U. S. SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K/A
(Mark One)
[X]
Annual report under Section 13 or 15(d) of the Securities Exchange Act of 1934
For the fiscal year ended August
31, 2013
[_]
Transition report under Section 13 or 15(d) of the Securities Exchange Act of 1934
For the transition
period from __________ to __________.
Commission File Number: 0-15482
ONCOLOGIX TECH, INC.
(Name of small business issuer in its
charter)
| Nevada |
|
86-1006416 |
| (State or other jurisdiction of incorporation or organization |
|
(I.R.S. Employer Identification No.) |
| |
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| 212 Edgewood Drive, Pineville, LA |
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71360 |
| (Address of principal executive offices) |
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Zip Code |
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| (616) 977-9933 |
| (Issuer’s telephone number) |
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| Securities registered under Section 12(b) of the Exchange Act: |
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| Title of Each Class |
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Name of Each Exchange on Which Registered |
| Common Stock, $.001 par value |
|
OTC:QB |
| |
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| Securities registered under Section 12(g) of the Exchange Act: None |
Indicate
by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. -Yes [_]
No [X]
Indicate
by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Exchange Act. Yes
[_] No [X]
Indicate
by check mark whether the registrant (1) filed all reports required to be filed by Section 13 or 15(d) of the Exchange Act of 1934
during the past 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been
subject to such filing requirements for the past 90 days. Yes [X] No [_]
Indicate
by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive
Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (Section 232.405 of this chapter) during the
preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes [X]
No [_]
Indicate
by check mark if disclosure of delinquent filers in response to Item 405 of Regulation S-K (Section 229.405 of this chapter) is
not contained herein, and will not be contained, to the best of registrant’s knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. [_]
Indicate by check mark whether the registrant
is a large accelerated filer, an accelerated filer, a non-accelerated filer or a smaller reporting company. See the definitions
of “large accelerated filer”, “accelerated filer”, and “smaller reporting company” in Rule
12b-2 of the Exchange Act.
Large accelerated
Filer [_] Accelerated Filer [_]
Non-accelerated
Filer [_] Smaller Reporting Company [X]
Indicate
by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act) Yes [_]
No [X]
Indicate the number of shares outstanding of each of the
issuer’s classes of common stock, as of the latest practicable date.
| Class |
|
Outstanding at November 8, 2013 |
| Common Stock, $0.001 par value |
|
81,087,422 |
The aggregate market
value of the Common Stock of the registrant held by non-affiliates as of November 8, 2013 was approximately $1,378,486 based on
closing stock price of the registrant’s common stock on that date.
Documents Incorporated By Reference
None
EXPLANATORY NOTE
This
amendment to the Current Report on Form 10-K filed by Oncologix Tech, Inc. (the “Company”) with the Security
and Exchange commission on July 31, 2014 is filed solely to correct the following errors: 1) To correct the wording on
the Auditors Report; 2) To adjust the title of the Statement of Cash Flows; and 3) To include an additional description in
Note 18.
| TABLE OF CONTENTS |
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| PART I |
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| Item 1 |
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Description of Business |
2 |
| Item 1A |
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Risk Factors |
12 |
| Item 1B |
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Unresolved Staff Comments |
16 |
| Item 2 |
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Properties |
16 |
| Item 3 |
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Legal Proceedings |
16 |
| Item 4 |
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Mine Safety Disclosures |
16 |
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| PART II |
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| Item 5 |
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Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of |
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Equity Securities |
17 |
| Item 6 |
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Selected Financial Data |
19 |
| Item 7 |
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Management's Discussion and Analysis of Financial Condition and Results of Operations |
20 |
| Item 7A |
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Quantitative and Qualitative Disclosures About Market Risk |
27 |
| Item 8 |
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Financial Statements and Supplementary Data |
28 |
| Item 9 |
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Changes in and Disagreements with Accountants on Accounting and Financial Disclosure |
29 |
| Item 9A |
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Controls and Procedures |
31 |
| Item 9B |
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Other Information |
31 |
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| PART III |
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| Item 10 |
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Directors, Executive Officers and Corporate Governance |
31 |
| Item 11 |
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Executive Compensation |
33 |
| Item 12 |
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Security Ownership of Certain Beneficial Owners and Management and Related |
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Stockholder Matters |
36 |
| Item 13 |
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Certain Relationships and Related Transactions, and Director Independence |
36 |
| Item 14 |
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Principal Accountant Fees and Services |
38 |
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| PART IV |
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| Item 15 |
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Exhibits, Financial Statement Schedules |
39 |
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SIGNATURES |
41 |
PART I
FORWARD LOOKING STATEMENTS
The statements contained
in this Annual Report on Form 10-K that are not historical fact are forward-looking statements. The forward-looking statements
contained herein are based on current expectations that involve a number of risks and uncertainties. These statements can be identified
by the use of forward-looking terminology such as “believes,” “expects,” “may,” “will,”
“should,” or “anticipates,” or the negative thereof or other variations thereon or comparable terminology,
or by discussions of strategy that involve risks and uncertainties. The Company wishes to caution the reader that its forward-looking
statements that are not historical facts are only predictions. No assurances can be given that the future results indicated, whether
expressed or implied, will be achieved. While sometimes presented with numerical specificity, these projections and other forward-looking
statements are based upon a variety of assumptions relating to the business of the Company, which, although considered reasonable
by the Company, may not be realized. Because of the number and range of assumptions underlying the Company’s projections
and forward-looking statements, many of which are subject to significant uncertainties and contingencies that are beyond the reasonable
control of the Company, some of the assumptions inevitably will not materialize, and unanticipated events and circumstances may
occur subsequent to the date of this report. These forward-looking statements are based on current expectations and the Company
assumes no obligation to update this information. Therefore, the actual experience of the Company and the results achieved during
the period covered by any particular projections or forward-looking statements may differ substantially from those projected. Consequently,
the inclusion of projections and other forward-looking statements should not be regarded as a representation by the Company or
any other person that these estimates and projections will be realized. The Company’s actual results may vary materially.
There can be no assurance that any of these expectations will be realized or that any of the forward-looking statements contained
herein will prove to be accurate.
Throughout this report,
unless otherwise indicated by the context, references herein to the “Company”, “Oncologix”, “we”,
our” or “us” means Oncologix Tech, Inc.., a Nevada corporation and its corporate subsidiaries and predecessors.
Item 1. Description of Business
OVERVIEW
We were originally formed
in 1995 as "Wavetech, Inc." a New Jersey corporation and changed our corporate domicile to Nevada in December 1997, by
merging into a Nevada corporation named, "Interpretel International, Inc." We subsequently changed our name, first to
"Wavetech International, Inc." and then, in 2000, to "BestNet Communications Corp." Our business at the time
was to provide worldwide long distance telephone communication and teleconferencing services to commercial and residential consumers
through the internet. That business was never profitable and we were able to continue it only by repeated equity and debt financings.
Accordingly, during December 2006, we determined to dispose of that business and sold it during February 2007.
We entered the medical
device business at the end of July 2006 through the acquisition of JDA Medical Technologies, Inc. ("JDA"), a development
stage company, which was merged into our wholly owned subsidiary, Oncologix Corporation. On January 22, 2007, we changed our name
to Oncologix Tech, Inc., to reflect this new business. During June 2007, we moved our principal offices from Grand Rapids, Michigan,
to our offices at 3725 Lawrenceville-Suwanee Road, Suite B-4, Suwanee, Georgia, 30024, telephone (770) 831-8818. At that address,
our business was the development of a medical device for brachytherapy (radiation therapy), called the “Oncosphere”
(or “Oncosphere System”), for the advanced medical treatment of soft tissue cancers. It is a radioactive micro-particle
designed to deliver therapeutic radiation directly to a tumor site by introducing the micro-particles into the artery that feeds
the tumor tissue. Its first application is expected to be the treatment of liver cancer. Due to a lack of funding, we suspended
these activities on December 31, 2007, whereupon we closed the offices in Suwanee Georgia.
Our new mailing address
is P.O. Box 8832, Grand Rapids, MI 49518-8832, telephone (616) 977-9933.
During May 2008, we determined
to dispose of most of the assets related to the development of the Oncosphere.
In February 2009, we entered
into a Technology Agreement with Institut für Umwelttechnologien GmbH, a German Company (“IUT”) whereunder the
parties have agreed that:
| (a) | The Company has granted an exclusive license to a new IUT subsidiary, called “IUTM”,
to develop and manufacture products based on the Company’s proprietary information. This proprietary information is not based
on the technology that had been subject to the Master License Agreement with the University of Maryland – Baltimore. The
Company has also transferred to IUTM a number of items of laboratory equipment and inventory useful in connection with the licensed
information. |
| (b) | The Company retains rights to market products based on such information as well as first consideration
for marketing rights for other possible IUTM products. |
| (c) | In consideration of the license, the Company has received a 10% equity interest in IUTM, which
is organized as a private German limited liability company and IUT has assumed approximately $82,000 of the Company’s indebtedness. |
| (d) | The Company’s marketing rights have been transferred to its subsidiary, Oncologix Corporation
and have issued IUTM 10% of the equity ownership of that subsidiary. |
In addition, on April 7,
2009, the Company entered into a Termination Agreement with the University of Maryland – Baltimore, The Master License Agreement
between the Company and the University has been formally terminated and each party has released the other from all liabilities
arising under the Master License Agreement.
On May 19, 2011, the Company
affected a one-for-four reverse stock split. All share and per share information has been restated to retroactively show the effect
of this stock split. The reverse split was approved by a majority of the Company’s shareholders on March 24, 2011.
On March 22, 2013, we acquired
all the outstanding stock of Dotolo Research Corporation (“Dotolo”), a FDA Registered, Class II, medical device manufacturer
with 25 years of product sales in the hydro-colonic irrigation, bowel preparation market. Dotolo Research Corporation began operations
in 1989 and markets hardware and disposable products to a customer base of over 900+ customers both domestically and internationally.
The Company currently operates in a limited, but competitive environment in hydro-colonic irrigation, of which there are only four
(4) companies approved by the FDA to manufacture a Class II medical device for colon-hydro therapy. Since the acquisition, we have
not had significant revenues from sales of our products, including sales to medical facilities due primarily to a lack of capital
needed to procure raw material inventory to fill customers’ orders.
On August 1, 2013, we acquired
all the outstanding stock of Angels of Mercy, Inc. (“Angels”). Angels provides non-medical, Personal Care Attendant
(PCA) services, Supervised Independent Living (SIL), Long-Term Senior Care, and other approved programs performed by a trained
caregiver that will meet the health service needs of beneficiaries whose disabilities preclude the performance of certain independent
living skills related to the activities of daily living (ADL).
On November 1, 2013, because
the development of the brachytherapy device was years off and could not be marketed at that time, the Company’s management
and Board of Directors determined to dispose of Oncologix Corporation and ? its Brachytherapy medical device subsidiary. With our
acquisition of Dotolo we currently have a viable FDA approved medical device which management believes requires minimal capital
investment to bring the Company to cash breakeven. Continued support of Oncologix Corporation would cost the Company substantial
additional investment that is beyond its means with no guarantee of FDA approval. Furthermore, as part of the disposal, the Company
will be relieved of over $90,000 in debt.
BUSINESS SEGMENTS
We identify our reportable
segments based on our management structure, financial data and market. We have identified two business segments: Medical Device
Manufacturing and Personal Care Services.
MEDICAL DEVICE MANUFACTURING
Dotolo Research
Corporation (“DRC”) designs, develops, manufactures and distributes the Toxygen hardware system with disposables
speculums and tubing. The company has a valid Registration from the FDA as a Class II medical device, and is licensed by
Health Canada, a CE mark for Europe, and is in compliance with ISO 9001:2000 and ISO 13485:2003 regulations. Our products
primary use is for colon and bowel preparation prior to medical procedures such as a Colonoscopy and OB/GYN medical
procedures and for individuals seeking health and wellness prevention and good colon health. There are currently over 20
million colonoscopy procedures performed annually within the United States and our strategic mission is to become the
preferred choice of colon lavage cleansing and bowel preparation by both patients and medical professionals. Management
believes its primary competitive strengths is its 25 year manufacturing history in the market of hydro-colonic irrigation,
its on-going development of new product technologies, exceptional quality controls, and world-wide distribution of all
hardware and disposable products. The Company utilizes an indirect, re-seller sales force to promote and sell the company
products. Management believes that the Company must expand its manufacturing capacity and its’ distribution sales
channels to be able to move into what management believes is a high growth market. The Management’s strategy in
becoming a publicly held company in the United States is to enhance the Company’s capital raising abilities to fund
increased manufacturing capacity, increase current inventory levels, improve payment terms with our core raw material
suppliers to reduce our COGS, execution of new product designs on all hardware and disposable products, maintain regulatory
compliance, expansion of a sales and marketing team and additional acquisitions of companies in the medical device and
healthcare markets.
Marketing
The Company's overall marketing
strategy is to strengthen is current position in the health and wellness markets, leverage its brand reputation and 25 year history
as a quality manufacturer of medical device products, and sell directly into the medical space. The direct sales strategy of providing
products to health and wellness spas has served the Company’s needs to date and has enabled us to obtain orders and operate
while avoiding the costs associated with hiring marketing employees and direct sales representatives. However, future growth will
require us to increase our product and brand awareness in the medical markets, hire a full time Quality Assurance/Regulatory Manager,
Director of Sales and Marketing, establish additional clinical research on bowel preparations and leverage the existing clinical
research performed by Dr. Joseph Fiorito et al. at Danbury Hospital utilizing the Dotolo Research products, increase our brand
and marketing, our web presence, and strengthen our domestic and international reseller distribution channels. The Company’s
distribution model has resulted in the Company not having a single customer account for more than 10% of its total sales. The Company
is seeking to expand its operations so that it can continue to service health and wellness customers but specifically sell products
directly to Out-Patient Endoscopy Centers, hospital systems, Veterans Administration Hospitals, Skilled Nursing Homes, and Sterile
kit packing distributors which will provide more profitable sales orders.
Domestic and International Payment Terms
Dotolo Research Corporation
records revenue both domestically and internationally through indirect sales channels as products are sold to independent distributors
or product re-sellers. Terms on all products sold are 50% of the total order, paid in advance, and the balance due prior to final
shipment (FOB). These sales terms, to date, has allowed our company to experience extremely few collection problems on its domestic
sales. International sales orders are via wire transfer and we have little to no payable receivable issues. Management believes
that once we enter into the medical space we will experience payment terms of Net-45 which will require the company to increase
its inventory levels on disposable products up to 30 day inventory supply levels.
Manufacturing
Dotolo Research Corporation
procures raw materials from various sources and performs on-site manufacturing and final sub-assembly operations. The company does
not outsource its manufacturing processes. Management believes that the skill level and experience of the Company’s work
force as well as the Company’s operations allow it to meet current order demand but will need to ramp up skilled bench assembly
workers and packaging employees when those orders from the medical markets commence. The Company's principal raw material is injection-molded
plastic, medical grade respiration tubing, water-filtration parts, and hardware components such as metal housings, fitting and
valves. The Company purchases its injection-molding raw materials from two (2) suppliers and hardware component parts from numerous
sources none of which is believed by the Company to be a dominant supplier.
Trademarks, Licenses and Patents
Dotolo Research Corporation
owns numerous patents, with it is primary patent on the Toxygen hardware, Patent # 5,788,650, “Colon Hydrotherapy Apparatus”-
Ultra Violet Water Filtration System. This Patent is valid through 2018 and protects this product design both domestically and
internationally.
Management believes that
new patents will be granted on our new speculum and hardware products and in each instance, the patents will, when granted, be
sufficient for us to pursue our proposed business. The grant of a patent by the U.S. Patent Office does not insure that the
patent will be upheld in litigation seeking to protect the patent or that the patent will not be found to infringe on patents held
by others.
Device Approval Process
It is anticipated that
our new product(s) re-designs will be regulated as a Class II medical device and will be subject to extensive regulation by the
FDA and other regulatory authorities in the US. The Food, Drug, and Cosmetic Act (“FD&C Act”) and
other federal and state statutes and regulations govern the research, design, development, preclinical and clinical testing, manufacturing,
safety, approval or clearance, labeling, packaging, storage, record keeping, servicing, promotion, import and export, and distribution
of medical devices.
Unless an exemption applies,
each medical device we wish to commercially distribute in the U.S. will require either prior premarket notification, or 510(k)
clearance, or premarket approval (PMA) from the FDA. The FDA classifies medical devices into one of three classes. Devices
requiring fewer controls because they are deemed to pose lower risk are placed in Class I or II. Class I devices are subject to
general controls such as labeling, premarket notification, and adherence to the FDA’s Quality System Regulation (a set of
current good manufacturing practice requirements put forth by the FDA which govern the methods used in, and the facilities and
controls used for, the design, manufacture, packaging, labeling, storage, installation and servicing of finished devices) (“QSR”).
Class IIdevices are subject to special controls such as performance standards, post-market surveillance, FDA guidelines, as well
as general controls. Some Class I and Class II devices are exempted by regulation from the premarket notification, or 510(k),
clearance requirement or the requirement of compliance with certain provisions of the QSR. Devices are placed in Class III, which
requires approval of a PMA application, if insufficient information exists to determine that the application of general controls
or special controls are sufficient to provide reasonable assurance of safety and effectiveness, or they are life-sustaining, life-supporting
or implantable devices, or the FDA deems these devices to be “not substantially equivalent” either
to a previously 510(k) cleared device or to a “pre-amendment” Class III device in commercial distribution
before May 28, 1976, for which PMA applications have not been required. The FDA may classify our products as class III devices,
requiring PMA approval. A PMA application must be supported by valid scientific evidence, which typically requires extensive
data, including technical, pre-clinical, clinical, manufacturing and labeling data, to demonstrate to the FDA’s satisfaction
the safety and effectiveness of the device. A PMA application must include, among other things, a complete description of the device
and its components, a detailed description of the methods, facilities and controls used to manufacture the device, and proposed
labeling. A PMA application also must be accompanied by a user fee, unless exempt. For example, the FDA does not require the submission
of a user fee for a small business’s first PMA. After a PMA application is submitted and found to be sufficiently complete,
the FDA begins an in-depth review of the submitted information. During this review period, the FDA may request additional information,
or clarification of information already provided. Also during the review period, an advisory panel of experts from outside the
FDA may be convened to review and evaluate the application and provide recommendations to the FDA as to the approvability of the
device. In addition, the FDA generally will conduct a pre-approval inspection of the manufacturing facility to ensure compliance
with the QSR, which requires manufacturers to follow design, testing, control, documentation, and other quality assurance procedures.
Our current products are
classified as a Class II device and we do not anticipate we will be required to first seek premarket approval for our products.
The FDA will determine based upon the 510(k) submission and may agree if the risk is low enough, and safety and effectiveness can
be assured with special controls in place, the PMA will not be required.
If a PMA is required, the
FDA can delay, limit, or deny approval of a PMA application for many reasons, including:
• The product may not
be safe or effective to the FDA’s satisfaction;
• The data from our
pre-clinical studies and clinical trials may be insufficient to support approval;
• The manufacturing
process or facilities we use may not meet applicable requirements; and
• Changes in FDA approval
policies or adoption of new regulations may require additional data.
If the FDA evaluations of
both the PMA application and the manufacturing facilities are favorable, the FDA will either issue an approval letter, or approvable
letter, which usually contains a number of conditions which must be met in order to secure final approval of the PMA. When and
if those conditions have been fulfilled to the satisfaction of the FDA, the agency will issue a PMA approval letter authorizing
commercial marketing of the device for certain indications. If the FDA’s evaluation of the PMA or manufacturing facilities
is not favorable, the FDA will deny approval of the PMA or issue a not approvable letter. The FDA may also determine that additional
clinical trials are necessary, in which case the PMA approval may be delayed while the trials are conducted and the data acquired
is submitted in an amendment to the PMA. Even with additional trials, the FDA may not approve the PMA application. The PMA process
can be expensive, uncertain, and lengthy and a number of devices for which FDA approval has been sought by other companies have
never been approved for marketing.
New PMA applications or
PMA supplements may be required for modifications to the manufacturing process, labeling and device specifications, materials or
design of a device that is approved through the PMA process. PMA supplements often require submission of the same type of information
as an initial PMA application, except that the supplement is limited to information needed to support any changes from the device
covered by the original PMA application, and may not require as extensive clinical data or the convening of an advisory panel.
Clinical trials are almost always required to support a PMA application, and are sometimes required for a 510(k) clearance. These
trials generally require submission of an application for an Investigational Device Exemption (“IDE”) to the
FDA. If a trial is considered a “Non-Significant Risk” (“NSR”) study subject to
abbreviated IDE regulations, a formal IDE submission is not required by the FDA. An IDE application must be supported byappropriate
data, such as animal and laboratory testing results, showing that it is safe to test the device in humans and that the testing
protocol is scientifically sound. The IDE application must be approved in advance by the FDA for a specified number of patients,
unless the product is deemed a non-significant risk device and eligible for more abbreviated IDE requirements. Generally,
clinical trials for a significant risk device may begin once the IDE application is approved by the FDA and the study protocol
and informed consent form are approved by appropriate institutional review boards (“IRBs”) at the clinical trial
sites. The FDA’s approval of an IDE allows clinical testing to go forward, but does not bind the FDA to accept the results
of the trial as sufficient to prove the product’s safety and effectiveness, even if the trial meets its intended success
criteria. All clinical trials must be conducted in accordance with the FDA’s IDE regulations that govern investigational
device labeling, prohibit promotion of the investigational device, and specify an array of recordkeeping, reporting and monitoring
responsibilities of study sponsors and study investigators. . Required records and reports are subject to inspection by the
FDA. The results of clinical testing may be unfavorable or, even if the intended safety and effectiveness success criteria are
achieved, may not be considered sufficient for the FDA to grant approval or clearance of a product.
Although we believe our
clinical trials will provide favorable data to support our PMA application, upon evaluation the FDA may conclude differently. Delays
in receipt of or failure to receive FDA approval, the withdrawal of previously received approvals, or failure to comply with existing
or future regulatory requirements would have a material adverse effect on our business, financial condition, and results of operations.
Even if granted, the approvals may include significant limitations on the intended use and indications for use for which our products
may be marketed.
After a device is approved
or cleared and placed in commercial distribution, numerous regulatory requirements apply. These include:
• establishing registration
and device listing;
• implementing QSR, which requires
manufacturers to follow design, testing, control, documentation and other quality assurance procedures;
• labeling regulations, which
prohibit the promotion of products for unapproved or “off-label” uses and impose other restrictions
on labeling;
• medical device reporting regulations,
which require that manufacturers report to the FDA if a device may have caused or contributed to a death or serious injury or malfunctioned
in a way that would likely cause or contribute to a death or serious injury if it were to recur; and
• corrections and removal reporting
regulations, which require that manufacturers report to the FDA field corrections and product recalls or removals if undertaken
to reduce a risk to health posed by the device or to remedy a violation of the FD&C Act that may present a risk to health.
Also, the FDA may require
us to conduct post market studies or order us to establish and maintain a system for tracking our products through the chain of
distribution to the patient level. The FDA enforces regulatory requirements by conducting periodic, unannounced inspections
and market surveillance.
Failure to comply with applicable
regulatory requirements, including those applicable to the conduct of our clinical trials, can result in enforcement action by
the FDA, which may lead to any of the following sanctions:
• Warning letters;
• Fines and civil penalties;
• Unanticipated expenditures;
• Delays in approving
or refusal to approve our applications, including supplements;
• Withdrawal of FDA
approval;
• Product recall or
seizure;
• Interruption of production;
• Operating restrictions;
• Injunctions; and
• Criminal prosecution.
Our products are manufactured
in compliance with current Good Manufacturing Practices (“GMP”) requirements set forth in the QSR. The QSR requires
a quality system for the design, manufacture, packaging, labeling, storage, installation and servicing of marketed devices and
includes extensive requirements with respect to quality management and organization, device design, equipment, purchase and handling
of components, production and process controls, packaging and labeling controls, device evaluation, distribution, installation,
complaint handling, servicing, and record keeping. The FDA enforces the QSR through periodic unannounced inspections If the FDA
believes that we are not in compliance with QSR, it can shut down the manufacturing operations, require recall of our products,
refuse to approve new marketing applications, institute legal proceedings to detain or seize products, enjoin future violations,
or assess civil and criminal penalties against us or our officers or other employees. Any such action by the FDA would have
a material adverse effect on our business. We cannot assure you that we will be able to comply with all applicable FDA regulations.
Non-FDA Government Regulation
The advertising of our products
will be subject to both FDA and Federal Trade Commission regulations. In addition, the sale and marketing of our products will
be subject to a complex system of federal and state laws and regulations intended to deter, detect, and respond to fraud and abuse
in the healthcare system. These laws and regulations restrict and may prohibit pricing, discounting, commissions and other
commercial practices that may be typical outside of the healthcare business. In particular, anti-kickback and self-referral laws
and regulations will limit our flexibility in crafting promotional programs and other financial arrangements with medical professionals
in connection with the sale of our products and related services, especially with respect to physicians seeking reimbursement through
Medicare or Medicaid. These federal laws include, by way of example, the following:
• the anti-kickback statute prohibits
certain business practices and relationships that might affect the provision and cost of healthcare services reimbursable under
Medicare, Medicaid and other federal healthcare programs, including the payment or receipt of remuneration for the referral of
patients whose care will be paid by Medicare or other federal healthcare programs;
• the physician self-referral
prohibition, commonly referred to as the Stark Law, which prohibits referrals by physicians of Medicare or Medicaid patients to
providers of a broad range of designated healthcare services in which the physicians or their immediate family members have ownership
interests or with which they have certain other financial arrangements;
• the anti-inducement law, which
prohibits providers from offering anything to a Medicare or Medicaid beneficiary to induce that beneficiary to use items or services
covered by either program;
• the Civil False Claims Act,
which prohibits any person from knowingly presenting or causing to be presented false or fraudulent claims for payment by the federal
government, including the Medicare and Medicaid programs; and
• the Civil Monetary Penalties
Law, which authorizes the US Department of Health and Human Services (“HHS”) to impose civil penalties administratively
for fraudulent or abusive acts.
Sanctions for violating
these federal laws include criminal and civil penalties that range from punitive sanctions, damage assessments, money penalties,
inprisonment, denial of Medicare and Medicaid payments, or exclusion from the Medicare and Medicaid programs, or both. These
laws also impose an affirmative duty on those receiving Medicare or Medicaid funding to ensure that they do not employ or contract
with persons excluded from the Medicare and other government programs.
Many states have adopted
or are considering legislative proposals similar to the federal fraud and abuse laws, some of which extend beyond the Medicare
and Medicaid programs to prohibit the payment or receipt of remuneration for the referral of patients and physician self-referrals
regardless of whether the service was reimbursed by Medicare or Medicaid. Many states have also adopted or are considering
legislative proposals to increase patient protections, such as limiting the use and disclosure of patient-specific health information.
These state laws typically impose criminal and civil penalties similar to the federal laws.
In the ordinary course of
their business, medical device manufacturers and suppliers have been and are subject regularly to inquiries, investigations and
audits by federal and state agencies that oversee these laws and regulations. Recent federal and state legislation has greatly
increased funding for investigations and enforcement actions, which have increased dramatically over the past several years. This
trend is expected to continue. Private enforcement of healthcare fraud also has increased, due in large part to amendments to the
Civil False Claims Act in 1986 that were designed to encourage private persons to sue on behalf of the government. These whistleblower
suits by private persons, known as qui tam relaters, may be filed by almost anyone, including physicians and their employees and
patients, our employees, and even competitors. The Health Insurance Portability and Accountability Act of 1996 (“HIPAA”),
in addition to its privacy provisions, created a series of new healthcare-related crimes.
Competition
The Company currently operates
in a limited, but competitive environment in hydro-colonic irrigation, of which there are only four (4) companies that are approved
by the FDA to manufacture a Class II medical device for colon-hydro therapy. The Company's major competitors are located in Phoenix,
Arizona, Clearwater Florida, San Antonio, Texas, and in Canada. The Company must design and develop a broader range of speculum
and disposable products to maintain and grow its market share.
In a sense, the Company
competes with traditional methods of bowel preparation prior to colonoscopy procedures such as Sodium Bi-phosphate and Sodium Phosphate
which have general medical acceptance. The Food and Drug Administration (FDA)
issued a safety alert regarding Fleet enemas and other related products in 2008. This alert was due to reports of acute phosphate
nephropathy which is an acute kidney injury occurring in some patients who had used oral sodium phosphate (OSP) products for bowel
cleansing prior to medical procedures. This injury was seen in patients who did not present with risk factors for this condition.
We believe that a hydro-colonic irrigation method of bowel preparation will be highly favored by consumers as it does not
require a difficult 24 hour fasting period, risk of renal failure, and an often unpleasant 12 hour overnight bowel preparation.
Proprietary Rights
We have entered into an
Employment Agreement with our Chief Executive Officer, and Non-circumvent and Non-Disclosure agreements with key employees that
require them to keep all of our proprietary information confidential. We cannot assure that such protections will prove adequate
should they be challenged in litigation.
Legal Proceedings
The Company is not party
to any legal proceedings.
Inventory Management
The Company's ability to
manage its inventories properly is an important factor in its operations. Inventory shortages can impede the Company's ability
to meet orders on a timely basis. Conversely, excess inventories will result in increased inventory carrying costs that will lower
gross margins. If the Company is unable to effectively manage its inventory, its business, results of operations and financial
condition will be adversely affected. Dotolo Research Corporation currently
operates its inventory management system on
MAS-90 (SAGE), and inventory is First In- First Out (FIFO) and we operate a Just in Time (JIT) system. All raw materials are procured
only after receipt of orders and we maintain fifteen (15) day inventory levels to support our top customers with disposable products
with those customers that provide the company with Standing Purchase Orders.
Suppliers and Service Providers
The Company's ability to
competitively price its products depends on the cost of raw material components especially petroleum based products, packaging
costs, cost of fuel for shipping charges, and its ability to maintain its’ fixed and variable overhead. The cost of materials
is subject to annual price increases from our suppliers and the company will enter into long-term pricing contracts to hold pricing
levels firm for one (1) year with future increases based upon the Producer Price Index (PPI).
Customers
The Company's financial
success is directly related to the willingness of our customers to continue to purchase its products. The Company does not typically
have long-term contracts with its customers however once in the medical market the Company hopes to execute standing re-supply
orders with large out-patient clinics and hospital systems. Sales to the Company's customers are generally on an order-by-order
basis and are subject to rights of cancellation and rescheduling by the customers. Failure to fill customers' orders in a timely
manner could harm the Company's relationships with its customers. Furthermore, if any of the Company's major customers experiences
a significant downturn in its business, then these customers may reduce or discontinue purchases from the Company, which could
have an adverse effect on the Company's business, results of operations and financial condition.
The Company sells its products
to our customers from its Published Price List and discounts pricing based on sales volumes. The company does not extend credit.
Financial difficulties of a customer could cause the Company to stop doing business with that customer or reduce its business with
that customer. The Company's inability to collect from its customers or a cessation or reduction of sales to certain customers
because of financial concerns could have an adverse effect on the Company's business, results of operations and financial condition.
The target markets and targeted customers for
our products include:
| · | Health and Wellness Spas |
| · | Endoscopy Out-Patient Clinics |
| · | Hospital Systems- Veterans Hospitals |
| · | Assisted Living Facilities |
| · | Individuals with disabilities such as paraplegic, quadriplegic and obesity |
Implementation of Growth Strategy.
As part of its growth strategy in our health
and wellness and medical device markets, the Company will:
| · | Re-strengthen and expand existing distribution channels s for our medical device products within
the United States. Currently these channels have not been active due to a lack of capital for the production of inventor. |
| · | Re-strengthen our existing international distribution and re-seller agreements that we have previously
established specifically in the United Kingdom, Saudi Arabia (Middle East), Africa, Mexico, Taiwan and Australia. |
| · | Release new product development on Version 2 of the Toxygen hardware system and release new speculum
disposable products. |
| · | Expand its factory operations to be able to accept large orders that will involve larger production
runs that management believes will be more profitable. |
These initiatives are
largely conditioned upon the Company obtaining additional capital, of which there can be no assurance. Any such failures could
have an adverse effect on the Company's business, results of operations and financial condition.
PERSONAL CARE SERVICES
Angels of Mercy, Inc. (“AOM”)
provides non-medical, Personal Care Attendant (PCA) services, Supervised Independent Living (SIL), Long-Term Senior Care, and other
approved programs performed by a trained caregiver that will meet the health service needs of beneficiaries whose disabilities
preclude the performance of certain independent living skills related to the activities of daily living (ADL).
PCA services that are reimbursed to AOM under
the waiver:
| · | Assisting with personal hygiene, dressing, bathing, and grooming |
| · | Performing or assisting in the performance of tasks related to maintaining a safe, healthy and
stable living environment such as: |
| · | Light cleaning tasks in areas of the home used by the recipient, |
| · | Shopping for such items as health and hygiene products, clothing and groceries, |
| · | Performing activities of daily living inside and outside of the home which require attendant care, |
| · | Assisting with or performing beneficiary laundry care chores |
| · | Assisting with bladder and/or bowel requirements, including bed pan routines |
| · | If indicated on the Plan of Care, assisting beneficiary to clinics, physician’s offices,
and other appointments, |
| · | Assisting the beneficiary to receive any service specified in the written Plan of Care, including
leisure skills development, |
| · | Assisting in activities which would enhance the individual employability and improve and enhance
the beneficiary’s quality of life. |
Supervised Independent Living (SIL) is an alternative
program for mentally challenged, developmentally disabled or physically disabled individuals. AOM provides the following personal
health services:
| · | Assistance with safety procedures and emergency contacts within the home environment |
| · | Counseling during the transition period |
| · | Assistance in meeting needs with medical management, employment, financial, budgeting, household
management, personal care, recreation and transportation |
| · | Accessibility to community resources |
| · | Independence and personal growth |
| · | Freedom from abuse, neglect and exploitation |
Personal Care Attendant Providers Licensing
Standards
Pursuant to R.S. 40:2120.2,
all Personal Care Attendant service providers and Home and Community- Based Services must be licensed by the Department of Health
& Hospitals. DHH establishes the minimum licensing standards and the licensing provisions contain the core requirements
for HCBS providers depending upon the services rendered by the HCBS provider. Currently, Angels of Mercy, Inc is in full
compliance and good standing with the licensing requirements set forth and established by the State of Louisiana Department of
Health & Hospitals.
Services and Fee Structure
AOM is reimbursed for each
approved “Unit of Service” provided, as determined by the Health Care Financing Administration (HCFA), the Department
of Social Services and based upon a detailed Case Management, Plan of Care for each beneficiary. A unit of service for PCA services
will be one-half hour. At least fifteen (15) minutes of service must be provided to the individual in order for AOM to bill for
a unit of service. A maximum of 1,825 hours (3,650 half-hour units) per beneficiary, per year can be billed under the Medicaid
waiver program.
Long
Term Care (LTC) - Older population or anyone whose disability occurred after their 21st birthday. Reimbursement rate: $2.89/quarter
hour
Early
Periodic Screening Diagnostic Treatment (EPSDT) – This service is provided from 3 years of age or older until 21 years
of age. Reimbursement rate: $2.53/quarter hour
Elderly
and Young Adult Waiver (EDA) – This service is provided by age 22 and normally up through death of the client. Reimbursement
rate: $2.83/quarter hour
New
Opportunity Waiver (NOW) The longest running Medicaid Waiver program and has the most resources available for the clients.
Several
programs within the NOW- Title 19.
Reimbursement rates:
IFS day program: $3.61/quarter
hour
IFS night: $2.17quarter
hour
IFS day x2: $2.72/quarter
hour
IFS day x3: 2.36/quarter
hour
IFS night x2: $1.52/quarter
hour
Supervised
Independent Living (SIL) - Clients live independently but with supervision and assistance from AOM trained staff. Activities of
Daily Living skills are taught by staff to clients. Some clients go to day programs, some are employed, and some clients receive
24 hours/day personal care services. Reimbursement rate: 16.93/hour/daily care 24/7
Non-FDA Government
Regulation
The
advertising of our healthcare services and medical device products will be subject to both FDA and Federal Trade Commission regulations.
In addition, the sale and marketing of our products will be subject to a complex system of federal and state laws and regulations
intended to deter, detect, and respond to fraud and abuse in the healthcare system. These laws and regulations restrict and
may prohibit pricing, discounting, commissions and other commercial practices that may be typical outside of the healthcare business.
In particular, anti-kickback and self-referral laws and regulations will limit our flexibility in crafting promotional programs
and other financial arrangements with medical professionals in connection with the sale of our products and related services, especially
with respect to physicians seeking reimbursement through Medicare or Medicaid. These federal laws include, by way of example,
the following:
• the anti-kickback statute prohibits
certain business practices and relationships that might affect the provision and cost of healthcare services reimbursable under
Medicare, Medicaid and other federal healthcare programs, including the payment or receipt of remuneration for the referral of
patients whose care will be paid by Medicare or other federal healthcare programs;
• the physician self-referral
prohibition, commonly referred to as the Stark Law, which prohibits referrals by physicians of Medicare or Medicaid patients to
providers of a broad range of designated healthcare services in which the physicians or their immediate family members have ownership
interests or with which they have certain other financial arrangements;
• the anti-inducement law, which
prohibits providers from offering anything to a Medicare or Medicaid beneficiary to induce that beneficiary to use items or services
covered by either program;
• the Civil False Claims Act,
which prohibits any person from knowingly presenting or causing to be presented false or fraudulent claims for payment by the federal
government, including the Medicare and Medicaid programs; and
• the Civil Monetary Penalties
Law, which authorizes the US Department of Health and Human Services (“HHS”) to impose civil penalties administratively
for fraudulent or abusive acts.
Sanctions for violating
these federal laws include criminal and civil penalties that range from punitive sanctions, damage assessments, money penalties,
imprisonment, denial of Medicare and Medicaid payments, or exclusion from the Medicare and Medicaid programs, or both. These
laws also impose an affirmative duty on those receiving Medicare or Medicaid funding to ensure that they do not employ or contract
with persons excluded from the Medicare and other government programs.
Many states have adopted
or are considering legislative proposals similar to the federal fraud and abuse laws, some of which extend beyond the Medicare
and Medicaid programs to prohibit the payment or receipt of remuneration for the referral of patients and physician self-referrals
regardless of whether the service was reimbursed by Medicare or Medicaid. Many states have also adopted or are considering
legislative proposals to increase patient protections, such as limiting the use and disclosure of patient-specific health information.
These state laws typically impose criminal and civil penalties similar to the federal laws.
In the ordinary course of
their business, medical device manufacturers and suppliers have been and are subject regularly to inquiries, investigations and
audits by federal and state agencies that oversee these laws and regulations. Recent federal and state legislation has greatly
increased funding for investigations and enforcement actions, which have increased dramatically over the past several years. This
trend is expected to continue. Private enforcement of healthcare fraud also has increased, due in large part to amendments to the
Civil False Claims Act in 1986 that were designed to encourage private persons to sue on behalf of the government. These whistleblower
suits by private persons, known as qui tam relaters, may be filed by almost anyone, including physicians and their employees and
patients, our employees, and even competitors. The Health Insurance Portability and Accountability Act of 1996 (“HIPAA”),
in addition to its privacy provisions, created a series of new healthcare-related crimes.
Competition
The Company currently operates
in a competitive environment in Personal Care Attendant (PCA) services. The Company's competitors are located throughout the State
of Louisiana where Personal Care Attendant licenses are authorized by the Department of Health and Hospitals to conduct business..
To provide a competitive edge on the competition, AOM will continue to hire highly skilled company employees,, deliver on-going
training, and deliver the highest level of personal care services.
Proprietary Rights
We have entered into an
Employment Agreement with our President, Key Managers and have executed Non-Circumvent and Non-Disclosure agreements with key employees
that require them to maintain all of our proprietary information and customers lists confidential. We cannot assure that
such protections will prove adequate should they be challenged in litigation.
Customers
The Company's financial
success is directly related to maintaining the continued excellence of personal care services we provide to our current clients
and the willingness of newly qualified clients to accept our organization as the “Preferred Provider Choice” to provide
their loved ones or themselves with the highest level of personal care.
EMPLOYEES
We currently have over
170 full time employees. Our Chief Executive Officer operates out of Louisiana and our Chief Financial Officer operates out of
Michigan. Our Medical Device Manufacturing segment has 2 full time employees. Our Personal Care Services segment has one hundred
and sixty eight (168) full time employees with fourteen (14) administrative employees, and a President. None of these employees
are covered by any collective bargaining agreement. The Company presently considers its employee relations to be satisfactory.
Item 1A. Risk Factors
RISK FACTORS
Those interested in investing
in the Company should carefully consider the following Risk Factors pertaining to Oncologix Tech as well as the risks and uncertainties
that are described in the Company's most recent Annual and Quarterly Reports under the Securities Exchange Act of 1934. These Risk
Factors are not all inclusive.
Going Concern Qualification.
Our Independent Accountants
have expressed doubt about our ability to continue as a going concern. The ability to continue as a going concern is an issue
raised as a result of the material operating losses incurred since inception, and its stockholders' deficit. We expect to continue
to experience net operating losses. Our ability to continue as a going concern is subject to our ability to obtain necessary funding
from outside sources, including obtaining additional funding from the sale of our securities or obtaining loans from various financial
institutions where possible. The going concern increases the difficulty in meeting such goals.
Risk of Issued Series D Convertible Preferred Stock to Common
Shareholders
In March 2013, our Board
of Directors authorized up to 60,000 shares of Series D Convertible Preferred Stock. Each share of Series D Convertible stock has
a par value of $0.001 and is convertible into 1,000 shares of common stock beginning after March 1, 2014. Each share of Series
D Convertible Preferred Stock has a stated value of $80.25. Each shares of Series D Convertible Preferred Stock shall have voting
rights as stated next: March 1, 2013 to February 28, 2014, 400 votes per share; March 1, 2014 to February 28, 2015, 800 votes per
share; March 1, 2015 to February 28, 2016, 1,200 votes per share; March 1, 2016 to February 28, 2017, 1,600 votes per share; March
1, 2017 and after, 2,000 votes per share.
In the event of any liquidation,
dissolution or winding-up of the Corporation, the Series D Preferred Stock then issued and outstanding shall be entitled to be
paid out of the assets of the Corporation available for distribution to its shareholders in a position senior to the Corporation’s
Common Stock shareholders. The effect of these senior securities could affect the value of our common stock.
Our internal control over financial reporting
is not considered effective, our business and stock price could be adversely affected.
Section 404 of the
Sarbanes-Oxley Act of 2002 requires us to evaluate the effectiveness of our internal control over financial reporting as of the
end of each fiscal year, and to include a management report assessing the effectiveness of our internal control over financial
reporting in our annual report on Form 10-K for that fiscal year. Our management, including our chief executive officer and chief
financial officer, does not expect that our internal control over financial reporting will prevent all error and all fraud. As
of August 31, 2013, the Company identified two material weaknesses: a) Oncologix lacks the necessary corporate accounting resources
to maintain adequate segregation of duties; b) In addition, we have a lack of a functioning Audit Committee as we only have one
independent director is not considered a Financial Expert within the meaning of Section 407 of the Sarbanes-Oxley Act. We may experience
a loss of public confidence, which could have an adverse effect on our business and on the market price of our common stock due
to our internal control being ineffective.
Financial Condition of Dotolo Research Corporation (“DRC”)
DRC has limited working
capital with no cash on hand at August 31, 2013. Since January 31, 2013, DRC has incurred indebtedness of $50,000 to meet its working
capital needs. These two notes bear interest at 18% per annum and require minimum, monthly interest payments of $750.00. Additional
financing will be required to get DRC to cash flow break even.
Need for Additional Capital
We will need substantial
funds to complete the development of new product introductions, manufacturing, and marketing of our products at DRC. Consequently,
we will seek to raise further capital through not only possible public and private offerings of equity and debt securities, but
also collaborative arrangements, strategic alliances, and equity and debt financings from other sources. AOM operates with positive
cash flow sufficient to service the business operations and debt payment requirements of the acquisition but will need additional
funds to complete the audit of Angels as well as costs for other required SEC and other regulatory filings. We now estimate the
need to raise at least $650,000 of additional funding for working capital and development for DRC. Additionally, we estimate the
need to raise at least $350,000 for overhead of Oncologix Tech, Inc. We may be unable to raise additional capital on commercially
acceptable terms, if at all, and if we raise capital through additional equity financing, existing shareholders may have their
ownership interests diluted. Our failure to be able to generate adequate funds from operations or from additional sources would
harm our business.
Uncertainties Regarding Healthcare Reimbursement
and Reform
Our ability to execute
our strategy in the medical markets depends in part on the extent to which healthcare services and products are paid by governmental
agencies, private health insurers and other organizations, such as health maintenance organizations, for the cost of such products
and related treatments. Our business could be harmed if healthcare payers and providers implement cost-containment measures and
governmental agencies implement measures that reduce payment to our customers for their use of our products.
Industry Intensely Competitive.
The medical device and
health services industry is intensely competitive. While we maintain a strong market share in hardware and disposable products
sales , there is no guarantee we can maintain our current market share. We will compete with both public and private medical device
and pharmaceutical companies that have a greater number of products on the market, have greater financial resources and have other
competitive advantages. We cannot be certain that one or more of our competitors will not receive patent protection that dominates,
blocks or adversely affects our product development or business; will benefit from significantly greater sales and marketing capabilities
or will not develop products that are accepted more widely than ours.
Healthcare Service Industry Intensely Competitive.
The healthcare service
industry is very competitive. We compete with both public and private healthcare service companies that hold Personal Care licenses
within the State of Louisiana and directly compete with companies that may have greater financial resources and have other competitive
advantages.
Intellectual Property Risk.
Our ability to obtain and
maintain patent and other protection for our products will affect our success. The patent positions of medical device companies
can be highly uncertain and involve complex legal and factual questions. Future patent rights, if granted, may not be upheld in
a court of law if challenged. Our patent rights may not provide competitive advantages for our products and may be challenged,
infringed upon or circumvented by our competitors. We cannot patent our products in all countries or afford to litigate every potential
violation worldwide. Because of the large number of patent filings in medical device, our competitors may have filed applications
or been issued patents and may obtain additional patents and proprietary rights relating to products or processes competitive with
or similar to ours. We cannot be certain that U.S. or foreign patents do not exist or will not issue that would harm our ability
to commercialize our products and product candidates.
Possible Failure to Comply with Government
Regulations.
We, and any prospective
contract manufacturers and suppliers are subject to extensive, complex, costly, and evolving governmental rules, regulations and
restrictions administered by the FDA, by other federal and state agencies, and by governmental authorities in other countries.
In the United States, our products are registered as a Class II device and cannot be marketed until they are approved for market
by the FDA. Obtaining FDA market approval involves the submission, among other information, may require clinical studies on the
product, and requires substantial time, effort and financial resources. The FDA, and other federal and state agencies, as well
as equivalent agencies of other countries with whom we will export our products, will also perform pre-licensing inspections of
our facility, if any, and our contract manufacturers' and suppliers' facilities. Our failure or the failure of our contract manufacturers
or suppliers to meet FDA or other agencies' requirements would delay or preclude our ability to sell our products potentially having
an adverse material effect on our business. Even with FDA market approval, we, as well as our partners, contract manufacturers
and suppliers, are subject to numerous FDA requirements covering, among other things, testing, manufacturing, quality control,
labeling and continuing review of medical products, and to permit government inspection at all times. Failure to meet or comply
with any rules, regulations, or restrictions of the FDA or other agencies could result in fines, unanticipated expenditures, product
delays, non-approval or recall, interruption of production, and criminal prosecution.
Exposure to Product Liability Claims.
Our design, testing, development,
manufacture, and marketing of products involve an inherent risk of exposure to product liability claims and related adverse publicity.
Although we believe that our product liability insurance is adequate, additional insurance coverage is expensive and in the future
we may be unable to obtain additional liability coverage on acceptable terms. If we are unable to obtain sufficient insurance at
an acceptable cost or if a successful product liability claim is made against us, whether fully covered by insurance or not, our
business could be harmed.
Reliance on Key Personnel
Our success will depend,
to a great extent, upon the experience, abilities and continued services of our executive officers and key management personnel.
If we lose the services of any of these officers or key personnel, our business could be harmed. Our success also will depend upon
our ability to attract and retain other highly qualified Regulatory, Marketing, Sales, and manufacturing personnel and our ability
to develop and maintain relationships with key individuals in the industry. Competition to attract qualified personnel and relationships
is intense and we compete with other companies in our industry. We may not be able to continue to attract and retain qualified
personnel.
Uncertainty as to our Ability to Initiate
Operations and Manage Growth.
Our efforts to market our
products will result in new and increased responsibilities for management personnel and will place a strain upon our management,
financial systems, and resources. We may be required to continue to implement and to improve our management, operating and financial
systems, procedures and controls on a timely basis and to expand, train, motivate and manage our employees. There can be no assurance
that our personnel, systems, procedures, and controls will be adequate to support our future operations.
Compliance with Government Regulations.
We, and all healthcare
service companies are subject to extensive, and evolving governmental rules, regulations and restrictions administered by the Department
of Health & Hospitals, the Bureau of Health Services Financing, by other federal and state agencies, and by governmental authorities.
Reliance on Key Personnel
Our success will depend,
to a great extent, upon the experience, abilities and continued services of our executive officers and key management personnel.
If we lose the services of any of these officers or key personnel, our business could be harmed. Our success also will depend upon
our ability to attract and retain other highly qualified health services Case Managers, sales and marketing, our core administrative
personnel and our ability to develop and maintain relationships with our clients in the industry.
Uncertainty as to our Ability to Grow Operations
and Manage Growth.
Our efforts to increase
market penetration will result in new and increased responsibilities for management personnel and will place a strain upon our
management, financial systems, and resources. We may be required to continue to implement and to improve our management, operating
and financial systems, procedures and controls on a timely basis and to expand, train, motivate and manage our employees. There
can be no assurance that our personnel, systems, procedures, and controls will be adequate to support our future operations.
Integration of Newly Acquired Businesses.
The Company may make strategic
acquisitions in the future and cannot assure that it will be able to successfully integrate the operations of newly-acquired businesses
into the Company's current operations. It is Management intent to consolidate various business functions to include Information
Technology, Accounting, legal under a central core operation. The failure to integrate newly acquired businesses or the inability
to make suitable strategic acquisitions in the future could have an adverse effect on the Company's business, results of operations
and financial condition.
Attraction and Retention of Qualified Personnel
The Company is dependent
on the efforts and abilities of its senior executive officers. While the Company believes that its senior management team has significant
experience and depth, appropriate senior management succession plans are in place. The Company's future success also depends on
its ability to identify, attract and retain additional qualified personnel.
Broker-Dealer Requirements May Affect Trading
and Liquidity of Our Common Stock
Section 15(g) of the
Securities Exchange Act of 1934, as amended, and Rule 15g-2 promulgated thereunder by the SEC require broker-dealers dealing
in penny stocks to provide potential investors with a document disclosing the risks of penny stocks and to obtain a manually
signed and dated written receipt of the document before effecting any transaction in a penny stock for the investor's
account.
Potential investors in
the Registrant's common stock are urged to obtain and read such disclosure carefully before purchasing any shares that are deemed
to be "penny stock." Moreover, Rule 15g-9 requires broker-dealers in penny stocks to approve the account of any investor
for transactions in such stocks before selling any penny stock to that investor. This procedure requires the broker-dealer to (i)
obtain from the investor information concerning his or her financial situation, investment experience and investment objectives;
(ii) reasonably determine, based on that information, that transactions in penny stocks are suitable for the investor and that
the investor has sufficient knowledge and experience as to be reasonably capable of evaluating the risks of penny stock transactions;
(iii) provide the investor with a written statement setting forth the basis on which the broker-dealer made the determination in
(ii) above; and (iv) receive a signed and dated copy of such statement from the investor, confirming that it accurately reflects
the investor's financial situation, investment experience and investment objectives. Compliance with these requirements may make
it more difficult for holders of our common stock to resell their shares to third parties or to otherwise dispose of them in the
market or otherwise.
Item 1B. Unresolved Staff
Comments
None.
Item 2. Properties
Our Chief Executive Officer
operates out of his office in Louisiana and our Chief Financial Officer operates out of his home office in Michigan. Dotolo operates
from a6,000 square foot industrial building containing approximately 4,500 square feet of manufacturing space and 1,500 square
feet of administration space. The Company’s manufacturing facility is located in Phoenix, Arizona and is considered adequate
for its present operations. Angels operates from two (2) administrative locations: Lafayette, Louisiana, a 2,800 square foot commercial
office and also Alexandria, Louisiana, a 1,500 square foot residential home. The business lease in Alexandria, Louisiana in on
month-to-month lease agreement and the Lafayette, Louisiana administrative office is on a 5-year lease with both monthly lease
payments negotiated below market average.
Item 3. Legal Proceedings
None.
Item 4. Mine Safety Disclosures
Not applicable.
PART II
Item 5. Market for Registrant’s
Common Equity, Related Stockholder matters and Issuer Purchases of Equity Securities
Market for Common Stock
On May 19, 2011, the Company
affected a one-for-four reverse stock split. All share and per share information have been restated to retroactively show the effect
of this stock split. The reverse split was previously approved by a majority of the Company’s shareholders on March 24, 2011.
Our common stock is traded
on the OTC:QB under the symbol “OCLG”. The high and low close prices of the Company's common stock as reported for
the last two fiscal years, by fiscal quarter (i.e. first quarter = September 1 through November 30) were as follows:
| |
High |
Low |
| FISCAL YEAR ENDED: |
|
|
| August 31, 2013 |
|
|
| First Quarter |
$ 0.08 |
$ 0.05 |
| Second Quarter |
$ 0.07 |
$ 0.04 |
| Third Quarter |
$ 0.08 |
$ 0.03 |
| Fourth Quarter |
$ 0.05 |
$ 0.01 |
| |
|
|
| FISCAL YEAR ENDED: |
|
|
| August 31, 2012 |
|
|
| First Quarter |
$ 0.04 |
$ 0.01 |
| Second Quarter |
$ 0.04 |
$ 0.01 |
| Third Quarter |
$ 0.02 |
$ 0.01 |
| Fourth Quarter |
$ 0.02 |
$ 0.01 |
| |
|
|
The closing stock price
of our common stock on November 8, 2013, was $0.017.
Recent Sales of Unregistered
Securities
The following table contains
information regarding our sales of unregistered securities during the past two fiscal years. We have made additional sales of unregistered
securities subsequent to our year end. See “LIQUIDITY AND CAPITAL RESOURCES.” The securities sold were a combination
of promissory notes convertible into shares of our common stock and sales of common stock to accredited investors. The principal
amount of each Note is equal to the amount borrowed from the investor.
| Date |
Securities |
|
Underwriters/ |
|
| Sold |
Sold |
Consideration |
Purchasers * |
Notes |
| |
|
|
|
|
| 10/6/2011 |
1,778,193 |
$ - |
Anthony Silverman, former CEO |
Anthony Silverman, our former President and CEO, converted a promissory note in the amount of $71,128 in principal and interest into 1,778,193 shares of common stock at $0.04 per share. These shares were exempt from registration under Section 4(2) of the Securities Act. |
| 10/6/2011 |
635,069 |
$ - |
Accredited Investor |
A non-affiliated accredited investor converted a promissory note in the amount of $25,403 in principal and interest into 635,069 shares of common stock at $0.04 per share. These shares were exempt from registration under Section 4(2) of the Securities Act. |
| 10/16/2011 |
625,000 |
$ 25,000 |
Accredited Investor |
The Company sold 625,000 shares of common stock to a non-related accredited investor at $0.04 per share. These shares were exempt from registration under Section 4(2) of the Securities Act |
| 1/26/2012 |
1,000,000 |
$ 40,000 |
Accredited Investor |
The Company sold 1,000,000 shares of common stock to a non-related accredited investor at $0.04 per share. These shares were exempt from registration under Section 4(2) of the Securities Act |
| 4/26/2012 |
250,000 |
$ 10,000 |
Accredited Investor |
The Company sold 250,000 shares of common stock to a non-related accredited investor at $0.04 per share. These shares were exempt from registration under Section 4(2) of the Securities Act |
| 8/24/2012 |
2,276,182 |
$ - |
Anthony Silverman, former CEO |
Anthony Silverman, our former President and CEO, converted a promissory note in the amount of $45,524 in principal and interest into 2,276,182 shares of common stock at $0.02 per share. These shares were exempt from registration under Section 4(2) of the Securities Act. |
| 10/15/2012 |
1,000,000 |
$ 20,000 |
Accredited Investor |
The Company sold 1,000,000 shares of common stock to a non-related accredited investor at $0.02 per share. These shares were exempt from registration under Section 4(2) of the Securities Act |
| 1/6/2013 |
2,000,000 |
$ 20,000 |
Accredited Investor |
The Company sold 2,000,000 shares of common stock to a non-related accredited investor at $0.01 per share. These shares were exempt from registration under Section 4(2) of the Securities Act |
| 2/8/2013 |
1,024,164 |
$ - |
Anthony Silverman, former CEO |
Anthony Silverman, our former President and CEO, converted a promissory note in the amount of $10,242 in principal and interest into 1,024,164 shares of common stock at $0.01 per share. These shares were exempt from registration under Section 4(2) of the Securities Act. |
| 6/17/2013 |
2,000,000 |
$ 10,000 |
Accredited Investor |
The Company sold 2,000,000 shares of common stock to a non-related accredited investor at $0.005 per share. These shares were exempt from registration under Section 4(2) of the Securities Act |
| 7/17/2013 |
4,000,000 |
$ 20,000 |
Accredited Investor |
The Company sold 4,000,000 shares of common stock to a non-related accredited investor at $0.005 per share. These shares were exempt from registration under Section 4(2) of the Securities Act |
| 8/8/2013 |
6,000,000 |
$ 36,000 |
Accredited Investor |
The Company sold 6,000,000 shares of common stock to a non-related accredited investor at $0.006 per share. These shares were exempt from registration under Section 4(2) of the Securities Act |
| |
|
|
|
|
| |
|
|
|
|
| |
20,175,346 |
$ 181,000 |
|
|
| |
|
|
|
|
| * There were no underwriters associated with any of our Sales of Unregistered Securities. |
Issuer Repurchases of
Equity Securities
We did not repurchase any
of our equity securities during the fourth quarter of the year ended August 31, 2013.
Holders
As of November 8, 2013,
the Company had 259 shareholders of record of its common stock. As of November 8, 2013, 1,331 owners of our common stock held them
in the names of various broker-dealers. As of November 8, 2013, the Company had one Unit holder of record. As of November
8, 2013, the Company had ten owners of Units who held them in the names of various brokers.
Dividend Policy
The Company has never declared
any cash dividends on any of the Company’s equity securities and currently plans to retain future earnings, if any, for business
growth.
Stock Performance Graph
We are a “smaller
reporting company”, as defined by regulation S-K and as such, are not required to provide the information contained in this
item pursuant to Regulation S-K.
Equity Compensation
Plan Information
The following table sets
forth information regarding the number of shares of our common stock that may be issued pursuant to our equity compensation plans
or arrangements as of the end of fiscal 2013.
2000 Stock Incentive Plan
| | |
Number of Securities | |
| |
Number of Securities |
| | |
To Be Issued Upon | |
Weighted Average | |
Remaining Available |
| | |
Exercise of Outstanding | |
Exercise Price of | |
For Future |
| | |
Options | |
Outstanding Options | |
Issuance Under Plans |
| | |
| | | |
| | | |
| | |
| Equity compensation plans | |
| | | |
| | | |
| | |
| approved by stockholders | |
| 242,085 | | |
$ | 1.123 | | |
| 6,442,418 | |
| | |
| | | |
| | | |
| | |
| Equity compensation plans | |
| | | |
| | | |
| | |
| not approved by stockholders | |
| — | | |
$ | 0.000 | | |
| — | |
| | |
| | | |
| | | |
| | |
| TOTAL | |
| 242,085 | | |
$ | 1.123 | | |
| 6,442,418 | |
The Company is authorized
to issue up to 7,500,000 shares of common stock under its 2000 Stock Incentive Plan. Shares may be issued as incentive stock options,
non-statutory stock options, deferred shares or restricted shares. Options are granted at the fair market value of the common stock
on the date of the grant and have terms of up to ten years. The 2000 Stock Incentive Plan also provides for an annual grant of
options to members of our Board of Directors. For fiscal years ended August 31, 2012, 2011, 2010, 2009 and 2008, our Board of Directors
elected to waive the grant of these annual options. We have 6,442,418 shares of common available for future issuance under our
2000 Stock Incentive Plan as of August 31, 2013. Under the 2000 Stock Incentive Plan the price of the granted common stock options
are equal to the fair market value of such shares on the date of grant. This plan has been approved by our shareholders.
2013 Omnibus Incentive Plan
| | |
Number of Securities | |
| |
Number of Securities |
| | |
To Be Issued Upon | |
Weighted Average | |
Remaining Available |
| | |
Exercise of Outstanding | |
Exercise Price of | |
For Future |
| | |
Options | |
Outstanding Options | |
Issuance Under Plans |
| | |
| | | |
| | | |
| | |
| Equity compensation plans | |
| | | |
| | | |
| | |
| approved by stockholders | |
| — | | |
$ | 0.00 | | |
| — | |
| | |
| | | |
| | | |
| | |
| Equity compensation plans | |
| | | |
| | | |
| | |
| not approved by stockholders | |
| — | | |
$ | 0.00 | | |
| 10,000,000 | |
| | |
| | | |
| | | |
| | |
| TOTAL | |
| — | | |
$ | 0.00 | | |
| 10,000,000 | |
The Company is authorized
to issue up to 10,000,000 shares of common stock under its 2013 Omnibus Incentive Plan to employees, officers, directors and consultants.
The issuance adoption of this plan has been approved by the Company’s Board of Directors on May 20, 2013. This plan has not
been approved by the Company’s shareholders and consequently, we cannot issue Incentive Stock Options to employees at this
time. Any options are granted at the fair market value of the common stock on the date of the grant and have terms of up to ten
years. We have 10,000,000 shares of common available for future issuance under our 2013 Omnibus Incentive Plan as of August 31,
2013. Under the 2013 Omnibus Incentive Plan the price of the granted common stock options are equal to the fair market value of
such shares on the date of grant.
For a description of our
2000 Stock Incentive Plan and 2013 Omnibus Incentive Plan, please see the description set forth in Note 8 of our Consolidated Financial
Statements.
Transfer Agent
Our transfer agent and
registrar are American Stock Transfer and Trust Co., 6201 15th Avenue, Brooklyn, NY 11219, Telephone (718) 921-8200.
Item 6. Selected Financial Data
We are a “smaller
reporting company”, as defined by regulation S-K and as such, are not required to provide the information contained in this
item pursuant to Regulation S-K.
Item 7. Management’s
discussion and Analysis of Financial Condition and Results of Operations
The following discussion
and analysis should be read in conjunction with our Consolidated Financial Statements and notes appearing elsewhere in this Report.
GENERAL
Oncologix Tech, Inc was
originally formed in 1995 as "Wavetech, Inc." a New Jersey corporation and changed our corporate domicile to Nevada in
December 1997, by merging into a Nevada corporation named, "Interpretel International, Inc." We subsequently changed
our name to "BestNet Communications Corp.” in 2000. At the time we provided worldwide long distance telephone communication
and teleconferencing services to commercial and residential consumers through the internet. That business was never profitable
and we disposed of our communications February 2007. During 2006 we entered the medical device industry with the acquisition of
JDA Medical Technologies, Inc. Currently, we are a diversified medical device and healthcare holding company. For its customers,
Oncologix provides FDA approved medical devices and state licensed healthcare services. For its shareholders, Oncologix acquires
profitable operations that build, maintain and nourish shareholder value. The Company’s corporate mission is to be the best
small cap medical device and healthcare holding company in North America.
RECENT ACQUISITIONS AND DIVESTURES
In furthering our strategy
to be the best small cap medical device and healthcare holding company, we acquired Dotolo Research Corporation (“DRC”)
on March 22, 2013 and Angels of Mercy, Inc. (“AOM”) on August 1, 2013. These acquisitions are further described in
Note 4 – Acquisition Activities, in the Notes to Consolidated Financial Statements appearing in Item 8 of this Form 10-K.
DRC is a FDA Registered,
Class II, medical device manufacturer with 25 years of product sales in the hydro-colonic irrigation, bowel preparation market.
Dotolo Research Corporation began operations in 1989 and markets hardware and disposable products to a customer base of over 900+
customers both domestically and internationally. The Company currently operates in a limited, but competitive environment in hydro-colonic
irrigation, of which there are only four (4) companies that are approved by the FDA to manufacture a Class II medical device for
colon-hydro therapy.
Angels of Mercy Inc. (“AOM”)
provides non-medical, Personal Care Attendant (PCA) services, Supervised Independent Living (SIL), Long-Term Senior Care, and other
approved programs performed by a trained caregiver that will meet the health service needs of beneficiaries whose disabilities
preclude the performance of certain independent living skills related to the activities of daily living (ADL).
On November 1, 2013, the
Company’s management and Board of Directors determined to dispose of Oncologix Corporation its Brachytherapy medical device
subsidiary. With our acquisition of Dotolo we currently have a viable FDA approved medical device requiring minimal capital investment
to bring the Company to cash breakeven. Continued support of Oncologix Corporation would cost the Company millions with no guarantee
of FDA approval. Furthermore, as part of the disposal, the Company will be relieved of over $90,000 in debt.
RESULTS OF OPERATIONS
Comparison of the fiscal years ended
August 31, 2013 (‘fiscal 2013”) and 2012 (‘fiscal 2012”)
Revenue
Revenues were $244,246 for fiscal 2013.There
were no revenues reflected in our fiscal 2012 financial statements. Revenues were primarily driven by our acquisition of AOM in
August 2013.
Cost of Revenues
Cost of revenues were $195,699
for fiscal 2013 as a result of our acquisitions of Dotolo and Angels. There were no cost of revenues reflected in our fiscal 2012
financial statements. Cost of revenues for DRC were $38,991 for fiscal 2013, and consist primarily of direct labor and minor purchases
of materials for our products. Cost of revenues for AOM were $156,708 for fiscal 2013, and consist primarily of wages paid to personal
care service employees who directly provide the PCA and SIL services.
General and Administrative Expense
General and administrative
expenses primarily include officer and administrative salaries, office rent, utilities, legal and accounting services, insurance,
public filing costs as well as other incidental overhead costs.
General and administrative
expense increased to $329,667 during fiscal 2013, from $130,769, an increase of 152% or $198,898 from the comparable period in
fiscal 2012. The primary reason for the increase is due to the general and administrative expenses associated with the acquisitions
of DRC and AOM during fiscal 2013. Payroll and related expenses increased to $193,029 during the fiscal 2013, from $79,646 in
the comparable period in fiscal 2013, due primarily to the hiring of our CEO,
President of Angels and administrative salaries at AOM as a result
of the acquisition. Legal expense increased to $16,531 fiscal 2013, from $494 in the comparable period in fiscal 2012, due primarily
to legal fees incurred in fiscal 2013 related to the acquisitions of DRC and AOM. Rent expense increased to $15,500 during fiscal
2013, from $0 in the comparable period in fiscal 2012, as a result of facilities rented by both DRC and AOM which were acquired
in fiscal 2013. Travel and meals expense increased to $12,697 during fiscal 2013, from $0 in the comparable period in fiscal 2012,
due primarily to a mileage reimbursement policy with AOMs’ employees as well as officer travel related to our two acquisitions
in fiscal 2013. Outside services increased to $14,168 during fiscal 2013, from $5,694 in the comparable period in fiscal 2012,
due primarily to additional SEC filings in fiscal 2013 related to our acquisitions as well as additional XBRL filing requirements.
Depreciation and Amortization
Depreciation and amortization
increased to $5,455 during fiscal 2013, from $450 during fiscal 2012. The increase in depreciation and amortization was the result
of fixed assets acquired in our two fiscal 2013 company acquisitions.
Interest Income
We had no interest income
in fiscal 2013 or fiscal 2012.
Interest and Finance Charges
Interest and finance charges
increased to $34,181 during fiscal 2013 from $10,768, an increase of over 100% from fiscal 2012. The increase is primarily attributable
to the acquisition of additional non-related party debt as a result of the acquisition of DRC during fiscal 2013.
Interest and finance charges
– related parties increased to $152,087 during fiscal 2013, from $25,311, an increase of over 100% or $126,776 for the comparable
period in fiscal 2012. The increase is primarily attributable to the issuance of warrants as finders’ fees to a related party
during fiscal 2013.
A summary of interest and finance charges is
as follows:
| | |
For the Year Ended |
| | |
August 31, | |
August 31, |
| | |
2013 | |
2012 |
| Interest expense on non-convertible notes | |
$ | 4,734 | | |
$ | 306 | |
| Interest expense on non-convertible notes - related parties | |
| 579 | | |
| 930 | |
| Interest expense on convertible notes payable | |
| 10,000 | | |
| 10,175 | |
| Interest expense on convertible notes payable - related parties | |
| 14,102 | | |
| 14,381 | |
| Amortization of note payable discounts | |
| — | | |
| — | |
| Amortization of note payable discounts - related parties | |
| — | | |
| 10,000 | |
| Other interest and finance charges | |
| 156,853 | | |
| 288 | |
| | |
| | | |
| | |
| Total interest and finance charges | |
$ | 186,268 | | |
$ | 36,080 | |
Induced Conversion Expense
Induced conversion expense
decreased to $10,242 during fiscal 2013, from $25,042, a decrease of 60% for the comparable period in fiscal 2012. The decrease
was due a fewer notes converted at a reduced conversion price in fiscal 2013.
Loss on Conversion of Notes Payable
Loss on conversion of notes
payable decreased to $0 for fiscal 2013, from $92,725, a decrease of 100% for the comparable period in fiscal 2012. The decrease
was due to the issuance of shares of common stock for the conversion of two related party convertible promissory notes during fiscal
2012 at below market value.
Income Taxes
At August 31, 2013, the
Company had federal net operating loss carry forwards totaling approximately $27,800,000. At August 31, 2013, the Company did not
have any state net operating loss carry forwards. The federal net operating loss carry forwards expire in various amounts beginning
in 2004 and ending in 2033. Due to our history of incurring losses from operations, we have provided a valuation allowance for
our net operating loss carry forward.
OUR SEGMENTS
We identify our reportable
segments based on our management structure, financial data and market. We have identified two business segments: Medical Device
Manufacturing and Personal Care Services.
Our Medical Device Manufacturing
segment consists of the products of Dotolo Research Corporation. This segment designs, develops, manufactures and distributes the
Toxygen medical device hardware system with disposables speculums and tubing.
Our Personal Care Service
segment consists of the services of Angels of Mercy, Inc. This segment provides non-medical, Personal Care Attendant (PCA) services,
Supervised Independent Living (SIL), Long-Term Senior Care, and other approved programs performed by a trained caregiver that will
meet the health service needs of beneficiaries whose disabilities preclude the performance of certain independent living skills
related to the activities of daily living (ADL).
Medical Device Manufacturing
Below is our income statement
for our Medical Device Manufacturing segment.
| | |
For the Years Ended |
| | |
August 31, | |
August 31, |
| | |
2013 | |
2012 |
| | |
| |
|
| Revenues | |
$ | 28,998 | | |
$ | — | |
| | |
| | | |
| | |
| Cost of revenues | |
| 38,991 | | |
| — | |
| | |
| | | |
| | |
| Gross profit | |
| (9,993 | ) | |
| — | |
| | |
| | | |
| | |
| Operating expenses: | |
| | | |
| | |
| General and administrative | |
| 49,431 | | |
| — | |
| Depreciation and amortization | |
| 4,048 | | |
| — | |
| | |
| | | |
| | |
| Total operating expenses | |
| 53,479 | | |
| — | |
| | |
| | | |
| | |
| Loss from operations | |
| (63,472 | ) | |
| — | |
| | |
| | | |
| | |
| Other income (expense): | |
| | | |
| | |
| Interest and finance charges | |
| (1,877 | ) | |
| — | |
| Other income (expenses) | |
| 126 | | |
| — | |
| | |
| | | |
| | |
| Total other income (expense) | |
| (1,751 | ) | |
| — | |
| | |
| | | |
| | |
| Loss from operations | |
$ | (65,223 | ) | |
$ | — | |
Personal Care Services
Below is our income statement
for our Personal Care Services.
| | |
For the Years Ended |
| | |
August 31, | |
August 31, |
| | |
2013 | |
2012 |
| | |
| |
|
| Revenues | |
$ | 215,248 | | |
$ | — | |
| | |
| | | |
| | |
| Cost of revenues | |
| 156,708 | | |
| — | |
| | |
| | | |
| | |
| Gross profit | |
| 58,540 | | |
| — | |
| | |
| | | |
| | |
| Operating expenses: | |
| | | |
| | |
| General and administrative | |
| 48,439 | | |
| — | |
| Depreciation and amortization | |
| 1,049 | | |
| — | |
| | |
| | | |
| | |
| Total operating expenses | |
| 49,488 | | |
| — | |
| | |
| | | |
| | |
| Income (loss) from operations | |
| 9,052 | | |
| — | |
| | |
| | | |
| | |
| Other income (expense): | |
| | | |
| | |
| Interest and finance charges | |
| (10,000 | ) | |
| — | |
| | |
| | | |
| | |
| Total other income (expense) | |
| (10,000 | ) | |
| — | |
| | |
| | | |
| | |
| Loss from operations | |
$ | (948 | ) | |
$ | — | |
CRITICAL ACCOUNTING POLICIES
“Management's
Discussion and Analysis of Financial Condition and Results of Operations ” (“MDA”) discusses our consolidated
financial statements that have been prepared in accordance with accounting principles generally accepted in the United States of
America. The preparation of these financial statements requires us to make estimates and assumptions that affect the reported amount
of assets and liabilities at the date of the financial statements, the disclosure of contingent assets and liabilities at the date
of the financial statements and the reported amounts of revenues and expenses during the reporting period. On an on-going basis,
we evaluate our estimates and judgments, including those related to research and development costs, deferred income taxes and the
impairment of long-lived assets. We base our estimates and judgments on historical experience and on various other factors that
are believed to be reasonable under the circumstances. The result of these estimates and judgments form the basis for making conclusions
about the carrying value of assets and liabilities that are not readily apparent from other sources. Actual results may differ
from these estimates under different assumptions or conditions; changes in these estimates as a result of future events may have
a material effect on the Company’s financial condition. The SEC suggests that all registrants list their most “critical
accounting policies” in MDA. A critical accounting policy is one which is both important to the portrayal of the Company’s
financial condition and results of operations and requires management’s most difficult, subjective or complex judgments,
often as a result of the need to make estimates about the effect of matters that are inherently uncertain. Management believes
the following critical accounting policies affect its more significant judgments and estimates in the preparation of its consolidated
financial statements: The impairment of long-lived assets, stock based compensation, deferred income tax valuation allowances,
pending or threatening litigation and the allocation of assets acquired and liabilities assumed in acquisitions. Please see Note
2 – Critical Accounting Policies for a further discussion of our accounting policies.
Revenue Recognition. Revenue is
recognized by the Company in accordance with Accounting Standards Codification Topic (“ASC”) 605.
Accordingly, revenue is recognized when all the following criteria are met: persuasive evidence of an arrangement exists;
delivery has occurred; the seller’s price to the buyer is fixed and determinable; and collectability is reasonably
assured. Currently, the primary revenue for the Company is derived from its sales in its Personal Care Services Segment. AOM
is reimbursed for each approved “Unit of Service” provided, as determined by the Health Care Financing
Administration (HCFA), the Department of Social Services and based upon a detailed Case Management, Plan of Care for each
beneficiary. A unit of service for PCA services will be one-half hour. At least fifteen (15) minutes of service must be
provided to the individual in order for AOM to bill for a unit of service. A maximum of 1,825 hours (3,650 half-hour units)
per beneficiary, per year can be billed under the Medicaid waiver program. Our only customer is the State of Louisiana who
reimburses us for the services we provide. We currently experience less than a two percent claims rejection rate.
Accounts Receivable.
The Company’s receivables in its medical device segment are subject to credit risk, and the Company typically does not
require collateral on its accounts receivable. Receivables are generally due within 30 days. The Company maintains an allowance
for uncollectable receivables that reduces the receivables to amounts that are expected to be collected. . The Company’s
receivables in its personal care segment are generally repaid in 14 days on average. We bill the State of Louisiana on a weekly
basis and are reimbursed two weeks later via electronic funds transfer. We are able to resubmit any rejected claims an additional
two times to the state for payment within the next twelve months. Currently we do not maintain an allowance for uncollectible receivables
as we analyze our claim rejection rate and make significant changes to prior company policies regarding rejected claims. Upon final
rejection, these receivables are written off to bad debt expense.
Long-Lived
Assets. ASC 360 – Property, Plant and Equipment addresses financial accounting and reporting for the impairment or disposal
of long-lived assets. The Company periodically evaluates whether events and circumstances have occurred that may warrant revision
of the estimated useful life of property and equipment or whether the remaining balance of property and equipment, or other long-lived
assets, should be evaluated for possible impairment. Instances that may lead to an impairment include: (i) a significant decrease
in the market price of a long-lived asset group; (ii) a significant adverse change in the extent or manner in which a long-lived
asset or asset group is being used or in its physical condition; (iii) a significant adverse change in legal factors or in
the business climate that could affect the value of a long-lived asset or asset group, including an adverse action or assessment
by a regulatory agency; (iv) an accumulation of costs significantly in excess of the amount originally expected for the acquisition
or construction of a long-lived asset or asset group; (v) a current-period operating or cash flow loss combined with a history
of operating or cash flow losses or a projection or forecast that demonstrates continuing losses associated with the use of a long-lived
asset or asset group; or (vi) a current expectation that, more likely than not, a long-lived asset or asset group will be
sold or otherwise disposed of significantly before the end of its previously estimated useful life.
An estimate of the related
undiscounted cash flows, excluding interest, over the remaining life of the property and equipment and long-lived assets is used
in assessing recoverability. Impairment loss is measured by the amount which the carrying amount of the asset(s) exceeds the fair
value of the asset(s). The Company primarily employs two methodologies for determining the fair value of a long-lived asset: (i) the
amount at which the asset could be bought or sold in a current transaction between willing parties or (ii) the present value
of estimated expected future cash flows grouped at the lowest level for which there are identifiable independent cash flows.
Goodwill and other intangible
assets.
The Company
adopted Accounting Standards Update 2011-08 “Intangibles – Goodwill and Other (Topic 350): Testing Goodwill for Impairment
(“ASU 2011-08”) in the fourth quarter of fiscal 2013 due to its recent acquisition of Dotolo Research Corporation and
Angels of Mercy, Inc. ASU 2011-08 permits an entity to first assess qualitative factors to determine whether it is more likely
that not that the fair value of a reporting unit is less than its carrying amount. Goodwill represents the excess of the cost of
a business combination over the fair value of the net assets acquired and these costs are subject to annual impairment tests.
We accounted
for the acquisition of Dotolo Research Corporation and Angels of Mercy, Inc. using the acquisition method of accounting under ASC
805 and ASC 810-10-65. The purchase price was allocated first to identifiable current then fixed assets as well as liabilities
assumed. We then earmarked identifiable intangibles, with the remainder to goodwill. We identified patents as our identifiable
asset for Dotolo Research Corporation. Amounts allocated to Goodwill for the acquisition of Dotolo are based on expanding our product
into the medical market and the potential upside of the sale with a FDA medical device product with a reimbursement code. Dotolo
is one of four companies worldwide with this FSA approved medical device product. Amounts allocated to goodwill for Angels of Mercy,
Inc. are based on increased clients and future revenues.
The Company
evaluates the recoverability of its indefinite lived intangible assets, which consist of Dotolo Research Corporation and Goodwill
in Angels of Mercy, Inc., based on estimates of future royalty payments that are avoided through its ownership of the intangibles
and patents, discounted to their present value. In determining the estimated fair value of the intangibles and patents, management
considers current and projected future levels of revenue based on its plans for Dotolo, business trends, prospects and market and
economic conditions. See Note 4 – Acquisitions for further information on the acquisition of Dotolo.
Pursuant to
ASC 350-20-35, we have identified two reporting units in our business, our medical device segment which consists of Dotolo Research
Corporation and our personal care segment which consists of Angels of Mercy, Inc. We follow the two step process in ASC 350-20-35
for impairment testing. In the first step we compare the fair value of the reporting unit as a whole to its carrying value, including
goodwill. For both reporting units, we have determined that the reporting units’ fair value exceeds its carrying value. We
also compare the carrying value of goodwill by itself for both reporting units.
The following
explains the results of our impairment testing. We have allocated $478,721 of goodwill to the Angels of Mercy, Inc. reporting
unit. As of August 31, 2013 the fair value exceeds the carrying value of goodwill by 34%. We have allocated $1,217,704 of goodwill
to the reporting unit Dotolo Research Corporation. As of August 31, 2013 the fair value exceeds the carrying value of goodwill
by 65%. In calculating the valuation, we used a discounted cash flow method based on the future 5 years cash flows of each reporting
unit. We used a discount rate of 8% which is currently higher that the current long term interest rate. An increase in the overall
national interest rate could have a negative impact on our valuation. An additional risk is the possibility of cash flow projections
falling short of our 5 year estimate amount.
LIQUIDITY AND CAPITAL RESOURCES
During fiscal year
2013, we acquired Dotolo Research Corporation and Angels of Mercy, Inc. While these acquisitions greatly increase the value
of our Company, they are not fully cash flow positive. Angels is currently cash flow positive but alone is unable to support
all the corporate overhead or needs of our other subsidiary, Dotolo. In addition, we will need additional funds for further
development and improvement of our medical device product. We also decided to dispose of Oncologix Corporation and cease our
relationship with IUTM. We anticipated that the cost of taking the Oncosphere project would take years and would cost the
company millions of dollars without any guarantee of FDA approval. We anticipate that we will require $1,000,000 for
operations during the next fiscal year. These funds will allow us to make improvements to our medical device products,
procure raw materials for manufacturing, and establish additional sales channels thereby moving the company to cash-flow
breakeven, cover corporate overhead and service our debt.
On August 31, 2013, we
had cash and cash equivalents of $39,456. Our historical and current operating losses to date have been covered by equity and debt
financing obtained from private investors, including certain present and former members of our Board of Directors. To date, we
never achieved positive cash flow or profitability while we tried to develop our Oncosphere product.
As of August 31, 2013,
we had total outstanding short-term and long-term debt and liabilities totaling $2,394,595. Please see Note 7 for further information.
CODE OF ETHICS
Our
Board of Directors has adopted a code of ethics that applies to our principal executive officer, principal financial officer and
to other persons performing similar functions. The code of ethics is designed to deter wrongdoing and to promote honest and ethical
conduct, full, fair, accurate, timely and understandable disclosure, compliance with applicable laws, rules and regulations, prompt
internal reporting of violations of the code and accountability for adherence to the code. We will provide a copy of our code of
ethics, without charge, to any person upon receipt of written request for such delivered to our corporate headquarters. All such
requests should be send to Oncologix Tech, Inc., P.O. Box 8832, Grand Rapids, MI 49518-8832.
OFF-BALANCE SHEET ARRANGEMENTS
As of August 31, 2013 and 2012, we had no off-balance
sheet arrangements.
Recent Accounting Pronouncements
We have evaluated all Accounting
Standards Updates through the date the financial statements were issued and do not believe any will have a material impact.
New Accounting Standard
In July 2012, the Financial
Accounting Standards Board (“FASB”) issued Accounting Standards Update 2012-02 “Intangibles – Goodwill
and Other (Topic 350): Testing Indefinite-Lived Intangible Assets for Impairment” (“ASU 2012-02”). ASU 2012-02
permits entities to first assess qualitative factors to determine whether it is more likely than not that the fair value of an
indefinite-lived intangible asset is impaired as a basis for determining whether it is necessary to perform the quantitative impairment
test. Under the amendments in ASU 2012-02, an entity is not required to calculate the fair value of an indefinite-lived intangible
asset unless it determines that it is more likely than not that the fair value of the asset is less than its carrying amount. An
entity also will have the option to bypass the qualitative assessment for any indefinite-lived intangible asset in any period and
proceed directly to performing the quantitative impairment test. ASU 2012-02 is effective for interim and annual indefinite-lived
intangible asset impairment tests performed for fiscal years beginning on or after September 15, 2012, with early adoption permitted.
The Company’s adoption of ASU 2012-02 is not expected to have an impact on its consolidated financial statements.
Item 7A. Quantitative and Qualitative Disclosures
About Market Risk
We are a “smaller
reporting company”, as defined by regulation S-K and as such, are not required to provide the information contained in this
item pursuant to Regulation S-K.
Item 8. Financial Statements and Supplementary
Data
Oncologix Tech, Inc. and Subsidiaries
Consolidated Financial Statements
Year Ended August 31, 2013 and 2012
Contents
| Report of Seale and Beers, CPAs, Independent Registered Public Accounting Firm |
F-1 |
| |
|
| Audited Financial Statements |
|
| |
|
| Consolidated Balance Sheets |
F-3 |
| Consolidated Statements of Operations |
F-4 |
| Consolidated Statements of Changes in Stockholders' Deficit |
F-5 |
| Consolidated Statements of Cash Flows |
F-6 |
| Notes to Consolidated Financial Statements |
F-7 |
SEALE AND BEERS, CPAs
PCAOB & CPAB REGISTERED AUDITORS
www.sealebeers.com
REPORT OF INDEPENDENT REGISTERED PUBLIC
ACCOUNTING FIRM
To the Board of Directors and Stockholders
of
Oncologix Tech, Inc.
We have audited the accompanying
balance sheets of Oncologix Tech, Inc. as of August 31, 2012 and 2013, and the related statements of income, stockholders’
equity (deficit), and cash flows for each of the years in the two-year period ended August 31, 2013. Oncologix Tech, Inc.’s management is responsible for these financial statements. Our responsibility
is to express an opinion on these financial statements based on our audits.
We conducted our audits in accordance with the standards
of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free of material misstatement. The company is not required
to have, nor were we engaged to perform, an audit of its internal control over financial reporting. Our audit included consideration
of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances,
but not for the purpose of expressing an opinion on the effectiveness of the company’s internal control over financial reporting.
Accordingly, we express no such opinion. An audit also includes examining, on a test basis, evidence supporting the amounts and
disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management,
as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our
opinion.
As discussed in Note 18 to the accompanying consolidated
financial statements, Oncologix Tech, Inc. has restated its financial statements for the year ended 2013.
In our opinion, the financial statements referred to
above present fairly, in all material respects, the financial position of Oncologix Tech, Inc. as of August 31, 2012 and 2013,
and the related statements of income, stockholders’ equity (deficit), and cash flows for each of the years in the two-year
period ended August 31, 2013 in conformity with accounting principles
generally accepted in the United States of America.
The accompanying financial statements have been prepared
assuming that the Company will continue as a going concern. As discussed in Note 3 to the financial statements, the Company has
no revenues, has negative working capital at August 31, 2013, has incurred recurring losses and recurring negative cash flow from
operating activities, and has an accumulated deficit which raises substantial doubt about its ability to continue as a going concern.
Management’s plans concerning these matters are also described in Note 3. The financial statements do not include any adjustments
that might result from the outcome of this uncertainty.
/s/ Seale and Beers, CPAs
Seale and Beers, CPAs
Las Vegas, Nevada
December 16, 2013, except for
Note 18, as to which the date is February 10, 2014
50 S. Jones Blvd. Suite 202 Las Vegas,
NV 89107 Phone: (888)727-8251 Fax: (888)782-2351
ONCOLOGIX TECH,
INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE
SHEETS
AUGUST 31, 2013 AND 2012
| | |
| |
|
| | |
August 31, | |
August 31, |
| | |
2013 | |
2012 |
| ASSETS |
|
|
|
| Current Assets: | |
| | | |
| | |
| Cash and cash equivalents | |
$ | 39,456 | | |
$ | 1,931 | |
| Accounts receivable (net of allowance of $3,000) | |
| 108,319 | | |
$ | — | |
| Inventory | |
| 31,271 | | |
$ | — | |
| Prepaid expenses and other current assets | |
| 39,176 | | |
| 2,993 | |
| | |
| | | |
| | |
| Total current assets | |
| 218,222 | | |
| 4,924 | |
| | |
| | | |
| | |
| Property and equipment (net of accumulated depreciation | |
| | | |
| | |
| of $11,820 and $8,916) | |
| 78,533 | | |
| 1,481 | |
| Deposits and other assets | |
| 10,050 | | |
| — | |
| Goodwill | |
| 1,696,425 | | |
| — | |
| Patents, registrations (net of amortization) | |
| 30,620 | | |
| — | |
| | |
| | | |
| | |
| Total assets | |
$ | 2,033,850 | | |
$ | 6,405 | |
| | |
| | | |
| | |
| LIABILITIES AND STOCKHOLDERS' DEFICIT | |
| | | |
| | |
| Current liabilities: | |
| | | |
| | |
| Convertible notes payable | |
$ | 125,000 | | |
$ | — | |
| Convertible notes payable - related parties | |
| 235,025 | | |
| — | |
| Notes payable | |
| 138,494 | | |
| — | |
| Notes payable - related parties | |
| 56,200 | | |
| — | |
| Accounts payable and other accrued expenses | |
| 895,664 | | |
| 142,990 | |
| Accrued interest payable | |
| 66,969 | | |
| 42,575 | |
| Accrued interest payable - related parties | |
| 65,743 | | |
| 48,216 | |
| | |
| | | |
| | |
| Total current liabilities | |
| 1,583,095 | | |
| 233,781 | |
| | |
| | | |
| | |
| Long-term liabilities: | |
| | | |
| | |
| Notes payable - (net of discount of $0 and $0) | |
| 811,500 | | |
| 125,000 | |
| Convertible notes payable - related parties (net of discount of $0 and $0) | |
| — | | |
| 235,025 | |
| | |
| | | |
| | |
| Total long-term liabilities | |
| 811,500 | | |
| 360,025 | |
| | |
| | | |
| | |
| Total liabilities | |
| 2,394,595 | | |
| 593,806 | |
| | |
| | | |
| | |
| Stockholders' Deficit: | |
| | | |
| | |
| Series A Preferred stock, par value $.001 per share; 10,000,000 shares authorized; 129,062
and 129,062 shares issued and outstanding at August 31, 2013 and August 31, 2012, respectively | |
| 129 | | |
| 129 | |
| Series D Preferred stock, par value $.001 per share; 10,000,000 shares authorized; 58,564 and
0 shares issued and outstanding at August 31, 2013 and August 31, 2012, respectively | |
| 59 | | |
| — | |
| Common stock, par value $.001 per share; 200,000,000 shares authorized; 74,587,422 and
57,563,258 shares issued and outstanding at August 31, 2013 and August 31, 2012, respectively | |
| 74,587 | | |
| 57,563 | |
| Additional paid-in capital | |
| 58,560,265 | | |
| 57,697,233 | |
| Accumulated deficit prior to reentering development stage | |
| (58,992,296 | ) | |
| (58,338,851 | ) |
| Deficit accumulated during the development stage | |
| — | | |
| — | |
| Noncontrolling interest | |
| (3,489 | ) | |
| (3,475 | ) |
| Common stock subscribed | |
| — | | |
| — | |
| | |
| | | |
| | |
| Total stockholders' deficit | |
| (360,745 | ) | |
| (587,401 | ) |
| | |
| | | |
| | |
| Total liabilities and stockholders' deficit | |
$ | 2,033,850 | | |
$ | 6,405 | |
The accompanying notes are an integral part
of these consolidated financial statements.
ONCOLOGIX TECH, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
| | |
For the Years Ended |
| | |
August 31, | |
August 31, |
| | |
2013 | |
2012 |
| | |
| |
|
| Revenues | |
$ | 244,246 | | |
$ | — | |
| | |
| | | |
| | |
| Cost of revenues | |
| 195,699 | | |
| — | |
| | |
| | | |
| | |
| Gross profit | |
| 48,547 | | |
| — | |
| | |
| | | |
| | |
| Operating expenses: | |
| | | |
| | |
| General and administrative | |
| 329,667 | | |
| 130,769 | |
| Depreciation and amortization | |
| 5,455 | | |
| 450 | |
| | |
| | | |
| | |
| Total operating expenses | |
| 335,122 | | |
| 131,219 | |
| | |
| | | |
| | |
| Loss from operations | |
| (286,575 | ) | |
| (131,219 | ) |
| | |
| | | |
| | |
| Other income (expense): | |
| | | |
| | |
| Interest and finance charges | |
| (34,181 | ) | |
| (10,768 | ) |
| Interest and finance charges - related parties | |
| (152,087 | ) | |
| (25,312 | ) |
| Loss on conversion of notes payable - related parties | |
| (10,242 | ) | |
| (92,758 | ) |
| Induced conversion expense | |
| — | | |
| (25,402 | ) |
| Loss on disposal of assets | |
| — | | |
| (110 | ) |
| Acquisition costs | |
| (173,864 | ) | |
| — | |
| Other income (expenses) | |
| 3,490 | | |
| — | |
| | |
| | | |
| | |
| Total other income (expense) | |
| (366,884 | ) | |
| (154,350 | ) |
| | |
| | | |
| | |
| Loss from operations | |
| (653,459 | ) | |
| (285,569 | ) |
| | |
| | | |
| | |
| Less loss attributable to noncontrolling interest | |
| (14 | ) | |
| (14 | ) |
| | |
| | | |
| | |
| Net loss before income taxes | |
| (653,445 | ) | |
| (285,555 | ) |
| | |
| | | |
| | |
| Income taxes | |
| — | | |
| — | |
| | |
| | | |
| | |
| Net loss attributable to common shareholders | |
$ | (653,445 | ) | |
$ | (285,555 | ) |
| | |
| | | |
| | |
| Loss per common share, basic and diluted: | |
$ | (0.01 | ) | |
$ | (0.01 | ) |
| | |
| | | |
| | |
| Weighted average number of shares | |
| | | |
| | |
| outstanding - basic and diluted | |
| 61,864,435 | | |
| 54,443,649 | |
The accompanying notes are an integral part
of these consolidated financial statements.
ONCOLOGIX TECH, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS
OF CHANGES IN STOCKHOLDERS’ DEFICIT
FOR THE PERIOD SEPTEMBER 1, 2012 THROUGH
AUGUST 31, 2013
| | |
| |
| |
| |
| |
| |
| |
| |
| |
| |
| |
|
| | |
Series A | |
Series D | |
| |
| |
Additional | |
| |
Non- | |
Common | |
|
| | |
| Preferred Stock | | Preferred Stock |
|
Common Stock |
| Paid-in | | |
| Accumulated | |
|
|
Controlling |
|
|
|
Stock |
|
|
|
|
|
| | |
| Shares | | |
| Amount | | |
| Shares | | |
| Amount | | |
| Shares | | |
| Amount | | |
| Capital | | |
| Deficit | | |
| Interest | | |
| Subscribed | | |
| Total | |
| | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | |
| Balance, August 31, 2011 | |
| 129,062 | | |
$ | 129 | | |
| — | | |
$ | — | | |
| 50,998,814 | | |
$ | 50,999 | | |
$ | 57,358,582 | | |
$ | (58,053,296 | ) | |
$ | (3,461 | ) | |
$ | — | | |
$ | (647,047 | ) |
| | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | |
| Issuance of stock purchased for cash | |
| — | | |
| — | | |
| — | | |
| — | | |
| 1,875,000 | | |
| 1,875 | | |
| 73,125 | | |
| — | | |
| — | | |
| — | | |
| 75,000 | |
| Conversion of notes payable | |
| — | | |
| — | | |
| — | | |
| — | | |
| 4,689,444 | | |
| 4,689 | | |
| 137,366 | | |
| — | | |
| — | | |
| — | | |
| 142,055 | |
| Beneficial conversion feature notes payable | |
| — | | |
| — | | |
| — | | |
| — | | |
| — | | |
| — | | |
| 10,000 | | |
| — | | |
| — | | |
| — | | |
| 10,000 | |
| Loss on conversion of notes payable - | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | |
| related parties | |
| — | | |
| — | | |
| — | | |
| — | | |
| — | | |
| — | | |
| 92,758 | | |
| — | | |
| — | | |
| — | | |
| 92,758 | |
| Induced conversion expense - conversion | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | |
| notes payable | |
| — | | |
| — | | |
| — | | |
| — | | |
| — | | |
| — | | |
| 25,402 | | |
| — | | |
| — | | |
| — | | |
| 25,402 | |
| Net loss | |
| — | | |
| — | | |
| — | | |
| — | | |
| — | | |
| — | | |
| — | | |
| (285,555 | ) | |
| (14 | ) | |
| — | | |
| (285,569 | ) |
| | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | |
| Balance, August 31, 2012 | |
| 129,062 | | |
$ | 129 | | |
| — | | |
$ | — | | |
| 57,563,258 | | |
$ | 57,563 | | |
$ | 57,697,233 | | |
$ | (58,338,851 | ) | |
$ | (3,475 | ) | |
$ | — | | |
$ | (587,401 | ) |
| | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | |
| Issuance of stock purchased for cash | |
| — | | |
| — | | |
| — | | |
| — | | |
| 15,000,000 | | |
| 15,000 | | |
| 91,000 | | |
| — | | |
| — | | |
| — | | |
| 106,000 | |
| Issuance of stock for fees | |
| — | | |
| — | | |
| — | | |
| — | | |
| 1,000,000 | | |
| 1,000 | | |
| 7,000 | | |
| — | | |
| — | | |
| — | | |
| 8,000 | |
| Issuance of preferred stock | |
| — | | |
| — | | |
| 58,564 | | |
| 59 | | |
| | | |
| | | |
| 585,581 | | |
| — | | |
| — | | |
| — | | |
| 585,640 | |
| Conversion of notes payable | |
| — | | |
| — | | |
| — | | |
| — | | |
| 1,024,164 | | |
| 1,024 | | |
| 9,217 | | |
| — | | |
| — | | |
| — | | |
| 10,241 | |
| Issuance of warrants for finance charges | |
| — | | |
| — | | |
| — | | |
| — | | |
| — | | |
| — | | |
| 159,992 | | |
| — | | |
| — | | |
| — | | |
| 159,992 | |
| Loss on conversion of notes payable - | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | |
| related parties | |
| — | | |
| — | | |
| — | | |
| — | | |
| — | | |
| — | | |
| 10,242 | | |
| — | | |
| — | | |
| — | | |
| 10,242 | |
| Net loss | |
| — | | |
| — | | |
| — | | |
| — | | |
| — | | |
| — | | |
| — | | |
| (653,445 | ) | |
| (14 | ) | |
| — | | |
| (653,459 | ) |
| | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | |
| Balance, August 31, 2013 | |
| 129,062 | | |
$ | 129 | | |
| 58,564 | | |
$ | 59 | | |
| 74,587,422 | | |
$ | 74,587 | | |
$ | 58,560,265 | | |
$ | (58,992,296 | ) | |
$ | (3,489 | ) | |
$ | — | | |
$ | (360,745 | ) |
The accompanying notes are an integral part
of these consolidated financial statements
ONCOLOGIX TECH, INC. AND SUBSIDIARIES
RESTATED
CONSOLIDATED STATEMENTS OF CASH FLOWS
| | |
For the Years Ended |
| | |
August 31, | |
August 31, |
| | |
2013 | |
2012 |
| Operating activities: | |
| | | |
| | |
| Net loss | |
$ | (653,459 | ) | |
$ | (285,569 | ) |
| | |
| | | |
| | |
| Adjustments to reconcile net loss to net cash used | |
| | | |
| | |
| in operating activities: | |
| | | |
| | |
| Depreciation and amortization | |
| 5,456 | | |
| 450 | |
| Loss on disposal of property and equipment | |
| — | | |
| 110 | |
| Amortization of discount on notes payable and warrants | |
| — | | |
| 10,000 | |
| Loss on conversion of notes payable - related parties | |
| 10,241 | | |
| 92,758 | |
| Induced conversion expense notes payable | |
| — | | |
| 25,402 | |
| Issuance of stock and warrants for fees | |
| 145,406 | | |
| — | |
| Issuance of note for fees | |
| 65,000 | | |
| — | |
| | |
| | | |
| | |
| Changes in operating assets and liabilities: | |
| | | |
| | |
| Accounts receivable | |
| 4,031 | | |
| — | |
| Prepaid expenses and other current assets | |
| 9,566 | | |
| 9,025 | |
| Inventory | |
| 69,610 | | |
| — | |
| Deposits and other assets | |
| — | | |
| — | |
| Accounts payable and other accrued expenses | |
| 206,591 | | |
| 3,189 | |
| Accrued interest payable - related parties | |
| 17,090 | | |
| 15,079 | |
| Accrued interest payable | |
| 14,651 | | |
| 10,175 | |
| | |
| | | |
| | |
| Net cash used in operating activities | |
| (105,817 | ) | |
| (119,381 | ) |
| | |
| | | |
| | |
| Investing activities: | |
| | | |
| | |
| Purchase of property and equipment | |
| — | | |
| (1,677 | ) |
| Acquisition of Dotolo subsidiary | |
| 1,653 | | |
| — | |
| Acquisition of Angels subsidiary | |
| (72,879 | ) | |
| — | |
| | |
| | | |
| | |
| Net cash used in investing activities | |
| (71,226 | ) | |
| (1,677 | ) |
| | |
| | | |
| | |
| Financing activities: | |
| | | |
| | |
| Proceeds from issuance of convertible notes | |
| | | |
| | |
| payable - related parties | |
| — | | |
| 20,000 | |
| Proceeds from issuance of notes payable - related parties | |
| 33,361 | | |
| 45,000 | |
| Proceeds from issuance of notes payable | |
| 120,000 | | |
| — | |
| Proceeds from the issuance of common stock | |
| 106,000 | | |
| 75,000 | |
| Repayment of notes payable | |
| (25,917 | ) | |
| (8,078 | ) |
| Repayment of notes payable - related parties | |
| (18,876 | ) | |
| — | |
| Repayment of convertible notes payable - related parties | |
| — | | |
| (20,000 | ) |
| | |
| | | |
| | |
| Net cash provided by financing activities | |
| 214,568 | | |
| 111,922 | |
| | |
| | | |
| | |
| Net increase (decrease) in cash and cash equivalents | |
| 37,525 | | |
| (9,136 | ) |
| | |
| | | |
| | |
| Cash and cash equivalents, beginning of period | |
| 1,931 | | |
| 11,067 | |
| | |
| | | |
| | |
| Cash and cash equivalents, end of period | |
$ | 39,456 | | |
$ | 1,931 | |
| | |
| |
|
| Cash paid during the year for: | |
| | | |
| | |
| | |
| | | |
| | |
| Interest | |
$ | 4,822 | | |
$ | 826 | |
| Income Taxes | |
$ | — | | |
$ | — | |
The accompanying notes are an integral part
of these consolidated financial statements.
ONCOLOGIX TECH, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1
- ORGANIZATION AND DESCRIPTION OF THE COMPANY
We were originally formed
in 1995 as "Wavetech, Inc." a New Jersey corporation and changed our corporate domicile to Nevada in December 1997, by
merging into a Nevada corporation named, "Interpretel International, Inc." We subsequently changed our name, first to
"Wavetech International, Inc." and then, in 2000, to "BestNet Communications Corp." Our business at the time
was to provide worldwide long distance telephone communication and teleconferencing services to commercial and residential consumers
through the internet. That business was never profitable and we were able to continue it only by repeated equity and debt financings.
Accordingly, during December 2006, we determined to dispose of that business and sold it during February 2007.
We entered the medical
device business at the end of July 2006 through the acquisition of JDA Medical Technologies, Inc. ("JDA"), a development
stage company, which was merged into our wholly owned subsidiary, Oncologix Corporation. On January 22, 2007, we changed our name
to Oncologix Tech, Inc., to reflect this new business. During June 2007, we moved our principal offices from Grand Rapids, Michigan,
to our offices at 3725 Lawrenceville-Suwanee Road, Suite B-4, Suwanee, Georgia, 30024, telephone (770) 831-8818. At that address,
our business was the development of a medical device for brachytherapy (radiation therapy), called the “Oncosphere”
(or “Oncosphere System”), for the advanced medical treatment of soft tissue cancers. It is a radioactive micro-particle
designed to deliver therapeutic radiation directly to a tumor site by introducing the micro-particles into the artery that feeds
the tumor tissue. Its first application is expected to be the treatment of liver cancer. Due to a lack of funding, we suspended
these activities on December 31, 2007, whereupon we closed the offices in Suwanee Georgia.
Our new mailing address
is P.O. Box 8832, Grand Rapids, MI 49518-8832, telephone (616) 977-9933.
During May 2008, we determined
to dispose of most of the assets related to the development of the Oncosphere.
In February 2009, we entered
into a Technology Agreement with Institut für Umwelttechnologien GmbH, a German Company (“IUT”) whereunder the
parties have agreed that:
| (a) | The Company has granted an exclusive license to a new IUT subsidiary, called “IUTM”,
to develop and manufacture products based on the Company’s proprietary information. This proprietary information is not based
on the technology that had been subject to the Master License Agreement with the University of Maryland – Baltimore. The
Company has also transferred to IUTM a number of items of laboratory equipment and inventory useful in connection with the licensed
information. |
| (b) | The Company retains rights to market products based on such information as well as first consideration
for marketing rights for other possible IUTM products. |
| (c) | In consideration of the license, the Company has received a 10% equity interest in IUTM, which
is organized as a private German limited liability company and IUT has assumed approximately $82,000 of the Company’s indebtedness. |
| (d) | The Company’s marketing rights have been transferred to its subsidiary, Oncologix Corporation
and have issued IUTM 10% of the equity ownership of that subsidiary. |
In addition, on April 7,
2009, the Company entered into a Termination Agreement with the University of Maryland – Baltimore, The Master License Agreement
between the Company and the University has been formally terminated and each party has released the other from all liabilities
arising under the Master License Agreement.
On May 19, 2011, the Company
effected a one-for-four reverse stock split. All share and per share information has been restated to retroactively show the effect
of this stock split. The reverse split was approved by a majority of the Company’s shareholders on March 24, 2011.
ONCOLOGIX TECH, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
On March 22, 2013, we acquired
all the outstanding stock of Dotolo Research Corporation (“DRC”), a FDA Registered, Class II, medical device manufacturer
with 25 years of product sales in the hydro-colonic irrigation, bowel preparation market. Dotolo Research Corporation began operations
in 1989 and is a market leader in hardware and disposable products sales, and has an active customer base of over 900+ customers
both domestically and internationally.
On August 1, 2013, we acquired
all the outstanding stock of Angels of Mercy, Inc. (“AOM”). Angels provides non-medical, Personal Care Attendant (PCA)
services, Supervised Independent Living (SIL), Long-Term Senior Care, and other approved programs performed by a trained caregiver
that will meet the health service needs of beneficiaries whose disabilities preclude the performance of certain independent living
skills related to the activities of daily living (ADL).
Because the development
of the brachytherapy device is years off and it cannot be marketed at this time, the Company’s management and Board of Directors
determined to dispose of Oncologix Corporation its Brachytherapy medical device subsidiary. With our acquisition of Dotolo we currently
have a viable FDA approved medical device requiring minimal capital investment to bring the Company to cash breakeven. Continued
support of Oncologix Corporation would cost the Company millions with no guarantee of FDA approval. Furthermore, as part of the
disposal, the Company will be relieved of over $90,000 in debt.
NOTE 2-
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
BASIS OF PRESENTATION
In the opinion of management,
the accompanying balance sheets and related interim statements of income, cash flows, and stockholders' equity include all adjustments,
consisting only of normal recurring items, necessary for their fair presentation in conformity with accounting principles generally
accepted in the United States of America ("U.S. GAAP"). Preparing financial statements requires management to make estimates
and assumptions that affect the reported amounts of assets, liabilities, revenue, and expenses. Actual results and outcomes may
differ from management's estimates and assumptions. Interim results are not necessarily indicative of results for a full year.
PRINCIPLES OF CONSOLIDATION
The consolidated financial
statements for the fiscal years ended August 31, 2013 and 2012 include the accounts of Oncologix Tech, Inc. and its wholly owned
subsidiaries, Dotolo Research Corporation, Angels of Mercy, Inc., Oncologix Corporation (90% Owned), Interpretel Inc., Telplex
International and International Environment Corporation collectively the Company. Dotolo Research Corporation is a Florida Corporation.
Angels of Mercy, Inc. is a Louisiana Corporation. Oncologix Corporation is a Nevada corporation. Interpretel Inc., Telplex International
and International Environment Corporation are inactive corporations. All significant intercompany accounts and transactions have
been eliminated in consolidation.
USE OF ESTIMATES
The preparation of financial
statements in accordance with accounting principles generally accepted in the United States of America requires management to make
estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities
at the date of the financial statements and the reportable amounts of revenues and expenses during the reporting period. Actual
results could differ from those estimates.
ONCOLOGIX TECH,
INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
REVENUE RECOGNITION
Revenue is recognized by
the Company in accordance with Accounting Standards Codification Topic (“ASC”) 605. Accordingly, revenue is recognized
when all the following criteria are met: persuasive evidence of an arrangement exists; delivery has occurred; the seller’s
price to the buyer is fixed and determinable; and collectability is reasonably assured. Currently, the primary revenue for the
Company is derived from its sales in its Personal Care Services Segment.
AOM is reimbursed for each approved “Unit
of Service” provided, as determined by the Health Care Financing Administration (HCFA), the Department of Social Services
and based upon a detailed Case Management, Plan of Care for each beneficiary. A unit of service for PCA services will be one-half
hour. At least fifteen (15) minutes of service must be provided to the individual in order for AOM to bill for a unit of service.
A maximum of 1,825 hours (3,650 half-hour units) per beneficiary, per year can be billed under the Medicaid waiver program. Our
only customer is the State of Louisiana who reimburses us for the services we provide. We currently experience a two percent claims
rejection rate.
CASH AND CASH EQUIVALENTS
The Company considers all
highly liquid instruments, with an initial maturity of three (3) months or less to be cash equivalents.
ACCOUNTS RECEIVABLE
The Company’s receivables
in its medical device segment are subject to credit risk, and the Company typically does not require collateral on its accounts
receivable. Receivables are generally due within 30 days. The Company maintains an allowance for uncollectable receivables that
reduces the receivables to amounts that are expected to be collected.
The Company’s receivables
in its personal care segment are generally repaid in 14 days on average. We bill the State of Louisiana on a weekly basis and are
reimbursed two weeks later via electronic funds transfer. We are able to resubmit any rejected claims an additional two times to
the state for payment within the next twelve months. Currently we do not maintain an allowance for uncollectible receivables as
we analyze our claim rejection rate and make significant changes to prior company policies regarding rejected claims. Upon final
rejection, these receivables are written off to bad debt expense.
INVENTORY
Inventories are stated
at costs and are held on a first-in, first-out basis.
PROPERTY AND EQUIPMENT
Property and equipment
is recorded at cost. Depreciation is provided for on the straight-line method over the estimated useful lives of the related assets
as follows:
| Furniture and fixtures |
5 to 10 years |
| Computer equipment |
5 years |
| Equipment |
5 to 10 years |
| Software |
3 to 5 years |
The cost of maintenance
and repairs is charged to expense in the period incurred. Expenditures that increase the useful lives of assets are capitalized
and depreciated over the remaining useful lives of the assets. When items are retired or disposed of, the cost and accumulated
depreciation are removed from the accounts and any gain or loss is included in income.
ONCOLOGIX TECH, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
LONG-LIVED ASSETS
ASC
360 – Property, Plant and Equipment addresses financial accounting and reporting for the impairment or disposal of long-lived
assets. The Company periodically evaluates whether events and circumstances have occurred that may warrant revision of the estimated
useful life of property and equipment or whether the remaining balance of property and equipment, or other long-lived assets, should
be evaluated for possible impairment. Instances that may lead to an impairment include: (i) a significant decrease in the
market price of a long-lived asset group; (ii) a significant adverse change in the extent or manner in which a long-lived
asset or asset group is being used or in its physical condition; (iii) a significant adverse change in legal factors or in
the business climate that could affect the value of a long-lived asset or asset group, including an adverse action or assessment
by a regulatory agency; (iv) an accumulation of costs significantly in excess of the amount originally expected for the acquisition
or construction of a long-lived asset or asset group; (v) a current-period operating or cash flow loss combined with a history
of operating or cash flow losses or a projection or forecast that demonstrates continuing losses associated with the use of a long-lived
asset or asset group; or (vi) a current expectation that, more likely than not, a long-lived asset or asset group will be
sold or otherwise disposed of significantly before the end of its previously estimated useful life.
An estimate of the related
undiscounted cash flows, excluding interest, over the remaining life of the property and equipment and long-lived assets is used
in assessing recoverability. Impairment loss is measured by the amount which the carrying amount of the asset(s) exceeds the fair
value of the asset(s). The Company primarily employs two methodologies for determining the fair value of a long-lived asset: (i) the
amount at which the asset could be bought or sold in a current transaction between willing parties or (ii) the present value
of estimated expected future cash flows grouped at the lowest level for which there are identifiable independent cash flows.
GOODWILL AND OTHER INTANGIBLE ASSETS
The Company adopted Accounting
Standards Update 2011-08 “Intangibles – Goodwill and Other (Topic 350): Testing Goodwill for Impairment (“ASU
2011-08”) in the fourth quarter of fiscal 2013 due to its recent acquisition of Dotolo Research Corporation. ASU 2011-08
permits an entity to first assess qualitative factors to determine whether it is more likely that not that the fair value of a
reporting unit is less than its carrying amount.
Goodwill represents the
excess of the cost of a business combination over the fair value of the net assets acquired. Other intangible assets are deemed
to have indefinite lives and are not amortized but are subject to annual impairment tests.
The Company evaluates the
recoverability of its indefinite lived intangible assets, which consist of Dotolo Research Corporation and Goodwill in Angels of
Mercy, Inc., based on estimates of future royalty payments that are avoided through its ownership of the intangibles and patents,
discounted to their present value. In determining the estimated fair value of the intangibles and patents, management considers
current and projected future levels of revenue based on its plans for Dotolo, business trends, prospects and market and economic
conditions. See Note 4 – Acquisitions for further information on the acquisition of Dotolo.
NONCONTROLLING INTEREST
ASC 810 - Consolidation
addresses the accounting and reporting standards for ownership interest in subsidiaries held by parties other than the parent,
the amount of consolidated net income attributable to the parent and to the non-controlling interest, changes in a parent’s
ownership interest, and the valuation of retained non-controlling equity investments when a subsidiary is deconsolidated. During
fiscal 2009, the Company issued a ten percent interest in its subsidiary, Oncologix Corporation, to IUTM as required in a technology
agreement. The Company valued this interest at $212. Through August 31, 2013, the Company has allocated $3,701 losses to its non-controlling
interest. The Company has adopted ASC 810 to account for this non-controlling interest.
ONCOLOGIX TECH, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
ADVERTISING COSTS
Advertising costs included
with selling, general and administrative expenses in the accompanying consolidated statements of operations were minimal for fiscal
2013 and fiscal 2012. Such costs are expensed when incurred.
INCOME TAXES
The Company adopted the
provisions of FASB ASC 740 - Income Taxes provides detailed guidance for the financial statement recognition, measurement and disclosure
of uncertain tax positions recognized in the financial statements. Income taxes are determined using the asset and liability method.
This method gives consideration to the future tax consequences associated with temporary differences between the carrying amounts
of assets and liabilities for financial statement purposes and the amounts used for income tax purposes.
FAIR VALUE OF FINANCIAL INSTRUMENTS
The estimated fair values
for financial instruments are determined at discrete points in time based on relevant market information. These estimates involve
uncertainties and cannot be determined with precision. The carrying amounts of accounts payable, accrued expenses, and notes payable
approximate fair value.
STOCK-BASED COMPENSATION
The Company has a stock-based
compensation plan, which is described more fully in Note 8. The Company accounts for stock-based compensation in accordance with
ASC 718. Under the fair value recognition provisions of this statement, share-based compensation cost is measured at the grant
date based on the fair value of the award and is recognized as expense over the vesting period. The Company estimates the fair
value of stock options granted using the Black-Scholes option valuation model. The fair value of all awards is amortized on a straight-line
basis over the vesting periods. The expected term of awards granted represent the period of time they are expected to be outstanding.
The Company determines the expected term based on historical experience with similar awards, giving consideration to the contractual
terms and vesting schedules. The Company estimates the expected volatility of its common stock at the date of grant based on the
historical volatility of its common stock. The risk-free interest rate is based on the U.S. treasury security rate estimated for
the expected life of the options at the date of grant. If actual results differ significantly from estimates, stock-based compensation
could be impacted.
CONVERTIBLE DEBT
Interest on convertible
debt is calculated using the simple interest method. The company recognizes a beneficial conversion feature to the extent the conversion
price is less than the closing stock price on the issuance of the convertible notes. The Company also follows ASC 470-50 and ASC
470-20 regarding changes in the terms of the convertible notes and the induced conversion of its convertible debt.
RECLASSIFICATIONS
Certain prior year amounts
have been reclassified to conform to the current year presentation.
STOCK INCENTIVE PLANS
Certain prior year amounts
have been reclassified to conform to the current year presentation.
ONCOLOGIX TECH,
INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
STOCK INCENTIVE PLANS
Share based payment compensation
costs for equity-based awards are measured on the grant date based on the fair value of the award on that date and is recognized
over the required service period. Fair value of stock option awards are estimated using the Black-Scholes model. Fair value of
restricted stock awards is based upon the quoted market price of the common stock on the date of grant.
NET LOSS PER COMMON SHARE
Basic earnings (loss) per
share is calculated under the provisions of ASC 260 which provides for calculation of “basic” and “diluted”
earnings per share. Basic earnings per share includes no dilution and is calculated by dividing income (loss) available to
common shareholders by the weighted average number of common shares outstanding for the period. Diluted earnings (loss) per
share is calculated based on the weighted average number of common shares outstanding during the period plus the dilutive effect
of common stock purchase warrants and stock options using the treasury stock method and the dilutive effects of convertible notes
payable and convertible preferred stock using the if-converted method. On Basic and diluted earnings per share for the two years
ended August 31, 2013 and 2012 are as follows:
| | |
For the Year Ended |
| | |
August 31, | |
August 31, |
| | |
2013 | |
2012 |
| | |
| |
|
| | |
| |
|
| Net loss attributable to common shareholders | |
$ | (653,445 | ) | |
$ | (285,555 | ) |
| | |
| | | |
| | |
| Weighted average shares outstanding | |
| 61,864,435 | | |
| 54,443,649 | |
| | |
| | | |
| | |
| Loss per common share, basic and diluted: | |
$ | (0.01 | ) | |
$ | (0.01 | ) |
Due to the net losses during
the fiscal 2013 and 2012, basic and diluted loss per share was the same, as the effect of potentially dilutive securities would
have been anti-dilutive. Shares attributable to convertible notes, stock options, preferred stock and warrants not included the
diluted loss per share calculation. Below lists all dilutive securities as of August 31, 2013 and 2012:
| | |
As of |
| | |
August 31, | |
August 31, |
| | |
2013 | |
2012 |
| | |
| Underlying | | |
| Underlying | |
| Description | |
| Common Shares | | |
| Common Shares | |
| Convertible preferred stock | |
| 58,628,531 | | |
| 64,531 | |
| Convertible notes payable | |
| 1,383,459 | | |
| 1,383,459 | |
| Options | |
| 242,085 | | |
| 297,085 | |
| Warrants | |
| 7,000,000 | | |
| — | |
| | |
| | | |
| | |
| Total potentially dilutive securities | |
| 67,254,075 | | |
| 1,745,075 | |
ONCOLOGIX TECH, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
SEGMENT INFORMATION
ASC 280-10
defines operating segments as components of a company about which separate financial information is available that is evaluated
regularly by the chief decision maker in deciding how to allocate resources and in assessing performance. The Company currently
has two business segments; medical device manufacturing and personal care services. Please see Note 17 – Business Segments
for more detailed information.
RECENT ACCOUNTING PRONOUNCEMENTS
We have evaluated all Accounting
Standards Updates through the date the financial statements were issued and do not believe any will have a material impact.
New Accounting Standard
In July 2012, the Financial
Accounting Standards Board (“FASB”) issued Accounting Standards Update 2012-02 “Intangibles – Goodwill
and Other (Topic 350): Testing Indefinite-Lived Intangible Assets for Impairment” (“ASU 2012-02”). ASU 2012-02
permits entities to first assess qualitative factors to determine whether it is more likely than not that the fair value of an
indefinite-lived intangible asset is impaired as a basis for determining whether it is necessary to perform the quantitative impairment
test. Under the amendments in ASU 2012-02, an entity is not required to calculate the fair value of an indefinite-lived intangible
asset unless it determines that it is more likely than not that the fair value of the asset is less than its carrying amount. An
entity also will have the option to bypass the qualitative assessment for any indefinite-lived intangible asset in any period and
proceed directly to performing the quantitative impairment test. ASU 2012-02 is effective for interim and annual indefinite-lived
intangible asset impairment tests performed for fiscal years beginning on or after September 15, 2012, with early adoption permitted.
The Company’s adoption of ASU 2012-02 is not expected to have an impact on its consolidated financial statements.
NOTE 3 - GOING CONCERN
The accompanying consolidated
financial statements have been prepared assuming the Company will continue as a going concern. The Company has incurred losses
from operations over the past several years and anticipates additional losses in fiscal 2014 and prior to achieving breakeven.
During fiscal
2013, we acquired Dotolo Research Corporation and Angels of Mercy, Inc. While these acquisitions greatly increase the value of
our Company, collectively they are not fully cash flow positive. AOM is currently cash flow positive but alone is unable to support
the corporate overhead or the capital requirements of our other subsidiary, DRC. We anticipate that we will require approximately
$1,000,000 to operate through August 31, 2014. Approximately $350,000 will be required to fund corporate overhead including all
debt services with the balance to invest into DRC for the procurement of raw material inventory, manufacturing production and
future product revisions at DRC. Approximately $250,000 will allow DRC to become current with its raw material vendors, procure
new inventory, and allow the company to manufacture and sell hardware products. With the $250,000 in funding, we will be able
to re-start all manufacturing and sell hardware products to fulfill eighty three (83) existing hardware customer orders within
three (3) months. During the following three months we expect to increase our hardware sales to include new hardware clients.
We expect our total hardware sales at the end of this six month period to be approximately $600,000. The remaining $400,000 will
be used to make design improvements to our products, including our disposable products to allow us to market directly to our current
customer base as well as enter into new markets. Design improvements to our hardware and disposable product entails modifying
our hardware product to allow only our disposable products to be connected directly to our Toxygen hydro-colonic hardware. These
and other improvements will allow the Company to have a unique product offering and increase our disposable product sales whereas
only the DRC disposable product can then be utilized on our Toxygen hardware and not our competitor disposable products. These
product modifications will allow DRC to remain competitive in a changing environment.
ONCOLOGIX TECH, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Our Company has never been
profitable and we have had to rely on debt and equity financings to fund operations. There is no assurance that the business activities
of DRC will achieve breakeven status by the end of 2014. Significant delays in achieving breakeven status could affect the ability
to obtain future debt and equity funding. These factors raise substantial doubt about the Company’s ability to continue as
a going concern. After auditing our financial statements, our independent auditor issued a going concern opinion and our ability
to continue is dependent on our ability to raise additional capital. Currently there is a substantial doubt in the Company’s
ability to continue as a going concern.
NOTE 4 – ACQUISITIONS
Dotolo Research Corporation
On March 22, 2013, the
Company acquired all of the outstanding shares of common stock of Dotolo Research Corporation (“Dotolo”), a medical
device company. With this recent acquisition, the company continued on its mission to facilitate the controlling interests and
acquisition of medical device, health care service, medical distribution and emerging health care technology companies. This business
model creates a complete business solution of unlimited marketing and revenues opportunities. Our model combines certain natural
relationships of medical device products with related but distinct products, services, markets and opportunities. The combined
sales, marketing, and operational synergies will enable the Company and our business units to provide a wide variety of complete
technology solutions at significant cost savings.
While operations have commenced
with Dotolo, the revenues have not been significant since the acquisition. This is primarily due to a lack of monies available
to invest into raw material inventory for Dotolo. .
The acquisition was accounted
for using the acquisition method of accounting and the purchase price was allocated to the assets acquired and liabilities assumed
based upon their estimated fair values at the date of acquisition. Identifiable intangible assets include patents, trade name and
customer list. The purchase price consisted of the issuance 58,564 shares of a newly created Series D Convertible Preferred Stock
(60,000 shares of Series D Preferred Stock designated). On March 22, 2013, the issued shares had a fair market value of $585,640
based on the fair market value of the underlying common stock shares. The issued Series D Convertible Preferred Stock have a liquidation
value of approximately $4,700,000 and are convertible anytime after March 1, 2014 into 1,000 shares of common stock each. Please
see Note 8 for a further description of the Series D Convertible Preferred Stock.
ONCOLOGIX TECH, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
The purchase price was
allocated to assets acquired and liabilities assumed as follows:
| | |
| | |
| Cash and cash equivalents | |
$ | 1,653 | |
| Accounts receivable (net) | |
| 769 | |
| Inventory | |
| 100,881 | |
| Prepaid expenses and other current assets | |
| 31,750 | |
| Property and equipment | |
| 22,957 | |
| Deposits and other assets | |
| 10,050 | |
| Purchased goodwill | |
| 1,217,704 | |
| Patents, registrations | |
| 33,172 | |
| | |
| | |
| Total assets acquired | |
$ | 1,418,936 | |
| | |
| | |
| Accounts payable and other accrued expenses | |
$ | 507,589 | |
| Customer deposits | |
$ | 78,807 | |
| Notes payable | |
| 177,763 | |
| Notes payable - related parties | |
| 58,600 | |
| Accrued interest payable | |
| 9,743 | |
| Accrued interest payable - related parties | |
| 794 | |
| | |
| | |
| Total liabilities assumed | |
$ | 833,296 | |
Angels of Mercy, Inc.
On August 1, 2013, the
Company acquired all the outstanding shares of Common Stock of Angels of Mercy, Inc. Pursuant to the Agreement, the Owners sold
all of the Common Stock of AOM for $650,000 represented by a down payment of $100,000 at closing and a four year Secured Promissory
Note for $550,000. The Company also issued the Owners 1,000,000 four year warrants with an exercise price of $0.015 that possesses
a cashless exercise option and agreed to pay $65,000 in broker fees related to this transaction.
The acquisition was accounted
for using the acquisition method of accounting and the purchase price was allocated to the assets acquired and liabilities assumed
based upon their estimated fair values at the date of acquisition. Identifiable intangible assets include patents and purchased
goodwill.
The purchase price was
allocated to assets acquired and liabilities assumed as follows:
| | |
| | |
| Cash and cash equivalents | |
$ | 27,121 | |
| Accounts receivable (net) | |
| 111,581 | |
| Prepaid expenses and other current assets | |
| 7,851 | |
| Property and equipment | |
| 57,000 | |
| Purchased goodwill | |
| 478,721 | |
| | |
| | |
| Total assets acquired | |
$ | 682,274 | |
| | |
| | |
| Accounts payable and other accrued expenses | |
$ | 9,688 | |
| | |
| | |
| Total liabilities assumed | |
$ | 9,688 | |
ONCOLOGIX TECH, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 5 - PROPERTY AND EQUIPMENT
Property and equipment
is composed of the following at August 31, 2013 and 2012:
| | |
August 31, | |
August 31, |
| | |
2013 | |
2012 |
| Furniture | |
$ | 10,388 | | |
$ | — | |
| Office Equipment | |
| 10,800 | | |
| — | |
| Computers | |
| 19,905 | | |
| 4,856 | |
| Software | |
| 3,497 | | |
| 497 | |
| Leasehold improvements | |
| 29,000 | | |
| — | |
| Equipment | |
| 16,763 | | |
| 5,044 | |
| | |
| | | |
| | |
| Total property and equipment at cost | |
| 90,353 | | |
| 10,397 | |
| | |
| | | |
| | |
| Less: accumulated depreciation and amortization | |
| (11,820 | ) | |
| (8,916 | ) |
| | |
| | | |
| | |
| | |
$ | 78,533 | | |
$ | 1,481 | |
NOTE 6
- LEASES
The Company leases office
space in two locations in Louisiana and warehouse/manufacturing space in Arizona. One of the leases in Louisiana and the Arizona
lease are on a month to month basis and the remaining Louisiana office location on a 5-year lease which began in October 2013.
Rent expense for the years ended August 31, 2013 and 2012 were $15,500 and nil, respectively. Future minimum lease payments are
disclosed below:
| | 2014 | | |
$ | 30,800 | |
| | 2015 | | |
| 33,600 | |
| | 2016 | | |
| 33,600 | |
| | 2017 | | |
| 33,600 | |
| | 2018 | | |
| 33,600 | |
| | | | |
| | |
| | | | |
| | |
| | Totals | | |
$ | 165,200 | |
NOTE 7 - NOTES PAYABLE
CONVERTIBLE NOTES PAYABLE:
Convertible notes payable
consist of the following as of August 31, 2013 and August 31, 2012:
| | |
August 31, | |
August 31, |
| | |
2013 | |
2012 |
| | |
| | | |
| | |
| 8.0% convertible notes due August 31, 2014 | |
$ | 125,000 | | |
$ | 125,000 | |
| | |
| | | |
| | |
| | |
| | | |
| | |
| Total unsecured convertible notes payable | |
| 125,000 | | |
| 125,000 | |
| Less: Current portion | |
| (125,000 | ) | |
| — | |
| | |
| | | |
| | |
| Long-term portion | |
$ | — | | |
$ | 125,000 | |
ONCOLOGIX TECH,
INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
The following is a summary
of future minimum payments on convertible notes payable as of August 31, 2013:
| |
Convertible |
| Fiscal Year Ending August 31, |
Notes Payable |
| 2014 |
$ 125,000
|
During May and June 2007,
we issued nine Convertible Promissory Notes in an aggregate principal amount of $700,000. These Convertible Promissory Notes were
due May 7, 2008, bore interest at the rate of 8% per annum and were convertible into our common stock at a rate of $1.00. Eight
of these notes were converted into common stock in fiscal 2009. The remaining Convertible Promissory Note, in the principal amount
of $125,000, was extended on January 28, 2010 initially to March 31, 2012 and then extended to September 30, 2013. In conjunction
with the initial extension, the conversion price was reduced to $0.60. As of August 31, 2013, the Company has accrued interest
in the amount of $52,575.
CONVERTIBLE RELATED PARTY NOTES PAYABLE:
| | |
August 31, | |
August 31, |
| | |
2013 | |
2012 |
| | |
| | | |
| | |
| 6.0% convertible note due September 2013 (1) | |
$ | 235,025 | | |
$ | 235,025 | |
| | |
| | | |
| | |
| | |
| | | |
| | |
| Total unsecured related party convertible notes payable | |
| 235,025 | | |
| 235,025 | |
| Less: Current portion | |
| (235,025 | ) | |
| — | |
| | |
| | | |
| | |
| Long-term portion | |
$ | — | | |
$ | 235,025 | |
| | |
| | | |
| | |
| (1) Note payable to former CEO who resigned 4/1/09 and still remains a director of our subsidiary. |
On April 1, 2009, we issued
to Ms. Lindstrom, our former Chief Executive Officer and current member of our subsidiary’s Board of Directors, a convertible
promissory note in lieu of payment of $235,025 in accrued salary owed to Ms. Lindstrom. This note accrues interest at a rate of
6% per annum and was originally due on March 31, 2012. The note is convertible into shares of the Company’s common stock
at a rate of $0.20 per common share. Ms. Lindstrom signed an abstention to convert this note until June 01, 2011. On March 16,
2012, Ms. Lindstrom agreed to extend the due date of the note to September 30, 2013. There was no beneficial conversion feature
recognized upon the issuance of this note. As of August 31, 2013, the Company has accrued interest in the amount of $62,317.
On February 8, 2013, the
Company issued a 30-Day convertible promissory note to Anthony Silverman, its former President and CEO, in the principal amount
of $10,242. This convertible note was issued to pay off a previously issued 90-Day promissory note. This note bore interest at
6% and is convertible into the company’s common stock at $0.01 per shares. On February 8, 2013, Mr. Silverman elected to
convert the note and accrued interest into 1,024,164 shares of common stock. The Company also recorded a $10,242 loss on the conversion
of this note.
On August 23, 2012, the
Company issued a convertible promissory note in principal amount of $45,000 to its President, Anthony Silverman, who is also a
member of the Board of Directors. This note was issued as payment in full of the principal and accrued interest of three outstanding
promissory notes in that aggregate amount. The newly issued convertible promissory note bore interest at 6% per annum and was
convertible into the Company's common stock at $0.04 per share. On August 24, 2012, Mr. Silverman elected to convert this note
plus accrued interest of $524 into 2,276,182 shares of the Company’s Common Stock. The company recognized a $22,758 loss
upon the conversion of this note.
ONCOLOGIX TECH,
INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
The following is a summary
of future minimum payments on related party convertible notes payable as of August 31, 2013:
| |
Related Conv. |
| Fiscal Year Ending August 31, |
Notes Payable |
| 2014 |
$ 235,025
|
RELATED PARTY
NOTES PAYABLE:
| | |
August 31, | |
August 31, |
| | |
2013 | |
2012 |
| 6.0% note due November 2013 (1) | |
$ | 4,600 | | |
| | |
| 6.0% line of credit (2) | |
| 51,600 | | |
| | |
| | |
| | | |
| — | |
| | |
| | | |
| | |
| Outstanding unsecured related party notes payable | |
$ | 56,200 | | |
$ | — | |
| | |
| | | |
| | |
| (1) Note payable to current CEO. |
| (2) Note payable to current CEO payable from subsidiary, Dotolo Research Corporation. No stated interest or due date |
On September 14, 2012,
the Company issued a 90-Day promissory note to Anthony Silverman, its President and CEO, in the principal amount of $10,000. The
note bore interest at 6% per annum. This note was further extended to February 11, 2013. On February 8, 2013, this note was paid
off together with accrued interest of $242 by the issuance of a convertible promissory note. Please see Convertible Related Party
Notes Payable for further information.
On October 11, 2012, the
Company issued a 30-Day promissory note to Anthony Silverman, its President and CEO, in the principal amount of $5,000. The note
bore an interest rate of 6%. This note was paid off, together with accrued interest of $5 on October 17, 2012.
On November 23, 2012 the
Company issued a 90-Day promissory note to Anthony Silverman, its President and CEO, in the principal amount of $5,000. The note
bore interest at 6% per annum. This note was paid off, together with accrued interest of $39 on January 9, 2013.
On March 8, 2013, the Company
issued a 60-Day promissory note to Anthony Silverman, its former President and CEO, in the principal amount of $2,686. The note
bore an interest rate of 6% and the due date has been extended to August 31, 2013. This note was paid off on August 16, 2013 together
with accrued interest of $71.
On April 26, 2013, the
Company issued a 10-Day promissory note to Wayne Erwin, its President and CEO, in the principal amount of $10,675. During the 4th
quarter of fiscal 2013, the Company repaid $6,075 of principal on this note. The note bears an interest rate of 6% and the due
date has been extended to November 30, 2013. As of August 31, 2013, the Company has accrued interest of $223.
During the last 18 months,
Wayne Erwin, our President and CEO, has advanced a total of $51,600 directly to Dotolo in an open advance account. To date we have
accrued $3,053 in interest. There is no specific due date on this note.
ONCOLOGIX TECH, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
The following is a summary
of future minimum payments on related party notes payable as of August 31, 2013:
| |
Related Conv. |
| Fiscal Year Ending August 31, |
Notes Payable |
| 2014 |
$ 56,200 |
OTHER NOTES
PAYABLE:
| | |
August 31, |
|
| August 31, |
|
| | |
2013 |
|
| 2012 |
|
| 12% note payable due May 2014 | |
$ | 15,000.00 | |
|
$ | - |
|
| Note payable | |
| 60,600.00 | |
|
|
|
|
| Time payment lease due January 2014 | |
| 3,311.00 | |
|
|
|
|
| Note payable - fee reimbursement | |
| 59,583.00 | |
|
|
|
|
| 18% note payable due January 2015 | |
| 30,000.00 | |
|
|
|
|
| 18% note payable due January 2015 | |
| 20,000.00 | |
|
|
|
|
| 18% note payable due January 2015 | |
| 100,000.00 | |
|
|
|
|
| 6% note payable due August 2015 | |
| 111,500.00 | |
|
|
|
|
| 6% note payable due October 2017 | |
| 550,000.00 | |
|
|
|
|
| | |
| | |
|
| |
|
| | |
| | |
|
| |
|
| Subtotal | |
| 949,994 | |
|
| |
|
| | |
| | |
|
| |
|
| Less: Current portion | |
| (138,494 | ) |
|
| - |
|
| | |
| | |
|
| |
|
| Long-term portion | |
$ | 811,500 | |
|
$ | - | |
On
October 31, 2012, the Company entered into a note payable agreement to finance $10,404 of directors and officer’s insurance
premiums. The note bears interest at a rate of 9.27% per annum and is due in ten monthly installments of $1,085, including principal
and interest, beginning on November 30, 2012. In May 2013 we defaulted on this note and our directors and officers insurance coverage
has lapsed as of May 2, 2013.
On May 23, 2013, the Company
issued a one year note in the amount of $20,000. The note bears and interest rate of 12% per annum. The Company is required to
repayment the note at a rate of $1,867 per month, which includes interest, on the 15th day of each month. The note is
secured by certain collateral of our President and CEO.
During April 2012, our
subsidiary Dotolo, entered into a financing agreement to provide up to $150,000 in funding for the subsidiary. The financing agreement
was due in January 2013. After repayments, we currently owe $60,600 which is currently in default. We are currently in final negotiations
with the lender on repayment.
Our subsidiary has a time
lease payment which is due to be paid off in January 2014.
On August 1, 2013, in connection
with our acquisition of Angels of Mercy, Inc. we entered into a promissory note to pay $65,000 of broker’s fees incurred
in the acquisition. Monthly payments of $5,417 are due and payable beginning on August 15, 2013. This note bears no interest.
On February 27, 2013 our
subsidiary Dotolo, entered into a note payable agreement to provide funding to its subsidiary in the principal amount of $30,000.
The note bears interest at 18% payable monthly on the 15th and is due in full in January 2015.
ONCOLOGIX TECH,
INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
On March 17, 2013 our subsidiary
Dotolo, entered into a note payable agreement to provide funding to its subsidiary in the principal amount of $20,000. The note
bears interest at 18% payable monthly on the 15th and is due in full in January 2015.
On May 23, 2013, the Company
issued a one year note in the amount of $20,000. The note bears and interest rate of 12% per annum. The Company is required to
repayment the note at a rate of $1,867 per month, which includes interest, on the 15th day of each month. The note is
secured by certain collateral of our President and CEO.
On July 26, 2013 the Company
issued a 18 month promissory note in the principal amount of $100,000. These funds were used for the cash down payment for the
Angels acquisition. The note bears interest at 18% and requires monthly interest payments of $1,200 beginning on September 26,
2013. A final balloon payment of principal and interest in the amount of $107,800 is due on January 26, 2015.
On August 1, 2011 our subsidiary
Dotolo, entered into a note payable agreement to provide funding to its subsidiary in the principal amount of $111,500. The note
bears interest at 6% and matures on August 31, 2015. As of August 31, 2013 the Company has accrued interest of 12,586.
On August 1, 2013, in connection
with our acquisition of Angels of Mercy, Inc. we entered into a promissory note to pay $550,000 for the purchase of Angels of Mercy,
Inc. Monthly payments of $9,115 are due and payable beginning on November 1, 2013 with a final balloon payment of $205,705 due
on October 1, 2017. This note bears interest at a rate of 6%.
The following is a summary
of future minimum payments on r notes payable as of August 31, 2013:
| | | | |
| Related Conv. | |
| | Fiscal Year Ending August 31, | | |
| Notes Payable | |
| | 2014 | | |
$ | 203,596 | |
| | 2015 | | |
| 344,032 | |
| | 2016 | | |
| 87,623 | |
| | 2017 | | |
| 314,743 | |
NOTE 8
- STOCKHOLDERS' EQUITY
PREFERRED STOCK:
Series A Convertible Preferred Stock.
The Company is authorized
to issue up to 10,000,000 shares of preferred stock, in one or more series, and to determine the price, rights, preferences and
privileges of the shares of each such series without any further vote or action by the stockholders. The rights of the holders
of common stock will be subject to, and may be adversely affected by, the rights of the holders of any shares of preferred stock
that may be issued in the future.
In January 2003, our Board
of Directors authorized up to 4,500,000 shares of Series A Convertible Preferred Stock. Each share of Series A Convertible
Preferred stock has a par value of $0.001 and is convertible into one-half share of common stock in upon a cash payment by the
holder to the Company of $0.40 per common share. The Series A Convertible Preferred Stock is entitled to receive, in
preference to the common stock, of noncumulative dividends, if declared by the Board of Directors, and a claim on the Company's
assets upon any liquidation of the Company senior to the common stock. These preferred shares are not entitled to voting
rights. There are presently outstanding 129,062 shares of Series A Preferred Stock
ONCOLOGIX TECH,
INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
On March 30, 2003, the
Company completed the private placement of Units pursuant to the terms of a Unit Purchase Agreement (the “Units”) with
accredited investors. Each Unit consists of the following underlying securities: (i) three shares of the Company’s common
stock; (ii) one share of Series A Convertible Preferred Stock, par value $.001 per share; and (iii) one three-year warrant to purchase
one share of common stock at a per share price of $0.30. The warrants expired on March 31, 2006. Each share of Series A Convertible
Preferred Stock is convertible into one half share of the Company’s common stock in exchange for $0.40 per common share ($.20
for each Series A Convertible Preferred share converted). The securities underlying the Units are not to be separately tradable
or transferable apart from the Units until such time as determined by the Company’s Board of Directors. A total of 4,032,743
Units were issued. As of August 31, 2013 and August 31, 2012, there were 129,062 and 129,062 Units outstanding that had not been
separated, respectively. These units are presented as their underlying securities on our balance sheet and consist of 64,531 shares
of Series A Preferred Stock and 96,797 shares of common stock which is included in the issued and outstanding shares.
Below is a table detailing
the outstanding Series A Convertible Preferred Stock shares outstanding during the last two fiscal years:
| | | | |
| Preferred | | |
| Number of | | |
| | | |
| Weighted Avg. | |
| | | | |
| Shares | | |
| Common Shares | | |
| Proceeds if | | |
| Per Common Sh. | |
| | | | |
| Outstanding | | |
| Convertible | | |
| Converted | | |
| Exercise Price | |
| | Outstanding, August 31, 2011 | | |
| 129,062 | | |
| 64,531 | | |
$ | 25,812 | | |
$ | 0.40 | |
| | | | |
| | | |
| | | |
| | | |
| | |
| | Expired/Retired | | |
| — | | |
| — | | |
| — | | |
$ | — | |
| | Converted | | |
| — | | |
| — | | |
| — | | |
$ | 0.40 | |
| | Issued | | |
| — | | |
| — | | |
| — | | |
$ | — | |
| | Outstanding, August 31, 2012 | | |
| 129,062 | | |
| 64,531 | | |
$ | 25,812 | | |
$ | 0.40 | |
| | | | |
| | | |
| | | |
| | | |
| | |
| | Expired/Retired | | |
| — | | |
| — | | |
| — | | |
$ | 0.40 | |
| | Converted | | |
| — | | |
| — | | |
| — | | |
$ | — | |
| | Issued | | |
| — | | |
| — | | |
| — | | |
$ | — | |
| | Outstanding, August 31, 2013 | | |
| 129,062 | | |
| 64,531 | | |
$ | 25,812 | | |
$ | 0.40 | |
Series D Convertible Preferred
Stock
In March 2013, our Board
of Directors authorized up to 60,000 shares of Series D Convertible Preferred Stock. Each share of Series D Convertible stock has
a par value of $0.001 and is convertible into 1,000 shares of common stock beginning after March 1, 2014. Each share of Series
D Convertible Preferred Stock has a stated liquidation value of $80.25. Each shares of Series D Convertible Preferred Stock shall
have voting rights as stated below:
March 1, 2013 to February
28, 2014, 400 votes per share;
March 1, 2014 to February
28, 2015, 800 votes per share;
March 1, 2015 to February
28, 2016, 1,200 votes per share;
March 1, 2016 to February
28, 2017, 1,600 votes per share;
March 1, 2017 and after,
2,000 votes per share;
On March 22, 2013, the
Company issued 58,564 shares of Series D Convertible Preferred Stock to acquire 100% of the outstanding common stock of Dotolo.
On March 22, 2013 the issued shares had a fair market value of $585,640 based on the fair market value of the underlying common
stock shares.
ONCOLOGIX TECH, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Below is a table detailing
the outstanding Series D Convertible Preferred Stock shares outstanding during the last two fiscal years:
| | |
Preferred | |
Number of | |
| |
Weighted Avg. |
| | |
Shares | |
Common Shares | |
Proceeds if | |
Per Common Sh. |
| | |
Outstanding | |
Convertible | |
Converted | |
Exercise Price |
| | Outstanding, August 31, 2011 | | |
| — | | |
| — | | |
$ | — | | |
$ | — | |
| | | | |
| | | |
| | | |
| | | |
| | |
| | Expired/Retired | | |
| — | | |
| — | | |
| — | | |
$ | — | |
| | Converted | | |
| — | | |
| — | | |
| — | | |
$ | — | |
| | Issued | | |
| — | | |
| — | | |
| — | | |
$ | — | |
| | Outstanding, August 31, 2012 | | |
| — | | |
| — | | |
$ | — | | |
$ | — | |
| | | | |
| | | |
| | | |
| | | |
| | |
| | Expired/Retired | | |
| — | | |
| — | | |
| — | | |
$ | — | |
| | Converted | | |
| — | | |
| — | | |
| — | | |
$ | — | |
| | Issued | | |
| 58,564 | | |
| 58,564,000 | | |
| — | | |
$ | 80.25 | |
| | Outstanding, August 31, 2013 | | |
| 58,564 | | |
| 58,564,000 | | |
$ | — | | |
$ | 80.25 | |
Our Board of Directors
authorized the separation of the Units into their component parts (Series A Convertible Preferred Stock only) in July 2004, February
2005, April 2008, March 2010 and July 2011. The table below describes the proceeds received for the conversion of preferred shares
into common stock:
| Date of Conversion |
Proceeds from Conversion |
Further Description and Remarks |
| July-August 2004 |
$487,523 |
During July and August 2004, holders of 2,437,614 Units contributed $487,523 to convert 2,437,614 shares of Series A. Convertible Preferred stock into 4,875,228 shares of common stock. |
| February 2005 |
$230,393 |
During February 2005, holders of 1,151,967 Units contributed $230,393 to convert 1,151,967 shares of Series A. Convertible Preferred stock into 2,303,934 shares of common stock. |
| April/June 2008 |
$29,460 |
During April and June 2008, holders of 147,300 Units contributed $29,460 to convert 147,300 shares of Series A. Convertible Preferred stock into 294,600 shares of common stock. |
| March/April 2010 |
$6,820 |
During March and April 2010, holders of 34,100 Units contributed $6,820 to convert 34,100 shares of Series A. Convertible Preferred stock into 68,200 shares of common stock. |
| July 2011 |
$0 |
During July 2011, holders of 132,700 Units elected to relinquish conversion of 132,700 shares of Convertible Preferred stock as part of splitting their Units. |
SUBSCRIBED COMMON STOCK:
As of August 31, 2013
and August 31, 2012, there were no shares of subscribed stock issuable.
ONCOLOGIX TECH, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
COMMON STOCK:
Below are recent sales
of unregistered securities:
| Date |
Securities |
|
Underwriters/ |
|
| Sold |
Sold |
Consideration |
Purchasers * |
Notes |
| |
|
|
|
|
| 10/6/2011 |
1,778,193 |
$ - |
Anthony Silverman, former CEO |
Anthony Silverman, our former President and CEO, converted a promissory note in the amount of $71,128 in principal and interest into 1,778,193 shares of common stock at $0.04 per share. These shares were exempt from registration under Section 4(2) of the Securities Act. |
| 10/6/2011 |
635,069 |
$ - |
Accredited Investor |
A non-affiliated accredited investor converted a promissory note in the amount of $25,403 in principal and interest into 635,069 shares of common stock at $0.04 per share. These shares were exempt from registration under Section 4(2) of the Securities Act. |
| 10/16/2011 |
625,000 |
$ 25,000 |
Accredited Investor |
The Company sold 625,000 shares of common stock to a non-related accredited investor at $0.04 per share. These shares were exempt from registration under Section 4(2) of the Securities Act |
| 1/26/2012 |
1,000,000 |
$ 40,000 |
Accredited Investor |
The Company sold 1,000,000 shares of common stock to a non-related accredited investor at $0.04 per share. These shares were exempt from registration under Section 4(2) of the Securities Act |
| 4/26/2012 |
250,000 |
$ 10,000 |
Accredited Investor |
The Company sold 250,000 shares of common stock to a non-related accredited investor at $0.04 per share. These shares were exempt from registration under Section 4(2) of the Securities Act |
| 8/24/2012 |
2,276,182 |
$ - |
Anthony Silverman, former CEO |
Anthony Silverman, our former President and CEO, converted a promissory note in the amount of $45,524 in principal and interest into 2,276,182 shares of common stock at $0.02 per share. These shares were exempt from registration under Section 4(2) of the Securities Act. |
| 10/15/2012 |
1,000,000 |
$ 20,000 |
Accredited Investor |
The Company sold 1,000,000 shares of common stock to a non-related accredited investor at $0.02 per share. These shares were exempt from registration under Section 4(2) of the Securities Act |
| 1/6/2013 |
2,000,000 |
$ 20,000 |
Accredited Investor |
The Company sold 2,000,000 shares of common stock to a non-related accredited investor at $0.01 per share. These shares were exempt from registration under Section 4(2) of the Securities Act |
| 2/8/2013 |
1,024,164 |
$ - |
Anthony Silverman, former CEO |
Anthony Silverman, our former President and CEO, converted a promissory note in the amount of $10,242 in principal and interest into 1,024,164 shares of common stock at $0.01 per share. These shares were exempt from registration under Section 4(2) of the Securities Act. |
| 6/17/2013 |
2,000,000 |
$ 10,000 |
Accredited Investor |
The Company sold 2,000,000 shares of common stock to a non-related accredited investor at $0.005 per share. These shares were exempt from registration under Section 4(2) of the Securities Act |
| 7/17/2013 |
4,000,000 |
$ 20,000 |
Accredited Investor |
The Company sold 4,000,000 shares of common stock to a non-related accredited investor at $0.005 per share. These shares were exempt from registration under Section 4(2) of the Securities Act |
| 8/8/2013 |
6,000,000 |
$ 36,000 |
Accredited Investor |
The Company sold 6,000,000 shares of common stock to a non-related accredited investor at $0.006 per share. These shares were exempt from registration under Section 4(2) of the Securities Act |
| |
|
|
|
|
| |
|
|
|
|
| |
20,175,346 |
$ 181,000 |
|
|
| |
|
|
|
|
| * There were no underwriters associated with any of our Sales of Unregistered Securities. |
ONCOLOGIX TECH,
INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS
NON-CONTROLLING INTEREST
On February 27, 2009, in
connection with the Technology Agreement we entered into with Institut für Umwelttechnologien GmbH, a German Company (“IUT”)
whereunder the parties have agreed that the Company’s marketing rights have been transferred to its subsidiary, Oncologix
Corporation and have issued IUTM 10% of the equity ownership of that subsidiary. As of February 27, 2009, the value of the non-controlling
interest was $212. It was determined at August 31, 2010 the value of the investment in IUTM was impaired.
Accordingly, we recorded an impairment loss in the amount of $3,186 for the year ended August 31, 2010. As of August 31, 2013,
$3,701 cumulative net loss was attributable to the non-controlling interest.
WARRANTS:
The following table summarizes
warrant activity in fiscal 2013 and 2012:
| |
|
|
|
Weighted Avg. |
| |
|
Number |
|
Exercise Price |
| Outstanding, August 31, 2011 |
|
- |
|
- |
| Expired/Retired |
|
- |
|
- |
| Exercised |
|
- |
|
- |
| Issued |
|
- |
|
- |
| Outstanding, August 31, 2012 |
|
- |
|
- |
| |
|
|
|
|
| Expired/Retired |
|
- |
|
- |
| Exercised |
|
- |
|
- |
| Issued |
|
7,000,000 |
|
0.012 |
| Outstanding, August 31, 2013 |
|
7,000,000 |
|
0.012 |
The fair value of warrants
granted is estimated using the Black-Scholes option pricing model. This model utilizes the following factors to calculate the fair
value of options granted: (i) annual dividend yield, (ii) weighted-average expected life, (iii) risk-free interest rate and (iv)
expected volatility. The warrants were expensed and accounted for under ASC 718.
The fair value for these
warrants was estimated as of the date of grant using a Black-Scholes option-pricing model with the following assumptions:
| |
|
|
|
Year Ended August 31, |
| |
|
|
|
2013 |
|
2012 |
| Volatility |
97.2% - 97.9% |
|
- |
| Risk free rate |
0.38% |
|
0.00% |
| Expected dividends |
None |
|
None |
| Expected term (in years) |
3 to 4 years |
|
- |
| |
|
|
|
|
|
|
| No warrants were issued in Fiscal 2012 |
|
|
|
ONCOLOGIX TECH, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Details relative to the 7,000,000 immediately
exercisable outstanding warrants at August 31, 2013 are as follows:
| | |
| |
Weighted | |
| |
|
| | |
| |
Average | |
| |
|
| Date of | |
Number | |
Exercise | |
Remaining | |
Expiration |
| Grant | |
of Shares | |
Price | |
Exercise Life | |
Date |
| | |
| |
| |
| |
|
| Fourth quarter of fiscal 2013 | |
| 7,000,000 | | |
$ | 0.012 | | |
3 to 4 years | |
| July-17 | |
| | |
| | | |
| | | |
| |
| | |
| Outstanding, August 31, 2013 | |
| 7,000,000 | | |
| | | |
| |
| | |
STOCK OPTIONS:
ASC 718 requires the estimation
of forfeitures when recognizing compensation expense and that this estimate of forfeitures be adjusted over the requisite service
period should actual forfeitures differ from such estimates. Changes in estimated forfeitures are recognized through a cumulative
adjustment, which is recognized in the period of change and which impacts the amount of unamortized compensation expense to be
recognized in future periods.
ASC 718 requires that modification
of the terms or conditions of an equity award is to be treated as an exchange of the original award for a new award. This event
is accounted for as if the entity repurchases the original instrument by issuing a new instrument of equal or greater value, incurring
additional compensation cost for any incremental value.
1997 Stock Incentive Plan
The Company is authorized
to issue up to 4,600,000 shares of common stock under its 1997 Stock Incentive Plan. Shares may be issued as incentive stock options,
non-statutory stock options, deferred shares or restricted shares. Options are granted at the fair market value of the common stock
on the date of the grant and have terms of up to ten years. We have 4,525,000 shares of common available for future issuance under
our 1997 Stock Incentive Plan as of August 31, 2013. Under the 1997 Stock Incentive Plan the price of the granted common stock
options are equal to the fair market value of such shares on the date of grant. This plan has been approved by our shareholders.
2000 Stock Incentive Plan
The Company is authorized
to issue up to 7,500,000 shares of common stock under its 2000 Stock Incentive Plan. Shares may be issued as incentive stock options,
non-statutory stock options, deferred shares or restricted shares. Options are granted at the fair market value of the common stock
on the date of the grant and have terms of up to ten years. The 2000 Stock Incentive Plan also provides for an annual grant of
options to members of our Board of Directors. For fiscal years ended August 31, 2012, 2011, 2010, 2009 and 2008, our Board of Directors
elected to waive the grant of these annual options. We have 6,417,418 shares of common available for future issuance under our
2000 Stock Incentive Plan as of August 31, 2013. Under the 2000 Stock Incentive Plan the price of the granted common stock options
are equal to the fair market value of such shares on the date of grant. This plan has been approved by our shareholders.
During the years ended
August 31, 2013 and 2012, we granted nil and nil options from the stock incentive plan described above, respectively. During the
years ended August 31, 2013 and 2012, nil and nil options were exercised, respectively. During the years ended August 31, 2013
and 2012, 80,000 and nil options expired, respectively. During the years ended August 31, 2013 and 2012, $0 and $0 was expensed
as stock based compensation, respectively
ONCOLOGIX TECH,
INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
| | | | |
| | | |
| | | |
| Weighted Average | |
| | | | |
| Number of | | |
| Option Price | | |
| Exercise Price | |
| | | | |
| Options Granted | | |
| Per Share | | |
| Per Share | |
| | | | |
| | | |
| | | |
| | |
| | Outstanding, August 31, 2011 | | |
| 297,085 | | |
| $0.12 - $5.16 | | |
$ | 1.43 | |
| | Granted | | |
| — | | |
| — | | |
| — | |
| | Exercised | | |
| — | | |
| — | | |
| — | |
| | Cancelled | | |
| — | | |
| | | |
| — | |
| | Outstanding, August 31, 2012 | | |
| 297,085 | | |
| $0.12 - $5.16 | | |
$ | 1.43 | |
| | Granted | | |
| | | |
| | | |
| | |
| | Exercised | | |
| — | | |
| — | | |
| — | |
| | Cancelled | | |
| (55,000 | ) | |
| $1.60 - $5.16 | | |
| 2.79 | |
| | Outstanding, August 31, 2013 | | |
| 242,085 | | |
| $0.12 - $2.00 | | |
$ | 1.12 | |
The aggregate intrinsic
value in the table above represents the total pre-tax intrinsic value (the difference between our closing stock price on the last
trading day of the fourth quarter of fiscal 2013 and the exercise price, multiplied by the number of in-the-money options) that
would have been received by the option holders had all option holders exercised their options on August 31, 2013.
Expected volatility is
based primarily on historical volatility. Historical volatility is computed using weekly average pricing observations for an applicable
historic period. We believe this method produces an estimate that is representative of our expectations of the future volatility
over the expected term of our options. We currently have no reason to believe future volatility over the expected life of these
options is likely to differ materially from historical volatility. The weighted-average expected life is based upon share option
exercises, pre and post vesting terminations and share option term expirations. The risk-free interest rate is based on the U.S.
treasury security rate estimated for the expected life of the options at the date of grant.
| | |
Options | |
Options | |
|
| | |
Outstanding | |
Exercisable | |
|
| Number of options | |
| 242,085 | | |
242,085 |
| Aggregate intrinsic value of options | |
$ | — | | |
$- |
| Weighted average remaining contractual term (years) | |
| 1.29 | | |
1.29 |
| Weighted average exercise price | |
$ | 1.12 | | |
$1.12 |
2013 Omnibus Incentive
Plan
The Company is authorized
to issue up to 10,000,000 shares of common stock under its 2013 Omnibus Incentive Plan to employees, officers, directors and consultants.
The issuance adoption of this plan has been approved by the Company’s Board of Directors on May 20, 2013. This plan has not
been approved by the Company’s shareholders and consequently, we cannot issue Incentive Stock Options to employees at this
time. Any options are granted at the fair market value of the common stock on the date of the grant and have terms of up to ten
years. We have 10,000,000 shares of common available for future issuance under our 2013 Omnibus Incentive Plan as of August 31,
2013. Under the 2013 Omnibus Incentive Plan the price of the granted common stock options are equal to the fair market value of
such shares on the date of grant.
.
ONCOLOGIX TECH,
INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 9 - COMMITMENTS AND CONTINGENCIES
EMPLOYMENT AGREEMENTS
On March 22, 2013, Wayne
Erwin, the Company’s Chief Executive Officer, signed a three year employment agreement. The agreement provides for an annual
salary of $120,000 along with a monthly auto allowance and health insurance allowance totaling $1,100. Annual increases are to
be approved by the Company’s Board of Directors or Compensation Committee. As of August 31, 2013, $58,750 was accrued as
salary under this agreement.
On April 1, 2013, Michael
Kramarz, the Company’s Chief Financial Officer, signed a three year employment agreement. The agreement provides for an annual
salary of $58,000 along with a monthly auto allowance and health insurance allowance totaling $500. Annual increases are to be
approved by the Company’s Board of Directors or Compensation Committee. As of August 31, 2013, $32,416 was accrued as salary
under this agreement.
CONSULTING CONTRACT
On September 1, 2012, Michael
Kramarz, the Company’s Chief Financial Officer, signed an additional twelve month consulting agreement. Mr. Kramarz is to
perform all his regular duties he had previously performed as Chief Financial Officer including the preparation of the Company’s
financial statements, SEC Filings, maintenance of corporate records, etc. Mr. Kramarz is to be compensated $70 per hour worked
and will turn in weekly time sheets for approval. Mr. Kramarz had previously had consulting contracts for the period of January
2008 through August 2012. During the year ended August 31, 2013 and 2012, we incurred an expense of $50,300 and $72,870 respectively,
under these agreements. This agreement was replaced by an employment agreement described below.
NOTE 9
- RELATED PARTY TRANSACTIONS AND CONTINGENCIES:
FINANCING WITH RELATED PARTIES:
During fiscal 2012 and
2011, the Company entered into financing agreements with related parties of the Company. Please see Note 7for further descriptions
of these transactions.
NOTE 10 - JOINT VENTURE
Institut für Umwelttechnologien GmbH
(IUT)
In February 2009, we entered
into a Technology Agreement with Institut für Umwelttechnologien GmbH, a German Company (“IUT”) whereunder the
parties have agreed that:
| (a) | The Company has granted an exclusive license to a new IUT subsidiary, called “IUTM”,
to develop and manufacture products based on the Company’s proprietary information. This proprietary information is not based
on the technology that had been subject to the Master License Agreement with the University of Maryland – Baltimore. The
Company has also transferred to IUTM a number of items of laboratory equipment and inventory useful in connection with the licensed
information. |
| (b) | The Company retains rights to market products based on such information as well as first consideration
for marketing rights for other possible IUTM products. |
| (c) | In consideration of the license, the Company has received a 10% equity interest in IUTM, which
is organized as a private German limited liability company and IUT has assumed approximately $82,000 of the Company’s indebtedness. |
| (d) | The Company’s marketing rights have been transferred to its subsidiary, Oncologix Corporation
and have issued IUTM 10% of the equity ownership of that subsidiary. |
ONCOLOGIX TECH,
INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
We have been advised that
IUTM is continuing the development of a brachytherapy device generally as described above but based on proprietary technology not
developed by the University of Maryland. During recent discussions with IUTM management, the prior understandings were reaffirmed.
It is now our expectation that we will receive information on at least two potential product lines under consideration and/or development
by IUTM. Upon receipt we plan to determine the extent to which we will be able to market them and to finance a marketing organization.
While our Management is optimistic as to the outcome of those discussions and future success in financing, it is not possible to
predict the probabilities of success with any degree of certainty. It was determined at August 31, 2010,
the value of the investment in IUTM was impaired. Accordingly, we recorded an impairment loss in the amount of $3,186.
On September 23, 2010,
the Company signed a Memorandum of Understanding with Institut für Umwelttechnologien GmbH and IUT Medical GMBH confirming
certain understandings among the parties with respect to their future relationships and business activities as originally contemplated
in their Technology Agreement of February 27, 2009, which was reaffirmed.
On November 1, 2013, because
the development of the brachytherapy device is years off and it cannot be marketed at this time, the Company’s management
and Board of Directors have determined to dispose of Oncologix Corporation its Brachytherapy medical device subsidiary. With our
acquisition of Dotolo we currently have a viable FDA approved medical device requiring minimal capital investment to bring the
Company to cash breakeven. Continued support of Oncologix Corporation would cost the Company millions with no guarantee of FDA
approval. Furthermore, as part of the disposal, the Company will be relieved of over $90,000 in debt.
NOTE 11
- RETIREMENT PLAN
Currently, the Company does not have a retirement
plan in place.
NOTE 12 - INCOME TAXES
As of August 31, 2013,
the Company has federal net operating loss carry-forwards totaling approximately $27,800,000 and general business credit carry-forwards
of approximately $140,000. As a result of the acquisition of Angels of Mercy, Inc., the general business credit carry-forwards
are limited to approximately $9,000 per year due to a Section 383 limitation. Currently there are no state net operating loss carry-forwards.
The federal net operating loss carry-forwards expire in various amounts beginning in 2004 and ending in 2033. The Company does
not have any current state net operating loss carry-forwards. Certain of the Company's net operating loss carry-forwards may be
subject to annual restrictions limiting their utilization in accordance with Internal Revenue Code Section 382, which include limitations
based on changes in control. Due to our history of losses from operations, we have provided a valuation allowance for our net operating
loss carry-forwards and deferred tax assets, net of certain deferred tax liabilities.
ASC 740 requires a company
to determine whether it is more likely than not that a tax position will be sustained upon examination based upon the technical
merits of the position. If the more-likely-than-not threshold is met, a company must measure the tax position to determine the
amount to recognize in the financial statements. As a result of the implementation of ASC 740 – Income Taxes, the Company
performed a review of its material tax positions. At the adoption date of ASC 740, the Company had no unrecognized tax benefit
which would affect the effective tax rate. As of August 31, 2013 and 2012, the Company had no accrued interest and penalties
related to uncertain tax positions. The Company is primarily subject to U.S. and Louisiana income taxes. The tax years 2010 to
current remain open to examination by U.S. federal and state tax authorities
ONCOLOGIX TECH, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
.
A reconciliation of the
beginning and ending accrual for uncertain tax positions is as follows:
| | |
| For the Year Ended August 31, | |
| | |
| 2013 | | |
| 2012 | |
| | |
| | | |
| | |
| Balance, beginning of year | |
$ | — | | |
$ | — | |
| Decreases in tax positions for prior years | |
| — | | |
| — | |
| Increase in tax positions for prior years | |
| — | | |
| — | |
| Increases in tax positions for current year | |
| — | | |
| — | |
| Settlements | |
| — | | |
| — | |
| Lapse in statute of limitations | |
| — | | |
| — | |
| | |
| | | |
| | |
| Balance, end of year | |
$ | — | | |
$ | — | |
The income tax benefit
for the years ended August 31, 2013 and 2012 is comprised of the following amounts:
| | |
| 2012 | | |
| 2011 | |
| Current: | |
$ | — | | |
$ | — | |
| | |
| | | |
| | |
| Deferred: | |
| | | |
| | |
| Federal | |
| (296,000 | ) | |
| (612,000 | ) |
| State | |
| — | | |
| — | |
| | |
| (296,000 | ) | |
| (612,000 | ) |
| Valuation Allowance | |
| 296,000 | | |
| 612,000 | |
| | |
$ | — | | |
$ | — | |
The Company's tax benefit
differs from the benefit calculated using the federal statutory income tax rate for the following reasons:
| | |
| 2013 | | |
| 2012 | |
| Statutory tax rate | |
| 35.0 | % | |
| 35.0 | % |
| State income taxes | |
| — | | |
| — | |
| Change in valuation allowance | |
| (35.0 | )% | |
| (35.0 | )% |
| Effective tax rate | |
| 0.0 | % | |
| 0.0 | % |
The components of the net
deferred tax assets (liabilities) are as follows:
| | |
| 2013 | | |
| 2012 | |
| Deferred tax assets (liabilities): | |
| | | |
| | |
| Property and equipment | |
$ | (1,000 | ) | |
$ | — | |
| Intangible assets | |
| — | | |
| — | |
| General business credits | |
| 140,000 | | |
| — | |
| Net operating loss carryforward | |
| 9,730,000 | | |
| 10,165,000 | |
| | |
| 9,869,000 | | |
| 10,165,000 | |
| Valuation allowance | |
| (9,869,000 | ) | |
| (10,165,000 | ) |
| | |
$ | — | | |
$ | — | |
ONCOLOGIX TECH,
INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
ASC 740 - Income Taxes,
requires a valuation allowance to reduce the deferred tax assets if, based on the weight of the evidence, it is more likely than
not that some or all of the deferred tax assets will not be realized. After consideration of all the evidence, both positive and
negative, management has determined that an $9,869,000 valuation allowance as of August 31, 2013 is necessary to reduce the net
deferred tax assets to the amount that will more likely than not be realized. The decrease in the valuation allowance for the current
year is $296,000.
NOTE 13 - RECENT ACCOUNTING PRONOUNCEMENTS
We have evaluated all Accounting
Standards Updates through the date the financial statements were issued and do not believe any will have a material impact on our
financial condition or results of operations.
NEW ACCOUNTING STANDARD
In July 2012, the Financial
Accounting Standards Board (“FASB”) issued Accounting Standards Update 2012-02 “Intangibles – Goodwill
and Other (Topic 350): Testing Indefinite-Lived Intangible Assets for Impairment” (“ASU 2012-02”). ASU 2012-02
permits entities to first assess qualitative factors to determine whether it is more likely than not that the fair value of an
indefinite-lived intangible asset is impaired as a basis for determining whether it is necessary to perform the quantitative impairment
test. Under the amendments in ASU 2012-02, an entity is not required to calculate the fair value of an indefinite-lived intangible
asset unless it determines that it is more likely than not that the fair value of the asset is less than its carrying amount. An
entity also will have the option to bypass the qualitative assessment for any indefinite-lived intangible asset in any period and
proceed directly to performing the quantitative impairment test. ASU 2012-02 is effective for interim and annual indefinite-lived
intangible asset impairment tests performed for fiscal years beginning on or after September 15, 2012, with early adoption permitted.
The Company’s adoption of ASU 2012-02 is not expected to have an impact on its consolidated financial statements.
NOTE 14
- STATEMENTS OF CASH FLOWS
During fiscal 2013 and
2012, the Company recognized investing and financing activities that affected the balance sheet, but did not result in cash receipts
or payments.
For the year ended August
31, 2013, these supplemental non-cash investing and financing activities are summarized as follows:
|
Amount |
| On October 31, 2012, the Company entered into a note payable agreement to finance $10,404 of directors and officer’s insurance premiums. The note bears interest at a rate of 9.27% per annum and was due in ten monthly installments of $1,085, including principal and interest, beginning on November 30, 2012. |
$ |
10,404 |
| On February 8, 2013, the Company recognized a loss on the conversion of a related party convertible note payable in the amount of $10,241. |
|
10,241 |
| On May 13, 2013 the Company issued 1,000,000 shares as additional compensation for the issuance of a one year promissory note. These shares were valued at $8,000, the closing price |
|
8,000 |
| On August 1, 2013, the Company issued 1,000,000 four year warrants as additional consideration for the purchase of Angels of Mercy, Inc. The value of these options, calculated using the Black-Scholes method were included in the purchase price of Angels of Mercy, Inc. |
|
22,586 |
| On August 5, 2013 the Company issued 6,000,000 three year warrants for finder’s fees in connection with funds raised through a stock purchase agreement. The value of these options calculated using the Black-Scholes method were recorded and interest and finance charges in our financial statements. |
|
137,406 |
| Total non-cash transactions from investing and financing activities. |
$ |
188,637 |
ONCOLOGIX TECH, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
For the year ended August
31, 2012, these supplemental non-cash investing and financing activities are summarized as follows:
| |
Amount |
| On October 6, 2011, the Company converted $25,403 of principal and accrued interest into 635,069 shares of its common stock. These shares were issued in October 2011. |
$ |
25,403
|
| The Company recognized induced conversion expense as a result of reducing the conversion price on non-related party notes converted during the first quarter of fiscal 2012. |
|
25,402
|
| On October 6, 2011, the Company converted $71,128 of principal and accrued interest into 1,778,193 shares of its common stock. This principal and interest was payable to our CEO, Anthony Silverman, a related party. The shares were issued in October 2012. |
|
71,128 |
| The Company recognized a loss on the conversion of related party notes during the first quarter of fiscal 2012. |
|
70,000 |
| The Company recognized a discount on the $10,000 convertible promissory note issued to a related party on October 7, 2011. The discount is related to a beneficial conversion feature issued in connection with this note. |
|
10,000 |
| On October 31, 2011, the Company entered into a note payable agreement to finance $8,078 of directors and officer’s insurance premiums. The note bears interest at a rate of 8.99% per annum and was due in nine monthly installments of $932, including principal and interest, beginning on November 30, 2011. |
|
8,078 |
| On August 24, 2012, the Company converted $45,524 of principal and accrued interest into 2,276,182 shares of its common stock. This principal and interest was payable to our CEO, Anthony Silverman, a related party. The shares were issued in August 2012. |
|
45,524 |
| The Company recognized a loss on the conversion of related party notes during the fourth quarter of fiscal 2012. |
|
22,758 |
| Total non-cash transactions from investing and financing activities. |
$ |
278,293 |
NOTE 15 – INVENTORY
We have inventory, on hand
in the amounts of $31,271 and nil as of August 31, 2013 and August 31, 2012, respectively, as it relates to our medical device
manufacturing segment. We do not maintain any inventory for our personal service care segment. Due to a lack of operating capital
for raw material inventory, we have currently suspended manufacturing of our toxygen product. Consequently, inventory is made up
of miscellaneous hardware parts.
NOTE 16 – GOODWILL, PATENTS AND OTHER
INTANGIBLE ASSETS
We currently carry our
patents and registrations net of amortization. As of August 31, 2013, the Company has a capitalized cost of patents and registrations
in the amount of $122,479 and accumulated amortization of 91,859. Our patents and registrations are amortized over a 20 year period.
Amortization for each of the next 5 fiscal years, assuming no impairment, will be $6,124 per year.
NOTE 17 – BUSINESS
SEGMENTS
We
identify our reportable segments based on our management structure, financial data and market. We have identified two business
segments: Personal Care Services and Medical Device Manufacturing.
ONCOLOGIX TECH,
INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Our
Personal Care Service segment consists of the services of Angels of Mercy, Inc. This segment provides non-medical, Personal Care
Attendant (PCA) services, Supervised Independent Living (SIL), Long-Term Senior Care, and other approved programs performed by
a trained caregiver that will meet the health service needs of beneficiaries whose disabilities preclude the performance of certain
independent living skills related to the activities of daily living (ADL).
Our
Medical Device Manufacturing segment consists of the products of Dotolo Research Corporation. This segment designs, develops, manufactures
and distributes the Toxygen hardware system with disposable speculums and medical grade tubing.
The
accounting policies of the segments are the same as those described, or referred to, in Note 2 - Summary of Significant Accounting
Policies. Assets and related depreciation expense in the column labeled “Corporate Overhead” pertain to capital assets
maintained at the corporate level. Segment loss from operations in the “Corporate Overhead” column contains corporate
related expenses not allocable to the operating segments. Intercompany transactions between operating segments were immaterial
in all periods presented.
Below
are the segment assets for the periods presented.
| | |
As of August 31, 2013 |
| | |
Personal Care | |
Medical Device | |
Corporate | |
|
| | |
Segment | |
Segment | |
Overhead | |
Totals |
| ASSETS |
| |
| |
|
|
| Current Assets: | |
| | | |
| | | |
| | | |
| | |
| Cash and cash equivalents | |
$ | 41,985 | | |
$ | (2,753 | ) | |
$ | 224 | | |
$ | 39,456 | |
| Accounts receivable (net of allowance of $3,000) | |
| 104,544 | | |
| 3,775 | | |
| — | | |
| 108,319 | |
| Inventory | |
| — | | |
| 31,271 | | |
| — | | |
| 31,271 | |
| Prepaid expenses and other current assets | |
| 7,851 | | |
| 30,050 | | |
| 1,275 | | |
| 39,176 | |
| | |
| | | |
| | | |
| | | |
| | |
| Total current assets | |
| 154,380 | | |
| 62,343 | | |
| 1,499 | | |
| 218,222 | |
| | |
| | | |
| | | |
| | | |
| | |
| Property and equipment (net of accumulated depreciation) | |
| 55,950 | | |
| 21,461 | | |
| 1,122 | | |
| 78,533 | |
| Deposits and other assets | |
| — | | |
| 10,050 | | |
| — | | |
| 10,050 | |
| Goodwill | |
| 478,721 | | |
| 1,217,704 | | |
| — | | |
| 1,696,425 | |
| Patents, registrations (net of amortization) | |
| — | | |
| 30,620 | | |
| — | | |
| 30,620 | |
| | |
| | | |
| | | |
| | | |
| | |
| Total assets | |
$ | 689,051 | | |
$ | 1,342,178 | | |
$ | 2,621 | | |
$ | 2,033,850 | |
ONCOLOGIX TECH, INC. AND SUBSIDIARIES
NOTES TO
CONSOLIDATED FINANCIAL STATEMENTS
| | |
As of August 31, 2012 |
| | |
Personal Care | |
Medical Device | |
Corporate | |
|
| | |
Segment | |
Segment | |
Overhead | |
Totals |
| ASSETS |
| |
| |
|
|
| Current Assets: | |
| | | |
| | | |
| | | |
| | |
| Cash and cash equivalents | |
$ | — | | |
$ | 25 | | |
$ | 1,906 | | |
$ | 1,931 | |
| Accounts receivable (net of allowance of $3,000) | |
| — | | |
| — | | |
| — | | |
| — | |
| Inventory | |
| — | | |
| — | | |
| — | | |
| — | |
| Prepaid expenses and other current assets | |
| — | | |
| — | | |
| 2,993 | | |
| 2,993 | |
| | |
| | | |
| | | |
| | | |
| | |
| Total current assets | |
| — | | |
| 25 | | |
| 4,899 | | |
| 4,924 | |
| | |
| | | |
| | | |
| | | |
| | |
| Property and equipment (net of accumulated depreciation) | |
| — | | |
| — | | |
| 1,481 | | |
| 1,481 | |
| Deposits and other assets | |
| — | | |
| — | | |
| — | | |
| — | |
| Goodwill | |
| — | | |
| — | | |
| — | | |
| — | |
| Patents, registrations (net of amortization) | |
| — | | |
| — | | |
| — | | |
| — | |
| | |
| | | |
| | | |
| | | |
| | |
| Total assets | |
$ | — | | |
$ | 25 | | |
$ | 6,380 | | |
$ | 6,405 | |
Below
are the statements of operations for the reporting periods presented.
| | |
For the Year Ended August 31, 2013 |
| | |
| Personal Care | | |
| Medical Device | | |
| Corporate | | |
| | |
| | |
| Segment | | |
| Segment | | |
| Overhead | | |
| Totals | |
| | |
| | | |
| | | |
| | | |
| | |
| Revenues | |
$ | 215,248 | | |
$ | 28,998 | | |
$ | — | | |
$ | 244,246 | |
| | |
| | | |
| | | |
| | | |
| | |
| Cost of revenues | |
| 156,708 | | |
| 38,991 | | |
| — | | |
| 195,699 | |
| | |
| | | |
| | | |
| | | |
| | |
| Gross profit | |
| 58,540 | | |
| (9,993 | ) | |
| — | | |
| 48,547 | |
| | |
| | | |
| | | |
| | | |
| | |
| Operating expenses: | |
| | | |
| | | |
| | | |
| | |
| General and administrative | |
| 48,439 | | |
| 49,575 | | |
| 231,653 | | |
| 329,667 | |
| Depreciation and amortization | |
| 1,049 | | |
| 4,048 | | |
| 358 | | |
| 5,455 | |
| | |
| | | |
| | | |
| | | |
| | |
| Total operating expenses | |
| 49,488 | | |
| 53,623 | | |
| 232,011 | | |
| 335,122 | |
| | |
| | | |
| | | |
| | | |
| | |
| Loss from operations | |
| 9,052 | | |
| (63,616 | ) | |
| (232,011 | ) | |
| (286,575 | ) |
| | |
| | | |
| | | |
| | | |
| | |
| Other income (expense): | |
| | | |
| | | |
| | | |
| | |
| Interest and finance charges | |
| (10,000 | ) | |
| (1,877 | ) | |
| (22,304 | ) | |
| (34,181 | ) |
| Interest and finance charges - related parties | |
| — | | |
| — | | |
| (152,087 | ) | |
| (152,087 | ) |
| Loss on conversion of notes payable - related parties | |
| — | | |
| — | | |
| (10,242 | ) | |
| (10,242 | ) |
| Induced conversion expense | |
| — | | |
| — | | |
| — | | |
| — | |
| Loss on disposal of assets | |
| — | | |
| — | | |
| — | | |
| — | |
| Acquisition costs | |
| — | | |
| | | |
| (173,864 | ) | |
| (173,864 | ) |
| Other income (expenses) | |
| — | | |
| 126 | | |
| 3,364 | | |
| 3,490 | |
| | |
| | | |
| | | |
| | | |
| | |
| Total other income (expense) | |
| (10,000 | ) | |
| (1,751 | ) | |
| (355,133 | ) | |
| (366,884 | ) |
| | |
| | | |
| | | |
| | | |
| | |
| Loss from operations | |
$ | (948 | ) | |
$ | (65,367 | ) | |
$ | (587,144 | ) | |
$ | (653,459 | ) |
ONCOLOGIX TECH, INC. AND SUBSIDIARIES
NOTES TO
CONSOLIDATED FINANCIAL STATEMENTS
| | |
For the Year Ended August 31, 2012 |
| | |
Personal Care | |
Medical Device | |
Corporate | |
|
| | |
Segment | |
Segment | |
Overhead | |
Totals |
| | |
| |
| |
| |
|
| Revenues |
|
$ |
— |
| |
$ |
— |
| |
$ |
— |
| |
$ |
— |
|
|
| | |
|
— |
| |
|
|
| |
|
|
| |
|
|
|
| Cost of revenues |
|
|
|
| |
|
— |
| |
|
— |
| |
|
— |
|
|
| | |
|
|
| |
|
|
| |
|
|
| |
|
|
|
| Gross profit | |
|
— |
| |
|
— |
| |
|
— |
| |
|
— |
|
| | |
|
|
| |
|
|
| |
|
|
| |
|
|
|
| Operating expenses: | |
| | | |
| | | |
| | | |
| | |
| General and administrative | |
| — | | |
| 144 | | |
| 130,625 | | |
| 130,769 | |
| Depreciation and amortization | |
| — | | |
| — | | |
| 450 | | |
| 450 | |
| | |
| | | |
| | | |
| | | |
| | |
| Total operating expenses | |
| — | | |
| 144 | | |
| 131,075 | | |
| 131,219 | |
| | |
| | | |
| | | |
| | | |
| | |
| Loss from operations | |
| — | | |
| (144 | ) | |
| (131,075 | ) | |
| (131,219 | ) |
| | |
| | | |
| | | |
| | | |
| | |
| Other income (expense): | |
| | | |
| | | |
| | | |
| | |
| Interest and finance charges | |
| — | | |
| — | | |
| (10,768 | ) | |
| (10,768 | ) |
| Interest and finance charges - related parties | |
| — | | |
| — | | |
| (25,312 | ) | |
| (25,312 | ) |
| Loss on conversion of notes payable - related parties | |
| — | | |
| — | | |
| (92,758 | ) | |
| (92,758 | ) |
| Induced conversion expense | |
| — | | |
| — | | |
| (25,402 | ) | |
| (25,402 | ) |
| Loss on disposal of assets | |
| — | | |
| — | | |
| (110 | ) | |
| (110 | ) |
| Acquisition costs | |
| — | | |
| | | |
| — | | |
| — | |
| Other income (expenses) | |
| — | | |
| — | | |
| — | | |
| — | |
| | |
| | | |
| | | |
| | | |
| | |
| Total other income (expense) | |
| — | | |
| — | | |
| (154,350 | ) | |
| (154,350 | ) |
| | |
| | | |
| | | |
| | | |
| | |
| Loss from operations | |
$ | — | | |
$ | (144 | ) | |
$ | (285,425 | ) | |
$ | (285,569 | ) |
ONCOLOGIX TECH, INC. AND SUBSIDIARIES
NOTES TO
CONSOLIDATED FINANCIAL STATEMENTS
NOTE 18 – RESTATED STATEMENT
OF CASH FLOWS
| | |
For the Years Ended |
|
|
|
|
| | |
August 31, | |
August 31, | |
|
| | |
2013 | |
2013 | |
|
| | |
(Restated) | |
(As Filed) | |
|
| Operating activities: | |
| | | |
| | | |
| | |
| Net loss | |
$ | (653,459 | ) | |
$ | (653,617 | ) | |
| Change due to elimination of goodwill amortization. | |
| | |
| | | |
| | | |
| | |
| Adjustments to reconcile net loss to net cash used | |
| | | |
| | | |
| | |
| in operating activities: | |
| | | |
| | | |
| | |
| Depreciation and amortization | |
| 5,456 | | |
| 5,614 | | |
| Change due to elimination of goodwill amortization. | |
| Loss on disposal of property and equipment | |
| — | | |
| — | | |
| | |
| Amortization of discount on notes payable and warrants | |
| — | | |
| — | | |
| | |
| Loss on conversion of notes payable - related parties | |
| 10,241 | | |
| 10,241 | | |
| | |
| Induced conversion expense notes payable | |
| — | | |
| — | | |
| | |
| Issuance of stock and warrants for fees | |
| 145,406 | | |
| 145,406 | | |
| | |
| Issuance of note for fees | |
| 65,000 | | |
| — | | |
| Reclassification of note issued for payment of fees related to Angels acquisition to correct actual cash paid. | |
| | |
| | | |
| | | |
| | |
| Changes in operating assets and liabilities: | |
| | | |
| | | |
| | |
| Accounts receivable | |
| 4,031 | | |
| 124,511 | | |
| Adjusted to correct actual cash received. | |
| Prepaid expenses and other current assets | |
| 9,566 | | |
| 9,566 | | |
| Adjusted to correct actual cash received. | |
| Inventory | |
| 69,610 | | |
| 69,611 | | |
| | |
| Deposits and other assets | |
| — | | |
| — | | |
| | |
| Accounts payable and other accrued expenses | |
| 206,591 | | |
| 404,540 | | |
| Adjusted to reflect payables and accrued expenses as part of Dotolo Acquisition. | |
| Accrued interest payable - related parties | |
| 17,090 | | |
| 6,831 | | |
| Adjusted to reflect portion of related party accrued interest as part of Dotolo Acquisition | |
| Accrued interest payable | |
| 14,651 | | |
| 24,394 | | |
| Adjusted to reflect portion of accrued interest as part of Dotolo Acquisition | |
| | |
| | | |
| | | |
| | |
| Net cash used in operating activities | |
| (105,817 | ) | |
| 147,097 | | |
| | |
| | |
| | | |
| | | |
| | |
| Investing activities: | |
| | | |
| | | |
| | |
| Purchase of property and equipment | |
| — | | |
| — | | |
| | |
| Acquisition of Dotolo subsidiary | |
| 1,653 | | |
| (195,781 | ) | |
| Amounts changed to reflect the cash received in the acquisition | |
| Acquisition of Angels subsidiary | |
| (72,879 | ) | |
| (128,359 | ) | |
| Amounts changed to properly reflect the actual cash outlay for the acquisition. | |
| | |
| | | |
| | | |
| | |
| Net cash used in investing activities | |
| (71,226 | ) | |
| (324,140 | ) | |
| | |
| | |
| | | |
| | | |
| | |
| Financing activities: | |
| | | |
| | | |
| | |
| Proceeds from issuance of convertible notes | |
| | | |
| | | |
| | |
| payable - related parties | |
| — | | |
| — | | |
| | |
| Proceeds from issuance of notes payable - related parties | |
| 33,361 | | |
| 33,361 | | |
| | |
| Proceeds from issuance of notes payable | |
| 120,000 | | |
| 120,000 | | |
| | |
| Proceeds from the issuance of common stock | |
| 106,000 | | |
| 106,000 | | |
| | |
| Repayment of notes payable | |
| (25,917 | ) | |
| (25,917 | ) | |
| | |
| Repayment of notes payable - related parties | |
| (18,876 | ) | |
| (18,876 | ) | |
| | |
| Repayment of convertible notes payable - related parties | |
| — | | |
| — | | |
| | |
| | |
| | | |
| | | |
| | |
| Net cash provided by financing activities | |
| 214,568 | | |
| 214,568 | | |
| | |
| | |
| | | |
| | | |
| | |
| Net increase (decrease) in cash and cash equivalents | |
| 37,525 | | |
| 37,525 | | |
| | |
| | |
| | | |
| | | |
| | |
| Cash and cash equivalents, beginning of period | |
| 1,931 | | |
| 1,931 | | |
| | |
| | |
| | | |
| | | |
| | |
| Cash and cash equivalents, end of period | |
$ | 39,456 | | |
$ | 39,456 | | |
| | |
ONCOLOGIX TECH, INC. AND SUBSIDIARIES
NOTES TO
CONSOLIDATED FINANCIAL STATEMENTS
NOTE 19
- SUBSEQUENT EVENTS
On September 11, 2013,
the Company entered into a two month consulting contract with an unrelated party to provide investor relations services. The company
issued 1,000,000 shares of its common stock from its 2013 Omnibus Incentive Plan as payment for these services.
On September 16, 2013,
the Company obtained a merchant loan in the amount of $80,000. The merchant loan bears interest at a rate of 15% and calls for
130 daily payments of $861. Out of the net proceeds, the company also paid $20,000 in broker fees.
On October 1, 2013, the
Company borrowed 10,000 in principal from an unrelated investor. The note is due January 2, 2014 and bears interest at 22%. Monthly
interest payments of $183.33 are due on the first of each month beginning on November 1, 2013 with the final payment of principal
and interest due on January 2, 2014.
On October 1, 2013, the
Board of Directors amended Michael Kramarz’s employment to increase his annual salary to $80,000 per annum.
On October 2, 2013, the
Company entered into a securities transfer agreement with an accredited investor as well as a current convertible note holder.
The agreement called for the accredited investor to purchase $25,000 of the current convertible note holder note. The Company issued
to the accredited investor a convertible promissory note bearing interest at 8% and convertible into shares of the Company’s
common stock using a three-day average of the lowest closing bid prices for the twenty trading days immediately preceding the conversion
date. On October 3, 2013, the Company issued 4,000,000 shares as partial conversion of the $25,000 note. In addition, the Company
entered into a one year convertible promissory note in principal amount of $25,000. The note bears interest at 8% per annum and
contains the same conversion terms as the previously stated note. The note may not be converted prior to December 31, 2013.
On November 1, 2013, the
Company entered into a Settlement Agreement with its former legal counsel. The current balance owed to prior counsel is $145,523.
Pursuant to the settlement agreement, the Company agreed to pay $50,000 in the form of a one year promissory note and transfer
its 90% ownership interest and all marketing rights of Oncologix Corporation, one of its subsidiaries as full settlement of the
current balance owed. The promissory note bears interest of 4% and requires monthly payment of $4,257 beginning on December 1,
2013.
On November 5, 2013 and
November 8, 2013, the Company entered into two, one-year promissory notes with accredited investors to borrow a total principal
amount of $20,000. Each promissory note is $10,000 in principal balance, bears interest at 18% and requires monthly interest payments
of $150 each. The company also issued 3,000,000 in cashless warrants as finder’s fees for these funds.
On December 3, 2013,
The Company entered into a eighteen month promissory note with an accredited investor to borrow a total principal amount of
$75,000. The note bears interest of 18% per annum and calls for monthly payments of principal and interest of $4,785.44
beginning on January 15, 2014. The Company also issued as additional finders’ fees to the investor, 3,500,000 shares of
common stock and 1,000,000 cashless warrants with an exercise price of $.025.
On December 10, 2013,
the Company acquired the assets of Amian Health Services., a leader in the Personal Care Attendant (PCA) healthcare services industry
for Veterans and Private Pay clients located in Louisiana. Operating in the same regions as AOM, we plan on merging these activities
with AOM thereby gaining synchronicities. We paid $75,000 down and issued a note for $25,000 to be paid over one year.
Item 9. Changes
in and Disagreements with Accountants on Accounting and Financial Disclosure
None
Item 9A. Controls and Procedures
Evaluation of Disclosure Controls and Procedures
We maintain disclosure
controls and procedures (as defined in Rule 13a-15(e) under the Exchange Act) that are designed to ensure that information that
would be required to be disclosed in Exchange Act reports is recorded, processed, summarized and reported within the time period
specified in the SEC’s rules and forms, and that such information is accumulated and communicated to our management, including
to our chief executive officer and chief financial officer, as appropriate, to allow timely decisions regarding required disclosure.
As required by Rule 13a-15 under the Exchange Act, our management including our Chief Executive Officer and Chief Financial Officer
evaluated the effectiveness of the design and operation of our disclosure controls and procedures as of August 31, 2013. Based
on that evaluation, we concluded that as of August 31, 2013, and as of the date that the evaluation of the effectiveness of our
disclosure controls and procedures was completed, our disclosure controls and procedures were not effective to satisfy the objectives
for which they are intended.
Management’s Report on Internal Control over Financial
Reporting
Section
404 of the Sarbanes-Oxley Act of 2002 requires that management document and test the Company’s internal control over financial
reporting and include in this Annual Report on Form 10-K a report on management’s assessment of the effectiveness of our
internal control over financial reporting.
Management
of the Company is responsible for establishing and maintaining adequate internal control over financial reporting. As defined in
Rules 13a-15(f) under the Securities Exchange Act of 1934, internal control over financial reporting is a process designed by,
or under the supervision of, the Company’s principal executive, principal operating and principal financial officers, or
persons performing similar functions, and effected by the Company’s board of directors, management and other personnel, to
provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external
purposes in accordance with accounting principles generally accepted in the United States of America. Under the supervision and
with the participation of our management, including our CEO and CFO, we conducted an evaluation of the effectiveness of our internal
control over financial reporting based upon the framework in Internal Control – Integrated Framework issued by the Committee
of Sponsoring Organizations of the Treadway Commission (COSO). Based on that evaluation, our management concluded that our internal
control over financial reporting is not effective, as of August 31, 2013. This was due to deficiencies that existed in the design
or operation of our internal control over financial reporting that adversely affected our internal controls and that may be considered
to be material weaknesses.
The
matters involving internal control over financial reporting that our management considered to be material weaknesses under the
standards of the Public Company Accounting Oversight Board were: (1) lack of a functioning audit committee due to a lack of a majority
of independent members and a lack of a majority of outside directors on our board of directors; (2) inadequate segregation of duties
consistent with control objectives of having segregation of the initiation of transactions, the recording of transaction and the
custody of assets; and (3) ineffective controls over period end financial disclosure and reporting processes. These material weaknesses
were identified by our CEO and CFO in connection with the review of our financial statements as of August 31, 2013.
To
address the material weaknesses set forth in items (2) and (3) discussed above, management performed additional analyses and other
procedures to ensure that the financial statements included herein fairly present, in all material respects, our financial position,
results of operations and cash flows for the periods presented.
This
annual report does not include an attestation report of the Company’s independent 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.
Implemented or Planned
Remediation Initiatives
In response to
the material weaknesses discussed above, we have implemented or plan to implement the following measures:
We will increase our accounting
personnel resources within the accounting function when funds are available to us. We have begun creating positions to segregate
duties consistent with control objectives of having separate individuals to perform: (1) the initiation of transactions; (2) recording
of transactions; and (3) the custody of assets. These resources are already in place at the subsidiary level. Secondly, we plan
to appoint one or more outside directors to our board of directors who shall be appointed to an audit committee resulting is a
fully functioning audit committee who will undertake the oversight in the establishment and monitoring of required internal controls
and procedures such as reviewing and approving estimates and assumptions made by management when funds are available to us.
Management believes that
the appointment of one of more directors will remedy the lack of a function audit committee and lack of a majority of outside directors.
We anticipate that these initiatives will be at least partially, if not fully, implemented by August 31, 2014. Additionally we
intend to test our updated controls and correct our deficiencies by August 31, 2014.
Changes in Internal Control Over Financial
Reporting
There were no changes in
our internal controls over financial reporting that occurred during the three months ended August 31, 2013 that have materially
affected, or are reasonably likely to materially affect, our internal controls over financial reporting.
The
Company’s management, including the Chief Executive Officer and principal financial officer, do not expect that its disclosure
controls or internal controls will prevent all error and all fraud. A control system, no matter how well conceived and operated,
can provide only reasonable, not absolute, assurance that the objectives of the control system are met. In addition, the design
of a control system must reflect the fact that there are resource constraints, and the benefits of controls must be considered
relative to their costs. Because of the inherent limitations in all control systems, no evaluation of controls can provide absolute
assurance that all control issues and instances of fraud, if any, within a company have been detected. These inherent limitations
include the realities that judgments in decision-making can be faulty, and that breakdowns can occur because of simple error or
mistake.
Item 9B. Other Information
None
PART III
Item 10. Directors,
Executive Officers and Corporate Governance
The following table sets
forth our directors, and executive officers, their ages and all offices and positions held. Directors are elected and serve thereafter
until their successors are duly elected by the stockholders. Officers and other employees serve at the will of the Board of Directors.
The information is presented as of November 1, 2012:
| Name |
Age |
Position held with Company |
| Roy Wayne Erwin |
55 |
Chief Executive Officer, President and Director |
| Michael Kramarz |
44 |
Chief Financial Officer, Secretary |
| Barry Griffith |
45 |
Director |
| Victoria Hart |
59 |
President of Angels of Mercy, Inc. Subsidiary. |
Wayne Erwin- 55,
is the Chairman/CEO of Oncologix Tech Inc. and its subsidiaries Dotolo Research Corporation and Angels of Mercy, Inc. Mr. Erwin
is the sole shareholder of Clearview Medical, LLC, a disregarded entity with limited activity. Since 2010, Wayne Erwin has been
the Chief Executive Officer of Deep South Capital, LLC., a company with very limited operations. From 2007 to 2010, Mr. Erwin was
the co-founder and Chief Operations Officer of Electronic Health Network, a leader in Healthcare, Medical Information Technology.
From 2007 to 2004 he was the Chief Operating Officer and Director of New Business Development at Crossroads Regional Hospital,
a 68 bed, acute care, in-patient and outpatient psychiatric and Substance Abuse Facility. From 1995 to 2004, Mr. Erwin was the
Regional Director of Sales for Centerpulse Orthopedics, Inc, a Division of Sulzer Corporation, a $ 3.0 billion Swiss conglomerate
specializing in orthopedic total joint reconstruction of hip, knees and shoulder products. Prior to 1995, Mr. Erwin was employed
by Valley Lab, Inc., Ball Aerospace and Texas Instruments in various senior management capacities. He served in the US Army, with
rank of Captain, at the 101st Airborne Division, with overseas assignments in Panama and Honduras and has advanced military training
in Air Borne, Air Assault, and Jungle Warfare training. Wayne graduated with a Bachelor of Science from Louisiana College- Pineville,
Louisiana.
Michael A. Kramarz –
44, has served as Chief Financial Officer of the Company since July 15, 2004. Mr. Kramarz was first employed by the Company
in September 2002, as its Controller. Mr. Kramarz is responsible for all financial statement, accounting, SEC compliance, payroll
and tax functions. From 1995 to 2002, Mr. Kramarz was employed as Accounting Manager for Assurant Group, where he was responsible
for the accounting and payroll functions for two inbound call centers. In addition, Mr. Kramarz was responsible for quarterly consolidations
into the parent company. From 1992 to 1995, Mr. Kramarz was a staff accountant at VandenToorn & Associates CPA firm where his
was responsible for compilations and reviews of financial statements, as well as tax return preparation. Mr. Kramarz holds a Certified
Management Accountant Designation (CMA) and a Certified Public Accountant Designation (CPA). Mr. Kramarz holds a Bachelor of Science
and Business Administration in Accounting from Aquinas College and a Masters in the Science of Taxation from Grand Valley State
University.
Vickie G. Hart – 59, is the President
of Angels of Mercy and brings over 35 years of senior management and healthcare services experience. Since 2011 through 2013,
she was the Owner and President of Triple E Healthcare Services, a healthcare services consulting firm located in Alexandria,
Louisiana. From 1992 through 2010, Ms. Hart was an Assistant Principal and teacher in Elementary and Secondary education for the
Rapides Parish School Systems. Ms. Hart is active in civic and charitable organizations, recently served on the D.A.R.E. Board
of Directors, Central Louisiana Lions Club, and the local United Way. Vickie Hart holds a Bachelor of Science Degree from Louisiana
State University and a Master Degree in Management from Northwestern State University, Natchitoches, Louisiana.
Barry Griffith – 45, has been
a director of the company since December of 2004. Mr. Griffith brings 20 years of early stage and start up medical device company
experience to Oncologix. Mr. Griffith has been involved in the introduction of novel medical devices in the Orthopedic, Vascular,
Neurological and Cancer markets for companies such as Mitek, Schneider, Novoste and Medtronic. His present position is founder
and principal of The Bench which is and executive search firm within the medical device industry based out of Newport Beach Ca.
Prior to that, he was Director of Sales with Cardiovascular Systems, Inc., Director of Sales for Calypso Medical Technologies and
held the Western Area Director roles with Novoste and Isoray.
Compliance with Section 16(a) of the Exchange
Act
Directors, executive officers
and holders of more than 10% of our outstanding common stock are required to comply with Section 16(a) of the Securities Exchange
Act of 1934, which requires generally that such persons file reports regarding ownership of transactions in securities of the Company
on Forms 3, 4, and 5. Based solely on its review of such forms received by it, or written representations from certain reporting
persons, the Company believes that all Section 16(a) filing requirements applicable to its officers and directors were complied
with during the fiscal year ended August 31, 2013.
Code of Ethics
Our Board of Directors
has adopted a code of ethics that applies to our principal executive officer, principal financial officer and to other persons
performing similar functions. The code of ethics is designed to deter wrongdoing and to promote
honest and ethical conduct, full, fair, accurate,
timely and understandable disclosure, compliance with applicable laws, rules and regulations, prompt internal reporting of violations
of the code and accountability for adherence to the code. We will provide a copy of our code of ethics, without charge, to any
person upon receipt of written request for such delivered to our corporate headquarters. All such requests should be send to Oncologix
Tech, Inc., P.O. Box 8832, Grand Rapids, MI 49518-8832.
Item 11. Executive Compensation
The following table summarizes
all compensation paid for services rendered to Oncologix for the fiscal years ended August 31, 2013 and 2012 by our Principal Executive
Officer and our two most highly compensated executive officers other than our principal executive officer. None of the Company's
other employees received compensation in excess of $100,000 during the last completed fiscal year.
| SUMMARY COMPENSATION TABLE |
| |
|
|
|
|
|
|
Non-qualified |
|
|
| Name and |
|
|
|
|
|
Nonequity |
deferred |
|
|
| Principal |
|
|
Bonus |
Stock |
Option |
incentive plan |
compensation |
All Other |
All Other |
| Position |
Year |
Salary |
($) |
awards($) |
awards($) |
compensation($) |
earnings($) |
compensation($) |
Total($) |
| |
|
|
|
|
|
|
|
|
|
| Roy Wayne Erwin |
2013 |
$ 58,750 |
$ - |
$ - |
$ - |
$ - |
$ - |
$ - |
$ 58,750 |
| Chief Executive Officer (1) |
2012 |
$ - |
$ - |
$ - |
$ - |
$ - |
$ - |
$ - |
$ - |
| |
|
|
|
|
|
|
|
|
|
| Michael A. Kramarz |
2013 |
$ 80,066 |
$ - |
$ - |
$ - |
$ - |
$ - |
$ - |
$ 80,066 |
| Chief Financial Officer (2) |
2012 |
$ 72,870 |
$ - |
$ - |
$ - |
$ - |
$ - |
$ - |
$ 72,870 |
| (1) | On March 22, 2013, Wayne Erwin, was elected the Company’s Chief Executive Officer, signed
a three year employment agreement. The agreement provides for an annual salary of $120,000 along with a monthly auto allowance
and health insurance allowance totaling $1,100. Annual increases are to be approved by the Company’s Board of Directors or
Compensation Committee. As of August 31, 2013, $58,750 was accrued as salary under this agreement. |
| (2) | Mr. Kramarz was hired by Oncologix as our Controller on September 16, 2002. Mr. Kramarz was appointed
Chief Financial Officer on July 15, 2004. Mr. Kramarz salary was set at $76,000 annually on June 25, 2007. From January 1, 2008
to March 31, 2013, Mr. Kramarz has been serving as Chief Financial Officer and was being compensated on a consulting basis. On
April 1, 2013, Mr. Kramarz signed a three year employment agreement. The agreement provides for an annual salary of $58,000 along
with a monthly auto allowance and health insurance allowance totaling $500. |
EMPLOYMENT AGREEMENTS
On March 22, 2013, Wayne
Erwin, the Company’s Chief Executive Officer, signed a three year employment agreement. The agreement provides for an annual
salary of $120,000 along with a monthly auto allowance and health insurance allowance totaling $1,100. Annual increases are to
be approved by the Company’s Board of Directors or Compensation Committee. As of August 31, 2013, $58,750 was accrued as
salary under this agreement.
On April 1, 2013, Michael
Kramarz, the Company’s Chief Financial Officer, signed a three year employment agreement. The agreement provides for an annual
salary of $58,000 along with a monthly auto allowance and health insurance allowance totaling $500. Annual increases are to be
approved by the Company’s Board of Directors or Compensation Committee. As of August 31, 2013, $ 32,416 was accrued as salary
under this agreement.
| x |
| |
|
|
|
|
|
|
|
|
|
|
|
| |
Option awards |
|
Stock awards |
| |
|
|
Equity incentive |
|
|
|
|
|
|
Equity incentive |
|
| |
|
|
plan awards: |
|
|
|
|
|
Equity incentive |
plan awards: |
|
| |
Number of |
Number of |
number of |
|
|
|
Number of |
Market value |
plan awards: |
market or payout |
|
|
securities |
securities |
securities |
|
|
|
shares or |
of shares |
number of |
value of |
|
| Name |
underlying |
underlying |
underlying |
|
|
|
units of |
or units |
unearned shares, |
unearned shares, |
|
| and |
unexercised |
unexercised |
unexercised |
Option |
Option |
|
stock that |
of stock |
units or other |
units or other |
|
| Principal |
options |
options (#) |
unearned |
exercise |
expiration |
|
have not |
that have |
rights that have |
rights that have |
|
| Position |
(#) Exercisable |
Unexercisable |
options (#) |
price($) |
date |
|
vested (#) |
not vested ($) |
not vested (#) |
not vested ($) |
|
| |
|
|
|
|
|
|
|
|
|
|
|
| Michael A. Kramarz |
12,750 |
- |
- |
$ 0.12 |
01/07/18 |
|
- |
$ - |
- |
$ - |
|
| Chief Financial Officer |
|
|
|
|
|
|
|
|
|
|
|
Options Grants
No options were granted
to any members of our Board of Directors during fiscal 2013 or fiscal 2012.
Option Exercise
There were no other options
exercised by the Named Executive Officers and the Company did not amend or adjust the exercise price of any stock options during
fiscal 2013 or 2012.
| DIRECTOR COMPENSATION |
| |
|
|
|
|
|
|
|
| |
Fees |
|
|
|
Non-qualified |
|
|
| |
earned |
|
|
Nonequity |
deferred |
|
|
| Name and Principal |
or paid in |
Stock |
Option |
incentive plan |
compensation |
All Other |
All Other |
| Position |
cash ($) |
awards($) |
awards($) |
compensation($) |
earnings($) |
compensation($) |
Total($) |
| |
|
|
|
|
|
|
|
| Roy Wayne Erwin |
$ - |
$ - |
$ - |
$ - |
$ - |
$ - |
$ - |
| |
|
|
|
|
|
|
|
| Barry Griffith |
$ - |
$ - |
$ - |
$ - |
$ - |
$ - |
$ - |
All directors are reimbursed
for their reasonable out-of-pocket expenses incurred in connection with attendance of board meetings and advising and consulting
with the officers and management from time to time. In addition, each director receives options to purchase 20,000 shares of common
stock upon election to the board and annual grants of 10,000 options for each year of service thereafter. The board of directors
elected to waive the annual options due for fiscal years 2012, 2011 and 2010. The options vest one year from the date of the grant
and terminate upon the earlier of 10 years from the date of grant or six months after the director ceases to be a member of the
Board.
Since suspension of its
research operations at Oncologix Corporation on December 31, 2007, no compensation has been paid to any members of the Company’s
Board of Directors.
Item 12. Security Ownership of Certain Beneficial
Owners and Management and Related Stockholder Matters
The following table sets
forth as of November 8, 2013, certain information with regard to the beneficial ownership of our common stock held by (i) each
shareholder known by us to beneficially own 5% or more of our outstanding common stock, (ii) each director individually, (iii)
the named executive officers and (iv) all of our officers and directors as a group:
| |
Name and Address |
Amount and Nature |
|
Percent |
| Title of Class |
of Beneficial Owner (2) |
of Beneficial Owner (1) |
|
of Class (1)(3) |
| |
|
|
|
|
| Common Stock |
Roy Wayne Erwin |
56,064,000 |
(4) |
40.88% |
| |
|
|
|
|
| Common Stock |
Michael Kramarz |
12,750 |
(5) |
0.02% |
| |
|
|
|
|
| Common Stock |
Barry Griffith |
225,000 |
(6) |
0.28% |
| |
|
|
|
|
| Common Stock |
Anthony Silverman |
6,222,395 |
(7) |
7.67% |
| |
7625 E Via Del Reposo |
|
|
|
| |
Scottsdale, AZ 85028 |
|
|
|
| |
|
|
|
|
| Common Stock |
Donald Schreifels |
26,318,570 |
(8) |
29.71% |
| |
6900 Wedgewood Drive, #340 |
|
|
|
| |
Minneapolis, MN 55311 |
|
|
|
| |
|
|
|
|
| Common Stock |
All directors and executive officers |
56,301,750 |
|
41.04% |
| |
as a group |
|
|
|
Less than 1%
| (1) | Unless otherwise noted, the address of each holder is P.O. Box 8832, Grand Rapids, MI 49518-8832. |
| (2) | A person is deemed to be the beneficial owner of securities that can be acquired within 60 days
from November 8, 2013 through the exercise of any option, warrant or other right. Shares of Common Stock subject to options, warrants
or rights which are currently exercisable or exercisable within 60 days are deemed outstanding solely for computing the percentage
of the person holding such options, warrants or rights, but are not deemed outstanding for computing the percentage of any other
person. |
| (3) | The amounts and percentages in the table are based upon 81,087,422 shares of Common Stock outstanding
as of November 8, 2013. |
| (4) | Includes 56,064 shares of Series D Convertible Preferred Stock, each share convertible into 1,000
shares of the Company’s common stock. |
| (5) | Includes 12,750 shares subject to vested options. |
| (6) | Includes 25,000 shares subject to vested options, direct ownership of 200,000 shares of stock underlying
units held. |
| (7) | Includes 3,500 shares subject to vested options, direct ownership of 6,218,895 shares |
| (8) | Includes direct ownership of 18,818,750 shares of common stock and direct ownership of 7,500,000
three-year warrants to purchase common stock. |
Item 13. Certain Relationships and Related
Transactions, and Director Independence
On October 6, 2011, the
Company issued a convertible promissory note in principal amount of $70,000 to its President, Anthony Silverman, who is also a
member of the Board of Directors. This note was issued as payment in full of the principal and accrued interest of three outstanding
promissory notes in that aggregate amount. The newly issued convertible promissory note bore interest at 6% per annum and was convertible
into the Company's common stock at $0.04 per share. On the same date, Mr. Silverman elected to convert this note plus accrued interest
of $1,128 into 1,778,193 shares of the Company’s Common Stock. The company recognized a $70,000 loss upon the conversion
of this note.
On October 7, 2011, the
Company issued a 90-day convertible promissory note in the principal amount of $10,000 to our President, Anthony Silverman, who
is also a member of the Board of Directors. This note, which was issued for operating capital, bore interest at 6% per annum and
was convertible into the Company’s common stock at $0.04 per share. The Company recognized a $10,000 beneficial conversion
feature upon the issuance of this note. During the fiscal year ended August 31, 2012, $10,000 was expensed as interest and finance
charges as a result of amortizing the discount from the beneficial conversion feature. This note was extended 90 days to April
4, 2012. On January 26, 2012 this note was paid off together with accrued interest of $182.
On December 26, 2011, the
Company issued a 90-day convertible promissory note in the principal amount of $10,000 to our President, Anthony Silverman, who
is also a member of the Board of Directors. This note, which was issued for operating capital, bore interest at 6% per annum and
was convertible into the Company’s common stock at $0.04 per share. The Company did not recognized any beneficial conversion
feature upon the issuance of this note. This note was extended 90 days to April 4, 2012. On January 26, 2012 this note was paid
off together with accrued interest of $51.
On March 26, 2012, the
Company issued a 60-Day promissory note to Anthony Silverman, its President and CEO, in the principal amount of $10,000. The note
bore interest rate of 6%. This note was extended to August 23, 2012. This note was paid off with the issuance of a $45,000 convertible
promissory note to Mr. Silverman.
On May 26, 2012, the Company
issued a 90-Day promissory note to Anthony Silverman, its President and CEO, in the principal amount of $10,000. The note bore
interest rate of 6%. This note was paid off with the issuance of a $45,000 convertible promissory note to Mr. Silverman.
On June 30, 2012, the Company
issued a 60-Day promissory note to Anthony Silverman, its President and CEO, in the principal amount of $5,000. The note bore interest
at a rate of 6%. This note was paid off with the issuance of a $45,000 convertible promissory note to Mr. Silverman.
On July 16, 2012, the Company
issued a 60-Day promissory note to Anthony Silverman, its President and CEO, in the principal amount of $10,000. The note bore
interest at a rate of 6%. This note was paid off with the issuance of a $45,000 convertible promissory note to Mr. Silverman.
On August 13, 2012, the
Company issued a 60-Day promissory note to Anthony Silverman, its President and CEO, in the principal amount of $10,000. The note
bore interest at a rate of 6%. This note was paid off with the issuance of a $45,000 convertible promissory note to Mr. Silverman.
On August 23, 2012, the
Company issued a convertible promissory note in principal amount of $45,000 to its President, Anthony Silverman, who is also a
member of the Board of Directors. This note was issued as payment in full of the principal and accrued interest of three outstanding
promissory notes in that aggregate amount. The newly issued convertible promissory note bore interest at 6% per annum and was convertible
into the Company's common stock at $0.04 per share. On August 24, 2012, Mr. Silverman elected to convert this note plus accrued
interest of $524 into 2,276,182 shares of the Company’s Common Stock. The company recognized a $22,758 loss upon the conversion
of this note.
On September 14, 2012,
the Company issued a 90-Day promissory note to Anthony Silverman, its President and CEO, in the principal amount of $10,000. The
note bore interest at 6% per annum. This note was further extended to February 11, 2013. On February 8, 2013, this note was paid
off together with accrued interest of $242 by the issuance of a convertible promissory note. Please see Convertible Related Party
Notes Payable for further information.
On October 11, 2012, the
Company issued a 30-Day promissory note to Anthony Silverman, its President and CEO, in the principal amount of $5,000. The note
bore an interest rate of 6%. This note was paid off, together with accrued interest of $5 on October 17, 2012.
On November 23, 2012 the
Company issued a 90-Day promissory note to Anthony Silverman, its President and CEO, in the principal amount of $5,000. The note
bore interest at 6% per annum. This note was paid off, together with accrued interest of $39 on January 9, 2013.
On March 8, 2013, the Company
issued a 60-Day promissory note to Anthony Silverman, its former President and CEO, in the principal amount of $2,686. The note
bore interest rate of 6% and the due date has been extended to August 31, 2013. This note was paid off on August 16, 2013 together
with accrued interest of $71.
On April 26, 2013, the
Company issued a 10-Day promissory note to Wayne Erwin, its President and CEO, in the principal amount of $10,675. During the 4th
quarter of fiscal 2013, the Company repaid $6,075 of principal on this note. The note bears an interest rate of 6% and the due
date has been extended to November 30, 2013. As of August 31, 2013, the Company has accrued interest of $223.
During the last 18 months,
Wayne Erwin, our President and CEO, has advanced a total of $51,600 directly to Dotolo in an open advance account. To date we have
accrued $3,053 in interest. There is no specific due date on this note.
Director Independence
The board has determined
that one of the current directors would qualify as independent director as that term is defined in the listing standards of the
NYSE Amex. Such independence definition includes a series of objective tests, including that the director is not an employee of
the company and has not engaged in various types of business dealings with the company.
Item 14. Principal Accountant Fees and Services
The
following table sets forth approximate fees billed to us by our auditors during the fiscal years ended August 31, 2013 and 2012
for: (i) services rendered for the audit of our annual financial statements and the review of our quarterly financial statements;
(ii) services by our auditor that are reasonably related to the performance of the audit or review of our financial statements
and that are not reported as Audit Fees; (iii) services rendered in connection with tax compliance, tax advice and tax planning;
and (iv) all other fees for services rendered.
| |
August 31, 2013 |
August 31, 2012 |
| |
|
|
| (i) Audit Fees |
$ 14,046 |
$ 13,046 |
| (ii) Audit Related Fees |
$ -- |
$ -- |
| (iii) Tax Fees |
$ -- |
$ -- |
| (iv) All Other Fees |
$ -- |
$ -- |
PART IV
Item 15. Exhibits, Financial Statement Schedules
(a)(1) The financial statements listed in the
index set forth in Item 7 of this Form 10-K is filed as part of this report.
(a)(2) Exhibits
| Number |
Description of Filing |
Method |
| 2.1 |
Agreement of Merger and Plan of Reorganization between BestNet Communications Corp, Oncologix Corporation and JDA Medical Technologies, Inc. |
(9) |
| 3.1 |
Articles of Incorporation, as originally filed with the Nevada Secretary of State on February 19, 1998, and as amended to date |
(1) |
| 3.3 |
Certificate of Amendment to Articles of Incorporation, as originally filed with the Nevada Secretary of State. |
(6) |
| 3.4 |
Amended Certificate of Designations, Rights, Preferences and Limitations of Series A Convertible Preferred Stock, as originally filed with the Nevada Secretary of State on November 19, 2003. |
(6) |
| 3.5 |
Amended Certificate of Designations, Rights, Preferences and Limitations of Series B Convertible Preferred Stock, as originally filed with the Nevada Secretary of State on November 19, 2003. |
(6) |
| 3.6 |
Amended Certificate of Designations, Rights, Preferences and Limitations of Series C Convertible Preferred Stock, as originally filed with the Nevada Secretary of State on November 19, 2003. |
(6) |
| 3.7 |
Amended and Restated Bylaws of BestNet Communications Corp. |
(8) |
| 3.8 |
Certificate of Amendment of Articles of Incorporation, as originally filed with the Nevada Secretary of State. |
(11) |
| 3.9 |
Certificate of Designations, Rights, Preferences and Limitations of Series D Convertible Preferred Stock, as originally filed with the Nevada Secretary of State on April 22, 2013 |
* |
| 4 |
2000 Incentive Stock Plan |
(2) |
| 4.1 |
Form of Unit Purchase Agreement |
(7) |
| 10.1 |
Securities Purchase Agreement between Wavetech and the investor and the Placement Agent |
(3) |
| 10.2 |
Registration Rights Agreement between Wavetech, the Investor and the Placement Agent |
(3) |
| 10.3 |
Registration Right Agreement |
(3) |
| 10.4 |
Securities Purchase Agreement |
(3) |
| 10.5 |
Product Customization Agreement |
(4) |
| 10.6 |
Purchase Agreement by and among Softalk, Inc., Interpretel (Canada) Inc. and Wavetech International, Inc. dated October 25, 1999 |
(5) |
| 10.7 |
Amendment No. 1 to Amended and Restated License Agreement |
(5) |
| 10.8 |
Amended and Restated License Agreement |
(5) |
| 10.9 |
Share Exchange Agreement by and among Wavetech International, Inc., Interpretel (Canada) Inc. and Softalk, Inc. dated November 13, 1999 |
(5) |
| 10.10 |
Minutes of Settlement between BestNet Communications Corp. and Softalk, Inc. |
(8) |
| 10.11 |
Lease Agreement Dated November 1, 2005, by and between Noto’s Properties LLC. and BestNet |
(10) |
| 10.12 |
Lease Agreement Dated July 25, 2006, by and between R & J Ventures LLC. and Oncologix Corporation |
(10) |
| 10.13 |
Lease Agreement Dated July 12, 2006, by and between Office Suites Plus and Oncologix Corporation |
(10) |
| 10.14 |
Form of Note and Warrant Purchase Agreement between BestNet and Mountainview Opportunistic Growth Fund LP |
(10) |
| 10.15 |
Form of Note Purchase Agreement Issued July 7, 2006 |
(10) |
| 10.16 |
Franco Consulting Agreement |
(9) |
| 10.17 |
Kennedy Employment Agreement |
(9) |
| 10.18 |
Green Employment Agreement |
(9) |
| 10.19 |
Lowe Employment Agreement |
(9) |
| 10.20 |
License to Fountain Pharmaceuticals, Inc. |
(11) |
| 10.21 |
Erwin Employment Agreement |
(12) |
| 10.22 |
Kramarz Employment Agreement |
* |
| 10.23 |
Hart Employment Agreement |
* |
| 14.1 |
Oncologix Tech, Inc. Code of Ethics |
(6) |
| 21 |
Subsidiaries of the Registrant |
* |
| 32.1 |
Section 906 Certification of Roy Wayne Erwin |
* |
| 32.2 |
Section 906 Certification of Michael A. Kramarz |
* |
| 31.1 |
Certification of Chief Executive Officer |
* |
| 31.2 |
Certification of Chief Financial Officer |
* |
| 99 |
Consent of Seale and Beers, CPAs |
* |
| (1) | Incorporated by reference to the like numbered exhibit to Form 10-QSB for the quarter ended February
28, 1998. |
| (2) | Incorporated by reference to the like numbered exhibit to Form S-8 as filed on May 29, 2001. |
| (3) | Incorporated by reference to exhibit 4.2 to Form 8-K filed on May 16, 2000. |
| (4) | Incorporated by reference to exhibit 10.1 to the Form 10-K for the fiscal year ended August 31,
2000. |
| (5) | Incorporated by reference to the Form 10-KSB for the fiscal year ended August 31, 1999, exhibits
10.6, 10.7, 10.8 and 10.9 were numbered exhibits 10.1, 10.2, 10.3 and 10.4 respectively in the Form 10-KSB for the year ended August
31, 1999. |
| (6) | Incorporated by reference to the Form 10-KSB for the fiscal year ended August 31, 2003. |
| (7) | Incorporated by reference to the Form 10-QSB for the quarter ended May 31, 2003, exhibit 4.4 was exhibit 10.1 in the Form 10-QSB
for the quarter ended May 31, 2003. |
| (8) | Incorporated by reference to the Form 10-KSB for the fiscal year ended August 31, 2004. |
| (9) | Incorporated by reference to the Current Report on Form 8-K, dated July 26, 2006. |
| (10) | Incorporated by reference to the Form 10-KSB for the fiscal year ended August 31, 2006. |
| (11) | Incorporated by reference to the Form 10-KSB for the fiscal year ended August 31, 2007 |
| (12) | Incorporated by reference to the Form 8-K filed on March 27, 2013 |
| (b) | Reports on Form 8-K Filed during the Last Quarter of The Period Covered by This Report are as Follows: |
Form 8-K filed August
7, 2013 – Acquisition of Angels of Mercy, Inc.
SIGNATURES
In accordance with Section
13 or 15(d) of the Exchange Act, the registrant caused this report to be signed on its behalf by the undersigned, thereunto duly
authorized.
| |
ONCOLOGIX TECH, INC. |
| |
|
| |
|
| Date: September
29, 2014 |
By: /s/ Roy Wayne Erwin |
| |
Name: Roy Wayne Erwin |
| |
Title: Chief Executive Officer and President |
| Date: September
29, 2014 |
By: /s/ Michael A. Kramarz |
| |
Name: Michael A. Kramarz |
| |
Title: Chief Financial Officer |
| |
|
In accordance with the
Exchange Act, this report has been signed below by the following persons on behalf of the registrant and in the capacities and
on the dates indicated.
| By: /s/ Roy Wayne Erwin |
Date: September
29, 2014 |
| Roy Wayne Erwin, Principal Executive Officer |
|
| |
|
| By: /s/ Michael A. Kramarz |
Date: September
29, 2014 |
| Michael A. Kramarz, Principal Financial Officer |
|
| |
|
| By: /s/ Michael A. Kramarz |
Date: September
29, 2014 |
| Michael A. Kramarz, Principal Accounting Officer |
|
| |
|
| By: /s/ Barry Griffith |
Date: September
29, 2014 |
| Barry Griffith, Director |
|
Exhibit 21
Subsidiaries of Oncologix Tech, Inc.
Subsidiaries of Registrant
|
Subsidiary |
State of Incorporation or Jurisdiction |
Percent of Ownership of Oncologix Tech, Inc. |
| Dotolo Research Corporation |
Louisiana |
100% |
| Angels of Mercy, Inc. |
Louisiana |
100% |
| Oncologix Corporation |
Nevada |
90% |
| International Environment Corporation |
Delaware |
100% |
| Interpretel (Canada) Inc. |
Province of Ontario |
100% |
| Interpretel, Inc. |
Arizona |
100% |
| Telplex International |
Arizona |
100% |
EXHIBIT 31.1
CERTIFICATION OF PRINCIPAL EXECUTIVE
OFFICER
PURSUANT
TO SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002
I, Roy Wayne
Erwin, certify that:
| (1) | I have reviewed this Annual Report on Form 10-K of Oncologix Tech, Inc.; |
| (2) | Based on my knowledge, the Report does not contain any untrue statement of a material fact or omit
to state a material fact necessary in order to make the statements made, in light of the circumstances under which such statements
were made, not misleading with respect to the period covered by the Report; |
| (3) | Based on my knowledge, the financial statements, and other financial information included in the
Report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant
as of, and for, the periods represented in this report; |
| (4) | The registrant’s other certifying officer and I are responsible for establishing and maintaining
disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e) and internal control over financial
reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have: |
| (a) | Designed such disclosure controls and procedures, or caused such disclosure controls and procedures
to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated
subsidiaries, is made known to us by others with these entities, particularly during the period in which this Report is being prepared; |
| (b) | Designed such internal control over financial reporting, or caused such internal control over financial
reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting
and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles; |
| (c) | Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented
in this Report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered
by this Report based on such evaluation; and |
| (d) | Disclosed in this Report any change in the registrant’s internal control over financial reporting
that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in case of
an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control
over financial reporting. |
| (5) | The registrant’s other certifying officer and I have disclosed, based on our most recent
evaluation of internal control over financial reporting,
to the registrant’s auditors and the audit committee of the Registrant’s board of directors (or persons performing
the equivalent functions): |
| (a) | All significant deficiencies and material weaknesses in the design or operation of internal
control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record,
process, summarize and report financial information; and |
| (b) | Any fraud, whether or not material, that involves management or other employees who have a significant
role in the registrant’s internal control over financial reporting. |
| Dated: |
September
29, 2014 |
| |
|
| By: |
/s/ Roy Wayne Erwin |
| |
Roy Wayne Erwin |
| |
Chief Executive Officer and President |
EXHIBIT 31.2
CERTIFICATION OF PRINCIPAL FINANCIAL
OFFICER
PURSUANT
TO SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002
I, Michael
Kramarz, certify that:
| (1) | I have reviewed this Annual Report on Form 10-K of Oncologix Tech, Inc.; |
| (2) | Based on my knowledge, the Report does not contain any untrue statement of a material fact or omit
to state a material fact necessary in order to make the statements made, in light of the circumstances under which such statements
were made, not misleading with respect to the period covered by the Report; |
| (3) | Based on my knowledge, the financial statements, and other financial information included in the
Report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant
as of, and for, the periods represented in this report; |
| (4) | The registrant’s other certifying officer and I are responsible for establishing and maintaining
disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e) and internal control over financial
reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have: |
| (a) | Designed such disclosure controls and procedures, or caused such disclosure controls and procedures
to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated
subsidiaries, is made known to us by others with these entities, particularly during the period in which this Report is being prepared; |
| (b) | Designed such internal control over financial reporting, or caused such internal control over financial
reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting
and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles; |
| (c) | Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented
in this Report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered
by this Report based on such evaluation; and |
| (d) | Disclosed in this Report any change in the registrant’s internal control over financial reporting
that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in case of
an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control
over financial reporting. |
| (5) | The registrant’s other certifying officer and I have disclosed, based on our most recent
evaluation of internal control over financial reporting,
to the registrant’s auditors and the audit committee of the Registrant’s board of directors (or persons performing
the equivalent functions): |
| (a) | All significant deficiencies and material weaknesses in the design or operation of internal
control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record,
process, summarize and report financial information; and |
| (b) | Any fraud, whether or not material, that involves management or other employees who have a significant
role in the registrant’s internal control over financial reporting. |
| Dated: |
September
29, 2014 |
| |
|
| By: |
/s/ Michael A. Kramarz |
| |
Michael A. Kramarz |
| |
Chief Financial and Accounting Officer |
Exhibit 32.1
ONCOLOGIX TECH, INC. AND SUBSIDIARIES
CERTIFICATION OF PRINCIPAL
EXECUTIVE OFFICER PURSUANT TO
18 U.S.C. SECTION 1350,
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF
2002
In connection with
the Annual Report of Oncologix Tech, Inc. (the “Company”) on Form 10-K for the fiscal year ended August 31, 2013, as
filed with the Securities and Exchange Commission on the date hereof (the “Report”), I Roy Wayne Erwin, Chief Executive
Officer and President of the Company, certify, pursuant to 18 U.S.C. ss. 1350, as adopted pursuant to ss. 906 of the Sarbanes-Oxley
Act of 2002, that:
| 1) | The report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange
Act of 1934; and |
| 2) | The information contained in the Report fairly presents, in all material respects, the financial
condition and result of operations of the Company. |
| Dated: |
September
29, 2014 |
| |
|
| By: |
/s/ Roy Wayne Erwin |
| |
Roy Wayne Erwin |
| |
Chief Executive Officer and President |
A signed original of this
written statement required by Section 906 has been provided to the Company and will be retained by the Company and furnished to
the Securities and Exchange Commission or its staff upon request.
The foregoing certification
is being furnished to the Securities and Exchange Commission as an exhibit to the Report and shall not be considered filed as part
of the Report.
Exhibit 32.2
ONCOLOGIX TECH, INC. AND SUBSIDIARIES
CERTIFICATION OF PRINCIPAL
FINANCIAL OFFICER PURSUANT TO
18 U.S.C. SECTION 1350,
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF
2002
In connection with
the Annual Report of Oncologix Tech, Inc. (the “Company”) on Form 10-K for the fiscal year ended August 31, 2013, as
filed with the Securities and Exchange Commission on the date hereof (the “Report”), I Michael A. Kramarz, Chief Financial
Officer of the Company, certify, pursuant to 18 U.S.C. ss. 1350, as adopted pursuant to ss. 906 of the Sarbanes-Oxley Act of 2002,
that:
| 1) | The report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange
Act of 1934; and |
| 2) | The information contained in the Report fairly presents, in all material respects, the financial
condition and result of operations of the Company. |
| Dated: |
September
29, 2014 |
| |
|
| By: |
/s/ Michael A. Kramarz |
| |
Michael A. Kramarz |
| |
Chief Financial and Accounting Officer |
A signed original of this
written statement required by Section 906 has been provided to the Company and will be retained by the Company and furnished to
the Securities and Exchange Commission or its staff upon request.
The foregoing certification
is being furnished to the Securities and Exchange Commission as an exhibit to the Report and shall not be considered filed as part
of the Report.
Exhibit 3.9
ROSS MILLER
Secretary of State
204 North Carson Street, Suite 1
Carson City, Nevada 89701-4520
(775) 684 5708
Website: www.nvsos.gov
| |
| CERTIFICATE OF DESIGNATION |
| (PURSUANT TO NRS 78.1955) |
| |
Important: Read attached instructions before
completing form.
ABOVE
SPACE IS FOR OFFICE USE ONLY
Certificate of Designation For
Nevada Profit Corporations
(Pursuant to NRS 78.1955)
1.
Name of corporation:
ONCOLOGIX TECH, INC.
2.
By resolution of the board of directors pursuant to a provision in the articles of incorporation, this certificate establishes
the following regarding the voting powers, designations, preferences, limitations, restrictions and relative rights of the following
class of series of stock:
A. Designation and Number.
Sixty Thousand (60,000)
of the Ten Million (10,000,000) authorized shares of Preferred Stock of the Corporation shall be designated Series D Convertible
Preferred Stock (the “Series D Preferred Stock”) and shall possess the rights and privileges set forth below.
B. Par Value
Stated Value, Purpose of Issuance and Certificates.
Each share of Series D
Preferred Stock shall have a par value of $.001, and a stated value face amount) of Eighty Dollars and Twenty Five Cents ($80.25)
(the “Stated Value”). Certificates representing the shares of Series D Preferred Stock purchased shall
be issued by the Corporation in accordance with the actions of the Board of Directors.
C. No Dividends.
The shares of Series D
Preferred Stock shall not be entitled to receive any dividends.
D. Liquidation
Preference.
In the event of any liquidation,
dissolution or winding-up of the Corporation, either voluntary or involuntary (a “Liquidation”), the Series D Preferred
Stock then issued and outstanding shall be entitled to be paid out of the assets of the Corporation available for distribution
to its shareholders on a pari passu basis, whether from capital, surplus or earnings, before any payment shall be made to
the holders of shares of Common Stock or upon any other series of Preferred Stock of the Corporation junior to the Series D Preferred
Stock, an amount per share equal to the Stated Value. If, upon any Liquidation of the Corporation, the assets of the Corporation
available for distribution to its shareholders shall be insufficient to pay the holders of shares of the Series D Preferred Stock
and the holders of any other series of Preferred Stock with a liquidation preference equal to the liquidation preference of the
Series D Preferred Stock the full amounts to which they shall respectively be entitled, the holders of shares of the Series D Preferred
Stock and the holders of any other series of Preferred Stock with a liquidation preference equal to the liquidation preference
of the Series D Preferred Stock shall receive all the assets of the Corporation available for distribution and each such holder
of the Series D Preferred Stock and the holders of any other series of preferred stock with a liquidation preference equal to the
liquidation preference of the Series D Preferred Stock shall share ratably in any distribution in accordance with the amounts due
such shareholders. After payment shall have been made to the holders of shares of the Series D Preferred Stock of the full amount
to which they shall be entitled, as aforesaid, the holders of shares of the Series D Preferred Stock shall be entitled to no further
distributions thereon and the holders of shares of the Common Stock and of shares of any other series of stock of the Corporation
shall be entitled to share, according to their respective rights and preferences, in all remaining assets of the Corporation available
for distribution to its shareholders.
E. Conversion Rights.
Subject to any limitations
on the right of the holders of the Series D Preferred Stock to convert their shares of Series D Preferred Stock into shares Common
Stock, the holders of Series D Preferred Stock shall have the following conversion rights:
(a) Conversion. Subject
to and upon compliance with the provisions of this Section E, the holder of any shares of Series D Preferred
Stock shall have the right at such holder’s option, at any time or from time to time after March 1, 2014, to convert
any of such shares of Series D Preferred Stock into fully paid and non-assessable shares of Common Stock at the rate of 1,000
shares of Common Stock for each Share of Series D Preferred Stock (the “Conversion Rate”), subject to adjustment
as set forth herein.
(b) Mechanics
of Conversion. The holder of any shares of Series D Preferred Stock may exercise the conversion right specified in Subsection
E(a) above by surrendering to the Corporation or any transfer agent of the Corporation the certificate or certificates
for the shares to be converted, accompanied by written notice specifying the number of shares to be converted. Conversion shall
be deemed to have been effected on the date when delivery of notice of an election to convert and certificates for shares is made
and such date is referred to herein as the “Conversion Date.” Subject to the provisions of Section F,
as promptly as practicable thereafter, the Corporation shall issue and deliver to or upon the written order of such holder a certificate
or certificates for the number of full shares of Common Stock to which such holder is entitled and a check or cash with respect
to any fractional interest in a share of Common Stock as provided in subsection H(e) below. Subject to the provisions
of Section F, the person in whose name the certificate or certificates for Common Stock are to be issued shall be
deemed to have become a holder of record of such Common Stock on the applicable Conversion Date. Upon conversion of only a portion
of the number of shares covered by a certificate representing shares of Series D Preferred Stock surrendered for conversion, the
Corporation shall issue and deliver to or upon the written order of the holder of the certificate so surrendered for conversion,
at the expense of the Corporation, a new certificate covering the number of shares of Series D Preferred Stock representing the
unconverted portion of the certificate so surrendered.
(e) Conversion
Rate Adjustments. The Conversion Rate shall be subject to the adjustment provisions of Section F below.
F. Anti-Dilution
Rights.
(a) Adjustments
for Dividends, Reclassifications, etc. In case the Corporation shall hereafter (i) declare a dividend or make a distribution
on its outstanding shares of Common Stock in shares of Common Stock, (ii) subdivide or reclassify its outstanding shares
of Common Stock into a greater number of shares, or (iii) combine or reclassify its outstanding shares of Common Stock into
a smaller number of shares, the Conversion Rate in effect at the time of the record date for such dividend or distribution or
of the effective date of such subdivision, combination or reclassification shall be adjusted so that it shall equal the price
determined by multiplying the Conversion Rate by a fraction, the numerator of which shall be the number of shares of Common Stock
outstanding after giving effect to such action, and the denominator of which shall be the number of shares of Common Stock outstanding
immediately prior to such action. Such adjustment shall be made successively whenever any event listed above shall occur.
(b) Adjustment
for Reorganization, Consolidation and Merger. In case of any reorganization of the Corporation (or any other corporation the
stock or other securities of which are at the time receivable on the conversion of the Series D Preferred Stock) after the Initial
Issuance Date, or in case, after such date, the Corporation (or any such other corporation) shall consolidate with or merge into
another corporation or entity or convey all or substantially all its assets to another corporation or entity, then and in each
such case the holders of the Series D Preferred Stock, upon the conversion thereof as provided in Section E
at any time after the consummation of such reorganization, consolidation, merger or conveyance, shall be entitled to receive,
in lieu of the stock or other securities and property receivable upon the conversion of their shares of Series D Preferred Stock
prior to such consummation, the stock or other securities or property to which such holders would have been entitled upon such
consummation if such holders had converted their shares of Series D Preferred Stock immediately prior thereto, all subject to
further adjustment as provided in Section F(a) above.
(c) Minimum
Adjustment. No adjustment in the Conversion Rate shall be required unless such adjustment would require an increase or decrease
of at least one (1) percent in such rate; provided, however, that any adjustments which by reason of this Section F(c)
are not required to be made shall be carried forward and taken into account in any subsequent adjustment required to be made hereunder.
All calculations under this Section F shall be made to the nearest cent or to the nearest one-hundredth of
a share, as the case may be. Anything in this Section F to the contrary notwithstanding, the Corporation shall
be entitled, but shall not be required, to make such changes in the Conversion Rate, in addition to those required by this Section F,
as it shall determine, in its sole discretion, to be advisable in order that any dividend or distribution in shares of Common
Stock, or any subdivision, reclassification or combination of Common Stock, hereafter made by the Corporation shall not result
in any Federal Income tax liability to the holders of Common Stock or securities convertible into Common Stock.
(d) Notices.
Whenever the Conversion Rate is adjusted, as herein provided, the Corporation shall promptly but no later than ten (10) days
after any request for such an adjustment by the holder, cause a notice setting forth the adjusted Conversion Rate and adjusted
number of shares of Common Stock issuable upon conversion of Series D Preferred Stock, and, if requested, information describing
the transactions giving rise to such adjustments, to be mailed to the holders at their last addresses appearing on the Corporation’s
records, and shall cause a certified copy thereof to be mailed to its transfer agent, if any. The Corporation may retain a firm
of independent certified public accountants selected by the Board of Directors (who may be the regular accountants employed by
the Corporation) to make any computation required by this Section F, and a certificate signed by such firm
shall be conclusive evidence of the correctness of such adjustment.
(e) Receipt
of Stock other than Common Stock. In the event that at any time, as a result of an adjustment made pursuant to this Section F,
the holder of Series D Preferred Stock thereafter shall become entitled to receive any shares of the Corporation, other than Common
Stock, thereafter the number of such other shares so receivable upon conversion of Series D Preferred Stock shall be subject to
adjustment from time to time in a manner and on terms as nearly equivalent as practicable to the provisions with respect to the
Common Stock contained herein.
(g) Continuation
of Rate and Number of Series D Preferred Stock. Irrespective of any adjustments in the Conversion Rate or the number or kind
of shares purchasable upon conversion of Series D Preferred Stock, Series D Preferred Stock theretofore or thereafter issued may
continue to express the same price and number and kind of shares as are stated in the similar Series D Preferred Stock initially
issuable pursuant to this Certificate of Designation.
G. Voting
Rights.
(a) Number
and Voting with other Shareholders. The holders of shares of Series D Preferred Stock shall be entitled to vote upon all matters
upon which holders of the Common Stock have the right to vote, and shall be entitled to the following number of votes(the “Voting
Rate”): (i) During the period from March 1, 2013 to February 28, 2014, 400 votes per share; (ii) During the period from
March 1, 2014 to February 28, 2015, 800 votes per share; (iii) During the period from March 1, 2015 to February 29, 2016, 1,200
votes per share; (iv) During the period from March 1, 2016 to February 28, 2017, 1,600 votes per share; and (v) after March 1,
2017, 2,000 votes per share, all subject to adjustment as set forth herein (the “Final Voting Rate”).
(b) Special
Class Voting Rights. In addition to any other rights provided by law, so long as any Series D Preferred Stock is outstanding,
the Corporation, without first obtaining the affirmative vote or written consent of the holders of not less than a majority of
such outstanding shares of Series D Preferred Stock, voting separately as a class, will not:
(i) authorize
or issue shares of any class or series of stock having any preference or priority as to dividends, assets or other rights superior
to any such preference or priority of the Series D Preferred Stock, or authorize or issue shares of stock of any class or any
bonds, debentures, notes or other obligations convertible into or exchangeable for, or having option rights to purchase, any shares
of stock of the Corporation having any preference or priority as to dividends, assets or other rights superior to any such preference
or priority of the Series D Preferred Stock; or
(ii) reclassify
any class or series of stock of the Corporation, that is junior in rights to the Series D Preferred Stock, into a class or series
of stock which has any rights senior to or in parity with the Series D Preferred Stock; or
(iii)
re-classify any class or series of stock of the Corporation, that is in parity with the Series D Preferred Stock, into a class
or series of stock which has any rights senior to the Series D Preferred stock.
(iv) commencing
September 21, 2013, the Series D Preferred Stock, voting as a class, shall be entitled to elect one member of the Board of Directors.
(c
) Adjustment to Voting Rate. Any change in the Conversion Rate shall result in a corresponding change in the Voting Rate
so that the Final Voting Rate shall always be twice the Conversion Rate.
H. Reservation
of Shares; Costs; Approvals; etc.
(a) Reservation
of Shares. The Corporation shall reserve at all times so long as any shares of Series D Preferred Stock remain outstanding,
free from preemptive rights, out of its treasury stock (if applicable) or its authorized but unissued shares of Common Stock,
or both, solely for the purpose of effecting the conversion of the shares of Series D Preferred Stock, sufficient shares of Common
Stock to provide for the conversion of all outstanding shares of Series D Preferred Stock (including taking into account any anti-dilution
adjustments pursuant to Section F above). All shares of Common Stock which may be issued upon conversion of
the shares of Series D Preferred Stock will upon issuance by the Corporation be duly and validly issued, fully paid and non-assessable
and free from all taxes, liens and charges with respect to the issuance thereof, and the Corporation shall take no action which
will cause a contrary result (including without limitation, any action which would cause the Conversion Rate to be less than the
par value, if any, of the Common Stock).
(b) Costs.
The Corporation shall pay all documentary, stamp, transfer or other transactional taxes attributable to the issuance or delivery
of shares of Common Stock upon conversion of any shares of Series D Preferred Stock; provided that the Corporation shall not be
required to pay any taxes which may be payable in respect of any transfer involved in the issuance or delivery of any certificate
for such shares in a name other than that of the holder of the shares of Series D Preferred Stock in respect of which such shares
are being issued.
(c) Approvals.
If any shares of Common Stock to be reserved for the purpose of conversion of shares of Series D Preferred Stock require registration
with or approval of any governmental authority under any Federal or state law before such shares may be validly issued or delivered
upon conversion, then the Corporation will in good faith and as expeditiously as possible endeavor to secure such registration
or approval, as the case may be. If, and so long as, any Common Stock into which the shares of Series D Preferred Stock are then
convertible is listed on any national securities exchange or on the NMS or NSCM, the Corporation will, if permitted by the rules
of such exchange or Nasdaq, list and keep listed on such exchange or the NMS or NSCM, upon official notice of issuance, all shares
of such Common Stock issuable upon conversion.
(d) Lost
or Stolen Certificates. Upon receipt by the Corporation of evidence of the loss, destruction, theft or mutilation of any Series
D Preferred Stock certificates (the “Certificates”) and (in the case of loss, theft or destruction) of indemnity or
security reasonably satisfactory to the Corporation, and upon surrender and cancellation of the Certificates, if mutilated, the
Corporation shall execute and deliver new Series D Preferred Stock Certificates of like tenor and date. However, the Corporation
shall not be obligated to re-issue such lost or stolen Series D Preferred Stock Certificates if the Holder thereof contemporaneously
requests the Corporation to convert such Series D Preferred Stock into Common Stock, in which event the Corporation shall be entitled
to rely on an affidavit of loss, destruction or theft of the Series D Preferred Stock Certificate or, in the case of mutilation,
tender of the mutilated certificate, and shall issue the shares of Common Stock issuable upon conversion.
(e) No
Fractional Shares. If the number of shares of Common Stock issuable upon the conversion of Series D Preferred Stock results
in any fractional shares, the Corporation shall not be required to issue fractions of shares, upon conversion of the Series D
Preferred Stock or otherwise, or to distribute certificates that evidence fractional shares. With respect to any fraction of a
share called for upon any conversion hereof, the Corporation shall pay to the holder an amount in cash equal to such fraction
multiplied by the current market value of such fractional share, determined as follows:
(i) If
the Common Stock is listed on a national securities exchange or admitted to unlisted trading privileges on such exchange or listed
for trading on the NMS, the current market value shall be the average of the last reported sale prices of the Common Stock on
such exchange for the ten (10) trading days prior to the date of conversion of Series D Preferred Stock; provided that if no such
sale is made on a day within such period or no closing sale price is quoted, that day’s market value shall be the average
of the closing bid and asked prices for such day on such exchange or system; or
(ii) If
the Common Stock is listed in the over-the-counter market (other than on NMS) or admitted to unlisted trading privileges, the
current market value shall be the mean the average of the last reported bid and asked prices reported by the National Quotation
Bureau, Inc. for the ten (10) trading days prior to the date of the conversion of the Series D Preferred Stock; or
(iii) If
the Common Stock is not so listed or admitted to unlisted trading privileges and bid and asked prices are not so reported, the
current market value shall be an amount determined in a reasonable manner by the Board of Directors of the Corporation.
(f) Status
of Converted Stock. In the event any shares of Series D Preferred Stock shall be converted as contemplated hereby, the shares
so converted shall be cancelled, shall return to the status of authorized but unissued shares of Preferred Stock of no designated
class or series, and shall not be issuable by the Corporation as Series D Preferred Stock.
3.
Effective Date of Filing (optional):
4.
Officer Signature _______________________________________________
Filing Fee: $175.00
IMPORTANT: Failure
to include any of the above information and submit the proper fees may cause this filing to be rejected.
SUBMIT IN DUPLICATE
Exhibit
10.22
EXECUTIVE EMPLOYMENT
AGREEMENT
This EXECUTIVE EMPLOYMENT AGREEMENT
("Agreement") is made and entered into as of April 2, 2013, by and between Oncologix Tech, Inc. (Company), a company
duly incorporated and validly existing under the laws of Nevada and Michael A. Kramarz ("Executive"), with principal
office located at 206 Crown St. SW, Wyoming, MI 49548.
RECITALS
A. WHEREAS, the Company
wishes to ensure that it will have the benefits and knowledge of Employee's services and expertise on the terms and conditions
hereinafter set forth; and
C. WHEREAS, Oncologix Tech,
Inc. is a diversified medical device and healthcare holding company.
D. WHEREAS, the Company
desires to engage Mr. Kramarz as Executive as Chief Financial Officer and the Executive desires to provide employment services
to the Company on all of the terms and conditions herein set forth.
E. WHEREAS, the Company
desires to provide the Executive with compensation in recognition of the Executive's valuable skills and services.
NOW, THEREFORE, in consideration
of the mutual covenants and conditions herein contained, the parties hereto agree as follows:
ARTICLE I. DEFINITION
In this Agreement, unless the context
otherwise requires, the following words shall have the following meaning:
"Board" means the Board
of Directors of the Company;
"Company" means Oncologix
Tech, Inc., a company duly incorporated and validly existing under the laws of the Nevada;
"Commencement Date" means
April 2, 2013, the date of commencement of Employment;
"Company Group" means
the Company and all of its subsidiaries;
"Employment" means the
employment of the Executive under the terms herein;
"Executive" means Michael
Kramarz, a citizen of the United States of America ;
Confidentiality and Non-Competition
Agreement" means the Confidentiality and Non-competition Agreement to be executed by and between the Company and Executive;
ARTICLE II. POSITION AND DUTIES
2.1 Employment. The
Company hereby employs the Executive as Chief Financial Officer. The Executive hereby accepts such engagement with the Company,
in accordance with and subject to all of the terms, conditions and covenants set forth in this Agreement. The Executive principal
office is located at 206 Crown St. SW, Wyoming, MI 49548 and Oncologix Tech, Inc. is headquartered at PO Box 8832, Grand Rapids,
MI 49518-8832 and the Executive will travel as required within the US.
2.2 Scope of Duties.
The Executive shall be the Chief Financial Officer and shall have such other additional positions with the Company as the Board
of Directors (the "Board") shall determine from time to time. The Executive shall have responsibility for the following
duties, operating within such established guidelines, plans or policies as may be established or approved by the Board from time
to time:
(a) prepare, in coordination with
the Company’s Registered Accountants and legal counsel, the GAAP financial statements and all required SEC filings, including
but not limited to the Annual Report on Form 10-K, Quarterly Reports on Form 10-Q, monthly financials and consolidations, account
reconciliations, 8-K’s, Press releases and other items required by the public entity, income taxes and payroll taxes for
the Oncologix Tech, Inc., and serving as Chief Financial Officer, Treasurer and Secretary;
(b) assist the Company with past
and future investors in issuing both debt and equity securities, as well as tracking the company’s common stock, options,
warrants and other equity securities.;
(c) as corporate Secretary, maintain
all corporate records relating to Oncologix and its subsidiaries, including but not limited to board minutes, required federal
and state filings;
(d) work with the Chief Executive
Officer and the Company’s investor relations firm to keep investors aware of the company’s activities;
(e) supporting the Company Board
of Directors, company legal representative, and the Chief Executive Officer in such matters as preparation and presentation of
such financial and statistical reports as may be requested from time to time and assisting in the Company's business and strategic
planning and preparation of annual budgets;
(f) such other
responsibilities and duties customarily performed by the Chief Financial Officer of companies in the same the healthcare services
and medical device industry;
(g) perform accounting and financial
duties for Company subsidiaries, perform cost/price analysis, financial projecting for potential new business acquisitions, and
maintain such financial records and reports as may be required for all Company subsidiaries.
2.3 Other Business Affiliations.
The Executive agrees that, without the approval of the Board, the Executive shall not, during the period of employment with the
Company, devote more than 25% at any time to any other business affiliation which would interfere with or derogate from Executive's
obligations under this Agreement. The Executive represents and warrants that his service as such Executive does not create any
conflict of interest in relation to his duties and obligations to the Company hereunder, and agrees that in the event such a conflict
arises, he will promptly report it to the Board.
2.4 No Breach of Duty.
The Executive represents that the Executive's performance of this Agreement and as an employee of the Company does not and will
not breach any agreement or duty to keep in confidence proprietary information acquired by the Executive in confidence or in trust
(i) prior to employment with the Company or (ii) pursuant to his service referred to in Section 2.3. The Executive
has not and will not enter into any agreement either written or oral in conflict with this Agreement. The Executive is not presently
restricted from being employed by the Company or entering into this Agreement.
ARTICLE III. DURATION
3.1 Commencement Date.
The Executive's first day of employment shall be April 2, 2013 ("Commencement Date").
3.2 Term. This Agreement
shall continue for an initial term of three (3) years from the Commencement Date unless otherwise terminated in accordance
with Article 8 below. Upon the expiration of the initial term, this Agreement shall be automatically extended for successive periods
of twelve (12) months, unless terminated by either party upon thirty (30) days' notice prior to the expiration of the
initial term or any subsequent terms.
ARTICLE IV. COMPENSATION
4.1 Salary. The Executive
shall be paid an initial base annual salary of $58,000 per annum, less deductions required by law, which shall be paid in equal
monthly installments in the U.S. dollar equivalent with the Company's normal and customary payroll practices. Such salary shall
be increased at a minimum of 5% per year, reviewed annually, and any base salary increases or decreases will be approved by the
Board of Directors, Compensation Committee. If inadequate funds are available, the salary and other benefits and expenses not
paid to Executive shall be accrued per quarter. At the end of the quarter, approved at the sole discretion by the Chief Executive
Officer, the accrued salary may be converted into Company stock forty five (45) days after the end of the quarter and converted
in stock at a price equivalent to the lowest five (5) day average bid price during the preceding quarter.
4.2 PROFESSIONAL FEES.
The Company shall have exclusive authority to determine the fees, or a procedure for establishing the fees, to be charged by
the Company. All sums paid to the Executive or the Company in the way of fees or otherwise for other services of the Executive,
shall, except as otherwise specifically agreed by the Company, be and remain the property of the Company and shall be included
in the Company's name in such checking account or accounts as the Company may from time to time designate.
4.3 CLIENTS AND CLIENT
RECORDS. The Company shall have the authority to determine who will be accepted as clients of the Company, and the
Executive recognizes that such clients accepted are clients of the Company and not the Executive. The Company shall have the
authority to designate, or to establish a procedure for designating which professional Executive of the Company will handle
each such client. All client records and files of any type concerning clients of the Company shall belong to and remain the
property of the Company, notwithstanding the subsequent termination of this Agreement.
4.4 POLICIES AND PROCEDURES.
The Company shall have the authority to establish from time to time the policies and procedures to be followed by the Executive
in performing services for the Company. Executive shall abide by the provisions of any contract entered into by the Company under
which the Executive provides services. Executive shall comply with the terms and conditions of any and all contracts entered by
the Company. Executive is not authorized to bind or negotiate contracts for the Company or enter into any legal or financial transaction
without prior approval from the Chief Executive Officer or the Board of Directors.
4.5 Bonus. The Executive
shall be eligible for an annual performance-based cash bonus at the discretion of the Board.
4.6 Reimbursable Expenses.
The Company shall reimburse the Executive for all reasonable business expenses incurred in the performance of the Executive's duties,
hereunder on behalf of the Company, subject to submission of expense reports and approval according to the Company's financial
regulations.
4.7 Income Taxes. The
payment of tax, social security and similar payments arising out of this Agreement shall be dealt with by the parties in accordance
with applicable laws and regulations.
4.8 Past Due Wages. As of
the date of this agreement, the Company recognizes that it owes the Executive past due wages in the amount of $16,000 for work
performed under his prior consulting contract for the months of January through March 2013. As funds are available, the Company
agrees to pay these wages (interest free) to the Executive over a six (6) month period commencing with the signing of this agreement,
as funds are available.
4.9 The Executive agrees to any
withholdings that must be made by the Company pursuant to such laws and regulations. Furthermore, the Executive undertakes to promptly
discharge any payments that are payable by him pursuant to such laws and regulations and agrees to indemnity the Company and hold
the Company harmless from any and all claims made by any entity on account of an alleged failure by the Executive to satisfy such
obligations.
ARTICLE V. OTHER BENEFITS, VACATION
, HOLIDAYS, INSURANCE
5.1 Vacation. The Executive
shall be entitled in each calendar year to fourteen (14) working days' vacation with full salary (in addition to statutory
holidays) to be taken at such reasonable time or times as approved by the Chief Executive Officer. The Executive may accumulate
and carry forward unused vacation to the following calendar year. The entitlement to vacation and, on termination of employment,
vacation pay in lieu of vacation, shall accrue pro rata throughout each calendar year of the period of employment.
5.2 Holidays. The Executive
shall be entitled to the all statutory public holidays observed.
5.3 Benefits. Employee shall
be entitled to participate in any and all medical insurance, group health care programs (including dental, vision and prescription
drug programs), disability insurance, pension and other benefit plans which are made generally available by the Company to other
similarly situated senior level employees performing similar functions as Executive. The Company, in its sole discretion, may,
at any time, amend or terminate its benefit plans or programs; provided, however, that the Company shall not do so except to the
extent that such amendment or termination is in good faith and applies generally to all employees of the Company.
If the Company does not have an
Executive Benefit program available, the company will provide a monthly fixed amount of $500.00 to secure Health/Dental and Long
Term Disability insurance.
5.4 Key Man Insurance.
The Company may maintain, at its expense, Key Man Life Insurance (the "Policy") on the life of Employee for the benefit
of the Company with a benefit of One Million Dollars ($1,000,000). Employee's signature to this Agreement constitutes Employee's
written consent to being insured under the Policy and that the Company may continue such life insurance coverage after Employee's
employment with the Company terminates, regardless of the cause of such termination. Employee shall make all necessary applications,
submit to physical examinations and otherwise cooperate with the Company with respect to the purchase of the policy.
5.5
Death of Executive. In the event the Executive shall die during the term hereof, the Company shall pay to the
Executive's surviving spouse, or if the Executive shall leave no surviving spouse, then to the Executive's estate, only such amounts
as may have been earned by the Executive prior to the Executive's date of death, but which were unpaid at date of death.
5.6 Life Insurance. Company
shall provide a term life policy to Executive in the face value amount of 3x annual base salary.
ARTICLE VI. CONFIDENTIALITY,
NONSOLICITATION AND NONCOMPETITION
6.1 Confidentiality.
During his employment, the Executive will have access to, will become acquainted with various trade secrets, confidential and proprietary
information relating to the business of the Company and its subsidiaries, including but not limited to customer, employee, supplier,
and distributor lists, contacts, addresses, information about employees and employee relations, training manuals and procedures,
recruitment methods and procedures, business plans and projections, employment contracts, employee handbooks, information about
customers and suppliers, price lists, costs and expenses, documents, budgets, proposals, financial information, inventions, patterns,
processes, formulas, data bases, know how, developments, experiments, improvements, computer programs, manufacturing, recruitment
and distribution techniques, specifications, tapes, and compilations of information, all of which are owned by the Company and
its subsidiaries, other parties with which the Company and its subsidiaries do business ("Third Parties") or customers
of the Company and its subsidiaries, and which are used in the operation of the business of the Company and its subsidiaries, or
such Third Parties or customers. The Executive agrees at all times during the term of his employment and thereafter to hold in
strictest confidence, and not to use, except for the benefit of the Company, or to disclose directly or indirectly to any person,
firm or corporation without written authorization of the Board, any trade secrets or confidential information. In addition, the
Executive understands "trade secret" or "confidential information" means all information concerning the Company
and its subsidiaries, Third Parties and/or customers (including but not limited to information regarding the particularities, preferences
and manner of doing business) that is (i) not generally known to the public and (ii) cannot be discovered or replicated
by a third party without substantial expense and effort.
6.2 Non-Solicitation.
The Executive agrees that during the Executive's employment and for a period of the later of two (2) years after the termination
of employment hereunder where the Company does business, the Executive shall not:
(i) directly call upon or solicit
any of the customers of the Company or its subsidiaries that were or became customers during the term of the Executive's employment
(as used herein "Customer" shall mean any person or company as listed as such on the books of Company or its subsidiaries);
or
(ii) induce or its subsidiaries
attempt to induce any employee, agent or consultant of the Company or its subsidiaries to terminate his or her association with
the Company or its subsidiaries.
6.3 Non-Competition.
The Executive agrees that during the Executive's employment and for a period of two (2) years , subject to Section 2.3,
devote full time to the business of the Company and will not directly or indirectly, engage, individually or as an officer, director,
employee, consultant, advisor, partner or co-venture, or as a stockholder or other proprietor owning an interest in any firm, corporation,
partnership or other organization in the business of manufacturing, selling or distributing products in competition with the products
and/or services of the Company and its subsidiaries. The Executive shall, during the term of the Executive's employment and the
term of the non-competition restriction, furnish to the Board a detailed statement of any outside employment or consulting services
in which the Executive seeks to engage or invest, and, as from time to time requested by the Board, resubmit for approval a detailed
statement thereof. In the event the Board determines in good faith that such violation or conflict exists, the Executive shall
refrain from such employment, consulting services or investment.
6.4 Enforceability.
The Executive agrees that, having regard to all the circumstances, the restrictions in this Article 6 are reasonable and necessary
but no more than sufficient for the protection of the Company. The Company and Executive agree that:
(i) each restriction in this Article
6 shall be read and construed independently of the other restrictions so that if one or more are found to be void or unenforceable
as an unreasonable restraint of trade or for any other reason, the remaining restrictions shall not be affected; and
(ii) if any restriction is found
to be void but would be valid and enforceable if some part of it were deleted or the period thereof were deleted or the range of
activities or area dealt with thereby were reduced in scope, the restriction shall apply with such modifications as may be necessary
to make it valid and enforceable.
6.5 Injunctive Relief.
In the event of the breach or threatened breach by the Executive of this Article 6, the Company, in addition to all other remedies
available to it at law or in equity, will be entitled to seek injunctive relief and/or specific performance to enforce this Article
6 in any court of competent jurisdiction.
6.6 Assignment and Transfer.
Executive’s rights and obligations under this Agreement shall not be transferable by assignment or otherwise, and any purported
assignment, transfer or delegation thereof shall be void. This Agreement shall inure to the benefit of, and be binding upon and
enforceable by, any purchaser of substantially all of Company’s assets, any corporate successor to Company or any assignee
thereof.
ARTICLE VII. ASSIGNMENT OF INVENTIONS
AND INTELLECTUAL PROPERTY
7.1 The parties foresee that the
Executive has created and may create designs or other intellectual property in the course of his duties hereunder and agree that
in this respect the Executive has a special responsibility to further the interests of the Company.
7.2 Any invention, production,
improvement or design made or process or information discovered or copyright work or trade mark or trade name or get-up source
code or any other intellectual property created by the Executive during the continuance of his Employment hereunder (whether before
or after the date hereof or whether capable of being patented or registered or not and whether or not made or discovered in the
course of his employment hereunder) in conjunction with or in any way affecting or relating to the business of any company in the
Company or capable of being used or adapted for use therein or in connection therewith shall forthwith be disclosed to the Company
and shall belong to and be the absolute property of such company in the Company Group as the Company may direct.
7.3 The Executive if and whenever
required to do so by the Company shall at the expense of the Company apply or join in applying for letters patent or other protection
or registration for any such invention, improvement design process information work trade mark name or get-up source code or other
intellectual property rights as aforesaid which belongs to such company and shall at the expense of such company execute and do
all instruments and things necessary for vesting the said letters patent or other protection or registration when obtained and
all right title and interest to and in the same in such company absolutely and as sole beneficial owner or in such other person
as the Company may specify.
7.4 The Executive hereby irrevocably
appoints the Company to be his attorney in his name and on his behalf to execute and do any such instrument or thing and generally
to use his name for the purpose of giving to the Company the full benefit of this Article and in favor of any third party a certificate
in writing signed by any Executive or by the secretary of the Company that any instrument or act falls within the authority hereby
conferred shall be conclusive evidence that such is the case.
ARTICLE VIII. TERMINATION
8.1 Except as otherwise provided
in Sections 3.3 and 8.2, the Executive employment may be terminated by either party giving the other not less than thirty (30) days'
notice in writing provided that the Company shall have the option to pay salary (pro-rated) in lieu of any required period of notice.
Notwithstanding the thirty (30) days' notice requirement in this Section 8.1, the Executive agrees to continue to perform
his duties hereunder until a new Chief Financial Officer of the Company is appointed and ensure a smooth transition thereafter,
and the terms of this Agreement shall continue to apply; provided that any such extension shall not exceed thirty (30) days.
During such thirty (30) days' notice period and any extension thereof pursuant to this Section 8.1, the Company shall
use its diligent efforts to recruit a new Chief Financial Officer.
8.2 Notwithstanding the other provisions
of this Agreement, the Company may terminate the Employment with Cause forthwith without prior notice (but without prejudice to
the rights and remedies of the Company) for any breach of this Agreement in any of the following cases:
(i) if the Executive fails or neglects
efficiently and diligently to carry out his duties to the reasonable satisfaction of the Board;
(ii) if the Executive is guilty
of serious misconduct in connection with the Employment;
(iii) if the Executive is convicted
of any criminal offense, which might reasonably be thought to adversely affect the performance of his duties;
(iii) if the Executive does any
act or thing which may bring serious discredit on the Company or the Company Group;
(iv) if the Executive commits any
serious breach of the Company's By-Laws and operating procedures (as laid down by the Company and communicated to the Executive
from time to time) and has caused serious financial loss to the Company;
(v) if the Executive fails to observe
and perform any of the duties and responsibilities imposed by this Agreement or which are imposed by law, or is in breach of any
representation, warranty or covenant made by the Executive under this Agreement;
(vi) if the Executive becomes unsound
of mind or suffers from a mental disorder; or
(vii) if the Executive otherwise
acts in breach of this Agreement so as materially to prejudice the business of the Company or the Company Group.
8.3 The Executive shall not, at
any time after termination of the Employment for whatever reason, represent himself as being in any way connected with the business
of the Company.
8.4 Upon termination of the Employment
for whatever reason, the Executive shall forthwith deliver to the Company or its authorized representative such of the following
as are in his possession or control:
(i) All keys, security and computer
passes, plans statistics, documents, records, papers, magnetic disks, tapes or other software storage media including all copies,
records and memoranda (whether or not recorded in writing or on computer disk or tape) made by the Executive of any confidential
or proprietary information relating to the business of the Company and its subsidiaries;
(ii) All credit cards and charge
cards provided for the Executive's use by the Company; and
(iii) All other property of the
Company not previously referred to in this Article; and
(iv) any breach
of this Agreement, which breach is not cured within thirty (30) days following written notice of such breach; and
(v) if Executive employment is
terminated With Cause, Executive will not be entitled to any Executive severance pay but will receive payment for any unpaid salary
up to that event and paid for all unused vacation days accrued and unpaid expenses.
8.5 Termination With-Out Cause.
The Company may terminate Executive’s employment hereunder at any time without cause, provided, however, that Executive
shall be entitled to severance pay in the amount of 26 weeks of Base Salary in addition to accrued but unpaid Salary and accrued
vacation, less deductions required by law, but only if, Executive executes a valid and comprehensive release of any and all claims
that the Executive may have against the Company in a form provided by the Company and Executive executes such form within ten (10)
days of tender.
8.6 DISABILITY OF EXECUTIVE
The Company may terminate this
Agreement without liability if Executive shall be permanently prevented from properly performing his essential duties hereunder
with reasonable accommodation by reason of illness or other physical or mental incapacity for a period of more than 180 consecutive
days. Upon such termination, Executive shall be entitled to all accrued but unpaid Base Salary and vacation.
(i) Definitions - For purposes
of this Agreement, whenever used in this Section 8.3:
"Total disability" shall
mean that the Executive is unable, mentally or physically, whether it be due to sickness, accident, age or other infirmity, to
engage in any aspect of the Executive's normal duties as set forth in this Agreement.
"Partial disability"
shall mean that the Executive is able to perform, to some extent, on behalf of the Company, the particular services in which the
Company specializes, and which the Executive previously performed for the Company, but that the Executive is unable, mentally or
physically, to devote the same amount of time to such services as was devoted prior to the occurrence of such sickness or accident.
"Normal monthly salary"
shall mean the salary which the Executive is being paid by the Company per month as of the commencement date of the period of disability,
as specified hereinabove or as determined by the Board of Directors pursuant to the terms hereof.
(ii) Total Disability
During a single period of total
disability of the Executive, the Executive shall be entitled to receive from the Company, the Executive's normal monthly salary
for the shorter of first three (3) months of disability or until any disability insurance policy available through the Executive’s
employment begins to pay benefits. If the single period of disability should continue beyond three (3) months, the Executive shall
receive only such amount as the Executive shall be entitled to receive under disability insurance coverage on the Executive, if
any.
(iii) Partial Disability
During a period of partial disability
of the Executive, the Executive shall receive an amount of compensation computed as follows:
That portion of the Executive's
normal monthly basic compensation which bears the same ratio to the Executive's normal monthly basic compensation as the amount
of time which the Executive is able to devote to the usual performance of services on behalf of the Company during such period
bears to the total time the Executive devoted to performing such services prior to the commencement date of the single period of
disability, and such amount shall be calculated by multiplying the Executive’s basic compensation by a fraction, the numerator
of which shall be the percentage of normal services that the Executive is able to perform and the denominator which shall be the
total services that the Executive is able to perform absent the partial disability.
(iv) Combination of Total and
Partial Disability
If a single period of disability
of the Executive consists of a combination of total disability and partial disability, the maximum total disability compensation
to which the Executive shall be entitled from the Company under this disability provision shall not exceed an amount equal to one
(1) times the Executive's normal monthly basic compensation.
(V) Broken Periods of Disability
A period of disability may be continuous
or broken. If broken into partial periods of disability which are separated by intervening periods of work, there shall be aggregated
together all of such successive partial periods of disability except any period prior to the time when any single period of work
extends for three months or longer; and such aggregated periods of disability shall be treated as a single period in determining
the amount of disability compensation to which an Executive shall be entitled under any provision of this Section.
8.7 Termination Due to Disability
If and when the period of total
or partial disability of the Executive totals six months, the Executive's employment with the Company shall automatically terminate.
Notwithstanding the foregoing, if the disabled Executive and the Company agree, the disabled Executive may thereafter be employed
by the Company upon such terms as may be mutually agreeable.
8.8 Commencement Date of Disability
The commencement date of a period
of disability, whether it is a continuous period or the aggregate of successive partial periods, shall be the first day on which
the Executive is disabled.
8.9 Dispute Regarding Existence
of Disability
Any dispute regarding the existence,
extent or continuance of the disability shall be resolved by the determination of a majority of three (3) competent physicians,
one (1) of whom shall be selected by the Company, one (1) of whom shall be selected by the Executive and the third (3rd) of whom
shall be selected by the other two (2) physicians so selected.
ARTICLE IX- INDEMNIFICATION
9.1 The Executive hereby agrees
to indemnify and hold the Company and its officers, directors, shareholders and Executives harmless from and against any loss,
claim, damage or expense, and/or all costs of prosecution or defense of their rights hereunder, whether in judicial proceedings,
including appellate proceedings, or whether out of court, including without limiting the generality of the foregoing, attorneys'
fees, and all costs and expenses of litigation, arising from or growing out of the Executive's breach or threatened breach of any
covenant contained herein.
9.2 The Company hereby agrees to
indemnify and hold the Executive harmless from and against any loss, claim, damage or expense, and/or all costs of prosecution
or defense of their rights hereunder, whether in judicial proceedings, including appellate proceedings, or whether out of court,
including without limiting the generality of the foregoing, attorneys' fees, and all costs and expenses of litigation, arising
from or growing out of the Company’s breach or threatened breach of any covenant contained herein.
ARTICLE X. MISCELLANEOUS PROVISIONS/JURISDICTION
10.1 Severability.
I If any term or provision of this Agreement shall be held to
be invalid or unenforceable for any reason, such term or provision shall be ineffective to the extent of such invalidity or unenforceability
without invalidating the remaining terms and provisions hereof, and this Agreement shall be construed as if such invalid or unenforceable
term or provision had not been contained herein.
10.2 Rights Cumulative.
The rights and remedies provided by this Agreement are cumulative, and the exercise of any right or remedy by either party
hereto (or by its successor), whether pursuant to this Agreement, to any other agreement, or to law, shall not preclude or waive
its right to exercise any or all other rights and remedies.
10.3 Nonwaiver.
No failure or neglect of either party hereto in any instance to exercise any right, power or privilege hereunder or under law
shall constitute a waiver of any other right, power or privilege or of the same right, power or privilege in any other instance.
All waivers by either party hereto must be contained in a written instrument signed by the party to be charged and, in the case
of the Company, by an officer of the Company (other than Executive) or other person duly authorized by the Company.
10.4 Assistance in Litigation.
Executive shall, during and after termination of employment, upon reasonable notice, furnish such information and proper assistance
to the Company as may reasonably be required by the Company in connection with any litigation in which it or any of its subsidiaries
or affiliates is, or may become a party; provided, however, that such assistance following termination shall be furnished at mutually
agreeable times and for mutually agreeable compensation.
10.5 Survival. Articles
6 and 7 and Section 9.7 shall survive the termination of this Agreement.
10.6 Entire Agreement.
This Agreement, together with all award agreements and long-term incentive agreements is the entire agreement between the parties
hereto concerning the subject matter hereof and supersedes and replaces all prior or contemporaneous agreements or understandings
between the parties.
10.7 Employment Amendments.
This Agreement may not be amended or modified in any manner, except by an instrument in writing signed by duly authorized members
of the Board.
10.8 Notices. Unless
otherwise provided herein, any notice required or permitted under this Agreement shall be given in writing and shall be deemed
to have been duly given upon personal delivery to the party to be notified or five (5) business days after being mailed by United
States certified or registered mail, postage prepaid, return receipt requested or two (2) days after being sent by Federal Express
or other recognized overnight delivery to the following respective addresses, or at such other address as each may specify by notice
to the other:
Notice to the Executive:
Michael A. Kramarz
Chief Financial Officer
206 Crown St. SW
Wyoming, MI 49548
10.9 Governing Law.
This Agreement shall be governed by and construed in all respects in accordance with the laws of the State of Louisiana.
11.1 Jurisdiction.
Unless otherwise provided for in this Agreement, the courts within Kent County, the City of Grand Rapids, Michigan shall have exclusive
jurisdiction to adjudicate any dispute arising out of this Agreement and/or employment relationship or termination thereof and
the Executive consents to such jurisdiction and venue.
11.2 Construction.
The headings and captions of this Agreement are provided for convenience only and are intended to have no effect in construing
or interpreting this Agreement. The language in all parts of this Agreement shall be in all cases construed according to its fair
meaning and not strictly for or against the Company or Executive.
11.3 Nonwaiver. No
failure or neglect of either party hereto in any instance to exercise any right, power or privilege hereunder or under law shall
constitute a waiver of any other right, power or privilege or of the same right, power or privilege in any other instance. All
waivers by either party hereto must be contained in a written instrument signed by the party to be charged and, in the case of
the Company, by an officer of the Company (other than Executive) or other person duly authorized by the Company.
11.4 Arbitration. Any controversy,
claim or dispute arising out of or relating to this Agreement or the employment relationship, either during the existence of the
employment relationship or afterwards, between the parties hereto, their assignees, their affiliates, their attorneys, or agents,
shall be settled by arbitration in Alexandria, Louisiana. Such arbitration shall be conducted in accordance with the then prevailing
commercial arbitration rules of the State of Louisiana but the arbitration shall be in front of an arbitrator, with the following
exceptions if in conflict: (a) one arbitrator shall be chosen by Executive and one (1) chosen by Company; (b) each party
to the arbitration will pay its pro rata share of the expenses and fees of the arbitrator(s), together with other expenses of the
arbitration incurred or approved by the arbitrator(s); and (c) arbitration may proceed in the absence of any party if written
notice of the proceedings has been given to such party. The parties agree to abide by all decisions and awards rendered in such
proceedings. Such decisions and awards rendered by the arbitrator shall be final and conclusive and may be entered in any court
having jurisdiction thereof as a basis of judgment and of the issuance of execution for its collection. All such controversies,
claims or disputes shall be settled in this manner in lieu of any action at law or equity; provided however, that nothing in this
subsection shall be construed as precluding the Company from bringing an action for injunctive relief or other equitable relief
or relief under the Confidential Information and Invention Assignment Agreement. The arbitrator shall not have the right to award
punitive damages, consequential damages, lost profits or speculative damages to either party. The parties shall keep confidential
the existence of the claim, controversy or disputes from third parties (other than the arbitrator), and the determination thereof,
unless otherwise required by law or necessary for the business of the Company. The arbitrator(s) shall be required to follow applicable
law.
IF FOR ANY REASON THIS ARBITRATION
CLAUSE BECOMES NOT APPLICABLE, THEN EACH PARTY, TO THE FULLEST EXTENT PERMITTED BY APPLICABLE LAW, HEREBY IRREVOCABLY WAIVES ALL
RIGHT TO TRIAL BY JURY AS TO ANY ISSUE RELATING HERETO IN ANY ACTION, PROCEEDING, OR COUNTERCLAIM ARISING OUT OF OR RELATING TO
THIS AGREEMENT OR ANY OTHER MATTER INVOLVING THE PARTIES HERETO.
12.0 Acknowledgment. The
Executive acknowledges that when this Agreement is concluded, the Executive will be able to earn a living without violating the
foregoing restrictions and that the Executive's recognition and representation of this fact is a material inducement to the execution
of this Agreement and to Executive's continued relationship with the Company.
12.1 Survival of Covenants
. All restrictive covenants contained in this Agreement shall survive the termination of this Agreement.
12.2 Limitations on Authority
. Without the express written consent from the Company, the Executive shall have no apparent or implied authority to: (i) Pledge
the credit of the Company or any of its other Executives; (ii) Bind the Company under any contract, agreement, note, mortgage or
otherwise; (iii) Release or discharge any debt due the Company; or (iv) sell, mortgage, transfer or otherwise dispose of any assets
of the Company.
12.3 Representation and Warranty
of Executive. The Executive acknowledges and understands that the Company has extended employment opportunities to Executive
based upon Executive's representation and warranty that Executive is in good health and able to perform the work contemplated by
this Agreement for the term hereof.
12.4 Invalid Provision; Severability
. The invalidity or unenforceability of a particular provision of this Agreement shall not affect the other provisions hereof,
and the Agreement shall be construed in all respects as if such invalid or unenforceable provisions were omitted.
12.5 Entire Agreement. This
Agreement contains the entire agreement and supersedes all prior agreements with Executive and Company and all understandings,
oral or written, with respect to the subject matter hereof. This Agreement may be changed only by an agreement in writing signed
by the party against whom any waiver, change, amendment, modification, or discharge is sought.
IN WITNESS WHEREOF, the
parties hereto have caused this Agreement to be duly executed and delivered as of the day and year first above written.
By: ________________________
Name: Michael
A. Kramarz
Title:
CFO, Treasurer, Secretary
Oncologix,
Tech Inc.
By: ________________________
Name: Roy
Wayne Erwin
Title:
CEO and Chairman
Exhibit
10.23
EXECUTIVE
EMPLOYMENT AGREEMENT
This EXECUTIVE EMPLOYMENT AGREEMENT
("Agreement") is made and entered into as of July 31, 2013, by and between Oncologix Tech, Inc. (Company), a company
duly incorporated and validly existing under the laws of Nevada and Vickie G. Hart ("Executive"), with principal office
located at 212 Edgewood Drive, Pineville, Louisiana 71360.
RECITALS
A. WHEREAS, the Company
wishes to ensure that it will have the benefits and knowledge of Employee's services and expertise on the terms and conditions
hereinafter set forth; and
C. WHEREAS, Oncologix Tech,
Inc. is a diversified medical device and healthcare holding company.
D. WHEREAS, Oncologix Tech
Inc. has acquired 100% of the common stock of Angels of Mercy, Inc. with business activities in the Personal Care Attendant (PCA)
non-medical, healthcare services.
E. WHEREAS, the Company
desires to engage Ms. Vickie G. Hart as President of Angels of Mercy, Inc. and the Executive desires to provide employment services
to the Company on all of the terms and conditions herein set forth.
F. WHEREAS, the Company
desires to provide the Executive with compensation in recognition of the Executive's valuable skills and services.
NOW, THEREFORE, in consideration
of the mutual covenants and conditions herein contained, the parties hereto agree as follows:
ARTICLE I. DEFINITION
In this Agreement, unless the context
otherwise requires, the following words shall have the following meaning:
"Board" means the Board
of Directors of the Company;
“Business” means Angels
of Mercy, Inc, a company incorporated and validly existing under the laws of the state of Louisiana;
"Company" means Oncologix
Tech, Inc., a company duly incorporated and validly existing under the laws of the Nevada;
"Commencement Date" means
April 2, 2013, the date of commencement of Employment;
"Company Group" means
the Company and all of its subsidiaries;
"Employment" means the
employment of the Executive under the terms herein;
"Executive" means Vickie
G. Hart, a citizen of the United States of America ;
Confidentiality and Non-Competition
Agreement" means the Confidentiality and Non-competition Agreement to be executed by and between the Company and Executive;
ARTICLE
II. POSITION AND DUTIES
2.1 Employment. The
Company hereby employs the Executive as President of Business. The Executive hereby accepts such engagement with the Company and
Business, in accordance with and subject to all of the terms, conditions and covenants set forth in this Agreement. The Executive
principal office is located at 212 Edgewood Drive, Pineville, Louisiana 71360, Angels of Mercy, Inc. is headquartered at 1306 Savoy
Road, Youngsville, Louisiana 70508, and Oncologix Tech, Inc. is headquartered at PO Box 8832, Grand Rapids, MI 49518-8832 and the
Executive will travel as required within the US.
2.2 Scope of Duties.
The Executive shall be the President and shall have such other additional positions with the Business as the Chief Executive Officer
and the Company shall determine from time to time. The Executive shall have responsibility for the following duties, operating
within such established guidelines, plans or policies as may be established or approved by the Company from time to time:
(a) prepare, in coordination with
the Company’s Chief Executive Officer and Chief Financial Officer, deliver GAAP Business financial statements, including
but not limited to the Monthly Balance Sheets and Income Statements, Quarterly Business Reports, assist with Press Releases and
other items required by the Company, verification of payment of all Business federal, state income taxes and payroll taxes, and
verify to Chief Financial Officer continued Business cash flow for all debt service and operational requirements;
(b) as President, maintain all
Business records relating to Angels of Mercy, Inc. and its subsidiaries, including but not limited to board minutes;
(c) supporting the Company Board
of Directors, company legal representative, and the Chief Executive Officer in such matters as preparation and presentation of
such financial and statistical reports as may be requested from time to time and assisting in the Company's business and strategic
planning and preparation of the Business annual budgets;
(d) such other
responsibilities and duties customarily performed by the President of companies in the Personal Care Attendant (PCA) healthcare
services industry;
2.3 Other Business Affiliations.
The Executive agrees that, without the approval of the Chief Executive Officer, the Executive shall not, during the period of employment
with the Company, devote more than 15% at any time to any other business affiliation which would interfere with or derogate from
Executive's obligations under this Agreement. The Executive represents and warrants that her service as such Executive does not
create any conflict of interest in relation to her duties and obligations to the Business or Company hereunder, and agrees that
in the event such a conflict arises, she will promptly report it to the Chief Executive Officer.
2.4 No Breach of Duty.
The Executive represents that the Executive's performance of this Agreement is as an employee of the Business and will not breach
any agreement or duty to keep in confidence proprietary information acquired by the Executive in confidence or in trust (i) prior
to employment with the Company or (ii) pursuant to his service referred to in Section 2.3. The Executive has not and
will not enter into any agreement either written or oral in conflict with this Agreement. The Executive is not presently restricted
from being employed by the Business or Company or entering into this Agreement.
ARTICLE III. DURATION
3.1 Commencement Date.
The Executive's first day of employment shall be July 31, 2013 ("Commencement Date").
3.2 Term. This Agreement
shall continue for an initial term of three (3) years from the Commencement Date unless otherwise terminated in accordance
with Article 8 below. Upon the expiration of the initial term, this Agreement shall be automatically extended for successive periods
of twelve (12) months, unless terminated by either party upon thirty (30) days' notice prior to the expiration of the
initial term or any subsequent terms.
ARTICLE IV. COMPENSATION
4.1 Salary. The Executive
shall be paid an initial base annual salary of $52,000 per annum, less deductions required by law, which shall be paid in equal
monthly installments in the U.S. dollar equivalent with the Business normal and customary payroll practices. Such salary shall
be increased at a minimum of 5% per year, reviewed annually, and any base salary increases or decreases will be approved by the
Chief Executive Officer, the Chief Financial Officer and the Company Board of Directors, Compensation Committee. If inadequate
funds are available, the salary and other benefits and expenses not paid to Executive shall be accrued per quarter. At the end
of the quarter, approved at the sole discretion by the Chief Executive Officer, the accrued salary may be converted into Company
stock forty five (45) days after the end of the quarter and converted in stock at a price equivalent to the lowest five (5) day
average bid price during the preceding quarter.
4.2 PROFESSIONAL FEES.
The Company shall have exclusive authority to determine the fees, or a procedure for establishing the fees, to be charged by
the Company to the Business. All sums paid to the Executive or the Company in the way of fees or otherwise for other services of
the Executive, shall, except as otherwise specifically agreed by the Company, be and remain the property of the Business and shall
be included in the Business’s name in such checking account or accounts as the Company may from time to time designate.
4.3 CLIENTS AND CLIENT RECORDS. The
Business shall have the authority to determine who will be accepted as clients of the Business, and the Executive recognizes that
such clients accepted are clients of the Business and not the Executive. All client records and files of any type concerning clients
of the Business shall belong to and remain the property of the Business, notwithstanding the subsequent termination of this Agreement.
4.4 POLICIES AND PROCEDURES.
The Company shall have the authority to establish from time to time the policies and procedures to be followed by the Executive
in performing services for the Business. Executive shall abide by the provisions of any contract entered into by the Company under
which the Executive provides services. Executive shall comply with the terms and conditions of any and all contracts entered by
the Company. Executive is not authorized to bind or negotiate contracts for the Business or enter into any legal or financial transaction
without prior approval from the Chief Executive Officer outside of the normal course of business.
4.5 Bonus. The Executive
shall be eligible for an annual performance-based cash bonus at the discretion of the Chief Executive Officer.
4.6 Reimbursable Expenses.
The Business shall reimburse the Executive for all reasonable business expenses incurred in the performance of the Executive's
duties, hereunder on behalf of the Business, subject to submission of expense reports and approval according to the Business and
Company's financial regulations.
4.7 Income Taxes. The
payment of tax, social security and similar payments arising out of this Agreement shall be dealt with by the parties in accordance
with applicable laws and regulations.
4.8 The Executive agrees to any
withholdings that must be made by the Business pursuant to such laws and regulations. Furthermore, the Executive undertakes to
promptly discharge any payments that are payable by him pursuant to such laws and regulations and agrees to indemnity the Business
and the Company and hold the Business and Company harmless from any and all claims made by any entity on account of an alleged
failure by the Executive to satisfy such obligations.
ARTICLE V. OTHER BENEFITS, VACATION
, HOLIDAYS, INSURANCE
5.1 Vacation. The Executive
shall be entitled in each calendar year to fourteen (14) working days' vacation with full salary (in addition to statutory
holidays) to be taken at such reasonable time or times as approved by the Chief Executive Officer. The Executive may accumulate
and carry forward unused vacation to the following calendar year. The entitlement to vacation and, on termination of employment,
vacation pay in lieu of vacation, shall accrue pro rata throughout each calendar year of the period of employment.
5.2 Holidays. The Executive
shall be entitled to the all statutory public holidays observed.
5.3 Benefits. Executive
shall be entitled to participate in any and all medical insurance, group health care programs (including dental, vision and prescription
drug programs), disability insurance, pension and other benefit plans which are made generally available by the Business or Company
to other similarly situated Executives performing similar functions as Executive. The Company, in its sole discretion may at any
time, amend or terminate its benefit plans or programs; provided, however, that the Company shall not do so except to the extent
that such amendment or termination is in good faith and applies generally to all employees of the Company.
If the Company does not have an
Executive Benefit program available, the company will provide a monthly fixed amount of $400.00 to secure Health/Dental and Long
Term Disability insurance.
5.4 Key Man Insurance.
The Company may maintain, at its expense, Key Man Life Insurance (the "Policy") on the life of Employee for the benefit
of the Company with a benefit of Two Hundred and Fifty Thousand Dollars ($250,000). Employee's signature to this Agreement constitutes
Employee's written consent to being insured under the Policy and that the Company may continue such life insurance coverage after
Employee's employment with the Company terminates, regardless of the cause of such termination. Employee shall make all necessary
applications, submit to physical examinations and otherwise cooperate with the Company with respect to the purchase of the policy.
5.5
Death of Executive. In the event the Executive shall die during the term hereof, the Company shall pay to the
Executive's surviving spouse, or if the Executive shall leave no surviving spouse, then to the Executive's estate, only such amounts
as may have been earned by the Executive prior to the Executive's date of death, but which were unpaid at date of death.
5.6 Life Insurance. Company
shall provide a term life policy to Executive in the face value amount of 3x annual base salary.
ARTICLE VI. CONFIDENTIALITY,
NONSOLICITATION AND NONCOMPETITION
6.1 Confidentiality.
During his employment, the Executive will have access to, will become acquainted with various trade secrets, confidential and proprietary
information relating to the business of the Company and its subsidiaries, including but not limited to customers, employee, supplier,
and distributor lists, contacts, addresses, information about employees and employee relations, training manuals and procedures,
recruitment methods and procedures, business plans and projections, employment contracts, employee handbooks, information about
customers and suppliers, price lists, costs and expenses, documents, budgets, proposals, financial information, inventions, patterns,
processes, formulas, data bases, know how, developments, experiments, improvements, computer programs, manufacturing, recruitment
and distribution techniques, specifications, tapes, and compilations of information, all of which are owned by the Business, the
Company and its subsidiaries, other parties with which the Company and its subsidiaries do business ("Third Parties")
or customers of the Company and its subsidiaries, and which are used in the operation of the business of the Business and its subsidiaries,
or such Third Parties or customers. The Executive agrees at all times during the term of his employment and thereafter to hold
in strictest confidence, and not to use, except for the benefit of the Business, or to disclose directly or indirectly to any person,
firm or corporation without written authorization of the Chief Executive Officer, any trade secrets or confidential information.
In addition, the Executive understands "trade secret" or "confidential information" means all information concerning
the Business, the Company and its subsidiaries, Third Parties and/or customers (including but not limited to information regarding
the particularities, preferences and manner of doing business) that is (i) not generally known to the public and (ii) cannot
be discovered or replicated by a third party without substantial expense and effort.
6.2 Non-Solicitation.
The Executive agrees that during the Executive's employment and for a period of the later of two (2) years after the termination
of employment hereunder where the Company does business, the Executive shall not:
(i) directly call upon or solicit
any of the customers of the Business or its subsidiaries that were or became customers during the term of the Executive's employment
(as used herein "Customer" shall mean any person or company as listed as such on the books of Business or its subsidiaries);
or
(ii) induce its subsidiaries, attempt
to induce any employee, agent or consultant of the Business to terminate his or her association with the Business, Company or its
subsidiaries.
6.3 Non-Competition.
The Executive agrees that during the Executive's employment and for a period of three (3) years , subject to Section 2.3,
devote full time to the business of the Company and will not directly or indirectly, engage, individually or as an officer, director,
employee, consultant, advisor, partner or co-venture, or as a stockholder or other proprietor owning an interest in any firm, corporation,
partnership or other organization in the business of Personal Care Attendant (PCA) healthcare services, selling or marketing of
services in competition with the products and/or services of the Business and its subsidiaries. The Executive shall, during the
term of the Executive's employment and the term of the non-competition restriction, furnish to the Company a detailed statement
of any outside employment or consulting services in which the Executive seeks to engage or invest, and, as from time to time requested
by the Company, resubmit for approval a detailed statement thereof. In the event the Company determines in good faith that such
violation or conflict exists, the Executive shall refrain from such employment, consulting services or investment.
6.4 Enforceability.
The Executive agrees that, having regard to all the circumstances, the restrictions in this Article 6 are reasonable and necessary
but no more than sufficient for the protection of the Business and the Company. The Company and Executive agree that:
(i) each restriction in this Article
6 shall be read and construed independently of the other restrictions so that if one or more are found to be void or unenforceable
as an unreasonable restraint of trade or for any other reason, the remaining restrictions shall not be affected; and
(ii) if any restriction is found
to be void but would be valid and enforceable if some part of it were deleted or the period thereof were deleted or the range of
activities or area dealt with thereby were reduced in scope, the restriction shall apply with such modifications as may be necessary
to make it valid and enforceable.
6.5 Injunctive Relief.
In the event of the breach or threatened breach by the Executive of this Article 6, the Company, in addition to all other remedies
available to it at law or in equity, will be entitled to seek injunctive relief and/or specific performance to enforce this Article
6 in any court of competent jusrisdiction.
6.6 Assignment and Transfer.
Executive’s rights and obligations under this Agreement shall not be transferable by assignment or otherwise, and any purported
assignment, transfer or delegation thereof shall be void. This Agreement shall inure to the benefit of, and be binding upon and
enforceable by, any purchaser of substantially all of Business and Company’s assets, any corporate successor to Business,
Company or any assignee thereof.
ARTICLE VII. ASSIGNMENT OF INVENTIONS
AND INTELLECTUAL PROPERTY
7.1 The parties foresee that the
Executive has created and may create business plans, marketing plans, designs or other intellectual property in the course of his
duties hereunder and agree that in this respect the Executive has a special responsibility to further the interests of the Company.
7.2 Any invention, production,
marketing plan, web-site development, business plans, business improvement or design made or process or information discovered
or copyright work or trade mark or trade name or get-up source code or any other intellectual property created by the Executive
during the continuance of his Employment hereunder (whether before or after the date hereof or whether capable of being patented
or registered or not and whether or not made or discovered in the course of his employment hereunder) in conjunction with or in
any way affecting or relating to the business of any company or capable of being used or adapted for use therein or in connection
therewith shall forthwith be disclosed to the Business and the Chief Executive Officer and shall belong to and be the absolute
property of such Business, the Company, the Company Group as the Company may direct.
7.3 The Executive if and whenever
required to do so by the Business shall at the expense of the Business or Company apply or join in applying for letters patent
or other protection or registration for any such invention, improvement design process information work trade mark name or get-up
source code or other intellectual property rights as aforesaid which belongs to such company and shall at the expense of such company
execute and do all instruments and things necessary for vesting the said letters patent or other protection or registration when
obtained and all right title and interest to and in the same in such company absolutely and as sole beneficial owner or in such
other person as the Company may specify.
7.4 The Executive hereby irrevocably
appoints the Business to be his attorney in his name and on his behalf to execute and do any such instrument or thing and generally
to use his name for the purpose of giving to the Business the full benefit of this Article and in favor of any third party a certificate
in writing signed by any Executive or by the secretary of the Company that any instrument or act falls within the authority hereby
conferred shall be conclusive evidence that such is the case.
ARTICLE VIII. TERMINATION
8.1 Except as otherwise provided
in Sections 3.3 and 8.2, the Executive employment may be terminated by either party giving the other not less than thirty (30) days'
notice in writing provided that the Business shall have the option to pay salary (pro-rated) in lieu of any required period of
notice. Notwithstanding the thirty (30) days' notice requirement in this Section 8.1, the Executive agrees to continue
to perform his duties hereunder until a new President of the Business is appointed and to ensure a smooth transition thereafter,
and the terms of this Agreement shall continue to apply; provided that any such extension shall not exceed thirty (30) days.
During such thirty (30) days' notice period and any extension thereof pursuant to this Section 8.1, the Business shall
use its diligent efforts to recruit a new President.
8.2 Notwithstanding the other provisions
of this Agreement, the Business and Company may terminate the Employment “With-Cause” forthwith without prior notice
(but without prejudice to the rights and remedies of the Business) for any breach of this Agreement in any of the following cases:
(i) if the Executive fails or neglects
efficiently and diligently to carry out his duties to the reasonable satisfaction of the Chief executive Officer and the Company
Board;
(ii) if the Executive is guilty
of serious misconduct in connection with the Employment;
(iii) if the Executive is convicted
of any criminal offense, which might reasonably be thought to adversely affect the performance of his duties;
(iii) if the Executive does any
act or thing which may bring serious discredit on the Business, Company or the Company Group;
(iv) if the Executive commits any
serious breach of the Business By-Laws and operating procedures (as laid down by the Business and communicated to the Executive
from time to time) and has caused serious financial loss to the Business;
(v) if the Executive fails to observe
and perform any of the duties and responsibilities imposed by this Agreement or which are imposed by law, or is in breach of any
representation, warranty or covenant made by the Executive under this Agreement;
(vi) if the Executive becomes unsound
of mind or suffers from a mental disorder; or
(vii) if the Executive otherwise
acts in breach of this Agreement so as materially to prejudice the business of the Business, Company or the Company Group.
8.3 The Executive shall not, at
any time after termination of the Employment for whatever reason, represent himself as being in any way connected with the Business
or the Company.
8.4 Upon termination of the Employment
for whatever reason, the Executive shall forthwith deliver to the Company or its authorized representative such of the following
as are in his possession or control:
(i) All keys, security and computer
passes, plans, statistics, documents, records, papers, magnetic disks, tapes or other software storage media including all copies,
records and memoranda (whether or not recorded in writing or on computer disk or tape) made by the Executive of any confidential
or proprietary information relating to the business of the Company and its subsidiaries;
(ii) All credit cards and charge
cards provided for the Executive's use by the Business; and
(iii) All other property of the
Company not previously referred to in this Article; and
(iv) any breach
of this Agreement, which breach is not cured within thirty (30) days following written notice of such breach; and
(v) if Executive employment is
terminated With Cause, Executive will not be entitled to any Executive severance pay but will receive payment for any unpaid salary
up to that event and paid for all unused vacation days accrued and unpaid expenses.
8.5 Termination With-Out Cause.
The Company may terminate Executive’s employment hereunder at any time without cause, provided, however, that Executive
shall be entitled to severance pay in the amount of 26 weeks of Base Salary in addition to accrued but unpaid Salary and accrued
vacation, less deductions required by law, but only if, Executive executes a valid and comprehensive release of any and all claims
that the Executive may have against the Company in a form provided by the Company and Executive executes such form within ten (10)
days of tender.
8.6 DISABILITY OF EXECUTIVE
The Company may terminate this
Agreement without liability if Executive shall be permanently prevented from properly performing his essential duties hereunder
with reasonable accommodation by reason of illness or other physical or mental incapacity for a period of more than 180 consecutive
days. Upon such termination, Executive shall be entitled to all accrued but unpaid Base Salary and vacation.
(i) Definitions - For purposes
of this Agreement, whenever used in this Section 8.3:
"Total disability" shall
mean that the Executive is unable, mentally or physically, whether it be due to sickness, accident, age or other infirmity, to
engage in any aspect of the Executive's normal duties as set forth in this Agreement.
"Partial disability"
shall mean that the Executive is able to perform, to some extent, on behalf of the Company, the particular services in which the
Company specializes, and which the Executive previously performed for the Company, but that the Executive is unable, mentally or
physically, to devote the same amount of time to such services as was devoted prior to the occurrence of such sickness or accident.
"Normal monthly salary"
shall mean the salary which the Executive is being paid by the Company per month as of the commencement date of the period of disability,
as specified hereinabove or as determined by the Board of Directors pursuant to the terms hereof.
(ii) Total Disability
During a single period of total
disability of the Executive, the Executive shall be entitled to receive from the Company, the Executive's normal monthly salary
for the shorter of first three (3) months of disability or until any disability insurance policy available through the Executive’s
employment begins to pay benefits. If the single period of disability should continue beyond three (3) months, the Executive shall
receive only such amount as the Executive shall be entitled to receive under disability insurance coverage on the Executive, if
any.
(iii) Partial Disability
During a period of partial disability
of the Executive, the Executive shall receive an amount of compensation computed as follows:
That portion of the Executive's
normal monthly basic compensation which bears the same ratio to the Executive's normal monthly basic compensation as the amount
of time which the Executive is able to devote to the usual performance of services on behalf of the Company during such period
bears to the total time the Executive devoted to performing such services prior to the commencement date of the single period of
disability, and such amount shall be calculated by multiplying the Executive’s basic compensation by a fraction, the numerator
of which shall be the percentage of normal services that the Executive is able to perform and the denominator which shall be the
total services that the Executive is able to perform absent the partial disability.
(iv) Combination of Total and
Partial Disability
If a single period of disability
of the Executive consists of a combination of total disability and partial disability, the maximum total disability compensation
to which the Executive shall be entitled from the Company under this disability provision shall not exceed an amount equal to one
(1) times the Executive's normal monthly basic compensation.
(V) Broken Periods of Disability
A period of disability may be continuous
or broken. If broken into partial periods of disability which are separated by intervening periods of work, there shall be aggregated
together all of such successive partial periods of disability except any period prior to the time when any single period of work
extends for three months or longer; and such aggregated periods of disability shall be treated as a single period in determining
the amount of disability compensation to which an Executive shall be entitled under any provision of this Section.
8.7 Termination Due to Disability
If and when the period of total
or partial disability of the Executive totals six months, the Executive's employment with the Company shall automatically terminate.
Notwithstanding the foregoing, if the disabled Executive and the Company agree, the disabled Executive may thereafter be employed
by the Company upon such terms as may be mutually agreeable.
8.8 Commencement Date of Disability
The commencement date of a period
of disability, whether it is a continuous period or the aggregate of successive partial periods, shall be the first day on which
the Executive is disabled.
8.9 Dispute Regarding Existence
of Disability
Any dispute regarding the existence,
extent or continuance of the disability shall be resolved by the determination of a majority of three (3) competent physicians,
one (1) of whom shall be selected by the Company, one (1) of whom shall be selected by the Executive and the third (3rd) of whom
shall be selected by the other two (2) physicians so selected.
ARTICLE IX- INDEMNIFICATION
9.1 The Executive hereby agrees
to indemnify and hold the Business, the Company and its officers, directors, shareholders and Executives harmless from and against
any loss, claim, damage or expense, and/or all costs of prosecution or defense of their rights hereunder, whether in judicial proceedings,
including appellate proceedings, or whether out of court, including without limiting the generality of the foregoing, attorneys'
fees, and all costs and expenses of litigation, arising from or growing out of the Executive's breach or threatened breach of any
covenant contained herein.
9.2 The Business and Company hereby
agrees to indemnify and hold the Executive harmless from and against any loss, claim, damage or expense, and/or all costs of prosecution
or defense of their rights hereunder, whether in judicial proceedings, including appellate proceedings, or whether out of court,
including without limiting the generality of the foregoing, attorneys' fees, and all costs and expenses of litigation, arising
from or growing out of the Company’s breach or threatened breach of any covenant contained herein.
ARTICLE X. MISCELLANEOUS PROVISIONS/JURISDICTION
10.1 Severability.
I If any term or provision of this Agreement shall be held to
be invalid or unenforceable for any reason, such term or provision shall be ineffective to the extent of such invalidity or unenforceability
without invalidating the remaining terms and provisions hereof, and this Agreement shall be construed as if such invalid or unenforceable
term or provision had not been contained herein.
10.2 Rights Cumulative.
The rights and remedies provided by this Agreement are cumulative, and the exercise of any right or remedy by either party
hereto (or by its successor), whether pursuant to this Agreement, to any other agreement, or to law, shall not preclude or waive
its right to exercise any or all other rights and remedies.
10.3 Nonwaiver.
No failure or neglect of either party hereto in any instance to exercise any right, power or privilege hereunder or under law
shall constitute a waiver of any other right, power or privilege or of the same right, power or privilege in any other instance.
All waivers by either party hereto must be contained in a written instrument signed by the party to be charged and, in the case
of the Company, by an officer of the Company (other than Executive) or other person duly authorized by the Company.
10.4 Assistance in Litigation.
Executive shall, during and after termination of employment, upon reasonable notice, furnish such information and proper assistance
to the Company as may reasonably be required by the Company in connection with any litigation in which it or any of its subsidiaries
or affiliates is, or may become a party; provided, however, that such assistance following termination shall be furnished at mutually
agreeable times and for mutually agreeable compensation.
10.5 Survival. Articles
6 and 7 and Section 9.7 shall survive the termination of this Agreement.
10.6 Entire Agreement.
This Agreement, together with all award agreements and long-term incentive agreements is the entire agreement between the parties
hereto concerning the subject matter hereof and supersedes and replaces all prior or contemporaneous agreements or understandings
between the parties.
10.7 Employment Amendments.
This Agreement may not be amended or modified in any manner, except by an instrument in writing signed by duly authorized members
of the Board.
10.8 Notices. Unless
otherwise provided herein, any notice required or permitted under this Agreement shall be given in writing and shall be deemed
to have been duly given upon personal delivery to the party to be notified or ten (10) business days after being mailed by United
States certified or registered mail, postage prepaid, return receipt requested or five (5) days after being sent by Federal Express
or other recognized overnight delivery to the following respective addresses, or at such other address as each may specify by notice
to the other:
Notice to the Executive:
Vickie G. Hart
212 Edgewood Drive
Pineville, Louisiana 71360
10.9 Governing Law.
This Agreement shall be governed by and construed in all respects in accordance with the laws of the State of Louisiana.
11.1 Jurisdiction.
Unless otherwise provided for in this Agreement, the courts within Rapides Parish, the City of Alexandria, Louisiana shall have
exclusive jurisdiction to adjudicate any dispute arising out of this Agreement and/or employment relationship or termination thereof
and the Executive consents to such jurisdiction and venue.
11.2 Construction.
The headings and captions of this Agreement are provided for convenience only and are intended to have no effect in construing
or interpreting this Agreement. The language in all parts of this Agreement shall be in all cases construed according to its fair
meaning and not strictly for or against the Company or Executive.
11.3 Nonwaiver. No
failure or neglect of either party hereto in any instance to exercise any right, power or privilege hereunder or under law shall
constitute a waiver of any other right, power or privilege or of the same right, power or privilege in any other instance. All
waivers by either party hereto must be contained in a written instrument signed by the party to be charged and, in the case of
the Business, by an officer of the Company (other than Executive) or other person duly authorized by the Company.
11.4 Arbitration. Any controversy,
claim or dispute arising out of or relating to this Agreement or the employment relationship, either during the existence of the
employment relationship or afterwards, between the parties hereto, their assignees, their affiliates, their attorneys, or agents,
shall be settled by arbitration in Alexandria, Louisiana. Such arbitration shall be conducted in accordance with the then prevailing
commercial arbitration rules of the State of Louisiana but the arbitration shall be in front of an arbitrator, with the following
exceptions if in conflict: (a) one arbitrator shall be chosen by Executive and one (1) chosen by Company; (b) each party
to the arbitration will pay its pro rata share of the expenses and fees of the arbitrator(s), together with other expenses of the
arbitration incurred or approved by the arbitrator(s); and (c) arbitration may proceed in the absence of any party if written
notice of the proceedings has been given to such party. The parties agree to abide by all decisions and awards rendered in such
proceedings. Such decisions and awards rendered by the arbitrator shall be final and conclusive and may be entered in any court
having jurisdiction thereof as a basis of judgment and of the issuance of execution for its collection. All such controversies,
claims or disputes shall be settled in this manner in lieu of any action at law or equity; provided however, that nothing in this
subsection shall be construed as precluding the Company from bringing an action for injunctive relief or other equitable relief
or relief under the Confidential Information and Invention Assignment Agreement. The arbitrator shall not have the right to award
punitive damages, consequential damages, lost profits or speculative damages to either party. The parties shall keep confidential
the existence of the claim, controversy or disputes from third parties (other than the arbitrator), and the determination thereof,
unless otherwise required by law or necessary for the business of the Company. The arbitrator(s) shall be required to follow applicable
law.
IF FOR ANY REASON THIS ARBITRATION
CLAUSE BECOMES NOT APPLICABLE, THEN EACH PARTY, TO THE FULLEST EXTENT PERMITTED BY APPLICABLE LAW, HEREBY IRREVOCABLY WAIVES ALL
RIGHT TO TRIAL BY JURY AS TO ANY ISSUE RELATING HERETO IN ANY ACTION, PROCEEDING, OR COUNTERCLAIM ARISING OUT OF OR RELATING TO
THIS AGREEMENT OR ANY OTHER MATTER INVOLVING THE PARTIES HERETO.
12.0 Acknowledgment. The
Executive acknowledges that when this Agreement is concluded, the Executive will be able to earn a living without violating the
foregoing restrictions and that the Executive's recognition and representation of this fact is a material inducement to the execution
of this Agreement and to Executive's continued relationship with the Company.
12.1 Survival of Covenants
. All restrictive covenants contained in this Agreement shall survive the termination of this Agreement.
12.2 Limitations on Authority
. Without the express written consent from the Company, the President shall have no apparent or implied authority to: (i) Pledge
the credit of the Company or any of its other Executives; (ii) Bind the Company under any contract, agreement, note, mortgage or
otherwise; (iii) Release or discharge any debt due the Company; or (iv) sell, mortgage, transfer or otherwise dispose of any assets
of the Business.
12.3 Representation and Warranty
of Executive. The Executive acknowledges and understands that the Business and Company has extended employment opportunities
to Executive based upon Executive's representation and warranty that Executive is in good health and able to perform the work contemplated
by this Agreement for the term hereof.
12.4 Invalid Provision; Severability
. The invalidity or unenforceability of a particular provision of this Agreement shall not affect the other provisions hereof,
and the Agreement shall be construed in all respects as if such invalid or unenforceable provisions were omitted.
12.5 Entire Agreement. This
Agreement contains the entire agreement and supersedes all prior agreements with Executive and Company and all understandings,
oral or written, with respect to the subject matter hereof. This Agreement may be changed only by an agreement in writing signed
by the party against whom any waiver, change, amendment, modification, or discharge is sought.
IN WITNESS WHEREOF, the
parties hereto have caused this Agreement to be duly executed and delivered as of the day and year first above written.
By: ________________________
Name: Vickie
G. Hart
Title:
President, Angels of Mercy, Inc.
Oncologix,
Tech Inc.
By: ________________________
Name: Roy
Wayne Erwin
Title:
CEO and Chairman
Oncologix Tech (CE) (USOTC:OCLG)
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