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                    U. S. SECURITIES AND EXCHANGE COMMISSION
                             Washington, D.C. 20549

                                   FORM 10-KSB

(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, 2007

[ ]  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                          (I.R.S. Employer
      of incorporation)                               Identification No.)

                    3725 Lawrenceville-Suwanee Rd., Suite B-4
                                Suwanee, GA 30024
                     --------------------------------------
                    (Address of principal executive offices)

                                 (770) 831-8818
               --------------------------------------------------
              (Registrant's telephone number, including area code)

              Securities registered under Section 12(g) of the Act:

     Name of exchange on which registered              Title of Each Class
     ------------------------------------              -------------------
                      None                                    None

              Securities registered under Section 12(b) of the Act:
                          Common Stock, $.001 Par Value
                                 --------------
                                (Title of Class)

     Check whether the issuer (1) filed all reports required to be filed by
Section 13 or 15(d) of the Exchange Act during the past 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 [ ]

     Check if there is no disclosure of delinquent filers in response to Item
405 of Regulation S-B contained in this form, and no disclosure will 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-KSB
or any amendment to this Form 10-KSB. [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]

     Issuer's revenues for the fiscal year ended August 31, 2007: $0.

     The aggregate market value of the Common Stock of the registrant held by
non-affiliates as of November 12, 2007 was approximately $24,872,704 based on
the average bid and asked prices for such Common Stock as reported on the OTC
Bulletin Board.

     The number of shares of Common Stock outstanding as of November 12, 2007
was 71,064,868.

                       Documents Incorporated By Reference

         Certain exhibits are incorporated in Item 13 by reference to other
reports and registration statements of the issuer which have been filed with the
Securities and Exchange Commission.



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<PAGE>



                                TABLE OF CONTENTS





                                     PART I


Item 1      Description of Business.......................................    2
Item 2      Description of Property.......................................   13
Item 3      Legal Proceedings.............................................   14
Item 4      Submission of Matters to a vote of Security Holders...........   14


                                     PART II


Item 5      Market for Common Equity and Related Stockholder
            Matters and Small Business Issuer Purchases of Equity
            Securities....................................................   14
Item 6      Management's Discussion and Analysis or Plan of
            Operation.....................................................   20
Item 7      Financial Statements..........................................   35
Item 8      Changes In and Disagreements With Accountants on
            Accounting and Financial Disclosure...........................   36
Item 8A     Controls and Procedures.......................................   36
Item 8B     Other Information.............................................   36


                                    PART III


Item 9      Directors, Executive Officers, Promoters, Control
            Persons and Corporate Governance;
            Compliance With Section 16(a) of the Exchange Act.............   36
Item 10     Executive Compensation........................................   39
Item 11     Security Ownership of Certain Beneficial Owners and
            Management and Related Stockholder Matters....................   44
Item 12     Certain Relationships and Related Transactions, and
            Director Independence.........................................   45
Item 13     Exhibits......................................................   47
Item 14     Principal Accountant Fees and Services........................   49

                                        1


<PAGE>

FORWARD LOOKING STATEMENTS

         This Annual Report on Form 10-KSB contains certain statements, that are
not descriptions of historical facts, are forward-looking statements within the
meaning of the safe harbor provisions of Section 27A of the Securities Act of
1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as
Amended. These statements relate to future events, including the future
financial performance of Oncologix. In some cases, you can identify
forward-looking statements by terminology such as "may," "will," "should,"
"expects," "plans," "anticipates," "believes," "estimates," "predicts,"
"potential," or "continue," or the negative of such terms and other comparable
terminology. These statements reflect management's expectations and estimates as
of the date of this report. Consequently, actual results may differ materially
from these projected in the forward-looking statements. In evaluating those
statements, you should specifically consider various factors, including the
risks, uncertainties and other matters discussed below under "CAUTION" and
elsewhere in this Annual Report on Form 10-KSB and in other periodic reports
filed with the U.S. Securities and Exchange Commission. These factors may cause
actual results to differ materially from any forward-looking statements.
Oncologix is not undertaking any obligation to update any forward-looking
statements contained in this report

         All references to "we," "our," "us," "Oncologix," or the "Company"
refer to Oncologix Tech, Inc., and its predecessors and subsidiaries, including
Oncologix Corporation.


                                     PART I

ITEM 1. DESCRIPTION OF BUSINESS

GENERAL OVERVIEW

         While we were formerly in another, unrelated business (described below)
our present business is 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.

         We were originally formed in 1995 as "Wavetech, Inc." a New Jersey
corporation and changed our corporate domicile to Nevada in December 1997, by
merging into a Nevada corporation named, "Interpretel International, Inc." We
subsequently changed our name, first to "Wavetech International, Inc." and then,
in 2000, to "BestNet Communications Corp." Our business at the time was to
provide worldwide long distance telephone communication and teleconferencing
services to commercial and residential consumers through the internet. That
business was never profitable and we were able to continue it only by repeated
equity and debt financings. Accordingly, during December 2006, we determined to
dispose of that business and sold it during February 2007. The discontinuation
of the telephone business segment has been recorded separately in the
accompanying consolidated financial statement.

         We entered the medical device business at the end of July 2006 through
the acquisition of JDA Medical Technologies, Inc. ("JDA"), a development stage
company, which was merged into our wholly owned subsidiary, Oncologix
Corporation. On January 22, 2007, we changed our name to Oncologix Tech, Inc.,
to reflect this new business. Presently our only business is to continue the
development of the Oncosphere. 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.

         JDA had been organized as a Maryland corporation in 2003 by Andrew S.
Kennedy, MD, David van Echo, MD, and Mr. Jeff Franco for the commercial
exploitation of an innovative technology (described below) for treating soft
tissue cancers. Dr. Kennedy, Dr. van Echo, and others, invented that technology
while associated with the University of Maryland, Baltimore (the "University"),
which paid for the research and development effort and which owns the
technology. The principal asset we acquired from JDA is the Master License
Agreement (described below), covering that technology, that was granted to JDA
by the University. The University has applied for patents on the licensed
technology which are still pending. No patents have yet been issued and there is
no assurance that any patents will be issued. If the applications are denied, we
will have no legal protection for the intellectual property embodied in the
technology and it will become available to others. See "Intellectual Property
Risk," below.

                                       2

<PAGE>


         From the time that JDA entered into the Master License Agreement, in
September 2003, until it was acquired by us in July 2006, its activities were
limited to the development of software ancillary to the licensed technology and
pursuing sources of financing. We expect this medical device business to remain
in the development stage for up to three years after the date of this Report.

         Under the terms of the JDA acquisition, we became obligated to apply
up to $4,000,000 to the operations of Oncologix. However, completion of product
development, obtaining FDA approval, manufacturing and marketing the product
will require substantial additional financing. See "CAUTION" and "MANAGEMENT'S
DISCUSSION AND ANALYSIS" elsewhere in this Report.

CAUTION

         Anyone considering an investment in our company should read this report
carefully, noting the descriptions of the various risks and uncertainties
involved in our business, including but not limited to the following:

         Need for Additional Capital. We will need substantial funds to complete
the development, manufacturing, and marketing of our potential future products.
Since our inception we have been dependent on obtaining operating capital from
private investors, including one present and one former Director. We are in the
process of seeking funds for our medical device business from private investors,
but there are no assured sources of additional financing nor is there any
assurance of success in that regard. 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 or from other sources. We now estimate the need to
raise at least $4,300,000 of additional funding to meet anticipated expenditures
for the next twelve months. We may be unable to raise additional capital on
commercially acceptable terms, if at all, and if we raise capital through
additional equity financing, the ownership interests of existing shareholders
may be diluted. Our failure to generate adequate funds would severely harm our
business. See "MANAGEMENT'S DISCUSSION AND ANALYSIS" below in this Report.

         Reliance on Anthony Silverman's Financial Assistance. Since October 22,
2003, we have relied substantially on the advice and assistance of Mr. Anthony
Silverman, a former member of our Board of Directors, in structuring our
financing, identifying sources of funding and acting as such a source himself.
Mr. Silverman and his affiliates own 6,433,484 shares of our common stock
(approximately 8.86 % of the voting stock) and he has advanced a total of
approximately $855,450 to the Company in short-term debt. Although we believe
that Mr. Silverman presently intends to continue rendering such assistance and
to extend the payment date of that short-term debt as may be necessary, there is
no assurance that this assistance or payment extension will continue as before.

                                       3

<PAGE>
<TABLE>
<CAPTION>


         Short Term Indebtedness. the following table summarizes our required
minimum cash payments for the next 12 months, as of August 31, 2007, including
our short-term notes payable, short-term convertible notes payable and their
respective due dates To the extent the convertible notes are not converted,
funds for repayment will have to be raised through additional debt or equity
financings.

                                                             Accrued
          Due Date   Interest Rate           Amount         Interest**       Total Owed     Convertible/Non-Convertible
          --------   -------------           ------         ----------       ----------     ---------------------------
         <S>            <C>                     <C>          <C>                 <C>      <C>
         12/4/2007      6.00%                   $ -          $ 69,961            69,961   Annual interest payment, 6% notes
                                                                                             issued Dec 2006 to Feb. 2007
        12/31/2007      10.00%              150,000            17,726           167,726   Convertible at $0.20 per share
       01/14/2008*      10.00%              200,000            30,466           230,466   Convertible at $0.30 per share
       01/14/2008*      10.00%              200,000            21,334           221,334   Non-Convertible
       01/14/2008*      10.00%               80,450                 -            80,450   Convertible at $0.12 per share
                                                                                             interest paid monthly
       01/14/2008*      8.00%               400,000            20,252           420,252   Non-Convertible
         1/15/2008      8.00%               350,000            18,948           368,948   Convertible at $0.20 per share
          5/7/2008      8.00%               700,000            54,855           754,855   Convertible at $0.25 per share
                                    ----------------  ----------------  ----------------

                                        $ 2,080,450         $ 233,542       $ 2,313,992
                                    ================  ================  ================

*    Debt held by Anthony Silverman, a former member of our Board of Directors

**   Interest calculated to maturity

         Software Requirement. To be used to its full advantage, the Oncosphere
should be used together with software developed and owned by others that is
expected to provide oncologists with a pre-treatment plan or post-treatment
verification of microsphere delivery of radioactive isotopes. This software is
presently, and we believe will be in the future, available to facilities using
the Oncosphere in the treatment of patients (such as hospitals, physicians'
offices and the like) on a commercial license basis. While we believe, based on
Management's knowledge of the industry, that if the software should no longer be
available from the dominant supplier, other software firms will be capable of
and willing to supply the need, this matter will not be under our control.

         Technology Uncertainties. Our business is subject to the risks inherent
in any new technology company, including that our technology-based product will
not function as we expect, that successful commercial development may take
substantially more time and effort than anticipated, that we may run out of
funds before development is complete and that a competitor's product may come to
the market before we are able to do so. See "OUR MICROSPHERE PRODUCT" and
"MANAGEMENT'S DISCUSSION AND ANALYSIS" below in this Report.

         Reliance on Key Personnel. Our success will largely depend upon the
experience, abilities and continued services of our executive officers and key
scientific personnel. If we lose the services of any of these officers or key
scientific personnel, our business could be harmed. Our success also will depend
upon our ability to attract and retain other highly qualified scientific,
managerial, sales, and manufacturing personnel and our ability to develop and
maintain relationships with key individuals in the industry. Competition for
these personnel and relationships is intense and we compete with numerous
pharmaceutical and biotechnology companies as well as with universities and
non-profit research organizations. We may not be able to continue to attract and
retain qualified personnel.

         Going Concern Qualification. We have disclosed in our financial
statements that they were prepared under the assumption that the Company will
continue as a going concern. We have incurred losses from operations over the
past several years and anticipate additional losses in the future. Additionally,
as a result of the acquisition of JDA and the associated License Agreement with
the University of Maryland, as described under "BUSINESS" and in our Notes to
Financial Statements included a part of this Report, the Company is required,
under the terms of the amended license agreement to raise substantial funds for
the development of the technology associated with the License Agreement. Our
independent auditors have included language in their report included on our 2007
financial statements that indicates that these matters raise doubt about our
ability to continue as a going concern. Our ability to

                                       4
</TABLE>
<PAGE>
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 sources where
possible. The going concern qualification increases the difficulty of meeting
such goals.

         Uncertainties Regarding Healthcare Reimbursement and Reform. Our
ability to commercialize products 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 industry is
intensely competitive. We will compete with both public and private medical
device, biotechnology and pharmaceutical companies that have been established
longer than we have, have a greater number of products on the market, have
greater financial and other resources and have other technological or
competitive advantages. We also compete in the development of technologies and
processes and in acquiring personnel and technology from academic institutions,
government agencies, and other private and public research organizations. 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 not benefit from significantly greater sales and marketing
capabilities or will not develop products that are accepted more widely than
ours.

         Intellectual Property Risk. Our ability to obtain and maintain patent
and other protection for our products will affect our success. We have exclusive
licenses to technologies subject to patent applications in the U.S. and four
foreign countries. The patent positions of medical device companies can be
highly uncertain and involve complex legal and factual questions. Our 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 the medical device
and biotechnology field, 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 be issued that
would harm our ability to commercialize our products and product candidates.

         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. Insurance coverage is
expensive and difficult to obtain and, in the future, we may be unable to obtain
coverage on acceptable terms, if at all. 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.

         Exposure to Environmental Risks. Our business involves the controlled
use of hazardous materials, chemicals, biologics, and radioactive compounds.
Manufacturing is extremely susceptible to product loss due to radioactive,
microbial, or viral contamination; material equipment failure; or vendor or
operator error; or due to the very nature of the product's short half-life.
Although we believe that when we become operational, our safety procedures for
handling and disposing of such materials will comply with state and federal
standards there will always be the risk of accidental contamination or injury.
In addition, radioactive, microbial, or viral contamination may cause the
closure of the respective manufacturing facility for an extended period. By law,
radioactive materials may only be disposed of at state-approved facilities. If
we were to become liable for an accident, or if we were to suffer an extended
facility shutdown, we could incur significant costs, damages, and penalties that
could harm our business.

         Uncertain Value of Our License from the University. Although we believe
that the patent pending on our licensed technology has significant value, we
cannot be confident that other similar technology does not exist or will not be
discovered, or that any patents, if granted, will be enforceable.

         Uncertainty as to our Ability to Initiate Operations and Manage Growth.
Our efforts to commercialize our medical 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.

         Valuation of JDA. The common stock and additional paid-in capital shown
in the financial statements included as a part of this Report reflects a value
of $4,604,893 for our acquisition of JDA, which was based on the market price of
our Common Stock on the date of that acquisition. There is no assurance that
revenue in that amount will ever be realized in the acquired business.

                                       5
<PAGE>


         Market Overhang. We are in the process of registering for resale to the
public of up to 6,746,684 shares of our common stock. All of those shares, and
20,117,629 more that are not being registered, are believed to be eligible for
resale pursuant to Rule 144 of the Securities and Exchange Commission. These
shares were purchased from us in private financings. The resale of any of these
shares may cause a decline in the public trading price of our common stock.


OUR MICROSPHERE PRODUCT

         The following terms which are used throughout this Report have the
following meanings:

         "Brachytherapy" refers to the process of placing therapeutic radiation
sources in or near diseased tissue.

         "CE Mark" refers to approval from authorities in the European Union to
sell a medical product commercially within the European Union.

         "FDA" refers to the United States Food and Drug Administration.

         "FIM Study" (also known as a Feasibility Study) refers to the "first in
man" clinical trial of a medical product; the FIM Study for the Oncosphere
System is planned to enroll up to ten human patients at two hospitals to provide
initial safety and feasibility data.

         "Investigational Device Exemption" or "IDE" refers to a procedure
whereby the FDA grants permission to test a new product with human patients in
the United States.

         "Micro-arterial brachytherapy" refers to the delivery of radiation into
or near a tumor through the artery carrying the blood supply to the tumor.

         "Microsphere" refers to a spherical microparticle, approximately
one-quarter the width of a human hair, capable of containing or binding a
radioisotope for the purpose of delivering radiation treatment directly to a
tumor through the system of arteries (vasculature) supplying blood to the tumor.
Our product is an innovative version of a microsphere that we call the
"Oncosphere."

         "Pivotal Clinical Trial" refers to a large, controlled clinical study
intended to provide the safety and effectiveness data to support a request for
approval from the FDA to sell a product commercially.

         "Pre-Market Approval" or "PMA" refers to the granting of a permit by
the FDA to market a product to the public. It requires submitting information
about the design and manufacture of the product to FDA along with clinical data
to support the approval of a device. It also includes a description of the
manufacturer's quality control system to ensure compliance with FDA
manufacturing, marketing, and design regulations. The term "PMA" is sometimes
also used to refer to an application for such a permit.

Our Microsphere Product

         Our product, embodying the technology licensed to us by the University,
is a microsphere called the "Oncosphere." Its intended use is as a means of
micro-arterial brachytherapy in the treatment of soft tissue cancer tumors in
the liver. Soft tissue tumors are connected to the blood supply and this kind of
therapy is administered through the patient's blood supply system.

         Soft tissue tumors are among the most difficult forms of cancer to
treat. If not cured by initial therapy, these tumors eventually become
unresponsive to chemotherapy and spread (metastasize) throughout the body. While
there has been some progress in recent years in treating these cancers with
surgery and chemotherapy, the five-year survival rates remain less than five
percent. There is a strong demand from patients and physicians confronting this
type of cancer for effective, easy-to-use therapies with acceptable side
effects. We believe that our Oncosphere product will provide such a therapy if
fully developed and approved for use.

                                       6

<PAGE>


         Currently the standard treatment for patients with advanced cancerous
tumors is chemotherapy, which is not specific to (that is, does not discriminate
as to) various types of cancer and has side effects that damage or destroy many
normal cells as well as the cancer cells. Thus, chemotherapy may result in
additional illness and even death. High doses of chemotherapy have typically
resulted in extended, unpleasant and sometimes life-threatening hospital stays.
Patients often require expensive, invasive medical attention before they recover
and are discharged to their homes.

         An alternative therapy, radiation, is most often administered by
delivering a beam from outside of the patient's body ("external beam radiation")
through the patient's body to the cancer tumor. Cells do not become resistant to
radiation as they do to chemotherapy. Therefore, radiation delivered to the cell
in sufficient doses will cause the death of the cell. However, because the
radiation originates from outside the body, the healthy tissues surrounding the
tumor and those between the source and the tumor also receive radiation and
suffer damage that can cause significant adverse side effects.

         Micro-arterial brachytherapy is an improvement over both chemotherapy
and external beam radiation. In this form of treatment, microspheres bearing
radiation are delivered directly through the bloodstream to the site of a cancer
tumor, thereby avoiding healthy tissues. Micro-arterial brachytherapy has the
additional significant advantage of being administered in an outpatient
procedure, with most patients being able to return home the day of treatment.

         We believe that when the development of the Oncosphere has been
completed and it is approved by the FDA and used in the treatment of patients,
it will have significant competitive advantages over microspheres now in the
market. Currently available microsphere products have shortcomings that have
limited their widespread adoption in the treatment of cancer patients. The
Oncosphere design is intended to overcome those limitations because it includes
the following features:

         1) Microsphere Imaging. The Oncosphere includes a beta-emitting
radioisotope for killing tumor cells and a gamma-emitting radioisotope for
imaging. Imaging provides the ability to verify that the radiation has been
delivered to the cancer tumor and not to healthy tissue. Microspheres currently
on the market do not provide this capability.

         2) Dose Planning and Verification. There are three critical steps in
radiation therapy; pre-treatment planning, dose prescription and post-treatment
verification of brachytherapy already performed. The first two steps as
currently performed rely on rough estimates and are not sufficiently defined to
conform to prevailing oncology standards of care. Accurate, scientifically-based
pre-treatment planning and dose prescription require software planning systems
that are not available for microspheres currently on the market. Furthermore,
post-treatment verification is not possible with currently available
microspheres because they are not capable of implanting the gamma-emitting
isotopes that permit imaging. We believe that certain currently available
software, as described below, will provide the capability for improved
performance of the first two steps. We also believe that the Oncosphere's
gamma-emitting isotope will provide a capability for post-treatment
verification.

         3) Handling and Delivery. The specific gravity of currently available
microspheres, composed of glass and resin, is relatively higher than the
specific gravity of blood serum and this causes them to settle quickly during
infusion, thus adding complexity to the delivery system and associated
procedures. The infusion process will be simplified with the use of the
Oncosphere because the specific gravity of the polymer of which it is made is
similar to that of blood serum. This polymer is commonly used in implantable
medical devices.

         4) Production. Currently available microspheres are manufactured by a
process that requires a costly nuclear reactor, which limits the number of doses
that can be produced each year. The Oncosphere will be manufactured with
chemical processes, which will permit production in greater quantities at lower
costs than currently available microspheres. These chemical processes will
afford greater flexibility in the manufacturing of the doses as they will permit
the use of multiple manufacturing locations and existing nuclear pharmacy
facilities, and facilitate the customization of radiation doses, and the scaling
of production quantities to match market demand.

         5) Physician Incentives. An important factor influencing physicians'
decisions in the selection of therapies is the amount of reimbursement by
Medicare and private insurance companies for patient treatments. Microsphere
brachytherapy is currently approved for reimbursement under established
standards that allow for some level of payment to the physician and hospital for
the treatment procedures as well as for the microspheres. The current lack of
treatment planning systems specific to microsphere technology provides little
economic incentive to those physicians to prescribe micro-arterial brachytherapy
for their patients. However, the ability of physicians to obtain a higher level
of reimbursement may be increased depending on the ability of those physicians
to plan treatments, prescribe dosing, image spheres after their delivery, and
use software packages for post-treatment verification. We believe that the use
of the Oncosphere with the software described below will improve their abilities
in that regard.

                                       7

<PAGE>


         The current reimbursement rate for brachytherapy technologies as
published by the Center for Medicare and Medicaid Services (CMS) is
approximately $14,000 per treatment (and is proposed to be $11,700 as of January
1, 2008). However, reimbursement rates can change (increase or decrease) from
time to time and the revenue and gross profit margins derived from the sale of
microspheres, including the Oncosphere, may fluctuate accordingly. The physician
using the Oncosphere may, however, obtain approval for additional reimbursement
based on the additional product features and benefits described above.

         We intend to focus our initial marketing efforts, after final FDA
approval is obtained, on the treatment of secondary liver cancer. "Secondary"
liver cancer is distinguished from "primary" liver cancer in that primary cancer
starts within the liver while secondary cancer has spread (metastasized) from
another area, such as the colon or breast, to the liver. The primary form is
most prevalent in relatively less-developed areas of the world, such as Asia and
Africa, while the secondary form predominates in highly developed areas such as
North America and Europe. Patients afflicted with secondary liver cancer often
die within six months of diagnosis. Patients treated with other microspheres,
now available in the market, have been known to survive for more than one year,
with the cause of death often being the source cancer rather than the secondary
liver cancer. Anticipated goals for treatment with the Oncosphere (if and when
approved for use) will be considered to have been met if the liver cancer is
stopped or its progression slowed or reversed, affording the patient an
extension of life, a more comfortable life and more time for treatment of the
source cancer.

         The current reimbursement rate for brachytherapy technologies as
published by the Center for Medicare and Medicaid Services (CMS) is
approximately $14,000 per treatment ($11,700 after January 1, 2008). However,
reimbursement rates can change (increase or decrease) from time to time and the
revenue and gross profit margins derived from the sale of microspheres,
including the Oncosphere, may fluctuate accordingly. The physician using the
Oncosphere may, however, obtain approval for additional reimbursement based on
the additional product features and benefits described above.

DEVELOPMENT STAGE OPERATIONS

         Our medical device business is in the development stage. Our activities
have consisted of conducting the studies and tests necessary to obtain data to
support an application to the FDA for authorization (an "Investigational Device
Exemption" or "IDE") to conduct clinical trials of the Oncosphere that will in
turn provide data on its safety and effectiveness in support of a Pre-Market
Approval (PMA) from the FDA. A PMA will permit us to market the Oncosphere to
the U.S. public. Additionally, this data will be used in support of applications
to the regulatory authorities in the European Union in support of a request to
market the Oncosphere product in those countries.

         We believe that we have succeeded in developing a new design as a
solution to a previously announced design and materials problem which occurred
with the original product design. Our business is nevertheless still subject to
the risks that our technology-based product will not function as we expect, that
successful commercial development may take substantially more time and effort
than anticipated, that we may run out of funds before development is complete
and that a competitor's product may come to the market before we are able to do
so.

         The total development effort (described in greater detail below) is
expected to take approximately one year from the date of this Report. We now
estimate that we will need at least $4,300,000 (including costs incurred in
raising money) to complete development but we cannot be certain that actual
costs will not exceed this amount. As described under "Management's Discussion
and Analysis" we believe that an average of approximately $360,000 per month

                                       8

<PAGE>
will be required to be applied to anticipated operational expenditures for the
next twelve months. We expect an additional $12,700,000 (a total of $17,000,000)
will be required to enable us to market the Oncosphere to the public in the
United States. Because we anticipate no funds from operations during this
period, we will attempt to raise all necessary funds from equity investors or
lenders. The form of any financing will depend on capital markets and industry
conditions at the time. There is, of course, no assurance that adequate funds
will be available as required.

         Based on the previous experience of Oncologix management in the
development of radiation medical devices and in obtaining FDA, European, and
radiation regulatory approvals, we believe that we have or can readily obtain
all of the resources necessary to complete the required studies and evaluations.
We employ outside contractors to perform various tasks and studies. While the
required expertise is highly specialized, it is available from a number of
sources and no difficulty is expected in identifying and engaging qualified
contractors.

         The work necessary to support an application to the FDA for an IDE is
generally divided into the three phases described in the following paragraphs.

         Product Design and Manufacturing Feasibility. This phase was completed
for the original product design and for the new design discussed above under
"Development Stage Operations." In completing this phase, we: (A) established a
microsphere specification and design that meets the user requirements as defined
in our Product Requirements Document; (B) demonstrated that lots can be
manufactured at pilot plant scale (i.e., in quantities large enough to support
an animal study and a pivotal clinical trial); and (C) completed a preliminary
manufacturing plan, based on reasonable assumptions and data that support a
commercially acceptable cost basis for commercial quantities.

         Pre-Clinical Testing. We are presently engaged in this phase, in which
animal experimentation is conducted to generate test results to verify the
design against its "product (user) requirements" and to identify the hazards of
its use in a risk analysis. This testing is required under both FDA and European
Standards governing the initiation of a clinical trial for medical devices and
is a necessary part of good engineering development and safety. These results
must be included in the IDE submission to the FDA. The trial design and final
specifications should be based on discussions with and preliminary advice from
the FDA. More specifically, the purpose of the animal study is to: (A) confirm
that radiation effects from the microspheres result in the expected local effect
in the liver, without adversely affecting other tissues or organs; (B) document
and describe any acute and/or chronic adverse events; (C) document and describe
the feasibility of the delivery of microspheres to the liver without "spilling
over" or "drifting" of the microspheres to other places in the body where their
effect would be harmful (this study is done by examining each organ of an animal
that has been used to test the product); and (D) document and describe any
potential liver toxicity.

         The animal study protocols defined the following specific objectives to
evaluate the general goals described above:

         1.   Evaluation of the functionality of the system components, the
              compatibility with standard interventional products and
              procedures, and the delivery of the microspheres to the liver.
         2.   Evaluation of the ability to deliver the microspheres via
              fluoroscopy.
         3.   Evaluation of the distribution of microspheres in the liver
              and other organs via gross pathology of organs and histology
              of tissues, with specific determination of microsphere
              deposition patterns, cluster analyses, and location of
              implantation within the hepatic parenchyma.
         4.   Evaluation of the ability to image the microspheres
              post-delivery.
         5.   Evaluation of the bioavailability of free and/or bound Y-90
              and In-111 in the first 30 days (10 half lives).
         6.   Evaluation of the effects of the microspheres and radiation on
              the liver, adjacent tissues, and possible target organs (e.g.,
              gastrointestinal tract, lungs, etc.) in the first 90 days.

         The animal studies to date using a rabbit model have provided the data
required to meet the first four of those objectives. The two remaining
objectives will require an additional animal study, because the rabbit proved to
be an inadequate model for these objectives. Studies to achieve these two
objectives are now planned to be completed with a different animal with an
anatomy of the liver vasculature (blood vessels) that more closely reflects the
human vascular anatomy than the rabbit. We expect to select the animal and do an
initial test with it during December 2007 and to complete animal testing during
January 2008.

         This phase will conclude with the completion of a report(s) of an
animal study that meets industry and scientific standards to support the
submission of an IDE to the FDA requesting approval for a clinical trial.

         Clinical Approval. In this phase, the IDE submission is prepared and
submitted to the FDA, and an approval to start the "pivotal clinical trial" is
granted. The IDE can be compiled and submitted when the design verification is
completed in the Pre-Clinical Testing Phase. The FDA responds to IDE submissions

                                       9
<PAGE>

within 30 days with an approval, conditional approval, or disapproval. An
approval or conditional approval will allow us to begin the treatment of
patients in the "pivotal clinical trial."

         We have revised our original clinical trial plan to include a
feasibility clinical trial prior to the initiation of a "pivotal clinical
trial." The feasibility clinical trial will be limited to ten patients at two
clinical centers to evaluate the safety of the Oncosphere product. Upon
completion of the enrollment of this limited number of patients and subsequent
follow-up, we plan to submit an IDE supplement requesting the initiation of a
"pivotal clinical trial" to the FDA. This Phase will be completed when the FDA
issues a letter granting approval or conditional approval for a Pivotal Clinical
Trial. Management estimates that this will occur in the second half of calendar
2008. Such a letter will constitute FDA consent to treat a group of patients on
an experimental basis and, if successful in that effort, we will then be able to
request FDA approval to market the Oncosphere under a PMA. Management estimates
that it will take approximately 18 months from the time the Pivotal Clinical
Trial is approved to the time the PMA is approved by FDA.

         Our other activities during that time are expected to include
participation by Dr. Andrew S. Kennedy, our Chief Medical and Scientific
Officer, in scientific presentations and papers informing the medical community
of the benefits of micro-arterial brachytherapy in general and in training
physicians in its application. As progress is made, we will begin to develop
manufacturing and marketing plans for the Oncosphere and will plan to obtain
financing for the necessary personnel, facilities and other requirements for the
conduct of a commercial business.

SOFTWARE

         To be used to its full advantage, the Oncosphere System should be used
together with software developed and owned by others that is expected to provide
oncologists with a pre-treatment plan or post-treatment verification of
microsphere delivery of radioactive isotopes. This software is presently, and we
believe will be in the future, available to facilities using the Oncosphere in
the treatment of patients (such as hospitals, physicians' offices and the like)
on a commercial license basis. We believe, based on Management's knowledge of
the industry, that if the software should no longer be available from the
dominant supplier, other software firms will be capable of and willing to supply
the need.

         Upon our acquisition of JDA, we became its successor as a party to a
certain Joint Development Agreement dated January 15, 2004, with Prowess
Software and Xintek Associates, LLC. That agreement relates to certain software,
initially developed by Dr. Andrew S. Kennedy (formerly of JDA and now one of our
officers and directors) and Dr. Cedric Yu of Xintek Associates, to serve the
purpose described in the preceding paragraph. That software, called the
Microsphere Treatment Planning System ("MTPS"), is to be owned 20% by us (as
successor to JDA), 20% by Xintek and 60% by Prowess Software. Prowess agreed to
continue to develop the MTPS and JDA and Xintek each paid $10,000 to Prowess in
consideration of the agreement. Each party to the agreement has the right to
become a "reseller" of the MTPS at a mark-up and the final profit to Prowess
from any sale of the MTPS is to be allocated among them according to their
respective ownership of MTPS. There is no assurance that Prowess will succeed in
its development efforts in obtaining FDA approval for MTPS.

         Notwithstanding that agreement, however, we have concluded that it will
be in the best interests of the Company and any future customers if such
customers were to seek equivalent software currently available in the market.
However, accurate post-treatment dose verification will be available only with
microspheres having a gamma (photon) emitting component which provides an
imaging capability. The Oncosphere has this component but there is a risk that
others may also develop the ability to include this feature in their products.
Our gamma-emitting component is expected to be protected by the patents applied
for by the University if and when the requested patents are approved.

         The software will have three uses or applications in performing
brachytherapy with microspheres; pre-treatment planning, dose prescription, and
post-treatment dose verification.

         In pre-treatment planning, images of the patient's liver and tumors,
obtained through radiological scanning, are read into the software to ascertain
their relative volumes and to calculate the radiation dose to be prescribed for
the patient. The treating physician may also use already existing radiotherapy
software to trace the liver and tumors, obtain their relative volumes and
transfer the data to the software to calculate the dose.

                                       10

<PAGE>


         Post treatment with microspheres, the physican can obtain images that
provide dose verification information; this information may be used to plan
additional microshpere treatments. The gamma-emitting component of the Onosphere
is intended to enhance this dose verification.

GOVERNMENT REGULATION

         Our activities in the development, manufacture and sale of cancer
therapy products are and will be subject to extensive laws, regulations,
regulatory approvals and guidelines. Within the United States, therapeutic
radiological devices must comply with the U.S. Federal Food, Drug and Cosmetic
Act, which is enforced by the FDA. We are also required to adhere to applicable
FDA regulations for Good Manufacturing Practices, including extensive record
keeping and periodic inspections of manufacturing facilities. Medical devices
such as the Oncosphere cannot be used or sold unless they are approved for
specified purposes by the FDA. There are two levels of FDA approval. The first
is the granting of approval to test the device in human subjects through an IDE;
the second is obtaining approval to market the device to the public for the
treatment of specified diseases through a PMA. We plan to evaluate the
Oncosphere System in humans in two stages: in a Feasibility Study first with up
to ten patients in two hospitals and then, if the Feasibility Study is
successful, in a Pivotal Trial with up to 200 patients at up to ten hospitals.
Separate FDA approval will be required for each such stage.

         Our business involves the importing, exporting, design, manufacture,
distribution, use and storage of beta- and gamma-emitting radioisotopes. These
activities in the United States are subject to federal, state and local rules
relating to radioactive material promulgated by the Nuclear Regulatory
Commission ("NRC"), and states that have subscribed to certain standards and
local authorities, known as "Agreement States." In addition, we must comply with
NRC, state and U.S. Department of Transportation requirements for labeling and
packaging shipments of radiation sources to hospitals or others users of our
devices. In order to market our devices commercially in the U.S., we will be
required to obtain a sealed source device registration from Agreement States
and/or the NRC, depending on the states in which the device will be distributed.

         Additionally, hospitals in the United States are required to have
radiation licenses to hold, handle and use radiation. Many hospitals and/or
physicians in the United States will be required to amend their radiation
licenses to include our isotopes before receiving and using them. Depending on
the state in which the hospital is located, the license amendment will be
processed by the responsible subscribing state department or agency or by the
NRC.

         Obtaining such registration, approvals and licenses can be complicated
and time consuming and there is no assurance that any of them can be obtained.


PLANS FOR PRODUCT APPROVAL AND MARKETING IN EUROPE

         Upon completion of our animal development and testing activities to
obtain FDA approval for use and marketing of the Oncosphere in the United
States, we plan to apply for similar approval in Europe. We expect to obtain
European approval by December 2008, significantly earlier than FDA approval. The
differences between FDA and European requirements are summarized as follows. The
European system is based on a certified third-party regulatory authority. The
governments of the member states of the European Union have agreed upon common
regulations (Medical Device Directives) which were promulgated at the European
level and translated into the regulations of each separate country. The
Competent Authorities are the government bodies in control in the respective
member states. Notified Bodies are third-party companies that are audited and
certified by the Competent Authorities; the Notified Bodies can audit and review
companies worldwide. A company wishing to place a product on the market in the
European Union must contract with a Notified Body and have its quality system
certified and request approval through the CE Marking process based on a tiered,
risk-based system. Our product requires a full submission of the safety and
feasibility data to the Notified Body before receiving a CE Mark. Since European
regulations require safety and feasibility data (in contrast to Safety and
Effectiveness data in the United States) it is possible that we may use some of
our own clinical data from the FIM Study and data from the clinical literature
on other products in support of the CE Mark. Once approved to apply the CE Mark,
a product may be placed into commercial trade. Further evaluation of the
product's effectiveness is usually carried out in post-market investigation by
the physicians treating with the product. We anticipate that even if significant
revenue is not derived from European marketing in its initial stages, the
approval obtained will provide the opportunity to collect additional clinical
effectiveness data and provide evidence of the effectiveness of the
manufacturing and marketing systems of the company and enhance the credibility
of the Oncosphere in the United States.

                                       11

<PAGE>


         Since inception, we have been developing a Quality System that conforms
to the FDA and the European medical device standards. Currently, we plan to
request review and certification by a Notified Body in mid calendar 2008. While
there is no guarantee this certification will be granted, current management and
staff have extensive experience in developing and implementing such Quality
Systems and obtaining certifications.


COMPETITION

         We are aware of several companies that have developed competing
products to address soft tissue cancers:

         MDS Nordion is a Canadian company whose microsphere product is named
"Therasphere." The FDA approved Therasphere for limited use under a Humanitarian
Device Exemption (HDE) on December 10, 1999 for the treatment of primary liver
cancer. We believe that Nordion is attempting to collect data from patients
treated under the HDE approval to support the submission of a request to the FDA
for a PMA. Additionally, we understand that Nordion has received approval from
the FDA in October, 2006 to initiate a clinical trial investigating the
treatment of colorectal liver metastases (i.e., secondary liver cancer) with
their Therasphere product. This trial may provide safety and effectiveness data
that could support FDA approval of a PMA for a secondary liver cancer
indication. We understand that approximately 200 doses of Therasphere were
administered in 2002.

         Sirtex is an Australian company with approximately $11,000,000 in
assets. Its microsphere product is named "SIR-Spheres." The FDA approved a PMA
for SIR-Spheres on March 5, 2002 for treatment of colorectal cancer metastases
in the liver (secondary liver cancer) concurrently with chemotherapy
administered into the liver directly by means of a hepatic arterial pump.
Approximately 400 doses of SIR-Spheres were administered in the year 2003, 900
doses in the year 2004 and 2,500 doses in the year 2005 worldwide.

         pSivida, a British development stage company, has developed a competing
brachytherapy product that is injected directly into solid tumors. This
technique would not compete directly with the Oncosphere, but is intended to
treat some of the same diseases as microspheres. pSivida is publicly traded
under symbol PSDV on the NASDAQ exchange.

         We believe that other companies are capable of developing technology
that could, if embodied in a suitable product, compete with the Oncosphere. We
also believe that one of those companies may have developed specifications for
such a product but that its plans for further development are now dormant. As
with any technology-based product, there is a risk that other, more advanced,
products will appear on the market.

THE MASTER LICENSE AGREEMENT

         The business of Oncologix is made possible by the Master License
Agreement ("License"), effective September 16, 2003, between Oncologix's
predecessor, JDA, and the University. The following description of the License
is incomplete and is qualified in every respect by the full text thereof, as
amended, which is filed as an Exhibit to this Report.

         We have the exclusive worldwide right to make, have made, use, lease,
offer to sell, sell and import products based on the technology embodied in the
Oncosphere, generally known as "Instant Microspheres for Micro-arterial Imaging
and Radiotherapy," subject to the terms of the License, including certain
reservations of rights (which we do not believe are material) in the University
and the U.S. Government. We may grant sublicenses and assign our rights under
certain conditions.

         The License is subject to termination if we fail to perform under
certain requirements of the License, including:

         (A) Making certain reports of our activities to the University;

         (B) Having, not later than September 16, 2008, submitted an IDE to the
FDA, or other foreign equivalent; or, alternatively, having initiated a clinical
trial in any country other than the USA ("initiated" means that the licensed
product has been administered to the first human subject in the clinical study);

         (C) Having obtained a PMA from the FDA not later than September 16,
2011;

         (D) Having completed the $4,000,000 funding for the Oncologix
operations as described elsewhere in this Report;

                                       12

<PAGE>


         (E) Make the following lump sum payments (in addition to payments
already made): $25,000 upon the commencement of a Clinical Trial of a licensed
product in any country other than the U.S. or filing an application with the FDA
for an IDE, $50,000 upon receipt of an approval by the FDA of a Pre-Market
Approval Application; $100,000 upon any future change in control of Oncologix,
and $200,000 at the end of the first calendar year in which Net Sales of
Oncospheres exceeds $5,000,000. Royalties are to be paid on a country-by-country
basis.

         (F) Reimburse the University for legal fees paid to patent counsel in
connection with the licensed technology;

         (G) Pay royalties as follows: 2.5% of Net Sales on a semi-annual basis
but a minimum of $10,000 for each year after commercial sales begin, and 25% of
royalties received by us from sub licensees, subject to various adjustments and
qualifications contained in the License.

         Our agreement to effect the $4,000,000 financing mentioned in (D),
above, was incorporated into the Master License Agreement as a condition to the
University's consent to JDA's assignment of the License to us in connection with
the Agreement of Merger and Plan of Reorganization with JDA. Because the other
parties to the Agreement of Merger and Plan of Reorganization by and among the
Company, Oncologix Corporation, JDA Medical Technologies, Inc. and the Principal
Shareholders and the Executive Shareholders (for a Limited Purpose) of JDA
Medical Technologies, Inc. (the "Merger Agreement") agreed to the delay in
funding, and we do not believe that we are in default under the Merger
Agreement. However, it is possible that the University will consider the delay
of funding to be a breach of the terms of the Master License Agreement, as
amended. If so, and if the University should notify us that it considers the
delay to be such a breach, we would have a period of ninety days in which to
cure the breach. As of the date of this Report, no such notice has been received
by us. If we are unable to obtain the financing required by the Merger Agreement
we could potentially lose the University of Maryland License Agreement, which
would have a material adverse effect on the Company. As of the date of this
Report, we have funded approximately $3,700,000 of the $4,000,000.

         We are also obligated to indemnify the University against certain
expenses as provided in the License, as amended.

         We have granted an exclusive sublicense under the License to Fountain
Pharmaceuticals, Inc., a Delaware corporation, for China, Taiwan and Hong Kong.
The provisions of the sublicense generally mirror those of the License; the
royalty rate thereunder is three percent (3%).

INTELLECTUAL PROPERTY PROTECTION

         We intend to rely on patent laws, software security measures, license
agreements and nondisclosure agreements to protect our exclusive rights under
the Master License Agreement with the University. Although patents have been
applied for the technology underlying the Oncosphere, no patent has yet been
granted and there is no assurance that any will be granted or that any part of
the technology will be patentable. We believe, however, that if patents are
issued as applied for, we will have legal protection for the technology that
provides the capability of attaching two isotopes, beta emitting for therapy and
gamma emitting for imaging or measurement, as described above. Even if granted
however, any patent may be limited in scope and patents issued to others, or
technologies owned by them, may result in competitive products that do not
infringe any patent and that may employ software for dose calculation without
infringing any patent that may be granted for the Oncosphere technology.

         While the availability of legal protection for the software described
above is presently uncertain, there may be significant advantages to using such
software in combination with the Oncosphere technology, in preference to other
available products, for the calculation of dosages. As described above, the
Oncosphere technology is the subject of pending U.S. and other patent
applications.


RESEARCH AND DEVELOPMENT

         Although Dr. Andrew S. Kennedy was one of the inventors of the
Oncosphere technology, he and his co-inventors were, at the time, associated
with the University, which bore the expense of research and development and is
the owner of the technology. We believe that the actual cash expense was
approximately $200,000 without including the value of the time spent by the
inventors. JDA has paid $10,000 as a contribution to the expense of the
development by Prowess Software of the MTPS software described above. Our plans
for funding continued research and development are reflected in the budget
described under "MANAGEMENT'S DISCUSSION AND ANALYSIS."

                                       13

<PAGE>


PERSONNEL

         We currently employ nine full-time employees: our Chief Financial
Officer, who is located in Michigan; six employees who work for our subsidiary
in Georgia, including our Chief Executive Officer, Chief Operating Officer,
Director of Radiation Operations and Safety, Project Director, Director of
Regulatory Affairs and an Administrative Assistant; our Chief Scientific and
Medical Officer who is located in Cary, North Carolina; and our Chairman of the
Board, who is located in Scottsdale, Arizona. We do not anticipate hiring
additional employees until we complete the Pre-Clinical Testing Phase and
approach the commencement of the pivotal clinical trials of our Oncosphere
System. We have engaged independent contractors, whose numbers vary from time to
time, to perform a substantial portion of the development work.

ITEM 2. DESCRIPTION OF PROPERTY

         Our corporate headquarters for the Company is located in approximately
2,000 square feet of office space at 3725 Lawrenceville-Suwannee Road, Suwanee,
Georgia, 30024. We lease office space there at a monthly rent of $2,567 under a
lease that expires July 31, 2008. We maintained an office in approximately 1,000
square feet located at 2850 Thornhills Ave. SE, Suite 104, Grand Rapids, MI
49546, at a monthly rent of $1,465 under a lease that expired October 31, 2007.

ITEM 3. LEGAL PROCEEDINGS

         Our dispute with Softalk, previously reported, has been settled
pursuant to a Settlement Agreement and Mutual Release dated June 20, 2007,
whereunder, Softalk paid the Company $10,000 and each party released the other
from all prior contractual agreements made between the parties and agreed to a
full settlement and discharge and mutual release of all existing and potential
claims.

ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

         None


                                     PART II

ITEM 5. MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS

         Common Stock

         The Company's common stock is quoted on the OTC Bulletin Board under
the symbol "OCLG." The high and low bid 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, 2006
First Quarter                          $ 0.26    $ 0.17
Second Quarter                         $ 1.30    $ 0.15
Third Quarter                          $ 0.44    $ 0.27
Fourth Quarter                         $ 0.35    $ 0.28

FISCAL YEAR ENDED:
August 31, 2007
First Quarter                          $ 0.40    $ 0.20
Second Quarter                         $ 0.49    $ 0.37
Third Quarter                          $ 0.43    $ 0.20
Fourth Quarter                         $ 0.42    $ 0.20

         The bid and ask prices of our common stock on November 12, 2007, were
$0.34 and $0.36, respectively.

                                       14

<PAGE>


         Holders

         As of November 12, 2007, the Company had 207 shareholders of record of
its common stock. As of November 12, 2007, 1,450 beneficial owners of our common
stock held them in the names of various broker-dealers. As of November 12, 2007,
the Company had one Unit holder of record. As of November 12, 2007, the Company
had ten beneficial owners of Units who hold them in the names of various
brokers.

         Dividends

         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.

                                       15

<PAGE>
<TABLE>
<CAPTION>


         Securities authorized for issuance under equity compensation plans

                                                 EQUITY COMPENSATION PLAN(1)

                                       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 Plan
                                              -------                   -------------------            -------------------
<S>                                          <C>                               <C>                          <C>
Equity compensation plans
approved by stockholders.........            5,456,860                         $0.64                        5,683,825

Equity compensation plans
not approved by stockholders:....                 --                           $0.00                             --
                                      -----------------------        -----------------------         -----------------------

TOTAL                                        5,456,860                         $0.64                        5,683,825
                                      =======================        =======================         =======================

          (1) We maintain a 2000 Stock Incentive Plan under which we have
2,620,493 shares of common stock available for future issuance as of August 31,
2007. Under the 2000 Stock Incentive Plan, the sale price of the shares of
common stock is equal to the fair market value of such shares on the date of the
option grant. In January 2007, our shareholders approved an increase in the
number of shares authorized for our 2000 Stock Incentive Plan to 7,500,000 from
5,000,000. We also maintain a 1997 Stock Incentive Plan under which we have
3,063,332 shares of common stock available for future issuance as of August 31,
2007. The sale price of the shares of common stock available under our 1997
Stock Incentive Plan is equal to the fair market value of such shares on the
date of grant. Both of these plans have been approved by our shareholders.

         For a description of our 1997 and 2000 Stock Incentive Plans, please
see the description set forth in Note 14 of our Consolidated Financial
Statements.

         Recent Sales of Unregistered Securities

         The following table contains information regarding our sales of
unregistered securities during the past three fiscal years. We have made
additional sales of unregistered securities subsequent to our year end. See
"LIQUIDITY AND CAPITAL RESOURCES." All of the securities sold were promissory
notes convertible into shares of our common stock. The principal amount of each
Note is equal to the amount borrowed from the investor.

------------------------- ------------------------------- ----------------------------------------------------------------
    Date of Issuance       Principal Amount of Note(s)                    Further Description and Remarks
------------------------- ------------------------------- ----------------------------------------------------------------
     March 23, 2005                  $80,450              We  issued  to  Anthony  Silverman,  a member  of our  Board of
                                                          Directors,  a  Convertible  Promissory  Note  in the  principal
                                                          amount of  $110,000,  convertible  at the  option of the holder
                                                          into  916,667  shares  of  the  Company's   common  stock.  The
                                                          Convertible  Promissory  Note  was due on  March  31,  2006 and
                                                          bears  interest at the rate of 10% per annum,  payable  monthly
                                                          and is  convertible  into our common  stock at a rate of $0.12.
                                                          The term of this note has been  extended to December  15, 2007.
                                                          As  of  August  31,  2007  and  August  31,  2006,  the  unpaid
                                                          principal   balance   on  this  note  is   $80,450,   which  is
                                                          convertible  into  670,417  shares  of  our  common  stock.  On
                                                          November 30, 2007, Mr.  Silverman  agreed to extend the note to
                                                          January 14, 2008.

------------------------- ------------------------------- ----------------------------------------------------------------
     March 13, 2006                  $350,000                      Issued to an accredited  investor;  originally payable
                                                          on May 13, 2007 (at the end  of fourteen  months  following the
                                                          date  of  issue),  accrues  interest  at the  rate of 8% and is
                                                          convertible  into our  common  stock at a  conversion  price of
                                                          $1.00  per  common  share.  The due date  under  this  note was
                                                          extended  until July 15, 2007 and  subsequently  extended until
------------------------- ------------------------------- ----------------------------------------------------------------
                                                            16

</TABLE>

<PAGE>
<TABLE>
<CAPTION>


------------------------- ------------------------------- ----------------------------------------------------------------
                                                          January 15, 2008. In addition,  we issued, to that investor,  a
                                                          two-year  warrant  for the  purchase  of 200,000  shares of our
                                                          common  stock  at an  exercise  price of $0.35  per  share.  We
                                                          recognized   a  discount  on  this   Convertible   Subordinated
                                                          Promissory  Note of  $47,379  related  to the fair value of the
                                                          warrants  issued in connection  with the note. On May 15, 2007,
                                                          the  accrued  interest of $32,649 was  converted  into  130,718
                                                          shares of the  Company's  common  stock at a per share price of
                                                          $0.25.   According,   the  Company   recognized   a  beneficial
                                                          conversion   feature  of  $22,222.   During   fiscal  2007,  we
                                                          expensed $50,583 as interest and finance  charges,  as a result
                                                          of amortization of the note discounts.

------------------------- ------------------------------- ----------------------------------------------------------------
      <S>                            <C>                  <C>
      July 7, 2006                   $200,000             We issued to two accredited investors,  Convertible  Promissory
                                                          Notes in the  principal  amounts of $145,000 and  $55,000.  The
                                                          notes were  originally  payable at the end of 90 days following
                                                          the  date of  issue,  accrued  interest  at the rate of 10% per
                                                          annum  and  were   convertible  into  our  common  stock  at  a
                                                          conversion  price of $0.30 per  common  share.  On  October  4,
                                                          2006,  the  maturity  date of these notes were  extended  until
                                                          December  4,  2006,  at which  time  they were  converted  into
                                                          Units,  each consisting of a 2 year, 6% note  convertible  into
                                                          our common stock at a per share price of $0.30  together with a
                                                          warrant for the purchase of a number of common shares  equaling
                                                          one half the  number  of shares  into  which  each  Convertible
                                                          Promissory Note is convertible.

------------------------- ------------------------------- ----------------------------------------------------------------
      July 7, 2006                   $200,000             We issued to Mr. Silverman another Convertible  Promissory Note
                                                          in the  principal  amount  of  $200,000  convertible  into  our
                                                          common  stock at a  conversion  price of $0.30 per  share.  The
                                                          Company subsequently  recorded a beneficial  conversion feature
                                                          of $66,667 in conjunction with the private  placement issued on
                                                          December  4, 2006.  This  latter note was payable at the end of
                                                          90 days  following the date of issue,  accrues  interest at the
                                                          rate of 10% per annum and is convertible  into our common stock
                                                          at  a  conversion   price  of  $0.30  per  common  share.   Mr.
                                                          Silverman   subsequently  agreed  to  extend  this  note  until
                                                          December 15, 2007.  During fiscal 2007, we expensed  $66,667 as
                                                          interest  and  finance  charges as a result of  amortizing  the
                                                          beneficial  conversion  feature.  On  November  30,  2007,  Mr.
                                                          Silverman agreed to extend the note to January 14, 2008.

------------------------- ------------------------------- ----------------------------------------------------------------
   September 30, 2006                $175,000             We  issued  additional  convertible  promissory  notes  to  Mr.
                                                          Silverman in the aggregate  principal  amount of $175,000.  The
                                                          notes were  payable on January 31, 2007 and accrue  interest at
                                                          the rate of 10% per annum and are  convertible  into our common
                                                          stock at a  conversion  price of $0.20 per  common  share.  The
                                                          Company recognized a beneficial  conversion features related to
                                                          these notes in the amount of $70,000  which was expensed in the
                                                          first six months of fiscal  2007.  On January 31,  2007,  these
                                                          notes  were  assigned  by  Mr.   Silverman  to  two  accredited
                                                          investors and were converted into 875,000 common shares.

------------------------- ------------------------------- ----------------------------------------------------------------
   September 30, 2006                $100,000             We  entered  into a note  purchase  agreement  and  convertible
                                                          promissory  note with an  accredited  investor for financing in
                                                          the amount of  $100,000.  The note was  payable on January  31,
------------------------- ------------------------------- ----------------------------------------------------------------

                                                            17

</TABLE>

<PAGE>
<TABLE>
<CAPTION>


------------------------- ------------------------------- ----------------------------------------------------------------
                                                          2007 and  accrues  interest  at the rate of 10% per annum.  The
                                                          note is  convertible  into our  common  stock  at a  conversion
                                                          price of $0.20 per common  share.  On  January  22,  2007,  the
                                                          Company  recognized  a  beneficial  conversion  feature  in the
                                                          amount of $40,000.  This  discount was fully  amortized  during
                                                          the six months ended  February  28, 2007.  On January 31, 2007,
                                                          we  received a request to convert  $100,000  in  principal  and
                                                          $3,370  in  accrued  interest  into  516,849  shares  of common
                                                          stock.   These shares were issued in June 2007.

------------------------- ------------------------------- ----------------------------------------------------------------
      <S>                            <C>                  <C>
      October 2006                   $250,000             We  entered  into  note  purchase  agreements  for  convertible
                                                          promissory  notes with five accredited  investors for financing
                                                          in the aggregate  amount of $250,000.  These notes were payable
                                                          on March 15, 2007,  and accrue  interest at the rate of 10% per
                                                          annum  and  were   convertible  into  our  common  stock  at  a
                                                          conversion  price of $0.20 per common  share.  We  recognized a
                                                          beneficial   conversion  feature  in  the  amount  of  $193,750
                                                          relative to these  notes.  During the second  quarter of fiscal
                                                          2007,  holders of notes in the aggregate  principal of $100,000
                                                          elected to convert their notes,  with unpaid  accrued  interest
                                                          of $2,774,  into 513,869  shares of common stock.  On March 15,
                                                          2007,  investors  holding the remaining  notes in the principal
                                                          amount  of  $150,000  agreed  to  extend  the due date of their
                                                          respective  notes until  September  15, 2007.  These notes were
                                                          further extended until December 31, 2007.

------------------------- ------------------------------- ----------------------------------------------------------------
    November 2, 2006                 $200,000             We  entered  into a note  purchase  agreement  and  convertible
                                                          promissory  note with an  accredited  investor for financing in
                                                          the  amount of  $200,000.  This note was  payable  on March 15,
                                                          2007 and  accrues  interest  at the rate of 10% per annum.  The
                                                          note is  convertible  into our  common  stock  at a  conversion
                                                          price of $0.20 per common  share.  We  recognized  a beneficial
                                                          conversion  feature in the amount of $150,000  with  respect to
                                                          this  note.  On  January  31,  2007,  the  accredited  investor
                                                          elected to convert  $200,000 in principal and $4,986 in accrued
                                                          interest into 1,024,931 shares of common stock.

------------------------- ------------------------------- ----------------------------------------------------------------
     December 2006                   $480,000             We issued seven  Convertible  Promissory  Notes in an aggregate
                                                          principal  amount of  $480,000.  These  Convertible  Promissory
                                                          Notes are due  December 4, 2008,  bear  interest at the rate of
                                                          6% per annum and are  convertible  into our  common  stock at a
                                                          rate of $0.30.  The  Convertible  Promissory  Notes were issued
                                                          in  a  private   offering  of  Units,   each  consisting  of  a
                                                          Convertible  Promissory  Note and a warrant for the purchase of
                                                          one  half  the  number  of  common   shares   into  which  each
                                                          Convertible  Promissory  Note  is  convertible.   The  warrants
                                                          expire on December 4, 2008 and have an exercise  price of $0.50
                                                          per share.  We recognized a discount of $58,708  related to the
                                                          warrants  and  a  beneficial  conversion  feature  of  $269,541
                                                          related  to these  notes.  During  fiscal  2007,  $119,231  was
                                                          expensed  as  interest  and  finance  charges  as a  result  of
                                                          amortizing the discount and beneficial conversion feature.

------------------------- ------------------------------- ----------------------------------------------------------------
      January 2007                   $485,000             We issued fourteen additional  Convertible  Promissory Notes in
                                                          an aggregate  principal amount of $485,000 as a continuation of
                                                          the  private  offering  of Units that  commenced  in  December,
------------------------- ------------------------------- ----------------------------------------------------------------

                                                            18
</TABLE>

<PAGE>
<TABLE>
<CAPTION>


------------------------- ------------------------------- ----------------------------------------------------------------
                                                          2006.  We  recognized  a  discount  of  $55,446  related to the
                                                          warrants  and  a  beneficial  conversion  feature  of  $300,197
                                                          related  to these  notes.  During  fiscal  2007,  $116,325  was
                                                          expensed  as  interest  and  finance  charges  as a  result  of
                                                          amortizing the discount and beneficial conversion feature.

------------------------- ------------------------------- ----------------------------------------------------------------
     <S>                             <C>                  <C>
     February 2007                   $330,000             We issued eight additional  Convertible  Promissory Notes in an
                                                          aggregate  principal  amount of $330,000 as a  continuation  of
                                                          the private  offering of Units  described  above. We recognized
                                                          a discount of $35,487  related to the warrants and a beneficial
                                                          conversion  feature of $192,820 related to these notes.  During
                                                          fiscal  2007,  $70,058 was  expensed  as  interest  and finance
                                                          charges as a result of amortizing  the discount and  beneficial
                                                          conversion feature.
------------------------- ------------------------------- ----------------------------------------------------------------
------------------------- ------------------------------- ----------------------------------------------------------------
     May/June 2007                   $700,000             We issued nine  Convertible  Promissory  Notes in an  aggregate
                                                          principal  amount of  $700,000.  These  Convertible  Promissory
                                                          Notes are due May 7, 2008,  bear interest at the rate of 8% per
                                                          annum and are  convertible  into our common  stock at a rate of
                                                          $0.25.  We  recognized  a  beneficial   conversion  feature  of
                                                          $501,000 related to these notes.  During fiscal 2007,  $151,143
                                                          was  expensed  as interest  and finance  charges as a result of
                                                          amortizing the beneficial conversion feature.

------------------------- ------------------------------- ----------------------------------------------------------------

                                                            19
</TABLE>

<PAGE>


ITEM 6.    MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION

         The following discussion and analysis should be read in conjunction
with our Consolidated Financial Statements and notes appearing elsewhere in this
Report.

CRITICAL ACCOUNTING POLICIES

         "Management's Discussion and Analysis or Plan of Operation" ("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 carrying value
of long-lived assets. We base our estimates and judgments on historical
experience and on various other factors that are believed to be reasonable under
the circumstances. The result of these estimates and judgments form the basis
for making conclusions about the carrying value of assets and liabilities that
are not readily apparent from other sources. Actual results may differ from
these estimates under different assumptions or conditions; changes in these
estimates as a result of future events may have a material effect on the
Company's financial condition. The SEC suggests that all registrants list their
most "critical accounting policies" in MDA. A critical accounting policy is one
which is both important to the portrayal of the Company's financial condition
and results of operations and requires management's most difficult, subjective
or complex judgments, often as a result of the need to make estimates about the
effect of matters that are inherently uncertain. Management believes the
following critical accounting policies affect its more significant judgments and
estimates in the preparation of its consolidated financial statements: The
carrying value of long-lived assets, stock based compensation, deferred income
tax valuation allowances, pending or threatening litigation and the allocation
of assets acquired and liabilities assumed in acquisitions.

         Carrying value of long-lived assets. The Company periodically evaluates
whether events and circumstances have occurred that may warrant revision of the
estimated useful life of property and equipment as well as other long-lived
assets. We record property and equipment at cost with depreciation provided for
on the straight-line method over the estimated useful lives of the related
assets. Impairment loss, if any, is measured by the amount which the carrying
amount of the assets exceeds the fair value of the assets.

         Stock-based compensation. Effective September 1, 2006, we adopted the
fair value recognition provisions of SFAS 123(R), using the modified prospective
transition method. Under that transition method, employee compensation cost
recognized in fiscal 2007 includes: (i) compensation cost for all share-based
payments granted prior to, but not yet vested as of September 1, 2006, based on
the grant date fair value estimated in accordance with the original provisions
of SFAS 123 and (ii) compensation cost for all share-based payments granted
subsequent to September 1, 2006, based on the grant date fair value estimated in
accordance with the provisions of SFAS 123(R). Results for prior periods have
not been restated. Stock-based employee compensation expense is recognized as a
component of general and administrative expense in the Statement of Operations.
The fair value of options granted is estimated using the Black-Scholes option
pricing model. This model utilizes the following factors to calculate the fair
value of options granted: (i) annual dividend yield, (ii) weighted-average
expected life, (iii) risk-free interest rate and (iv) expected volatility.
Expected volatility is based primarily on historical volatility. Historical
volatility is computed using weekly average pricing observations for an
applicable historic period. We believe this method produces an estimate that is
representative of our expectations of the future volatility over the expected
term of our options.

         Deferred tax assets. In assessing the realizability of deferred tax
assets, management assesses the likelihood that deferred tax assets will be
recovered from future taxable income, and to the extent that recovery is not
likely a valuation allowance is established. We adjust the valuation allowance
in the period management determines it is more likely than not that deferred tax
assets will or will not be realized. To date, we have fully reserved for our
deferred tax assets based primarily on our history of recurring losses.

         Reserves related to pending or threatening litigation. We previously
had a dispute with Softalk, which is more fully described in the notes to our
Consolidated Financial Statements. This dispute had been dormant and
accordingly, we did not recognize a liability for this dispute in fiscal 2006 or
fiscal 2007. This matter was resolved pursuant to a Settlement Agreement and
Mutual Release dated

                                       20

<PAGE>

June 20, 2007 whereunder Softalk paid the Company $10,000 and each party
released the other from all prior contractual agreements made between the
parties and agreed to a full settlement and discharge and mutual release of all
existing and potential claims.

         Allocation of assets acquired and liabilities assumed in the
acquisition of JDA. Assets acquired and liabilities assumed were recorded at
their estimated fair values. The value allocated to the purchased in-process
research and development costs requires forward looking, income-based models, in
which we utilized the discounted positive cash flow method to project cash
flows. We estimated that cash flows from our product would commence in the
second quarter of fiscal 2011. If our project gets delayed, this could affect
the discounted future cash flow and reduce the value of the acquired in-process
research and development. Additionally, projected revenue was derived from
amounts currently being reimbursed by Medicare. Should those reimbursement
amounts change significantly, this could adversely affect how we value current
and future acquired in-process research and development costs.

                                       21

<PAGE>


GENERAL DISCUSSION

Medical Device Business

         On July 26, 2006, we entered into the medical device business, which is
now in the pre-clinical testing phase. We anticipate a total expenditure of
approximately $17,000,000 over the next three year period for the activities we
believe will be necessary to enable us to develop, obtain FDA approval for, and
market the Oncosphere product to the public. These expenditures are expected to
include approximately $4,300,000 through feasibility to pivotal approval and
$12,700,000 to commercialization. Since we anticipate no funds from operations,
we will be required to raise all necessary funds from equity investors or
lenders. The form and availability of the financing will depend on capital
markets and industry conditions at the time. There is, of course, no assurance
that funding will be available as required, or on terms acceptable to us.

Telephone Business

         As previously discussed herein we disposed of our telephone business
during the second quarter of fiscal 2007. The historical operations and
disposition of the telephone business have been reported as discontinued
operations within the accompanying financial statements for all periods
presented.

PLAN OF OPERATION

         We are developing a brachytherapy (radiation therapy) device, called
the Oncosphere, for the advanced medical treatment of soft tissue cancers, with
the first application expected to be the treatment of liver cancer. The
Oncosphere 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.

Satisfaction of our cash obligations for the next 12 months.

         Our operating losses to date have been covered by equity and debt
financing obtained from private investors, including certain present and former
members of our Board of Directors. We never achieved positive cash flow or
profitability in our telephone business because we did not generate a volume of
business sufficient to cover our overhead costs and have, as described above,
discontinued it and sold most of its assets. On July 26, 2006, we acquired the
assets of a development stage medical device company and are now in the process
of continuing product development and obtaining government approval for the use
of our medical device. This change in business line will require substantial
additional funding to support the development and approval of this new device.

         As of the date of this report, we will need approximately $4,300,000
(including the $2,700,000 we seek to raise in this Offering) to fund operations
for the next twelve months, without regard to repaying any short-term
convertible or non-convertible notes payable. That amount, if we succeed in
raising it, will allow us to complete all of the Development Phases of the
Oncosphere and conduct a human feasibility clinical trial. We will be required
to seek additional capital in the future to fund our Pivotal Clinical Trials.


Summary of any product research and development that we will perform for the
term of our plan of operation.

         Our medical device business is in the development stage. Our present
activities consist of conducting the studies and tests necessary to obtain data
in support of an application to the FDA for authorization (an "IDE") to conduct
a feasibility clinical study of the Oncosphere. To do so, we must first conduct
a number of engineering and animal clinical studies and evaluations to collect
information to support our IDE application to the FDA. This effort is now
expected to take approximately 12 months. We expect the $4,300,000 we have
agreed to commit to this effort will be sufficient to take us through our human
feasibility clinical study, but we cannot be certain that costs will not exceed
this amount.

         Based on the previous experience of Oncologix management in the
development of radiation medical devices and in obtaining FDA and radiation
regulatory approvals, we believe that we have or can readily obtain all of the
resources necessary to complete the required studies and evaluations. We have
contracts with outside contractors to perform various tasks and studies. While
the required expertise is highly specialized, it is available from a number of

                                       22

<PAGE>


sources and no difficulty is expected in identifying a number of qualified
contractors. We have secured contracts with key contractors to provide test
materials in sufficient quantities and acceptable quality levels to complete the
testing requirements. Suppliers of the materials used in the manufacture of the
radioactive microspheres have been identified and are able to provide materials
in sufficient quantities to support ongoing development activities. We
anticipate no difficulties in finding alternative sources of supply should that
become necessary or advisable.

         The work necessary to support an application to the FDA for an IDE is
generally divided into the three phases described in the following paragraphs.

         Product Design and Manufacturing Feasibility. This phase, which was
certified as completed by our officers on January 29, 2007, involved the
definition of the design and the feasibility of manufacturing the product. More
specifically: (A) a microsphere specification and design were defined that met
the user requirements as defined in the Product Requirements Document; (B) it
was demonstrated that lots can be manufactured at pilot plant scale (i.e. in
quantities large enough to support an animal study and a pivotal clinical
trial); and (C) a preliminary manufacturing plan, based on reasonable
assumptions, was completed based on data that support a commercially acceptable
cost basis for commercial quantities.

         Pre-Clinical Testing. We are now engaged in this phase, in which animal
experimentation is conducted to generate test results to verify the design
against its "product (user) requirements" and to identify the hazards of its use
in a risk analysis. This testing is required by the FDA standards and European
Standards governing the initiation of a clinical trial for medical devices and
is a necessary part of good engineering development and safety. These results
must be included in the submission to the FDA requesting IDE approval. The trial
design and final specifications are planned to be based on discussions with and
preliminary advice from the FDA.

         The animal study will be the last pre-clinical test completed before
the submission of the request for an IDE to the FDA. The purpose of the animal
study will be to: (A) confirm that radiation effects from the microspheres
result in the expected local effect in the liver, without adversely affecting
other tissues or organs; (B) document and describe any acute and chronic adverse
events; (C) document and describe the feasibility of the delivery of
microspheres to the liver without "spilling over" or "drifting" to other places
in the body where their effect would be harmful (this is evaluated by examining
each organ of an animal that has been used to test the product); and (D)
document and describe any potential liver toxicity.

         The animal study protocols defined the following specific objectives to
evaluate the general goals described above:

     1.  Evaluation of the functionality of the system components, the
         compatibility with standard interventional products and procedures,
         and the delivery of the microspheres to the liver.
     2.  Evaluation of the ability to deliver of the microspheres via
         fluoroscopy.
     3.  Evaluation of the distribution of microspheres in the liver and other
         organs via gross pathology of organs and histology of tissues, with
         specific determination of microsphere deposition patterns, cluster
         analyses, and location of implantation within the hepatic parenchyma.
     4.  Evaluation of the ability to image the microspheres post-delivery.
     5.  Evaluation of the bioavailability of free and/or bound Y-90 and In-111
         in the first 30 days (10 half lives).
     6.  Evaluation of the effects of the microspheres and radiation on the
         liver, adjacent tissues, and possible target organs (e.g.,
         gastrointestinal tract, lungs, etc.) in the first 90 days.

         The animal studies to date have provided the data required to meet the
first four objectives. The two remaining objectives will require an additional
animal study, because the rabbit model used previously proved to be an
inadequate animal model for these objectives. Studies to achieve these two
objectives are now planned to be completed with a different animal with liver
vasculature (blood vessels) that more closely reflects the human liver
vasculature than the rabbit.

         This phase will conclude with the completion of a report(s) of an
animal study that meets industry and scientific standards to support the
submission of an IDE to the FDA requesting approval for a clinical trial.

         Clinical Approval. In this phase, the IDE submission is prepared and
submitted to the FDA, and an approval to initiate a human clinical trial is
granted. The IDE can be compiled and submitted when the design verification
activities are completed in the Pre-Clinical Testing Phase. The FDA has usually
responded to IDE submissions within 30 days with an approval, conditional
approval, or disapproval. An approval or conditional approval will allow us to
begin the treatment of patients in a "pivotal clinical trial."

                                       23

<PAGE>


         We have revised our original clinical trial plan to include a
feasibility clinical trial prior to the initiation of a "pivotal clinical
trial." The feasibility clinical trial will be limited to up to ten patients at
two clinical centers to evaluate the safety of the Oncosphere product. Upon
completion of the enrollment of this limited number of patients and subsequent
follow-up, we plan to submit an IDE supplement requesting the initiation of a
Pivotal Trial to the FDA. This Phase will be completed when the FDA issues a
letter granting approval or conditional approval for a Pivotal Clinical Trial.
Management estimates that this will occur in the second half of calendar 2008.
Such a letter will constitute FDA consent to treat a group of patients on an
experimental basis and if successful in that effort, we will then be able to
request FDA approval to market the Oncosphere to all patients with specified
diseases under a PMA.

         Our other activities during that time are expected to include
participation by Dr. Andrew S. Kennedy, a member of our Board of Directors and
our Chief Science and Medical Officer, in scientific presentations and papers
informing the medical community of the benefits of micro-arterial brachytherapy
in general and in training physicians in its application. As progress is made,
we will begin to develop manufacturing and marketing plans for the Oncosphere
and will plan to obtain financing for the necessary personnel, facilities and
other requirements for the conduct of a commercial business.

Plans for Product Approval and Marketing in Europe

         In parallel with our development and testing activities to obtain FDA
approval for use and marketing of the Oncosphere in the United States, we plan
to apply for similar approval in Europe. The differences between FDA and
European requirements are summarized as follows. The European system is based on
a contracted regulatory authority. The governments of the member states of the
European Union have agreed upon common regulations (Medical Device Directives)
which were promulgated at the European level and translated into the regulations
of each separate country. The Competent Authorities (CA) are the government
bodies in control in the respective member states. Notified Bodies (NB) are
third-party companies that are audited and certified by the CA, and the NB can
act worldwide. A company wishing to place a product on the market in the Europe
Union must contract with a NB and have their quality system certified and
request approval through the CE Marking process based on a tiered, risk-based
system. Our product requires a full submission of the safety and feasibility
data to the NB before receiving a CE Mark. Since the European Union requires
only safety and feasibility data (not Safety and Effectiveness data as does the
FDA) it is possible that we may use some of our own data and some data from
medical literature reporting on similar products to support the CE Mark. In
Europe, after a CE mark is received, the product is basically tested for
effectiveness in the market by physicians in their treatment of patients.

Expected purchase or sale of plant and significant equipment.

         We do not anticipate the purchase or sale of any plant or significant
equipment, as such items are not required by us at this time, other than
laboratory equipment that is necessary to produce the product that will be used
in pre-clinical testing and the human clinical trials. We will continue to use
contracted laboratory and manufacturing facilities through the remainder of the
pre-clinical testing phase.

Significant changes in the number of employees.

         We currently employ nine full time employees, our Chief Financial
Officer, who is located at our office in Michigan, six who are employed by our
subsidiary in Georgia, including our Chief Executive Officer, Chief Operating
Officer, Director of Radiation Operations and Safety, Project Director, Director
of Regulatory Affairs and an Administrative Assistant, our Chief Scientific and
Medical Officer who is located in Cary, North Carolina, and our Chairman of the
Board, is located in Scottsdale, Arizona. We do not anticipate hiring employees
until we complete the Pre-Clinical Testing Phase and approach the commencement
of the pivotal clinical trials of our Oncosphere System.

COMPARISON OF FISCAL YEAR ENDED AUGUST 31, 2007 (fiscal 2007) TO THE FISCAL YEAR
ENDED AUGUST 31, 2006 (fiscal 2006)

General and Administrative Expense

          General and administrative expenses included in our results from
continuing operations include legal and accounting fees, license fees, travel,
payroll and related expenses, directors and officers insurance, and public
relations expenses. These expenses relate primarily to general corporate
overhead and accordingly are segregated from general and administrative expenses
that related directly to our telephone business, which are included in the

                                       24

<PAGE>


results from discontinued operations. General and administrative expenses that
are specific to our telephone business include bad debt expense, agent's
commissions, outside services, postage, web hosting expense, phone licenses,
customer support salaries, and commodity and excise taxes.

         General and administrative expense increased to approximately
$1,270,000 during fiscal 2007, from approximately $468,000, an increase of 171%
or $802,000 from the comparable period in fiscal 2006. Cash based compensation
and other related payroll expenses increased to approximately $293,000 during
fiscal 2007, from approximately $122,000 during fiscal 2006. This increase was
due to increased compensation from an increase in personnel as well as increased
total Director compensation due to an increase in the number of Directors.
Stock-based compensation expense increased to approximately $222,000 during
fiscal 2007, from nil during fiscal 2006. This increase is due to our
implementation of SFAS 123(R) during fiscal 2007 and the issuance of stock and
options for services. Travel and entertainment expense increased to
approximately $87,000 during fiscal 2007, from approximately $20,000 during
fiscal 2006. This increase was due primarily to travel associated with the
Medical Device Business, which the Company only had for one month in fiscal
2006. Legal and accounting expense increased to approximately $385,000 during
fiscal 2007, from approximately $149,000 during fiscal 2006 due primarily to
additional legal and accounting services associated with the Company's new
Medical Device Business as well as expenses associated with the funding of our
operations. Rent expense increased to approximately $50,000 during fiscal 2007,
from approximately $16,000 during fiscal 2006 as a result of adding office space
associated with our Medical Device Business. Outside services increased to
approximately $30,000 during fiscal 2007, from approximately $9,000 during
fiscal 2006 as a result of increased costs associated with SEC filings as a
result of our Medical Device Business. Investor relations expense increased to
approximately $67,000 during fiscal 2007, from approximately $5,000 during
fiscal 2006. The increase was due to the hiring of an investor relations firm
and increased press releases associated with out Medical Device Business. Other
general and administrative expenses increased to approximately $43,000 during
fiscal 2007, from approximately $11,000 during fiscal 2006 due primarily to
additional office expenses of our Medical Device Business.

Research and Development Expense

         Research and development expense decreased to approximately $4,962,000
during fiscal 2007, from $5,334,000 during fiscal 2006. Research and development
expense relates to our Medical Device Business, which was acquired during July
2006 and is in the development stage. Of the fiscal 2007 research and
development expenses referred to above, approximately $3,357,000 was recorded as
acquired in-process research and development expenses incurred upon the release
of 7,460,790 shares from escrow as a result of the completion of the
"Development Phase" of our Medical Device Business and that amount was based on
the market value of those shares at the time. Of the fiscal 2006 research and
development expenses referred to above, approximately $5,270,000 was recorded as
acquired in-process research and development expenses incurred upon the
acquisition of JDA.

         Under the terms of our acquisition of JDA, we issued 43,000,000 shares
of our common stock to the previous owners of JDA. Of these shares, 29,843,160
were placed into escrow pending the achievement of certain development and
operating goals. These escrowed shares were not included in the calculation of
the purchase price of JDA and will be included in that calculation if and to the
extent that the applicable contingencies are resolved and the shares are
released from escrow. The development and operating goals that relate to the
release of these shares, and the number of shares to be released at the time the
goal is achieved are as follows: (i) 7,460,790 shares upon the completion of the
"Development Phase," as defined in the Merger Agreement between the Company and
JDA (already released as stated above); (ii) 9,325,988 shares upon the
completion of the "Pre-Clinical Testing Phase" as defined in the merger
agreement; and (iii) 13,056,382 shares upon the completion of the "Clinical
Approval Phase."

         There are risks and uncertainties associated with completing
development on schedule, and consequences if not completed timely. We estimate
that we will have revenue and positive cash flows from the marketing of our
product in the United States beginning in the second quarter of fiscal 2011. We
expect revenue and modest positive cash flow from the European market in the
second quarter of fiscal 2009. Significant delays, could affect future funding
and market interest. We must receive Pre-Market Approval from the FDA for the
Oncosphere in order to commercialize the product in the US. There is no
assurance of approval from the FDA or European authorities. The process for FDA
approval may be longer than we project, which may materially affect the time
required to commercialize the product. The Oncosphere also requires approvals
from appropriate radiation regulatory agencies because suppliers and users of
the Oncosphere product will be required to obtain the necessary licenses to
receive, store and administer the radiation therapy. Delays in licensing or
changes in licensing regulations could affect the acceptance of the Oncosphere

                                       25

<PAGE>

in the clinical trial as well as the commercial settings. We have never been
profitable and we have had to rely on debt and equity financings to fund
operations. Significant delays in development could affect the ability to obtain
future debt and equity funding which may affect our ability to continue as a
going concern.

         We have also determined significant appraisal assumptions which may
have a material effect on future research and development expense including:

     1.  Period in which net cash inflows are expected to commence: The value
         allocated to the purchased in-process research and development costs
         requires forward-looking, income-based models, in which we utilized
         the discounted cash flow method to project cash flows. That value is
         based on our estimate that positive cash flows from our product will
         commence in the second quarter of fiscal 2011. Any significant delay
         in our product development could affect the discounted future cash
         flow and the future value of the acquired in-process research and
         development expenses.

     2.  Material anticipated changed from historical pricing, margins, and
         expense levels:

     3.  Reimbursement: Reimbursement from insurance companies and governmental
         agencies is currently available for microsphere technology. We assume
         that all CPT codes identified in this plan will be applicable at the
         time of product commercialization. Future health care reforms or
         changes in reimbursement for microsphere technology could limit market
         acceptance of the Oncosphere.

     4.  Manufacturing, Sources of Supply and Scale-Up: During the development
         and commercialization phases, various factors may affect our ability
         to manufacture our product in sufficient supplies to support market
         needs. The process used to manufacture the product may exceed cost
         projections which could materially impact gross margins. We will
         depend upon suppliers for the components that comprise the Oncosphere
         product. Inability to procure adequate quantity or quality of
         materials could materially affect our ability to supply sufficient
         quantities of product to meet market projections.

     5.  Dependence on Market Acceptance: The development of the market is
         predicated upon acceptance by medical oncologists, radiation
         oncologists, interventional radiologists and hospital administrators
         of sphere based radiotherapies as a viable alternative to the current
         therapies for liver cancer.

     6.  Update of In Process Research and Development (IPR&D): As of the date
         of this Report, there have not been any significant changes in the
         assumptions made at the time of our acquisition of JDA. We currently
         anticipate that we will have a commercially viable product in the
         United States in the first quarter of fiscal 2011. We also anticipate
         that we will have a commercially viable produce in Europe in the
         second quarter of fiscal 2009.

Depreciation and Amortization

         Depreciation and amortization increased to approximately $21,000 during
fiscal 2007, from $243 during fiscal 2006. The increase in depreciation and
amortization from fiscal 2006 to fiscal 2007 was the result of assets being
acquired for our Medical Device Business.

Interest Income

         Interest income decreased to approximately $11,000 during fiscal 2007,
from approximately $14,000, a decrease of 21% from fiscal 2006. The decrease is
the result of an interest bearing note receivable associated with the
acquisition of our Medical Device Business in fiscal 2006.


Interest and Finance Charges

         Interest and finance charges increased to approximately $1,322,000
during fiscal 2007, from approximately $53,000, an increase in excess of 100%,
from fiscal 2006. The increase is primarily attributable to interest accrued on
the issuance of convertible notes payable in connection with the Company's
financing transactions and the amortization of discounts on convertible notes
payable.

                                       26

<PAGE>
<TABLE>
<CAPTION>


         A summary of interest and finance charges is as follows:


                                                                              Period From
                                                                               Inception
                                                                             (Acquisition
                                                                               of JDA) to
                                                                               August 31,
                                                                                  2007
                                                     ----------   ----------   ----------
                                                        2007         2006         2007
                                                     ----------   ----------   ----------
<S>                                                  <C>          <C>          <C>
Interest expense on nonconvertible notes .........   $   46,125   $    3,836   $   48,230
Interest expense on convertible notes payable.....      151,110       27,409      157,568
Amortization of note payable discounts ...........    1,027,755       19,018    1,031,203
Other interest and finance charges ...............       96,951        2,978       99,951
                                                     ----------   ----------   ----------
Total interest and finance charges ...............   $1,321,941   $   53,241   $1,336,952
                                                     ==========   ==========   ==========


         We had outstanding convertible notes payable during both fiscal 2007
and fiscal 2006. A discount to those notes was recorded due to the value of
warrants and the beneficial conversion terms inherent to these convertible
notes. The amortization of these discounts was recorded as interest and finance
charge expense over the life of the notes. See Note 9 of Notes to Consolidated
Financial Statements included in Item 7 in this Report. Cash paid for interest
and finance charges increased by approximately 119% from fiscal 2006 to fiscal
2007 because of increased interest relating to short-term bridge financing which
was paid off. The overall increase in interest expense resulted from increases
in the balances of outstanding convertible notes payable.

Income Taxes

         At August 31, 2007, the Company had federal net operating loss
carryforwards totaling approximately $30,700,000 and state net operating loss
carryforwards of approximately $16,000,000. The federal net operating loss
carryforwards expire in various amounts beginning in 2004 and ending in 2027.
Due to our history of incurring losses from operations, we have provided a
valuation allowance for our net operating loss carryforward.

     Pending Accounting Pronouncements

         In February 2007, the Financial Accounting Standards Board issued
Statement of Financial Accounting Standards No. 159 ("SFAS No. 159") "The Fair
Value Option for Financial Assets and Financial Liabilities" which permits
entities to choose to measure many financial instruments and certain other items
at fair value. The objective is to improve financial reporting by providing
entities with the opportunity to mitigate volatility in reported earnings caused
by measuring related assets and liabilities differently without having to apply
complex hedge accounting provisions. An investment in a subsidiary which the
Company is required to consolidate is an eligible option established by this
Statement. SFAS No. 159 is effective as of the beginning of an entity's first
fiscal year that begins after November 15, 2007, provided that the entity also
elects to apply the provisions of SFAS No. 157. Early adoption is possible. We
do expect the adoption of SFAS No. 159 to have a material effect on our
financial condition or results of operations.

         In September 2006, the Financial Accounting Standards Board issued
Statement of Financial Accounting Standards No. 158, ("SFAS No. 158")
"Employers' Accounting for Defined Benefit Pension and Other Postretirement
Plans" which improved financial reporting by requiring an employer to recognize
the overfunded or underfunded status of a defined benefit postretirement plan as
an asset or liability in its statement of financial position and to recognize
changes in that funded status in the year in which the changes occur through
comprehensive income of a business entity or changes in unrestricted net assets
of a not-for-profit organization. SFAS No. 158 is effective for financial
statements issued for fiscal years beginning after December 15, 2006, and
interim periods within those fiscal years. Earlier adoption is encouraged. We do
not expect the adoption of SFAS No. 158 to have a material effect on our
financial condition or results of operation.

         In September 2006, the Financial Accounting Standards Board issued
Statement of Financial Accounting Standards No. 157, "Fair Value Measurements"
which defines fair value, establishes a framework for measuring fair value and
expands disclosures about fair value measurements. SFAS No. 157 is effective for
financial statements issued for fiscal years beginning after November 15, 2007,

                                       27
</TABLE>

<PAGE>


and interim periods within those fiscal years. Earlier adoption is encouraged.
We do not expect the adoption of SFAS No. 157 to have a material effect on our
financial condition or results of operation.

         In June 2006, the Financial Accounting Standards Board issued FASB
Interpretation No. 48, "Accounting for Uncertainty in Income Taxes - an
interpretation of FASB Statement No. 109," which prescribes a recognition
threshold and measurement attribute for the financial statement recognition and
measurement of a tax position taken or expected to be taken in a tax return. FIN
48 also provides guidance on de-recognition, classification, interest and
penalties, accounting in interim periods, disclosure and transition. FIN 48 is
effective for fiscal years beginning after December 15, 2006. We do not expect
the adoption of FIN 48 to have a material effect on our financial condition, and
we are currently evaluating the impact, if any, the adoption of FIN 48 will have
on our disclosure requirements.


LIQUIDITY AND CAPITAL RESOURCES

         Our operating losses to date have been covered by equity and debt
financing obtained from private investors, including certain present members of
our Board of Directors. We never achieved positive cash flow or profitability in
our telephone business because we did not generate a volume of business
sufficient to cover our overhead costs. Our Consolidated Financial Statements
contain explanatory language related to our ability to continue as a going
concern and our auditors have qualified their opinion on our Consolidated
Financial Statements for the year ended August 31, 2007, included as part of
this Report, reflecting uncertainty as to our ability to continue in business as
a going concern.

         On July 26, 2006, we acquired the assets of a development stage medical
device company and are now in the process of continuing product development and
obtaining government approval for the use of our medical device. This change in
business line will require substantial additional funding to support the
development and approval of this new device. We now estimate that we will need
approximately $17,000,000 to develop and take our medical device to
commercialization which includes expenditures of approximately $4,300,000
through the Clinical Approval Phase.

         On August 31, 2007, we had cash and cash equivalents of $141,691. The
Company is currently in the development stage and does not expect to generate
income from its planned medical device product. As a result, we have
historically relied upon the issuance of debt or equity in order to finance our
operations. Our operating losses to date have been covered by equity and debt
financing obtained from private investors, including certain present members of
our Board of Directors.

         In the second quarter of fiscal 2007, we received cash proceeds of
$60,000 from the sale of our telephone business assets. In addition, we expect
to obtain cash in the amount of approximately $70,000 through the return of
various cash deposits we have made with various vendors to our Telephone
Business, as well as receivables collected for revenue generated up to the date
of sale of the telephone business. The cash generated from this sale is expected
to be applied to our general corporate expenses. During the third quarter of
fiscal 2007, we received $30,000 of those deposits with the balance returned to
us in the fourth quarter of fiscal 2007.

         We agreed, in our Merger Agreement with JDA, to provide $4,000,000 to
fund the operations of Oncologix through the Clinical Approval Phase, which are
described in more detail in our Form 10-KSB for the year ended August 31, 2006.
This amount was scheduled to be advanced in installments as follows:

     o   $350,000 was advanced prior to the Merger, in March 2006

     o   $400,000 was advanced upon the Closing of the Merger.

     o   $1,250,000 to be advanced in five payments of $250,000 each at the end
         of each of the five successive months commencing with August 2006, and

     o   $2,000,000 to be advanced at the end of January 2007.

         The $350,000 and $400,000 advances as well as the monthly payments for
August through December (a total of $2,000,000) were made out of funds borrowed
for that purpose by the Company. As agreed with the other parties to the Merger
Agreement, we delayed the final advance of $2,000,000, with such funding to be
made in increments as needed in fiscal 2007. We have currently funded a total of
$3,700,000 towards the Oncosphere project. We now estimate additional
expenditures of approximately $4,300,000 through the Clinical Approval Phase
which includes an additional animal trial and human feasibility trial. The
feasibility trial is expected to provide data on human patients one year earlier
than data available from the pivotal clinical trial.

                                       28

<PAGE>
<TABLE>
<CAPTION>


         Our agreement to effect this financing was incorporated into the Master
License Agreement with the University of Maryland as a condition to the
University's consent to JDA's assignment of the License to us. Because the other
parties to the Agreement of Merger and Plan of Reorganization by and among
BestNet Communications Corp., Oncologix Corporation, JDA Medical Technologies,
Inc. and the Principal Shareholders and the Executive Shareholders (for a
Limited Purpose) of JDA Medical Technologies, Inc. (the "Merger Agreement")
agreed to the delay in funding and we do not believe that we are in default
under the Merger Agreement. However, it is possible that the University may
consider the delay of funding to be a breach of the terms of the Master License
Agreement, as amended. If so, and if the University should notify us that it
considers the delay to be such a breach, we would have a period of ninety days
in which to cure the breach. As of the date of this Report, no such notice has
been received by us. If we are unable to obtain the financing required by the
Merger Agreement we could potentially lose the University of Maryland License
Agreement, which would have a material adverse effect on the Company.

         In fiscal 2007, we raised approximately $3,450,000 in proceeds from the
sale of debt and equity securities and the exercise of stock options, (compared
with approximately $1,263,000 in fiscal 2006), primarily through the following
transactions:

------------------------- ------------------------------- ----------------------------------------------------------------
    Date of Issuance       Principal Amount of Note(s)                    Further Description and Remarks
------------------------- ------------------------------- ----------------------------------------------------------------
    <S>                              <C>                  <C>
   September 7, 2006                 $500,000             We issued a $200,000 60-day  promissory note to Stanley Schloz,
                                                          a member  of the  Company's  Board  of  Directors,  for  bridge
                                                          financing  in that  amount.  This note  accrued  interest  at a
                                                          rate of 10% and was due in full,  including  accrued  interest,
                                                          on November 6, 2006.  On November 6, 2006,  Mr.  Schloz  agreed
                                                          to extend this note until November 30, 2006, then  subsequently
                                                          until  December 15, 2006.  The note  principal of $200,000 plus
                                                          accrued  interest  of $5,425 was paid in full on  December  15,
                                                          2006.

------------------------- ------------------------------- ----------------------------------------------------------------
   September 7, 2006                 $50,000              We  issued  a  $50,000  60-day  promissory  note  with  Anthony
                                                          Silverman,  a member of the Company's  Board of Directors,  for
                                                          bridge  financing  in that amount.  This note accrued  interest
                                                          at a rate  of  10%  and  was  due in  full,  including  accrued
                                                          interest,  on  November  6, 2006.  On  November  6,  2006,  Mr.
                                                          Silverman  agreed to extend this note until  November 30, 2006,
                                                          then  subsequently  until  December  15,  2006.  This  note was
                                                          further  extended  until January 31, 2007.  This note principal
                                                          of $50,000 plus accrued  interest of $2,000 was paid in full on
                                                          January 31, 2007.

------------------------- ------------------------------- ----------------------------------------------------------------
   September 30, 2006                $175,000             We  issued  additional  convertible  promissory  notes  to  Mr.
                                                          Silverman in the aggregate  principal  amount of $175,000.  The
                                                          notes were  payable on January 31, 2007 and accrue  interest at
                                                          the rate of 10% per annum and are  convertible  into our common
                                                          stock at a  conversion  price of $0.20 per  common  share.  The
                                                          Company recognized a beneficial  conversion features related to
                                                          these notes in the amount of $70,000  which was expensed in the
                                                          first six months of fiscal  2007.  On January 31,  2007,  these
                                                          notes  were  assigned  by  Mr.   Silverman  to  two  accredited
                                                          investors  and  were  converted  into  875,000  common  shares.
                                                          These shares were issued in June 2007.

------------------------- ------------------------------- ----------------------------------------------------------------
   September 30, 2006                $100,000             We  entered  into a note  purchase  agreement  and  convertible
                                                          promissory  note with an  accredited  investor for financing in
                                                          the amount of  $100,000.  The note was  payable on January  31,
                                                          2007 and  accrues  interest  at the rate of 10% per annum.  The
                                                          note is  convertible  into our  common  stock  at a  conversion
------------------------- ------------------------------- ----------------------------------------------------------------

                                                            29
</TABLE>

<PAGE>
<TABLE>
<CAPTION>


------------------------- ------------------------------- ----------------------------------------------------------------
                                                          price of $0.20 per common  share.  On  January  22,  2007,  the
                                                          Company  recognized  a  beneficial  conversion  feature  in the
                                                          amount of $40,000.  This  discount was fully  amortized  during
                                                          the six months ended  February  28, 2007.  On January 31, 2007,
                                                          we  received a request to convert  $100,000  in  principal  and
                                                          $3,370  in  accrued  interest  into  516,849  shares  of common
                                                          stock.  These shares were issued in June 2007.

------------------------- ------------------------------- ----------------------------------------------------------------
      <S>                            <C>                  <C>
      October 2006                   $250,000             We  entered  into  note  purchase  agreements  for  convertible
                                                          promissory  notes with five accredited  investors for financing
                                                          in the aggregate  amount of $250,000.  These notes were payable
                                                          on March 15, 2007,  and accrue  interest at the rate of 10% per
                                                          annum  and  were   convertible  into  our  common  stock  at  a
                                                          conversion  price of $0.20 per common  share.  We  recognized a
                                                          beneficial   conversion  feature  in  the  amount  of  $193,750
                                                          relative to these  notes.  During the second  quarter of fiscal
                                                          2007,  holders of notes in the aggregate  principal of $100,000
                                                          elected to convert their notes,  with unpaid  accrued  interest
                                                          of $2,774,  into 513,869  shares of common stock.  These shares
                                                          were  issued  in  June  2007.  On  March  15,  2007,  investors
                                                          holding  the  remaining  notes  in  the  principal   amount  of
                                                          $150,000  agreed  to  extend  the due date of their  respective
                                                          notes until December 31, 2007.

------------------------- ------------------------------- ----------------------------------------------------------------
    November 2, 2006                 $200,000             We  entered  into a note  purchase  agreement  and  convertible
                                                          promissory  note with an  accredited  investor for financing in
                                                          the  amount of  $200,000.  This note was  payable  on March 15,
                                                          2007 and  accrues  interest  at the rate of 10% per annum.  The
                                                          note is  convertible  into our  common  stock  at a  conversion
                                                          price of $0.20 per common  share.  We  recognized  a beneficial
                                                          conversion  feature in the amount of $150,000  with  respect to
                                                          this  note.  On  January  31,  2007,  the  accredited  investor
                                                          elected to convert  $200,000 in principal and $4,986 in accrued
                                                          interest into  1,024,931  shares of common stock.  These shares
                                                          were issued in June 2007.

------------------------- ------------------------------- ----------------------------------------------------------------
     December 2006                   $480,000             We issued seven  Convertible  Promissory  Notes in an aggregate
                                                          principal amount of $480,000,  of which $200,000 represents the
                                                          conversion  of  previously  outstanding  notes  payable.  These
                                                          Convertible  Promissory  Notes are due  December 4, 2008,  bear
                                                          interest at the rate of 6% per annum and are  convertible  into
                                                          our  common  stock  at  a  rate  of  $0.30.   The   Convertible
                                                          Promissory  Notes were  issued in a private  offering of Units,
                                                          each consisting of a Convertible  Promissory Note and a warrant
                                                          for the  purchase of one half the number of common  shares into
                                                          which each  Convertible  Promissory  Note is  convertible.  The
                                                          warrants  expire on December 4, 2008 and have an exercise price
                                                          of $0.50  per  share.  We  recognized  a  discount  of  $58,708
                                                          related to the warrants and a beneficial  conversion feature of
                                                          $269,541  related to these notes.  During fiscal 2007,  $77,518
                                                          was  expensed  as interest  and finance  charges as a result of
                                                          amortizing the discount and beneficial conversion feature.

------------------------- ------------------------------- ----------------------------------------------------------------
   December 15, 2006                 $200,000             We entered into a 16-day  promissory  note with Mr.  Silverman,
                                                          for  bridge  financing  in the  amount of  $200,000.  This note
                                                          accrued  interest  at a rate  of 10% per  annum  and was due in
                                                          full,  including  accrued  interest,  on December 31, 2006.  On

------------------------- ------------------------------- ----------------------------------------------------------------

                                                            30
</TABLE>

<PAGE>
<TABLE>
<CAPTION>


------------------------- ------------------------------- ----------------------------------------------------------------
                                                          December 29,  2006,  Mr.  Silverman  agreed to extend this note
                                                          until  January  31,  2007  and  then  further   extended  until
                                                          December  15,  2007.  In  connection  with a $25,000  principal
                                                          payment on November 30, 2007,  Mr.  Silverman  agreed to extend
                                                          the balance of the note to January 14, 2008.

------------------------- ------------------------------- ----------------------------------------------------------------
  <S>                                <C>                 <C>
   December 29, 2006                 $50,000              We entered into a one-month  promissory note with Mr. Silverman
                                                          for  bridge  financing  in the  amount  of  $50,000.  This note
                                                          accrued  interest  at a rate  of 10% per  annum  and was due in
                                                          full,  including  accrued  interest,  on January 31, 2007. This
                                                          note  principal of $50,000  plus  accrued  interest of $452 was
                                                          paid in full on January 31, 2007.

------------------------- ------------------------------- ----------------------------------------------------------------
      January 2007                   $485,000             We issued fourteen additional  Convertible  Promissory Notes in
                                                          an aggregate  principal amount of $485,000 as a continuation of
                                                          the  private  offering  of Units that  commenced  in  December,
                                                          2006.  We  recognized  a  discount  of  $55,446  related to the
                                                          warrants  and  a  beneficial  conversion  feature  of  $300,197
                                                          related  to  these  notes.  During  fiscal  2007,  $68,565  was
                                                          expensed  as  interest  and  finance  charges  as a  result  of
                                                          amortizing the discount and beneficial conversion feature.

------------------------- ------------------------------- ----------------------------------------------------------------
     February 2007                   $330,000             We issued eight additional  Convertible  Promissory Notes in an
                                                          aggregate  principal  amount of $330,000 as a  continuation  of
                                                          the private  offering of Units  described  above. We recognized
                                                          a discount of $35,487  related to the warrants and a beneficial
                                                          conversion  feature of $192,820 related to these notes.  During
                                                          fiscal  2007,  $38,477 was  expensed  as  interest  and finance
                                                          charges as a result of amortizing  the discount and  beneficial
                                                          conversion feature.

------------------------- ------------------------------- ----------------------------------------------------------------
     April 13, 2007                  $400,000             We entered  into a 45-day  promissory  note with Mr.  Silverman
                                                          for  bridge  financing  in the  amount of  $400,000.  This note
                                                          accrued  interest  at a rate  of 8% per  annum  and  was due in
                                                          full,  including  accrued  interest on May 28, 2007.  This note
                                                          has  been  extended  until  July  31,  2007  and  then  further
                                                          extended  until  December 15, 2007.  On November 30, 2007,  Mr.
                                                          Silverman agreed to extend the note to January 14, 2008.

------------------------- ------------------------------- ----------------------------------------------------------------
        May 2007                     $600,000             We issued eight  Convertible  Promissory  Notes in an aggregate
                                                          principal  amount of  $600,000.  These  Convertible  Promissory
                                                          Notes are due May 7, 2008,  bear interest at the rate of 8% per
                                                          annum and are  convertible  into our common  stock at a rate of
                                                          $0.25.  We  recognized  a  beneficial   conversion  feature  of
                                                          $437,000 related to these notes.  During fiscal 2007,  $135,047
                                                          was  expensed  as interest  and finance  charges as a result of
                                                          amortizing the beneficial conversion feature.

------------------------- ------------------------------- ----------------------------------------------------------------

                                                            31
</TABLE>

<PAGE>
<TABLE>
<CAPTION>


------------------------- ------------------------------- ----------------------------------------------------------------
       <S>                           <C>                  <C>
       June 2007                     $100,000             We  issued  a  Convertible  Promissory  Notes  in an  aggregate
                                                          principal  amount of  $100,000.  These  Convertible  Promissory
                                                          Notes are due May 7, 2008,  bear interest at the rate of 8% per
                                                          annum and are  convertible  into our common  stock at a rate of
                                                          $0.25.  We  recognized  a  beneficial   conversion  feature  of
                                                          $64,000  related to this note.  During the first nine months of
                                                          fiscal  2007,  $16,096 was  expensed  as  interest  and finance
                                                          charges as a result of  amortizing  the  beneficial  conversion
                                                          feature.

------------------------- ------------------------------- ----------------------------------------------------------------


         During fiscal 2007, 52,000 employee stock options were exercised.
45,000 of these options were exercised at an exercise price of $0.165 per share
and 7,000 were exercised at an exercise price of $0.23 per share. The exercise
of these options resulted in proceeds to the Company of approximately $9,000.

         Additionally, subsequent to fiscal 2007, we raised additional borrowed
funds by issuing convertible promissory notes as follows:


           Date                Amount                                 Transaction and Remarks
     September 7, 2007        $150,000         Issued to Stanley L. Schloz,  a Director.  Originally  due on December
                                          15, 2007,  $100,000 of the  principal  has been repaid and the payment date
                                          for the remaining  $50,000 of principal and accrued interest is now January
                                          14, 2008. The unpaid  principal is convertible to common stock at $0.20 per
                                          share.
      September 2007          $160,000         Notes in this aggregate  principal amount,  bearing interest at 6% per
                                          annum,  due two years after the issue date,  convertible to common stock at
                                          $0.30  per  share,  issued to four  accredited  investors.  The Notes  were
                                          issued in Units which also  consisted  of a warrant for the purchase of the
                                          same number of shares  issuable upon  conversion of the  respective  notes,
                                          exercisable at $0.50 per share.

       October 2007           $380,000         Notes in this  aggregate  principal  amount,  with  the same  terms as
                                          described  above for the  Notes  issued in  September  2007 were  issued to
                                          twelve accredited investors.

       November 2007          $550,000         Notes in this  aggregate  principal  amount,  with  the same  terms as
                                          described  above for the  Notes  issued in  September  2007 were  issued to
                                          seventeen accredited investors.

         As of the date of this report, we will need approximately $4,300,000 to
fund operations for the next twelve (12) months, without regard to repaying any
short-term convertible or non-convertible notes payable. This funding will allow
us to complete the Development Phases of our Oncosphere System and take us
through a human feasibility clinical trial as well as fund corporate overhead
during that same time period. We will be required to seek additional capital in
the future to fund our Pivotal Clinical Trials through additional equity or debt
financing. The financing could have a negative impact on our financial condition
and our shareholders.

         We estimated that we will have cash flows from our product beginning in
the first quarter of fiscal 2011. Significant delays, could affect future
funding and market interest. The company must receive Pre-Market Approval from
the FDA for the Oncosphere product in order to commercialize the product. There
can be no guarantee of approval from the FDA. Alternatively, the process for FDA
approval may be longer than projected in this plan which may materially affect
the time required to commercialize the product. The Oncosphere product is also
dependent upon radiation regulatory agencies. Potential suppliers and users of
the Oncosphere product will be required to obtain the necessary licenses to
receive, store and administer the radiation therapy. Delays in licensing or
changes in licensing regulations could affect the acceptance of the Oncosphere
product in the clinical trial as well as the commercial settings. Our Company
has never been profitable and we have had to rely on debt and equity financings
to fund operations. Significant delays in development could affect the ability
to obtain future debt and equity funding which may affect or ability to continue
as a going concern.

                                       32
</TABLE>

<PAGE>
<TABLE>
<CAPTION>


         Short Term Indebtedness. the following table summarizes our required
minimum cash payments for the next 12 months, as of August 31, 2007, including
our short-term notes payable, short-term convertible notes payable and their
respective due dates To the extent the convertible notes are not converted,
funds for repayment will have to be raised through additional debt or equity
financings.


         Below is a summary listing for the next 12 months, as of August 31,
2007, of our required minimum cash payments including our short-term notes
payable, short-term convertible notes payable and their respective due dates To
the extent the convertible notes are not converted, funds for repayment will
have to be raised through additional debt or equity financings.



                                                             Accrued
          Due Date   Interest Rate           Amount         Interest**       Total Owed     Convertible/Non-Convertible
          --------   -------------           ------         ----------       ----------     ---------------------------
         <S>            <C>                     <C>          <C>                 <C>      <C>
         12/4/2007      6.00%                   $ -          $ 69,961            69,961   Annual interest payment, 6% notes
                                                                                             issued Dec 2006 to Feb. 2007
        12/31/2007      10.00%              150,000            17,726           167,726   Convertible at $0.20 per share
       01/14/2008*      10.00%              200,000            30,466           230,466   Convertible at $0.30 per share
       01/14/2008*      10.00%              200,000            21,334           221,334   Non-Convertible
       01/14/2008*      10.00%               80,450              --              80,450   Convertible at $0.12 per share
                                                                                             interest paid monthly
       01/14/2008*      8.00%               400,000            20,252           420,252   Non-Convertible
         1/15/2008      8.00%               350,000            18,948           368,948   Convertible at $0.20 per share
          5/7/2008      8.00%               700,000            54,855           754,855   Convertible at $0.25 per share
                                    ----------------  ----------------  ----------------

                                        $ 2,080,450         $ 233,542       $ 2,313,992
                                    ================  ================  ================

*    Debt held by Anthony Silverman, a former member of our Board of Directors

**   Interest calculated to maturity


         INFLATION AND OTHER FACTORS

         The Company's operations are influenced by general economic trends and
technology advances in the medical industries.

         Our activities in the development, manufacture and sale of cancer
therapy products are, and will be subject to extensive laws, regulations,
regulatory approvals and guidelines. Within the United States, therapeutic
radiological devices must comply with the U.S. Federal Food, Drug and Cosmetic
Act, which is enforced by the FDA. We are also required to adhere to applicable
FDA regulations for Good Manufacturing Practices, including extensive record
keeping and periodic inspections of manufacturing facilities. Medical devices
such as the Oncosphere cannot be used or sold unless they are approved for
specified purposes by the FDA. There are two levels of FDA approval. The first
is the granting of approval to evaluate use of the device in human subjects
(through an IDE); the second is obtaining approval to market the device to the
public for the treatment of specified diseases (PMA).

         Our business involves the importing, exporting, design, manufacture,
distribution, use and storage of beta and gamma emitting radioisotopes. These
activities in the United States are subject to federal, state and local rules
relating to radioactive material promulgated by the Nuclear Regulatory
Commission ("NRC"), and states that have subscribed to certain standards and
local authorities, known as "Agreement States" In addition, we must comply with
NRC, state and U.S. Department of Transportation requirements for labeling and
packaging shipments of radiation sources to hospitals or others users of our
devices. In order to market our devices commercially, we will be required to
obtain a sealed source device registration from Agreement States and/or the NRC,
depending on the states in which the device will be distributed.

                                       33
</TABLE>

<PAGE>


         Additionally, hospitals in the United States are required to have
radiation licenses to hold, handle and use radiation. Many hospitals and/or
physicians in the United States will be required to amend their radiation
licenses to include our isotopes before receiving and using them. Depending on
the state in which the hospital is located, the license amendment will be
processed by the responsible subscribing state department or agency or by the
NRC.

         Obtaining such registration, approvals, and licenses can be complicated
and time consuming and there is no assurance that any of them can be obtained.


CODE OF ETHICS

         The company has adopted and attached an exhibit of this Report its Code
of Ethics consistent with disclosure required (2) by section 406 of the
Sarbanes-Oxley Act of 2002.

                                       34

<PAGE>


ITEM 7.  FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.

                              Oncologix Tech, Inc.
                        Consolidated Financial Statements
                           Year Ended August 31, 2007

                                    Contents

Report of Semple, Marchal & Cooper, LLP, Independent Registered
Public Accounting Firm                                                  F-1

Audited Financial Statements

     Consolidated Balance Sheet                                         F-2
     Consolidated Statements of Operations                              F-3
     Consolidated Statements of Changes in Stockholders' Equity
       (Deficit)                                                        F-4
     Consolidated Statements of Cash Flows                              F-5
     Notes to Consolidated Financial Statements                         F-6

                                       35

<PAGE>


             REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To The Stockholders and Board of Directors of
Oncologix Tech, Inc. (A Development Stage Company)
Suwanee, Georgia

         We have audited the accompanying consolidated balance sheet of
Oncologix Tech, Inc. (A Development Stage Company) (the "Company") as of August
31, 2007 and the related consolidated statements of operations, changes in
stockholders' equity (deficit) and cash flows for the years ended August 31,
2007 and 2006 and for the period from inception (Acquisition of JDA on July 26,
2006) to August 31, 2007. These financial statements are the responsibility of
the Company's management. 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
controls over financial reporting. Our audits include 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.

         In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the financial position of Oncologix
Tech, Inc. as of August 31, 2007, and the results of its operations and its cash
flows for the years ended August 31, 2007 and 2006 and for the period from
inception (acquisition of JDA on July 26, 2006) to August 31, 2007, in
conformity with accounting principles generally accepted in the United States of
America.

         The accompanying consolidated financial statements have been prepared
assuming that the Company will continue as a going concern. As discussed in Note
17 to the consolidated financial statements, the Company has suffered recurring
losses from operations and has a working capital deficit as of August 31, 2007.
These matters raise substantial doubt about the Company's ability to continue as
a going concern. Management's plans in regard to these matters are also
described in Note 17. The consolidated financial statements do not include any
adjustments that might result from the outcome of this uncertainty.


/s/  SEMPLE, MARCHAL & COOPER, LLP
---------------------------------------
     SEMPLE, MARCHAL & COOPER, LLP



Phoenix, Arizona

December 12, 2007

                                      F-1

<PAGE>
<TABLE>
<CAPTION>


                                ONCOLOGIX TECH, INC. AND SUBSIDIARIES
                                    (A DEVELOPMENT STAGE COMPANY)
                                     CONSOLIDATED BALANCE SHEET
                                           AUGUST 31, 2007



                                               ASSETS


Current Assets:
     <S>                                                                               <C>
     Cash and cash equivalents .....................................................   $    141,691
     Prepaid expenses and other current assets .....................................        115,101
     Prepaid commissions ...........................................................        117,346
                                                                                       ------------

          Total current assets .....................................................        374,138

Property and equipment (net of accumulated depreciation
     of $40,849) ...................................................................        203,322
Deposits and other assets ..........................................................         25,619
Investment in joint venture ........................................................         10,000
                                                                                       ------------

               Total assets ........................................................   $    613,079
                                                                                       ============

                                LIABILITIES AND STOCKHOLDERS' DEFICIT

Current liabilities:
     Convertible notes payable (net of discount of $349,857) .......................   $    850,143
     Convertible notes payable  related parties ....................................        280,450
     Notes payable  related parties ................................................        600,000
     Accounts payable and other accrued expenses ...................................         86,339
     Accrued interest payable ......................................................        132,921
                                                                                       ------------

          Total current liabilities ................................................      1,949,853

Convertible notes payable (net of discount of $606,585) ............................        688,415
                                                                                       ------------

               Total liabilities ...................................................      2,638,268
                                                                                       ------------

Stockholders' Deficit:
     Preferred stock, par value $.001 per share; 10,000,000 shares authorized
          443,162 shares issued and outstanding at August 31, 2007 .................            443
     Common stock, par value $.001 per share; 200,000,000 shares authorized;
          93,357,986 shares issued at August 31, 2007; 70,975,616 shares outstanding
          at August 31, 2007 .......................................................         70,976
     Additional paid-in capital ....................................................     47,805,282
     Accumulated deficit prior to the acquisition of JDA ...........................    (36,650,424)
     Accumulated deficit during the development stage ..............................    (13,258,133)
     Common stock subscribed, underlying common shares of 22,689 ...................          6,667
                                                                                       ------------

               Total stockholders' deficit .........................................     (2,025,189)
                                                                                       ------------

               Total liabilities and stockholders' deficit .........................   $    613,079
                                                                                       ============


                    See accompanying notes to consolidated financial statements.

                                                F-2
</TABLE>

<PAGE>
<TABLE>
<CAPTION>


                            ONCOLOGIX TECH, INC. AND SUBSIDIARIES
                                (A DEVELOPMENT STAGE COMPANY)
                            CONSOLIDATED STATEMENTS OF OPERATIONS



                                                                                 Period From
                                                                                  Inception
                                                                                (Acquisition
                                                    Year Ended August 31,        of JDA) to
                                                ----------------------------     August 31,
                                                    2007            2006            2007
                                                ------------    ------------    ------------

Operating expenses:
  <S>                                           <C>             <C>             <C>
  General and administrative ................   $  1,269,802    $    468,249    $  1,453,169
  Research and development ..................      4,961,531       5,334,202      10,295,733
  Depreciation and amortization .............         20,914             243          21,157
                                                ------------    ------------    ------------
  Total operating expenses ..................      6,252,247       5,802,694      11,770,059
                                                ------------    ------------    ------------
  Loss from operations ......................     (6,252,247)     (5,802,694)    (11,770,059)
                                                ------------    ------------    ------------
Other income (expense):
  Interest income ...........................         10,824          13,700          10,909
  Interest and finance charges ..............     (1,321,941)        (53,241)     (1,336,952)
  Other income (expense) ....................         10,409            (150)         10,409
                                                ------------    ------------    ------------
  Total other income (expense) ..............     (1,300,708)        (39,691)     (1,315,634)
                                                ------------    ------------    ------------
  Net loss from continuing operations .......     (7,552,955)     (5,842,385)    (13,085,693)
                                                ------------    ------------    ------------

Discontinued operations:
  Operating loss from discontinued operations        (93,178)       (243,680)       (172,361)
  Loss on disposal of discontinued operations            (79)           --               (79)
                                                ------------    ------------    ------------

  Net loss from discontinued operations .....        (93,257)       (243,680)       (172,440)
                                                ------------    ------------    ------------
Net loss ....................................   $ (7,646,212)   $ (6,086,065)   $(13,258,133)
                                                ============    ============    ============

Loss per common share, basic and diluted:
      Continuing operations .................   $      (0.12)   $      (0.12)   $      (0.20)
      Discontinued operations ...............          (0.00)          (0.01)          (0.00)
                                                ------------    ------------    ------------
                                                $      (0.12)   $      (0.13)   $      (0.20)
                                                ============    ============    ============
 Weighted average number of shares
  outstanding  basic and diluted ............     66,454,700      47,690,475      65,898,399
                                                ============    ============    ============


                See accompanying notes to consolidated financial statements.

                                             F-3
</TABLE>

<PAGE>
<TABLE>
<CAPTION>


                                          ONCOLOGIX TECH, INC. AND SUBSIDIARIES
                                              (A DEVELOPMENT STAGE COMPANY)
                          CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY (DEFICIT)



                                                   Preferred Stock                Common Stock              Additional
                                             ---------------------------   ----------------------------       Paid-in
                                                Shares         Amount         Shares          Amount          Capital
                                             ------------   ------------   ------------    ------------    ------------

<S>                                               <C>       <C>              <C>           <C>             <C>
Balance, August 31, 2005 .................        443,162   $        443     47,019,654    $     47,020    $ 37,300,605

Retirement of treasury stock .............           --             --       (1,900,000)         (1,900)       (910,100)
Beneficial conversion feature and warrants
    issued - convertible notes payable ...           --             --             --              --            47,379
Stock optioons and warrants
    exercised ............................           --             --        1,978,299           1,979         510,669
Stock-based compensation .................           --             --             --              --            43,673
Net loss .................................           --             --             --              --              --
                                             ------------   ------------   ------------    ------------    ------------
Balance, Acquisition of JDA, July 26, 2006        443,162            443     47,097,953          47,099      36,992,226

Common stock issued in
   acquisition of JDA ....................           --             --       13,156,840          13,156       4,591,737
Stock options exercised ..................           --             --            5,000               5             820
Stock based compensation .................           --             --             --              --            15,031
Net loss .................................           --             --             --              --              --
                                             ------------   ------------   ------------    ------------    ------------
Balance, August 31, 2006 .................        443,162            443     60,259,793          60,260      41,599,814

Stock options exercised ..................           --             --           52,000              52           9,073
Stock based compensation .................           --             --          272,384             272         307,464
Issuance of escrow shares - JDA ..........           --             --        7,460,790           7,461       3,349,895
Issuance of stock for services ...........           --             --             --              --              --
Conversion of notes payable ..............           --             --        2,930,649           2,931         583,199
Beneficial conversion feature and warrants
   issued - convertible notes payable ....           --             --             --              --         1,955,837
Net loss .................................           --             --             --              --              --
                                             ------------   ------------   ------------    ------------    ------------
Balance, August 31, 2007 .................        443,162   $        443     70,975,616    $     70,976    $ 47,805,282
                                             ============   ============   ============    ============    ============


                              See accompanying notes to consolidated financial statements.

                                                          F-4
</TABLE>

<PAGE>
<TABLE>
<CAPTION>


                                          ONCOLOGIX TECH, INC. AND SUBSIDIARIES
                                              (A DEVELOPMENT STAGE COMPANY)
                          CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY (DEFICIT)
                                                        (Continued)



                                                                     Treasury Stock             Common
                                              Accumulated    ----------------------------       Stock
                                                Deficit         Shares          Amount        Subscribed       Total
                                             ------------    ------------    ------------    ------------   ------------

<S>                                           <C>               <C>          <C>             <C>            <C>
Balance, August 31, 2005 .................    (36,176,280)      1,900,000    $   (912,000)   $       --     $    259,788

Retirement of treasury stock .............           --        (1,900,000)        912,000            --             --
Beneficial conversion feature and warrants
    issued - convertible notes payable ...           --              --              --              --           47,379
Stock optioons and warrants
    exercised ............................           --              --              --              --          512,648
Stock-based compensation .................           --              --              --              --           43,673
Net loss .................................       (474,144)           --              --              --         (474,144)
                                             ------------    ------------    ------------    ------------   ------------
Balance, Acquisition of JDA, July 26, 2006    (36,650,424)           --              --              --          389,344

Common stock issued in
   acquisition of JDA ....................           --              --              --              --        4,604,893
Stock options exercised ..................           --              --              --              --              825
Stock based compensation .................           --              --              --              --           15,031
Net loss .................................     (5,611,921)           --              --              --       (5,611,921)
                                             ------------    ------------    ------------    ------------   ------------
Balance, August 31, 2006 .................    (42,262,345)           --              --              --         (601,828)

Stock options exercised ..................           --              --              --              --            9,125
Stock based compensation .................           --              --              --              --          307,736
Issuance of escrow shares - JDA ..........           --              --              --              --        3,357,356
Issuance of stock for services ...........           --              --              --             6,667          6,667
Conversion of notes payable ..............           --              --              --              --          586,130
Beneficial conversion feature and warrants
   issued - convertible notes payable ....           --              --              --              --        1,955,837
Net loss .................................     (7,646,212)           --              --              --       (7,646,212)
                                             ------------    ------------    ------------    ------------   ------------
Balance, August 31, 2007 .................    (49,908,557)           --      $       --      $      6,667   $ (2,025,189)
                                             ============    ============    ============    ============   ============

                                 See accompanying notes to consolidated financial statements.

                                                          F-4(Con't)
</TABLE>

<PAGE>
<TABLE>
<CAPTION>


                                           ONCOLOGIX TECH, INC. AND SUBSIDIARIES
                                               (A DEVELOPMENT STAGE COMPANY)
                                           CONSOLIDATED STATEMENTS OF CASH FLOWS



                                                                                                           Period From
                                                                                                             Inception
                                                                                                           (Acquisition
                                                                                Year Ended August 31,       of JDA) to
                                                                            ----------------------------     August 31,
                                                                                2007            2006            2007
                                                                            ------------    ------------    ------------
Operating activities:
    <S>                                                                     <C>             <C>             <C>
    Net loss ............................................................   $ (7,646,212)   $ (6,086,065)   $(13,258,133)
        Net loss from discontinued operations ...........................         93,257         243,680         172,440
                                                                            ------------    ------------    ------------
        Net loss from continuing operations .............................     (7,552,955)     (5,842,385)    (13,085,693)

    Adjustments to reconcile net loss to net cash used
      in operating activities:
        Depreciation and amortization ...................................         20,914             243          21,157
        Gain on disposal of property and equipment.......................           (128)           --              (128)
        Stock based compensation expense ................................        307,736          58,704         322,767
        Acquired inprocess research and development expense .............      3,357,356       5,266,145       8,623,501
        Amortization of discount on notes payable .......................      1,027,755          19,018       1,031,202
        Issuance of stock for services ..................................          6,667            --             6,667
            Prepaid expenses and other current assets ...................        (83,933)         44,837          76,538
            Prepaid commissions .........................................       (117,346)       (117,346)
            Deposits and other assets ...................................        (21,006)         (4,613)        (25,619)
            Accounts payable and accrued expenses .......................       (160,863)         44,659        (174,873)
            Accrued interest payable ....................................         98,632          (1,817)         83,226
                                                                            ------------    ------------    ------------
    Net operating cash flows  continuing operations .....................     (3,117,171)       (415,209)     (3,238,601)

    Net operating cash flows  discontinued operations ...................         36,642        (140,579)          1,504
                                                                            ------------    ------------    ------------
    Net cash used in operating activities ...............................     (3,080,529)       (555,788)     (3,237,097)
                                                                            ------------    ------------    ------------

Investing activities:
    Collection of notes receivable  related parties .....................         16,564            --            16,564
    Purchase of property and equipment ..................................       (198,919)         (5,057)       (218,270)
    Disposal of property and equipment ..................................          1,084            --             1,084
    Acquisition of JDA, net of cash acquired ............................           --          (290,730)       (290,730)
                                                                            ------------    ------------    ------------
    Net investing cash flows  continuing operations .....................       (181,271)       (295,787)       (491,352)

    Net investing cash flows  discontinued operations ...................         60,000         (35,556)         60,000
                                                                            ------------    ------------    ------------
    Net cash used in investing activities ...............................       (121,271)       (331,343)       (431,352)
                                                                            ------------    ------------    ------------

Financing activities:
     Proceeds from exercise of stock options and warrants ...............          9,125         513,473           9,950
     Proceeds from issuance of convertible notes payable ................      2,345,000         550,000       2,545,000
     Proceeds from issuance of convertible notes
        payable  related parties ........................................        175,000         200,000         375,000
     Proceeds from issuance of notes payable  related parties ...........        900,000       1,250,000
     Repayment of notes payable .........................................       (151,128)        (94,778)       (201,128)
     Repayment of notes payable  related parties ........................       (300,000)           --          (300,000)
     Principal payments on capital lease obligations ....................           --            (2,721)           --
                                                                            ------------    ------------    ------------

Net cash provided by financing activities - continuing operation ........      2,977,997       1,165,974       3,678,822
                                                                            ------------    ------------    ------------

Net increase (decrease) in cash and cash equivalents ....................       (223,803)        278,843          10,373


Cash and cash equivalents, beginning of period ..........................        365,494          86,651         131,318
                                                                            ------------    ------------    ------------

Cash and cash equivalents, end of period ................................   $    141,691    $    365,494    $    141,691
                                                                            ============    ============    ============


                               See accompanying notes to consolidated financial statements.

                                                             F-5
</TABLE>

<PAGE>


                      ONCOLOGIX TECH, INC. AND SUBSIDIARIES
                          (A DEVELOPMENT STAGE COMPANY)
                CONSOLIDATED STATEMENTS OF CASH FLOWS (CONTINUED)


Supplemental disclosure of cash flow information (continued):



                                                                    Period
                                                                     From
                                                                   Inception
                                     Year Ended August 31,       (Acquisition
                                     ---------------------        of JDA) to
                                     2007         2006          August 31, 2007
                                     ----         ----          ---------------

Cash paid during the year for:

Interest                           $ 27,946     $ 12,783          $ 28,629
Income Taxes                       $   --       $   --            $   --


          See accompanying notes to consolidated financial statements.

                                      F-6

<PAGE>



NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

1. ORGANIZATION AND BASIS OF PRESENTATION

         The consolidated financial statements of Oncologix Tech, Inc. (formerly
BestNet Communications Corp., a Nevada corporation, and also formerly Wavetech
International, Inc.) include the accounts of Oncologix Tech, Inc. and its wholly
owned subsidiaries, Oncologix Corporation, Interpretel, Inc., Interpretel Canada
Inc., and Telplex International Communications, Inc. (collectively the
"Company," "Oncologix," "we," "us" or "our"). On January 22, 2007, we changed
our name from BestNet Communications Corp. to Oncologix Tech, Inc. On July 26,
2006, we launched a medical device segment through the acquisition of JDA
Medical Technologies, Inc. ("JDA"), a development stage medical device company.
Since the acquisition of JDA, our principal activities have been primarily
limited to research and development activities to continue product development
in efforts to obtain government approval for the use of the medical device, and
to seek sources of financing for these research and development activities. We
had operated an internet based telephone business (the "Telephone Business")
from our inception until it was disposed of during February 2007. The Telephone
Business is accordingly presented as discontinued operations. Because of the
disposition of our Telephone Business, we are now characterized as a development
stage company and accordingly, the accompanying consolidated financial
statements provide financial information from the date we acquired JDA (July 26,
2006). The Company's fiscal year ends on August 31. All significant intercompany
accounts and transactions have been eliminated in consolidation. The Company has
recorded net operating losses in each of the previous fifteen years.

         The preparation of the Company's financial statements in conformity
with accounting principles generally accepted in the United States of America
requires the Company's management to make estimates and assumptions that affect
the amounts reported in these financial statements and accompanying notes.
Actual results could differ from those estimates. The Company makes significant
assumptions concerning the amount of the accounts receivable reserve, reserves
related to deferred tax assets and the allocation of assets acquired and
liabilities assumed in the acquisition of JDA. Due to the uncertainties inherent
in the estimation process and the significance of these items, it is at least
reasonably possible that the estimates in connection with these items could be
further materially revised within the next year.

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

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.

RESEARCH AND DEVELOPMENT

         Research and Development expenses, consulting fees, expenses associated
with regulatory filings and internally allocated expenses are charged to expense
as they are incurred.

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 7 years
Computer equipment                              5 years
Equipment                                       5 to 7 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.

                                      F-7

<PAGE>


         The Company accounts for its capitalized internal use software in
accordance with Statement of Position ("SOP") 98-1, Accounting for Costs of
Computer Software Developed or Obtained for Internal Use. Accordingly,
capitalized internal use software represents software costs incurred in the
application development stage.


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.

INCOME TAXES

         Income taxes are determined using the asset and liability method. This
method gives consideration to the future tax consequences associated with
temporary differences between the carrying amounts of assets and liabilities for
financial statement purposes and the amounts used for income tax purposes.

FAIR VALUE OF FINANCIAL INSTRUMENTS

         The estimated fair values for financial instruments are determined at
discrete points in time based on relevant market information. These estimates
involve uncertainties and cannot be determined with precision. The carrying
amounts of accounts payable, accrued expenses, and notes payable approximate
fair value.

CONSOLIDATION POLICIES

         The consolidated financial statements for the years ended August 31,
2007 and 2006 include the accounts of Oncologix Tech, Inc. and its wholly owned
subsidiaries, Oncologix Corporation, Interpretel (Canada) Inc. and Interpretel
Inc., collectively the Company. Oncologix Corporation is a Nevada corporation.
Interpretel Inc. is an Arizona corporation. Interpretel (Canada) Inc. is a
Canadian corporation. All significant intercompany accounts and transactions
have been eliminated in consolidation.

STOCK-BASED COMPENSATION

         Prior to September 1, 2006, we accounted for our stock-based
compensation plans under the recognition and measurement provisions of
Accounting Principles Board Opinion ("APB 25") No. 25 "Accounting for Stock
Issued to Employees," and related interpretations, as permitted by FASB
Statement No. 123, Accounting for Stock-Based Compensation ("SFAS 123").
Effective September 1, 2006, we adopted the fair value recognition provisions of
SFAS 123(R), using the modified prospective transition method. Under that
transition method, employee compensation cost recognized for fiscal 2007
includes: (i) compensation cost for all share-based payments granted prior to,
but net yet vested as of September 1, 2006, based on the grant date fair value
estimated in accordance with the original provisions of SFAS 123 and (ii)
compensation cost for all share-based payments granted subsequent to September
1, 2006, based on the grant date fair value estimated in accordance with the

                                      F-8

<PAGE>
<TABLE>
<CAPTION>


provisions of SFAS 123(R). Results for prior periods have not been restated.
Stock-based compensation expense is recognized as a component of general and
administrative expense in the Statement of Operations.

         As a result of adopting SFAS 123(R) on September 1, 2006, our net loss
for the fiscal year ended August 31, 2007, is approximately $222,057 higher than
if we had continued to account for share-based compensation under APB 25,
respectively. The adoption of this standard had no impact on our provision for
income taxes because of the valuation allowance for our deferred tax assets due
to our history of recurring net losses.

         Prior to the adoption of SFAS 123(R), we presented all tax benefits, if
any, or tax deductions resulting from the exercise of stock options as operating
cash flows in the Statement of Cash Flows. As a result of adopting SFAS 123(R),
tax benefits resulting from tax deductions in excess of the compensation cost
recognized for options (excess tax benefits) are classified as financing cash
flows.

         The following table illustrates the effect on net loss and loss per
share if we had applied the fair value recognition provisions of SFAS 123 to
options granted to employees under our stock option plans during the year ended
August 31, 2006:


                                                                                                 Period From
                                                                                                  Inception
                                                                                                (Acquisition
                                                                          Year Ended              of JDA to
                                                                        August 31, 2006       August 31, 2006)
                                                                        ---------------       ----------------

<S>                                                                     <C>                   <C>
Net loss attributable to common stockholders, as reported...........    $    (6,086,065)      $     (5,611,921)

Add:  Compensation expense for employee equity awards
recorded at fair value in the determination of net loss as
reported............................................................               --                     --

Less:  Compensation expense for equity awards determined by
the fair value based method.........................................            (85,645)               (16,397)
                                                                        ---------------       ----------------
Pro forma net loss available to common shareholders.................    $    (6,171,710)      $     (5,628,318)
                                                                        ===============       ================
Loss per share, as reported.........................................    $         (0.13)      $          (0.09)
                                                                        ===============       ================
Pro forma loss per share............................................    $         (0.13)      $          (0.09)
                                                                        ===============       ================


         The fair value for these options was estimated as of the date of grant
using a Black-Sholes option-pricing model with the following assumptions:

                                                                                Period From
                                                                                 Inception
                                                                              (Acquisition of
                                                            Year Ended            JDA) to
                                                          August 31, 2006     August 31, 2006
                                                          ---------------     ---------------
Volatility                                                     46% to 93%                 55%
Risk free rate                                               3.00% to 4.87%             3.00%
Expected dividends                                                     None              None
Expected term (in years)                                       1 to 7 years      1 to 6 years

NET LOSS PER COMMON SHARE

         Basic earnings (loss) per share is calculated by dividing income (loss)
available to common shareholders by the weighted average number of common shares
outstanding for the period. Diluted earnings (loss) per share is calculated
based on the weighted average number of common shares outstanding during the
period plus the dilutive effect of common stock purchase warrants and stock
options using the treasury stock method and the dilutive effects of convertible
notes payable and convertible preferred stock using the if-converted method. Due
to the net losses in fiscal 2007 and fiscal 2006 and from the period of

                                      F-9

</TABLE>

<PAGE>
<TABLE>
<CAPTION>


inception (acquisition of JDA on July 26, 2006) to August 31, 2007, basic and
diluted loss per share were the same, as the effect of potentially dilutive
securities would have been anti-dilutive. Potentially dilutive securities not
included in the diluted loss per share calculation, due to net losses, are as
follows:



                                                                                           Period from
                                                                                            Inception
                                                                                         (Acquisition of
                                                                                          JDA) to August
                                                       Year Ended August 31,                 31, 2007
                                                  -------------------------------            --------
                                                    2007                 2006                  2007
                                                  ----------           ----------           ----------
                                                  Underlying           Underlying           Underlying
    Description                                  Common Shares        Common Shares        Common Shares
    -----------                                  -------------        -------------        -------------
    <S>                                         <C>                  <C>                   <C>
    Convertible preferred stock............         886,324              886,324               886,324
    Convertible notes payable..............       8,803,750              670,417             8,803,750
    Options................................         297,055              187,052               297,055
    Warrants...............................          23,784                2,759                23,784
                                                 ----------           ----------            ----------
    Total potentially dilutive securities..      10,010,913            1,746,552            10,010,913
                                                 ==========           ==========            ==========


SEGMENT INFORMATION

         SFAS No. 131, "Disclosure About Segments of an Enterprise and Related
Information," 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 has identified two operating segments: telephone and
medical device. Our telephone segment is presented as discontinued operations
for all periods presented.

ADVERTISING COSTS

         Advertising costs are expensed as incurred and are included in selling,
general and administrative expenses. Advertising expense totaled approximately
$5,000 and $2,000 for the years ended August 31, 2007 and 2006, respectively.

RECENT AND PENDING ACCOUNTING PRONOUNCEMENTS

         In February 2007, the Financial Accounting Standards Board ("FASB")
issued SFAS No. 159, "The Fair Value Option for Financial Assets and Financial
Liabilities" ("SFAS 159"), which is effective for fiscal years beginning after
November 15, 2007. SFAS 159 permits entities to choose to measure many financial
instruments and certain other items at fair value. The objective is to improve
financial reporting by providing entities with the opportunity to mitigate
volatility in reported earnings caused by measuring related assets and
liabilities differently without having to apply complex hedge accounting
provisions. We do not expect the adoption of SFAS 159 to have a material impact
on our financial condition or results of operations

         In September 2006, the Financial Accounting Standards Board issued
Statement of Financial Accounting Standards No. 158, ("SFAS No. 158")
"Employers' Accounting for Defined Benefit Pension and Other Postretirement
Plans" which improved financial reporting by requiring an employer to recognize
the overfunded of underfunded status of a defined benefit postretirement plan as
an asset or liability in its statement of financial position and to recognize
changes in that funded status in the year in which the changes occur through
comprehensive income of a business entity or changes in unrestricted net assets
of a not-for-profit organization. SFAS No. 158 is effective for financial
statements issued for fiscal years beginning after December 15, 2006, and
interim periods within those fiscal years. Earlier adoption is encouraged. We do
not expect the adoption of SFAS No. 158 to have a material effect on our
financial condition or results of operation.

         In September 2006, the Financial Accounting Standards Board issued
Statement of Financial Accounting Standards No. 157, "Fair Value Measurements"
which defines fair value, establishes a framework for measuring fair value and
expands disclosures about fair value measurements. SFAS No. 157 is effective for
financial statements issued for fiscal years beginning after November 15, 2007,

                                      F-10
</TABLE>

<PAGE>


and interim periods within those fiscal years. Earlier adoption is encouraged.
We do not expect the adoption of SFAS No. 157 to have a material effect on our
financial condition or results of operation.

         In June 2006, the Financial Accounting Standards Board issued FASB
Interpretation No. 48, "Accounting for Uncertainty in Income Taxes - an
interpretation of FASB Statement No. 109," which prescribes a recognition
threshold and measurement attribute for the financial statement recognition and
measurement of a tax position taken or expected to be taken in a tax return. FIN
48 also provides guidance on de-recognition, classification, interest and
penalties, accounting in interim periods, disclosure and transition. FIN 48 is
effective for fiscal years beginning after December 15, 2006. We do not expect
the adoption of FIN 48 to have a material effect on our financial condition, and
we are currently evaluating the impact, if any, the adoption of FIN 48 will have
on our disclosure requirements.

3. DISCONTINUED OPERATIONS

         Our Telephone 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 most of the assets of the Telephone
Business and entered into discussions with a prospective purchaser. During
January 2007, we entered into an agreement to sell those assets for an aggregate
selling price of $60,000 in cash. Under the terms of the sale, we retained the
rights to receivables generated and deposits made prior to January 31, 2007. We
completed the sale during February 2007. The sale of the Telephone Business
assets was for the book value of the property and equipment assets resulting in
a loss of $79. No income tax benefit or provision has been attributed to
discontinued operations for all periods presented. Revenue from discontinued
operations was $351,568 and $1,174,073 for the years ended August 31, 2007 and
2006, respectively. Pre-tax net loss from discontinued operations was $93,257
and $243,680 for the years ended August 31, 2007 and 2006, respectively.
Previously, our Telephone Business was reported as a separate business segment.
As of August 31, 2007, there were no net assets relating to discontinued
operations. Operating results of our telephone business are summarized as
follows:


                                                          Year Ended
                                                           August 31,
                                                  -----------------------------
                                                      2007              2006
                                                  -----------       -----------
    Revenue.................................      $   351,568       $ 1,174,073
    Cost of Revenue.........................          210,545           720,403
                                                  -----------       -----------
       Gross margin.........................          141,023           453,670
    Other operating expenses................          234,201           697,350
                                                  -----------       -----------
       Loss from discontinued operations....      $   (93,178)      $  (243,680)
                                                  ===========       ===========

                                      F-11

<PAGE>


4. PROPERTY AND EQUIPMENT

         Property and equipment is composed of the following at August 31, 2007:

         Furniture.............................................    $  16,981
         Research and development equipment ...................      115,052
         Computer equipment ...................................       31,472
         Software .............................................       59,690
         Leasehold improvements ...............................        1,422
         Equipment ............................................       19,554
                                                                   ---------

         Total property and equipment at cost .................      244,171

         Less: accumulated depreciation and amortization ......      (40,849)
                                                                   ---------

                                                                   $ 203,322
                                                                   =========

         For fiscal 2007 and 2006 and for the period from inception (Acquisition
of JDA on 07/26/06) to August 31, 2007, depreciation expense from continuing
operations related to property and equipment is approximately $21,000 and $250
and $21,000, respectively. For fiscal 2007 and 2006, no depreciation amounts
were included in research and development costs. No amount included in the above
accumulated depreciation and amortization balance of $40,849 relates to
capitalized software.

5. COMMITMENTS AND CONTINGENCIES

LEASES:

         The Company has entered into non-cancelable operating lease
arrangements for two office locations, web hosting and one co-location facility.
The web hosting and co-location facility relates to our discontinued operations.
Rent expense under operating leases in 2007, 2006 and for the period from
inception (acquisition of JDA on July 26, 2006) to August 31, 2007 is
approximately $96,000, $150,000 and $119,000, respectively, of which, $46,000,
$133,000 and $18,000 is classified as part of discontinued operations. The
following is a summary of future minimum lease payments on these operating
leases as of August 31, 2007:

                                                       Operating
           Fiscal Year Ending August 31,                 Leases
           -----------------------------                 ------
           2008                                       $    31,175

EMPLOYMENT AGREEMENTS:

         On July 26, 2006, we entered into two-year employment agreements with
Dr. Andrew Kennedy, Andrew Green and Adam Lowe whereby these individuals will
receive annual compensation of $240,000, $180,000 and $180,000, respectively. On
June 25, 2007, our Board of Directors approved an increase in annual
compensation for Mr. Green and Mr. Lowe to $200,000.

RESEARCH AND DEVELOPMENT AGREEMENTS:

         On October 19, 2006, Oncologix entered into an agreement with the
Institut fur Umwelttechnologien GmbH (IUT) of Berlin Germany whereby IUT will
provide development, manufacturing and testing services in connection with the
development of the feasibility phase of the Oncosphere program. The purpose of
this phase was to demonstrate the commercial feasibility of the manufacture of
the Oncosphere our proposed radioactive microsphere product for the treatment of
liver cancer. This contract is for a nine-month period at a contract price of
seventy-five thousand Euros, or approximately $100,000. IUT will provide
facilities, radiation handling licenses, and personnel with experience in
chemistry, and provide expertise radiation protection, dosimetry, and
radio-labeling of organic compounds. As the initial feasibility phase has been
successfully completed, IUT will continue to support the Oncosphere program in
the Pre-Clinical Testing Phase through the remainder of the term of the initial
agreement. Both parties will meet to discuss a possible continuation of the
support activities beyond the initial contract period. We expect to continue our
relationship with IUT, at a minimum, through the Clinical Approval Phase with

                                      F-12

<PAGE>


assistance in providing adequate supplies of radiolabeled Oncospheres to support
pre-clinical testing and human clinical trials. IUT has the necessary
facilities, expertise and regulatory licensing to support this supply
requirement. As of the date of this report, we agreed to extend this contract at
the same rate through the end of our current fiscal year, August 31, 2007 and it
subsequently ended October 31, 2007. Effective November 1, 2007, Oncologix
entered into a revised agreement with IUT to provide continued support on the
development, manufacturing and testing services in connection with the
pre-clinical testing phase of the Oncosphere System. The contract is for a
six-month period at a contract price of ninety-six thousand Euros, or
approximately $145,000. IUT will provide additional facilities, materials and
personnel support to Oncologix in order to complete the pre-clinical testing
requirements associated with the Oncosphere System.

         During October 2006, the Company entered into a twelve-month consulting
agreement with a medical physicist. We agreed to pay a minimum of $1,050 per
month under the terms of the contract. The medical physicist will provide
expertise and advice on the dosimetry of the Oncosphere product; training on the
approved version of the Prowess software for the development team; provide
updates on guidance documents, rules and trends related to medical physics and
the use of microspheres and microsphere brachytherapy; advice on the product and
design requirements for the delivery system for the Oncosphere; and general
microsphere handling considerations and radiation safety program requirements.

         During October 2006, the Company entered into consulting agreements
with two consultants located in Germany to provide their expertise with respect
to chemistry and radiation to assist us in completing the development
feasibility phase of the Oncosphere program. These contracts covered the period
through February 2007 and have a contract price of seventy-thousand Euros and
fifty-thousand Euros (or approximately $91,000 and $65,000), respectively. These
contracts were completed in the second quarter of fiscal 2007.

         We have entered into new contracts with two consultants located in
Germany to cover the radiation technical support needed to complete pre-clinical
development activities through the Clinical Approval Phase. The new contracts
are for a period of 12 months beginning in March, 2007 ending in February, 2008.
The new base contract price for the two German consultants for this 12 month
period are 144,000 Euros and 100,000 Euros (or approximately $210,000 and
150,000), respectively, and will cover a minimum of two full-time equivalent
technical resources for the period of the contracts. These consultants will work
in conjunction with IUT to provide adequate supplies of radiolabeled
microspheres to support pre-clinical testing and human clinical trials. On July
31, 2007 we terminated the 100,000 Euros contract with an effective termination
date of August 31, 2007.

         In March, 2007, the Company entered into a research agreement with the
Institut de Cardiologie de Montreal (also known as the Montreal Heart Institute,
or MHI) to conduct an acute animal study using non-radioactive Oncospheres. The
cost of the initial animal study was approximately $35,000. The animal study was
conducted at MHI in April, 2007. The results from this animal study helped to
confirm the feasibility of the treatment procedure and the delivery and
distribution of microspheres to the liver.

         During May 2007, the Company entered into an agreement with Saint
Joseph's Research Institute (SJRI) in Norcross Georgia to conduct two additional
animal studies relating to the pre-clinical testing of the Oncosphere product.
The term of the agreement is to continue for the time required to conduct the
two studies. The first study, a non-radioactive study, has been completed at a
cost of approximately $9,000. The second study began in the second half of the
2007 calendar year and is expected to cost approximately $200,000. We are
planning an additional animal study to begin after December 2007 with SJRI at an
anticipated cost of $200,000.

         On June 11, 2007, the Company entered into a six-month consulting
agreement with a medical doctor. We agreed to pay $2,500 per month for this
consulting contract. The doctor will provide inputs for the design and
development of our microsphere, and provide us access to clinical facilities for
the purposes of reviewing activities associated with the handling, use and
administration of microsphere brachytherapy products. This doctor agreed to
accept unregistered common stock as payment for his services. Accordingly,
22,689 shares, representing $6,667 in consulting fees are currently listed in
subscribed common stock. These shares were issued in October 2007 and valued
based on the average market price of our common stock.

SOFTALK:

         Our dispute with Softalk, previously reported, has been settled and
resolved pursuant to a Settlement Agreement and Mutual Release dated June 20,
2007 whereunder Softalk paid the Company $10,000 and each party released the

                                      F-13

<PAGE>

other from all prior contractual agreements made between the parties and agreed
to a full settlement and discharge and mutual release of all existing and
potential claims.

6. JOINT DEVELOPMENT AGREEMENT

          As part of the acquisition of JDA, Oncologix acquired an investment in
a Joint Development Agreement with two other entities to create the Microsphere
Treatment Planning System ("MTPS") software. JDA originally invested $10,000 in
the Joint Development Agreement during 2004 and Oncologix will own 20% of the
MTPS software upon completion of development. Under the terms of the Joint
Development Agreement, Oncologix will be entitled to receive a portion of
profits from future sales, if any, of the MTPS software. As of August 31, 2007,
the MTPS software development had stalled, although we have not given up our
stake in this investment.

7. LICENSE AGREEMENT

         The technology underlying the medical device being developed by the
Company is subject to a certain Master License Agreement ("License"), effective
September 16, 2003, between Oncologix's predecessor, JDA, as Licensee, and the
University of Maryland as Licensor. We assumed JDA's position in our acquisition
of JDA. The following description of the License is incomplete and is qualified
in every respect by the full text thereof, as amended, which is filed as an
Exhibit to our Form 10-KSB for the year ended August 31, 2006.

         We have the exclusive worldwide right to make, have made, use, lease,
offer to sell, sell and import products based on the technology embodied in the
Oncosphere, generally known as "Instant Microspheres for Microarterial Imaging
and Radiotherapy," subject to the terms of the License, including certain
reservations of rights (which we do not believe are material) by the University
and the U.S. Government. We may grant sublicenses and assign our rights under
certain conditions.

         The License is subject to termination if we fail to perform under
certain requirements of the License, including:

         (A) Making certain reports of our activities to the University;

         (B) Having submitted an IDE to the FDA, or other foreign equivalent,
         not later than September 16, 2008. Alternatively, having initiated a
         clinical trial in any country other than the USA with "initiated"
         indicating that the licensed product has been administered to the first
         subject in the clinical study;

         (C) Having obtained a PMA from the FDA not later than September 16,
         2011;

         (D) Having completed the $4,000,000 funding for the Oncologix
         operations as described elsewhere in this Report;

         (E) Make the following lump sum payments (in addition to payments
         already made): $25,000 upon the commencement of a Clinical Trial of a
         licensed product in any country other than the U.S. or filing an
         application with the FDA for an IDE, $50,000 upon receipt of an
         approval by the FDA of a Pre-Market Approval Application; $100,000 upon
         any future change in control of Oncologix, and $200,000 at the end of
         the first calendar year in which Net Sales of Oncospheres exceeds
         $5,000,000. Royalties are to be paid on a country-by-country basis.

         (F) Reimburse the University for legal fees paid to patent counsel in
         connection with the licensed technology;

         (G) Pay royalties as follows: 2.5% of Net Sales on a semi-annual basis
         but a minimum of $10,000 for each year after commercial sales begin,
         and 25% of royalties received by us from sublicensees, subject to
         various adjustments and qualifications contained in the License.

         We are also obligated to indemnify the University against certain
expenses as provided in the License, as amended.

         We have granted an exclusive sublicense under the License to Fountain
Pharmaceuticals, Inc. a Delaware corporation, for China, Taiwan and Hong Kong.
The royalty rate thereunder is three percent (3%) and the other provisions of
the sublicense generally mirror those of the License.

                                      F-14

<PAGE>
<TABLE>
<CAPTION>


8. NOTES PAYABLE

CONVERTIBLE NOTES PAYABLE:

         Convertible notes payable consist of the following as of August 31,
2007 and August 31, 2006:



                                                                       August 31,     August 31,
                                                                          2007          2006
                                                                      -----------    -----------
<S>                                                                   <C>            <C>
8.0% convertible note due January 15, 2008, net of a discount of
     $0 and $28,361 as of August 31, 2007 and August 31, 2006 .....   $   350,000    $   321,639

10.0% convertible notes due December 31, 2007, net of a discount of
     $0 as of August 31, 2007 .....................................       150,000           --

8.0% convertible notes due May 2008, net of a discount of
     $349,857 as of August 31, 2007 ...............................       350,143           --

6.0% convertible notes due December 2008, net of a discount of
     $606,585 as of August 31, 2007 ...............................       688,415           --

10.0% convertible notes due September 2007, exchanged for 6.0%
     convertible notes due December 2008 ..........................          --          200,000
                                                                      -----------    -----------
Total unsecured convertible notes payable .........................     1,538,558        521,639
Less:  Current portion ............................................      (850,143)      (521,639)
                                                                      -----------    -----------

Longterm portion ..................................................   $   688,415    $      --
                                                                      ===========    ===========


         The following is a summary of future minimum payments on convertible
notes payable as of August 31, 2007:

                                                          Convertible
             Fiscal Year Ending August 31,               Notes Payable
             -----------------------------               -------------
             2008                                         $ 1,200,000
             2009                                           1,295,000

         On March 13, 2006, we issued to an accredited investor; originally
payable on May 13, 2007 (at the end of fourteen months following the date of
issue), accrues interest at the rate of 8% and is convertible into our common
stock at a conversion price of $1.00 per common share. The due date under this
note was extended until July 15, 2007 and subsequently extended until January
15, 2008. In addition, we issued, to that investor, a two-year warrant for the
purchase of 200,000 shares of our common stock at an exercise price of $0.35 per
share. We recognized a discount on this Convertible Subordinated Promissory Note
of $47,379 related to the fair value of the warrants issued in connection with
the note. On May 15, 2007, the accrued interest of $32,649 was converted into
130,718 shares of the Company's common stock at a per share price of $0.25.
According, the Company recognized a beneficial conversion feature of $22,222.
During fiscal 2007, we expensed $50,583 as interest and finance charges, as a
result of amortization of the note discounts.

         On July 7, 2006, we issued to two accredited investors, Convertible
Promissory Notes in the principal amounts of $145,000 and $55,000. The notes
were originally payable at the end of 90 days following the date of issue,
accrued interest at the rate of 10% per annum and were convertible into our
common stock at a conversion price of $0.30 per common share. On October 4,
2006, the maturity date of these notes were extended until December 4, 2006, at
which time they were converted into Units, each consisting of a 2 year, 6% note
convertible into our common stock at a per share price of $0.30 together with a
warrant for the purchase of a number of common shares equaling one half the
number of shares into which each Convertible Promissory Note is convertible.

         On September 30, 2006, we entered into a note purchase agreement and
convertible promissory note with an accredited investor for financing in the
amount of $100,000. The note was payable on January 31, 2007 and accrues
interest at the rate of 10% per annum. The note is convertible into our common
stock at a conversion price of $0.20 per common share. On January 22, 2007, the
Company recognized a beneficial conversion feature in the amount of $40,000.

                                      F-16
</TABLE>

<PAGE>
<TABLE>
<CAPTION>


This discount was fully amortized during the six months ended February 28, 2007.
On January 31, 2007, we received a request to convert $100,000 in principal and
$3,370 in accrued interest into 516,849 shares of common stock which were issued
in June 2007.

         During October 2006, we entered into note purchase agreements for
convertible promissory notes with five accredited investors for financing in the
aggregate amount of $250,000. These notes were payable on March 15, 2007, and
accrue interest at the rate of 10% per annum and were convertible into our
common stock at a conversion price of $0.20 per common share. We recognized a
beneficial conversion feature in the amount of $193,750 relative to these notes.
During the second quarter of fiscal 2007, holders of notes in the aggregate
principal of $100,000 elected to convert their notes, with unpaid accrued
interest of $2,774, into 513,869 shares of common stock which were issued in
June 2007. On March 15, 2007, investors holding the remaining notes in the
principal amount of $150,000 agreed to extend the due date of their respective
notes until September 15, 2007. These notes were further extended until December
31, 2007.

         On November 2, 2006, we entered into a note purchase agreement and
convertible promissory note with an accredited investor for financing in the
amount of $200,000. This note was payable on March 15, 2007 and accrues interest
at the rate of 10% per annum. The note is convertible into our common stock at a
conversion price of $0.20 per common share. We recognized a beneficial
conversion feature in the amount of $150,000 with respect to this note. On
January 31, 2007, the accredited investor elected to convert $200,000 in
principal and $4,986 in accrued interest into 1,024,931 shares of common stock
which were issued in June 2007.

         During December 2006, we issued seven Convertible Promissory Notes in
an aggregate principal amount of $480,000. These Convertible Promissory Notes
are due December 4, 2008, bear interest at the rate of 6% per annum and are
convertible into our common stock at a rate of $0.30. The Convertible Promissory
Notes were issued in a private offering of Units, each consisting of a
Convertible Promissory Note and a warrant for the purchase of one half the
number of common shares into which each Convertible Promissory Note is
convertible. The warrants expire on December 4, 2008 and have an exercise price
of $0.50 per share. We recognized a discount of $58,708 related to the warrants
and a beneficial conversion feature of $269,541 related to these notes. During
fiscal 2007, $119,231 was expensed as interest and finance charges as a result
of amortizing the discount and beneficial conversion feature.

         During January 2007, we issued fourteen additional Convertible
Promissory Notes in an aggregate principal amount of $485,000 as a continuation
of the private offering of Units that commenced in December, 2006. We recognized
a discount of $55,446 related to the warrants and a beneficial conversion
feature of $300,197 related to these notes. During fiscal 2007, $116,325 was
expensed as interest and finance charges as a result of amortizing the discount
and beneficial conversion feature.

         During February 2007, we issued eight additional Convertible Promissory
Notes in an aggregate principal amount of $330,000 as a continuation of the
private offering of Units described above. We recognized a discount of $35,487
related to the warrants and a beneficial conversion feature of $192,820 related
to these notes. During fiscal 2007, $70,058 was expensed as interest and finance
charges as a result of amortizing the discount and beneficial conversion
feature.

         During May and June 2007, we issued nine Convertible Promissory Notes
in an aggregate principal amount of $700,000. These Convertible Promissory Notes
are due May 7, 2008, bear interest at the rate of 8% per annum and are
convertible into our common stock at a rate of $0.25. We recognized a beneficial
conversion feature of $501,000 related to these notes. During fiscal 2007,
$151,143 was expensed as interest and finance charges as a result of amortizing
the beneficial conversion feature.

CONVERTIBLE RELATED PARTY NOTES PAYABLE:

                                                                August 31,    August 31,
                                                                  2007          2006
                                                                --------      --------

<C>                                                             <C>           <C>
10.0% convertible note due January 14, 2008 .................   $ 80,450      $ 80,450

10.0% convertible notes due January 14, 2008 ................    200,000          --
                                                                --------      --------
Outstanding unsecured related party convertible notes payable   $280,450      $ 80,450
                                                                ========      ========

                                          F-17
</TABLE>

<PAGE>


         On March 23, 2005, we issued to Anthony Silverman, a member of our
Board of Directors, a Convertible Promissory Note in the principal amount of
$110,000, convertible at the option of the holder into 916,667 shares of the
Company's common stock. The Convertible Promissory Note was due on March 31,
2006 and bears interest at the rate of 10% per annum, payable monthly and is
convertible into our common stock at a rate of $0.12. The term of this note has
been extended to December 15, 2007. As of August 31, 2007 and August 31, 2006,
the unpaid principal balance on this note is $80,450, which is convertible into
670,417 shares of our common stock. On November 30, 2007, Mr. Silverman agreed
to extend the note to January 14, 2008.

         On July 7, 2006, we issued to Mr. Silverman another Convertible
Promissory Note in the principal amount of $200,000 convertible into our common
stock at a conversion price of $0.30 per share. The Company subsequently
recorded a beneficial conversion feature of $66,667 in conjunction with the
private placement issued on December 4, 2006. This latter note was payable at
the end of 90 days following the date of issue, accrues interest at the rate of
10% per annum and is convertible into our common stock at a conversion price of
$0.30 per common share. Mr. Silverman subsequently agreed to extend this note
until December 15, 2007. During fiscal 2007, we expensed $66,667 as interest and
finance charges as a result of amortizing the beneficial conversion feature. On
November 30, 2007, Mr. Silverman agreed to extend the note to January 14, 2008.

On September 30, 2006, we issued additional convertible promissory notes to Mr.
Silverman in the aggregate principal amount of $175,000. The notes were payable
on January 31, 2007 and accrue interest at the rate of 10% per annum and are
convertible into our common stock at a conversion price of $0.20 per common
share. The Company recognized a beneficial conversion features related to these
notes in the amount of $70,000 which was expensed in the first six months of
fiscal 2007. On January 31, 2007, these notes were assigned by Mr. Silverman to
two accredited investors and were converted into 875,000 common shares.

RELATED PARTY NOTES PAYABLE:


                                                        August 31,    August 31,
                                                           2007         2006
                                                         --------     --------
10.0% note due January 14, 2008 .....................     200,000

8.0% note due January 14, 2008 ......................     400,000

Outstanding unsecured related party notes payable ...    $600,000     $   --
                                                         ========     ========

         On September 7, 2006. we issued a $200,000 60-day promissory note to
Stanley Schloz, a member of the Company's Board of Directors, for bridge
financing in that amount. This note accrued interest at a rate of 10% and was
due in full, including accrued interest, on November 6, 2006. On November 6,
2006, Mr. Schloz agreed to extend this note until November 30, 2006, then
subsequently until December 15, 2006. The note principal of $200,000 plus
accrued interest of $5,425 was paid in full on December 15, 2006.

         On September 7, 2006, we issued a $50,000 60-day promissory note with
Anthony Silverman, a member of the Company's Board of Directors, for bridge
financing in that amount. This note accrued interest at a rate of 10% and was
due in full, including accrued interest, on November 6, 2006. On November 6,
2006, Mr. Silverman agreed to extend this note until November 30, 2006, then
subsequently until December 15, 2006. This note was further extended until
January 31, 2007. This note principal of $50,000 plus accrued interest of $2,000
was paid in full on January 31, 2007.

         On December 15, 2006. we entered into a 16-day promissory note with Mr.
Silverman, for bridge financing in the amount of $200,000. This note accrued
interest at a rate of 10% per annum and was due in full, including accrued
interest, on December 31, 2006. On December 29, 2006, Mr. Silverman agreed to
extend this note until January 31, 2007 and then further extended until December
15, 2007. In connection with a $25,000 principal payment on November 30, 2007,
Mr. Silverman agreed to extend the balance of the note to January 14, 2008.

         On December 29, 2006, we entered into a one-month promissory note with
Mr. Silverman for bridge financing in the amount of $50,000. This note accrued
interest at a rate of 10% per annum and was due in full, including accrued
interest, on January 31, 2007. This note principal of $50,000 plus accrued
interest of $452 was paid in full on January 31, 2007.

                                      F-18

<PAGE>


         On April 13, 2007. we entered into a 45-day promissory note with Mr.
Silverman for bridge financing in the amount of $400,000. This note accrued
interest at a rate of 8% per annum and was due in full, including accrued
interest on May 28, 2007. This note has been extended until July 31, 2007 and
then further extended until December 15, 2007. On November 30, 2007, Mr.
Silverman agreed to extend the note to January 14, 2008.

OTHER NOTES PAYABLE:

         On October 1, 2006, we entered into a note payable agreement to finance
$20,756 of directors and officer's insurance premiums. The note bears interest
at a rate of 10.25% per annum and is due in nine monthly installments of $2,408,
including principal and interest, beginning on November 1, 2006. As of August
31, 2007 and August 31, 2006, the principal on this note is $0 and $0,
respectively.

         As a condition to the acquisition of JDA, the Company assumed a note
payable to the State of Maryland Department of Business and Economic Development
("DBED") in the amount of $100,000. At the time of assumption, the unpaid
principal and interest on this note was $126,055. The note bears interest at a
rate of 10% and was paid in full, including accrued interest of $36,919 on June
30, 2007.

9. TEDCO OBLIGATION

         On November 20, 2003, JDA entered into an Investment Agreement with the
Maryland Technology Development Corporation ("TEDCO"). Pursuant to this
Investment Agreement, TEDCO provided funding of $30,373 (the "TEDCO Funds") to
JDA during 2004. The TEDCO obligation was assumed by us as a result of the
acquisition of JDA in July 2006. The Investment Agreement calls for the
repayment of the TEDCO Funds through either (i) repayment of the original amount
of the TEDCO Funds, with increases to the required repayment amount commencing
during calendar year 2007 or (ii) a percentage of future revenue derived from
the JDA technology. As a result of the sale of JDA to us, the TEDCO obligation
was in technical default and this obligation was accordingly repaid during
November of 2006.

10. STOCKHOLDERS' EQUITY

PREFERRED STOCK:

         The Company is authorized to issue up to 10,000,000 shares of preferred
stock, in one or more series, and to determine the price, rights, preferences
and privileges of the shares of each such series without any further vote or
action by the stockholders. The rights of the holders of common stock will be
subject to, and may be adversely affected by, the rights of the holders of any
shares of preferred stock that may be issued in the future.

UNITS:

         On March 30, 2003, the Company completed the private placement of Units
pursuant to the terms of a Unit Purchase Agreement (the "Units") with accredited
investors. Each Unit consists of the following underlying securities: (i) three
shares of the Company's common stock; (ii) one share of Series A Convertible
Preferred Stock, par value $.001 per share; and (iii) one three-year warrant to
purchase one share of common stock at a per share price of $0.30. The warrants
expired on March 31, 2006. Each share of Series A Convertible Preferred Stock is
convertible into two shares of the Company's common stock in exchange for $0.10
per common share ($.20 for each Series A Convertible Preferred share converted).
The securities underlying the Units are not to be separately tradable or
transferable apart from the Units until such time as determined by the Company's
Board of Directors. Our Board of Directors authorized the separation of the
Units into their component parts twice, once in July 2004 and again in February
2005. As of August 31, 2007 and August 31, 2006, there were 443,162 Units
outstanding that had not been separated. These units are presented as their
underlying securities on our balance sheet and consist of 443,162 shares of
Series A Preferred Stock and 1,329,486 shares of common stock.

                                      F-19

<PAGE>
<TABLE>
<CAPTION>


SUBSCRIBED COMMON STOCK:

         As of August 31, 2007, we have 22,689 shares of subscribed stock that
are issuable for the payment of consulting services from June 11, 2007 until
August 31, 2007, representing a consulting fee of $6,667.

COMMON STOCK:

         Under the terms of our acquisition of JDA, we issued 43,000,000 shares
of our common stock to the previous owners of JDA. Of these shares, 29,843,160
were placed into escrow pending the achievement of certain development and
operating goals. These escrowed shares were not included in the calculation of
the purchase price of JDA and will be included in that calculation if and to the
extent that the applicable contingencies are resolved and the shares are
released from escrow. The development and operating goals that relate to the
release of these shares, and the number of shares to be released at the time the
goal is achieved are as follows: (i) 7,460,790 shares upon the completion of the
"Development Phase," as defined in the Merger Agreement between the Company and
JDA (already released as stated below); (ii) 9,325,988 shares upon the
completion of the "Pre-Clinical Testing Phase as defined in the merger
agreement; and (iii) 13,056,382 shares upon the completion of the Clinical
Approval Phase.

         During the second quarter of 2007, our subsidiary's Chief Medical,
Chief Executive and Chief Operating officers certified to our Board of Directors
that the Development Phase had been completed. The 7,460,790 shares tied to that
completion were accordingly released in the third quarter of 2007. During fiscal
2007, we issued 272,384 shares as a payment for a finders fee and consulting
services in the total amount of $53,000.


WARRANTS:

         The following table summarizes warrant activity in fiscal 2007 and
2006:

                                                           Number          Exercise Price
                                                          ----------        -------------

        <S>                                                <C>              <C>     <C>
         Outstanding, August 31, 2005 .............        4,096,138        $0.27 - $5.00
         Expired/Retired ..........................         (910,088)       $0.30 - $5.00
         Exercised ................................       (1,905,299)       $0.22 - $0.30
         Issued ...................................          200,000        $        0.35
                                                          ----------        -------------
         Outstanding, August 31, 2006 .............        1,480,751        $0.27 - $2.90
         Expired/Retired ..........................       (1,200,000)       $0.32 - $0.50
         Exercised ................................             --                   --
         Issued ...................................        2,158,326        $        0.50
                                                          ----------        -------------
         Outstanding, August 31, 2007 .............        2,439,077        $0.27 - $2.90
                                                          ==========        =============

         Details relative to the 2,439,077 outstanding warrants at August 31,
2007 are as follows:


                          Date of                           Number         Exercise          Expiration
                           Grant                          of Shares          Price              Date
         -------------------------------------------   -----------------  ------------  ----------------------
         First quarter of fiscal 2002                            25,000        $ 2.90        October 17, 2007
         Second quarter of fiscal 2002                            5,751          1.19        January 30, 2008
         Third quarter of fiscal 2002                         1,100,000          0.50          April 23, 2007
         Second quarter of fiscal 2004                          100,000          0.32         January 8, 2007
         Third quarter of fiscal 2004                            40,000          0.27          April 15, 2014
         Fourth quarter of fiscal 2004                           10,000          0.29            June 4, 2009
         Third quarter of fiscal 2006                           200,000          0.35          March 13, 2008
                                                       -----------------

         Outstanding, August 31, 2006                         1,480,751
         Second quarter of fiscal 2007                         (100,000)         0.32         January 8, 2007
         Second quarter of fiscal 2007                        2,158,326          0.50        December 4, 2008
         Third quarter of fiscal 2007                        (1,100,000)         0.50          April 23, 2007
                                                       -----------------

         Outstanding, August 31, 2007                         2,439,077
                                                       =================

                                                     F-20
</TABLE>

<PAGE>


         On September 26, 2005, the Company's Executive Committee temporarily
reduced the exercise price on its trading warrants. The original exercise price
of these warrants was $0.30 and were issued in connection with the Unit
offerings discussed above. For the period from September 26, 2005 through
October 14, 2005, the exercise price on these warrants was reduced to $0.22.
During this time period, 930,400 warrants were exercised and 930,400 shares of
common stock were issued as a result of these warrants being exercised. The
exercise of these warrants resulted in gross proceeds to the Company of
approximately $205,000.

         On February 17, 2006, 5,000 warrants were exercised at an exercise
price of $0.30. The exercise of these warrants resulted in gross proceeds to the
Company of $1,500.

         Our Company's Board of Directors authorized the splitting of the Units
twice, once in July 2004 and again in February 2005. As of March 9, 2006, there
were 1,186,825 warrants outstanding from previously split Units. Between March
9, 2006 and March 31, 2006, warrant holders elected to exercise 730,349
underlying warrants for proceeds of approximately $219,000.

         Effective March 31, 2006, warrants underlying the March 2003 Unit
offering expired. Between March 9, 2006 and March 31, 2006, in exchange for
$0.30 per Unit, the Company's Board of Directors offered Unit holders the right
to exercise the underlying warrants, for their original exercise price of $0.30
per warrant, and exchange the Unit certificate for one share of common stock and
a new modified unit ("Modified Unit"). Each Modified Unit consists of the
following underlying securities: (a) three shares of the Company's common stock;
and (b) one share of Series A Convertible Preferred Stock, par value $.001 per
share. Each share of Series A Convertible Preferred Stock is convertible into
two shares of the Company's common stock in exchange for $0.10 per common share
($.20 for each Series A Convertible Preferred share converted). As of March 9,
2006, there were 443,162 Units outstanding from the March 2003 Unit offering.
During this period, Unit holders elected to exercise 239,550 underlying warrants
and exchange 239,550 Units for Modified Units for proceeds of approximately
$72,000.

         The remaining contractual life of warrants outstanding as of August 31,
2007 was 1.29 years. Warrants for the purchase of 2,439,077 and 1,480,751 shares
were immediately exercisable on August 31, 2007 and 2006 respectively with a
weighted-average price of $0.509 and $0.503 per share.

STOCK OPTIONS:

         The Company is authorized to issue up to 4,600,000 shares of common
stock under its 1997 Stock Incentive Plan. Shares may be issued as incentive
stock options, non-statutory stock options, deferred shares or restricted
shares. Options are granted at the fair market value of the common stock on the
date of the grant and have terms of up to ten years.

         The Company is authorized to issue up to 7,500,000 shares of common
stock under its 2000 Stock Incentive Plan. Shares may be issued as incentive
stock options, non-statutory stock options, deferred shares or restricted
shares. Options are granted at the fair market value of the common stock on the
date of the grant and have terms of up to ten years.

         During the fiscal years ended August 31, 2007 and 2006, we granted
1,135,000 and 1,375,860 options from the stock incentive plans described above,
respectively. The fair value of options granted is estimated using the
Black-Scholes option pricing model. This model utilizes the following factors to
calculate the fair value of options granted: (i) annual dividend yield, (ii)
weighted-average expected life, (iii) risk-free interest rate and (iv) expected
volatility.

         The fair value for these options was estimated as of the date of grant
using a Black-Scholes option-pricing model with the following assumptions:

                                      F-21

<PAGE>


                                                                   Period From
                                                                    Inception
                                     Year Ended August 31,       (Acquisition of
                                -------------------------------      JDA) to
                                     2007             2006       August 31, 2007
                                --------------   --------------   --------------
Volatility ..................    118% to  188%       46% to 93%      55% to 188%
Risk free rate ..............   4.50% to 4.88%   3.00% to 4.87%   3.00% to 4.88%
Expected dividends ..........             None             None             None
Expected term (in years) ....     3 to 6 years     1 to 7 years     1 to 6 years


         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.

         SFAS 123(R) requires the estimation of forfeitures when recognizing
compensation expense and that this estimate of forfeitures be adjusted over the
requisite service period should actual forfeitures differ from such estimates.
Changes in estimated forfeitures are recognized through a cumulative adjustment,
which is recognized in the period of change and which impacts the amount of
unamortized compensation expense to be recognized in future periods.

         During the fiscal years ended August 31, 2007 and 2006, 52,000 and
78,000 employee options were exercised, respectively, 250,000 and 339,300
options were forfeited, respectively and 33,333 and nil options expired. As of
August 31, 2007, $136,400 of total unrecognized compensation cost related to
employee stock options is expected to be recognized over a weighted average
period of approximately 0.71 years. Additional information relative to our
employee options outstanding at August 31, 2007 is summarized as follows:


                                                        Options       Options
                                                      Outstanding   Exercisable
                                                      -----------   -----------
Number of options .................................     5,456,860     4,441,024
Aggregate intrinsic value of options ..............   $    28,100   $    28,100
Weighted average remaining contractual term (years)          4.89          4.31
Weighted average exercise price ...................   $      0.64   $     0.690


         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 2007 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, 2007.

                                      F-22

<PAGE>
<TABLE>
<CAPTION>

         A summary of the Company's stock option activity is as follows:

                                                                            Weighted Average
                                         Number of        Option Price       Exercise Price
                                      Options Granted      Per Share           Per Share
                                         ----------      -------------         --------
<S>                                       <C>            <C>     <C>           <C>
Outstanding, August 31, 2005 .......      3,698,633      $0.17 - $8.00         $   1.04
Granted ............................      1,375,860      $0.19 - $0.40             0.35
Exercised ..........................        (78,000)     $0.17 - $0.23             0.21
Cancelled ..........................       (339,300)     $0.50 - 8.00              3.02
                                         ----------      -------------        --------
Outstanding, August 31, 2006 .......      4,657,193      $0.17 - $7.38             0.71
Granted ............................      1,135,000      $0.37 - 0.45              0.42
Exercised ..........................        (52,000)     $0.17 - $0.23             0.17
Cancelled ..........................       (283,333)     $0.35 - $4.86             0.88
                                         ----------      -------------         --------

Outstanding, August 31, 2007 .......      5,456,860      $0.17 - $7.38         $   0.64
                                         ==========      =============         ========


         We have 2,620,493 and 3,063,332 shares of common stock available for
future issuance under our 2000 Stock Incentive Plan and 1997 Stock Incentive
Plan, respectively, as of August 31, 2007. Under the 2000 Stock Incentive Plan
and 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. Both of
these plans have been approved by our shareholders. During fiscal 2007, the
Company sought and received approval from its shareholders to increase the
number of shares issuable under the 2000 Stock Incentive Plan from 5,000,000 to
7,500,000.

         The weighted average fair value of stock options granted during fiscal
2007 and 2006, for which the exercise price was equal to the fair market value
of the stock at the time of grant, were $.42 and $.35 per share, respectively.

         During fiscal 2007, we granted 410,000 options to members' of our Board
of Directors at exercise prices ranging from $0.37 to $0.45 per share. These
options vest between one and two years.

         During fiscal 2007, we granted 475,000 options to employees at exercise
prices ranging from $0.41 to $0.43 per share. These options vest between
immediately and up to one year.

         During fiscal 2007, we granted 250,000 options to consultants at an
exercise price of $0.41 per share. These options vest in one
year.

         During fiscal 2007, 52,000 employee stock options were exercised. The
exercise of these options resulted in proceeds to the Company of $9,125.

11. INCOME TAXES

         As of August 31, 2007, the Company has federal net operating loss
carryforwards totaling approximately $30,700,000 and state net operating loss
carryforwards totaling approximately $16,000,000. The federal net operating loss
carryforwards expire in various amounts beginning in 2004 and ending in 2027.
The state net operating loss carryforwards expire in various amounts beginning
in 2003 and ending in 2012. Certain of the Company's net operating loss
carryforwards 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. In addition, approximately $3,200,000 of net
operating loss carryforwards are further limited to activities in a trade or
business in which the Company is not presently involved. Due to our history of
losses from operations, we have provided a valuation allowance for our net
operating loss carryforwards and deferred tax assets, net of certain deferred
tax liabilities.

         The income tax benefit for the years ended August 31, 2007 and 2006 is
comprised of the following amounts:

                                           2007          2006
                                       -----------   -----------
Current:                               $      --     $      --

Deferred:
   Federal                              (1,265,000)     (260,000)
   State                                  (198,000)      (40,000)
                                       -----------   -----------
                                        (1,463,000)     (300,000)
Valuation Allowance                      1,463,000       300,000
                                       -----------   -----------
                                       $      --     $      --
                                       ===========   ===========

                                      F-23
</TABLE>
<PAGE>


         The Company's tax benefit differs from the benefit calculated using the
federal statutory income tax rate for the following reasons:

                                                   2007       2006
                                                   ----       ----
Statutory tax rate                                 34.0%      34.0%
State income taxes                                  5.3%       5.3%
Change in valuation allowance                    (39.3)%    (39.3)%
Effective tax rate                                  0.0%       0.0%

         The components of the net deferred tax assets (liabilities) are as
follows:

                                             2007             2006
                                        --------------   --------------
Deferred tax assets (liabilities):
Property and equipment                  $       (9,000)  $       (3,000)
Intangible assets                            1,817,000        1,670,000
Other                                            1,000            4,000
Net operating loss carryforward             11,285,000       10,016,000
                                        --------------   --------------
                                            13,094,000       11,687,000
Valuation allowance                        (13,094,000)     (11,687,000)
                                        --------------   --------------
                                        $         --     $         --
                                        ==============   ==============

         SFAS No. 109, Accounting for 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 $13,094,000 valuation allowance as
of August 31, 2007 is necessary to reduce the net deferred tax assets to the
amount that will more likely than not be realized. The change in the valuation
allowance for the current year is $1,310,000, which is net of approximately
$97,000 of net operating loss benefits that have expired in the current year.

12. RELATED PARTY TRANSACTIONS AND CONTINGENCIES:

FINANCING WITH RELATED PARTIES:

         During fiscal 2007 and 2006, the Company entered into financing
agreements with several related parties of the Company. Please see Note 8 for
further descriptions of these transactions.

13. RETIREMENT PLAN

         Effective June 1, 2000, the Company adopted a 401(k) retirement plan.
Employees are eligible to participate in the plan after 90 days of service.
Salary deferral may range from 1% to 18%. The Company matches the amounts
deferred by the employees, up to 5% of an employee's annual compensation with
50% of the matched amount vesting after the employees' first year of service and
the remaining 50% of the matched amount vesting after the employees' second year
of service. During fiscal 2007, the Company closed this retirement plan. The
Company matched contributions totaling approximately $0 and $700 for the years
ended August 31, 2007 and 2006, respectively.


14. STATEMENTS OF CASH FLOWS

         During fiscal 2007 and 2006, the Company recognized investing and
financing activities that affected the balance sheet, but did not result in cash
receipts or payments.

                                      F-24

<PAGE>
<TABLE>
<CAPTION>


For fiscal 2007, these non-cash investing and financing activities are
summarized as follows:

                                                                                         Amount
                                                                                         ------

         <S>                                                                          <C>
         The Company recognized a discount on the Convertible Promissory Notes
issued to many accredited investors (See Note 9). This discount is related to
warrants and beneficial conversion feature issued in connection with these
notes.                                                                                $  1,955,837

         During fiscal 2007, the Company converted $586,130 of principal and
accrued interest into 2,930,649 shares of its common stock. These shares were
issued in June 2007.                                                                  $    586,130

         On October 1, 2006, the Company entered into a note payable agreement
to finance $20,756 of directors and officer's insurance premiums. The note bears
interest at a rate of 10.25% per annum and is due in nine monthly installments
of $2,408, including principal and interest, beginning on November 1, 2006. This
note was paid in full during July 2007.

                                                                                            20,756
                                                                                      ------------

         Total non-cash transactions from investing and financing activities.         $  2,562,723
                                                                                      ============

For fiscal 2006, these non-cash investing and financing activities are
summarized as follows:

                                                                                         Amount
                                                                                         ------

         The Company recognized a discount on the Convertible Subordinated
Promissory Note issued to an accredited investor (See Note 8). This discount is
related to warrants issued in connection with this note.                              $     47,379

         On October 1, 2005, the Company entered into a note payable agreement
to finance $44,314 of directors and officer's insurance premiums. The note bears
interest at a rate of 9.25% per annum and is due in eight monthly installments
of $5,115, including principal and interest, beginning on November 1, 2005. This
note was paid in full during July 2006.

                                                                                            44,314
                                                                                      ------------

         Total non-cash transactions from investing and financing activities.         $     91,693
                                                                                      ============

For period from inception (Acquisition of JDA) to August 31, 2007, these
non-cash investing and financing activities are summarized as follows:

                                                                                         Amount
                                                                                         ------

         The Company recognized a discount on the Convertible Promissory Notes
issued to many accredited investors (See Note 9). This discount is related to
warrants and beneficial conversion feature issued in connection with these
notes.                                                                                $  1,955,837

         On October 1, 2006, the Company entered into a note payable agreement
to finance $20,756 of directors and officer's insurance premiums. The note bears
interest at a rate of 10.25% per annum and is due in nine monthly installments
of $2,408, including principal and interest, beginning on November 1, 2006. This
note was paid in full during July 2007.                                                     20,756
                                                                                      ------------

         Total non-cash transactions from investing and financing activities.         $  1,976,593
                                                                                      ============

15. SUBSEQUENT EVENTS

         On September 7, 2007, the Company entered into a convertible promissory
note with Stanley Schloz, a member of the Company's Board of Directors, for
bridge financing in the amount of $150,000. This note bears interest at a rate
of 12% and is payable monthly. The principal is due in full on December 15,
2007. On November 30, 2007, the Company repaid $100,000 of the principal. In
connection with this repayment, Mr. Schloz agreed to extend the remaining
principal until January 14, 2008. The note is convertible into the Company's
common stock at a conversion price of $0.20 per common share.

                                      F-25
</TABLE>

<PAGE>


         During September through November 2007, we issued Convertible
Promissory Notes in an aggregate principal amount of $1,090,000. These
Convertible Promissory Notes are due September 17, 2009, bear interest at the
rate of 6% per annum and are convertible into our common stock at a rate of
$0.30 per common share. The convertible Promissory Notes were issued in a
private offering of Units, each consisting of a Convertible Promissory Note and
a warrant for the purchase the number of common shares into which each
Convertible Promissory Note is convertible. The warrants expire on September 17,
2009 and have an exercise price of $0.50 per share. On December 3, 2007, the
Company also issued 57,500 warrants to purchase the Company's common stock at an
exercise price of $0.40 per share as a result of this financing.

         On October 1, 2007, the Company entered into a note payable agreement
to finance $18,897 of directors and officer's insurance premiums. The note bears
interest at a rate of 10.50% per annum and is due in nine monthly installments
of $2,193, including principal and interest, beginning on November 1, 2007.

         During October 2007, we issued 39,252 shares of common stock to a
consultant for payment of consulting fees of $9,167.

         During November 2007, 50,000 employee stock options were exercised. The
exercise of these options resulted in proceeds to the Company of $11,500.

         On November 9, 2007, pursuant to a consulting contract, the Company
issued 75,000 options to purchase the Company's common stock at an exercise
price of $0.34 per share.

         We intend to raise $2,700,000 in a Private Placement Memorandum through
the sale of our common stock commencing in December 2007.

RESEARCH AND DEVELOPMENT AGREEMENTS

         On October 19, 2006, Oncologix entered into an agreement with the
Institut fur Umwelttechnologien GmbH (IUT) of Berlin Germany whereby IUT will
provide development, manufacturing and testing services in connection with the
development of the feasibility phase of the Oncosphere program. The purpose of
this phase was to demonstrate the commercial feasibility of the manufacture of
the Oncosphere our proposed radioactive microsphere product for the treatment of
liver cancer. This contract is for a nine-month period at a contract price of
seventy-five thousand Euros, or approximately $100,000. IUT will provide
facilities, radiation handling licenses, and personnel with experience in
chemistry, and provide expertise radiation protection, dosimetry, and
radio-labeling of organic compounds. As the initial feasibility phase has been
successfully completed, IUT will continue to support the Oncosphere program in
the Pre-Clinical Testing Phase through the remainder of the term of the initial
agreement. Both parties will meet to discuss a possible continuation of the
support activities beyond the initial contract period. We expect to continue our
relationship with IUT, at a minimum, through the Clinical Approval Phase with
assistance in providing adequate supplies of radiolabeled Oncospheres to support
pre-clinical testing and human clinical trials. IUT has the necessary
facilities, expertise and regulatory licensing to support this supply
requirement. As of the date of this report, we agreed to extend this contract at
the same rate through the end of our current fiscal year, August 31, 2007 and it
subsequently ended October 31, 2007. Effective November 1, 2007, Oncologix
entered into a revised agreement with IUT to provide continued support on the
development, manufacturing and testing services in connection with the
pre-clinical testing phase of the Oncosphere System. The contract is for a
six-month period at a contract price of ninety-six thousand Euros, or
approximately $145,000. IUT will provide additional facilities, materials and
personnel support to Oncologix in order to complete the pre-clinical testing
requirements associated with the Oncosphere System.

         On November 9, 2007, the Company entered into a six-month consulting
agreement with a medical doctor and granted him options to purchase 75,000
shares of common stock at a price of $0.34 per share as the sole consideration
for his consulting services. This consultant will assist with the design and
conduct of the animal studies at SJRI, including assistance with our delivery
system and clinical trials.

                                      F-26

<PAGE>


16. 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 2008 and prior to achieving breakeven. Additionally, as a
result of the acquisition of JDA and the associated License Agreement with the
UofM, the Company is required, under the terms of the amended license agreement
to raise substantial funds for the development of the technology associated with
the License Agreement. The requirements of the License Agreement are disclosed
in Note 8 above. Management has been historically successful in obtaining
financing and has implemented a number of cost-cutting initiatives to reduce
working capital needs. On October 24, 2006, a majority of the Company's
shareholders approved the increase in the number of authorized shares to
200,000,000. In addition, the Company anticipates that we will need
approximately $17,000,000 in funding to take our Oncosphere to
commercialization. The increase in the number of authorized shares will allow
the Company to raise additional funding through debt and equity financings
sufficient to fund our business. The Company requires and continues to pursue
additional capital for payment of current obligations, to meet the requirements
of the License Agreement discussed above and growth and achievement of
breakeven.

         We agreed, in our Merger Agreement with JDA, to provide $4,000,000 to
fund the operations of Oncologix through the Clinical Approval Phase, which is
described in more detail in our Form 10-KSB for the year ended August 31, 2006.
This amount was to be advanced in installments as follows:

     o   $350,000 was advanced prior to the Merger, in March 2006

     o   $400,000 was advanced upon the Closing of the Merger.

     o   $1,250,000 to be advanced in five payments of $250,000 each at the end
         of each of the five successive months commencing with August 2006, and

     o   $2,000,000 to be advanced at the end of January 2007.

         The $350,000 and $400,000 advances as well as the monthly payments for
August through December (a total of $2,000,000) were made out of funds borrowed
for that purpose by the Company. As agreed with the other parties to the Merger
Agreement, we delayed the final advance of $2,000,000, with such funding to be
made in increments as needed in fiscal 2007 and fiscal 2008. We have currently
funded a total of $3,700,000 towards the Oncosphere project. We now estimate
additional expenditures of approximately $4,300,000 through the Clinical
Approval Phase which includes an additional animal trial and human feasibility
trial. The feasibility trial is expected to provide data on human patients one
year earlier than data available from the pivotal clinical trial.

         Our agreement to effect this financing was incorporated into the Master
License Agreement with the University of Maryland as a condition to the
University's consent to JDA's assignment of the License to us. Because the other
parties to the Agreement of Merger and Plan of Reorganization by and among
BestNet Communications Corp., Oncologix Corporation, JDA Medical Technologies,
Inc. and the Principal Shareholders and the Executive Shareholders (for a
Limited Purpose) of JDA Medical Technologies, Inc. (the "Merger Agreement")
agreed to the delay in funding. We do not believe that we are in default under
the Merger Agreement. However, it is possible that the University may consider
the delay of funding to be a breach of the terms of the Master License
Agreement, as amended. If so, and if the University should notify us that it
considers the delay to be such a breach, we would have a period of ninety days
in which to cure the breach. As of the date of this Report, no such notice has
been received by us. If we are unable to obtain the financing required by the
Merger Agreement we could potentially lose the University of Maryland License
Agreement, which would have a material adverse effect on the Company.

         As of the date of this report, we will need approximately $4,300,000 to
fund operations for the next twelve (12) months, without regard to repaying any
short-term convertible or non-convertible notes payable. This funding will allow
us to complete the Development Phases of our Oncosphere System and take us
through a human feasibility clinical trial as well as fund corporate overhead
during that same time period. We will be required to seek additional capital in
the future to fund our Pivotal Clinical Trials through additional equity or debt
financing. The financing could have a negative impact on our financial condition
and our shareholders.

         Risks and uncertainties associated with completing development on
schedule, and consequences if not completed timely: We estimate that we will
have cash flows from our product beginning in the first quarter of fiscal 2011.
Significant delays, could affect future funding and market interest. The company
must receive Pre-Market Approval from the FDA for the Oncosphere product in
order to commercialize the product. There can be no guarantee of approval from
the FDA. Alternatively, the process for FDA approval may be longer than

                                      F-27

<PAGE>


projected in this plan which may materially affect the time required to
commercialize the product. The Oncosphere product is also dependent upon
radiation regulatory agencies. Potential suppliers and users of the Oncosphere
product will be required to obtain the necessary licenses to receive, store and
administer the radiation therapy. Delays in licensing or changes in licensing
regulations could affect the acceptance of the Oncosphere product in the
clinical study as well as the commercial settings. Our Company has never been
profitable and we have had to rely on debt and equity financings to fund
operations. Significant delays in development could affect the ability to obtain
future debt and equity funding which may affect or ability to continue as a
going concern.

                                      F-28

<PAGE>


ITEM 8.  CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
         FINANCIAL DISCLOSURE.

     None

ITEM 8A. CONTROLS AND PROCEDURES

         At the end of the period covered by this report, we carried out an
evaluation, under the supervision and with the participation of our management,
including our President and Chief Executive Officer along with our Chief
Financial Officer, of the effectiveness of the design and operation of our
disclosure controls and procedures pursuant to Rule 13a-14 under the Securities
Exchange Act of 1934, as amended. Based upon that evaluation, our President and
Chief Executive Officer along with our Chief Financial Officer concluded that
our disclosure controls and procedures are effective in timely alerting them to
material information relating to BestNet (including its consolidated subsidiary)
required to be included in the Company's periodic SEC filings. There have been
no significant changes in our internal controls or in other factors that could
significantly affect internal controls subsequent to the date that we carried
out our evaluation.

ITEM 8B. OTHER INFORMATION

     None

                                    PART III

ITEM 9.    DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT

     Information concerning our directors and executive officers as of November
12, 2007, is set forth below:

    Name                 Age              Position held with Company
    ----                 ---              --------------------------
Andrew Green              39     Chief Executive Officer, President and Director
Adam G. Lowe              45     Chief Operating Officer and Director
Stanley L. Schloz         64     Chairman of the Board
Andrew Kennedy, MD        43     Chief Medical Officer and Director
Barry Griffith            39     Director
Judy Lindstrom            62     Director
Steven Kurtzman, MD       45     Director
Michael A. Kramarz        38     Chief Financial Officer



         ANDREW M. GREEN became a director of the Company on July 26, 2006, upon
the merger with JDA. On June 25, 2007, he was appointed as Chief Executive
Officer and President. He had been a consultant to JDA from May 2006 until the
merger. Previously, since June 2005, he was a principal in NeoMedica, LLC, a
consulting group that specialized in executive level medical device consulting
for clients that included early stage ventures dealing with Class III devices
involving cardiology, ophthalmology, orthopedics, and electrophysiology. Prior
to that, from 1996 until 2005, he was employed by the Novoste Corporation (a
publicly traded medical device company). His final position with Novoste was as
a corporate officer with responsibility for Regulatory Affairs, Clinical
Affairs, Quality Assurance and New Technology/Business Development. From 1993
until his employment with Novoste, he was employed as a Scientific
Reviewer/Biomedical Engineer for the FDA, where he was responsible for the
review of scientific, technical, pre-clinical and clinical data submitted in
support of the safety and effectiveness of both interventional and general
cardiovascular devices. He holds a BS degree in Biological Sciences and an MS
degree in Bioengineering, both from Clemson University, where his research
focused on characterization and use of materials in a biological environment. He
also served in the US Army as a Field Combat Medical Specialist.

         ADAM G. LOWE became a Director of Oncologix and President and Chief
Operating Officer of Oncologix upon the Merger. He had been a consultant to JDA
from May 2006 until the Merger. Previously, since June 2005, he and Mr. Andrew
Green (see above) were employed by NeoMedica, LLC, a consulting group owned by
them, that specialized in executive level medical device consulting for clients
that included early stage ventures dealing with Class III vascular brachytherapy
devices involving cardiology, ophthalmology, orthopedics, and electrophysiology.

                                       36

<PAGE>


Prior to that, from 1999, he was employed by the Novoste Corporation (a publicly
traded medical device company) as a corporate officer in the areas of Quality
Assurance, Regulatory Affairs and Operations dealing with Class III vascular
brachytherapy devices. Before his employment by Novoste, he was employed by C.R.
Bard, Inc. from 1988 until 1991 and again from 1993 until 1999 in various
quality assurance positions in the areas of oncology, radiology and urology with
his last being as Vice President of Quality. He was employed by Johnson &
Johnson from 1991 until 1993. He holds a BS-Materials Science and Engineering
degree with a concentration in polymer science from North Carolina State
University.

         STANLEY L. SCHLOZ has been a Director since October 2003 and President
since November 2004. Mr. Schloz retired from Motorola in 1998 after a 32-year
career in positions advancing from engineering through senior business
management. As Director, Tactical Systems Operations of the Space and Systems
Technology Group he was responsible for the strategic direction and performance
of the electronic fuse business with over $150,000,000 in annual sales, serving
US and foreign governments, along with prime contractors. His organization
consisted of over 400 program management, engineering, marketing, and
manufacturing associates. Mr. Schloz has been engaged in business management
consulting since July 2000. He holds the degree of Bachelor of Science in
Electrical Engineering from Iowa State University and has done advanced business
studies at Arizona State University.

         ANDREW KENNEDY, MD, became a director of the Company on July 26, 2006,
and a Director and Officer of our subsidiary, Oncologix Corporation upon the
merger. The major part of his time and efforts will continue to be applied to
his position as co-medical director for Wake Radiology Oncology Services in
Cary, North Carolina, where he has been since 2002 and where his primary
activity is providing patients with treatments for cancer, specializing in
gastrointestinal cancers, as well as cancers of the breast, lung and cervix.
From 1997 until 2002, he was an associate professor in the Radiation Oncology
and head of GI radiation oncology at The University of Maryland School of
Medicine, and Residency program director. He is an internationally known
radiation oncologist He has given numerous presentations on radiation therapy
for the treatment of colorectal and liver cancer, and was instrumental in
reintroducing an important new treatment for liver cancer, called infusion of
microspheres, which offers hope to patients who have not had success with
chemotherapy. He developed the most commonly used protocol in the US for
infusion of microspheres and is the recipient of more than $900,000 in research
grants to further investigate this and other cancer treatments. He has written
many peer-reviewed scientific papers, articles, book chapters and abstracts on
radiation oncology and has been invited to give presentations on radiation
therapy for GI cancers and infusion of microspheres at the premier medical
conferences in the United States, Asia and Europe. He is a graduate of Loma
Linda School of Medicine, in Loma Linda, California, and completed his residency
at The University of North Carolina at Chapel Hill, where, as chief resident,
and later a research fellow, he completed significant work in three-dimensional
treatment planning (3D external beam radiation therapy) and radiobiology
research.

         BARRY GRIFFITH has been a director of the company since December of
2004. Mr. Griffith brings 15 years of early stage and upstart 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 Northeast Area Sales Manager with
Cardiovascular Systems Inc. Prior to that, he was Director of Sales for Calypso
Medical Technologies and held the Western Area Director roles with Novoste and
Isoray. Isoray is introducing the new Prostate Brachytherapy Isotope Cesium 131.

         JUDY LINDSTROM became a director of the Company on June 26, 2007. She
was Chief Operating Officer of the U.S. division of Portland Orthopedics from
2000 through 2006, a privately-held company headquartered in Sydney, Australia.
Since September, 2006, she has also been a director and business consultant for
Genis, a private company in Iceland developing a carbohydrate to regenerate true
bone. From 1998 to 2001, she operated her own medical device consulting company,
JL International. From 1996 to 1998, she was Executive Vice President, Global
Sales and Marketing, for Wright Medical Technology, Inc. She was President and
Chief Executive Officer of Neovision from 1995 to 1996. From 1991 to 1994, she
was President for MicroAire Surgical Instruments, Inc. Ms. Lindstrom also served
as General Manager for two operating divisions of Baxter International, V.
Mueller Endoscopy (1991) and Edward Orthopedics (1988 - 1991). She was the first
woman promoted to General Manager for a Baxter operating unit. From 1991 - 1996,
Ms. Lindstrom served on the board of directors of Everest Medical Corporation (a
NASDAQ listed company prior to its acquisition in April, 2000) and in 1994
served on the board of AdvaMed (formerly the Health Industry Manufacturers
Association).

                                       37

<PAGE>


         STEVEN KURTZMAN, MD. was elected to our Board of Directors on June 25,
2007. He previously served as a director of our subsidiary, Oncologix
Corporation upon the Merger. Since December 2005, he has been an advisor to our
Company and has been the Medical Director of IsoRay Medical, Inc. a publicly
traded company since January 2006. IsoRay manufactures and markets radiation
devices for brachytherapy primarily for the treatment of prostrate cancer. He
has also been Medical Director of Xoft Microtube, Inc. since January 2007. Xoft
manufactures miniaturized x-ray tubes for use in High Dose Rate Brachytherapy
applications. He has, since 1998, been practicing medicine in the San Francisco,
California, Bay area specializing in radiation oncology. He is currently the
Director of Brachytherapy for Western Radiation Oncology, P.C. He is considered
an expert in the management of prostate cancer and has lectured on and taught
prostate brachytherapy nationally. He holds a BA from Cornell University and is
a graduate of Case Western Reserve University School of Medicine. He completed
his residency training in radiation oncology at the Hospital of the University
of Pennsylvania.

         MICHAEL A. KRAMARZ 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
and accounting 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.

     ************

         ANTHONY SILVERMAN, who resigned as a member of our Board of Directors
on October 12, 2007, continues to assist and advise us in connection with our
financing efforts, is the holder of approximately $880,000 of our short term
debt (now due and payable on January 14, 2008, and is the holder, together with
his affiliates, of 6,433,484 shares of our common stock. Although Mr. Silverman
has consented to extend the due dates of this indebtedness several times and has
indicated his intention to continue to do so, there is no assurance of continued
extensions or that, if granted, such consent will not be given subject to such
conditions as Mr. Silverman may deem appropriate. Because of these continuing
relationships, it is possible that Mr. Silverman may be considered to be an
"affiliate" of the Company. He is the General Partner of Katsinam Partners, LP,
a private investment fund located in Scottsdale, Arizona that invests in micro
and small-cap public companies. Katsinam holds 1,998,000 shares of our common
stock and 40,000 warrants to purchase shares of our common stock. Mr. Silverman
also manages his personal investments. Mr. Silverman has been a shareholder of
BestNet since April 2002. Mr. Silverman was Founder, Chairman and CEO of
Paradise Valley Securities from 1987 to 1999. For most of his 30-year career in
the securities business, Mr. Silverman concentrated in transactions for the
financing of micro-cap and small-cap companies. Mr. Silverman has led financings
aggregating over $500 million for close to 100 companies, including diverse
industries such as airlines, food products, telecommunications, retail, media
and life sciences.


SECTION 16(A) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE

         Section 16(a) of the Exchange Act requires Oncologix's directors and
officers, and persons who own more than 10% of a registered class of Oncologix's
equity securities to file reports of ownership and changes in ownership with the
Securities and Exchange Commission. Officers, directors and greater than 10%
stockholders are required by Securities and Exchange Commission regulation to
furnish Oncologix with copies of all Section 16(a) forms they file.

         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, 2007.

                                       38

<PAGE>
<TABLE>
<CAPTION>


ITEM 10.  EXECUTIVE COMPENSATION

         The following table summarizes all compensation paid for services
rendered to Oncologix for the fiscal years ended August 31, 2007 and 2006 by our
Chief Executive Officer and our other employee whose aggregate cash compensation
exceeded $100,000 (the "Named Executive Officers"). 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
                                                                                 Nonequity        deferred     All Other
Name and Principal                                        Stock       Option   incentive plan    compensation   compens-   All Other
    Position                Year    Salary    Bonus ($)  awards($)  awards($)  compensation($)   earnings($)    ation($)   Total($)
-------------------------   ----   --------   --------   --------   --------   --------------     ---------     --------   --------
<S>                         <C>    <C>        <C>        <C>        <C>        <C>                <C>           <C>        <C>
Andrew M. Green             2007   $183,333   $   --     $   --     $  3,104   $   --             $   --        $   --     $186,437
CEO and President (1)       2006   $ 15,000   $   --     $   --     $  5,655   $   --             $   --        $   --     $ 20,655


Stanley L. Schloz           2007   $ 62,333   $   --     $   --     $  3,104   $   --             $   --        $ 11,000   $ 76,437
Chariman of the Baord (2)   2006   $ 52,467   $ 10,000   $   --     $ 27,957   $   --             $   --        $ 11,700   $102,124


Dr. Andrew M. Kennedy       2007   $220,000   $   --     $   --     $  3,104   $   --             $   --        $   --     $223,104
CMO (3)                     2006   $ 20,000   $   --     $   --     $  5,655   $   --             $   --        $   --     $ 25,655


Adam Lowe                   2007   $183,333   $   --     $   --     $  5,326   $   --             $   --        $   --     $188,659
COO (4)                     2006   $ 15,000   $   --     $   --     $   --     $   --             $   --        $   --     $ 15,000


James C. Reed (5)           2007   $ 42,147   $   --     $   --     $ 74,127   $   --             $   --         $   --     $116,274
                            2006   $   --     $   --     $   --     $   --     $   --             $   --         $   --     $   --


     (1)  Mr. Green was appointed to the Company's Board of Directors on July
          26, 2006. Mr. Green has an employment agreement with the Company's
          subsidiary, Oncologix Corporation, where his is to be paid an annual
          salary of $180,000. On June 25, 2007 the Board of Directors appointed
          Mr. Green Chief Executive Officer and approved an increase in Mr.
          Green's annual salary to $200,000, On July 26, 2006, Mr. Green was
          granted options to purchase 20,000 shares of our common stock at a per
          share exercise price of $0.35 per share. These options vest as
          follows: 1/3 vest immediately; 1/3 vest in one year; 1/3 vest in two
          years. On July 26, 2006, Mr. Green was granted options to purchase
          125,000 shares of our common stock at a per share exercise price of
          $0.35. These options were subsequently cancelled On December 19, 2006,
          Mr. Green was granted options to purchase 10,000 shares of our common
          stock at a per share exercise price of $0.45 and vest in one year.

     (2)  Mr. Schloz was appointed President on November15, 2004. Pursuant to
          his agreement, he was to receive annual compensation of $54,000. On
          July 27, 2006, the Company's Board of Directors authorized an increase
          in annual compensation to $68,000. Also on that date, the Board of
          Directors authorized a $10,000 bonus. Mr. Schloz also receives $12,000
          annually for service on the Company's Board of Directors. On June 25,
          2007, Mr. Schloz was elected as the Company's Chairman of the Board
          and subsequently stepped down as President and Chief Executive
          Officer. On March 24, 2005, Mr. Schloz was also granted options to
          purchase an aggregate of 20,000 shares of our common stock at an
          exercise price of $.165 per share. These options vest immediately. On
          December 5, 2005, Mr. Schloz was also granted options to purchase an
          aggregate of 10,000 shares of our common stock at an exercise price of

                                       39
</TABLE>

<PAGE>


          $.24 per share as part of the Company's annual grant program for
          service on the Company's Board of Directors. These options vest in one
          year. On March 22, 2006, Mr. Schloz was granted options to purchase an
          aggregate of 100,000 shares of our common stock at an exercise price
          of $.40. These options vest in one year. On December 19, 2006, Mr.
          Schloz was granted options to purchase 10,000 shares of our common
          stock at a per share exercise price of $0.45 and vest in one year.

     (3)  Dr. Kennedy was appointed to the Company's Board of Directors on July
          26, 2006. Dr. Kennedy has an employment agreement with the Company's
          subsidiary, Oncologix Corporation, where his is to be paid an annual
          salary of $240,000. On July 26, 2006, Dr. Kennedy was granted options
          to purchase 20,000 shares of our common stock at a per share exercise
          price of $0.35 per share. These options vest as follows: 1/3 vest
          immediately; 1/3 vest in one year; 1/3 vest in two years. On December
          19, 2006, Dr. Kennedy was granted options to purchase 10,000 shares of
          our common stock at a per share exercise price of $0.45 and vest in
          one year.

     (4)  Mr. Lowe has an employment agreement with the Company's subsidiary,
          Oncologix Corporation, where his is to be paid an annual salary of
          $180,000. On June 25, 2007 the Board of Directors appointed Mr. Lowe
          Chief Operating Officer and approved an increase in Mr. Lowe's annual
          salary to $200,000, On July 26, 2006, Mr. Lowe was granted options to
          purchase 125,000 shares of our common stock at a per share exercise
          price of $0.35. These options were subsequently cancelled. On Julne
          25, 2007, Mr. Lowe was granted options to purchase 20,000 shares of
          our common stock at a per share exercise price of $0.38. These options
          vest as follows: 1/3 vest immediately; 1/3 vest in one year; 1/3 vest
          in two years.

     (5)  Mr. Reed was hired by Oncologix as our Director of Radiation Science
          and Radiation Safety Officer on April 30, 2007 where he is to be paid
          an annual salary of $125,000. Mr. Reed was granted options to purchase
          250,000 shares of our common stock at a per share exercise price of
          $0.44. These optiond vest as follows: 1/4 vest immediately and 3/4
          vest in one year.

EMPLOYMENT AGREEMENTS

         On July 26, 2006, the Company, through its subsidiary Oncologix
Corporation, entered into an employment agreement with Dr. Andrew Kennedy
whereby Dr. Kennedy is to serve as the Company's Chief Scientific and Medical
Officer. The term of the agreement is two years, and will automatically extend
for additional one year term on each anniversary date unless the term is
modified or terminated in accordance with the terms of the agreement at least
sixty days prior to such anniversary dates. The agreement provides that Dr.
Kennedy will receive annual compensation of $240,000. Dr. Kennedy is to
participate in any benefit plans provided to executive employees of the Company,
and to a bonus at the discretion of the Board of Directors. He waived his salary
for the months of August and September, 2007.

         On July 26, 2006, the Company, through its subsidiary Oncologix
Corporation, entered into an employment agreement with Andrew Green whereby Mr.
Green is to serve as the Company's Chief Executive Officer. The term of the
agreement is two years, and will automatically extend for additional one year
term on each anniversary date unless the term is modified or terminated in
accordance with the terms of the agreement at least sixty days prior to such
anniversary dates. The agreement provides that Mr. Green will receive annual
compensation of $180,000. Mr. Green is to participate in any benefit plans
provided to executive employees of the Company, and to a bonus at the discretion
of the Board of Directors. Effective as of July 1, 2007, Mr. Green's annual
compensation was increased to $200,000.

                                       40

<PAGE>
<TABLE>
<CAPTION>


         On July 26, 2006, the Company, through its subsidiary Oncologix
Corporation, entered into an employment agreement with Adam Lowe whereby Mr.
Lowe is to serve as the Company's Chief Operating Officer. The term of the
agreement is two years, and will automatically extend for additional one year
term on each anniversary date unless the term is modified or terminated in
accordance with the terms of the agreement at least sixty days prior to such
anniversary dates. The agreement provides that Mr. Lowe will receive annual
compensation of $180,000. Mr. Lowe is to participate in any benefit plans
provided to executive employees of the Company, and to a bonus at the discretion
of the Board of Directors. Effective as of July 1, 2007, Mr. Lowe's annual
compensation was increased to $200,000.



                                       OUTSTANDING EQUITY AWARDS AT FISCAL YEAR END



                                                                  Option awards
                              --------------------------------------------------------------------------------------------

                                                                 Equity incentive
                                                                   plan awards:
                                Number of         Number of          number of
                                securities       securities         securities
                                underlying       underlying         underlying
                               unexercised       unexercised        unexercised
Name and Principal               options           options           unearned         Option exercise    Option expiration
    Position                 (#) Exercisable  (#) Unexercisable     options (#)          price($)              date
    --------                 ---------------  -----------------     -----------          --------              ----

<S>                                    <C>                <C>             <C>              <C>               <C>
Andrew M. Green                        13,333             6,667            --              $ 0.35            07/26/16
                                            -            10,000            --              $ 0.45            12/19/16


Stanley L. Schloz                      20,000              --              --              $ 0.40            10/22/13
                                        5,000              --              --              $ 0.27            12/17/13
                                       50,000              --              --              $ 0.35            01/05/14
                                       10,000              --              --              $ 0.24            12/05/15
                                      100,000              --              --              $ 0.40            03/22/13
                                         --              10,000            --              $ 0.45            12/19/16


Dr. Andrew M. Kennedy                  13,333             6,667            --              $ 0.35            07/26/16
                                         --              10,000            --              $ 0.45            12/19/16


Adam Lowe                               6,666            13,334            --              $ 0.38            06/25/17

                                                            41

</TABLE>

<PAGE>
<TABLE>
<CAPTION>


                                  OUTSTANDING EQUITY AWARDS AT FISCAL YEAR END
                                                  (Continued)



                                                             Stock awards
                              -----------------------------------------------------------------------------


                                                                         Equity incentive    Equity incentive
                                                                           plan awards:        plan awards:
                                                                            number of       market or payout
                                   Number of         Market value        unearned shares,   value of unearned
                              shares or units of  of shares or units      units or other     shares, units or
Name and Principal              stock that have   of stock that have     rights that have   other rights that
    Position                      not vested (#)      not vested ($)      not vested (#)    have not vested ($)
    --------                      --------------      --------------      --------------    -------------------

<S>                                    <C>               <C>                   <C>               <C>
Andrew M. Green                        --                $   --                --                $   --
                                       --                $   --                --                $   --


Stanley L. Schloz                      --                $   --                --                $   --
                                       --                $   --                --                $   --
                                       --                $   --                --                $   --
                                       --                $   --                --                $   --
                                       --                $   --                --                $   --
                                       --                $   --                --                $   --


Dr. Andrew M. Kennedy                  --                $   --                --                $   --
                                       --                $   --                --                $   --


Adam Lowe                              --                $   --                --                $   --


                                                    41(Cont)

</TABLE>

<PAGE>


Options Grants
--------------

         On December 19, 2006, Dr. Kennedy and Messrs. Schloz, Griffith,
Silverman and Green were each granted options to purchase an aggregate of 10,000
shares of our common stock at an exercise price of $0.45 per share. These
options vest in one year.

         On June 25, 2007, Mr. Lowe was granted options to purchase an aggregate
of 20,000 shares of our common stock at an exercise price of $0.38 per share.
These options vest as follows: one-third vest immediately, one-third vest in one
year, one-third vest in two years.

         On June 25, 2007, Dr. Kurtzman was granted options to purchase an
aggregate of 20,000 shares of our common stock at an exercise price of $0.38 per
share. .These options vest as follows: one-third vest immediately, one-third
vest in one year, one-third vest in two years.

         On June 26, 2007, Ms. Lindstrom was granted options to purchase an
aggregate of 20,000 shares of our common stock at an exercise price of $0.37 per
share. These options vest as follows: one-third vest immediately, one-third vest
in one year, one-third vest in two years.

         On July 6, 2007, Ms. Lindstrom, Mr. Griffith and Dr. Kurtzman were each
granted options to purchase an aggregate of 100,000 shares of our common stock
at an exercise price of $0.40 per share. These options vest in one year.


Option Exercise
---------------

         During the fiscal year ended August 31, 2007, Mr. Schloz exercised
20,000 options at an exercise price of $0.165 per share resulting on funds to
the Company of $3,300. 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.

                                       42

<PAGE>
<TABLE>
<CAPTION>


                                                        DIRECTOR COMPENSATION


                                                                                     Non-qualified
                           Fees 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($)
    --------                --------   ---------     ---------    ---------------     -----------    ---------------      --------
<S>                         <C>          <C>         <C>               <C>               <C>              <C>             <C>
Barry Griffith              $ 11,000     $  --       $ 22,636          $  --             $  --            $  --           $ 33,636

Dr. Steven Kurtzman         $ 11,000     $  --       $ 24,858          $  --             $  --            $  --           $ 35,858

Judy Lindstom               $  1,000     $  --       $ 24,722          $  --             $  --            $  --           $ 25,722

Anthony Silverman           $ 11,000     $  --       $  3,104          $  --             $  --            $  --           $ 14,104


         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 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. In addition, each
non-employee board member receives a monthly director fee of $1,000.

         All of the directors waived all fees for the months of August and
September, 2007, and Dr. Kennedy waived his salary for the same period. In
addition, Mr. Schloz waived his salary as Chairman for the month of August,
2007.

                                       43
</TABLE>

<PAGE>
<TABLE>
<CAPTION>

ITEM 11. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND
         RELATED STOCKHOLDER MATTERS

     The following table sets forth as of November 12, 2007, 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 (1)           of Beneficial Owner (2)(3)          of Class (3)
--------------        -----------------------           --------------------------          ------------
<S>                   <C>                                      <C>       <C>                   <C>
Common Stock          Andrew M. Green                          3,785,123 (4)                   5.32%

Common Stock          Adam G. Lowe                             3,768,456 (5)                   5.30%

Common Stock          Stanley L. Schloz                        1,176,992 (6)                   1.65%

Common Stock          Barry Griffith                             399,000 (7)                   0.56%

Common Stock          Andrew Kennedy, MD                      13,973,071 (9)                  19.66%

Common Stock          Steven Kurtzman, MD                        306,666 (10)                  0.43%

Common Stock          Judy Lindstrom                               6,666 (11)                  0.01%

Common Stock          Michael Kramarz                            255,000 (12)                  0.36%

Common Stock          Anthony Silverman                        6,433,484 (8)                   8.86%
                      7625 E Via Del Reposo
                      Scottsdale, AZ  85258

Common Stock          Jeff Franco                             13,949,738 (13)                 19.63%
                      6501 Autumn Wind Circle
                      Clarksville, MD  21029

Common Stock          All directors and
                      executive officers as                   30,106,258                      40.66%
                      a group

------------------------------------------------------------------------------------------------------
     Less than 1%

     (1)  Unless otherwise noted, the address of each holder is 3725
          Lawrenceville-Suwanee Rd., Suite B-4, Suwanee, GA 30024.

     (2)  A person is deemed to be the beneficial owner of securities that can
          be acquired within 60 days from November 12, 2007 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 71,064,868
          shares of Common Stock outstanding as of November 12, 2007

     (4)  Includes 23,333 shares subject to vested options and direct ownership
          of 3,761,790 shares, of which 2,821,342 are subject to an escrow
          agreement.

     (5)  Includes 6,666 shares subject to vested options and direct ownership
          of 3,761,790 shares, of which 2,821,342 are subject to an escrow
          agreement.

     (6)  Includes 195,000 shares subject to vested options, direct ownership of
          250,000 shares issuable upon conversion of a convertible promissory
          note and direct ownership of 731,992 shares, but does not include any
          shares held by Katsinam Partners, LP, of which Mr. Schloz has no power
          to vote such shares, although his is the holder of a 7.8% limited
          partnership interest in Katsinam Partners, LP.

     (7)  Includes 390,000 shares subject to vested options and 9,000 shares of
          stock underlying units held.

     (8)  Includes 90,000 shares subject to vested options, direct ownership of
          2,918,400 shares, direct ownership of warrants to purchase 50,000
          shares, direct ownership of 1,337,084 shares issuable upon conversion
          of two promissory notes and 1,998,000 shares and 40,000 warrants to
          purchase shares owned by Katsinam Partners, LP, of which Mr. Silverman
          is the holder of a 17.64% limited partnership interest and is the
          General partner with sole power to vote such shares.

                                       44
</TABLE>

<PAGE>


     (9)  Includes 23,333 shares subject to vested options and direct ownership
          of 13,949,738 shares indicated of which 8,369,842 are subject to an
          escrow agreement.

     (10) Includes 306,666 shares subject to vested options. (11) Includes 6,666
          shares subject to vested options. (12) Includes 255,000 shares subject
          to vested options.

     (13) Includes direct ownership of 13,949,738 shares, of which 8,369,842 are
          subject to an escrow agreement.


ITEM 12. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

         On March 23, 2005, we issued to Anthony Silverman, who was at the time
a member of our Board of Directors, a Convertible Promissory Note in the
principal amount of $110,000, the principal and interest of which are
convertible at the option of the holder into 916,667 shares of the Company's
common stock at a price of $0.12 per share. The Note was originally due on March
31, 2006, now extended to January 14, 2008, and bears interest at the rate of
10% per annum, payable monthly and is convertible into our common stock. As of
August 31, 2007, the unpaid principal balance on this note is $80,450, which is
convertible into 670,417 shares of our common stock.

         On July 7, 2006, we issued another Note to Mr. Silverman in the
principal amount of $200,000 convertible into our common stock at a conversion
price of $0.30 per share. This latter note was originally due at the end of 90
days following the date of issue, accrues interest at the rate of 10% per annum,
and is convertible into our common stock at a conversion price of $0.30 per
common share. Mr. Silverman subsequently agreed to extend this note until
January 14, 2008.

         Under the terms of our acquisition of JDA in July, 2006, we issued
43,000,000 shares of our common stock to the previous owners of JDA, including
three current directors, Dr. Andrew Kennedy, Andrew Green and Adam Lowe. Of
these shares, 29,843,160 were placed into escrow pending the achievement of
certain development and operating goals. These escrowed shares were not included
in the calculation of the purchase price of JDA and will be included in that
calculation if and to the extent that the applicable contingencies are resolved
and the shares are released from escrow. We released 7,460,790 shares upon the
completion of our "Development Phase." The development and operating goals that
relate to the release of the remaining shares, and the number of shares to be
released at the time the goal is achieved are as follows: (i) 9,325,988 shares
upon the completion of our "Pre-Clinical Testing Phase;" and (ii) 13,056,382
shares upon the completion of our "Clinical Approval Phase."

         On September 30, 2006, we issued additional convertible promissory
notes to Mr. Silverman in the aggregate principal amount of $175,000, due
January 31, 2007 and bearing interest at the rate of 10% per annum and are
convertible into our common stock at a price of $0.20 per share. The company
recognized a beneficial conversion features related to these notes in the amount
of $50,000 which was expensed in the first six months of fiscal 2007. On January
31, 2007, these notes were assigned by Mr. Silverman to two accredited investors
and were converted into 875,000 common shares.

         On December 15, 2006, we issued a $200,000 16-day promissory note to
Mr. Silverman for bridge financing. This note accrues interest at a rate of 10%
per annum. Mr. Silverman has agreed to extend this note until January 14, 2008.

         On April 13, 2007, we issued a $400,000 45-day promissory note to Mr.
Silverman for bridge financing. This note accrues interest at a rate of 8% per
annum. Payment of this note has been extended until January 14, 2008.

         On September 4, 2007, we borrowed $150,000 from Mr. Stanley L. Schloz,
one of our Directors, on a note bearing interest at the rate of 1% per month,
convertible into common stock at the rate of $0.20 per share and originally due
December 15, 2007. We have repaid $100,000 of that amount and intend to pay the
remaining principal balance, plus accrued interest, from the proceeds of this
Offering.

                                       45

<PAGE>

         Under the terms of our acquisition of JDA in July, 2006, we issued
43,000,000 shares of our common stock to the previous owners of JDA, including
three of whom are current directors, Dr. Andrew Kennedy, Andrew Green and Adam
Lowe. Of these shares, 29,843,160 were placed into escrow pending the
achievement of certain development and operating goals. These escrowed shares
were not included in the calculation of the purchase price of JDA and will be
included in that calculation if and to the extent that the applicable
contingencies are resolved and the shares are released from escrow. We released
7,460,790 shares upon the completion of our "Development Phase." The development
and operating goals that relate to the release of the remaining shares, and the
number of shares to be released at the time the goal is achieved are as follows:
(i) 9,325,988 shares upon the completion of our "Pre-Clinical Testing Phase";
and (ii) 13,056,382 shares upon the completion of our "Clinical Approval Phase."

                                       46

<PAGE>
<TABLE>
<CAPTION>


ITEM 13. EXHIBITS, LIST AND REPORTS ON FORM 8-K.

(a)(1) The financial statements listed in the index set forth in Item 7 of this
Form 10-KSB are filed as part of this report.

(a)(2) Exhibits

       Number                                   Description of Filing                               Method
       ------                                   ---------------------                               ------

         <S>            <C>                                                                          <C>
         2.1           Agreement of Merger and Plan of Reorganization between BestNet                (9)
                       Communications Corp, Oncologix Corporation and JDA Medical
                       Technologies, Inc.

         3.1           Articles of Incorporation, as originally filed with the Nevada                (1)
                       Secretary of State on February 19, 1998, and as amended to date

         3.3           Certificate of Amendment to Articles of Incorporation, as originally          (6)
                       filed with the Nevada Secretary of State.

         3.4           Amended Certificate of Designations, Rights, Preferences and                  (6)
                       Limitations of Series A Convertible Preferred Stock, as originally
                       filed with the Nevada Secretary of State on November 19, 2003.

         3.5           Amended Certificate of Designations, Rights, Preferences and                  (6)
                       Limitations of Series B Convertible Preferred Stock, as originally
                       filed with the Nevada Secretary of State on November 19, 2003.

         3.6           Amended Certificate of Designations, Rights, Preferences and                  (6)
                       Limitations of Series C Convertible Preferred Stock, as originally
                       filed with the Nevada Secretary of State on November 19, 2003.

         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.

          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           (3)
                       the Placement Agent

        10.2           Registration Rights Agreement between Wavetech, the Investor and the          (3)
                       Placement Agent

        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)           (5)
                       Inc. and Wavetech International, Inc. dated October 25,
                       1999

        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.,           (5)
                       Interpretel (Canada) Inc. and Softalk, Inc. dated November 13, 1999

        10.10          Minutes of Settlement between BestNet Communications Corp. and                (8)
                       Softalk, Inc.

        10.11          Lease Agreement Dated November 1, 2005, by and between Noto's                 (10)
                       Properties LLC. and Bestnet

        10.12          Lease Agreement Dated July 25, 2006, by and between R & J Ventures            (10)
                       LLC. and Oncologix Corporation

                                       47

</TABLE>

<PAGE>
<TABLE>
<CAPTION>


        <S>            <C>                                                                          <C>
        10.13          Lease Agreement Dated July 12, 2006, by and between Office Suites Plus        (10)
                       and Oncologix Corporation

        10.14          Form of Note and Warrant Purchase Agreement between BestNet and               (10)
                       Mountainview Opportunistic Growth Fund LP

        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.                                      *

        14.1           Oncologix Tech, Inc. Code of Ethics                                           (6)

         21            Subsidiaries of the Registrant                                                 *

        32.1           Section 906 Certification of Andrew M. Green                                   *

        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 Semple, Marchal & Cooper, LLP.                                      *

----------------------

*        Filed herewith

(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 reverence 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.

                                       48
</TABLE>

<PAGE>


(b) Reports on Form 8-K Filed during the Last Quarter of The Period Covered by
This Report are as Follows:

  September 4, 2007         Oncologix Tech, Inc. issues convertible promissory
                            note with Chairman of the Board.

  September 13, 2007        Oncologix Tech, Inc. issues press release dated
                            September 10, 2007.

  October 12, 2007          Resignation of Director from Oncologix Tech, Inc.
                            Board of Directors

  November 26, 2007         Oncologix Tech, Inc. issues press release dated
                            November 26, 2007.


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, 2007 and 2006 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, 2007          August 31, 2006
         (i)     Audit Fees              $   105,000               $   90,000
         (ii)    Audit Related Fees      $    41,000               $   57,000
         (iii)   Tax Fees                $     9,000               $    7,000
         (iv)   All Other Fees           $      --                 $     --

     Audit related fees for the year ended August 31, 2006 primarily relate to
the audit of JDA Medical Technologies, Inc., an entity that Oncologix Tech, Inc.
(formerly Bestnet Communications Corp.) acquired during the fourth quarter of
fiscal 2006.

                                       49

<PAGE>


                                   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:  December 14, 2007                    By:   /s/  Andrew M. Green
                                               --------------------------------
                                            Name:      Andrew M. Green
                                            Title:     Chief Executive Officer
                                                       and President


Date:  December 14, 2007                    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/  Andrew M. Green                               Date:  December 14, 2007
   ------------------------------------
          Andrew M. Green,
          Chief Executive Officer,
          President and Director

By:  /s/  Michael A. Kramarz                            Date:  December 14, 2007
   ------------------------------------
          Michael A. Kramarz,
          Chief Financial Officer

By:  /s/  Stanley L. Schloz                             Date:  December 14, 2007
   ------------------------------------
          Stanley L. Schloz,
          Chairman of the Board

By:  /s/  Barry Griffith                                Date:  December 14, 2007
   ------------------------------------
          Barry Griffith, Director

By:  /s/  Andrew Kennedy                                Date:  December 14, 2007
   ------------------------------------
       Andrew Kennedy, MD, Director

By:  /s/  Adam G. Lowe                                  Date:  December 14, 2007
   ------------------------------------
          Adam G. Lowe, Director

By:  /s/  Judy Lindstrom                                Date:  December 14, 2007
   ------------------------------------
          Judy Lindstrom, Director

By:  /s/  Steven Kurtzman                               Date:  December 14, 2007
   ------------------------------------
          Steven Kurtzman, MD, Director

                                       50