UNITED
STATES
 SECURITIES
AND EXCHANGE COMMISSION
 Washington,
D.C. 20549
 
 FORM
10-Q
 
 x
              QUARTERLY
      REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF
      1934FOR
      THE QUARTERLY PERIOD ENDED JUNE 30, 2009o
              TRANSITION
      REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF
      1934For
      the transition period
  from___________to____________
 
 Commission
File Number:0-21092
 
 OCTuS,
Inc.
 (Exact
name of registrant as specified in its charter)
 Nevada
              33-0013439(State
      or other jurisdiction of incorporation or organization)
              (I.R.S.
      Employer Identification No.)
 
 803
      Second Street Suite 303, Davis, California 95616(Address
      of principal executive offices)
 
 (530)
564-0200
 (Issuer’s
Telephone Number)
 
 719
Second Street, Suite 9
 Davis,
CA 95616
 (Former
name, former Address and former fiscal year, if changed since last report.)
  
 Indicate
by check mark whether the registrant  (1) has 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.x
Yes  o
No
  Indicate
by check mark whether the registrant is a large accelerated file, an accelerated
filer, a non-accelerated filer, or a smaller reporting company. See the
definitions of "large accelerated filer," "accelerated filer" and "smaller
reporting company" in Rule 12b-2 of the Exchange Act.
  Large
      accelerated filer
              o
              Accelerated
      filer
              oNon-accelerated
      filer
              o
              Smaller
      reporting company
              x
  Indicate
by check mark whether the registrant is a shell company (as defined in Rule
12b-2 of the Exchange Act).x  Yes  o No
  As of
August 11, 2009, the registrant had 43,687,072 shares of common stock
outstanding.
  1
  
 TABLE
OF CONTENTS
 
 PART I. FINANCIAL
      INFORMATION
              PageItem
      1.     Financial StatementsConsolidated
      Balance Sheets as of June 30, 2009 and December 31, 2008
      (Unaudited)
              3Consolidated
      Statements of Operations for the Three Months and Six Months Ended June
      30, 2009 and  June 30, 2008 (Unaudited)
              4Consolidated
      Statements of Cash Flows for the Six Months Ended June 30, 2009 and June
      30, 2008 (Unaudited)
              5Notes
      to Consolidated Financial Statements (Unaudited)
              6Item
      2.    Management’s Discussion and Analysis of
      Financial Condition and Results of Operations
              10Item
      3.    Quantitative and Qualitative Disclosures About
      Market Risk
              12Item
      4.    Controls and Procedures
              12PART
      II. OTHER INFORMATIONItem
      1.    Legal Proceedings
              13Item
      1A. Risk Factors
              13Item
      2.    Unregistered Sales of Equity Securities and Use
      of Proceeds
              13Item
      3.    Defaults upon Senior Securities
              13Item
      4.    Submission of Matters to a Vote of Security
      Holders
              13Item
      5.    Other Information
              13Item
      6.    Exhibits
              13SIGNATURES
              14
  2
 
 PART
1. FINANCIAL INFORMATION
 Item 1.  Financial
Statements
 OCTuS,
INC.
 CONSOLIDATED
BALANCE SHEETS
 (Unaudited)
   June
      30,
                      2009
                    
                    
                    December
      31, 2008ASSETSCURRENT
      ASSETSCash
                    
                    $
                    97,818
                    
                    
                    
                    -Total
      current assets
                    
                    
                    97,818
                    
                    
                    
                    -OTHER
      ASSETSDeposits
                    
                    
                    1,175
                    
                    
                    
                    -TOTAL
      ASSETS
                    
                    $
                    98,994
                    
                    
                    $
                    -LIABILITIES
      AND STOCKHOLDERS' DEFICITCURRENT
      LIABILITIESAccounts
      payable and accrued liabilities
                    
                    $
                    179,602
                    
                    
                    $
                    32,151Accounts
      payable and accrued liabilities - related parties
                    
                    
                    22,073
                    
                    
                    
                    43,711Notes
      payable
                    
                    
                    5,000
                    
                    
                    
                    -Notes
      payable - related parties
                    
                    
                    10,000
                    
                    
                    
                    -Convertible
      notes, current portion
                    
                    
                    57,500
                    
                    
                    
                    441,853Total
      current liabilities
                    
                    
                    274,175
                    
                    
                    
                    520,715LONG
      TERM LIABILITIESConvertible
      notes, net of unamortized discount of $99,758 and $0,
      respectively
                    
                    
                    423,281
                    
                    
                    
                    -Total
      long-term liabilities
                    
                    
                    423,281
                    
                    
                    
                    -Commitments
      and contingencies
                    
                    
                    -
                    
                    
                    
                    -STOCKHOLDERS'
      DEFICITSeries
      A preferred stock, $0.001 par value, 300,000 sharesauthorized,
      no shares issued or outstanding
                    
                    
                    -
                    
                    
                    
                    -Series
      B preferred stock, $0.001 par value, 910,000 sharesauthorized,
      no shares issued or outstanding
                    
                    
                    -
                    
                    
                    
                    -Series
      C 6% cumulative preferred stock, $0.001 par value,250,000
      shares authorized, no shares issued and outstanding
                    
                    
                    -
                    
                    
                    
                    -Undesignated  preferred
      stock, $0.001 par value,540,000
      shares authorized,  no shares issued or
    outstanding
                    
                    
                    -
                    
                    
                    
                    -Common
      stock,  $0.001 par value, 100,000,000 shares
      authorized43,687,072
      and 13,437,072 shares issued and outstanding, respectively
                    
                    
                    43,687
                    
                    
                    
                    13,437Additional
      paid-in capital
                    
                    
                    23,209,722
                    
                    
                    
                    22,857,472Accumulated
      deficit
                    
                    
                    (23,851,871
                    )
                    
                    
                    (23,391,624
                    )Total
      stockholders' deficit
                    
                    
                    (598,462
                    )
                    
                    
                    (520,715
                    )TOTAL
      LIABILITIES AND STOCKHOLDERS' DEFICIT
                    
                    $
                    98,994
                    
                    
                    $
                    -
 
  The
accompanying notes are an integral part of these unaudited consolidated
financial statements.
  3
  OCTuS,
INC.
 CONSOLIDATED
STATEMENTS OF OPERATIONS
 FOR
THE THREE AND SIX MONTHS ENDED JUNE 30, 2009 AND 2008
 (Unaudited)
 
 THREE
      MONTHS ENDED JUNE 30,
                      
                      
                      SIX
      MONTHS ENDED JUNE 30,2009
                      
                      
                      2008
                      
                      
                      2009
                      
                      
                      2008Revenues
                      
                      $
                      -
                      
                      
                      $
                      -
                      
                      
                      $
                      -
                      
                      
                      $
                      -General
      and administrative expenses
                      
                      
                      169,981
                      
                      
                      
                      14,223
                      
                      
                      
                      448,466
                      
                      
                      
                      23,339Loss
      from operations
                      
                      
                      (169,981
                      )
                      
                      
                      (14,223
                      )
                      
                      
                      (448,466
                      )
                      
                      
                      (23,339
                      )Interest
      expense
                      
                      
                      (3,055
                      )
                      
                      
                      (8,750
                      )
                      
                      
                      (11,781
                      )
                      
                      
                      (77,275
                      )Net
      loss
                      
                      $
                      (173,036
                      )
                      
                      $
                      (22,973
                      )
                      
                      $
                      (460,247
                      )
                      
                      $
                      (39,614
                      )Per
      share information - basic and dilutedNet
      loss per common share
                      
                      $
                      (0.00
                      )
                      
                      $
                      (0.00
                      )
                      
                      $
                      (0.01
                      )
                      
                      $
                      (0.00
                      )Weighted
      average shares outstanding
                      
                      
                      43,612,072
                      
                      
                      
                      13,437,072
                      
                      
                      
                      34,573,812
                      
                      
                      
                      13,437,072




The
accompanying notes are an integral part of these unaudited consolidated
financial statements.
  4
  OCTuS,
INC.
 CONSOLIDATED
STATEMENTS OF CASH FLOWS
 FOR
THE SIX MONTHS ENDED JUNE 30, 2009 AND 2008
 (Unaudited)
 
 2009
                  
                  
                  2008OPERATING
      ACTIVITIESNet
      loss
                  
                  $
                  (460,247
                  )
                  
                  $
                  (39,614
                  )Adjustments
      to reconcile net loss to net cashused
      in operating activities:Share-based
      compensation
                  
                  
                  282,500
                  
                  
                  
                  -Note
      discount amortization
                  
                  
                  242
                  
                  
                  
                  
                  -Change
      in operating assets and liabilities:Increase
      in accounts payable and accrued liabilities
                  
                  
                  147,450
                  
                  
                  
                  10,213Increase
      in accounts payable and accrued liabilities - related
    parties
                  
                  
                  14,049
                  
                  
                  
                  17,276Net
      cash used in operating activities
                  
                  
                  (16,006)
                  
                  
                  
                  (12,125
                  )INVESTING
      ACTIVITIESDeposits
      paid
                  
                  
                  (1,175)
                  
                  
                  
                  -Net
      cash used by financing activities
                  
                  
                  (1,175)
                  
                  
                  
                  -FINANCING
      ACTIVITIESProceeds
      from convertible notes payable
                  
                  
                  100,000
                  
                  
                  
                  -Proceeds
      from notes payable
                  
                  
                  5,000
                  
                  
                  
                  -Proceeds
      from notes payable - related parties
                  
                  
                  10,000
                  
                  
                  
                  12,125Net
      cash provided by financing activities
                  
                  
                  115,000
                  
                  
                  
                  12,125Net
      change in cash
                  
                  
                  97,819
                  
                  
                  
                  -CASH
      AT BEGINNING OF PERIOD
                  
                  
                  -
                  
                  
                  
                  -CASH
      AT END OF PERIOD
                  
                  $
                  97,819
                  
                  
                  $
                  -SUPPLEMENTAL
      CASH FLOW INFORMATION:Cash
      paid for interest
                  
                  $
                  -
                  
                  
                  $
                  -Cash
      paid for income taxes
                  
                  $
                  -
                  
                  
                  $
                  -NONCASH
      INVESTING AND FINANCING ACTIVITIES:Conversion
      of accrued interest into convertible note payable - related
      party
                  
                  $
                  38,686
                  
                  
                  $
                  -Debt
      discount from warrants issued with convertible debt
                  
                  $
                  100,000
                  
                  
                  $
                  -
 The
accompanying notes are an integral part of these unaudited consolidated
financial statements.
  5
 OCTuS,
Inc.
 Notes
to Consolidated Financial Statements
 (Unaudited)
   Note
1 – Summary of Significant Accounting Policies
 
 Financial
Statement Presentation
 
 The
accompanying unaudited consolidated financial statements of OCTuS, Inc. (“Octus”
or the “Company”) have been prepared in accordance with generally accepted
accounting principles for interim financial information and with the
instructions to Form 10-Q.  Accordingly, they do not include all of
the information and footnotes required by generally accepted accounting
principles for complete financial statements.  These financial
statements should be read in conjunction with the audited consolidated financial
statements and footnotes included thereto for the fiscal year ended December 31,
2008 for OCTuS, Inc. on Form 10-K, as filed with the Securities and Exchange
Commission.
 
 The
financial statements reflect all adjustments, consisting of normal recurring adjustments,
which, in the opinion of management, are necessary
for a fair presentation of the results for the periods shown.
 
 Organization
 
 OCTuS was
formed as a California corporation in 1983.  On December 29, 2001, a
majority of the shareholders voted to change our state of incorporation from
California to Nevada.  In December 2003, the change was completed and
OCTuS became a Nevada corporation.   OCTuS is a smart energy
management company developing, marketing and selling energy-efficient lighting
and cooling solutions that enable public sector and private organizations to
reduce their energy expenses. The company has developed OctusSEP (Smart Energy
Platform), a turnkey energy savings and demand response management program for
the energy management market in the United States.
 
 Principles
of Consolidation
 
 All of
our subsidiaries are inactive.  All significant intercompany
transactions and balances, if any, have been eliminated in
consolidation.
 
 Estimates
 
 The
preparation of financial statements in conformity with accounting principles
generally accepted in the United States of America requires management to make
estimates and assumptions that affect the reported amount of assets and
liabilities and disclosure of contingent assets and liabilities at the date of
the financial statements and the reported amounts of revenues and expenses
during the reporting period.  Actual results could differ from those
estimates.
 
 Loss
Per Share
 
 Basic
loss per common share (“EPS”) calculations were determined by dividing net loss
by the weighted average number of shares of common stock outstanding during the
years.  Diluted loss per common share calculations were determined by
dividing the net loss by the weighted average number of common shares and
dilutive common share equivalents outstanding.  During the three and
six months ending June 30, 2009 common stock equivalents were not included in
the calculation, as their effect would be anti-dilutive.
 
 Share-Based
Compensation
 
 OCTuS
provides compensation costs for our stock option plans based on estimated fair
values. OCTuS estimates the fair value of each stock option at the grant date by
using the Black-Scholes option-pricing model and provides for expense
recognition over the service period, if any, of the stock option.
  6
 OCTuS,
Inc.
 Notes
to Consolidated Financial Statements
 (Unaudited)
   Note
2 – Going Concern
 
 The
accompanying unaudited consolidated financial statements have been prepared in
conformity with accounting principles generally accepted in the United States of
America, which contemplates continuation of OCTuS as a going
concern.  OCTuS has a working capital deficit of $176,138, a
stockholders’ deficit of $598,462 and an accumulated deficit of $23,851,871 as
of June 30, 2009.  In addition, OCTuS has generated net losses of
$460,247 and $39,614 during the six months ending June 30, 2009 and 2008,
respectively, and currently has no revenue-generating operations.
 
 We are
actively seeking technologies and business opportunities in the smart energy
sector, which may include the licensing, acquisition or development of smart
energy and energy efficiency products or technologies as part of the OctusSEP
(Smart Energy Platform).  We anticipate the need for additional debt
or equity financing, and if OCTuS raises
additional funds through equity financing transactions, the issuance of
additional shares would dilute the ownership of existing
shareholders.  However, OCTuS has no commitment from any party to
provide additional capital, and there is no
assurance that such funding will be available when needed, or if available, that
its terms will be favorable or acceptable to OCTuS.
  The
financial statements do not include any adjustments to reflect the possible
future effects on the recoverability and classification of assets or the amounts
and classification of liabilities that may result from the possible inability of
OCTuS to continue as a going concern.
 
 Note
3 – Related Party Transactions
 
 On
February 24, 2009, OCTuS entered into employment agreements with Christian J.
Soderquist and George M. Ecker pursuant to which Mr. Soderquist will serve as
Chief Executive Officer of OCTuS and Mr. Ecker will serve as Chief Financial
Officer of OCTuS. Mr. Soderquist and Mr. Ecker were also appointed directors of
OCTuS. Concurrently, OCTuS executed restricted stock purchase agreements dated
February 24, 2009, with each of Mr. Soderquist and Mr. Ecker.
  Both
employment agreements have a term of three years, through February 23, 2012,
with the term extended automatically for successive one-year terms unless either
party notifies the other in writing at least 90 days prior to the expiration of
the then-effective term of such party’s intention not to renew the
agreement.  Pursuant to the employment agreement, Octus will pay Mr.
Soderquist and Mr. Ecker a base annual salary of $180,000 each, which will
increase annually by the increase in the consumer price index from the prior
year (the “Base Salary”).The
officers have agreed for an interim period to defer receipt of payment of some
or all of their base salaries based on the outstanding achievements of one or
more of the milestones described below and OCTuS’s ability to pay salaries. Each
officer will be eligible for an annual bonus of up to 50% of his base annual
salary as then in effect, as determined by Octus’ Compensation Committee or
Board of Directors.  OCTuS issued to each person 15,000,000 shares of
common stock.  These shares were valued at $270,000 and recorded as
share-based compensation during the six months ended June 30,
2009.
  Under the
terms of the restricted stock purchase agreements, a portion of the shares is
subject to repurchase by OCTuS if certain milestones are not achieved before the
first anniversary of the date of the purchase agreements.  For each of
the following events that are not achieved before the first anniversary of the
date of the purchase agreements, 25% of the shares are subject to repurchase by
OCTuS at the original purchase price per share.  If all four
milestones are achieved, then all repurchase rights of OCTuS will
lapse.  The milestone events are:  completion of sale of
equity securities of OCTuS with proceeds to OCTuS of $100,000 or more; execution
by OCTuS of a license agreement or purchase contract with at least two
third-party persons or entities to acquire or license technologies and/or
products related to OCTuS’s intended business; receipt of revenues from the sale
by OCTuS of products licensed or owned by OCTuS; and execution by OCTuS of a
renewable energy and/or energy efficiency project contract.  In the
event of a change in control of OCTuS, defined in the agreement to include
events such as a merger or sale of assets transaction which results in more than
a 50% change of ownership of OCTuS, all restrictions lapse and the shares will
become fully vested.
  There
were 43,437,072 shares of common stock outstanding after the issuance of the
shares in accordance with the purchase agreements.  The 30,000,000
shares issued pursuant to the purchase agreements represented approximately 69%
of the then outstanding shares of OCTuS.
  Each
employment agreement provides that if the employment of the officer is
terminated by Octus without cause (as defined in the employment agreement) or by
the officer for good reason (as defined in the employment agreement) or upon her
death, the officer (or his estate) is entitled to receive in cash payment an
amount equal to all previously accrued but unpaid compensation (including
accrued but unused vacation leave) as of the date of such termination, and a
lump sum payment equal to the amount of the Base Salary that the officer would
have earned if the officer had remained employed with Octus during the remaining
portion of the then-current term.
  7
 OCTuS,
Inc.
 Notes
to Consolidated Financial Statements
 (Unaudited)
   Note
4 – Notes Payable
 
 During
April 2009, a third party loaned OCTuS $5,000 to provide short-term working
capital.  This loan bears interest at 10% and is due upon
demand.
 
 Note
5 – Notes Payable - Related Parties
 
 During
April 2009, two of our officers and directors, Christian J. Soderquist and
George M. Ecker, each loaned OCTuS $5,000 to provide short-term working
capital.  These loans bear interest at 10% and are due upon
demand.
 
 Note
6 – Convertible Notes Payable
 
 Effective
March 31, 2009, a convertible promissory note with a principal balance of
$328,106 and accrued interest of $38,686 held by Grupo Dynastia SA was sold to
another party who already held a promissory note in the amount of
$113,747.  The terms were modified such that the principal and
interest will be paid over 60 months. The convertible promissory note can be
converted into common stock at a rate of $0.10 per share and bears interest at
an annual rate of 8% until converted or paid.  Total interest expense
under borrowings from this party during the six months ending June 30, 2009 was
$10,989.  The current portion of this note is $57,500 at June 30,
2009.
 
 On June
22, 2009, OCTuS issued a convertible secured promissory note (the “Note”) with a
principal amount of $100,000 to an investor.  The note bears interest
at a rate of 10% per annum and is due on June 21, 2011.  Accrued
interest is paid semi-annually, with the first payment due six months after the
date the Note is issued.  At the Company’s option, the Company may
make any interest payment either in cash or by delivery of a number of shares of
Common Stock with a value equal to the amount of interest due and payable,
calculated based on the average closing price of the Common Stock on the OTC
Bulletin Board (or whatever exchange, market or quotation system the Common
Stock is then traded), for the ten trading days ending three days before the
date that such payment is due.  The Company granted to the holder of
the note a security interest of all assets of the Company, ranking before all
preferred and common shareholders and subordinated to the existing senior
convertible debt.  The Note may be converted to common stock at 70% of
the price per share paid for securities in a financing of at least $1,000,000 or
at any time after 90 days after issuance at the greater of $0.15 per share or
70% of the average closing price of the common stock for the ten trading days
ending five days before the conversion date.  In conjunction with the
issuance of the Note, OCTuS issued a warrant to the note holder to purchase
350,000 shares of OCTuS common stock at an exercise price of $0.01 per
share.  The term of the warrant is 180 days. The relative fair value
of the warrant is $40,643.  The intrinsic value of the conversion
feature totaled $59,357 resulting in a discount of $100,000 to the note payable.
The discount will be amortized over the life of the note. The details are as
follows:
  Face
      value of note payable
                    
                    $
                    100,000Less:
      discount related to warrants
                    
                    
                    (40,643
                    )discount
      related to conversion feature
                    
                    
                    (59,357
                    )Add:
      amortization of debt discount
                    
                    
                    242Carrying
      value of note at June 30, 2009
                    
                    $
                    242
 
 Note
8 – Equity Transaction
 
 On
February 24, 2009, OCTuS issued the CFO and CEO each 15,000,000 shares of common
stock.  These shares were valued at $270,000 and recorded as
share-based compensation during the six months ended June 30,
2009.
  8
 OCTuS,
Inc.
 Notes
to Consolidated Financial Statements
 (Unaudited)
 On May 5,
2009, OCTuS entered into an employment agreement with John Argo pursuant to
which Mr. Argo will serve as Director, Energy Projects & Finance of OCTuS.
The employment agreement has a term of three years, through April 30, 2012, with
a base annual salary of $120,000. Concurrently, OCTuS signed a stock purchase
agreement with Mr. Argo whereby Mr. Argo was issued 250,000 shares of common
stock, valued at $12,500, and recorded as share-based compensation.
  Warrant
activity during six months ended June 30, 2009 is as follows:
 
 Warrants
                  
                  
                  Weighted
      Average
                      Exercise
      Price
                  
                  
                  Weighted
      Average Remaining Contractual
                      Term
      (in Years)Outstanding
      at beginning of year
                  
                  
                  -
                  
                  
                  $
                  -
                  
                  
                  
                  -Granted
                  
                  
                  350,000
                  
                  
                  
                  0.01
                  
                  
                  
                  0.5Exercised
                  
                  
                  -
                  
                  
                  
                  -
                  
                  
                  
                  -Forfeited
                  
                  
                  -
                  
                  
                  
                  -
                  
                  
                  
                  -Outstanding
      at end of the period
                  
                  
                  350,000
                  
                  
                  $
                  0.01
                  
                  
                  
                  0.5
 
 
 OCTuS estimates
the fair value of each warrant at the grant date by using the Black-Scholes
option-pricing model with the following weighted-average assumptions used for
grants during the six months ended June 30, 2009 as follows:
 
 June
      30, 2009Dividend
      yield
                      
                      
                      0.00
                      %Expected
      volatility
                      
                      
                      424.81
                      %Risk free
      interest
                      
                      
                      2.75
                      %Expected
      lives
                      
                      0.5
      years
 
 9
  Item
2.  Management’s Discussion and Analysis of Financial Condition and
Results of Operations
 
 This
following information specifies certain forward-looking statements of management
of the company. Forward-looking statements are statements that estimate the
happening of future events and are not based on historical
fact.  Forward-looking statements may be identified by the use of
forward-looking terminology, such as “may”, “shall”, “could”, “expect”,
“estimate”, “anticipate”, “predict”, “probable”, “possible”, “should”,
“continue”, or similar terms, variations of those terms or the negative of those
terms.  The forward-looking statements specified in the following
information have been compiled by our management on the basis of assumptions
made by management and considered by management to be reasonable. Our future
operating results, however, are impossible to predict and no representation,
guaranty, or warranty is to be inferred from those forward-looking
statements.
 
 The
assumptions used for purposes of the forward-looking statements specified in the
following information represent estimates of future events and are subject to
uncertainty as to possible changes in economic, legislative, industry, and other
circumstances. As a result, the identification and interpretation of data and
other information and their use in developing and selecting assumptions from and
among reasonable alternatives require the exercise of judgment. To the extent
that the assumed events do not occur, the outcome may vary substantially from
anticipated or projected results, and, accordingly, no opinion is expressed on
the achievability of those forward-looking statements. We cannot guarantee that
any of the assumptions relating to the forward-looking statements specified in
the following information are accurate, and except as required by lawwe assume no obligation to update any such
forward-looking statements.
 
 Critical
Accounting Policy and Estimates
 
 Our
Management's Discussion and Analysis of Financial Condition and Results of
Operations section discusses our consolidated financial statements, which have
been prepared in accordance with accounting principles generally accepted in the
United States of America. The preparation of these financial statements requires
management to make estimates and assumptions that affect the reported amounts of
assets and liabilities at the date of the financial statements and the reported
amounts of revenues and expenses during the reporting period. On an on-going
basis, management evaluates its estimates and judgments, including those related
to revenue recognition, accrued expenses, financing operations, and
contingencies and litigation. Management bases its estimates and judgments on
historical experience and on various other factors that are believed to be
reasonable under the circumstances, the results of which form the basis for
making judgments about the carrying value of assets and liabilities that are not
readily apparent from other sources. Actual results may differ from these
estimates under different assumptions or conditions. The most significant
accounting estimates inherent in the preparation of our financial statements
include estimates as to the appropriate carrying value of certain assets and
liabilities which are not readily apparent from other sources. These accounting
policies are described at relevant sections in this discussion and analysis and
in the notes to the consolidated financial statements included in our Annual
Report for the year ended December 31, 2008 filed on Form 10-K.
 
 General
 
 We are
actively seeking technologies and business opportunities in the smart energy
sector, which may include the licensing, acquisition or development of smart
energy and energy efficiency products or technologies as part of the OctusSEP
(Smart Energy Platform).  We intend to recruit management, advisors
and affiliates with sufficient experience needed to review and qualify such
technologies and business opportunities for our involvement.  Although
we are seeking such opportunities, we may not consummate any such transaction,
and even if we complete a transaction it is possible that we would not generate
sufficient revenue to sustain our operations. We anticipate the need for
additional debt or equity financing, and if the Company raises additional funds
through equity financing transactions, the issuance of additional shares would
dilute the ownership of existing shareholders.
  On April
2, 2009, we announced the formation of the Octus Advisory Group, composed of
leading professionals in the renewable energy, energy efficiency, and financial
industries. On May 21, 2009, we announced the launch of EECBG: $1-to-$3, a program to
help cities and counties maximize the immediate benefit of Energy Efficiency and
Conservation Block Grant (EECBG) funding provided through the American Recovery
and Reinvestment Act (ARRA) of 2009. On June 2, 2009, we announced the OctusSEP (Smart Energy
Platform), a turnkey energy savings and demand response management system. Octus
intends to bring OctusSEP to market through
the retrofit of buildings with a full suite of energy-efficient technologies and
the provision of ongoing energy management services. On June 16, 2009, we
announced that the Company has joined the California Lighting
Technology Center’s (CLTC) California Smart Lighting Initiative. The Initiative
was conceived by CLTC in association with industry partners, the University of
California, California utilities, and the California Energy Commission with an
aim to reduce maintenance, energy and operational costs for exterior lighting
applications by 50% or more. On June 25, 2009, we announced the creation of the
Octus Smart Energy Alliance. The alliance enables Octus and its partners to
collaboratively deploy energy efficiency and demand response solutions,
leveraging the Octus Smart Energy Platform (OctusSEP), to generate
immediate energy savings for commercial, industrial and public sector
organizations.
  10
 Results
of Operations for the Three Months Ended June 30, 2009 Compared to the Three
Months Ended June 30, 2008
 
 We did
not realize any revenues during either the three months ended June 30, 2009 or
the three months ended June 30, 2008.
  During
the three months ended June 30, 2009, we reported a net loss of $173,036, or
$0.00 per share, compared to a net loss of $22,973, or $0.00 per share, for the
three months ended June 30, 2008. We expect to incur losses at least until such
time as we begin generating revenue from operations.
  During
the three months ended June 30, 2009, our general and administrative expenses
were $169,981, as compared to $14,223 for the three months ended June 30, 2008.
The increase of $155,758 was primarily due to accrued officer’s salaries of
$139,069 and $12,500 of share-based compensation recorded during the three
months ended June 30, 2009, as compared to $0 for the three months ended June
30, 2008.  The other general and administrative expenses consisted
primarily of professional fees incurred to prepare our financial statements and
submit regulatory filings required to maintain our status as a public
company
  Interest
expense for the three months ended June 30, 2009 was $3,055 compared to $8,750
incurred for the three months ended June 30, 2008. The decrease of $5,695 was
primarily due to a higher debt balance during the 2008 period and the transfer
and refinancing of our long term debt which resulted in a lower interest rate on
the underlying debt during the 2009 period.
  Results
of Operations for the Six Months Ended June 30, 2009 Compared to the Six Months
Ended June 30, 2008
 
 We did
not realize any revenues during either the six months ended June 30, 2009 or the
six months ended June 30, 2008.
  During
the six months ended June 30, 2009, we reported a net loss of $460,247, or $0.02
per share, compared to a net loss of $39,614, or $0.00 per share, for the six
months ended June 30, 2008. We expect to incur losses until such time that we
begin generating revenue from operations.
  During
the six months ended June 30, 2009, our general and administrative expenses were
$448,466, as compared to $23,339 for the six months ended June 30, 2008. The
increase of $425,127 was primarily due to $282,500 of share-based compensation
recorded during the six months ended June 30, 2009, as compared to $0 for the
six months ended June 30, 2008 and $139,069 relating to the accrual of deferred
officers salaries during the six months ended June 30, 2009 compared to $0 for
the six months ended June 30, 2008. The other general and administrative
expenses consisted primarily of professional fees incurred to prepare our
financial statements and submit regulatory filings required to maintain our
status as a public company.
  Interest
expense for the six months ended June 30, 2009 was $11,781 compared to $77,275
incurred for the six months ended June 30, 2008. The decrease of $65,494 was
primarily due to a higher debt balance during the 2008 period and the transfer
and refinancing of our long term debt which resulted in a lower interest rate on
the underlying debt.
  As of
June 30, 2009, we had significant tax credits and research carry-forwards for
federal tax reporting purposes that expire through 2009. Additionally, we have
federal and state net operating loss carry-forwards, expiring through 2027.
Because of a substantial change in our ownership resulting from the 30,000,000
shares issued in February 2009, an annual limitation has been placed on
utilization of the loss carry forwards generated prior to our change in
ownership.
 
 Liquidity
and Capital Resources
 
 For the
six months ended June 30, 2009, we incurred a net loss of $460,247 that included
$282,500 of share-based compensation expense and $139,069 of accrued salary
deferrals. Our total assets were $98,994 as of June 30, 2009, including current
assets of $97,818 of cash and $1,175 of other assets. Our current liabilities
were $274,175 as of June 30, 2009, including $179,602 in accounts payable and
accrued liabilities, $22,073 in accounts payable and accrued liabilities due to
related parties $57,500 in current portion of long term debt to related parties,
$10,000 of short-term debt to related parties and $5,000 of short-term notes
payable. We also had $423,281 in the long-term portion of convertible debt to
other third parties.
  At June
30, 2009, we had cash and equivalents of $97,818.  Although we have
actively been pursuing new investments or other business opportunities, we
cannot give assurance that we will enter into any new investment or business
transaction, or that the terms of any agreements relating to financing or
business activities will be on terms favorable to us.  In April 2009,
our officers, directors, and a third party loaned us a total of $15,000 to
continue operations, and in June 2009 we issued a convertible secured promissory
note with a principal amount of $100,000 to an investor. We cannot give
assurance that we will enter into any new investment, or that the terms of any
such agreements will be on terms favorable to us. There is no assurance that our
officers and directors or others will continue to fund us. Should we be unable
to obtain revenues or raise additional capital, we could be forced to cease
business activities altogether, and the holders of security interests would
likely be entitled to receive all or substantially all of our assets.
  11
 
 Our
Plan of Operations for the Next Twelve Months
 
 As of
this date, we are actively seeking technologies and business opportunities in
the smart energy sector, which may include the licensing, acquisition or
development of smart energy and energy efficiency products or technologies as
part of the OctusSEP (Smart Energy Platform), or the acquisition of another
company. Although we are seeking such opportunities, we may not be able to
consummate a transaction that would generate sufficient revenues to sustain our
operations. We anticipate the need for additional debt or equity
financing.  If we raise additional funds through equity financing
transactions, the issuance of additional shares would dilute the ownership of
existing shareholders.
 
 The
Company believes that it has sufficient cash on hand as of June 30, 2009 to fund
operations at its expected level until approximately the end of the third
quarter of 2009, assuming no unforeseen expenses. Management believes that
without an influx of significant new funds, we will not be able to sustain our
operations beyond approximately the end of the third quarter of 2009. Although
we have actively been pursuing new investment, we cannot give assurance that we
will enter into any new investment, or that the terms of any such agreements
will be on terms favorable to us. There is no assurance that anyone will
continue to fund us. Should we be unable to obtain additional funds, we could be
forced to cease business activities altogether, and the holders of security
interests would likely be entitled to receive all or substantially all of our
assets.
  Off
Balance Sheet Arrangements
 
 There are
no off balance sheet arrangements that have or are reasonably likely to have a
current or future effect on our financial condition, changes in financial
condition, revenues or expenses, results of operations, liquidity, capital
expenditures or capital resources that are material to investors.
 
 Item
3. Quantitative and Qualitative Disclosures about Market Risk
  Not
applicable.
  Item
4. Controls and Procedures
 
 Evaluation
of disclosure controls and procedures
 
 Under the
supervision and with the participation of our management, including our Chief
Executive Officer and Chief Financial Officer, we conducted an evaluation of our
disclosure controls and procedures, as such term is defined under Rule 13a-15(e)
and 15d-15(e) promulgated under the Securities Exchange Act of 1934, as amended
(the “Exchange Act”) as of the end of the period covered by this
report.  Disclosure controls and procedures are defined as those
controls and other procedures of an issuer that are designed to ensure that the
information required to be disclosed by the issuer in the reports it files or
submits under the Exchange Act is recorded, processed, summarized and reported,
within the time periods specified in the Commission’s rules and forms, and that
such information is accumulated and communicated to our management, including
our principal executive and financial officer, as appropriate, to allow timely
decisions regarding required disclosure.  Based on their evaluation,
our principal executive officer and principal accounting officer concluded that
as of June 30, 2009, our disclosure controls and procedures were not effective
to provide reasonable assurance that information required to be disclosed in our
Exchange Act reports is recorded, processed, summarized and reported within the
time periods specified by the rules and forms of the SEC and is accumulated and
communicated to management, including the chief executive officer and chief
financial officer, as appropriate to allow timely decisions regarding required
disclosure.  Our conclusion was based on (1) our lack of systematic
accounting and disclosure procedures, notwithstanding that the Company’s
financial statements and notes thereto are prepared and reviewed by management
and that the Company’s chief financial officer reviewed each transaction during
the periods covered by the report that had an effect on the Company’s financial
statements included in the Form 10-Q, (2) the absence of personnel, other than
the chief financial officer, with requisite expertise in the functional areas of
finance and accounting, and (3) the absence of a functioning audit committee or
outside directors on the Company’s board of directors.
 
 Throughout
the period covered by the report, the Company was a shell company (as defined in
Rule 12b-2 under the Exchange Act), had no or minimal amounts of cash until
the receipt of proceeds from issuance of the convertible Note at the end of June
2009, did not haveany
employees other than the new chief executive officer and chief financial officer
appointed in February 2009 and the director of energy projects and finance
appointed in May 2009, and did not engage in active business
activities.  To address the weaknesses identified above, management
reviewed and performed an analysis of every transaction for the period covered
by the report that had an impact on the Company’s financial statements included
in the Form 10-Q.  Accordingly, notwithstanding the existence of the
material weaknesses described in this Item, management believes that the
financial statements included in this Quarterly Report on Form 10-Q fairly
present, in all material respects, our financial condition, results of
operations and cash flows for the periods presents in accordance with U.S.
generally accepted accounting principles.  The Company also intends to
address the weaknesses identified above by adding more formalized accounting,
control and disclosure procedures, by hiring additional personnel resources when
the Company’s operations and financial position permit it to do so, by
continuing to have the chief financial officer review all significant
transactions affecting the Company’s financial statements, and by considering
the appointment of outside directors and audit committee members in the future
where appropriate.
  12
 
 Changes
in internal controls.
 
 There
were no changes in our internal control over financial reporting that occurred
during the fiscal quarter covered by this report that have materially affected,
or are reasonably likely to materially affect, our internal control over
financial reporting.
 
 PART II — OTHER INFORMATION
 
 Item
1. Legal Proceedings.
 
 None.
 
 Item
1A. Risk Factors.
 
 Our
business is subject to various risks, including those described in Item 1A of
our annual report on Form 10-K for the fiscal year ended December 31, 2008, and
strongly encourage you to review the Form 10-K and other reports that we filed
with the SEC after the filing of the Form 10-K. There have been no material
changes from the risk factors disclosed in that section of our Form
10-K.
 
 Item
2. Unregistered Sales of Equity Securities and Use of Proceeds.
 
 On May 6,
2009, the Company filed a Report on Form 8-K disclosing the issuance of 250,000
shares of common stock pursuant to a restricted stock purchase agreement in
connection with the retention of a new employee of the Company, and the
disclosure set forth in that Form 8-K is hereby incorporated into this Item by
reference.  The issuance of common stock was completed in accordance
with the exemption provided by Rule 504 of Regulation D of the Securities Act of
1933 and/or Section 4(2) of the Securities Act of 1933, as
amended.  The purchaser represented that it was acquiring securities
for its own account, not as nominee or agent, and not with a view to the resale
or distribution of any part thereof in violation of the Securities Act.
 
 Item
3.  Defaults Upon Senior Securities
 
 None.
 
 Item
4.  Submission of Matters to Vote of Security Holders
 
 None.
 
 Item
5.  Other Information14
 
 None.
 
 Item
6.  Exhibits
  3.1
                    Bylaws
      of the Company.10.1
                    Employment
      Agreement between the Company and John Argo.10.2
                    Restricted
      Stock Purchase Agreement dated May 5, 2009, between the Company and John
      Argo.10.3
                    Convertible
      Secured Promissory Note dated June  22, 2009, between the
      Company and Margaret Wong.10.4
                    Common
      Stock Purchase Warrant date June 22, 2009, between the Company and
      Margaret Wong.10.5
                    Note
      Amendment with the Senior Lender.10.6
                    Agreement 
      George Ecker regarding compensation10.7
                    Agreement
      Christian Soderquist regarding compensation31.
                    Rule
      13a-14(a)/15d-14(a) Certifications.32.
                    Section
      1350
Certifications.
  13
 
 SIGNATURES
 
 In
accordance with the requirements of the Securities Exchange Act of 1934, the
registrant caused this report to be signed on its behalf by the undersigned,
thereunto duly authorized.
 
 OCTuS,
      Inc.,
                a
      Nevada corporationAugust
      14,  2009
              By:
              /s/
      Christian SoderquistChristian
      Soderquist
                Chief
      Executive Officer and a Director
 
 14