UNITED STATES


SECURITIES AND EXCHANGE COMMISSION


Washington, D.C. 20549





FORM 10-Q/A


(Amendment No. 1)





x
QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934FOR THE QUARTERLY PERIOD ENDED MARCH 31, 2010o
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.)





2020 Research Park Drive, Suite 110, Davis, California 95616(Address of principal executive offices)





(530) 564-0200


(Issuer’s Telephone Number)





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 has submitted electronically and posted on its corporate website, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).  Yes o   Noo





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).o Yes   x   No





As of May 24, 2010, the registrant had 44,767,072 shares of common stock outstanding.










TABLE OF CONTENTS




PART I.  FINANCIAL INFORMATION
PageExplanatory Note
2Item 1.                      Financial Statements
3Consolidated Balance Sheets as of March 31, 2010 and December 31, 2009 (Unaudited)
3Consolidated Statements of Operations for the Three Months Ended March 31, 2010 and 2009 (Unaudited)
4Consolidated Statements of Cash Flows for the Three Months Ended March 31, 2010 and 2009 (Unaudited)
5Notes to Consolidated Financial Statements (Unaudited)
6Item 2.                      Management’s Discussion and Analysis of Financial Condition and Results of Operations
12Item 4.                      Controls and Procedures
15PART II.  OTHER INFORMATIONItem 2.                      Unregistered Sales of Equity Securities and Use of Proceeds
17Item 5.                      Other Information
18Item 6.                      Exhibits
20SIGNATURES
21


1




EXPLANATORY NOTE
  This Amendment No. 1 on Form 10-Q/A (the “Form 10-Q/A”) is being filed to amend our Quarterly Report on Form 10-Q for the period ended March 31, 2010, that we filed with the Securities and Exchange Commission (the “SEC” or the “Commission”) on May 24, 2010 (the “Form 10-Q”).  This Form 10-Q/A revises or amends the following items, in response to comments that we received from the SEC in connection with its review of the Form 10-Q:
  ·
Part I, Item 1, to revise the financial statements and notes to disaggregate product revenues, and add disclosure concerning the Company’s revenue recognition policy, and to revise Note 8 to the financial statements to clarify specific terms of a license agreement.
  ·
Part 1, Item 1, to revise the financial statements and notes to reflect certain related party convertible notes presentation and disclosure.
  ·
Part I, Item 2, to revise the disclosures concerning our Overview; Results of Operations for the three months ended March 31, 2010 as compared to the three months ended March 31, 2009 and revise disclosure in our Liquidity and Capital Resources section to disclose various note agreements.
  ·
Part I, Item 4, to revise the disclosures concerning the Company’s controls and procedures.
  ·
Part II, Item 2, to expand disclosures concerning recent sales of unregistered securities.
  ·
Section 302 Certifications, to conform certain wording.
  This amended Form 10-Q/A does not attempt to modify or update any other disclosures set forth in the original Form 10-Q, or to provide a general update or discussion of other developments at the Company after the date of the original filing.  All information contained in this Form 10-Q/A and the original Form 10-Q is subject to updating and supplementing as provided in the periodic reports that we have filed and will file after the original filing date with the Securities and Exchange Commission.  This Form 10-Q/A does not include the items from the original Form 10-Q that are not being amended.  Accordingly, it should be read in
conjunction with the original Form 10-Q, and our other filings with the SEC subsequent to the filing of the Form 10-Q.
  2
 PART 1. FINANCIAL INFORMATION


Item 1.  Financial Statements


OCTuS, INC.


CONSOLIDATED BALANCE SHEETS


(Unaudited)





March 31,

2010


December 31,

2009ASSETSCURRENT ASSETSCash

$
-


$
23,003Accounts receivable – trade


5,700



-Other current assets


1,686



1,686TOTAL ASSETS

$
7,386


$
24,689LIABILITIES AND STOCKHOLDERS' DEFICITCURRENT LIABILITIESAccounts payable

$
111,165


$
102,236Accrued liabilities


48,988



26,750Accounts payable – related parties


4,993



4,993Accrued liabilities – related parties


69,952



63,986Stock payable


177,300



171,700Notes payable


-



5,000Notes payable – related parties


33,250



32,750Convertible notes payable – related parties


125,000



88,500Total current liabilities


570,648



495,915LONG TERM LIABILITIESConvertible notes – related party – less current portion


355,539



392,039Convertible notes, net of unamortized discount of $17,888 and $17,709, respectively


152,578



117,291TOTAL LIABILITIES


1,078,765



1,005,245Commitments 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 authorized44,767,072 and 43,867,072 shares issued and outstanding, respectively


44,767



43,867Additional paid-in capital


23,579,606



23,299,212Accumulated deficit


(24,695,752
)


(24,323,635
)Total stockholders' deficit


(1,071,379
)


(980,556
)TOTAL LIABILITIES AND STOCKHOLDERS' DEFICIT

$
7,386


$
24,689








The accompanying notes are an integral part of these unaudited consolidated financial statements.




3





OCTuS, INC.


CONSOLIDATED STATEMENTS OF OPERATIONS


FOR THE THREE MONTHS ENDED MARCH 31, 2010 AND 2009


(Unaudited)





THREE MONTHS ENDED

MARCH 31,2010


2009RevenuesService revenue

$
206


$
-Product revenue


5,700



-Total Revenues


5,906



-General and administrative expenses


336,611



278,485Loss from operations


(330,705)



(278,485)Interest expense


(41,412)



(8,726)Net loss

$
(372,117)


$
(287,211)Net loss per common share - basic and diluted

$
(0.01)


$
(0.01)Weighted average shares outstanding - basic and diluted


44,290,294



25,103,739








The accompanying notes are an integral part of these unaudited consolidated financial statements.


4
  OCTuS, INC.


CONSOLIDATED STATEMENTS OF CASH FLOWS


FOR THE THREE MONTHS ENDED MARCH 31, 2010 AND 2009


(Unaudited)





2010


2009OPERATING ACTIVITIESNet loss

$
(372,117)


$
(287,211)Adjustments to reconcile net loss to net cashprovided by (used in) operating activities:Share-based compensation


247,684



270,000Amortization of debt discount


33,030



-Change in operating assets and liabilities:Increase in accounts receivable


(5,700)



-Increase in accounts payable and accrued liabilities


31,167



7,206Increase in accounts payable and accrued liabilities – related parties


6,433



10,680Increase in stock payable


5,600



-Net cash provided by (used in) operating activities


(53,903)



675INVESTING ACTIVITIESDeposits paid


-



(675)Net cash used by investing activities


-



(675)FINANCING ACTIVITIESProceeds from convertible notes payable


30,000



-Proceeds from short term debt – related party


500



-Proceeds from exercise of warrants


400



-Net cash provided by financing activities


30,900



-Net change in cash


(23,003)



-CASH AT BEGINNING OF PERIOD


23,003



-CASH AT END OF PERIOD

$
-


$
-SUPPLEMENTAL CASH FLOW INFORMATIONCash paid for interest

$
-


$
-Cash paid for income taxes

$
-


$
-NONCASH INVESTING AND FINANCING ACTIVITIESConversion of note payable and accrued interest into convertible note payable

$
5,455


$
-Debt discount from warrants issued with convertible debt

$
33,210


$
-Conversion of accrued interest into convertible note payable - related party

$
-


$
38,686








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 interim consolidated financial statements of  OCTuS, Inc. (“OCTuS”) have been prepared in accordance with accounting principles generally accepted in the United States of America for interim financial information and with the instructions to Form 10-Q. Accordingly, they do not include all of the information and notes required by generally accepted accounting principles for complete financial statements and should be read in conjunction with  Management's Discussion and Analysis and the audited financial statements and notes thereto contained in our 2009 Annual Report filed with the Securities and Exchange Commission on Form 10-K. In the opinion of management, all
adjustments, consisting of normal recurring adjustments, necessary for a fair presentation of financial position and the results of operations for the interim periods presented have been reflected herein. The results of operations for the interim periods are not necessarily indicative of the results to be expected for the full year. Notes to the consolidated financial statements which would substantially duplicate the disclosure contained in the audited financial statements for 2009 as reported on Form 10-K have been omitted.





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.




Revenue Recognition
  Revenue is derived primarily from providing services under short-term negotiated fixed and variable fee arrangements.  Revenue is recognized when it is earned, typically when our services have been rendered.  Upon execution of an agreement, if services have not been provided then the amount to be paid as a deposit under such agreement is recorded as deferred revenue on the balance sheet and is reclassified as revenue on the statement of operations after services have been provided and such revenue earned.  Any amount that has been earned, but not yet billed, is recorded as work in process or unbilled at the balance sheet date.  Our product revenue
is recognized upon delivery to the customer.
  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 months ending March 31, 2010 and 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 $563,262, a stockholders’ deficit of $1,071,379 and an accumulated deficit of $24,695,752 as of March 31, 2010.  In addition, OCTuS has generated net losses of $372,117 and $287,211 during the three months ending March 31, 2010 and 2009, respectively, and currently has minimal revenue generated from operations.





We have licensed technologies and initiated energy savings projects and are actively seeking to continue and develop technologies and business opportunities in the smart energy sector, which may include the additional 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.  The agreements provide for a base salary of $180,000 per annum, which will increase annually by the increase in the consumer price index from the prior year (the “Base Salary”).The officers agreed to irrevocably waive all unpaid compensation as of
December 31, 2009.  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 three months ended March 31, 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.  On May 1, 2010, the board of directors determined that all four milestones have been achieved, and the repurchase rights of OCTuS lapsed.


There were 43,437,072 shares of common stock outstanding after the issuance of the shares in accordance with the purchase agreements.





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 his death, the officer (or his estate) is entitled to receive in cash payment an amount equal to all previously accrued but unpaid compensation (including accrued but unused vacation leave) as of the date of such termination, and a lump sum payment equal to the amount of the Base Salary that the officer would have earned if the officer had remained employed with OCTuS during the remaining portion of the then-current term.


Effective March 31, 2009, a convertible promissory note with a principal balance of $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 of the new combined $480,539 note 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 three months ending March 31, 2010 was $3,204.  The
current portion of this note is $125,000 at March 31, 2010.


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.  In February 2010 the loan balance of $5,000 and related accrued interest of $455 was converted into a convertible note payable bearing interest at 10% and further described in Note 6.





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.





During the year ended December 31, 2009 and in February 2010, Mr. Soderquist loaned OCTuS $27,750 and $500, respectively for total proceeds of $28,250 to the Company.  These loans bear interest at 10% and are due upon demand.





Note 6 – Convertible Notes Payable




In June through December of 2009 and during the first quarter of 2010, OCTuS issued convertible secured promissory notes (the “Note”) with an aggregate principal amount of $135,000 and $30,000, respectively, to investors.  Also during the three months ended March 31, 2010, OCTuS issued a convertible note in exchange for another promissory note and accrued interest of $5,455.  The Notes bear interest at a rate of 10% per annum and is due one year from the date of issuance.  Accrued interest is paid semi-annually, with the first payment due six months after the date the Note is issued.  At OCTuS’ option, OCTuS 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.  OCTuS granted to the holder of the note a security interest of all assets of OCTuS, 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 $0.30 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 Notes, OCTuS issued warrants during the year ended December 31, 2009 and the three months ended March 31, 2010 to the note holders to purchase 190,000 shares and 202,000 shares, respectively, of OCTuS’ common stock at an exercise price of $0.10 and $0.01, respectively, per share.  The term of the warrants is from 180 days to eighteen months. The relative fair value of the warrants was $59,000 and $79,098, respectively.  The intrinsic values of the conversion features totaled $63,817 and $13,112, respectively resulting in discounts of $122,817 and $33,210, respectively to the notes payable. The discount will be amortized over the period from the commitment date until the notes become convertible by the holder.  The details are as follows:





Face value of convertible notes payable

$
650,994Less: discount related to warrants


(79,098
)discount related to conversion feature


(76,929
)Add: amortization of debt discount


138,150Carrying value of notes at March 31, 2010

$
633,117





Note 7 – Equity





In June 2009, OCTuS entered into a twelve-month consulting agreement which calls for OCTuS to issue 10,000 shares of common stock each month the contract is in effect.  OCTuS issued 30,000 shares under this agreement during the three months ended March 31, 2010, valued at $7,500 and recorded as share-based compensation.




8




OCTuS, Inc.


Notes to Consolidated Financial Statements


(Unaudited)





In October 2009, OCTuS entered into a three-month consulting agreement which calls for OCTuS to issue 20,000 shares of common stock each month the contract is in effect.  During the three months ended March 31, 2010 OCTuS accrued $5,600 of stock payable for the 20,000 shares due in January 2010 per the agreement.  As of March 31, 2010, OCTuS had a total stock payable of $177,300 for unissued common shares to various consultants.





On December 6, 2009, OCTuS entered into a “Reserve Equity Financing Agreement” with AGS Capital Group, LLC (the “Facility”).  The signed agreement authorized OCTuS to issue and sell up to $5,000,000 of shares of common stock.  As of March 31, 2010, there have been no issuances under the Facility.
 
 In January 2010, OCTuS entered into a three-month consulting agreement which calls for OCTuS to issue 30,000 shares of common stock to an employee upon execution of the agreement as a signing bonus, 10,000 shares of common stock each month, and pay a $4,000 stipend each month the contract is in effect.  OCTuS issued 60,000 shares under this agreement during the quarter ended March 31, 2010, valued at $10,000 and recorded as share-based compensation.
 
 In January 2010, OCTuS entered into a three-month consulting agreement which calls for OCTuS to issue 30,000 shares of common stock each month the contract is in effect.  The consultant terminated the contract in March 2010.  OCTuS issued 60,000 shares under this agreement during the three months ended March 31, 2010, valued at $18,900 and recorded as share-based compensation.
 
 In January 2010, OCTuS entered into a three-month consulting agreement which calls for OCTuS to issue 30,000 shares of common stock to a consultant each month the contract is in effect.  OCTuS issued 90,000 shares under this agreement during the quarter ended March 31, 2010, valued at $26,100 and recorded as share-based compensation.
 
 In January 2010, OCTuS entered into a three-month consulting agreement which calls for OCTuS to issue 30,000 shares of common stock each month the contract is in effect.  OCTuS issued 90,000 shares under this agreement during the quarter ended March 31, 2010, valued at $23,400 and recorded as share-based compensation.
 
 In February 2010, OCTuS entered into a three-month consulting agreement which call for OCTuS to issue 15,000 shares of common stock each month the contract is in effect.  OCTuS issued 30,000 shares under this agreement during the quarter ended March 31, 2010, valued at $6,900 and recorded as share-based compensation.
 
 In February 2010, OCTuS entered into a six-month consulting agreement which calls for OCTuS to issue 1,000,000 shares of common stock for services.  All services were not performed as originally agreed and 500,000 shares were returned by the consultant and cancelled by OCTuS.  For the services that were performed, OCTuS agreed that the consultant could keep the remaining 500,000 shares which were valued at $150,000 and recorded as share-based compensation.
 
 Warrant and option activity during the three months ended March 31, 2010 is as follows:




Warrants


Weighted Average Exercise Price


Weighted Average Remaining Contractual Term

(in Years)Outstanding at December 31, 2009


540,000


$
0.10



0.45Granted


202,000



0.01



1.37Exercised


(40,000)



0.01



1.36Forfeited


-



-



-Outstanding and exercisable at March 31, 2010


702,000


$
0.08



0.93





As of March 31, 2010, all warrants outstanding had an intrinsic value of $112,860.




9





OCTuS, Inc.


Notes to Consolidated Financial Statements


(Unaudited)




Options


Weighted Average

Exercise Price


Weighted Average

Remaining Contractual Term

(in Years)Outstanding at December 31, 2009


60,000


$
0.36



2.60Granted


-



-



-Exercised


-



-



-Forfeited


-



-



-Outstanding and exercisable at March 31, 2010


60,000


$
0.36



2.38





For the three months ended March 31, 2010, OCTuS amortized $4,884 of share-based compensation relating to the options.  As of March 31, 2010, all options outstanding had no intrinsic value.





OCTuS estimates the fair value of each warrant and option at the grant date by using the Black-Scholes option-pricing model with the following weighted-average assumptions used for grants during the three months ended March 31, 2010 as follows:





March 31, 2010Dividend yield
0.00%Expected volatility
318%Risk free interest rate
0.82%Expected lives in years
1.5





Note 8 – License Agreements





On August 28, 2009, OCTuS entered into an exclusive license agreement with The Regents of the University of California (the “University”) pursuant to which OCTuS acquired exclusive rights under a provisional U.S. patent application and related intellectual property relating to an evaporative cooling technology known as “Wickool.”  The application relates to the passive evaporative cooling of rooftop HVAC units, whereby Wickool repurposes the condensate generated by HVAC equipment to cool incoming air and thereby increase energy efficiency and reduce peak-demand electricity use.  The Wickool system can be used to retrofit presently installed HVAC units in addition to integration in
new building construction design and is best suited for large scale, commercial installations. Wickool was developed by the University of California, Davis Western Cooling Efficiency Center, and is being commercially tested by major retailers. The license covers the United States and, to the extent available, foreign rights, exclusively covers all fields of use and includes the right to sublicense, subject to standard University terms applying to sublicenses.




Under the agreement, OCTuS will pay the University a nominal annual minimum cash payment each year until the year following the year of the first sale of a licensed product.  Upon commencement of commercial sales, OCTuS will pay the University the greater of a minimal annual fee of $2,000 or royalties based on net sales of licensed products, licensed services, and other revenue resulting directly from use of the licensed products.  The agreement also provides that OCTuS will pay the University one and one half (11⁄2%) percent of net sales of any consideration received by OCTuS for the grant of
rights under a sublicense from OCTuS.  OCTuS is responsible for reimbursing the University for prior patent costs incurred, which are not material, and subsequent legal fees and patent costs incurred in connection with prosecuting the application and maintaining any patents that may issue from the application.  The agreement includes a number ofmilestone conditions including:
 
 (a)
Milestone #1: Funding of Licensee:  $250,000.00 by December 31, 2010;
 (b)
Milestone #2:  Manufacturing of Licensed Product: begins (including by a third party on behalf of Licensee) by May 31, 2010;
 (c)
Milestone #3:  First Sales of Licensed Product or Licensed Services: by August 31, 2010; and
 (d)
Milestone #4:  1,000 units of Licensed Product Sold: by August 31, 2011.
 
 The agreement also includes several other customary provisions, including representations and warranties of the parties, provisions addressing indemnification of the University by OCTuS, use of names and other intellectual property, litigation and disputes, and insurance requirements, and other customary provisions.
 10


OCTuS, Inc.


Notes to Consolidated Financial Statements


(Unaudited)


In February, 2010, we entered into a seven-year, non-exclusive license agreement with EcoNexus, LLC, whereby we were granted certain rights to EcoNexus’s Environmental Impact Manager technology. If and when Octus develops a commercial product based on the EcoNexus technology, Octus will grant 100,000 shares of common stock to EcoNexus. In addition, Octus will pay EcoNexus a royalty of one and three quarters percent (1.75%) based upon net sales of the licensed and develop product over the term of the agreement. As of May 22, 2010, Octus has not completed development of the commercial product based on the
EcoNexus technology, and thus no consideration has been granted, to date, to EcoNexus.
  Note 9 – Subsequent Events





In May 2010, OCTuS issued a Note with a face value of $100,000 and warrants to purchase 400,000 shares of common stock at a purchase price of $0.01 per share.  The warrants have a term of eighteen months.




In May 2010, OCTuS entered into an Asset Purchase Agreement and related agreements with Quantum Energy Solutions, Inc., a California corporation ("Quantum"), pursuant to which OCTuS will purchase substantially all of the assets of Quantum for a purchase price subject to certain post-closing adjustments described in the agreement, and OCTuS to assume certain liabilities of Quantum. Consideration to be paid and liabilities assumed by OCTuS in the transaction include:





- 150,000 shares of common stock granted to Quantum


- Assumption of approximately $89,000 in Quantum accounts payable and credit facilities


- Assumption of $130,000 in Quantum long-term debt


- Assumption of approximately $53,000 in Quantum accounts receivable


- Two-year consulting agreement with Quantum President Jim Collins





OCTuS will offer employment to all active employees of Quantum and continue relationships with independent contractors of Quantum as of the closing date.




11





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 law we assume no obligation to update any such forward-looking statements.





Critical Accounting Policy and Estimates





Our Management's Discussion and Analysis of Financial Condition and Results of Operations section discusses our 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, 2009
filed on Form 10-K.





Overview





OCTuS is a smart energy management company developing, marketing and selling energy-efficient lighting, cooling and energy management solutions that enable public sector and private organizations to reduce their energy expenses. OCTuS has developed OctusSEP (Smart Energy Platform), a turnkey energy savings platform for the energy management of commercial, industrial and institutional buildings.




On August 20, 2009 we announced our affiliation with the California Lighting Technology Center (CLTC) and the Western Cooling Efficiency Center (WCEC) to further development and deployment the Octus Smart Energy Platform.  CLTC and WCEC are part of the University of California, Davis Energy Efficiency Center, and are supported by leading companies, utilities and federal and state energy organizations.  The Company’s affiliations with the CLTC and WCEC focus on identifying and developing suitable products and services for OctusSEP and our energy-efficiency offerings.  The Company does not have a formal
relationship with the CLTC, and the Company is pays an annual $10,000 fee as an affiliate member of the WCEC.  As a WCEC affiliate, Octus is collaborating with the Center to commercially test and develop WickoolTM, a technology the Company licensed from the University of California.





On September 1, 2009, we announced an exclusive worldwide license with the University of California for Wickool, a passive evaporative cooling technology for commercial rooftop HVAC units. Wickool has been commercially tested by the WCEC at Target Corp. and Wal-Mart stores as a retrofit to rooftop HVAC units.




12




On October 4, 2009, we announced a joint venture with Quantum Energy Solutions to catalyze commercialization of the Octus Smart Energy Platform and to collaboratively pursue smart energy projects.  The joint venture was focused on bringing OctusSEP and related offerings to market, including collaborative marketing to Quantum’s historical clients.  Under the joint venture arrangement, Octus and Quantum may each elect to engage the other on a non-exclusive basis as a partner in energy projects.  The company originating the business opportunity will receive 75% of the
project’s net profit, with the partner receiving 25%.  When Quantum elects to bill a project through Octus, Octus will receive 25% of the project’s net profit and will compensate Quantum with an equitable amount of Octus common stock.  The arrangement also provided that Octus and Quantum will evaluate each project and their relative contributions and compensation, and that if warranted, the companies may modify the above terms to reflect individual project contributions.  In addition, Octus and Quantum may source lighting (and other energy) products from each other, with an intent to private label (as an Octus or a Quantum-branded) the products.  The sourcing partner will receive a 15% commission – based on the manufactured price – for such products.




On October 27, 2009, we announced the addition to two energy industry executives to our Advisory Group: Mark Henwood, CEO of Henwood Associates, and Dr. Mark Modera, director of the UC Davis Western Cooling Efficiency Center.




On January 29, 2010, we entered into consulting agreements with Dave Glende and John Walter to provide services in the fields of smart energy services and smart energy products.




On April 21, 2010 we entered into an agreement to test and demonstrate energy-efficient LED parking garage fixtures for one of the largest hotel-casinos in Northern California.




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.


13
  Results of Operations for the Three Months Ended March 31, 2010 Compared to the Three Months Ended March 31, 2009





We realized revenue of $5,906 during the three months ended March 31, 2010 from product sales and execution of energy projects.  We did not realize any revenues during the three months ended March 31, 2009.  Our revenue recognized during the quarter ended March 31, 2010, consisted of (1) energy efficient direct product sales, with related services of $206 and (2) services under two energy efficient projects, including provision of products of $5,700.





During the three months ended March 31, 2010, our general and administrative expenses were $336,611, as compared to $278,485 for the three months ended March 31, 2009. The increase of $58,126 was primarily due to an increase in salary expense of $51,918 from $0 during the three months ended March 31, 2009 to $51,918 during the three months ending March 31, 2010.  The other general and administrative expenses consisted primarily of rent and office supplies.





Interest expense for the three months ended March 31, 2010 was $41,412 compared to $8,726 incurred for the three months ended March 31, 2009. The increase of $32,686 was due to a higher debt balance during the 2010 period.





During the three months ended March 31, 2010, we reported a net loss of $372,117, or $0.01 per share, compared to a net loss of $287,211, or $0.01 per share, for the three months ended March 31, 2009. We expect to incur losses at least until such time as we begin generating significant revenue from operations.





Liquidity and Capital Resources





For the three months ended March 31, 2010, we incurred a net loss of $372,117 that included $247,684 of noncash share-based compensation expense. Our total assets were $7,386 as of March 31, 2010.  Our current liabilities were $570,648 as of March 31, 2010, including $160,153 in accounts payable and accrued liabilities, $74,945 in accounts payable and accrued liabilities due to related parties $125,000 in current portion of convertible notes, $33,250 of short-term debt to related parties and $177,300 of common stock payable. We also had $508,117 in the long-term portion of convertible debt.




During the first quarter of 2010, OCTuS issued convertible secured promissory notes (the “2010 Notes”) proceeds of $30,000.  See Note 6 to our financial statements for discussion of related terms of this note.   At March 31, 2010, we had no cash on hand.  In May 2010, 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.




In addition to revenues that we may receive from customers and sales of products and services, we will need to raise additional funds through debt or equity financing to achieve our current business strategy.  The financing we need may not be available when needed.  Even if this financing is available, it may be on terms that we deem unacceptable or are materially adverse to the interests of existing investors with respect to dilution of book value, dividend preferences, liquidation preferences, or other terms.  Our inability to obtain financing will inhibit our ability to implement our development strategy, and as a result, could require us to diminish or
suspend our development strategy and possibly cease our operations.  If we are unable to obtain financing on reasonable terms, we could be forced to delay, scale back or eliminate certain product and service development programs.  In addition, such inability to obtain financing on reasonable terms could have a negative effect on our business, operating results or financial condition to such an extent that we are forced to restructure, file for bankruptcy, sale assets or cease operations.  We cannot provide assurances that we will be able to enter into any new investment, or that the terms of any agreements relating to any new investment will be on terms favorable to the Company.





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Our Plan of Operations for the Next Twelve Months





Over the past year we have actively pursued technologies and business opportunities in the smart energy sector, and we continue to pursue such technologies and opportunities. We have recruited management, advisors and affiliates who we believe have sufficient experience to review and qualify such technologies and business opportunities. Although we continue to seek such opportunities, we may not consummate any such transactions beyond what have been consummated to date, and it is possible such transactions would not generate sufficient revenue to sustain our operations.





In May 2010, the OCTuS raised $100,000 in new capital.  Management believes that we will be able to sustain our operations through the summer. 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 or finance growth through ongoing operations, 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 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 March 31, 2010, 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.


15
 
 Management Report on Internal Control Over Financial Reporting
  Our management is responsible for establishing and maintaining adequate internal control over financial reporting, as defined in Rule 13a-15(f) and 15d-15(f) under the Exchange Act.  Our internal control over financial reporting is designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles.  Our internal control over financial reporting includes those policies and procedures that:
  1.
pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the Company;
  2.
provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with accounting principles generally accepted in the United States of America, and that receipts and expenditures of the Company are being made only in accordance with authorizations of management and directors of the Company; and
  3.
provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the Company’s assets that could have a material effect on our financial statements.
  All internal control systems, no matter how well designed, have inherent limitations.  Therefore, even those systems determined to be effective can provide only reasonable assurance with respect to financial statement preparation and reporting.  Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.
  During the Annual 10-K review process for the year ended December 31, 2009, management conducted an evaluation of the effectiveness of our internal control over financial reporting based on the framework in Internal Control—Integrated Frameworkissued by the Committee of Sponsoring Organizations of the Treadway Commission.  Based on this evaluation, our management concluded our internal control over financial reporting was not effective as of December 31, 2009 and the deficiencies reported continue to be deficiencies as of March 31, 2010.
  1.
Overall 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-K,
  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.
  A material weakness is a control deficiency (within the meaning of Public Company Accounting Oversight Board (“PCAOB”) Auditing Standard No. 5) or combination of control deficiencies, that results in more than a remote likelihood that a material misstatement of the annual or interim financial statements will not be prevented or detected on a timely basis.


Throughout the period covered by the report, the Company had minimal amounts of cash and limited 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.


Remediation of Material Weaknesses
 
 The Company 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.


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.


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  PART II — OTHER INFORMATION




Item 2. Unregistered Sales of Equity Securities and Use of Proceeds





In June 2009, OCTuS entered into a twelve-month consulting agreement with Siva Gunda to assist in the development of the Octus Smart Energy Platform, including identification of key partners, systems and components.  The agreement provides for OCTuS to issue 10,000 shares of common stock each month the contract is in effect.  OCTuS issued 30,000 shares under this agreement during the three months ended March 31, 2010, valued at $7,500 and recorded as share-based compensation.


The shares were issued in reliance on Section 4(2) of the Securities Act.  The recipient represented that the recipient had a pre-existing relationship with the Company or one or more of its officers or directors of a nature and duration that enabled the recipient to be aware of the business of the Company, that the recipient had the opportunity to ask questions of, and receive from answers from, executive officers of the Company with respect to the acquisition of the shares and the business of the Company, and that the recipient understood the speculative nature of the acquisition of the
shares.  The recipient of the shares represented that the securities were being acquired for investment purposes, for the recipient’s 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, and that the recipient was familiar with the business of OCTuS, had an opportunity to ask questions of the officers of OCTuS concerning its business, and understood the investment risks involved in acquiring the shares.
 
 In October 2009, OCTuS entered into a three-month consulting agreement with Jim Collins of Quantum Energy Solutions, Inc. to provide sales services relating to expanding our service offering.  The agreement provided for OCTuS to issue 20,000 shares of common stock each month the contract is in effect.    During the three months ended March 31, 2010 OCTuS accrued $5,600 of stock payable for the 20,000 shares due in January 2010 per the agreement.  As of March 31, 2010, OCTuS had a total stock payable of $177,300 for unissued common shares.  The agreement was
entered into in reliance on Section 4(2) of the Securities Act.  The recipient represented that the securities were being acquired for investment purposes, for the recipient’s 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, that the recipient had a pre-existing relationship with the Company or one or more of its officers or directors of a nature and duration that enabled the recipient to be aware of the business of the Company, that the recipient had the opportunity to ask questions of, and receive from answers from, executive officers of the Company with respect to the acquisition of the shares and the business of the Company, that the recipient understood the speculative nature of the acquisition of the shares, and that the recipient was familiar with the business of OCTuS,
had an opportunity to ask questions of the officers of OCTuS, and understood the investment risks involved in acquiring the shares.
 
 In January 2010, OCTuS entered into a three-month consulting agreement with each of Mananya Chansanchai to provide services relating to energy solutions program management, and Dave Glende to assist with development of the Company’s product and services roadmap and overall technology-based product offerings, and John Walter to assist with creation of a marketing plan for Wickool and assist with implementation of a distribution/dealer program for Wickool.  These agreements call for OCTuS to issue a total of 70,000 shares of common stock each month the contracts are in effect.  The
shares issuable under these agreements were issued in reliance on Section 4(2) of the Securities Act.  Each recipient of the shares represented that the securities were being acquired for investment purposes, for the recipient’s 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, that the recipient had a pre-existing relationship with the Company or one or more of its officers or directors of a nature and duration that enabled the recipient to be aware of the business of the Company, that the recipient had the opportunity to ask questions of, and receive from answers from, executive officers of the Company with respect to the acquisition of the shares and the business of the Company, that the recipient understood the speculative nature of the acquisition of the shares, and that the
recipient was familiar with the business of OCTuS, had an opportunity to ask questions of the officers of OCTuS, and understood the investment risks involved in acquiring the shares.
 
 In January 2010, OCTuS entered into a three-month business and financial advisory services contract with DCA Partners LLC providing for OCTuS to issue 30,000 shares of common stock each month the contract is in effect.  The shares were issued in reliance on Section 4(2) of the Securities Act.  The recipient of the shares represented that the securities were being acquired for investment purposes, for the recipient’s 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, that the recipient had a
pre-existing relationship with the Company or one or more of its officers or directors of a nature and duration that enabled the recipient to be aware of the business of the Company, that the recipient had the opportunity to ask questions of, and receive from answers from, executive officers of the Company with respect to the acquisition of the shares and the business of the Company, that the recipient understood the speculative nature of the acquisition of the shares, and that the recipient was familiar with the business of OCTuS, had an opportunity to ask questions of the officers of OCTuS, and understood the investment risks involved in acquiring the shares.
 
 17
 In February 2010, OCTuS entered into a three-month consulting agreement with George Condon to provide services relating to development, implementation and management of Octus Energy Savings Program (OctusESP) for commercial brokers and other referral sources.  The agreement provided for OCTuS to issue 15,000 shares of common stock each month the contract is in effect.  The shares were issued in reliance on Section 4(2) of the Securities Act.  The recipient of the shares represented that the securities were being acquired for investment purposes, for the recipient’s 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, that the recipient had a pre-existing relationship with the Company or one or more of its officers or directors of a nature and duration that enabled the recipient to be aware of the business of the Company, that the recipient had the opportunity to ask questions of, and receive from answers from, executive officers of the Company with respect to the acquisition of the shares and the business of the Company, that the recipient understood the speculative nature of the acquisition of the shares, and that the recipient was familiar with the business of OCTuS, had an opportunity to ask questions of the officers of OCTuS, and understood the investment risks involved in acquiring the shares.
 
 In February 2010, OCTuS entered into a six month agreement with TPC Holdings to provide public relations services.  The agreement provided for OCTuS to issue 1,000,000 shares of common stock at a purchase price of $0.0001 per share.  All services were not performed as originally agreed and 500,000 shares were returned by the consultant and cancelled by OCTuS.  For the services that were performed, OCTuS agreed that the consultant could keep the remaining 500,000 shares which were valued at $150,000 and recorded as share-based compensation.  The shares were issued in
reliance on Section 4(2) of the Securities Act.  The recipient of the shares represented that the securities were being acquired for investment purposes, for the recipient’s 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, that the recipient had a pre-existing relationship with the Company or one or more of its officers or directors of a nature and duration that enabled the recipient to be aware of the business of the Company, that the recipient had the opportunity to ask questions of, and receive from answers from, executive officers of the Company with respect to the acquisition of the shares and the business of the Company, that the recipient understood the speculative nature of the acquisition of the shares, and that the recipient was familiar with the business of OCTuS, had
an opportunity to ask questions of the officers of OCTuS, and understood the investment risks involved in acquiring the shares.
 
 During the first quarter of 2010, OCTuS issued convertible secured promissory notes (the “2010 Notes”) with a principal amount of $35,000 to five investors for proceeds of $30,000 and, in the case of one investor, conversion of an outstanding promissory note into a convertible note.  The 2010 Notes bear interest at a rate of 10% per annum and are due two years from the date of issuance.  Accrued interest is paid semi-annually, with the first payment due six months after the date the Notes were issued.  At OCTuS’ option, OCTuS 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.  OCTuS granted to the holder of the note a security interest of all assets of OCTuS, ranking before all preferred and common shareholders and subordinated to the existing senior convertible debt.  The Notes 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 $0.35 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 Notes, OCTuS issued warrants to the note holders to purchase 140,000 shares of OCTuS common stock at an exercise price of $0.01 per share.  The term of the warrants is eighteen months.  The securities were issued without any public solicitation, to a limited number of investors.  The shares were issued in reliance on Section 4(2) of the Securities Act.  Each investor represented that the securities were being acquired for investment purposes, for the recipient’s 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.  Each investor also represented that they had an opportunity to ask questions of management of OCTuS, understood the investment risks involved
in acquiring the securities, that the recipient had a pre-existing relationship with the Company or one or more of its officers or directors of a nature and duration that enabled the recipient to be aware of the business of the Company, that the recipient had the opportunity to ask questions of, and receive from answers from, executive officers of the Company with respect to the acquisition of the securities and the business of the Company, that the recipient understood the speculative nature of the acquisition of the securities. and was an accredited investor as defined in Regulation D.


Item 5.  Other Information





Certain Matters Relating to the Company’s 2003 Reincorporation Transaction





In connection with a review of previous corporate transactions, the Company recently became aware of administrative errors related to the Company's change of domicile from California to Nevada at the end of 2003.  At the time of all of the events described below, the Company was a shell company with no cash (or nominal cash), no business and a small amount of liabilities consisting primarily of accrued obligations and notes to a related party.  Further, the majority shareholder, and the person who was the president of Octus California at the time of the events described below, have affirmed in writing to the Company that their vote, support and intention was to enact the
events.





As reflected in previous filings by the Company with the Securities and Exchange Commission (the “Commission”), in December 2001, Octus, which was then incorporated in California (sometimes referred to as “Octus California”), distributed a proxy statement to its shareholders in connection with its annual meeting of stockholders to be held on December 29, 2001 (the “2001 Meeting”), soliciting approval for a proposal to change the state of incorporation of Octus from California to Nevada.  The proxy statement indicated that the change of domicile would be accomplished by merging Octus California into a newly formed subsidiary, Octus
Nevada.  At the time, one shareholder, Grupo Dynastia, S.A., a foreign corporation, held approximately 56% of the outstanding voting stock as of the record date of the meeting.  Grupo Dynastia has represented to management of the Company in writing that it supported the reincorporation and change of domicile.  In addition, Grupo Dynastia and the person who at the time was the president of Octus California have represented to management of the Company in writing that Grupo Dynastia delivered to Octus California in advance of the 2001 Meeting a signed form of proxy appointing the president of Octus as proxy for the shareholder to vote the shareholder’s shares in favor of the reincorporation and the other proposals at the 2001 Meeting.  However, the Company does not have in its records evidence that an executed proxy was received by Octus
California from Grupo Dynastia or taken into account at the meeting.


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In December 2003, the Company decided to effect the reincorporation transaction that it believed had been approved at the 2001 shareholder meeting.  A new corporation was incorporated in Nevada named Octus, Inc. (“Octus Nevada”).  All assets and liabilities of Octus California, which consisted of the nominal cash and minimal liabilities described below, were transferred to Octus Nevada on or before December 31, 2003 as part of the change of corporate domicile.  However, for reasons of administrative inadvertence, articles of merger were not filed in either Nevada or California.


In January 2004, dissolution and winding up certificates were filed with the California Secretary of State for Octus California, reciting that Octus California had elected to wind up and dissolve; that the election was made by the vote of at least 5.8 million shares, representing in excess of approximately 90% of the outstanding shares of the Company; that the affairs of Octus California had been completely wound up; that the known debts and liabilities of the company had been paid or provided for; and that all known assets of the company had been distributed to the Octus California shareholders.





The person who was the president of Octus California at the time at the time of the events described above has affirmed in writing that these filings were intended to be part of the process of implementing the reincorporation merger transaction.  At the time, Grupo Dynastia owned common stock and preferred stock of Octus California representing in excess of 97.6% of the voting power of the outstanding shares of Octus California.  Grupo Dynastia has represented to management of the Company in writing that it supported and approved of the reincorporation transaction in December 2003, regardless whether it was effected by means of a merger, transfer of assets and lisbilities or
other mechanism.





On March 23, 2004, the Company filed its Annual Report on Form 10-K with the SEC with respect to the year ended December 31, 2003 (the “2003 Form 10-K”), indicating that it was a Nevada corporation and including the following disclosure:  “On December 29, 2001, a majority of the shareholders voted to change the Company's state of incorporation from California to Nevada.  In December 2003, this change was completed and the Company became a Nevada corporation.”  According to the 2003 Form 10-K, at December 31, 2003, Octus was not engaged in any business activities, its total assets consisted of $22 of cash, and its liabilities consisted of
accounts payable and accrued expenses of $1,238, accounts payable and accrued expenses to related parties of $16,138, and notes payable to a related party, Grupo Dynastia, of $144,271.  According to the 2003 Form 10-K, the aggregate market value of shares held by non-affiliates of the Company as of March 18, 2004, was $31,676, and the actual value of those shares may have been even less in light of, among other factors, the Company’s liabilities and lack of any business and cash assets.





Implementing what management of the Company believed was the merger transaction, Octus Nevada subsequently issued one share of Octus Nevada for each share of Octus California held by each person who was a former shareholder of Octus California.  If not part of the merger transaction, the the Company believes the issuance of shares was part of the distribution by Octus California of its remaining assets, consisting of the shares issued by Octus Nevada, to its shareholders as part of the process of winding up Octus California.  Accordingly, there was no change in ownership of shares of the Company as the result of the redomicile.  In addition, no shareholder has
communicated with the Company or its officers in any way concerning claims or complaints relating to the above matters.





The Company has submitted for filing with the Nevada Secretary of State, articles of merger reflecting the merger transaction that the Company believed occurred at the end of 2003.  However, the Company cannot provide any assurances concerning the legal effect, if any, of belatedly filing such articles of merger at such time in the circumstances described above.





The foregoing matters may give rise to liabilities, claims or regulatory actions under federal or state laws, including without limitation relating to whether sufficient shareholder approval was obtained for the reincorporation transaction, whether the issuance of shares of Octus Nevada in the reincorporation transaction complied with federal and state securities laws, whether the foregoing matters affect Octus Nevada's status as a successor issuer under federal securities laws, and other related matters.  The Company can give no assurance as to whether any such liabilities, claims or regulatory actions, including actions by the Commission or state regulatory authorities, may arise in
the future or the outcome of any such liabilities, claims or regulatory actions on the Company's business and previously reported or current financial statements.  An adverse outcome in any such claim or proceeding could have a material adverse effect on the Company's business, financial position and results of operations.


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  Item 6.  Exhibits





Exhibit No.
Description10.1
License Agreement between OCTuS and EcoNexus, LLC, dated February 3, 2010.31.1
Rule 13a-14(a)/15d-14(a) Certification of Chief Executive Officer.31.2
Rule 13a-14(a)/15d-14(a) Certification of Chief Financial Officer.32.1
Section 1350 Certification of Chief Executive Officer32.2
Section 1350 Certification of Chief Financial Officer





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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 corporationSeptember 26, 2011
By:
/s/ Christian SoderquistChristian Soderquist

Chief Executive Officer and a Director




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