U.S. Securities and Exchange Commission

Washington, D.C. 20549



FORM 10-QSB







|(Mark One)
|----------
|[X]       
|          
|          
|          
|[  ]      
|          
|          





Commission File Number 0-21092



OCTuS, INC.

(Exact name of small business issuer as specified in its charter)





|CALIFORNIA                      | 33-0013439         
|------------------------------- | -------------------
|(State or other jurisdiction of | (I.R.S. Employer   
|incorporation or organization)  | Identification No.)





13161 Sundance Ave., San Diego, CA 92129

(Address of principal executive offices)



858-922-1219

(Issuer's telephone number)



Check whether the issuer (1) filed all reports required to be filed by Section 13 or 15(d) of the Exchange Act during the past 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes |X| No |_|



State the number of shares outstanding of each of the issuer's classes of common equity, as of the latest practicable date:





|October 30, 2002 | Common Stock, no par value | 6,468,420         
|---------------- | -------------------------- | ------------------
|(Date)           | (Class)                    | (Number of Shares)
|                 |                            |                   
|                 | Series C Preferred Stock   | 250,000           
|                 | (Class)                    | (Number of Shares)



Transitional Small Business Disclosure Format (check one):



|Yes [ ] | No[X]
|------- | -----





OCTuS, INC.

FORM 10-QSB

FOR THE PERIOD ENDED SEPTEMBER 30, 2002



INDEX





|           |                       |                                                                                                                    | PAGE
|---------- | --------------------- | ------------------------------------------------------------------------------------------------------------------ | ----
|PART I.    | FINANCIAL INFORMATION |                                                                                                                   
|           |                       |                                                                                                                    |     
|           | ITEM 1.               | FINANCIAL STATEMENTS                                                                                               |     
|           |                       |                                                                                                                    |     
|           |                       | Consolidated Balance Sheet at September 30, 2002 (unaudited)                                                       | 3   
|           |                       |                                                                                                                    |     
|           |                       | Consolidated Statements of Operations for the three and nine months ended September  30, 2002 and 2001 (unaudited) | 4   
|           |                       |                                                                                                                    |     
|           |                       | Consolidated Statements of Cash Flows for the nine months ended September  30, 2002 and 2001 (unaudited)           | 5   
|           |                       |                                                                                                                    |     
|           |                       | Notes to Consolidated Financial Statements (unaudited)                                                             | 6   
|           |                       |                                                                                                                    |     
|           |                       |                                                                                                                    |     
|           | ITEM 2.               | MANAGEMENT'S DISCUSSION AND ANALYSIS                                                                               | 7   
|           |                       |                                                                                                                    |     
|           |                       |                                                                                                                    |     
|PART II.   | OTHER INFORMATION     | 8                                                                                                                 
|           |                       |                                                                                                                    |     
|           |                       |                                                                                                                    |     
|SIGNATURES |                       | 9                                                                                                                 
|           |                       |                                                                                                                   







Part I. Financial Information

Item 1. Financial Statements





|OCTuS, INC.                            
|---------------------------------------
|CONSOLIDATED BALANCE SHEET             
|September 30, 2002                     
|(unaudited)                            
|                                       
|                                       
|ASSETS                                 
|                                       
|CURRENT ASSETS                         
|                                       
|                                       
|                                       
|                                       
|LIABILITIES AND STOCKHOLDERS' (DEFICIT)
|                                       
|CURRENT LIABILITIES                    
|                                       
|                                       
|                                       
|                                       
|                                       
|STOCKHOLDERS' (DEFICIT)                
|                                       
|                                       
|                                       
|                                       
|                                       
|                                       
|                                       
|                                       





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









|OCTuS, INC.                                    
|-----------------------------------------------
|CONSOLIDATED STATEMENTS OF OPERATIONS          
|(unaudited)                                    
|                                               
|                                               
|                                               
|                                               
|                                               
|                                               
|Revenues                                       
|                                               
|General and administrative expenses            
|                                               
|(Loss) from operations                         
|                                               
|Interest expense                               
|                                               
|Net (loss)                                     
|                                               
|Preferred dividends                            
|                                               
|Net (loss) available to common shareholders    
|                                               
|Per share information - basic and fully diluted
|Weighted average shares outstanding            
|                                               
|Net (loss) per common share                    







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









|OCTuS, INC.                          
|-------------------------------------
|CONSOLIDATED STATEMENTS OF CASH FLOWS
|(unaudited)                          
|                                     
|                                     
|                                     
|                                     
|                                     
|                                     
|OPERATING ACTIVITIES                 
|                                     
|                                     
|INVESTING ACTIVITIES                 
|                                     
|                                     
|FINANCING ACTIVITIES                 
|                                     
|                                     
|                                     
|                                     
|                                     
|BEGINNING CASH                       
|                                     
|ENDING CASH                          







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





OCTuS, INC.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

SEPTEMBER 30, 2002

(UNAUDITED)





Note 1.  Basis Of Presentation



The accompanying unaudited financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America ("GAAP") for interim financial information and Item 310(b) of Regulation S-B.  They do not include all of the information and footnotes required by GAAP for complete financial statements.  In the opinion of management, all adjustments (consisting only of normal recurring adjustments) considered necessary for a fair presentation have been included.  The results of operations for the periods presented are not necessarily indicative of the results to be expected for the full year.  For further information, refer to the audited financial statements of the Company as of December 31, 2001 and for the two years then ended, including notes thereto, included in the Company's Form 10-KSB.



Note 2.  Earnings Per Share



The Company calculates net income (loss) per share as required by Statement of Financial Accounting Standards (SFAS) 128, "Earnings per Share." Basic earnings (loss) per share is calculated by dividing net income (loss) by the weighted average number of common shares outstanding for the period. Diluted earnings (loss) per share is calculated by dividing net income (loss) by the weighted average number of common shares and dilutive common stock equivalents outstanding. During the periods presented, common stock equivalents were not considered, as their effect would be anti-dilutive.



Note 3.  Related Party Transactions



During the nine months ended September 30, 2002, a related party loaned the Company $13,850 for operations at 10% interest.  No terms have been determined on the repayment of these funds.



During the three and nine months ended September 30, 2002, the Company incurred $10,500 and $31,500 of consulting expense, respectively, related to an employment agreement with the President of the Company in which he will provide consulting services at a monthly rate of $3,500.  As of September 30, 2002, $65,709 of expenses related to this agreement were unpaid and included in accounts payable and accrued expenses - related parties.



Note 4.  Stockholders' (Deficit)



The Board of Directors approved a 1:20 reverse stock split for all outstanding shares of the Company's common stock  effective  April 10, 2002.  All shares and per share amounts have been retroactively adjusted to give effect to the split.



Note 5.  Settlement



On February 15, 2002 the majority shareholder filed a complaint alleging that the Company was in default on two promissory notes totaling $426,511 and accrued interest in the amount of $184,214.  The Company settled the complaint in June 2002.



Under the terms of the settlement agreement, the Company was required to issue one unrestricted share of its common stock in settlement of each $0.10 of the Plaintiff's respective debts.  This resulted in a total of 6,107,250 shares being issued to the Plaintiff.  The shares were issued at their fair market value of $0.03 per share resulting in an increase in common stock of $183,217.  The



Note 6.  Going Concern



The accompanying consolidated financial statements have been prepared in conformity with accounting principles generally accepted in the United States of America, which contemplates continuation of the Company as a going concern.  The Company has working capital and shareholders' deficiencies of $115,007 and an accumulated deficit of $22,965,142 as of September 30, 2002.



The Company is currently seeking a viable business to merge with and, in addition, is seeking equity capital.  However, the Company 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 the Company.



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 the Company to continue as a going concern.



RESULTS OF OPERATIONS FOR THE THREE MONTHS ENDED SEPTEMBER 30, 2002



NET SALES. There were no revenues for the three months ended September 30, 2002.



SELLING, GENERAL AND ADMINISTRATIVE. The Company recorded $12,045 for general and administrative expenses for the three months ended September 30, 2002, a decrease of $471 from the same period in 2001.  The primary expenses of the Company are consulting fees of $10,500 paid to the President of the Company and professional fees associated with being a publicly traded company.



NET LOSS. Net loss from operations for the three months ended September 30, 2002 was $12,724 as compared to a $23,381 loss for the same period in 2001.



Results Of Operations For The NINE Months Ended SEPTEMBER 30, 2002



NET SALES. There were no net sales for the nine months ended September 30, 2002, which represented no change, from the same period in 2001. Because the Company currently is without a product there are no sales or even prospects of sales in the near future.



SELLING, GENERAL AND ADMINISTRATIVE. The Company recorded $38,833 for selling, general and administrative expenses for the nine months ended September 30, 2002, a decrease of $6,236 from the same period in 2001.  The Company is operating as a shell company; at this point there are no employees and no sales efforts due to the lack of a product.



NET LOSS. Net loss from operations for the nine months ended September 30, 2002 was $51,341, as compared to a $79,170 loss for the same period in 2001.



LIQUIDITY AND CAPITAL RESOURCES. For the three months ended September 30, 2002, the Company posted a net operating loss of $12,724. Cash on hand on September 30, 2002 was $144. Although the Company has actively been pursuing licensing arrangements and new investment, there can be no assurance that any licensing agreements and/or new investment will be entered into by the Company, or that the terms of any such agreements will be on terms favorable to the Company. Should the Company be unable to obtain additional revenues and/or raise additional capital, it could be forced to curtail operations or cease business activities altogether.



RISK FACTORS, WHICH MAY AFFECT FUTURE RESULTS



HISTORY OF OPERATING LOSSES



For the calendar year ended December 31, 2001, the Company recorded a net loss of $115,066. For the calendar year ended December 31, 2000, the Company recorded a loss of $ 46,385.



At December 31, 2001, the Company had no tangible assets, negative working capital, an accumulated deficit of $22,913,800 and a shareholders' deficit of $684,907. Unless the Company acquires a new technology or product it is unlikely that the Company will be profitable in the future.



NEED FOR ADDITIONAL CAPITAL



The Company's cash on hand as of September 30, 2002 was $144, which is inadequate to meet the Company's budgeted operating requirements. Additional cash resources are required to sustain the Company's operations. Since September 2000 operations have been funded by loans from Grupo Dynastia S.A a Panamanian company, one of the Company's principal shareholders. It should be noted that the Company 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 the Company. Should the Company be unable to obtain additional capital when and as needed, it could be forced to cease business activities altogether. It is unlikely that the Company will be able to raise additional capital without dramatically diluting the existing equity ownership of the Company's Common stockholders.



TRANSACTIONS WITH AFFILIATES



The Company has been a party to certain transactions with related persons and affiliates. The Company believes that all such transactions were in its best interests on terms no less favorable to the Company than could have been obtained from unaffiliated third parties and each transaction was approved by disinterested and independent members of the Board of Directors.





TRADING MARKET/DELISTING FROM NASDAQ SMALLCAP MARKET/VOLATILITY OF STOCK PRICE



In January 1993, the Company completed an initial public offering of 100,000 Units, each unit comprised of one share of Common Stock and one Common Stock Purchase Warrant. These securities were quoted on the Nasdaq SmallCap Market until February 1, 1995, at which time they were delisted due to the Company's inability to meet that market's minimum capital and surplus requirements. The securities now trade on the OTC Bulletin Board that is generally considered to be less efficient markets. While the Company intends to reapply for listing on the Nasdaq SmallCap Market if conditions are favorable for it to do so, there can be no assurance that the Company's securities will be accepted by the Nasdaq SmallCap Market upon application by the Company for relisting.



The market price of the Common Stock, Units, and Warrants, like that of the securities of many other high technology companies, has been highly volatile. Factors such as fluctuation in the Company's operating results, announcements of technological innovations or new products by the Company or its competitors, developments in the Company's strategic alliances with other companies, and general market conditions may have a significant effect on the market price of the Common Stock



EFFECT OF CERTAIN ANTI-TAKEOVER CHARTER AND BYLAW PROVISIONS



Certain provisions of the Company's Amended and Restated Articles of Incorporation (the Articles) and Bylaws could have the effect of making it more difficult for a third party to acquire, or could discourage a third party from attempting to acquire, control of the Company. Such provisions may limit or reduce the price that investors might be willing to pay for shares of the Common Stock. Certain of such provisions allow the Company to issue preferred stock with rights senior to those of the Common Stock and impose various procedural and other requirements that could make it more difficult for shareholders to effect certain corporate actions. The Articles also provide for a classified board in the event the Company's shares are traded on a national securities exchange or the Nasdaq National Market. A classified board could make it more difficult for a third party to acquire control, or could discourage a third party from attempting to acquire, control of the board.



DESCRIPTION OF PROPERTY.



In October 1996, the Company moved its offices to a 400 square foot office suite in an area of northern San Diego known as the Golden Triangle. Since November 1999 the company uses only floor space in the office of its sole officer, John Belden. The company pays no rent, which would be negligible, for the use of this space.



The Company does not maintain any other leases for office space and owns no real property.





PART II.



OTHER INFORMATION



ITEM 1. LEGAL PROCEEDINGS



On February 15, 2002, a Complaint was filed by Grupo Dynastia, S.A., the majority shareholder, against the Company.  The Complaint alleges that the Company is in default on two promissory notes, one dated April 14, 1998, and the other dated September 27, 2000 (the "Notes"), totaling $426,511, plus accrued interest in the sum of $184,214. On June 18, 2002 the United States District Court, State of Nevada issued a settlement order to issue 6,107,250 shares of the company's common stock as payment in full of the aforementioned notes and accrued interest.  These shares were treated as issued and outstanding at June 30, 2002.



ITEM 2. CHANGES IN SECURITIES AND USE OF PROCEEDS



NOTES AND ADVANCES PAYABLE



For the nine months ended September 2002, Grupo Dynastia S. A. advanced $13,850 to the company bearing interest at the rate of 10% per annum.



ITEM 3. DEFAULTS UPON SENIOR SECURITIES



None.



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



No matters were submitted to a vote of security holders during the second quarter of the fiscal year covered by this report.



ITEM 5. OTHER INFORMATION



None.



ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K.





|Exhibits | 99.1 CERTIFICATION PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002(18 U.S.C. SECTION 1350)
|-------- | ----------------------------------------------------------------------------------------------------











SIGNATURES



Pursuant to the requirements of the Securities Exchange Act of 1934, the small business issuer has duly caused this report to be signed on its behalf by the undersigned thereunto authorized.



OCTuS, INC.





|Date: October 30, 2002 | /s/  John C. Belden
John C. Belden
President & CEO /
Chief Financial Officer
|---------------------- | ----------------------------------------------------------------------------





CERTIFICATIONS

I, John Belden, certify that:

|1. | I have reviewed this quarterly report on Form 10-QSB of OCTuS, Inc.;                                                                                                                                                                                                                                                                      
|-- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|2. | Based on my knowledge, this quarterly report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this quarterly report; and        
|3. | Based on my knowledge, the financial statements, and other financial information included in this quarterly report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this quarterly report.                               
|4. | I am responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-14 and 15d-14) for the registrant and have:                                                                                                                                                                    
|   | a) designed such disclosure controls and procedures to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this quarterly report is being prepared;                                        
|   | b) evaluated the effectiveness of the registrant's disclosure controls and procedures as of a date within 90 days prior to the filing date of this quarterly report (the "Evaluation Date"); and                                                                                                                                          
|   | c) presented in this quarterly report my conclusions about the effectiveness of the disclosure controls and procedures based on our evaluation as of the Evaluation Date;                                                                                                                                                                 
|5. | I have disclosed, based on my most recent evaluation, to the registrant's auditors and the audit committee of registrant's board of directors (or persons performing the equivalent function):                                                                                                                                            
|   | a) all significant deficiencies in the design or operation of internal controls which could adversely affect the registrant's ability to record, process, summarize and report financial data and have identified for the registrant's auditors any material weaknesses in internal controls; and                                         
|   | b) any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal controls; and                                                                                                                                                                                 
|6. | I have indicated in this quarterly report whether or not there were significant changes in internal controls or in other factors that could significantly affect internal controls subsequent to the date of our most recent evaluation, including any corrective actions with regard to significant deficiencies and material weaknesses.

|Date: | October 30, 2002                                       
|----- | -------------------------------------------------------
|      | By: /s/ John Belden                                    
|      | John Belden                                            
|      | Chief Executive Officer and Principal Financial Officer