U.S. SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-K

~~FORM 10-K~~x Annual Report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 for the fiscal year ended December 31, 2010

x Annual Report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 for

the fiscal year ended December 31, 2009

o Transition Report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

For 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)		(IRS Employer Identification No.)

803 Second Street
2020 Research Park Drive
Suite 303
Suite 110
Davis, California		~~95616~~95618
(Address of principal executive offices)		(Zip Code)

(530) 564-0200

(Registrant's Telephone Number, Including Area Code)

Securities registered pursuant to Section 12(b) of the Exchange Act: None

Securities registered pursuant to Section 12(g) of the Exchange Act:

Common Stock, $0.~~0001~~001 par value per share

(Title of Class)

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes o No x

Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. Yes o No x

Indicate by check mark whether registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 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 o

Indicate by check mark if disclosure of delinquent filers in response to Item 405 of Regulation S-K (§229.405 of this chapter) is not contained herein, and will not be contained, to the best of registrant's knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendments to this Form 10-K. o

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act. (Check one)

Large accelerated filer o	Accelerated filer o
Non-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 Act) Yes o No x

As of ~~April~~ 15June 30, 2010, ~~there~~the ~~were~~last 44business day of the registrant’s most recently completed second fiscal quarter,~~867,072~~ ~~shares~~the aggregate market value of the registrant’s common stock ~~outstanding~~ held by non-affiliates of the registrant was $1,646,756 based on the closing sale price of $0.08 on such date as reported on the OTCBB.

As of September 13, 2011 there were 55,173,177 shares of common stock outstanding.

OCTUS, INC.

FORM 10-K

FISCAL YEAR ENDED DECEMBER 31, ~~2009~~2010

Item		Page
	PART I
11	Business	2
1.	Business	2
1A.	Risk Factors	3
1B.	Unresolved Staff Comments	8
1B.	Unresolved Staff Comments	6
2.	Properties	6
3.	Legal Proceedings	6
4.	Submission of Matters to a Vote of Security Holders	6
	PART II
5.	Market for Registrant'’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities	69
6.	Selected Financial Data	912
7.	Management'’s Discussion and Analysis of Financial Condition and Results of Operations	912
7A.	Quantitative and Qualitative Disclosure About Market Risk	11
8.	Consolidated Financial Statements and Supplementary Data	17
8.	Financial Statements and Supplementary Data	12
9A(T).	Controls and Procedures	35
9.	Changes in and Disagreements With Accountants on Accounting and Financial Disclosure	23
9A(T).	Controls and Procedures	23
	PART III
10.	Directors, Executive Officers and Corporate Governance	2336
11.	Executive Compensation	2539
12.	Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters	2740
13.	Certain Relationships and Related Transactions, and Director Independence	2841
14.	Principal Accounting Fees and Services	28
	PART IV
15.	Exhibits, Financial Statement Schedules	29
14.	Principal Accountant Fees and Services	43
15.	Exhibits, Financial Statement Schedules	44

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Unless the context otherwise requires, the terms “we,” our,” “the Company” and “Octus” refer to Octus Inc. and its subsidiaries.

FORWARD LOOKING STATEMENTS

Statements made in this Form 10-K that are not historical or current facts are "forward-looking statements" made pursuant to the safe harbor provisions of Section 27A of the Securities Act of 1933, as amended (the "Securities Act"), and Section 21E of the Securities Exchange Act of 1934, as amended (the "Exchange Act"). These statements often can be identified by the use of terms such as "may," "will," "expect," "believe," "anticipate," "estimate," "approximate," or "continue," or the negative thereof. The Company intends that such forward-looking statements be subject to the safe harbors for such statements. The Company wishes to caution readers not to place undue reliance on any such forward-looking statements, which speak only as of the date made. Any forward-looking statements represent management's best judgment as to what may occur in the future. However, forward-looking statements are subject to risks, uncertainties and important factors beyond the control of the Company that could cause actual results and events to differ materially from historical results of operations and events and those presently anticipated or projected. These factors include adverse economic conditions, entry of new and stronger competitors, inadequate capital and unexpected costs. The Company disclaims any obligation subsequently to revise any forward-looking statements to reflect events or circumstances after the date of such statement or to reflect the occurrence of anticipated or unanticipated events.

PART I

ITEM 1. BUSINESS

Introduction

Octus was incorporated in October 1983 under the laws of the State of California. On December 29, 2001, a majority of the shareholders voted to change our state of incorporation from California to Nevada. In December 2003, this change was completed and we became a Nevada corporation. Currently our Common Stock is eligible for quotation on the OTC Bulletin Board under the symbol OCTI.

The Company seeks to become a leading ~~renewable~~resource ~~energy~~ efficiency company that brings innovative energy efficiency and ~~renewable~~water ~~energy~~efficiency solutions to the commercial and public sector markets. ~~The~~OCTuS ~~Company~~ intends to pursue and facilitate ~~renewable~~resource ~~energy~~ efficiency projects involving energy and water efficiency systems, and products that ~~the~~OCTuS ~~Company~~ may develop, acquire, license or distribute. ~~The~~OCTuS ~~Company~~ believes that the market demand for ~~smart~~ energy ~~management~~ ~~– reducing the energy use~~ and ~~costs~~water inconservation ~~commercial,~~presents ~~industrial and municipal buildings -- is~~ an attractive business opportunity.

We are actively seeking technologies and business opportunities in the resource efficiency sector, which may include the licensing, acquisition or development of energy and water efficiency products or technologies and the facilitation and management of financing solutions for resource efficiency projects. We intend to recruit management, advisors and affiliates with sufficient experience needed to review and qualify such technologies and business opportunities for our involvement. Although we are seeking such opportunities, we may not consummate any such transactions beyond what have been consummated to date, and it is possible such transactions would not generate sufficient revenue to sustain our operations. We anticipate the need for additional debt or equity financing, and if the Company raises additional funds through equity financing transactions, the issuance of additional shares would dilute the ownership of existing shareholders.

On 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 Wickool™, 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.

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 November 9, 2009, we announced the launch of SmartLightSupply.com, an electronic commerce marketplace featuring smart, energy-efficient lighting products for the commercial market. However no business was conducted through the e-commerce site, and the Company has ceased operation of SmartLightSupply.com.

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.

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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.

On June 16, 2010, we announced a consummation of an asset purchase agreement and related agreements with Quantum Energy Solutions, Inc., a California corporation (“Quantum”). Effective June 30, 2010, the acquisition of Quantum has been accounted for using purchase accounting since OCTuS acquired substantially all of the assets, debts, employees, intangible contracts and business of Quantum.

The purchase price included 150,000 shares of OCTuS common stock, valued at $7,500 on the date of the transaction closing which was June 10, 2010, at $0.05, plus assumption of $62,891 in accounts payable and accrued expenses; assumption of a line of credit facility with a balance of $45,253 and assumption of a 3-year promissory note to the seller for $130,000.

On June 29, 2010, OCTuS announced one of the world’s leading retailers has purchased nine Wickool® units for installation atop one of its Northern California retail stores.

On July 14, 2010, OCTuS announced it completed an energy-efficient lighting project for the Contra Costa Community College District, one of the largest multi-college community college districts in California. OCTuS secured the project through a competitive bid process. The retrofit is projected to generate a simple payback of 1.94 years with a 51% return on investment, which is the product of an estimated 70% reduction in electricity use of the District's exterior lighting system.

On July 15, 2010, OCTuS announced it was selected, throughout a competitive bid process, as an approved energy efficiency contractor for Roseville Electric’s Small Business Lighting Program. OCTuS’ selection is part of Roseville Electric’s $1,073,700 in American Recovery and Reinvestment Act of 2009 (ARRA) funds for energy efficiency programs granted to the City of Roseville.

On July 22, 2010, OCTuS announced it was awarded a contract to develop an energy-efficient lighting retrofit project for the City of Davis, California, focused on the City’s downtown parking facilities and its Central Park Pavilion. OCTuS will manage the project development process, including energy and technology analysis, contractor selection, and project management.

On July 27, 2010, OCTuS announced Quantum Energy Solutions has been awarded a contract for an energy-efficient lighting retrofit project for the Hampton Inn & Suites property in Lodi, California.

On August 12, 2010, OCTuS announced it has partnered with Five Star Bank to provide energy efficiency project financing for commercial and industrial building owners. The OCTuS/Five Star Bank Smart Energy Financing Program (“Building Energy Savings”) enables property owners to significantly reduce their energy expenses with little to no upfront costs.

On October 5, 2010, Octus announced it has won and is implementing multiple energy-efficient lighting retrofit projects leveraging Roseville Electric's Small Business Lighting Program.

On February 22, 2011, OCTuS announced the signing of a definitive agreement with Alternative Energy Partners, Inc. (OTCBB: AEGY) to acquire one hundred percent of Élan Energy Corp. and Sunarias Corporation in exchange for common shares of Octus. In addition, Octus signed a definitive agreement with Lin Han Equity Corporation to transfer majority ownership of Octus to Lin Han, in exchange for common stock in privately-held Healthcare of Today, Inc., and working capital to fund Octus' growth strategy.

On July 19, 2011, OCTuS announced that, effective July 13, 2011, it had discontinued negotiation of an Acquisition Agreement with Alternative Energy Partners, Inc. (“AEGY”) and an Investment Agreement with Lin-Han Equity Corporation due to non-performance by AEGY and Lin-Han, with no further action or claim.

On August 2, 2011, OCTuS announced it has completed seven water efficiency projects for multi-family apartment communities. The water-saving retrofit projects involved the replacement of inefficient toilets with high-efficiency systems in Northern California apartment complexes, generating an estimated 5.3 million gallons of water savings per year. Octus secured financing for the projects including $80,000 in utility rebates, significantly subsidizing the water-saving property improvement for the apartment management and investment groups.

On August 17, 2011, OCTuS announced the debut of RebateWorks™, a multi-faceted service focused on simplifying the procurement of utility company rebates and incentives.

Management believes that without an influx of significant new funds or the generation of positive cash flows through operations, we will not be able to sustain our operations in the near future. Although we have actively been pursuing new investment, we cannot give assurance that we will enter into any new investment, or that the terms of any such agreements will be on terms favorable to us. There is no assurance that anyone will continue to fund us. Should we be unable to obtain additional funds, we could be forced to cease business activities altogether, and the holders of security interests would likely be entitled to receive all or substantially all of our assets.

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We are implementing a business plan focused to provide innovative solutions that significantly and reduce energy and water use in buildings. We seek to accomplish this through the implementation of energy and water efficiency projects, including equipment upgrades, energy auditing and consulting, financing programs, management and facilitation of utility company rebates, and lighting and HVAC retrofit projects.

Our corporate strategy is to:

(1)	Develop energy-saving projects and deliver energy-efficiency services, including the retrofit of municipal , commercial and multi-family buildings with energy-efficient lighting, HVAC and energy management systems;

(2)	Develop water-saving projects and deliver water-efficiency services, including the retrofit of municipal, commercial and multi-family buildings with water-saving products and systems;

(3)	Develop, administer, market and implement turnkey energy-efficiency and water-efficiency programs for energy utilities, water agencies, and commercial real estate managers, developers and investors; and,

(4)	Create, implement and administer energy financing programs;

(5)	Identify, analyze, prescribe, manage and procure utility company rebates under the Company’s RebateWorks service offering\.

We focus on three specific markets: the commercial and industrial market, including utilities, the multi-family market, and the M.U.S.H. (municipality, university, school and hospital) market.

We believe the following factors drive demand for resource efficiency services by property owners and managers in the U.S. commercial, industrial, utility, multi-family and M.U.S.H. markets:

·	The potential for significant return on investment and demonstrable long-term cost savings resulting from the financing and implementation of efficiency solutions;

·	Concerns regarding the substantial and volatile cost of energy and water, the adverse implication of global climate change and the desire for energy independence;

·	Increasing pressure on corporations and public sector organizations to establish and attain sustainability goals;

·	Increasing regulatory pressure on utilities to include energy efficiency, renewable energy and water conservation in their resource plans and budgets;

·	The availability of rebates and tax incentives at the federal, state, and regional levels for organizations that reduce their resource consumption;

·	Existing and prospective government mandates to improve the efficiency of M.U.S.H. facilities and;

·	The migration toward a low-carbon economy which will potentially place a price or tax on the carbon emissions of our clients.

Our EfficiencyWorks business provides energy engineering, consulting and financing services. These services target development and implementation of energy-efficient lighting, HVAC, water conservation, and energy management projects for commercial, industrial, multi-family and municipal building owners. Our customers reduce energy use and costs, improve reliability, increase the value of their real estate assets and maximize the operating efficiency of their buildings. In June 2010, we acquired certain assets of Quantum Energy Solutions, Inc., a pioneer in the development of energy efficiency projects.

Our RebateWorks business seeks to maximize the value of energy and water efficiency rebates for customers, and improve the impact these programs have for utilities and the communities they serve. RebateWorks offerings fall into three main categories:

1.	Services – A turnkey service for multi-family and institutional property owners and managers that aids them in capturing utility rebates and incentives for energy- and water-efficient building improvements.

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2.	Products – Octus has partnered with manufacturers of leading energy- and water-efficiency products to bundle rebates with their products, thus improving the economic value of such measures.

3.	Programs – We leverage our experience in working with utility companies to assist in creating, marketing and administering rebate programs that have maximal impact on GHG and water reduction goals.

Our EfficiencyFinancing business seeks to create, manage and administer financing for building improvements that reduce utility expenses and improve the amenity of buildings.

Market Overview

According to the U.S. Department of Energy (“DOE”), the United States consumes more energy than any other country in the world. The United States is primarily dependent on traditional fossil fuels to supply energy for end users, which includes transportation, heating and electricity. Recently, nearly all energy costs have risen due to a variety of factors, including the concern over a limited supply of fuel to meet increasing global demand.

U.S. electricity prices have risen in recent years due to increasing energy prices, supply constraints, and the growing demand for electricity. According to the DOE, electricity prices increased just 5.1% from 1996 to 2003 for commercial clients. However, the average retail price of electricity to commercial clients rose 20.2% from 8.03 cents per kilowatt-hour in 2003 to a record of 9.65 cents per kilowatt-hour in 2007. In addition, the Energy Information Administration (“EIA”) reported demand for electricity grew from 3,492 billion kilowatt hours in 1997 to 4,157 billion kilowatt hours in 2007, a 19% increase in 10 years. These trends have created market opportunities for energy efficiency and smart energy management solutions due to immediate energy cost savings and positive environmental impact energy users realize after adopting and implementing solutions.

Government Initiatives and Mandates to Stimulate Energy Efficiency for Facilities

Improvements in energy technology and increases in government initiatives have created immediate economic reasons for building owners to upgrade to more efficient, cost saving technology. In response to increasing environmental concerns over the years, coupled with record electricity demand and costs, regulatory authorities have created incentives for utilities and end-users to reduce electricity usage. The federal government and many state governments have passed legislation that provides incentives to electricity users to reduce consumption by adopting energy efficiency solutions and forces utilities to decouple revenue from their electricity sales. These incentives lower the net costs of implementing smart energy efficiency solutions. This helps building owners and managers rationalize and accelerate decisions to replace obsolete systems. More recently, the ARRA and other related stimulus initiatives contain provisions that further support energy efficiency as a national priority. Stephen Chu, U.S. Energy Secretary, recently opined, “If I were emperor of the world, I would put the pedal to the floor on energy efficiency and conservation for the next decade.”

Legislation and mandates adopted to date which have stimulated building energy efficiency projects in both the commercial and industrial and public sector include:

Federal Legislation:

The Energy Policy Act of 2005 (“EPAct05”) includes a significant tax-incentive to improve energy efficiency of commercial facilities. The Commercial Building Tax Deduction is an incentive established to provide a tax-deduction of up to $1.80 per square foot for expenses incurred for the installation of energy efficient lighting, heating, ventilating, and air conditioning (“HVAC”), hot water systems and building envelope systems.

The EPAct05 and Executive Order 13423 (January 2007) set new federal energy goals. The first goal is to cut energy use in federal facilities by 3% per year from 2003 levels during the period from 2007 through 2015. Second, the federal government is to increase the use of renewable energy to not less than 3% of total electricity use in 2007-2009, not less than 5% in 2010-2012, and not less than 7.5% in 2013 and thereafter, with at least half of renewable purchases coming from new renewable sources.

The Energy Independence and Security Act of 2007 (“EISA”) included the permanent reauthorization of energy savings performance contracts (“ESPCs”). ESPCs are contracting vehicles that allow federal agencies to complete energy projects for their facilities without up-front investment and without special Congressional appropriations to pay for the improvements. In December 2008, the DOE awarded sixteen contracts to Energy Services Companies (ESCOs) for up to $80 billion in energy efficiency, renewable energy and water conservation projects at federal facilities.

More recently, the $787 billion American Recovery and Reinvestment Act of 2009 (“ARRA”) reflects increased government focus on energy efficiency initiatives, in addition to other continuing legislation and mandates.

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Additionally, many federal entities have made provisions for funding opportunities outside of the ARRA, including:

The U.S. Department of Energy currently manages the Loan Guarantee Program, authorized by the EPAct05, which guarantees loans on projects that either reduce emissions or advance energy efficiency technologies, encouraging early commercial use of such projects.

The General Services Administration, in conjunction with a $4.5 billion ARRA appropriation, has taken an initiative to convert its facilities to High-Performance Green Buildings.

Property Assessed Clean Energy Bonds (“PACE”) are bonds with terms of up to 20 years and issued by municipalities, with the proceeds lent to commercial and residential property owners in the community to finance energy efficiency, water efficiency and renewable energy projects. These loans are secured by borrowers’ properties and are repaid over the term of the issuance via an annual assessment on properties’ tax bills. The first PACE bonds were issued in 2009. It is estimated that potential for PACE bonds could exceed $500 billion.

State Legislation and Other Initiatives Supporting Energy Efficiency for Facilities

Over the past few years, there have been increasing numbers of state initiatives encouraging or requiring utilities to establish Demand-Side Management (“DSM”) and energy efficiency programs. DSM and energy efficiency programs typically provide incentives to utility customers to offset a portion of the upfront cost of energy efficiency projects. Regulatory mandates, such as the Energy Efficiency Resource Standards (“EERS”), often result in significant economic incentives to utility customers and have served to increase the number of DSM and energy efficiency projects, especially in several Northeast and West Coast states. Under these programs utilities actively seek participants, arrange for project management and implementation services for energy efficiency projects initiated under their programs, and pay a portion of the costs.

Current EERS typically require utilities to achieve savings equivalent to between one and 1.5 percent of their annual sales through energy efficiency. In response to EERS, many states have begun planning or have already implemented DSM and Energy Efficiency projects, including New York, where utilities have filed more than $6 billion in new DSM and Energy Efficiency programs and Pennsylvania with utilities allocating more than $275 million per year to new DSM and Energy Efficiency projects. Currently 26 states, representing 71% of the U.S population, have adopted, or are in the process of adopting, EERS programs. The Save American Energy Act currently being considered by Congress would establish a national EERS program requiring utilities to achieve 15% energy savings through utility efficiency programs, building energy codes, appliance standards and related efficiency measures. In addition to these programs, five states--Maryland, Nevada, New York, Montana and Oregon--currently offer incentives for commercial facilities that meet green building standards.

Initiatives of Non-Governmental Organizations

Public awareness of cost savings and environmental benefits accruing from facility energy efficiency initiatives are also being stimulated by organizations other than the federal government. These include a number of non-government organizations (“NGOs”) that are helping to increase public awareness of the environmental and operational value of prioritizing building energy efficiency initiatives. These initiatives include efforts to focus on specific major projects. They have helped focus commercial and public sector entities on the need to take action and for results to be seen by their stakeholders. Notable examples include:

Clinton Climate Initiative (“CCI”)—Working with governments and businesses around the world, the CCI focuses on three strategic program areas consisting of increasing energy efficiency in cities, catalyzing the large-scale supply of clean energy and working to stop deforestation.

Energy Efficiency Partnership of Greater Washington—This is a collective partnership of energy efficiency companies, banks, local governments and facility owners to reach a goal of reducing energy use by twenty to fifty percent in existing facilities in the Greater Washington, D.C. region.

Growing Interest in Adoption of Environmentally Conscientious Energy Efficiency Strategies

Electricity supply shortages and rising energy prices have led consumers, companies and public entities to implement “sustainable” policies to reduce energy use and greenhouse gas emissions. As standards of corporate accountability evolve, stockholders and other stakeholders are pushing organizations to recognize and act to reduce their carbon footprint. Achieving greater energy efficiency is a cost-effective way to reduce energy consumption and promote environmental stewardship. According to Institute of Business and Economic Research (“IBER”), energy represents 30% of operating expenses in a typical office building, which makes it the single largest building operating expense. DOE estimates that residential and commercial buildings are responsible for 39% of total U.S energy consumption and that buildings account for 38% of total U.S. CO2 emissions, America’s largest single source.

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There is an increasing demand for environmentally friendly and sustainable building construction and methods for addressing energy efficient upgrades of facilities. The term “green building” has been adopted to refer to buildings that use lower amounts of electricity and reduce their emissions through use of energy efficient equipment and materials. According to McGraw-Hill Construction, an estimated 10%-12% of current new commercial construction starts are green, representing a $24-$29 billion market, and total commercial construction market is on track to grow to $56-$70 billion annually by 2013. In the U.S., the Energy Star project, which is jointly sponsored by the Environmental Protection Agency (“EPA”) and DOE, and the U.S. Green Building Council’s Leadership in Energy and Environmental Design (“LEED”) program are the two major rating systems to encourage development of energy-efficient and sustainable facilities. According to IBER only 1,360 of the approximately 332,000 U.S. commercial facilities listed in the Co-Star Group, Inc. database of commercial properties for sale or lease are certified by either LEED or Energy Star as “green” office buildings. We believe that economic and environmental factors will drive growth in new construction and retrofit projects that result in green building certifications.

Commercial and Industrial Market

We believe there is currently a significant market opportunity for the sale of resource efficiency solutions based on the amount of U.S. electricity expenditures, potential energy savings with currently available solutions, and amount of commercial and industrial floor space able to be retrofitted. The EIA estimated that in 2003 the U.S. commercial sector spent approximately $46 billion on electricity for lighting, heating, ventilating and air conditioning. This represented approximately 67% of the $69 billion total electricity spending by that sector for facilities. Also according to the EIA, more than 63 billion square feet of commercial building floor space in the U.S. was built before 2004. We believe there are about 4 million “small commercial / small site” buildings of less than 100,000 square feet in the U.S. today. Few of these small site buildings have any form of centralized energy management or control systems in place. With constant changes in lighting products and energy management technologies, this represents a significant amount of floor space able to be retrofitted to improve energy efficiency and meet sustainability goals.

Intellectual Property

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 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 a percentage 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 of customary milestone conditions related to OCTuS’ progress in funding support of the product, commencement of manufacturing, and commencement and progress of commercial sales. In ~~The~~the agreement ~~also includes several other customary provisions~~, ~~including~~OCTuS ~~representations~~agreed ~~and~~to ~~warranties~~diligently ofproceed with the ~~parties~~development, ~~provisions addressing~~manufacture ~~indemnification~~and sale of ~~the~~licensed ~~University~~products, bylicensed ~~OCTuS,~~services ~~use~~and oflicensed ~~names~~methods and ~~other intellectual~~to ~~property,~~diligently ~~litigation~~market ~~and~~them ~~disputes,~~in ~~and~~quantities ~~insurance~~sufficient ~~requirements,~~to ~~and other~~meet ~~customary~~the ~~provisions~~market demand.

Pursuant to these milestone conditions, OCTuS committed to achieve the following objectives and milestones in its activities under the agreement:

(a)

Funding of OCTuS: $250,000 by December 31, 2010 (accomplished in June 2010);

(b)

Manufacturing of a licensed product begins (including by a third-party on behalf of OCTuS) by May 31, 2010 (accomplished in February 2010);

(c)

First sales of a licensed product or licensed services by August 31, 2010 (accomplished in February 2010); and

(d)

1,000 units of licensed products sold by August 31, 2011 (not accomplished).

If OCTuS is unable to meet any of these diligence obligations, then the University will notify OCTuS of failure to perform, and OCTuS will have the right to extend the target date of any such diligence obligation for a period of six months upon the payment of $5,000 within 30 days of the date to be extended for each such extension option exercised by OCTuS. OCTuS may further extend the target date of any diligence obligation for an additional six months upon payment of an additional $5,000. Additional extensions may be granted only by mutual written consent of OCTuS and the University. Should OCTuS elect not to extend the dates or fail to meet a milestone by the extended target date, then the University will have the right either to terminate the agreement or to reduce OCTuS’ exclusive license to a non-exclusive license, by means of a notice delivered to OCTuS, with OCTuS having 60 days to cure the deficiency or to request arbitration. 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. To date, the University has not provided a failure to perform notification to OCTuS.

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Though laboratory and in-field testing continues for the licensed technology, funded through University and other public sector grants, the Company does not anticipate generating significant, if any, revenue through the sale of the licensed technology, in light of its unproven state and the uncertainty of commercial viability. Given that OCTuS has not accomplished the milestone requiring the sale of 1,000 units by August 31, 2011, and further given the nascent state of the licensed technology, it is not likely Octus will maintain its license with the University.

Government Regulation

As our current operations and activities are minimal, applicable government regulations do not have a material impact on our activities. However, if we successfully execute on our business plan, we anticipate that federal, state and local environmental, energy, tax incentive, health, labor relations, sanitation, building, zoning, fire and safety regulations could have an effect on our business and on the businesses of the customers to which we intend to sell products, services and solutions.

Our Research and Development

We are not currently conducting any research and development activities although we may conduct such activities in the foreseeable future.

Employees

As of December 31, ~~2009~~2010, we had ~~four~~seven employees. We added ~~four~~three employees to our workforce during the year ended December 31, ~~2009~~2010. None of our employees is currently represented by labor unions or covered by a collective bargaining agreement. We believe that relations with our employees are good.

2ITEM 1B. UNRESOLVED STAFF COMMENTS

~~ITEM 1A. RISK~~SEC ~~FACTORS~~Comment Letter

~~Risks Related~~We towill ~~Our~~be ~~Business~~filing our amended annual report on Form 10-K for the year ended December 31, 2009 and quarterly report on Form 10-Q for the periods ended March 31, 2010, June 30, 2010 and September 30, 2010.

~~Much~~In ~~of the~~November ~~information~~2010, ~~included~~we inreceived ~~this~~a ~~annual~~comment ~~report~~letter ~~includes~~from orthe isSEC ~~based~~which ~~upon estimates,~~we ~~projections~~submitted orour ~~other~~initial ~~“forward-looking~~response ~~statements.”~~in ~~Such forward-looking~~December ~~statements~~2010. In ~~any~~January ~~include~~2011, ~~projections~~we orreceived ~~estimates~~a ~~made~~subsequent bycomment usletter and ~~our~~ ~~management~~we insubmitted ~~connection~~red-lined ~~with~~versions of our ~~business~~amended ~~operations.~~annual ~~While~~report ~~these forward-looking~~on ~~statements,~~Form ~~and~~10-K ~~any~~for ~~assumptions~~the ~~upon~~year ~~which~~ended ~~they~~December ~~are based~~31, ~~are made~~2009; inour ~~good~~quarterly ~~faith~~interim ~~and~~reports ~~reflect~~for ~~our~~the ~~current~~periods ~~judgment~~ended ~~regarding~~March ~~the~~31, ~~direction~~2010; ~~of our~~June ~~business~~30, ~~actual~~2010 ~~results~~and ~~will~~September ~~almost always vary~~30, ~~sometimes~~2010. On ~~materially,~~August ~~from any estimates~~11, ~~predictions~~2011, ~~projections,~~we ~~assumptions,~~received ora ~~other~~third ~~future performance~~comment ~~suggested~~letter ~~herein.~~with Wethe ~~undertake~~following noopen ~~obligation~~points towhich ~~update forward-looking~~we ~~statements~~plan to ~~reflect~~address ~~events~~as orsoon ~~circumstances~~as ~~occurring~~reasonably practical after the ~~date~~filing of ~~such~~this ~~statements.~~Form 10-K for the year ended December 31, 2010:

~~Such estimates,~~· ~~projections~~In orour ~~other~~Form ~~“forward~~10-~~looking~~K ~~statements”~~for ~~involve~~fiscal ~~various risks~~year ~~and~~ended ~~uncertainties~~December as31, ~~outlined~~2009, ~~below.~~Certain WeRelationships ~~caution~~and ~~readers~~Related ofTransactions, ~~this~~we’ve ~~annual report~~been ~~that~~asked ~~important~~to ~~factors~~revise inour ~~some~~Item ~~cases~~13 ~~have~~disclosure ~~affected~~to ~~and,~~disclose in the ~~future, could~~indentified ~~materially~~related ~~affect~~party ~~actual~~to ~~results~~whom ~~and~~the ~~cause~~Grupo ~~actual~~Dynastia ~~results~~note was sold to. ~~differ materially~~We ~~from~~have ~~the~~made ~~results~~such ~~expressed~~disclosure in ~~any~~this ~~such~~form ~~estimates,~~10-K ~~projections~~for ~~or other~~the ~~“forward-looking~~year ~~statements.”~~ended InDecember ~~evaluating us~~31, ~~our~~2010 ~~business~~ and ~~any investment~~will infile ~~our~~an ~~business,~~amended ~~readers~~Form ~~should~~10-K ~~carefully~~for ~~consider~~ the ~~following factors~~year ended December 31, 2009.

~~We have~~· ~~limited~~In ~~operating~~our ~~history~~Form ~~that~~10-K ~~you~~for ~~can~~the ~~use~~year toended ~~evaluate~~December us31, ~~and~~2009, ~~therefore~~ we ~~may~~ ~~not~~omitted ~~survive~~certain ifexhibits wein ~~meet~~proper ~~some~~form ~~of the problems, expenses, difficulties, complications~~ and ~~delays~~will ~~frequently~~file ~~encountered~~those bywith athe ~~start~~amended 10-upK ~~company~~for 2009.

~~We essentially~~· ~~ceased~~In ~~active~~our ~~business~~Form in10-Q ~~1997~~for ~~and~~the ~~have~~period ~~been~~ended ~~reviewing~~September ~~business opportunities~~30, ~~since February 2009 when we hired new officers and directors of the Company To date~~2010, we ~~have~~failed ~~focused~~to ~~our~~present ~~attention~~Management’s onDiscussion ~~seeking product~~ and ~~technology~~ ~~licensing,~~Analysis ~~acquisitions~~for ~~and~~the ~~business~~predecessor ~~opportunities. Accordingly~~entity, ~~you can~~Quantum ~~evaluate~~Energy ~~our~~Solutions. ~~business,~~We ~~and~~will ~~therefore~~amend our ~~future~~Quarterly ~~prospects,~~Report ~~based only~~ on ~~a limited~~Form ~~operating~~10-Q ~~history.~~for ~~You must consider our prospects in light of~~ the ~~risks and~~period ~~uncertainties~~ended ~~encountered~~September by30, ~~start-up companies~~2010. As aWe ~~start-up company,~~have wealso ~~can~~included ~~provide~~such nodiscussion ~~assurances~~in ~~that~~this weForm ~~will~~10-K befor ~~able to make~~ the ~~necessary steps~~year toended ~~achieve~~December ~~profitability in the future~~31, ~~such as expanding our customer base~~2010.

We· ~~are subject to all the substantial risks inherent in the commencement of a new business enterprise with new management.~~ We ~~can provide no assurance that we will be able to successfully generate revenues or operate profitably. We~~ have ~~limited~~failed ~~business history for you~~ to ~~analyze~~file ortimely ~~to aid you in making an informed judgment as to~~ the ~~merits~~Form of10-K anfor ~~investment~~fiscal inyear ~~our securities.~~ended ~~Any~~December ~~investment~~31, in2010, our ~~common~~quarterly ~~stock~~reports ~~should~~for bethe ~~considered~~periods aended ~~high~~March ~~risk investment because you will be placing funds at risk in an unseasoned start-up company with unforeseen costs~~31, ~~expenses,~~2011 ~~competition~~ and ~~other~~June ~~problems~~30, ~~to which start-up ventures are often subject~~2011.

As we have such a limited history of operation, you will be unable to assess our future operating performance or our future financial results or condition by comparing these criteria against our past or present equivalents.-8-

We will require additional funds to achieve our current business strategy. Our inability to obtain additional financing will inhibit our ability to expand or even maintain our business operations.

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 your interests 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 extent that we are forced to restructure, file for bankruptcy, sell assets or cease operations, any of which could put your investment dollars at significant risk.

We expect to experience significant and rapid growth in the scope and complexity of our business if our business strategy gains acceptance in the market. If we are unable to hire additional staff to handle engineering, sales and marketing of our products and services and manage our operations, our growth could harm our future business results and may strain our managerial and operational resources.

If our business gains acceptance in the market, we expect to experience significant and rapid growth in the scope and complexity of our business. We will need to hire staff to market our products and services and perform finance and accounting functions. We will be required to hire a broad range of personnel in order to successfully advance our operations. This growth is likely to place a strain on our management and operational resources. If we fail to develop and implement effective systems, or hire and retain sufficient personnel for the performance of all of the functions necessary to effectively service and manage our future relationships, or fail to manage growth effectively, our business will fail and you will lose your entire investment in our company.

If we are unable to hire and retain key personnel, then we may not be able to implement our business plan.

We depend on the services of our officers and directors, Christian Soderquist and George Ecker. Our success depends on the continued efforts of these individuals to manage our business operations. The loss of the services of either of these individuals could have a negative effect on our business, financial condition and results of operations. In addition, our success in expanding our business operations is largely dependent on our ability to hire highly qualified personnel. In addition, we may lose employees or consultants that we hire due to higher salaries and fees being offered by competitors or other businesses in the industry.

Our managers’ control of our company may prevent you from causing a change in the course of our operations and may affect the market price of our common stock.

Mr. Soderquist and Mr. Ecker each beneficially own approximately 35% of our common stock and together control the majority of the Company’s voting shares. Accordingly, for as long as they continue to own more than 50% of our common stock, they will be able to elect a majority or all of our board of directors, control all matters that require a stockholder vote (such as mergers, acquisitions and other business combinations) and exercise a significant amount of influence over our management and operations. Therefore, your ability to cause a change in the course of our operations may be impeded. This concentration of ownership could result in a reduction in value to the common stock you own and could have the effect of preventing us from undergoing a change of control in the future.

We may pursue strategic acquisitions and investments that could have an adverse effect on our business if they are unsuccessful.

As part of our business strategy, we intend to acquire companies, and acquire or license technologies and product lines. There is the risk that our valuation assumptions and models for any acquired product, business or technology that we may acquire will be overly optimistic or inaccurate or that customers do not demand the products or services to the extent we expect, the technology does not function as we expect, that or the technology we acquire is the subject of infringement or trade secret claims by third parties.

The identification of acquisition candidates is difficult and we may not correctly assess the risks related to such acquisitions and investments. In particular, our determinations and assessments of technology candidates involve assessments of the financial performance of the candidates and past financial performance that we observe may not be indicative of future financial performance. In addition, acquisitions could be effected on terms less satisfactory to us than expected. If these risks materialize, the benefit that we derive from businesses, technologies, products or services that we acquire or license may be less than we expect, with the result that our operating losses could increase.

We have a history of losses and have a deficit, which raises substantial doubt about our ability to continue as a going concern.

We cannot provide assurances that we will be able to successfully develop our business. These circumstances raise substantial doubt about our ability to continue as a going concern as described in an explanatory paragraph to our independent auditors’ report on our audited financial statements, dated that are included in this Report. If we are unable to continue as a going concern, investors will likely lose all of their investments in our company.

Because we may never become profitable from our operations, our business may fail.

We expect to incur losses into the foreseeable future. We recognize that if we are unable to generate significant revenues, we will not be able to earn profits or continue operations. There is no history upon which to base any assumption as to the likelihood that we will prove successful, and we can provide no assurance that we will generate any revenues or ever achieve profitability. If we are unsuccessful in addressing these risks, our business will fail and investors may lose all of their investment in our company.

Risks Associated With Our Common Stock

Trading on the OTC Bulletin Board may be volatile and sporadic, which could depress the market price of our common stock and make it difficult for our stockholders to resell their shares.

Our common stock is quoted on the OTC Bulletin Board service of the National Association of Securities Dealers. Trading in stock quoted on the OTC Bulletin Board is often thin and characterized by wide fluctuations in trading prices, due to many factors that may have little to do with the company’s operations or business prospects. This volatility could depress the market price of our common stock for reasons unrelated to operating performance. Moreover, the OTC Bulletin Board is not a stock exchange, and trading of securities on the OTC Bulletin Board is often more sporadic than the trading of securities listed on a quotation system like Nasdaq or a stock exchange. Accordingly, shareholders may have difficulty reselling any of the shares.

Trading of our stock may be restricted by the SEC's penny stock regulations, which may limit a stockholder's ability to buy and sell our stock.

The Securities and Exchange Commission has adopted regulations which generally define “penny stock” to be any equity security that has a market price (as defined) less than $5.00 per share or an exercise price of less than $5.00 per share, subject to certain exceptions. Our securities are covered by the penny stock rules, which impose additional sales practice requirements on broker-dealers who sell to persons other than established customers and “accredited investors.” The term “accredited investor” refers generally to institutions with assets in excess of $5,000,000 or individuals with a net worth in excess of $1,000,000 or annual income exceeding $200,000 or $300,000 jointly with their spouse. The penny stock rules require a broker-dealer, prior to a transaction in a penny stock not otherwise exempt from the rules, to deliver a standardized risk disclosure document in a form prepared by the SEC which provides information about penny stocks and the nature and level of risks in the penny stock market. The broker-dealer also must provide the customer with current bid and offer quotations for the penny stock, the compensation of the broker-dealer and its salesperson in the transaction and monthly account statements showing the market value of each penny stock held in the customer's account. The bid and offer quotations, and the broker-dealer and salesperson compensation information, must be given to the customer orally or in writing prior to effecting the transaction and must be given to the customer in writing before or with the customer's confirmation. In addition, the penny stock rules require that prior to a transaction in a penny stock not otherwise exempt from these rules, the broker-dealer must make a special written determination that the penny stock is a suitable investment for the purchaser and receive the purchaser's written agreement to the transaction. These disclosure requirements may have the effect of reducing the level of trading activity in the secondary market for the stock that is subject to these penny stock rules. Consequently, these penny stock rules may affect the ability of broker-dealers to trade our securities. We believe that the penny stock rules discourage investor interest in and limit the marketability of our common stock.

We do not intend to pay dividends on any investment in the shares of stock of our company.

We have never paid any cash dividends and currently do not intend to pay any dividends for the foreseeable future. Because we do not intend to declare dividends, any gain on an investment in our company will need to come through an increase in the stock’s price. This may never happen and investors may lose all of their investment in our company.

We recently became aware of 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.

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 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 liabilities 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 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.

ITEM 1B UNRESOLVED STAFF COMMENTS

None.

ITEM 2 PROPERTIES

Our corporate offices are located at 803 Second Street, Suite 303, Davis, CA 95616. These facilities are leased under a short term lease agreement.

We also maintain approximately 400 square feet of office space at 619 State Street, Unit A, Carlsbad, CA 92011, on a month to month basis. We do not maintain any other leases for office space and nor own any real property. We believe these facilities are adequate for our requirements and that adequate space is available for the expansion of our business in the foreseeable future should that be necessary .

ITEM 3. LEGAL PROCEEDINGS

We are not currently involved in any legal proceedings and have no legal proceedings pending.

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

There were no matters submitted to a vote of the shareholders during the year ended December 31, 2009.

PART II

ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES

Market for Common Stock

Our common stock is eligible for quotation on the Over-the-Counter Bulletin Board pink sheets under the symbol "OCTI.OB".

7Set forth below are the ranges of high and low bid prices for each quarter for the Common Stock as reported by the OCTI.OB for the years ended December 31, 2010 and 2009.

Set forth below are the ranges of high and low bid prices for each quarter for the Common Stock as reported by the OCTI.OB for the years ended December 31, 2009 and 2008.

COMMON STOCK
QUARTER ENDED	HIGH		LOW
March 31, 2009	$	0.10	$	0.01
June 30, 2009		0.25		0.05
September 30, 2009		0.39		0.10
December 31, 2009		0.35		0.18
March 31, 2010		0.02		0.02
June 30, 2010		0.08		0.02
September 30, 2010		0.04		0.04
December 31, 2010		0.02		0.02

COMMON STOCK
QUARTER ENDED	HIGH		LOW
March 31, 2008		0.08		0.08
June 30, 2008		0.04		0.04
September 30, 2008		0.07		0.07
December 31, 2008		0.01		0.01
March 31, 2009		0.01		0.10
June 30, 2009		0.05		0.25
September 30, 2009		0.10		0.39
December 31, 2009		0.18		0.35

The source of these high and low prices was the OTC Bulletin Board. These quotations reflect inter-dealer prices, without retail mark-up, markdown or commissions and may not represent actual transactions. The high and low prices listed have been rounded up to the next highest two decimal places.

It is anticipated that the market price of our common stock will be subject to significant fluctuations in response to variations in our quarterly operating results, general trends in the market for the products we distribute, and other factors, over many of which we have little or no control. In addition, broad market fluctuations, as well as general economic, business and political conditions, may adversely affect the market for our common stock, regardless of our actual or projected performance. On ~~April~~September 97, ~~2010~~2011, the closing price of our common stock as reported by the OTC Bulletin Board was $0.2102 per share. Trading on our Common Stock is extremely limited and sporadic. Therefore, prices are not an accurate indication of the market value of our Common Stock.

Reports to Security Holders

We are a reporting company with the Securities and Exchange Commission, or SEC. The public may read and copy any materials filed with the Securities and Exchange Commission at the Securities and Exchange Commission’s Public Reference Room at 100 F Street, N.E., Washington, D.C. 20549. The public may also obtain information on the operation of the Public Reference Room by calling the Securities and Exchange Commission at 1-800-SEC-0330. The Securities and Exchange Commission maintains an Internet site that contains reports, proxy and information statements, and other information regarding issuers that file electronically with the Securities and Exchange Commission. The address of that site is http://www.sec.gov .

Dividends

We have never declared or paid cash dividends on our Common Stock and have no current intention to declare or pay any dividends on our Common Stock in the foreseeable future. We intend to retain earnings, if any, for the development of our business.

Description of Capital Stock

Our authorized capital stock at December 31, 2010 consists of the following:

· Common stock, $0.001 par value, 100,000,000 shares authorized; ~~approximately 43~~46,~~867~~229,072 shares issued and outstanding;

Series A preferred stock, $0.001 par value, 300,000 shares authorized, no shares issued or outstanding;

Series B preferred stock, $0.001 par value, 910,000 shares authorized, no shares issued or outstanding;

Series C 6.0% cumulative preferred stock, $0.001 par value, 250,000 shares authorized, no shares issued and outstanding; and

Undesignated preferred stock, $0.001 par value, 540,000 shares authorized, no shares issued or outstanding.

Holders of shares of our common stock are entitled to receive dividends when and as declared by our Board of Directors from funds legally available. All the shares of our common stock have equal voting rights and are non-assessable. Each shareholder of our common stock is entitled to share ratably in any assets available for distribution to holders our equity securities upon our liquidation. Holders of our common stock do not have preemption rights.

As of ~~April~~ 12September 13, ~~2010~~2011, there were approximately ~~311~~356 holders of our Common Stock.

-9-

Recent Sales of Unregistered Securities

~~On February~~In ~~24,~~January ~~2009~~2010, weOCTuS entered into ~~share~~a ~~purchase~~three-month ~~agreements~~consulting ~~with~~agreement ~~our~~which ~~two officers~~calls ~~and~~for ~~directors~~OCTuS ~~whereby~~to ~~they~~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 ~~received~~month, 15and pay a $4,000 stipend each month the contract is in force. OCTuS issued 90,000 ~~common~~ shares under this agreement during the year ended December 31, 2010, valued at $13,350 and recorded as share-based compensation.

OnIn ~~May~~January 52010, ~~2009,~~ OCTuS entered into ana ~~employment~~three-month consulting agreement ~~with~~which ~~John~~calls ~~Argo~~for ~~pursuant~~OCTuS to ~~which~~ ~~Mr.~~issue ~~Argo~~30,000 ~~will~~shares ~~serve~~of ascommon ~~Director,~~stock ~~Energy~~each ~~Projects~~month &the ~~Finance~~contract ofis ~~OCTuS~~in force. The ~~employment~~consultant ~~agreement~~terminated ~~has~~the acontract ~~term~~in ofMarch ~~three~~2010. ~~years,~~OCTuS ~~through~~issued ~~April 30~~60,000 ~~2012,~~shares ~~with a~~under ~~base~~this ~~annual~~agreement ~~salary~~during ofthe ~~$120,000.~~year ~~Concurrently,~~ended ~~OCTuS~~December ~~issued 250~~31,~~000~~ ~~shares of common stock~~2010, valued at $1218,~~500~~900 toand ~~Mr. Argo,~~ recorded as share-based compensation.

In ~~June 2009~~January 2010, OCTuS entered into a ~~twelve~~three-month consulting agreement which calls for OCTuS to issue 1030,000 shares of common stock to a consultant each month the contract is in force. OCTuS issued 7090,000 shares under this agreement during the year ended December 31, ~~2009~~2010, valued at $2026,~~900~~100 and recorded as share-based compensation.

In ~~July 2009~~January 2010, OCTuS entered into a three-month consulting agreement which calls for OCTuS to issue 2030,000 shares of common stock toeach anmonth ~~employee~~the ~~upon~~contract ~~execution~~is ~~of the~~in force. OCTuS issued 90,000 shares under this agreement asduring athe ~~signing~~quarter ~~bonus~~ended March 31, 102010,~~000~~ ~~shares~~valued ofat ~~common~~$23,400 ~~stock~~and ~~each~~recorded ~~month~~as share-based compensation. At the end of May 2010, ~~and pay~~OCTuS entered into a $2new six-month consulting agreement with the same consultant which calls for OCTuS to issue 25,000 ~~stipend~~shares of common stock each month the contract is in force. Under the new contract, OCTuS issued 80125,000 shares ~~under~~through ~~this~~December ~~agreement~~31, ~~during~~2010, ~~the~~valued ~~year~~at ~~ended~~$8,100 ~~December~~and 31owes 25, ~~2009~~000 shares, valued at $221,~~200~~050, ~~and~~to the consultant recorded as ~~share-based~~a ~~compensation~~stock payable.

In ~~July 2009~~February 2010, OCTuS entered into a three-month consulting agreement which ~~calls~~call for OCTuS to issue 1015,000 shares of common stock each month the contract is in force. OCTuS issued 3045,000 shares under this agreement during the year ended December 31, ~~2009~~2010, valued at $98,~~300~~100, and recorded as share-based compensation. In June, 2010, OCTuS entered into a new six-month consulting agreement with this same consultant which calls for OCTuS to issue 10,000 shares of common stock each month the agreement is in force. OCTuS issued a total of 40,000 shares, valued at $2,290, under the new consulting agreement during the year ended December 31, 2010. As of December 31, 2010, OCTuS owed another 20,000 shares, valued at $620, that is recorded as a stock payable.

In ~~August 2009~~February 2010, OCTuS entered into a ~~twelve~~six-month consulting agreement which calls for OCTuS to ~~pay~~issue $31,000 ~~and issue 10~~,000 shares of common stock ~~each~~for ~~month~~services. All ~~the contract~~services iswere innot ~~force. OCTuS~~performed ~~issued~~as 30originally agreed and 500,000 shares ~~under~~were ~~this~~considered ~~agreement during~~in dispute by OCTuS and a cancellation order for these shares was issued. For the ~~year~~services ~~ended~~that ~~December~~were 31performed, ~~2009~~OCTuS agreed that the consultant could keep the initial 500,000 shares which were valued at $9150,~~300~~000 and recorded as share-based compensation. During ~~This~~March ~~contract~~2011, the original cancellation order for the 500,000 shares in dispute was ~~terminated~~rescinded ~~October~~and the consultant was allowed to keep the shares. As such, OCTuS determined that an additional $150,000 in compensation expense be recorded as of December 31, ~~2009~~2010 ~~by mutual~~for ~~agreement~~the fair market value of the shares at the original service date.

OnDuring ~~August 12,~~the ~~2009~~first quarter of 2010, OCTuS ~~entered~~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 ~~consulting~~years ~~agreements~~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 ~~each~~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 ~~consultants~~of anthe ~~option~~Notes, OCTuS issued warrants to the note holders to purchase 30140,000 shares of OCTuS’ common stock at an exercise price of $0.39 01 per share. The ~~options~~term ~~vest~~of ~~ratably~~the ~~over~~warrants ~~six~~is eighteen months. The ~~and~~securities ~~expire~~were issued without any public solicitation, to a limited number of investors. The shares were issued in reliance on ~~August~~ 17Section 4(2) of the Securities Act. Each investor represented that the securities were being acquired for investment purposes, ~~2012~~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 ~~The~~investor ~~options~~also ~~each~~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 ~~value~~pre-existing relationship with the Company or one or more of ~~$11~~its officers or directors of a nature and duration that enabled the recipient to be aware of the business of the Company,~~091~~ onthat the ~~date~~recipient had the opportunity to ask questions of, ~~grant. One~~and receive from answers from, executive officers of the ~~Consulting~~Company ~~Agreements~~with respect to the acquisition of the securities and the business of the Company and that the recipient understood the speculative nature of the acquisition of the securities and was ~~terminated~~an ~~effective~~accredited ~~November~~investor ~~23, 2009~~as defined in Regulation D.

~~In September~~During ~~2009,~~the ~~OCTuS~~year ~~entered~~ended ~~into~~December a31, ~~software~~2010, ~~development contract that required~~ OCTuS toissued ~~issue 91~~562,000 ~~shares of~~ common ~~stock~~shares asin ~~part~~connection ofwith the ~~developer’s compensation~~exercise ~~upon execution~~ of ~~the~~warrants ~~agreement. The~~for ~~shares were valued at~~ $305,~~000 and recorded as share-based compensation~~620. ~~OCTuS sent a notice of termination of this Agreement to the contractor on January 13, 2010 and considers the contract null and void.~~

In October 2009, OCTuS entered into a one year investor relations agreement which calls for the issuance of 350,000 shares of common stock such agreement was terminated by OCTuS on January 8, 2010 with no shares issued.-10-

In ~~2009~~June 2010, OCTuS issued ~~convertible secured promissory notes (the “Note”) with a principal amount of $135~~150,000 to investors. The Note bears 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~~valued 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~~ $17,~~000~~500,~~000~~ orin atconnection 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~~ ofacquisition ~~the Note, OCTuS issued warrants to the note holder to purchase 540,000 shares~~ of ~~OCTuS~~Quantum ~~common~~Energy ~~stock at an exercise price of $0.01 per share. The term of the warrants is 18 months. The relative fair value of the warrants is $59~~Solutions,~~000. The~~ ~~intrinsic value of the conversion feature totaled $63,817 resulting in a discount of $122,817 to the notes payable~~Inc.

9In May 2010, OCTuS issued a convertible secured promissory note with a principal value of $100,000 to an investor. The note had a stated interest rate of 10% and is due May 2013. Accrued interest was to be paid semi-annually with the first payment due six months after the date the note was issued. The note contained a conversion option where the unpaid principal and interest due could 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 note, OCTuS issued warrants to the same investor to purchase 400,000 shares of common stock at an exercise price of $0.01 per share. The term of the warrants was eighteen months. The relative fair value of the warrants was $38,544 resulting in an initial discount. The conversion feature had no intrinsic value at the date of inception. In June, OCTuS repaid the $100,000 note and cancelled the outstanding warrants resulting in the accelerated amortization of the discount of $38,544 into interest expense.

In ~~January~~ June 2010, OCTuS ~~entered~~issued a convertible secured promissory note with a principal value of $500,000 to an investor. The note has a stated interest rate of 12% and is due in June, 2011. No payments of principal or interest are due to be paid until the date of maturity. At any time commencing ninety (90) days after the date of issuance of this note and before the maturity date or earlier conversion of this note, the holder, at holder’s option and upon five (5) days prior written notice to the Company, may convert in whole or in part the outstanding principal and accrued but unpaid interest of this note into ~~three~~a ~~three-month~~number ~~consulting~~of ~~agreements~~shares ~~which~~of common stock determined ~~call~~by the greater of $0.30 per share or at 70% of the average closing price of the common stock on, for the ten trading days ending five days before the conversion date. OCTuS issued warrants in conjunction with this note to ~~issue~~purchase 702,500,000 shares of common stock ~~each~~at ~~month~~an exercise price of $0.01 per share. The term of the ~~contracts~~warrants is eighteen months. The relative fair value of the warrants was $98,201 resulting in an initial discount. The conversion feature had no intrinsic value at the date of inception. For the year ended December 31, 2010, $98,201 related to the debt discount was amortized into interest expense. In addition, OCTuS recorded a deferred financing cost associated with a payment of $30,000 to an unrelated third party as a finder’s fee for this note. The deferred financing cost is being ~~are~~amortized over the one-year maturity period of the convertible note resulting in ~~force~~$16,250 in interest expense for the year ended December 31, 2010. On December 3, 2010, OCTuS received a notice of default from the note holder for non-payment of principal and accrued interest. On December 20, 2010, OCTuS received a notice of intent to collect for the entire note balance due. In July 2011, the note was modified and extended and is no longer considered to be in default. See Note 12 Subsequent Events of footnotes to financial statements for modifications and extension terms of this note.

~~In January~~On June 10, 2010, OCTuS entered into an ~~investment~~Asset ~~advisory~~Purchase ~~services~~Agreement ~~contract~~and ~~which calls~~related ~~for~~agreements ~~OCTuS~~with toQuantum ~~issue~~Energy 30Solutions, Inc., a California corporation (“Quantum”). The purchase price included 150,000 shares of OCTuS common stock, ~~each~~valued ~~month~~at $7,500, on the ~~contract is~~date inof ~~force~~the transaction closing which was June 10, 2010, at $0. ~~The~~05 ~~term~~per ofshare, ~~the~~plus ~~contract~~assumption isof ~~three~~$62,891 ~~months~~in accounts payable and ~~may~~accrued ~~be extended~~expenses; onassumption of a ~~month~~line of credit facility with a balance of $45,253 and assumption of a 3-year promissory note to ~~month~~the ~~basis~~seller for $130,000.

In ~~February~~ ~~2010~~March 2011, OCTuS ~~entered~~issued ~~into~~2,547.055 ashares ~~three-month~~in ~~consulting~~connection ~~agreement~~with ~~which~~a ~~call for~~convertible ~~OCTuS~~note toin ~~issue~~the 15amount of $32,000 ~~shares~~under the terms of ~~common~~a ~~stock~~Convertible ~~each~~Bridge ~~month~~Loan. See ~~the~~Note ~~contract~~12 isSubsequent ~~in force~~Events to the financial statements.

In ~~February~~ ~~2010~~April 2011, OCTuS ~~entered~~issued ~~into~~58,325 ashares ~~six~~for ~~month~~payment ~~public~~of ~~relations~~accrued ~~contract~~interest ~~which calls~~of ~~for~~$17,546 ~~OCTuS~~related to ~~issue~~various ~~1,000,000~~convertible ~~shares~~notes ofagreements. ~~common~~OCTuS ~~stock~~calculated atthe aconversion ~~purchase~~rate ~~price~~ of the shares at $0.~~0001~~30 per share.

~~During the~~In ~~first~~July ~~quarter of 2010~~2011, OCTuS ~~issued~~modified ~~convertible~~and ~~secured~~extended ~~promissory notes (~~the ~~“2010~~terms ~~Note”) with a principal amount~~ of ~~$35,000~~the ~~to investors for proceeds of~~ $30500,000, asConvertible ~~$5,000~~note ~~of the convertible notes~~ issued ~~was~~in toJune ~~convert a standard promissory note outstanding as of December 31, 2009 to a convertible note. The~~ 2010 ~~Note bears interest at a rate of 10% per annum and is due two years from the date of issuance. Accrued interest is paid semi-annually~~, ~~with~~which ~~the~~matured ~~first~~in ~~payment~~June ~~due six months after the date the Note is issued~~2011. At OCTuS’ ~~option,~~received ~~OCTuS may make any interest payment either in cash or by delivery of~~ a ~~number~~default ofnotice ~~shares~~from ~~of Common Stock with a value equal to~~ the ~~amount~~note ofholder ~~interest due~~ and ~~payable,~~negotiated 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~~modification. The ~~Note~~general ~~may~~terms ~~be converted to common stock at 70%~~ of the ~~price~~modification 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 Note, OCTuS issued warrants to the note holder to purchase 140,000 shares of OCTuS common stock at an ~~exercise~~extension ~~price of $0.01 per share. The term of the warrants is eighteen months.~~include:

~~Other than~~· ~~these~~An ~~transactions~~extension weof ~~did not sell any equity securities during~~ the ~~period covered~~maturity bydate ~~this~~from ~~report~~June ~~that~~2010 ~~were~~to ~~not~~December ~~registered~~2, ~~under the Securities Act.~~2011;

The issuance of 2,000,000 shares of common stock;

Past due interest of approximately $30,000 became part of the principal amount;

Change in conversion price of the note from the greater of $0.30 or 70% of the average closing price of the common stock, for the ten trading days ending five days before the conversion date to $0.15.

In July 2011, OCTuS issued 2,338,725 shares of common stock, with a fair value of $7,250, in payment of $5,075 of accrued interest related to the $480,539 convertible notes- related party outstanding.

Equity Compensation Plans

We have a stock option plan for option grants to our directors, officers, employees and consultants. Such options are granted at fair value, vest over three to five years, and expire not more than ten years from date of grant. As of December 31, ~~2009~~2010, we have reserved a total of ~~450~~10,000,000 shares of common stock for exercise under the stock option plan. As of December 31, ~~2009~~2010, ~~one~~ ~~option~~we ~~for~~have ~~15,000~~options ~~shares and one option~~ for 301,060,000 shares ~~at a grant price of $0~~outstanding.39 During ~~per~~the ~~share~~year ~~were~~ended ~~issued~~December in31, ~~August~~2010, ~~2009~~we ~~with~~granted aoptions ~~term~~to ofpurchase ~~three years. Accordingly~~1, ~~405~~000,000 shares ~~are~~at ~~available~~exercise ~~for~~prices ~~grant~~ranging ~~under~~from ~~the stock option plan~~$0. ~~The~~05 ~~remaining~~to ~~life of the option is 2~~$0.~~75 years~~11.

At December 31, 2009, we had options to purchase 60,000 shares outstanding. As of December 31, 2009, one option for 30,000 shares and one option for 30,000 shares at grant prices of $0.39 and $0.33 per share were issued in August 2009 with a term of three years. Accordingly, 405,000 shares are available for grant under the stock option plan. The remaining life of the option is 2.75 years.

-11-

Penny Stock Regulation

Shares of our common stock are subject to rules adopted by the Securities and Exchange Commission that regulate broker-dealer practices in connection with transactions in "penny stocks". Penny stocks are generally equity securities with a price of less than $5.00 (other than securities registered on certain national securities exchanges or quoted on the Nasdaq system, provided that current price and volume information with respect to transactions in those securities is provided by the exchange or system). The penny stock rules require that a broker-dealer, prior to a transaction in a penny stock not otherwise exempt from those rules, deliver a standardized risk disclosure document prepared by the Securities and Exchange Commission, which contains the following:

a description of the nature and level of risk in the market for penny stocks in both public offerings and secondary trading;

a description of the broker's or dealer's duties to the customer and of the rights and remedies available to the customer with respect to violation to such duties or other requirements of securities' laws;

a brief, clear, narrative description of a dealer market, including "bid" and "ask" prices for penny stocks and the significance of the spread between the "bid" and "ask" price

a toll-free telephone number for inquiries on disciplinary actions;

definitions of significant terms in the disclosure document or in the conduct of trading in penny stocks; and

such other information and is in such form (including language, type, size and format), as the Securities and Exchange Commission shall require by rule or regulation.

Prior to effecting any transaction in penny stock, the broker-dealer also must provide the customer the following:

the bid and offer quotations for the penny stock;

the compensation of the broker-dealer and its salesperson in the transaction;

the number of shares to which such bid and ask prices apply, or other comparable information relating to the depth and liquidity of the market for such stock; and

monthly account statements showing the market value of each penny stock held in the customer's account.

In addition, the penny stock rules require that prior to a transaction in a penny stock not otherwise exempt from those rules, the broker-dealer must make a special written determination that the penny stock is a suitable investment for the purchaser and receive the purchaser's written acknowledgment of the receipt of a risk disclosure statement, a written agreement to transactions involving penny stocks, and a signed and dated copy of a written suitability statement. These disclosure requirements may have the effect of reducing the trading activity in the secondary market for a stock that becomes subject to the penny stock rules. Holders of shares of our common stock may have difficulty selling those shares because our common stock will probably be subject to the penny stock rules.

Purchases of Equity Securities

None during the period covered by this report.

ITEM 6. SELECTED FINANCIAL DATA

As a “smaller reporting company” as defined by Item 10 of Regulation S-K, the Company is not required to provide information required by this Item.

ITEM 7. 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 THAT 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. NO ASSURANCE CAN BE GIVEN THAT ANY OF THE ASSUMPTIONS RELATING TO THE FORWARD-LOOKING STATEMENTS SPECIFIED IN THE FOLLOWING INFORMATION ARE ACCURATE, AND WE ASSUME NO OBLIGATION TO UPDATE ANY SUCH FORWARD-LOOKING STATEMENTS.

11-12-

Critical Accounting Policy and Estimates

Our Management's Discussion and Analysis of Financial Condition and Results of Operations section discusses our 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 ongoing 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. As we did not engage in active business operations during 2008, the most significant accounting estimates inherent in the preparation of our financial statements include estimates as to the appropriate amounts to accrue for accounting and legal expenses. These accounting policies are described at relevant sections in this discussion and analysis and in the notes to the financial statements included in this Annual Report.

Revenue Recognition

We recognize revenue for the sale of our products and our services when the following four basic criteria are met: (1) persuasive evidence of an arrangement exists; (2) delivery has occurred or services rendered; (3) the seller’s price to the buyer is fixed and determinable; and (4) collectability is reasonably assured. 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 or product has been shipped. 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.

Management's Discussion and Analysis of Financial Condition

This information should be read in conjunction with the audited consolidated financial statements and notes contained herein.

Overview

~~OCTuS~~We is seek to become a ~~smart~~leading ~~energy~~resource ~~management~~efficiency company ~~developing,~~that ~~marketing~~brings ~~and~~innovative ~~selling~~ energy~~-efficient~~ ~~lighting,~~efficiency ~~cooling~~ and ~~energy~~water ~~management~~efficiency solutions ~~that~~to ~~enable~~ the commercial and public sector markets. OCTuS intends to pursue and ~~private~~facilitate ~~organizations~~resource toefficiency ~~reduce~~projects ~~their~~involving energy ~~expenses.~~and ~~OCTuS has~~water ~~developed~~efficiency ~~OctusSEP~~systems, ~~(Smart~~and ~~Energy~~products ~~Platform),~~that aOCTuS ~~turnkey~~may ~~energy~~develop, ~~savings~~acquire, ~~and demand~~license ~~response~~or ~~management~~distribute. OCTuS ~~program~~believes ~~for~~that the market demand for energy ~~management~~and ~~market~~water inconservation ~~the United~~presents ~~States~~an attractive business opportunity.

We are actively seeking technologies and business opportunities in the ~~smart~~resource ~~energy~~ efficiency sector, which may include the licensing, acquisition or development of ~~smart~~ energy and ~~energy~~water efficiency products or technologies asand ~~part~~the facilitation and management of ~~the~~financing ~~OctusSEP (Smart~~solutions ~~Energy~~for ~~Platform)~~resource efficiency projects. We intend to recruit management, advisors and affiliates with sufficient experience needed to review and qualify such technologies and business opportunities for our involvement. Although we are seeking such opportunities, we may not consummate any such transactions beyond what have been consummated to date, and it is possible such transactions would not generate sufficient revenue to sustain our operations. We anticipate the need for additional debt or equity financing, and if the Company raises additional funds through equity financing transactions, the issuance of additional shares would dilute the ownership of existing shareholders.

OnResults ~~July 9, 2009 we announced the addition~~ of ~~two~~Operations ~~energy~~for ~~industry executives to our management team: Tobin J.M. Richardson as Senior Advisor, Energy Markets, and Siva Gunda as Senior Engineer, Smart Energy Solutions. Richardson is Director of~~ the ~~ZigBee~~Year ~~Smart~~Ended ~~Energy~~December ~~Initiative~~31, ~~where~~2010 hecompared ~~drives~~to ~~adoption~~Year ofEnded ~~energy efficiency~~December ~~technology in key smart energy markets~~31, ~~and~~2009 ~~Gunda is the Southern California Edison International Energy Efficiency Fellow with the UC Davis Energy Efficiency Center.~~(Successor)

OnWe ~~August 20~~recognized $197,186 wein ~~announced~~revenue ~~our~~for ~~affiliation~~the ~~with~~year ~~the~~ended ~~California~~December ~~Lighting~~31, ~~Technology~~2010 ~~Center (CLTC)~~as ~~and~~compared to $0 during the ~~Western~~year ~~Cooling~~ended ~~Efficiency~~December ~~Center~~31, ~~(WCEC)~~2009. The toincrease ~~further~~was ~~development and~~a ~~deployment~~result of the ~~Octus~~acquisition ~~Smart~~of certain assets of Quantum Energy ~~Platform~~Solutions, Inc. ~~CLTC~~in ~~and~~June ~~WCEC~~2010 ~~are~~and ~~part~~the execution of ~~the University~~resource ofefficiency ~~California,~~projects ~~Davis~~and ~~Energy~~product ~~Efficiency~~sales. Gross ~~Center,~~margin ~~and~~during ~~are~~the ~~supported~~year ~~by leading~~ended ~~companies~~December 31, ~~utilities~~2010 ~~and~~was ~~federal~~$50,204 ~~and~~or ~~state~~25% ~~energy organizations~~on these resource efficiency related projects.

~~On September~~We incurred $1,429,781 ~~2009~~in general and administrative expenses during the year ended December 31, we2010 ~~announced~~as compared to $784,430 during the year ended December 31, 2009. The increase in general and administrative expenses was related primarily to stock-based compensation, an ~~exclusive~~increase ~~worldwide~~in ~~license~~accounting and auditing fees associated with the ~~University~~ acquisition of ~~California~~certain ~~for~~assets ~~Wickool,~~of aQuantum ~~passive~~Energy ~~evaporative~~Solutions, ~~cooling~~Inc., ~~technology for~~and ~~commercial~~response ~~rooftop~~to ~~HVAC~~an ~~units~~SEC comment letter. During ~~Wickool~~the ~~has~~year ~~been~~ended ~~commercially~~December ~~tested~~31, by2010, ~~the WCEC~~we atreported ~~Target~~a ~~Corp~~net loss of $1,680,484 or $0.04 ~~and~~loss ~~Wal-Mart~~per ~~stores~~share, ascompared to a ~~retrofit~~net loss of $932,011 or $0.02 loss per share for the year ended December 31, 2009 We expect to ~~rooftop~~incur ~~HVAC~~losses until such ~~units~~time, if ever, we begin generating significant revenue from operations.

~~On October~~Interest 4,expense ~~2009,~~for wethe ~~announced~~year aended ~~joint~~December ~~venture~~31, ~~with~~2010 ~~Quantum~~was ~~Energy~~$300,933 ~~Solutions~~compared to ~~catalyze~~ ~~commercialization~~$147,581 ofincurred ~~the~~during ~~Octus~~2009. The ~~Smart~~increase ~~Energy~~was ~~Platform~~primarily ~~and~~related to ~~collaboratively~~ ~~pursue~~the ~~smart~~amortization ~~energy~~of ~~projects.~~debt ~~Quantum~~discounts ~~has~~and ~~managed~~deferred ~~more~~financing ~~than~~costs of $~~100 million~~203,914 induring ~~energy~~the ~~projects~~year ~~for~~ended ~~several~~December ~~hundred clients~~31, ~~including~~2010 ~~Safeway,~~as ~~Bank of~~compared ~~America,~~to ~~Sears~~$105,108 ~~Hewlett-Packard~~for ~~and~~the ~~Chevron~~year ended December 31, 2009.

~~On October~~Results ~~27,~~of ~~2009,~~Operations wefor ~~announced~~ the ~~addition~~Year toEnded ~~two~~December ~~energy industry executives to our Advisory Group: Mark Henwood~~31, ~~CEO~~2010 of(Successor) ~~Henwood~~compared ~~Associates,~~to ~~and~~Year ~~Dr.~~Ended ~~Mark Modera,~~December ~~director of the UC Davis Western Cooling Efficiency Center. On November 2~~31, 2009, ~~we announced the launch of SmartLightSupply.com, an electronic commerce marketplace featuring smart, energy-efficient lighting products for the commercial market.~~(Predecessor)

~~We anticipate~~The ~~the~~results ~~need~~of operations for ~~additional~~the ~~debt~~year orended ~~equity~~December ~~financing~~31, ~~and~~2010 if(Successor) includes six months of operating history after the ~~Company raises~~acquisition ~~additional~~of ~~funds~~certain ~~through~~assets ~~equity~~of ~~financing~~Quantum ~~transactions~~Energy Solutions, Inc., while the ~~issuance~~year ended December 31, 2009 includes a full year of ~~additional~~ ~~shares~~operations ~~would~~of ~~dilute~~the historical Quantum company. During the ~~ownership~~period in 2010 after the acquisition of ~~existing~~Quantum, we recognized $197,186 of revenue related to the execution of resource efficiency projects and product compared to a year to date revenue amount of $239,582 recognized by the predecessor entity during 2009. The increased revenue rate is due to a focused sales efforts ~~shareholders~~and focused marketing efforts in the rebate market and successful negotiations of contracts. Gross margin during the year ended December 31, 2010 (which includes only six months of Quantum activity) was $50,204 or 25% as compared to $63,579 or 26.5% for the full year ended December 31, 2009 for the predecessor company.

~~Results of Operations for the Year Ended December 31, 2009 Compared to Year Ended December 31, 2008~~-13-

We ~~did not~~incurred ~~realize~~$1,429,781 ~~any~~in ~~revenues~~general ~~during~~and ~~either~~administrative expenses in the successor company during the year ended December 31, 2009, orwhile the predecessor incurred $333,201 during the year ended December 31, ~~2008~~2009. The increase is primarily due to stock-based compensation incurred in the successor company as the predecessor company was privately held. In addition, an increase in accounting and auditing fees associated with the acquisition and being a public company contributed to fluctuation of general and administrative expenses.

During the year ended December 31, 2009, we reported a net loss of $932,011 or $0.02 per share, compared to a net loss of $66,865 or $0.00 per share for the year ended December 31, 2008. We expect to incur losses until such time, if ever, we begin generating revenue from operations.

During the year ended December 31, 2009, our general and administrative expenses were $784,430, as compared to $31,866 for 2008. General and administrative expenses consisted primarily of payroll expenses and share based compensation.

Interest expense for the year ended December 31, 2009 was $147,581 compared to $34,999 incurred during 2008.

As of December 31, 2009, we had significant tax credits and research carry-forwards for federal tax reporting purposes that expire through 2009. Additionally, we have federal and state net operating loss carry-forwards, expiring through 2027. Because of a substantial change in our ownership resulting from an initial public offering, an annual limitation of approximately $600,000 has been placed on utilization of the loss carry forwards generated prior to our initial public offering.

Liquidity and Capital Resources

Cash on hand as of December 31, ~~2009~~2010 was $35,962 as compared to $23,003 at December 31, 2009. Our total assets were $24397,~~689~~868 as of December 31, 2010 and $24,869 at December 31, 2009. Our current liabilities were $~~495~~2,~~915~~099,100 as of December 31, ~~2009,~~ 2010 including $~~102~~373,~~236~~217 in accounts payable, $~~171~~159,~~700~~970 in stock payable, $26252,~~750~~819 in accrued liabilities, $63194,~~986~~357 in accrued liabilities-related parties, $5158,~~000~~565 notes payable, $3227,~~750~~468 notes payable - related parties, $88635,000 convertible notes payable and $237,500 in convertible notes - related party. At December 31, 2009, our current liabilities were $495,915 reflecting an increase to December 31, 2010 due to the convertible notes. At December 31, 2009, our accounts payable and accrued liabilities were $128,986.

~~Although we~~During ~~have~~the ~~actively~~year ~~been~~ended ~~pursuing~~December ~~new~~31, ~~investments~~2010, orcash ~~other~~flows ~~business~~used in operations was $509,673 ~~we cannot~~and ~~give~~was ~~assurance~~made ~~that~~up weprimarily ~~will~~of ~~enter~~the ~~into~~net ~~any~~loss ~~new~~of ~~investment~~$1,680,484 orand ~~agreement~~non-cash ~~to acquire~~add ~~such~~backs ~~operations~~of $187,664 orin ~~that~~amortization ~~the~~of ~~terms~~debt discounts; $436,839 of ~~any~~share-based ~~agreements~~compensation ~~relating~~and ~~to financing~~$16,250 orof ~~commercial~~amortization ~~activities~~of ~~will~~deferred befinancing oncosts; ~~terms~~increase ~~favorable~~of toaccounts ~~us.~~payable Weand ~~cannot give~~accrued ~~assurance~~liabilities ~~that~~of we$434,159; ~~will~~accounts ~~enter~~payable ~~into~~and ~~any~~accrued ~~new~~liabilities-related ~~investment~~parties of $131,741 orprimarily ~~that~~related ~~the~~to ~~terms~~accrued ~~of any~~salaries ~~such~~and ~~agreements~~the ~~will~~increase bein deferred revenue on ~~terms~~amounts ~~favorable~~received toin usadvance of revenue recognition of $54,296. During ~~Should~~December we31, be2009, ~~unable~~cash ~~to obtain~~flows ~~revenues~~used orin ~~raise~~operations ~~additional~~was ~~capital~~$148,061 weand ~~could~~was bemade ~~forced~~up toprimarily ~~cease~~of the net loss ~~business~~of ~~activities~~$932,011 ~~altogether~~and non-cash add backs of share-based compensation of $349,353 and amortization of debt discount of $105,108; and an increase in accounts payable and accrued liabilities of $96,835 and increase in stock payable of $171,700.

~~Our Plan~~The Company financed its operations during the year ended December 31, 2010 primarily through advances from our CEO of ~~Operations~~$48,500 and issuance of convertible notes payable of $630,000 along with the exercise of warrants for $5,620. During year ended December 31, 2009, the ~~Next~~company ~~Twelve~~financed ~~Months~~its operations primarily through the issuance of convertible notes of $135,000 and loans from related parties of $32,750.

WeDuring ~~are actively~~the ~~seeking~~first ~~technologies~~quarter ~~and~~of ~~business~~2010, ~~opportunities~~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 ~~smart~~case ~~energy sector~~of one investor, ~~which~~conversion ~~may~~of ~~include~~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 ~~licensing~~date of issuance. Accrued interest is paid semi-annually, ~~acquisition~~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 ~~development~~by delivery of ~~smart~~a number of shares of Common Stock with a value equal to the ~~energy~~amount of interest due and ~~energy~~payable, ~~efficiency~~calculated ~~products~~based oron ~~technologies~~the asaverage ~~part~~closing price of the ~~OctusSEP~~ Common Stock on the OTC Bulletin Board (~~Smart~~or ~~Energy~~whatever ~~Platform~~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. WeOCTuS ~~intend~~granted to ~~recruit~~the ~~management,~~holder ~~advisors and~~of ~~affiliates~~the ~~with~~note ~~sufficient~~a ~~experience~~security ~~needed~~interest toof ~~review~~all assets of OCTuS, ranking before all preferred and ~~qualify~~common ~~such technologies~~shareholders and ~~business~~subordinated ~~opportunities~~to ~~for~~the ~~our~~existing ~~involvement~~senior convertible debt. ~~Although we~~The ~~are~~Notes ~~seeking~~may ~~such~~be ~~opportunities,~~converted weto ~~may~~common ~~not~~stock ~~consummate~~at 70% of the price per share paid for securities in a financing of at least $1,000,000 or at any ~~such~~time ~~transactions~~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 ~~beyond~~Notes, ~~what~~OCTuS ~~have~~issued ~~been~~warrants ~~consummated~~to the note holders to ~~date~~purchase 140,000 ~~and~~shares itof OCTuS common stock at an exercise price of $0.01 per share. The term of the warrants is ~~possible~~eighteen ~~such~~months. The ~~transactions would~~securities ~~not~~were ~~generate~~issued ~~sufficient~~without ~~revenue~~any public solicitation, to ~~sustain~~a ~~our~~limited ~~operations~~number of investors. The Weshares ~~anticipate~~ were issued in reliance on Section 4(2) of the ~~need~~Securities Act. Each investor represented that the securities were being acquired for ~~additional~~investment ~~debt~~purposes, for the recipient’s own account, not as nominee or ~~equity~~agent ~~financing~~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 ifduration that enabled the recipient to be aware of the business of the Company, ~~raises additional~~that ~~funds~~the ~~through~~recipient ~~equity~~had ~~financing~~the ~~transactions~~opportunity to ask questions of, and receive from answers from, executive officers of the ~~issuance~~Company with respect to the acquisition of ~~additional~~ ~~shares~~the ~~would~~securities ~~dilute~~and the ~~ownership~~business of ~~existing shareholders~~the Company and that the recipient understood the speculative nature of the acquisition of the securities.

~~Management believes~~In ~~that~~May ~~without~~2010, OCTuS issued a convertible secured promissory note with a principal value of $100,000 to an ~~influx~~investor. The note had a stated interest rate of ~~significant~~10% ~~new~~and ~~funds,~~is wedue ~~will~~May ~~not~~2013. Accrued beinterest ~~able~~was to ~~sustain~~ ~~our~~be ~~operations~~paid ~~beyond~~semi-annually ~~approximately~~with the ~~end~~first ~~of April~~payment ~~2010~~due six months after the date the note was issued. ~~Although~~ The wenote ~~have~~contained ~~actively~~a ~~been~~conversion ~~pursuing~~option ~~new~~where ~~investment,~~the weunpaid ~~cannot~~principal ~~give~~and ~~assurance that~~interest wedue ~~will~~could ~~enter~~be ~~into~~converted ~~any~~to ~~new~~common ~~investment,~~stock orat ~~that~~70% of the ~~terms~~price per share paid for securities in a financing of at least $1,000,000 or at any ~~such agreements~~time ~~will~~after be90 ondays ~~terms~~after ~~favorable~~issuance toat usthe greater of $0.30 ~~There~~per isshare noor ~~assurance~~70% ~~that~~of ~~anyone~~the average closing price of the common stock for the ten trading days ending ~~will~~five ~~continue~~days tobefore ~~fund~~the usconversion date. In ~~Should~~conjunction wewith bethe ~~unable~~issuance of the note, OCTuS issued warrants to ~~obtain~~the ~~additional~~same ~~funds~~investor to purchase 400,000 ~~we could~~shares beof ~~forced~~common tostock ~~cease~~at ~~business~~an ~~activities~~exercise ~~altogether~~price of $0.01 per share. The term of the warrants was eighteen months. The relative fair value of the warrants was $38,544 ~~and~~resulting in an initial discount. The conversion feature had no intrinsic value at the ~~holders~~date of ~~security~~ ~~interests~~inception. In ~~would~~June, ~~likely~~OCTuS berepaid ~~entitled~~the to$100,000 ~~receive~~note ~~all~~and orcancelled ~~substantially~~the ~~all~~ outstanding warrants resulting in the accelerated amortization of ~~our~~the ~~assets~~discount of $38,544 into interest expense.

We are implementing a business plan focused to provide innovative solutions that significantly improve energy management and reduce energy costs. Our purpose is to enable building owners and managers to reduce energy consumption by 50% or more. We seek to accomplish this through the development and deployment of the Octus Smart Energy Platform (OctusSEP), a portfolio of smart devices, sensors, and software-~~enabled energy management services, and the implementation of smart energy projects, including equipment upgrades, energy auditing and consulting, building automation, and lighting and HVAC retrofits.~~14-

~~Our~~In June 2010, OCTuS issued a convertible secured promissory note with a principal value of $500,000 to an investor. The note has a stated interest rate of 12% and is due in June, 2011. No payments of principal or interest are due to be paid until the date of maturity. At any time commencing ninety (90) days after the date of issuance of this note and before the maturity date or earlier conversion of this note, the holder, at holder’s option and upon five (5) days prior written notice to the Company, may convert in whole or in part the outstanding principal and accrued but unpaid interest of this note into a number of shares of common stock determined by ~~corporate~~the ~~strategy~~greater of $0.30 per share or at 70% of the average closing price of the common stock on, for the ten trading days ending five days before the conversion date. OCTuS issued warrants in conjunction with this note to purchase 2,500,000 shares of common stock at an exercise price of $0.01 per share. The term of the warrants is eighteen months. The relative fair value of the warrants was $98,201 resulting in an initial discount. The conversion feature had no intrinsic value at the date of inception. For the year ended December 31, 2010, $98,201 related to: the debt discount was amortized into interest expense. In addition, OCTuS recorded a deferred financing cost associated with a payment of $30,000 to an unrelated third party as a finder’s fee for this note. The deferred financing cost is being amortized over the one-year maturity period of the convertible note resulting in $16,250 in interest expense for the year ended December 31, 2010.

~~(1)~~Subsequent ~~Develop,~~Financing ~~license and acquire a portfolio of smart energy efficiency technologies (the “Octus Smart Energy Platform,” or, “OctusSEP”);~~Activities

~~(2)~~In ~~Generate~~March, ~~revenue~~April, ~~through~~May, ~~the~~June ~~sale~~and August of ~~OctusSEP~~2011, ~~solutions~~Mr. ~~via~~Soderquist ~~direct~~loaned OCTuS a total of $72,000 ~~channel~~under various note agreements. The notes accrue interest at the rate of 10% per year and ~~technology~~payment ~~sub-licensing~~of ~~activities;~~the accrued interest and principal are due no later than March 20, 2012, April 1, 2012, April 21, 2012, May 27, 2012, June 2012 and August 2012.

~~(3)~~In ~~Develop~~March ~~energy~~2011, ~~projects~~OCTuS ~~and~~entered ~~deliver~~into ~~energy-efficiency~~an ~~services,~~agreement ~~including~~for ~~the~~an ~~retrofit~~Equity Line of ~~municipal~~Credit and ~~commercial~~a ~~buildings~~Convertible ~~with~~Bridge ~~energy-efficient~~Loan ~~lighting,~~with ~~HVAC~~a ~~and~~third ~~energy management systems;~~party.

~~(4)~~· ~~Develop~~Under ~~and~~the ~~deliver~~terms ~~software-enabled~~of ~~energy~~the ~~management~~Equity ~~services;~~Line ~~and,~~of Credit:

~~(5)~~o ~~Create~~The ~~and~~third ~~monetize~~party ~~energy~~may ~~information~~commit ~~and~~to ~~intelligence~~purchase up to ~~help~~$5,000,000 ~~building~~of ~~owners~~the ~~and~~company’s ~~managers~~common ~~better~~stock ~~manage~~over ~~their~~the ~~energy~~course ~~use~~of twenty-four months after an effective registration statement has been filed with the SEC. If the Company does not complete the registration statement, then the commitment is null and ~~costs~~void.

Weo ~~focus on~~Upon ~~two~~OCTuS’ ~~specific markets: the commercial and industrial market~~option, ~~including utilities, and~~ the ~~M.U.S.H.~~maximum ~~(municipality,~~amount ~~university, school and hospital) market. We deploy solutions through OctusSEP to reduce the energy-related expenditures~~ of ~~our~~any ~~clients'~~individual ~~facilities~~purchase ~~and the impact~~ of ~~their~~OCTuS’ ~~energy~~common ~~use~~stock ~~on the~~is ~~environment~~$350,000 ~~including~~at ~~smart~~any ~~energy~~one ~~management~~time ~~systems, energy efficient lighting upgrades, energy efficiency mechanical~~ and ~~electrical~~no ~~retrofit~~purchase ~~and upgrade~~will ~~services,~~be ~~and~~made ~~renewable~~in ~~energy~~amount ~~project~~lower ~~development~~than ~~and implementation~~$20,000.

~~We believe~~o ~~the~~The ~~following~~purchase ~~factors~~price ~~drive~~will ~~demand~~be ~~for~~set ~~smart~~at ~~energy~~90% ~~efficiency~~of ~~services by~~the ~~facility~~market ~~owners~~price inof the Ustock.~~S. commercial, industrial and M.U.S.H. markets:~~

§· ~~the~~Under ~~potential for immediate return on investment and demonstrable long-term cost savings resulting from~~ the ~~installation~~terms of ~~smart~~the ~~energy~~Convertible ~~efficiency~~Bridge ~~solutions;~~Loan:

§o ~~concerns~~Financings ~~regarding~~will ~~the~~consist ~~substantial~~of ~~and~~a ~~volatile~~series ~~cost~~of convertible notes in an aggregate amount of ~~energy~~up to $250,000 with the ~~adverse~~first ~~implication~~tranche ofbeing ~~global~~$32,000 ~~climate~~and ~~change~~subsequent ~~and~~tranches ~~the~~as ~~desire~~agreed ~~for~~upon ~~energy~~by ~~independence;~~the parties.

§o ~~increasing~~In ~~pressure~~April on2011, ~~corporations~~$32,000 ~~and~~was ~~public~~funded ~~sector~~directly ~~organizations~~ to ~~establish~~a ~~and~~vendor ~~attain~~of ~~sustainability~~the ~~goals;~~company.

§o ~~increasing~~The ~~regulatory~~convertible ~~pressure~~notes onwill ~~utilities~~carry toan ~~include~~interest ~~energy~~rate ~~efficiency~~of 9% and ~~renewable~~be ~~energy~~convertible into shares of common stock at the greater of $0.025 or 70% of the average lowest volume weighted average price for 10 trading days prior to conversion. The floor of $0.025 will be eliminated if OCTuS fails to enter into a minimum of $600,000 in ~~their~~new ~~resource~~contracts ~~plans;~~within three months of the first tranche of $32,000.

§o A commitment fee of $250,000 worth of restricted common shares will be issued to the ~~availability~~third party in consideration of ~~rebates~~funding ~~and~~of ~~tax~~the ~~incentives~~convertible atnotes. The first tranche of shares worth $83,333 was due with the ~~federal~~funding of the first tranche of $32,000. ~~state~~The company issued 2,547,055 shares on April 6, 2011 in satisfaction of this first commitment. The remaining tranches of stock under the commitment fee are not due until (1) filing the registration statement, assuming funding has occurred and ~~regional~~(2) ~~levels~~the ~~for~~registration ~~organizations~~statement ~~that~~becoming ~~reduce~~effective, ~~their~~assuming ~~energy~~funding ~~consumption;~~has occurred.

§In ~~existing~~April ~~and~~2011, ~~prospective~~OCTuS ~~government~~issued ~~mandates~~58,325 shares for payment of accrued interest of $17,546 related to ~~improve~~various convertible notes agreements. OCTuS calculated the ~~efficiency~~conversion rate of Mthe shares at $0.~~U.S.H.~~30 ~~facilities;~~per share.

§In ~~the~~June ~~allocation~~and ofJuly ~~funds~~2011, ~~under~~OCTuS ~~the~~entered ~~American~~into ~~Recovery~~various ~~and~~note ~~Reinvestment~~agreements ~~Act~~with ofa ~~2009~~third ~~("ARRA")~~party ~~to promote energy efficiency~~ and ~~alternative~~assigned ~~energy~~certain ~~projects~~customer inreceivables ~~federal,~~as ~~state~~collateral ~~and~~for ~~local~~these ~~municipal facilities; and~~notes.

~~§ the migration toward a low~~-~~carbon economy which will potentially place a price or tax on the carbon emissions of our clients.~~15-

· On June 13, 2011, $37,700 was funded under a note with an interest rate of 12% per year. As a result, OCTuS assigned customer receivables of $39,684. Payment of accrued interest and principal are due no later than November 12, 2011. The company receives a discount from remitting the customer balance if collected and remitted prior to November 30, 2011. On June 29, 2011, OCTuS paid $38,493 of principal and interest related to this note.

~~Through OctusSEP~~· weOn ~~intend~~July to1, ~~offer~~2011, ~~building~~$23,010 ~~owners~~was ~~and~~funded ~~managers~~under a ~~full~~note ~~range~~with an interest rate of ~~solutions~~ to12% ~~address~~per ~~the~~year. ~~energy~~As ~~efficiency~~a ~~and~~result, ~~energy~~OCTuS ~~management~~assigned ~~needs~~customer receivables of ~~their facilities~~$24,221. ~~These~~Payment ~~solutions~~of ~~are~~accrued ~~based~~interest onand ~~our~~principal ~~ability~~are todue ~~identify~~no ~~and~~later ~~deliver significant~~than ~~return~~November on30, ~~our~~2011. ~~clients'~~The ~~investments,~~company ~~improve~~receives ~~the~~a ~~quality~~discount ofoff ~~their facilities,~~the ~~maximize~~customer ~~their~~balance ~~operational~~if ~~savings~~collected and ~~reduce~~remitted ~~their~~prior ~~maintenance costs.~~to WeNovember ~~intend~~30, to2011. ~~sell~~In ~~smart~~July ~~energy~~and ~~products~~August 2011, ~~develop~~OCTuS ~~energy~~paid ~~projects,~~a ~~deliver software-enabled~~partial ~~energy~~payment ~~management~~of ~~services~~$16,173 ~~and~~related ~~monetize~~to ~~energy~~principal ~~intelligence through~~and ~~three~~interest ~~business~~associated ~~units:~~with this note.

~~Our~~· ~~Smart~~On ~~Energy~~July ~~Products business~~1, ~~intends~~2011, to$32,331 ~~offer~~was funded under a ~~proprietary~~note ~~line~~with an interest rate of ~~integrated,~~12% ~~intelligent controls,~~per ~~sensors,~~year. ~~network~~As ~~appliances~~a result, ~~and~~OCTuS ~~energy~~assigned ~~management~~customer ~~software~~receivables toof ~~provide continuous~~$34,033. ~~management~~Payment of ~~lighting~~accrued interest and ~~HVAC~~principal ~~equipment~~are ~~using~~due ~~wireless~~no later than November 30, 2011. The company receives a discount off the customer balance if collected and ~~power line~~remitted ~~communication~~prior ~~technology~~to November 30, 2011.

~~All products~~· ~~communicate~~On ~~using~~July ~~open~~1, ~~standards~~2011, $11,245 was funded under a note with an interest rate of 12% per year. ~~Product~~As ~~offerings~~a result, OCTuS assigned customer receivables of $11,837. Payment of accrued interest and principal are ~~communication protocol~~due ~~agnostic~~no later than November 30, 2011. ~~Revenue~~The ~~comes~~company ~~from~~receives ~~product~~a ~~sales~~discount off the customer balance if collected and ~~technology sub-licensing.~~remitted Asprior ofto ~~December~~November 3130, ~~2009~~2011. In July 2011, ~~proprietary~~OCTuS ~~Octus~~paid ~~smart~~$11,481 ~~energy~~in ~~products were:~~principal and interest associated with this note.

§In ~~Wickool~~July 2011, aOCTuS ~~passive~~modified ~~evaporative~~and ~~cooling~~extended ~~solution~~the ~~that~~terms ~~generates~~of ~~efficiencies~~the ~~through~~$500,000 ~~reuse~~Convertible ofnote ~~condensate~~issued ~~created~~in byJune ~~commercial~~2010, ~~rooftop~~which ~~HVAC~~matured ~~units.~~in ~~Octus~~June ~~executed~~2011. The ancompany ~~exclusive~~received ~~worldwide~~a ~~license~~default ofnotice ~~the~~from ~~technology with~~ the ~~University~~note ofholder ~~California~~and onnegotiated ~~September~~a ~~1, 2009~~modification. The ~~Wickool~~general ~~was~~terms ~~developed~~of by the ~~Western~~modification ~~Cooling~~an ~~Efficiency~~extension ~~Center at the University of California, Davis, and was commercially demonstrated by two major retailers.~~include:

§· ~~Octus~~An ~~SmartCenter,~~extension anof ~~IP-based~~the ~~energy~~maturity ~~services~~date ~~appliance~~from ~~that~~June ~~wirelessly~~2010 ~~networks~~to ~~and~~December ~~optimizes~~2, ~~the energy-efficiency of commercial lighting and HVAC systems.~~2011

§· ~~Octus~~The ~~SmartPortal,~~issuance ~~Web-based~~of ~~energy management software that enables building owners and managers to monitor~~2, ~~control~~000,000 ~~and~~shares ~~manage~~of ~~energy~~common ~~use within their facilities.~~stock;

~~Our~~· ~~Smart~~Past ~~Energy~~due ~~Services~~interest ~~unit intends~~of toapproximately ~~develop~~$30,000 ~~deliver~~became ~~and~~part ~~manage~~of ~~software-enabled~~the ~~services.~~principal Services include reporting systems, building automation, resource management, and value-added services. Value-added services include maintenance monitoring and service alert/dispatch services, cost accounting information, modeling and benchmarking, to name a few. These are delivered through Octus SmartPortal, a hosted solution delivering capabilities through a Software as a Service (SaaS) model and subscriptions are on a per-service, per-user or per-facility basis. Revenue comes from subscriptions to one or more services or software modules.amount;

~~Our~~· ~~Smart~~Change ~~Energy~~in ~~Projects business~~conversion ~~provides~~price ~~energy~~of ~~engineering,~~the ~~consulting~~note ~~and~~from ~~financing~~the ~~services.~~greater ~~These services~~of ~~target~~$0.30 ~~development~~or ~~and~~70% ~~implementation~~ of ~~energy-efficient~~the ~~lighting, HVAC,~~average ~~energy~~closing ~~management~~price ~~and~~of ~~renewable~~the ~~energy~~common ~~projects~~stock, for ~~commercial,~~the ~~industrial and~~ten ~~municipal~~trading ~~building~~days ~~owners.~~ending ~~Our~~five ~~customers~~days ~~reduce~~before ~~energy use and costs, improve reliability, and maximize~~ the ~~operating~~conversion ~~efficiency~~date ofto ~~their buildings~~$0.15.

~~Market Overview~~· Removal of the cashless exercise provision of the warrants issued under the original agreement.

~~According to~~In ~~the~~July ~~U.S.~~2011, ~~Department~~OCTuS ofissued ~~Energy ("DOE")~~2,338,725 ~~the~~shares ~~United~~of ~~States~~common ~~consumes~~stock, ~~more~~with ~~energy than~~a ~~any~~fair ~~other~~value ~~country~~of ~~in the world. The United States is primarily dependent on traditional fossil fuels to supply energy for end users~~$7, ~~which includes transportation~~250, ~~heating~~in ~~and~~payment ~~electricity.~~of ~~Recently~~$5,075 ~~nearly~~of ~~all~~accrued ~~energy~~interest ~~costs~~related ~~have risen due~~ to athe ~~variety of factors~~$480,539 ~~including~~convertible ~~the~~notes- ~~concern~~related ~~over~~party ~~a limited supply of fuel to meet increasing global demand~~outstanding.

~~U.S. electricity~~In ~~prices~~July ~~have~~2011, ~~risen~~OCTuS inissued ~~recent~~2,000,000 ~~years~~shares, ~~due~~with toa ~~increasing~~fair ~~energy~~value ~~prices~~of $6, ~~supply~~200, ~~constraints~~as bonus shares under a two year convertible promissory note with a third party for $50,000. The maturity date of this note is July 2013. The convertible note agreement has a stated interest rate of 9% and the ~~growing~~accrued ~~demand~~interest ~~for~~is ~~electricity~~due semi-annually. The ~~According~~note tomay be converted at the ~~DOE,~~ ~~electricity~~option ~~prices~~of ~~increased~~the ~~just~~holder ~~5.1%~~at ~~from~~any ~~1996~~time tocommencing ~~2003~~ninety ~~for~~days ~~commercial clients~~after the issuance of the note at lesser of $0.03 ~~However,~~per share or 70% of the average ~~retail~~closing price of ~~electricity~~the toshares ~~commercial~~for ~~clients rose~~the ~~20.2%~~ten ~~from~~days ~~8.03~~ending ~~cents~~five ~~per~~days ~~kilowatt-hour~~before inthe ~~2003~~conversion todate. Upon a ~~record~~financing of ~~9.65~~at ~~cents~~least $1,000,000, (“Qualified ~~per~~Financing,”) ~~kilowatt-hour~~the innote ~~2007.~~shall Inbe ~~addition,~~automatically converted into shares at a conversion price equal to the ~~Energy~~lesser ~~Information~~of ~~Administration ("EIA")~~$0.03 ~~reported~~or ~~demand~~70% of the price per share paid for ~~electricity~~the ~~grew~~securities ~~from~~issued ~~3,492 billion~~Qualified ~~kilowatt hours~~Financing. inOn ~~1997~~August to2, 42011,~~157 billion~~ ~~kilowatt~~the ~~hours~~parties inagreed ~~2007~~that effective with the original date of the agreement, athat ~~19%~~the ~~increase~~conversion ~~in 10 years.~~price ~~These~~was ~~trends~~changed ~~have~~to ~~created~~be ~~market~~the ~~opportunities~~greater ~~for~~of ~~energy efficiency~~$0.01 ~~and~~or ~~smart~~70% ~~energy~~of ~~management~~the ~~solutions~~average ~~due~~closing toprice ~~immediate~~of ~~energy~~the ~~cost savings~~shares ~~and~~for ~~positive~~the ~~environmental~~ten ~~impact~~days ~~energy~~ending ~~users~~five ~~realize~~days ~~after~~before ~~adopting and~~the ~~implementing~~conversion ~~solutions~~date.

~~Regulatory policy~~In ~~increasingly~~addition ~~requires~~to ~~utilities~~revenues tothat ~~promote~~we ~~energy~~may ~~efficiency~~receive from customers and ~~obtain renewable~~sales ~~energy~~of ~~resources~~products asand ~~part~~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 ~~their~~existing ~~resource~~investors ~~planning~~with respect to dilution of book value, dividend preferences, liquidation preferences, or other terms. Our ~~Simultaneously~~inability to obtain financing will inhibit our ability to implement our development strategy, and as a result, could require us to diminish or suspend ~~increasing~~our ~~costs~~development strategy and ~~time~~possibly ~~required~~cease our operations. If we are unable to ~~construct~~obtain ~~traditional~~financing ~~power~~on ~~plants~~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 ~~causing~~ ~~utilities~~forced to ~~view~~restructure, file for bankruptcy, sale assets or cease operations. We cannot provide assurances that we will be able to enter into any new investment, inor ~~energy~~that ~~efficiency~~the asterms anof ~~attractive alternative~~any agreements relating to any new investment inwill ~~traditional~~be ~~generating~~on ~~capacity~~terms favorable to the Company.

We believe that smart energy efficiency, which we define as intelligently and systematically reducing the amount of energy used to operate facilities and produce goods and services, is the most immediate and economic means to reduce end user energy costs and promote environmental stewardship. At a minimum, smart energy efficiency accomplishes four objectives:

§ delivers immediate and recurring energy cost savings;

§ reduces greenhouse gas emissions to help alleviate climate change;

§ stimulates the economy through the creation of new jobs in the "green" segment; and

§ enhances the value and net operating income of buildings.

The value of smart energy efficiency as a resource is affirmed by increasing emphasis placed on it in regulation, legislation and appropriations. The American Council for an Energy Efficient Economy ("ACEEE") estimates that $300 billion was invested in energy efficiency technologies and infrastructure in the U.S. in 2004, and that annual investment may grow to $700 billion by 2030 in conjunction with the goal of reducing energy use by 20%. According to ACEEE, total additional investment from 2008 to 2030 could reach nearly $7 trillion. We believe investments in smart energy efficiency solutions will have a significant impact on electricity costs and demand, while improving the overall sustainability of the global energy market.

A 2009 study by McKinsey & Company offers a detailed analysis of the magnitude of the efficiency potential in non-transportation uses of energy. The study shows that the U.S. economy has the potential to reduce annual non-transportation energy consumption by roughly 23 percent by 2020, eliminating more than $1.2 trillion in waste – well beyond the $520 billion upfront investment (not including program costs) that would be required. This reduction in energy use would also result in the abatement of 1.1 gigatons of greenhouse gas emissions annually – the equivalent of taking the entire U.S. fleet of passenger vehicles and light trucks off the roads.

According to Amory Lovins, Chairman & Chief Scientist of the Rocky Mountain Institute, there are abundant opportunities to save 70% to 90% of the energy and cost for lighting, fan, and pump systems; 50% for electric motors; and 60% in areas such as heating, cooling, office equipment, and appliances.

Government Initiatives and Mandates to Stimulate Energy Efficiency for Facilities

Legislation and mandates adopted to date which have stimulated building energy efficiency projects in both the commercial and industrial and public sector include:

Federal Legislation:

§ The Energy Policy Act of 2005 ("EPAct05") includes a significant tax-incentive to improve energy efficiency of commercial facilities. The Commercial Building Tax Deduction is an incentive established to provide a tax-deduction of up to $1.80 per square foot for expenses incurred for the installation of energy efficient lighting, heating, ventilating, and air conditioning ("HVAC"), hot water systems and building envelope systems.

§ The EPAct05 and Executive Order 13423 (January 2007) set new federal energy goals. The first goal is to cut energy use in federal facilities by 3% per year from 2003 levels during the period from 2007 through 2015. Second, the federal government is to increase the use of renewable energy to not less than 3% of total electricity use in 2007-2009, not less than 5% in 2010-2012, and not less than 7.5% in 2013 and thereafter, with at least half of renewable purchases coming from new renewable sources.

§ The Energy Independence and Security Act of 2007 ("EISA") included the permanent reauthorization of energy savings performance contracts ("ESPCs"). ESPCs are contracting vehicles that allow federal agencies to complete energy projects for their facilities without up-front investment and without special Congressional appropriations to pay for the improvements. In December 2008, the DOE awarded sixteen contracts to Energy Services Companies (ESCOs) for up to $80 billion in energy efficiency, renewable energy and water conservation projects at federal facilities.

More recently, the $787 billion American Recovery and Reinvestment Act of 2009 ("ARRA") reflects increased government focus on energy efficiency initiatives, in addition to other continuing legislation and mandates. The ARRA provides approximately $36.7 billion through a number of funding sources and for financial incentives to stimulate energy projects, including:

§ $16.8 billion through the Office of Energy Efficiency and Renewable Energy

§ $6.0 billion through the Office of Environmental Management

§ $4.5 billion through the Office of Electricity Delivery & Energy Reliability

§ $4.0 billion through the Loan Guarantee Program Office

§ $3.4 billion through the Office of Fossil Energy

§ $1.6 billion through the Office of Science

§ $400 million through the Advanced Research Projects Agency - Energy

Additionally, many federal entities have made provisions for funding opportunities outside of the ARRA, including:

§ The U.S. Department of Energy currently manages the Loan Guarantee Program, authorized by the EPAct05, which guarantees loans on projects that either reduce emissions or advance energy efficiency technologies, encouraging early commercial use of such projects.

§ The General Services Administration, in conjunction with a $4.5 billion ARRA appropriation, has taken an initiative to convert its facilities to High-Performance Green Buildings.

§ Property Assessed Clean Energy Bonds ("PACE") are bonds with terms of up to 20 years and issued by municipalities, with the proceeds lent to commercial and residential property owners in the community to finance energy efficiency and renewable energy projects. These loans are secured by borrowers properties and are repaid over the term of the issuance via an annual assessment on properties’ tax bills. The first PACE bonds were issued in 2009. It is estimated that potential for PACE bonds could exceed $500 billion. The Waxman-Markey Energy Bill includes a provision that would provide for DOE support of these bonds.

State Legislation and Other Initiatives Supporting Energy Efficiency for Facilities

Over the past few years, there have been increasing numbers of state initiatives encouraging or requiring utilities to establish Demand-Side Management ("DSM") and energy efficiency programs. DSM and energy efficiency programs typically provide incentives to utility customers to offset a portion of the upfront cost of energy efficiency projects. Regulatory mandates, such as the Energy Efficiency Resource Standards ("EERS"), often result in significant economic incentives to utility customers and have served to increase the number of DSM and energy efficiency projects, especially in several Northeast and West Coast states. Under these programs utilities actively seek participants, arrange for project management and implementation services for energy efficiency projects initiated under their programs, and pay a portion of the costs.

Initiatives of Non-Governmental Organizations

Public awareness of cost savings and environmental benefits accruing from facility energy efficiency initiatives are also being stimulated by organizations other than the federal government. These include a number of non-government organizations ("NGOs") that are helping to increase public awareness of the environmental and operational value of prioritizing building energy efficiency initiatives. These initiatives include efforts to focus on specific major projects. They have helped focus commercial and public sector entities on the need to take action and for results to be seen by their stakeholders. Notable examples include:

§ Clinton Climate Initiative ("CCI")—Working with governments and businesses around the world, the CCI focuses on three strategic program areas consisting of increasing energy efficiency in cities, catalyzing the large-scale supply of clean energy and working to stop deforestation.

§ Energy Efficiency Partnership of Greater Washington—This is a collective partnership of energy efficiency companies, banks, local governments and facility owners to reach a goal of reducing energy use by twenty to fifty percent in existing facilities in the Greater Washington, D.C. region.

As much of ARRA funding has yet to be allocated to specific projects and programs, it is premature to identify resulting benefits. However, we believe that we are well positioned to capitalize on the range of mandates and initiatives intended to stimulate building energy efficiency. We are focusing sales and marketing efforts to industries and markets likely to be primary beneficiaries of significant government funding.

Growing Interest in Adoption of Environmentally Conscientious Energy Efficiency Strategies

Electricity supply shortages and rising energy prices have led consumers, companies and public entities to implement "sustainable" policies to reduce energy use and greenhouse gas emissions. As standards of corporate accountability evolve, stockholders and other stakeholders are pushing organizations to recognize and act to reduce their carbon footprint. Achieving greater energy efficiency is a cost-effective way to reduce energy consumption and promote environmental stewardship. According to Institute of Business and Economic Research ("IBER"), energy represents 30% of operating expenses in a typical office building, which makes it the single largest building operating expense. DOE estimates that residential and commercial buildings are responsible for 39% of total U.S energy consumption and that buildings account for 38% of total U.S. CO2 emissions, America’s largest single source.

There is an increasing demand for environmentally friendly and sustainable building construction and methods for addressing energy efficient upgrades of facilities. The term "green building" has been adopted to refer to buildings that use lower amounts of electricity and reduce their emissions through use of energy efficient equipment and materials. According to McGraw-Hill Construction, an estimated 10%-12% of current new commercial construction starts are green, representing a $24-$29 billion market, and total commercial construction market is on track to grow to $56-$70 billion annually by 2013. In the U.S., the Energy Star project, which is jointly sponsored by the Environmental Protection Agency ("EPA") and DOE, and the U.S. Green Building Council's Leadership in Energy and Environmental Design ("LEED") program are the two major rating systems to encourage development of energy-efficient and sustainable facilities. According to IBER only 1,360 of the approximately 332,000 U.S. commercial facilities listed in the Co-Star Group, Inc. database of commercial properties for sale or lease are certified by either LEED or Energy Star as "green" office buildings. We believe that economic and environmental factors will drive growth in new construction and retrofit projects that result in green building certifications.

Commercial and Industrial Market

We believe there is currently a significant market opportunity for the sale of smart energy efficiency solutions based on the amount of U.S. electricity expenditures, potential energy savings with currently available solutions, and amount of commercial and industrial floor space able to be retrofitted. The EIA estimated that in 2003 the U.S. commercial sector spent approximately $46 billion on electricity for lighting, heating, ventilating and air conditioning. This represented approximately 67% of the $69 billion total electricity spending by that sector for facilities. Also according to the EIA, more than 63 billion square feet of commercial building floor space in the U.S. was built before 2004. We believe there are about 4 million "small commercial / small site" buildings of less than 100,000 square feet in the U.S. today. Few of these small site buildings have any form of centralized energy management or control systems in place. With constant changes in lighting products and energy management technologies, this represents a significant amount of floor space able to be retrofitted to improve energy efficiency and meet sustainability goals.

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 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURE ABOUT MARKET RISK~~-16-

As a “smaller reporting company” as defined by Item 10 of Regulation S-K, the Company is not required to provide information required by this Item.

ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

OCTUS , Inc.
Table of Contents
	Page
Report of Independent Registered Public Accounting Firm	1318
Consolidated Balance Sheets	1419
Consolidated Statements of Operations	1520
Consolidated Statements of Changes in Stockholders’ Deficit	16
Consolidated Statements of Changes in Stockholders’ Equity (Deficit)	21
Consolidated Statements of Cash Flows	1722
Notes to Consolidated Financial Statements	1823

18-17-

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the Shareholders and Board of Directors

Octus, Inc.

Davis, California

We have audited the accompanying consolidated balance sheets of Octus, Inc. (Successor Company) as of December 31, ~~2009~~2010 and ~~2008~~2009, and the related consolidated statements of operations, changes in stockholders' equity (deficit), and cash flows for the years then ended December 31, 2010 and 2009. We have audited the accompanying balance sheet of Quantum Energy Solutions, Inc. (Predecessor Company) as of December 31, 2009, and ~~2008~~the related statements of operations, changes in stockholders' equity (deficit), and cash flows for the year ended December 31, 2009. These consolidated financial statements are the responsibility of the Company's management. Our ~~responsibility~~ responsibility is to express an opinion on these consolidated financial statements based on our audits.

We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States.). Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. Our audit included consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.

In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of Octus, Inc. (Successor Company) as of December 31, ~~2009~~2010 and ~~2008~~2009, and the results of its operations, and its cash flows for the years ended December 31, 2010 and 2009, and ~~2008~~the financial position of Quantum Energy Solutions, Inc. (Predecessor Company) as of December 31, 2009, and the results of its operations, and its cash flows for the year ended December 31, 2009, in conformity with accounting principles generally accepted in the United States of America.

The accompanying consolidated financial statements have been prepared assuming that Octus will continue as a going concern. As discussed in Note 2 to the consolidated financial statements, Octus has suffered recurring losses from operations and has working capital and stockholders’ deficits. These factors raise substantial doubt about the Company’s ability to continue as a going concern. Management’s plans in regard to these matters are also discussed in Note 2. The consolidated financial statements do not include any adjustments that might result from the outcome of this uncertainty.

/s/ GBH CPAs, PC

GBH CPAs, PC

www.gbhcpas.com

Houston, Texas

~~April~~September 1512, ~~2010~~ 2011

19-18-

OCTUS , INC.

CONSOLIDATED BALANCE SHEETS

	December 31, 2009			December 31, 2008
							PREDECESSOR
ASSETS
	SUCCESSOR COMPANY						COMPANY
CURRENT ASSETS
	December 31, 2010			December 31, 2009			December 31, 2009
Cash	23,003			-
ASSETS
Other receivable	1,686			-
CURRENT ASSETS
Total current assets	24,689			-
Cash	$	35,962		$	23,003		$	126,940
TOTAL ASSETS	$	24,689		$	-
Accounts receivable – trade, net of allowance of $0		112,332			-			-
LIABILITIES AND STOCKHOLDERS' DEFICIT
Deferred financing costs, net of accumulated amortization of $16,250		13,750			-			-
CURRENT LIABILITIES
Other current assets		3,770			1,686			-
Accounts payable	$	102,236		$	32,151
TOTAL CURRENT ASSETS		165,814			24,689			126,940
Accrued liabilities		26,750			-
Property, plant and equipment, net of accumulated depreciation of $552		6,382			-			-
Stock payable		171,700			-
Goodwill		225,672			-			-
Accounts payable - related parties		4,993			3,169
TOTAL ASSETS	$	397,868		$	24,689		$	126,940
Accrued liabilities - related parties		63,986			43,542
LIABILITIES AND STOCKHOLDERS' DEFICIT
Notes payable		5,000			-
CURRENT LIABILITIES
Notes payable - related parties		32,750			-
Accounts payable	$	373,217		$	102,236		$	90,885
Convertible notes payable		88,500			-
Accrued liabilities		252,819			26,750			-
Convertible notes payable - related parties		-			441,853
Accounts payable – related parties		5,908			4,993			-
Total current liabilities		495,915			520,715
Accrued liabilities – related parties		194,357			63,986			-
LONG TERM LIABILITIES
Deferred revenue		54,296			-
Convertible notes payable, less debt discount of $17,709 and $0, respectively		509,330			-
Stock payable		159,970			171,700			-
Total liabilities		1,005,245			520,715
Notes payable		158,565			5,000			35,899
Commitments and contingencies		-			-
Notes payable – related parties		27,468			32,750			109,951
STOCKHOLDERS' DEFICIT
Convertible notes – related party – current portion		237,500			88,500			-
Series A preferred stock, $0.001 par value, 300,000 shares
Convertible notes payable – current portion, net of unamortized discount of $0		635,000			-			-
authorized, no shares issued or outstanding		-			-
TOTAL CURRENT LIABILITIES		2,099,100			495,915			236,735
Series B preferred stock, $0.001 par value, 910,000 shares
LONG TERM LIABILITIES
authorized, no shares issued or outstanding		-			-
Notes payable – long term – related party		48,000			-			-
Series C 6% cumulative preferred stock, $0.001 par value,
Convertible notes – related party		243,039			392,039			-
250,000 shares authorized, no shares issued and outstanding		-			-
Convertible notes, net of unamortized discount of $0 and $17,709, respectively		35,455			117,291			-
Undesignated preferred stock, $0.001 par value,
TOTAL LIABILITIES		2,425,594			1,005,245			-
540,000 shares authorized, no shares issued or outstanding		-			-
Commitments and contingencies		-			-			-
Common stock, $0.001 par value, 100,000,000 shares
STOCKHOLDERS' DEFICIT
authorized, 43,867,072 and 13,437,072 shares issued and outstanding, respectively		43,867			13,437
Series A preferred stock, $0.001 par value, 300,000 shares authorized, no shares issued or outstanding		-			-			-
Additional paid-in capital		23,299,212			22,857,472
Series B preferred stock, $0.001 par value, 910,000 shares authorized, no shares issued or outstanding		-			-			-
Accumulated deficit		(24,323,635	)		(23,391,624	)
Series C 6% cumulative preferred stock, $0.001 par value, 250,000 shares authorized, no shares issued and outstanding		-			-			-
Total stockholders' deficit		(980,556	)		(520,715	)
Undesignated preferred stock, $0.001 par value, 540,000 shares authorized, no shares issued or outstanding		-			-			-
TOTAL LIABILITIES AND STOCKHOLDERS' DEFICIT	$	24,689		$	-
Common stock, $0.001 par value, 100,000,000 shares authorized 46,229,072 and 43,867,072 shares issued and outstanding, respectively. (Predecessor entity: Common stock $0.10 par; 100,000 shares authorized; 10,000 shares issued and outstanding		46,229			43,867			1,000
Additional paid-in capital		23,930,164			23,299,212			64,937
Accumulated deficit		(26,004,119	)		(24,323,635	)		(175,732	)
TOTAL STOCKHOLDERS’ DEFICIT		(2,027,726	)		(980,556	)		(109,795	)
TOTAL LIABILITIES AND STOCKHOLDERS' DEFICIT	$	397,868		$	24,689		$	126,940

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

20-19-

OCTUS , INC.

CONSOLIDATED STATEMENTS OF OPERATIONS

FOR THE YEARS ENDED DECEMBER 31, ~~2009~~2010 ~~AND~~and ~~2008~~2009

	2009			2008
	SUCCESSOR COMPANY						PREDECESSOR COMPANY
Revenues	$	-		$	-
	2010			2009			2009
General and administrative expenses		784,430			31,866
Revenues
Loss from operations		(784,430	)		(31,866	)
Product revenue	$	6,113		$	-		$	-
Interest expense		147,581			34,999
Service revenue		191,073			-			239,582
Net loss	$	(932,011	)	$	(66,865	)
Total revenue		197,186			-			239,582
Net loss per common share – basic and diluted	$	(0.02	)	$	(0.00	)
Cost of goods sold		(146,982)			-			(176,003	)
Weighted average shares outstanding – basic and diluted		39,223,812			13,437,072
Gross margin		50,204			-			63,579
General and administrative expenses		1,429,781			784,430			333,201
Loss from operations		(1,379,577	)		(784,430	)		(269,622	)
Interest expense		(300,933	)		(147,581	)		(2,928	)
Interest income		26			-				-
Net loss	$	(1,680,484	)	$	(932,011	)	$	(272,550	)
Per common share information - basic and diluted
Net loss per common share	$	(0.04	)	$	(0.02	)	$	(27.26	)
Weighted average common shares outstanding		45,250,412			39,223,812			10,000

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

21-20-

OCTUS , INC.

CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY (DEFICIT)

FOR THE YEARS ENDED DECEMBER 31, ~~2009~~2010 AND ~~2008~~2009 (Successor and Predecessor)

	Common stock
	Number				Additional
	Numbers of				Additional Paid-in		Accumulated Earnings
	of				Paid-in		Accumulated
	Shares		Amount		Capital		(Deficit)			Total
	Shares		Amount		Capital		Deficit			Total
Balances as of December 31, 2008 (Predecessor)		10,000	$	1,000	$	55,472	$	136,271		$	192,743
Balance as of December 31, 2007		13,437,072	$	13,437	$	22,857,472	$	(23,324,759	)	$	(453,850	)
Net loss		-		-		-		(272,550)			(272,550)
Net loss		-		-		-		(66,865	)		(66,865	)
Cash contributions from owners						9,465		-			9,465
Balance as of December 31, 2008		13,437,072		13,437		22,857,472		(23,391,624	)		(520,715)
Cash distributions to owners		-		-		-		(39,453)			(39,453)
Balance as of December 31, 2009 (Predecessor)		10,000	$	1,000	$	64,937	$	(175,732)		$	(109,795)
Balance as of December 31, 2008 (Successor)		13,437,072	$	13,437	$	22,857,472	$	(23,391,624	)	$	(520,715	)
Common shares issued for services		30,430,000		30,430		304,270		-			334,700
Stock options issued for services		-		-		14,653		-			14,653
Discount on convertible notes		-		-		122,817		-			122,817
Net loss								(932,011	)		(932,011	)
Balance as of December 31, 2009		43,867,072	$	43,867	$	23,299,212	$	(24,323,635	)	$	(980,556	)
Balance as of December 31, 2009 (Successor)		43,867,072		43,867		23,299,212		(24,323,635	)		(980,556	)
Common shares issued for services		1,610,000		1,610		413,530		-			415,140
Discount on convertible notes		-		-		169,955		-			169,955
Amortization of stock options issued for services		-		-		21,699		-			21,699
Common shares issued for warrant exercises		562,000		562		5,058		-			5,620
Stock issued for business combination		150,000		150		7,350		-			7,500
Stock issued for stock payable		40,000		40		13,360		-			13,400
Net loss		-		-		-		(1,680,484)			(1,680,484)
Balances at December 31, 2010 (Successor)		46,229,072	$	46,229	$	23,930,164	$	(26,004,119)		$	(2,027,726)

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

22-21-

OCTUS , INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS

FOR THE YEARS ENDED DECEMBER 31, ~~2009~~2010 AND ~~2008~~2009

	2009			2008
	SUCCESSOR COMPANY						PREDECESSOR COMPANY
OPERATING ACTIVITIES
	2010			2009			2009
Net loss	$	(932,011	)	$	(66,865	)
OPERATING ACTIVITIES
Adjustments to reconcile net loss to net cash
Net loss	$	(1,680,484	)	$	(932,011	)	$	(272,550	)
used in operating activities:
Adjustments to reconcile net loss to net cash used in operating activities:
Amortization of debt discount		105,108			-
Depreciation		552			-			1,786
Share-based compensation		~~349~~436,~~353~~839			-349,353			-
Changes in operating assets and liabilities
Amortization of deferred financing cost		16,250			-			-
Accounts payable and accrued liabilities		96,835			14,840
Amortization of debt discount		187,664			105,108			-
Stock payable		171,700			-
Changes in operating assets and liabilities:
Accounts payable and accrued liabilities – related parties		60,954			34,999
Decrease (increase) in accounts receivable		(92,360	)		-			222,031
Net cash used in operating activities		(148,061	)		(17,026	)
Increase (decrease) in accounts payable and accrued liabilities		434,159			96,835			(10,293	)
INVESTING ACTIVITIES
Increase in accounts payable and accrued liabilities – related parties		131,741			60,954			-
Increase in deposit		(1,686	)		-
Increase in stock payable		1,670			171,700			-
Net cash provided by investing activities		(1,686	)		-
Increase in deferred revenue		54,296			-			-
FINANCING ACTIVITIES
Net cash used in operating activities		(509,673	)		(148,061	)		(59,026	)
Proceeds from notes payable – related parties		32,750			17,026
INVESTING ACTIVITIES
Proceeds from notes payable		5,000			-
Payments for fixed assets		(6,934	)		-			-
Proceeds from convertible debt		135,000			-
Proceeds from deposits		-			-			71,455
Net cash provided by financing activities		172,750			17,026
Payment on deposits		(2,084	)		(1,686	)		-
Net change in cash		23,003			-
Net cash provided by (used in) investing activities		(9,018	)		(1,686	)		71,455
CASH AT BEGINNING OF YEAR		-			-
FINANCING ACTIVITIES
CASH AT END OF YEAR	$	23,003		$	-
Payments on line of credit		(3,369	)		-			(19,781	)
SUPPLEMENTAL CASH FLOW INFORMATION:
Borrowings on line of credit		-			-			27,200
Cash paid for interest	$	1,090		$	-
Cash distributions to owners		-			-			(39,453	)
Cash paid for income taxes	$	-		$	-
Cash contributions from owners		-			-			9,465
NONCASH INVESTING AND FINANCING ACTIVITIES:
Payments on notes payable		(13,319	)		-			-
Conversion of accrued interest into convertible note	$	38,686		$	-
Proceeds from convertible notes payable		630,000			135,000			-
Debt discount from warrants issued with convertible debt	$	122,817		$	-
Cash paid for deferred financing costs		(30,000	)		-			-
Conversion of liabilities into convertible note payable - related party	$	-		$	442,643
Payments on convertible notes payable		(100,000	)		-			-
Proceeds from loans – related party		48,500			32,750			103,951
Payments on loans – related party		(5,782	)		-			-
Proceeds from exercise of warrants		5,620			-			-
Proceeds from notes payable		-			5,000			-
Net cash provided by financing activities		531,650			172,750			81,382
Net change in cash		12,959			23,003			93,811
CASH AT BEGINNING OF PERIOD		23,003			-			33,129
CASH AT END OF PERIOD	$	35,962		$	23,003		$	126,940
SUPPLEMENTAL CASH FLOW INFORMATION
Cash paid for interest	$	28,339		$	1,090		$	2,928
Cash paid for income taxes	$	-		$	-		$	-
NONCASH INVESTING AND FINANCING ACTIVITIES
Debt discount from warrants issued with convertible debt	$	169,955		$	122,817		$	-
Conversion of note payable and accrued interest into convertible note payable - related party	$	5,455		$	-		$	-
Issuance of stock in satisfaction of stock payable	$	13,400		$	-		$	-
Net assets acquired in business combination for common stock	$	7,500		$	-		$	-

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

23-22-

OCTUS , INC.

Notes to Consolidated Financial Statements

Note 1 – Summary of Significant Accounting Policies

Organization and Basis of Presentation

Octus, Inc. (“OCTuS”) was formed as a California corporation in 1983. On December 29, 2001, a majority of the shareholders voted to change our state of incorporation from California to Nevada. In December 2003, the change was completed and OCTuS became a Nevada corporation. Today OCTuS is seeking to become a leading ~~renewable~~resource ~~energy~~ efficiency company that brings innovative energy efficiency and ~~renewable~~water ~~energy~~efficiency solutions to the commercial and public sector markets. OCTuS intends to pursue and facilitate ~~renewable~~ resource energy efficiency projects involving energy and water efficiency systems, and products that OCTuS may develop, acquire, license or distribute. OCTuS believes that the market demand for energy ~~conservation~~ and ~~energy~~water ~~creation~~conservation presents an attractive business opportunity. On June 10, 2010, OCTuS entered into an Asset Purchase Agreement and related agreements with Quantum Energy Solutions, Inc., a California corporation (“Quantum”). Effective June 30, 2010, the acquisition of Quantum has been accounted for using purchase accounting since OCTuS acquired substantially all of the assets, debts, employees, intangible contracts and business of Quantum.

OCTuS determined Quantum Energy Solutions, Inc. to be its predecessor entity as Quantum’s historical operations were significantly larger than the historical operations of OCTuS. For purposes of financial statements, designation of an acquired business as a predecessor is required if a registrant succeeds to the business of another entity and the registrant’s own operations prior to the succession appear insignificant relative to the operations assumed or acquired. As such, OCTuS has included the historical financial statements of Quantum as its predecessor entity.

Principles of Consolidation

~~All~~The financial statements include the business combination of ~~our~~ ~~subsidiaries~~Quantum ~~are~~Energy ~~inactive~~Solutions, Inc. as of June 30, 2010 and thereafter. 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.

Reclassification

Certain amounts for prior periods have been reclassified to conform to the current presentation.

Cash and Cash Equivalents

For the purpose of the statements of cash flows, all highly liquid investments with the maturity of three months or less are considered to be cash equivalents.

Intangibles

Intangible assets at December 31, 2010 included goodwill of $225,672 related to the acquisition of Quantum.

ASC 350-20 eliminated the amortization of goodwill, and requires annual impairment testing of goodwill and introduces the concept of indefinite life intangible assets. OCTuS adopted ASC 350-20 effective January 1, 2002. If the carrying amount of a reporting unit exceeds its fair value, we measure the possible goodwill impairment based upon an allocation of the estimate of fair value of the reporting unit to all of the underlying assets and liabilities of the reporting unit, including any previously unrecognized intangible assets (Step Two Analysis). The excess of the fair value of a reporting unit over the amounts assigned to its assets and liabilities (“carrying amount”) is the implied fair value of goodwill. An impairment loss is recognized to the extent that a reporting unit’s recorded goodwill exceeds the implied fair value of goodwill. At June 30, 2010, OCTuS completed its intitial impairment testing of goodwill. During, the remainder of the year, there were no events or circumstances that would have indicated potential impairment. OCTuS performed its annual impairment test on June 30, 2011 and the carrying amount of Quantum did not exceed its fair value and as a result, no impairment loss was recognized.

-23-

Revenue Recognition

We ~~currently~~ ~~have~~recognize no revenue ~~generating~~for ~~operations. We~~the ~~plan~~sale toof ~~record revenue~~our products and our services when the following four basic criteria are met: (1) persuasive evidence of an arrangement exists; (2) delivery has occurred or services rendered; (3) the seller’s price to the buyer is fixed and determinable; and (4) collectability is reasonably assured. 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 or product ~~delivery~~ has ~~occurred~~been shipped. Upon execution of an agreement, ~~the~~if ~~sales~~services ~~price~~have not been provided then the amount to be paid as a deposit under such agreement is recorded as deferred revenue on the ~~customer~~balance sheet and is ~~fixed~~ orreclassified ~~determinable,~~as revenue on the statement of operations after services have been provided and ~~collectability~~such revenue earned. Any amount that has been earned, but not yet billed, is ~~reasonably~~recorded ~~assured~~as work in process or unbilled at the balance sheet date.

Income Taxes

OCTuS is a taxable entity and recognizes deferred tax assets and liabilities for the future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax basis. Deferred tax assets and liabilities are measured using enacted tax rates expected to be in effect when the temporary differences reverse. The effect on the deferred tax assets and liabilities of a change in tax rates is recognized in income in the year that includes the enactment date of the rate change. A valuation allowance is used to reduce deferred tax assets to the amount that is more likely than not to be realized. Interest and penalties associated with income taxes are included in selling, general and administrative expense.

OCTuS has adopted ASC 740 “Accounting for Uncertainty in Income Taxes” ~~(formerly FIN 48)~~ which prescribes a comprehensive model of how a company should recognize, measure, present, and disclose in its financial statements uncertain tax positions that OCTuS has taken or expects to take on a tax return. ASC 740 states that a tax benefit from an uncertain position may be recognized if it is "more likely than not" that the position is sustainable, based upon its technical merits. The tax benefit of a qualifying position is the largest amount of tax benefit that is greater than 50 percent likely of being realized upon ultimate settlement with a taxing authority having full knowledge of all relevant information. As of December 31, ~~2009~~2010, OCTuS had not recorded any tax benefits from uncertain tax positions.

Fair Value of Financial Instruments

Fair value estimates discussed herein are based upon certain market assumptions and pertinent information available to management as of December 31, ~~2009~~ 2010. The respective carrying value of certain on-balance-sheet financial instruments approximated their fair values. These financial instruments include accounts payable, accrued expenses and notes payable. Fair values were assumed to approximate carrying values because these financial instruments are short term, their carrying amounts approximate fair values, or they are payable on demand.

Loss ~~Per~~ 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 years ended December 31, ~~2009~~2010 and ~~2008~~2009, common stock ~~equivalents~~options of 1,060,000 and 60,000, warrants of 2,580,000 and 540,000, and debt convertible into shares of 7,480,976 and 5,705,390, respectively, were not included in the calculation, as their effect would be anti-dilutive.

OCTUS , INC.

Notes to Consolidated Financial Statements

Stock-Based Compensation

OCTuS follows the Accounting Standards Codification ASC 718 - Compensation - Stock ~~Compensation~~ ~~(formerly SFAS No~~Compensation. ~~123 (R).~~ Under ASC 718, OCTuS estimates the fair value of each stock option award at the grant date by using the Black-Scholes option pricing model and common shares based on the last quoted market price of OCTuS’ common stock on the date of the share grant. The fair value determined represents the cost for the award and is recognized over the vesting period during which an employee is required to provide service in exchange for the award. As share-based compensation expense is recognized based on awards ultimately expected to vest, OCTuS reduces the expense for estimated forfeitures based on historical forfeiture rates. Previously recognized compensation costs may be adjusted to reflect the actual forfeiture rate for the entire award at the end of the vesting period. Excess tax benefits, as defined in ASC 718, if any, are recognized as an addition to paid-in capital.

Subsequent Events

OCTuS evaluated events occurring between the end of our fiscal year, December 31, ~~2009~~ 2010, and ~~April 15, 2010~~ when the consolidated financial statements were issued.

-24-

Recent Pronouncements

~~Effective January~~There 1,were ~~2009,~~various ~~the~~accounting ~~FASB~~standards ~~issued~~and ~~SFAS~~interpretations ~~No.~~issued ~~160~~recently, ~~“Noncontrolling~~none ~~Interests~~of ~~in Consolidated~~which ~~Financial~~are ~~Statements,~~expected anto ~~amendment~~a ofhave ~~ARB~~a ~~No.~~material ~~51”.~~impact ~~SFAS~~on ~~No.~~our ~~160 (ASC~~consolidated ~~810~~financial ~~“Consolidation”)~~position, ~~which~~operations ~~requires~~or ~~companies:~~cash flow.

• To recharacterize minority interests, previously classified within liabilities, as noncontrolling interests reported as a component of consolidated equity on the balance sheet,

• To include total income in net income, with separate disclosure on the face of the consolidated income statement of the attribution of income between controlling and noncontrolling interests, and

• To account for increases and decreases in noncontrolling interests as equity transactions with any difference between proceeds of a purchase or issuance of noncontrolling interests being accounted for as a change to the controlling entity’s equity instead of as current period gains/losses in the consolidated income statement. Only when the controlling entity loses control and deconsolidates a subsidiary will a gain or loss be recognized.

SFAS No. 160 was effective prospectively for fiscal years beginning on or after December 15, 2008 except for its specific transition provisions for retroactive adoption of the balance sheet and income statement presentation and disclosure requirements for existing minority interests that are reflected in these consolidated financial statements for all periods presented. The new authoritative guidance did not have an impact on OCTuS’ consolidated financial statements.

In June 2009, the FASB issued SFAS No. 168, The FASB Accounting Standards Codification and the Hierarchy of Generally Accepted Accounting Principles (“SFAS 168” or ASC 105-10). SFAS 168 (ASC 105-10) establishes the Codification as the sole source of authoritative accounting principles recognized by the FASB to be applied by all nongovernmental entities in the preparation of financial statements in conformity with GAAP. SFAS 168 (ASC 105-10) was prospectively effective for financial statements issued for fiscal years ending on or after September 15, 2009, and interim periods within those fiscal years. The adoption of SFAS 168 (ASC 105-10) on July 1, 2009 did not impact OCTuS’ results of operations or financial condition. The Codification did not change GAAP; however, it did change the way GAAP is organized and presented. As a result, these changes impact how companies reference GAAP in their financial statements and in their significant accounting policies. OCTuS implemented the Codification in this Report by providing references to the Codification topics alongside references to the corresponding standards.

There were various other accounting standards and interpretations issued recently, none of which are expected to a have a material impact on our consolidated financial position, operations or cash flow.

Note 2 – 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 OCTuS as a going concern. OCTuS has a working capital deficit of $~~471~~1,~~226~~933,286, a stockholders’ deficit of $~~980~~2,~~556~~027, 726 and an accumulated deficit of $2426,~~323~~004,~~635~~119 as of December 31, ~~2009~~2010. In addition, OCTuS has generated recurring losses, aggregating $~~932~~1,~~011~~680,484 and $66932,~~865~~ 011 in ~~2009~~2010 and ~~2008~~2009, respectively~~, and currently has no revenue generating operations~~.

We are actively seeking technologies and business endeavors in the alternative energy sector, which may include the licensing or acquisition of alternative energy and energy efficiency products or technologies. Although we are seeking such opportunities, it is unlikely that we will be able to consummate any such transaction which would generate sufficient revenues to sustain our operations. 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. OCTuS is reliant on a related party to provide working capital. There is no assurance that such related party will continue to provide working capital.

OCTUS , INC.

Notes to Consolidated Financial Statements

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~~Business ~~Party Transactions~~Combination

Purchase of Quantum Energy Solutions, Inc.

On June 10, 2010, OCTuS entered into an Asset Purchase Agreement and related agreements with Quantum Energy Solutions, Inc., a California corporation (“Quantum”). Effective June 30, 2010, the acquisition of Quantum has been accounted for using purchase accounting since OCTuS acquired substantially all of the assets, debts, employees, intangible contracts and business of Quantum.

The purchase price included 150,000 shares of OCTuS common stock, valued at $7,500, on the date of the transaction closing which was June 10, 2010, at $0.05 per share, plus assumption of $62,891 in accounts payable and accrued expenses; assumption of a line of credit facility with a balance of $45,253 and assumption of a 3-year promissory note to the seller for $130,000.

OCTuS entered into various employment and consulting arrangements with Quantum employees and a former owner where OCTuS issued 700,000 stock options to purchase common stock at exercise prices ranging from $0.06 to $0.11 per share. OCTuS estimated the fair market value of these stock options to be $38,513 using a Black Scholes pricing model and will be amortized over the future requisite service period. During the year ended December 31, 2010, $12,289 of share based compensation relating to these options was recognized. The two year consulting arrangement with a former owner of Quantum included additional compensation of (i) a monthly cash payment of $5,000 and (ii) commissions on contracts originated by the consultant on Quantum projects of 10% of the gross margin payable in common stock; 30% of the gross margin payable in cash on projects invoiced in the first 90 days after consummation of the purchase; 20% of the gross margin payable in cash on projects invoiced in the second 90 days after purchase; and 10% of the gross margin payable in cash for projects invoiced thereafter through the end of the two year term. All additional compensation described above occurs after the purchased accounts payable have been paid for.

On June 10, 2010, OCTuS assumed a three-year promissory note with the former principal owner of Quantum in the amount of $130,000. The note has a simple interest rate of 6% per year. No later than the 10th day of each month, OCTuS shall pay 36 equal monthly payments of $3,955 for principal and interest (assuming no further principal payments are made as further described) and make principal reduction payments as may occur of 10% of the gross margin of revenue received over the prior 30 days from projects initiated by former Quantum employees or principals. OCTuS may prepay any or this entire note and accrued interest with no penalty any time before the maturity of the note. In June 2010, the former principal of Quantum and OCTuS agreed to assign this note to a trust administered by the former principal owner of Quantum. As of December 31, 2010, OCTuS has made principal payments of $13,319 under the terms of this note and is currently behind in its monthly payments.

In addition, OCTuS assumed the outstanding balance of $45,253 owed under a Line of Credit Facility with a variable interest rate currently at 7.25%. The total line of credit capacity is $50,000, but OCTuS cannot borrow under the line of credit. As of December 31, 2010, OCTuS has made principal payments of $3,369 under the terms of this line of credit.

-25-

The acquisition price was allocated to the assets acquired and liabilities assumed based upon their estimated fair values with the excess being recorded in goodwill. The following table summarizes the estimated fair values of the assets acquired and liabilities assumed at the date of acquisition: Subsequent to the acquisition, and at December 31, 2010, management examined the collectability of the acquired receivables and determined that $12,890 of the originally acquired receivables were no long deemed to be collectible, so management reserved for those receivables with a corresponding increase to goodwill:

Cash and cash equivalents	$	-
Accounts receivable		19,972
Goodwill		225,672
Total assets acquired		245,644

Accounts payable and accrued expenses		62,891
Line of credit		45,253
Long term debt		130,000
Total liabilities assumed		238,144

Net assets acquired	$	7,500

The allocation of the purchase price was based on preliminary estimates and is provisional at December 31, 2010. Estimates and assumptions are subject to change upon the receipt of management’s review of the final amounts and final tax returns. This final evaluation of net assets acquired took place on June 10, 2011.

The following unaudited pro-forma combined condensed financial statements are based on the unaudited historical financial statements of Quantum and OCTuS after giving effect to the acquisition of Quantum. This historical operation of OCTuS, Inc. includes six months of Quantum activity as the acquisition for accounting purposes was effective on June 30, 2010. The unaudited pro-forma condensed combined statements of operations for the years ended December 31, 2010 and 2009 is presented as if the acquisition had taken place on the first day of each period by combining the unaudited historical results of Quantum and OCTuS.

The unaudited pro-forma results were as follows:

OCTuS, Inc.

Unaudited Pro-forma Statements of Operations

	For the Year Ended December 31, 2010
	Historical OCTuS, Inc.			Historical Quantum for the 180-day period ended June 29, 2010			Pro-forma Adjustments			Pro-forma Condensed Combined
Revenues	$	197,186		$	95,300		$	-		$	292,486
Cost of sales		(146,982)			(46,542)			-			193,524
Gross margin		50,204			48,758			-			98,962
Operating expenses		(1,429,781	)		(98,114	)		-			(1,527,895	)
Interest income and expense, net		(300,907	)		(1,531	)		-			(302,438	)
Net loss	$	(1,680,484	)	$	(50,887	)	$	-		$	(1,731,371	)

Net loss per share - basic and diluted	$	(0.04	)							$	(0.04	)
Weighted average shares outstanding -basic and diluted		45,250,412						150,000	(a)		45,400,412

	For the Year Ended December 31, 2009
	Historical OCTuS, Inc.			Historical Quantum			Pro-forma Adjustments				Pro-forma Condensed Combined
Revenues	$	-		$	239,582			$	-		$	239,582
Cost of sales		-			(176,003)				-			(176,003)
Gross margin		-			63,579				-			63,579
Operating expenses		(784,430	)		(333,201	)			-			(1,117,631	)
Interest expense		(147,581	)		(2,928	)			-			(150,509	)
Net loss	$	(932,011	)	$	(272,550	)		$	-		$	(1,204,561	)

Net loss per share - basic and diluted	$	(0.02	)								$	(0.03	)
Weighted average shares outstanding -basic and diluted		39,223,812							150,000	(a)		39,373,812

(a)

OCTuS issued 150,000 shares as consideration for the purchase of Quantum. The pro-forma adjustment treats the shares as having been issued at the first day of each period.

-26-

Note 4 – Related Party Transactions

On February 24, 2009, OCTuS entered into employment agreements with Christian J. Soderquist and George M. Ecker pursuant to which Mr. Soderquist will serve as Chief Executive Officer of OCTuS and Mr. Ecker will serve as Chief Financial Officer of OCTuS. Mr. Soderquist and Mr. Ecker were also appointed directors of OCTuS. Concurrently, OCTuS executed restricted stock purchase agreements dated February 24, 2009, with each of Mr. Soderquist and Mr. Ecker.

Both employment agreements have a term of three years, through February 23, 2012, with the term extended automatically for successive one-year terms unless either party notifies the other in writing at least 90 days prior to the expiration of the then-effective term of such party’s intention not to renew the agreement. Pursuant to the employment agreement, OCTuS will pay Mr. Soderquist and Mr. Ecker a base annual salary of $180,000 each, which will increase annually by the increase in the consumer price index from the prior year (the “Base Salary”). The officers have agreed for an interim period to defer receipt of payment of some or all of their base salaries based on the outstanding achievements of one or more of the milestones described below and OCTuS’ ability to pay salaries. Each officer will be eligible for an annual bonus of up to 50% of his base annual salary as then in effect, as determined by OCTuS’ Compensation Committee or Board of Directors. OCTuS issued to each person 15,000,000 shares of common stock. These shares were valued at $270,000 and recorded as share-based compensation during the year ended December 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. If all four milestones are achieved, then all repurchase rights of OCTuS will lapse. The milestone events are: completion of sale of equity securities of OCTuS with proceeds to OCTuS of $100,000 or more; execution by OCTuS of a license agreement or purchase contract with at least two third-party persons or entities to acquire or license technologies and/or products related to OCTuS’ intended business; receipt of revenues from the sale by OCTuS of products licensed or owned by OCTuS; and execution by OCTuS of a renewable energy and/or energy efficiency project contract. In the event of a change in control of OCTuS, defined in the agreement to include events such as a merger or sale of assets transaction which results in more than a 50% change of ownership of OCTuS, all restrictions lapse and the shares will become fully vested. The milestones were met in their entirety prior to February 24, 2010 resulting in the lapse of all repurchase rights OCTuS held.

There were 43,437,072 shares of common stock outstanding after the issuance of the shares in accordance with the purchase agreements. The 30,000,000 shares issued pursuant to the purchase agreements represented approximately 69% of the then outstanding shares of OCTuS.

Each employment agreement provides that if the employment of the officer is terminated by OCTuS without cause (as defined in the employment agreement) or by the officer for good reason (as defined in the employment agreement) or upon 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.

~~Note~~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 Sasaima Holdings SA, 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 year ending December 31, 2010 and 2009 was $12,816 and $28,146 4respectively. The –current ~~Notes~~portion ~~Payable~~of this note is $237,500 and $88,500 at December 31, 2010 and 2009, respectively. Upon conversion of the outstanding principal and accrued interest, this party would own greater than 10% of the outstanding shares on a fully diluted basis. During the year ended December 31, 2010, OCTuS paid $5,000 toward accrued interest on this note.

~~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. During February 2010, this loan and accrued interest were converted into the convertible note and warrant offering.~~27-

Note 5 – Notes Payable ~~- Related Parties~~

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. During February 2010, this loan and $455 of accrued interest were converted into the convertible note and warrant offering.

Note 6 – 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. In November and December 2009, Mr. Soderquist loaned OCTuS an additional $17,500 and $5,250, respectively for total proceeds for the year ended December 31, 2009 of $32,750. These loans bear interest at 10% and are due upon demand.

~~Note 6~~During –the ~~Convertible~~year ~~Notes~~ended ~~Payable~~December 31, 2010, Mr. Soderquist loaned OCTuS a total of $48,500. $500 of these loans bear interest at 10% and are due upon demand. $48,000 of these notes is due in November and December 2012 and is presented as long term.

~~Effective March~~During ~~31,~~year ~~2009,~~ended aDecember ~~convertible~~31, ~~promissory note with a principal balance of $328~~2010,~~106~~ ~~and~~payments ~~accrued interest~~ of $385,~~686~~782 ~~held~~have bybeen ~~Grupo Dynastia SA was sold to another party who already held a promissory note in the amount of $113,747. The terms were modified such that the principal and interest will be~~ paid ~~over~~by 60OCTuS ~~months.~~on ~~The~~these ~~convertible~~related ~~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~~notes ~~the year ending December 31, 2009 was $28,146~~payable. ~~The current portion of this note is $88,500 at December 31, 2009.~~

26Note 7 – Convertible Notes Payable

InFor ~~June through~~the years ended December of31, 2010 and 2009, OCTuS issued convertible secured promissory notes ~~(the “Note”)~~ with ana ~~aggregate~~ principal amount of $35,000 and $135,000, respectively, to investors. The ~~Note~~notes ~~bears~~bear interest at a rate of 10% per annum and is are 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~~notes is are issued. At OCTuS’ option, OCTuS may make any interest payment either in cash or by delivery of a number of shares of ~~Common~~common ~~Stock~~stock with a value equal to the amount of interest due and payable, calculated based on the average closing price of the ~~Common~~common ~~Stock~~stock on the OTC Bulletin Board (or whatever exchange, market or quotation system the ~~Common~~common ~~Stock~~stock is then traded), for the ten trading days ending three days before the date that such payment is due. As of December 31, 2010, OCTuS has not made any interest payments in cash or stock. OCTuS granted to the holder of the ~~note~~notes 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~~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 $0.30 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 ~~Note~~notes, OCTuS issued warrants to the note ~~holder~~holders to purchase 202,000 and 540,000, respectively, shares of OCTuS common stock at an exercise price of $0.01 per share. The term of the warrants is ~~180 days~~eighteen months. The relative fair value of the warrants iswas $20,098 and $59,000, respectively. The intrinsic value of the conversion feature totaled $13,112 and $63,817, respectively, resulting in a discount of $33,210 and $122,817, respectively, to the notes payable. ~~The~~During ~~discount~~the ~~will~~years beended ~~amortized~~December ~~over the~~31, ~~life~~2010 and 2009, $50,919 and $105,108 of the ~~notes.~~debt ~~The~~discount ~~details~~was ~~are~~amortized asinto ~~follows:~~interest expense, respectively.

Face value of notes payable	$	135,000
Less: discount related to warrants		(59,000	)
discount related to conversion feature		(63,817	)
Add: amortization of debt discount		105,108
Carrying value of notes at December 31, 2009	$	117,291

In May 2010, OCTuS issued a convertible secured promissory note with a principal value of $100,000 to an investor. The note had a stated interest rate of 10% and is due May 2013. Accrued interest was to be paid semi-annually with the first payment due six months after the date the note was issued. The note contained a conversion option where the unpaid principal and interest due could 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 note, OCTuS issued warrants to the same investor to purchase 400,000 shares of common stock at an exercise price of $0.01 per share. The term of the warrants was eighteen months. The relative fair value of the warrants was $38,544 resulting in an initial discount. The conversion feature had no intrinsic value at the date of inception. In June 2010, OCTuS repaid the $100,000 note and cancelled the outstanding warrants resulting in the accelerated amortization of the debt discount of $38,544 into interest expense.

~~Note 7 – Equity Transactions~~-28-

~~On February~~In ~~24,~~June ~~2009~~2010, OCTuS issued a convertible secured promissory note with a principal value of $500,000 to an investor. The note has a stated interest rate of 12% and is due in June, 2011. No payments of principal or interest are due to be paid until the ~~CFO~~date of maturity. At any time commencing ninety (90) days after the date of issuance of this note and ~~CEO~~before ~~each~~the 15maturity date or earlier conversion of this note,~~000~~ the holder,~~000~~ at holder’s option and upon five (5) days prior written notice to the Company, may convert in whole or in part the outstanding principal and accrued but unpaid interest of this note into a number of shares of common stock determined by the greater of $0.30 per share or at 70% of the average closing price of the common stock on, for the ten trading days ending five days before the conversion date. ~~These~~OCTuS issued warrants in conjunction with this note to purchase 2,500,000 shares ~~were~~of ~~valued~~common stock at an exercise price of $~~270~~0.01 per share. The term of the warrants is eighteen months. The relative fair value of the warrants was $98,~~000~~201 ~~and~~resulting in an initial discount. The conversion feature had no intrinsic value at the date of inception. For the year ended December 31, 2010, $98,201 related to the debt discount was amortized into interest expense. In addition, OCTuS recorded a deferred financing cost associated with a payment of $30,000 to an unrelated third party as a finder’s fee for this note. The deferred financing cost is being amortized ~~share~~over the one-~~based~~year ~~compensation~~maturity ~~during~~period of the convertible note resulting in $16,250 in interest expense for the year ended December 31, ~~2009~~ 2010. On December 3, 2010, OCTuS received a notice of default from the note holder for non-payment of principal and accrued interest. On December 20, 2010, OCTuS received a notice of intent to collect for the entire note balance due. In July 2011, the note was modified and extended and is no longer considered to be in default. See Note 12 Subsequent Events for modifications and extension terms of this note.

OnThe ~~May~~respective ~~5, 2009,~~discounts ~~OCTuS~~for ~~entered~~the ~~into~~aggregated anconvertible ~~employment~~notes ~~agreement~~and ~~with~~convertible ~~John~~notes ~~Argo~~– ~~pursuant~~related ~~to which~~party ~~Mr.~~have ~~Argo~~been ~~will~~amortized ~~serve~~over asthe ~~Director,~~period ~~Energy~~from ~~Projects~~the &commitment ~~Finance~~date ofuntil ~~OCTuS. The~~the ~~employment~~notes ~~agreement~~become ~~has~~convertible aby ~~term~~the ~~of three years, through April 30, 2012, with a base annual salary of $120,000~~holder. The ~~Concurrently,~~details ~~OCTuS~~are ~~issued 250,000 shares of common stock, valued at $12,500 to Mr. Argo, and recorded~~ as ~~share-based compensation.~~follows:

Warrant and option activity during the year ended December 31, 2009 is as follows:

Face value of convertible notes payable	$	1,150,994
Less: discount related to warrants		(215,843	)
discount related to conversion feature		(76,929	)
Add: accumulated amortization of debt discount		292,772
Carrying value of convertible notes at December 31, 2010	$	1,150,994

	Warrants		Weighted Average Exercise Price		Weighted Average Remaining Contractual Term ( in Years)
Outstanding at December 31, 2008		-	$	-		-
Granted		540,000		0.01		1.3
Exercised		-		-		-
Forfeited		-		-		-
Outstanding at December 31, 2009		540,000	$	0.01		1.1
Exercisable at December 31, 2009		540,000

Principal repayment provisions for all notes and convertible notes payable are as follows as of December 31, 2010:

	Options		Weighted Average Exercise Price		Weighted Average Remaining Contractual Term ( in Years)
2011	$	1,058,532
Outstanding at December 31, 2008		-	$	-		-
2012		233,455
Granted		35,000		0.36		3.0
2013		93,039
Exercised		-		-		-
2014		-
Forfeited		-		-		-
Thereafter		-
Outstanding at December 31, 2009		35,000	$	0.36		2.6
Total	$	1,385,026
Exercisable at December 31, 2009		35,000

OnNote ~~August 17,~~8 ~~2009,~~– ~~OCTuS~~Equity entered into consulting agreements and granted two consultants the option to purchase a total of 35,000 shares of OCTuS’ common stock at $0.39 per share. These options vest ratably over six months and expire on August 17, 2012. The options had a value of $19,538 on the date of grant.Transactions

In June 2009, OCTuS ~~estimates the~~ ~~fair~~entered ~~value~~into ofa ~~each~~twelve-month ~~warrant~~consulting ~~and~~agreement ~~option~~which atcalls ~~the~~for ~~grant~~OCTuS ~~date~~to byissue ~~using~~10,000 ~~the Black-Scholes~~shares ~~option-pricing~~of ~~model~~common ~~with~~stock each month the ~~following~~contract ~~weighted-average assumptions~~is ~~used~~in ~~for~~force. OCTuS ~~grants~~issued 50,000 shares under this agreement during the year ended December 31, ~~2009~~2010, valued at $9,300 and recorded as ~~follows:~~ share-based compensation.

	December 31, 2009
Dividend yield		0.00%
Expected volatility	191% to 424%
Risk free interest rate	1.54% to 2.75%
Expected lives in years	0.5 to 3

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 force. As of December 31, 2009, OCTuS owed the consultant 40,000 common shares with a fair value of $13,400 and recorded a stock payable. During the year ended December 31, 2010 OCTuS issued the 40,000 common shares owed to the consultant for the $13,400 stock payable and the remaining 20,000 common shares, valued at $5,600, per the agreement which was recorded as share-based compensation.

27In 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 force. OCTuS issued 90,000 shares under this agreement during the year ended December 31, 2010, valued at $13,350 and recorded as share-based compensation.

In ~~June 2009~~January 2010, OCTuS entered into a ~~twelve~~three-month consulting agreement which calls for OCTuS to issue 1030,000 shares of common stock each month the contract is in force. The consultant terminated the contract in March 2010. OCTuS issued 7060,000 shares under this agreement during the year ended December 31, ~~2009~~2010, valued at $2018,900 and recorded as share-based compensation.

In ~~July 2009~~January 2010, OCTuS entered into a three-month consulting agreement which calls for OCTuS to issue 2030,000 shares of common stock to ~~an employee upon execution of the agreement as~~ a ~~signing~~consultant ~~bonus, 10,000 shares of common stock~~ each month, ~~and pay a $2,000 stipend each month~~ the contract is in force. OCTuS issued 8090,000 shares under this agreement during the year ended December 31, ~~2009~~ 2010, valued at $2226,~~200~~100, and recorded as share-based compensation.

~~In July 2009, OCTuS entered into a three~~-month consulting agreement which calls for OCTuS to issue 10,000 shares of common stock each month the contract is in force. OCTuS issued 30,000 shares under this agreement during the year ended December 31, 2009, valued at $9,300 and recorded as share29-~~based compensation.~~

In ~~August 2009~~January 2010, OCTuS entered into a ~~twelve~~three-month consulting agreement which calls for OCTuS to ~~pay $3,000 and~~ issue 1030,000 shares of common stock each month the contract is in force. OCTuS issued 3090,000 shares under this agreement during the ~~year~~quarter ended ~~December~~March 31, ~~2009~~2010, valued at $923,~~300~~400 and recorded as share-based compensation. At the end of May 2010, OCTuS entered into a new six-month consulting agreement with the same consultant which calls for OCTuS to issue 25,000 shares of common stock each month the contract is in force. Under the new contract, OCTuS issued 125,000 shares through December 31, 2010, valued at $8,100 and owes 25,000 shares, valued at $1,050, to the consultant recorded as a stock payable.

In February 2010, OCTuS entered into a three-month consulting agreement which calls for OCTuS to issue 15,000 shares of common stock each month the contract is in force. OCTuS issued 45,000 shares under this agreement during the year ended December 31, 2010, valued at $8,100, and recorded as share-based compensation. In June, 2010, OCTuS entered into a new six-month consulting agreement with this same consultant which calls for OCTuS to issue 10,000 shares of common stock each month the agreement is in force. OCTuS issued a total of 40,000 shares, valued at $2,290 under the new consulting agreement during the year ended December 31, 2010 and recorded as share-based compensation. As of December 31, 2010, OCTuS owed another 20,000 shares, valued at $620, that is recorded as a stock payable.

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 considered in dispute by OCTuS and a cancellation order for these shares was issued. For the services that were performed, OCTuS agreed that the consultant could keep the initial 500,000 shares which were valued at $150,000 and recorded as share-based compensation. During March 2011, the original cancellation order for the 500,000 shares in dispute was rescinded and the consultant was allowed to keep the shares. As such, OCTuS determined that an additional $150,000 in compensation expense be recorded as of December 31, 2010 for the fair market value of the shares at the original service date.

As of December 31, 2009, OCTuS had recorded a stock payable of $158,300 for 471,000 unissued common shares to various consultants. This stock payable remained unsettled as of December 31, 2010.

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 70,000 shares under this agreement during the year ended December 31, 2009, valued at $20,900 and recorded as share-based compensation.

In July 2009, OCTuS entered into a three-month consulting agreement which calls for OCTuS to issue 20,000 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 $2,000 stipend each month the contract is in effect. OCTuS issued 80,000 shares under this agreement during the year ended December 31, 2009, valued at $22,200 and recorded as share-based compensation.

In July 2009, OCTuS entered into a three-month consulting agreement which 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 year ended December 31, 2009, valued at $9,300 and recorded as share-based compensation.

In August 2009, OCTuS entered into a twelve-month consulting agreement which calls for OCTuS to pay $3,000 and issue 10,000 shares of common stock each month the contract is in effect. OCTuS issued 30,000 shares under this agreement during the year ended December 31, 2009, valued at $9,300 and recorded as share-based compensation.

In September 2009, OCTuS entered into a software development contract that required OCTuS to issue 91,000 shares of common stock as part of the developer’s compensation upon execution of the agreement. The shares were valued at $30,000 and recorded as share-based compensation. OCTuS sent a notice of termination of this Agreement to the contractor on January 13, 2010 and considers the contract null and void.

As of December 31, ~~2009,~~2010 OCTuS had recorded a stock payable of $~~171~~159,~~700~~970 for ~~511~~516,000 shares not issued pursuant to the terms of the consulting agreements noted above.

During the year ended December 31, 2010, OCTuS issued 562,000 common shares in connection with the exercise of warrants for $5,620.

In August 2009, OCTuS entered into various consulting arrangements where OCTuS issued 60,000 stock options to purchase common stock at exercise prices ranging from $0.33 to $0.39 per share. OCTuS estimated the fair market value these stock options to be $19,538 using a Black Scholes pricing model. This amount has been amortized over the requisite service period. During the year ended December 31, 2010, $4,884 of share-based compensation relating to these options was recognized.

In June 2010, OCTuS entered into various employment and consulting arrangements with Quantum employees and a former owner where OCTuS issued 700,000 stock options to purchase common stock at exercise prices ranging from $0.06 to $0.11 per share. OCTuS estimated the fair market value of these stock options to be $38,513 using a Black Scholes pricing model and will be amortized over the future requisite service period. During the year ended December 31 2010, $12,285 of share-based compensation relating to these options was recognized.

-30-

In July 2010, OCTuS entered into various employment and consulting arrangements with two individuals where OCTuS issued 300,000 stock options to purchase common stock at exercise prices ranging from $0.05 to $0.09 per share. OCTuS estimated the fair market value of these stock options to be $16,885 using a Black Scholes pricing model and will be amortized over the future requisite service periods. During the year ended December 31, 2010, $4,530 of share-based compensation relating to these options was recognized.

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 year ended December 31, 2010 and 2009 as follows:

	December 31, 2010		December 31, 2009
Dividend yield		0.00%		0.00%
Expected volatility	158% to 175%		191% to 424%
Risk free interest rate	0.29% to 0.74%		1.54% to 2.75%
Expected lives in years	1 to 2		0.5 to 3

Warrant and option activity during the years ended December 31, 2010 and 2009 is as follows:

	Warrants		Weighted Average Exercise Price		Weighted Average Remaining Contractual Term (in Years)
Outstanding at December 31, 2008		-	$	-		-
Granted		540,000		0.01		1.3
Exercised		-		-		-
Forfeited		-		-		-
Outstanding at December 31, 2009		540,000		0.01		1.1
Granted		3,102,000		0.01		0.9
Exercised		(562,000)		0.01		-
Forfeited		(500,000)		0.01		-
Outstanding at December 31, 2010		2,580,000	$	0.01		0.9
Exercisable at December 31, 2010		2,580,000	$	0.01		0.9

At December 31, 2010, the intrinsic value of warrants outstanding was $15,480.

	Options		Weighted Average Exercise Price		Weighted Average Remaining Contractual Term (in Years)
Outstanding at December 31, 2008		-	$	-		-
Granted		60,000		0.36		1.6
Exercised		-		-		-
Forfeited		-		-		-
Outstanding at December 31, 2009		60,000		0.36		1.6
Granted		1,000,000		0.08		1.3
Exercised		-		-		-
Forfeited		-		-		-
Outstanding at December 31, 2010		1,060,000	$	0.09		1.3
Exercisable at December 31, 2010		110,000	$	0.01		1.5

During the years ended December 31, 2010 and 2009, OCTus recorded $21,699 and $14,653, respectively in stock based compensation related to the estimated fair market value of its options. At December 31, 2010, OCTus had $38,583 in unamortized stock based compensation related to its stock options issued for service.

-31-

Preferred Stock

Octus has authorized a total of 2,000,000 shares of $0.001 par value preferred stock. Of the Series A Preferred Stock, 300,000 shares are authorized and of the Series B Preferred Stock, 910,000 shares are authorized. The Cumulative Series C Preferred Stock had 250,000 shares authorized. The Series classification of the remaining authorized preferred shares has not yet been determined and such designation is at the discretion of the board of directors. There were no preferred shares outstanding as of December 31, ~~2009~~2010 and ~~2008~~2009.

Note 8 9 – Income Taxes

Deferred income taxes are provided on a liability method whereby deferred tax assets and liabilities are established for the difference between the financial reporting and income tax basis of assets and liabilities as well as operating loss and tax credit carry forwards. Deferred tax assets are reduced by a valuation allowance when, in the opinion of management, it is more likely than not that some portion or all of the deferred tax assets will not be realized.

Realization of deferred tax assets is dependent upon sufficient future taxable income during the period that deductible temporary differences and carry-forwards are expected to be available to reduce taxable income. At December 31, 2009 ~~the~~OCTuS ~~Company~~ has recorded a 100% valuation allowance as management believes it is likely that any deferred tax assets will not be realized.

At December 31, ~~2009~~2010, ~~the~~OCTuS ~~Company~~ had net operating loss ~~carryforwards~~carry forwards of $236,~~869~~711,~~174~~709 that will expire between ~~2009~~2010 through ~~2029~~2030.

No tax benefit has been reported in the ~~December 31, 2009~~ financial statements since the potential tax benefit is offset by the valuation allowance. ~~Due~~Net ~~to the change in the Tax Reform Act of 1986, net~~ operating loss ~~carryforwards~~carry forwards for federal income tax reporting purposes may be subject to annual limitations in the event of certain changes in ownership. ~~Should a change in ownership occur, net operating loss carryforwards may be limited as to use in future years.~~

28Note 10 – License Agreement

OCTUS, INC.

Notes to Consolidated Financial Statements

Note 9 – License Agreement

~~Note 10~~Pursuant –to ~~Equity~~these ~~Line~~milestone ofconditions, ~~Credit~~OCTuS committed to achieve the following objectives and milestones in its activities under the agreement:

(a)

Funding of OCTuS: $250,000 by December 31, 2010 (accomplished in June 2010);

(b)

Manufacturing of a licensed product begins (including by a third-party on behalf of OCTuS) by May 31, 2010 (accomplished in February 2010);

(c)

First sales of a licensed product or licensed services by August 31, 2010 (accomplished in February 2010); and

(d)

1,000 units of licensed products sold by August 31, 2011 (not accomplished).

-32-

Note 11 – Equity Line of Credit

On December 6, 2009, OCTuS entered into a “Reserve Equity Financing Agreement” with AGS Capital Group, LLC (the “Facility”). The signed agreement authorizes OCTuS to issue and sell up to $5,000,000 of the Company’s fully registered and tradable common stock. These transactions will be made in compliance with the provisions of “Regulation D” of the Securities Act of 1933. There have been no issuances under the Facility.

Note 11 12 – Subsequent Events

In January ~~2010~~2011, OCTuS entered into ~~three~~a ~~three~~two-~~month~~year ~~consulting~~employment ~~agreements~~agreement ~~which call~~with John Walter naming Mr. Walter as the Chief Operating Officer. Under the terms of the agreement, Mr. Walter will be paid a base salary of $120,000. By mutual consent, the salary from January 1, 2011 through March 31, 2011 was to be paid on April 1, 2011. Mr. Walter will be eligible for a discretionary bonus of 30% of the base salary as determined by the Board. OCTuS issued options to ~~issue~~purchase 70500,000 shares of common stock ~~each~~at ~~month~~an exercise price of $0.016 which will vest in two tranches at the ~~contract~~one-year isand two-year anniversary. OCTuS estimated the fair market value inof ~~force~~these options using the Black-Scholes pricing model to be $5,690.

In ~~January~~ ~~2010~~March, ~~OCTuS~~April, ~~entered~~May, ~~into~~June anand ~~investment~~August ~~advisory~~of ~~services~~2011, ~~contract~~Mr. ~~which calls~~Soderquist ~~for~~loaned OCTuS toa ~~issue~~total 30of $72,000 ~~shares~~under ofvarious ~~common~~note ~~stock~~agreements. The ~~each~~notes ~~month~~accrue interest at the ~~contract is~~rate inof ~~force. The~~10% ~~term~~per year and payment of the ~~contract~~accrued isinterest ~~three~~and ~~months~~principal ~~and~~are ~~may~~due ~~be extended~~no onlater athan ~~month~~March to20, ~~month~~2012, ~~basis~~April 1, 2012, April 21, 2012, May 27, 2012, June 2012 and August 2012.

In ~~February~~ ~~2010~~March 2011, OCTuS entered into aan ~~three-month consulting~~ agreement ~~which call~~ for ~~OCTuS~~an toEquity ~~issue~~Line ~~15,000~~of ~~shares~~Credit ofand ~~common~~a ~~stock~~Convertible ~~each~~Bridge ~~month~~Loan ~~the~~with ~~contract~~a isthird ~~in force~~party.

~~In February~~· ~~2010,~~Under ~~OCTuS~~the ~~entered~~terms ~~into a public relations contract which calls for OCTuS to issue 1,000,000 shares~~ of ~~common~~the ~~stock~~Equity atLine ~~a purchase price~~ of ~~$0.0001 per share.~~Credit:

~~During the~~o ~~first~~The ~~quarter~~third ofparty ~~2010,~~may ~~OCTuS~~commit ~~issued~~to ~~convertible~~purchase ~~secured~~up ~~promissory~~to ~~notes (the “2010 Note”) with a principal amount of~~ $305,000,000 ~~to investors. The 2010 Note bears interest at a rate~~ of ~~10%~~the ~~per~~company’s ~~annum and~~common isstock ~~due~~over ~~two years from~~ the ~~date~~course of ~~issuance. Accrued interest is paid semi~~twenty-~~annually,~~four ~~with the first payment due six~~ months after ~~the~~an ~~date~~effective ~~the Note~~registration isstatement ~~issued. At~~has ~~OCTuS’~~been ~~option,~~filed ~~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~~SEC. ofIf ~~interest due and payable, calculated based on~~ the ~~average closing~~Company ~~price~~does ofnot ~~the~~complete ~~Common Stock on~~ the ~~OTC~~registration ~~Bulletin Board (or whatever exchange~~statement, ~~market or quotation system the Common Stock is~~ then ~~traded), for~~ the ~~ten~~ ~~trading~~commitment ~~days ending three days before the date that such payment~~ is ~~due. OCTuS~~ ~~granted~~null ~~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~~void. 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 $0.35 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 Note, OCTuS issued warrants to the note holder to purchase 120,000 shares of OCTuS common stock at an exercise price of $0.01 per share. The term of the warrants is 18 months.

29o Upon OCTuS’ option, the maximum amount of any individual purchase of OCTuS’ common stock is $350,000 at any one time and no purchase will be made in amount lower than $20,000.

~~ITEM~~o 9.The ~~CHANGES~~purchase INprice ~~AND~~will ~~DISAGREEMENTS~~be ~~WITH ACCOUNTANTS~~set ONat ~~ACCOUNTING~~90% ~~AND~~of ~~FINANCIAL DISCLOSURE~~ the market price of the stock.

~~None~~o There have been no issuances under this facility.

Under the terms of the Convertible Bridge Loan:

Financings will consist of a series of convertible notes in an aggregate amount of up to $250,000 with the first tranche being $32,000 and subsequent tranches as agreed upon by the parties.

In April 2011, $32,000 was funded directly to a vendor.

The convertible notes will carry an interest rate of 9% and be convertible into shares of common stock at the greater of $0.025 or 70% of the average lowest volume weighted average price for 10 trading days prior to conversion. The floor of $0.025 will be eliminated if OCTuS fails to enter into a minimum of $600,000 in new contracts within three months of the first tranche of $32,000.

A commitment fee of $250,000 worth of restricted common shares will be issued to the third party in consideration of funding of the convertible notes. The first tranche of shares worth $83,333 was due with the funding of the first tranche of $32,000. OCTuS issued 2,547,055 shares on April 6, 2011 in satisfaction of this first commitment. The remaining tranches of stock under the commitment fee are not due until (1) filing the registration statement, assuming funding has occurred and (2) the registration statement becoming effective, assuming funding has occurred.

-33-

In April 2011, OCTuS issued 58,325 shares for payment of accrued interest of $17,546 related to various convertible notes agreements. OCTuS calculated the conversion rate of the shares at $0.30 per share.

In June and July 2011, OCTuS entered into various note agreements with a third party and assigned certain customer receivables as collateral for these notes.

On June 13, 2011, $37,700 was funded under a note with an interest rate of 12% per year. As a result, OCTuS assigned customer receivables of $39,684. Payment of accrued interest and principal are due no later than November 12, 2011. OCTuS receives a discount from remitting the customer balance if collected and remitted prior to November 30, 2011. On June 29, 2011, OCTuS paid $38,493 of principal and interest related to this note.

On July 1, 2011, $23,010 was funded under a note with an interest rate of 12% per year. As a result, OCTuS assigned customer receivables of $24,221. Payment of accrued interest and principal are due no later than November 30, 2011. OCTuS receives a discount off the customer balance if collected and remitted prior to November 30, 2011. In July and August 2011, OCTuS paid a partial payment of $16,173 related to principal and interest associated with this note.

On July 1, 2011, $32,331 was funded under a note with an interest rate of 12% per year. As a result, OCTuS assigned customer receivables of $34,033. Payment of accrued interest and principal are due no later than November 30, 2011. OCTuS receives a discount off the customer balance if collected and remitted prior to November 30, 2011.

On July 1, 2011, $11,245 was funded under a note with an interest rate of 12% per year. As a result, OCTuS assigned customer receivables of $11,837. Payment of accrued interest and principal are due no later than November 30, 2011. OCTuS receives a discount off the customer balance if collected and remitted prior to November 30, 2011. In July 2011, OCTuS paid $11,481 in principal and interest associated with this note.

In July 2011, OCTuS modified and extended the terms of the $500,000 Convertible note issued in June 2010, which matured in June 2011. OCTuS received a default notice from the note holder and negotiated a modification. The general terms of the modification an extension include:

An extension of the maturity date from June 2010 to December 2, 2011;

The issuance of 2,000,000 shares of common stock;

Past due interest of approximately $30,000 became part of the principal amount;

Removal of the cashless exercise provision of the warrants issued under the original agreement.

In July 2011, OCTuS issued 2,000,000 shares, with a fair value of $6,200, as bonus shares under a two year convertible promissory note with a third party for $50,000. The maturity date of this note is in July 2013. The convertible note agreement has a stated interest rate of 9% and the accrued interest is due semi-annually. The note may be converted at the option of the holder at any time commencing ninety days after the issuance of the note at lesser of $0.03 per share or 70% of the average closing price of the shares for the ten days ending five days before the conversion date. Upon a financing of at least $1,000,000, (“Qualified Financing,”) the note shall be automatically converted into shares at a conversion price equal to the lesser of $0.03 or 70% of the price per share paid for the securities issued in the Qualified Financing. On August 2, 2011, the parties agreed that effective with the original date of the agreement, that the conversion price was changed to be the greater of $0.01 or 70% of the average closing price of the shares for the ten days ending five days before the conversion date.

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ITEM 9A(T). CONTROLS AND PROCEDURES

~~Evaluation of~~ Disclosure Controls and Procedures~~; Management’s Annual Report on Internal Control over Financial Reporting~~

~~Management~~ Our management, with the participation of the Company’s isPrincipal ~~responsible~~Executive ~~for~~Officer ~~establishing~~ and ~~maintaining~~Principal ~~adequate~~Financial ~~internal control~~Officer, ~~over~~has ~~financial~~evaluated ~~reporting.~~the ~~The~~effectiveness of the Company'’s ~~internal~~disclosure ~~control~~controls ~~over~~and ~~financial reporting~~procedures (as such term is ~~designed~~defined toin ~~provide~~Rules ~~reasonable~~13a-15(e) ~~assurance~~and as15d-15(e) tounder the ~~reliability~~Securities ~~of the~~Exchange ~~Company's~~Act ~~financial~~of ~~reporting~~1934, ~~and~~as amended (the ~~preparation~~“Exchange Act”)) as of ~~financial~~the ~~statements~~end ~~in accordance~~of ~~with~~the ~~generally~~period ~~accepted~~covered ~~accounting~~by ~~principles~~this report. ~~Internal Control~~In ~~over~~designing ~~financial~~and ~~reporting~~evaluating ~~includes~~the ~~those~~disclosure ~~policies~~controls and procedures, ~~that: (i)~~management ~~pertain~~recognized tothat ~~the~~any ~~maintenance~~controls ofand ~~records~~procedures, ~~that~~no inmatter ~~reasonable~~how ~~detail~~well ~~accurately~~ designed and ~~fairly~~operated, ~~reflect~~can ~~the~~only ~~transactions~~provide ~~and~~reasonable ~~dispositions~~assurance of achieving the ~~assets~~desired ofcontrol ~~the company,~~objectives ~~(ii)~~and ~~provide~~management ~~reasonable~~is ~~assurance~~required ~~that~~to apply ~~transactions~~its ~~are~~judgment ~~recorded~~in ~~as necessary~~evaluating tothe ~~permit~~cost-benefit ~~preparation~~relationship of ~~financial~~possible ~~statements~~controls inand ~~accordance~~procedures. Based ~~with generally~~on ~~accepted~~such ~~accounting principles~~evaluation, ~~and~~the ~~that~~Company’s ~~receipts~~Principal Executive Officer and ~~expenditures~~Principal ~~of the~~Financial ~~company~~Officer ~~are~~have ~~being~~concluded ~~made~~that ~~only~~as inof ~~accordance~~December ~~with~~31, ~~authorizations~~2010, ofthe ~~management;~~ Company’s disclosure controls and ~~(iii)~~procedures ~~provide~~were not effective, at the reasonable assurance ~~regarding~~level, ~~prevention~~in orrecording, ~~timely~~processing, ~~detection of~~summarizing ~~unauthorized~~and ~~acquisition~~reporting, ~~use~~on ora ~~disposition~~timely ofbasis, information required to be disclosed by the ~~company’s asset~~ ~~that~~Company ~~could~~in ~~have~~the areports ~~material~~that ~~effect~~it onfiles or submits under the ~~financial statement. Because~~Exchange ofAct ~~its~~and ~~inherent~~in ~~limitations,~~ensuring ~~internal~~that ~~control~~information ~~over financial~~required ~~reporting~~to ~~may~~be ~~not~~disclosed ~~prevent~~by orthe ~~detect~~Company ~~misstatement. Also, projections~~in ofthe ~~any~~reports ~~evaluations~~that ofit ~~effectiveness~~files toor ~~future~~submits ~~periods~~under ~~are~~the ~~subject~~Exchange Act is accumulated and communicated to the ~~risk~~Company’s ~~that~~management, ~~controls~~including ~~may~~the ~~become~~Principal ~~inadequate~~Executive ~~because~~Officer ofand ~~changes~~Principal inAccounting ~~conditions~~Officer, or ~~that~~as ~~the~~appropriate ~~degree~~to ofallow ~~compliance~~timely ~~with~~discussions regarding required disclosure; due to the ~~policies~~material ~~and~~weaknesses ~~procedures~~described ~~may deteriorate~~below.

~~Under~~In ~~the supervision~~light ~~and~~of ~~with~~ the ~~participation~~material ofweaknesses ~~our~~described ~~management~~below, ~~including our Chief Executive Officer and Chief Financial Officer,~~ we ~~conducted~~performed anadditional ~~evaluation~~analysis ~~of our disclosure controls~~ and ~~procedures,~~other ~~as such term is defined under Rule 13a~~post-~~15(e) and~~closing ~~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,~~statements 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 December 31, 2009, our disclosure controls and procedures were ~~not effective~~prepared ~~to provide reasonable assurance that information required to be disclosed~~ in ~~our~~accordance ~~Exchange~~with ~~Act~~generally ~~reports~~accepted isaccounting 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 disclosureprinciples. ~~Our conclusion was based on (1) our lack of systematic accounting and disclosure procedures~~Accordingly, ~~notwithstanding~~we ~~that the~~believe ~~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~~this ~~Form~~report ~~10-Q~~fairly present, ~~(2)~~in ~~the~~all ~~absence~~material ~~of personnel~~respects, ~~other~~our ~~than the chief~~ financial ~~officer~~condition, ~~with~~results ~~requisite expertise in the functional areas~~ of ~~finance and accounting~~operations, ~~and~~changes ~~(3)~~in ~~the~~shareholder’s ~~absence~~equity ofand ~~a functioning~~cash ~~audit~~flows ~~committee~~for ~~or outside directors on~~ the ~~Company’s~~periods ~~board of directors~~presented.

~~Throughout the~~Management period covered by the report, the Company had no or minimal amounts of cash until the receipt of proceeds from issuance of convertible Notes at the end of June 2009 and December 2009 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-K. Accordingly, notwithstanding the existence of the material weaknesses described in this Item, management believes that the financial statements included in this Annual Report on ~~Form~~Internal ~~10-K~~Control ~~fairly~~over ~~present, in~~Financial 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.Reporting

Our ~~independent~~ ~~registered~~management ~~public~~is ~~accounting~~responsible ~~firm,~~for ~~GBH~~establishing ~~CPAs,~~and PCmaintaining adequate internal control over financial reporting, ~~has~~as ~~not~~defined ~~issued~~in ~~an attestation~~Rule ~~report~~13a-15(f) onand 15d-15(f) under the ~~effectiveness~~Exchange Act. Our internal control over financial reporting is designed to provide reasonable assurance regarding the reliability of ~~OCTuS’~~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:

~~Changes~~ 1. pertain to the maintenance of records that, in ~~Internal~~reasonable ~~Controls~~detail, accurately and fairly reflect the transactions and dispositions of the assets of the Company;

~~Except~~2. provide reasonable assurance that transactions are recorded as ~~described~~ ~~above,~~necessary ~~there~~to ~~have~~permit ~~been~~preparation noof ~~changes~~financial statements in ~~the~~accordance ~~Company’s~~with ~~internal~~accounting ~~controls over~~principles ~~financial~~generally ~~reporting~~accepted ~~during~~in the ~~last~~United ~~fiscal~~States ~~year~~of America, and that ~~have~~receipts ~~materially affected,~~and orexpenditures of the Company are ~~reasonably~~being ~~likely~~made toonly ~~materially~~in ~~affect,~~accordance ~~the~~with ~~Company’s~~authorizations ~~internal controls~~of ~~over~~management ~~financial~~and ~~reporting.~~directors of the Company; and

303. 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.

~~PART III~~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.

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.

Under the supervision and with the participation of our management, including our Principal Executive Officer and Principal Financial Officer, we conducted an evaluation of the effectiveness of our internal control over financial reporting as of the period covered by this report based on the framework in Internal Control – Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (“COSO”). Based on the results of management’s assessment and evaluation, our Principal Executive Officer and Principal Financial Officer concluded that our internal control over financial reporting was not effective due to the material weaknesses described below:

Overall lack of systematic accounting and disclosure procedures have caused the company to not file its annual report on Form 10-K, it’s interim quarterly financial statements for the periods ended March 31, 2011 and June 30, 2011 timely, 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,

The absence of personnel, other than the chief financial officer, with requisite expertise in the functional areas of finance and accounting, and

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The absence of a functioning audit committee or outside directors on the Company’s board of directors.

Throughout the period covered by the report, the Company had no or minimal amounts of cash until the receipt of proceeds from issuance of convertible Notes at the end of December 30, 2010 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-K. Accordingly, notwithstanding the existence of the material weaknesses described in this Item, management believes that the financial statements included in this Annual Report on Form 10-K 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.

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.

Attestation Report of the Independent Registered Public Accounting Firm

This amended annual report does not include an attestation report by the Company’s registered public accounting firm regarding internal control over financial reporting, because Management’s report in the annual report was not subject to attestation by the Company’s independent registered public accounting firm, pursuant to the temporary rules of the SEC that permit the Company to provide only management’s report in this annual report.

Inherent Limitations on the Effectiveness of Controls

Management does not expect that our disclosure controls and procedures or our internal control over financial reporting will prevent or detect all errors and all fraud. A control system, no matter how well conceived and operated, can provide only reasonable, not absolute, assurance that the objectives of the control systems are met. Further, the design of a control system must reflect the fact that there are resource constraints, and the benefits of controls must be considered relative to their costs. Because of the inherent limitations in a cost-effective control system, no evaluation of internal control over financial reporting can provide absolute assurance that misstatements due to error or fraud will not occur or that all control issues and instances of fraud, if any, have been or will be detected.

These inherent limitations include the realities that judgments in decision-making can be faulty and that breakdowns can occur because of a simple error or mistake. Controls can also be circumvented by the individual acts of some persons, by collusion of two or more people, or by management override of the controls. The design of any system of controls is based in part on certain assumptions about the likelihood of future events, and there can be no assurance that any design will succeed in achieving its stated goals under all potential future conditions. Projections of any evaluation of controls effectiveness to future periods are subject to risks. Over time, controls may become inadequate because of changes in conditions or deterioration in the degree of compliance with policies or procedures.

Changes in Internal Control over Financial Reporting

There have not been any changes in the Company’s internal control over financial reporting (as such term is defined in Rules 13-15(f) and 15d-15(f) under the Exchange Act) during the last fiscal quarter that has materially affected, or is reasonably likely to materially affect, the Company’s internal control over financial reporting.

ITEM 10. DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE

The following sets forth certain information about each of our executive officers and directors and their current positions with the Company. The information set forth below was provided by these individuals:

NAME	POSITION HELD	DIRECTOR SERVICE	AGE
Christian Soderquist	President and Chief Executive Officer; Director	2009		4142
George Ecker	Chief Financial Officer; Director	2009		5051

Christian Soderquist, 4142, has more than 1718 years of experience founding, managing, capitalizing and selling companies. From 2004 to 2008 he served as a Director of Sierra Energy Corporation. From 2004 to 2007, he co-founded and was Managing Director of Crescendo, a luxury real estate investment firm that was acquired in 2008 by Abercrombie and Kent. From 2007 to 2008, he was a business consultant to companies in a variety of industries. He also created and sold a marketing strategy firm that he grew to 130 clients, and founded and directed several software companies. Previously, Mr. Soderquist managed two business incubators, Technology Development Center and Venture Lab, and served on the board of directors of the Sacramento Entrepreneurship Academy (of which he was president for three years), the Sacramento Area Regional Technology Alliance, and UC Davis Connect. He earned a BS from Cal Poly, San Luis Obispo, and an MBA from the University of California, Davis. The board has concluded that Mr. Soderquist should serve on our board based on his experience in assisting, operating and growing start-up companies, and his knowledge of the markets in which the Company competes and intends to compete, and his knowledge of our company gained from his position as an officer of the Company.

George Ecker, 50, has over 25 years of entrepreneurial and management experience in international and domestic ventures. He is presently the President and Director of Nova Mobility Systems, a company specializing in the design and manufacture of rugged handheld mobile computers. From 2002 until 2006 Mr. Ecker was the President of the Channel Financial Group, a financial services company providing corporate finance consulting as well as strategic services to international private equity managers. He holds a Bachelor of Science degree in Finance, with honors, from the University of the State of New York.-36-

George Ecker, 51, has over 25 years of entrepreneurial and management experience in international and domestic ventures. He is presently the President and Director of Nova Mobility Systems, a company specializing in the design and manufacture of rugged handheld mobile computers. From 2002 until 2006, Mr. Ecker was the President of the Channel Financial Group, a financial services company providing corporate finance consulting as well as strategic services to international private equity managers. He holds a Bachelor of Science degree in Finance, with honors, from the University of the State of New York. The board has concluded that Mr. Ecker should serve on our board based on his financial and executive experience in companies of different sizes, his financial background, and his knowledge of our company gained from his position as an officer of the Company.

There are no orders, judgments, or decrees of any governmental agency or administrator, or of any court of competent jurisdiction, revoking or suspending for cause any license, permit or other authority to engage in the securities business or in the sale of a particular security or temporarily or permanently restraining any of our officers or directors from engaging in or continuing any conduct, practice or employment in connection with the purchase or sale of securities, or convicting such person of any felony or misdemeanor involving a security, or any aspect of the securities business or of theft or of any felony. Nor are any of the officers or directors of any corporation or entity affiliated with us so enjoined.

BOARD INDEPENDENCE

Standard of Independence

At this time, the Company is not subject to the requirements of a national securities exchange or an inter-dealer quotation system with respect to the need to have a majority of its directors be independent. In the absence of such requirements, the Company has elected to use the definition established by the NASDAQ independence rule which defines an “independent director” as “a person other than an officer or employee of the company or its subsidiaries or any other individual having a relationship, which in the opinion of the company's board of directors, would interfere with the exercise of independent judgment in carrying out the responsibilities of a director.” The definition further provides that the following relationships are considered bars to independence regardless of the board's determination:

Employment by the Company. Employment of the director or a family member by the Company or any parent or subsidiary of the Company at any time thereof during the past three years, other than family members in non-executive officer positions.

$100,000 Compensation. Acceptance by the director or a family member of any compensation from the Company or any parent or subsidiary in excess of $100,000 during any twelve month period within three years of the independence determination.

Auditor Affiliation. A director or a family member of the director, being a partner of the Company's outside auditor or having been a partner or employee of the company's outside auditor who worked on the Company's audit, during the past three years.

Payments to or from an Affiliated Entity. A director who is, or has a family member who is, a partner in, or a controlling shareholder or an executive officer of, any organization to which the Company made, or from which the Company received, payments for property or services in the current or any of the past three fiscal years that exceed 5% of the recipient's consolidated gross revenues for that year, or $200,000, whichever is more, other than (i) payments arising solely from investments in the Company’s securities or (ii) payments made under non-discretionary charitable contribution matching programs.

Service on Compensation Committee of Another Entity. A director of the Company who is, or has a family member who is, employed as an executive officer of another entity where at any time during the past three years any of the executive officers of the Company serve on the compensation committee of such other entity.

Based on the foregoing definition, the board of directors has determined that we do not have any independent directors.

Standing Committees of the Board

At this time, the Company is a small business issuer whose common stock is authorized for quotation on the OTC Bulletin Board and is not subject to the requirements of a national securities exchange or an inter-dealer quotation system with respect to the establishment and maintenance of any standing committees. In any event, the Company, in February 2008, established a separate standing audit committee, compensation committee and nominating committee.

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The only members of our audit committee are Directors Christian Soderquist and George Ecker. The firm is in search of additional qualified candidates. The audit committee performs the following functions: (1) selection and oversight of our independent accountant; (2) establishing procedures for the receipt, retention and treatment of complaints regarding accounting, internal controls and auditing matters; and (3) engaging outside advisors. The Company is not a "listed company" under SEC rules and therefore its audit committee is not required to be comprised of only independent directors. The members of the audit committee are not independent directors. The audit committee does not include an independent director who is an "audit committee financial expert" within the meaning of the rules and regulations of the SEC. The board has determined, however, that the members of the audit committee are able to read and understand fundamental financial statements and have substantial business experience that results in the member's financial sophistication. Accordingly, the board believes that the members of the audit committee have the sufficient knowledge and experience necessary to fulfill their duties and obligations required to serve on the audit committee.

The only members of our compensation committee are Directors Christian Soderquist and George Ecker. This committee has two primary responsibilities: (1) to establish, review and approve CEO compensation and to review and approve other senior executive compensation, and (2) to monitor our management resources, structure, succession planning, development and selection process as well as the performance of key executives. It also oversees our Equity Plan and any other compensation and equity-based plans.

All of our directors serve on our nominating committee.

Compensation of the Board of Directors

Directors are not paid any fees or compensation for services as members of our board of directors or any committee thereof, but are reimbursed for their out-of-pocket expenses incurred in connection with attendance at meeting of the board of directors. We may, in the future, compensate non-employee directors who serve on our board of directors by paying cash compensation and/or the issuance of options under an equity incentive plan.

Section 16(A) Beneficial Ownership Reporting Compliance

Section 16(a) of the Securities Act of 1934 requires our directors, executive officers, and any persons who own more than 10% of a registered class of our equity securities, to file reports of ownership and changes in ownership with the Securities and Exchange Commission. SEC regulation requires executive officers, directors and greater than 10% stockholders to furnish us with copies of all Section 16(a) forms they file. Based solely on our review of the copies of such forms received by us, or written representations from certain reporting persons, we believe that during the year ended December 31, ~~2008~~2010, that none of our executive officers, directors, or greater than 10% stockholders were subject to any applicable filing requirements.

Code of Ethics

A code of ethics relates to written standards that are reasonably designed to deter wrongdoing and to promote:

Honest and ethical conduct, including the ethical handling of actual or perceived conflicts of interest between personal and professional relationships;

Full, fair, accurate, timely and understandable disclosure in reports and documents that are filed with, or submitted to, the SEC and in other public communications made by an issuer;

Compliance with applicable governmental laws, rules and regulations;

The prompt internal reporting of violations of the code to an appropriate person or persons identified in the code; and

Accountability for adherence to the code.

In March 2004, we adopted a Code of Business Conduct and Ethics (“Code of Ethics”) that our employees, officers (including executive officers, which include our principal executive officer and principal financial and accounting officer and persons performing similar functions) and directors are asked to uphold. This Code of Ethics covers all of the above-described standards of conduct.

A copy of our Code of Ethics may be requested from the Company, without charge, by contacting the Company’s chief financial officer at the Company’s principal executive offices. We intend to satisfy any disclosure requirement under Item 5.05 of Form 8-K relating to any future amendments to or waivers from any provision of our Code of Ethics that relate to one or more of the items set forth in Item 406(b) of Regulation S-K by describing such amendments and/or waivers on such website, within four business days following the date of a waiver or a substantive amendment; and if we do not make such disclosures on our web site then we intend to make such disclosures on a Form 8-K within the required time periods. Information on our Internet website is not, and shall not be deemed to be a part of this annual report on Form 10-K or incorporated into any other filings we make with the SEC.

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ITEM 11. EXECUTIVE COMPENSATION

Summary Compensation Table

~~There~~The ~~was no~~following ~~compensation~~table ~~required~~provides tocertain beinformation ~~report~~with ~~under~~respect ~~this~~to ~~Item~~the ~~paid~~2010 tocompensation of our ~~executive officers or~~ directors ~~for~~who ~~the~~served ~~fiscal~~in ~~years~~such ~~ended~~capacity ~~December~~during ~~31,~~the ~~2008~~year.

Name and Principal Position	Year	~~Year~~Salary ($)	Bonus ($)	~~Salary~~Stock Awards ($)	~~Bonus~~Option Awards ($)	~~Option~~Other ~~Awards~~Compensation ($)	~~Other~~Total ~~Compensation~~ ($)	~~Total ($)~~
Christian J. Soderquist Chief Executive Officer		2009		19,230	-0-	-0-	-0-	19,230
Christian J. Soderquist,	2010	29,645	-0-	-0-	-0-	-0-	29,645
Georg M. Ecker Chief Financial Officer		2009		19,230	-0-	-0-	-0-	19,230
Chief Executive Officer	2009	19,230	-0-	135,000(1)	-0-	-0-	154,230
George M. Ecker,	2010	58,680	-0-	-0-	-0-	-0-	58,680
Chief Financial Officer	2009	19,230	-0-	135,000(1)	-0-	-0-	154,230
David S. Pere,	2010	-0-	-0-	-0-	-0-	-0-	-0-
President, Financial Officer (2)	2009	-0-	-0-	-0-	-0-	-0-	-0-

(1) The ~~employment~~ ~~contracts~~stock ~~for~~awards ~~each~~reflected ~~officer~~in ~~stipulate~~the ~~that~~above table were valued in the ~~annual~~aggregate ~~compensation~~based on the market price at the grant date in accordance with FASB ASC Topic 718. The shares were issued to each isof ~~$180,000~~the above persons pursuant to berestricted ~~paid~~stock ~~upon~~purchase ~~receipt~~agreements in consideration of ~~sufficient~~their ~~capital~~agreement to ~~meet~~join the ~~contractual~~ ~~obligations. Both~~company as executive officers ~~have~~and ~~waived~~directors, ~~their~~for ~~rights~~services rendered to the ~~portion~~company in connection with the development of ~~their~~business ~~wages~~plans ~~that~~and ~~remain~~strategies, ~~unpaid~~and asfor related proprietary ideas concerning the company’s business strategy. See the “Employment Contracts” below for a description of ~~December~~additional ~~31, 2009~~terms of the restricted stock purchase agreements relating to these shares.

(2)	The named person was an executive officer of the Company, but resigned when Mr. Soderquist and Mr. Ecker became officers and directors of the Company.

Employment Contracts

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 the Company and Mr. Ecker will serve as Chief Financial Officer of the Company. Mr. Soderquist and Mr. Ecker were also appointed directors of the Company. Concurrently the Company executed restricted stock purchase agreements dated February 24, 2009, with each of Mr. Soderquist and Mr. Ecker.

33Both employment agreements have a term of three years, through February 23, 2012, with the term extended automatically for successive one-year terms, unless either party notifies the other in writing at least 90 days prior to the expiration of the then-effective term of such party’s intention not to renew the agreement. Pursuant to the employment agreement, Octus has agreed to pay Mr. Soderquist and Mr. Ecker a base annual salary of $150,000 each, 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 their rights to any unpaid compensation for the 2009 year. 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. The agreements provide that the Company will issue to each person 15,000,000 shares of common stock for services rendered and contributed to the Company, with the shares issued to each person having a fair market value of $135,000 based on the market price of the shares on the date of the agreements. As of December 31, 2010, OCTuS has accrued payroll balances of $120,355 and $91,320 for unpaid salary amounts owing to Mr. Soderquist and Mr. Ecker, respectively.

~~Both employment~~Under ~~agreements~~the ~~have~~terms of the restricted stock purchase agreements, a ~~term~~portion of ~~three~~the ~~years,~~shares ~~through~~is ~~February~~subject ~~23,~~to ~~2012, with~~repurchase by the ~~term~~Company ~~extended~~if ~~automatically~~certain ~~for~~milestones ~~successive~~are ~~one-year~~not ~~terms~~achieved ~~unless~~before ~~either party~~the ~~notifies~~first anniversary of the ~~other~~date inof ~~writing~~the atpurchase ~~least~~agreements. For 90each ~~days~~of ~~prior~~the tofollowing events that are not achieved before the ~~expiration~~first anniversary of the ~~then-effective~~date ~~term~~of the purchase agreements, 25% of ~~such~~the ~~party’s~~shares ~~intention~~are ~~not~~subject to ~~renew~~repurchase by the ~~agreement~~ Company at the original purchase price per share. ~~Pursuant~~If toall ~~the~~four ~~employment~~milestones ~~agreement~~are achieved, ~~Octus~~then ~~has~~all ~~agreed~~repurchase ~~to pay~~rights ~~Mr.~~of ~~Soderquist~~the ~~and~~Company Mrwill lapse. The ~~Ecker~~milestone aevents ~~base~~are: completion ~~annual~~of ~~salary~~sale of equity securities of the Company with proceeds to the Company of $~~180~~100,000 ~~each,~~or ~~which will~~more; ~~increase~~execution ~~annually~~ by the ~~increase~~Company inof a license agreement or purchase contract with at least two third-party persons or entities to acquire or license technologies and/or products related to the ~~consumer~~Company’s ~~price~~intended ~~index~~business; receipt of revenues from the ~~prior~~ ~~year~~sale (by the ~~“Base~~Company ~~Salary”).~~of ~~The~~products ~~officers~~licensed ~~have~~or ~~agreed~~owned ~~for~~by anthe ~~interim~~Company; ~~period to~~and ~~defer~~execution ~~some~~by orthe ~~all~~Company of ~~their~~ ~~base~~a ~~salaries~~renewable ~~based~~energy onand/or energy efficiency project contract. In the ~~outstanding achievements~~event of ~~one~~a change in control of the Company, defined in the agreement to include events such as a merger or sale of assets transaction which results in more than a 50% change of ownership of the ~~milestones~~Company, ~~described~~all ~~below~~restrictions lapse and the shares will become fully vested. The Company’s ~~ability~~ board of directors determined that the four milestone events were met prior to ~~pay~~February 24, ~~salaries~~2010. The ~~Each~~financing ~~officer~~milestone ~~will~~was satisfied beby ~~eligible~~completion ~~for~~of anthe ~~annual~~Company’s ~~bonus~~$100,000 offinancing ~~up to~~transaction ~~50%~~in June 2009. The purchase contract milestone was satisfied by the Wickool license with the University of ~~his~~California ~~base~~and ~~annual~~the ~~salary~~February as2010 ~~then~~license inagreement ~~effect~~with EcoNexus, asLLC. The ~~determined~~revenue bymilestone ~~Octus’ Compensation~~was ~~Committee~~achieved orin ~~Board~~February 2010 with the sale of ~~Directors~~a Wickool product. The ~~agreements~~milestone ~~provide that~~relating to execution of a renewal energy or energy efficiency project contract was satisfied with the ~~Company~~January ~~will~~2010 ~~issue~~contract with Quantum Energy Solutions to ~~each~~pursue ~~person~~specific ~~15,000,000~~joint ~~shares~~projects ofand ~~common~~the ~~stock~~February 2010 evaporative cooling project installation for ~~services~~ ~~rendered~~an industrial building manager. Since the board of directors consists of Mr. Soderquist and ~~contributed~~Mr. toEcker, the ~~Company~~determination that the milestones were satisfied was made by the persons who benefitted from that determination, and accordingly was not made by disinterested persons.

Under the terms of the restricted stock purchase agreements, a portion of the shares is subject to repurchase by the Company 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 the Company at the original purchase price per share. If all four milestones are achieved, then all repurchase rights of the Company will lapse. The milestone events are: completion of sale of equity securities of the Company with proceeds to the Company of $100,000 or more; execution by the Company of a license agreement or purchase contract with at least two third-party persons or entities to acquire or license technologies and/or products related to the Company’s intended business; receipt of revenues from the sale by the Company of products licensed or owned by the Company; and execution by the Company of a renewable energy and/or energy efficiency project contract. In the event of a change in control of the Company, defined in the agreement to include events such as a merger or sale of assets transaction which results in more than a 50% change of ownership of the Company, all restrictions lapse and the shares will become fully vested. The milestones were met in their entirety prior to February 24, 2010 resulting in the lapse of all repurchase rights the Company held.39-

Each employment agreement provides that if the employment of the officer is terminated by Octus without cause (as defined in the employment agreement) or by the officer for good reason (as defined in the employment agreement) or upon her death, the officer (or his estate) is entitled to receive in cash payment an amount equal to all previously accrued but unpaid compensation (including accrued but unused vacation leave) as of the date of such termination, and a lump sum payment equal to the amount of the Base Salary that the officer would have earned if the officer had remained employed with Octus during the remaining portion of the then-current term.

Stock Options/SAR Grants

We did not grant any stock options to our named executive officers during either fiscal 2009 or 2008. We do not have any outstanding stock appreciation rights.

Long Term Incentive Plans

As of December 31, 2009, we had no group life, health, hospitalization, or medical reimbursement or relocation plans in effect. Further, we had no pension plans or plans or agreements which provide compensation on the event of termination of employment or corporate change in control.

Outstanding Equity Awards at Fiscal Year-End

None.

Director Compensation

There was no compensation paid to our directors for their services as directors during the fiscal year ended December 31, ~~2009~~2010.

ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS

The following table sets forth certain information regarding the beneficial ownership of our Voting Stock as of ~~April~~September 129, ~~2010~~2011, by (i) each of our named executive officers and directors; (ii) our named executive officers and directors as a group; and (iii) shareholders known by us to beneficially own more than 5% of any class of our voting securities. The beneficial ownership of securities is defined in accordance with the rules of the Securities and Exchange Commission and means generally the power to vote or exercise investment discretion with respect to securities, regardless of any economic interests therein. Except as otherwise indicated, we believe that the ~~beneficial~~ beneficial owners of the securities listed below have sole investment and voting power with respect to such shares, subject to community property laws where applicable. Unless otherwise indicated, the business address for each of the individuals or entities listed below is c/o OCTuS, Inc., ~~803~~2020 ~~Second~~Research ~~Street~~Park Drive, Suite ~~303~~110, Davis, CA ~~95616~~95618.

Title of Class	Name of Beneficial Owner	Amount and Nature of Beneficial Ownership	Percent of Class
Common Stock	Christian Soderquist	1513,000,000 common shares Officer and Director*		3423.2056	%
Common Stock	George Ecker	1513,~~000~~250,000 common shares Officer and Director*		3424.2001	%
Common Stock	All officers and directors as a group	3026,~~000~~250,000 common shares		6847.4057	%

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Beneficial ownership is determined in accordance with the rules of the Securities and Exchange Commission and generally includes voting or investment power with respect to securities. In accordance with Securities and Exchange Commission rules, shares of our common stock which may be acquired upon exercise of stock options or warrants which are currently exercisable or which become exercisable within 60 days of the date of the table are deemed beneficially owned by the optionees. Subject to community property laws, where applicable, the persons or entities named in the table above have sole voting and investment power with respect to all shares of our common stock indicated as beneficially owned by them.

Changes in Control

There are approximately 4355,~~867~~173,~~000~~177 shares of common stock outstanding, and therefore the 30 26,~~000~~250,000 ~~shares~~held ~~issued pursuant to the purchase agreements entered into~~ by ~~Octus~~ ~~and~~ Mr. Soderquist and Mr. Ecker collectively represent approximately 6847.57% of the outstanding shares of the Company. A change in control of the Company therefore occurred by virtue of the issuance of shares to Mr. Ecker and Mr. Soderquist and their appointment as directors and officers of the Company. Our management is not aware of any arrangements which may result in "changes in control~~" as that term is defined by the provisions of Item 403(c) of Regulation S-B outside of these two share issuances~~."

Equity Compensation Plan Information

AsAt of December 31, 2009, ~~there~~we ~~were~~had ~~two~~ options to purchase 60,000 shares outstanding. As ~~and~~of ~~there~~December ~~has~~31, ~~been~~2009, no one option ~~transactions~~for ~~during~~30,000 ~~the~~shares ~~two~~and ~~years~~one ~~ended~~option ~~December 31~~for 30, ~~2009~~000 shares at grant prices of $0. ~~The~~39 ~~options~~and ~~outstanding~~$0.33 per share were issued in August 2009 ~~for~~with a ~~total~~ term of 35three years. Accordingly, 405,000 shares atare aavailable ~~strike~~for ~~price~~grant ofunder ~~$0.39~~the ~~per~~stock ~~share~~option ~~with~~plan. The aremaining ~~term~~life of ~~three~~ the option is 2.75 years.

ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

Conflicts Related to Other Business Activities

The persons serving as our officers and directors have existing responsibilities and, in the future, may have additional responsibilities, to provide management and services to other entities in addition to us. As a result, conflicts of interest between us and the other activities of those persons may occur from time to time.

We will attempt to resolve any such conflicts of interest in our favor. Our officers and directors are accountable to us and our shareholders as fiduciaries, which requires that such officers and directors exercise good faith and integrity in handling our affairs. A shareholder may be able to institute legal action on our behalf or on behalf of that shareholder and all other similarly situated shareholders to recover damages or for other relief in cases of the resolution of conflicts in any manner prejudicial to us.

Related Party Transactions

A former officer and director paid certain expenses on behalf of Octus for periods prior to 2007. As of December 31, 2009, amounts accrued and unpaid to this individual totaled $3,169 and are included in accounts payable - related parties. Also during the year, the current CEO, Christian J. Soderquist paid company expenses on his personal credit card in the amount of $1,824. These amount total $4,993 at December 31, 2009.

At December 31, 2009, there is $27,396 of accrued officer payroll and payroll related taxes for the current officers of the company, Christian J. Soderquist and George M. Ecker.

Under the terms of the restricted stock purchase agreements, a portion of the shares is subject to repurchase by OCTuS if certain milestones are not achieved before the first anniversary of the date of the purchase agreements. For each of the following events that are not achieved before the first anniversary of the date of the purchase agreements, 25% of the shares are subject to repurchase by OCTuS at the original purchase price per share. If all four milestones are achieved, then all repurchase rights of OCTuS will lapse. The milestone events are: completion of sale of equity securities of OCTuS with proceeds to OCTuS of $100,000 or more; execution by OCTuS of a license agreement or purchase contract with at least two third-party persons or entities to acquire or license technologies and/or products related to OCTuS’s intended business; receipt of revenues from the sale by OCTuS of products licensed or owned by OCTuS; and execution by OCTuS of a renewable energy and/or energy efficiency project contract. In the event of a change in control of OCTuS, defined in the agreement to include events such as a merger or sale of assets transaction which results in more than a 50% change of ownership of OCTuS, all restrictions lapse and the shares will become fully vested. The milestones were met in their entirety prior to February 24, 2010 resulting in the lapse of all repurchase rights the Company held.41-

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. In November and December 2009, Mr. Soderquist loaned OCTuS an additional $17,500 and $5,250, respectively for total related party proceeds for the year end December 31, 2009 of $32,750. These loans bear interest at 10% and are due upon demand.

36Effective 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 Sasaima Holdings SA, 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 year ending December 31, 2010 and 2009 was $12,816 and $28,146 respectively. The current portion of this note is $125,000 and $88,500 at December 31, 2010 and 2009, respectively. Upon conversion of the outstanding principal and accrued interest, this party would own greater than 10% of the outstanding shares on a fully diluted basis. During the year ended December 31, 2010, OCTuS paid $5,000 toward accrued interest on this note. .

During the year ended December 31, 2010, Mr. Soderquist loaned OCTuS $48,500. $500 of these loans bear interest at 10% and are due upon demand. $48,000 of these notes is due in November and December 2012 and is presented as long term.

During year ended December 31, 2010, payments of $5,782 have been paid by the company on these related party notes payable.

In March, April, May, June and August of 2011, Mr. Soderquist loaned OCTuS a total of $72,000 under various note agreements. The notes accrue interest at the rate of 10% per year and payment of the accrued interest and principal are due no later than March 20, 2012, April 1, 2012, April 21, 2012, May 27, 2012, June 2012 and August 2012.

With regard to any future related party transactions, we plan to fully disclose any and all related party transactions, including, but not limited to, the following:

disclose such transactions in prospectuses where required;

disclose in any and all filings with the Securities and Exchange Commission, where required;

obtain disinterested directors consent; and

obtain shareholder consent where required.

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Director Independence

Members of our Board of Directors are not independent as that term is defined by defined in Rule 4200(a)(15) of the Nasdaq Marketplace Rules.

ITEM 14 . PRINCIPAL ~~ACCOUNTING~~ACCOUNTANT FEES AND SERVICES

~~Our~~ We retained GBH, CPA’s (“GBH”) as our principal ~~outside~~accountant ~~auditor~~in is2009. We had no relationship with GBH ~~CPAs,~~prior PCto their retention as our principal accountant. ~~Set~~The ~~forth~~following ~~below~~table ~~are~~sets forth the aggregate fees ~~and expenses~~paid ~~for~~ to GBH ~~CPAs, PC~~ for ~~each~~audit ofservices ~~the~~rendered ~~last~~in ~~two~~connection ~~years~~with our consolidated financial statements and reports for the ~~following~~ ~~services~~years ~~provided~~ended toDecember us31, 2009 and 2010:

	2009		2008
	December 31, 2010		December 31, 2009
Annual Audit Fees	$	24,700	$	11,000
(i) Audit Fees	$	53,700	$	24,700
Audit-Related Fees		-		-
(ii) Audit Related Fees		40,000		-
Tax Fees		1,800		-
(iii) Tax Fees		-		1,800
Other Fees		-		-
(iv) All Other Fees		-		-
Total Fees	$	2493,700	$	1126,~~000~~500

~~Our~~Audit ~~board of~~Fees: ~~directors~~Consists ~~reviews~~of ~~and~~fees ~~approves~~billed ~~audit~~for ~~and~~professional ~~permissible non-audit~~ services ~~performed~~ byrendered ~~its~~for ~~independent~~the ~~accountants,~~audit asof ~~well~~OCTuS’ asconsolidated ~~the~~financial ~~fees~~statements ~~charged~~and ~~for~~the ~~such services. In its~~ review of ~~non-audit~~interim ~~service~~consolidated ~~fees~~financial ~~and~~statements ~~its~~included ~~appointment of~~in ~~GBH~~quarterly ~~CPAs~~reports, PCservices asthat ~~our~~are ~~independent~~normally ~~accountants,~~provided ~~the~~in ~~board~~connection ~~of directors considered whether the provision of such services is compatible~~ with ~~maintaining independence. All~~statutory ofand ~~the~~regulatory ~~services~~filings ~~provided~~or engagements and ~~fees~~attest ~~charged by GBH CPAs~~services, ~~PC,~~except inthose ~~2008~~not ~~and~~required ~~2009, were approved~~ by ~~the~~statute ~~board~~or ~~of directors~~regulation.

Audit-Related Fees: Consists of fees billed for the audit of Quantum Energy Solutions, Inc. and assurance and related services that are reasonably related to the performance of the audit and review of OCTuS’ consolidated financial statements and are not reported under "Audit Fees."

Tax Fees: Consists of tax compliance, tax preparation and other tax services. Tax compliance and tax preparation consists of fees billed for professional services related to assistance with tax returns. Other tax services consist of fees billed for other miscellaneous tax consulting.

All Other Fees: None.

Pre-Approval of Audit and Permissible Non-Audit Services of Independent Auditors

The Board of Directors pre-approves all audit and permissible non-audit services provided by GBH. These services may include audit services, audit-related services, tax services and other services. The Board of Directors may also pre-approve particular services on a case-by-case basis and may delegate pre-approval authority to one or more directors. If so delegated, the director must report any pre-approval decision to the Board of Directors at its first meeting after the pre-approval was obtained.

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PART IV

ITEM 15. EXHIBITS, FINANCIAL STATEMENT SCHEDULES

EXHIBIT NUMBER	DESCRIPTION	NOTES
31.1	Section 302 Certification Annual Report on Form 10-K
3.1	Amended and Restated Articles of Incorporation	(2)
32.1	Certification Pursuant To 18 U.S.C. Section 1350, As Adopted Pursuant To Section 906 Of The Sarbanes-Oxley Act Of 2002
3.2	Certificate of Determination of Preferences of Series C Preferred Stock of Octus, Inc.	(5)
3.3	Amended Bylaws	(11)
3.4	Certificate of Amendment to Articles of Incorporation	(7)
10.1	Form of Indemnification Agreements entered into by and between Octus, Inc. and its officers and directors	(1)
10.2	Directors 1993 Stock Option Plan, Form of Stock Option Agreement, Non-Qualified Options, 1993 Directors Stock Option Plan	(2)
10.3	Convertible Promissory Notes dated September 30, 2008 with Sasaima Holdings SA	(8)
10.4	Convertible Promissory Notes dated September 30, 2008 with Grupo Dynastia SA	(8)
14.1	Code of Ethics	(6)
10.5	Restricted Stock Purchase Agreement, dated February 24, 2009, between the Company and Christian Soderquist	(9)
10.6	Restricted Stock Purchase Agreement, dated February 24, 2009, between the Company and George M. Ecker	(9)
10.7	Employment Agreement, effective February 24, 2009, between the Company and Christian Soderquist	(9)
10.8	Employment Agreement, effective February 24, 2009, between the Company and George M. Ecker	(9)
10.9	Loan Modification Agreement (Sasaima Holdings SA letter to Octus Inc.), executed March 31, 2009	(9)
10.10	Employment Agreement, effective May 5, 2009, between the Company and John Argo	(10)
10.11	Restricted Stock Purchase Agreement, dated May 5, 2009, between the Company and John Argo	(10)
10.12	Employment Agreement, effective April 1, 2009, between the Company and John Argo	(11)
10.13	Convertible Secured Promissory Note, dated June 22, 2009, between the Company and Margaret Wong	(11)
10.14	Common Stock Purchase Warrant, dated June 22, 2009, between the Company and Margaret Wong	(11)
10.15	Note Amendment with the Senior Lender, dated March 31, 2009	(11)
10.16	Salary Agreement, dated August 10, 2009, between the Company and George Ecker	(11)
10.17	Salary Agreement, dated August 10, 2009, between the Company and Christian Soderquist	(11)
10.18	Exclusive License Agreement for Wicking Condensate Evaporator at AC Condenser, effective August 1, 2009, between The Regents of the University of California, acting through its Davis Campus Technology Transfer Services, at the University of California, Davis and Octus Energy, Inc.	(12)
10.19	Reserve Equity Financing Agreement, dated December 6, 2009, between AGS Capital Group, LLC and the Company	(13)
10.20	Registration Rights Agreement, dated December 6, 2009, between AGS Capital Group, LLC and the Company	(13)
10.21	Eco Nexus Non-exclusive License Agreement	(14)
10.22	Completion of Acquisition of Quantum Energy Solutions, Inc.	(15)
10.23	Equity Line of Credit and Bridge Loan Agreement, dated March 29, 2011 between Orchid Island Capital LLC and the Company	(14)
10.24	Agreement to Extend terms of EAM Promissory Note signed July 13, 2011 between EAM, Inc. and the Company	(14)
10.25	Convertible Secured Promissory Note and Purchase Agreement, dated July 15, 2011 between the Company and Cova Holdings	(14)
31.1	Section 302 Certification
32.1	Certification Pursuant to 18 U.S.C. Section 1350
32.2	Certification Pursuant to 18 U.S.C. Section 1350

37(1) Incorporated by reference from the Company’s Form S-1, as amended, SEC registration number 33-51862, which was declared effective January 15, 1993.

(2)	Incorporated by reference from the Company’s Post-Effective Amendment No. 1 on Form S-3 to Form S-1, bearing the SEC registration number 33-51862, which was declared effective January 6, 1995.

(3)	Incorporated by reference from the Company’s Quarterly Report on Form 10-QSB for the period ended December 31, 1994 filed with the SEC July 6, 1995.

(4)	Incorporated by reference from the Company’s Form 8-K filed with the SEC November 13, 1995.

(5)	Incorporated by reference from the Company’s Form 8-K filed with the SEC on August 12, 1996.

(6)	Incorporated by reference from the Company’s Annual Report on Form 10-KSB for the period ended December 31, 1993.

(7)	Incorporated by reference to the Company’s Form 8-K filed with the Securities and Exchange Commission on June 16, 2005.

(8)	Incorporated by reference to the Company’s Form 8-K filed with the Securities and Exchange Commission on June 16, 2005.

(9)	Incorporated by reference to exhibits filed with the Form 10-K filed with the SEC on April 15, 2009.

(10)	Incorporated by reference to exhibits filed with the Form 10-Q filed with the SEC on May 15, 2009.

(11)	Incorporated by reference to exhibits filed with the Form 10-Q filed with the SEC on August 14, 2009.

(12)	Incorporated by reference to exhibit filed with the Form 10-Q filed with the SEC on November 23, 2009.

(13)	Incorporated by reference to exhibits filed with the Form 8-K filed with the SEC on December 10, 2009.
(14)	Incorporated by reference to exhibits filed with the Form 10-K filed with the SEC on September 13, 2011.
(15)	Incorporated by reference to exhibits files with the Form 8-K filed with the SEC on June 16, 2010.

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SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

	OCTUS, INC.
Dated: April 15, 2010	By:	/s/ Christian J. Soderquist
Dated: September 13, 2011	By:	/s/ Christian J. Soderquist
		Christian J. Soderquist President and Chief Executive Officer

Pursuant to the requirements of the Securities Exchange Act of 1934, this Annual Report on Form 10-K has been signed by the following persons on behalf of the registrant and in the capacities and on the dates indicated.

Name	Title	Date
/s/ Christian J. Soderquist	President Chief Executive Officer, Chairman	~~April~~September 1513, ~~2010~~2011
Christian J. Soderquist	(Principal Executive Officer)
/s/ George M. Ecker	Principal Financial and Accounting Officer,	~~April~~September 1513, ~~2010~~2011
George M. Ecker	Director

Filing Compare · OCTUS INC