ON4 COMMUNICATIONS INC. - FORM 10-Q

Attached files

file	filename
EXCEL - IDEA: XBRL DOCUMENT - ON4 COMMUNICATIONS INC.	Financial_Report.xls
EX-31.2 - SECTION 302 CERTIFICATION - ON4 COMMUNICATIONS INC.	exhibit31-2.htm
EX-32.2 - SECTION 906 CERTIFICATION - ON4 COMMUNICATIONS INC.	exhibit32-2.htm
EX-32.1 - SECTION 906 CERTIFICATION - ON4 COMMUNICATIONS INC.	exhibit32-1.htm
EX-31.1 - SECTION 302 CERTIFICATION - ON4 COMMUNICATIONS INC.	exhibit31-1.htm

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

FORM 10-Q

(Mark One)

[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended April 30, 2012

[ ] TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from ____________________ to ____________________

Commission File Number 001-34297

ON4 COMMUNICATIONS, INC.
(Exact name of registrant as specified in its charter)

Delaware	98-0540536
(State or other jurisdiction of incorporation or organization)	(IRS Employer Identification No.)

Suite 102 – 628 West 12^thAvenue, Vancouver, BC	V5Z 1M8
(Address of principal executive offices)	(Zip Code)

(480) 525-4361
(Registrant’s telephone number, including area code)

N/A
(Former name, former address and former fiscal year, if changed since last report)

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the 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.
[X] YES [ ] NO

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).
[X] YES [ ] NO

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

Large accelerated filer [ ]	Accelerated filer [ ]
Non-accelerated filer [ ] (Do not check if a smaller reporting company)	Smaller reporting company [X]

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act
[ ] YES [X] NO

APPLICABLE ONLY TO ISSUERS INVOLVED IN BANKRUPTCY
PROCEEDINGS DURING THE PRECEDING FIVE YEARS

Check whether the registrant has filed all documents and reports required to be filed by Sections 12, 13 or 15(d) of the Exchange Act after the distribution of securities under a plan confirmed by a court.
[ ] YES [ ] NO

APPLICABLE ONLY TO CORPORATE ISSUERS

Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date.

68,102,490 common shares issued and outstanding as of June 12, 2012.

Table of Contents

PART I – FINANCIAL INFORMATION		3

Item 1.	Financial Statements	3

Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	5

Item 3.	Quantitative and Qualitative Disclosure About Market Risk	12

Item 4.	Controls and Procedures	12

PART II – OTHER INFORMATION		12

Item 1.	Legal Proceedings	12

Item 2.	Unregistered Sales of Equity Securities	12

Item 3.	Defaults Upon Senior Securities	12

Item 4.	Mine Safety Disclosures	13

Item 5.	Other Information	13

Item 6.	Exhibits	13

SIGNATURES		15

PART I – FINANCIAL INFORMATION

Item 1. Financial Statements

The unaudited interim financial statements of On4 Communications, Inc. follow. These statements are presented in U.S. dollars and are prepared in accordance with generally accepted accounting principles in the United States.

ON4 COMMUNICATIONS INC.

Consolidated Financial Statements

Six Months Ended April 30, 2012 and 2011

(Expressed in US dollars)

ON4 COMMUNICATIONS INC.
(A Development Stage Company)
Consolidated Balance Sheets
(Expressed in US Dollars)

	April 30,		October 31,
	2012		2011
	$		$
	(Unaudited)

ASSETS

Current Assets

Cash	1,280		–
Loan receivable (Note 4)	35,095		–
Deferred financing costs (Note 8)	5,973		–

Total Current Assets	42,348		–

Property and equipment (Note 5)	–		1,126

Total Assets	42,348		1,126

LIABILITIES AND STOCKHOLDERS’ DEFICIT

Current Liabilities

Accounts payable and accrued liabilities	448,080		449,566
Accrued interest payable	270,967		223,915
Due to related parties (Note 6)	434,319		405,753
Notes payable (Note 7)	467,785		467,643
Convertible note, less discount of $Nil (Note 8)	122,500		–

Total Liabilities	1,743,651		1,546,877

Nature of Operations and Continuance of Business (Note 1)
Commitment (Note 12)
Subsequent Events (Note 13)

Stockholders’ Deficit

Preferred stock: 10,000,000 shares authorized, non-voting, no par value; No shares issued and outstanding	–		–

Common stock: 200,000,000 shares authorized, $0.0001 par value; 68,102,490 and 66,602,490 shares issued and outstanding, respectively	6,810		6,660

Additional paid-in capital	11,915,535		11,866,935

Common stock issuable	70,000		70,000

Deficit accumulated during the development stage	(13,693,648	)	(13,489,346	)

Total Stockholders’ Deficit	(1,701,303	)	(1,545,751	)

Total Liabilities and Stockholders’ Deficit	42,348		1,126

F-1

ON4 COMMUNICATIONS INC.
(A Development Stage Company)
Consolidated Statements of Operations
(Expressed in US Dollars)
(Unaudited)

									Accumulated
									From
	For The		For The		For The		For The		June 5,
	Three		Three		Six		Six		2006
	Months		Months		Months		Months		(Date of
	Ended		Ended		Ended		Ended		Inception)
	April 30,		April 30,		April 30,		April 30,		to April 30,
	2012		2011		2012		2011		2012
	$		$		$		$		$

Revenue	–		–		–		–		–

Operating Expenses
Advertising and marketing	–		–		–		–		182,182
Amortization of intangible assets	–		–		–		–		18,138
Amortization of property and equipment	–		241		241		483		32,677
Consulting fees	48,750		(21,000	)	48,750		(2,191	)	2,165,016
Foreign exchange loss	5,085		12,533		2,399		16,061		256,906
General and administrative	11,544		7,403		12,980		15,501		1,103,308
Impairment of goodwill	–		–		–		–		3,274,109
Impairment of assets	–		–		885		–		2,220,609
Management fees (Note 6(b))	16,706		–		27,655		–		1,190,251
Payroll	–		–		–		–		29,516
Professional fees	19,369		30,014		47,498		38,498		725,642
Research and development	–		–		–		–		318,360
Total Operating Expenses	101,454		29,191		140,408		68,352		11,516,714
Operating Loss	(101,454	)	(29,191	)	(140,408	)	(68,352	)	(11,516,714	)
Other Income (Expense)
Gain on settlement of debt	–		–		–		–		807,352
Interest and other income	–		–		–		–		181,682
Interest expense	(25,462	)	(23,861	)	(63,894	)	(43,668	)	(762,532	)
Write-off of note receivable	–		–		–		–		(1,114,182	)
Total Other Income (Expense)	(25,462	)	(23,861	)	(63,894	)	(43,668	)	(887,680	)
Loss from Continuing Operations	(126,916	)	(53,052	)	(204,302	)	(112,020	)	(12,404,394	)
Discontinued Operations (Note 3)
Loss from discontinued operations	–		(3,144	)	–		(8,085	)	(1,282,616	)
Gain on disposal of discontinued operations	–		76,834		–		76,834		76,834
Loss on Discontinued Operations	–		73,690		–		68,749		(1,205,782	)
Net Income (Loss)	(126,916	)	20,638		(204,302	)	(43,271	)	(13,610,176	)

Net Income (Loss) Per Share – Basic and Diluted
Continuing operations	–		–		–		–
Discontinued operations	–		–		–		–

Weighted Average Shares Outstanding	67,108,000		99,875,000		67,619,000		66,602,490

F-2

ON4 COMMUNICATIONS INC.
(A Development Stage Company)
Consolidated Statements of Cash Flows
(Expressed in US Dollars)
(Unaudited)

					Accumulated
	For The		For The		From
	Six		Six		June 5, 2006
	Months		Months		(Date of
	Ended		Ended		Inception) to
	April 30,		April 30,		April 30,
	2012		2011		2012
	$		$		$
Operating Activities
Net loss from continuing operations	(204,302	)	(112,020	)	(12,404,394	)
Adjustments to reconcile net loss to net cash used in operating activities:
Accretion of discount on convertible debt	–		–		75,000
Amortization of property and equipment	241		483		32,677
Amortization of intangible assets	–		–		18,138
Amortization of deferred financing costs	1,527		–		1,527
Gain on settlement of debt	–		–		(807,352	)
Impairment of goodwill	–		–		3,274,109
Impairment of assets	885		–		2,220,609
Issuance of notes payable for services and penalties	–		–		90,402
Issuance of shares for services	48,750		–		576,750
Stock-based compensation	–		(3,691	)	1,136,981
Write-off of notes receivable	–		–		1,114,182
Changes in operating assets and liabilities:
Accounts receivable	–		–		(5,431	)
Prepaid expenses and deposits	–		–		(10,678	)
Accounts payable and accrued liabilities	(1,344	)	16,603		812,377
Accrued interest payable	47,052		41,013		490,238
Deferred revenue	–		–		–
Due to related parties	28,566		35,642		629,906
Net Cash Used In Operating Activities	(78,625	)	(21,970	)	(2,754,959	)

Investing Activities
Acquisition of intangible assets	–		–		(182,687	)
Cash acquired in reverse merger	–		–		1,523
Cash from disposition of subsidiary	–		15,000		15,709
Loan receivable	(35,095	)	–		(35,095	)
Acquisition of property and equipment	–		–		(33,562	)
Advances for note receivable	–		–		(1,114,182	)
Net Cash Used In Investing Activities	(35,095	)	15,000		(1,348,294	)

Financing Activities
Proceeds from issuance of common stock	–		–		1,821,267
Proceeds from issuance of preferred stock	–		–		1,000,000
Proceeds from notes payable	115,000		–		842,022
Repayment of notes payable	–		–		(81,250	)
Proceeds from related parties	–		–		561,935
Repayments to related parties	–		–		(84,780	)
Share issuance costs	–		–		(8,000	)
Net Cash Provided By Financing Activities	115,000		–		4,051,194
Effects of Exchange Rate Changes on Cash	–		–		54,862
Net Cash (Used in) Provided by Discontinued Operations:
Operating Activities	–		–		(119,701	)
Investing Activities	–		–		(661,509	)
Financing Activities	–		–		779,687
	–		–		(1,523	)
Increase (Decrease) in Cash	1,280		(6,970	)	1,280
Cash - Beginning of Period	–		7,558		–
Cash - End of Period	1,280		588		1,280

Supplemental Disclosures
Interest paid	–		–		–
Income taxes paid	–		–		–

F-3

ON4 COMMUNICATIONS INC.
(A Development Stage Company)
Notes to the Financial Statements
April 30, 2012
(Expressed in US dollars)
(Unaudited)

1.	Nature of Operations and Continuance of Business

	Sound Revolution Inc. (the "Company"), was incorporated on June 4, 2001 under the laws of the State of Delaware and on October 2, 2009 changed its name to On4 Communications, Inc. On May 1, 2009, the Company merged with On4 Communications, Inc. (“On4”), an Arizona corporation incorporated on June 5, 2006. Pursuant to the terms of the merger agreement, the Company acquired all assets and liabilities of On4 by issuing new shares to all former shareholders of On4 on a 1-to-1 basis. The Company issued 27,955,089 common shares to the former shareholders of On4 and the merger was accounted for as a “reverse merger” using the purchase method of accounting, with the former shareholders of On4 controlling 68% of the issued and outstanding common shares of the Company after the closing of the transaction. Accordingly, On4 was deemed to be the acquirer for accounting purposes and the financial statements are presented as a continuation of On4 and include the results of operations of On4 since incorporation on June 5, 2006, and the results of operations of the Company since the date of acquisition on May 1, 2009.

	On4 is in the business of manufacturing two-way communication and location devices with applications that include tracking people, pets, assets, and inventory, among others. The Company had two wholly-owned subsidiaries: (i) Sound Revolution Recordings Inc., which was incorporated in British Columbia, Canada on June 20, 2001, for the purpose of carrying on music marketing services in British Columbia, and (ii) Charity Tunes Inc., which was incorporated in the State of Delaware on June 27, 2005, for the purpose of operating a website for the distribution of songs online. On March 16, 2011, the Company disposed its two wholly owned subsidiaries, Sound Revolution Recordings Inc., and Charity Tunes Inc., for consideration of $15,000 and 6,300 shares of the acquirer’s common stock. The Company is a Development Stage Company, as defined by Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) 915, Development Stage Entities, and has not yet generated significant revenues from their intended business activities.

	Going Concern

	These financial statements have been prepared on a going concern basis, which implies that the Company will continue to realize its assets and discharge its liabilities in the normal course of business. The Company has not generated significant revenues since inception and is unlikely to generate significant revenue or earnings in the immediate or foreseeable future. The continuation of the Company as a going concern is dependent upon the continued financial support from its shareholders, the ability of the Company to obtain necessary equity financing to continue operations, and the attainment of profitable operations. As at April 30, 2012, the Company has a working capital deficiency of $1,701,303 and has accumulated losses totaling $13,693,648 since inception. These factors raise substantial doubt regarding the Company’s ability to continue as a going concern. These financial statements do not include any adjustments to the recoverability and classification of recorded asset amounts and classification of liabilities that might be necessary should the Company be unable to continue as a going concern

	The Company will need additional working capital to continue or to be successful in any future business activities. Therefore, continuation of the Company as a going concern is dependent upon obtaining the additional working capital necessary to accomplish its objective. Management plans to seek debt or equity financing, or a combination of both, to raise the necessary working capital.

2.	Summary of Significant Accounting Principles

	Basis of Presentation and Principles of Consolidation

	These financial statements are prepared in conformity with accounting principles generally accepted in the United States and are presented in US dollars, unless otherwise noted. The Company’s fiscal year end is October 31.

	Use of Estimates

	The preparation of financial statements in conformity with US generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts 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. The Company regularly evaluates estimates and assumptions related to the useful life and recoverability of long-lived assets, fair value of convertible debt, stock-based compensation, and deferred income tax asset valuation allowances. The Company bases its estimates and assumptions on current facts, historical experience and various other factors that it believes to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities and the accrual of costs and expenses that are not readily apparent from other sources. The actual results experienced by the Company may differ materially and adversely from the Company’s estimates. To the extent there are material differences between the estimates and the actual results, future results of operations will be affected.

F-4

ON4 COMMUNICATIONS INC.
(A Development Stage Company)
Notes to the Financial Statements
April 30, 2012
(Expressed in US dollars)
(Unaudited)

2.	Summary of Significant Accounting Principles (continued)

	Cash and Cash Equivalents

	The Company considers all highly liquid instruments with maturity dates of three months or less at the time of issuance to be cash equivalents.

	Property and Equipment

	Property and equipment, consisting primarily of computer hardware and office equipment, is stated at cost and is amortized using the straight-line method over the estimated lives of the related assets of three and five years, respectively.

	Impairment of Long-Lived Assets

	In accordance with ASC 360, Property, Plant, and Equipment, the Company tests long-lived assets or asset groups for recoverability when events or changes in circumstances indicate that their carrying amount may not be recoverable. Circumstances which could trigger a review include, but are not limited to: significant decreases in the market price of the asset; significant adverse changes in the business climate or legal factors; accumulation of costs significantly in excess of the amount originally expected for the acquisition or construction of the asset; current period cash flow or operating losses combined with a history of losses or a forecast of continuing losses associated with the use of the asset; and current expectation that the asset will more likely than not be sold or disposed significantly before the end of its estimated useful life. Recoverability is assessed based on the carrying amount of the asset and its fair value which is generally determined based on the sum of the undiscounted cash flows expected to result from the use and the eventual disposal of the asset, as well as specific appraisal in certain instances. An impairment loss is recognized when the carrying amount is not recoverable and exceeds fair value.

	Research and Development Expenses

	Research and development costs are expensed as incurred.

	Advertising Costs

	The Company expenses advertising costs as incurred. For the six months ended April 30, 2012 and 2011, advertising costs were $nil.

	Earnings Per Share

	The Company computes net loss per share in accordance with ASC 260, Earnings per Share, which requires presentation of both basic and diluted earnings per share (EPS) on the face of the statements of operations. Basic EPS is computed by dividing net loss available to common shareholders (numerator) by the weighted average number of shares outstanding (denominator) during the period. Diluted EPS gives effect to all dilutive potential common shares outstanding during the period using the treasury stock method and convertible preferred stock using the if-converted method. In computing diluted EPS, the average stock price for the period is used in determining the number of shares assumed to be purchased from the exercise of stock options or warrants. Diluted EPS excludes all dilutive potential shares if their effect is anti-dilutive.

	Stock-based Compensation

	The Company records stock-based compensation in accordance with ASC 718, Compensation – Stock Based Compensation and ASC 505-50 - Equity-Based Payments to Non-Employees. All transactions in which goods or services are the consideration received for the issuance of equity instruments are accounted for based on the fair value of the consideration received or the fair value of the equity instrument issued, whichever is more reliably measurable.

	Foreign Currency Translation

	The Company’s functional currency and its reporting currency is the United States dollar and foreign currency transactions are primarily undertaken in Canadian dollars. Monetary balance sheet items expressed in foreign currencies are translated into US dollars at the exchange rates in effect at the balance sheet date. Non-monetary assets and liabilities are translated at historical rates. Revenues and expenses are translated at average rates for the period, except for amortization, which is translated on the same basis as the related asset. Gains and losses arising on translation or settlement of foreign currency denominated transactions or balances are included in the determination of income.

F-5

ON4 COMMUNICATIONS INC.
(A Development Stage Company)
Notes to the Financial Statements
April 30, 2012
(Expressed in US dollars)
(Unaudited)

2.	Summary of Significant Accounting Principles (continued)

	Comprehensive Income

	ASC 220, Comprehensive Income, establishes standards for the reporting and display of comprehensive loss and its components in the financial statements. As at April 30, 2012 and 2011, the Company had no items representing comprehensive income or loss.

	Income Taxes

	The Company accounts for income taxes using the asset and liability method in accordance with ASC 740, Accounting for Income Taxes. The asset and liability method provides that deferred tax assets and liabilities are recognized for the expected future tax consequences of temporary differences between the financial reporting and tax bases of assets and liabilities, and for operating loss and tax credit carry-forwards. Deferred tax assets and liabilities are measured using the currently enacted tax rates and laws that will be in effect when the differences are expected to reverse. The Company records a valuation allowance to reduce deferred tax assets to the amount that is believed more likely than not to be realized.

	The Company files federal income tax returns in the United States. The Company may be subject to a reassessment of federal taxes by tax authorities for a period of three years from the date of the original notice of assessment in respect of any particular taxation year. In certain circumstances, the federal statute of limitations can reach beyond the standard three year period. The statute of limitations in the United States for income tax assessment varies from state to state. Tax authorities have not audited any of the Company’s income tax returns.

	The Company recognizes interest and penalties related to uncertain tax positions in tax expense. During the six months ended April 30, 2012 and 2011, there were no charges for interest or penalties.

	Financial Instruments and Fair Value Measures

	ASC 820, Fair Value Measurements, requires an entity to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value. ASC 820 establishes a fair value hierarchy based on the level of independent, objective evidence surrounding the inputs used to measure fair value. A financial instrument’s categorization within the fair value hierarchy is based upon the lowest level of input that is significant to the fair value measurement. ASC 820 prioritizes the inputs into three levels that may be used to measure fair value:

Level 1

Level 1 applies to assets or liabilities for which there are quoted prices in active markets for identical assets or liabilities.

Level 2

Level 2 applies to assets or liabilities for which there are inputs other than quoted prices that are observable for the asset or liability such as quoted prices for similar assets or liabilities in active markets; quoted prices for identical assets or liabilities in markets with insufficient volume or infrequent transactions (less active markets); or model-derived valuations in which significant inputs are observable or can be derived principally from, or corroborated by, observable market data.

Level 3

Level 3 applies to assets or liabilities for which there are unobservable inputs to the valuation methodology that are significant to the measurement of the fair value of the assets or liabilities.

The Company’s financial instruments consist primarily of cash, loan receivable, accounts payable, accrued interest payable, amounts due to related parties, notes and convertible notes payable. Pursuant to ASC 820, the fair value of our cash is determined based on “Level 1” inputs, which consist of quoted prices in active markets for identical assets and the fair value of derivative liabilities are determined based on “Level 3” inputs which consist of unobservable inputs to the validation methodology that are significant to the measurement of their fair value. We believe that the recorded values of all of our other financial instruments approximate their current fair values because of their nature and respective maturity dates or durations.

F-6

ON4 COMMUNICATIONS INC.
(A Development Stage Company)
Notes to the Financial Statements
April 30, 2012
(Expressed in US dollars)
(Unaudited)

2.	Summary of Significant Accounting Principles (continued)

	Recent Accounting Pronouncements

	The Company has implemented all new accounting pronouncements that are in effect and that may impact its financial statements and does not believe that there are any other new accounting pronouncements that have been issued that might have a material impact on its financial statements.

	Reclassification

	Certain items have been reclassified to conform to the current year presentation standards.

3.	Discontinued Operations

	(a)	PetsMobility

		On April 30, 2010, a company controlled by the former President of the Company acquired certain assets including Pets911.com from the Company's wholly owned subsidiary, PetsMobility, in consideration for the return and cancellation of 2,000,000 shares of the Company's common stock. As at April 30, 2010, the date of disposition, the assets disposed of had a carrying value of $nil. On October 29, 2010, the agreement was amended to include the Company’s interest in PetsMobility. As a result of the Company’s disposal of PetsMobility, all operations related to the former subsidiary have been classified as discontinued operations.

		The results of PetsMobility’s discontinued operations are summarized as follows:

Accumulated

For The

from

Three

Six

June 5,

Months

2006

Ended

(Inception)

April 30,

To April 30,

2012

2011

2012

2011

2012

Revenue

–

6,744

Expenses

Advertising and marketing

–

44,748

Amortization of property and equipment

–

9,709

Consulting fees

–

262,523

Foreign exchange loss

–

General and administrative

–

45,505

Impairment of intangible assets

–

651,800

Management fees

–

51,000

Professional fees

–

28,802

Payroll

–

16,838

Research and development

–

79,354

Total Expenses

–

1,190,306

Operating Loss

–

(1,183,562

)

Other Income (Expenses)

Loss on settlement of debt

–

(1,120

)

Interest and other income

–

3,166

Net Loss from Discontinued Operations

–

(1,181,516

)

F-7

ON4 COMMUNICATIONS INC.
(A Development Stage Company)
Notes to the Financial Statements
April 30, 2012
(Expressed in US dollars)
(Unaudited)

3.	Discontinued Operations (continued)

	(b)	Sound Revolution and Charity Tunes Inc.

		On March 16, 2011, the Company disposed of its wholly owned subsidiaries, Sound Revolution Recordings Inc., and Charity Tunes Inc., for consideration of $15,000 and 6,300 shares of the acquirer’s common stock resulting in a gain on settlement of debt of $76,834. As a result of the Company’s disposal of Sound Revolution Recordings Inc., and Charity Tunes Inc., all assets, liabilities, and expenses related to the former subsidiaries have been classified as discontinued operations.

		The results of Sound Revolution Recordings Inc., and Charity Tunes Inc., discontinued operations are summarized as follows:

Accumulated

For The

from

Three

Six

June 5,

Months

2006

Ended

(Inception)

April 30,

To April 30,

2012

2011

2012

2011

2012

Revenue

–

222,866

Cost of sales

–

97,230

Gross margin

–

125,636

Expenses

Advertising and marketing

–

9,298

Amortization of property and equipment

–

373

–

1,121

4,162

Consulting fees

–

2,242

–

5,534

15,218

Foreign exchange loss

–

529

–

1,430

6,025

General and administrative

–

12,960

Professional fees

–

35,783

Payroll

–

25,950

Total Expenses

–

3,144

–

8,085

109,396

Operating Income (Loss)

–

(3,144

)

–

(8,085

)

16,240

Other Income (Expenses)

Gain on settlement of debt

–

4,442

Interest expense

–

(121,782

)

Net Loss from Discontinued Operations

–

(3,144

)

–

(8,085

)

(101,100

)

4.	Loan Receivable

	On December 15, 2011, the Company entered into the share exchange agreement with NetCents Systems Ltd. (“NetCents”) described in Note 12(b). At April 30, 2012, the Company was owed $35,095 for expenses paid on behalf of NetCents. The amount is unsecured, non-interest bearing and due on demand.

5.	Property and Equipment

				April 30,	October 31,
				2012	2011
		Accumulated		Net Carrying	Net Carrying
	Cost	Amortization	Impairment	Value	Value
	$	$	$	$	$
Office equipment	26,036	25,151	885	–	1,126

During the six months ended April 30, 2012, the Company recorded an impairment loss of $885 for office equipment no longer in use.

F-8

ON4 COMMUNICATIONS INC.
(A Development Stage Company)
Notes to the Financial Statements
April 30, 2012
(Expressed in US dollars)
(Unaudited)

6.	Related Party Transactions

	a)	As at April 30, 2012, the Company owed $434,319 (October 31, 2011 - $405,753) to management and directors for advance of operating funds and services provided on behalf of the Company. The amounts owing are unsecured, non- interest bearing, and due on demand.

	b)	During the six months ended April 30, 2012, the Company incurred $27,655 (2011 - $nil) of management fees to the Company’s Chief Financial Officer.

7.	Notes Payable

	April 30,	October 31,
	2012	2011
	$	$
Bling Capital Corp., unsecured, and due on demand.	25,305	25,163
Scottsdale Investment Corporation, unsecured, due interest at 12% per annum, and due on demand.	319,980	319,980
Ed Aaronson, unsecured, due interest at 10% per annum, and due on demand.	115,000	115,000
Troy Rice, unsecured, due interest at 10% per annum, and due on demand.	7,500	7,500
	467,785	467,643

8.	Convertible Notes

	a)	On December 28, 2011, the Company entered into a Convertible Promissory Note agreement for $47,500. Pursuant to the agreement, the loan is convertible into shares of common stock at a variable conversion price equal to the lower of 51% of the average of the lowest three closing bid prices for the common stock during the 10 trading days prior to the date of the conversion notice. The loan bears interest at 8% per year and the principal amount and any interest thereon are due on September 30, 2012.

		Pursuant to ASC 815, “Derivatives and Hedging,” the Company will recognize the fair value of the embedded conversion feature as a derivative liability when the Note becomes convertible on June 25, 2012. The Company paid $2,500 of deferred finance costs relating to the issuance of the Note. At April 30, 2012, the Company had recorded amortization of $1,111 and the remaining $1,389 will be charged to operation over the life of the note.

	b)	On February 13, 2012, the Company entered into a Convertible Promissory Note agreement for $32,500. Pursuant to the agreement, the loan is convertible into shares of common stock at a variable conversion price equal to the lower of 51% of the average of the lowest three closing bid prices for the common stock during the 10 trading days prior to the date of the conversion notice. The loan bears interest at 8% per year and the principal amount and any interest thereon are due on November 15, 2012.

		Pursuant to ASC 815, “Derivatives and Hedging,” the Company will recognize the fair value of the embedded conversion feature as a derivative liability when the Note becomes convertible on August 12, 2012. The Company paid $2,500 of deferred finance costs relating to the issuance of the Note. At April 30, 2012, the Company had recorded amortization of $416 and the remaining $2,084 will be charged to operation over the life of the note.

	c)	On March 21, 2012, the Company entered into a Convertible Promissory Note agreement for $42,500. Pursuant to the agreement, the loan is convertible at a variable conversion price equal to the lower of 51% of the average of the lowest two closing bid prices for the common stock during the 100 trading days prior to the date of the conversion notice. The loan bears interest at 8% per year and the principal amount and any interest thereon are due on December 26, 2012.

		Pursuant to ASC 815, “Derivatives and Hedging,” the Company will recognize the fair value of the embedded conversion feature as a derivative liability when the Note becomes convertible on September 17, 2012. The Company paid $2,500 of deferred finance costs relating to the issuance of the Note. At April 30, 2012, the Company had recorded amortization of $Nil and the remaining $2,500 will be charged to operation over the life of the note.

F-9

ON4 COMMUNICATIONS INC.
(A Development Stage Company)
Notes to the Financial Statements
April 30, 2012
(Expressed in US dollars)
(Unaudited)

9.	Common Stock

	a)	Effective April 20, 2012, the Company amended its Articles of Incorporation to increase the authorized number of shares of common stock from 100,000,000 to 200,000,000 shares of common stock, par value of $0.0001 per share.

	b)	On February 29, 2012, the Company issued 1,500,000 common shares to a consultant for services with a fair value of $48,750.

10.	Share Purchase Warrants

	As at April 30, 2012, and October 31, 2011, the following share purchase warrants were outstanding:

	Exercise
Number of	Price
Warrants	$	Expiry Date
1,300,000	0.50	October 23, 2012
156,000	0.50	February 28, 2013
1,456,000

11.	Stock Options

	The following table summarizes stock option plan activities:

		Weighted	Weighted
		Average	Average	Aggregate
	Number of	Exercise	Remaining	Intrinsic
	Options	Price	Contractual Life	Value
		$	(years)	$
Outstanding, October 31, 2011 and April 30, 2012	2,625,000	0.30	3.71	–

Additional information regarding stock options as of April 30, 2012 and October 31, 2011, is as follows:

	Exercise
Number of	Price
Options	$	Expiry Date
2,000,000	0.15	March 3, 2015
275,000	0.50	July 23, 2017
350,000	1.00	December 18, 2017
2,625,000

	At April 30, 2012 and October 31, 2011, the Company had no unvested options or unrecognized compensation expense.

12.	Commitments

	a)	On February 23, 2010, the Company entered into a trademark license agreement (the “Agreement”). Pursuant to the Agreement, the Company was granted an exclusive license to use certain trademarks and trade names on the Company’s hardware, software and services that provide tracking and location monitoring for people, animals and property of any other nature, but excluding firearms and related accessories, as well as existing licensed products and services of the Company, including but not limited to GPS, E911, A-GPS, radio frequency, beacon technology. Other applications that are covered under the Trademark License Agreement also include offenders monitoring, elderly, medical, teens and children tracking, public safety officers, executives, cars, tracks, motorcycles, aircrafts, boats, personal watercrafts, ATV’s, equipment, cargo, tools, trailers, electronic equipment, retail goods, and consumer goods in transit. The licensed territory includes the United States, Canada and Mexico. The Agreement expires on February 1, 2015.

		The Company must pay a royalty of net sales and incurred a non-refundable advance against royalties of $5,000. The Company must pay guaranteed royalties with 25% of each royalty for the year due at the end of each calendar quarter. Further, the Company has agreed to spend an amount equal to at least 2% of all net sales of the licensed products during each contract year for promotional activities.

F-10

ON4 COMMUNICATIONS INC.
(A Development Stage Company)
Notes to the Financial Statements
April 30, 2012
(Expressed in US dollars)
(Unaudited)

12.	Commitments (continued)

	b)	On December 15, 2011, the Company entered into a share exchange agreement (the “Agreement”) with NetCents Systems Ltd. (“NetCents”). Pursuant to the terms of the Agreement, the Company will issue two shares of common stock for every one share of NetCents stock issued and outstanding on the date of closing. Upon completion of the transaction, NetCents would become a wholly owned subsidiary of the Company. The Agreement is subject to conditions precedent to closing, and the risk that these conditions precedent will not be satisfied results in there being no assurance that the Agreement will be completed as contemplated, or at all. As of the date of issuance of these financial statements, the agreement had yet to be completed.

13.	Subsequent Events

	a)	On May 8, 2012, the Company entered into a Convertible Promissory Note agreement for $32,500. Pursuant to the agreement, the loan is convertible 180 days after issuance into shares of common stock at a variable conversion price equal to the lower of 51% of the average of the lowest three closing bid prices for the common stock during the 10 trading days prior to the date of the conversion notice. The loan bears interest at 8% per year and the principal amount and any interest thereon are due on February 11, 2013.

	b)	On May 4, 2012, the Company modified the terms of the convertible notes described in Notes 8(a) and (b) from convertible at an average of the lowest three closing bid prices for the common stock during the 10 trading days prior to the date of the conversion notice to an average of the two lowest closing bid prices for the common stock during the 100 trading days prior to the date of the conversion notice.

F-11

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

Forward-Looking Statements

This quarterly report contains forward-looking statements that involve risks and uncertainties. These statements relate to future events or our future financial performance. In some cases, you can identify forward-looking statements by terminology such as "may", "should", "expect", "plan", "anticipate", "believe", "estimate", "predict", "potential" or "continue" or the negative of these terms or other comparable terminology. These statements are only predictions. Actual events or results may differ materially.

While these forward-looking statements, and any assumptions upon which they are based, are made in good faith and reflect our current judgment regarding the direction of our business, actual results will almost always vary, sometimes materially, from any estimates, predictions, projections, assumptions or other future performance suggested in this report. Except as required by applicable laws, we do not intend to update any of the forward-looking statements to conform these statements to actual results.

Our unaudited financial statements are stated in U.S. dollars and are prepared in accordance with generally accepted accounting principles in the United States. The following discussion should be read in conjunction with our financial statements and the related notes that appear elsewhere in this quarterly report.

In this quarterly report, unless otherwise specified, all dollar amounts are expressed in United States dollars. All references to "common shares" refer to the common shares in our capital stock.

As used in this quarterly report and unless otherwise indicated, the terms "we", "us", "our" and "our company" mean On4 Communications Inc., a Delaware corporation, unless otherwise indicated.

Business Overview

We were incorporated as a Delaware company on June 4, 2001 under the name Sound Revolution Inc. On July 2, 2009 we changed our name to On4 Communications, Inc. Our fiscal year end is October 31. Our address is Suite 102 – 628 West 12^thAvenue, Vancouver, BC, V5Z 1M8. Our telephone number is (480) 525-4361.

Our common stock is quoted on the Pink Sheets Quotation system under the symbol “ONCI.PK” and on the Berlin Stock Exchange under the symbol O4C:GR.

Corporate History

We were incorporated as a Delaware company on June 4, 2001 under the name Sound Revolution Inc. On July 2, 2009 we changed our name to On4 Communications, Inc.

On June 10, 2008, our company effected a 1 for 42 reverse stock split of the outstanding shares of common stock our company and also increased the number of authorized share capital of our company from 100,000,000 to 110,000,000 shares. 100,000,000 shares out the total authorized capital shall be common stock and 10,000,000 shall be preferred stock. On June 26, 2008, the reverse stock split and the increase in our company’s authorized capital came into effect. As a result of the reverse split, the number of the outstanding shares of common stock of our company was decreased from 10,854,629 shares to 258,444 shares of common stock.

On March 12, 2009, we entered into a merger agreement with On4 Communications, Inc., a private Arizona company incorporated on June 5, 2006 (“On4”). We subsequently amended this agreement on April 7, 2009, and on May 1, 2009 we completed the merger with On4, with us as the surviving entity. Upon the completion of the merger, we had three wholly-owned subsidiaries: (i) Charity Tunes Inc., a Delaware company incorporated on June 27, 2005 for the purpose of operating a website for the distribution of music online; (ii) Sound Revolution Recordings Inc., a British Columbia, Canada company incorporated on June 20, 2001 for the purpose of carrying on music marketing services in British Columbia; and (iii) PetsMobility Inc., a Delaware company incorporated on March 23, 2006 for the purpose of operating the website www.petsmo.com and related business.

On April 29, 2010 we sold our interest in PetsMobility, excluding certain specific assets, to On4 Communications Inc., a private Canadian company and our shareholder (“On4 Canada”) pursuant to an asset purchase agreement in exchange for On4 Canada returning 2,000,000 shares of our common stock to our treasury for cancellation. On October 29, 2010 we amended the asset purchase agreement to clarify certain terms of the purchase and sale.

On March 16, 2011 we sold our interest in Charity Tunes and Sound Revolution to Empire Success, LLC, a private Nevada limited liability company, in exchange for $15,000 and 6,300 shares of Empire’s common stock. As a result, we currently have no subsidiaries.

On November 3, 2011 we entered into a binding Letter of Intent to acquire 100% of the issued and outstanding shares of NetCents Systems Ltd., a private Alberta corporation engaged in the development and implementation of a unique and secure electronic payment system for online merchants and consumers. The Letter of Intent provides for a period of due diligence which will lead to a formal agreement whereby we will acquire 100% of the issued and outstanding capital of NetCents.

On December 15th, 2011, we entered into a share exchange agreement with NetCents and the selling shareholders of NetCents. Pursuant to the terms of the share exchange agreement, our company and NetCents agreed to engage in a share exchange which, if completed, would result in NetCents becoming a wholly owned subsidiary of our company. The share exchange has not been completed as of the date of this Quarterly Report and is subject to completion of due diligence by the parties, and to the following material terms and conditions:

1.	We will issue 2 shares of our common stock from treasury for every 1 share of NetCents stock issued and outstanding on the date of closing;

2.	NetCents will have no more than 16,245,421 shares of its common stock issued and outstanding on the closing date of the Share Exchange Agreement. Additional issuances must be authorized by our company;

3.	NetCents will have delivered to our company audited financial statements for its last two fiscal years and any applicable interim period ended no more than 35 days before the closing of the share exchange agreement, prepared in accordance with United States GAAP and audited by an independent auditor registered with the Public Company Accounting Oversight Board in the United States; and

4.	NetCents will file all required documentation with the Province of Alberta to effect the share exchange.

Also on December 15, 2011 NetCents received the approval for the share exchange agreement and the share exchange transaction from holders of approximately 76% of its voting securities through written resolution in lieu of holding a meeting.

On December 28, 2011, we entered into a Convertible Promissory Note agreement with Asher Enterprises, Inc. pursuant to which we received debt financing of $47,500. Pursuant to the agreement, the loan is convertible into shares of common stock at a variable conversion price equal to the lower of 51% of the average of the lowest three closing bid prices for the common stock during the 10 trading days prior to the date of the conversion notice. The loan bears interest at 8% per year and the principal amount and any interest thereon are due on September 30, 2012.

On February 29, 2012, we issued 1,500,000 shares of our common stock registered on Form S-8 to a consultant for services with a fair value of $48,750.

On March 13, 2012, we received written consent from the board of directors and the holders of 52.40% of the Company’s voting securities to amend the Articles of Incorporation to increase our authorized capital.

On February 13, 2012, we entered into a Convertible Promissory Note agreement with Asher Enterprises, Incl. pursuant to which we received debt financing of$32,500. Pursuant to the agreement, the loan is convertible into shares of common stock at a variable conversion price equal to the lower of 51% of the average of the lowest three closing bid prices for the common stock during the 10 trading days prior to the date of the conversion notice. The loan bears interest at 8% per year and the principal amount and any interest thereon are due on November 15, 2012.

On March 21, 2012, we entered into a second Convertible Promissory Note agreement with Asher Enterprises, Inc. pursuant to which we received debt financing of $42,500. Pursuant to the agreement, the loan is convertible at a variable conversion price equal to the lower of 51% of the average of the lowest two closing bid prices for the common stock during the 100 trading days prior to the date of the conversion notice. The loan bears interest at 8% per year and the principal amount and any interest thereon are due on December 26, 2012.

On April 19, 2012, the Delaware Secretary of State accepted for filing of a Certificate of Amendment, wherein, we amended our Articles of Incorporation to increase the authorized number of shares of our common stock from 100,000,000 to 200,000,000 shares of common stock, par value of $0.0001 per share, effective April 20, 2012. Our preferred stock remains unchanged.

Our Current Business

We are a development stage company, providing wireless communications services to telecommunication companies, consumers and businesses. Our platform comprises global positioning system (“GPS”) device management, location-based services (“LBS”) capabilities, and the broadcasting of proprietary and non-proprietary content. LBS is a term used to describe the delivery of information and entertainment content to consumers with mobile devices based on the geographical position of the mobile device. We intend to deliver LBS via two-way communication tracking devices with applications that are able to track people, pets, assets and inventory. Our solution platform integrates various location-aware devises, such as GPS receivers, and transmits data to a range of devices, including Web browsers, instant messengers, short message service/mail, and mobile phones.

Research and Development Expenditures

We have incurred $nil in research and development expenditures over the last two fiscal years.

Employees

As of April 30, 2012, are only employees are our directors and officers. We plan to hire additional employees when circumstances warrant.

Results of Operations

Three and Six Months Ended April 30, 2012 and January 31, 2011, and the Period from June 5, 2006 (Date of Inception) to April 30, 2012.

Our results of operations are presented below:

Accumulated

from

June 5, 2006

Three Months

Six Months

(Date of

Ended

Inception) to

April 30,

2012

2011

2012

2011

2012

(unaudited)

($)

Revenue

Nil

Total Operating Expenses

101,454

29,191

140,408

68,352

11,516,714

Total Other Expenses

25,462

23,861

63,894

43,668

887,680

Loss (Gain) from Discontinued Operations

Nil

(73,690

)

Nil

(68,749

)

1,205,782

Net Loss

(126,916

)

20,638

(204,302

)

(43,271

)

(13,610,176

)

From our inception on June 5, 2006 to April 30, 2012, we did not generate any revenue.

Expenses

Accumulated

from

Three Months

Six Months

June 5, 2006

Ended

(Date of

April 30,

Inception) to

2012

2011

2012

2011

April 30, 2012

(unaudited)

($)

Advertising and Marketing

Nil

182,182

Amortization of intangible assets

Nil

18,138

Amortization of property and equipment

Nil

241

483

32,677

Consulting fees

48,750

(21,000

)

48,750

(2,191

)

2,165,016

Foreign exchange (gain) loss

5,085

12,533

2,399

16,061

256,906

General and administrative

11,544

7,403

12,980

15,501

1,103,308

Impairment of Goodwill

Nil

3,274,109

Impairment of Assets

Nil

885

Nil

2,220,609

Management Fees

16,706

Nil

27,055

Nil

1,190,251

Payroll

Nil

29,516

Professional fees

19,369

30,014

47,498

38,498

725,642

Research and Development

Nil

318,360

Our total expenses during the three months ended April 30, 2012 consisted of $48,750 in consulting fees, $5,085 in foreign exchange loss, $11,544 in general and administrative expenses, $16,706 in management fees and $19,369 in professional fees. During this period we also incurred $25,462 in the form of interest expenses.

Our total expenses during the three months ended April 30, 2011 consisted of $241 in amortization of property and equipment, $12,533 in foreign exchange loss $7,403 in general and administrative expenses, and $30,014 in professional fees. During this period we also incurred $23,861 in the form of interest expenses.

Our total expenses during the six months ended April 30, 2012 consisted of $241 in amortization of property and equipment, $48,750 in consulting fees, $2,399 in foreign exchange loss, $12,980 in general and administrative expenses, $885 in impairment of assets, $27,055 in management fees and $47,498 in professional fees, During this period we also incurred $63,894 in the form of interest expenses.

Our total expenses during the six months ended April 30, 2011 consisted of $483 in amortization of property and equipment, $16,061 in foreign exchange loss $15,501 in general and administrative expenses, and $38,498 in professional fees. During this period we also incurred $43,668 in the form of interest expenses.

Our total expenses from our inception on June 5, 2006 to April 30, 2012 consisted of $182,182 in advertising and marketing expenses, $18,138 in amortization of intangible assets, $32,677 in amortization of property and equipment, $2,165,016 in consulting fees, $256,906 in foreign exchange loss, $1,103,308 in general and administrative expenses, $3,274,109 in impairment of goodwill, $2,220,609 in impairment of intangible assets, $1,190,251 in management fees, $29,516 in payroll expenses, $725,642 in professional fees and $318,360 in research and development expenses.

Our general and administrative expenses consisted of travel, meals and entertainment, office maintenance, communication expenses (cellular, internet, fax and telephone), office supplies and courier and postage costs. Our professional fees consisted of legal, accounting and auditing fees.

The increase in our operating expenses during the three months ended April 30, 2012 compared to the same period in 2011 was primarily due to increased consulting fees, general and administrative expenses, and management fees during the most recent period.

The increase in our operating expenses during the six months ended April 30, 2012 compared to the same period in 2011 was primarily due to increased consulting fees, impairment of assets, management fees and professional fees during the most recent period.

During the three months ended April 30, 2012 we incurred a $101,454 operating loss, and a net loss of $126,916. During the same period in fiscal 2011 we incurred an operating loss of $29,191 and a net income of $20,638. During the six months ended April 30, 2012 we incurred a $140,408 operating loss, and a net loss of $204,302. During the same period in fiscal 2011 we incurred an operating loss of $68,352 and a net loss of $43,271. We did not experience any net loss per share during the three and six months ended April 30, 2012 and 2011. From our inception on June 5, 2006 to April 30, 2012 we incurred a $12,404,394 loss from continuing operations, incurred a $1,205,782 loss from discontinued operations and incurred a net loss $13,610,176.

Liquidity and Capital Resources

Working Capital

	At		At
	April 30,		October 31,
	2012		2011
	($)		($)
Current Assets	42,348		Nil
Current Liabilities	1,743,651		1,546,877
Working Capital/(Deficit)	(1,701,303	)	(1,546,877	)

Cash Flows

					Period from
	Six Months		Six Months		Inception
	Ended		Ended		(June 5, 2006)
	April 30,		April 30,		to April 30,
	2012		2011		2012
	($)		($)		($)
Net Cash used in Operating Activities	(78,625	)	(21,970	)	(2,754,959	)
Net Cash provided by/(used in) Investing Activities	(35,095	)	15,000		(1,348,294	)
Net Cash provided by Financing Activities	115,000		Nil		4,051,194
Net Increase (Decrease) in Cash During Period	1,280		(6,970	)	1,280

As of April 30, 2012 we had $1,280 in cash, $42,348 in total assets, $1,743,651 in total liabilities and a working capital deficit of $1,701,303. As of April 30, 2012 we had an accumulated deficit of $13,693,648.

During the six months ended January 31, 2012 we spent $78,625 on operating activities, compared to spending of $21,970 on operating activities during the same period in fiscal 2011. The increase in our expenditures on operating activities during the six months ended April 30, 2012 was largely due to additional proceeds received from financing activities that gave us more flexibility to incur additional operating expenditures. From our inception on June 5, 2006 to April 30, 2012 we spent $2,754,959 on operating activities.

During the six months ended April 30, 2012 we spent $35,095 on investing activities, whereas we received $15,000 on investing activities during the same period in fiscal 2011. From our inception on June 5, 2006 to April 30, 2012 we spent $1,348,294 on investing activities, the bulk of which was in the form of advances for notes receivable of $1,114,182 and the acquisition of intangible assets of $182,687.

During the six months ended April 30, 2012 we received $115,000 from financing activities, all of which was in the form of proceeds from notes payable, whereas we received no income from financing activities during the same period in fiscal 2011. From our inception on June 5, 2006 to April 30, 2012 we received $4,051,194 from financing activities, primarily in the form of proceeds from the issuance of our common stock and preferred stock.

For the next 12 months (beginning May 2012), we estimate our planned expenses to be approximately $1,700,000, as summarized in the table below:

Description	Potential	Estimated
	Completion	Expenses
	Date	($)
General and administrative expenses	12 months	250,000
Research and development	12 months	100,000
Sales and marketing	12 months	200,000
Professional fees	12 months	150,000
Unallocated working capital	12 months	100,000
Debt repayment	12 months	900,000
Total		1,700,000

Based on our planned expenditures, we require additional funds of approximately $1,700,000 to proceed with our business plan over the next 12 months (beginning May 2011). If we are not able to obtain additional financing on a timely basis, we will be unable to conduct our operations as planned, and we will not be able to meet our obligations as they become due. In such event, we will be forced to scale down or perhaps even cease our operations.

Future Financings

We have not generated significant revenues since inception and are unlikely to generate significant revenues or earnings in the immediate or foreseeable future. We rely upon the sale of our securities and proceeds from related parties to fund our operations. We anticipate that we will incur substantial losses for the foreseeable future, and we are dependent upon obtaining outside financing to carry out our operations.

We will require approximately $1,700,000 over the next 12 months (beginning May 2011) to enable us to proceed with our plan of operations, including paying our ongoing expenses. These cash requirements are in excess of our current cash and working capital resources. Accordingly, we intend to raise funds from private placements, loans or possibly a registered public offering (either self-underwritten or through a broker-dealer). At this time we do not have a commitment from any broker-dealer to provide us with financing, and there is no guarantee that any financing will be available to us or if available, on terms that will be acceptable to us.

If we are unable to obtain the necessary additional financing, then we plan to reduce the amounts that we spend on our operations, our professional fees and our general and administrative expenses so as not to exceed the amount of capital resources that are available to us. If we do not secure additional financing our current cash reserves and working capital will be not be sufficient to enable us to sustain our operations for the next 12 months, even if we do decide to scale them down.

Going Concern

Our financial statements for the three months ended April 30, 2012 have been prepared on a going concern basis and contain an additional explanatory paragraph in Note 1 which identifies issues that raise substantial doubt about our ability to continue as a going concern. Our financial statements do not include any adjustments that might result from the outcome of this uncertainty.

Off-Balance Sheet Arrangements

We have no significant off-balance sheet arrangements that have or are reasonably likely to have a current or future effect on our financial condition, changes in our financial condition, revenues or expenses, results of operations, liquidity, capital expenditures or capital resources that are material to our stockholders.

Inflation

The amounts presented in our financial statements do not provide for the effect of inflation on our operations or financial position. The net operating losses shown would be greater than reported if the effects of inflation were reflected either by charging operations with amounts that represent replacement costs or by using other inflation adjustments.

Critical Accounting Policies

Our financial statements are affected by the accounting policies used and the estimates and assumptions made by management during their preparation. A complete summary of these policies is included in Note 2 of the notes to our financial statements for the three and six months ended April 30, 2012. We have identified below the accounting policies that are of particular importance in the presentation of our financial position, results of operations and cash flows, and which require the application of significant judgment by management.

Use of Estimates

The preparation of financial statements in conformity with US generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts 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. Our company regularly evaluates estimates and assumptions related to the useful life and recoverability of long-lived assets, fair value of convertible debt, stock-based compensation, and deferred income tax asset valuation allowances. Our company bases its estimates and assumptions on current facts, historical experience and various other factors that it believes to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities and the accrual of costs and expenses that are not readily apparent from other sources. The actual results experienced by our company may differ materially and adversely from our company’s estimates. To the extent there are material differences between the estimates and the actual results, future results of operations will be affected.

Stock-based Compensation

Our company records stock-based compensation in accordance with ASC 718, Compensation – Stock Based Compensation and ASC 505-50 - Equity-Based Payments to Non-Employees. All transactions in which goods or services are the consideration received for the issuance of equity instruments are accounted for based on the fair value of the consideration received or the fair value of the equity instrument issued, whichever is more reliably measurable.

Foreign Currency Translation

Our company’s functional currency and its reporting currency is the United States dollar and foreign currency transactions are primarily undertaken in Canadian dollars. Monetary balance sheet items expressed in foreign currencies are translated into US dollars at the exchange rates in effect at the balance sheet date. Non-monetary assets and liabilities are translated at historical rates. Revenues and expenses are translated at average rates for the period, except for amortization, which is translated on the same basis as the related asset. Gains and losses arising on translation or settlement of foreign currency denominated transactions or balances are included in the determination of income.

Item 3. Quantitative and Qualitative Disclosure About Market Risk

As a “smaller reporting company”, we are not required to provide the information required by this Item.

Item 4. Controls and Procedures

Management's Report on Disclosure Controls and Procedures

We maintain disclosure controls and procedures, as defined in Rule 13a-15(e) and Rule 15d-15(e) promulgated under the Securities Exchange Act of 1934 (the "Exchange Act"), that are designed to ensure that information we are required to disclose in the reports that we file or submit under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the rules and forms of the Securities and Exchange Commission (the “SEC”) and that such information is accumulated and communicated to our management, including our chief executive officer (also our principal executive officer) and our chief financial officer, (also our principal financial officer and principal accounting officer), as appropriate to allow timely decisions regarding required disclosure.

As of the end of the period covered by this report, our management, with the participation of our chief executive officer (also our principal executive officer) and our chief financial officer, (also our principal financial officer and principal accounting officer), carried out an evaluation of the effectiveness of our disclosure controls and procedures. Based on this evaluation, and in light of the material weaknesses in our internal control over financial reporting, our management concluded that our disclosure controls and procedures were not effective to ensure that information we are required to disclose in the reports we file or submit under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the rules and forms of the SEC, and that such information was not accumulated and communicated to management, including our chief executive officer (also our principal executive officer) and our chief financial officer, (also our principal financial officer and principal accounting officer), to allow timely decisions regarding required disclosure.

Changes in Internal Control

There were no changes in our internal control over financial reporting during the quarterly period covered by this report that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

PART II – OTHER INFORMATION

Item 1. Legal Proceedings

We know of no material, existing or pending legal proceedings against our company, nor are we involved as a plaintiff in any material proceeding or pending litigation. There are no proceedings in which any of our directors, executive officers or affiliates, or any registered or beneficial stockholder, is an adverse party or has a material interest adverse to our interest.

Item 2. Unregistered Sales of Equity Securities

None.

Item 3. Defaults Upon Senior Securities

None.

Item 4. Mine Safety Disclosures

Not applicable.

Item 5. Other Information

On May 4, 2012, we amended the terms of our Convertible Promissory Note Agreements with Asher Enterprises, Inc. dated December 28, 2011 and February 13, 2012, respectively. Pursuant to the amendments, the Promissory Notes shall be convertible at an average of the lowest three closing bid prices for the common stock during the 10 trading days prior to the date of the conversion notice to an average of the two lowest closing bid prices for the common stock during the 100 trading days prior to the date of the conversion notice.

On May 8, 2012, the Company entered into a third Convertible Promissory Note agreement with Asher Enterprises, Inc. pursuant to which we received debt financing in the amount of $32,500. Pursuant to the agreement, the loan is convertible 180 days after issuance into shares of common stock at a variable conversion price equal to the lower of 51% of the average of the lowest three closing bid prices for the common stock during the 10 trading days prior to the date of the conversion notice. The loan bears interest at 8% per year and the principal amount and any interest thereon are due on February 11, 2013.

Item 6. Exhibits

Exhibit	Description
No.

(3)	(i) Articles of Incorporation; (ii) By-laws

3.1	Articles of Incorporation (incorporated by reference to our Registration Statement filed on Form SB-2 on August 20, 2004)

3.2	By-Laws (incorporated by reference to our Registration Statement filed on Form SB-2 on August 20, 2004)

3.3	Certificate of Amendment dated June 10, 2008 (incorporated by reference to our Current Report on Form 8-K filed on June 26, 2008)

3.3	Certificate of Merger dated May 1, 2009 (incorporated by reference to our Current Report on Form 8- K filed on May 7, 2009)

3.4	Certificate of Amendment dated May 21, 2009 (incorporated by reference to our Current Report on Form 8-K filed on July 28, 2009)

3.5	Certificate of Amendment dated March 13, 2012 (incorporated by reference to our Current Report on Form 8-K filed on May 2, 2012)

(10)	Material Contracts

10.1	Merger Agreement between Sound Revolution Inc. and On4 Communications, Inc. dated March 12, 2009 (incorporated by reference to our Current Report on Form 8-K filed on March 16, 2009)

10.2	Merger Agreement Amendment between Sound Revolution Inc. and On4 Communications, Inc. dated March 26, 2009 (incorporated by reference to our Current Report on Form 8-K filed on April 13, 2009)

10.3	Asset Purchase Agreement between our company and On4 Communications, Inc. (Canada) dated April 29, 2010 (incorporated by reference to our Quarterly Report on Form 10-Q filed on June 22, 2010)

10.4	Asset Purchase Agreement between our company, Charity Tunes Inc., Bacchus Filings Inc., Bacchus Entertainment Ltd. and Penny Green dated April 30, 2010 (incorporated by reference to our Quarterly Report on Form 10-Q filed on June 22, 2010)

10.5	Acquisition Agreement between our company and Empire Success, LLC dated March 16, 2011 (incorporated by reference to our Quarterly Report on Form 10-Q filed on June 17, 2011)

10.6	Letter of Intent between our company and NetCents Systems Ltd. (incorporated by reference to our Current Report on Form 8-K filed on November 9, 2011)

10.7	Share Exchange Agreement between our company and NetCents Systems Ltd., et al, dated December 15, 2011 (incorporated by reference to our Current Report on Form 8-K filed on December 19, 2011)

Exhibit	Description
No.

(31)	Rule 13a-14(a)/15d-14(a) Certifications

31.1*	Section 302 Certification pursuant to the Sarbanes-Oxley Act of 2002 of the Principal Executive Officer

31.2*	Section 302 Certification pursuant to the Sarbanes-Oxley Act of 2002 of the Principal Financial Officer and Principal Accounting Officer

(32)	Section 1350 Certifications

32.1*	Section 906 Certification pursuant to the Sarbanes-Oxley Act of 2002 of the Principal Executive Officer

32.2*	Section 906 Certification pursuant to the Sarbanes-Oxley Act of 2002 of the Principal Financial Officer and Principal Accounting Officer

(99)	Additional Exhibits

99.1	Audit Committee Charter dated September 30, 2009 (incorporated by reference to our Annual Report on Form 10-K filed on February 16, 2010)

101**	Interactive Data Files

101.INS	XBRL Instance Document
101.SCH	XBRL Taxonomy Schema
101.CAL	XBRL Taxonomy Calculation Linkbase
101.DEF	XBRL Taxonomy Definition Linkbase
101.LAB	XBRL Taxonomy Label Linkbase
101.PRE	XBRL Taxonomy Presentation Linkbase

*	Filed herewith.

**	Furnished herewith. Pursuant to Rule 406T of Regulation S-T, the Interactive Data Files on Exhibit 101 hereto are deemed not filed or part of any registration statement or prospectus for purposes of Sections 11 or 12 of the Securities Act of 1933, are deemed not filed for purposes of Section 18 of the Securities and Exchange Act of 1934, and otherwise are not subject to liability under those sections.

SIGNATURES

Pursuant to the requirements 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.

		On4 Communications, Inc.

Date: June 14, 2012.	By:	/s/ Clayton Moore
		Clayton Moore
		President, Chief Executive Officer and Director
		(Principal Executive Officer)


Date: June 14, 2012.	By:	/s/ Tom Locke
		Tom Locke
		Chief Financial Officer, Secretary, Treasurer and
		Director
		(Principal Financial Officer and Principal
		Accounting Officer)

Attached files

ON4 COMMUNICATIONS INC. Reports

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