**UNITED
      STATES**


**SECURITIES
      AND EXCHANGE COMMISSION**


**WASHINGTON,
      DC 20549**




**FORM
      10-KSB/A**


Amendment
      No. 1




**x**
            **ANNUAL
                REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF
                1934**





For
      the
      fiscal year ended December
      31, 2006




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




Commission
      File Number  001-33426




NEURO-HITECH,
      INC.


**(Exact
      name of Small Business Issuer as Specified in its Charter)**




Delaware
            
            20-4121393**(State
                or Other Jurisdiction of**
            
            **(I.R.S.
                Employer****Incorporation
                or
                Organization)**
            
            **Identification
                No.)**





One
      Penn Plaza, Suite 1503, New York, NY 10019


**(Address
      of Principal Executive Offices)**




(212)
      594-1215


**(Issuer’s
      Telephone Number, Including Area Code)**





Securities
      registered under Section 12(b) of the Exchange Act:


Title
                  of each class
              
              Name
                  of each exchange on which registeredCommon
                  Stock, $0.001 par value per
                  share
              
              NASDAQ
                  Capital Market





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




Check
      whether the issuer is not required to file reports pursuant to Section 13 or
      15(d) of the Exchange Act.  ̈





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





Check
      if
      there is no disclosure of delinquent filers in response to Item 405 of
      Regulation S-B contained in this form, and no disclosure will be contained,
      to
      the best of registrant’s knowledge, in definitive proxy or information
      statements incorporated by reference in Part III of Form 10-KSB or any amendment
      to this Form 10-KSB. þ





Indicate
      by check mark whether the registrant is a shell company (as defined in Rule
      12b-2 of the Exchange Act).


 ̈ Yes  þ No





State
      issuer’s revenues for its most recent fiscal year.  $304,240









The
      aggregate market value of the voting and non-voting common equity held by
      non-affiliates of the registrant as of April 12, 2007, based upon the closing
      price of the common stock as reported on the OTC
      Bulletin Board as of
      such date, was approximately $50,000,000.





The
      number of shares outstanding of each of the issuer’s classes of common equity,
      as of March 30, 2007 is:





Common
              Stock
            
            
            12,333,537




**DOCUMENTS
      INCORPORATED BY REFERENCE**





NONE





Transitional
      Small Business Disclosure Format (check one):     ࿲
Yes  þ No







**EXPLANATORY
        NOTE**
  We
        are
        filing this Amendment No. 1 to our Annual Report on Form 10-KSB as filed
        with
        the Securities and Exchange Commission on April 13, 2007, to include Items
        9,
        10, 11, 12 and 14, which we had originally intended to include in our Proxy
        Statement and to update the table of Exhibits. We intend to file our Proxy
        Statement next month. This Form 10-KSB/A does not reflect events occurring
        after
        the filing of the original Form 10-KSB, or modify or update those disclosures
        in
        any way other than as required to reflect the effects of the inclusion of
        the
        above referenced items.


**NEURO-HITECH,
      INC.**





**FORM
      10-KSB**





**FOR
      THE FISCAL YEAR ENDED DECEMBER 31, 2006**




PagePART
                  IItem
                  1. Description of Business
              
              1Item
                  2. Description of Property
              
              26Item
                  3. Legal Proceedings
              
              26Item
                  4. Submission of Matters to a Vote of Security Holders
              
              26PART
                  IIItem
                  5. Market for Common Equity, Related Stockholder Matters and Small
                  Business Issuer Purchases of Equity Securities
              
              26Item
                  6. Management’s Discussion and Analysis or Plan of Operations
              
              27Item
                  7. Financial Statements
              
              31Item
                  8. Changes in and Disagreements with Accountants on Accounting
                  and
                  Financial Disclosure
              
              31Item
                  8A. Controls and Procedures
              
              32Item
                  8B. Other Information
              
              32PART
                  IIIItem
                  9. Directors, Executive Officers, Promoters, Control Persons and
                  Corporate
                  Governance; Compliance with Section 16(a) of the Exchange
                  Act
              
              33Item
                  10. Executive Compensation
              
              35Item
                  11. Security Ownership of Certain Beneficial Owners and Management
                  and
                  Related Stockholder Matters
              
              38Item
                  12. Certain Relationships and Related Transactions, and Director
                  Independence
              
              39Item
                  13. Exhibits
              
              41Item
                  14. Principal Accountant Fees and Services
              
              44








**PART
      I**





**Item
      1. Description of Business**





**Description
      of the Company**





Neuro-Hitech,
      Inc. (the “Company” or “Neuro-Hitech”) is an early stage pharmaceutical company
      engaged in the acquisition and development of therapies for Alzheimer’s
      disease and other degenerative neurological disorders .
      The
      Company is focused particularly on technologies that address large unmet medical
      needs and have the potential to enter clinical development within 12 to 24
      months after acquisition, and on driving development in a rapid, cost-effective
      manner.





The
      Company’s most advanced product candidate, Huperzine A, is in Phase II clinical
      trials in the U.S. and is being tested for efficacy and safety in the treatment
      of mild to moderate Alzheimer’s
      disease .
      Huperzine A is a cholinesterase inhibitor that the Company believes may be
      effective in the treatment of Alzheimer’s
      disease and Mild
      Cognitive Impairment (“MCI”), although, to date, its efforts have been focused
      upon Huperzine A’s effectiveness in Alzheimer’s
      disease. Through
      a
      collaboration with the Alzheimer’s Disease Cooperative Study (“ADCS”), the
      Company has completed two Phase I studies. ADCS was formed in 1991 as a
      cooperative agreement between the National Institute of Aging and the University
      of California San Diego, with the goal of advancing the research of drugs for
      treating patients with Alzheimer’s disease, the National Institutes of Health
      (“NIH”) and Georgetown University Medical Center (“Georgetown”).





The
      Company is also studying the transdermal delivery of Huperzine A. The Company
      believes that Huperzine A can effectively be delivered transdermally because
      of
      its low dosage requirement and low molecular weight. The Company believes that
      a
      transdermal patch is the ideal way to deliver any Alzheimer’s treatment because
      the patch may provide the drug for transdermal delivery for up to between three
      and five days while avoiding the gastrointestinal tract. The Company expects
      to
      begin Phase I clinical trial in the first quarter of 2008 and to report study
      results later that year.




Worldwide
      research thus far suggests that, in addition to Alzheimer’s Disease, Huperzine A
      may be effective in treating other dementias and myasthenia gravis. Also,
      research suggests that it has potential neuroprotective properties that may
      render it useful as a protection against neurotoxins, and it has an anti-oxidant
      effect.





In
      addition to Huperzine A, the Company is currently working on two major
      pre-clinical development programs: one for second generation anti-amyloid
      compounds or disease modifying drugs for Alzheimer’s disease and, secondly,
      development of a series of compounds targeted to treat and prevent
      epilepsy.





The
      Company has imported and sold inventories of natural huperzine to vitamin and
      supplement suppliers to generate revenues. However, the majority of the
      Company’s operations to date have been funded through Company’s private
      placement of equity securities.





**History**





The
      Company was originally formed on February 1, 2005, as Northern Way Resources,
      Inc., a Nevada corporation, for the purpose of acquiring exploration and early
      stage natural resource properties. On January 24, 2006, the Company entered
      into
      an Agreement and Plan of Reorganization (the “Merger Agreement”) by and among
      the Company, Marco Hi-Tech JV Ltd., a privately held New York corporation
      (“Marco”), and Marco Acquisition I, Inc., a newly formed wholly-owned Delaware
      subsidiary of the Company (“Acquisition Sub”). Upon closing of the transactions
      contemplated under the Merger Agreement (the “Merger”), Acquisition Sub was
      merged with and into Marco, and Marco became a wholly-owned subsidiary of the
      Company. The Merger was consummated on that date and in connection with that
      Merger, the Company changed its name to Neuro-Hitech Pharmaceuticals, Inc.
      The
      Company subsequently changed its name to Neuro-Hitech, Inc. on August 11,
      2006.





Pursuant
      to the Merger Agreement, at closing, shareholders of Marco received 0.5830332
      shares of the Company’s Common Stock for each issued and outstanding share of
      Marco’s common stock, par value $.01 per share. As a result, at closing of the
      Merger, the Company issued 6,164,006 shares of its Common Stock to the former
      stockholders of Marco, which represented approximately 80% of the Company’s
      outstanding Common Stock following the Merger, in exchange for 100% of the
      outstanding capital stock of Marco.




1




All
      references to the “Company” for periods prior to the closing of the Merger refer
      to Marco, and references to the “Company” for periods subsequent to the closing
      of the Merger refer to Neuro-Hitech and its subsidiaries.





Marco
      was
      incorporated in the State of New York on December 11, 1996. Through 2005, Marco
      was focused primarily on licensing proprietary Huperzine A technology from
      independent third-party developers and investigators, including the Mayo
      Foundation for Medical Education and Research in Rochester, Minnesota (the
“Mayo
      Foundation”), and conducting analytical work and clinical trials of Huperzine A,
      and until such time operated with no full-time employees and minimal internal
      resources. In addition, from time to time, Marco imported and sold inventories
      of natural huperzine and other dietary supplement ingredients to vitamin and
      supplement suppliers to generate revenues. In 2005, Marco determined to raise
      additional capital to pursue additional approvals and undertake necessary
      studies for the development and commercialization of Huperzine A, including
      securing rights to third-party transdermal patch technology.





Upon
      the
      Merger, the Company abandoned the line of business pursued by Northern Way
      Resources prior to the Merger.





On
      November 29, 2006, the Company completed an acquisition by merger of Q-RNA,
      Inc. (“Q-RNA”), a New York-based biotechnology company focused on diseases such
      as Alzheimer’s, epilepsy and Parkinson’s disease (the “Q-RNA Merger”), pursuant
      to the Agreement and Plan of Merger (the “Q-RNA Merger Agreement”) with QA
      Acquisition Corp., a Delaware corporation, QA Merger LLC, a Delaware limited
      liability company, Q-RNA and Dr. David Dantzker, as the “Representative” of the
      Q-RNA security holders.





The
      Merger consideration paid to the Q-RNA securityholders pursuant to the Q-RNA
      Merger Agreement consisted of an aggregate of: (i) 1,800,000 shares of the
      Company’s common stock, (ii) warrants to purchase 600,356 shares of the
      Company’s common stock at an exercise price of $13 per share, and (iii) warrants
      to purchase 600,356 shares of the Company’s common stock at an exercise price of
      $18 per share. The Company also assumed Q-RNA options outstanding which upon
      exercise will be exercisable for 199,286 shares of the Company’s common
      stock.





The
      acquisition of Q-RNA provided the Company with a pipeline of compounds, many
      of
      which have been discovered and developed internally. Among the compounds that
      Q-RNA believed were ready to move to optimization and pre-clinical development
      were NHT0012, which is one of a number of second generation disease modifying
      drugs for Alzheimer’s disease that inhibit A-beta and Tau oligomerization and
      NHT1107, which is one of a large pharmaceutical library of drugs designed for
      the treatment of epilepsy that offer both anti-ictogenci (ability to treat
      epilepsy) and anti-epileptogenic (ability to prevent epilepsy) properties.





**Description
      of the Business**





**Alzheimer’s
      disease** **and MCI**




Alzheimer’s
      disease, the leading cause of dementia, is characterized by the progressive
      loss
      of memory, thinking (cognitive function) and the ability to perform the
      activities of daily living (global function). There is currently no cure.
      According to the Alzheimer’s Association and the American Health Assistance
      Foundation:




·
            Alzheimer’s
                disease currently affects approximately 5 million people in the U.S.,
                including as many as 10% of people age 65 and older and nearly 50%
                of
                those age 85 and older.




·
            Worldwide,
                Alzheimer’s disease affects 18 million people, and that number is
                expected to reach 34 million by
                2025.




·
            There
                are 350,000 new diagnoses of Alzheimer’s disease, and 59,000 Alzheimer’s
                disease deaths, per year in the
                U.S.




·
            Following
                initial diagnosis, patients live 8 years, on average, but may live
                up to
                20 years with the disease.




·
            Total
                annual expenditures on Alzheimer’s disease in the U.S. exceed $100 billion
                annually, and the average lifetime cost per Alzheimer’s disease patient is
                $174,000.




2




The
      precise physical changes in the brain that produce Alzheimer’s disease are
      complex and not completely understood, but it is generally believed that the
      misfolding of two proteins, A-beta and Tau, are central to the process. The
      two
      best-validated early drug targets for Alzheimer’s disease are cholinesterase and
      the N-methyl-D-aspartate receptor (NMDA-receptor). There are only four
      commonly-used drugs that the FDA has approved for the treatment of the symptoms
      of Alzheimer’s disease. Although the precise mechanism of action of these four
      drugs is unknown, three of these drugs are believed to inhibit cholinesterase,
      and one is believed to inhibit the NMDA-receptor. These four drugs and their
      respective marketers, FDA approval dates and mechanisms of action are set forth
      in the following table.





**Drug
                (Trade Name/Generic)**
            
            **Marketed
                by**
            
            **FDA
                Approval Date**
            
            **Postulated
                Mechanism**Aricept®(donepezil)
            
            Pfizer
                Inc./Eisai Co., Ltd.
            
            November 25, 1996
            
            Cholinesterase
                inhibitionExelon®(rivastigmine)
            
            Novartis
                AG
            
            April 21, 2000
            
            Cholinesterase
                inhibitionRazadyne®(galantamine)
            
            Johnson
                & Johnson
            
            February 28, 2001
            
            Cholinesterase
                inhibitionNamenda®(memantine)
            
            Forest
                Laboratories, Inc.
            
            October 16, 2003
            
            NMDA-receptor
                inhibition




According
      to Merrill Lynch equity research, the worldwide market for Alzheimer’s disease
      drugs in 2005 was $3 billion, with the largest selling cholinesterase
      inhibitor, Aricept, generating $1.7 billion of those sales.




The
      market performance of the existing Alzheimer’s disease therapeutics is
      particularly noteworthy given that their clinical performance to date has been
      modest. Specifically, as stated in their FDA-approved labeling, none of the
      drugs approved by the FDA to treat Alzheimer’s disease has been proven to
      prevent or change the underlying process of brain deterioration
      (neurodegeneration) in patients with Alzheimer’s disease. Rather, these drugs
      have been shown only to slow the worsening of the symptoms of Alzheimer’s
      disease—primarily loss of cognitive and global function. Furthermore, in the
      studies submitted in support of applications for FDA approval of these drugs,
      none of these drugs was shown significantly to improve both cognitive and global
      function over a six-month period in the patients studied. Thus, the Company
      believes that there is room for improvement in this large and growing
      pharmaceutical market.





In
      addition to the market for Alzheimer’s
      disease ,
      compounds such as Huperzine A may provide potential benefits to patients
      diagnosed with MCI by slowing down the advent of Alzheimer’s
      disease or other
      forms of dementia. According to the Mayo Clinic, MCI afflicts up to 20% of
      the
      non-demented population over 65.  MCI
      is a
      relatively new classification of memory disorder that is characterized by
      noticeable memory loss, but otherwise normal behavior. According to the Mayo
      Clinic, MCI converts to Alzheimer’s
      disease at a
      rate of 10 to 15% a year.





**Huperzine
      A**





The
      Company’s decision to begin clinical development of huperzine for Alzheimer’s
      disease and to investigate potential clinical development of huperzine for
      other
      neurological indications, was based in part on the following data:





Huperzine
      A is a compound that is used in China as a prescription drug for treating Alzheimer’s
      disease and
      other forms of dementia. Clinical trials conducted outside the United States
      of
      Huperzine A have been successful, and one Chinese study using the same clinical
      end points as an FDA-approved study for a leading Alzheimer’s
      disease treatment show Huperzine A to be significantly more efficacious than any
      treatment currently available on the U.S. market. Both pre-clinical and animal
      and human clinical studies using United States Food and Drug Administration
      (“FDA”) and other protocol end points conducted both in China and in the U.S.
      suggest that Huperzine A:




·
            may
                have significantly longer inhibitory action at lower doses than the
                other
                approved drugs for early and middle stageAlzheimer’s
                disease;





·
            may
                prove to reduce the unpleasant side effects resulting from use of
                other
                approved drugs for early and middle stageAlzheimer’s
                disease;





·
            may
                be effective not only in increasing the brain’s acetylcholine levels, but
                also levels of other important neurotransmitters such as dopamine
                and
                noradrenaline;




3




·
            may
                have high oral bioavailability and good penetration through the
                blood-brain barrier; and





·
            may
                exhibit neuroprotective properties, and may significantly decrease
                neuronal cell death due to glutamate-induced
                excitotoxicity.





Although
      not being pursued by the Company at this time, Chinese clinical studies have
      indicated that Huperzine A may also have potential in the treatment of
      myasthenia gravis, a progressive autoimmune disease resulting in neuromuscular
      failure, which, untreated can lead to blindness and death from respiratory
      failure. In a 1986 study by Y.S. Cheng et al., it was shown that Huperzine
      A
      controlled the clinical manifestations of the disease in 99% of the 128 patients
      treated. Additional research at the Walter Reed Institute of Research indicates
      that Huperzine A may also have application as a nerve gas antidote. Under the
      Orphan Drug Act, the FDA may grant orphan drug designation to drugs intended
      to
      treat a rare disease or condition, which is generally a disease or condition
      that affects fewer than 200,000 individuals in the United States. The Company
      believes that huperzine can qualify for orphan drug designation for treating
      myasthevia gravis.





**Future
      Compounds**





The
      acquisition of Q-RNA provided the Company with a pipeline of compounds, many
      of
      which have been discovered and developed by Dr. Donald F. Weaver, an inventor
      and expert in neuroscience and chemistry. The Company believes these compounds
      provide it with a robust research and development pipeline. The following
      compounds are ready to move to optimization and pre-clinical
      development:





NHT0012
      is one of a number of second generation disease modifying drugs for Alzheimer’s
      disease that inhibit A-beta and Tau oligomerization. *In
      vitro* studies
      suggest that these compounds are likely to offer a better pharmacological
      profile than first generation drugs by having:




·
            Enhanced
                anti-aggregation activity





·
            Better
                blood-brain barrier (BBB)
                penetration





·
            Milder
                side effect profile





Currently
      marketed medications only help to control symptoms and do not slow or reverse
      the progression of the disease. NHT0012 belongs to an emerging class of
      compounds focused on reducing the progression of Alzheimer’s disease while also
      improving its debilitating symptoms. It is believed that NHT0012 will prevent
      the formation and breaks down existing neurotoxic amyloid beta aggregates,
      allowing amyloid peptides to clear from the brain rather than accumulate and
      form amyloid plaques, a hallmark pathology of Alzheimer’s disease.





NHT1107
      is one of a large pharmaceutical library of drugs designed for the treatment
      of
      epilepsy that offer both anti-ictogenci (ability to treat epilepsy) and
      anti-epileptogenic (ability to prevent epilepsy) properties. Many of these
      compounds have proven to be effective in animal model ( *in
      vivo* )
      systems
      conducted at the National Institutes of Health.





Existing
      medications for epilepsy only control symptoms (i.e. seizures) and do not slow
      the progression of the disorder.  NHT1107 is a prototypic agent in a
      pioneering class of new antiepileptogenic agents that actually prevent the
      onset
      of epilepsy after a brain injury.  It is believed that NHT1107 prevents
      excessive brain excitation that arises from abnormal  activities
      of glutamate and Gamma-Aminobutyric Acid within the injured brain and that
      culminate in causing epilepsy.





**Licenses
      and Patents**





**Mayo
      Foundation (Huperzine A)**





The
      Company holds an exclusive license for two composition of matter patents and
      four process patents for Racemic Huperzine A, Huperzine A and their analogues
      and derivatives from the Mayo Foundation. The Company has an exclusive worldwide
      license to the four process patents pursuant to a Technology License Contract
      with the Mayo Foundation (the “Mayo Licensing Agreement”) and rights to patents
      or future developments. The Company made an initial, nonrefundable royalty
      payment of $82,500 when it entered into the Mayo Licensing Agreement in 1997
      and
      upon filing of an investigational new drug application (IND) the Company paid
      $25,000 to Mayo in 2002, and will be required to make, once FDA approval is
      received, quarterly royalty payments of 5% of net sales of the licensed products
      and 1% of net sales of any Natural Products (as such terms are defined in the
      Mayo Licensing Agreement) sold by the Company prior to May 29, 2007, with a
      minimum annual royalty of $300,000. The Company is also obligated to make
      certain maintenance and milestone royalties payments. The total amount of
      royalties payable under these milestones are $3,225,000. As of December 31,
      2006, the Company has paid $25,000 in milestone royalties. Prior to obtaining
      FDA approval of a Licensed or a Natural Product the Company is obligated to
      pay
      the Mayo Foundation $5,000 annually. The Company also has an option to license
      any patents that issue as a result of continuations, continuations-in-part,
      divisional or foreign applications filed based on the licensed patent upon
      payment of $15,000. The Mayo Foundation has the option under the Mayo Licensing
      Agreement to purchase products from the Company at a 30% discount to
      market.




4




For
      the
      year ended December 31, 2006, the payments made by the Company to the Mayo
      Foundation under the terms of the Mayo Licensing Agreement have been
      approximately $205,000 and the total payments made by the Company to the Mayo
      Foundation under the terms of the Mayo Licensing Agreement since inception
      have
      been approximately $350,000. These costs are reflected in the Research and
      Development caption of the Statement of Operations.





**PARTEQ**





As
      part
      of the acquisition of Q-RNA, the Company assumed exclusive license agreements
      and an option to purchase an exclusive license with PARTEQ Research and
      Development Innovations (“PARTEQ”), the technology licensing arm of Queens
      University, Kingston, Ontario, Canada. The exclusive license agreement grants
      the Company exclusive worldwide licenses to all innovations and developments
      made under the Sponsored Research Agreement, as defined therein.





**PARTEQ
      - Alzheimer’s Research**





The
      Company holds an exclusive license for patent applications directed to compounds
      (including bi-aromatic and aromatic anionic (e.g., bi-indole and single indole)
      compounds) and methods for treating protein folding disorders (including
      Alzheimer’s disease) from PARTEQ.





**PARTEQ
      - Epilepsy Research**





The
      exclusive license agreement grants the Company an exclusive worldwide license
      to
      all innovations and developments, including the patent applications and
      additional filings pursuant to the Exclusive Patent License Agreement with
      PARTEQ (the “PARTEQ Licensing Agreement”) for Alzheimer’s research. The Company
      paid a one-time license fee of C$25,000 when it entered into the PARTEQ
      Licensing Agreement in 2005 and will be required to make quarterly royalty
      payments of 3% of net sales of the licensed products, with a minimum annual
      royalty of C$10,000 for 2007, C$20,000 for 2008, C$30,000 for 2009 and C$40,000
      for 2010 and each subsequent calendar year. Until such time as the Company
      has a
      licensed product, the Company will not have to make quarterly payments. It
      does
      not anticipate having a licensed product in the near term. The Company is also
      obligated to make the following milestone payments: C$100,000 upon completion
      of
      a Phase I trial of a licensed product, C$250,000 upon completion of a Phase
      II
      trial of a licensed product, and C$1,000,000 upon the first FDA approval (as
      such term is defined in the PARTEQ Licensing Agreement). The Company also has
      the right to sub-license with the payment of 20% of all non-royalty sublicensing
      consideration.





Under
      the
      terms of the PARTEQ Licensing Agreement, which was amended earlier this year,
      the Company is obligated to pay fixed annual fees of C$256,802 for the
      Alzheimer’s research.





The
      Company holds an option to acquire an exclusive worldwide license to all
      innovations and developments for certain compounds (including pyrimidine,
      heterocyclic, beta-alanine, uracil, diuracil, beta amino acid analogs and
      related compounds) and patents/patent applications related thereto from PARTEQ
      for Epilepsy research, including the patent applications and additional filings,
      pursuant to the Exclusive Patent License Option Agreement with PARTEQ (the
      “PARTEQ Licensing Option Agreement”) for Epilepsy Research. The Company made a
      non-refundable, non-creditable option payment of C$10,000 when it entered into
      the PARTEQ Licensing Option Agreement in 2006. If the Company exercises its
      option, the Company will make a non-refundable, non-creditable license payment
      of C$17,500 at the time of such exercise. If the Company exercises its option,
      it will be required to make quarterly royalty payments of 3% of net sales of
      the
      licensed products, with a minimum annual royalty of C$10,000 through the second
      anniversary of the license, C$20,000 through the third anniversary of the
      license, C$30,000 through the fourth anniversary of the license and C$40,000
      through the fifth anniversary of the license and each subsequent anniversary.
      The Company does not anticipate having a licensed product in the near term
      and
      thus will not be required to make these quarterly payments. If the Company
      exercises its option, the Company is also obligated to make the following
      milestone payments: C$100,000 upon completion of a Phase I trial of a licensed
      product, C$250,000 upon completion of a Phase II trial of a licensed product,
      and C$1,000,000 upon the first FDA approval (as such term is defined therein).
      If the Company exercises its option, the Company also has the right to
      sub-license with the payment of 20% of all non-royalty sublicensing
      consideration. ****




5




For
      the
      year ended December 31, 2006, the payments made by the Company to PARTEQ under
      these agreements have been approximately C$48,600 and are reflected in the
      Research and Development caption of the Statement of Operations.





Under
      the
      terms of the PARTEQ Licensing Option Agreement, the Company is required to
      pay
      fixed annual fees of C$150,800 for the epilepsy research.





**Strategy**





**Huperzine
      A For** **Alzheimer’s
      disease** **(Oral)**





The
      Company’s primary focus is completing the Phase II clinical trial for Huperzine
      A in conjunction with Georgetown and the ADCS. The Company presently anticipates
      that this phase will be completed in the fourth quarter of 2007.





**Georgetown
      (Phase II Clinical Trial)**





In
      December 2003, the Company entered into a clinical research agreement, which
      was
      amended in November 2005, with Georgetown pursuant to which Georgetown will
      provide the Company with Phase II research. The costs associated with this
      agreement total $3,146,667 and will be partially funded by the National
      Institutes of Health. The Company’s portion of the total cost is $1,846,667,
      payable in installments upon the achievement of certain milestones.





On
      December 8, 2006, the Company announced the expansion of the size of the Phase
      II clinical trial by 60 participants, an increase of 40%.  The
      Company’s portion of the total cost increased by another $1,934,270 and is
      payable in installments. This agreement may be terminated by either party upon
      30 days notice. ****





For
      the
      year ended December 31, 2006, the payments made by the Company to Georgetown
      under the terms of the clinical research agreement were approximately $952,500
      and the total payments made by the Company to Georgetown since inception of
      the
      agreement were approximately $1,927,500.  These
      costs are reflected in the Research and Development caption of the Statement
      of
      Operations.





The
      Company expects to make additional payments to Georgetown of $1,853,437 until
      the conclusion of the Phase II clinical trials which the Company expects to
      occur later this year.




6




**Org
      Syn Laboratory (Synthetic Huperzine)**





On
      February 1, 2006, the Company entered into an exclusive development agreement
      (the “Development Agreement”) with Org Syn Laboratory, Inc. (“Org Syn”) for the
      development by Org Syn of synthetic Huperzine A. Under the terms of the
      Development Agreement, Org Syn received an aggregate of $209,727 upon the
      execution of the Development Agreement, $142,083 six months from the execution
      date and an additional $67,644 seven months from the execution date (subject
      to
      the achievement of certain milestones) for services rendered under the
      Development Agreement. The Development Agreement may be terminated by the
      Company if Org Syn fails to achieve certain stated milestones.





For
      the
      year ended December 31, 2006, the payments made by the Company to Org Syn were
      approximately $419,500 and are reflected in the Research and Development caption
      of the Statement of Operations.





**Huperzine
      A For** **Alzheimer’s
      disease** **(Transdermal)**





The
      Company’s strategy is to make Huperzine A available in both oral and transdermal
      form. The Company believes that Huperzine A can effectively be delivered
      transdermally because of its low dosage requirement and low molecular
      weight.





A
      marketing study funded by the Company has shown that patient compliance is
      a
      crucial factor in determining patient and doctor choice in choosing a medication
      for Alzheimer’s
      disease .
      Often
      it is the responsibility of a caregiver to remind the patient to take the orally
      given medications. Recognizing this, the Company hopes to develop and license
      a
      multi-day transdermal patch, which, if successfully realized, will be able
      to be
      applied to the patient for more than one day. The Company believes that some
      advantages of a transdermal delivery may include:




·
            avoidance
                of first-pass metabolism; better control of drug and metabolite plasma
                levels leading to improved therapy with reduced side effects;





·
            avoidance
                of non-compliance resulting, for example, from patients forgetting
                to take
                the medication; and





·
            improved
                quality of life for caregiver who only needs to replace the patch
                up to
                once per every three to five days.





**XEL
      Herbaceuticals, Inc. (Transdermal)**





On
      March
      15, 2006, the Company entered into a development agreement with Xel
      Herbaceuticals, Inc. (“XEL”) for XEL to develop a Huperzine A Transdermal
      Delivery System (“Delivery Product”). Under the terms of the agreement, the
      Company paid XEL a $250,000 fee upon the execution of the agreement and will
      pay
      XEL $92,500 per month during the development of the Delivery Product, which
      development is estimated to take approximately 16 months. The monthly payment
      is
      subject to quarterly adjustment and subject to a limit on aggregate development
      cost overruns of $250,000. XEL has agreed to pay any cost overruns in excess
      of
      $250,000. The Company and XEL intend to seek domestic and foreign patent
      protection for the Delivery Product.





If
      the
      Company elects to exercise its right to license the Delivery Product in the
      United States and Canada (“North America”) and to develop the Delivery Product
      on its own. Similarly, if the Company elects to exercise its option to license
      the Delivery Product worldwide excluding China, Taiwan, Hong Kong, Macau and
      Singapore (“Worldwide”), and develop the Delivery Product on its own, the
      Company will pay XEL an additional initial license fee of $400,000 and up to
      an
      aggregate of $2.4 million in additional payments upon the achievement of
      comparable milestones. If XEL fails to obtain a U.S. or international patent,
      the corresponding license fee and milestone payments will be reduced by 50%
      until such time as XEL obtains such patent, at which time the unpaid 50% of
      all
      such milestone payments previously not made will be due.





The
      Company will also be obligated to pay XEL royalty payments of between 7% and
      10%
      of net sales, with such royalty payments subject to reduction upon the
      expiration of the patent or the launch of a generic product in the applicable
      territory. If a patent has not been issued in either the United States or
      Canada, the royalty payments will be subject to reduced rates of between 3%
      and
      5% of net sales. Royalty payments for sales in the Worldwide territory will
      be
      subject to good faith negotiations between the parties.




7




If
      the
      Company elects to exercise its right to license the Delivery Product in the
      United States and Canada (“North America”) and to develop the Delivery Product
      on its own, the Company will pay XEL an initial license fee of $400,000 and
      up
      to an aggregate of $2.4 million in additional payments upon the achievement
      of
      certain milestones, including completion of a prototype, initial submission
      to
      the FDA, completion of phases of clinical studies and completion of the FDA
      submission and FDA approval.. Similarly, if the Company elects to exercise
      its
      option to license the Delivery Product worldwide excluding China, Taiwan, Hong
      Kong, Macau and Singapore (“Worldwide”), and develop the Delivery Product on its
      own, the Company will pay XEL an additional initial license fee of $400,000
      and
      up to an aggregate of $2.4 million in additional payments upon the achievement
      of comparable milestones. If XEL fails to obtain a U.S. or international patent,
      the corresponding license fee and milestone payments will be reduced by 50%
      until such time as XEL obtains such patent, at which time the unpaid 50% of
      all
      such milestone payments previously not made will be due.





If
      the
      Company elects not to exercise its right to license the Delivery Product and
      XEL
      elects to further develop the Delivery Product without the Company, XEL will
      be
      obligated to pay the Company 30% of any net profits realized up to a maximum
      of
      two times the amount paid by the Company to XEL during development, excluding
      the initial $250,000 signing fee. Upon such election, XEL will be entitled
      to
      full ownership of the intellectual property of the Delivery Product. If the
      Company elects to exercise its rights to license the Delivery Product in North
      America, but not Worldwide, XEL will have certain rights to obtain intellectual
      property protection in any country outside North America upon payment to the
      Company for such rights, such fees to be negotiated in good faith by the
      parties.





For
      the
      year ended December 31, 2006, the total payments made by the Company to XEL
      under this agreement were approximately $1,081,000 and are reflected in the
      Research and Development caption of the Statement of Operations. The Company
      expects the continued development and the achievement of certain milestones
      will
      require the Company to make additional payments in 2007 of approximately
      $655,500 under the terms of the agreement.





**Commercialization
      of Huperzine A**





The
      Company currently intends to focus upon the development of collaborative, joint
      and strategic alliances and licensing arrangements with various pharmaceutical
      companies for marketing the Company’s products once FDA approval is obtained,
      although there can be no assurance that FDA approval will be obtained. The
      Company presently believes the estimated additional costs to bring Huperzine
      A
      to market as an oral dose drug, after completing two Phase III clinical trials,
      will be substantial and no assurances as to future cost can be made. Upon
      obtaining FDA approval for Huperzine A, it is anticipated that the Company’s
      collaborative partners, if the Company is successful in obtaining collaborative
      partners, will be primarily responsible for the sale and distribution of
      Huperzine A products. Efforts will be made to reach licensing agreements with
      collaborative partners to participate in earlier phases of the drug development
      process for the Company’s products, reducing the need for it to obtain financing
      for the additional development costs. This strategy may enable the Company
      to
      gain access to the marketing expertise and resources of the Company’s potential
      partners and to lower its capital requirements.





Although
      the Company’s primary focus is the commercialization of Huperzine A, the Company
      believes that a scientific and clinical rationale exists for exploring the
      potential of both preclinical compounds discovered by Dr. Donald
      Weaver.





**NHT0012
      for** **Alzheimer’s
      disease**





Protein
      misfolding and aggregation are critical steps in the pathogenesis of a number
      of
      neurodegenerative diseases. In many cases, self-assembly of two or more proteins
      is implicated in these diseases, including Alzheimer’ s
      disease, in which aggregation of amyloid-β (Aβ), tau and α-synuclein may all
      contribute to neurotoxicity. Inhibiting aberrant folding and assembly of one
      or
      more of these species is thus of great therapeutic interest. A novel class
      of
      bi-aromatic compounds has been identified by researchers engaged by Neuro-Hitech
      that pot ently
      inhibit the aggregation of Aβ, tau and α-synuclein in Thioflavin T (ThT) and
      Thioflavin S (ThS) dye-binding fluorescence assays. The aggregation of both
      major physiological isoforms of Aβ, i.e. Aβ40 and Aβ42, was inhibited and
      compounds also caused disassembly of pre-formed aggregates. Further experiments
      confirmed the anti-amyloidogenic activity of the compounds against Aβ40;
      circular dichroism studies showed the compounds inhibited the random coil to
      β-sheet conversion, while Aβ40 binding was studied in 1H NMR experiments.
      Furthermore, compounds rescued SH-SY5Y neuroblastoma cells from Aβ40 toxicity in
      a cell viability model. Ongoing pharmacokinetic testing for the compounds has
      been positive, with evidence of blood-brain barrier permeability,
      half- lives
      of
      several hours and minimal to no toxicity at doses as high as 300
      mg/kg.




8




**NHT1107
      - Anti-ictogenci and anti-epileptogenic**





Current
      drugs for the treatment of epilepsy are little more than “symptomatic” agents,
      suppressing the symptoms of epilepsy, while failing to deal with the causative
      process underlying the susceptibility to seizures. The Neuro-Hitech approach
      to
      designing drugs to prevent epilepsy differentiates between “ictogenesis” and
“epileptogenesis”. No current anticonvulsant drug influences the natural history
      of epilepsy, thus there is a crucial need for prototype “preventative”
antiepileptogenic drugs. Since epileptogenesis arises from altered
      excitatory/inhibitory neurotransmitter activity, drug design exploiting such
      neurotransmitters represents a therapeutic approach to epileptogenesis.
      Neuro-Hitech’s approach focuses on b -alanine,
      an unexploited neuromodulator that affords multiple opportunities for drug
      design. b -alanine’s
      unique structure is intermediate between a -
      and g -amino
      acids and thus b -alanine
      can bind to glutamate, glycine and g -amino
      butyric acid neurotransmitter receptors in brain. b -Alanine
      analogs have “proGABAergic” and “antiglutamatergic” activities and thus
      represent powerful platforms for drug design. Neuro-Hitech’s lead compound in
      this therapeutic domain, NHT1107, prevents the onset of epilepsy in the
      spontaneous recurrent seizure rat model of epilepsy by 82%, compared to
      controls. NHT1107 is non-toxic in rodents at doses ranging from 100-300 mg/kg.
      NHT1107 is thus a structurally unique analogue of b -alanine
      with pioneering anti-epileptogenic activity. Preclinical development of this
      compound is currently underway in collaboration with the Antiepileptic Drug
      Development Program at NIH.





In
      addition to developing a pioneering anti-epileptogenic drug, Neuro-Hitech’s
      antiepilepsy program is also focusing on the design and development of improved
      anticonvulsant drugs with fewer side-effects. Other analogues of b -alanine
      are being optimized for their anti-ictogenic properties to permit the
      development of an efficacious anticonvulsant agent with reduced cognitive and
      memory-related side-effects.





**Manufacturing
      and Raw Materials**





The
      Company does not have, and does not intend to establish, manufacturing
      facilities to produce its product candidates in the near or mid-term. The
      Company plans to control capital expenditures by using contract manufacturers
      to
      produce product candidates. It is the Company’s belief that there are a
      sufficient number of high quality GLP (Good Laboratory Practice) and GMP (Good
      Manufacturing Practice) contract manufacturers available, and the Company has
      had discussions and in some instances established relationships to fulfill
      its
      production needs for research and clinical use.





The
      manufacturer of Neuro-Hitech’s product candidates or any future product, whether
      done by third-party contractors as planned or internally, will be subject to
      rigorous regulations, including the need to comply with the FDA’s current GMP
      standards. As part of obtaining FDA approval for each product, each of the
      manufacturing facilities must be inspected, approved by and registered with
      the
      FDA. In addition to obtaining FDA approval of the prospective manufacturer’s
      quality control and manufacturing procedures, domestic and foreign manufacturing
      facilities are subject to periodic inspection by the FDA and/or foreign
      regulatory authorities.





The
      Company currently obtains natural huperzine from a limited number of suppliers
      in China. If the Company is unable to develop synthetic huperzine, the Company
      may be wholly dependent upon its limited suppliers to provide the Company
      natural huperzine. Although the Company believes it has a good working
      relationship with its suppliers, the Company is aware of the increased risk
      and
      challenges posed when relying on limited suppliers.





The
      Company attempts to manage these risks by active inventory management. A
      material shortage, contamination and/or recall could adversely affect the
      manufacturing of the Company’s products.




9




**Government
      Regulation**





The
      research and development, manufacture and marketing of controlled-release
      pharmaceuticals are subject to regulation by U.S., Canadian and foreign
      governmental authorities and agencies. Such national agencies and other federal,
      state, provincial and local entities regulate the testing, manufacturing, safety
      and promotion of the Company’s products. Regulations applicable to the Company’s
      products may change as the currently limited number of approved
      controlled-release products increases and regulators acquire additional
      experience in this area.





**United
      States Regulation**





**New
      Drug Application**





The
      Company will be required by the FDA to comply with New Drug Application (“NDA”)
      procedures for its products prior to commencement of marketing by the Company
      or
      the Company’s licensees. New drug compounds and new formulations for existing
      drug compounds are subject to NDA procedures. These procedures include (a)
      preclinical laboratory and animal toxicology tests; (b) scaling and testing
      of
      production batches; (c) submission of an investigational new drug application
      (“IND”), and subsequent approval is required before any human clinical trials
      can commence; (d) adequate and well controlled replicate human clinical trials
      to establish the safety and efficacy of the drug for its intended indication;
      (e) the submission of an NDA to the FDA; and (f) FDA approval of an NDA prior
      to
      any commercial sale or shipment of the product, including pre-approval and
      post-approval inspections of its manufacturing and testing facilities. If all
      of
      these data in the product application is owned by the applicant, the FDA will
      issue its approval without regard to patent rights that might be infringed
      or
      exclusivity periods that would affect the FDA’s ability to grant an approval if
      the application relied upon data which the applicant did not own. The Company
      currently intends to generate all data necessary to support FDA approval of
      the
      applications the Company files.





Preclinical
      laboratory and animal toxicology tests may have to be performed to assess the
      safety and potential efficacy of the product. The results of these preclinical
      tests, together with information regarding the methods of manufacture of the
      products and quality control testing, are then submitted to the FDA as part
      of
      an IND requesting authorization to initiate human clinical trials. Once the
      IND
      notice period has expired, clinical trials may be initiated, unless a hold
      on
      clinical trials has been issued by the FDA.





Clinical
      trials involve the administration of a pharmaceutical product to individuals
      under the supervision of qualified medical investigators that are experienced
      in
      conducting studies under “Good Clinical Practice” guidelines. Clinical studies
      are conducted in accordance with protocols that detail the objectives of a
      study, the parameters to be used to monitor safety and the efficacy criteria
      to
      be evaluated. Each protocol is submitted to the FDA and to an Institutional
      Review Board prior to the commencement of each clinical trial. Clinical studies
      are typically conducted in three sequential phases, which may overlap. In Phase
      I, the initial introduction of the product into human subjects, the compound
      is
      tested for absorption, safety, dosage, tolerance, metabolic interaction,
      distribution, and excretion. Phase II involves studies in a limited patient
      population with the disease to be treated to (1) determine the efficacy of
      the
      product for specific targeted indications, (2) determine optimal dosage and
      (3)
      identify possible adverse effects and safety risks. In the event Phase II
      evaluations demonstrate that a pharmaceutical product is effective and has
      an
      acceptable safety profile, Phase III clinical trials are undertaken to further
      evaluate clinical efficacy of the product and to further test its safety within
      an expanded patient population at geographically dispersed clinical study sites.
      Periodic reports on the clinical investigations are required.





The
      Company, or the FDA, may suspend clinical trials at any time if it is believed
      that clinical subjects may be exposed to unacceptable health risks. The results
      of the product development, analytical laboratory studies and clinical studies
      are submitted to the FDA as part of an NDA for approval of the marketing and
      commercialization of a pharmaceutical product.





In
      certain companies where the objective is to develop a generic version of an
      approved product already on the market in controlled-release dosages, an
      Abbreviated New Drug Application (“ANDA”) may be filed in lieu of filing an NDA.
      Under the ANDA procedure, the FDA waives the requirement to submit complete
      reports of preclinical and clinical studies of safety and efficacy and instead
      requires the submission of bio-equivalency data, that is, demonstration that
      the
      generic drug produces the same effect in the body as its brand-name counterpart
      and has the same pharmacokinetic profile, or change in blood concentration
      over
      time. The advantages of an ANDA over an NDA include reduced research and
      development costs associated with bringing a product to market, and generally
      a
      shorter review and approval time at the FDA. This procedure is not available
      to
      the Company’s planned products but might be available to the Company’s
      competitors if the Company receives FDA approval for one or more of its
      products.




10




**Exclusivity
      Issues**





Under
      U.S. law, the expiration of a patent on a drug compound does not create a right
      to make, use or sell that compound. There may be additional patents relating
      to
      a person’s proposed manufacture, use or sale of a product that could potentially
      prohibit such person’s proposed commercialization of a drug
      compound.





The
      Food
      Drug and Cosmetic Act (“FDC”) contains non-patent market exclusivity provisions
      that offer protection to pioneer drug products and are independent of any patent
      coverage that might also apply. Five years of exclusivity are granted to the
      first approval of a “new chemical entity.” Three years of exclusivity may apply
      to products which are not new chemical entities, but for which new clinical
      investigations are essential to the approval. For example, a new indication
      for
      use, or a new dosage strength of a previously approved product, may be entitled
      to exclusivity, but only with respect to that indication or dosage strength.
      Exclusivity only offers protection against a competitor entering the market
      via
      the ANDA route, and does not operate against a competitor that generates all
      of
      its own data and submits a full NDA.





If
      applicable regulatory criteria are not satisfied, the FDA may deny approval
      of
      an NDA or an ANDA or may require additional testing. Product approvals may
      be
      withdrawn if compliance with regulatory standards is not maintained or if
      problems occur after the product reaches the market. The FDA may require further
      testing and surveillance programs to monitor the pharmaceutical product that
      has
      been commercialized. Noncompliance with applicable requirements can result
      in
      additional penalties, including product seizures, injunction actions and
      criminal prosecutions.





**Additional
      Regulatory Considerations**





Sales
      of
      the Company’s products by licensees outside the United States and Canada are
      subject to regulatory requirements governing the testing, registration and
      marketing of pharmaceuticals, which vary widely from country to
      country.





In
      addition to the regulatory approval process, pharmaceutical companies are
      subject to regulations under provincial, state and federal law, including
      requirements regarding occupational safety, laboratory practices, environmental
      protection and hazardous substance control, and may be subject to other present
      and future local, provincial, state, federal and foreign regulations, including
      possible future regulations of the pharmaceutical industry. The Company believes
      that it is in compliance in all material respects with such regulations as
      are
      currently in effect.





**Competition**





The
      Company intends to develop and market (either on its own or by license to third
      parties) proprietary pharmaceutical products based on Huperzine A and NHT0012.
      The Company’s competition consists of those companies which develop drugs to
      treat Alzheimer’s
      disease ,
      MCI and
      other forms of dementia, and companies that develop Alzheimer’s
      disease and MCI
      drugs and drug delivery systems for theses drugs.





Additionally,
      t he
      Company seeks to develop and market (either on its own or by license to third
      parties) proprietary pharmaceutical products based on NHT1107. Currently,
      there are 12 drugs on the market for the symptomatic treatment of epilepsy.
       All of the drugs currently on the market are anti-seizure drugs that must
      be taken after epilepsy has developed. These anti-seizure drugs suppress the
      occurrence of seizures in an individual with established epilepsy. The Company
      seeks to develop anti-epileptogenic agent that may prevent the onset of epilepsy
      after a brain injury. Currently, there are no anti-epileptogenic drugs on the
      market.





An
      increasing number of pharmaceutical companies are interested in the development
      and commercialization of products that treat these diseases. The Company also
      expects that competition in the field of drug delivery will significantly
      increase in the future since smaller specialized research and development
      companies are beginning to concentrate on this aspect of the business. For
      each
      area, some of the major pharmaceutical companies have invested and are
      continuing to invest significant resources in the development of these products,
      and some have invested funds in specialized drug delivery
      companies.




11




Other
      companies may develop new drug formulations and products for Alzheimer’s
      disease, Epilepsy or MCI,
      or may improve existing drug formulations and products more efficiently than
      the
      Company can. In addition, almost all of the Company’s competitors have vastly
      greater resources than the Company does. While the Company’s product development
      capabilities and exclusive patent licenses may help it maintain a market
      position in the field of drug delivery, there can be no assurance that others
      will not be able to develop these capabilities, or alternative technologies
      outside the scope of the Company’s patents, if any, or that even if patent
      protection is obtained, these patents will not be successfully challenged in
      the
      future.




**Scientific
      and Clinical Advisory Board**




The
      Company maintains a Scientific and Clinical Advisory Board comprised of
      scientists and physicians with experience relevant to the Company and its
      product candidates. Members of the Company’s Scientific and Clinical Advisory
      Board have agreed to consult and advise the Company in their respective areas
      of
      expertise. The Company has placed special emphasis on identifying members of
      its
      Scientific and Clinical Advisory Board with expertise in the treatment of the
      clinical indications targeted by the Company’s programs. The Company’s
      Scientific and Clinical Advisory Board consists of the following
      members:




**Paul
      Aisen, M.D.** Dr. Aisen is a Professor of Neurology and Medicine, Vice Chair of the
      Department of Neurology and the Director of the Memory Disorders Program at
      Georgetown University School of Medicine. Dr. Aisen was one of the first
      Alzheimer’s disease clinical trialists in the U.S. and was an investigator in
      the pivotal FDA registration studies for Namenda ® . Dr. Aisen also serves
      as the Associate Director of the Alzheimer’s Disease Cooperative Study Group.
      Dr. Aisen received his M.D. from Columbia University, College of Physicians
      and Surgeons.




**Robert
      M. Moriarty, M.D.**  **** Dr.
      Robert M. Moriarty is a consultant of Org Syn Laboratory, Inc. Dr. Moriarty
      received his Ph.D. degree from Princeton University. After completing
      postdoctoral work at University of Munich and Harvard University, he worked
      as a
      research chemist at Merck from 1955-57. He founded Steroids Limited in 1981,
      which became SynQuest Limited and was acquired by United Therapeutics in 2000.
      Dr. Moriarty has authored over 200 articles on various topics in synthetic
      and
      mechanistic organic synthesis. Dr. Moriarty is a recipient of several
      prestigious awards and grants.




**Dr.
      Dinesh Patel, M.D.** Dr.
      Patel is the Chairman of the Board and Co-founder of Xel Herbaceuticals Inc.
      Dr.
      Patel has served fourteen years as Co-founder, Chairman of the Board of
      Directors, President & CEO, of TheraTech, Inc., a Salt Lake City based
      company that has been a pioneer in the development and manufacture of innovative
      drug delivery products. Under Dr. Patel’s guidance, TheraTech established
      strategic alliances with major pharmaceutical companies, including Eli Lilly,
      Pfizer, Procter & Gamble, Roche, SmithKline Beecham, and Wyeth-Ayerst. Dr.
      Patel directed the construction of a state-of-the-art manufacturing facility
      and
      oversaw the company’s R&D efforts through the manufacture of its currently
      marketed transdermal products (transdermal testosterone and estrogen
      hormone-replacement therapy patches). Dr. Patel has been the recipient of
      numerous awards.




**Donald
      F. Weaver, M.D.** Dr.
      Weaver is currently Canada Research Chair in Neuroscience/Chemistry, Professor
      of the Department of Medicine (Neurology), Professor of the Department of
      Chemistry and Professor of the School of Biomedical Engineering at Dalhousie
      University in Halifax, Nova Scotia, Canada. With experience that spans academic
      and commercial interests, he has published hundreds of articles, is a prolific
      inventor with over 70 patents to his name and is the recipient of many awards
      and honors. Dr. Weaver co-founded three biotechnology companies, including
      Neurochem, Inc., and is a fellow of the Canadian Institute of Chemistry (FCIC),
      a fellow of the Royal College of Physicians and Surgeons of Canada (FRCIP)
      and a
      board-certified neurologist.




**Employees**





As
      of
      March 30, 2007, the Company had one full-time employee and five employees that
      work on a part-time basis, including Mr. Seltzer and Mr. Kestenbaum. Mr. Seltzer
      and Mr. Kestenbaum are employed by other organizations and will continue to
      participate on a part-time basis, not devoting full-time efforts to the affairs
      of the Company for the foreseeable future.




12




**Corporate
      Information**





The
      Company’s corporate headquarters are located at One Penn Plaza, New York, NY
      10019. The Company’s telephone number is (212) 594-1215, and its fax number is
      (212) 798-8183.





**Executive
      Officers and Significant Employees of the Registrant**





The
      following sets forth certain information with regard to the executive officers
      of the Company as of March 30, 2007 (ages are as of December 31,
      2006):





**Name**
            
            **Age**
            
            **Position**Reuben
                Seltzer
            
            50
            
            President,
                Chief Executive Officer and DirectorAlan
                Kestenbaum
            
            45
            
            Executive
                Vice President and DirectorL.
                William McIntosh
            
            61
            
            Chief
                Operating Officer and DirectorDavid
                Barrett
            
            31
            
            Chief
                Financial OfficerWilliam
                Wong
            
            59
            
            Chief
                Scientific Officer





**Reuben
      Seltzer** has been
      serving as President and Chief Executive Officer of the Company since January
      2006. Mr. Seltzer has been chief executive and president of Marco since 1996,
      president of Marco LLC, since January 2002 and a director and consultant for
      Hi-Tech Pharmacal Co., Inc. (NASDAQ: HITK), a pharmaceutical company since
      1992.
      Mr. Seltzer received a B.A. in Economics from Queens College, a J.D. degree
      from
      Benjamin N. Cardozo School of Law, and an L.L.M. from New York
      University.





**Alan
      Kestenbaum** has been
      serving as Executive Vice President of the Company since January 2006. Mr.
      Kestenbaum has been executive vice president and a director of Marco and Marco
      Hi-Tech JV LLC, a raw material and ingredient distribution company serving
      the
      dietary supplement industry (“Marco LLC”) since January 2002. Mr. Kestenbaum
      founded in 1985, and is currently chief executive officer of, Marco
      International Corp., an international finance investment and trading company
      specializing in raw materials. In March 2004, Mr. Kestenbaum founded and is
      currently chairman and chief executive officer of Globe Specialty Metals, Inc.
      Mr. Kestenbaum also serves as a director for Wolverine Tube, Inc. Mr. Kestenbaum
      received a B.A. in Economics cum laude from Yeshiva University, New York.





**L.
      William McIntosh** has been
      serving as Chief Operating Officer since November 2006. Prior to joining the
      Company, Mr. McIntosh spent 30 years within the pharmaceutical and biotechnology
      industries in a variety capacities including marketing, sales, business
      development, product development and general management. Immediately prior
      to
      joining the Company, he served as a director and Chief Executive Officer of
      Q-RNA between August 2004 and the closing of the Merger. Prior to that, Mr.
      McIntosh served as Principal and Managing Director of Novatures Consulting
      Group
      between June 2003 and July 2004. Between August 2001 and May 2003, Mr. McIntosh
      served as President and CBO of FASgen, Inc. Mr. McIntosh has also served in
      senior positions at Merck & Co., Inc., Medco Containment Services,
      Boehringer Mannheim Pharmaceuticals Corporation, Zynaxis, Inc., Smith-Kline
      Beecham Pharmaceuticals, VIMRx Pharmaceuticals, Inc. and Nexell Therapeutics,
      Inc. Mr. McIntosh received both his B.S. and M.B.A. from Lehigh University
      in
      Pennsylvania.





**David
      Barrett** has been
      serving as Chief Financial Officer since April 2006. Between January 2005 and
      April 2006, Mr. Barrett had been serving as Chief Financial Officer of Overture
      Financial Services, LLC, a company specializing in construction and management
      of investment platforms for financial intermediaries. Between September 2003
      and
      January 2005, Mr. Barrett served in a variety of capacities, most recently
      as
      Chief Financial Officer of Overture Asset Managers, LLC, an asset management
      holding company that partners, acquires and manages investment managers with
      complementary investment products. Between June 1999 and September 2003, Mr.
      Barrett was employed by Deloitte & Touche where he served in a variety of
      capacities, most recently as Senior Consultant in merger and acquisition
      services.




13




**William
      Wong** has been
      serving as Chief Scientific Officer since November 2006. Immediately prior
      to
      joining the Company, Dr. Wong worked in a variety of management capacities
      at
      pharmaceutical development, biotechnology and medical device companies during
      his twenty-five year career, most recently at Q-RNA, where he served as Vice
      President of Product Development, between August 2002 and November 2006. Prior
      to that, he served as Principal at Novatures Consulting Group. He has served
      on
      the senior management teams at Lynx Therapeutics, IntraCel Corporation, E.I.
      DuPont Co. and Becton-Dickinson Corp. Dr. Wong received his Ph.D. from the
      University of Rochester School of Medicine in the Department of Microbiology
      and
      Immunology.





The
      Company is committed to legal and ethical conduct in fulfilling its
      responsibilities. The Board expects all directors, as well as officers and
      employees, to act ethically at all times. Additionally, the Board expects the
      Chief Executive Officer, the Chief Financial Officer, and all senior financial
      and accounting officials to adhere to the Company’s Code of Ethics which was
      adopted on February 23, 2006. The Code of Ethics incorporates the Company’s
      expectations of its executive officers that enable the Company to provide
      accurate and timely disclosure in its filings with the SEC and other public
      communications. In addition, they incorporate the Company’s guidelines
      pertaining to topics such as complying with applicable laws, rules, and
      regulations; reporting of code violations; and maintaining accountability for
      adherence to the code.





The
      full
      text of the Code of Ethics is published on the investor relations portion of
      our
      website at *www.neurohitech.com* .
      The
      Company intends to disclose any amendments to provisions of its Code of Ethics,
      or waivers of such provisions granted to executive officers and directors,
      on
      this website within four business days following the date of any such amendment
      or waiver.





**Risk
      Factors**





Investing
      in the Company’s common stock involves a high degree of risk. Prospective
      investors should carefully consider the risks described below, together with
      all
      of the other information included or referred to in this Annual Report on Form
      10-KSB, before purchasing shares of the Company’s common stock. There are
      numerous and varied risks, known and unknown, that may prevent the Company
      from
      achieving its goals. The risks described below are not the only ones the Company
      will face. If any of these risks actually occur, the Company’s business,
      financial condition or results of operation may be materially adversely
      affected. In such case, the trading price of the Company’s common stock could
      decline and investors in the Company’s common stock could lose all or part of
      their investment.





**Risks
      Related to the Company and the Company’s Business**





***The
      failure to complete development of Huperzine A, obtain government approvals,
      including required FDA approvals, or to comply with ongoing governmental
      regulations could delay or limit introduction of proposed products and result
      in
      failure to achieve revenues or maintain the Company’s ongoing business.***





The
      Company’s research and development activities, and the manufacture and marketing
      of its intended products, are subject to extensive regulation for safety,
      efficacy and quality by numerous government authorities in the United States
      and
      abroad. Before receiving FDA clearance to market the Company’s proposed
      products, the Company will have to demonstrate that its products are safe and
      effective on the patient population and for the diseases that are to be treated.
      Clinical trials, manufacturing and marketing of drugs are subject to the
      rigorous testing and approval process of the FDA and equivalent foreign
      regulatory authorities. The FDA and other federal, state and foreign statutes
      and regulations govern and influence the testing, manufacture, labeling,
      advertising, distribution and promotion of drugs and medical devices. As a
      result, clinical trials and regulatory approval can take a number of years
      or
      longer to accomplish and require the expenditure of substantial financial,
      managerial and other resources.





In
      order
      to be commercially viable, the Company must successfully research, develop,
      obtain regulatory approval for, manufacture, introduce, market and distribute
      its technologies. For each drug the Company must successfully meet a number
      of
      critical developmental milestones, including:




·
            demonstrate
                benefit from each specific drug
                technology,




14




·
            demonstrate
                through pre-clinical and clinical trials that the drug and patient
                specific therapy is safe and effective, and





·
            establish
                a viable Good Manufacturing Process capable of potential scale
                up.




The
      time
      frame necessary to achieve these developmental milestones may be long and
      uncertain, and the Company may not successfully complete these milestones for
      any of its intended products in development.





In
      addition to the risks previously discussed, Huperzine A is subject to additional
      developmental risks which include the following:




·
            the
                uncertainties arising from the rapidly growing scientific aspects
                of drug
                therapies and potential treatments,





·
            uncertainties
                arising as a result of the broad array of potential treatments related
                to
                neurological disease, and





·
            anticipated
                expense and time believed to be associated with the development and
                regulatory approval of treatments for neurological
                disease.




In
      order
      to conduct clinical trials that are necessary to obtain approval by the FDA
      to
      market a product, it is necessary to receive clearance from the FDA to conduct
      such clinical trials. The FDA can halt clinical trials at any time for safety
      reasons or because the Company or its clinical investigators do not follow
      the
      FDA’s requirements for conducting clinical trials. If the Company is unable to
      receive clearance to conduct clinical trials or the trials are halted by the
      FDA, the Company would not be able to achieve any revenue from such product,
      as
      it is illegal to sell any drug or medical device for human consumption without
      FDA approval.





***Data
      obtained from clinical trials is susceptible to varying interpretations, which
      could delay, limit or prevent regulatory clearances.***





Data
      already obtained, or in the future obtained, from pre-clinical studies and
      clinical trials (as of the date of this Annual Report Phase II clinical trials
      of Huperzine A have been undertaken) do not necessarily predict the results
      that
      will be obtained from later pre-clinical studies and clinical trials. Moreover,
      pre-clinical and clinical data is susceptible to varying interpretations, which
      could delay, limit or prevent regulatory approval. The Company is also not
      able
      to assure that the results of the tests already conducted will be consistent
      with prior observations or support the Company’s applications for regulatory
      approval. A number of companies in the pharmaceutical industry have suffered
      significant setbacks in advanced clinical trials, even after promising results
      in earlier trials. The failure to adequately demonstrate the safety and
      effectiveness of an intended product under development could delay or prevent
      regulatory clearance of a potential drug, resulting in delays to
      commercialization, and could materially harm the Company’s business. The
      Company’s clinical trials may not demonstrate sufficient levels of safety and
      efficacy necessary to obtain the requisite regulatory approvals for the
      Company’s drugs, and thus its proposed drugs may not be approved for marketing.
      Even after approval, further studies could result in withdrawal of FDA and
      other
      regulatory approvals and voluntary or involuntary withdrawal of products from
      the market.





The
      Company may encounter delays or rejections based upon additional government
      regulation from future legislation or administrative action or changes in FDA
      policy during the period of development, clinical trials and FDA regulatory
      review. The Company may encounter similar delays in foreign countries. Sales
      of
      the Company’s products outside the U.S. would be subject to foreign regulatory
      approvals that vary from country to country. The time required to obtain
      approvals from foreign countries may be shorter or longer than that required
      for
      FDA approval, and requirements for foreign licensing may differ from FDA
      requirements. The Company may be unable to obtain requisite approvals from
      the
      FDA and foreign regulatory authorities, and even if obtained, such approvals
      may
      not be on a timely basis, or they may not cover the uses that the Company
      requests.





In
      the
      future, the Company may select drugs which may contain controlled substances
      which are subject to state, federal and foreign laws and regulations regarding
      their manufacture, use, sale, importation and distribution. For such drugs
      containing controlled substances, the Company and any suppliers, manufacturers,
      contractors, customers and distributors may be required to obtain and maintain
      applicable registrations from state, federal and foreign law enforcement and
      regulatory agencies and comply with state, federal and foreign laws and
      regulations regarding the manufacture, use, sale, importation and distribution
      of controlled substances. These regulations are extensive and include
      regulations governing manufacturing, labeling, packaging, testing, dispensing,
      prescription and procurement quotas, record keeping, reporting, handling,
      shipment and disposal. Failure to obtain and maintain required registrations
      or
      comply with any applicable regulations could delay or preclude the Company
      from
      developing and commercializing drugs containing controlled substances and
      subject the Company to enforcement action. In addition, because of their
      restrictive nature, these regulations could limit the Company’s
      commercialization of drugs containing controlled substances. As a result, the
      Company’s drug and technology research program may be curtailed, redirected or
      eliminated at any time.




15




***Because
      the Company has accumulated deficits in the research and development of
      Huperzine A since inception, there is no guarantee that the Company will ever
      become profitable even if one or more of the Company’s drugs are approved for
      commercialization.***





Since
      inception the Company has recorded operating losses. As of December 31, 2006,
      the Company had a stockholders’ equity of approximately  $3,691,000  and
      an
      accumulated deficit of approximately ($24,034,000) . In
      addition, the Company expects to incur increasing operating losses over the
      next
      several years as the Company continues to incur increasing costs for research
      and development and clinical trials, compliance with governmental regulations
      and in other development activities. The Company’s ability to generate revenue
      and achieve profitability depends upon its ability, alone or with others, to
      complete the development of its proposed products, obtain the required
      regulatory approvals and manufacture, market and sell its proposed products.
      Development is costly and requires significant investment. In addition, the
      Company may choose to license rights to particular drugs. The license fees
      for
      such drugs may increase the Company’s costs.





The
      Company has not generated any revenue from the commercial sale of its proposed
      products in development or any drugs and does not expect to receive such revenue
      in the near future. The Company’s primary activity to date has been research and
      development. Revenues to date are primarily from sales of inventory of imported
      huperzine, which may be continued by the Company, but which may be reduced
      or
      eliminated entirely as the Company refocuses its efforts on drug development
      and
      approval.





A
      substantial portion of the research results and observations on which the
      Company relies were performed by third-parties at those parties’ facilities,
      cost and expense. The Company cannot be certain as to when or whether to
      anticipate commercializing and marketing its proposed products in development,
      and do not expect to generate sufficient revenues from proposed product sales
      to
      cover its expenses or achieve profitability in the near future.





***The
      Company has limited cash available, and the Company may not have sufficient
      cash
      to continue its business operations.***





As
      of
      April 1, 2007 the Company had approximately $6 million in cash and cash
      equivalents which reflects the completion of a private placement in March 2007.
      The Company increased its research and development expenses related to Huperzine
      A from $678,798 for the year ended December 31, 2005 to $2,674,714 for the
      year
      ended December 31, 2006 as a result of the expansion of the Company’s clinical
      development portfolio for Huperzine A. The Company expects to continue to incur
      losses in future months as the Company engages in further expenditures to
      develop its business infrastructure and pursue its business plan. Presently,
      the
      Company expects that its available cash, cash equivalents and interest income,
      are sufficient to meet its operating expenses and capital requirements for
      a
      period of at least twelve months, however, if the Company fails to raise
      additional capital it may not have sufficient cash to meet its operating
      expenses and capital requirements in the future. Even with additional capital,
      the Company may not be able to execute its current business plan and fund
      business operations long enough to achieve positive cash flow. Furthermore,
      the
      Company may be forced to reduce its expenses and cash expenditures to a material
      extent, which would impair the Company’s ability to execute its business
      operations.





16





***Acceptance
      of the Company’s products in the marketplace is uncertain and failure to achieve
      market acceptance will prevent or delay its ability to generate
      revenues.***





The
      Company’s future financial performance will depend, at least in part, upon the
      introduction and acceptance of the Company’s proposed Huperzine A products by
      physicians, patients, payors and the broader medical community. Even if approved
      for marketing by the necessary regulatory authorities, the Company’s products
      may not achieve market acceptance. The degree of market acceptance will depend
      upon a number of factors, including:




·
            the
                receipt of regulatory clearance of marketing claims for the uses
                that the
                Company is developing;





·
            the
                establishment and demonstration of the advantages, safety and efficacy
                of
                Huperzine A;





·
            pricing
                and reimbursement policies of government and third party payors such
                as
                insurance companies, health maintenance organizations and other health
                plan administrators;





·
            the
                Company’s ability to attract corporate partners, including pharmaceutical
                companies, to assist in commercializing the Company’s intended products;
                and





·
            the
                Company’s ability to market its
                products.




***The
      Company may face costly and time consuming litigation from third parties which
      claim that the Company’s products infringe on their intellectual property
      rights, particularly because there is substantial uncertainty about the validity
      and breadth of medical patents.***





There
      is
      significant litigation in the biotechnology field regarding patents and other
      intellectual property rights. Biotechnology companies of roughly the Company’s
      size and financial position have gone out of business after fighting and losing
      an infringement battle. The Company may be exposed to future litigation by
      third
      parties based on claims that the Company’s technologies, products or activities
      infringe the intellectual property rights of others or that the Company has
      misappropriated the trade secrets of others. This risk is exacerbated by the
      fact that the validity and breadth of claims covered in medical technology
      patents and the breadth and scope of trade secret protection involve complex
      legal and factual questions for which important legal principles are unresolved.
      In particular, there are many patents relating to specific genes, nucleic acids,
      polypeptides or the uses thereof to treat Alzheimer’s disease and other central
      nervous system diseases. Some of these may encompass genes or polypeptides
      that
      the Company utilizes in its drug development activities. Any litigation or
      claims against the Company, whether or not valid, could result in substantial
      costs, could place a significant strain on the Company’s financial and
      managerial resources and could harm the Company’s reputation. Most of the
      Company’s license agreements would likely require that the Company pay the costs
      associated with defending this type of litigation. In addition, intellectual
      property litigation or claims could force the Company to do one or more of
      the
      following:




·
            cease
                selling, incorporating or using any of the Company’s Huperzine A products
                and/or products that incorporate the challenged intellectual property,
                which would adversely affect the Company’s future
                revenue;





·
            pay
                significant damages and the patentee could prevent the Company from
                using
                the patented genes or polypeptides for the identification or development
                of drug compounds;





·
            obtain
                a license from the holder of the infringed intellectual property
                right,
                which license may be costly or may not be available on reasonable
                terms,
                if at all; or





·
            redesign
                the Company’s products, which would be costly and time
                consuming.




As
      of
      March 30, 2007, the Company has not engaged in discussions, received any
      communications, nor does the Company have any reason to believe that any third
      party is challenging or has the proper legal authority to challenge the
      Company’s intellectual property rights or those of the actual patent holders, or
      the Company’s licenses.




17




***If
      the Company is unable to adequately protect or enforce its rights to
      intellectual property or secure rights to third party patents, the Company
      may
      lose valuable rights, experience reduced market share, assuming any, or incur
      costly litigation to protect such rights.***





The
      Company’s ability to obtain licenses to patents, apply for new patents on a
      Huperzine A product, maintain trade secret protection and operate without
      infringing the proprietary rights of others will be important to its
      commercializing any products under development. Therefore, any disruption in
      access to the technology could substantially delay the development of Huperzine
      A or other products.





The
      patent positions of biotechnology and pharmaceutical companies, including ours,
      which also involve licensing agreements, are frequently uncertain and involve
      complex legal and factual questions. In addition, the coverage claimed in a
      patent application can be significantly reduced before the patent is issued.
      Consequently, the Company’s patent applications and any issued and licensed
      patents may not provide protection against competitive technologies or may
      be
      held invalid if challenged or circumvented. The Company’s competitors may also
      independently develop drug technologies or products similar to the Company’s or
      design around or otherwise circumvent patents issued or licensed to the Company.
      In addition, the laws of some foreign countries may not protect the Company’s
      proprietary rights to the same extent as U.S. law.





The
      Company also relies upon trade secrets, technical know how and continuing
      technological innovation to develop and maintain the Company’s competitive
      position. The Company generally will seek to require its employees, consultants,
      advisors and collaborators to execute appropriate confidentiality and assignment
      of inventions agreements. These agreements typically provide that all materials
      and confidential information developed or made known to the individual during
      the course of the individual’s relationship with the Company is to be kept
      confidential and not disclosed to third parties except in specific
      circumstances, and that all inventions arising out of the individual’s
      relationship with the Company shall be the its exclusive property. These
      agreements may be breached, or unavailable, and in some instances, the Company
      may not have an appropriate remedy available for breach of the agreements.
      Furthermore, the Company’s competitors may independently develop substantially
      equivalent proprietary information and techniques, reverse engineer the
      Company’s information and techniques, or otherwise gain access to its
      proprietary technology. The Company may be unable to meaningfully protect its
      rights in trade secrets, technical know how and other non patented technology.





Although
      the Company’s trade secrets and technical know how are important, the Company’s
      continued access to the patents and ability to develop, and apply for, new
      patents is a significant factor in the development and commercialization of
      Huperzine A and other products. Aside from the general body of scientific
      knowledge from other drug processes and technology, these patents and processes,
      to the best of the Company’s knowledge and based upon its current scientific
      data, are the only intellectual property necessary to develop its proposed
      drugs. The Company does not believe that it is or will be knowingly violating
      any other patents in developing Huperzine A or its other products.





***The
      Company may have to resort to litigation to protect its rights for certain
      intellectual property, or to determine their scope, validity or
      enforceability.***





Enforcing
      or defending the Company’s rights is expensive, could cause diversion of its
      resources and may not prove successful. Any failure to enforce or protect the
      Company’s rights could cause it to lose the ability to exclude others from using
      Huperzine A or to develop or sell competing products.





***The
      Company may rely on third party contract research organizations, service
      providers and suppliers to support development and clinical testing of its
      products.***





Failure
      of any of these contractors to provide the required services in a timely manner
      or on reasonable commercial terms could materially delay the development and
      approval of the Company’s products, increase its expenses and materially harm
      its business, financial condition and results of operations.





Key
      components of the Company’s drug technologies may be provided by sole or limited
      numbers of suppliers, and supply shortages or loss of these suppliers could
      result in interruptions in supply or increased costs.




18




Certain
      components used in the Company’s research and development activities such as
      naturally occurring or synthetic Huperzine are currently purchased from a single
      or a limited number of sources primarily located in China in the case of
      naturally  occurring
      supplies. The reliance on a sole or limited number of suppliers could result
      in:





·
            potential
                delays associated with research and development and clinical and
                preclinical trials due to an inability to timely obtain a single
                or
                limited source component;





·
            potential
                inability to timely obtain an adequate supply;
                and





·
            potential
                of reduced control over pricing, quality and timely
                delivery.




The
      Company does not have long-term agreements with any of its suppliers, and
      therefore the supply of a particular component could be terminated without
      penalty to the supplier. Any interruption in the supply of components could
      cause the Company to seek alternative sources of supply or manufacture these
      components internally. If the supply of any components is interrupted,
      components from alternative suppliers may not be available in sufficient volumes
      within required timeframes, if at all, to meet the Company’s needs. This could
      delay the Company’s ability to complete clinical trials, obtain approval for
      commercialization or commence marketing, or cause the Company to lose sales,
      incur additional costs, delay new product introductions or harm the Company’s
      reputation. Further, components from a new supplier may not be identical to
      those provided by the original supplier. Such differences if they exist could
      affect product formulations or the safety and effect of the Company’s products
      that are being developed and delay regulatory approvals.





***The
      Company depends upon a limited number of suppliers for its supply of natural
      huperzine. The Company’s inability to obtain natural huperzine could harm its
      business.***




The
      number of available suppliers of natural huperzine is limited. The Company
      does
      not have a long-term supply contract with any of its current suppliers, and
      purchases natural huperzine on a purchase order basis. If the Company is unable
      to obtain sufficient quantities of natural huperzine when needed, or to develop
      a synthetic version of Huperzine A in the future, the Company’s ability to
      pursue its business plan could be delayed or reduced, or the Company may be
      forced to pay higher prices for the natural huperzine.




***Due
      to the Company’s limited marketing, sales and distribution experience, the
      Company may be unsuccessful in its efforts to sell its products, enter into
      relationships with third parties or develop a direct sales
      organization.***





The
      Company has yet to establish marketing, sales or distribution capabilities
      for
      its proposed products. Until such time as the Company’s products are further
      along in the regulatory process, the Company will not devote meaningful time
      and
      resources to this effort. At the appropriate time, the Company intends to enter
      into agreements with third parties to sell its products or the Company may
      develop its own sales and marketing force. The Company may be unable to
      establish or maintain third party relationships on a commercially reasonable
      basis, if at all. In addition, these third parties may have similar or more
      established relationships with the Company’s competitors.





If
      the
      Company does not enter into relationships with third parties for the sales
      and
      marketing of its products, the Company will need to develop its own sales and
      marketing capabilities. The Company has limited experience in developing,
      training or managing a sales force. If the Company chooses to establish a direct
      sales force, the Company may incur substantial additional expenses in
      developing, training and managing such an organization. The Company may be
      unable to build a sales force on a cost effective basis or at all. Any such
      direct marketing and sales efforts may prove to be unsuccessful. In addition,
      the Company will compete with many other companies that currently have extensive
      marketing and sales operations. The Company’s marketing and sales efforts may be
      unable to compete against these other companies. The Company may be unable
      to
      establish a sufficient sales and marketing organization on a timely basis,
      if at
      all.





The
      Company may be unable to engage qualified distributors. Even if engaged, these
      distributors may:




·
            fail
                to satisfy financial or contractual obligations to the
                Company;




19




·
            fail
                to adequately market the Company’s
                products;





·
            cease
                operations with little or no notice;
                or





·
            offer,
                design, manufacture or promote competing
                products.





If
      the
      Company fails to develop sales, marketing and distribution channels, the Company
      would experience delays in product sales and incur increased costs, which would
      harm the Company’s financial results. If the Company is unable to convince
      physicians as to the benefits of its intended products, it may incur delays
      or
      additional expense in its attempt to establish market acceptance.





Broad
      use
      of the Company’s drug technology may require physicians to be informed regarding
      its intended products and the intended benefits. The time and cost of such
      an
      educational process may be substantial. Inability to successfully carry out
      this
      physician education process may adversely affect market acceptance of the
      Company’s products. The Company may be unable to timely educate physicians
      regarding its intended products in sufficient numbers to achieve the Company’s
      marketing plans or to achieve product acceptance. Any delay in physician
      education may materially delay or reduce demand for the Company’s products. In
      addition, the Company may expend significant funds towards physician education
      before any acceptance or demand for the Company’s products is created, if at
      all.





***The
      Company will require additional funding which will be significant and may have
      difficulty raising needed capital in the future because of its limited operating
      history and business risks associated with the Company’s drug
      technology.***





The
      Company’s business currently does not generate significant revenue from the
      Company’s proposed products and its limited revenue may not be sufficient to
      meet its future capital requirements. The Company does not know when, or if,
      this will change. The Company has expended and will continue to expend
      substantial funds in the research, development and clinical and pre-clinical
      testing of its drug technology. The Company will require additional funds to
      conduct research and development, establish and conduct clinical and
      pre-clinical trials, establish commercial scale manufacturing arrangements
      and
      to provide for the marketing and distribution of its products. Additional funds
      may not be available on acceptable terms, if at all. If adequate funds are
      unavailable from any available source, the Company may have to delay, reduce
      the
      scope of or eliminate one or more of its research or development programs or
      product launches or marketing efforts which may materially harm the Company’s
      business, financial condition and results of operations.





The
      Company’s long term capital requirements are expected to depend on many factors,
      including:




·
            the
                number of potential products and technologies in
                development;





·
            continued
                progress and cost of the Company’s research and development programs;





·
            progress
                with pre-clinical studies and clinical trials;





·
            the
                time and costs involved in obtaining regulatory clearance;





·
            costs
                involved in preparing, filing, prosecuting, maintaining and enforcing
                patent claims;





·
            costs
                of developing sales, marketing and distribution channels and the
                Company’s
                ability to sell its drugs;





·
            costs
                involved in establishing manufacturing capabilities for clinical
                trial and
                commercial quantities of the Company’s
                drugs;





·
            competing
                technological and market
                developments;





·
            market
                acceptance or the Company’s
                products;




20




·
            costs
                for recruiting and retaining management, employees and consultants;
                and





·
            costs
                for training physicians.





The
      Company may consume available resources more rapidly than currently anticipated,
      resulting in the need for additional funding. The Company may seek to raise
      any
      necessary additional funds through the exercising of warrants, equity or debt
      financings, collaborative arrangements with corporate partners or other sources,
      which may be dilutive to existing stockholders or otherwise have a material
      effect on the Company’s current or future business prospects. In addition, in
      the event that additional funds are obtained through arrangements with
      collaborative partners or other sources, the Company may have to relinquish
      economic and/or proprietary rights to some of the Company’s technologies or
      products under development that the Company would otherwise seek to develop
      or
      commercialize by itself. If adequate funds are not available, the Company may
      be
      required to significantly reduce or refocus its development efforts with regards
      to its drug technology, compounds and drugs.





***The
      market for the Company’s products is rapidly changing and competitive, and new
      drug mechanisms, drug technologies, new therapeutics, new drugs and new
      treatments which may be developed by others could impair the Company’s ability
      to maintain and grow its business and remain
      competitive.***





The
      pharmaceutical and biotechnology industries are subject to rapid and substantial
      technological change. Developments by others may render the Company’s
      technologies and intended products noncompetitive or obsolete, or the Company
      may be unable to keep pace with technological developments or other market
      factors.





Technological
      competition from pharmaceutical and biotechnology companies, universities,
      governmental entities and others diversifying into the field is intense and
      is
      expected to increase. Many of these entities have significantly greater research
      and development capabilities and budgets than the Company do, as well as
      substantially more marketing, manufacturing, financial and managerial resources.
      These entities represent significant competition for the Company. Acquisitions
      of, or investments in, competing pharmaceutical or biotechnology companies
      by
      large corporations could increase such competitors’ financial, marketing,
      manufacturing and other resources.





The
      Company’s resources are limited and the Company may experience management,
      operational or technical challenges inherent in such activities and novel
      technologies.





***Competitors
      have developed or are in the process of developing technologies that are, or
      in
      the future may be, the basis for competition.***





Some
      of
      these technologies may have an entirely different approach or means of
      accomplishing similar therapeutic effects. The Company’s competitors may develop
      drug technologies and drugs that are safer, more effective or less costly than
      its intended products and, therefore, present a serious competitive threat
      to
      the Company.





***The
      Company has no manufacturing capabilities. If third-party manufacturers of
      the
      Company’s product candidates fail to devote sufficient time and resources to the
      Company’s concerns, or if their performance is substandard, its clinical trials
      and product introductions may be delayed.***





Currently,
      the Company has no internal manufacturing capabilities for any of its product
      candidates. The Company cannot be sure that the Company will be able to: (i)
      acquire or build facilities that will meet quality, quantity and timing
      requirements; or (ii) enter into manufacturing contracts with others on
      acceptable terms. Failure to accomplish these tasks would impede the Company’s
      efforts to bring its product candidates to market, which would adversely affect
      its business. Moreover, if the Company decides to manufacture one or more
      product candidates, the Company would incur substantial start-up expenses and
      would need to expand the Company’s facilities and hire additional personnel.




21




The
      Company currently expects to utilize third-party manufacturers to produce the
      drug compounds used in clinical trials and for the potential commercialization
      of future products. If the Company is unable to obtain or retain third-party
      manufacturers, the Company will not be able to commercialize its products.
      The
      Company’s reliance on contract manufacturers also will expose the Company to the
      following risks:





·
            contract
                manufacturers may encounter difficulties in achieving volume production,
                quality control and quality assurance and also may experience shortages
                in
                qualified personnel. As a result, the Company’s contract manufacturers
                might not be able to meet its clinical schedules or adequately manufacture
                the Company’s products in commercial quantities when required;





·
            switching
                manufacturers may be difficult because the number of potential
                manufacturers is limited. It may be difficult or impossible for the
                Company to find a replacement manufacturer quickly on acceptable
                terms, or
                at all;





·
            the
                Company’s contract manufacturers may not perform as agreed or may not
                remain in the contract manufacturing business for the time required
                to
                successfully produce, store or distribute the Company’s products;
                and





·
            if
                the Company’s primary contract manufacturer should be unable to
                manufacture any of its product candidates for any reason, or should
                fail
                to receive FDA approval or Drug Enforcement Administration approval,
                commercialization of the Company’s product candidates could be delayed
                which would negatively impact its
                business.





Third-party
      manufacturers also must comply with the FDA, the Drug Enforcement Administration
      and other regulatory requirements for their facilities. The Company does not
      have control over third-party manufacturers’ compliance with the regulations and
      standards established by these agencies. In addition, manufacture of product
      candidates on a limited basis for investigational use in animal studies or
      human
      clinical trials does not guarantee that large-scale, commercial production
      is
      viable. Small changes in methods of manufacture can affect the safety, efficacy,
      controlled release or other characteristics of a product. Changes in methods
      of
      manufacture, including commercial scale-up, can, among other things, require
      the
      performance of new clinical studies.





***The
      Company’s product development efforts may not result in commercial
      products.***





The
      Company intends to continue its aggressive research and development program.
      Successful product development in the biotechnology industry is highly
      uncertain, and very few research and development projects produce a commercial
      product. Products that appear promising in the early phases of development,
      such
      as in early human clinical trials, may fail to reach the market for a number
      of
      reasons, such as:





·
            the
                product did not demonstrate acceptable clinical trial results even
                though
                it demonstrated positive preclinical trial
                results;





·
            the
                product was not effective in treating a specified condition or
                illness;





·
            the
                product had harmful side effects on
                humans;





·
            the
                necessary regulatory bodies, such as the FDA, did not approve the
                Company’s product for an intended use;





·
            the
                product was not economical for the Company to commercialize;





·
            other
                companies or people have or may have proprietary rights over the
                Company’s
                product, such as patent rights, and will not let the Company sell
                it on
                reasonable terms, or at all; or





·
            the
                product is not cost effective in light of existing
                therapeutics.





As
      a
      result, there can be no assurance that any of the Company’s products currently
      in development will ever be successfully commercialized.




22




***If
      the Company fails to negotiate or maintain successful collaborative arrangements
      with third parties, the Company’s development and commercialization activities
      may be delayed or reduced.***





In
      the
      past, the Company has entered into, and expect to enter into in the future,
      collaborative arrangements with third parties, such as universities,
      governmental agencies, charitable foundations, manufacturers, contract research
      organizations and corporate partners, who provide the Company with funding
      and/or who perform research, development, regulatory compliance, manufacturing
      or commercialization activities relating to some or all of the Company’s product
      candidates. If the Company fails to secure or maintain successful collaborative
      arrangements, its development and commercialization activities may be delayed
      or
      reduced.





The
      Company currently depends and will continue to depend heavily on third parties
      for support in research and development and clinical and pre-clinical testing.
      The Company expects to conduct activities with Georgetown and Xel, among others,
      to provide the Company with access to a Huperzine A testing and for a
      transdermal Huperzine A patch. The Company also expects to conduct activities
      with Org Syn to develop synthetic methods to produce Huperzine A. Under certain
      circumstances, the universities, and other collaborators, may acquire certain
      rights in newly developed intellectual property developed in conjunction with
      the Company.





Research
      and development and clinical trials involve a complex process, and these
      universities’ facilities may not be sufficient. Inadequate facilities could
      delay clinical trials of the Company’s drugs and result in delays in regulatory
      approval and commercialization of its drugs, either of which would materially
      harm the Company’s business. The Company may utilize a portion of its available
      cash to establish an independent facility to replace or supplement university
      facilities.





These
      collaborative agreements can be terminated under certain conditions by the
      Company’s partners. The Company’s partners may also under some circumstances
      independently pursue competing products, delivery approaches or technologies.
      Even if the Company’s partners continue their contributions to the Company’s
      collaborative arrangements, they may nevertheless determine not to actively
      pursue the development or commercialization of any resulting products. Also,
      the
      Company’s partners may fail to perform their obligations under the collaborative
      arrangements or may be slow in performing their obligations. In addition, the
      Company’s partners may experience financial difficulties at any time that could
      prevent them from having available funds to contribute to these collaborations.
      In these circumstances, the Company’s ability to develop and market potential
      products could be severely limited.





***If
      the Company is unable to hire and retain additional qualified personnel, the
      Company’s ability to grow its business may be harmed.***





The
      Company is small and if unable to continue to attract, retain and motivate
      highly qualified management and scientific personnel and develop and maintain
      important relationships with leading academic institutions and scientists,
      may
      not be able to achieve its research and development objectives. Competition
      for
      personnel and academic collaborations is intense.





Although
      the Company has outsourced and intends to continue to outsource its development
      programs, the Company also may need to hire additional qualified personnel
      with
      expertise in preclinical testing, clinical research and testing, government
      regulation, formulation and manufacturing and sales and marketing. The Company
      competes for qualified individuals with numerous biopharmaceutical companies,
      universities and other research institutions and other emerging entrepreneurial
      companies. Competition for such individuals, particularly in the New York City
      area, where the Company is located, is intense and the Company cannot be certain
      that the Company’s search for such personnel will be successful. Attracting and
      retaining qualified personnel will be critical to the Company’s success. Skilled
      employees in the Company’s industry are in great demand. The Company is
      competing for employees against companies located in the New York metropolitan
      area that are more established than the Company is and has the ability to pay
      more cash compensation than the Company does. The Company will require
      experienced scientific personnel in many fields in which there are a limited
      number of qualified personnel and will have to compete with other technology
      companies and academic institutions for such personnel. As a result, depending
      upon the success and the timing of clinical tests, the Company may continue
      to
      experience difficulty in hiring and retaining highly skilled employees,
      particularly scientists. If the Company is unable to hire and retain skilled
      scientists, its business, financial condition, operating results and future
      prospects could be materially adversely affected.




23




***If
      users of the Company’s products are unable to obtain adequate reimbursement from
      third party payors, or if new restrictive legislation is adopted, market
      acceptance of the Company’s products may be limited and the Company may not
      achieve anticipated revenues.***





The
      continuing efforts of government and insurance companies, health maintenance
      organizations and other payors of healthcare costs to contain or reduce costs
      of
      health care may affect the Company’s future revenues and profitability, and the
      future revenues and profitability of the Company’s potential customers,
      suppliers and collaborative partners and the availability of capital. For
      example, in certain foreign markets, pricing or profitability of prescription
      pharmaceuticals is subject to government control. In the United States, given
      recent federal and state government initiatives directed at lowering the total
      cost of health care, the U.S. Congress and state legislatures will likely
      continue to focus on health care reform, the cost of prescription
      pharmaceuticals and on the reform of the Medicare and Medicaid systems. While
      the Company cannot predict whether any such legislative or regulatory proposals
      will be adopted, the announcement or adoption of such proposals could materially
      harm the Company’s business, financial condition and results of operations.





The
      Company’s ability to commercialize its products will depend in part on the
      extent to which appropriate reimbursement levels for the cost of its products
      and related treatment are obtained by governmental authorities, private health
      insurers and other organizations, such as HMOs. Third party payors are
      increasingly challenging the prices charged for medical drugs and services.
      Also, the trend toward managed health care in the United States and the
      concurrent growth of organizations such as HMOs, which could control or
      significantly influence the purchase of health care services and drugs, as
      well
      as legislative proposals to reform health care or reduce government insurance
      programs, may all result in lower prices for or rejection of the Company’s
      drugs. The cost containment measures that health care payors and providers
      are
      instituting and the effect of any health care reform could materially harm
      the
      Company’s ability to operate profitably.





***Changes
      in the healthcare industry that are beyond the Company’s control may be
      detrimental to its business.***





The
      healthcare industry is changing rapidly as the public, government, medical
      professionals and the pharmaceutical industry examine ways to broaden medical
      coverage while controlling the increase in healthcare costs. Potential changes
      could put pressure on the prices of prescription pharmaceutical products and
      reduce the Company’s business or prospects. The Company cannot predict when, if
      any, proposed healthcare reforms will be implemented, and these changes are
      beyond the its control.





***The
      Company’s limited operating history makes evaluating its common stock more
      difficult, and therefore, investors have limited information upon which to
      rely.***





An
      investor can only evaluate the Company’s business based on a limited operating
      history. The Company’s operations are expected to change dramatically as the
      Company evolves from primarily a “virtual” technology holding company with no
      full-time employees to a capitalized company with larger internal operations
      and
      costs. This limited history may not be adequate to enable an investor to fully
      assess the Company’s ability to develop Huperzine A and proposed drugs, obtain
      FDA approval, and achieve market acceptance of the Company’s proposed products
      and respond to competition, or conduct such affairs as are presently
      contemplated.





***The
      Company does not currently have specific plans for its available cash and its
      management will have broad discretion in determining future
      allocation.***





The
      principal purposes of the Company’s cash are to conduct research and development
      of Huperzine A and other products, pursue steps towards regulatory approval for
      those products, arrange for synthesis and manufacturing of products, hire
      employees and expand the Company’s access to facilities. Currently, the Company
      does not have specific plans for all of its available cash. The Company expects
      to use a percentage of its cash for general corporate purposes, including
      working capital, salaries, professional fees, pursuing further financing
      alternatives, development of products, regulatory approvals and capital
      expenditures.




24




***The
      Company’s compliance with the reporting requirements of federal securities laws
      and SEC rules concerning internal controls may be time consuming, difficult
      and
      expensive.***





The
      Company is a public reporting company and, accordingly, subject to the
      information and reporting requirements of the Exchange Act and other federal
      securities laws, including compliance with the Sarbanes-Oxley Act. It may be
      time consuming, difficult and costly for the Company to develop and implement
      the internal controls and reporting procedures required by the Sarbanes-Oxley
      Act. The costs of preparing and filing annual and quarterly reports, proxy
      statements and other information with the SEC and furnishing audited reports
      to
      stockholders will cause the Company’s expenses to be higher than they would be
      if the Company had remained privately-held and not consummate the Merger. The
      Company may need to hire additional financial reporting, internal controls
      and
      other finance personnel in order to develop and implement appropriate internal
      controls and reporting procedures. If the Company is unable to comply with
      the
      internal controls requirements of the Sarbanes-Oxley Act, the Company may not
      be
      able to obtain the independent accountant certifications required by the
      Sarbanes-Oxley Act. Additionally, the Company will incur substantial expenses
      in
      connection with the preparation of a registration statement and related
      documents to register certain shares of the Company’s common stock which it is
      obligated to register.





***Because
      the Company became public by means of a reverse merger, it may not be able
      to
      attract the attention of major brokerage firms.***





There
      may
      be risks associated with the Company becoming public through a “reverse merger.”
Securities analysts of major brokerage firms may not provide coverage of the
      Company since there is no incentive to brokerage firms to recommend the purchase
      of the Company’s common stock. No assurance can be given that brokerage firms
      will, in the future, want to conduct any secondary offerings on behalf of the
      Company.





**Risks
      Relating to the Company’s Common Stock**





***Applicable
      SEC rules governing the trading of “penny stocks” may limit the trading and
      liquidity of the Company’s common stock in the future, which could affect its
      trading price.***





The
      Company’s common stock is quoted on the OTCBB. If the Company’s common stock
      trades below $5.00 per share in the future, it may be considered a “penny stock”
and subject to SEC rules and regulations which impose limitations upon the
      manner in which such shares may be publicly traded. These regulations require
      the delivery, prior to any transaction involving a penny stock, of a disclosure
      schedule explaining the penny stock market and the associated risks. Under
      these
      regulations, certain brokers who recommend such securities to persons other
      than
      established customers or certain accredited investors must make a special
      written suitability determination regarding such a purchaser and receive such
      purchaser’s written agreement to a transaction prior to sale. These regulations
      have the effect of limiting the trading activity of the common stock and
      reducing the liquidity of an investment in the common stock.





***The
      market price of the Company’s common stock is likely to be highly volatile and
      subject to wide fluctuations.***





The
      market price of the Company’s common stock is likely to be highly volatile and
      could be subject to wide fluctuations in response to a number of factors, some
      of which are beyond the Company’s control, including:





·
            announcements
                of new products or services by the Company’s
                competitors;





·
            quarterly
                variations in the Company’s revenues and operating
                expenses;





·
            announcements
                of technological innovations or new products or services by the Company;
                and





·
            sales
                of the common stock by the Company’s founders or other selling
                stockholders.




***The
      common stock is controlled by insiders.***





Alan
      Kestenbaum, Reuben Seltzer and certain affiliated parties beneficially own
      a
      large percentage of the Company’s outstanding shares of common stock. Such
      concentrated control of the Company may adversely affect the price of the common
      stock. The Company’s principal security holders may be able to control matters
      requiring approval by security holders, including the election of directors.
      Such concentrated control may also make it difficult for stockholders to receive
      a premium for their shares of common stock in the event of a merger with a
      third
      party or different transaction that requires stockholder approval. In addition,
      certain provisions of Delaware law could have the effect of making it more
      difficult or more expensive for a third party to acquire, or of discouraging
      a
      third party from attempting to acquire, control of the Company. Accordingly,
      under certain circumstances, investors may have no effective voice in the
      management of the Company.




25




***The
      Company does not expect to pay dividends for the foreseeable
      future.***





The
      Company currently intends to retain any future earnings to support the
      development and expansion of its business and does not anticipate paying cash
      dividends in the foreseeable future. Any payment of future dividends will be
      at
      the discretion of the board of directors after taking into account various
      factors, including but not limited to the Company’s financial condition,
      operating results, cash needs, growth plans and the terms of any credit
      agreements that the Company may be a party to at the time.





***Mergers
      of the type the Company completed are usually heavily scrutinized by the SEC
      and
      the Company may encounter difficulties or delays in obtaining future regulatory
      approvals.***





Historically,
      the SEC and Nasdaq have not generally favored transactions in which a
      privately-held company merges into a largely inactive company with publicly
      traded stock, and there is a significant risk that the Company may encounter
      difficulties in obtaining the regulatory approvals necessary to conduct future
      financing or acquisition transactions. On June 28, 2005, the SEC adopted rules
      dealing with private company mergers into dormant or inactive public companies.
      As a result, it is likely that the Company will be scrutinized carefully by
      the
      SEC and possibly by the National Association of Securities Dealers or Nasdaq,
      which could result in difficulties or delays in achieving SEC clearance of
      any
      future registration statements or other SEC filings that the Company may pursue.
      As a consequence, the Company’s financial condition and the value and liquidity
      of the Company’s shares may be negatively impacted.





**Item
      2. Description of Property.**





The
      Company leases office space at One Penn Plaza, Suite 1503, New York, New York
      10119





**Item
      3. Legal Proceedings.**





The
      Company is not a party to any pending legal proceedings





**Item
      4. Submission of Matters to a Vote of Security Holders.**




The
      Company did not submit any matter to a vote of security holders through the
      solicitation of proxies or otherwise during the fourth quarter of the fiscal
      year ended December 31, 2006.





**PART
      II**





**Item
      5.Market for Common Equity, Related Stockholder Matters and Small Business
      Issuer Purchases of Equity Securities**





The
      Company’s common stock is quoted on the Over-the-Counter Bulletin Board under
      the symbol “NHPI.”





The
      following table sets forth the range of the high and low bid prices for our
      common stock since February 2, 2006, the first day our stock was traded on
      the
      Over-the-Counter Bulletin Board market, as reported by the National Quotation
      Bureau, and represents interdealer quotations, without retail markup, markdown
      or commission and may not be reflective of actual transactions.





Bid
                Price Per ShareHigh
            
            LowFebruary
                2006 - March 2006
            
            $
            10.73
            
            $
            5.49April
                2006 - June 2006
            
            $
            9.15
            
            $
            5.00July
                2006 - September 2006
            
            $
            8.00
            
            $
            5.25October
                2006 - December 2006
            
            $
            7.50
            
            $
            5.00January
                2007 - March 2007
            
            $
            7.25
            
            $
            4.75




26




**Stockholders**





As
      of
      March 27, 2006, the Company believes there were approximately 126 holders of
      record of its common stock. The Company believes that a greater number of
      holders of its common stock are “street name” or beneficial holders, whose
      shares are held of record by banks, brokers and other financial
      institutions.





**Dividends**





The
      Company has never declared or paid any cash dividends on its common stock.
      The
      Company currently intends to retain all available funds and any future earnings
      to fund the development and growth of its business and does not anticipate
      declaring or paying any cash dividends on its common stock in the foreseeable
      future.





**Recent
      Sales of Unregistered Securities**





The
      Company did not sell any unregistered equity securities during the year ended
      December 31, 2006 that were not previously reported on a Quarterly Report on
      Form 10-QSB or a Current Report on Form 8-K.





**Item
      6. Management’s Discussion and Analysis or Plan of
      Operation**




**FORWARD-LOOKING
      STATEMENTS**




This
      Annual Report on Form 10-KSB contains forward-looking statements (as defined
      in
      Section 27A of the Securities Act and Section 21E of the Exchange Act). To
      the
      extent that any statements made in this Report contain information that is
      not
      historical, these statements are essentially forward-looking. Forward-looking
      statements can be identified by the use of words such as “expects,” “plans”
“will,” “may,” “anticipates,” “believes,” “should,” “intends,” “estimates,”
“projects” and other words of similar meaning. These statements are subject to
      risks and uncertainties that cannot be predicted or quantified and consequently,
      actual results may differ materially from those expressed or implied by such
      forward-looking statements. Such risks and uncertainties include those outlined
      in “Risk Factors” found within our Annual Report on Form 10-KSB and include,
      without limitation, the Company’s early stage, limited history, limited
      revenues, limited cash and ability to raise capital to finance the growth of
      the
      Company’s operations, the ability of the Company to develop its products and
      obtain necessary governmental approvals, the Company’s ability to protect its
      proprietary information, the Company’s ability to attract or retain qualified
      personnel, including scientific and technical personnel and other risks detailed
      from time to time in the Company’s filings with the SEC, or
      otherwise.





All
      references to the “Company” for periods prior to the closing of the Merger refer
      to Marco, and references to the “Company” for periods subsequent to the closing
      of the Merger refer to Neuro-Hitech and its subsidiaries.





THE
      FOLLOWING DISCUSSION SHOULD BE READ TOGETHER WITH THE INFORMATION CONTAINED
      IN
      THE FINANCIAL STATEMENTS AND RELATED NOTES INCLUDED ELSEWHERE IN THIS ANNUAL
      REPORT ON FORM 10-KSB.





The
      Company is an early stage pharmaceutical company engaged in the acquisition
      and
      development of therapies for Alzheimer’s
      disease and other degenerative neurological disorders .
      The
      Company focuses particularly on technologies that address large unmet medical
      needs and have the potential to enter clinical development within 12 to 24
      months after acquisition, and on driving development in a rapid, cost-effective
      manner.




27




The
      Company’s Current Portfolio





The
      Company’s most advanced product candidate, Huperzine A, is in Phase II clinical
      trials in the U.S. and is being tested for efficacy and safety in the treatment
      of mild to moderate Alzheimer’s disease. Huperzine A is a cholinesterase
      inhibitor that the Company believes may be effective in the treatment of
      Alzheimer’s disease and Mild Cognitive Impairment (“MCI”), although, to date,
      its efforts have been focused upon Huperzine A’s effectiveness in Alzheimer’s
      disease.





The
      Company is also studying Huperzine A in transdermal form. The Company believes
      that Huperzine A can effectively be delivered transdermally because of its
      low
      dosage requirement and low molecular weight. The Company believes that a
      transdermal patch is the ideal way to deliver any Alzheimer’s treatment because
      the patch may provide the drug for up to five days and because transdermal
      delivery is a more efficient way to deliver the drug, avoiding the
      gastrointestinal tract.




Worldwide
      research thus far suggests that, in addition to Alzheimer’s disease, Huperzine A
      may be effective in treating other dementias and myasthenia gravis. Also, it
      has
      potential neuroprotective properties that may render it useful as a protection
      against neurotoxins, and it has an anti-oxidant effect.





In
      addition to Huperzine A, the Company is currently working on two major
      pre-clinical development programs: one for second generation anti-amyloid
      compound for the treatment of Alzheimer’s disease and, the second program
      involves the development of a series of compounds targeted to treat and prevent
      epilepsy.





**History**





The
      Company was originally formed on February 1, 2005, as Northern Way Resources,
      Inc., a Nevada corporation, for the purpose of acquiring exploration and early
      stage natural resource properties. On January 24, 2006, the Company entered
      into
      an Agreement and Plan of Reorganization (the “Merger Agreement”) by and among
      the Company, Marco Hi-Tech JV Ltd., a privately held New York corporation
      (“Marco”), and Marco Acquisition I, Inc., a newly formed wholly-owned Delaware
      subsidiary of ours (“Acquisition Sub”). Upon closing of the transactions
      contemplated under the Merger Agreement (the “Merger”), Acquisition Sub was
      merged with and into Marco, and Marco became a wholly-owned subsidiary of the
      Company. The Merger was consummated on January 24, 2006, and in connection
      with
      that Merger, the Company changed its name to Neuro-Hitech Pharmaceuticals,
      Inc.
      The Company subsequently changed its name to Neuro-Hitech, Inc. on August 11,
      2006.





Marco
      was
      incorporated in the State of New York on December 11, 1996. Through 2005, Marco
      conducted analytical work and clinical trials of Huperzine A and was focused
      primarily on licensing proprietary Huperzine A technology from independent
      third-party developers and investigators, including the Mayo Foundation, and
      until such time operated with no full-time employees and minimal internal
      resources. In addition, from time to time, Marco has imported and sold
      inventories of natural huperzine and other dietary supplement ingredients to
      vitamin and supplement suppliers to generate revenues. In 2005, Marco decided
      to
      raise additional capital to pursue additional approvals and undertake necessary
      studies for the development and commercialization of Huperzine A, including
      funding development and securing rights to third-party transdermal patch
      technology.





Upon
      the
      Merger, the Company abandoned the line of business pursued by Northern Way
      Resources prior to the Merger.





On
      November 29, 2006, the Company completed its acquisition by merger of
      Q-RNA, Inc. (“Q-RNA”), a New York-based biotechnology company focused on
      diseases such as Alzheimer’s, epilepsy and Parkinson’s disease, pursuant to the
      Agreement and Plan of Merger with QA Acquisition Corp., a Delaware corporation,
      QA Merger LLC, a Delaware limited liability company, Q-RNA and Dr. David
      Dantzker, as the “Representative” of the Q-RNA securityholders.




28




**Plan
      of Operation**





The
      Company’s most advanced product candidate, Huperzine A, is in Phase II clinical
      trials in the U.S. and is being tested for efficacy and safety in the treatment
      of mild to moderate Alzheimer’s disease. The Company anticipates concluding
      patient recruitment by the end of April 2007 and obtaining top-line data during
      the fourth quarter of 2007.





The
      Company is also studying Huperzine A in transdermal form. The Company expects
      to
      begin Phase I clinical trials in the first quarter of 2008 and to report study
      results in the latter half of 2008.





Upon
      obtaining FDA approval for Huperzine A, it is anticipated that the Company’s
      collaborative partners, if the Company is successful in obtaining collaborative
      partners, will be primarily responsible for the manufacturing, sale and
      distribution of Huperzine A products. Efforts will be made to reach licensing
      agreements with collaborative partners to participate in earlier phases of
      the
      drug development process for the Company’s products, reducing the likelihood of
      the need for it to obtain financing for the additional research and development
      costs. This strategy may enable the Company to gain access to the marketing
      expertise and resources of the Company’s potential partners, and to lower its
      capital requirements.





The
      principal uses of the Company’s cash and cash equivalents are concluding the
      Phase II clinical trials, developing alternative delivery technologies,
      improving on the synthetic processes, and continuing to fund pre-clinical
      compounds associated with the agreements with PARTEQ. Although the Company
      has
      developed plans related to its operations, management continues to retain
      significant flexibility for the uses of Company funds. In additional to meeting
      its working capital needs, the Company may also use its cash and cash
      equivalents to acquire additional products or technologies.





The
      amounts and the timing of the Company’s expenditures will depend upon numerous
      factors, including the progress of the Company’s efforts. The Company’s estimate
      of its allocation of resources is based upon the Company’s current plans and
      estimates regarding anticipated expenditures. Actual expenditures may vary
      substantially from these estimates, and the Company may find it necessary or
      advisable to reallocate its resources for other purposes.





Although
      the Company has developed initial plans and assumptions related to its
      operations, management retains significant flexibility in applying a substantial
      portion of the net proceeds of the offerings. Pending use of the net proceeds,
      the Company may invest the net proceeds of the offerings in short-term,
      interest-bearing, investment-grade securities or accounts.





The
      Company has generated limited **** revenue
      from operations to date, and expects to continue generating limited operating
      revenue for several years. Substantially all of the Company’s operations to date
      have been funded through the sale of its securities, and the Company expects
      this to continue to be the case for the foreseeable future.





The
      Company anticipates, based on current plans and assumptions relating to
      operations, that its cash and cash equivalents are sufficient to satisfy its
      contemplated cash requirements to implement its business plan for at least
      the
      next twelve months. In the event that the Company’s cash and cash equivalents
      prove to be insufficient to fund the implementation of its business plan (due
      to
      a change in the Company’s plans or a material inaccuracy in its assumptions, or
      as a result of unanticipated expenses, technical difficulties or other
      unanticipated problems), the Company will be required to seek additional
      financing sooner than anticipated in order to proceed with such implementation.
      Additional funds may not be available on acceptable terms, if at all. If
      adequate funds are unavailable the Company may have to delay, reduce the scope
      of or eliminate one or more of its research or development programs, product
      launches or marketing efforts which may materially harm the Company’s financial
      condition and operations.





**Results
      of Operations**





The
      following discussion provides a comparison of the Company’s results from
      operations for the year ended December 31, 2006 to the year ended December
      31,
      2005.


29


The
      Company had revenues from operations of $304,240 for the year ended December
      31,
      2006, a 46.02% increase from the $208,343 in revenue achieved from the year
      ended December 31, 2005. The increase in revenue was a result of an increase
      in
      product sales to the Company’s single customer of natural huperzine.  The
      revenue increase is due solely to the sale of natural huperzine.




Cost
      of
      goods sold as a percentage of the Company’s revenue was 51% for the year ended
      December 31, 2006, compared with 49% for the year ended December 31, 2005.
      The
      Company’s cost of goods sold remained relatively constant as a percentage of the
      Company’s revenue as the Company continues to purchase its natural huperzine
      from the same supplier as the prior year on substantially similar
      terms.





The
      Company’s total selling, general and administrative expenses increased from
      $389,706 for the year ended December 31, 2005 to $1,765,486 for the year ended
      December 31, 2006. This increase was the result of the Company’s expansion of
      its executive management and salaries and benefits in response to the
      acquisition of Q-RNA. Additionally, a portion of the increase in the selling,
      general and administrative expenses from the prior year is attributable to
      the
      increased costs associated with being a public company.





The
      Company’s research and development costs increased from $678,798 for the year
      ended December 31, 2005 to $19,480,501 for the year ended December 31,
      2006.  As a result of its acquisition of Q-RNA, and in accordance with FASB
      Statement No. 4, “Applicability of FASB Statement No. 2 to Business Combinations
      Accounted for by the Purchase Method”, the Company assigned as in-process
      research and development, $16,805,787, which represents a substantial portion
      of
      the total costs of the Q-RNA acquisition. The acquisition of Q-RNA provided
      the
      Company with intellectual property and a pipeline of preclinical compounds.
      The
      Company believes the intellectual property and compounds should be expensed
      in
      the year of the acquisition due to the Company’s inability to determine an
      alternative future use in accordance with the aforementioned accounting
      pronouncement. The increase in other research and development expenses increased
      from $678,798 for the year ended December 31, 2005 to $2,674,714 for the year
      ended December 31, 2006 as a result of the expansion of the Company’s clinical
      development portfolio for Huperzine A. The Company expects operating expenses
      in
      2007 to increase further beyond fourth quarter 2006 levels as it continues
      to
      expand its Huperzine research and development activities, begin its planned
      IND
      for the trandsdermal patch and increase its headcount to staff these activities.





In
      December 2003, the Company entered into a clinical research agreement, which
      was
      amended in November 2005, with Georgetown pursuant to which Georgetown will
      provide the Company with Phase II research on Huperzine A. The costs associated
      with this agreement total $3,146,667 and will be partially funded by the
      National Institutes of Health. The Company’s portion of the total cost is
      $1,846,667 and payable in installments upon the achievement of certain
      milestones.  On
      December 8, 2006, the Company announced the expansion in the size of the Phase
      II clinical trial by 60 participants, an increase of 40%.  The
      Company’s portion of the total cost increased by another $1,934,270 and is
      payable in installments. This agreement may be terminated by either party upon
      30 days notice. The Company expects to make additional payments to Georgetown
      of
      approximately $1,850,000 until the conclusion of the Phase II clinical trials
      which the Company expects to occur later this year.





On
      February 1, 2006, the Company entered into an exclusive development agreement
      with Org Syn for the development by Org Syn of synthetic Huperzine A, in
      accordance with the terms of the Agreement. Org Syn received an aggregate of
      $209,727 upon the execution of the Agreement and may receive up to an additional
      $209,727 upon the achievement of certain milestones for services rendered under
      the Agreement.





On
      March
      15, 2006, the Company entered into a Development Agreement with XEL for XEL
      to
      develop a Huperzine A transdermal delivery system (the “Product”). Under the
      terms of the agreement, the Company paid XEL a $250,000 fee upon the execution
      of the Agreement and will pay XEL $92,500 per month during the development
      of
      the Product, which development is estimated to occur in the latter half of
      2007
      in accordance with the original estimates and the existing schedule. The monthly
      payment is subject to quarterly adjustment and subject to a limit on aggregate
      development cost overruns of $250,000. **** XEL
      has
      agreed to pay any cost overruns in excess of $250,000. The Company expects
      the
      continued development and the achievement of certain milestones will require
      the
      Company to make additional payments in calendar year 2007 of approximately
      $655,500 under the terms of the agreement.




30




As
      part
      of the acquisition of Q-RNA, the Company assumed exclusive license agreements
      with PARTEQ. Under the terms of the exclusive PARTEQ Licensing Agreement the
      Company made an initial one-time license fee of C$25,000 and is obligated to
      pay
      fixed annual fees of $256,802 for the Alzheimer’s research. The Company may also
      be required to make quarterly royalty payments of 3% of net sales of the
      licensed products, with a minimum annual royalty of C$10,000 for 2007, C$20,000
      for 2008, C$30,000 for 2009 and C$40,000 for 2010 and each subsequent calendar
      year. Until such time as the Company has a licensed product, the Company will
      not have to make any quarterly payments. The Company is also obligated to make
      the following milestone payments: C$100,000 upon completion of a Phase I trial
      of a licensed product, C$250,000 upon completion of a Phase II trial of a
      licensed product, and C$1,000,000 upon the first FDA approval (as such term
      is
      defined in the PARTEQ Licensing Agreement). The Company does not currently
      anticipate having a licensed product in the near term. The Company also has
      the
      right to sub-license with the payment of 20% of all non-royalty sublicensing
      consideration.





Under
      the
      terms of the PARTEQ Licensing Option Agreement, the Company made an initial
      payment of C$10,000. The Company has also paid C$48,600 to PARTEQ under the
      terms of this agreement during the calendar year ended December 31, 2006. If
      the
      Company exercises its option, the Company will make a non-refundable,
      non-creditable license payment of C$17,500 at the time of such exercise and
      will
      be required to make quarterly royalty payments of 3% of net sales of the
      licensed products, with a minimum annual royalty of C$10,000 through the second
      anniversary of the license, C$20,000 through the third anniversary of the
      license, C$30,000 through the fourth anniversary of the license and C$40,000
      through the fifth anniversary of the license and each subsequent anniversary.
      The Company does not anticipate having a licensed product in the near term
      and
      until such time will not be required to make quarterly payments. If the Company
      exercises its option, the Company is also obligated to make the following
      milestone payments: C$100,000 upon completion of a Phase I trial of a licensed
      product, C$250,000 upon completion of a Phase II trial of a licensed product,
      and C$1,000,000 upon the first FDA approval (as such term is defined therein).
      If the Company exercises its option, the Company also has the right to
      sub-license with the payment of 20% of all non-royalty sublicensing
      consideration. ****





**Liquidity
      and Capital Resources**





During
      2006, the Company issued 3,026,204 shares of its Common Stock in private
      placements of the Company’s securities, raising gross proceeds of $8,508,531.
      Costs and expenses related to these private offerings, including, placement
      agent, legal, accounting, printing fees, totaled in aggregated, $353,127 and
      were charged to additional paid-in capital.





Prior
      to
      the closing of the Merger, the Company’s predecessor, Marco completed a private
      offering in which Marco received total gross proceeds of $996,006, which after
      the closing of the Merger were converted into 664,004 shares of the Company’s
      common stock.




Between
      January 2006 and March 2006, the Company received total gross proceeds of
      $4,375,000 from the private placement with accredited investors of an aggregate
      of 1,750,000 shares of the Company’s common stock and warrants to purchase
      437,500 shares of the Company’s common stock. The common stock was sold in the
      offering at $2.50 per share and the exercise price of the warrants was $5.00
      per
      share.





In
      November 2006, the Company received total gross proceeds of $3,137,525 from
      the
      private placement with accredited investors receiving an aggregate of 612,200
      shares of the Company’s common stock and warrants to purchase 306,100 shares of
      the Company’s common stock. The common stock was sold in the offering at $5.125
      per share and the exercise price of the warrants was $7.00 per
      share.





**Item
      7. Financial Statements**




The
      Company’s Financial Statements and the Report of the Independent Accountants
      appear at the end of this annual report.




**Item
      8. Changes in and Disagreements With Accountants on Accounting and Financial
      Disclosure**




Not
      applicable.




31




**Item
      8A. Controls and Procedures**





Not
      applicable.





**Item
      8B. Other Information**





None.




32


**PART
      III**




**Item
        9. Directors, Executive Officers, Promoters, Control Persons and Corporate
        Governance; Compliance with Section 16(a) of the Exchange Act**
 
 The
        following sets forth certain information with regard to the directors, executive
        officers and certain significant employees of the Company (ages are as of
        December 31, 2006):
 
 **Name**
              **Age**
              **Position**Reuben
                  Seltzer
              50
              President,
                  Chief Executive Officer and DirectorAlan
                  Kestenbaum
              45
              Executive
                  Vice President and DirectorDavid
                  Barrett
              31
              Chief
                  Financial OfficerL.
                  William McIntosh
              61
              Chief
                  Operating Officer and DirectorWilliam
                  Wong
              59
              Chief
                  Scientific OfficerJohn
                  Abernathy
              69
              DirectorMark
                  Auerbach
              68
              DirectorDavid
                  Dantzker
              63
              DirectorJay
                  Lombard
              46
              Director
 
 **Reuben
        Seltzer** has been
        serving as a director of Neuro-Hitech and its President and Chief Executive
        Officer since January 2006. Mr. Seltzer has been Chief Executive and President
        of Marco since 1996, president of Marco LLC, since January 2002 and a director
        and consultant for Hi-Tech Pharmacal Co., Inc., a pharmaceutical company
        since
        1992.
 
 **Alan
        Kestenbaum** has been
        serving as a director of Neuro-Hitech and its Executive Vice President since
        January 2006. Mr. Kestenbaum founded in 1985, and is currently Chief Executive
        Officer of, Marco International Corp., an international finance investment
        and
        trading company specializing in raw materials. In March 2004, Mr. Kestenbaum
        founded and is currently Chairman and Chief Executive Officer of Globe Specialty
        Metals, Inc. Mr. Kestenbaum also serves as a director for Wolverine Tube,
        Inc.
 
 **David
        Barrett** has been
        serving as Chief Financial Officer since April 2006. Between January 2005
        and
        April 2006, Mr. Barrett had been serving as Chief Financial Officer of Overture
        Financial Services, LLC, a company specializing in construction and management
        of investment platforms for financial intermediaries. Between September 2003
        and
        January 2005, Mr. Barrett served in a variety of capacities, most recently
        as
        Chief Financial Officer of Overture Asset Managers, LLC, an asset management
        holding company that partners, acquires and manages investment managers with
        complementary investment products. Between June 1999 and September 2003,
        Mr.
        Barrett was employed by Deloitte & Touche where he served in a variety of
        capacities, most recently as Senior Consultant in merger and acquisition
        services.
 
 **L.
        William McIntosh** has been
        serving as a director of Neuro-Hitech and its Chief Operating Officer since
        November 2006. Prior to joining the Company, Mr. McIntosh spent 30 years
        within
        the pharmaceutical and biotechnology industries in a variety capacities
        including marketing, sales, business development, product development and
        general management. Immediately prior to joining the Company, he served as
        a
        director and Chief Executive Officer of Q-RNA between August 2004 and November
        2006. Prior to that, Mr. McIntosh served as Principal and Managing Director
        of
        Novatures Consulting Group between June 2003 and July 2004. Between August
        2001
        and May 2003, Mr. McIntosh served as President and CBO of FASgen, Inc. Mr.
        McIntosh has also served in senior positions at Merck & Co., Inc., Medco
        Containment Services, Boehringer Mannheim Pharmaceuticals Corporation, Zynaxis,
        Inc., Smith-Kline Beecham Pharmaceuticals, VIMRx Pharmaceuticals, Inc. and
        Nexell Therapeutics, Inc.
  **William
        Wong** has been
        serving as Chief Scientific Officer since November 2006. Immediately prior
        to
        joining the Company, Dr. Wong worked in a variety of management capacities
        at
        pharmaceutical development, biotechnology and medical device companies during
        his twenty-five year career, most recently at Q-RNA, where he served as Vice
        President of Product Development, between August 2002 and November 2006.
        Prior
        to that, he served as Principal at Novatures Consulting Group. He has served
        on
        the senior management teams at Lynx Therapeutics, IntraCel Corporation, E.I.
        DuPont Co. and Becton-Dickinson Corp. Dr. Wong received his Ph.D. from the
        University of Rochester School of Medicine in the Department of Microbiology
        and
        Immunology.
  33
  **John
        Abernathy** has
        been
        a director of Neuro-Hitech since January 2006. Mr. Abernathy served as Chief
        Operating Officer of Patton Boggs LLP, a law firm, from January 1995 until
        his
        retirement in May 2004, and as managing partner of the accounting firm BDO
        Seidman from 1983 to 1990. Since July 2001, Mr. Abernathy has served on the
        board of directors of Par Pharmaceutical Company, Inc. (“Par”) and as a chairman
        of its audit committee since September 2003. Mr. Abernathy is also a director
        of
        Sterling Construction Company, Inc., a civil construction company and chairs
        its
        audit committee.
 
 **Mark
        Auerbach** has
        been
        Chairman of the board of directors of Neuro-Hitech since January 2006. Mr.
        Auerbach has served as Executive Chairman of the board of directors since
        September 2003, and as director since 1990, of Par, and as a director of
        Optimer
        Pharmaceuticals, Inc., a biopharmaceutical company with a portfolio of
        late-stage anti-infective products and a range of preclinical antibiotics
        from
        carbohydrate drug discovery platform, since May 2005. From June 1993 through
        December 2005, Mr. Auerbach has served as Senior Vice President and Chief
        Financial Officer of Central Lewmar L.P., a distributor of fine
        papers.
 
 **David
        Dantzker** has
        been
        serving as a director of Neuro-Hitech since November 2006. Dr. Dantzker has
        been
        a general partner at Wheatley MedTech Partners, L.P., a New York-based venture
        capital firm since January 2001. He has served on the faculty and in leadership
        positions of four major research-oriented medical schools and has authored
        or
        co-authored 130 research papers and five textbooks. He is an internationally
        recognized expert in the area of pulmonary medicine and critical care. Prior
        to
        serving with Wheatley Partners, Dr. Dantzker served as Chief Executive Officer
        of Redox Pharmaceuticals Corporation from November 2000 until October 2001.
        Dr.
        Dantzker served as President of Long Island Jewish Medical Center from July
        1993
        to October 1997 and President of North Shore—LIJ Health System from October 1997
        until May 2000. Dr. Dantzker is currently chairman of the board of directors
        of
        Versamed, Inc. and Oligomerix and a director of CNS, Visionsense, Ltd., Advanced
        Biohealing Inc. and Valera Pharmaceuticals, Inc., which is listed on The
        NASDAQ
        Global Market System.
 
 **Jay
        Lombard** has been
        serving as a director of Neuro-Hitech since February 2007. Dr. **** Lombard
        has been serving as the Chairman of Neurology at Bronx Lebanon Hospital since
        September 2006 and as Clinical Assistant Professor of Neurology at Cornell
        University Medical College, New York Presbyterian Hospital **** since **** January
        1998. Dr. Lombard has also been the director of the Brain Behavior Center
        in
        Pomona, New York since January 2001. Dr. Lombard is a board certified
        neurologist and is a published author and speaker on various neurological
        matters. Dr Lombard completed his neurology residency at Albert Einstein
        College
        of Medicine, Long Island Jewish Medical Center and is on several advisory
        boards
        including Two River Holdings and Metagenics, Inc.
 
 ***Section
        16(a) Beneficial Ownership Reporting Compliance*** *.* Section
        16(a) of the Securities Exchange Act of 1934, as amended, requires our directors
        and executive officers, among others, to file with the SEC and NASDAQ an
        initial
        report of ownership of our stock on Form 3 and reports of changes in ownership
        on Form 4 or Form 5. Persons subject to Section 16 are required by SEC
        regulations to furnish us with copies of all Section 16(a) forms that they
        file.
        Under SEC rules, some forms of indirect ownership and ownership of Company
        stock
        by family members are covered by these reporting requirements. Based solely
        on a
        review of the copies of such forms in our possession, and any written
        representations received from reporting persons, we believe that during fiscal
        2006 all of our executive officers and directors filed the required reports
        on a
        timely basis under Section 16(a).
 
 ***Code
        of Ethics*** .
        The
        Company is committed to legal and ethical conduct in fulfilling its
        responsibilities. The Board expects all directors, as well as officers and
        employees, to act ethically at all times. Additionally, the Board expects
        the
        Chief Executive Officer, the Chief Financial Officer, and all senior financial
        and accounting officials to adhere to the Company’s Code of Ethics which was
        adopted on February 23, 2006. The Code of Ethics incorporates the Company’s
        expectations of its executive officers that enable the Company to provide
        accurate and timely disclosure in its filings with the SEC and other public
        communications. In addition, they incorporate the Company’s guidelines
        pertaining to topics such as complying with applicable laws, rules, and
        regulations; reporting of code violations; and maintaining accountability
        for
        adherence to the code.
 
 The
        full
        text of the Code of Ethics is published on the investor relations portion
        of our
        website at *www.neurohitech.com* .
        The
        Company intends to disclose any amendments to provisions of its Code of Ethics,
        or waivers of such provisions granted to executive officers and directors,
        on
        this website within four business days following the date of any such amendment
        or waiver.
  34
 ***Audit
        Committee*** .
        The
        Company has an Audit Committee that assists the Board in its general oversight
        of our financial reporting, internal controls, and audit functions and is
        responsible for the appointment, retention, compensation, and oversight of
        the
        work of our independent registered public accounting firm. The Audit Committee
        is composed of Messrs. Abernathy, Auerbach and Dantzker, each of which has
        been
        determined by the Board, to meet the relevant definition of “independent
        director.” The Board has determined that Messrs. Abernathy and Auerbach each
        meet the SEC’s qualifications to be an “audit committee financial expert.” The
        Board determined that each Audit Committee member has sufficient knowledge
        in
        reading and understanding the Company’s financial statements to serve on the
        Audit Committee.
 
 **Item
        10. Executive Compensation**
 
 **Compensation
        Discussion and Analysis**
  The
        Company’s primary objective with respect to executive compensation is to design
        compensation programs which will align executives’ compensation with our overall
        business strategies, attract and retain highly qualified executives and provide
        incentives that drive stockholder value. The Compensation Committee of our
        Board
        (which we will refer to as the “Committee”) is responsible for developing and
        maintaining appropriate compensation programs for our Executive Officers,
        including our Named Executive Officers. The Committee is comprised of Directors
        Auerbach, Dantzker and Abernathy (Chair). In order to enhance the Committee’s
        ability to carry out these responsibilities effectively, as well as ensure
        that
        the Company maintains strong links between executive pay and performance,
        the
        Committee:
  ·
                Reviews
                    management recommendations to the Committee with respect to compensation
                    decisions. The Chief Executive Officer is not present when the
                    Committee
                    makes decisions on his compensation package.
 ·
                Reviews
                    the Chief Executive Officer’s individual performance evaluations for
                    executive officers and discusses such performance assessments
                    with the
                    Chief Executive Officer on an annual basis and recommends any
                    adjustments
                    to the Board for approval.
 
 In
          setting compensation for the Executive Officers, the Committee:
 
 ·
                Considers
                    comparative market data, gathered from early stage bio-technology
                    companies of comparable size.
 ·
                Considers
                    prior salary levels and the value of any long-term incentive
                    awards at the
                    time the awards were made.
  The
        allocation of at risk compensation between short-term and long-term performance
        compensation is based on market comparisons to remain competitive to other
        companies and to further our objective to attract and retain highly qualified
        executives. This allocation is re-evaluated annually.
 
 ***Compensation
        Components***
  *Salaries*
  The
        Company believes that executive base salaries should generally be targeted
        at or
        below the median of the range of salaries for executives in similar positions
        and with similar responsibilities at comparable companies. However, the Company
        may provide for base salaries above the median if, in the Committee’s view, a
        particular executive’s performance exceeded expectations; if an executive takes
        on additional responsibilities; or under other special circumstances. Base
        salaries are reviewed annually, and adjusted from time to time to realign
        salaries with market levels after taking into account individual performance
        and
        experience.
  35
  *Long-Term
        Incentive Awards*
  The
        Company believes that the most effective means to encourage long-term
        performance by our Executive Officers is to create an ownership culture.
        This
        philosophy is implemented through the granting of equity-based awards that
        vest
        based on continued employment and other long-term awards which vest on
        achievement of pre-determined performance goals. For 2006, the equity-based
        awards were designed in part to promote retention of key executives during
        the
        acquisition of Q-RNA.
 
 *Stock
        Options*
 
 The
        Company believes that use of options provides it with the ability to retain
        key
        employees and at the same time increase stockholder value since the value
        of the
        common stock underlying the options is only realized if the Company’s stock
        price increases from the date on which the options are granted. The Committee
        approves all options grants and sets the option price based on fair market
        value
        of the Company’s common stock on the effective date of the grant.
  **Director
        Compensation**
  The
        Board
        has agreed to pay Mr. Auerbach a director fee of $100,000 per year, payable
        quarterly. The Company has also agreed to pay Mr. Abernathy a director fee
        of
        $40,000 per year, payable quarterly.
  The
        table
        below sets forth the compensation paid to each non-employee member of our
        Board
        during the fiscal year ended December 31, 2006.
 
 **Name**
              
              **Fees
                  Earned**
                **or
                  Paid in Cash**
                **($)**
              
              **Option**
                **Awards
                  (2)**
                **($)**
              
              **All
                  Other**
                **Compensation**
                **($)**
              
              **Total**
                **($)**Mark
                  Auerbach
              
              
              100,000
              
              
              119,231
              
              
              —
              
              
              219,231John
                  Abernathy
              
              
              40,000
              
              
              19,871
              
              
              —
              
              
              59,871David
                  Dantzker (1)
              
              
              —
              
              
              —
              
              
              —
              
              
              —Jay
                  Lombard (1)
              
              
              —
              
              
              —
              
              
              —
              
              
              —
 
 (1)
        Dr.
        Dantzker did not receive any compensation for Board service in 2006. Dr.
        Lombard
        was not serving on the Board during 2006.
 
 (2)
        Of
        these amounts, $119,231 represents the full grant date fair value of an option
        to purchase 300,000 shares granted to Mr. Auerbach on January 24, 2006 and
        $19,871 represents the full grant date fair value of an option to purchase
        50,000 shares granted to Mr. Abernathy on January 24, 2006. The value represents
        the dollar amounts recognized for financial statement reporting purposes
        in 2006
        in accordance with FAS 123R for awards made during 2006.
  **Compensation
        Tables**
  **Summary
        Compensation Table**
  The
        following table shows the total compensation awarded to, earned by or paid
        to
        each Named Executive Officer during 2006 for service to the Company and its
        subsidiaries for the year ended December 31, 2006.
 **Name
                  and**
                **Principal
                  Position****(a)**
              
              **Year**
                **(b)**
              
              **Salary
                  (1)**
                **($)**
                **(c)**
              
              **Option**
                **Awards
                  (2)**
                **($)**
                ******(d)**
              
              **All
                  Other Compensation**
                **(i)**
              
              **Total**
                **(****$)**
                ******(j)**Reuben
                  Seltzer
                President,
                  Chief Executive Officer, Director
              
              
              2006
              
              
              206,250
              
              
              87,488
              
              
              —
              
              
              293,738Alan
                  Kestenbaum
                Executive
                  Vice President, Director
              
              
              2006
              
              
              73,333
              
              
              27,837
              
              
              —
              
              
              101,170David
                  J. Barrett
                Chief
                  Financial Officer
              
              
              2006
              
              
              120,000
              
              
              —
              
              
              —
              
              
              120,000
  36
 (1)
        Represents salary paid during the year ended December 31, 2006. The Company
        has
        agreed to pay annual base salaries of $225,000 and $80,000, to Mr. Seltzer
        and
        Mr. Kestenbaum, respectively. The Company initially agreed to pay Mr. Barrett
        an
        annual base salary of $150,000 which was increased effective January 1, 2007
        to
        $200,000.
 
 (2)
        Represents the dollar amounts recognized for financial statement reporting
        purposes in 2006 in accordance with FAS 123R for awards made during 2006.
        For
        discussions of the relevant assumptions made in calculating these amounts,
        see
        Note 8 to our consolidated financial statements.
  **Outstanding
        Equity Awards at Fiscal Year-End**
  The
        following table presents information on equity awards held under the 2006
        Incentive Stock Plan as of December 31, 2006.
  **Name****(a)**
              
              **Number
                  of**
                **Securities**
                **Underlying**
                **Unexercised**
                **Options**
                **(#)**
                **Exercisable**
                **(b)**
              
              **Number
                  of**
                **Securities**
                **Underlying**
                **Unexercised**
                **Options**
                **(#)**
                **Unexercisable**
                **(c)**
              
              **Equity**
                **Incentive**
                **Plan**
                **Awards:**
                **Number**
                **of**
                **Securities**
                **Underlying**
                **Unexercised**
                **Unearned**
                **Options**
                **(#)**
                **(d)**
              
              **Option**
                **Exercise**
                **Price**
                **($)**
                **(e)**
              
              **Option**
                **Expiration**
                **Date**Reuben
                  Seltzer (1)
              
              
              73,333
              
              
              146,667
              
              
              —
              
              
              2.50
              
              
              1/24/2016Alan
                  Kestenbaum (2)
              
              
              23,333
              
              
              46,667
              
              
              —
              
              
              2.50
              
              
              1/24/2016David
                  Barrett
              
              
              —
              
              
              —
              
              
              —
              
              
              —
              
              
              —
 
 (1)
        Mr.
        Seltzer’s option to purchase 220,000 shares of the Company’s common stock became
        exercisable as to 73,333 shares on January 24, 2006 and an additional 73,333
        on
        January 24, 2007. An additional 73,334 shares will become exercisable on
        January
        24, 2008.
  (2)
        Mr.
        Kestenbaum’s option to purchase 70,000 shares of the Company’s common stock
        became exercisable as to 23,333 shares on January 24, 2006 and an additional
        23,333 on January 24, 2007. An additional 73,334 shares will become exercisable
        on January 24, 2008.
  37
  **Item
        11. Security Ownership of Certain Beneficial Owners and Management and Related
        Stockholder Matters**
  The
        following table sets forth certain information, as of December 31, 2006,
        concerning securities authorized for issuance under the Company’s 2006
        Non-Employee Directors Stock Option Plan and 2006 Incentive Stock
        Plan:
 
 **Number
                  of securities to be**
                **issued
                  upon exercise of**
                **outstanding
                  options, warrants**
                **and
                  rights**
              **Weighted-average
                  exercise**
                **price
                  of outstanding options,**
                **warrants
                  and rights**
              **Number
                  of securities remaining**
                **available
                  for future issuance**
                **under
                  equity compensation**
                **plans
                  (excluding securities**
                **reflected
                  in column (a))****(a)**
              **(b)**
              **(c)****Equity
                  compensation**
                **plans
                  approved by**
                **security
                  holders (1)**
              750,000
              $2.99
              50,000**Equity
                  compensation plans**
                **not
                  approved by**
                **security
                  holders (2)**
              840,000
              $5.85
              110,000**Total**
              1,590,000
              $4.50
              160,000
 
 (1)
        Includes 400,000 shares authorized for issuance under the Company’s 2006
        Non-Employee Directors Stock Option Plan and 400,000 shares authorized issuance
        under the Company’s 2006 Incentive Stock Plan.
  (2)
        Includes 950,000 shares authorized for issuance under the Company’s 2006
        Incentive Stock Plan by the Board.
 
 **SECURITY
        OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT**
 
 The
        following table sets forth the information that we know regarding ownership
        of
        our common stock on April 10, 2007 by (i) each person who is known to us
        to own
        5% or more of our common stock, (ii) each of our directors and
        (iii) each of our named executive officers.
 
 **Stockholder**
              **Number
                  of Shares of**
                **common
                  Stock**
                **Beneficially
                  Owned at**
                **April
                  10, 2007 (1)**
              **Percentage**
                **of
                  Shares**
                **Beneficially**
                **Owned
                  (1)****5%
                  or Greater Stockholders**Hi-Tech
                  Pharmacal Co., Inc. (2)
              1,140,610
                  (4)
              9.2%Wheatley
                  MedTech Partners, L.P. (3)
              768,942
                  (5)
              6.1%Wheatley
                  New York Partners, LP (3)
              1,066,987
                  (6)
              8.3%Durand
                  Venture Associates, LLC
              1,373,636
                  (7)
              10.5%**Directors
                  and Executive Officers:**John
                  D. Abernathy, Director
              50,000
                  (8)
              *Mark
                  Auerbach, Director
              300,000
                  (9)
              2.4%David
                  J. Barrett, Chief Financial Officer
              40,000
                  (10)
              *David
                  Dantzker, Director
              30,098
                  (11)
              *Alan
                  Kestenbaum, Executive Vice President and Director
              2,207,176
                  (12)
              17.9%Jay
                  Lombard, Director
              16,666
                  (13)
              *L.
                  William McIntosh, Chief Operating Officer and Director
              50,354
                  (14)
              *Reuben
                  Seltzer, Chief Executive Officer, President and Director
              1,217,276
                  (15)
              9.7%All
                  directors and executive officers as a group (8
                  individuals)
              3,911,570
                  (16)
              30.7%
  *
        Less
        than 1%.
  38
  (1)
        Unless otherwise indicated, includes shares owned by a spouse, minor children
        and relatives sharing the same home, as well as entities owned or controlled
        by
        the named person. Unless otherwise noted, shares are owned of record and
        beneficially by the named person. Based upon 12,333,537 shares of Common
        Stock
        outstanding on April 10, 2007.
  (2)
        Reuben Seltzer is a director of Hi-Tech Pharmacal Co., Inc. and disclaims
        beneficial ownership as to any of the shares owned by Hi-Tech Pharmacal Co.,
        Inc.
  (3)
        David
        Dantzker is a director of Wheatley MedTech Partners, L.P. and Wheatley New
        York
        Partners, LP and disclaims beneficial ownership as to any of the shares owned
        by
        each of those entities.
  (4)
        Includes 15,000 shares of Common Stock issuable upon the exercise of currently
        exercisable warrants.
  (5)
        Includes 326,656 shares of Common Stock issuable upon the exercise of currently
        exercisable warrants.
  (6)
        Includes 452,172 shares of Common Stock issuable upon the exercise of currently
        exercisable warrants.
  (7)
        Includes 686,818 shares of Common Stock issuable upon the exercise of currently
        exercisable warrants.
  (8)
        Includes options to purchase 16,666 shares of Common Stock exercisable within
        sixty (60) days of April 10, 2007.
  (9)
        Includes options to purchase 100,000 shares of Common Stock exercisable within
        sixty (60) days of April 10, 2007.
  (10)
        Includes options to purchase 40,000 shares of Common Stock exercisable within
        sixty (60) days of April 10, 2007.
  (11)
        Includes options to purchase 30,098 shares of Common Stock exercisable within
        sixty (60) days of April 10, 2007.
  (12)
        Includes warrants to purchase 15,000 shares of Common Stock and options to
        purchase 46,666 shares of Common Stock exercisable within sixty (60) days
        of
        January 9, 2007.
  (13)
        Includes options to purchase 16,666 shares of Common Stock exercisable within
        sixty (60) days of April 10, 2007.
  (14)
        Includes 31,604 shares of Common Stock issuable upon the exercise of currently
        exercisable options and options to purchase 18,750 shares of Common Stock
        exercisable within sixty (60) days of April 10, 2007.
  (15)
        Includes 5,000 shares of Common Stock issuable upon the exercise of currently
        exercisable warrants and options to purchase 146,666 shares of Common Stock
        exercisable within sixty (60) days of April 10, 2007.
  (16)
        Includes shares of Common Stock issuable upon the exercise of currently
        exercisable warrants and options to purchase Common Stock exercisable within
        sixty (60) days of April 10, 2007.
  **Item
        12. Certain Relationships and Related Transactions, and Director
        Independence**
 
 **CERTAIN
        RELATIONSHIPS AND RELATED TRANSACTIONS**
 
 The
        Board’s Audit Committee is responsible for review, approval, or ratification of
        “related-person transactions” between the Company or its subsidiaries and
        related persons. Under SEC rules, a related person is a director, officer,
        nominee for director, or 5% stockholder of the Company since the beginning
        of
        the last fiscal year and their immediate family members. The Audit Committee
        determines whether the related person has a material interest in a transaction
        and may approve, ratify, rescind, or take other action with respect to the
        transaction in its discretion.
  In
        the
        year ended December 31, 2006, the following related party transactions
        occurred:
  On
        January 5, 2006, Mark Auerbach, one of our directors, and his wife purchased
        an
        aggregate of 367,046 shares of Marco common stock pursuant to a securities
        purchase agreement with Marco for an aggregate purchase price of $321,000.
        Prior
        to the merger of Marco with the Company, Mr. Auerbach transferred an aggregate
        of 24,012.36 shares to his son and daughter-in-law. Upon the effectiveness
        of
        the merger with the Company, such shares of Marco common stock were converted
        into 200,000 shares of the Company’s Common Stock.
 
 On
        January 5, 2006, John Abernathy, one of our directors, purchased 57,173.42
        shares of Marco common stock for a purchase price of $50,001 pursuant to
        a
        securities purchase agreement with Marco. Upon the effectiveness of the merger
        with the Company, such shares of Marco common stock were converted into 33,334
        shares of the Company’s Common Stock.
 
 On
        January 24, 2006 Hi-Tech Pharmacal Co., Inc. and Alan Kestenbaum each purchased
        $150,000 of Units in a private offering and on January 27, 2006 Reuben Seltzer
        purchased $50,000 of Units in a private offering at the same price, and subject
        to the same terms, as other subscribers in the private offering. Each Unit
        consisted of (i) 10,000 shares of the Company’s Common Stock and
        (ii) a detachable, transferable three-year warrant to purchase 2,500 shares
        of the Company’s Common Stock. The Units were sold at a purchase price of
        $25,000 per Unit.
  39
 *Director
        Independence* .
        Each of
        the non-employee directors qualifies as “independent” in accordance with the
        published listing requirements of NASDAQ: Mr. Abernathy, Mr. Auerbach, Dr.
        Dantzker and Dr. Lombard. Messrs. Kestenbaum, McIntosh and Seltzer do not
        qualify as independent because they are Neuro-Hitech employees. The NASDAQ
        rules
        have both objective tests and a subjective test for determining who is an
        “independent director.” The objective tests state, for example, that a director
        is not considered independent if he is an employee of the Company or is a
        partner in or executive officer of an entity to which the Company made, or
        from
        which the Company received, payments in the current or any of the past three
        fiscal years that exceed 5% of the recipient’s consolidated gross revenue for
        that year. The subjective test states that an independent director must be
        a
        person who lacks a relationship that, in the opinion of the Board, would
        interfere with the exercise of independent judgment in carrying out the
        responsibilities of a director.
 
 None
        of
        the non-employee directors were disqualified from “independent” status under the
        objective tests. In assessing independence under the subjective test, the
        Board
        took into account the standards in the objective tests, and reviewed and
        discussed additional information provided by the directors and the Company
        with
        regard to each director’s business and personal activities as they may relate to
        the Company and its management. Based on all of the foregoing, as required
        by
        NASDAQ rules, the Board made a subjective determination as to each independent
        director that no relationships exists which, in the opinion of the Board,
        would
        interfere with the exercise of independent judgment in carrying out the
        responsibilities of a director. The Board has not established categorical
        standards or guidelines to make these subjective determinations, but considers
        all relevant facts and circumstances.
 
 In
        addition to the board-level standards for director independence, the directors
        who serve on the Audit Committee each satisfy standards established by the
        SEC
        providing that to qualify as “independent” for the purposes of membership on
        that Committee, members of audit committees may not accept directly or
        indirectly any consulting, advisory, or other compensatory fee from the Company
        other than their director compensation.
 
 *Transactions
        Considered in Independence Determinations* .
        In
        making its independence determinations, the Board considered transactions
        occurring since the beginning of 2004 between the Company, its predecessors,
        and
        entities associated with the independent directors or members of their immediate
        family. All identified transactions that appear to relate to the Company
        and a
        person or entity with a known connection to a director are presented to the
        Board for consideration. In making its subjective determination that each
        non-employee director is independent, the Board considered the transactions
        in
        the context of the NASDAQ objective standards, the special standards established
        by the SEC for members of audit committees, and the SEC and Internal Revenue
        Service (IRS) standards for compensation committee members. In each case,
        the
        Board determined that, because of the nature of the director’s relationship with
        the entity and/or the amount involved, the relationship did not impair the
        director’s independence.


40


**Item
      13 Exhibits**




**Exhibit**
            
            
            
            **Incorporated
                by Reference**
            
            **Filed****Number**
            
            **Exhibit
                Description**
            
            **Form**
            
            **Exhibit**
            
            **Filing****Date**
            
            **Herewith**2.1
            
            Agreement
                and Plan of Merger, dated January 17, 2006, between Northern Way
                Resources, Inc., a Nevada corporation and Northern Way Resources,
                Inc., a
                Delaware corporation
            
            8-K
            
            2.1
            
            1/23/062.2
            
            Certificate
                of Ownership and Merger merging Northern Way Resources, Inc., a Nevada
                corporation into Northern Way Resources, Inc., a Delaware
                corporation
            
            8-K
            
            2.2
            
            1/23/062.3
            
            Articles
                of Merger merging Northern Way Resources, Inc., a Nevada corporation
                into
                Northern Way Resources, Inc., a Delaware corporation
            
            8-K
            
            2.3
            
            1/23/062.4
            
            Agreement
                of Merger and Plan of Reorganization, dated as of January 24, 2006,
                by and
                among Neurotech Pharmaceuticals, Inc., Marco Hi-Tech JV Ltd., and
                Marco
                Acquisition I, Inc.
            
            8-K
            
            2.1
            
            1/30/062.5
            
            Agreement
                and Plan of Merger, dated as of November 16, 2006, by and among
                Neuro-Hitech, Inc., QA Acquisition Corp., QA Merger LLC, Q-RNA, Inc.,
                and
                Dr. David Dantzker, as the Representative of the Q-RNA, Inc. security
                holders.
            
            8-K
            
            2.1
            
            12/5/063.1
            
            Certificate
                of Incorporation of Neurotech Pharmaceuticals, Inc.
            
            8-K
            
            3.1
            
            1/23/063.2
            
            Certificate
                of Merger of Marco Acquisition I, Inc. with and into Marco Hi-Tech
                JV
                Ltd.
            
            8-K
            
            3.5
            
            1/30/063.3
            
            Certificate
                of Merger of Marco Acquisition I, Inc. with and into Marco Hi-Tech
                JV
                Ltd.
            
            8-K
            
            3.6
            
            1/30/063.4
            
            Certificate
                of Amendment of Certificate of Incorporation of Neurotech Pharmaceuticals,
                Inc., changing name to Neuro-Hitech Pharmaceuticals, Inc.
            
            8-K
            
            3.7
            
            1/30/063.5
            
            Certificate
                of Ownership and Merger effective August 11, 2006
            
            8-K
            
            3.1
            
            8/11/063.6
            
            By-laws
                of the Company
            
            8-K
            
            3.2
            
            1/23/064.1
            
            Form
                of Common Stock Purchase Warrant Certificate
            
            8-K
            
            4.1
            
            1/30/064.2
            
            Warrant
                to purchase common stock of Marco-Hitech JV Ltd. issued to Brown
                Brothers
                Harriman & Co.
            
            8-K
            
            4.2
            
            1/30/064.3
            
            Warrant
                to purchase common stock of Marco-Hitech JV Ltd. issued to Barry
                Honig
            
            8-K
            
            4.3
            
            1/30/06




41




4.4
            
            Form
                of Marco Hi-Tech JV Ltd. Registration Rights Agreement
            
            8-K
            
            10.4
            
            1/30/064.5
            
            Registration
                Rights Agreement, dated as of November 29, 2006, by and among
                Neuro-Hitech, Inc. and David Dantzker as the Representative of the
                Q-RNA,
                Inc. security holders
            
            8-K
            
            4.1
            
            12/5/064.6
            
            Registration
                Rights Agreement, dated as of November 29, 2006, by and among
                Neuro-Hitech, Inc. and individuals and entities that are parties
                to the
                Securities Purchase Agreement dated as of November 16,
                2006
            
            8-K
            
            4.2
            
            12/5/064.7
            
            Form
                of $13 Warrant issued pursuant to the Merger.
            
            8-K
            
            4.3
            
            12/5/064.8
            
            Form
                of $18Warrant issued pursuant to the Merger.
            
            8-K
            
            4.4
            
            12/5/064.9
            
            Form
                of Warrant issued in connection with the Private Offering.
            
            8-K
            
            4.5
            
            12/5/0610.1
            
            Neurotech
                Pharmaceuticals, Inc. 2006 Incentive Stock Plan
            
            8-K
            
            10.1
            
            1/30/0610.2
            
            Neurotech
                Pharmaceuticals, Inc. 2006 Non-Employee Directors Stock Option
                Plan
            
            8-K
            
            10.2
            
            1/30/0610.3
            
            Form
                of Private Placement Subscription Agreement
            
            8-K
            
            10.3
            
            1/30/0610.4
            
            Securities
                Purchase Agreement, dated January 5, 2006, by and between Marco Hi-Tech
                JV
                Ltd. and the investors signatory thereto
            
            8-K
            
            10.5
            
            1/30/0610.5
            
            Director
                and Officer Indemnification Agreement dated January 24, 2006, between
                Neurotech Pharmaceuticals, Inc. and Reuben Seltzer
            
            8-K
            
            10.6
            
            1/30/0610.6
            
            Director
                and Officer Indemnification Agreement dated January 24, 2006, between
                Neurotech Pharmaceuticals, Inc. and Alan Kestenbaum
            
            8-K
            
            10.7
            
            1/30/0610.7
            
            Director
                and Officer Indemnification Agreement dated January 24, 2006, between
                Neurotech Pharmaceuticals, Inc. and John Abernathy
            
            8-K
            
            10.8
            
            1/30/0610.8
            
            Director
                and Officer Indemnification Agreement dated January 24, 2006, between
                Neurotech Pharmaceuticals, Inc. and Mark Auerbach
            
            8-K
            
            10.9
            
            1/30/0610.9
            
            Technology
                License Contract, dated as of June 1, 1997, by and between Mayo Foundation
                for Medical Education and Research and Marco Hi-Tech JV
                Ltd.
            
            8-K
            
            10.12
            
            1/30/06




42




10.10
            
            Clinical
                Research Agreement, dated March 1, 2002, by and between Georgetown
                University and Marco Hi-Tech JV Ltd.
            
            8-K
            
            10.13
            
            1/30/0610.11
            
            Offer
                Letter, dated January 6, 2006, to John Abernathy from Marco Hi-Tech
                JV
                Ltd.
            
            8-K
            
            10.14
            
            1/30/0610.12
            
            Offer
                Letter, dated January 5, 2006, to Mark Auerbach from Marco Hi-Tech
                JV
                Ltd.
            
            8-K
            
            10.15
            
            1/30/0610.13
            
            Development
                Agreement dated February 1, 2006, between the Company and Org Syn
                Laboratory, Inc
            
            10-QSB
            
            10.1
            
            5/15/0610.14
            
            Development
                Agreement dated March 15, 2006, between the Company and Xel
                Herbaceuticals, Inc
            
            10-QSB
            
            10.2
            
            5/15/0610.15
            
            Securities
                Purchase Agreement, dated as of November 16, 2006, by and among
                Neuro-Hitech, Inc. and the investors identified therein.
            
            8-K
            
            2.2
            
            12/5/0610.16
            
            Amendment
                No. 1 to 2006 Incentive Stock Plan
            
            8-K
            
            4.6
            
            12/5/0610.17
            
            Amendment
                No. 2to 2006 Incentive Stock Plan
            
            8-K
            
            4.7
            
            12/5/0610.18
            
            Consultant
                Agreement, dated as of November 29, 2006, by and between Neuro-Hitech,
                Inc., and D.F. Weaver Medical, Inc., Donald F. Weaver, Principal
                Consultant.
            
            8-K
            
            10.1
            
            12/5/0610.19
            
            2002
                Q-RNA, Inc. Stock Incentive Plan
            
            S-8
            
            10.1
            
            12/13/0614.1
            
            Code
                of Ethics
            
            10-KSB
            
            14.1
            
            3/31/0616.1
            
            Letter
                from Dale, Matheson, Carr-Hilton Labonte, dated as of January 27,
                2006
            
            8-K
            
            16.1
            
            2/6/0621.1
            
            Subsidiaries
            
            10-KSB
            
            21.2
            
            4/13/0723.01
            
            Consent
                of Independent Registered Public Accounting Firm
            
            10-KSB
            
            23.01
            
            4/13/0731.1
            
            Certification
                of Chief Executive Officer Pursuant to Section 302 of the Sarbanes-Oxley
                Act of 2002
            
            
            
            
            
            
            
            X31.2
            
            Certification
                of the Chief Financial Officer Pursuant to Section 302 of the
                Sarbanes-Oxley Act of 2002
            
            
            
            
            
            
            
            X32.1
            
            Certification
                of the Chief Executive Officer and Chief Financial Officer Pursuant
                to 18
                U.S.C. 1350, as adopted Pursuant to Section 906 of the Sarbanes-Oxley
                Act
                of 2002
            
            
            
            
            
            
            
            X




43




**Item
      14. Principal Accountant Fees and Services**




The
        table
        below sets forth the aggregate audit fees, audit-related fees, tax fees and
        all
        other fees billed for services rendered by the Company’s principal accountant in
        our fiscal years ended December 31, 2006 and December 31, 2005.
 
 **2006**
              
              **2005**Audit
                  Fees
              
              $
              13,000
              
              $
              15,000Audit
                  Related Fees
              
              
              --
              
              
              --Tax
                  Fees
              
              $
              3,000
              
              $
              3,000All
                  Other Fees
              
              $
              10,500
              
              $
              6,000
 
 *Audit
        Fees* .
        Consists of fees billed for professional services rendered for the audit
        of our
        annual consolidated financial statements and review of the quarterly
        consolidated financial statements and services that are normally provided
        by
        Moore Stephens, P.C., in connection with statutory and regulatory filings
        or
        engagements.
  *Audit-Related
        Fees* .
        Consists of fees billed for assurance and related services that are reasonably
        related to the performance of the audit or review of our consolidated financial
        statements and are not reported under “Audit Fees.”
 
 *Tax
        Fees* .
        Consists of fees billed for professional services for tax compliance, tax
        advice
        and tax planning.
  *All
        Other Fees* .
        Consists of fees for products and services other than the services reported
        above, including fees associated with the review of the Company’s periodic
        reports and reports on Form 8-K.
 
 The
        Audit
        Committee requires that management obtain the prior approval of the Audit
        Committee for all audit and permissible non-audit services to be provided.
        The
        Audit Committee considers and approves at its first meeting of each year,
        anticipated audit and permissible non-audit services to be provided during
        the
        year, as well as the projected fees for those services. The Audit Committee
        considers and pre-approves additional audit and permissible non-audit services
        and fees as needed at each meeting. The Audit Committee has delegated authority
        to its Chair to pre-approve audit and permissible non-audit services between
        meetings, provided that the Chair reports any such pre-approval to the Audit
        Committee at its next meeting. The Audit Committee will not approve non-audit
        engagements that would violate SEC rules or impair the independence of Moore
        Stephens. All audit and permissible non-audit services rendered to the Company
        in 2006 were pre-approved in accordance with these procedures.


44


**NEURO-HITECH,
      INC. AND SUBSIDIARIES**





**INDEX
      TO FINANCIAL STATEMENTS**


**Page**Report
                  of Independent Registered Public Accounting Firm
              
              F-1Consolidated
                  Balance Sheet - December 31, 2006
              
              F-2Consolidated
                  Statements of Operations - Years Ended December 31, 2006 and
                  2005
              
              F-3Consolidated
                  Statements of Changes in Stockholders’ [Deficit] Equity-
                  Years Ended December 31, 2006 and 2005
              
              F-4Consolidated
                  Statements of Cash Flows - Years Ended December 31, 2006 and
                  2005
              
              F-5Notes
                  to the Consolidated Financial Statements
              
              F-6







**REPORT
        OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM**


To
        the
        Board of Directors
 Neuro-Hitech,
        Inc.
 New
        York,
        New York
 
 
 We
        have
        audited the consolidated balance sheet of Neuro-Hitech, Inc. and subsidiaries
        as
        of December 31, 2006 and the related consolidated statements of operations,
        stock holders’ equity and cash flows for each of the two years in the period
        ended December 31, 2006. These financial statements are the responsibility
        of
        the Company’s management. Our responsibility is to express an opinion on these
        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 audit to obtain reasonable assurance about whether the financial
        statements are free of material misstatement. 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 the 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 Neuro-Hitech, Inc. and
        subsidiaries as of December 31, 2006 and the results of their operations
        and
        their cash flows for each of the two years in the period ended December 31,
        2006, in conformity with U.S. generally accepted accounting principles.
 
 As
        discussed in Note 2 to the Consolidated Financial Statements, effective January
        1, 2006, the Company adopted Statements of Financial Accounting Standards
        No.
        123(R).
   MOORE
                  STEPHENS, P.C.Certified
                  Public Accountants
  Cranford,
        New Jersey
 March
        28,
        2007


F-1


**Neuro-Hitech,
        Inc. and Subsidiaries**
 **Consolidated
        Balance Sheet** **As
          of December 31, 2006**


**ASSETS:**Current
                  Assets:Cash
                  and Cash Equivalents
              
              $
              4,705,195Accounts
                  Receivable
              
              
              25,800Inventory
              
              
              31,291Prepaid
                  Expenses
              
              
              23,921Deferred
                  Charges
              
              
              93,750Total
                  Current Assets
              
              
              4,879,957Property
                  and Equipment, net
              
              
              7,246**Total
                  Assets**
              
              **$**
              **4,887,203****LIABILITIES
                  AND STOCKHOLDERS' EQUITY:**Current
                  Liabilities:Accounts
                  Payable and Accrued Expenses
              
              $
              1,195,744Total
                  Current LiabilitiesStockholders'
                  Equity:Common
                  Stock-Class A $.001 Par Value Authorized: 100, Issued & Outstanding:
                  100
              
              
              -Common
                  Stock $.001 Par Value Authorized: 44,999,900, Issued & Outstanding:
                  11,855,135
              
              
              11,855Additional
                  Paid-in Capital
              
              
              28,891,967Deferred
                  Compensation
              
              
              (1,178,147
              )Accumulated
                  Deficit
              
              
              (24,034,216
              )Totals
              
              
              3,691,459Total
                  Stockholders' Equity
              
              
              3,691,459**Total
                  Liabilities and Stockholders' Equity**
              
              **$**
              **4,887,203**


See
        Notes
        to Consolidated Financial Statements


F-2




**Neuro-Hitech,
        Inc. and Subsidiaries** **Consolidated
          Statements of Operations**
  **Years
                  Ended December 31,****2006**
              
              **2005**Sales
              
              $
              304,240
              
              $
              208,343Cost
                  of Goods Sold
              
              
              155,014
              
              
              102,637Gross
                  Profit
              
              
              149,226
              
              
              105,706Operating
                  Expenses:Selling
                  General & Administrative Expenses
              
              
              1,765,486
              
              
              389,706Research
                  and Development Costs
              
              
              19,480,501
              
              
              678,798Share-Based
                  Compensation
              
              
              327,835
              
              
              -Amortization
                  of Deferred Compensation
              
              
              130,905
              
              
              -Total
                  Operating Expenses
              
              
              21,704,727
              
              
              1,068,504(Loss)
                  from Operations
              
              
              (21,555,501
              )
              
              (962,798
              )Other
                  Income:Interest
                  Income
              
              
              147,730
              
              
              7,957Total
                  Other Income
              
              
              147,730
              
              
              7,957(Loss)
                  before Provisions for IncomeTaxes
              
              
              (21,407,771
              )
              
              (954,841
              )Provisions
                  for Income Taxes
              
              
              -
              
              
              -**Net
                  (Loss)**
              
              **$**
              **(21,407,771**
              **)**
              **$**
              **(954,841**
              **)****Basic
                  and Diluted (Loss) per Weighted Average Common Shares
                  Outstanding**
              
              **$**
              **(2.25**
              **)**
              **$**
              **(0.11**
              **)****Weighted
                  Average - Common Shares Outstanding**
              
              
              **9,528,650**
              
              
              **8,327,056**


See
        Notes
        to Consolidated Financial Statements
 F-3
 **Neuro-Hitech,
          Inc. and Subsidiaries**
 **Consolidated
          Statment of Changes in Stockholders' [Deficit] Equity**
  **Convertible
                    Preferred Stock Series A**
                
                **Class
                    A - Common Stock**
                
                **Common
                    Stock**
                
                **Additional
                    Paid-In**
                
                **Deferred**
                
                **Accumulated****Shares**
                
                **Amount**
                
                **Shares**
                
                **Amount**
                
                **Shares**
                
                **Amount**
                
                **Capital**
                
                **Compensation**
                
                **Deficit**
                
                **Totals****Balance
                    as of January 1, 2005**
                
                
                **12,005**
                
                **$**
                **12,005**
                
                
                
                
                $
                -
                
                
                **8,654,112**
                
                **$**
                **86,541**
                
                **$**
                **2,478,373**
                
                
                
                
                **$**
                **(1,671,604**
                **)**
                **$**
                **905,315**Net
                    (Loss)
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                (954,841
                )
                
                (954,841
                )**Balance
                    as of December 31, 2005**
                
                
                **12,005**
                
                **$**
                **12,005**
                
                
                **-**
                
                
                **-**
                
                
                **8,654,112**
                
                **$**
                **86,541**
                
                **$**
                **2,478,373**
                
                
                **-**
                
                **$**
                **(2,626,445**
                **)**
                **$**
                **(49,526**
                **)**Recapitalization
                    as of January 18, 2006
                
                
                (12,005
                )
                
                (12,005
                )
                
                100
                
                $
                -
                
                
                (1,626,860
                )
                
                (79,514
                )
                
                91,519
                
                
                
                
                
                
                
                
                **-**Private
                    Placement of Common Stock, net of issuance costs of
                    $353,127
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                3,026,204
                
                
                3,026
                
                
                8,152,378
                
                
                
                
                
                
                
                
                8,155,404Common
                    Stock and Warrants Issued in Connection with Q-RNA merger, net
                    of issuance
                    costs of $271,394
                
                
                
                
                
                
                
                
                -
                
                
                -
                
                
                1,800,000
                
                
                1,800
                
                
                16,532,593
                
                
                
                
                
                
                
                
                16,534,393Exercise
                    of Stock Options
                
                
                
                
                
                
                
                
                -
                
                
                -
                
                
                1,679
                
                
                2
                
                
                217
                
                
                
                
                
                
                
                
                219Share-Based
                    Compensation Expense
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                327,835
                
                
                
                
                
                
                
                
                327,835Recognition
                    of Non-Qualified Stock Options in accordance with Consulting
                    Agreement
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                1,309,052
                
                $
                (1,309,052
                )
                
                
                
                
                -Amortization
                    of Deferred Compensation
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                130,905
                
                
                
                
                
                130,905Net
                    (Loss)
                
                
                **-**
                
                
                
                
                
                **-**
                
                
                
                
                
                **-**
                
                
                
                
                
                
                
                
                -
                
                
                (21,407,771
                )
                
                **(21,407,771**
                **)****Balance
                    as of December 31, 2006**
                
                
                **-**
                
                **$**
                **-**
                
                
                **100**
                
                **$**
                **-**
                
                
                **11,855,135**
                
                **$**
                **11,855**
                
                **$**
                **28,891,967**
                
                **$**
                **(1,178,147**
                **)**
                **$**
                **(24,034,216**
                **)**
                **$**
                **3,691,459**
  See Notes to Consolidated Financial
        Statements
  F-4
 **Neuro-Hitech,
          Inc. and Subsidiaries**
 **Consolidated
          Statements of Cash Flows**
  **Years
                    Ended December 31,****2006**
                
                **2005**Cash
                    flows used in operating activities:Net
                    (Loss)
                
                $
                (21,407,771
                )
                $
                (954,841
                )Adjustments
                    to Reconcile Net (Loss) to Net Cash (Used In) Operating
                    Activities:Acquired
                    Research and Development Costs
                
                
                16,805,787
                
                
                -Share-based
                    Compensation Expense
                
                
                327,835
                
                
                -Amortization
                    of Deferred Compensation
                
                
                130,905
                
                
                -Depreciation
                    Expense
                
                
                1,749
                
                
                -Change
                    in operating assets and liabilities:(Increase)
                    Decrease in Assets:Accounts
                    Receivable
                
                
                26,325
                
                
                (29,370
                )Inventory
                
                
                (31,293
                )
                
                12,587Due
                    From Affiliate
                
                
                -
                
                
                27,669Prepaid
                    Expenses
                
                
                (23,921
                )
                
                472,345Income
                    Taxes Receivable
                
                
                -
                
                
                35,067Deferred
                    Charges
                
                
                (93,750
                )
                
                -Increase
                    (Decrease) in Liabilities:Accounts
                    Payable and Accrued Expenses
                
                
                1,045,793
                
                
                22,457Due
                    To Affiliate
                
                
                (42,304
                )
                
                -Total
                    Adjustments
                
                
                18,147,126
                
                
                540,755Net
                    cash (used in) Operating activities
                
                
                (3,260,645
                )
                
                (414,086
                )Cash
                    flows used in Investing activities:Business
                    Acquisition and Related Costs
                
                
                (271,394
                )
                
                -Capital
                    Expenditures
                
                
                (8,995
                )
                
                -Net
                    cash (used in) Investing activities
                
                
                (280,389
                )
                
                -Cash
                    flows from financing activities:Net
                    Proceeds from Private Placement Offering of Common Stock
                
                
                8,155,404
                
                
                -Proceeds
                    from Exercise of Stock Options
                
                
                219
                
                
                -Net
                    cash provided by Financing activities
                
                
                8,155,623
                
                
                -Net
                    increase (decrease) in cash and cash equivalents
                
                
                4,614,589
                
                
                (414,086
                )Cash
                    and cash equivalents, beginning of years
                
                
                90,606
                
                
                504,692Cash
                    and cash equivalents, end of years
                
                $
                4,705,195
                
                $
                90,606**Cash
                    Paid For:**Income
                    Taxes
                
                $
                -
                
                $
                -Interest
                
                $
                -
                
                $
                -




**Supplemental
        Disclosure of Non-Cash Investing and Financing
        Activities:**
  In
        connection with the Q-RNA merger, the Company entered into a consulting
        agreement and issued 500,000 non-qualified stock options valued at their
        grant
        date fair value - date of the merger closing. The total fair value of these
        options approximated $1,309,000 and was recognized as Deferred Compensation
        in
        the Stockholders' Equity section of the Balance Sheet. During 2006, in
        accordance with vesting terms of the options, the Company recognized
        approximately $131,000 of expense for the amortization of Deferred Compensation.
        As of December 31, 2006, there was approximately $1,178,000 of remaining
        Deferred Compensation.
 
 In
        connection with the reverse merger into Northern Way Resources - a non-operating
        public shell - shareholders of the former privately held company - Marco
        Hi-Tech
        J.V. LTD - converted their shares of preferred stock into common stock of
        the
        publicly traded Company for approximatly $12,000.




See
      Notes to Consolidated Financial
      Statements




F-5




NEURO-HITECH,
      INC. AND SUBSIDIARIES


NOTES
      TO
      THE CONSOLIDATED FINANCIAL STATEMENTS





[1]
      Nature of Operations





Neuro-Hitech,
      Inc. (the “Company” or “Neuro-Hitech”) is an early stage pharmaceutical company
      engaged in the acquisition and development of therapies for Alzheimer’s
      disease and other degenerative neurological disorders .
      The
      Company focuses particularly on technologies that address large unmet medical
      needs and have the potential to enter clinical development within 12 to 24
      months after acquisition, and on driving development in a rapid, cost-effective
      manner. The Company’s current portfolio consists of small molecule drugs in
      development to treat large, unmet medical needs - Alzheimer’s disease, epilepsy
      and myasthenia gravis.





On
      November 29, 2006, the Company completed an acquisition by merger of Q-RNA,
      Inc. (“Q-RNA”), a New York-based biotechnology company focused on diseases such
      as Alzheimer’s, epilepsy and Parkinson’s. The acquisition of Q-RNA provided the
      Company with a pipeline of compounds, many of which have been discovered and
      developed internally. Q-RNA believed that these compounds provided it with
      a
      robust research and development pipeline.





Liquidity





The
      accompanying consolidated financial statements have been prepared on a
      going-concern basis, which contemplates the continuation of operations,
      realization of assets, and liquidation of liabilities in the ordinary course
      of
      business. For the tax year ending December 31, 2006, the Company generated
      a net
      loss of approximately $21.4 million. As of December 31, 2006, the Company has
      funded its working capital requirements primarily through the sale of equity
      to
      founders, institutional and individual investors. Management intends to fund
      future operations through entrance into the commercial marketplace as well
      as
      additional equity offerings.





There
      can
      be no assurance that the Company will be successful in obtaining financing
      at
      the level needed for long-term operations or on terms acceptable to the Company.
      In addition, there can be no assurance, assuming the Company is successful
      in
      commercializing its product, realizing revenues and obtaining new equity or
      debt
      offerings that the Company will achieve profitability or positive cash flow.
      As
      discussed above, the Company is incurring significant losses, which give rise
      to
      questions about its ability to continue as a going concern. The accompanying
      financial statements do not include any adjustments that might result from
      the
      outcome of this uncertainty.





[2]
      Summary of Significant Accounting Policies




Principles
      of Consolidation





The
      consolidated financial statements include the accounts of the Company and its
      wholly owned subsidiaries. All inter-company balances and transactions have
      been
      eliminated. Approximately $304,240 and $4,887,203 of consolidated revenue and
      assets, after eliminations, respectively are based upon the accounts of the
      parent and $0 and $0 of consolidated revenue and assets, after eliminations
      respectively, of the subsidiary.





Use
      of
      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 effect 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 revenue and expenses during
      the reporting periods. Actual results could differ from those
      estimates.




F-6




Cash
      and
      Cash Equivalents




Cash
      and
      cash equivalents consist of highly liquid financial instruments with an original
      maturity of three months or less from the date acquired.





Concentrations
      of Credit Risk ******





Financial
      statement items which potentially subject the Company to concentrations of
      credit risk are cash and cash equivalents and trade accounts receivable arising
      from the Company’s normal business activities. To mitigate cash risks, the
      Company places its cash with a high credit quality financial institution. At
      December 31, 2006, the Company had approximately $4,600,000 in this financial
      institution that is subject to normal credit risk beyond federally insured
      amounts.





Accounts
      receivable are recorded at invoiced amounts and do not bear interest. The
      Company has established guidelines relative to credit ratings and maturities
      that seek to maintain stability and liquidity. The Company routinely assesses
      the financial strength of its customers and maintains allowances for doubtful
      accounts for estimate of the amount of probable credit losses of accounts
      receivable balances outstanding. Account balances are charged against the
      allowance after all means of collection have been pursued and likelihood of
      collection is remote. The Company does not have any off-balance sheet credit
      exposure related to its customers. Based on management’s assessment of credit
      losses as of December 31, 2006, no allowance for doubtful accounts was deemed
      necessary.





Inventory





Inventory
      is stated at the lower of average cost or market.





Property
      and Equipment





Furniture,
      fixtures and equipment are carried at cost. Depreciation is recorded on the
      straight-line method over three years, which approximates its useful life.
      Depreciation expense in 2006 and 2005 was $1,749 and $0,
      respectively.





Routine
      maintenance and repair costs are charged to expense as incurred and renewals
      and
      improvements that extend the useful life of the assets are capitalized. Upon
      sale or retirement, the cost and related accumulated depreciation are eliminated
      from the respective accounts and any resulting gain or loss is reported in
      the
      statement of operations. During 2006 and 2005, there were no sales or
      retirements of property and equipment.





Earnings
      Per Share





The
      Company has adopted the provisions of SFAS No. 128. Basic earnings per share
      is
      computed by dividing income available to common stockholders by the weighted
      average number of common shares outstanding during the period. SFAS No. 128
      also
      requires a dual presentation of basic and diluted earnings per share on the
      face
      of the statement of operations for all companies with complex capital
      structures. Diluted earnings per share reflects the amount of earnings for
      the
      period available to each share of common stock outstanding during the reporting
      period, while giving effect to all dilutive potential common shares that were
      outstanding during the period, such as common shares that could result from
      the
      potential exercise or conversion of securities into common stock.





The
      computation of diluted earnings per share does not assume conversion, exercise,
      or contingent issuance of securities that would have an antidilutive effect
      on
      per share amounts [i.e., increasing earnings per share or reducing loss per
      share]. The dilutive effect of outstanding options and warrants and their
      equivalents are reflected in dilutive earnings per share by the application
      of
      the treasury stock method which recognizes the use of proceeds that could be
      obtained upon exercise of options and warrants in computing diluted earnings
      per
      share. It assumes that any proceeds would be used to purchase common stock
      at
      the average market price during the period. Options and warrants will have
      a
      dilutive effect only when the average market price of the common stock during
      the period exceeds the exercise price of the options or warrants.





F-7




Basic
      earnings (loss) per share reflect the amount of earnings (loss) for the period
      attributable to each share of common stock outstanding during the reporting
      period. For the year ended December 31, 2006 the Company recorded a loss and
      as
      a result, the average number of common shares used in the calculation of basic
      and diluted loss per share have not been adjusted for the effects of potential
      common shares from unexercised stock options and warrants.




In
      January 2006, the Company merged into a non-operating public shell, analogous
      to
      a reverse acquisition as more fully described in Note 5 - Capital Stock. The
      shares issued in connection with this transaction are presented as outstanding
      for all periods presented.




The
      basic
      and diluted loss per common share outstanding on the Consolidated Statement
      of
      Operations excludes common shares represented by warrants and options from
      the
      computation of diluted net loss per share, as they have an anti-dilutive effect
      but may dilute earnings per share in the future.





Share-Based
      Compensation





Effective
      January 1, 2006, the Company adopted SFAS No. 123(R), “Share-Based
      Payment,” which requires the Company to record as an expense in its financial
      statements the fair value of all stock-based compensation awards. The Company
      currently utilizes a standard option pricing model (i.e., Black-Scholes) to
      measure the fair value of stock options granted to employees using the “modified
      prospective” method. Under the “modified prospective” method, compensation cost
      is recognized in the financial statements beginning with the effective date,
      based on the requirements of SFAS No. 123(R) for all share-based payments
      granted after that date, and based on the requirements of SFAS No. 123(R) for
      all unvested awards granted prior to the effective date of SFAS No. 123(R).





During
      2005, no share-based payments were granted under the Company’s stock option plan
      and therefore the Company did not have any share-based compensation expense
      under the modified prospective method for that period.





Deferred
      Compensation





In
      accordance with EITF Abstract No. 96-18, “Accounting for Equity Instruments That
      Are Issued to Other Than Employees for Acquiring, or in Conjunction with
      Selling, Goods or Services,” based on the nature of the consultant as a service
      provider, the fair value of these shares have been measured based on their
      grant
      date - the date the agreement was entered into in connection with the Q-RNA
      merger - using the Black-Scholes pricing model and recorded as Deferred
      Compensation in the Stockholders’ Equity section of the balance
      sheet.





Income
      Taxes





The
      Company follows the provisions of the Statement of Financial Accounting
      Standards No. 109, Accounting for Income Taxes (“SFAS 109”). Income taxes are
      provided on taxable income at the statutory rates applicable to such income.
      Deferred taxes arise from the temporary differences in the basis of assets
      and
      liabilities for income tax and financial reporting purposes. Deferred tax assets
      are reduced by a valuation allowance if it is more likely than not that some
      portion or all of the deferred tax asset will not be realized.





Fair
      Value of Financial Instruments





The
      carrying amounts of financial instruments including cash and cash equivalents,
      accounts receivable, other assets, accounts payable and accrued expenses,
      approximate fair value due to the relatively short maturity of these
      instruments.





Revenue
      Recognition





Revenues
      from product sales are recognized when products are shipped to the
      customer.




F-8


Research
        and Development Costs


All
      research and development costs are expensed as incurred and include costs paid
      to sponsored third parties to perform research and conduct clinical
      trials.





Advertising
      Expense





The
      cost
      of advertising is expensed as incurred. The Company incurred approximately
      $0 in
      advertising costs during 2006 and 2005.





[3]
      Property and Equipment





December
                31, 2006Office
                Equipment
            
            $
            8,995Less:
                Accumulated depreciation
            
            
            1,749Net
                Office Equipment
            
            $
            7,246





[4]
      Operating Lease





The
      company leases office space under a three year lease expiring June 30, 2009.
      The
      Company is required to pay utilities, insurance and other costs related to
      the
      leased facilities.





July
                2006 - June 2007
            
            $
            53,712July
                2007 - June 2008
            
            
            54,971July
                2008 - June 2009
            
            
            56,261July
                2009 - June 2010
            
            
            -July
                2010 - June 2011
            
            
            -Thereafter
            
            
            -Totals
            
            $
            164,944





The
      Company’s lease on its office space has an escalation clause requiring increases
      over the lease term. The effect of the escalation clause which requires
      straight-line recognition over the lease term has not been recorded in
      accordance with SFAS No. 13 “Accounting for Leases” as it has been deemed
      immaterial.





[5]
      Capital Stock





Recapitalization





On
      January 18, 2006, Northern Way Resources, Inc., a Nevada corporation
      (“Northern-NV”) was merged with and into Northern Way Resources Inc., a Delaware
      corporation (“Northern-DE”) for the sole purpose of changing its state of
      incorporation from Nevada to Delaware pursuant to an Agreement and Plan of
      Merger dated January 12, 2006 (“Reincorporation Merger Agreement”), which was
      approved through an action by written consent of a majority of the stockholders
      on the same date (“Reincorporation Merger”). Under the terms of the
      Reincorporation Merger, each share of Northern-NV was exchanged for one share
      of
      Northern-DE. In connection with the Reincorporation Merger, Northern-DE changed
      its name to Neurotech Pharmaceuticals, Inc. (“Neurotech”).




On
      January 24, 2006 Neurotech entered into an Agreement of Merger and Plan of
      Reorganization by and among Neurotech, Marco Hi-Tech J.V. Ltd., a privately
      held
      New York corporation, and Marco Acquisition I, Inc., (“Acquisition Sub”) a newly
      formed wholly-owned Delaware subsidiary of Neurotech. Upon closing of the merger
      transactions contemplated under the Merger Agreement, Acquisition Sub was merged
      with and into Marco, and Marco became a wholly-owned subsidiary of
      Neurotech.





On
      January 25, 2006, Neurotech filed a Certificate of Amendment to its Certificate
      of Incorporation in the State of Delaware in order to change its name to
      Neuro-Hitech Pharmaceuticals, Inc.





For
      accounting purposes, the acquisition was treated as an issuance of shares for
      cash by Marco with Marco as the acquirer. Historical operations information
      prior to January 2006 is that of Marco only. The accounting is identical to
      that
      resulting from a reverse acquisition except that no goodwill or other intangible
      assets are recorded. Pro forma information is not presented as of the date
      of
      this transaction, Neurotech was considered a public shell and accordingly,
      the
      transaction was not considered a business combination.




F-9




Thereafter,
      on August 11, 2006, Neuro-Hitech Pharmaceuticals, Inc. amended its Certificate
      of Incorporation to change its name to “Neuro-Hitech, Inc.”





Private
      Offering





Immediately
      after the closing of the Merger on January 24, 2006, there were 7,027,252 shares
      of Neuro-Hitech Common Stock issued and outstanding and 100 shares of
      Neuro-Hitech Class A Common Stock issued and outstanding.





Prior
      to
      the closing of the Merger, the Company’s predecessor, Marco completed a private
      offering in which Marco received total gross proceeds of  $996,006,
      which after the closing of the merger with the Company, were converted into
      664,004 shares of the Company’s common stock. Subsequent to the closing of the
      Merger, Neuro-Hitech completed a private offering of 1,750,000 shares of its
      common stock and warrants to purchase 437,500 shares of its common stock for
      $4,375,000 million in cash. The exercise price of the warrants is $5.00 per
      share. ****





On
      November 29, 2006 Neuro-Hitech closed on the sale in a private offering of
      612,200 shares of its common stock and warrants to purchase 306,100 shares
      of
      its common stock for $3,137,525 in cash.  The exercise price of the
      warrants is $7.00 per share.





Placement
      agent, legal, accounting, printing and other costs related to these offerings,
      in the aggregate amount of $353,127, were charged to additional paid-in capital
      in the year ended December 31, 2006.





Business
      Combination





On
      November 29, 2006 Neuro-Hitech completed the acquisition of Q-RNA, Inc., a
      New
      York-based biotechnology company focused on diseases such as Alzheimer’s,
      epilepsy and Parkinson’s disease. Neuro-Hitech privately issued merger
      consideration to the Q-RNA securityholders consisting of an aggregate of: (i)
      1,800,000 shares of Neuro-Hitech common stock, (ii) warrants to purchase 600,356
      shares of Neuro-Hitech common stock at an exercise price of $13 per share,
      and
      (iii) warrants to purchase 600,356 shares of Neuro-Hitech common stock at
      an exercise price of $18 per share.  In addition, Neuro-Hitech assumed
      Q-RNA employee stock options now exercisable for 199,288 shares of Neuro-Hitech
      common stock. The weighted average exercise price of these stock options was
      $12.66. The Neuro-Hitech common stock issued as merger consideration will be
      subject to a lock-up of up to two years and therefore not freely transferable
      during the lock-up period.





[6]
      Research and License Agreement





Mayo
      Foundation





The
      Company holds an exclusive license for two composition of matter patents and
      four process patents for Racemic Huperzine A, Huperzine A and their analogues
      and derivatives from the Mayo Foundation.





The
      Company has an exclusive worldwide license to the four patents pursuant to
      a
      Technology License Contract with the Mayo Foundation (the “Mayo Licensing
      Agreement”) and rights to patents or future developments. The Company made an
      initial, nonrefundable royalty payment of $82,500 when it entered into the
      Mayo
      Licensing Agreement in 1997 and upon filing of an investigational new drug
      application (IND) the Company paid $25,000 to Mayo in 2002, and will be required
      to make, once FDA approval is received, quarterly royalty payments of 5% of
      net
      sales of the licensed products and 1% of net sales of any Natural Products
      (as
      such terms are defined in the Mayo Licensing Agreement) sold by the Company
      prior to May 29, 2007, with a minimum annual royalty of $300,000. The Company
      is
      also obligated to make certain maintenance and milestone royalties payments.
      The
      total amount of royalties payable under these milestones are $3,225,000. As
      of
      December 31, 2006, the Company has paid $25,000 in milestone royalties. Prior
      to
      obtaining FDA approval of a Licensed or a Natural Product the Company is
      obligated to pay the Mayo Foundation $5,000 annually. The Company also has
      an
      option to license any patents that issue as a result of continuations,
      continuations-in-part, divisional or foreign applications filed based on the
      licensed patent upon payment of $15,000. The Mayo Foundation has the option
      under the Mayo Licensing Agreement to purchase products from the Company at
      a
      30% discount to market.




F-10




As
      of
      December 31, 2006, the Company continues to coordinate the research and
      development efforts needed in order to complete the clinical studies and have
      not received FDA approval. In addition, there have not been any sales of any
      licensed product during the year ended December 31, 2006.





Under
      the
      terms of the Agreement, the Company will pay fixed annual fees of $5,000 prior
      to obtaining FDA approval.





For
      the
      year ended December 31, 2006 and 2005, the total research and development costs
      incurred by the Company have been approximately $205,000 and $5,000,
      respectively. The total costs since inception of the agreement were
      approximately $350,000 and are reflected in the Research and Development caption
      of the Statement of Operations.





Georgetown
      University





In
      December 2003, the Company entered into a clinical research agreement, which
      was
      amended in November 2005, with Georgetown pursuant to which Georgetown will
      provide the Company with Phase II research. The costs associated with this
      agreement total $3,146,667 and will be partially funded by the National
      Institutes of Health. The Company’s portion of the total cost is $1,846,667 and
      payable in installments upon the achievement of certain milestones.





On
      December 8, 2006, the Company announced the expansion of the size of the Phase
      II clinical trial by 60 participants, an increase of 40%.  The
      Company’s portion of the total cost increased by another $1,934,270 and is
      payable in installments. This agreement may be terminated by either party upon
      30 days notice. ****





For
      the
      year ended December 31, 2006, the total cost incurred by the Company was
      $952,500 and the total costs incurred since inception of the agreement was
      approximately $1,927,500.





The
      Company expects to make total payments of $1,853,437 in 2007 as the Phase II
      clinical trial conclude.





Org
      Syn
      Laboratory, Inc.





On
      February 1, 2006, the Company entered into an exclusive development agreement
      with Org Syn for the development of synthetic Huperzine A. Org Syn received
      an
      aggregate of $209,727 upon the execution of the Agreement and may receive up
      to
      an additional $209,727 upon the achievement of certain milestones for services
      rendered under the Agreement. **** The
      Development Agreement may be terminated by the Company if Org Syn fails to
      achieve certain stated milestones.





For
      the
      year ended December 31, 2006, the total research and development cost incurred
      was approximately $419,500 and is reflected in the Research and Development
      caption of the Statement of Operations.





Xel
      Herbaceuticals, Inc.





On
      March
      15, 2006, the Company entered into a development agreement with Xel
      Herbaceuticals, Inc. (“XEL”) for XEL to develop a Huperzine A Transdermal
      Delivery System (“Delivery Product”). Under the terms of the agreement, the
      Company paid XEL a $250,000 fee upon the execution of the agreement and will
      pay
      XEL $92,500 per month during the development of the Delivery Product, which
      development is estimated to take approximately 16 months. The $250,000 fee
      paid
      upon the execution of the agreement is amortized ratably over the term of the
      agreement and is reflected in Deferred Charges caption of the Balance Sheet
      as
      of December 31, 2006 for $93,750. The monthly payment is subject to quarterly
      adjustment and subject to a limit on aggregate development cost overruns of
      $250,000. XEL has agreed to pay any cost overruns in excess of $250,000. The
      Company and XEL intend to seek domestic and foreign patent protection for the
      Delivery Product.




F-11




If
      the
      Company elects to exercise its right to license the Delivery Product in the
      United States and Canada (“North America”) and to develop the Delivery Product
      on its own, the Company will pay XEL an initial license fee of $400,000 and
      up
      to an aggregate of $2.4 million in additional payments upon the achievement
      of
      certain milestones, including completion of a prototype, initial submission
      to
      the FDA, completion of phases of clinical studies and completion of the FDA
      submission and FDA approval.. Similarly, if the Company elects to exercise
      its
      option to license the Delivery Product worldwide excluding China, Taiwan, Hong
      Kong, Macau and Singapore (“Worldwide”), and develop the Delivery Product on its
      own, the Company will pay XEL an additional initial license fee of $400,000
      and
      up to an aggregate of $2.4 million in additional payments upon the achievement
      of comparable milestones. If XEL fails to obtain a U.S. or international patent,
      the corresponding license fee and milestone payments will be reduced by 50%
      until such time as XEL obtains such patent, at which time the unpaid 50% of
      all
      such milestone payments previously not made will be due.





The
      Company will also be obligated to pay XEL royalty payments of between 7% and
      10%
      of net sales, with such royalty payments subject to reduction upon the
      expiration of the patent or the launch of a generic product in the applicable
      territory. If a patent has not been issued in either the United States or
      Canada, the royalty payments will be subject to reduced rates of between 3%
      and
      5% of net sales. Royalty payments for sales in the worldwide territory will
      be
      subject to good faith negotiations between the parties.





If
      the
      Company exercises its right to license the Delivery Product in North America
      and
      to develop the Delivery Product with a third party, the Company will pay XEL
      50%
      of any initial signing fees and milestone fees (excluding any research and
      development fees) paid by such third party. Similarly, in the event that the
      Company decides to exercise its option to license the Delivery Product Worldwide
      and to develop the Delivery Product with a third party, the Company will pay
      XEL
      50% of any initial signing fees and milestone fees (excluding any research
      and
      development fees) paid by such third party. If XEL fails to obtain a U.S. or
      international patent, the percentage of the corresponding fees will be reduced
      to 25%. The Company will pay XEL 20% of any royalty payments received by the
      Company from third-party sublicensees, or if the Delivery Product is not
      protected by at least one patent, 10% of any royalty received by the Company
      from sublicensees.





If
      the
      Company elects not to exercise its right to license the Delivery Product and
      XEL
      elects to further develop the Delivery Product without the Company, XEL will
      be
      obligated to pay the Company 30% of any net profits realized up to a maximum
      of
      two times the amount paid by the Company to XEL during development, excluding
      the initial $250,000 signing fee. Upon such election, XEL will be entitled
      to
      full ownership of the intellectual property of the Delivery Product. If the
      Company elects to exercise its rights to license the Delivery Product in North
      America, but not Worldwide, XEL will have certain rights to obtain intellectual
      property protection in any country outside North America upon payment to the
      Company for such rights, such fees to be negotiated in good faith by the
      parties.





For
      the
      year ended December 31, 2006, the total research and development costs incurred
      were approximately $1,081,000 and are reflected in the Research and Development
      caption of the Statement of Operations.





The
      Company expects to make total payments of $655,500 in 2007 for continued
      development and achievement of certain milestones.





Dalhousie
      License Agreements (PARTEQ)





As
      part
      of the acquisition of Q-RNA, the Company assumed exclusive License Agreements
      with PARTEQ Research and Development Innovations (“PARTEQ”), the technology
      licensing arm of Queens University, Kingston, Ontario, Canada.





The
      Exclusive Patent License Agreement with PARTEQ (the “Alzheimer’s Agreement”)
      grants the Company an exclusive worldwide license to all innovations and
      developments, including the patent applications and additional filings, related
      to specified patents related to research on Alzheimer’s disease. The Company
      made a one-time license fee of C$25,000 when it entered into the Alzheimer’s
      Agreement in 2005 and will be required to make quarterly royalty payments of
      3%
      of net sales of the licensed products (as such term is defined in Alzheimer’s
      Agreement), with a minimum annual royalty of C$10,000 for 2007, C$20,000 for
      2008, C$30,000 for 2009 and C$40,000 for 2010 and each subsequent calendar
      year.
      The Company is also obligated to make the following milestone payments:
      C$100,000 upon completion of a Phase I trial of a licensed product, C$250,000
      upon completion of a Phase II trial of a licensed product, and C$1,000,000
      upon
      the first FDA approval (as such term is defined in the Alzheimer’s Agreement).
      The Company also has the right to sub-license with the payment of 20% of all
      non-royalty sublicensing consideration.




F-12




Under
      the
      terms of the Alzheimer’s Agreement which was amended in early 2007, the Company
      will pay fixed annual fees of C$256,802.





The
      Exclusive Patent License Option Agreement with PARTEQ (the “Epilepsy Agreement”)
      grants the Company an option to acquire an exclusive worldwide license to all
      innovations and developments, including the patent applications and additional
      filings, related to specified patents related to research on Epilepsy. The
      Company made a non-refundable, non-creditable option payment of C$10,000 when
      it
      entered into the Epilepsy Agreement in 2006. If the Company exercises its
      option, the Company will make a non-refundable, non-creditable license payment
      of C$17,500 at the time of such exercise. If the Company exercises its option,
      it will be required to make quarterly royalty payments of 3% of net sales of
      the
      licensed products (as such term is defined in Epilepsy Agreement), with a
      minimum annual royalty of C$10,000 through the second anniversary of the
      license, C$20,000 through the third anniversary of the license, C$30,000 through
      the fourth anniversary of the license and C$40,000 through the fifth anniversary
      of the license and each subsequent anniversary. If the Company exercises its
      option, the Company is also obligated to make the following milestone payments:
      C$100,000 upon completion of a Phase I trial of a licensed product, C$250,000
      upon completion of a Phase II trial of a licensed product, and C$1,000,000
      upon
      the first FDA approval (as such term is defined therein). If the Company
      exercises its option, the Company also has the right to sub-license with the
      payment of 20% of all non-royalty sublicensing consideration. ****





For
      the
      year ended December 31, 2006, the total research and development costs incurred
      were approximately C$48,600 and are reflected in the Research and Development
      caption of the Statement of Operations.





Under
      the
      terms of the Epilepsy Agreement which was amended in early 2007, the Company
      will pay fixed annual fees of C$150,800.





The
      following chart estimates the fixed annual research and development costs of
      the
      Company, excluding any exercise of the option under the Epilepsy Agreement
      and
      any milestone payments to XEL.


Year
              
              Amount2007
              
              $
              2,839,5192008
              
              
              5,0002009
              
              
              5,0002010
              
              
              -2011
              
              
              -Thereafter
              
              
              -Total
              
              $
              2,849,519





*See
      Note 14 for description of a subsequent event related to the License Agreement
      with PARTEQ.*





[7]
      Business Combination





On
      November 29, 2006, the Company completed an acquisition by merger of Q-RNA,
      Inc. a privately held New York-based biotechnology company. In connection with
      the acquisition, the Company issued (i) 1,800,000 shares of the Company’s common
      stock, (ii) warrants to purchase 600,356 shares of the Company’s common stock at
      an exercise price of $13 per share, and (iii) warrants to purchase 600,356
      shares of the Company’s common stock at an exercise price of $18 per share. The
      Company also assumed Q-RNA options outstanding which upon exercise will be
      exercisable into 199,286 shares of the Company’s common stock. The common shares
      and warrants were valued at the adjusted close price of the NHPI stock on the
      closing date of the agreement which was $5.60 per share. The issuance costs
      related to the Q-RNA Merger totaled approximately $271,000.





Upon
      acquisition of Q-RNA, the Company adopted Interpretation No. 4 (FIN),
      Applicability of FASB Statement No. 2 to Business Combinations Accounted for
      by
      the Purchase Method. In accordance with this interpretation, a substantial
      portion of the costs of the Q-RNA acquisition, $16,805,787 million, was assigned
      to in-process research and development and expensed upon acquisition as
      management deemed these assets to have no alternative future use.




F-13




The
      unaudited pro forma information below assumes that Q-RNA was acquired in fiscal
      2006 and 2005 at the beginning of the respective year. The impact of charges
      for
      in-process research and development have been excluded.





The
      unaudited proforma information is presented for informational purposes only
      and
      is not indicative of the results of future operations or results that would
      have
      been achieved had the acquisitions taken place at the beginning of fiscal
      years.


For
                  the Years Ended December 31,**2006**
              
              **2005**Total
                  Revenue
              
              $
              304,240
              
              $
              208,343Net
                  [Loss]
              
              $
              (5,402,784
              )
              $
              (1,884,746
              )Basic
                  and Diluted [Loss] Per Common Share
              
              $
              (0.48
              )
              $
              (0.17
              )




The
      acquisition of Q-RNA provided the Company with intellectual property and a
      pipeline of preclinical compounds.




[8]
      Employee and Non-Employee Stock Based Compensation





As
      of
      December 31, 2006 the Company had two stock-based compensation plans, which
      are
      described below. The Company adopted the fair value method of recording
      stock-based compensation in accordance with the modified prospective method
      of
      SFAS No. 123(R), Share-Based Payment.





The
      Company’s Incentive Plan provides for the issuance of options and other
      equity-based awards for the Company’s common stock. Shares issued upon exercise
      of equity-based awards are shares held in treasury that have been reserved
      for
      issuance under the plan. The Company’s Incentive Plan is administered by the
      Company’s board of directors, or a committee appointed by the Board, which
      determines recipients and types of awards to be granted, including the number
      of
      shares subject to the awards, the exercise price and the vesting schedule.
      Options generally have an exercise price equal to the fair market value of
      the
      Company’s common stock as of the grant date.





Non-Employee
      Stock Option Plan





On
      January 24, 2006, Neuro-Hitech’s shareholders approved the Company’s 2006
      Non-Employee Directors Stock Option Plan (the “Directors Plan”). Key features of
      this Plan include:




·
            Non-employee
                directors of the Company and its subsidiaries are eligible to participate
                in the Directors Plan. The term of the Directors Plan is ten years.
                400,000 shares of common stock have been reserved for issuance under
                the
                Directors Plan.




·
            Options
                may only be issued as non-qualified stock
                options.




·
            Stockholder
                approval is required in order to replace or reprice
                options.




·
            The
                Directors Plan is administered by the board or a committee designated
                by
                the board.




F-14




·
            Options
                shall be granted within ten years from the effective
                date.




·
            Upon
                a “change in control” any unvested options shall vest and become
                immediately exercisable.




A
      summary
      of the stock option activity under the Company’s Non-Employee Directors Stock
      Option Plan during the year ended December 31, 2006 is presented
      below:


Options
                  Outstanding as of 12/31/2006
              
              Options
                  ExercisableWeighted
                  Average
              
              
              
              WeightedExercise
                  Price Range
              
              Number
                  of Shares Outstanding
              
              Remaining
                  Contractual Life
              
              Exercise
                  Price Per Share
              
              As
                  of 12/31/2006
              
              Average
                  Exercise Price Per Share$0.00
                  to $2.50 per share
              
              
              350,000
              
              
              4.00
              
              $
              2.50
              
              
              116,666
              
              $
              2.50




Year
                  Ended Dec. 31, 2006Number
                  of Options
              
              Weighted
                Average
                  Exercise
                Price
                  Per ShareInception
              
              
              -
              
              
              -Granted
              
              
              350,000
              
              $
              2.50Exercised
              
              
              -
              
              
              -Expired
              
              
              -
              
              
              -Outstanding
                  at End of Year
              
              
              350,000
              
              $
              2.50





Employee
      Stock Option Plan





On
      January 24, 2006, Neuro-Hitech’s shareholders approved the Company’s
      2006 Incentive Stock Plan (the “Incentive Plan”). Key features of this Plan
      include:




·
            Company’s
                officers, directors, key employees and consultants of the Company
                and its
                subsidiaries are eligible to participate in the Incentive Plan. The
                term
                of the Incentive Plan is ten years. 1,350,000 shares of common stock
                have
                been reserved for issuance under the Incentive
                Plan.




·
            Both
                incentive and nonqualified stock options may be granted under the
                Incentive Plan.




·
            The
                Incentive Plan terminates on January 23, 2016.




·
            The
                Incentive Plan is administered by the board of directors or a committee
                designated by the board.




On
      January 24, 2006, the Company's Chief Executive Officer and Executive Vice
      President were granted options to purchase 220,000 shares and 70,000 shares
      of the Company’s common stock, respectively, each at an exercise price of $2.50
      per share. One-third of the shares granted vested on the date of grant and
      the
      remaining shares vest in equal proportions on the first and second
      anniversaries of the grant date.





In
      connection with the acquisition of Q-RNA, the Company also entered into a
      consulting relationship with Dr. Donald F. Weaver and signed an Employment
      Agreement with William McIntosh, as Chief Operating Officer, and William Wong,
      as Chief Scientific Officer.





Under
      the
      terms of the Consultant Agreement, the Company issued 500,000 non-qualified
      stock options to Dr. Donald Weaver. These options have a contractual term of
      15
      years and are exercisable at $5.85 per share.




F-15




Vesting
      of the options is based on two separate criteria. The first vesting criteria
      is
      for each successful year of completion of the sponsored research agreement
      measured from July to June and commencing in 2006 the consultant will earn
      the
      right to exercise the purchase of 50,000 options which total 200,000 options
      over a four year vesting term.





The
      second vesting criteria allows for the ability to earn the right to purchase
      the
      other 300,000 options measured by achievement of specified milestones in
      connection with the sponsored research agreement. There are four milestones
      allowing for the right to purchase an additional 75,000 shares, respectively.





Initial
      recognition of the deferred compensation approximated $1.3 million and was
      amortized by approximately 131,000 through December 31, 2006 due to vesting
      of
      the first 50,000 shares in accordance with achievement of the first successful
      year of completion of the sponsored research agreement from July 2005 through
      June 2006.





On
      November 29, 2006, Mr. McIntosh signed an employment agreement and received
      options to purchase 300,000 shares of the Company’s common stock, which option
      becomes exercisable as to 18,750 shares per quarter beginning as of the date
      of
      this agreement. The option has an exercise price of $5.85 per
      share.





On
      November 29, 2006, Mr. Wong signed an employment agreement and received options
      to purchase 150,000 shares of the Company’s common stock, which option becomes
      exercisable as to 9,375 shares per quarter beginning as of the date of this
      agreement. The option has an exercise price of $5.85 per share.


Options
                  Outstanding as of 12/31/2006
              
              Options
                  ExercisableWeighted
                  Average
              
              
              
              WeightedExercise
                  Price Range
              
              Number
                  of Shares Under Option
              
              Remaining
                  Contractual Life
              
              Exercise
                  Price Per Share
              
              As
                  of 12/31/2006
              
              Average
                  Exercise Price Per Share$0.00
                  to $2.50 per share
              
              
              290,000
              
              
              9.08
              
              $
              2.50
              
              
              96,667
              
              $
              2.50$2.51
                  to $5.85per share
              
              
              950,000
              
              
              12.55
              
              $
              5.85
              
              
              78,125
              
              $
              5.851,240,000
              
              
              
              
              
              
              
              
              174,792




Year
                  Ended Dec. 31, 2006Number
                  of
                Options
              
              Weighted
                Average
                  Exercise
                Price
                  Per ShareInception
              
              
              -
              
              
              -Granted
              
              
              1,240,000
              
              $
              5.07Exercised
              
              
              -
              
              
              -Expired
              
              
              -
              
              
              -Outstanding
                  at End of Year
              
              
              1,240,000
              
              $
              5.07




The
      fair
      value used in calculating the stock option expense has been estimated using
      Black-Scholes pricing model which takes into account as of the grant date,
      the
      exercise price, expected life of the option, contractual term, current price
      of
      the underlying stock, expected volatility, expected dividends on the stock
      and
      the risk-free interest rate based on expected term of the option. The risk-free
      rate is estimated based on U.S. Treasury security rates for the applicable
      terms.





F-16




The
      following is the average of the data used for the aforementioned
      assumptions:


**Year
                  Ended**
              
              **Risk-Free
                  Interest Rate**
              
              **Expected
                  Life**
              
              **Expected
                  Volatility**
              
              **Expected
                  Dividends**December
                  31, 2006
              
              
              4.45
              %
              
              5
              
              
              48.60
              %
              
              None




During
      2006, compensation costs on vested awards for two plans totaled approximately
      $328,000 and is reflected in Share-Based Compensation caption of the Statement
      of Operations.





As
      of
      December 31, 2006, there was $1,178,147 of total unrecognized compensation
      cost
      related to nonvested stock-based compensation in connection with the Q-RNA
      merger and the related consulting agreement entered into. This amount is to
      be
      recognized as Amortization of Deferred Compensation in the Statement of
      Operations in accordance with vesting provisions. As of December 31, 2006,
      approximately $131,000 reflected in Amortization of Deferred Compensation in
      the
      Statement of Operations in accordance with the vesting schedule.





Options
      Assumed From Q-RNA Merger




As
        part
        of the Q-RNA merger, the Company assumed Q-RNA options outstanding which
        upon
        exercise will be exercisable into 199,286 shares of the Company’s common stock.
        Upon consummation of the Q-RNA Merger, the shares were immediately exercisable
        into the Company’s common stock.
  Options
                  Outstanding as of 12/31/2006
              
              Options
                  ExercisableWeighted
                  Average
              
              
              
              WeightedExercise
                  Price Range
              
              Number
                  of Shares Under Option
              
              Remaining
                  Contractual Life
              
              Exercise
                  Price Per Share
              
              As
                  of 12/31/2006
              
              Average
                  Exercise Price Per Share$0.00
                  to $3.80 per share
              
              
              12,059
              
              
              0.38
              
              $
              3.80
              
              
              12,059
              
              $
              3.80$3.81
                  to $9.49 per share
              
              
              1,210
              
              
              6.75
              
              $
              9.49
              
              
              1,210
              
              $
              9.49$9.50
                  to $12.66 per share
              
              
              180,314
              
              
              6.88
              
              $
              12.66
              
              
              180,314
              
              $
              12.66$12.67
                  to $13.92 per share
              
              
              1,975
              
              
              0.42
              
              $
              13.92
              
              
              1,975
              
              $
              13.92195,558
              
              
              
              
              
              
              
              
              195,558




Year
                  Ended December 31, 2006Number
                  of Options
              
              Weighted
                  Average Exercise Price Per ShareAssumed
                  Upon Acquisition
              
              
              199,286
              
              $
              11.88Exercised
              
              
              1,679
              
              $
              0.13Expired
              
              
              2,049
              
              $
              11.44Outstanding
                  at End of Year
              
              
              195,558
              
              $
              11.88


*See
        Note 5 for further description of the options assumed by the Company in
        connection with the Q-RNA merger.*


Warrants
      to Non-Employees




Prior
      to
      the closing of the Merger with Northern Way Resources, Inc., the Company’s
      predecessor, the Company granted warrants to purchase an aggregate of 100,000
      shares of common stock at $2.50 per share.




F-17





In
      connection with a private offering of its securities, in January 2006, the
      Company granted warrants to purchase an aggregate of 437,500 shares of common
      stock at $5.00 per share.





In
      November 2006 in connection with a private placement offering, the Company
      granted warrants to purchase an aggregate of 306,100 shares of common stock
      at
      $7.00 per share.





A
      summary
      of the warrant activity during the year ended December 31, 2006 is presented
      below:


Options
                  Outstanding as of 12/31/2006
              
              Options
                  ExercisableWeighted
                  Average
              
              
              
              WeightedExercise
                  Price Range
              
              Number
                  of Shares Under Option
              
              Remaining
                  Contractual Life
              
              Exercise
                  Price Per Share
              
              As
                  of
                12/31/2006
              
              Average
                  Exercise Price Per Share$0.00
                  to $2.50 per share
              
              
              100,000
              
              
              4.00
              
              $
              2.50
              
              
              100,000
              
              $
              2.50$2.51
                  to $5.00 per share
              
              
              437,500
              
              
              3.00
              
              $
              5.00
              
              
              437,500
              
              $
              5.00$5.01
                  to $7.00 per share
              
              
              306,100
              
              
              4.00
              
              $
              7.00
              
              
              306,100
              
              $
              7.00*$7.01
                  to $13.00 per share
              
              
              600,356
              
              
              9.92
              
              $
              13.00
              
              
              600,356
              
              $
              13.00*$13.01
                  to $18.00 per share
              
              
              600,356
              
              
              9.92
              
              $
              18.00
              
              
              600,356
              
              $
              18.002,044,312
              
              
              
              
              
              
              
              
              2,044,312


Year
                  Ended December 31, 2006Number
                  of
                Warrants
              
              Weighted
                  Average Exercise Price Per ShareBeginning
                  of year
              
              
              40,000
              
              $
              0.98Granted
              
              
              2,044,312
              
              $
              11.34Exercised
              
              
              -
              
              
              -Expired
              
              
              (40,000
              )
              $
              0.98Outstanding
                  at end of year
              
              
              2,044,312
              
              $
              11.34




*See
      Note 5 for further description of the 1,200,712
      warrants issued in connection with the acquisition of
      Q-RNA.




[9]
      Employment Contracts and Consulting Agreements




Under
      the
      terms of the Q-RNA Merger Agreement, the Company entered into a consulting
      agreement with Dr. Donald F. Weaver and employment agreements with William
      McIntosh, as Chief Operating Officer, and William Wong, as Chief Scientific
      Officer.




Under
      the
      terms of the Consultant Agreement, Dr. Weaver will serve as a member of the
      Company’s Scientific Advisory Board and consult with the Company on matters
      pertaining to the research and development of products owned or licensed by
      the
      Company. Dr. Weaver will also serve as the coordinator and administrator of
      any
      formal licensing, sponsored research or other agreements as executed by the
      Company with Queens University, PARTEQ Innovations and Dalhousie University.




F-18




In
      consideration for the Consultant’s services, Dr. Weaver will be paid $1,000 per
      day, pro rata as appropriate for services actually performed. The term of the
      Agreement is one year from November 29, 2006.




L.
      William McIntosh became the Company’s Chief Operating Officer and a member of
      the Company’s board of directors. Mr. McIntosh’s annualized base salary will be
      $240,000 per year. Under the terms of his employment agreement, Mr. McIntosh
      shall devote, on average, four days a week to the business affairs of the
      Company and be compensated accordingly. The term of the Agreement is one year
      from November 29, 2006.




William
      Wong became the Company’s Chief Scientific Officer. Mr. Wong’s annualized base
      salary will be $180,000 per year. Under the terms of his employment agreement,
      Mr. Wong shall devote, on average, three days a week to the business affairs
      of
      the Company and be compensated accordingly. The term of the Agreement is one
      year from November 29, 2006.




*See
      Note 8 for a description of the option grants.*





[10]
      Related Party Transaction





During
      2006 and 2005, the Company recorded allocated salary, payroll taxes and other
      operational expenses from a company affiliated through common ownership. In
      November 2005, the Company borrowed $25,000 from this affiliate. As of December
      31, 2006 and 2005, the amount due to the affiliate totaled approximately $0
      and
      $42,300, respectively. In March 2006, the Company fully repaid the amount due
      to
      the affiliate totaling approximately $45,000.





[11]
      Income Taxes





For
      2006
      and 2005, the Company has no current income tax expense. Deferred taxes based
      upon differences between the financial statement and tax basis of assets and
      liabilities and available net operating loss carryforwards are summarized as
      follows:


December
                  31,2006
              
              2005Deferred
                  Tax Asset - Non-Current:Net
                  Operating Loss Carryforwards
              
              $
              9,400,000
              
              $
              1,036,000Valuation
                  Allowance
              
              
              (9,400,000
              )
              
              (1,036,000
              )$
              -
              
              $
              -




A
      full
      valuation allowance has been established due to the uncertainty about the
      realization of the deferred tax asset. The net change during 2006 and 2005
      in
      the total valuation allowance was approximately $8,400,000 and $430,000,
      respectively.





As
      of
      December 31, 2006, the Company has net operating loss carry-forwards of
      approximately $23,500,000. The Company’s net operating loss carry-forwards as
      of December 31, 2006 expire as set forth in the following
      table.


Year
                  of Expiration
              
              Amount2012
              
              $
              153,0002021
              
              
              21,0002022
              
              
              113,0002023
              
              
              634,0002024
              
              
              713,0002025
              
              
              955,0002026
              
              
              20,900,000$
              23,489,000




The
      utilization of the net operating loss could be limited based upon provisions
      established in Section 382 of the Internal Revenue Code.




F-19




[12]
      Other Concentrations





The
      number of available suppliers of natural huperzine is limited. The Company
      does
      not have a long-term supply contract with its current suppliers, and purchases
      natural huperzine on a purchase order basis. If the Company is unable to obtain
      sufficient quantities of natural huperzine, when needed, or develop a synthetic
      version of Huperzine A in the future, the Company’s ability to pursue its
      business plan could be delayed or reduced, or the Company may be forced to
      pay
      higher prices for the natural huperzine.




[13]
      New
      Authoritative Pronouncements




In
      February 2007, the Financial Accounting Standards Board (FASB) issued SFAS
      No.
      159, “The Fair Value Option for Financial Assets and Financial Liabilities -
      Including an Amendment of FASB Statement No. 115”. This statement permits
      entities to choose to measure many financial instruments and certain other
      items
      at fair value. Most of the provisions of SFAS No. 159 apply only to entities
      that elect the fair value option. However, the amendment to SFAS No. 115
“Accounting for Certain Investments in Debt and Equity Securities” applies to
      all entities with available-for-sale and trading securities. SFAS No. 159 is
      effective as of the beginning of an entity’s first fiscal year that begins after
      November 15, 2007. Early adoption is permitted as of the beginning of a fiscal
      year that begins on or before November 15, 2007, provided the entity also elects
      to apply the provision of SFAS No. 157, “Fair Value Measurements”. The adoption
      of this statement is not expected to have a material effect on the Company’s
      financial statements.




In
      September 2006, the SEC issued Staff Accounting Bulletin (“SAB”) No. 108,
“Considering the Effects of Prior Year Misstatements when Quantifying
      Misstatements in Current Year Financial Statements.” SAB No. 108 addresses how
      the effects of prior year uncorrected misstatements should be considered when
      quantifying misstatements in current year financial statements. SAB No. 108
      requires companies to quantify misstatements using a balance sheet and income
      statement approach and to evaluate whether either approach results in
      quantifying an error that is material in light of relevant quantitative and
      qualitative factors. SAB No. 108 is effective for period ending after November
      15, 2006. The impact of adopting SAB No. 108 is unknown.




In
      September 2006, the FASB issued SFAS No. 158, “Employers’ Accounting for Defined
      Benefit Pension and Other Postretirement Plans - an amendment of FASB Statements
      No. 87, 88, 106, and 132(R)”. This statement requires employers to recognize the
      over-funded or under-funded status of a defined benefit postretirement plan
      (other than a multiemployer plan) as an asset or liability in its statement
      of
      financial position and to recognize changes in that funded status in the year
      in
      which the changes occur through comprehensive income of a business entity or
      changes in unrestricted net assets of a not-for-profit organization. This
      statement also requires an employer to measure the funded status of a plan
      as of
      the date of its year-end statement of financial position, with limited
      exceptions. The provisions of SFAS No. 158 are effective for employers with
      publicly traded equity securities as of the end of the fiscal year ending after
      December 15, 2006. The adoption of this statement did not have a material effect
      on the Company’s reported financial position or results of operations.




In
      September 2006, the FASB issued SFAS No. 157, “Fair Value Measurements”. The
      objective of SFAS No. 157 is to increase consistency and comparability in fair
      value measurements and to expand disclosures about fair value measurements.
      SFAS
      No. 157 defines fair value, establishes a framework for measuring fair value
      in
      generally accepted accounting principles, and expands disclosures about fair
      value measurements. SFAS No. 157 applies under other accounting pronouncements
      that require or permit fair value measurements and does not require any new
      fair
      value measurements. The provisions of SFAS No. 157 are effective for fair value
      measurements made in fiscal years beginning after November 15, 2007. The
      adoption of this statement is not expected to have a material effect on the
      Company’s future reported financial position or results of operations.




In
      June
      2006, the FASB issued FASB Interpretation No. 48, “Accounting for Uncertainty in
      Income Taxes, an interpretation of FASB Statements No. 109”. FIN 48 clarifies
      the accounting for uncertainty in income taxes by prescribing a two-step method
      of first evaluating whether a tax position has met a more likely than not
      recognition threshold and second, measuring that tax position to determine
      the
      amount of benefit to be recognized in the financial statements. FIN 48 provides
      guidance on the presentation of such positions within a classified statement
      of
      financial position as well as on derecognition, interest and penalties,
      accounting in interim periods, disclosure, and transition. FIN 48 is effective
      for fiscal years beginning after December 15, 2006. The adoption of this
      statement is not expected to have a material effect on the Company’s future
      reported financial position or results of operations.





F-20




[14]
      Subsequent Events





On
      March
      4, 2007, the Company amended its Agreement with Dalhousie University. The
      amendment calls for a increase in fees for the Alzheimer’s program from
      C$221,500 per year to C$256,802 and an increase in fees for the Epilepsy program
      from C$75,000 per year to C$150,800 per year.




Between
      January 1, 2007 and March 15, 2007, the Company conducted a private placement
      offering of its securities with institutional and individual investors and
      received total gross proceeds of $2,379,005 from that the offering. The
      investors received an aggregate of 464,196 shares of the Company’s common stock
      and warrants to purchase 232,098 shares of the Company’s common stock. The
      common stock was sold in the offering at $5.125 per share and the exercise
      price
      of the warrants was $7.00 per share.




F-21




**SIGNATURES**
 
 In
        accordance with Section 13 or 15(d) of the Exchange Act, the registrant has
        duly
        caused this Amendment No. 1 to be signed on its behalf by the undersigned
        thereunto duly authorized.
 
 **NEURO-HITECH,
                  INC.**
                (Registrant)Date:
                  April 30, 2007
              
              /s/ David
                BarrettDavid
                  BarrettChief
                  Financial Officer