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UNITED STATESSECURITIES AND EXCHANGE COMMISSIONWASHINGTON, D.C. 20549

FORM 20-F

[ ] REGISTRATION STATEMENT PURSUANT TO SECTION 12(b) OR (g)
OF THE SECURITIES EXCHANGE ACT OF 1934or

[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIESEXCHANGE ACT OF 1934For the fiscal year ended: May
31, 2010 or

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

[ ] SHELL COMPANY REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THESECURITIES EXCHANGE ACT OF 1934

Commission file number: 001-31995

MEDICURE INC.(Exact name
of registrant as specified in its charter)

Canada(Jurisdiction of incorporation or
organization)

2 - 1250 Waverley Street, Winnipeg, Manitoba, Canada R3T
6C6(Address of principal executive offices)

Dr. Albert D. Friesen, Tel: (204) 487-7412, Fax: (204)
488-9823 2 - 1250 Waverley Street, Winnipeg, Manitoba, Canada R3T
6C6 (Name, Telephone, E-mail and/or Facsimile
number and Address of Company Contact Person)

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

Securities registered or to be registered pursuant to Section
12(g) of the Act: Common Shares, without par
value(Title of Class)

Securities for which there is a reporting obligation pursuant to
Section 15(d) of the Act: None

Indicate the number of outstanding shares of each of the
issuers classes of capital or common stock as of the close of the period
covered by the annual report:

At May 31, 2010 the registrant had 130,307,552 common shares
issued and outstanding

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2

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

If this report is an annual or transition report, indicate by
check mark if the registrant is not required to file reports pursuant to Section
13 or 15(d) of the Securities Exchange Act of 1934. Yes
[    ]  No [ x ]

Indicate by check mark whether the registrant (1) has filed all
reports required to be filed by Section 13 or 15(d) of the Securities Exchange
Act of 1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes [ x
]No [     ]

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

Indicate by check mark whether the registrant is a large
accelerated filer, an accelerated filer, or a non-accelerated filer. See
definition of accelerated filer and large accelerated filer in Rule 12b-2 of
the Exchange Act. (Check one):

|Large Accelerated Filer[    
    ] | Accelerated Filer[     ] | Non-Accelerated Filer[ x
  ]
|---------------------------------- | ------------------------ | ----------------------------

Indicate by check mark which basis of accounting the registrant
has used to prepare the financial statements included in this filing:

|US GAAP [     ] | International Financial Reporting        | Other[ x ]
|--------------- | ---------------------------------------- | ----------
|                | Standards as issued by the International |           
|                | Accounting Standards Board
      [     ] |           

If Other has been checked in response to the previous
question, indicate by check mark which financial statement item the registrant
has elected to follow: Item 17 [ x ]Item 18
[     ]

If this is an annual report, indicate by check mark whether the
registrant is a shell Company (as defined in Rule 12b-2 of the Exchange Act).
Yes [    ]  No [ x ]

As of May 31, 2010, the rate for Canadian dollars was US $0.9583
for CND $1.00.

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3

TABLE OF CONTENTS

|GLOSSARY
      OF TERMS                                             | 5 
|------------------------------------------------------------------- | --
|FORWARD
      LOOKING STATEMENTS                                    | 5 
|PART
      I                                                        | 8 
|ITEM
      1. IDENTITY OF DIRECTORS, SENIOR MANAGEMENT AND ADVISERS | 8 
|A.
      Directors and Senior Management                            | 8 
|B.
      Advisers                                                   | 8 
|C.
      Auditors                                                   | 8 
|ITEM
      2. OFFER STATISTICS AND EXPECTED TIMETABLE               | 8 
|ITEM
      3. KEY INFORMATION                                       | 8 
|A.
      Selected Financial Data                                    | 8 
|B.
      Capitalization and Indebtedness                            | 11
|C.
      Reasons for the Offer and Use of Proceeds                  | 11
|D.
      Risk Factors                                               | 11
|ITEM
      4. INFORMATION ON THE COMPANY                            | 24
|A.
      History and Development of the Company                     | 24
|B.
      Business Overview                                          | 25
|C.
      Organizational Structure                                   | 30
|D.
      Property, Plants and Equipment                             | 30
|ITEM
      4A. UNRESOLVED STAFF COMMENTS                            | 31
|ITEM
      5. OPERATING AND FINANCIAL REVIEW AND PROSPECTS          | 31
|A.
      Operating Results                                          | 33
|B.
      Liquidity and Capital Resources                            | 38
|C.
      Research and Development, Patents and Licenses, Etc.       | 39
|D.
      Trend Information                                          | 44
|E.
      Off-balance Sheet Arrangements                             | 44
|F.
      Contractual Obligations                                    | 45
|ITEM
      6. DIRECTORS, SENIOR MANAGEMENT AND EMPLOYEES            | 46
|A.
      Directors and Senior Management                            | 46
|B.
      Compensation                                               | 49
|C.
      Board Practices                                            | 50
|D.
      Employees                                                  | 57
|E.
      Share Ownership                                            | 57
|ITEM
      7. MAJOR SHAREHOLDERS AND RELATED PARTY TRANSACTIONS     | 59
|A.
      Major Shareholders                                         | 59
|B.
      Related Party Transactions                                 | 59
|C.
      Interests of Experts and Counsel                           | 61
|ITEM
      8. FINANCIAL INFORMATION                                 | 61
|A.
      Consolidated Statements or Other Financial Information     | 61
|ITEM
      9. THE OFFERING AND LISTING                              | 61
|A.
      Listing Details                                            | 61
|C.
      Markets                                                    | 62
|ITEM
      10. ADDITIONAL INFORMATION                               | 63

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4

|A. Share Capital                                                                                  | 63    
|------------------------------------------------------------------------------------------------- | ------
|B. Memorandum and Articles of
      Association                                                   | 63    
|C. Material Contracts                                                                             | 66    
|D. Exchange Controls                                                                              | 67    
|E. Taxation                                                                                       | 68    
|F. Dividends and Paying Agents                                                                    | 76    
|G. Statement by Experts                                                                           | 76    
|H. Documents on Display                                                                           | 76    
|I. Subsidiary
      Information                                                                   | 77    
|ITEM 11. QUANTITATIVE AND
      QUALITATIVE DISCLOSURES ABOUT MARKET RISK                         | 77    
|ITEM 12.
      DESCRIPTION OF SECURITIES OTHER THAN EQUITY SECURITIES                             | 77    
|ITEM 13. DEFAULTS, DIVIDEND
      ARREARAGES AND DELINQUENCIES                                    | 77    
|ITEM 14. MATERIAL
      MODIFICATIONS TO THE RIGHTS OF SECURITY HOLDERS AND USE OF
      PROCEEDS | 77    
|ITEM 15. CONTROLS AND
      PROCEDURES                                                            | 77    
|ITEM 16.
      RESERVED                                                                           | 79    
|ITEM 16A. AUDIT COMMITTEE
      FINANCIAL EXPERT                                                  | 79    
|ITEM 16B. CODE
      OF ETHICS                                                                    | 79    
|ITEM 16C. PRINCIPAL ACCOUNTANT
      FEES AND SERVICES                                            | 80    
|ITEM 16D.
      EXEMPTIONS FROM THE LISTING STANDARDS FOR AUDIT COMMITTEES                        | **80**
|ITEM 16E. PURCHASES OF EQUITY
      SECURITIES BY THE ISSUER AND AFFILIATED PURCHASERS            | 80    
|PART III                                                                                          | 81    
|ITEM 17. FINANCIAL
      STATEMENTS                                                               | 81    
|ITEM 18.
      FINANCIAL STATEMENTS                                                               | 82    
|ITEM 19. EXHIBITS                                                                                 | 82    
|Exhibit 12.1 
      Certification of CEO pursuant to Section 302                                 |       
|Exhibit 12.2  Certification of CFO pursuant
      to Section 302                                 |       
|Exhibit 13.1  Certification of CEO and CFO                                                       |       
|Exhibit 23.1  consent of independent registered
      public accounting firm                     |       

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5

GLOSSARY OF TERMS

The following words and phrases shall have the meanings set
forth below:

"angina"means chest pain;

"angioplasty"means an operation to repair a damaged
blood vessel or unblock an artery;

CABGmeans coronary artery bypass graft;

"FDA"means the United States Food and Drug
Administration;

"ischemia" means the lack of blood flow;

"myocardial infarction" means scarring and death to
portions of the heart wall;

"myocardial ischemia" means blockages to
  parts of the heart muscle;

"TPD" means the Canadian Therapeutic Products
Directorate, formerly the Canadian Health Protection Branch;

As used in this annual report, the Corporation or Company
refers to Medicure Inc., the Company resulting from the amalgamation of
Medicure Inc. and Lariat Capital Inc., and Medicure refers to Medicure Inc.
prior to its amalgamation with Lariat Capital Inc. unless otherwise indicated,
all references to dollar amounts in this annual report are to Canadian dollars.

FORWARD LOOKING STATEMENTS

Medicure Inc. cautions readers that certain important factors
(including without limitation those set forth in this Form 20-F) may affect the
Companys actual results in the future and could cause such results to differ
materially from any forward-looking statements that may be deemed to have been
made in this Form 20-F annual report, or that are otherwise made by or on behalf
of the Company. This Annual Report contains forward-looking statements and
information which may not be based on historical fact, which may be identified
by the words believes, may, plan, will, estimate, continue,
anticipates, intends, expects, and similar expressions and the negative of
such expressions. Such forward looking statements include, without limitation,
statements regarding:

- our intention to further advance our commercial operation and increase
  AGGRASTAT® product revenue;
- our intention to raise capital through equity or debt financings,
  collaborative or other arrangements with third parties or through other
  sources of financing;
- our ongoing corporate restructuring plan including the ongoing negotiations
  with our existing lender;
- our intention to discover and develop new pharmaceuticals;
- our intention to license the sale and distribution of any products we may
  commercialize to larger, international pharmaceutical companies;

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6

- our plan to move forward with a clinical development program for
  TARDOXALTMin chronic indications;
- our intention to build a pipeline of products over the next several years,
  including our drug product candidates currently at the discovery and
  preclinical stages of development;
- our evaluation of other drug candidates for potential license with the
  objective of further broadening our product and patent portfolio; and
- our licensing and research collaboration discussions, from time to time,
  with larger pharmaceutical firms and other biotechnology firms relating to the
  potential purchase, development and/or commercialization of our product
  candidates.

Such forward-looking statements and information involve a
number of assumptions as well as known and unknown risks, uncertainties and
other factors that may cause the actual results, events or developments to be
materially different from any future results, events or developments expressed
or implied by such forward-looking statements and information including, without
limitation:

- the ability to meet its debt obligations;
- dependence on collaborative partners;
- sufficient working capital to meet current obligations;
- our ability to continue as a going concern;
- the competitive landscape in the markets which we compete, pricing and/or
  Medicare/Medicaid positioning for AGGRASTAT®;
- the availability of capital on acceptable terms to pursue the
  commercialization of AGGRASTAT®and to carry on research and
  development programs related to TARDOXALTMor other products;
- unanticipated interruptions in our manufacturing operations;
- significant changes in foreign exchange rate;
- the impact of new discoveries and scientific information that affect the
  competitive positioning of AGGRASTAT®and/or its competitors;
- the impact of competitive products and pricing;
- the compliance with all long-term debt covenants and obligations;
- the expense and outcome of certain legal and regulatory proceedings and
  expense thereto;
- the nature of the market for TARDOXALTMin the treatment of
  neurological indications;

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7

- the regulatory approval process leading to commercialization;
- fluctuations in operating results;
- our ability to anticipate and manage the risks associated with the
  foregoing, contractual disagreements with third parties;
- the unpredictability of protection provided by our patents;
- the results of continuing safety and efficacy studies by industry and
  government agencies;
- the regulatory environment and decisions by regulatory bodies impacting our
  products, fees relating or our and the feasibility of additional clinical
  trials;
- the Companys stage of development;
- the Companys limited product revenues;
- the Companys limited human resources;
- risks associated with the completion of clinical trials and obtaining
  regulatory approval to market the Companys products; and
- other risks as detailed from time to time in our filings with the SEC and
  the Canadian Securities Administrators.

These factors should be considered carefully and readers are
cautioned not to place undue reliance on such forward-looking statements and
information. The Company disclaims any obligation to update any such factors or
to publicly announce the result of any revisions to any of the forward-looking
statements and information contained herein to reflect future results, events or
developments, except as otherwise required by applicable law. Additional risks
and uncertainties relating to the Company and its business can be found in the
Risk Factors section of this Annual Report.

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8

PART I

ITEM 1. IDENTITY OF DIRECTORS, SENIOR MANAGEMENT AND
ADVISERS

A. Directors and Senior Management

Not applicable

B. Advisers

Not applicable

C. Auditors

Not applicable

ITEM 2. OFFER STATISTICS AND EXPECTED
TIMETABLE

Not applicable

ITEM 3. KEY INFORMATION

A. Selected Financial Data

The selected financial data of the Company as at May 31, 2010
and 2009 and for the fiscal years ended May 31, 2010, 2009 and 2008 was
extracted from the audited consolidated financial statements of the Company
included in this annual report on Form 20-F. The information contained in the
selected financial data is qualified in its entirety by reference to the more
detailed consolidated financial statements and related notes included in Item 17
- Financial Statements, and should be read in conjunction with such financial
statements and with the information appearing in Item 5 - Operating and
Financial Review and Prospects. The selected financial data as at May 31, 2008,
2007 and 2006 and for the fiscal years ended May 31, 2007 and 2006 was extracted
from the audited financial statements of the Company not included in this annual
report. Reference is made to Note 16 of the consolidated financial statements of
the Company included herein for a discussion of the material measurement
differences between Canadian GAAP and U.S. GAAP, and their effect on the
Companys financial statements. Except where otherwise indicated, all amounts
are presented in accordance with Canadian GAAP.

To date, the Company has not generated sufficient cash flow
from operations to fund ongoing operational requirements, debt service
obligations and cash commitments. The Company has financed its operations
principally through the net revenue received from the sale of
AGGRASTAT®, sale of its equity securities, the issue of warrants and
stock options, interest on excess funds held and the issuance of debt. The
Companys ability to continue operations is dependent on the ability of the
Company to restructure its debt and obtain additional financing. See Item 3 -
Key Information - D. Risk Factors.

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9

Under Canadian Generally Accepted Accounting Principles (in
Canadian dollars):

|Balance Sheet Data                                           |  | May 31,      |   |  | May 31,      |   |  | May 31,      |   |  | May 31,     |   |  | May 31,     |  
|------------------------------------------------------------ |  | ------------ | - |  | ------------ | - |  | ------------ | - |  | ----------- | - |  | ----------- | -
|                                                             |  | 2010         |   |  | 2009         |   |  | 2008         |   |  | 2007        |   |  | 2006        |  
|(as at period end)                                           |  | **$**        |   |  | **$**        |   |  | **$**        |   |  | **$**       |   |  | **$**       |  
|Current Assets                                               |  | 1,489,440    |   |  | 3,519,609    |   |  | 14,402,736   |   |  | 35,827,187  |   |  | 35,841,573  |  
|Capital Assets                                               |  | 68,752       |   |  | 93,532       |   |  | 132,887      |   |  | 196,521     |   |  | 50,663      |  
|Intangible Assets                                            |  | 4,414,882    |   |  | 5,936,819    |   |  | 8,353,610    |   |  | 23,412,131  |   |  | 2,921,841   |  
|Other Assets                                                 |  | -            |   |  | -            |   |  | 11,916,000   |   |  | 349,963     |   |  | -           |  
|Total Assets                                                 |  | 5,973,074    |   |  | 9,549,960    |   |  | 34,805,233   |   |  | 59,785,802  |   |  | 38,814,077  |  
|Total Liabilities                                            |  | 30,929,727   |   |  | 29,096,919   |   |  | 41,361,393   |   |  | 25,479,333  |   |  | 1,644,339   |  
|Net Assets / (deficiency)                                    |  | (24,956,653  | ) |  | (19,546,959  | ) |  | (6,556,160   | ) |  | 34,306,469  |   |  | 37,169,738  |  
|Capital Stock, warrants and Contributed Surplus              |  | 129,125,153  |   |  | 129,002,341  |   |  | 128,677,313  |   |  | 112,137,421 |   |  | 83,297,304  |  
|Deficit                                                      |  | (154,081,806 | ) |  | (148,549,300 | ) |  | (135,233,473 | ) |  | (77,830,952 | ) |  | (46,127,566 | )
|Statement of Operations (for the fiscal
      year ended on) |  |              |   |  |              |   |  |              |   |  |             |   |  |             |  
|Product Sales                                                |  | 3,317,073    |   |  | 4,792,513    |   |  | 2,247,129    |   |  | 5,944,730   |   |  | -           |  
|Interest and Other Income                                    |  | 4,913        |   |  | 255,713      |   |  | 1,149,574    |   |  | 1,590,801   |   |  | 299,737     |  
|Loss from Continuing Operations                              |  | (5,532,506   | ) |  | (13,315,827  | ) |  | (57,402,521  | ) |  | (31,703,386 | ) |  | (12,607,074 | )
|Net Loss for the Period                                      |  | (5,532,506   | ) |  | (13,315,827  | ) |  | (57,402,521  | ) |  | (31,703,386 | ) |  | (12,607,074 | )
|Basic and Diluted Loss per Share                             |  | (0.04        | ) |  | (0.10        | ) |  | (0.46        | ) |  | (0.30       | ) |  | (0.17       | )
|Weighted-Average Number of Common Shares Outstanding         |  | 130,307,552  |   |  | 130,307,552  |   |  | 125,476,086  |   |  | 104,879,404 |   |  | 75,144,764  |  

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10

Under U.S. Generally Accepted Accounting Principles (in
Canadian dollars):

|Balance Sheet Data                                   |  | May 31,      |   |  | May 31,      |   |  | May 31,      |   |  | May 31,     |   |  | May 31,     |  
|---------------------------------------------------- |  | ------------ | - |  | ------------ | - |  | ------------ | - |  | ----------- | - |  | ----------- | -
|                                                     |  | 2010         |   |  | 2009         |   |  | 2008         |   |  | 2007        |   |  | 2006        |  
|(as at Period end)                                   |  | **$**        |   |  |              |   |  |              |   |  |             |   |  |             |  
|Current Assets                                       |  | 1,489,440    |   |  | 3,519,609    |   |  | 14,402,736   |   |  | 35,827,187  |   |  | 35,841,573  |  
|Capital Assets                                       |  | 68,752       |   |  | 93,532       |   |  | 132,887      |   |  | 196,521     |   |  | 50,663      |  
|Intangible Assets                                    |  | 3,845,916    |   |  | 4,676,656    |   |  | 5,510,661    |   |  | 20,078,862  |   |  | -           |  
|Other Assets                                         |  | 2,014,801    |   |  | 2,250,518    |   |  | 14,470,081   |   |  | 349,963     |   |  | -           |  
|Total Assets                                         |  | 7,418,909    |   |  | 10,540,315   |   |  | 34,516,365   |   |  | 56,452,533  |   |  | 35,892,236  |  
|Total Liabilities                                    |  | 32,982,499   |   |  | 31,347,086   |   |  | 43,915,123   |   |  | 25,479,333  |   |  | 1,644,339   |  
|Net Assets / (deficiency)                            |  | (25,563,590  | ) |  | (20,806,771  | ) |  | (9,398,758   | ) |  | 30,973,200  |   |  | 34,247,897  |  
|Capital Stock, warrants and Contributed Surplus      |  | 136,304,087  |   |  | 145,246,995  |   |  | 144,921,967  |   |  | 128,382,255 |   |  | 99,542,135  |  
|Deficit                                              |  | (161,867,677 | ) |  | (166,053,766 | ) |  | (154,320,725 | ) |  | (97,409,055 | ) |  | (65,294,238 | )
|Statement of Operations                              |  |              |   |  |              |   |  |              |   |  |             |   |  |             |  
|Product Sales                                        |  | 3,317,073    |   |  | 4,792,513    |   |  | 2,247,129    |   |  | 5,944,730   |   |  | -           |  
|Interest and Other Income                            |  | 4,913        |   |  | 255,713      |   |  | 1,149,574    |   |  | 1,590,801   |   |  | 299,737     |  
|Loss from Continuing Operations                      |  | (4,772,309   | ) |  | (11,733,041  | ) |  | (56,911,670  | ) |  | (32,114,817 | ) |  | (14,175,800 | )
|Net Loss for the Period                              |  | (4,772,309   | ) |  | (11,733,041  | ) |  | (56,911,670  | ) |  | (32,114,817 | ) |  | (14,175,800 | )
|Basic and Diluted Loss per Share                     |  | (0.04        | ) |  | (0.09        | ) |  | (0.45        | ) |  | (0.31       | ) |  | (0.19       | )
|Weighted-Average Number of Common Shares Outstanding |  | 130,307,552  |   |  | 130,307,552  |   |  | 125,476,086  |   |  | 104,879,404 |   |  | 75,144,764  |  

Dividends

No cash dividends have been declared nor are any intended to be
declared. The Company is not subject to legal restrictions respecting the
payment of dividends except that they may not be paid if the Company is, or
would after the payment be, insolvent. Dividend policy will be based on the
Company's cash resources and needs and it is anticipated that all available cash
will be required to further the Companys research and development activities
for the foreseeable future.

Exchange Rates

Unless otherwise indicated, all reference to dollar amounts are
to Canadian dollars. The following table sets out the exchange rates for one
Canadian dollar expressed in terms of one U.S. dollar for the periods indicated.
Rates of exchange are obtained from the Bank of Canada and believed by the
Registrant to approximate closely the noon buying rates in New York City for
cable transfers as certified for customs purposes by the Federal Reserve Bank in
New York.

|           |  | May 31, 2010 |  |  | May 31, 2009 |  |  | May 31, 2008 |  |  | May 31, 2007 |  |  | May 31, 2006 | 
|---------- |  | ------------ |  |  | ------------ |  |  | ------------ |  |  | ------------ |  |  | ------------ | 
|           |  |              |  |  |              |  |  |              |  |  |              |  |  |              | 
|Period End |  | 0.9583       |  |  | 0.9160       |  |  | 1.0070       |  |  | 0.9349       |  |  | 0.9079       | 
|Average    |  | 0.9403       |  |  | 0.8645       |  |  | 0.9857       |  |  | 0.8798       |  |  | 0.8588       | 

---

11

|                   |  | September    |  |  | August |  |  | July   |  |  | June   |  |  | May    |  |  | April  |  |  | March  | 
|------------------ |  | ------------ |  |  | ------ |  |  | ------ |  |  | ------ |  |  | ------ |  |  | ------ |  |  | ------ | 
|                   |  | 2010         |  |  | 2010   |  |  | 2010   |  |  | 2010   |  |  | 2010   |  |  | 2010   |  |  | 2010   | 
|                   |  | (Sep. 1- 24) |  |  |        |  |  |        |  |  |        |  |  |        |  |  |        |  |  |        | 
|High for Period(1) |  | 0.9789       |  |  | 0.9893 |  |  | 0.9750 |  |  | 0.9864 |  |  | 0.9900 |  |  | 1.0052 |  |  | 0.9938 | 
|Low for Period(1)  |  | 0.9430       |  |  | 0.9369 |  |  | 0.9365 |  |  | 0.9391 |  |  | 0.9218 |  |  | 0.9827 |  |  | 0.9601 | 

Notes: (1) Figures are extracted from daily
exchange rates

As of September 24, 2010 the exchange rate to convert one
Canadian dollar into one U.S. dollar was 0.9750.

B. Capitalization and Indebtedness

Not applicable

C. Reasons for the Offer and Use of Proceeds

Not applicable

D. Risk Factors

The Companys business entails significant risks. In addition
to the usual risks associated with a business, the following is a general
description of certain significant risk factors which are applicable to the
Company.

Going concern risk

These consolidated financial statements have been prepared on a
going concern basis in accordance with Canadian generally accepted accounting
principles. The going concern basis of presentation assumes that the Company
will continue in operation for the foreseeable future and be able to realize its
assets and discharge its liabilities and commitments in the normal course of
business. There is significant doubt about the appropriateness of the use of the
going concern assumption because the Company has experienced operating losses
and cash outflows from operations since incorporation and has significant debt
servicing obligations that it does not have the ability to repay without
refinancing or restructuring. At May 31, 2010, the Company was in default of the
terms of its long-term debt financing obligations, and continues to be in
default. Under an event of default, the lender can exercise its security rights
under the agreement, and accordingly the long-term debt obligation has been
classified as a current liability as at May 31, 2010.

The Company has experienced a loss of $5,532,506 and negative
cash flows from operations of $1,452,809 in the year ending May 31, 2010, and
has accumulated a deficit of $154,081,806 as at May 31, 2010. The Company
continues to monitor staff and corporate expenses to the extent deemed
appropriate in order to more closely align expenses with net revenue. Based on
the Companys operating plan, its existing working capital is not sufficient to
fund its planned operations, capital requirements, debt servicing obligations,
and commitments through the end of the fiscal 2011 year without restructuring of
its debt and raising additional capital. The Company is in ongoing discussions
with its senior lender to restructure its debt, and in January 2010, retained
advisors to assist in the evaluation of financial alternatives and fundraising
options, and to assist in the partnership, license or sale of
AGGRASTAT®. No agreements with the lender or other potential lenders
or investors have been reached yet and there can be no assurance that such agreements will be reached. Further,
the Companys financing agreement includes certain restrictive covenants on
commercial and developmental products including intellectual property.

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12

Therefore
the ability of the Company to execute on its operating plan and/or obtain
additional capital is likely to be contingent on having collaborative
relationships with its senior lender. The Company is currently evaluating
expressions of interest regarding the potential partnership, license, or sale of
AGGRASTAT® and/or an investment in the Company, and may also consider
conversion of all or a portion of its long term debt into equity instruments.
Such transactions, if completed, could have a significant dilutive effect on
existing shareholders. If the Company is unable to restructure its debt,
complete other strategic alternatives, and/or secure additional funds, the
Company will have to consider additional strategic alternatives which may
include, among other strategies, asset divestitures, monetization of certain
intangibles, and/or the winding up, dissolution or liquidation of the Company.

The ability of the Company to continue as a going concern and
to realize the carrying value of its assets and discharge its liabilities when
due is dependent on many factors, including, but not limited to the actions
taken or planned, some of which are described above, which are intended to
mitigate the adverse conditions and events which raise doubt about the validity
of the going concern assumption used in preparing these financial statements.
There is no certainty that these and other strategies will be sufficient to
permit the Company to continue as a going concern.

The Company has engaged in a restructuring program designed
to reduce costs and conserve capital which may not be successful.

During the year, the Company implemented additional
organizational changes including streamlining US sales staff, downsizing
administration staff, and outsourcing a large portion of administration and
accounting functions to a service company to further reduce expenses and find
operational efficiencies. The Companys ability to continue in operation for the
foreseeable future remains dependent upon the effective execution of its
business development and strategic plans, and on securing additional sources of
financing and restructuring of its existing Debt Financing agreement. The
Company estimates it currently has sufficient working capital to fund its
current obligations and planned operations through to the end of the current
fiscal year and potentially beyond this point, excluding debt servicing
obligations.

Prior to the acquisition of
AGGRASTAT®, the Company had no products in commercial
production or use. As such, the Company was considered to be a development-stage
enterprise for accounting purposes prior to the acquisition. The Company expects
to continue to incur substantial losses and may never achieve profitability,
which in turn may harm its future operating performance and may cause the market
price of its stock to decline.

With the exception of AGGRASTAT®, the Companys
products are in the development stage and accordingly, its business operations
are subject to all of the risks inherent in the establishment and maintenance of
a developing business enterprise, such as those related to competition and
viable operations management.

The Company has incurred net losses every year since inception
in 1997. The Company incurred net losses of $5,532,506 for the year ended May
31, 2010, $13,315,827 for the year ended May 31, 2009, $57,402,521 for the year
ended May 31, 2008, $31,703,386 for the year ended May 31, 2007, and $12,607,074
for the year ended May 31, 2006.

The Company anticipates that its losses will continue for the
foreseeable future under the current capital structure. The long-term
profitability of the Companys operations is uncertain, and may never occur.

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13

The Companys long-term profitability will be directly related
to its ability to develop a commercially viable drug product or products. This
in turn depends on numerous factors, including the following:

| | a) | the success of the Companys research and development
      activities, including its drug discovery, preclinical and clinical
      development programs;                              
| | -- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | b) | obtaining Canadian and United States regulatory approvals
      to market any of its lead products;                                                                                     
| | c) | the ability to contract for the manufacture of the
      Companys products according to schedule and within budget, given that it
      has no experience in large scale manufacturing;
| | d) | the ability to successfully prosecute and defend its
      patents and other intellectual property; and                                                                                 
| | e) | the ability to successfully market the Companys products
      including AGGRASTAT®(tirofiban hydrochloride), given that it
      has limited resources.                               

If the Company does achieve profitability, it may not be able
to sustain or increase profitability in the future.

Substantial cash payments may be required under the terms of
the Companys borrowings upon an event of default or change of control. Such
cash payments may leave the Company with little or no working capital in the
business or make the Company insolvent.

In September 2007, the Company entered into a debt financing
agreement with Birmingham Associates Ltd. (Birmingham), an affiliate of Elliott
Associates, L.P. (Elliott) for a US$25 million up-front cash payment. Under the
terms of the agreement, Birmingham receives a payment based on a percentage of
AGGRASTAT® net sales. Birmingham is entitled to a return of 20
percent on the first US$15 million in AGGRASTAT® revenues, 17.5
percent on the next US$10 million, 15 percent on the next $5 million and 5
percent thereafter, subject to an escalating minimum annual return, until May
31, 2020. The minimum annual returns start at US$2.5 million in 2008 and
escalate to US$6.9 million in 2017, with minimum payments over the life of the
agreement aggregating US$49.7 million. The Company has had to seek extensions
from its lender under its secured debt financing agreement dated September 17,
2007 to defer required payments of US$4.3 million. As at May 31, 2010, the
Company is in default of the terms of its debt financing obligations and
continues to be in default. The debt agreement contains no express provisions to
accelerate debt payments in an event of default, however under the agreement the
lender can exercise its security rights at any time. Accordingly, for financial
reporting purposes, based on the guidance in Canadian GAAP EIC-59 Long Term
Debt With Covenant Violations, the outstanding long term debt of US$25 million
that is in default has been classified as a current liability in the
consolidated financial statements for the year ended May 31, 2010.

The Companys substantial debt could impair its financial
condition. The Company is highly leveraged and has substantial debt service
obligations which it may not be able to meet in the ordinary course of business.

As of May 31, 2010, the Company had approximately US$47.2
million of future debt service obligations (minimum payments) on its long-term
debt. This substantial indebtedness could have important consequences for the
Company. For example, it could:

- increase the Companys vulnerability to general adverse economic and
  industry conditions, including increases to interest rates;
- impair the Companys ability to obtain additional financing in the future
  for working capital needs, capital expenditures or general corporate purposes;

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14

- require the Company to dedicate a significant portion of its existing cash
  and proceeds from any future financing transactions to the payment of
  principal and interest on its debt, which would reduce the funds available for
  its operations;
- limit the Companys flexibility in planning for, or reacting to, changes in
  the business and the industry in which it operates; and
- place the Company at a competitive disadvantage compared to its competitors
  that have less debt.

The Company has not been able to meet its obligations under
these facilities.

The Company may be exposed to short-term liquidity risk.

The Company currently relies on trade credit as well as cash
from term debt and equity issues to provide the necessary short-term financing
to conduct the Companys research and development activities as well as its
commercial operations. Should suppliers and other creditors decline to extend
short-term credit to the Company in the future, it may have a material adverse
effect on the Companys business prospects, financial results and financial
condition.

Despite current indebtedness levels, the Company may still
be able to incur substantially more debt. This could further exacerbate the
risks associated with the Companys substantial leverage.

Despite current indebtedness levels, the Company may still be
able to incur substantial additional indebtedness in the future.

The Company may never receive regulatory approval in Canada,
the United States or abroad for any of its products developed. Therefore, the
Company may not be able to sell any therapeutic products developed.

The Companys failure to obtain necessary regulatory approvals
to fully market its current and future therapeutic products in one or more
significant markets may adversely affect its business, financial condition and
results of operations. The procedure involved in obtaining regulatory approval
from the competent authorities to market therapeutic products is long and costly
and may delay product development. The approval to market a product may be
applicable to a limited extent only or it may be refused entirely.

With the exception of AGGRASTAT®, all of the
Companys products are currently in the research and development stages. The
Company may never have another commercially viable drug product approved for
marketing. To obtain regulatory approvals for its products and to achieve
commercial success, human clinical trials must demonstrate that the products are
safe for human use and that they show efficacy. Unsatisfactory results obtained
from a particular study or clinical trial relating to one or more of the
Companys products may cause the Company to reduce or abandon its commitment to
that program.

If the Company fails to successfully complete its clinical
trials, it will not obtain approval from the from the U.S. Food and Drug
Administration (FDA) and other international regulatory agencies, to market
its leading products, Regulatory approvals also may be subject to conditions
that could limit the market its products or make either products more difficult
or expensive to sell than anticipated. Also, regulatory approvals may be revoked at any time, including for failure to
comply with regulatory requirements or poor performance of its products in terms
of safety and effectiveness.

---

15

The Companys business, financial condition and results of
operations may be adversely affected if it fails to obtain regulatory approvals
in Canada, the United States and abroad to market and its products or any
current or future drug products, including any limitations imposed on the
marketing of such products.

The Company may not be able to hire or retain the qualified
scientific, technical and management personnel it requires.

The Companys business prospects and operations depend on the
continued contributions of certain of the Companys executive officers and other
key management and technical personnel, certain of whom would be difficult to
replace.

The Company has a contract with CanAm Bioresearch Inc.
(CanAm) to perform for it a significant amount of its research and development
activities. Because of the specialized scientific nature of the Companys
business, the loss of services of CanAm may require the Company to attract and
retain replacement qualified scientific, technical and management personnel.
Competition in the biotechnology industry for such personnel is intense and the
Company may not be able to hire or retain a sufficient number of qualified
personnel, which may compromise the pace and success of its research and
development activities.

Also, certain of the Companys management personnel are
officers and/or directors of other companies, some publicly-traded, and will
only devote part of their time to the Company. The Company does not have key
person insurance in effect in the event of a loss of any management, scientific
or other key personnel. The loss of the services of one or more of the Companys
current executive officers or key personnel or the inability to continue to
attract qualified personnel could have a material adverse effect on the
Companys business prospects, financial results and financial condition.

The Company faces substantial technological competition from
many biotechnology companies with much greater resources, and it may not be able
to effectively compete.

Technological and scientific competition in the pharmaceutical
and biotechnology industry is intense. The Company competes with other companies
in Canada, the United States and abroad to develop products designed to treat
similar conditions. Many of these other companies have substantially greater
financial, technical and scientific research and development resources,
manufacturing and production and sales and marketing capabilities than the
Company. Small companies may also prove to be significant competitors,
particularly through collaborative arrangements with large pharmaceutical and
biotechnology companies. Developments by other companies may adversely affect
the competitiveness of the Companys products or technologies or the commitment
of its research and marketing collaborators to its programs or even render its
products obsolete.

The pharmaceutical and biotechnology industry is characterized
by extensive drug discovery and drug research efforts and rapid technological
and scientific change. Competition can be expected to increase as technological
advances are made and commercial applications for biopharmaceutical products
increase. The Companys competitors may use different technologies or approaches
to develop products similar to the products which it is developing, or may
develop new or enhanced products or processes that may be more effective, less
expensive, safer or more readily available before or after the Company obtains
approval of its products. The Company may not be able to successfully compete
with its competitors or their products and, if it is unable to do so, the Companys
business, financial condition and results of operations may suffer.

---

16

The Company may be unable to establish collaborative and
commercial relationships with third parties.

The Companys success will depend partly on its ability to
enter into and to maintain various arrangements with corporate partners,
licensors, licensees and others for the research, development, clinical trials,
manufacturing, marketing, sales and commercialization of its products. These
relationships will be crucial to the Companys intention to license to or
contract with larger, international pharmaceutical companies the manufacturing,
marketing, sales and distribution of any products it may commercialize for
production. There can be no assurance that any licensing or other agreements
will be established on favourable terms, if at all. The failure to establish
successful collaborative arrangements may negatively impact the Companys
ability to develop and commercialize its products, and may adversely affect its
business, financial condition and results of operations.

The Companys financing agreement with Birmingham includes
certain restrictive covenants on the corporations commercial and developmental
products including intellectual property. The ability for the Company to execute
on portions of its business plan may be contingent on having collaborative
relationships with Birmingham. The failure to establish or maintain this
successful collaborative arrangement may negatively impact the Company.

The Company has licensed certain technologies relating to
products under development and may enter into future licensing agreements. The
Companys current licensing agreements contain provisions allowing the licensors
to terminate such agreements if it becomes insolvent or breach the terms and
conditions of the licensing agreements without rectifying such event of default
in accordance with the agreement terms.

The Company is currently dependent on a single manufacturer
of its sole commercial product, AGGRASTAT®and on a single
supplier of raw material used in the manufacture of
AGGRASTAT®.

The Company is reliant on a single supplier of the raw material
for AGGRASTAT® and a single third party manufacturer of the final
product AGGRASTAT®. If the supply of raw material or the
manufacturing agreement for AGGRASTAT® is terminated or interrupted,
of if the inventories of AGGRASTAT® currently help are contaminated
or otherwise lost, and the Company was unable to obtain a replacement supplier
or manufacturer, it could have a material adverse effect on the Companys
business prospects, financial results and financial condition.

The Company may fail to obtain acceptable prices or
appropriate reimbursement for its products and its ability to successfully
commercialize its products may be impaired as a result.

Government and insurance reimbursements for healthcare
expenditures play an important role for all healthcare providers, including
physicians, medical device companies, drug companies, medical supply companies,
and companies, such as the Company, that plan to offer various products in the
United States and other countries in the future. The Companys ability to earn
sufficient returns on its products will depend in part on the extent to which
reimbursement for the costs of such products, related therapies and related
treatments will be available from government health administration authorities,
private health coverage insurers, managed care organizations, and other
organizations. In the United States, the Companys ability to have its products
and related treatments and therapies eligible for Medicare or private insurance
reimbursement will be an important factor in determining the ultimate success of
its products. If, for any reason, Medicare or the insurance
companies decline to provide reimbursement for the Companys products and
related treatments, the Companys ability to commercialize its products would be
adversely affected. There can be no assurance that the Companys products and
related treatments will be eligible for reimbursement.

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17

There has been a trend toward declining government and private
insurance expenditures for many healthcare items. Third-party payers are
increasingly challenging the price of medical products and services.

If purchasers or users of the Companys products and related
treatments are not able to obtain appropriate reimbursement for the cost of
using such products and related treatments, they may forgo or reduce such use.
Even if the Companys products and related treatments are approved for
reimbursement by Medicare and private insurers, of which there can be no
assurance, the amount of reimbursement may be reduced at times, or even
eliminated. This would have a material adverse effect on the Companys business,
financial condition, and results of operations.

Significant uncertainty exists as to the reimbursement status
of newly approved healthcare products, and there can be no assurance that
adequate third-party coverage will be available.

The Company does not have manufacturing experience and has
limited marketing resources and may never be able to successfully manufacture or
market certain of its products.

The Company has no experience in large-scale manufacturing and
has limited resources for marketing or selling its products. The Company may
never be able to successfully manufacture and market certain of its products. If
any other of its products are approved for sale, the Company intends to contract
with and rely on third parties to manufacture, and possible to market and sell
its products. Accordingly, the quality, timing and ultimately the commercial
success of such products may be outside of the Companys control. Failure of or
delay by a third party manufacturer of the Companys products to comply with
good manufacturing practices or similar quality control regulations or satisfy
regulatory inspections may have a material adverse effect on its future
prospects. Failure of or delay by a third party in the marketing or selling of
the Companys products or failure of the Company to successfully market and sell
such products likewise may have a material adverse effect on its future
prospects.

The Company has limited product liability insurance and may
not be able to obtain adequate product liability insurance in the future.

The sale and use of products under development by the Company,
and the conduct of clinical studies involving human subjects, may entail product
and professional liability risks, which are inherent in the testing, production,
marketing and sale of new drugs to humans. While the Company has taken, and will
continue to take, what it believes are appropriate precautions, there can be no
assurance that it will avoid significant liability exposure. Although the
Company currently carries product liability insurance for clinical trials, there
can be no assurance that it has sufficient coverage, or can in the future obtain
sufficient coverage at a reasonable cost. An inability to obtain insurance on
economically feasible terms or to otherwise protect against potential product
liability claims could inhibit or prevent the commercialization of products
developed by the Company. The obligation to pay any product liability claim or
recall a product may have a material adverse effect on its business, financial
condition and future prospects. In addition, even if a product liability claim
is not successful, adverse publicity and the time and expense of defending such
a claim may significantly interfere with the Companys business.

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18

If the Company is unable to successfully protect its
proprietary rights, its competitive position will be adversely affected.

The Companys success will depend partly on its ability to
obtain and protect its patents and protect its proprietary rights in unpatented
trade secrets.

The Company owns or jointly owns 39 patents from the United
States Patent Office. The Company has additional pending United States patent
applications. The Companys pending and any future patent applications may not
be accepted by the United States Patent and Trademark Office or any other
jurisdiction in which applications may be filed. Also, processes or products
that may be developed by the Company in the future may not be patentable.

The patent protection afforded to biotechnology and
pharmaceutical companies is uncertain and involves many complex legal,
scientific and factual questions. There is no clear law or policy involving the
degree of protection afforded under patents. As a result, the scope of patents
issued to the Company may not successfully prevent third parties from developing
similar or competitive products. Competitors may develop similar or competitive
products that do not conflict with the Companys patents. Litigation may be
commenced by the Company to prevent infringement of its patents. Litigation may
also commence against the Company to challenge its patents that, if successful,
may result in the narrowing or invalidating of such patents. It is not possible
to predict how any patent litigation will affect the Companys efforts to
develop, manufacture or market its products. However, the cost of litigation to
prevent infringement or uphold the validity of any patents issued to the Company
may be significant, in which case its business, financial condition and results
of operations may suffer. Patents provide protection for only a limited period
of time, and much of such time can occur well before commercialization
commences.

Disclosure and use of the Companys proprietary rights in
unpatented trade secrets not otherwise protected by patents are generally
controlled by written agreements. However, such agreements will not provide the
Company with adequate protection if they are not honoured, others independently
develop an equivalent technology, disputes arise concerning the ownership of
intellectual property, or its trade secrets are disclosed improperly. To the
extent that consultants or other research collaborators use intellectual
property owned by others in their work with the Company, disputes may also arise
as to the rights to related or resulting know-how or inventions.

Others could claim that the Company infringes on their
proprietary rights, which may result in costly, complex and time consuming
litigation.

The Companys success will depend partly on its ability to
operate without infringing upon the patents and other proprietary rights of
third parties. The Company is not currently aware that any of its products or
processes infringes the proprietary rights of third parties. However, despite
its best efforts, the Company may be sued for infringing on the patent or other
proprietary rights of third parties at any time in the future.

Such litigation, with or without merit, is time-consuming and
costly and may significantly impact the Companys financial condition and
results of operations, even if it prevails. If the Company does not prevail, it
may be required to stop the infringing activity or enter into a royalty or
licensing agreement, in addition to any damages it may have to pay. The Company
may not be able to obtain such a license or the terms of the royalty or license
may be burdensome for it, which may significantly impair the Companys ability
to market its products and adversely affect its business, financial condition
and results of operations.

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19

The Company is subject to stringent governmental regulation,
in the future may become subject to additional regulations and if it is unable
to comply, its business may be materially harmed.

Biotechnology, medical device, and pharmaceutical companies
operate in a high-risk regulatory environment. The FDA and other national health
agencies can be very slow to approve a product and can also withhold product
approvals. In addition, these health agencies also oversee many other medical
product operations, such as research and development, manufacturing, and testing
and safety regulation of medical products. As a result, regulatory risk is
normally higher than in other industry sectors.

The Company is or may become subject to various federal,
provincial, state and local laws, regulations and recommendations. The Company
is subject to various laws and regulations in Canada, relating to product
emissions, use and disposal of hazardous or toxic chemicals or potentially
hazardous substances, infectious disease agents and other materials, and
laboratory and manufacturing practices used in connection with its research and
development activities. If the Company fails to comply with these regulations,
it may be fined or suffer other consequences that could materially affect its
business, financial condition or results of operations.

The Company is unable to predict the extent of future
government regulations or industry standards. However, it should be assumed that
government regulations or standards will increase in the future. New regulations
or standards may result in increased costs, including costs for obtaining
permits, delays or fines resulting from loss of permits or failure to comply
with regulations.

The Companys products may not gain market acceptance, and
as a result it may be unable to generate significant revenues.

Except with respect to AGGRASTAT®, the Company does
not currently have the required clinical data and results to successfully market
its product candidates in any jurisdiction; future clinical or preclinical
results may be negative or insufficient to allow it to successfully market any
of its product candidates; and obtaining needed data and results may take longer
than planned, and may not be obtained at all.

Even if the Companys products are approved for sale, they may
not be successful in the marketplace. Market acceptance of any of the Companys
products will depend on a number of factors, including demonstration of clinical
effectiveness and safety; the potential advantages of its products over
alternative treatments; the availability of acceptable pricing and adequate
third-party reimbursement; and the effectiveness of marketing and distribution
methods for the products. Providers, payors or patients may not accept the
Companys products, even if they prove to be safe and effective and are approved
for marketing by the FDA and other national regulatory authorities. The Company
estimates that it may take up to two years or longer before its initial products
may be sold commercially. If the Companys products do not gain market
acceptance among physicians, patients, and others in the medical community, its
ability to generate significant revenues from its products would be limited.

The Company may not achieve its projected development goals
in the time frames it announces and expects.

The Company sets goals for and makes public statements
regarding timing of the accomplishment of objectives material to its success,
such as the commencement and completion of clinical trials, anticipated
regulatory approval dates, and time of product launch. The actual timing of
these events can vary dramatically due to factors such as delays or failures in
the Companys clinical trials, the uncertainties inherent in the regulatory
approval process, and delays in achieving product development, manufacturing or
marketing milestones necessary to commercialize its products.

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20

There can be no
assurance that the Companys clinical trials will be completed, that it will make
regulatory submissions or receive regulatory approvals as planned, or that it
will be able to adhere to its current schedule for the scale-up of manufacturing
and launch of any of its products. If the Company fails to achieve one or more
of these milestones as planned, that could materially affect its business,
financial condition or results of operations and the price of its common shares
could decline.

The Companys business involves the use of hazardous
material, which requires it to comply with environmental regulations.

The Companys research and development processes and commercial
activities may involve the controlled storage, use, and disposal of hazardous
materials and hazardous biological materials. The Company is subject to laws and
regulations governing the use, manufacture, storage, handling, and disposal of
such materials and certain waste products. Although the Company believes that
its safety procedures for handling and disposing of such materials comply with
the standards prescribed by such laws and regulations, the risk of accidental
contamination or injury from these materials cannot be completely eliminated. In
the event of such an accident, the Company could be held liable for any damages
that result, and any such liability could exceed its resources. There can be no
assurance that the Company will not be required to incur significant costs to
comply with current or future environmental laws and regulations, or that its
business, financial condition, and results of operations will not be materially
or adversely affected by current or future environmental laws or regulations.

The Companys insurance may not provide adequate coverage with
respect to environmental matters.

Environmental regulation could have a material adverse
effect on the results of the Companys operations and its financial position.

The Company is subject to a broad range of environmental
regulations imposed by federal, state, provincial, and local governmental
authorities. Such environmental regulation relates to, among other things, the
handling and storage of hazardous materials, the disposal of waste, and the
discharge of contaminants into the environment. Although the Company believes
that it is in material compliance with applicable environmental regulation, as a
result of the potential existence of unknown environmental issues and frequent
changes to environmental regulation and the interpretation and enforcement
thereof, there can be no assurance that compliance with environmental regulation
or obligations imposed thereunder will not have a material adverse effect on the
Company in the future.

The Company is exposed to foreign exchange movements since
the majority of its debt financing and its commercial sales operations are
denominated in U.S. currency.

At May 31, 2010, the Company had US$47.2 million of future debt
service obligations (minimum payments). As well, the majority of the Companys
sales revenues and a substantial portion of its selling, general and
administrative expenses are denominated in U.S. dollars. The Company does not
utilize derivatives, such as foreign currency forward contracts and futures
contracts, to manage its exposure to currency risk and as a result a change in
the value of the Canadian dollar against the U.S. dollar could have a negative
impact on the Companys business prospects, financial results and financial
condition.

The Company may need to raise additional capital through the
sale of its securities, resulting in dilution to its existing shareholders. Such
funds may not be available, or may not be available on reasonable terms,
adversely affecting the Companys operations.

The Company has limited financial resources and has financed
its operations through the sale of securities, primarily common shares. The
Company has significant on-going cash expenses and limited ability to generate cash from operations.

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21

To meet its on-going
cash needs the Company will need to continue its reliance on the sale of such
securities for future financing, resulting in dilution to its existing
shareholders. The Companys long-term capital requirements may be notably
significant and will depend on many factors, including continued scientific
progress in its product discovery and development program, progress in its
pre-clinical and clinical evaluation of products and product candidates, time
and expense associated with filing, prosecuting and enforcing its patent claims
and costs associated with obtaining regulatory approvals. In order to meet such
capital requirements, the Company will consider contract fees, collaborative
research and development arrangements, public financing or additional private
financing (including the issuance of additional equity securities) to fund all
or a part of particular programs.

The Companys business, financial condition and results of
operations will depend on its ability to obtain additional financing which may
not be available under favourable terms, if at all. The Companys ability to
arrange such financing in the future will depend in part upon the prevailing
capital market conditions as well as its business performance. Where additional
financing is available, the Company may be required to obtain approval for the
Companys shareholders. Such approval may not be provided.

If its capital resources are exhausted and adequate funds are
not available, the Company may have to reduce substantially or eliminate
expenditures for research and development, testing, production and marketing of
its proposed products, or obtain funds through arrangements with corporate
partners that require it to relinquish rights to certain of its technologies or
products.

Future issuance of the Companys common shares will result
in dilution to its existing shareholders. Additionally, future sales of the
Companys common shares into the public market may lower the market price which
may result in losses to its shareholders.

As of May 31, 2010, the Company had 130,307,552, common shares
issued and outstanding. A further 4,311,349 common shares are issuable upon
exercise of outstanding stock options and another 15,961,271 common shares are
issuable upon exercise of share purchase warrants, all of which may be exercised
in the future resulting in dilution to the Companys shareholders. The Companys
stock option plan allows for the issuance of stock options to purchase up to a
maximum of 10% of the outstanding common shares at any time.

Sales of substantial amounts of the Companys common shares
into the public market, or even the perception by the market that such sales may
occur, may lower the market price of its common shares.

The Companys common shares may experience extreme price and
volume volatility which may result in losses to its shareholders.

On May 31, 2010, the Companys common shares closed at a price
of CDN$0.015 on the NEX board of the TSX Venture Exchange (NEX). For the
period from June 1, 2009 to May 31, 2010, the high and low trading prices of the
Companys common shares were CDN$0.06 and CDN$0.01, respectively, with a total
trading volume of 38,405,860 shares. The Companys shares were delisted from Amex
on July 3, 2008 and from the TSX on March 26, 2010.

Daily trading volume on the TSX of the Companys common shares
for the period from June 1, 2009 to May 31, 2010 has fluctuated, with a high of
4,505,442 shares and a low of nilshares, averaging approximately 158,702
shares. Accordingly, the trading price of the Companys common shares may be
subject to wide fluctuations in response to a variety of factors including
announcement of material events by the Company such as the status of required
regulatory approvals for its products, competition by new products or new
innovations, fluctuations in its operating results, general and
industry-specific economic conditions and developments pertaining to patent and
proprietary rights.

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22

The trading price of the Companys common shares may be
subject to wide fluctuations in response to a variety of factors and/or
announcements concerning such factors, including:

- actual or anticipated period-to-period fluctuations in financial results;
- ability to restructure its debt and recapitalize the Company
- litigation or threat of litigation;
- failure to achieve, or changes in, financial estimates by securities
  analysts;
- new or existing products or services or technological innovations by the
  Company or its competitors;
- comments or opinions by securities analysts or major shareholders;
- conditions or trends in the pharmaceutical, biotechnology and life science
  industries;
- significant acquisitions, strategic partnerships, joint ventures or capital
  commitments;
- results of, and developments in, the Companys research and development
  efforts, including results and adequacy of, and developments in, its clinical
  trials and applications for regulatory approval;
- additions or departures of key personnel;
- sales of the Companys common shares, including by holders of the notes on
  conversion or repayment by the Company in common shares;
- economic and other external factors or disasters or crises;
- limited daily trading volume; and
- developments regarding the Companys patents or other intellectual property
  or that of its competitors.

In addition, the securities markets in the United States and
Canada have recently experienced a high level of price and volume volatility,
and the market price of securities of biotechnology companies have experienced
wide fluctuations in price which have not necessarily been related to the
operating performance, underlying asset values or prospects of such
companies.

There may not be an active, liquid market for the Companys
common shares.

On March 26, 2010, the Companys common shares were delisted
from the TSX due to the Companys current inability to meet continued listing
requirements. March 29, 2010, the Companys common shares commenced trading on
the NEX board of the TSX Venture Exchange under the symbol MPH.H. The transfer
in stock exchange listing to the NEX was designed to ensure continuous trading
and continued liquidity for the Companys shareholders.

The Companys shares ceased trading on the Amex effective July
3, 2008.

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23

There is no guarantee that an active trading market for the
Companys common shares will be maintained on the NEX. Investors may not be able
to sell their shares quickly or at the latest market price if trading in its
common shares is not active.

If there are substantial sales of the Companys common
shares, the market price of its common shares could decline.

Sales of substantial numbers of the Companys common shares
could cause a decline in the market price of its common shares. Any sales by
existing shareholders or holders of options or warrants may have an adverse
effect on the Companys ability to raise capital and may adversely affect the
market price of its common shares.

The Company has no history of paying dividends, does not
intend to pay dividends in the foreseeable future and may never pay dividends.

Since incorporation, the Company has not paid any cash or other
dividends on its common shares and does not expect to pay such dividends in the
foreseeable future as all available funds will be invested to finance the growth
of its business. The Company will need to achieve profitability prior to any
dividends being declared, which may never happen.

If the Companys is classified as a passive foreign
investment Company for United States income tax purposes, it could have
significant and adverse tax consequences to United States holders of its common
shares.

The Company does not believe that it was a passive foreign
investment Company for the taxable year ended May 31, 2010, and does not expect
that it will be a passive foreign investment Company (PFIC) for the taxable
year ending May 31, 2011. (See more detailed discussion in Item 10 E  Taxation)
However, there can be no assurance that the IRS will not challenge the
determination made by the Company concerning its passive foreign investment
Company status or that the Company will not be a passive foreign investment
Company for the current taxable year or any subsequent taxable year.
Accordingly, although the Company expects that it may be a QFC for the taxable
year ending May 31, 2011, there can be no assurances that the IRS will not
challenge the determination made by the Company concerning its QFC status, that
the Company will be a QFC for the taxable year ending May 31, 2011 or any
subsequent taxable year, or that the Company will be able to certify that it is
a QFC in accordance with the certification procedures issued by the Treasury and
the IRS.

The Companys classification as a PFIC could have significant
and adverse tax consequences for United States holders of its common shares.

The Company has adopted a shareholder rights plan.

The Company has adopted a shareholder rights plan. The
provisions of such plan could make it more difficult for a third party to
acquire a majority of the Companys outstanding common shares, the effect of
which may be to deprive the Companys shareholders of a control premium that
might otherwise be realized in connection with an acquisition of its common
shares.

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24

Risks associated with Material weaknesses within the
Companys financial reporting and review process

In connection with its review of the Companys internal control
over financial Reporting, the Company has identified material weaknesses with
the Companys financial reporting and review process, involving the preparation
and review of the reconciliation form Canadian GAAP to United States GAAP and
the complex accounting issues due limited staff. Based on such determination,
the Companys management concluded that the Companys internal control over
financial reporting was not effective as of May 31, 2010. The Company either
plans to ensure adequate personnel are available with the necessary training and
expertise or rely on an external third party to provide this control. Any
failure to remediate the material weakness, to implement the required new or
improved control, or difficulties encountered in the implementation, could cause
the Company to fail to meet its reporting obligations on a timely basis or
result in material misstatements in the annual or interim financial statements.
Inadequate internal control over financial reporting could also cause investors
to lose confidence in the Companys reported financial information, which could
cause the Companys stock price to decline.

ITEM 4. INFORMATION ON THE COMPANY

A. History and Development of the Company

On December 22, 1999, the Company was formed by the
amalgamation of Medicure Inc. with Lariat Capital Inc. pursuant to the
provisions of the Business Companys Act (Alberta). The Company was
continued from Alberta to the federal jurisdiction by Certificate of Continuance
issued pursuant to the provisions of the Canada Business Companys Acton
February 23, 2000.

The Companys current legal and commercial name is Medicure
Inc. and its current registered office is 30th Floor, 360 Main
Street, Winnipeg, Manitoba, Canada, R3C 4G1, Phone (204) 487-7412. The Companys
head office is located at 2-1250 Waverley Street, Winnipeg, Manitoba, Canada,
R3T 6C6.

In August 2006, the Company acquired the U.S. rights to its
first commercial product, AGGRASTAT® Injection (tirofiban
hydrochloride) in the United States and its territories (Puerto Rico, Virgin
Islands and Guam) for US$19,000,000.

In September 2007, the Company monetized a percentage of its
current and potential future commercial revenues by entering into a debt
financing agreement with Birmingham Associates Ltd. (Birmingham), an affiliate
of Elliott Associates, L.P. (Elliott) for proceeds of US$25 million (See Item 5
B  Liquidity and Capital Resources).

In February 2008, the Company announced that its pivotal Phase
III MEND-CABG II clinical trials with MC-1 did not meet the primary endpoint and
as a result was not sufficient to support the filings. As a result, the Company
announced a restructuring plan that resulted in the organization reducing its
head count by approximately 50 employees and full-time consultants. The
restructuring and downsizing in March 2008 conserved capital for ongoing
operations.

In fiscal 2009, the Company continued to focus on the sale and
marketing of AGGRASTAT® and on focusing its research and development
activities on the development of TARDOXALTM, for Tardive Dyskinesia,
and MC-1 for chronic cardiovascular disorders, and exploring further cost
savings measures. All these initiatives were initiated due to the restructuring
plan announced towards the end of fiscal 2008. These activities assisted in
further reducing the Companys use of capital, in particular its investment in
research and development programs but have moved forward certain programs on a
limited and focused fashion such as the Phase II clinical study of
TARDOXALTM for the treatment of Tardive Dyskinesia.

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25

Since that time and up until the current date, further
organizational charges have been undertaken to further reduce expenses and find
operational efficiencies. The Companys ability to continue in operation for the
foreseeable future remains dependent upon the effective execution of its
business development and strategic plans, and on securing additional sources of
financing and restructuring of its existing Debt Financing agreement. The
Company estimates it currently has sufficient working capital to fund its
current obligations and planned operations through to the end of the current
fiscal year and potentially beyond this point. As of May 31, 2010, the Company
had accrued US$4.3 million in debt service obligations. Of this amount, US$1.7
million was originally due July 15, 2009; US$0.2 million was originally due
October 15, 2009; US$0.2 million was originally due January 15, 2010; US$0.2
million was originally due April 15, 2010; and US$2.0 million was originally due
July 15, 2010. As at May 31, 2010, the Company is in default of the terms of its
debt financing obligations and continues to be in default. The debt agreement
contains no express provisions to accelerate debt payments in an event of
default, however under the agreement the lender can exercise its security rights
at any time. Accordingly, for financial reporting purposes, based on the
guidance in EIC-59 Long Term Debt With Covenant Violations, the outstanding
long term debt of US$25 million that is in default has been classified as a
current liability in the consolidated financial statements for the year ended
May 31, 2010.

B. Business Overview

Plan of Operation

Medicure is a specialty pharmaceutical Company engaged in the
research, clinical development and commercialization of human therapeutics. The
Companys primary focus is on the sale and marketing of its acute care
cardiovascular drug, AGGRASTAT® (tirofiban hydrochloride) in the
United States and its territories through its U.S. subsidiary, Medicure Pharma
Inc. The Companys primary ongoing Research and Development activity is the
development and implementation of a new brand and life cycle management strategy
for AGGRASTAT®. The Companys primary, non-AGGRASTAT®
Research and Development activity is TARDOXALTM for the treatment of
Tardive Dyskinesia ("TD"). The Company continues to investigate and advance
certain other product opportunities.

In fiscal 2008, the Company was focused on two major
objectives; first and foremost on the 3000 patient Phase III trial of MC-1 for
protection of ischemic reperfusion injury during Coronary Artery By-pass Graft
surgery (CABG), entitled MEND-CABG II and secondly on increasing the sales of
AGGRASTAT®. In February 2008 the Company announced that the pivotal
Phase III trial, MEND-CABG II, did not meet the primary end point and therefore
would not file an application for regulatory approval of the use of MC-1, for
this indication. It further announced that the MC-1 development for the acute
indication of CABG, ACS and Stroke would be put on hold and the primary focus
would shift to growing the AGGRASTAT® sales through its Commercial
business and that the Companys Research and Development activity would focus on
exploring other clinical applications of MC-1.

As a result of the above, the Company announced a restructuring
plan that enabled the Company to significantly conserve capital for ongoing
operations. The Company continues to look for areas were it can reduce overhead
and further conserve capital and will continue to do so into the 2011 fiscal
year. The Company is also exploring various alternatives for further
strengthening its financial position and will provide additional guidance as
appropriate. The Companys ability to continue in operation for the foreseeable
future and to realize its assets and discharge its liabilities and commitments
in the normal course of business is dependent on the ability of the Company to
execute on these plans, restructure its debt financial obligations and secure
additional sources of financing. There is no certainty these and other strategies will be achieved or that they will be
sufficient to permit the Company to continue as a going concern.

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26

Recent Developments

- As announced on January 13, 2010 and as a result of ongoing discussions
  with its lender and the progress made by management in the advancement of
  AGGRASTAT®, the Company has received a number of expressions of
  interest from third parties regarding the potential partnership, license, or
  sale of AGGRASTAT®and/or an investment in the Company.
   
  In light
  of these developments, the Board of Directors of Medicure has mandated the
  implementation of a formal process to evaluate all of these expressions of
  interest and to solicit others with a view to pursuing those opportunities
  that maximize value for shareholders and other stakeholders. To assist in this
  process, the Board has retained Bloom Burton & Co, a leading Canadian life
  sciences focused investment banking firm, to assist in the evaluation of
  financial alternatives and fundraising options, and Beal Advisors LLC, a San
  Francisco based financial and strategic advisory firm, to assist in the
  partnership, license or sale of AGGRASTAT®.
   
  The Company
  anticipates the process will take several months; however, there can be no
  assurance that any transaction will ultimately be completed. This formal
  process is ongoing as of the date of this Annual Report on Form of 20-F.
- To further capital conservation and redirection efforts the Company has
  streamlined its US sales staff and further downsized its administration staff.
  The Company has also outsourced a large portion of its administration and
  accounting functions to a related party service company to further reduce
  costs (see F. Contractual Obligations).
- During the past year the Company has had ongoing discussions with its
  senior lender in order to restructure the existing arrangements and has
  received extensions from its senior lender to defer US$4.3 million in
  payments, which as discussed below are now past due and therefore the Company
  is in default of the terms of the long-term debt. The Company is continuing
  with these discussions and through the formal process announced on January 13,
  2010, is working to have a satisfactory resolution as soon as possible. The
  senior creditor has thus far provided extensions and/or otherwise not
  exercised its rights under the Debt Financing Agreement however, there can be
  no assurance that the senior creditor will be satisfied through the process or
  that the senior lender will provide sufficient time to maximize the process,
  and will not exercise its security rights under the agreement.

Commercial:

In fiscal 2007, the Company acquired the U.S. rights to its
first commercial product, AGGRASTAT® Injection (tirofiban
hydrochloride), in the United States and its territories (Puerto Rico, Virgin
Islands, and Guam). AGGRASTAT®, a glycoprotein GP IIb/IIIa receptor
antagonist, is used for the treatment of acute coronary syndrome (ACS) including
unstable angina, which is characterized by chest pain when one is at rest, and
non-Q-wave myocardial infarction (MI). The Company continues to support the
product through its home office and a small, dedicated field force of
cardiovascular specialists employed under the Companys US subsidiary, Medicure
Pharma.

Net revenue from the sale of AGGRASTAT® for fiscal
2010 decreased 31% over the net revenue for fiscal 2009. All of the Companys
sales are denominated in US dollars. The decline is attributable to fluctuations
in foreign currency exchange rates, an increase in wholesaler purchasing in
advance of a price increase introduced during the 3rd quarter of 2010, and a
modest decrease in hospital demand for AGGRASTAT®. Since then, wholesale purchasing has
more closely reflected hospital demand with modest fluctuations attributing to
wholesaler inventory adjustments.

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27

Subsequent to year end the Company continued cost savings
strategies for its commercial operations and has reduced and is realigning its
sales force. These measures are expected to assist in further reducing the
Companys cash burn in fiscal 2011.

Going forward and contingent on financing arrangements,
including the successful renegotiation of the Companys current debt, the
Company plans to explore opportunities to further expand revenue through
strategic investments related to AGGRASTAT® and the acquisition of
other niche products that fit the commercial organization.

Research and Development:

The Companys primary ongoing Research and Development activity
is the development and implementation of a new brand and life cycle management
strategy for AGGRASTAT®. While the Company believes that it will be
able to finalize a relatively low cost clinical, product and regulatory
strategy, it requires additional resources to implement this plan. Until such
resources become available, the Company is working to advance this program with
the modest capital investment that it can make from its available cash
resources.

The Companys primary, non-AGGRASTAT® Research and
Development activity is TARDOXALTM for the treatment of Tardive
Dyskinesia ("TD"). The Companys lead drug candidate is TARDOXALTM
currently in development for treating the serious neurological disorder tardive
dyskinesia (TD). This program evolved from the Companys extensive clinical
experience with MC-1, a naturally occurring small molecule, for new chronic
medical conditions. A modest amount of capital is being used on the clinical
program for treatment for TD and on exploring other potential treatments using
data collected during previous research programs. The Company is also pursuing
licensing opportunities for its library of small-molecule anti-thrombotic
drugs.

The following table summarizes the Companys research and
development programs, their therapeutic focus, and their stage of development.

Product
      Candidate
    Therapeutic focus
    Stage of DevelopmentAGGRASTAT®
    Acute
      Cardiology
    Phase
      III/IV - planningTARDOXALTM
    TD/Neurological indications
    Phase
      II - enrolling patientsMC-1-Chronic
    Lipid lowering/metabolic syndrome
    Phase II - pursuing partnershipMC-45308
    Anti-thrombotic small molecules
    Discovery - pursuing partnership


The TARDOXALTM and MC-1 programs benefit from over
10 years of work that the Company invested in advancing this compound through
late-stage human clinical testing in acute and chronic cardiovascular
conditions. Over this time the Company invested substantially in numerous animal
and human safety and pharmacokinetic studies, product manufacturing and
formulation development, efficacy studies in chronic and acute conditions, and
other laboratory and non-lab work. The Company believes the information and
physical assets resulting from this activity is a valuable asset that will
reduce costs and also speed development of this molecule for application to
other conditions.

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28

The development of MC-1 for use in acute cardiovascular
conditions is not listed in the table above as these initiatives have been
placed on hold. The Company is continuing some analyses from these studies as
resources permit, and will in due course determine what, if any, further
investigation is warranted.

The Companys library of novel therapeutics includes a series
of small molecule dual acting anticoagulant/antiplatelet compounds (including
the preclinical lead compound MC-45308) which may be useful in treating venous
and arterial thrombosis. These compounds, which have shown activity in venous
and arterial models of thrombosis, provide a basis for further research,
optimization and preclinical development.

The Company from time to time also evaluates other drug
candidates for potential license with the objective of further broadening its
product and patent portfolio.

It is the Companys intention to actively search for a
partnership with a large pharmaceutical Company. Such a partnership may provide
funding for Phase II and Phase III clinical trials, add experience to the
product development process, and bring in overall marketing expertise. While the
Company has had informal discussions with potential partners, no formal
agreement, or letter of intent, has been entered into by the Company as of the
date hereof.

The Company anticipates that no substantial material
acquisition of equipment or facilities will take place in the coming year.

Potential New Products in Development Stage

One of the Companys primary focuses is the clinical
development and commercialization of its lead research product,
TARDOXALTM for Tardive Dyskinesia (TD). TD is a serious movement
disorder which results from long-term treatment with antipsychotic medications.
At present there is no treatment available for TD in the US. TARDOXALs
potential for treatment of TD is supported by its biological mechanism of action
and by preliminary clinical studies which indicated efficacy of a related
compound in treatment of TD.

Earlier studies have demonstrated that the Companys product
MC-1 has the potential as a cardioprotective treatment in reducing damage to the
heart associated with acute ischemic and reperfusion injury (MEND-1 Phase-II
study). The MEND-CABG Phase-II study demonstrated that a 250mg dose of MC-1
significantly reduced the composite of events driven by a 46.9% reduction in
non-fatal heart attacks. Based on these trials the Company initiated a follow on
Phase-III MEND-CABG II study at over 120 cardiac centres enrolling over 3000
patients. The MEND-CABG II trial did not meet its primary end point and
therefore was not sufficient for registration filings for market approval. Due
to a lack of resources, the Company has put the further development of MC-1 for
acute cardiovascular indications on hold.

Separate from the MEND CABG program, preclinical and clinical
studies have shown that MC-1 has the potential to provide other clinical
benefits to patients with hyperlipidemia, hyperglycemia, hypertension etc. The
Company is interested in advancing these applications of MC-1 through
partnerships with another pharmaceutical Company. However at this time
sufficient resources are not available to pursue these applications.

The Company has various compounds currently in early stage
research and development.

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29

The Company has developed a novel series of small molecule dual
acting anticoagulant/antiplatelet compounds which may be useful in treating
venous and arterial thrombosis. These novel compounds are patented and based on
a vitamin B6(pyridoxine) scaffold. The dual acting
anticoagulant/antiplatelet molecules have shown definite activity in venous and
arterial models of thrombosis. Preclinical studies show these compounds to have
lesser bleeding tendencies as compared to currently used agents such as heparin.
Acute toxicity studies in rats also demonstrate a favourable safety profile.

The Company seeks to establish a licensing arrangement or
R&D collaboration to advance these compounds to human clinical studies when
sufficient financial resources are available to do so.

As at May 31, 2010, the Company had 39 issued United States
patents (see Item 5  Operating and Financial Review and Prospects  C. Research
and Development, Patents and Licenses, Etc. below).

Competitors Current Products

The only commercial product the corporation currently has,
being AGGRASTAT®, is sold by the Company in the United States of
America.

AGGRASTAT® competes in a market segment commonly
referred to as the anti-thrombotic market (treatments to remove or prevent
formation of blood clots). More specifically, AGGRASTAT®is one of a
handful of antiplatelet drugs which affect thrombus (blood clot) formation by
preventing the aggregation of platelets in the blood stream. Of the different
classes of antiplatelet drugs, AGGRASTAT® is a representative of the
glycoprotein IIB/IIIA inhibitors drug class. There are three of these agents
approved for use, including abciximab (ReoPro®), eptifibatide
(Integrilin®), and tirofiban (Aggrastat®). Of the two
directly competing agents, AGGRASTAT® is most closely comparable to
Integrilin® as they are both highly potent, small molecule drugs that
have reversible antiplatelet effects.

Competitors Products in Development

At present the Company is not aware of any other glycoprotein
IIb/IIIa inhibitors in development. However, the utilization of its drug may be
affected by the continued advancement of new antithrombotic and antiplatelet
agents. The potential future launch of generic versions of AGGRASTAT®
and/or of other competitive drugs is also expected to impact utilization of the
Companys drug. Many companies, including large pharmaceutical and biotechnology
companies, are conducting development of products that are intended to address a
same or similar medical need. Many of these companies have much larger financial
and other resources than the Company does, including those related to research
and development, manufacturing, and sales and marketing. The Company also faces
competition in recruiting scientific personnel from colleges, universities,
agencies, and research organizations who seek patent protection and licensing
agreements for the technologies they develop.

Competitive Strategy and Position

The Company is primarily focusing on:

|1. | Maintaining and Growing AGGRASTAT®sales in the United States. The present market for the
      class of drug GP IIb/IIIa, of which AGGRASTAT®is one of three
      in the USA market, is approximately $450 million per year (2010). At
      present AGGRASTAT®has ≤ 2% of this market. AGGRASTAT®is recommended by the AHA and ACC Guidelines as one of the three GP
      IIb/IIIa drugs to be used for the treatment of ACS. AGGRASTAT®has been shown, in several clinical trials, to reduce mortality
      and/or morbidity (myocardial infarction) post ACS by as much as
  40%.
|-- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

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|2. | The development of a new brand and clinical strategy
      for AGGRASTAT®:As stated previously, the
      Companys primary ongoing Research and Development activity is the
      development and implementation of a new brand and life cycle management
      strategy for AGGRASTAT®. While the Company believes that it
      will be able to finalize a relatively low cost clinical, product and
      regulatory strategy, it requires additional resources to implement this
      plan. Until such resources become available, the Company is working to
      advance this program with the modest capital investment that it can make
      from its available cash resources.
|-- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
|3. | The development of TARDOXALTMfor Tardive Dyskinesia and other neurological indications.The Company is focusing initially on these markets because of
      preclinical and clinical evidence supporting the products safety and
      potential efficacy in these applications.                                                                                                                                                                                                                                                                                                                                                                                                          
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
|4. | Establishing a licensing arrangement or R&D
      collaboration to advance the dual acting anticoagulant/antiplatelet
      molecules to the clinic.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      

It is the Companys intention to secure a partnership with a
large pharmaceutical company for commercialization of TARDOXAL or other agents
from its product pipeline. Such a partnership would provide funding for clinical
development, add experience to the product development process and provide
market positioning expertise. While the Company has had informal discussions
with potential partners in this regard, no formal agreement or letter of intent
has been entered into by the Company as of the date hereof.

C. Organizational Structure

Medicure International Inc., a wholly owned subsidiary of the
Company, was incorporated pursuant to the laws of Barbados, West Indies, on May
23, 2000. Medicure International Inc.s registered office is located at
Whitepark House, White Park Road, Bridgetown, Barbados. Medicure International
Inc.s head office is located at 2nd Street, Holetown, St. James, Barbados.

Medicure Pharma Inc., a wholly owned subsidiary of the Company,
was incorporated pursuant to the laws of the State of Delaware, United States of
America, on September 30, 2005. Medicure Pharma Inc.s registered office is 2711
Centerville Road, Suite 400, Wilmington, Delaware, 19808. Medicure Pharma Inc.s
head office is located at 500 Atrium Drive, Somerset, NJ, 08873.

American Cardio Therapeutics Inc., a Company that is 49% owned
by Medicure Pharma Inc., was incorporated pursuant to the laws of the State of
Delaware, United States of America, on September 30, 2005. American Cardio
Therapeutics Inc.s registered office is 2711 Centerville Road, Suite 400,
Wilmington, Delaware, 19808. As at May 31, 2010, American Cardio Therapeutics
Inc. was involved in no material transactions.

Medicure Europe Limited, a wholly owned subsidiary of the
Company, was incorporated pursuant to the laws of the United Kingdom, on May
19, 2006. Medicure Europe ceased operations on August 4, 2009.

D. Property, Plants and Equipment

Office Space

Included in connection with the business and administration
services agreemententered into with Genesys Venture Inc. (see F.
Contractual Obligations), the Company has use of approximately 1,000 square feet of office space as part of its business services
contract with a related party. The office is located in Winnipeg, Manitoba,
Canada.

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ITEM 4A. UNRESOLVED STAFF COMMENTS

Not applicable

ITEM 5. OPERATING AND FINANCIAL REVIEW AND
PROSPECTS

This section contains forward-looking statements involving
risks and uncertainties. The Company's actual results could differ materially
from those anticipated in these forward-looking statements as a result of
certain factors, including those set forth under part Item 3 - Key Information -
D. Risk Factors. The following discussion of the financial condition, changes in
financial conditions and results of operations of the Company for the years
ended May 31, 2010, May 31, 2009 and May 31, 2008 should be read in conjunction
with the consolidated financial statements of the Company. The Companys
consolidated financial statements are presented in Canadian dollars and have
been prepared in accordance with Canadian generally accepted accounting
principles (GAAP) included under Item 17 to this annual report. Material
measurement differences between Canadian and U.S. GAAP, as applicable to the
Company, are set forth in note 16 to the consolidated financial statements of
the Company included herein.

Critical Accounting Estimates

The Companys consolidated financial statements are prepared in
accordance with Canadian generally accepted accounting principles (Canadian
GAAP). A reconciliation of amounts to present in accordance with United States
generally accepted accounting principles (US GAAP) is described in note 16 to
the audited consolidated financial statements for the year ended May 31, 2010.
These accounting principles require management to make certain estimates and
assumptions. Management believes that the estimates and assumptions upon which
the Company relies are reasonable based upon information available at the time
these estimates and assumptions are made. Actual results could differ from these
estimates. Future estimates and assumptions may lead to different judgments than
those applied in the preparation of these consolidated financial statements.
Areas of significant estimates include revenue recognition, research and
development costs, clinical trial expenses, the assessment of net recoverable
value of intangible assets, income taxes, stock-based compensation and
accounting for warrants.

Revenue recognitionThe Company recognizes product
revenue when substantially all of the risks and rewards of ownership have
transferred to the customer and collection is reasonably assured. Revenue is
recognized upon product delivery and when no significant contractual obligations
remain. As is common practice in the pharmaceutical industry, the Companys
sales are made to pharmaceutical wholesalers for further distribution to end
consumers.

Net sales reflect reduction of gross sales at the time of
initial sales recognition for estimated wholesaler chargebacks, discounts,
allowances for product returns, and other rebates. In determining the amounts of
certain of these allowances and accruals, the Company uses estimates. The
Company estimates chargebacks, discounts, and other rebates using the following
factors: contract prices and terms with customers, estimated customer and
wholesaler inventory levels, and average contractual chargeback rates.

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32

Research and development costsAll costs of research
activities are expensed in the period in which they are incurred. Development
costs are charged as an expense in the period incurred unless a development
project meets stringent criteria for cost deferral and amortization. The Company
assesses whether these costs have met the relevant criteria for deferral and
amortization at each reporting date. No development costs have been deferred to
date.

Clinical trial expensesClinical trial expenses are
a component of the Companys research and development costs. These expenses
include fees paid to contract research organizations, clinical sites, and other
organizations who conduct development activities on the Companys behalf. The
amount of clinical trial expenses recognized in a period related to clinical
agreements are based on estimates of the work performed using an accrual basis
of accounting. These estimates incorporate factors such as patient enrolment,
services provided, contractual terms, and prior experience with similar
contracts.

Intangible assetsCosts incurred in obtaining
patents are capitalized and amortized upon issuance on a straight-line basis
over the remaining legal life of the respective patents, being approximately
twenty years, or their economic life, if shorter. The cost of servicing the
Companys patents is expensed as incurred. Intangible assets are recorded at
acquisition cost and are amortized on a straight-line basis based on the
following estimated useful lives:

Technology license
    8 yearsPatents
    5-20 yearsTrademark
    10 yearsCustomer list
    10 years


The Company determines the estimated useful lives of intangible
assets based on a number of factors, including: legal, regulatory or contractual
limitations; known technological advances; anticipated demand; and the existence
or absence of competition. A significant change in any of these factors could
require a revision of the expected useful life of the intangible asset, which
could have a material impact on the Companys results of operations through an
increase to amortization.

On a regular basis, management reviews the valuation of
intangible assets taking into consideration any events and circumstances which
may impair their recoverable value including expected cash flows, the potential
benefit the Company expects to derive from the costs incurred to date and the
Companys ongoing development plans. A change in any of these assumptions could
produce a different fair value, which could have a material impact on the
Companys results of operations.

Income TaxesThe Company follows the asset and
liability method of accounting for income taxes. Under this method, future
income tax assets and liabilities are recognized for the future tax consequences
attributable to differences between the financial statement carrying amounts of
existing assets and liabilities and their respective tax bases. Future income
tax assets and liabilities are measured using enacted or substantively enacted
tax rates expected to apply to taxable income in the years in which those
temporary differences are expected to be recovered or settled. The effect on
future tax assets and liabilities of a change in tax rates is recognized in
income in the period that includes the date of substantive enactment. Given the
Companys history of net losses and expected future losses, the Company is of
the opinion that it is more likely than not that these tax assets will not be
realized in the foreseeable future and therefore, a full valuation allowance has
been recorded against these income tax assets. As a result, no net future income
tax assets or liabilities are recorded on the Companys balance sheets at
year-end.

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33

Stock-based compensationThe Company has a stock
option plan for its directors, management, consultants, and employees.
Compensation expense is recorded for stock options issued to employees and non
employees using the fair value method. The Company must calculate the fair value
of stock options issued and amortize the fair value to stock compensation
expense over the vesting period, and adjust the amortization for stock option
forfeitures and cancellations. The Company uses the Black-Scholes model to
calculate the fair value of stock options issued which requires that certain
assumptions including the expected life of the option and expected volatility of
the stock be estimated at the time that the options are issued. The Company
amortizes the fair value using the accelerated method over the vesting period of
the options, generally a period of three years. The factors included in the
Black-Scholes model are reasonably likely to change from period to period due to
changes in the Companys stock price and external factors, as further stock
options are issued and as adjustments are made to previous calculations for
unvested stock option forfeitures and cancellations.

The stock-based compensation recorded by the Company is a
critical accounting estimate because of the value of compensation recorded, the
volume of the Companys historical stock option activity, and the many
assumptions that are required to be made to calculate the compensation expense.
The Black-Scholes model is not the only permitted model to calculate the fair
value of stock options. A different model, such as the binomial model, as well
as any changes to the assumptions made may result in a different stock
compensation expense calculation. The Company recorded stock compensation
expense in fiscal 2010 of $122,812 (2009 - $325,028; 2008 - $563,272).

A. Operating Results

General

The Company has concentrated primarily on research and
development and has yet to and may never derive any revenues from its clinical
products. The Company has a limited operating history and its prospects must be
considered in light of the risks, expenses and difficulties frequently
encountered with the establishment of a business in a highly competitive
industry, characterized by frequent new product introductions.

As discussed in Note 1 of the consolidated financial statements
of the Company, the financial statements have been prepared on a going concern
basis in accordance with Canadian generally accepted accounting principles. The
going concern basis of presentation assumes that the Company will continue in
operation for the foreseeable future and be able to realize its assets and
discharge its liabilities and commitments in the normal course of business.
There is significant doubt about the appropriateness of the use of the going
concern assumption because the Company has experienced operating losses and cash
outflows from operations since incorporation and has significant debt servicing
obligations that it does not have the ability to repay without refinancing or
restructuring. At May 31, 2010, the Company was in default of the terms of its
long-term debt financing obligations, and continues to be in default. Under an
event of default, the lender can exercise its security rights under the
agreement, and accordingly the long-term debt obligation has been classified as
a current liability as at May 31, 2010.

The Company has experienced a loss of $5,532,506 and negative
cash flows from operations of $1,452,809 in the year ending May 31, 2010, and
has accumulated a deficit of $154,081,806 as at May 31, 2010. The Company
continues to monitor staff and corporate expenses to the extent deemed
appropriate in order to more closely align expenses with net revenue. Based on
the Companys operating plan, its existing working capital is not sufficient to
fund its planned operations, capital requirements, debt servicing obligations,
and commitments through the end of the fiscal 2011 year without restructuring of
its debt and raising additional capital. The Company is in ongoing discussions
with its senior lender to restructure its debt, and in January 2010, retained advisors to
assist in the evaluation of financial alternatives and fundraising options, and
to assist in the partnership, license or sale of AGGRASTAT®.

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34

No
agreements with the lender or other potential lenders or investors have been
reached yet and there can be no assurance that such agreements will be reached.
Further, the Companys financing agreement includes certain restrictive
covenants on commercial and developmental products including intellectual
property. Therefore the ability of the Company to execute on its operating plan
and/or obtain additional capital is likely to be contingent on having
collaborative relationships with its senior lender. The Company is currently
evaluating expressions of interest regarding the potential partnership, license,
or sale of AGGRASTAT® and/or an investment in the Company, and may
also consider conversion of all or a portion of its long term debt into equity
instruments. Such transactions, if completed, could have a significant dilutive
effect on existing shareholders. If the Company is unable to restructure its
debt, complete other strategic alternatives, and/or secure additional funds, the
Company will have to consider additional strategic alternatives which may
include, among other strategies, asset divestitures, monetization of certain
intangibles, and/or the winding up, dissolution or liquidation of the Company.

The ability of the Company to continue as a going concern and
to realize the carrying value of its assets and discharge its liabilities when
due is dependent on many factors, including, but not limited to the actions
taken or planned, some of which are described above, which are intended to
mitigate the adverse conditions and events which raise doubt about the validity
of the going concern assumption used in preparing these financial statements.
There is no certainty that these and other strategies will be sufficient to
permit the Company to continue as a going concern.

The financial statements do not reflect adjustments that would
be necessary if the going concern assumption were not appropriate. If the
going concern basis was not appropriate for these financial statements, then
adjustments would be necessary in the carrying value of assets and liabilities,
the reported revenues and expenses, and the balance sheet classifications used.

Year Ended May 31, 2010 Compared to the Year Ended May 31,
2009

Net product sales for fiscal 2010 were $3,317,000, compared to
$4,793,000 in fiscal 2009. The Company currently sells AGGRASTAT® to
drug wholesalers. These wholesalers subsequently sell AGGRASTAT® to
the hospitals where health care providers administer the drug to patients.
Wholesaler management decisions to increase or decrease their inventory of
AGGRASTAT® may result in sales of AGGRASTAT® to
wholesalers that do not track directly with demand for the product at hospitals.
The decline is attributable to fluctuations in foreign currency exchange rates
and an increase in wholesaler purchasing in advance of a price increase
introduced during the 3rd quarter of 2009. Since then, wholesale purchasing has
more closely reflected hospital demand with modest fluctuations attributing to
wholesaler inventory adjustments.

Cost of goods sold represents direct product costs associated
with AGGRASTAT® including and write-downs for obsolete inventory.
Amortization of the related acquired AGGRASTAT® intangible assets is
separately discussed below.

Cost of sales for fiscal 2010 were $572,000 compared to
$377,000 in fiscal 2009. The Company has a minimum purchase commitment for the
manufacturing of AGGRASTAT® and as a result has recorded a $0.3
million charge to recognize this commitment. The increase is partially offset by
direct costs linked to lower sales volume during the year ended May 31, 2010 as
compared to of 2009.

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35

Total Selling, general, and administrative expenditures for
fiscal 2010 were $4,475,000, compared to $9,255,000 in fiscal 2009. Selling,
general, and administrative expenditures related to AGGRASTAT® were
$3,277,000 in fiscal 2010, compared to $6,598,000 in fiscal 2009. Selling,
general, and administrative expenditures for AGGRASTAT® are
primarily related to field selling expenses, product promotion costs and
administrative expenses. The appreciation of the US dollar compared the Canadian
dollar favourably impacted our expenditures which complimented Managements cost
curtailment program implemented since the beginning of the fiscal year. Other
selling, general, and administrative expenditures in fiscal 2010 decreased to
$1,198,000 from $2,657,000 in fiscal 2009 mainly due to Managements cost
curtailment program, as well as a one-time provision against research advances
recorded in fiscal 2009. These reductions were offset by professional and
advisory fee related to ongoing discussions with the Companys secured
lender.

Net Research and development expenditures for fiscal 2010 were
$393,000, compared to $23,000 in fiscal 2009. The increase in research and
development expenditures as compared to fiscal 2009 is due to the Company
continuing with its Phase II clinical study TARDOXALTM on a cost
conservative basis until such time as the Companys financial condition
improves. In 2009, the Company recovered approximately $800,000 in research and
development expenses as a result of negotiations and support from clinical
partners and service providers for costs incurred in 2008. This recovery was
applied against existing 2009 expenditures.

The Companys Impairment of Intangibles assets decreased from
$1,756,000 in fiscal 2009 to $769,000 in fiscal 2010. During fiscal 2009 the
Company had initiated a review of all outstanding patents as part of its ongoing
cost curtailment program. Intangible assets are reviewed for impairment on an
ongoing basis whenever events or changes in circumstances indicate that the
carrying amount may not be recoverable. Based on this review certain patents
were deemed not significant to the Companys commercial and research operations
and a decision was made to surrender issued patents and withdraw applications
under review. The majority of these patents were in the review stage in numerous
countries. As a result, an impairment charge of $1.0 million was recorded to
write off the carrying value of these specific patents.

It is important to note that historical patterns of impairment
charges cannot be taken as an indication of future impairments. The amount and
timing of impairments and write-downs may vary substantially from period to
period depending on the business and research activities being undertaken at any
one time and changes in the Company's commercial strategy.

Amortization for the year ended May 31, 2010 was $919,000,
compared to $939,000 in fiscal 2009. The majority of amortization expense in
both periods relates the amortization of AGGRASTAT® intangibles. The
amortization was lower in fiscal 2010 due to the write-down of the intangibles
in fiscal 2009 and 2010.

Interest and other income for the year ended May 31, 2010 was
$5,000, compared to $256,000 in fiscal 2009. The decrease in interest and other
income in fiscal 2010 is the result of lower cash and cash equivalents balance
and lower interest rates as compared to the prior fiscal year.

Interest expense for fiscal 2010 was $3,280,000, compared to
$4,945,000 in fiscal 2009. The decrease in interest expense for the year ended
May 31, 2010 as compared to fiscal 2009 is primarily due to the repayment of the
term loan facility during the second quarter of 2009.

The net foreign exchange gain for the year ended May 31, 2010
was $1,247,000, compared to a net foreign exchange loss of $1,636,000 in fiscal
2009. The net foreign exchange gain during the year ended May 31, 2010 changed
by $2.88 million due to a weakening of the U.S. dollar relative to the Canadian
dollar in the year. Foreign exchange loss represents changes in the Canadian
dollar value of foreign currency denominated operating accounts and long-term
debt in response to changes in the value of the Canadian dollar relative to US
dollar. The value of the Canadian dollar relative to the US dollar increased
over the period, with exchange rates moving from $1.095 as at May 31, 2009 to
$1.046 as at May 31, 2010, which resulted in a foreign exchange gain of $1.2 million
for the year. In the prior year, the value of the Canadian dollar decreased,
with exchange rates moving from $0.994 as at May 31, 2008 to $1.092 as at May
31, 2009, which resulted in a foreign exchange loss of $1.64 million for the
prior year.

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36

For the year ended May 31, 2010, the Company recorded a
consolidated net loss of $5,532,000 or $0.04 per share compared to a
consolidated net loss of $13,316,000 or $0.10 per share for the year ended May
31, 2009. As discussed above the main factors contributing to the decrease in
the loss as compared to the 2009 fiscal year resulted from the cost curtailment
program whereby normal operating costs (exclusive of debt servicing requirements
and costs related to restructuring of debt as discussed above) have been brought
in line with revenues. Savings were offset by decreases in wholesale
AGGRASTAT® sales.

The weighted average number of common shares outstanding used
to calculate basic and diluted loss per share was 130,507,552 for the years
ended May 31, 2010 and 2009.

Year Ended May 31, 2009 Compared to the Year Ended May 31,
2008

Net product sales for fiscal 2009 were $4,793,000, compared to
$2,247,000 in fiscal 2008. The Company currently sells AGGRASTAT® to
drug wholesalers. These wholesalers subsequently sell AGGRASTAT® to
the hospitals where health care providers administer the drug to patients.
Wholesaler management decisions to increase or decrease their inventory of
AGGRASTAT® may result in sales of AGGRASTAT® to
wholesalers that do not track directly with demand for the product at hospitals.
The appreciation of the US dollar accounted for approximately 29% of the
increase. The remaining increase is due to increased wholesaler demand and a
modest price increase during the third quarter of 2009.

Cost of goods sold represents direct product costs associated
with AGGRASTAT® including write-downs for obsolete inventory.
Amortization of the related acquired AGGRASTAT® intangible assets is
separately discussed below.

Cost of sales for fiscal 2009 were $377,000 compared to
$606,000 in fiscal 2008. The decrease in cost of sales is attributable to lower
write-downs for obsolete inventory during 2009 (2009-$92,986; 2008 - $428,822),
offset by the increased sales volume.

Total Selling, general, and administrative expenditures for
fiscal 2009 were $9,255,000, compared to $12,073,000 in fiscal 2008. Selling,
general, and administrative expenditures related to AGGRASTAT® were
$6,598,000 in fiscal 2009, compared to $6,782,000 in fiscal 2008. Selling,
general, and administrative expenditures for AGGRASTAT® are primarily
related to field selling expenses, product promotion costs and administrative
expenses. The appreciation of the US dollar compared the Canadian dollar
negatively impacted our expenditures by approximately $.9 million, however this
was offset positively by the restructuring of the commercial operations which
began in fiscal 2008 which helped reduce selling, general and administrative
expenditures by approximately $1.1 million. Other selling, general, and
administrative expenditures in fiscal 2009 decreased to $2,657,000 from
$5,291,000 in fiscal 2008 mainly due to a reduction in costs associated with the
Companys restructuring efforts from 2008 (approximately $1.1 million associated
with reduced head office staff), less financing and business activity
development activities during the year (approximately $.6 million), a recovery
of regulatory fees paid in fiscal 2008 (approximately $.5 million), reduced
capital tax expenditures of approximately $0.3 million and a general reduction
in other general and administrative expenses. These reductions were offset by a
one time provision of approximately one million dollars for potentially
unrecoverable prepaid research costs.

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37

Net Research and development expenditures for fiscal 2009 were
$23,000, compared to $28,660,000 in fiscal 2008. The significant decrease in
Research and development expenditures as compared to fiscal 2008 is due to
completion of the Phase III MEND-CABG II study in the third quarter of fiscal
2008 and with the support of our clinical partners and service providers, the
Company was able to secure a recovery on certain research and development costs
incurred in fiscal 2008 of approximately $970,000. There were no Phase III
studies during 2009. Pre-clinical and other research and development costs are
also lower as the Company focuses on its commercial product and only on selected
research and development programs. The research and development costs related to
some ongoing regulatory and administrative costs, the development program
involving use of TARDOXAL in the treatment of neurological conditions and other
research exploring further uses of the Companys library of novel,
anti-thrombotic small molecules developed by its Drug Discovery program.

Charges for impairment of intangible assets decreased from
$13,057,000 in fiscal 2008 to $1,756,000 in fiscal 2009. The significant
write-downs during fiscal 2008 had occurred after the Company has decided to
suspend the development of MC-1 as a monotherapy for acute indications such as
CABG as part of a corporate restructuring plan announced in March 2008 resulting
in an impairment charge of $13.1 million. During fiscal 2009 the Company had
initiated a review of all outstanding patents as part of its ongoing cost
curtailment program. Based on this review certain patents were deemed not
significant to the Companys commercial and research operations and a decision
was made to surrender issued patents and withdraw applications under review. The
majority of these patents were in the review stage in numerous countries. As a
result, an impairment charge of $1.8 million was recorded to write off the
carrying value of these specific patents.

Amortization for the year ended May 31, 2009 was $939,000,
compared to $2,653,000 in fiscal 2008. The majority of amortization expense in
both periods relates the amortization of AGGRASTAT® intangibles. The
amortization was lower in fiscal 2009 due to the write-down of the intangibles
in fiscal 2009.

Interest and other income for the year ended May 31, 2009 was
$256,000, compared to $1,150,000 in fiscal 2008. The decrease in interest and
other income in fiscal 2008 is the result of lower cash and cash equivalents
balance and lower interest rates as compared to the prior fiscal year.

Interest expense for fiscal 2009 was $4,945,000, compared to
$3,831,000 in fiscal 2008. The increase in interest expense is primarily due to
the US$25 million in long-term debt that the Company secured in the second
quarter of fiscal 2008 being outstanding for a full year in 2009 compared to 8.5
months in 2008, an early termination fee of US$600,000 paid in relation to the
repayment of the term loan facility during the second quarter of 2009 and the
strengthening of the US dollar during the period as the Companys debt and
interest payments are denominated in US dollars.

The net foreign exchange loss for the year ended May 31, 2009
was $1,636,000, compared to a net foreign exchange gain of $79,000 in fiscal
2008. The net foreign exchange loss in fiscal 2009 is due to a strengthening
U.S. dollar relative to the Canadian dollar in the period. The exchange rate
used at May 31, 2009 was 1.0917 versus 0.9930 at May 31, 2008. The U.S. dollar
had traded up to a high of 1.3066 during the year. The majority of the loss was
incurred on our US dollar denominated debt, partially offset by gains on the
Companys U.S. denominated cash.

For the year ended May 31, 2009, the Company recorded a
consolidated net loss of $13,316,000 or $0.10 per share compared to a
consolidated net loss of $57,402,000 or $0.46 per share for the year ended May
31, 2008. As discussed above the main factors contributing to the decrease in
the loss as compared to 2008 was the significant reduction in Research and
Development costs, lower write-downs on intangible assets and a reduction in general and administration costs.
Higher interest costs and the appreciation of the U.S. dollar added to the loss
as compared to 2008.

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38

The weighted average number of common shares outstanding used
to calculate basic and diluted loss per share increased was 130,507,552 for the
years ended May 31, 2009 and 2008.

B. Liquidity and Capital Resources

Since the Companys inception, it has financed operations
primarily from public and private sales of equity, debt financing, the issue of
warrants and exercise of stock options, and interest income on excess funds
held. At present, the Company estimates it currently has sufficient working
capital and revenues to fund its current obligations and planned operations
excluding debt servicing obligations.

Cash used in operating activities for fiscal 2010 decreased
$9.0 million or 86.0% to $1.5 million compared to $10.4 million for fiscal 2009
primarily due to:

| |  | A decrease of $5.3 million related to loss from
      operations before changes in operating assets and liabilities due mainly
      to:      
| |  | ----------------------------------------------------------------------------------------------------------------------------------------------
| |  |                                                                                                                                               
| |  |                                                                                                                                               
| |  |                                                                                                                                               
| |  |                                                                                                                                               
| |  |                                                                                                                                               
| |  | Those factors were partially offset by decrease of $3.7
      million related to the change in accounts payable and accrued
      liabilities.

Investing activities for fiscal years 2010 and 2009 were
insignificant.

Financing activities for fiscal years 2010 and 2009 were
insignificant.

At May 31, 2010 the Company had cash and cash equivalents
totaling $371,000 compared to $1,978.000 as of May 31, 2009.

As at May 31, 2010, the Company had a working capital
deficiency of $29,440,287 compared to working capital a working capital
deficiency of $535,328 at May 31, 2009. The reduction of working capital was
mainly due to increases in accrued interest on long-term debt, the
reclassification of the debt to a current liability, and use of funds to support
operations.

The Company has long-term debt at May 31, 2010 of US$25.0
million recorded in on its financial statements relating to the Birmingham debt
described in more detail above. The Company has imputed an effective interest
rate of 13.3% . The minimum annual debt obligations are disclosed in Item
5F-Contractual Obligations.

The Company currently has accrued US$4.3 million in debt
service obligations. Of this amount, US$1,739,659 was originally due July 15,
2009; US$180,811 was originally due October 15, 2009; US$195,550 was originally
due January 15, 2010; US$160,359 was originally due April 15, 2010; and
$2,063,280 was originally due July 15, 2010. As at September 27, 2010, the
Company was in default of the terms of its debt financing obligations and
continues to be in default. The debt agreement contains no express provisions to
accelerate debt payments in an event of default, however under the agreement the
lender can exercise its security rights at any time. Accordingly, for financial
reporting purposes, based on the guidance in Canadian GAAP EIC-59 Long Term
Debt With Covenant Violations, the outstanding long term debt of US$25 million
that is in default has been classified as a current liability as at May 31, 2010. Depending on the outcome of these negotiations
the Company may not have sufficient working capital to maintain operations. In
addition to the negotiations with the Companys senior lender the Company
continues to implement a cost savings program to further reduce its operating
expenses and exploring additional strategic alternatives.

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39

The Company has experienced a loss of $5,532,506 and negative
cash flows from operations of $1,452,809 in the year ending May 31, 2010, and
has accumulated a deficit of $154,081,806 as at May 31, 2010. The Company
continues to monitor staff and corporate expenses to the extent deemed
appropriate in order to more closely align expenses with net revenue. Based on
the Companys operating plan, its existing working capital is not sufficient to
fund its planned operations, capital requirements, debt servicing obligations,
and commitments through the end of the fiscal 2011 year without restructuring of
its debt and raising additional capital. The Company is in ongoing discussions
with its senior lender to restructure its debt, and in January 2010, retained
advisors to assist in the evaluation of financial alternatives and fundraising
options, and to assist in the partnership, license or sale of
AGGRASTAT®. No agreements with the lender or other potential lenders
or investors have been reached yet and there can be no assurance that such
agreements will be reached. Further, the Companys financing agreement includes
certain restrictive covenants on commercial and developmental products including
intellectual property. Therefore the ability of the Company to execute on its
operating plan and/or obtain additional capital is likely to be contingent on
having collaborative relationships with its senior lender. The Company is
currently evaluating expressions of interest regarding the potential
partnership, license, or sale of AGGRASTAT® and/or an investment in
the Company, and may also consider conversion of all or a portion of its long
term debt into equity instruments. Such transactions, if completed, could have a
significant dilutive effect on existing shareholders. If the Company is unable
to restructure its debt, complete other strategic alternatives, and/or secure
additional funds, the Company will have to consider additional strategic
alternatives which may include, among other strategies, asset divestitures,
monetization of certain intangibles, and/or the winding up, dissolution or
liquidation of the Company.

As at May 31, 2010 the Company had US $0.3 million in cash and
cash equivalents to fund the U.S. denominated long-term debt as well U.S.
denominated selling, general and administrative expenses and research and
development costs. The Company currently has no derivatives, such as foreign
currency forward contracts and futures contracts, hedging the balance of the
U.S. denominated debt.

The total number of common shares issued and outstanding at May
31, 2010 and 2009 was 130,307,552.

C. Research and Development, Patents and Licenses, Etc.

Research and Development

Drug development and design begins with an idea, or theoretical
concept for treating a given disorder. The idea is advanced through the drug
design process, resulting in preliminary candidates that have theoretical
potential. Candidates are improved to achieve the optimal effectiveness with
limited toxicity. Following preclinical testing, products with the greatest
potential become lead candidates and are advanced into clinical trials (human
testing) with the intent of having them receive regulatory approval for
marketing.

The Companys primary ongoing Research and Development activity
is the development and implementation of a new brand and life cycle management
strategy for AGGRASTAT®. While the Company believes that it will be
able to finalize a relatively low cost clinical, product and regulatory
strategy, it requires additional resources to implement this plan. Until such
resources become available, the Company is working to advance this program with the modest
capital investment that it can make from its available cash resources.

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40

In February 2008, the Company announced that its pivotal Phase
III MEND-CABG II clinical trial with MC-1 did not meet the primary endpoint and
as a result were not sufficient to support the filings. This program has been
put on hold due to the Companys limited resources at this time. At such time as
the Companys resources warrant a further review of this program the Company
will do so and then make a determination as to what if any further investigation
is warranted. The key findings from the study were presented at the American
College of Cardiology 57th Annual Scientific Session in April 2008. The trial
was designed to evaluate the effect of The Companys lead product MC-1, versus
placebo, on the incidence of cardiovascular death or nonfatal myocardial
infarction up to and including 30 days following coronary artery bypass graft
(CABG) surgery. Based on the results, the Company does not plan, in the
foreseeable future, on submitting an application for MC-1 marketing approval to
the U.S. Food and Drug Administration for the CABG indication. However, the
information and findings from the program was used to investigate alternative
applications of MC-1 leading to the Companys current lead drug candidate
TARDOXALTM.

TARDOXALTM is currently in development for treating
the serious neurological disorder tardive dyskinesia (TD). This program evolved
from The Companys extensive clinical experience with MC-1, a naturally
occurring small molecule, for new chronic medical conditions.

The TARDOXALTM and MC-1 programs benefit from over
10 years of work that the Company invested in advancing this compound through
late-stage human clinical testing in acute and chronic cardiovascular
conditions. Over this time the Company invested substantially in numerous animal
and human safety and pharmacokinetic studies, product manufacturing and
formulation development, efficacy studies in chronic and acute conditions, and
other laboratory and non-lab work. The Company believes the information and
physical assets resulting from this activity are valuable assets that will
reduce costs and also speed development of this molecule for application to
other conditions.

The Company is also pursuing licensing opportunities for its
library of small-molecule anti-thrombotic drugs.

It is the Companys intention to actively search for a
partnership with a large pharmaceutical Company. Such a partnership may provide
funding for Phase II and Phase III clinical trials, add experience to the
product development process, and bring in overall marketing expertise. While the
Company has had informal discussions with potential partners, no formal
agreement, or letter of intent, has been entered into by the Company as of the
date hereof.

As outlined in Item 17, Company-sponsored research and
development net expenditures for fiscal 2010 were $393,385 (2009 - $22,706; 2008
- $28,660,250). During fiscal 2009, the Company, and with the support of our
clinical partners and service providers, was able to secure a recovery on
certain research and development costs incurred in fiscal 2008 of approximately
$970,000.

Patents and Licenses

The Company has 39 patents from the United States Patent Office
providing protection for AGGRASTAT® and certain uses of MC-1 and
related compounds in treatment of cardiovascular diseases and other compounds
for the use in cardiovascular disease. The Company has also filed 8 regular
applications in the United States plus corresponding patent applications in
other jurisdictions. The Company will continue to file patents to extend
protection of MC-1 and for new compounds in development. The 39 patents issued
to the Company are as follows:

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41

Patent Number
    Issue Date
    Title5,292,756
    March 8, 1994
    Novel Sulfonamide Fibrinogen
      Receptor Antagonists5,658,929
    August 19, 1997
    Novel Sulfonamide Fibrinogen
      Receptor Antagonists5,733,916
    March 31, 1998
    Prevention and treatment of
      ischemia-reperfusion and endotoxin-related injury using adenosine and
      purino receptor antagonists5,733,919
    March
      31, 1998
    Compositions for Inhibiting Platelet Aggregation5,814,643
    September 29, 1998
    Novel Sulfonamide Fibrinogen
      Receptor Antagonists5,880,136
    March 9, 1999
    Novel Sulfonamide Fibrinogen
      Receptor Antagonists5,965,581
    October 12, 1999
    Compositions for Inhibiting Platelet Aggregation5,972,967
    October 26, 1999
    Compositions for Inhibiting Platelet Aggregation5,978,698
    November 2, 1999
    Angioplasty Procedure Using
      Nonionic Contrast Media6,040,317
    March 21, 2000
    Novel Sulfonamide Fibrinogen
      Receptor Antagonists6,043,259
    March 28, 2000
    Treatment of Cardiovascular and
      Related Pathologies6,051,587
    April
      18, 2000
    Treatment of Age Related Hypertension6,136,794
    October 24, 2000
    Platelet Aggregation Inhibition
      Using Low Molecular Weight Heparin in Combination with a GP IIb/IIIa
      Antagonist6,339,085
    January 15, 2002
    Prodrugs of MC16,417,204
    July
      9, 2002
    5-AZA Analogues6,489,345
    December 3, 2002
    Treatment of Diabetes and Related Pathologies6,538,112
    March
      25, 2003
    Anticoagulant Test6,548,519
    April
      15, 2003
    5-AZA Analogues6,586,414
    July
      1, 2003
    Methods of Treating Stroke6,605,612
    August
      12, 2003
    Mimics of MC16,667,315
    December 23, 2003
    Mimics of MC16,677,356
    January 13, 2004
    Combination6,770,660
    August
      3, 2004
    Method for Inhibiting Platelet Aggregation6,780,997
    August
      24, 2004
    Cardioprotective Phosphonates and Malonates6,861,439
    March
      1, 2005
    Treatment of Cerebrovascular Disease6,867,215
    March
      15, 2005
    Cardioprotective Phosphonates and Malonates6,890,943
    May
      10, 2005
    Pyridoxal Analogues and Methods of Treatment6,897,228
    May 24, 2005
    Pyridoxine and Pyridoxal
      Analogues: Cardiovascular Therapeutics7,105,673
    September 12, 2006
    Cardioprotective Phosphonates and Malonates7,115,625
    October 3, 2006
    Treatment of Cardiovascular and
      Related Pathologies7,125,889
    October 24, 2006
    Treatment of Cardiovascular and
      Related Pathologies7,132,430
    November 7, 2006
    Treatment of Cardiovascular and
      Related Pathologies


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42

7,144,892
    December 5, 2006
    Treatment of Cardiovascular and
      Related Pathologies7,148,233
    December 12, 2006
    Treatment of Cardiovascular and
      Related Pathologies7,230,009
    June
      12, 2007
    Pyridoxal Analogues and Methods of Treatment7,375,112
    May 20, 2008
    Compounds and Methods for
      Reducing Triglyceride Levels7,425,570
    September 16, 2008
    Pyridoxine and Pyridoxal Analogues: New Uses7,442,689
    October 28, 2008
    Cardioprotective Phosphonates and Malonates7,459,468
    December 2, 2008
    Aryl Sulfonic Pyridoxines as Antiplatelet Agents


Patent 5,733,916 is sublicensed by the Company from ENDACEA,
Inc. ENDACEA, Inc. has the right to sublicense the Sublicensed Patents to the
Company in accordance with an agreement with the Trustees at the University of
Pennsylvania. Pursuant to a Sublicense Agreement dated April 11, 2006, ENDACEA
sublicensed the exclusive worldwide use of the patents to the Company. Pursuant
to the Sublicense Agreement, the Company has agreed to pay ENDACEA, Inc. a
royalty payment on Net Sales of Sublicensed Products sold worldwide. The
Sublicense Agreement commenced on April 11, 2006.

Patents 6,043,259, 6,051,587, 6,339,085, 6,890,943 and
7,230,009 are jointly owned by the Company and the University of Manitoba.
Pursuant to a Licence Agreement dated August 18, 1997, an Assignment Agreement
dated September 26, 1997, an updated License Agreement dated August 30, 1999 and
a newly revised version executed November 24, 2006, which supersedes all
previous versions, (the Licence Agreement) the University of Manitoba
licensed the exclusive worldwide use of the patents and the MC-1 technology to
the Company. Pursuant to the License Agreement, the Company has agreed to pay
the University of Manitoba a royalty payment of up to 3% of net sales from any
cardiovascular product derived from the MC-1 technology. The License Agreement
was originally signed on August 30, 1999 and subsequently amended on November
24, 2006 and shall terminate if a patent or patents, domestic or foreign, are
obtained prior to commercialization of a Licensed Product, the expiration date
of the last to expire of any patents covered by the Patent Rights.

The MC-1 technology is derived from work done by employees of
the Company and by two employees of the University of Manitoba, Dr. Naranjan
Dhalla and Dr. Krishnamurti Dakshinamurti, Professor Emeritus, Department of
Biochemistry.

Patents 5,292,756, 5,658,929, 5,733,919, 5,814,643, 5,880,136,
5,965,581, 5,972,967, 5,978,698, 6,040,317, 6,136,794, 6,538,112 and 6,770,660
were purchased by the Company from MGI GP, INC. (a Delaware corporation doing
business as MGI PHARMA and its Affiliate, Artery, LLC). Pursuant to an Asset
Purchase Agreement dated August 8, 2006, MGI GP, INC. sold the exclusive use of
the patents to the Company in the specified territory (the United States of
America including the Commonwealth of Puerto Rico; Guam; and the United States
Virgin Islands). Pursuant to the Asset Purchase Agreement the Company agreed to
pay MGI GP, INC. a one time fee for the procurement of the acquired assets. The
Asset Purchase Agreement was executed August 8, 2006.

There are 8 pending regular and provisional United States
patent applications, including 7 filed with the United States Patent Office as
either regular or provisional applications. Certain of these are owned by the
Company by virtue of their inventorship, in whole are in part, by employees of
the Company and, subsequent to June 1, 2000, by CanAm Bioresearch Inc. Effective
June 22, 2010, application 10/909,608 lapsed.

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43

Much of the work, including some of the research methods, that
is important to the success of the Companys business is germane to the industry
and may not be patentable. For this reason all employees, contracted researchers
and consultants are bound by non-disclosure agreements.

Given that the patent applications for these technologies
involve complex legal, scientific and factual questions, there can be no
assurance that patent applications relating to the technology used by the
Company will result in patents being issued, or that, if issued, the patents
will provide a competitive advantage or will afford protection against
competitors with similar technology, or will not be challenged successfully or
circumvented by competitors.

The Company has filed patents in accordance with the Patent
Cooperation Treaty (the PCT). The PCT is a multilateral treaty that was
concluded in Washington in 1970 and entered into force in 1978. It is
administered by the International Bureau of the World Intellectual Property
Organization (the WIPO), headquartered in Geneva, Switzerland. The PCT
facilitates the obtaining of protection for inventions where such protection is
sought in any or all of the PCT contracting states (total of 104 at July 1999).
It provides for the filing of one patent application (the international
application), with effect in several contracting states, instead of filing
several separate national and/or regional patent applications. At the present
time, an international application may include designation for regional patents
in respect of contracting states party to any of the following regional patent
treaties: The Protocol on Patents and Industrial Designs within the framework of
the African Regional Industrial Property Organization, the Eurasian Patent
Convention, the European Patent Convention, and the Agreement Establishing the
African Intellectual Property Organization. The PCT does not eliminate the
necessity of prosecuting the international application in the national phase of
processing before the national or regional offices, but it does facilitate such
prosecution in several important respects by virtue of the procedures carried
out first on all international applications during the international phase of
processing under the PCT. The formalities check, the international search and
(optionally) the international preliminary examination carried out during the
international phase, as well as the automatic deferral of national processing
which is entailed; give the applicant more time and a better basis for deciding
whether and in what countries to further pursue the application. Further
information may be obtained from the official WIPO internet website
(http://www.wipo.int).

On June 1, 2000 the Company entered into the Medicure
International Licensing Agreement whereby it licensed the world-wide development
and marketing rights for MC-1, except for Canada, to its wholly owned
subsidiary, Medicure International Inc. As consideration for the grant of the
license, Medicure International Inc. agreed to pay the Company a fee of $1.00
upon the completion of specified milestones in the development process, together
with a variable royalty of 7% to 9% of net sales of MC-1 (if any sales are ever
in fact made). The term of the Medicure International Licensing Agreement will
expire on the date of expiration of the last to expire patent on MC-1, or in the
absence of any such patent, on the 10th anniversary of the date of the first
commercial sale of MC-1 in the country where it was last introduced (if it is
ever so introduced). The Medicure International Licensing Agreement may be
terminated under a number of circumstances and, in any event, by either party at
any time by providing the other with at least 90 days prior written notice of
its intention to terminate the Medicure International Licensing Agreement.

Medicure International Inc. subsequently entered into a
development agreement with CanAm on June 1, 2000 and Clinical Development
Research Institute (CDRI) on July 2, 2004 to perform research and development of
MC-1 and other compounds at cost, plus a reasonable mark-up not to exceed ten
percent of any amount invoiced. The parties to the development agreements have
agreed that the aggregate amount of all invoiced expenditures shall not exceed
$30,000,000 over the term of each agreement. The development agreement with CDRI
is no longer in effect. The term of the CanAm development agreement is to expire
on the completion of all research and development activities by CanAm and the
written acknowledgment by CanAm and Medicure International Inc.
that no further research projects will be undertaken (see Item 6 - Directors,
Senior Management and Employees - A. Directors and Senior Management).

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44

The development agreements may be terminated under a number of
circumstances and, in any event, by Medicure International Inc. at any time by
providing CanAm or CDRI with at least 30 days prior written notice of its
intention to terminate, or by CanAm or CDRI at any time by providing Medicure
International Inc, with at least 90 days prior written notice of its intention
to terminate the development agreement.

The agreements provide that all confidential information
developed or made known during the course of the relationship with the Company
is to be kept confidential except in specific circumstances.

D. Trend Information

Net revenue from the sale of AGGRASTAT® for fiscal
2010 decreased 31% over the net revenue for the in fiscal 2009. All of the
Companys sales are denominated in US dollars. The decline is attributable to
fluctuations in foreign currency exchange rates, an increase in wholesaler
purchasing in advance of a price increase introduced during the 3rd quarter of
2010, and a modest decrease in hospital demand for AGGRASTAT®. Since
then, wholesale purchasing has more closely reflected hospital demand with
modest fluctuations attributing to wholesaler inventory adjustments.

The Company is not aware of any other trends, uncertainties,
demands, commitments or events which are reasonably likely to have a material
effect upon the Companys net sales or revenues, income from continuing
operations, profitability, liquidity or capital resources, or that would cause
reported financial information not necessarily to be indicative of future
operating results or financial condition except the potential effect the
following items may or may not have:

- Current negotiations with the Companys senior lender (see section 4A and
  5B) could lead to significant changes in the Companys operations. However, at
  this time no final decisions have been made so the Company can not predict
  what this impact maybe.
- Subsequent to year end the Company has initiated further cost savings
  strategies for its commercial operations and has reduced and realigned its
  sales force. These measures are expected to assist in further reducing the
  Companys cash burn in 2011.

E. Off-balance Sheet Arrangements

As of May 31, 2010 the Company does not have any off-balance
sheet arrangements, other than those disclosed below.

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45

F. Contractual Obligations

The following tables set forth the Companys contractual
obligations as of May 31, 2010:

Contractual Obligations Payment Due By Period(in thousands of
      US$)
    Total
    2011
    2012
    2013
    2014
    2015
    ThereafterLong-term debt obligations1
    $45,411
    $2,600
    $3,500
    $3,920
    $4,390
    $4,917
    $26,084Purchase Agreement commitments2
    1,852
    644
    805
    403
    -
    -
    -Management services agreement commitments
    150
    150Total
    $47,413
    $3,394
    $4,305
    $4,323
    $4,390
    $4,917
    $26,084


Debt obligations reflect the minimum annual payments under the
debt financing agreement, and reflect the contractual terms. As discussed above,
as at May 31, 2010 the Company is in default of the payment terms of its
long-term debt and accordingly the entire balance of the debt has been
classified as a current liability. See also note 2 below.

In addition to the contractual obligations disclosed above, the
Company and its wholly-owned subsidiaries, have ongoing research and development
agreements with third parties in the ordinary course of business. The agreements
include the research and development of TARDOXALTM as well as other
projects.

Effective October 1, 2009, the Company entered into a business
and administration services agreement with Genesys Venture Inc., a company
controlled by the CEO of the Company, under which the Company is committed to
pay $25,000 per month or $300,000 per annum. The agreement shall be
automatically renewed for succeeding terms of one year on terms to be mutually
agreed upon by the parties. The Company may terminate this agreement at any time
upon 60 days written notice.

|_________________________________
|---------------------------------
|1                                
|                                 
|                                 
|                                 
|                                 
|                                 
|2                                

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46

In addition, as at May 31, 2010, the Company has committed to
fund up to a maximum of $3,000,000 in research and development activities under
a development agreement with a contract research organization. The timing of
expenditures and payments is largely at the discretion of the Company and the
agreements may be terminated at any time provided thirty (30) days notice is
provided. Accordingly, no obligations are included in the above table in related
to these agreements.

The Company periodically enters into research agreements with
third parties that include indemnification provisions customary in the industry.
These guarantees generally require the Company to compensate the other party for
certain damages and costs incurred as a result of claims arising from research
and development activities undertaken on behalf of the Company. In some cases,
the potential amount of future payments that could be required under these
indemnification provisions could be unlimited. These indemnification provisions
generally survive termination of the underlying agreement. The nature of the
indemnification obligations prevents the Company from making a reasonable
estimate of the maximum potential amount it could be required to pay.
Historically, the Company has not made any indemnification payments under such
agreements and no amount has been accrued in the accompanying financial
statements with respect to these indemnification obligations.

The Company has granted royalties to third parties based on
future commercial sales of certain cardiovascular uses of MC-1, aggregating up
to 3.9% on net sales. To date, no royalties are due and/or payable. The Company
does not have any royalty commitments on AGGRASTAT® nor on any future
commercial sales of TARDOXALTM for the indication currently being
pursued

ITEM 6. DIRECTORS, SENIOR MANAGEMENT AND
EMPLOYEES

A. Directors and Senior Management

Directors and Senior Management

The members of the board of directors and senior officers of
the Company including a brief biography of each are as follows:

Dr. Albert D. Friesen, Winnipeg, Manitoba, Canada -
Director, President, Chairman and Chief Executive Officer

The founder of Medicure Inc., Dr. Friesen holds a Ph.D. in
protein chemistry from the University of Manitoba. Dr. Friesen played a key role
in founding several health industry companies including Rh Pharmaceuticals
(acquired by Cangene Inc.), ABI Biotechnology (acquired by Apotex Inc.),
Viventia Biotech Inc., Genesys Pharma Inc. and KAM Scientific Inc. Dr. Friesen
has experience in the establishment of pharmaceutical production facilities and
has also managed and initiated the research and clinical development of several
pharmaceutical candidates. Dr. Friesen is a founder of the Industrial
Biotechnology Association of Canada (IBAC) and past Chairman of its board of
directors and former member of the Industrial Advisory Committee to the
Biotechnology Research Institute in Montreal. Dr. Friesen previously served as a
senior executive of other publicly-traded companies, including a position as
President of Viventia Biotech Inc. (formerly Novopharm Biotech Inc.) In addition
to his role with the Company, Dr. Friesen is currently the President and
Chairman of Genesys Venture Inc., a biotech incubator, based in Winnipeg. Dr.
Friesen provides his services to the Company through A.D. Friesen Enterprises
Ltd., his private consulting corporation. Dr. Friesen devotes substantially all
of his time to the Company. Date of birth is May 19, 1947

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47

Dr. Arnold Naimark, Winnipeg, Manitoba, Canada -
Director

Arnold Naimark, O.C., O.M., M.D., L.L.D., F.R.C.P.(C), F.R.S.C,
FCAHS,. has had a distinguished career in biomedical research, medicine and
higher education. He is President Emeritus and Dean of Medicine Emeritus of the
University of Manitoba, and is currently Director of the Universitys Centre for
the Advancement of Medicine. He also serves as Chair of the Health Canada
Science Advisory Board, Chair of Genome Prairie; as a director of CancerCare
Manitoba and member of the Research Council of the Canadian Institute for
Advanced Research and of the Alberta Cancer Board International Committee on
Research. Dr. Naimark was the founding Chair of the Canadian Health Services
Research Foundation and of the Canadian Biotechnology Advisory Committee and has
served on many other committees and boards, in such positions as Director of the
Canadian Imperial Bank of Commerce, Chair of the International Review Panel for
the Medical Research Council of Canada and President of the Association of
Universities and Colleges of Canada. Dr. Naimark has received several honorary
degrees and awards, including the Order of Canada and the Order of Manitoba.
Date of birth is August24, 1933.

Gerald P. McDole, Mississauga, Ontario, Canada, MBA 
Director

Mr. McDole is currently a director of several Canadian
healthcare companies. Mr. McDole is Past President of AstraZeneca Canada Inc. He
was named President and CEO of AstraZeneca Canada Inc.'s pharmaceutical
operations in 1999 and immediately led the merger of Astra Pharma and Zeneca
Pharma Inc. Prior to this, Mr. McDole was president and CEO of Astra Pharma
Inc., a position he assumed in 1985 after having served as Executive
Vice-President. Mr. McDole is a member of the Canadian Healthcare Marketing Hall
of Fame, and has been recognized by Canadian Healthcare Manager Magazine with
the Who's Who in Healthcare Award in the pharmaceutical category. In recognition
of Mr. McDole's outstanding contributions to the biotech and pharmaceutical
industries, the University of Manitoba recently established The Gerry McDole
Fellowship in Health Policy and Economic Growth. Date of birth is January 25,
1940.

Peter Quick, Mill Neck, New York, USA - Director

Mr. Quick currently serves on the Board of Directors for Fund
For The Poor, the Board of Governors of St. Francis Hospital on Long Island, and
the National Selection Committee for the Jefferson Scholars Program of the
University of Virginia. Mr. Quick is past President and CEO of Quick &
Reilly, Inc. and a former President of the American Stock Exchange. Mr. Quick
has also served on the Board of Governors of the Chicago Stock Exchange and as
Chairman of the Midwest Securities Trust Company. Mr. Quick received a
bachelor's degree in engineering from the University of Virginia and attended
Stanford University's Graduate School of Petroleum Engineering. He was a
lieutenant in the United States Navy, and served four years active duty. Date of
birth is February 11, 1956.

Dawson Reimer, MAES - Vice-President, Operations

Dawson Reimer proceeded from a Master's Degree in Economic
Development, University of Waterloo to be employed as a full-time consultant to
the Federal Department of Western Diversification. In this capacity, he
conducted entrepreneurship training and developed a business start-up training
program. Beginning in 1996, he served as Business Development/Investor Relations
with Genesys Pharma Inc. He was also project coordinator for the establishment
of the Company's new research and pharmaceutical production facility. In 1997,
he began conducting business activities for Genesys Venture Inc., a biotech
business incubator, where he has assisted numerous biotechnology ventures in
developing business plans, obtaining financing, and developing intellectual
property protection. In this capacity, Mr. Reimer became actively involved in
the Company at its inception and has been directly employed by the Company since
2001. Mr. Reimer is a son-in-law of Dr. Albert D. Friesen,
Director, President, Chairman and Chief Executive Officer. Date of birth is May
7, 1971.

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48

Eric Johnstone, CA  Chief Financial Officer

Eric has acted as The Companys Chief Financial Officer since
October 2009. His services are provided to the Company through a Management
Services Agreement with Genesys Venture Inc. (GVI). In addition to The
Company, Mr. Johnstone acts as Chief Financial Officer for Kane Biotech Inc. and
Miraculins Inc. and is the Vice-President, Finance of DiaMedica Inc. Previous to
his time at GVI and The Company, he was a Manager of Audit and Assurance at BDO
Dunwoody LLP, working with a broad cross-section of businesses and organizations
in Manitoba and Ontario. Eric is a Chartered Accountant and holds a Bachelor of
Commerce (Hons.) degree from the University of Manitoba. Date of birth is
January 15, 1977.

Management

Dr. Albert D. Friesen - Chairman, President, Chief Executive
Officer and Director: Dr. Friesen directs the overall business management of
the Company (see Directors and Senior Management under this item).

Dawson Reimer - Vice-President, Operations: Mr. Reimer
holds the responsibility of commercial operations and managing the internal
operations as well as certain other functional areas. (See Directors and Senior
Management under this item)

Eric Johnstone, CA - Chief Financial Officer and
Secretary: Mr. Johnstone is responsible for the Companys financial
management and accounting practices (see Directors and Senior Management under
this item).

Scientific Advisory Board

The Scientific Advisory Board is called on by the Companys
Management and Board from time to time to provide independent review of research
activities and work plans. At present and during the past year, the Companys
R&D activities have been minimal so no meetings were held but members of
Scientific Advisory Board remain available to be called on as deemed
appropriate. The members of the Scientific Advisory Board and a brief biography
of each are as follows:

Dr. Paul Armstrong - Chairperson

Dr. Armstrong, Chair of the Scientific Advisory Board, is
Professor in the Department of Medicine, University of Alberta in Edmonton. Dr.
Armstrong is an internationally recognized cardiologist and clinical
investigator with extensive expertise in the design and conduct of clinical
trials focused on acute ischemic syndromes and congestive heart failure. Dr.
Armstrong has published widely and served as a senior advisor to major
organizations and industry.

Dr. Stephen Hanessian

Dr. Hanessian is Professor, Department of Chemistry, University
of Montreal. Dr. Hanessian is one of North Americas most renowned medicinal
chemists with considerable experience in industry collaboration for the
discovery of new pharmaceuticals.

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49

Dr. Morris Karmazyn

Dr. Karmazyn is a Professor in the Department of Pharmacology
and Toxicology at the University of Western Ontario in London, Ontario. Dr.
Karmazyn is internationally recognized and has received numerous distinctions
for his research in the field of myocardial ischemia and ischemic reperfusion
injury.

Dr. Pierre Theroux

Dr. Theroux is Professor of Medicine at the University of
Montreal and Chief of the Coronary Care Unit at the Montreal Heart Institute.
Dr. Therouxs innovative work is widely recognized and he has contributed
extensively to the development of new treatments for acute ischemic heart
disease.

Dr. Jeffrey Weitz

Dr. Weitz is Professor of Medicine and Haematology at McMaster
University in Hamilton where he has contributed extensively to understanding the
role of thrombosis and its treatment in cardiovascular disease. Dr. Weitz also
brings a wealth of expertise in academic-industrial collaboration and
development of new products.

Dr. Trevor Hassell

Dr. Hassell is Adjunct Professor of Medicine at the University
of the West Indies, Barbados, and Consultant Physician and Cardiologist at the
Queen Elizabeth Hospital, also in Barbados. He is President-Elect of the
Inter-American Heart Foundation, former President of the Caribbean Cardiac
Society and founder, President and member of the Board of Directors of the Heart
Foundation of Barbados.

Dr. A. Michael Lincoff

Dr. Lincoff is an interventional cardiologist in the Cleveland
Clinic Department of Cardiovascular Medicine and a staff cardiologist in the
Joseph J. Jacobs Center for Thrombosis and Vascular Biology, Department of
Molecular Cardiology at the Cleveland Clinic Research Institute. Dr. Lincoffs
specialty interests focus on high-risk and complex coronary angioplasty,
preventing restenosis, treating acute coronary syndromes and acute myocardial
infarction, and developing antithrombotic therapy during coronary intervention.

B. Compensation

No compensation of any kind was paid to the directors and
executive officers of the Company during the year ended May 31, 2010, except for
stock-based compensation described in Item 6(E) below and as follows:

On October 1, 2001, a compensation agreement was entered into
between the Company and A.D. Friesen Enterprises Ltd., a corporation owned by
Dr. Friesen and subsequently amended on October 1, 2003, October 1, 2005,
October 1, 2006, and October 1, 2007. For the year ended May 31, 2010, the
Company paid A.D. Friesen Enterprises Ltd., $281,000 in consulting compensation,
including bonuses. Dr. Friesen is eligible for an annual bonus, if certain
objectives of the Company are met, as determined by the Board of Directors.

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50

Dawson Reimer serves the Company as Vice President, Operations
and received a salary of $135,000 payable in equal semi-monthly instalments in
fiscal 2010.

During the year ended May 31, 2010, the Company paid directors
a total of Nil (Year ended May 31, 2009: Nil; Year ended May 31, 2008: Nil; Year
ended May 31, 2007: Nil; Year ended May 31, 2006: Nil) for consulting fees.

While the Company has agreed to provide its directors $2,000
for each quarterly board meeting they personally attend ($1,000 via telephone),
and $1,500 for each quarterly executive compensation, nominating and corporate
governance committee meeting or audit and finance committee meeting they attend,
at present and for the duration of the 2010 fiscal year, due to the Companys
current financial position, the board has offered and committed not to request,
and has therefore not received, any compensation for their services as directors
.. The Company does not provide any cash compensation for its directors who are
also officers of the Company for their services as directors.

No pension, retirement fund and other similar benefits have
been set aside for the officers and directors of the Company.

C. Board Practices

The Board of Directors presently consists of four directors who
were elected at the Companys annual general meeting of the shareholders held on
November 27, 2009. Each director holds office until the next annual general
meeting of the Company or until his successor is elected or appointed, unless
his office is earlier vacated in accordance with the Articles of the Company, or
with the provisions of the Canada Business Companys Act. Dr. Albert D.
Friesen has served as a director of the Company since September 1997. Dr. Arnold
Naimark has served as a director of the Company since March 2000. Gerald McDole
has served as a director of the Company since January 2004. Peter Quick has
served as a director of the Company since November 2005.

Audit and Finance Committee

Pursuant to Section 171 of the Canada Business Companys
Act (the Act), the Company is required to have an Audit Committee.
As at the date hereof, the Audit and Finance Committee is comprised of three
independent directors: Gerald McDole (Chair), Dr. Arnold Naimark, and Peter
Quick. The relevant experience of each member is described above. (See Item 6.
Directors, Senior Management and Employees) Section 171(1) of the Act requires
the directors of a reporting corporation to elect from among their number a
committee composed of not fewer than three directors, of whom a majority must
not be officers or employees of the corporation or an affiliate of the
corporation. Section 171(3) of the Act provides that, before financial
statements are approved by the directors, they must be submitted to the audit
committee for review. Section 171(4) of the Act provides that the auditor must
be given notice of, and has the right to appear before and to be heard at, every
meeting of the audit committee, and must appear before the audit committee when
requested to do so by the committee. Finally, section 171(5) of the Act provides
that on the request of the auditor, the audit committee must convene a meeting
of the audit committee to consider any matters the auditor believes should be
brought to the attention of the directors or members.

Under the Sarbanes-Oxley Act of 2002, the independent auditor
of a public Company is prohibited from performing certain non-audit services.
The Audit and Finance Committee has adopted procedures and policies for the
pre-approval of non-audit services, as described in the audit committee charter.

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51

AUDIT AND FINANCE COMMITTEE CHARTER

GENERAL FUNCTIONS, AUTHORITY, AND ROLE

The purpose of the Audit and Finance Committee is to oversee
the accounting and financial reporting processes of the Company and the audits
of its financial statements, and thereby assist the Board in monitoring (1) the
integrity of the financial statements of the Company, (2) compliance by the
Company with ethical policies and legal and regulatory requirements related to
financial reporting, (3) the appointment, compensation, qualifications,
independence and performance of the Companys internal and external auditors,
(4) the performance of the Company's independent auditors, and (5) performance
of the Company's internal controls and financial reporting process.

The Audit and Finance Committee has the power to conduct or
authorize investigations into any matters within its scope of responsibilities,
with full access to all books, records, facilities and personnel of the Company,
its auditors and its legal advisors. In connection with such investigations or
otherwise in the course of fulfilling its responsibilities under this charter,
the Audit and Finance Committee has the authority to independently retain
special legal, accounting, or other consultants to advise it, and may request
any officer or employee of the Company, its independent legal counsel or
independent auditor to attend a meeting of the Audit and Finance Committee or to
meet with any members of, or consultants to, the Audit and Finance Committee.
The Audit and Finance Committee has the power to create specific sub-committees
with all of the power to conduct or authorize investigations into any matters
within the scope of the mandate of the sub-committee, with full access to all
books, records, facilities and personnel of the Company, its auditors and its
legal advisors.

The Company's independent auditor is ultimately accountable to
the Board of Directors and to the Audit and Finance Committee, who, as
representatives of the Company's shareholders, have the authority and
responsibility to evaluate the independent auditor, appoint and replace the
independent auditor, and to determine appropriate compensation for the
independent auditor. In the course of fulfilling its specific responsibilities
hereunder, the Audit and Finance Committee must maintain free and open
communication between the Company's independent auditors, Board of Directors and
Company management. The responsibilities of a member of the Audit and Finance
Committee are in addition to such member's duties as a member of the Board of
Directors.

While the Audit and Finance Committee has the responsibilities
and powers set forth in this charter, it is not the duty of the Audit and
Finance Committee to plan or conduct audits or to determine that the Company's
financial statements are complete, accurate, and in accordance with generally
accepted accounting principles. This is the responsibility of management and the
independent auditor. Nor is it the duty of the Audit and Finance Committee to
conduct investigations, to resolve disagreements, if any, between management and
the independent auditor or to assure compliance with laws and regulations and
the Companys Code of Ethics. Any responsibilities that the Audit and Finance
Committee has the power to act upon, may be recommended to the Board to act
upon.

MEMBERSHIP

The membership of the Audit and Finance Committee will be as
follows:

The Committee shall consist of a minimum of three members of
the Board of Directors, appointed from time to time, each of whom is
affirmatively confirmed as independent by the Board of Directors, with such
affirmation disclosed in the Company's annual Information Circular.

The Board will elect, by a majority vote, one member as
chairperson.

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52

The members of the Audit and Finance Committee will meet all
independence and financial literacy requirements of The American Stock Exchange,
The Toronto Stock Exchange, Rule 10A-3 of the Securities Exchange Act of 1934,
as amended, Multilateral Instrument 52-110 and the requirements of such other
securities exchange or quotations system or regulatory agency as may from time
to time apply to the Company.

A member of the Audit and Finance Committee may not, other than
in his or her capacity as a member of the Audit and Finance Committee, the Board
of Directors, or any other Board committee, accept any consulting, advisory, or
other compensatory fee from the Company, and may not be an affiliated person of
the Company or any subsidiary thereof.

RESPONSIBILITIES

The responsibilities of the Audit and Finance Committee shall
be as follows:

Frequency of Meetings

Meet quarterly or more often as may be deemed necessary or
appropriate in its judgment, either in person or telephonically.

The Audit and Finance Committee will meet with the independent
auditor at least quarterly, either in person or telephonically.

Reporting Responsibilities

Provide to the Board of Directors proper Committee minutes.

Report Committee actions to the Board of Directors with such
recommendations as the Committee may deem appropriate.

Charter Evaluation

Annually review and reassess the adequacy of this Charter and
recommend any proposed changes to the Board of Directors for approval.

Whistleblower Mechanism

Adopt and review annually a procedure through which employees
and others can anonymously inform the Audit and Finance Committee regarding any
concerns about the Company's accounting, internal accounting controls or
auditing matters. The procedure shall include responding to and the retention
of, any such complaints.

Legal Responsibilities

Perform such functions as may be assigned by law, by the
Company's certificate of incorporation, memorandum, articles or similar
documents, or by the Board of Directors.

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53

INDEPENDENT AUDITOR

Nominations

Nominates annually the independent auditor to be proposed for
shareholder approval.

Compensation and Evaluation

Approve the compensation of the independent auditor, evaluate
the performance of the independent auditor and, if so determined by the
Committee, replace the independent auditor.

Pre-approve all related party transactions, which are
transactions or loans between the Company and a related party involving goods,
services, or tangible or intangible assets that are (1) material to the Company
or the related party, or (2) unusual in their nature or conditions. A related
party includes an affiliate, major shareholder, officer, other key management
personnel or director of the Company, a Company controlled by any of those
parties or a family member of any of those parties.

Engagement Procedures for Audit and Non-audit Services

Approve in advance all audit services to be provided by the
independent auditor. Establish policies and procedures that establish a
requirement for approval in advance of the engagement of the independent auditor
to provide permitted non-audit services and to prohibit the engagement of the
independent auditor for any activities or services not permitted by any of the
Canadian provincial securities commissions, the SEC or any securities exchange
on which the Company's shares are traded including any of the following ten
types of non-audit services:

Bookkeeping or other services related to accounting records or
financial statements of the Company;

Financial information systems design and implementation
consulting services;

Appraisal or valuation services, fairness opinions, or
contributions-in-kind reports;

Actuarial services;

Internal audit outsourcing services;

Any management or human resources function;

Broker, dealer, investment advisor, or investment banking
services;

Legal services;

Expert services related to the auditing service; and

Any other service the Board of Directors determines is not
permitted.

Hiring Practices

Ensure that no individual who is, or in the past 3 years has
been, affiliated with or employed by a present or former auditor of the Company
or an affiliate, is hired by the Company as a senior officer until at least 3
years after the end of either the affiliation or the auditing relationship.

---

54

Independence Test

Take reasonable steps to confirm the independence of the
independent auditor, which shall annually include:

Ensuring receipt from the independent auditor of a formal
written statement delineating all relationships between the independent auditor
and the Company, consistent with the Independence Standards Board Standard No. 1
and related Canadian regulatory body standards;

Considering and discussing with the independent auditor any
relationships or services provided to the Company, including non-audit services,
that may impact the objectivity and independence of the independent auditor; and

As necessary, taking, or recommending that the Board of
Directors take, appropriate action to oversee the independence of the
independent auditor and evaluate whether it is appropriate to rotate the
independent auditor on a regular basis.

Audit and Finance Committee Meetings

Notify the independent auditor of every Audit and Finance
Committee meeting and permit the independent auditor to appear and speak at
those meetings.

At the request of the independent auditor, convene a meeting of
the Audit and Finance Committee to consider matters the auditor believes should
be brought to the attention of the directors or shareholders.

Keep minutes of its meetings and report to the Board for
approval of any actions taken or recommendations made.

Restrictions

Confirm with management and the independent auditor that no
restrictions are placed on the scope of the auditors' review and examination of
the Company's accounts.

OTHER PROFESSIONAL CONSULTING SERVICES

Engagement Review

As necessary, consider with management the rationale and
selection criteria for engaging professional consulting services firms.

Ultimate authority and responsibility to select, evaluate and
approve professional consulting services engagements.

AUDIT AND REVIEW PROCESS AND RESULTS

Scope

Consider, in consultation with the independent auditor, the
audit scope, staffing and planning of the independent auditor.

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55

Review Process and Results

Consider and review with the independent auditor the matters
required to be discussed by Statement on Auditing Standards No. 61, as the same
may be modified or supplemented from time to time.

Review and discuss with management and the independent auditor
at the completion of annual and quarterly examinations:

The Company's audited and unaudited financial statements and
related notes; The Company's MD&A and news releases related to financial
results; The independent auditor's audit of the financial statements and its
report thereon; Any significant changes required in the independent auditor's
audit plan; The appropriateness of the presentation of any non-GAAP related
financial information;

Any serious difficulties or disputes with management
encountered during the course of the audit; and

Other matters related to the conduct of the audit, which are to
be communicated to the Audit and Finance Committee under generally accepted
auditing standards.

Review the management letter delivered by the independent
auditor in connection with the audit.

Following such review and discussion, if so determined by the
Committee, recommend to the Board that the annual financial statements be
included in the Company's annual report.

Review, discuss with management and approve annual and interim
quarterly financial statements prior to public disclosure. The chairperson of
the Audit and Finance Committee may represent the entire Audit and Finance
Committee for purposes of this review.

Review and discuss with management and the independent auditor
the adequacy of the Company's internal accounting and financial controls that
management and the Board of Directors have established and the effectiveness of
those systems, and inquire of management and the independent auditor about
significant financial risks or exposures and the steps management has taken to
minimize such risks to the Company.

Meet separately with the independent auditor and management, as
necessary or appropriate, to discuss any matters that the Audit and Finance
Committee or any of these groups believe should be discussed privately with the
Audit and Finance Committee.

Review and discuss with management and the independent auditor
the accounting policies which may be viewed as critical, including all
alternative treatments for financial information within generally accepted
accounting principles that have been discussed with management, and review and
discuss any significant changes in the accounting policies of the Company and
industry accounting and regulatory financial reporting proposals that may have a
significant impact on the Company's financial reports.

Review with management and the independent auditor the effect
of regulatory and accounting initiatives as well as off-balance sheet
structures, if any, on the Company's financial statements.

---

56

Review with management and the independent auditor any
correspondence with regulators or governmental agencies and any employee
complaints or published reports which raise material issues regarding the
Company's financial statements or accounting policies.

Review with the Company's General Counsel legal matters that
may have a material impact on the financial statements, the Company's financial
compliance policies and any material reports or inquiries received from
regulators or governmental agencies related to financial matters.

SECURITIES REGULATORY FILINGS

Review filings with the Canadian provincial securities
commissions and the SEC and other published documents containing the Company's
financial statements.

Review, with management and the independent auditor, prior to
filing with regulatory bodies, the interim quarterly financial reports
(including related notes and MD&A) at the completion of any review
engagement or other examination. The chairperson of the Audit and Finance
Committee may represent the entire Audit and Finance Committee for purposes of
this review.

RISK ASSESSMENT

Meet periodically with management to review the Company's major
financial risk exposures and the steps management has taken to monitor and
control such exposures.

Assess risk areas and policies to manage risk including,
without limitation, environmental risk, insurance coverage and other areas as
determined by the Board of Directors from time to time.

Review and discuss with management, and approve changes to, the
Company's Corporate Treasury Policy.

ADOPTION OF AUDIT AND FINANCE COMMITTEE CHARTER

This charter was originally adopted by the Board of Directors
on August 23, 2004 and is reviewed and amended as necessary on an annual basis.

Executive Compensation, Nominating and Corporate
Governance Committee

The Executive Compensation, Nominating and Corporate Governance
Committee is responsible for determining the compensation of executive officers
of the Company. The current members of the Committee are Dr. Arnold Naimark
(Chair), Gerald McDole and Peter Quick, none of whom is a current or former
executive officer of the Company. The Committee meets at least once a year.

The Committee has developed a policy to govern the Company's
approach to corporate governance issues and provides a forum for concerns of
individual directors about matters not easily or readily discussed in a full
board meeting, e.g., the performance of management. The Committee ensures there
is a clear definition and separation of the responsibilities of the Board, the
Committees of the Board, the Chief Executive Officer and other management
employees. It also ensures there is a process in place for the orientation and
education of new directors and for continuing education of the Board. The
Committee also assesses the effectiveness of the Board and its committees on an
ongoing ad hoc basis. It also reviews at least annually the Company's
responsiveness to environmental impact, health and safety and other regulatory
standards.

---

57

The Committee reviews the objectives, performance and
compensation of the Chief Executive Officer at least annually and makes
recommendations to the Board for change. The Committee makes recommendations
based upon the Chief Executive Officers suggestions regarding the salaries and
incentive compensation for senior officers of the Company. The Committee also
reviews significant changes to compensation, benefits and human resources
policies and compliance with current human resource management practices, such
as pay equity, performance review and staff development. The Committee is
responsible for reviewing and recommending changes to the compensation of
directors as necessary.

The charter of the Executive Compensation, Nominating and
Corporate Governance Committee can be found on the Companys website at
www.medicure.com.

D. Employees

In addition to the individuals disclosed in Section A.
Directors and Senior Management of this item, the Company has 6 employees.
During the year ended May 31, 2010, the Company outsourced some of its general,
administrative and research activities.

E. Share Ownership

With respect to the persons referred to above in Section B,
Compensation, the following table discloses the number of shares (each share
possessing identical voting rights), stock options held and percent of the
shares outstanding held by those persons at May 31, 2010.

|Title of Class | Identity of Person or Group    | Amount Owned | Percentage of Class
|-------------- | ------------------------------ | ------------ | -------------------
|               |                                |              |                    
|Common shares  | Dr. Albert D.
      Friesen(1) | 9,621,699(1) | 7.38%              
|Common shares  | Dr. Arnold Naimark             | Nil          | Nil                
|Common shares  | Gerald P. McDole               | 10,000       | 0.01%              
|Common shares  | Peter Quick                    | Nil          | Nil                
|Common shares  | Eric Johnstone                 | Nil          | Nil                
|Common shares  | Dawson Reimer                  | 289,735      | 0.22%              

|(1) | Dr. Albert Friesen holds 2,837,500 shares personally or
      in an RRSP, a Canadian individual retirement plan. The rest of the shares
      are held by ADF Family Holding Corp., his wife Mrs. Leona M. Friesen, and
      CentreStone Ventures Limited Partnership Fund (the Fund). Dr. Friesen is
      the General Partner of the Fund.
|--- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

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58

Incentive Stock Options

The following table discloses the stock options beneficially
held by the aforementioned persons, as of May 31, 2010. The stock options are
for shares of Common Stock of the Company.

Name of Person
    Number of
      Shares Subject to Issuance
    Exercise Price
      per Share
    Expiry DateDr. Albert D. Friesen
    150,000 150,000
    $1.65 $1.63
    December 6, 2015 October 14, 2016Dr. Arnold Naimark
    35,000 110,000 50,000
      10,000
    $1.65 $0.98 $0.04
      $0.04
    December 6, 2015 December
      11, 2017 September 3, 2018 April 16, 2019Gerald P. McDole
    75,000 10,000 50,000
      10,000
    $1.65 $0.98 $0.04
      $0.04
    December 6, 2015 December
      11, 2017 September 3, 2018 April 16, 2019Peter Quick
    100,000 50,000 10,000
      50,000 10,000
    $1.65 $1.54 $0.98
      $0.04 $0.04
    December 6, 2015 January
      16, 2017 December 11, 2017 September 3, 2018 April 16, 2019Eric Johnstone
    nil
    n/a
    n/aDawson Reimer
    65,000 100,000 100,000
    $1.65 $1.63 $0.03
    December 6, 2015 October
      14, 2016 November 10, 2018


The Company has established an Incentive Stock Option Plan (the
Plan) for its directors, key officers, employees and consultants. Options
granted pursuant to the Plan will not exceed a term of ten years and are granted
at an option price and on other terms which the directors determine is necessary
to achieve the goal of the Plan and in accordance with regulatory requirements,
including those of the TSX Venture Exchange. Each option entitles the holder
thereof to purchase one (1) Common Share of the Company on the terms set forth
in the Plan and in such purchasers specific stock option agreement. The option
price may be at a discount to market price, which discount will not, in any
event, exceed that permitted by any stock exchange on which the Companys Common
Shares are listed for trading.

The number of Common Shares allocated to the Plan, the exercise
period for the options (not to exceed five years), and the vesting provisions
for the options will be determined by the board of directors of the Company from
time to time. The aggregate number of shares reserved for issuance under the
Plan, together with any other employee stock option plans, options for services
and employee stock purchase plans, will not exceed 10% of the issued and
outstanding Common Shares.

The Common Shares issued pursuant to the exercise of options,
when fully paid for by a participant, are not included in the calculation of
Common Shares allocated to or within the Plan. Should a participant cease to be
eligible due to the loss of corporate office (being that of an officer or
director) or employment, the option shall cease for varying periods not
exceeding 90 days. Loss of eligibility for consultants is regulated by specific
rules imposed by the directors when the option is granted to the appropriate
consultant. The Plan also provides that estates of deceased
participants can exercise their options for a period not exceeding one year
following death.

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59

ITEM 7. MAJOR SHAREHOLDERS AND RELATED PARTY
TRANSACTIONS

A. Major Shareholders

As of May 31, 2010, the following table sets forth the
beneficial ownership of the Company's common shares by each person known by the
Company to own beneficially more than 5% of the issued and outstanding common
shares of the Company. Information as to shares beneficially owned, directly or
indirectly, by each nominee or over which each nominee exercises control or
direction, not being within the knowledge of the Company, has been furnished by
the respective nominees individually. CDS & Company, Toronto, Ontario is a
clearing house that owns approximately 76,483,337 (58.7%) of common shares of
the Company on behalf of beneficial owners. The Company does not know the
majority of the ultimate beneficial owners of these common shares.

|Title of Class | Identity of Person or Group                      | Amount Owned | Percentage of Class
|-------------- | ------------------------------------------------ | ------------ | -------------------
|               |                                                  |              |                    
|Common shares  | Dr. Albert D.
      Friesen(2)Winnipeg, Manitoba | 9,621,699(1) | 7.38%              
|Common shares  | Dr. Lars Hoie London, England                    | 20,018,230   | 15.36%             

|Notes:
|------
|(1)   
|(2)   

As of April 27, 2009, there were approximately 6,860
shareholders of record worldwide. As of this date there were approximately 1,602
shareholders of record in the United States holding a total of 24,906,240 common
shares of the Company.

To the best of the Company's knowledge, it is not owned or
controlled, directly or indirectly, by another Company, by any foreign
government or by any other natural or legal person severally or jointly.

As of May 31, 2010, the total number of issued and outstanding
common shares of the Company beneficially owned by the directors and executive
officers of the Company as a group was 10,940,499 (or 8.40% of common shares).

To the best of the Company's knowledge, there are no
arrangements, the operation of which at a subsequent date will result in a
change in control of the Company.

The major shareholders do not have any special voting rights.

B. Related Party Transactions

Other than as set forth below, management of the Company is not
aware of any material interest, direct or indirect, of any director or officer
of the Company, any person beneficially owning, directly or indirectly, more
than 10% of the Companys voting securities, or any associate or affiliate of
any such person in any transaction within the last three years or in any
proposed transaction which in either case has materially affected or will
materially affect the Company or its subsidiaries.

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60

On October 1, 2001, a two-year consulting contract was entered
into with A.D. Friesen Enterprises Ltd., a corporation owned by Dr. Friesen.
This agreement, which was subsequently amended on February 1, 2002, paid A.D.
Friesen Enterprises Ltd. an annual salary of $150,000 payable in monthly
instalments. On October 1, 2003 a new two year consulting contract was entered
into with A.D. Friesen Enterprises Ltd. for an annual salary of $175,000. On
October 1, 2005, a one-year consulting contract was entered into with A.D.
Friesen Enterprises Ltd. for an annual salary of $200,000. On October 1, 2006, a
two-year consulting contract was entered into with A.D. Friesen Enterprises Ltd.
for an annual salary of $250,000. On October 1, 2007, a consulting contract was
entered into with A.D. Friesen Enterprises Ltd. for an annual salary of
$275,000. The consulting contract expired on December 31, 2008. This salary is
reviewed annually by the Board. Dr. Friesen is also eligible for grants of
incentive stock options and bonuses, if certain objectives between the Board and
Dr. Friesen are met, as determined by the Board. During the year ended May 31,
2010, the Company paid a total of $281,000 to A.D. Friesen Enterprises Ltd.
During the year ended May 31, 2009 the Company paid a total of $281,000 to A.D.
Friesen Enterprises Ltd. During the year ended May 31, 2008, the Company paid a
total of $272,249 to A.D. Friesen Enterprises Ltd.

Dr. Friesen, a director, the Chairman, the President and the
Chief Executive Officer of the Company also owns a leasing company, Waverley
Business and Science Centre Inc. which entered into a lease with the Company as
of March 1, 2002. The lease agreement was subsequently amended on March 15,
2005. Pursuant to this agreement, the Company leased approximately 4,000 square
feet of office space from Waverley Business and Science Centre Inc. for minimum
annual rental payments of $44,264, with additional overhead payable under the
lease dependant on usage. The lease terminated effective October 31, 2010.
During the fiscal year 2010, $28,754 was paid for base and additional rent.
During fiscal 2009, $69,012 was paid for base and additional rent. During fiscal
2008, $69,012 was paid for base and additional rent.

Dr. Friesen, a director, the Chairman, the President and the
Chief Executive Officer of the Company is also the majority shareholder in a
management service company, Genesys Venture Inc. which entered into a management
service agreement with the Company as of October 1, 2010. The Chief Financial
Officer's services, intellectual property management, accounting, payroll, human
resources, and information technology are provided pursuant to this agreement.
During fiscal 2010, $175,000 was paid in accordance with the terms of this
agreement.

Dr. Friesen, a director, the Chairman, the President and the
Chief Executive Officer of the Company also owns a clinical research
organization, GVI Clinical Development Solutions Inc. (GVI CDS) which entered
into the following clinical research contracts with the Company;

|Nature of Agreement                           | Effective Date | Terms                                                                                                      
|--------------------------------------------- | -------------- | -----------------------------------------------------------------------------------------------------------
|Regulatory affairs support                    | June 22, 2009  | Services provided as needed.                                                                               
|Pharmacovigilance and medical affairs support | August 1, 2009 | Monthly retainer of $4,000, plus hourly
      charges for pharmacovigilance services outside base services.
|Quality assurance support                     | June 1, 2010   | Services provided as needed.                                                                               
|AGGRASTAT®clinical trial management           | May 1, 2010    | Services provided for on an hourly fee
      basis under terms of the contract.                            

During the fiscal 2010, $88,918 was paid to GVI CDS.

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61

C. Interests of Experts and Counsel

Not applicable

ITEM 8. FINANCIAL INFORMATION

A. Consolidated Statements or Other Financial Information

Financial Statements

Included in Item 17 hereto are the consolidated financial
statements of the Company for the years ended May 31, 2010, 2009 and 2008. The
consolidated financial statements including related notes are accompanied by the
report of the Companys independent registered public accounting firm, KPMG LLP.

Legal Proceedings

There are no legal or arbitration proceedings, including those
relating to bankruptcy, receivership or similar proceedings and those involving
any third party, which may have, or have had in the recent past, significant
effects on the Companys financial position or profitability. There are no
significant legal proceedings to which the Company is a party, nor to the best
of the knowledge of the Companys management are any legal proceedings
contemplated.

Dividend Policy

The Company has not paid dividends in the past and it has no
present intention of paying dividends on its shares as it anticipates that all
available funds will be invested to finance the growth of its business. The
directors of the Company will determine if and when dividends should be declared
and paid in the future based upon the Companys financial position at the
relevant time. All of the Companys Shares are entitled to an equal share of any
dividends declared and paid.

ITEM 9. THE OFFERING AND LISTING

A. Listing Details

The Company's common shares are listed and traded on NEX board
of the TSX Venture Exchange (NEX) under the symbol MPH.H. Prior to March 26,
2010, The Companys shares traded on the Toronto Stock Exchange. The historical
trading data for the common shares of the Company on the above-mentioned
exchanges is set out below.

|                         | TSX/NEX  | TSX/NEX | Amex(1)    | Amex(1)
|------------------------ | -------- | ------- | ---------- | -------
|Fiscal Period/Year Ended | High ($) | Low ($) | High ($US) | Low    
|                         |          |         |            | ($US)  
|May 31, 2010             | 0.06     | 0.01    | (2)        | (2)    
|May 31, 2009             | 0.06     | 0.02    | (2)        | (2)    
|May 31, 2008             | 1.70     | 0.06    | 1.64       | 0.05   
|May 31, 2007             | 1.88     | 1.10    | 1.70       | 0.91   
|May 31, 2006             | 2.37     | 0.83    | 2.07       | 0.66   

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62

|Fiscal Quarter Ended |      |      |  | 
|-------------------- | ---- | ---- |  | 
|                     |      |      |  | 
|May 31, 2010         | 0.04 | 0.02 |  | 
|February 28, 2010    | 0.06 | 0.02 |  | 
|November 30, 2009    | 0.05 | 0.01 |  | 
|August 30, 2009      | 0.02 | 0.01 |  | 
|May 31, 2009         | 0.04 | 0.03 |  | 
|February 28, 2009    | 0.04 | 0.02 |  | 
|November 30, 2008    | 0.06 | 0.02 |  | 
|August 31, 2008      | 0.05 | 0.02 |  | 
|                     |      |      |  | 
|Month                |      |      |  | 
|                     |      |      |  | 
|August 2010          | 0.02 | 0.01 |  | 
|July 2010            | 0.02 | 0.01 |  | 
|June 2010            | 0.03 | 0.02 |  | 
|May 2010             | 0.02 | 0.01 |  | 
|April 2010           | 0.03 | 0.01 |  | 
|March 2010           | 0.02 | 0.01 |  | 

|Note: |                                                                                         
|----- | ----------------------------------------------------------------------------------------
|(1)   | The Company commenced trading on the American
      Stock Exchange on February 17, 2004.
|(2)   | The Company ceased trading on the American
      Stock Exchange on July 3, 2008.        

C. Markets

The Company's common shares commenced trading on the Toronto
Stock Exchange on March 15, 2002 and on the American Stock Exchange on February
17, 2004. The Companys shares ceased trading on the Amex effective July 3, 2008
and transferred from the Toronto Stock Exchange to the NEX board of the TSX
Venture Exchange on March 26, 2010.

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63

ITEM 10. ADDITIONAL INFORMATION

A. Share Capital

Not applicable

B. Memorandum and Articles of Association

1. Objects and Purposes of the Company

The Memorandum of the Company places no restrictions upon the
Companys objects and purposes.

2. Directors

Under applicable Canadian law, the directors and officers of
the Company, in exercising their powers and discharging their duties, must act
honestly and in good faith with a view to the best interests of the Company. The
directors and officers must also exercise the care, diligence and skill that a
reasonably prudent person would exercise in comparable circumstances.

Section 4.14 of By-Law No.1 of the Company (the By-Law)
provides that a director shall not be disqualified by reason of his office from
contracting with the Company or a subsidiary thereof. Subject to the provisions
of the Canada Business Companys Act(the Act), a director shall not by
reason only of his office be accountable to the Company or its shareholders for
any profit or gain realized from a contract or transaction in which he has an
interest. Such contract or transaction shall not be voidable by reason only of
such interest, or by reason only of the presence of a director so interested at
a meeting, or by reason only of his presence being counted in determining a
quorum at a meeting of the directors at which such a contract or transaction is
approved, provided that a declaration and disclosure of such interest shall have
been made at the time and in the manner prescribed by section 120 of the Act,
and the director so interested shall have refrained from voting as a director on
the resolution approving the contract or transaction (except as permitted by the
Act) and such contract shall have been reasonable and fair to the Company and
shall have been approved by the directors or shareholders of the Company as
required by section 120 of the Act.

Section 4.01 of the By-Law states that the exact number of
directors to form the board shall be determined from time to time by the
directors of the Company entitled to vote at regular meetings. A quorum of the
board shall be a majority of the board. No business shall be transacted at a
meeting unless a quorum is present.

Section 3.01 of the By-Law states that the board may, without
the authorization of the shareholders:

|i)   | borrow money upon the credit of the Company;                                                                                                                                                       
|---- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|ii)  | issue, reissue, sell or pledge debt obligations of the
      Company, including bonds, debentures, notes or other evidences of
      indebtedness or guarantees, whether secured or unsecured;     
|iii) | subject to section 44 of the Act, give a guarantee on
      behalf of the Company to secure performance of an obligation of any
      person; and                                                  
|iv)  | mortgage, hypothecate, pledge or otherwise create a
      security interest in all or any property of the Company, owned or
      subsequently acquired, to secure any obligation of the
  Company.

The borrowing powers of the directors can be varied by amending
the By-Law of the Company.

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64

There is no provision in the By-Law imposing a requirement for
retirement or non-retirement of directors under an age limit requirement.

Section 4.02 states that a director need not be a shareholder
to be qualified as a director.

3. Shares

The Articles of the Company provide that the Company is
authorized to issue an unlimited number of shares designated as Common Shares,
Class A Common Shares and Preferred Shares. Except for meetings at which only
holders of another specified class or series of shares of the Company are
entitled to vote separately as a class or series, each holder of the Common and
Class A shares is entitled to receive notice of, to attend and to vote at all
meetings of the shareholders of the Company. Subject to the rights, privileges,
restrictions and conditions attached to any other class of shares of the
Company, the holders of the Common and Class A shares are also entitled to
receive dividends if, as and when declared by the directors of the Company and
are entitled to share equally in the remaining property of the Company upon
liquidation, dissolution or winding-up of the Company.

The Preferred Shares may from time to time be issued in one or
more series and, subject to the following provisions, and subject to the sending
of articles of amendment in respect thereof, the directors may fix from time to
time and before issue a series of Preferred Shares, the number of shares which
are to comprise that series and the designation, rights, privileges,
restrictions and conditions to be attached to that series of Preferred Shares
including, without limiting the generality of the foregoing, the rate or amount
of dividends or the method of calculating dividends, the dates of payment of
dividends, the redemption, purchase and/or conversion, and any sinking fund or
other provisions.

The Preferred Shares of each series shall, with respect to the
payment of dividends and the distribution of assets or return of capital in the
event of liquidation, dissolution or winding-up of the Company, whether
voluntary or involuntary, or any other return of capital or distribution of the
assets of the Company among its shareholders for the purpose of winding-up its
affairs, rank on a parity with the Preferred Shares of every other series and be
entitled to preference over the Common and Class A Common Shares and over any
other shares of the Company ranking junior to the Preferred Shares. The
Preferred Shares of any series may also be given other preferences, not
inconsistent with these articles, over the Common Shares and Class A Common
Shares and any other shares of the Company ranking junior to the Preferred
Shares of a series as may be fixed in accordance with terms outlined above.

If any cumulative dividends or amounts payable on the return of
capital in respect of a series of Preferred Shares are not paid in full, all
series of Preferred Shares shall participate rateably in respect of accumulated
dividends and return of capital.

Unless the directors otherwise determine in the articles of
amendment designating a series of Preferred Shares, the holder of each share or
a series of Preferred Shares shall not, as such, be entitled to receive notice
of or vote at any meeting of shareholders, except as otherwise specifically
provided in the Act.

4. Rights of Shareholders

Under the Act, shareholders of the Company are entitled to
examine, during its usual business hours, the Companys articles and by-laws,
notices of directors and change of directors, any unanimous shareholder
agreements, the minutes of meetings and resolutions of shareholders and the list
of shareholders.

Shareholders of the Company may obtain a list of shareholders
upon payment of a reasonable fee and sending an affidavit to the Company or its
transfer agent stating, among other things, that the list of shareholders will not be used by any person except in
connection with an effort to influence the voting of shareholders of the
Company, an offer to acquire shares of the Company or any other matter relating
to the affairs of the Company.

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65

Under the Act, shareholders of the Company may apply to a court
having jurisdiction directing an investigation to be made of the Company. If it
appears to the court that the formation, business or affairs of the Company were
conducted for fraudulent or unlawful purposes, or that the powers of the
directors were exercised in a manner that is oppressive or unfairly disregards
the interests of the shareholders, the court may order an investigation to be
made of the Company.

To change the rights of holders of stock, where such rights are
attached to an issued class or series of shares, requires the consent by a
separate resolution of the holders of the class or series of shares, as the case
may be, requiring a majority of two-thirds of the votes cast.

The Company is organized under the laws of Canada. The majority
of the Companys directors, officers, and affiliates of the Company, as well as
the experts named in this registration statement, are residents of Canada and,
to the best of the Companys knowledge, all or a substantial portion of their
assets and all of the Companys assets are located outside of the United States.
As a result, it may be difficult for shareholders of the Company in the United
States to effect service of process on the Company or these persons above within
the United States, or to realize in the United States upon judgments rendered
against the Company or such persons. Additionally, a shareholder of the Company
should not assume that the courts of Canada (i) would enforce judgments of U.S.
courts obtained in actions against the Company or such persons predicated upon
the civil liability provisions of the U.S. federal securities laws or other laws
of the United States, or (ii) would enforce, in original actions, liabilities
against the Company or such persons predicated upon the U.S. federal securities
laws or other laws of the United States.

Laws in the United States and judgments of U.S. courts would
generally be enforced by a court of Canada unless such laws or judgments are
contrary to public policy in Canada, are or arise from foreign penal laws or
laws that deal with taxation or the taking of property by a foreign government
and are not in compliance with applicable laws in Canada regarding the
limitation of actions. Further, a judgment obtained in a U.S. court would
generally be recognized by a court of Canada, except under the following
examples:

|i)   | the judgment was rendered in a U.S. court that had no
      jurisdiction according to applicable laws in Canada;                                                                                                                                                                                                      
|---- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|ii)  | the judgment was subject to ordinary remedy (appeal,
      judicial review and any other judicial proceeding which renders the
      judgment not final, conclusive or enforceable under the laws of the
      applicable state) or not final, conclusive or enforceable under the laws
      of the applicable state;
|iii) | the judgment was obtained by fraud or in any manner
      contrary to natural justice or rendered in contravention of fundamental
      principles of procedure; and                                                                                                                                                  
|iv)  | a dispute between the same parties, based on the same
      subject matter has given rise to a judgment rendered in a court of Canada
      or has been decided in a third country and the judgment meets the
      necessary conditions for recognition in a court of
  Canada.                                      

5. Meetings

Subject to the provisions of the Act, the annual general
meeting of the shareholders shall be on such date in each year as the board of
directors may determine, and a special meeting of the shareholders may be
convened at any time by order of the President or by the board on their own
motion or on the requisition of shareholders as provided for in the Act. Notice
of the time and place of each meeting of shareholders shall be given not less
than 21 days nor more than 60 days before the date of the meeting to each
director and shareholder.

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66

A meeting of shareholders may be held without
notice at any time and at any place provided a waiver of notice is obtained in
accordance with section 136 of the Act. The quorum for the transaction of
business at meetings of the shareholders shall consist of not less than one (1)
shareholder present or represented by proxy and holding in all not less than
five (5%) percent of the issued capital of the Company carrying voting rights.
At any meeting of shareholders, every person shall be entitled to vote who, at
the time of the taking of a vote (or, if there is a record date for voting, at
the close of business on such record date) is entered in the register of
shareholders as the holder of one or more shares carrying the right to vote at
such meeting, subject to the provisions of the Act.

6. Ownership of Securities

There are no limitations on the right to own securities,
imposed by foreign law or by the By-Law or other constituent document of the
Company.

7. Change in Control of Company

No provision of the Companys articles of association, charter
or By-Law would have the effect of delaying, deferring, or preventing a change
in control of the Company, and operate only with respect to a merger,
acquisition or corporate restructuring of the Company or any of its
subsidiaries. The Company does have a shareholder rights plan as outlined in
Item 3.D  Risk Factors.

8. Ownership Threshold

The Manitoba and Ontario Securities Acts provide that a
person that has direct or indirect beneficial ownership of, control or direction
over, or a combination of direct or indirect beneficial ownership of, and
control or direction over, securities of the issuer carrying more than 10% of
the voting rights attached to all the issuer's outstanding voting securities
must, within 10 days of becoming an "insider", file an insider report in the
required form effective the date on which the person became an insider,
disclosing any direct or indirect beneficial ownership of, or control or
direction over, securities of the reporting issuer. The Manitoba and Ontario
Securities Acts also provide for the filing of a report by an "insider"
of a reporting issuer who acquires or transfers securities of the issuer. This
insider report must be filed within 5 days after the change takes place.

The U.S. rules governing the ownership threshold above which
shareholder ownership must be disclosed are more stringent than those discussed
above. Section 13 of the Exchange Act imposes reporting requirements on persons
who acquire beneficial ownership (as such term is defined in the Rule 13d-3
under the Exchange Act) of more than 5 per cent of a class of an equity security
registered under Section 12 of the Exchange Act. In general, such persons must
file, within 10 days after such acquisition, a report of beneficial ownership
with the Securities and Exchange Commission containing the information
prescribed by the regulations under Section 13 of the Exchange Act. This
information is also required to be sent to the issuer of the securities and to
each exchange where the securities are traded.

C. Material Contracts

The following are the material contracts of the Company, other
than those mentioned elsewhere in this Form, to which the Company or any member
of the group is a party, for the two years immediately preceding publication of
this registration statement.

| | a) | Management services agreement with Genesys Venture Inc.,
      dated October 1, 2010
| | -- | ------------------------------------------------------------------------------------

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67

D. Exchange Controls

There is no law or government decree of regulation in Canada
that restricts the export or import of capital, or that affects the remittance
of dividends, interest or other payments to a non-resident holder of Common
Shares, other than withholding tax requirements. See "Item 7 Taxation."

There is no limitation imposed by Canadian law or by the
articles or other charter documents of the Company on the right of a
non-resident to hold or vote the Common Shares or the Class A common shares of
the Company, other than as provided in the Investment Canada Act, as amended
(the "Investment Act").

The Investment Act generally prohibits implementation of a
reviewable investment by an individual, government or agency thereof,
corporation, partnership, trust or joint venture that is a "non-Canadian" as
defined in the Investment Act (a "non-Canadian"), unless, after review the
Minister responsible for the Investment Act is satisfied that the investment is
likely to be of net benefit to Canada. If an investment by a non-Canadian is not
a reviewable investment, it nevertheless requires the filing of a short notice
which may be given at any time up to 30 days after the implementation of the
investment.

An investment in Common Shares of the Company by a non-Canadian
that is a "WTO investor" (an individual or other entity that is a national of,
or has the right of permanent residence in, a member of the World Trade
Organization, current members of which include the European Community, Germany,
Japan, Mexico, the United Kingdom and the United States, or a WTO
investor-controlled entity, as defined in the Investment Act) would be
reviewable under the Investment Act if it were an investment to acquire direct
control, through a purchase of assets or voting interests, of the Company and
the value of the assets of the Company equalled or exceeded $184 million, the
threshold established for 1999, as indicated on the financial statements of the
Company for its fiscal year immediately preceding the implementation of the
investment. In subsequent years, such threshold amount may be increased or
decreased in accordance with the provisions of the Investment Act.

An investment in Common Shares of the Company by a
non-Canadian, other than a WTO investor, would be reviewable under the
Investment Act if it were an investment to acquire direct control of the Company
and the value of the assets were $5.0 million or more, as indicated on the
financial statements of the Company for its fiscal year immediately preceding
the implementation of the investment.

A non-Canadian, whether a WTO investor or otherwise, would
acquire control of the Company for the purposes of the Investment Act if he, she
or it acquired a majority of the Common Shares of the Company or acquired all or
substantially all of the assets used in conjunction with the Company's business.
The acquisition of less than a majority, but one-third or more of the Common
Shares of the Company, would be presumed to be an acquisition of control of the
Company unless it could be established that the Company was not controlled in
fact by the acquirer through the ownership of the Common Shares.

The Investment Act would not apply to certain transactions in
relation to Common Shares of the Company, including:

| | (a) | an acquisition of Common Shares of the Company by any
      person if the acquisition were made in the ordinary course of that
      person's business as a trader or dealer in securities;                                            
| | --- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |     |                                                                                                                                                                                                                                        
| | (b) | an acquisition of control of the Company in connection
      with the realization of security granted for a loan or other financial
      assistance and not for any purpose related to the provisions of the
      Investment Act; and

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68

| | (c) | an acquisition of control of the Company by reason of an
      amalgamation, merger, consolidation or corporate reorganization following
      which the ultimate direct or indirect control in fact of the Company,
      through the ownership of voting interests, remains
  unchanged.
| | --- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

E. Taxation

U.S. Federal Income Tax Consequences

The following is a summary of the anticipated material U.S.
federal income tax consequences to a U.S. Holder (as defined below) arising from
and relating to the acquisition, ownership, and disposition of common shares of
(Common Shares).

This summary is for general information purposes only and does
not purport to be a complete analysis or listing of all potential U.S. federal
income tax consequences that may apply to a U.S. Holder as a result of the
acquisition, ownership, and disposition of Common Shares. In addition, this
summary does not take into account the individual facts and circumstances of any
particular U.S. Holder that may affect the U.S. federal income tax consequences
of the acquisition, ownership, and disposition of Common Shares. Accordingly,
this summary is not intended to be, and should not be construed as, legal or
U.S. federal income tax advice with respect to any U.S. Holder. Each U.S. Holder
should consult its own financial advisor, legal counsel, or accountant regarding
the U.S. federal income, U.S. state and local, and foreign tax consequences of
the acquisition, ownership, and disposition of Common Shares.

Scope of this Summary

Authorities

This summary is based on the Internal Revenue Code of 1986, as
amended (the Code), Treasury Regulations (whether final, temporary, or
proposed), published rulings of the Internal Revenue Service (the IRS),
published administrative positions of the IRS, the Convention Between Canada and
the United States of America with Respect to Taxes on Income and on Capital,
signed September 26, 1980, as amended (the Canada-U.S. Tax Convention), and
U.S. court decisions that are applicable and, in each case, as in effect and
available, as of the date of this Annual Report. Any of the authorities on which
this summary is based could be changed in a material and adverse manner at any
time, and any such change could be applied on a retroactive basis. This summary
does not discuss the potential effects, whether adverse or beneficial, of any
proposed legislation that, if enacted, could be applied on a retroactive basis.

U.S. Holders

For purposes of this summary, a U.S. Holder is a beneficial
owner of Common Shares that, for U.S. federal income tax purposes, is (a) an
individual who is a citizen or resident of the U.S., (b) a corporation, or any
other entity classified as a corporation for U.S. federal income tax purposes,
that is created or organized in or under the laws of the U.S. or any state in
the U.S., including the District of Columbia, (c) an estate if the income of
such estate is subject to U.S. federal income tax regardless of the source of
such income, or (d) a trust if (i) such trust has validly elected to be treated
as a U.S. person for U.S. federal income tax purposes or (ii) a U.S. court is
able to exercise primary supervision over the administration of such trust and
one or more U.S. persons have the authority to control all substantial decisions
of such trust.

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69

Non-U.S. Holders

For purposes of this summary, a non-U.S. Holder is a
beneficial owner of Common Shares other than a U.S. Holder. This summary does
not address the U.S. federal income tax consequences of the acquisition,
ownership, and disposition of Common Shares to non-U.S. Holders. Accordingly, a
non-U.S. Holder should consult its own financial advisor, legal counsel, or
accountant regarding the U.S. federal income, U.S. state and local, and foreign
tax consequences (including the potential application of and operation of any
tax treaties) of the acquisition, ownership, and disposition of Common Shares.

U.S. Holders Subject to Special U.S. Federal Income Tax
Rules Not Addressed

This summary does not address the U.S. federal income tax
consequences of the acquisition, ownership, and disposition of Common Shares to
U.S. Holders that are subject to special provisions under the Code, including
the following U.S. Holders: (a) U.S. Holders that are tax-exempt organizations,
qualified retirement plans, individual retirement accounts, or other
tax-deferred accounts; (b) U.S. Holders that are financial institutions,
insurance companies, real estate investment trusts, or regulated investment
companies; (c) U.S. Holders that are dealers in securities or currencies or U.S.
Holders that are traders in securities that elect to apply a mark-to-market
accounting method; (d) U.S. Holders that have a functional currency other than
the U.S. dollar; (e) U.S. Holders that are liable for the alternative minimum
tax under the Code; (f) U.S. Holders that own Common Shares as part of a
straddle, hedging transaction, conversion transaction, constructive sale, or
other arrangement involving more than one position; (g) U.S. Holders that
acquired Common Shares in connection with the exercise of employee stock options
or otherwise as compensation for services; (h) U.S. Holders that hold Common
Shares other than as a capital asset within the meaning of Section 1221 of the
Code; (i) U.S. Holders who are U.S. expatriates or former long-term residents of
the United States.; or (j) U.S. Holders that own (directly, indirectly, or by
attribution) 10% or more of the total combined voting power of the outstanding
shares of the Company. U.S. Holders that are subject to special provisions under
the Code, including U.S. Holders described immediately above, should consult
their own financial advisor, legal counsel or accountant regarding the U.S.
federal income, U.S. state and local, and foreign tax consequences of the
acquisition, ownership, and disposition of Common Shares.

If an entity that is classified as a partnership (or
pass-through entity) for U.S. federal income tax purposes holds Common Shares,
the U.S. federal income tax consequences to such partnership (or pass-through
entity) and the partners of such partnership (or owners of such pass-through
entity) generally will depend on the activities of the partnership (or
pass-through entity) and the status of such partners (or owners). Partners of
entities that are classified as partnerships (or owners of pass-through
entities) for U.S. federal income tax purposes should consult their own
financial advisor, legal counsel or accountant regarding the U.S. federal income
tax consequences of the acquisition, ownership, and disposition of Common
Shares.

Tax Consequences Other than U.S. Federal Income Tax
Consequences Not Addressed

This summary does not address the U.S. state and local, U.S.
federal estate and gift, or foreign tax consequences to U.S. Holders of the
acquisition, ownership, and disposition of Common Shares. Each U.S. Holder
should consult its own financial advisor, legal counsel, or accountant regarding
the U.S. state and local, U.S. federal estate and gift, and foreign tax
consequences of the acquisition, ownership, and disposition of Common Shares.
(See TaxationCanadian Federal Income Tax Consequences above).

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U.S. Federal Income Tax Consequences of the Acquisition,
Ownership, and Disposition of Common Shares

Distributions on Common Shares

General Taxation of Distributions

A U.S. Holder that receives a distribution, including a
constructive distribution, with respect to the Common Shares will be required to
include the amount of such distribution in gross income as a dividend (without
reduction for any Canadian income tax withheld from such distribution) to the
extent of the current or accumulated earnings and profits of the Company. To
the extent that a distribution exceeds the current and accumulated earnings and
profits of the Company, such distribution will be treated (a) first, as a
tax-free return of capital to the extent of a U.S. Holders tax basis in the
Common Shares and, (b) thereafter, as gain from the sale or exchange of such
Common Shares. (See more detailed discussion at Disposition of Common Shares
below).

Reduced Tax Rates for Certain
Dividends

For taxable years beginning before January 1, 2011, a dividend
paid by the Company generally will be taxed at the preferential tax rates
applicable to long-term capital gains if (a) the Company is a qualified foreign
corporation (as defined below), (b) the U.S. Holder receiving such dividend is
an individual, estate, or trust, and (c) such dividend is paid on Common Shares
that have been held by such U.S. Holder for at least 61 days during the 121-day
period beginning 60 days before the ex-dividend date. The Company generally
will be a qualified foreign corporation under Section 1(h)(11) of the Code (a
QFC) if (a) the Company is eligible for the benefits of the Canada-U.S. Tax
Convention, or (b) the Common Shares are readily tradable on an established
securities market in the U.S. However, even if the Company satisfies one or more
of such requirements, the Company will not be treated as a QFC if the Company is
a passive foreign investment Company (as defined below) for the taxable year
during which the Company pays a dividend or for the preceding taxable year.

As discussed below, the Company does not believe that it was a
passive foreign investment Company for the taxable year ended May 31, 2010,
and does not expect that it will be a passive foreign investment Company for
the taxable year ending May 31, 2011. (See more detailed discussion at
Additional Rules that May Apply to U.S. Holders below). However, there can be
no assurance that the IRS will not challenge the determination made by the
Company concerning its passive foreign investment Company status or that the
Company will not be a passive foreign investment Company for the current
taxable year or any subsequent taxable year. Accordingly, although the Company
expects that it may be a QFC for the taxable year ending May 31, 2011, there can
be no assurances that the IRS will not challenge the determination made by the
Company concerning its QFC status, that the Company will be a QFC for the
taxable year ending May 31, 2011 or any subsequent taxable year, or that the
Company will be able to certify that it is a QFC in accordance with the
certification procedures issued by the Treasury and the IRS.

If the Company is not a QFC, a dividend paid by the Company to
a U.S. Holder, including a U.S. Holder that is an individual, estate, or trust,
generally will be taxed at ordinary income tax rates (and not at the
preferential tax rates applicable to long-term capital gains). The dividend
rules are complex, and each U.S. Holder should consult its own financial
advisor, legal counsel, or accountant regarding the dividend rules.

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71

Distributions Paid in Foreign
Currency

The amount of a distribution paid to a U.S. Holder in foreign
currency generally will be equal to the U.S. dollar value of such distribution
based on the exchange rate applicable on the date of receipt. A U.S. Holder that
does not convert foreign currency received as a distribution into U.S. dollars
on the date of receipt generally will have a tax basis in such foreign currency
equal to the U.S. dollar value of such foreign currency on the date of receipt.
Such a U.S. Holder generally will recognize ordinary income or loss on the
subsequent sale or other taxable disposition of such foreign currency (including
an exchange for U.S. dollars).

Dividends Received Deduction

Dividends paid on the Common Shares generally will not be
eligible for the dividends received deduction. The availability of the
dividends received deduction is subject to complex limitations that are beyond
the scope of this discussion, and a U.S. Holder that is a corporation should
consult its own financial advisor, legal counsel, or accountant regarding the
dividends received deduction.

Disposition of Common Shares

A U.S. Holder will recognize gain or loss on the sale or other
taxable disposition of Common Shares in an amount equal to the difference, if
any, between (a) the amount of cash plus the fair market value of any property
received and (b) such U.S. Holders tax basis in the Common Shares sold or
otherwise disposed of. Any such gain or loss generally will be capital gain or
loss, which will be long-term capital gain or loss if the Common Shares are held
for more than one year. Gain or loss recognized by a U.S. Holder on the sale or
other taxable disposition of Common Shares generally will be treated as U.S.
source for purposes of applying the U.S. foreign tax credit rules unless the
gain is subject to tax in Canada and resourced as foreign source under the
U.S.-Canada Tax Convention and the U.S. Holder elects to treat such gain as
foreign source.

Preferential tax rates apply to long-term capital gains of a
U.S. Holder that is an individual, estate, or trust. There are currently no
preferential tax rates for long-term capital gains of a U.S. Holder that is a
corporation. Deductions for capital losses are subject to significant
limitations under the Code.

The amount realized on a sale or other disposition of Common
Shares for an amount in foreign currency will generally be the U.S. dollar value
of this amount on the date of sale or disposition. On the settlement date, the
U.S. Holder will recognize U.S. source foreign currency gain or loss (taxable as
ordinary income or loss) equal to the difference (if any) between the U.S.
dollar value of the amount received based on the exchange rates in effect on the
date of sale or other disposition and the settlement date.

Foreign Tax Credit

A U.S. Holder that pays (whether directly or through
withholding) Canadian income tax with respect to dividends paid on the Common
Shares generally will be entitled, at the election of such U.S. Holder, to
receive either a deduction or a credit for such Canadian income tax paid.
Generally, a credit will reduce a U.S. Holders U.S. federal income tax
liability on a dollar-for-dollar basis, whereas a deduction will reduce a U.S.
Holders income subject to U.S. federal income tax. This election is made on a
year-by-year basis and applies to all foreign taxes paid (whether directly or
through withholding) by a U.S. Holder during a year.

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72

Complex limitations apply to the foreign tax credit, including
the general limitation that the credit cannot exceed the proportionate share of
a U.S. Holders U.S. federal income tax liability that such U.S. Holders
foreign source taxable income bears to such U.S. Holders worldwide taxable
income. In applying this limitation, a U.S. Holders various items of income and
deduction must be classified, under complex rules, as either foreign source or
U.S. source. In addition, this limitation is calculated separately with
respect to specific categories of income. Dividends paid by the Company
generally will constitute foreign source income and generally will be
categorized as passive income. The foreign tax credit rules are complex, and
each U.S. Holder should consult its own financial advisor, legal counsel, or
accountant regarding the foreign tax credit rules.

Information Reporting; Backup Withholding Tax

Payments made within the U.S., or by a U.S. payor or U.S.
middleman, of dividends on, or proceeds arising from the sale or other taxable
disposition of, Common Shares generally will be subject to information reporting
and backup withholding tax, at the rate of 28%, if a U.S. Holder (a) fails to
furnish such U.S. Holders correct U.S. taxpayer identification number
(generally on Form W-9), (b) furnishes an incorrect U.S. taxpayer identification
number, (c) is notified by the IRS that such U.S. Holder has previously failed
to properly report items subject to backup withholding tax, or (d) fails to
certify, under penalty of perjury, that such U.S. Holder has furnished its
correct U.S. taxpayer identification number and that the IRS has not notified
such U.S. Holder that it is subject to backup withholding tax. However, U.S.
Holders that are corporations generally are excluded from these information
reporting and backup withholding tax rules. Any amounts withheld under the U.S.
backup withholding tax rules will be allowed as a credit against a U.S. Holders
U.S. federal income tax liability, if any, or will be refunded, if such U.S.
Holder furnishes required information to the IRS. Each U.S. Holder should
consult its own financial advisor, legal counsel, or accountant regarding the
information reporting and backup withholding tax rules.

Additional Rules that May Apply to U.S. Holders

If the Company is a passive foreign investment Company (as
defined below), the preceding sections of this summary may not describe the U.S.
federal income tax consequences to U.S. Holders of the acquisition, ownership,
and disposition of Common Shares.

Passive Foreign Investment Company

The Company generally will be a passive foreign investment
Company under Section 1297 of the Code (a PFIC) if, for a taxable year, (a)
75% or more of the gross income of the Company for such taxable year is passive
income or (b) 50% or more of the assets held by the Company either produce
passive income or are held for the production of passive income, based on the
fair market value of such assets (or on the adjusted tax basis of such assets,
if the Company is not publicly traded and either is a controlled foreign
corporation or makes an election). Passive income includes, for example,
dividends, interest, certain rents and royalties, certain gains from the sale of
stock and securities, and certain gains from commodities transactions.

For purposes of the PFIC income test and asset test described
above, if the Company owns, directly or indirectly, 25% or more of the total
value of the outstanding shares of another foreign corporation, the Company will
be treated as if it (a) held a proportionate share of the assets of such other
foreign corporation and (b) received directly a proportionate share of the
income of such other foreign corporation. In addition, for purposes of the PFIC
income test and asset test described above, passive income does not include
any interest, dividends, rents, or royalties that are received or accrued by the
Company from a related person (as defined in Section
954(d)(3) of the Code), to the extent such items are properly allocable to the
income of such related person that is not passive income.

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73

In addition, if the Company is a PFIC and owns shares of
another foreign corporation that also is a PFIC, under certain indirect
ownership rules, a disposition of the shares of such other foreign corporation
or a distribution received from such other foreign corporation generally will be
treated as an indirect disposition by a U.S. Holder or an indirect distribution
received by a U.S. Holder, subject to the rules of Section 1291 of the Code
discussed below. To the extent that gain recognized on the actual disposition by
a U.S. Holder of Common shares or income recognized by a U.S. Holder on an
actual distribution received on Common Shares was previously subject to U.S.
federal income tax under these indirect ownership rules, such amount generally
should not be subject to U.S. federal income tax.

If the Company is a PFIC, the U.S. federal income tax
consequences to a U.S. Holder of the acquisition, ownership, and disposition of
Common Shares will depend on whether such U.S. Holder makes an election to treat
the Company as a qualified electing fund or QEF under Section 1295 of the
Code (a QEF Election) or a mark-to-market election under Section 1296 of the
Code (a Mark-to-Market Election). A U.S. Holder that does not make either a
QEF Election or a Mark-to-Market Election will be referred to in this summary as
a Non-Electing U.S. Holder.

Under Section 1291 of the Code, any gain recognized on the sale
or other taxable disposition of Common Shares, and any excess distribution (as
defined in Section 1291(b) of the Code) paid on the Common Shares, must be
ratably allocated to each day in a Non-Electing U.S. Holders holding period for
the Common Shares. The amount of any such gain or excess distribution allocated
to prior years of such Non-Electing U.S. Holders holding period for the Common
Shares generally will be subject to U.S. federal income tax at the highest tax
applicable to ordinary income in each such prior year. A Non-Electing U.S.
Holder will be required to pay interest on the resulting tax liability for each
such prior year, calculated as if such tax liability had been due in each such
prior year.

A U.S. Holder that makes a QEF Election generally will not be
subject to the rules of Section 1291 of the Code discussed above. However, a
U.S. Holder that makes a QEF Election generally will be subject to U.S. federal
income tax on such U.S. Holders pro rata share of (a) the net capital gain of
the Company, which will be taxed as long-term capital gain to such U.S. Holder,
and (b) and the ordinary earnings of the Company, which will be taxed as
ordinary income to such U.S. Holder. A U.S. Holder that makes a QEF Election
will be subject to U.S. federal income tax on such amounts for each taxable year
in which the Company is a PFIC, regardless of whether such amounts are actually
distributed to such U.S. Holder by the Company.

A U.S. Holder that makes a Mark-to-Market Election generally
will not be subject to the rules of Section 1291 of the Code discussed above. A
U.S. Holder may make a Mark-to-Market Election only if the Common Shares are
marketable stock (as defined in Section 1296(e) of the Code). A U.S. Holder
that makes a Mark-to-Market Election will include in gross income, for each
taxable year in which the Company is a PFIC, an amount equal to the excess, if
any, of (a) the fair market value of the Common Shares as of the close of such
taxable year over (b) such U.S. Holders tax basis in such Common Shares. A U.S.
Holder that makes a Mark-to-Market Election will, subject to certain
limitations, be allowed a deduction in an amount equal to the excess, if any, of
(a) such U.S. Holders adjusted tax basis in the Common Shares over (b) the fair
market value of such Common Shares as of the close of such taxable year.

---

74

The Company does not believe that it was a PFIC for the taxable
year ended May 31, 2010, and, based on current operations and financial
projections, does not expect that it will be a PFIC for the taxable year ending
May 31, 2011. The determination of whether the Company was, or will be, a PFIC
for a taxable year depends, in part, on the application of complex U.S.
federal income tax rules, which are subject to differing interpretations. In
addition, whether the Company will be a PFIC for the taxable year ending May 31,
2009 and each subsequent taxable year depends on the assets and income of the
Company over the course of each such taxable year and, as a result, cannot be
predicted with certainty as of the date of this Annual Report. Accordingly,
there can be no assurance that the IRS will not challenge the determination made
by the Company concerning its PFIC status or that the Company was not, or will
not be, a PFIC for any taxable year.

The PFIC rules are complex, and each U.S. Holder should consult
its own financial advisor, legal counsel, or accountant regarding the PFIC rules
and how the PFIC rules may affect the U.S. federal income tax consequences of
the acquisition, ownership, and disposition of Common Shares.

Canadian Federal Income Tax Considerations for United States
Residents

The following, as of the date hereof, is a summary of the
principal Canadian federal income tax considerations generally applicable to the
holding and disposition of Common Shares by a holder, (a) who for the purposes
of the Income Tax Act (Canada) (the Tax Act) at all relevant times, is not
resident, or deemed to be resident in Canada, deals at arms length and is not
affiliated with the Company for the purpose of the Tax Act, holds the Common
Shares as capital property and does not use or hold, and is not deemed to use or
hold, the Common Shares in the course of carrying on, or otherwise in connection
with, a business in Canada, and (b) who, for the purposes of the Canada -
United States Income Tax Convention(the Convention) at all relevant
times, is a resident of the United States, has never been a resident of Canada,
has not held or used (and does not hold or use) Common Shares in connection with
a permanent establishment or fixed base in Canada, and who otherwise qualifies
for the full benefits of the Convention. Common Shares will generally be
considered to be capital property to a holder unless such shares are held in the
course of carrying on a business, or in an adventure or concern in the nature of
trade. Holders who meet all the criteria in clauses (a) and (b) are referred to
herein as a U.S. Holder or U.S. Holders and this summary only addresses the
tax considerations to such U.S. Holders. The summary does not deal with special
situations, such as the particular circumstances of traders or dealers, limited
liability companies, tax exempt entities, insurers or financial institutions.
Such holders should consult their own tax advisors.

This summary is based upon the current provisions of the Tax
Act, the regulations thereunder in force at the date hereof (Regulations), all
specific proposals to amend the Tax Act and Regulations publicly announced by or
on behalf of the Minister of Finance (Canada) prior to the date hereof and the
current provisions of the Convention and the current administrative practices of
the Canada Revenue Agency published in writing prior to the date hereof. This
summary does not otherwise take into account or anticipate any changes in law or
administrative practices whether by legislative, governmental or judicial
decision or action, nor does it take into account tax laws of any province or
territory of Canada or of the United States or of any other jurisdiction outside
Canada.

For the purposes of the Tax Act, all amounts relating to the
acquisition, holding or disposition of the Common Shares must be converted into
Canadian dollars based on the relevant exchange rate applicable thereto.

This summary is of a general nature only and is not intended
to be, nor should it be construed to be, legal or tax advice to any particular
U.S. Holder and no representation with respect to the federal income tax
consequences to any particular U.S. Holder or prospective U.S. Holder is made.
The tax liability of a U.S. Holder will depend on the holders particular
circumstances. Accordingly, U.S.Holders should consult with their own tax advisors for
advice with respect to their own particular circumstances.

---

75

Dividends

Amounts paid or credited or deemed to be paid or credited to a
U.S. Holder as, on account or in lieu of payment, or in satisfaction of,
dividends on Common Shares will be subject to Canadian withholding tax on the
gross amount of the dividends. Under the Convention, the rate of Canadian
withholding tax on dividends paid or credited by the Company to a U.S. Holder
that beneficially owns such dividends is generally 15% unless the beneficial
owner is a Company which owns at least 10% of the voting stock of the Company at
that time in which case the rate of Canadian withholding tax is reduced to 5%.

Dispositions

A U.S. Holder will generally not be subject to tax under the
Tax Act on any capital gain realized on a disposition of Common Shares, unless
the shares constitute taxable Canadian property to the U.S. Holder at the time
of disposition and the U.S. Holder is not entitled to relief under the
Convention. Generally, Common Shares will not constitute taxable Canadian
property to a U.S. Holder provided that such shares are listed on a designated
stock exchange (which currently includes the NEX at the time of the disposition
and, during the 60-month period immediately preceding the disposition, the U.S.
Holder, persons with whom the U.S. Holder does not deal at arms length, or the
U.S. Holder together with such persons has not owned 25% or more of the issued
shares of any series or class of the Companys capital stock.

If the Common Shares constitute taxable Canadian property to a
particular U.S. Holder, any capital gain arising on their disposition may be
exempt from Canadian tax under the Convention if at the time of disposition the
Common Shares do not derive their value principally from real property situated
in Canada.

Canadian Federal Income Tax Consequences

The following is a summary of the principal Canadian federal
income tax considerations, as of the date hereof, generally applicable to
Security holders who deal at arm's length with the Company, who, for purposes of
the Income Tax Act (Canada) (the "Canadian Tax Act") and any applicable tax
treaty or convention, have not been and will not be resident or deemed to be
resident in Canada at any time while they have held shares of the Company, to
whom such shares are capital property, and to whom such shares are not "taxable
Canadian property" (as defined in the Canadian Tax Act). This summary does not
apply to a non-resident insurer.

Generally, shares of the Company will be considered to be
capital property to a holder thereof provided that the holder does not use such
shares in the course of carrying on a business or has not acquired them in one
or more transactions considered to be an adventure in the nature of trade. All
security holders should consult their own tax advisors as to whether, as a
matter of fact, they hold shares of the Company as capital property for the
purposes of the Canadian Tax Act.

Under the current provisions of the Canadian Tax Act, as
modified by the Proposed Amendments (see below), one-half of capital gains
(taxable capital gains) must be included in computing the income of a holder
in the year of disposition. One-half of capital losses (allowable capital
losses) may generally be deducted against taxable capital gains for the year
of disposition subject to and in accordance with the provisions of the Canadian
Tax Act.

---

76

Allowable capital losses in excess of a holders taxable
capital gains of a taxation year may generally be carried back three years and
carried forward indefinitely for deduction against taxable capital gains
realized in those years, to the extent and under circumstances permitted under
the Canadian Tax Act.

This discussion takes into account specific proposals to amend
the Canadian Tax Act and the regulations thereunder publicly announced by or on
behalf of the Minister of Finance (Canada) prior to the date hereof (the
"Proposed Amendments") and assumes that all such Proposed Amendments will be
enacted in their present form. No assurances can be given that the Proposed
Amendments will be enacted in the form proposed, if at all; however the Canadian
federal income tax considerations generally applicable to security holders
described herein will not be different in a material adverse way if the Proposed
Amendments are not enacted.

Except for the foregoing, this discussion does not take into
account or anticipate any changes in law, whether by legislative, administrative
or judicial decision or action, nor does it take into account provincial,
territorial or foreign income tax legislation or considerations, which may
differ from the Canadian federal income tax considerations described herein.

Generally, shares of the Company will not be taxable Canadian
property at a particular time provided that such shares are listed on a
prescribed stock exchange (which exchanges currently include the Toronto Stock
Exchange), the holder does not use or hold, and is not deemed to use or hold,
the shares of the Company in connection with carrying on a business in Canada
and the holder, persons with whom such holder does not deal at arm's length, or
the holder and such persons, have not owned (or had under option) 25% or more of
the issued shares of any class or series of the capital stock of the Company at
any time within five years preceding the particular time.

A holder of shares of the Company that are not taxable Canadian
property will not be subject to tax under the Canadian Tax Act on the sale or
other disposition of shares.

While intended to address all material Canadian Federal
Income Tax considerations, this summary is for general information purposes
only, and is not intended to be, nor should it be construed to be, legal or tax
advice to any holder or prospective holder of common shares. No opinion was
requested by the Company, or is provided by its legal counsel and/or auditors.
Additionally, this summary does not consider the effects of United States
federal, state, local or foreign income tax consequences.

Accordingly, holders and prospective holders of common
shares should consult their own tax advisors about the consequences of
purchasing, owning, and disposing of common shares of the Company.

F. Dividends and Paying Agents

Not applicable

G. Statement by Experts

Not applicable

H. Documents on Display

The documents described herein may be inspected at the head
office of Company at 2  1250 Waverley Street, Winnipeg, Manitoba, Canada R3T
6C6, during normal business hours.

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77

I. Subsidiary Information

Not applicable

ITEM 11. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT
MARKET RISK

INTEREST RATE RISK

The primary objective of the Companys investment activities is
to preserve principal by maximizing the income the Company receives from such
activities without significantly increasing risk. Securities that the Company
invests in are generally highly liquid short-term investments such as term
deposits with terms to maturity of less than one year.

Due to the short-term nature of these investments, the Company
believes there is no material exposure to interest rate risk arising from such
investments and accordingly, no quantitative tabular disclosure is required.

FOREIGN EXCHANGE RISK

The Companys primary currency of operations is the Canadian
dollar. However, the Company has expenditures and holds investments denominated
in a foreign currency. In fiscal 2010, it is estimated that approximately 72% of
the Companys expenditures were denominated in a foreign currency, primarily
being the US dollar and 100% of the Companys product revenues were denominated
in the US dollar. To date the Company has not entered into any future or forward
contracts, or other derivative instruments, for either hedging or speculative
purposes, to mitigate the impact of foreign exchange fluctuations on these
costs, revenues or on U.S. dollar denominated debt. A 10% change in foreign
exchange rates for fiscal 2010 would have impacted loss for the year by 13%.

ITEM 12. DESCRIPTION OF SECURITIES OTHER THAN EQUITY
SECURITIES

Not applicable

PART II

ITEM 13. DEFAULTS, DIVIDEND ARREARAGES AND
DELINQUENCIES

Not applicable

ITEM 14. MATERIAL MODIFICATIONS TO THE RIGHTS OF SECURITY
HOLDERS ANDUSE OF PROCEEDS

Not applicable

ITEM 15. CONTROLS AND PROCEDURES

Disclosure Controls and Procedures

The Companys disclosure controls and procedures (DCP) are
designed to provide reasonable assurance that all relevant information is
communicated to senior management, including the Chief Executive Officer (CEO) and the Chief Financial Officer (CFO), to
allow timely decisions regarding required disclosure.

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78

Based on this evaluation
carried out by the CEO and CFO, these officers concluded that as of the end of
the period covered by this Annual Report on Form 20-F, our disclosure controls
and procedures were not effective to ensure that the information required to be
disclosed by our company in reports it files or submits under the Exchange Act
is recorded, processed, summarized and reported within the time periods
specified in the rules and forms of the Securities and Exchange Commission.
These disclosure controls and procedures include controls and procedures
designed to ensure that such information is accumulated and communicated to the
Companys management, including our companys principal executive officer and
principal financial officer, to allow timely decisions regarding required
disclosure. The conclusion that the disclosure controls and procedures were not
effective was due to the presence of material weaknesses in internal control
over financial reporting as identified below under the heading Internal
Controls over Financial Reporting Procedures Management anticipates that such
disclosure controls and procedures will not be effective until the material
weaknesses are remediated.

Managements Annual Report on Internal Control over
Financial Reporting

The management of the Company is responsible for establishing
and maintaining adequate internal controls over financial reporting (as defined
in Rule 13a-15(f) under the Exchange Act). The Companys internal control system
was designed to provide reasonable assurance to the Companys management and the
board of directors regarding the reliability of financial reporting and
preparation and fair presentation of published financial statements for external
purposes in accordance with GAAP. Internal control over financial reporting
includes those policies and procedures that:

| | 1. | pertain to the maintenance of records that in reasonable
      detail accurately and fairly reflect the transactions and dispositions of
      the assets of the Company;                                                                                                                                                      
| | -- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |    |                                                                                                                                                                                                                                                                                                                                
| | 2. | provide reasonable assurance that transactions are
      recorded as necessary to permit preparation of financial statements in
      accordance with GAAP, and that receipts and expenditures of the Company
      are being made only in accordance with authorizations of management and
      directors of the Company; and
| |    |                                                                                                                                                                                                                                                                                                                                
| | 3. | provide reasonable assurance regarding prevention or
      timely detection of unauthorized acquisition, use or disposition of the
      Companys assets that could have a material effect on the financial
      statements.                                                                                                 

All internal control systems, no matter how well designed, have
inherent limitations. Therefore, even those systems determined to be effective
can provide only reasonable assurance with respect to financial statement
preparation and presentation. Because of its inherent limitations, internal
control over financial reporting may not prevent or detect misstatements.
Projections of any evaluation of effectiveness to future periods are subject to
the risk that controls may become inadequate because of changes in conditions or
that the degree of compliance with the policies or procedures may deteriorate.

The Company, with the participation of the CEO and the CFO, has
conducted an evaluation of the design and operation of internal control over
financial reporting as of May 31, 2010, based on the framework set forth in
Internal Control  Integrated Framework, issued by the Committee of Sponsoring
Organizations of the Treadway Commission (COSO). This evaluation included review
of the documentation of controls, evaluation of the design effectiveness of
controls, testing of the operating effectiveness of controls and a conclusion on
this evaluation. Based on this evaluation, management concluded that the
Companys ICFR was not effective as at May 31, 2010 due to the following
material weaknesses:

| | 1. | The Company did not maintain sufficient personnel with an
      appropriate level of technical accounting knowledge, experience, and
      training in the application of United States GAAP
to allow for the independent preparation and review of the
      reconciliation from Canadian GAAP to United States GAAP as disclosed in
  Note 16 to the financial statements; and
| | -- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

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79

| | 2. | Due to the limited number of staff and the inability to
      attract outside expert advice on a cost effective basis, there is a risk
      of material misstatements related to the accounting and reporting for
      complex transactions.
| | -- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

These control deficiencies did not result in any adjustments to
the Companys annual audited or interim unaudited consolidated financial
statements. However, the control deficiencies result in a reasonable possibility
that a material misstatement in the financial statements may occur and not be
detected on a timely basis.

Attestation Report of the Registered Public Accounting
Firm

This annual report does not include an attestation report of
the Company's registered public accounting firm regarding internal control over
financial reporting. Management's report is not subject to attestation by the
Company's registered public accounting firm pursuant to temporary rules of the
Securities and Exchange Commission that permit the Company to provide only
management's report in this annual report.

Changes in Internal Control over Financial Reporting and
Planned Remediation Activities

During the year the Chief Financial Officer resigned and was
replaced. In addition, in connection with ongoing efforts to reduce operating
costs, the Company transferred the accounting and administrative
responsibilities to a company controlled by the CEO of the Company. As a result
of outsourcing accounting and administrative responsibilities, certain
procedural controls have been amended to better reflect changes in task
assignments.

Other than as discussed above, there have been no changes in
the Company's internal controls identified in connection with the evaluation
described in the preceding paragraph that occurred during the period covered by
this Annual Report on Form 20-F which have materially affected, or are
reasonably likely to materially affect, the Company's internal controls over
financial reporting.

Other than as discussed above, no other remediation activities
have been undertaken in fiscal 2010 due to cost constraints and the Companys
focus on its capital restructuring.

ITEM 16. RESERVED

Not applicable

ITEM 16A. AUDIT COMMITTEE FINANCIAL EXPERT

As of May 31, 2010, Mr. Gerald McDole, a non-employee director,
was a member of the audit committee of the Company. The board of directors of
the Company has determined that Mr. McDole (i) qualifies as an audit committee
financial expert pursuant to Items 16A(b) and (c) of Form 20-F and (ii) is
independent as defined by Rule 121A of the NYSE Amex Company Guide and Rule
10A-3 of the Exchange Act. In addition, all members of the audit committee are
considered financially literate under applicable Canadian laws.

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80

ITEM 16B. CODE OF ETHICS

On August 23, 2004, the Company adopted a written Code of
Business Conduct and Ethics (Code of Ethics) that applies to the Companys
principal executive officer, principal financial officer and to all its other
employees. These standards are a guide to help ensure that all of the Companys
employees live up to high ethical standards. A copy of the Code of Ethics is
maintained on the Companys website at www.medicure.com.

The Company intends to disclose any amendment to or waiver from
any provision in the Code of Ethics, that has occurred during the past fiscal
year and that applies to the principal executive officer, principal financial
officer, principal accounting officer or controller, or persons performing
similar functions, either in its Exchange Act annual report or on the Companys
Internet website.

ITEM 16C. PRINCIPAL ACCOUNTANT FEES AND
SERVICES

In accordance with the requirements of the Sarbanes-Oxley Act
of 2002 and the Audit Committees charter, all audit and audit-related work and
all non-audit work performed by the chartered accountants, KPMG LLP, is approved
in advance by the Audit Committee, including the proposed fees for such work.
The Audit Committee is informed of each service actually rendered that was
approved through its pre-approval process.

(a) Audit fees

2010
    
    
    2009$
    87,500
    
    $
    154,000


Audit fees consist of fees billed for the audit of the
Companys annual financial statements.

(b) Audit-related fees

2010
    
    
    2009$
    8,900
    
    $
    12,500


Audit-related fees consist of fees billed for accounting
consultations and services associated with the issuance of securities filings
and prospectuses, if any.

(c) Tax fees - No compensation was paid to KPMG for tax
compliance, tax advice and tax planning in fiscal 2010 or 2009.

(d) All other fees

2010
    
    
    2009$
    -
    
    $
    -


(e) Audit Committees Pre-approval Policies

All KPMG services and fees are approved by the Audit Committee.

ITEM 16D. EXEMPTIONS FROM THE LISTING STANDARDS FOR AUDIT
COMMITTEES

Not applicable

ITEM 16E. PURCHASES OF EQUITY SECURITIES BY THE ISSUER
AND AFFILIATEDPURCHASERS

Not applicable

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81

PART III

ITEM 17. FINANCIAL STATEMENTS

The consolidated financial statements were prepared in
accordance with Canadian GAAP and are presented in Canadian dollars. There are
material measurement differences between United States and Canadian GAAP. A
reconciliation of the consolidated financial statements to United States GAAP is
set forth in Note 16 of the notes to the consolidated financial statements.

The consolidated financial statements are in the following
order:

| | 1. | Report of Independent Registered Public Accounting
  Firm;         
| | -- | -------------------------------------------------------------------
| | 2. | Consolidated Balance Sheets;                                       
| | 3. | Consolidated Statements of Operations and Comprehensive
      loss;
| | 4. | Consolidated Statements of Shareholders Equity
    (Deficiency)   
| | 5. | Consolidated Statements of Cash Flows; and                         
| | 6. | Notes to Consolidated Financial
  Statements.                      

---

| | Consolidated Financial Statements
| | ---------------------------------
| | (Expressed in Canadian Dollars)  
| |                                  
| | MEDICURE INC.                    
| |                                  
| | Year ended May 31, 2010          

---

MANAGEMENT REPORT

The accompanying financial statements have been prepared by
  management and approved by the board of directors of Medicure Inc. (the
  Company). Management is responsible for the information and representations
  contained in these financial statements.

These financial statements have been prepared in accordance
  with Canadian generally accepted accounting principles. The significant
  accounting policies, which management believes are appropriate for the Company,
  are described in note 2 to these financial statements. The Company maintains a
  system of internal control and processes intended to provide assurance that
  assets are safeguarded and to assist in preparation of relevant and reliable
  financial information.

The board of directors is responsible for reviewing and
  approving these financial statements and overseeing managements performance of
  its financial reporting responsibilities. An audit committee of three
  non-management directors is appointed by the board. The audit committee reviews
  the financial statements, audit process and financial reporting with management
  and with the external auditors and reports to the board of directors prior to
  the approval of the audited financial statements for publication.

KPMG LLP, the Companys external auditors, who are appointed by
  the shareholders, audited the financial statements in accordance with Canadian
  generally accepted auditing standards to enable them to express to the
  shareholders their opinion on these financial statements. Their report
  follows.

|/s/ Albert
      Friesen |  | /s/
      Eric Johnstone 
|------------------------ |  | -------------------------
|                         |  |                          
|Dr. Albert D. Friesen    |  | Mr. Eric R. Johnstone, CA
|President & CEO          |  | Chief Financial Officer  

---




---

|MEDICURE INC.                  
|-------------------------------
|Consolidated Balance Sheets    
|(Expressed in Canadian dollars)
|May 31, 2010 and
      2009    

|                                                      |   | 2010         |   |   | 2009         |  
|----------------------------------------------------- | - | ------------ | - | - | ------------ | -
|                                                      |   |              |   |   |              |  
|                                                      |   |              |   |   |              |  
|                                                      |   |              |   |   |              |  
|Assets                                                |   |              |   |   |              |  
|Current assets:                                       |   |              |   |   |              |  
|Cash                                                  | $ | 371,262      |   | $ | 1,978,725    |  
|Accounts receivable (Note
      4)                    |   | 390,923      |   |   | 551,697      |  
|Inventories (Note 5)                                  |   | 550,975      |   |   | 631,303      |  
|Prepaid expenses                                      |   | 176,280      |   |   | 357,884      |  
|                                                      |   |              |   |   |              |  
|                                                      |   | 1,489,440    |   |   | 3,519,609    |  
|                                                      |   |              |   |   |              |  
|Property and equipment (Note 6)                       |   | 68,752       |   |   | 93,532       |  
|Intangible assets (Note 7)                            |   | 4,414,882    |   |   | 5,936,819    |  
|                                                      |   |              |   |   |              |  
|                                                      |   |              |   |   |              |  
|                                                      | $ | 5,973,074    |   | $ | 9,549,960    |  
|                                                      |   |              |   |   |              |  
|                                                      |   |              |   |   |              |  
|                                                      |   |              |   |   |              |  
|Liabilities and Shareholders' Deficiency              |   |              |   |   |              |  
|Current liabilities:                                  |   |              |   |   |              |  
|Accounts payable and
      accrued liabilities        | $ | 1,320,185    |   | $ | 1,512,377    |  
|Accrued
      interest on long-term debt (Note 8)     |   | 5,469,343    |   |   | 2,542,560    |  
|Long-term debt (Note 8)                               |   | 24,140,199   |   |   | -            |  
|                                                      |   |              |   |   |              |  
|                                                      |   | 30,929,727   |   |   | 4,054,937    |  
|                                                      |   |              |   |   |              |  
|Long-term debt (Note 8)                               |   | -            |   |   | 25,041,982   |  
|                                                      |   |              |   |   |              |  
|Shareholders deficiency:                             |   |              |   |   |              |  
|Capital
      stock (Note 9(b))                       |   | 116,014,623  |   |   | 116,014,623  |  
|Warrants (Note 9(d))                                  |   | 9,065,720    |   |   | 9,065,720    |  
|Contributed surplus                                   |   | 4,044,810    |   |   | 3,921,998    |  
|Deficit                                               |   | (154,081,806 | ) |   | (148,549,300 | )
|                                                      |   |              |   |   |              |  
|                                                      |   | (24,956,653  | ) |   | (19,546,959  | )
|Nature of operations and going concern
      (Note 1) |   |              |   |   |              |  
|Commitments and
      contingencies (Note 11)         |   |              |   |   |              |  
|                                                      |   |              |   |   |              |  
|                                                      | $ | 5,973,074    |   | $ | 9,549,960    |  

On behalf of the Board:

|/s/ Albert Friesen | /s/ Gerald McDole
|------------------ | -----------------
|Director           | Director         

See accompanying notes to consolidated financial statements.
F-1

---

|MEDICURE INC.                                                     
|------------------------------------------------------------------
|Consolidated Statements of Operations and Comprehensive
      Loss
|(Expressed in Canadian dollars)                                   
|Years ended May
      31, 2010, 2009 and 2008                     

|                                                                                                  |   | 2010        |   |   | 2009        |   |   | 2008        |  
|------------------------------------------------------------------------------------------------- | - | ----------- | - | - | ----------- | - | - | ----------- | -
|                                                                                                  |   |             |   |   |             |   |   |             |  
|                                                                                                  |   |             |   |   |             |   |   |             |  
|Revenue:                                                                                          |   |             |   |   |             |   |   |             |  
|Product sales, net                                                                                | $ | 3,317,073   |   | $ | 4,792,513   |   | $ | 2,247,129   |  
|                                                                                                  |   |             |   |   |             |   |   |             |  
|Expenses:                                                                                         |   |             |   |   |             |   |   |             |  
|Cost of goods sold,
      excluding amortization                                                  |   | 571,688     |   |   | 377,079     |   |   | 605,623     |  
|Selling, general and
      administrative (Note 12)                                               |   | 4,474,825   |   |   | 9,255,219   |   |   | 12,072,596  |  
|Research and development
      (Note 11(a))                                                       |   | 393,385     |   |   | 22,706      |   |   | 28,660,250  |  
|Investment tax credits                                                                            |   | (306,692    | ) |   | (565,932    | ) |   | -           |  
|Write-down of fixed and
      intangible assets                                                   |   | 769,335     |   |   | 1,755,955   |   |   | 13,056,697  |  
|Amortization                                                                                      |   | 919,215     |   |   | 938,733     |   |   | 2,652,566   |  
|                                                                                                  |   |             |   |   |             |   |   |             |  
|                                                                                                  |   | 6,821,756   |   |   | 11,783,760  |   |   | 57,047,732  |  
|                                                                                                  |   |             |   |   |             |   |   |             |  
|                                                                                                  |   |             |   |   |             |   |   |             |  
|Loss before the undernoted                                                                        |   | (3,504,683  | ) |   | (6,991,247  | ) |   | (54,800,603 | )
|                                                                                                  |   |             |   |   |             |   |   |             |  
|Other expenses (income):                                                                          |   |             |   |   |             |   |   |             |  
|Interest and other income                                                                         |   | (4,913      | ) |   | (255,713    | ) |   | (1,149,574  | )
|Interest expense                                                                                  |   | 3,279,608   |   |   | 4,944,682   |   |   | 3,830,838   |  
|Foreign exchange loss (gain), net                                                                 |   | (1,246,872  | ) |   | 1,635,611   |   |   | (79,346     | )
|                                                                                                  |   |             |   |   |             |   |   |             |  
|                                                                                                  |   | 2,027,823   |   |   | 6,324,580   |   |   | 2,601,918   |  
|                                                                                                  |   |             |   |   |             |   |   |             |  
|Loss and
      comprehensive loss                                                                 | $ | (5,532,506  | ) | $ | (13,315,827 | ) | $ | (57,402,521 | )
|                                                                                                  |   |             |   |   |             |   |   |             |  
|Basic and diluted loss per share                                                                  | $ | (0.04       | ) | $ | (0.10       | ) | $ | (0.46       | )
|Weighted average
      number of common shares used in computing basic and diluted loss per share |   | 130,307,552 |   |   | 130,307,552 |   |   | 125,476,086 |  

See accompanying notes to consolidated financial statements.
F-2

---

|MEDICURE INC.                                                     
|------------------------------------------------------------------
|Consolidated Statements of Shareholders Equity
      (Deficiency)
|(Expressed in Canadian dollars)                                   
|Years ended May
      31, 2010, 2009 and 2008                     

|                                                                           |   | 2010         |   |   | 2009         |   |   | 2008         |  
|-------------------------------------------------------------------------- | - | ------------ | - | - | ------------ | - | - | ------------ | -
|                                                                           |   |              |   |   |              |   |   |              |  
|                                                                           |   |              |   |   |              |   |   |              |  
|Capital stock:                                                             |   |              |   |   |              |   |   |              |  
|Balance,
      beginning of year                                           | $ | 116,014,623  |   | $ | 116,014,623  |   | $ | 109,102,397  |  
|Reclassification of
      warrants                                         |   | -            |   |   | -            |   |   | (6,425,336   | )
|Exercise
      of options for cash                                         |   | -            |   |   | -            |   |   | 90,241       |  
|Private placement on
      October 5, 2007, net of issue costs             |   |              |   |   |              |   |   |              |  
|of $714,445                                                                |   | -            |   |   | -            |   |   | 13,247,321   |  
|                                                                           |   |              |   |   |              |   |   |              |  
|Balance,
      end of year                                                 |   | 116,014,623  |   |   | 116,014,623  |   |   | 116,014,623  |  
|                                                                           |   |              |   |   |              |   |   |              |  
|Warrants:                                                                  |   |              |   |   |              |   |   |              |  
|Balance, beginning of
      year                                           |   | 9,065,720    |   |   | 9,094,635    |   |   | -            |  
|Warrants
      expired during period                                       |   | -            |   |   | (28,915      | ) |   | -            |  
|Reclassification of
      warrants                                         |   | -            |   |   | -            |   |   | 6,425,336    |  
|Warrants
      granted with long-term debt                                 |   | -            |   |   | -            |   |   | 809,344      |  
|Private placement
      on October 5, 2007, net of issue costs of $104,795 |   | -            |   |   | -            |   |   | 1,859,955    |  
|                                                                           |   |              |   |   |              |   |   |              |  
|Balance, end of year                                                       |   | 9,065,720    |   |   | 9,065,720    |   |   | 9,094,635    |  
|                                                                           |   |              |   |   |              |   |   |              |  
|Contributed surplus:                                                       |   |              |   |   |              |   |   |              |  
|Balance,
      beginning of year                                           |   | 3,921,998    |   |   | 3,568,055    |   |   | 3,035,024    |  
|Stock-based compensation                                                   |   | 122,812      |   |   | 325,028      |   |   | 563,272      |  
|Warrants
      expired during period                                       |   | -            |   |   | 28,915       |   |   | -            |  
|Options exercised - transferred to capital stock                           |   | -            |   |   | -            |   |   | (30,241      | )
|                                                                           |   |              |   |   |              |   |   |              |  
|Balance, end of year                                                       |   | 4,044,810    |   |   | 3,921,998    |   |   | 3,568,055    |  
|                                                                           |   |              |   |   |              |   |   |              |  
|Deficit:                                                                   |   |              |   |   |              |   |   |              |  
|Balance,
      beginning of year                                           |   | (148,549,300 | ) |   | (135,233,473 | ) |   | (77,830,952  | )
|Loss and comprehensive loss for the period                                 |   | (5,532,506   | ) |   | (13,315,827  | ) |   | (57,402,521  | )
|                                                                           |   |              |   |   |              |   |   |              |  
|Balance, end of year                                                       |   | (154,081,806 | ) |   | (148,549,300 | ) |   | (135,233,473 | )
|                                                                           |   |              |   |   |              |   |   |              |  
|Shareholders
      deficiency                                             | $ | (24,956,653  | ) | $ | (19,546,959  | ) | $ | (6,556,160   | )

See accompanying notes to consolidated financial statements.
F-3

---

|MEDICURE INC.                                
|---------------------------------------------
|Consolidated Statement of Cash Flows         
|(Expressed in Canadian dollars)              
|Years ended May
      31, 2010, 2009 and 2008

|                                                                       |   | 2010       |   |   | 2009        |   |   | 2008        |  
|---------------------------------------------------------------------- | - | ---------- | - | - | ----------- | - | - | ----------- | -
|                                                                       |   |            |   |   |             |   |   |             |  
|                                                                       |   |            |   |   |             |   |   |             |  
|Cash provided by (used in):                                            |   |            |   |   |             |   |   |             |  
|Operating activities:                                                  |   |            |   |   |             |   |   |             |  
|Loss and comprehensive loss
      for the year                         | $ | (5,532,506 | ) | $ | (13,315,827 | ) | $ | (57,402,521 | )
|Adjustments for:                                                       |   |            |   |   |             |   |   |             |  
|Amortization of property and equipment                                 |   | 22,969     |   |   | 42,907      |   |   | 78,222      |  
|Amortization of
      intangible assets                                |   | 896,244    |   |   | 895,826     |   |   | 2,574,344   |  
|Amortization of deferred debt issue expense                            |   | 198,192    |   |   | 383,445     |   |   | 327,484     |  
|Accretion on long-term
      debt                                      |   | 285,818    |   |   | 426,521     |   |   | 216,853     |  
|Stock-based compensation                                               |   | 122,812    |   |   | 325,028     |   |   | 563,272     |  
|Write-down of inventory                                                |   | -          |   |   | 92,985      |   |   | 428,822     |  
|Write-down of property and equipment                                   |   | 4,041      |   |   | -           |   |   | -           |  
|Write-down of intangible
      assets                                  |   | 765,294    |   |   | 1,755,955   |   |   | 13,056,697  |  
|Unrealized foreign exchange (gain) loss                                |   | (1,372,970 | ) |   | 1,657,142   |   |   | 634,336     |  
|Change in the following:                                               |   |            |   |   |             |   |   |             |  
|Accounts
      receivable                                              |   | 160,774    |   |   | 332,646     |   |   | 1,163,917   |  
|Inventories                                                            |   | 80,328     |   |   | (407,929    | ) |   | (105,177    | )
|Prepaid
      expenses                                                 |   | 181,604    |   |   | 739,220     |   |   | 71,499      |  
|Research advance                                                       |   | -          |   |   | 200,000     |   |   | -           |  
|Accounts
      payable and accrued liabilities                         |   | (192,192   | ) |   | (4,338,798  | ) |   | (2,685,694  | )
|Accrued interest on long-term debt                                     |   | 2,926,783  |   |   | 792,740     |   |   | 1,106,446   |  
|                                                                       |   |            |   |   |             |   |   |             |  
|                                                                       |   | (1,452,809 | ) |   | (10,418,139 | ) |   | (39,971,500 | )
|Investing activities:                                                  |   |            |   |   |             |   |   |             |  
|Acquisition of property and equipment                                  |   | (2,230     | ) |   | (3,552      | ) |   | (14,588     | )
|Acquisition of intangible assets                                       |   | (139,601   | ) |   | (234,990    | ) |   | (572,520    | )
|                                                                       |   |            |   |   |             |   |   |             |  
|                                                                       |   | (141,831   | ) |   | (238,542    | ) |   | (587,108    | )
|Financing activities:                                                  |   |            |   |   |             |   |   |             |  
|Issuance of common shares and
      warrants, net of share issue costs |   | -          |   |   | -           |   |   | 15,167,276  |  
|Proceeds from issuance of long-term debt and
      warrants            |   | -          |   |   | -           |   |   | 25,022,600  |  
|Repayments of long-term debt                                           |   | -          |   |   | (14,454,000 | ) |   | (3,959,616  | )
|Debt issue expenses                                                    |   | -          |   |   | -           |   |   | (1,727,902  | )
|Cash released from restriction                                         |   | -          |   |   | 14,454,000  |   |   | (11,916,000 | )
|                                                                       |   |            |   |   |             |   |   |             |  
|                                                                       |   | -          |   |   | -           |   |   | 22,586,358  |  
|Foreign exchange
      gain (loss) on cash held in foreign currency    |   | (12,823    | ) |   | 730,476     |   |   | (1,893,140  | )
|                                                                       |   |            |   |   |             |   |   |             |  
|Decrease in cash                                                       |   | (1,607,463 | ) |   | (9,926,205  | ) |   | (19,865,390 | )
|Cash, beginning of year                                                |   | 1,978,725  |   |   | 11,904,930  |   |   | 31,770,320  |  
|                                                                       |   |            |   |   |             |   |   |             |  
|Cash, end of year                                                      | $ | 371,262    |   | $ | 1,978,725   |   |   | 11,904,930  |  
|                                                                       |   |            |   |   |             |   |   |             |  
|                                                                       |   |            |   |   |             |   |   |             |  
|Supplementary information:                                             |   |            |   |   |             |   |   |             |  
|Cash transactions:                                                     |   |            |   |   |             |   |   |             |  
|Interest paid                                                          | $ | -          |   | $ | 3,341,975   |   | $ | 2,353,130   |  
|Interest received                                                      |   | 14,350     |   |   | 542,761     |   |   | 1,023,347   |  

See accompanying notes to consolidated financial statements.
F-4

---

|MEDICURE INC.                                 
|----------------------------------------------
|Notes to the Consolidated Financial Statements
|(Expressed in Canadian dollars)               
|Years ended May
      31, 2010, 2009 and 2008 

|1. | Nature of operations and going
      concern:
|-- | ---------------------------------------------

Medicure Inc. (the Company) is a
  biopharmaceutical company engaged in the research and development and
  commercialization of human therapeutics. The Company has the U.S. rights to the
  commercial product, AGGRASTAT®Injection (tirofiban hydrochloride) in
  the United States and its territories (Puerto Rico, U.S. Virgin Islands, and
  Guam). AGGRASTAT®, a glycoprotein GP IIb/IIIa receptor antagonist, is
  used for the treatment of acute coronary syndrome (ACS) including unstable
  angina, which is characterized by chest pain when one is at rest, and non-Q-wave
  myocardial infarction.

The Companys lead research and
  development program is TARDOXALTM(product previously referred to as
  AVASTREMTM). This program grew out of Medicures effort to reposition
  MC-1, pyridoxal 5 phosphate (P5P), a naturally occurring small molecule, for
  new chronic medical conditions.

These consolidated financial statements
  have been prepared on a going concern basis in accordance with Canadian
  generally accepted accounting principles. The going concern basis of
  presentation assumes that the Company will continue in operation for the
  foreseeable future and be able to realize its assets and discharge its
  liabilities and commitments in the normal course of business. There is
  significant doubt about the appropriateness of the use of the going concern
  assumption because the Company has experienced operating losses and cash
  outflows from operations since incorporation and has significant debt servicing
  obligations that it does not have the ability to repay without refinancing or
  restructuring. At May 31, 2010, the Company was in default of the terms of its
  long-term debt financing obligations, and continues to be in default. Under an
  event of default, the lender can exercise its security rights under the
  agreement, and accordingly the long-term debt obligation has been classified as
  a current liability as at May 31, 2010 (note 8).

The Company has experienced a loss of
  $5,532,506 and negative cash flows from operations of $1,452,809 in the year
  ending May 31, 2010, and has accumulated a deficit of $154,081,806 as at May 31,
  2010. The Company continues to monitor staff and corporate expenses to the
  extent deemed appropriate in order to more closely align expenses with net
  revenue. Based on the Companys operating plan, its existing working capital is
  not sufficient to fund its planned operations, capital requirements, debt
  servicing obligations, and commitments through the end of the fiscal 2011 year
  without restructuring of its debt and raising additional capital. The Company is
  in ongoing discussions with its senior lender to restructure its debt, and in
  January 2010, retained advisors to assist in the evaluation of financial
  alternatives and fundraising options, and to assist in the partnership, license
  or sale of AGGRASTAT®. No agreements with the lender or other
  potential lenders or investors have been reached yet and there can be no
  assurance that such agreements will be reached. Further, the Companys financing
  agreement includes certain restrictive covenants on commercial and developmental
  products including intellectual property. Therefore the ability of the Company
  to execute on its operating plan and/or obtain additional capital is likely to
  be contingent on having collaborative relationships with its senior lender. The
  Company is currently evaluating expressions of interest regarding the potential
  partnership, license, or sale of AGGRASTAT®and/or an investment in
  the Company, and may also consider conversion of all or a portion of its long
  term debt into equity instruments. Such transactions, if completed, could have a
  significant dilutive effect on existing shareholders. If the Company is unable
  to restructure its debt, complete other strategic alternatives, and/or secure
  additional funds, the Company will have to consider additional strategic
  alternatives which may include, among other strategies, asset divestitures,
  monetization of certain intangibles, and/or the winding up, dissolution or
  liquidation of the Company.

The ability of the Company to continue
  as a going concern and to realize the carrying value of its assets and discharge
  its liabilities when due is dependent on many factors, including, but not
  limited to the actions taken or planned, some of which are described above,
  which are intended to mitigate the adverse conditions and events which raise
  doubt about the validity of the going concern assumption used in preparing these
  financial statements. There is no certainty that these and other strategies will
  be sufficient to permit the Company to continue as a going concern.

The financial statements do not reflect
  adjustments that would be necessary if the going concern assumption were not
  appropriate. If the going concern basis was not appropriate for these
  financial statements, then adjustments would be necessary in the carrying value
  of assets and liabilities, the reported revenues and expenses, and the balance
  sheet classifications used.

F-5

---

|MEDICURE INC.                                 
|----------------------------------------------
|Notes to the Consolidated Financial Statements
|(Expressed in Canadian dollars)               
|Years ended May
      31, 2010, 2009 and 2008 

|2. | Significant accounting policies:
|-- | --------------------------------
|   |                                 
|   | (a)                             
|   |                                 
|   |                                 
|   |                                 
|   |                                 
|   |                                 
|   | (b)                             
|   |                                 
|   |                                 
|   |                                 
|   | (c)                             
|   |                                 
|   |                                 
|   |                                 
|   | (d)                             
|   |                                 
|   |                                 
|   |                                 
|   | (e)                             
|   |                                 
|   |                                 

| | Asset                             | Basis               | Annual rate
| | --------------------------------- | ------------------- | -----------
| |                                   |                     |            
| | Computer equipment                | Straight-line       | 25%        
| | Furniture, fixtures and equipment | Diminishing balance | 20% to 25% 
| | Leasehold improvements            | Straight-line       | 20%        

| | (f) | Intangible assets:                                                                                                                                                                                                                                                                                                                  
| | --- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |     |                                                                                                                                                                                                                                                                                                                                     
| |     | Costs incurred in obtaining patents are capitalized and
      amortized upon issuance on a straight-line basis over the remaining legal
      life of the respective patents, being approximately twenty years, or their
      economic life, if shorter. The cost of servicing the Companys patents is
      expensed as incurred.
| |     |                                                                                                                                                                                                                                                                                                                                     
| |     | Intangible assets are recorded at acquisition cost and
      are amortized on a straight-line basis based on the following estimated
      useful lives:                                                                                                                                                                            

F-6

---

|MEDICURE INC.                                 
|----------------------------------------------
|Notes to the Consolidated Financial Statements
|(Expressed in Canadian dollars)               
|Years ended May
      31, 2010, 2009 and 2008 

|2. | Significant accounting policies (continued):
|-- | --------------------------------------------
|   |                                             
|   | **(f)**                                     

| | Patents            | 5 - 20 years  
| | ------------------ | --------------
| | Trademark          | 10 years      
| | Technology license | 8 years       
| | Customer list      | 10
      years

| | (g) | Deferred debt issue expenses:                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
| | --- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |     |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
| |     | Costs incurred to obtain financing are deferred and
      amortized over the term of the associated debt using the effective
      interest method. Amortization is a non-cash charge to interest
      expense.                                                                                                                                                                                                                                                                                                                                                                                                                                                    
| |     |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
| | (h) | Impairment of long-lived assets:                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
| |     |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
| |     | The carrying amount of long-lived assets which includes
      property and equipment and intangible assets to be held and used is
      reviewed for impairment on an ongoing basis whenever events or changes in
      circumstances indicate that the carrying amount may not be recoverable. An
      impairment is recognized when the carrying amount of an asset to be held
      and used exceeds the projected undiscounted future net cash flows expected
      from its use and disposal, and is measured as the amount by which the
      carrying amount of the asset exceeds its fair value.                                                           
| |     |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
| | (i) | Stock-based compensation:                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
| |     |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
| |     | The Company has a stock option plan [note 9(c)] for its
      directors, management, employees and consultants. The Company uses the
      fair value method of accounting for stock options granted. The fair value
      of the options is expensed over their vesting period. The Company
      estimates forfeitures for each grant and incorporates this estimate into
      the calculation of compensation cost recorded each period.                                                                                                                                                                                                                        
| |     |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
| | (j) | Government assistance and investment tax
      credits:                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
| |     |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
| |     | Government assistance toward current expenses is recorded
      as a reduction of the related expenses in the period the expenses are
      incurred. Government assistance towards property and equipment is deducted
      from the cost of the related property and equipment. The benefits of
      investment tax credits for scientific research and development
      expenditures (SR&ED) incurred directly by the Company are recognized
      in the period the qualifying expenditure is made, providing there is
      reasonable assurance of recoverability. SR&ED investment tax credits
      receivable are recorded at their net realizable value.
| |     |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
| | (k) | Research and development:                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
| |     |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
| |     | All costs of research activities are expensed in the
      period in which they are incurred. Development costs are charged as an
      expense in the period incurred unless a development project meets criteria
      for cost deferral and amortization. No development costs have been
      deferred to date. Tangible and intangible assets acquired for use in
      research and development projects are accounted for as described in note
      2(e) and (f).                                                                                                                                                                                           
| |     |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
| | (l) | Clinical trial expenses:                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
| |     |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
| |     | Clinical trial expenses are a component of the Companys
      research and development costs. These expenses include fees paid to
      contract research organizations, clinical sites, and other organizations
      who conduct development activities on the Companys behalf. The amount of
      clinical trial expenses recognized in a period related to clinical
      agreements are based on estimates of the work performed using an accrual
      basis of accounting. These estimates incorporate factors such as patient
      enrolment, services provided, contractual terms, and prior experience with
      similar contracts.                  

F-7

---

|MEDICURE INC.                                 
|----------------------------------------------
|Notes to the Consolidated Financial Statements
|(Expressed in Canadian dollars)               
|Years ended May
      31, 2010, 2009 and 2008 

|2. | Significant accounting policies
      (continued):
|-- | --------------------------------------------------
|   |                                                   
|   | (m)                                               
|   |                                                   
|   |                                                   
|   |                                                   
|   | (n)                                               
|   |                                                   
|   |                                                   
|   |                                                   
|   | (o)                                               
|   |                                                   
|   |                                                   
|   |                                                   
|   |                                                   
|   |                                                   
|   | (p)                                               
|   |                                                   
|   |                                                   
|   |                                                   
|   | (q)                                               
|   |                                                   
|   |                                                   

| |  |  | Cash and cash equivalents are classified as
      held-for-trading. They are measured at fair value and the gains or losses
      resulting from re-measurement at the end of each period are recognized in
      net loss for the period.
| |  |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

F-8

---

|MEDICURE INC.                                 
|----------------------------------------------
|Notes to the Consolidated Financial Statements
|(Expressed in Canadian dollars)               
|Years ended May
      31, 2010, 2009 and 2008 

|2. | Significant accounting policies
      (continued):
|-- | --------------------------------------------------
|   |                                                   
|   | (q)                                               
|   |                                                   
|   |                                                   
|   |                                                   
|   |                                                   
|   |                                                   
|   |                                                   

| | (r) | Changes in accounting policy:                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
| | --- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |     |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
| |     | Goodwill and intangible assets:                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
| |     |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
| |     | Effective June 1, 2009, the Company adopted CICA Handbook
      Section 3064, which replaces Section 3062, Goodwill and Other Intangible
      Assets, and Section 3450, Research & Development Costs, and
      establishes standards for the recognition, measurement and disclosure of
      goodwill and intangible assets. The provisions relating to the definition
      and initial recognition of intangible assets, including internally
      generated intangible assets, are equivalent to the corresponding
      provisions of International Accounting Standard 38, Intangible Assets.
      There was no impact on the Company's financial position and results of
      operations on adoption of this standard.                                                                                                            
| |     |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
| | (s) | Recent accounting pronouncements not yet
      adopted:                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
| |     |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
| |     | In January 2009, the CICA issued Handbook Section 1582,
      Business Combinations, Section 1601, Consolidated Financial Statements,
      and Section 1602, Non-controlling Interests. These Sections apply to
      interim and annual financial statements relating to fiscal years beginning
      on or after January 1, 2011. Earlier adoption is permitted as of the
      beginning of a fiscal year. An entity adopting Section 1582 also must
      adopt Sections 1601 and 1602 at the same time.                                                                                                                                                                                                                                                                                                                                 
| |     |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
| |     | Section 1582 requires business acquisitions to be
      measured at fair value on the acquisition date, acquisition-related costs
      to be expensed, gains from bargain purchases to be recorded in net
      earnings, and expands the definition of a business. Section 1601
      establishes standards for the preparation of consolidated financial
      statements and Section 1602 requires that non-controlling interest be
      presented as part of equity and that transactions between the Company and
      the non-controlling interests be reported as equity transactions. Section
      1582 will apply to any business combinations in the period following
      adoption. The Company is in the process of assessing the impact of
      adoption of Section 1601 and Section 1602 on its financial
      statements.

|3. | Convergence to International Financial Reporting
      Standards ("IFRS"):                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
|-- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
|   | In 2006, the Canadian Accounting Standards Board (AcSB)
      published a new strategic plan that will significantly affect financial
      reporting requirements for Canadian companies. The AcSB's strategic plan
      outlines the convergence of Canadian GAAP with IFRS over a five-year
      transitional period. In February 2008, the AcSB announced that 2011 is the
      changeover date for publicly-listed companies to use IFRS, replacing
      Canada's own GAAP. The date is for interim and annual financial statements
      relating for fiscal years beginning on or after January 1, 2011. The
      Company's first year end under IFRS will be May 31, 2012. The transition
      date for the Company will be June 1, 2011 and will require restatement for
      comparative purposes of amounts reported by the Company for the year ended
      May 31, 2011. While the Company has begun assessing the adoption of IFRS
      for fiscal 2012, the financial reporting impact of the transition to IFRS
      has not been estimated at this time.

F-9

---

|MEDICURE INC.                                 
|----------------------------------------------
|Notes to the Consolidated Financial Statements
|(Expressed in Canadian dollars)               
|Years ended May
      31, 2010, 2009 and 2008 

|4. | Accounts receivable:
|-- | --------------------

| |                           |   | May 31, 2010 |  |   | May 31, 2009 | 
| | ------------------------- | - | ------------ |  | - | ------------ | 
| |                           |   |              |  |   |              | 
| | Trade accounts receivable | $ | 375,228      |  | $ | 448,563      | 
| | Interest receivable       |   | 54           |  |   | 10,352       | 
| | Other                     |   | 15,641       |  |   | 92,782       | 
| |                           |   |              |  |   |              | 
| |                           | $ | 390,923      |  | $ | 551,697      | 

As at May 31, 2010, the trade accounts
  receivable consists of amounts owing from three customers which represent
  approximately 90 percent (May 31, 2009 - 95 percent) of trade accounts
  receivable.

|5. | Inventories:
|-- | ------------

| |                                       |   | May 31, 2010 |  |   | May 31, 2009 | 
| | ------------------------------------- | - | ------------ |  | - | ------------ | 
| | Raw materials and packaging materials | $ | 120,035      |  | $ | 145,146      | 
| | Finished goods                        |   | 430,940      |  |   | 486,157      | 
| |                                       | $ | 550,975      |  | $ | 631,303      | 

|   | During the year ending May 31, 2010, the Company
      wrote-off unusable inventory of nil (May 31, 2009 - $92,985, May 31, 2008
      - nil). Inventory expensed as part of cost of goods sold during the year
      ended May 31, 2010 was $218,702 (May 31, 2009 - $279,872, May 31,2008 -
      $130,850).
|-- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|   |                                                                                                                                                                                                                                                                                                               
|6. | Property and equipment:                                                                                                                                                                                                                                                                                       

| |                                         |   |         |  |   | Accumulated  |  |   | Net book | 
| | --------------------------------------- | - | ------- |  | - | ------------ |  | - | -------- | 
| | May 31,
      2010                      |   | Cost    |  |   | amortization |  |   | value    | 
| | Computer equipment                      | $ | 36,377  |  | $ | 13,704       |  | $ | 22,673   | 
| | Furniture,
      fixtures and equipment |   | 136,429 |  |   | 90,350       |  |   | 46,079   | 
| |                                         | $ | 172,806 |  | $ | 104,054      |  | $ | 68,752   | 
| |                                         |   |         |  |   | Accumulated  |  |   | Net book | 
| | May 31, 2009                            |   | Cost    |  |   | amortization |  |   | value    | 
| | Computer equipment                      | $ | 155,958 |  | $ | 143,919      |  | $ | 12,039   | 
| | Furniture, fixtures and equipment       |   | 184,056 |  |   | 102,563      |  |   | 81,493   | 
| |                                         | $ | 340,014 |  | $ | 246,482      |  | $ | 93,532   | 

Included in general and administration
  expenses is a gain on sale of property and equipment of $7,193 (2009 - nil, 2008
  - nil) and the Company also recorded a write-down of property and equipment of
  $4,041 (2009 - nil, 2008 - nil).

F-10

---

|MEDICURE INC.                                 
|----------------------------------------------
|Notes to the Consolidated Financial Statements
|(Expressed in Canadian dollars)               
|Years ended May
      31, 2010, 2009 and 2008 

|7. | Intangible assets:
|-- | ------------------

| |                    |   | Cost, net of |  |   | Accumulated  |  |   | Net book  | 
| | ------------------ | - | ------------ |  | - | ------------ |  | - | --------- | 
| | May 31,
      2010 |   | impairments  |  |   | amortization |  |   | value     | 
| |                    |   |              |  |   |              |  |   |           | 
| | Patents            | $ | 8,872,044    |  | $ | 5,304,021    |  | $ | 3,568,023 | 
| | Trademarks         |   | 1,534,440    |  |   | 814,610      |  |   | 719,830   | 
| | Customer list      |   | 270,784      |  |   | 143,755      |  |   | 127,029   | 
| |                    |   |              |  |   |              |  |   |           | 
| |                    | $ | 10,677,268   |  | $ | 6,262,386    |  | $ | 4,414,882 | 
| |                    |   |              |  |   |              |  |   |           | 
| |                    |   | Cost, net of |  |   | Accumulated  |  |   | Net book  | 
| | May 31,
      2009 |   | impairments  |  |   | amortization |  |   | value     | 
| |                    |   |              |  |   |              |  |   |           | 
| | Patents            | $ | 9,654,175    |  | $ | 4,696,494    |  | $ | 4,957,681 | 
| | Trademarks         |   | 1,534,440    |  |   | 702,173      |  |   | 832,267   | 
| | Customer list      |   | 270,784      |  |   | 123,913      |  |   | 146,871   | 
| |                    |   |              |  |   |              |  |   |           | 
| |                    | $ | 11,459,399   |  | $ | 5,522,580    |  | $ | 5,936,819 | 

As part of its ongoing review of all
  intellectual property, the Company recorded an impairment write-down of $765,294
  (May 31, 2009 - $1,755,955, May 31, 2008 - $13,056,697). The Company also
  reviewed the remaining intangible assets for impairments as at May 31, 2010 and
  has determined no further write-downs were necessary.

During the year ended May 31, 2008,
  conditions had arisen which triggered the need to review the Companys
  long-lived assets for impairment. As a result, the Company recorded an
  impairment write-down of $13,056,697 to the carrying value of value of patents,
  trademark, technology license, and customer list which exceeded their fair value
  based on discounted future cash flows and market prices for similar assets.

As described in Note 8, certain
  intangible assets are pledged as security against long-term debt.

|8. | Long-term debt:
|-- | ---------------

| |                                         |   | May 31, 2010 |   |   | May 31, 2009 | 
| | --------------------------------------- | - | ------------ | - | - | ------------ | 
| | Birmingham long-term debt               | $ | 24,140,199   |   | $ | 25,041,982   | 
| | Current portion of
      long-term debt |   | (24,140,199  | ) |   | -            | 
| |                                         | $ | -            |   | $ | 25,041,982   | 

Principal repayments to maturity by
  fiscal year are as follows:

| | 2012                                                                                  | $ | 869,071    |  
| | ------------------------------------------------------------------------------------- | - | ---------- | -
| | 2013                                                                                  |   | 1,816,021  |  
| | 2014                                                                                  |   | 2,604,853  |  
| | 2015                                                                                  |   | 3,555,073  |  
| | 2016                                                                                  |   | 4,694,581  |  
| | Thereafter                                                                            |   | 12,615,401 |  
| |                                                                                       |   |            |  
| |                                                                                       |   | 26,155,000 |  
| | Less deferred debt issue expenses (net of accumulated
      amortization of $559,837) |   | (2,014,801 | )
| |                                                                                       |   |            |  
| |                                                                                       | $ | 24,140,199 |  

F-11

---

|MEDICURE INC.                                 
|----------------------------------------------
|Notes to the Consolidated Financial Statements
|(Expressed in Canadian dollars)               
|Years ended May
      31, 2010, 2009 and 2008 

|8. | Long-term debt
      (continued):
|-- | ---------------------------------

In September 2007, the Company entered
  into a debt financing agreement with Birmingham Associates Ltd. (Birmingham), an
  affiliate of Elliott Associates, L.P. (Elliott) for proceeds of US$25 million.
  Under the terms of the agreement, Birmingham receives payments based on a
  percentage of AGGRASTAT®net sales. Birmingham is entitled to a
  return of 20 percent on the first US$15 million in AGGRASTAT®revenues, 17.5 percent on the next US$10 million, 15 percent on the next
  US$5 million and 5 percent thereafter, subject to an escalating minimum annual
  return, until May 31, 2020. The minimum annual payments start at US$2.5 million
  in 2008 and escalate to US$6.9 million in 2017. The total minimum payments over
  the life of the agreement aggregate US$49.7 million. The annual minimum payments
  are reflected in the effective interest rate calculation of the debt.

As at May 31, 2010, the Company was in
  default of the terms of its debt financing obligations and continues to be in
  default. The current portion of the minimum payments that are past due included
  in the accrued interest on long-term debt is $4,540,151, or US $4,339,659 (May
  31, 2009 - $1,899,186). Of this amount, US$1,739,659 was originally due July 15,
  2009; US$180,811 was originally due October 15, 2009; US$195,550 was originally
  due January 15, 2010; US$160,359 was originally due April 15, 2010; and
  $2,063,280 was originally due July 15, 2010. The debt agreement contains no
  express provisions to accelerate debt payments in an event of default, however
  under the agreement the lender can exercise its security rights at any time
  while in default. Accordingly, for financial reporting purposes, based on the
  guidance in EIC-59 Long Term Debt With Covenant Violations, the outstanding
  long term debt of US$25 million that is in default has been classified as a
  current liability as at May 31, 2010 (see Note 1).

As disclosed in (Note 9(d)), the
  Company issued 1,000,000 warrants associated with the debt financing agreement.
  The warrants were valued at CDN$809,344 based on the fair value of the options
  at the date of issue using the Black-Scholes option pricing model. The warrants
  have been recorded in shareholders equity and the Company recorded a long-term
  debt liability of CDN$24,213,256. The Company also incurred debt issuance costs
  of CDN$1,727,902, which it has recorded as a discount on the debt. The imputed
  effective interest rate is 13.3 percent.

Birmingham has the option to convert
  its rights based on AGGRASTAT®to MC-1 (products that contains P5P)
  within six months after MC-1s commercialization, if achieved. Upon conversion
  to MC-1, Birmingham would be entitled to a return of 10 percent on the first
  US$35 million in MC-1 revenues, 5 percent on the next US$40 million in MC-1
  revenues and 3 percent thereafter, subject to a minimum annual return of US$2.6
  million until May 31, 2020. Birmingham would receive payments based on MC-1
  revenues until December 31, 2024, unless a novel patent is obtained for MC-1,
  which could extend the period of payments.

Birminghams participation rights are
  secured by a first security interest in the intellectual property rights of the
  Company in AGGRASTAT®and MC-1 (subject to certain specified MC-1
  lien release terms), the proceeds derived from the commercialization of
  AGGRASTAT®and MC-1 (including without limitation any royalties
  receivable derived from any licensing of AGGRASTAT®and MC-1 to any
  third party and accounts receivable from the sale of AGGRASTAT®and
  MC-1 products), all intellectual, proprietary and other rights (including
  without limitation to contractual promotion and licensing rights and benefits)
  associated with, or derived from, AGGRASTAT®and MC-1, as well as
  shares in Medicure Pharma Inc. and Medicure International Inc.

During the 30 day period following the
  date on which the U.S. Food and Drug Administration shall have first approved
  MC-1 for sale to the public, the Company may elect to terminate AGGRASTAT®or MC-1 Debt Payment rights with the payment, prior to the end of such 30
  day period, of US$70 million to Birmingham.

In addition, upon the approval of MC-1
  for a second indication, the Company may once again elect to terminate
  AGGRASTAT®or MC-1 debt payment rights with the payment, prior to the
  end of such 30 day period, of US$120 million to Birmingham. The termination
  options represent an embedded derivative as defined in CICA Handbook Section
  3855, Financial Instruments - Recognition and Measurement. As of May 31, 2010,
  the estimated fair value of the termination options is nil.

F-12

---

|MEDICURE INC.                                 
|----------------------------------------------
|Notes to the Consolidated Financial Statements
|(Expressed in Canadian dollars)               
|Years ended May
      31, 2010, 2009 and 2008 

|9. | Capital stock:
|-- | --------------
|   |               
|   | (a)           
|   |               
|   |               
|   |               
|   | (b)           
|   |               
|   |               

| |                       | Number of Common Shares | Amount       
| | --------------------- | ----------------------- | -------------
| | Balance, May 31, 2008 | 130,307,552             | $ 116,014,623
| | Balance, May 31, 2009 | 130,307,552             | 116,014,623  
| | Balance, May 31, 2010 | 130,307,552             | $ 116,014,623

| | (c) | Options:                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              
| | --- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |     |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
| |     | The Company has a stock option plan which is administered
      by the Board of Directors of the Company with stock options granted to
      directors, management, employees and consultants as a form of
      compensation. The number of common shares reserved for issuance of stock
      options is limited to a maximum of ten percent of the outstanding common
      shares of the Company at any time. The stock options generally are subject
      to vesting over a period up to three years and have a maximum term of ten
      years.
| |     |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
| |     | Changes in the number of options outstanding during the
      year ended May 31, 2010 and 2009 are as
      follows:                                                                                                                                                                                                                                                                                                                                                                                                                                  

| |                                                                                                             |  |            |   |   | May 31, 2010 |  |  |            |   |   | May 31, 2009 | 
| | ----------------------------------------------------------------------------------------------------------- |  | ---------- | - | - | ------------ |  |  | ---------- | - | - | ------------ | 
| |                                                                                                             |  |            |   |   |              |  |  |            |   |   |              | 
| |                                                                                                             |  |            |   |   | Weighted     |  |  |            |   |   | Weighted     | 
| |                                                                                                             |  |            |   |   | average      |  |  |            |   |   | average      | 
| |                                                                                                             |  |            |   |   | exercise     |  |  |            |   |   | exercise     | 
| |                                                                                                             |  | Shares     |   |   | price        |  |  | Shares     |   |   | price        | 
| |                                                                                                             |  |            |   |   |              |  |  |            |   |   |              | 
| | Balance, beginning of year                                                                                  |  | 7,272,807  |   | $ | 0.57         |  |  | 6,717,683  |   | $ | 0.87         | 
| | Granted                                                                                                     |  | -          |   |   | -            |  |  | 2,905,000  |   |   | 0.04         | 
| | Forfeited, cancelled or expired                                                                             |  | (2,240,615 | ) |   | 0.26         |  |  | (2,349,876 | ) |   | 0.82         | 
| |                                                                                                             |  |            |   |   |              |  |  |            |   |   |              | 
| | Balance, end of year                                                                                        |  | 5,032,192  |   | $ | 0.71         |  |  | 7,272,807  |   | $ | 0.57         | 
| |                                                                                                             |  |            |   |   |              |  |  |            |   |   |              | 
| | Options exercisable, end of year                                                                            |  | 4,311,349  |   |   |              |  |  | 3,313,339  |   |   |              | 
| |                                                                                                             |  |            |   |   |              |  |  |            |   |   |              | 
| | Weighted average fair value per unit of options granted
      during the year at market value on grant date |  |            |   | $ | -            |  |  |            |   | $ | 0.02         | 

F-13

---

|MEDICURE INC.                                 
|----------------------------------------------
|Notes to the Consolidated Financial Statements
|(Expressed in Canadian dollars)               
|Years ended May
      31, 2010, 2009 and 2008 

|9. | Capital stock (continued):
|-- | --------------------------
|   |                           
|   | (c)                       
|   |                           
|   |                           

| |                 |             | Weighted average | Options outstanding |            
| | --------------- | ----------- | ---------------- | ------------------- | -----------
| | Range of        | Number      | remaining        | weighted average    | Number     
| | exercise prices | outstanding | contractual life | exercise price      | exercisable
| |                 |             |                  |                     |            
| | $0.03 - $1.00   | 3,665,025   | 7.96 years       | $0.31               | 2,965,849  
| | $1.01 - $2.00   | 1,217,167   | 5.92 years       | $1.65               | 1,195,500  
| | $2.01 - $2.64   | 150,000     | 0.02 years       | $2.64               | 150,000    
| |                 |             |                  |                     |            
| | $0.03 - $2.64   | 5,032,192   | 7.23 years       | $0.71               | 4,311,349  

The compensation expense related to
  stock options granted in previous periods under the stock option plan for the
  year ended May 31, 2010 was $122,812 (2009 - $325,028, 2008 - $563,272).

The compensation expense was
  determined based on the fair value of the options at the date of measurement
  using the Black-Scholes option pricing model with the following weighted average
  assumptions. There were no stock options granted during the year ended May 31,
  2010.

| |                           | May 31, 2010 | May 31, 2009
| | ------------------------- | ------------ | ------------
| |                           |              |             
| | Expected option life      | -            | 6.8 years   
| | Risk free interest rate   | -            | 3.55%       
| | Dividend yield            | -            | nil         
| | Expected
      volatility | -            | 73.55%      

| |     | The cost of stock-based payments that are fully vested
      and non-forfeitable at the grant date is measured and recognized at that
      date. For awards that vest at the end of the vesting period, compensation
      cost is recognized on a straight-line basis over the vesting period. For
      awards that vest on a graded basis, compensation cost is recognized on a
      pro-rata basis over the vesting period from the date of issuance. For the
      year ended May 31, 2010, the Company recognized compensation expense of
      $122,812 (2009 - $325,028, 2008 - $563,272).
| | --- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |     |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
| | (d) | Warrants:                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
| |     |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
| |     | Changes in the number of warrants outstanding during the
      years ended May 31, 2010, 2009 and 2008 are as
      follows:                                                                                                                                                                                                                                                                                                                                                                                                                                                                        

| |                                          |           | Exercise        |           | Granted     |           | Granted     |          
| | ---------------------------------------- | --------- | --------------- | --------- | ----------- | --------- | ----------- | ---------
| | Issue                                    | Original  | price           | May 31,   | (Exercised) | May 31,   | (Exercised) | May 31,  
| | (Expiry date)                            | granted   | per
      share | 2008      | (Cancelled) | 2009      | (Cancelled) | 2010     
| |                                          |           |                 |           |             |           |             |          
| |                                          |           |                 |           |             |           |             |          
| | 104,110 units 
      (August 19, 2008)   | 104,110   | $1.18           | 104,110   | (104,110)   | -         | -           | -        
| |                                          |           |                 |           |             |           |             |          
| | 2,602,750 units 
      (August 19, 2010) | 2,602,750 | $1.18           | 2,602,750 | -           | 2,602,750 | -           | 2,602,750
| |                                          |           |                 |           |             |           |             |          
| | 4,000,000 units 
      (May 9, 2011)     | 4,000,000 | USD $2.10       | 4,000,000 | -           | 4,000,000 | -           | 4,000,000

F-14

---

|MEDICURE INC.                                 
|----------------------------------------------
|Notes to the Consolidated Financial Statements
|(Expressed in Canadian dollars)               
|Years ended May
      31, 2010, 2009 and 2008 

|9. | Capital stock (continued):
|-- | --------------------------

| | (d) | Warrants (continued):
| | --- | ---------------------

| |                                            |           | Exercise        |           | Granted     |           | Granted     |          
| | ------------------------------------------ | --------- | --------------- | --------- | ----------- | --------- | ----------- | ---------
| | Issue                                      | Original  | price           | May 31,   | (Exercised) | May 31,   | (Exercised) | May 31,  
| | (Expiry date)                              | granted   | per
      share | 2008      | (Cancelled) | 2009      | (Cancelled) | 2010     
| |                                            |           |                 |           |             |           |             |          
| |                                            |           |                 |           |             |           |             |          
| | 3,984,608 units 
      (December 22, 2011) | 3,984,608 | USD $1.70       | 3,984,608 | -           | 3,984,608 | -           | 3,984,608
| |                                            |           |                 |           |             |           |             |          
| | 1,000,000 units 
      (December 31, 2016) | 1,000,000 | USD $1.26       | 1,000,000 | -           | 1,000,000 | -           | 1,000,000
| |                                            |           |                 |           |             |           |             |          
| | 4,373,913 units 
      (October 5, 2012)   | 4,373,913 | USD $1.50       | 4,373,913 | -           | 4,373,913 | -           | 4,373,913

| |     | The warrants, with the exception of the warrants expiring
      on December 31, 2016, were issued together with common shares either under
      prospectus offerings or private placements with the net proceeds allocated
      to common shares and warrants based on their relative fair values using
      the Black-Scholes model. The warrants expiring on December 31, 2016 were
      issued with the debt financing agreement in September 2007, as disclosed
      in note 8.
| | --- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |     |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
| |     | The warrants expiring on May 9, 2011, December 22, 2011,
      October 5, 2012, and December 31, 2016 may be exercised, upon certain
      conditions being met, on a cashless basis based on a formula described in
      the warrant agreements.                                                                                                                                                                                                                                      
| |     |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
| | (e) | Shareholder rights plan:                                                                                                                                                                                                                                                                                                                                                                                                                                                                
| |     |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
| |     | The Company has a shareholder rights plan, the primary
      objective of which is to ensure, to the extent possible, that all
      shareholders of the Company are treated fairly in connection with any
      takeover offer for the Company and to ensure that the Board of Directors
      is provided with sufficient time to evaluate unsolicited takeover bids and
      to explore and develop alternatives to maximize shareholder
      value.                               

|10. | Income taxes:                                                                                
|--- | ---------------------------------------------------------------------------------------------
|    |                                                                                              
|    | Significant components of the Company's future tax assets
      (liabilities) are as follows:

| |                                                        |   | 2010        |   |   | 2009        |  
| | ------------------------------------------------------ | - | ----------- | - | - | ----------- | -
| |                                                        |   |             |   |   |             |  
| | Future tax assets:                                     |   |             |   |   |             |  
| | Non-capital loss carry-forwards                        | $ | 5,984,000   |   | $ | 4,956,000   |  
| | Scientific
      research and experimental development |   | 3,793,000   |   |   | 3,793,000   |  
| | Share issue costs                                      |   | 249,000     |   |   | 632,000     |  
| | Other                                                  |   | 737,000     |   |   | 720,000     |  
| |                                                        |   |             |   |   |             |  
| |                                                        |   | 10,763,000  |   |   | 10,101,000  |  
| | less: Valuation
      allowance                        |   | (10,763,000 | ) |   | (10,101,000 | )
| |                                                        |   |             |   |   |             |  
| |                                                        | $ | -           |   | $ | -           |  

F-15

---

|MEDICURE INC.                                 
|----------------------------------------------
|Notes to the Consolidated Financial Statements
|(Expressed in Canadian dollars)               
|Years ended May
      31, 2010, 2009 and 2008 

|10. | Income taxes (continued):                                                                         
|--- | --------------------------------------------------------------------------------------------------
|    |                                                                                                   
|    | The reconciliation of the Canadian statutory rate to the
      income tax provision is as follows:

| |                                                                                              |   | 2010      |   |   | 2009       |   |   | 2008        |  
| | -------------------------------------------------------------------------------------------- | - | --------- | - | - | ---------- | - | - | ----------- | -
| |                                                                                              |   |           |   |   |            |   |   |             |  
| | Loss for the year:                                                                           |   |           |   |   |            |   |   |             |  
| | Canadian                                                                                     | $ | 1,250,420 |   | $ | 3,777,652  |   | $ | 5,111,984   |  
| | Foreign                                                                                      |   | 4,282,086 |   |   | 9,538,175  |   |   | 52,290,537  |  
| |                                                                                              |   |           |   |   |            |   |   |             |  
| |                                                                                              | $ | 5,532,506 |   | $ | 13,315,827 |   | $ | 57,402,521  |  
| |                                                                                              |   |           |   |   |            |   |   |             |  
| |                                                                                              |   |           |   |   |            |   |   |             |  
| | Canadian federal and provincial income
      taxes at 27.00% (2009 - 27.00%; (2008 - 27.00%) | $ | 1,494,000 |   | $ | 3,595,000  |   | $ | 15,499,000  |  
| | Change in rates                                                                              |   | -         |   |   | -          |   |   | (964,000    | )
| | Permanent differences and other items                                                        |   | 59,000    |   |   | (64,000    | ) |   | (126,000    | )
| | Foreign tax rate in foreign jurisdiction                                                     |   | (932,000  | ) |   | (2,256,000 | ) |   | (12,914,000 | )
| | Change in valuation allowance                                                                |   | (662,000  | ) |   | (759,000   | ) |   | (1,888,000  | )
| | Other                                                                                        |   | 41,000    |   |   | (516,000   | ) |   | 393,000     |  
| |                                                                                              |   |           |   |   |            |   |   |             |  
| |                                                                                              | $ | -         |   | $ | -          |   | $ | -           |  

The foreign tax rate differential is
  the difference between the Canadian federal and provincial statutory income tax
  rate and the tax rates in Barbados (2.5 percent) and the United States (34
  percent) that are applicable to losses incurred by the Company's wholly-owned
  subsidiaries, Medicure International Inc. and Medicure Pharma Inc.

| | At May 31, 2010, the Company has the
      following available for application in future years:
| | -----------------------------------------------------------------------------------------------
| | •                                                                                              
| | •                                                                                              
| | •                                                                                              

|11. | Commitments and contingencies:
|--- | ------------------------------
|    |                               
|    | (a)                           
|    |                               
|    |                               

| | Purchase agreement                                                                |  
| | --------------------------------------------------------------------------------- | -
| |                                                                                   |  
| |                                                                                   |  
| | Contractual obligations payment due by fiscal period ending
      May 31: (USD $) |  
| | 2011                                                                              |  
| | 2012                                                                              |  
| | 2013                                                                              |  
| |                                                                                   |  
| |                                                                                   |  
| |                                                                                   | $

F-16

---

|MEDICURE INC.                                 
|----------------------------------------------
|Notes to the Consolidated Financial Statements
|(Expressed in Canadian dollars)               
|Years ended May
      31, 2010, 2009 and 2008 

|**11.** | Commitments and contingencies
      (continued):
|------- | ------------------------------------------------
|        |                                                 
|        |                                                 
|        |                                                 
|        |                                                 
|        |                                                 
|        |                                                 
|        |                                                 
|        |                                                 
|        |                                                 
|        |                                                 

| | (i)  | Contracts with clinical research organizations (CROs) are
      payable over the terms of the trials and timing of payments is largely
      dependent on various milestones being met, such as the number of patients
      recruited, number of monitoring visits conducted, the completion of
      certain data management activities, trial completion, and other
      trial-related activities. As at May 31, 2010, the Company has no
      outstanding commitments related to clinical research agreements with
      CROs.
| | ---- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |      |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
| | (ii) | As at May 31, 2010, the Company has committed to fund a
      further $3,000,000 in research and development activities under a
      development agreement with a research organization. The timing of
      expenditures and payments is largely at the discretion of the Company and
      the agreements may be terminated at any time provided 30 days notice is
      provided.                                                                                                                                               

| | (b) | Guarantees:                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
| | --- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |     |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
| |     | The Company periodically enters into research agreements
      with third parties that include indemnification provisions customary in
      the industry. These guarantees generally require the Company to compensate
      the other party for certain damages and costs incurred as a result of
      claims arising from research and development activities undertaken on
      behalf of the Company. In some cases, the maximum potential amount of
      future payments that could be required under these indemnification
      provisions could be unlimited. These indemnification provisions generally
      survive termination of the underlying agreement. The nature of the
      indemnification obligations prevents the Company from making a reasonable
      estimate of the maximum potential amount it could be required to pay.
      Historically, the Company has not made any indemnification payments under
      such agreements and no amount has been accrued in the accompanying
      financial statements with respect to these indemnification
      obligations.
| |     |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
| | (c) | Royalties:                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
| |     |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
| |     | The Company is obligated to pay royalties to third
      parties based on any future commercial sales of MC-1, aggregating up to
      3.9 percent on net sales. To date, no royalties are due and/or
      payable.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
| |     |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
| |     | These royalty commitments exclude any obligations to
      Birmingham pursuant to the debt financing agreement (Note
      8).                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        

F-17

---

|MEDICURE INC.                                 
|----------------------------------------------
|Notes to the Consolidated Financial Statements
|(Expressed in Canadian dollars)               
|Years ended May
      31, 2010, 2009 and 2008 

|11. | Commitments and contingencies
      (continued):
|--- | ------------------------------------------------
|    |                                                 
|    | (d)                                             
|    |                                                 
|    |                                                 

|12. | Related party transactions:                                                                                                                                                                                                                                                                                                                                                                                      
|--- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|    |                                                                                                                                                                                                                                                                                                                                                                                                                  
|    | Related parties consist of certain officers and
      shareholders, companies with significant influence, and companies in which
      certain directors, officers, or shareholders have interests. These
      transactions are in the normal course of operations and are measured at
      the exchange amount, which is the amount of consideration established and
      agreed upon by the related parties.
|    |                                                                                                                                                                                                                                                                                                                                                                                                                  
|    | Related party transactions incurred during the years
      ended May 31, 2010, 2009 and 2008 are as
      follows:                                                                                                                                                                                                                                                                                               

| |                                      |  | 2010    |  |  | 2009    |  |  | 2008    | 
| | ------------------------------------ |  | ------- |  |  | ------- |  |  | ------- | 
| |                                      |  |         |  |  |         |  |  |         | 
| | Rent                                 |  | 45,477  |  |  | 69,012  |  |  | 76,268  | 
| | Business and administrative services |  | 431,000 |  |  | 281,000 |  |  | 272,249 | 
| | Clinical research services           |  | 88,918  |  |  | -       |  |  | -       | 

|    | In accordance with the above noted contract (Note 11(a)),
      the Chief Financial Officer's services are provided through a consulting
      agreement with GVI. In addition, intellectual property, accounting,
      payroll, human recourses and information technology services are provided
      to the Company through the GVI agreement.
|--- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|    |                                                                                                                                                                                                                                                                                                                                                   
|    | Clinical research services are provided through a
      consulting agreement with GVI Clinical Development Solutions ("GVI CDS").
      In addition, pharmacovigilance and safety, regulatory support, quality
      control and clinical support are provided to the Company through the GVI
      CDS agreement.                                
|    |                                                                                                                                                                                                                                                                                                                                                   
|13. | Financial instruments:                                                                                                                                                                                                                                                                                                                            
|    |                                                                                                                                                                                                                                                                                                                                                   
|    | The Company has classified its financial instruments as
      follows:                                                                                                                                                                                                                                                                            

| |                                                                              |  | May 31, 2010 |  |  | May 31, 2009 | 
| | ---------------------------------------------------------------------------- |  | ------------ |  |  | ------------ | 
| |                                                                              |  |              |  |  |              | 
| | Financial assets:                                                            |  |              |  |  |              | 
| | Cash and cash
      equivalents (held-for-trading)                           |  | 371,262      |  |  | 1,978,725    | 
| | Accounts receivable (loans and receivables)                                  |  | 390,923      |  |  | 551,697      | 
| |                                                                              |  |              |  |  |              | 
| |                                                                              |  | 762,185      |  |  | 2,530,422    | 
| |                                                                              |  |              |  |  |              | 
| |                                                                              |  |              |  |  |              | 
| | Financial liabilities:                                                       |  |              |  |  |              | 
| | Accounts payable and accrued
      liabilities (other financial liabilities) |  | 1,320,185    |  |  | 1,512,377    | 
| | Accrued interest
      on long-term debt (other financial liabilities)       |  | 5,469,343    |  |  | 2,542,560    | 
| | Long-term debt (other financial liabilities)                                 |  | 24,140,199   |  |  | 25,041,982   | 
| |                                                                              |  |              |  |  |              | 
| |                                                                              |  | 30,929,727   |  |  | 29,096,919   | 

F-18

---

|MEDICURE INC.                                 
|----------------------------------------------
|Notes to the Consolidated Financial Statements
|(Expressed in Canadian dollars)               
|Years ended May
      31, 2010, 2009 and 2008 

|13. | Financial instruments (continued):                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
|--- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              
|    | The Company has determined that the carrying values of
      its short-term financial assets and liabilities, including cash and cash
      equivalents, accounts receivable and accounts payable and accrued
      liabilities, approximates their fair value because of the relatively short
      periods to maturity of these instruments. Management cannot reasonably
      estimate the fair value of the long term debt due to the financial
      condition of the Company (Note 1) and underlying terms and conditions of
      the debt agreement (Note 8). The Company has not entered into future or
      forward contracts as at May 31, 2010.
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              
|    | The Companys financial instruments are exposed to
      certain financial risks, including credit risk, liquidity and market
      risk.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    

| | (a) | Credit risk:                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
| | --- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |     |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
| |     | Credit risk is the risk of financial loss to the Company
      if a partner or counterparty to a financial instrument fails to meet its
      contractual obligation and arises principally from the Companys cash and
      cash equivalents, restricted cash and accounts receivable. The carrying
      amounts of the financial assets represent the maximum credit
      exposure.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
| |     |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
| |     | The Company limits its exposure to credit risk on cash
      and cash equivalents by placing these financial instruments with
      high-credit quality financial institutions.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
| |     |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
| |     | The Company is subject to a concentration of credit risk
      related to its accounts receivable as amounts are owing primarily from
      three customers. At May 31, 2010, the outstanding accounts receivable were
      within normal payment terms and the Company had recorded no allowance for
      doubtful accounts.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
| |     |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
| | (b) | Liquidity risk:                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
| |     |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
| |     | Liquidity risk is the risk that the Company will not be
      able to meet its financial obligations as they come due. The Company
      manages its liquidity risk by continuously monitoring forecasted and
      actual cash flows, as well as anticipated investing and financing
      activities and to ensure, as far as possible, that it will have sufficient
      liquidity to meet its liabilities when due and to fund future operations.
      The Company assessed liquidity risk as high because at May 31, 2010, the
      Company was in default of the terms of its debt financing obligations
      (Note 8). The Company continues ongoing discussions with its senior lender
      to restructure its debt. Based on the Companys operating plan, its
      existing working capital is not sufficient to fund its planned operations,
      capital requirements, debt servicing obligations, and commitments through
      the end of the fiscal 2011 year without restructuring of its debt and
      raising additional capital. Depending on the outcome of these negotiations
      the Company may not have sufficient working capital to maintain operations
      (see note 1).
| |     |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
| |     | The majority of the Companys accounts payable and
      accrued liabilities are due within the current operating period. For
      long-term debt repayments see Note 8.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
| |     |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
| | (c) | Market risk:                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
| |     |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
| |     | Market risk is the risk that changes in market prices,
      such as foreign currency and interest rates, will affect the Companys
      earnings or the value of the financial instruments held.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
| |     |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
| |     | (i)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
| |     |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
| |     |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                

F-19

---

|MEDICURE INC.                                 
|----------------------------------------------
|Notes to the Consolidated Financial Statements
|(Expressed in Canadian dollars)               
|Years ended May
      31, 2010, 2009 and 2008 

|13. | Financial instruments (continued):
|--- | ----------------------------------
|    |                                   
|    | (c)                               
|    |                                   
|    |                                   
|    |                                   
|    |                                   

| | (Expressed in USD $)                     |   | May 31, 2010 |   |   | May 31, 2009 |  
| | ---------------------------------------- | - | ------------ | - | - | ------------ | -
| |                                          |   |              |   |   |              |  
| | Cash                                     | $ | 256,883      |   | $ | 1,151,509    |  
| | Accounts receivable                      |   | 344,406      |   |   | 410,885      |  
| | Accounts payable and accrued liabilities |   | (972,472     | ) |   | (934,099     | )
| | Accrued interest on long-term debt       |   | (5,227,817   | ) |   | (2,328,992   | )
| | Long term debt                           |   | (25,000,000  | ) |   | (25,000,000  | )
| |                                          |   |              |   |   |              |  
| |                                          | $ | (30,599,000  | ) | $ | (26,700,697  | )

| |      | Based on the above net exposures as at May 31, 2010,
      assuming that all other variables remain constant, a 5 percent
      appreciation or deterioration of the Canadian dollar against the U.S.
      dollar would result in a corresponding decrease or increase of
      approximately $1,600,000 (May 31, 2009 - $1,500,000, May 31, 2008 -
      $1,800,000) in the Companys net loss.                          
| | ---- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |      |                                                                                                                                                                                                                                                                                                                                                                                                                            
| | (ii) | Interest rate risk:                                                                                                                                                                                                                                                                                                                                                                                                        
| |      |                                                                                                                                                                                                                                                                                                                                                                                                                            
| |      | Interest rate risk is the risk that the future cash flows
      of a financial instrument will fluctuate because of changes in market
      interest rates.                                                                                                                                                                                                                                                                
| |      |                                                                                                                                                                                                                                                                                                                                                                                                                            
| |      | The Company is exposed to interest rate risk arising
      primarily from fluctuations in interest rates on its cash and cash
      equivalents.                                                                                                                                                                                                                                                                           
| |      |                                                                                                                                                                                                                                                                                                                                                                                                                            
| |      | An increase in 100 basis points in interest rates during
      the year ended May 31, 2010, with all other variables held constant, would
      have decreased the shareholders deficiency and decreased the net loss by
      approximately $2,300 (May 31, 2009 - $13,000, May 31, 2008 - $70,000). The
      Birmingham debt has been excluded due to the nature of the interest
      payments as described in Note 8.

|14. | Management of capital:                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
|--- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
|    | The Companys objectives when managing capital are to
      safeguard the Companys ability to continue as a going concern (Note 1)
      and to provide capital to pursue the development and commercialization of
      its products.                                                                                                                                                                                                                                                                                                          
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
|    | In the management of capital, the Company includes cash
      and cash equivalents, long-term debt, capital stock, warrants and
      contributed surplus.                                                                                                                                                                                                                                                                                                                                                                                       
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
|    | The Company manages its capital structure and makes
      adjustments to it in light of economic conditions. The Company, upon
      approval from its Board of Directors, will balance its overall capital
      structure through new share issuances, granting of stock options, the
      issue of debt or by undertaking other activities as deemed appropriate
      under the specific circumstance. The Companys overall strategy with
      respect to capital risk management remains unchanged for the year ended
      May 31, 2010.

F-20

---

|MEDICURE INC.                                 
|----------------------------------------------
|Notes to the Consolidated Financial Statements
|(Expressed in Canadian dollars)               
|Years ended May
      31, 2010, 2009 and 2008 

|15. | Segmented information:                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
|--- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
|    | The Company operates in one business segment, the
      biopharmaceutical industry. Substantially all of the Companys assets and
      operations are located in three locations; Canada, the United States and
      Barbados. During the year ended May 31, 2010, 100 percent of product
      revenues were generated from sales of AGGRASTAT®in the United
      States, which was to seven customers. Customer A accounted for 36 percent,
      Customer B accounted for 28 percent, Customer C accounted for 26 percent,
      and the remaining four customers accounted for 10 percent of
      revenues.
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
|    | Property and equipment and intangible assets are located
      in the following countries:                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         

| |               |   | May 31, 2010 |  |   | May 31, 2009 | 
| | ------------- | - | ------------ |  | - | ------------ | 
| |               |   |              |  |   |              | 
| | Canada        | $ | 40,871       |  | $ | 129,430      | 
| | Barbados      |   | 4,397,819    |  |   | 5,837,505    | 
| | United States |   | 44,944       |  |   | 63,416       | 

|16. | Reconciliation of generally accepted accounting
      principles:                                                                                                                                                                                                            
|--- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|    |                                                                                                                                                                                                                                                                              
|    | The Company prepares its consolidated financial
      statements in accordance with Canadian GAAP, the measurement principles of
      which, as applied in these consolidated financial statements, conform in
      all material respects with U.S. GAAP except as follows:
|    |                                                                                                                                                                                                                                                                              
|    | (a)                                                                                                                                                                                                                                                                          
|    |                                                                                                                                                                                                                                                                              
|    |                                                                                                                                                                                                                                                                              
|    |                                                                                                                                                                                                                                                                              
|    |                                                                                                                                                                                                                                                                              
|    |                                                                                                                                                                                                                                                                              
|    | (b)                                                                                                                                                                                                                                                                          
|    |                                                                                                                                                                                                                                                                              
|    |                                                                                                                                                                                                                                                                              

F-21

---

|MEDICURE INC.                                 
|----------------------------------------------
|Notes to the Consolidated Financial Statements
|(Expressed in Canadian dollars)               
|Years ended May
      31, 2010, 2009 and 2008 

|16. | Reconciliation of generally accepted accounting
      principles (continued):
|--- | -----------------------------------------------------------------------------
|    |                                                                              
|    | (b)                                                                          
|    |                                                                              
|    |                                                                              
|    |                                                                              
|    |                                                                              
|    |                                                                              
|    |                                                                              
|    |                                                                              
|    |                                                                              
|    |                                                                              
|    |                                                                              
|    |                                                                              
|    |                                                                              
|    |                                                                              
|    |                                                                              
|    |                                                                              
|    |                                                                              
|    |                                                                              
|    |                                                                              
|    |                                                                              

F-22

---

|MEDICURE INC.                                 
|----------------------------------------------
|Notes to the Consolidated Financial Statements
|(Expressed in Canadian dollars)               
|Years ended May
      31, 2010, 2009 and 2008 

|16. | Reconciliation of generally accepted accounting
      principles (continued):
|--- | -----------------------------------------------------------------------------
|    |                                                                              
|    | (b)                                                                          
|    |                                                                              
|    |                                                                              
|    |                                                                              
|    |                                                                              
|    |                                                                              
|    | (c)                                                                          
|    |                                                                              
|    |                                                                              

| |                                                                                                                                               |   | 2010        |   |   | 2009        |   |   | 2008        |  
| | --------------------------------------------------------------------------------------------------------------------------------------------- | - | ----------- | - | - | ----------- | - | - | ----------- | -
| |                                                                                                                                               |   |             |   |   |             |   |   |             |  
| | Loss for the year, Canadian GAAP                                                                                                              | $ | (5,532,506  | ) | $ | (13,315,827 | ) | $ | (57,402,521 | )
| | Adjustments for the following:                                                                                                                |   |             |   |   |             |   |   |             |  
| | Intangible assets (a)                                                                                                                         |   | (139,601    | ) |   | (234,990    | ) |   | (572,520    | )
| | Amortization of intangible assets (a)                                                                                                         |   | 65,153      |   |   | 61,821      |   |   | 179,587     |  
| | Impairment of
      intangible assets (a)                                                                                                     |   | 765,294     |   |   | 1,755,955   |   |   | 883,784     |  
| | Change in fair value of warrants (b)                                                                                                          |   | 69,351      |   |   | -           |   |   | -           |  
| |                                                                                                                                               |   |             |   |   |             |   |   |             |  
| |                                                                                                                                               |   |             |   |   |             |   |   |             |  
| | Loss for the year, U.S. GAAP                                                                                                                  | $ | (4,772,309  | ) | $ | (11,733,041 | ) | $ | (56,911,670 | )
| |                                                                                                                                               |   |             |   |   |             |   |   |             |  
| |                                                                                                                                               |   |             |   |   |             |   |   |             |  
| | Basic and diluted loss per share, U.S. GAAP                                                                                                   | $ | (0.04       | ) | $ | (0.09       | ) | $ | (0.45       | )
| |                                                                                                                                               |   |             |   |   |             |   |   |             |  
| | Weighted average
      number of common shares                                                                                                |   | 130,307,552 |   |   | 130,307,552 |   |   | 125,476,086 |  
| |                                                                                                                                               |   |             |   |   |             |   |   |             |  
| |                                                                                                                                               |   |             |   |   |             |   |   |             |  
| | The impact of the measurement
      differences to U.S. GAAP would result in the consolidated statements of
      cash flow items as follows:
| |                                                                                                                                               |   |             |   |   |             |   |   |             |  
| |                                                                                                                                               |   |             |   |   |             |   |   |             |  
| |                                                                                                                                               |   | 2010        |   |   | 2009        |   |   | 2008        |  
| |                                                                                                                                               |   |             |   |   |             |   |   |             |  
| | Operating activities                                                                                                                          | $ | (1,592,410  | ) | $ | (10,653,129 | ) | $ | (40,544,020 | )
| | Investing activities                                                                                                                          |   | (2,230      | ) |   | (3,552      | ) |   | (14,588     | )
| | Financing activities                                                                                                                          |   | -           |   |   | -           |   |   | 22,586,358  |  

F-23

---

|MEDICURE INC.                                 
|----------------------------------------------
|Notes to the Consolidated Financial Statements
|(Expressed in Canadian dollars)               
|Years ended May
      31, 2010, 2009 and 2008 

|16. | Reconciliation of generally accepted accounting
      principles (continued):
|--- | -----------------------------------------------------------------------------
|    |                                                                              
|    | (c)                                                                          
|    |                                                                              
|    |                                                                              

| |                                       |   | 2010         |   |   | 2009         |   |   | 2008        | 
| | ------------------------------------- | - | ------------ | - | - | ------------ | - | - | ----------- | 
| |                                       |   |              |   |   |              |   |   |             | 
| | Deferred debt issue expenses          | $ | 2,014,801    |   | $ | 2,250,518    |   | $ | 2,554,081   | 
| | Long-term debt                        |   | 26,155,000   |   |   | 27,292,500   |   |   | 36,741,000  | 
| | Warrant liability                     |   | 37,971       |   |   | -            |   |   | -           | 
| | Intangible assets                     |   | 3,845,916    |   |   | 4,676,656    |   |   | 5,510,661   | 
| | Capital stock and contributed surplus |   | 136,304,087  |   |   | 145,246,995  |   |   | 144,921,967 | 
| | Deficit                               |   | (161,867,677 | ) |   | (166,053,766 | ) |   | 154,320,725 | 

| | (d) | Recent accounting pronouncements:                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
| | --- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |     |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
| |     | The following accounting standards were issued recently
      by the FASB. The Company is currently evaluating the impact of these new
      standards on its consolidated financial statements.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
| |     |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
| |     | Codification and Hierarchy of Generally Accepted
      Accounting Principles                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
| |     |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
| |     | In June 2009, the Financial Accounting Standards Board
      (FASB) issued Accounting Standards Update (ASU) No. 2009-01, Topic
      105 - Generally Accepted Accounting Principles (formerly SFAS 168, The
      FASB Accounting Standards Codification TM and the Hierarchy of Generally
      Accepted Accounting Principles). Accounting Standards Codification
      (ASC) Topic 105 establishes the FASB Accounting Standards
      Codification®(Codification) as the source of authoritative
      accounting principles recognized by the FASB to be applied by
      non-governmental entities in the preparation of financial statements in
      conformity with US GAAP for Securities and Exchange Commission (SEC)
      registrants. All guidance contained in the Codification carries an equal
      level of authority. The Codification supersedes all existing non-SEC
      accounting and reporting standards. The FASB will no longer issue new
      standards in the form of Statements, FASB Staff Positions or Emerging
      Issues Task Force Abstracts. The FASB will instead issue new standards in
      the form of ASUs. The FASB will not consider ASUs as authoritative in
      their own right and ASUs will serve only to update the Codification,
      provide background information about the guidance and provide the basis
      for conclusions on the changes in the Codification. These changes and the
      Codification itself do not change US GAAP. The adoption of these changes
      has only impacted the manner in which new accounting guidance under US
      GAAP is referred and did not impact the Company's consolidated financial
      statements.
| |     |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
| |     | Consolidation of Variable Interest
      Entities                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
| |     |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
| |     | In December 2009, the FASB issued ASU 2009-17,
      Consolidations (Topic 810), Improvements to Financial Reporting by
      Enterprises Involved with Variable Interest Entities (formerly SFAS 167,
      Amendments to FASB Interpretation No. 46(R)), which amends the
      consolidation guidance for variable interest entities (VIE). The changes
      include the elimination of the exemption for qualifying special purpose
      entities and a new approach for determining who should consolidate a VIE.
      In addition, changes to when it is necessary to reassess who should
      consolidate a VIE have also been made.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
| |     |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
| |     | In determining the primary beneficiary, or entity
      required to consolidate a VIE, quantitative analysis of who absorbs the
      majority of the expected losses or receives a majority of the expected
      residual returns or both of the VIE is no longer required. Under ASU
      2009-17, an entity is required to assess whether its variable interest or
      interests in an entity give it a controlling financial interest in the
      VIE, which involves more qualitative analysis.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           

F-24

---

|MEDICURE INC.                                 
|----------------------------------------------
|Notes to the Consolidated Financial Statements
|(Expressed in Canadian dollars)               
|Years ended May
      31, 2010, 2009 and 2008 

|16. | Reconciliation of generally accepted accounting
      principles (continued):
|--- | -----------------------------------------------------------------------------

| | (d) | Recent accounting pronouncements
      (continued):
| | --- | ---------------------------------------------------

Additional disclosures will be
  required under this ASU to provide more transparent information regarding an
  entitys involvement with a VIE. The provisions of this ASU are to be applied
  for years beginning after November 15, 2009, for interim periods within those
  years, and for interim and annual reporting periods thereafter. Early adoption
  is not permitted.

Accounting for Transfers of
  Financial Assets

In December 2009, the FASB issued ASU
  2009-16, Transfers and Servicing (Topic 860), an Amendment of the Accounting
  for Transfers of Financial Assets, (formerly SFAS 166, Accounting for Transfers
  of Financial Assets). This ASU significantly changes how companies account for
  transfers of financial assets. The ASU provides revised guidance in a number of
  areas including the elimination of the qualifying special purpose entity
  concept, the introduction of a new participating interest definition that must
  be met for transfers of portions of financial assets to be eligible for sale
  accounting, clarification and amendments to the derecognition criteria for a
  transfer to be accounted for as a sale, a change to the amount of recognized
  gain or loss on a transfer accounted for as a sale when beneficial interests are
  received by the transferor, and extensive new disclosures. The provisions of
  this ASU are to be applied to transfers of financial assets occurring in years
  beginning after November 15, 2009.

Fair Value Measurements and
  Disclosures

In January 2010, the FASB issued ASU
  2010-06, Fair Value Measurements and Disclosures (Topic 810) Improving
  Disclosures About Fair Value Measurements. This ASU provides further disclosure
  requirements for recurring and non-recurring fair value measurements. These
  disclosure requirements include transfers in and out of Level 1 and 2 and
  additional information relating to activity in Level 3 fair value measurements.
  The ASU also provides clarification on the level of disaggregation for
  disclosure of fair value measurement. The new disclosures and clarifications are
  effective for interim and annual periods beginning after December 15, 2009,
  except for disclosures about activity in Level 3 fair value measurements, which
  are effective for fiscal years beginning after December 15, 2010 and for interim
  periods within those fiscal years.

Multiple-Deliverable
  Arrangements

In October 2009, the FASB provided
  amendments to the criteria for separating consideration in multiple-deliverable
  arrangements, established a selling price hierarchy for determining the selling
  price of a deliverable, and eliminated the residual method of allocation of
  consideration by requiring that the arrangement consideration be allocated at
  the inception of the arrangement to all deliverables using the relative selling
  price method. FASB also requires expanded disclosures related to
  multiple-deliverable revenue arrangements, including information about the
  significant judgmental made and changes to those judgments, as well as how the
  application of the relative selling-price method affects the timing and amount
  of revenue recognition. These amendments will be effective prospectively for
  revenue arrangements entered into or materially modified in the fiscal years
  beginning on or after June 15, 2010.

Revenue Recognition for Research
  and Development Transactions

In April 2010, FASB published guidance
  on defining a milestone and determining when it may be appropriate to apply the
  milestone method of revenue recognition for research or development
  transactions. Consideration that is contingent on achievement of a milestone in
  its entirety may be recognized as revenue in the period in which the milestone
  is achieved only if the milestone is judged to meet certain criteria to be
  considered substantive. Milestones should be considered substantive in their
  entirety and may not be bifurcated. An arrangement may contain both substantive
  and non-substantive milestones that should be evaluated individually. The
  amendments are effective on a prospective basis for milestones achieved in
  fiscal years, and interim periods within those years, beginning on or after June
  15, 2010. Early adoption is permitted.

F-25

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82

Other Schedules

Information required pursuant to Schedule 21.12 -04 of
Regulation S-X has been disclosed on page 6. See Item 3A  Selected Financial
Information.

Information required pursuant to Schedule 21.12 -09 of
Regulation S-X is not applicable.

ITEM 18. FINANCIAL STATEMENTS

Not applicable.

ITEM 19. EXHIBITS

|Number | Exhibit                                                                                                                                                                                                                                                  
|------ | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|       |                                                                                                                                                                                                                                                          
|1.     | Articles of Incorporation
      and Bylaws:                                                                                                                                                                                                              
|       |                                                                                                                                                                                                                                                          
|1.1    | Medicures Articles of
      Incorporation dated September 15, 1997 [1];                                                                                                                                                                                 
|1.2    | Lariats Articles of Incorporation dated June
      3, 1997 [1];                                                                                                                                                                                         
|1.3    | Medicures Certificate of
      Continuance from Manitoba to Alberta dated December 3, 1999 [1];                                                                                                                                                         
|1.4    | Certificate of Amalgamation for Medicure and
      Lariat dated December 22, 1999 [1];                                                                                                                                                                   
|1.5    | Medicures Certificate of
      Continuance from Alberta to Canada dated February 23, 2000 [1];                                                                                                                                                          
|1.6    | Amended Certificate of Continuance and Articles
      of Continuance dated February 20, 2003 [3];                                                                                                                                                        
|1.7    | Bylaws [5];                                                                                                                                                                                                                                              
|1.8    | Bylaw No. 2 **                                                                                                                                                                                                                                           
|       |                                                                                                                                                                                                                                                          
|4.     | Material Contracts and Agreements:                                                                                                                                                                                                                       
|       |                                                                                                                                                                                                                                                          
|4.1    | Transfer Agency Agreement between Montreal
      Trust Company of Canada and the Company dated as of January 26, 2000,
      whereby Montreal Trust Company of Canada agreed to act as transfer agent
      and registrar with respect to the Shares [1];
|       |                                                                                                                                                                                                                                                          
|4.2    | Medicure International Licensing Agreement
      between the Company and Medicure International Inc. dated June 1, 2000,
      wherein the Company granted Medicure International Inc a license with
      regard to certain intellectual property [1];  
|       |                                                                                                                                                                                                                                                          
|4.3    | Development Agreement between Medicure
      International Inc. and CanAm Bioresearch Inc. dated June 1, 2000, wherein
      CanAm Bioresearch Inc. agreed to conduct research and development
      activities for Medicure International [1];          
|       |                                                                                                                                                                                                                                                          
|4.4    | Amendment to the Consulting Services Agreement
      dated February 1, 2002 between A.D. Friesen Enterprises Ltd. and the
      Company whereby consulting services will be provided to the Company by Dr.
      Albert D. Friesen [2];                  
|       |                                                                                                                                                                                                                                                          
|4.5    | Stock Option Plan approved February 4, 2002
      [3];                                                                                                                                                                                                   
|       |                                                                                                                                                                                                                                                          
|4.5    | Amendment dated March 1, 2002 to the
      Development Agreement between Medicure International Inc. and CanAm
      Bioresearch Inc [5];                                                                                                                

---

83

|4.7  | Amendment dated August 7, 2003 to the Development
      Agreement between Medicure International Inc. and CanAm Bioresearch Inc
      [3];                                                                                                                                                                                   
|---- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|     |                                                                                                                                                                                                                                                                                                                              
|4.8  | Amendment to the Consulting Services Agreement dated
      October 1, 2003 between A.D. Friesen Enterprises Ltd. and the Company
      whereby consulting services will be provided to the Company by Dr. Albert
      D. Friesen [4];                                                                                       
|     |                                                                                                                                                                                                                                                                                                                              
|4.9  | Employment Agreement with Dawson Reimer dated October 1,
      2001 [4];                                                                                                                                                                                                                                                     
|     |                                                                                                                                                                                                                                                                                                                              
|4.10 | Amendment to Employment Agreement dated April 5, 2005
      between A.D. Friesen Enterprises Ltd. and the Company [5];                                                                                                                                                                                                       
|     |                                                                                                                                                                                                                                                                                                                              
|4.11 | Amendment to Employment Agreement dated April 5, 2005
      between Dawson Reimer and the Company [5];                                                                                                                                                                                                                       
|     |                                                                                                                                                                                                                                                                                                                              
|4.12 | Amendment to Employment Agreement dated April 5, 2005
      between Derek Reimer and the Company [5];                                                                                                                                                                                                                        
|     |                                                                                                                                                                                                                                                                                                                              
|4.13 | Amendment dated July 8, 2005 to the Development Agreement
      between Medicure International Inc. and CanAm Bioresearch Inc
  [5];                                                                                                                                                                                         
|     |                                                                                                                                                                                                                                                                                                                              
|4.14 | Amendment to Employment Agreement dated October 1, 2005
      between A.D. Friesen Enterprises Ltd. and the Company [6];                                                                                                                                                                                                     
|     |                                                                                                                                                                                                                                                                                                                              
|4.15 | Amendment to Development Agreement dated June 1, 2000
      between CanAm Bioresearch Inc. and Medicure International Inc. dated July
      4, 2006 [6];                                                                                                                                                                     
|     |                                                                                                                                                                                                                                                                                                                              
|4.16 | Amended Stock Option Plan approved October 25, 2005
      [6];                                                                                                                                                                                                                                                               
|     |                                                                                                                                                                                                                                                                                                                              
|4.17 | Amendment to Employment Agreement dated October 1, 2006
      between A.D. Friesen Enterprises Ltd. and the Company [7];                                                                                                                                                                                                     
|     |                                                                                                                                                                                                                                                                                                                              
|4.18 | Amended License Agreement between Medicure and the
      University of Manitoba dated November 24, 2006, originally dated August
      30, 1999, wherein the University of Manitoba granted to Medicure an
      exclusive license with regard to certain intellectual property (the U of
      M Licensing Agreement) [7];
|     |                                                                                                                                                                                                                                                                                                                              
|4.19 | Amendment to Employment Agreement dated October 1, 2007
      between A.D. Friesen Enterprises Ltd. and the Company [8];                                                                                                                                                                                                     
|     |                                                                                                                                                                                                                                                                                                                              
|4.20 | Amended Stock Option Plan approved October 2, 2007 as
      filed on October 9, 2007 Form S-8 #333-146574                                                                                                                                                                                                                    
|     |                                                                                                                                                                                                                                                                                                                              
|4.21 | Employment Agreement with Dwayne Henley June 10, 2008
      [8]                                                                                                                                                                                                                                                              
|     |                                                                                                                                                                                                                                                                                                                              
|4.22 | Debt financing agreement between Birmingham Associates
      Ltd. and the Company dated September 17, 2007 [8].                                                                                                                                                                                                              
|     |                                                                                                                                                                                                                                                                                                                              
|4.23 | Business and administration services agreement between
      Genesys Venture Inc. and the Company dated October 1,
  2010.                                                                                                                                                                                                   

---

84

|4.24 | Master services agreement
        between GVI Clinical Development Solutions Inc. and the Company dated
        June 9, 2009.                            
|---- | ---------------------------------------------------------------------------------------------------------------------------------------------------------
|     |                                                                                                                                                          
|11.  | Code of Ethics [4].                                                                                                                                      
|     |                                                                                                                                                          
|12.1 | Certification
        of CEO pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 **.                                                               
|     |                                                                                                                                                          
|12.2 | Certification
        of CFO pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 **.                                                               
|     |                                                                                                                                                          
|13.1 | Certification
        of CEO and CFO pursuant to 18 U.S.C. Section 1350, as adopted pursuant
        to Section 906 of the Sarbanes-Oxley Act of 2002 **.
|     |                                                                                                                                                          
|     | [1] Herein incorporated by reference
      as previously included in the Companys Form 20-F registration statement
      filed on January 30, 2001.     
|     |                                                                                                                                                          
|     | [2]  Herein incorporated by
      reference as previously included in the Companys Form 20-F annual
      report filed on December 31, 2002.            
|     |                                                                                                                                                          
|     | [3]  Herein incorporated by
      reference as previously included in the Companys Form 20-F annual
      report filed on October 20, 2003.             
|     |                                                                                                                                                          
|     | [4] Herein incorporated by reference
      as previously included in the Companys Form 20-F annual report filed
      on September 15, 2004.            
|     |                                                                                                                                                          
|     | [5] Herein incorporated by reference
      as previously included in the Companys Form 20-F annual report filed
      on August 19, 2005.               
|     |                                                                                                                                                          
|     | [6]  Herein incorporated by
      reference as previously included in the Companys Form 20-F annual
      report filed on August 10, 2006.              
|     |                                                                                                                                                          
|     | [7]  Herein incorporated by
      reference as previously included in the Companys Form 20-F annual
      report filed on August 22, 2007.              
|     |                                                                                                                                                          
|     | [8] Herein incorporated by reference
      as previously included in the Companys Form 20-F annual report filed
      on August 27, 2008.               
|     |                                                                                                                                                          
|     | [9]  Herein incorporated by
      reference as previously included in the Companys Form 20-F annual
      report filed on September 2, 2009.            
|     |                                                                                                                                                          
|23.1 | Consent
        of Independent Registered Pubic Accounting Firm **                                                                                       
|     |                                                                                                                                                          
|     | ** Filed Herewith                                                                                                                                        

---

85

SIGNATURE PAGE

Pursuant to the requirements of Section 12 of the Securities
Exchange Act of 1934, the Company certifies that it meets all of the
requirements for filing on Form 20-F and has duly caused this annual report to
be signed on its behalf by the undersigned, thereunto duly authorized.

Dated: September 28, 2010

ON BEHALF OF THE CORPORATION, MEDICURE INC.

|per:                      | 
|------------------------- | 
|                          | 
|/s/ Albert Friesen        | 
|                          | 
|Albert D. Friesen, Ph.D.  | 
|Chairman, President & CEO | 

---