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UNITED STATESSECURITIES AND EXCHANGE COMMISSIONWashington, D.C.
20549

FORM 10-K

(Mark One)

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

For the fiscal year ended January 31, 2011

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

For the transition period from [ ] to [ ]

Commission file number 333-161157

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

|British Columbia                                                     | N/A                                 
|-------------------------------------------------------------------- | ------------------------------------
|(State or other jurisdiction of incorporation or
      organization) | (I.R.S. Employer Identification No.)
|                                                                     |                                     
|                                                                     |                                     
|1275 West 6thAvenue,
      Vancouver, British Columbia               | V6H 1A6                             
|(Address of principal executive offices)                             | (Zip Code)                          

Registrant's telephone number, including area code:
604.221.0595

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

|Title of Each Class | Name of Each Exchange On Which Registered
|------------------- | -----------------------------------------
|N/A                 | N/A                                      

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

N/A(Title of class)

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

Indicate by check mark if the registrant is not required to file
reports pursuant to Section 13 or Section 15(d) of the Act 
Yes [ ]     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 last 90
days.
Yes [ ]     No [ x ]

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Indicate by check mark whether the registrant has submitted
electronically and posted on its corporate Website, if any, every Interactive
Data File required to be submitted and posted pursuant to Rule 405 of Regulation
S-K (§229.405 of this chapter) during the preceding 12 months (or for such
shorter period that the registrant was required to submit and post such
files).
Yes [ ]     No [ ]

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

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

|Large accelerated filer [ ] | Accelerated filer [ ]          
|--------------------------- | -------------------------------
|Non-accelerated filer [ ]   | Smaller reporting company [ x ]

Indicate by check mark whether the registrant is a shell company
(as defined in Rule 12b-2 of the Exchange Act). 
Yes[ ]     No[ x ]

The aggregate market value of Common Stock held by
non-affiliates of the Registrant on July 31, 2010 was $Nil based on a $Nil
average bid and asked price of such common equity, as of the last business day
of the registrants most recently completed second fiscal quarter (there were no
trades during this quarter).

Indicate the number of shares outstanding of each of the
registrants classes of common stock as of the latest practicable
date.33,621,618 as of May 5, 2011

DOCUMENTS INCORPORATED BY REFERENCE

None.

2

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TABLE OF CONTENTS

|Item
      1.  | Business                                                                                                                 | 4 
|-------------- | ------------------------------------------------------------------------------------------------------------------------ | --
|Item
      1A. | Risk
      Factors                                                                                                       | 30
|Item
      1B. | Unresolved
      Staff Comments                                                                                          | 40
|Item
      2.  | Properties                                                                                                               | 41
|Item
      3.  | Legal
      Proceedings                                                                                                  | 41
|Item
      4.  | [Removed
      and Reserved]                                                                                             | 41
|Item
      5.  | Market
      for Registrants Common Equity, Related Stockholder Matters and Issuer
      Purchases of Equity Securities | 41
|Item
      6.  | Selected
      Financial Data                                                                                            | 42
|Item
      7.  | Managements
      Discussion and Analysis of Financial Condition and Results of Operations                              | 42
|Item
      7A. | Quantitative
      and Qualitative Disclosures About Market Risk                                                         | 47
|Item
      8.  | Financial
      Statements and Supplementary Data                                                                        | 47
|Item
      9.  | Changes
      in and Disagreements With Accountants on Accounting and Financial
      Disclosure                         | 63
|Item
      9A. | Controls
      and Procedures                                                                                            | 63
|Item
      9B. | Other
      Information                                                                                                  | 64
|Item
      10. | Directors,
      Executive Officers and Corporate Governance                                                             | 64
|Item
      11. | Executive
      Compensation                                                                                             | 69
|Item
      12. | Security
      Ownership of Certain Beneficial Owners and Management and Related
      Stockholder Matters.              | 71
|Item
      13. | Certain
      Relationships and Related Transactions, and Director Independence                                          | 73
|Item
      14. | Principal
      Accounting Fees and Services                                                                             | 74
|Item
      15. | Exhibits,
      Financial Statement Schedules                                                                            | 74

3

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PART I

|Item 1. | Business
|------- | --------

This annual report contains forward-looking statements. These
statements relate to future events or our future financial performance. In some
cases, you can identify forward-looking statements by terminology such as may,
should, expects, plans, anticipates, believes, estimates,
predicts, potential or continue or the negative of these terms or other
comparable terminology. These statements are only predictions and involve known
and unknown risks, uncertainties and other factors, including the risks in the
section entitled Risk Factors, that may cause our or our industrys actual
results, levels of activity, performance or achievements to be materially
different from any future results, levels of activity, performance or
achievements expressed or implied by these forward-looking statements.

Although we believe that the expectations reflected in the
forward-looking statements are reasonable, we cannot guarantee future results,
levels of activity, performance or achievements. Except as required by
applicable law, including the securities laws of the United States, we do not
intend to update any of the forward-looking statements to conform these
statements to actual results.

Our financial statements are stated in Canadian Dollars
(CDN$) and are prepared in accordance with United States Generally Accepted
Accounting Principles.

In this annual report, unless otherwise specified, all dollar
amounts are expressed in United States dollars and all references to common
shares refer to the common shares in our capital stock.

As used in this annual report, the terms we", "us", "our" and
"our company" mean Neurokine Pharmaceuticals Inc., unless otherwise
indicated.

General Overview

We are a development stage biopharmaceutical company and have
only recently begun operations. We were incorporated in the Province of British
Columbia, Canada under the name 649186 B.C. Ltd., on June 10, 2002. On September 9, 2003 we changed our name to Xerxes Health
Corp. and on June 26, 2007 we adopted our current name, Neurokine
Pharmaceuticals Inc.. We have no subsidiaries.

Our principal executive office is located at 1275 West 6th
Avenue, Vancouver, British Columbia, Canada, V6H 1A6. Our telephone number is
(604) 221-0595.

We are engaged in the development and commercialization of
therapeutic pharmaceutical products with a strategic emphasis on research and
development to innovate applications for existing drugs. This is commonly known
as drug re-profiling. Our research and development activities are focused on
assessing known drugs and compounds, developing hypotheses concerning their
usage for new indications (diseases), and conducting experimentation and
clinical research to test those hypotheses. Where appropriate based on our
research, we intend to depart from a strict re-profiling strategy to develop new
variants of, or delivery methods for, existing drugs or compounds.

Our business model currently includes the following
activities:

- identifying new indications for approved and marketed products;
- securing intellectual property rights to those products;
- conducting preliminary laboratory tests and clinical trials; and
- establishing partnerships with large pharmaceutical and biotechnology
  companies to develop and commercialize products outside of their initial
  market focus.

4

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Our management believes that our strategic emphasis on drug
re-profiling is superior to a strategy based exclusively on new drug development
because the drugs we are seeking to re-profile have already passed a significant
number of required regulatory tests. Similarly, when compared to developing a
new drug, re-profiling typically requires less research and development time and
cost and offers a greater possibility of obtaining regulatory approval and
ultimately achieving commercialization. On the other hand, drug re-profiling can
also pose certain challenges such as securing property rights for non-generic
drugs, the cost of which may make re-profiling prohibitive. In spite of any
advantages our strategy may provide, we will likely face a wide range of common
pharmaceutical industry challenges. For example, any products that we may
develop will be required to undergo a time-consuming, costly and burdensome
pre-market approval process and we may be unable to obtain regulatory approval
for them.

We may not commence clinical testing of any products that we
may develop and the commercial value of any clinical study that we conduct will
depend significantly upon our choice of indication and our patient population
selection. If we are unable to commence clinical testing or if we make a poor
choice in terms of clinical strategy, we may never achieve revenues. Our
clinical trials may also fail to adequately demonstrate the safety or efficacy
of our product candidates for our chosen indications, which may force us to
abandon our business plan. Even if we are able to ultimately obtain regulatory
approval for any products that we may develop, we may never become
profitable.

To date, we have concentrated our research and development
activities on innovating uses for existing drugs for the treatment of diseases
mediated by acute and chronic inflammatory reactions. Through our research, we
have identified and, where required, secured the rights necessary to develop two
anti-inflammatory products, NK-001 and NK-002, that we believe hold promising
prospects for the treatment of neurocognitive impairment and Alzheimers
disease, respectively.

NK-001 is a new application of an existing new drug and
therefore adheres to our re-profiling strategy. We do not anticipate that NK-001
will require pre-clinical, preliminary safety or pharmacokinetic (the process by
which the drug is metabolized by the body) studies. NK-001 is a new application
of the drug Etanercept, which is marketed under United States Food and Drug
Administration (FDA) approval as a treatment for rheumatoid arthritis. Because
Etanercept has already been the subject of safety studies on a patient
population similar to patients targeted by NK-001, we do not anticipate having
to complete these additional studies before proceeding to later-stage clinical
trials, and we have received approval to conduct clinical trials in South Africa
on that basis.

In contrast, NK-002 is a new formulation for the delivery of an
existing drug and is therefore properly classified as a new drug. As a new drug,
NK-002 will require a complete development program, including the full range of
successful pre-clinical, safety and pharmacokinetic studies before advanced
clinical testing will be permitted to occur. Both of our planned products,
including our flagship product NK-001, are in the development stage as of the
date of this Annual Report and neither has been approved to date for sale to the
public in any country.

The research and development activities required to produce the
intellectual property underlying our two product candidates, NK-001and NK-002,
was carried out by Dr. Ahmad Doroudian, our director and sole officer, Jonathan
Willmer, our former Chief Medical Officer and former director, and Dr. Hassan
Salari, a former officer and director, in their capacity as our officers. To
date, we have outsourced all other research and development work to third
parties, including clinical trial planning, laboratory services, data
management, statistical services and report writing. We anticipate that we will
continue to rely on third parties to satisfy our research and development
requirements until such time as it becomes cost effective to hire employees to
satisfy those requirements. We have not carried on any research and development
activities since January 2009 and our ability to continue our research and
development activities depends on securing additional financing.

A brief summary of the major stages of our business plan that
we are seeking to complete over the next 12 months and the cost estimates to
complete each step are as follows:

Commence and complete our planned Phase II clinical trials of
NK-001 (50 patients) - $1,355,000; and

- Complete pre-clinical studies of NK-002 - $500,000.

5

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We will also be required to complete additional steps in order
to market and sell any of our products to the public. Our determination of which
specific additional steps we will need to complete before any of our products
become marketable may vary depending on the results of the clinical trials and
studies mentioned above. The following table sets out the various steps we
anticipate we must complete in order to carry out our business plan for our two
planned products. Estimated costs and completion times have been indicated where
estimable, as has any progress made to date.

|                                                                                                         | Product                                                                                                                                                                                                               
|-------------------------------------------------------------------------------------------------------- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Anticipated
      Steps                                                                                  | NK-001                                                                                                                                                                                                                
|Secure Intellectual Property Protection of Drug Concept                                                  | Patent Application Submitted                                                                                                                                                                                          
|Secure Rights to Use Re-Profiled Drug                                                                    | Not Required (Generic Drug)                                                                                                                                                                                           
|Pre-Clinical Testing                                                                                     | Not Required                                                                                                                                                                                                          
|Secure Investigational New Drug Approval or Equivalent                                                   | Not Required (Generic Drug)                                                                                                                                                                                           
|Phase I Clinical Trials                                                                                  | Not Required                                                                                                                                                                                                          
|Phase II Clinical Trials                                                                                 | Clinical Trial Protocol Complete and Approved for
      Implementation Clinical Trials Delayed Until Sufficient Financing
      is Secured Estimated Cost: $1,355,000 Estimated Completion Date:
      September, 2012
|Phase III Clinical Trials                                                                                | Required                                                                                                                                                                                                              
|Submit New Drug Application or Equivalent and Obtain
      Marketing Approval                            | Required                                                                                                                                                                                                              
|Finance Marketing and Manufacturing of Approved Drug or
      Secure Marketing and Manufacturing Partner | Required                                                                                                                                                                                                              

Our Current Business

We are a development stage biopharmaceutical company engaged in
the development and commercialization of therapeutic pharmaceutical products,
with a strategic emphasis on the innovation of new therapeutic uses for existing
drugs. This is commonly known as drug re-profiling. Our research and development
activities are focused on assessing known drugs and compounds, developing
hypotheses concerning their usage for new indications (diseases), and conducting
experimentation and clinical research to test those hypotheses. Where
appropriate based on our research, we intend to depart from a strict
re-profiling strategy to develop new variants of, or delivery methods for,
existing drugs or compounds. Our focus on drug-reprofiling, although not
uncommon amongst pharmaceutical companies, differs from traditional drug
development practices which focus largely on the development of new drugs.

6

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To date, we have concentrated our research on innovating
applications for existing drugs for the treatment of diseases and conditions
mediated by acute and chronic inflammatory reactions. The diseases and
conditions that have been the subject of our research include:

- neurocognitive impairment, and specifically, neurocognitive impairment in
  post-coronary artery bypass graft (also known as CABG or heart bypass)
  surgery patients;
- degenerative central nervous system diseases, and specifically, Alzheimers
  disease; and
- degenerative disk disease, and specifically, discogenic neck and back pain
  conditions.

Through our research we have identified and, where required,
secured the rights necessary to develop two anti-inflammatory products, NK-001
and NK-002, that we believe hold promising prospects for the treatment of
neurocognitive impairment and Alzheimers disease, respectively. Of these,
NK-001 falls under our re-profiling strategy, as it is a new application of the
drug Etanercept, which is marketed under FDA approval as a treatment for
rheumatoid arthritis. Accordingly, we do not anticipate that NK-001 will require
pre-clinical, preliminary safety or pharmacokinetic (the process by which the
drug is metabolized by the body) studies. Because Etanercept has already been
the subject of safety studies on a patient population similar to patients
targeted by NK-001, we do not anticipate requiring additional pre-clinical or
safety studies before proceeding to later stage clinical trials, and we have
received approval to conduct clinical trials in South Africa on that basis.

In contrast, NK-002 is a new formulation for the delivery of
Etanercept and is therefore properly classified as a new drug. As a new drug,
NK-002 will require a full development program, including a full range of
successful pre-clinical, safety, and pharmacokinetic studies before advanced
clinical testing will be permitted to occur. Both of our planned products,
including our flagship product NK-001, are in the development stage as of the
date of this Annual Report and neither has been approved for sale to the public
in any country.

The research and development activities required to produce the
intellectual property underlying our two product candidates, NK-001 and NK-002,
was carried out by Dr. Ahmad Doroudian, our director and sole officer, Jonathan
Willmer, our former Chief Medical Officer and former director, and Dr. Hassan
Salari, a former officer and director, in their capacity as our officers. To
date, we have outsourced all other research and development work to third
parties, including clinical trial planning, laboratory services, data
management, statistical services and report writing. We have relied primarily on
three contractors in this regard. The first, Globe Laboratories Inc., is a
center for drug research and development founded and controlled by Julian
Salari, a former officer and director of our company, that provides us with
expertise in manufacturing certain generic drugs that are the basis of our
planned products. The second, Virtus Clinical Development (Pty.) Limited is a
South African firm that specializes in the planning and execution of clinical
trials and has developed the clinical protocol of NK-001 on our behalf and
entered into an agreement with us to conduct that clinical trial. The third,
Northern Lipids Inc., assisted us to develop certain liposomal encapsulations
for our development of NK-002. We anticipate that we will continue to rely on
third parties to satisfy our research and development requirements until such
time as it becomes cost effective to hire employees to satisfy those
requirements.

Our Strategy: A Focus on Drug Re-Profiling Complimented by
Strategic New Drug Development.

Our highly experienced management team has implemented a
business-minded and cost-conscious approach to product research and development
by focusing on innovating new uses for existing drugs on the market, also known
as drug re-profiling, while also engaging in selective research and development
regarding the innovation of new drugs.

In order for a drug to be successful, it must be both
efficacious and acceptably safe. Therefore, before a drug may be commercially
marketed, it must be scrutinized and approved by applicable health authorities
(such as the FDA in the United States) in each country or jurisdiction where it
is sought to be sold. In pharmaceutical research and development, clinical
trials are conducted to allow safety and efficacy data to be collected for new
drugs or devices. Health authorities then scrutinize the clinical trial results
and determine, based on the results, whether a drug may be sold to the public.
Similarly, clinical trials may only take place once satisfactory information has
been gathered on the quality of the product and its non-clinical safety, and
approval to conduct the trials has been granted by the health authority in the
country where the trial is scheduled to take place.

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Clinical trials involving new drugs are commonly classified
into four phases. Each phase of the drug approval process is treated as a
separate clinical trial. The drug-development process will normally proceed
through all four phases over many years. If the drug successfully passes through
Phases I, II, and III, it will usually be approved by the national regulatory
authority for use in the general population. Phase IV trials are 'post-approval'
studies. Due to the considerable cost that may be required to complete a full
series of clinical trials, the burden of paying for all the necessary people and
services is usually borne by the sponsor, who may be the pharmaceutical or
biotechnology company that developed the drug that is the subject of the study.
Since the diversity of roles may exceed the resources of the sponsor, clinical
trials are often managed by outsourced partners such as contract research
organizations. Furthermore, approval rates for new drugs at each clinical trial
stage are prohibitively low, which may require the sponsor to finance additional
trials or abandon the drug under development altogether. The various phases of
clinical trials and the anticipated clinical trial requirements of our planned
products are described in detail in this section under the heading Clinical
Trial Phases.

The strategy of drug re-profiling seeks to avoid the cost of
repeating one or more pre-clinical, safety, pharmacokinetic or Phase I clinical
tests by applying existing drug research to new indications. In doing so, a
company may reduce the time required to complete the necessary research and
development activities, which can typically take in excess of 10 years, by more
than half, as well as reduce the corresponding development costs. Significantly,
a re-profiled drug, if efficacious for its new indication, is also more likely
to be approved by an applicable health authority because it has already been
shown to meet regulated safety standards that the vast majority of developmental
drugs fail to achieve. If a re-profiled drug is no longer protected by patent,
no relationship between the original owner or developer of the drug and the
re-profiler of the drug need exist. However, it may in some circumstances be
beneficial for the re-profiler to obtain a license from the original owner of
the drug where there exists an opportunity to receive development,
manufacturing, marketing or financing assistance from such owner.

We anticipate that our re-profiling approach will result in
faster, more efficient clinical trials and dramatically increase the chance of
obtaining regulatory approval at each clinical trial stage. In some cases (as in
the case of NK-001), we anticipate that we will be able to bypass certain
clinical trial stages as a result of basing our products on re-profiled
drugs.

Our Products

Our current product research focus is on biologics (vaccines,
blood and blood components), allergenics, somatic cells (cells relating to the
wall of the body cavity), gene therapy, tissues, and recombinant therapeutics
(drugs produced by genetic engineering) that cause cell death in tumors. Such
biologics are known as anti-tumor necrosis factors. To date, we have identified
two products as ideal candidates for development:

- NK-001 for the potential treatment of neurocognitive impairment in
  post-coronary artery bypass graft (commonly known as CABG or heart bypass)
  surgery patients; and
- NK-002 for the potential treatment of Alzheimers disease.

NK-001

NK-001 is a new application of the generic drug Etanercept for
treating neurocognitive impairment in CABG surgery patients. We consider NK-001
to be our flagship product as it is at a more advanced stage of development than
our other planned products, and we intend to apply our resources toward its
development in priority to our other planned products. Etanercept is the generic
version of the drug Enbrel, which is currently under patent protection in the
United States. However, Enbrel no longer benefits from patent protection in
South Africa, where we have conducted and will continue to conduct research and
development activities pertaining to NK-001. The United States patent for Enbrel
is scheduled to expire in 2009. As such, we do not require a license to use
Etanercept in South Africa (and, to our knowledge, in most jurisdictions outside
of the United States). Also, if our research and development activities are successful, we do not anticipate
requiring a license to manufacture or market NK-001 in the United States after
2009, provided the life of the Enbrel patent is not extended.

8

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On April 18, 2008 we filed a single United States Patent
Application (No. 61-046061) regarding the use of NK-001 (Etanercept) and similar
TNF-Alpha targeting drugs (which can generally be described as anti-inflammatory
drugs) in the treatment of post-CABG cognitive impairment. This patent
application is under examination, and a patent has not yet been granted to us or
published.

For NK-001 to become profitable, we will require our patent
application to be successful. If our application is not ultimately successful,
we may be forced to abandon our development of NK-001. For our patent
application to succeed, we may be required to complete additional research in
order to respond to enquiries from the United States Patent Office or to defend
against challenges to our patent once it is published, if at all.

TNF-Alpha Inhibitors

NK-001 is a recombinant, or an artificially created
human-soluble tumor necrosis factor protein characterized by its tendency to
specifically bind to and inhibit TNF-Alpha. Tumor necrosis factor (TNF) is a
category of protein that induces the death of tumor cells and possesses a wide
range of actions that induce inflammation. TNF-Alpha is a cytokine, a category
of polypeptide (small protein) regulator that is produced widely throughout the
body by cells of diverse origin. It is involved in systemic inflammation and is
a member of a group of cytokines that stimulate the acute phase reaction. Acute
phase reaction is the process where, in response to injury, the bodys
inflammatory cells secrete cykotines into the bloodstream to destroy or inhibit
the growth of microbes, viruses or other foreign materials. The bodys immune
cells secrete TNF-Alpha and other cykotines to defend against infectious disease
and foreign materials, and TNF-Alpha is capable of inducing inflammation and
inhibiting the growth of tumors and replication of viruses. Dysregulation and,
in particular, overproduction of TNF-Alpha have been implicated in a variety of
human diseases, including rheumatoid arthritis, ankylosing spondylitis (the
inflammation of joints in the spine), psoriatic arthritis and psoriasis. NK-001
has been used since 1998 to treat a number of these diseases.

CABG and Neurocognitive Impairment

We intend to apply NK-001 to the treatment of neurocognitive
impairment in post-coronary artery bypass graft surgery patients. This surgery
is commonly known as CABG or heart bypass surgery. CABG has become a standard
method of treatment and has become one of the most commonly performed open
heart operations in the United States. According to a 1999 study by Selnes,
Goldsbrough, Borowicz and McKhann entitled Neurobehavioural Sequelae of
Cardiopulmonary Bypass (The Lancet, Vol. 353, May 8, 1999), about
800,000 patients internationally and 650,000 patients in the United States
undergo heart bypass surgery every year.

Heart bypass surgery is recommended for selected groups of
patients with significant narrowing and blockages of the heart arteries, or
coronary artery disease. It creates new routes around narrowed and blocked
arteries, allowing sufficient blood flow to deliver oxygen and nutrients to the
heart muscle. This surgery is usually performed with the heart stopped,
necessitating the usage of cardiopulmonary bypass, a technique where a pump
temporarily takes over the function of the heart and lungs during surgery,
maintaining the circulation of blood and the oxygen content of the body.

In addition to stroke and postoperative delirium, cognitive
impairment is a recognized adverse complication of heart bypass surgery.
According to a 2009 study published in the CHEST journal of the American College
of Chest Physicians, short-term post-CABG cognitive impairment has been reported
as having an incidence ranging from 33% to 83%, and long-term cognitive
impairment an incidence ranging of 20% to 60%. Post-heart bypass cognitive
impairment exhibits itself as impairment of memory, concentration, language
comprehension and social integration. It can present days to weeks after surgery
and may remain a permanent disorder.

The cause of post-CABG cognitive impairment has been attributed
to a number of factors, including obstruction of the blood vessels of the brain
(cerebral microembolization), decreased blood flow through the brain (global
cerebral hypoperfusion), systemic and cerebral inflammation, cerebral
temperature changes, accumulation of fluid in the brain (cerebral edema),
possible blood-brain barrier dysfunction and genetic susceptibility.

9

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Post-CABG Surgery Cognitive Impairment: An Inflammatory
Phenomenon

Several reports have suggested that post-heart bypass cognitive
impairment is an inflammatory phenomenon in which inflammatory mediators, such
as cytokines (including the cykotines TNF-Alpha, interleukin -1, interleukin-8,
and interleukin-6), are released to trigger the brains inflammatory response.
It has been further observed that elevated levels of inflammatory mediators,
including TNF-Alpha, have been shown to be indicators of high morbidity (the
presence of an abnormal condition that impairs bodily function) and mortality
rates after heart bypass surgery. While most studies have looked at peripheral
levels of cytokines in response to surgical stress, it has also been reported
that elevated levels of pro-inflammatory cytokines have been detected in the
cerebrospinal fluid after heart bypass surgery. Moreover, it has been shown that
heart trauma leads not only to an increase in pro-inflammatory cytokine levels
outside the brain, but also to a concurrent marked increase in brain cytokine
levels. Accordingly, the apparent significance of pro-inflammatory cytokines,
such as TNF-Alpha, has led to the suggestion that these inflammatory mediators
may be considered as targets in the inflammatory process associated with
post-CABG cognitive impairment.

Current Treatment of Post-CABG Cognitive Impairment

Currently, prevention is considered to be the most effective
treatment strategy for post-CABG cognitive impairment, as preventative or
therapeutic interventions are limited. It has been postulated that therapeutic
interventions aimed at diminishing the inflammatory response might result in
better outcomes; for example, the use of a synthetic non-psychotropic
cannabinoid (a drug having certain attributes of cannabis that does not alter
brain function) to treat mild cognitive impairment, including post-surgical
cognitive impairment, has been described. The use of a protease inhibitor (a
class of medication used to treat or prevent viral infection), such as aprotinin
(TrasylolTM), has also been reported as having a marked protective effect on the
brain in reducing the severity of cognitive deficit developing after heart
bypass surgery.

Therapeutic Applications of TNF-Alpha Antagonists

The use of TNF-Alpha antagonists to treat various disorders has
been described. TNF-Alpha is an intracellular mediator, a protein that mediates
the immune responses produced by a variety of cells, including both types of
white blood cells (macrophages and monocytes). The responses triggered by
TNF-Alpha are initiated through its interaction with distinct TNF-Alpha cell
surface receptors.

TNF-Alpha binds to these cell surface receptors and triggers an
array of pro-inflammatory effects, including the release of other
pro-inflammatory cytokines and chemokines (a type of cykotine); the release of
enzymes which break down proteins (metalloproteinases); and an increase in the
production of proteins that line the interior surface of blood vessels
(endothelial adhesion molecules), thereby further amplifying the inflammatory
and immune cascade and inducing a plethora of inflammatory and catabolic
(molecule breakdown) effects. Interference in the binding of TNF-Alpha to cell
surface receptors of the target cell results in the neutralization of TNF-Alpha
and the blockage of its biologic effects. For example, TNF-Alpha receptor
proteins that are naturally produced in soluble form (designated as TNF-R)
inhibit TNF-Alpha action by competing with cell surface receptors for binding
TNF-Alpha, thereby blocking its biologic effects. Various TNF-Alpha targeting
drugs, also known as TNF-Alpha antagonists, TNF-Alpha inhibitors and TNF-Alpha
blockers, have been developed to neutralize or inhibit TNF-Alpha activity. These
drugs bind to inhibit TN F-Alpha from binding to its receptor and triggering the
inflammatory response. In this way, TNF-Alpha targeting drugs deactivate
TNF-Alpha.

A human-soluble TNF-Alpha receptor protein has been shown to
suppress TNF-Alpha dependent inflammatory diseases, specifically arthritis.
TNF-Alpha targeting drugs have also been shown to be effective in treating other
inflammatory diseases such as Wegeners disease, Behçets disease,
keratoscleritis, lymphomatous tracheo-bronchitis, Cogans syndrome, and rapidly
destructive crystal arthropathy. Studies in rat models have also shown that
TNF-Alpha targeting drugs can potentially be used to treat brain injuries. The
use of TNF-Alpha antagonists has also been described for the treatment of
various neuropsychiatric and neurological disorders including multiple
sclerosis, Alzheimers disease, Huntingtons disease, Parkinsons disease,
Bells palsy, PHN (shingles), influenza and HIV.

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TNF-Alpha in the Treatment of Neural Disorders

While TNF-Alpha targeting drugs have been shown to be effective
in treating various diseases associated with inflammation, their use in the
treatment of neural disorders is hampered by the inability of most TNF-Alpha
targeting drugs to cross the blood-brain barrier. The blood-brain barrier is a
cellular structure in the central nervous system that restricts the passage of
certain chemical substances and microscopic objects (e.g. bacteria) between the
bloodstream and the neural tissue itself, while still allowing the passage of
substances essential to metabolic function (e.g. oxygen). For example, the
TNF-Alpha targeting drug Etanercept, being both hydrophilic (able to bond with
water or hydrogen) and of high molecular weight, is prevented from crossing the
intact blood-brain barrier. It is also unlikely that any transport mechanism
exists for TNF-Alpha targeting drugs to enter the central nervous system.
Accordingly, for brain related diseases, conventional general administration
(administration into the blood stream) of TNF-Alpha targeting drugs is not
effective, and they must instead be administered locally (directly into the
cerebrospinal fluid) to have effect. For example, to treat Alzheimers disease
with a TNF-Alpha targeting drug such as Etanercept, the drug must be
administered adjacent to the spinal column.

Commercially Available TNF-Alpha Inhibitors:
Etanercept

Etanercept is a recombinant (engineered) DNA drug made by
combining two proteins (also known a fusion protein). It binds TNF-Alpha to
human immunoglobulin G1 (IgG1) in the body. Immunoglobulins are proteins that
play an essential role in the bodys immune system by attaching to foreign
substances, such as bacteria, and assisting to destroy them. In this way,
Etanercept can regulate excess TNF-Alpha and decrease its role in disorders
involving excess inflammation in humans and other animals, including autoimmune
diseases such as ankylosing spondylitis, juvenile rheumatoid arthritis,
psoriasis, psoriatic arthritis, rheumatoid arthritis, and, potentially, in a
variety of other disorders mediated by excess TNF-Alpha.

The most common side effects of Etanercept are mild to moderate
itching, pain, swelling and redness at the site of injection. Headache,
dizziness, nasal and throat irritation also occur. Because TNF-Alpha plays an
important role in the response of the immune system to infections, blocking the
action of TNF-Alpha with Etanercept may worsen or increase the occurrence of
infections, and patients with serious infections should not receive the
drug.

Etanercept treatment should be discontinued if a patient
develops a serious infection. Treatment using the drug is not initiated in
patients with active infections or an allergy to any of its components, and
children should receive their recommended immunizations before beginning any
treatment involving Etanercept. Etanercept should also be used with caution in
patients prone to infection, such as those with advanced or poorly-controlled
diabetes.

Some reported associated conditions may or may not be related
to Etanercept. Since Etanercept has been on the market, there have been reports
of multiple sclerosis, myelitis (inflammation of the spinal cord) and optic
neuritis (inflammation of the optic nerve) in patients using the drug.
Etanercept is not recommended for persons with preexisting diseases of the
central nervous system (brain and/or spinal cord) or for those with multiple
sclerosis, myelitis or optic neuritis. Additionally, rare cases of seriously low
blood counts (pancytopenia) have been reported in patients using the drug.

Rational and Objectives for the Application of TNF-Alpha in
the Treatment of Post-CABG Neurocognitive Impairment

While it has been speculated that preventative treatment with
an anti-TNF therapy might be a therapeutic approach to reducing inflammatory
processes associated with heart bypass surgery, no experimental data has been
provided to demonstrate the therapeutic effect of anti-TNF on post-CABG
cognitive impairment. Nevertheless, based on a review of the current medical
literature, we believe that there is sufficient rationale to pursue the
development of the treatment. As the blood-brain barrier has been shown to be
dysfunctional and leaky in this syndrome, it is expected that an unmodified
TNF-Alpha antagonist such as NK-001 (Etanercept) will cross into the brain in
sufficient amounts to diminish the inflammatory reaction.

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Our research and development objectives in applying TNF-Alpha
in the treatment of post-heart bypass neurocognitive impairment are:

- to evaluate the effects of NK-001 in preventing cognitive side effects
  following CABG surgery;
- to evaluate the safety and tolerability of NK-001 in patients undergoing
  heart bypass surgery;
- to assess blood plasma levels of NK-001 in patients undergoing CABG
  surgery. Blood plasma is the yellow liquid component of blood in which the
  blood cells are suspended. It makes up about 55% of total blood volume and is
  mostly composed of water (92% by volume). Blood plasma also contains dissolved
  proteins, glucose, clotting factors, mineral ions, hormones and carbon dioxide
  (plasma being the main medium for transporting products that are excreted by
  the body);
- to evaluate the effects of NK-001 on serum TNF-Alpha levels in patients
  undergoing heart bypass surgery (the serum is a fluid component of clotted
  blood and it lacks clotting factors and other elements which plasma includes,
  instead retaining antibodies, electrolytes and soluble proteins); and
- to examine the relationship between markers of blood brain barrier
  dysfunction and cognitive outcome in patients undergoing CABG surgery.

With the assistance of Virtus Clinical Development (Pty.)
Limited. (Virtus), a contract research organization based in South Africa, we
have designed Phase II human clinical trials of NK-001 to undertake the
aforementioned research and development objectives. Virtus provides services to
a wide range of international biotechnology and pharmaceutical companies,
assisting them in implementing their drug development programs and specifically
the design, management and monitoring of the clinical phases of such programs.
We intend to begin our clinical trials of NK-001 using 50 post-CABG surgery
patients. Our trials will be conducted in four to six separate locations in and
around Cape Town, South Africa.

To date, we have received approval for our proposed Phase II
clinical trial protocol from the Medicines Control Council of the Department of
Health (South Africa) and from the central ethics board of that country. The
protocol describes the scientific rationale, objective(s), design, methodology,
statistical considerations and organization of the planned trials. Our ability
to pursue our clinical trials was subject to the approval of our research
protocol by the Medicines Control Council.

We view NK-001 as our flagship product because, of our planned
products, it is at the most advanced stage of development. In the case of
NK-001, we believe that it is unnecessary to conduct pre-clinical studies and
Phase I clinical trials of the drug for the following reasons:

- Preclinical, Phase I safety and pharmacokinetic studies have already been
  successfully completed on Etanercept;
- Etanercept has already been tested in different patient populations (both
  genders, all age groups, and multiple ethnic groups);
- Phase II and II studies have been completed for Etanecept as applied to a
  number of indications, providing additional safety information for the use of
  the drug on older populations who are the target population for NK-001; and
- There are no existing animal models for post CABG cognitive impairment by
  which we could conduct additional safety tests on animals.

On January 28, 2009, we submitted amendments to our clinical
trial protocol that were subsequently approved by the Medicines Control Council
on May 12, 2009. As a result, we now have full authority to proceed with our
Phase II clinical trial of NK-001.

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Our study will involve identifying 50 otherwise healthy
individuals undergoing heart bypass surgery, performing pre-surgery cognitive
assessment, administering NK-001 (Etanercept) pre- and post-surgery and six
months of follow up. We anticipate that we will begin our trial in the winter of
2011, and we anticipate the full cost of the trial to be approximately
$1,350,000.

Regulatory and Patent Issues

Etanercept was first released for commercial use in late 1998.
In North America, it is co-marketed by Amgen Inc. and Pfizer Inc. under the
trade name Enbrel in two separate formulations, one in powder form and the other
as a pre-mixed liquid. Pfizer Inc. is the sole marketer of Enbrel outside of
North America.

In our research, we have worked with the generic form of
Etanercept. We currently rely on a method for producing the generic form of
Etanercept licensed to us by Globe Laboratories Inc. (Globe), a company
founded and controlled by Julian Salari, our former President, former Secretary
and former Director. We intend to continue to rely on the generic form of
Etanercept produced by Globe for as long as our license from Globe is effective.
Under the terms of our non-exclusive License Agreement with Globe dated June 17,
2008, we were obligated to remit CAD$500,000 to Globe, comprised of a
non-refundable license fee of CAD$150,000 (including CAD$50,000 in respect of
patent preparation and filing fees) and a one-time royalty payment of
CAD$350,000. In June 2008, we settled our obligation to Globe by issuing Globe
2,000,000 shares of our common stock and we no longer have any enduring
financial obligation to Globe. We do, however, have an ongoing obligation to
Globe to use our best efforts to commercialize products based on its
intellectual property and to indemnify it from any third-party claims resulting
from our use of its intellectual property. Under the terms of our non-exclusive
License Agreement with Globe, Globe has the right to terminate our license in
the event that we become bankrupt or insolvent, or if our business is placed in
the hands of a receiver, assignee or trustee. Barring such circumstances, we
anticipate that our license from Globe will be perpetual. We have waived our
rights pursuant to Article 4.2 of the License Agreement that required Globe to
prepare and file certain patents on our behalf.

In the United States the FDA has licensed Etanercept for the
following therapeutic applications:

- moderate to severe rheumatoid arthritis (November 1998);
- moderate to severe polyarticular juvenile idiopathic arthritis (1999);
- psoriatic arthritis (2002);
- ankylosing spondylitis (July 2003); and
- moderate to severe plaque psoriasis (April 2004).

The United States Patent on Etanercept (Enbrel) in the United
States will expire in 2009. Patent protection for Etanercept in South Africa has
already lapsed, and the drug is commercially available in generic form.

On April 18, 2008 we filed a single United States Patent
Application (No. 61-046061) for the use of TNF-Alpha targeting drugs (including
NK-001 and similar anti-inflammatory drugs) in the treatment of post-heart
bypass cognitive impairment. The application is currently under review by the
United States Patent Office.

NK-002

NK-002 is a development stage drug for the treatment of
Alzheimers disease. We filed a United States Patent Application for NK-002 on
January 31, 2008 (No. 61-02540). The application is currently under review by
the United States Patent Office.

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Liposome Encapsulated NK-001 for the Treatment of
Alzheimers and Other Neurodegenerative Diseases

We are developing a novel liposome based on transferring
protein. Transferrin is a blood plasma protein for iron ion delivery. When a
transferrin protein loaded with iron encounters a transferrin receptor on the
surface of a cell, it binds to it and, as a consequence, is transported into the
cell in a vesicle. By enclosing NK-001 in a transferrin-based liposome, the drug
is able to cross the blood brain barrier. As described above, the blood-brain
barrier is a metabolic or cellular structure in the central nervous system that
restricts the passage of various chemical substances and microscopic objects
(e.g. bacteria) between the bloodstream and the neural tissue, while still
allowing the passage of substances essential to metabolic function (e.g.
oxygen). In its neuroprotective role, the blood-brain barrier functions to
hinder the delivery of many potentially important diagnostic and therapeutic
agents to the brain. Therapeutic molecules and genes that might otherwise be
effective in diagnosis and therapy do not cross the blood-brain barrier in
adequate amounts. We anticipate that NK-002 will succeed in overcoming these
limitations for the delivery of NK-001 in the treatment of Alzheimers
disease.

Our management believes that there is currently no promising
drug on the market for the treatment of Alzheimers disease. Although
understanding of the disease in the medical community is not conclusive, over
1000 scientific articles on Alzheimers disease identify it as an autoimmune
condition. To that effect, anti-inflammatory drugs have been tested in treating
Alzheimers disease with promising results, although a significant lack of
progress in the application of anti-inflammatory drugs in the treatment of the
disease has been attributed to poor brain penetration due to the blood-brain
barrier. NK-002 promises to overcome this obstacle.

NK-001 is currently used in the treatment of arthritis and
psoriasis to block the actions of TNF-Alpha made by the bodys immune system.
TNF-Alpha is a protein that triggers an array of pro-inflammatory effects. In
patients with Alzheimers disease, NK-001 appears to have an effect that is
sustained beyond six months of treatment. In fact, a small pilot study conducted
by researchers at the University of California, Los Angeles, in 15 patients
administering 25-50 milligrams of NK-001 significantly improved MMS (Mini-Mental
Status Examination), ADAS-Cog (Alzheimerss Disease Assessment Skill) and SIB
(Severe Impairment Battery) results (See Tobinick, Gross, Weinberger, Cohen:
TNF-Alpha Modulation for Treatment of Alzheimer's Disease: A 6-Month Pilot
Study(MedGenMed 2006, 8(2):25)). These results show great promise,
exceeding the exhibited short-lived effects of traditional cholinesterase
treatment. However, NK-001 is noted for its poor blood-brain barrier
penetration. In fact, naked protein drugs like NK-001 traverse the blood-brain
barrier at a rate of approximately 0.001% to 9%. However, if appropriately
encapsulated, protein drugs traverse the blood brain barrier at a rate of
between 1% and 20%. According to a 2006 study, encapsulation increases the rate
of drug uptake by 100% to 1000% (See Mishra, Mahor, Rawat, et al., Targeted
brain delivery of AZT via transferrin anchored pegylated albumin
nanoparticles(J Drug Target 2006; 14:45-53)).

On October 2, 2007 we entered into a Master Service Agreement
with Northern Lipids Inc. pursuant to which Northern Lipids developed certain
liposomal encapsulation formulas for NK-002 on our behalf. The proprietary
formulations were completed at a cost of approximately $36,000 and all
intellectual property rights in the results and proceeds of the agreement were
transferred to us. In April 2008, Globe began testing three different
encapsulation preparations in rodent trials on our behalf. On January 31, 2008
we filled a United States Patent Application (No. 61-02540) for the therapeutic
use of a liposome formulation for the delivery of drugs across the blood-brain
barrier. Our United States Patent Application filed on April 18, 2008 (No.
61-046061) also pertains to certain aspects of NK-001, namely the delivery of
TNF-Alpha targeting drugs (including NK-001and similar anti-inflammatory drugs)
across the blood-brain barrier.

As with NK-001, in our research activities involving NK-002 we
have employed the generic form of Etanercept as licensed to us and produced by
Globe pursuant to our non-exclusive License Agreement dated June 17, 2008, and
we intend to continue to rely on that product. We also employ our own
proprietary encapsulation technology developed on our behalf by Northern Lipids
in accordance with our Master Service Agreement.

Unlike NK-001, NK-002 falls under the category of a new drug
and will require a complete range of successful pre-clinical and clinical trials
before we can seek marketing approval.

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Clinical Trial Phases

The following section describes the most common phases of
clinical drug trials with reference to the clinical trial requirements that we
anticipate will be required for each of our planned products.

Pre-Clinical Trials

Pre clinical trials involve in vitro(test tube) and
in vivo(animal) experiments using wide-ranging doses of the study drug
to obtain preliminary efficacy, toxicity and pharmacokinetic (how the body
processes the drug) information. Such tests assist pharmaceutical companies in
deciding whether a drug candidate possesses scientific merit for further
development as an investigational new drug.

Of our current planned products, only NK-002 will require us to
undertake pre-clinical trials. Subject to our ability to obtain adequate
financing, we anticipate completing pre-clinical trials of NK-002 at a cost of
approximately $500,000 over a period of 12 months. It is our goal to begin
pre-clinical trials of NK-002 before the middle of 2010; however we will not
establish a firm start date until we raise sufficient financing, which there is
no guarantee that we will be able to do. We do not anticipate requiring
pre-clinical trials of NK-001 because equivalent trials of Etanercept, the drug
underlying NK-001, have already been successfully completed by third parties.

Phase 0

Phase 0 is a recent designation for exploratory, first-in-human
trials conducted in accordance with the FDAs 2006 Guidance on Exploratory
Investigational New Drug (IND)

Studies. Distinctive features of Phase 0 trials include the
administration of single subtherapeutic doses (doses not intended to treat
diseases) of the study drug to a small number of subjects (10-15) to gather
preliminary data on the agent's pharmacokinetics (how the body processes the
drug) and pharmacodynamics (how the drug works in the body).

Of our current planned products, only NK-002 will require us to
undertake Phase 0 clinical trials. Subject to our ability to obtain adequate
financing, we anticipate completing combined Phase 0 and Phase I clinical trials
of NK-002 at a cost of approximately $1,100,000. We have not scheduled or
completed trial protocols for these trials although we anticipate that they will
require12 to 24 months to complete.

Phase I

Phase I trials are the first stage of drug testing in human
subjects. Normally, a small group of healthy volunteers (20-50) will be
selected. This phase includes trials designed to assess the safety, tolerability
and effects of the drug in relation to the human body, including how it is
absorbed, distributed, metabolized and eliminated by the body. These trials are
often conducted in an inpatient clinic, where the subject can be observed by
full-time staff. The subject who receives the drug is usually observed until
several half-lives of the drug have passed. Phase I trials also normally include
dose-ranging (or dose escalation) studies so that the appropriate dose for
therapeutic use can be found. The tested range of doses will usually be a
fraction of any dose that causes harm in animal testing.

Phase I trials most often include healthy volunteers; however,
real patients are used in some circumstances, such as when patients have an
end-stage disease and lack other treatment options. This exception to the rule
most often occurs in oncology (cancer) and HIV drug trials. Volunteers are paid
an inconvenience fee for the time they spend in the volunteer centre. Pay ranges
from a small amount of money for a short period of residence to a larger amount
of up to approximately $6,000 depending on the length of the volunteers
participation in the trial.

Of our current planned products, we believe that only NK-002
will require us to undertake Phase I clinical trials. Subject to our ability to
obtain adequate financing, we anticipate completing combined Phase 0 and Phase I
clinical trials of NK-002 at a cost of approximately $1,100,000. We have not
scheduled or completed trial protocols for these trials although we anticipate
that they will require 12 to 24 months to complete. We do not anticipate
requiring Phase I trials of NK-001 because equivalent trials of
Etanercept, the drug underlying NK-001, have already been successfully completed
by third parties.

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Phase II

Once the initial safety of a study drug has been confirmed in
Phase I trials, Phase II trials are performed on larger groups (20-300) and are
designed to assess how well the drug works, as well as to continue Phase I
safety assessments using a larger group of volunteers and patients. When the
development process for a new drug fails, this usually occurs during Phase II
trials when the drug is discovered not to work as planned or to have toxic
effects.

Phase II studies are sometimes divided into Phase IIA and Phase
IIB. Phase IIA is specifically designed to assess dosing requirements (how much
of the drug should be given), while Phase IIB is specifically designed to study
efficacy (how well the drug works at the prescribed dose(s)).

Some trials combine Phase I and Phase II, and test both
efficacy and toxicity.

All of our planned products must undergo Phase II clinical
trials. Completion of these trials is subject to our ability to obtain adequate
financing,

We anticipate completing our Phase II trial of NK-001 at a cost
of approximately $1,355,000 over a 12 month period. It is our goal to begin the
trial in the winter of 2010; however, we will not establish a firm start date
until we raise sufficient financing, which there is no guarantee that we will be
able to do. The trial protocol for our Phase II trial is complete and has
received full regulatory approval.

We have not completed a prospective budget or timetable for
completing Phase II trials of NK-002. Our ability to pursue Phase II trials of
NK-002 is subject to our ability to obtain adequate financing and to
successfully complete pre-clinical and Phase I trials on the drug.

Phase III

Phase III studies are randomized controlled multi-center trials
on large patient groups (300-3,000 or more, depending upon the disease or
medical condition studied), and are intended to definitively assess the
effectiveness of the drug as compared to the current gold standard treatment.
Because of their size and comparatively long duration, Phase III trials are the
most expensive, time-consuming and difficult trials to design and run,
especially in therapies for chronic medical conditions.

It is common practice that certain Phase III trials will
continue while a regulatory submission is pending at the appropriate regulatory
agency. This allows patients to continue to receive possibly lifesaving drugs
until the drug can be obtained commercially. Other reasons for performing trials
at this stage may include label expansion (to show the drug is suitable for
additional types of patients/diseases beyond the original use for which the drug
was approved for marketing), obtaining additional safety data, or to support
marketing claims for the drug. Studies in this phase are categorized by some
companies as "Phase IIIB studies".

While not required in all cases, it is typically expected that
at least two successful Phase III trials will be necessary to demonstrate a
drug's safety and efficacy in order to obtain approval from appropriate
regulatory agencies, such as the FDA (United States), the Therapeutic Goods
Administration (Australia) or the European Medicines Agency (European Union),
for example.

Once a drug has proved satisfactory after Phase III trials, the
trial results are usually combined into a large document containing a
comprehensive description of the methods and results of human and animal
studies, manufacturing procedures, formulation details and shelf life. This
collection of information makes up the regulatory submission that is provided
for review to the appropriate regulatory authorities in different countries.
They review each submission, and, it is hoped, give sponsors approval to market
the particular drug.

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Most drugs undergoing Phase III clinical trials can be marketed
under FDA norms with proper recommendations and guidelines, but the drugs must
be recalled immediately from the market if any adverse effects are reported.
While most pharmaceutical companies refrain from this practice, it is not
abnormal to see many drugs undergoing Phase III clinical trials in the
market.

We anticipate that all of our current planned products will
require us to undertake Phase III clinical trials; however, we lack sufficient
information to estimate the costs or timeframe required to complete any Phase
III clinical trials at this time. Our ability to pursue Phase III trials will be
subject to our ability to obtain adequate financing and successfully complete
earlier trials phases for the products in question.

Phase IV

A Phase IV trial is also known as a post-marketing surveillance
trial. Phase IV trials involve safety surveillance (pharmacovigilance) and
ongoing technical support of a drug after it receives permission to be sold.
Phase IV studies may be required by regulatory authorities or may be undertaken
by a sponsoring company for competitive (to find a new market for the drug) or
other reasons (for example, the drug may not have been tested for interactions
with other drugs, or on certain population groups such as pregnant women, who
are unlikely to subject themselves to trials). The safety surveillance is
designed to detect any rare or long-term adverse effects over a much larger
patient population and longer time period than was possible during the Phase I
through III clinical trials. Harmful effects discovered by Phase IV trials may
result in a drug no longer being sold or being restricted to certain uses.

We are unable to accurately anticipate at this time whether our
current planned products will require us to undertake Phase IV clinical trials.
Similarly, we are unable to accurately anticipate at this time what the costs or
timeframe to complete those trials might be. Our ability to pursue any Phase IV
trials which may be required of us or which we may undertake voluntarily will be
subject to our ability to adequately finance those trials and to successfully
complete Phase III trials.

Research and Development Progress

Landmarks in our product research and development activities to
date include the following events:

- From June 2002 to May 2008 we developed the intellectual property
  underlying our two product candidates, NK-001 and NK-002. This development
  work involved surveying medical research and clinical developments to identify
  promising research and development opportunities and establishing frameworks
  for pre-clinical and clinical research. This work was carried out at various
  times on our behalf by Dr. Ahmad Doroudian, Dr. Hassan Salari and Dr. Jonathan
  Willmer in their capacity as our officers. The intellectual property rights
  underlying each candidate were assigned to us by these individuals effective
  January 30, 2008 for NK-001, and April 18, 2008 for NK-002.
- On October 2, 2007, we entered into a Master Service Agreement with
  Northern Lipids Inc. pursuant to which Northern Lipids developed certain
  proprietary liposomal encapsulation formulas for the encapsulation of NK-002
  on our behalf.
- On January 31, 2008 we filled a United States Patent Application (No.
  61-02540) for the therapeutic use of a liposome formulation for the delivery
  of drugs across the blood-brain barrier (NK-002).
- On March 1, 2008 we entered into Clinical Trial Services Master Agreement
  with Virtus Clinical Development (Pty) Limited (Virtus), whereby Virtus
  agreed to provide regulatory, clinical trial management and related services
  to us in respect of our planned Phase II clinical trials of NK-001.
- On March 22, 2008 Virtus submitted our proposed research protocol for
  NK-001 to the Medicines Control Council of the Department of Health (South
  Africa) on our behalf for review and approval. The research protocol is for
  Phase II clinical trials and is entitled A Randomized, Placebo-Controlled
  Study to Assess the Effect of NK-001 in Protecting Against the Cognitive Side  Effects of Coronary Artery Bypass Graft (CABG
  or Heart Bypass) Surgery. This research protocol was subsequently approved by
  the Medicines Control Council and the central ethics board of South Africa.

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- On April 18, 2008 we filed a United States Patent Application (No.
  61-046061) for the use of TNF-Alpha targeting drugs (including NK-001 and
  similar anti-inflammatory drugs) in the treatment of post-heart bypass
  cognitive impairment.
- In April 2008 we began testing three different encapsulation preparations
  of NK-002 in rodent trials. This testing was carried out by scientists at
  Globe Laboratories Inc. on our behalf.
- On June 17, 2008 we entered into a non-exclusive License Agreement with
  Globe Laboratories Inc., a center for drug research and development, to use
  their developed know-how involving new techniques for the production of
  therapeutic proteins, including Etanercept, which forms the basis of NK-001
  and NK-002. Julian Salari, our former President, former Secretary and former
  Director, is the President, founder and controlling shareholder of Globe.
  Under the terms of the License Agreement, we were obligated to remit
  CAD$500,000 to Globe, comprised of a non-refundable license fee of CAD$150,000
  (including CAD$50,000 in respect of patent preparation and filing fees) and a
  one-time royalty payment of CAD$350,000. In June 2008, we settled our
  obligation to Globe by issuing Globe 2,000,000 shares of our common stock. The
  know-how licensed by Globe to us pursuant to the License Agreement was
  transferred through the communication of formulas and descriptions of the
  manufacturing process. Although we have and intend in the future to rely on
  Globe for manufacturing services in relation to the licensed know-how, the
  non-exclusive License Agreement does not obligate us to use Globes services
  in order to avail ourselves of the licensed rights, and we are permitted to
  sub-license the know-how if required. We have waived our rights pursuant to
  Article 4.2 of the License Agreement that required Globe to prepare and file
  certain patents on our behalf.
- In 2008 we established a relationship with Dr. Maziar Badii, our Director,
  who will advise us on the development of new product candidates for the
  treatment of acute and chronic back pain.
- On January 28, 2009 Virtus submitted amendments to our research protocol
  for NK-001 that were subsequently approved by the Medicines Control Council
  (Republic of South Africa) on May 12, 2009. We now have full authority to
  proceed with our Phase II clinical trial in its modified form.

Markets for our Planned Products

NK-001

We anticipate that our study of NK-001 in post-CABG patients
will, if successful, generate a market for the drug as well as provide data that
may lead to applying the drug in the treatment of other diseases such as
Alzheimers disease. Heart bypass surgery has become a standard method of
treatment and has become one of the most commonly performed open heart
operations in the United States. An estimated 800,000 patients throughout the
word undergo heart bypass surgery every year and about 650,000 of those patients
are located in the United States (Selnes, Goldsbrough, Borowicz and McKhann:
Neurobehavioural Sequelae of Cardiopulmonary Bypass (The Lancet, Vol .
353, May 8, 1999)).

Heart byass surgery is recommended for selected groups of
patients with significant narrowing and blockage of the heart arteries. We
envision that NK-001 will be used at the time of surgery to prevent cognitive
impairment from occurring. We will test our hypothesis as part of our planned
Phase II clinical trial of NK-001, in which trial participants will receive
NK-001 (or a placebo) before undergoing CABG surgery. There is currently no
effective therapy for post-CABG cognitive impairment, so if we are successful,
we anticipate that all heart bypass patients will be prescribed NK-001.
Accordingly, based on the annual number of worldwide heart bypass surgery
patients and an estimated average treatment cost of approximately USD$1,000 per
patient, we anticipate that the potential annual worldwide market for NK-001 will be approximately
USD$800 million and USD$650 million in the United States alone.

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NK-002

According to the United States Alzheimers Association,
approximately 5.3 million Americans suffered from Alzheimer's disease in 2009.
According to Alzheimers Disease International, there are an estimated 30
million people with dementia worldwide. By 2050, it is projected that this
figure will have increased to over 100 million, with much of the increase
occurring in developing countries. Already more than 60% of people with dementia
live in developing countries, but by 2040 this is estimated to rise to 71%. The
fastest growth in the elderly population is taking place in China, India and
their south Asian and western Pacific neighbors. Alzheimer's disease accounts
for more than 50% of cases of dementia in Caucasian populations, but this may
not apply to other national or ethnic groups, as more research is needed in this
area. According to a 2005 study by Toronto, Canada-based Research and Markets,
the total market for Alzheimers treatments in the seven major world markets
(the United States, Germany, the United Kingdom, France, Italy, Spain and Japan)
was estimated at USD$6.1 billion for 2005 and is anticipated to increase to
USD$7.8 billion by the year 2010. The same study also noted that the share of
then-approved drugs specifically for Alzheimers disease was expected to be
USD$3.1 billion in the year 2005 and USD$4.1 billion by the year 2010, provided
all of the drugs remain on the market. We cannot yet anticipate what share of
the market of Alzheimers medication NK-002 is likely to assume if it is proven
safe and effective.

Research and Development

From our inception on June 10, 2002 to January 30, 2010 we
spent $224,674 on research and development activities. We anticipate that we
will incur approximately USD$1.4 million in research and development expenses
over the next 12 months, however this may change if we are unsuccessful in
obtaining sufficient additional financing.

Intellectual Property

We own the common law trademark rights in our corporate name
and logo. We have not registered any of our trademark rights for protection. We
also own 100% of all right and title in and to the following patents:

- United States Patent Application No. 61-02540 (filed on January 31, 2008)
  for the therapeutic use of a liposome formulation for the delivery of drugs
  across the blood-brain barrier (NK-002).
- United States Patent Application No. 61-046061 (filed on April 18, 2008)
  for the use of TNF- Alpha targeting drugs (including NK-001and similar
  anti-inflammatory drugs) in the treatment of post CABG cognitive impairment.

We also own certain know-how and proprietary technology related
to the production of certain liposomal encapsulation formulae forming part of
NK-002. This know-how and technology was developed on our behalf by Northern
Lipids Inc. at a cost of approximately $36,000 pursuant to a Master Service
Agreement dated October 2, 2007.

Finally, we own a perpetual, non-exclusive license to use the
know-how and trade secrets of Globe Laboratories Inc. to produce certain
therapeutic proteins. These therapeutic proteins include the generic drug
Etanercept, which is the basis for our products NK-001 and NK-002. We acquired
the license pursuant to our non-exclusive License Agreement with Globe, which is
a company founded and controlled by Julian Salari, our former President, former
Secretary and former Director. Under the terms of the License Agreement, we were
obligated to pay Globe $500,000 in consideration for the license. The payment
was to be comprised of a non-refundable license fee of $150,000 and a one-time
royalty payment of $350,000. In June 2008 we settled our obligation to Globe by
issuing Globe 2,000,000 shares of our common stock. We have also waived our
rights pursuant to Article 4.2 of the License Agreement that required Globe to
prepare and file certain patents on our behalf.

Globe has the right to revoke the license in the event that we
become insolvent, make an assignment for the benefit of our creditors, or are
the subject of bankruptcy proceedings. Although we are not dependent on our
license from Globe to develop any of our products, we believe that the
license affords us a competitive advantage by giving us access to an affordable
and high quality supply of generic drugs, including Etanercept, that are
necessary for our research. However, if we were to lose our license from Globe,
we do not anticipate that we would face any difficulties accessing alternate
suppliers of generic drugs required for our research. The know-how licensed to
us pursuant to the License Agreement was transferred us to by communicating
formulas and descriptions of the manufacturing process. Although we have and
intend in the future to rely on Globe for manufacturing services in relation to
the licensed know-how, the non-exclusive License Agreement does not obligate us
to use Globes services in order to avail ourselves of the licensed rights, and
we are permitted to sub-license the know-how if required.

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Manufacturing

We have limited experience in, and do not own facilities for,
manufacturing any products or product candidates. We utilize contract
manufacturers to produce clinical supplies of any components of our products
that are not commercially available such as our proprietary encapsulation
technology forming part of NK-002, which was developed on our behalf and
manufactured by Northern Lipids Inc. at a cost of approximately $36,000 pursuant
to our Master Service Agreement. Although we intend to continue to rely on
contract manufacturers to produce certain of our products for both clinical and
commercial supplies, we will oversee the production of those products and do not
anticipate relying on any particular contract manufacturer.

If we obtain FDA approval or approval outside the United States
for our product candidates, we plan to rely on contract manufacturers to produce
sufficient quantities for large-scale commercialization. These contract
manufacturers will be subject to extensive government regulation. Regulatory
authorities in the markets that we intend to serve require that drugs be
manufactured, packaged and labeled in conformity with current Good Manufacturing
Practices as set by the FDA. In this regard, we plan to engage only contract
manufacturers who have the capability to manufacture drug products in compliance
with current Good Manufacturing Practices in bulk quantities for
commercialization. We also intend to safeguard our intellectual property when
working with contract manufacturers by working only with manufacturers who in
our estimation have a strong track record of safeguarding confidential
information and who are willing to enter into agreements with us that impose
upon them strict intellectual property protection measures.

Sales, Marketing and Distribution

We currently have no sales or distribution capabilities and
limited marketing capabilities. In order to commercialize our products, we must
develop sales, marketing and distribution capabilities or make arrangements with
other parties to perform these services for us.

If NK-001 or any of our other products receives marketing
approval from the FDA, we currently plan to build our own U.S. sales force to
market our products directly to surgical and post-surgical centers and
physicians in the United States who specialize in CABG surgery. We believe that
we can best serve this market with a focused, specialty sales force. We also
plan to conduct a variety of promotional and educational programs aimed at
establishing awareness of NK-001 in the physician community as an approved
treatment for post-heart bypass neurocognitive impairment. These programs will
focus on differentiating NK-001 from other competing products and re planned to
include sales representative promotion, publications in medical journals,
continuing medical education, symposia, regional speaker programs and medical
conference exhibits.

Outside of the United States, and subject to obtaining
marketing approval in the applicable countries, we intend to engage sales,
marketing and distribution partners in Europe, Asia and Latin America.

To the extent that we expand NK-001 for indications beyond
post-CABG neurocognitive impairment, such as painful diabetic neuropathy
(PDN), we may expand our sales force or establish partner relationships with
larger pharmaceutical companies that have well-established sales forces in place
to effectively carry our products to a broader physician market both in the
United States and abroad.

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Competition

If any of our products receive marketing approval, they may
compete against, and may be used in combination with, well-established products
currently used both on and off-label in the treatment of their respective
indications. By the time we are able to commercialize a product candidate, the
competition and potential competition may be greater and more direct. There are
many other companies working to develop new drugs and other therapies to treat
disease mediated by acute or chronic inflammation, including Alzheimers disease
and discogenic back pain. Many of the compounds in development by such companies
are already marketed for other indications. Other companies are focusing on new
compounds, most of which are in pre-clinical or early phases of development.

We expect to compete with others on, among other things, the
safety and efficacy of our products. Competing successfully will depend on our
continued ability to attract and retain skilled and experienced personnel; to
identify, secure the rights to and develop pharmaceutical products and
compounds; and to exploit these products and compounds commercially before
others are able to develop competing products. In addition, our ability to
compete may be affected because insurers and other third-party payors in some
cases seek to encourage the use of generic products making branded products less
attractive to buyers from a cost perspective.

Patents and Proprietary Rights

Our success will depend in part on our ability to protect our
products and product candidates by obtaining and maintaining a strong
proprietary position both in the United States and in other countries. To
develop and maintain our proprietary position, we will rely on patent
protection, regulatory protection, trade secrets, know-how, continuing
technological innovations and licensing opportunities.

The patent positions of pharmaceutical companies like us are
generally uncertain and involve complex legal, scientific and factual questions.
In addition, the coverage claimed in a patent application can be significantly
reduced before the patent is issued. Consequently, we do not know whether any of
the products or product candidates we acquire or license will result in the
issuance of patents or, if any patents are issued, whether they will provide
significant proprietary protection or will be circumvented or challenged and
found to be unenforceable or invalid. In limited instances, patent applications
in the United States and certain other jurisdictions are maintained in secrecy
until a patent is issued, and since the publication of discoveries in the
scientific or patent literature often lags behind actual discoveries, we cannot
be certain of the priority of inventions covered by pending patent applications.
Moreover, we may have to participate in interference proceedings declared by the
U.S. Patent and Trademark Office to determine priority of invention or in
opposition proceedings in a foreign patent office, any of which could result in
substantial cost to us, even if the eventual outcome is favorable to us. There
can be no assurance that a court of competent jurisdiction would hold any
patents, if issued, valid. An adverse outcome could subject us to significant
liabilities to third parties, require disputed rights to be licensed from third
parties or require us to cease using such technology. To the extent prudent, we
intend to bring litigation against third parties that we believe are infringing
our patents.

We also rely on trade secret protection for our confidential
and proprietary information. No assurance can be given that others will not
independently develop substantially equivalent proprietary information and
techniques or otherwise gain access to our trade secrets or disclose such
technology or that we can meaningfully protect our trade secrets. However, we
believe that the substantial costs and resources required to develop
technological innovations will help us protect our products.

It is our policy to require our employees, consultants,
contractors, or scientific and other advisors, to execute confidentiality
agreements upon the commencement of employment or consulting relationships with
us. These agreements provide that all confidential information developed or made
known to the individual during the course of the individuals relationship with
us is to be kept confidential and not disclosed to third parties except in
specific circumstances. These agreements provide that all inventions related to
our business that are conceived by the individual during the course of our
relationship shall be our exclusive property. There can be no assurance,
however, that these agreements will provide meaningful protection or adequate
remedies for our trade secrets in the event of unauthorized use or disclosure of
such information.

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Employees and Consultants

As of May 5, 2011, we did not have any full-time or part-time
employees. We currently engage independent contractors in the areas of
accounting, legal and auditing services. We plan to engage independent
contractors in the areas of clinical trial data management. Dr. Ahmad Doroudian
provides his services to us with remuneration on a non-exclusive basis. Dr.
Maziar Badii and Richard Azani, our directors, provide their services to us as
remunerated consultants.

Government Regulations

In this section and throughout this Annual Report, the term
FDA means the United States Food and Drug Administration.

Our current and future operations and research and development
activities are or will be subject to various laws and regulations in the
countries in which we conduct or plan to conduct our business, including but not
limited to the United States, Canada and South Africa. These laws and
regulations govern the research, development, sale and marketing of
pharmaceuticals, taxes, labor standards, occupational health and safety, toxic
substances, chemical products and materials, waste management and other matters
relating to the pharmaceutical industry. We may require permits, registrations
or other authorizations to maintain our operations and to carry out our future
research and development activities, and these permits, registrations or
authorizations will be subject to revocation, modification and renewal.

Governmental authorities have the power to enforce compliance
with lease conditions, regulatory requirements and the provisions of required
permits, registrations or other authorizations, and violators may be subject to
civil and criminal penalties including fines, injunctions, or both. The failure
to obtain or maintain a required permit may also result in the imposition of
civil and criminal penalties, and third parties may have the right to sue to
enforce compliance.

We expect to be able to comply with all applicable laws and
regulations and do not believe that such compliance will have a material adverse
effect on our competitive position. We have obtained and intend to obtain all
permits, licenses and approvals required by all applicable regulatory agencies
to maintain our current operations and to carry out our future research and
development activities. We are not aware of any material violations of permits,
licenses or approvals issued with respect to our operations, and we believe that
we will continue to comply with all applicable laws and regulations.

Pharmaceutical Regulatory Regimes

Regulation by governmental authorities in the United States and
other countries is a significant factor in the development, manufacture and
marketing of pharmaceuticals. All of our product candidates will require
regulatory approval by governmental agencies prior to commercialization. In
particular, our products candidates are subject to rigorous pre-clinical testing
and clinical trials and other premarketing approval requirements of the FDA and
regulatory authorities in other countries. Various federal, state and foreign
statutes and regulations govern or affect the manufacturing, safety, labeling,
storage, record-keeping and marketing of pharmaceutical products. The lengthy
process of seeking required approvals and the continuing need for compliance
with applicable statutes and regulations require the expenditure of substantial
resources. When and if we obtain regulatory approval for any of our product
candidates, the approval may be limited in scope, which may significantly limit
the indicated uses for which our product candidates may be marketed, promoted
and advertised. Further, approved pharmaceuticals and manufacturers are subject
to ongoing review and previously unknown problems may be discovered that may
result in restrictions on the manufacture, sale or use of approved
pharmaceuticals or their withdrawal from the market.

Pre-Clinical Studies

Before testing any compounds with potential therapeutic value
in human subjects in the United States, stringent governmental requirements for
pre-clinical data must be satisfied. Pre-clinical testing includes both in
vitroand in vivolaboratory evaluation and characterization of the
safety and efficacy of a drug and its formulation. Pre-clinical testing results obtained from these studies, including tests in
several animal species, are submitted to the FDA as part of an Investigational
New Drug Application (and IND Application) and are reviewed by the FDA prior
to the commencement of human clinical trials. These pre-clinical data must
provide an adequate basis for evaluating both the safety and the scientific
rationale for initial trials in human volunteers.

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Clinical Trials

If a company wants to conduct clinical trials in the United
States to test a new drug in humans, an IND Application must be prepared and
submitted to the FDA. The IND Application becomes effective if not rejected or
put on clinical hold by the FDA within 30 days of filing the application. In
addition, an Institutional Review Board must review and approve the trial
protocol and monitor the trial on an ongoing basis. The FDA may, at any time
during the 30-day review period or at any time thereafter, impose a clinical
hold on proposed or ongoing clinical trials. If the FDA imposes a clinical hold,
clinical trials may commence or recommence without FDA authorization, and then
only under terms authorized by the FDA. The IND Application process can result
in substantial delay and expense.

Clinical Trial Phases

Clinical trials typically are conducted in three sequential
phases, Phases I, II and II, with Phase IV trials potentially conducted after
marketing approval is obtained. These phases may be compressed, may overlap or
may be omitted in some circumstances.

- Phase I clinical trials: After an IND Application becomes effective, Phase
  I human clinical trials can begin. These trials evaluate a drugs safety
  profile and the range of safe dosages that can be administered to healthy
  volunteers or patients, including the maximum tolerated dose that can be given
  to a trial subject. Phase I trials also determine how a drug is absorbed,
  distributed, metabolized and excreted by the body, and the duration of its
  action.
- Phase II clinical trials: Phase II clinical trials are generally designed
  to establish the optimal dose, to evaluate the potential effectiveness of the
  drug in patients who have the target disease or condition and to further
  ascertain the safety of the drug at the dosage given in a larger patient
  population.
- Phase III clinical trials: In Phase III clinical trials, the drug is
  usually tested in a controlled, randomized trial comparing the investigational
  new drug to a control (which may be an approved form of therapy) in an
  expanded and well-defined patient population and at multiple clinical sites.
  The goal of these trials is to obtain definitive statistical evidence of
  safety and effectiveness of the IND regime as compared to control in defined
  patient populations with a given disease and stage of illness.

New Drug Application

After completion of clinical trials, if there is substantial
evidence that the drug is both safe and effective, a New Drug Application is
prepared and submitted for the FDA to review. The New Drug Application must
contain all of the essential information on the drug gathered to that date,
including data from pre-clinical studies and clinical trials, and the content
and format of a New Drug Application must conform with all FDA regulations and
guidelines. Accordingly, the preparation and submission of a New Drug
Application is an expensive and major undertaking for a sponsor.

The FDA reviews all New Drug Applications submitted before it
accepts them for filing and may request additional information from the sponsor
rather than accepting a New Drug Application for filing. In such an event, the
New Drug Application must be submitted with the additional information and,
again, is subject to review before filing. Once the submission is accepted for
filing, the FDA begins an in-depth review of the New Drug Application. By law,
the FDA has 180 days in which to review the New Drug Application and respond to
the applicant. The review process is often significantly extended by the FDA
through requests for additional information and clarification. The FDA may refer
the application to an appropriate advisory committee, typically a panel of
clinicians, for review, evaluation and a recommendation as to whether the application
should be approved and the scope of any approval. The FDA is not bound by the
recommendation, but gives great weight to it. If the FDA evaluations of both the
New Drug Application and the manufacturing facilities are favorable, the FDA may
issue either an approval letter or an approvable letter, which usually contains
a number of conditions that must be satisfied in order to secure final approval.
If the FDAs evaluation of the New Drug Application submission or manufacturing
facility is not favorable, the FDA may refuse to approve the New Drug
Application or issue a not approvable letter.

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Fast Track Designation and Priority Review

The FDAs fast track program is intended to facilitate the
development and expedite the review of drugs that are intended for the treatment
of a serious or life-threatening condition for which there is no effective
treatment and which demonstrate the potential to address unmet medical needs for
their condition. Under the fast track program, the sponsor of a new drug may
request the FDA to designate the drug for a specific indication as a fast track
product at any time during the clinical development of the product. The FDA must
determine if the product qualifies for fast track designation within 60 days of
receipt of the sponsors request.

For a product candidate where fast track designation is
obtained, the FDA may initiate review of sections of a New Drug Application
before the application is complete. This rolling review is available if the
applicant provides a schedule for the submission of the remaining information
and pays applicable user fees. However, the time period specified in the
Prescription Drug User Fees Act, which governs the time period goals the FDA has
committed to reviewing a New Drug Application, does not begin until the complete
application is submitted. Additionally, the fast track designation may be
withdrawn by the FDA if the FDA believes that the designation is no longer
supported by data emerging in the clinical trial process.

In some cases, the FDA may designate a product for priority
review. A product is eligible for priority review, or review within a targeted
six-month time frame from the time a New Drug Application is accepted for
filing, if the product provides a significant improvement compared to marketed
products in the treatment, diagnosis or prevention of a disease. A fast-track
designated product generally meets the FDAs criteria for priority review. We
cannot guarantee that any of our products will receive a priority review
designation, or if a priority designation is received, that review or approval
will be faster than conventional FDA procedures.

When appropriate, we intend to seek fast track designations for
our products. We cannot predict the ultimate impact, if any, of the fast track
process on the timing or likelihood of FDA approval on any of our potential
products. Importantly, fast track designation does not result in the elimination
or waiver of any pre-clinical or clinical trial requirements.

Orphan Drug Designation

The FDA may grant orphan drug designation to drugs intended to
treat a rare disease or condition that affects fewer than 200,000 individuals in
the United States. Orphan drug designation must be requested before submitting a
New Drug Application. If the FDA grants orphan drug designation, the generic
identity of the therapeutic agent and its potential orphan use are disclosed
publicly by the FDA. Orphan drug designation does not convey any advantage in,
or shorten the duration of, the regulatory review and approval process. If a
product that has orphan drug designation subsequently receives FDA approval for
the indication for which it has such designation, the product is entitled to
orphan exclusivity, which means the FDA may not approve any other applications
to market the same drug for the same indication, except in very limited
circumstances, for up to seven years after receiving FDA approval.

When appropriate, we intend to seek orphan status for certain
indications that may be treated with our products. We cannot predict the
ultimate impact, if any, of orphan status on the timing or likelihood of FDA
approval on any of our potential products. Importantly, if a company obtains
orphan drug designation for a drug and indication equivalent to one of our
products (i.e. the same underlying drug applied to the same indication), our
product may not be approved for the same indication for up to seven subsequent
years.

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The Hatch-Waxman Act

Under the Drug Price Competition and Patent Term Restoration
Act of 1984, known as the Hatch-Waxman Act, newly approved drugs may benefit
from a statutory period of non-patent marketing exclusivity in the United
States. The Hatch-Waxman Act provides five years of marketing exclusivity to the
first applicant to gain approval of a New Drug Application under Section 505(b)
of the Food, Drug and Cosmetic Act for a new chemical entity. A drug qualifies
as a new chemical entity if the FDA has not previously approved any other drug
containing the same active ingredient. The Hatch-Waxman Act provides data
exclusivity by prohibiting abbreviated New Drug Applications, and the submission
of section 505(b)(2) applications, which are marketing applications where the
applicant does not own or have a legal right of reference to all the data
required for approval, by another company for another version of such drug
during the exclusive period. Protection under the Hatch-Waxman Act will not
prevent the filing or approval of a full New Drug Application for the same
active ingredient, although the applicant would be required to conduct its own
adequate and well-controlled clinical trials to demonstrate safety and
effectiveness.

Other Regulatory Requirements

Any products we manufacture or distribute under FDA approvals
are subject to pervasive and continuing regulation by the FDA, including
record-keeping requirements and reporting of adverse experiences with the
products. Drug manufacturers and their subcontractors are required to register
with the FDA and, where appropriate, state agencies, and are subject to periodic
unannounced inspections by the FDA and state agencies for compliance with
current Good Manufacturing Practices, or cGMP, regulations which impose
procedural and documentation requirements upon us and each third-party
manufacturer we utilize.

The FDA closely regulates the marketing and promotion of drugs.
A company can make only those claims relating to safety and efficacy that are
approved by the FDA. Failure to comply with these requirements can result in
adverse publicity, warning letters, corrective advertising and potential civil
and criminal penalties. Physicians may prescribe legally available drugs for
uses that are not described in the products labeling and that differ from those
tested by us and approved by the FDA. Such off-label uses are common across
medical specialties. Physicians may believe that such off-label uses are the
best treatment for many patients in varied circumstances. The FDA does not
regulate the behavior of physicians in their choice of treatments. The FDA does,
however, restrict manufacturers from communicating on the subject of off-label
use.

The FDAs policies may change and additional government
regulations may be enacted which could prevent or delay regulatory approval of
NK-001 or our future product candidates, or such approval of new indications for
our future products. We cannot predict the likelihood, nature or extent of
adverse governmental regulations that might arise from future legislative or
administrative action, either in the United States or abroad.

European Union

Clinical Trials

In common with the United States, the various phases of
pre-clinical and clinical research in the European Union are subject to
significant regulatory controls. The regulatory controls on clinical research in
the European Union are now largely harmonized following the implementation of
the Clinical Trials Directive 2001/20/EC, or CTD. Compliance with the national
implementations of the CTD has been mandatory since May 1, 2004. However,
variations in member state regimes continue to exist, particularly in the small
number of member states that have yet to implement the CTD fully.

All member states currently require regulatory and independent
ethics committee approval of interventional clinical trials. European regulators
and ethics committees also require the submission of adverse event reports
during a study and a copy of the final study report.

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Marketing Authorization

In the European Union, approval of new medicinal products can
be obtained through the mutual recognition procedure or the centralized
procedure. The mutual recognition procedure entails initial assessment by the
national authorities of a single member state and subsequent review by national
authorities in other member states based on the initial assessment. The
centralized procedure requires the submission of a single Marketing
Authorization Application (a MAA) to the European Medicines Agency (the
EMEA) leading to an approval that is valid in all European Union member
states. It is required for certain medicinal products, such as biotechnology
products and certain new chemical entities, and is optional, or available at the
EMEAs discretion, for other new chemical entities or innovative medicinal
products with novel characteristics.

Under the centralized procedure, a MAA is submitted to the
EMEA. Two European Union member states are appointed to conduct an initial
evaluation of each MAA. These countries each prepare an assessment report, which
are then used as the basis of a scientific opinion of the Committee for
Medicinal Products for Human Use. If this opinion is favorable, it is sent to
the European Commission which drafts a decision. After consulting with the
member states, the European Commission adopts a decision and grants a marketing
authorization, which is valid throughout the European Union and confers the same
rights and obligations in each of the member states as a marketing authorization
granted by that member state.

The European Union expanded its membership by ten states in May
2004. Two more countries joined on January 1, 2007. Several other European
countries outside of the European Union, particularly those intending to accede
to the European Union, accept European Union review and approval as a basis for
their own national approval.

Advertising

In the European Union, the promotion of prescription medicines
is subject to intense regulation and control, including a prohibition on
direct-to-consumer advertising. Some jurisdictions require that all promotional
materials for prescription medicines be subjected to either prior internal or
regulatory review and approval.

Data Exclusivity

For an MAA filed after October 30, 2005, European Union
regulators offer eight years of data exclusivity during which generic drug
manufacturers cannot file abridged applications. This is followed by two years
of market exclusivity during which generic MMAs may be reviewed and approved but
during which generic drug manufacturers cannot launch products. The manner in
which these new exclusivity provisions will be applied in practice remains far
from clear and there can be no assurance that NK-001 or our other current or
future product candidates will qualify for such exclusivity.

Other Regulatory Requirements

If a marketing authorization is granted for our products in the
European Union, the holder of the marketing authorization will be subject to
ongoing regulatory obligations. A holder of a marketing authorization for our
products is legally obliged to fulfill a number of obligations by virtue of its
status as a Marketing Authorization Holder (a MAH). While the associated legal
responsibility and liability cannot be delegated, the MAH can delegate the
performance of related tasks to third parties, provided that this delegation is
appropriately documented. A MAH can therefore either ensure that it has adequate
resources, policies and procedures to fulfill its responsibilities, or can
delegate the performance of some or all of its obligations to others, such as
distributors or marketing partners.

The obligations of a MAH include:

- Manufacturing and Batch Release: Marketing Authorization Holders should
  guarantee that all manufacturing operations comply with relevant laws and
  regulations, applicable good manufacturing practices, the product
  specifications and manufacturing conditions set out in the marketing
  authorization and that each batch of product is subject to appropriate release
  formalities.

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- Pharmacovigilance: Marketing Authorization Holders are obliged to monitor
  the safety of products post-approval and to submit to the regulators safety
  reports on an expedited and periodic basis. There is an obligation to notify
  regulators of any other information that may affect the risk benefit ratio for
  the product.
- Advertising and Promotion: Marketing Authorization Holders remain
  responsible for all advertising and promotion of their products in the
  relevant jurisdiction, including promotional activities by other companies or
  individuals on their behalf. Some jurisdictions require that a MAH subject all
  promotional materials to either prior internal or regulatory review and
  approval.
- Medical Affairs/Scientific Service: Marketing Authorization Holders are
  required to have a function responsible for disseminating scientific and
  medical information on their medicinal products, predominantly to healthcare
  professionals, but also to regulators and patients.
- Legal Representation and Distributor Issues: Marketing Authorization
  Holders are responsible for regulatory actions or inactions of their
  distributors and agents, including the failure of distributors to provide a
  MAH with safety data within a timeframe that allows the MAH to fulfill its
  reporting obligations.
- Preparation, Filing and Maintenance of the Application and Subsequent
  Marketing Authorization: Marketing Authorization Holders have general
  obligations to maintain appropriate records, to comply with the marketing
  authorizations terms and conditions, to submit renewal applications and to
  pay all appropriate fees to the authorities. There are also general reporting
  obligations, such as an obligation to inform regulators of any information
  that may lead to the modification of the marketing authorization dossier or
  product labeling, and of any action to suspend, revoke or withdraw an approval
  or to prohibit or suspend the marketing of a product.

We may hold marketing authorizations for our products in our
own name, or appoint an affiliate or a collaboration partner to hold the
marketing authorization on our behalf. Any failure by a Marketing Authorization
Holder to comply with these obligations may result in regulatory action against
the MAH and its approvals and ultimately threaten our ability to commercialize
our products.

Approvals Outside of the United States and the European
Union

We will also be subject to a wide variety of foreign
regulations governing the development, manufacture and marketing of our
products. Whether or not FDA approval or European marketing authorization has
been obtained, approval of a product by the comparable regulatory authorities of
other foreign countries must still be obtained prior to manufacturing or
marketing the product in those countries. The approval process varies from
country to country and the time needed to secure approval may be longer or
shorter than that required for FDA approval or a European marketing
authorization. We cannot assure you that clinical trials conducted in one
country will be accepted by other countries or that approval in one country will
result in approval in any other country.

Third-Party Reimbursement and Pricing Controls

General

In the United States and elsewhere, patients access to
pharmaceutical products depends in significant part on the coverage and
reimbursement of a product or service by third-party payors, such as government
programs, private insurance plans and employers. Third-party payors increasingly
are challenging the prices charged for medical products and services. It will be
time consuming and expensive for us to go through the process of seeking
reimbursement from Medicare, Medicaid and private payors. We may be unable to
achieve reimbursement from some payors because they may not consider our
products to be reasonable and necessary or cost-effective. Furthermore, it is
possible that even if payors are willing to reimburse patients for our products,
the reimbursement levels may not be sufficient to allow us to sell our products
on a competitive and profitable basis.

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In many foreign markets, including the countries in the
European Union, the pricing of pharmaceutical products is subject to direct
governmental control and to drug reimbursement programs with varying price
control mechanisms. In the European Union, governments influence the price of
pharmaceutical products through their pricing and reimbursement rules and the
control of national health care systems that fund a large part of the cost of
such products to consumers. The approach taken varies from member state to
member state: some jurisdictions operate positive and/or negative list systems
under which products may only be marketed once a reimbursement price has been
agreed, and other member states allow companies to fix their own prices for
medicines, but monitor and control company profits. The downward pressure on
health care costs in general, particularly prescription drugs, has become very
intense. As a result, increasingly high barriers are being erected to the entry
of new products, as exemplified by the National Institute for Clinical
Excellence in the United Kingdom which evaluates the data supporting new
medicines and passes reimbursement recommendations to the government. In
addition, in some countries cross-border imports from low-priced markets
(parallel imports) exert a commercial pressure on pricing within a country.

In the United States, there have been, and we expect that there
will continue to be, a number of federal and state proposals to implement means
by which the government can negotiate lower drug prices for Medicare and
Medicaid beneficiaries. While we cannot predict whether such legislative bills
will become law, their enactment could have a material adverse effect on our
business, financial condition and results of operations.

Medicare

In the following section, all references to CMS refer to the
Centers for Medicare and Medicaid Services.

We expect that in the United States a majority of the patients
who are treated with our products will be Medicare beneficiaries. The CMS is the
agency within the Department of Health and Human Services that administers both
Medicare and Medicaid. Two aspects of Medicare reimbursement will be relevant to
our products: the availability of reimbursement for physician services for
administration of our products and the availability of reimbursement for our
products themselves.

The CMS has asserted the authority of Medicare not to cover
particular products or services if it determines that they are not reasonable
and necessary for Medicare beneficiaries. The CMS may create a national
coverage determination (a NCD) for a product, which establishes on a
nationwide basis the indications that will be covered and the frequency limits
for administration of the product. However, for most new drugs that are eligible
for payment, the CMS does not create a NCD. We do not know whether we will seek
or obtain a NCD for any of our current or potential products or whether any NCD
we obtain will contain favorable coverage terms. As mentioned above, if Medicare
coverage for our products is available, the CMS may decide to provide
reimbursement through one of two avenues: Part B coverage for
physician-administered drugs, or Part D coverage for outpatient prescription
drugs. Under Part B coverage, Medicare reimburses purchasers of drugs that meet
three statutory requirements:

- the product is reasonable and necessary;
- the product is not usually self-administered and as such is incidental to a
  physicians service in the office setting; and
- the administering physician bills Medicare directly for the product.

Currently, topical products are considered usually
self-administered; therefore, coverage under Part B would require a specific
determination that any of our products differ from most topical products and
should therefore be covered under Part B. There can be no guarantee that we will
obtain such a determination. For the reasons discussed below, the failure to
obtain such a determination could materially and adversely affect our ability to
generate revenue.

If there is not a national coverage decision, the local
Medicare contractors that are responsible for administering the Part B program
on a regional basis may have the discretion to decline coverage and
reimbursement for a drug or to issue a local coverage decision (a LCD). These policies can
include both coverage criteria for the drug and frequency limits for the
administration of the drug. The local contractors in different areas of the
country may determine that our products should be treated like most topical
patches and may deny coverage under Part B or, even if they allow coverage, may
establish varying coverage criteria and frequency limits for any product.
Furthermore, obtaining LCDs in the various regions can be a time-consuming and
expensive process.

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Medicare payment for physician services related to the
administration of any of our products, if any, will most likely be determined
according to a prospectively set payment rate, determined by a procedure code
established by the American Medical Association. These codes, called Current
Procedural Terminology (CPT) codes, describe the procedure performed and can
be specific or more general in nature. We believe that although there are
existing CPT codes that could be used, a specific code for the administration of
each of our products would be preferable. We plan to apply for a specific CPT
code. If, at launch, a specific CPT code is not available, local Medicare
contractors will advise which existing CPT code should be used for services
related to the administration of our products.

The CMS has been considering changes to Medicare reimbursement
that could result in lower payments for physician-administered drugs, and
Congress may also consider legislation that would mandate lower reimbursement
levels. A reduction in reimbursement levels could materially and adversely
affect our revenue.

The CMS may determine that any of our products do not qualify
for Part B coverage and should instead be covered under the Part D outpatient
prescription drug benefit. Because, unlike Part B, Part D coverage reimburses
patients only for the drug itself and does not provide reimbursement for the
physicians administration services (though a physician can bill for service
under Part B and it is possible that the CMS will provide such coverage for the
administration of any of our products, even if the product in question is
covered under Part D), physicians may not consider our products as attractive a
treatment option if they are reimbursed under Part D instead of Part B. In
addition, under Part D, there are multiple types of plans and numerous plan
sponsors, each with its own formulary and product access requirements. While the
CMS evaluates Part D plans proposed formularies for potentially discriminatory
practices, the plans have considerable discretion in establishing formularies,
establishing tiered co-pay structures and placing prior authorization and other
restrictions on the use of specific products. Moreover, Part D plan sponsors are
permitted and encouraged to negotiate rebates with manufacturers. Revenue for
our products will be substantially affected by their respective formulary status
on Part D plans and the rebates that Part D plan sponsors are able to
negotiate.

Medicaid

Most State Medicaid programs have established preferred drug
lists, and the process, criteria and timeframe for obtaining placement on the
preferred drug list vary from state to state. A federal law establishes minimum
rebates that a manufacturer must pay for Medicaid utilization of a product, and
many states have established supplemental rebate programs as a condition for
including a drug product on a preferred drug list. Submitting a preferred drug
list application to each state will be a time-consuming and expensive process,
and it is not clear how many or which state programs will accept the
applications. Review times for these applications can vary from weeks to 14
months or more.

Private Insurance Reimbursement

Commercial insurers usually offer two types of benefits:
medical benefits and pharmacy benefits. In most private insurance plans,
physician-administered drugs are provided under the medical benefit. If private
insurers decide to cover any of our products, they will reimburse for the
drug(s) and its administration in a variety of ways, depending on the insurance
plans revenue targets, employer and benefit manager input and the contract
negotiated with their physicians. Like Medicare and Medicaid, commercial
insurers have the authority to place coverage and utilization limits on
physician-administered drugs. Many private insurers tend to adopt reimbursement
methodologies for a product similar to those adopted by Medicare. Revenue for
our products may be materially and adversely affected if private payors make
unfavorable reimbursement decisions or delay making favorable reimbursement
decisions.

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REPORTS TO SECURITY HOLDERS

We are required to file annual, quarterly and current reports,
proxy statements and other information with the Securities and Exchange
Commission and our filings are available to the public over the internet at the
Securities and Exchange Commissions website at http://www.sec.gov. The public
may read and copy any materials filed by us with the Securities and Exchange
Commission at the Securities and Exchange Commissions Public Reference Room at
100 F Street N.E. Washington D.C. 20549. The public may obtain information on
the operation of the Public Reference Room by calling the Securities and
Exchange Commission at 1-800-732-0330. The SEC also maintains an Internet site
that contains reports, proxy and formation statements, and other information
regarding issuers that file electronically with the SEC, at
http://www.sec.gov.

|Item 1A. | Risk Factors
|-------- | ------------

Risks Related to Our Business and Industry

There is substantial doubt as to whether we will continue
operations. If we discontinue operations, you could lose your
investment.

Our financial statements have been prepared on the going
concern basis, which assumes that we will be able to realize our assets and
discharge our liabilities in the normal course of business. However, as at
January 31, 2011 we had not earned any revenues and had an accumulated deficit
of $3,919,531. We anticipate that we will incur increased expenses without
realizing sufficient revenues (if any) to offset those expenses, and we
therefore expect to incur significant losses for the foreseeable future. Our
ability to continue our operations is dependent on obtaining additional
financing and generating future revenues, and no assurance can be given that we
will successfully be able to do so. Accordingly, our auditor has indicated in
our financial statements that these factors raise substantial doubt about our
ability to continue as a going concern. Importantly, the inclusion in our
financial statements of a going concern opinion may negatively impact our
ability to raise future financing and achieve future revenue. The threat of our
ability to continue as a going concern will be removed only when, in the opinion
of our auditor, our revenues have reached a level that is able to sustain our
business operations.

If we are unable to obtain additional financing from outside
sources and eventually generate enough revenues, we may be forced to sell a
portion or all of our assets, or curtail or discontinue our operations. If any
of these happens, you could lose all or part of your investment. Our financial
statements do not include any adjustments to our recorded assets or liabilities
that might be necessary if we become unable to continue as a going concern.

We have incurred operating losses in each year since our
inception and expect to continue to incur substantial and increasing losses for
the foreseeable future. If we cannot generate sufficient revenues to operate
profitably, we may suspend or cease our operations.

We have not generated any revenue since our inception on June
10, 2002 and we have incurred operating and net losses in each year of our
existence. Our net loss was $3,023,058 for the year ended January 31, 2011,
$120,134 for the year ended January 31, 2010 and $3,919,531 from our inception
on June 10, 2002 to January 31, 2011. We expect to incur substantial and
increasing losses for the foreseeable future as we develop, seek regulatory
approval for and commercialize our product candidates and pursue our other
research and development activities. If our flagship product NK-001 is not
successful in clinical trials, does not gain regulatory approval or does not
achieve market acceptance, we may never generate any revenue. We also cannot
assure you that we will be profitable even if we successfully commercialize
NK-001 or any of our other product candidates. If we fail to generate sufficient
revenues to operate profitability, or if we are unable to fund our continuing
losses, you could lose all or part of your investment.

Our business is to research and develop new applications of
existing therapeutic drugs and enhancements to those drugs, and if we are unable
to market our new applications and enhancements we may never generate
revenues.

We have concentrated our efforts on developing new, proprietary
substances, methods and processes intended to enhance the therapeutic effects of
existing anti-inflammatory drugs in the treatment of diseases mediated by acute
and chronic inflammatory conditions. The existing drugs that
form the basis of our efforts to develop our new substances, methods and
processes are relatively new, and any scientific evidence that may exist to
support the feasibility of our goals is not conclusive. If we are not successful
in developing and marketing any new applications or enhancements for these
existing drugs we may never generate revenues and our business may fail.

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We will require substantial additional funds to complete our
research and development activities, and if such funds are not available we may
need to significantly curtail or cease our operations.

We will require substantial funds to research, develop, test
and protect our product candidates, and to manufacture and market any such
candidates that may be approved for commercial sale. Based on our current cash
levels, we do not have sufficient cash to meet our planned day-to-day operating
needs through January 2012, including our planned research and development
activities. We raised approximately $41,009 through a private placements during
the year ended January 31, 2011 and $65,079 from the issuance of a convertible  debenture. Based on our planned research and development
activities, we anticipate that we will require additional funds of approximately
$722,163 to meet our planned day-to-day operating needs for the next 12
months. If we do not raise sufficient funds, our plan of operation will be
delayed until such time as we raise sufficient funds, provided we are able to do
so. Further, the cost of carrying out our operating activities and research and
development activities is not fixed, and our cash levels may at any time prove
to be insufficient to finance them. Our financing needs may change substantially
because a number of factors which are difficult to predict or which may be
outside of our control. These include increased competition, the costs of
licensing existing drugs and protecting rights to our proprietary technology,
the resources required to complete pre-clinical and clinical studies, and the
length and results of the regulatory approval process.

We may not succeed in raising the additional funds that we
require because such funds may not be available to us on acceptable terms, if at
all. We intend to seek additional funding through strategic alliances or through
public or private sales of our equity securities, and we may also obtain
equipment leases and pursue opportunities to obtain debt financing in the
future. If we are unable to obtain sufficient funding on a timely basis, we may
be forced to significantly curtail or cease our operations.

Our inability to complete our research and development
projects in a timely manner could have a material adverse effect of our results
of operations, financial condition and cash flows.

If our research and development projects are not completed in a
timely fashion (by the end of December 2011), our company could experience:

- substantial additional cost for re-application to obtain
clinical trial approvals;
- additional competition as other groups may enter the area of use of
  anti-inflammatory application to treat neurocognitive impairment;
- up to six months delay in obtaining approvals; and
- delay in obtaining future inflow of cash from financing or partnership
  activities,

any of which could have a material adverse effect of our
results of operations, financial condition and cash flows.

Any products that we may develop will be required to undergo
a time-consuming, costly and burdensome pre-market approval process, and if we
are unable to obtain regulatory approval for our products we may never become
profitable.

Any products that we may develop will be subject to extensive
governmental regulations relating to development, clinical trials, manufacturing
and commercialization. In the United States, for example, the prospective
therapeutic products that we intend to develop and market are regulated by the
FDA under its new drug development and review process. Before such therapeutic
products can be marketed, we must obtain clearance from the FDA by submitting an
investigational new drug application, then by successfully completing human
testing under three phases of clinical trials, and finally by submitting a new
drug application.

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Our development stage product NK-001 is a re-profiled product
based on Etanercept, a drug that has been approved by the FDA and by the
Medicines Control Council of the Department of Health (South Africa), where we
intend to conduct our clinical trials, As such, we do not need to receive
investigational new drug approval (or the South African equivalent) before
proceeding with our development of NK-001. We intend to conduct clinical trials
of NK-001 in South Africa and, if our trials are successful, we plan to initiate
a new drug application process with the FDA. To date, we have received approval
for our proposed Phase II clinical trial protocol for NK-001 from the Medicines
Control Council and from the South African Central Ethics Board. Unlike NK-001,
NK-002 is properly classified as a new drug and will first require
investigational new drug approval (or the equivalent) in the jurisdiction where
we decide to conduct clinical trials. Investigational new drug applications must
be supported by extensive pre-clinical research and, if obtained, must be
followed by not less than three successful phases of clinical trials before a
new drug application can be submitted. We have not established any timelines for
filing any FDA applications for either of our products, and we do not anticipate
doing so until we have completed the relevant research and development.

The time required to obtain approvals for our prospective
therapeutic products from the FDA and other agencies in foreign locales with
similar processes is unpredictable. We expect to be able to accelerate the
approval process and to increase the chances of approval by using existing and
approved drugs as the basis for our own technology. However, we cannot guarantee
that our expectations will be realized, and there is no assurance that we will
ever receive regulatory approval to use our proprietary substances, methods and
processes. If we do not obtain such regulatory approval, we may never become
profitable.

We may not commence clinical testing for any of our
prospective therapeutic products and the commercial value of any clinical study
that we may conduct will depend significantly upon our choice of indication and
our patient population selection. If we are unable to commence clinical testing
or if we make a poor choice in terms of clinical strategy, we may never achieve
revenues.

In order to commence clinical testing we must successfully
complete and obtain positive scientific results from pre-clinical studies and,
in the case of an existing drug that we are re-profiling for a new indication,
adopt existing pre-clinical or early stage clinical studies to our own research.
If we successfully complete any clinical study of our own, the commercial value
of any such study will significantly depend upon our choice of indication and
our patient population selection for that indication.

We plan to employ existing drugs for new indications, and these
drugs may have the ability to treat different kinds of indications. As a result,
we may incorrectly assess the market opportunities of an indication or may
incorrectly estimate or fail to fully appreciate the scientific and
technological difficulties associated with treating an indication. In addition,
the quality and robustness of the results and data of any clinical study that we
may conduct will depend upon our selection of a patient population for clinical
testing, and if we select a patient population that is not representative of our
intended target market, or rely on pre-existing clinical results and data that
do not reflect our intended target market or selected patient population, we may
be forced to complete supplemental pre-clinical and/or clinical testing of our
product candidates or terminate our research and development activities related
to those candidates. The utility of any clinical results and data produced by
third parties that we may apply to our own research will also depend upon the
similarity between the patient population studied to obtain those results and
data and the patient population that we select for our own clinical testing. Our
inability to commence clinical testing or our choice of clinical strategy could
therefore compromise our business prospects and prevent us from achieving
revenues.

Our clinical trials may fail to adequately demonstrate the
safety and efficacy of our product candidates, which could force us to abandon
our business plan.

Before obtaining regulatory approval for the commercial sale of
any of our product candidates, we must demonstrate through lengthy, complex and
expensive pre-clinical testing and clinical trials that each product is both
safe and effective for use in each target indication. Clinical trial results are
inherently difficult to predict, and the results we have obtained or may obtain
from third-party trials or from our own trials may not be indicative of results
from future trials. We may also suffer significant setbacks in advanced clinical
trials even after obtaining promising results in earlier studies.

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Although we intend to modify any of our protocols in ongoing
studies to address any setbacks, there can be no assurance that these
modifications will be adequate or that these or other factors will not have a
negative effect on the results of our clinical trials. This could significantly
disrupt our efforts to obtain regulatory approvals and commercialize our product
candidates. Furthermore, we may voluntarily suspend or terminate our clinical
trials if at any time we believe that they present an unacceptable safety risk
to patients, either in the form of undesirable side effects or otherwise. If we
cannot show that our product candidates are both safe and effective in clinical
trials, we may be forced to abandon our business plan.

We rely on third parties to conduct our pre-clinical and
clinical trials. If these third parties do not perform as contractually required
or otherwise expected we may not be able to obtain regulatory approval for our
product candidates, which may prevent us from becoming profitable.

We currently rely on third parties such as contract research
organizations, medical institutions, clinical investigators and contract
laboratories, to assist us with our pre-clinical and clinical trials. For
example, we currently rely on Virtus Clinical Development (Pty) Limited in
relation to regulatory matters, clinical trial management and all other clinical
services related to our research and development of NK-001, and specifically
with respect to our 50 patient randomized clinical trials we plan to conduct in
South Africa. To that effect, we have entered into a Clinical Trial Services
Master Agreement with Virtus dated March 1, 2009. In carrying out such trials,
we are required to comply with various regulations and standards, commonly
referred to as good clinical practices, regarding conducting, recording and
reporting to ensure that data and results are credible and accurate and that the
trial participants are adequately protected. If the third parties on whom we
rely do not successfully perform their duties or meet regulatory obligations or
expected deadlines, or if they need to be replaced or the quality or accuracy of
the data they obtain is compromised, our development activities or clinical
trials may be extended, delayed, suspended or terminated, and we may not be able
to obtain regulatory approval for our product candidates. This could prevent us
from becoming profitable.

If we are unable to establish a sales, marketing and
distribution infrastructure or enter into collaborations with partners to
perform these functions, we may not be successful in commercializing our product
candidates. This could cause us to cease our operations.

In order to successfully commercialize any of our product
candidates, we must either develop a satisfactory sales, marketing and
distribution infrastructure or enter into collaborations with partners to
perform these services for us. We will require substantial resources to create
such an infrastructure, and we may never possess the resources to do so. For
example, we may be unable to recruit and retain an adequate number of effective
sales and marketing personnel or we may incur unforeseen costs and expenses in
connection with developing the necessary infrastructure.

Although we plan to develop our own sales and marketing
organizations in some markets, we intend to enter into partnering, co-promotion
and other distribution arrangements to commercialize our products in most
markets. We may not be able to enter into collaborations on acceptable terms, if
at all, and we may face competition in our search for partners with whom we may
collaborate. If we are not able to build a satisfactory sales, marketing and
distribution infrastructure or collaborate with one or more partners to perform
these functions, we may not be able to successfully commercialize our product
candidates, which could cause us to cease our operations.

Our product candidates may never gain market acceptance even
if we obtain the necessary regulatory approvals, which could prevent us from
generating revenues.

Even if we receive the necessary regulatory approvals to
commercially sell our product candidates, the success of these candidates will
depend on their acceptance by physicians and patients, among other things.
Market acceptance of, and demand for, any product that we develop and
commercialize will depend on many factors, including:

- our ability to provide acceptable evidence of safety and efficacy;
- our ability to obtain sufficient third-party insurance coverage or
  reimbursement;

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- the availability, relative cost and relative efficacy of alternative and
  competing treatments;
- the effectiveness of our or our collaborators sales, marketing and
  distribution strategy; and
- publicity concerning our products or competing products and treatments.

If our product candidates fail to gain market acceptance, we
may be unable to generate sufficient revenue to continue our business.

We will depend on other parties to manufacture our product
candidates. If these parties fail to meet our manufacturing requirements and
applicable regulatory requirements, our product development and
commercialization efforts could suffer and we may never realize a
profit.

If we obtain the necessary regulatory approvals to market our
products, we will rely on contract manufacturers as single source suppliers for
the components of our product candidates. Both our product candidates are based
(either entirely, as with NK-001, or partially, as with NK-002) upon existing
generic drugs and therefore we do not anticipate having to obtain those products
from their original developers. However, we will rely on manufacturers with
expertise in producing certain generic drugs and other components and we do not
plan to enter into long-term supply agreements with any of these manufacturers.
As a result, any of them could terminate their relationship with us at any time
and for any reason.

Because of our planned reliance on contract manufacturers, we
may also be exposed to additional risks, including those related to intellectual
property and the failure of such manufacturers to comply with strictly-enforced
regulatory requirements, manufacture components to our specifications, or
deliver sufficient component quantities to us in a timely manner. For example, a
contract manufacturer working on our behalf may violate the intellectual
property rights of a third party in manufacturing a component of one of our
products, and if such a violation occurs without our knowledge, we may be held
vicariously liable for the acts of our contractor, incur related costs and court
mandated damages, or become enjoined from selling products which violate those
third-party intellectual property rights. Similarly, if a contract manufacturer
working on our behalf is found to be in violation of FDA or other national
regulatory standards regarding the manufacture, packaging or labeling of any of
our products, we could face any of a number of adverse consequences including
costly regulatory investigations and fines, interruptions in the flow of our
products or materials, product recalls, or liability to consumers regarding any
of our products that do not meet such regulatory requirements. If any of these
events occurs, if our relationship with any of our potential contract
manufacturers terminates, or if any such manufacturer is unable fulfill its
obligations to us for any reason, our product development and commercialization
efforts could suffer and we may never realize a profit.

We face potential product liability exposure, and any claim
brought against us may cause us to divert resources from our normal operations
or terminate selling, distributing and marketing any product for which we have
received regulatory approval. This may cause us to cease our operations.

The use of our product candidates in clinical trials and the
sale of any products for which we obtain regulatory approval may expose us to
product liability claims from consumers, health care providers, pharmaceutical
companies or other entities. Although we plan to obtain product liability
insurance coverage for our clinical trials with limits that we hope will be
customary and adequate to provide us with coverage for foreseeable risks
associated with our product development efforts, our insurance coverage may be
insufficient to reimburse us for the actual expenses or losses we may
suffer.

To date, we have received a comfort letter from the insurer
Marsh Inc. stating that our planned clinical trials of NK-001 are eligible for
customary insurance subject to the approval of our clinical trial protocol by
the requisite health authorities. If we obtain sufficient financing to proceed
with our planned clinical trials, we intend to purchase insurance in amounts
customary for trials comparable to our own. To that effect, we intend to consult
with industry professionals to determine the optimal amount of coverage. In
order to obtain insurance, we must subject our clinical trial protocol to a full
review by our eventual insurance provider. The process of binding an insurance
policy for a clinical trial can take as long as three months.

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We also plan to expand our insurance to cover the commercial
sale of products if we obtain the necessary regulatory approval to do so;
however, the same product liability risks apply in those circumstances as in
clinical trials. Further, even if we are able to successfully defend ourselves
against any potential claims, we will likely incur substantial costs in the form
of unanticipated expenses and negative publicity. This could result in decreased
demand for our product candidates, the withdrawal of clinical trial
participants, an impaired business reputation, revenue loss or an inability to
commercialize our product candidates. Any of these consequences could cause us
to cease our operations.

We face substantial competition in the therapeutic
pharmaceutical research and development industry, which could harm our business
and our ability to operate profitably.

Our industry is highly competitive, and many of our potential
competitors, either alone or together with their partners, have substantially
greater financial resources, research and development programs, clinical trial
and regulatory experience, expertise in the protection of intellectual property
rights, and manufacturing, distribution and sales and marketing capabilities
than us. As a result, they may be able to:

- develop product candidates and market products that are less expensive,
  safer, more effective or involve more convenient treatment procedures than our
  future products;
- commercialize competing products before we can launch any of our product
  candidates;
- initiate or withstand substantial price competition more successfully than
  us;
- enjoy greater success in recruiting skilled scientific workers from a
  limited pool of available talent;
- more effectively negotiate third-party licenses and strategic alliances;
  and
- take advantage of acquisition or other opportunities more readily than us.

We are not currently aware of any active NK-001 competitors for
the treatment of post-coronary artery bypass graft cognitive impairment, nor are
we aware of any active competitors seeking to develop a novel encapsulation
similar to NK-002, despite the widespread the study of Etanercept as a treatment
for Alzheimers disease. If we are unable to maintain a competitive advantage in
our industry in the face of rapid technological change, our business could be
harmed and we may not be able to operate profitably.

All of our product candidates and product development
processes will be subject to ongoing regulatory requirements, and may therefore
be the subject of regulatory or enforcement action. The associated costs could
prevent us from achieving our goals or becoming profitable.

Our product candidates, clinical data, third-party
manufacturing facilities and processes and advertising and promotional
activities for any product that receives regulatory approval will be subject to
significant review and ongoing and changing regulation by various regulatory
agencies. Our failure to comply with any regulatory requirements may subject us
to administrative and judicial sanctions, which may include warning letters,
civil and criminal penalties, injunctions, product seizures or detention,
product recalls, total or partial suspension of production, or the denial of
pending product marketing applications.

Even if we receive regulatory approval to market a particular
product candidate, such approval could be conditional upon our conducting costly
post-approval studies or could limit the indicated uses that we are able to
include on our product labels. In addition, regulatory or enforcement actions
could adversely affect our ability to develop, market and sell our prospective
products successfully and harm our reputation, which could lead to reduced
market demand for such products. Consequently, the costs associated with any
such action could cause our business to suffer and prevent us from achieving our
goals or becoming profitable.

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Since all of our officers, directors and many business
assets are located in Canada, you may be limited in your ability to enforce U.S.
civil actions against them for damages to the value of your investment.

Many of our business assets are located in Canada and all of
our officers and directors are residents of Canada. Consequently, if you are a
U.S. investor it may be difficult for you to affect service of process on our
officers and directors within the United States or enforce a civil judgment of a
U.S. court in Canada if a Canadian court determines that the U.S. court in which
the judgment was obtained did not have jurisdiction in the matter. There is also
substantial doubt whether an original action predicated solely upon civil
liability may successfully be brought in Canada against any of our officers,
directors or business assets. As a result, you may not be able to recover
damages as compensation for any decline in the value of your investment.

We may indemnify our directors and officers against
liability to us and our security holders, and such indemnification could
increase our operating costs.

Our Articles allow us to indemnify our directors and officers
against claims associated with carrying out the duties of their offices. Our
Articles also allow us to reimburse them for the costs of certain legal
defenses. Insofar as indemnification for liabilities arising under the
Securities Act of 1933 (the Securities Act) may be permitted to our directors,
officers or control persons, we have been advised by the SEC that such
indemnification is against public policy and is therefore unenforceable.

Since our officers and directors are aware that they may be
indemnified for carrying out the duties of their offices, they may be less
motivated to meet the standards required by law to properly carry out such
duties, which could increase our operating costs. Further, if our officers and
directors file a claim against us for indemnification, the associated expenses
could also increase our operating costs.

Risks Related to Our Intellectual Property

If we are unable to maintain and enforce our proprietary
intellectual property rights, we may not be able to operate profitably.

Our commercial success will depend, in part, on obtaining and
maintaining patent protection, trade secret protection and regulatory protection
of our technologies and product candidates as well as successfully defending
third-party challenges to such technologies and candidates. We will be able to
protect our technologies and product candidates from use by third parties only
to the extent that valid and enforceable patents, trade secrets or regulatory
protection cover them and we have exclusive rights to use them. The ability of
our licensors, collaborators and suppliers to maintain their patent rights
against third-party challenges to their validity, scope or enforceability will
also play an important role in determining our future.

In addition, our commercial success will depend, in part, on
maintaining patent rights we have licensed or plan to license related to
products we may market in the future. Since we will not fully control the patent
prosecution of any licensed patent applications, it is possible that our
licensors will not devote the same resources or attention to the prosecution of
the licensed patent applications as we would if we controlled the prosecution of
the applications ourselves. Consequently, the resulting patent protection, if
any, may not be as strong or comprehensive as it would be had we done so.

The patent positions of biopharmaceutical companies can be
highly uncertain and involve complex legal and factual questions that include
unresolved principles and issues. No consistent policy regarding the breadth of
claims allowed regarding such companies patents has emerged to date in the
United States, and the patent situation outside the United States is even more
uncertain. Changes in either the patent laws or in interpretations of patent
laws in the United States or other countries may diminish the value of our
intellectual property. Accordingly, we cannot predict with any certainty the
range of claims that may be allowed or enforced concerning our patents or
third-party patents.

We also rely on trade secrets to protect our technologies,
especially where we do not believe patent protection is appropriate or
obtainable. However, trade secrets are difficult to protect. While we seek to
protect confidential information, in part, through confidentiality agreements
with our consultants and scientific and other advisors, they may unintentionally or wilfully disclose our information to
competitors. Enforcing a claim against a third party related to the illegal
acquisition and use of trade secrets can be expensive and time consuming, and
the outcome is often unpredictable. If we are not able to maintain patent or
trade secret protection on our technologies and product candidates, then we may
not be able to exclude competitors from developing or marketing competing
products, and we may not be able to operate profitability.

36

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If we are the subject of an intellectual property
infringement claim, the cost of participating in any litigation could cause us
to go out of business.

There has been, and we believe that there will continue to be,
significant litigation and demands for licenses in our industry regarding patent
and other intellectual property rights. Although we anticipate having a valid
defense to any allegation that our current product candidates, production
methods and other activities infringe the valid and enforceable intellectual
property rights of any third parties, we cannot be certain that a third party
will not challenge our position in the future. Other parties may own patent
rights that we might infringe with our products or other activities, and our
competitors or other patent holders may assert that our products and the methods
we employ are covered by their patents. These parties could bring claims against
us that would cause us to incur substantial litigation expenses and, if
successful, may require us to pay substantial damages. Some of our potential
competitors may be better able to sustain the costs of complex patent
litigation, and depending on the circumstances, we could be forced to stop or
delay our research, development, manufacturing or sales activities. Any of these
costs could cause us to go out of business.

We may in the future be required to license patent rights
from third-party owners in order to develop our products candidates. If we
cannot obtain those licenses or if third-party owners do not properly maintain
or enforce the patents underlying such licenses, we may not be able to market or
sell our planned products.

Although we are not currently dependent on any third-party
intellectual property rights to execute our research and development activities,
we plan to license patent-protected technologies and other intellectual property
if we believe it is necessary or useful to use third-party intellectual property
to develop our products, or if our product development threatens to infringe
upon the intellectual property rights of third parties. Typically, we would seek
to negotiate and obtain any required third party licenses immediately following
the completion of preliminary research to establish a concept and plan of
development for a new product candidate. However, depending on the ongoing
results and requirements of pre-clinical or clinical trials, which may
unexpectedly vary from our anticipated plan of development, we may be required
to seek additional third-party licenses at later stages of product development.
We may be required to pay license fees or royalties or both to obtain such
licenses, and there is no guarantee that such licenses will be available on
acceptable terms, if at all. Even if we are able to successfully obtain a
license, the rights may be non-exclusive, and this would give our competitors
access to the same intellectual property as us, which could ultimately prevent
us from commercializing a product.

Should we succeed in obtaining a license, our business
prospects will depend, in part, on the ability of our licensors to obtain,
maintain and enforce patent protection on our licensed intellectual property.
Our licensors may terminate our license, may not pursue and successfully
prosecute any potential patent infringement claim, may fail to maintain their
patent applications, or may pursue any litigation less aggressively than we
would. Without protection for the intellectual property that we license, other
companies may be able to offer substantially similar products for sale, and we
may not be able to market or sell our planned products or generate any
revenues.

Certain third-party intellectual property rights from which
we currently benefit are licensed to us on a non-exclusive basis, which could
ultimately place us at a competitive disadvantage or prevent us from
commercializing our product candidates.

On June 17, 2008 we entered into a non-exclusive License
Agreement with Globe Laboratories Inc., a company founded and controlled by
Julian Salari, our former President, former Secretary and former Director, to
acquire the right to use Globes know-how to produce certain drugs known as
protein therapeutics which form the basis of our products. For example, Globes
intellectual property provides us with a method to produce Etanercept, the
generic protein therapeutic drug that forms the basis of NK-001 and NK-002.
Because our license from Globe is non-exclusive, Globe is free to license
identical intellectual property to third parties, including those that may
directly compete with us in our field of development. Although the intellectual
property provided to us by Globe allows us to produce generic products that are generally available from a
number of suppliers, we believe that Globes method for producing these products
is currently qualitatively superior and more cost-effective than most
alternative means of producing or obtaining them. If Globe licenses its
proprietary method to our competitors, we will lose what we believe to be a
competitive advantage, the loss of which may make us vulnerable to increased
competition and hinder or ultimately prevent us from commercializing our product
candidates.

37

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If we fail to comply with our obligations under our
non-exclusive License Agreement with Globe Laboratories Inc. or any other
license or related agreements to which we are a party or that we may enter into
in the future, we could lose license rights that may be necessary to or greatly
assist us in developing our therapeutic products.

Under the terms of our non-exclusive License Agreement with
Globe Laboratories Inc., we were obligated to remit CAD$500,000 to Globe,
comprised of a non-refundable license fee of USD$150,000 (including CAD$50,000
in respect of patent preparation and filing fees) and a one-time royalty payment
of CAD$350,000. In June 2008, we settled our obligation to Globe by issuing
Globe 2,000,000 shares of our common stock and we no longer have any enduring
financial obligation to Globe. We do, however, have an ongoing obligation to
Globe to use our best efforts to commercialize products based on its
intellectual property and to indemnify it from any third-party claims resulting
from our use of its intellectual property. In addition, Globe has the right
under this license to license the same intellectual property to our competitors
for similar purposes.

Similar to the non-exclusive license granted to us by Globe,
any license agreement that we may enter into in the future in connection with
our efforts to develop drugs may impose various development, commercialization,
funding, royalty, diligence, sublicensing, insurance and other obligations on
us. If we breach any material obligations, such as the obligation to protect the
confidentiality of the intellectual property under license, the licensor may
have the right to terminate the license which could prevent us from developing,
manufacturing and selling products that are covered by the licensed technology
or permit a competitor to access the licensed technology. Under the terms of our
non-exclusive License Agreement with Globe, Globe has the right to terminate our
license in the event that we become bankrupt or insolvent, or if our business is
placed in the hands of a receiver, assignee or trustee. In addition, Globe has
the right to terminate our license if we default on any of the clauses of the
License Agreement and fail to remedy such defaults within 90 days of Globe
providing notice to us of such default along with its intent to terminate.
Because our License Agreement with Globe allows us to access generic drugs
required to develop our products that are widely available, we do not strictly
rely on our license from Globe to conduct our research and development
activities. However, because intellectual property licensed to us by Globe
allows us to produce high quality generic drugs at relatively low cost, the loss
of our license with Globe would cause us to lose a competitive advantage.

If the FDA grants one of our competitors an orphan drug
designation for a drug and indication combination that is identical to the drug
and indication combination used and targeted by one of our products, we will
prevented from marketing that product for seven years.

The FDA may grant an orphan drug designation to a drug intended
to treat a rare disease or condition that affects fewer than 200,000 individuals
in the United States. An orphan drug designation must be requested before a
sponsor submits a New Drug Application to the FDA, and if the FDA grants such a
designation the generic identity of the therapeutic agent and its potential
orphan use are disclosed publicly by the FDA. An orphan drug designation does
not convey any advantage in, or shorten the duration of, the regulatory review
and approval process that a drug must undergo; however, if a product that is the
subject of an orphan drug designation subsequently receives FDA approval for the
indication for which it has such a designation, the product is entitled to
orphan exclusivity for up to seven years after receiving FDA approval. This
means that the FDA may not approve any other applications to market the same
drug for the same indication, except in very limited circumstances.

Therefore, if one of our competitors obtains an orphan drug
designation for a drug and indication combination that is identical to the drug
and indication combination of one of our products (i.e. the same underlying drug
applied to the same indication), our product may not be approved for the same
indication for up to seven subsequent years.

38

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Risks Associated with Our Securities

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

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

Our stock is a penny stock. Trading of our stock may be
restricted by the SECs penny stock regulations and FINRAs sales practice
requirements, which may limit a stockholders ability to buy and sell our stock.

Our stock is a penny stock. The Securities and Exchange
Commission has adopted Rule 15g-9 which generally defines penny stock to be
any equity security that has a market price (as defined) less than $5.00 per
share or an exercise price of less than $5.00 per share, subject to certain
exceptions. Our securities are covered by the penny stock rules, which impose
additional sales practice requirements on broker-dealers who sell to persons
other than established customers and accredited investors. The term
accredited investor refers generally to institutions with assets in excess of
$5,000,000 or individuals with a net worth in excess of $1,000,000 or annual
income exceeding $200,000 or $300,000 jointly with their spouse. The penny stock
rules require a broker-dealer, prior to a transaction in a penny stock not
otherwise exempt from the rules, to deliver a standardized risk disclosure
document in a form prepared by the SEC which provides information about penny
stocks and the nature and level of risks in the penny stock market. The
broker-dealer also must provide the customer with current bid and offer
quotations for the penny stock, the compensation of the broker-dealer and its
salesperson in the transaction and monthly account statements showing the market
value of each penny stock held in the customers account. The bid and offer
quotations, and the broker-dealer and salesperson compensation information, must
be given to the customer orally or in writing prior to effecting the transaction
and must be given to the customer in writing before or with the customers
confirmation. In addition, the penny stock rules require that prior to a
transaction in a penny stock not otherwise exempt from these rules, the
broker-dealer must make a special written determination that the penny stock is
a suitable investment for the purchaser and receive the purchasers written
agreement to the transaction. These disclosure requirements may have the effect
of reducing the level of trading activity in the secondary market for the stock
that is subject to these penny stock rules. Consequently, these penny stock
rules may affect the ability of broker-dealers to trade our securities. We
believe that the penny stock rules discourage investor interest in, and limit
the marketability of, our common stock.

In addition to the penny stock rules promulgated by the
Securities and Exchange Commission, the Financial Industry Regulatory Authority
has adopted rules that require that in recommending an investment to a customer,
a broker-dealer must have reasonable grounds for believing that the investment
is suitable for that customer. Prior to recommending speculative low priced
securities to their non-institutional customers, broker-dealers must make
reasonable efforts to obtain information about the customers financial status,
tax status, investment objectives and other information. Under interpretations
of these rules, the Financial Industry Regulatory Authority believes that there
is a high probability that speculative low-priced securities will not be
suitable for at least some customers. The Financial Industry Regulatory
Authority  requirements make it more difficult for broker-dealers to recommend
that their customers buy our common stock, which may limit your ability to buy
and sell our stock.

You will experience dilution or subordinated stockholder
rights, privileges and preferences as a result of our financing efforts.

We must raise additional capital from external sources to carry
out our business plan over the next 12 months. To do so, we may issue debt
securities, equity securities or a combination of these securities; however, we
may not be able to sell these securities, particularly under current market
conditions. Even if we are successful in finding buyers for our securities, such
buyers could demand high interest rates or require us to agree to onerous
operating covenants, which could in turn harm our ability to operate our
business by reducing our cash flow and restricting our operating activities. If we choose to sell shares of our common stock,
this will result in dilution to our existing stockholders. In addition, any
shares of common stock we may issue may have rights, privileges and preferences
superior to those of our current stockholders.

39

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We do not intend to pay dividends and there will thus be
fewer ways in which you are able to make a gain on your investment, if at
all.

We have never paid dividends and do not intend to pay any
dividends for the foreseeable future. To the extent that we may require
additional funding currently not provided for in our financing plan, our funding
sources may prohibit the declaration of dividends. Because we do not intend to
pay dividends, any gain on your investment will need to result from an
appreciation in the price of our common stock. There will therefore be fewer
ways in which you are able to make a gain on your investment, if at all. There
is also no guarantee that your investment will appreciate.

You may face significant restrictions on the resale of your
shares due to state blue sky laws.

Each state has its own securities laws, often called blue sky
laws, which (1) limit sales of securities to a states residents unless the
securities are registered in that state or qualify for an exemption from
registration, and (2) govern the reporting requirements for broker-dealers doing
business directly or indirectly in the state. Before a security is sold in a
state, there must be a registration in place to cover the transaction, or it
must be exempt from registration. The applicable broker-dealer must also be
registered in that state.

We do not know whether our securities will be registered or
exempt from registration under the laws of any state. A determination regarding
registration will be made by those broker-dealers, if any, who agree to serve as
market makers for our common stock. There may be significant state blue sky law
restrictions on the ability of investors to sell, and on purchasers to buy, our
securities. You should therefore consider the resale market for our common stock
to be limited, as you may be unable to resell your shares without the
significant expense of state registration or qualification.

Other Risks

Because some of our officers and directors are located in
non-U.S. jurisdictions, you may have no effective recourse against the non U.S.
officers and directors for misconduct and may not be able to enforce judgment
and civil liabilities against our officers, directors, experts and agents.

Some of our directors and officers are nationals and/or
residents of countries other than the United States, specifically Canada and
Colombia, and all or a substantial portion of such persons assets are located
outside the United States. As a result, it may be difficult for investors to
enforce within the United States any judgments obtained against our officers or
directors, including judgments predicated upon the civil liability provisions of
the securities laws of the United States or any state thereof.

Trends, Risks and Uncertainties

We have sought to identify what we believe to be the most
significant risks to our business, but we cannot predict whether, or to what
extent, any of such risks may be realized nor can we guarantee that we have
identified all possible risks that might arise. Investors should carefully
consider all of such risk factors before making an investment decision with
respect to our common stock.

|Item 1B. | Unresolved Staff Comments
|-------- | -------------------------

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

40

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|Item 2. | Properties
|------- | ----------

We do not currently own or lease a dedicated executive office
or laboratory space. We maintain a dedicated mailing address and telephone
reception service located at 1275 West 6th Avenue, Vancouver, British Columbia,
Canada V6H 1A6, at a cost of approximately $70 per month. We also have access to
office and meeting space at that location for a nominal fee, on an as-used
basis.

|Item 3. | Legal Proceedings
|------- | -----------------

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

|Item 4. | [Removed and Reserved]
|------- | ----------------------

PART II

|Item 5. | Market for Registrants Common Equity,
      Related Stockholder Matters and Issuer Purchases of Equity
      Securities
|------- | ------------------------------------------------------------------------------------------------------------------------

Our Common stock quoted on the OTC Bulletin Board under the
Symbol "NEUKF". Our common stock was listed for quotation on April 13, 2010.

The following table reflects the high and low bid information
for our common stock obtained from Stockwatch and reflects inter-dealer prices,
without retail mark-up, markdown or commission, and may not necessarily
represent actual transactions.

The high and low bid prices of our common stock for the periods
indicated below are as follows:

OTC Bulletin BoardQuarter Ended
    High
    LowJanuary 31, 2011
    $2.41
    $0.51October 31, 2010
    $2.52
    $2.40July 31, 2010
    N/A(1)
    N/A(1)April 30, 2010
    N/A(1)
    N/A(1)


|(1) | Our common stock was listed for quotation on April 13,
      2010. Our first trade did not occur until October 4,
  2010.
|--- | -------------------------------------------------------------------------------------------------------------------------

As of May 5, 2011, there were approximately 42 holders of
record of our common stock. As of such date, 33,621,618 common shares were
issued and outstanding.

Our common shares are issued in registered form. Island Stock
Transfer Inc., 100 Second Avenue South, Suite 705S, St. Petersburg, Florida
33701 (Telephone: 727.289.0010) is the registrar and transfer agent for our
common shares.

Dividend Policy

We have not paid any cash dividends on our common stock and
have no present intention of paying any dividends on the shares of our common
stock. Our current policy is to retain earnings, if any, for use in our
operations and in the development of our business. Our future dividend policy
will be determined from time to time by our board of directors.

41

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Recent Sales of Unregistered Securities; Use of Proceeds
from Registered Securities

Other than as disclosed below, we did not sell any equity
securities which were not registered under the Securities Act during the year
ended January 31, 2011 that were not otherwise disclosed on our quarterly
reports on Form 10-Q or our current reports on Form 8-K filed during the year
ended January 31, 2011.

Equity Compensation Plan Information

Except as disclosed below, we do not have a stock option plan
in favor of any director, officer, consultant or employee of our company.

Convertible Securities

As of May 5, 2011, we had outstanding options to purchase
800,000 shares of our common stock at $0.005 exercisable until May 25, 2015. As
of May 5, 2011, we had outstanding warrants to purchase 3,800,000 shares of our
common stock at $0.005 per stock exercisable until July 30, 2015.

Purchase of Equity Securities by the Issuer and Affiliated
Purchasers

We did not purchase any of our shares of common stock or other
securities during our fourth quarter of our fiscal year ended January 31,
2011.

|Item 6. | Selected Financial Data
|------- | -----------------------

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

|Item 7. | Managements Discussion and Analysis of
      Financial Condition and Results of Operations
|------- | -------------------------------------------------------------------------------------------

The following discussion should be read in conjunction with our
audited financial statements and the related notes for the years ended January
31, 2011 and January 31, 2010 that appear elsewhere in this annual report. The
following discussion contains forward-looking statements that reflect our plans,
estimates and beliefs. Our actual results could differ materially from those
discussed in the forward looking statements. Factors that could cause or
contribute to such differences include, but are not limited to those discussed
below and elsewhere in this annual report, particularly in the section entitled
"Risk Factors" beginning on page 30 of this annual report.

Our audited financial statements are stated in United States
Dollars and are prepared in accordance with United States Generally Accepted
Accounting Principles.

Purchase of Significant Equipment

We do not intend to purchase any significant equipment over the
next twelve months.

Personnel Plan

We do not expect any material changes in the number of
employees over the next 12 month period (although we may enter into employment
or consulting agreements with our officers or directors). We do and will
continue to outsource contract employment as needed.

42

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Results of Operations

For the Year Ending January 31, 2011 and 2010

| |                    |   | Year Ended |  
| | ------------------ | - | ---------- | -
| |                    |   | January 31 |  
| |                    |   | 2011       |  
| | Revenue            | $ | Nil        |  
| | Operating Expenses | $ | 144,336    |  
| | Net Loss           | $ | (3,023,058 | )

Expenses

Our operating expenses for our years ended January 31, 2011 and
2010 are outlined in the table below:

| |                            |   | Year Ended | 
| | -------------------------- | - | ---------- | 
| |                            |   | January 31 | 
| |                            |   | 2011       | 
| | Amortization               | $ | 38         | 
| | Foreign exchange loss      | $ | 2,111      | 
| | General and administrative | $ | 58,735     | 
| | Management fees            | $ | 32,476     | 
| | Professional fees          | $ | 50,976     | 
| | Research and development   | $ | Nil        | 

Operating expenses for year ended January 31, 2011 increased by
20% as compared to the comparative period in 2010 primarily as a result of an
increase in professional fees.

Revenue

We have not earned any revenues since our inception and we do
not anticipate earning revenues in the upcoming quarter.

Equity Compensation

We currently do not have any stock option or equity
compensation plans or arrangements.

Liquidity and Financial Condition

|Working Capital           |   |             |   |   |             |  |  |            |  
|------------------------- | - | ----------- | - | - | ----------- |  |  | ---------- | -
|                          |   | At          |   |   | At          |  |  | Percentage |  
|                          |   | January 31, |   |   | January 31, |  |  | Increase/  |  
|                          |   | 2011        |   |   | 2010        |  |  | (Decrease) |  
|Current Assets            | $ | 15,037      |   | $ | 18,979      |  |  | (21%       | )
|Current Liabilities       | $ | 40,575      |   | $ | 14,809      |  |  | 757%       |  
|Working Capital (Deficit) | $ | (25,538     | ) | $ | 4,170       |  |  | (2,781%    | )

|Cash Flows                                    |   |             |   |   |             |  
|--------------------------------------------- | - | ----------- | - | - | ----------- | -
|                                              |   | Year Ended  |   |   | Year Ended  |  
|                                              |   | January 31, |   |   | January 31, |  
|                                              |   | 2011        |   |   | 2010        |  
|Net Cash used in Operating Activities         | $ | (107,754    | ) | $ | (36,166     | )
|Net Cash used in Investing Activities         | $ | (2,276      | ) | $ | Nil         |  
|Net Cash Provided by Financing Activities     | $ | 106,088     |   | $ | 25,421      |  
|Increase (Decrease) in Cash During the Period | $ | (3,942      | ) | $ | (10,745     | )

43

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We will require additional funds to fund our budgeted expenses
over the next 12 months. These funds may be raised through equity financing,
debt financing, or other sources, which may result in further dilution in the
equity ownership of our shares. There is still no assurance that we will be able
to maintain operations at a level sufficient for an investor to obtain a return
on his investment in our common stock. Further, we may continue to be
unprofitable. We need to raise additional funds in the immediate future in order
to proceed with our budgeted expenses.

Specifically, we estimate our operating expenses and working
capital requirements for the next 12 months to be as follows:

Estimated ExpensesDescription
    
    ($)Sales and Marketing Costs:Advertising
    
    3,600Investor Relations
    
    60,000Literature
    
    6,000Conference Attendance
    
    21,000Travel
    
    22,000Entertainment and Promotion
    
    2,400Marketing Costs
    
    115,000Operating Expenses:Professional Fees
    
    60,000Employee Salaries and Benefits
    
    384,000Office Equipment
    
    1,600Office Supplies
    
    1,200Office and Lab Lease
    
    40,000Telephone, Fax, Cellular, Internet
    
    6,000Vehicles and Transportation
    
    14,400


Based on our planned expenditures, we will require additional
funds of approximately $722,163 (a total of $733,200 less our cash of
approximately $15,037 as of January 31, 2011) to proceed with our business plan
over the next 12 months. If we secure less than the full amount of financing that we
require, we will not be able to carry out our complete business plan and we will
be forced to proceed with a scaled back business plan based on our available
financial resources.

We anticipate that we will incur substantial losses for the
foreseeable future. Even if we carry out our planned research and development
activities on our products, there is no guarantee that we will be able to market
them or derive any revenues from their sale. Currently, we intend to prioritize
the allocation of any financing that we may receive toward the development of
NK-001, which has reached the most advanced development stage of our product
candidates. Because NK-001 has reached this stage we believe that prioritizing
its development will afford us the greatest likelihood of generating revenues
which will in turn allow us to finance the development of other product
candidates. Although we intend to conduct research and development of our other
planned product, NK-002, we do not have a formal clinical trial protocol or
formal budget in place for NK-002 at this time.

The following table sets out the various steps we will be
required to complete in order to carry out our research and development of
NK-001 and NK-002. Where estimated costs or completion times are known, they
have been indicated, and where progress has been made, it has been indicated.
Where estimated completion times and cost estimates are omitted for future
business steps, they are omitted because (i) we believe no reliable estimate may
be made until currently planned research is completed and assessed, and/or (ii)
we do not currently have sufficient resources to complete research that may be
required to provide a reliable estimate.

|                                                        | Product                     
|------------------------------------------------------- | ----------------------------
|Anticipated
      Steps                                 | NK-001                      
|Secure Intellectual Property Protection of Drug Concept | Patent Application Submitted

44

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|                                                                                                               | Product                                                                                                                                                                                                                     
|-------------------------------------------------------------------------------------------------------------- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Anticipated
      Steps                                                                                        | NK-001                                                                                                                                                                                                                      
|Secure Rights to Use Re-Profiled Drug                                                                          | Not Required (Generic Drug)                                                                                                                                                                                                 
|Pre-Clinical
      Testing                                                                                     | Not
      Required                                                                                                                                                                                                          
|Secure Investigational New Drug Approval or Equivalent                                                         | Not Required (Generic Drug)                                                                                                                                                                                                 
|Phase I Clinical
      Trials                                                                                  | Not
      Required                                                                                                                                                                                                          
|Phase II Clinical Trials                                                                                       | Clinical Trial Protocol Complete and Approved for
      Implementation Clinical Trials Delayed Until Sufficient Financing
      is Secured Estimated Cost: $1,355,000 
      Estimated Completion Date:
      September 2012
|Phase III
      Clinical Trials                                                                                | Required                                                                                                                                                                                                                    
|Submit New Drug Application or Equivalent and Obtain
      Marketing Approval                                  | Required                                                                                                                                                                                                                    
|Finance
      Marketing and Manufacturing of Approved Drug or Secure Marketing
      and Manufacturing Partner | Required                                                                                                                                                                                                                    

During the years ended January 31, 2011 and 2010, we incurred
$Nil and $Nil, respectively, on NK001, and $Nil and $Nil, respectively, on
NK002. We  did not commence clinical trials during 2011 and 2010 due to insufficient  cash. We are seeking to raise funds to  continue testing and development.

We expect that we may obtain material net cash inflows from our
projects 18 to 36 months following the start of our proposed clinical trials,
which we expect will begin soon after the necessary funding is obtained.
However, there can be no assurance we will obtain such cash inflows.

We intend to raise capital through equity and, if necessary,
debt financing. We anticipate that the bulk of any additional funding we receive
will be in the form of equity financing from the sale of our common stock.
However, we do not have any financing arranged and we cannot provide any
assurance that we will be able to raise sufficient funds from the sale of our
common stock to fund our operations or planned research and development
activities. In the absence of such financing, we will not be able to carry out
our planned research and development activities. Even if we are successful in
obtaining equity financing to fund our operations and research and development
activities, there is no assurance that we will obtain the funding necessary to
pursue any advanced research and development following the completion of our
planned clinical trials. If we do not continue to obtain additional financing,
we may be forced to abandon our business plan.

Any modifications to our plans will be based on many factors,
including the results of our clinical trials and the amount of available
capital. Further, the extent to which we carry out our development of planned
products is dependent upon the amount of financing available to us.

Future Financings

We will require additional financing in order to enable us to
proceed with our plan of operations, as discussed above, including approximately
$150,000 over the next 12 months to pay for our ongoing expenses. These expenses
include legal, accounting and audit fees as well as general and administrative
expenses. These cash requirements are in excess of our current cash and working
capital resources. Accordingly, we will require additional financing in order
to continue operations and to repay our liabilities. There is
no assurance that any party will advance additional funds to us in order to
enable us to sustain our plan of operations or to repay our liabilities.

45

---

We anticipate continuing to rely on equity sales of our common
stock in order to continue to fund our business operations. Issuances of
additional shares will result in dilution to our existing stockholders. There is
no assurance that we will achieve any additional sales of our equity securities
or arrange for debt or other financing to fund our planned business
activities.

We presently do not have any arrangements for additional
financing for the expansion of our exploration operations, and no potential
lines of credit or sources of financing are currently available for the purpose
of proceeding with our plan of operations.

Contractual Obligations

As a smaller reporting company, we are not required to
provide tabular disclosure obligations.

Going Concern

We have not generated any revenues and are dependent upon
obtaining outside financing to carry out our operations and pursue our
pharmaceutical research and development activities. If we are unable to generate
future cash flows, raise equity or secure alternative financing, we may not be
able to continue our operations and our business plan may fail. You may lose
your entire investment.

If our operations and cash flow improve, management believes
that we can continue to operate. However, no assurance can be given that
management's actions will result in profitable operations or an improvement in
our liquidity situation. The threat of our ability to continue as a going
concern will cease to exist only when our revenues have reached a level able to
sustain our business operations.

Off-Balance Sheet Arrangements

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

Critical Accounting Policies

The discussion and analysis of our financial condition and
results of operations are based upon our consolidated financial statements,
which have been prepared in accordance with the accounting principles generally
accepted in the United States of America. Preparing financial statements
requires management to make estimates and assumptions that affect the reported
amounts of assets, liabilities, revenue, and expenses. These estimates and
assumptions are affected by managements application of accounting policies. We
believe that understanding the basis and nature of the estimates and assumptions
involved with the following aspects of our financial statements is critical to
an understanding of our financial statements.

Foreign Currency Translation

Our companys functional currency and our reporting currency is
the Canadian dollar and foreign currency transactions are primarily undertaken
in United States dollars. The financial statements of our company are translated
to Canadian dollars in accordance with ASC 830, Foreign Currency Translation,
using the exchange rate prevailing at the balance sheet date. Gains and losses
arising on translation or settlement of foreign currency denominated
transactions or balances are included in the determination of income.

46

---

Basic and Diluted Net Loss Per Share

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

Recent Accounting Pronouncements

In February 2010, the FASB issued ASU No. 2010-09 Subsequent
Events (ASC Topic 855) Amendments to Certain Recognition and Disclosure
Requirements (ASU No. 2010-09). ASU No. 2010-09 requires an entity that is an
SEC filer to evaluate subsequent events through the date that the financial
statements are issued and removes the requirement for an SEC filer to disclose a
date, in both issued and revised financial statements, through which the filer
had evaluated subsequent events. The adoption did not have an impact on our
companys financial position and results of operations.

In January 2010, the FASB issued an amendment to ASC 820, Fair
Value Measurements and Disclosure, to require reporting entities to separately
disclose the amounts and business rationale for significant transfers in and out
of Level 1 and Level 2 fair value measurements and separately present
information regarding purchase, sale, issuance, and settlement of Level 3 fair
value measures on a gross basis. This standard, for which our company is
currently assessing the impact, is effective for interim and annual reporting
periods beginning after December 15, 2009 with the exception of disclosures
regarding the purchase, sale, issuance, and settlement of Level 3 fair value
measures which are effective for fiscal years beginning after December 15, 2010.
The adoption of this standard is not expected to have a significant impact on
our companys financial statements.

Our company has implemented all new accounting pronouncements
that are in effect and that may impact its financial statements and does not
believe that there are any other new accounting pronouncements that have been
issued that might have a material impact on its financial position or results of
operations.

|Item 7A. | Quantitative and Qualitative Disclosures
      About Market Risk
|-------- | ----------------------------------------------------------------

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

|Item 8. | Financial Statements and Supplementary
      Data
|------- | -------------------------------------------------

47

---

|NEUROKINE PHARMACEUTICALS INC.       
|-------------------------------------
|Financial Statements                 
|(Expressed in Canadian dollars)      
|Years Ended January 31, 2011 and 2010

48

---



REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING
FIRM

To the Board of Directors and Stockholders of Neurokine
Pharmaceuticals Inc.(A Development Stage Company)

We have audited the accompanying balance sheets of Neurokine
Pharmaceuticals Inc. (A Development Stage Company) as of January 31, 2011 and
2010, and the related statements of operations, stockholders equity, and cash
flows for the years then ended and accumulated from June 10, 2002 (Date of
Inception) to January 31, 2011. These financial statements are the
responsibility of the Company's management. Our responsibility is to express an
opinion on these financial statements based on our audits.

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

In our opinion, the financial statements referred to above
present fairly, in all material respects, the financial position of the Company
as of January 31, 2011 and 2010, and the results of its operations and its cash
flows for the years then ended and accumulated from June 10, 2002 (Date of
Inception) to January 31, 2011, in conformity with accounting principles
generally accepted in the United States.

The accompanying financial statements have been prepared
assuming the Company will continue as a going concern. As discussed in Note 1 to
the financial statements, the Company has not generated any revenues and has
incurred operating losses since inception. These factors raise substantial doubt
about the Companys ability to continue as a going concern. Managements plans
in regard to these matters are also discussed in Note 1 to the financial
statements. The financial statements do not include any adjustments that might
result from the outcome of this uncertainty.

/s/ SATURNA GROUP CHARTERED ACCOUNTANTS LLP

Saturna Group Chartered Accountants LLP Vancouver,
Canada

May 6, 2011

49

---

|NEUROKINE PHARMACEUTICALS INC. 
|-------------------------------
|(A Development Stage Company)  
|Balance Sheets                 
|(Expressed in Canadian dollars)

|                                                                                                                                                    |  | January 31, 2011 |   |  | January 31, 2010 |  
|--------------------------------------------------------------------------------------------------------------------------------------------------- |  | ---------------- | - |  | ---------------- | -
|                                                                                                                                                    |  | $                |   |  | $                |  
|Assets                                                                                                                                              |  |                  |   |  |                  |  
|Current Assets                                                                                                                                      |  |                  |   |  |                  |  
|Cash                                                                                                                                                |  | 15,037           |   |  | 18,979           |  
|Total Current Assets                                                                                                                                |  | 15,037           |   |  | 18,979           |  
|Property and equipment (Note 3)                                                                                                                     |  | 2,238            |   |  |                 |  
|Total Assets                                                                                                                                        |  | 17,275           |   |  | 18,979           |  
|                                                                                                                                                    |  |                  |   |  |                  |  
|Liabilities and Stockholders Equity (Deficit)                                                                                                      |  |                  |   |  |                  |  
|Current Liabilities                                                                                                                                 |  |                  |   |  |                  |  
|Accounts payable and accrued liabilities                                                                                                            |  | 12,608           |   |  | 6,896            |  
|Due to related parties (Note
      10)                                                                                                              |  | 17,269           |   |  | 2,913            |  
|Loan payable (Note 4)                                                                                                                               |  |                 |   |  | 5,000            |  
|Convertible debenture, net of unamortized discount
      of $54,445 (Note 5)                                                                        |  | 10,698           |   |  |                 |  
|Total Current Liabilities                                                                                                                           |  | 40,575           |   |  | 14,809           |  
|Derivative liabilities (Note 6)                                                                                                                     |  | 2,927,928        |   |  |                 |  
|Total Liabilities                                                                                                                                   |  | 2,968,503        |   |  | 14,809           |  
|Nature of operations and continuance of
      business (Note 1)                                                                                     |  |                  |   |  |                  |  
|Subsequent event (Note 12)                                                                                                                          |  |                  |   |  |                  |  
|Stockholders Equity (Deficit)                                                                                                                      |  |                  |   |  |                  |  
|Common stock: 200,000,000 shares authorized,
      without par value    33,621,618 and 23,829,618 shares issued
      and outstanding, respectively |  | 915,893          |   |  | 826,484          |  
|Common stock issuable (Note 7)                                                                                                                      |  |                 |   |  | 32,000           |  
|Additional paid-in capital                                                                                                                          |  | 52,410           |   |  | 42,159           |  
|Accumulated deficit during the development stage                                                                                                    |  | (3,919,531       | ) |  | (896,473         | )
|Total
      Stockholders Equity (Deficit)                                                                                                          |  | (2,951,228       | ) |  | 4,170            |  
|Total Liabilities and Stockholders Equity (Deficit)                                                                                                |  | 17,275           |   |  | 18,979           |  

(The accompanying notes are an integral part of these financial
statements)

50

---

|NEUROKINE PHARMACEUTICALS INC. 
|-------------------------------
|(A Development Stage Company)  
|Statements of Operations       
|(Expressed in Canadian dollars)

|                                                                    |  |             |   |  |             |   |  | Accumulated   |  
|------------------------------------------------------------------- |  | ----------- | - |  | ----------- | - |  | ------------- | -
|                                                                    |  |             |   |  |             |   |  | from June 10, |  
|                                                                    |  |             |   |  |             |   |  | 2002 (Date of |  
|                                                                    |  | Year Ended  |   |  | Year Ended  |   |  | Inception) to |  
|                                                                    |  | January 31, |   |  | January 31, |   |  | January 31,   |  
|                                                                    |  | 2011        |   |  | 2010        |   |  | 2011          |  
|                                                                    |  | $           |   |  | $           |   |  | $             |  
|                                                                    |  |             |   |  |             |   |  |               |  
|Revenue                                                             |  |            |   |  |            |   |  |              |  
|                                                                    |  |             |   |  |             |   |  |               |  
|Expenses                                                            |  |             |   |  |             |   |  |               |  
|Amortization                                                        |  | 38          |   |  |            |   |  | 38            |  
|Foreign exchange loss                                               |  | 2,111       |   |  | 1,171       |   |  | 6,247         |  
|General and administrative                                          |  | 58,735      |   |  | 56,623      |   |  | 134,777       |  
|Management fees (Note 10)                                           |  | 32,476      |   |  | 32,000      |   |  | 78,976        |  
|Professional fees                                                   |  | 50,976      |   |  | 28,715      |   |  | 96,097        |  
|Research and development                                            |  |            |   |  | 1,625       |   |  | 224,674       |  
|Royalties                                                           |  |            |   |  |            |   |  | 500,000       |  
|Total Expenses                                                      |  | 144,336     |   |  | 120,134     |   |  | 1,040,809     |  
|Loss from
      Operations                                          |  | (144,336    | ) |  | (120,134    | ) |  | (1,040,809    | )
|Other Expenses                                                      |  |             |   |  |             |   |  |               |  
|Accretion of discount on convertible debt
      (Note 5)            |  | (10,698     | ) |  |            |   |  | (10,698       | )
|Loss on change in fair value of derivative
      liability (Note 6) |  | (2,868,024  | ) |  |            |   |  | (2,868,024    | )
|Total Other
      Expenses                                          |  | (2,878,722  | ) |  |            |   |  | (2,878,722    | )
|Net Loss                                                            |  | (3,023,058  | ) |  | (120,134    | ) |  | (3,919,531    | )
|                                                                    |  |             |   |  |             |   |  |               |  
|Net loss per share, basic and diluted                               |  | (0.11       | ) |  | (0.01       | ) |  |               |  
|                                                                    |  |             |   |  |             |   |  |               |  
|Weighted average shares outstanding                                 |  | 28,037,486  |   |  | 23,794,000  |   |  |               |  

(The accompanying notes are an integral part of these financial
statements)

51

---

|NEUROKINE PHARMACEUTICALS INC.    
|----------------------------------
|(A Development Stage Company)     
|Statements of Stockholders Equity
|(Expressed in Canadian dollars)   

|                                                                  |  |              |  |  |         |  |  |               |  |  |          |   |  |             |  |  | Deficit     |   |  |          |  
|----------------------------------------------------------------- |  | ------------ |  |  | ------- |  |  | ------------- |  |  | -------- | - |  | ----------- |  |  | ----------- | - |  | -------- | -
|                                                                  |  |              |  |  |         |  |  |               |  |  |          |   |  |             |  |  | Accumulated |   |  |          |  
|                                                                  |  |              |  |  |         |  |  | Common        |  |  | Share    |   |  | Additional  |  |  | During the  |   |  |          |  
|                                                                  |  | Common Stock |  |  | Stock   |  |  | Subscriptions |  |  | Paid-In  |   |  | Development |  |  |             |  
|                                                                  |  | Shares       |  |  | Amount  |  |  | Issuable      |  |  | Received |   |  | Capital     |  |  | Stage       |   |  | Total    |  
|                                                                  |  | #            |  |  | $       |  |  | $             |  |  | $        |   |  | $           |  |  | $           |   |  | $        |  
|Balance  June 10, 2002 (Date of Inception)
      and January 31, |  |              |  |  |         |  |  |               |  |  |          |   |  |             |  |  |             |   |  |          |  
|2007                                                              |  |             |  |  |        |  |  |              |  |  |         |   |  |            |  |  |            |   |  |         |  
|Issuance of common stock for cash                                 |  | 18,000,000   |  |  | 45,000  |  |  |              |  |  |         |   |  |            |  |  |            |   |  | 45,000   |  
|Issuance of common stock for services rendered                    |  | 400,000      |  |  | 60,000  |  |  |              |  |  |         |   |  |            |  |  |            |   |  | 60,000   |  
|Proceeds from share subscriptions received                        |  |             |  |  |        |  |  |              |  |  | 183,588  |   |  |            |  |  |            |   |  | 183,588  |  
|Net loss for the
      period                                     |  |             |  |  |        |  |  |              |  |  |         |   |  |            |  |  | (122,578    | ) |  | (122,578 | )
|Balance  January 31, 2008                                        |  | 18,400,000   |  |  | 105,000 |  |  |              |  |  | 183,588  |   |  |            |  |  | (122,578    | ) |  | 166,010  |  
|Issuance of common stock for cash                                 |  | 1,340,418    |  |  | 201,063 |  |  |              |  |  | (183,588 | ) |  |            |  |  |            |   |  | 17,475   |  
|Issuance of common stock for license
      agreement              |  | 4,000,000    |  |  | 500,000 |  |  |              |  |  |         |   |  |            |  |  |            |   |  | 500,000  |  
|Net loss for the
      year                                       |  |             |  |  |        |  |  |              |  |  |         |   |  |            |  |  | (653,761    | ) |  | (653,761 | )
|Balance  January 31, 2009                                        |  | 23,740,418   |  |  | 806,063 |  |  |              |  |  |         |   |  |            |  |  | (776,339    | ) |  | 29,724   |  
|Issuance of common stock for cash                                 |  | 89,200       |  |  | 20,421  |  |  |              |  |  |         |   |  |            |  |  |            |   |  | 20,421   |  
|Share issuable for management fees                                |  |             |  |  |        |  |  | 32,000        |  |  |         |   |  |            |  |  |            |   |  | 32,000   |  
|Fair value of stock options granted                               |  |             |  |  |        |  |  |              |  |  |         |   |  | 42,159      |  |  |            |   |  | 42,159   |  
|Net loss for the year                                             |  |             |  |  |        |  |  |              |  |  |         |   |  |            |  |  | (120,134    | ) |  | (120,134 | )
|Balance  January
      31, 2010                                  |  | 23,829,618   |  |  | 826,484 |  |  | 32,000        |  |  |         |   |  | 42,159      |  |  | (896,473    | ) |  | 4,170    |  

(The accompanying notes are an integral part of these financial
statements)

52

---

|NEUROKINE PHARMACEUTICALS INC.    
|----------------------------------
|(A Development Stage Company)     
|Statements of Stockholders Equity
|(Expressed in Canadian dollars)   

|                                                            |  |              |  |  |         |  |  |          |   |  |             |  |  | Deficit     |   |  |            |  
|----------------------------------------------------------- |  | ------------ |  |  | ------- |  |  | -------- | - |  | ----------- |  |  | ----------- | - |  | ---------- | -
|                                                            |  |              |  |  |         |  |  |          |   |  |             |  |  | Accumulated |   |  |            |  
|                                                            |  |              |  |  |         |  |  | Common   |   |  | Additional  |  |  | During the  |   |  |            |  
|                                                            |  | Common Stock |  |  | Stock   |  |  | Paid-In  |   |  | Development |  |  |             |  
|                                                            |  | Shares       |  |  | Amount  |  |  | Issuable |   |  | Capital     |  |  | Stage       |   |  | Total      |  
|                                                            |  | #            |  |  | $       |  |  | $        |   |  | $           |  |  | $           |   |  | $          |  
|Balance  January 31, 2010                                  |  | 23,829,618   |  |  | 826,484 |  |  | 32,000   |   |  | 42,159      |  |  | (896,473    | ) |  | 4,170      |  
|Issuance of common stock for cash at US$0.005 per share     |  | 6,000,000    |  |  | 30,849  |  |  |         |   |  |            |  |  |            |   |  | 30,849     |  
|Share issued for management fees                            |  | 192,000      |  |  | 38,400  |  |  | (32,000  | ) |  |            |  |  |            |   |  | 6,400      |  
|Shares issued to settle debt                                |  | 2,000,000    |  |  | 10,000  |  |  |         |   |  |            |  |  |            |   |  | 10,000     |  
|Shares issued for exercise of share
      purchase warrants |  | 1,200,000    |  |  | 7,620   |  |  |         |   |  |            |  |  |            |   |  | 7,620      |  
|Shares issued for exercise of stock options                 |  | 400,000      |  |  | 2,540   |  |  |         |   |  |            |  |  |            |   |  | 2,540      |  
|Fair value of stock options granted                         |  |             |  |  |        |  |  |         |   |  | 5,076       |  |  |            |   |  | 5,076      |  
|Fair value of warrants exercised                            |  |             |  |  |        |  |  |         |   |  | 5,175       |  |  |            |   |  | 5,175      |  
|Net loss for the year                                       |  |             |  |  |        |  |  |         |   |  |            |  |  | (3,023,058  | ) |  | (3,023,058 | )
|Balance  January
      31, 2011                            |  | 33,621,618   |  |  | 915,893 |  |  |         |   |  | 52,410      |  |  | (3,919,531  | ) |  | (2,951,228 | )

(The accompanying notes are an integral part of these financial
statements)

53

---

|NEUROKINE PHARMACEUTICALS INC. 
|-------------------------------
|(A Development Stage Company)  
|Statements of Cash Flows       
|(Expressed in Canadian dollars)

|                                                                                  |  |             |   |  |             |   |  | Accumulated from    |  
|--------------------------------------------------------------------------------- |  | ----------- | - |  | ----------- | - |  | ------------------- | -
|                                                                                  |  | For the     |   |  | For the     |   |  | June 10, 2002 (Date |  
|                                                                                  |  | Year Ended  |   |  | Year Ended  |   |  | of Inception) to    |  
|                                                                                  |  | January 31, |   |  | January 31, |   |  | January 31,         |  
|                                                                                  |  | 2011        |   |  | 2010        |   |  | 2011                |  
|                                                                                  |  | $           |   |  | $           |   |  | $                   |  
|                                                                                  |  |             |   |  |             |   |  |                     |  
|Operating Activities                                                              |  |             |   |  |             |   |  |                     |  
|Net loss for the period                                                           |  | (3,023,058  | ) |  | (120,134    | ) |  | (3,919,531          | )
|Adjustments to reconcile net loss to net
      cash used in operating activities: |  |             |   |  |             |   |  |                     |  
|Accretion of discount on convertible debt                                         |  | 10,698      |   |  |            |   |  | 10,698              |  
|Amortization                                                                      |  | 38          |   |  |            |   |  | 38                  |  
|Loss on change in fair value of derivative
      liability                        |  | 2,868,024   |   |  |            |   |  | 2,868,024           |  
|Shares issued for royalties                                                       |  |            |   |  |            |   |  | 500,000             |  
|Shares issued for services                                                        |  | 6,400       |   |  | 32,000      |   |  | 98,400              |  
|Stock-based compensation                                                          |  | 5,076       |   |  | 42,159      |   |  | 47,235              |  
|Changes in operating assets and liabilities:                                      |  |             |   |  |             |   |  |                     |  
|Accounts payable and accrued
      liabilities                                    |  | 10,712      |   |  | 6,896       |   |  | 17,608              |  
|Due
      to related parties                                                      |  | 14,356      |   |  | 2,913       |   |  | 17,269              |  
|                                                                                  |  |             |   |  |             |   |  |                     |  
|Net Cash Used In
      Operating Activities                                       |  | (107,754    | ) |  | (36,166     | ) |  | (360,259            | )
|                                                                                  |  |             |   |  |             |   |  |                     |  
|Investing Activities                                                              |  |             |   |  |             |   |  |                     |  
|Purchase of property and equipment                                                |  | (2,276      | ) |  |            |   |  | (2,276              | )
|                                                                                  |  |             |   |  |             |   |  |                     |  
|Net Cash Used In Investing Activities                                             |  | (2,276      | ) |  |            |   |  | (2,276              | )
|                                                                                  |  |             |   |  |             |   |  |                     |  
|Financing Activities                                                              |  |             |   |  |             |   |  |                     |  
|Proceeds from loan payable                                                        |  |            |   |  | 5,000       |   |  | 5,000               |  
|Proceeds from issuance of
      convertible debenture                             |  | 65,079      |   |  |            |   |  | 65,079              |  
|Proceeds from issuance of common shares                                           |  | 41,009      |   |  | 20,421      |   |  | 307,493             |  
|                                                                                  |  |             |   |  |             |   |  |                     |  
|Net Cash Provided
      by Financing Activities                                   |  | 106,088     |   |  | 25,421      |   |  | 377,572             |  
|                                                                                  |  |             |   |  |             |   |  |                     |  
|Increase (Decrease) in Cash                                                       |  | (3,942      | ) |  | (10,745     | ) |  | 15,037              |  
|                                                                                  |  |             |   |  |             |   |  |                     |  
|Cash  Beginning
      of Period                                                  |  | 18,979      |   |  | 29,724      |   |  |                    |  
|                                                                                  |  |             |   |  |             |   |  |                     |  
|Cash  End of
      Period                                                        |  | 15,037      |   |  | 18,979      |   |  | 15,037              |  
|                                                                                  |  |             |   |  |             |   |  |                     |  
|Supplemental disclosures:                                                         |  |             |   |  |             |   |  |                     |  
|Interest paid                                                                     |  |            |   |  |            |   |  |                    |  
|Income tax paid                                                                   |  |            |   |  |            |   |  |                    |  
|                                                                                  |  |             |   |  |             |   |  |                     |  
|Non-cash investing and financing activities:                                      |  |             |   |  |             |   |  |                     |  
|Shares issued for settlement
      of debt                                        |  | 10,000      |   |  |            |   |  | 10,000              |  
|Fair
      value of options and warrants exercised                                |  | 5,175       |   |  |            |   |  | 5,175               |  

54

---

|NEUROKINE PHARMACEUTICALS INC.   
|---------------------------------
|(A Development Stage Company)    
|Notes to the Financial Statements
|Year ended January 31, 2011      
|(Expressed in Canadian dollars)  

|1. | Nature of Operations and Continuance of
      Business                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
|-- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
|   | Neurokine Pharmaceuticals Inc. (the Company) was
      incorporated in British Columbia under the Business Corporations Act on
      June 10, 2002. The Company is a development stage company, as defined by
      Financial Accounting Standards Board (FASB) Accounting Standards
      Codification (ASC) 915, Development Stage Entities, and is in the
      business of developing and commercializing new uses for existing
      prescription drugs for diseases mediated by acute and chronic inflammatory
      reactions as well as developing proprietary encapsulation technology in
      the treatment of neurodegenerative diseases.                                                                                                                                                                                          
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
|   | These financial statements have been prepared on the
      going concern basis, which assumes that the Company will be able to
      realize its assets and discharge its liabilities in the normal course of
      business. As at January 31, 2011, the Company has not earned any revenue,
      has a working capital deficit of $25,538, and an accumulated deficit of
      $3,919,531. The continued operations of the Company are dependent on its
      ability to generate future cash flows or obtain additional financing.
      These factors raise substantial doubt about the Companys ability to
      continue as a going concern. These financial statements do not include any
      adjustments to the recorded assets or liabilities that might be necessary
      should the Company be unable to continue as a going concern.
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
|2. | Significant Accounting Policies                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
|   | (a)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
|   | (b)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
|   | (c)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
|   | (d)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
|   | (e)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      

55

---

|NEUROKINE PHARMACEUTICALS INC.   
|---------------------------------
|(A Development Stage Company)    
|Notes to the Financial Statements
|Year ended January 31, 2011      
|(Expressed in Canadian dollars)  

|2. | Significant Accounting Policies(continued)
|-- | ------------------------------------------
|   |                                           
|   | (f)                                       
|   |                                           
|   |                                           
|   |                                           
|   | (g)                                       
|   |                                           
|   |                                           
|   |                                           
|   |                                           
|   |                                           
|   |                                           
|   |                                           
|   |                                           
|   |                                           
|   | (h)                                       
|   |                                           
|   |                                           
|   |                                           
|   | (i)                                       
|   |                                           
|   |                                           

56

---

|NEUROKINE PHARMACEUTICALS INC.   
|---------------------------------
|(A Development Stage Company)    
|Notes to the Financial Statements
|Year ended January 31, 2011      
|(Expressed in Canadian dollars)  

|2. | Significant Accounting Policies(continued)
|-- | ------------------------------------------
|   |                                           
|   | (j)                                       
|   |                                           
|   |                                           
|   |                                           
|   | (k)                                       
|   |                                           
|   |                                           
|   |                                           
|   | (l)                                       
|   |                                           
|   |                                           

Level 1

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

Level 2

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

Level 3

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

| |     | The Companys financial instruments consist principally
      of cash, accounts payable and accrued liabilities, amounts due to related
      parties, and convertible debenture. Pursuant to ASC 820, the fair value of
      our cash is determined based on Level 1 inputs, which consist of quoted
      prices in active markets for identical assets. We believe that the
      recorded values of all of our other financial instruments approximate
      their current fair values because of their nature and respective maturity
      dates or durations.
| | --- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |     |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
| | (m) | Research and Development Costs                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
| |     |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
| |     | Research costs are expensed in the period that they are
      incurred.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                

57

---

|NEUROKINE PHARMACEUTICALS INC.   
|---------------------------------
|(A Development Stage Company)    
|Notes to the Financial Statements
|Year ended January 31, 2011      
|(Expressed in Canadian dollars)  

|2. | Significant Accounting Policies(continued)
|-- | ------------------------------------------
|   |                                           
|   | (n)                                       
|   |                                           
|   |                                           
|   |                                           
|   | (o)                                       
|   |                                           
|   |                                           
|   |                                           
|   |                                           
|   |                                           
|   |                                           
|   |                                           
|3. | Property and Equipment                    

| |                                |  |       |  |  |              |  |  | 2010         |  |  |                    | 
| | ------------------------------ |  | ----- |  |  | ------------ |  |  | ------------ |  |  | ------------------ | 
| |                                |  |       |  |  | Accumulated  |  |  | Net carrying |  |  | 2009               | 
| |                                |  | Cost  |  |  | amortization |  |  | value        |  |  | Net carrying value | 
| |                                |  | $     |  |  | $            |  |  | $            |  |  | $                  | 
| | Office furniture and equipment |  | 2,276 |  |  | 38           |  |  | 2,238        |  |  |                   | 

|4. | Loan Payable                                                                                                                                                                                                                                                                                                                                                                   
|-- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|   |                                                                                                                                                                                                                                                                                                                                                                                
|   | On April 1, 2009, the Company entered into a loan
      agreement with a company controlled by a director of the Company for
      $5,000. Under the terms of the loan, the amount is unsecured, non-interest
      bearing, and due on demand. On July 31, 2010, the loan was settled by the
      issuance of 2,000,000 common shares of the Company. Refer to Note
    7(b).

58

---

|NEUROKINE PHARMACEUTICALS INC.   
|---------------------------------
|(A Development Stage Company)    
|Notes to the Financial Statements
|Year ended January 31, 2011      
|(Expressed in Canadian dollars)  

|5. | Convertible Debenture                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
|-- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
|   | On December 17, 2010, the Company issued a convertible
      debenture with a non-related party for $65,079 (US$65,000). The debenture
      is unsecured, bears interest at 8% per annum, and matures on September 17,
      2011. The note is convertible into common shares at a conversion price
      equal to 55% of the average closing market price of the lowest three
      trading prices of the Companys common stock during the preceding ten days
      prior to conversion. The Company recorded the conversion feature of the
      convertible debenture as a derivative liability at an estimated fair value
      of $65,079 with a corresponding discount to the convertible debenture.
      During the year ended December 31, 2010, the Company recorded accretion
      expense of the discount on the convertible debenture of $10,698 and a loss
      on the change in fair value of the conversion option derivative liability
      of $21,276. As of December 31, 2010, the carrying value of the convertible
      debenture is $10,698, and the fair value of the conversion option
      derivative liability was $86,355. The calculation of the fair value of the
      conversion option derivative liability was determined using the
      Black-Scholes option pricing model with the following assumptions:
      expected life of 0.75 years, volatility of 125%, and risk-free rate of
      1.19%.
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
|6. | Derivative Liabilities                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
|   | Derivative financial liabilities consist of convertible
      debenture, warrants originally issued in private placements, and stock
      options with exercise prices denominated in United States dollars, which
      differs from the Companys functional currency. The fair value of these
      derivative liabilities is as follows:                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 

| |                                                    |  | Exercise Price |  |  | 2010      |  |  | 2009 | 
| | -------------------------------------------------- |  | -------------- |  |  | --------- |  |  | ---- | 
| |                                                    |  | $              |  |  | $         |  |  | $    | 
| | US$65,000 convertible debenture                    |  | US$0.63        |  |  | 86,355    |  |  |     | 
| | 3,800,000 warrants
      expiring on July 30, 2015 |  | US$0.005       |  |  | 2,841,573 |  |  |     | 
| |                                                    |  |                |  |  | 2,927,928 |  |  |     | 

The fair value of derivative financial
liabilities were determined using the Black-Scholes option pricing model, using
the following assumptions:

2011Risk-free Interest rate
    
    1.26%Expected life (in years)
    
    0.63-4.50Expected volatility
    
    125%


|7. | Common Stock
|-- | ------------
|   |             
|   | (a)         
|   |             
|   | (b)         
|   |             
|   | (c)         

59

---

|NEUROKINE PHARMACEUTICALS INC.   
|---------------------------------
|(A Development Stage Company)    
|Notes to the Financial Statements
|Year ended January 31, 2011      
|(Expressed in Canadian dollars)  

|7. | Common Stock(continued)                                                        
|-- | -------------------------------------------------------------------------------
|   |                                                                                
|   | (d)                                                                            
|   |                                                                                
|   | (e)                                                                            
|   |                                                                                
|   | (f)                                                                            
|   |                                                                                
|   | (g)                                                                            
|   |                                                                                
|   | (h)                                                                            
|   |                                                                                
|   | (i)                                                                            
|   |                                                                                
|8. | Share Purchase Warrants                                                        
|   |                                                                                
|   | The following table summarizes the continuity of share
      purchase warrants:

| |                                    |  |            |   |  | Weighted       | 
| | ---------------------------------- |  | ---------- | - |  | -------------- | 
| |                                    |  |            |   |  | Average        | 
| |                                    |  | Number of  |   |  | Exercise Price | 
| |                                    |  | Warrants   |   |  | $              | 
| | Balance, January 31, 2009 and 2010 |  |           |   |  |               | 
| | Issued                             |  | 5,000,000  |   |  | 0.005          | 
| | Exercised                          |  | (1,200,000 | ) |  | 0.005          | 
| | Balance, January
      31, 2011    |  | 3,800,000  |   |  | 0.005          | 

As at January 31, 2011, the following
share purchase warrants were outstanding:

ExerciseNumber of
    PriceWarrants
    $
    Expiry Date3,800,000
    0.005
    July 30, 2015


60

---

|NEUROKINE PHARMACEUTICALS INC.   
|---------------------------------
|(A Development Stage Company)    
|Notes to the Financial Statements
|Year ended January 31, 2011      
|(Expressed in Canadian dollars)  

|9. | Stock Options                                                                      
|-- | -----------------------------------------------------------------------------------
|   |                                                                                    
|   | The following table summarizes the continuity of the
      Companys stock options:

| |                                                     |  |                  |   |  |                |  |  | Weighted         |  |  |           | 
| | --------------------------------------------------- |  | ---------------- | - |  | -------------- |  |  | ---------------- |  |  | --------- | 
| |                                                     |  |                  |   |  | Weighted       |  |  | average          |  |  | Aggregate | 
| |                                                     |  |                  |   |  | average        |  |  | remaining        |  |  | intrinsic | 
| |                                                     |  | Number           |   |  | exercise price |  |  | contractual life |  |  | value     | 
| |                                                     |  | of
      options |   |  | (US$)          |  |  | (years)          |  |  | (US$)     | 
| | Outstanding, January 31, 2009                       |  |                 |   |  |               |  |  |                  |  |  |           | 
| | Granted                                             |  | 300,000          |   |  | 0.20           |  |  |                  |  |  |           | 
| | Outstanding and exercisable, January 31,
      2010 |  | 300,000          |   |  | 0.20           |  |  |                  |  |  |           | 
| | Granted                                             |  | 1,200,000        |   |  | 0.005          |  |  |                  |  |  |           | 
| | Exercised                                           |  | (400,000         | ) |  | 0.005          |  |  |                  |  |  |           | 
| | Expired                                             |  | (300,000         | ) |  | 0.20           |  |  |                  |  |  |           | 
| | Outstanding and exercisable, January 31, 2011       |  | 800,000          |   |  | 0.005          |  |  | 4.3              |  |  | 596,000   | 

Additional information regarding stock
options as of January 31, 2011, is as follows:

ExerciseNumber of
    PriceOptions
    $
    Expiry Date800,000
    0.005
    May 25, 2015


The fair values for stock options
granted have been estimated using the Black-Scholes option pricing model
assuming no expected dividends and the following weighted average
assumptions:

2011
    2010Risk-free Interest rate
    2.06%
    1.29%Expected life (in years)
    5.0
    2.0Expected volatility
    125%
    120%


During the year ended January 31, 2011,
the weighted average fair value of the stock options granted was $0.004 (2010 -
$0.10) per option, and there is no unrecognized compensation expense relating to
unvested options.

|10. | Related Party Transactions
|--- | --------------------------
|    |                           
|    | (a)                       
|    |                           
|    | (b)                       
|    |                           
|    | (c)                       

61

---

|NEUROKINE PHARMACEUTICALS INC.   
|---------------------------------
|(A Development Stage Company)    
|Notes to the Financial Statements
|Year ended January 31, 2011      
|(Expressed in Canadian dollars)  

|11. | Income Taxes                                                                                                                                                                                                                                                                                                                                                                                                                             
|--- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                          
|    | The Company has $993,536 of non-capital operating losses
      carried forward to offset taxable income in future years which expire
      beginning in fiscal 2028. The income tax benefit differs from the amount
      computed by applying the Canadian federal and provincial statutory rates
      to net loss before income taxes for the years ended January 31, 2011 and
      2010, respectively, as a result of the
following:

| |                               |  | 2011       |   |  | 2010     |  
| | ----------------------------- |  | ---------- | - |  | -------- | -
| |                               |  | $          |   |  | $        |  
| | Net loss before taxes         |  | (3,023,058 | ) |  | (120,134 | )
| | Statutory rate                |  | 28.50%     |   |  | 30.00%   |  
| |                               |  |            |   |  |          |  
| | Expected tax recovery         |  | (861,572   | ) |  | (36,041  | )
| | Permanent differences         |  | 821,893    |   |  | 12,648   |  
| | Change in enacted rates       |  | 13,407     |   |  | 3,119    |  
| | Change in valuation allowance |  | 26,272     |   |  | 20,274   |  
| | Income tax
      provision    |  |           |   |  |         |  

The significant components of deferred
income tax assets and liabilities as at January 31, 2011 and 2010, after
applying enacted corporate income tax rates, are as follows:

| |                                    |  | 2011     |   |  | 2010     |  
| | ---------------------------------- |  | -------- | - |  | -------- | -
| |                                    |  | $        |   |  | $        |  
| | Non-capital losses carried forward |  | 248,394  |   |  | 222,122  |  
| | Valuation
      allowance          |  | (248,394 | ) |  | (222,122 | )
| | Net deferred tax asset             |  |         |   |  |         |  

The following table lists the fiscal
year in which the loss was incurred and the expiration date of the operating
loss:

Non-CapitalLoss
    
    
    ExpiryPeriod Incurred
    
    
    $
    
    
    Date2008
    
    
    122,578
    
    
    20282009
    
    
    653,761
    
    
    20292010
    
    
    77,975
    
    
    20302011
    
    
    139,222
    
    
    2031993,536


|12. | Subsequent Event                                                                                                                                                                                                                                                                                                                                                      
|--- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|    |                                                                                                                                                                                                                                                                                                                                                                       
|    | In February 2011, the Company issued a convertible
      debenture for US$37,985. The convertible debenture bears interest at 8%
      per annum and matures on November 2011. The debenture is convertible into
      shares of common stock of the Company at any time before maturity at a
      conversion price of 55% of the market value of the common
  stock.

62

---

|Item 9. | Changes in and Disagreements With
      Accountants on Accounting and Financial Disclosure
|------- | ------------------------------------------------------------------------------------------

There were no disagreements with our accountants related to
accounting principles or practices, financial statement disclosure, internal
controls or auditing scope or procedure during the two fiscal years and
subsequent interim periods.

|Item 9A. | Controls and Procedures
|-------- | -----------------------

As required by Rule 13a-15 under the Exchange Act, our
management evaluated the effectiveness of the design and operation of our
disclosure controls and procedures as of January 31, 2011.

Disclosure controls and procedures refer to controls and other
procedures designed to ensure that information required to be disclosed in the
reports we file or submit under the Securities Exchange Act is recorded,
processed, summarized and reported within the time periods specified in the
rules and forms of the SEC and that such information is accumulated and
communicated to our management, including our chief executive officer and chief
financial officer, as appropriate, to allow timely decisions regarding required
disclosure. In designing and evaluating our disclosure controls and procedures,
management recognizes that any controls and procedures, no matter how well
designed and operated, can provide only reasonable assurance of achieving the
desired control objectives, and management is required to apply its judgment in
evaluating and implementing possible controls and procedures.

Managements Annual Report on Internal Control over
Financial Reporting.

Our management is responsible for establishing and maintaining
adequate internal control over financial reporting. Under the supervision and
with the participation of our management, including our President (our principal
executive officer, principal financial officer and principal accounting
officer), we conducted an evaluation of the effectiveness of our internal
control over financial reporting as of January 31, 2011 using the criteria
established in Internal ControlIntegrated Framework issued by the Committee of
Sponsoring Organizations of the Treadway Commission (COSO).

A material weakness is a deficiency, or combination of
deficiencies, in internal control over financial reporting, such that there is a
reasonable possibility that a material misstatement of the Companys annual or
interim financial statements will not be prevented or detected on a timely
basis. In its assessment of the effectiveness of internal control over financial
reporting as of January 31, 2011, the Company determined that there were control
deficiencies that constituted material weaknesses, as described below:

|1. | We did not maintain appropriate financial reporting
      controls As of January 31, 2011, the Company has not maintained
      sufficient internal controls over financial reporting for the financial
      reporting process. As at January 31, 2011, our company did not have
      sufficient financial reporting controls with respect to timely financial
      reporting and the ability to process complex accounting issues such as
      calculation and recording of fair value of derivative liability.
      Subsequent to January 31, 2011, our company has obtained the necessary
      assistance to ensure that the performance of complex accounting issues can
      be performed accurately and on a timely basis.
|-- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

Accordingly, our company concluded that these control
deficiencies resulted in a reasonable possibility that a material misstatement
of the annual or interim financial statements will not be prevented or detected
on a timely basis by the companys internal controls.

As a result of the material weaknesses described above,
management has concluded that our company did not maintain effective internal
control over financial reporting as of January 31, 2011 based on criteria
established in Internal ControlIntegrated Framework issued by COSO.

Saturna Group Chartered Accountants LLP, our independent
registered public auditors, was not required to and has not issued an
attestation report concerning the effectiveness of our internal control over
financial reporting as of January 31, 2011 pursuant to temporary rules of the Securities
and Exchange Commission that permit our company to provide only managements
report in this annual report.

63

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Changes in Internal Controls.

During the period ended January 31, 2011, there were no changes
in our internal control over financial reporting that materially affected, or
are reasonably likely to materially affect, our internal control over financial
reporting.

|Item 9B. | Other Information
|-------- | -----------------

On March 30, 2011, Dr. Hassan Salari resigned as secretary and
as a director of our company and Dr. David Filer resigned as a director of our
company. Concurrently with the resignations, we appointed Dr. Ahmad Doroudian as
secretary of our company and we appointed Richard Azani to our board of
directors.

PART III

|Item 10. | Directors, Executive Officers and Corporate
      Governance
|-------- | ------------------------------------------------------------

All directors of our company hold office until the next annual
meeting of the security holders or until their successors have been elected and
qualified. The officers of our company are appointed by our board of directors
and hold office until their death, resignation or removal from office. Our
directors and executive officers, their ages, positions held, and duration as
such, are as follows:

Name
    Position Held
      with the Company
    Age
    Date First Elected or
      AppointedDr. Ahmad Doroudian
    President, Chief Executive Officer and Director
    50
    September 17, 2007Dr. Maziar Badii
    Director
    43
    June 19, 2009Richard Azani
    Director
    54
    March 30, 2011Moira Ong
    Chief Financial Officer
    36
    December 26, 2010


Business Experience

The following is a brief account of the education and business
experience during at least the past five years of each director, executive
officer and key employee of our company, indicating the persons principal
occupation during that period, and the name and principal business of the
organization in which such occupation and employment were carried out.

Ahmad Doroudian, PhD, President, Chief Executive Officer,
Chief Financial Officer, Secretary and Director

Dr. Doroudian was appointed as our President, Chief Executive
Officer, Chief Financial Officer, and Director on September 17, 2007 and as
Secretary on March 31, 2011.

Prior to joining us, Dr. Doroudian was involved in early stage
financing and management of private and publicly listed companies. From 1997 to
2004, he acted as the Chief Executive Officer, Chairman, Vice Chairman and
Director of PanGeo Pharma, Inc. (now PendoPharm, a division of Pharmascience
Inc.), a TSX-listed company founded by Dr. Doroudian which received over $100
million dollars in financing. From 2004 through 2007, Dr. Doroudian also served
as the President of, Rayan Pharma Inc., an exporter of pharmaceuticals to
Eastern Europe. From 2006 to 2008, Dr. Doroudian was owner and Chief Executive
Officer of ABF Pharmacy, a group of successful retail pharmacies. Dr. Doroudian is also the President and
Chief Executive Officer of Merus Labs International Inc., a specialty
pharmaceutical company engaged in the acquisition and licensing of
pharmaceutical products.

64

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Maziar Badii, MD, FRCP, Director

Specialist in Rheumatology, Degenerative Disc Disease, and
Spinal Disorders

Dr. Maziar Badii was appointed to our Board of Directors on
June 19, 2009.

For the past five years, Dr. Badii has practiced rheumatology
and spine medicine at Vancouver General Hospital in British Columbia. He is also
an associate clinical professor in the Spine Division, Department of
Orthopedics, at the University of British Columbia. He specializes in the
treatment of neck and back pain. His areas of clinical interest encompass
non-surgical management of neck pain, back pain, and sciatica; management of
osteoporosis including vertebral compression fractures and vertebroplasty;
emerging medical treatments for back pain such as Botox and "biologic"
therapies; as well as spinal injections for neck and back pain. Dr. Badii
completed medical school, internal medicine, and rheumatology training at the
University of British Columbia. He has an active practice and is a research
scientist at The Arthritis Research Centre of Canada, engaging in
musculoskeletal and spinal research.

Dr. Badii is a former Director of Injury and Disability
Prevention at the Occupational Health and Safety Agency for Healthcare (OHSAH)
in British Columbia and a fellow with the Royal College of Physicians and
Surgeons of Canada and the Canadian Rheumatology Association.

Richard Azani, Director

Richard Azani was appointed to our Board of Directors on March
30, 2011.

Since March 2010, Richard Azani has been the president, chief
executive officer, chief financial officer and director of A5 Laboratories,
Inc.

He also has been the president and chief executive officer of
Vida nutra pharma since 2003. From 1996 to 2006 Mr. Azani was the president and
chief executive officer of Actilab Pharma Inc. and from 1994 to 1996, he was the
vice-president of Analex Laboratory.

Richard Azani received his B.Sc in Biochemistry and Analytical
Chemistry and his M.Sc in Structural determination of protein using N.M.R. and
X-Ray at the University of Toulouse  France. Mr. Azani also received his Ph.D
at the University of Toulouse  France and his Post-Doctorate at McGill
University  Montreal Canada.

Moira Ong, Chief Financial Officer

Ms. Ong, has more than 10 years experience in public company
accounting and audit reporting. From 2005 until 2010, Ms. Ong was Senior Manager
at Grant Thornton, LLP in charge of completion of financial statements for
Canadian publicly listed companies. From 2003 to 2005 she served as Financial
Consultant for Strategic Income Security Services. Ms. Ong was the manager of
Banking and Securities at Deloitte & Touche LLP in New York from 2000 to
2003 and served as the Senior Accountant for Grant Thornton LLP from1996 to
2000. Ms. Ong obtained her CA designation in 1999 and her CFA designation in
2003.

Ms. Ong is also the Chief Financial Officer of Merus Labs
International Inc., a specialty pharmaceutical company engaged in the
acquisition and licensing of pharmaceutical products.

Family Relationships

There are no family relationships between any of our directors,
executive officers and proposed directors or executive officers.

65

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Conflicts of Interest

Dr. Ahmad Doroudian is also the President and Chief Executive
Officer of Rayan Pharma Inc., a private manufacturer of pharmaceutical
preparations, and the President and Chief Executive Officer of Merus Labs
International Inc., a specialty pharmaceutical company engaged in the
acquisition and licensing of pharmaceutical products. Dr. Maziar Badii, a
director of our company, conducts musculoskleletal and spinal research various
academic and non-academic organizations.

While we do not anticipate that these activities will compete
with our business, Drs. Doroudian and Badii may have pre-existing fiduciary
duties with one or more organizations and may not agree to present business
opportunities or research data to us unless other entities have first declined
to accept them or consented to their release. Accordingly, they may have a
conflict of interest in determining to which entity a particular business
opportunity should be presented.

Our directors are not obligated to commit their time and
attention exclusively to our business and, accordingly, they may encounter a
conflict of interest in allocating their time between our operations and those
of other businesses. Currently, Dr. Ahmad Doroudian commits between 10 and 20
hours per week to our business. Our other directors, Dr. Maziar Badii and
Richard Azani, devote their time on an as needed basis. All of our directors, in
the course of their other business activities, may become aware of investment
and business opportunities which may be appropriate for presentation to us as
well as other entities to which they owe a fiduciary duty. As a result, they may
have conflicts of interest in determining to which entity a particular business
opportunity should be presented. They may also in the future become affiliated
with entities engaged in business activities similar to those we intend to
conduct.

In general, officers and directors of a corporation are
required to present business opportunities to a corporation if:

- the corporation could financially undertake the opportunity;
- the opportunity is within the corporations line of business; and
- it would be unfair to the corporation and its stockholders not to bring the
  opportunity to the attention of the corporation.

Involvement in Certain Legal Proceedings

None of our directors, executive officers, promoters or control
persons has been involved in any of the following events during the past ten
years:

1. A petition under the Federal bankruptcy laws or any state
insolvency law was filed by or against, or a receiver, fiscal agent or similar
officer was appointed by a court for the business or property of such person, or
any partnership in which he was a general partner at or within two years before
the time of such filing, or any corporation or business association of which he
was an executive officer at or within two years before the time of such
filing;

2. Such person was convicted in a criminal proceeding or is a
named subject of a pending criminal proceeding (excluding traffic violations and
other minor offenses);

3. Such person was the subject of any order, judgment, or
decree, not subsequently reversed, suspended or vacated, of any court of
competent jurisdiction, permanently or temporarily enjoining him from, or
otherwise limiting, the following activities:

| | i. | Acting as a futures commission merchant, introducing
      broker, commodity trading advisor, commodity pool operator, floor broker,
      leverage transaction merchant, any other person regulated by the Commodity
      Futures Trading Commission, or an associated person of any of the
      foregoing, or as an investment adviser, underwriter, broker or dealer in
      securities, or as an affiliated person, director or employee of any investment company, bank,
      savings and loan association or insurance company, or engaging in or
      continuing any conduct or practice in connection with such
  activity
| | -- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

66

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| | ii.  | Engaging in any type of business practice; or                                                                                                                                                                   
| | ---- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |      |                                                                                                                                                                                                                 
| | iii. | Engaging in any activity in connection with the purchase
      or sale of any security or commodity or in connection with any violation
      of Federal or State securities laws or Federal commodities
  laws;

4. Such person was the subject of any order, judgment or
decree, not subsequently reversed, suspended or vacated, of any Federal or State
authority barring, suspending or otherwise limiting for more than 60 days the
right of such person to engage in any activity described in paragraph (f)(3)(i)
of this section, or to be associated with persons engaged in any such
activity;

5. Such person was found by a court of competent jurisdiction
in a civil action or by the Commission to have violated any Federal or State
securities law, and the judgment in such civil action or finding by the
Commission has not been subsequently reversed, suspended, or vacated;

6. Such person was found by a court of competent jurisdiction
in a civil action or by the Commodity Futures Trading Commission to have
violated any Federal commodities law, and the judgment in such civil action or
finding by the Commodity Futures Trading Commission has not been subsequently
reversed, suspended or vacated;

7. Such person was the subject of, or a party to, any Federal
or State judicial or administrative order, judgment, decree, or finding, not
subsequently reversed, suspended or vacated, relating to an alleged violation
of:

| | i.   | Any Federal or State securities or commodities law or
      regulation; or                                                                                                                                                                                                                                                
| | ---- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |      |                                                                                                                                                                                                                                                                                                                           
| | ii.  | Any law or regulation respecting financial institutions
      or insurance companies including, but not limited to, a temporary or
      permanent injunction, order of disgorgement or restitution, civil money
      penalty or temporary or permanent cease-and-desist order, or removal or
      prohibition order; or
| |      |                                                                                                                                                                                                                                                                                                                           
| | iii. | Any law or regulation prohibiting mail or wire fraud or
      fraud in connection with any business entity; or                                                                                                                                                                                                            

8. Such person was the subject of, or a party to, any sanction
or order, not subsequently reversed, suspended or vacated, of any
self-regulatory organization (as defined in Section 3(a)(26) of the Exchange Act
(15 U.S.C. 78c(a)(26))), any registered entity (as defined in Section 1(a)(29)
of the Commodity Exchange Act (7 U.S.C. 1(a)(29))), or any equivalent exchange,
association, entity or organization that has disciplinary authority over its
members or persons associated with a member.

Compliance with Section 16(a) of the Securities Exchange Act
of 1934

Our common stock is not registered pursuant to Section 12 of
the Securities Exchange Act of 1934, as amended (the Exchange Act).
Accordingly, our officers, directors, and principal stockholders are not subject
to the beneficial ownership reporting requirements of Section 16(a) of the
Exchange Act.

Code of Ethics

Effective April 20, 2011, our company's board of directors
adopted a Code of Business Conduct and Ethics that applies to, among other
persons, members of our board of directors, our company's officers including our
president, chief executive officer and chief financial officer, employees,
consultants and advisors. As adopted, our Code of Business Conduct and Ethics
sets forth written standards that are designed to deter wrongdoing and to
promote:

| | 1. | honest and ethical conduct, including the ethical
      handling of actual or apparent conflicts of interest between personal and
      professional relationships;
| | -- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------

67

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| | 2. | full, fair, accurate, timely, and understandable
      disclosure in reports and documents that we file with, or submit to, the
      Securities and Exchange Commission and in other public communications made
      by us;
| | -- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |    |                                                                                                                                                                                                                              
| | 3. | compliance with applicable governmental laws, rules and
      regulations;                                                                                                                                                   
| |    |                                                                                                                                                                                                                              
| | 4. | the prompt internal reporting of violations of the Code
      of Business Conduct and Ethics to an appropriate person or persons
      identified in the Code of Business Conduct and Ethics; and                            
| |    |                                                                                                                                                                                                                              
| | 5. | accountability for adherence to the Code of Business
      Conduct and Ethics.                                                                                                                                               

Our Code of Business Conduct and Ethics requires, among other
things, that all of our company's Senior Officers commit to timely, accurate and
consistent disclosure of information; that they maintain confidential
information; and that they act with honesty and integrity.

In addition, our Code of Business Conduct and Ethics emphasizes
that all employees, and particularly Senior Officers, have a responsibility for
maintaining financial integrity within our company, consistent with generally
accepted accounting principles, and federal and state securities laws. Any
Senior Officer who becomes aware of any incidents involving financial or
accounting manipulation or other irregularities, whether by witnessing the
incident or being told of it, must report it to our company. Any failure to
report such inappropriate or irregular conduct of others is to be treated as a
severe disciplinary matter. It is against our company policy to retaliate
against any individual who reports in good faith the violation or potential
violation of our company's Code of Business Conduct and Ethics by another.

Our Code of Business Conduct and Ethics is being filed with the
Securities and Exchange Commission as Exhibit 14.1 to our annual report for the
year ended January 31, 2011. We will provide a copy of the Code of Business
Conduct and Ethics to any person without charge, upon request. Requests can be
sent to: Neurokine Pharmaceuticals Inc., 1275 West 6thAvenue,
Vancouver, British Columbia V6H 1A6.

Committees of the Board

All proceedings of our board of directors were conducted by
resolutions consented to in writing by all the directors and filed with the
minutes of the proceedings of the directors. Such resolutions consented to in
writing by the directors entitled to vote on that resolution at a meeting of the
directors are, according to the corporate laws of the state of Nevada and the
bylaws of our company, as valid and effective as if they had been passed at a
meeting of the directors duly called and held.

Our audit committee consists of Dr. Ahmad Doroudian and Dr.
Maziar Badii.

Our company currently does not have nominating, compensation
committees or committees performing similar functions nor does our company have
a written nominating, compensation or audit committee charter. Our board of
directors does not believe that it is necessary to have such committees because
it believes that the functions of such committees can be adequately performed by
our directors.

Our company does not have any defined policy or procedure
requirements for shareholders to submit recommendations or nominations for
directors. The directors believe that, given the early stage of our development,
a specific nominating policy would be premature and of little assistance until
our business operations develop to a more advanced level. Our company does not
currently have any specific or minimum criteria for the election of nominees to
the board of directors and we do not have any specific process or procedure for
evaluating such nominees. Our directors assess all candidates, whether submitted
by management or shareholders, and make recommendations for election or
appointment.

A shareholder who wishes to communicate with our board of
directors may do so by directing a written request addressed to our President,
at the address appearing on the first page of this annual report.

68

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Audit Committee and Audit Committee Financial Expert

Our board of directors has determined that none of our the
members of our audit committee qualifies as an "audit committee financial
expert" as defined in Item 407(d)(5)(ii) of Regulation S-K, and is "independent"
as the term is used in Item 7(d)(3)(iv) of Schedule 14A under the Securities
Exchange Act of 1934, as amended.

We believe that the members of our board of audit committee and
our entire board of directors are collectively capable of analyzing and
evaluating our financial statements and understanding internal controls and
procedures for financial reporting. We believe that retaining an independent
director who would qualify as an "audit committee financial expert" would be
overly costly and burdensome and is not warranted in our circumstances given the
early stages of our development and the fact that we have not generated any
material revenues to date. In addition, we currently do not have nominating,
compensation or audit committees or committees performing similar functions nor
do we have a written nominating, compensation or audit committee charter. Our
board of directors does not believe that it is necessary to have such committees
because it believes the functions of such committees can be adequately performed
by our board of directors.

|Item 11. | Executive Compensation
|-------- | ----------------------

The particulars of the compensation paid to the following
persons:

- our principal executive officer;
- each of our two most highly compensated executive officers who were serving
  as executive officers at the end of the years ended January 31, 2011 and 2010;
  and
- up to two additional individuals for whom disclosure would have been
  provided under (b) but for the fact that the individual was not serving as our
  executive officer at the end of the years ended January 31, 2011 and 2010,

who we will collectively refer to as the named executive
officers of our company, are set out in the following summary compensation
table, except that no disclosure is provided for any named executive officer,
other than our principal executive officers, whose total compensation did not
exceed $100,000 for the respective fiscal year:

SUMMARY COMPENSATION
      TABLEName and
      Principal Position
    Year
    Salary
      ($)
    Bonus
      ($)
    Stock
      Awards ($)
    Option
      Awards ($)
    Non-Equity Incentive
      Plan Compensa- tion ($)
    Change in Pension
      Value and Nonqualified Deferred
      Compensation Earnings ($)
    All Other
      Compensa- tion ($)
    Total
      ($)Dr. Ahmad Doroudian(1)President, Chief Executive Officerand Director
    2011 2010
    21,000 Nil
    Nil Nil
    Nil Nil
    Nil Nil
    3,383 Nil
    Nil Nil
    Nil Nil
    24,383 NilJudson Culter(2)Former Chief Financial Officer
    2011 2010
    Nil N/A
    Nil N/A
    Nil N/A
    Nil N/A
    Nil N/A
    Nil N/A
    5,000 N/A
    5,000 N/AMoira Ong(1)Chief
      Financial Officer
    2011 2010
    Nil N/A
    Nil N/A
    Nil N/A
    Nil N/A
    Nil N/A
    Nil N/A
    1,560 N/A
    1,560N/A


69

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|(1) | Dr. Doroudian was appointed president, chief executive
      officer and director of our company on September 17, 2007, as secretary on
      March 30, 2011 and as chief financial officer on
|--- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|    |                                                                                                                                                                                               
|(2) | Mr. Cutler was appointed chief financial officer on May
      28, 2010 and resigned on December 26, 2010                                                                                      
|    |                                                                                                                                                                                               
|(3) | Ms. Ong was appointed chief financial officer on December
      26, 2010.                                                                                                                     

Other than as set out below, there are no arrangements or plans
in which we provide pension, retirement or similar benefits for directors or
executive officers. Our directors and executive officers may receive share
options at the discretion of our board of directors in the future. We do not
have any material bonus or profit sharing plans pursuant to which cash or
non-cash compensation is or may be paid to our directors or executive officers,
except that share options may be granted at the discretion of our board of
directors.

On July 13, 2009 we entered into a Directors Agreement with
Dr. Maziar Badii pursuant to which we issued Dr. Badii options to purchase
150,000 shares of our common stock in consideration for his services as our
Director. The options are exercisable at a price of USD$0.20 per share until the
earlier of (i) July 13, 2011; (ii) 30 calendar days following the termination of
the Director agreement between Dr. Badii and us; or (iii) our common stock
achieving a closing price of USD$0.50 or greater as quoted on a public stock
exchange in Canada or the United Sates for a period of five trading days.

Stock Option Plan

Currently, we do not have a stock option plan in favor of any
director, officer, consultant or employee of our company.

Stock Options/SAR Grants

The following table provides information about equity and
non-equity awards granted to the named executives in 2011:

GRANTS OF PLAN-BASED
      AWARDSName
    Grant 
      Date
    Estimated Future
      Payouts Under       Non-Equity Incentive Plan Awards
    Estimated
      Future Payouts Under Equity Incentive Plan Awards
    All 
      Other
      Stock Awards: Number of Shares of Stocks
      or Units (#)
    All
      Other Option Awards: Number of Securities Underlying
      Options (#)
    Exercise or Base Price of
      Option Awards ($/Sh)
    Grant
      Date Fair Value of Stock and Option AwardsThreshold ($)
    Target
      ($)
    Maximum ($)
    Threshold ($)
    Target
      ($)
    Maximum ($)Dr.       Ahmad Doroudian
    May       25, 2010
    Nil
    Nil
    Nil
    Nil
    Nil
    Nil
    Nil
    800,000
    0.005
    3,384


70

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Outstanding Equity Awards at Fiscal Year End

The particulars of unexercised options, stock that has not
vested and equity incentive plan awards for our named executive officers are set
out in the following table:

Options
      Awards
    Stock AwardsName
    Number
      of Securities Underlying Unexercised
      Options (#) Exercisable
    Number
      of Securities Underlying Unexercised
      Options (#) Unexercisable
    Equity
      Incentive Plan Awards: Number of
      Securities Underlying Unexercised
      Unearned Options (#)
    Option
      Exercise Price ($)
    Option
      Expiration Date
    Number
      of Shares orUnits of Stock ThatHave Not Vested (#)
    **Market Value**of Shares or **Units of**That
      Have Not Vested ($)
    Equity
      IncentivePlan Awards: Number of
      Unearned **Shares, Units**or Other
      **Stock Rights That**Have Not
      Vested (#)
    Equity
      Incentive **Plan Awards:** Market
      or Payout Value of Unearned **Shares,
      Units**or Other **Rights That**
      Have Not Vested ($)Dr. Ahmad Doroudian
    800,000
    Nil
    800,000
    0.005
    May 25, 2015
    Nil
    N/A
    N/A
    N/A


Option Exercises

During our Fiscal year ended January 31, 2011 there were no
options exercised by our named officers.

Compensation of Directors

We do not have any agreements for compensating our directors
for their services in their capacity as directors, although such directors are
expected in the future to receive stock options to purchase shares of our common
stock as awarded by our board of directors.

We have determined that Richard Azani is an independent
director, as that term is used in Item 7(d)(3)(iv)(B) of Schedule 14A under the
Securities Exchange Act of 1934, as amended, and as defined by Rule
4200(a)(15) of the NASDAQ Marketplace Rules.

Pension, Retirement or Similar Benefit Plans

There are no arrangements or plans in which we provide pension,
retirement or similar benefits for directors or executive officers. We have no
material bonus or profit sharing plans pursuant to which cash or non-cash
compensation is or may be paid to our directors or executive officers, except
that stock options may be granted at the discretion of the board of directors or
a committee thereof.

Indebtedness of Directors, Senior Officers, Executive
Officers and Other Management

None of our directors or executive officers or any associate or
affiliate of our company during the last two fiscal years, is or has been
indebted to our company by way of guarantee, support agreement, letter of credit
or other similar agreement or understanding currently outstanding.

Family Relationships

There are no family relationships between any of our executive
officers or directors.

|Item 12. | Security Ownership of Certain Beneficial
      Owners and Management and Related Stockholder **Matters**
|-------- | --------------------------------------------------------------------------------------------------------

The following table sets forth, as of May 5, 2011, certain
information with respect to the beneficial ownership of our common shares by
each shareholder known by us to be the beneficial owner of more than 5% of our
common shares, as well as by each of our current directors and
executive officers as a group. Each person has sole voting and investment power
with respect to the shares of common stock, except as otherwise indicated.
Beneficial ownership consists of a direct interest in the shares of common
stock, except as otherwise indicated.

71

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Name and Address of Beneficial Owner
    Amount and Nature ofBeneficial Ownership
    Percentageof
      Class(1)Dr. Ahmad Doroudian 4172 Doncaster Way Vancouver BC
      V6 1V9
    7,550,000 (2)Common
    22.46%Dr. Maziar Badii 3536 SW Marine Drive
      Vancouver BC V6N 3Z2
    650,000 (3)Common
    1.93%Richard Azani 
      10300 Chemin Cote de Liesse,  
      Lachine, PQ, Canada, H8T 1A3
    Nil
    0%Moira Ong 
      5674  Daffodil Drive
      West  Vancouver, BC  V7W 1P3
    Nil
    0%Directors and Officers as a
      Group(1)
    8,200,000 common
    24.39%Penny Green 1820  925 West Georgia
      Street Vancouver BC V6C 3L2
    6,512,384
      (4)Common
    19.37%Sandra E. Hamman Rue du Jura 60
      1180 Rolle, Switzerland
    5,000,000 common
    14.87%Frederik Salari 2306 10 67 Marinaside
      Crescent Vancouver BC V6Z 3A4
    1,500,000 common
    4.46%Dr. Hassan Salari 1517 West 58thAvenue Vancouver BC V6P 1W6
    5,002,000(5)common
    14.88%Francine Salari 1517 West 58thAvenue Vancouver BC V6P 1W6
    1,500,000 common
    4.46%Julian Salari 403  2096 West 46thAvenue Vancouver BC V6M 2K9
    1,150,000 common
    3.42%


| | (1) | Under Rule 13d-3, a beneficial owner of a security
      includes any person who, directly or indirectly, through any contract,
      arrangement, understanding, relationship, or otherwise has or shares: (i)
      voting power, which includes the power to vote, or to direct the voting of
      shares; and (ii) investment power, which includes the power to dispose or
      direct the disposition of shares. Certain shares may be deemed to be
      beneficially owned by more than one person (if, for example, persons share
      the power to vote or the power to dispose of the shares). In addition,
      shares are deemed to be beneficially owned by a person if the person has
      the right to acquire the shares (for example, upon exercise of
  an option) within 60 days of the date as of which the
      information is provided. In computing the percentage ownership of any
      person, the amount of shares outstanding is deemed to include the amount
      of shares beneficially owned by such person (and only such person) by
      reason of these acquisition rights. As a result, the percentage of
      outstanding shares of any person as shown in this table does not
      necessarily reflect the persons actual ownership or voting power with
      respect to the number of shares of common stock actually outstanding on
      May 5, 2011. As of May 5, 2011, there were 33,621,618 shares of our
    companys common stock issued and outstanding.
| | --- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

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| | (2) | Includes 2,250,000 shares owned by Dr. Doroudian,
      2,000,000 shares owned by Khadija Zerouali, the spouse of Dr. Doroudian,
      and 2,000,000 shares owned by Kinwa Pharma International Company Ltd., a
      company over which Dr. Doroudian and Ms. Zerouali have shared voting and
      investment power and 800,000 options to purchase shares at $0.005 for a
      period of five years from May 26, 2010.                                                                                          
| | --- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |     |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
| | (3) | Includes 500,000 shares and 150,000 unissued shares
      underlying options exercisable at a price of USD$0.20 per share until the
      earlier of (i) July 13, 2011; (ii) within 30 calendar days following the
      termination of the Director agreement between Dr. Badii and us dated July
      17; 2009; or (iii) upon our common stock achieving a closing price of
      USD$0.50 or greater as quoted on a public stock exchange in Canada or the
      United Sates for a period of five trading days.
| |     |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
| | (4) | Includes 3,300,000 shares owned by Bacchus Filings Inc.,
      a company over which Ms. Green has sole voting and investment
  power.                                                                                                                                                                                                                                                                                                                                                                               
| |     |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
| | (5) | Includes 150,000 unissued shares underlying options
      exercisable at a price of USD$0.20 per share until the earlier of (i) July
      13, 2011; (ii) within 30 calendar days following the termination of the
      Director agreement between Dr. Shojania and us dated July 17, 2009; or
      (iii) upon our common stock achieving a closing price of USD$0.50 or
      greater as quoted on a public stock exchange in Canada or the United Sates
      for a period of five trading days.                

Changes in Control

We are unaware of any contract or other arrangement or
provisions of our Articles or Bylaws the operation of which may at a subsequent
date result in a change of control of our company. There are not any provisions
in our Articles or Bylaws, the operation of which would delay, defer, or prevent
a change in control of our company.

|Item 13. | Certain Relationships and Related
      Transactions, and Director Independence
|-------- | -------------------------------------------------------------------------------

Except as disclosed herein, no director, executive officer,
shareholder holding at least 5% of shares of our common stock, or any family
member thereof, had any material interest, direct or indirect, in any
transaction, or proposed transaction since the year ended January 31, 2011, in
which the amount involved in the transaction exceeded or exceeds the lesser of
$120,000 or one percent of the average of our total assets at the year end for
the last three completed fiscal years.

On July 13, 2009 we entered into a Directors Agreement with
Dr. Maziar Badii pursuant to which we issued Dr. Badii options to purchase
150,000 shares of our common stock in consideration for his services as our
Director. The options are exercisable at a price of USD$0.20 per share until the
earlier of (i) July 13, 2011; (ii) 30 calendar days following the termination of
the Director agreement between Dr. Badii and us; or (iii) our common stock
achieving a closing price of USD$0.50 or greater as quoted on a public stock
exchange in Canada or the United Sates for a period of five trading days.

On May 25, 2010 we entered into an Incentive Stock Option
Agreement with Dr. Ahmad Doroudian wherein Dr. Douroudian received options to
purchase 800,000 shares of our common stock at a price of $0.05 per share until
May 25, 2015.

Director Independence

We currently act with three directors, consisting of Dr. Ahmad
Doroudian, Dr. Maziar Badii and Richard Azani.

Our audit committee consists of Dr. Ahmad Doroudian and Dr.
Maziar Badii.

73

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We do not have a standing compensation
or nominating committee, but our entire board of directors acts in such
capacities.

|Item 14. | Principal Accounting Fees and Services
|-------- | --------------------------------------

The aggregate fees billed for the most recently completed
fiscal year ended January 31, 2011 and for the fiscal year ended January 31,
2010 for professional services rendered by the principal accountant for the
audit of our annual financial statements and review of the financial statements
included in our quarterly reports on Form 10-Q and services that are normally
provided by the accountant in connection with statutory and regulatory filings
or engagements for these fiscal periods were as follows:

Year EndedJanuary 31, 2011 $
    January 31, 2010 $Audit Fees
    18,000
    13,550Audit Related Fees
    Nil
    NilTax Fees
    Nil
    NilAll Other Fees
    Nil
    NilTotal
    18,000
    13,550


Our board of directors pre-approves all services provided by
our independent auditors. All of the above services and fees were reviewed and
approved by the board of directors either before or after the respective
services were rendered.

Our board of directors has considered the nature and amount of
fees billed by our independent auditors and believes that the provision of
services for activities unrelated to the audit is compatible with maintaining
our independent auditors independence.

PART IV

|Item 15. | Exhibits, Financial Statement Schedules
|-------- | ---------------------------------------

|(a) | Financial Statements
|--- | --------------------
|    |                     
|    | (1)                 
|    |                     
|    | (2)                 
|    |                     
|(b) | Exhibits            

|Exhibit | Description                                                                                                                                                                      
|------- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|No.     |                                                                                                                                                                                  
|(3)     | Articles of Incorporation
      and Bylaws                                                                                                                                       
|3.1     | Articles of Incorporation
      649186 B.C. Ltd. (incorporated by reference from our Registration
      Statement on Form S-1 filed on August 7, 2009)                           
|3.2     | Company Act Memorandum of
      649186 B.C. Ltd. Certificate of Amendment (incorporated by reference from
      our Registration Statement on Form S-1 filed on August 7, 2009)
|3.3     | Certificate of Filing of 649186
      B.C. Ltd. (incorporated by reference from our Registration Statement on
      Form S-1 filed on August 7, 2009)                            

74

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|Exhibit | Description                                                                                                                                                                                                                  
|------- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|No.     |                                                                                                                                                                                                                              
|3.4     | Certificate of
        Incorporation of 649186 B.C. Ltd. (incorporated by reference from our
        Registration Statement on Form S-1 filed on August 7, 2009)                                                             
|3.5     | Certificate of Name Change of
        649186 B.C. Ltd. to Xerxes Health Corp. (incorporated by reference from
        our Registration Statement on Form S-1 filed on August 7, 2009)                                        
|3.6     | Transition Application
        of Xerxes Health Corp. (incorporated by reference from our Registration
        Statement on Form S-1 filed on August 7, 2009)                                                                
|3.7     | Certificate of Name Change of
        Xerxes Health Corp. to Neurokine Pharmaceuticals Inc. (incorporated by
        reference from our Registration Statement on Form S-1 filed on August
        7, 2009)                  
|3.8     | Notice of Alteration
        to Authorized Share Structure (incorporated by reference from our Registration
        Statement on Form S-1 filed on August 7, 2009)                                                           
|(10)    | Material Contracts                                                                                                                                                                                                           
|10.1    | Share Subscription
        of Dr. Ahmad Doroudian dated September 17, 2007 (incorporated by reference
        from our Registration Statement on Form S-1 filed on August 7, 2009)                                           
|10.2    | Non-Exclusive License Agreement
        with Globe Laboratories Inc. dated June 17, 2008 (incorporated by reference
        from our Registration Statement on Form S-1/A filed on December 3, 2009)                         
|10.3    | Management Consulting
        Agreement with Penny Green dated April 1, 2009 (incorporated by reference
        from our Registration Statement on Form S-1 filed on August 7, 2009)                                         
|10.4    | Director and Option Agreement
        with Dr. Kamran Shojania dated July 13, 2009 (incorporated by reference
        from our Registration Statement on Form S-1 filed on August 7, 2009)                                   
|10.5    | Director and
        Option Agreement with Dr. Maziar Badii dated July 13, 2009 (incorporated
        by reference from our Registration Statement on Form S-1 filed on August
        7, 2009)                              
|10.6    | Shareholders Agreement
        withi Dr. Hassan Salari dated July 24, 2009 (incorporated by reference
        from our Registration Statement on Form S-1 filed on August 7, 2009)                                          
|10.7    | Shareholders
        Agreement with Francine Salari dated July 24, 2009 (incorporated by reference
        from our Registration Statement on Form S-1 filed on August 7, 2009)                                             
|10.8    | Clinical Trial Services Agreement
        with Virtus Clinical Development (Pty) Limited dated March 1, 2009 (incorporated
        by reference from our Registration Statement on Form S-1/A filed on March
        4, 2010)
|10.9    | Master Service
        Agreement with Northern Lipids Inc. Dated October 2, 2007 (incorporated
        by reference from our Registration Statement on Form S-1/A filed on December
        3, 2009)                         
|10.10   | Assignment of Invention (NK-001)
        dated January 30, 2008 (incorporated by reference from our Registration
        Statement on Form S-1/A filed on December 3, 2009)                                                  
|10.11   | Assignment of
        Invention (NK-002) dated April 18, 2008 (incorporated by reference from
        our Registration Statement on Form S-1/A filed on December 3, 2009)                                                    
|10.12   | Subscription Agreement with Hassan
        Salari (incorporated by reference from our Form 8-K filed on August 12,
        2010)                                                                                             
|10.13   | Subscription
        Agreement with Ahmad Doroudian (incorporated by reference from our Form
        8-K filed on August 12, 2010)                                                                                           
|(14)    | Code of Ethics                                                                                                                                                                                                               
|14.1    | Code of Ethics
        and Business Conduct                                                                                                                                                                                  
|(31)    | Rule 13a-14(d)/15d-14(d) Certifications                                                                                                                                                                                      
|31.1*   | Section
        302 Certification under Sarbanes-Oxley Act of 2002 of principal executive
        officer                                                                                                                    
|31.2*   | Section
        302 Certification under Sarbanes-Oxley Act of 2002 principal financial
        officer                                                                                                                       

75

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|Exhibit | Description                                                                                    
|------- | -----------------------------------------------------------------------------------------------
|No.     |                                                                                                
|(32)    | Section 1350 Certifications                                                                    
|32.1*   | Section 906 Certification
      under Sarbanes-Oxley Act of 2002 of principal executive officer
|32.2*   | Section
      906 Certification under Sarbanes-Oxley Act of 2002 principal financial officer   

|* | Filed herewith.
|- | ---------------

76

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SIGNATURES

In accordance with Section 13 or 15(d) of the Exchange Act, the
registrant caused this report to be signed on its behalf by the undersigned,
thereunto duly authorized.

|                    | NEUROKINE PHARMACEUTICALS INC.                 
|------------------- | -----------------------------------------------
|                    | (Registrant)                                   
|                    |                                                
|                    |                                                
|Dated: May 10, 2011 | /s/
      Ahmad Doroudian                      
|                    | Ahmad Doroudian                                
|                    | President, Chief Executive Officer and Director
|                    | (Principal Executive Officer)                  
|                    |                                                
|Dated: May 10, 2011 | /s/
      Moira Ong                            
|                    | Moira Ong                                      
|                    | Chief Financial Officer                        
|                    | (Principal Financial Officer and Principal     
|                    | Accounting Officer)                            

Pursuant to the requirements of the Securities Exchange Act of
1934, this report has been signed below by the following persons on behalf of
the registrant and in the capacities and on the dates indicated.

|Dated: May 10, 2011 | /s/
      Ahmad Doroudian                              
|------------------- | -------------------------------------------------------
|                    | Ahmad Doroudian                                        
|                    | President, Chief Executive Officer and Director        
|                    | (Principal Executive Officer, Principal
      Financial
|                    | Officer and Principal Accounting Officer)              
|                    |                                                        
|Dated: May 10, 2011 | /s/
      Moira Ong                                    
|                    | Moira Ong                                              
|                    | Chief Financial Officer                                
|                    | (Principal Financial Officer and Principal             
|                    | Accounting Officer)                                    
|                    |                                                        
|                    |                                                        
|Dated: May 10, 2011 | /s/
      Maziar Badii                                 
|                    | Maziar Badii                                           
|                    | Director                                               
|                    |                                                        
|                    |                                                        
|Dated: May 10, 2011 | /s/
      Richard Azani                                
|                    | Richard Azani                                          
|                    | Director                                               

77

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