OMB APPROVALOMB Number: 3235-0288 Expires: April 30, 2015 Estimated average burden hours per response..2645.52


UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549



FORM 20-F

(Mark One)



oREGISTRATION STATEMENT PURSUANT TO SECTION 12(b) OR (g) OF THE SECURITIES EXCHANGE ACT OF 1934

OR

xANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the fiscal year ended June 30, 2012

OR

oTRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934



oSHELL COMPANY REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934



Date of Event requiring this shell company report _____________



For the transition period from ___________________ to ______________________



Commission file number: 000-51848



ALDA Pharmaceuticals Corp.

(Exact name of Registrant as specified in its charter)



Not applicable

(Translation of Companys name into English)



Province of British Columbia, Canada

(Jurisdiction of incorporation or organization)



1518  1030 West Georgia Street, Vancouver, BC, V6E 2Y3 CANADA

Contact person: Jamie Lewin, Phone: 604-739-3052 Email best-fit-consulting@hotmail.com

(Address of principal executive offices)



Securities registered or to be registered pursuant to Section 12(b) of the Act.



Title of each class

Name of each exchange on which registered

Not Applicable

Not Applicable

Securities registered or to be registered pursuant to Section 12(g) of the Act.



Common Shares Without Par Value - Toronto Venture Stock Exchange

(Title of Class)

Securities for which there is a reporting obligation pursuant to Section 15(d) of the Act.

None

(Title of Class)



Indicate the number of outstanding shares of each of the issuers classes of capital or common stock as of the close of the period covered by the annual report.  ( July 01, 2011) 63,996,799 common shares; (June 30, 2012) 6,959,680 common shares



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



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



Indicate by check mark whether the Company (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 Company was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.  Yes  o     No x



Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, or a non-accelerated filer. See definition of “accelerated filer and large accelerated filer” in Rule 12b-2 of the Exchange Act (check one):  Large accelerated filer  o                   Accelerated filer o                 Non-Accelerated filerx



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

U.S. GAAP     o                                                International Financial Reporting Standards as issued                                               Other o

by the International Accounting Standards Board              x



If “Other” has been checked in response to the previous question, indicate by check mark which financial statement item the registrant has elected to follow. Indicate by check mark which financial statement item the Company has elected to follow.  Item 17 o     Item 18 o



(APPLICABLE ONLY TO ISSUES INVOLVED IN BANKRUPTCY PROCEEDING DURING THE PAST FIVE YEARS)



Indicate by check mark whether the Company has filed all documents and reports required to be filed by Sections 12, 13 or 15(d) of the Securities Exchange Act of 1934 subsequent to the distribution of securities under a plan confirmed by a court.  Yes  o     No o



The information set forth in this Annual Report on Form 20-F is as at June 30, 2012 unless an earlier or later date is indicated.



SEC 1852 (01-12) Persons who respond to the collection of information contained in this form are not required to respond unless the form displays a currently valid OMB control number.



i



---



FORM 20-F ANNUAL REPORT

TABLE OF CONTENTS







PART I

4

ITEM 1. IDENTITY OF DIRECTORS SENIOR MANAGEMENT AND ADVISERS

4

ITEM 2. OFFER STATISTICS AND EXPECTED TIMETABLE

5

ITEM 3. KEY INFORMATION

5

ITEM 4. INFORMATION ON THE COMPANY

16

ITEM 5. OPERATING AND FINANCIAL REVIEW AND PROSPECTS

40

ITEM 6. DIRECTORS, SENIOR MANAGEMENT AND EMPLOYEES

48

ITEM 7. MAJOR SHAREHOLDERS AND RELATED PARTY TRANSACTIONS

58

ITEM 8. FINANCIAL INFORMATION

60

ITEM 9. THE OFFER AND LISTING

63

ITEM 10. ADDITIONAL INFORMATION

64

ITEM 11. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

72

ITEM 12. DESCRIPTION OF SECURITIES OTHER THAN EQUITY SECURITIES

72



PART II

72

ITEM 13. DEFAULTS, DIVIDEND ARREARAGES AND DELINQUENCIES

72

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

72

ITEM 15. CONTROLS AND PROCEDURES

72

ITEM 16. RESERVED

72



PART III

75

ITEM 17. FINANCIAL STATEMENTS

75

ITEM 18. FINANCIAL STATEMENTS

75

ITEM 19. EXHIBITS

76

SIGNATURES

109































ii



---





INTRODUCTION



The Company was incorporated by registration of its Memorandum and Articles under the BC Companies Act on May 30, 2000 under the name Duft Biotech Capital Ltd.

On November 13, 2003, the Company acquired the assets of ALDA Pharmaceuticals Inc. (API), a private company founded in 1996.

On November 26, 2003 the Company changed its name to ALDA Pharmaceuticals Corp. (the Company) The Company is still a British Columbia, Canada, company.

Effective August 19, 2005, the authorized share capital of the Company was increased to an unlimited number of common shares without par value. There are no Indentures or Agreements limiting the payment of dividends and there are no conversion rights, special liquidation rights, pre-emptive rights or subscription rights.



BUSINESS OF ALDA PHARMACEUTICALS CORP.



The Company is principally in the business of developing infection control products for industrial and consumer use and for the treatment of topical infections.



FINANCIAL AND OTHER INFORMATION



The Companys reporting currency and domestic currency is Canadian Dollars. In this Annual Report, unless otherwise specified, all dollar amounts are expressed in Canadian Dollars (CDN$ or $). The Government of Canada permits a floating exchange rate to determine the value of the Canadian Dollar against the U.S. Dollar (US$). Comparisons of historic exchange rates between the US$ and the CDN$ are contained in Section 3.A.3.



FORWARD-LOOKING STATEMENTS



This Annual Report on Form 20-F contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995, principally in ITEM #4, Information on the Company and ITEM #5, Operating and Financial Review of Prospects. These statements may be identified by the use of words like plan, expect, aim, believe, project, anticipate, intend, estimate, will, should, could and similar expressions in connection with any discussion, expectation, or projection of future operating or financial performance, events or trends. In particular, these include statements about the Companys strategy for growth, future performance or results of current sales and production, interest rates, foreign exchange rates, and the outcome of contingencies, such as acquisitions and/or legal proceedings and intellectual property issues.

Forward-looking statements are based on certain assumptions and expectations of future events that are subject to risks and uncertainties. Actual future results and trends may differ materially from historical results or those projected in any such forward-looking statements depending on a variety of factors, including, among other things, the factors discussed in this Annual Report under ITEM #3, Key Information, Risk Factors and factors described in documents that the Company may furnish from time to time to the Securities and Exchange Commission. The Company undertakes no obligation to update publicly or revise any forward-looking statements because of new information.

MEASUREMENT INFORMATION

Canada uses the metric measurement system and all of the measures used by the Company adhere to the standards of the metric system.







3



---

TABLE OF CONTENTS







PART I



ITEM 1. IDENTITY OF DIRECTORS SENIOR MANAGEMENT AND ADVISERS

1.A.1. Directors and senior management

Table No. 1 lists as of June 30, 2012 the names of the Directors of the Company.



Table No. 1

Directors



|                                                                                 |     |                                
|-------------------------------------------------------------------------------- | --- | -------------------------------
|Name and Residential Address                                                     | Age | Date First Elected or Appointed
|Terrance G. Owen
1518  1030 West Georgia Street,
Vancouver, BC V6E 2Y3, Canada  | 66  | May 30, 2000                   
|Jamie Lewin (1)
1518  1030 West Georgia Street,
Vancouver, BC V6E 2Y3, Canada   | 63  | April 12, 2012                 
|Eugene Hodgson (1)
1400  601 West Hastings Street
Vancouver, BC, Canada V6B 5A6 | 56  | October 12, 2004               
|Linda Allison (1)
3074 Spencer Place
West Vancouver, BC, Canada V7V 3C9          | 65  | June 30, 2003                  
|Ronald Zokol
470 West Tower 555 West 12th Avenue
Vancouver, BC, Canada V5Z 3X7   | 63  | November 13, 2003              
|William F. McCoy
735 Thornapple Drive
Naperville, IL,. USA 60540                 | 57  | March 17, 2005                 



(1) Member of Audit Committee





1.A.2. Senior Management

Table No. 2 lists the names of the Senior Management of the Company. The Senior Management serves at the pleasure of the Board of Directors.



Table No. 2

Senior Management



|                                                  |     |                          
|------------------------------------------------- | --- | -------------------------
|Name and Position                                 | Age | Date of First Appointment
|Terrance Owen, President & CEO                    | 66  | May 30, 2000             
|Jamie Lewin, CFO and Secretary (April 12, 2012)   | 63  | April 12, 2012           
|Peter Chen, CFO and Secretary    (April 12, 2012) | 50  | May 30, 2000             

Mr. Chen resigned on April 12, 2012.



Mr. Owens business functions, as President and CEO of the Company, include overall supervision of all officers and consultants, as well as management of research and development, strategic planning, business development, operations, liaison with auditors, accountants, lawyers, regulatory authorities, the financial community and shareholders and reporting to the Board of Directors.

Mr. Lewins and Mr. Chens business functions, as CFO, include financial statement preparation, accounting, liaising with auditors, accountants, lawyers and regulatory authorities and preparation, payment and organization of the expenses, taxes, and other financial activities of the Company and reporting to the Board of Directors



4



---

TABLE OF CONTENTS





Mr. Lewins and Mr. Chens business functions, as Corporate Secretary, include attending and being the secretary of all meetings of the Board, shareholders and committees of the Board and entering, or causing to be entered in records kept for that purpose, minutes of all proceedings thereat; gives or causes to be given, as and when instructed, all notices to shareholders, Directors, officers, auditors and members of committees of the Board; is the custodian of the stamp or mechanical device generally used for affixing the corporate seal of the Company and of all books, records and instruments belonging to the Company, except when some other officer or agent has been appointed for that purpose; and in the future can have such other powers and duties as the Board of the chief executive officer may specify. Mr. Lewin and Mr. Chen may delegate all or part of his duties as Corporate Secretary to a nominee or to corporate counsel from time to time.

1.B. Legal Advisors

The legal advisors for the Company are Getz Prince Wells, Barristers & Solicitors, 1810  1111 West Georgia St., Vancouver, B.C. V6E 4M3., Phone 604-605-4293 Fax 604 685-9798. As of October 2, 2007, the Company has retained Stanislaw Ashbaugh LLP, 4400 - 701 Fifth Avenue, Seattle, WA 98104 to provide assistance with matters concerning securities laws in the United States. The firm does not provide other legal services to the Company.

The Companys Banks are the:  Canadian Imperial Bank of Commerce. Its business address and telephone number are 554 6th Street, New Westminster, British Columbia Canada V3L 3B5. Tel: (604) 665-7925.Bank of Montreal, 595 Burrard St. Vancouver, British Columbia Canada V7X 1L7. Tel: (604) 665-7374.

1.C. Auditors

On June 30, 2007, the auditors for the Company were Berris Mangan, Chartered Accountants of 1827 West 5th Avenue, Vancouver, British Columbia, Canada, V6J 1P5 (previously known as BME + Partners). On August 31, 2007, the Company changed auditors, due to a decision by Berris Mangan to focus its practice on companies with Canadian reporting responsibilities that are listed on the Toronto Stock Exchange. On the same date the Company appointed HLB Cinnamon Jang Willoughby, Charted Accountants (CJW) of 1827 West 5thAvenue Vancouver, BC, Canada, V6J 1 P5 on an interim basis to conduct the year-end audit for the year ended June 30, 2007. CJW was appointed as the Companys auditor at the Annual General Meeting held on December 12, 2007 and has completed the year end audits for the Company since that date. During the financial year ending June 30, 2010, HLB Cinnamon Jang Willoughby restructured by way of a merger to form Meyers Norris Penny LLP who performed the year end audits in 2011 and 2012.



ITEM 2. OFFER STATISTICS AND EXPECTED TIMETABLE



No disclosure necessary.



ITEM 3. KEY INFORMATION

3.A.1. Selected Financial Data

The selected financial data should be read in conjunction with the financial statements and other financial information included elsewhere in the Annual Report.



The Company has not declared any dividends since incorporation and does not anticipate that it will do so in the foreseeable future. The present policy of the Company is to retain all available funds for use in its operations and the expansion of its business.



Table No. 3 is derived from the audited financial statements of the Company, which have been prepared in accordance with

IFRS, as issued by the International Accounting Standards Board (IASB) and Interpretations of the International Financial Reporting Interpretations Committee (IFRIC). IFRS represents standards and interpretations approved by the International Accounting Standards Board (IASB), and are comprised of IFRS, International Accounting Standards (IASs), and interpretations issued by the International Financial Reporting Interpretations Committee (IFRICs) or the former Standing Interpretations Committee (SICs) and effective for the Companys reporting period ended June 30,

2012.



5



---

TABLE OF CONTENTS





Table No. 3

Selected Financial Data

(CDN$)





|                               |                 |                 |                 |                 |                
|------------------------------ | --------------- | --------------- | --------------- | --------------- | ---------------
|                               | Year
Ended
2012 | Year
Ended
2011 | Year
Ended
2010 | Year
Ended
2009 | Year
Ended
2008
|IFRS                           |                 |                 |                 |                 |                
|Revenue                        | 83,361          | 305,592         | 1,459,686       | 282,261         | 249,042        
|Net (Loss) for the Year        | (306,565)       | (1,875,565)     | (3,992,659)     | (1,183,009)     | (1,937,735)    
|Basic Income (Loss) Per Share  | (0.03)          | (0.03)          | (0.07)          | (0.02)          | (0.05)         
|Dividends Per Share            | 0               | 0               | 0               | 0               | 0              
|Wtg. Avg. Shares (1)           | 6,451,760       | 6,231,468       | 5,689,516       | 4,990,456       | 4,260,535      
|Period-end Shares (1)          | 6,959,680       | 6,399,680       | 5,872,180       | 5,134,180       | 4,951,180      
|                               |                 |                 |                 |                 |                
|Working Capital                | (1,320,984)     | (1,068,383)     | 234,420         | 1,721,192       | 2,470,247      
|Sponsorship Liability          | 0               | 0               | 237,983         | 0               | 0              
|Long-Term Debt                 | 0               | 0               | 0               | 0               | 0              
|Capital Stock                  | 7,933,288       | 7,921,708       | 7,494,231       | 5,842,389       | 5,524,289      
|Shareholders Equity (Deficit) | (1,321,164)     | (1,066,502)     | 239,296         | 1,725,883       | 2,476,054      
|Total Assets                   | 19,751          | 190,494         | 1,353,067       | 1,782,098       | 2,533,975      
|                               |                 |                 |                 |                 |                
|US GAAP                        |                 |                 |                 |                 |                
|Net Loss                       | (306,565)       | (1,875,565)     | (3,992,659)     | (1,183,009)     | (1,937,735)    
|Loss Per Share                 | (0.03)          | (0.03)          | (0.07)          | (0.02)          | (0.05)         
|Shareholders Equity           | (1,321,164)     | (1,066,502)     | 239,296         | 1,725,883       | 2,476,054      
|Total Assets                   | 19,751          | 190,494         | 1,353,067       | 1,782,098       | 2,533,975      





(1) On March 08, 2012 the Company consolidated its shares on a 10 to 1 basis. This resulted in the outstanding shares of the company being consolidated from 63,996,800 to 6,399,680. All references to common shares, share purchase warrants, stock options, and per share amounts for all periods have been adjusted on a retrospective basis to reflect the common share consolidation. At June 30, 2012 there were 6,959,680 shares issued and outstanding.



3.A.3. Exchange Rates



In this Annual Report, unless otherwise specified, all dollar amounts are expressed in Canadian Dollars (CDN$). The Government of Canada permits a floating exchange rate to determine the value of the Canadian Dollar against the U.S. Dollar (US$).

Table No. 4 sets forth the exchange rates for the Canadian Dollar at the end of five most recent fiscal years ended June 30, 2012, the average rates for the period and the range of high and low rates for the period. The data for each month during the most recent six months is also provided.

For purposes of this table, the rate of exchange means the noon buying rate in New York City for cable transfers in foreign currencies as certified for customs purposes by the Federal Reserve Bank of New York.



The table sets forth the number of US Dollars required under that formula to buy one Canadian Dollar. For example, where the number 0.8704 is quoted in the upper left hand number in the table, it means that it took on average in December 2012, 98.95 cents US to purchase one Canadian dollar. For most periods presented, the Canadian dollar has been worth less than one US dollar.



6



---

TABLE OF CONTENTS





Table No. 4

U.S. Dollar/Canadian Dollar





|                                      |         |        |        |       
|------------------------------------- | ------- | ------ | ------ | ------
|Period                                | Average | Low    | High   | Close 
|December 2012                         | 0.9895  | 0.9881 | 0.9912 | 0.9898
|November 2012                         | 0.9970  | 0.9951 | 0.9990 | 0.9968
|October 2012                          | 0.9872  | 0.9845 | 0.9895 | 0.9875
|September 2012                        | 0.9782  | 0.9759 | 0.9807 | 0.9784
|August 2012                           | 0.9921  | 0.9906 | 0.9946 | 0.9927
|July 2012                             | 1.0139  | 1.0116 | 1.0162 | 1.0134
|June 2012                             | 1.0280  | 1.0248 | 1.0312 | 1.0275
|                                      |         |        |        |       
|Three Months Ended September 30, 2012 | 0.9947  | 0.9927 | 0.9971 | 0.9948
|Three Months Ended June 30, 2012      | 1.0101  | 1.0070 | 1.0132 | 1.0101
|                                      |         |        |        |       
|Fiscal Year Ended June 30, 2012       | 1.0019  | 1.0002 | 1.0221 | 1.0019
|Fiscal Year Ended June 30, 2011       | 0.9995  | 0.9381 | 1.0542 | 1.0370
|Fiscal Year Ended June 30, 2010       | 0.9484  | 0.8580 | 1.0039 | 0.9429
|Fiscal Year Ended June 30, 2009       | 0.8575  | 0.7692 | 0.9984 | 0.8602
|Fiscal Year Ended June 30, 2008       | 0.9897  | 0.9298 | 1.0905 | 0.9817



(Source: http://www.bankofcanada.ca/rates/exchange/10-year-converter/)



3.B. Capitalization and Indebtedness



Table No. 5 sets forth the capitalization and indebtedness of the Company as of June 30, 2012.



On October 31, 2008, the Company granted options to acquire 550,000 common shares of the Company to directors, consultants, officers, employees and investor relations. The options have an exercise price of $0.20 with an exercisable term of five years expiring on October 31, 2013. 500,000 options vested immediately with an estimated fair value of $0.09 per share resulting $48,743 in stock based compensation expense being recognized and 50,000 options vested in equal quarterly installments over a period of 12 months from the date of grant.



On June 5, 2009, the Company granted options to acquire 1,600,000 common shares of the Company to directors, consultants, officers, employees and investor relations. The options have an exercise of $0.25 with an exercisable term of five years expiring on June 4, 2014. 1,450,000 options vested immediately with an estimate fair value of $0.13 per share resulting $185,853 in stock based compensation expense being recognized and 150,000 options vested in equal quarterly installments over a period of 12 months from the date of grant.



On September 9, 2009,the Company completed a private placement of 6,000,000 units of the Company at a price of $0.25 per unit for gross proceeds of $1,500,000. Each unit consists of one common share of the Company and one share purchase warrant. Each warrant entitles the holder to acquire one additional common share at a price of $0.40 per share until September 11, 2010 with a forced exercise provision attached to each warrant. Finders fees and legal fees in the amount of $53,523 were charged against share capital in connection with the private placement. Warrants were valued at $490,142. On August 13, 2010, the Company received an approval for the extension of the exercise period of these 6,000,000 outstanding share purchase warrants. Pursuant to the extension, the applicable exercise period was extended by one further year, from September 16, 2010 to September 16, 2011. The warrant exercise price of 40 cents per share remained the same. At the time of this report, all of the warrants expired without being exercised.



On September 7, 2010, the Company closed a private placement for total gross proceeds of $327,500. A total of 3,275,000 units of the Company were issued at a price of 10 cents per unit. Each unit consists of one common share of the Company and one non-transferable share purchase warrant entitling the holder to acquire one additional common of the Company at a price of 20 cents per common share for a period of 24 months from the date of the issuance of the purchase warrant with a forced exercise provision attached to each warrant. The Company paid finders fee of $2,250 to certain registrants with respect to the offering. Finders fees of $2,250 and legal fees of $15,887 were charged against share capital in connection with the private placement. Warrants were valued at $86,334.



7



---

TABLE OF CONTENTS







During the year ended June 30, 2012, no warrants were exercised.



On October 15, 2009, the Company granted options to acquire 750,000 common shares of the Company to directors, consultants, officers, employees and investor relations. The options have an exercise price of $0.55 with an exercisable term of five years expiring on October 15, 2014. Of these, 700,000 options vested immediately with an estimate fair value of $0.46 per share resulting $324,935 in stock based compensation expense being recognized. The remaining 50,000 options were vested in equal quarterly installments over a period of 12 months from the date of grant, are now fully vested and resulted in additional stock based compensation of $23,044. During the year ended June 30, 2010, a total of 20,000 of these particular options were cancelled due to the departure of an employee, leaving a total of 730,000 options.



On January 12, 2011, the Company closed a private placement for total gross proceeds of $200,000. A total of 2,000,000 units of the Company were issued at a price of 10 cents per unit. Each unit consists of one common share of the Company and one non-transferable share purchase warrant entitling the holder to acquire one additional common share of the Company at a price of 20 cents per common share for a period of 24 months from the date of issuance of the purchase warrant with a forced exercise prevision attached to each warrant. The issuance with respect to the private placement will be subject to a hold period expiring on May 13, 2011. Legal fees of $5,626 were charged against share capital in connection with the private placement. Warrants were valued at $18,676.



On April 27, 2012, the Company closed a non-brokered private placement of 560,000 units of the Companys common shares at a price of 10 cents per unit, for proceeds of $56,000. Each unit consists of one common share of the Company and one share purchase warrant, which will entitle the holder thereof to purchase one additional common share of the Company for a period of 24 months from the closing date of the offering at an exercise price of 15 cents for the first 12 months and 20 cents during the next 12 months. The Company has paid a finders fee of $4,100 pursuant to the policies of the TSX Venture Exchange.



During the year ended June 30, 2012, no options were exercised by the option holders.



Table No. 5

Capitalization and Indebtedness

As of June 30, 2012



|                                     |            
|------------------------------------ | -----------
|SHAREHOLDERS EQUITY                 |            
|Common shares issued and outstanding | 6,399,680  
|Share Capital                        | 7,933,288  
|Subscriptions Receivables            | 0          
|Reserve-Warrants                     | 1,004,346  
|Reserve  Options                    | 1,640,613  
|Retained Earnings (deficit)          | 11,899,412 
|Net Shareholders Equity             | (1,321,164)
|TOTAL CAPITALIZATION                 |            
|Stock Options Outstanding (1):       | 288,000    
|Warrants Outstanding (2):            | 1,087,500  
|Capital Leases:                      | None       
|Guaranteed Debt                      | None       
|Secured Debt:                        | None       



(1) See Table 11 for exercise prices and terms of these options.

(2)See Table 13 for exercise prices and terms of these warrants.





3.C. Reasons for the Offer and Use of Proceeds

General working capital.



8



---

TABLE OF CONTENTS







3.D. Risk Factors



Risks pertaining to the Company:



The Company's limited operating history makes it difficult to evaluate the Companys current business and forecast future results.

The Company was started as a Capital Pool Company, has been operating its current business since November, 2003 and has had limited revenues during this time. Since its inception, the Company has experienced significant operating losses each year. These losses are due to substantial expenditures on intellectual property protection, product development and product testing of commercial and consumer infection control products. The Company has also been engaged in a program of pre-clinical testing for registration of a number of therapeutic products with Health Canada and the FDA. This testing is costly and time consuming and the Company does not have sufficient funds to undertake all of the testing that is required to satisfy the requirements of these regulatory agencies. Accordingly, the Company requires outside funding to complete these tests. As funds are raised, they will be invested in the testing and the Company will continue to accumulate losses that are proportional to the funds raised and spent on testing. In addition, the Company launched a number of consumer and commercial products, described above, and established new sales and distribution agreements. Although sales of T36® Antiseptic Hand Sanitizer products were substantial during the last quarter of 2009, sales subsequently dropped to nearly zero for reasons discussed below in the commentary on the financial statements. As a result, future sales of the Companys products are virtually impossible to predict.



The Company has no significant source of operating cash flow and failure to generate revenues in the future could cause the Company to go out of business.

Based upon current plans to introduce its products into new markets in Canada and internationally, pursue additional patent applications and regulatory approvals for the T36®technology, develop new products, maintain the Companys public listing on the TSX-Venture Exchange (the Exchange) and support the continued registration of its securities in the US, the Company expects to incur operating losses in future periods. These losses will occur because there are continuing expenses associated with the marketing and production of the Companys products, research and development, intellectual property protection, testing and registration of therapeutic products, legal and accounting fees, the maintenance of its public listing and other expenses associated with running an operating business. Even if the Company becomes operationally profitable from the introduction and sale of new products, the Company plans to invest heavily in pre-clinical testing, clinical trials and registration of its therapeutic products and will need to raise significant amounts of new funding to complete these activities. Also, the Company may not be successful in generating significant revenues from therapeutic products in the future. Failure to generate more revenues could cause the Company to contract or go out of business. At the time of this report, the Company is insolvent because its liabilities are greater than its assets and trading in its shares have been halted due to a failure to file its audited annual statements on time. If the Company was forced to liquidate its assets, the value received would be less than what is shown on the balance sheet because the inventory is valued at cost, not selling price. In the future, it is likely that the inventory value will be reduced to reflect selling cost which will further decrease the value of the assets compared to liabilities. Also at the time of this report, the Company has insufficient funds to continue the production and sales of its products and will be unable to do so without securing further financing.



In order to undertake further financings, the Company consolidated its shares

On March 08, 2012 the Company consolidated its shares on a 10 to 1 basis. This resulted in the outstanding shares of the company being consolidated from 63,996,800 to 6,399,680. All references to common shares, share purchase warrants, stock options, and per share amounts for all periods have been adjusted on a retrospective basis to reflect the common share consolidation. At June 30, 2012 there were 6,959,680 shares issued and outstanding.



If the Company raises further funds through equity issuances, the price of its securities could decrease due to the dilution caused by the sale of additional shares.

Additional funds raised by the Company through the issuance of equity or convertible debt securities will cause the Companys current shareholders to experience dilution and possibly lower the trading price of its shares. Such securities may grant rights, preferences or privileges senior to those of the Companys common shareholders. The Company is not profitable and will not be profitable for the foreseeable future under its current development plan. The Company plans to issue further equity to raise funds as necessary to continue operations and fund its program of research and development, patent protection and regulatory approvals. As a result, an indeterminate amount of dilution of the Companys capital stock will occur.



9



---

TABLE OF CONTENTS







The Company has issued a limited number of shares out of its authorized capital of an unlimited number of common shares, which could be dilutive and negatively affect the share price.

Having an unlimited number of authorized but unissued common shares could allow the Companys Directors and Officers to issue a large number of shares without shareholder approval, leading to significant dilution of current shareholders and possible lowering of the share price.



The Company could enter into debt obligations and not have the funds to repay these obligations.

The Company does not have any contractual restrictions on its ability to incur debt and, accordingly, the Company could incur significant amounts of indebtedness to finance its operations. Any such indebtedness could contain covenants, which would restrict the Companys operations. The Company might not be able to repay indebtedness.



The Company could enter into contractual obligations and not have the funds to pay for these obligations.

The Company does not have any contractual restrictions on its ability to enter into binding agreements and, accordingly, the Company could incur significant obligations to third parties including financial obligations. Any such obligations could restrict the Companys operations and the Company might not be able to pay for its commitments. If the Company cannot meet its commitments, legal action could be taken against the Company. Any such actions could further restrict the Companys ability to conduct its business or could cause the Company to go out of business.



The Company has a history of generating limited revenues and the continuing failure to generate further revenues could cause the Company to cease operations.

The Company has no history of pre-tax profit and in the previous three years has had only limited annual revenues for each of the years it has been operating. The Company sustained operating losses for each of its fiscal years and has sustained significant accumulated operating losses. The continued operation of the Company will be dependent upon its ability to generate operating revenues and to procure additional financing. The Company may not be successful in generating revenues or raising capital in the future. Failure to generate revenues or raise capital could cause the Company to cease operations. The auditors reports to the shareholders are expressed in accordance with Canadian reporting standards, which do not require a reference to conditions and events that cast substantial doubt on the Company's ability to continue as a going concern when these are adequately disclosed in the financial statements. In the United States, reporting standards for auditors require the addition of an explanatory paragraph when the financial statements are affected by conditions and events that cast substantial doubt on the Company's ability to continue as a going concern. Had the Companys financial statements been audited by US auditors, the Company may have received a going concern qualification. A going concern qualification, or the existence of a basis for such a qualification, could negatively affect the Companys ability to raise capital.



As the Company is a Canadian company, it may be difficult for U.S. shareholders of the Company to effect service on the Company or to realize on judgments obtained in the United States.



The Company is a Canadian corporation. A majority of its directors and officers are residents of Canada and a significant part of its assets are, or will be, located outside of the United States. As a result, it may be difficult for shareholders resident in the United States to effect service within the United States upon the Company, directors, officers or experts who are not residents of the United States, or to realize in the United States judgments of courts of the United States predicated upon civil liability of any of the Company, directors or officers under the United States federal securities laws. If a judgment is obtained in the U.S. courts based on civil liability provisions of the U.S. federal securities laws against the Company or its directors or officers, it will be difficult to enforce the judgment in the Canadian courts against the Company and any of the Companys non-U.S. resident executive officers or directors. Accordingly, United States shareholders may be forced to bring actions against the Company and its respective directors and officers under Canadian law and in Canadian courts in order to enforce any claims that they may have against the Company or its directors and officers. Nevertheless, it may be difficult for United States shareholders to bring an original action in the Canadian courts to enforce liabilities based on the U.S. federal securities laws against the Company and any of the Companys non-U.S. resident executive officers or directors.



The Companys future performance is dependent on key personnel. The loss of the services of any of the Companys executives or Board of Directors could have a material adverse effect on the Company.

The Companys performance is substantially dependent on the performance and continued efforts of the Companys executives and its Board of Directors. Dr. Terrance G. Owen is the President, Chief Executive Officer and a Director. Jamie Lewin is the Secretary, Chief Financial Office and a Director. Dr. Linda Allison, Dr. Ronald Zokol, Dr. William F. McCoy and Eugene Hodgson are independent Directors. Dr. Allison, Mr. Chen and Mr. Hodgson are members of the Audit Committee. The loss of the services of any of the Companys executives or Board of Directors could have a material adverse effect on the Companys business, results of operations and financial condition. There is no assurance that key personnel can be replaced with people with similar qualifications within a reasonable period of time. The Company



10



---

TABLE OF CONTENTS





currently does not carry any key person insurance on any of the executives or members of the board of directors. The only contracts in place with any of the employees, officers or directors of the Company are with Terrance Owen and Peter Chen. The Company currently has no Directors and Officers insurance in place and, as a result, it is possible that some or all of the Directors may resign. If any or all Directors resign, there is no assurance that new Directors can be found to replace any directors who resign.



The Company has not declared any dividends since its inception in 2000 and has no present intention of paying any cash dividends on its common shares in the foreseeable future.

The Company has not declared any dividends since its inception in 2000, and has no present intention of paying any cash dividends on its common shares in the foreseeable future. The payment by the Company of dividends, if any, in the future, rests in the discretion of the Company's Board of Directors and will depend, among other things, upon the Company's earnings, its capital requirements and financial condition, as well as other relevant factors.



The Companys future performance is dependent on key suppliers and manufacturers and a loss of any suppliers or manufacturers could have a material adverse effect on the Company by reducing or eliminating the ability of the Company to manufacture or sell its products.

The Company does not have agreements in place with any of its key suppliers for raw materials, other supplies or manufacturing. If any of the Companys suppliers or manufacturers were to go out of business or were unable to procure the raw materials or other supplies required by the Company to manufacture its products, the Company would have to find other suppliers or manufacturers. There is no guarantee that the Company would be able to find other suppliers or manufacturers. If the Company could not find other suppliers or manufacturers, production of the Companys products would be delayed for an indefinite period of time and such delays would lead to delayed revenues or reduced revenues or both.



If the Company is unable to manufacture its products, there is a risk that customers will be lost and that the Company will be unable to regain these customer.

At the time of this report, the Company has insufficient funds to have some of its products manufactured and there are back orders for products that the Company may not be able to deliver. Customers may go to other suppliers to satisfy their needs and it is possible that the Company will not be able to regain these customers.



To meet its financial obligations, the Company may be required to divest itself of certain assets

Since the Company has insufficient funds to meet its financial obligations, it is possible that the Company may have to sell or provide rights to some or all of its assets.



There is no assurance that the patent applications filed for theT36®technology or for other products will be approved, and failure to obtain such approvals could leave the Company with no further protection for its intellectual property and reduced sales.

Patent protection of the T36® technology is very important to the Companys current and future products because the T36® Disinfectant technology is the basis for most of its products. Although patents have been allowed in the United States, China and Australia, there is also no assurance that these patents will not be challenged or that future patent applications will be successful. A lack of patent protection would significantly alter the competitive environment and possibly allow competitors to infringe on the technology of the Companys business. Reduced revenues and lack of future products could result from such infringement.



There is no assurance that the Company will be able to secure the funds needed for future development, and failure to secure such funds could lead to a lack of opportunities for growth.

Many of the Companys products require very costly laboratory testing to establish toxicity, efficacy and analytical methods and clinical trials to establish effectiveness and safety on human subjects. This testing is required in order to obtain required regulatory approvals from Health Canada, the EPA and FDA in the US and the EMA in the EU. A lack of funds would impair the ability of the Company to complete such tests. A lack of funds would also impair the Companys ability to establish marketing and sales plans once the products have been approved for sale. If adequate financing is not available when required, the Company may be required to delay, scale back or eliminate various activities and may be unable to continue in operation. The Company may seek such additional financing through debt or equity offerings, but there can be no assurance that such financing will be available on terms acceptable to the Company or at all. Any equity offering will result in dilution to the ownership interests of the Companys shareholders and may result in dilution to the value of such interests.



There is no assurance that research and development being conducted by the Company to create new products will be successful.

The Company is conducting research and development on new products, but the outcomes of research and development are never certain. For example, there is no assurance that any new products will be developed or that any new products that do



11



---

TABLE OF CONTENTS





result will have a competitive advantage or market acceptance, will not be superseded by the new products of competitors, will not infringe on the patents of other companies or that other companies will not develop products that infringe on patents obtained by the Company for its new products. The Company has completed the formulations for new products but still needs to conduct the toxicity and efficacy tests and establish the analytical methods required to obtain regulatory approvals from Health Canada, the EPA and FDA in the US and the EMA in the EU.



The Company and the Companys products have limited brand awareness which limits the ability of the Company to gain credibility from prospective customers and to sell its products into new markets.

Market knowledge of the Companys name is limited. The Company will need to devote considerable resources to educate new markets about the products the Company offers. In establishing new markets, the Company will be competing with companies that are potentially already entrenched in such markets or may be better funded than the Company. The ability of the Company to raise brand awareness will depend on its ability to raise the money required to undertake such an intensive marketing effort. As noted elsewhere, there is no assurance that the Company can raise funds required for such an investment in marketing.



The Company has limited sales and marketing experience and can provide no assurance that the Company can keep its current customers or gain new ones.

The Company has limited experience in marketing and selling its products and the Company has no sales or marketing staff. The Company will have to expend substantial funds to promote and develop its products. The Companys success in this regard will depend on the quality of its products and its ability to develop and implement an effective sales and marketing strategy. Failure to achieve the marketing objectives will have a material adverse effect on the Company and on its results of operations and financial condition.



Conflicts of interest may exist for Directors and Officers which may inhibit their ability to act in the best interests of the Company and its shareholders leading to possible impairment of the Companys ability to achieve its business objectives.

The directors and officers of the Company will not be devoting all of their time to the affairs of the Company. The directors and officers of the Company are directors and officers of other companies. The directors and officers of the Company will be required by law to act in the best interests of the Company. They will have the same obligations to the other companies in respect of which they act as directors and officers. Discharge by the directors and officers of their obligations to the Company may result in a breach of their obligations to the other companies and, in certain circumstances, this could expose the Company to liability to those companies. Similarly, discharge by the directors and officers of their obligations to the other companies could result in a breach of their obligation to act in the best interests of the Company. Such conflicting legal obligations may expose the Company to liability to others and impair its ability to achieve its business objectives. Terrance Owen has been the Secretary of Bi-optic Ventures Inc., since September, 2002 and a Director of this same company since September, 2006. Terrance Owen is also a Director of Fortunate Sun Mining Company Ltd. since October 19, 2011 and Pacific Arc Resources Ltd. since December 23, 2011. As a non-management Director and Officer of these companies, ,all of which are  listed on the TSX-Venture Exchange, Terrance Owen spends up to eight hours per month. Jamie Lewin is a Director and/or CFO of seven other public companies and spends up to 5 hours per week on these companies. Neither Jamie Lewin nor Terrance Owen is a Director or Officer of any companies that compete with or provide services that are similar to those of the Company.



Management of the Company can, through their stock ownership in the Company, influence all matters requiring approval by the Companys shareholders.

Management of the Company at the time of this report, collectively own approximately 3.7% of the Company's issued and outstanding common shares at that date. These shareholders, if acting together, could significantly influence all matters requiring approval by the Company's shareholders, including the election of directors and the approval of mergers or other business combination transactions. Management may not make decisions that will maximize shareholder value and may make decisions that will contribute to or cause the entrenchment of management.



The value and transferability of the Company shares may be adversely impacted by the limited trading market for the Companys common shares.

No assurance can be given that a market for the Companys common shares will be quoted on an exchange in the U.S. or on the NASD's Over the Counter Bulletin Board. The Companys common shares may be subject to illiquidity and investors may not be able to sell their shares in a timely manner.



The value and transferability of the Company shares may be adversely impacted by the penny stock rules.

The sale or transfer of the Company common shares by shareholders in the United States may be subject to the so-called "penny stock rules." Under Rule 15g-9 of the Exchange Act, a broker or dealer may not sell a "penny stock" (as defined in Rule 3a51-1) or effect the purchase of a penny stock by any person unless:



(a)

Such sale or purchase is exempt from Rule 15g-9;



12



---

TABLE OF CONTENTS







(b)

Prior to the transaction the broker or dealer has (1) approved the person's account for transaction in penny stocks in accordance with Rule 15g-9, and (2) received from the person a written agreement to the transaction setting forth the identity and quantity of the penny stock to be purchased; and



(c)

The purchaser has been provided an appropriate disclosure statement as to penny stock investment.



The SEC adopted regulations generally define a penny stock to be any equity security other than a security excluded from such definition by Rule 3a51-1. Such exemptions include, but are not limited to (1) an equity security issued by an issuer that has (i) net tangible assets of at least $2,000,000, if such issuer has been in continuous operations for at least three years, (ii) net tangible assets of at least $5,000,000, if such issuer has been in continuous operation for less than three years, or (iii) average revenue of at least $6,000,000 for the preceding three years; (2) except for purposes of Section 7(b) of the Exchange Act and Rule 419, any security that has a price of $5.00 or more; and (3) a security that is authorized or approved for authorization upon notice of issuance for quotation on the NASDAQ Stock Market, Inc.'s Automated Quotation System. It is likely that the Companys common shares, assuming a market were to develop in the US, will be subject to the regulations on penny stocks. Consequently, the market liquidity for the common shares may be adversely affected by such regulations limiting the ability of broker/dealers to sell the Companys common shares and the ability of shareholders to sell their securities in the secondary market in the US Moreover, the Company shares may only be sold or transferred by the Company shareholders in those jurisdictions in the US in which an exemption for such "secondary trading" exists or in which the shares may have been registered.



There is no guarantee that there is a market for the Companys common shares in the United States.

Although the Companys common shares were added to the OTC Bulletin Board System on April 20, 2009 under the symbol APCSF, trading of the companys shares is very limited. The Company cannot guarantee that there will be a market for the Companys common shares in the United States or that there will any significant amount trading in the companys shares for the foreseeable future The Company cannot guarantee that it will continue to maintain a listing in the United States or that it will not be found in default of existing regulations or new regulations and be suspended from trading or delisted.



Risks Pertaining to the Industry



Registration of products may not occur in a timely manner which could lead to delays in product introductions, reduced revenue expectations and extra costs to conduct further tests to satisfy regulatory agencies.

Government agencies, such as the EPA and the Food and Drug Administration (FDA) in the United States and Health Products and Food Branch in Canada, need to provide approvals of the Companys products prior to any sales of these products. To obtain such approvals, the Company must submit extensive amounts of information on the efficacy, toxicology, carcinogenicity, mutagenecity and other testing of the products that it is trying to register. After all of the information is provided, the agencies can request supplemental information and further testing. Once all of the requirements for documentation are satisfied, the agencies can take an indeterminate amount of time to provide approvals for the Company to market its products. Significant delays could lead to slower revenue growth than anticipated. In addition, regulatory delays can allow time for competitors to devise strategies to prevent or reduce market penetration. There is no assurance that government agencies will accept for registration any of the Companys products.



The Company is very dependent on the registration and sale of its commercial, retail and therapeutic products.

If the Company is not successful in achieving regulatory approval of its products, its ability to generate revenues will be impaired. Even if registrations are successful, there is no guarantee that the Company will be able to maintain the registrations or be able to pass inspections by the regulatory authorities that permit the sale of the Companys products. In the event of a failed inspection, it is possible that the Company may be ordered to stop the sale of its products or undertake a recall of products that the regulatory authorities deem to be non-compliant with existing regulations. If the Company is ordered to recall or stop the sale of any of its products, the ability of the Company to generate revenues will be impaired. If such a recall or suspension of sales occurs, there is no guarantee that the Company will, at any future date, be able to resume the sale of the suspended or recalled products.



There is a risk that the Companys intellectual property infringes upon the rights of other companies, which could lead to reduced revenues, reduced margins due to sanctions against the Company, outright withdrawal or prohibition of products or trademarks from the market and significant costs for legal defense against infringement claims, re-branding of products and revised marketing materials.

The Company is unaware of any infringement claims being made against the Company or its products or processes at the time of writing. In the future, there can be no assurances that third parties will not assert infringement claims in the future or require the Company to obtain a license for the intellectual property rights of such third parties. There can be no assurance that such a license, if required, will be available on reasonable terms or at all. If the Company does not obtain



13



---

TABLE OF CONTENTS





such a license, it could encounter delays in the introduction of products or could find that the development, manufacture or sale of products requiring such a license could be prohibited.



There is a risk that earlier inventionsmay exist that invalidate the Companys patent applications so that the Company may not be able to sell any infringing products.

Since patent applications are maintained in secrecy for a period of time after filing, and since publication of discoveries in the scientific or patent literature often lags behind actual discoveries, the Company cannot be certain that it was the first creator of inventions covered by pending patent applications, or that it was the first to file patent applications for such inventions. The Company might have to participate in interference proceedings in U.S., Canadian or patent offices in other jurisdictions to determine priority of invention, at substantial cost, particularly if such actions are required overseas. There can be no assurance that the Companys patents, if issued, would be held valid or enforceable by a court. The Company has patents issued in the United States, China and Australia and patent applications filed in the European Union and Canada. These patent applications seek intellectual property protection for the basic formulation of the T36®formulation, the method for making it and certain therapeutic uses of the formulation.



There may be limited ability to defend the patents if and when they are issued, leading to loss of sales that might otherwise be realized if the Company was in a position to defend its patents.

Litigation among pharmaceutical companies can be intense and costly. The Company might not have the financial ability to defend its patents, if issued, against larger industry players. Litigation may be necessary to enforce patents issued or assigned to the Company, or to determine the scope and validity of a third party's proprietary rights. Additionally, there can be no assurances that the Company would prevail in any such action. An adverse outcome in litigation or as part of an interference or other proceeding in a court or patent office could subject the Company to significant liabilities, require disputed rights to be licensed from other parties or require the Company to cease using certain technology or products, any of which could have a material adverse effect on the Companys business.



The market for disinfectant products is competitive and well established with a number of large, multinational, widely recognized companies with significant financial and marketing resources selling, and possibly developing, similar products.

Competitors are already well established in the market for disinfectant and antiseptic products and products for the treatment of topical infections. The introduction of new products into these existing markets could be met with aggressive marketing, price cutting and distribution impediments by competitors. To obtain market share, the Companys business must penetrate a market with established competitors and obtain sufficient recognition to be able to displace the existing products. Substantial funds will have to be spent on marketing and education to achieve these objectives. Competitors may be developing new technologies and new products that will offer significant improvements over existing products, including those offered by the Company. There can be no assurance that others will not independently develop similar products, duplicate any of the Companys products or, if patents are issued to the Company, design around such patents. There can be no assurance that a competitor's technology or product would be found to infringe the Companys patents. In the disinfectant market, key competitors include Germiphene Corporation, Virox Technologies, Inc., JohnsonDiversey Inc., Advanced Sterilization Products, Reckitt Benckiser and Metrex Research Corporation. All of these companies are well established and sell disinfection products into the same markets served by the Company. In the hand sanitizer market, there are also well established competitors such as Gojo Industries, Inc., Johnson and Johnson Inc., Deb Canadian Hygiene Inc., Soapopular Inc. and Belvedere International. In the therapeutic markets being targeted by the Company, a number of large competitors, such as Johnson and Johnson, Cardinal Health, Reckitt Benckiser and Ortho Pharmaceutical are well established. Such large and aggressive competitors can deploy their significant resources to prevent a new competitor, such as the Company, from securing market share.



The Companys T36® Disinfectant is composed of various chemicals that may pose risks due to flammability and possible health risks.

One of the main components of T36®Disinfectant, T36® Antiseptic Hand Sanitizer and T36® Disinfectant Cleaner CONCENTATE is ethanol, which is flammable and has a flash point (the minimum temperature at which the liquid produces a sufficient concentration of vapour above it that it forms an ignitable mixture with air) of 13oC. Water, which is part of the T36® formulation, raises the flash point to 24oC. The transport and storage of T36®products can pose a fire hazard if shipped or stored in sufficient quantities. The Company uses an independent warehousing company to store and ship T36®Disinfectant. The warehouse is fully equipped with fire suppression equipment according to the relevant regulations established by the municipal, provincial and federal governments. T36®products are shipped by ground only in cases of 4 bottles holding 4 litres each or in smaller quantities per case. In these quantities, T36®Disinfectant is not classified as a Dangerous Good under Sections 1.15, 1.16 and 1.17 of the Transportation of Dangerous Goods Act administered by Transport Canada. As a result, no special regulations apply to the shipping of T36®Disinfectant by ground within Canada. There is no guarantee that special shipping regulations will not be applied to shipments of T36®Disinfectant in the future or in other jurisdictions, such as the United States.





14



---

TABLE OF CONTENTS





Two potentially toxic components of T36®Disinfectant are present in low concentrations compared to their LD50levels (the amount of the substance that kills 50% of the test population of experimental animals when administered as a single dose). O-phenylphenol (OPP) in pure crystalline form is considered to be a possible carcinogen and eye contact can cause severe irritation or burns with possible eye damage (Concentration in T36®Disinfectant = 2,800 ppm, oral LD50 = 2,480 mg/kg in rats) For some individuals, o-phenylphenol can also irritate the skin. Benzalkonium chloride (BZK) supplied as a 50% solution in water, has been reported to cause allergic reactions and the swelling of the mucosa when used as a preservative in nose sprays and eye drops on a continuous, long-term basis by sensitive users (Concentration in T36®Disinfectant = 2,000 ppm, oral LD50 = 300 mg/kg in rats). The Company does not directly handle, store, use or dispose of OPP or BZK in pure form but only in their highly diluted form in T36®Disinfectant. Further, because the denatured alcohol that contains denatonium benzoate to prepare T36®Disinfectant, the consumption of significant amounts of T36®Disinfectant is not possible. Therefore, it is unlikely that anyone can be poisoned or otherwise harmed through the proper use of T36®Disinfectant as instructed by the Company.



Toxicology studies conducted for the company by Product Safety Labs (PSL), located in Dayton, New Jersey, have confirmed that T36®Disinfectant has no harmful effects on animals except as reported below by PSL:



·

Acute inhalation (rat): LC50 > 2020 mg/m3. Difficulty breathing, irregular respiration, lethargy and discharge from nose and eyes reported.

·

Acute oral (rat): LD50 > 5000 mg/kg. Lethargy and hunched posture reported.

·

Acute dermal (rat): LD50 > 2000 mg/kg. No systemic effects observed.

·

Effects not observed but possible based on individual ingredients may include: ataxia, loss of coordination, drowsiness, intoxication, nausea and vomiting.



However, T36®Disinfectant is classified as a moderate eye irritant. Although T36®Disinfectant is not measurably toxic if used as directed by the Company, it is possible that regulations against these chemicals may become more restrictive and affect the ability of the Company to market its products in certain jurisdictions without additional warning labels. The chemicals present in T36® are biodegradable with sufficient time and do not pose a long-term threat to the environment. However, given the attention that any chemicals may attract from environmental groups, it is possible that negative publicity about these chemicals could affect the ability of the company to market its products in certain jurisdictions. There are persuasive arguments and credible scientific evidence available to support the safety of T36®Disinfectant, but such an educational effort on the part of the Company would require funds to be spent and would affect the profitability of the Company.



The Company has a limited number of customers and is dependent on a few key accounts to maintain its current levels of sales.

The key customers for which sales account for more than 10% of total revenues during the period being reported on are:



·

Esthetics Plus, Inc.: A distributor to the beauty market with a contract that renews on an annual basis. Either party can terminate the contract on 60 days notice or with 30 days notice for any breach of the contract if the breach is not rectified within the 30 day notice period,

·

Sinclair Dental Limited: A distributor to the dental market and a customer of both API and the Company for 8 years,

·

The Stevens Company Limited: A distributor to the scientific and medical markets and a customer of both API and the Company for 8 years, and

·

VWR International: A distributor to the laboratory market and customer of API and the Company for 8 years.

·

Product Distribution Centre: A distributor that is owned by the provincial government of BC, supplies the provinces public sector consumers within BC and a customer of the Company and API for 8 years.

·

Acklands Granger International (AGI): A distributor of industrial, safety and fastener products with catalogue sales and 160 branches and 5 distribution centres across the country. Acklands-Grainger was the Official Supplier of the Vancouver 2010 Olympic Winter Games, Vancouver 2010 Paralympic Winter Games and is the Official Supplier of the Canadian Olympic Committee, the 2010 Canadian Olympic Team and the 2012 Canadian Olympic Team for industrial safety and material handling supplies.



The Company currently sells its T36® Disinfectant, the T36® Disinfectant Wipes, T36® Antiseptic Hand Sanitizer Gel and Wipes, and T36® Disinfectant Cleaner CONCENTRATE through these distributors. The current sales through these distributors would be disrupted if any of these distributors stopped representing the Company. The result would be a reduction in the Companys revenues until new distributors could be found. It is possible that new distributors could not be found and the Company would have to try to sell its products directly to the end users, leading to a significant increase in marketing and sales costs even if the sales levels could be regained.



15



---

TABLE OF CONTENTS







ITEM 4. INFORMATION ON THE COMPANY



4.A.  History and Development of the Company



Capital Pool Company



The Company was incorporated by registration of its Memorandum and Articles under the BC Companies Act on May 30, 2000 under the name Duft Biotech Capital Ltd. and was classified as a Capital Pool Company (CPC) on the TSX Venture Exchange. Under the policies of the TSX Venture Exchange, the principal business of a CPC is to identify and evaluate opportunities for acquisition. The completion of such an acquisition is referred to as a Qualifying Transaction. A CPC does not carry on any business other than the identification and evaluation of assets or businesses in connection with potential Qualifying Transactions, does not have business operations or assets other than seed capital and has no written or oral agreements for the acquisition of an asset or business at the time of formation.



A Qualifying Transaction, pursuant to the policies of the TSX Venture Exchange, is a transaction whereby a capital pool company:

(a)

Issues or proposes to issue, in consideration for the acquisition of significant assets or businesses, common shares or securities convertible, exchangeable or exercisable into common shares, which, if fully converted, exchanged or exercised would represent more than 25 percent of its common shares issued and outstanding immediately prior to the issuance;

(b)

Enters into an arrangement, amalgamation, merger or reorganization with another issuer with significant assets, whereby the ratio of securities which are distributed to the security holders of the capital pool company and the other issuer results in the security holders of the other issuer acquiring control of the resulting entity; or

(c)

Otherwise acquires significant assets other than cash.



Qualifying Transaction



On November 13, 2003, the Company completed its Qualifying Transaction, which was the acquisition of the assets of API, a private company founded in 1996 and since renamed 513947 BC Ltd. (513947). The transaction was approved by the TSX Venture Exchange as a valid Qualifying Transaction.



To support the acquisition of API as its Qualifying Transaction, the Company had an independent valuation of API conducted. From the valuation, direct development costs were estimated to be $378,000 as follows.



|                                                                    |         
|------------------------------------------------------------------- | --------
|Intellectual property development (patent application & trademarks) | $31,584 
|Marketing materials development                                     | $38,756 
|Product development                                                 | $237,668
|Regulatory approval                                                 | $69,788 
|Total direct developmental costs (rounded up)                       | $378,000



These direct development costs were discounted by 20% to $302,400. Estimated administrative costs of $45,000 and unpaid salaries of $192,551 were added to the discounted direct development costs to arrive at a total value of $539,951. This value was rounded up to $540,000 and $15,000 worth of inventories of completed T36® Disinfectant and raw materials brought the total to $550,000.



The Company purchased these assets of API with 3,711,263 shares of the Company plus forgiveness of loans and accrued interest of $57,747.40 advanced to API by the Company prior to completion of the Qualifying Transaction. The Company purchased only the assets and not the liabilities of API except for the trademark litigation undertaken by JohnsonDiversey Inc. against API. This litigation was subsequently settled and is discussed elsewhere. As a result of the asset purchase, API became the registered owner of the shares of the Company. The Company also acquired the intellectual property and $17,500 worth of inventory from API. The intellectual property consisted of one patent application, #PCT/CA2002/001284, A wide spectrum disinfectant, filed on August 20, 2002 under the Patent Cooperation Treaty (PCT), described in more detail below. two Drug Identification Numbers (DINs, i.e.,02245056 for T36® Disinfectant under its previous name, Spritz and 02231344 for the same product renamed, Viralex and subsequently renamed to T36® Disinfectant),  provided to the Company by Health Canada and the pending trademarks for Viralex, T36 and a logo displayed with the name, ALDA Pharmaceuticals. (described under Trademarks in Section 4.B. Business Overview), customer lists and contacts, products under development (also described in 4.B. Business Overview), marketing materials, technical bulletins, and instructions for customers and technical studies.





16



---

TABLE OF CONTENTS





Agreements that still remain in effect as a result of the asset purchase are the appended Voting Agreement and the Non-Competition Agreement.



Voting Agreement (Exhibit 3.)



The parties to the Voting Agreement, dated November 13, 2003 and established as a condition of completing the Qualifying Transaction, are API, Allan Shapiro (Shapiro), Michael Wilby (Wilby), the Company, Terrance Owen (Owen), Peter Chen (Chen) and Bruce Schmidt (Schmidt).



Under the terms of the agreement, API, Shapiro and Wilby will vote their shares of the Company in favour of the number of directors of the Company not to exceed six directors with one director being independent of API and the election of Owen, Chen and Schmidt as directors of the Company provided they have been nominated by the Company for election to the Board of the Company;



Until termination of this Agreement, the Company will nominate Owen, Chen and Schmidt for election to the Board at each Meeting provided each person consents to continuing as a director of the Company, is not then prohibited by law from serving as a director of the Company and that each nomination and election is acceptable to the TSX Venture Exchange and all other applicable securities regulatory authorities.



Subject to restrictions imposed under applicable securities legislation, API, Shapiro or Wilby may sell shares of the Company through a stock exchange. If any of them proposes to sell in excess of 200,000 shares of the Company in an off-market transaction they will require the purchaser to agree to be bound by the terms of the Voting Agreement.



If a take-over bid or other offer is made to shareholders of the Company by an arms-length third party for all or a portion of the shares of The Company, API, Shapiro and Wilby will be free to tender to such bid or offer any shares owned by them and will not be required to comply with the selling restrictions described above.



The Voting Agreement will terminate with respect to Wilby, at the earlier of:



·

such time as API, Shapiro and Wilby collectively cease to hold, directly  or indirectly, less than 10% of the issued voting shares of The Company;

·

such time as Wilby ceases to hold directly or indirectly, or control at least 5% of the issued  voting shares of The Company; and

·

5 years from the date of the execution and delivery of this Agreement.



The Voting Agreement will not terminate with respect to API and Shapiro, except with the consent of the TSX Venture Exchange. As of June 30, 2008, the Voting Agreement was no longer in effect for Wilby since his personal shareholdings were below 5% of the issued voting shares of the Company.



On November 1, 2004, the Voting Agreement was amended. The parties to the Amendment are API, Shapiro, Wilby, the Company, Owen, Chen and Schmidt.



The Amendment was entered into because of the name changes undertaken by the Company and API after completion of the Qualifying Transaction and the resignation of Schmidt as a director of the Company. The Amendment also changed references to Owen, Chen and Schmidt to Owen Nominee, Chen Nominee and Schmidt Nominee, respectively, so that, if any one of Owen, Chen or Schmidt does not consent to being nominated as a director of APC, another person acceptable to the TSX Venture Exchange and to the other nominees would become a party to the Voting Agreement. On October 4, 2004, Eugene Hodgson was appointed as a director and became the Schmidt nominee on completion of the Amendment.



This agreement was terminated for Mr. Chen when he resigned on April 12, 2012.





Non-Competition Agreement (Exhibit 4.i.)

The parties to the Non-Competition Agreement, dated November 13, 2003 and established as a condition of completing the Qualifying Transaction, are API, Shapiro and the Company.



Under the terms of the Agreement, API and Shapiro agree that neither Shapiro nor API will compete with the Company in any way. In the case of API, the Agreement expired after one year on November 13, 2004. In the case of Shapiro, the Agreement stays in place until January 31, 2012 which is a period of one year after his services for the Company came to



17



---

TABLE OF CONTENTS





an end. Competition, as defined in the Agreement, includes, but is not limited to, the solicitation of customers or the sale of any products or services that are in any way similar to those offered by the Company or inducement of any employees of the Company to leave the Company.



Shapiro agrees that any breach of the agreement by him could cause irreparable harm to the Company and that the Company can take any action that it deems necessary to end the breach and be compensated for the breach.



Change of Business.



As a consequence of completing the Qualifying Transaction, the Company entered into the business of developing and marketing disinfectant products.



On November 26, 2003 the Company changed its name to ALDA Pharmaceuticals Corp. The Company is still registered in British Columbia, Canada only.



In October, 2010, the head office of the Company moved to Unit 170  4320 Viking Way, Richmond, BC V6V 2L4. The Companys telephone number is (604) 521-8300. The contact person is: Mr. Terrance Owen, President and CEO or Mr. Peter Chen, CFO and Secretary. The Companys common shares have been listed for trading on the TSX Venture Exchange since July, 2001.



Financings



The Company has financed its operations since inception through funds raised in a series of private placements of common shares:



|            |                                                                       |                  |              
|----------- | --------------------------------------------------------------------- | ---------------- | -------------
|Fiscal Year | Nature of Share Issuance                                              | Number of Shares | Amount ($)   
|Fiscal 2001 | Private Placement @ $0.085                                            | 1,176,475        | $100,000.38  
|            |                                                                       |                  |              
|Fiscal 2002 | Canadian Prospectus Offering (IPO) @$0.17                             | 1,200,000        | $204,000.00  
|Fiscal 2003 | Brokers Warrant Shares on Canadian Prospectus Offering (IPO) @ $0.17 | 150,000          | $25,500.00   
|            |                                                                       |                  |              
|Fiscal 2004 | Private Placement @ $0.15                                             | 346,666          | $52,000.00   
|            | Private Placement @ $0.20                                             | 6,200,000        | $1,240,000.00
|            |                                                                       |                  |              
|Fiscal 2005 | Private Placement @ $0.10                                             | 3,000,000        | $300,000.00  
|            |                                                                       |                  |              
|Fiscal 2006 | Private Placement @$0.05                                              | 3,916,000        | $195,800.00  
|            | Private placement @ $0.05                                             | 1,100,000        | $55,000.00   
|            |                                                                       |                  |              
|Fiscal 2007 | Private placement @ $0.05                                             | 1,430,000        | $ 71,500.00  
|            | Private placement @ $0.10                                             | 8,000,000        | $800,000.00  
|            |                                                                       |                  |              
|Fiscal 2008 | Private placement @ $0.12                                             | 2,000,000        | $240,000.00  
|            | Private placement @ $0.15                                             | 3,500,000        | $525,000.00  
|            |                                                                       |                  |              
|Fiscal 2009 | N/A                                                                   | N/A              | N/A          
|            |                                                                       |                  |              
|Fiscal 2010 | Private placement @ $0.25                                             | 6,000,000        | $1,500,000.00
|Fiscal 2011 | Private placement @ $0.10                                             | 3,275,000        | $327,500     
|            | Private placement @ $0.10                                             | 2,000,000        | $200,000     
|Fiscal 2012 | Private placement @ $0.10                                             | 560,000          | $56,000      



4.B. Business Overview



The Company was established in order to develop and commercialize disinfectant products. The Company has called the disinfectant technology T36®. T36®is a mixture of ethanol, o-phenylphenol (OPP), benzalkonium chloride (BZK), chlorhexidine gluconate (CHG) and other ingredients, including Nonoxynol-9 (N-9), water and, optionally, lemon or orange fragrances. All of these component chemicals are bio-degradable.





18



---

TABLE OF CONTENTS





The Company has secured patents and has additional patents pending for the specific combination of these products although the ingredients are all common chemical compounds.



During its first five years, Companys primary focus was on product development. In April, 2009, the Company completed a line of products that included T36® Disinfectant, T36® Antiseptic Hand Sanitizers and T36® Disinfectant Cleaner CONCENTRATE.



T36® Disinfectant



The Companys first product, an Intermediate Level Disinfectant called Viralex and subsequently renamed T36®Disinfectant, was launched in September of 2001, prior to the acquisition of API. It is being sold primarily to (i) First Responder organizations including ambulance, fire fighters and police forces in Canada, (ii) dental clinics, and (iii) beauty and hair care salons and spas. T36®Disinfectant has been issued a Drug Identification Number (DIN) by Health Canada for its use on any hard, inanimate non-porous surfaces. This includes, but is not limited to, counter tops, cutting boards, sinks, tubs, scissors and other non-critical equipment used in beauty salons, spas,  dental offices, and medical clinics and equipment used by firefighters, police and paramedics. T36® Disinfectant is also permitted to be used in restaurants and other facilities where food is prepared.



Efficacy studies - T36® Disinfectant



Efficacy studies refer to proving a drug's effectiveness (in this case as a disinfectant) in producing a desired result (bactericidal, virucidal, fungicidal or tuberculocidal). In studies conducted by independent laboratories in Canada and the United States, T36® Disinfectant has demonstrated efficacy against bacteria, fungi and viruses. The types of surfaces tested were hard non-porous surfaces unless otherwise noted.



1.

An efficacy study, dated February 10, 1997, was conducted by British Columbia Research Inc. (Vancouver, Canada) under the supervision of Dr. Ernie Lee. The organisms tested were four strains of bacteria (Staphylococcus epidermis, Pseudomonas aeruginosa, Serratia marcescens, and Mycobacterium tuberculosis) one strain of yeast (Candida albicans), spores from one strain of fungus (Aspergillus fumigatus) and two strains of viruses (Herpes Simplex Virus-1 and Poliovirus-1) in compliance with test standards accepted by Health Canadas Therapeutic Product Directorate Twenty five replicates of each organism at low levels, ranging from 38 to 177 cfus/ml (colony forming units/ml) were dried on microscope cover slips and exposed to T36® Disinfectant for varying times. The studies demonstrated that no growth occurred for any of the replicates. It was concluded that T36® Disinfectant was 100% effective against all five organisms after 10 minutes or longer contact times. At shorter contact times, the kill rate for all 5 organisms ranged from 95.5% to 97.2% after a 1 minute exposure and 98.7 and 99.0% after a 5 minute exposure.



2.

An efficacy study, dated June 6, 1997, was conducted by Dr. Richard Stokes of the University of British Columbia in conjunction with the British Columbia Childrens Hospital. Twenty replicates of Mycobacterium tuberculosis at approximately 107cfus/ml were dried on microscope cover slips and exposed to T36® Disinfectant for varying times. The studies demonstrated that the kill rate was 99.99997% (a reduction of log10 = 6.46) and 99.99998% (a reduction of log10 = 6.59) after a 10 minute exposure. The requirement for a disinfectant to be designated as Tuberculocidal by Health Canada is a log10reduction of 6.0 or greater.



3.

Efficacy studies were conducted by Viromed Biosafety Laboratories of Minneapolis, Minnesota, completed on February 23, 2000. The organisms tested were Staphylococcus aureus, Pseumomonas aeruginosa, Salmonella choleraesuis, Human Immunodeficiency Virus Type I, Herpes simplex Virus Type 1, Trichophyton mentagrophytesand Poliovirus Type 1, in compliance with test standards accepted by the Environmental Protection Agency (EPA) of the United States.

·

For each of the bacteria, Staphylococcus aureus, Pseumomonas aeruginosa, Salmonella choleraesuis, 180 replicates at 6.1 x106 cfu/ml (log10 = 6.79), 1.9 x 106 cfu/ml (log10 = 6.28) and 1.7 x 104 cfu/ml (log10 = 4.23), respectively, were dried on microscope slides and exposed to T36® Disinfectant for 3 minutes. For both Staphylococcus aureusandPseumomonas aeruginosa, growth was observed on only 1 replicate out of 180. For Salmonella choleraesuis, none of the 180 replicates showed any growth. These results met the requirement that no more than 1 replicate out of 60 can show growth and T36® Disinfectant was deemed to demonstrate efficacy against all three bacteria.

·

For Human Immunodeficiency Virus Type I, six replicates at 1.77 x105 cfu/ml (log10 = 5.25), were dried on the bottom of Petri dishes. After being exposed to T36® Disinfectant for 3 minutes, none of the replicates showed any viral activity and T36® Disinfectant was deemed to demonstrate efficacy against HIV.



19



---

TABLE OF CONTENTS





·

ForHerpes simplex Virus Type 1, six replicates at 5.6 x106 cfu/ml (log10 = 6.25), were dried on the bottom of Petri dishes, After being exposed to T36® Disinfectant for 3 minutes, none of the replicates showed any viral activity and T36® Disinfectant was deemed to demonstrate efficacy against the Herpes virus.

·

ForPoliovirus Type 1, six replicates at 5.6 x105 cfu/ml (log10 = 5.75), were dried on the bottom of Petri dishes. After being exposed to T36® Disinfectant for 3 minutes, none of the replicates showed any viral activity and T36® Disinfectant was deemed to demonstrate efficacy against the Polio virus.

·

For the fungus, Trichophyton mentagrophytes, twenty replicates at 4.6 x104 cfu/ml (log10 = 4.66), were dried on microscope slides. After being exposed to T36® Disinfectant for 3 minutes, none of the replicates showed any viral activity and T36® Disinfectant was deemed to demonstrate efficacy against Trichophyton mentagrophytes.



The above studies demonstrated that T36® Disinfectant was effective in inactivating polio viruses within 3 minutes and tuberculosis mycobacteria within 5 minutes. Polio and tuberculosis are benchmark micro-organisms because they are among the most difficult to kill with disinfectant products. Efficacy against polio and tuberculosis demonstrates a high level of disinfection capability. In order to make a virucidal claim and a tuberculocidal claim, a disinfectant product must demonstrate its ability to destroy the poliomyelitis type 1 virus, and Mycobacterium bovis or tuberculosis mycobacteria within a specified time. This is mandated in Canada by the Canadian General Standards Board, Assessment of Efficacy of Antimicrobial Agents for Use on Environmental Surfaces and Medical Devices, CAN/CGSB -2.161-97, p.4, and the Therapeutic Products Programme Guidelines on Disinfectant Drugs, 1999 Edition, Appendix II on page 23.



In all of the testing described above, controls were used to validate the testing protocols. A positive test result required complete inactivation of the tested viruses and complete efficacy against the fungi and bacteria as required by the U.S. EPA for disinfectant label claims. The results from BCRI demonstrated efficacy in excess of Log10 4.0 (i.e. 10,000 times reduction in micro-organisms) in compliance of the standards required in Canada. The tuberculocidal studies demonstrated results in excess of Log10 6.0 (1,000,000 times reduction in micro-organisms).



Toxicology studies



Toxicology is the study of the adverse effects of chemical, physical or biological agents on living organisms and the ecosystem, including the prevention and amelioration of such adverse effects. The toxicology studies listed below were conducted with T36® Disinfectant in the United States by Product Safety Labs in East Brunswick, New Jersey, USA and completed in November, 1999.



·

Acute Oral Toxicity Study in Rats - This test determines the amount of a substance that kills 50% of the test population of experimental animals when administered as a single dose. Five thousand milligrams of T36® Disinfectant per kilogram of bodyweight was administered orally to ten healthy rats. The animals were observed for mortality, signs of gross toxicity, and behavioral changes at least once daily for 14 days. Bodyweights were recorded prior to administration and again on Days 7 and 14. Necropsies were performed on all animals at terminal sacrifice. All animals survived and gained weight during the study. Following administration, most animals exhibited piloerection (erection of the hair), hunched posture and/or were hypoactive. Apart from one female that exhibited reduced fecal volume between Days 0 and 5, all affected animals recovered from the above symptoms. Based on the results of this study, the single dose acute oral LD50 of T36® Disinfectant is greater than 5,000 mg/kg of bodyweight

·

Primary Skin Irritation Study in Rabbits - This test determines the potential for a substance to produce irritation after a single topical application. Five-tenths of a milliliter of T36® Disinfectant was applied to the skin of three healthy rabbits for 4 hours. Following exposure, dermal irritation was evaluated and no dermal irritation was noted at any dose site during the study. Based on the results of this study, T36® Disinfectant is classified as non-irritating to the skin.

·

Primary Eye Irritation Study in Rabbits - This test determines the potential for a substance to produce irritation from a single dose to the eye. One-tenth of a milliliter of T36® Disinfectant was placed into the right eye of six healthy rabbits. The treated eyes of three rabbits were rinsed with physiological saline after instillation. The eyes of the remaining three rabbits were not rinsed. The left eye remained untreated and served as a control. Ocular irritation was evaluated and, based on the results of this study. T36® Disinfectant is classified as moderately irritating to the unrinsed eye and severely irritating to the rinsed eye.

·

Acute Inhalation Toxicity Study in Rats - This test determines the potential for a substance to produce toxicity from a single exposure via the inhalation route. Ten healthy rats were exposed to T36® Disinfectant vapours at a closed chamber at a concentration 2.02 mg/L for 4 hours. The animals were observed for mortality, signs of gross toxicity, and behavioral changes at least once daily for 14 days thereafter. Bodyweights were recorded prior to exposure and again on Days 7 and 14. All animals survived exposure to the test atmosphere and gained bodyweight over the 14-day observation period. During the exposure, the rats Exhibited ocular and nasal discharge, shortness of breath, irregular respiration, shallow respiration, hunched posture and hypoactivity. With the exception of ocular and nasal discharge



20



---

TABLE OF CONTENTS





and shallow respiration, similar clinical signs persisted in all animals upon removal from the exposure chamber. Some animals also developed noisy breathing, reduced fecal volume and/or a prone posture, but all rats recovered from these symptoms by Day 11 and appeared active and healthy for the remainder of the study. Necropsy findings at terminal sacrifice were unremarkable. Based on the results of this study, the single exposure acute inhalation LC50 of T36® Disinfectant is greater than 2.02 mg/L.

·

Acute Dermal Toxicity Study in Rats - This test determines the health hazards likely to arise from a short-term exposure to a substance from a single topical application to the skin. Two thousand milligrams per kilogram of bodyweight of T36® Disinfectant was applied to the skin of ten healthy rats for 24 hours. The animals were observed for mortality, signs of gross toxicity, and behavioral changes at least once daily for 14 days. Bodyweights were recorded prior to application and again on Days 7 and 14. Necropsies were performed on all animals at terminal sacrifice. All animals survived, gained weight and appeared active and healthy. There were no signs of gross toxicity, adverse pharmacologic effects or abnormal behavior. Gross necropsy findings at terminal sacrifice were unremarkable. Based on the results of this study, the single dose acute dermal LD50 of T36® Disinfectant is greater than 2,000 mg/kg of bodyweight.

·

Dermal Sensitization Study in Guinea Pigs - This test determines the potential for a substance to produce sensitization after repeated topical applications. T36® Disinfectant was topically applied to twenty healthy test guinea pigs, once each week for a three week induction period. Twenty-seven days after the first induction dose, a challenge dose of T36® Disinfectant at its highest non-irritating concentration (100%) was applied to a new site on each guinea pig. Ten untreated animals were maintained under the same environmental conditions and treated with T36® Disinfectant at challenge only. Approximately 24 and 48 hours after each induction and challenge dose, the animals were scored for erythema (redness of the skin). Based on the results of this study, T36® Disinfectant is not considered to be a contact sensitizer.



The efficacy and toxicology studies described above, although completed some time ago, are still valuable assets of the Company because they are being used to support further regulatory approvals of the T36®formulation. For example, the studies were incorporated into the pre-IND package that was presented to the FDA on July 15, 2008 and into the pre-CTA (pre-Clinical Trial Application) that was presented to Health Canada on July 22, 2009. These studies were also included in the IND submission, described below, that was presented to the FDA on September 8, 2009 and, after receiving a response from the FDA, was re-submitted with additional information on January 4, 2010. The studies above will also be included in a CTA for Health Canada when it is submitted.



There were no p-values nor other estimates of statistical significance employed in the studies because such measurements are not required by Health Canada or the EPA and, therefore, are not part of the standard protocols. There were no further requirements for the Company to undertake further studies to sell T36® Disinfectant in Canada. The studies described above were conducted according to the requirements of the EPA. EPA registration of T36® has not been pursued to date and it is uncertain if EPA registration for T36® will be pursued in the future. However, if the Company does decide to pursue EPA registration in the future, the following requirements apply.



Disinfectant products are classified by the EPA as pesticides under the authority of the Federal Insecticide, Fungicide, and Rodenticide Act (FIFRA). Federal law requires that, before selling or distributing a disinfectant in the United States, a registration, or license, must be obtained from the Environmental Protection Agency (EPA). The process of registering a pesticide is a scientific, legal, and administrative procedure through which EPA examines the ingredients of the disinfectant, how it is to be used, the amount, frequency, and timing of its use, storage and disposal practices and potential human health and environmental effects associated with use of the product. In order to accomplish this, potential registrants must generate scientific data necessary to address concerns pertaining to the identity, composition, potential adverse effects and environmental fate of each disinfectant. These data allow the EPA to evaluate whether a pesticide has the potential to cause harmful effects to non-target organisms and the environment including humans, wildlife, plants and surface water or ground water.



The tests required for EPA approval of a disinfectant are described above in the sections above entitled Efficacy studies and Toxicology studies. These tests adhere to the standards established by the AOAC (Association of Analytical Communities) International, an organization that provides over 3,000 analytical methods in its publication Official Methods of Analysis of the AOAC International. For disinfectants, such as T36® Disinfectant, the AOAC standards that apply include the AOAC Use-Dilution Method, the AOAC Germicidal Spray Products Test, the AOAC Fungicidal Test and the AOAC Tuberculocidal Activity Method. Storage and stability studies and proof that the manufacturing process is reliable must also be provided to the EPA.



After completion, the efficacy and toxicology studies are submitted to the EPA according to specific templates that are provided by the EPA and available on the website of the EPA. These templates ensure that the testing results are submitted in standard formats to facilitate the review of the information by the EPA.



21



---

TABLE OF CONTENTS







A disinfectant can only be used legally according to the directions on the labeling accompanying it at the time of sale. Accordingly, the content of product labels is also subjected to review and must be approved by the EPA to ensure full and accurate disclosure of such matters as the concentrations of ingredients, instructions for use, precautions, any hazards to health or the environment, treatments for exposure, disposal instructions, manufacturer and the registrant. Most states also conduct a review of the disinfectant label to ensure that it complies with federal labeling requirements and any additional state restrictions of use.



Once all of the tests and the label for a product have been approved by the EPA a "registration" or license that permits a disinfectants manufacture, distribution, sale, and use is granted. A manufacturer must have an EPA Establishment License because the Federal Insecticide, Fungicide, and Rodenticide Act (FIFRA) requires that production of disinfectants be conducted in a registered Pesticide-Producing Establishment. In this case, Production" includes formulation, packaging, repackaging, and re-labeling. Production in an unregistered establishment is a violation of the law. The EPA assigns a unique number to each establishment that produces any pesticide or device. Each company must submit EPA Form 3540-8 to request an establishment number. FIFRA requires that each producing establishment must place its EPA establishment number on the label or immediate container of each disinfectant, device or active ingredient produced.



After a disinfectant is registered by the EPA, the Company, its manufacturers, distributors and independent testing facilities must maintain full and complete records for review by the EPA if an inspection is required. These records include such matters as information on manufacturing, quality control of ingredients and finished goods, inventory, shipping, receiving and disposal.



Products registered in Canada



The Company is also selling or in various stages of development of other products describe below. Unless otherwise indicated, the Company has not determined, for any of these products that are not already being sold, when or if manufacturing will be started, revenues will be realized, any further testing will be conducted or registrations will be pursued in any jurisdiction outside Canada. If any further testing or registrations are undertaken, it is not known how much time or funding such testing would require or how long it will take the regulatory bodies to approve the products for marketing by the Company or if the regulatory bodies will approve the products at all. There are active competitors that are already well established in the markets selected by the Company. Delays may allow even more competition to develop comparable products, which will make market penetration more difficult which would, in turn, lead to reduced revenues.



·

T36 DisinfexTM Spray and Wipes: This product, formerly named, Viralex, then, T36® Disinfectant, has been re-named as, T36 DisinfexTM, and is manufactured and marketed as a liquid in 60, 480 and 4,000 ml bottles and as wipes in canisters.

·

T36 DisinfexTM Disinfectant Cleaner Wipes: This product has been recognized by Health Canada as being able to kill bacteria, fungi and viruses on hard surfaces within 10 minutes (compared to the 3 to 5 minute time for T36®Disinfectant). It has also passed internal company efficacy and cleaning testing. This product is intended for use in hospitals, cruise lines, airlines and consumer applications that dont require a disinfectant product that is as fast acting as T36®Disinfectant, but need a more economical product that also cleans surfaces. The Health Canada DIN for this product is 02272989. On July 17, 2008, the Company received DIN 02314134 for this same product but renamed to T36 DisinfexTM Disinfectant Cleaner. As of the date of this report, this product has not been manufactured or sold.

·

T36® Disinfectant Cleaner CONCENTRATE: This product (DIN 02278820) is intended to be used at dilutions up the 1/64 for large scale applications, such as floors and walls and has been on the market since November, 2008.

·

T36® Antiseptic Hand Sanitizer Gel, Liquids and Wipes:  On July 23, 2008, the Company was issued DIN 02314320 for a new Antiseptic Hand Sanitizer Gel. This new DIN allowed the Company to sell its first product for human use. This product consists of 0.15% BZK in 70% ethanol and, unlike standard 62% ethanol hand sanitizers, has been demonstrated in testing conducted by ATS Labs in Eagan, MN to be effective against Norwalk-like viruses as announced by the Company in a news release dated January 30, 2009. In the testing, Feline Calicivirus was grown to a log10 titer of 6.5 and exposed to the product for up to 5 minutes. After 5 minutes, the Companys product reduced the viral titer by 98.2%. The 62% ethanol product had no measurable effect in the same time period.



The product also kills the H1N1 influenza virus within 15 seconds in testing conducted by Bioscience Laboratories, Inc. in Bozeman, MT as announced by the Company in a news release dated August 7, 2009. In this testing, H1N1 Virus (Swine-like H1N1 Influenza A virus Strain A/California/04/2009) was grown to a log10 titer of 6.75 and exposed to the Companys product for up to 1 minute. The maximum measurable kill rate of 99.994%, a log10 reduction of 4.75, was achieved in 15 seconds.



Testing has also shown that T36® Antiseptic Hand Sanitizer is effective against two new strains of antibiotic



22



---

TABLE OF CONTENTS





resistant bacteria that have taken genes from other bacteria that have the ability to digest nearly all antibiotics, including penicillin-like antibiotics that possess broad spectrum antibacterial properties and are typically used as a last resort. Such genetic swapping is common among bacteria and is a major cause of antibiotic resistance. The testing was conducted by Bioscience Laboratories, Inc. in Bozeman, MT as announced by the Company in a news release dated December 2, 2010 using clinical isolates. In this testing Escherichia coli, Extended-Spectrum Beta Lactamase, Carbapenemase-Producing and Klebsiella pneumoniae, KPC2 positive, Carbapenemase-Producing were grown to a log10 titer of 8.91 and 8.85, respectively and exposed to the Companys product for up to 1 minute. The maximum measurable kill rate for E. coli was 99.99988%, a log10 reduction of 5.91 in 15 seconds and, for K. pneumoniae, 99.99986%, a log10 reduction of 5.85 also in 15 seconds.



The gel form of the T36® Antiseptic Hand Sanitizer is being sold in various sizes of bottles and provided in automatic dispensers. On January 2, 2009, DIN 02321424was issued for T36® The Liquid Antiseptic Hand Sanitizer. On January 24, 2009, DIN 02322153 was issued for T36® Antiseptic Hand Sanitizer Spray. Both of these products are manufactured in liquid form, rather than as a gel, for use  in spray bottles and automatic dispensers. On January 20, 2009, DIN 02321947 was issued for T36®Antiseptic Hand Sanitizer Wipes which incorporate the liquid forms of T36®Antiseptic Hand Sanitizer into wipes contained in canisters.



The following table summarizes the DINs and NPNs that have been received from Health Canada.



DINs

|         |           |                                         
|-------- | --------- | ----------------------------------------
|02231344 | 11-Jun-97 | T36 DisinfexTM                          
|02278820 | 20-Jun-06 | T36® Disinfectant Cleaner CONCENTRATE   
|02314134 | 18-Jul-08 | T36® Disinfex Disinfectant Cleaner      
|02314320 | 23-Jul-08 | T36®Antiseptic Hand Sanitizer           
|02321424 | 2-Jan-09  | T36®The Liquid Antiseptic Hand Sanitizer
|02321947 | 20-Jan-09 | T36®The Wipe Antiseptic Hand Sanitizer  
|02322153 | 24-Jan-09 | T36®Antiseptic Hand Sanitizer Spray     
|02322501 | 4-Feb-09  | T36®Medicated Cleanser                  
|02338521 | 30-Nov-09 | Wahl Spray On Disinfectant              



NPNs

|         |           |                                  
|-------- | --------- | ---------------------------------
|80014930 | 25-Nov-09 | T36®Hs (Hand Sanitizer)          
|80026033 | 27-Jun-11 | T36® 0.5% Hydrocortisone Ointment





On January 2, 2012, the Company licensed the rights to manufacture and market T36®disinfectant and hand sanitizer products in Canada to Proterra Management Group Inc. (formerly 612480 BC Ltd.),a company controlled by Peter Chen, a former Director and CFO, in settlement of management fees of $125,440 owed to Proterra Management Group Inc. No rights to any other products or territories were provided to Proterra. ALDA retains a Right of First Refusal to reacquire the rights if Proterra receives a valid third party offer for nay portion of the rights provided to Proterra. ALDA retains all of the intellectual property including the DIN's NPN's, patents and trademarks. Management is of the opinion that the rights provided to Proterra were fairly priced since the Company had moved from its warehouse, could no longer support the manufacturing and marketing of disinfectants or hand sanitizers and was unable to maintain its Drug Establishment License that is required to sell hand sanitizer products. The Company also offered the rights to competing companies and to third party manufacturers and received no offers except one that was for the forgiveness of approximately $10,000 in debt owed by the Company.



Products registered in the US.



On February 12, 2010, the Company was registered with the FDA and received Data Universal Numbering System Number 206462025. On April 7, 2010, the company received National Drug Code (NDC) Labeler Code #52175 that allows the Company to sell OTC (Over the Counter) monograph products in the US. The OTC monograph refers to the Tentative Final Monograph for OTC Healthcare Antiseptic Drug Products published in the US Federal Register on June 17, 1994. This document describes antiseptic products that may be registered for sale in the US without further testing due to the known efficacy of the ingredients. This includes hand sanitizers that contain 60% to 95% ethanol. The Company has prepared a version of T36® Antiseptic Hand Sanitizer that contains 70% ethanol for the US market and is seeking distribution at this time.



The following table summarizes the NDC numbers for the Company products in the US.









23



---

TABLE OF CONTENTS







NDCs

|             |              |                                                                      
|------------ | ------------ | ---------------------------------------------------------------------
|Product Code | Package Code | Description                                                          
|             |              | T36® Antiseptic Hand Sanitizer Gel                                   
|111          | 11           | 15 mL T36®Antiseptic Hand Sanitizer Lemon Scented with Aloe Vera     
|111          | 12           | 30 mL T36®Antiseptic Hand Sanitizer Lemon Scented with Aloe Vera     
|111          | 13           | 60mL T36®Antiseptic Hand Sanitizer Lemon Scented with Aloe Vera      
|111          | 14           | 240mL T36®Antiseptic Hand Sanitizer Lemon Scented with Aloe Vera     
|111          | 15           | 354 mL T36®Antiseptic Hand Sanitizer Lemon Scented with Aloe Vera    
|111          | 16           | 1 L T36®Antiseptic Hand Sanitizer Lemon Scented with Aloe Vera       
|111          | 21           | 900 mL T36® Antiseptic Hand Sanitizer Dispenser Refill - AUTO        
|111          | 22           | 1L  T36® Antiseptic Hand Sanitizer Dispenser Refill- MANUAL          
|             |              | T36® Antiseptic Hand Sanitizer Liquid                                
|112          | 11           | 15 mL T36®Antiseptic Hand Sanitizer Lemon Scented with Aloe Vera     
|112          | 12           | 30 mL T36®Antiseptic Hand Sanitizer Lemon Scented with Aloe Vera     
|112          | 13           | 60mL T36®Antiseptic Hand Sanitizer Lemon Scented with Aloe Vera      
|112          | 14           | 240mL T36®Antiseptic Hand Sanitizer Lemon Scented with Aloe Vera     
|112          | 15           | 354 mL T36®Antiseptic Hand Sanitizer Lemon Scented with Aloe Vera    
|112          | 18           | 480 mL T36®Antiseptic Hand Sanitizer Lemon Scented with Aloe Vera    
|112          | 21           | 900 mL T36® Antiseptic Hand Sanitizer Dispenser Refill - AUTO        
|             |              | T36® Antiseptic Hand Sanitizer Wipes                                 
|113          | 31           | T36®  The Wipe Antiseptic Hand Sanitizer Lemon Scented  (35 Sheets)
|113          | 32           | T36®  The Wipe Antiseptic Hand Sanitizer Lemon Scented (160 Wipes) 



Product registrations in progress



Registration of the T36® technology for the following applications is in progress. Definitions of the product categories and further information are taken from the Guidance Document. Human-Use Antiseptic Drugs published by Health Canada and dated October 21, 2009 (the Guidance Document). For all of the products discussed below, it is therefore necessary for the Company to undertake further animal, efficacy, toxicology and clinical studies to obtain registration of the T36® formulation for human use.





“Personal Use” products are those self-selected for use by an individual in a domestic setting. “Personal Commercial Use” products are those made available to the general public for occasional use and are intended to reduce transient organisms on the skin in a commercial or institutional setting. This includes, but may not be limited to, antiseptic products dispensed in washrooms in public buildings (such as daycares and schools) or used in workplaces other than healthcare or food-handling premises. These products are commonly used to reduce transient organisms on hands, including those organisms that may not necessarily be encountered in a domestic setting. They are intended to provide a superficial and non-persistent cleaning effect to reduce microbial load on hands to either augment the effect of soap and water cleaning or for use when soap and water are not available. Most hand sanitizers, consisting of ethanol or BZK alone, fit in these categories of products and, in Canada and the US, are usually registered as Monograph products. A Monograph product can be sold without efficacy or toxicology studies if it contains certain amounts of known ingredients, such as ethanol at 60 to 80% in Canada or  60 to 95% in the US or BZK at concentrations up to 0.15% in Canada and 0.13% in the US. T36® Antiseptic Hand Sanitizer contains both 70% ethanol and 0.15% BZK and was provided with a DIN by Health Canada even though it contains a combination of ingredients. Further, due to the BZK, T36® Antiseptic Hand Sanitizer is expected to have a persistent effect. The full T36® formulation, which contains four anti-microbial ingredients in ethanol has demonstrated anti-viral, anti-fungal and anti-tuberculocidal activity in addition to being anti-bacterial. The perceived advantage of doing so is that the T36® formulation is known to have anti-microbial activity that is not seen in other hand sanitizers and could be unique among this category of products.



·

Professional Food Handler Use products are those which are indicated for use by food handlers and are used frequently to reduce transient organisms on the skin in a commercial or institutional setting including food processing plants, restaurants, retail supermarkets, and fast food outlets. The intent of such products is to both protect food handlers as well as to reduce the likelihood of transmission of disease through food. The requirements for the registration of such product is similar to those for  personal use products and personal commercial use products but there is a requirement to test for additional infectious organisms due to the possible presence of enteric viruses. It is not known at this time if the Company will be pursuing this market.





24



---

TABLE OF CONTENTS





·

Professional Health Care Use productsare those which are indicated for use by individuals to reduce transient and/or resident organisms on the skin in a healthcare setting (such as hospitals, nursing homes, clinics, dental offices). Such products are to be used in accordance with applicable hospital protocols. Healthcare settings typically exhibit a higher presence of transient and nosocomial (hospital acquired) organisms than domestic or commercial institutions. As such there is an inherently higher safety risk to health if the product is not effective. Professional healthcare use antiseptics can be broken down into three categories as follows:



(a)

Patient Preoperative Skin Preparations are used on patients prior to surgical procedures, injections or insertion of catheters withthe goal of significantly reducing and inactivating transient and resident organisms on skin to prevent their entry into the surgical site. An inert biological dye can be added to the T36® formulation to make the area of application visible. An appropriate delivery system will also be needed. Such products are intended to be applied once and must have a 6 hour residual effect. Current products in this category include relatively high concentrations of CHG in alcohol. Again, the T36® formulation has the perceived advantage of a broader spectrum of anti-microbial activity.



(b)

Professional Hygienic Handrubs and Handwashes are used by  healthcare personnel and patients after surgery to prevent transmission of infectious organisms. Handwashes require water while handrubs do not. The T36® formulation has been prepared in the form of gels, sprays and wipes and, if registration is successful, will be developed for use as a professional hygienic handrub in nursing stations, patient rooms, hallways, washrooms, etc.



(c)

Surgical handscrubs include surgical handrubs and handwashes. Again, handwashes require water while handrubs do not. The Company has developed a proprietary anti-viral, anti-bacterial soap, T36® Handwash. Preliminary testing of this product at BC Research, Inc. was conducted under the supervision of Dr. Ernie Lee. The soap was tested against three strains of test bacteria (Staphylococcus epidermis, Pseudomonas aeruginosaandSerratia marcescens) and one strain of viruses (Herpes Simplex Virustype 1)at various concentrations at various contact times ranging from 1 minute to 10 minutes. In these tests, all bacteria were killed by the soap diluted up to 500 times within 1 minute. A substantial bacterial population reduction was found even when the bacteria were exposed to higher soap dilutions of 1/1000. In addition to bactericidal effectiveness, preliminary results indicated that the soap inactivated Herpes simplex, although an exact endpoint could not be determined due to toxicity of the soap towards the cultured cells used to propagate the virus. Further testing would have to be conducted to determine virucidal activity. The Company is considering registration of this product as a Professional Hygienic Handwash and a Surgical Handwash.



·

T36® Topical infection treatment: The body normally hosts a variety of microorganisms, including bacteria and fungi. Some of these are useful to the body. Others may multiply rapidly and form infections. Approximately sixty percent of microbial infections are systemic, meaning that the infections are spread throughout the body, leaving 40% of microbial infections that are topical, i.e., occur on the surface of the body. Topical fungal infections include mold-like fungi that cause athlete's foot, jock itch and ringworm, and yeast-like fungi that can cause diaper rash, oral thrush, cutaneous candidiasis and some cases of genital rashes. Bacterial infections, such as Staphylococcus can also infect the skin, particularly if a patient has a preceding skin condition, such as eczema. The Companys T36® formulation can be used to treat such topical infections and anecdotal evidence has shown that it can be used to treat such conditions as athletes foot and toenail infections.



·

Anti-inflammatory, antiseptic therapeutics: The Company has developed a prototype product that contains 2% hydrocortisone in a T36® gel for use on topical infections and, in particular, inflamed infections. Preliminary studies with the formulation, under the direction of a physician, quickly resolved a number of skin infections, such as chronic eczema with secondary Staphylococcus infections and fungal infections, such as athletes foot and diaper rash. A second formulation contains 50% T36® at a 50% concentration and 0.1% betamethasone, a moderately potent glucocorticoid steroid with anti-inflammatory and immunosuppressive properties. Unlike other drugs with these effects, betamethasone does not cause water retention. The lower concentration of T36® reduces the stinging caused by the ethanol when applied to inflamed areas. It is a more suitable preparation for use on sensitive areas or when used for infants for such infections as diaper rash. The Company is planning on conducting tests also against Athletes Foot with this combined anti-infective and anti-inflammatory formulation. As discussed above, a PCT patent application has been filed with CIPO to cover the composition, method of preparation and use of T36® formulations that also contain steroids, anesthetics or analgesics. The patent application has now moved to national examinations in the US and the EU.



25



---

TABLE OF CONTENTS





·

Vulvovaginal infections (VVIs): Current treatments available for VVIs focus mainly on yeast infections which cause only 23% to 33% of VVIs (Schwiertz et al., 2006. Throwing the dice for the diagnosis of vaginal complaints? Ann Clin Microbiol Antimicrob. 5:4 and Ferris D.G., Dekle C, Litaker M.S.J. 1996. Women's use of over-the counter antifungal medications for gynecologic symptoms. Fam Pract. 42(6):595-600). T36® VVI Treatment is effective against all fungal and bacterial VVIs regardless of the species or combinations of species causing the infection. The Company plans to undertake the testing required for this product when sufficient financing has been has been secured.



Testing for of the T36® formulation for therapeutic indications



There is competition in all of the therapeutic markets that the Company has targeted. However, the T36®formulation is not expected to be expensive to manufacture and can be used in a broad variety of infection-control products. Toxicology and efficacy studies have already demonstrated that the T36®formulation is not toxic and is effective at killing all bacteria, viruses and fungi. The intended applications are topical, except for the vulvovaginitis treatment. Rather than disrupting metabolic pathways, the T36®formulation consists of four anti-microbial ingredients in relatively low concentrations that act synergistically to disrupt the physical structure of the infectious agents. This approach prevents microbial resistance from developing. None of the active ingredients are known to have any significant side effects on humans.



The Company has competed preliminary studies required by Health Canada, the US Food and Drug Administration (FDA) and the European Medicines Agency (EMeA) for the targeted applications. These studies, conducted at Bioscience Laboratories, Inc. (BSI) located in Bozeman, Montana, are summarized below.



·

Six species of bacteria were completely killed after 30 seconds of exposure, including VRE (Vancomycin-Resistant Enterococcus), MRSA (Methicillin-Resistant Staphylococcus aureus) and MDR (Multi-Drug Resistant) Enterococcus faecium. These three species of bacteria are critical concerns in hospitals, nursing homes and other medical facilities based on their resistance to many antibiotics and other treatments. The clinical testing was completed according to the standards required by the FDA in the US, Health Canada and the European Medicines Agency, which included exposure of the bacteria to T36® for periods ranging from 30 seconds to 30 minutes. In other tests that were conducted for internal purposes, Staphylococcus aureusandPseudomonas aeruginosa were completely killed by T36® with 15 seconds.

·

The fungus,Candida albicans, was completely killed after 5 minutes exposure, again, the shortest time required by the FDA, Health Canada and the European Medicines Agency. C. albicans is a major cause of yeast infections which account for one-third of all vulvovaginal infections (VVIs). Bacteria are a second major cause of VVIs and combinations of bacteria and fungi cause most of the remaining cases. The effectiveness that T36® has demonstrated against both fungi and bacteria provides important evidence that ALDAs T36® VVI Treatment will provide an effective means to treat all types of VVIs. A second fungus, Aspergillus niger, was completely killed within 15 minutes, also well within the 60 minute kill time required by the US, EU and Canadian regulatory agencies. A. niger is a causative agent for upper respiratory infections.

·

Two mycobacteria,Mycobacterium aviumandMycobacterium terrae were completely killed by the T36®formulation within 5 minutes, also the shortest time required by the FDA, Health Canada and the European Medicines Agency (EMA). Mycobacteria are among the most difficult bacteria to kill and are used as benchmark organisms to test the effectiveness of anti-microbial formulations.

·

Two species of fungi responsible for athletes foot, Trichophyton mentagrophytes and Trichophyton rubrum were completely killed by the T36®formulation within 5 minutes, also the shortest time required by the FDA, Health Canada and the EMA. The Company intends to pursue registration of the T36® formulation containing anti-inflammatory compounds for use against athletes foot which is relatively easy to test, represents a large market and will allow physicians to prescribe the product off-label for other topical infections once it has been approved. In other tests that were conducted for internal purposes, Trichophyton mentagrophytes was completely killed by T36® with 15 seconds.

·

Ten different types of viruses were killed completely by the T36® formulation. Of these, 5 types were killed within the minimum 30-second time required by the FDA, including Herpes Types I and II and Influenza B. The remaining 5 types, including Polio and Hepatitis A, the hardiest viruses, were killed within 1 to 3 minutes.



Testing required for therapeutic registrations



Having completed these preliminary clinical tests, Investigational New Drug (IND) application #102,487 was submitted to the FDA which has responded with its requirements for pre-clinical and clinical tests. In consultation with its advisors, the Company is preparing a clinical plan and the following studies are understood to be required.



26



---

TABLE OF CONTENTS







In-vitrostudies

·

Time Kill Evaluation  In these tests, dozens of different species of infectious micro-organisms are exposed to each of the active ingredients of a test substance and the complete test substance formula for periods of time ranging from 15 seconds to 30 minutes to determine the time required for each ingredient of a test substance and the complete test substance formulation to completely kill the selected species. The objectives of the testing are to determine the effective exposure times required for the test substance to be effective and if the individual ingredients have an additive, subtractive or synergistic effect.

·

MIC (Minimum Inhibitory Concentration) Evaluation  Each ingredient of a test substance, the complete test substance formula and a known antiseptic product are tested against hundreds of micro-organisms in suspension tests. The objectives of the tests are to quantify the minimum concentration that is required for each of the test substances to have a measurable effect on the tested species, compare those results to the known antiseptic product and determine if the individual ingredients have an additive, subtractive or synergistic effect. This protocol has been approved by the FDA with minor modifications.

·

Percutaneous Absorption and Cutaneous Disposition (AD studies)- Fresh human skin samples are incubated for 24 hours with the epidermal surface exposed to each ingredient of a test substance and the complete test substance formula in a flow-through diffusion cells. The amount of each test article absorbed across the skin into the receptor fluid is determined byliquid chromatography and tandem mass spectrometry. Disposition of each of the test substances in the various skin layers is also determined using the same methods. These tests evaluate the rate and amount of each test substance absorbed across viable human skin after in vitro exposure and the disposition of each test substance in layers (stratum corneum, epidermis, and dermis) of viable human skin.

·

Genotoxicity  This test is required to measure an agents ability to cause genetic damage. A standard battery of tests typically involves an in vitro test for gene mutation in bacteria, e.g., the Ames test, and an in vitro test with cytogenetic evaluation of chromosomal damage with mammalian cells or an in vitro mouse lymphoma thymidine kinase (tk) assay prior to the first human exposure. Prior to the initiation of  Phase II clinical studies, an in vivo test for chromosomal damage using rodent hematopoietic cells should be conducted. Such tests are routine, are relatively inexpensive, have high statistical power, are generally reproducible and detect a variety of genotoxic effects.



If there is little or no adsorption into or through the skin, the genotoxicity test described above and the carcinogenicity and reproductive toxicology tests described below may not be required since all of these effects rely on ingestion of an agent and T36® is a topical preparation. However, for completeness, descriptions of these tests are provided in the event they are required by the regulatory agencies.



Animal studies

·

Carcinogenicity - The three major ways of testing for carcinogens are animal tests, epidemiological studies and bacterial tests to assess if a chemical or physical agent increases the risk of cancer. The traditional study designs involve exposure of rodents to the test substance for up to two years, with an extensive pathological examination at the end of the study to detect any tumours that may be present in the tissues of the animals. It is reported that O-Phenylphenol has a TD50 of 232 mg/kg per day where TD50 is the chronic dose rate (expressed in milligrams per kilogram of bodyweight per day) which would induce tumors in half of the number of test animals at the end of the standard lifespan for the species. T36® contains 2,800 mg/liter so the TD50implies that a 100 kg person would have to consume over 8 liters of T36® each day to reach the TD50 level.

·

Reproductive toxicology - The main objective of this testing is to identify the effects caused by exposure to chemical substances on mammalian reproductive functions in all stages within the development process including gonadal function, conception, birth, and the growth and development of the offspring. The testing is usually done in rats at levels that are toxic but not lethal down to non-toxic levels through the 21st day of the third generation.

·

Dermal irritation and dermal toxicity  This study is to be conducted with an appropriate animal model, such as mini-pigs, for a dosage time that is at least as long as the intended duration of exposure of the T36® formulation to the skin. Since hand sanitizers are used continuously for indefinite periods of time, the maximum exposure time required by the regulatory agencies will be used. A protocol for this study is required.



Human studies

Single dose irritation study  To assess the safety of the T36® formulation, a single dose study must be conducted to determine if there is any irritation or adsorption of the product when used on human subjects.



27



---

TABLE OF CONTENTS







The following test will be required since it specifically measures the effects of topical preparations.



Photosensitivity - The photo-patch test is conducted to examine the influence of rays when a chemical substance is placed on the skin. Twenty four to 48 hours after a material that is suspected of causing photosensitive disease is pasted on the skin, the site is exposed to UV rays. If reddening or swelling occurs within 24 hours, the test is considered to be positive for such disease.

·

21-Day Cumulative Irritation Patch Test (Irritation Test) - If the single dose irritation study above verifies the safety of T36®, a longer irritation study is permitted. The objective of this test is to assesses the irritation caused by topical products and chemicals over 21 days of continuous exposure of the skin. The test substance is incorporated into patches that remain on the skin for a period of time and are replaced from time to time to maintain continuous exposure to the skin.

·

Multi-dose dermal irritation  In these tests, the objective is to evaluate the effect, if any, of prolonged and repeated exposure of the skin to the test substance. The Induction Phase of this study incorporates the test substance into a series of patches that are applied to the skin of 50 subjects repeatedly for periods of time and then removed. After a rest period, new patches are applied. This process is repeated over a period of time with a number of new patches and after completion of this phase, the reaction of the skin is evaluated. The Challenge Phase takes place some time after application of the final induction patch. Challenge patches are applied to previously untested sites, adjacent to the original induction patch sites. The reaction of the skin is evaluated 24 to 48 hours after application and the subjects are asked to report any delayed reactions which might occur after the final challenge patch reading.

·

Sensitivity test  This test is conducted on up to 350 individuals to determine if there are any deleterious effects or resistance to antibiotics. It has also been observed that resistance to certain microbicides, such as benzalkonium chloride (BZK), also occurs and that BZK-induced resistance to can lead to resistance to certain antibiotics, such as oxacillin. All of the T36® products provided by the Company contain BZK. It is therefore necessary to determine if T36® products may cause bacterial resistance, particularly with Methicillin-Resistant Staphylococcus aureus (MRSA). As discussed above, In microbiology, Minimum Inhibitory Concentration (MIC) is the lowest concentration of an antimicrobial agent that will inhibit the visible growth of a microorganism after overnight incubation. MICs of BZK for resistant MRSA are very low compared to the BZK content of T36® products. If used as directed, it is expected that T36® products will completely kill resistant MRSA.



To summarize, the following tests are required prior to clinical trials being conducted.

·

In-vitro studies

·

Time Kill EvaluationF

·

MIC (Minimum Inhibitory Concentration) EvaluationFH

·

Percutaneous Absorption and Cutaneous DispositionFH

·

Genotoxicity (May not be needed if there is little or no absorption)FH

·

Animal studies

·

Carcinogenicity (May not be needed if there is little or no absorption)F

·

Reproductive toxicology (May not be needed if there is little or no absorption)FH

·

Dermal irritation and dermal toxicityFH



·

Human studies

·

Single dose irritation studyFH

·

PhotosensitivityH



·

21-Day Cumulative Irritation Patch Test (Irritation Test)F



·

Multi-dose dermal irritationF

·

Sensitivity testFH

F Required by FDA

H Required by Health Canada



The European Standards or ENs are protocols that have been established to ensure consistent testing methods of a wide variety of substances. The following tests will be required for registration of T36® products for use as antiseptic products.



28



---

TABLE OF CONTENTS







Tests for hygenic handwashes and handrubs, and surgical scrubs

·

EN1499  This protocol, Chemical disinfectants and antiseptics  Hygienic handwash  Test method and requirements, published in 1997, is used to assess the efficacy of hygienic handwashes, that require the use of water, in hospital settings. These protocols will be used to establish the efficacy of T36® Handwash, for general healthcare personnel use in nursing stations, patient rooms, hallways, washrooms, etc.

·

EN1500 - This protocol, Chemical disinfectants and antiseptics  Hygienic handrub  Test method and requirements published in 1997, is used to assess the efficacy of hygienic handrubs, that do not require the use of water, in hospital settings. These protocols will be used to establish the efficacy of T36® Handrub also for general healthcare personnel use in nursing stations, patient rooms, hallways, washrooms, etc.

·

EN12791 - This protocol, Chemical disinfectants and antiseptics  Surgical hand disinfection  Test method and requirements published in 2005, is used to assess the efficacy of hygienic handwashes and handrubs, with or without water, respectively for use in hospital settings as a surgical scrub. This is the highest level of hand hygiene required of a product.



Clinical trials

Full clinical trials will be required for use of T36® for the treatment of Athletes foot and VVIs. The full extent and cost of testing cannot be determined until many of the test above have been conducted to allow the evaluation of efficacy and toxicity under clinical conditions. However, the testing that is generally required is described below.



·

Pilot Clinical Evaluation - This study evaluates the antimicrobial efficacy of a disinfectant in two different applications when used as patient preoperative skin preparation on 10 subjects. A disinfectant must achieve a log10 microbial reduction of 3 or greater on skin of the groin and a log10microbial reduction of 2 or greater on skin of the abdomen at ten minutes post-application. The objective of the testing is to obtain an preliminary evaluation of the efficacy of the test substance when used on humans.

·

Full pre-operative clinical evaluation - The study evaluates the immediate and persistent antimicrobial properties of a disinfectant when used as a preoperative skin preparation. A known active control, e.g., 4% chlorhexidine, and a placebo, e.g., sterile saline, are also evaluated. All treatments are assessed for their potential to cause skin irritation. One-hundred subjects are screened in order to obtain at least forty subjects having sufficient number of resident bacterial flora to permit evaluation of the efficacy of the test products. The objective of this test is to further evaluate the efficacy of a test substance when used on humans.

·

Phase I Clinical Trials: This is the first stage of testing of a new therapeutic in human subjects, normally with a small group (20-60) of healthy volunteers. The objective is to assess the safety and tolerability of the product as a therapeutic, as well as to determine the effects of various doses of the product. For externally administered agents, the testing is simpler than for injected or internally administered agents. However, Phase 1 trials can require up to 2 years to complete, including analysis of the collected data, preparation of the Phase I report for submission to the FDA and the time until a response is received. If these results of Phase I are accepted by the FDA, then the clinical trial can proceed to Phase II.

·

Phase II Clinical Trials: This second phase tests the therapeutic on a larger group and evaluates both the required dose (i.e. different quantities of the therapeutic) and efficacy (i.e. how well the therapeutic works for the specified indication). Phase II trials can take up to 3 years. However, some trials can combine Phase I and Phase II, which can reduce the total time required.

·

Phase III Clinical Trials: This third phase of clinical trial depends on the indications for which the therapeutic is being tested. For most agents Phase III trials are a randomized, controlled, multi-center trial with large patient groups (often more than 300), with the objective of confirming that the therapeutic is as effective or more effective than the current gold standard for the same application. Phase III trials can take up to 5 years or more to complete. If the results of the Phase III trial are approved by the FDA, then product is approved for marketing for the specific indications that were tested.



The budget and timetable for all of the testing that may be required has not yet been established and it is not known how long the testing may take. After the results are obtained from the non-human tests and are reported to the regulatory agencies, there is no certainty that permission will be granted to undertake human trials or that further pre-clinical testing will not be required. In addition to the testing that is described above, the regulatory agencies may require other tests that have not been considered by the Company or change their requirements. If additional testing is required, it is not known how long it will take for the Company to prepare, submit and modify the protocols and undertake such testing, how much the additional testing will cost or how much additional time will be required.





29



---

TABLE OF CONTENTS





The three phases of clinical trials can require a number of years to complete. The total time required is dependant on the nature of the therapeutic product, the condition being treated, the design of the protocols, the time to recruit patients and the review process conducted by the regulatory agencies. The registration time for products taken internally can take much longer than for topical agents. The costs of a complete clinical trial can be significant, depending on the intended application. The Company may not conduct any clinical trials itself, but may enter into strategic alliances or licensing agreements with larger companies, which can support the costs of such trials.



The objective of the Company is to undertake testing that will satisfy the three major jurisdictions, namely The US, the EU and Canada. There are minor differences that are expected lead to increased costs, but management has decided that it is more economical to absorb these costs initially rather than conduct separate testing for each jurisdiction.



In other parts of the world, FDA or EMA testing is generally accepted for registration applications. If the company decides to register the products in China, it is likely that the testing will have to be repeated in China unless there is harmonization of the requirements in the meantime. In the Peoples Republic of China (China), the Company must have its products tested for toxicology and efficacy at the Centers for Disease Control (CDC). The Chinese CDC should not be confused with the CDC in Atlanta, Georgia, although both organizations share the same name. Upon completion of successful testing at the CDC, products can be registered for sale within China.



The Company does not keep separate records of the cost of the development and registration for each product for a number of reasons. First, much of the development had already been done on the products before the Company acquired the assets of API in November, 2003 and API did not keep such records. Second, the Companys expenditures after completing the acquisition of the assets of API have mostly involved registration, intellectual property protection and some testing. These expenses are recorded in separate categories from research and development in the financial statements but are not segregated for each product. Third, the level of expenditures by the Company would be relatively small if they were allocated to individual products and would not be considered to be material if expenditures on each product were considered on their own. Finally, the cost of accounting for such a variety of expenditures on such a number of products is not considered to be financially justified.



Limited information has been provided on the estimated time of completion for individual products and for the estimated time of material net cash inflows for a number of reasons. Testing in the US for applications to the FDA or the EPA, in Canada for Health Canada and in Europe for the European Medicines Agency, is dependent on financing to support these tasks. The timing of financing and even the availability of financing is uncertain, which mean that completion dates and the time required to achieve material net cash flows are also uncertain. Even when the financing is available to complete testing and prepare the required submissions to the regulatory bodies, the time taken by the regulatory agencies to review the submissions is unpredictable.



Further, the regulatory agencies may identify deficiencies in the submission and request more documentation or possibly even more testing before providing an approval for a product, if such approval is granted at all. Since the timing to secure product registration and market approval is uncertain and delays can lead to the entrenchment of competitors and make the penetration of markets more difficult, even more uncertainty is added to the estimates of time required to time to arrive at material net cash flows. For these reasons, the Company believes that it is more prudent to not project the times or costs of market approval for individual products.



Accelerated therapeutic product strategy



Typically, a number of common skin conditions, from boils to pimples, scrapes and athletes foot, share two common characteristics:  the presence of an infective agent, such as a bacteria or fungus, and the bodys inflammatory response to it. A combination of the T36®formula and 0.5% hydrocortisone would address both issues in a single treatment, making the prescription or recommendation process easier for the physician and the application easier for the patient. At this time, there are few combinations of antiseptics with anti-inflammatories on the market and any such products may not be effective against all types of infections. For example, products that contain only antibiotics as the anti-infective agent may not be effective on fungi or on all types of bacteria. As described above, the Company is pursuing combinations of T36® with anti-inflammatories and other additives but the introduction of new therapeutic products can be a lengthy, expensive and uncertain process.



As a way to reduce time, costs and unpredictability and to accelerate the Companys entry into the therapeutics market, the Company is pursuing a strategy that introduces Monograph products for topical use. In Canada, 0.5% hydrocortisone, a common anti-inflammatory product, described in the monograph, Hydrocortisone Topical published by Health Canada on January 22, 2007, can be sold as an OTC topical anti-inflammatory under a Natural Product Number (NPN). On September 8, 2011, the Company announced that NPN 80026033 had been issued for T36® 0.5% Hydrocortisone Ointment.





30



---

TABLE OF CONTENTS





Separate products can be bundled in a single package with each product to be applied sequentially. For marketing, internet-based direct-to-consumer strategies can be pursued based on a number of premises:



·

The targeted conditions are extremely common.

·

Patients often seek out over-the-counter remedies for them, many of which are much less supported by data than either T36® products or 0.5% Hydrocortisone.

·

Anecdotal and credible evidence of benefits of this approach can be obtained and publicized.

·

Support of selected health care providers can be sought and published.



Plan of Operations



Anticipated Changes to Facilities/Employees



In October, 2010, the Company moved to 170  4320 Viking Way, Richmond, BC, Canada in order to consolidate its offices and warehouse facilities at one location. The lease expired on October 31, 2011 and the Company has moved its remaining inventory into a storage facility and is currently sharing office space at 1518  1030 West Georgia Street in Vancouver, BC, Canada. For the foreseeable future, this will remain as the physical location of the Company.



United States vs. Foreign Sales/Assets



All of the Companys assets are located in Canada.



All of the Companys sales to date have been in Canada.



Material Effects of Government Regulations



At this time, the Companys sales are primarily in Canada and, as a result, government regulations in Canada affect the Company most significantly. However, the Company hopes to commence sales in the United States, China, Europe and other jurisdictions in the future and, as a result, we have summarized the government regulations in these markets that may affect the Company in the future. The Companys products and future planned products can be categorized either as disinfectant products or therapeutic products, depending on the intended use. A summary is provided on the government regulations for both of these product categories.



1.

Canada: In order to market and sell a disinfectant, which is classified as a drug in Canada, the product must be approved by Health Canada, a federal government department responsible for the oversight of drugs and certain other medical products. The Therapeutics Product Directorate (TPD) is the department of Health Canada that issues the DIN (Drug Identification Number) for registered products. A company can apply for a DIN by submitting the appropriate fee, a draft label and, in most cases, copies of completed efficacy and safety studies to support the claims made on the label. The descriptions of the tests required for Health Canada approval of a disinfectant are described above in the sections entitled Efficacy studies and Toxicology studies. The TPD generally takes up to 12 months or more for review and completion prior to the issuance of a DIN. However, if further documentation or studies are required, the time taken to obtain approval for a new product can be longer.



T36®Disinfectant has received approval from Health Canada as a disinfectant, disinfectant cleaner, sanitizer and deodorizer. The DIN for T36 Disinfectant is 02231344, which permits its sale in Canada for these applications. T36®Disinfectant has also been approved in Canada by the Canadian Food Inspection Agency for use in Registered Establishments, which include meat processing plants, restaurants, breweries, wineries and other commercial food processing establishments.



Canada has a number of Category IV monographs. Under these monographs, products may be approved if they meet well-established criteria for minimum concentrations of active ingredients and meet certain labelling requirements. For example, T36® Disinfectant Cleaner CONCENTRATE and T36 DisinfexTM Disinfectant Cleaner had DINs issued for meeting the criteria in the monograph entitled, Hard Surface Disinfectants. The T36® Antiseptic Hand Sanitizer products received DINs for meeting the requirements of the monograph, Antiseptic Skin Cleansers and T36® 0.5% Hydrocortisone Ointment was provided with a NPN under the monograph, Hydrocortisone Topical.





31



---

TABLE OF CONTENTS





Production facilities that manufacture an approved product with DINs must have an Establishment License that verifies its adherence to Good Manufacturing Practices (GMP) as set out by of Health Canada. Norwood Packaging Ltd. (Norwood), Cosmaceutical Research Lab, Inc. and Seavan Health & Beauty Partnership which produce the Companys products, all have Establishment Licenses. The Companys agreement with Norwood, dated September 29, 2005 (Exhibit 4.b.) was terminated by mutual agreement on June 18, 2008 (Exhibit 4.l).



Health Canadas Natural Health Products Directorate issues NPNs. Facilities that manufacture products with NPNs must have a Site License, also issued by Health Canada. All three of manufacturers that have been used by the Company maintain Site Licenses.



United States:In order to market and sell a disinfectant in the US, the product must be approved by either the US Food & Drug Administration (FDA) or the US Environmental Protection Agency (EPA), depending on the intended use. The Company cannot say when, or even if, any submissions to the EPA or the FDA will be completed. The Company cannot predict the timing of FDA or EPA approval, or even if such approval can be obtained.



EPA



Disinfectant products, such as hard surface disinfectants, are regulated by the EPA. The types or procedures and tests required for EPA approval of a disinfectant are described above in the sections entitled Efficacy studies and Toxicology studies  in the section entitled T36® Disinfectant under 4.B.Company Development.



FDA



Any products with therapeutic claims or intended for use on humans are regulated by the FDA. It is illegal to market and sell therapeutic products in the United States without FDA registration. At this time, the Company has completed certain pre-clinical testing to satisfy FDA requirements for registration of T36® as a skin antiseptic and for other uses. Protocols for the next round of testing have been submitted to the FDA for review. If these protocols are approved, the Company intends to proceed with this proposed testing and, ultimately, to obtain to registration of its therapeutic products with the FDA. The testing that has been done and that the Company intends to conduct is detailed above in the sections entitled Testing for therapeutic indications in the section titled, 4.B.Company Development. The FDA has also published a number of monographs and, as in Canada, if proposed products meet the criteria defined by these monographs and the Company has a National Drug Code Labeler Code, a National Drug Code or NDC can be submitted for a product, such as the T36® Antiseptic Hand Sanitizer.



2.

China: In the Peoples Republic of China (China), the Company must have its products tested for toxicology and efficacy at the Centers for Disease Control (CDC). The Chinese CDC should not be confused with the CDC in Atlanta, Georgia, although both organizations share the same name. The studies required by the CDC in China include the following tests.



·

Kill tests against Staphylococcus aureus, Escherichia coli and Pseudomonas aeruginosa  In a suspension test, the disinfectant must provide a log10 reduction in bacterial population of 5.0 or more within a test time designated by the supplier of the disinfectant. A suspension test involves adding the bacteria to the disinfectant, usually at a ratio of 0.1 to 2 parts bacterial suspension to 9.9 to 8 parts disinfectant, respectively.

·

Field disinfecting test on general hard surfaces  General bacterial counts are first determined on table surfaces and the window frame surfaces, maintained at 19 to 21 oC, by taking sample swabs and culturing the bacteria. The same surfaces are then wiped with the disinfectant and sampled after a test time designated by the supplier of the disinfectant. The disinfectant must provide a average log10 reduction in bacterial population of 2.0 or more in this test.

·

Metal corrosion test - Metal plates made of stainless steel, carbon steel, copper and aluminum are immersed continuously for 72 hors in the disinfectant. The corrosion rate, measured in millimeters per annum, is then determined for each metal.

·

Acute oral toxicity test - Four dosage groups receive 1,000, 2,150, 4,640, and 10,000 mg/kg of disinfectant administered orally with 10 animals in each group and comprised of half females and half males. After exposure to the disinfectant, the general conditions, symptoms of toxicity, and deaths of animals are observed over a period of 2 weeks. After the tests are finished, all animals are dissected and gross pathological changes of animals are recorded. Acute toxicities are measured in terms of the LD50, the dose at which 50% of the animals die.

·

Bone marrow erythrocyte micronucleus test - Rats are given a dose of 500, 2,000, and 5,000 mg/kg of disinfectant by gastric lavage. Each group consists of 5 females and 5 males. Thirty hours later, the rats are given a second dose that is identical to the first. Six hours later, the rats are killed and dissected. Bone marrow from the sternum is removed, smeared on microscope slides, stained and examined for signs of chromosomal mutations.



32



---

TABLE OF CONTENTS





·

Skin irritation test - Twenty-four hours before testing, a 3 cm x 3 cm area beside both sides of spinal cords on the backs of three New Zealand rabbits is shaved. On the next day, a testing area of 2.5 cm x 2.5 cm on the shaved skin on the left side is marked and 0.5 ml of disinfectant is smeared evenly on the test area, covered by 2 to 4 layers of gauze the same size as the test area and one layer of cellophane which is a little bigger than testing area for each animal. The test area is directly exposed to the disinfectant in this way for 4 hours. The shaved area on the right side is exposed to saline as a negative control using the same procedure. After the 4 hour exposure, the dressings are removed and shaved areas are washed using warm water to remove any residual saline or disinfectant. After 1, 24, and 48 hrs the level of skin irritation is observed and recorded.

On October 6, 2004, ALDA entered into an agreement with Fuzhou Xinmei Biotech Co. Ltd. (Fuzhou) to manufacture and distribute ALDAs products in Fujian province in China. An agent acting on behalf of Fuzhou (the Agent) had the testing above completed and, on August 31, 2006, Fuzhou received a Certificate of Approval from the Fujian Centre of Disease Control for T36®Disinfectant. The registration of T36® Disinfectant in China was expanded beyond disinfection of inanimate objects, such as hospital equipment and instruments, to also allow external use on humans, including use as a first-aid antiseptic and hand sanitizer. The Certificate of Approval allowed the Agent to apply to the Chinese National Centre for Health Inspection and Supervision for approval to manufacture T36®Disinfectant for sale in China and for export. On April 19, 2007, a manufacturing certificate (Certificate of Approval (Health ID. No. 0109, the Certificate) was granted to the Agent in China for a period of four years from April 19, 2007 to April 18, 2011. It is reported to the Company that the Certificate has since been renewed for an additional 4 years to April 18, 2015.

In May 25, 2007, Fuzhous agent in China established a new company, He-Yi She Ye Limited (He-Yi) and the agreement with Fuzhou was transferred to He-Yi and expanded to cover marketing in all of China. He-Yi has the right to distribute ALDAs products in China subject to ALDAs approval of each distributorship, and has established a manufacturing facility for production of the T36® formulation.

He-Yi will pay ALDA a royalty, based on the gross revenues received by He-Yi for all of ALDAs products sold in China according to the agreement that is provided as Exhibit 4g accompanying the 1st amendment to the 2007 Form 20-F that was filed on EDGAR on December 3, 2008.

ALDA, at ALDAs discretion, will have the right to buy product from He-Yi. At the request of ALDA and with the authorization of ALDA, He-Yi agrees to direct ship ALDAs products for ALDA, at ALDAs expense, to anywhere in the world. As of the date of this report, the agreement remains in effect.

Seasonality

Historically, some seasonality has been observed with  the Companys products as sales usually decline in the summer and over the Christmas period due to the general business slowdown resulting from customers being on holidays. The exception to this pattern occurred during the quarters ended December 31, 2009 and March 31, 2010 when sales of T36® Antiseptic Hand Sanitizer increased substantially due to the expected H1N1 pandemic, a general shortage of hand sanitizers on the market and withdrawal of certain competitors from the Canadian market as they focused on US demand for hand sanitizers.

Another reason for the higher sales during these period was the publicity and sales generated from the corporate sponsorship agreement (the Sponsorship) with the Vancouver Organizing Committee for the 2010 Olympic and Paralympic Winter Games (VANOC). Under the terms of the Sponsorship, the Company had the exclusive rights to be the Official Supplier in the Hand Sanitizer and Disinfectant Cleaning Products category for the 2010 Winter Games and rights to associate with the Canadian Olympic Team competing at the Vancouver 2010 Olympic Winter Games and the London 2012 Olympic Games through to December 31, 2012.

After March 31, 2010, sales returned to lower levels. This was primarily due to a lack of consumer interest in hand sanitizers compared to the high level of interest that was sparked by the expected H1N1 flu pandemic that did not meet the expectations of the World Health Organization (WHO) for virulence or severity. Sales were also hampered by delayed deliveries from the Companys contract manufacturers which led to unfilled orders, backorders and reduced revenues. Normal seasonal fluctuations are now considered to be more likely in the future.

Dependency upon Patents/Licenses/Contracts/Processes





33



---

TABLE OF CONTENTS





If the Company is able to further commercialize and increase sales of its T36®products, the Company may be dependent on patent and trademark protection to protect future potential revenues and growth. There is no guarantee that the Companys patents or trademarks do not infringe on another companys patents or trademarks or that the Companys patents or trademarks will be upheld if challenged. If the Companys patents or trademarks are found to be in violation of the patents or trademarks of another company, there is no guarantee that the Company will be able to obtain a license at an acceptable price or at all from the successful challenger to be continue to sell products. Also, if the Company is unable to defend its patents, it is possible that new or existing competitors will enter the markets the Company is pursuing. The Company may be required to enter into contracts with other agencies to provide, as examples but not limited to, manufacturing, sales and marketing activities. There is no guarantee that either the Company or the other agencies will be able to fulfill their obligations. If the Company or the other parties fail to meet their requirements under the terms of the contracts, it is possible that the Company may not be able to find suitable providers that are able or willing to meet its needs in the future. If the Company cannot live up to its obligations under such agreements, it is possible that the reputation of the Company will be damaged to the extent that it will not be able to supply its customers. The Company is dependent on certain processes that are, in turn, dependent on a stable and reliable supply of equipment and materials. If, for any reason, the equipment or materials required for the Company to operate are not available, it is possible that the Company may not be able to manufacture its products. Any of the adverse events described above could cause the Company to lose revenues or go out of business.



Patents and patent applications



The Company is attempting to patent or secure proprietary protection for the specific combination and manufacturing of the T36®formulation although the ingredients are all common chemical compounds.



The Patent Cooperation Treaty (PCT) is an international patent law treaty established in 1970. It provides a unified procedure for filing patent applications to protect inventions in each of its Contracting States, which includes each jurisdiction specified below. A patent application filed under the PCT is called an international application or PCT application. A single filing of an international application is made with a Receiving Office (RO) in one language. It then results in a search being performed by an International Searching Authority (ISA), accompanied with a written opinion regarding the patentability of the invention which is the subject of the application. Optionally, this is followed by a preliminary examination, performed by an International Preliminary Examining Authority (IPEA). The PCT does not lead to the grant of an "international patent", which does not exist, but rather, national patent examinations that are handled by each relevant national or regional authority. For example, in Canada, the US, China, andAustralia, there are national patent offices whereas, in Europe, the European Patent Office handles the national phase for its member states.



API filed patent application #PCT/CA2002/001284, A wide spectrum disinfectant, on August 20, 2002. All rights to the patent application were transferred from API to the Company on completion of the Qualifying Transaction on November 13, 2003. A summary of subsequent events in each jurisdiction is presented below.



Canada

On February 18, 2005 the Canadian Intellectual Property Office (CIPO) received the PCT patent application and assigned it Patent Application Number 2,495,938. On August 17, 2007, the Company filed a Request for Examination with CIPO. On September 24, 2007 the Company filed a Voluntary Amendment to the patent application filed with CIPO. The proposed amendments expanded the claims to include a number of therapeutic applications of the T36®formulation, including its use in cosmetics and in a microbicidal gel to prevent the transmission of sexually transmitted infections (STIs). On October 4, 2007, the Company was notified that CIPO had acknowledged a request by the Company to examine the patent application. Since the process of examination can take two years, for a fee of $500, the Company requested an Expedited Examination on November 7, 2007 to reduce the response time to approximately three months. On April 8, 2008, CIPO provided an Office Action in which a number of questions were posed to the Company. Many of the same questions had already been posed by the Examiner for the EPO and the Company was advised that a response was required by October 8, 2009. On the advice of the Companys patent lawyers, the Company decided to temporarily abandon the Canadian patent application to defer costs and the abandonment was deemed effective by CIPO on October 8, 2008. However, the patent application was reinstated and a response to the Office Action was submitted to CIPO prior to the revised deadline of October 8, 2009. On November 16, 2009, CIPO issued a Notice of Reinstatement to the Company. On June 29, 2010, CIPO issued a second Office Action which required a response by December 29, 2010. On August 17, 2010, the Company provided its response to the second Office Action. On April 6, 2011, the Company announced in a news release that the Canadian patent had been allowed.



European Union

On March 30, 2005 the PCT application was accepted for national examination by the European Patent Office (EPO) which assigned it Patent Application Number 02754054.1-2113. The countries covered by the European patent application are Austria, Belgium, Bulgaria, Switzerland, Cyprus, the Czech Republic, Germany, Denmark, Estonia, Spain, Finland,



34



---

TABLE OF CONTENTS





France, Great Britain (the UK), Greece, Ireland, Italy, Liechtenstein, Luxembourg, Monaco, Netherlands, Portugal, Sweden, the Slovak Republic and Turkey. On May 18, 2005, the bibliographic data of the above-noted application was published in the European Patent Bulletin, under Publication No. 1530485. The resulting effect of such publication is that any possible infringer is deemed to have knowledge of the patent application without the Company having to formally inform them of this applications existence. On October 18, 2006 the EPO provided the Company with an Office Action requesting further information on the patent application. The Company responded to the questions and received a second Office Action, dated September 5, 2007 from the EPO. This second Office Action requested that the Company provide certain additional information and to conduct certain experiments to support the claims that were made in the application. The Company completed both the literature research and the laboratory studies and, on December 19, 2008, submitted the response to the second Office Action to the EPO. A third Office Action, dated August 13, 2009, was provided to the Company by the EPO and a response from the Company was required by December 13, 2009. The Company requested and was granted a two month postponement. A response was submitted by the Company to the EPO prior to the new deadline of February 13, 2010. On October 28, 2010, the EPO provided another Office Action and a response was provided prior to the deadline of August 20, 2011.



China

On February 6, 2008, the Company announced that Certificate of Invention Patent Number ZL02829642.7 had been issued by the State Intellectual Property Office of the Peoples Republic of China. The patent provides protection for the composition and production methods for ALDAs T36® formulation until August 20, 2022. On November 25, 2010 the Company was advised that the above patent became vulnerable to an application for a compulsory license on October 17, 2010. Under Chinese patent practice, it is possible for a third party to apply for the grant of a compulsory license should the invention not have been worked or otherwise been impeded from being worked, three years from the grant of a Patent. This may take into account circumstances where the conditions attached to the licensing of the invention are unreasonable, or the demand for the invention is not reasonably being met. The government body responsible for considering applications for a compulsory license will consider a multitude of factors before granting such a license and there may be mechanisms available for patentees to respond, or comment, on such applications.



Amendments to the original patent application were also drafted by the Company. As in the case of the amendments prepared for CIPO, the proposed amendments to the original Chinese patent application expanded the original claims to include a number of therapeutic applications of the T36® formulation, including its use in cosmetics and in a microbicidal gel to prevent the transmission of sexually transmitted infections (STIs). On October 10, 2007, the Company was advised that the amended claims had been submitted to the Chinese Patent Office. On January 30, 2008 the Chinese Patent office assigned Chinese Divisional Patent Application No. 200710142798.3 to the new application which was published in the Chinese Patent Gazette, under Publication No. CN101112624A. On April 13, 2010, the Company received an Office Action from the Chinese Patent Office and a response was filed by the Company prior to the deadline of June 11, 2010. A second Office Action was received on September 23, 2010 and a response was filed prior to the deadline of October 16, 2010. A third Office Action was received by the Company on February 1, 2011. The Company chose not to respond to this Office Action and abandoned this application.



United States

US Patent #7,338,927

U.S. Patent Number 7,338,927 was issued on March 4, 2008 and provides protection for the composition and production methods for ALDA's T36® formulation until August 20, 2022. The patent can be viewed on the website of the USPTO.



U.S. patent #7,560,422

On July 14, 2009, the USPTO issued U.S. Patent Number 7,560,422. The new patent is  a continuation of US Patent Number 7,338,927 that was issued on March 4, 2008 and provides further protection for ALDA's T36® formulation until August 20, 2022. The new patent includes claims to additional aspects of the T36® formulation, including the use of T36® as a component of a personal lubricant, in a method of preventing or reducing the transmission of a sexually transmitted diseases including Herpes, Chlamydia and HIV and for use in sanitizers and cleansers in creams, ointments and wipes.



Australia

Australian Patent #2002322916

On February 22, 2008, the Company announced that Australian Patent Number 2002322916 was issued by the Australia Patent Office. The patent provides protection for the composition and production methods for ALDAs T36®formulation until August 20, 2022.



Australian Patent #2007237333

On March 2, 2010, the Company announced that Australian patent No. 2007237333 was issued by the Australian patent office. This new patent is a divisional patent of Australian patent No. 2002322916 that was issued on Jan. 10, 2008, and provides further protection for ALDA's T36® formulation until Aug. 20, 2022. The divisional patent includes claims to



35



---

TABLE OF CONTENTS





additional aspects of the T36 formulation, including the use of T36 as a component of a personal lubricant, in a method of preventing or reducing the transmission of sexually transmitted diseases, including herpes, chlamydia and the human immunodeficiency virus, and as a sanitizer or cleanser in the form of creams, ointments and wipes. The divisional patent also includes claims to methods of producing the T36.



PCT application for anti-inflammatory, antiseptic therapeutic formulation



On March 20, 2008 the Company filed a comprehensive new patent application, International Application No. PCT/CA2008/000536, Antiseptic Compositions for the Treatment of Infections, with CIPO under the Patent Cooperation Treaty (PCT). The new PCT application seeks protection for the composition and preparation of T36®formulations that also contain steroids, anesthetics or analgesics for use on topical infections and, in particular, inflamed infections. Typically, infections with associated inflammation are treated with separate antiseptic and anti-inflammatory preparations. The new T36®formulations combine these properties into a single treatment, making the prescription process easier for the physician and the application easier for the patient.



On January 13, 2009, the Company was notified by its patent lawyers that an International Search Report (ISR) and Written Opinion was issued by the International Searching Authority (ISA) on December 18, 2008. As part of the PCT patent process, the ISA performs a search of prior art to identify any relevant art that may impact the patentability of a PCT application. Generally, prior art consists of everything which has been made available to the public anywhere in the world, for example, by means of a written disclosure (including drawings and other illustrations). The prior art is relevant if it is capable of being of assistance in determining whether an invention, as claimed, is new and involves an inventive step and was made available to the public before the international filing date. The ISA then issues a preliminary and non-binding Written Opinion. This Written Opinion is an assessment by an Examiner on whether or not a patent application conforms with respect to certain requirements for patentability. As disclosed above, references cited in the Search Report and Written Opinion were submitted to the USPTO on January 5, 2009 in an Information Disclosure Statement (IDS) relating to the new US CPA.



The claims made in this particular PCT application were purposefully very broad. Accordingly, the examiner for ISA found a number of patents and other literature that, in the opinion of the examiner, represented prior art. At this time, the Company has submitted the application for National Examination. As the National Examiners provide their responses to the PCT application, the Company can respond by arguing against the opinions of the Examiners, or amending the claims.



USPTO Filing

The application was filed at the USPTO on September 17, 2010 assigned Serial No. 12/933,358 with an official filing date of March 20, 2008. On November 8, 2010 the Company was advised that the USPTO provided a Notice of Missing Parts and requested a response by December 20, 2010 On May 20, 2011, the Company filed the required information and amended claims.



EPO Filing

The above-noted application was filed at the EPO on October 20, 2010 and has been assigned Serial No. 08733640.0 with an official filing date of March 20, 2008. On November 5, 2010, the EPO provided notice that any claim amendments and the fees payable for the application were due on the non-extendable deadline of December 5, 2010. The claims and fees were submitted prior to that deadline.



CIPO Filing

Submission to CIPO has been postponed for up to one year.



At the time of writing, the Company has no assurance that any patents that have not yet been granted will be granted at all and, if any patents are granted, the Company cannot estimate when the patents will be granted or what claims will be allowed and protected, if any.



Trademarks:



In Canada, trademark applications are advertised in the Trade-marks Journal. For a period of two months after a trademark is advertised in this manner, opposition to the proposed trademark can be filed. If CIPO receives notification within the two month period that a statement of opposition is to be filed, an extension may be granted to allow the submission of a formal statement of opposition. If a statement of opposition is received by CIPO, the applicant is obliged to respond with a counter statement within one month. Such trademark disputes can delay the allowance of a trademark for years or prevent the trademark from being allowed at all. In Canada, trademark registrations are granted for an initial period of 15 years from the date of the registration after which the trademark may be renewed for further periods of 15 years.





36



---

TABLE OF CONTENTS





In the United States, the Principal Register of the US Patent and Trademark Office (USPTO) conveys the important substantive rights that most people associate with federal registration and, as a result, it is the preferred method of federal trademark protection. Probably the most important benefit of placing a mark on the Principal Register is that anybody who later initiates use of the same or a confusingly similar trademark may be presumed by the courts to be a "willful infringer" and therefore liable for damages. In the US, for a trademark registration to remain valid, an Affidavit of Use (Section 8 Affidavit) must be filed: (1) between the fifth and sixth year following registration, and (2) within the year before the end of every ten-year period after the date of registration. The registrant may file the affidavit within a grace period of six months after the end of the sixth or tenth year, with payment of an additional fee. The registrant must also file a Section 9 renewal application within the year before the expiration date of a registration, or within a grace period of six months after the expiration date, with payment of an additional fee. Assuming that an Affidavit of Use is filed on time, registrations granted after November 16, 1989 have a 10-year term. This is also true for the renewal periods which have a 10-year term if the registration was granted on or after November 16, 1989.



Although the Companys management conducts due diligence before attempting to register any trademarks in order to avoid infringement on any existing trademarks or trademarks for which applications have been submitted, there is no guarantee that trademarks will be issued or that trademarks will not infringe on the trademarks of other companies or that other companies will not take action against the Company for trademark infringement.



T36®

The Company successfully trademarked T36® and the design of the T36® logo in Canada on April 22, 2004 (Registration No. TMA608308) for pharmaceuticals, namely a disinfectant agent, and in the United States as a Principal Register mark on November 2, 2004 (Registration No. 2898506) for a pharmaceutical agent for use as an ingredient in disinfectants in liquid, spray, cream, ointment or gel for the prevention of infectious diseases. Prior to November 2, 2010, the Company  requested and received a 6 month extension to April 2, 2011 to file the Affidavit of Use which was filed prior to April 2, 2011. On July 11, 2011, the Company was notified that the Declaration and Specimen of Use filed for T36® had been accepted by the United States Patent and Trademark Office. This registration remains in force and will be due for renewal on January 18, 2015.



ALDA Pharmaceuticals logo

The Company also successfully trademarked a logo on July 16, 2004 (Registration No. TMA615064) for pharmaceutical preparations, namely anti-fungals, anti-infectives and anti-hypersensitives, vitamins and mineral supplements, and diagnostic reagents, for medical use and in the United States on January 18, 2005 (Registration No. 2918352), also as a Principal Register mark for pharmaceutical preparations, namely anti-fungals, anti-infectives and anti-hypersensitives, vitamins and mineral supplements, and diagnostic reagents, for medical use. The trademark remains in force in Canada but is no longer used in Canada. An Affidavit of Use was not filed for this trademark in the US so  that particular trademark is considered to be abandoned in the US.



ICEN®

On November 2, 2009, ICEN® became a registered trademark of the Company in Canada (Registration No. TMA751,878) for antiseptic preparations; personal disinfectant sprays; disinfectants for household, commercial and institutional use; disinfectant wipes; disinfectant cleaning preparations for household, commercial and institutional use. At the time of this report, the trademark has not been used.



T36 Disinfex®

On December 2, 2009, T36 Disinfex became a registered trademark of the Company (Registration No. TMATMA754,444) for antiseptic preparations, personal disinfectant sprays, disinfectants for household, commercial and institutional use, disinfectant wipes, disinfectant cleaning preparations for household, commercial and institutional use.



Sources/Availability of Raw Materials and Production



T36®is comprised of ethanol, o-phenyl phenol, benzalkonium chloride and other ingredients, including lemon fragrance and water. All of these chemical raw materials are commonly produced in industrialized countries by a number of manufacturers and are generally considered safe to transport. However, they have a low value to weight ratio which means it is likely cheaper to source raw materials from local producers than shipping raw materials from other markets. As a result, the Company does not believe that it is vulnerable to raw materials shortages or to loss of access to supply from any one producer but cannot guarantee that supplies will always be available in the quantities or quality required or that its manufacturers will always be able to meet its needs in a timely manner or at all.



37



---

TABLE OF CONTENTS





The Company had entered into a production contract with Norwood Packaging Ltd. (see Exhibit 4.b.) but this agreement was terminated by mutual agreement on June 18, 2008 (Exhibit 4.l). The Company does not anticipate entering into other production contracts in the foreseeable future.



The Company does not have production facilities.



Principal markets and Potential Product Markets



Prior to the 2010 fiscal year, the Companys sales have principally been to First Responder organizations, including ambulance, fire fighters and police forces in Canada, dental clinics and personal services establishments including hair salons and spas. During the quarters ended December 31, 2009 and March 31, 2010, sales increased substantially primarily due to retail sales of T36® Antiseptic Hand Sanitizer through pharmacy chains in Canada. During these two quarters, sales were driven by concerns about the possibility of a H1N1 pandemic. Also, certain major competitors withdrew from the Canadian market due to a shortage of supplies and focused on the US market which created a significant opportunity for the Company. Sales to VANOC also accounted for a significant increase during these two quarters. During the quarter ended June 30, 2010, sales of hand sanitizers decreased due to the passage of the flu season and the return of the competitors that had temporarily withdrawn from the Canadian market. Also, the expected H1N1 pandemic was not as serious as had been feared and consumers were no longer focused on the use of hand sanitizer products. It is not known if the interest will be rekindled as a new flu season approaches. As a result of these events, the Company retains a focus on the retail market as well as its traditional dental, personal services and first responders.



There are no reliable estimates of the size of the disinfectant, disinfectant cleaner or hand sanitizer markets in these particular segments.



At the time of this report, the Company is now selling its products to distributors that service commercial, academic, pharmaceutical, government, dental, medical and first responder markets in Canada only. At the time of this report, the Companys Antiseptic Hand Sanitizer products are registered for sale in the US but no sales have been achieved yet in the US. The Company was investigating the sale of its products in other countries such as the UK, the EU, Australia, South Africa and India but currently has insufficient funds to pursue foreign sales. However, as detailed in Item 4.B., Material Effects of Government Regulation, the Companys products must first receive regulatory approval in any new sales jurisdiction and obtaining this approval can be costly and time consuming. There is no guarantee that the Company will be able to obtain such approval and it is not possible to predict how long it would take to obtain such approvals.



There is no reliable estimate of the size of the Canadian market for disinfectant products or products similar to those of the Company. Also, no reliable estimates are available for the US or overseas markets.



Disinfectant Products are a very broad category of products and, where estimates are available of market size, the data appears to include many products dissimilar to those offered by the Company and often includes consumer products (e.g. widely marketed consumer brand name hand soaps). As well, particularly in the market niches where the Companys sales have been to date (as described above), there are a number of private company producers of disinfectant products whose sales figures are not publicly available. Public companies do not generally break down sales numbers in sufficient detail to allow the Company to be able to determine any reliable market information. No industry trade organization exists which could provide estimates of disinfectant sales, in the product categories being pursued be the Company, for Canada or the United States.



Marketing, Distribution and Sales Channels



The Company does not directly sell its products to end users. The Companys marketing, distribution and sales method has been to market its products to wholesalers of similar products who then market the products to end users. The Company has also sold its products through retail outlets such as pharmacies and grocery stores, as discussed above. Currently, the Company has no sales or marketing staff.



The wholesale industry for disinfectants, cleaners, cleaning and hospital supplies and similar consumer products is fragmented into a large number of suppliers. As a result, no competitor of the Company exercises significant control over distribution or the markets except that a hand sanitizer, Purell, distributed by Johnson & Johnson Consumer Products Company Division, a division of Johnson & Johnson Consumer Companies Inc. (J&J), is well-established in the market and well known to consumers. J&J is a large company with significant resources and has the ability to compete very vigorously to maintain its dominant market share of the hand sanitizer market. It is very possible that the Company may not be able to compete effectively against J&J and may not be able to maintain a stable share or any share of the market for hand sanitizers. With other products such as T36® Disinfectant and T36® Disinfectant Cleaner CONCENTRATE , the



38



---

TABLE OF CONTENTS





Company must convince each new wholesaler that it approaches to carry the T36® products, often in place of other existing products, and also to make the Companys products available to the wholesalers customers.



The Companys products and name are not immediately recognizable to end consumers and, as a result, wholesalers have to make some additional effort to generate sales, as compared to the effort associated with a product familiar to end consumers. This difficulty, which all new companies face in marketing their products, is probably the greatest challenge for the Company (i.e. how to get end consumers to recognize and request its products from wholesalers), given the Companys limited budget for incentives or advertising.

The Company primarily markets it products to distributors through its website, by telephone and e-mail, attending trade shows and distribution of promotional materials.



The current key accounts during the period of this report are described below. Except as noted, there are no contracts or oral agreements in place. Distributors place orders for products from the Company, and the Company ships the products from its warehouse in Richmond, BC, Canada or direct from the contract manufacturer via carriers approved by the Company or the customer. All product shipments are generally made FOB from the Companys warehouse or other shipper and title passes to the customer upon the Companys or customers carrier taking delivery of the product from the shipper. The Company may prepay all costs of transportation and insurance and the customer reimburses the Company for such expenses. The payment terms for products delivered to the customer by the Company are net cash in Canadian currency within 30 days.



1.

Acklands-Grainger Inc. (AGI) entered into a Supplier Agreement with the Company in October, 2009 and will distribute the Companys products across Canada. AGI is Canadas largest distributor of industrial, safety and fastener products with a comprehensive catalogue, 160 branches and 5 distribution centres across the country. Acklands-Grainger is the Official Supplier of the Vancouver 2010 Olympic Winter Games, Vancouver 2010 Paralympic Winter Games, the Canadian Olympic Committee, the 2010 Canadian Olympic Team and the 2012 Canadian Olympic Team for industrial safety and material handling supplies. AGI has been a distributor for two years.



2.

Esthetics Plus, Inc. (EP) is a distributor to the beauty market and entered into an agreement with the Company dated February 1, 2005 (Exhibit 4.h.). EP has exclusive distribution rights in the beauty industry across Canada, except that the agreement is not exclusive within the province of BC. The material terms of the agreement between the Company and EP are described below under Item 10.C. Material Contracts.



3.

Sinclair Dental Limited is a distributor to the dental market and, as of the date of this report, has been a customer of the Company for over 7 years.



4.

Product Distribution Centre (PDC) is a Crown Corporation of the Province of British Columbia, Canada, a distributor to the first responder market and, as of the date of this report, has been a customer of the Company for over 7 years.



5.

The Stevens Company Limited is a distributor to the scientific and medical markets and, as of the date of this report, has been a customer of the Company for over 7 years.



6.

VWR International is a distributor to the laboratory market and, as of the date of this report, has been a customer of the Company for over 7 years.



On January 2, 2012, the Company licensed the rights to manufacture and market T36®disinfectant and hand sanitizer products in Canada to Proterra Management Group Inc. (formerly 612480 BC Ltd.),a company controlled by Peter Chen, a former Director and CFO, in settlement of management fees of $125,440 owed to Proterra Management Group Inc. No rights to any other products or territories were provided to Proterra. ALDA retains a Right of First Refusal to reacquire

the rights if Proterra receives a valid third party offer for nay portion of the rights provided to Proterra. ALDA retains all of the intellectual property including the DIN's NPN's, patents and trademarks. Management is of the opinion that the rights provided to Proterra were fairly priced since the Company had moved from its warehouse, could no longer support the manufacturing and marketing of disinfectants or hand sanitizers and was unable to maintain its Drug Establishment

License that is required to sell hand sanitizer products. The Company also offered the rights to competing companies and to third party manufacturers and received no offers except one that was for the forgiveness of approximately $10,000 in debt owed by the Company.



39



---

TABLE OF CONTENTS







4.C. Organization structure



The Company is not part of a group and has only one wholly owned subsidiary, Sirona Therapeutics Corp. (Sirona), formerly the ALDA Institute for Preventative Health Care Inc., a Company incorporated in British Columbia.



On January 12, 2005, the Company entered into a license agreement with Sirona. Under this agreement, the Company can choose to transfer the rights to certain therapeutic applications of its T36®Disinfectant to Sirona if financing is directed into Sirona rather then into the Company. The Company will retain ownership of the technologies if Sirona undertakes any financing and completes the patenting and registration of any therapeutic products developed and based on the T36®Disinfectant. At the present time, Sirona is an inactive company, but is in a position to become active if Sirona secures investment funding in the future. If such an investment is not made directly into Sirona, it will remain inactive or may undertake unrelated business activities.



4.D. Property, Plant and Equipment



The Company has no facilities.



The Company uses outside manufacturers for its production needs..



Item 4A Unresolved Staff Comments



No disclosure necessary.



ITEM 5. OPERATING AND FINANCIAL REVIEW AND PROSPECTS



This discussion should be read in conjunction with the audited financial statements of the Company and related notes included therein.



5.A. Operating Results of the Company



Overview



Over the course of the Companys operating history, the Company has secured the required government and regulatory approvals to market and sell T36®Disinfectant, Disinfectant Wipes, T36® Antiseptic Hand Sanitizer Gel, Spray and Wipes and T36® Disinfectant Cleaner CONCENTATE in Canada resulting in the sales described in Results of Operations below. To date, all of the Companys sales have been solely in Canada which, while a developed industrial economy, is not a particularly large market relative to economies such as the United States, China or the European Union (EU). The Company has secured a National Drug Code (NDC) Labeler Code for hand sanitizer products in the US but has not yet sold products there. Registration of products in the EU is also being investigated. Although sales in Canada increased significantly during the 2010 fiscal year, much of the increase was due to public concern over the expected H1N1 pandemic. Due to increased material costs that resulted from a shortage of materials, higher sales costs and increased storage costs, gross margins declined from 20.4% in the 2009 fiscal year to 14.3%. The Company has always been reliant on third party manufacturers and this has impeded the ability of the Company to improve its margins and manage its inventories and has affected its competitiveness. During the 2011 fiscal year, sales of hand sanitizers collapsed and the global market conditions made financing unavailable or unattractive and the Company experienced a sever shortage of working capital. This has halted the Companys quest to continue investing in clinical testing and registration of its therapeutic products in Canada, the EU and the US through Health Canada, the EMA and the FDA, respectively



To accomplish these goals now, the Company will need to raise significant amounts of new funding.



1.4

RESULTS OF OPERATIONS



Sales



From the sale of T36 Disinfex® and T36®Antiseptic Hand Sanitizer through its distributors to the first responder, dental, beauty, commercial and consumer markets, the Company recorded sales of$83,361in 2012 compared to  $305,592 in 2011 and $1,459,686 in 2010.





40



---

TABLE OF CONTENTS





During the quarter ended June 30, 2012, sales of hand sanitizers decreased due to the passage of the flu season and the return of the competitors that had temporarily withdrawn from the Canadian market Also, the expected H1N1 pandemic was not as serious as had been feared and consumers were no longer focused on the use of hand sanitizer products. Sales of hand sanitation products declined precipitously and, at the date of this report, no new interest has been observed even as a new flu season approaches. Also, the Companys customers have reported being overstocked on hand sanitizer inventories and did not re-order such products in 2012. Inventories of hand sanitizer expired in December, 2012. Further, since the Company vacated its warehouse after the lease expired on October 31, 2011 it had no facility that met Good Manufacturing Practices (GMP) requirements. As a consequence, its Drug Establishment License (DEL) was suspended.





Cost of Sales

For the year ended June 30, 2012, 2011 and 2010, the cost of sales incurred was $77,993, $255,889 and $1,250,439 representing 93.56%, 83.74% and 85.7% of total sales, respectively. On October 31, 2011, the Companys lease for the warehouse expired and the Company eliminated most of its inventory and wrote it off. The Company is now occupying temporary offices.



Gross (Loss)/ Profit

For the year ended June 30, 2012, 2011 and 2010, the Company recorded a gross profit of $5,368, $49,703, and $209,247, respectively.



Advertising and Promotion

Advertising and promotion costs were $1,639 due mainly to the ceasing of organized sales. This contrasts sharply with the same period in 2011 $479,026 due to payments to VANOC for the Sponsorship, advertising associated with the Sponsorship and the preparation of new product brochures and other new marketing materials.



Conference

Conference costs were $nil, $3,509, and $19,960 for the year ended June 30, 2012, 2011 and 2010, respectively. The conference costs were high in the year ended June 30, 2010 due to attendance by company representatives at trade shows such as the annual meeting of the Ontario Dental Association and meetings organized by distributors which allowed the Company to introduce its products to sales and marketing representatives of the distributors. In 2012, conference costs were reduced to conserve cash.



Consulting

Consulting fees for the year ended June 30, 2012, 2011 and 2010 were $152,302, $368,575 and $579,632 respectively. During the 2010 fiscal year $115,225 non-cash stock-based compensation was recognized for consultants. In 2011, no non-cash stock-based compensation was recognized. Details of the non-cash stock-based compensation provided by the Company are provided in Note 7(b) of the accompanying financial statements. In addition to the non-cash stock-based compensation provided to consultants, $324,000 was paid to executives of the Company in 2011, $350,000 in 2010 in remuneration for their services to the Company. During 2012 $124,440 of consulting fees due were settled with Proterra in exchange for the Canadian license for T3/6. Subsequent to year end an additional $39,760 was settled for shares valued at $0.10 each.



Investor Relations

Investor relations activities amounted to 18,196, $88,073 and $ 116,503 for the years ended June 30, 2012, 2011 and 2010, respectively. Freeform Communications, Inc. (Freeform) was paid a total of $nil, $70,910 and $70,000 for their services to the Company for the year ended June 30, 2012, 2011, 2010, respectively. As of June 30, 2012, Freeform had deferred $11,000 of its payments until further financing is secured



Legal and Accounting Fees

In 2012, legal and accounting fees of $29,915 (2011 - $42,198) were lower due to relatively less legal work being required. Legal fees incurred in the periods generally consist of advising the Company on general legal matters, attending to preparation of required and revised documentation to the TSX Venture Exchange and the securities commissions, the preparation of documentation required for private placements and attending to the closing of the private placements. Accounting fees consisted of consultation fees, auditing of the Companys annual financial statements.



Product Registration and Development Costs

Total costs incurred in this category for the year ended June 30, 2012, 2011 and 2010 were $31,886, $76,524 and $223,263 respectively. The expenses related to research and development activities, which do not meet generally accepted criteria for deferral, are expensed as incurred. Costs in this category include continuation of patent applications, ongoing registration of T36 Disinfex as a trademark in Canada, testing fees paid to BioScience Laboratories, Inc. to undertake clinical testing for



41



---

TABLE OF CONTENTS





the T36® therapeutic applications, and fees paid to regulatory consultants in Canada and US to pursue the registration of the Companys therapeutics products. During the 2012 year, costs were lower due to less activity in product registration, development and patenting.



Wages and Benefits

Wages and benefits were $63,017, $237,395and $445,484 for the years ended June 30, 2012, 2011 and 2010. Costs in this category include the wages paid for accounting and administrative assistance and to sales, marketing and warehouse staff. New sales staff was hired during the 2010 fiscal year, leading to the increase in wage and benefit costs. Non-cash stock-based compensation expenses of $207,405 were recognized for employees during the 2011 fiscal year compared to $nilfor the year ended June 30, 2012.



Loss and Comprehensive Loss for the Year

The Company continued to have losses from operations of $306,656, $1,875,565 and $3,992,659 for the year ended June 30, 2012, 2011, 2010, respectively. In the 2010 fiscal year, non-cash stock-based compensation of $355,594 was similar to that of the 2009 fiscal year. In 2011, non-cash stock-based compensation was $11,522. The details of non-cash stock-based compensation are disclosed in Note 7(b) and in the Consolidated Statements of Cash Flows in the audited consolidated financial statements. Additional non-cash expenses in 2011 were $24,600 from revaluation of warrants and $431,369 from writing down inventory.



the significantly higher loss incurred during the 2010 fiscal year was primarily due to payments to VANOC for the Sponsorship.



5. B. Liquidity and capital resources



Liquidity



Although the Company generates revenues from the sale of its T36® products, sales are mainly occurring in Canada. The Company has also established a plan to introduce products to other markets in the US and the EU and for the development, testing, registration and marketing of therapeutic applications of the T36® formulation. Management has been and continues to evaluate the possibility of acquiring technologies that are complementary to T36® technology and launching similar types of product lines in the near future. The Company will need to undertake further financings in order to carry out these plans. These financings will lead to the dilution of current shareholders of the Company.



Capital resources



During the year ended June 30, 2011, no warrants and options were exercised



On January 12, 2011, the Company completed a private placement of 2,000,000 units of the Company at a price of $0.10 per unit for gross proceeds of $200,000. Each unit consists of one common share of the Company and one share purchase warrant. Each warrant entitles the holder to acquire one additional common share at a price of $0.20 per share until January 12, 2013 with a forced exercise provision attached to each warrant providing that if, for ten consecutive trading days, the closing price of the listed shares of the Company exceeds $0.40 then the exercise period of the warrants will be reduced to a period of 10 days following such trading days. Legal fees of $5,626 were charged against share capital in connection with the private placement. Warrants were valued at $18,676.



On September 7, 2010, the Company completed a private placement of 3,275,000 units of the Company at a price of $0.10 per unit for gross proceeds of $327,500. Each unit consists of one common share of the Company and one share purchase warrant. Each warrant entitles the holder to acquire one additional common share at a price of $0.20 per share until September 7, 2012 with a forced exercise provision attached to each warrant providing that if, for ten consecutive trading days, the closing price of the listed shares of the Company exceeds $0.40 then the exercise period of the warrants will be reduced to a period of 10 days following such trading days. Finders fees of $2,250 and legal fees of $15,887 were charged against share capital in connection with the private placement. Warrants were valued at $57,581.



On September 9, 2009, the Company completed a private placement of 6,000,000 units of the Company at a price of $0.25 per unit for gross proceeds of $1,500,000. Each unit consists of one common share of the Company and one share purchase warrant. Each warrant entitles the holder to acquire one additional common share at a price of $0.40 per share until



42



---

TABLE OF CONTENTS





September 11, 2010 with a forced exercise provision attached to each warrantproviding thatif, for ten consecutive trading days, the closing price of the listed shares of the Company exceeds $0.80 then the exercise period of the warrants will be reduced to a period of 10 days following such trading days. Finders fees and legal fees in the amount of $53,523 were charged against share capital in connection with the private placement. On August 13, 2010, the TSX Venture Exchange accepted the extension of the warrants by the Company to September 16, 2011 at the same price and with the same forced conversion conditions. At the time of this report, the warrants expired and none were exercised.



On October 15, 2009, the Company granted options to acquire 750,000 common shares of the Company to directors, consultants, officers, employees and investor relations. The options have an exercise of $0.55 with an exercisable term of five years expiring on October 15, 2014. Of these, 700,000 options vested immediately with an estimate fair value of $0.46 per share resulting $324,935 in stock based compensation expense being recognized. The remaining 50,000 options were vested in equal quarterly installments over a period of 12 months from the date of grant. No options were granted during the 2010 or 2011 fiscal years. However, during the year ended June 30, 2010, options granted to a consultant and an employee to acquire a total of 270,000 common shares of the Company were cancelled due to the termination of the consultant and the departure of an employee.



As at June 30, 2011, the Company had 63,996,799 outstanding common shares and a total of 11,275,000 outstanding warrants exercisable at an exercise price of $0.20 or at $0.40 if there is a forced conversion before the date of expiration. The outstanding stock options as at June 30, 2011 were 2,880,000 at an exercise price range of $0.20 to $0.55 per option. Upon the exercise of outstanding warrants and exercisable options, the Company will have fully diluted outstanding common shares of 78,151,799,



At the time of this report, the Company does not have sufficient working capital to pursue its development plans. There can be no guarantee that the Company will derive any proceeds from the exercise of outstanding warrants and options. There is no assurance that additional funding will be made available to the Company to fulfill its business objectives. In addition, there can be no assurance that the Company will be able to obtain adequate financing in the future to fulfill its business objectives or that the terms of such financing will be favourable. Many of the Companys products still require further development, laboratory testing and human testing in order to obtain required regulatory approvals. A lack of funds will impair the ability of the Company to complete such tests. A lack of funds will also impair the Companys ability to manufacture its products and establish marketing and sales plans once the products have been approved for sale. If adequate financing is not available when required, the Company may be required to delay, scale back or eliminate various activities and may be unable to continue in operation. The Company may seek such additional financing through debt or equity offerings, which might alter the capital structure of the Company, but there can be no assurance that such financing will be available on terms acceptable to the Company or at all. Any equity offering will result in dilution to the ownership interests of the Companys shareholders and may result in dilution to the value of such interests.



Critical Accounting Policies



The preparation of the financial statements in conformity with Canadian GAAP requires management to make estimates and assumptions that affect the amounts reported of assets and liabilities, the disclosure of contingent assets and liabilities at the date of financial statements and the amounts of revenues and expenses for the reporting period. The areas of estimation are the stock-based compensation, estimated useful lives of depreciable assets, and intellectual property. The Company believes that the estimates and assumptions upon which it relies are reasonable and are based on information available to the Company at the time that estimates and assumptions are made. Actual results could differ from those estimates.



Changes in Significant Accounting Policies



In January 2009, the CICA issued Section 1582, Business Combinations, which replaces former guidance on business combinations. Section 1582 establishes principles and requirements of the acquisition method for business combination and related disclosures. The Section applies prospectively to business combinations for which the acquisition date is on or after the beginning of the first annual reporting period beginning on or after January 1, 2011 with earlier adoption permitted. The Company is currently evaluating the impact of this standard on its financial statements.





43



---

TABLE OF CONTENTS





In January 2009, the CICA issued Handbook Section 1601, Consolidated Financial Statements, which replaces the existing standard. This Section carries forward existing Canadian guidance for preparing consolidated financial statements other than non-controlling interests. The Section is effective for interim and annual financial statements beginning on January 1, 2011 and earlier adoption is permitted. The Company is currently evaluating the impact of adopting this standard on its consolidated financial statements.



In January 2009, the CICA issued Section 1602, Non-controlling Interests, which replaces existing guidance. Section 1602 provides guidance on accounting for a non-controlling interest in a subsidiary in consolidated financial statements subsequent to a business combination. These standards are effective on or after the beginning of the first annual reporting period on or after January 1, 2011 with earlier adoption permitted. As of June 30, 2011 the Company has no non-controlling interests, and accordingly there is no currently expected impact as a result of the standard.



In June 2009, the CICA amended Handbook Section 3855, "Financial Instruments - Recognition and Measurement, to clarify the application of the effective interest method after a debt instrument has been impaired. The Section has also been amended to clarify when an embedded prepayment option is separated from its host instrument for accounting purposes. The amendments apply to interim and annual financial statements relating to fiscal years beginning on or after May 1, 2009 for the amendments relating to the effective interest method and January 1, 2011 for the amendment relating to embedded prepayment options. The Company is currently evaluating the impact of the amendments.



International Financial Reporting Standards (IFRS)



In February 2008, the Canadian Accounting Standards Board (AcSB) confirmed that the changeover for all Canadian Publicly Accountable Enterprises (PAEs) to adopt International Financial Reporting Standards (IFRS), replacing Canadian GAAP, will be effective for interim and annual financial statements relating to fiscal years beginning on or after January 1, 2011.



The transition date for the Company is July 1, 2011, at which time Canadian GAAP will cease to apply for the Company and will be replaced by IFRS. The Companys first set of filing prepared under IFRS will be the unaudited interim financial statements for the quarter ending September 30, 2011, including comparative IFRS financial information for the quarter ending September 30, 2010, an opening balance sheet as at July 1, 2010 and full disclosure of all new IFRS polices. The first annual IFRS financial statements will be for the year ending June 30, 2012 with restatement of comparative balance sheets as at June 30, 2011 and July 1, 2010 and statement of operations for the year ended June 30, 2011, as well as conversion adjustments and reconciliations for the year ending June 30, 2011.



Although IFRS uses a conceptual framework similar to Canadian GAAP, there are significant differences in recognition, measurement and disclosure. The management of the Company has developed a project plan for the conversion to IFRS based on the current nature of the operations. The Company has broken down its IFRS transition plan into three phases: (1) Diagnostic and Scoping phase; (2) Planning, Analysis and Design phase, and (3) Implementation and Transition phase.



The Diagnostic and Scoping phase requires the Company to assess the key accounting policies and financial systems that would be impacted by the transition to IFRS. Each potential impact identified during this phase is ranked to the degree of impact on our financial reporting and the overall complexity of the conversion effort. During the year, the Company completed the diagnosis phase for the adoption of IFRS. The diagnosis has identified the main differences between the accounting treatments applied by the Company under Canadian GAAP and the IFRS as well as the practical implications related to the measure.



The Planning, Analysis and Design phase requires the Company to prepare detailed analysis of the major differences between GAAP and IFRS applicable to the Company, decisions on accounting policy choices where applicable, a review of the information technology systems and determining the impact of the conversion on the business activities and internal control environment. During the quarter ended June 30, 2011, the Company evaluated and documented the existing differences between IFRS and Canadian GAAP in accounting and disclosure requirements, the selection of accounting policies, the consideration of options available including the application of IFRS-1- First-time adoption of International Financial Reporting Standard for an entitys initial adoption of IFRS. Key management has been trained throughout the convergence period. Current accounting program used is sufficient enough to support requirements of IFRS policy and reporting. We expect minimal changes to our internal control over financial reporting and disclosure controls and procedures upon transition to IFRS.



44



---

TABLE OF CONTENTS







The Implementation and Transition phase requires the Company to fully execute the necessary changes to the information technology systems, and the internal controls and development of the financial statement presentation and disclosures in accordance with the managements accounting choices of IFRS. The Company is currently implementing the identified changes to business processes, financial systems, accounting policies, disclosure controls and internal controls over financial reporting. The Company does not expect any significant impact on its business processes, financial systems, disclosure controls and internal controls over financial reporting as a result of change to IFRS.



The Companys adoption of IFRS will require the application of IFRS-1 First-time adoption of International Financial Reporting Standard (IFRS 1) which provides guidance for an entitys initial adoption of IFRS. IFRS 1 generally requires that an entity apply all IFRS effective at the end of its first IFRS reporting period retrospectively, with specific mandatory exemptions and a limited number of optional exemptions. The following are IFRS 1 exemptions that the Company will elect on transition date: (1) Fixed assets: The adopter has the option to elect fair value at the date of the transition as the deemed cost for its fixed assets. The Company will not utilize this election; (2) Financial instruments: The adopter may elect to reclassify a financial instrument as an available for sale, or as a financial asset or financial liability as at fair value through profit or loss, at the date of transition to IFRS, provided the asset or liability meets certain criteria. The Company will keep the same classification of its financial instruments.



The adoption of IFRS will result in some changes to the Companys existing accounting policies currently prepared in accordance to Canadian GAAP. During the evaluation process, the Company has prepared a component evaluation of its existing financial statement line items, comparing Canadian GAAP to the corresponding IFRS guidelines. To date, the Company has identified a number of differences between Canadian GAAP and IFRS and potential changes to its existing accounting policies in key areas that will likely affect the Companys financial reporting. Set out below are selected key areas of accounting differences where changes in accounting policies in conversion to IFRS may impact the Companys consolidated financial statements. The list and comments should not be construed as a comprehensive list of changes that will result from transition to IFRS, but rather highlights those areas of accounting differences the Company currently believes to be most significant.



Presentation of Financial Statement (IAS 1)

Financial statement presentation is addressed in conjunction with the related IFRS standards. Certain additional disclosures will be required in the notes to the financial statements and the statement of operations will be modified to reflect either a presentation by nature or by function. The Company is currently working on preliminary IFRS financial statements in accordance with IAS 1.



Property, plant and equipment (IAS 16)

Property, Plant & Equipment under IAS 16 and Canadian GAAP contain the same basic principles, however there are some differences. IFRS require that significant parts of an asset be depreciated separately and that depreciation commences when the asset is available for use. IFRS also permit property, plant and equipment to be measured using the fair value model or the historical cost model. The Company is not planning on adopting the fair value measurement model for its property, plant and equipment. The Company will continue to measure its property, plant and equipment at amortized cost.



Impairment of assets (IAS 36)

Under Canadian GAAP, the impairment test for assets or asset groups is a two-step process. The first step involves comparing undiscounted future cash flows of an asset or asset group to the carrying value. If the undiscounted cash flows are below its carrying value, the second step is required whereby an impairment charge is calculated as the difference between the asset or asset group discounted future cash flows, and its carrying amount. Impairments under IAS 36 only require a one-step impairment test. Using this test, the carrying value of an asset or asset group (referred to as a Cash Generating Unit) is compared to its recoverable amount, which is the higher of fair value less costs to sell, and value-in-use, which involves discounted future cash flows. Also, unlike Canadian GAAP, IFRS require impairment charges to be reversed when circumstances indicate that the impairment no longer exists. The Company does not believe this will impact its financial results.





45



---

TABLE OF CONTENTS





Share-based compensation (IFRS 2)

Stock-based compensation  IFRS 1 encourages, but does not require, the application of IFRS 2 Shared-based Payment to equity instruments that were granted on or before November 7, 2002. A first-time adopter is also encouraged, but not required, to apply IFRS 2 to equity instruments that were granted after November 7, 2002 and vested before the date of transition or on January 1, 2005, whichever is later. Under Canadian GAAP, the total fair value of the award is recognized on a straight-line basis over the employment period necessary to vest the award, whereas under IFRS, each tranche in an award with graded vesting is considered a separate grant with a different vesting date and fair value. Furthermore, contrary to Canadian GAAP, the Company is required to estimate the number of awards expected to vest, instead of posting the forfeiture of awards when they occur.



Revenue (IAS 18)

The current general principles for revenue recognition are very similar between IFRS and Canadian GAAP. We do not expect any significant quantitative differences to exist in all aspects of Canadian GAAP revenue recognition upon the adoption of IFRS.



Estimates: IFRS 1 does not permit changes to estimates that have been made previously. Accordingly, estimates used in the preparation of the Companys opening IFRS statement of financial position as at the transition date will be consistent with those made under current Canadian GAAP. If necessary, estimates will be adjusted to reflect any difference in accounting policy.



The Board of Directors and the Audit Committee have been regularly updated on the progress of the IFRS conversion plan, and made aware of the evaluation to date of the key aspects of IFRS affecting the Company.



5.C. Research and development, patents and licenses etc.



The Companys policy is to contract out product testing to GMP-qualified laboratories in the US and Canada that are registered with the FDA and Health Canada. For regulatory submissions, the Company  employs the services of consultants who have expertise in domestic and international regulatory matters to make the required submissions to the regulatory agencies, such as the FDA and Health Canada. For its patenting and trade marking activities, the Company uses the services of independent intellectual property lawyers. The Company also relies on its own management to determine the strategies for these activities, to undertake literature research and to advise the outside consultants on their mandates.



For the last three years, the Companys general R&D policy has been to:



·

pursue the registration of its therapeutic products in the US and Canada,

·

undertake testing of the effectiveness of its products against infectious organisms and

·

pursue and maintain patents and trademarks on the T36® technology



Registration of therapeutic products



·

FDA  As discussed in more detail above, the Company has completed a number of in-vitro tests and has compiled an extensive information file on the T36® technology and its individual components based on these tests and literature research. This was presented to the FDA in the form of a preliminary Investigational New Drug (pre-IND) application prior to a meeting with the FDA on July 15, 2008 to determine what further work is required to have a number of the T36® products approved for topical use on humans. From this meeting and subsequent correspondence with the FDA, an IND submission, was presented to the FDA on September 8, 2009. After receiving a response from the FDA, additional information was submitted to the agency on January 4, 2010. From the meeting and these submissions, a program of testing has been developed and is described in more detail above. A summary of these tests is presented below.

·

Health Canada  On July 22, 2009 a meeting was held with officials of Health Canada to discuss a preliminary Clinical Trial Application (Pre-CTA) application that had been previously submitted in order to determine what further work was required before clinical trials with the T36® technology could be started. The tests required by Health Canada are summarized below.





46



---

TABLE OF CONTENTS





Required testing

·

In-vitro studies

·

Time Kill EvaluationF

·

MIC (Minimum Inhibitory Concentration) EvaluationFH

·

Percutaneous Absorption and Cutaneous DispositionFH

·

Genotoxicity (May not be needed if there is little or no absorption)FH



·

Animal studies

·

Carcinogenicity (May not be needed if there is little or no absorption)F

·

Reproductive toxicology (May not be needed if there is little or no absorption)FH

·

Dermal irritation and dermal toxicityFH



·

Human studies

·

Single dose irritation studyFH

·

PhotosensitivityH



·

21-Day Cumulative Irritation Patch Test (Irritation Test)F



·

Multi-dose dermal irritationF

·

Sensitivity testFH

F Required by FDA

H Required by Health Canada



The Companys policy is to conduct the tests above when funding is available. On completion, or sooner as allowed by the regulatory agencies, the European Standard tests will be conduct for hygienic hand rubs and hand washes and surgical scrubs. For treatments of topical infections, such as athletes foot, and for vulvovaginal infections, the more rigourous Phase I through Phase III clinical trials will be conducted when funding is available.



Product testing

The Companys R&D policy also includes testing of its products on infectious organisms that are of particular interest to the healthcare community or are recent mutations of existing species. Over time, such testing has been conducted on MRSA, Norwalk-like virus, H1N1 and new antibiotic-resistant strains of  Escherichia coli and Klebsiella pneumoniae. As new micro-organisms of interest receive attention from the media or the medical community, testing will be considered and arranged if deemed to be worthwhile. Generally, such testing is completed for informational purposes only or to support the registrations that are in progress and cannot be used to make additional claims on existing products. To make claims for specific infectious organisms requires a level of testing that is very expensive and not considered to be a priority for the disinfectant or antiseptic hand sanitizer products.



Patents and trademarks

As discussed in more detail above, the patents issued and pending for the T36® technology are as follows:



Issued

·

US - #7,338,927 and #7,560,422

·

Australia - #2002322916 and #2007237333

·

China - #ZL02829642.7

Pending

·

Europe - Patent Applications #02754054.1-2113 and #08733640.0

·

Canada - Patent Application #2,495,938

·

US - Patent Application #20110212933



Expenditures on these activities are as follows for each fiscal year ended June 30.



·

2008

$505,339

·

2009

$289,208

·

2010

$337,670

·

2011

$114,277

·

2012

$  31,886



At the time of this report, he Company does not presently have sufficient working capital to fund all of the activities described above and will need to undertake further financings to secure the funds required. If such finds are not available under terms acceptable to the Company it is possible that no further funds will be raised and these activities will have to be



47



---

TABLE OF CONTENTS





curtailed accordingly. If the Company is unable to raise all or even any of the funds required for these activities, it is possible that sales will decline and that product development and intellectual property protection will not proceed as planned. Delays in product development and patenting could have an adverse effect on the future of the Company by delaying product introductions and allowing competitors to gain market share at the expense of the Company.



5.D.  Trend information



Usually, the major trend affecting the Company is the seasonal concerns that are raised through the fall and winter over flu and colds. This seasonal affect was greatly exaggerated in the 2010 fiscal year when the World Health Organization (WHO) declared H1N1 to be a Level Six pandemic. This action by the WHO has contributed to the awareness and perception that there is a growing need or demand for products similar to those the Company produces. This resulted in substantial growth in the market for disinfectant products, in particular, consumer products which are effective against infectious microorganisms during the fall and winter of 2009 and 2010. As discussed elsewhere in this report, there was a nearly total collapse of the market for hand sanitizers in Canada and sales have not yet recovered from that low point. As a result, the seasonal effects of the market for the Companys products were greater than usual. It is not known at this time when the market for hand sanitation products will recover or if it will at all. Clearly, reliable predictions of future revenues are not possible at this time.



5.E. Off-balance sheet arrangements



The Company does not have any off-balance sheet arrangements.



5.F. Tabular disclosure of contractual obligations



The Company does not have any long-term debt obligations, capital (finance) lease obligations, operating lease obligations, purchase obligations or other long-term liabilities reflected on the Companys balance sheet.



5.G. Safe Harbor



This Annual Report on Form 20-F contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995, principally in ITEM #4, Information on the Company and ITEM #5. These statements may be identified by the use of words like plan, expect, aim, believe, project, anticipate, intend, estimate, will, should, could and similar expressions in connection with any discussion, expectation, or projection of future operating or financial performance, events or trends. In particular, these include statements about the Companys strategy for growth, future performance or results of current sales and production, interest rates, foreign exchange rates, and the outcome of contingencies, such as acquisitions and/or legal proceedings and intellectual property issues.



Forward-looking statements are based on certain assumptions and expectations of future events that are subject to risks and uncertainties. Actual future results and trends may differ materially from historical results or those projected in any such forward-looking statements depending on a variety of factors, including, among other things, the factors discussed in this Annual Report under ITEM #3, Key Information, Risk Factors and factors described in documents that the Company may furnish from time to time to the Securities and Exchange Commission. The Company undertakes no obligation to update publicly or revise any forward-looking statements because of new information.



ITEM 6. DIRECTORS, SENIOR MANAGEMENT AND EMPLOYEES



A. Directors and Senior Management



The following table sets forth certain information as of June 30, 2011 about the Companys current directors and senior management. There have been no subsequent changes to the Companys current directors and senior management, except as footnoted below:









48



---

TABLE OF CONTENTS







Table No. 6:

Directors and Senior Management:





|                |          |                             |                                                           |                       
|--------------- | -------- | --------------------------- | --------------------------------------------------------- | ----------------------
|Name            | Age      | Position                    | Other Reporting Companies in Canada 
or the United States
|Company         | Position
|Terrance Owen   | 66       | President, CEO and Director | Bi-optic Ventures Inc.                                    | Secretary and Director
|Jamie Lewin     | 63       | CFO, Secretary and Director | Choice Gold Corp.                                         | Phoenix Copper Corp.  
|Peter Chen*     | 50       | Secretary, CFO and Director | None                                                      | n/a                   
|Eugene Hodgson* | 56       | Director                    | Timmins Gold Corp.                                        | Director              
|Linda Allison   | 65       | Director                    | None                                                      | n/a                   
|Ronald Zokol    | 63       | Director                    | None                                                      | n/a                   
|William McCoy   | 57       | Director                    | None                                                      | n/a                   

*On December 15, Mr. Hodgson resigned from the Board of Directors for personal reasons.

*On April 12, Mr. Chen resigned from the Board of Directors for personal reasons.





o

Terrance Owen  President, CEO and Director:B.Sc. (Honours), University of Victoria, 1968; M.Sc., Biology, UNB, 1970; Ph.D., UBC, 1974, M.B.A., SFU, 1991; President, CEO, Director and co-founder of the Company  since 2000; President of Helix Biotech ULC, a laboratory providing DNA testing services for paternity, immigration and forensic cases, 1980 2002; President, Helix BioPharma Corp., a biopharmaceutical company focused on drug delivery, drug discovery, drug development, drug distribution and drug licensing, 1995 to 1998; Secretary of Bi-optic Ventures Inc. a company listed on the TSX Venture Exchange since September, 2002; Director of Bi-Optic Ventures Inc. since September, 2006; Director of Fortunate Sun Mining Company Ltd. since October 19, 2011 and a Director of Pacific Arc Resources Ltd. since December 23, 2011.



o

Jamie A Lewin  CFO, Secretary:  BA (Economics) Western University, 1972; LLB Laval University, 1984; MBA City University, 1992; Certified Management Accountant (CMA), 2003; Chief Financial Officer of: Grand Peak Capital Corp. since 2009, Lucky Minerals Inc. since 2010, Grenville Gold Corp. since 2011, Orofino Minerals Inc. since 2011 and Innovative Properties Inc. since 2011.  Abenteuer Resources Corp., from 2006 to 2011, Dussault Apparel, Inc., from 2007 to 2008; Musgrove Minerals Corp. 2011  2012, Acana Capital Corp. from 2011 to 2012. In addition he has been a Director at:  Choice Gold 2012  current, Abenteuer Resources 2006  2011, Lucky Minerals 2010  2011 and Innovative Properties 2011  2012.



o

Peter Chen  Secretary, CFO and Director:Diploma in Accounting, Douglas College, 1993; self-employed financial consultant, 1993 to 2003; CFO, Prospect Point Exploration & Management Services Ltd., a private company providing mineral exploration consulting services, 2000 to 2003; President of Canadian Mineral Exploration Managing Consultants Inc., a private company providing mineral exploration services to publicly listed companies that have projects in Africa and South East Asia, 1997 to 2000 and CFO. 1994 to 2000; Director of the Douglas College Foundation, 2004 to 2007; co-founder of the Company and CFO since its inception in May, 2000 and Director of Fortunate Sun Mining Company Ltd. since October 19, 2011.



o

Eugene Hodgson  Director:  Bachelor of Arts, University of Calgary, 1978; Director, Corporate Development, Intrawest Corporation, 1990 to 1996; President, E.A. Hodgson & Associates, a private management consulting firm, since 1996; currently, Vice President, Western Region, Corp finance International Limited., a firm that provides specialized term financing to mid-sized and large companies; Director, Timmins Gold Corp., a publicly-traded companies; previously CFO and Director, Sea Breeze Power Inc.; co-founder of the "Families for School Seismic Safety" in B.C.; Member of the Advisory Committee to the Independent Power Producers of B.C.; former Director, Vancouver Board of Trade and current Area Commissioner, Pacific Spirit Area for the Boy Scouts of Canada.



Linda Allison - Director:BSc (Honours), Simon Fraser University; MSc; University of London; Diploma of Imperial College (DIC), Imperial College of Science and Technology, London, 1972; PhD, Simon Fraser University, 1978 in neurophysiology, molecular biology and biophysics; President, Groberman Computer Engineering Ltd., a computer technology company developing custom systems for scientific and industrial applications, 1980 to 1995; President,



49



---

TABLE OF CONTENTS





Snowdon & Associates Management Consultants Ltd., a management consulting company that provides professional services to medical device, biotechnology, pharmaceutical, and high technology companies, since 1985; Corporate finance in two investment banking and brokerage firms assisting financing of biomedical and high technology companies in North America and Europe, 1992 to 1998; President & CEO, Ondine Biopharma Corp., a biomedical company developing photo-activated drugs, 1998 to 2001; President & CEO, Genesis Bioventures Inc., a biomedical holding company that invested in companies developing novel diagnostics and therapeutics in the areas of cancer and neurological disorders, 2000 to 2001; President & CEO and Director, MDX Medical Inc., a biomedical company developing medical imaging technologies for the improved diagnosis and treatment of cancer, 2003 to 2005 and Member, ForeFront Committee of the Alberta Heritage Foundation for Medical Research since 2006.



o

Ron Zokol  Director: Director, ALDA Pharmaceuticals Corp. since, 2003;  has practiced and lectured in the fields of dental surgery and prosthodontics for the last 30 years; Director of the Pacific Institute for Implant Dentistry and a Diplomat of the American Board of Oral Implantology; President of the Vancouver and District Dental Society in 1986; currently is an internationally recognized lecturer in his field and teaches advanced reconstructive dentistry and provides expertise on infection control.



o

William McCoy  Director:Director, ALDA Pharmaceuticals Corp. since March, 2005; Chief Technology Officer, Phigenics, LLC, a life sciences technology company based in Chicago, Illinois since 2005; Chairman, American Society of Heating, Refrigerating and Air-conditioning Engineers (ASHRAE) Environmental Health Committee, 2008 to 2009; received the Intellectual Property Law Association "Inventor of the Year" award, 2001; received Medal for Outstanding Contribution to Management and Science from Intl. Water Assoc., Berlin 2001; author of full length book,"Preventing Legionellosis", 2005; holds 28 patents in microbial diagnostics, control, and manufacturing of industrial antimicrobials.



The Directors have served in their respective capacities since their election and/or appointment and will serve until the next Annual General Meeting or until a successor is duly elected, unless the office is vacated in accordance with the Articles/By-Laws of the Company.



The senior management serves at the pleasure of the Board of Directors.



No Director and/or member of senior management had been the subject of any order, judgment, or decree of any governmental agency or administrator or of any court or competent jurisdiction, revoking or suspending for cause any license, permit or other authority of such person or of any corporation of which he is a Director and/or member of senior management, to engage in the securities business or in the sale of a particular security or temporarily or permanently restraining or enjoining any such person or any corporation of which he is an officer or director from engaging in or continuing any conduct/practice/employment in connection with the purchase or sale of securities, or convicting such person of any felony or misdemeanor involving a security or any aspect of the securities business or of theft or of any felony.



There are no family relationships between any two or more Directors or members of senior management.



There are no arrangements or understandings with major shareholders, customers, suppliers or others, pursuant to which any person referred to above was selected as a Director or member of senior management.



6.B. Compensation



Cash Compensation



Total compensation accrued and/or paid (directly and/or indirectly) to all Directors/Senior Management during the year ended June 30, 2012 and previous years are detailed in Table No. 7 below:





















50



---

TABLE OF CONTENTS







Table No. 7

Annual Compensation of Senior Management





|                                              |                          |                     |                         |                                                   |                                             |                                                     |                     |                              
|--------------------------------------------- | ------------------------ | ------------------- | ----------------------- | ------------------------------------------------- | ------------------------------------------- | --------------------------------------------------- | ------------------- | -----------------------------
|                                              |                          | Annual Compensation | Long Term Compensation  |                                                  
|                                              |                          |                     |                         |                                                   | Awards                                      | Payouts                                             |                    
|Name and
Principal Position                   | Year                     | Salary
($)          | Bonus
($)(3)            | Other 
Annual 
Compen-
sation ($)                 | Securities Under 
Option/
SAR's Granted
(#) | Shares/
Units 
Subject to 
Resale 
Restrictions
($) | LTIP 
Pay-
outs ($) | All Other 
Compen-sation 
($)
|Terrance G. Owen, Chief Executive Officer (1) | 2012
2011
2010
2009
2008 | Nil
Nil
Nil
Nil
Nil | Nil
$13,000
Nil
Nil
Nil | $94,081
$ 180,000
$ 180,000
$ 180,000
$ 150,000
$ | Nil
125,000
350,000
400,000
550,000         | Nil
Nil
Nil
Nil
Nil                                 | Nil
Nil
Nil
Nil
Nil | Nil
Nil
Nil
Nil
Nil          
|Jamie Lewin, Chief Financial Officer          | 2012                     | Nil                 | Nil                     | $3,000 (4)                                        | Nil                                         | Nil                                                 | Nil                 | Nil                          
|Peter Chen, past Chief Financial Officer (2)  | 2012
2011
2010
2009
2008 | Nil
Nil
Nil
Nil
Nil | Nil
Nil
$13,000
Nil
Nil | $ 61,221
$144,000
$ 144,000
$ 144,000
$ 120,000   | Nil
Nil
125,000
350,000
400,000             | Nil
Nil
Nil
Nil
Nil                                 | Nil
Nil
Nil
Nil
Nil | Nil
Nil
Nil
Nil
Nil
l        

(1)

Consulting/management fees (other annual compensation of $94,081, $180,000, $180,000, $180,000 and $150,000 in 2012, 2011, 2010, 2009, and 2008 respectively) were paid to a management consulting company owned by Terrance Owen;



(2)

Consulting/management fees (other annual compensation of $61,221,  $144,000, $144,000, $44,000 and $120,000 in 2012, 2011, 2010, 2009 and 2008, respectively) were paid to a management consulting company owned by Peter Chen.



(3)

Discretionary bonus paid to Terrance Owen and Peter Chen or companies owned/controlled by Terrance Owen and Peter Chen.



(4)

Jamie Lewin invoices on a fee-for services basis at $60 an hour through his proprietorship Best Fit Consulting.









51



---

TABLE OF CONTENTS





Table No. 8

Stock Option Grants to directors and officers in Fiscal 2010 Ended June 30, 2010,

Fiscal 2011 Ended June 30, 2011 and Fiscal 2012 Ended June 30, 2012





|               |                           |                                           |                          |                                  |                                  |                                                                 
|-------------- | ------------------------- | ----------------------------------------- | ------------------------ | -------------------------------- | -------------------------------- | ----------------------------------------------------------------
|Name           | Number of Options Granted | % Of Total Options Granted
in
Fiscal Year | Exercise Price per Share | Grant Date                       | Expiration Date                  | Mkt. Value of Securities Underlying Options on Date of Grant (1)
|Terrance Owen  | 10,000
25,000
12,500      | 4.65
11.63
17.12                          | $2.00
$2.50
$5.50        | 10/31/2008
06/04/2009
10/15/2009 | 10/31/2013
06/04/2014
10/15/2014 | $8,862
$32,044
$57,612                                          
|Peter Chen     | 10,000
25,000
12,500      | 4.65
11.63
17.12                          | $2.00
$2.50
$5.50        | 10/31/2008
06/04/2009
10/15/2009 | 10/31/2013
06/04/2014
10/15/2014 | $8,862
$32,044
$57,612                                          
|Linda Allison  | 5,000
15,000
5,000        | 2.33
6.98
6.85                            | $2.00
$2.50
$5.50        | 10/31/2008
06/04/2009
10/15/2009 | 10/31/2013
06/04/2014
10/15/2014 | $4,431
$19,226
$23,045                                          
|William McCoy  | 5,000
15,000
5,000        | 2.33
6.98
6.85                            | $2.00
$2.50
$5.50        | 10/31/2008
06/04/2009
10/15/2009 | 10/31/2013
06/04/2014
10/15/2014 | $4,431
$19,226
$23,045                                          
|Eugene Hodgson | 5,000
15,000
5,000        | 2.33
6.98
6.85                            | $2.00
$2.50
$5.50        | 10/31/2008
06/04/2009
10/15/2009 | 10/31/2013
06/04/2014
10/15/2014 | $4,431
$19,226
$23,045                                          
|Ron Zokol      | 5,000
15,000
5,000        | 2.33
6.98
6.85                            | $2.00
$2.50
$5.50        | 10/31/2008
06/04/2009
10/15/2009 | 10/31/2013
06/04/2014
10/15/2014 | $4,431
$19,226
$23,045                                          

(1) See Notes 7.(b)(i), (ii) and (iv)of the accompanying financial statements for the year ended June 30, 2012.





The following table gives certain information concerning stock option exercises during Fiscal 2012 by the Companys Senior Management and Directors. It also gives information concerning stock option values.



Table No. 9

Aggregated Stock Options Exercises in Fiscal 2012

Fiscal Year-end Unexercised Stock Options

Fiscal Year-end Stock Option Values

Senior Management/Directors





|               |                                       |                          |                                                                                       
|-------------- | ------------------------------------- | ------------------------ | --------------------------------------------------------------------------------------
|Name           | Number of Shares Acquired on Exercise | Aggregate Value Realized | Value of Unexercised In-the-Money Options at Fiscal Year-End Exercisable/Unexercisable
|Terrance Owen  | 0                                     | $0                       | $0/$0                                                                                 
|William McCoy  | 0                                     | $0                       | $0/$0                                                                                 
|Peter Chen     | 0                                     | $0                       | $0/$0                                                                                 
|Ron Zokol      | 0                                     | $0                       | $0/$0                                                                                 
|Linda Allison  | 0                                     | $0                       | $0/$0                                                                                 
|Eugene Hodgson | 0                                     | $0                       | $0/$0                                                                                 









52



---

TABLE OF CONTENTS







Director Compensation:  The Company has no formal plan for compensating its Directors for their service in their capacity as Directors. Directors are entitled to reimbursement for reasonable travel and other out-of-pocket expenses incurred in connection with attendance at meetings of the Board of Directors. The Board of Directors may award special remuneration to any Director undertaking any special services on behalf of the Company other than services ordinarily required of a Director. Other than indicated below no Director received any compensation for his services as a Director, including committee participation and/or special assignments.



Stock Options:  The Company may grant stock options to Directors, Senior Management and employees. Refer to ITEM #6.E., "Share Ownership" and Table No. 8 for information about stock option grants. During the fiscal years ended June 30, 2012 and 2011, no options were granted. During the fiscal year ended June 30, 2010, a total of 750,000 were granted and 20,000 options were subsequently cancelled due to the departure of an employee. Table 8 excludes 280,000 share purchase options granted to non-officer and non-director employees, which were granted on October 15, 2009 at an exercise price of $0.55 and have a term of 5 years from the date of grant. During the fiscal year ended June 30, 2009, a total of 2,150,000 stock options were granted and 1,830,000 were exercised. Table 8 excludes 650,000 share purchase options granted to non-officer and non-director employees, which were granted on October 31, 2008 and June 4, 2009 at an exercise price of $0.20 to $0.25, respectively, and have a term of 5 years from the date of grant.



Change of Control Remuneration:  On June 1, 2008,  the Company established agreements to provide remuneration received by the President & CEO, Terrance Owen, and the CFO, Peter Chen, and their respective consulting companies in Fiscal 2008 to compensate such officers in the event of termination of employment (as a result of resignation, retirement, change of control) or a change of responsibilities following a change of control, where the value of such compensation exceeds US$60,000 per Senior Management (filed with  the 2008 Form 20-F as Exhibits 4.j and 4.k).



Other Compensation:  No Senior Manager or Director received other compensation in excess of the lesser of US$25,000 or 10% of such officer's cash compensation, and all Senior Managers or Directors as a group did not receive other compensation which exceeded US$25,000 times the number of persons in the group or 10% of the compensation.



Bonus/Profit Sharing/Non-Cash Compensation:  Except for the stock option program discussed in ITEM #6.E., the Company had no material bonus or profit sharing plans pursuant to which cash or non-cash compensation is or may be paid to the Company's Directors or Senior Management.



Pension/Retirement Benefits: No funds were set aside or accrued by the Company during Fiscal 2009 to provide pension, retirement or similar benefits for Directors or Senior Management.



6.C. Board Practices



6.C.1. Terms of Office.

At every Annual General Meeting of the Company, the Directors are elected by the shareholders and serve as Directors until the next Annual General Meeting is held.



6.C.2. Directors Service Contracts.



Employment agreements (filed with  the 2008 Form 20-F as Exhibits 4.j and 4.k) dated June 1, 2008 were entered into with Terrance Owen and Peter Chen (the Officers) who provide their services to the Company through their respective holding companies, 503213 BC Ltd. and 612480 BC Ltd., respectively  The material terms of these contracts are as follows.



The Company retains the Officers as independent consultants. The Company will not be required to make contributions for employment insurance, Canada Pension, workers compensation or other similar levies in respect of the fee for services to be paid to the Officers. The Officers agree to pay all required contributions and deductions for income taxes, workers compensation and employment insurance and shall indemnify and save the Company harmless from and against all claims, actions, losses, expenses, costs or damages which the Company or its officers, employees or agents may suffer as a result of the Consultants non-compliance with this requirement.



The Officers agree to provide sufficient time and attention to the business and affairs of the Company, to advise and counsel the Board and to channel to the Company all knowledge, business and customer contacts and any other information that could concern or be in any way beneficial to the Company. All information communicated to the Company will be the property of the Company.The Officers acknowledge that each is a person in a special relationship, as that expression is defined in the securities laws of various provinces of Canada, and may receive



53



---

TABLE OF CONTENTS





material information concerning the business and affairs of the Company that has not been generally disclosed, and covenant and agree that they will not purchase or sell any securities of the Company until such information has been generally disclosed.The Company is aware that the Officers may provide services to certain other companies from time to time as disclosed above. The Officers agree that they will not provide services to any other companies without the written approval of the Company.



The Company will pay a consulting fee in the amount of (Cdn)$15,000.00 per month to the holding company of Terrance Owen and (Cdn)$12,000.00 per month to the holding company of Peter Chen plus applicable GST. The fees payable will be reviewed annually, and may be adjusted by the Company in consultation with the Officers to reflect general economic conditions, changes in the duties provided under this Agreement or performance by the Officers. The Officers are entitled to participate in the Companys incentive stock option plan (Exhibit 4.m).The Company will reimburse the Officers for all reasonable travelling and other out-of-pocket expenses incurred in connection with services provided to the Company. The Officers will be entitled to participate in any benefit programs established by the Company. To date, no such plans are in place.



Inventions of any type made by the Officers become the sole property of the Company which will hold all intellectual property rights for such inventions. If the Company chooses to patent, copyright, trademark or otherwise protect the inventions, the Officers will assign their rights to the Company. The Officers will treat all information of the company as confidential except any information that is presently in the public domain, any information that subsequently becomes part of the public domain, any information obtained by the Officers from a third party with a valid right to disclose it or any information that was independently developed by the Officers or was in their possession prior to receipt from the Company.



The Officers agree that they shall not engage in any activity that is contrary to or detracts from the performance of the business of the Company, will not receive and personal benefit from any party having business with the Company without the approval of the Board and, during the term of the agreement and for a period of one year afterwards, will not compete with the Company or solicit customers or employees of the Company



The Officers may terminate this Agreement by giving thirty (30) days written notice to the Company. The Company may waive such notice and, if it does so, this Agreement will cease on the date the Company waives such notice.The Company may terminate this Agreement without notice or payment in lieu of notice for breach of the agreement.The Company may terminate this Agreement at its sole discretion and for any reason upon giving the Consultant written notice of termination provided that the Company pays, in lieu of notice, twelve (12) months fee severance.The Company may terminate this Agreement without notice or payment in lieu of notice upon a change of control of the holding company of the Officer or the death or permanent disability of the Officer.Upon termination of this Agreement, the Consultant will promptly return all property. This Agreement may be subject to the acceptance by TSX Venture Exchange and a refusal to do so shall not constitute a default of the Company.



Jamie Lewin currently invoices on a fee-for services basis at $60 an hour through his proprietorship Best Fit Consulting.



6.C.3. Board of Director Committees.



The Company has an Audit Committee, which is governed by an Audit Committee Charter (filed as Exhibit 11 with the amended 2007 Form 20-F filed on December 3, 2008.), recommends to the Board of Directors the engagement of the independent auditors of the Company and reviews with the independent auditors the scope and results of the Companys audits, the Companys internal accounting controls, and the professional services furnished by the independent auditors to the Company. The current members of the Audit Committee are: Peter Chen (the Companys CFO), Eugene Hodgson (non-management Director) and Linda Allison (non-management Director). The Audit Committee met four times during the year ended June 30, 2011 to discuss and approve the Companys audited and quarterly financial statements. The Audit Committee also met subsequent to the Companys last Annual General Meeting of shareholders.



6.D. Employees



As of the date of this report, the Company had no employees except for the two Officers, President & CEO, Terrance Owen and CFO, Jamie, who is invoices on a straight fee-for-services basis at $60 an hour.





54



---

TABLE OF CONTENTS







6.E. Share Ownership



Table No. 10 lists, as of June 30, 2012, Directors and Senior Management who beneficially own the Company's voting securities, consisting solely of common shares, and the amount of the Company's voting securities owned by the Directors and Senior Management as a group.



Table No. 10

Shareholdings of Directors and Senior Management





|               |                            |                                           |                     |                                                               
|-------------- | -------------------------- | ----------------------------------------- | ------------------- | --------------------------------------------------------------
|Title of Class | Name of Beneficial Owner   | Amount and Nature
of
Beneficial Ownership | Percent of Class(1) | Options and
Warrants exercisable in 60 days from June 30, 2012
|Common         | Terrance Owen              | 163,850                                   | 2.56%               | 154,500                                                       
|Common         | Linda Allison              | 33,800                                    | 0.53%               | 55,000                                                        
|Common         | Peter Chen                 | 76,785                                    | 1.20%               | 92,500                                                        
|Common         | Eugene Hodgson             | 6,750                                     | 0.11%               | 25,000                                                        
|Common         | Ronald Zokol               | 30,500                                    | 0.48%               | 35,500                                                        
|Common         | William McCoy              | 7,250                                     | 0.11%               | 27,250                                                        
|               | Total Directors/Management | 318,935                                   | 4.99%               | 389,750                                                       

(1) Based on 6,959,680 outstanding as of June 30, 2012





Stock Options:  The terms of incentive options grantable by the Company are done in accordance with the rules and policies of the TSX Venture Exchange and the British Columbia Securities Commission, including the number of common shares under option, the exercise price and expiry date of such options and any amendments thereto. The Company adopted a formal written stock option plan (the "Plan") on December 13, 2005. (A copy of the Companys Stock Option Plan was filed with the 2005 Form 20-F as Exhibit 4.e.) At every Annual General Meeting of the Company, the Plan is presented to and voted on by the shareholders of the Company. If approved, the terms and conditions of the Plan remain in force for the subsequent year. The Stock Option Plan was amended and passed by a majority of shareholders at the Annual General Meeting held on January 27, 2012. A copy of the amended Stock Option Plan is provided as Exhibit 4.m. It will remain in effect until the next Annual General Meeting of Shareholders.



Such terms and conditions, including the pricing of the options, expiry and the eligibility of personnel for such stock options, are described below. The terms of the original Stock Option Plan and the major changes in the Stock Option Plan as amended in 2009 (the 2009 Plan) are described below and provided as Exhibit 4.m.



The principal purposes of the Companys stock option program are to (a) assist the Company in attracting, retaining, and motivating directors, officers and employees of the Company and, (b) to closely align the personal interests of such directors, officers and employees with the interests of the Company and its shareholders.



The Plan provides that stock options may be granted to service providers for the Company. The term service providers means:



(a)

Any full or part-time employee or Officer, or insider of the Company or any of its subsidiaries;



(b)

Any other person employed by a company or individual providing management services to the Company;



(c)

Any other person or company engaged to provide ongoing consulting services for the Company or any entity controlled by the Company or





55



---

TABLE OF CONTENTS





(d)

Any individual engaged to provide services that promote the purchase or sale of the issued securities (any person in (a), (b), (c) or (d) hereinafter referred to as an Eligible Person); and



(e)

Any registered retirement savings plan established by such Eligible Person, or any corporation controlled by such Eligible Person, the issued and outstanding voting shares of which are, and will continue to be, beneficially owned, directly or indirectly, by such Eligible Person and/or spouse, children and/or grandchildren of such Eligible Person.



For stock options to Employees, Consultants or Management Company Employees, the Company must represent that the optionee is a bona fide Employee, Consultant or Management Company Employee as the case may be. The terms insider Controlled and subsidiary shall have the meanings ascribed thereto in the Securities Act (Ontario) from time to time. Subject to the foregoing, the board of directors or Committee, as applicable, shall have full and final authority to determine the persons who are to be granted options under the Plan and the number of shares subject to each option.



The Plan shall be administered by the board of directors of the Company or a committee established by the board of directors for that purpose. Subject to approval of the granting of options by the board of directors or Committee, as applicable, the Company shall grant options under the Plan.



The Plan provides that the aggregate number of shares of the Company, which may be issued and sold under the Plan, will not exceed 10% of the issued shares of the Company. The Company shall not, upon the exercise of any option, be required to issue or deliver any shares prior to (a) the admission of such shares to listing on any stock exchange on which the Companys shares may them be listed, and (b) the completion of such registration or other qualification of such shares under any law, rules or regulation as the Company shall determine to be necessary or advisable. If any shares cannot be issued to any optionee for whatever reason, the obligation of the Company to issue such shares shall terminate and any option exercise price paid to the Company shall be returned to the optionee.



If a stock option expires or otherwise terminates for any reason without having been exercised in full, the number of common shares reserved for issuance under that expired or terminated stock option shall again be available for the purposes of the Plan. Any stock option outstanding when the Plan is terminated will remain in effect until it is exercised or it expires. The Plan provides that it is solely within the discretion of the Board to determine who should receive stock options and in what amounts, subject to the following conditions:



(a)

Options will be non-assignable and non-transferable except that they will be exercisable by the personal representative of the option holder in the event of the option holders death;

(b)

Under the revised 2009 Plan, options may be exercisable for a maximum of ten years from grant date rather than five years;

(c)

Under the revised 2009 Plan, options to acquire more than 5% of the issued shares of the Company may be granted to any one individual in any 12-month period the approval of the disinterested shareholders of the Company;

(d)

Options to acquire no more than 2% of the issued shares of the Company may be granted to any one consultant in any 12-month period;

(e)

Options to acquire no more than an aggregate of 2% of the issued shares of  the Company may be granted to an employee conducting investor relations activities (as defined in TSX Venture Exchange Policy 1.1), in any 12 month period;

(f)

Options to acquire no more than 10% of the issued shares of the Company may be granted to any insiders in any 12-month period;

(g)

Under the revised 2009 Plan, options held by an option holder who is a director, employee, consultant or management company employee are no longer required to expire within 90 days after the option holder ceases to be a director, employee, consultant or management company employee;

(h)

Under the revised 2009 Plan, options held by an option holder who is engaged in investor relations activities are no longer required expire within 30 days after the option holder ceases to be employed by the Company to provide investor relations activities; and

(i)

In the event of an option holders death, the option holders personal representative may exercise any portion of the option holders vested outstanding options for a period of one year following the option holders death.



The Plan provides that other terms and conditions may be attached to a particular stock option, such terms and conditions to be referred to in a schedule attached to the option certificate. Stock options granted to directors, senior officers, employees or consultants will vest when granted unless otherwise determined by the Board on a case by case basis, other than stock options granted to consultants performing investor relations activities, which will vest in stages over 12 months with no more than one-fourth of the options vesting in any three month period.



56



---

TABLE OF CONTENTS





The price at which an option holder may purchase a common share upon the exercise of a stock option will be as set forth in the option certificate issued in respect of such option and in any event will not be less than the discounted market price of the Companys common shares as of the date of the grant of the stock option (the Award Date). The market price of the Companys common shares for a particular Award Date will typically be the closing trading price of the Companys common shares on the day immediately preceding the Award Date, or otherwise in accordance with the terms of the Plan. Where there is no such closing price or trade on the prior trading day market price shall mean the average of the most recent bid and ask of the shares of the Company on any stock exchange on which the shares are listed or dealing network on which the shares of the Company trade.



In no case will a stock option be exercisable at a price less than the minimum prescribed by each of the organized trading facilities or the applicable regulatory authorities that would apply to the award of the stock option in question.



Common shares will not be issued pursuant to stock options granted under the Plan until they have been fully paid for by the option holder. The Company will not provide financial assistance or loans to option holders to assist them in exercising their stock options.



The names and titles of the Directors/Executive Officers/Employees of the Company to whom outstanding stock options have been granted and the number of common shares subject to such options is set forth in Table No. 11 as of June 30, 2012, as well as the number of options granted to them. There are outstanding stock options granted to consultants, scientific advisors and investor relations.



Table No. 11

Stock Options Outstanding





|                       |                           |                          |                                  |                                 
|---------------------- | ------------------------- | ------------------------ | -------------------------------- | --------------------------------
|Directors and Officers | Number of Options Granted | Exercise Price per Share | Grant Date                       | Expiration Date                 
|Terrance Owen          | 10,000
25,000
12,500      | $2.00
$2.50
$5.50        | 10/31/2008
06/04/2009
10/15/2009 | 10/31/2013
06/04/2014
10/15/2014
|Peter Chen             | 10,000
25,000
12,500      | $2.00
$2.50
$5.50        | 10/31/2008
06/04/2009
10/15/2009 | 10/31/2013
06/04/2014
10/15/2014
|Linda Allison          | 5,000
15,000
5,000        | $2.00
$2.50
$5.50        | 10/31/2008
06/04/2009
10/15/2009 | 10/31/2013
06/04/2014
10/15/2014
|William McCoy          | 5,000
15,000
5,000        | $2.00
$2.50
$5.50        | 10/31/2008
06/04/2009
10/15/2009 | 10/31/2013
06/04/2014
10/15/2014
|Eugene Hodgson         | 5,000
15,000
5,000        | $2.00
$2.50
$5.50        | 10/31/2008
06/04/2009
10/15/2009 | 10/31/2013
06/04/2014
10/15/2014
|Ron Zokol              | 5,000
15,000
5,000        | $2.00
$2.50
$5.50        | 10/31/2008
06/04/2009
10/15/2009 | 10/31/2013
06/04/2014
10/15/2014
|TOTAL                  | 195,000                   |                          |                                  |                                 





57



---

TABLE OF CONTENTS







Table No. 11 (contd)

Stock Options Outstanding



|                                                                          |                           |                          |                                  |                                 
|------------------------------------------------------------------------- | ------------------------- | ------------------------ | -------------------------------- | --------------------------------
|Employees and Others                                                      | Number of
Options
Granted | Exercise Price
per Share | Grant Date                       | Expiration Date                 
|Allan Shapiro                                                             | 10,000
15,000             | $2.00
$2.50              | 10/31/2008
06/04/2009            | 10/31/2013
06/04/2014           
|Eric Lam                                                                  | 5,000
20,000
8,000        | $2.00
$2.50
$5.50        | 10/31/2008
06/04/2009
10/15/2009 | 10/31/2013
06/04/2014
10/15/2014
|Tracy Haubrich                                                            | 2,000                     | $5.50                    | 10/15/2009                       | 10/15/2014                      
|Diane Mann                                                                | 13,000                    | $5.50                    | 10/15/2009                       | 10/15/2014                      
|Freeform Communications                                                   | 15,000
5,000              | $2.50
$5.50              | 06/04/2009
10/15/2009            | 06/04/2014
10/15/2014           
|Total consultants, scientific advisors, employees  and
investor relations | 93,000                    |                          |                                  |                                 
|Total Outstanding                                                         | 288,000                   |                          |                                  |                                 





ITEM 7. MAJOR SHAREHOLDERS AND RELATED PARTY TRANSACTIONS



7.A. Major Shareholders



As of June 30, 2012, all shareholders have the same voting rights attached thereto as all other common shares of the Company except that, under the terms of the Voting Agreement described above and attached as Exhibit 3 to the amended 2007 Form 20-F filed on December 3, 2008. As of June 30, 2012, no shareholder held more than 5% of the Issued and Outstanding Common Shares.



|     |                                                                                 |                                                                                                             |                                            
|---- | ------------------------------------------------------------------------------- | ----------------------------------------------------------------------------------------------------------- | -------------------------------------------
|Name | Number of Common
Shares, Warrants and Options (exercisable within 60 days) Held | Percentage of Common
Shares Held (calculated as a percentage of issued and outstanding on June 30, 2012 (1) | Options and warrants exercisable in 60 days
|N/A  | N/A                                                                             | N/A                                                                                                         | N/A                                        

(1)Based on 6,959,680 shares outstanding



7.A.1.a. Holdings By Major Shareholders.

Refer to ITEM #6.E and Table No. 10.



7.A.1.b. Significant Changes in Major Shareholders Holdings.

---No Disclosure Required---



7.A.1.c. Different Voting Rights.



The Companys major shareholders do not have different voting rights except as described in the Voting Agreement (Exhibit 3 filed with the amended 2007 Form 20-F on December 3, 2008) which is summarized in Section 4.A., History and Development of the Company.



58



---

TABLE OF CONTENTS







7.A.2. Canadian Share Ownership.



On June 30, 2012, the Companys shareholders list showed 6,959,680 common shares outstanding, an estimated 368 registered shareholders. The Company has researched the indirect holding by depository institutions and other financial institutions estimates that there are: 31 holders of record  resident in Canada, holding 6,895,246 common shares; 2 holders of record resident in the USA, holding 2,400 common shares and 3 holders of record resident elsewhere holding 62,034 common shares.



7.A.3. Control of the Company

The Company is a publicly owned Canadian corporation, the shares of which are owned primarily by Canadian residents and other foreign residents. The Company is not controlled by any foreign government or other person(s) except as described in ITEM #4.A., History and Growth of the Company, and ITEM #6.E., Share Ownership.



7.A.4. Change of Control of Company Arrangements

---No Disclosure Necessary---



7.B. Related Party Transactions



Effective June 1, 2008, the Company entered into consulting agreements with the management of the Company (filed as Exhibits, 4.j and 4.k with the 2008 Form 20-F on March 27, 2009.).



During the year ended June 30, 2012, the Company was invoiced for consulting fees of $155,305 (2011: $324,000; 2010: $350,000) from companies controlled by directors of the Company. The Company paid $116,305 for 2012 (2011: $178,000; 2010: $350,000). The remainder, $39,000 for 2012 (2011: $146,000; 2010: $NIL) will be paid when sufficient financing becomes available.



During the year ended June 30, 2012, the Company paid $Nil of rent (2011: $9,572; 2010: $38,259) to a company controlled by a director of the Company. On October 13, 2011, the company moved from the premises owned by the director as a result of the corporate office relocation.



During the year ended June 30, 2012, the Company received financial loans in the amount of $29,000 (2011: $77,000; 2010: $NIL) from companies controlled by the directors of the Company.



During the year ended June 30, 2012, the company recorded stock based compensation expense of $NIL (2011: $Nil; 2010: $115,225;) to directors and companies controlled by a director of the Company.



During the year ended June 30, 2012, the Company had subscriptions receivable of $Nil (2011: $30,000; 2010: $NIL) owing by directors of the Company, the funds were received in the year ended June 30, 2011 resulting in a carrying balance of $NIL



The Company entered into an agreement with Phigenics, LLC on July 21, 2005 (see 10.C. Material Contracts for a summary of the agreement and Exhibit 4.a. for details of the agreement). William McCoy, a Director of the Company, is the Chief Technical Officer of Phigenics. This agreement is still in effect but will not become effective until such time as the Company pursues the registration of products with the EPA in the US.



Accounting Fees

For the annual statements dated June 30, 2012, 2011, 2010 and 2009 the Company paid accounting fees of $16,000, $23,000 and $35,000 to Meyers Norris Penny LLP and, for the annual statements dated June 30, 2009, $29,010 to HLB Cinnamon Jang Willoughby, Charted Accountants. During the financial year ending June 30, 2010 HLB Cinnamon Jang Willoughby restructured by way of a merger to form Meyers Norris Penny LLP.



Indirect Payments

---No Disclosure Required---



Shareholder Loans

---No Disclosure Required---



59



---

TABLE OF CONTENTS







Amounts Owing to Senior Management/Directors

As if the date of this report, $106,000 is owing to Terrance Owen, President, CEO and Director by the way of Promissory Notes for funds advanced to the Company. Also as noted above, as of October 31, 2011, companies controlled by Terrance Owen and Peter Chen, CFO and Director, had accrued management fees of $159,040 and $125,440, respectively. There is no money owing to any other members of senior management or members of the Board of Directors.



There have been no transactions since June 30, 2005, or proposed transactions, which have materially affected or will materially affect the Company in which any director, executive officer, or beneficial holder of more than 5% of the outstanding common shares, or any of their respective relatives, spouses, associates or affiliates has had or will have any direct or material indirect interest other than those already disclosed.



7.C. Interests of Experts and Counsel

---No Disclosure Required---



ITEM 8. FINANCIAL INFORMATION



8.A. Consolidated Statements and Other Financial Information



The preparation of the financial statements in conformity with Canadian GAAP requires management to make estimates and assumptions that affect the amounts reported of assets and liabilities, the disclosure of contingent assets and liabilities at the date of financial statements and the amounts of revenues and expenses for the reporting period. The areas of estimation are the stock-based compensation, estimated useful lives of depreciable assets, and intellectual property. The Company believes that the estimates and assumptions upon which it relies are reasonable and are based on information available to the Company at the time that estimates and assumptions are made. Actual results could differ from those estimates.



The financial statements as required under ITEM #17 are attached hereto and found immediately following the text of this Annual Report. These include audited financial statements for the fiscal years ended June 30, 2011 and 2010 prepared by the auditor, Meyers Norris Penny LLP and for 2009 by the auditor Cinnamon Jang Willoughby. During the financial year ending June 30, 2010 HLB Cinnamon Jang Willoughby restructured by way of a merger to form Meyers Norris Penny LLP.



International Financial Reporting Standards (IFRS)



In February 2008, the Canadian Accounting Standards Board (AcSB) confirmed that the changeover for all Canadian Publicly Accountable Enterprises (PAEs) to adopt International Financial Reporting Standards (IFRS), replacing Canadian GAAP, will be effective for interim and annual financial statements relating to fiscal years beginning on or after January 1, 2011.



The transition date for the Company is July 1, 2011, at which time Canadian GAAP ceased to apply for the Company and was replaced by IFRS. The Companys first set of filing prepared under IFRS was the unaudited interim financial statements for the quarter ending September 30, 2011, including comparative IFRS financial information for the quarter ending September 30, 2010, an opening balance sheet as at July 1, 2010 and full disclosure of all new IFRS polices. The first annual IFRS financial statements is for the year ending June 30, 2012 with restatement of comparative balance sheets as at June 30, 2011 and July 1, 2010 and statement of operations for the year ended June 30, 2011, as well as conversion adjustments and reconciliations for the year ending June 30, 2012.



Although IFRS uses a conceptual framework similar to Canadian GAAP, there are significant differences in recognition, measurement and disclosure. The management of the Company developed a project plan for the conversion to IFRS based on the current nature of the operations. The Company broke down its IFRS transition plan into three phases: (1) Diagnostic and Scoping phase; (2) Planning, Analysis and Design phase, and (3) Implementation and Transition phase.  The Diagnostic and Scoping phase required the Company to assess the key accounting policies and financial systems that would be impacted by the transition to IFRS. Each potential impact identified during this phase was ranked to the degree of impact on our financial reporting and the overall complexity of the conversion effort. During the year, the Company completed the diagnosis phase for the adoption of IFRS. The diagnosis has identified the main differences between the accounting treatments applied by the Company under Canadian GAAP and the IFRS as well as the practical implications related to the measure.



60



---

TABLE OF CONTENTS







The Planning, Analysis and Design phase required the Company to prepare detailed analysis of the major differences between GAAP and IFRS applicable to the Company, decisions on accounting policy choices where applicable, a review of the information technology systems and determining the impact of the conversion on the business activities and internal control environment. During the year ended June 30, 2012, the Company evaluated and documented the existing differences between IFRS and Canadian GAAP in accounting and disclosure requirements, the selection of accounting policies, the consideration of options available including the application of IFRS-1- First-time adoption of International Financial Reporting Standard for an entitys initial adoption of IFRS. Key management has been trained throughout the convergence period. Current accounting program used is sufficient enough to support requirements of IFRS policy and reporting. There were minimal changes to our internal control over financial reporting and disclosure controls and procedures upon transition to IFRS.



The Implementation and Transition phase required the Company to fully execute the necessary changes to the information technology systems, and the internal controls and development of the financial statement presentation and disclosures in accordance with the managements accounting choices of IFRS. The Company implemented the identified changes to business processes, financial systems, accounting policies, disclosure controls and internal controls over financial reporting. There was no significant impact on its business processes, financial systems, disclosure controls and internal controls over financial reporting as a result of change to IFRS.



The Companys adoption of IFRS required the application of IFRS-1 First-time adoption of International Financial Reporting Standard (IFRS 1) which provided guidance for an entitys initial adoption of IFRS. IFRS 1 generally requires that an entity apply all IFRS effective at the end of its first IFRS reporting period retrospectively, with specific mandatory exemptions and a limited number of optional exemptions. The following are IFRS 1 exemptions that the Company  elected on transition date: (1) Fixed assets: The adopter has the option to elect fair value at the date of the transition as the deemed cost for its fixed assets. The Company did not utilize this election; (2) Financial instruments: The adopter may elect to reclassify a financial instrument as an available for sale, or as a financial asset or financial liability as at fair value through profit or loss, at the date of transition to IFRS, provided the asset or liability meets certain criteria. The Company kept the same classification of its financial instruments.



The adoption of IFRS resulted in some changes to the Companys existing accounting policies prepared in accordance to Canadian GAAP. During the evaluation process, the Company prepared a component evaluation of its existing financial statement line items, comparing Canadian GAAP to the corresponding IFRS guidelines. The Company  identified a number of differences between Canadian GAAP and IFRS and potential changes to its existing accounting policies in key areas that affected the Companys financial reporting. Set out below are selected key areas of accounting differences where changes in accounting policies in conversion to IFRS impacted the Companys consolidated financial statements.



Presentation of Financial Statement (IAS 1)

Financial statement presentation addressed in conjunction with the related IFRS standards. Certain additional disclosures were required in the notes to the financial statements and the statement of operations were modified to reflect either a presentation by nature or by function.



Property, plant and equipment (IAS 16)

Property, Plant & Equipment under IAS 16 and Canadian GAAP contain the same basic principles, however there were some differences. IFRS required that significant parts of an asset be depreciated separately and that depreciation commenced when the asset was available for use. IFRS also permitted property, plant and equipment to be measured using the fair value model or the historical cost model. The Company did not adopt the fair value measurement model for its property, plant and equipment. The Company continued to measure its property, plant and equipment at amortized cost.



Impairment of assets (IAS 36)

Under Canadian GAAP, the impairment test for assets or asset groups was a two-step process. The first step involved comparing undiscounted future cash flows of an asset or asset group to the carrying value. If the undiscounted cash flows were below the carrying value, the second step was required whereby an impairment charge was calculated as the difference between the asset or asset group discounted future cash flows, and its carrying amount. Impairments under IAS 36 only required a one-step impairment test. Using this test, the carrying value of an asset or asset group (referred to as a Cash Generating Unit) was compared to its recoverable amount, which was the higher of fair value less costs to sell, and



61



---

TABLE OF CONTENTS





value-in-use, which involved discounted future cash flows. Also, unlike Canadian GAAP, IFRS required impairment charges to be reversed when circumstances indicate that the impairment no longer existed. This did not impact the Companys financial statements.



Share-based compensation (IFRS 2)

Stock-based compensation  IFRS 1 encouraged, but did not require, the application of IFRS 2 Shared-based Payment to equity instruments that were granted on or before November 7, 2002. A first-time adopter was also encouraged, but not required, to apply IFRS 2 to equity instruments that were granted after November 7, 2002 and vested before the date of transition or on January 1, 2005, whichever is later. Under Canadian GAAP, the total fair value of the award is recognized on a straight-line basis over the employment period necessary to vest the award, whereas under IFRS, each tranche in an award with graded vesting is considered a separate grant with a different vesting date and fair value. Furthermore, contrary to Canadian GAAP, the Company was required to estimate the number of awards expected to vest, instead of posting the forfeiture of awards when they occur.



Revenue (IAS 18)

The current general principles for revenue recognition are very similar between IFRS and Canadian GAAP. There were no significant quantitative differences upon the adoption of IFRS.



Estimates: IFRS 1 did not permit changes to estimates that were made previously. Accordingly, estimates used in the preparation of the Companys opening IFRS statement of financial position as at the transition date are consistent with those made under current Canadian GAAP



The Board of Directors and the Audit Committee have been regularly updated on the progress of the IFRS conversion plan, and made aware of the evaluation to date of the key aspects of IFRS affecting the Company.



8.A.7. Legal/Arbitration Proceedings



. On January 5, 2012, at a court hearing, Cosmaceutical Research Lab, Inc. (CRL) received a Small Claims judgment against the Company for the amount of $9,727.93. The Company is in discussions with CRL on how to pay the amount owing. Other than this one action, the Directors and the management of the Company do not know of any material, active or pending, legal proceedings against them; nor is the Company involved as a plaintiff in any other material proceeding or pending litigation.



On March 29, 2012, ACD Insurance Services Ltd. filed a Notice of Claim (the ACD Claim) in the Provincial Court of British Columbia, North Vancouver against the Company for $2,148.00 for unpaid invoices and court costs. The Company did not dispute the claim and the Court issued a summary judgment against the Company.



8.B. Significant Changes



On December 15, 2011, Mr. Eugene Hodgson resigned as a director and was replaced on the audit committee by Dr. Ronald Zokol. On December 19, 2011 the Company announced that Mr. Hodgson was to be replaced by Mr. Sina Pirooz but the Company did not complete the appointment due to a decision to reduce the number of directors to five from six after Mr. Hodgsons resignation.



On March 08, 2012 the Company consolidated its shares on a 10 to 1 basis. This resulted in the outstanding shares of the company being consolidated from 63,996,800 to 6,399,680. All references to common shares, share purchase warrants, stock options, and per share amounts for all periods have been adjusted on a retrospective basis to reflect the common share consolidation.



On April 12, 2012 Peter Chen resigned as CFO, Secretary and Director of the Company. On the same date Jamie Lewin accepted to act as CFO, Secretary and Director.



62



---

TABLE OF CONTENTS







ITEM 9. THE OFFER AND LISTING



9.A. Common Share Trading Information



The Company's common shares trade on the TSX Venture Exchange in Toronto, Ontario, Canada, under the symbol "APH". The Company applied for listing on the TSX Venture Exchange and began trading on the TSX Venture Exchange on July 31, 2001 under its former name, Duft Biotech Capital Ltd. and under its former symbol, DUF. The Company also trades on the OTCQB under the symbol APCSF.



Table No. 12 lists the high, low and closing sales prices on the TSX Venture Exchange for the last six months, last ten fiscal quarters, and last five fiscal years.



Table No. 12

TSX Venture Exchange

Common Shares Trading Activity





Sale - Canadian Dollars



|                                |       |       |        
|------------------------------- | ----- | ----- | -------
|                                | High  | Low   | Closing
|Month ended 12/31/12            | n/a   | n/a   | m/a    
|Month ended 11/30/12            | 0.085 | 0.085 | 0.085  
|Month ended 10/31/12            | 0.095 | 0.075 | 0.095  
|Month ended 09/30/12            | n/a   | n/a   | n/a    
|Month ended 08/31/12            | n/a   | n/a   | n/a    
|Month ended 07/31/12            | 0.07  | 0.07  | 0.07   
|                                |       |       |        
|Fiscal Year Ended 06/30/2012    | n/a   | n/a   | n/a    
|Fiscal Year Ended 06/30/2011    | 0.14  | 0.04  | 0.05   
|Fiscal Year Ended 06/30/2010    | 0.74  | 0.12  | 0.12   
|Fiscal Year Ended 06/30/2009    | 0.48  | 0.06  | 0.17   
|Fiscal Year Ended 06/30/2008    | 1.57  | 0.14  | 0.42   
|                                |       |       |        
|Fiscal Quarter Ended 12/31/2012 | 0.11  | 0.11  | 0.11   
|Fiscal Quarter Ended 09/30/2012 | 0.085 | 0.085 | 0.085  
|Fiscal Quarter Ended 06/30/2012 | n/a   | n/a   | n/a    
|Fiscal Quarter Ended 03/31/2012 | 0.155 | 0.145 | 0.15   
|Fiscal Quarter Ended 12/31/2011 | 0.04  | 0.02  | 0.025  
|Fiscal Quarter Ended 09/30/2011 | 0.05  | 0.03  | 0.03   
|Fiscal Quarter Ended 06/30/2011 | 0.09  | 0.04  | 0.05   
|Fiscal Quarter Ended 03/31/2011 | 0.11  | 0.08  | 0.08   





9.A.5. Common Share Description



Registrar/Common Shares Outstanding/Shareholders



Effective August 19, 2005, the authorized share capital of the Company was increased to an unlimited number of common shares without par value due to changes in the British Columbia Company Act which permitted this action.



There are no Indentures or Agreements limiting the payment of dividends and there are no conversion rights, special liquidation rights, pre-emptive rights or subscription rights.



63



---

TABLE OF CONTENTS







Computershare Trust Company of Canada (located at 2nd Floor, 510 Burrard Street, Vancouver, British Columbia Canada V6C 3B9) is the registrar and transfer agent for the common shares.



Stock Options

Refer to ITEM 6.E., Table No. 9 (Aggregate Option Exercises) and Table No. 11 (Stock Options Outstanding) for additional information regarding the Companys stock options.



Table No. 13 lists, as of June 30, 2012, share purchase warrants (options to purchase common shares) outstanding, the date the share purchase warrants were issued, the exercise price, and the expiration date of the share purchase warrants.  These warrants were issued in conjunction with private placements of the Companys securities and all holders of the Companys warrants are resident in Canada.



Table No. 13

Share Purchase Warrants Outstanding





|                                                  |                                                     |                                                     |                   |                                                  
|------------------------------------------------- | --------------------------------------------------- | --------------------------------------------------- | ----------------- | -------------------------------------------------
|Effective Date of Issuance                        | Number of Share Purchase Warrants Originally Issued | Number of Share Purchase Warrants Still Outstanding | Exercise Price    | Expiration Date of Share Purchase Warrants       
|September 7, 2010
January 12, 2011
April 27, 2012 | 327,500(1)
200,000(2)
560,000(3)                    | 327,500
200,000
560,000                             | $2.00
$2.00
$0.10 | September 7, 2012
January 12, 2013
April 27, 2014

(1)

Issued pursuant to a private placement which closed on September 7, 2010. Exercisable period of the warrants to September 7, 2011 at the exercise price of $2.00 per share with a forced exercise provision attached to each warrant.

(2)

Issued pursuant to a private placement which closed on January 12, 2011. Exercisable period of the warrants to January 12, 2013 at the exercise price of $2.00 per share with a forced exercise provision attached to each warrant.

(3)

Issued pursuant to a private placement which closed on April 27, 2012. Exercisable period of the warrants to April 27, 2014 at the exercise price of $0.10 per share with a forced exercise provision attached to each warrant.







9.A.6. Differing Rights

---No Disclosure Necessary---



9.A.7.a. Subscription Warrants/Right

---No Disclosure Necessary---



9.A.7.b. Convertible Securities/Warrants

---No Disclosure Necessary---



9.C. Stock Exchanges Identified



The common shares trade on the TSX Venture Exchange which is headquartered in Toronto, Ontario.



Refer to ITEM #9.A.4 for trading information and history. At this time, the Company is not seeking a listing on any other stock exchange.



ITEM 10. ADDITIONAL INFORMATION



10.A. Share Capital



10.A.1. Authorized/Issued Capital.



Effective August 19, 2005, the authorized share capital of the Company was increased to an unlimited number of common shares without par value due to changes in the British Columbia Company Act which permitted this action.





64



---

TABLE OF CONTENTS





At June 30, 2012, there were an unlimited number of common shares authorized and 6,959,680 common shares issued and outstanding. On March 08, 2012 the Company consolidated its shares on a 10 to 1 basis



At June 30, 2011, there were an unlimited number of common shares authorized and 63,996,799 common shares issued and outstanding.



At June 30, 2010, there were an unlimited number of common shares authorized and 58,721,799 common shares issued and outstanding.



At June 30, 2009, there were an unlimited number of common shares authorized and 51,341,799 common shares issued and outstanding.



At June 30, 2008, there were an unlimited number of common shares authorized and there were 49,511,799 common shares issued and outstanding.



At June 30, 2007, there were an unlimited number of common shares authorized and there were 32,192,404 common shares issued and outstanding.



At June 30, 2006, there were an unlimited number of common shares authorized and there were 20,800,404 common shares issued and outstanding.



As of June 30, 2005, there were 100,000,000 common shares authorized and 15,784,404 common shares issued.



As of June 30, 2004, there were 100,000,000 common shares authorized and 12,784,404 common shares issued.



As of June 30, 2003, there were 100,000,000 common shares authorized and 2,451,475 common shares issued.



As of June 30, 2002, there were 100,000,000 common shares authorized and 2,376,475 common shares issued.



As of June 30, 2001, there were 100,000,000 common shares authorized and 1,176,475 common shares issued.



During the last five years, less than 1% of the capital has been paid for with assets other than cash.



10.A.2. Shares Not Representing Capital.

---No Disclosure Necessary---



10.A.3. Shares Held By Company.

---No Disclosure Necessary---



10.A.4. Stock Options/Share Purchase Warrants

---Refer to Tables No. 8, No. 11 No. 13.---



10.A.5. Stock Options/Share Purchase Warrants

---Refer to Tables No. 8, No. 11 No. 13.---





65



---

TABLE OF CONTENTS





10.A.6. History of Share Capital



The Company has financed its operations through funds raised in public and private placements of common shares and warrants and from revenues from the sale of its products:



|            |                                                                       |                  |                       
|----------- | --------------------------------------------------------------------- | ---------------- | ----------------------
|Fiscal Year | Nature of Share Issuance                                              | Number of Shares | Amount ($)            
|Fiscal 2001 | Private Placement @ $0.85                                             | 117,647          | $100,000.38           
|            |                                                                       |                  |                       
|Fiscal 2002 | Canadian Prospectus Offering (IPO) @$1.70                             | 120,000          | $204,000.00           
|Fiscal 2003 | Brokers Warrant Shares on Canadian Prospectus Offering (IPO) @ $1.70 | 15,000           | $25,500.00            
|            |                                                                       |                  |                       
|Fiscal 2004 | Private Placement @ $1.50                                             | 34,666           | $52,000.00            
|            | Private Placement @ $2..00                                            | 620,000          | $1,240,000.00         
|            |                                                                       |                  |                       
|Fiscal 2005 | Private Placement @ $1.00                                             | 300,000          | $300,000.00           
|            |                                                                       |                  |                       
|Fiscal 2006 | Private Placement @$0.50
Private Placement @$0.50                     | 391,600
110,000  | $195,800.00
$55,000.00
|            |                                                                       |                  |                       
|Fiscal 2007 | Private Placement @$1.50
Private Placement @$1.00                     | 143,000
800,000  | $71,500.00
$800,000.00
|            |                                                                       |                  |                       
|Fiscal 2008 | Private placement @ $1.20                                             | 200,000          | $240,000.00           
|            | Private placement @ $1.50                                             | 350,000          | $525,000.00           
|            |                                                                       |                  |                       
|Fiscal 2009 | N/A                                                                   | N/A              | N/A                   
|            |                                                                       |                  |                       
|Fiscal 2010 | Private placement @ $2.50                                             | 600,000          | 1,500,000.00          
|            |                                                                       |                  |                       
|Fiscal 2011 | Private placement @ $1.00
Private placement @ $1.00                   | 327,500
200,000  | $327,500
$200,000     
|Fiscal 2012 | Private placement @$0.10                                              | 560,000          | $56,000               



*Shares consolidated 10 to 1and adjusted on a retrospective basis.



10.A.7. Resolutions/Authorizations/Approvals

---No Disclosure Necessary---



10.B. Memorandum and Articles of Association

The Companys corporate constituting documents comprising the Notice of Articles and Articles are registered with the British Columbia Registrar of Companies under Incorporation No. BC0607937. A copy of the Articles was filed as an Exhibit 1 with the Companys initial registration statement on Form 20-F.



The following is a summary of certain  provisions of the Company's  Notice of Articles and Articles and certain provisions of the British Columbia Business Corporations Act (the BCA), applicable to the Company:



Objects and Purposes

The Articles do not specify objects or purposes. Under both the BCA, a British Columbia corporation generally has all the legal powers of a natural person. British Columbia corporations may not undertake certain limited business activities such as operating as a trust company or railroad without alterations to its form of articles and specific government consent.



Share Capital

The authorized capital of the Company consists of an unlimited number of common shares without par value. All of the common shares must be fully paid and are not subject to any future call or assessment. All of the common shares of the Company rank equally as to voting rights, participation in a distribution of the assets of the Company on a liquidation, dissolution or winding-up of the Company and the entitlement to dividends. The holders of the common shares are entitled to receive notice of all shareholder meetings and to attend and vote at such meetings. Shareholders are not entitled to cumulative voting. Each common share carries with it the right to one vote. The common shares do not have preemptive or



66



---

TABLE OF CONTENTS





conversion rights. In addition, there are no sinking fund or redemption provisions applicable to the common shares or any provisions discriminating against any existing or prospective holders of such securities as a result of a shareholder owning a substantial number of shares.



Share Certificates

Under the Articles, a shareholder is entitled to a share certificate representing the number of shares of the Company held or a written acknowledgement of the shareholders right to obtain such a share certificate.



No Limitation on Foreign Ownership

There are no limitations under the Companys Articles or in the BCA on the right of persons who are not citizens of Canada to hold or vote common shares.



Dividends

Dividends may be declared by the Board out of available assets and are paid rateably to holders of common shares. No dividend may be paid if the Company is, or would thereby become, insolvent.



Voting Rights

Each of the Companys common share is entitled to one vote on matters to which common shares ordinarily vote including the annual election of directors, appointment of auditors and approval of corporate changes. There are no cumulative voting rights applicable to the Company.



Borrowing Powers

The Company, if authorized by the directors, may: (a) borrow money in the manner and amount, on the security, from the sources and on the terms and conditions that they consider appropriate; (b) issue bonds, debentures and other debt obligations either outright or as security for any liability or obligation of the Company or any other person and at such discounts or premiums and on such other terms as they consider appropriate; (c) guarantee the repayment of money by any other person or the performance of any obligation of any other person; and (d)mortgage, charge, whether by way of specific or floating charge, grant a security interest in, or give other security on, the whole or any part of the present and future assets and undertaking of the Company.



Indemnity Provisions

Under the Articles and the BCA, the Company is now permitted (and is, in some circumstances, required) to indemnify a past or present director or officer of the Company or an associated corporation without obtaining prior court approval in respect of an eligible proceeding. An eligible proceeding includes any legal proceeding relating to the activities of the individual as a director or officer of the Company. However, under the BCA, the Company will be prohibited from paying an indemnity if: (a) the party did not act honestly and in good faith with a view to the best interests of the Company; (b) the proceeding was not a civil proceeding and the party did not have reasonable grounds for believing that his or her conduct was lawful; and (c) the proceeding is brought against the party by the Company or an associated corporation.



Directors  Number and Qualification

The Companys Articles do not specify a maximum number of directors. The minimum under British Columbia law for a public company is three. The number of directors shall be the number of directors fixed by the directors annually or the number that are actually elected at a general shareholders meeting under the Existing Articles. The number of directors is determined, annually, by shareholders at the annual shareholders meeting and all directors are elected at that time. Under the Articles the directors are entitled between successive annual general meetings to appoint one or more additional directors but not more than one-third of the number of directors fixed at a shareholders or actually elected at the preceding annual shareholders meeting. Directors automatically retire at the commencement of each annual meeting but may be re-elected thereat.



Directors must be of the age of majority (18), and meet eligibility criteria including being mentally competent, not an un-discharged bankrupt, no fraud related convictions in the previous five years. There are residency requirements and there is no mandatory retirement age either under the Articles or under the BCA. Directors need not own any shares of the Company in order to qualify as directors.



Directors - Powers and Limitations

Directors must manage or supervise the management of the business and affairs of the Company and have the authority to exercise all such powers which are not required to be exercised by the shareholders as governed by the BCA. Directors may, by resolution, create and appoint an executive committee consisting of the director or directors that they deem appropriate. This executive committee has, during the intervals between meetings of the Board, all of the directors powers,



67



---

TABLE OF CONTENTS





except the power to fill vacancies in the Board, the power to remove a Director, the power to change the membership of, or fill vacancies in, any committee of the Board and any such other powers as may be set out in the resolution or any subsequent directors resolution. Directors may also by resolution appoint one or more committees other than the executive committee. These committees may be delegated any of the directors powers except the power to fill vacancies on the board of directors, the power to remove a director, the power to change the membership or fill vacancies on any committee of the directors, and the power to appoint or remove officers appointed by the directors.



Under the BCA, directors are obligated to abstain from voting on matters in which they may be financially interested after disclosing in writing such interest. Directors compensation is not a matter on which they must abstain. Directors borrowing powers are not generally restricted where the borrowing is in the Companys best interests, but the directors may not authorize the Company to provide financial assistance for any reason where the Company is insolvent or the providing of the guarantee would render it insolvent.



Amendment of Articles and Notice of Articles; Special Transactions

The Articles provide that the general authority required to amend all provisions of the Companys Articles and the Notice of Articles relating to the authorized share structure is a resolution of the directors and the attachment of special rights and restrictions thereto, including any changes therein, an ordinary resolution. If the amendment prejudices or interferes with the rights or special rights attached to any class of issued shares, by the provisions of the BCA, the consent of the holders of that class of shares by a special separate resolution is also required.



Certain corporate changes or proposed transactions including amalgamation with another company, sale of substantially all of the Companys assets, re-domiciling out of the jurisdiction of British Columbia, creation of new classes of shares not only require the consent of the holders of common shares by a special separate resolution but generally also give rise to a dissent right which is the right to be paid the fair value of the stockholders shares in cash if the required special resolution is actually passed and the Company elects to proceed with the matter notwithstanding receipt of dissent notices. A notice of a shareholders meeting at which such a change or proposed transaction is intended to be considered must include a prominent notice of the dissent right. Dissent provisions are governed by the BCA and not by the Articles of the Company.



Under the Articles, a special separate resolution requires a majority of three-quarters of the votes cast.



Shareholders Meetings

In addition to reflecting the present notice and other provisions of the BCA relating to shareholders meetings, the Articles provide that shareholders meetings may be held at such place as is determined by the directors. Shareholders meetings are governed by the Articles of the Company but many important protections and procedures are contained within the BCA and the Securities Act (British Columbia) and the Securities Act (Alberta) and the respective regulations and rules thereto and the policy statements, notices and blanket orders of the respective commissions of each of British Columbia and Alberta, together with the national policy statements, and national instruments applied by the such commissions (collectively, Applicable Canadian Securities Law). The Articles provide that the Company will hold an annual shareholders meeting, will provide at least 21 days notice and will provide for certain procedural matters and rules of order with respect to conduct of the meeting. The BCA and Applicable Canadian Securities Law superimpose requirements that generally provide that shareholders meetings require not less than a 60 day notice period from initial public notice and that the Company makes a thorough advanced search of intermediary and brokerage registered shareholdings to facilitate communication with beneficial shareholders so that meeting proxy and information materials can be sent via the brokerages to unregistered but beneficial shareholders. The form and content of information circulars and proxies and like matters are governed by Applicable Canadian Securities Law and includes the specifies relating to disclosure requirements for the proxy materials and various corporate actions, background information on the nominees for election for director, executive compensation paid in the previous year and full details of any unusual matters or related party transactions.



The Company must hold an annual shareholders meeting open to all shareholders for personal attendance or by proxy at each shareholders determination. The meeting must be held within 13 months of the previous annual shareholders meeting and must present audited statements which are dated no more than six months prior to such meeting.



Change in Control

The Company has not implemented any shareholders rights or other poison pill protection against possible take-overs. The Company does not have any agreements which are triggered by a take-over or other change of control. There are no provisions in its articles triggered by or affected by a change in outstanding shares which gives rise to a change in control. There are no provisions in the Companys material agreements giving special rights to any person on a change in control.





68



---

TABLE OF CONTENTS





Insider Share Ownership Reporting

The Articles of the Company do not require disclosure of share ownership. Share ownership of director nominees must be reported annually in proxy materials sent to the Companys shareholders. There are no requirements under the BCA to report ownership of shares of the Company but Applicable Canadian Securities Law requires disclosure of trading by insiders (generally officers, directors and holders of 10% of voting shares) within 10 days of the trade. Controlling shareholders (generally those in excess of 20% of outstanding shares) must provide seven days advance notice of share sales.



Applicable Canadian Securities Law

Applicable Canadian Securities Law governs matters typically pertaining to public companies such as continuous quarterly financial reporting, immediate disclosure of material changes, insider trade reporting, take-over protections to ensure fair and equal treatment of all shareholders, exemption and resale rules pertaining to non-prospectus securities issuances as well as civil liability for certain misrepresentations, disciplinary, appeal and discretionary ruling matters. All of the Companys shareholders regardless of residence have equal rights under this legislation except as provided for in the Voting Agreement (Exhibit 3.a.).



10.C. Material Contracts



Phigenics (Exhibit 4.a.):



On August 9, 2005 the Company signed an agreement appointing Phigenics, LLC to manage the registration of its products with the EPA Registration and assist with U.S. sales. Dr. William F. McCoy, Director is the Chief Technical Officer of Phigenics LLC.



Under the terms of the agreement, Phigenics LLC will provide a contribution in kind of up to $33,000 at a mutually agreeable per diem rate.



The Company will: provide up to $32,000 (US) for registration fees and pay royalties to Phigenics LLC ranging from 7% in the first year to 1% in the 6th and 7th years and a finders fee of 5% of sales to new clients for the first year after the first sale and 3% for the next year. Neither the term nor the termination provisions of the agreement are defined. The agreement will become active only if the Company decides to pursue registration of any of its products with the EPA in the US.



10.D. Exchange Controls



Canada has no system of exchange controls. There are no Canadian restrictions on the repatriation of capital or earnings of a Canadian public company to non-resident investors. There are no laws in Canada or exchange restrictions affecting the remittance of dividends, profits, interest, royalties and other payments to non-resident holders of the Companys securities, except as discussed in ITEM 10, Taxation" below.



Restrictions on Share Ownership by Non-Canadians:  There are no limitations under the laws of Canada or in the organizing documents of the Company on the right of foreigners to hold or vote securities of the Company, except that the Investment Canada Act may require review and approval by the Minister of Industry (Canada) of certain acquisitions of "control" of the Company by a "non-Canadian". The threshold for acquisitions of control is generally defined as being one-third or more of the voting shares of the Company. "Non-Canadian" generally means an individual who is not a Canadian citizen, or a corporation, partnership, trust or joint venture that is ultimately controlled by non-Canadians. If a non-Canadian (for example, a US resident acquirer) were to acquire such a control position, they would not be required to do any filings or provide any notices to the Ministry of Industry (Canada) unless notified first by that Ministry that their acquisition of control was under review.



Canada has, as does the United States, competition laws designed to promote competition in industry and markets. The Competition Act (Canada) provides Canadas federal government with the power to review or prevent business transactions, such as acquiring a controlling interest in a company similar to the Company , if it is found that the acquisition of control would reduce competition in a given market or industry. Since the market that the Company competes in is extremely competitive, no single company, including the Company, seems to have significant market power. Acquisition of the Company, therefore, would not lead to reduced competition.





69



---

TABLE OF CONTENTS





10.E. Taxation



Canadian Federal Income Tax Considerations:



The following is a brief summary of some of the principal Canadian federal income tax consequences to a holder of common shares of the Company (a "U.S. Holder") who deals at arm's length with the Company, holds the shares as capital property and who, for the purposes of the Income Tax Act (Canada) (the "Act") and the Canada  United States Income Tax Convention (the "Treaty"), is at all relevant times resident in the United States, is not and is not deemed to be resident in Canada and does not use or hold and is not deemed to use or hold the shares in carrying on a business in Canada. Special rules, which are not discussed below, may apply to a U.S. Holder that is an insurer that carries on business in Canada and elsewhere.



Under the Act and the Treaty, a U.S. Holder of common shares will generally be subject to a 5% withholding tax on dividends paid or credited or deemed by the Act to have been paid or credited on such shares. The withholding tax rate is 5% where the U.S. Holder is a corporation that beneficially owns at least 10% of the voting shares of the Company and the dividends may be exempt from such withholding in the case of some U.S. Holders such as qualifying pension funds and charities.

In general, a U.S. Holder will not be subject to Canadian income tax on capital gains arising on the disposition of shares of the Company unless (i) at any time in the five-year period immediately preceding the disposition, 25% or more of the shares of any class or series of the capital stock of the Company was owned by (or was under option of or subject to an interest of) the U.S. holder or persons with whom the U.S. holder did not deal at arm's length, and (ii) the value of the common shares of the Company at the time of the disposition derives principally from real property (as defined in the Treaty) situated in Canada. For this purpose, the Treaty defines real property situated in Canada to include rights to explore for or exploit mineral deposits and other natural resources situated in Canada, rights to amounts computed by reference to the amount or value of production from such resources, certain other rights in respect of natural resources situated in Canada and shares of a corporation the value of whose shares is derived principally from real property situated in Canada.



The US Internal Revenue Code provides special anti-deferral rules regarding certain distributions received by US persons with respect to, and sales and other dispositions (including pledges) of stock of, a passive foreign investment company. A foreign corporation, such as the Company, will be treated as a passive foreign investment company if 75% or more of its gross income is passive income for a taxable year or if the average percentage of its assets (by value) that produce, or are held for the production of, passive income is at least 50% for a taxable year. The Company believes that it was not a passive foreign investment company for the taxable year ended December 31, 2009 and, furthermore, expects to conduct its affairs in such a manner so that it will not meet the criteria to be considered passive foreign investment company in the foreseeable future.



Dividends:



A Holder will be subject to Canadian withholding tax ("Part XIII Tax") equal to 25%, or such lower rate as may be available under an applicable tax treaty, of the gross amount of any dividend paid or deemed to be paid on common shares. Under the Canada-U.S. Income Tax Convention (1980) as amended by the Protocols signed on 6/14/1983, 3/28/1984, 3/17/1995, and 7/29/1997 (the "Treaty"), the rate of Part XIII Tax applicable to a dividend on common shares paid to a Holder who is a resident of the United States and who is the beneficial owner of the dividend, is 5%. If the Holder is a company that owns at least 10% of the voting stock of the Company paying the dividend, and, in all other cases, the tax rate is 15% of the gross amount of the dividend. The Company will be required to withhold the applicable amount of Part XIII Tax from each dividend so paid and remit the withheld amount directly to the Receiver General for Canada for the account of the Holder.



Disposition of Common Shares:



A Holder who disposes of a common share, including by deemed disposition on death, will not normally be subject to Canadian tax on any capital gain (or capital loss) thereby realized unless the common share constituted "taxable Canadian property" as defined by the Tax Act. Generally, a common share of a public corporation will not constitute taxable Canadian property of a Holder if the share is listed on a prescribed stock exchange unless the Holder or persons with whom the Holder did not deal at arm's length alone or together held or held options to acquire, at any time within the five years preceding the disposition, 25% or more of the shares of any class of the capital stock of the Company. The Canadian Venture Exchange is a prescribed stock exchange under the Tax Act. A Holder who is a resident of the United States and realizes a capital gain on a disposition of a common share that was taxable Canadian property will nevertheless, by virtue of the Treaty, generally be exempt from Canadian tax thereon unless:





70



---

TABLE OF CONTENTS





(a)  More than 50% of the value of the common shares is derived from, or from an interest in, Canadian real estate, including Canadian mineral resource properties,

(b)

The common share formed part of the business property of a permanent establishment that the Holder has or had in Canada within the 12 month period preceding the disposition, or

(c)

The Holder is an individual who (i) was a resident of Canada at any time during the 10 years immediately preceding the disposition, and for a total of 120 months during any period of 20 consecutive years, preceding the disposition, and (ii) owned the common share when he ceased to be resident in Canada.



A Holder who is subject to Canadian tax in respect of a capital gain realized on a disposition of a common share must include three quarters of the capital gain (taxable capital gain) in computing the Holder's taxable income earned in Canada. The Holder may, subject to certain limitations, deduct three-quarters of any capital loss (allowable capital loss) arising on a disposition of taxable Canadian property from taxable capital gains realized in the year of disposition in respect to taxable Canadian property and, to the extent not so deductible, from such taxable capital gains realized in any of the three preceding years or any subsequent year.



United States Taxation:



For federal income tax purposes, an individual who is a citizen or resident of the United States or a domestic corporation ("U.S. Taxpayer") will recognize a gain or loss on the sale of the Company's common shares equal to the difference between the proceeds from such sale and the adjusted tax basis of the common shares. The gain or loss will be a capital gain or capital loss if the Company's common shares are a capital asset in U.S. Taxpayer's hands.



For federal income tax purposes, a U.S. Taxpayer will be required to include in gross income dividends received on the Company's common shares. A U.S. Taxpayer who pays Canadian tax on a dividend on common shares will be entitled, subject to certain limitations, to a credit (or alternatively, a deduction) against federal income tax liability. A domestic corporation that owns at least 10% of the voting shares should consult its tax advisor as to applicability of the deemed paid foreign tax credit with respect to dividends paid on the Company's common shares.



Under a number of circumstances, United States Investor acquiring shares of the Company may be required to file an information return with the Internal Revenue Service Center where they are required to file their tax returns with a duplicate copy to the Internal Revenue Service Center, Philadelphia, PA 19255. In particular, any United States Investor who becomes the owner, directly or indirectly, of 10% or more of the shares of the Company will be required to file such a return. Other filing requirements may apply. United States Investors should consult their own tax advisors concerning these requirements.



The US Internal Revenue Code provides special anti-deferral rules regarding certain distributions received by US persons with respect to, and sales and other dispositions (including pledges) of stock of, a passive foreign investment company. A foreign corporation, such as the Company, will be treated as a passive foreign investment company if 75% or more of its gross income is passive income for a taxable year or if the average percentage of its assets (by value) that produce, or are held for the production of, passive income is at least 50% for a taxable year. The Company believes that it was not a passive foreign investment company for the taxable year ended December 31, 2009 and, furthermore, expects to conduct its affairs in such a manner so that it will not meet the criteria to be considered passive foreign investment company in the foreseeable future.



10.F. Dividends and Paying Agents



The Company has not declared any dividends on its common shares for the last five years and does not anticipate that it will do so in the foreseeable future. The present policy of the Company is to retain future earnings for use in its operations and the expansion of its business.



Notwithstanding the aforementioned: the Company is unaware of any dividend restrictions; has no specific procedure for the setting of the date of dividend entitlement; but might expect to set a record date for stock ownership to determine entitlement; has no specific procedures for non-resident holders to claim dividends, but might expect to mail their dividends in the same manner as resident holders. The Company has not nominated any financial institutions to be the potential paying agents for dividends in the United States.





71



---

TABLE OF CONTENTS





10.G. Statement by Experts



The Companys auditor for its financial statements for fiscal year ended 2011 was Meyers Norris Penny LLP. During the financial year ending June 30, 2010, HLB Cinnamon Jang Willoughby restructured by way of a merger to form Meyers Norris Penny LLP.  Their audit report for Fiscal 2011 is included with the related financial statements in this Annual Report with their consent attached hereto as an exhibit.



10.H. Document on Display

--- No Disclosure Necessary ---



ITEM 11. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

--- No Disclosure Necessary ---



ITEM 12. DESCRIPTION OF SECURITIES OTHER THAN EQUITY SECURITIES



12.A. Debt Securities

--- No Disclosure Necessary ---



12.B. Warrants and Rights

--- No Disclosure Necessary ---



12.C. Other Securities

--- No Disclosure Necessary ---



12.D. American Depository Shares

-- No Disclosure Necessary ---



PART II



ITEM 13. DEFAULTS, DIVIDEND ARREARAGES AND DELINQUENCIES

--- No Disclosure Necessary ---



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

--- No Disclosure Necessary ---



ITEM 15. CONTROLS AND PROCEDURES



The Company carried out an evaluation, under the supervision and with the participation of the Companys management, including the Companys President, of the effectiveness of the design and operation of the Companys disclosure controls and procedures (as defined in the Exchange Act Rule 13a-15(e)) as of the end of the period covered by this report. Based upon that evaluation, the President concluded that the Companys disclosure controls and procedures are effective in timely alerting them to material information relating to the Company required to be included in the Companys periodic SEC filings, and that information is recorded, processed, summarized and reported as and when required.



There was no significant change in the Companys internal control over financial reporting that occurred during the Companys most recently completed fiscal year ended June 30, 2011 that has materially affected, or is reasonably likely to materially affect, the Companys internal control over financial reporting. Nor were there any significant deficiencies or material weaknesses in the Company's internal controls requiring corrective actions.



ITEM 16. RESERVED



ITEM 16A. AUDIT COMMITTEE FINANCIAL EXPERTS



Linda Allison, Eugene Hodgson and Jamieare members of the Companys Audit Committee. Linda Allison and Eugene Hodgson are considered independent and financially literate, as those terms are defined in applicable securities legislation.



Dr. Allison received a BSc (Honours) from Simon Fraser University, Vancouver, BC, Canada in 1969, a MSc from the University of London, UK and a Diploma of Imperial College (DIC) from the Imperial College of Science and Technology, London, UK in 1972. She received her PhD from Simon Fraser University in 1978 based on research in the areas of



72



---

TABLE OF CONTENTS





neurophysiology, molecular biology and biophysics. From 1980 to 1995, she was President of Groberman Computer Engineering Ltd., a computer technology company developing custom systems for scientific and industrial applications. In 1985, she founded Snowdon & Associates Management Consultants Ltd., a management consulting company that provides professional services to medical device, biotechnology, pharmaceutical, and high technology companies. From 1992 to 1998, Dr. Allison worked in the corporate finance departments of two investment banking and brokerage firms, during which time she assisted the financing of biomedical and high technology companies in both North America and Europe. From 1998 to 2001, she was President & CEO of Ondine Biopharma Corp., a biomedical company developing photo-activated drugs. From 2000 to 2001, she was the President & CEO of Genesis Bioventures Inc., a biomedical holding company that invested in companies developing novel diagnostics and therapeutics in the areas of cancer and neurological disorders. From 2003 to 2005, she served as President & CEO and a Director of MDX Medical Inc., a biomedical company developing medical imaging technologies for the improved diagnosis and treatment of cancer. From 2006 to present, she has been on the ForeFront Committee of the Alberta Heritage Foundation for Medical Research.



Eugene Hodgson received a Bachelor of Arts degree from the University of Calgary in 1978. He was Director of Corporate Development for Intrawest Corporation from 1990 till 1996 and has been the President of E.A. Hodgson & Associates, a private management consulting firm, since 1996. He currently serves as a Vice President Western Region of Corpfinance International Limited., a firm that provides specialized term financing to mid-sized and large companies and is a Director of Timmins Gold Corp., a publicly-traded company. Mr. Hodgson was previously a CFO and Director of Sea Breeze Power Inc. He is a co-founder of the "Families for School Seismic Safety" in B.C. and a past Director of the Independent Power Producers of B.C. He is a former Director of the Vancouver Board of Trade and current Area Commissioner of the Pacific Spirit Area for the Boy Scouts of Canada.



Due to the resignation of Mr. Hodgson from the Companys Board of Directors on December 15, 2011, he was replaced on the audit committee by Dr. Ronald Zokol.



Dr. Zokol was a Director of ALDA Pharmaceuticals Inc., the assets of which were acquired in November, 2003 as a Qualifying Transaction by the Company which had been created as a Capital Pool Company. Dr. Ron Zokol graduated from the University of British Columbia, Faculty of Dentistry in 1974 and started his first 20 years of practice in partnership with his father, a certified specialist in prosthodontics. In 1983, Dr. Zokol started his career in implant dentistry and graduated from the Misch Implant Institute in 1993. In 1996, Dr. Zokol founded the Pacific Institute for Implant Dentistry where he continues today as director. In 1997, Dr. Zokol accepted a further surgical teaching position with the Canadian Implant Institute in Montmagny, Quebec. Dr. Zokol has held a number of prominent professional positions including the presidency for the Vancouver & District Dental Society; Chair, General Examination Committee for the College of Dental Surgeons of British Columbia; Chief Examiner for the College of Dental Surgeons of British Columbia; and Clinical Lecturer for the University of British Columbia, Faculty of Dentistry, Department of Prosthodontics.



Jamie A Lewin  CFO, Secretary:  BA (Economics) Western University, 1972; LLB Laval University, 1984; MBA City University, 1992; Certified Management Accountant (CMA), 2003; Chief Financial Officer of: Grand Peak Capital Corp. since 2009, Lucky Minerals Inc. since 2010, Grenville Gold Corp. since 2011, Orofino Minerals Inc. since 2011 and Innovative Properties Inc. since 2011.  Abenteuer Resources Corp., from 2006 to 2011, Dussault Apparel, Inc., from 2007 to 2008; Musgrove Minerals Corp. 2011  2012, Acana Capital Corp. from 2011 to 2012. In addition he has been a Director at:  Choice Gold 2012  current, Abenteuer Resources 2006  2011, Lucky Minerals 2010  2011 and Innovative Properties 2011  2012.



ITEM 16B. CODE OF ETHICS



The company has not adopted a formal code of ethics because, as a TSX Venture Exchange issuer, the Company is only required have an audit committee. The audit committee is composed of a majority of independent members as discussed above under the heading Item 16.B. Audit Committee Financial Experts.



In lieu of a code of ethics, the Company has adopted the following methodology with respect to corporate governance.



The management of ALDA is responsible for establishing and maintaining disclosure controls and procedures for information relating to the Company, including its consolidated subsidiaries. The Companys management is also responsible for establishing and maintaining adequate internal control over financial reporting.



ALDAs Board of Directors facilitates its exercise of independent supervision over management by ensuring that the Board is composed of a majority of independent directors. The Board, at present, is composed of six directors, all of which are considered to be independent except for Mr. Owen and Mr. Chen who are also senior officers. In determining whether a director is independent, the Board considers, for example, whether the director has a relationship, which could, or could be perceived to, interfere with the director's ability to objectively assess the performance of management.



73



---

TABLE OF CONTENTS







The Board monitors the ethical conduct of ALDA and its management and ensures that it complies with applicable legal and regulatory requirements, such as those of relevant securities commissions and stock exchanges. The Board has found that the fiduciary duties placed on individual directors by the Companys governing corporate legislation and the common law, as well as the restrictions placed by applicable corporate legislation on the individual directors participation in decisions of the Board in which the director has an interest, have been sufficient to ensure that the Board operates independently of management and in the best interests of the Company.



The Board is specifically responsible for approving long-term strategic plans and annual operating plans and budgets recommended by management. Board consideration and approval is also required for all material contracts, business transactions and all debt and equity financing proposals. The independent directors on the Board are also responsible for approving senior executive compensation and retirement plans.



The Board delegates to management, through the offices of President and Chief Executive Officer and Chief Financial Officer, responsibility for meeting defined corporate objectives, implementing approved strategic and operating plans, carrying on the Companys business in the ordinary course, managing the Companys cash flow, evaluating new business opportunities, recruiting staff and complying with applicable regulatory requirements. The Board also looks to management to furnish recommendations respecting corporate objectives, long-term strategic plans and annual operating plans.



Given the relatively static composition of the Board of Directors and the Companys management over the last several years, the Board has not appointed a corporate governance committee and these functions are currently performed by the Board as a whole.



ITEM 16C. PRINCIPAL ACCOUNTING FEES AND SERVICES



External Auditor Service Fees



During the financial year ending June 30, 2010, HLB Cinnamon Jang Willoughby restructured by way of a merger to form Meyers Norris Penny LLP. The following table sets out the aggregate fees billed by Meyers Norris Penny LLP, Chartered Accountants in 2010 and 2011.



|     |                |                       |              |                  
|---- | -------------- | --------------------- | ------------ | -----------------
|Year | Audit Fees     | Audit Related Fees(1) | Tax Fees(2)  | All Other Fees(3)
|2010 | $31,000 (89%)  | $Nil        (0%)      | Nil (0%)     | $4,000 (11%)     
|2011 | $23,000 (100%) | $Nil        (0%)      | Nil (0%)     | $Nil (0%)        
|2012 | $16,000 (69%)  | $Nil        (0%)      | $1,900 (11%) | $Nil (0%)        



(1)Related to assurance and related services that are reasonably related to the performance of the audit and review of the Companys financial statements and not included in the amounts noted underAudit Fees.

(2)Related to fees billed by the Companys external auditor for professional services rendered for tax compliance, tax advice and tax planning.

(3)Related to other accounting services that is excluded from theAudit Fees.



Pre-Approval Policies and Procedures



The Audit Committee has adopted an Audit Committee Charter (Exhibit 11) governing the provision of audit and non-audit services by the external auditor. This charter requires the Audit Committee to:



1.

recommend to the Board of Directors the external auditor to be nominated by the Board of Directors and the compensation of the external auditor (see 4.1.(a) and (b), Exhibit 11) and



2.

to pre-approve all non-audit services provided by the external auditor (see 4.1.(n), Exhibit 11).



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

---Not applicable---



ITEM 16E. PURCHASES OF EQUITY SECURITIES BY THE COMPANY/AFFILIATED PURCHASERS

---Not Applicable---



74



---

TABLE OF CONTENTS







PART III



ITEM 17. FINANCIAL STATEMENTS



The Company's financial statements are stated in Canadian Dollars (CDN$) and are prepared in accordance with Canadian Generally Accepted Accounting Principles (GAAP), the application of which, in the case of the Company, conforms in all material respects for the periods presented with United States GAAP, except as discussed in footnotes to the financial statements.



The financial statements as required under ITEM #17 are attached hereto and found immediately following the text of this Annual Report. The audit report of Meyers Norris Penny LLP, Charted Accountants, is included herein immediately preceding the audited financial statements.



Audited Financial Statements

-- see exhibits

ITEM 18. FINANCIAL STATEMENTS



The Company has elected to provide financial statements pursuant to ITEM #17.







75



---

TABLE OF CONTENTS







ITEM 19. EXHIBITS



The financial statements thereto as required under ITEM #17 are attached hereto and found immediately following the text of this Annual Report. The report of the Companys independent auditors for the audited financial statements are included herein immediately preceding the audited financial statements.



(A) Financial information



(i)

Audited Consolidated Financial Statements for the fiscal years ending June 30, 2012 and 2011.

1.

Auditors Report, dated October 29, 2012.

2.

Consolidated Statements of Financial Position at June 30, 2012, June 30, 2011 and July 01, 2010.

3.

Consolidated Statements of Operations and Comprehensive Loss for the fiscal years ending June 30, 2012 and 2011.

4.

Consolidated Statements of Changes In Equity as at: June 30, 2012, June 30, 2011 and July 01, 2010.

5.

Consolidated Statements of Cash Flows for the fiscal years ending June 30, 2012 and 2011.

6.

Notes to Consolidated Financial Statements.

7.

Management Discussion and Analysis dated October 29, 2012



(B)  Index to Exhibits:



|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|1.
Certificate of Incorporation, Certificates of Name Change, Articles of Incorporation, previously filed with the 2005 Form 20-F as Exhibit 1.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              
|2.
Instruments defining the rights of holders of the securities being registered - See Exhibit Number 1.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
|3.
Voting Trust Agreement- dated November 13, 2003 between API, Allan Shapiro and Michael Wilby and an amendment to the agreement dated November 1, 2004, previously filed as Exhibit 3 with the amended 2007 Form 20-F filed on December 3, 2008.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
|4.
Material Contracts
a.
Letter of Agreement with Phigenics LLC regarding US registration and distribution of the Companys products dated July 21, 2005, previously filed with the 2005 Form 20-F as Exhibit 4.a.;
b.
Stock Option Plan, previously filed with the 2005 Form 20F as Exhibit 4.e.;
c.
Non-competition agreement dated November 13, 2003 with 513947 BC Ltd., Allan Shapiro and Michael Wilby previously filed as Exhibit 4.i with the amended 2007 Form 20-F filed on December 3, 2008;
d.
Directors Service contract with Terrance Owen and 503213 BC Ltd. previously filed as Exhibit 4.j with the amended 2007 Form 20-F filed on March 27, 2009;
e.
Directors Service contract with Peter Chen and 612480 BC Ltd. previously filed as Exhibit 4.k with the amended 2007 Form 20-F filed on March 27, 2009;
f.  Amended Stock Option Plan, approved by the shareholders at an Annual General Meeting held on December 11, 2009.n.   Office Premises Lease Agreement, dated November 1, 2009.; Remove from here and EDGAR
|5.
List of Foreign Patents
China: ZL02829642.7
Australia: 2002322916 and 2007237333                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
|6.
Calculation of earnings per share  N/A                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
|7.
Explanation of calculation of ratios  N/A                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
|8.
List of Subsidiaries  N/A (the Company has only one subsidiary, Sirona Therapeutics Corp.)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
|9.
Statement pursuant to the instructions to Item 8.A.4, regarding the financial statements filed in registration statements for initial public offerings of securities  N/A                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
|10.
Documents pertaining to the Change of Auditors - previously filed as Exhibit 10 with the amended 2007 Form 20-F filed on February 17, 2009.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              
|11.
Audit Committee Charter - previously filed as Exhibit 11 with the amended 2007 Form 20-F filed on December 3, 2008.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
|12.1
Certification of Chief Executive Officer pursuant to Section 302 of SarbanesOxley Act of 2002                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
|12.2
Certification of Chief Financial Officer pursuant to Section 302 of SarbanesOxley Act of 2002                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
|13.1
Certification of Chief Executive Officer pursuant to Section 906 of SarbanesOxley Act of 2002                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
|13.2
Certification of Chief Financial Officer pursuant to Section 906 of SarbanesOxley Act of 2002                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          



76



---

TABLE OF CONTENTS













[alda20fsept1312sec002.gif]























CONSOLIDATED

FINANCIAL  STATEMENTS





























For the Years Ended

June 30, 2012 and 2011





















77



---

TABLE OF CONTENTS





Managements Responsibility

















To the Shareholders of ALDA Pharmaceuticals Corp.:



Management is responsible for the preparation and presentation of the accompanying consolidated financial statements, including responsibility for significant accounting judgments and estimates in accordance with International Financial Reporting Standards.  This responsibility includes selecting appropriate accounting principles and methods, and making decisions affecting the measurement of transactions in which objective judgment is required.



In discharging its responsibilities for the integrity and fairness of the financial statements, management designs and maintains the necessary accounting systems and related internal controls to provide reasonable assurance that transactions are authorized, assets are safeguarded and financial records are properly maintained to provide reliable information for the preparation of financial statements.



The Board of Directors and the Audit Committee are composed primarily of Directors who are neither management nor employees of the Company. The Board is responsible for overseeing management in the performance of its financial reporting responsibilities, and for approving the financial information included in the annual report. The Board fulfills these responsibilities by reviewing the financial information prepared by management and discussing relevant matters with management and external auditors. The Audit Committee has the responsibility of meeting with management, and external auditors to discuss the internal controls over the financial reporting process, auditing matters and financial reporting issues.  The Board is also responsible for recommending the appointment of ALDA Pharmaceuticals Corp.s external auditors.



We draw attention to Note 1 in the consolidated financial statements which indicates the existence of a material uncertainty that may cast significant doubt on the Companys ability to continue as a going concern.



MNP LLP, an independent firm of Chartered Accountants, is appointed by the shareholders to audit the financial statements and report directly to them; their report follows.  The external auditors have full and free access to, and meet periodically and separately with, the Board of Directors, Audit Committee and management to discuss their audit findings.







October 29, 2012







Terry Owen

Jamie Lewin





Chief Executive Officer

Chief Financial Officer





78



---

TABLE OF CONTENTS





Auditors Report

[alda20fsept1312sec004.gif]

INDEPENDENT AUDITORS' REPORT



To the Shareholders of ALDA Pharmaceutical Corp.:



We have audited the accompanying consolidated financial statements of ALDA Pharmaceutical Corp., which comprise the consolidated statements of financial position as at June 30, 2012, June 30, 2011, and July 1,

2010, and the consolidated statements of operations and comprehensive loss, consolidated statements of changes in equity and consolidated statements of cash flows for the years ended June 30, 2012 and 2011, and the related notes, which comprise a summary of significant accounting policies and other explanatory information.



Managements Responsibility for the Consolidated Financial Statements

Management is responsible for the preparation and fair presentation of these consolidated financial statements in accordance with International Financial Reporting Standards, and for such internal control as management determines is necessary to enable the preparation of consolidated financial statements that are free from material misstatement, whether due to fraud or error.



Auditors Responsibility

Our responsibility is to express an opinion on these consolidated financial statements based on our audit. We conducted our audit in accordance with Canadian generally accepted auditing standards. Those standards require  that  we  comply  with  ethical  requirements and  plan  and  perform the  audit  to  obtain  reasonable assurance about whether the consolidated financial statements are free from material misstatement.



An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the consolidated financial statements. The procedures selected depend on the auditors judgment, including the assessment of the risks of material misstatement of the consolidated financial statements, whether due to fraud or error. In making those risk assessments, the auditor considers internal control relevant to the entitys preparation and fair presentation of the consolidated financial statements in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the entitys internal control. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of accounting estimates made by management, as well as evaluating the overall presentation of the consolidated financial statements.



We believe that the audit evidence we have obtained in our audits is sufficient and appropriate to provide a basis for our audit opinion.



Opinion

In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of ALDA Pharmaceutical Corp. as at June 30, 2012, June 30, 2011, and July 1, 2010, and the results of their operations and their cash flows for the years ended June 30, 2012 and 2011 in accordance with International Financial Reporting Standards.



Emphasis of Matter

Without qualifying our opinion, we draw attention to Note 1 of these consolidated financial statements, which states that ALDA Pharmaceutical Corp. incurred significant losses from operations, negative cash flows from operating activities and has an accumulated deficit. This, along with other matters described in Note 2, indicates  the  existence  of  a  material  uncertainty  which  may  cast  doubt  about  the  ability  of  ALDA Pharmaceutical Corp. to continue as a going concern.

[alda20fsept1312sec005.jpg]

October 29, 2012

Vancouver, BC                                                                                                        Chartered Accountants

[alda20fsept1312sec007.gif]



79



---

TABLE OF CONTENTS







ALDAPHARMACEUTICALS CORP. CONSOLIDATED

STATEMENT OF FINANCIAL POSITION

AS AT JUNE 30, 2012, JUNE 30, 2011 AND JULY 1, 2010





|                                                   |                      |                       |                       
|-------------------------------------------------- | -------------------- | --------------------- | ----------------------
|EXPRESSED IN CANADIAN DOLLARS                      | June 30, 2012        | June 30, 2011         | July 01, 2010         
|ASSETS                                            
|Current Assets                                     |                      |                       |                       
|Cash and Equivalents                               | $              2,335 | $               9,095 | $            146,701  
|Accounts Receivable                                | 8,159                | 57,291                | 162,398               
|Inventory (Note 6)                                 | -                    | 94,929                | 593,574               
|Prepaid Expenses and Others                        | 9,077                | 27,298                | 207,535               
|                                                   | 19,751               | 188,613               | 1,110,208             
|                                                   |                      |                       |                       
|Equipment(Note 7)                                  | -                    | 1,881                 | 4,876                 
|Long Term Prepaid Expense(Note 8)                  | -                    | -                     | 237,983               
|                                                   |                      |                       |                       
|Total Assets                                       | $            19,751  | $           190,494   | $          1,353,067  
|                                                   |                      |                       |                       
|LIABILITIES                                       
|Current Liabilities                                |                      |                       |                       
|Accounts Payable and Accrued Liabilities (Note 11) | $          347,235   | $         304,996     | $            195,788  
|Sponsorship Liability  Current portion (Note 8)   | 875,000              | 875,000               | 680,000               
|Promissory Notes (Note 12)                         | 118,500              | 77,000                | -                     
|                                                   | 1,340,735            | 1,256,996             | 875,788               
|                                                   |                      |                       |                       
|Sponsorship Liability(Note 8)                      | -                    | -                     | 237,983               
|Total Current Liabilities                          | 1,340,735            | 1,256,996             | 1,113,771             
|                                                   |                      |                       |                       
|SHAREHOLDERS DEFICIT                             
|Share Capital(Note 9(a))                           | 7,933,288            | 7,921,708             | 7,494,231             
|Subscriptions Receivables(Note 10, 13)             | -                    | -                     | (30,000)              
|Reserves(Note 9 (d) & (e)                          | 2,644,960            | 2,604,638             | 2,492,259             
|Deficit                                            | (11,899,412)         | (11,592,848)          | (9,717,194)           
|                                                   | (1,321,164)          | (1,066,502)           | 239,296               
|Total Liabilities & Shareholders Deficit          | $           19,571   | $             190,494 | $            1,353,067
|                                                   |                      |                       |                       
|                                                   |                      |                       |                       
|Going Concern (Note 1)                             |                      |                       |                       
|Subsequent events (Note 18)                        |                      |                       |                       
|                                                   |                      |                       |                       
|                                                   |                      |                       |                       





*See accompanying notes to the consolidated financial statements



|                                                                                                                                         
|-----------------------------------------------------------------------------------------------------------------------------------------
|Approved on Behalf of the Board of Directors on October 29, 2012.

Terry Owen
Jamie Lewin

Terry Owen, Director
Jamie Lewin, Director







80



---





ALDAPHARMACEUTICALS CORP

CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS

FOR THE YEARS ENDED JUNE 30, 2012 AND JUNE 30, 2012







|                                                       |                                        |                                 
|------------------------------------------------------ | -------------------------------------- | --------------------------------
|EXPRESSED IN CANADIAN DOLLARS                          | June 30,
2012                          | June 30,
2011                   
|Revenues                                               | $                             83,361   | $                     305,592   
|Expenses                                               |                                        |                                 
|Advertising and Promotion                              | 1,639                                  | 479,026                         
|Changes in Inventory                                   | 77,993                                 | 255,889                         
|Conference                                             | -                                      | 3,509                           
|Consulting (Note 8(b) for stock-based compensation)    | 152,302                                | 368,575                         
|Depreciation-Furniture and Equipment                   | 1,881                                  | 2,995                           
|Dues and Filing Fees                                   | 43,701                                 | 33,792                          
|Interest and Bank Charges                              | 928                                    | 3,668                           
|Investor Relations                                     | 18,196                                 | 88,073                          
|Legal and Accounting                                   | 29,915                                 | 42,198                          
|Office and Miscellaneous                               | 20,635                                 | 44,914                          
|Product Registration & Development                     | 31,886                                 | 76,524                          
|Rent                                                   | 28,187                                 | 63,165                          
|Recovery / write down of inventory                     | 34,506                                 | 431,369                         
|Travel                                                 | 137                                    | 22,469                          
|Wages and Benefits                                     | 63,017                                 | 237,395                         
|Warrant Revaluation                                    | -                                      | 24,600                          
|Total Expenses                                         | 504,923                                | 2,178,161                       
|Finance Expense                                        | 12,810                                 | 2,996                           
|Settlement of Management Fees                          | (127,806)                              | -                               
|                                                       | (114,996)                              | 2,996                           
|Income/(Loss) and Comprehensive Income/ (Loss) for the |                                        |                                 
|Period                                                 | $                         (306,565)    | $                  (1,875,565   
|                                                       |                                        |                                 
|                                                       |                                        |                                 
|Basis Loss Per Share                                   | $                               (0.05) | $                         (0.03)
|Diluted Loss Per Share                                 | $                               (0.05) | $                         (0.03)
|Weighted Average Number of Shares Outstanding          | 6,451,760                              | 6,231,468                       
|                                                       |                                        |                                 































*See accompanying notes to the consolidated financial statements







81



---











ALDAPHARMACEUTICALS CORP

CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY

AS AT JUNE 30, 2012, JUNE 30, 2011 AND JULY 1, 2010



|                                |                  |                |                         |                 |                |                 |                 
|------------------------------- | ---------------- | -------------- | ----------------------- | --------------- | -------------- | --------------- | ----------------
|EXPRESSED IN CANADIAN DOLLARS   | Number of Shares | Share Capital  | Subscription Receivable | Warrant Reserve | Option Reserve | Deficit         | Total           
|                                |                  |                |                         |                 |                |                 |                 
|Balance, July 1, 2011           | 6,399,680        | $   7,921,708  | -                       | 964,026         | 1,640,614      | (11,592,847)    | (1,066,499)     
|Issued during the year for cash |                  |                |                         |                 |                |                 |                 
|Private Placements              | 560,000          | 56,000         | -                       | -               | -              | -               | 56,000          
|Share issuance costs            |                  |                |                         |                 |                |                 |                 
|Finders fees                   | -                | (4,100)        | -                       | -               | -              | -               | (4,100)         
|Stock-based compensation        | -                | -              | -                       | -               | -              | -               | -               
|Warrant in placement            | -                | (40,320)       | -                       | 40,320          | -              | -               | -               
|Subscription funds received     | -                | -              | -                       | -               | -              | -               | -               
|Net comprehensive loss          | -                | -              | -                       | -               |                | (306,565)       | (307,372)       
|Balance, June 30, 2012          | 6,959,680        | $    7,933,288 | $                     - | $     1,004,346 | $    1,640,614 | $  (11,899,412) | $    (1,321,971)







|                                |                  |                |                          |                              |                             |                 |                  
|------------------------------- | ---------------- | -------------- | ------------------------ | ---------------------------- | --------------------------- | --------------- | -----------------
|                                | Number of Shares | Share Capital  | Subscription Receivable  | Contributed Surplus Warrants | Contributed Surplus Options | Deficit         | Total            
|                                |                  |                |                          |                              |                             |                 |                  
|Balance, July 1, 2010           | 5,872,180        | $    7,494,231 | $       (30,000)         | $        863,168             | $    1,629,091              | $   (9,717,194) | $         239,296
|Issued during the year for cash |                  |                |                          |                              |                             |                 |                  
|Private placements              | 527,500          | 451,240        | -                        | 76,257                       | -                           | -               | 527,497          
|Share issuance costs            | -                | (21,513)       | -                        | -                            | -                           | -               | (21,513)         
|Finders fees                   | -                | (2,250)        | -                        | -                            | -                           | -               | (2,250)          
|Stock-based compensation        | -                | -              | -                        | -                            | 11,522                      | -               | -                
|Warrant revaluation             | -                | -              | -                        | 24,600                       | -                           | -               | 24,600           
|Subscription funds received     | -                | -              | 30,000                   | -                            | -                           | -               | 30,000           
|Net comprehensive loss          | -                | -              | -                        | -                            | -                           | (1,875,654)     | (1,875,654)      
|Balance June 30, 2011           | 6,399,680        | $    7,921,708 | $                      - | $         964,025            | $      1,640,613            | $  (11,592,848) | $   (1,066,502)  
|                                |                  |                |                          |                              |                             |                 |                  
|                                |                  |                |                          |                              |                             |                 |                  
|                                |                  |                |                          |                              |                             |                 |                  



*On March 8, 2012, the Company consolidated its share capital on a one (1) new common share without par value for every ten (10) existing common shares without par value basis. All common shares and per share amounts have been restated to give retroactive effect to the share consolidation.







*See accompanying notes to the consolidated financial statements









82



---





ALDAPHARMACEUTICALS CORP

CONSOLIDATED STATEMENTS OF CASH FLOWS

FOR THE YEARS ENDED JUNE 30, 2012 AND 2011



|                                                                                            |            |             
|------------------------------------------------------------------------------------------- | ---------- | ------------
|EXPRESSED IN CANADIAN DOLLARS                                                               | 2012       | 2011        
|Operating Activities:                                                                       |            |             
|Income/(Loss) and Comprehensive Income/(Loss)                                               |            |             
|for the Period                                                                              | $(306,565) | $(1,875,565)
|Depreciation-Furniture and Equipment                                                        | 1,881      | 2,905       
|Stock-Based Compensation                                                                    | -          | 11,522      
|Warrant Revaluation                                                                         | -          | 24,600      
|Inventory write-down                                                                        | 34,506     | 431,369     
|Accretion of Sponsorship Liability                                                          | -          | 32,017      
|                                                                                            | (270,178)  | (1,373,152) 
|Changes in Non-Cash Working Capital Items
Decrease/ (Increase) in Accounts Receivable       | 49,132     | 105,107     
|Decrease/ (Increase) in Inventory                                                           | 60,423     | 67,276      
|Decrease/ (Increase) in Prepaid                                                             | 18,221     | 418,221     
|(Decrease)/ Increase in Accounts Payable and                                                |            |             
|Accrued Liabilities                                                                         | 83,739     | 109,208     
|                                                                                            | 211,515    | (699,812)   
|Investing Activities:
Purchase of Furniture and Equipment
Decrease/(Increase) in Short Term | -          | -           
|Investments                                                                                 | -          | -           
|                                                                                            | -          | -           
|Financing activities:
Net Proceeds on Issuance of Shares                                    | 56,000     | 527,497     
|Change in sponsorship liability                                                             |            | (75,000)    
|Share issue costs                                                                           | (4,100)    | (23,763)    
|Proceeds from subscriptions receivable                                                      |            | 30,000      
|Net Promissory Notes                                                                        |            | 77,000      
|                                                                                            | 51,900     | 535,734     
|Increase/ (Decrease) in Cash                                                                | (6,761)    | (137,606)   
|Cash, Beginning of Period                                                                   | $9,095     | $146,701    
|Cash, End of Period                                                                         | $2,335     | $9,095      









*See accompanying notes to the consolidated financial statements



83



---

ALDAPHARMACEUTICALS CORP.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

FOR THE YEARS ENDED JUNE 30, 2012 AND 2011









1.

NATURE OF OPERATIONS AND GOING CONCERN



ALDA Pharmaceuticals Corp. (the Company) was incorporated under the Company Act of British Columbia on May 30, 2000 and is listed on the TSX Venture Exchange (the Exchange).  The address of the Companys corporate office and principal place of business is located at Suite 1518, 1030 West Georgia Street, Vancouver, BC, Canada, V6E 2Y3.



The Companys main business activity is the development, production and marketing of infection control agent products, principally a product marketed as T36®.  Effective November 26, 2003, the name of the Company was changed from Duft Biotech Capital Ltd. to ALDA Pharmaceuticals Corp. During the year ended June 30, 2012, the Company granted Canadian manufacturing and marketing rights for certain T36®products to an insider of the Company as discussed in more detail in Note 13(a).



These consolidated financial statements have been prepared on the basis of accounting principles applicable to a going concern which assumes that the Company will continue in operations for the foreseeable future and be able to realize assets and satisfy liabilities in the normal course of business. During the year ended June 30, 2012, the Company experienced operating losses and negative operating cash flows, operations of the Company having been funded by the issuance of share capital.



The continuation of the Company as a going concern is dependent upon its ability to raise additional financing and ultimately attain and maintain profitable operations. To the extent the Company is unable to cover its ongoing cash requirements through operations; the Company expects to raise additional financing to cover any shortfall. There can be no assurance that such financing and profitability will occur in the amounts and with terms expected.



In  the  event  that  cash  flow  from operations,  if  any,  together  with  the  proceeds  from any  future financings are insufficient to meet the Companys current operating expenses, the Company will be required to re-evaluate its planned expenditures and allocate its total resources in such a manner as the Board of Directors and management deems to be in the Companys best interest. This may result in a substantial reduction of the scope of existing and planned operations.



These consolidated financial statements do not reflect any adjustments, which could be material, to the carrying values of assets and liabilities, which may be required should the Company be unable to continue as a going concern.



|                            |                 |                 |                
|--------------------------- | --------------- | --------------- | ---------------
|                            | June 30, 2012
$ | June 30, 2011
$ | April 1, 2010
$
|Deficit                     | (11,899,412)    | (11,592,848)    | (9,717,194)    
|Working capital deficiency/ |                 |                 |                
|Working capital             | (1,321,164)     | (1,068,383)     | 234,420        







84



---

ALDAPHARMACEUTICALS CORP.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

FOR THE YEARS ENDED JUNE 30, 2012 AND 2011









2.

STATEMENT OF COMPLIANCE



The financial statements of the Company, including comparatives, have been prepared in accordance with IFRS, as issued by the International Accounting Standards Board (IASB) and Interpretations of the International Financial Reporting Interpretations Committee (IFRIC). IFRS represents standards and interpretations approved by the International Accounting Standards Board (IASB), and are comprised of IFRS, International Accounting Standards (IASs), and interpretations issued by the International Financial Reporting Interpretations Committee (IFRICs) or the former Standing Interpretations    Committee (SICs) and effective for the Companys reporting period ended June 30,

2012.



Subject to certain transition elections disclosed in Note 19, the Company has consistently applied the same accounting policies in its opening IFRS statement of financial position at July 1, 2010 and throughout all periods presented, as if these policies had always been in effect. As the Company issued its first annual financial statements under IFRS on June 30, 2011, the comparative figures for 2011 in these financial statements are IFRS figures.



These consolidated financial statements were authorized for issuance by the Board of Directors on

October 29, 2012



3.

BASIS OF PRESENTATION



These financial statements have been prepared on the historical cost basis. The presentation and functional currency of the Company is the Canadian dollar.



4.

SIGNIFICANT ACCOUNTING POLICIES



These consolidated financial statements for the year ended June 30, 2012, including comparatives have been  prepared  using  accounting  policies  in  compliance  with  International  Financial  Reporting Standards (IFRS).



a)    Consolidation



These consolidated financial statements include the accounts of the Company and its wholly- owned subsidiary, Sirona Therapeutics Corp. (Sirona).  The name of the subsidiary was changed on January 10, 2006 from ALDA Institute For Preventative Health Care Inc.  Sirona is an inactive company, the shares of which were acquired pursuant to an asset purchase agreement.   All significant inter-company balances and transactions have been eliminated on consolidation.



b)

Cash and equivalents



Cash and equivalents include cash and highly liquid market instruments with original terms to maturity of less than ninety days at the time of acquisition.



c)

Accounts receivable



Accounts receivable is presented net of allowance for doubtful accounts.  The allowance for doubtful accounts reflects estimates of probable losses in accounts receivable.  The allowance is determined based on balances outstanding for over 90 days from the invoice date, historical experience and other current information.   The Company extends credit to customers and distributors; credit checks are required for all new distributors.





85



---

ALDAPHARMACEUTICALS CORP.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

FOR THE YEARS ENDED JUNE 30, 2012 AND 2011







4.

SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)



d)   Inventory



Inventory is comprised of finished goods and related raw materials.  Finished goods are reported at the lesser of cost and estimated net realizable value.  Raw materials are reported at the lesser of cost  and  replacement  cost.    Inventory  is  determined  using  the  first  in,  first  out  cost  flow assumption.



e)

Furniture and equipment

Furniture and equipment is recorded at cost and is depreciated using the following annual rates: Furniture and fixtures  20% Straight line

Computer equipment

30% Straight line

Computer software

30% Straight line



Where an item of furniture and equipment is made up of more than one significant part, each part is depreciated separately over its respective estimated useful life.  The estimated useful lives, residual values and depreciation methods are reviewed each year end, with the effect of any changes in estimate being accounted for on a prospective basis. Gains and losses on disposal of property  and  equipment  are  determined  by  comparing  the  proceeds  from  disposal  with  the carrying amount of furniture and equipment, and recognized net of costs associated with the disposal within other income in net loss for the period.



f)

Impairment



(i)   Financial assets

Financial assets are assessed at each reporting date to determine whether there is objective evidence that they are impaired. A financial asset is impaired if objective evidence indicates that a loss event has occurred after the initial recognition of the asset, and that the loss event had a negative effect on the estimated future cash flows of that asset that can be estimated reliably.



An impairment loss in respect of a financial asset measured at amortized cost is calculated as the difference between its carrying amount and the present value of the estimated future cash flows discounted at the assets original effective interest rate. Losses are recognized in profit or loss and reflected in an allowance account against receivables. Interest on the impaired asset continues to be recognized through the unwinding of the discount. When a subsequent event causes the amount of impairment loss to decrease, the decrease in impairment loss is reversed through profit or loss.



(ii)  Non-financial assets

Property, plant and equipment and intangible assets are tested for impairment when events or changes in circumstances indicate that the carrying amount may not be recoverable. The

recoverable amount of an asset or cash-generating unit is the greater of its value in use and its

fair value less costs to sell.  In assessing value in use, the estimated future cash flows are discounted to their present value using a pre-tax discount rate that reflects current market assessments of the time value of money and the risks specific to the asset.  For the purpose of impairment testing, assets that cannot be tested individually are grouped together into the smallest group of assets that generates cash inflows from continuing use that are largely independent of the cash inflows of other assets or groups of assets (the "cash-generating unit", or "CGU").



86



---

ALDAPHARMACEUTICALS CORP.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

FOR THE YEARS ENDED JUNE 30, 2012 AND 2011







4.

SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)



f)

Impairment (continued)



(ii)  Non-financial assets (continued)



An impairment loss is recognized if the carrying amount of an asset or its CGU exceeds its estimated recoverable amount.  Impairment losses are recognized in profit or loss.  Impairment losses recognized in respect of CGUs are allocated to the assets in the unit (group of units) on a pro rata basis.



Impairment losses recognized in prior periods are assessed at each reporting date for any indications that the loss has decreased or no longer exists.  An impairment loss is reversed if there has been a change in the estimates used to determine the recoverable amount.  An impairment loss is reversed only to the extent that the assets carrying amount does not exceed the carrying amount that would have been determined, net of depreciation or amortization, if no impairment loss had been recognized



g)   Patent application and development costs



Patent application and development costs include expenditures attributable to efforts by the Company to research and develop and bring to commercial production a new product, as well as to acquire legal protections for its proprietary products, such as trademarks and patents.  Research costs are expensed in the period in which they are incurred.  Development costs are charged as an expense in the period incurred except in circumstances where the market and technical feasibility of the product have been established, recovery of these costs can reasonably be regarded as assured, and future values can be realized, in which case such costs are capitalized.  In the latter case, patent application and development costs are amortized on a systematic basis over the patent life of 20 years.



h)   Intangible assets



The carrying values of intangible assets which are determined to have a finite useful life are amortized on a systematic basis over the useful life of 20 years. Intangible assets are subject to an impairment test on an annual basis, based on a comparison of the fair value of the intangible asset to its carrying value.  The carrying value is adjusted for impairment as necessary and any excess of the carrying amount over the fair value of the intangible asset is charged to earnings in the period occurred.   Intangible assets were fully written down as of June 30, 2008 and have no carrying value in the balance sheet.



i)

Revenue recognition



The revenue of the Company is primarily derived from the sale of the Companys T36®product. Revenue is recognized at the time of shipment, at which point risks and rewards over ownership and title of transfer have passed to the customer.  At the point of sale, the Company assesses whether collection of the amount billed to the customer is reasonably assured.  If collection of the amount is not reasonably assured, the Company defers recognizing revenue until such point as collection is reasonably assured, usually upon receipt of payment.  If the customer is not known to the Company, payment in advance is required and the revenue is recognized when the products are shipped.  Revenue is recognized net of any expected sales return.  Under the Companys current policy, returns of products are not allowed unless damaged products or the wrong products have been shipped by the Company.



87



---

ALDAPHARMACEUTICALS CORP.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

FOR THE YEARS ENDED JUNE 30, 2012 AND 2011









4.

SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)



j)

Income taxes



Income tax expense comprises current and deferred income tax.  Income tax is recognized in the consolidated statement of comprehensive income (loss) except to the extent it relates to items recognized in other comprehensive income or directly in equity.



Current income tax

Current income tax expense is based on the results for the period as adjusted for items that are not taxable or not deductible.  Current income tax is calculated using tax rates and laws that were enacted or substantively enacted at the end of the reporting period.  Management periodically evaluates  positions  taken  in  tax  returns  with  respect  to  situations  in  which  applicable  tax regulation is subject to interpretation.  Provisions are established where appropriate on the basis of amounts expected to be paid to the tax authorities.



Deferred income tax

Deferred income taxes are the taxes expected to be payable or recoverable between the carrying amounts of assets in the consolidated statement of financial position and their corresponding tax bases used in the computation of taxable profit, and are accounted for using the balance sheet liability method.   Deferred tax liabilities are generally recognized for all taxable temporary differences between the carrying amounts of assets and their corresponding tax bases.  Deferred tax assets are recognized to the extent that it is probable that taxable profits will be available against which deductible temporary differences can be utilized.  Such assets and liabilities are not recognized if the temporary difference arises from the initial recognition of goodwill or from the initial recognition (other than in a business combination) of other assets in a transaction that affects neither the taxable profit nor the accounting profit.



Deferred income tax liabilities:



·

are generally recognized for all taxable temporary differences;



·

are recognized for taxable temporary differences arising on investments in subsidiaries except where the reversal of the temporary difference can be controlled and it is probable that the difference will not reverse in the foreseeable future; and



·

are not recognized on temporary differences that arise from goodwill which is not deductible for tax purposes.



Deferred income tax assets:



·

are recognized to the extent it is probable that taxable profits will be available against which the deductible temporary differences can be utilized; and



·

are reviewed at the end of the reporting period and reduced to the extent that it is no longer probable that sufficient taxable profits will be available to allow all or part of an asset to be recovered.



k)   Stock-based compensation



The Company follows the fair value method of accounting for the stock option awards granted to employees, directors, officers and consultants.  Stock options issued to consultants are accounted for based on the fair value of the services rendered.  If this cannot be reliably measured the stock options are valued using the fair-value-based method over the period of services provided.





88



---

ALDAPHARMACEUTICALS CORP.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

FOR THE YEARS ENDED JUNE 30, 2012 AND 2011







4.

SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)



k)   Stock-based compensation (continued)



The fair value of stock options is determined by the Black-Scholes Option Pricing Model with assumptions for risk-free interest rates, dividend yields, volatility of expected market prices and an expected life of the options. The number of stock option awards expected to vest are estimated using a forfeiture rate based on historical experience and future expectations. Share-based compensation is amortized to earnings over the vesting period of the related option. Any consideration received from the participants upon exercise of stock options is credited to share capital.  The Company uses graded or accelerated depreciation which specifies that each vesting tranche must be accounted for as a separate arrangement with a unique fair value measurement. Each vesting tranche is subsequently amortized separately from the grant date.  Option-pricing models require the use of highly subjective estimates and assumptions including the expected stock price volatility. Changes in the underlying assumptions can materially affect the fair value estimates and, therefore, existing models do not necessarily provide reliable measurement of the fair value of the Companys stock options.



l)

Share Capital



Common shares issued in exchange for goods and services are recorded at an amount based on the fair market value of the common shares just prior to the date of issuance. Common shares issued in private placements, in conjunction with common share purchase warrants, are recorded using the residual method, whereby the proceeds of the private placement are allocated first to the common shares at the lesser of the common shares fair value and the gross proceeds of the private placement,  with  any  residual  amounts  then  being  allocated  to  the  common  share  purchase warrants. Share issuance expenses are applied against share capital.  As at June 30, 2012, there were 1,087,500 warrants issued and outstanding.





m)

Basis and diluted loss per share



Loss per share is calculated based on the weighted average number of common shares outstanding during the reported period.  Basic loss per share is computed by dividing income available to common shareholders by the weighted average number of common shares outstanding in the year. The Company uses the treasury stock method to compute the dilutive effect of options, warrants and similar instruments.  Under this method, the dilutive effect on loss per share is recognized on the use of the proceeds that could be obtained upon exercise of options, warrants and similar instruments.   It assumes that the proceeds would be used to purchase common shares at the average market price during the year.



n)

Foreign Exchange



Foreign currency transactions are translated into the Companys functional currency, Canadian dollars, at exchange rates in effect on the date of the transactions.  Monetary assets and liabilities are translated into Canadian dollars at the exchange rate in effect as at the statement of financial position date.  Revenue and expenses were translated at the rate of exchange prevailing when the transactions were settled.   Foreign currency gains and losses are included in general and administrative expenses.



89



---

ALDAPHARMACEUTICALS CORP.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

FOR THE YEARS ENDED JUNE 30, 2012 AND 2011







4.

SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)



o)

Financial Instruments



Financial instruments are initially recognized at their fair value on a settlement date basis when the Company becomes a party to the contractual provisions of the financial instrument or non- financial derivative contract.



Fair Values -Fair value is the amount at which a financial instrument could be exchanged between willing  parties  based  on  current  markets  for  instruments  with  the  same  risk,  principal  and remaining maturity. Fair value estimates are based on present value and other valuation techniques using rates that reflect those that the Company could currently obtain, on the market, for financial instruments with similar terms, conditions and maturities.



The fair value hierarchy establishes three levels to classify the inputs to valuation techniques used to measure fair value.  The three levels of the fair value hierarchy are described below:



Level 1  Unadjusted quoted prices in active markets that are accessible at the measurement date for identical, unrestricted assets or liabilities.



Level 2  Inputs that are observable, either directly or indirectly, but do not qualify as Level 1 inputs (i.e., quoted prices for similar assets or liabilities).



Level 3  Prices or valuation techniques that require inputs that are both significant to the fair value measurement and unobservable (i.e., supported by little or no market activity).



Unless otherwise noted, cash and cash equivalents, HST receivable, and accounts payable and accrued liabilities are stated at amounts that approximate their fair value.  The fair values of these instruments approximate their carrying values due to the short term nature of these financial instruments.



This section establishes standards for the recognition, measurement disclosure and presentation of financial instruments.   Under the new standard, financial assets and liabilities are initially recognized at fair value and are subsequently measured based on their classification as held-for- trading, held-to-maturity, loans and receivables, available-for-sale, or other financial liabilities, as described below:



Financial assets at fair value through profit or loss (FVTPL) -Financial assets and financial liabilities that are purchased and incurred with the intention of generating profits in the near term are classified as FVTPL.  Any financial instrument can be designated as FVTPL as long as its fair value can be reliably measured.  These instruments are measured at fair value with subsequent changes in fair value included in earnings.



The Company has classified cash and cash equivalents as FVTPL, which accordingly are carried at their fair values.  FVTPL assets are not subject to significant credit, foreign exchange or interest rate risk due to their short term nature.



Held-to-maturity - Financial assets that have a fixed maturity date and fixed or determinable payments, where the Company intends and has the ability to hold the financial asset to maturity are classified as held-to-maturity and measured at amortized cost using the effective interest rate method.









90



---

ALDAPHARMACEUTICALS CORP.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

FOR THE YEARS ENDED JUNE 30, 2012 AND 2011









4.

SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)



o)

Financial Instruments (continued)



Any gains and losses arising from the sale of held-to-maturity financial assets are included in earnings. Any transaction costs incurred to acquire held-to-maturity financial assets will be included in earnings.  Currently, the Company has no held-to-maturity financial assets.



Loans and receivables - Items classified as loans and receivables are measured at amortized cost using the effective interest method.  Any gains or losses on the realization of loans and receivables are included in earnings. Any transaction costs incurred to acquire loans and receivables financial instruments will be included in earnings. The Company has classified GST receivable as loans and receivables.



Available-for-sale - Available-for-sale assets are those financial assets that are not classified as held-for-trading, held-to-maturity or loans or receivables, and are carried at fair value.  Any unrealized gains or losses arising from the change in fair value are recorded as other comprehensive income.  Available-for-sale securities are written down to fair value through earnings whenever it is necessary to reflect other-than-temporary impairment.  Cumulative gains and losses arising upon the sale of the instrument are included in earnings. Any transaction costs incurred to acquire available-for-sale financial assets will be included in earnings. Currently, the Company has no available-for-sale financial assets.



Other financial liabilities - Financial liabilities that are not classified as held-to-maturity are classified as other financial liabilities, and are carried at amortized cost using the effective interest method.  Any gains or losses arising from the realization of other financial liabilities are included in earnings.



The Company has classified accounts payable and accrued liabilities, sponsorship liability and promissory notes as other financial instruments, which are accordingly carried at amortized cost. Due to their short-term natures, the fair values of other financial liabilities approximate their carrying values, and they are not subject to significant credit, foreign exchange or interest rate risk.



q)   Use of Estimates



The preparation of financial statements using accounting policies in compliance with IFRS requires management to make estimates and assumptions that affect the amounts reported in the consolidated financial statements and disclosures of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the period. . Such estimates may have a significant impact on the interim condensed consolidated financial statements.  Actual amounts could differ materially from the estimates used and, accordingly, affect the results of the operations.  The preparation of the interim condensed consolidated financial statements also requires management to exercise judgment in the process of applying the accounting policies.  Areas requiring significant management estimates include stock based compensation expense, valuation of share purchase warrants, valuation of accounts receivables, recognition of revenue and valuation of inventory.



91



---

ALDAPHARMACEUTICALS CORP.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

FOR THE YEARS ENDED JUNE 30, 2012 AND 2011





5.   RECENT ACCOUNTING PRONOUNCEMENTS



Certain pronouncements were issued by the IASB or the IFRIC that are mandatory for accounting periods. Many are not applicable or do not have a significant impact to the Company and have been excluded from the table below. The following have not yet been adopted and are being evaluated to determine their impact on the Company.



(a) IFRS 9 Financial instruments (IFRS 9) was issued by the IASB in October 2010 and will replace IAS 39 - Financial Instruments: Recognition and Measurement (IAS 39). IFRS 9 uses a single approach to determine whether a financial asset is measured at amortized cost or fair value, replacing the multiple rules in IAS 39. The approach in IFRS 9 is based on how an entity manages its financial instruments in the context of its business model and the contractual cash flow characteristics of the financial assets. Most of the requirements in IAS 39 for classification and measurement of financial liabilities were carried forward unchanged to IFRS 9. The new standard also requires a single impairment method to be used, replacing the multiple impairment methods in IAS 39. IFRS 9 is effective for annual periods beginning on or after January 1, 2013.  IASB has proposed to move the effective date of IFRS 9 to January 1, 2015.



(b) IFRS 10 Consolidated Financial Statements  effective for annual periods beginning on or after January 1, 2013, with early adoption permitted, establishes principles for the presentation and preparation of consolidated financial statements when an entity controls one or more other entities.



(c) IFRS 11 Joint arrangements (IFRS 11) was issued by the IASB in May 2011 and will replace IAS

31 - Interests in Joint ventures and SIC 13  Jointly Controlled Entities  Non-Monetary Contributions by Ventures. IFRS 11 is effective for annual period beginning on or after January 1, 2013.



(d) IFRS 12 Disclosure of Interests in Other Entities - effective for annual periods beginning on or after January 1, 2013, with early adoption permitted, requires the disclosure of information that enables users of financial statements to evaluate the nature of, and risks associated with its interests in other entities and the effects of those interests on its financial position, financial performance and cash flows.



(e) IFRS 13 Fair Value Measurement - effective for annual periods beginning on or after January 1,

2013, with early adoption permitted, provides   the guidance on the measurement of   fair value and related disclosures through a fair value hierarchy.





6.

INVENTORY



Inventory consists of the following:



|               |                   |               |             
|-------------- | ----------------- | ------------- | ------------
|               | June 30,
2012     | June 30,
2011 | July 1,
2010
|Finished goods | $               - | $    60,653   | $    394,646
|Raw materials  | -                 | 34,276        | 198,928     
|               | $               - | $    94,929   | $    593,574





When the Company did not renew the facilities lease, its license to sell pharmaceutical products became

impaired and the Use Before Date on the remaining inventory was approaching, accordingly the inventory was written down to $nil at year end.













92



---

ALDAPHARMACEUTICALS CORP.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

FOR THE YEARS ENDED JUNE 30, 2012 AND 2011







7.

EQUIPMENT



Equipment consists of the following:



|                   |                   |                          |                      
|------------------ | ----------------- | ------------------------ | ---------------------
|                   | Cost              | Accumulated
Depreciation | June 30, 2012
Net    
|                   |                   |                          |                      
|Computer equipment | $          33,997 | $          33,997        | $                   0
|                   |                   |                          |                      
|                   | Cost              | Accumulated
Depreciation | June 30, 2011
Net    
|                   |                   |                          |                      
|Computer equipment | $          33,997 | $           32,116       | $             1,881  
|                   |                   |                          |                      



8. SPONSORSHIP LIABILITY



Sponsorship liability represents final payments owing per the sponsorship agreement to be fully paid by December 31, 2012.  The scheduled sponsorship payments per the sponsorship agreement were in default.  As June 30, 2012, the total outstanding sponsorship liability was $875,000.  The Company has been unable to pay the remaining $875,000 that is owed to the Canadian Olympic Committee (the COC) under the terms of the Sponsorship. As a result, the Company has agreed to stop using the Olympics marks. Also, with the agreement of the Company, the full amount of the COC liability has been assigned by the COC to a third party. Full details of the assignment are available in Note 18

Subsequent Events.



Full amount of future benefits recognized of use of Olympic Marks of $237,983 was expensed to earnings during the year ended June 30, 2011.



9.   SHAREHOLDERS EQUITY



a)    Authorized Share Capital



Authorized: Unlimited common shares without par value

Issued share capital



On March 08, 2012 the Company consolidated its shares on a 10 to 1 basis. This resulted in the outstanding shares of the company being consolidated from 63,996,800 to 6,399,680.   All references to common shares, share purchase warrants, stock options, and per share amounts for all periods have been adjusted on a retrospective basis to reflect the common share consolidation. At June 30, 2012 there were 6,959,680 shares issued and outstanding.



Private Placements



i)

On April 27, 2012, the Company closed a non-brokered private placement of 560,000 units of the Companys common shares at a price of 10 cents per unit, for proceeds of $56,000.  Each unit consists of one common share of the Company and one share purchase warrant, which will entitle the holder thereof to purchase one additional common share of the Company for a period of 24 months from the closing date of the offering at an exercise price of 15 cents for the first 12 months and 20 cents during the next 12 months.  The Company has paid a finders fee of $4,100 pursuant to the policies of the TSX Venture Exchange.







93



---

ALDAPHARMACEUTICALS CORP.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

FOR THE YEARS ENDED JUNE 30, 2012 AND 2011







9.

SHAREHOLDERS EQUITY (CONTINUED)



ii)   On January 12, 2011, the Company closed a private placement for total gross proceeds of

$200,000.  A total of 200,000 units of the Company were issued at a price of $1.00 per unit. Each unit consists of one common share of the Company and one non-transferable share purchase warrant entitling the holder to acquire one additional common share of the Company at a price of $2.00 per common share for a period of 24 months from the date of issuance of the purchase warrant with a forced exercise prevision attached to each warrant.  The issuance with respect to the private placement will be subject to a hold period expiring on May 13,

2011.  Legal fees of $5,626 were charged against share capital in connection with the private placement.  Warrants were valued at $18,676.



iii)  On September 7, 2010, the Company closed a private placement for total gross proceeds of

$327,500.  A total of 327,500 units of the Company were issued at a price of $1.00 per unit. Each unit consists of one common share of the Company and one non-transferable share purchase warrant entitling the holder to acquire one additional common share of the Company at a price of $2.00 per common share for a period of 24 months from the date of the issuance of the purchase warrant with a forced exercise provision attached to each warrant.  The issuance with respect to the private placement will be subject to a hold period expiring on January 8, 2011.  The Company paid finders fee of $2,250 to certain registrants with respect to the offering.  Finders fees of $2,250 and legal fees of $15,887 were charged against share capital in connection with the private placement. Warrants were valued at $57,581.



Warrants exercised



i)

During the year ended June 30, 2010, 138,000 warrants were exercised by the holders at an exercise price range of $4.50 per warrant for total gross proceeds of $621,000. Warrant value of $74,506 previously recorded in contributed surplus for warrants were credited to share capital.



ii)   On August 13, 2010, the Company received an approval for the extension of the exercise period of a total 600,000 outstanding share purchase warrants issued as part of the non- brokered private placement of common share units that closed on September 30, 2009. Pursuant to the extension, the applicable exercise period will be extended by one further year, from September 16, 2010 to September 16, 2011.  The warrant exercise price of $4.00 per share will remain the same.



As a result of the extension, the Company recorded a warrant revaluation expense of $24,600 for the incremental value of the modified warrants with a corresponding credit to contributed surplus.  The incremental value of the modified warrants were measured by the difference between the fair value of the modified warrants determined using the Black-Scholes option pricing model and the value of the old warrants immediately before its term was modified, determined based on the shorter of its remaining expected life and its expected life of the modified warrants.



b)   Stock options



The Company has adopted an incentive share purchase option plan under the rules of the TSX Venture Exchange pursuant to which it is authorized to grant options to executive officers, directors, employees and consultants, enabling them to acquire up to 10% of the issued and outstanding common shares of the Company.  The options can be granted for a maximum term of

5 years and generally vest either immediately or in specified increments of 25%.







94



---

ALDAPHARMACEUTICALS CORP.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

FOR THE YEARS ENDED JUNE 30, 2012 AND 2011









9.

SHAREHOLDERS EQUITY (CONTINUED)



No individual may hold options to purchase common shares of the Company exceeding 5% of the total number of common shares outstanding from time to time.   Pursuant to the policies of the TSX Venture Exchange, shares issued on exercise of options are restricted from trading during the four month period subsequent to the date of grant.



A summary of the Companys stock options and changes during each year is presented below:





|                                |                          |                                 |                          |                  |                                
|------------------------------- | ------------------------ | ------------------------------- | ------------------------ | ---------------- | -------------------------------
|                                | Year ended June 30, 2012 |                                 | Year ended June 30, 2011
|                                | Number of Shares         | Weighted average exercise price |                          | Number of Shares | Weighted average exercise price
|Outstanding, beginning of year  | 288,000                  | $ 3.20                          |                          | 560,000          | $  4.70                        
|Granted during period/year      | -                        | -                               |                          | -                | -                              
|-consulting/officer             | -                        | -                               |                          | -                | -                              
|-directors                      | -                        | -                               |                          | -                | -                              
|-employees                      | -                        | -                               |                          | -                | -                              
|-investor relations             | -                        | -                               |                          | -                | -                              
|Cancelled during period/year    | -                        | -                               |                          | (272,000)        | 6.30                           
|Outstanding, end of period/year | 288,000                  | $ 3.20                          |                          | 288,000          | $  3.20                        



The following table summarizes information about stock options outstanding at June 30, 2012:



|                 |                |                  |                    |               
|---------------- | -------------- | ---------------- | ------------------ | --------------
|Number of
Shares | Exercise
Price | Expiry
Date      | Number
Exercisable | Exercise
Price
|55,000           | $  2.00        | October 31, 2013 | 55,000             | $  2.00       
|160,000          | $  2.50        | June 4, 2014     | 160,000            | $  2.50       
|73,000           | $  5.50        | October 15, 2014 | 73,000             | $  5.50       
|288,000          |                |                  | 288,000            |               



(i)

On October 31, 2008, the Company granted options to acquire 55,000 common shares of the company to directors, consultants, officers, employees and investor relations. The options had an exercise price of $2.00 with an exercisable term of five years expiring on October 31,

2013. 50,000 options vested immediately with an estimated fair value of $0.09 per share resulting $48,743 in stock based compensation expense being recognized. 5,000 options were vested in equal quarterly installments over a period of 12 months from the date of grant.



(ii)

On June 5, 2009, the Company granted options to acquire 160,000 common shares of the company to directors, consultants, officers, employees and investor relations. The options had an exercise of $2.50 with an exercisable term of five years expiring on June 4, 2014. 145,000 options vested immediately with an estimate fair value of $0.13 per share resulting $185,853 in stock based compensation expense being recognized. 15,000 options were vested in equal quarterly installments over a period of 12 months from the date of grant.

















95



---

ALDAPHARMACEUTICALS CORP.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

FOR THE YEARS ENDED JUNE 30, 2012 AND 2011





9.   SHAREHOLDERS EQUITY (CONTINUED)



(iii)

On October 15, 2009, the Company granted options to acquire 75,000 common shares of the company to directors, consultants, officers, employees and investor relations. The options had an exercise of $5.50 with an exercisable term of five years expiring on October 15, 2014.

70,000 options vested immediately with an estimate fair value of $0.46 per share resulting

$324,935 in stock based compensation expense being recognized. 5,000 options were vested in equal quarterly installments over a period of 12 months from the date of grant. In 2010,

2,000 were canceled when an employee left the company.



Stock-based compensation expense is presented in the Statement of Operations and Deficit as follows:





|                               |                            |                         
|------------------------------ | -------------------------- | ------------------------
|                               | June 30, 2012              | June 30, 2011           
|Consulting/Officers            | $                        - | $                      -
|Investor Relations             | -                          | 11,522                  
|Wages and Benefits             | -                          | -                       
|Total Stock-Based Compensation | $                       -  | $            11,522     



The  fair  value  of  each  option  was  estimated  as  at  the  date  of  grant  using  the  Black-Scholes option-pricing model with the following weighted-average assumptions:



|                             |               |              
|---------------------------- | ------------- | -------------
|                             | June 30, 2012 | June 30, 2011
|Dividend yield               | -             | -            
|Expected volatility          | -             | -            
|Risk free interest rate      | -             | -            
|Expected average option term | -             | -            







c)

Warrants



The Company has issued warrants entitling the holders to acquire common shares of the Company.



A summary of changes in unexercised warrants is presented below:



|                          |                     |                     |                      |                      |                     |          
|------------------------- | ------------------- | ------------------- | -------------------- | -------------------- | ------------------- | ---------
|                          | Warrants
@ 2.00
(1) | Warrants
@ 2.00
(2) | Warrants @ $0.20
(3) | Warrants
@ $4.00
(4) | Warrants
@$4.50
(5) | Total    
|Outstanding June 30, 2010 | -                   | -                   | -                    | 600,000-             | -                   | 600,000  
|Granted during Period     | 327,500             | 200,000             | -                    | -                    | -                   | 527,500  
|Warrant expired           | -                   | -                   | -                    | (600,000)            | -                   | (600,000)
|Warrant extended          | -                   | -                   | -                    | 600,000              | -                   | 600,000  
|Outstanding June 30, 2011 | 327,500             | 200,000             | -                    | 600,000              | -                   | 1,127,500
|Warrant expired           | -                   | -                   | -                    | (600,000)            | -                   | (600,000)
|Warrants issued           | -                   | -                   | 560,000              | -                    | -                   | 560,000  
|Outstanding June 30, 2012 | 327,500             | 200,000             | 560,000              | -                    | -                   | 1,087,500







96



---

ALDAPHARMACEUTICALS CORP.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

FOR THE YEARS ENDED JUNE 30, 2012 AND 2011





9.   SHAREHOLDERS EQUITY (CONTINUED)



(1)  Exercisable at a price of $2.00 per warrant until September 7, 2012, granted pursuant to private placement.

(2)  Exercisable at a price of $2.00 per warrant until January 11, 2013, granted pursuant to private placement.

(3)  Exercisable at a price of $0.10 per warrant until April 27, 2013 and at $0.20 until April 27,

2014, granted pursuant to a private placement.



The fair value of each warrant was estimated as at the date of grant using the Black-Scholes pricing model with the following weighted-average assumptions:



|                             |               |              
|---------------------------- | ------------- | -------------
|                             | June 30, 2012 | June 30, 2011
|Dividend yield               | 0%            | 0%           
|Expected volatility          | 264%          | 75.50%-93.57%
|Risk free interest rate      | 1.69          | 1.41%- 1.68% 
|Expected average option term | 2 years       | 2 years      



d)   Warrant Reserve:



The stock warrant reserve records items recognized as warrants until such time that they are exercised, at which time the corresponding amount will be transferred to share capital. If the warrants expire unexercised, the amount recorded is transferred to the option reserve.



|                                  |                            |                     
|--------------------------------- | -------------------------- | --------------------
|                                  | June 30, 2012              | June 30, 2011       
|Balance, beginning of period/year | $                  964,025 | $            863,168
|Private Placement (9 (a) ( i))    | 40,320                     | 76,257              
|Warrant Exercised                 | -                          | -                   
|Warrant Revaluation               | -                          | 24,600              
|Balance, end of period/year       | $               1,008,345  | $            964,025





e)

Option Reserve:



The stock option reserve records items recognized as stock-based compensation expense until such time that the stock options are exercised, at which time the corresponding amount will be transferred to share capital. If the options expire unexercised, the amount recorded remains in the account.



|                                     |                          |                    
|------------------------------------ | ------------------------ | -------------------
|                                     | June 30, 2012            | June 30, 2011      
|Balance, beginning of period/year    | $              1,640,613 | $         1,629,091
|Options issued to employees          | -                        |                    
|Options issued to directors          | -                        |                    
|Options issued to consultants        | -                        |                    
|Options issued to investor relations | -                        | 11,522             
|Options exercised                    | -                        |                    
|Balance, end of period/year          | $              1,640,613 | $         1,640,613













97



---

ALDAPHARMACEUTICALS CORP.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

FOR THE YEARS ENDED JUNE 30, 2012 AND 2011





10. SUBSCRIPTIONS RECEIVABLE



During the year ended June 30, 2010, the Company had subscriptions receivable of $30,000, which bears interest at prime plus 2% per annum, and was payable no later than October 31, 2010. During the year ended June 30, 2011, $30,000 was received in full by the Company. There were no subscriptions receivable at June 30, 2012.



11.  NOTICES OF CLAIM



On September 23, 2011, a supplier to the Company, Cosmaceutical Research Lab, Inc. (CRL) filed a Notice of Claim (the CRL Claim) in the Provincial Court of British Columbia, Surrey against the Company for $9,727.93 for unpaid invoices and court costs. The Company did not dispute the claim and the Court issued a summary judgment against the Company.



On March 29, 2012, ACD Insurance Services Ltd. filed a Notice of Claim (the ACD Claim) in the Provincial Court of British Columbia, North Vancouver against the Company for $2,148.00 for unpaid invoices and court costs. The Company did not dispute the claim and the Court issued a summary judgment against the Company.



12.  PROMISSORY NOTES



During the year ended June 30, 2012, the Company received another financial loan in the net amount of $29,000 from companies controlled by the directors of the Company.  The promissory notes are due on demand, bear interest at a rate of 12% per annum.  During the year ended June 30, 2012, the Company accrued interests on promissory notes of $12,810 (2011: $NIL). As of June 30, 2012, the accrued interest payable on promissory notes was $15,806.



During the year ended June 30, 2012, the Company received another financial loan in the net amount of $12,500 from the third party.  The promissory notes are due on demand with 0% interest rate.



During the year ended June 30, 2011, the Company received financial loans in the amount of $77,000 from companies controlled by the directors of the Company.   The promissory notes are due on demand, bear interest at a rate of 12% per annum.  The accrued interests on promissory notes were

$2,996 as of June 30, 2011.



13.  RELATED PARTY TRANSACTIONS



a)   During the year ended June 30, 2012, the Company was invoiced for consulting fees of $152,302 (2011 - $324,000) The Company paid $12,558 (2011 - $178,000) and the remainder $139,744 (2011 - $146,000) will be paid when sufficient funds are available. Please refer to Note 18 for subsequent events note regarding consulting fees settled for the issuance of shares.













98



---

ALDAPHARMACEUTICALS CORP.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

FOR THE YEARS ENDED JUNE 30, 2012 AND 2011





13.  RELATED PARTY TRANSACTIONS (CONTINUED)



On January 2, 2012, the Company licensed the rights to manufacture and market T36®disinfectant and hand sanitizer products in Canada to Proterra Management Group Inc. (formerly 612480 BC Ltd.),a company controlled by Peter Chen, a former Director and CFO, in settlement of management fees of $125,440 owed to Proterra Management Group Inc. No rights to any other products or territories were provided to Proterra. ALDA retains a Right of First Refusal to re- acquire the rights if Proterra receives a valid third party offer for nay portion of the rights provided to Proterra. ALDA retains all of the intellectual property including the DIN's NPN's, patents and trademarks. Management is of the opinion that the rights provided to Proterra were fairly priced since the Company had moved from its warehouse, could no longer support the manufacturing and marketing of disinfectants or hand sanitizers and was unable to maintain its Drug Establishment License that is required to sell hand sanitizer products. The Company also offered the rights to competing companies and to third party manufacturers and received no offers except one that was for the forgiveness of approximately $10,000 in debt owed by the Company



After the settlement of management fees owed to Proterra Management Group Inc., the total cumulative accrued consulting fees of net $159,040 for the related parties will be paid when sufficient financing becomes available.



b)   During  the  year  ended  June  30,  2012,  the  Company  paid  rent  of  $NIL  (2011  -  $9,572)  to companies controlled by directors of the Company.



c)   During the year ended June 30, 2012, the Company received net financial loans in the amount of

$29,000 (2011 - $77,000) from companies controlled by the directors of the Company.  As at June

30, 2012, the cumulative balance of related party Promissory Notes was $106,000. Accrued interest on these promissory notes of $15,806 was forgiven at year-end.



These transactions were measured at the exchange amount, which is the amount of consideration established and agreed to by the related parties. All related party transactions were in the normal course of business operations.



14. CAPITAL DISCLOSURES



The Company includes shareholders equity and cash and its equivalents in the definition of capital, which totaled negative $1,318,829 (June 30, 2011: $1,057,407). The Companys objectives when managing capital is to maintain sufficient cash resources to support its day-to-day operations.  The Company includes shareholders equity and cash and its equivalent in the definition of capital. The availability of capital is solely through the issuance of the Companys common shares.  The Company will not issue additional equity until such time when funds are needed and the market conditions become favorable to the Company. There are no assurances that funds will be made available to the Company when required. The Company makes every effort to safeguard its capital and minimize its dilution to its shareholders.



The Company is not subject to any externally imposed capital requirements.



15.   SEGMENTED INFORMATION



The Companys assets as well as sales are all located and have occurred all in Canada.











99



---

ALDAPHARMACEUTICALS CORP.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

FOR THE YEARS ENDED JUNE 30, 2012 AND 2011



16.   FINANCIAL INSTRUMENTS AND FINANCIAL RISK MANAGEMENT



The Companys financial instruments include cash and equivalents, short term investments, accounts receivable and accounts payable and accrued liabilities. The carrying values of these financial instruments approximate their fair values due to their relatively short periods to maturity. The Companys risk management policies are established to identify and analyze the risks faced by the Company, to set appropriate risk limits and controls, and to monitor risks and adherence to market conditions and the Companys activities. The Company has exposure to credit risk, liquidity risk and market risk as a result of its use of financial instruments.



This note presents information about the Companys exposure to each of the above risks and the Companys objectives, policies and processes for measuring and managing these risks. Further quantitative disclosures are included throughout these financial statements. The Board of Directors has overall responsibility for the establishment and oversight of the Companys risk management framework. The Board has implemented and monitors compliance with risk management policies



a)    Credit risk

Credit risk is the risk of financial loss to the Company if a customer or counterparty to a financial instrument fails to meet its contractual obligations and arises primarily from the Companys cash

and cash equivalents, trade receivables, and GST input tax credits. The Companys cash and equivalents  are  held  through  a  large  Canadian  financial  institution.    Cash  equivalents  are

composed of financial instruments issued by Canadian banks with high investment-grade ratings.

The Company does not have financial assets that are invested in asset backed commercial paper.



The Company performs ongoing credit evaluations of its trade receivables, but does not require collateral.  The Company establishes an allowance for doubtful accounts based on the credit risk applicable to particular customers and historical data.



The Company monitors the concentration of exposure and where possible, if necessary, takes steps to limit exposure to any one counterparty.  The Company views credit risk on cash deposits, trade receivables, and GST input tax credits as minimal.



b)   Liquidity risk

Liquidity risk is the risk that the Company will incur difficulties meeting its financial obligations as they are due. The Companys approach to managing liquidity is to ensure, as far as possible, that it will have sufficient liquidity to meet its liabilities when due, under both normal and stressed

conditions without incurring unacceptable losses or risking harm to the Companys reputation.

See Note 1 for working capital balances.



The Company monitors its spending plans, repayment obligations and cash resources and takes actions with the objective of ensuring that there is sufficient capital in order to meet short-term business requirements.  To facilitate its expenditure program, the Company raises funds primarily through public equity financing. The Company anticipates it will have adequate liquidity to fund its financial liabilities through future equity contributions.



As at June 30, 2012, the Companys financial liabilities were comprised of accounts payable and accrued liabilities which have a maturity of less than one year.  The outstanding sponsorship liability as at June 30, 2012 was $875,000.   The scheduled sponsorship payments of $605,000 were in default during the year ended 2011.  During the year ended June 30, 2012, the Company received net financial loans of $29,000 from companies controlled by the Director of the Company and $12,500 from a third party.  After receiving the additional net financial loans of $41,500, the balance of Promissory Notes increased to $118,500.









100



---

ALDAPHARMACEUTICALS CORP.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

FOR THE YEARS ENDED JUNE 30, 2012 AND 2011





16.   FINANCIAL INSTRUMENTS AND FINANCIAL RISK MANAGEMENT (CONTINUED)



c)

Market risk

Market risk for the Company consists of currency risk, and interest rate risk. The objective of market risk management is to manage and control market risk exposures within acceptable limits, while maximizing returns.



i)    Currency risk

Foreign currency exchange rate risk is the risk that the fair value or future cash flows will fluctuate as a result of changes in foreign exchange rates. As all of the Companys purchases and sales are denominated in Canadian dollars, and has no significant cash balances denominated in foreign currencies, the Company is not exposed to foreign currency exchange risk at this time.



ii)   Interest rate risk

Interest rate risk is the risk that fair values or future cash flows will fluctuate as a result of changes in market interest rates. In respect of financial assets, the Companys policy is to

invest cash at floating interest rates and cash reserves are to be maintained in cash equivalents

in order to maintain liquidity, while achieving a satisfactory return for shareholders. Fluctuations in interest rates impact marginally on the value of cash and equivalents.



The Company is not exposed to interest rate risk on its short term liabilities, and does not have any long-term liabilities.



d)   Determination of Fair Value 

The fair values of financial assets and financial liabilities are determined as follows:



i)

For cash and cash equivalents, accounts receivable, accounts payable and accrued liabilities carrying amounts approximate fair value due to their short-term maturity;

ii)  The fair value of notes payable and obligations under capital lease approximate their carrying value as their effective interest rates approximate current market rates;

iii) The fair value of derivative financial instruments is determined based on fair market valuation methods.



|                                          |                             |                  |                |                     
|----------------------------------------- | --------------------------- | ---------------- | -------------- | --------------------
|                                          | Fair Value at June 30, 2012
|                                          | Total                       | Level 1          | Level 2        | Level 3             
|Financial Assets                          |                             |                  |                |                     
|Cash and cash equivalents                 |                             |                  |                |                     
|(Held-for-trading)                        | $          2,335            | $          2,335 | $            - | $                  -
|Accounts receivable                       |                             |                  |                |                     
|(Loans and receivables)                   | 8,159                       | 8,159            | -              | -                   
|Accounts payables and accrued liabilities |                             |                  | -              | -                   
|(Other financial liabilities)             | 1,222,235                   | 1,222,235        |                |                     
|Promissory notes                          |                             |                  |                |                     
|(Other financial liabilities)             | 118,500                     | 118,500          | -              | -                   



The fair value hierarchy establishes three levels to classify the inputs to valuation techniques used to measure fair value. The three levels of the fair value hierarchy are described below:









101



---

ALDAPHARMACEUTICALS CORP.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

FOR THE YEARS ENDED JUNE 30, 2012 AND 2011





16.   FINANCIAL INSTRUMENTS AND FINANCIAL RISK MANAGEMENT (CONTINUED)



Level 1:

Unadjusted quoted prices in active markets that are accessible at the measurement date for identical assets or liabilities and amounts resulting from direct arms length transactions.



Cash and equivalents, accounts receivable, and accounts payable and accrued liabilities are valued using quoted market prices or from amounts resulting from direct arms length transactions. As a result, these financial assets and liabilities have been included in Level 1 of the fair value hierarchy.



Level 2:

Inputs other than quoted prices included in Level 1 that are observable for the asset or liability, either directly or indirectly, for substantially the full contractual term. Derivatives are included in Level 2 of the fair value hierarchy as they are valued using price models. These models require a variety of

inputs, including, but not limited to, contractual terms, market prices, forward price curves, yield

curves and credit spreads. Currently the Company has no financial instruments at this level.



Level 3:

Inputs for the asset or liability are not based on observable market data. Currently the Company has no financial instruments at this level.



17.   INCOME TAXES



The following table reconciles the expected income taxes expense (recovery) at the Canadian statutory income tax rates to the amounts recognized in the consolidated statements of operations for the years ended month and date, 2012 and 2011:





|                                            |                       |  |                          
|------------------------------------------- | --------------------- |  | -------------------------
|                                            | 2012                  |  | 2011                     
|Income (Loss) Before Taxes                  | $(306,565)            |  | $(1,875,564)             
|Statutory tax rate                          | 25.75%                |  | 27.50%                   
|Expected income tax (recovery)              | (78,941)              |  | (515,780)                
|Non-deductible items                        | (30,664)              |  | 7,622                    
|Change in estimates                         | -                     |  | 12,182                   
|Foreign Tax Rate Difference                 | -                     |  |                          
|Change enacted tax rate                     | 3,192                 |  | 45,908                   
|Others                                      | -                     |  | (2,772)                  
|Change in Deferred tax asset not recognized | 106,412               |  | 452,840                  
|Total income taxes (recovery                | $                   - |  | $                       -









102



---

ALDAPHARMACEUTICALS CORP.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

FOR THE YEARS ENDED JUNE 30, 2012 AND 2011



17.   INCOME TAXES (CONTINUED)



Deferred income taxes reflect the tax effects of temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes. Deferred tax assets (liabilities) at June 30, 2012,

2011 and 2010 are comprised of the following:





|                                  |                    |  |                  |  |                  
|--------------------------------- | ------------------ |  | ---------------- |  | -----------------
|                                  | 2012               |  | 2011             |  | 2010             
|Non capital loss carry forwards   | $        2,402,124 |  | $      2,291,120 |  | $       1,870,981
|Fixed Assets                      | 5,396              |  | 4,926            |  | 7,861            
|Financial Instrument              | 87,153             |  | 87,153           |  | 52,290           
|Financing Costs                   | 8,712              |  | 13,775           |  | 13,001           
|                                  | 2,503,386          |  | 2,396,973        |  | 1,944,133        
|Deferred tax asset not recognized | (2,603,386)        |  | (2,396,973)      |  | (1,944,133)      
|Net Deferred tax asset            | $-                 |  | $-               |  | $-               



The Company has net operating loss carry forwards of approximately $9,608,498 which may be carried forward to apply against future year income tax for Canadian income tax purposes, subject to the final determination by taxation authorities, expiring in the following years:



|       |          
|------ | ---------
|EXPIRY | 2012 FS  
|2014   | 603,255  
|2015   | 582,793  
|2026   | 463,528  
|2027   | 450,897  
|2028   | 893,646  
|2029   | 859,482  
|2030   | 3,456,877
|2031   | 1,854,000
|2032   | 444,020  
|TOTAL  | 9,608,498





18.   SUBSEQUENT EVENTS



1.

Subsequent to the year-end, 327,500 share purchase warrants expired on September 7th.



2.

On September 7, 2012, ALDA Pharmaceuticals Corp. the Company announced that the TSX Venture Exchange had accepted a shares for debt arrangement. Debts totaling $935,299.76 would be settled by issuing 11,257,395 common shares to creditors at an average value of 0.083 per share.  Of these shares, 10,687,500 were are subjected to resale restrictions equivalent to a TSX-V Tier 2 Value Security Escrow Agreement which allows a scheduled release of shares from escrow over a three year period.



The remaining 569,895 shares will beare subject to a 4-month hold period running from the date of issuance.  There was no change of control or new insiders created as a result. Upon completion, there will be 18,217,074 issued and outstanding common shares in the capital of the Company.  This transaction did not result in a change of control or in the creation of new insiders.







103



---

ALDAPHARMACEUTICALS CORP.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

FOR THE YEARS ENDED JUNE 30, 2012 AND 2011





18.   SUBSEQUENT EVENTS (CONTINUED)



3.

On September 17, 2012, ALDA Pharmaceuticals Corp.   the Company announced that the TSX Venture Exchange had provided acceptance of the License Agreement between the Company and Canagen Pharmaceuticals Inc. of Richmond, B.C. The License Agreement provided the Company with the global sales and marketing rights, except for China and India, to Pedia-Safe Polyvitamin Drops.



The Agreement provided for the payment of CDN$340,000 by the issuance of 3,400,000

Common Shares of ALDA at a deemed price of $0.10 per share. This transaction will did not result in a change of control or in the creation of new insiders. Upon completion, there will were 21,617,074 issued and outstanding common shares in the capital of the Company.



4.

Subsequent to year end the, the Company received operating loans totaling $27,406.40 from Canagen Pharmaceuticals Inc and. $1,100. From C3 Energy Inc and $872.66 from Terrance Owen. These loans are not secured and dont bear interest.



5.

Subsequent to year end, a director of the company who was owed $159,040 of consulting fees, forgave $119,280 of the fees and accepted a settlement of $39,760 that was converted into 397,600 shares priced at 10 cents per share as part of the debt settlement arrangement that was announced by the Company on September 7, 2012. These shares are subject to a four month hold period from the date of issuance.



6.

Subsequent to year end, the Company accrued management fees of $15,000 to Terrance

Owen, President & CEO, and $3,000 To Jamie Lewin, CFO.



7.

On October 18, 2012 the Company announced that it had entered into a binding Memorandum of Understanding to acquire FerroHeme®, a dietary iron supplement and the concomitant global sales and marketing rights to the product, from Canagen Pharmaceuticals Inc. (Canagen) of Richmond, BC. Under the terms of the Memorandum of Understanding, ALDA will provide payments over a period of three years to reimburse Canagen for the development and goodwill costs of FerroHeme and, thereafter, pay royalties of 5% of net sales to Canagen until the earlier of five years or the total royalties paid to Canagen are equal to

50% of the acquisition cost. On full payment of the development costs and the royalties, ownership of FerroHeme® will be transferred to ALDA. By mutual agreement of ALDA and Canagen, the payments and royalties may be paid in cash or shares of ALDA, subject to the policies of the TSX Venture Exchange. The Company and Canagen will use their best efforts to complete a definitive option agreement by November 15, 2012.



8.

On  October  19,  2012,  the  Company  announced  that  it  had  entered  into  a  binding Memorandum of Understanding that grants ALDA an option to acquire a number of new pharmaceutical products (the Products) from Canagen Pharmaceuticals Inc. (Canagen) of Richmond, BC. The Products include:



a.    Patentable, compounds for the treatment of:



i.

Melanoma and other forms of skin cancer and ii.

Alzheimers.

b.

A non-prescription, proprietary opiate addiction treatment product, which has been endorsed by the World Health Organization (WHO) and registered as a pharmaceutical in

China, Cambodia, Thailand, Myanmar and successfully used in these countries to treat

opiate-addicted patients.



c.

A new, patented TB drug, which has been registered and used as a drug in Ukraine for the company treatment of Tuberculosis and multi-drug resistant TB.





104



---

ALDAPHARMACEUTICALS CORP.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

FOR THE YEARS ENDED JUNE 30, 2012 AND 2011





18.   SUBSEQUENT EVENTS (CONTINUED)



d.

The generic chemotherapy compounds, paclitaxel and docetaxel,

e.

Octacosanyl nicotinate, a cardiovascular drug with US Patent 7,615,641 and f.

Any other products that Canagen wishes to include in the Option.



Under the terms of the Memorandum of Understanding, ALDA will have the right to undertake due diligence on the Products in order to validate any claims of efficacy, evaluate their market potential and estimate the costs to bring them to market. ALDA will have a Right of First Refusal to match the terms offered by any third party for any of the Products.



The Company and Canagen will use their best efforts to complete a definitive option agreement by November 15, 2012. The acquisition of any of the Products will be subject to the policies of the TSX Venture Exchange.



19.  TRANSITION TO IFRS Overview

The Canadian Accounting Standards Board has confirmed that IFRS replaced current Canadian GAAP

for publicly accountable enterprises, including the Company, for interim and annual financial statements relating to fiscal years beginning on or after January 1, 2011.  Previously, the Company prepared its interim and annual consolidated financial statements in accordance with Canadian GAAP. The accounting policies described in Note 3 and 4 have been selected to be consistent with IFRS as is expected to be effective on June 30, 2012, the Companys first annual IFRS reporting date.





As this is the Companys first year of financial statements under IFRS, the Company has applied retrospectively new standards and interpretations which were effective for annual periods commencing on or after July 1, 2010.  IFRS 1 - First Time Adoption of International Financial Reporting Standards provides optional exemptions from other IFRSs, at the discretion of first time IFRS adopters.



Designation of previously recognized financial instruments

The Company may elect to reclassify a financial instrument as an available for-sale, or as a financial asset or financial liability as at fair value through profit or loss, at the date of transition to IFRS, provided the asset or liability meets the certain criteria.  The Company did not reclassify the category that financial instruments are designated to at transition date.   Therefore this exemption was not applied.



Share-based payments

IFRS  2,  Share-based  Payments,  encourages  application  of  its  provisions  to  equity  instruments granted on or before November 7, 2002, but permits the application only to equity instruments granted after November 7, 2002 that had not vested by the transition date. Under IFRS, an estimate is required

of the number of grants which are expected to vest, which is revised if subsequent information

indicates that actual forfeitures are to differ from estimates. Under Canadian GAAP, forfeitures are recognized as they occur. Moreover, under IFRS 2, each tranche in an award with graded vesting is considered a separate grant with a different vesting date and fair value. Each grant is accounted for on that basis. The Company has elected not to retrospectively apply IFRS 2  Share-Based Payments to its equity instruments granted on or before November 7, 2002, or granted after November 7, 2002 that vested before July 1, 2010.











105



---

ALDAPHARMACEUTICALS CORP.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

FOR THE YEARS ENDED JUNE 30, 2012 AND 2011











19.  TRANSITION TO IFRS (CONTINUED)



Use of Estimates

A companys estimates under IFRS at the date of transition to IFRS must be consistent with estimates made for the same date under Canadian GAAP, unless there is objective evidence that those estimates were in error.



IFRS 1 requires an entity to reconcile equity, comprehensive income and cash flows for prior periods. In preparing these financial statements in accordance with IFRS 1, no reconciliation differences were identified.   As a result, equity reported in accordance with Canadian GAAP is the same as IFRS on at June 30, 2011, and July 1, 2010.   Similarly total comprehensive loss reported under Canadian GAAP is the same as IFRS for the year ended June 30, 2011.



On the whole, the transfer to IFRS did not affect the Companys financial statements except for the re- labeling of Contributed Surplus as Reserves.





Reconciliation of Consolidated Statement of Financial Position as at July 1, 2010



|                                         |                          |                            |                         
|---------------------------------------- | ------------------------ | -------------------------- | ------------------------
|                                         | Canadian
GAAP            | Effect of
Transition       | IFRS                    
|ASSETS                                  
|                                         |                          |                            |                         
|Current Assets                           |                          |                            |                         
|Cash and Equivalents                     | $              146,701   | $                       -  | $              146,701  
|Accounts Receivable                      | 162,398                  | -                          | 162,398                 
|Inventory                                | 593,574                  | -                          | 593,574                 
|Prepaid Expenses and Others              | 207,535                  | -                          | 207,535                 
|                                         | 1,110,208                | -                          | 1,110,208               
|Equipment                                | 4,876                    | -                          | 4,876                   
|Long Term Prepaid Expense                | 237,983                  |                            | 237,983                 
|                                         | $            1,353,067   | $                        - | $            1,353,067  
|                                         |                          |                            |                         
|LIABILITIES                             
|                                         |                          |                            |                         
|Current Liabilities                      |                          |                            |                         
|Accounts Payable and Accrued Liabilities | $                195,788 | $                       -  | $                195,788
|Sponsorship Liability  Current portion  | 680,000                  | -                          | 680,000                 
|                                         | 875,788                  | -                          | 875,788                 
|Sponsorship Liability                    | 237,983                  | -                          | 237,983                 
|                                         | 1,113,771                | -                          | 1,113,771               
|                                         |                          |                            |                         
|SHAREHOLDERSDEFICIENCY                 
|                                         |                          |                            |                         
|Share Capital                            | 7,494,231                | -                          | 7,494,231               
|Subscriptions Receivables                | (30,000)                 | -                          | (30,000)                
|Contributed Surplus  Warrants           | 863,168                  | (863,168)                  | -                       
|Contributed Surplus  Options            | 1,629,091                | (1,629,091)                | -                       
|Reserves                                 | -                        | -                          | 2,492,259               
|Deficit                                  | (9,717,194)              | -                          | (9,717,194)             
|                                         | 239,296                  | -                          | 239,296                 
|                                         | $    1,353,067           | $                      -   | $        1,353,067      





106



---

ALDAPHARMACEUTICALS CORP.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

FOR THE YEARS ENDED JUNE 30, 2012 AND 2011





19.  TRANSITION TO IFRS (CONTINUED)



Reconciliation of Consolidated Statement of Financial Position as at June 30, 2011



|                                         |                          |                            |                               
|---------------------------------------- | ------------------------ | -------------------------- | ------------------------------
|                                         | Canadian
GAAP            | Effect of
Transition       | IFRS                          
|ASSETS                                  
|                                         |                          |                            |                               
|Current Assets                           |                          |                            |                               
|Cash and Equivalents                     | $                  9,095 | $                       -  | $                        9,095
|Accounts Receivable                      | 57,291                   | -                          | 57,291                        
|Inventory                                | 94,929                   | -                          | 94,929                        
|Prepaid Expenses and Others              | 27,298                   | -                          | 27,298                        
|                                         | 188,613                  | -                          | 188,613                       
|Equipment                                | 1,881                    | -                          | 1,881                         
|Long Term Prepaid Expense                | -                        | -                          | -                             
|                                         | $              190,494   | $                        - | $                    190,494  
|                                         |                          |                            |                               
|LIABILITIES                             
|                                         |                          |                            |                               
|Current Liabilities                      |                          |                            |                               
|Accounts Payable and Accrued Liabilities | $              304,996   | $                       -  | $                    304,996  
|Sponsorship Liability  Current portion  | 875,000                  | -                          | 875,000                       
|Promissory Notes                         | 77,000                   | -                          | 77,000                        
|                                         | 1,256,996                | -                          | 1,256,996                     
|Sponsorship Liability                    | -                        | -                          | -                             
|                                         | 1,256,996                | -                          | 1,256,996                     
|                                         |                          |                            |                               
|SHAREHOLDERSDEFICIENCY                 
|                                         |                          |                            |                               
|Share Capital                            | 7,921,708                | -                          | 7,921,708                     
|Subscriptions Receivables                | -                        | -                          | -                             
|Contributed Surplus  Warrants           | 964,025                  | (964,025)                  | -                             
|Contributed Surplus  Options            | 1,640,613                | (1,640,613)                | -                             
|Reserves                                 |                          |                            | 2,604,638                     
|Deficit                                  | (11,592,848)             | -                          | (11,592,848)                  
|                                         | (1,066,502)              | -                          | (1,066,502)                   
|                                         | $             190,494    | $                      -   | $                   190,494   







107



---

ALDAPHARMACEUTICALS CORP.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

FOR THE YEARS ENDED JUNE 30, 2012 AND 2011







19.  TRANSITION TO IFRS (CONTINUED)



Reconciliation of Consolidated Interim Statement of Operations and Comprehensive Loss for the year ended June 30, 2011





|                                         |                    |                        |                      
|---------------------------------------- | ------------------ | ---------------------- | ---------------------
|                                         | Canadian
GAAP      | Effect of
Transition   | IFRS                 
|                                         |                    |                        |                      
|Sales                                    | $          305,592 | $                    - | $             305,592
|                                         |                    |                        |                      
|Cost of Sales                            | (255,889)          | -                      | (255,889)            
|                                         |                    |                        |                      
|Gross (Loss)/ Profit                     | 49,703             | -                      | 49,703               
|                                         |                    |                        |                      
|Interest on Promissory Notes             | (2,996)            | -                      | (2,996)              
|                                         |                    |                        |                      
|General & Administrative Expenses        |                    |                        |                      
|Advertising and Promotion                | 479,026            | -                      | 479,026              
|Amortization  Furniture and Equipment   | 2,995              | -                      | 2,995                
|Conference                               | 3,509              | -                      | 3,509                
|Consulting and Management Fees           | 368,575            | -                      | 368,575              
|Dues and Filing Fees                     | 33,792             | -                      | 33,792               
|Interest and Bank Charges                | 3,668              | -                      | 3,668                
|Investor Relations                       | 88,073             | -                      | 88,073               
|Legal and Accounting                     | 42,198             | -                      | 42,198               
|Office and Miscellaneous                 | 44,914             | -                      | 44,914               
|Product Registration & Development       | 76,524             | -                      | 76,524               
|Rent                                     | 63,165             | -                      | 63,165               
|Travel                                   | 22,469             | -                      | 22,469               
|Wages and Benefits                       | 237,395            | -                      | 237,395              
|Write down of Inventory                  | 431,369            | -                      | 431,369              
|Warrant Revaluation                      | 24,600             | -                      | 24,600               
|Total General & Administration Expenses  | 1,922,272          | -                      | 1,922,272            
|Loss and Comprehensive Loss for the Year | $      (1,875,565) | $                    - | $        (1,875,565) 
|                                         |                    |                        |                      













20.

COMPARATIVE FIGURES



Certain comparative figures have been reclassified to conform to the presentation adopted in the current year.















108



---









SIGNATURES

The registrant hereby certifies that it meets all of the requirements for filing on Form 20-F and that it has duly caused and authorized the undersigned to sign this registration report on its behalf.

|                        |                           
|----------------------- | --------------------------
|Dated: October 24, 2013 | ALDA PHARMACEUTICALS CORP.
|                        |                           
|                        | By: /s/Jamie Lewin        
|                        | Jamie Lewin,              
|                        | Chief Financial Officer   







109