BetterLife Pharma Inc. - Quarter Report: 2010 July (Form 10-Q)

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549

FORM 10-Q

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

For the quarterly period ended July 31, 2010

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

For the transition period from ______________________To ______________________

Commission file number: 333-161157

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

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

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

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

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

Indicate by check mark whether the registrant 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 [ ] No

APPLICABLE ONLY TO CORPORATE ISSUERS

As of September 13, 2010 the registrant’s outstanding common stock consisted of 32,021,618 shares.

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Table of Contents

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PART I - FINANCIAL INFORMATION

ITEM 1.      FINANCIAL STATEMENTS

The unaudited interim financial statements of Neurokine Pharmaceuticals Inc. (the “Company”, “Neurokine”, “we”, “our”, “us”) follow. All currency references in this report are to U.S. dollars unless otherwise noted.

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NEUROKINE PHARMACEUTICALS INC.
Financial Statements
(Expressed in Canadian dollars)
Six Months Ended July 31, 2010

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Nature of Operations and Continuance of Business (Note 1)
Subsequent Events (Note 7)

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

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

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

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Additional information regarding stock options as of July 31, 2010, is as follows:

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

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ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION

Forward Looking Statements

This report on Form 10-Q contains certain forward-looking statements. All statements other than statements of historical fact are “forward-looking statements” for purposes of these provisions, including any projections of earnings, revenues, or other financial items; any statements of the plans, strategies, and objectives of management for future operation; any statements concerning proposed new products, services, or developments; any statements regarding future economic conditions or performance; statements of belief; and any statement of assumptions underlying any of the foregoing. Such forward-looking statements are subject to inherent risks and uncertainties, and actual results could differ materially from those anticipated by the forward-looking statements.

These forward-looking statements involve significant risks and uncertainties, including, but not limited to, the following: competition, promotional costs and the risk of declining revenues. Our actual results could differ materially from those anticipated in such forward-looking statements as a result of a number of factors. These forward-looking statements are made as of the date of this filing, and we assume no obligation to update such forward-looking statements. The following discusses our financial condition and results of operations based upon our consolidated financial statements which have been prepared in conformity with accounting principles generally accepted in the United States. It should be read in conjunction with our financial statements and the notes thereto included elsewhere herein.

Results of Operations

The following summary of our results of operations should be read in conjunction with our financial statements for the quarter ended July 31, 2010, which are included herein.

Our operating results for the three and six months ended July 31, 2010 and 2009are summarized as follows:

For the three months ended July 31, 2010, our net losses decreased by 33,439, or 44.02% as compared to the three months ended July 31, 2009. Our losses have decreased primarily due to lower general and administrative expenses.

Our total current liabilities as of July 31, 2010 were $24,169 as compared to total liabilities of $14,809 as of January 31, 2010. The increase was due to an increase in trade payables related to professional fees and filing fees.

Revenue

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

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Equity Compensation

Subsequent to year-end, we entered into a consulting CFO contract. Pursuant to the contract with our CFO, a portion of his remuneration will be in the form of common stock. As the amounts are subject to hourly billings, we cannot estimate the amount of anticipated equity grants at this time. Currently, there is no other equity compensation anticipated at this time.

Liquidity and Financial Condition

Working Capital

Cash Flows

Operating Activities

Net cash used by operating activities was $38,735 in the six months ended July 31, 2010 compared with net cash used by operating activities of $30,351 in the three months ended July 31, 2009.

Investing Activities

We did not incur any investing activities during the six months ended July 31, 2010 and 2009.

Financing Activities

Net cash provided by financing activities was $22,500 in the six months ended July 31, 2010 compared to $25,421 provided by financing activities in the three months ended July 31, 2009.

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

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

Based on our planned expenditures, we will require additional funds of approximately $2.5 million (a total of $2,507,208 plus our negative working capital of $21,425 as of July 31, 2010) to proceed with our business plan over the next 12 months. If we secure less than the full amount of financing that we require, we will not be able to carry out our complete business plan and we will be forced to proceed with a scaled back business plan based on our available financial resources.

Inflation

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

Off-Balance Sheet Arrangements

As of July 31, 2010, we had no off balance sheet transactions that have or are reasonably likely to have a current or future effect on our financial condition, changes in our financial condition, revenues or expenses, results of operations, liquidity, capital expenditures or capital resources.

Critical Accounting Policies

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

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Foreign Currency Translation

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

Basic and Diluted Net Loss Per Share

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

Recent Accounting Pronouncements

In March 2010, the FASB (Financial Accounting Standards Board) issued Accounting Standards Update 2010-11 (ASU 2010-11), “Derivatives and Hedging (Topic 815): Scope Exception Related to Embedded Credit Derivatives.” The amendments in ASU 2010-11 are effective for each reporting entity at the beginning of its first fiscal quarter beginning after June 15, 2010. Early adoption is permitted at the beginning of each entity’s first fiscal quarter beginning after issuance of this Update. Our company does not expect the provisions of ASU 2010-11 to have a material effect on the financial position, results of operations or cash flows of our company.

In February 2010, the FASB Accounting Standards Update 2010-10 (ASU 2010-10), “Consolidation (Topic 810): Amendments for Certain Investment Funds.” The amendments in this Update are effective as of the beginning of a reporting entity’s first annual period that begins after November 15, 2009 and for interim periods within that first reporting period. Early application is not permitted. Our company’s adoption of provisions of ASU 2010-10 did not have a material effect on the financial position, results of operations or cash flows.

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

In January 2010, the FASB issued an amendment to ASC 820, “Fair Value Measurements and Disclosure”, to require reporting entities to separately disclose the amounts and business rationale for significant transfers in and out of Level 1 and Level 2 fair value measurements and separately present information regarding purchase, sale, issuance, and settlement of Level 3 fair value measures on a gross basis. This standard, for which our company is currently assessing the impact, is effective for interim and annual reporting periods beginning after December 15, 2009 with the exception of disclosures regarding the purchase, sale, issuance, and settlement of Level 3 fair value measures which are effective for fiscal years beginning after December 15, 2010.

In January 2010, the FASB issued an amendment to ASC 505, Equity, where entities that declare dividends to shareholders that may be paid in cash or shares at the election of the shareholders are considered to be a share issuance that is reflected prospectively in EPS, and is not accounted for as a stock dividend. This standard is effective for interim and annual periods ending on or after December 15, 2009 and is to be applied on a retrospective basis. The adoption of this standard is not expected to have a significant impact on our company’s financial statements.

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

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURE ABOUT MARKET RISK.

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

ITEM 4. CONTROLS AND PROCEDURES

Evaluation of Disclosure Controls and Procedures

We maintain disclosure controls and procedures, as defined in Rule 13a-15(e) promulgated under the Securities Exchange Act of 1934 (the "Exchange Act"), that are designed to ensure that information required to be disclosed by us in the reports that we file or submit under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the Securities and Exchange Commission's rules and forms and that such information is accumulated and communicated to our management, including our Chief Executive Officer and Chief Financial Officer, as appropriate to allow timely decisions regarding required disclosure. We carried out an evaluation, under the supervision and with the participation of our management, including our Chief Executive Officer and Chief Financial Officer, of the effectiveness of the design and operation of our disclosure controls and procedures as of July 31, 2010. Based on the evaluation of these disclosure controls and procedures the Chief Executive Officer and Chief Financial Officer concluded that our disclosure controls and procedures were not effective.

Changes in Internal Controls

During the quarter covered by this report there were no changes in our internal control over financial reporting (as defined in Rule 13a-15(e) and Rule 15d-15(e) under the Exchange Act) that materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

PART II. OTHER INFORMATION

ITEM 1. LEGAL PROCEEDINGS

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

ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCCEDS

None.

ITEM 3. DEFAULTS UPON SENIOR SECURITIES

None.

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ITEM 4. [REMOVED AND RESERVED]

ITEM 5. OTHER INFORMATION

On May 28, 2010, we received a resignation from Penny Green and Dr. Ahmad Doroudian. Ms. Green resigned as the Company’s Vice President of Finance, Secretary and director and Dr. Doroudian resigned as the Company’s Chief Financial Officer and Principal Accounting Officer but will remain as the President, Chief Executive Officer and director. Ms. Green’s and Dr. Doroudian’s resignations were not the result of any disagreements with the Company regarding its operations, policies, practices or otherwise.

To fill the vacancies created by the resignations of Ms. Green and Dr. Doroudian, the Company appointed the following individuals:

• Judson Culter as the Company’s Chief Financial Officer and Principal Accounting Officer; and

• Dr. Hassan Salari as the Company’s Secretary.

On May 18th, 2010, we entered into a consulting agreement with Judson Culter for CFO and Principle Accounting Officer services. Judson is a licensed and experienced CPA and will help us redesign our internal controls, fill-out our management team with respect to the accounting and finance roles, and assist with financing and fund-raising. We do not expect any additional material changes in the number of employees over the next 12 month period. However, we may also enter into employment or consulting agreements with our officers or directors. We do and will continue to outsource contract employment as needed.

On June 16, 2010, Neurokine Pharmaceuticals Inc. (the “Company”, “we”, “us”) received a resignation from Bruce Pridmore. Mr. Pridmore resigned as the Company’s director. Mr. Pridmore’s resignation was not the result of any disagreements with the Company regarding its operations, policies, practices or otherwise. To fill the vacancy created by the resignation of Mr. Bruce, the Company appointed the following individual: Dr. David Filer as the Company’s director, effective June 21, 2010. Our board of directors now consists of Dr. Ahmad Doroudian, Dr. Hassan Salari, Dr. Maziar Badii and Dr. Kamran Shojania and Dr. David Filer.

During the last 10 years, Dr. Filer has been self employed and has worked as a healthcare analysts in New York. He worked in that capacity for a number of investment bankers and brokerage firms as well as biotechnology companies in North America. He is a prominent healthcare analyst in New York and assisted companies such as Paramount Biocapital, Sunrise Equities, Centercort Capital, Spencer Trask Ventures, Altira Capital, Cornerstone Pharmaceuticals, Cleveland Biolabs, Advaxis, Biocancell, United Therapeutics, Enzon Inc. Working with investors professional managers and inventors to establish and guide their companies seeking the clinical investigation and commercial development of cutting edge technologies and products. Furthermore, he managed the merger of Unigene and Pfizer in deal valued at $60 MM. Dr. Filer has a Ph.D. in Microbiology and Molecular Biology and worked at the New York University Medical Center as teaching instructor from 1984-1999.

There are no family relationships among our directors or executive officers. There have been no transactions between our company and Mr. Filer since our last fiscal year which would be required to be reported herein.

ITEM 6. EXHIBITS.

The following exhibits are included with this quarterly filing:

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SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

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