THERALINK TECHNOLOGIES, INC. - Annual Report: 2012 (Form 10-K)

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

FORM 10-K

(Mark One)

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

For the fiscal year ended: February 29, 2012

or

[   ] 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: 000-52218

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

90 Fairmount Road West, Califon, New Jersey 07830
(Address of principal executive offices and Zip Code)

Registrant's telephone number, including area code: (908) 975-0753

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

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

Common Stock, par value $0.0001 per share
(Title of Class)

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

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

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

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).
Yes [X]     No [   ]

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

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See 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 Act).
Yes [   ]     No [X]

State the aggregate market value of the voting and non-voting common equity held by non-affiliates computed by reference to the price at which the common equity was last sold, or the average bid and asked price of such common equity, as of the last business day of the registrant's most recently completed second fiscal quarter.

15,186,000 shares of common stock at a price of $0.60 per share for an aggregate market value of $9,111,600.¹

¹ The aggregate market value of the voting stock held by non-affiliates is computed by reference to the closing price of shares of common stock of the registrant on the OTC Bulletin Board on August 12, 2011 of $0.60 per share.

APPLICABLE ONLY TO CORPORATE REGISTRANTS

Indicate the number of shares outstanding of each of the registrant's classes of common stock, as of the latest practicable date:
20,836,000 shares of common stock are issued and outstanding as of May 18, 2012.

DOCUMENTS INCORPORATED BY REFERENCE

Not Applicable

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TABLE OF CONTENTS

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PART I

ITEM 1. BUSINESS

Forward-Looking Statements

This annual report contains forward-looking statements. All statements other than statements of historical facts contained in this annual report, including statements regarding our future financial position, business strategy and plans and objectives of management for future operations, are forward looking statements. These statements relate to future events or our future financial performance. In some cases, you can identify forward-looking statements by terminology such as "may", "should", "expect", "plan", "anticipate", "believe", "estimate", "predict", "potential" or "continue" or the negative of these terms or other comparable terminology. Such forward-looking statements include, without limitation, statements regarding our future products, statements regarding our anticipated future regulatory submissions and statements regarding our anticipated future cash position.

We have based these forward-looking statements largely on our current expectations and projections about future events that we believe may affect our financial condition, results of operations, business strategy, and financial needs. These statements are only predictions and involve known and unknown risks, uncertainties and other factors, including the risks in the section entitled "Risk Factors" that may cause our company's or our industry's actual results, levels of activity, performance or achievements to be materially different from any future results, levels of activity, performance or achievements expressed or implied by these forward-looking statements.

Moreover, we are a new entrant to the pharmaceutical business and our management cannot predict all of the risks we will face in establishing our company in this industry, nor can we assess the impact that these risk factors might have on our business or the extent to which any risk factor, or any combination of risk factors, may cause actual results to differ materially from those contained in any forward-looking statements. You should not rely upon forward-looking statements as predictions of future events. Although we believe that the expectations reflected in the forward-looking statements are reasonable, we cannot guarantee future results, levels of activity, performance or achievements. Except as required by applicable law, including the securities laws of the United States, we do not intend to update any of the forward-looking statements to conform these statements to actual results.

As used in this annual report and unless otherwise indicated, the terms "we", "us", "PediatRx" and "our" refer to PediatRx Inc., a Nevada corporation. Unless otherwise specified, all dollar amounts are expressed in United States dollars and all references to "common shares" refer to the common shares in PediatRx's capital stock.

Corporate Overview

Our company was incorporated under the laws of Nevada on March 18, 2005 under the name "Striker Energy Corp.". From inception until the summer of 2008, we were engaged in the mineral exploration business. During the summer of 2008, we abandoned our mineral exploration properties and made the transition to oil and gas. On July 23, 2010, our wholly owned subsidiary PediatRx Inc., a Nevada corporation, completed the acquisition of Granisol® (granisetron HC1) oral solution ("Granisol") from Cypress Pharmaceutical, Inc. ("Cypress") and we abandoned our interest in the oil and gas business in favor of pursuing opportunities in the pharmaceutical industry. Effective December 28, 2010, we changed our name from "Striker Energy Corp." to "PediatRx Inc." to better reflect our new business. We effected this name change by a merger with our wholly-owned subsidiary, PediatRx Inc., a Nevada corporation.

Our Business

On June 17, 2010, we entered into a letter of intent with Cypress to acquire all of the assets associated with Granisol. First approved in 2008, Granisol is an oral, liquid granisetron solution, formerly distributed by Hawthorn Pharmaceuticals, a wholly-owned subsidiary of Cypress. The Food and Drug Administration has approved Granisol's use in cancer care to prevent nausea and vomiting associated with cancer therapy. On June 18, 2010, we caused PediatRx Inc. to be incorporated as a wholly-owned subsidiary of Striker Energy Corp. under the laws of the state of Nevada. On July 23, 2010 we, through our wholly-owned subsidiary PediatRx Inc., acquired Granisol from Cypress and we turned our focus to the pharmaceutical industry and terminated our interest in oil and natural gas exploration. Effective December 28, 2010, we changed our name from "Striker Energy Corp." to "PediatRx Inc." to better reflect our new business. We effected this name change by a merger with our wholly-owned subsidiary, PediatRx Inc.

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Granisol is our first acquisition. We have been the sole distributor of Granisol and have focused our marketing efforts on specialists in the field of oncology and supportive care. We do not now, nor do we intend to manufacture our products. We contracted manufacturing to Therapex, a division of E-Z-EM Canada Inc., a subsidiary of E-Z-EM, Inc., the entity that manufactured Granisol for Cypress.

On September 12, 2011 we entered into a co-promotion agreement with Bi-Coastal Pharmaceutical Corp. ("Bi-Coastal"). Pursuant to the co-promotion agreement, Bi-Coastal granted us the non-exclusive right to promote Aquoral™ within the United States of America. Aquoral, a product which can be used in oncology supportive care, is an FDA-cleared treatment for xerostomia (the medical term for dry mouth due to a lack of saliva). Xerostomia is especially prevalent in patients undergoing various treatments for cancer and those with Sjogren's syndrome. We were required to include Aquoral in no less than 85% of our sales calls. In return for our promotional efforts, we were to receive compensation for each unit sold. The agreement with Bi-Coastal is for an initial term of two years and automatically renews for one year terms unless either party provides notice of non-renewal at least six months prior to the expiration of the then-current term. The agreement is terminable at any time, by either party, upon six months prior written notice to the other party and is also terminable for cause.

On January 26, 2012, we entered into a binding term sheet (the "Term Sheet") with Apricus Biosciences, Inc. ("Apricus") for (1) a Co-Promotion Agreement in the United States for Granisol® (the "Co-Promotion Agreement"), (2) the assignment of our Co-Promotion Agreement with Bi-Coastal for Aquoral™ to Apricus (the "Assignment Agreement and (3) a Sale Agreement for Granisol® outside of the United States (the "Asset Purchase Agreement"). Also in the Term Sheet, we entered into a non-binding arrangement (the "Arrangement") for the sale of our company to Apricus in a proposed merger transaction.

On February 21, 2012 we entered into three definitive agreements and one side letter with Apricus. The three definitive agreements consist of the Co-Promotion Agreement, the Assignment Agreement and the Asset Purchase Agreement. Pursuant to the Co-Promotion Agreement, we granted to Apricus the exclusive right to commercialize Granisol in six U.S. states and the non-exclusive right to commercialize Granisol in all other U.S. States, in addition to the right to manufacture Granisol. In addition, we have agreed that, for a period of five years from the effective date of the Co-Promotion Agreement, we will not license any co-promotion rights in the non-exclusive states to any third party. We have retained the right to commercialize Granisol in the non-exclusive states. We intend to book sales in the non-exclusive states that we generate through our own promotional efforts. Each party has agreed to cooperate with the other in respect of promotional materials and efforts on terms specified in the Co-Promotion Agreement.

The initial term of the Co-Promotion Agreement is for a period of ten years from the effective date, though it may be terminated prior to expiration under certain conditions. If the Co-Promotion Agreement is terminated by us prior to the end of the initial term, we will be required to pay to Apricus an amount based upon a varying percentage of our net operating income related to Granisol for a period subsequent to termination depending upon when the termination occurs.

Pursuant to the Assignment Agreement, we have assigned all of our rights and responsibilities under our co-promotion agreement with Bi-Coastal for Aquoral, and Apricus has assumed all rights and responsibilities under the co-promotion agreement as of the effective date. Bi-Coastal has consented to the assignment of the co-promotion agreement.

Pursuant to the Asset Purchase Agreement, we have sold to Apricus all of our rights related to Granisol in all countries and territories outside of the United States. We have also agreed that we and our officers and directors will not compete in the field of anti-emetic products in certain areas outside of the United States.

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As consideration for entering into these three Agreements we received an initial payment of $325,000 from Apricus. The Co-Promotion agreement also provides for the payment to our company of a royalty that will be calculated based upon Apricus' U.S. generated net operating income related to Granisol.

The binding term sheet between our company and Apricus contemplates, in addition to the transactions reflected in the three agreements described above, a non-binding expression of interest in the merger of our company with Apricus. The non-binding portion of the term sheet contemplates that we will be acquired by Apricus in a merger in exchange for $4,000,000, to be paid in the common stock of Apricus, with $3,600,000 distributed to our shareholders immediately and $400,000 held back from shares that would be distributed to our Chief Executive Officer and Chief Financial Officer for a period of six months as an indemnity for breaches by us of our representations and warranties. Additionally, it contemplates that Apricus will assume certain debt and other liabilities of our company up to $675,000. The side letter referred to above refines the timing with respect to the parties' agreement – which is contained in the binding term sheet - that Apricus will pay to our company a 'break-up fee" (in the form of restricted stock of Apricus having a value, as of a specified date, of $1,000,000) if our two companies do not merge by June 1, 2012, (or such other date as may be mutually agreed to by the Parties) unless, prior to that date, we file for bankruptcy or the Granisol asset is materially impaired. There is no assurance that we will be able to complete the merger of our company with Apricus as contemplated above, or on terms acceptable to our company.

We are pursuing the merger with Apricus, but are also continuing to focus our promotional efforts for Granisol on healthcare professionals, payers, end-users and their caregivers.

Competition

Granisol is the only oral, liquid granisetron HCl solution currently on the market and approved by the United States Food and Drug Administration.

Research and Development Expenditures

Expenditures attributable to research and development of Granisol over the last two fiscal years totaled $96,000.

Employees

At present, we have one employee who is also an officer of the Company, serving in the capacity of Chief Financial Officer. Our Chief Executive Officer serves pursuant to a consulting agreement.

Subsidiaries

We do not have any subsidiaries.

Intellectual Property

We own one registered trademark for Granisol.

Government Regulations

We have sought and received approval from the United States Food and Drug Administration for a labeling code for Granisol. The labeling code is required on packaging of pharmaceutical products distributed in healthcare facilities including hospitals. We have also applied for and received all required state distribution licenses that permit us to begin distributing Granisol under PediatRx's label.

Success in the United States pharmaceutical industry is dependent on approval by the United States Food and Drug Administration for many aspects of the business including product efficacy, product manufacturing, product distribution, and product marketing. To aid us in our efforts to achieve the highest level of compliance with United States Food and Drug Administration requirements we are utilizing experts in the field of pharmaceutical compliance.

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ITEM 1A. RISK FACTORS

An investment in our common stock involves a number of very significant risks. You should carefully consider the following risks and uncertainties in addition to other information in this report in evaluating our company and its business before purchasing shares of our company's common stock. Our business, operating results and financial condition could be seriously harmed due to any of the following risks. You could lose all or part of your investment due to any of these risks.

Risks Related to Our Company

Our independent auditors have expressed substantial doubt about our ability to continue as a going concern.

We have generated minimal revenue from operations since our incorporation. During the twelve month period ended February 29, 2012, we incurred a net loss of $952,543. From inception through February 29, 2012, we incurred an aggregate loss of $2,251,326. We anticipate that we will continue to incur operating expenses which will be offset to some degree by revenues from the sales and co-promotion of Granisol. Unless we are able to grow the revenues from Granisol significantly through our own efforts and the co-promotion effort of Apricus, we may never reach a point where we have positive net income. If we cannot substantially increase our revenues from sales of Granisol, we will continue to generate losses and will require additional funding to remain in business. We estimate our average monthly expenses over the next 12 months to be approximately $105,000, including general and administrative expenses, but excluding any development or product acquisition costs in the event we are unsuccessful in completing the merger with Apricus. On February 29, 2012, we had cash and cash equivalents of approximately $258,140. In order to fund our anticipated budget for the next 12 months, excluding any development or product acquisition costs, we believe that we will need to raise in excess of $1 million. This amount could increase if we encounter difficulties that we cannot anticipate at this time. We have traditionally raised our operating capital from the sale of equity securities and the placement of notes payable, but there can be no assurance that we will continue to be able to do so. If we do not successfully merge with Apricus, and the Granisol asset has not been impaired, we are entitled to an additional payment from them of $1,000,000 in Apricus common stock. If for some reason we do not receive such payment, or if we are unable to convert such stock proceeds into cash and could not otherwise raise the money that we need in order to continue to operate our business, we will be forced to delay, scale back or eliminate some or all of our operations. If any of these were to occur, there is a substantial risk that our business would fail.

These circumstances raise substantial doubt about our ability to continue as a going concern, as described in the explanatory paragraph to our independent auditors' report on our financial statements for the year ended February 29, 2012. Although our financial statements raise substantial doubt about our ability to continue as a going concern, they do not reflect any adjustments that might result if we are unable to continue our business. Our financial statements contain additional note disclosure describing the circumstances that lead to this disclosure by our independent auditors.

Our substantial debt and other financial obligations could impair our financial condition and our ability to fulfill our debt obligations. Any refinancing of this substantial debt could be at significantly higher interest rates.

As of February 29, 2012, we had total debt of approximately $532,986 (including accrued interest of approximately $32,986). Our substantial indebtedness and other current financial obligations and any that we may become a party to in the future could:

• impair our ability to obtain financing in the future for working capital, capital expenditures, partnerships, acquisitions or general corporate purposes;

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• have a material adverse effect on us if we fail to comply with financial and affirmative and restrictive covenants in debt agreements and an event of default occurs as a result of a failure that is not cured or waived;

• require us to dedicate a substantial portion of our cash flow for interest payments on our indebtedness and other financial obligations, thereby reducing the availability of our cash flow to fund working capital and capital expenditures;

• limit our flexibility in planning for, or reacting to, changes in our business and the industry in which we operate; and

• place us at a competitive disadvantage compared to our competitors that have proportionally less debt.

If we are unable to meet our debt service obligations and other financial obligations, we could be forced to restructure or refinance our indebtedness and other financial transactions, seek additional equity capital or sell our assets. We might then be unable to obtain such financing or capital or sell our assets on satisfactory terms, if at all. Any refinancing of our indebtedness could be at significantly higher interest rates, and/or incur significant transaction fees.

We are an early-stage company with a limited operating history, which may hinder our ability to successfully meet our objectives.

We are an early-stage company with a limited operating history upon which to base an evaluation of our current business and future prospects. While we have recently acquired Granisol, our sales have been minimal and, there can be no assurance that we will be successful in our efforts to increase sales. As a result, the revenue and income potential of our business is unproven. In addition, because of our limited operating history, we have limited insight into trends that may emerge and affect our business. Errors may be made in predicting and reacting to relevant business trends and we will be subject to the risks, uncertainties and difficulties frequently encountered by early-stage companies in evolving markets. We may not be able to successfully address any or all of these risks and uncertainties. Failure to adequately do so could cause our business, results of operations and financial condition to suffer.

Our CEO and CFO are engaged elsewhere and their time and effort will not be devoted to our company full-time.

Our CEO and CFO are each engaged in other positions with other companies. As a result, our company is and will continue to be managed on a part-time basis. Our business could be adversely impacted by the lack of full time management.

If we are unable to successfully recruit qualified managerial and field personnel, we may not be able to continue our operations.

In order to successfully implement and manage our business plan, we will depend upon, among other things, successfully recruiting qualified managerial and field personnel having experience in the pharmaceutical industry. Competition for qualified individuals is intense. We may not be able to find, attract and retain qualified personnel on acceptable terms. If we are unable to find, attract and retain qualified personnel with technical expertise, our business operations could suffer.

Risks Relating to the Pharmaceutical Business

Our pharmaceutical expenditures may not result in commercially successful products.

We cannot be sure our business expenditures will result in the successful partnering, acquisition, development or launch of products that will prove to be commercially successful or will improve the long-term profitability of our business. If such business expenditures do not result in successful partnering, acquisition, development or launch of commercially successful brand products our results of operations and financial condition could be materially adversely affected.

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Third-parties may claim that we infringe their proprietary rights and may prevent us from manufacturing and selling some of our products.

The manufacture, use and sale of new products that are the subject of conflicting patent rights have been the subject of substantial litigation in the pharmaceutical industry. These lawsuits relate to the validity and infringement of patents or proprietary rights of third parties. Litigation may be costly and time-consuming, and could divert the attention of our management and technical personnel. In addition, if we infringe on the rights of others, we could lose our right to develop, manufacture or market products or could be required to pay monetary damages or royalties to license proprietary rights from third parties. Although the parties to patent and intellectual property disputes in the pharmaceutical industry have often settled their disputes through licensing or similar arrangements, the costs associated with these arrangements may be substantial and could include on-going royalties. Furthermore, we cannot be certain that the necessary licenses would be available to us on commercially reasonable terms, or at all. As a result, an adverse determination in a judicial or administrative proceeding or failure to obtain necessary licenses could prevent us from manufacturing and selling a number of our products, and could have a material adverse effect on our business, results of operations, financial condition and cash flows.

The loss of or inability to attract key personnel could cause our business to suffer.

The success of our present and future operations will depend, to a significant extent, upon the experience, abilities and continued services of key personnel. We cannot assure you that we will be able to attract and retain key personnel. Employment or consulting agreements with our senior executives do not guarantee that our senior executive officers will continue to work for us for a significant period of time, or at all. We do not carry key-employee life insurance on any of our officers.

We may need to raise additional funds in the future which may not be available on acceptable terms or at all.

We may consider issuing additional debt or equity securities in the future to fund potential acquisitions or investments, to refinance existing debt, or for general corporate purposes. If we issue equity or convertible debt securities to raise additional funds, our existing stockholders may experience dilution, and the new equity or debt securities may have rights, preferences and privileges senior to those of our existing stockholders. If we incur additional debt, it may increase our leverage relative to our earnings or to our equity capitalization, requiring us to pay additional interest expenses. We may not be able to market such issuances on favorable terms, or at all, in which case, we may not be able to develop or enhance our products, execute our business plan, take advantage of future opportunities, or respond to competitive pressures or unanticipated customer requirements.

Extensive industry regulation has had, and will continue to have, a significant impact on our business, especially our product development, manufacturing and distribution capabilities.

All pharmaceutical companies are subject to extensive, complex, costly and evolving government regulation. For the U.S., this is principally administered by the FDA and to a lesser extent by the DEA and state government agencies, as well as by varying regulatory agencies in foreign countries where products or product candidates are being manufactured and/or marketed. The Federal Food, Drug and Cosmetic Act, the Controlled Substances Act and other federal statutes and regulations, and similar foreign statutes and regulations, govern or influence the testing, manufacturing, packing, labeling, storing, record keeping, safety, approval, advertising, promotion, sale and distribution of our products.

Under these regulations, we may become subject to periodic inspection of our facilities, procedures and operations and/or the testing of our products by the FDA, the DEA and other authorities, which conduct periodic inspections to confirm that we are in compliance with all applicable regulations. In addition, the FDA and foreign regulatory agencies conduct pre-approval and post-approval reviews and plant inspections to determine whether our systems and processes are in compliance with cGMP and other regulations. Following such inspections, the FDA or other agency may issue observations, notices, citations and/or Warning Letters that could cause us to modify certain activities identified during the inspection. FDA guidelines specify that a Warning Letter is issued only for violations of "regulatory significance" for which the failure to adequately and promptly achieve correction may be expected to result in an enforcement action. We are required to report adverse events associated with our products to FDA and other regulatory authorities. Unexpected or serious health or safety concerns would result in labeling changes, recalls, market withdrawals or other regulatory actions.

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The range of possible sanctions includes, among others, FDA issuance of adverse publicity, product recalls or seizures, fines, total or partial suspension of production and/or distribution, suspension of the FDA's review of product applications, enforcement actions, injunctions, and civil or criminal prosecution. Any such sanctions, if imposed, could have a material adverse effect on our business, operating results, financial condition and cash flows. Under certain circumstances, the FDA also has the authority to revoke previously granted drug approvals. Similar sanctions as detailed above may be available to the FDA under a consent decree, depending upon the actual terms of such decree. If internal compliance programs do not meet regulatory agency standards or if compliance is deemed deficient in any significant way, it could materially harm our business.

The pharmaceutical industry is highly competitive.

The pharmaceutical industry has an intensely competitive environment that will require an on-going, extensive search for technological innovations and the ability to market products effectively, including the ability to communicate the effectiveness, safety and value of products to healthcare professionals in private practice, group practices and managed care organizations ("MCOs"). We are smaller than most of our competitors. Most of our competitors have been in business for a longer period of time than us, have a greater number of products on the market and have greater financial and other resources than we do. Furthermore, recent trends in this industry are toward further market consolidation of large drug companies into a smaller number of very large entities, further concentrating financial, technical and market strength and increasing competitive pressure in the industry. If we directly compete with them for the same markets and/or products, their financial strength could prevent us from capturing a profitable share of those markets. It is possible that developments by our competitors will make any products or technologies that we acquire non- competitive or obsolete.

Risks Relating to Our Common Stock

If we issue additional shares in the future, it will result in the dilution of our existing shareholders.

Our articles of incorporation authorize the issuance of up to 150,000,000 shares of common stock with a par value of $0.0001 per share. Our Board of Directors may choose to issue some or all of such shares to acquire one or more products and to fund our overhead and general operating requirements. The issuance of any such shares will reduce the book value per share and may contribute to a reduction in the market price of the outstanding shares of our common stock. If we issue any such additional shares, such issuance will reduce the proportionate ownership and voting power of all current shareholders. Further, such issuance may result in a change of control of our corporation.

Trading of our stock is restricted by the Securities Exchange Commission's penny stock regulations, which may limit a stockholder's ability to buy and sell our common stock.

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

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FINRA sales practice requirements may also limit a stockholder's ability to buy and sell our stock.

In addition to the "penny stock" rules described above, the Financial Industry Regulatory Authority (known as "FINRA") has adopted rules that require that in recommending an investment to a customer, a broker-dealer must have reasonable grounds for believing that the investment is suitable for that customer. Prior to recommending speculative low priced securities to their non-institutional customers, broker-dealers must make reasonable efforts to obtain information about the customer's financial status, tax status, investment objectives and other information. Under interpretations of these rules, FINRA believes that there is a high probability that speculative low priced securities will not be suitable for at least some customers. FINRA requirements make it more difficult for broker-dealers to recommend that their customers buy our common stock, which may limit your ability to buy and sell our stock and have an adverse effect on the market for our shares.

Our common stock is illiquid and the price of our common stock may be negatively impacted by factors which are unrelated to our operations.

Although our common stock is currently listed for quotation on the OTC Bulletin Board, trading through the OTC Bulletin Board is frequently thin and highly volatile. There is no assurance that a sufficient market will develop in our stock, in which case it could be difficult for shareholders to sell their stock. The market price of our common stock could fluctuate substantially due to a variety of factors, including market perception of our ability to achieve our planned growth, quarterly operating results of our competitors, trading volume in our common stock, changes in general conditions in the economy and the financial markets or other developments affecting our competitors or us. In addition, the stock market is subject to extreme price and volume fluctuations. This volatility has had a significant effect on the market price of securities issued by many companies for reasons unrelated to their operating performance and could have the same effect on our common stock.

We do not intend to pay dividends on any investment in the shares of stock of our company.

We have never paid any cash dividends and currently do not intend to pay any dividends for the foreseeable future. Because we do not intend to declare dividends, any gain on an investment in our company will need to come through an increase in the stock's price. This may never happen and investors may lose all of their investment in our company.

ITEM 1B. UNRESOLVED STAFF COMMENTS

Not Applicable.

ITEM 2. PROPERTIES

Executive Offices and Registered Agent

Our Chief Executive Officer and corporate headquarters is located at 90 Fairmount Road West, Califon, New Jersey 07830. Our Chief Executive Officer utilizes a separate area on his personal property comprised of approximately 450 square feet of office space for which he charges no rent to us.

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Our registered office for service in the State of Nevada is located at National Registered Agents, Inc. of NV, 1000 East William Street Suite 204, Carson City NV 89701.

Intellectual Property

We own one registered trademark for Granisol.

ITEM 3. LEGAL PROCEEDINGS

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

ITEM 4. MINE SAFETY DISCLOSURES

Not applicable.

PART II

ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES

Market information

Our common stock is quoted on the OTC Bulletin Board of the Financial Industry Regulatory Authority, Inc. Our symbol is "PEDX.OB", and our CUSIP number is 70532X107.

The following table shows the quarterly range of high and low bid information for our common stock over the fiscal quarters for the last two fiscal years as quoted on the OTC Bulletin Board. We obtained the following high and low bid information from the OTC Bulletin Board. These over-the-counter market quotations reflect inter-dealer prices without retail mark-up, mark-down or commission, and may not represent actual transactions.

On May 14, 2012, the closing price of our common stock as reported by the OTC Bulletin Board was $0.57 per share.

Transfer Agent

Our shares of common stock are issued in registered form. The transfer agent and registrar for our common stock is Transfer Online, Inc, 512 SE Salmon Street, Portland, OR 97214.

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Holders of Common Stock

As of May 14, 2012, there were 117 holders of record of our common stock. As of such date, 20,836,000 shares were issued and outstanding.

Dividends

We have never declared or paid any cash dividends or distributions on our capital stock. We currently intend to retain our future earnings, if any, to support operations and to finance expansion and therefore we do not anticipate paying any cash dividends on our common stock in the foreseeable future.

Securities authorized for issuance under equity compensation plans.

Effective February 18, 2011, our Board of Directors adopted and approved the 2011 stock option plan. The purpose of the 2011 stock option plan is to enhance the long-term stockholder value of our company by offering opportunities to directors, key employees, officers, independent contractors and consultants of our company to acquire and maintain stock ownership in our company in order to give these persons the opportunity to participate in our company's growth and success, and to encourage them to remain in the service of our company. A total of 2,000,000 shares of our common stock are available for issuance and during the 12 month period after the first anniversary of the adoption of the 2011 stock option plan by our Board of Directors, and during each 12 month period thereafter, our Board of Directors is authorized to increase the number of shares issuable by up to 500,000 shares.

The following table summarizes certain information regarding our equity compensation plan as of February 29, 2012:

Equity Compensation Plan Information

Recent sales of unregistered securities

Since the beginning of our fiscal year ended February 29, 2012, we have not sold any equity securities that were not registered under the Securities Act of 1933 that were not previously reported in a quarterly report on Form 10-Q or in a current report on Form 8-K.

Purchases of Equity Securities by the Issuer and Affiliated Purchasers

None.

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ITEM 6. SELECTED FINANCIAL DATA

Not applicable.

ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

The following discussion should be read in conjunction with our financial statements and the related notes that appear elsewhere in this annual report. The following discussion contains forward-looking statements that reflect our plans, estimates and beliefs. Our actual results could differ materially from those discussed in the forward looking statements. Factors that could cause or contribute to such differences include those discussed below and elsewhere in this annual report on Form 10-K.

Liquidity and Capital Resources

Our financial condition for the 12 months ended February 29, 2012 and February 28, 2011 and the changes between those periods for the respective items are summarized as follows:

We have suffered recurring losses from inception. Our ability to meet our financial liabilities and commitments is primarily dependent upon the continued financial support of our directors and shareholders, the continued issuance of equity to new or existing shareholders, and our ability to achieve and maintain profitable operations.

Working Capital

As of February 29, 2012, our working capital decreased by $650,349, due largely to a) our taking on additional debt in the form of a 5% unsecured promissory note in the amount of $250,000 due on May 6, 2012, which has been utilized to fund infrastructure and the launch of Granisol, b) an increase in accounts payable and accrued liabilities of $68,535 and c) a decrease in current assets of $331,814.

On May 6, 2011, we issued an unsecured promissory note in the amount of $250,000, bearing interest at five percent (5%) per annum on the principal balance. The unsecured promissory note is due on May 6, 2012. The principal amount, or such portion thereof as shall remain outstanding from time to time, shall accrue simple interest, calculated monthly in arrears at a rate of 5% per annum commencing on the date of this unsecured promissory note and payable at maturity. When not in default, the unsecured promissory note and any accrued interest, can be repaid in whole or in part without notice or penalty, with a minimum of six months interest due if repaid prior to the six month anniversary. As of April 19, 2012, we entered into an amendment for this promissory note to extend the maturity date until August 15, 2012.

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Cash Flows

Cash Used in Operating Activities

Our cash used in operating activities for the twelve months ended February 29, 2012, compared to our cash used in operating activities for the twelve months ended February 28, 2011, decreased by $196,116, primarily due to the receipt of $325,000 in co-promotion revenue related to the signing of the Co-Promotion Agreement with Apricus.

Cash Provided by Financing Activities

Our cash provided by financing activities for the twelve months ended February 29, 2012, compared to our cash provided by financing activities for the twelve months ended February 28, 2011, decreased by $2,030,000 due to the issuance of one $250,000 5% unsecured promissory note due on May 6, 2012 during the twelve months ended February 29, 2012 while during the twelve month period ended February 28, 2011 we issued a $200,000, 5% unsecured promissory note due on July 26, 2012, and completed equity placements totalling $2,080,000 with the issuance of a total of 3,825,000 shares of common stock.

Cash Used in Investing Activities

Our cash used in investing activities for the twelve months ended February 29, 2012, compared to our cash provided by financing activities for the twelve months ended February 28, 2011, decreased by $1,000,000. During the twelve month period ended February 28, 2011, $1,000,000 was used to complete the acquisition of Granisol from Cypress while no cash was utilized in investing activities during the twelve month period ended February 29, 2012.

Cash Requirements

Our primary objectives for the next twelve month period are to pursue the merger with Apricus and to continue to commercialize Granisol in the non-exclusive states.

Specifically, we estimate our operating expenses, excluding stock based compensation and amortization expense, and working capital requirements for the next 12 months to be as follows:

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These expenses and working capital requirements will be offset to some degree by revenue generation from sales and co-promotion of Granisol. There can be no assurance that we will generate revenues significant enough to offset these expenses to some or any degree and that we will not have significant needs for other financing to support the activities of our company. There can be no assurance that additional financing will be available to us when needed or, if available, that it can be obtained on commercially reasonable terms. If we are not able to obtain the additional financing on a timely basis, if and when it is needed, we will be forced to scale down or perhaps even cease the operation of our business.

Results of Operation

The following summary of our results of operations should be read in conjunction with our audited financial statements for the twelve month periods ended February 29, 2012 and February 28, 2011.

Revenues

We have recognized $781,050 in net product revenue during the twelve month period ended February 29, 2012 and $266,808 during the twelve month periods ended February 28, 2011. This increase of $514,242 is partially due to the receipt of $260,000 related to the signing of the Co-Promotion Agreement with Apricus in February 2012, while there was no similar revenue during the twelve month period ended February 28, 2011. In addition, we sold Granisol for twelve months during the twelve month period ended February 29, 2012, while we only sold Granisol for five months during the twelve month period ended February 28, 2011. We recognized no revenue prior to 2010. We sell Granisol primarily to wholesalers. Our distribution channel includes our third party logistics distributor and independent wholesalers who distribute the product directly to hospitals and other end-user customers. The majority of our shipments are made to wholesalers, with whom we have contracted to distribute the product. We are also contracting with group purchasing organizations to increase awareness of, and reduce market barriers for, Granisol.

Cost of Goods Sold

We have recognized $219,438 in cost of goods sold during the twelve month period ended February 29, 2012, and $85,563 during the twelve month periods ended February 28, 2011. This increase of $133,875 is due to the fact that we sold Granisol for twelve months during the twelve month period ended February 29, 2012, while we only sold Granisol for five months during the twelve month period ended February 28, 2011. In addition, during the twelve month period ended February 29, 2012, we recorded a reserve for obsolescence for inventory in the amount of $90,500 to effectively write off inventory which will expire in September 2012 and become unsaleable. We recognized no cost of goods sold prior to 2010. Our cost of goods sold consists primarily of our third-party manufacturing costs, third-party inventory management and distribution costs, wholesaler fee for services costs and freight-in on inventory purchases.

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Expenses

The table below shows our expenses for the twelve month periods ended February 29, 2012 and February 28, 2011.

In the twelve month period ended February 29, 2012, our expenses increased by $348,723 over the twelve month period ended February 28, 2011, due to an increase in employee expense of $190,931, and increase in marketing expense of $84,045 and an increase in travel expense of $12,144 which increases are primarily due to the incurrence of these expenses for a full twelve months during the twelve month period ended February 29, 2012 while these expenses were incurred for only eight months during the twelve month period ended February 28, 2011. Consulting fees decreased by $154,272 as a result of a shift of two consultants to employee status. Amortization expense increased by $36,784 due to the recording of amortization for a full twelve months during the twelve month period ended February 29, 2012 while amortization was only recorded for seven months during the twelve month period ended February 28, 2011. In addition, there was an increase in stock based compensation of $213,912 due to the issuance of stock options to employees, consultants and one director during the twelve month period ended February 29, 2012 while there were no stock option issuances during the twelve month period ended February 28, 2011. Other expenses including general and administrative expenses, rent, regulatory expenses, insurance expense, legal and accounting expense and interest expense decreased by a net amount of $34,821 due to cost reduction measures that we initiated during the twelve month period ended February 29, 2012.

Off-Balance Sheet Arrangements

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

Going Concern

Our audited financial statements and information for the period ended February 29, 2012, have been prepared by our management on a going concern basis, which contemplates the realization of assets and the settlement of liabilities and commitments in the normal course of business. We have generated limited revenues to date and have incurred a net loss of approximately $952,543 during the 12 month period ended February 29, 2012, and approximately $2,251,326 from inception (March 18, 2005) through February 29, 2012. We cannot provide any assurance that we will ultimately achieve profitable operations or become cash flow positive, or raise additional funds through the sale of debt and/or equity.

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On February 29, 2012, we had cash of $258,140. Our management does not believe that our current capital resources will be adequate to continue operating our company and maintaining our business strategy for more than three months. If we are unable to raise additional capital in the near future, or consummate our merger with Apricus Biosciences, Inc. within the next several months, we expect that we will need to curtail operations, liquidate any assets that we might own, seek additional capital on less favorable terms and/or pursue other remedial measures. Our financial statements do not include any adjustments related to the recoverability and classification of assets or the amounts and classification of liabilities that might be necessary should we be unable to continue as a going concern.

Application of Critical Accounting Policies

The preparation of financial statements in conformity with accounting principles generally accepted in the U.S., or GAAP, requires us to make certain estimates, judgments and assumptions that affect the reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities at the date of the financial statements, and the reported amounts of expenses during the reporting period. Some of our accounting policies require us to make difficult and subjective judgments, often as a result of the need to make estimates of matters that are inherently uncertain. The following accounting policies involve critical accounting estimates because they are particularly dependent on estimates and assumptions made by management about matters that are highly uncertain at the time the accounting estimates are made. In addition, while we have used our best estimates based on facts and circumstances available to us at the time, different estimates reasonably could have been used. Changes in the accounting estimates we use are reasonably likely to occur from time to time, which may have a material impact on the presentation of our financial condition and results of operations.

The following is a summary of significant accounting policies used in the preparation of these financial statements.

Inventory

Inventory is stated at the lower-of-cost or market on an average cost basis. Reserves for excess, slow moving or obsolete inventory are established when we become aware of an impairment in a product's marketability due to changes in formulation, market demand and conditions or other factors. Such reserves are established based upon the difference between the product's cost and our estimate of its net realizable value.

Intangible Assets

Intangible assets consist of product rights and know-how, the Granisol trademark, and a manufacturing and supply agreement. We are amortizing the product rights and know-how over a ten year period on a straight line basis.

Intangible assets of our company are reviewed for impairment whenever events or circumstances indicate that the carrying amount of assets may not be recoverable.

We consider assets to be impaired if the carrying value exceeds the future projected cash flows from related operations (undiscounted and without interest charges). If impairment is deemed to exist, the assets will be written down to fair value.

Sales Deductions

Concurrently with the recognition of revenue, the estimated sales provisions for product returns, sales rebates, chargebacks, payment discounts and other sales allowances are recorded. Sales provisions are established based upon consideration of a variety of factors, including but not limited to, historical relationship to revenues, historical payment and return experience, customer rebate arrangements and current contract sales terms with wholesale and indirect customers. The following briefly describes the nature of each provision and how such provisions are estimated.

• Payment discounts are reductions to invoiced amounts offered to customers for payment within a specified period and are estimated upon shipment utilizing historical customer payment experience.

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• Sales rebates are offered to certain customers to promote customer loyalty and encourage greater product sales. These rebate programs provide that, upon the attainment of pre-established volumes or the attainment of revenue milestones for a specified period, the customer receives either credit against purchases or cash payment. Other promotional programs are incentive programs periodically offered to customers. Due to the nature of these programs, we are able to estimate provisions for rebates and other promotional programs based on specific terms in each agreement at the time of shipment along with an estimate of the customer's purchases over the specified period.

• Consistent with common industry practices, there are certain terms with customers to allow them to return a product that is within a certain period of the product's expiration date. Upon shipment of product to customers, an estimate for such returns is recorded. This estimate is determined by applying a historical relationship of products returned to products sold and market conditions including but not limited to the reformulation of products.

• Generally, credits may be issued to customers for decreases that are made to selling prices for the value of inventory that is owned by customers at the date of the price reduction. These credits are not contractually agreed to; instead, we issue price adjustment credits at our discretion. Price adjustment credits are estimated at the time the price reduction occurs. The amount is calculated based on an estimate of customer inventory levels.

• There are arrangements with certain parties establishing prices for products for which the parties independently select a wholesaler from which to purchase. Such parties are referred to as indirect customers. A chargeback represents the difference between the sales invoice price to the wholesaler and the indirect customer's contract price, which is lower. Provisions for estimating chargebacks are calculated primarily using historical chargeback experience, contract pricing and sales information provided by wholesalers and chains, among other factors.

Actual product returns, chargebacks and other sales allowances incurred are, however, dependent upon future events and may be different than our estimates. These sales deductions are continually monitored and we make adjustments to these provisions when it becomes evident that actual product returns, chargebacks and other sales allowances may differ from established allowances.

Stock-based Compensation

We account for all stock-based payments and awards under the fair value based method. Stock-based payments to non-employees are measured at the fair value of the consideration received, or the fair value of the equity instruments issued, or liabilities incurred, whichever is more reliably measurable. The fair value of stock-based payments to non-employees is periodically re-measured until the counterparty performance is complete, and any change therein is recognized over the vesting period of the award and in the same manner as if we had paid cash instead of paying with or using equity based instruments. Compensation costs for stock-based payments with graded vesting are recognized on a straight-line basis. The cost of the stock-based payments to non-employees that are fully vested and non-forfeitable as of the grant date is measured and recognized at that date, unless there is a contractual term for services in which case such compensation would be amortized over the contractual term.

We account for the granting of share purchase options to employees using the fair value method whereby all awards to employees will be recorded at fair value on the date of the grant. The fair value of all share purchase options are expensed over their vesting period with a corresponding increase to additional paid-in capital.

We use the Black-Scholes option valuation model to calculate the fair value of share purchase options at the date of the grant. Option pricing models require the input of highly subjective assumptions, including the expected price volatility. Changes in these assumptions can materially affect the fair value estimates. Please refer to Note 7 – Stock Options, included in the financial statements appearing elsewhere in the report, for additional information regarding stock-based compensation.

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Recently issued accounting pronouncements

In May 2011, FASB amended the fair value measurement and disclosure guidance in ASC 820, Fair Value Measurement, to converge US GAAP and IFRS requirements for measuring amounts at fair value as well as disclosures about these measurements. FASB ASC 820 is effective for interim and annual periods beginning after December 15, 2011. The Company does not expect the application of FASB ASC 820 to have a material effect on the Company's consolidated results of operations and financial position.

ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

Not Applicable

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ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

PediatRx Inc.

(A Development Stage Company)

Financial Statements
February 29, 2012

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Report of Independent Registered Public Accounting Firm

To the Board of Directors and Stockholders
PediatRx Inc.

We have audited the accompanying balance sheets of PediatRx Inc. (a development stage company) (the "Company") as of February 29, 2012 and February 28, 2011 and the related statements of operations, stockholders' equity (deficit), and cash flows for the years then ended, and for the period from inception (March 18, 2005) to February 29, 2012. These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements based on our audits. The financial statements for the period from inception (March 18, 2005) to February 28, 2010 were audited by other auditors and our opinion, insofar as it relates to cumulative amounts included for such prior periods, is based solely on the report of other such auditors.

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

In our opinion, based on our audits and the report of other auditors, the financial statements referred to above present fairly, in all material respects, the financial position of the Company as of February 29, 2012 and February 28, 2011, and the results of its operations and its cash flows for the years then ended, and for the period from inception (March 18, 2005) to February 29, 2012 in conformity with accounting principles generally accepted in the United States of America.

The accompanying financial statements have been prepared assuming that the Company will continue as a going concern. As discussed in Note 1 to the financial statements, the Company has suffered recurring losses from operations and is in the development stage of its operations. This raises substantial doubt about the Company's ability to continue as a going concern. Management's plans in regard to these matters are also described in Note 1. The financial statements do not include any adjustments that might result from the outcome of this uncertainty.

/s/ HORNE LLP

Ridgeland, Mississippi
May 18, 2012

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Report of Independent Registered Public Accounting Firm

To the Board of Directors and Stockholders of
PediatRx Inc.
(An Exploration Stage Company)

We have audited the accompanying statements of operations and cash flows and changes in stockholders' deficiency of PediatRx Inc. (the “Company”) for the year ended 28 February 2010 and for the period from the date of inception on 18 March 2005 to 28 February 2010. These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements based on our audit.

We conducted our audit in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform an audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for our opinion.

In our opinion, the financial statements referred to above present fairly, in all material respects, the results of operations and cash flows of the Company for the year ended 28 February 2010 and for the period from the date of inception on 18 March 2005 to 28 February 2010 in conformity with accounting principles generally accepted in the United States.

The accompanying financial statements have been prepared assuming that the Company will continue as a going concern. As discussed in Note 1 to the financial statements, conditions exist which raise substantial doubt about the Company's ability to continue as a going concern unless it is able to generate sufficient cash flows to meet its obligations and sustain its operations. Management's plans in regard to these matters are also described in Note 1. The financial statements do not include any adjustments that might result from the outcome of this uncertainty.

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PediatRx Inc.
(A Development Stage Company)

BALANCE SHEETS

The accompanying notes are an integral part of these financial statements.

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PediatRx Inc.
(A Development Stage Company)

STATEMENTS OF OPERATIONS

The accompanying notes are an integral part of these financial statements.

- 26 -

PediatRx Inc.
(A Development Stage Company)

Statements of Stockholders' Equity (Deficit)

The accompanying notes are an integral part of these financial statements.

- 27 -

PediatRx Inc.
(A Development Stage Company)

Statements of Cash Flows

The accompanying notes are an integral part of these financial statements.

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PediatRx Inc.
(A Development Stage Company)
Notes to the Financial Statements
February 29, 2012

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PediatRx Inc.
(A Development Stage Company)
Notes to the Financial Statements
February 29, 2012

On February 21, 2012 the Company entered into three definitive agreements and one side letter with Apricus which include the Co-Promotion Agreement, the Assignment Agreement and the Asset Purchase Agreement. Pursuant to the Co-Promotion Agreement, the Company granted to Apricus the exclusive right to commercialize Granisol in six U.S. states and the non-exclusive right to commercialize Granisol in all other U.S. States, in addition to the right to manufacture Granisol. In addition, the Company has agreed that, for a period of five years from the effective date of the Co-Promotion Agreement, it will not license any co-promotion rights in the non-exclusive states to any third party. The Company has retained the right to commercialize Granisol in the non-exclusive states. The Company will recognize sales in the non-exclusive states that it generates through its own promotional efforts. Each party has agreed to cooperate with the other in respect of promotional materials and efforts on terms specified in the Co-Promotion Agreement.

The initial term of the Co-Promotion Agreement is for a period of ten years from the effective date, though it may be terminated prior to expiration under certain conditions. If the Co-Promotion Agreement is terminated by the Company prior to the end of the initial term, the Company will be required to pay to Apricus an amount based upon a varying percentage of its net operating income related to Granisol for a period subsequent to termination depending upon when the termination occurs.

Pursuant to the Assignment Agreement, the Company has assigned all of its rights and responsibilities under the Co-Promotion agreement with Bi-Coastal for Aquoral, and Apricus has assumed all rights and responsibilities under the Co-Promotion Agreement as of the effective date. Bi-Coastal has consented to the assignment of the co-promotion agreement.

Pursuant to the Asset Purchase Agreement, the Company sold to Apricus all of its rights related to Granisol in all countries and territories outside of the United States. The Company has also agreed that it and its officers and directors will not compete in the field of anti-emetic products in certain areas outside of the United States.

As consideration for entering into these three Agreements the Company received an initial payment of $325,000 from Apricus. The agreements also provide for the payment to the Company of a royalty that will be calculated based upon Apricus' United States generated net operating income related to Granisol. The Company has recognized revenues of $260,000 associated with the exclusive rights for Apricus to commercialize Granisol in six U.S. states. In addition, the Company has recognized a gain from sale of product rights totaling $64,000 associated with the Asset Purchase Agreement.

The binding term sheet between the Company and Apricus contemplates, in addition to the transactions reflected in the three agreements described above, a non-binding expression of interest in the merger of the Company with Apricus. The non-binding portion of the term sheet contemplates that the Company will be acquired by Apricus in a merger in exchange for $4,000,000, to be paid in the common stock of Apricus, with $3,600,000 distibuted to the shareholders of the Company immediately and $400,000 held back from shares that would be distributed to the Company's Chief Executive Officer and Chief Financial Officer for a period of six months as an indemnity for breaches by the Company of its representations and warranties. Additionally, it contemplates that Apricus will assume certain debt and liabilities of the Company up to $675,000. The side letter referred to above refines the timing with respect to the parties' agreement that Apricus will pay to the Company a 'break-up fee" (in the form of restricted stock of Apricus having a value of $1,000,000) if the two companies do not merge by June 1, 2012, (or such other date as may be mutually agreed to by the Parties) unless, prior to that date, the Company files for bankruptcy or the Granisol asset is materially impaired.

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PediatRx Inc.
(A Development Stage Company)
Notes to the Financial Statements
February 29, 2012

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PediatRx Inc.
(A Development Stage Company)
Notes to the Financial Statements
February 29, 2012

Accounts Receivable

Trade receivables are reported at net realizable value. In the normal course of business, credit is extended to customers on a short-term basis and generally collateral is not required. Management determines the allowance for doubtful accounts based on historical losses and current economic conditions. On a continuing basis, management analyzes delinquent receivables and once these receivables are determined to be uncollectible, they are written off through a charge against an existing allowance account. Additionally, management includes the reserve for sales discounts given at the time of sale in the accounts receivable balance. As of February 28, 2011, an allowance for sales discounts of $1,020 has been netted against accounts receivable. No allowance for sales discounts has been netted against accounts receivable as of February 29, 2012.

Inventories

Inventories, consisting primarily of a pharmaceutical drug are stated at the lower-of-cost or market on an average cost basis. Reserves for excess, slow moving or obsolete inventory are established when management becomes aware of an impairment in a product's marketability due to changes in formulation, market demand and conditions or other factors. Such reserves are established based upon the difference between the product's cost and management's estimate of its net realizable value. As of February 29, 2012, a reserve for obsolescence in the amount of $90,500 has been netted against inventories.

Intangible Assets

Intangible assets consist of product rights and know-how, the Granisol trademark, and a manufacturing and supply agreement. As of February 29, 2012, intangible assets include costs of $882,820 less related accumulated amortization of $139,780, which amortization began in August 2010. The Company is amortizing the product rights and know-how over the estimated useful life of ten years on a straight line basis. As of February 29, 2012, annual amortization expense for each of the succeeding five years is expected to be $88,282.

Intangible assets of the Company are reviewed for impairment whenever events or circumstances indicate that the carrying amount of assets may not be recoverable. Management considers assets to be impaired if the carrying value exceeds the future projected cash flows from related operations (undiscounted and without interest charges). If impairment is deemed to exist, the assets will be written down to fair value.

Income taxes

Deferred income taxes are reported for timing differences between items of income or expense reported in the financial statements and those reported for income tax purposes in accordance with ASC 740, Income Taxes, which requires the use of the asset/liability method of accounting for income taxes. Deferred income taxes are recognized for the future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases, and for tax losses and credit carry-forwards. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. The Company provides a valuation allowance for deferred tax assets when it is unable to conclude that it is more likely than not that the assets will be realized.

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PediatRx Inc.
(A Development Stage Company)
Notes to the Financial Statements
February 29, 2012

The impact of an uncertain income tax position on the income tax return must be recognized at the largest amount that is more-likely-than-not to be sustained upon audit by the relevant taxing authority. An uncertain income tax position will not be recognized if it has less than a 50% likelihood of being sustained. The Company classifies interest and penalties, if any, as a component of its income tax provision.

Revenue Recognition

Revenue is recognized from product sales when the merchandise is shipped. Accordingly, revenue is recognized when all of the following occur: a purchase order is received from a customer; title and risk of loss pass to the customer upon shipment of the merchandise under the terms of FOB destination; prices and estimated sales provisions for product returns, sales rebates, chargebacks, payment discounts and other promotional allowances are reasonably determinable; and the customer's payment ability has been reasonably assured.

Concurrently with the recognition of revenue, the estimated sales provisions for product returns, sales rebates, chargebacks, payment discounts and other sales allowances are recorded. Sales provisions are established based upon consideration of a variety of factors, including but not limited to, historical relationship to revenues, historical payment and return experience, customer rebate arrangements and current contract sales terms with wholesale and indirect customers. The following briefly describes the nature of each provision and how such provisions are estimated.

- 33 -

PediatRx Inc.
(A Development Stage Company)
Notes to the Financial Statements
February 29, 2012

Actual product returns, chargebacks and other sales allowances incurred are, however, dependent upon future events and may be different than management's estimates. These sales deductions are continually monitored and management makes adjustments to these provisions when it becomes evident that actual product returns, chargebacks and other sales allowances may differ from established allowances.

The Company periodically enters into various types of revenue arrangements with third-parties, including agreements for the sale or license of product rights, promotion agreements and others. These agreements may include the receipt of upfront payments and royalties. Fees received upon entering into license and other collaborative agreements where the Company has continuing involvement are recorded as deferred revenue and recognized as other revenue over an appropriate period of time. Royalty revenue from licensees, which are based on third-party sales of licensed products, is recorded in accordance with the contract terms, when third-party sales can be reliably measured and collection of the funds is reasonably assured.

Basic and diluted net loss per share

The Company computes net income or loss per share in accordance with ASC 260, Earnings per Share ("ASC 260"). ASC 260 requires presentation of both basic and diluted earnings per share ("EPS") on the face of the statement of operations. Basic EPS is computed by dividing net income or loss available to common shareholders (numerator) by the weighted average number of common stock equivalents outstanding (denominator) during the period. Diluted EPS gives effect to all dilutive potential common stock equivalents 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. There were no potentially dilutive common stock equivalents for the periods from inception through February 29, 2012.

Start-up expenses

ASC 720, Start-Up Costs ("ASC 270"), requires that costs associated with start-up activities be expensed as incurred. Accordingly, start-up costs associated with the Company's formation have been included in the Company's expenses for the period from the date of inception (March 18, 2005) through February 29, 2012.

Stock-based Compensation

The Company accounts for all stock-based payments and awards under the fair value based method. Stock-based payments to non-employees are measured at the fair value of the consideration received, or the fair value of the equity instruments issued, or liabilities incurred, whichever is more reliably measurable. The fair value of stock-based payments to non-employees is periodically re-measured until the counterparty performance is complete, and any change therein is recognized over the vesting period of the award and in the same manner as if the Company had paid cash instead of paying with or using equity based instruments. Compensation costs for stock-based payments with graded vesting are recognized on a straight-line basis. The cost of the stock-based payments to non-employees that are fully vested and non-forfeitable as of the grant date is measured and recognized at that date, unless there is a contractual term for services in which case such compensation would be amortized over the contractual term.

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PediatRx Inc.
(A Development Stage Company)
Notes to the Financial Statements
February 29, 2012

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PediatRx Inc.
(A Development Stage Company)
Notes to the Financial Statements
February 29, 2012

Prior to the closing date, a purchase order was placed with Therapex for one lot of product to be delivered subsequent to the closing date. Such inventory to be delivered is an integral part of the acquisition and the seller has been paid by PediatRx as part of the $1 million cash consideration. The Company assigned $117,180 to inventory receivable on the balance sheet as of the Closing Date, with the remaining purchase price allocated to the product rights and know-how associated with the Abbreviated New Drug Application (“ANDA”), the Granisol trademark, and the manufacturing and supply agreement with Therapex. The related inventory was received in October 2010. The Company is amortizing the product rights and know-how over the estimated useful life of ten years on a straight line basis, beginning with August, 2010.

The purchase price for the Granisol product line was allocated in accordance with the acquisition method of accounting. The acquisition method of accounting is based on ASC 805, Business Combinations, and uses the fair value concepts defined in ASC 820, Fair Value Measurements and Disclosures,. For the twelve months ended February 28, 2011, the Company incurred $18,975 in costs related to the acquisition of the Granisol product line. These costs are reflected in expenses in the Statements of Operations.

The following unaudited pro forma information was prepared assuming that the acquisitions of Granisol had taken place at the beginning of fiscal 2010. In preparing the pro forma financial information, various assumptions were made; therefore, the Company does not imply that the future results will be indicative of the following pro forma information:

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PediatRx Inc.
(A Development Stage Company)
Notes to the Financial Statements
February 29, 2012

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PediatRx Inc.
(A Development Stage Company)
Notes to the Financial Statements
February 29, 2012

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PediatRx Inc.
(A Development Stage Company)
Notes to the Financial Statements
February 29, 2012

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PediatRx Inc.
(A Development Stage Company)
Notes to the Financial Statements
February 29, 2012

At February 29, 2012, the following stock options were outstanding:

The original contractual life of all options issued is five years. The aggregate intrinsic value is calculated as the difference between the exercise price of the underlying awards and the quoted market price of the Company's stock for the options that were in-the-money at February 29, 2012. The total grant date stock-based compensation expense for options outstanding during the twelve months ended February 29, 2012 was $213,912. As of February 29, 2012 unrecognized compensation costs of approximately $306,189 related to non-vested stock option awards granted after March 1, 2011 will be recognized on a straight-line basis over the remaining vesting period for each award. The weighted average fair value of the stock options granted during the twelve months ended February 29, 2012 is $0.60.

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PediatRx Inc.
(A Development Stage Company)
Notes to the Financial Statements
February 29, 2012

The fair value of stock options granted has been determined using the Black-Scholes option pricing model using the following weighted average assumptions applied to stock options granted during the periods:

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PediatRx Inc.
(A Development Stage Company)
Notes to the Financial Statements
February 29, 2012

The composition of the Company's deferred tax assets as at February 29, 2012 and February 28, 2011 is as follows:

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ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE

None.

ITEM 9A. CONTROLS AND PROCEDURES

Disclosure controls and procedures

We maintain "disclosure controls and procedures", as that term is defined in Rule 13a-15(e), promulgated by the Securities and Exchange Commission pursuant to the Securities Exchange Act of 1934, as amended. Disclosure controls and procedures include controls and procedures designed to ensure that information required to be disclosed in our company's reports filed under the Securities Exchange Act of 1934 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 principal executive officer and principal accounting officer to allow timely decisions regarding required disclosure.

As required by paragraph (b) of Rules 13a-15 under the Securities Exchange Act of 1934, our management, with the participation of our principal executive officer and principal financial officer, evaluated our company's disclosure controls and procedures as of the end of the period covered by this annual report on Form 10-K. Based on this evaluation, our management concluded that as of the end of the period covered by this annual report on Form 10-K, our disclosure controls and procedures were effective.

Internal control over financial reporting

Management's annual report on internal control over financial reporting

Our management, including our principal executive officer and principal financial officer, is responsible for establishing and maintaining adequate internal control over financial reporting (as defined in Rule 13a-15(f) under the Securities Exchange Act of 1934).

Our management, with the participation of our principal executive officer and principal financial officer, evaluated the effectiveness of our internal control over financial reporting as of February 29, 2012. Our management's evaluation of our internal control over financial reporting was based on the framework in Internal Control—Integrated Framework, issued by the Committee of Sponsoring Organizations of the Treadway Commission. Based on this evaluation, our management concluded that our internal control over financial reporting was effective as of February 29, 2012 and that there were no material weaknesses in our internal control over financial reporting.

A material weakness is a deficiency or a combination of control deficiencies in internal control over financial reporting such that there is a reasonable possibility that a material misstatement of our annual or interim financial statements will not be prevented or detected on a timely basis.

Limitations on Effectiveness of Controls

Our principal executive officer and principal financial officer do not expect that our disclosure controls or our internal control over financial reporting will prevent all errors and all fraud. A control system, no matter how well conceived and operated, can provide only reasonable, not absolute, assurance that the objectives of the control system are met. Further, the design of a control system must reflect the fact that there are resource constraints, and the benefits of controls must be considered relative to their costs. Because of the inherent limitations in all control systems, no evaluation of controls can provide absolute assurance that all control issues and instances of fraud, if any, within our company have been detected. These inherent limitations include the realities that judgments in decision-making can be faulty, and that breakdowns can occur because of a simple error or mistake. Additional controls can be circumvented by the individual acts of some persons, by collusion of two or more people, or by management override of the controls. The design of any system of controls also is based in part upon certain assumptions about the likelihood of future events, and there can be no assurance that any design will succeed in achieving its stated goals under all potential future conditions; over time, controls may become inadequate because of changes in conditions, or the degree of compliance with the policies or procedures may deteriorate. Because of the inherent limitations in a cost-effective control system, misstatements due to error or fraud may occur and not be detected.

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Changes in internal control over financial reporting

There were no changes in our internal control over financial reporting during the fourth quarter of our fiscal year ended February 29, 2012 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

ITEM 9B. OTHER INFORMATION

As of April 19, 2012, we entered into an amendment for the promissory note dated June 15, 2009 in the principal amount of $50,000 to extend the maturity date of the note until August 15, 2012.

As of April 19, 2012, we entered into an amendment for the promissory note dated May 6, 2011 in the principal amount of $250,000 to extend the maturity date of the note until August 15, 2012.

PART III

ITEM 10. DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE

Directors and Executive Officers

Our directors and executive officers, their age, positions held, and duration of such, are as follows:

Business Experience

The following is a brief account of the education and business experience of directors and executive officers during at least the past five years, indicating their principal occupation during the period, and the name and principal business of the organization by which they were employed:

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Dr. Cameron Durrant

Dr. Durrant was appointed as President, Chief Executive Officer and a director of our company on November 17, 2010. Since May 28, 2010, Dr. Durrant served in a consulting capacity as President and a director of PediatRx Inc., our wholly owned subsidiary until it was merged into Striker Energy Corp. on December 28, 2011.

Dr. Durrant's background includes executive-level positions with Merck & Co. (NYSE: MRK), Glaxo Smith Kline PLC (NYSE: GSK), Pharmacia Corporation (now part of Pfizer Inc. (NYSE: PFE) and Johnson & Johnson (NYSE: JNJ). He has been CEO of PediaMed Pharmaceuticals, Inc. and Spherics, Inc. and served on their boards.

Dr. Durrant also served as executive chairman and director of Anavex Life Sciences Corp. (OTCBB: AVXL), a publicly traded biopharmaceutical company engaged in the discovery and development of novel drug targets to treat serious diseases for which there are urgent unmet medical needs with a primary focus on Alzheimer's disease, from January 1, 2010 to September 16, 2011.

Dr. Durrant is a founding board member of Bexion Pharmaceuticals, a private oncology research and development company with therapeutics, diagnostic/imaging and drug delivery capabilities. Dr. Durrant has previously served on several public and private pharmaceutical company boards (including Topaz Pharmaceuticals, PDS Biotechnology Corporation and Pressure Point Inc) and has been an advisor to Pilgrim Software and to Saxa Private Equity Partners.

Dr. Durrant was a regional winner and national finalist for Ernst & Young's Entrepreneur of the Year award in 2005. Dr. Durrant holds a MBA from Henley Management College at Oxford and a MB and BCh (equivalent to the American MD degree) from the Welsh National School of Medicine in Cardiff, U.K., a DRCOG, a DipCH and the MRCGP.

We believe Dr. Durrant is qualified to serve on our Board of Directors because of his knowledge of our company's history and current operations and his prior and current board experience, in addition to his education and business experiences described above.

David Tousley

Mr. Tousley was appointed as Secretary, Treasurer, Chief Financial Officer and a director of our company on November 17, 2010. Since July 1, 2010, Mr. Tousley served as the Secretary, Treasurer, Chief Financial Officer and a director of PediatRx Inc., our wholly owned subsidiary until it was merged into Striker Energy Corp. on December 28, 2011.

Mr. Tousley has over 25 years of senior-level experience in biotech, specialty pharmaceuticals and full-phase pharmaceutical companies. He has held the position of President, COO and CFO at companies including airPharma, PediaMed Pharmaceuticals, Inc., AVAX Technologies Inc. (OTCBB: AVXT), and Pasteur, Merieux, Connaught, (known today as Sanofi-Pasteur SA). During his career, Mr. Tousley has led all aspects of operations, including pharmaceutical development, in both the private and public company environment. His accomplishments include the raising of over $100 million in debt and equity financings and he has led key business development activities, including joint ventures, partnerships, acquisitions and divestitures in the U.S., Europe and Australia.

Mr. Tousley was Chief Financial Officer of Anavex Life Sciences Corp. (OTCBB: AVXL) from September 1, 2010 until May 9, 2011 and was a director of Anavex from June 3, 2008 until February 24, 2011.

Mr. Tousley currently serves as a director of ImmunoGenetix Therapeutics, Inc, a biotech company that is developing advanced DNA immunotherapies for HIV infection.

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Mr. Tousley holds an MBA in accounting from Rutgers Graduate School of Business and a B.A. in English from Rutgers College, both in New Jersey and belongs to the New Jersey Society of Certified Public Accountants and the American Institute of Certified Public Accountants.

We believe Mr. Tousley is qualified to serve on our Board of Directors because of his knowledge of our company's history and current operations, which he gained from his employment as Chief Financial Officer of PediatRx Inc., our wholly owned subsidiary since July 1, 2010, in addition to his education and business experiences described above.

Joseph Carusone

Mr. Carusone was appointed as Vice President, Investor Relations of our company on November 17, 2010 and as a director of our company on August 18, 2008. He also served as president, secretary and treasurer of our company from August 18, 2008 until November 17, 2010. For more than 10 years, Mr. Carusone has been involved in the founding of and management of private companies and partnerships including those in the oil and gas industry. His experience as a liaison between management and shareholders is extensive. He has been the president of Opex Energy Corp. since its inception on August 22, 2007. Since 2001, Mr. Carusone has been founder and president of the investor relations firm Primoris Group Inc. Between 1999 and 2001, Mr. Carusone was vice-president of operations of StockHouse Media Corporation. For eight years following his graduation from the University of Toronto with a degree in Engineering and Applied Science (1987), Mr. Carusone managed research activities in University of Toronto's Institute for Aerospace Studies' Space Robotics Group.

We believe Mr. Carusone is qualified to serve on our Board of Directors because of his knowledge of our company's history and current operations, which he gained from working for our company as described above, in addition to his education and business experiences as described above.

Paul Richardson

Mr. Richardson was appointed as a Director of our company on September 15, 2011.

Mr. Richardson is a pharmaceutical senior executive with more than 30 years of experience in US and global commercialization, product and business development, and organizational leadership. He brings significant expertise in sales management, business development, licensing, acquisition, commercialization and strategic marketing to PediatRx. Mr. Richardson most recently held the position of Regional President of Pfizer's North America Specialty Care business unit with direct accountability for the delivery, in 2010, of over $4.5 billion of annual revenue and associated profitability targets.

From 2006 until 2008, Mr. Richardson was Vice President and Therapeutic Cluster Lead for pain, inflammation, sex health, urology, respiratory and ophthalmology in Pfizer's Worldwide Commercial Development Group. Between 2003 and 2006, Mr. Richardson served as Vice President of Pfizer's diversified products, targeted brands and dermatology and ophthalmology therapy areas. Prior to 2004, Mr. Richardson served in a several roles of increasing senior responsibility with the Upjohn Company, Pharmacia and Upjohn and Pharmacia. He holds a BSc (honors) in Physiology from the University of Leeds, United Kingdom.

We believe Mr. Richardson is qualified to serve on our Board of Directors because of his education and business experiences as described above.

Family Relationships

There are no family relationships between any director or executive officer.

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Involvement in Certain Legal Proceedings

Our directors and executive officers have not been involved in any of the following events during the past ten years:

Section 16(a) Beneficial Ownership Reporting Compliance

Section 16(a) of the Securities Exchange Act of 1934 requires our executive officers and directors, and persons who own more than 10% of our common stock, to file reports regarding ownership of, and transactions in, our securities with the Securities and Exchange Commission and to provide us with copies of those filings. Based solely on our review of the copies of such forms received by us, or written representations from certain reporting persons, we believe that during fiscal year ended February 29, 2012, all filing requirements applicable to our officers, directors and greater than ten percent beneficial owners were complied with.

Code of Ethics

We have not adopted a code of ethics because our board of directors believes that our small size does not merit the expense of preparing, adopting and administering a code of ethics. Our board of directors intends to adopt a code of ethics when circumstances warrant.

Corporate Governance

Term of Office

Each director of our company is to serve for a term of one year ending on the date of subsequent annual meeting of stockholders following the annual meeting at which such director was elected. Notwithstanding the foregoing, each director is to serve until his successor is elected and qualified or until his death, resignation or removal. Our board of directors is to elect our officers and each officer is to serve until his successor is elected and qualified or until his death, resignation or removal.

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Committees of the Board

Our Board of Directors held no formal meetings during the year ended February 29, 2012. All proceedings of our Board of Directors were conducted by resolutions consented to in writing by all the directors and filed with the minutes of the proceedings of the directors. Such resolutions consented to in writing by the directors entitled to vote on that resolution at a meeting of the directors are, according to the corporate laws of the State of Nevada and our By-laws, as valid and effective as if they had been passed at a meeting of our directors duly called and held.

We currently do not have nominating or compensation committees or committees performing similar functions nor do we have a written nominating or compensation committee charter. Our Board of Directors does not believe that it is necessary to have such committees because it believes that the functions of such committees can be adequately performed by our Board of Directors.

We do not have any defined policy or procedure requirements for shareholders to submit recommendations or nominations for directors. We do not currently have any specific or minimum criteria for the election of nominees to our Board of Directors and we do not have any specific process or procedure for evaluating such nominees. Our Board of Directors assesses all candidates, whether submitted by management or shareholders, and makes recommendations for election or appointment.

A shareholder who wishes to communicate with our Board of Directors may do so by directing a written request to the address appearing on the first page of this annual report.

Audit Committee and Audit Committee Financial Expert

We do not have a standing audit committee at the present time. Our Board of Directors has determined that while we have a board member (David L. Tousley) that qualifies as an "audit committee financial expert" as defined in Item 407(d)(5)(ii) of Regulation S-K, we do not have a board member that qualifies as "independent" as the term is used by NASDAQ Marketplace Rule 5605(a)(2).

We believe that our Board of Directors is capable of analyzing and evaluating our financial statements and understanding internal controls and procedures for financial reporting. The Board of Directors of our company does not believe that it is necessary to have an audit committee because we believe that the functions of an audit committee can be adequately performed by the Board of Directors. In addition, we believe that retaining an independent director who would qualify as an "audit committee financial expert" would be overly costly and burdensome and is not warranted in our circumstances given the early stages of our development.

ITEM 11. EXECUTIVE COMPENSATION

Summary Compensation

The particulars of compensation paid to the following persons:

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Employment Agreements

Dr. Cameron Durrant

Effective May 28, 2010, we entered into a consulting agreement with Dr. Cameron Durrant, a shareholder of our company, to assist management in the identification of opportunities available to us in the healthcare industry and to recommend terms of potential acquisitions. Under the agreement, we agreed to compensate Dr. Durrant on a time-spent basis at the rate of $1,000 per day, plus reimbursement of reasonable associated expenses. Dr. Durrant's agreement with our company dated May 28, 2010 was terminated in lieu of the September 24, 2010 agreement with PediatRx.

On September 24, 2010, with retroactive effect to July 1, 2010, we entered into a second consulting agreement with Dr. Cameron Durrant. Pursuant to the consulting agreement, Dr. Durrant agreed to perform such duties as are regularly and customarily performed by the Chief Executive Officer of a corporation in consideration for, among other things, $250,000 per annum. The term of the consulting agreement is one year from July 1, 2010, unless both parties agree to extend.

In addition, of the 4,250,000 shares of our common stock owned by Dr. Durrant, 2,833,333 shares are subject to a lockup agreement between us and Dr. Durrant, which lockup agreement became effective February 7, 2011. The lockup agreement expires on December 31, 2015.

During the twelve month period ended February 29, 2012, we incurred consulting fees of $208,333 (February 28, 2011 - $178,667, 2010 – $0, cumulative – $387,000) in connection with Dr. Durrant's consulting agreements. We have recorded a payable to Dr. Durrant of $170,253 and $75,423 related to consulting fees as of February 29, 2012 and February 28, 2011, respectively. In addition, we have recorded a payable to Dr. Durrant of $51,342 and $85,572 related to business establishment expenses incurred by Dr. Durrant that are unreimbursed to him as of February 29, 2012 and February 28, 2011, respectively.

David Tousley

On September 14, 2010, with retroactive effect to July 1, 2010, we entered into an employment agreement with Mr. David Tousley, Chief Financial Officer, Treasurer and Secretary of PediatRx. Pursuant to the employment agreement, Mr. Tousley agreed to perform such duties as are regularly and customarily performed by the Chief Financial Officer of a corporation in consideration for, among other things, $200,000 per annum. Mr. Tousley is also eligible to receive an annual bonus and an annual stock option award at the end of each year at the discretion of the Board of Directors of PediatRx. The term of the employment agreement is two years from July 1, 2010, unless both parties agree to extend.

In addition, of the 400,000 shares of our common stock owned by Mr. Tousley, 266,666 shares are subject to a lockup agreement between us and Mr. Tousley, which lockup agreement became effective February 7, 2011. The lockup agreement expires on December 31, 2015.

Effective March 4, 2011, we granted 690,000 stock options to David Tousley, our Chief Financial Officer and a director of our company. The stock options are exercisable at the exercise price of $1.14 per share until March 4, 2016 and vest on a quarterly basis over three years, beginning on June 4, 2011. Assumptions used in the calculation of fair value are described in the footnotes to our financial statements.

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Effective March 1, 2012, we gave notice to Mr. Tousley that we will be terminating his employment agreement pursuant to Section 6.3(b) of the agreement. As a result, Mr. Tousley's employment agreement will cease effective October 31, 2012.

Jorge Rodriguez

On September 14, 2010, with retroactive effect to July 1, 2010, we entered into an employment agreement with Mr. Jorge Rodriguez, Chief Commercial Officer of PediatRx. Pursuant to the employment agreement, Mr. Rodriguez agreed to perform such duties as are regularly and customarily performed by the Chief Commercial Officer of a corporation in consideration for, among other things, $150,000 per annum. Mr. Rodriguez was also eligible to receive an annual bonus and an annual stock option award at the end of each year at the discretion of the Board of Directors of PediatRx. The term of the employment agreement was two years from July 1, 2010, unless both parties agreed to extend.

Effective March 4, 2011, we granted 420,000 stock options to Jorge Rodriguez, our Vice President and Chief Commercial Officer. The stock options were exercisable at the exercise price of $1.14 per share until March 4, 2016 and vested on a quarterly basis over three years, beginning on June 4, 2011.

On December 15, 2011, Mr. Rodriguez, resigned from all positions with the company and the Company entered into an agreement with Mr. Rodriguez pursuant to which it terminated his employment agreement and amended his stock option agreement (dated March 4, 2011) in order to terminate all unvested options effective immediately and to extend the exercise period for his 105,000 vested options to December 15, 2012. In connection with the termination, the Company paid Mr. Rodriguez the amount of $19,500.

Outstanding Equity Awards at Fiscal Year-End

The following table sets forth for each named executive officer certain information concerning the outstanding equity awards as of February 29, 2012.

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Compensation of Directors

Our Board of Directors has received no compensation to date and there are no plans to compensate them in the near future, unless and until we become profitable in our business operations. We may issue options in the future as we retain the services of independent directors.

The table below shows the compensation of our directors for their services as directors for our last completed fiscal year ended February 29, 2012:

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Long-Term Incentive Plans, Retirement or Similar Benefit Plans

There are currently no arrangements or plans in which we provide pension, retirement or similar benefits for directors or executive officers, except that we may reimburse our executive employees for up to 70% of their health insurance premiums under their individual policies. We may provide employee benefit plans to our employees in the future.

Our directors, executive officers and employees may receive stock options at the discretion of our Board of Directors.

Pursuant to the terms of the employment agreement with David Tousley, our Secretary, Treasurer and Chief Financial Officer, Mr. Tousley is eligible to receive an annual bonus at the end of each year, initially targeted to be 50% of his base salary. Both the decision to pay a bonus and the amount of the bonus is at the discretion of our Board of Directors. The bonus is payable in cash, equity or a combination of cash and equity so long as the cash portion is not less than 50% of the total value of the bonus.

Resignation, Retirement, Other Termination, or Change in Control Arrangements

We have arrangements in respect of remuneration received or that may be received by our executive officers 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 as follows:

Pursuant to the terms of the employment agreement with David Tousley, our Secretary, Treasurer and Chief Financial Officer, if the agreement is terminated for other than just cause by us then we agreed to continue to pay Mr. Tousley his base salary for the Termination Notice Period (defined as the period of six months plus two months per year of engagement of Mr. Tousley up to a maximum of twelve months) or, at our discretion to pay a lump sum amount equal to Mr. Tousley's base monthly salary times the number of months in the Termination Notice Period. Mr. Tousley may also be entitled to a pro-rata performance bonus based upon an objective evaluation by us of his achievement of certain pre-determined goals as of the date of termination.

In addition, if Mr. Tousley is terminated within six months following a change of control, or if the surviving entity fails to provide a similar agreement following a change of control, then we agreed to pay Mr. Tousley a lump sum amount equal to 150% of the amount calculated by multiplying (i) one twelfth of his base salary times (ii) not less than six months or the number of months in the Termination Notice Period.

Effective March 1, 2012, we gave notice to Mr. Tousley that we will be terminating his employment agreement pursuant to Section 6.3(b) of his agreement. As a result, Mr. Tousley's employment agreement will cease effective October 31, 2012.

ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS

In the following table, we have determined the number and percentage of shares beneficially owned in accordance with Rule 13d-3 of the Securities Exchange Act of 1934 based on information provided to us by our controlling shareholders, executive officers and directors, and this information does not necessarily indicate beneficial ownership for any other purpose. In determining the number of shares of our common stock beneficially owned by a person and the percentage ownership of that person, we include any shares as to which the person has sole or shared voting power or investment power, as well as any shares subject to warrants or options held by that person that are currently exercisable or exercisable within 60 days.

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^* Less than 1%.

Changes in Control

On January 26, 2012, we entered into a term sheet with Apricus Biosciences, Inc., which included a non-binding expression of interest in the merger of our company with Apricus. See "Item 1. Business – Our Business."

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ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE

Transactions with related persons

Except as disclosed below, since March 1, 2010, there have been no transactions, or currently proposed transactions, in which we were or are to be a participant and the amount involved exceeds the lesser of $120,000 or one percent of the average of our total assets at year end for the last two completed fiscal years ($13,384), and in which any of the following persons had or will have a direct or indirect material interest:

During the year ended February 28, 2011, Joseph Carusone, an officer and director of our company made contributions to capital for management fees in the amount of $3,000 and for rent in the amount of $600. There were no contributions to capital for management fees or rent made by Mr. Carusone for the year ended February 29, 2012

Effective May 28, 2010 we entered into a consulting agreement with Dr. Cameron Durrant, a shareholder of our company, to assist us in the identification of opportunities available to us in the healthcare industry and to recommend terms of potential acquisitions. Under the agreement, we were to compensate Dr. Durrant on a time-spent basis at the rate of $1,000 per day, plus reimbursement of reasonable associated expenses. Dr. Durrant's agreement with the Company dated May 28, 2010 was terminated in lieu of the September 24, 2010 agreement with PediatRx.

On September 24, 2010, with retroactive effect to July 1, 2010, we entered into a second consulting agreement with Dr. Cameron Durrant. Pursuant to the consulting agreement, Dr. Durrant agreed to perform such duties as are regularly and customarily performed by the Chief Executive Officer of a corporation in consideration for, among other things, $250,000 per annum. The term of the consulting agreement is one year from July 1, 2010, unless both parties agree to extend.

In addition, of the 4,250,000 shares of our common stock owned by Dr. Durrant, 2,833,333 shares are subject to a lockup agreement with Dr. Durrant, which lockup agreement became effective February 7, 2011. The lockup agreement expires on December 31, 2015.

During the twelve month period ended February 29, 2012, we accrued a total of $208,333 (February 28, 2011 – $178,667, February 28, 2010 – none, cumulative – $387,000) and paid $113,503 in connection with Dr. Durrant's consulting agreements. During the twelve month period ended February 28, 2011 we accrued an additional 84,250 in expenses paid by him related to the establishment of PediatRx of which $34,536 has been repaid as of February 29, 2012. Interest associated with such accrued consulting and other expenses was accrued at 5% per annum through December 31, 2010. The largest amount outstanding to Dr. Durrant since March 1, 2010 was $221,595, including accrued interest of $1,628. As of February 29, 2012, we owed Dr. Durrant a total of $221,595 (consulting fees of $170,253, other expenses of $49,714 and interest of $1,628 (February 28, 2011 – $160,996).

On September 14, 2010, with retroactive effect to July 1, 2010, we entered into an employment agreement with Mr. David Tousley, Chief Financial Officer, Treasurer and Secretary of PediatRx. Pursuant to the employment agreement, Mr. Tousley agreed to perform such duties as are regularly and customarily performed by the Chief Financial Officer of a corporation in consideration for, among other things, $200,000 per annum. Mr. Tousley is also eligible to receive an annual bonus and an annual stock option award at the end of each year at the discretion of our Board of Directors. The term of the employment agreement is two years from July 1, 2010, unless both parties agree to extend.

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In addition, of the 400,000 shares of our common stock owned by Mr. Tousley, 266,666 shares are subject to a lockup agreement with Mr. Tousley, which lockup agreement became effective February 7, 2011. The lockup agreement expires on December 31, 2015.

Effective March 4, 2011, we granted 690,000 stock options to David Tousley, our Chief Financial Officer and a director of our company. The stock options are exercisable at the exercise price of $1.14 per share until March 4, 2016 and vest on a quarterly basis over three years, beginning on June 4, 2011.

As of March 1, 2012, we gave notice to Mr. Tousley that we will be terminating the employment agreement between Mr. Tousley and us pursuant to Section 6.3(b) of his Employment Agreement. As a result, Mr. Tousley's employment agreement will cease effective October 31, 2012.

On September 14, 2010, with retroactive effect to July 1, 2010, we entered into an employment agreement with Mr. Jorge Rodriguez, Chief Commercial Officer of PediatRx. Pursuant to the employment agreement, Mr. Rodriguez agreed to perform such duties as are regularly and customarily performed by the Chief Commercial Officer of a corporation in consideration for, among other things, $150,000 per annum. Mr. Rodriguez was also eligible to receive an annual bonus and an annual stock option award at the end of each year at the discretion of our Board of Directors. The term of the employment agreement was two years from July 1, 2010, unless both parties agreed to extend.

Effective March 4, 2011, we granted 420,000 stock options to Jorge Rodriguez, our Vice President and Chief Commercial Officer. The stock options were exercisable at the exercise price of $1.14 per share until March 4, 2016 and vested on a quarterly basis over three years, beginning on June 4, 2011.

On December 15, 2011, Mr. Rodriguez, resigned from all positions with the company and we entered into an agreement with Mr. Rodriguez pursuant to which we terminated his employment agreement and amended his stock option agreement (dated March 4, 2011) in order to terminate all unvested options and to extend the exercise period for his 105,000 vested options to December 15, 2012. In connection with the termination, we paid Mr. Rodriguez the amount of $19,500.

Director Independence

Our common stock is quoted on the OTC Bulletin Board operated by FINRA (the Financial Industry Regulatory Authority), which does not impose any director independence requirements. Under NASDAQ Marketplace Rule 5605(a)(2), a director is not considered to be independent if he is also an executive officer or employee of the company. Because Cameron Durrant, David Tousley and Joseph Carusone serve in executive capacities, we determined that Paul Richardson is our only "independent director" as that term is defined by NASDAQ Marketplace Rule 5605(a)(2).

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ITEM 14. PRINCIPAL ACCOUNTING FEES AND SERVICES

Audit Fees

The following table sets forth the fees billed to our company for the years ended February 29, 2012 and February 28, 2010 for professional services rendered by Horne LLP, Certified Public Accountants, our independent registered public accounting firm since May 31, 2010:

The following table sets forth the fees billed to our company for the years ended February 29, 2012 and February 28, 2010 for professional services rendered by James Stafford, Chartered Accountants, our prior independent registered public accounting firm:

Pre-Approval Policies and Procedures

Our entire Board of Directors, which acts as our audit committee, pre-approves all services provided by our independent auditors. All of the above services and fees were reviewed and approved by our board of directors before the respective services were rendered.

Our Board of Directors has considered the nature and amount of fees billed by James Stafford and Horne LLP and believe that the provision of services for activities unrelated to the audit is compatible with maintaining their respective independence.

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PART IV

ITEM 15. EXHIBITS, FINANCIAL STATEMENT SCHEDULES

Exhibits required by Item 601 of Regulation S-K:

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* Filed herewith.

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SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) 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.

PEDIATRX INC.

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