UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form 10-Q
(Mark One)
[X]
| QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
For the quarterly period ended | July 31, 2014 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
or | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
[ ] | TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
For the transition period from | to | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Commission File Number | 333-161157 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
NEUROKINE PHARMACEUTICALS INC. | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
(Exact name of registrant as specified in its charter)
(604) 805-7783 (Registrant’s telephone number, including area code) N/A (Former name, former address and former fiscal year, if changed since last report) 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. [X] YES [ ] 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). [X] YES [ ] NO Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a small reporting company. See the definitions of “large accelerated filer”, “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act. Large accelerated filer [ ] Accelerated filer [ ] Non-accelerated [ ] (Do not check if a smaller reporting company) Smaller reporting company [X] Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act) [ ] YES [X] NO APPLICABLE ONLY TO ISSUERS INVOLVED IN BANKRUPTCY Check whether the registrant has filed all documents and reports required to be filed by Sections 12, 13 or 15(d) of the Exchange Act after the distribution of securities under a plan confirmed by a court. [ ] YES [ ] NO APPLICABLE ONLY TO CORPORATE ISSUERS Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date. 115,767,073 common shares issued and outstanding as of September 15, 2014. TABLE OF CONTENTS PART I – FINANCIAL INFORMATION Management's Discussion and Analysis of Financial Condition and Results of Operations Quantitative and Qualitative Disclosure About Market Risk Unregistered Sales of Equity Securities and Use of Proceeds Defaults Upon Senior Securities PART I – FINANCIAL INFORMATION Item 1. Financial Statements Our unaudited interim financial statements for the three and six months ended 3 NEUROKINE PHARMACEUTICALS INC. (A Development Stage Company) Financial Statements (Expressed in Canadian dollars) Period ended 4 NEUROKINE PHARMACEUTICALS INC. (A Development Stage Company) (Expressed in Canadian dollars) July 31, 2014 $ (unaudited) January 31, 2014 $ Assets Current assets Cash 5,136 1,044 Amounts receivable 5,728 5,251 Total current assets 10,864 6,295 Property and equipment (Note 3) 645 872 Total assets 11,509 7,167 Liabilities and Stockholders’ Deficit Current liabilities Accounts payable and accrued liabilities 47,690 35,373 Loans payable (Note 4) 59,989 55,306 Due to related parties (Note 10) 182,842 151,384 Convertible debentures, net of unamortized discount of $nil and $7,304, respectively (Note 5) 303,814 286,852 Derivative liabilities – current portion (Note 6) 8,484 200,000 Total current liabilities 602,819 728,915 Derivative liabilities (Note 6) 11,899 28,765 Total liabilities 614,718 757,680 Stockholders’ Deficit Common stock: Unlimited shares authorized, without par value, 115,767,073 and 100,767,073 shares issued and outstanding, respectively 1,274,148 1,151,148 Common stock issuable (Note 7) 225,000 225,000 Additional paid-in capital 757,586 787,586 Deficit accumulated during the development stage (2,859,943) (2,914,247) Total stockholders’ deficit (603,209) (750,513) Total liabilities and stockholders’ deficit 11,509 7,167 (The accompanying notes are an integral part of these financial statements) April 30, 2014 $ (unaudited) January 31, 2014 $ Assets Current assets Cash 480 1,044 Other receivable 5,498 5,251 Total current assets 5,978 6,295 Property and equipment (Note 3) 758 872 Total assets 6,736 7,167 Liabilities and Stockholders’ Deficit Current liabilities Accounts payable and accrued liabilities 40,200 35,373 Loans payable (Note 4) 57,579 55,306 Due to related parties (Note 10) 154,524 151,384 Convertible debentures, net of unamortized discount of $nil and $7,304, respectively (Note 5) 297,750 286,852 Derivative liabilities – current portion (Note 6) 8,483 200,000 Total current liabilities 558,536 728,915 Derivative liabilities (Note 6) 14,949 28,765 Total liabilities 573,485 757,680 Stockholders’ Deficit Common stock: 200,000,000 shares authorized, without par value, 115,767,073 and 100,767,073 shares issued and outstanding, respectively 1,274,148 1,184,148 Common stock issuable (Note 7) 225,000 225,000 Additional paid-in capital 757,586 754,586 Deficit accumulated during the development stage (2,823,483) (2,914,247) Total stockholders’ deficit (566,749) (750,513) Total liabilities and stockholders’ deficit 6,736 7,167 NEUROKINE PHARMACEUTICALS INC. (A Development Stage Company) (Expressed in Canadian dollars) Three Months Ended July 31, 2014 $ Three Months Ended July 31, 2013 $ Six Months Ended July 31, 2014 $ Six Months Ended July 31, 2013 $ Accumulated from June 10, 2002 (Date of Inception) to July 31, 2014 $ Revenue – – – – – Expenses Amortization 114 114 228 228 1,631 Consulting – – – – 126,519 Foreign exchange loss (gain) 129 5,200 (3,139) 7,386 36,879 General and administrative 13,839 12,269 17,278 14,950 264,216 Management fees (Note 10) – 7,500 3,000 15,000 172,161 Professional fees 15,889 7,428 20,798 8,497 223,144 Research and development – – – – 282,715 Royalties – – – – 500,000 Total expenses 29,971 32,511 38,165 46,061 1,607,265 Loss from operations (29,971) (32,511) (38,165) (46,061) (1,607,265) Other income (expense) Accretion of discount on convertible debentures – (1,177) (7,304) (1,216) (217,988) Financing costs – – (90,000) (63,000) (459,449) Gain on change in fair value of derivative liabilities 3,050 (5,453) 208,383 29,767 77,027 Loss on settlement of debt – – – – (512,500) Interest expense (9,539) (9,061) (18,610) (16,708) (139,768) Total other income (expense) (6,489) (15,691) 92,469 (51,157) (1,252,678) Net (loss) income (36,460) (48,202) 54,304 (97,218) (2,859,943) Net (loss) income per share, basic – – – – Net income (loss) per share, diluted – – – – Weighted average shares outstanding - basic 115,767,073 35,767,073 108,722,874 35,767,073 Weighted average shares outstanding - diluted 115,767,073 260,762,361 108,722,874 260,762,361 Three Months Ended April 30, 2014 $ Three Months Ended April 30, 2013 $ Accumulated from June 10, 2002 (Date of Inception) to April 30, 2014 $ Revenue - - - Expenses Amortization 114 114 1,517 Consulting - - 126,519 Foreign exchange (gain) loss (3,268) 2,186 36,750 General and administrative 3,439 2,681 250,377 Management fees (Note 10) 3,000 7,500 172,161 Professional fees 4,909 1,069 207,255 Research and development - - 282,715 Royalties - - 500,000 Total expenses 8,194 13,550 1,577,294 Loss from operations (8,194) (13,550) (1,577,294) Other income (expense) Accretion of discount on convertible debentures (7,304) (39) (217,988) Financing costs (90,000) (63,000) (459,449) Gain on change in fair value of derivative liabilities 205,333 35,220 73,977 Loss on settlement of debt - - (512,500) Interest expense (9,071) (7,647) (130,229) Total other income (expense) 98,958 (35,466) (1,246,189) Net income (loss) 90,764 (49,016) (2,823,483) Net income (loss) per share, basic - - Net income (loss) per share, diluted - - Weighted average shares outstanding - basic 101,441,230 35,767,073 Weighted average shares outstanding - diluted 101,441,230 249,875,817 NEUROKINE PHARMACEUTICALS INC. (A Development Stage Company) (Expressed in Canadian dollars) Six Months Ended July 31, 2014 $ Six Months Ended July 31, 2013 $ Accumulated from June 10, 2002 (Date of Inception) to July 31, 2014 $ Three Months Ended April 30, 2014 $ Three Months Ended April 30, 2013 Accumulated from June 10, 2002 (Date of Inception) to April 30, 2014 $ Operating activities Net income (loss) 90,764 (49,016) (2,823,483) 54,304 (97,218) (2,859,943) Adjustments to reconcile net loss to net cash used in operating activities: Accretion of discount on convertible debentures 7,304 39 217,989 7,304 1,216 217,988 Amortization 114 114 1,517 228 228 1,630 (Gain) loss on change in fair value of derivative liabilities (205,333) (35,220) (73,977) (208,382) (29,767) (77,026) Stock issued for royalties - - 500,000 – – 500,000 Stock issued for financing costs 90,000 63,000 539,919 90,000 – 539,919 Stock-based compensation - - 61,911 – – 61,911 Stock issued for loan default - - 63,000 – 63,000 63,000 Loss on settlement of debt - - 490,000 – – 490,000 Services contributed by officer 3,000 - 3,000 3,000 – 3,000 Changes in operating assets and liabilities: Amounts receivable (247) (12) (5,498) (477) (503) (5,728) Accounts payable and accrued liabilities 10,694 5,363 198,068 26,657 11,386 214,033 Due to related parties 3,140 15,400 272,023 31,458 31,128 300,341 Net cash used in operating activities (564) (332) (555,531) Net cash provided by (used in) operating activities 4,092 (20,530) (550,875) Investing activities Purchase of property and equipment - - (2,276) – – (2,276) Net cash used in investing activities - - (2,276) – – (2,276) Financing activities Proceeds from loan payable - - 270,000 – – 270,000 Repayment of loan payable - - (150,000) – – (150,000) Proceeds from issuance of convertible debentures - 15,000 130,794 – 15,254 130,794 Proceeds from issuance of shares - - 307,493 – – 307,493 Net cash provided by financing activities - 15,000 558,287 – 15,254 558,287 (Decrease) increase in cash (564) 14,668 480 Effect of foreign exchange – 5,762 – Increase in cash 4,092 486 5,136 Cash – beginning of period 1,044 475 - 1,044 475 – Cash – end of period 480 15,143 480 5,136 961 5,136 Supplemental disclosures: Interest paid - - 76,078 – 76,078 Income tax paid - - - – – Non-cash investing and financing activities: Contributed services - - 150,000 – 153,000 Debt discount on beneficial conversion feature - - 30,000 – 30,000 Forgiveness of related party debt - - 7,500 – 7,500 Shares issued for conversion of debentures - - 43,736 – 43,736 Shares issued for settlement of debt - - 45,000 – 45,000 Fair value of options and warrants exercised - - 5,175 – 5,175 (The accompanying notes are an integral part of these financial statements) NEUROKINE PHARMACEUTICALS INC. (A Development Stage Company) Notes to the Financial Statements Period (Expressed in Canadian dollars) 1. Nature of Operations and Continuance of Business Neurokine Pharmaceuticals Inc. (the “Company”) was incorporated in British Columbia under the Business Corporations Act on June 10, 2002. The Company is a development stage company, as defined by Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) 915,Development Stage Entities, and is in the business of developing and commercializing new uses for existing prescription drugs for diseases mediated by acute and chronic inflammatory reactions as well as developing proprietary encapsulation technology in the treatment of neurodegenerative diseases. These financial statements have been prepared on the going concern basis, which assumes that the Company will be able to realize its assets and discharge its liabilities in the normal course of business. As at 2. Significant Accounting Policies (a) Basis of Presentation The financial statements and the related notes of the Company are prepared in accordance with generally accepted accounting principles in the United States and are expressed in Canadian dollars. The Company’s fiscal year-end is January 31. (b) Use of Estimates The preparation of these financial statements in conformity with generally accepted accounting principles in the United States requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. The Company regularly evaluates estimates and assumptions related to the useful life and recoverability of long-lived assets, valuation of convertible debentures, assumptions used to determine the fair values of stock-based compensation and derivative liabilities, and deferred income tax asset valuation allowances. The Company bases its estimates and assumptions on current facts, historical experience and various other factors that it believes to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities and the accrual of costs and expenses that are not readily apparent from other sources. The actual results experienced by the Company may differ materially and adversely from the Company’s estimates. To the extent there are material differences between the estimates and the actual results, future results of operations will be affected. (c) Interim Financial Statements These interim unaudited financial statements have been prepared on the same basis as the annual financial statements and in the opinion of management, reflect all adjustments, which include only normal recurring adjustments, necessary to present fairly the Company’s financial position, results of operations and cash flows for the periods shown. The results of operations for such periods are not necessarily indicative of the results expected for a full year or for any future period. 2. Significant Accounting Policies (continued) (d) Cash and Cash Equivalents The Company considers all highly liquid instruments with a maturity of three months or less at the time of issuance to be cash equivalents. As at (e) Property and Equipment Property and equipment is comprised of office equipment and is recorded at cost. The Company amortizes the cost of equipment on a straight-line basis over their estimated useful life of five years. (f) Long-lived Assets In accordance with ASC 360, “Property, Plant and Equipment”, the Company tests long-lived assets or asset groups for recoverability when events or changes in circumstances indicate that their carrying amount may not be recoverable. Circumstances which could trigger a review include, but are not limited to: significant decreases in the market price of the asset; significant adverse changes in the business climate or legal factors; accumulation of costs significantly in excess of the amount originally expected for the acquisition or construction of the asset; current period cash flow or operating losses combined with a history of losses or a forecast of continuing losses associated with the use of the asset; and current expectation that the asset will more likely than not be sold or disposed significantly before the end of its estimated useful life. Recoverability is assessed based on the carrying amount of the asset and its fair value, which is generally determined based on the sum of the undiscounted cash flows expected to result from the use and the eventual disposal of the asset, as well as specific appraisal in certain instances. An impairment loss is recognized when the carrying amount is not recoverable and exceeds fair value. (g) Stock-Based Compensation The Company records stock-based compensation in accordance with ASC 718,Compensation – Stock-Based Compensation, using the fair value method. All transactions in which goods or services are the consideration received for the issuance of equity instruments are accounted for based on the fair value of the consideration received or the fair value of the equity instrument issued, whichever is more reliably measurable. (h) Derivative Financial Instruments Derivative financial instruments that are not classified as equity and are not used in hedging relationships are measured at fair value. Subsequent changes to fair value are recorded in the statement of operations. (i) The Company computes net 2. Significant Accounting Policies (continued) (j) Comprehensive Loss ASC 220,Comprehensive Income, establishes standards for the reporting and display of comprehensive loss and its components in the financial statements. As at (k) Research and Development Costs Research costs are expensed in the period that they are incurred. (l) Financial Instruments and Fair Value Measures ASC 820,Fair Value Measurements, requires an entity to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value. ASC 820 establishes a fair value hierarchy based on the level of independent, objective evidence surrounding the inputs used to measure fair value. A financial instrument’s categorization within the fair value hierarchy is based upon the lowest level of input that is significant to the fair value measurement. ASC 820 prioritizes the inputs into three levels that may be used to measure fair value: Level 1 Level 1 applies to assets or liabilities for which there are quoted prices in active markets for identical assets or liabilities. Level 2 Level 2 applies to assets or liabilities for which there are inputs other than quoted prices that are observable for the asset or liability such as quoted prices for similar assets or liabilities in active markets; quoted prices for identical assets or liabilities in markets with insufficient volume or infrequent transactions (less active markets); or model-derived valuations in which significant inputs are observable or can be derived principally from, or corroborated by, observable market data. Level 3 Level 3 applies to assets or liabilities for which there are unobservable inputs to the valuation methodology that are significant to the measurement of the fair value of the assets or liabilities. (m) Foreign Currency Translation The Company’s functional currency and its reporting currency is the Canadian dollar and foreign currency transactions are primarily undertaken in United States dollars. Monetary assets and liabilities are translated using the exchange rate prevailing at the balance sheet date. Non-monetary assets and liabilities denominated in foreign currencies are translated at rates of exchange in effect at the date of the transaction. Expenses are translated at average rates for the period. Gains and losses arising on translation or settlement of foreign currency denominated transactions or balances are included in the determination of income. 2. Significant Accounting Policies (continued) (n) Recent Accounting Pronouncements The Company has implemented all new accounting pronouncements that are in effect and that may impact its financial statements and does not believe that there are any other new accounting pronouncements that have been issued that might have a material impact on its financial position or results of operations. (o) Comparative Figures During the period, the Company determined that certain transactions affecting stockholders’ equity had inadvertently been recorded using a par value of $0.001 in the fiscal year ended January 31, 2014. The Company has determined that its previously filed Form 10-K included a misclassification of $33,000 related to equity. After taking the reclassification into account, the balances of common shares and additional paid-in capital as of January 31, 2014, are $1,184,148 and $754,586, respectively. 3. Property and Equipment Cost $ Accumulated amortization $ October 31, 2013 Net carrying value $ January 31, 2014 Net carrying value $ Office furniture and equipment 2,276 1,518 758 872 Cost $ Accumulated amortization $ July 31, 2014 Net carrying value $ January 31, 2014 Net carrying value $ Office furniture and equipment 2,276 1,631 645 872 4. Loans Payable (a) On March 30, 2012, the Company issued a promissory note to a non-related party for $30,000. The loan is unsecured, bears interest at 24% per annum, and was due on March 30, 2013. As at (b) On September 19, 2013, the Company issued a promissory note to a non-related party for US$10,000. The loan is unsecured, bears interest at 24% per annum, and is due on September 18, 2014. 5. Convertible Debentures (a) On December 17, 2010, the Company issued a convertible debenture with a non-related party for $65,079 (US$65,000). The debenture is unsecured, bears interest at 8% per annum, and matured on September 17, 2011. The note is convertible into common shares at a conversion price equal to 55% of the average closing market price of the lowest three trading prices of the Company’s common stock during the preceding ten days prior to conversion. The Company recorded the conversion feature of the convertible debenture as a derivative liability at an estimated fair value of $65,079 with a corresponding discount to the convertible debenture. On June 23, 2011, the Company issued 145,455 common shares to convert $11,674 (US$12,000). On June 29, 2011, the Company issued 169,697 common shares to convert $13,792 (US$14,000). As of 5. Convertible Debentures (continued) (b) On February 23, 2011, the Company issued a convertible debenture with a non-related party for $37,944 (US$40,000). The debenture is unsecured, bears interest at 8% per annum, and matured on December 23, 2011. The note is convertible into common shares at a conversion price equal to 55% of the average closing market price of the lowest three trading prices of the Company’s common stock during the preceding ten days prior to conversion. The Company recorded the conversion feature of the convertible debenture as a derivative liability at an estimated fair value of $37,944 with a corresponding discount to the convertible debenture. On July 11, 2011, the Company issued 230,303 common shares to convert $18,270 (US$19,000). As of (c) On July 4, 2011, the Company issued a note payable with a non-related party for $85,000. The note was unsecured, due interest at 24% per annum, and due on October 4, 2011. On October 4, 2011, the note was extended to January 4, 2012 under the same terms of the original agreement. On December 4, 2011, the Company agreed to modify the principal balance owing of $85,000 and accrued interest of $8,551 into a new $100,000 note payable, which is unsecured, due interest at 24% per annum, and due on December 3, 2012. In addition, the note became convertible into common shares of the Company at a conversion rate of $0.001 per share. As part of the conversion to extend the note, the Company issued 10,000,000 common shares with a fair value of $225,000 as a termination fee of the original note agreement. As the modified debt terms include a beneficial conversion feature, the Company accounted for the modified debt terms in accordance with ASC 470,Debt – Debt with Conversions and Other Options. The conversion feature resulted in a discount on the convertible note of $100,000. As of (d) On April 26, 2013, As the convertible debt terms include a beneficial conversion feature, the Company accounted for the debt terms in accordance with ASC 470,Debt – Debt with Conversions and Other Options. The conversion feature resulted in a discount on the convertible note of $15,000. During the 6. Derivative Liabilities Derivative liabilities consist of convertible debentures with variable conversion prices and share purchase warrants originally issued in private placements with conversion/exercise prices denominated in United States dollars, which differs from the Company’s functional currency. The fair values of these derivative liabilities are as follows: April 30, 2014 $ (unaudited) January 31, 2014 $ December 2010 convertible debenture 3,472 81,848 February 2011 convertible debenture 1,869 44,072 Default penalty on convertible debentures 3,142 74,080 75,000 warrants expiring on July 4, 2013 - - 3,800,000 warrants expiring on July 30, 2015 14,949 28,765 23,432 228,765 July 31, 2014 $ (unaudited) January 31, 2014 $ December 2010 convertible debenture 1,572 81,848 February 2011 convertible debenture 846 44,072 Default penalty on convertible debentures 1,423 74,080 75,000 warrants expiring on July 4, 2013 – – 3,800,000 warrants expiring on July 30, 2015 16,542 28,765 20,383 228,765 The fair values of derivative financial liabilities were determined using the Black-Scholes option pricing model, using the following assumptions: Expected Volatility Risk-free Interest Rate Expected Dividend Yield Expected Life (in years) Expected Volatility Risk-free Interest Rate Expected Dividend Yield Expected Life (in years) As at issuance date: December 2010 convertible debenture 125% 1.19% 0% 0.75 125% 1.19% 0% 0.75 February 2011 convertible debenture 125% 1.27% 0% 0.75 125% 1.27% 0% 0.75 Default penalty on convertible debenture 125% 0.08% 0% 0.50 125% 0.08% 0% 0.50 75,000 warrants expiring on July 4, 2013 125% 0.30% 0% 2.00 125% 0.30% 0% 2.00 3,800,000 warrants expiring on July 30, 2015 125% 1.26% 0% 4.50 125% 1.26% 0% 4.50 As at April 30, 2014: As at July 31, 2014: December 2010 convertible debenture 213% 0.03% 0% 0.25 177% 0.03% 0% 0.25 February 2011 convertible debenture 213% 0.03% 0% 0.25 177% 0.03% 0% 0.25 Default penalty on convertible debenture 213% 0.03% 0% 0.25 177% 0.03% 0% 0.25 3,800,000 warrants expiring on July 30, 2015 353% 0.11% 0% 1.25 342% 0.12% 0% 1.00 7. Common Shares On March 24, 2013, 30,000,000 shares of common stock were issuable pursuant to a default penalty on a convertible note payable. On April 27, 2014, 15,000,000 shares of common stock were issuable pursuant to a default penalty on a convertible note payable. On September 24, 2013, the Company issued 35,000,000 shares of common stock to settle $35,000 of due to related party. 8. Share Purchase Warrants The following table summarizes the continuity of share purchase warrants: Number of Warrants Weighted Average Exercise Price (US$) Balance, January 31, 2013 3,875,000 0.01 Expired (75,000) 0.15 Balance, April 30 and January 31, 2014 3,800,000 0.01 Number of Warrants Weighted Average Exercise Price (US$) Balance, January 31, 2013 3,875,000 0.01 Expired (75,000) 0.15 Balance, July 31 and January 31, 2014 3,800,000 0.01 As at Number of Warrants Exercise Price $ Expiry Date 3,800,000 0.005 July 30, 2015 9. Stock Options The following table summarizes the continuity of the Company’s stock options: Number Weighted Weighted Average Remaining Contractual Life (years) Aggregate Intrinsic Value (US$) Outstanding and exercisable, April 30, 2014, January 31, 2014 and January 31, 2013 800,000 0.005 1.56 – Number Weighted Weighted Average Remaining Contractual Life (years) Aggregate Intrinsic Value (US$) Outstanding and exercisable, January 31, 2013 800,000 0.005 2.3 – Outstanding and exercisable, January 31, 2014 800,000 0.005 1.3 – Outstanding and exercisable, July 31, 2014 800,000 0.005 0.8 – Additional information regarding stock options as of Number of Options Exercise Price $ Expiry Date 800,000 0.005 May 25, 2015 10. Related Party Transactions As at During the 14 11. Fair Value Measurements The Company’s financial instruments consist principally of cash, amounts receivable, accounts payable and accrued liabilities, amounts due to related parties, loans payable, convertible debentures and derivative liability. The Company uses the Black-Sholes model to calculate the fair value of the derivative liability. Fair Value Measurements Using Description Total Fair Value at July 31, 2014 Quoted Prices in Active Markets (Level 1) Significant Other Observable Inputs (Level 2) Significant Unobservable Inputs (Level 3) Derivative liabilities $ 20,383 $ - $ 20,383 $ - Fair Value Measurements Using Description Total Fair Value at January 31, 2014 Quoted Prices in Active Markets (Level 1) Significant Other Observable Inputs (Level 2) Significant Unobservable Inputs (Level 3) Derivative liabilities $ 228,765 $ - $ 228,765 $ - 12. Subsequent Events 15 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations Forward-Looking Statements This report on Form 10-Q contains certain forward-looking statements. All statements other than statements of historical fact are “forward-looking statements” for purposes of these provisions, including any projections of earnings, revenues, or other financial items; any statements of the plans, strategies, and objectives of management for future operation; any statements concerning proposed new products, services, or developments; any statements regarding future economic conditions or performance; statements of belief; and any statement of assumptions underlying any of the foregoing. Such forward-looking statements are subject to inherent risks and uncertainties, and actual results could differ materially from those anticipated by the forward-looking statements. These forward-looking statements involve significant risks and uncertainties, including, but not limited to, the following: competition, promotional costs and the risk of declining revenues. Our actual results could differ materially from those anticipated in such forward-looking statements as a result of a number of factors. These forward-looking statements are made as of the date of this filing, and we assume no obligation to update such forward-looking statements. The following discusses our financial condition and results of operations based upon our unaudited financial statements which have been prepared in conformity with accounting principles generally accepted in the United States. It should be read in conjunction with our financial statements and the notes thereto included elsewhere herein. Although we believe that the expectations reflected in the forward-looking statements are reasonable, we cannot guarantee future results, levels of activity, performance or achievements. Except as required by applicable law, including the securities laws of the United States, we do not intend to update any of the forward-looking statements to conform these statements to actual results. Our financial statements are stated in Canadian Dollars (CDN$) and are prepared in accordance with United States Generally Accepted Accounting Principles. In this quarterly report, unless otherwise specified, all dollar amounts are expressed in Canadian Dollars (CDN$) and all references to “common shares” refer to the common shares in our capital stock. As used in this quarterly report, the terms “we”, “us”, “our” and “our company” mean Neurokine Pharmaceuticals Inc., unless otherwise indicated. General Overview We are a development stage biopharmaceutical company. We were incorporated in the Province of British Columbia, Canada under the name “649186 B.C. Ltd.” on June 10, 2002. On September 9, 2003, we changed our name to “Xerxes Health Corp.” and on June 26, 2007, we adopted our current name, “Neurokine Pharmaceuticals Inc.”. We have no subsidiaries. Effective June 4, 2014, we filed with the British Columbia Registrar of Companies a Form 11, Notice of Alteration, wherein we increased our authorized share capital from 200,000,000 common shares without par value to an unlimited number of common shares without par value. The increase of authorized capital was approved by our stockholders at the annual and special meeting held on June 3, 2014. Our principal executive office is located at 1275 West 6th Avenue, Vancouver, British Columbia, Canada, V6H 1A6. Our telephone number is (604) 805-7783. 16 We are engaged in the development and commercialization of therapeutic pharmaceutical products with a strategic emphasis on research and development to innovate applications for existing drugs. This is commonly known as drug re-profiling. Our research and development activities are focused on assessing known drugs and compounds, developing hypotheses concerning their usage for new indications (diseases), and conducting experimentation and clinical research to test those hypotheses. Where appropriate based on our research, we intend to depart from a strict re-profiling strategy to develop new variants of, or delivery methods for, existing drugs or compounds. Our Current Business We are a development stage biopharmaceutical company engaged in the development and commercialization of therapeutic pharmaceutical products, with a strategic emphasis on the innovation of new therapeutic uses for existing drugs. This is commonly known as drug re-profiling. Our research and development activities are focused on assessing known drugs and compounds, developing hypotheses concerning their usage for new indications (diseases), and conducting experimentation and clinical research to test those hypotheses. Where appropriate based on our research, we intend to depart from a strict re-profiling strategy to develop new variants of, or delivery methods for, existing drugs or compounds. Our focus on drug re-profiling, although not uncommon amongst pharmaceutical companies, differs from traditional drug development practices which focus largely on the development of new drugs. To date, we have concentrated our research on innovating applications for existing drugs for the treatment of diseases and conditions mediated by acute and chronic inflammatory reactions. The diseases and conditions that have been the subject of our research include: · neurocognitive impairment, and specifically, neurocognitive impairment in post-coronary artery bypass graft (also known as “CABG” or “heart bypass”) surgery patients; · degenerative central nervous system diseases, and specifically, Alzheimer’s disease; and · degenerative disk disease, and specifically, discogenic neck and back pain conditions. Through our research we have identified and, where required, secured the rights necessary to develop two anti-inflammatory products, NK-001 and NK-002, that we believe hold promising prospects for the treatment of neurocognitive impairment and Alzheimer’s disease, respectively. Of these, NK-001 falls under our re-profiling strategy, as it is a new application of the drug Etanercept, which is marketed under FDA approval as a treatment for rheumatoid arthritis. Accordingly, we do not anticipate that NK-001 will require pre-clinical, preliminary safety or pharmacokinetic (the process by which the drug is metabolized by the body) studies. Because Etanercept has already been the subject of safety studies on a patient population similar to patients targeted by NK-001, we do not anticipate requiring additional pre-clinical or safety studies before proceeding to later stage clinical trials, and we have received approval to conduct clinical trials in South Africa on that basis. In contrast, NK-002 is a new formulation for the delivery of Etanercept and is therefore properly classified as a new drug. As a new drug, NK-002 will require a full development program, including a full range of successful pre-clinical, safety, and pharmacokinetic studies before advanced clinical testing will be permitted to occur. Both of our planned products, including our flagship product NK-001, are in the development stage as of the date of this quarterly report and neither has been approved for sale to the public in any country. 17 The research and development activities required to produce the intellectual property underlying our two product candidates, NK-001 and NK-002, was carried out by Dr. Ahmad Doroudian, a director and officer of our On April 26, 2013, we issued a convertible debenture with a non-related party for $15,254 (US$15,000). The debenture is secured by 15,000,000 shares of common stock of our company, to be delivered to the lender if principal and interest are not repaid on maturity, bears interest at 24% per annum, and matured on April 27, 2014. As the debenture matured unpaid, 15,000,000 shares of common stock became issuable. The note, plus accrued interest, is convertible into common shares at a conversion price of US$0.001 per share at the discretion of the lender and at any time during the term of this debenture. On September 26, 2013, we entered into a debt settlement subscription agreement with a director and officer of our company, Ahmad Doroudian. Pursuant to the agreement our board of directors authorized the issuance to Dr. Doroudian of 35,000,000 shares in our common stock at the price of $0.001 per share. The securities were issued in full settlement of $35,000 in debt payable on demand to Dr. Doroudian in respect of cash advances made by him to our company. As a result of the transaction Dr. Doroudian owns or beneficial owns the aggregate of 43,059,784 shares of our common stock which constitutes approximately 60% of our issued and outstanding voting securities as at the date of this report. Results of Operations The following summary of our results of operations should be read in conjunction with our financial statements for the quarter ended Our operating results for the three and six months ended Three Months Ended April 30, 2014 2013 Revenue $ - $ - Operating expenses $ 8,194 $ 13,550 Accretion of discounts on convertible debentures $ 7,304 $ 39 Financing costs $ 90,000 $ 63,000 Loss (gain) on change in fair value derivative $ (205,333) $ (35,220) Interest expense $ 9,071 $ 7,647 Net income (loss) $ 90,764 $ (49,016) Three Months Ended Six Months Ended July 31, July 31, 2014 2013 2014 2013 Revenue $ Nil $ Nil $ Nil $ Nil Amortization $ 114 $ 114 $ 228 $ 228 Foreign exchange (gain) loss $ 129 $ 5,200 $ (3,139 ) $ 7,386 General and administrative $ 13,839 $ 12,269 $ 17,278 $ 14,950 Management fees $ Nil $ 7,500 $ 3,000 $ 15,000 Professional fees $ 15,889 $ 7,428 $ 20,798 $ 8,497 Research and development $ Nil $ Nil $ Nil $ Nil Total Other (Income) Expenses $ 6,489 $ 15,691 $ 92,469 $ 51,157 Net Income (Loss) $ (36,460 ) $ (48,202 ) $ 54,304 $ (97,218 ) For the three months ended 18 Revenue We have not earned any revenues since our inception and we do not anticipate earning revenues in the upcoming quarter. Liquidity and Financial Condition Working Capital At At April 30, January 31, 2014 2014 Current Assets $ 5,978 $ 6,295 Current Liabilities $ 558,536 $ 728,915 Working Capital (Deficit) $ (552,558) $ (722,620) At At July 31, January 31, 2014 2014 Current Assets $ 10,864 $ 6,295 Current Liabilities $ 602,819 $ 728,915 Working Capital (Deficit) $ (591,955 ) $ (722,620 ) Our total current assets as of Cash Flows Three Months Ended Three Months Ended April 30, April 30, 2014 2013 Net Cash used in Operating Activities $ (564) $ (332) Net Cash used in Investing Activities $ - $ - Net Cash Provided by Financing Activities $ - $ 15,000 Increase (Decrease) in Cash During the Period $ (564) $ (14,668) Six Months Ended July 31, 2014 2013 Net Cash Provided By (Used In) Operating Activities $ 4,092 $ (20,530 ) Net Cash Provided By Financing Activities $ Nil $ 15,254 Effect of foreign exchange $ Nil $ 5,762 Increase in Cash During the Period $ 4,092 $ 486 Operating Activities During the Investing Activities We did not have any investing activities during the Financing Activities During the We will require additional funds to fund our budgeted expenses over the next 12 months. These funds may be raised through equity financing, debt financing, or other sources, which may result in further dilution in the equity ownership of our shares. There is still no assurance that we will be able to maintain operations at a level sufficient for an investor to obtain a return on his investment in our common stock. Further, we may continue to be unprofitable. We need to raise additional funds in the immediate future in order to proceed with our budgeted expenses. 19 Specifically, we estimate our operating expenses and working capital requirements for the next 12 months to be as follows: Estimated Expenses Description ($) Sales and Marketing Costs: Advertising 3,600 Investor Relations 60,000 Literature 6,000 Conference Attendance 21,000 Travel 22,000 Entertainment and Promotion 2,400 Marketing Costs 115,000 Operating Expenses: Professional Fees 60,000 Employee Salaries and Benefits 384,000 Office Equipment 1,600 Office Supplies 1,200 Office and Lab Lease 40,000 Telephone, Fax, Cellular, Internet 6,000 Vehicles and Transportation 14,400 737,200 Based on our planned expenditures, we will require additional funds of approximately $737,200to proceed with our business plan over the next 12 months. If we secure less than the full amount of financing that we require, we will not be able to carry out our complete business plan and we will be forced to proceed with a scaled back business plan based on our available financial resources. Inflation The amounts presented in the financial statements do not provide for the effect of inflation on our operations or financial position. The net operating losses shown would be greater than reported if the effects of inflation were reflected either by charging operations with amounts that represent replacement costs or by using other inflation adjustments. Off-Balance Sheet Arrangements We have no off-balance sheet arrangements that have or are reasonably likely to have a current or future effect on our financial condition, changes in financial condition, revenues or expenses, results of operations, liquidity, capital expenditures or capital resources that is material to stockholders. Critical Accounting Policies The discussion and analysis of our financial condition and results of operations are based upon our financial statements, which have been prepared in accordance with the accounting principles generally accepted in the United States of America. Preparing financial statements requires management to make estimates and assumptions that affect the reported amounts of assets, liabilities, revenue, and expenses. These estimates and assumptions are affected by management’s application of accounting policies. We believe that understanding the basis and nature of the estimates and assumptions involved with the following aspects of our financial statements is critical to an understanding of our financial statements. 20 Basis of Presentation The financial statements and the related notes of our company are prepared in accordance with generally accepted accounting principles in the United States and are expressed in Canadian dollars. Our company’s fiscal year-end is January 31. Use of Estimates The preparation of these financial statements in conformity with generally accepted accounting principles in the United States requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Our company regularly evaluates estimates and assumptions related to the recoverability of long-lived assets, valuation of convertible debentures, assumptions used to determine the fair value of stock-based compensation and derivative liabilities, and deferred income tax asset valuation allowances. Our company bases our estimates and assumptions on current facts, historical experience and various other factors that we believe to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities and the accrual of costs and expenses that are not readily apparent from other sources. The actual results experienced by our company may differ materially and adversely from our company’s estimates. To the extent there are material differences between the estimates and the actual results, future results of operations will be affected. Cash and Cash Equivalents Our company considers all highly liquid instruments with a maturity of three months or less at the time of issuance to be cash equivalents. As at Property and Equipment Property and equipment is comprised of office equipment and is recorded at cost. Our company amortizes the cost of equipment on a straight-line basis over their estimated useful life of five years. Long-lived Assets In accordance with ASC 360, “Property, Plant and Equipment”, our company tests long-lived assets or asset groups for recoverability when events or changes in circumstances indicate that their carrying amount may not be recoverable. Circumstances which could trigger a review include, but are not limited to: significant decreases in the market price of the asset; significant adverse changes in the business climate or legal factors; accumulation of costs significantly in excess of the amount originally expected for the acquisition or construction of the asset; current period cash flow or operating losses combined with a history of losses or a forecast of continuing losses associated with the use of the asset; and current expectation that the asset will more likely than not be sold or disposed significantly before the end of its estimated useful life. Recoverability is assessed based on the carrying amount of the asset and its fair value, which is generally determined based on the sum of the undiscounted cash flows expected to result from the use and the eventual disposal of the asset, as well as specific appraisal in certain instances. An impairment loss is recognized when the carrying amount is not recoverable and exceeds fair value. Stock-Based Compensation Our company records stock-based compensation in accordance with ASC 718,Compensation – Stock-Based Compensation, using the fair value method. All transactions in which goods or services are the consideration received for the issuance of equity instruments are accounted for based on the fair value of the consideration received or the fair value of the equity instrument issued, whichever is more reliably measurable. 21 Derivative Financial Instruments Derivative financial instruments that are not classified as equity and are not used in hedging relationships are measured at fair value. Subsequent changes to fair value are recorded in the statement of operations. Earnings (Loss) Per Share Our company computes net earnings (loss) per share in accordance with ASC 260,Earnings Per Share.ASC 260 requires presentation of both basic and diluted earnings per share (“EPS”) on the face of the income statement. Basic EPS is computed by dividing net income (loss) available to common shareholders (numerator) by the weighted average number of shares outstanding (denominator) during the period. Diluted EPS gives effect to all dilutive potential common shares outstanding during the period using the treasury stock method and convertible preferred stock using the if-converted method. In computing diluted EPS, the average stock price for the period is used in determining the number of shares assumed to be purchased from the exercise of stock options or warrants. Diluted EPS excludes all dilutive potential shares if their effect is anti-dilutive. At Comprehensive Loss ASC 220,Comprehensive Income, establishes standards for the reporting and display of comprehensive loss and its components in the financial statements. As at Research and Development Costs Research costs are expensed in the period that they are incurred. Financial Instruments and Fair Value Measures ASC 820,Fair Value Measurements, requires an entity to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value. ASC 820 establishes a fair value hierarchy based on the level of independent, objective evidence surrounding the inputs used to measure fair value. A financial instrument’s categorization within the fair value hierarchy is based upon the lowest level of input that is significant to the fair value measurement. ASC 820 prioritizes the inputs into three levels that may be used to measure fair value: Level 1 -Level 1 applies to assets or liabilities for which there are quoted prices in active markets for identical assets or liabilities. Level 2 -Level 2 applies to assets or liabilities for which there are inputs other than quoted prices that are observable for the asset or liability such as quoted prices for similar assets or liabilities in active markets; quoted prices for identical assets or liabilities in markets with insufficient volume or infrequent transactions (less active markets); or model-derived valuations in which significant inputs are observable or can be derived principally from, or corroborated by, observable market data. Level 3 -Level 3 applies to assets or liabilities for which there are unobservable inputs to the valuation methodology that are significant to the measurement of the fair value of the assets or liabilities. 22 Foreign Currency Translation Our company’s functional currency and its reporting currency is the Canadian dollar and foreign currency transactions are primarily undertaken in United States dollars. Monetary assets and liabilities are translated using the exchange rate prevailing at the balance sheet date. Non-monetary assets and liabilities denominated in foreign currencies are translated at rates of exchange in effect at the date of the transaction. Expenses are translated at average rates for the period. Gains and losses arising on translation or settlement of foreign currency denominated transactions or balances are included in the determination of income. Recent Accounting Pronouncements Our company has implemented all new accounting pronouncements that are in effect and that may impact our financial statements and we do not believe that there are any other new accounting pronouncements that have been issued that might have a material impact on our financial position or results of operations. Item 3. Quantitative and Qualitative Disclosure About Market Risk As a “smaller reporting company”, we are not required to provide the information required by this Item. Item 4. Controls and Procedures Evaluation of Disclosure Controls and Procedures We maintain disclosure controls and procedures, as defined in Rule 13a-15(e) promulgated under the Securities Exchange Act of 1934 (the "Exchange Act"), that are designed to ensure that information required to be disclosed by us in the reports that we file or submit under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the Securities and Exchange Commission's rules and forms and that such information is accumulated and communicated to our management, including our president (our principal executive officer) and our chief financial officer (principal financial officer and principal accounting officer), as appropriate to allow timely decisions regarding required disclosure. We carried out an evaluation, under the supervision and with the participation of our management, including our president (our principal executive officer) and our chief financial officer (principal financial officer and principal accounting officer), of the effectiveness of the design and operation of our disclosure controls and procedures as of quarter covered by this report. Based on the evaluation of these disclosure controls and procedures our president (our principal executive officer) and our chief financial officer (principal financial officer and principal accounting officer) concluded that our disclosure controls and procedures were not effective. Changes in Internal Controls During the quarter covered by this report there were no changes in our internal control over financial reporting that materially affected, or are reasonably likely to materially affect, our internal control over financial reporting. 23 Item 1. Legal Proceedings We know of no material, existing or pending legal proceedings against us, nor are we involved as a plaintiff in any material proceeding or pending litigation. There are no proceedings in which any of our directors, officers or affiliates, or any registered or beneficial shareholder, is an adverse party or has a material interest adverse to our company. Item 1A. Risk Factors As a “small reporting company”, we are not required to provide the information required by this Item. Item 2. Unregistered Sales of Equity Securities and Use of Proceeds Item 3. Defaults Upon Senior Securities Item 4. Mine Safety Disclosures Item 5. Other Information On July 24, 2014, we appointed Patrick C. Frankham and Hamid Doroudian as directors of our company and appointed Ahmad Doroudian, a current director, as president, chief executive officer and secretary. 24 Item 6. Exhibits Exhibit Number Description (3) Articles of Incorporation and Bylaws 3.1 Articles of Incorporation 649186 B.C. Ltd. (incorporated by reference from our Registration Statement on Form S-1 filed on August 7, 2009) 3.2 “Company Act” Memorandum of 649186 B.C. Ltd. Certificate of Amendment (incorporated by reference from our Registration Statement on Form S-1 filed on August 7, 2009) 3.3 Certificate of Filing of 649186 B.C. Ltd. (incorporated by reference from our Registration Statement on Form S-1 filed on August 7, 2009) 3.4 Certificate of Incorporation of 649186 B.C. Ltd. (incorporated by reference from our Registration Statement on Form S-1 filed on August 7, 2009) 3.5 Certificate of Name Change of 649186 B.C. Ltd. to Xerxes Health Corp. (incorporated by reference from our Registration Statement on Form S-1 filed on August 7, 2009) 3.6 Transition Application of Xerxes Health Corp. (incorporated by reference from our Registration Statement on Form S-1 filed on August 7, 2009) 3.7 Certificate of Name Change of Xerxes Health Corp. to Neurokine Pharmaceuticals Inc. (incorporated by reference from our Registration Statement on Form S-1 filed on August 7, 2009) 3.8 Notice of Alteration to Authorized Share Structure (incorporated by reference from our Registration Statement on Form S-1 filed on August 7, 2009) 3.9 Notice of Alteration to Authorized Share Structure (incorporated by reference from our Current Report on Form 8-K filed on June 4, 2014) (10) Material Contracts 10.1 Non-Exclusive License Agreement with Globe Laboratories Inc. dated June 17, 2008 (incorporated by reference to our Registration Statement on Form S-1/A filed on December 3, 2009) 10.2 Clinical Trial Services Agreement with Virtus Clinical Development (Pty) Limited dated March 1, 2009 (incorporated by reference to our Registration Statement on Form S-1/A filed on March 4, 2010) 10.3 Master Service Agreement with Northern Lipids Inc. dated October 2, 2007 (incorporated by reference to our Registration Statement on Form S-1/A filed on December 3, 2009) 10.4 Assignment of Invention (NK-001) dated January 30, 2008 (incorporated by reference to our Registration Statement on Form S-1/A filed on December 3, 2009) 10.5 Assignment of Invention (NK-002) dated April 18, 2008 (incorporated by reference to our Registration Statement on Form S-1/A filed on December 3, 2009) 10.6 Subscription Agreement with Ahmad Doroudian (incorporated by reference to our Form 8-K filed on August 12, 2010) 10.7 Debt Settlement Subscription Agreement dated September 26, 2013 with Ahmad Doroudian (incorporated by reference to our Quarterly Report on Form 10-Q filed on December 16, 2013) (31) Rule 13a-14(d)/15d-14(d) Certifications 31.1* Section 302 Certification under the Sarbanes-Oxley Act of 2002 of Hamid Doroudian 31.2* Section 302 Certification under the Sarbanes-Oxley Act of 2002 of Moira Ong (32) Section 1350 Certifications 32.1* Section 906 Certification under the Sarbanes-Oxley Act of 2002 of Hamid Doroudian 32.2* Section 906 Certification under the Sarbanes-Oxley Act of 2002 of Moira Ong 25 101** Interactive Data Files 101.INS 101.SCH 101.CAL 101.DEF 101.LAB 101.PRE XBRL Instance Document XBRL Taxonomy Extension Schema Document XBRL Taxonomy Extension Calculation Linkbase Document XBRL Taxonomy Extension Definition Linkbase Document XBRL Taxonomy Extension Label Linkbase Document XBRL Taxonomy Extension Presentation Linkbase Document * Filed herewith ** Furnished herewith. Pursuant to Rule 406T of Regulation S-T, the Interactive Data Files on Exhibit 101 hereto are deemed not filed or part of any registration statement or prospectus for purposes of Sections 11 or 12 of the Securities Act of 1933, are deemed not filed for purposes of Section 18 of the Securities and Exchange Act of 1934, and otherwise are not subject to liability under those sections. 26 SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. NEUROKINE PHARMACEUTICALS INC. (Registrant) Dated: September 15, 2014 /s/ Ahmad Doroudian President, Chief Executive Officer, Secretary and (Principal Executive Officer) Dated: /s/ Moira Ong Moira Ong Chief Financial Officer (Principal Financial Officer and Principal Accounting Officer) 27 |