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MANAGEMENT'S DISCUSSION AND ANALYSIS OF OPERATING RESULTS
AND FINANCIAL CONDITION OF AMORFIX LIFE SCIENCES LTD.

FOR THE YEARS AND THREE MONTHS ENDED
MARCH 31, 2011 AND 2010
The following information prepared as of June 28, 2011 should be read in conjunction
with Amorfix Life Sciences Ltd.'s (Amorfix or the Company) March 31, 2011 annual
audited financial statements and related notes which are prepared in accordance with
Canadian generally accepted accounting principles (GAAP) in Canadian dollars and the
Annual Information Form dated June 28, 2011.
Forward Looking Statements
This Management's Discussion and Analysis contains forward-looking statements about
the Company's business, financial condition, research and development and potential
future products, including without limitation, the costs of research and development
programs, and timing in achieving research and development and commercialization
milestones. Forward-looking statements can be identified by the use of forward-looking
terms such as "anticipate", "believe", "expect", "plan", "will," "can", "may," "could" or
"should" or comparable terms.
The Company's actual results could differ materially from those anticipated in these
forward-looking statements as a result of many factors, including, without limitation, the
need for extensive additional research and development, which is costly and time-
consuming and may not produce anticipated or useful results; scientific research and
development risks; intellectual property risks; partnership/strategic alliance risks; the
actions of competitors; the need for regulatory approvals such as FDA approvals, which
is not assured; product liability and insurance risks; the need for future human clinical
testing, the occurrence and success of which is not assured; changes in business strategy
or development plans; and the need for additional capital, which may not be obtained;
and the fact that the Company may not produce any products or if it does, that such
products may not be commercially successful.
By their nature, forward-looking statements involve numerous assumptions, inherent
risks and uncertainties, both general and specific, that could cause actual results and
experience to differ materially from the anticipated results or other expectations,
predictions, forecasts or projections expressed in such forward-looking statements.
Readers are cautioned not to place undue reliance on these forward-looking statements
and should review the "Risks and Uncertainties" below.
The Company
Amorfix is a product development company focused on therapeutic products and
diagnostic devices targeting misfolded protein diseases including ALS, cancers and
Alzheimer's disease.
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Amorfix has developed a key expertise in the field of protein misfolding with its ability
to identify regions on proteins that are unique in a diseased state and not in a normal
healthy state. These unique regions are called Disease Specific Epitopes
TM
(DSE) and are
selected by Amorfix due to their potential to provide for highly specific diagnostic
assessments as well as targets for potential therapeutic drug development.
Amorfix is developing diagnostic products with the goal of detecting the presence of
aggregated misfolded proteins (AMPs) in tissue, blood or other biofluids. Early
detection of people with neurodegenerative diseases or cancer has the potential to
significantly change the prognosis for these patients and allow for earlier application of
emerging therapies.
Amorfix technologies are also being used to develop antibody and vaccine therapies that
target Disease Specific Epitopes (DSEs) on disease-relevant proteins as an innovative
approach to treat these currently incurable disorders.
Recent scientific publications in the field of neurodegenerative diseases, such as
Alzheimer's disease (AD) and Parkinson's disease, have shown that misfolded proteins
can move from cell to cell in the nervous system. This opens the possibility that protein
misfolding diseases can be treated, and perhaps cured, by blocking the "propagation" of
protein misfolding in the space between cells. Amorfix initially developed its
immunotherapeutic approach to amyotrophic lateral sclerosis (ALS) based on the idea
that misfolded superoxide dismutase 1 (SOD1) propagates between cells, and can be
neutralized by antibodies and thereby stop disease progression. The Company was the
first to show antibodies and vaccines to DSEs on misfolded SOD1 could significantly
prolong the life of ALS model mice. Building on its growing expertise in this field, the
Company has recently expanded its focus to include misfolded proteins in cancer, using
its proprietary ProMISTM platform to predict protein misfolding and identify novel DSEs
to develop targeted therapeutics and companion diagnostics.

Development of New Therapies
ALS belongs to a family of fatal neurodegenerative diseases, which includes Alzheimer's
and Parkinson's diseases, and in which AMPs are thought to be a major pathway in the
progressive killing of brain cells. In ALS, also known as "Lou Gehrig's disease," muscles
throughout the body weaken and atrophy, due to degeneration of motor nerve cells that
supply them from the spinal cord and brain. Symptoms can start with limb weakness or
muscle twitching, stiffness and muscle cramps from ages 40 to 70 years. ALS is a fatal
disease in which half of affected people die within three years after diagnosis. The
protein that is believed to misfold and aggregate in the central nervous system of ALS
patients is called superoxide dismutase-1 (SOD1).
Amorfix's technology targets misfolded SOD1 through two approaches: a passive
infusion of manufactured monoclonal antibodies and an active immunization approach
designed to elicit the production of similar antibodies by the patient's own body.
Amorfix's technology is based on the premise that the misfolding and aggregation of
SOD1 is a principal agent in the death of neurons that occurs in ALS. Amorfix believes
that if misfolded SOD1 can be specifically recognized and its toxic activity neutralized
by antibodies, ALS can be effectively treated.
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Development History
In February and April 2006 in a series of agreements, the Company acquired certain
SOD1 technologies and exclusively licensed additional SOD1 technologies owned by Dr.
Neil Cashman, the Company's Chief Scientific Officer, and his co-inventors for
diagnostic and therapeutic applications for ALS disease. A research plan was established
to enable proof-of-concept studies to validate the Company's therapeutic approach to the
treatment of ALS and potential development partners were contacted.
In August 2006, the Company signed a research and investment agreement with Biogen
Idec MA (Biogen) which included an option for Biogen to license the exclusive
worldwide rights to certain Amorfix technology to develop and commercialize
therapeutic products directed against ALS. Over the following 28 months, Biogen
contributed US$750,000 (Cdn$860,207) in funding support for the ALS program through
subscriptions for 1,243,433 common shares of the Company in an initial investment and
three additional investment transactions made on the achievement of predefined research
milestones by Amorfix.
In July 2007, the Company achieved the first research milestone, the development of
DSE antibodies to misfolded SOD1. In October 2008, the Company achieved the second
research milestone; the DSE monoclonal antibody treatments demonstrated statistically
significant improvement in survival over controls in a mouse model of ALS. In
December 2008, the Company announced the achievement of the third research milestone
with the completion of the final study report. In February 2009, Biogen allowed its option
to license the SOD1 technologies for use in the treatment of ALS to lapse.
On July 14, 2010 the Company announced that it entered into a licensing agreement
granting Biogen exclusive worldwide rights to its lead ALS monoclonal antibodies.
Biogen Idec will now, at its expense, complete the development and prepare for clinical
trials. Under the agreement, Biogen will receive the exclusive worldwide license to
develop and commercialize Amorfix's DSE antibodies for ALS while Amorfix retains all
rights for vaccines and diagnostics. The Company received an up-front payment of US$1
million and is eligible to receive milestone payments and royalties on sales.
The licensed intellectual property includes DSE and antibodies arising from Amorfix's
discovery platform using the ProMISTM algorithm for prediction of DSEs on misfolded
proteins. This unique approach enables the identification of unique DSEs to be used for
the development of antibodies that recognize and inhibit only the misfolded protein
which forms in the disease, while allowing the normal protein to continue to function.
As vaccines have different development timelines and require special expertise compared
to the antibodies, Amorfix sought other partners to develop an ALS vaccine. On June 3,
2010, the Company and Pan-Provincial Vaccine Enterprise Inc. (PREVENT) of
Saskatoon, Saskatchewan, announced that they have entered into a licensing agreement
granting PREVENT exclusive worldwide rights to Amorfix's lead ALS vaccines. Under
the agreement, PREVENT will receive the exclusive worldwide license to develop
Amorfix's DSEs vaccines for the ALS field of use. Under the license terms, PREVENT
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will develop vaccine formulations, finish preclinical studies for regulatory approvals and
conduct clinical testing of the vaccines at their cost. Upon successful completion of Phase
I clinical trials both parties have an option to lead the commercialization process under a
cost-sharing and revenue-sharing arrangement which includes royalty payments. The
licensed intellectual property includes DSEs and vaccines arising from Amorfix's
discovery platform using the ProMISTM algorithm for prediction of DSEs on misfolded
proteins.
In November 2007, Amorfix announced the discovery of misfolded SOD1 protein in the
brains of people with AD. This breakthrough result suggested that SOD1 is a common
link between the two brain-wasting diseases, Alzheimer's and ALS. SOD1 has a "Jekyll-
and-Hyde" nature as it normally plays an important protective role in detoxifying free
radicals in the body, but when misfolded can create lethal oxidative free radicals.
In July 2008, the Company announced a research collaboration to develop Alzheimer's
treatments based upon the discovery of misfolded SOD1 protein in the brains of people
with AD. The research program includes preclinical efficacy studies for both antibody
treatments and vaccines and is being conducted in Dr. Cashman's laboratory at the Brain
Research Center at the University of British Columbia in collaboration with Amorfix
scientists, and is supported by a $227,500 grant from the Canadian Institutes for Health
Research (CIHR). The Company has completed its funding of its $540,000 cash and in-
kind contribution commitment to the program. The animal model studies for the research
project to develop both antibody and vaccines against misfolded SOD1 for the treatment
of AD have been completed and the result do not support continuing with this program.
Accordingly, the Company has stopped research on this program.
Amorfix's technology related to the role of SOD1 in ALS and Alzheimer's is covered by
patent applications including one recently published entitled, "Methods and
Compositions to treat and Detect Misfolded-SOD1 Mediated Diseases". The patent
applications relate to the methods and two compositions for treating and detecting
conditions, disease and disorders mediated by non-native SOD1. In December 2008,
Amorfix received its first issued patent from the U.S. Patent and Trademark Office titled
"ALS-Specific Peptide Composition". This patent covers one of the key disease specific
epitopes in the SOD1 "Jekyll and Hyde" protein which Amorfix has shown is exposed
when it misfolds and becomes toxic for nerve cells. Amorfix DSE antibodies bind to this
region and the Company believes neutralize the toxic effects of SOD1 giving the
longevity extension Amorfix has previously reported in animal models of ALS.

New Misfolded Protein Diagnostics and Therapeutics for the Treatment of Cancer

The Company has expanded its research and development program to identify novel
Disease Specific Epitopes (DSEs) on misfolded proteins that may be involved in cancer.
The Company licensed the exclusive rights to the ProMISTM target identification
technology from the University of British Columbia, to predict novel DSEs on the
molecular surface of misfolded proteins. ProMISTM is an "in silico" rational selection
approach that can be applied to any protein where the normal folding structure is at least
partially known and predicts how the protein will misfold. There are 57,000 such protein
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structures currently available in public databases. ProMIS TM has already been used to
identify potential DSE's on more than a dozen well validated target proteins likely to be
misfolded in cancer and the development of novel immunotherapeutics and companion
diagnostics for six of these targets has begun.
It is well established that protein misfolding is a central pathological event in many fatal
neurodegenerative diseases including AD, Parkinson's disease, and ALS. Recently,
intriguing evidence for a role of misfolded proteins in cancer has been identified. Studies
in our laboratories and others have confirmed this role and there is a growing body of
published literature on this topic providing further support for our scientific rationale.
The focus on misfolded proteins represents an entirely new approach to the identification
of cancer targets and may allow for the development of very selective therapeutics
offering greater efficacy and less toxicity.

Cancer cells are stressed by uncontrolled growth, rapid cell division and oxidative
damage which can induce protein misfolding, unfolding and partial loss of native protein
structure. In some cases, the ability of cancer cells to effectively evade the immune
system and continue to grow and spread throughout the body may depend on aberrant
signaling by incorrectly folded proteins. It appears that misfolded proteins are tolerated
more in cancer cells compared to normal cells where they are either refolded into their
proper configuration or discarded. Indirect evidence for the importance of protein
misfolding in cancer is derived from the demonstration of increased sensitivity of cancer
cells to proteasome inhibitors suggesting the production of a larger quantity of unfolded
or misfolded protein compared to normal cells. The selective targeting of cancer cells
based on expression of misfolded proteins represents an entirely new avenue for
therapeutic intervention.

The primary issues associated with the failure of new therapeutics in the clinic fall into
three general categories:
1.
The target selected for therapeutic intervention is not causal to the pathogenesis
of the disease.
2.
The drug being tested fails to effectively neutralize the disease target; and
3.
The drug has off target side effects that make it toxic and prevent its use at
therapeutic levels.

Amorfix's strategy to identify novel DSEs on well validated targets using the ProMIS
TM
technology may solve these problems and provides the Company with the opportunity to
produce highly selective and potent proprietary therapeutics with greater efficacy and
safety while greatly reducing the risk of failure.
Recent studies with a monoclonal antibody to a DSE site on one of the selected proteins
confirmed that the misfolded protein is present on cancer cells but not on normal cells.
The antibody targets a specific DSE region of the misfolded protein that is not present on
the normally folded protein. This new finding indicates that the antibody has potential to
be developed for both diagnostic uses and therapeutic treatments for several cancers. The
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Company is in the process of producing antibodies to these targets for further validation
and development.
Once a DSE region of a protein has been identified, Amorfix begins the process of
developing antibodies that recognize these DSEs. Antibodies that are generated are
screened and assessed for therapeutic and diagnostic use. The Company established three
strategic alliances to expand its capabilities to develop immunotherapeutics to numerous
proteins (Epitomics Inc., Aragen Bioscience Inc. and QED Bioscience Inc.) and is also
exploring partnerships with other companies to accelerate the development and expand
its program to other proteins of interest. These three alliances are all focused on the
development of antibodies for the treatment of cancer.
In May 2010, Amorfix entered into an agreement with Epitomics, Inc. to develop high-
affinity monoclonal antibodies against a number of DSE targets for cancer predicted by
Amorfix's proprietary ProMISTM computational platform discovery technology.
Epitomics, together with its partners, has successfully generated over a dozen humanized
therapeutic antibody drug leads targeting immune diseases and cancers using RabMAb®
technology and its proprietary Mutation Lineage Guided humanization technology.
On November 23, 2010, the Company, with Epitomics, announced that high affinity
antibodies to prion protein (PrP) disease DSEs have been produced, which bind
preferentially to several cancer primary cells and tumor cell lines, but not normal cells.
The Company has completed the initial evaluation of antibodies and selected a number of
them for further evaluation and characterization. The results of the initial studies show
that these antibodies bind to misfolded PrP which is expressed on the surface of tumor
cells but does not bind to normally folded PrP on normal cells. The Company is now in
the process of conducting additional binding studies for the selection of antibodies to be
tested in animal models of cancer. We expect to initiate the in vivo proof of concept
studies in the fourth quarter of this calendar year.
In May 2010, Amorfix entered into an agreement with Aragen BioScience, Inc. (Aragen)
to develop high affinity monoclonal antibodies (mAbs) against a number of targets for
cancer predicted by ProMISTM. Amorfix has identified several DSEs on misfolded Fas
receptor which is a well characterized target on cells that, when activated, causes
programmed cell death, or apoptosis. Previous attempts by others to use Fas receptor as a
therapeutic target for the development of new anti-cancer therapeutics have failed
because its expression and function lead to undesirable side effects on normal cells.
Using our ProMISTM technology, our goal is to identify DSEs on Fas receptor proteins
that will provide the required specificity for our mAbs to target and kill tumor cells while
leaving normal cells intact. Use of the Aragen technology did not produce antibodies of
the quality required for advancement into further studies and the collaboration with
Aragen has been terminated.
In June 2010, the Company entered into a third cancer antibody development agreement,
with QED Bioscience Inc. (QED). Under the agreement, QED will generate monoclonal
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antibodies against several DSEs on misfolded CD38 protein. CD38 is a well
characterized target on the surface of a variety of lymphoid tumors including multiple
myeloma, AIDS-related lymphomas and post-transplant lymphoproliferations and is part
of a complex network producing growth and survival signals to tumor cells. As such,
CD38 represents an attractive target for therapeutic intervention with a specific antibody
and can also be used as a prognostic marker which fits well into the Company's strategy
of developing companion diagnostics along with novel therapeutic antibodies. Use of the
QED technology resulted in a small number of potential antibodies that selectively bind
to one DSE on the CD38 receptor and not normal cells. The Company is in the process
of characterizing these antibodies in a variety of cellular assay systems. Antibodies
against the other two DSEs were not of sufficient quality to move forward with
characterization.
As a result of the success the Company has had with Epitomics in developing antibodies
to PrP DSEs, during the quarter ended December 31, 2010 the Company entered into
further agreements with Epitomics to develop high affinity monoclonal antibodies against
specific DSEs on misfolded Fas receptor proteins and misfolded CD38 proteins.
Epitomics will follow the same protocol for developing these antibodies as it has done for
the misfolded PrP proteins. The initial work to generate sufficient antibodies for testing
has been completed and the Company will soon be isolating and characterizing these in a
variety of systems to determine binding specificity on tumor and normal cells

Neurodegenerative Disesase

Early Diagnosis and Treatment
AD, ALS and Parkinson's disease are chronic neurodegenerative illnesses which are
associated with neural deposits of AMPs. These diseases are not thought to be infectious
and it is believed that their AMPs result from abnormal synthesis or metabolism of the
normal neural proteins. Currently, the only definitive diagnostic for these diseases is
post-mortem examination of brain tissue. There are currently approximately 5 million
people in North America with AD and an equal number with dementia who may be
suffering from AD but an accurate diagnosis is impossible due to the lack of a blood test.
A sensitive and specific diagnostic blood test could allow earlier treatment for AD
patients and would lead to the development of better therapies as patients could be
accurately screened into clinical drug trials. It is not known whether aggregated proteins
from these diseases are present in blood as there is no test currently that could detect
them. Worldwide there are 460 million people over the age of 65 who should be tested
annually for AD. There are an estimated 1.6 million people in North America with
Parkinson's disease and an estimated 33,000 people with ALS. The Company has the
potential to develop diagnostics and therapeutics for ALS and Parkinson's disease and
also to develop diagnostics for AD.
Development History
In January 2006, the Ontario Genomics Institute (OGI) committed $100,000 of funding
through the subscription of common shares and warrants to support the initiation of an
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Alzheimer's disease blood diagnostic research and development program incorporating
the EP platform. OGI invested $50,000 on signing the agreement and invested a further
$50,000 in September 2006 when Amorfix established the proof of concept of its Epitope
Protection technology using Abeta aggregates, the protein known to misfold and
aggregate in Alzheimer's disease. This achievement was validated by an expert scientific
panel convened by OGI that reviewed the Amorfix data.
On the strength of this data and the development plan, Amorfix was awarded an
Industrial Research Assistance Program (IRAP) grant from the Government of Canada in
December 2006. Amorfix received $265,912 of support over the two year term of the
grant under this IRAP program.
From December 2006 to March 2008, the Company initiated and progressed its AD
diagnostic assay development by screening and selecting monoclonal antibodies,
establishing a sample preparation protocol to enrich for the Abeta proteins, assessing
several different assay formats and optimizing the assay conditions. The Company
developed the assay using synthetic Abeta protein and subsequently demonstrated the
ability of the assay to detect Abeta aggregates from AD brain spiked into normal plasma.
In June 2008, the AD test achieved its target sensitivity in being able to detect aggregated
Abeta protein of 1 in 1,000,000 dilution of a 10% AD brain homogenate in a plasma
sample. At this level of sensitivity, the Amorfix test was not able to detect aggregated
Abeta in human blood plasma or cerebral spinal fluid samples. The Company then
assessed other potential commercial applications for this very sensitive aggregated Abeta
protein assay and identified a potential market to assay the brain tissue of human
transgenic AD mice to accelerate the assessment of drug efficacy in these models.
With funding from a second grant from the National Research Council Canada Industrial
Research Assistance Program (NRC-IRAP) of $50,000 in September 2009 and internal
funds, the Company continues development of an assay to measure Alzheimer's-related
Abeta in CSF and blood for screening patients into AD clinical trials, for early diagnosis
of the disease and monitoring of disease progression. The chronology of the
development plan includes validation of the test first in transgenic models of AD (mice,
rats), then non-transgenic animal models of AD (dog) leading to testing of human CSF
and plasma samples. Since June 2008, the AD test, now branded as the A
4
test (Amorfix
Aggregated Abeta Assay) has accomplished the following:
·
Reformatted the assay using internally generated antibodies and increased the
sensitivity of the assay.
·
Demonstrated the ability to detect aggregated Abeta in the brains of transgenic
AD mice and rats, dogs and humans.
·
In May 2010, the A
4
assay detected AD-associated aggregated Abeta in the blood
from a mouse model of AD. This achievement represents the first time that
aggregated ABeta has been measured in blood plasma from any animal model.
The A
4
assay detects both oligomeric and fibrillar aggregates of Abeta, which are
generally considered to be the toxic forms and major contributors to brain
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dysfunction in AD. The quantitative measurement of aggregated Abeta in plasma
was obtained using the A
4
on samples from Tg2576 transgenic mice as early as 3
months of age. The Tg2576 mouse is the most commonly used transgenic model
for preclinical evaluation of potential AD therapeutics. The aggregated Abeta
peptide was detected in the blood from transgenic mice, but not in blood from
non-transgenic age-matched control mice. This breakthrough will now allow
scientists to monitor levels of aggregated Abeta in the blood of individual AD
mice as they age and to detect the impact of treatments with novel AD
medications.
·
In collaboration with an AD drug developer, confirmed their results by showing a
drug effect on treatment of AD mice by verifying their novel drug's ability to
reduce aggregated Abeta formation in animal models of AD.
·
Demonstrated the A
4
assay can be used for the specific quantification of
aggregated Abeta 1-42 in tissue culture. This allows for high-throughput
screening for selection of lead compounds to use for pre-clinical AD trials in
animals.
·
On July 12, 2010 the Company announced that it has used its A
4
test to compare
the rate of accumulation of aggregated Abeta in the brain tissue of various mouse
models of AD. Amorfix presented this new data at the International Conference
on Alzheimer's Disease (ICAD 2010). The paper presented by Amorfix entitled
"Early Detection of Beta-Amyloid Aggregation in In Vivo and In Vitro Models of
Alzheimer's Disease" characterized seven different AD mouse models by
quantitatively measuring the Abeta aggregates in brain tissue from animals 1
month to 14 months of age.
·
On September 16, 2010, the Company announced that its A
4
test has been
validated by the publication of a research study, conducted by scientists at
ReMynd and Amorfix, in a peer-reviewed scientific publication. The Journal of
Alzheimer's Disease has published the research article entitled: Pathological
Hallmarks, Clinical Parallels, and Value for Drug Testing in Alzheimer's Disease
of the APP [V717I] London Transgenic Mouse. In this paper, among other
findings, the authors confirm the validity of the Amorfix A
4
test in detecting
aggregated Abeta, which is a neuropathological marker of the "APP London"
(APP-Ld) mouse model. The published data include A
4
analysis of the brains from
the APP-Ld mice to monitor accumulation of aggregated species of Abeta at ages
too young to analyze using conventional methods such as immunohistochemistry.
·
On October 21, 2010, the Company and Biotrofix, Inc., a contract research
organization specializing in pharmacology testing in small animal models of CNS
and vascular diseases, announced that they have successfully detected the
presence of the aggregated Abeta in the cerebral spinal fluid (CSF) from
transgenic mice using the Amorfix A4 test. The results come from a collaborative
study using the transgenic (Tg2576) mouse model of Alzheimer's disease (AD).
Following collection and analysis of CSF, plasma and brains from three month
old transgenic and normal mice, they successfully detected the presence of the
aggregated Abeta in the CSF from the transgenic mice, which correlated with the
signal detected in the brains and plasma. This is the first time the detection of
aggregated Abeta has been achieved in CSF from any mouse model. The
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Company has previously reported the quantitative detection of aggregated Abeta
in brains and plasma from AD animal models and these most recent results of
detection in CSF in mice at such a young age further increases the utility of the A
4
test.
·
On March 11, 2011, the Company presented a paper at the 10
th
International
Conference on Alzheimer's and Parkinson's Diseases in Barcelona. The paper,
entitled "Detection of -Amyloid Aggregates in CSF From Transgenic Animal
Models of Alzheimer´s Disease Using the Amorfix Aggregated Abeta Assay
(A4)", is the result of collaborations with reMYND NV, the Karolinska Institute,
and the University of Southern Denmark. The results of this study confirm the
results of previous work performed in collaboration with Biotrofix, Inc.

On the strength of its success with the detection of aggregated Abeta in the CSF of mouse
models the company proceeded to continue the research for the development of a human
assay for the detection of aggregated Abeta in CSF.

On October 07, 2010, the Company announced that it had accepted an invitation to
become a member of the Alzheimer's Disease Neuroimaging Initiative (ADNI). The
mission of ADNI is to establish and validate tests for brain images, as well as cerebral
spinal fluid and blood biomarkers, as predictors of AD. Membership in ADNI will
provide Amorfix access to leading research in the Alzheimer's field and access to human
clinical samples necessary to validate the its A
4
assay as a potential human diagnostic
test.

On January 07, 2011, the Company announced that it has detected a signal from
aggregated Abeta in human CSF as an important milestone in the development of the
human AD diagnostic. The samples tested were collected from AD patients and
compared with samples obtained from aged-matched control subjects. The data from
this study will be presented on July 17, 2011 at the Alzheimer's Association International
Conference on Alzheimer's disease to be held from July 16-21 in Paris, France. The
poster presentation entitled "Development of An Ultra Sensitive Assay for Detection of
Aggregated Beta Amyloid in Human CSF", will present preliminary data generated using
the Company's EP-AD Diagnostic CSF Test. This data demonstrates proof-of-concept
validation and suggests that this assay shows promise as a potential diagnostic biomarker
assay for Alzheimer's disease.

The Company continues to work towards increasing the sensitivity of the assay for
detection of the aggregated Abeta proteins and to optimize the assay procedures to
develop an accurate and robust assay that gives minimal false positives and negatives.
There are several aggregated proteins of interest which may have a role in the progression
of AD and we are directing our research and development efforts to create a diagnostic
test that will determine the levels of these aggregated proteins in the CSF of AD patients.
Quantification of these aggregated proteins along with measurements of monomeric
forms of the Abeta protein (non-aggregated) will be an important package of information
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for treating neurologists to aid in the accurate diagnosis of AD and initiate treatment as
soon as possible.
The Company believes its assay technology also has the potential to identify patients with
mild cognitive impairment (MCI) who may progress into Alzheimer's disease and will
be evaluating this potential once the current test is fully optimized.
Commercial Pre-clinical Services
The Company identified a pre-clinical commercial application for this very sensitive
aggregated Abeta protein assay to measure Abeta aggregates in the brain tissue of human
transgenic AD mice to assist in the assessment of drug efficacy in these models. Since the
A
4
assay can detect aggregated Abeta in animal brain tissue much earlier than
conventional methods, the Company believes that the A
4
test will accelerate the
development and evaluation of new treatments for AD. The Company recorded it first
sales for this service in fiscal 2010 and continues to build awareness of this service in the
AD research community through direct marketing, conferences, partnerships with other
AD contact research companies, engagement of leading AD researchers in collaborative
studies and word of mouth from satisfied customers. The Company expects to grow its
revenue by sourcing new customers and growing the business from existing customers as
the test is integrated into their standard testing protocols. The Company estimates the
potential market for this service to be up to 50,000 tests per year.
On July 6, 2010 the Company announced that it had entered into a partnership agreement
with reMYND NV, a drug developer and contract research organization, to offer
Amorfix's A
4
amyloid testing service to reMYND's contract research clients. reMYND's
contract research business offers an extensive portfolio of preclinical in-vivo efficacy,
pharmacokinetic and safety testing of experimental Alzheimer therapies using proprietary
mouse models of Alzheimer's disease.
Development of New Diagnostic Tests
The Company believes that its expertise in the development of highly sensitive and
specific diagnostic tests can be applied to the benefit of other potential biomarkers. In
early fiscal 2010, the Company announced a collaboration with BioMosaics Inc., a
privately-held cancer biomarker development company, to develop and commercialize a
blood-based assay for the early detection of hepatocellular carcinoma (HCC) or primary
liver cancer. The Company is developing an assay incorporating the existing technology
for the blood test licensed to BioMosaics, plus new material from the Sunnybrook
Research Institute needed to improve the test. The Company will receive royalties on
commercial product sales, and an option to manufacture the assay kits and reagents for
global distribution. BioMosaics is responsible for product commercialization. This
project is funded by an "Intellectual Property Development and Commercialization
Program" investment of $280,000 from the Ontario Institute for Cancer Research (OICR)
to the Sunnybrook Research Institute. To December 31, 2010, the Company has received
funding of $154,348 out of the $200,000 it is eligible to receive. The research program
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funded by the OICR grant is now completed and the prototype assay has been transferred
to BioMosaics for clinical testing and commercialization.
HCC is the fifth most common cancer in the world, with approximately 600,000 new
cases every year. It is the third most common cause of cancer-related death. Early
detection could significantly improve treatment outcomes.
In December 2009, the Company completed the development of a prototype test and
started testing clinical samples to determine sensitivity and specificity. A key issue is the
ability to differentiate between cirrhosis, hepatitis and HCC. Testing of the prototype
assay yielded results which met the specificity and sensitivity criteria set forth in the
research agreement. In the quarter ended September 30, 2010, the Company completed
the technology transfer of the prototype assay it developed to BioMosaics who will
continue the development and subsequent commercialization. Amorfix maintains the
rights to royalties to commercial product sales.
BioMosaics has started the initial evaluation of the diagnostic test with human blood
samples from patients with HCC. While preliminary results from studies completed to
date are promising, further refinement of the assay test procedure is desired to improve
clinical utility of the test. In addition, BioMosaics plans to begin characterization of
sample handling and preparation procedures to optimize the diagnostic sensitivity and
specificity of the immunoassay. Subsequent studies with clinical samples has
demonstrated that this assay system is not capable of identifying patients with early liver
cancer and, therefore, additional development is required prior to commercialization of
the assay.
Protecting the Blood Supply
From late 2005 to June 2010 the Company was actively engaged in a research program to
develop and commercialize an assay that could screen blood for vCJD. Conventional
scientific methods to date have been unable to adequately address a fundamental problem
in the detection of AMPs in blood which is the presence of the normal protein at a
million-fold higher relative concentration to the misfolded protein. The Company's EP
platform technology specifically addressed this issue by chemically modifying the normal
proteins while protecting the misfolded aggregates.
The Company was successful in developing the most sensitive and specific assay to
detect spiked prions in human plasma, however the test did not yield positive results in
plasma from the small samples of human vCJD that were made available for testing. The
Company has reached an impasse until scientific understanding improves or more vCJD
patient blood is available. In June 2010, the Company suspended the commercialization
of the vCJD blood screening test allowing a more focussed effort on its other research
programs. Future research may prompt re-evaluation of this assessment.
Development History
In late 2005, the United Kingdom National vCJD Surveillance Unit and National Institute
for Biological Standards and Control (NIBSC) released a series of steps that a blood test
for vCJD must pass in order to be accepted. Amorfix entered into this process and from
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13
January 2006 to June 2010 the Company advanced its vCJD prion detection assay
towards commercialization. Over this period, the Company developed a very robust and
highly sensitive and specific assay for the detection of spiked prions in human plasma
and completed multiple product validation steps and was awarded by the UK National
Health Service (NHS) a supply contract for its vCJD blood screening assay that the NHS
could use when it was prepared to initiate a blood screening program for vCJD.
In December 2009, following the success it had in detecting spiked prions in human
plasma, the Company announced that NIBSC provided three plasma samples from three
different vCJD patients which the Company tested using the first generation of the EP-
vCJD test. Amorfix was the first Company to have received plasma from NIBSC's
limited supply of samples of plasma from vCDJ patients. The samples tested negative
and the UK authorities concluded that Amorfix's first generation test was not sufficiently
sensitive to detect infected human blood samples.
During the third and fourth quarter of 2010, the Company continued development
activities to improve the sensitivity of its EP-vCJD
TM
blood screening test. In May 2010,
the Company announced that it was successful in developing versions 2 and 3 of the test,
both four times more sensitive than the first version which underwent testing with vCJD
patient blood in December 2009. The Company obtained a rare blood sample from a
person in the clinical phase of vCJD and used the new versions of the EP-vCJD tests to
test this sample. It was scored negative by both versions of the test and the Company
made the decision to suspend further research and commercialization of the vCJD blood
screening test.

Protecting the Food Supply
The Company applied its EP technology and developed an assay to detect sheep scrapie.
During 2008, Amorfix adapted its vCJD blood screening assay to detect endogenous
prions in symptomatic sheep and in the first quarter of fiscal 2009 detected endogenous
prions in presymptomatic sheep. Current ante-mortem testing methods for sheep scrapie
are not commercializable at scale and may not be accurate enough for broad application
where a simple blood test could be adopted quickly and easily.
The Company's analysis of the market opportunity for a scrapie test suggests scrapie
must be recognized as a public health issue before it would be widely used to eliminate
scrapie-infected sheep. Accordingly, the Company has focused its resources on projects
with greater market potential at this time and will consider further development with a
partner or at a time that scrapie becomes a human health concern.
Antibodies
In October 2009, the Company announced that it has signed an agreement with Cedarlane
Laboratories Limited, a leading supplier of antibodies and other research reagents, for the
sale and distribution of certain Amorfix antibodies and reagents for research purposes
only.
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Annual Results of Operations
Since inception, the Company has incurred losses while advancing the research and
development of its diagnostic and therapeutic technologies. The net loss for the year
ended March 31, 2011 was $3,330,437 compared to $4,857,038 for the year ended March
31, 2010. The decreased net loss in the year ended March 31, 2011 resulted mainly from
the US$1,000,000 non-refundable license fee revenue recorded in the three months ended
September 30, 2010 and lower salary and program expenses associated with the decision
to suspend the Company's vCJD program.
For the year ended March 31, 2011, revenue from license fees was $1,030,600 compared
to $nil for the comparable period. The Company entered into a license agreement with
Biogen Idec MA (Biogen) in July 2010 and received a US$1,000,000 non-refundable fee.
The Company has no significant remaining obligations to Biogen under the terms of the
agreement. For the year ended March 31, 2011 revenue for services and sales was
$119,900, as compared to $45,516 in the comparative period. Substantially all of this
revenue was for the Company's A
4
test which the Company began marketing in the third
quarter of fiscal 2010.
For the year ended March 31, 2011, interest revenue was $45,666 compared to $134,063
for the year ended March 31, 2010. The decrease was due mostly to lower holdings in
marketable securities in the current period than in the comparable period.
Research and development expenditures for the year ended March 31, 2011 were
$3,156,835 compared to $3,686,663 in the comparable period. Salaries and personnel-
related expenses decreased by $379,543 to $2,157,151 for the year ended March 31, 2011
due mainly to lower stock-based compensation expense and lower employee related
expenses. Severance costs incurred in June 2010 associated with the decision to suspend
commercialization of the Company's vCJD program were offset by lower salaries
expense for the balance of the fiscal year. Research and development program expenses
decreased by $351,204 to $1,244,362 in the year ended March 31, 2011 due mainly to the
suspension of the vCJD and AD therapeutic programs offset by higher expenses for both
the AD diagnostic and ProMIS programs. Investment tax credits and federal and
provincial grants recorded for the year ended March 31, 2011 were $244,678 compared
to $445,597 in the prior year.
General and administrative costs for the year ended March 31, 2011 were $1,163,329
compared to $1,192,257 in the comparable period. The decrease for the year ended
March 31, 2011 resulted mainly from lower stock-based compensation expense partially
offset by severance costs and higher consulting fees.
Amortization expense for the year ended March 31, 2011 was $206,439 compared to
$157,427 in the comparable period. The increase in amortization expense in the year
ended March 31, 2011 was due mainly to accelerated amortization recorded as a result of
some leaseholds and laboratory equipment being no longer in use, primarily related to the
suspension of the vCJD program.
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Results of Operations ­ Fourth Quarter 2011 and 2010
The net loss for the three months ended March 31, 2011 was $784,549 compared to
$1,249,460 for the three months ended March 31, 2010. The decreased net loss year-
over-year resulted mainly from lower expenses associated with the decision to suspend
commercialization of the Company's vCJD program in June 2010.
For the three months ended March 31, 2011 revenue for services and sales was $24,953,
as compared to $605 in the comparative period. Substantially all of this revenue was for
the Company's A
4
test which the Company began marketing in the third quarter of fiscal
2010.
For the three months ended March 31, 2011, interest revenue was $3,862 compared to
$27,994 for the three months ended March 31, 2010.
Research and development expenditures for the three months ended March 31, 2011 were
$575,474 compared to $891,991 in the comparable period. Salaries and personnel-related
expenses decreased by $339,594 to $320,208 for the three months ended March 31, 2011
due mainly to lower staffing associated with the decision to suspend commercialization
of the Company's vCJD program in June 2010 and lower stock-based compensation.
Research and development program expenses decreased by $99,997 to $296,844 in the
three months ended March 31, 2011 due mainly to the suspension of the vCJD and AD
therapeutic programs offset by higher expenses for both the AD diagnostic and ProMIS
programs. Investment tax credits and federal and provincial grants recorded for the three
months ended March 31, 2011 were $41,578 compared to $164,652 in the prior year
period.
General and administrative costs for the three months ended March 31, 2011 were
$216,506 compared to $347,867 in the comparable prior year period. The decrease for the
three months ended March 31, 2011 resulted mainly from lower stock-based
compensation expense.
Amortization expense for the three months ended March 31, 2011 was $21,384 compared
to $38,201 in the comparable period.
Liquidity and Capital Resources
Amorfix is a development stage company as it has earned minimal recurring revenues to
date and does not expect to have significant revenues until it is able to sell its product
candidates after obtaining applicable regulatory approvals or it establishes collaborations
that provide funding, such as licensing fees, milestone payments, royalties, research
funding or otherwise. Operations have been financed since inception through the sale of
equity securities and the conversion of common share purchase warrants and stock
options. The Company's objectives, when managing capital, are to ensure there are
sufficient funds available to carry out its research, development and commercialization
programs. Once funds have been raised, the Company manages its liquidity risk by
investing in highly liquid corporate and government bonds with staggered maturities to
provide regular cash flow for current operations. The Company does not hold any asset-
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16
backed commercial paper and its cash and cash equivalents are not subject to any external
restrictions. The Company also manages liquidity risk by continuously monitoring actual
and projected cash flows. The Board of Directors reviews and approves the Company's
operating and capital budgets, as well as any material transactions not in the ordinary
course of business. The majority of the Company's accounts payable and accrued
liabilities have maturities of less than three months.
On February 28, 2011 the Company completed a non-brokered private placement through
the issuance of 1,470,586 common shares at a price of $0.34 per common share for gross
proceeds of $500,000 ($472,233 net of share issuance costs).
On March 11, 2011, the Company announced that it had entered into an agreement with
the investment banking firm Loewen, Ondaatje, McCutcheon, Limited (LOM)
to undertake an offering of up to $2.5 million in units (Units) on a private placement
basis, each unit being offered at a price of $0.35 per Unit and to consist of one common
share and one-half of one common share purchase warrant. The Company has
terminated this placement offering. The Company is actively pursuing financing
alternatives.
The Company incurred a loss of $3,330,437 for the year ended March 31, 2011 and has a
deficit of $27,089,361 as at March 31, 2011. These circumstances may cast significant
doubt as to the ability of the Company to continue as a going concern. Management
projects that the Company's current working capital of $2,270,470 is sufficient to fund its
operations through to the end of December 2011. The Company is actively pursuing
financing alternatives, but there is no assurance that these initiatives will be successful,
timely or sufficient. Consequently, the Company's ability to continue as a going concern
beyond that point is dependent on its ability to generate revenues from its products or
secure additional financing in order to continue its research and development activities
either on its own or with partners.
The Company measures cash burn as the net cash used in operations which was
$2,246,430 for the year ended March 31, 2011 as compared to $4,033,505 for the year
ended March 31, 2010. The reduced cash burn was due primarily to the US$1,000,000
non-refundable license fee received from Biogen as well as lower research and
development expenses in the current period associated with the decision to suspend
commercialization of the Company's vCJD program.
During the year ended March 31, 2011, the Company purchased $21,122, of property and
equipment compared to $11,595 in the comparable period last year. Property and
equipment is used primarily for research and development purposes.
Amorfix's working capital requirements may fluctuate in future periods depending on
numerous factors, including: results of research and development activities; progress or
lack of progress in our diagnostic or therapeutic research and development programs,
preclinical studies or clinical testing; the ability to establish corporate collaborations and
licensing agreements; the Company's ability to access research and development funding
and/or equity financing; changes in the focus, direction, or costs of research and
development programs; the costs involved in preparing, filing, prosecuting, maintaining,
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defending and enforcing patent claims; competitive and technological advances; the
potential need to develop, acquire or license new technologies and products; new
regulatory requirements implemented by applicable regulatory authorities; the timing and
outcome of the regulatory review process; or commercialization activities, if any.
Financial Instruments
Financial instruments consist of cash and cash equivalents, marketable securities,
amounts receivable, and accounts payable and accrued liabilities. The Company's cash
and cash equivalents and marketable securities are used to fund research activities and
administrative overhead. Investment decisions are made in accordance with an
investment policy that establishes guidelines for investment eligibility, credit quality,
liquidity and foreign currency exposure.
The Company manages its exposure to credit loss and liquidity risk by placing its cash
with major financial institutions and investing in high-quality government and corporate
issuers with low credit risk. The Company invests in commercial paper with a Dominion
Bond Rating Service (DBRS) rating of R-1 Low or higher, or equivalent Standard &
Poor's (S&P) or Moody's Investor Service (Moody's) rating. The Company invests in
government and corporate bonds with a DBRS rating of A- or higher, or equivalent S&P
or Moody's rating. The Company does not hold any asset-backed commercial paper.
Cash and cash equivalents held by the Company are not subject to any external
restrictions.
The Company is exposed to interest rate risk arising from fluctuations in interest rates on
its cash and cash equivalents and marketable securities and to foreign exchange risk on its
holdings of US dollar denominated cash and cash equivalents and marketable securities.
The Company manages its interest rate risk by holding its investments to maturity, where
possible. The Company manages its exposure to currency fluctuations by holding cash
and cash equivalents and marketable securities denominated in US dollars in amounts
approximating current US dollar financial liabilities and US dollar planned expenditures.
As at March 31, 2011 the Company held US dollar denominated cash and cash
equivalents in the amount of US$849,550.
The Company earns interest revenue from its cash, cash equivalents and marketable
securities. The Company considers all cash and cash equivalents as held-for-trading. As
at March 31, 2011, cash and cash equivalents consisted of cash on deposit and short-term
debt instruments. The Company's marketable securities are all considered as available-
for-sale and are carried at fair value with unrealized gains and losses included in other
comprehensive income (OCI) until realized, when the cumulative gain or loss is recorded
in the statement of operations. For the year March 31, 2011 the Company recorded a
$15,423 unrealized loss on marketable securities.
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Critical Accounting Estimates

Equity based instruments
The Company used the Black-Scholes and similar barrier option pricing models to value
common share purchase warrants and stock options issued by the Company. These
pricing models require the use of several variables involving assumptions including the
price volatility of the Company's stock over a relevant timeframe, the expected life of the
warrant or option, a relevant risk-free interest rate and the Company's future dividend
policy. Changes in the assumptions used can have a significant impact on the values
determined. Management has selected these variables and applied the valuation models
on a consistent basis.
Income tax valuation allowance
The Company has a net tax benefit resulting from non-capital losses carried forward, and
pools of scientific research and experimental development expenditures and investment
tax credits. In view of the history of net losses incurred, management has recorded a full
valuation allowance against these future income tax assets.
Accounting Changes and New Pronouncements

In fiscal 2011, the company adopted a revenue recognition policy for non-refundable
license fees as a result of its license agreement with Biogen Idec. Non-refundable license
fees are recognized as revenue when the Company has no further involvement or
obligation to perform services under the arrangement, the fee is fixed or determinable and
collection of the amount is reasonably assured.

The Accounting Standards Board of Canada has announced that public companies in
Canada are to adopt International Financial Reporting Standards (IFRS) for fiscal years
beginning on or after January 1, 2011. The Company is required to prepare its first
financial statements that are compliant with IFRS for the interim period ending June 30,
2011. The Company's plan considers the impact that IFRS has on its accounting policies
and implementation decisions, financial statement presentation and disclosure options
available on initial changeover to IFRS, information technology and data systems, and
internal control over financial reporting.

The Acting Chief Financial Officer manages the Company's IFRS convergence project
with assistance from an external consultant with financial reporting expertise. The
Company is small and has a simple corporate structure with no subsidiaries or foreign
operations. The Company's compensation plans are not based on Canadian GAAP
measurements. For these reasons there is not a need to have a cross functional team of
human resources and information technology professionals.
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19
The following table summarizes the Company's changeover plan and progress to date.
This information reflects management's most recent assumptions and expectations;
however, changes to IFRS or the Company's activities may change these assumptions or
expectations.

Key Activities
Timeline/Progress to Date
Accounting policies and financial
reporting
Identify applicable differences between
IFRS and current Canadian GAAP
accounting practices
Identification of IFRS differences affecting
the Company is substantially complete,
pending future IFRS changes released by
the IASB.
Finalize accounting policy choices and
assess elective options under IFRS 1 First
Time Adoption
Initial accounting policy choices and
applicable elective options under IFRS 1
have been identified and been presented to
the Audit Committee
Quantify impact of changeover on opening
balance sheet
The opening balance sheet adjustments are
in the process of being quantified and this
process is expected to be completed by June
30, 2011.
Information technology and data
systems
Evaluate accounting system for changes
related to the adoption of IFRS
This assessment has been completed. No
system changes will be required to the
Company's accounting system.
Internal controls over financial
reporting
Approval of accounting policy choices and
initial IFRS 1 elections
Initial accounting policy choices have been
reviewed for all significant accounting
policies and applicable elective options
under IFRS 1 are completed.
Design, implement and test controls over
IFRS data
The Company has designed the processes
required to be compliant with the IFRS
standards and is currently implementing
these changes.
Disclosure controls and procedures
Review and approval of IFRS disclosures
Review and approval of ongoing IFRS
disclosures is part of the current disclosure
approval process
Expertise and training
Technical review of IFRS standards, IFRS
1 elections and policy choices
Senior finance personnel have attended
external IFRS training sessions, participated
in web training sessions and have received
continuous communication from third
parties including accounting service
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20
providers and IASB's IFRS website.
The Company's external auditors have
provided guidance to the Audit Committee
and Management on IFRS standards of
significance to the Company and with
recommendations on managing the balance
of the project.

Impact to Accounting Policies

The Company has determined that most of the differences between IFRS and Canadian
GAAP will not have a material impact on the on the Company's operations or financial
results. The adoption of the following IFRS standards is expected to have an impact on
the financial results of the Company or its accounting processes:

IFRS 1 ­ First-time adoption of IFRS
To comply with IFRS, all changes to the Company's accounting policies must be adopted
on a retrospective basis with the cumulative impact to the statement of operations and
loss recorded as an adjustment to opening deficit (April 1, 2010). IFRS 1 provides
companies in their first year of adoption certain optional exemptions from retrospective
application and some mandatory exceptions from retrospective application of IFRS. The
following elections and exemptions are applicable to the Company:
·
Share-based payments. This exemption allows first-time adopters to not apply
IFRS 2 ­ Share-based payments to equity instruments that were granted after
November 7, 2002 that had not vested prior to the transition date of April 1, 2010.
The Company will not take this exemption. .
·
Business Combinations. This exemption allows first-time adopters to adopt IFRS
3 ­ Business Combinations
standard on a retrospective or prospective basis. The
Company will elect to prospectively apply the standard such that the transaction
to record the reverse takeover of Luxor 2005, the Company's only business
combination, will not be restated, should the exemption apply to this transaction.
The company is currently evaluating the accounting for this transaction under
IFRS.
·
Fair value or revaluation as deemed cost. This exemption allows a first-time
adopter to revalue its property, plant and equipment at fair value at the date of
transition, April 1, 2010, and use this fair value as the deemed cost. The
Company will not make this election.
·
IFRS 1 ­ Mandatory Exceptions. The IFRS 1 standard requires first time adopters
to continue to use its Canadian GAAP estimates under IFRS.
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21
IFRS 2 ­ Share-based payment

There are three changes that the Company will be required to make to its current stock-
based compensation policy.
·
Under Canadian GAAP, entities have a choice of recognizing stock-based
compensation for options that vest in instalments (graded vesting) on a straight-
line over the life of all instalments or on an accelerated basis, whereby each
instalment is considered a separate grant. The Company adopted the policy of
recognizing the expense on a straight-line basis. IFRS 2 does not allow straight-
line recognition and the Company will be required to use the accelerated basis.
The Company is currently evaluating the impact of this adjustment on its opening
balance sheet at the date of transition.
·
Under Canadian GAAP, entities have a choice of recording stock-option
forfeitures as they occur, or recording an estimate of forfeitures. The Company
adopted the policy of recording forfeitures as they occurred. IFRS 2 requires
companies estimate forfeitures and the Company will be required to change its
policy. The Company has assessed that the impact of this adjustment is not
material due to the low level of forfeitures.
·
Under Canadian GAAP, some consultants were considered non-employees by
definition. Stock-based compensation for these consultants was determined by
estimating the value of the options over the service period and revaluing each
quarter end until vesting had occurred, in accordance with the guidance for
awards issued to non-employees. Under IFRS, the employee definition is broader
and as a result, certain consultants previously considered non-employees are now
considered employees under IFRS as they are managed similarly to employees
and perform services similar to those of employees. The Company is currently
evaluating the impact of this adjustment.

The changes related to the graded vesting feature in options and the requirement to
estimate forfeitures affect the timing of expense recognition, but will not change the total
stock-based compensation recorded for an option grant at the point of vesting or
forfeiture.

IAS 36 ­ Impairment of Assets

There are several differences between Canadian GAAP and IFRS for determining
impairment of non-financial assets.
·
Under Canadian GAAP, impairment of non-financial assets is calculated at the
asset group level, whereas under IFRS, impairment is calculated at the cash
generating unit (CGU) which is a lower level than would be considered under
Canadian GAAP. A CGU is the smallest identifiable group of assets that
generates cash inflows that are largely independent of cash inflows from other
assets.
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22
·
Under IFRS, the test for impairment of non-financial assets is calculated using
discounted cash flows. Under Canadian GAAP, impairment is first calculated
using non-discounted cash flows, and only if the test indicates impairment, a
second test using discounted cash flows is then used.
·
Under IFRS, an entity can reverse a previously recorded impairment provision if
there has been a change in the estimates used to determine the assets recoverable
amount. This reversal is not allowed under Canadian GAAP.
The Company has established CGUs for its non-financial assets and does not expect to
record any impairment upon adoption of this standard at the transition date of April 1,
2010.

IAS 21 ­ The Effects of Changes in Foreign Exchange

Under Canadian GAAP, unrealized foreign exchange gains and losses on available for
sale financial instruments are recorded in Other Comprehensive Income. Under IFRS,
the unrealized foreign exchange gains and losses are included in the determination of net
income or loss from operations. This difference will not have a significant impact on the
financial results as the Company currently holds minimal foreign investments classified
as available for sale.

Impact to Presentation and Disclosure
IAS 1, Presentation of Financial Statements
The Company will be required to group its expenses on the statement of operations using
a classification system based on nature or function. The Company will be presenting its
expenses by function and, as a result, will reclassify depreciation expense into research
and development expenses. Disclosure of expenses by nature will be included in the
notes to the financial statements.
IAS 24, Related Party Disclosures
Under IAS 24, an entity must disclose key management and board member compensation
in total and analyzed by component. Comprehensive disclosures of related party
transactions are required for each category of related party relationship. These
disclosures are not required under Canadian GAAP.

In addition to the above changes, other IFRS standards require expanded disclosure as
compared to Canadian GAAP. The Company will comply with these additional
requirements.
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Outstanding Share Data
The authorized capital of the Company consists of an unlimited number of common
shares and an unlimited number of preferred shares. No preferred shares have been issued
to date.
The following table reflects the activity of the Company's common shares for the year
ended March 31, 2011 and to the date of this Management's Discussion and Analysis:
#
of
Shares
Outstanding April 1, 2010
48,514,418
Issued upon exercise of DSU
546,384
Issued in equity financing
1,470,586
Issued in relation to a severance agreement
78,571
Outstanding March 31 and June 28, 2011
50,609,959

Warrants
The following tables reflect the activity of the warrants for the year ended March 31,
2011 and to the date of this Management's Discussion and Analysis, and reflect the
potential cash proceeds to the Company on exercise of these instruments:
Common share
Common share
Purchase Warrants
Purchase Warrants
Exercise price
$1.00
$0.68
Expiry date
April 29, 2011
April 29, 2011
#
$
#
$
Opening balance, April 1, 2010
2,302,275
2,302,275
148,140 100,735
Issued
-
-
-
-
Exercised or Expired
-
-
-
-
Closing balance, March 31, 2011
2,302,275
2,302,275
148,140 100,735
Expired (2,302,275)
(2,302,275)
(148,140)
(100,735)
Closing balance, June 28, 2011
-
-
-
-

Stock Options

The following table reflects the activity under the Company's stock option plan for the
year ended March 31, 2011 and to the date of this Management's Discussion and
Analysis:
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24
#
Options
Weighted Average
Exercise Price
Outstanding April 1, 2010
5,198,042
$ 0.98
Issued 892,500
$
0.36
Expired (1,300,417)
$
0.81
Outstanding March 31, 2011
4,790,125
$ 0.98
Expired (903,500)
$1.01
Outstanding June 28, 2011
3,886,625
$0.88
Exercisable June 28, 2011
3,410,249
$0.94
Deferred Share Unit (DSU) Plan
The following table reflects the activity under the Company's DSU plan for the year
ended March 31, 2011 and to the date of this Management's Discussion and Analysis:
#
Units
Outstanding April 1, 2010
610,092
Redeemed (546,384)
Outstanding March 31 and June 28, 2011
63,708
Selected Annual Financial Information
Year ended
Year ended
Year ended
Key Financial Indicators
March 31, 2011 March 31, 2010
March 31, 2009
Revenue and interest earned
$1,196,166
$179,579
$244,499
Expense - research and development
$3,156,835
$3,686,663
$4,126,945
Expense - general and administrative
$1,163,329
$1,192,527
$1,040,468
Net loss
($3,330,437)
($4,857,038)
($5,148,133)
Net loss per common share
($0.07)
($0.10)
($0.12)
Working capital
$2,270,470
$4,444,749
$4,458,065
Cash flow used in operations
($2,246,340)
($4,033,505)
($4,130,597)
Total assets
$3,009,012
$5,408,724
$5,517,184
Net cash proceeds from equity financing
$472,233
$3,719,773
$272,622
Weighted average common shares outstanding
48,795,401
47,711,070
41,985,488
Quarterly Selected Financial Information
The following tables sets out selected financial information for the Company for the
preceding eight quarters. The increased net loss in first quarter of fiscal 2011 is due
mainly to one-time severance costs associated with the decision to suspend
commercialization of its vCJD program. The higher revenue and lower net loss in the
second quarter of fiscal 2011 results mainly from the non-refundable license fee revenue
recorded in the period. The decreased net loss in the third and fourth quarters as
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25
compared to the first quarter and prior fiscal year reflects reduced ongoing expenditures
as result of the downsizing in the first quarter of 2011.
2011
2010
4th
3rd
2nd 1st 4th 3rd 2nd 1st
Quarter
Quarter
Quarter
Quarter
Quarter Quarter Quarter Quarter
Revenue and
Interest earned
$28,815
$18,826 $1,105,117
$43,408
$28,599
$71,381
$38,315
$41,284
Net
loss
($784,549) ($795,415) ($25,728) ($1,724,745) ($1,249,460) ($1,149,932) ($1,286,905) ($1,170,741)
Net loss per
common
share ($0.02)
($0.02)
($0.00) ($0.04) ($0.03) ($0.02) ($0.03) ($0.03)

Contractual Arrangements and Commitments
In February 2009, the Company entered into an agreement with the University of
British Columbia (UBC) to further the development of and to commercialize
technology developed in part by Dr. Cashman that may predict DSE regions on
proteins. Under the agreement, the Company is committed to make milestone payments
up to $1,400,000 per product developed using this technology based on the successful
outcomes of predefined clinical and regulatory outcomes, and to make royalty payments
to UBC based on revenue earned from the licensed technology. A minimum annual
royalty payment of $25,000 per calendar year is payable after 2011.
Under the terms of a contribution agreement with the National Research Council Canada
under the Industrial Research Assistance Program (IRAP), the Company received a grant
to support research on its Alzheimer's disease diagnostic test. In certain limited
circumstances, including where the Company exports control of this technology out of
Canada through sale or licence, the Company may be required to repay up to two times
the amount of the IRAP grant received. The Company received $265,912 in funding and
has not recorded any liability for this contingent repayment.
In October 2010, the company joined a third party research initiative, the Alzheimer's
Disease Neurimaging Initiative Continuation (ADNI) with the Foundation for the
National Institute of Health and in support thereof, has committed to payments of
$25,000 each year over the next four years.
The Company has committed to fund $70,000 to UBC to fund a research program, with
Dr. Neil Cashman as principal investigator, related to one of the company's research and
development programs. No amounts have been paid as at March 31, 2011.
The Company is committed to the following payments under the terms of its lease
agreements for the years ending March 31,


On termination of the lease for its Mississauga, Ontario premises, the landlord, at its
option, may require the company to convert some or all of the leased premises to
$
2012
229,300
2013 134,500
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26
warehouse space. No liability has been recognized because the fair value of the cost of
converting the premises cannot be reasonably estimated due to uncertainty about the
likelihood and timing of the landlord exercising its option and the extent of the possible
conversion to warehouse space if the option is exercised.
Related Party Transactions
During fiscal 2009 and 2010, the Company entered into three agreements with the
University of British Columbia (UBC), with Dr. Neil Cashman, an officer of the
Company, as principal investigator, to fund research related to the Company's research
and development programs in the amount of $749,799. During the nine months ended
December 31, 2010, the final $87,710 was paid to UBC. The Company has no remaining
obligations for these three agreements.
A company controlled by a director of Amorfix provides investment advisory services to
Amorfix.
During the year ended March 31, 2011, the company paid $18,620 to a company over
which a director has significant influence, for legal and consulting services related to the
February 28, 2011 private placement offering.
Risks and Uncertainties
Prospects for companies in the biotechnology industry generally may be regarded as
uncertain given the nature of the industry and, accordingly, investments in biotechnology
companies should be regarded as speculative. Biotechnology research and development
involves a significant degree of risk. An investor should carefully consider the risks and
uncertainties described below, as well as other information contained in this
Management's Discussion and Analysis. The risks and uncertainties described below is
not an exhaustive list. Additional risks and uncertainties not presently known to the
Company or that the Company believes to be immaterial may also adversely affect the
Company's business. If any one or more of the following risks occur, the Company's
business, financial condition and results of operations could be seriously harmed. Further,
if the Company fails to meet the expectations of the public market in any given period,
the market price of the Company's common shares could decline.
Early Stage Development and Scientific Uncertainty. Several of Amorfix's products
are at an early stage of development. Significant additional investment in research and
development, product validation, technology transfer to manufacturing, production scale-
up, manufacturing, clinical testing, and regulatory submissions of such product
candidates is required prior to commercialization. There can be no assurance that any
such products will actually be developed. The development and regulatory processes
may require access to rare biofluid and tissue samples from people and animals with
AMP diseases which may not be available to the Company in sufficient amounts or in a
timely fashion to allow Amorfix to complete the development or receive regulatory
approval of any product or process. The presence of AMPs in human blood has never
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been measured and so may be not present or at levels so low as to be unmeasurable. A
commitment of substantial time and resources is required to conduct research and clinical
trials if Amorfix is to complete the development of any product. It is not known whether
any of these product or process candidates will meet applicable health regulatory
standards and obtain required regulatory approvals, or whether such products can be
produced in commercial quantities at reasonable costs and be successfully marketed, or
whether ante-mortem diagnostic tests for AMP diseases will achieve market acceptance,
or if Amorfix's investment in any such products will be recovered through sales or
royalties.
Lack of Product Revenues and History of Losses. To date, Amorfix has not recorded
any revenues from the sale of biopharmaceutical products. As at March 31, 2011,
Amorfix has a deficit of $27,089,361. Amorfix expects to incur additional losses during
the periods of research and development, clinical testing, and application for regulatory
approval of its product candidates. Amorfix expects to incur losses unless and until such
time as payments from corporate collaborations, product sales and/or royalty payments
generate sufficient revenues to fund its continuing operations.
Additional Financing Requirements and Access to Capital. Amorfix will require
substantial additional funds for further research and development, planned clinical
testing, regulatory approvals, establishment of manufacturing capabilities and, if
necessary, the marketing and sale of its products. Amorfix may attempt to raise additional
funds for these purposes through public or private equity or debt financing, collaborations
with other biopharmaceutical companies and/or from other sources. There can be no
assurance that additional funding or partnerships will be available on terms acceptable to
Amorfix and which would foster successful commercialization of Amorfix's products.
Patents and Proprietary Technology. Amorfix's success will depend in part on its
ability to obtain, maintain, and enforce patent rights, maintain trade secret protection and
operate without infringing the proprietary rights of third parties. There can be no
assurance that pending patent applications will be allowed, that Amorfix will develop
additional proprietary products that are patentable, that issued patents will provide
Amorfix with any competitive advantage or will not be challenged by any third parties, or
that patents of others will not have an adverse effect on the ability of Amorfix to do
business. Furthermore, there can be no assurance that others will not independently
develop similar products, duplicate any of Amorfix's products, or design around the
products patented by Amorfix. In addition, Amorfix may be required to obtain licenses
under patents or other proprietary rights of third parties. No assurance can be given that
any licenses required under such patents or proprietary rights will be available on terms
acceptable to Amorfix. If Amorfix does not obtain such licenses it could encounter
delays in introducing one or more of its products to the market, while it attempts to
design around such patents, or could find that the development, manufacturing or sale of
products requiring such licenses could be foreclosed. In addition, Amorfix could incur
substantial costs in defending itself in suits brought against it on such patents or in suits
where it attempts to enforce its own patents against other parties.
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Until such time, if ever, that patent applications are filed, the ability of Amorfix to
maintain the confidentiality of its technology may be crucial to its ultimate possible
commercial success. While Amorfix has adopted procedures designed to protect the
confidentiality of its technology, no assurance can be given that such arrangements will
be effective, that third parties will not gain access to Amorfix's trade secrets or disclose
the technology, or that Amorfix can meaningfully protect its rights to its trade secrets.
Dependence on Collaborative Partners, Licensors and Others. Amorfix's activities
will require it to enter into various arrangements with corporate and academic
collaborators, licensors, licensees and others for the research, development, clinical
testing, manufacturing, marketing and commercialization of its products. Amorfix intends
to attract corporate partners and enter into additional research collaborations. There can
be no assurance, however, that Amorfix will be able to establish such additional
collaborations on favorable terms, if at all, or that its current or future collaborations will
be successful. Failure to attract commercial partners for its products may result in the
Company incurring substantial clinical testing, manufacturing and commercialization
costs prior to realizing any revenue from product sales or result in delays or program
discontinuance if funds are not available in sufficient quantities.
Should any collaborative partner fail to develop, manufacture, or commercialize
successfully any product to which it has rights, or any partner's product to which Amorfix
will have rights, Amorfix's business may be adversely affected. Failure of a collaborative
partner to continue to participate in any particular program could delay or halt the
development or commercialization of products generated from such program. In
addition, there can be no assurance that the collaborative partners will not pursue other
technologies or develop alternative products either alone or in collaboration with others,
including Amorfix's competitors, as a means for developing treatments for the diseases
targeted by Amorfix's programs.
Furthermore, Amorfix will hold licenses for certain technologies and there can be no
assurance that these licenses will not be terminated, or that they will be renewed on
conditions acceptable to Amorfix. Amorfix intends to negotiate additional licenses in
respect of technologies developed by other companies and academic institutions. Terms
of license agreements to be negotiated may include, inter alia, a requirement to make
milestone payments, which may be substantial. Amorfix will also be obligated to make
royalty payments on the sales, if any, of products resulting from licensed technology and,
in some instances, may be responsible for the costs of filing and prosecuting patent
applications.
Government Regulations. Biotechnology and pharmaceutical companies operate in a
high-risk regulatory environment. The manufacture and sale of animal and human
diagnostic and therapeutic products is governed by numerous statutes and regulations in
the United States, Canada and other countries where Amorfix intends to market its
products. The subject matter of such legislation includes approval of manufacturing
facilities, controlled research and testing procedures, review and approval of
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manufacturing, preclinical and clinical data prior to marketing approval, as well as
regulation of marketing activities, notably advertising and labelling.
The process of completing clinical testing and obtaining required approvals is likely to
take several years and require the expenditure of substantial resources. Furthermore,
there can be no assurance that the regulators will not require modification to any
submissions which may result in delays or failure to obtain regulatory approvals. Any
delay or failure to obtain regulatory approvals could adversely affect the ability of
Amorfix to utilize its technology, thereby adversely affecting operations. Further, there
can be no assurance that Amorfix's diagnostic product candidates will achieve levels of
sensitivity and specificity sufficient for regulatory approval or market acceptance, or that
its therapeutic product candidates prove to be safe and effective in clinical trials, or
receive the requisite regulatory approval. There is no assurance that the Company will be
able to timely and profitably produce its products while complying with all the applicable
regulatory requirements.
Foreign markets, other than the United States and Canada,
impose similar restrictions.
Hazardous Materials and Environmental Matters. Certain of Amorfix's research and
development processes will involve the controlled use of hazardous materials. Amorfix
is subject to federal, provincial and local laws and regulations governing the use,
manufacture, storage, handling and disposal of such materials and certain waste products.
Although management of Amorfix believes that its procedures for handling and disposing
of such materials comply with the standards prescribed, the risk of accidental
contamination or injury from these materials cannot be completely eliminated. In the
event of such an accident, Amorfix could be held liable for damages and such liability
could exceed the resources of Amorfix. Amorfix is not specifically insured with respect
to this liability. Although management of Amorfix believes that Amorfix currently
complies in all material respects with applicable environmental laws and regulations,
Amorfix may be required to incur significant costs to comply with environmental laws
and regulations in the future. Furthermore, there can be no assurance that the operations,
business or assets of Amorfix will not be materially adversely affected by current or
future environmental laws or regulations.
Rapid Technological Change. The biotechnology and pharmaceutical industries are
characterized by rapid and substantial technological change. There can be no assurance
that developments by others will not render Amorfix's products or technologies non-
competitive, or that Amorfix will keep pace with technological developments.
Competitors have developed or are developing technologies that could be the basis for
competitive products. Some of these products have an entirely different approach or
means of accomplishing the desired diagnostic or therapeutic effect as compared with
products to be developed by Amorfix, and could be more effective and less costly than
the products to be developed by Amorfix. In addition, alternative forms of medical
treatment may be competitive with Amorfix's products.
Competition. Technological competition from pharmaceutical companies,
biopharmaceutical companies and universities is intense and is expected to increase.
Potential competitors of Amorfix have or may develop product development capabilities
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or financial, scientific, marketing and human resources exceeding those of Amorfix.
Competitors may develop products before Amorfix develops its own products, obtain
regulatory approval for such products more rapidly than Amorfix, or develop products
which are more effective than those which Amorfix intends to develop. Research and
development by others may render Amorfix's technology or products obsolete or non-
competitive or produce treatments or cures superior to any therapy developed or to be
developed by Amorfix, or otherwise preferred to any therapy developed by Amorfix.
Reliance on Key Personnel. Amorfix is dependent on certain members of its
management and scientific staff, the loss of services of one or more of whom could
adversely affect Amorfix. In addition, Amorfix's ability to manage growth effectively
will require it to continue to implement and improve its management systems and to
recruit and train new employees. There can be no assurance that Amorfix will be able to
successfully attract and retain skilled and experienced personnel.
Status of Healthcare Reimbursement. Amorfix's ability to successfully market certain
diagnostic or therapeutic products may depend in part on the extent to which
reimbursement for the cost of such products and related treatments will be available from
government health administration authorities, private health insurers and other
organizations. Significant uncertainty exists as to whether newly approved healthcare
products will qualify for reimbursement. Furthermore, challenges to the price of medical
products and services are becoming more frequent. There can be no assurance that
adequate third-party coverage will be available to establish price levels, which would
allow Amorfix to realize an acceptable return on its investment in product development.
Potential Product Liability. Pharmaceutical products involve an inherent risk of
product liability claims and associated adverse publicity. Product liability insurance is
costly, availability is limited and may not be available on terms which would be
acceptable to Amorfix, if at all. An inability to maintain sufficient insurance coverage on
reasonable terms or to otherwise protect against potential product liability claims could
prevent or inhibit the commercialization of Amorfix's potential products. A product
liability claim brought against Amorfix, or withdrawal of a product from the market,
could have a material adverse effect upon Amorfix and its financial condition.
Volatility of Share Price, Absence of Dividends and Fluctuation of Operating
Results
. Market prices for the securities of biotechnology companies, including the
Company, have historically been highly volatile. Factors such as fluctuation of the
Company's operating results, announcements of technological innovations, patents or
new commercial products by Amorfix or competitors, results of clinical testing,
regulatory actions, or public concern over the safety of biopharmaceutical products and
other factors could have a significant effect on the share price or trading volumes for the
common shares. The Company's common shares have been subject to significant price
and volume fluctuations and may continue to be subject to significant price and volume
fluctuations in the future. Amorfix has not paid dividends to date and does not expect to
pay dividends in the foreseeable future.
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Disclosure Controls and Procedures
The Chief Executive Officer and Acting Chief Financial Officer evaluated the
effectiveness of the Company's disclosure controls and procedures as at the financial year
ended March 31, 2011. Based on that evaluation, the Chief Executive Officer and the
Acting Chief Financial Officer concluded that the design and operation of these
disclosure controls and procedures were effective as at March 31, 2011 to provide
reasonable assurance that material information relating to the Company, would be made
known to them by others within the Company.
Internal Control over Financial Reporting
As at the financial year ended March 31, 2011, the Chief Executive Officer and Acting
Chief Financial Officer evaluated the design of the Company's internal control over
financial reporting. Based on that evaluation, the Chief Executive Officer and the Acting
Chief Financial Officer concluded that the design of internal control over financial
reporting was effective as at March 31, 2011 to provide reasonable assurance regarding
the reliability of financial reporting and the preparation of financial statements for
external purposes in accordance with Canadian GAAP. No material weaknesses in
internal controls over financial reporting were identified. There were no changes in the
Company's internal control over financial reporting that occurred during the most recent
interim period that has materially affected, or is reasonably likely to materially affect, the
Company's internal control over financial reporting.
Additional Information
Additional information relating to the Company, including its Annual Information Form,
can also be found on SEDAR at
www.sedar.com
.