Nature and Continuance of Operations

6 Months Ended

Aug. 31, 2012

Nature and Continuance of Operations [Text Block]

2.	Nature and Continuance of Operations
	Striker Energy Corp. was incorporated under the laws of the State of Nevada on March 18, 2005. The Company originally intended to engage in the acquisition and exploration of mineral properties. In 2008, the Company transitioned its business from mineral property exploration to oil and natural gas exploration.
	Effective September 12, 2008, the Company completed a stock split by the issuance of two new common shares for each one outstanding common share of the Company. Unless otherwise noted, all references herein to number of shares, price per share or weighted average number of shares outstanding have been adjusted to reflect this stock split on a retroactive basis.
	On June 17, 2010, the Company entered into a letter of intent with Cypress Pharmaceutical, Inc. (“Cypress”) to acquire all of the assets associated with Granisol® (granisetron HC1) oral solution (“Granisol”). First approved in 2008, Granisol is the only oral, liquid granisetron solution, formerly distributed by Hawthorn Pharmaceuticals, a subsidiary of Cypress. The Food and Drug Administration has approved the use of Granisol in cancer care to treat nausea and vomiting associated with cancer therapy. On June 18, 2010, the Company incorporated PediatRx Inc., the Company’s wholly-owned subsidiary under the laws of the state of Nevada. On July 23, 2010, PediatRx Inc. concluded a definitive agreement to acquire Granisol from Cypress and the Company turned its focus to the pharmaceutical industry and terminated its interest in oil and natural gas exploration. Effective December 28, 2010, the Company merged with its subsidiary (PediatRx Inc.) and changed its name to PediatRx Inc..
	On September 12, 2011 the Company entered into a co-promotion agreement with Bi-Coastal Pharmaceutical Corp. (“Bi-Coastal”). Pursuant to the co-promotion agreement, Bi-Coastal granted the Company the non-exclusive right to promote Aquoral™ within the United States of America. Aquoral, another oncology supportive care product, is an FDA-cleared treatment for xerostomia (the medical term for dry mouth due to a lack of saliva). Xerostomia is especially prevalent in patients undergoing various treatments for cancer and those with Sjogren’s syndrome. The Company is required to include Aquoral in no less than 85% of its sales calls.

In return for the Company’s promotional efforts, it will receive compensation for each unit sold. The agreement with Bi-Coastal is for an initial term of two years and will automatically renew for one year terms unless either party provides notice of non-renewal at least six months prior to the expiration of the then-current term. The agreement is terminable at any time, by either party, upon six months prior written notice to the other party and is also terminable for cause.

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

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

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

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

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

As consideration for entering into these three Agreements the Company received an initial payment of $325,000 from Apricus. The agreements also provide for the payment to the Company of a royalty that will be calculated based upon Apricus' United States generated net operating income related to Granisol. The Company has recognized revenues of $260,000 associated with the exclusive rights for Apricus to commercialize Granisol in six U.S. states. In addition, the Company has recognized a gain on sale of product rights totaling $64,900 associated with the Asset Purchase Agreement.

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

On June 27, 2012, the Company entered in to a Termination Agreement (the “Termination Agreement”) with Apricus Biosciences, Inc. (“Apricus”) pursuant to which the parties acknowledged that they have formally terminated discussion regarding the proposed merger of the two companies.

Pursuant to the Termination Agreement, Apricus issued and delivered to the Company 373,134 shares of its common stock in full satisfaction of its obligation to pay the Company $1,000,000 in common stock as break-up fee. The Company has recognized other income of $1,000,000 related to the break-up fee.

In addition, pursuant to the Termination Agreement, on July 16, 2012, Apricus filed a Registration Statement on Form S-3 registering these shares for resale. At such time as the shares become eligible for resale pursuant to a valid and effective registration statement or pursuant to an exemption from the registration requirement of the Securities Act of 1933, including Rule 144, the Company has agreed that if it proposes to sell any of the shares on a public market or quotation service, it will only be permitted to sell on any given trading day, such number of shares as does not exceed 5% of the average daily volume of the Apricus’s common stock traded in the previous five trading days. The Company expects to be able to sell shares under a Rule 144 exemption beginning on December 1, 2012 or earlier if the registration statement is declared effective and has therefore classified the common stock as available for sale securities. The Company determined the fair value of the common stock to be $1,000,000 at the effective date of the termination and August 31, 2012. Due to the sales restrictions, the Company determined the fair value using quoted prices for similar assets in active markets that are directly observable and thus represent a Level 2 fair value measurement.

PediatRx intends to utilize the proceeds from the sale of Apricus common stock to pay off certain notes payable and other liabilities and for continuting operations. The value of the stock may be more than or less than $1,000,000 in the aggregate if and when all of the 373,134 shares are sold. This will be dependent on the actual share price of Apricus stock and does not take into account any stockbroker commissions. The Company is investigating other business development and product opportunities and strategic alternatives.

The Company is a development stage enterprise, as defined in Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) Topic 915, Development Stage Entities . The Company has devoted substantially most of its efforts to the initial marketing of

Granisol and has been seeking to secure rights to other pharmaceutical products through acquisition, licensing and reformulation activities.

The Company has net income of $578,672, for the six month period ended August 31, 2012, a net loss of $768,164 for the six month period ended August 31, 2011, a net loss of $1,672,654 for the period from inception on March 18, 2005 through August 31, 2012 and has a working capital surplus at August 31, 2012 of $256,284 (February 28, 2012 – working capital deficit of $498,667). The Company's financial statements as of August 31, 2012 and for the six month period ended August 31, 2012 have been prepared on a going concern basis, which contemplates the realization of assets and the settlement of liabilities and commitments in the normal course of business.

Management cannot provide assurance that the Company will ultimately achieve profitable operations or become cash flow positive, or raise additional debt and/or equity capital. As of August 31, 2012, the Company's assets consisted of cash and cash equivalents of $65,172, investment in Apricus of $1,000,000 and accounts receivable from product sales, net of sales allowances, of $65,708. Management believes that the Company's capital resources are not currently adequate to continue operating and maintaining its business strategy for the fiscal year ending February 28, 2013. The Company had fully intended to pursue the merger with Apricus. Pursuant to the Termination Agreement, the Company will utilize the proceeds from sales of Apricus common stock, once the registration statement becomes effective or under a Rule 144 exemption, to pay certain notes payable and other liabilities and is investigating business development and other strategic alternatives. Although the Company has historically raised capital from sales of equity and from the issuance of promissory notes, there is no assurance that it will be able to continue to do so. If the Company is unable to raise additional capital, secure additional lending in the near future or complete business development activities which leverage remaining Granisol opportunities, or to secure other product opportunities to leverage its infrastructure, management expects that the Company will need to curtail or cease operations. These financial statements do not include any adjustments related to the recoverability and classification of assets or the amounts and classification of liabilities that might be necessary should the Company be unable to continue as a going concern.

As of August 31, 2012 the Company was in the process of transitioning to its new operating business and expects to incur operating losses for the next twelve months as it moves forward with its co-promotion efforts with Apricus for Granisol and explores other product and business development opportunities.