ITEM 7. MANAGEMENT DISCUSSION AND ANALYSIS OR PLAN OF OPERATION

Liquidity and Capital Resources

For the year ended October 31, 2010 the Company incurred a net loss of approximately $2,038,000 (2009-$28,900,000) and a cash flow deficiency from operating activities of approximately $2,163,000 (2009-$735,000). The Company has not yet established an ongoing source of revenues sufficient to cover our operating costs and allow us to continue as a going concern. The Company has funded its activities to date almost exclusively from debt and equity financings. These matters raise substantial doubt about the Company's ability to continue as a going concern and our independent auditors included an explanatory paragraph to emphasize such doubt in their report on the audit of our financial statements.

The Company will continue to require substantial funds to continue research and development, including preclinical studies and clinical trials of our products, and to commence sales and marketing efforts. The Company's plans include financing activities such as private placements of its common stock and issuances of convertible debt instruments. The Company is also actively pursuing industry collaboration activities including product licensing and specific project financing.

The Company believes that it will be successful in obtaining the necessary financing to fund its operations, meet revenue projections and manage costs; however, there are no assurances that such additional funding will be achieved and that the Company will succeed in its future operations. Our current annual cash requirement is approximately $1,500,000. The cash balance at October 31, 2010 was $1,844,752, meaning that we had sufficient cash reserves to cover the next year's operations.