UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549



FORM 10-Q

(Mark One)

| | x | QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
| | - | ---------------------------------------------------------------------------------------



For the quarterly period ended September 30, 2015



| |  ̈ | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
| | - | ----------------------------------------------------------------------------------------



For the transition period from ______ to _______



Commission File Number: 001-37426





CYNAPSUS THERAPEUTICS INC.

(Exact name of registrant as specified in its
charter)



|Canada(State or other jurisdictionof incorporation or organization)                       | 98-1226819(I.R.S. EmployerIdentification No.)
|----------------------------------------------------------------------------------------- | ---------------------------------------------
|                                                                                          |                                              
|828 Richmond Street West,Toronto, Ontario, Canada(Address of principal executive offices) | M6J 1C9
        (zip code)                   
|                                                                                          |                                              
|416-703-2449(Registrant’s telephone number, including area code)                         



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



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



Indicate by check mark whether the registrant
is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions
of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2
of the Exchange Act.



|Large accelerated filer  ̈                                            | Accelerated filer  ̈        
|-------------------------------------------------------------------- | ---------------------------
|Non-accelerated filer x(Do not check if a smaller reporting company) | Smaller reporting company  ̈



Indicate by check mark whether the registrant
is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes  ̈ No x



As of November 10, 2015, there were 12,203,925
common shares, no par value per share, of Cynapsus Therapeutics Inc. outstanding.











CYNAPSUS THERAPEUTICS INC.



FORM 10-Q

TABLE OF CONTENTS



|                                                  |                                                                                                                                | Page
|------------------------------------------------- | ------------------------------------------------------------------------------------------------------------------------------ | ----
|                                                  |                                                                                                                                |     
|general matters                                   | 1                                                                                                                             
|                                                  |                                                                                                                                |     
|Special Note Regarding Forward-Looking statements | 2                                                                                                                             
|                                                  |                                                                                                                                |     
|                                                  | PART I  FINANCIAL INFORMATION                                                                                                  |     
|                                                  |                                                                                                                                |     
|ITEM 1.                                           | FINANCIAL STATEMENTS.                                                                                                          | 3   
|                                                  |                                                                                                                                |     
|                                                  | Interim Consolidated Statements of Financial Position as of September 30, 2015 and December 31, 2014                           | 3   
|                                                  |                                                                                                                                |     
|                                                  | Interim Consolidated Statements of Loss and Comprehensive Loss for the three and nine months ended September 30, 2015 and 2014 | 4   
|                                                  |                                                                                                                                |     
|                                                  | Interim Consolidated Statements of Changes in Shareholders’ Equity for the nine months ended September 30, 2015 and 2014       | 5   
|                                                  |                                                                                                                                |     
|                                                  | Interim Consolidated Statements of Cash Flows for the nine months ended September 30, 2015 and 2014                            | 6   
|                                                  |                                                                                                                                |     
|                                                  | Notes to the Unaudited Condensed Interim Consolidated Financial Statements                                                     | 7   
|                                                  |                                                                                                                                |     
|ITEM 2.                                           | MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS                                          | 22  
|                                                  |                                                                                                                                |     
|ITEM 3.                                           | QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.                                                                    | 37  
|                                                  |                                                                                                                                |     
|ITEM 4.                                           | CONTROLS AND PROCEDURES.                                                                                                       | 39  
|                                                  |                                                                                                                                |     
|                                                  | PART II
OTHER INFORMATION                                                                                                      |     
|                                                  |                                                                                                                                |     
|ITEM 1.                                           | LEGAL PROCEEDINGS                                                                                                              | 40  
|                                                  |                                                                                                                                |     
|ITEM 1A.                                          | RISK FACTORS.                                                                                                                  | 40  
|                                                  |                                                                                                                                |     
|ITEM 2.                                           | UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS                                                                    | 73  
|                                                  |                                                                                                                                |     
|ITEM 6.                                           | EXHIBITS.                                                                                                                      | 74  
|                                                  |                                                                                                                                |     
|SIGNATURES                                        | 77                                                                                                                            
|                                                  |                                                                                                                                |     
|EXHIBIT INDEX                                     | 78                                                                                                                            





i







GENERAL
MATTERS



In this Quarterly Report
on Form 10-Q, unless the context otherwise requires, the terms “Cynapsus,” “we,” “us” and “our”
refer to Cynapsus Therapeutics Inc. and our wholly-owned subsidiary, Adagio Pharmaceuticals Ltd., or Adagio.



Cynapsus, a corporation
organized under the federal laws of Canada, qualifies as a foreign private issuer in the U.S. for purposes of the United States
Securities Exchange Act of 1934, as amended, or the Exchange Act. Although, as a foreign private issuer, we are not required to
do so, we currently file quarterly reports on Form 10-Q and current reports on Form 8-K, and we will file annual reports on Form
10-K, with the United States Securities and Exchange Commission, or the SEC, instead of filing the reporting forms available to
foreign private issuers.



Unless otherwise noted
herein, all references to “$,” “Cdn$,” “Canadian dollars,” or “dollars” are to
the currency of Canada and “US$,” “United States dollars,” or “U.S. dollars” are to the currency
of the United States.



As of November 10, 2015,
the noon rate of exchange published by the Bank of Canada was US$1.00 = Cdn$1.3259.



-1-







Special
Note Regarding Forward-Looking Statements



Some of the statements
contained in this Quarterly Report on Form 10-Q constitute “forward-looking statements” within the meaning of applicable
securities laws. These forward-looking statements include information about possible or assumed future results of our business,
financial condition, results of operations, liquidity, plans and objectives. In some cases, you can identify forward-looking statements
by terminology such as “believe,” “may,” “estimate,” “continue,” “anticipate,”
“intend,” “should,” “plan,” “expect,” “predict,” “potential,”
or the negative of these terms or other similar expressions. The statements we make regarding the following matters are forward-looking
by their nature and are based on certain of the assumptions noted below:



| | · | our beliefs regarding the advantages of APL-130277 and assumptions that others will share such
beliefs;
| | - | -------------------------------------------------------------------------------------------------------



| | · | our expectations regarding the commercialization of APL-130277;
| | - | ---------------------------------------------------------------



| | · | our belief that there is an unmet medical need and market opportunity for APL-130277;
| | - | -------------------------------------------------------------------------------------



| | · | our expectations regarding regulatory approval in the United States and in other jurisdictions;
| | - | -----------------------------------------------------------------------------------------------



| | · | our expectation that APL-130277 will be able to follow the regulatory pathway set forth in Section
505(b)(2) of the United States Federal Food, Drug, and Cosmetic Act, or FDCA;
| | - | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | · | our plan to timely commence and/or complete remaining trials and studies as required by the U.S.
Food and Drug Administration, or FDA, and other regulators, including our Phase 3 clinical trials and studies;
| | - | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | · | our beliefs regarding frequency, types and severity of OFF episodes;
| | - | --------------------------------------------------------------------



| | · | our expectations regarding future capital needs and funding requirements and our assumptions relating
to current and future costs;
| | - | ----------------------------------------------------------------------------------------------------------------------------------



| | · | our ability to successfully develop APL-130277 and any other product candidates we may develop
in the future;
| | - | -------------------------------------------------------------------------------------------------------------



| | · | our beliefs regarding the sufficiency of our existing cash for funding certain activities;
| | - | ------------------------------------------------------------------------------------------



| | · | our intention to develop and commercialize APL-130277 in international markets;
| | - | -------------------------------------------------------------------------------



| | · | our expectation that third-party contract manufacturing organizations will be able to provide us
with sufficient quantities of our sublingual thin film formulation of apomorphine; and
| | - | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | · | our expectation for building a focused sales and marketing infrastructure to market APL-130277
and any other product candidates in the United States.
| | - | -----------------------------------------------------------------------------------------------------------------------------------------------------



The preceding list is not
intended to be an exhaustive list of all of our forward-looking statements. The forward-looking statements are based on our beliefs,
assumptions and expectations of future performance, taking into account the information currently available to us. These statements
are only predictions based upon our current expectations and projections about future events. There are important factors that
could cause our actual results, levels of activity, performance or achievements to differ materially from the results, levels of
activity, performance or achievements expressed or implied by the forward-looking statements including, but not limited to those
factors identified under the caption “Risk Factors” in Part II, Item 1A and in our filings and reports in the United
States with the SEC available on the SEC’s web site at www.sec.gov, and in Canada with the various Canadian securities regulators,
which are available online at www.sedar.com. Furthermore, unless otherwise stated, the forward-looking statements contained in
this Quarterly Report on Form 10-Q are made as of the date hereof, and we have no intention and undertake no obligation to update
or revise any forward-looking statements, whether as a result of new information, future events, changes or otherwise, except as
required by law.



-2-







PART I – FINANCIAL INFORMATION



ITEM 1. FINANCIAL STATEMENTS.



|CYNAPSUS THERAPEUTICS INC.                           
|-----------------------------------------------------
|Interim Consolidated Statements of Financial Position



UNAUDITED

(in Canadian dollars)



|                                           |  |       |       |  | September 30, |  |             | December 31, | 
|------------------------------------------ |  | ----- | ----- |  | ------------- |  | ----------- | ------------ | 
|                                           |  | NOTES |       |  | 2015          |  |             | 2014         | 
|                                           |  |       |       |  | $             |  |             | $            | 
|ASSETS                                     |  |       |       |  |               |  |             |              | 
|Current assets                             |  |       |       |  |               |  |             |              | 
|Cash                                       |  |       | 5     |  |               |  | 109,521,968 |              | 
|Prepaid expenses and other current assets  |  |       |       |  |               |  | 1,270,596   |              | 
|Total current assets                       |  |       |       |  |               |  | 110,792,564 |              | 
|Non-current assets                         |  |       |       |  |               |  |             |              | 
|Property, plant and equipment              |  |       | 6     |  |               |  | 392,537     |              | 
|Intangible assets                          |  |       | 7     |  |               |  | 538,614     |              | 
|                                           |  |       |       |  |               |  |             |              | 
|Total assets                               |  |       |       |  |               |  | 111,723,715 |              | 
|                                           |  |       |       |  |               |  |             |              | 
|LIABILITIES                                |  |       |       |  |               |  |             |              | 
|Current liabilities                        |  |       |       |  |               |  |             |              | 
|Accounts payable and accrued liabilities   |  |       | 8, 14 |  |               |  | 4,297,152   |              | 
|Total current liabilities                  |  |       |       |  |               |  | 4,297,152   |              | 
|                                           |  |       |       |  |               |  |             |              | 
|SHAREHOLDERS’ EQUITY                       |  |       |       |  |               |  |             |              | 
|Share capital                              |  |       | 9     |  |               |  | 140,871,019 |              | 
|Warrants                                   |  |       | 9     |  |               |  | 11,917,521  |              | 
|Share-based payments                       |  |       | 9     |  |               |  | 6,088,581   |              | 
|Deficit                                    |  |       |       |  |               |  | (51,450,558 | )            | 
|Total shareholders’ equity                 |  |       |       |  |               |  | 107,426,563 |              | 
|                                           |  |       |       |  |               |  |             |              | 
|Total liabilities and shareholders’ equity |  |       |       |  |               |  | 111,723,715 |              | 



COMMITMENTS AND CONTINGENT LIABILITIES (Note 15)



APPROVED ON BEHALF OF THE BOARD:



|“Ronald Hosking” , | Director | “Rochelle Stenzler” , | Director
|------------------ | -------- | --------------------- | --------



The accompanying notes are an integral part of these unaudited condensed
interim consolidated financial statements.



-3-







|CYNAPSUS THERAPEUTICS INC.                                    
|--------------------------------------------------------------
|Interim Consolidated Statements of Loss and Comprehensive Loss



UNAUDITED

(in Canadian dollars)



|                                                                  |  |       |        |  | For the three months ended September 30, |  |            | For the nine months ended September 30, | 
|----------------------------------------------------------------- |  | ----- | ------ |  | ---------------------------------------- |  | ---------- | --------------------------------------- | 
|                                                                  |  | NOTES |        |  | 2015                                     |  |            | 2014                                    | 
|                                                                  |  |       |        |  | $                                        |  |            | $                                       | 
|EXPENSES                                                          |  |       |        |  |                                          |  |            |                                         | 
|Research and development                                          |  |       | 10     |  |                                          |  | 6,825,094  |                                         | 
|Operating, general and administrative                             |  |       | 11     |  |                                          |  | 1,815,546  |                                         | 
|Share-based payments                                              |  |       | 9      |  |                                          |  | 1,491,370  |                                         | 
|Amortization of intangible assets                                 |  |       | 7      |  |                                          |  | 11,970     |                                         | 
|Depreciation of property, plant and equipment                     |  |       | 6      |  |                                          |  | 38,051     |                                         | 
|Acquisition milestone share-based payment                         |  |       | 13, 14 |  |                                          |  | -          |                                         | 
|Unrealized foreign exchange gain                                  |  |       |        |  |                                          |  | (7,262,033 | )                                       | 
|Recovery on scientific research                                   |  |       |        |  |                                          |  | (30,924    | )                                       | 
|Research grant                                                    |  |       | 12     |  |                                          |  | -          |                                         | 
|Interest income net of interest expense and related charges       |  |       |        |  |                                          |  | (2,109     | )                                       | 
|Loss and comprehensive loss for the period                        |  |       |        |  |                                          |  | 2,886,965  |                                         | 
|                                                                  |  |       |        |  |                                          |  |            |                                         | 
|Loss per share - basic and diluted                                |  |       |        |  |                                          |  | 0.24       |                                         | 
|Weighted average number of shares outstanding – basic and diluted |  |       | 9      |  |                                          |  | 12,126,742 |                                         | 



The accompanying notes are an integral part of these unaudited condensed
interim consolidated financial statements.



-4-







|CYNAPSUS THERAPEUTICS INC.                                        
|------------------------------------------------------------------
|Interim Consolidated Statements of Changes in Shareholders’ Equity



UNAUDITED

(in Canadian dollars)



|                                              |  | Share  Capital |             |  | Warrants |  |            | Share-based  Payments |  |  | Deficit   |   |  | Total |            
|--------------------------------------------- |  | -------------- | ----------- |  | -------- |  | ---------- | --------------------- |  |  | --------- | - |  | ----- | -----------
|                                              |  | $              |             |  | $        |  |            | $                     |  |  | $         |   |  | $     |            
|Balance as at December 31, 2014               |  |                | 31,740,941  |  |          |  | 13,452,183 |                       |  |  | 2,787,525 |   |  |       | (32,510,652
|                                              |  |                |             |  |          |  |            |                       |  |  |           |   |  |       |            
|Public offering, net of transaction costs     |  |                | 81,217,659  |  |          |  | -          |                       |  |  | -         |   |  |       | -          
|Private placement, net of transaction costs   |  |                | 19,551,377  |  |          |  | -          |                       |  |  | -         |   |  |       | -          
|Exercise of warrants                          |  |                | 6,674,957   |  |          |  | (1,534,662 | )                     |  |  | -         |   |  |       | -          
|Acquisition milestone share-based payment     |  |                | 1,500,000   |  |          |  | -          |                       |  |  | -         |   |  |       | -          
|Exercise of share-based payments              |  |                | 186,085     |  |          |  | -          |                       |  |  | (65,387   | ) |  |       | -          
|Share-based payments                          |  |                | -           |  |          |  | -          |                       |  |  | 3,366,443 |   |  |       | -          
|Loss for the period                           |  |                | -           |  |          |  | -          |                       |  |  | -         |   |  |       | (18,939,906
|Activity for the period                       |  |                | 109,130,078 |  |          |  | (1,534,662 | )                     |  |  | 3,301,056 |   |  |       | (18,939,906
|                                              |  |                |             |  |          |  |            |                       |  |  |           |   |  |       |            
|Balance as at September 30, 2015              |  |                | 140,871,019 |  |          |  | 11,917,521 |                       |  |  | 6,088,581 |   |  |       | (51,450,558
|                                              |  |                |             |  |          |  |            |                       |  |  |           |   |  |       |            
|Balance as at December 31, 2013               |  |                | 16,156,398  |  |          |  | 4,211,014  |                       |  |  | 1,918,672 |   |  |       | (21,692,065
|                                              |  |                |             |  |          |  |            |                       |  |  |           |   |  |       |            
|Prospectus offering, net of transaction costs |  |                | 13,037,024  |  |          |  | 9,803,212  |                       |  |  | -         |   |  |       | -          
|Exercise of warrants                          |  |                | 1,000,954   |  |          |  | (254,154   | )                     |  |  | -         |   |  |       | -          
|Exercise of share-based payments              |  |                | 226,892     |  |          |  |            |                       |  |  | (106,774  | ) |  |       | -          
|Share-based payments                          |  |                | -           |  |          |  | -          |                       |  |  | 630,464   |   |  |       | -          
|Loss for the period                           |  |                | -           |  |          |  | -          |                       |  |  | -         |   |  |       | (5,718,138 
|Activity for the period                       |  |                | 14,264,870  |  |          |  | 9,549,058  |                       |  |  | 523,690   |   |  |       | (5,718,138 
|                                              |  |                |             |  |          |  |            |                       |  |  |           |   |  |       |            
|Balance as at September 30, 2014              |  |                | 30,421,268  |  |          |  | 13,760,072 |                       |  |  | 2,442,362 |   |  |       | (27,410,203



The accompanying notes are an integral part of these unaudited condensed
interim consolidated financial statements.



-5-







|CYNAPSUS THERAPEUTICS INC.                   
|---------------------------------------------
|Interim Consolidated Statements of Cash Flows



UNAUDITED

(in Canadian dollars)



|                                                             |  |       |        |  | For the nine months ended September 30, | 
|------------------------------------------------------------ |  | ----- | ------ |  | --------------------------------------- | 
|                                                             |  | NOTES |        |  | 2015                                    | 
|                                                             |  |       |        |  | $                                       | 
|Operating activities                                         |  |       |        |  |                                         | 
|Loss for the period                                          |  |       |        |  |                                         | 
|Items not affecting cash:                                    |  |       |        |  |                                         | 
|Share-based payments                                         |  |       | 9      |  |                                         | 
|Amortization of intangible assets                            |  |       | 7      |  |                                         | 
|Depreciation of property, plant and equipment                |  |       | 6      |  |                                         | 
|Acquisition milestone share-based payment                    |  |       | 13, 14 |  |                                         | 
|Unrealized gain on foreign exchange                          |  |       |        |  |                                         | 
|                                                             |  |       |        |  |                                         | 
|Changes in non-cash working capital:                         |  |       |        |  |                                         | 
|Change in prepaid expenses and other current assets          |  |       |        |  |                                         | 
|Change in accounts payables and accrued liabilities          |  |       |        |  |                                         | 
|Deferred grant proceeds                                      |  |       |        |  |                                         | 
|Net cash used in operating activities                        |  |       |        |  |                                         | 
|                                                             |  |       |        |  |                                         | 
|Investing activities                                         |  |       |        |  |                                         | 
|Purchase of property, plant and equipment                    |  |       | 6      |  |                                         | 
|Net cash used in investing activities                        |  |       |        |  |                                         | 
|                                                             |  |       |        |  |                                         | 
|Financing activities                                         |  |       |        |  |                                         | 
|Gross proceeds from issuance of shares and warrants          |  |       | 9      |  |                                         | 
|Commissions and share issuance costs                         |  |       | 9      |  |                                         | 
|Gross proceeds from exercise of warrants                     |  |       | 9      |  |                                         | 
|Gross proceeds from exercise of share-based payments         |  |       | 9      |  |                                         | 
|Net cash provided by financing activities                    |  |       |        |  |                                         | 
|                                                             |  |       |        |  |                                         | 
|Effect of exchange rate changes on cash and cash equivalents |  |       |        |  |                                         | 
|Increase in cash and cash equivalents                        |  |       |        |  |                                         | 
|Cash and cash equivalents, beginning of period               |  |       |        |  |                                         | 
|Cash and cash equivalents, end of period                     |  |       |        |  |                                         | 



The accompanying notes are an integral part of these unaudited condensed
interim consolidated financial statements.



-6-







|CYNAPSUS THERAPEUTICS INC.                                                
|--------------------------------------------------------------------------
|Notes to the Unaudited Condensed Interim Consolidated Financial Statements
|September 30, 2015                                                        
|(in Canadian dollars)                                                     



| | 1. | NATURE OF OPERATIONS
| | -- | --------------------



Cynapsus Therapeutics Inc. (“Cynapsus”
or the “Company”) is a specialty pharmaceutical company currently focused on developing and preparing to commercialize
a fast-acting, easy-to-use, sublingual thin film for the on-demand management of debilitating OFF episodes associated with Parkinson’s
disease. The Company’s shares are listed on the Toronto Stock Exchange (“Exchange”) (CTH: TSX) and traded in
the United States on the NASDAQ Global Market (NASDAQ: CYNA). Cynapsus was incorporated under the federal laws of Canada. The head
office, principal address, registered address and records office of the Company are located at 828 Richmond Street West, Toronto,
Ontario, Canada, M6J 1C9.



| | 2. | BASIS OF PREPARATION
| | -- | --------------------



The unaudited condensed interim
consolidated financial statements consolidate the financial statements of Cynapsus and its wholly-owned subsidiary, Adagio Pharmaceuticals
Ltd. (“Adagio”). All significant intercompany transactions and balances have been eliminated.



These unaudited condensed interim
consolidated financial statements have been prepared in compliance with International Accounting Standard (“IAS”) 34
Interim Financial Reporting. The notes presented in these unaudited condensed interim consolidated financial statements
include only significant events and transactions occurring since the Company’s last fiscal year end and are not fully inclusive
of all matters required to be disclosed in its annual audited consolidated financial statements. The accounting policies adopted
in the preparation of the unaudited condensed interim consolidated financial statements are consistent with those followed in the
preparation of the Company’s annual consolidated financial statements for the year ended December 31, 2014. Any subsequent
changes to International Financial Reporting Standards (“IFRS”) as issued by the International Accounting Standards
Board (“IASB”) or their interpretation that are given effect in the Company’s annual consolidated financial statements
for the year ending December 31, 2015 could result in a restatement of these unaudited condensed interim consolidated financial
statements.



On November 10, 2015, the Board
of Directors approved and authorized these unaudited condensed interim consolidated financial statements for the three and nine
months ended September 30, 2015.



Certain comparative figures have
been reclassified to conform to the financial statement presentation adopted for the current period.



In the opinion of management, all
adjustments considered necessary for fair presentation of the Company’s financial position, results of operations and cash
flows have been included. Operating results for the three and nine month periods ended September 30, 2015 are not necessarily indicative
of the results that may be expected for the year ending December 31, 2015.



-7-







|CYNAPSUS THERAPEUTICS INC.                                                
|--------------------------------------------------------------------------
|Notes to the Unaudited Condensed Interim Consolidated Financial Statements
|September 30, 2015                                                        
|(in Canadian dollars)                                                     



| | 3. | FUTURE ACCOUNTING CHANGES
| | -- | -------------------------



Certain pronouncements that were
issued by the IASB or the International Financial Reporting Interpretations Committee are mandatory for accounting periods beginning
on or after January 1, 2016. Many are not applicable or do not have a significant impact to the Company and have been excluded.
The following pronouncement has not yet been adopted and is being evaluated to determine its impact on the Company.



IFRS 9, Financial Instruments(“IFRS 9”) was issued by the IASB in July 2014 and will replace IAS 39, Financial Instruments: Recognition and
Measurement (“IAS 39”) and all previous versions of IFRS 9. IFRS 9 uses a single approach to determine whether
a financial asset is measured at amortized cost, fair value through profit or loss, or fair value through other comprehensive income.
The approach in IFRS 9 is based on how an entity manages its financial instruments in the context of its business model and the
contractual cash flow characteristics of the financial assets. Most of the requirements in IAS 39 for classification and measurement
of financial liabilities were carried forward unchanged to IFRS 9, except that an entity choosing to measure a financial liability
at fair value will present the portion of any change in fair value due to changes in the entity’s own credit risk in other
comprehensive income, rather than within profit or loss. The new standard also requires a single impairment method to be used,
replacing the multiple impairment methods in IAS 39. IFRS 9 is effective for annual periods beginning on or after January 1, 2018.
Earlier adoption is permitted.



| | 4. | SIGNIFICANT ACCOUNTING JUDGMENTS, ESTIMATES AND ASSUMPTIONS
| | -- | -----------------------------------------------------------



The preparation of these unaudited
condensed interim consolidated financial statements in accordance with IFRS requires management to make judgments, estimates and
assumptions that affect the application of accounting policies and reported amounts of assets and liabilities at the date of the
unaudited condensed interim consolidated financial statements and reported amounts of revenue and expenses during the reporting
period. Actual outcomes could differ from these estimates. The unaudited condensed interim consolidated financial statements include
estimates, which, by their nature, are uncertain. The impact of such estimates are pervasive throughout the unaudited condensed
interim consolidated financial statements, and may require accounting adjustments based on future occurrences.



The estimates and underlying assumptions
are reviewed on a regular basis. Revisions to accounting estimates are recognized in the period in which the estimate is revised
and in any future periods affected. The areas involving a higher degree of judgment or complexity, or areas where the assumptions
and estimates are significant to the financial statements were the same as those applied to the Company’s consolidated financial
statements as at and for the year ended December 31, 2014.



-8-







|CYNAPSUS THERAPEUTICS INC.                                                
|--------------------------------------------------------------------------
|Notes to the Unaudited Condensed Interim Consolidated Financial Statements
|September 30, 2015                                                        
|(in Canadian dollars)                                                     



| | 5. | RISK MANAGEMENT
| | -- | ---------------



Financial risk management



In the normal course of business,
the Company is exposed to a number of financial risks that can affect its operating performance. These risks are credit risk, liquidity
risk and market risk. The Company’s overall risk management program and prudent business practices seek to minimize any potential
adverse effects on the Company’s financial performance. There were no changes in the Company’s approach to risk management
during the three and nine months ended September 30, 2015.



| | (i) | Credit risk
| | --- | -----------

The Company’s cash balance
is on deposit with a Canadian chartered bank. The Company has no significant concentration of credit risk arising from operations.
Management believes that the credit risk concentration with respect to these financial instruments is remote.



| | (ii) | Liquidity risk
| | ---- | --------------

The Company’s approach to
managing liquidity risk is to ensure that it will have sufficient liquidity to meet liabilities when due. As at September 30, 2015,
the Company had cash of $109,521,968 and prepaid expenses and other current assets of $1,412,366 (December 31, 2014 - $17,448,497
and $269,779, respectively) to settle current liabilities of $4,297,152 (December 31, 2014 - $3,080,631). Most of the Company’s
accounts payable and accrued liabilities have contractual maturities of less than 30 days and are subject to normal trade terms.



Market
risk



| | (i) | Interest rate risk
| | --- | ------------------

The Company had a cash balance
of $109,521,968 as at September 30, 2015 (December 31, 2014 - $17,448,497). The Company’s current policy is to invest excess
cash in a business savings account. The Company considers interest rate risk to be minimal.



| | (ii) | Foreign currency risk
| | ---- | ---------------------

Foreign currency risk is the risk
that the fair value or future cash flows of a financial instrument will fluctuate because of changes in foreign exchange rates.
The Company’s functional and presentation currency is the Canadian dollar and all amounts in the condensed interim consolidated
financial statements are expressed in Canadian dollars, unless otherwise noted. The Company funds the majority of research and
development expenses in the United States from its U.S. dollar bank account held in Canada and certain expenses in Europe on a
cash call basis using the Euro converted from its Canadian dollar bank accounts held in Canada. The Company believes that while
currency conversions could affect results of operations, there is not a significant risk to its ability to meet its obligations.
The Company does not use derivative instruments to hedge its foreign currency risk.



-9-







|CYNAPSUS THERAPEUTICS INC.                                                
|--------------------------------------------------------------------------
|Notes to the Unaudited Condensed Interim Consolidated Financial Statements
|September 30, 2015                                                        
|(in Canadian dollars)                                                     



| | 5. | RISK MANAGEMENT (continued)
| | -- | ---------------------------



| | (ii) | Foreign currency risk (continued)
| | ---- | ---------------------------------





The following table summarizes
accounts denominated in U.S. dollars, reported in Canadian dollar equivalents, and the effective US$/Cdn$ exchange rate applied
as at:



|                       |  | September 30, 2015 |             |   | December 31, 2014 | 
|---------------------- |  | ------------------ | ----------- | - | ----------------- | 
|                       |  | $                  |             |   | $                 | 
|Cash                   |  |                    | 108,673,746 |   |                   | 
|Accounts payable       |  |                    | (1,758,497  | ) |                   | 
|Net exposure           |  |                    | 106,915,249 |   |                   | 
|                       |  |                    |             |   |                   | 
|US$/Cdn$ exchange rate |  |                    | 1.335       |   |                   | 



Based on the Company’s foreign
currency exposures noted above, a 10% strengthening of the U.S. dollar against the Canadian dollar as at September 30, 2015 would
have decreased the net loss by approximately $10,700,000 (December 31, 2014 - $1,100,000), assuming all other variables remained
constant. A 10% weakening of the U.S. dollar would have an opposite effect, assuming that all other variables remained constant.



| | (iii) | Price risk
| | ----- | ----------



| |  | The Company is exposed to price risk with respect to the Active Pharmaceutical Ingredient (“API”) used in research and development activities. The Company monitors API prices in the United States, Europe and Asia to determine the appropriate course of action to be taken by the Company. Management believes that the price risk concentration with respect to API is minimal.
| |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | (iv) | Fair value
| | ---- | ----------

IFRS requires that the Company
disclose information about the fair value of its financial assets and liabilities. Fair value estimates are made at the consolidated
statement of financial position dates based on relevant market information and information about the financial instrument. These
estimates are subjective in nature and involve uncertainties in significant matters of judgment and, therefore, cannot be determined
with precision. Changes in assumptions could significantly affect these estimates.



Cash is classified as loans and
receivables, measured at amortized cost. Accounts payable and accrued liabilities are classified as other financial liabilities,
which are measured at amortized cost.



The carrying amounts for cash,
accounts payable and accrued liabilities on the consolidated statements of financial position approximate fair value because of
the short term nature of these instruments.



-10-







|CYNAPSUS THERAPEUTICS INC.                                                
|--------------------------------------------------------------------------
|Notes to the Unaudited Condensed Interim Consolidated Financial Statements
|September 30, 2015                                                        
|(in Canadian dollars)                                                     



| | 5. | RISK MANAGEMENT (continued)
| | -- | ---------------------------



Capital risk management



The Company manages its
capital structure and makes adjustments to it, based on the funds available to the Company, in order to support its research
and development activities. The Company’s capital structure consists of share capital, warrants and share-based payments. The
Board of Directors does not establish quantitative return on capital criteria for management but rather relies on the
expertise of the Company’s management to sustain future development of the business.



The product candidates which the
Company currently has in its pipeline are in the research stage; as such, the Company is dependent on external financing to fund
its activities. In order to carry out the planned research and development and pay for administration costs, the Company will spend
its existing working capital and raise additional amounts as needed.



Management reviews its capital management
approach on an ongoing basis and believes that this approach, given the relative size of the Company, is reasonable.



There were no changes in the Company’s
approach to capital management during the three and nine months ended September 30, 2015. The Company and its subsidiary are not
subject to externally imposed capital requirements.



| | 6. | PROPERTY, PLANT AND EQUIPMENT
| | -- | -----------------------------



The following is a summary of property, plant and equipment
as at December 31, 2014 and September 30, 2015:



|                                        |  | Computer  |         |  | Furniture and |  |        | Leasehold    |  |  |        | 
|--------------------------------------- |  | --------- | ------- |  | ------------- |  | ------ | ------------ |  |  | ------ | 
|                                        |  | Equipment |         |  | Fixtures      |  |        | Improvements |  |  | Total  | 
|                                        |  | $         |         |  | $             |  |        | $            |  |  | $      | 
|Cost                                    |  |           |         |  |               |  |        |              |  |  |        | 
|Balance as at December 31, 2014         |  |           | 199,773 |  |               |  | 54,093 |              |  |  | 32,880 | 
|Additions                               |  |           | 164,241 |  |               |  | 12,043 |              |  |  | 38,174 | 
|Balance as at September 30, 2015        |  |           | 364,014 |  |               |  | 66,136 |              |  |  | 71,054 | 
|                                        |  |           |         |  |               |  |        |              |  |  |        | 
|Accumulated Depreciation                |  |           |         |  |               |  |        |              |  |  |        | 
|Balance as at December 31, 2014         |  |           | 10,934  |  |               |  | 10,982 |              |  |  | 7,000  | 
|Depreciation                            |  |           | 54,570  |  |               |  | 7,576  |              |  |  | 17,606 | 
|Balance as at September 30, 2015        |  |           | 65,504  |  |               |  | 18,558 |              |  |  | 24,606 | 
|                                        |  |           |         |  |               |  |        |              |  |  |        | 
|Net book value                          |  |           |         |  |               |  |        |              |  |  |        | 
|Net book value as at December 31, 2014  |  |           | 188,839 |  |               |  | 43,111 |              |  |  | 25,880 | 
|Net book value as at September 30, 2015 |  |           | 298,511 |  |               |  | 47,578 |              |  |  | 46,448 | 



-11-







|CYNAPSUS THERAPEUTICS INC.                                                
|--------------------------------------------------------------------------
|Notes to the Unaudited Condensed Interim Consolidated Financial Statements
|September 30, 2015                                                        
|(in Canadian dollars)                                                     



| | 7. | INTANGIBLE ASSETS
| | -- | -----------------



The following is a summary of intangible
assets as at December 31, 2014 and September 30, 2015:



|                                                       |  | APL-130277 |         |  | License   |  |         |       | 
|------------------------------------------------------ |  | ---------- | ------- |  | --------- |  | ------- | ----- | 
|                                                       |  | Patents    |         |  | Agreement |  |         | Total | 
|                                                       |  | $          |         |  | $         |  |         | $     | 
|Cost                                                   |  |            |         |  |           |  |         |       | 
|Balance as at December 31, 2014 and September 30, 2015 |  |            | 718,150 |  |           |  | 200,000 |       | 
|                                                       |  |            |         |  |           |  |         |       | 
|Accumulated Amortization                               |  |            |         |  |           |  |         |       | 
|Balance as at December 31, 2014                        |  |            | 143,628 |  |           |  | 200,000 |       | 
|Amortization                                           |  |            | 35,908  |  |           |  | -       |       | 
|Balance as at September 30, 2015                       |  |            | 179,536 |  |           |  | 200,000 |       | 
|                                                       |  |            |         |  |           |  |         |       | 
|Net book value                                         |  |            |         |  |           |  |         |       | 
|Net book value as at December 31, 2014                 |  |            | 574,522 |  |           |  | -       |       | 
|Net book value as at September 30, 2015                |  |            | 538,614 |  |           |  | -       |       | 



On December 22, 2011, the Company
completed the acquisition of 100% of the outstanding common shares of Adagio and certain indebtedness of Adagio. The acquisition
was accounted for as a purchase of assets by the Company, as Adagio did not meet the definition of a business.



On June 10, 2005, the Company entered
into a license agreement with a research and development company relating to technologies associated with the Company’s previous
drug development candidate. The license is for patents that have been issued in certain jurisdictions, which will expire in February
2023, and are currently pending in other jurisdictions. On December 31, 2014, due to the emphasis by the licensee on a different
product line in their development pipeline, and the lack of any progress on the licensed project, the Company reviewed the carrying
value of the intangible asset for potential impairment. The Company determined that there are no expected future cash flows attributable
to this asset and recorded an impairment charge of $94,449 to write down the carrying value of the intangible asset to zero.



ARx LLC Supply Agreement



On March 17, 2015, the Company entered
into an agreement with ARx LLC (“ARx”), whereby ARx assigned to the Company certain patents related to APL-130277 and
in exchange the agreement provides that ARx is the sole partner for formulation and process development activities for APL-130277
during the term of the agreement and the expectation of entering into a commercial supply agreement, under which ARx will be the
majority supplier of APL-130277 in the United States prior to filing for Food and Drug Administration (“FDA”) approval
of APL-130277. The agreement provides that the Company retain sole ownership of all filings with respect to APL-130277. The non-monetary
transaction has been recorded at nil, as the fair value of the patents received by the Company and considerations given up could
not be reliably measured.



-12-







|CYNAPSUS THERAPEUTICS INC.                                                
|--------------------------------------------------------------------------
|Notes to the Unaudited Condensed Interim Consolidated Financial Statements
|September 30, 2015                                                        
|(in Canadian dollars)                                                     



| | 8. | ACCOUNTS
                                         PAYABLE AND ACCRUED LIABILITIES
| | -- | ---------------------------------------------------------------------------------



The following is a summary
of accounts payable and accrued liabilities as at December 31, 2014 and September 30, 2015:





|                                            |  | September 30, 2015 |           |  | December 31, 2014 | 
|------------------------------------------- |  | ------------------ | --------- |  | ----------------- | 
|                                            |  | $                  |           |  | $                 | 
|Trade payables                              |  |                    | 3,490,358 |  |                   | 
|Due to related parties (Note 14)            |  |                    | 180,852   |  |                   | 
|Bonus accruals to related parties (Note 14) |  |                    | 314,000   |  |                   | 
|Other accrued liabilities                   |  |                    | 311,942   |  |                   | 
|                                            |  |                    | 4,297,152 |  |                   | 



| | 9. | SHARE
                                         CAPITAL
| | -- | ------------------------------------------------------



| | i) | Authorized common shares
| | -- | ------------------------



Unlimited number of common shares
with no par value



| | ii) | Issued and outstanding common shares
| | --- | ------------------------------------



On May 15, 2015, the Company
completed a share consolidation of the Company’s issued and outstanding common shares on the basis of one (1) new common
share for every sixteen (16) common shares issued and outstanding. All common shares, options, warrants and per share amounts
have been restated to give retrospective effect to the share consolidation.





|                                                             |  | Number
of 
Common Shares |           
|------------------------------------------------------------ |  | ------------------------ | ----------
|                                                             |  | #                        |           
|Balance as at December 31, 2014                              |  |                          | 5,020,885 
|Shares issued for cash – public offering                     |  |                          | 5,175,000 
|Shares issued for cash – private placement                   |  |                          | 1,377,467 
|Shares issued as acquisition milestone share-based payment   |  |                          | 69,960    
|Shares issued for cash from exercise of warrants             |  |                          | 491,228   
|Shares issued for cash from exercise of share-based payments |  |                          | 10,082    
|Balance as at September 30, 2015                             |  |                          | 12,144,622





On March 11, 2015, pursuant
to an amended agreement, the Company issued 69,960 common shares to former Adagio shareholders as an acquisition milestone share-based
payment (see Note 13, Acquisition Milestone Share-based Payment).



On March 31, 2015, the Company
announced the completion of a private placement of 1,377,467 common shares of the Company for gross proceeds of $20,981,579 (US$16,750,000).
The issue price of $15.23 per share represents a 20% discount to the five-day volume-weighted average price per common share on
the TSX as of the close of business on March 27, 2015. The common shares issued were subject to a hold period, which expired four
months plus one day from the date of issue. The Company incurred share issuance and broker commissions costs of $1,430,203 in
connection with this transaction.



-13-







|CYNAPSUS THERAPEUTICS INC.                                                
|--------------------------------------------------------------------------
|Notes to the Unaudited Condensed Interim Consolidated Financial Statements
|September 30, 2015                                                        
|(in Canadian dollars)                                                     



| | 9. | SHARE
                                         CAPITAL (continued)
| | -- | ------------------------------------------------------------------



| | ii) | Issued and outstanding common shares (continued)
| | --- | ------------------------------------------------



As part of the March 31, 2015
private placement, the Dexcel Pharma Group, a strategic pharmaceutical investor and significant shareholder of Cynapsus and which
also has two directors on the Board of Directors of the Company, subscribed for 271,381 common shares having an aggregate subscription
price of $4,133,684 (see Note 14, Related Party Transactions).



On June 23, 2015, the Company
completed an underwritten public offering in the United States of 5,175,000 common shares at a price to the public of US$14.00
per share, for gross proceeds of $89,309,115 (US$72,450,000), including the exercise in full of the underwriters’ option
to purchase additional common shares. The Company incurred share issuance and broker commissions costs of $8,091,455 in connection
with this transaction. The Company’s common shares are now dual listed on the NASDAQ Global Market and the TSX. As part
of the June 23, 2015 public offering in the United States, the Dexcel Pharma Group subscribed for 733,500 common shares having
an aggregate subscription price of $12,658,596 (US$10,269,000) (see Note 14, Related Party Transactions).



| | iii) | Warrants
| | ---- | --------



| |  | The number of warrants outstanding as at December 31, 2014 and September
                                         30, 2015 and changes during the nine months ended September 30, 2015 are as follows:
| |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------





|                                 |  | Number
    ofWarrants |           |   | Equity–Warrants |  |            | WeightedAverageExercisePrice/Share | 
|-------------------------------- |  | --------------------- | --------- | - | --------------- |  | ---------- | ---------------------------------- | 
|                                 |  | #                     |           |   | $               |  |            | $                                  | 
|Balance as at December 31, 2014  |  |                       | 3,752,182 |   |                 |  | 13,452,183 |                                    | 
|Exercised                        |  |                       | (491,228  | ) |                 |  | (1,534,662 | )                                  | 
|Balance as at September 30, 2015 |  |                       | 3,260,954 |   |                 |  | 11,917,521 |                                    | 



A summary of warrants
exercised during the nine months ended September 30, 2015 is as follows:



|Number
    ofWarrants |         |  | CashProceeds |  |           | ExercisePrice | 
|--------------------- | ------- |  | ------------ |  | --------- | ------------- | 
|#                     |         |  | $            |  |           | $             | 
|                      | 325,924 |  |              |  | 2,998,513 |               | 
|                      | 164,939 |  |              |  | 2,138,127 |               | 
|                      | 365     |  |              |  | 3,655     |               | 
|                      | 491,228 |  |              |  | 5,140,295 |               | 





-14-







|CYNAPSUS THERAPEUTICS INC.                                                
|--------------------------------------------------------------------------
|Notes to the Unaudited Condensed Interim Consolidated Financial Statements
|September 30, 2015                                                        
|(in Canadian dollars)                                                     



| | 9. | SHARE
                                         CAPITAL (continued)
| | -- | ------------------------------------------------------------------



| | iii) | Warrants (continued)
| | ---- | --------------------



Warrants issued and outstanding
as at September 30, 2015 are as follows:



|Number of  Warrants |           |  | Exercise  Price |  |       | Exercise  Trigger* |  |  | Expiry Date |  | Description
|------------------- | --------- |  | --------------- |  | ----- | ------------------ |  |  | ----------- |  | -----------
|#                   |           |  | $/ Share        |  |       | $/ Share           |  |  |             |  |            
|                    | 11,875    |  |                 |  | 16.00 |                    |  |  | 24.00       |  |            
|                    | 20,366    |  |                 |  | 10.00 |                    |  |  | -           |  |            
|                    | 7,887     |  |                 |  | 10.00 |                    |  |  | -           |  |            
|                    | 693,829   |  |                 |  | 9.20  |                    |  |  | 22.08       |  |            
|                    | 181,575   |  |                 |  | 9.20  |                    |  |  | 22.08       |  |            
|                    | 2,345,422 |  |                 |  | 12.96 |                    |  |  | 31.20       |  |            
|                    | 3,260,954 |  |                 |  |       |                    |  |  |             |  |            



*Note: Included in some
of the warrant agreements are provisions such that each warrant entitles the holder to purchase one common share at a price equal
to the exercise price per share for a period up to the expiry date, except that, subject to certain exceptions, the warrants will
be cancelled if they are not exercised within 30 days after written notice from the Company that the closing price of its common
shares on the principal stock exchange of the Company has been three times the unit price of the offering or more for 20 consecutive
trading days.



There were no warrants issued
during the three or nine months ended September 30, 2015. The weighted average grant date fair value of the warrants issued during
the year ended December 31, 2014 was $3.81. The weighted average contractual life remaining for the warrants as at September 30,
2015 is 3.22 years (December 31, 2014 - 3.71 years).



| | iv) | Share-based
                                         payments
| | --- | -------------------------------------------------------------



The Company has in place a stock
option plan for the purchase of common shares by its directors, officers, employees and other service providers. No amounts are
paid or payable by the recipient on receipt of the option. The options carry neither rights to dividends nor voting rights. Options
may be exercised at any time from the date of vesting to the date of their expiry. The number of options granted is approved by
the Board of Directors. All options expire up to 365 days after the resignation of an employee or director and expire 90 days
after the resignation of a consultant.



The aggregate number of common
shares reserved for issuance under the stock option plan is a maximum of 10% of the issued and outstanding common shares of the
Company. As at September 30, 2015, there were a total of 973,017 options outstanding, representing 8.0% of the issued and outstanding
common shares of the Company (December 31, 2014 – 340,665 options, and 6.8%, respectively). No one person shall be granted
options representing more than 5% of the issued and outstanding common shares of the Company in a 12-month period. Option grants
to persons providing consulting and investor services may not exceed 2% of the issued and outstanding common shares of the Company
in any 12-month period. The options are non-assignable and non-transferable and may be granted for a term not exceeding 10 years.
The exercise price of the options is fixed by the Board of Directors of the Company and shall not be lower than the market price
(as defined by the TSX) of the shares at the time of grant, subject to all applicable regulatory requirements.



-15-







|CYNAPSUS THERAPEUTICS INC.                                                
|--------------------------------------------------------------------------
|Notes to the Unaudited Condensed Interim Consolidated Financial Statements
|September 30, 2015                                                        
|(in Canadian dollars)                                                     



| | 9. | SHARE
                                         CAPITAL (continued)
| | -- | ------------------------------------------------------------------



| | iv) | Share-based payments (continued)
| | --- | --------------------------------



The number of stock options outstanding
as at December 31, 2014 and September 30, 2015, and changes during the nine months ended September 30, 2015 are as follows:





|                                             |  | Number
    ofOptions |         |   | WeightedAverageExercisePrice/Share | 
|-------------------------------------------- |  | -------------------- | ------- | - | ---------------------------------- | 
|                                             |  | #                    |         |   | $                                  | 
|Options outstanding as at December 31, 2014  |  |                      | 340,653 |   |                                    | 
|Granted                                      |  |                      | 662,393 |   |                                    | 
|Exercised                                    |  |                      | (10,082 | ) |                                    | 
|Forfeited                                    |  |                      | (16,510 | ) |                                    | 
|Expired                                      |  |                      | (3,437  | ) |                                    | 
|Options outstanding as at September 30, 2015 |  |                      | 973,017 |   |                                    | 





On April 2, 2015, the Company
granted stock options to acquire 248,743 common shares. The stock options were granted to officers, directors and employees of
the Company at an exercise price equal to $21.76 per share and expire 5 years from the date of grant. 39,686 options vested immediately.
For 209,057 of the options, one-quarter vested immediately, one-quarter will vest in one year, one-quarter will vest in two years,
and one-quarter will vest in three years.



On September 18, 2015, the
Company granted stock options to acquire 413,650 common shares. The stock options were granted to officers, directors and employees
of the Company at an exercise price equal to $21.40 per share and expire 10 years from the date of grant. 89,500 options will
vest in one year. For 324,150 of the options, one-fifth vested immediately, one-fifth will vest in one year, one-fifth will vest
in two years, one-fifth will vest in three years, and one-fifth will vest in four years.



Weighted average assumptions
used in the Black-Scholes option pricing model to determine the fair value of stock options granted during the nine months ended
September 30, 2015 are as follows:



|Exercise price                                                     |  | $ | 21.54      |  
|------------------------------------------------------------------ |  | - | ---------- | -
|Grant date share price                                             |  | $ | 21.54      |  
|Risk-free interest rate                                            |  |   | 0.96       | %
|Expected dividend yield                                            |  |   | -          |  
|Expected volatility                                                |  |   | 100.1      | %
|Expected option term                                               |  |   | 4.85 years |  
|Weighted average fair value of options
    granted during the year |  | $ | 15.52      |  



For the three months ended
September 30, 2015, share-based compensation expense attributable to the operating, general and administrative function was $850,501
(September 30, 2014 – $173,433) and to the research and development function was $640,869 (September 30, 2014 – $38,935).
For the nine months ended September 30, 2015, share-based compensation expense attributable to the operating, general and administrative
function was $1,987,440 (September 30, 2014 – $532,082) and to the research and development function was $1,379,004 (September
30, 2014 – $98,382).



-16-







|CYNAPSUS THERAPEUTICS INC.                                                
|--------------------------------------------------------------------------
|Notes to the Unaudited Condensed Interim Consolidated Financial Statements
|September 30, 2015                                                        
|(in Canadian dollars)                                                     



| | 9. | SHARE
                                         CAPITAL (continued)
| | -- | ------------------------------------------------------------------



| | iv) | Share-based payments (continued)
| | --- | --------------------------------



Stock options outstanding
and exercisable as at September 30, 2015 are as follows:



|Number of Options 
    Outstanding |         |  | Number of Options 
    Vested and  Exercisable |  |         | Effective Exercise Price/ 
    Share |  | Expiry Date | 
|---------------------------------- | ------- |  | ---------------------------------------------- |  | ------- | ------------------------------------ |  | ----------- | 
|#                                  |         |  | #                                              |  |         | $                                    |  |             | 
|                                   | 312     |  |                                                |  | 312     |                                      |  | 16.00       | 
|                                   | 3,124   |  |                                                |  | 3,124   |                                      |  | 16.00       | 
|                                   | 2,500   |  |                                                |  | 2,500   |                                      |  | 16.00       | 
|                                   | 17,185  |  |                                                |  | 17,185  |                                      |  | 16.00       | 
|                                   | 1,625   |  |                                                |  | 1,625   |                                      |  | 16.00       | 
|                                   | 937     |  |                                                |  | 937     |                                      |  | 16.00       | 
|                                   | 23,332  |  |                                                |  | 23,332  |                                      |  | 7.36        | 
|                                   | 55,998  |  |                                                |  | 55,998  |                                      |  | 5.76        | 
|                                   | 1,562   |  |                                                |  | 1,562   |                                      |  | 4.96        | 
|                                   | 137,749 |  |                                                |  | 137,749 |                                      |  | 10.40       | 
|                                   | 72,393  |  |                                                |  | 27,759  |                                      |  | 19.84       | 
|                                   | 242,650 |  |                                                |  | 91,955  |                                      |  | 21.76       | 
|                                   | 413,650 |  |                                                |  | 64,830  |                                      |  | 21.40       | 
|                                   | 973,017 |  |                                                |  | 428,868 |                                      |  |             | 



The total number of common
shares that were issuable pursuant to stock options that were exercisable as at September 30, 2015 is 428,868 (December 31, 2014
– 222,317). The weighted average exercise price of these options as at September 30, 2015 is $14.65 (December 31, 2014 –
$12.22).



The weighted average contractual
life remaining for the exercisable and outstanding shares issuable on exercise of stock options as at September 30, 2015 is 4.47
years and 6.44 years, respectively (December 31, 2014 – 3.59 years and 3.98 years).



| | 10. | RESEARCH
                                         AND DEVELOPMENT
| | --- | -----------------------------------------------------------------



| |  | Components of research and development expenses for the three and
                                         nine months ended September 30, 2015 and September 30, 2014, respectively, are as follows:
| |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|                               |  | Three
                                         months endedSeptember 30, |           |  | Nine
                                         months endedSeptember 30, | 
|------------------------------ |  | ------------------------------------------------------------------------ | --------- |  | ----------------------------------------------------------------------- | 
|                               |  | 2015                                                                     |           |  | 2014                                                                    | 
|                               |  | $                                                                        |           |  | $                                                                       | 
|Salaries, benefits and bonuses |  |                                                                          | 361,638   |  |                                                                         | 
|Other research and development |  |                                                                          | 6,463,456 |  |                                                                         | 
|                               |  |                                                                          | 6,825,094 |  |                                                                         | 



-17-







|CYNAPSUS THERAPEUTICS INC.                                                
|--------------------------------------------------------------------------
|Notes to the Unaudited Condensed Interim Consolidated Financial Statements
|September 30, 2015                                                        
|(in Canadian dollars)                                                     



| | 11. | OPERATING,
                                         GENERAL AND ADMINISTRATIVE
| | --- | ------------------------------------------------------------------------------



| |  | Components of operating, general and administrative expenses
    for the three and nine months ended September 30, 2015 and September 30, 2014, respectively, are as follows:
| |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|                                            |  | Three
                                         months endedSeptember 30, |           |  | Nine
                                         months endedSeptember 30, | 
|------------------------------------------- |  | ------------------------------------------------------------------------ | --------- |  | ----------------------------------------------------------------------- | 
|                                            |  | 2015                                                                     |           |  | 2014                                                                    | 
|                                            |  | $                                                                        |           |  | $                                                                       | 
|Salaries, benefits, bonuses and board fees  |  |                                                                          | 503,315   |  |                                                                         | 
|Other operating, general and administrative |  |                                                                          | 1,312,231 |  |                                                                         | 
|                                            |  |                                                                          | 1,815,546 |  |                                                                         | 



| | 12. | RESEARCH
                                         GRANT
| | --- | -------------------------------------------------------



On August 8, 2012, the Company
was awarded a grant of US$947,925 ($942,977) from The Michael J. Fox Foundation (“MJFF”) for Parkinson’s Research
to support clinical studies to develop the Company’s product candidate APL-130277, a sublingual thin film strip reformulation
of apomorphine. The grant was awarded under the Foundation's The Edmond J. Safra Core Programs for Parkinson’s Research,
Clinical Intervention Awards aimed at supporting human clinical trials testing promising Parkinson’s disease therapies that
may significantly and fundamentally improve treatment for people with Parkinson’s disease. Funds awarded by MJFF are to
be used solely for the specified project and are conditioned on meeting certain milestones and deliverables. The first milestone
payment of US$297,825 ($289,516) was received on September 20, 2012 and was fully used by December 31, 2012. The second milestone
payment of US$412,087 ($410,053) was received on January 30, 2013 and was fully used by December 31, 2013. On December 16, 2013,
the Company received the final milestone payment for the first grant of US$238,012 ($254,102). As at December 31, 2013, $239,969
was recorded as deferred grant proceeds, and was fully used and recognized into income in the three months ended March 31, 2014.



On July 3, 2014, the Company
was awarded a second grant of US$500,000 from MJFF to support clinical studies to develop APL-130277. This MJFF grant was used
to fund the Company’s CTH-105 clinical study. Funds awarded by MJFF are to be used solely for the specified project and
are conditioned on meeting certain milestones and deliverables. The first milestone payment of US$100,000 ($112,000) was received
on September 4, 2014 and was recognized as research grant income in the third quarter of 2014. The second milestone payment of
US$300,000 ($342,660) was received on December 9, 2014 and was recognized as research grant income in the fourth quarter of 2014.
The final milestone payment of US$100,000 ($127,710) was received on March 13, 2015 and was recognized as research grant income
in the first quarter of 2015.



As part of the MJFF grant agreement,
Cynapsus is required to support further Parkinson’s disease research by making up to US$1,000,000 in contributions to MJFF
based on future sales of APL-130277 beginning the year that the Company posts net sales of APL-130277 in excess of US$5,000,000.



-18-







|CYNAPSUS THERAPEUTICS INC.                                                
|--------------------------------------------------------------------------
|Notes to the Unaudited Condensed Interim Consolidated Financial Statements
|September 30, 2015                                                        
|(in Canadian dollars)                                                     



| | 13. | ACQUISITION
                                         MILESTONE SHARE-BASED PAYMENT
| | --- | ----------------------------------------------------------------------------------



On December 22, 2011, the Company
completed the acquisition of 100% of the outstanding common shares of Adagio and certain indebtedness of Adagio (the “Transaction”).
The Transaction was structured as a share exchange with Adagio shareholders receiving newly issued common shares of the Company
in exchange for all of the issued and outstanding shares of Adagio. The Transaction also provided for contingent payments upon
the completion of operational milestones. On January 28, 2015, the Company and the former Adagio shareholders, who are substantially
represented by key management and therefore are related parties, signed an amendment to the Adagio Share Purchase Agreement to
better reflect the contemplated agreement between the parties resulting in an amended condition as described in milestone payment
(a) below. Adagio shareholders were entitled to the following additional payments pursuant to the Transaction:



| | a) | a payment of $1,500,000 conditional upon the successful completion
    of the Company’s Phase 2 CTH-105 study in Parkinson’s patients, and written confirmation from the FDA, that one
    Phase 3 efficacy study, one Phase 3 safety study, a bridging study and an ease-of-use study will be sufficient to allow the
    Company to pursue approval for a new drug application pursuant to Section 505(b)(2) of the United States Federal Food, Drug
    and Cosmetic Act, as amended, to be satisfied by the issuance of common shares at a deemed value equal to the 30-day volume
    weighted average trading price (“VWAP”) immediately prior to the first public announcement of the receipt of written
    minutes from the FDA confirming the above; and
| | -- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | b) | a payment of $2,500,000 conditional upon the successful completion
    of the APL-130277 final safety study, to be satisfied by the issuance of common shares at a deemed value equal to the 30 day
    VWAP immediately prior to the first public announcement of the results of such study. This study had not been started as at
    September 30, 2015.
| | -- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



With respect
to the payments described in (a) and (b) above, the VWAP of the common shares may not be less than the “discounted market
price” as defined in the policies of the Exchange.



On March
11, 2015, the Company announced the results of the end of Phase 2 meeting with the FDA, which triggered the milestone payment
described in (a) above to former Adagio shareholders of 69,960 common shares at a deemed value of $21.44 per common share. The
fair value of these shares, in the amount of $1,500,000, was recorded as an expense. See Note 14, Related Party Transactions.



-19-







|CYNAPSUS THERAPEUTICS INC.                                                
|--------------------------------------------------------------------------
|Notes to the Unaudited Condensed Interim Consolidated Financial Statements
|September 30, 2015                                                        
|(in Canadian dollars)                                                     



| | 14. | RELATED
                                         PARTY TRANSACTIONS
| | --- | -------------------------------------------------------------------



Key management personnel are
those persons having authority and responsibility for planning, directing and controlling the activities of the Company, including
directors and senior executives. Compensation paid or payable to key management was composed of the following during the three
and nine months ended September 30, 2015 and September 30, 2014, respectively:



|                                                            |  | Three Months Ended
    September 30, |           |  | Nine Months Ended
    September 30, | 
|----------------------------------------------------------- |  | ------------------------------------ | --------- |  | ----------------------------------- | 
|                                                            |  | 2015                                 |           |  | 2014                                | 
|                                                            |  | $                                    |           |  | $                                   | 
|Short-term salaries, benefits and bonuses
    to executives |  |                                      | 351,029   |  |                                     | 
|Directors’ fees                                             |  |                                      | 95,750    |  |                                     | 
|Share-based payments                                        |  |                                      | 5,824,258 |  |                                     | 
|                                                            |  |                                      | 6,271,037 |  |                                     | 



Share-based payments presented
above represent the grant date fair value of options issued to key management during the period.



As at September 30, 2015, included
in accounts payable and accrued liabilities was $180,852 (December 31, 2014 - $128,713) due to officers and directors of the Company
(See Note 8, Accounts Payable and Accrued Liabilities). These amounts are unsecured and non-interest bearing with no fixed terms
of repayment. As at September 30, 2015, $314,000 was accrued as bonuses to related parties (December 31, 2014 - $508,710).



The Company’s executive
agreements provide for additional payments in the event of termination without cause (see Note 15, Commitments and Contingent
Liabilities).



On March 11, 2015, the Company
announced the results of the end of Phase 2 meeting with the FDA, which triggered a milestone payment to former Adagio shareholders
of 69,960 common shares. Of the total, 37,652 shares were issued to the Company’s President and Chief Executive Officer
(see Note 13, Acquisition Milestone Share-based Payment).



As part of the March 31, 2015
private placement, the Dexcel Pharma Group, a strategic pharmaceutical investor and significant shareholder of Cynapsus, and which
also has two directors on the Board of Directors of the Company, subscribed for 271,381 common shares having an aggregate subscription
price of $4,133,684 (see Note 9, Share Capital).



As part of the June 23, 2015
public offering in the United States, the Dexcel Pharma Group subscribed for 733,500 common shares having an aggregate subscription
price of Cdn$12,658,596 (US$10,269,000) (See Note 9, Share Capital).



During the three and nine month
periods ended September 30, 2015, the Company paid fees of $14,356 to one of its directors on account of consulting services rendered.



-20-







|CYNAPSUS THERAPEUTICS INC.                                                
|--------------------------------------------------------------------------
|Notes to the Unaudited Condensed Interim Consolidated Financial Statements
|September 30, 2015                                                        
|(in Canadian dollars)                                                     



| | 15. | COMMITMENTS AND CONTINGENT LIABILITIES
| | --- | --------------------------------------



As at September 30, 2015, the
Company had research and development and other service contract commitments, as well as minimum future payments under operating
leases for the periods presented as follows:



|                              |  | Less than 1 year |            |  | 1-2 years |  |           | Total | 
|----------------------------- |  | ---------------- | ---------- |  | --------- |  | --------- | ----- | 
|                              |  | $                |            |  | $         |  |           | $     | 
|Purchase Obligations          |  |                  | 18,735,000 |  |           |  | 5,037,000 |       | 
|Operating Leases              |  |                  | 118,000    |  |           |  | -         |       | 
|Total Contractual Obligations |  |                  | 18,853,000 |  |           |  | 5,037,000 |       | 



Of the total purchase obligations,
one consulting contract contains a change of control clause in which, subject to certain conditions, the Company agrees to pay
the vendor an amount equal to fees based on the minimum billable hours for the remainder of the agreement term. As a triggering
event has not taken place, these contingent payments have not been recognized in these financial statements. The Company does
not have a practicable estimate for the expected value of this contingent liability due to the nature of the triggering event.
As at September 30, 2015, the maximum amount of any contingent liability, based on a remaining term of eight months, was $526,861,
which was included in the amount of unrecognized purchase obligations.



The Company is a party to certain
management contracts for its executive officers and employees. Minimum management contract termination commitments remaining under
the agreements, for termination without cause, are approximately $2,035,413 and would be payable within one year.



See also Note 12, Research
Grant and Note 13, Acquisition Milestone Share-Based Payment.



-21-







ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS.



The following “Management’s
Discussion and Analysis of Financial Condition and Results of Operations”, or MD&A, relates to the financial position
and results of operations of Cynapsus for the three and nine months ended September 30, 2015 and should be read in conjunction
with our unaudited condensed interim consolidated financial statements and related notes for the three and nine months ended September
30, 2015 as well as our audited annual consolidated financial statements and related notes for the year ended December 31, 2014
included in the prospectus that forms a part of our registration statement on Form F-10 (File No. 333-204226), as supplemented
and filed with the SEC on June 18, 2015. Our unaudited condensed interim consolidated financial statements for the period ended
September 30, 2015 and related notes have been prepared in compliance with International Accounting Standard 34, Interim Financial
Reporting. The policies applied in the unaudited condensed interim consolidated financial statements are based on International
Financial Reporting Standards, or IFRS, as issued by the International Accounting Standards Board.



The discussion and
analysis within this MD&A are as of November 10, 2015, unless otherwise noted.



In this MD&A,
unless otherwise indicated, all dollar amounts are expressed in Canadian dollars. The term “dollars” and the symbols
“$” and “Cdn$” refer to Canadian dollars and the term “U.S. dollars” and the symbol “US$”
refer to United States dollars.



The following discussion
contains forward-looking statements that reflect our plans, estimates and beliefs. Our actual results could differ materially
from those discussed in the forward-looking statements and you are cautioned not to place undue reliance on forward-looking statements.
Factors that could cause or contribute to these differences include those discussed below and elsewhere in this Quarterly Report
on Form 10-Q, particularly in “Special Note Regarding Forward-Looking Statements” and “Risk Factors.”
The forward-looking statements included in this Quarterly Report on Form 10-Q are made only as of the date hereof.



Overview



Cynapsus is a specialty
central nervous system, or CNS, pharmaceutical company developing and preparing to commercialize a Phase 3, fast-acting, easy-to-use,
sublingual thin film for the on-demand turning ON of debilitating OFF episodes associated with Parkinson’s disease, or PD.
PD is a chronic, progressive neurodegenerative disease characterized by motor symptoms including tremor at rest, rigidity and
impaired movement as well as significant non-motor symptoms such as cognitive impairment and mood disorders. The re-emergence
of PD symptoms is referred to as an OFF episode. We recently successfully completed a Phase 2 clinical trial for our product candidate,
APL-130277, a sublingual formulation of apomorphine hydrochloride, or apomorphine. Apomorphine is the only molecule approved for
acute, intermittent treatment of OFF episodes for advanced PD patients, but is currently only approved as a subcutaneous injection
in the United States. APL-130277 is a “turning ON” medication designed to rapidly, safely and reliably convert a PD
patient from the OFF to the ON state while avoiding many of the issues associated with subcutaneous delivery of apomorphine. It
is designed to convert all types of OFF episodes, including morning OFF episodes, often considered the most difficult to treat.
We have recently initiated our Phase 3 clinical program for APL-130277, relying on the abbreviated Section 505(b)(2) regulatory
pathway in the United States, and we intend to submit a new drug application, or NDA, in 2016.



Since our inception
in 2004, we have devoted substantially all of our resources to business planning, capital raising and identifying and developing
our product candidates, preparing to conduct clinical studies of our product candidates, providing general and administrative
support for these operations and protecting our intellectual property. We have funded our operations primarily through the public
and private placements of common shares and warrants, the exercise of warrants, and the issuance of secured debentures. From inception,
we have received net proceeds of approximately Cdn$149.0 million from such transactions. As of September 30, 2015, we had cash
in the amount of Cdn$109.5 million.



-22-







We expect to continue
to incur significant expenses and increasing operating losses for at least the next several years. We also expect expenses will
increase substantially in connection with our ongoing activities, as we:



| | · | continue the development of our APL-130277 product candidate, including conducting planned
    and future clinical trials;
| | - | --------------------------------------------------------------------------------------------------------------------------



| | · | continue to engage third-party providers to supply and manufacture our clinical study materials
    and to develop large-scale manufacturing capabilities;
| | - | ----------------------------------------------------------------------------------------------------------------------------------------------------------



| | · | seek regulatory approvals for our product candidate in the United States, Europe and other
    jurisdictions;
| | - | -------------------------------------------------------------------------------------------------------------



| | · | add personnel, including personnel to support our product development and future commercialization
    of APL-130277 in the United States;
| | - | ------------------------------------------------------------------------------------------------------------------------------------------



| | · | add operational, financial and management information systems;
| | - | --------------------------------------------------------------



| | · | maintain, leverage and expand our intellectual property portfolio; and
| | - | ----------------------------------------------------------------------



| | · | operate as a public company in the United States and Canada.
| | - | ------------------------------------------------------------



We are a clinical
stage company and have not generated any revenue. We have incurred significant losses and negative cash flows from operations
since our inception. As of September 30, 2015, we had a deficit accumulated of Cdn$51.5 million and expect to continue to incur
significant losses for the foreseeable future. Management expects our research and development and general and administrative
expenses to continue to increase substantially for the foreseeable future and, as a result, we may need additional capital to
fund operations, which may be obtained through one or more public or private equity or debt financings, or other sources such
as potential licensing or partnership arrangements.



Recent Developments



On February 4, 2015,
we held our End-of-Phase 2 meeting with the FDA. We will follow Section 505(b)(2) of the FDCA for the development of APL-130277
in the U.S. The drug substance (apomorphine) in APL-130277 is identical to the active pharmaceutical ingredient in the FDA approved
subcutaneous injection, Apokyn®, and APL-130277 is designed for similar usage but potentially for a broader range of PD patients.
The Section 505(b)(2) regulatory pathway will require us to provide statistically significant clinical evidence that PD patients
experience improvement in their motor function as a result of delivery of apomorphine via the sublingual thin film route compared
to placebo.



On March 11, 2015,
following the End-of-Phase 2 meeting with the FDA, we announced that an agreement was reached on the design, duration and size
for the Phase 3 program clinical studies, as well as for primary and key secondary endpoints. As a result, we have initiated a
pivotal Phase 3 program evaluating the safety and efficacy of APL-130277 in PD patients.



On March 12, 2015,
Tamar Howson was appointed to our board of directors. Ms. Howson is a seasoned business development executive within the pharmaceutical
industry, having formerly served as Senior Vice President at both Bristol-Myers Squibb and SmithKline Beecham. Ms. Howson currently
serves as a business development and strategy consultant to biopharmaceutical companies and she also serves as a director at Oxigene
Pharmaceuticals and Organovo. She has formerly served as a director at several biotechnology companies, including Actavis, Ariad,
Idenix Pharmaceuticals, NPS Pharmaceuticals, SkyePharma and Warner Chilcott.



On March 31, 2015,
we announced the completion of a private placement of 1,377,467 common shares for gross proceeds of approximately Cdn$21.0 million
(approximately US$17 million). The financing was led by funds associated with OrbiMed, Aisling Capital and Venrock, with participation
from various other institutional investors, including existing shareholders Broadfin Capital, Sphera Funds Management, Pura Vida
Investments, DAFNA Capital Management and Dexcel Pharma Technologies Ltd./Dexxon Holdings Ltd.



-23-







On April 22,
2015, we presented data at the American Academy of Neurology annual meeting that demonstrated that a minimum efficacious
plasma threshold of apomorphine was required to convert a patient from the OFF state to the ON state. APL-130277 reached this
threshold in as early as 10 minutes and levels were maintained over this threshold through 90 minutes after dosing. This
translated to clinically meaningful improvement in motor function as assessed by the Movement Disorders Society UPDRS Part
III (a newer version of the UPDRS Part III scale), or MDS-UPDRS Part III, score.



On May 15, 2015, we
announced the filing of a registration statement with the SEC relating to our initial public offering in the United States of
our common shares and the filing of an application to list our common shares on The NASDAQ Stock Market LLC, or NASDAQ. We also
announced an amendment to our articles to consolidate our issued and outstanding common shares on the basis of one post-consolidation
common share for 16 pre-consolidation common shares to facilitate the proposed listing on NASDAQ.



On June 4, 2015, we
announced the issuance of a U.S. Patent No. 9,044,475 providing broad coverage for sublingual apomorphine.  This patent is
solely owned by Cynapsus and granted with claims that provide us with protection of pharmaceutical dosage forms that combine apomorphine
hydrochloride particles with an organic pH neutralizing agent and a permeation enhancer in a sublingual film. This patent is scheduled
to expire in June of 2030 and covers APL-130277 and related formulations. The issued patent is the third to issue as a U.S. patent
from our patent application filings directed to sublingual apomorphine therapies.



On June 18, 2015,
following the pricing of our initial public offering in the United States, our common shares commenced trading on the NASDAQ Global
Market under the symbol “CYNA”.  Our common shares also continue to be listed on the Toronto Stock Exchange,
or TSX, under the symbol “CTH.”  On June 23, 2015, we announced the completion of our initial public offering
in the United States of 5,175,000 common shares for total gross proceeds of approximately Cdn$89.3 million (approximately US$72.5
million), including the exercise in full of the underwriters’ option to purchase additional common shares.



On June 25, 2015,
we announced that we presented data from clinical trials of APL-130277 at the 19th International Congress of Parkinson’s
Disease and Movement Disorders (MDS) in San Diego, California, showing APL-130277 significantly improved PD symptoms (as measured
by MDS-UPDRS Part III), rapidly turning patients from the OFF to ON state and was generally safe and well tolerated.



On June 29, 2015,
we announced enrollment of the first patient in the CTH-300 clinical trial, a pivotal Phase 3 study to examine the efficacy, safety
and tolerability of APL-130277 for the acute treatment of OFF episodes in patients with PD. The CTH-300 trial is a double-blind,
placebo-controlled, parallel-design study with an estimated enrollment of 126 PD patients in 35 centers who have at least one
OFF episode every 24 hours, with total OFF time of at least two hours per day. The study objective is to evaluate the efficacy
and safety of APL-130277 versus placebo in patients with PD. The 126 patients will each be observed for 12 weeks, with dosing
at home and in clinic. The primary endpoint will be measured at week 12 in clinic and will be the mean change in the MDS-UPDRS
Part III score at 30 minutes after dosing. The key secondary endpoint will be the percentage of patients who convert from the
OFF to the ON state at or before 30 minutes of dosing with APL-130277 in clinic at the week 12 visit.



On September 2, 2015,
we announced enrollment of the first patient in the CTH-301 clinical trial, a pivotal Phase 3 study to examine the safety and
tolerability of APL-130277 for the acute treatment of OFF episodes in patients with PD. The CTH-301 trial is a 6-month, open-label,
single arm safety study in PD patients who have at least one OFF episode every 24 hours, with total OFF time of at least two hours
per day. The primary endpoint for the study is the safety and tolerability of APL-130277 in patients with PD. The secondary endpoints
examine efficacy variables including the change in the MDS-UPDRS Part III scores over the 6-months of treatment. Sites will recruit
patients over several months, with each patient being evaluated for six months. An estimated 226 patients will be enrolled, including
up to 126 who had been enrolled in the CTH-300 efficacy study and rolled over to this study, plus an additional 100 new patients.



-24-







Results of Operations – Comparison of the three months
ended September 30, 2015 and the three months ended September 30, 2014



Loss and Loss Per Share



For the three months ended September
30,



|                                 |  | 2015 (Cdn$) |           |  | 2014 (Cdn$) |  |           | Cdn$ change in
    2015 |  |  | % change in
    2015 |  
|-------------------------------- |  | ----------- | --------- |  | ----------- |  | --------- | ----------------------- |  |  | -------------------- | -
|Loss                             |  |             | 2,886,965 |  |             |  | 1,691,808 |                         |  |  | 1,195,157            |  
|Basic and diluted loss per share |  |             | 0.24      |  |             |  | 0.34      |                         |  |  | (0.10                | )



Net
loss for the three months ended September 30, 2015 exceeded the loss for the three months ended September 30, 2014 due mainly
to higher research and development program costs related to the APL-130277 Phase 3 clinical program, higher personnel costs with
the number of staff increasing from eight to 19 people, higher professional and consulting fees, investor relations and shareholder
relations costs, and higher share-based compensation expenses. Higher expenditures in the three months ended September 30, 2015
were partially offset by large unrealized foreign exchange gains upon currency translation.



Basic
loss per share is calculated using the weighted average number of common shares outstanding during the period. As a result of
losses in the respective periods, there is no dilutive loss per share calculation.



The
weighted average number of common shares outstanding for the three months ended September 30, 2015 was 12,126,742 (September 30,
2014 – 4,935,357). The weighted average number of common shares outstanding increased primarily as a result of 1,377,467
common shares issued in a private placement on March 31, 2015, and 5,175,000 common shares issued in our initial public offering
in the United States on June 23, 2015.



Research and Development (R&D)



For the three months ended September
30,



|                               |  | 2015 (Cdn$) |           |  | 2014 (Cdn$) |  |           | Cdn$ change in
    2015 |  |  | % change in
    2015 | 
|------------------------------ |  | ----------- | --------- |  | ----------- |  | --------- | ----------------------- |  |  | -------------------- | 
|Salaries, benefits and bonuses |  |             | 361,639   |  |             |  | 65,211    |                         |  |  | 296,428              | 
|Other R&D                      |  |             | 6,463,455 |  |             |  | 1,181,843 |                         |  |  | 5,281,612            | 
|Total R&D                      |  |             | 6,825,094 |  |             |  | 1,247,054 |                         |  |  | 5,578,040            | 



Research
and development expenses for the three months ended September 30, 2015 were substantially higher than for the three months ended
September 30, 2014 due to increased activity associated with the APL-130277 program. Expenditures increased as a result of increases
in salaries and benefits associated with additional staff, consulting, clinical research, packaging development, patent protection,
analytics, and scale-up chemistry, manufacturing and controls, or CMC, work for APL-130277. Higher expenditures in the three months
ended September 30, 2015 were partially offset by large unrealized foreign exchange gains upon currency translation.



-25-







Operating, General and Administrative
(OG&A)



For the three months ended September
30,



|                                           |  | 2015 (Cdn$) |           |  | 2014 (Cdn$) |  |           | Cdn$ change in
    2015 |  |  | % change in
    2015 | 
|------------------------------------------ |  | ----------- | --------- |  | ----------- |  | --------- | ----------------------- |  |  | -------------------- | 
|Salaries, benefits, bonuses and board fees |  |             | 503,314   |  |             |  | 425,735   |                         |  |  | 77,579               | 
|Other OG&A                                 |  |             | 1,312,232 |  |             |  | 580,108   |                         |  |  | 732,124              | 
|Total OG&A                                 |  |             | 1,815,546 |  |             |  | 1,005,843 |                         |  |  | 809,703              | 



OG&A
costs for the three months ended September 30, 2015 were higher than for the comparable period in 2014 due mainly to increases
in salaries and benefits associated with the addition of new staff and higher employee base salaries, investor and public relations
activities, professional and consulting fees, and travel costs.



Other Expenses (Recoveries)



For the three months ended September
30,



|                                                            |  | 2015 (Cdn$) |            |   | 2014 (Cdn$) |  |          | Cdn$ change in
    2015 |  |  | % change in
    2015 |  
|----------------------------------------------------------- |  | ----------- | ---------- | - | ----------- |  | -------- | ----------------------- |  |  | -------------------- | -
|Share-based payments                                        |  |             | 1,491,370  |   |             |  | 212,368  |                         |  |  | 1,279,002            |  
|Amortization of intangible assets                           |  |             | 11,970     |   |             |  | 14,747   |                         |  |  | (2,777               | )
|Depreciation of property, plant and equipment               |  |             | 38,051     |   |             |  | 2,923    |                         |  |  | 35,128               |  
|Unrealized foreign exchange (gain) loss                     |  |             | (7,262,033 | ) |             |  | (644,660 | )                       |  |  | (6,617,373           | )
|Research grant                                              |  |             | -          |   |             |  | (112,000 | )                       |  |  | 112,000              |  
|Recovery on scientific research                             |  |             | (30,924    | ) |             |  | (21,717  | )                       |  |  | (9,207               | )
|Interest income net of interest expense and related charges |  |             | (2,109     | ) |             |  | (12,750  | )                       |  |  | 10,641               |  





Share-based
payments increased to Cdn$1,491,370 for the three months ended September 30, 2015 from Cdn$212,368 for the three months ended
September 30, 2014, primarily due to the expense related to 413,650 stock options granted on September 18, 2015, as well as compensation
expense recognized over the vesting period for stock options previously granted. There were no grants of stock options during
the three months ended September 30, 2014.



Foreign
exchange gains for three months ended September 30, 2015 were Cdn$7,262,033 compared to Cdn$644,660 in the three months ended
September 30, 2014 due to unrealized gains on significantly higher U.S. dollar cash balances on hand at September 30, 2015,
combined with a significant strengthening of the U.S. dollar, compared to September 30, 2014. As at September 30, 2015, we had
cash of US$81,434,055 denominated in U.S. dollars, compared to US$12,317,433 as at September 30, 2014.



-26-







Results of Operations – Comparison of the nine months
ended September 30, 2015 and the nine months ended September 30, 2014



Loss and Loss Per Share



For the nine months ended September
30,



|                                 |  | 2015 (Cdn$) |            |  | 2014 (Cdn$) |  |           | Cdn$ change in
    2015 |  |  | % change in
    2015 | 
|-------------------------------- |  | ----------- | ---------- |  | ----------- |  | --------- | ----------------------- |  |  | -------------------- | 
|Loss                             |  |             | 18,939,906 |  |             |  | 5,718,138 |                         |  |  | 13,221,768           | 
|Basic and diluted loss per share |  |             | 2.30       |  |             |  | 1.44      |                         |  |  | 0.86                 | 



Net
loss for the nine months ended September 30, 2015 exceeded the loss for the nine months ended September 30, 2014 due mainly to
higher research and development program costs related to the APL-130277 clinical program, higher personnel costs with the number
of staff increasing from eight to 19 people, higher professional and consulting fees, investor relations and shareholder relations
costs, and higher share-based compensation expenses.



Basic
loss per share is calculated using the weighted average number of shares outstanding during the period. As a result of losses
in the respective periods, there is no dilutive loss per share calculation.



The
weighted average number of common shares outstanding for the nine months ended September 30, 2015 was 8,250,706 (2014 –
3,984,413).The weighted average number of common shares outstanding increased primarily as a result of 1,377,467 common
shares issued in a private placement on March 31, 2015, and 5,175,000 common shares issued in our initial public offering in the
United States on June 23, 2015.



Research and Development (R&D)



For the nine months ended September
30,



|                               |  | 2015 (Cdn$) |            |  | 2014 (Cdn$) |  |           | Cdn$ change in
    2015 |  |  | % change in
    2015 | 
|------------------------------ |  | ----------- | ---------- |  | ----------- |  | --------- | ----------------------- |  |  | -------------------- | 
|Salaries, benefits and bonuses |  |             | 1,206,655  |  |             |  | 179,288   |                         |  |  | 1,027,367            | 
|Other R&D                      |  |             | 16,370,109 |  |             |  | 2,680,624 |                         |  |  | 13,689,485           | 
|Total R&D                      |  |             | 17,576,764 |  |             |  | 2,859,912 |                         |  |  | 14,716,852           | 



Research
and development expenses for the nine months ended September 30, 2015 were substantially higher than for the nine months ended
September 30, 2014 due to increased activity associated with the APL-130277 program. Expenditures increased as a result of increases
in salaries and benefits associated with additional staff, consulting, clinical research, packaging development, patent protection,
analytics, and scale-up CMC work for APL-130277.



Operating, General and Administrative
(OG&A)



For the nine months ended September
30,



|                                           |  | 2015 (Cdn$) |           |  | 2014 (Cdn$) |  |           | Cdn$ change in
    2015 |  |  | % change in
    2015 | 
|------------------------------------------ |  | ----------- | --------- |  | ----------- |  | --------- | ----------------------- |  |  | -------------------- | 
|Salaries, benefits, bonuses and board fees |  |             | 1,725,991 |  |             |  | 1,030,494 |                         |  |  | 695,497              | 
|Other OG&A                                 |  |             | 3,907,528 |  |             |  | 1,827,823 |                         |  |  | 2,079,7045           | 
|Total OG&A                                 |  |             | 5,633,519 |  |             |  | 2,858,317 |                         |  |  | 2,775,202            | 



-27-







OG&A
costs for the nine months ended September 30, 2015 were higher than for the comparable period in 2014 due mainly to increases
in salaries and benefits associated with the addition of new staff and higher employee base salaries, investor and public relations
activities, professional and consulting fees, board fees related to the public offering in the United States, and travel costs.



Other Expenses
(Recoveries)



For the nine months ended September
30,



|                                                            |  | 2015 (Cdn$) |            |   | 2014 (Cdn$) |  |          | Cdn$ change in
    2015 |  |  | % change in
    2015 |  
|----------------------------------------------------------- |  | ----------- | ---------- | - | ----------- |  | -------- | ----------------------- |  |  | -------------------- | -
|Share-based payments                                        |  |             | 3,366,443  |   |             |  | 630,464  |                         |  |  | 2,735,979            |  
|Amortization of intangible assets                           |  |             | 35,908     |   |             |  | 44,240   |                         |  |  | (8,332               | )
|Depreciation of property, plant and equipment               |  |             | 79,752     |   |             |  | 5,358    |                         |  |  | 74,394               |  
|Acquisition milestone share-based payment                   |  |             | 1,500,000  |   |             |  | -        |                         |  |  | 1,500,000            |  
|Unrealized foreign exchange (gain) loss                     |  |             | (9,007,058 | ) |             |  | (254,435 | )                       |  |  | (8,752,623           | )
|Recovery on scientific research                             |  |             | (100,924   | ) |             |  | (41,717  | )                       |  |  | (59,207              | )
|Research grant                                              |  |             | (127,710   | ) |             |  | (351,969 | )                       |  |  | 224,259              |  
|Interest income net of interest expense and related charges |  |             | (16,788    | ) |             |  | (32,032  | )                       |  |  | 15,244               |  





Share-based
payments increased to Cdn$3,366,443 for the nine months ended September 30, 2015 from Cdn$630,464 for the nine months
ended September 30, 2014, primarily due to the expense related to 413,650 stock options granted on September 18, 2015 and
248,743 stock options granted on April 2, 2015, as well as compensation expense recognized over the vesting period for stock
options previously granted. Share-based payments expense for the nine months ended September 30, 2014 related primarily to
140,998 stock options  granted on May 20, 2014.



Under
the terms of the amended Adagio Share Purchase Agreement, we are required to pay the former Adagio shareholders contingent consideration
upon the completion of certain operational milestones. (See “Contractual Obligations and Commitments” below.) On March 11,
2015, we announced the results of our end of Phase 2 meeting with the FDA, which triggered a milestone payment to former Adagio
shareholders of 69,960 newly issued common shares. The fair value of these shares, in the amount of Cdn$1,500,000, was recorded
as an expense during the three months ended March 31, 2015.



Foreign
exchange gains for the nine months ended September 30, 2015 were Cdn$9,007,058 compared to Cdn$254,435 in the nine months ended
September 30, 2014 due to unrealized gains on significantly higher U.S. dollar cash balances on hand at September 30, 2015,
combined with a significant strengthening of the U.S. dollar, compared to September 30, 2014. As at September 30, 2015, we had
cash of US$81,434,055 denominated in U.S. dollars, compared to US$12,317,433 as at September 30, 2014.



Research grants for
the nine months ended September 30, 2015 represent the final installment of the second The Michael J. Fox Foundation for Parkinson’s
Research, or MJFF, grant received, while research grants recognized in the nine months ended September 30, 2014 relate to amounts
previously deferred from the first MJFF grant, as well as from the first installment of the second MJFF grant. MJFF grants
were awarded to support clinical research activities and have been recognized in accordance with IFRS.



-28-







Summary of Quarterly Results



The following table
presents a summary of our unaudited quarterly results of operations for each of our last eight quarters. This data has been derived
from our unaudited condensed interim consolidated financial statements, which the policies applied were based on IFRS and the
same basis as our annual audited financial statements and, in our opinion, include all adjustments necessary, consisting solely
of normal recurring adjustments, for the fair presentation of such information.



Financial Information



(Numbers rounded to the nearest thousands)



|                                                                |  | Q3 2015 (Cdn$) |             |   | Q2 2015 (Cdn$) |  |             | Q1 2015 (Cdn$) |  |  | Q4 2014 (Cdn$) |  
|--------------------------------------------------------------- |  | -------------- | ----------- | - | -------------- |  | ----------- | -------------- |  |  | -------------- | -
|Total assets                                                    |  |                | 111,724,000 |   |                |  | 112,957,000 |                |  |  | 38,434,000     |  
|R&D                                                             |  |                | 6,825,000   |   |                |  | 7,881,000   |                |  |  | 2,871,000      |  
|OG&A                                                            |  |                | 1,816,000   |   |                |  | 2,040,000   |                |  |  | 1,778,000      |  
|Other operating expenses                                        |  |                | (5,752,000  | ) |                |  | 1,044,000   |                |  |  | 582,000        |  
|Research grant                                                  |  |                | -           |   |                |  | -           |                |  |  | (128,000       | )
|Interest income net of interest expense and related
    charges |  |                | (2,000      | ) |                |  | (6,000      | )              |  |  | (9,000         | )
|Loss and comprehensive loss                                     |  |                | 2,887,000   |   |                |  | 10,959,000  |                |  |  | 5,094,000      |  
|Loss per share (basic and diluted)                              |  |                | 0.24        |   |                |  | 1.50        |                |  |  | 0.97           |  



|                                                                |  | Q3 2014 (Cdn$) |            |   | Q2 2014 (Cdn$) |  |            | Q1 2014 (Cdn$) |  |  | Q4 2013 (Cdn$) |  
|--------------------------------------------------------------- |  | -------------- | ---------- | - | -------------- |  | ---------- | -------------- |  |  | -------------- | -
|Total assets                                                    |  |                | 20,397,000 |   |                |  | 21,540,000 |                |  |  | 2,398,000      |  
|R&D                                                             |  |                | 1,247,000  |   |                |  | 1,164,000  |                |  |  | 449,000        |  
|OG&A                                                            |  |                | 1,006,000  |   |                |  | 894,000    |                |  |  | 958,000        |  
|Other operating expenses                                        |  |                | (436,000   | ) |                |  | 775,000    |                |  |  | 45,000         |  
|Research grant                                                  |  |                | (112,000   | ) |                |  | -          |                |  |  | (240,000       | )
|Interest income net of interest expense and related
    charges |  |                | (13,000    | ) |                |  | (17,000    | )              |  |  | (2,000         | )
|Loss and comprehensive loss                                     |  |                | 1,692,000  |   |                |  | 2,816,000  |                |  |  | 1,210,000      |  
|Loss per share (basic and diluted)                              |  |                | 0.34       |   |                |  | 0.62       |                |  |  | 0.49           |  



-29-









Income Taxes



Our management uses
estimates when determining deferred income taxes. These estimates are used to determine the recoverability of tax loss carry forward
amounts, research and development expenditures and investment tax credits. Significant judgment is required regarding our future
profitability to be able to recognize deferred taxes. Changes in market conditions, changes in tax legislation, patent challenges
and other factors, including the approval or launch of generic versions of our products, could adversely affect the ongoing value
of deferred taxes. The carrying amount of deferred income tax assets is reassessed at each reporting period and reduced to the
extent that it is no longer probable that sufficient taxable profits will be available to utilize all or part of the deferred
income tax assets. Unrecognized deferred income tax assets are reassessed at each reporting period and are recognized to the extent
that it is probable that there will be sufficient taxable profits to allow all or part of the asset to be recovered.



We had approximately
Cdn$26,316,000 of non-capital losses as at December 31, 2014, which under certain circumstances can be used to reduce the taxable
income of future years. We currently have not recognized any deferred income tax assets with respect to these balances.



Liquidity and Capital Resources



Since
inception, our cash requirements have been financed primarily through issuances of common shares, warrants and secured debentures.
We anticipate future funding requirements to be met primarily through additional securities issuances, debentures, research and
development tax credits, other potential sources of government funding, grants from foundations that support PD research, or a
combination of the above.



The
development of pharmaceutical products is a process that requires significant investment. We expect to incur significant research
and development expenses, including expenses related to completing Phase 3 clinical trials, NDA submissions with the FDA, commercialization
studies, and preparation for a U.S. product launch. We also expect that our general and administrative expenses will increase
in the future as we add infrastructure, including personnel costs, investor relations activities and professional fees.



Our
future capital requirements will depend on a number of factors, including the continued progress of our research and development
for our APL-130277 product candidate, the timing and outcome of clinical trials and regulatory approvals, payments received or
made under licensing or other collaborative agreements, if any, the costs involved in preparing, filing, prosecuting, maintaining,
defending and enforcing patent claims and other intellectual property rights, defending against patent infringement claims, the
acquisition of licenses or technologies, the status of competitive products and our success in developing and maintaining markets
for our product candidate, if approved.



Our
cash balance was Cdn$109,521,968 at September 30, 2015 compared to Cdn$17,448,497 at December 31, 2014. Accounts payable
and accrued liabilities as at September 30, 2015 was Cdn$4,297,152 compared to Cdn$3,080,631 at December 31, 2014.



Based
on our current operating plan, we believe that existing cash will be sufficient to fund research and development and OG&A
overhead expenditures, complete Phase 3 clinical studies and CMC requirements for an NDA in the United States in 2016, continue
to prepare for commercial launch of APL-130277 in the U.S. market in late 2017, commence initial regulatory, clinical and commercial
activities for European market registration, and initiate other early stage pipeline development programs.



-30-









There are a significant number of warrants
and options outstanding, some of which are in-the-money and may provide future sources of capital. As at September 30, 2015, we
had 875,404 warrants outstanding with an exercise price of Cdn$9.20, which, if exercised as of September 30, 2015, would have
resulted in gross proceeds to us of approximately Cdn$8,053,717. Also, as at September 30, 2015, we had 2,345,422 warrants outstanding
with an exercise price of Cdn$12.96, which, if exercised as of September 30, 2015, would have resulted in gross proceeds to us
of approximately Cdn$30,396,669.



Operating
Activities



For
the three months ended September 30, 2015, our operating activities used cash of Cdn$9,490,602 compared to Cdn$2,106,430
in the three months ended September 30, 2014. The increase is primarily attributed to increased research and development expenses
associated with Phase 3 clinical trials for the APL-130277 product candidate. Cash used in operating activities for the three
months ended September 30, 2015 reflects the net loss of Cdn$4,286,817 for the three months ended September 30, 2015, adjusted
for non-cash items including share-based payments, amortization of intangible assets, depreciation of property, plant and equipment,
changes in non-cash working capital (including prepaid expenses and other current assets, and accounts payable and accrued liabilities)
and unrealized gains on foreign exchange.



For
the nine months ended September 30, 2015, our operating activities used cash of Cdn$22,749,157 compared to Cdn$6,704,444
in the nine months ended September 30, 2014. The increase is primarily attributed to increased research and development expenses
associated with Phase 3 clinical trials for the APL-130277 product candidate. Cash used in operating activities for the nine months
ended September 30, 2015 reflects the net loss of Cdn$20,339,758 for the nine months ended September 30, 2015, adjusted for non-cash
items including share-based payments, amortization of intangible assets, depreciation of property, plant and equipment, changes
in non-cash working capital (including prepaid expenses and other current assets, and accounts payable and accrued liabilities),
acquisition milestone share-based payment and unrealized gains on foreign exchange.



Investing
Activities



For
the three months ended September 30, 2015, we purchased Cdn$42,623 of computer equipment and leasehold improvements, compared
to Cdn$31,324 in the three months ended September 30, 2014.



For
the nine months ended September 30, 2015, we purchased Cdn$214,459 of computer equipment and leasehold improvements, compared
to Cdn$49,230 in the nine months ended September 30, 2014.



-31-







Financing Activities



For
the three months ended September 30, 2015, our net financing activities generated cash of Cdn$339,118, compared to Cdn$9,804 for
the three months ended September 30, 2014.



For
the nine months ended September 30, 2015, our net financing activities generated cash of Cdn$106,030,029 compared to Cdn$23,707,154
for the nine months ended September 30, 2014.



During
the three months ended September 30, 2015 we generated Cdn$346,854 in proceeds from the exercise of warrants, and Cdn$34,992 in
proceeds from the exercise of stock options, while in the three months ended September 30, 2014, we generated Cdn$9,804 in proceeds
from the exercise of warrants.



During
the nine months ended September 30, 2015, we raised net proceeds of Cdn$19,551,377 through a private placement of common shares,
and completed an underwritten public offering in the United States of 5,175,000 common shares for net proceeds of Cdn$81,217,659
(approximately US$66.4 million). During the nine months ended September 30, 2014, we generated Cdn$22,840,236 from the completion
of a short form prospectus offering in Canada with a concurrent U.S. private placement. During the nine months ended September
30, 2015, we generated Cdn$5,140,295 in proceeds from the exercise of warrants, compared to Cdn$746,800 during the nine months
ended September 30, 2014. In addition, we generated Cdn$120,698 in proceeds from the exercise of stock options, compared to Cdn$120,118
during the nine months ended September 30, 2014.



Effect
of Exchange Rate Changes



For
the three months ended September 30, 2015, the effect of exchange rate changes on cash was Cdn$7,262,033 as result of the Canadian
dollar weakening relative to the U.S. dollar.



For
the nine months ended September 30, 2015, the effect of exchange rate changes on cash was Cdn$9,007,058 as result of the Canadian
dollar weakening relative to the U.S. dollar.



As
at September 30, 2015, we had cash of Cdn$108,673,746 and accounts payable of Cdn$1,758,497 denominated in U.S. dollars (December
31, 2014 – Cdn$12,370,423 and Cdn$1,539,496, respectively).



Off-Balance Sheet Arrangements



We do not have any off-balance
sheet arrangements.



-32-







Related Party Transactions



Key
management personnel are those persons having authority and responsibility for planning, directing and controlling the activities
of Cynapsus, including directors and senior executives. Compensation paid or payable to key management was composed of the following
during the three and nine months ended September 30, 2015 and September 30, 2014, respectively:



|                                                            |  | Three
                                         Months EndedSeptember 30, |           |  | Nine
                                         Months EndedSeptember 30, | 
|----------------------------------------------------------- |  | ------------------------------------------------------------------------ | --------- |  | ----------------------------------------------------------------------- | 
|                                                            |  | 2015                                                                     |           |  | 2014                                                                    | 
|                                                            |  | (Cdn$)                                                                   |           |  | (Cdn$)                                                                  | 
|Short-term salaries, benefits and bonuses
    to executives |  |                                                                          | 351,029   |  |                                                                         | 
|Directors’ fees                                             |  |                                                                          | 95,750    |  |                                                                         | 
|Share-based payments                                        |  |                                                                          | 5,824,258 |  |                                                                         | 
|                                                            |  |                                                                          | 6,271,037 |  |                                                                         | 



Share-based payments
presented above represent the grant date fair value of options issued to key management during the period.



As at September
30, 2015, included in accounts payable and accrued liabilities was Cdn$180,852 (December 31, 2014 - Cdn$128,713) due to our officers
and directors. These amounts are unsecured and non-interest bearing with no fixed terms of repayment. As at September 30, 2015,
Cdn$314,000 was accrued as bonuses to related parties (December 31, 2014 - Cdn$508,710).



The
employment agreements with our executive officers provide for additional payments in the event of termination without cause.



On
March 11, 2015, we announced the results of the end of Phase 2 meeting with the FDA, which triggered a milestone payment to former
Adagio shareholders of 69,960 common shares. Of the total, 37,652 common shares were issued to our President and Chief Executive
Officer.



As
part of the March 31, 2015 private placement, the Dexcel Pharma Group, a strategic pharmaceutical investor and significant shareholder
of Cynapsus, and which also has two directors on our board of directors, subscribed for 271,381 common shares having an aggregate
subscription price of Cdn$4,133,684.



As
part of the June 23, 2015 public offering in the United States, the Dexcel Pharma Group subscribed for 733,500 common shares having
an aggregate subscription price of Cdn$12,658,596 (US$10,269,000).



During the three
and nine month periods ended September 30, 2015, we paid fees of Cdn$14,356 to one of our directors on account of consulting services
rendered.



-33-







Contractual Obligations and Commitments



As at September
30, 2015, we had research and development and other service contract commitments, as well as minimum future payments under operating
leases for the periods presented as follows:





|                              |  | Less than1 year |            |  | 1-2years |  |           | Total  | 
|----------------------------- |  | --------------- | ---------- |  | -------- |  | --------- | ------ | 
|                              |  | (Cdn$)          |            |  | (Cdn$)   |  |           | (Cdn$) | 
|Purchase Obligations          |  |                 | 18,735,000 |  |          |  | 5,037,000 |        | 
|Operating Leases              |  |                 | 118,000    |  |          |  | -         |        | 
|Total Contractual Obligations |  |                 | 18,853,000 |  |          |  | 5,037,000 |        | 





Of
the total purchase obligations, one consulting contract contains a change of control clause in which, subject to certain conditions,
we agreed to pay the vendor an amount equal to fees based on the minimum billable hours for the remainder of the agreement term.
As a triggering event has not taken place, these contingent payments have not been recognized in our financial statements. We
do not have a practicable estimate for the expected value of this contingent liability due to the nature of the triggering event.
As at September 30, 2015, the maximum amount of any contingent liability, based on a remaining term of eight months, was Cdn$526,861,
which was included in the amount of unrecognized purchase obligations.



We
are a party to certain management contracts for our executive officers. Minimum management contract termination commitments remaining
under the agreements, for termination without cause, are approximately Cdn$2,035,413 and are all payable within one year.



On
December 22, 2011, we completed the acquisition of 100% of the outstanding common shares of Adagio and certain indebtedness
of Adagio, which we refer to as the Transaction. The Transaction was structured as a share exchange with Adagio shareholders receiving
newly issued common shares of Cynapsus in exchange for all of the issued and outstanding shares of Adagio. On January 28,
2015, we and the former Adagio shareholders, who are substantially represented by key management and therefore are related parties,
signed an amendment to the Adagio Share Purchase Agreement to better reflect the contemplated agreement between the parties. Adagio
shareholders are entitled to a payment of Cdn$2,500,000 conditional upon the successful completion of the APL-130277 final safety
study, to be satisfied by the issuance of common shares at a deemed value equal to the 30 day volume weighted average trading
price, or VWAP, immediately prior to the first public announcement of the results of such study. This study had not been started
as of September 30, 2015. The VWAP of the common shares may not be less than the “discounted market price” as defined
in the policies of the TSX.



Our
President and Chief Executive Officer was also a director, officer and majority shareholder of Adagio. To satisfy our board of
director’s fiduciary duties and to appropriately manage the Transaction, our board of directors appointed a special committee
comprised of independent directors.. The special committee also retained independent legal counsel as well as an independent registered
financial advisor registered with the Financial Industry Regulatory Authority, Inc., or FINRA, to provide a fairness opinion.
We also obtained minority shareholder approval in connection with the Adagio Share Purchase Agreement.



As
a condition of the second MJFF grant agreement, we are required to support further PD research by making up to US$1,000,000 in
contributions to MJFF conditional on future sales of APL-130277, beginning the year that  we post net sales of APL-130277
in excess of US$5,000,000.



-34-







Critical Accounting Policies and Estimates



A
summary of significant accounting policies is included in Note 6 of our audited consolidated financial statements for the year
ended December 31, 2014. Critical accounting estimates require our management to make judgments, estimates and assumptions
that affect the application of accounting policies and reported amounts of assets and liabilities at the date of the consolidated
financial statements and reported amounts of revenue and expenses during the reporting period. Actual outcomes could differ from
these estimates. Changes in our management’s accounting estimates can have a material impact on our financial results. Our
significant accounting judgments, estimates and assumptions are included in Note 5 of our audited consolidated financial statements
for the year ended December 31, 2014 and are also described below.



The
estimates and underlying assumptions are reviewed on a regular basis. Revisions to accounting estimates are recognized in the
period in which the estimate is revised and in any future periods affected. The areas involving a higher degree of judgment or
complexity, or areas where the assumptions and estimates are significant to the financial statements were the same as those applied
to our consolidated financial statements as at and for the year ended December 31, 2014.



Intangible
assets



We
estimate the useful lives of intangible assets from the date they are available for use in the manner intended by our management
and periodically review the useful lives to reflect our management’s intent about developing and commercializing the assets.
Our management also estimates their recoverability to assess if there has been an impairment. The amounts and timing of recorded
expenses for amortization and impairments of intangible assets for any period are affected by these estimates. The estimates are
reviewed at least annually and are updated if expectations change as a result of technical or commercial obsolescence, generic
threats and legal or other limits to use. It is possible that changes in these factors may cause significant changes in the estimated
useful lives of our intangible assets in the future.



Share-based
payments



Our
management determines costs for share-based payments using market-based valuation techniques. The fair value of the market-based
and performance-based share awards are determined at the date of grant using generally accepted valuation techniques. Assumptions
are made and judgments are used in applying valuation techniques. These assumptions and judgments include estimating the future
volatility of the stock price, expected dividend yield, future employee turnover rates and future employee stock option exercise
behaviors and corporate performance. Such judgments and assumptions are inherently uncertain. Changes in these assumptions affect
the fair value estimates.



-35-







Share Capital



Since the three months
ended September 30, 2015, the following changes have occurred to common shares, stock options and warrants:



|                         |  | As at November 10, 2015 |           
|------------------------ |  | ----------------------- | ----------
|                         |  | Number of shares        |           
|                         |  | #                       |           
|As at September 30, 2015 |  |                         | 12,144,622
|Warrants exercised       |  |                         | 59,303    
|As at November 10, 2015  |  |                         | 12,203,925



Exercised Warrants



Summary of warrants exercised since the
nine months ended September 30, 2015 are as follows:





|Number ofWarrants |        |  | CashProceeds |  |         | ExercisePrice |  |  | Expiry Date
|----------------- | ------ |  | ------------ |  | ------- | ------------- |  |  | -----------
|#                 |        |  | $            |  |         | $             |  |  |            
|                  | 35,875 |  |              |  | 330,050 |               |  |  | 9.20       
|                  | 1,415  |  |              |  | 14,155  |               |  |  | 10.00      
|                  | 22,013 |  |              |  | 285,288 |               |  |  | 12.96      
|                  | 59,303 |  |              |  | 629,493 |               |  |  |            





-36-









| | ITEM 3. | QUANTITATIVE
                                         AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.
| | ------- | ----------------------------------------------------------------------------------------------------



FINANCIAL RISK MANAGEMENT



In
the normal course of business, we are exposed to a number of financial risks that can affect our operating performance. These
risks are credit risk, liquidity risk and market risk. Our overall risk management program and prudent business practices seek
to minimize any potential adverse effects on our financial performance. There were no changes in our approach to risk management
during the three and nine months ended September 30, 2015.



Credit
risk



Our
cash balance is on deposit with a Canadian chartered bank. We have no significant concentration of credit risk arising from operations.
Our management believes that the credit risk concentration with respect to these financial instruments is remote.



Liquidity
risk



Our
approach to managing liquidity risk is to ensure that we will have sufficient liquidity to meet liabilities when due. As at September
30, 2015, we had cash of Cdn$109,521,968 and prepaid expenses and other current assets of Cdn$1,412,366 (December 31, 2014 - Cdn$17,448,497
and Cdn$269,779, respectively) to settle current liabilities of Cdn$4,297,152 (December 31, 2014 - Cdn$3,080,631). Most of our
accounts payable and accrued liabilities have contractual maturities of less than 30 days and are subject to normal trade terms.



Market risk



| | (a) | Interest rate risk
| | --- | ------------------



| |  | We had a cash balance of Cdn$109,521,968 as at September 30, 2015 (December 31, 2014 - Cdn$17,448,497).
    Our current policy is to invest excess cash in a business savings account. We consider interest rate risk to be minimal.
| |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | (b) | Foreign currency risk
| | --- | ---------------------



| |  | Foreign currency risk is the risk that the fair value or future
    cash flows of a financial instrument will fluctuate because of changes in foreign exchange rates. Our functional and presentation
    currency is the Canadian dollar and all amounts in the condensed interim consolidated financial statements are expressed in
    Canadian dollars, unless otherwise noted. We fund the majority of research and development expenses in the United States from
    our U.S. dollar bank account held in Canada and certain expenses in Europe on a cash call basis using the Euro converted from
    our Canadian dollar bank accounts held in Canada. We believe that while currency conversions could affect results of operations,
    there is not a significant risk to our ability to meet our obligations. We do not use derivative instruments to hedge our
    foreign currency risk.
| |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



-37-







| |  | The following table summarizes accounts denominated in U.S.
    dollars, reported in Canadian dollar equivalents, and the effective US$/Cdn$ exchange rate applied as at:
| |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|                       |  | September 30, 2015 |             |   | December 31, 2014 | 
|---------------------- |  | ------------------ | ----------- | - | ----------------- | 
|                       |  | (Cdn$)             |             |   | (Cdn$)            | 
|Cash                   |  |                    | 108,673,746 |   |                   | 
|Accounts payable       |  |                    | (1,758,497  | ) |                   | 
|Net exposure           |  |                    | 106,915,249 |   |                   | 
|                       |  |                    |             |   |                   | 
|US$/Cdn$ exchange rate |  |                    | 1.335       |   |                   | 



| |  | Based on our foreign currency exposures noted above, a 10% strengthening
    of the U.S. dollar against the Canadian dollar as at September 30, 2015 would have decreased the net loss by approximately
    Cdn$10,700,000 (December 31, 2014 - Cdn$1,100,000), assuming all other variables remained constant. A 10% weakening of the
    U.S. dollar would have an opposite effect, assuming that all other variables remained constant.
| |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | (c) | Price risk
| | --- | ----------



| |  | We are exposed to price risk with respect to the Active Pharmaceutical
    Ingredient, or API, used in research and development activities. We monitor API prices in the United States, Europe and Asia
    to determine the appropriate course of action to be taken by us. Our management believes that the price risk concentration
    with respect to API is minimal.
| |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | (d) | Fair value
| | --- | ----------



| |  | IFRS requires that we disclose information about the fair value
    of our financial assets and liabilities. Fair value estimates are made at the consolidated statement of financial position
    dates based on relevant market information and information about the financial instrument. These estimates are subjective
    in nature and involve uncertainties in significant matters of judgment and, therefore, cannot be determined with precision.
    Changes in assumptions could significantly affect these estimates.
| |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  | Cash is classified as loans and receivables, which is measured
    at amortized cost. Accounts payable and accrued liabilities are classified as other financial liabilities, which are measured
    at amortized cost.
| |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  | The carrying amounts for cash, accounts payable and accrued
    liabilities on the consolidated statements of financial position approximate fair value because of the short term nature of
    these instruments.
| |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



Capital risk management



We manage our capital
structure and make adjustments to it, based on the funds available to us, in order to support our research and development activities.
Our capital structure consists of share capital, warrants and share-based payments. Our board of directors does not establish quantitative return
on capital criteria for management but rather relies on the expertise of our management to sustain future development of the business.



The product candidates
which we currently have in our pipeline are in the research stage; as such, we are dependent on external financing to fund our
activities. In order to carry out the planned research and development and pay for administration costs, we will spend our existing
working capital and raise additional amounts as needed.



Management reviews
our capital management approach on an ongoing basis and believes that this approach, given our relative size, is reasonable.



There were no changes
in our approach to capital management during the three and nine months ended September 30, 2015. We and our subsidiary are not
subject to externally imposed capital requirements.



-38-







| | ITEM 4. | CONTROLS AND
                                         PROCEDURES.
| | ------- | -----------------------------------------------------------------



We
conducted an evaluation of the effectiveness of the design and operation of our disclosure controls and procedures. The evaluation
was conducted under the supervision and with the participation of management, including our President and Chief Executive Officer
(“CEO”), who is our principal executive officer, and Chief Operating Officer and Chief Financial Officer (“CFO”),
who is our principal financial officer, as of December 31, 2014. Based on the evaluation, our CEO and CFO concluded that
such disclosure controls and procedures—as defined in Canada under National Instrument 52-109— Certification of
Disclosure in Issuers’ Annual and Interim Filings, are effective as at December 31, 2014.



We
also conducted an evaluation of the effectiveness of our disclosure controls and procedures (as defined in Rules 13a-15(e) and
15d-15(e) under the Exchange Act) as of the end of the period covered by this report. Such evaluation was conducted under the
supervision and with the participation of management, including our CEO and CFO, as of September 30, 2015. Based on such evaluation,
our CEO and CFO concluded that as of September 30, 2015, such disclosure controls and procedures were effective to ensure that
information required to be disclosed by us in reports that we file or submit under the Exchange Act is recorded, processed, summarized
and reported, within the time periods specified in SEC rules and forms, and accumulated and communicated to our management, including
our CEO and CFO, to allow timely decisions regarding required disclosure.



It
should be noted that while our disclosure controls and procedures are designed to provide a reasonable level of assurance of achieving
their objectives, our CEO and CFO do not expect that our disclosure controls and procedures or internal control over financial
reporting will prevent all errors and fraud. A control system, no matter how well conceived or operated, can provide only reasonable,
not absolute, assurance that the objectives of the control system are met.



There
were no changes in our internal control over financial reporting during the quarter ended September 30, 2015 that materially affected,
or are reasonably likely to materially affect, our internal control over financial reporting.



-39-







PART II - OTHER INFORMATION



| | ITEM 1. | LEGAL PROCEEDINGS.
| | ------- | ------------------



In
the ordinary course of business, we may be from time to time involved in lawsuits, claims, investigations, proceedings, and threats
of litigation relating to intellectual property, commercial arrangements, employment and other matters. While the outcome of these
proceedings and claims cannot be predicted with certainty, as of September 30, 2015, we were not party to any legal or arbitration
proceedings that may have, or have had in the recent past, significant effects on our financial position. No governmental proceedings
are pending or, to our knowledge, contemplated against us. We are not a party to any material proceedings in which any director,
officer or affiliate of ours, any owner of record or beneficially of more than five percent of our common shares, or any associate
of any of the foregoing, is either a party adverse to us or our subsidiary or has a material interest adverse to us or our subsidiary.



| | ITEM 1A. | RISK FACTORS.
| | -------- | -------------



Investing in
our common shares involves numerous risks. You should carefully consider the risks and uncertainties described below together
with all of the other information contained in this Quarterly Report on Form 10-Q, including our consolidated financial statements
and related notes appearing in this Quarterly Report on Form 10-Q, before deciding to invest in our common shares. If any of the
following risks actually occurs, our business, prospects, operating results and financial condition could suffer materially, the
trading price of our common shares could decline and you could lose all or part of your investment. The risks and uncertainties
described below are not the only ones we face. Additional risks and uncertainties not presently known to us or that we currently
believe to be immaterial may also adversely affect our business.



This Quarterly
Report on Form 10-Q also contains forward-looking statements that involve risks and uncertainties. Our actual results could differ
materially from those anticipated in these forward-looking statements as a result of certain factors, including the risks faced
by us described below and elsewhere in this Quarterly Report on Form 10-Q. See “Special Note Regarding Forward-Looking Statements”
for information relating to these forward-looking statements.



Risks Related to Our Financial Position
and Need for Additional Capital



We have incurred net losses
since our inception and anticipate that we will continue to incur substantial operating losses for the foreseeable future. We
may never achieve or sustain profitability.



We have incurred net
losses during each fiscal period since our inception. Our net loss was Cdn$10.8 million for the year ended December 31, 2014.
As of December 31, 2014, we had a deficit accumulated during the development stage of Cdn$32.5 million. Our net loss was Cdn$2.9
million for the quarter ended September 30, 2015, and as of September 30, 2015, we had a deficit of Cdn$51.5 million. We do not
know when or whether we will become profitable. To date, we have not commercialized any products or generated any revenues from
the sale of products, and we do not expect to generate any product revenues in the foreseeable future. Our losses have resulted
principally from costs incurred in our research and development activities. Our net losses may fluctuate significantly from quarter-to-quarter
and year-to-year.



-40-







We have devoted most
of our financial resources to research and development, including our clinical and preclinical development activities. To date,
we have financed our operations primarily through the sale of equity securities and debt and, to a lesser extent, through grants
from charitable foundations. The amount of our future net losses will depend, in part, on the rate of our future expenditures
and our ability to obtain funding through equity or debt financings, strategic collaborations (such as licensing agreements or
the sale of a share of our revenue stream) or additional grants. We have not completed pivotal clinical trials for our product
candidate and it will be a few years, if ever, before our product candidate APL-130277 is ready for commercialization. Even if
we obtain regulatory approval to market our product candidate, our future revenues (if any) will depend upon a number of factors,
including the size of any markets in which our product candidate has received approval, and our ability to achieve sufficient
market acceptance, reimbursement from third-party payors and adequate market share for our product candidate in those markets.



We expect to continue
to incur significant expenses and increasing net losses for at least the next several years. We expect our expenses will increase
substantially in connection with our ongoing activities, as we:



| | • | conduct our Phase 3 clinical trials
                                         for APL-130277;
| | - | --------------------------------------------------------------------------------------------



| | • | prepare and submit our Section
                                         505(b)(2) NDA to the FDA;
| | - | -------------------------------------------------------------------------------------------------



| | • | seek regulatory approval for APL-130277
                                         in the United States and elsewhere;
| | - | --------------------------------------------------------------------------------------------------------------------



| | • | add personnel to support our product
                                         development and commercialization efforts;
| | - | ------------------------------------------------------------------------------------------------------------------------



| | • | continue evaluating additional
                                         product opportunities within the CNS field; and
| | - | -----------------------------------------------------------------------------------------------------------------------



| | • | operate as a public company in
                                         both Canada and the United States.
| | - | ----------------------------------------------------------------------------------------------------------



If we are required
by the FDA, or any equivalent foreign regulatory authority, to perform clinical trials or studies in addition to those we currently
expect to conduct, or if there are any delays in completing the clinical trials of APL-130277, our expenses could further increase.



To become and remain
profitable, we must succeed in developing our product candidate, obtaining regulatory approval for it, and manufacturing, marketing
and selling our product when and if we obtain regulatory approval in the United States or elsewhere. We may not succeed in these
activities, and we may never generate revenue from our product sales that is significant enough to achieve profitability. Even
if we achieve profitability in the future, we may not be able to sustain profitability in subsequent periods. Our failure to become
or remain profitable would depress our market value and could impair our ability to raise capital, expand our business, discover
or develop other product candidates or continue our operations. A decline in our value could cause you to lose all or part of
your investment.



We will require substantial
additional financing to achieve our goals, and a failure to obtain this necessary capital when needed could force us to delay,
limit, reduce or terminate our product development or commercialization efforts.



Our cash was Cdn$109.5
million as of September 30, 2015. Based on our current operating plan, we believe that our existing cash will be sufficient to
fund research and development and OG&A overhead expenditures, complete Phase 3 clinical studies and CMC requirements for the
filing of an NDA in 2016 under the abbreviated Section 505(b)(2) regulatory pathway in the United States, continue to prepare
for commercial launch of APL-130277 in the U.S. market in late 2017, commence initial regulatory and clinical activities for European
market registration, and initiate other early stage pipeline development programs. We believe that we will continue to expend
substantial resources for the foreseeable future developing APL-130277. These expenditures will include costs associated with
research and development, conducting Phase 3 clinical trials, potentially obtaining regulatory approvals and manufacturing products,
as well as marketing and selling products approved for sale, if any, and potentially acquiring new technologies. In addition,
other unanticipated costs may arise. Because the outcome of our planned and anticipated clinical trials is highly uncertain, we
cannot reasonably estimate the actual amounts necessary to successfully complete the development and commercialization of our
product candidate. Our costs will increase if we suffer any delays in our Phase 3 clinical trials for APL-130277, including, without
limitation, delays in enrollment of patients. We expect to continue incurring additional costs associated with operating as a
public company in the United States, hiring additional personnel and expanding our facilities.



-41-







Our future capital
requirements depend on many factors, including:



| | • | the scope, progress, results and
                                         costs of researching and developing APL-130277 and conducting clinical trials in the
                                         United States and elsewhere;
| | - | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | • | the timing of, and the costs involved
                                         in, obtaining regulatory approvals in the United States, Europe and elsewhere for APL-130277
                                         if clinical trials are successful;
| | - | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | • | the cost of commercialization
                                         activities for APL-130277, if our product candidate is approved for sale, including marketing,
                                         sales and distribution costs;
| | - | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | • | the cost of manufacturing APL-130277
                                         for clinical trials in preparation for regulatory approval and in preparation for commercialization;
| | - | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | • | our ability to establish and maintain
                                         licensing or other arrangements with third-parties and the financial terms of such agreements;
| | - | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | • | the costs involved in preparing,
                                         filing, prosecuting, maintaining, defending and enforcing patent claims, including litigation
                                         costs and the outcome of such litigation; and
| | - | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | • | the timing, receipt, and amount
                                         of sales of, or royalties on, our product candidate, if any.
| | - | -------------------------------------------------------------------------------------------------------------------------------------



Based on our current
operating plan, we believe that our existing cash will be sufficient to fund research and development and OG&A overhead expenditures,
complete Phase 3 clinical studies and CMC requirements for an NDA in the United States in 2016, continue to prepare for commercial
launch of APL-130277 in the U.S. market in late 2017, commence initial regulatory and clinical activities for European market
registration, and initiate other early stage pipeline development programs. However, our operating plan may change as a result
of many factors currently unknown to us. As a result of these factors, we may need additional funds sooner than planned. In addition,
we may seek additional capital due to strategic considerations even if we believe we have sufficient funds for our current or
future operating plans. Additional funds may not be available when we need them on terms that are acceptable to us, or at all.
If adequate funds are not available to us on a timely basis, we may be required to delay, limit, reduce or terminate clinical
trials or other development activities for our product candidates, or delay, limit, reduce or terminate our establishment of sales
and marketing capabilities or other activities that may be necessary to commercialize our product candidate.



Raising additional capital
may cause dilution to our existing shareholders, restrict our operations or require us to relinquish rights to our product candidate
on unfavorable terms to us.



We may seek additional
capital through a variety of means, including through private and public equity offerings and debt financings. To the extent that
we raise additional capital through the sale of equity or convertible debt securities, your ownership interest will be diluted,
and the terms of such equity or convertible debt securities may include liquidation or other preferences that are senior to, or
otherwise adversely affect, your rights as a shareholder. Debt financing, if available, may involve agreements that include covenants
limiting or restricting our ability to take certain actions, such as incurring indebtedness, making capital expenditures, declaring
dividends or encumbering our assets to secure future indebtedness. If we raise additional funds through strategic partnerships
with third-parties, we may have to relinquish valuable rights to our product candidate, or grant licenses on terms that are not
favorable to us. If we are unable to raise additional funds through equity or debt financing when needed, we may be required to
delay, limit, reduce or terminate our product development or commercialization efforts for APL-130277, or grant rights to develop
and market our product candidate that we would otherwise prefer to develop and market ourselves or on terms less favorable than
we might otherwise negotiate.



-42-







Risks Related to Clinical Development
and Regulatory Approval of Our Product Candidate



Clinical failure may occur
at any stage of clinical development, and we may never succeed in developing marketable products or generating product revenue.



Although the active
ingredient in APL-130277, apomorphine, has been used safely as apomorphine hydrochloride in injectable form for treatment of PD
for a number of years, it has not previously been approved or demonstrated to be safe in sublingual form. Our early encouraging
clinical results for APL-130277 are not necessarily predictive of the results of our ongoing or future clinical trials, including
our Phase 3 clinical trials, and the safety of our product candidate. Promising results in preclinical studies and early clinical
trials of any product candidate may not be predictive of similar results in humans during later clinical trials. Any further clinical
trials that we may conduct may not demonstrate the efficacy and safety necessary to obtain regulatory approval to market our product
candidate and the FDA could require us to complete additional safety, efficacy or other studies. If the results of our ongoing
or future clinical trials are inconclusive with respect to the efficacy of our product candidate or if we do not meet the clinical
endpoints with statistical significance or if there are safety concerns associated with our product candidate, we may be prevented
from or delayed in obtaining marketing approval for our product candidate. In some instances, there can be significant variability
in safety or efficacy results between different clinical trials of the same product candidate due to numerous factors, including,
without limitation, changes in trial procedures set forth in protocols, differences in the size and type of the patient populations,
differences in the dosage amounts of APL-130277 and the response of patients to such amounts, changes in and adherence to the
clinical trial protocols and the rate of dropout among clinical trial participants.



Alternatively, even
if we obtain regulatory approval, that approval may be for indications or patient populations that are not as broad as intended
or desired or may require labeling that includes significant use or distribution restrictions or safety warnings. For example,
certain existing formulations of apomorphine outside the United States used for the treatment of OFF episodes (ApoGo, ApokinON
and Apomin) are currently only indicated for advanced PD patients, and there can be no assurance that our product candidate will
not be similarly limited in its indications for the treatment of PD. We may also be required by the FDA to perform additional
or unanticipated clinical trials to obtain approval, including, without limitation, an ease-of-use study to be completed in patients
in the morning OFF state; a Thorough QT study in healthy volunteers to determine the potential arrhythmia liability of our product
candidate; additional toxicity studies; and additional safety and/or efficacy studies if the primary endpoint does not show a
large enough delta, if the FDA finds a small safety signal or does not accept our final safety data, or is concerned with our
study blinding. We could also be subject to additional post-approval or post-marketing testing requirements to maintain regulatory
approval. In addition, regulatory authorities may withdraw their approval of a product or impose restrictions on its distribution,
such as in the form of a modified Risk Evaluation and Mitigation Strategy. The failure to obtain timely regulatory approval of
our product candidate, any product marketing limitations or a product withdrawal would negatively impact our business, results
of operations and financial condition.



Delays or failure in the commencement,
enrollment or completion of clinical trials of our product candidate could result in increased costs to us as well as a delay
or failure in obtaining regulatory approval, or prevent us from commercializing our product candidate on a timely basis, or at
all.



We cannot guarantee
that clinical trials, including those associated with Phase 3 clinical trials for APL-130277, will be conducted as planned or
completed on schedule, if at all. A delay or failure of one or more clinical trials can occur at any stage of testing. Events
that may prevent successful or timely commencement, enrollment or completion of clinical development include, without limitation:



-43-







| | • | delays by us in reaching a consensus
                                         with regulatory agencies on trial design;
| | - | -----------------------------------------------------------------------------------------------------------------------



| | • | delays in reaching agreement on
                                         acceptable terms with prospective clinical research organizations, or CROs, and clinical
                                         trial sites;
| | - | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | • | delays in obtaining required Institutional
                                         Review Board approval at each clinical trial site;
| | - | --------------------------------------------------------------------------------------------------------------------------------------



| | • | delays in recruiting suitable
                                         patients to participate in clinical trials and/or recruitment occurring more slowly than
                                         expected;
| | - | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | • | insufficient or inadequate supply
                                         or quality of materials, including API, to conduct our clinical trials;
| | - | --------------------------------------------------------------------------------------------------------------------------------------------------



| | • | imposition of a clinical hold
                                         by regulatory agencies for any reason, including safety concerns or after an inspection
                                         of clinical operations or trial sites;
| | - | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | • | failure by CROs, other third-parties
                                         or us to adhere to clinical trial requirements;
| | - | -----------------------------------------------------------------------------------------------------------------------------



| | • | failure to perform in accordance
                                         with the FDA’s good clinical practices, or GCP, or applicable regulatory guidelines
                                         in other countries;
| | - | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | • | delays or other problems in the
                                         testing, validation, manufacturing and delivery of our product candidate to the clinical
                                         sites;
| | - | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | • | delays or negative results caused
                                         by patients not completing participation in a trial or not returning for post-treatment
                                         follow-up;
| | - | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | • | delays in clinical trial site
                                         start-up;
| | - | --------------------------------------------------------------------------------



| | • | impact of placebo administered
                                         on patient participation in clinical trials and on efficacy of our product candidate;
| | - | -------------------------------------------------------------------------------------------------------------------------------------------------------------



| | • | failure to adhere to our Phase
                                         3 clinical trial protocols, including not administering the thin film correctly;
| | - | --------------------------------------------------------------------------------------------------------------------------------------------------------



| | • | patients’ inability for
                                         whatever reason to dose at home as a part of such clinical trials;
| | - | -----------------------------------------------------------------------------------------------------------------------------------



| | • | occurrence of serious adverse
                                         events, or AEs, in further clinical trials that are associated with our product candidate
                                         and such AEs viewed to outweigh our product candidate’s potential benefits;
| | - | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | • | changes in regulatory requirements
                                         and guidance that require amending or submitting new clinical protocols; or
| | - | -------------------------------------------------------------------------------------------------------------------------------------------------------



| | • | varying interpretations of data
                                         by the FDA and foreign regulatory agencies.
| | - | --------------------------------------------------------------------------------------------------------------------



Moreover, principal
investigators for our clinical trials may serve as scientific advisors or consultants to us from time to time and receive compensation
in connection with such services. Under certain circumstances, we may be required to report some of these relationships to the
FDA. The FDA may conclude that a financial relationship between us and a principal investigator has created a conflict of interest
or otherwise affected interpretation of the trial. The FDA may therefore question the integrity of the data generated at the applicable
clinical trial site and the utility of the clinical trial itself may be jeopardized. This could result in a delay in approval,
or rejection, of our marketing applications by the FDA and may ultimately lead to the denial of marketing approval of our product
candidate.



Delays, including
delays caused by the above or other factors, can be costly and could negatively affect our ability to complete a clinical trial,
which could negatively affect the price of our common shares. If we are not able to successfully complete clinical trials, we
will not be able to obtain regulatory approval and will not be able to commercialize our product candidate.



-44-







Clinical development, regulatory
review and approval of the FDA and comparable foreign authorities are lengthy, time consuming, and inherently unpredictable. If
we are ultimately unable to obtain regulatory approval for our product candidate, our business will be materially adversely affected.



Our product candidate
will be subject to extensive governmental regulations relating to, among other things, development, clinical trials, manufacturing
and commercialization. In order to obtain regulatory approval for the commercial sale of our product candidate, we must demonstrate
through extensive preclinical studies and clinical trials that our product candidate is safe and effective for use in the target
indication.



The time required
to obtain approval by the FDA and comparable foreign authorities is unpredictable, typically takes many years following the commencement
of clinical trials, and depends upon numerous factors.



In addition, approval
policies, regulations, or the type and amount of clinical data necessary to gain approval may change during the course of our
product candidate’s clinical development and may vary among jurisdictions, which may cause delays in the approval or the
decision not to approve an application. We have not obtained regulatory approval for our product candidate in any jurisdiction,
and it is possible that our product candidate or any product candidates we may seek to develop in the future will not obtain regulatory
approval in any jurisdiction. In addition, we may gain regulatory approval for APL-130277 in some but not all of the jurisdictions
available or some but not all of the target indications, resulting in limited commercial opportunity for our product candidate,
if approved.



Applications for our
product candidate could be delayed or could fail to receive regulatory approval for many reasons, including, but not limited to,
the following:



| | • | the FDA or comparable foreign
                                         regulatory authorities may disagree with the design or implementation of our clinical
                                         trials;
| | - | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | • | the population studied in the
                                         clinical program may not be sufficiently broad or representative to assure safety in
                                         the full population for which we seek approval;
| | - | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | • | the FDA or comparable foreign
                                         regulatory authorities may disagree with our interpretation of data from nonclinical
                                         studies or clinical trials;
| | - | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | • | the data collected from clinical
                                         trials of our product candidate may not be sufficient to support the submission of an
                                         NDA or other submission or to obtain regulatory approval in the United States or elsewhere;
| | - | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | • | the FDA may determine that we
                                         cannot rely on Section 505(b)(2) for our product candidate, in which case we may be required
                                         to conduct additional clinical trials, provide additional data and information and meet
                                         additional standards for product approval, resulting in increased time and financial
                                         resources required to obtain FDA approval for our product candidate;
| | - | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | • | the FDA may not grant our product
                                         candidate three years of marketing exclusivity under the United States Drug Price Competition
                                         and Patent Term Restoration Act of 1984;
| | - | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | • | the FDA may determine that we
                                         have identified the wrong Reference Listed Drug, or RLD, or that approval of a Section
                                         505(b)(2) application for our product candidate is blocked by patent or non-patent exclusivity
                                         of the RLD or RLDs;
| | - | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



-45-







| | • | the FDA may require us to conduct
                                         additional clinical trials depending on the safety data from our planned future clinical
                                         trials, including our Phase 3 clinical trials for APL-130277;
| | - | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | • | we may be unable to demonstrate
                                         to the FDA or comparable foreign regulatory authorities that our product candidate’s
                                         risk-benefit ratio for its proposed indication is acceptable;
| | - | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | • | the FDA or comparable foreign
                                         regulatory authorities may fail to approve the manufacturing processes, test procedures
                                         and specifications, or facilities of third-party manufacturers with which we contract
                                         for clinical and commercial supplies;
| | - | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | • | our third-party providers may
                                         be unable to demonstrate compliance with current Good Manufacturing Practices, or cGMP,
                                         to the satisfaction of the FDA or comparable foreign regulatory authorities, which could
                                         result in delays in regulatory approval or require us to withdraw or recall products
                                         and interrupt commercial supply of our products; and
| | - | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | • | the approval policies or regulations
                                         of the FDA or comparable foreign regulatory authorities may significantly change in a
                                         manner rendering our clinical data insufficient for approval.
| | - | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



This lengthy approval
process, as well as the unpredictability of the results of clinical trials, may result in our failing to obtain regulatory approval
to market our product candidate or any of our product candidates in the future, which would significantly harm our business, results
of operations, and prospects.



We currently have only one
product candidate, APL-130277, in clinical trials and are substantially dependent on this single product candidate. A failure
of this product candidate in clinical development would adversely affect our business. If we decide to leverage success with our
APL-130277 product candidate to develop other product opportunities, we may not be successful in such efforts.



APL-130277 is our
only product candidate. If we were required to discontinue development of APL-130277, if APL-130277 does not receive regulatory
approval, if we do not obtain our targeted indications for APL-130277 or if APL-130277 fails to achieve sufficient market acceptance
for any indication, we would be delayed by many years in our ability to achieve profitability, if ever. Moreover, if we decide
to leverage success with our APL-130277 product candidate to develop other product opportunities, we may not be successful in
such efforts. In any such event, our business will be materially adversely affected.



If we fail to obtain regulatory
approval in jurisdictions outside the United States, we will not be able to market our products in those jurisdictions.



We intend to market
our product candidate, APL-130277, if approved, in international markets, including in Europe, either directly or through partnerships.
Such marketing will require separate regulatory approvals in each market and compliance with numerous and varying regulatory requirements,
including initial regulatory and clinical activities for European market registration. The approval procedures vary from country
to country and may require additional testing that we are not required to perform to obtain regulatory approval in the United
States. Moreover, the time required to obtain approval may differ from that required to obtain FDA approval. In addition, in many
countries outside the United States, a product candidate must be approved for reimbursement before it can be approved for sale
in that country. Approval by the FDA does not ensure approval by regulatory authorities in other countries or jurisdictions, and
approval by one foreign regulatory authority does not ensure approval by regulatory authorities in other foreign countries or
by the FDA. The foreign regulatory approval process may include all of the risks associated with obtaining FDA approval. We may
not obtain foreign regulatory approvals on a timely basis, if at all. We may not be able to file for regulatory approvals and
may not receive necessary approvals to commercialize APL-130277 or any of our future products in any market. If we and/or any
future partner are unable to obtain regulatory approval for APL-130277 in one or more significant foreign jurisdictions, then
the commercial opportunity for APL-130277, and our financial condition, will be adversely affected.



-46-







Even if we receive regulatory
approval for APL-130277 for any indication, it will be subject to ongoing regulatory review, which may result in significant additional
expense. Additionally, our product, if approved, could be subject to labeling and other restrictions, and we may be subject to
penalties if we fail to comply with regulatory requirements or experience unanticipated problems with our product.



Any regulatory approvals
that we receive for our product candidate may also be subject to limitations on the approved indicated uses for which the product
may be marketed or to conditions of approval, or contain requirements for potentially costly post-marketing testing, including
Phase 4 clinical trials, and surveillance to monitor safety and efficacy. In addition, if the FDA or comparable foreign regulatory
authorities approve our product candidate, the manufacturing process, labeling, packaging, distribution, AE reporting, storage,
advertising, promotion and recordkeeping for the product will be subject to extensive and ongoing regulatory requirements. These
requirements include submissions of safety and other post-marketing information and reports, registration, as well as continued
compliance with cGMP and GCP, for any clinical trials that we conduct post-approval.



Later discovery of
previously unknown problems with our approved product, including AEs of unanticipated severity or frequency, or with manufacturing
operations or processes, or failure to comply with regulatory requirements, may result in, among other things:



| | • | restrictions on the marketing
                                         or manufacturing of the product, withdrawal of the product from the market, or voluntary
                                         or mandatory product recalls;
| | - | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | • | fines, warning letters, or holds
                                         on clinical trials;
| | - | ---------------------------------------------------------------------------------------------



| | • | refusal by the FDA or comparable
                                         foreign regulatory authorities to approve supplements to approved applications filed
                                         by us, or suspension or revocation of product license approval;
| | - | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | • | product seizure or detention,
                                         or refusal to permit the import or export of our product; and
| | - | ------------------------------------------------------------------------------------------------------------------------------------



| | • | injunctions or the imposition
                                         of civil or criminal penalties.
| | - | ------------------------------------------------------------------------------------------------------



The policies of the
FDA and comparable foreign regulatory authorities may change and additional government regulations may be enacted that could prevent,
limit or delay regulatory approval of our product candidate in the United States or foreign jurisdictions. We cannot predict the
likelihood, nature or extent of government regulation that may arise from future legislation or administrative action, either
in the United States or abroad. If we are slow or unable to adapt to changes in existing requirements or the adoption of new requirements
or policies, or not able to maintain regulatory compliance, we may lose any marketing approval that may have been obtained and
we may not achieve or sustain profitability, which would adversely affect our business.



-47-







Our product candidate may
cause undesirable side effects or have other properties that delay or prevent its regulatory approval or limit its commercial
potential.



Undesirable side effects
caused by our product candidate could cause us or regulatory authorities to interrupt, delay or halt clinical trials and could
result in the denial of regulatory approval by the FDA or other regulatory authorities and potential product liability claims.
Serious AEs deemed to be caused by our product candidate could have a material adverse effect on the development of our product
candidate and our business as a whole. The AEs seen in clinical studies in healthy volunteers and PD patients to date reflect
typical dopaminergic AEs seen with all dopaminergic medications. In particular, apomorphine, the active ingredient in our product
candidate, has been associated with several safety and tolerability challenges, including nausea, vomiting, lowering of blood
pressure and orthostatic hypotension (a form of low blood pressure that may cause lightheadedness or fainting). Our understanding
of the relationship between APL-130277 and these events may change as we gather more information, and additional unexpected AEs
may occur. As we complete additional clinical trials for our product candidate, the FDA could potentially require labeling recommending
extensive physician monitoring during titration (same as with injectable apomorphine), which could adversely affect the commercial
potential of our product candidate. In addition, although apomorphine has been in use for over 20 years, the long-term impact
of using apomorphine in sublingual delivery form is not well understood. Although side effects exhibited by patients in our clinical
trials have been limited so far, there can be no assurance that, in later clinical trials or if approved, our product candidate
will not cause patients to experience unexpected side effects or expected side effects on a more severe level. Moreover, incorrect
or improper use of our thin film (including if a patient swallows the film rather than allowing it to dissolve under the tongue)
will result in the apomorphine drug not having its intended effect, and may result in additional unexpected side effects or AEs.
While we intend to invest in physician and patient education to foster correct and proper use, there can be no assurance that
our product candidate will be used correctly, and if used incorrectly, such misuse could hamper commercial adoption of our product
candidate, if approved, at the rate we currently expect.



If we or others identify
undesirable side effects caused by our product candidate either before or after receipt of marketing approval, a number of potentially
significant negative consequences could result, including, without limitation:



| | • | our clinical trials may be put
                                         on hold;
| | - | --------------------------------------------------------------------------------



| | • | we may be unable to obtain regulatory
                                         approval for our product candidate;
| | - | ------------------------------------------------------------------------------------------------------------------



| | • | regulatory authorities may withdraw
                                         approvals of our product candidate;
| | - | ----------------------------------------------------------------------------------------------------------------



| | • | regulatory authorities may require
                                         additional warnings on the label;
| | - | -------------------------------------------------------------------------------------------------------------



| | • | we may be required to change the
                                         way our product candidate is administered, conduct additional clinical trials or change
                                         the labeling of our product candidate;
| | - | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | • | we may be subject to limitations
                                         on how we may promote our product candidate;
| | - | ----------------------------------------------------------------------------------------------------------------------



| | • | a medication guide outlining the
                                         risks of such side effects for distribution to patients may be required;
| | - | --------------------------------------------------------------------------------------------------------------------------------------------------



| | • | we could be sued and held liable
                                         for harm caused to patients; and
| | - | ----------------------------------------------------------------------------------------------------------



| | • | our reputation may suffer.
| | - | --------------------------



Any of these events
could prevent us from achieving or maintaining market acceptance of our product candidate and could substantially increase commercialization
costs.



Risks Related to Development and
Manufacturing of Our Product Candidate and Our Reliance on Third-Parties



We rely on third-parties to
supply APIs and manufacture and package our sublingual thin film formulation of apomorphine. We do not have long-term contracts
with such manufacturers or suppliers.



We depend on third-party
suppliers of APIs and third-party contract manufacturing organizations for all clinical supply and packaging of APL-130277, our
sublingual thin film formulation of apomorphine, for use in our clinical trials. Any problems we experience with any such third-parties
could delay the manufacturing of our product candidate and our clinical studies, which could harm our business and results of
operations. We do not currently have a long-term manufacturing contract for our sublingual thin film formulation of apomorphine.
We anticipate entering into a commercial supply agreement with ARx LLC, or ARx, under which ARx will be the majority supplier
of APL-130277 with respect to the United States prior to our filing for FDA approval of APL-130277. Under our existing agreement
with ARx, we have agreed to pay ARx in certain circumstances a fee based on the invoiced cost incurred by us (less the costs of
the related API and packaging) if we engage a different supplier for the manufacture of APL-130277, which would make it more costly
in certain circumstances for us to use a contingency supplier for APL-130277.



-48-







We receive the API
for use in our clinical trials of our product candidate on a purchase order basis. We may be unable to enter into long-term agreements
or agreements that would provide sufficient quantities of any materials for our product candidate. Though we expect that third-party
contract manufacturing organizations will be able to provide sufficient quantities of our sublingual thin film formulation of
apomorphine for our Phase 3 clinical trials and for commercializing our product candidate if and when it is approved, we do not
have agreements in place that guarantee the supply or the price of the materials for our product candidate, so there can be no
assurance that we actually receive sufficient quantities. In particular, orders of our API, which is derived from the opium poppy,
must be made with significant lead time due to limited supply of opium poppy produced for this purpose. In addition, production
of our API is generally lower in priority to other opium poppy derivatives, such as morphine. In the event of supply limitations,
due to adverse events (including poor germination conditions or catastrophic events) or otherwise, the supply of our API may be
significantly reduced. Any such decrease in the availability or significant delay in the acquisition of our API or other material
could considerably delay the manufacturing of our product candidate. If we are unable to arrange for alternative third-party sources,
or to do so on commercially reasonable terms or in a timely manner, we may be delayed in completing our remaining clinical trials
of, obtaining regulatory approval for and commercializing our product candidate. In addition, because we do not have any control
over the process or timing of the supply of the API, there is greater risk that we will not have sufficient quantities of the
API at an acceptable cost or quantity, which could delay, prevent or impair our development or commercialization efforts.



Reliance on third-party
manufacturers and suppliers entails risks to which we would not be subject if we manufactured and packaged our product candidate
ourselves, including reliance on the third-party for regulatory compliance and quality assurance, the possibility of breach of
the agreement by the third-party because of factors beyond our control (including a failure to manufacture our product candidate
in accordance with our specifications) and the possibility of termination or nonrenewal of the agreement by the third-party, based
on its own business priorities, at a time that is costly or damaging to us. In addition, our product candidate may compete with
others for access to manufacturing facilities and capacity. There are a limited number of manufacturers that operate under cGMP
regulations in the United States or elsewhere and that might be capable of manufacturing for us. We may therefore be subject to
unexpected increases in the cost of our supplies or manufacture of our product candidate, which may far exceed the cost of producing
a drug substance and require increased capital expenditures.



We are subject to a number
of risks relating to our third-party service providers, any of which could substantially increase our costs and limit supply of
our products.



If our offices or
any facility of our third-party service providers, such as the CROs, contract manufacturing organizations and API suppliers that
we utilize to develop and manufacture our product candidate, were to suffer an accident or a force majeure event such as major
fire or explosion, major equipment failure or power failure lasting beyond the capabilities of its backup generators or other
similar event, we could be materially adversely affected and any of our clinical trials could be materially delayed. Such an extended
shut down may force us to procure a new research and development facility or another manufacturer or supplier, which could be
time-consuming and costly. During any such period, we may be unable to receive our product candidate. For example, our API is
derived from the opium poppy, which is sensitive to changes in weather and environmental conditions. Any adverse changes in such
conditions or other catastrophe could significantly reduce the supply of API for our product candidate.



-49-







The process of manufacturing
the active drug in our product candidate, our sublingual thin film formulation of apomorphine, is complex, highly regulated and
subject to the risk of product loss due to contamination, equipment failure or improper installation or operation of equipment,
or vendor or operator error. Even minor deviations from normal manufacturing processes or quality requirements for our product
candidate could result in reduced production yields, product defects and other supply disruptions. If microbial, viral, or other
contaminations are discovered in our product candidate or in the manufacturing facilities in which our product candidate is or
will be made, such manufacturing facilities may need to be closed to investigate and remedy the contamination. Any adverse developments
affecting manufacturing operations for our product candidate may result in shipment delays, inventory shortages, lot failures,
withdrawals or recalls, or other interruptions in the supply of our product candidate. We may also have to take inventory write-offs
and incur other charges and expenses for our product candidate that fails to meet specifications, undertake costly remediation
efforts, or seek more costly manufacturing alternatives. Also, as any third-party manufacturer we engage scales up manufacturing
of our product candidate, if approved, it may encounter unexpected issues relating to the manufacturing process or the quality,
purity and stability of the product candidate, and it may be required to refine or alter its manufacturing processes to address
these issues. Resolving these issues could result in significant delays and may result in significantly increased costs. If any
of our third-party manufacturers experience significant delays or other obstacles in producing any approved product for commercial
scale, our ability to market and sell any approved products may be adversely affected and our business could suffer.



Our third-party manufacturers
and suppliers are subject to FDA inspection from time to time. Failure by our third-party manufacturers and suppliers to pass
such inspections and otherwise satisfactorily complete the FDA approval regimen with respect to our product candidate may result
in regulatory actions such as the issuance of FDA Form 483 notices of observations, warning letters or injunctions or the loss
of operating licenses. Based on the severity of the regulatory action, our clinical or commercial supply of product and packaging
and other services could be interrupted or limited, which could have a material adverse effect on our business. In addition, in
order to obtain regulatory approval for our product candidate, our third-party manufacturers will be required to consistently
produce the API used in our product candidate in commercial quantities and of specified quality on a repeated basis and document
their ability to do so. This is referred to as process validation. If the third-party manufacturers are unable to satisfy this
requirement, our business will be materially and adversely affected.



Furthermore, if our
product candidate or any future product candidate is approved and contract manufacturers fail to deliver the required commercial
quantities of finished product on a timely basis or at commercially reasonable prices, and we are unable to find one or more replacement
manufacturers capable of production at a substantially equivalent cost, in substantially equivalent volumes and quality and on
a timely basis, we would likely be unable to meet demand for our product and could lose potential revenue. It may take several
years to establish an alternative source of supply for our product candidate and to have any new source approved by the FDA, the
European Medicines Agency or any other relevant regulatory authorities.



-50-







The ability of our third-party
manufacturers and suppliers to continue manufacturing and supplying our product candidate depends on their continued adherence
to cGMP regulations.



The manufacturing
processes for our product candidate and API are governed by detailed cGMP regulations. Failure by third-party manufacturers, suppliers
and quality operations units to adhere to established regulations or to meet a specification or procedure set forth in cGMP requirements
could require that a product or material be rejected and destroyed. Adherence to cGMP regulations and the effectiveness of our
quality control systems are periodically assessed through inspections of manufacturing facilities by regulatory authorities, including
the FDA through its facilities inspection program. Such inspections could result in deficiency citations, which would require
action to correct those deficiencies to the satisfaction of the applicable regulatory authorities. If critical deficiencies are
noted or if recurrences are not prevented, we may have to recall product or suspend operations until appropriate measures are
implemented. Since cGMP reflects ever-evolving standards, manufacturing processes and procedures must be regularly updated to
comply with cGMP. We have limited or no control over our manufacturers’ or suppliers’ compliance with these regulations
and standards. These changes may cause us to incur additional costs and may adversely impact our results of operations. For example,
more sensitive testing assays (if and when they become available) may be required or existing procedures or processes may require
revalidation, all of which may be costly and time-consuming and could delay or prevent the manufacturing of our product candidate.
If the safety of any product candidate or API supplied is compromised due to our manufacturers’ or suppliers’ failure
to adhere to applicable laws or for other reasons, we may not be able to obtain regulatory approval for or successfully commercialize
our product candidate and we may be held liable for any injuries sustained as a result. Any of these factors could cause a delay
of clinical studies, regulatory submissions, approvals or commercialization of our product candidate, entail higher costs or impair
our reputation.



If we change the manufacturers
of our product candidate, we may be required to conduct comparability studies evaluating the manufacturing processes of the product
candidate.



The FDA and other
regulatory authorities maintain strict requirements governing the manufacturing process for medical delivery systems, such as
the thin films used to deliver the apomorphine sublingually in our product candidate. For example, when a manufacturer seeks to
modify or change that process, the FDA typically requires the applicant to conduct non-clinical and, depending on the magnitude
of the changes, potentially clinical comparability studies that evaluate the potential differences in the product candidate resulting
from the change in the manufacturing process. Delays in designing and completing a comparability study to the satisfaction of
the FDA or other regulatory agencies could delay or preclude our development plans and, thereby, delay our ability to receive
marketing approval, or limit our revenue and growth once our product candidate is approved. In addition, in the event that the
FDA or other regulatory agencies do not accept non-clinical comparability data, we may need to conduct a study involving dosing
of patients comparing the two products. That study may result in a delay of the approval or launch of our product candidate.



We rely on third-parties to
conduct clinical trials for APL-130277, and if they do not properly and successfully perform their obligations to us, we may not
be able to obtain regulatory approvals for APL-130277.



We have designed the
clinical trials for APL-130277. However, we rely on CROs and other third-parties to assist in managing, monitoring and otherwise
carrying out many of these trials. We compete with many other companies for the resources of these third-parties. There is a limited
number of third-party service providers that specialize or have the expertise required to achieve our business objectives. The
third-parties on whom we rely generally may terminate their engagements at any time, and having to enter into alternative arrangements
would delay development and commercialization of our product candidate.



The FDA and comparable
foreign regulatory authorities require compliance with regulations and standards, including GCP, for designing, conducting, monitoring,
recording, analyzing, and reporting the results of clinical trials to assure that the data and results are credible and accurate
and that the rights, integrity and confidentiality of trial participants are protected. Although we rely on third-parties to conduct
many of our clinical trials, they are not our employees, and we are responsible for ensuring that each of these clinical trials
is conducted in accordance with its general investigational plan, protocol and other requirements. Our reliance on these third-parties
for research and development activities will reduce our control over these activities but will not relieve us of our responsibilities,
and we cannot assure you that upon inspection by a given regulatory authority, such regulatory authority will determine that any
of our clinical trials comply with GCP regulations.



-51-







These CROs and third-parties
are not our employees and we will not be able to control, other than by contract, the amount of resources, including time, which
they devote to our product candidate and clinical trials. In addition, the use of third-party service providers requires us to
disclose our proprietary information to these parties, which could increase the risk that this information will be misappropriated.
If these third-parties do not successfully carry out their duties under their agreements, if the quality or accuracy of the data
they obtain is compromised due to their failure to adhere to clinical trial protocols or to regulatory requirements, or if they
otherwise fail to comply with clinical trial protocols or meet expected deadlines, the clinical trials of our product candidate
may not meet regulatory requirements. If clinical trials do not meet regulatory requirements or if these third-parties need to
be replaced, such clinical trials may be extended, delayed, suspended or terminated. If any of these events occur, we may not
be able to obtain regulatory approval of our product candidate on a timely basis or at all.



We may not be successful in
establishing and maintaining strategic partnerships, which could adversely affect our ability to develop and commercialize products,
negatively impacting our operating results.



We continue to evaluate
and, as deemed appropriate, we expect to enter into partnerships in the future when strategically attractive, with one or more
pharmaceutical companies for the development and commercialization of APL-130277 in Europe, Japan and other countries. We face
significant competition in seeking appropriate partners for our product candidate, and the negotiation process is time-consuming
and complex. In order for us to successfully partner our product candidate, potential partners must view our product candidate
as economically valuable in markets they determine to be attractive in light of the terms that we are seeking and other available
products for development and commercialization or licensing by other companies. Even if we are successful in our efforts to establish
strategic partnerships, the terms that we agree upon may not be favorable to us, and we may not be able to maintain such strategic
partnerships if, for example, development or approval of our product candidate is delayed or sales of our approved product are
disappointing. Any delay in entering into strategic partnership agreements related to our product candidate could delay the development
and commercialization of our product candidate and reduce its competitiveness even if it reaches the market.



If we fail to establish
and maintain strategic partnerships related to our product candidate, we will bear all of the risk and costs related to the development
and commercialization of our product candidate, and we may need to seek additional financing, hire additional employees and otherwise
develop expertise, such as regulatory expertise. This could negatively affect the development of our product candidate.



Risks Related to Commercialization
of Our Product Candidate



Our future commercial success
depends upon attaining significant market acceptance of our product candidate, if approved, among physicians, health care payors,
patients and the medical community.



Even if we obtain
regulatory approval for APL-130277, our product candidate may not gain market acceptance among physicians, health care payors
(both private insurers and government programs, such as Medicare and Medicaid), patients and the medical community. Market acceptance
of our product candidate, if approved, depends on a number of factors, including, without limitation:



-52-







| | • | the efficacy and safety of the
                                         product, as demonstrated in clinical trials, compared to other products;
| | - | ------------------------------------------------------------------------------------------------------------------------------------------------



| | • | the indications for which the
                                         product is approved and the label approved by regulatory authorities for use with the
                                         product, including any limitations or warnings that may be required on the label;
| | - | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | • | acceptance by physicians and patients
                                         of the product as a safe and effective treatment;
| | - | --------------------------------------------------------------------------------------------------------------------------------



| | • | the cost, safety and efficacy
                                         of treatment in relation to alternative treatments;
| | - | --------------------------------------------------------------------------------------------------------------------------



| | • | improper use of the product by
                                         patients;
| | - | ---------------------------------------------------------------------------------



| | • | changes in the standard of care
                                         for the targeted indications for our product candidate;
| | - | --------------------------------------------------------------------------------------------------------------------------------



| | • | the availability of adequate reimbursement
                                         and pricing by third-party payors and government authorities;
| | - | -------------------------------------------------------------------------------------------------------------------------------------------------



| | • | relative convenience and ease
                                         of administration, including, but not limited to, the potential need for titration in
                                         a physician’s office, the ease of opening the packaging and retrieving the thin
                                         film and the limited need to administer medication to control for any side effects such
                                         as nausea;
| | - | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | • | the prevalence and severity of
                                         adverse side effects; and
| | - | -------------------------------------------------------------------------------------------------



| | • | the effectiveness of our sales
                                         and marketing efforts.
| | - | ----------------------------------------------------------------------------------------------



Market acceptance
is critical to our ability to generate significant revenue and become profitable. Our product candidate, if approved and commercialized,
may be accepted in only limited capacities or not at all. If our approved product is not accepted by the market to the extent
that we expect, we may not be able to generate significant revenue and our business would suffer.



The market for our product
candidate may not be as large as we expect.



Our estimates of the
potential market opportunity for APL-130277 include several key assumptions based on our industry knowledge, industry publications,
third-party research reports and other surveys, and market research with health care providers, payors and patients.These
assumptions include the prevalence and growth of PD, the percentage of patients receiving apomorphine as part of their treatment
regimen, the percentage of these patients experiencing OFF episodes and the percentage of PD patients for which APL-130277 may
be an effective treatment option. While we believe that our internal assumptions are reasonable, if any of these assumptions proves
to be inaccurate, then the actual market for APL-130277 could be smaller than our estimates of our potential market opportunity.If the actual market for APL-130277 is smaller than we expect, our product revenue may be limited and it may be more difficult
for us to achieve or maintain profitability.



In addition, final
product labeling specifically lists the approved therapeutic indications, the types of patients that should be treated with the
product, how frequently and for how long these patients should be treated and how treatment should be initiated. While physicians
are free to use the product as they choose, we and any pharmaceutical company partner are prohibited from marketing or promoting
the product outside these approved indications and uses. In addition, certain existing formulations of apomorphine outside the
United States used for the treatment of OFF episodes (ApoGo, ApokinON and Apomin) are currently only indicated for advanced PD
patients. Should final approved labeling differ materially from our proposed labeling, the actual market for APL-130277 could
be smaller than our estimates of our potential market opportunity.



-53-







We currently have no sales
and marketing staff and no product distribution network. If we are unable to establish sales and marketing arrangements, we will
not be successful in commercializing our product candidate.



We do not currently
have a sales or marketing infrastructure and do not have experience in the sale, marketing or distribution of pharmaceutical products.
To achieve commercial success for our product candidate in the United States, Europe and other jurisdictions, we may enter into
sales, marketing and distribution agreements with third-parties in respect of the commercialization of our product candidate in
such jurisdictions. Entering into arrangements with third-parties to perform these services may result in lower product revenues
and profitability, if any, than if we were to market, sell and distribute our product ourselves. In addition, we may not be successful
in entering into arrangements with third-parties in the future to sell, market and distribute our product candidate or may be
unable to do so on terms that are favorable to us. We likely will have little control over such third-parties, and any of them
may fail to devote the necessary resources and attention to sell and market our product effectively.



In the future, we
expect to build a focused sales and marketing infrastructure to market APL-130277 and, potentially, other product candidates in
the United States, if and when they are approved. There are risks involved with establishing our own sales, marketing and distribution
capabilities. For example, recruiting and training a sales force is expensive and time consuming and could delay any product launch.
If the commercial launch of a product candidate for which we recruit a sales force and establish marketing capabilities is delayed
or does not occur for any reason, we would have prematurely or unnecessarily incurred these commercialization expenses. This may
be costly, and our investment would be lost if we cannot retain or reposition our sales and marketing personnel.



Factors that may inhibit
our efforts to commercialize our products on our own include:



| | • | our inability to recruit, train
                                         and retain adequate numbers of effective sales and marketing personnel;
| | - | ------------------------------------------------------------------------------------------------------------------------------------------------



| | • | our inability to effectively reach
                                         our target audience of general neurologists and movement disorder specialists;
| | - | ----------------------------------------------------------------------------------------------------------------------------------------------------------



| | • | the lack of adequate numbers of
                                         physicians to prescribe our product candidate, if approved, or any future products;
| | - | ------------------------------------------------------------------------------------------------------------------------------------------------------------



| | • | the lack of complementary products
                                         to be offered by sales personnel, which may put us at a competitive disadvantage relative
                                         to companies with more extensive product lines; and
| | - | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | • | unforeseen costs and expenses
                                         associated with creating an independent sales and marketing organization.
| | - | ------------------------------------------------------------------------------------------------------------------------------------------------



If we do not successfully
establish sales, marketing and distribution capabilities, either on our own or in collaboration with third-parties, we will not
be successful in commercializing our product candidates.



Reimbursement may be limited
or unavailable in certain market segments for our product candidate, which could make it difficult for us to sell our product,
if approved, profitably.



In both domestic and
foreign markets, sales of our product, if approved, will depend, in part, on the extent to which the costs of our product will
be covered by third-party payors, such as government health programs, commercial insurance and managed health care organizations.
These third-party payors decide which drugs will be covered and establish reimbursement levels for those drugs. The containment
of health care costs has become a priority of governments in the United States, Europe and elsewhere as well as private third-party
payors. The prices of drugs have been a focus in this effort. Governments and private third-party payors have attempted to control
costs by limiting coverage and the amount of reimbursement for particular medications, which could affect our ability to sell
our product, if approved, profitably. Cost-control initiatives could cause us to decrease the price we might establish for our
product, if approved, which could result in lower than anticipated product revenues.



-54-







In the United States,
we will need to obtain approvals for payment for our product candidate from private insurers, including managed care organizations,
and from governmental health care programs including Medicare and Medicaid. Coverage and reimbursement by a third-party payor
may depend upon a number of factors, including the third-party payor’s determination that use of our product candidate is:



| | • | a covered benefit under its health
                                         plan;
| | - | ---------------------------------------------------------------------------------



| | • | safe, effective and medically
                                         necessary;
| | - | ---------------------------------------------------------------------------------



| | • | appropriate for the specific patient;
| | - | -------------------------------------



| | • | cost-effective; and
| | - | -------------------



| | • | neither experimental nor investigational.
| | - | -----------------------------------------



Adverse pricing limitations
may hinder our ability to recoup our investment in APL-130277, even if such product candidate obtains marketing approval.



Obtaining coverage
and reimbursement approval for our product candidate from a government or other third-party payor is a time consuming and costly
process that could require us to provide supporting scientific, clinical and cost-effectiveness data for the use of our product
candidate to the payor. Further, there is significant uncertainty related to third-party payor coverage and reimbursement of newly
approved drugs, including those with novel formulations such as APL-130277. We may not be able to provide data sufficient to gain
acceptance with respect to coverage and reimbursement. We cannot be sure that coverage or adequate reimbursement will be available
for our product candidate. Also, we cannot be sure that reimbursement amounts will not reduce the demand for, or the price of,
our product candidate. If reimbursement is not available or is available only to limited levels, we may not be able to commercialize
our product, if approved. In addition, in the United States, third-party payors are increasingly attempting to contain health
care costs by limiting access, coverage, and the level of reimbursement of new drugs. As a result, significant uncertainty exists
as to whether and how much third-party payors will reimburse patients for their use of newly approved drugs, which in turn will
put pressure on the pricing of drugs.



Price controls may be imposed
in foreign markets, which may adversely affect our future profitability.



In some countries
other than the United States, particularly member states of the European Union, the pricing of prescription drugs is subject to
governmental control. In these countries, pricing negotiations with governmental authorities can take considerable time after
receipt of marketing approval for a product. In addition, there can be considerable pressure by governments and other stakeholders
on prices and reimbursement levels, including as part of cost containment measures. Political, economic and regulatory developments
may further complicate pricing negotiations, and pricing negotiations may continue after reimbursement has been obtained. Reference
pricing used by various European Union member states and parallel distribution, or arbitrage between low-priced and high-priced
member states, can further reduce prices. In some countries, additional clinical research may be required to enable comparison
of the cost-effectiveness of our product candidate to other available therapies in order to obtain or maintain reimbursement or
pricing approval. Publication of discounts by third-party payors or authorities may lead to further pressure on the prices or
reimbursement levels within the country of publication and other countries. If reimbursement of our product candidate is unavailable
or limited in scope or amount, or if pricing is set at unsatisfactory levels, our business could be adversely affected.



-55-







The impact on us of health
care reform legislation and other changes in the health care industry and in health care spending is currently unknown, and may
adversely affect our business model.



Our revenue prospects
could be affected by changes in health care spending and policy in the United States and abroad. We operate in a highly regulated
industry and new laws, regulations or judicial decisions, or new interpretations of existing laws, regulations or decisions, related
to health care availability, the method of delivery or payment for health care products and services could negatively impact our
business, operations and financial condition.



There have been, and
likely will continue to be, legislative and regulatory proposals and initiatives within the United States and foreign jurisdictions
directed at broadening the availability of health care and containing or lowering the cost of health care. We cannot predict the
initiatives that may be adopted in the future or whether initiatives that have been adopted will be repealed or modified. These
legislative and/or regulatory changes may negatively impact the reimbursement for drug products, following approval, and thus
affect our ability to sell our product profitably. The continuing efforts of governments, insurance companies, managed care organizations
and other payors of health care services to contain or reduce costs of health care may adversely affect:



| | • | the demand for our product candidate
                                         if we obtain regulatory approval;
| | - | ---------------------------------------------------------------------------------------------------------------



| | • | our ability to set a price that
                                         we believe is fair for our product candidate;
| | - | ----------------------------------------------------------------------------------------------------------------------



| | • | our ability to obtain coverage
                                         and reimbursement approval for our product candidate;
| | - | -----------------------------------------------------------------------------------------------------------------------------



| | • | our ability to generate revenues
                                         and achieve or maintain profitability;
| | - | ----------------------------------------------------------------------------------------------------------------



| | • | the level of taxes that we are
                                         required to pay; and
| | - | --------------------------------------------------------------------------------------------



| | • | our access to capital.
| | - | ----------------------



Any significant spending
reductions affecting Medicare, Medicaid or other publicly funded or subsidized health programs that may be implemented, and/or
any significant taxes or fees that may be imposed on us, as part of any broader deficit reduction effort or legislative replacement
to the United States Budget Control Act, could have an adverse impact on our anticipated product revenues.



We face substantial competition,
which may result in others discovering, developing or commercializing products before, or more successfully, than we do.



Our industry is highly
competitive and subject to rapid and significant technological change. While we believe that our technology, knowledge, experience
and scientific resources provide us with competitive advantages, we face competition from many different sources, including large
pharmaceutical, specialty pharmaceutical, biotechnology and generic drug companies and academic and government institutions. These
organizations may have significantly greater resources than we do and conduct similar research, seek and obtain patent protection
that may impact our freedom to operate and establish collaborative arrangements for research, development, manufacturing and marketing
of products that compete with our product candidate. Our commercial opportunity could be reduced or eliminated if our competitors
have products that are better in one or more of these categories. Furthermore, our competitors may, among other things: develop
and commercialize products that are, or are perceived to be, safer, more effective, less expensive, or more convenient or easier
to administer; obtain quicker regulatory approval; establish superior proprietary positions; have access to more manufacturing
capacity; implement more effective approaches to sales and marketing; or form more advantageous strategic alliances.



-56-







We believe that the
main competitors for APL-130277 are therapies that can limit the occurrence of OFF episodes and other therapies for the on-demand
treatment of OFF episodes. These therapies include both pharmacotherapies and invasive therapies for advanced patients such as
deep brain stimulation and intestinal-infused levodopa that may be used in less advanced PD patients. Pharmacotherapies that can
maintain consistent plasma concentration of levodopa over extended durations could reduce the occurrence of motor fluctuations
and thus reduce the need for on-demand treatments for OFF episodes such as APL-130277. Approaches to achieve consistent levodopa
plasma concentrations include new formulations of carbidopa/levodopa, a combination of levodopa and an inhibitor of DOPA decarboxylase
(an enzyme found throughout the body) referred to as carbidopa, such as extended-release and intestinal infusions, and therapies
that prolong the effect of levodopa. Extended-release formulations of oral and patch carbidopa/levodopa are being developed by
groups including Impax Laboratories, Inc., Depomed Inc. and Neuroderm Ltd. A continuous administration of a gel-containing levodopa
through a tube that is surgically implanted into the intestine is being developed by AbbVie Inc. This therapy, known as Duodopa/Duopa,
is approved in the European Union and recently gained approval in the United States. Additionally, new formulations of dopamine
agonist therapies (such as pramipexole and rotigotine) may be developed that can further prolong the effect of carbidopa/levodopa
regimens and reduce the frequency of motor fluctuations.



If approved for the
treatment of OFF episodes, APL-130277 would also compete against on-demand therapies that aim to specifically address OFF episodes,
such as the levodopa capsules administered through an inhaler for the treatment of OFF episodes that are being developed by Acorda
Therapeutics, Inc. If such treatment is approved before our product candidate, then such treatment could capture a large percentage
of the market share for the treatment of OFF episodes and could affect the acceptance and adoption of our product candidate. At
this time, an injectable formulation of apomorphine, Apokyn®, which is a STADA Arzneimittel AG product distributed by U.S.
Worldmeds, LLC in the United States, is the only therapy approved for the treatment of OFF episodes. Apokyn was approved for this
use in the United States in 2004, and for advanced PD patients in Europe in 1993. As we complete additional clinical trials for
our product candidate, if our pharmacokinetic data suggests that the time to ON associated with our product candidate is slower
than with Apokyn, the commercialization of our product candidate could be adversely affected.



One or more of our
competitors may utilize their expertise in sublingual delivery of drugs to develop and obtain approval for sublingual delivery
products that may compete with APL-130277. If approved, our product candidate may face competition in the target commercial areas.
The availability of our competitors’ products could limit the demand and the price we are able to charge for our product
candidate that we may develop and commercialize.



Risks Related to Our Intellectual
Property



If we are unable to obtain
and maintain sufficient intellectual property protection for our product candidate, or if the scope of the intellectual property
protection is not sufficiently broad, our ability to successfully commercialize our product candidate and compete effectively
may be adversely affected.



Our success depends
in large part on our ability to obtain and maintain protection with respect to our intellectual property and proprietary technology.
We rely upon a combination of patents, trade secret protection and confidentiality agreements to protect the intellectual property
related to APL-130277. If we do not adequately protect our intellectual property, competitors may be able to use our technologies
and erode or negate any competitive advantage that we may have, which could harm our business and ability to achieve profitability.
In particular, our success depends in large part on our ability to obtain and maintain patent protection with respect to our product
candidate in the United States, Europe, Japan, and other countries. The patentability of inventions and the validity, enforceability
and scope of patents in the pharmaceutical field can be uncertain because they involve complex legal and factual considerations.
The standards applied by the United States Patent and Trademark Office, or USPTO, and other foreign patent offices in granting
patents are not always applied uniformly or predictably, even within a given jurisdiction. For example, there is no uniform worldwide
policy regarding patentable subject matter or the scope of claims allowable in patents. The same patent applications that we own
may fail to result in issued patents in the United States, Europe, Japan, or in other countries, and if they do, such patents
may not cover our product candidate in the United States, the European Union, Japan or in other countries. The patent prosecution
process is expensive and time-consuming, and we may not be able to file and prosecute all necessary or desirable patent applications
at a reasonable cost or in a timely manner. It is also possible that we may fail to identify patentable aspects of our research
and development prior to the deadlines for taking action to obtain patent protection on such research and developments. No patentability
searches have been completed nor have patentability opinions of counsel been obtained. There is no assurance that all potentially
relevant prior art relating to our patents and patent applications has been found. We may be unaware of prior art that could be
used to invalidate an issued patent or prevent our pending patent applications from issuing as patents. The issuance of a patent
is not conclusive as to the correctness of its inventorship, ownership, priority, validity or enforceability. Therefore, even
if patents do successfully issue and even if such patents cover our product candidate, third-parties may challenge their validity,
enforceability or scope, and such challenges may result in such patents being narrowed or invalidated. Furthermore, even if they
are unchallenged, our patents and patent applications may not adequately protect our intellectual property, provide sufficient
exclusivity for our product candidate, prevent others from designing around our claims or otherwise provide us with a competitive
advantage.



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Additionally, our
confidentiality agreements and other contractual protections may not be adequate to protect our intellectual property from unauthorized
disclosure, third-party infringement or misappropriation. We may not have adequate remedies in the case of a breach of any such
agreements, and our trade secrets and other proprietary information could be disclosed to our competitors or others may independently
develop substantially equivalent or superior proprietary information and techniques or otherwise gain access to our trade secrets
or disclose such technologies. ARx is a non-exclusive licensee in all fields other than generic APL-130277 applications of our
patent family entitled “Sublingual Films”, of which ARx was previously a co-owner with us. Accordingly, ARx has some
freedom to operate with respect to these patents. In addition, ARx is an exclusive licensee of all intellectual property generated
under our agreement with ARx in all fields, in respect of other products and formulations and such license affects our use of
such intellectual property and survives termination of the agreement. Additionally, the laws of some foreign countries do not
protect intellectual property rights to the same extent as the laws of the United States, Europe, and Japan, and many companies
have encountered significant problems in protecting and defending such rights in foreign jurisdictions. The legal systems of certain
countries, particularly certain developing countries, do not favor the enforcement of patents and other intellectual property
protection, particularly those relating to pharmaceuticals, and this could make it difficult for us to stop the infringement of
our patents. Any of these outcomes could impair our ability to prevent competition from third-parties, which may have an adverse
impact on our business.



If the patent applications
we own with respect to our product candidate fail to issue, if their breadth or strength of protection is threatened, or if they
fail to provide meaningful exclusivity, it could dissuade companies from collaborating with us. We cannot offer any assurances
about which, if any, patents will issue, the breadth of any such patents or whether any issued patents will be found invalid and
unenforceable or will be threatened by third-parties. Any successful challenge to these patents or any other patents owned by
us could deprive us of rights necessary for the successful commercialization of our product candidate. Since patent applications
in the United States, Europe, and Japan, and most other countries are confidential for a period of time after filing, and some
remain so until issued, we cannot be certain that we were the first to file any patent application related to our product candidate.
Furthermore, if third-parties have filed such patent applications, an interference proceeding in the United States can be initiated
by the USPTO or a third-party to determine who was the first to invent the subject matter covered by the patent claims of our
first two families of patents and applications. In addition, patents have a limited lifespan. In the United States, the natural
expiration of a patent is generally 20 years after the utility application is filed. Various extensions may be available; however,
the life of a patent and the protection it affords is limited. If we encounter delays in obtaining regulatory approvals, the period
of time during which we could market our product under patent protection could be reduced. Even if patents covering our product
candidate are obtained, once the patent life has expired or lapsed for a product, we may be open to competition from similar or
generic products. The launch of a generic version of our product in particular would be likely to result in an immediate and substantial
reduction in the demand for our product, which could have a material adverse effect on our business.



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Recent patent reform
legislation could increase the uncertainties and costs surrounding the prosecution of our patent applications and the enforcement
or defense of our issued patents. On September 16, 2011, the United States Leahy-Smith America Invents Act, or AIA, was signed
into law. The AIA includes a number of significant changes to United States patent law. These include provisions that affect the
way patent applications are prosecuted, redefine what qualifies as relevant prior art, may affect patent litigation and switch
the United States patent system from a “first-to-invent” system to a “first-to-file” system. The USPTO
recently developed new regulations and procedures to govern administration of the AIA, and many of the substantive changes to
patent law associated with the AIA, and in particular, the first-to-file provisions, only became effective on March 16, 2013.
Accordingly, it is not clear what, if any, impact the AIA will have on the operation of our business. The AIA and its implementation
could increase the uncertainties and costs surrounding the prosecution of our patent applications and the enforcement or defense
of our issued patents, all of which could have a material adverse effect on our business and financial condition. Further changes
to the patent laws in the United States and other jurisdictions could also diminish the value of our patents and patent applications
or narrow the scope of our patent protection.



Obtaining and maintaining
our patent protection depends on compliance with various procedural, document submission, fee payment and other requirements imposed
by governmental patent agencies, and our patent protection could be reduced or eliminated for non-compliance with these requirements.
The USPTO and various foreign governmental patent agencies require compliance with a number of procedural, documentary, fee payment
and other provisions during the patent process. In many cases, an inadvertent lapse can be cured by payment of a late fee or by
other means in accordance with the applicable rules. However, there are situations in which noncompliance can result in abandonment
or lapse of a patent or patent application, resulting in partial or complete loss of patent rights in the relevant jurisdiction.
In this event, competitors might be able to enter the market earlier than would otherwise have been the case. Any loss of patent
protection could have a material adverse impact on our business. We may be unable to prevent competitors from entering the market
with a product that is similar to or the same as our product candidate.



We may become involved in
lawsuits to protect or enforce our intellectual property, which could be expensive, time consuming and unsuccessful.



Competitors may infringe,
misappropriate or otherwise violate our patents or our other intellectual property rights. To counter infringement or unauthorized
use, litigation may be necessary to enforce or defend our intellectual property rights, to protect our trade secrets and/or to
determine the validity and scope of our own intellectual property rights or the proprietary rights of others. Such litigation
can be expensive and time consuming, and any such claims could provoke these parties to assert counterclaims against us, including
claims alleging that we infringed their patents or other intellectual property rights. Many of our current and potential competitors
have the ability to dedicate substantially greater resources to litigate intellectual property rights than we can. Accordingly,
despite our efforts, we may not be able to prevent third-parties from infringing upon or misappropriating our intellectual property.
Litigation could result in substantial costs and diversion of management attention and resources, which could harm our business
and financial results. In addition, in an infringement proceeding, a court may decide that a patent owned by or licensed to us
is invalid or unenforceable, or may refuse to stop the other party from using the technology at issue on the grounds that our
patents do not cover the technology in question. An adverse result in any litigation proceeding could put one or more of our patents
at risk of being invalidated, held unenforceable or interpreted narrowly, and could put any of our patent applications at risk
of not issuing as a patent. Furthermore, because of the substantial amount of discovery required in connection with intellectual
property litigation, there is a risk that some of our confidential information could be compromised by disclosure during such
litigation.



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We could become subject
to interference or derivation proceedings provoked by third-parties or brought by the USPTO or other foreign patent authorities
to determine the priority of inventions or other matters of inventorship with respect to our patents or patent applications. Our
business could be harmed if the prevailing party does not offer us a license on commercially reasonable terms, if any license
is offered at all. We may also become involved in other proceedings, such as re-examination or opposition proceedings, before
the USPTO, the European Patent Office, or other foreign counterparts relating to our intellectual property or the intellectual
property rights of others. An unfavorable outcome in any such proceedings could require us to cease using the related technology
or require us to attempt to license rights to the related technology from the prevailing party, or could cause us to lose valuable
intellectual property rights. We may also become involved in disputes with others regarding the ownership of intellectual property
rights. For example, where we jointly develop intellectual property with certain parties, disagreements may arise as to the ownership
of the intellectual property developed pursuant to these relationships. If we are unable to resolve these disputes, we could lose
valuable intellectual property rights.



Third-party claims of intellectual
property infringement or misappropriation may prevent or delay our development and commercialization efforts or impact our share
price.



Our commercial success
depends, in part, on us not infringing the patents and proprietary rights of third-parties. There is a substantial amount of litigation,
both within and outside the United States, involving patent and other intellectual property rights in the pharmaceutical industry,
including patent infringement lawsuits, interferences, oppositions and inter partes reexamination proceedings before the
USPTO and corresponding foreign patent offices. Numerous United States and foreign issued patents and pending patent applications
owned by third-parties exist in the field in which we are developing our product candidate. As the pharmaceutical industries expand
and more patents are issued, the risk increases that our product candidate may be subject to claims of infringement of the patent
rights of third-parties. The coverage of patents is subject to interpretation by the courts, and the interpretation is not always
uniform. If we are sued for patent infringement, we would need to demonstrate that our product candidate or methods either do
not infringe the patent claims of the relevant patent or that the patent claims are invalid, and we may not be able to do this.
Demonstrating patent invalidity and/or non-infringement may be difficult. Even if we are successful in these proceedings, we may
incur substantial costs and the time and attention of our management and scientific personnel could be diverted in pursuing these
proceedings, which could have a material adverse effect on us. In addition, we may not have sufficient resources to bring these
actions to a successful conclusion.



Third-parties may
assert that we, our customers, licensees or parties indemnified by us are employing their proprietary technology without authorization
or have infringed upon, misappropriated or otherwise violated their intellectual property or other rights. For example, we may
be subject to claims that we are infringing the patent, trademark or copyright rights of third-parties, or that our employees
have misappropriated or divulged their former employers’ trade secrets or confidential information. There may be third-party
patents or patent applications with claims to materials, formulations, methods of manufacture or methods for treatment related
to the use or manufacture of our product candidate, that we failed to identify. For example, applications filed before November
29, 2000 and certain applications filed after that date that will not be filed outside the United States remain confidential until
issued as patents. Except for the preceding exceptions, patent applications in the United States and elsewhere are generally published
only after a waiting period of approximately 18 months after the earliest filing, and sometimes not at all. Therefore, patent
applications covering our product candidate could have been filed by others without our knowledge. Additionally, pending patent
applications that have been published can, subject to certain limitations, be later amended in a manner that could cover our platform
technologies, our product candidate or the use or manufacture of our product candidate.



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If any third-party
patents were held by a court of competent jurisdiction to cover aspects of our product candidate, including the materials, formulations,
methods of manufacture, methods of analysis, and/or methods for treatment, the holders of any such patents would be able to block
our ability to develop and commercialize our product candidate until such patent expired or unless we obtain a license from such
third-party in order to use the infringing technology and continue developing and commercializing our infringing product candidate.
Such licenses may not be available on commercially acceptable terms, if at all. Even if we were able to obtain a license, the
rights may be nonexclusive, which could result in our competitors gaining access to the same intellectual property licensed to
us. Ultimately, we could be prevented from commercializing our product candidate, or be forced to cease some aspect of our business
operations, if, as a result of actual or threatened patent infringement claims, we are unable to enter into licenses on acceptable
terms.



Parties making claims
against us may obtain injunctive or other equitable relief, which could effectively block our ability to further develop and commercialize
our product candidate. Defending against claims of patent infringement or misappropriation of trade secrets could be costly and
time consuming, regardless of the outcome. Thus, even if we were to ultimately prevail, or to settle at an early stage, such litigation
could burden us with substantial unanticipated costs. In addition, litigation or threatened litigation could result in significant
demands on the time and attention of our management team, distracting them from the pursuit of other company business. In the
event of a successful claim of infringement against us, in addition to potential injunctive relief, we may have to pay substantial
damages, including treble damages and attorneys’ fees if we are found to have willfully infringed a patent, pay royalties,
redesign our infringing product or obtain one or more licenses from third-parties, which may be impossible or require substantial
time and monetary expenditure.



We are evaluating
third-party patents and pending patent applications that may pose risks to the commercialization of APL-130277 in the U.S. and
Europe. The validity of several of such third-party patents is being challenged either in the U.S. district courts, at the USPTO,
or both, by multiple third-parties. We have discussed a license to certain of these third-party patents and applications, and
we are evaluating whether a license to certain of these third-party patents and patent applications is desirable. Should APL-130277
ultimately be found to infringe a valid and enforceable third-party patent claim, such third-party patents could adversely impact
our commercial efforts, requiring us to obtain a license from the relevant third-party patent owner in order to continue commercializing
our product candidate, and such licenses may not be available on commercially reasonable terms or at all. If one or more of these
third-party patents were asserted against us, we expect to vigorously contest such an action.



We may face a claim
of misappropriation if a third-party believes that we inappropriately obtained and used trade secrets of such third-party. We
are not aware of any material threatened or pending claims related to these matters, but in the future litigation may be necessary
to defend against such claims. If we are found to have misappropriated a third-party’s trade secrets, we may be prevented
from further using such trade secrets, limiting our ability to develop our product candidate, and we may be required to pay damages.



During the course
of any patent or other intellectual property litigation, there could be public announcements of the results of hearings, rulings
on motions, and other interim proceedings in the litigation. If securities analysts or investors regard these announcements as
negative, the perceived value of our product candidate or intellectual property could be diminished and it could have a substantial
adverse effect on the market price of our common shares. Such litigation or proceedings could substantially increase our operating
losses and reduce the resources available for development activities or any future marketing or distribution activities.



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We will not be able to protect
our intellectual property rights throughout the world.



Filing, prosecuting
and defending patents on our product candidate throughout the world would be prohibitively expensive. Competitors may use our
technologies in jurisdictions where we have not obtained patent protection to develop their own products and, further, may export
otherwise infringing products to territories where we have patent protection but where enforcement is not as strong as in the
United States. These products may compete with our product candidate in jurisdictions where we do not have any issued patents
and our patent claims or other intellectual property rights may not be effective or sufficient to prevent them from so competing.
Many companies have encountered significant problems in protecting and defending intellectual property rights in foreign jurisdictions.
The legal systems of certain countries, particularly certain developing countries, do not favor the enforcement of patents and
other intellectual property protection, particularly those relating to pharmaceuticals, which could make it difficult for us to
stop the infringement of our patents or marketing of competing products in violation of our proprietary rights generally. Proceedings
to enforce our patent rights in foreign jurisdictions could result in substantial cost and divert our efforts and attention from
other aspects of our business.



Confidentiality agreements
with employees and third-parties may not prevent unauthorized disclosure of trade secrets and other proprietary information.



In addition to the
protection afforded by patents, we rely on trade secret protection and confidentiality agreements to protect proprietary know-how
that is not patentable or that we elect not to patent, processes for which patents are difficult to enforce and any other elements
of our platform technology and discovery and development processes that involve proprietary know-how, information or technology
that is not covered by patents. Trade secrets can be difficult to protect. Any disclosure to, misappropriation by, or reverse
engineering by third-parties of our confidential proprietary information or know-how could enable competitors to quickly duplicate
or surpass our technological achievements, thus eroding our competitive position in our market. We seek to protect our proprietary
technology and processes, in part, by entering into confidentiality agreements, non-disclosure and invention assignment agreements
with our employees, consultants, and third-party scientific advisors, contractors and collaborators. However, we cannot be certain
that such agreements have been entered into with all relevant parties, that our trade secrets and other confidential proprietary
information will not be disclosed or that competitors will not otherwise gain access to our trade secrets or independently develop
substantially equivalent information and techniques. Although we use reasonable efforts to protect our trade secrets, our employees,
consultants, contractors, or outside scientific advisors might intentionally or inadvertently disclose our trade secret information
to competitors.



Enforcing a claim
that a third-party illegally obtained and is using any of our trade secrets is expensive and time consuming, and the outcome is
unpredictable. In addition, courts outside the United States sometimes do not protect proprietary rights such as trade secrets
to the same extent or in the same manner as United States courts. Misappropriation or unauthorized disclosure of our trade secrets
could impair our competitive position and may have a material adverse effect on our business, results of operations and financial
condition.



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Risks Related to Our Business and
Industry



If we fail to attract and
keep senior management and key scientific personnel, we may be unable to successfully develop our product candidate, conduct our
clinical trials and commercialize our product candidate.



We are highly dependent
on members of our senior management, including Anthony Giovinazzo, our President and Chief Executive Officer, Albert Agro, our
Chief Medical Officer, Thierry Bilbault, our Chief Scientific Officer and Executive Vice President, CMC, and Andrew Williams,
our Chief Operating Officer and Chief Financial Officer. The loss of the services of any of these persons could impede the achievement
of our research, development and commercialization objectives. Also, each of these persons may terminate their employment with
us at any time. We do not maintain “key person” insurance for any of our executives or other employees.



Recruiting and retaining
qualified scientific, clinical, sales and marketing personnel will also be critical to our success. We may not be able to attract
and retain these personnel on acceptable terms given the competition among numerous pharmaceutical and biotechnology companies
for similar personnel. We also experience competition for the hiring of scientific and clinical personnel from universities and
research institutions. In addition, we rely on consultants and advisors, including scientific and clinical advisors, to assist
us in formulating our research and development and commercialization strategy. Our consultants and advisors, including our scientific
founders, may be employed by employers other than us and may have commitments under consulting or advisory contracts with other
entities that may limit their availability to us.



We may encounter difficulties
in managing our growth and expanding our operations successfully.



As we seek to advance
our product candidate through clinical trials and commercialization, we will need to expand our development, regulatory, manufacturing,
marketing and sales capabilities or contract with third-parties to provide these capabilities for us. As our operations expand,
we expect that we will need to manage additional relationships with one or more strategic partners, and with suppliers and other
third-parties. Future growth will impose significant added responsibilities on members of management. Our future financial performance
and our ability to commercialize our product candidate and to compete effectively will depend, in part, on our ability to manage
any future growth effectively. To that end, we must be able to manage our development efforts and clinical trials effectively
and hire, train and integrate additional management, administrative and, if necessary, sales and marketing personnel. Due to our
limited financial resources, we may not be able to accomplish these tasks, and our failure to accomplish any of them could prevent
us from successfully growing our company or disrupt our operations.



Our relationships with health
care professionals, institutional providers, principal investigators, consultants, customers (actual and potential) and third-party
payors are, and will continue to be, subject, directly and indirectly, to Canadian and United States federal and state health
care fraud and abuse, false claims, marketing expenditure tracking and disclosure, government price reporting, and health information
privacy and security laws. If we are unable to comply, or have not fully complied, with such laws, we could face penalties, including,
without limitation, civil, criminal, and administrative penalties, damages, monetary fines, disgorgement, possible exclusion from
participation in Medicare, Medicaid and other government health care programs, contractual damages, reputational harm, diminished
profits and future earnings, and curtailment or restructuring of our operations.



Our business operations
and activities may be directly or indirectly subject to various fraud and abuse laws, including, without limitation, the United
States federal Anti-Kickback Statute and the United States False Claims Act. If we obtain FDA approval for our product candidate
and begin commercializing our product candidate in the United States, our potential exposure under such laws will increase significantly,
and our costs associated with compliance with such laws are also likely to increase. These laws may impact, among other things,
our current activities with principal investigators and research subjects, as well as proposed and future sales, marketing and
education programs. In addition, we may be subject to patient privacy regulation by the federal government and state governments
in which we conduct our business. The laws that may affect our ability to operate include, but are not limited to:



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| | • | the United States federal health
                                         care Anti-Kickback Statute, which prohibits, among other things, knowingly and willfully
                                         soliciting, receiving, offering or paying any remuneration (including any kickback, bribe,
                                         or rebate), directly or indirectly, overtly or covertly, in cash or in kind, to induce,
                                         or in return for, either the referral of an individual, or the purchase, lease, order
                                         or recommendation of any good, facility, item or service for which payment may be made,
                                         in whole or in part, under a United States federal health care program, such as the Medicare
                                         and Medicaid programs;
| | - | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | • | United States federal civil and
                                         criminal false claims laws, including the United States False Claims Act, and civil monetary
                                         penalty laws, which prohibit, among other things, individuals or entities from knowingly
                                         presenting, or causing to be presented, claims for payment or approval from Medicare,
                                         Medicaid, or other third-party payors that are false or fraudulent or knowingly making
                                         a false statement to improperly avoid, decrease or conceal an obligation to pay money
                                         to the United States government;
| | - | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | • | the United States Health Insurance
                                         Portability and Accountability Act of 1996, or HIPAA, which created new federal criminal
                                         statutes that prohibit knowingly and willfully executing, or attempting to execute, a
                                         scheme to defraud any health care benefit program or obtain, by means of false or fraudulent
                                         pretenses, representations, or promises, any of the money or property owned by, or under
                                         the custody or control of, any health care benefit program, regardless of the payor (public
                                         or private) and knowingly and willfully falsifying, concealing, or covering up by any
                                         trick or device a material fact or making any materially false statements in connection
                                         with the delivery of, or payment for, health care benefits, items or services relating
                                         to health care matters;
| | - | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | • | HIPAA, as amended by the United
                                         States Health Information Technology for Economic and Clinical Health Act of 2009 and
                                         their respective implementing regulations, which impose requirements on certain covered
                                         health care providers, health plans, and health care clearinghouses as well as their
                                         respective business associates that perform services for them that involve the use, or
                                         disclosure of, individually identifiable health information, relating to the privacy,
                                         security and transmission of individually identifiable health information without appropriate
                                         authorization;
| | - | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | • | the United States federal physician
                                         self-referral law, commonly known as the Stark Law, which prohibits a physician from
                                         making a referral to an entity for certain designated health services reimbursed by Medicare
                                         or Medicaid if the physician or a member of the physician’s family has a financial
                                         relationship with the entity, and which also prohibits the submission of any claims for
                                         reimbursement for designated health services furnished pursuant to a prohibited referral;
| | - | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | • | the United States Physician Payments
                                         Sunshine Act, created under Section 6002 of the United States Patient Protection and
                                         Affordable Care Act, as amended by the United States Health Care and Education Reconciliation
                                         Act of 2010, or collectively, the ACA, and its implementing regulations requires manufacturers
                                         of drugs, devices, biologicals and medical supplies for which payment is available under
                                         Medicare, Medicaid or the Children’s Health Insurance Program (with certain exceptions)
                                         to report annually to the United States Department of Health and Human Services information
                                         related to payments or other transfers of value made to physicians (defined to include
                                         doctors, dentists, optometrists, podiatrists and chiropractors) and teaching hospitals,
                                         as well as ownership and investment interests held by physicians and their immediate
                                         family members, with data collection required beginning August 1, 2013 and reporting
                                         to the Centers for Medicare & Medicaid Services required by March 31, 2014 and by
                                         the 90th day of each subsequent calendar year;
| | - | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



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| | • | United States federal consumer
                                         protection and unfair competition laws, which broadly regulate marketplace activities
                                         and activities that potentially harm consumers;
| | - | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | • | United States federal government
                                         price reporting laws, changed by the ACA to, among other things, increase the minimum
                                         Medicaid rebates owed by most manufacturers under the Medicaid Drug Rebate Program and
                                         offer such rebates to additional populations, that require us to calculate and report
                                         complex pricing metrics to government programs, where such reported prices may be used
                                         in the calculation of reimbursement and/or discounts on our marketed drugs (participation
                                         in these programs and compliance with the applicable requirements may subject us to potentially
                                         significant discounts on our products, increased infrastructure costs, and potentially
                                         limit our ability to offer certain marketplace discounts);
| | - | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | • | the United States Foreign Corrupt
                                         Practices Act, which regulates certain financial relationships with foreign government
                                         officials (which could include, for example, certain medical professionals); and
| | - | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | • | U.S. state law equivalents of
                                         each of the above federal laws, such as anti-kickback, false claims, consumer protection
                                         and unfair competition laws which may apply to our business practices, including but
                                         not limited to, research, distribution, sales and marketing arrangements as well as submitting
                                         claims involving health care items or services reimbursed by any third-party payor, including
                                         commercial insurers; state laws that require biotech companies to comply with the pharmaceutical
                                         industry’s voluntary compliance guidelines and the relevant compliance guidance
                                         promulgated by the federal government that otherwise restricts payments that may be made
                                         to health care providers; state laws that require drug manufacturers to file reports
                                         with states regarding marketing information, such as the tracking and reporting of gifts,
                                         compensation and other remuneration and items of value provided to health care professionals
                                         and entities (compliance with such requirements may require investment in infrastructure
                                         to ensure that tracking is performed properly, and some of these laws result in the public
                                         disclosure of various types of payments and relationships, which could potentially have
                                         a negative effect on our business and/or increase enforcement scrutiny of our activities);
                                         and state laws governing the privacy and security of health information in certain circumstances,
                                         many of which differ from each other in significant ways and often are not preempted
                                         by HIPAA, thus complicating compliance efforts.
| | - | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



In addition, the regulatory
approval and commercialization of our product candidate outside the United States will also likely subject us to foreign equivalents
of the health care laws mentioned above, among other foreign laws.



Because of the breadth
of these laws and the narrowness of the statutory exceptions and safe harbors available, it is possible that some of our business
activities could be subject to challenge under one or more of such laws. In addition, recent health care reforms have strengthened
some of these laws. Efforts to ensure that our business arrangements will comply with applicable health care laws may involve
substantial costs. It is possible that governmental and enforcement authorities will conclude that our business practices may
not comply with current or future statutes, regulations or case law interpreting applicable fraud and abuse or other health care
laws and regulations. If our operations are found to be in violation of any of the laws described above or any other governmental
regulations that apply to us, we may be subject to penalties, including, without limitation, civil, criminal, and administrative
penalties, damages, monetary fines, disgorgement, possible exclusion from participation in Medicare, Medicaid and other state
and federal government health care programs, contractual damages, reputational harm, diminished profits and future earnings, and
curtailment or restructuring of our operations, any of which could materially adversely affect our ability to operate our business
and our financial results.



-65-







We or our third-party providers
may experience a security breach that could lead to the loss of critical information.



Our business is increasingly
dependent on critical, complex and interdependent information technology systems, including Internet-based systems, to support
business processes as well as internal and external communications. The size and complexity of our and our third-party providers’
computer systems make them potentially vulnerable to breakdown, natural disaster, malicious intrusion, malware and other cyber-attacks,
which may result in the impairment of production and key business processes. In addition, our and our third-party providers’
systems are potentially vulnerable to data security breaches—whether by employees or others—that may expose sensitive
data to unauthorized persons. Such data security breaches could lead to the loss of trade secrets or other intellectual property,
the value of which may be contingent upon maintaining its confidentiality, or could lead to the public exposure of personal information
(including sensitive personal information) of our employees, clinical trial patients, partners and others. This could require
us to expend significant efforts and resources or incur significant expense to eliminate these problems and address related security
concerns. Such disruptions and breaches of data security could have a material adverse effect on our business, reputation, and
financial condition, could cause significant interruptions in our operations and impair our ability to conduct our business and
comply with regulations during the occurrence of any such incident.



Our employees may engage in
misconduct or other improper activities, including noncompliance with regulatory standards and requirements and insider trading.



We are exposed to
the risk of employee fraud or other misconduct. Misconduct by employees could include intentional failures to comply with FDA
regulations, to provide accurate information to the FDA, to comply with manufacturing standards we have established, to comply
with federal and state health care fraud and abuse laws and regulations, to report financial information or data accurately or
to disclose unauthorized activities to us. In particular, sales, marketing and business arrangements in the health care industry
are subject to extensive laws and regulations intended to prevent fraud, kickbacks, self-dealing and other abusive practices.
These laws and regulations may restrict or prohibit a wide range of pricing, discounting, marketing and promotion, sales commission,
customer incentive programs and other business arrangements. Employee misconduct could also involve the improper use of information
obtained in the course of clinical trials, which could result in regulatory sanctions and serious harm to our reputation. It is
not always possible to identify and deter employee misconduct, and the precautions we take to detect and prevent this activity
may not be effective in controlling unknown or unmanaged risks or losses or in protecting us from governmental investigations
or other actions or lawsuits stemming from a failure to be in compliance with such laws or regulations. If any such actions are
instituted against us, and we are not successful in defending ourselves or asserting our rights, those actions could have a significant
impact on our business, including the imposition of civil, criminal and administrative penalties, damages, monetary fines, disgorgement,
possible exclusion from participation in Medicare, Medicaid and other federal health care programs, contractual damages, reputational
harm, diminished profits and future earnings, and curtailment or restructuring of our operations, any of which could adversely
affect our ability to operate our business and our results of operations.



-66-







If product liability lawsuits
are brought against us, we may incur substantial liabilities and may be required to limit commercialization of our product candidate.



We face an inherent
risk of product liability as a result of the clinical testing of our product candidate and will face an even greater risk if we
commercialize our product candidate. For example, we may be sued if the product we develop allegedly causes injury or is found
to be otherwise unsuitable during product testing, manufacturing, marketing or sale. Any such product liability claims may include
allegations of defects in manufacturing, defects in design, a failure to warn of dangers inherent in the product, negligence,
strict liability, and a breach of warranties. Claims could also be asserted under state consumer protection acts. If we cannot
successfully defend ourselves against product liability claims, we may incur substantial liabilities or be required to limit commercialization
of our product candidate. Even a successful defense would require significant financial and management resources. Regardless of
the merits or eventual outcome, liability claims may result in, without limitation:



| | • | injury to our reputation;
| | - | -------------------------



| | • | decreased demand for our product
                                         candidate;
| | - | ------------------------------------------------------------------------------------



| | • | withdrawal of clinical trial participants;
| | - | ------------------------------------------



| | • | costs to defend the related litigations;
| | - | ----------------------------------------



| | • | a diversion of management’s
                                         time and our resources;
| | - | --------------------------------------------------------------------------------------------



| | • | substantial monetary awards to
                                         trial participants or patients;
| | - | -------------------------------------------------------------------------------------------------------



| | • | product recalls, withdrawals,
                                         or labeling, marketing or promotional restrictions;
| | - | --------------------------------------------------------------------------------------------------------------------------



| | • | loss of revenue;
| | - | ----------------



| | • | the inability to commercialize
                                         our product candidate; and
| | - | --------------------------------------------------------------------------------------------------



| | • | a decline in our share price.
| | - | -----------------------------



Failure to obtain
and retain sufficient product liability insurance at an acceptable cost to protect against potential product liability claims
could prevent or inhibit the commercialization of our product candidate. We currently carry product liability insurance covering
our clinical trials. Although we maintain such insurance, any claim that may be brought against us could result in a court judgment
or settlement in an amount that is not covered, in whole or in part, by our insurance or that is in excess of the limits of our
insurance coverage. Our insurance policies also have various exclusions, and we may be subject to a product liability claim for
which we have no coverage. We will have to pay any amounts awarded by a court or negotiated in a settlement that exceed our coverage
limitations or that are not covered by our insurance, and we may not have, or be able to obtain, sufficient capital to pay such
amounts. If we are unable to obtain or maintain sufficient insurance coverage at an acceptable cost or to otherwise protect against
potential product liability claims, it could prevent or inhibit the development and commercial production and sale of our product
candidate, which could adversely affect our business, financial condition, results of operations and prospects.



We and our third-party contract
manufacturers and suppliers must comply with environmental, health and safety laws and regulations, and failure to comply with
these laws and regulations could expose us to significant costs or liabilities.



We and our third-party
manufacturers and suppliers are subject to numerous and increasingly stringent environmental, health and safety laws and regulations,
including those governing laboratory procedures and the use, generation, manufacture, distribution, storage, handling, treatment,
remediation and disposal of hazardous materials and wastes. Hazardous chemicals, including flammable and biological materials,
are involved in certain aspects of our business, and we cannot eliminate the risk of injury or contamination from the use, generation,
manufacture, distribution, storage, handling, treatment or disposal of hazardous materials and wastes. In the event of contamination
or injury, or failure to comply with environmental, health and safety laws and regulations, we could be held liable for any resulting
damages and any such liability could exceed our assets and resources. We could also incur significant costs associated with civil
or criminal fines and penalties for failure to comply with such laws and regulations. If our third-party manufacturers and suppliers
fail to operate in compliance with applicable environmental, health and safety laws and regulations or properly dispose of wastes
associated with our product candidate, we could be held liable for any resulting damages, suffer reputational harm or experience
a disruption in the manufacture and supply of our product candidate.



-67-







Risks Related to Our Common Shares



If we are a passive foreign
investment company, or PFIC, for United States federal income tax purposes in any year, certain adverse tax rules could apply
to U.S. Holders of our common shares.



Based on estimates
of the composition of our income and the value of our assets, we believe that we may be a PFIC for United States federal income
tax purposes for our current taxable year.



We will be classified
as a PFIC for any taxable year for United States federal income tax purposes if either (i) 75% or more of our gross income in
that taxable year is passive income or (ii) the average percentage of our assets by value in that taxable year which produce or
are held for the production of passive income (which includes cash) is at least 50%.



PFIC status is determined
annually and depends upon the composition of a company’s income and assets and the market value of its stock from time to
time. Therefore, there can be no assurance as to our PFIC status for future taxable years. The value of our assets will be based,
in part, on the then market value of our common shares, which is subject to change.



If we are a PFIC for
any taxable year during which a U.S. Holder (as defined below) holds common shares, such U.S. Holders could be subject to adverse
United States federal income tax consequences (whether or not we continue to be a PFIC). For example, U.S. Holders may become
subject to increased tax liabilities under United States federal income tax laws and regulations, and will become subject to burdensome
reporting requirements. If we are a PFIC during which a U.S. Holder holds common shares, such U.S. Holder may be able to make
a “mark-to-market” election or a “qualified electing fund” election that could mitigate the adverse United
States federal income tax consequences that would otherwise apply to such U.S. Holder. We will provide the information necessary
for a U.S. Holder to make the qualified election; however, no assurance can be given that such information will be available for
any lower-tier PFIC that we do not control.



The term
“U.S. Holder” means a holder of a common share of Cynapsus that is for United States federal income tax purposes:



| | · | an
                                         individual citizen or resident of the United States;
| | - | ------------------------------------------------------------------------------------------------



| | · | a
                                         corporation (or other entity treated as a corporation for United States federal income
                                         tax purposes) created or organized in or under the laws of the United States, any state
                                         thereof or the District of Columbia;
| | - | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | · | an
                                         estate the income of which is subject to United States federal income taxation regardless
                                         of its source; or
| | - | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | · | a
                                         trust if it (1) is subject to the primary supervision of a court within the United States
                                         and one or more United States persons have the authority to control all substantial decisions
                                         of the trust or (2) has a valid election in effect under applicable United States Treasury
                                         regulations to be treated as a United States person.
| | - | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



-68-







U.S. Holders are urged
to consult their own tax advisers as to whether we may be treated as a PFIC and the tax consequences thereof.



We are eligible to be treated
as an “emerging growth company,” as defined in the Jumpstart Our Business Startups Act of 2012, or the JOBS Act, and
we cannot be certain if the reduced disclosure requirements applicable to emerging growth companies will make our common shares
less attractive to investors.



We are an “emerging
growth company,” as defined in the JOBS Act. For as long as we continue to be an emerging growth company, we may take advantage
of exemptions from various reporting requirements that are applicable to other public companies that are not emerging growth companies,
including, but not limited to, (1) not being required to comply with the auditor attestation requirements of Section 404 of the
United States Sarbanes-Oxley Act of 2002, (2) reduced disclosure obligations regarding executive compensation in our periodic
reports, and (3) exemptions from the requirements of holding a nonbinding advisory vote on executive compensation and shareholder
approval of any golden parachute payments not previously approved.



We could be an emerging
growth company for up to five years, although circumstances could cause us to lose that status earlier, including if the market
value of our common shares held by non-affiliates exceeds US$700 million as of any June 30 before that time or if we have total
annual gross revenue of US$1.0 billion or more during any fiscal year before that time, in which cases we would no longer be an
emerging growth company as of the following December 31 or, if we issue more than US$1.0 billion in non-convertible debt during
any three-year period before that time, we would cease to be an emerging growth company immediately. We cannot predict if investors
will find our common shares less attractive because we may rely on these exemptions. If some investors find our common shares
less attractive as a result, there may be a less active trading market for our common shares and our share price may be more volatile.



There is no assurance that
an active trading market in our common shares will be sustained. We do not know what the market price of our common shares will
be and, as a result, it may be difficult for you to sell your common shares.



Our common shares
are listed on the TSX in Canada and the NASDAQ in the United States. If a robust market for our common shares is not sustained,
it may be more difficult for you to sell your common shares at an attractive price. Further, an inactive market in either Canada
or the United States may also impair our ability to raise capital by selling common shares and may impair our ability to enter
into strategic partnerships or acquire companies or products by using our common shares as consideration. We cannot predict the
prices at which our common shares will trade. It is possible that in one or more future periods our results of operations may
be below the expectations of public market analysts and investors and, as a result of these and other factors, the price of our
common shares may fall.



The market price of our common
shares may be highly volatile, which could cause our investors to incur substantial losses.



The market price of
our common shares could be subject to wide fluctuations in response to many risk factors listed in this “Risk Factors”
section, and others beyond our control, including, but not limited to:



| | • | results and timing of clinical
                                         trials of our product candidate, APL-130277;
| | - | --------------------------------------------------------------------------------------------------------------------



| | • | results of clinical trials of
                                         our competitors’ products;
| | - | -------------------------------------------------------------------------------------------------



| | • | failure to adequately protect
                                         our intellectual property or proprietary technology;
| | - | ---------------------------------------------------------------------------------------------------------------------------



-69-







| | • | pending or threatened litigation
                                         involving our intellectual property or proprietary technology or us infringing upon a
                                         third-party’s intellectual property or proprietary technology;
| | - | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | • | our inability to raise additional
                                         capital, or if we are able to raise capital, the terms on which we raise it;
| | - | -------------------------------------------------------------------------------------------------------------------------------------------------------



| | • | commencement or termination of
                                         any licensing or other partnering arrangement;
| | - | ----------------------------------------------------------------------------------------------------------------------



| | • | regulatory actions with respect
                                         to our product candidate or our competitors’ products;
| | - | -------------------------------------------------------------------------------------------------------------------------------



| | • | actual or anticipated fluctuations
                                         in our financial condition and operating results;
| | - | -----------------------------------------------------------------------------------------------------------------------------



| | • | publication of research reports
                                         by securities analysts about us or our competitors or our industry;
| | - | --------------------------------------------------------------------------------------------------------------------------------------------



| | • | our failure or the failure of
                                         our competitors to meet analysts’ projections or guidance that we or our competitors
                                         may give to the market;
| | - | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | • | additions and departures of key
                                         personnel;
| | - | -----------------------------------------------------------------------------------



| | • | strategic decisions by us or our
                                         competitors, such as acquisitions, divestitures, spin-offs, joint ventures, strategic
                                         investments or changes in business strategy;
| | - | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | • | the passage of legislation or
                                         other regulatory developments affecting us or our industry;
| | - | ----------------------------------------------------------------------------------------------------------------------------------



| | • | fluctuations in the valuation
                                         of companies perceived by investors to be comparable to us;
| | - | ----------------------------------------------------------------------------------------------------------------------------------



| | • | sales of our common shares by
                                         us, our insiders or our other shareholders;
| | - | ------------------------------------------------------------------------------------------------------------------



| | • | speculation in the press or investment
                                         community about us, our common shares or our industry;
| | - | --------------------------------------------------------------------------------------------------------------------------------------



| | • | announcement or expectation of
                                         additional financing efforts;
| | - | -----------------------------------------------------------------------------------------------------



| | • | changes in accounting principles;
| | - | ---------------------------------



| | • | terrorist acts, acts of war or
                                         periods of widespread civil unrest;
| | - | -----------------------------------------------------------------------------------------------------------



| | • | natural disasters and other calamities;
| | - | ---------------------------------------



| | • | changes in market conditions for
                                         biotechnology and pharmaceutical stocks; and
| | - | ----------------------------------------------------------------------------------------------------------------------



| | • | changes in general market and
                                         economic conditions.
| | - | -------------------------------------------------------------------------------------------



In addition, the stock
market has recently experienced significant volatility, particularly with respect to pharmaceutical, biotechnology and other life
sciences company stocks. The volatility of pharmaceutical, biotechnology and other life sciences company stocks often does not
relate to the operating performance of the companies represented by the stock. As a result of this volatility, the price of our
common shares may decline even if our operating results, underlying asset values or prospects have not changed.As we operate
in a single industry, we are especially vulnerable to these factors to the extent that they affect our industry or our products,
or to a lesser extent our markets. Continued listing of our common shares on the NASDAQ in addition to the TSX may increase share
price volatility on the TSX and also result in volatility of the trading price on the NASDAQ because trading will be split between
the two markets, resulting in less liquidity on both exchanges. In addition, different liquidity levels, volume of trading, currencies
and market conditions on the two exchanges may result in different prevailing trading prices. In the past, securities class action
litigation has often been initiated against companies following periods of volatility in their share price. This type of litigation
could result in substantial costs and divert our management’s attention and resources, and could also require us to make
substantial payments to satisfy judgments or to settle litigation.



-70-







We do not expect to pay any
cash dividends for the foreseeable future.



You should not rely
on an investment in our common shares to provide dividend income. We do not anticipate that we will pay any cash dividends to
holders of our common shares in the foreseeable future. Instead, we plan to retain any earnings to maintain and expand our operations.
In addition, any future debt financing arrangement may contain terms prohibiting or limiting the amount of dividends that may
be declared or paid on our common shares. Accordingly, investors must rely on sales of their common shares after price appreciation,
which may never occur, as the only way to realize any return on their investment. As a result, investors seeking cash dividends
should not purchase our common shares.



If securities or industry
analysts do not publish research, or publish inaccurate or unfavorable research about our business, our share price and trading
volume could decline.



The trading market
for our common shares will depend, in part, on the research and reports that securities or industry analysts publish about us
or our business. If one or more of the analysts who cover us downgrade our common shares or publish inaccurate or unfavorable
research about our business, our share price would likely decline. In addition, if our operating results fail to meet the forecast
of analysts, our share price would likely decline. If one or more of these analysts cease coverage of us or fail to publish reports
on us regularly, demand for our common shares could decrease, which might cause our share price and trading volume to decline.



As we are a Canadian company,
it may be difficult for United States shareholders to effect service on us or to realize on judgments obtained in the United States.



We are incorporated
under the federal laws of Canada, most of our directors and officers are residents of Canada, and most or all of our assets and
the assets of such persons are located outside the United States. Consequently, it may be difficult for United States investors
to effect service of process within the United States upon us or upon such persons who are not residents of the United States,
or to realize in the United States upon judgments of United States courts predicated upon civil liabilities under United States
securities laws. A judgment of a United States court predicated solely upon such civil liabilities may be enforceable in Canada
by a Canadian court if the United States court in which the judgment was obtained had jurisdiction, as determined by the Canadian
court, in the matter. There is substantial doubt whether an original action could be brought successfully in Canada against any
of such persons or us predicated solely upon such civil liabilities.



As a foreign private issuer, we
are subject to different United States securities laws and rules than a domestic United States issuer, which may limit the information
publicly available to our shareholders.



We are currently a
“foreign private issuer” as defined under U.S. securities laws. As a result, even though we are subject to the informational
requirements of the Exchange Act, as a foreign private issuer, we are currently exempt from certain informational requirements
of the Exchange Act to which domestic U.S. issuers are subject, such as the proxy solicitation rules under Section 14 of the Exchange
Act. In order to be more easily compared to our principal competitors, we will be filing annual reports on Form 10-K, quarterly
reports on Form 10-Q and current reports on Form 8-K, with the SEC, as if we were a U.S. domestic issuer. The insider reporting
and short-profit provisions under Section 16 of the Exchange Act are not applicable to us, so our shareholders may not know on
as timely a basis when our officers, directors and principal shareholders purchase or sell our common shares, as the reporting
periods under the corresponding Canadian insider reporting requirements are longer.



-71-







We may lose our foreign private
issuer status in the future, which could result in significant additional costs and expenses to us.



In the future, we
might potentially lose our foreign private issuer status. If we are not a foreign private issuer, we would not be eligible to
use certain foreign issuer forms and would be required to file periodic and current reports and registration statements on United
States domestic issuer forms with the SEC. In addition, we may lose the ability to rely upon exemptions from NASDAQ corporate
governance requirements that are available to foreign private issuers. Further, if we engage in capital raising activities after
losing our foreign private issuer status, there is a higher likelihood that investors may require us to file resale registration
statements with the SEC as a condition to any such financing.



-72-







ITEM 2. UNREGISTERED SALES OF EQUITY
SECURITIES AND USE OF PROCEEDS.



(a)
Sales of Unregistered Securities



Set forth below are
the sales of our securities sold by us during the quarter ended September 30, 2015, which were not registered under the United
States Securities Act of 1933, as amended, or the Securities Act.



From July 7, 2015
to September 30, 2015, we issued an aggregate of 28,071 common shares pursuant to the exercise of warrants, for aggregate cash
consideration of Cdn$346,853. From August 24, 2015 to August 28, 2015, we issued an aggregate of 2,187 common shares pursuant
to the exercise of stock options, for aggregate cash consideration of Cdn $34,992. Such common shares were issued by us in the
United States and to “U.S. persons” (as both such terms are defined in Regulation S under the Securities Act, or Regulation
S, in reliance upon Rule 506(b) of Regulation D under the Securities Act, or Regulation D, solely to “accredited investors,”
as such term is defined in Rule 501(a) of Regulation D. Such common shares were issued outside the United States to non-U.S. persons
in reliance upon Regulation S.



(b)
Use of Proceeds



On June 17, 2015,
our registration statement on Form F-10 (File No. 333-204226) was declared effective by the SEC for our initial public offering
in the United States pursuant to which we sold an aggregate of 5,175,000 common shares (inclusive of 675,000 common shares sold
by us pursuant to the full exercise of an option granted to the underwriters in connection with the offering) at a price to the
public of US$14.00 per share for aggregate gross offering proceeds of approximately US$72.5 million. Merrill Lynch, Pierce, Fenner
& Smith Incorporated acted as sole book-running manager for the offering, Nomura Securities International, Inc. acted as a
lead manager and Noble Financial Capital Markets acted as co-manager. On June 23, 2015, we closed the sale of such common shares,
resulting in net proceeds to us of approximately US$66.4 million after deducting underwriting discounts and commissions of approximately
US$5.1 million and other offering expenses of approximately US$1 million. No payments were made by us to directors, officers or
persons owning ten percent or more of our common shares or to their associates, or to our affiliates.



There has been no
material change in the planned use of proceeds from our initial public offering as described in our prospectus that forms a part
of our registration statement on Form F-10 (File No. 333-204226), as supplemented and filed with the SEC on June 18, 2015. As
of September 30, 2015, we held all of the funds received in cash.



(c) Issuer Purchases
of Equity Securities



Not
applicable.



-73-







| | ITEM 6. | EXHIBITS.
| | ------- | ---------



|Exhibit
    Number |  | Description                                                                                                                                                                                                                                                                                                                                                     
|------------------ |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|                   |  |                                                                                                                                                                                                                                                                                                                                                                 
|2.1*^              |  | Share Purchase Agreement
    dated December 22, 2011 among Cynapsus, Adagio and the former shareholders of Adagio                                                                                                                                                                                                                                               
|                   |  |                                                                                                                                                                                                                                                                                                                                                                 
|2.2*               |  | Share Purchase Agreement
    Amending Agreement dated January 28, 2015 among Cynapsus and the former shareholders of Adagio                                                                                                                                                                                                                                     
|                   |  |                                                                                                                                                                                                                                                                                                                                                                 
|3.1                |  | Articles of Amalgamation
    of Cynapsus, as amended (incorporated by reference to Exhibit 3.1 to Cynapsus’s quarterly report on Form 10-Q for the
    quarter ended June 30, 2015 filed with the SEC on August 14, 2015 (File No. 001-37426))                                                                                                                  
|                   |  |                                                                                                                                                                                                                                                                                                                                                                 
|3.2                |  | By-law No. 2 of Cynapsus
    (incorporated by reference to Exhibit 3.2 to Cynapsus’s quarterly report on Form 10-Q for the quarter ended June 30,
    2015 filed with the SEC on August 14, 2015 (File No. 001-37426))                                                                                                                                          
|                   |  |                                                                                                                                                                                                                                                                                                                                                                 
|4.1                |  | Specimen Common Share
    Certificate of Cynapsus (incorporated by reference to Exhibit 4.1 to Cynapsus’s quarterly report on Form 10-Q for the
    quarter ended June 30, 2015 filed with the SEC on August 14, 2015 (File No. 001-37426))                                                                                                                     
|                   |  |                                                                                                                                                                                                                                                                                                                                                                 
|4.2                |  | Form of Warrant Certificate
    dated July 18, 2012 (incorporated by reference to Exhibit 4.2 to Cynapsus’s quarterly report on Form 10-Q for the quarter
    ended June 30, 2015 filed with the SEC on August 14, 2015 (File No. 001-37426))                                                                                                                   
|                   |  |                                                                                                                                                                                                                                                                                                                                                                 
|4.3                |  | Form of Warrant Certificate
    dated October 24, 2012 (incorporated by reference to Exhibit 4.3 to Cynapsus’s quarterly report on Form 10-Q for the
    quarter ended June 30, 2015 filed with the SEC on August 14, 2015 (File No. 001-37426))                                                                                                                
|                   |  |                                                                                                                                                                                                                                                                                                                                                                 
|4.4                |  | Form of Warrant Certificate
    dated November 23, 2012 (incorporated by reference to Exhibit 4.4 to Cynapsus’s quarterly report on Form 10-Q for the
    quarter ended June 30, 2015 filed with the SEC on August 14, 2015 (File No. 001-37426))                                                                                                               
|                   |  |                                                                                                                                                                                                                                                                                                                                                                 
|4.5                |  | Warrant Indenture dated
    March 1, 2013, by and between Equity Financial Trust Company and Cynapsus (incorporated by reference to Exhibit 4.5 to Cynapsus’s
    quarterly report on Form 10-Q for the quarter ended June 30, 2015 filed with the SEC on August 14, 2015 (File No. 001-37426))                                                                 
|                   |  |                                                                                                                                                                                                                                                                                                                                                                 
|4.6                |  | Supplemental Indenture
    dated May 15, 2015, by and between Equity Financial Trust Company and Cynapsus (relating to the Warrant Indenture dated March
    1, 2013) (incorporated by reference to Exhibit 4.6 to Cynapsus’s quarterly report on Form 10-Q for the quarter ended
    June 30, 2015 filed with the SEC on August 14, 2015 (File No. 001-37426)) 
|                   |  |                                                                                                                                                                                                                                                                                                                                                                 
|4.7                |  | Warrant Indenture dated
    April 15, 2014, by and between Equity Financial Trust Company and Cynapsus (incorporated by reference to Exhibit 4.7 to Cynapsus’s
    quarterly report on Form 10-Q for the quarter ended June 30, 2015 filed with the SEC on August 14, 2015 (File No. 001-37426))                                                                
|                   |  |                                                                                                                                                                                                                                                                                                                                                                 
|4.8                |  | Supplemental Indenture
    dated May 15, 2015, by and between Equity Financial Trust Company and Cynapsus (relating to the Warrant Indenture dated April
    15, 2014) (incorporated by reference to Exhibit 4.8 to Cynapsus’s quarterly report on Form 10-Q for the quarter ended
    June 30, 2015 filed with the SEC on August 14, 2015 (File No. 001-37426))



-74-







|Exhibit
    Number |  | Description                                                                                                                                                                                                                                                                                                      
|------------------ |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|                   |  |                                                                                                                                                                                                                                                                                                                  
|10.1               |  | Lease, dated May 1,
    2008, by and between Richmond Walnut Business Centre Inc. and Cynapsus (incorporated by reference to Exhibit 10.1 to Cynapsus’s
    quarterly report on Form 10-Q for the quarter ended June 30, 2015 filed with the SEC on August 14, 2015 (File No. 001-37426))                        
|                   |  |                                                                                                                                                                                                                                                                                                                  
|10.2               |  | Lease Extension Agreement,
    dated May 1, 2014, by and between Richmond Walnut Business Centre Inc. and Cynapsus (incorporated by reference to Exhibit
    10.2 to Cynapsus’s quarterly report on Form 10-Q for the quarter ended June 30, 2015 filed with the SEC on August 14,
    2015 (File No. 001-37426))
|                   |  |                                                                                                                                                                                                                                                                                                                  
|10.3               |  | Short Occupancy Agreement
    dated August 31, 2015 between Cynapsus and Images Life Media Inc. (incorporated by reference to Exhibit 10.2 to Cynapsus’s
    Form 8-K filed with the SEC on September 4, 2015 (File No. 001-37426))                                                                              
|                   |  |                                                                                                                                                                                                                                                                                                                  
|10.4#              |  | Agreement dated March
    17, 2015 by and between ARx, LLC and Cynapsus (incorporated by reference to Exhibit 10.3 to Cynapsus’s quarterly report
    on Form 10-Q for the quarter ended June 30, 2015 filed with the SEC on August 14, 2015 (File No. 001-37426))                                               
|                   |  |                                                                                                                                                                                                                                                                                                                  
|10.5+              |  | 2014 Amended and Restated
    Stock Option Plan (incorporated by reference to Exhibit 4.1 to Cynapsus’s registration statement on Form S-8 filed with
    the SEC on July 29, 2015 (File No. 333-205929))                                                                                                        
|                   |  |                                                                                                                                                                                                                                                                                                                  
|10.6+              |  | Employment Agreement,
    dated October 1, 2015, between Anthony Giovinazzo and Cynapsus (incorporated by reference to Exhibit 10.1 to Cynapsus’s
    Form 8-K filed with the SEC on October 2, 2015 (File No. 001-37426))                                                                                       
|                   |  |                                                                                                                                                                                                                                                                                                                  
|10.7+              |  | Employment Agreement,
    dated October 1, 2015, between Andrew Williams and Cynapsus (incorporated by reference to Exhibit 10.2 to Cynapsus’s
    Form 8-K filed with the SEC on October 2, 2015 (File No. 001-37426))                                                                                          
|                   |  |                                                                                                                                                                                                                                                                                                                  
|10.8+              |  | Employment Agreement,
    dated October 1, 2015, between Thierry Bilbault and Cynapsus (incorporated by reference to Exhibit 10.3 to Cynapsus’s
    Form 8-K filed with the SEC on October 2, 2015 (File No. 001-37426))                                                                                         
|                   |  |                                                                                                                                                                                                                                                                                                                  
|10.9+              |  | Employment Agreement,
    dated October 1, 2015, between Albert Agro and Cynapsus (incorporated by reference to Exhibit 10.4 to Cynapsus’s Form
    8-K filed with the SEC on October 2, 2015 (File No. 001-37426))                                                                                              
|                   |  |                                                                                                                                                                                                                                                                                                                  
|10.10+             |  | Form of Director and
    Officer Indemnification Agreement dated effective as of September 2, 2015 (incorporated by reference to Exhibit 10.1 to Cynapsus’s
    Form 8-K filed with the SEC on September 4, 2015)                                                                                                
|                   |  |                                                                                                                                                                                                                                                                                                                  
|10.11*             |  | Non-disclosure, Non-solicitation
    and Non-competition Agreement dated November 16, 2009 between Anthony Giovinazzo and Cynapsus                                                                                                                                                                               
|                   |  |                                                                                                                                                                                                                                                                                                                  
|10.12*             |  | Non-disclosure, Non-solicitation
    and Non-competition Agreement dated January 1, 2006 between Andrew Williams and Cynapsus                                                                                                                                                                                    
|                   |  |                                                                                                                                                                                                                                                                                                                  
|10.13*             |  | Non-disclosure, Non-solicitation
    and Non-competition Agreement dated October 6, 2014 between Thierry Bilbault and Cynapsus                                                                                                                                                                                   
|                   |  |                                                                                                                                                                                                                                                                                                                  
|10.14*             |  | Non-disclosure, Non-solicitation
    and Non-competition Agreement dated April 1, 2013 between Albert Agro and Cynapsus                                                                                                                                                                                          



-75-











|Exhibit
    Number |  | Description                                                                                                                                                                           
|------------------ |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|                   |  |                                                                                                                                                                                       
|10.15*             |  | Consulting
and Advisory Agreement effective July 1, 2015 between Cynapsus and Hutchinson and Associates                                                                               
|                   |  |                                                                                                                                                                                       
|31.1*              |  | Certification of Chief
    Executive Officer pursuant to Rule 13a-14(a) of the Exchange Act, as adopted pursuant to Section 302 of the Sarbanes-Oxley
    Act of 2002                 
|                   |  |                                                                                                                                                                                       
|31.2*              |  | Certification of Chief
    Financial Officer pursuant to Rule 13a-14(a) of the Exchange Act, as adopted pursuant to Section 302 of the Sarbanes-Oxley
    Act of 2002                 
|                   |  |                                                                                                                                                                                       
|32.1**             |  | Certifications of Chief
    Executive Officer and Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the
    Sarbanes-Oxley Act of 2002












| | *  | Filed herewith.                                                                                                                                                                                                                                                            
| | -- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | ** | Furnished herewith.                                                                                                                                                                                                                                                        
| | ^  | Certain schedules have been omitted from this filing pursuant to
                                         Item 601(b)(2) of Regulation S-K. We will furnish copies of any of the schedules to the
                                         SEC upon request.               
| | #  | Confidential portions of the exhibit have been redacted and filed
                                         separately with the SEC pursuant to a confidential treatment request in accordance with
                                         Rule 24b-2 of the Exchange Act.
| | +  | Indicates management contract or compensatory plan.                                                                                                                                                                                                                        





-76-







SIGNATURES



Pursuant to the requirements of the Securities
Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly
authorized.



|                         | CYNAPSUS THERAPEUTICS INC.
|------------------------ | --------------------------
|                         |                           
|Date: November  12, 2015 | By:                       
|                         |                           
|                         |                           
|                         |                           



-77-







EXHIBIT INDEX



|Exhibit
    Number |  | Description                                                                                                                                                                                                                                                                                                                                                     
|------------------ |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|                   |  |                                                                                                                                                                                                                                                                                                                                                                 
|2.1*^              |  | Share Purchase Agreement
    dated December 22, 2011 among Cynapsus, Adagio and the former shareholders of Adagio                                                                                                                                                                                                                                               
|                   |  |                                                                                                                                                                                                                                                                                                                                                                 
|2.2*               |  | Share Purchase
Agreement Amending Agreement dated January 28, 2015 among Cynapsus and the former shareholders of Adagio                                                                                                                                                                                                                                         
|                   |  |                                                                                                                                                                                                                                                                                                                                                                 
|3.1                |  | Articles of Amalgamation
    of Cynapsus, as amended (incorporated by reference to Exhibit 3.1 to Cynapsus’s quarterly report on Form 10-Q for the
    quarter ended June 30, 2015 filed with the SEC on August 14, 2015 (File No. 001-37426))                                                                                                                  
|                   |  |                                                                                                                                                                                                                                                                                                                                                                 
|3.2                |  | By-law No. 2 of Cynapsus
    (incorporated by reference to Exhibit 3.2 to Cynapsus’s quarterly report on Form 10-Q for the quarter ended June 30,
    2015 filed with the SEC on August 14, 2015 (File No. 001-37426))                                                                                                                                          
|                   |  |                                                                                                                                                                                                                                                                                                                                                                 
|4.1                |  | Specimen Common Share
    Certificate of Cynapsus (incorporated by reference to Exhibit 4.1 to Cynapsus’s quarterly report on Form 10-Q for the
    quarter ended June 30, 2015 filed with the SEC on August 14, 2015 (File No. 001-37426))                                                                                                                     
|                   |  |                                                                                                                                                                                                                                                                                                                                                                 
|4.2                |  | Form of Warrant Certificate
    dated July 18, 2012 (incorporated by reference to Exhibit 4.2 to Cynapsus’s quarterly report on Form 10-Q for the quarter
    ended June 30, 2015 filed with the SEC on August 14, 2015 (File No. 001-37426))                                                                                                                   
|                   |  |                                                                                                                                                                                                                                                                                                                                                                 
|4.3                |  | Form of Warrant Certificate
    dated October 24, 2012 (incorporated by reference to Exhibit 4.3 to Cynapsus’s quarterly report on Form 10-Q for the
    quarter ended June 30, 2015 filed with the SEC on August 14, 2015 (File No. 001-37426))                                                                                                                
|                   |  |                                                                                                                                                                                                                                                                                                                                                                 
|4.4                |  | Form of Warrant Certificate
    dated November 23, 2012 (incorporated by reference to Exhibit 4.4 to Cynapsus’s quarterly report on Form 10-Q for the
    quarter ended June 30, 2015 filed with the SEC on August 14, 2015 (File No. 001-37426))                                                                                                               
|                   |  |                                                                                                                                                                                                                                                                                                                                                                 
|4.5                |  | Warrant Indenture dated
    March 1, 2013, by and between Equity Financial Trust Company and Cynapsus (incorporated by reference to Exhibit 4.5 to Cynapsus’s
    quarterly report on Form 10-Q for the quarter ended June 30, 2015 filed with the SEC on August 14, 2015 (File No. 001-37426))                                                                 
|                   |  |                                                                                                                                                                                                                                                                                                                                                                 
|4.6                |  | Supplemental Indenture
    dated May 15, 2015, by and between Equity Financial Trust Company and Cynapsus (relating to the Warrant Indenture dated March
    1, 2013) (incorporated by reference to Exhibit 4.6 to Cynapsus’s quarterly report on Form 10-Q for the quarter ended
    June 30, 2015 filed with the SEC on August 14, 2015 (File No. 001-37426)) 
|                   |  |                                                                                                                                                                                                                                                                                                                                                                 
|4.7                |  | Warrant Indenture dated
    April 15, 2014, by and between Equity Financial Trust Company and Cynapsus (incorporated by reference to Exhibit 4.7 to Cynapsus’s
    quarterly report on Form 10-Q for the quarter ended June 30, 2015 filed with the SEC on August 14, 2015 (File No. 001-37426))                                                                
|                   |  |                                                                                                                                                                                                                                                                                                                                                                 
|4.8                |  | Supplemental Indenture
    dated May 15, 2015, by and between Equity Financial Trust Company and Cynapsus (relating to the Warrant Indenture dated April
    15, 2014) (incorporated by reference to Exhibit 4.8 to Cynapsus’s quarterly report on Form 10-Q for the quarter ended
    June 30, 2015 filed with the SEC on August 14, 2015 (File No. 001-37426))



-78-







|Exhibit
    Number |  | Description                                                                                                                                                                                                                                                                                                      
|------------------ |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|                   |  |                                                                                                                                                                                                                                                                                                                  
|10.1               |  | Lease, dated May 1,
    2008, by and between Richmond Walnut Business Centre Inc. and Cynapsus (incorporated by reference to Exhibit 10.1 to Cynapsus’s
    quarterly report on Form 10-Q for the quarter ended June 30, 2015 filed with the SEC on August 14, 2015 (File No. 001-37426))                        
|                   |  |                                                                                                                                                                                                                                                                                                                  
|10.2               |  | Lease Extension Agreement,
    dated May 1, 2014, by and between Richmond Walnut Business Centre Inc. and Cynapsus (incorporated by reference to Exhibit
    10.2 to Cynapsus’s quarterly report on Form 10-Q for the quarter ended June 30, 2015 filed with the SEC on August 14,
    2015 (File No. 001-37426))
|                   |  |                                                                                                                                                                                                                                                                                                                  
|10.3               |  | Short Occupancy Agreement
    dated August 31, 2015 between Cynapsus and Images Life Media Inc. (incorporated by reference to Exhibit 10.2 to Cynapsus’s
    Form 8-K filed with the SEC on September 4, 2015 (File No. 001-37426))                                                                              
|                   |  |                                                                                                                                                                                                                                                                                                                  
|10.4#              |  | Agreement dated March
    17, 2015 by and between ARx, LLC and Cynapsus (incorporated by reference to Exhibit 10.3 to Cynapsus’s quarterly report
    on Form 10-Q for the quarter ended June 30, 2015 filed with the SEC on August 14, 2015 (File No. 001-37426))                                               
|                   |  |                                                                                                                                                                                                                                                                                                                  
|10.5+              |  | 2014 Amended and Restated
    Stock Option Plan (incorporated by reference to Exhibit 4.1 to Cynapsus’s registration statement on Form S-8 filed with
    the SEC on July 29, 2015 (File No. 333-205929))                                                                                                        
|                   |  |                                                                                                                                                                                                                                                                                                                  
|10.6+              |  | Employment Agreement,
    dated October 1, 2015, between Anthony Giovinazzo and Cynapsus (incorporated by reference to Exhibit 10.1 to Cynapsus’s
    Form 8-K filed with the SEC on October 2, 2015 (File No. 001-37426))                                                                                       
|                   |  |                                                                                                                                                                                                                                                                                                                  
|10.7+              |  | Employment Agreement,
    dated October 1, 2015, between Andrew Williams and Cynapsus (incorporated by reference to Exhibit 10.2 to Cynapsus’s
    Form 8-K filed with the SEC on October 2, 2015 (File No. 001-37426))                                                                                          
|                   |  |                                                                                                                                                                                                                                                                                                                  
|10.8+              |  | Employment Agreement,
    dated October 1, 2015, between Thierry Bilbault and Cynapsus (incorporated by reference to Exhibit 10.3 to Cynapsus’s
    Form 8-K filed with the SEC on October 2, 2015 (File No. 001-37426))                                                                                         
|                   |  |                                                                                                                                                                                                                                                                                                                  
|10.9+              |  | Employment Agreement,
    dated October 1, 2015, between Albert Agro and Cynapsus (incorporated by reference to Exhibit 10.4 to Cynapsus’s Form
    8-K filed with the SEC on October 2, 2015 (File No. 001-37426))                                                                                              
|                   |  |                                                                                                                                                                                                                                                                                                                  
|10.10+             |  | Form of Director and
    Officer Indemnification Agreement dated effective as of September 2, 2015 (incorporated by reference to Exhibit 10.1 to Cynapsus’s
    Form 8-K filed with the SEC on September 4, 2015)                                                                                                
|                   |  |                                                                                                                                                                                                                                                                                                                  
|10.11*             |  | Non-disclosure, Non-solicitation
    and Non-competition Agreement dated November 16, 2009 between Anthony Giovinazzo and Cynapsus                                                                                                                                                                               
|                   |  |                                                                                                                                                                                                                                                                                                                  
|10.12*             |  | Non-disclosure, Non-solicitation
    and Non-competition Agreement dated January 1, 2006 between Andrew Williams and Cynapsus                                                                                                                                                                                    
|                   |  |                                                                                                                                                                                                                                                                                                                  
|10.13*             |  | Non-disclosure, Non-solicitation
    and Non-competition Agreement dated October 6, 2014 between Thierry Bilbault and Cynapsus                                                                                                                                                                                   
|                   |  |                                                                                                                                                                                                                                                                                                                  
|10.14*             |  | Non-disclosure, Non-solicitation
    and Non-competition Agreement dated April 1, 2013 between Albert Agro and Cynapsus                                                                                                                                                                                          



-79-









|Exhibit
    Number |  | Description                                                                                                                                                                           
|------------------ |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|                   |  |                                                                                                                                                                                       
|10.15*             |  | Consulting
and Advisory Agreement effective July 1, 2015 between Cynapsus and Hutchinson and Associates                                                                               
|                   |  |                                                                                                                                                                                       
|31.1*              |  | Certification of Chief
    Executive Officer pursuant to Rule 13a-14(a) of the Exchange Act, as adopted pursuant to Section 302 of the Sarbanes-Oxley
    Act of 2002                 
|                   |  |                                                                                                                                                                                       
|31.2*              |  | Certification of Chief
    Financial Officer pursuant to Rule 13a-14(a) of the Exchange Act, as adopted pursuant to Section 302 of the Sarbanes-Oxley
    Act of 2002                 
|                   |  |                                                                                                                                                                                       
|32.1**             |  | Certifications of Chief
    Executive Officer and Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the
    Sarbanes-Oxley Act of 2002










| | *  | Filed herewith.                                                                                                                                                                                                                                                            
| | -- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | ** | Furnished herewith.                                                                                                                                                                                                                                                        
| | ^  | Certain schedules have been omitted from this filing pursuant to
                                         Item 601(b)(2) of Regulation S-K. We will furnish copies of any of the schedules to the
                                         SEC upon request.               
| | #  | Confidential portions of the exhibit have been redacted and filed
                                         separately with the SEC pursuant to a confidential treatment request in accordance with
                                         Rule 24b-2 of the Exchange Act.
| | +  | Indicates management contract or compensatory plan.                                                                                                                                                                                                                        



-80-