Exhibit 99.3





Consolidated Financial Statements

(Expressed in Canadian dollars)



ym biosciences inc.



Years ended June 30, 2012 and 2011











Management's
Annual Report on

Internal
Control Over Financial Reporting.



The management of the Company is responsible
for establishing and maintaining adequate internal control over financial reporting ("ICFR"), as such term is defined
in Exchange Act Rules 13a-15(f) and 15d-15(f). ICFR includes those policies and procedures that: (i) pertain to the maintenance
of records that in reasonable detail accurately and fairly reflect the transactions and dispositions of the assets of the Company;
(ii) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements
in accordance with International Financial Reporting Standards, and that the Company's receipts and expenditures are being made
only in accordance with the authorizations of its management and directors; and (iii) provide reasonable assurance regarding prevention
or timely detection of unauthorized acquisition, use or disposition of the Company's assets that could have a material effect on
the Company's consolidated financial statements. Because of its inherent limitations, ICFR may not prevent or detect misstatements.



The Company's management has assessed the
effectiveness of the Company's ICFR as of June 30, 2012. In making its assessment, management used the Internal Control –
Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). Based on this assessment,
management has concluded that the Company's ICFR was effective as of June 30, 2012.



The effectiveness of the Company's internal
control over financial reporting as of June 30, 2012, has been audited by KPMG LLP, an independent registered public accounting
firm, as stated in their report which follows hereafter.



|/s/ Dr. Nicholas Glover             |  | /s/ Len Vernon                               | 
|----------------------------------- |  | -------------------------------------------- | 
|Dr. Nicholas Glover                 |  | Len Vernon, CA                               | 
|President & Chief Executive Officer |  | Vice President of Finance and Administration



September 20, 2012















| | KPMG LLP                  |  | Telephone | (416) 777-8500
| | ------------------------- |  | --------- | --------------
| | Chartered Accountants     |  | Fax       | (416) 777-8818
| | Bay Adelaide Centre       |  | Internet  | www.kpmg.ca   
| | 333 Bay Street Suite 4600 |  |           |               
| | Toronto ON  M5H 2S5       |  |           |               
| | Canada                    |  |           |               



Independent
auditors' Report



To the Shareholders of YM BioSciences Inc.



We have audited the accompanying consolidated financial
statements of YM BioSciences Inc., and its subsidiaries, which comprise the consolidated statements of financial position as at
June 30, 2012, June 30, 2011 and July 1, 2010, the consolidated statements of loss and comprehensive loss, changes in equity
and cash flows for the years ended June 30, 2012 and June 30, 2011, and notes, comprising a summary of significant accounting policies
and other explanatory information.



Management's Responsibility for the
Consolidated Financial Statements



Management is responsible for the preparation
and fair presentation of these consolidated financial statements in accordance with International Financial Reporting Standards,
as issued by the International Accounting Standards Board, and for such internal control as management determines is necessary
to enable the preparation of consolidated financial statements that are free from material misstatement, whether due to fraud
or error.



Auditors' Responsibility



Our responsibility is to express an opinion
on these consolidated financial statements based on our audits. We conducted our audits in accordance with Canadian generally
accepted auditing standards and the standards of the Public Company Accounting Oversight Board (United States). Those standards
require that we comply with ethical requirements and plan and perform the audit to obtain reasonable assurance about whether the
consolidated financial statements are free from material misstatement.



An audit involves performing procedures
to obtain audit evidence about the amounts and disclosures in the consolidated financial statements. The procedures selected depend
on our judgment, including the assessment of the risks of material misstatement of the consolidated financial statements,
whether due to fraud or error. In making those risk assessments, we consider internal control relevant to the entity's preparation
and fair presentation of the consolidated financial statements in order to design audit procedures that are appropriate in the
circumstances. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of accounting
estimates made by management, as well as evaluating the overall presentation of the consolidated financial statements.



We believe that the audit evidence we have
obtained in our audits is sufficient and appropriate to provide a basis for our audit opinion.



| | KPMG LLP is a Canadian limited liability partnership and a member firm
    of the KPMG
| | --------------------------------------------------------------------------------------
| | network of independent member firms affiliated with KPMG International Cooperative    
| | (“KPMG International”), a Swiss entity.                                               
| | KPMG Canada provides services to KPMG LLP.                                            















Page 2



Opinion



In our opinion, the consolidated financial
statements present fairly, in all material respects, the consolidated financial position of YM BioSciences Inc. and its subsidiaries
as at June 30, 2012, June 30, 2011 and July 1, 2010, and its consolidated financial performance and its consolidated cash
flows for the years ended June 30, 2012 and June 30, 2011 in accordance with International Financial Reporting Standards, as issued
by the International Accounting Standards Board.



Other Matter



We also have audited, in accordance with
the standards of the Public Company Accounting Oversight Board (United States), YM BioSciences Inc.'s internal control over financial
reporting as of June 30, 2012, based on the criteria established in Internal Control - Integrated Framework issued by the
Committee of Sponsoring Organizations of the Treadway Commission (COSO), and our report dated September 20, 2012 expressed an unmodified
opinion on the effectiveness of YM BioSciences Inc.'s internal control over financial reporting.







Chartered Accountants, Licensed Public
Accountants



September 20, 2012

Toronto, Canada















| | KPMG LLP                  |  | Telephone | (416) 777-8500
| | ------------------------- |  | --------- | --------------
| | Chartered Accountants     |  | Fax       | (416) 777-8818
| | Bay Adelaide Centre       |  | Internet  | www.kpmg.ca   
| | 333 Bay Street Suite 4600 |  |           |               
| | Toronto ON  M5H 2S5       |  |           |               
| | Canada                    |  |           |               



REPORT
OF INDEPENDENT REGISTERED
PUBLIC ACCOUNTING FIRM



To The Board of Directors of YM BioSciences
Inc.:



We have audited YM BioSciences Inc.'s internal
control over financial reporting as of June 30, 2012, based on criteria established in Internal Control - Integrated Framework
issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). YM BioSciences Inc.'s management is responsible
for maintaining effective internal control over financial reporting and for its assessment of the effectiveness of internal control
over financial reporting, included in the Management's Discussion and Analysis of Financial Condition and Results of Operations
for the year ended June 30, 2012. Our responsibility is to express an opinion on the Company's internal control over financial
reporting based on our audit.



We conducted our audit in accordance with
the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform
the audit to obtain reasonable assurance about whether effective internal control over financial reporting was maintained in all
material respects. Our audit included obtaining an understanding of internal control over financial reporting, assessing the risk
that a material weakness exists, and testing and evaluating the design and operating effectiveness of internal control based on
the assessed risk. Our audit also included performing such other procedures as we considered necessary in the circumstances. We
believe that our audit provides a reasonable basis for our opinion.



A company's internal control over financial
reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation
of financial statements for external purposes in accordance with generally accepted accounting principles. A company's internal
control over financial reporting includes those policies and procedures that: (1) pertain to the maintenance of records that, in
reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable
assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with International
Financial Reporting Standards, and that receipts and expenditures of the company are being made only in accordance with authorizations
of management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized
acquisition, use, or disposition of the company's assets that could have a material effect on the financial statements.



Because of its inherent limitations, internal
control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness
to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree
of compliance with the policies or procedures may deteriorate.



| | KPMG LLP is a Canadian limited liability partnership and a member firm
    of the KPMG
| | --------------------------------------------------------------------------------------
| | network of independent member firms affiliated with KPMG International Cooperative    
| | (“KPMG International”), a Swiss entity.                                               
| | KPMG Canada provides services to KPMG LLP.                                            

















Page 2



Opinion



In our opinion, YM BioSciences Inc. maintained,
in all material respects, effective internal control over financial reporting as of June 30, 2012, based on criteria established
in Internal Control - Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO).



We also have audited, in accordance with
the standards of the Public Company Accounting Oversight Board (United States), the consolidated statements of financial position
of YM BioSciences Inc. and subsidiaries as of June 30, 2012, June 30, 2011 and July 1, 2010, and the related consolidated statements
of loss and comprehensive loss, changes in equity and cash flows for the years ended June 30, 2012 and June 30, 2011, and our report
dated September 20, 2012 expressed an unqualified opinion on those consolidated financial statements.







Chartered Accountants, Licensed Public
Accountants



Toronto, Canada

September 20, 2012











|ym biosciences inc.                                    
|-------------------------------------------------------
|Consolidated Statements of Financial Position          
|(Expressed in Canadian dollars, unless otherwise noted)
|                                                       



|                              |  |      |    |     | June 30, |   |              | June 30, |  |   | July 1,      |  
|----------------------------- |  | ---- | -- | --- | -------- | - | ------------ | -------- |  | - | ------------ | -
|                              |  | Note |    |     | 2012     |   |              | 2011     |  |   | 2010         |  
|                              |  |      |    |     |          |   |              |          |  |   |              |  
|Assets                        |  |      |    |     |          |   |              |          |  |   |              |  
|                              |  |      |    |     |          |   |              |          |  |   |              |  
|Current assets:               |  |      |    |     |          |   |              |          |  |   |              |  
|Cash and cash equivalents     |  |      | 4  |     |          | $ | 87,140,020   |          |  | $ | 32,046,630   |  
|Short-term deposits           |  |      | 4  |     |          |   | 45,310,288   |          |  |   | 47,611,922   |  
|Accounts receivable           |  |      |    |     |          |   | 252,884      |          |  |   | 205,900      |  
|Prepaid expenses              |  |      |    |     |          |   | 257,780      |          |  |   | 731,676      |  
|Total current assets          |  |      |    |     |          |   | 132,960,972  |          |  |   | 80,596,128   |  
|                              |  |      |    |     |          |   |              |          |  |   |              |  
|Non-current assets:           |  |      |    |     |          |   |              |          |  |   |              |  
|Property and equipment        |  |      | 5  |     |          |   | 62,118       |          |  |   | 91,320       |  
|Intangible assets             |  |      | 6  |     |          |   | 2,629,682    |          |  |   | 7,137,698    |  
|Total non-current assets      |  |      |    |     |          |   | 2,691,800    |          |  |   | 7,229,018    |  
|                              |  |      |    |     |          |   |              |          |  |   |              |  
|Total assets                  |  |      |    |     |          | $ | 135,652,772  |          |  | $ | 87,825,146   |  
|                              |  |      |    |     |          |   |              |          |  |   |              |  
|Liabilities and Equity        |  |      |    |     |          |   |              |          |  |   |              |  
|                              |  |      |    |     |          |   |              |          |  |   |              |  
|Current liabilities:          |  |      |    |     |          |   |              |          |  |   |              |  
|Accounts payable              |  |      |    |     |          | $ | 803,421      |          |  | $ | 1,718,893    |  
|Accrued liabilities           |  |      |    |     |          |   | 2,262,972    |          |  |   | 2,652,511    |  
|Share purchase warrants       |  |      | 8  |     |          |   | 7,221,040    |          |  |   | 14,476,681   |  
|Deferred revenue              |  |      | 10 |     |          |   | 381,270      |          |  |   | 594,072      |  
|Total current liabilities     |  |      |    |     |          |   | 10,668,703   |          |  |   | 19,442,157   |  
|                              |  |      |    |     |          |   |              |          |  |   |              |  
|Non-current liabilities:      |  |      |    |     |          |   |              |          |  |   |              |  
|Deferred revenue              |  |      | 10 |     |          |   | 1,556,853    |          |  |   | 1,831,722    |  
|Total non-current liabilities |  |      |    |     |          |   | 1,556,853    |          |  |   | 1,831,722    |  
|                              |  |      |    |     |          |   |              |          |  |   |              |  
|Equity:                       |  |      |    |     |          |   |              |          |  |   |              |  
|Share capital                 |  |      | 9  | (a) |          |   | 340,173,078  |          |  |   | 264,548,643  |  
|Contributed surplus           |  |      |    |     |          |   | 16,712,315   |          |  |   | 15,144,062   |  
|Deficit                       |  |      |    |     |          |   | (233,458,177 | )        |  |   | (213,141,438 | )
|Total equity                  |  |      |    |     |          |   | 123,427,216  |          |  |   | 66,551,267   |  
|                              |  |      |    |     |          |   |              |          |  |   |              |  
|Total liabilities and equity  |  |      |    |     |          | $ | 135,652,772  |          |  | $ | 87,825,146   |  



Approved by the Board and authorized for
issue on September 20, 2012:



/s/ Tryon M. Williams Director



/s/ Dr. Nick Glover  Director



See accompanying notes to the consolidated
financial statements.



1







|ym biosciences inc.                                    
|-------------------------------------------------------
|Consolidated Statements of Loss and Comprehensive Loss 
|(Expressed in Canadian dollars, unless otherwise noted)
|                                                       
|Years ended June 30, 2012 and 2011                     
|                                                       



|                                             |  | Note |    |     | 2012 |   |             | 2011 | 
|-------------------------------------------- |  | ---- | -- | --- | ---- | - | ----------- | ---- | 
|                                             |  |      |    |     |      |   |             |      | 
|Revenue:                                     |  |      |    |     |      |   |             |      | 
|Out-licensing                                |  |      |    |     |      | $ | 1,070,665   |      | 
|                                             |  |      |    |     |      |   | 1,070,665   |      | 
|                                             |  |      |    |     |      |   |             |      | 
|Expenses:                                    |  |      |    |     |      |   |             |      | 
|Licensing and product development            |  |      | 12 |     |      |   | 26,643,838  |      | 
|General and administrative                   |  |      | 13 |     |      |   | 6,175,132   |      | 
|                                             |  |      |    |     |      |   | 32,818,970  |      | 
|                                             |  |      |    |     |      |   |             |      | 
|Loss before financial results                |  |      |    |     |      |   | (31,748,305 | )    | 
|                                             |  |      |    |     |      |   |             |      | 
|Finance income                               |  |      | 14 |     |      |   | 11,431,566  |      | 
|                                             |  |      |    |     |      |   |             |      | 
|Finance costs                                |  |      | 14 |     |      |   | –           |      | 
|                                             |  |      |    |     |      |   |             |      | 
|Net loss and comprehensive loss for the year |  |      |    |     |      | $ | (20,316,739 | )    | 
|                                             |  |      |    |     |      |   |             |      | 
|Basic and diluted loss per common share      |  |      | 9  | (b) |      | $ | (0.16       | )    | 



See accompanying notes to the consolidated
financial statements.

2







|ym biosciences inc.                                    
|-------------------------------------------------------
|Consolidated Statements of Changes in Equity           
|(Expressed in Canadian dollars, unless otherwise noted)
|                                                       
|Years ended June 30, 2012 and 2011                     
|                                                       



|                                                                        |  | Share capital |             |  | Contributed |   |             |         |  |   |            |  
|----------------------------------------------------------------------- |  | ------------- | ----------- |  | ----------- | - | ----------- | ------- |  | - | ---------- | -
|                                                                        |  | Number        |             |  | Amount      |   |             | surplus |  |   | Deficit    |  
|                                                                        |  | (note 9)      |             |  |             |   |             |         |  |   |            |  
|                                                                        |  |               |             |  |             |   |             |         |  |   |            |  
|Balance, June 30, 2011                                                  |  |               | 116,681,948 |  |             | $ | 264,548,643 |         |  | $ | 15,144,062 |  
|                                                                        |  |               |             |  |             |   |             |         |  |   |            |  
|Net loss and comprehensive loss for the year                            |  |               | –           |  |             |   | –           |         |  |   | –          |  
|                                                                        |  |               |             |  |             |   |             |         |  |   |            |  
|Transactions with owners of the Company, recognized directly in equity: |  |               |             |  |             |   |             |         |  |   |            |  
|Shares issued pursuant to prospectus offering                           |  |               | 40,250,000  |  |             |   | 74,232,207  |         |  |   | –          |  
|Shares issued on exercise of options                                    |  |               | 614,845     |  |             |   | 1,392,228   |         |  |   | (670,529   | )
|Share-based compensation                                                |  |               | –           |  |             |   | –           |         |  |   | 2,238,782  |  
|Total transactions with owners of the Company                           |  |               | 40,864,845  |  |             |   | 75,624,435  |         |  |   | 1,568,253  |  
|                                                                        |  |               |             |  |             |   |             |         |  |   |            |  
|Balance, June 30, 2012                                                  |  |               | 157,546,793 |  |             | $ | 340,173,078 |         |  | $ | 16,712,315 |  



|                                                                        |  | Share capital |             |  | Contributed |   |             |         |  |   |            |  
|----------------------------------------------------------------------- |  | ------------- | ----------- |  | ----------- | - | ----------- | ------- |  | - | ---------- | -
|                                                                        |  | Number        |             |  | Amount      |   |             | surplus |  |   | Deficit    |  
|                                                                        |  | (note 9)      |             |  |             |   |             |         |  |   |            |  
|                                                                        |  |               |             |  |             |   |             |         |  |   |            |  
|Balance, July 1, 2010                                                   |  |               | 80,359,623  |  |             | $ | 203,498,239 |         |  | $ | 14,232,353 |  
|                                                                        |  |               |             |  |             |   |             |         |  |   |            |  
|Net loss and comprehensive loss for the year                            |  |               | –           |  |             |   | –           |         |  |   | –          |  
|                                                                        |  |               |             |  |             |   |             |         |  |   |            |  
|Transactions with owners of the Company, recognized directly in equity: |  |               |             |  |             |   |             |         |  |   |            |  
|Shares issued on exercise of options                                    |  |               | 1,074,077   |  |             |   | 1,965,590   |         |  |   | (798,279   | )
|Shares issued on exercise of warrants                                   |  |               | 723,248     |  |             |   | 2,375,179   |         |  |   | –          |  
|Shares issued pursuant to prospectus offering                           |  |               | 34,525,000  |  |             |   | 56,709,635  |         |  |   | –          |  
|Share-based compensation                                                |  |               | –           |  |             |   | –           |         |  |   | 1,709,988  |  
|Total transactions with owners of the Company                           |  |               | 36,322,325  |  |             |   | 61,050,404  |         |  |   | 911,709    |  
|                                                                        |  |               |             |  |             |   |             |         |  |   |            |  
|Balance, June 30, 2011                                                  |  |               | 116,681,948 |  |             | $ | 264,548,643 |         |  | $ | 15,144,062 |  



See accompanying notes to the consolidated
financial statements.



3







|ym biosciences inc.                                    
|-------------------------------------------------------
|Consolidated Statements of Cash Flows                  
|(Expressed in Canadian dollars, unless otherwise noted)
|                                                       
|Years ended June 30, 2012 and 2011                     
|                                                       



|                                                    |  | Note |    |     | 2012 |   |             | 2011 | 
|--------------------------------------------------- |  | ---- | -- | --- | ---- | - | ----------- | ---- | 
|                                                    |  |      |    |     |      |   |             |      | 
|Cash provided by (used in):                         |  |      |    |     |      |   |             |      | 
|                                                    |  |      |    |     |      |   |             |      | 
|Operating activities:                               |  |      |    |     |      |   |             |      | 
|Net loss for the year                               |  |      |    |     |      | $ | (20,316,739 | )    | 
|Items not involving cash:                           |  |      |    |     |      |   |             |      | 
|Depreciation of property and equipment              |  |      | 5  |     |      |   | 57,359      |      | 
|Amortization of intangible assets                   |  |      | 6  |     |      |   | 4,508,016   |      | 
|Interest income                                     |  |      |    |     |      |   | (716,799    | )    | 
|Unrealized (gain) loss on cash and cash equivalents |  |      |    |     |      |   | (1,269,907  | )    | 
|Gain on disposal of property and equipment          |  |      |    |     |      |   | –           |      | 
|Share-based compensation                            |  |      | 9  | (c) |      |   | 2,238,782   |      | 
|Change in fair value of share purchase warrants     |  |      | 8  |     |      |   | (7,255,641  | )    | 
|Changes in non-cash working capital balances:       |  |      |    |     |      |   |             |      | 
|Short-term deposits                                 |  |      |    |     |      |   | (598,996    | )    | 
|Accounts receivable                                 |  |      |    |     |      |   | (46,984     | )    | 
|Prepaid expenses                                    |  |      |    |     |      |   | 473,896     |      | 
|Accounts payable                                    |  |      |    |     |      |   | (915,472    | )    | 
|Accrued liabilities                                 |  |      |    |     |      |   | (389,539    | )    | 
|Deferred revenue                                    |  |      | 10 |     |      |   | (487,671    | )    | 
|Net cash used in operating activities               |  |      |    |     |      |   | (24,719,695 | )    | 
|                                                    |  |      |    |     |      |   |             |      | 
|Investing activities:                               |  |      |    |     |      |   |             |      | 
|Proceeds from sale of short-term deposits           |  |      |    |     |      |   | 49,200,630  |      | 
|Purchase of short-term deposits                     |  |      |    |     |      |   | (46,300,000 | )    | 
|Interest received                                   |  |      |    |     |      |   | 716,799     |      | 
|Additions to property and equipment                 |  |      |    |     |      |   | (28,157     | )    | 
|Net cash provided by (used in) investing activities |  |      |    |     |      |   | 3,589,272   |      | 
|                                                    |  |      |    |     |      |   |             |      | 
|Financing activities:                               |  |      |    |     |      |   |             |      | 
|Issuance of common shares on exercise of options    |  |      |    |     |      |   | 721,699     |      | 
|Issue of common shares on exercise of warrants      |  |      |    |     |      |   | –           |      | 
|Net proceeds from issuance of shares                |  |      |    |     |      |   | 74,232,207  |      | 
|Net cash provided by financing activities           |  |      |    |     |      |   | 74,953,906  |      | 
|                                                    |  |      |    |     |      |   |             |      | 
|Increase in cash and cash equivalents               |  |      |    |     |      |   | 53,823,483  |      | 
|                                                    |  |      |    |     |      |   |             |      | 
|Impact of foreign exchange rates on cash            |  |      |    |     |      |   | 1,269,907   |      | 
|                                                    |  |      |    |     |      |   |             |      | 
|Cash and cash equivalents, beginning of year        |  |      |    |     |      |   | 32,046,630  |      | 
|                                                    |  |      |    |     |      |   |             |      | 
|Cash and cash equivalents, end of year              |  |      |    |     |      | $ | 87,140,020  |      | 



See accompanying notes to the consolidated
financial statements.



4







|ym biosciences inc.                                    
|-------------------------------------------------------
|Notes to the Consolidated Financial Statements         
|(Expressed in Canadian dollars, unless otherwise noted)
|                                                       
|Years ended June 30, 2012 and 2011                     
|                                                       



| | 1. | Corporate information:
| | -- | ----------------------



YM BioSciences Inc. (the "Company"
or "YM") was incorporated on August 17, 1994 under the laws of the Province of Ontario and was continued under the
laws of the Province of Nova Scotia on December 11, 2001. The Company's shares are publicly traded on the Toronto Stock Exchange
and the NYSE Amex. The Company's registered office is at 5045 Orbitor Drive, Building 11, Suite 400, Mississauga, Ontario, L4W
4Y4.



YM has entered into licensing
agreements with certain biotechnology, pharmaceutical and medical institutes or has acquired technology originated in such institutes.
The acquisitions of licenses and products provide exclusive rights for certain territories for certain products or families of
products developed and rights of first refusal on additional territories, additional products or extensions to existing products.
The Company is a drug development company advancing three clinical-stage hematology and cancer-related products.



| | 2. | Basis of presentation:
| | -- | ----------------------



| | (a) | Statement of compliance:
| | --- | ------------------------



The Company's consolidated financial
statements were previously prepared in accordance with Canadian generally accepted accounting principles ("Canadian GAAP").
Canadian GAAP differs in some areas from IFRS. See note 18 for reconciliations and descriptions of the effect of the transition
from Canadian GAAP to International Financial Reporting Standards ("IFRS") on the reported financial position, financial
performance and cash flows of the Company.



These consolidated financial statements
were prepared in accordance with IFRS as issued by the International Accounting Standards Board ("IASB") and the Company
has elected July 1, 2010 as the date of transition to IFRS (the "transition date"). As these consolidated financial
statements are the Company's first annual presentation of its results and financial position under IFRS, they were prepared in
accordance with IFRS 1, First-time Adoption of IFRS ("IFRS 1"). The accounting policies applied in these
consolidated financial statements are based on the IFRS standards and International Financial Reporting Interpretations Committee
("IFRIC") interpretations issued and in effect for the year ended June 30, 2012. The accounting policies set out
below were consistently applied to all periods unless otherwise noted below.



These consolidated financial statements
for the year ended June 30, 2012, were authorized for issuance by the Board of Directors of the Company on September 20,
2012.



5







|ym biosciences inc.                                       
|----------------------------------------------------------
|Notes to the Consolidated Financial Statements (continued)
|(Expressed in Canadian dollars, unless otherwise noted)   
|                                                          
|Years ended June 30, 2012 and 2011                        
|                                                          



| | 2. | Basis of presentation (continued):
| | -- | ----------------------------------



| | (b) | Basis of measurement and going concern:
| | --- | ---------------------------------------



These consolidated financial statements
have been prepared on the historical cost basis, except for financial assets which are measured at fair value through profit or
loss and liabilities for cash-settled share-based payment arrangements which are measured at fair value through profit or loss.



These consolidated financial statements
have been prepared on a going concern basis, which assumes that the Company will continue in operation for the foreseeable future
and, accordingly, will be able to realize its assets and discharge its liabilities in the normal course of operations. Management
has assessed the Company's ability to continue as a going concern. Since inception, the Company has concentrated on product licensing
and development. It has had no net earnings, minimal revenue, negative operating cash flows and has financed its activities primarily
through the issuance of shares and warrants. The Company's ability to continue as a going concern is dependent on obtaining additional
investment capital and the achievement of profitable operations. There can be no assurance that the Company will be successful
in increasing revenue or raising additional investment capital to generate sufficient cash flows to continue as a going concern.
These consolidated financial statements do not reflect the adjustments that might be necessary to the carrying amounts of reported
assets, liabilities, revenue and expenses and the statement of financial position classifications used if the Company were unable
to continue operations in accordance with this assumption.



Taking into consideration the
cash, cash equivalents and short-term deposits, management has projected that the Company has sufficient cash resources to fund
its current operations beyond the next 12 months.



| | (c) | Functional and presentation currency:
| | --- | -------------------------------------



Items included in the financial
statements of each consolidated entity are measured using the currency of the primary economic environment in which the entity
operates (the "functional currency").



These consolidated financial statements
are presented in Canadian dollars, which is the functional currency of the parent company and its subsidiaries.



6







|ym biosciences inc.                                       
|----------------------------------------------------------
|Notes to the Consolidated Financial Statements (continued)
|(Expressed in Canadian dollars, unless otherwise noted)   
|                                                          
|Years ended June 30, 2012 and 2011                        
|                                                          



| | 2. | Basis of presentation (continued):
| | -- | ----------------------------------



| | (d) | Use of significant estimates and assumptions:
| | --- | ---------------------------------------------



The preparation of these consolidated
financial statements requires management to make estimates and assumptions that affect the application of accounting policies and
the amounts of assets, liabilities, revenue and expenses reported in the consolidated financial statements and the related notes
to the consolidated financial statements. Although these estimates are based on management's best knowledge of the amount, events
or actions, actual results may differ from those estimates and those differences could be material. The impacts of such estimates
are pervasive throughout the consolidated financial statements, and may require accounting adjustments based on future occurrences.



These estimates and underlying
assumptions are reviewed on an ongoing basis. Revisions to accounting estimates are recognized in the period in which the estimate
is revised and in any future periods affected.



The areas which require management
to make significant estimates and assumptions in determining carrying values include, but are not limited to:



| | (i) | Valuation of share-based compensation, share purchase warrants and share appreciation rights:
| | --- | ---------------------------------------------------------------------------------------------



Management measures the costs
for share-based compensation, the value of share purchase warrants and share appreciation rights using market-based option valuation
techniques. Assumptions are made and estimates are used in applying the valuation techniques. These include estimating the future
volatility of the share price, expected dividend yield, expected risk-free interest rate, future employee turnover rates and future
share option and share purchase warrants exercise behaviours and corporate performance. Such estimates and assumptions are inherently
uncertain. Changes in these assumptions affect the fair value estimates of share-based payments, share purchase warrants and share
appreciation rights. These assumptions are reviewed annually.



7







|ym biosciences inc.                                       
|----------------------------------------------------------
|Notes to the Consolidated Financial Statements (continued)
|(Expressed in Canadian dollars, unless otherwise noted)   
|                                                          
|Years ended June 30, 2012 and 2011                        
|                                                          



| | 2. | Basis of presentation (continued):
| | -- | ----------------------------------



| | (ii) | Measurement, period of use and potential impairment of intangible assets:
| | ---- | -------------------------------------------------------------------------



Management reviews objective evidence
each reporting period to assess whether there are indications of impairment of the intangible assets and make judgments about their
period of use. These determinations and their individual assumptions require that management make a decision based on the best
and most reliable information available at each reporting period.



| | (iii) | Timing of recognition of revenue:
| | ----- | ---------------------------------



In determining the appropriate
period over which to recognize revenue from an up-front non-refundable payment, management reviews the deliverables as identified
in the collaboration arrangements and makes assumptions regarding the time to commercialization. These assumptions are reviewed
each reporting period.



| | 3. | Significant accounting policies:
| | -- | --------------------------------



The accounting policies set out
below have been applied consistently to all periods presented in these consolidated financial statements and in preparing the opening
IFRS consolidated statement of financial position at July 1, 2010, the date of transition to IFRS, unless otherwise indicated.



| | (a) | Basis of consolidation:
| | --- | -----------------------



| | (i) | Subsidiaries:
| | --- | -------------



Subsidiaries are entities controlled
by the Company. The financial statements of subsidiaries are included in the consolidated financial statements from the date that
control commences until the date that control ceases. The financial statements of the subsidiaries are prepared for the same reporting
period as the Company, using consistent accounting policies. All intercompany transactions and balances have been eliminated upon
consolidation.



8







|ym biosciences inc.                                       
|----------------------------------------------------------
|Notes to the Consolidated Financial Statements (continued)
|(Expressed in Canadian dollars, unless otherwise noted)   
|                                                          
|Years ended June 30, 2012 and 2011                        
|                                                          



| | 3. | Significant accounting policies(continued):
| | -- | -------------------------------------------



| | (ii) | Jointly controlled entities:
| | ---- | ----------------------------



Joint ventures are those entities
over whose activities the Company has joint control, established by contractual agreement. The Company owns 80% of CIMYM BioSciences
Inc. and has proportionately consolidated its joint venture since the date that joint control commenced and will continue until
the date that joint control ceases and has made provisions for any advances to the joint venture that were not eliminated on consolidation.



| | (b) | Foreign currency:
| | --- | -----------------



Transactions in foreign currencies
are translated into the functional currency of the Company at the prevailing exchange rates at the dates of the transactions. Monetary
assets and liabilities denominated in foreign currencies at the reporting date are retranslated to the functional currency at the
exchange rate at that date. Foreign currency differences arising on retranslation are recognized in profit or loss.



| | (c) | Revenue recognition:
| | --- | --------------------



Revenue is recognized when the
Company has transferred to the buyer the significant risks and rewards of ownership of the goods; the Company retains neither continuing
managerial involvement to the degree usually associated with ownership nor effective control over the goods sold; the amount of
revenue can be measured reliably; it is probable that the economic benefits associated with the transaction will flow to the Company;
and the costs incurred or to be incurred in respect of the transaction can be measured reliably.



Contingent revenue attributable
to the achievement of regulatory or developmental milestones is recognized only on the achievement of the applicable milestone
and when collectability is probable.



Non-refundable up-front fees for
access to the Company's proprietary technology in connection with certain research and development collaborations are deferred
and recognized as revenue on a systematic basis over the estimated term of the related collaboration required until the milestone
associated with commercial approval of the first indication in the licensee's territory has been satisfied and the milestone payment
received, or until it is determined that no further collaboration is required. The estimated term is based on a drug development
plan, as discussed with licensees.



9







|ym biosciences inc.                                       
|----------------------------------------------------------
|Notes to the Consolidated Financial Statements (continued)
|(Expressed in Canadian dollars, unless otherwise noted)   
|                                                          
|Years ended June 30, 2012 and 2011                        
|                                                          



| | 3. | Significant accounting policies(continued):
| | -- | -------------------------------------------



The Company has license agreements
that specify that certain royalties are earned by the Company on sales of licensed products in the licensed territories. Licensees
report sales and royalty information in the 90 days after the end of the quarter in which the activity takes place and typically
do not provide the Company with forward estimates or current-quarter information. Because the Company is not able to reasonably
estimate the amount of royalties earned during the period in which these licensees actually ship products, royalty revenue is not
recognized until the royalties are reported to the Company and the collection of these royalties is probable.



| | (d) | Financial instruments:
| | --- | ----------------------



| | (i) | Financial assets:
| | --- | -----------------



Under IFRS, the Company's financial
assets are classified as loans and receivables.



A financial asset is derecognized
when the rights to receive cash flows from the asset have expired or when the Company has transferred its rights to receive cash
flows from the asset.



Loans and receivables are non-derivative
financial assets with fixed or determinable payments that are not quoted in an active market. Loans and receivables are initially
recognized at fair value plus transaction costs and subsequently measured at amortized cost using the effective interest rate method
less any impairment losses. Cash and cash equivalents comprise cash balances. Short-term deposits comprise term deposits with original
maturities of 12 months or less. The Company has classified its cash and cash equivalents, short-term deposits and accounts receivable
as loans and receivables.



The Company does not have any
financial assets at fair value through profit or loss, held-to-maturity investments or available-for-sale financial assets.



10







|ym biosciences inc.                                       
|----------------------------------------------------------
|Notes to the Consolidated Financial Statements (continued)
|(Expressed in Canadian dollars, unless otherwise noted)   
|                                                          
|Years ended June 30, 2012 and 2011                        
|                                                          



| | 3. | Significant accounting policies(continued):
| | -- | -------------------------------------------



| | (ii) | Financial liabilities:
| | ---- | ----------------------



Financial liabilities at fair
value through profit or loss include financial liabilities held for trading and financial liabilities designated upon initial recognition
as liabilities at fair value through profit or loss. The Company's share purchase warrants that have a strike price in a currency
other than the Company's functional currency have been classified as a derivative financial liability at fair value, with changes
in value reflected in profit or loss upon initial recognition and subsequent measurement.



Other financial liabilities are
recognized initially at fair value plus any directly attributable transaction costs and, subsequently, at amortized cost using
the effective interest method. The Company has classified its accounts payable and accrued liabilities as other financial liabilities.



A financial liability is derecognized
when its contractual obligations are discharged, cancelled or expire.



| | (iii) | Equity:
| | ----- | -------



Common shares are classified as
equity. Incremental costs directly attributable to the issuance of common shares are recognized as a deduction from equity, net
of any income tax effects.



| | (e) | Property and equipment:
| | --- | -----------------------



| | (i) | Recognition and measurement:
| | --- | ----------------------------



Items of property and equipment
are measured at cost less accumulated depreciation and accumulated impairment losses. Cost includes expenditures that are directly
attributable to the acquisition of the asset. When parts of an item of property and equipment have different useful lives, they
are accounted for as separate items (major components) of property and equipment. Gains and losses on disposal of an item of property
and equipment are determined by comparing the proceeds from disposal with the carrying amount of property and equipment, and are
recognized in profit or loss.



11







|ym biosciences inc.                                       
|----------------------------------------------------------
|Notes to the Consolidated Financial Statements (continued)
|(Expressed in Canadian dollars, unless otherwise noted)   
|                                                          
|Years ended June 30, 2012 and 2011                        
|                                                          



| | 3. | Significant accounting policies(continued):
| | -- | -------------------------------------------



| | (ii) | Subsequent costs:
| | ---- | -----------------



The cost of replacing a part of
an item of property and equipment is recognized in the carrying amount of the item if it is probable that the future economic benefits
embodied within the part will flow to the Company, and its cost can be measured reliably. The carrying amount of the replaced part
is derecognized. The costs of the day-to-day servicing of property and equipment are recognized in profit or loss as incurred.



| | (iii) | Depreciation:
| | ----- | -------------



The estimated useful lives and
the methods of depreciation for the current and comparative periods are as follows:



|Asset                        |  | Basis         |  | Rate           
|---------------------------- |  | ------------- |  | ---------------
|                             |  |               |  |                
|Computer and other equipment |  | Straight line |  | Over 3 years   
|Furniture                    |  | Straight line |  | Over 5 years   
|Leasehold improvements       |  | Straight line |  | Over lease term



Estimates for depreciation methods,
useful lives and residual values are reviewed at each reporting period end and adjusted if appropriate.



| | (f) | Intangible assets:
| | --- | ------------------



Intangible assets that are acquired
(acquired technology) and have finite useful lives are measured at cost less accumulated amortization and accumulated impairment
losses. Subsequent expenditure is capitalized only when it increases the future economic benefits embodied in the specific asset
to which it relates. All other expenditures are recognized in profit or loss as incurred.



Amortization is recognized in
profit or loss on a straight-line basis over the estimated useful lives of intangible assets from the date they are available for
use in the manner intended by management. The period over which the technologies acquired in the January 29, 2010 acquisition of
Cytopia Limited ("Cytopia") are available for use is estimated at three years, which reflects management's intended use
of the asset and the estimate of the time to market for the technologies.



12







|ym biosciences inc.                                       
|----------------------------------------------------------
|Notes to the Consolidated Financial Statements (continued)
|(Expressed in Canadian dollars, unless otherwise noted)   
|                                                          
|Years ended June 30, 2012 and 2011                        
|                                                          



| | 3. | Significant accounting policies(continued):
| | -- | -------------------------------------------



The amortization method and amortization
period of an intangible asset with a finite life is reviewed at each reporting period. Changes in the expected useful life or the
expected pattern of consumption of future economic benefits embodied in the asset are accounted for by changing the amortization
period or method, as appropriate, and are treated as changes in accounting estimates.



Development costs:



Development expenditures are capitalized
only if development costs can be measured reliably, the product or process is technically and commercially feasible, future economic
benefits are probable and the Company intends to and has sufficient resources to complete development and to use or sell the asset.
Other development expenditures are expensed as incurred. No development costs have been capitalized to date.



| | (g) | Impairment:
| | --- | -----------



| | (i) | Financial assets:
| | --- | -----------------



A financial asset not carried
at fair value through profit or loss is assessed at each reporting date to determine whether there is objective evidence that it
is impaired. A financial asset is impaired if objective evidence indicates that a loss event has occurred after the initial recognition
of the asset, and that the loss event had a negative effect on the estimated future cash flows of that asset that can be estimated
reliably.



An impairment test is performed,
on an individual basis, for each material financial asset. Other individually non-material financial assets are tested as groups
of financial assets with similar risk characteristics.



| | (ii) | Non-financial assets:
| | ---- | ---------------------



The carrying amounts of the Company's
non-financial assets are reviewed at each reporting date to determine whether there is any indication of impairment. If such an
indication exists, the recoverable amount is estimated.



13







|ym biosciences inc.                                       
|----------------------------------------------------------
|Notes to the Consolidated Financial Statements (continued)
|(Expressed in Canadian dollars, unless otherwise noted)   
|                                                          
|Years ended June 30, 2012 and 2011                        
|                                                          



| | 3. | Significant accounting policies(continued):
| | -- | -------------------------------------------



The recoverable amount of an asset
or a cash-generating unit is the greater of its value in use and its fair value less costs to sell. In assessing value in use,
the estimated future cash flows are discounted to their present value using a pre-tax discount rate that reflects current market
assessments of the time value of money and the risks specific to the asset or cash-generating unit. For the purpose of impairment
testing, assets that cannot be tested individually are grouped together into the smallest group of assets that generates cash inflows
from continuing use that are largely independent of cash inflows of other assets or cash-generating units. An impairment loss is
recognized if the carrying amount of an asset or its related cash-generating unit exceeds its estimated recoverable amount.



| | (h) | Provisions:
| | --- | -----------



A provision is recognized if,
as a result of a past event, the Company has a present legal or constructive obligation that can be estimated reliably, and it
is probable that an outflow of economic benefits will be required to settle the obligation. Provisions are measured by discounting
the expected future cash flows at a pre-tax rate that reflects current market assessments of the time value of money and the risks
specific to the liability. The unwinding of the discount on provisions is recognized in finance costs. No provisions have been
recognized.



| | (i) | Government grants and assistance:
| | --- | ---------------------------------



Government grants are not recognized
until there is reasonable assurance that the Company will comply with the conditions attached to them and that the grants will
be received.



Government grants that are receivable
as compensation for expenses or losses already incurred or for the purpose of giving immediate financial support to the Company
with no future related costs are recognized in profit or loss in the period in which they become receivable.



14







|ym biosciences inc.                                       
|----------------------------------------------------------
|Notes to the Consolidated Financial Statements (continued)
|(Expressed in Canadian dollars, unless otherwise noted)   
|                                                          
|Years ended June 30, 2012 and 2011                        
|                                                          



| | 3. | Significant accounting policies(continued):
| | -- | -------------------------------------------



Other government grants are recognized
as a reduction of the related expenses over the periods necessary to match them with the costs for which they are intended to compensate,
on a systematic basis.



Government assistance, including
investment tax credits relating to development costs, is recorded as a reduction of the development costs when the related expenditures
are incurred and there is reasonable assurance that the assistance will be received.



| | (j) | Share-based compensation:
| | --- | -------------------------



The grant-date fair value of share-based
payment awards granted to employees is recognized as expense, with a corresponding increase in contributed surplus, over the period
that the employees unconditionally become entitled to the awards. The amount recognized as an expense is adjusted to reflect the
number of awards for which the related service is expected to be met, such that the amount ultimately recognized as an expense
is based on the number of awards that met the related service and non-market performance conditions at the vesting date.



The fair value of the amount payable
to employees in respect of share appreciation rights, which are settled in cash, is recognized as an expense with a corresponding
increase in liabilities, over the period that the employees unconditionally become entitled to payment. The liability is remeasured
at each reporting date and at settlement date. Any changes in the fair value of the liability are recognized in profit or loss.



| | (k) | Finance income and finance costs:
| | --- | ---------------------------------



Finance income is comprised of
interest income on funds invested, and fair value gains on financial assets and financial liabilities at fair value through profit
or loss. Interest income is recognized as it accrues in profit or loss, using the effective interest rate method.



Finance costs comprise fair value
losses on financial assets and financial liabilities at fair value through profit or loss.



Foreign currency gains and losses
are reported on a net basis as either finance income or finance costs depending on the change from foreign currency fluctuations.



15







|ym biosciences inc.                                       
|----------------------------------------------------------
|Notes to the Consolidated Financial Statements (continued)
|(Expressed in Canadian dollars, unless otherwise noted)   
|                                                          
|Years ended June 30, 2012 and 2011                        
|                                                          



| | 3. | Significant accounting policies(continued):
| | -- | -------------------------------------------



| | (l) | Income tax:
| | --- | -----------



Income tax expense comprises current
and deferred tax. Current tax and deferred tax is recognized in profit or loss except to the extent that it relates to a business
combination, or items recognized directly in equity or in other comprehensive income.



Current tax is the expected tax
payable or receivable on the taxable income or loss for the year, using tax rates enacted or substantively enacted at the reporting
date, and any adjustment to tax payable in respect of previous years.



Deferred tax is recognized in
respect of temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the
amounts used for taxation purposes.



Deferred tax assets and liabilities
are offset if there is a legally enforceable right to offset current tax liabilities and assets, and they relate to income taxes
levied by the same tax authority on the same taxable entity.



Deferred tax is measured at the
tax rates that are expected to be applied to temporary differences when they reverse, based on the laws that have been enacted
or substantively enacted by the reporting date. A deferred tax asset is recognized for unused tax losses, tax credits and deductible
temporary differences, to the extent that it is probable that future taxable profits will be available against which they can be
utilized.



| | (m) | Loss per share:
| | --- | ---------------



Basic loss per share is computed
by dividing the net loss available to common shareholders by the weighted average number of shares outstanding during the reporting
period. Diluted loss per share is computed similarly to basic loss per share, except that the weighted average shares outstanding
are increased to include additional shares for the assumed exercise of stock options and warrants, if dilutive. The number of additional
shares is calculated by assuming that outstanding stock options and warrants were exercised and that the proceeds from such exercises
were used to acquire common stock at the average market price during the reporting periods. The inclusion of the Company's stock
options and warrants in the computation of diluted loss per share has an anti-dilutive effect on the loss per share and, therefore,
they have been excluded from the calculation of diluted loss per share.



16







|ym biosciences inc.                                       
|----------------------------------------------------------
|Notes to the Consolidated Financial Statements (continued)
|(Expressed in Canadian dollars, unless otherwise noted)   
|                                                          
|Years ended June 30, 2012 and 2011                        
|                                                          



| | 3. | Significant accounting policies(continued):
| | -- | -------------------------------------------



| | (n) | New standards and interpretations not yet effective:
| | --- | ----------------------------------------------------



Accounting standards issued but
not yet effective up to the date of issuance of the Company's consolidated financial statements are listed below. This listing
is of standards and interpretations issued, which the Company reasonably expects to be applicable at a future date. The Company
intends to adopt these standards when they become effective.



| | (i) | International Accounting Standard ("IAS") 12, Income Taxes ("IAS 12"):
| | --- | ----------------------------------------------------------------------



In December 2010, the IASB amended
IAS 12 for the recovery of underlying assets measured at fair value and the impact on deferred taxes. The amendments provide a
solution to the problem of assessing whether recovery would be through use or through sale when the asset is measured at fair value
under IAS 40, Investment Property, by adding the presumption that the recovery would normally be through sale. The amendment also
incorporates the remaining guidance in SIC-21, Income Taxes - Recovery of Revalued Non-depreciable Assets, as SIC-21 has been
withdrawn. The effective date of the amendment is for annual periods beginning on or after January 1, 2012. The Company is
in the process of reviewing the amendment to determine the impact on the consolidated financial statements.



| | (ii) | IFRS 7, Financial Instruments: Disclosures - Enhanced Derecognition Disclosure Requirements:
| | ---- | --------------------------------------------------------------------------------------------



The amendment requires additional
disclosure about financial assets that have been transferred but not derecognized to enable the user of the Company's consolidated
financial statements to understand the relationship with those assets that have not been derecognized and their associated liabilities.
In addition, the amendment requires disclosures about continuing involvement in derecognized assets to enable the user to evaluate
the nature of, and risk associated with, the Company's continuing involvement in those derecognized assets. The amendment becomes
effective for annual periods beginning on or after July 1, 2013. The amendment affects disclosure only and the Company does not
expect the amendments to have a material impact on the consolidated financial statements, because of the nature of the Company's
operations and the types of financial assets that it holds.



17







|ym biosciences inc.                                       
|----------------------------------------------------------
|Notes to the Consolidated Financial Statements (continued)
|(Expressed in Canadian dollars, unless otherwise noted)   
|                                                          
|Years ended June 30, 2012 and 2011                        
|                                                          



| | 3. | Significant accounting policies(continued):
| | -- | -------------------------------------------



| | (iii) | IFRS 9, Financial Instruments ("IFRS 9"):
| | ----- | -----------------------------------------



In November 2009, the IASB issued
IFRS 9, which covers classification and measurement as the first part of its project to replace IAS 39, Financial Instruments -
Recognition and Measurement ("IAS 39"). In October 2010, the IASB also incorporated new accounting requirements for liabilities.
The standard introduces new requirements for measurement and eliminates the current classification of loans and receivables, available-for-sale
and held-to-maturity, currently in IAS 39. There are new requirements for the accounting of financial liabilities as well as a
carryover of requirements from IAS 39. The Company does not anticipate early adoption and will adopt the standard when it is mandated
by the IASB, which is in fiscal 2016. The Company is in the process of reviewing the standard to determine the impact on the consolidated
financial statements.



| | (iv) | IFRS 10, Consolidated Financial Statements ("IFRS 10"):
| | ---- | -------------------------------------------------------



IFRS 10 requires an entity to
consolidate an investee when it is exposed, or has rights to variable returns from its involvement with the investee and has the
ability to affect those return through its power over the investee. IFRS 10 supersedes SIC-12, Consolidations - Special Purpose
Entities, and replaces parts of IAS 27, Consolidated and Separate Financial Statements ("IAS 27"). The effective date
of this amendment is for annual periods beginning on or after January 1, 2013. The Company is in the process of reviewing the standard
to determine the impact on the consolidated financial statements.



| | (v) | IFRS 11, Joint Arrangements ("IFRS 11"):
| | --- | ----------------------------------------



IFRS 11 requires a venturer to
classify its interest in a joint arrangement as a joint operation or a joint venture. The standard eliminates the use of the proportionate
consolidation method to account for joint ventures. Joint ventures will be accounted for using the equity method of accounting
while under a joint operation the venturer will recognize its share of the assets, liabilities, revenue and expenses of the joint
operation. IFRS 11 supersedes SIC-13, Jointly Controlled Entities - Non-Monetary Contributions by Venturers, and IAS 31, Joint
Ventures ("IAS 31"). The effective date of this amendment is for annual periods beginning on or after January 1, 2013.
The Company is in the process of reviewing the standard to determine the impact on the consolidated financial statements.



18







|ym biosciences inc.                                       
|----------------------------------------------------------
|Notes to the Consolidated Financial Statements (continued)
|(Expressed in Canadian dollars, unless otherwise noted)   
|                                                          
|Years ended June 30, 2012 and 2011                        
|                                                          



| | 3. | Significant accounting policies(continued):
| | -- | -------------------------------------------



| | (vi) | IFRS 12, Disclosure of Interest in other Entities ("IFRS 12"):
| | ---- | --------------------------------------------------------------



IFRS 12 establishes disclosure
requirements for interests in other entities such as subsidiaries, joint arrangements, associates and unconsolidated structured
entities. The standard carries forward existing disclosures and also introduces significant additional disclosure requirements
that address the nature of, and risks associated with, an entity's interest in other entities. IFRS 12 replaces the previous disclosure
requirements included in IAS 27, IAS 31 and IAS 28, Investment in Associates and Joint Ventures. The effective date of this
amendment is for annual periods beginning or after January 1, 2013. The Company is in the process of reviewing the standard to
determine the impact on the consolidated financial statements.



| | (vii) | IFRS 13, Fair Value Measurement ("IFRS 13"):
| | ----- | --------------------------------------------



IFRS 13 is a comprehensive standard
for fair value measurement and disclosure requirements for use across all IFRS standards. IFRS 13 defines fair value and establishes
disclosures about fair value measurement. The effective date of this amendment is for annual periods beginning or after January
1, 2013. The Company is in the process of reviewing the standard to determine the impact on the consolidated financial statements.



| | (viii) | IAS 28, Investments in Associates and Joint Ventures ("IAS 28"):
| | ------ | ----------------------------------------------------------------



The IASB also amended IAS 28,
an existing standard, to include joint ventures in its scope and to address the changes in IFRS 10, 11 and 12. The effective date
of this amendment is for annual periods beginning or after January 1, 2013. The Company is in the process of reviewing the standard
to determine the impact on the consolidated financial statements.



| | (ix) | IAS 1, Presentation of Financial Statements ("IAS 1"):
| | ---- | ------------------------------------------------------



The IASB amended IAS 1 by revising
how certain items are presented in other comprehensive income ("OCI"). Items within OCI that may be reclassified to profit
and loss will be separated from items that will not. The standard is effective for financial years beginning on or after July 1,
2012, with early adoption permitted. The Company is in the process of reviewing the standard to determine the impact on the consolidated
financial statements.



19







|ym biosciences inc.                                       
|----------------------------------------------------------
|Notes to the Consolidated Financial Statements (continued)
|(Expressed in Canadian dollars, unless otherwise noted)   
|                                                          
|Years ended June 30, 2012 and 2011                        
|                                                          



| | 4. | Cash and cash equivalents and short-term deposits:
| | -- | --------------------------------------------------



As a condition of various prospectus
financings and the controlled equity offering program entered into on April 23, 2010, the Company agreed to restrict use of
$144.361 million of the net proceeds raised to fund drug development activities not related to Cuban originated products or for
general purposes not related to the Cuban licensed products and technologies, except those activities expressly consented under
the licenses granted by the U.S. Office of Foreign Asset Control. As at June 30, 2012, of the $132.451 million (2011 - $79.659 million;
2010 - $45.645 million) in cash and short-term deposits, approximately $43.566 million (2011 - $31.189 million; 2010 - $38.816
million) is unrestricted and can be used for any purpose and approximately $88.885 million (2011 - $48.470 million; 2010 - $6.829 million)
can be used for any purpose other than activities related to the Cuban products outlined above.



| | 5. | Property and equipment:
| | -- | -----------------------



|                         |  | Computer  |          |   |           |   |         |              |  |   |         |  
|------------------------ |  | --------- | -------- | - | --------- | - | ------- | ------------ |  | - | ------- | -
|                         |  | and other |          |   |           |   |         | Leasehold    |  |   |         |  
|                         |  | equipment |          |   | Furniture |   |         | improvements |  |   | Total   |  
|                         |  |           |          |   |           |   |         |              |  |   |         |  
|Cost                     |  |           |          |   |           |   |         |              |  |   |         |  
|                         |  |           |          |   |           |   |         |              |  |   |         |  
|Balance, July 1, 2010    |  | $         | 471,083  |   |           | $ | 99,574  |              |  | $ | 52,539  |  
|Additions                |  |           | 71,684   |   |           |   | –       |              |  |   | –       |  
|Disposals                |  |           | (157,331 | ) |           |   | –       |              |  |   | –       |  
|                         |  |           |          |   |           |   |         |              |  |   |         |  
|Balance, June 30, 2011   |  |           | 385,436  |   |           |   | 99,574  |              |  |   | 52,539  |  
|Additions                |  |           | 23,357   |   |           |   | 4,800   |              |  |   | –       |  
|Disposals                |  |           | (159,135 | ) |           |   | –       |              |  |   | (35,559 | )
|                         |  |           |          |   |           |   |         |              |  |   |         |  
|Balance, June 30, 2012   |  | $         | 249,658  |   |           | $ | 104,374 |              |  | $ | 16,980  |  
|                         |  |           |          |   |           |   |         |              |  |   |         |  
|Accumulated depreciation |  |           |          |   |           |   |         |              |  |   |         |  
|                         |  |           |          |   |           |   |         |              |  |   |         |  
|Balance, July 1, 2010    |  | $         | 411,950  |   |           | $ | 85,203  |              |  | $ | 41,268  |  
|Depreciation             |  |           | 66,689   |   |           |   | 4,908   |              |  |   | 6,936   |  
|Disposals                |  |           | (170,725 | ) |           |   | –       |              |  |   | –       |  
|                         |  |           |          |   |           |   |         |              |  |   |         |  
|Balance, June 30, 2011   |  |           | 307,914  |   |           |   | 90,111  |              |  |   | 48,204  |  
|Depreciation             |  |           | 48,241   |   |           |   | 4,783   |              |  |   | 4,335   |  
|Disposals                |  |           | (159,135 | ) |           |   | –       |              |  |   | (35,559 | )
|                         |  |           |          |   |           |   |         |              |  |   |         |  
|Balance, June 30, 2012   |  | $         | 197,020  |   |           | $ | 94,894  |              |  | $ | 16,980  |  
|                         |  |           |          |   |           |   |         |              |  |   |         |  
|Net carrying amounts     |  |           |          |   |           |   |         |              |  |   |         |  
|                         |  |           |          |   |           |   |         |              |  |   |         |  
|Balance, July 1, 2010    |  | $         | 59,133   |   |           | $ | 14,371  |              |  | $ | 11,271  |  
|Balance, June 30, 2011   |  |           | 77,522   |   |           |   | 9,463   |              |  |   | 4,335   |  
|Balance, June 30, 2012   |  |           | 52,638   |   |           |   | 9,480   |              |  |   | –       |  



20













|ym biosciences inc.                                       
|----------------------------------------------------------
|Notes to the Consolidated Financial Statements (continued)
|(Expressed in Canadian dollars, unless otherwise noted)   
|                                                          
|Years ended June 30, 2012 and 2011                        
|                                                          



| | 6. | Intangible assets:
| | -- | ------------------



|Cost                                                   |  |   |            | 
|------------------------------------------------------ |  | - | ---------- | 
|                                                       |  |   |            | 
|Balance, July 1, 2010, June 30, 2011 and June 30, 2012 |  | $ | 13,524,054 | 
|                                                       |  |   |            | 
|Accumulated amortization                               |  |   |            | 
|                                                       |  |   |            | 
|Balance, July 1, 2010                                  |  | $ | 1,878,340  | 
|Amortization                                           |  |   | 4,508,016  | 
|                                                       |  |   |            | 
|Balance, June 30, 2011                                 |  |   | 6,386,356  | 
|Amortization                                           |  |   | 4,508,016  | 
|                                                       |  |   |            | 
|Balance, June 30, 2012                                 |  | $ | 10,894,372 | 
|                                                       |  |   |            | 
|Net carrying amounts                                   |  |   |            | 
|                                                       |  |   |            | 
|Balance, July 1, 2010                                  |  | $ | 11,645,714 | 
|Balance, June 30, 2011                                 |  |   | 7,137,698  | 
|Balance, June 30, 2012                                 |  |   | 2,629,682  | 



On January 29, 2010, on acquisition
of Cytopia, the Company recorded $13,524,054 of acquired technologies, which included the intellectual property and in-process
research and development of the Company's CYT387 and CYT997 products, as well as a number of other molecules.



| | 7. | Consolidation of joint venture:
| | -- | -------------------------------



Included in the consolidated financial
statements are the following items:



|                        |  | June 30, |            |  | June 30, |   |            | July 1, | 
|----------------------- |  | -------- | ---------- |  | -------- | - | ---------- | ------- | 
|                        |  | 2012     |            |  | 2011     |   |            | 2010    | 
|                        |  |          |            |  |          |   |            |         | 
|Current assets          |  | $        | –          |  |          | $ | –          |         | 
|Non-current assets      |  |          | –          |  |          |   | –          |         | 
|Current liabilities(1)  |  |          | 79,072,851 |  |          |   | 77,324,884 |         | 
|Non-current liabilities |  |          | 1,556,853  |  |          |   | 1,831,722  |         | 
|Out-licensing revenue   |  |          | 990,786    |  |          |   | 935,798    |         | 
|Expenses                |  |          | 2,463,884  |  |          |   | 8,146,119  |         | 



(1)Of
the current liabilities, $78,691,578 (2011 - $76,730,809; 2010 - $68,771,457) is owed to the Company and is eliminated on consolidation.



21







|ym biosciences inc.                                       
|----------------------------------------------------------
|Notes to the Consolidated Financial Statements (continued)
|(Expressed in Canadian dollars, unless otherwise noted)   
|                                                          
|Years ended June 30, 2012 and 2011                        
|                                                          



| | 8. | Share purchase warrants:
| | -- | ------------------------



|                            |  | 2012      |           |  | 2011  |  
|--------------------------- |  | --------- | --------- |  | ----- | -
|                            |  | Number of |           |  | Fair  |  
|                            |  | warrants  |           |  | value |  
|                            |  |           |           |  |       |  
|Balance,  beginning of year |  |           | 7,366,418 |  |       | $
|Exercised                   |  |           | –         |  |       |  
|Fair value adjustment       |  |           | –         |  |       |  
|                            |  |           |           |  |       |  
|Balance, end of year        |  |           | 7,366,418 |  |       | $



The fair value of warrants
was calculated using the Black-Scholes option pricing model with the following assumptions at June 30:



|                        |  | 2012 |           |   | 2011 |  
|----------------------- |  | ---- | --------- | - | ---- | -
|                        |  |      |           |   |      |  
|Exercise price          |  | $    | 1.60 U.S. |   |      | $
|Fair value              |  | $    | 0.98      |   |      | $
|Expected life           |  |      | 2.7 years |   |      |  
|Risk-free interest rate |  |      | 1.1       | % |      |  
|Expected volatility     |  |      | 66.2      | % |      |  



On March 10, 2010, the Company
completed a prospectus offering of 14,583,000 units at U.S. $1.20 per unit for gross proceeds of U.S. $17,499,600 (Cdn. $17,895,081),
and net cash proceeds of U.S. $15,712,614 (Cdn. $16,067,710). Each unit consisted of one common share and one-half common share
purchase warrant. In connection with the financing, the Company issued 874,980 broker warrants having an aggregate fair value of
U.S. $171,496 (Cdn. $175,371), estimated using the Black-Scholes option pricing model. Each whole common share purchase warrant
and each broker warrant entitles the warrant holder to acquire one common share at an exercise price of U.S. $1.60 per share. These
8,166,480 warrants may be exercised at any time from September 10, 2010 to their expiry on March 10, 2015. There were no warrants
exercised during the year ended June 30, 2012 (2011 - 800,062).



22







|ym biosciences inc.                                       
|----------------------------------------------------------
|Notes to the Consolidated Financial Statements (continued)
|(Expressed in Canadian dollars, unless otherwise noted)   
|                                                          
|Years ended June 30, 2012 and 2011                        
|                                                          



| | 9. | Share capital:
| | -- | --------------



| | (a) | Authorized and issued:
| | --- | ----------------------



| | (i) | Authorized:
| | --- | -----------



The Company has authorized share
capital of 500,000,000 Class A preferred shares; 500,000,000 Class B preferred shares, Series 1; 500,000 Class A non-voting common
shares; and 500,000,000 common shares. All classes of shares have no par value.



Common shareholders are entitled
to receive dividends as declared by the Company at its discretion and are entitled to one vote per share at the Company's annual
general meeting.



| | (ii) | Common shares issued in the year ended June 30, 2012:
| | ---- | -----------------------------------------------------



On February 29, 2012, the Company
completed a prospectus offering of 40,250,000 shares for gross proceeds of U.S. $80,500,000 (Cdn. $79,421,300), resulting in net
cash proceeds of U.S. $75,243,165 (Cdn. $74,232,207) after deducting U.S. $5,256,835 (Cdn. $5,189,093) in transaction costs.



| | (iii) | Common shares issued in the year ended June 30, 2011:
| | ----- | -----------------------------------------------------



On December 17 and December 23,
2010, the Company completed a prospectus offering of 25,000,000 and 3,750,000 common shares at U.S. $1.60 per common share, respectively,
for gross proceeds of U.S. $46,000,000 (Cdn. $46,493,000), resulting in net cash proceeds of U.S. $42,874,672 (Cdn. $43,334,522),
after deducting U.S. $3,125,328 (Cdn. $3,158,478) in transaction costs.



Between January 13, 2011 and June
14, 2011, the Company sold 5,775,000 shares at a weighted average price of U.S. $2.53 per common share for gross proceeds of U.S. $14,582,098
(Cdn. $13,923,786), resulting in net proceeds of Cdn. $13,375,113 after deducting Cdn. $548,673 in transaction costs. These
shares were sold under a Sales Agreement with Cantor Fitzgerald & Co, under which the Company could, at its discretion, from
time to time, sell up to a maximum of 7,750,000 of its common shares through an at-the-market equity offering program known as
a Controlled Equity Offering. The agreement expired on October 16, 2011.



23







|ym biosciences inc.                                       
|----------------------------------------------------------
|Notes to the Consolidated Financial Statements (continued)
|(Expressed in Canadian dollars, unless otherwise noted)   
|                                                          
|Years ended June 30, 2012 and 2011                        
|                                                          



| | 9. | Share capital (continued):
| | -- | --------------------------



| | (b) | Basic and diluted loss per common share:
| | --- | ----------------------------------------



The weighted average number of
shares for the year ended June 30, 2012 was 130,276,191 (2011 - 97,764,811). The Company has not adjusted its weighted average
number of shares outstanding for the purpose of calculating the diluted loss per share as any adjustment related to stock options
or warrants would be anti-dilutive.



| | (c) | Stock options:
| | --- | --------------



The Company has granted stock
options pursuant to a stock option plan. Under the plan, options to purchase common shares may be granted to directors, officers,
employees and service providers of the Company for a maximum term of 10 years.



Compensation cost recognized as
an expense for the year ended June 30, 2012 for share-based employee compensation awards was $2,238,782 (2011 - $1,709,988).



The fair value of each option
granted was estimated on the date of grant using the Black-Scholes option pricing model with the following assumptions:



|                                                  |  | 2012 |            |   | 2011 |  
|------------------------------------------------- |  | ---- | ---------- | - | ---- | -
|                                                  |  |      |            |   |      |  
|Number of options issued                          |  |      | 2,037,500  |   |      |  
|Weighted average exercise price                   |  | $    | 1.73       |   |      | $
|Weighted average risk-free interest rate          |  |      | 2.1        | % |      |  
|Weighted average volatility factor                |  |      | 85.0       | % |      |  
|Forfeiture rate                                   |  |      | 2.5% - 7.8 | % |      |  
|Dividend rate                                     |  |      | 0.0        | % |      |  
|Weighted average expected life of options (years) |  |      | 6.0        |   |      |  
|Vesting period (months)                           |  |      | 0 - 24     |   |      |  
|Weighted average fair value of options granted    |  | $    | 1.22       |   |      | $
|Fair value of options granted                     |  | $    | 2,478,394  |   |      | $



The Black-Scholes model used by
the Company to calculate option values was developed to estimate the fair value of freely tradable, fully transferable options
without vesting restrictions, which significantly differs from the Company's stock option awards. This model also requires highly
subjective assumptions, including future stock price volatility and expected option life, which greatly affect the calculated values.



24







|ym biosciences inc.                                       
|----------------------------------------------------------
|Notes to the Consolidated Financial Statements (continued)
|(Expressed in Canadian dollars, unless otherwise noted)   
|                                                          
|Years ended June 30, 2012 and 2011                        
|                                                          



| | 9. | Share capital (continued):
| | -- | --------------------------



The risk-free interest rate is
based on the implied yield on a Canadian Government zero-coupon issue with a remaining term equal to the expected term of the option.
The volatility is based solely on historical volatility equal to the expected life of the option. The life of the options is estimated
considering the vesting period at the grant date, the term of the option and the average length of time similar grants have remained
outstanding in the past. The forfeiture rate is an estimate based on historical evidence and future expectations. The dividend
yield was set at zero since it is the present policy of the Company to retain all earnings to finance operations and future growth.



The following table reflects the
activity under the stock option plan for the years ended June 30, 2012 and 2011 and the share options outstanding at the end
of the years:



|                               |  | 2012   |           |   | 2011     |  
|------------------------------ |  | ------ | --------- | - | -------- | -
|                               |  |        |           |   | Weighted |  
|                               |  |        |           |   | average  |  
|                               |  |        |           |   | exercise |  
|                               |  | Number |           |   | price    |  
|                               |  |        |           |   |          |  
|Outstanding, beginning of year |  |        | 7,125,916 |   |          | $
|Granted                        |  |        | 2,037,500 |   |          |  
|Exercised                      |  |        | (738,060  | ) |          |  
|Expired                        |  |        | (72,488   | ) |          |  
|Cancelled (after vesting)      |  |        | (247,500  | ) |          |  
|Forfeited (before vesting)     |  |        | (28,334   | ) |          |  
|                               |  |        |           |   |          |  
|Outstanding, end of year       |  |        | 8,077,034 |   |          |  
|                               |  |        |           |   |          |  
|Exercisable, end of year       |  |        | 6,296,006 |   |          | $



|                |  | Options outstanding |           |  | Options outstanding | 
|--------------- |  | ------------------- | --------- |  | ------------------- | 
|                |  |                     |           |  | Weighted            | 
|                |  |                     |           |  | average             | 
|                |  |                     |           |  | remaining           | 
|Range of        |  | Number              |           |  | contractual         | 
|exercise prices |  | outstanding         |           |  | life (years)        | 
|                |  |                     |           |  |                     | 
|$0.50 - $1.00   |  |                     | 1,058,152 |  |                     | 
|$1.01 - $2.00   |  |                     | 5,564,382 |  |                     | 
|$2.01 - $3.00   |  |                     | 364,563   |  |                     | 
|$3.01 - $4.00   |  |                     | 492,558   |  |                     | 
|$4.01 - $15.27  |  |                     | 597,379   |  |                     | 
|                |  |                     |           |  |                     | 
|                |  |                     | 8,077,034 |  |                     | 



25







|ym biosciences inc.                                       
|----------------------------------------------------------
|Notes to the Consolidated Financial Statements (continued)
|(Expressed in Canadian dollars, unless otherwise noted)   
|                                                          
|Years ended June 30, 2012 and 2011                        
|                                                          



| | 9. | Share capital (continued):
| | -- | --------------------------



| | (d) | Share appreciation rights:
| | --- | --------------------------



The Company has granted share
appreciation rights ("SARs") to certain employees. Under the plan, SARs are granted to employees and service providers
of the Company's Australian subsidiary for a maximum term of 10 years.



The outstanding SARs are measured
at their fair value using the Black-Scholes option pricing model at the end of each reporting period, with changes recognized through
profit or loss. For the year ended June 30, 2012, the Company recorded a gain of $86,681 (2011 - expense of $120,213) related to
SARs.



The fair value of each SAR granted
was estimated on the date of grant and each subsequent reporting date using the Black-Scholes option pricing model with the following
assumptions:



|                                                  |  | 2012 |            |   | 2011 |  
|------------------------------------------------- |  | ---- | ---------- | - | ---- | -
|                                                  |  |      |            |   |      |  
|Number of rights outstanding                      |  |      | 180,000    |   |      |  
|Weighted average exercise price                   |  | $    | 1.69       |   |      | $
|Risk-free interest rate                           |  |      | 1.1% - 1.5 | % |      |  
|Volatility factor                                 |  |      | 66% - 88   | % |      |  
|Dividend rate                                     |  |      | 0          | % |      |  
|Expected life of rights (% of contractual life)   |  |      | 60% - 95   | % |      |  
|Vesting period (months)                           |  |      | 0 - 24     |   |      |  
|Weighted average fair value of rights outstanding |  | $    | 1.26       |   |      | $
|Amount accrued as at June 30                      |  | $    | 188,164    |   |      | $



The Black-Scholes model used by
the Company to calculate SARs values was developed to estimate the fair value of freely tradable, fully transferable options without
vesting restrictions, which significantly differs from the Company's SARs. This model also requires highly subjective assumptions,
including future stock price volatility and average option life, which greatly affect the calculated values.



26







|ym biosciences inc.                                       
|----------------------------------------------------------
|Notes to the Consolidated Financial Statements (continued)
|(Expressed in Canadian dollars, unless otherwise noted)   
|                                                          
|Years ended June 30, 2012 and 2011                        
|                                                          



| | 9. | Share capital (continued):
| | -- | --------------------------



The risk-free interest rate is
based on the implied yield on a Government of Canada zero-coupon issue with a remaining term equal to the expected term of the
SARs. The volatility is based solely on historical volatility equal to the expected life of the SARs. The life of the SARs is estimated
considering the vesting period at the grant date, the term of the SARs and the average length of time similar grants have remained
outstanding in the past. The forfeiture rate is an estimate based on historical evidence and future expectations. The dividend
yield was set at zero since it is the present policy of the Company to retain all earnings to finance operations and future growth.



The following table reflects the
activity under the SARs plan for the years ended June 30, 2012 and 2011 and the SARs outstanding at the end of the years:



|                               |  | 2012   |         |   | 2011     |  
|------------------------------ |  | ------ | ------- | - | -------- | -
|                               |  |        |         |   | Weighted |  
|                               |  |        |         |   | average  |  
|                               |  |        |         |   | exercise |  
|                               |  | Number |         |   | price    |  
|                               |  |        |         |   |          |  
|Outstanding, beginning of year |  |        | 153,332 |   |          | $
|Granted                        |  |        | 90,000  |   |          |  
|Exercised/cancelled            |  |        | (63,332 | ) |          |  
|                               |  |        |         |   |          |  
|Outstanding, end of year       |  |        | 180,000 |   |          |  
|                               |  |        |         |   |          |  
|Exercisable, end of year       |  |        | 116,666 |   |          | $



| | 10. | Deferred revenue:
| | --- | -----------------



Deferred revenue consists of the
unamortized portion of the initial license fees under the terms of licensing agreements. These initial license fees are non-refundable
and are deferred and recognized as revenue over the term of the related collaboration. As at June 30, 2012, deferred revenue of
$1,938,123 (2011 - $2,425,794; 2010 - $3,174,825) is related to an out-licensing agreement for nimotuzumab dated July 25, 2006.
The revenue recognized for the year ended June 30, 2012 was $487,671 (2011 - $749,031). As a result of a revision to the estimated
period of the collaboration in fiscal 2012, the revenue recognition period was extended an additional two years to July 2017.



27







|ym biosciences inc.                                       
|----------------------------------------------------------
|Notes to the Consolidated Financial Statements (continued)
|(Expressed in Canadian dollars, unless otherwise noted)   
|                                                          
|Years ended June 30, 2012 and 2011                        
|                                                          



| | 10. | Deferred revenue (continued):
| | --- | -----------------------------



Under the terms of the licensing
agreements, the Company continues to be involved in the development of its products and is not required to fund any development
in the licensed territories. Initial license fee revenue is non-refundable and is deferred and recognized as revenue over the term
of the related collaboration. The agreements also entitle the Company to receive milestone payments on the occurrence of regulatory
approval and royalties on the commercial sale of the developed product.



| | 11. | Income taxes:
| | --- | -------------



| | (a) | Income tax expense:
| | --- | -------------------



|                                                  |  | 2012 |   |  | 2011 |  
|------------------------------------------------- |  | ---- | - |  | ---- | -
|                                                  |  |      |   |  |      |  
|Current tax expense:                              |  |      |   |  |      |  
|Current period                                    |  | $    | – |  |      | $
|Adjustment for prior periods                      |  |      | – |  |      |  
|                                                  |  |      | – |  |      |  
|                                                  |  |      |   |  |      |  
|Deferred tax expense:                             |  |      |   |  |      |  
|Origination and reversal of temporary differences |  |      | – |  |      |  
|Reduction in tax rate                             |  |      | – |  |      |  
|                                                  |  |      | – |  |      |  
|                                                  |  |      |   |  |      |  
|Total tax expense                                 |  | $    | – |  |      | $



| | (b) | Tax recognized in equity:
| | --- | -------------------------



The Company did not recognize
any deferred tax recovery related to share issue costs of $5,189,093 (2011 - $3,707,151) charged directly to deficit as management
does not believe that it is more probable than not that the Company can realize its deferred tax assets. The share issue costs
are included in the amount of unrecognized deductible temporary differences shown in note 11(e).



28







|ym biosciences inc.                                       
|----------------------------------------------------------
|Notes to the Consolidated Financial Statements (continued)
|(Expressed in Canadian dollars, unless otherwise noted)   
|                                                          
|Years ended June 30, 2012 and 2011                        
|                                                          



| | 11. | Income taxes (continued):
| | --- | -------------------------



| | (c) | Reconciliation of effective tax rate:
| | --- | -------------------------------------



|                                                                   |  | 2012 |        |    | 2011 |  
|------------------------------------------------------------------ |  | ---- | ------ | -- | ---- | -
|                                                                   |  |      |        |    |      |  
|Loss for the year                                                  |  |      |        |    |      | $
|Total tax expense                                                  |  |      |        |    |      |  
|                                                                   |  |      |        |    |      |  
|Loss excluding tax                                                 |  |      |        |    |      | $
|                                                                   |  |      |        |    |      |  
|Income tax expense calculated at average:                          |  |      |        |    |      |  
|Canadian income tax rates                                          |  |      | 27.26  | %  |      | $
|Tax effect of changes in rates                                     |  |      | 10.11  | %  |      |  
|Differences in rates due to subsidiaries in foreign  jurisdictions |  |      | 5.94   | %  |      |  
|Other non-deductible items                                         |  |      | 13.98  | %  |      |  
|Other adjustments                                                  |  |      | 5.94   | %  |      |  
|Change in unrecognized temporary differences                       |  |      | (63.23 | )% |      |  
|                                                                   |  |      |        |    |      |  
|                                                                   |  |      | 0.00   | %  |      | $



29







|ym biosciences inc.                                       
|----------------------------------------------------------
|Notes to the Consolidated Financial Statements (continued)
|(Expressed in Canadian dollars, unless otherwise noted)   
|                                                          
|Years ended June 30, 2012 and 2011                        
|                                                          



| | 11. | Income taxes (continued):
| | --- | -------------------------



| | (d) | Tax losses:
| | --- | -----------



Unused tax losses for which
no deferred tax asset has been recognized (as recovery is not currently probable).



|             |  |        |            |  | United |   |            |           | 
|------------ |  | ------ | ---------- |  | ------ | - | ---------- | --------- | 
|             |  | Canada |            |  | States |   |            | Australia | 
|             |  |        |            |  |        |   |            |           | 
|2015         |  | $      | 5,466,000  |  |        | $ | –          |           | 
|2019         |  |        | –          |  |        |   | 1,000      |           | 
|2020         |  |        | –          |  |        |   | 28,000     |           | 
|2021         |  |        | –          |  |        |   | 84,000     |           | 
|2022         |  |        | –          |  |        |   | 2,600,000  |           | 
|2023         |  |        | –          |  |        |   | 4,603,000  |           | 
|2024         |  |        | –          |  |        |   | 3,040,000  |           | 
|2025         |  |        | –          |  |        |   | 3,143,000  |           | 
|2026         |  |        | 13,286,000 |  |        |   | 43,500,000 |           | 
|2027         |  |        | 10,200,000 |  |        |   | 4,987,000  |           | 
|2028         |  |        | 16,234,000 |  |        |   | 2,634,000  |           | 
|2029         |  |        | 13,262,000 |  |        |   | 1,204,000  |           | 
|2030         |  |        | 15,290,000 |  |        |   | 852,000    |           | 
|2031         |  |        | 11,079,000 |  |        |   | 1,199,000  |           | 
|2032         |  |        | 2,156,000  |  |        |   | 2,308,000  |           | 
|Indefinitely |  |        | –          |  |        |   | –          |           | 
|             |  |        |            |  |        |   |            |           | 
|             |  | $      | 86,973,000 |  |        | $ | 70,183,000 |           | 



Tax losses were recognized to
the extent required to offset the future reversal of the deductible temporary difference of $2,630,000 (2011 - $7,138,000) related
to acquired technologies. No deferred tax asset was recognized for tax losses aggregating $251,125,000 (2011 - $240,172,000). In
addition, the Company had capital losses at December 31, 2012 of approximately $1,048,000 (2011 - $1,048,000) in respect of which
no deferred tax asset has been recognized. Deferred tax assets are recognized where it is probable that future taxable profit will
be available to utilize the losses.



30







|ym biosciences inc.                                       
|----------------------------------------------------------
|Notes to the Consolidated Financial Statements (continued)
|(Expressed in Canadian dollars, unless otherwise noted)   
|                                                          
|Years ended June 30, 2012 and 2011                        
|                                                          



| | 11. | Income taxes (continued):
| | --- | -------------------------



| | (e) | Unrecognized temporary differences:
| | --- | -----------------------------------



Deferred tax assets have not
been recognized in respect of the following items:



|                                 |  | 2012 |             |  | 2011 |  
|-------------------------------- |  | ---- | ----------- |  | ---- | -
|                                 |  |      |             |  |      |  
|Deductible temporary differences |  | $    | 68,494,419  |  |      | $
|Non-capital tax losses           |  |      | 251,125,276 |  |      |  
|                                 |  |      |             |  |      |  
|                                 |  | $    | 319,619,695 |  |      | $



The non-capital tax losses
in Canada and the United States expire between 2015 and 2032 whereas those in Australia do not expire (see note 11(d) above). The
deductible temporary differences do not expire under current tax legislation. Deferred tax assets have not been recognized in respect
of these items because it is not probable that future taxable profit will be available against which the Company can utilize the
benefits therefrom.



| | (f) | Recognized deferred tax assets and liabilities:
| | --- | -----------------------------------------------



Deferred tax assets and liabilities
are attributable to the following:



|                       |  | 2012 |          |   | 2011 |  
|---------------------- |  | ---- | -------- | - | ---- | -
|                       |  |      |          |   |      |  
|Tax loss carryforwards |  | $    | (788,905 | ) |      | $
|Acquired technologies  |  |      | 788,905  |   |      |  
|                       |  |      |          |   |      |  
|                       |  | $    | –        |   |      | $



31







|ym biosciences inc.                                       
|----------------------------------------------------------
|Notes to the Consolidated Financial Statements (continued)
|(Expressed in Canadian dollars, unless otherwise noted)   
|                                                          
|Years ended June 30, 2012 and 2011                        
|                                                          



| | 11. | Income taxes (continued):
| | --- | -------------------------



| | (g) | Unused investment tax credits:
| | --- | ------------------------------



The Company performs certain
qualified research and development activities that result in investment tax credits ("ITCs") under applicable Canadian
and U.S. tax laws. The ITCs can be used to offset future Canadian and United States federal taxes payable. The Company has not
recognized a receivable in respect of its unused ITCs as there is no reasonable assurance that the ITCs can be utilized prior to
their expiration. Canadian and U.S. federal ITCs expire as follows:



|     |  |        |           |  | United |  
|---- |  | ------ | --------- |  | ------ | -
|     |  | Canada |           |  | States |  
|     |  |        |           |  |        |  
|2019 |  | $      | –         |  |        | $
|2020 |  |        | 6,000     |  |        |  
|2021 |  |        | 257,000   |  |        |  
|2022 |  |        | 426,000   |  |        |  
|2023 |  |        | 354,000   |  |        |  
|2024 |  |        | 301,000   |  |        |  
|2025 |  |        | 423,000   |  |        |  
|2026 |  |        | 1,060,000 |  |        |  
|2027 |  |        | 1,049,000 |  |        |  
|2028 |  |        | 926,000   |  |        |  
|2029 |  |        | 994,000   |  |        |  
|2030 |  |        | 879,000   |  |        |  
|2031 |  |        | 849,000   |  |        |  
|2032 |  |        | 392,000   |  |        |  
|     |  |        |           |  |        |  
|     |  | $      | 7,916,000 |  |        | $



In addition, the Company had provincial
tax credits available of approximately $705,000 (2011 - $661,000), which can only be used to offset future provincial taxes payable,
in respect of which no receivable has been recognized.



32







|ym biosciences inc.                                       
|----------------------------------------------------------
|Notes to the Consolidated Financial Statements (continued)
|(Expressed in Canadian dollars, unless otherwise noted)   
|                                                          
|Years ended June 30, 2012 and 2011                        
|                                                          



| | 12. | Licensing and product development:
| | --- | ----------------------------------



Components of licensing and product
development expenses for the years ended June 30, 2012 and 2011 were as follows:



|                                                                  |  | 2012 |            |  | 2011 |  
|----------------------------------------------------------------- |  | ---- | ---------- |  | ---- | -
|                                                                  |  |      |            |  |      |  
|Licensing and product development costs, excluding the undernoted |  | $    | 16,837,585 |  |      | $
|Salaries, bonuses and fees                                        |  |      | 4,329,933  |  |      |  
|Share-based compensation                                          |  |      | 963,969    |  |      |  
|Depreciation of property and equipment                            |  |      | 4,335      |  |      |  
|Amortization of intangible  assets                                |  |      | 4,508,016  |  |      |  
|                                                                  |  |      |            |  |      |  
|                                                                  |  | $    | 26,643,838 |  |      | $



Annual licensing and product
development expenses may vary due to the timing of costs for manufacturing, initiating and completing pre-clinical and clinical
trials, granting of stock options and recognizing government assistance.



| | 13. | General and administrative expenses:
| | --- | ------------------------------------



Components of general and administrative
expenses for the years ended June 30, 2012 and 2011 were as follows:



|                                                            |  | 2012 |           |  | 2011 |  
|----------------------------------------------------------- |  | ---- | --------- |  | ---- | -
|                                                            |  |      |           |  |      |  
|General and administrative costs, excluding  the undernoted |  | $    | 3,536,209 |  |      | $
|Salaries, bonuses and fees                                  |  |      | 1,311,086 |  |      |  
|Share-based compensation                                    |  |      | 1,274,813 |  |      |  
|Depreciation of property and equipment                      |  |      | 53,024    |  |      |  
|                                                            |  |      |           |  |      |  
|                                                            |  | $    | 6,175,132 |  |      | $



33







|ym biosciences inc.                                       
|----------------------------------------------------------
|Notes to the Consolidated Financial Statements (continued)
|(Expressed in Canadian dollars, unless otherwise noted)   
|                                                          
|Years ended June 30, 2012 and 2011                        
|                                                          



| | 14. | Finance income and finance costs:
| | --- | ---------------------------------



Components of finance income for
the years ended June 30, 2012 and 2011 were as follows:



|                               |  | 2012 |            |  | 2011 |  
|------------------------------ |  | ---- | ---------- |  | ---- | -
|                               |  |      |            |  |      |  
|Interest income                |  | $    | 716,799    |  |      | $
|Gain on short-term deposits    |  |      | –          |  |      |  
|Net foreign currency gain      |  |      | 3,459,126  |  |      |  
|Warrant revaluation adjustment |  |      | 7,255,641  |  |      |  
|                               |  |      |            |  |      |  
|Finance income                 |  | $    | 11,431,566 |  |      | $



Components of finance costs
for the years ended June 30, 2012 and 2011 were as follows:



|                               |  | 2012 |   |  | 2011 |  
|------------------------------ |  | ---- | - |  | ---- | -
|                               |  |      |   |  |      |  
|Net foreign currency loss      |  | $    | – |  |      | $
|Warrant revaluation adjustment |  |      | – |  |      |  
|                               |  |      |   |  |      |  
|Finance costs                  |  | $    | – |  |      | $



| | 15. | Commitments:
| | --- | ------------



The Company has entered into various
contracts for clinical, preclinical and other studies, none of which individually exceeds $1,000,000, totalling $11,046,952, of
which $6,078,851 has been incurred as at June 30, 2012 and the remaining $4,968,101 has yet to be incurred. Any early termination
penalties cannot exceed the amount of the contract commitment.



As at June 30, 2012, the approximate
future minimum rental payments relating to operating leases for premises are as follows:



|                      |  | 2012 |        |  | 2011 |  
|--------------------- |  | ---- | ------ |  | ---- | -
|                      |  |      |        |  |      |  
|Less than 1 year      |  | $    | 46,397 |  |      | $
|Between 1 and 5 years |  |      | –      |  |      |  
|                      |  |      |        |  |      |  
|                      |  | $    | 46,397 |  |      | $



34







|ym biosciences inc.                                       
|----------------------------------------------------------
|Notes to the Consolidated Financial Statements (continued)
|(Expressed in Canadian dollars, unless otherwise noted)   
|                                                          
|Years ended June 30, 2012 and 2011                        
|                                                          



| | 16. | Related party transactions:
| | --- | ---------------------------



The key management personnel of
the Company are the Directors, the President and Chief Executive Officer, the Chief Medical Officer and all the Vice-Presidents.



Compensation for key management
personnel of the Company for the years ended June 30, 2012 and 2011 was as follows:



|                             |  | 2012 |           |  | 2011 |  
|---------------------------- |  | ---- | --------- |  | ---- | -
|                             |  |      |           |  |      |  
|Short-term employee benefits |  | $    | 2,782,450 |  |      | $
|Termination benefits         |  |      | 290,222   |  |      |  
|Share-based compensation     |  |      | 1,330,602 |  |      |  
|                             |  |      |           |  |      |  
|                             |  | $    | 4,403,274 |  |      | $



Key management personnel participate
in the stock option plan and executive officers participate in the Company's health plan. Directors receive annual and meeting
fees for their services. As at June 30, 2012, the key management personnel control less than 1% of the voting shares of the Company.



Occasionally, directors will provide
assistance to management on a consulting basis to evaluate new opportunities or provide guidance for drug development activities.
The fees incurred during the year ended June 30, 2012 totalled $125,122 (2011 - $91,513). Amounts due to related parties, including
amounts due to key management personnel, at year end are unsecured, interest free and settlement occurs in cash. There have been
no guarantees provided or received for any related party receivables or payables.



| | 17. | Financial instruments:
| | --- | ----------------------



| | (a) | Financial assets and liabilities:
| | --- | ---------------------------------



The Company has determined the
estimated fair values of its financial instruments based on appropriate valuation methodologies; however, considerable judgment
is required to develop these estimates. The carrying values of current financial assets and liabilities approximate their fair
values due to their relatively short periods to maturity.





35









|ym biosciences inc.                                       
|----------------------------------------------------------
|Notes to the Consolidated Financial Statements (continued)
|(Expressed in Canadian dollars, unless otherwise noted)   
|                                                          
|Years ended June 30, 2012 and 2011                        
|                                                          



| | 17. | Financial instruments (continued):
| | --- | ----------------------------------



| | (b) | Risks arising from financial instruments and risk management:
| | --- | -------------------------------------------------------------



The Company's activities expose
it to a variety of financial risks: market risk (including foreign exchange and interest rate risks), credit risk and liquidity
risk. Risk management is the responsibility of the Company, which identifies, evaluates and, where appropriate, mitigates financial
risks.



| | (i) | Market risk:
| | --- | ------------



| | (a) | Foreign exchange risk:
| | --- | ----------------------



The Company operates in Canada,
the United States and Australia and has relationships with entities in other countries. Foreign exchange risk arises because the
cost of transactions denominated in foreign currencies may vary due to changes in exchange rates.



Balances in foreign currencies
at June 30, 2012 were:



|                                                  |  | U.S.    |            |   | Australian |  
|------------------------------------------------- |  | ------- | ---------- | - | ---------- | -
|                                                  |  | dollars |            |   | dollars    |  
|                                                  |  |         |            |   |            |  
|Cash and cash equivalents and short-term deposits |  | $       | 45,729,327 |   |            | $
|Accounts receivable                               |  |         | 30,268     |   |            |  
|Accounts payable and accrued liabilities          |  |         | (1,622,524 | ) |            |  
|                                                  |  |         |            |   |            |  
|                                                  |  | $       | 44,137,071 |   |            | $



Based on the balances above, a
1% change in the foreign exchange rate for the U.S. dollar or the Australian dollar would have a net impact of $440,882 on the
year-end balances.



36







|ym biosciences inc.                                       
|----------------------------------------------------------
|Notes to the Consolidated Financial Statements (continued)
|(Expressed in Canadian dollars, unless otherwise noted)   
|                                                          
|Years ended June 30, 2012 and 2011                        
|                                                          



| | 17. | Financial instruments (continued):
| | --- | ----------------------------------



| | (b) | Interest rate risk:
| | --- | -------------------



The Company is exposed to interest
rate risk to the extent that short-term deposits are at a fixed rate of interest and their market value can vary with the change
in market interest rates. The Company's maximum exposure to interest rate risk is based on the effective interest rate and the
current carrying value of these assets. The Company monitors market interest rates and mitigates against interest rate risk by
not investing in deposits longer than 12 months.



There is a risk that future cash
flows from invested cash, cash equivalents and short-term deposits will vary as the market interest rates fluctuate because these
investments earn interest at market rates. Based on the June 30, 2012 balance of approximately $132.45 million, a variation of
100 basis points in the market interest rate could affect the consolidated financial statements of loss and comprehensive loss
by approximately $1.324 million. For the year ended June 30, 2012, the Company recorded interest income of $717 thousand (2011
- $469 thousand), in relation to these assets.



| | (ii) | Credit risk:
| | ---- | ------------



The Company limits its exposure
to credit risk by investing only in liquid debt securities with a strong credit rating issued by Canadian Schedule I banks. Accounts
receivable are subject to normal credit risk. The maximum exposure to credit risk is equal to the carrying value of the accounts
receivable. The Company regularly assesses the accounts receivable and takes action to collect the amounts or provide adequate
reserves against doubtful accounts. The Company currently has no reserve for doubtful accounts as there have been no bad debts
to date.



| | (iii) | Liquidity risk:
| | ----- | ---------------



Liquidity risk is the risk that
the current financial obligations exceed the cash available to satisfy those obligations at any point in time. The Company's objective
in managing liquidity risk is to maintain sufficient readily available cash in order to meet its liquidity requirements. The Company
achieves this by maintaining sufficient cash and cash equivalents.



37







|ym biosciences inc.                                       
|----------------------------------------------------------
|Notes to the Consolidated Financial Statements (continued)
|(Expressed in Canadian dollars, unless otherwise noted)   
|                                                          
|Years ended June 30, 2012 and 2011                        
|                                                          



| | 17. | Financial instruments (continued):
| | --- | ----------------------------------



| | (c) | Fair value of financial instruments:
| | --- | ------------------------------------



The Company measures fair value
using the following fair value hierarchy that reflects the significance of the inputs used in making the measurements:



| | · | Level 1 - quoted prices (unadjusted) in active markets for an identical instrument;
| | - | -----------------------------------------------------------------------------------

| | · | Level 2 - inputs other than quoted prices included in Level 1 that are observable for the asset
or liability either directly (i.e., as prices) or indirectly (i.e., derived from prices); and
| | - | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | · | Level 3 - inputs for the asset or liability that are not based on observable market data (unobservable
inputs).
| | - | ---------------------------------------------------------------------------------------------------------------



As at June 30, 2012, June 30,
2011 and July 1, 2010, all of the Company's financial instruments that are carried at fair value have been classified as Level
2 within the fair value hierarchy.



| | (d) | Capital management:
| | --- | -------------------



The Company's primary objective
when managing capital is to ensure that it has sufficient cash resources to fund its development and commercialization activities
and to maintain its ongoing operations. To secure the additional capital necessary to pursue these plans, the Company may attempt
to raise additional funds through the issuance of equity or by securing strategic partners.



The Company includes cash and
cash equivalents and short-term deposits in the definition of capital.



The Company is not subject to
externally imposed capital requirements, except as described in note 4 regarding restricted cash and there has been no change
with respect to the overall capital management strategy during the years ended June 30, 2012 and 2011.



38







|ym biosciences inc.                                       
|----------------------------------------------------------
|Notes to the Consolidated Financial Statements (continued)
|(Expressed in Canadian dollars, unless otherwise noted)   
|                                                          
|Years ended June 30, 2012 and 2011                        
|                                                          



| | 18. | Transition to IFRS:
| | --- | -------------------



These are the Company's first
annual consolidated financial statements prepared in accordance with IFRS. The accounting policies set out in note 3 have been
applied in preparing the consolidated financial statements for the years ended June 30, 2012 and 2011, and in the preparation of
the opening IFRS statement of financial position as at July 1, 2010 (the Company's date of transition) and as at June 30, 2011.



Elected exemptions from full retrospective
application:



IFRS 1 requires first-time
adopters to retrospectively apply all effective IFRS as of the reporting date. However, it also provides for certain optional exemptions
and certain mandatory exceptions for first-time IFRS adopters. In preparing these consolidated financial statements in accordance
with IFRS 1, the Company has applied the mandatory exceptions of IFRS. The Company has also applied the following optional
exemptions from full retrospective application of IFRS to its opening statement of financial position as at July 1, 2010:



Share-based payment transactions:



The Company elected to apply the
exemption provided under IFRS 1 and only applied IFRS 2, Share-based Payments, to equity instruments granted after
November 7, 2002 that had not vested by the transition date.



Business combinations:



The Company has applied the business
combination exemption in IFRS 1 to not apply IFRS 3, Business Combinations ("IFRS 3"), retrospectively
to past business combinations. Accordingly, the Company has not restated business combinations that took place prior to the transition
date.



39







|ym biosciences inc.                                       
|----------------------------------------------------------
|Notes to the Consolidated Financial Statements (continued)
|(Expressed in Canadian dollars, unless otherwise noted)   
|                                                          
|Years ended June 30, 2012 and 2011                        
|                                                          



| | 18. | Transition to IFRS (continued):
| | --- | -------------------------------



Consolidated and separate financial
statements:



In accordance with IFRS 1, if
a company elects to apply IFRS 3 prospectively, IAS 27, Consolidated and Separate Financial Statements("IAS 27"),
as amended in 2008 must also be applied prospectively. As the Company elected to apply IFRS 3 prospectively, the Company has also
elected to apply lAS 27 prospectively.



In preparing its opening IFRS
consolidated statement of financial position, in accordance with IFRS 1, the Company has adjusted amounts reported previously
in the consolidated financial statements prepared in accordance with Canadian GAAP. An explanation of how the transition from Canadian
GAAP to IFRS has affected the Company's financial position and financial performance is set out in the following tables and the
notes that accompany the tables. The transition from Canadian GAAP to IFRS has not had a material impact on the consolidated statements
of cash flows. The reconciling items between Canadian GAAP and IFRS presentation have no net effect on the cash flows generated.



40







|ym biosciences inc.                                       
|----------------------------------------------------------
|Notes to the Consolidated Financial Statements (continued)
|(Expressed in Canadian dollars, unless otherwise noted)   
|                                                          
|Years ended June 30, 2012 and 2011                        
|                                                          



| | 18. | Transition to IFRS (continued):
| | --- | -------------------------------



The July 1, 2010 Canadian GAAP
consolidated financial position and equity have been reconciled to IFRS as follows:



|                              |  |      |           |  |          |   |              | Effect of  |  |   |            |  
|----------------------------- |  | ---- | --------- |  | -------- | - | ------------ | ---------- |  | - | ---------- | -
|                              |  |      |           |  | Canadian |   |              | transition |  |   |            |  
|                              |  | Note |           |  | GAAP     |   |              | to IFRS    |  |   | IFRS       |  
|                              |  |      |           |  |          |   |              |            |  |   |            |  
|Assets                        |  |      |           |  |          |   |              |            |  |   |            |  
|                              |  |      |           |  |          |   |              |            |  |   |            |  
|Current assets:               |  |      |           |  |          |   |              |            |  |   |            |  
|Cash and cash equivalents     |  |      |           |  |          | $ | 19,460,141   |            |  | $ | –          |  
|Short-term deposits           |  |      |           |  |          |   | 26,184,991   |            |  |   | –          |  
|Accounts receivable           |  |      |           |  |          |   | 161,184      |            |  |   | –          |  
|Prepaid expenses              |  |      |           |  |          |   | 237,962      |            |  |   | –          |  
|Total current assets          |  |      |           |  |          |   | 46,044,278   |            |  |   | –          |  
|                              |  |      |           |  |          |   |              |            |  |   |            |  
|Non-current assets:           |  |      |           |  |          |   |              |            |  |   |            |  
|Property and equipment        |  |      |           |  |          |   | 84,775       |            |  |   | –          |  
|Intangible assets             |  |      |           |  |          |   | 11,645,714   |            |  |   | –          |  
|Total non-current assets      |  |      |           |  |          |   | 11,730,489   |            |  |   | –          |  
|                              |  |      |           |  |          |   |              |            |  |   |            |  
|Total assets                  |  |      |           |  |          | $ | 57,774,767   |            |  | $ | –          |  
|                              |  |      |           |  |          |   |              |            |  |   |            |  
|Liabilities and Equity        |  |      |           |  |          |   |              |            |  |   |            |  
|                              |  |      |           |  |          |   |              |            |  |   |            |  
|Current liabilities:          |  |      |           |  |          |   |              |            |  |   |            |  
|Accounts payable              |  |      |           |  |          | $ | 699,277      |            |  | $ | –          |  
|Accrued liabilities           |  |      |           |  |          |   | 2,085,824    |            |  |   | –          |  
|Share purchase warrants       |  |      | (i)       |  |          |   | –            |            |  |   | 6,358,480  |  
|Deferred revenue              |  |      |           |  |          |   | 1,523,916    |            |  |   | –          |  
|Total current liabilities     |  |      |           |  |          |   | 4,309,017    |            |  |   | 6,358,480  |  
|                              |  |      |           |  |          |   |              |            |  |   |            |  
|Non-current liabilities:      |  |      |           |  |          |   |              |            |  |   |            |  
|Deferred revenue              |  |      |           |  |          |   | 1,650,909    |            |  |   | –          |  
|Total non-current liabilities |  |      |           |  |          |   | 1,650,909    |            |  |   | –          |  
|                              |  |      |           |  |          |   |              |            |  |   |            |  
|Equity:                       |  |      |           |  |          |   |              |            |  |   |            |  
|Share capital                 |  |      |           |  |          |   | 203,498,239  |            |  |   | –          |  
|Share purchase warrants       |  |      | (i)       |  |          |   | 1,473,246    |            |  |   | (1,473,246 | )
|Contributed surplus           |  |      | (ii)      |  |          |   | 14,088,671   |            |  |   | 143,682    |  
|Deficit                       |  |      | (i), (ii) |  |          |   | (167,245,315 | )          |  |   | (5,028,916 | )
|Total equity                  |  |      |           |  |          |   | 51,814,841   |            |  |   | (6,358,480 | )
|                              |  |      |           |  |          |   |              |            |  |   |            |  
|Total liabilities and equity  |  |      |           |  |          | $ | 57,774,767   |            |  | $ | –          |  



41







|ym biosciences inc.                                       
|----------------------------------------------------------
|Notes to the Consolidated Financial Statements (continued)
|(Expressed in Canadian dollars, unless otherwise noted)   
|                                                          
|Years ended June 30, 2012 and 2011                        
|                                                          



| | 18. | Transition to IFRS (continued):
| | --- | -------------------------------



The June 30, 2011 Canadian GAAP
consolidated financial position and equity have been reconciled to IFRS as follows:



|                              |  |      |                  |  |          |   |              | Effect of  |  |   |             |  
|----------------------------- |  | ---- | ---------------- |  | -------- | - | ------------ | ---------- |  | - | ----------- | -
|                              |  |      |                  |  | Canadian |   |              | transition |  |   |             |  
|                              |  | Note |                  |  | GAAP     |   |              | to IFRS    |  |   | IFRS        |  
|                              |  |      |                  |  |          |   |              |            |  |   |             |  
|Assets                        |  |      |                  |  |          |   |              |            |  |   |             |  
|                              |  |      |                  |  |          |   |              |            |  |   |             |  
|Current assets:               |  |      |                  |  |          |   |              |            |  |   |             |  
|Cash and cash equivalents     |  |      |                  |  |          | $ | 32,046,630   |            |  | $ | –           |  
|Short-term deposits           |  |      |                  |  |          |   | 47,611,922   |            |  |   | –           |  
|Accounts receivable           |  |      |                  |  |          |   | 205,900      |            |  |   | –           |  
|Prepaid expenses              |  |      |                  |  |          |   | 731,676      |            |  |   | –           |  
|Total current assets          |  |      |                  |  |          |   | 80,596,128   |            |  |   | –           |  
|                              |  |      |                  |  |          |   |              |            |  |   |             |  
|Non-current assets:           |  |      |                  |  |          |   |              |            |  |   |             |  
|Property and equipment        |  |      |                  |  |          |   | 91,320       |            |  |   | –           |  
|Intangible assets             |  |      |                  |  |          |   | 7,137,698    |            |  |   | –           |  
|Total non-current assets      |  |      |                  |  |          |   | 7,229,018    |            |  |   | –           |  
|                              |  |      |                  |  |          |   |              |            |  |   |             |  
|Total assets                  |  |      |                  |  |          | $ | 87,825,146   |            |  | $ | –           |  
|                              |  |      |                  |  |          |   |              |            |  |   |             |  
|Liabilities and Equity        |  |      |                  |  |          |   |              |            |  |   |             |  
|                              |  |      |                  |  |          |   |              |            |  |   |             |  
|Current liabilities:          |  |      |                  |  |          |   |              |            |  |   |             |  
|Accounts payable              |  |      |                  |  |          | $ | 1,718,893    |            |  | $ | –           |  
|Accrued liabilities           |  |      | (iii)            |  |          |   | 2,532,298    |            |  |   | 120,213     |  
|Share purchase warrants       |  |      | (i)              |  |          |   | –            |            |  |   | 14,476,681  |  
|Deferred revenue              |  |      |                  |  |          |   | 594,072      |            |  |   | –           |  
|Total current liabilities     |  |      |                  |  |          |   | 4,845,263    |            |  |   | 14,596,894  |  
|                              |  |      |                  |  |          |   |              |            |  |   |             |  
|Non-current liabilities:      |  |      |                  |  |          |   |              |            |  |   |             |  
|Deferred revenue              |  |      |                  |  |          |   | 1,831,722    |            |  |   | –           |  
|Total non-current liabilities |  |      |                  |  |          |   | 1,831,722    |            |  |   | –           |  
|                              |  |      |                  |  |          |   |              |            |  |   |             |  
|Equity:                       |  |      |                  |  |          |   |              |            |  |   |             |  
|Share capital                 |  |      | (i)              |  |          |   | 263,399,692  |            |  |   | 1,148,951   |  
|Share purchase warrants       |  |      | (i)              |  |          |   | 1,329,235    |            |  |   | (1,329,235  | )
|Contributed surplus           |  |      | (ii)             |  |          |   | 14,855,788   |            |  |   | 288,274     |  
|Deficit                       |  |      | (i), (ii), (iii) |  |          |   | (198,436,554 | )          |  |   | (14,704,884 | )
|Total equity                  |  |      |                  |  |          |   | 81,148,161   |            |  |   | (14,596,894 | )
|                              |  |      |                  |  |          |   |              |            |  |   |             |  
|Total liabilities and equity  |  |      |                  |  |          | $ | 87,825,146   |            |  | $ | –           |  



42







|ym biosciences inc.                                       
|----------------------------------------------------------
|Notes to the Consolidated Financial Statements (continued)
|(Expressed in Canadian dollars, unless otherwise noted)   
|                                                          
|Years ended June 30, 2012 and 2011                        
|                                                          



| | 18. | Transition to IFRS (continued):
| | --- | -------------------------------



Canadian GAAP consolidated statement
of operations and comprehensive loss for the year ended June 30, 2011 has been reconciled to IFRS as follows:





|                                    |  |      |                                                                                                                        |  |          |   |             | Effect of   |  |   | Effect of        |   |  |      |            |   |                 
|----------------------------------- |  | ---- | ---------------------------------------------------------------------------------------------------------------------- |  | -------- | - | ----------- | ----------- |  | - | ---------------- | - |  | ---- | ---------- | - | ----------------
|                                    |  |      |                                                                                                                        |  |          |   |             | transition  |  |   | transition       |   |  |      |            |   |                 
|                                    |  |      |                                                                                                                        |  | Canadian |   |             | to IFRS     |  |   | to IFRS          |   |  |      |            |   |                 
|Canadian GAAP description           |  | Note |                                                                                                                        |  | GAAP     |   |             | measurement |  |   | reclassification |   |  | IFRS |            |   | IFRS description
|Revenue:                            |  |      |                                                                                                                        |  |          |   |             |             |  |   |                  |   |  |      |            |   |                 
|Out-licensing                       |  |      |                                                                                                                        |  |          | $ | 1,033,239   |             |  | $ | –                |   |  | $    | –          |   |                 
|Interest
    income                 |  |      | (iv)                                                                                                                   |  |          |   | 469,191     |             |  |   | –                |   |  |      | (469,191   | ) |                 
|                                    |  |      |                                                                                                                        |  |          |   | 1,502,430   |             |  |   | –                |   |  |      | (469,191   | ) |                 
|Expenses:                           |  |      |                                                                                                                        |  |          |   |             |             |  |   |                  |   |  |      |            |   |                 
|Licensing and product               |  |      |                                                                                                                        |  |          |   |             |             |  |   |                  |   |  |      |            |   |                 
|development                         |  |      | (ii),
                                                                                (iii), (viii), (ix)              |  |          |   | 23,249,053  |             |  |   | 120,213          |   |  |      | 452,714    |   |                 
|General
    and administrative      |  |      | (ii),
                                                                                                     (vii), (ix) |  |          |   | 8,341,885   |             |  |   | 144,592          |   |  |      | (746,620   | ) |                 
|                                    |  |      |                                                                                                                        |  |          |   | 31,590,938  |             |  |   | 264,805          |   |  |      | (293,906   | ) |                 
|                                    |  |      |                                                                                                                        |  |          |   |             |             |  |   |                  |   |  |      |            |   |                 
|Loss before the undernoted          |  |      |                                                                                                                        |  |          |   | (30,088,508 | )           |  |   | (264,805         | ) |  |      | (175,285   | ) |                 
|                                    |  |      |                                                                                                                        |  |          |   |             |             |  |   |                  |   |  |      |            |   |                 
|Loss on foreign exchange            |  |      | (iv)
                                                                                (v), (vi)                         |  |          |   | (1,407,760  | )           |  |   | –                |   |  |      | 1,888,074  |   |                 
|Gain on sale of short-term deposits |  |      | (i),
                                                                                (v), (vi)                         |  |          |   | 11,123      |             |  |   | (9,411,163       | ) |  |      | (1,418,883 | ) |                 
|Gain on disposal of property        |  |      |                                                                                                                        |  |          |   |             |             |  |   |                  |   |  |      |            |   |                 
|and equipment                       |  |      | (vii)                                                                                                                  |  |          |   | 13,394      |             |  |   | –                |   |  |      | (13,394    | ) |                 
|Other income                        |  |      | (viii)                                                                                                                 |  |          |   | 280,512     |             |  |   | –                |   |  |      | (280,512   | ) |                 
|                                    |  |      |                                                                                                                        |  |          |   |             |             |  |   |                  |   |  |      |            |   |                 
|Net loss and comprehensive          |  |      |                                                                                                                        |  |          |   |             |             |  |   |                  |   |  |      |            |   |                 
|loss
    for the year               |  |      |                                                                                                                        |  |          | $ | (31,191,239 | )           |  | $ | (9,675,968       | ) |  | $    | –          |   |                 









43







|ym biosciences inc.                                       
|----------------------------------------------------------
|Notes to the Consolidated Financial Statements (continued)
|(Expressed in Canadian dollars, unless otherwise noted)   
|                                                          
|Years ended June 30, 2012 and 2011                        
|                                                          



| | 18. | Transition to IFRS (continued):
| | --- | -------------------------------



Notes to tables:



Measurement differences:



| | (i) | Share purchase warrants:
| | --- | ------------------------



Under Canadian GAAP, the Company
recognized its outstanding shareholder and broker warrants as part of equity; however, under IFRS, such warrants denominated in
a different currency than the Company's functional currency must be classified as a financial liability and measured at fair value,
with changes reflected in profit or loss upon initial recognition and subsequent measurement. This measurement difference has an
effect on deficit and share purchase warrants liability in the consolidated statements of financial position and finance costs
or finance income in the consolidated statement of loss and comprehensive loss in the periods presented.



| | (ii) | Stock options:
| | ---- | --------------



Both Canadian GAAP and IFRS require
the fair value of stock options granted to be expensed over the vesting period. YM stock options generally vest one third immediately
and one third on each of the first and second anniversaries. Under Canadian GAAP, the Company treated each option grant as one
contract, expensed one third of the compensation cost immediately and the remaining compensation cost on a straight-line basis
over 24 months. Under IFRS, the Company is required to treat each tranche with a different vesting date as a separate contract
and, therefore, expenses one third of the compensation cost immediately, one third equally over 12 months and one third equally
over 24 months. This measurement difference has an effect on deficit and contributed surplus in the consolidated statements of
financial position and general and administrative expenses and licensing and product development expense in the consolidated statement
of loss and comprehensive loss for the periods presented.



44







|ym biosciences inc.                                       
|----------------------------------------------------------
|Notes to the Consolidated Financial Statements (continued)
|(Expressed in Canadian dollars, unless otherwise noted)   
|                                                          
|Years ended June 30, 2012 and 2011                        
|                                                          



| | 18. | Transition to IFRS (continued):
| | --- | -------------------------------



| | (iii) | SARs:
| | ----- | -----



Under Canadian GAAP, the Company
used the intrinsic value method to measure the value of SARs. IFRS requires that the SARs be valued using the fair value method.
Thus, under IFRS, the Company uses the Black-Scholes option pricing model to determine the fair value upon initial recognition
and subsequent measurement, with changes reflected in profit or loss. The SARs plan was started in September 2010 so there was
no impact to the opening statement of financial position as at July 1, 2010. This difference has an effect on accrued liabilities
and deficit in the consolidated statements of financial position and licensing and product development expenses in the consolidated
statement of loss and comprehensive loss.



Reclassification differences:



Under Canadian GAAP, the consolidated
statement of loss and comprehensive loss was presented by a combination of function and nature of expenses. The Company elected
to present its items in the consolidated statements of loss and comprehensive loss by function under IFRS. The following reclassifications
were made:



| | (iv) | Interest income was reclassified to finance income.
| | ---- | ---------------------------------------------------



| | (v) | Loss on foreign exchange was reclassified to finance costs.
| | --- | -----------------------------------------------------------



| | (vi) | Gain on sale of short-term deposits was reclassified to finance income.
| | ---- | -----------------------------------------------------------------------



| | (vii) | Gain on disposal of property and equipment was reclassified to general and administrative expenses.
| | ----- | ---------------------------------------------------------------------------------------------------



| | (viii) | Grant received and other income were reclassified to licensing and product development expenses.
| | ------ | ------------------------------------------------------------------------------------------------



| | (ix) | A portion of share-based compensation was reclassified to licensing and product development expenses
from general and administrative expenses.
| | ---- | ----------------------------------------------------------------------------------------------------------------------------------------------





45