UNITED STATESSECURITIES AND EXCHANGE COMMISSION _________________________________________ WASHINGTON, D.C. 20549 FORM 20-F/A (Amendment No. 1) (Mark One) [   ] REGISTRATION STATEMENT PURSUANT TO SECTION 12(b) OR (g) OF THE SECURITIES EXCHANGE ACT OF 1934 OR [ X ] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the fiscal year endedDecember 31 2014 OR [   ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from __________ to __________ OR [   ] SHELL COMPANY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 Date of event requiring this shell company report _____________ Commission file number 000-55103 _________________________________________ PACIFIC THERAPEUTICS LTD.(Exact name of registrant as specified in its charter) N/A(Translation of registrant’s name into English) British Columbia, Canada(Jurisdiction of incorporation or organization) 600-535 Howe Street, Vancouver, British Columbia, Canada V6C 2Z4(Address of principal executive offices) Tel:604-559-8051(Name, Telephone, E-Mail and/or Facsimile Number and Address of Company Contact Person) Securities registered or to be registered pursuant to Section 12(b) of the Act:NONE _______________________________________ Securities registered or to be registered pursuant to Section 12(g) of the Act:


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Title of each class:

   Name of each exchange on which registered:CLASS A COMMON SHARES,

   Canadian Securities ExchangeNO PAR VALUE
 _________________________________________ Securities for which there is a reporting obligation pursuant to Section 15(d) of the Act:NONE Indicate the number of outstanding shares of each of the Company’s classes of capital or common stock as of the close of the period covered by the annual report: 38,976,825 Class A Common Shares, no par value as of December 31, 2014. Indicate by check mark if the registrant is a well-known seasoned Company, as defined in Rule 405 of the Securities Act. YES [   ]   NO [ X ] If this report is an annual or transition report, indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934. YES [   ]   NO [ X ] Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. YES [ X ]   NO [   ] Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site: www.towerwireless.com, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). YES [   ]   NO [ X ] Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, or a non-accelerated filer. See definition of “accelerated filer and large accelerated filer” in Rule 12b-2 in the Exchange Act. (Check one): Large Accelerated Filer

   [   ]

   Accelerated Filer

   [   ]

   Non-Accelerated Filer

   [ X ]
 Indicate by check mark which basis of accounting the registrant has used to prepare the financial statements included in this filing: [   ] U.S. GAAP[ X ] International Financial Reporting Standards as issued by the International Accounting Standards Board[   ] Other If "Other" has been checked in response to the previous question, indicate by check mark which financial statement item the registrant has elected to follow: [   ] Item 17   [ X ] Item 18 If this is an annual report indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act: YES [   ]   NO [ X ]


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Explanatory Note This Amendment No. 1 on Form 20-F/A (this “Amendment No. 1”) to our annual report on Form 20-F for the year ended December 31, 2014, filed with the Securities and Exchange Commission on May 9, 2017 (the “2014 Form 20-F”), is filed to amend and restate the entire 2014 Form 20-F. This Amendment No 1 contains information up to April 30, 2015, the date of the audit report on the financial statements for the year ended December 31, 2014. Pursuant to Rule 12b-15 promulgated under the Securities Exchange Act of 1934, as amended, we have included the entire text of the 2014 Form 20-F in this Amendment No. 1 and new certifications by our chief executive officer and chief financial officer are being filed as exhibits to this Amendment No. 1.


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Table of Contents PagePART I

   1Item 1.

   Identity of Directors, Senior Management and Advisors

   1Item 2.

   Offer Statistics and Expected Timetable

   1Item 3.

   Key Information

   1Item 4.

   Information on the Company

   10Item 4A.

   Unresolved Staff CommentsItem 5.

   Operating and Financial Review

   25Item 6.

   Directors, Senior Management and Employees

   31Item 7.

   Major Shareholders and Related Party Transactions

   39Item 8.

   Financial Information

   40Item 9.

   The Offer and Listing

   40Item 10.

   Additional Information

   42Item 11.

   Quantitative and Qualitative Disclosures about Market Risk

   49Item 12.

   Description of Securities Other Than Equity Securities

   49PART II

   49Item 13.

   Defaults, Dividend Arrearages and Delinquencies

   49Item 14.

   Material Modifications to the Rights of Security Holders and Use of Proceeds

   49Item 15.

   Controls and Procedures

   49Item 16A.

   Audit Committee Financial Experts

   50Item 16B.

   Code of Ethics

   50Item 16C.

   Principal Accountant Fees and Services

   50Item 16D.

   Exemptions from the Listing Standards for Audit Committees

   51Item 16E.

   Purchases of Equity Securities by the Company and Affiliated Purchasers

   51Item 16F.

   Change in Registrant’s Certifying Accountant

   51Item 16G.

   Corporate Governance

   53Item 16H.

   Mine Safety Disclosure

   53PART III

   54Item 17.

   Financial Statements

   54Item 18.

   Financial Statements

   54Item 19.

   Exhibits

   54SIGNATURES

   55


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Part I References in this Annual Report on Form 20-F to “we,” “our” and the “Company” refer to Pacific Therapeutics Ltd . and its predecessor, as applicable, individually and collectively with its subsidiaries as the context requires. Brief Introduction Pacific Therapeutics Ltd. is a British Columbia, Canada corporation, incorporated on September 12, 2005. It is a reporting Company in British Columbia and Ontario, and its shares are listed for trading on the Canadian Securities Exchange (“CSE”). Item 1. Identity of Directors, Senior Management and Advisers Not applicable Item 2. Offer Statistics and Expected Timetable Not applicable Item 3. Key Information A. Selected financial data For the Years Ended December 31, 2014, 2013 and 2012 The following selected information should be read in conjunction with the Company’s financial statements, and notes, filed with this Form 20-F. This information, and all other financial information in this Form 20-F, is stated in Canadian dollars unless otherwise noted. The financial information is presented on the basis of International Financial Reporting Standards as issued by the International Accounting Standards Board. Year ended

   FYE 2014

   FYE 2013

   FYE 2012

   FYE 2011

   FYE 2010(IFRS)

   (IFRS)

   (IFRS)

   (IFRS)

   (IFRS)Net Sales

   $Nil

   $Nil

   $Nil

   $Nil

   $NilNet loss and comprehensive loss

   ($693,645)

   ($740,846)

   ($605,468)

   ($463,768)

   ($318,100)Basic and diluted loss per share

   ($0.02)

   ($0.03)

   ($0.03)

   ($0.03)

   ($0.02)Weighted average shares

   37,830,595

   27,561,948

   21,637,193

   18,172,472

   16,350,054
  Year ended

   FYE 2014

   FYE 2013

   FYE 2012

   FYE 2011

   FYE 2010(IFRS)

   (IFRS)

   (IFRS)

   (IFRS)

   (IFRS)Total assets

   $67,315

   $287,044

   $206,533

   $422,178

   $119,919Net Assets

   ($875,761)

   ($440,144)

   ($430,990)

   $15,762

   ($64,354)Share capital

   $2,760,010

   $2,699,210

   $1,995,716

   $1,765,754

   $1,133,136Contributed surplus

   $289,766

   $123,704

   $206,212

   $162,052

   $136,110Deficit accumulated during the development stage

   ($3,955,537)

   ($3,263,058)

   ($2,662,918)

   ($2,094,115)

   ($1,564,296)Common shares issued and outstanding

   38,976,825

   37,456,825

   22,586,825

   20,989,157

   15,930,452Dividends

   $Nil

   $Nil

   $Nil

   $Nil

   $Nil
 1


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Currency The following table sets out exchange rates, based on the noon buying rates in New York City, for cable transfers in foreign currencies as certified for customs purposes by the Federal Reserve Bank of New York, referred to as the "Noon Buying Rate", for the conversion of dollars to Canadian dollars in effect at the end of the following periods, the average exchange rates during these periods (based on daily Noon Buying Rates) and the range of high and low exchange rates for the periods indicated: Years Ended December 31,2014

   

   2013

   

   2012

   

   2011

   

   2010($/C$)End of period

   0.8620

   

   0.9401

   

   1.0042

   

   0.9835

   

   0.9991High for period

   0.8588

   

   0.9348

   

   0.9600

   

   0.9430

   

   0.9280Low for period

   0.9423

   

   1.0164

   

   1.0299

   

   1.0584

   

   1.0040Average for period

   0.9060

   

   0.9712

   

   1.007

   

   1.0121

   

   0.9714
 On September 5, 2017, the most recent weekly publication of the Noon Buying Rate before the date of this Form 20-F reported that, as of September 1, 2017, the Noon Buying Rate for the conversion of dollars to Canadian dollars was $0.8083 per Canadian dollar. B. Capitalization and indebtedness. Not applicable. C. Reasons for the offer and use of proceeds. Not applicable. D. Forward-Looking Statement and Risk factors. Forward-Looking Statements This Form 20-F and the documents to which we refer you contain forward-looking statements. In addition, from time to time, we or our representatives may make forward-looking statements orally or in writing. We base these forward-looking statements on our expectations and projections about future events, which we derive from the information currently available to us. Such forward-looking statements relate to future events or our future performance. You can identify forward-looking statements by those that are not historical in nature, particularly those that use terminology such as “may,” “will,” “should,” “expects,” “anticipates,” “contemplates,” “estimates,” “believes,” “plans,” “projected,” “predicts,” “potential” or “continue” or the negative of these or similar terms. In evaluating these forward-looking statements, you should consider various factors, including those described in “Risk Factors” below. These and other factors may cause our actual results to differ materially from any forward-looking statement. Forward-looking statements are only predictions. The forward-looking events discussed in this Form 20-F, the documents to which we refer you and other statements made from time to time by us or our representatives, may not occur, and actual events and results may differ materially and are subject to risks, uncertainties and assumptions about us. Risk Factors An investment in the common shares of the Company must be considered highly speculative due to the nature of the Company’s business. The risk and uncertainties below are not the only risks and uncertainties the Company may have. Additional risks and uncertainties not presently known to the Company or that the Company currently considers immaterial may also impair the business, operations and future prospects of the Company and cause the price of the Common Shares to decline. If any of the following risks actually occur, the business of the Company may be harmed and its financial condition and results of operations may suffer significantly. In addition to the risks described elsewhere and the other information in this Form 20-F, the Company notes the following risk factors: Issuer Risk - Risks that are specific to the Company Insufficient Funds to Accomplish the Company's Business Objectives The Company remains under constant working capital pressures. As of December 31, 2014, the Company had a working 2


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capital deficit of $940,251. In the near future, potential revenues cannot support existing and upcoming expenses or other capital requirements. When the current funding has been expended, the Company will require and is planning for additional funding. There is no assurance that this funding will be available when required by the Company and/or available on suitable terms. Furthermore, the Company expects negative operating cash flows for the immediately foreseeable future. Substantial Capital Requirements for Research and Development The Company anticipates that it may make substantial research and development expenditures for clinical trials in the future. As the Company has no operating revenue being generated from its research and development activities, the Company does not expect to generate any revenue in the near future and may have limited ability to expend the capital necessary to undertake or complete future research and development work. There can be no assurance that debt or equity financing will be available or sufficient to meet these requirements or for other corporate purposes or, if debt or equity financing is available, that it will be on terms acceptable to the Company. Moreover, future activities may require the Company to alter its capitalization significantly. If the Company is unable to obtain additional financing, it may be unable to complete the development and commercialization of PTL-202 and PTL-303 or continue its research and development programs. Unanticipated Costs and Delays The Company may be subject to unanticipated costs or delays that would accelerate its need for additional capital or increase the costs of individual clinical trials. If the Company is unable to raise additional capital when required or on acceptable terms, it may have to significantly delay, scale back or discontinue the development and/or commercialization of one or more of its product candidates. The Company may also be required to: seek collaborators for our product candidates at an earlier stage than otherwise would be desirable and on terms that are less favorable than might otherwise be available; orrelinquish or license on unfavorable terms its rights to technologies or product candidates that it otherwise would seek to develop or commercialize itself. Uncertainty of Additional Financing The Company does not have the existing capital resources to fund operations to complete a pivotal bio-availability study of PTL-202 providing information for future development studies. The Company anticipates that it will need to raise additional capital, through private placements or public offerings of its equity or debt securities, in addition to the capital on hand, to complete the long-term development and commercialization of its current product candidates. The inability of the Company to access sufficient additional capital for its operations could have a material adverse effect on the Company’s financial condition, results of operations or prospects. In particular, failure to obtain such financing on a timely basis could cause the Company to miss certain acquisition opportunities and reduce or terminate its business. Dilution As of December 31, 2014, the Company’s sources of cash have been limited primarily to proceeds from the founders, friends and retail investors. It is likely that the Company will enter into more agreements to issue shares of its common stock and warrants and options to purchase shares of common stock. The impact of the issuance of a significant amount of shares of common stock from the exercise of the Company’s outstanding warrants and options could place downward pressure on the market price of the Company’s shares of common stock. The Company cannot be certain that additional funding will be available on acceptable terms, or at all. To the extent that the Company raises additional funds by issuing equity securities, its shareholders may experience significant dilution. Any debt financing, if available, may involve restrictive covenants, such as limitations on the Company’s ability to incur additional indebtedness, limitations on its ability to acquire or license intellectual property rights and other operating restrictions that could adversely impact its ability to conduct business. No History of Sales or Profits The Company does not have a history of earnings or profit, has never had any products available for commercial sale and has not generated any revenue from product sales. The Company does not anticipate that it will generate revenue from the sale of products for the foreseeable future and has not yet submitted any products for approval by regulatory authorities. The Company continues to incur research and development and general and administrative expenses related to its operations. 3


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There is no assurance that in the future the Company will develop revenues, operate profitably or provide a return on investment. Therefore, investors should not invest on the expectation of receiving dividends or any guaranteed return on their investment of any nature. The Company is expected to continue to incur losses for the foreseeable future and expects these losses to increase as it continues research activities and development of its product candidates, seeks regulatory approvals for its product candidates, and acquires rights to additional products for development. If the Company’s product candidates fail in clinical trials or do not gain regulatory approval, or if its product candidates do not achieve market acceptance, the Company may never become profitable. Even if the Company achieves profitability in the future, it may not be able to sustain profitability in subsequent periods. No History of Paying Dividends An increase in the market price of the Company’s common stock, which is uncertain and unpredictable, may be an investor’s sole source of gain from an investment in the Company’s Common Shares. An investment in the Company’s Common Shares may not be appropriate for investors who require dividend income. No dividends have been paid on the Company's Common Shares since inception and there is no assurance that such dividends will be earned or paid in the future. For the foreseeable future, the Company expects to re-invest in its operations all cash flow that might otherwise be available for distribution to shareholders in the form of cash dividends. While the payment of stock dividends is an alternative, there is no assurance that these will be paid in the foreseeable future. The Company does not anticipate paying any dividends on the Shares in the foreseeable future. As a result, capital appreciation, if any, of the Company’s Common Shares will be the shareholder’s sole source of gain for the foreseeable future. Commercializing of Drug Candidates In order to successfully commercialize drugs, the Company must enter into collaborations with partners to develop a capable sales, marketing and distribution infrastructure. The Company intends to enter into partnering, co-promotion and other distribution arrangements to commercialize products in most markets. However, the Company may not be able to enter into collaborations on acceptable terms, if at all, and may face competition in its search for partners with whom to collaborate. If the Company is unable to develop collaborations with one or more partners to perform these functions, it may not be able to successfully commercialize its products, which could cause the Company to cease operations. Dependence on the Success of PTL-202 PTL-202, the Company’s lead product candidate, has been tested in pre-clinical models of lung Fibrosis. These tests indicate that PTL-202 may be an effective drug to treat Pulmonary Fibrosis. PTL-202 was cleared by regulators to begin Phase 1 clinical trials during 2012. This drug/drug interaction trial was concluded in September 2012. In order to market PTL-202, the Company, in conjunction with its collaborators, will have to conduct additional clinical trials, including bioequivelency, Phase 2 proof of principal clinical trials as well as Phase 3 clinical trials, to demonstrate safety and efficacy. The Company has not initiated any Phase 2 or Phase 3 clinical trials with any of its product candidates. If the proposed clinical trials generate safety concerns or demonstrate a lack of efficacy, or competitive products developed by third parties show significant benefit in the indications in which the Company is developing product candidates, any planned clinical trial may be delayed, altered or not initiated and PTL-202 may never receive regulatory approval or be successfully commercialized. The Company’s other product candidate, PTL-303, has only been tested in cellular assays to determine a signal as a possible drug candidate. PTL-303 has not been tested in animals or humans. Even if the Company’s product candidates receive regulatory approval, the Company or its collaborators may not be successful in marketing them for a number of reasons, including the introduction by competitors of more clinically-effective or cost-effective alternatives or failure in the Company or collaborator’s sales and marketing efforts. Any failure to obtain approval of PTL-202 or PTL-303, and successfully commercialize them, would have a material and adverse impact on the Company’s business, which could cause the Company to cease operations. Reliance on the Company’s management Investors will in large part entrust their funds to the directors, management, and other professional advisors in whose judgment investors must depend with only limited information about their specific evaluation of the “sound business reasons” on which any reallocation of funds would be based. The Company's financing and enterprise acquisition/development 4


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policies and practices may be changed at the discretion of the Board of Directors. Persons who are not willing to rely on the Company’s management and/or Directors should not purchase the Company’s Shares. Attraction and Retention of the Company’s Management The Company may not be able to attract or retain qualified management and scientific personnel in the future due to the intense competition for qualified personnel among specialty pharmaceutical, biotechnology, pharmaceutical and other businesses. If the Company is not able to attract and retain the necessary personnel to accomplish its business objectives, the achievement of its development objectives, its ability to raise additional capital and its ability to implement its business strategy may be significantly reduced. In particular, if the Company loses any members of its senior management team, it may not be able to find suitable replacements in a timely fashion, or at all, and the business may be harmed as a result. Use of Contract Personnel From time to time the Company will need to contract additional personnel to continue its expansion. The Company uses scientific, clinical and regulatory advisors extensively to assist in formulating its development and clinical strategies. These advisors are not the Company’s employees and may have commitments to, or consulting or advisory contracts with, other entities that may limit their availability to the Company. In addition, these advisors may have arrangements with other companies to assist those companies in developing products or technologies that may compete with the Company’s. If the Company is unable to contract the correct personnel, it may be unable to implement or complete its product development programs, resulting in the inability to commercialize its product candidates or generate sufficient revenue to continue in business. Dependence on key employees, suppliers or agreements Executive management of the Company's business is primarily provided by the Company's CEO, CFO, and Board of Directors. At this stage of its corporate development, the Company has necessarily limited the establishment of extensive administrative and operating infrastructure. Instead, the Company may rely, for necessary skills, on external adviser/consultants with extensive senior level management experience in such fields as formulation, drug development, pharmaceutical regulations, finance, manufacturing, marketing, law, and investment. The future success of the Company is very dependent upon the ongoing availability and commitment of its directors, officers and advisor consultants, not all of whom are or will be bound by formal contractual employment agreements. The absence of these formal contractual relationships may be considered to represent an area of risk. Marketing and Distribution Risk If the Company is unable to develop its sales and marketing and distribution capability on its own or through collaborations with marketing partners, it will not be successful in commercializing its product candidates. The Company currently does not have a marketing staff nor a sales or distribution organization. The Company does not intend to develop a sales or distribution organization internally. The Company currently does not have marketing, sales or distribution capabilities. The Company has decided to collaborate with third parties that have direct sales forces and established distribution systems, either to augment or substitute in lieu of its own sales force and distribution systems. To the extent that the Company enters into co-promotion or other licensing arrangements, its product revenue is likely to be lower than if the Company directly marketed or sold its products, when and if it has any. In addition, any revenue received will depend in whole or in part upon the efforts of such third parties, which may not be successful and will generally not be within the Company’s control. If the Company is unable to enter into such arrangements on acceptable terms or at all, it may not be able to successfully commercialize its existing and future product candidates. If the Company is not successful in commercializing its existing and future product candidates, either on its own or through collaborations with one or more third parties, future product revenue will suffer and the Company may incur significant additional losses. Industry Risk - Risks faced by the Company because of the industry in which it operates Research and Development The existing drugs that form the basis of the Company’s efforts to develop new substances, methods and processes are well known, yet any scientific evidence that may exist to support the feasibility of the Company’s goals is not conclusive. If the Company is not successful in developing and marketing any new drugs, combinations of existing drugs or reformulation and repurposing of existing approved drugs it may never generate revenues and the business may fail. 5


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Clinical Trial Design The Company’s business strategy is to combine, reformulate and repurpose existing drugs for the treatment of new indications, and these new drug combinations or formulations may have the ability to treat many indications. The Company may incorrectly assess the market opportunities of an indication or may incorrectly estimate or fail to fully appreciate the scientific and technological difficulties associated with treating a specific indication. Furthermore, the quality and robustness of the results and data of any clinical study the Company conducts will depend upon the selection of a patient population for clinical testing. If the selected population is not representative of the intended population, further clinical testing of product candidates or termination of research and development activities related to the selected indication may be required. The Company’s ability to commence clinical testing or the choice of clinical development path could compromise business prospects and prevent the achievement of revenue. Product Failure in Clinical Trials Clinical trials may fail to adequately demonstrate the safety and efficacy of product candidates. The Company will be required to demonstrate with substantial evidence through well-controlled clinical trials that its product candidates are safe and effective for use in a diverse population before the Company can seek regulatory approvals for their commercial sale. Negative results from clinical trials will prevent the commercialization of a drug candidate. If the Company cannot show that its product candidates are both safe and effective in clinical trials, it will need to re-evaluate its strategic plans. Positive results from pre-clinical studies and early clinical trials should not be relied upon as evidence that later-stage or large-scale clinical trials will succeed. Success in early clinical trials does not mean that future clinical trials will be successful because product candidates in later-stage clinical trials may fail to demonstrate sufficient safety and efficacy to the satisfaction of the FDA and other non-U.S. regulatory authorities, despite having progressed through initial clinical trials. Even after the completion of Phase 3 clinical trials, the FDA or other non-U.S. regulatory authorities may disagree with the Company’s clinical trial design and its interpretation of data, and may require the Company to conduct additional clinical trials to demonstrate the efficacy of its product candidates. Regulatory Risk and Market Approval Any products that the Company develops will be subject to extensive government regulations relating to development, clinical trials, manufacturing and commercialization. In the United States, for example, the drug combinations that the Company intends to develop and market are regulated by the FDA under its new drug development and review process. Before any therapeutic products can be marketed, the sponsor company must obtain clearance from the FDA by submitting an investigational new drug application, then by successfully completing human testing under three phases of clinical trials, and finally by submitting a new drug application. The time required to obtain approvals for drug combinations or reformulations from the FDA and other agencies in foreign locales with similar processes is unpredictable. There is no assurance that the Company will ever receive regulatory approval to use its proprietary drug combinations or reformulations as human therapeutics. If such regulatory approval is not obtained, the Company may never become profitable. Failure to Receive Regulatory Approval f or Clinical Trials The Company’s clinical development programs for PTL-202 and PTL-303 may not receive regulatory approval for clinical trials if the Company fails to demonstrate that they are safe and effective in pre-clinical trials. Consequently, failure to obtain necessary approvals from the FDA or similar non-U.S. regulatory agencies to operate clinical trials for the Company’s product candidates could result in delays to the Company’s product development efforts. Manufacture and Supply of Drug Candidates The Company does not own or operate manufacturing facilities, and it depends on third-party contract manufacturers for production of its product candidates. The Company has no experience in drug formulation or manufacturing, and it lacks the resources and the capability to manufacture any of its product candidates. Product candidates have been purchased in limited quantities for pre-clinical studies from scientific supply houses. For Phase 1 and 2 clinical trials of PTL-202, the Company will need to obtain additional quantities of active pharmaceutical ingredients. The Company will need to contract with a manufacturer for a supply of PTL-303 for pre-clinical, and Investigational New Drug-enabling toxicology studies and initial clinical trials (Phase 1 and 2). If, in the future, one of the Company’s product candidates is approved for commercial sale, the 6


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Company or its collaborator will need to manufacture that product candidate in commercial quantities. The Company cannot guarantee that the third-party manufacturers with which it has previously contracted will have sufficient capacity to satisfy future manufacturing needs of PTL-202 or PTL-303, or that the Company will be able to negotiate additional purchases of active pharmaceutical ingredients or drug products from these or alternative manufacturers on terms favourable to the Company, or at all. Third party manufacturers may fail to perform under their contractual obligations, or may fail to deliver the required commercial quantities of bulk active ingredients or finished product on a timely basis and at commercially reasonable prices. Any performance failure on the part of the Company’s contract manufacturers could delay clinical development or regulatory approval of the Company’s product candidates or commercialization of its future product candidates, depriving the Company of potential product revenue and resulting in additional losses. If the Company is required to identify and qualify an alternate manufacturer, it may be forced to delay or suspend its clinical trials, regulatory submissions, required approvals or commercialization of its product candidates, which may cause it to incur higher costs and could prevent the successfully commercializing its product candidates. If the Company is unable to find one or more replacement manufacturers capable of production at a reasonably favourable cost, in enough volume, of adequate quality, and on a timely basis, the Company would likely be unable to meet demand for its product candidates and its clinical trials could be delayed or it could lose potential revenue. The Company’s ability to replace an existing active pharmaceutical ingredient manufacturer may be difficult because the number of potential manufacturers may be limited and the FDA or non-US regulator must approve any replacement manufacturer before it can begin manufacturing the Company’s product candidates. Such approval would require new testing and compliance inspections. It may be difficult or impossible for the Company to identify and engage a replacement manufacturer on acceptable terms in a timely manner, or at all. The Company expects to continue to depend on third-party contract manufacturers for the foreseeable future. The Company’s product candidates require precise, high quality manufacturing. Any of the Company’s contract manufacturers will be subject to ongoing periodic unannounced inspection by the FDA and non-U.S. regulatory authorities to ensure strict compliance with current Good Manufacturing Practice (“cGMP”), and other applicable government regulations and corresponding standards. If the Company’s contract manufacturers fail to achieve and maintain high manufacturing standards in compliance with cGMP regulations, the Company may experience manufacturing errors resulting in patient injury or death, product recalls or withdrawals, delays or interruptions of production or failures in product testing or delivery, delay or prevention of filing or approval of marketing applications for the Company’s product candidates, cost overruns or other problems that could seriously harm its business. Significant scale-up of manufacturing may require additional validation studies, which the FDA must review and approve. Additionally, any third party manufacturers the Company retains to manufacture its product candidates on a commercial scale must pass an FDA or non-US regulator pre-approval inspection for conformance to the cGMPs before the Company can obtain approval of its product candidates. If the Company is unable to successfully increase the manufacturing capacity for a product candidate in conformance with cGMPs, the regulatory approval or commercial launch of any related products may be delayed or there may be a shortage in supply. Market Acceptance of the Company’s Products Even if the Company receives the necessary regulatory approvals to commercially sell its drug candidates, the success of these candidates will depend on their acceptance by physicians and patients, and reimbursement among other things. In the United States and elsewhere, the Company’s product revenues will depend principally upon the reimbursement rates established by third-party payors, including government health administration authorities, managed-care providers, public health insurers, private health insurers and other organizations. These third-party payors are increasingly challenging the price, and examining the cost effectiveness, of medical products and services. In addition, significant uncertainty exists as to the reimbursement status, if any, of newly approved drugs, pharmaceutical products or product indications. The Company may need to conduct post-marketing clinical trials in order to demonstrate the cost-effectiveness of products. Such clinical trials may require the Company to commit a significant amount of management time, financial and other resources. If reimbursement of the Company’s product candidates is unavailable or limited in scope or amount or if pricing is set at unsatisfactory levels, the Company’s revenues could be reduced. In some countries other than the United States, particularly the countries of the European Union and Canada, the pricing of prescription pharmaceuticals is subject to government controls. In these countries, obtaining pricing approval from government authorities can take six to twelve months or longer after the receipt of regulatory marketing approval of a product for an indication. To obtain reimbursement or pricing approval in some countries, the Company may be required to conduct a clinical trial that compares the cost-effectiveness of its product candidate to other available therapies. The Company’s 7


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revenues could be reduced if reimbursement of a product candidate is unavailable or limited in scope or amount or if pricing is set at unsatisfactory levels. Canadian, US, European and other foreign governments continue to propose and pass legislation designed to reduce the cost of healthcare, including drugs. In the United States, there have been, and the Company expects that there will continue to be, federal and state proposals to implement similar government control. In addition, increasing emphasis on managed care in the United States will continue to put pressure on the pricing of pharmaceutical products. For example, the Medicare Prescription Drug Improvement and Modernization Actof 2003 reforms the way Medicare will cover and reimburse for pharmaceutical products. The legislation expands Medicare coverage for drug purchases by the elderly and eventually will introduce a new reimbursement methodology based on average sales prices for certain drugs. In addition, the new legislation provides authority for limiting the number of outpatient drugs that will be covered in any therapeutic class. As a result of the new legislation and the expansion of federal coverage of drug products, the Company expects that there will be additional pressure to contain and reduce costs. The Medicaid program and state healthcare laws and regulations in the USA may also be modified to change the scope of covered products and/or reimbursement methodology. Cost control initiatives could decrease the established reimbursement rates that the Company receives for any products in the future, which would limit its revenues and profitability. Legislation and regulations affecting the pricing of pharmaceutical products, including PTL-202 and PTL-303, may change at any time, which could further limit or eliminate reimbursement rates for PTL-202 or other product candidates. If the Company’s drug candidates fail to gain market acceptance, it may be unable to generate sufficient revenue to continue in business. Failure to Obtain Regulatory Approval Outside the United States The Company intends to market certain of its existing and future product candidates in non-North American markets. In order to market its existing and future product candidates in the European Union and many other non-North American jurisdictions, the Company must obtain separate regulatory approvals. The Company has had no interactions with non-North American regulatory authorities, and the approval procedures vary among countries and can involve additional testing, and the time required to obtain approval may differ from that required to obtain FDA approval. Approval by the FDA or other regulatory authorities does not ensure approval by regulatory authorities in other countries, and approval by one or more non-North American regulatory authorities does not ensure approval by regulatory authorities in other countries or by the FDA. The non-North American regulatory approval process may include all of the risks associated with obtaining FDA approval. The Company may not obtain non-North American regulatory approvals on a timely basis, if at all. In addition, the Company may not be able to file for non-North American regulatory approvals and may not receive necessary approvals to commercialize its existing and future product candidates in any market. If such regulatory approval is not obtained, the Company may never become profitable. Product Liability The use of the Company’s drug candidates in clinical trials and the sale of any products for which regulatory approval is obtained may expose the Company to product liability claims from consumers, health care providers, pharmaceutical companies or other entities. Any claim brought against the Company may cause the diversion of resources from normal operations or cause the Company to cease the sale, distribution and marketing of its products that have received regulatory approval. This may cause the Company to cease operations. Intellectual Property Rights The Company’s commercial success will depend, in part, on obtaining and maintaining patent protection, trade secret protection and regulatory protection of its proprietary technology and information as well as successfully defending third-party challenges to its proprietary technology and information. The Company will be able to protect its proprietary technology and information from use by third parties only to the extent that valid and enforceable patents, trade secrets or regulatory protection cover them and the Company has exclusive rights to utilize them. The ability of the Company’s licensors, collaborators and suppliers to maintain their patent rights against third-party challenges to their validity, scope or enforceability will also play an important role in determining the Company’s future. 8


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Reliance on Licensors to Maintain Patent Rights The Company’s commercial success may also depend, in part, on maintaining patent rights that have been licensed related to products that the Company may market in the future. Since the Company will not fully control the patent prosecution of any licensed patent applications, it is possible that the licensors will not devote the same resources or attention to the prosecution of the licensed patent applications as the Company would if it controlled the prosecution of the applications. The licensor may not pursue and successfully prosecute any potential patent infringement claim, may fail to maintain their patent applications, or may pursue any litigation less aggressively than the Company would. Consequently, the resulting patent protection, if any, may not be as strong or comprehensive. Uncertainty of Patent Protection The patent positions of life science companies including specialty pharmaceutical companies can be highly uncertain and involve complex legal and factual questions that include unresolved principles and issues. No consistent policy regarding the breadth of claims allowed in such companies’ patents has emerged to date in the United States, and the patent situation outside the United States is even more uncertain. Changes in either the patent laws or in interpretations of patent laws in the United States or other countries may diminish the value of the Company’s intellectual property rights. Therefore, the Company cannot predict with any certainty the range of claims that may be allowed or enforced in its patents or in-licensed patents. Reliance on Trade Secrets The Company also relies on trade secrets to protect its technology, especially where the Company does not believe patent protection is appropriate or obtainable. However, trade secrets are difficult to protect. While the Company seeks to protect confidential information, in part, through confidentiality agreements with employees, consultants, contractors, or scientific and other advisors, they may unintentionally or wilfully disclose the Company’s confidential information to competitors. Enforcing a claim against a third party related to the illegal acquisition and use of trade secrets can be expensive and time consuming, and the outcome is often unpredictable. If the Company is not able to maintain patent or trade secret protection on its technologies and product candidates, then the Company may not be able to exclude competitors from developing or marketing competing products, and the Company may not be able to operate profitability. Intellectual Property Infringement Claims There has been, and there will continue to be, significant litigation and demands for licenses in the life sciences industry regarding patent and other intellectual property rights. Although the Company anticipates having a valid defence to any allegation that its current product candidates, production methods and other activities infringe the valid and enforceable intellectual property rights of any third parties, the Company cannot be certain that a third party will not challenge this position in the future. Other parties may own patent rights that the Company might infringe with its drug candidates, products or other activities, and the Company’s competitors or other patent holders may assert that the Company’s products and the methods employed are covered by their patents. These parties could bring claims against the Company causing substantial litigation expenses and, if successful, may require payment of substantial damages. Some of the Company’s potential competitors may be better able to sustain the costs of complex patent litigation, and depending on the circumstances, the Company could be forced to stop or delay its research, development, manufacturing or sales activities. Any of these costs could cause the Company to go out of business. Licensed Patent Rights The Company has licensed patents and plans to license technologies and other patents if it believes it is necessary or useful to use third party intellectual property to develop its products, or if its product development threatens to infringe upon the intellectual property rights of third parties. The Company may be required to pay license fees or royalties or both to obtain such licenses, and there is no guarantee that such licenses will be available on acceptable terms, if at all. Even if the Company is able to successfully obtain a license, the rights may be non-exclusive, which would give the Company’s competitors’ access to the same intellectual property it has rights to, which could prevent the Company from commercializing a product. The Company’s licensors may terminate the license. Without protection for the intellectual property that is licensed, other companies may be able to offer substantially similar products for sale, the Company may not be able to market or sell the planned products or generate any revenues. 9


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Licenses and Permits to Operate The operations of the Company may require licenses and permits from various governmental authorities, in both domestic and foreign jurisdictions. There can be no assurance that the Company will be able to obtain all necessary licenses and permits that may be required to carry out its research and development of its projects. Without these licenses and permits the Company may not be able to market or sell the planned products or generate any revenues. Competition The pharmaceutical industry is intensely competitive in all its phases, and the Company competes with other companies that have greater financial resource and technical facilities. Competition could adversely affect the Company’s ability to acquire suitable projects in the future. Significant and increasing competition exists for pharmaceutical opportunities internationally. There are a number of large established pharmaceutical companies with substantial capabilities and far greater financial and technical resources than the Company. The Company may be unable to acquire additional attractive pharmaceutical development opportunities on terms it considers acceptable and there can be no assurance that the Company's research and development programs will yield any new drugs or result in any commercially viable compounds or technologies. Conflicts of Interest Certain of the directors and officers of the Company will be engaged in, and will continue to engage in, other business activities on their own behalf and on behalf of other companies (including life science companies) and, as a result of these and other activities, such directors and officers may become subject to conflicts of interest. The British Columbia Business (“BCBCA”) provides that in the event that a director has a material interest in a contract or proposed contract or agreement that is material to the Company, the director shall disclose his interest in such contract or agreement and shall refrain from voting on any matter in respect of such contract or agreement, subject to and in accordance with the BCBCA. To the extent that conflicts of interest arise, such conflicts will be resolved in accordance with the provisions of the BCBCA. To the knowledge of the management of the Company, there are no existing or potential material conflicts of interest between the Company and a proposed director or officer of the Company except as otherwise disclosed herein. Foreign Currency Risk A substantial portion of the Company’s expenses and future revenues may be incurred in foreign currencies. The Company’s business will be subject to risks typical of an international business including, but not limited to, differing tax structures, regulations and restrictions and general foreign exchange rate volatility. Fluctuations in the exchange rate between the Canadian dollar and such other currencies may have a material effect on the Company’s business, financial condition and results of operations and could result in downward pressure for the Company’s products or in losses from currency exchange rate fluctuations. The Company does not actively hedge against foreign currency fluctuations. The Company is at Risk of Securities Class Action Litigation In the past, securities class action litigation has often been brought against a company following a decline in the market price of its securities. This risk is especially relevant for the Company because biotechnology, specialty pharmaceutical and biopharmaceutical companies have experienced significant stock price volatility in recent years. If the Company faces such litigation, it could result in substantial costs and a diversion of management’s attention and resources, which could harm the Company’s business Item 4. Information on the Company A. History and development of the company. Name and Incorporation The Company was incorporated under the BCBCA on September 12, 2005 as “Pacific Therapeutics Ltd.”. The Company’s head office and registered and records office is located at Suite 600-535 Howe Street, Vancouver, British Columbia, V6C 2Z4 Canada. The Company’s phone number is (604) 559-8051 and its web site is www.pacifictherapeutics.com. The information on our website does not form a part of this Form 20-F. 10


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The Company is a reporting Company in British Columbia and Ontario and its shares were listed for trading on the CSE, the Frankfort Stock Exchange and are quoted on the OTC Pink Sheets. Inter-Corporate Relationships The Company does not have any inter-corporate relationships. Significant Acquisitions and Dispositions Other than the potential licensing of a technology for oral disintegration, the Company did not complete any acquisitions or dispositions during the fiscal year ended December 31, 2014. Operating and Financial Review and Prospects From inception through to December 31, 2012, the Company incurred total expenses in the development of its intellectual property of $1,836,405, which included $548,204 of research and development expenses (research and development expenses on the financial statements have been offset by $53,277 in funding from the Industrial Research Assistance Program (“IRAP”) and $187,427 in Scientific Research and Experimental Development ("SR&ED") tax credits), $398,431 of professional fees and $889,770 of wages and benefits. B. Business overview Business Strategy The Company was focused during the fiscal year ended December 31, 2014 on combing, reformulating and repurposing approved drugs. It was initially developing drugs for diseases of progressive excessive scarring, including Idiopathic Pulmonary Fibrosis, Liver Cirrhosis, Pulmonary Fibrosis associated with Scleroderma and Post Lung Transplant Bronchiolitis Obliterans. The Company assumed the clinical, regulatory and commercial development activities of its product candidates and advances them through the regulatory and clinical pathways toward commercial approval. This strategy reduced the risk, time and cost of developing therapies for Fibrosis by avoiding the risks associated with basic research and using compounds with unknown safety and toxicity. The Company leveraged its expertise to manage and perform critical steps in drug development including the design and conduct of clinical trials, the development and execution of intellectual property strategies, the recruitment and selection of development partners and the interaction with drug regulatory authorities. Its strategy includes reformulating approved drugs to increase efficacy and patient compliance, and completing the further clinical testing, manufacturing and other regulatory requirements sufficient to seek marketing authorizations via the filing of a New Drug Application (“NDA”) with the FDA and/or a potential Marketing Application Authorization (“MAA”) with the European Medicines Evaluation Agency (“EMEA”) or similar marketing authorizations by regulators in other countries including Canada. The main elements of the Company’s strategy during the fiscal year ended December 31, 2014 were as follows: 1) Identification of Product Candidates The Company performed scientific evaluations and market assessments of drugs and drug combinations and research from academics and other drug development companies. As part of this process, the Company evaluated the clinical and pre-clinical research and the intellectual property rights associated with the potential products and research to determine the commercial potential of the product candidate. The Company intended to mitigate the risks associated with development and commercialization of drug candidates by targeting drug candidates that: are combinations of already approved compounds;have well established safety records;have potential to be reformulated to a once a day oral dose;have potential to be reformulated to an oral dissolving technology;are already marketed in countries other than the United States or Europe; andhave pre-clinical animal data or clinical data of potential efficacy in Fibrosis additional indications. 11


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The Company has initially focused on Fibrosis indications as it believes there is a large unmet medical need in this area. As an example, Idiopathic Pulmonary Fibrosis (IPF) affects more than 130,000 Americans (IPF Summit 2011). An estimated 48,000 cases of IPF are diagnosed annually (Am J Respir Crit Care Med. 2006;174(7):810-816). In addition, patients with IPF have poor prognosis; an estimated 40,000 people die each year from IPF. Further, there are no FDA approved treatments for IPF (IPF Summit 2011). The Company had developed a Scientific and Advisory Board (“SAB”) to support this strategy. The members of this group are very experienced in the clinical development of drug candidates for Pulmonary Fibrosis, lung transplant, airway disease and Scleroderma. 2) In-licensing In identifying a promising product candidate, the Company seeks to negotiate a license to the rights for the candidate from the holder of those rights. Typically the goal is to secure licenses that permit the Company to conduct further research, development and clinical trials as well as engage in additional intellectual property protection. The Company will also seek terms that provide it with the rights to further licensing of manufacturing and marketing rights to any resulting products. This process is known as in-licensing. 3) Product Development Upon securing the appropriate rights to the product candidate, the Company intended to advance the candidate through the regulatory and commercialization pathways for marketing approval in major markets. This process included implementing intellectual property strategies, formulation and reformulation strategies, making regulatory submissions, conducting or managing clinical trials, and performing or managing the collection, collation and interpretation of clinical and field data and the submission of this data to relevant regulatory authorities. 4) Outsourcing In order to optimize return on investment and the development of product candidates, the Company used a virtual company business model which included outsourcing all non-core business activities. Factors that the Company considered to determine core and non-core activities included: Infrastructure costOperating costFrequency of useRegulatory protocolRequirement for third party verificationCapacityQuality control Management had determined that having its own laboratory and staff for conducting infrequent pre-clinical studies is not a core capacity that is required and, therefore, it has to develop relationships with labs that it may outsource this work to. In order to maintain quality control, these projects were managed very closely by the Company’s staff and the Company developed all protocols for the completion of this work. Other functions the Company had decided to outsource include analytical assay development, formulation, clinical trials and manufacturing. 5) Principal Products PTL-202 The Company’s lead product candidate, PTL-202, is a combination of drugs that have been separately approved for marketing by the FDA for sale in the United States. In animal trials, the combination was more effective than either of its components at reducing indicators of Fibrosis. The Company is planning to complete development of a once a day pill of the combination using proprietary in licensed technologies. The Company conducted a drug/drug interaction study in 2012. The Company found a combination of two compounds developed in France that showed efficacy in human Fibrosis. The efficacy of this combination to prevent further Fibrosis in humans was confirmed in two separate independent proofs of principal Phase 2 clinical trials in Radiation Induced Fibrosis. The Company took one of the compounds, Pentoxifylline, and combined it with a powerful antioxidant and then conducted experiments in a mouse. These experiments showed that the new 12


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combination was effective at reducing the progression of the Fibrosis in the mouse lung. This new combination is being developed as the Company’s lead drug candidate, PTL-202. A provisional patent was filed in the United States by the Company in October 2007 to cover the composition of matter and method of use of this combination. In October 2008, the Company filed an application under the Patent Cooperation Treaty based on the above provisional application. The Company received a positive preliminary examination of the PCT application in the spring of 2009. During 2012 the patent prosecution continued and the Company filed Reponses to patent examiners in Europe and the US. The combination has now been formulated into a once a day tablet and the drugs included in PTL-202 have been successfully tested in a drug/drug interaction study in humans in 2012. PTL-303 The Company’s other product candidate, PTL-303, is a combination of drugs including one that has been approved for use in Japan and other jurisdictions. This combination may have a wide range of uses, including treating, preventing and reducing disorders of progressive scarring in humans. The Company does not have any funds allocated for the further development of PTL-303 as at December 31, 2014. The composition, including a cytokine modifier and anti-oxidant which is a precursor of Glutathione, was investigated for its antifibrotic activity by employing two In Vitro collagen synthesis assays. The Company discovered that the combination PTL-303 brings about substantial synergistic anti-fibrotic effects in a TGF-Beta1 mediated collagen synthesis assay, when compared to the individual drugs. The composition can be administered in any convenient manner, such as a pill, or inhalation, and may be formulated for injection. A provisional patent titled “Composition and Method for Treating Fibrosis” was filed by the Company with the United States patent office on October 29, 2008. The application number is 61/109,446. A PCT application covering the technology of PTL-303 was filed by the Company in October 2009. 7) Oral Dissolving Technology The Company has executed a letter of intent with Globe Labs Ltd. Of Vancouver, BC for the potential in-license of an oral dissolving tablet technology. The technology may be used for the delivery of up to three different compounds. The initial use of the technology maybe for the delivery of sildenafil citrate for the treatment of erectile dysfunction. Principal Products 1) PTL-202 Once a Day Formulation Combination of Pan-phosphodiesterase inhibitor, Pentoxifylline, with N-acetylcysteine Idiopathic Pulmonary Fibrosis (“IPF”) is a long term, progressive form of lung disease characterized by progressive buildup of scar tissue on the supporting framework (interstitium) of the lungs. The term Idiopathic is used only when the cause of the Fibrosis is unknown. Despite extensive investigation, the cause of IPF remains unknown. The disease involves abnormal and excessive deposition of scar tissue (Fibrosis) in the Pulmonary Interstitium (mainly the walls of the Alveoli) with minimal associated inflammation (Figure 1). The symptoms initially develop slowly. The most common symptom is progressive difficulty in breathing, but also includes dry cough. 13


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Figure 1 - Human Airways  The Company’s lead product, PTL-202, is a combination of two compounds designed to treat IPF: Pentoxifylline (PTX) and NAC (N-acetylcysteine). The Company has completed pre-clinical studies on PTL-202, development of a pill that can be taken once a day and completed a drug/drug interaction study in humans in 2012. A pivotal bio-equivalency study is planned for 2013 and maybe followed by a Phase 2 Proof-of-Principle clinical trial beginning in 2014. Therapeutic Approach The combination of drugs in PTL-202 is intended to stop the progression of IPF by reducing the amount of several messenger molecules that are known to be associated with scarring. In addition, the combination has anti-oxidant properties that protect the lung cells from further damage caused by the Fibrosis. PTX increases the diameter of blood vessels and enhances blood flow. PTX has been successfully and safely used for many years for treatment of vascular diseases such as cramping in the leg. There is growing evidence that PTX is an anti-inflammatory and may inhibit scarring in the lung. NAC (N-acetylcysteine), the second compound in the PTL-202 combination, has been shown in animals to prevent some of the effects of IPF, including the progressive deterioration of patients. Pre-clinical Studies The Company has conducted a number of pre-clinical studies using PTL-202 for the treatment of lung Fibrosis in a mouse. The Company believes that these studies show that PTL-202 has the potential to be a safe and effective treatment for IPF. The Company conducted proof-of-concept animal studies to evaluate the relative efficacy of stand-alone or combination treatments of PTX and NAC in lung Fibrosis. In the initial experiment, wet lung weight was measured under various treatments. From this early experiment, it was determined that PTL-202 may be more effective than its separate components. In further pre-clinical experiments, PTL-202 treatment was more effective than either PTX or NAC alone on lung Fibrosis in mice. In addition, treatment with PTL-202 caused a significant reduction in TNF-alpha in the lung fluid. This finding indicates that PTL-202 may act by reducing the amount of TNF-alpha. TNF-alpha is thought to stimulate the formation of scar tissue. Moreover, there were no deaths or abnormal reactions with a daily administration of PTL-202 during the experiments, indicating a lack of side effects which is consistent with the data from earlier clinical trials in humans for PTX and NAC separately. 14


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The results of these extensive pre-clinical studies suggest that PTL-202 may be safe and effective agent for the treatment of Pulmonary Fibrosis. DEVELOPMENT PLANS OF PTL-202 Formulation Development The goal of the Company is to develop a pill containing both drugs that only needs to be taken once per day. Existing, marketed, modified release versions of the drugs will be evaluated as a simple daily or twice daily fixed dose combination formulation. Given, the preliminary dose ranges/strengths of 600-1200mg of PTX combination with 600mg-1200mg NAC once a day, the physical size for an ingestible tablet will be a barrier to success. Current formulation of PTX, with Vitamin E rather than NAC, in a Phase 2 study has shown inhibition of messenger molecules and a reduction in scar tissue. Both PTX and NAC are water soluble molecules, with short resident time in the bloodstream. This high water solubility presents a challenge to once-a-day administration as both molecules are rapidly absorbed and metabolized quickly by the body. The goal from a development perspective is to deliver an appropriately formulated controlled release product, reducing the absolute amount of drug per tablet needed to achieve a clinically effective blood level. To accomplish this goal formulation development prototypes will target release of the drugs to provide sustained levels of the drug in the blood. A controlled release formulation of PTL-202, a fixed dose combination of pentoxifylline (PTX) and N-acetylcysteine (NAC), for the potential treatment of idiopathic pulmonary fibrosis (IPF), Liver Cirrhosis and other fibrotic diseases was completed in 2012. Phase 1: Clinical Studies The Company has completed the initial clinical study of PTL-202. The study was a drug/drug interaction study. This study, conducted in humans was intended to determine if any new by products are created by the combination of the drugs in PTL-202 and to determine if the combination is bio-equivalent to its generic counter parts. The study included 12 healthy males. The bio-analytical portion (PK assay development and good laboratory practice validation) of the above-mentioned study was completed by a lab contracted by the Company. Therefore, following the Company’s stated business strategy, the Company acted as a sponsor of the study and the CROs were hired to execute the objectives of the study. Successful completion of this Phase 1 study of PTL-202 is a major milestone because as many as 30% of Phase 1 drug trials are failures. Phase 2: Proof- of-Concept in Humans The proposed Phase 2 study is a proof-of-concept or proof-of-relevance trial. The proposed study utilizes principles of adaptive design approach and has two interconnected parts. The proof-of-concept trial will be designed to assess the safety and efficacy of PTL-202 in patients with IPF. Study patients will receive formulated PTL-202 or individual components of PTL-202. Neither the patient or the physician will know if they are getting PTL-202 or a component. The objectives of the study are: To evaluate the safety and tolerability of 12 months of treatment with PTL-202 in patients with IPF versus placebo and individual components of PTL-202 (PTX and NAC);To compare changes in forced vital volume capacity in IPF patients treated with PTL-202 versus treatment with PTX and NAC alone and placebo;To compare changes in the following parameters in IPF patients treated with PTL-202;Diffusion capacity for carbon monoxide;Extent and nature of IPF-related abnormalities on high resolution CT; andTo compare quality of life evaluations in IPF patients treated with PTL-202 and individual components of PTL- 202 versus placebo. The cost to complete the Phase 2 study is estimated at $8 million. Additional funds will be required to complete this phase of the development of PTL-202. On completion of this proof-of-principal study the Company will look to out-license PTL-202 to a larger company capable of completing the development and commercialization of PTL-202. Such additional funds would likely be raised through a private placement of securities. There is no assurance that such funding will be available. See also “Risk Factors” in this filing. 2) PIPELINE PRODUCT: PTL-303 Fixed Dose Combination of TGF-2 Inhibitor and NAC - Pre-clinical 15


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The Company has completed In Vitro studies of this combination that have confirmed the compounds method of action. This data has been included in the provisional patent application for PTL-303 to support the composition of matter and methods claims. The Company does not have any funds allocated for the further development of PTL-303 at this time. In the future, as funds are available, the Company will initiate animal studies using lung Fibrosis in mice to generate additional data to assess the efficacy of PTL-303. The pre-clinical work will also focus on the delivery of the compound to the liver and the efficacy of the compound in a liver Fibrosis model. Efficacy in the liver Fibrosis model will lead to further Investigational New Drug application (IND) enabling studies when funds are available. Manufacturing The Company has limited experience in, and does not own facilities for, manufacturing any products or product candidates. The Company, in partnership with IntelGenx Corp. (IntelGenx), will utilize contract manufacturers to produce clinical supplies of any components of its products that are not commercially available. Although the Company intends to continue to rely on contract manufacturers to produce certain of its products for both clinical and commercial supplies, the Company and IntelGenx will oversee the production of those products. Sales, Marketing and Distribution The Company currently has no sales or distribution capabilities and limited marketing capabilities. In order to commercialize its products, the Company must develop sales, marketing and distribution capabilities or make arrangements with other parties to perform these services for us. The Company’s intention is to out-license its products once Phase 2 testing has been completed. It is anticipated the licensee will have the capability to market, sell and distribute the Company’s products. Intellectual Property We believe we are developing a valuable portfolio of intellectual property rights to protect the technologies, inventions and improvements that we believe are significant to our business, which includes patent applications in the United States, Europe and Canada. Our success in the specialty pharmaceutical industry depends in substantial part on effective management of both intellectual property assets and infringement risks. In particular, we must be able to protect our own intellectual property as well as minimize the risk that any of our products infringes on the intellectual property rights of others. We enter into agreements with all our employees involved in research and development, under which all intellectual property during their employment belongs to us, and they waive all relevant rights or claims to such intellectual property. All our employees involved in research and development are also bound by a confidentiality obligation, and have agreed to disclose and assign to us all inventions conceived by them during their term of employment. Despite measures we take to protect our intellectual property, unauthorized parties may attempt to copy aspects of our products or our proprietary technology or to obtain and use information that we regard as proprietary. If we fail to protect our intellectual property rights, it could harm our business and competitive position. For more information, see “Risk Factors” in this Form 20-F. The Company has filed the below patent: Patent Cooperation Treaty Patent Application No. PCT/CA2008/001880 Filed 23 October 2008COMPOSITIONS AND METHODS FOR TREATING FIBROPROLIFERATIVE DISORDERS The patent is filed under the Patent Cooperation Treaty in Canada, the United States and Europe. Specialized Skills and Knowledge All aspects of the Company’s business require specialized skills and knowledge. Such skills and knowledge include pre-clinical research, clinical drug development, regulatory, intellectual property management, business development, licensing, 16


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legal, corporate finance and accounting. Below is a list of the Company’s consultants and advisors during the year ended December 31, 2015. Dr. Lola Maksumova MD, PhD -Consultant, Former VP of Drug DevelopmentDr. Maksumova joined the Company in June 2007 as Vice President of Drug Development and held that position until November 2008. She rejoined the Company as a part time consultant in January 2009. Dr. Maksumova brings many years of bio-medical research experience, an understanding of disease processes in the areas of inflammation and Fibrosis, and expertise in cell signaling of immune disorders. Prior to her current position, Dr. Maksumova worked as Senior Scientist with Chemokine Therapeutics. Dr. Maksumova is a co-inventor of PTL-202 and PTL-303. Dr. Maksumova earned her medical degree from Tashkent Medical School and PhD in Medical Biochemistry from Hamamatsu University School of Medicine, Japan. Her professional training includes post-doctoral fellowships at Virginia Mason Research center in Seattle (2001) and with the Faculty of Medicine at University of British Columbia (2002-2006). Dr. Maksumova is compensated on an hourly basis for the time she spends consulting for the Issuer. Scientific Advisory Board (“SAB”) The members of the Company’s strategic advisory board, none of whom are officers or employees, provide advice, assistance and consultation in the fields of drug development, clinical trials and Fibrosis. The SAB consists of clinical advisors considered to be known opinion leaders in their respective fields, and they offer the Company advice and feedback regarding the following: the Company’s drug development programs;the opportunities provided by unmet needs and market opportunities; andthe existence of new products and technologies among other things. The following is a brief biography of each of the Company’s Pulmonary Fibrosis and Bronchiolitis Obliterans clinical advisors, which includes a description of each individual’s credentials and recent professional experience. Daryl Knight, Ph.D.Dr. Darryl Knight is a professor at University of Newcastle, Australia. Dr. Knight obtained his PhD at the University of Western Australia in 1993 and did post-doctoral training at the University of British Columbia. From 1997 to 2001 he was a Senior Research Officer in the Asthma & Allergy Research Institute of the University of Western Australia and was Head of the Experimental Biology division of the Institute from 2002 to 2004. He was also an Adjunct Senior Lecturer in the Department of Medicine at the University of Western Australia. Dr. Daryl Knight was the Canada Research Chair in Airway Disease and Associate Director of the James Hogg iCAPTURE Centre for Cardiovascular and Pulmonary Research. He was a tenured Professor of Pharmacology and Therapeutics at the University of British Columbia, Vancouver. Dr Knight sits on the Respiratory Science Grant Review panel at the CIHR, the Basic Science Review Panel of the Canadian Lung Association and is on the editorial board of 5 Respiratory Journals. Ganesh Raghu MD, FCCP, FACPDr. Ganesh Raghu MD, FCCP, FACP is a specialist in Idiopathic Pulmonary Fibrosis (IPF). He is a professor of Pulmonary Medicine at the University Of Washington Medical Centre and a Director of the Lung transplant program there. He has conducted several clinical trials for the treatment of IPF with antifibrotic drugs. His current research interests include quality of life measures in IPF and lung transplantation, as well as the treatment of rejection and infection in lung transplants. Dr. Raghu received his M.D. in 1973 from Mysore Medical College, University of Mysore, Mysore, India. He Interned at University Hospitals, University of Mysore in 1974 and was a resident in General Medicine and Chest Medicine, Hartlepool General Hospital and Postgraduate Medical Center (University of Newcastle Upon Tyne), Hartlepool, England in 1977. In 1980 he conducted his residency in Internal Medicine at State University of New York in Buffalo. He was the Chief Medical Resident at the State University of New York, Buffalo from 1980 to 1981. Dr. Raghu moved to Seattle in 1983 to complete fellowships in Pulmonary and Critical Care Medicine as well as Lung Cell Biology at the University of Washington. Dr. Andreas Zuckermann, MDDr. Zuckermann’s specialties include heart and lung transplantation. He is a Staff Surgeon in the Department of Cardiothoracic Surgery at University of Vienna in Austria and Co-Director of the Cardiac Transplantation Program there. He is also a Director the International Society for Heart and Lung Transplantation. He has been involved in over 170 thoracic transplantations and has conducted clinical research in post-transplant patients. His current interests are focused on heart lung transplantation and beating heart transplants. Dr. Zuckermann received his MD from Vienna Medical School, University of Vienna in 1991. From 1991 – 1993 he was the transplant coordinator in the Department of Cardiothoracic Surgery at the University of Vienna. From 1993 to 2000 prior to his appointment as a Staff Surgeon he trained in Cardio-thoracic surgery at St. Polten Hospital in Vienna where he assisted in over 30 lung transplants. 17


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James R. Seibold,MD, FACP, FACRDr. Seibold is the past Director of the Scleroderma Program University of Michigan. He had been on the faculty of UMDNJ from 1980-2004 where he had served as Chief of the Division of Rheumatology, Director of the Clinical Research Center and as the W.H. Conzen Chair of Clinical Pharmacology. Author of more than 300 scientific publications, his medical practice specializes in Scleroderma, Raynaud’s phenomenon and interventional research in the rheumatologic diseases. He has received multiple awards from arthritis and Scleroderma patient organizations. Dr. Seibold is currently the President of the Scleroderma Clinical Trials Consortium. Competitive Conditions Current Therapies for Idiopathic Pulmonary Fibrosis In North America the current therapy for Idiopathic Pulmonary Fibrosis is based on the premise that recruitment and activation of inflammatory cells leads to the progressive development of IPF. However, massive doses of immunosuppressive agents meant to decrease the number or activity of inflammatory cells do not alter the development of IPF. Instead, patients develop serious side effects leading to a shortened lifespan. Since the current therapy is not successful, there is an urgent need to develop alternative potent, non-toxic, long lasting therapy for these unmet medical needs. PTL-202 works by inhibiting messenger molecules that are active in the development of IPF, specifically TNF-alpha. Until recently treatment for IPF in North America consists of using immunosuppressants and anti-oxidants. In an attempt to minimize side effects many patients are prescribed drugs to prevent GI side effects, osteoporosis and infection. A clinical study during 2012 concluded that this treatment using immunosuppressants was actually harmful to IPF patients. Supplemental oxygen is prescribed to patients who are unable to maintain a satisfactory amount of oxygen in the blood. This treatment remains unsatisfactory as the median survival is 2 – 4 years once diagnosis is made and the 5 year survival rate ranges from 20% – 40% (Olson AL, Swigris JJ, Lezotte DC, Norris JM, Wilson CG, Brown KK. “Mortality from pulmonary fibrosis increased in the United States from 1992 to 2003”. Am J Respir Crit Care Med. 2007;176(3):277-284). InterMune Inc.’s (“InterMune”) Pirfenidone represents the most advanced therapy being developed to treat IPF. Pirfenidone is a synthetic small molecule that is orally available for the prevention of fibrotic lesions in general. Pirfenidone has gastrointestinal side effects and will darken the skin and cover from the sun is required with its use. In contrast to PTL-202, Pirfenidone works by reducing the activity of an enzyme. Both InterMune and Shinogi & Co., Ltd. (“Shinogi”) have conducted Phase 3 trials of Pirfenidone to treat IPF. InterMune has recently received approval to market Pirfenidone for IPF in the European Union and Canada, Shinogi recently received approval to market Pirfenidone for IPF in Japan. Pirfenidone is currently undergoing clinical trials for uterine fibrosis (PhII), scleroderma (PhII), proliferative vitreoretinopathy (PhII), multiple sclerosis (PhII), liver fibrosis (PhII), wound healing (PhI), and benign prostatic hyperplasia (PhI). Pirfenidone is not approved for use in either the United States. There are no therapies for IPF approved in the United States. Current Therapies for Scleroderma Treatment of Scleroderma is directed toward the individual feature(s) affecting different areas of the body: Aggressive treatment of elevations in blood pressure have been extremely important in preventing kidney failure;Blood-pressure medications, such as captopril, are frequently used; andSerious inflammation of the lungs (alveolitis) can require immune suppression with cyclophosphamide (Cytoxan) along with prednisone. Additionally, medications are used to suppress the overly active immune system that seems to be spontaneously causing the disease in organs affected. Medications used for this purpose include penicillamine, azathioprine, and methotrexate. The optimal treatment of Scleroderma lung disease is an area of active research. Stem-cell transplantation is being explored as a possible option. There are no effective treatments for lung fibrosis associated with Scleroderma. No medication has been found to be universally effective for all patients with scleroderma. In an individual patient, the illness may be mild and not require treatments. In some, the disease is ravaging and relentless. Lung fibrosis in Scleroderma may be fatal. PTL-202’s main focus in Scleroderma is treating patients with lung fibrosis. Current Therapies for Post Lung Transplant Bronchiolitis Obliterans The current therapy for Post Lung Transplant Bronchiolitis Obliterans (“PLT-BO”) is based on the same premise as in IPF, recruitment and activation of inflammatory cells leads to the development and progression of PLT-BO. However, massive 18


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doses of immunosuppressive agents meant to decrease the number or activity of inflammatory cells do not alter the course of IPF or PLT-BO. Instead, patients develop serious side effects leading to a shortened lifespan. There are no FDA-approved treatments for IPF. Despite these advances, optimal therapy for IPF remains elusive and has yet to be identified (http://www.ipfsummit.org/pdf/Needs-Assessment.pdf) Competing IPF Drugs Currently Under Development ACTIVE PHASE III CLINICAL TRIALS BIBF 1120 - Manufactured by Boehringer Ingelheim: A Phase III, double-blind trial in patients with PF to investigate the effect of Oral BIBF 1120, 150 mg Twice Daily, on Annual Forced Vital Capacity Decline. A primary outcome measure will be the annual rate of decline in in FVC over 32 weeks;Cyclosporine Inhalation Solution (CIS) - Manufactured by APT Pharmaceuticals - (For lung transplant recipients only): A Phase III multi-center, randomized, controlled study to demonstrate the efficacy and safety of cyclosporine inhalation solution (CIS) in Improving Bronchiolitis Obliterans Syndrome-Free Survival Following Lung Transplantation. The study seeks to demonstrate the efficacy and safety of CIS in improving survival, and preventing BOS when given prophylactically to lung transplant recipients in addition to their standard immunosuppressive regimen. The study is no longer recruiting patients;Pirfenidone - Manufactured by InterMune: A Phase III, double-blind, placebo-controlled trial to evaluate the treatment effect of pirfenidone on change in a lung function measure (percent predicted forced vital capacity, or %FVC) and to evaluate the safety of treatment with pirfenidone compared with placebo; andThalomid (Thalidomide) - Manufactured by Celgene: A Phase III, double-blind, placebo-controlled safety and efficacy study investigating the Treatment of Chronic Cough in Idiopathic Pulmonary Fibrosis with Thalidomide. Please visit www.clinicaltrials.gov and search "IPF" for a complete description of this trial, including inclusion/exclusion criteria. The study is sponsored by Johns Hopkins Medical Center (Baltimore, MD). ACTIVE PHASE II CLINICAL TRIALS CNTO 888 (Manufactured by Centocor, Inc.): A Phase 2, Multicenter, Multinational, Randomized, Double- Blind, Placebo-Controlled, Parallel-Group, Dose-Ranging Study Evaluating the Efficacy and Safety of CNTO888 Administered Intravenously. The primary objective is to determine the efficacy (as measured by pulmonary function) and safety of CNTO 888 in patients with IPF. The secondary outcome measures are to assess the effect of CNTO 888 on measures of disease progression, patient reported outcomes, functional capacity and health-related quality of life, and to assess the pharmacokinetics and pharmacodynamics of CNTO 888 in IPF. The study began recruiting patients in October, 2008, with a goal of recruiting 120 patients. Patients will be in the study for about 74 weeks;FG-3019 (Manufactured by FibroGen, Inc.): A Phase II study of FG-3019 (therapeutic antibody against connective tissue growth factor) for patients with IPF. The study is a Phase 2a, Open-Label, Single Arm Study to Evaluate the Safety, Tolerability, and Efficacy of FG-3019 in Subjects With Idiopathic Pulmonary Fibrosis;Interferon alpha (Amarillo Biosciences): A Phase II, randomized, double-blind, placebo-controlled trial to determine whether interferon-alpha, delivered in low doses via orally dissolving lozenges given 3 times per day for 4 weeks, can reduce the frequency and severity of chronic cough in patients with COPD or IPF. Cough frequency will be assessed via 24-hour digital audio recordings made prior to entry, and at weeks 2 and 4 of treatment. Patients will also complete questionnaires regarding cough frequency, duration and intensity, QOL, dyspnea, and antitussive medication usage weekly during treatment. The study is seeking 80 patients however it is only recruiting patients at Texas Tech University (Lubbock, TX). THIS IS TEMPORARILY ON HOLD; andSTX-100 (Stromedix, Inc.): STX-100 is a monoclonal antibody being developed for the treatment of idiopathic pulmonary fibrosis (IPF). This multi-center, randomized, double-blind, placebo-controlled study will evaluate the safety, tolerability, pharmacokinetics, and pharmacodynamics of STX-100 in patients with IPF. The study began recruitment in Q4 11 and will enroll patients at sites across the United States. ACTIVE PHASE I CLINICAL TRIALS GS 6624 (formerly AB0024) - Developed by Gilead Sciences, Inc. Phase 1 drug candidate (humanized monoclonal antibody targeting the human LOXL2 protein) for patients with IPF. An ongoing Phase 1 study is designed to evaluate the safety, tolerability, pharmacokinetics and pharmacodynamics of GS 6624 in adult patients with IPF;IW001 - Manufactured by Immuneworks. A Phase I study of the safety and tolerability of 3 doses of IW001 per 19


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day in patients with IPF over a 24 week treatment period. To explore the biologic effects of IW001 on T-cell and B-cell reactivity. This study will also explore relationships between Collagen V reactivity and clinical measures of lung function in patients with IPF. This study is now recruiting; and

PRM-151 - Manufactured by Promedior, Inc. A Phase 1b study of the safety, tolerability, pharmacokinetics, and pharmacodynamics of IV PRM-151 in patients with idiopathic pulmonary fibrosis has initiated in the US and the Netherlands. This study is now recruiting patients. PRM-151 is being developed for potential therapeutic uses to prevent, treat, and reduce fibrosis in a number of disease settings. Economic Dependence The Company’s business is substantially dependent on its own patent applications to use intellectual property protected by patent, trade secret and know-how owned by the Company. It is not expected that the Company’s business will be affected in the current financial year by the termination of the Dalhousie license. The Company’s business is substantially dependent on contracts to purchase the major part of its requirements for research and development services for the development of assays, formulation, pre-clinical research, clinical research and/or raw materials and manufactured product upon which its business depends. The Company expects that its business will be affected in the current financial year by the negotiation of new contracts and renegotiation or termination of contracts or sub-contracts. Seasonality Not Applicable Insurance We maintain commercial general liability insurance coverage to cover product liability claims arising from the use of our products. We also maintain liability insurance to cover specific clinical trials risks. Our insurance coverage, however, may not be sufficient to cover any claim for product liability. We are subject to product liability exposure and have limited insurance coverage. Any product liability claims or potential safety-related regulatory actions could damage our reputation and materially and adversely affect our business, financial condition and results of operations. We also provide directors’ and officers’ liability and company reimbursement insurance to cover all of our directors and officers against losses arising from claims we indemnify for. Our current officers and directors insurance coverage expires on July 22, 2014. We plan to renew the insurance upon its expiration. Facilities See Item 4D, “Information on the Company — Property, Plant and Equipment.” Legal Proceedings We are not currently a party to any material legal proceeding. From time to time, we may bring against others or be subject to various claims and legal actions arising in the ordinary course of business. Regulation Government Regulations The current and future operations and research and development activities of the Company are or will be subject to various laws and regulations in the countries in which the Company conducts or plans to conduct activities, including but not limited to the United States, Canada and the European Union. These laws and regulations govern the research, development, sale and marketing of pharmaceuticals, taxes, labor standards, occupational health and safety, toxic substances, chemical products and materials, waste management and other matters relating to the pharmaceutical industry. Permits, registrations or other authorizations may also be required to maintain operations and to carry out the Company’s future research and development activities, and these permits, registrations or authorizations will be subject to revocation, modification and renewal. Governmental authorities have the power to enforce compliance with lease conditions, regulatory requirements and the provisions of required permits, registrations or other authorizations, and violators may be subject to civil and criminal 20


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penalties including fines, injunctions, or both. The failure to obtain or maintain a required permit may also result in the imposition of civil and criminal penalties, and third parties may have the right to sue to enforce compliance. The Company expects to be able to comply with all applicable laws and regulations and does not believe that such compliance will have a material adverse effect on its competitive position. The Company has obtained and intends to obtain all permits, licenses and approvals required by all applicable regulatory agencies to maintain current operations and to carry out future research and development activities. U.S. Pharmaceutical Regulatory Agency Regulation by governmental authorities in the United States and other countries is a significant factor in the development, manufacture and marketing of pharmaceuticals. All of the Company’s product candidates will require regulatory approval by government agencies prior to commercialization. In particular, product candidates are subject to rigorous pre-clinical testing and clinical trials and other premarketing approval requirements of the FDA and regulatory authorities in other countries. Various federal, state and foreign statutes and regulations govern the manufacturing, safety, labeling, storage, record-keeping and marketing of pharmaceutical products. The lengthy process of seeking required approvals and the continuing need for compliance with applicable statutes and regulations require the expenditure of substantial resources. When and if regulatory approval is obtained for any of the Company’s product candidates, the approval may be limited in scope, which may significantly limit the indicated uses for which the product candidates may be marketed, promoted and advertised. In addition, approved pharmaceuticals and manufacturers are subject to ongoing review and discovery of previously unknown problems that may result in restrictions on the manufacture, sale or use of approved pharmaceuticals or in their withdrawal from the market. Pre-clinical Studies Before testing any compounds with potential therapeutic value in human subjects in the United States, stringent governmental requirements for pre-clinical data must be satisfied. Pre-clinical testing includes both in vitro and in vivo laboratory evaluation and characterization of the safety and efficacy of a drug and its formulation. Pre-clinical testing results obtained from these studies, including tests in several animal species, are submitted to the FDA as part of an investigational new drug application, or IND, and are reviewed by the FDA prior to the commencement of human clinical trials. These pre-clinical data must provide an adequate basis for evaluating both the safety and the scientific rationale for the initial trials in human volunteers. Clinical Trials If a company wants to conduct clinical trials in the United States to test a new drug in humans, an IND must be prepared and submitted to the FDA. The IND becomes effective if not rejected or put on clinical hold by the FDA within 30 days of filing the application. The IND process can result in substantial delay and expense. Clinical Trial Phases Clinical trials typically are conducted in three sequential phases, Phases 1, 2 and 3, with Phase 4 trials potentially conducted after marketing approval. These phases may be compressed, may overlap or may be omitted in some circumstances. Phase 1 clinical trials: After an IND becomes effective, Phase 1 human clinical trials can begin. These trials evaluate a drug’s safety profile and the range of safe dosages that can be administered to healthy volunteers or patients, including the maximum tolerated dose that can be given to a trial subject. Phase 1 trials also determine how a drug is absorbed, distributed, metabolized and excreted by the body, and duration of its action.Phase 2 clinical trials: Phase 2 clinical trials are generally designed to establish the optimal dose, to evaluate the potential effectiveness of the drug in patients who have the target disease or condition and to further ascertain the safety of the drug at the dosage given in a larger patient population.Phase 3 clinical trials: In Phase 3 clinical trials, the drug is usually tested in a controlled, randomized trial comparing the investigational new drug to a control (which may be an approved form of therapy) in an expanded and well-defined patient population and at multiple clinical sites. The goal of these trials is to obtain definitive statistical evidence of safety and effectiveness of the investigational new drug regime as compared to control in defined patient populations with a given disease and stage of illness. 21


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New Drug Application After completion of clinical trials, if there is substantial evidence that the drug is both safe and effective, a New Drug Application, is prepared and submitted for the FDA to review. The New Drug Application must contain all of the essential information on the drug gathered to that date, including data from pre-clinical studies and clinical trials, and the content and format of a New Drug Application must conform with all FDA regulations and guidelines. Accordingly, the preparation and submission of a New Drug Application is an expensive and major undertaking for a company. The FDA reviews all New Drug Applications submitted before it accepts them for filing and may request additional information from the sponsor rather than accepting a New Drug Application for filing. In such an event, the New Drug Application must be submitted with the additional information and, again, is subject to review before filing. Once the submission is accepted for filing, the FDA begins an in-depth review of the New Drug Application. By law, the FDA has 180 days in which to review the New Drug Application and respond to the applicant. The review process is often significantly extended by the FDA through requests for additional information and clarification. The FDA may refer the application to an appropriate advisory committee, typically a panel of clinicians, for review, evaluation and a recommendation as to whether the application should be approved and the scope of any approval. The FDA is not bound by the recommendation, but gives great weight to it. If the FDA evaluations of both the New Drug Application and the manufacturing facilities are favorable, the FDA may issue either an approval letter or an approvable letter, which usually contains a number of conditions that must be satisfied in order to secure final approval. If the FDA’s evaluation of the New Drug Application submission or manufacturing facility is not favorable, the FDA may refuse to approve the New Drug Application or issue a not approvable letter. Fast Track Designation and Priority Review The FDA’s fast track program is intended to facilitate the development and expedite the review of drugs that are intended for the treatment of a serious or life-threatening condition for which there is no effective treatment and which demonstrate the potential to address unmet medical needs for their condition. Under the fast track program, the sponsor of a new drug may request the FDA to designate the drug for a specific indication as a fast track product at any time during the clinical development process. In some cases, the FDA may designate a product for priority review. A product is eligible for priority review, or review within a targeted six-month time frame from the time a New Drug Application is accepted for filing, if the product provides a significant improvement compared to marketed products in the treatment, diagnosis or prevention of a disease. The Company regularly assesses its products for fast track potential but cannot guarantee any of its products will receive a priority review designation, or if a priority designation is received, that review or approval will be faster than conventional FDA procedures. Orphan Drug Designation The FDA may grant orphan drug designation to drugs intended to treat a rare disease or condition that affects fewer than 200,000 individuals in the United States, such as IPF. If the FDA grants orphan drug designation, the generic identity of the therapeutic agent and its potential orphan use are disclosed publicly by the FDA. Orphan drug designation does not convey any advantage in, or shorten the duration of, the regulatory review and approval process. If a product that has orphan drug designation subsequently receives FDA approval for the indication for which it has such designation, the product is entitled to orphan exclusivity, which means the FDA may not approve any other applications to market the same drug for the same indication, except in very limited circumstances, for up to seven years after receiving FDA approval. When appropriate, the Company will seek orphan status for certain indications that may be treated with its products. Other Regulatory Requirements Any products manufactured or distributed under FDA approvals are subject to continuing regulation by the FDA, including record-keeping requirements and reporting of adverse experiences with the products. Drug manufacturers and their subcontractors are required to register with the FDA and, where appropriate, state agencies, and are subject to periodic unannounced inspections by the FDA and state agencies for compliance with current good manufacturing practices and regulations which impose procedural and documentation requirements upon drug developers and each third party manufacturer they utilize. The FDA closely regulates the marketing and promotion of drugs. A company can make only those claims relating to safety and efficacy that are approved by the FDA. Failure to comply with these requirements can result in adverse publicity, warning letters, corrective advertising and potential civil and criminal penalties. Physicians may prescribe legally available 22


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drugs for uses that are not described in the product’s labeling and that differ from those tested by us and approved by the FDA. Such off-label uses are common across medical specialties. Physicians may believe that such off-label uses are the best treatment for many patients in varied circumstances. The FDA does not regulate the behavior of physicians in their choice of treatments. The FDA does, however, restrict manufacturers from communicating on the subject of off-label use. European Union Clinical Trials In common with the United States, the various phases of pre-clinical and clinical research in the European Union are subject to significant regulatory controls. The regulatory controls on clinical research in the European Union are now largely harmonized following the implementation of the Clinical Trials Directive 2001/20/EC, or CTD. Compliance with the national implementations of the CTD has been mandatory from May 1, 2004. However, variations in the member state review agencies continue to exist, particularly in the small number of member states that have yet to implement the CTD fully. All member states currently require regulatory and independent ethics committee approval of interventional clinical trials. European regulators and ethics committees also require the submission of adverse event reports during a study and a copy of the final study report. Marketing Authorization In the European Union, approval of new medicinal products can be obtained through the mutual recognition procedure or the centralized procedure. The mutual recognition procedure entails initial assessment by the national authorities of a single member state and subsequent review by national authorities in other member states based on the initial assessment. The centralized procedure entails submission of a single Marketing Authorization Application (“MAA”) to the European Medicines Agency (“EMEA”) leading to an approval that is valid in all European Union member states. EMEA approval is required for certain medicinal products, such as biotechnology products and certain new chemical entities, and optional, or available at the EMEA’s discretion for other new chemical entities or innovative medicinal products with novel characteristics. Under the centralized procedure, an MAA is submitted to the EMEA. Two European Union member states are appointed to conduct an initial evaluation of each MAA. These countries each prepare an assessment report, which are then used as the basis of a scientific opinion of the Committee for Medicinal Products for Human Use (“CHMP”). If this opinion is favorable, it is sent to the European Commission which drafts a decision. After consulting with the member states, the European Commission adopts a decision and grants a marketing authorization, which is valid throughout the European Union and confers the same rights and obligations in each of the member states as a marketing authorization granted by that member state. The European Union expanded its membership by ten in May 2004. Two more countries joined on January 1, 2007. Several other European countries outside of the European Union, particularly those intending to accede to the European Union, accept European Union review and approval as a basis for their own national approval. Advertising In the European Union, the promotion of prescription medicines is subject to intense regulation and control, including a prohibition on direct-to-consumer advertising. Some jurisdictions require that all promotional materials for prescription medicines be subjected to either prior internal or regulatory review and approval. Data Exclusivity For applications filed after October 30, 2005, European Union regulators offer eight years data exclusivity during which generic drug manufacturers cannot file abridged applications. This is followed by two years market exclusivity during which generic applications may be reviewed and approved but during which generic drug manufacturers cannot launch products. Other Regulatory Requirements If a marketing authorization is granted for the Company’s products in the European Union, the holder of the marketing authorization will be subject to ongoing regulatory obligations. A holder of a marketing authorization for the Company’s products is legally obliged to fulfill a number of obligations by virtue of its status as a Marketing Authorization Holder. 23


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While the associated legal responsibility and liability cannot be delegated, the Marketing Authorization Holder can delegate the performance of related tasks to third parties, provided that this delegation is appropriately documented. A Marketing Authorization Holder can therefore either ensure that it has adequate resources, policies and procedures to fulfill its responsibilities, or can delegate the performance of some or all of its obligations to others, such as distributors or marketing partners. The obligations of a Marketing Authorization Holder include: Manufacturing and Batch Release: Marketing Authorization Holders should guarantee that all manufacturing operations comply with relevant laws and regulations, applicable good manufacturing practices, with the product specifications and manufacturing conditions set out in the marketing authorization and that each batch of product is subject to appropriate release formalities;Pharmaco-vigilance: Marketing Authorization Holders are obliged to monitor the safety of products post- approval and to submit to the regulators safety reports on an expedited and periodic basis. There is an obligation to notify regulators of any other information that may affect the risk benefit ratio for the product;Advertising and Promotion: Marketing Authorization Holders remain responsible for all advertising and promotion of its products in the relevant jurisdiction, including promotional activities by other companies or individuals on their behalf. Some jurisdictions require that a Marketing Authorization Holder subject all promotional materials to either internal or prior regulatory review and approval;Medical Affairs/Scientific Service: Marketing Authorization Holders are required to have a function responsible for disseminating scientific and medical information on its medicinal products, predominantly to healthcare professionals, but also to regulators and patients;Legal Representation and Distributor Issues: Marketing Authorization Holders are responsible for regulatory actions or inactions of their distributors and agents, including the failure of distributors to provide a Marketing Authorization Holder with safety data within a timeframe that allows the Marketing Authorization Holder to fulfill its reporting obligations; andPreparation, Filing and Maintenance of the Application and Subsequent Marketing Authorization: Marketing Authorization Holders have general obligations to maintain appropriate records, to comply with the marketing authorization’s terms and conditions, to submit renewal applications and to pay all appropriate fees to the authorities. There are also general reporting obligations, such as an obligation to inform regulators of any information that may lead to the modification of the marketing authorization dossier or product labeling, and of any action to suspend, revoke or withdraw an approval or to prohibit or suspend the marketing of a product. The Company may hold marketing authorizations for products in its own name, or appoint an affiliate or a collaboration partner to hold the marketing authorization on its behalf. Any failure by a Marketing Authorization Holder to comply with these obligations may result in regulatory action against the Marketing Authorization Holder and its approvals and ultimately threaten our ability to commercialize our products. Canada In Canada, applications for a marketing authorization, known as a notice of compliance, are submitted to the Health Canada Therapeutic Products Directorate, which is the federal regulatory body that oversees the approval of pharmaceutical products for human use. Under the Food and Drugs Act (Canada) and the regulations there under, a manufacturer must present substantive scientific evidence of a product’s safety, efficacy and quality. At present, Health Canada targets 355 days for application review and approvals. Once the application is approved and the applicant receives a notice of compliance, the applicant has the right to sell the product in Canada. In addition to regulations in the United States, Europe and Canada, the Company is subject to a variety of foreign regulations governing clinical trials and commercial distribution of our future product candidates in other jurisdictions. Approvals Outside of the United States, Canada and the European Union The Company and its products will also be subject to a wide variety of foreign regulations governing development, manufacture and marketing. Whether or not FDA approval or European marketing authorization has been obtained, approval of a product by the comparable regulatory authorities of other foreign countries must still be obtained prior to manufacturing 24


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or marketing the product in those countries. The approval process varies from country to country and the time needed to secure approval may be longer or shorter than that required for FDA approval or a European marketing authorization. The Company cannot assure investors that clinical trials conducted in one country will be accepted by other countries or that approval in one country will result in approval in any other country. C. Organizational structure Not Applicable. D. Property, plant and equipment. As we operate as a virtual company and we have no products approved for marketing, and no research and development facilities or manufacturing plant, we therefore have no PP&E relating to manufacturing equipment at this time. However, we do have minimal amounts of lab equipment, computer equipment, furniture and fixtures and leasehold improvements relating to our head office. See the financial statements for the fiscal year ended December 31, 2014 included in this Form 20-F. Our head office is located at 1500 – 409 Granville St. in Vancouver BC, Canada. Item 5. Operating and Financial Review and Prospects A. Operating Results The following discussion of our financial condition and results of operations is based upon and should be read in conjunction with our financial statements for the fiscal years ended December 31, 2014, December 31, 2013 and December 31, 2012, have been prepared in accordance with International Financial Reporting Standards (“IFRS”). This discussion contains forward-looking statements that involve certain risks and uncertainties. We caution you that our businesses and financial performance are subject to substantial risks and uncertainties. See Item 3.D, “Key Information — Risk Factors”. The Company’s net loss for the year ended December 31, 2014, totaled $693,645 or $0.02 per share (FYE 2013 – $740,846 or $0.03 per share, FYE 2012 - $605,468 or $0.03 per share). The main contributor to this decreased loss in 2014 is the decrease in research and development, advertising and promotion and investor relations as well as the incurrence of a loss on the derivative liability. Revenues The Company has not generated any revenue from the sale of drug therapies. The Company has not recognized any revenue since inception through December 31, 2014. The Company does not expect to receive any revenues until after the completion of the Phase 2 trial of PTL-202. The Company’s revenues will be earned through upfront payments from licenses, milestone payments included in-licenses and royalty income from licenses. The Company’s revenues will depend on out licensing the Company’s drug candidates to suitable development and commercialization partners and its partners’ abilities to successfully complete clinical trials and commercialize the Company’s drug candidates worldwide. General and Administrative Expenses General and administrative costs consist primarily of personnel related costs, non-intellectual property related legal costs, accounting costs and other professional and administrative costs associated with general corporate activities. During the year ended December 31, 2014, the total general and administrative costs were $202,809 as compared to the year ended December 31, 2013 during which period the total general and administrative costs were $90,084. The decreased loss is largely due to an increase in advertising and promotion of $119,588, investor relations of $36,175 and professional fees of $9,757 in the year ended December 31, 2014 as compared to the year ended December 31, 2013. From 2013 and beyond, as PTL-202 begins clinical development and as operations are developed to move PTL-202 and other drug candidates through the clinical trial process, general and administrative expenses will increase. Increases in personnel costs, professional fees and contract services will make up a significant portion of these planned expenditures. 25


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Intellectual Property and Intangible Assets All license and option fees paid to licensors for intellectual property licenses are accrued to intangible assets on the Company’s financial statements. In addition, any expenses for intellectual property protection including patent lawyers services fees and any filing fees with government agencies or the World Intellectual Property Organization are accrued to intangible assets. This cost will decrease in the twelve months following the date of this prospectus as no new filings are anticipated. Interest Income Interest income consists of interest earned on the Company’s cash and cash equivalents. There was interest income in 2014 of $Nil (2013- $16,861, 2012 – $104,378). Profits At this time, the Company is not anticipating profit from operations. Until such time as the Company is able to realize profits from the out licensing of products under development, the Company will report an annual deficit and will rely on its ability to obtain equity and/or debt financing to fund on-going operations. For information concerning the business of the Company, please see “Item 4. Information on the Company”. Contributed Surplus, which arises from the recognition of the estimated fair value of stock options and warrants, was $289,766 for fiscal year 2014, compared with $123,704 for fiscal year 2013 and $206,212 for fiscal year 2012. The increase in contributed surplus was due to the issuance of stock options to officers and directors. As a result of the net and comprehensive loss for the fiscal year 2014 of $693,645 (compared with $740,846 for fiscal year 2013 and $605,468 for fiscal year 2012), the deficit as of December 31, 2014 increased to $3,955,537 from $3,263,058 as of December 31, 2013, for an increase of $692,479. The deficit as of December 31, 2013 increased to $3,263,058 from $2,662,918 as of December 31, 2012, for an increase of $600,140. During the fiscal year 2014, the Company’s net cash provided by financing activities increased to $197,785, compared with $731,273 for fiscal year 2013 and $315,518 for fiscal year 2012. At present, the Company’s operations do not generate cash inflows and its financial success after 2012 is dependent on management’s ability to continue to obtain sufficient funding to sustain operations through the development stage and successfully bring the Company’s technologies to the point that they may be out licensed so that the Company achieves profitable operations. The research and development process can take many years and is subject to factors that are beyond the Company’s control. In order to finance the Company’s future research and development and to cover administrative and overhead expenses in the coming years the Company may raise money through equity sales. Many factors influence the Company’s ability to raise funds, including the Company’s track record, and the experience and caliber of its management. Actual funding requirements may vary from those planned due to a number of factors, including the progress of research activities. Management believes it will be able to raise equity capital as required in the long term, but recognizes there will be risks involved that may be beyond their control. Should those risks fully materialize, it may not be able to raise adequate funds to continue its operations. Comparison of Years Ended December 31, 2014 and 2013 31-Dec-14

   31-Dec-13

   Change

   Change$

   $

   $

   %Revenue

   Nil

   Nil

   0

   N/AResearch and Development*

   Nil

   Nil

   0

   N/AWages and Benefits

   160,947

   157,916

   3,031

   2%Professional Fees

   168,490

   178,247

   -9,757

   -5%Advertising and Promotion

   

   

   -119,588

   -64%
 26


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67,923

   187,511Investor Relations

   25,075

   61,250

   -36,175

   -59%General and Administrative

   202,809

   90,084

   112,725

   125%Insurance

   30,194

   22,461

   7,733

   34%Rent and Occupancy Cost

   14,543

   13,284

   1,259

   9%Interest Expense (Income)

   22,877

   16,861

   6,016

   36%Other Expense

   787

   12,532

   -11,745

   -94%Net and Comprehensive Loss

   693,645

   740,146

   -46,501

   -15%
 *

   The Research and Development expense for 2014 is Nil because all research and development during the year was carried out by our partner on the development of PTL-202, IntelGenx Corp. Comparison of Quarters EndedDecember 31, 2014 and 2013 December

   September

   June

   March

   December

   September

   June

   March31, 2014

   31, 2014

   30, 2014

   31, 2014

   31, 2013

   31, 2013

   30, 2013

   31, 2013$

   $

   $

   $

   $

   $

   $

   $Total Revenues

   Nil

   Nil

   Nil

   Nil

   Nil

   Nil

   Nil

   NilNet Loss

   (234,285)

   (135,543)

   (149,592)

   (174,225)

   (308,768)

   (104,895)

   (152,648)

   (174,535)Loss per Share basic and diluted

   (0.01)

   (0.00)

   (0.00)

   (0.00)

   (0.01)

   (0.00)

   (0.01)

   (0.01)Cash

   1,513

   8,370

   1,905

   10,220

   180,692

   7,523

   1,927

   7,220Total Assets

   67,315

   87,769

   81,660

   122,296

   287,043

   136,900

   78,413

   121,075Non-Current Liabilities

   Nil

   Nil

   Nil

   Nil

   Nil

   Nil

   Nil

   Nil
 Critical Accounting Estimates The Company’s accounting policies are presented in Note 3 of the December 31, 2012 audited financial statements. The preparation of financial statements in accordance with International Financial Reporting Standards (IFRS) requires management to select accounting policies and make estimates. Such estimates may have a significant impact on the financial statements. Actual amounts could differ materially from the estimates used and, accordingly, affect the results of the operations. These include: the assumptions used for the determinations of the timing of future income tax events;the carrying values of property, plant and equipment, intangible assets such as technology licenses and patents, derivative liability, convertible note, and the valuation of stock-based compensation expense. Changes in Accounting Policies including Initial Adoption The Company has adopted IFRS, as of January 1, 2010, as discussed in Note 2(a) of the December 31, 2014 Financial Statements. Financial Instruments The Company’s financial instruments consist of cash and cash equivalents, accounts payable and accrued liabilities, amounts due to shareholders, shareholder demand loan, the liability portion of the convertible note and the derivative liability. Cash and cash equivalents are classified as financial assets. Unless otherwise noted, it is management’s opinion that the Company is not exposed to significant interest, currency or credit risks arising from financial instruments. The fair value of cash and 27


---

cash equivalents and accounts payable and accrued liabilities approximates their carrying values due to their short-term maturity or capacity for prompt liquidation. Accounts payable and accrued liabilities, amounts due to shareholders, shareholder demand loan, the liability portion of the convertible note and the derivative liability are classified as financial liabilities. Accounts payable and accrued liabilities, shareholder demand loan, balances due to shareholder and the liability portion of the convertible note are recognized initially at fair value, and subsequently stated at amortized cost. The derivative financial liability is initially measured at fair value, with subsequent measurement to fair value at the end of each reporting period. Foreign exchange risk is the risk arising from changes in foreign currency fluctuations. The Company does not use any derivative instruments to reduce its exposure to fluctuations in foreign currency rates. It is the opinion of management that the foreign exchange risk to which the Company is exposed is minimal. Limitations of Controls and Procedures The Company’s management, including the Chief Executive Officer and Chief Financial Officer, believe that any disclosure controls and procedures or internal controls over financial reporting, no matter how well conceived and operated, can provide only reasonable, not absolute, assurance that the objectives of the control system are met. Further, the design of a control system must reflect the fact that there are resource constraints, and the benefits of controls must be considered relative to their costs. Because of the inherent limitations in all control systems, they cannot provide absolute assurance that all control issues and instances of fraud, if any, within the Company have been prevented or detected. These inherent limitations include the realities that judgments in decision-making can be faulty, and that breakdowns can occur because of simple error or mistake. Additionally, controls can be circumvented by the individual acts of some persons, by collusion of two or more people, or by unauthorized override of the control. The design of any systems of controls also is based in part upon certain assumptions about the likelihood of future events, and there can be no assurance that any design will succeed in achieving its stated goals under all potential future conditions. Accordingly, because of the inherent limitations in a cost effective control system, misstatements due to error or fraud may occur and not be detected. B. Liquidity and Capital Resources. Overview The Company is a development stage company and therefore has no regular cash inflows. Selected financial data pertaining to liquidity and capital resources for the fiscal years ended December 31, 2014 and December 31, 2013 is presented below. Comparison of Years Ended December 31, 2014 and 2013 %Chang$ Change

   eYear ended

   2014

   2013

   between two

   betweenyears

   twoyears$

   $Cash and Cash Equivalents

   1,513

   180,692

   -179,179

   -99%Current Assets

   2,825

   224,688

   -221,863

   -99%Current Liabilities

   943,076

   727,188

   215,888

   30%Working Capital

   -940,251

   -502,500

   -437,751

   87%Accumulated Deficit

   3,955,537

   3,263,058

   692,479

   21%Cash used in Operations

   366,769

   546,866

   -180,097

   -33%Cash flows from Financing Activities

   197,785

   731,273

   -533,488

   -73%Interest Income

   $Nil

   $Nil

   $Nil

   %Nil
 28


---

As of December 31, 2014, the Company had cash and cash equivalents of $1,513 (compared with $180,692 for fiscal year 2013 and $9,854 for fiscal year 2012) and negative working capital of ($940,251) (compared with ($502,500) for fiscal year 2013 and ($529,416) for fiscal year 2012). Working capital is calculated as current assets less current liabilities. Cash and cash equivalents decreased by $179,179 between fiscal year 2014 and fiscal year 2013 due to an increase in financing during the period. Working Capital decreased by $437,751 from fiscal year 2014 to fiscal year 2013 due to the decrease in restricted cash from the irrevocable subscription agreements upon the cancellation of those agreements and a reclassification of amounts due to shareholders from non-current to current liabilities. Total liabilities only increased by $215,888 for the fiscal year ended December 31, 2014 when compared to the total liabilities for the fiscal year ended December 31, 2013. Operating Activities Cash utilized in operating activities during fiscal year 2014 was $366,769 (compared with $546,866 for fiscal year 2013 and $304,983 for fiscal year 2012). The increase in cash utilized in operations during fiscal year 2014 as compared to fiscal year 2013 was due to an increase in advertising and promotion, research and development and investor relations. This increase was offset by a decrease in expenses for Professional Fees. The increase in cash utilized in operations during fiscal year 2014 as compared to fiscal year 2013 was due to an increase in professional fees related to the company becoming a reporting Company. This increase in the fiscal year 2014 was offset by reductions in wages and benefits, travel, research and development, as well as computer expenses. Investing Activities Investing activities primarily include additions to fixed assets and intangible assets. Net cash used in investing activities was $10,195, $13,569 and $9,775 in fiscal year ended December 31, 2014, 2013 and 2012, respectively. In 2014, 2013 and 2012 the investing activities represent mainly investment in patents and the development of intellectual property. Financing Activities The Company’s cash inflows from financing activities comprised proceeds from common share issuances, warrants and warrant exercises for cash during fiscal year ended December 31, 2014 totaling $197,785. The Company’s cash inflows from financing activities comprised proceeds from common share issuances, warrant exercises, re-pricing of shares for cash and cash subscriptions received under the terms of the irrevocable subscription agreements during fiscal year ended December 31, 2013 totaling $731,273, compared with $315,788 for fiscal year ended December 31, 2012. Cash from financing activities increased by $533,488 between fiscal year 2014 and fiscal year 2013 and decreased by $415,485 between fiscal year 2013 and fiscal year 2012. Capital Expenditures Capital expenditures include $nil to acquire laboratory equipment in 2014, $Nil in 2013 and $Nil in 2012. There were no capital expenditures during the quarters ended December 31, 2014 or 2013. C. Research and Development Research and development expense consists primarily of salaries for management of research contracts and research contracts for pre-clinical studies, clinical studies and assay development as well as the development of clinical trial protocols and application to government agencies to conduct clinical trials, including consulting services fees related to regulatory issues and business development expenses related to the identification and evaluation of new drug candidates. Research and development costs are expensed as they are incurred. Comparison of Years Ended December 31, 2014, 2013 and 2012 From inception through to December 31, 2014, the Company incurred total expenses in the development of its intellectual property of $1,836,405, which includes $548,204 of research and development expenses (research and development expenses 29


---

on the financial statements have been offset by $53,277 in IRAP funding and $187,427 in SR&ED tax credits), $398,431 of professional fees and $889,770 of wages and benefits. Year ended

   

   

   Year ended

   

   

   Year endedDecember 31, 2014

   

   

   December 31, 2013

   

   

   December 31, 2012Research and Development ExpensesPersonnel, Consulting, and Stock-based Compensation

   

   $Nil

   

   

   $Nil

   

   

   $NilLicense Fees and Subcontract research

   

   $Nil

   

   

   $Nil

   

   

   $51,790Facilities and Operations

   

   $Nil

   

   

   $Nil

   

   

   $5,659Less: Government contributions

   

   $Nil

   

   

   $Nil

   

   

   ($6,508)Total

   

   $Nil

   

   

   $Nil

   

   

   $50,941
 The increase in research expense in 2012 is due to the initiation of clinical trials of PTL-202. The fees paid to the contract research operation for the drug/drug interaction trial in India was $47,134. There is no research and development expense for 2014 and 2013 as all research and development was conducted by IntelGenx Corp. under the agreement the Company has with them. The decrease in R&D expenses in fiscal year 2013 as compared to fiscal year 2012 is a reflection of the development of the bio-analytical assay for Pentoxifylline and NAC in fiscal year ended December 31, 2012. In fiscal year 2010 the R&D expense for personnel, consulting and stock based compensation was offset by $10,000 that was received from a potential development partner on the signing of a letter of intent for the development of PTL-202. Additional financing will be required to complete the development and commercialize PTL-202. There is no assurance that such financing will be available or that the Company will have the capital to complete this proposed development and commercialization. The Company was able to complete the formulation, drug/drug interaction study of PTL-202, analyzing the blood samples and analyzing the data from the drug/drug interaction trial in 2012 as planned. The Company’s clinical development studies and regulatory considerations relating to PTL-202 are subject to risks and uncertainties that may significantly impact its expense estimates and development schedules, including: the scope, rate of progress and cost of the development of PTL-202;uncertainties as to future results of the pivotal bio equivalency study of PTL-202;the Company’s ability to enroll subjects in clinical trials for current and future studies;the Company’s ability to raise additional capital; andthe expense and timing of the receipt of regulatory approvals. In addition to the formulation and clinical development plans for PTL-202 the Company may begin development of PTL-303 for the treatment of Liver Cirrhosis. The Company will only be able to begin development of PTL-303 if additional funds are available. There is no guarantee that these funds will be available to the Company and, if they are available, they may not be available on acceptable terms. Development of PTL-303 may significantly impact the Company’s expense projections and development timelines. D. Trend Information Other than as disclosed elsewhere in this Form 20-F, we are not aware of any trends, uncertainties, demands, commitments or events for the period from January 1, 2010 to December 31, 2014 that are reasonably likely to have a material adverse effect on our revenues, income, profitability, liquidity or capital resources, or that caused the disclosed financial information to be not necessarily indicative of future operating results or financial conditions. E. Off Balance Sheet Arrangements The Company is not a party to any off-balance sheet arrangements that have, or are reasonably likely to have, a current or future material effect on the Company’s financial condition, changes in financial condition, revenues, expenses, results of operations, liquidity, capital expenditures or capital resources. 30


---

F. Tabular Disclosure of Contractual Obligations The Company has no known contractual obligations specified in Item 5.F.1 as of the latest fiscal year end balance sheet date, other than the license agreement with Dalhousie University which was cancelled on January 9, 2013. Item 6. Directors, Senior Management and Employees Directors and Senior Management The following table sets forth certain information relating to our directors and executive officers as of April 30, 2015: Name and

   Principal Occupation for Past Five

   Date of

   Common Shares

   Percentage ofPosition

   Years

   Appointment to

   Held

   CommonOffice

   

   SharesOutstandingDouglas H. Unwin, B.Sc., BA President, CEO, Director

   President & CEO of the Company sinceSeptember 2005

   September 12, 2005

   4,539,667

   11.2%Douglas Wallis Director, CA

   Partner, Smyth Ratcliffe CharteredAccountants

   May 10, 2011

   350,510

   0.9%M. Greg Beniston, BA, LLB Chairman

   Senior Legal Counsel, CHC HelicopterMay 2006 to present, Sole Practitioner, January 2004 to present

   Chairman since October 31, 2007; Corporate Secretary: from September 2005 to October 31, 2007

   400,000

   1.0%Wendi Rodrigueza, PhD Director

   VP Product Development, ProNAiTherapeutics, Inc. September 2006 to present, Director Project Management, NovartisSeptember 2005, to September 2008, Sr.

   November 5, 2009

   100,000

   0.2%Derick Sinclair, CA CFO and Corporate Secretary

   CFO, Cadan Resource Corporation, May 2007 to present, CFO Madeira MineralsLtd2009 to present, CFO Viscount Mining Ltd 2010 to present.

   Chief Financial Officer since September 1, 2007; Corporate Secretary Since October 31, 2007

   435,510

   1.1%
 The Company’s Audit Committee consists of Doug Unwin, Greg Beniston and Douglas Wallis. The Company’s Compensation Committee consists of Doug Unwin, Greg Beniston and Douglas Wallis. The following is a brief description of the background of the key management, directors and the promoters of the Company: Douglas H. Unwin, B.Sc., MBAPresident and Chief Executive Officer& Director -Mr. Unwin is the Company’s founder and has served as President and Chief Executive Officer since the Company’s inception in September 2005. Mr. Unwin graduated from the University of British Columbia with a B.Sc. in Biology in 1981. In 1985 he graduated from the University of Saskatchewan with a Master’s in Business Administration. He is a full time employee of the Company and devotes the majority of his working hours to the Company’s business. Mr. Unwin is responsible for the Company’s overall strategic direction and the implementation of that strategy. He is based at the Company’s head office in Vancouver, British Columbia. Mr. Unwin is an experienced executive with 27 years of diverse experience including 22 years as an entrepreneur in life sciences, aquaculture and telecommunications. He has spent his last 12 years focused on life science start-ups, technology commercialization and venture capital financing. Mr. Unwin was an associate with Neuro Discovery Inc. a venture capital company focused on investing in therapies for neurological disorders. During his tenure Mr. Unwin reviewed numerous business plans and assisted in the structuring of investments. Prior to founding the Company, Mr. Unwin was the CEO of Med BioGene Inc. a start-up medical device company. 31


---

Derick Sinclair, B.Comm., CAChief Financial Officer- Mr. Sinclair, is an experienced CFO having worked with US and Canadian public and private companies for over 20 years. He is a contractor and devotes approximately 15% of his time to the Company. His duties with the Company include, bookkeeping, financial management and reporting, assisting the CEO where necessary and liaising between the board and the Company’s auditors. Mr. Sinclair began his accounting career in 1982 as an auditor with KPMG Peat Marwick Thorne. He received his CA designation in 1985 and his Bachelor of Commerce (Honours) University of Windsor in 1982. From 1985 to 2003, Mr. Sinclair was employed by BC Rail and its subsidiaries and their successors. He began at BC Rail as a Manager in General Accounting rising in 1998 to the role of CFO & VP Administration Westel Telecommunications Ltd. Mr. Sinclair currently operates DR Financial Services Limited focused on providing controller services to small and medium size public companies. He is also CFO of Cadan Resources Corporation, Madeir Minerals Ltd, and Viscount Mining Ltd publicly traded exploration companies on the TSX Venture Exchange. M. Greg Beniston, BA, LLBChairman Of the Board & Director- Mr. Beniston, is an experienced counsel with expertise in technology, corporate/commercial, securities, corporate governance and aviation. Mr. Beniston received his BA (Honours) with a major in Commerce from Simon Fraser University in 1979. Greg received his LLB from the University of British Columbia in 1987. Mr. Beniston devotes less than 10% of his time to the affairs of the Company. He was Legal Counsel and Corporate Secretary for Xillix Technologies Corp. (TSX) a cancer imaging company from 1993 until 2000 and was Vice President Legal and Corporate Secretary of MDSI Mobile Data Solutions Inc. (TSX, NASDQ) from 1996 to 2003. Since 2007 Mr. Beniston has been employed by The CHC Helicopter Group Of Companies as Senior Legal Counsel. Mr. Beniston also served as the Company’s Corporate Secretary from inception through October 2007. Douglas Wallis, CADirector-A Chartered Accountant for over 30 years, Doug Wallis specializes in work with Canadian and US public companies. Doug received his CA after completing a five-year post-secondary education articling program. His work involves everything from assisting in the structure of initial public offerings to comprehensive audit services. Doug's extensive experience in accounting and the rules of professional conduct are also highly valued at Smythe Ratcliffe LLP. As a partner heavily involved in Professional Standards, he brings a commitment to integrity, professionalism and quality that permeates throughout the entire leadership team. Previously, Doug was the Director of Professional Advisory Services, Institute of Chartered Accountants of BC. Mr. Wallis devotes less than 10% of his time to the affairs of the Company. Besides his work at Smythe Ratcliffe, Doug is the Past Chairman of the Board for the Canadian Network for International Surgery (CNIS). Wendi Rodrigueza, PhD.Director– Dr. Rodrigueza brings over 16 years of drug development experience to the Company’s Board of Directors. Ms. Rodrigueza devotes less than 10% of her time to the affairs of the Company.From 1994 – 1998 she conducted post doctorate fellow studies at Thomas Jefferson University and The Medical College of Pennsylvania. Wendi received her Ph.D. from the University of British Columbia in 1994. From 1998 to 2003, she was employed by Esperion Therapeutics Inc. culminating in the position of Director, Product Development. Dr. Rodrigueza was a co-inventor of the technology Esperion was founded on. Esperion was sold to Pfizer Global Research and Development for $1.3 billion in 2003. She is currently VP of Drug Development for ProNAi Therapeutics and since 2003 has been a consultant to several companies including CuraGen Corporation and Novartis Institute of Biomedical Research. Other Reporting Company Experience The following table sets out the directors, officers and promoters of the Company that are, or have been within the last five years, directors, officers or promoters of other companies that are or were reporting companies in any Canadian jurisdiction: Name of Director,

   Name of Reporting Company

   Exchange

   Position

   PeriodOfficer or PromoterDerick Sinclair, CA

   Cadan Resources Corporation

   TSX Venture

   CFO

   May 2007 - PresentDerick Sinclair, CA

   Madeira Minerals Ltd.

   NEX

   CFO

   May 2009 - Present
 B. Compensation. Remuneration and Borrowing The Board of Directors may determine remuneration to be paid to the directors. The Compensation Committee assists the Board of Directors in reviewing and approving the compensation structure for the directors. The Board of Directors may exercise all the powers of the Company to borrow money and to mortgage or charge its undertaking, property and uncalled 32


---

capital, and to issue debentures or other securities whether outright or as security for any debt obligations of the Company or of any third party. Compensation of Directors and Executive Officers In 2014, we paid aggregate cash compensation of approximately $272,956 to our directors and executive officers as a group. We do not pay or set aside any amounts for pension, retirement or other benefits for our officers and directors. We provide directors and officer’s liability and company reimbursement insurance to cover all of our directors and officers against losses arising from claims we indemnify for. Our current insurance coverage will expire on November 9, 2014. We plan to renew the insurance upon its expiration. 2014 Stock Option Plan The Company's Stock Option Plan (the “2014 Stock Option Plan”) is a “rolling” stock option plan pursuant to which directors, officers, employees and consultants of the Company are awarded options to purchase Common Shares (the “Options”). The 2014 Stock Option Plan was last approved by the Shareholders at the Company’s annual and special meeting of the Shareholders held on September 22, 2014. Pursuant to the policies of the CSE, a "rolling" plan must receive yearly shareholder approval. The 2014 Stock Option Plan has been established to advance the interests of the Company or any of its subsidiaries and affiliates by encouraging the directors, officers, employees and consultants of the Company, or any of its subsidiaries or affiliates, to acquire Common Shares thereby increasing their proprietary interest in the Company, encouraging them to remain with the Company, or its subsidiaries or affiliates, and providing them with additional incentive in the conduct of their affairs for and on behalf of the Company, its subsidiaries and affiliates. Some key provisions of the 2014 Stock Option Plan are as follows: (a) The aggregate number of Common Shares reserved for issuance under the 2014 Stock Option Plan must not exceed 10% of outstanding Common Shares (on a non-diluted basis). The Common Shares in respect of which Options are not exercised shall be available for subsequent Option grants. No fractional shares may be purchased or issued thereunder; (b) the aggregate number of Common Shares reserved for issuance under the 2014 Stock Option Plan and granted to any one person within a 12 month period may not exceed 5% of the outstanding Common Shares; (c) the issuance of Common Shares to insiders pursuant to the 2014 Stock Option Plan within a 12 month period may not exceed 10% of the outstanding Common Shares; (d) the issuance of Common Shares to any one insider and such insider's associates pursuant to the 2014 Stock Option Plan within a 12 month period may not exceed 10% of the outstanding Common Shares; (e) the issuance of Common Shares to any one Consultant (as such term is defined in the Canadian Securities Exchange Corporate Finance Manual) pursuant to the 2014 Stock Option Plan within a one year period may not exceed 2% of the outstanding Common Shares. In the event of a participant ceasing to be a director, officer or employee of the Company or a subsidiary of the Company for any reason other than death, including the resignation or retirement of the participant as a director, officer or employee of the Company or the termination by the Company of the employment of the participant, prior to the expiry time of an Option, such Option, if vested, shall cease and terminate on the Ninetieth (90th) day following the effective date of such resignation or termination. In the event of the death of a participant on or prior to the expiry time of an Option, such Option, if vested, may be exercised as to such of the Common Shares in respect of which such Option has not previously been exercised (including in respect of the right to purchase Common Shares not otherwise vested at such time), by the legal personal representatives of the participant at any time up to and including (but not after) a date one year following the date of death of the participant provided that the Board may extend the date of termination for a period ending up to twelve (12) months from the date of death of the participant or the expiry time of such Option, whichever occurs first. Pursuant to the 2014 Stock Option Plan, the Company can, at any time, have a number of Options outstanding equal to up to 10% of the then outstanding number of Common Shares. In the event of the exercise or cancellation of any Options, the Company could make a further grant of Options, provided that the 10% maximum is not exceeded Equity Compensation Plan Information as of December 31, 2014 Plan Category

   Column (a)

   Column (b)

   Column (c)Number of securities to

   Weighted-average

   Number of securities remainingbe issued upon exercise

   exercise price of

   available for future issuanceof outstanding options

   outstanding options

   under equity compensation plansEquity compensation plans approved by security holders

   3,675,000

   N/A

   222,682 33


---

Equity compensation plans not approved by security holders

   Nil

   N/A

   NilTotal

   3,675,000

   N/A

   222,682
 Outstanding Options as ofApril 30, 2015 Name

   Number of securities underlying

   Option exercise

   Option expiration dateunexercised options (#)

   price ($)

   (d)(a)

   (b)

   (c)Douglas H. Unwin - CEO

   500,000

   $0.06

   June 11, 2015150,000

   $0.10

   December 21, 201775,000

   $0.10

   July 3, 2017100,000

   $0.10

   April 4, 2018100,000

   $0.10

   March 2, 2019Derick Sinclair - CFO

   150,000

   $0.10

   December 21, 2017100,000

   $0.10

   April 4, 2018100,000

   $0.10

   March 2, 2019
 Notes:(1)

   The option-based awards relate to those stock options awarded pursuant to the Option Plan.(2)

   The value of unexercised in-the-money options was calculated based on the difference between the closing price of the Shares underlying the options as at December 31, 2014, the last closing price prior to the Corporation's year end, which was $0.03 and the exercise price of the option.(3)

   The Corporation does not have any share-based incentive compensation plans outstanding. Employment Agreements The Company entered into an employment agreement with Mr. Unwin effective as of January 1, 2010. This is the only employment agreement the Company has entered into. Under the agreement, Mr. Unwin is to receive an annual base salary of $160,000, subject to increases at the discretion of the Company’s Board of Directors. Mr. Unwin is also eligible for a discretionary performance bonus as determined by the Company’s Board of Directors. Under the agreement, other than in the event of a change in control of the Company, Mr. Unwin may terminate his employment at any time by giving three months prior written notice of the effective date of his resignation. If the Company terminates Mr. Unwin’s employment without cause, the Company is obligated to pay to him a lump sum of up to 12 months of his then current base salary plus such other sums owed for arrears of salary, vacation pay and any performance bonus. The Company is also obligated to maintain Mr. Unwin’s benefits during the notice period. If Mr. Unwin obtains a new source of remuneration for personal services, the payment of benefits will cease six months from the date of termination of his employment, excluding the notice period. As of March 1, 2011 Mr. Unwin voluntarily reduced his annual base salary to $120,000. This reduction will remain in place until January 31, 2013. On June 1, 2011, Mr. Unwin took a further annual base salary reduction to $100,000. As of February 1, 2012, Mr. Unwin’s salary has been returned to $160,000 per year. As of March 1, 2011 Mr. Sinclair voluntarily reduced his base annual fee to $18,000. This reduction remained in place until January 31, 2013. Mr. Sinclair’s base annual fee was returned to $36,000 as of February 1, 2012. Change in Control Agreements As part of his Employment Agreement, the Company entered into a change of control agreement with Mr. Unwin effective as of January 1, 2010. This is the only change of control agreement the Company has entered into. In the event of a potential change in control and until 12 months after a change in control, unless Mr. Unwin terminates his employment with the Company for good reason, Mr. Unwin will continue to diligently carry out his duties and obligations under his employment agreement. If within 12 months following a change of control of the Company, Mr. Unwin terminates his employment for good reason, or the Company terminates his employment other than for cause, the Company is obligated to pay to Mr. Unwin a lump sum equal to 12 months of his then current base salary plus other sums owed for arrears of salary, vacation pay and any performance bonus. In such case, The Company is also obligated to maintain Mr. Unwin’s benefits for the 12-month period and his unvested stock options will immediately vest. 34


---

Board Practices Duties of Directors Under British Columbia law, our directors have a duty of loyalty to act honestly in good faith with a view to our best interest. Our directors also have a duty to exercise the care, diligence and skills that a reasonably prudent person would exercise in comparable circumstances. In fulfilling their duty of care to us, our directors must ensure compliance with our amended and restated memorandum and articles of association. A shareholder has the right to seek damages if a duty owed by our directors is breached. The functions and powers of our Board of Directors include, among others: convening shareholders’ annual general meetings and reporting its work to shareholders at such meetings;issuing authorized but unissued shares and redeem or purchase outstanding shares of our company;declaring dividends and distributions;appointing officers and determining the term of office and compensation of officers;exercising the borrowing powers of our company and mortgaging the property of our company; andapproving the transfer of shares of our company, including the registering of such shares in our share register. Qualification There is no shareholding qualification for directors. Board Committees Our Board of Directors has established an Audit Committee and a Compensation Committee. AUDIT COMMITTEE The Audit Committee has various responsibilities as set forth in Multilateral Instrument 52-110 (“MI 52-110”). The Audit Committee oversees the accounting and financial reporting practices and procedures of the Company and the audits of the Company’s financial statements. The principal responsibilities of the Audit Committee include: (i) overseeing the quality, integrity and appropriateness of the internal controls and accounting procedures of the Company, including reviewing the Company’s procedures for internal control with the Company’s auditors and Chief Financial Officer; (ii) reviewing and assessing the quality and integrity of the Company’s internal and external reporting processes, its annual and quarterly financial statements and related management discussion and analysis, and all other material continuous disclosure documents; (iii) establishing separate reviews with management and external auditors of significant changes in procedures or financial and accounting practices, difficulties encountered during auditing, and significant judgments made in management's preparation of financial statements; (iv) monitoring compliance with legal and regulatory requirements related to financial reporting; (v) reviewing and pre-approving the engagement of the auditor of the Company and independent audit fees; and (vi) assessing the Company’s accounting policies, and considering, approving, and monitoring significant changes in accounting principles and practices recommended by management and the auditor. Audit Committee Charter There is no change in audit committee charter for the year. Composition of the Audit Committee As noted above, the members of the Audit Committee are Douglas Unwin, Greg Beniston and Douglas Wallis, all of whom are considered independent pursuant to NI 52-110, except Mr. Unwin who is also an officer of the Company. All members of the Audit Committee are considered to be financially literate. A member of the Audit Committee is independentif the member has no direct or indirect material relationship with the Company. A material relationship means a relationship which could, in the view of the Board, reasonably interfere with the exercise of a member’s independent judgment. A member of the Audit Committee is considered financially literateif he or she has the ability to read and understand a set of financial statements that present a breadth and level of complexity of accounting issues that are generally comparable to the breadth and complexity of the issues that can reasonably be expected to be raised by the Company. 35


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Relevant Education and Experience Please see above for the biographies of Douglas Unwin, Greg Beniston and Douglas Wallis. Audit Committee Oversight The Audit Committee has not made any recommendations to the Board to nominate or compensate any external auditor. Reliance of Certain Exemptions The Company’s auditors have not provided any material non-audit services. The Company is relying on the exemptions provided for in Section 6.1 of NI 52-110 in respect of the composition of its Audit Committee and in respect of certain of its reporting obligations under NI 52-110. Pre-Approval Policies on Certain Exemptions The Audit Committee has not adopted specific policies and procedures for the engagement of non-audit services. Compensation Committee Our Compensation Committee consists of Mr. Beniston, Mr. Wallis and Mr. Unwin. Mr. Beniston is the chairman of our Compensation Committee. Our Board of Directors has determined that Mr. Wallis and Mr. Beniston are “independent directors” within the meaning of NYSE Manual Section 303A. Our Compensation Committee is responsible for, among other things: reviewing and approving corporate goals and objectives relevant to the compensation of our co-chief executive officers, evaluating the performance of our co-chief executive officers in light of those goals and objectives, and setting the compensation level of our co-chief executive officers based on this evaluation;reviewing and making recommendations to our Board of Directors regarding our compensation policies and forms of compensation provided to our directors and officers;reviewing and making recommendations to our co-chief executive regarding the compensation level, share- based compensation and bonuses for our officers other than our co-chief executive officers;reviewing and determining cash and share-based compensation for our directors;administering our equity incentive plans in accordance with the terms thereof; andsuch other matters that are specifically delegated to the Compensation Committee by our Board of Directors from time to time. Corporate Governance General Effective June 30, 2005, NI 58-101 and NP 58-201 were adopted in each of the provinces and territories of Canada. NI 58-101 requires companies to disclose the corporate governance practices that they have adopted. NP 58-201 provides guidance on corporate governance practices. The Board believes that good corporate governance improves corporate performances and benefits all shareholders. The Canadian Securities Administrators (“CSA”) have adopted NP 58-201, which provides non-prescriptive guidelines on corporate governance practices for reporting companies such as the Company. In addition, the CSA have implemented NI 58-101, which prescribes certain disclosure by the Company of its corporate governance practices. This section sets out the Company’s approach to corporate governance and addresses the Company’s compliance with NI 58-101. Composition of the Board The Board of Directors facilitates its exercise of independent supervision over management by ensuring that the Board is composed of a majority of independent directors. Directors are considered to be independent if they have no direct or indirect material relationship with the Company. A “material relationship” is a relationship which could, in the view of the Board, be reasonably expected to interfere with the exercise of a director’s independent judgment. The Board has four directors, three of which are considered to be independent. Mr. Beniston, Mr. Wallis, and Ms. Rodrigueza are considered to be independent directors for the purposes of NI 58-101, and Mr. Unwin is not considered to be independent as he is also a 36


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senior officer of the Company. The mandate of the Board is to act in the best interests of the Company and to supervise management. The Board is responsible for approving long-term strategic plans and annual operating budgets recommended by management. Board consideration and approval is also required for material contracts and business transactions, and all debt and equity financing transactions. Any responsibility which is not delegated to management or to the committees of the Board remains with the Board. The Board meets on a regular basis consistent with the state of the Company’s affairs and also from time to time as deemed necessary to enable it to fulfill its responsibilities. The Chairman of the Board is Mr. Greg Beniston, who is an independent director. Directorship None of the directors of the Company is also a director of other reporting companies (or equivalent) in a Canadian or foreign jurisdiction as of the date of this listing statement. Position Descriptions The Board has not developed written position descriptions for the chair or the chair of any board committees or for the CEO. Given the size of the Company’s infrastructure and the existence of only a small number of officers, the Board does not feel that it is necessary at this time to formalize position descriptions in order to delineate their respective responsibilities. Meetings of Independent Directors The Board has appointed two committees, the Audit Committee and the Compensation Committee. The Audit committee is comprised of a majority of independent directors and meets regularly. Additional information concerning the committee is found in ‘Audit Committee’ above and in the disclosure below in this ‘Corporate Governance’ section. The Compensation Committee is comprised of two independent directors plus the CEO. This committee meets as required. The members of the Compensation Committee are Mr. Beniston, Mr. Wallis and Mr. Unwin. Orientation and Continuing Education When new directors are appointed, they receive orientation, commensurate with their previous experience, on the Company’s technologies, product candidates, business and industry and on the responsibilities of directors. New directors also receive historical public information about the Company and the mandates of the committees of the Board. Board meetings may also include presentations by the Company’s management and employees to give the directors additional insight into the Company’s business. In addition, new directors are encouraged to visit and meet with management on a regular basis and to pursue continuing education opportunities where appropriate. Ethical Business Conduct The Board has approved a Code of Business Conduct and Ethics (the “Code”, filed herewith as Exhibit 11.1) to be followed by the Company’s directors, officers, employees and principal consultants and those of its subsidiaries. The Code is also to be followed, where appropriate, by the Company’s agents and representatives, including consultants where specifically required. The purpose of the Code is to, among other things, promote honest and ethical conduct, avoid conflicts of interest, protect confidential or proprietary information and comply with the applicable government laws and securities rules and regulations. In the event that a director, officer or employee departs from the Code, the Company is authorized to file a material change report. The board does not actively monitor compliance with the Code, but requires prompt notification of apparent or actual breaches so that it may investigate and take action. The Code has been circulated to all employees. When proposed transactions or agreements in which directors or officers may have an interest, material or not, are presented to the Board, such interest is disclosed and the persons who have such an interest are excluded from all discussion on the matter and are not allowed to vote on the proposal. Nomination of Directors The Company does not have a formal process or committee for proposing new nominees for election to the Board of Directors. The nominees are generally the result of recruitment efforts by the Board members, including both formal and informal discussions among Board members. 37


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Compensation The Board has established a Compensation Committee. The Compensation Committee is responsible for reviewing the adequacy and form of compensation paid to the Company’s executives and key employees, and ensuring that such compensation realistically reflects the responsibilities and risks of such positions. In fulfilling its responsibilities, the Board evaluates the performance of the chief executive officer and other senior management in light of corporate goals and objectives, and makes recommendations with respect to compensation levels based on such evaluations. Other Board Committees Other than the Audit Committee and Compensation Committee described in this Form 20-F, the Board has no other committees. Assessments The Board regularly assesses its own effectiveness and the effectiveness and contribution of each Board committee member and Director. Interested Transactions A director may vote with respect to any contract or transaction in which he or she is interested, provided that the nature of the interest of any director in such contract or transaction is disclosed by him or her at or prior to its consideration and any vote in that matter. D. Employees As of December 31, 2014 the Company had the following number of employees and contractors: Location

   Full Time Employees

   ContractorsVancouver, British Columbia

   1

   1
 The Company utilizes consultants and contractors to carry on many of its activities and, in particular, to supervise and conduct pre-clinical scientific experiments, assay development and validation. In addition, the Company’s Chief Financial Officer is a contractor not a full time employee. Other functions the Company has decided to outsource include assay development, formulation, clinical trials and manufacturing. It is currently more cost-effective to outsource these functions due to the Company’s sporadic requirements. As the Company expands its activities, it is probable that it will hire additional employees. In addition, contractors and employees may move between locations from time to time as conditions and business opportunities warrant. E. Share Ownership. As of April 30, 2015, the Company has 40,976,825 Common Shares outstanding. The following table sets forth, as of April 30, 2015: (a) the names of each beneficial owner of more than five percent (5%) of our Common Stock known to us, the number of shares of Common Stock beneficially owned by each such person, and the percent of our Common Stock so owned before and after the Share Exchange; and (b) the names of each director, executive officer and significant employee, the number of shares our Common Stock beneficially owned, and the percentage of our Common Stock so owned, by each such person, and by all of our directors and executive officers as a group. Each person has sole voting and investment power with respect to the shares of our Common Stock, except as otherwise indicated. Beneficial ownership consists of a direct interest in the shares of Common Stock, except as otherwise indicated. Individual beneficial ownership also includes shares of Common Stock that a person has the right to acquire within 60 days from April 30, 2015. Name and Municipality of Residence and

   Common Shares

   Percentage of Common

   Percentage ofPosition

   Held

   Shares Outstanding(2)

   Votes HeldDouglas H. UnwinNorth Vancouver, BCPresident, CEO, Director (1)

   4,539,667(3)(4)

   11.2%

   11.2%
 38


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Name and Municipality of Residence and

   Common Shares

   Percentage of Common

   Percentage ofPosition

   Held

   Shares Outstanding(2)

   Votes HeldDouglas Wallis Vancouver, BCDirector (1)

   350,510

   0.9%

   0.9%M. Greg Beniston, BA, LLBVancouver, BCChairman (1)

   400,000

   1.0%

   1.0%Wendi Rodrigueza Boston, MassDirector

   100,000

   0.2%

   0.2%Derick Sinclair, CANorth Vancouver, BCCFO and Corp. Secretary

   435,510

   1.1%

   1.1%Directors and Officers as a Group

   

   14.4%

   14.4%
  (1)

   Members of the Audit and Compensation Committee.(2)

   The calculations are based on 40,976,825 shares of Common Stock issued and outstanding as of May 20, 2016.(3)

   1,155,000 shares of these are held by Donna Armstrong, Mr. Unwin’s spouse.(4)

   1,660,500 shares of these are held by Douglas Cove Capital Corp., a company owned jointly between Douglas H. Unwin and his spouse Donna Armstrong. Item 7. Major Shareholders and Related Party Transactions A . Major Shareholders. Please refer to Item 6.E, “Share Ownership”. B. Related Party Transactions. Other than as disclosed herein, to the best of our knowledge, in the year ended December 31, 2014, there were no material transactions or loans between our company and: (a) enterprises that directly or indirectly through one or more intermediaries control or are controlled by, or are under common control with, our company; (b) associates; (c) individuals owning, directly or indirectly, an interest in the voting power of our company that gives them significant influence over our company, and close members of any such individual’s family; (d) key management personnel of our company, including directors and senior management of our company and close members of such individuals’ families; or (e) enterprises in which a substantial interest in the voting power is owned, directly or indirectly, by any person described in (c) or (d) or over which such a person is able to exercise significant influence. In the normal course of operations, we enter into transactions with related parties, which include, among others, affiliates whereby we have a significant equity interest (10% or more) in the affiliates or have the ability to influence the affiliates’ or our operating and financing policies through significant shareholding, representation on the board of directors, corporate charter and/or bylaws. The affiliates also include certain of our directors, President and Chief Executive Officer, Chief Financial Officer, Chief Operating Officer and their close family members. Payments or accruals for services provided to the Company by the related persons during the years ended December 31, 2014 were: 2014$Consulting fees paid or accrued to Derick Sinclair (CFO)

   36,000Accounting fees paid to a company controlled by Derick Sinclair

   6,000Legal fees paid to Greg Beniston, a director of the Company

   3,12145,121
 39


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The Company has made several short term, unsecured, non-interest bearing, payable on demand loans to related parties in connection with certain services provided by such related parties. As of December 31, 2014 the balances of these loans were as follows: December 31

   2014$Amounts owing to Derick Sinclair (CFO) for loans and consulting and accounting fees

   124,724Amounts owing to Greg Beniston, a director of the Company for legal fees

   19,928Amounts owing to Doug Wallis, a director of the Company

   2,964Amounts owing to Doug Unwin (CEO) for loans and salary

   465,156612,772
 Additionally, during the year ended December 31, 2014 the Company issued 1,000,000 Common Shares and warrants to settle $50,000 of outstanding debt owing to a director of the Company There are no amounts due to the Company from companies that have directors in common with the Company or have a partner who is a director of the Company. There were no amounts due to the Company from shareholders in the fiscal year ended 2014. C . Interests of Experts and Counsel. Not applicable. Item 8. Financial Information A. Consolidated Statements and Other Financial Information The consolidated financial statements of the Company included with this Form 20-F have been prepared in compliance with International Financial Reporting Standards, as adopted by the International Accounting Standards Board. See “Item 18: Financial Statements”. Legal Proceedings We are not involved in any legal actions or claims and to our knowledge no such actions or claims are pending. Dividend Distributions We did not declare or pay any dividends to our shareholders in 2014. The actual timing, payment and amount of dividends paid on our shares of common stock is determined by our Board, based upon things such as our cash flow, results of operations and financial condition, the need for funds to finance ongoing operations and such other business considerations as our Board considers relevant. B. Significant Changes Not applicable for the year ended December 31, 2014. Item 9. The Offer and Listing A. Offer and Listing Details The Company’s Common Shares were listed for trading on the CSE under the symbol of “PT”. The high and low sale prices on the CSE for our Common Shares for the five most recent full financial years are: Year Ended

   High Sales Price

   Low Sales Price2010

   $0.18

   $0.10
 40


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2011

   $0.18

   $0.102012

   $0.17

   $0.032013

   $0.16

   $0.042014

   $0.08

   $0.02
 The quarterly high and low sales prices on the CSE for our shares of Common Stock for the two most recently completed full financial years prior to the original filing date of the 2014 Form 20-F are: Quarters Ended

   High Sales Price

   Low Sales PriceMarch 31, 2013

   $

   0.08

   $

   0.04June 30, 2013

   $

   0.12

   $

   0.05September 30, 2013

   $

   0.10

   $

   0.05December 31, 2013

   $

   0.16

   $

   0.05March 31, 2014

   $

   0.08

   $

   0.06June 30, 2014

   $

   0.08

   $

   0.05September 30, 2014

   $

   0.05

   $

   0.02December 31, 2014

   $

   0.03

   $

   0.02
 The monthly high and low sales prices on the CSE for our Common Shares for each month during the 2014 calendar year: Month

   High Sales Price

   Low Sales PriceJanuary 2014

   $

   0.08

   $

   0.07February 2014

   $

   0.08

   $

   0.06March 2014

   $

   0.08

   $

   0.06April 2014

   $

   0.08

   $

   0.06May 2014

   $

   0.08

   $

   0.06June 2014

   $

   0.08

   $

   0.05July 2014

   $

   0.06

   $

   0.04August 2014

   $

   0.05

   $

   0.01September 2014

   $

   0.05

   $

   0.02October 2014

   $

   0.04

   $

   0.02November 2014

   $

   0.06

   $

   0.04December 2014

   $

   0.03

   $

   0.02
 On April 30, 2015, the closing price of our Common Shares was $0.02 per share The transfer of our Common Shares is managed by our transfer agent, Computershare Trust Company of Canada. B. Plan of Distribution Not applicable. C. Markets Please see “Offer and Listing Details” above in this Item 9. D. Selling Shareholders Not applicable. E. Dilution Not Applicable. 41


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F. Expense of the Issue Not Applicable. Item 10. Additional Information A. Share Capital As of December 31, 2014, the Company has the following shares authorized and issued: Class of Share

   Number of Authorized Shares

   Number of Issued SharesOutstandingClass A common shares without par value

   Unlimited

   38,976,825
 As of December 31, 2014, the Company had 38,976,825 Class A common shares (the “Common Shares”) outstanding. The Company has financed its operations through the issuance of Common Shares through private placement, the exercise of warrants issued in the private placements, and the exercise of stock options. The changes in the Company’s share capital during the last three fiscal years are as follows: On January 31, 2012 66,666 common share warrants with an exercise price of $0.15 were exercised by an officer of the Company for 66,666 Common Shares and proceeds of $10,000;On June 20, 2012, the Company completed a private placement of 732,670 units at $0.15 per unit for gross proceeds of $109,900. Each unit was comprised of one Common Share and one warrant to purchase one Common Share at $0.22 per share exercisable until June 20, 2014;On June 20, 2012, certain finders were issued 56,667 units with the same terms as in the foregoing, which were valued at $8,500;On September 21, 2012, the Company completed a private placement of 741,666 units at $0.15 per unit for gross proceeds of $111,250. Each unit was comprised of one Common Share and one warrant to purchase one Common Share at $0.22 per share exercisable until September 21, 2014. Certain finders were issued 5,500 units with the same terms as in the foregoing, which were valued at $825.On February 13, 2013 the Company closed the first tranche of a non-brokered private placement and issued 1,800,000 units at $0.05 per unit for gross proceeds of $90,000, of which $30,000 was recorded during the year ended December 31, 2012. Each unit was comprised of one Common Share and one-half a purchase warrant, each whole warrant being exercisable for one Common Share at an exercise price of $0.22 until February 12, 2015. The Company paid finder’s fees of $5,000 and issued 100,000 finders warrants to finders in the first tranche. The finders’ warrants have the same terms as the warrants that are part of the above units.On May 1, 2013, the Company closed the second tranche of a non-brokered private placement and issued an additional 2,200,000 units at $0.05 per unit for gross proceeds of $110,000. The Company paid finder’s fees of $10,000 and issued 200,000 finders warrants to finders in the second tranche. The finders’ warrants have the same terms as the warrants that are part of the above units.On October 8, 2013 the Company closed the first tranche and issued 2,160,000 units for gross proceeds of $108,000. 2,160,000 warrants were issued with an expiration date of October 8, 2016. Each unit was comprised of one Common Share and one share purchase warrant, each warrant being exercisable for one Common Share at an exercise price of $0.10 for three years from the closing date of the placement, Finders’ fees were paid in the amount of $4,500 cash and issued 90,000 finders warrants having the same terms as the warrants issued as part of the units.On October 18, 2013 the Company closed the second tranche and issued 1,980,000 units for gross proceeds of $99,000. 1,980,000 warrants were issued with an expiration date of October 18, 2016 Finders fees were paid in the amount of $2,000 cash and issued 40,000 finders warrants having the same terms as the warrants issued as part of the units. 42


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On November 5, 2013 the Company closed the third tranche and issued 6,730,000 units for gross proceeds of $336,500. 6,730,000 warrants were issued with an expiration date of November 5, 2016. Finders’ fees were paid in the amount of $2,500 cash and issued 50,000 finders warrants having the same terms as the warrants issued as part of the units.On January 6, 2014, the Company extended the expiry date of 2,473,334 share purchase warrants exercisable to purchase one Common Share of the Company at an exercise price of $0.15 per share from the original expiry date of January 31, 2014 to July 31, 2014;On January 6, 2014, the Company extended the expiry date of 600,000 share purchase warrants exercisable to purchase one Common Share of the Company at an exercise price of $0.15 per share from the original expiry date of May 16, 2014 to November 16, 2014;On January 6, 2014, the Company extended the expiry date 60,000 share purchase warrants exercisable to purchase one Common Share of the Company at an exercise price of $0.25 per share from the original expiry date of February 28, 2014 to August 28, 2014;On January 10, 2014, the Company granted 400,000 stock options to advisors and consultants of the Company to purchase Common Shares of the Company for proceeds of $0.10 per common share expiring January 10, 2017;On March 7, 2014 the Company issued 525,000 stock options to directors, officers, advisors and consultants of the Company to purchase common shares of the Company for proceeds of $0.10 per common share expiring March 7, 2019;On May 7, 2014 the Company announced that it had entered into an advisory agreement with TriPoint Global Equities LLC (“TriPoint”) and issued to TriPoint warrants to purchase 700,000 shares at a price of $0.10 per share.The warrants expire on February 28, 2016;On June 14, 2014 the Company issued 500,000 options to purchase Common Shares to a director and officer. The options may be exercised at a price of $0.06 per share for a period of one (1) year;On October 3, 2014 the Company issued 1,520,000 units for gross proceeds of $76,000 (including $6,000 in cash proceeds and $70,000 to settle outstanding accounts payable). 1,520,000 warrants were issued with an expiration date of October 3, 2015. Each unit is comprised of one Common Share and one share purchase warrant, each warrant being exercisable for one common share at an exercise price of $0.15;On October 28, 2014 the Company issued to consultants a total of 500,000 options to purchase common shares with an exercise price of $0.10, 200,000 of the options will expire on October 30, 2015; 100,000 of the options will expire on October 30, 2018; and 200,000 will expire October 30, 2020;On February 24, 2015, the Company issued a total of 400,000 options to purchase Common Shares to a director and a consultant; andOn March 20, 2015, the Company closed the second tranche of a non-brokered private placement and issued 2,000,000 units at $0.05 per unit for cash proceeds of $21,000 and to retire debts totaling $59,000. Each unit is comprised of one common share and one share purchase warrant exercisable for one common share at an exercise price of $0.15 until March 20, 2016.On April 1, 2015, the Company received regulatory approval to re-price its warrants outstanding as at March 30, 2015 to an exercise price of $0.03 for a period of 30 days.On April 28, 2015, the Company received regulatory approval to extend the time frame to exercise the previously the warrants that were repriced on April 1, 2015. The expiry date has now been extended to May 15, 2015. B. Memorandum and Articles of Association We are organized under the laws of the Province of British Columbia, Canada and have been assigned the number BC1056802. Our Articles do not contain a description of our objects and purposes. 43


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Our Articles do not restrict a director’s power to vote on a proposal, arrangement or contract in which the director is materially interested, vote on compensation to themselves or any other members of their body in the absence of an independent quorum or exercise borrowing powers. There is no mandatory retirement age for our directors and our directors are not required to own securities of our company in order to serve as directors. Our authorized capital consists of an unlimited number of Class A common shares without par value. The holders of Common Shares are entitled to vote at all meetings of the Company’s shareholders, to receive dividends, if, as and when declared by the Board, and, subject to the rights of holders of any shares ranking in priority to, or on parity with the Common Shares, to participate ratably in any distribution of property or assets upon the liquidation, winding-up, or other dissolution of the Company. The Common Shares are not subject to any future call or assessments and do not have any pre-emptive rights or redemption rights. There are no limitations specific to the rights of non-Canadians to hold or vote our common shares under the laws of Canada or British Columbia, or in our charter documents. Our Articles provide for the election of directors at each annual general meeting. Each director holds office until the next annual general meeting of our shareholders or until his successor is elected or appointed, unless his office is earlier vacated in accordance with our Articles or with the provisions of the BCBCA. An annual meeting of shareholders must be held at such time in each year that is not later than 15 months after the last preceding annual meeting and at such place as our Board may from time to time determine. The quorum for the transaction of business at any meeting of shareholders is two persons who are entitled to vote at the meeting in person or by proxy and who hold in aggregate at least 5% of the issued shares entitled to be voted at the meeting. Only persons entitled to vote, our directors and auditors and others who, although not entitled to vote, are otherwise entitled or required to be present, are entitled to be present at a meeting of shareholders. Other than not specifically providing a mechanism for shareholders to call a special meeting, our do Articles contain any provisions that would have an effect of delaying, deferring or preventing a change in control of our Company. Our Articles also do not contain any provisions that would operate only with respect to a merger, acquisition or corporate restructuring of our Company. Our Articles do not contain any provisions governing the ownership threshold above which shareholder ownership must be disclosed. Our Articles are not significantly different from the requirements of the BCBCA and the conditions imposed by our Articles governing changes in capital are not more stringent than what is required by the BCBCA. C. Material Contracts Except as otherwise disclosed in this Form 20-F, the Company has no other material contracts. D. Exchange Controls There are no laws, decrees or regulations in Canada relating to restrictions on the export or import of capital, or affecting the remittance of interest, dividends or other payments to non-resident holders of our shares of common stock. E. Taxation Canada Canadian Federal Income Tax Information for United States Residents The following is a discussion of material Canadian federal income tax considerations generally applicable to holders of our common shares who, for purposes of the Income Tax Act (Canada) and the regulations thereunder, or the Canadian Tax Act: deal at arm’s length and are not affiliated with us;hold such shares as capital property;do not use or hold (and will not use or hold) and are not deemed to use or hold our common shares, in or in the course of carrying on business in Canada; 44


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have not been at any time residents of Canada; andare, at all relevant times, residents of the United States, or U.S. Residents, under the Canada-United States Income Tax Convention (1980), or the Convention. TAX MATTERS ARE VERY COMPLICATED AND THE CANADIAN FEDERAL INCOME TAX CONSEQUENCES OF PURCHASING, OWNING AND DISPOSING OF OUR COMMON SHARES WILL DEPEND UPON THE STOCKHOLDER’S PARTICULAR SITUATION. THE SUMMARY OF MATERIAL CANADIAN FEDERAL INCOME TAX CONSEQUENCES SET FORTH BELOW IS INTENDED TO PROVIDE ONLY A GENERAL SUMMARY AND IS NOT INTENDED TO BE A COMPLETE ANALYSIS OR DESCRIPTION OF ALL POTENTIAL CANADIAN FEDERAL INCOME TAX CONSEQUENCES. THIS DISCUSSION DOES NOT INCLUDE A DESCRIPTION OF THE TAX LAWS OF ANY PROVINCE OR TERRITORY WITHIN CANADA. ACCORDINGLY, HOLDERS AND PROSPECTIVE HOLDERS OF OUR COMMON SHARES ARE ENCOURAGED TO CONSULT WITH THEIR OWN TAX ADVISERS ABOUT THE TAX CONSEQUENCES TO THEM HAVING REGARD TO THEIR OWN PARTICULAR CIRCUMSTANCES, INCLUDING ANY CONSEQUENCES OF PURCHASING, OWNING OR DISPOSING OF OUR COMMON SHARES ARISING UNDER CANADIAN FEDERAL, CANADIAN PROVINCIAL OR TERRITORIAL, U.S. FEDERAL, U.S. STATE OR LOCAL TAX LAWS OR TAX LAWS OF JURISDICTIONS OUTSIDE THE UNITED STATES OR CANADA. This summary is based on the current provisions of the Canadian Income Tax Act, proposed amendments to the Canadian Income Tax Act publicly announced by the Minister of Finance (Canada) prior to the date hereof (the “Proposed Amendments”), and the provisions of the Convention as in effect on the date hereof. No assurance can be given that the Proposed Amendments will be entered into law in the manner proposed, or at all. No advance income tax ruling has been requested or obtained from the Canada Revenue Agency to confirm the tax consequences of any of the transactions described herein. This summary is not exhaustive of all possible Canadian federal income tax consequences for U.S. Residents, and other than the Proposed Amendments, does not take into account or anticipate any changes in law, whether by legislative, administrative, governmental or judicial decision or action, nor does it take into account Canadian provincial, U.S. or foreign tax considerations which may differ significantly from those discussed herein. No assurances can be given that subsequent changes in law or administrative policy will not affect or modify the opinions expressed herein. A U.S. Resident will not be subject to tax under the Canadian Tax Act in respect of any capital gain on a disposition of our common shares unless such shares constitute “taxable Canadian property”, as defined in the Canadian Tax Act, of the U.S. Resident and the U.S. Resident is not eligible for relief pursuant to the Convention. Our common shares will not constitute “taxable Canadian property” if, at any time during the 60-month period immediately preceding the disposition of the common shares, the U.S. Resident, persons with whom the U.S. Resident did not deal at arm’s length, or the U.S. Resident together with all such persons, did not own 25% or more of the issued shares of any class or series of shares of our capital stock. In addition, the Convention generally will exempt a U.S. Resident who would otherwise be liable to pay Canadian income tax in respect of any capital gain realized by the U.S. Resident on the disposition of our common shares, from such liability provided that the value of our common shares is not derived principally from real property situated in Canada, Canadian Resource Property and Canadian Timber Resource Property. However, where the US resident and purchaser are related the purchaser must generally report the transaction to the Canada Revenue Agency within 30 days of the transaction date to benefit from the Convention. The Convention may not be available to a U.S. Resident that is a U.S. LLC which is not subject to tax in the U.S. Amounts in respect of our common shares paid or credited or deemed to be paid or credited as, on account or in lieu of payment of, or in satisfaction of, dividends to a U.S. Resident will generally be subject to Canadian non-resident withholding tax at the rate of 25%. Currently, under the Convention the rate of Canadian non-resident withholding tax will generally be reduced to: 5% of the gross amount of dividends if the beneficial owner is a company that is resident in the U.S. and that owns at least 10% of our voting shares; or15% of the gross amount of dividends if the beneficial owner is some other resident of the U.S. Generally, the Convention does not apply to US resident LLC’s that are fiscally transparent. However, the Convention may apply to withholding tax rates on dividends attributed to a US resident member of a US resident fiscally transparent LLC to the extent of the consider to have been received by that member. 45


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United States Federal Income Tax Information for United States Holders. The following is a general discussion of material U.S. federal income tax consequences of the ownership and disposition of our common shares by U.S. Holders (as defined below). This discussion is based on the United States Internal Revenue Code of 1986, as amended, Treasury regulations promulgated thereunder, and judicial and administrative interpretations thereof, all as in effect at the date hereof and all of which are subject to change, possibly with retroactive effect. This discussion only addresses the tax consequences for U.S. Holders that will hold their common shares as a “capital asset” and does not address U.S. federal income tax consequences that may be relevant to particular U.S. Holders in light of their individual circumstances or U.S. Holders that are subject to special treatment under certain U.S. federal income tax laws, such as: tax-exempt organizations and pension plans;persons subject to alternative minimum tax;banks and other financial institutions;insurance companies;partnerships and other pass-through entities (as determined for United States federal income tax purposes);broker-dealers;persons who hold their common shares as a hedge or as part of a straddle, constructive sale, conversion transaction, and other risk management transaction; andpersons who acquired their common shares through the exercise of employee stock options or otherwise as compensation. As used herein, the term “U.S. Holder” means a beneficial owner of our common shares that is: an individual citizen or resident of the United States;a corporation, a partnership or entity treated as a corporation or partnership for U.S. federal income tax purposes, that is created or organized in or under the laws of the United States or any political subdivision thereof;an estate the income of which is subject to U.S. federal income taxation regardless of its source; anda trust if both: a United States court is able to exercise primary supervision over the administration of the trust; and one or more United States persons have the authority to control all substantial decisions of the trust. TAX MATTERS ARE VERY COMPLICATED AND THE UNITED STATES FEDERAL INCOME TAX CONSEQUENCES OF PURCHASING, OWNING AND DISPOSING OF OUR COMMON SHARES WILL DEPEND UPON THE STOCKHOLDER’S PARTICULAR SITUATION. THE SUMMARY OF MATERIAL UNITED STATES FEDERAL INCOME TAX CONSEQUENCES SET FORTH BELOW IS INTENDED TO PROVIDE ONLY A GENERAL SUMMARY AND IS NOT INTENDED TO BE A COMPLETE ANALYSIS OR DESCRIPTION OF ALL POTENTIAL UNITED STATES FEDERAL INCOME TAX CONSEQUENCES. NOTE THAT THIS DISCUSSION DOES NOT INCLUDE A DESCRIPTION OF THE TAX LAWS OF ANY STATE OR LOCAL GOVERNMENT WITHIN THE UNITED STATES. ACCORDINGLY, HOLDERS AND PROSPECTIVE HOLDERS OF OUR COMMON SHARES ARE ENCOURAGED TO CONSULT THEIR TAX ADVISORS ABOUT THE U.S. FEDERAL, STATE, LOCAL, AND FOREIGN TAX CONSEQUENCES OF PURCHASING, OWNING AND DISPOSING OF OUR COMMON SHARES. Ownership of Shares The gross amount of any distribution received by a U.S. Holder with respect to our common shares generally will be included in the U.S. Holder’s gross income as a dividend to the extent attributable to our current and accumulated earnings and profits (as determined under U.S. federal income tax principles). To the extent a distribution received by a U.S. Holder is not a dividend because it exceeds the U.S. Holder’s pro rata share of our current and accumulated earnings and profits, it will be treated first as a tax-free return of capital and reduce (but not below zero) the adjusted tax basis of the U.S. Holder’s shares. To the extent the distribution exceeds the adjusted tax basis of the U.S. Holder’s shares, the remainder will be taxed as capital gain (the taxation of capital gain is discussed under the heading “Sale of Shares” below). For taxable years beginning before January 1, 2009, dividends received by non-corporate U.S. Holders from a qualified foreign corporation are taxed at the same preferential rates that apply to long-term capital gains. A foreign corporation is a “qualified foreign corporation” if it is eligible for the benefits of a comprehensive income tax treaty with the United States (the income tax treaty between Canada and the United States is such a treaty) or the shares with respect to which such dividend is paid is readily tradable on an established securities market in the United States (such as the Nasdaq Capital Market). Notwithstanding satisfaction of one or both of these conditions, a foreign corporation is not a qualified foreign corporation if it is a passive foreign investment company (“PFIC”) for the taxable year of the corporation in which the 46


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dividend is paid or the preceding taxable year. (Whether a foreign corporation is a PFIC is discussed below under the heading “Passive Foreign Investment Companies”). A foreign corporation that is a PFIC for any taxable year within a U.S. person’s holding period generally is treated as a PFIC for all subsequent years in the U.S. person’s holding period. Although we have not been, are not now, and do not expect to be a PFIC, and we don’t expect to pay dividends, you should be aware of the following matters in the event that we do become a PFIC and do pay dividends. If we were to become a PFIC, then U.S. Holders who acquire our common shares may be treated as holding shares of a PFIC throughout their holding period for the purpose of determining whether dividends received from us are dividends from a qualified foreign corporation. As a consequence, dividends received by U.S. Holders may not be eligible for taxation at the preferential rates applicable to long-term capital gains. If a distribution is paid in Canadian dollars, the U.S. dollar value of such distribution on the date of receipt is used to determine the amount of the distribution received by a U.S. Holder. A U.S. Holder who continues to hold such Canadian dollars after the date on which they are received, may recognize gain or loss upon their disposition due to exchange rate fluctuations. Generally such gains and losses will be ordinary income or loss from U.S. sources. U.S. Holders may deduct Canadian tax withheld from distributions they receive for the purpose of computing their U.S. federal taxable income (or alternatively a credit may be claimed against the U.S. Holder’s U.S. federal income tax liability as discussed below under the heading “Foreign Tax Credit”). Corporate U.S. Holders generally will not be allowed a dividend received deduction with respect to dividends they receive from us. Foreign Tax Credit Generally, the dividend portion of a distribution received by a U.S. Holder will be treated as income in the passive income category for foreign tax credit purposes. Subject to a number of limitations, a U.S. Holder may elect to claim a credit against its U.S. federal income tax liability (in lieu of a deduction) for Canadian withholding tax deducted from its distributions. The credit may be claimed only against U.S. federal income tax attributable to a U.S. Holder’s passive income that is from foreign sources. If we were to become a qualified foreign corporation with respect to a non-corporate U.S. Holder, dividends received by such U.S. Holder will qualify for taxation at the same preferential rates that apply to long-term capital gains. In such case, the dividend amount that would otherwise be from foreign sources is reduced by multiplying the dividend amount by a fraction, the numerator of which is the U.S. Holder’s preferential capital gains tax rate and the denominator of which is the U.S. Holder’s ordinary income tax rate. The effect is to reduce the dividend amount from foreign sources, thereby reducing the U.S. federal income tax attributable to foreign source income against which the credit may be claimed. Canadian withholding taxes that cannot be claimed as a credit in the year paid may be carried back to the preceding year and then forward 10 years and claimed as a credit in those years, subject to the same limitations referred to above. The rules relating to the determination of the foreign tax credit are very complex. U.S. Holders and prospective U.S. Holders should consult their own tax advisors to determine whether and to what extent they would be entitled to claim a foreign tax credit. Sale of Shares Subject to the discussion of the “passive foreign investment company” rules below, a U.S. Holder generally will recognize capital gain or loss upon the sale of our shares equal to the difference between: (a) the amount of cash plus the fair market value of any property received; and (b) the U.S. Holder’s adjusted tax basis in such shares. This gain or loss generally will be capital gain or loss from U.S. sources, and will be long-term capital gain or loss if the U.S. Holder held its shares for more than 12 months. Generally, the net long-term capital gain of a non-corporate U.S. Holder from the sale of shares is subject to taxation at a top marginal rate of 15%. A Capital gain that is not long-term capital gain is taxed at ordinary income rates. The deductibility of capital losses is subject to certain limitations. Passive Foreign Investment Companies We will be a PFIC if, in any taxable year either: (a) 75% or more of our gross income consists of passive income; or (b) 50% or more of the value of our assets is attributable to assets that produce, or are held for the production of, passive income. Subject to certain limited exceptions, if we meet the gross income test or the asset test for a particular taxable year, our shares held by a U.S. Holder in that year will be treated as shares of a PFIC for that year and all subsequent years in the U.S. Holder’s holding period, even if we fail to meet either test in a subsequent year. 47


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If we were a PFIC in the future, gain realized by a U.S. Holder from the sale of PFIC Shares and certain dividends received on such shares would be subject to tax under the excess distribution regime, unless the U.S. Holder made one of the elections discussed below. Under the excess distribution regime, federal income tax on a U.S. Holder’s gain from the sale of PFIC Shares would be calculated by allocating the gain ratably to each day the U.S. Holder held its shares. Gain allocated to years preceding the first year in which we were a PFIC in the U.S. Holder’s holding period, if any, and gain allocated to the year of disposition would be treated as gain arising in the year of disposition and taxed as ordinary income. Gain allocated to all other years would be taxed at the highest tax rate in effect for each of those years. Interest for the late payment of tax would be calculated and added to the tax due for each of the PFIC Years, as if the tax was due and payable with the tax return filed for that year. A distribution that exceeds 125% of the average distributions received on PFIC Shares by a U.S. Holder during the 3 preceding taxable years (or, if shorter, the portion of the U.S. Holder’s holding period before the taxable year) would be taxed in a similar manner. A U.S. Holder may avoid taxation under the excess distribution regime by making a qualified electing fund (“QEF”) election. For each year that we would meet the PFIC gross income test or asset test, an electing U.S. Holder would be required to include in gross income, its pro rata share of our net ordinary income and net capital gains, if any. The U.S. Holder’s adjusted tax basis in our shares would be increased by the amount of such income inclusions. An actual distribution to the U.S. Holder out of such income generally would not be treated as a dividend and would decrease the U.S. Holder’s adjusted tax basis in our shares. Gain realized from the sale of our shares covered by a QEF election would be taxed as a capital gain. U.S. Holders will be eligible to make QEF elections, only if we agree to provide to the U.S. Holders, which we do, the information they will need to comply with the QEF rules. Generally, a QEF election should be made by the due date of the U.S. Holder’s tax return for the first taxable year in which the U.S. Holder held our shares that includes the close of our taxable year for which we met the PFIC gross income test or asset test. A QEF election is made on IRS Form 8621. A U.S. Holder may also avoid taxation under the excess distribution regime by timely making a mark-to-market election. An electing U.S. Holder would include in gross income the increase in the value of its PFIC Shares during each of its taxable years and deduct from gross income the decrease in the value of its PFIC Shares during each of its taxable years. Amounts included in gross income or deducted from gross income by an electing U.S. Holder are treated as ordinary income and ordinary deductions from U.S. sources. Deductions for any year are limited to the amount by which the income inclusions of prior years’ exceed the income deductions of prior years. Gain from the sale of PFIC Shares covered by an election is treated as ordinary income from U.S. sources while a loss is treated as an ordinary deduction from U.S. sources only to the extent of prior income inclusions. Losses in excess of such prior income inclusions are treated as capital losses from U.S. sources. A mark-to-market election is timely if it is made by the due date of the U.S. Holder’s tax return for the first taxable year in which the U.S. Holder held our shares that includes the close of our taxable year for which we met the PFIC gross income test or asset test. A mark-to-market election is also made on IRS Form 8621. As noted above, a PFIC is not a qualified foreign corporation and hence dividends received from a PFIC are not eligible for taxation at preferential long-term capital gain tax rates. Similarly, ordinary income included in the gross income of a U.S. Holder who has made a QEF election or a market-to-market election, and dividends received from corporations subject to such election, are not eligible for taxation at preferential long-term capital gain rates. The PFIC rules are extremely complex and could, if they apply, have significant, adverse effects on the taxation of dividends received and gains realized by a U.S. Holder. Accordingly, prospective U.S. Holders are strongly urged to consult their tax adviser concerning the potential application of these rules to their particular circumstances. Controlled Foreign Corporation Special rules apply to certain U.S. Holders that own stock in a foreign corporation that is classified as a “controlled foreign corporation” (“CFC”). We do not expect to be classified as a CFC. However, future ownership changes could cause us to become a CFC. Prospective U.S. Holders are urged to consult their tax advisor concerning the potential application of the CFC rules to their particular circumstances. Information Reporting and Backup Withholding United States information reporting and backup withholding requirements may apply with respect to distributions to U.S. Holders, or the payment of proceeds from the sale of shares, unless the U.S. Holder: (a) is an exempt recipient (including a corporation); (b) complies with certain requirements, including applicable certification requirements; or (c) is described in certain other categories of persons. The backup withholding tax rate is currently 28%. Any amounts withheld from a payment to a U.S. Holder under the backup withholding rules may be credited against any U.S. federal income tax liability of the U.S. Holder and may entitle the U.S. Holder to a refund. 48


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F. Dividends and Paying Agents Not applicable. G. Statements by Experts Not applicable. H. Documents on Display Not applicable. I. Subsidiary Information Not applicable Item 11. Quantitative and Qualitative Disclosures about Market Risk Market risk is the risk of loss related to changes in market prices, including interest rates and foreign exchange rates, of financial instruments that may adversely impact our consolidated financial position, results of operations or cash flows. Inflation-related risks We do not believe that inflation has had a material impact on our revenues or income over the past two fiscal years. To the extent that inflation results in rising interest rates and has other adverse effects on capital markets, it could adversely affect our financial position and profitability. Foreign currency exchange risk Foreign exchange risk is the risk arising from changes in foreign currency fluctuations. Foreign currency fluctuations have not previously had a material impact on the Company’s financial results. Consequently, the Company does not use any derivative instruments to reduce its exposure to fluctuations in foreign currency rates. It is the opinion of management that the foreign exchange risk to which the Company is exposed is currently minimal. Item 12. Description of Securities Other Than Equity Securities Not applicable. Part II Item 13. Defaults, Dividend Arrearages and Delinquencies Not applicable. Item 14. Material Modifications to the Rights of Security Holders and Use of Proceeds Not applicable. Item 15. Controls and Procedures Conclusion Regarding the Effectiveness of Disclosure Controls and Procedures As of the end of the period covered by this report, we evaluated the effectiveness of the design and operation of our disclosure controls and procedures (as such term is defined in Rules 13a-15(e) under the Securities Exchange Act of 1934). Our principal executive and financial officers supervised and participated in this evaluation. Based on this evaluation, our principal executive and financial officers each concluded that our disclosure controls and procedures were effective in timely alerting them to material information required to be included in our periodic reports to the Securities and Exchange Commission. The design of any system of controls is based in part upon various assumptions about the likelihood of future events, and there can be no assurance that any of our plans, products, services or procedures will succeed in achieving their intended goals under future conditions. 49


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Changes in Internal Control There were no changes in the Company’s internal controls over financial reporting (as defined in Rule 13a-15f and 15d-15(f) of the Securities Exchange Act of 1934) that occurred during the period covered by this report that have materially affected, or are likely to materially affect, the Company’s internal control over financial reporting. Management’s Report on Internal Control over Financial Reporting Management of the Company is responsible for establishing and maintaining internal control over financial reporting as defined in Rules 13a-15(f) and 15(d)-15(f) of the Securities Exchange Act of 1934. The Company’s internal control over financial reporting is 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. Internal control over financial reporting includes maintaining records that in reasonable detail accurately and fairly reflect our transactions; providing reasonable assurance that transactions are recorded as necessary for preparation of our financial statements; providing reasonable assurance that receipts and expenditures are made in accordance with management authorization; and providing reasonable assurance that unauthorized acquisition, use or disposition of Company assets that could have a material effect on our financial statements would be prevented or detected on a timely basis. Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements and can provide only reasonable assurance with respect to financial statement preparation and presentation. 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 policies or procedures may deteriorate. Management assessed the effectiveness of the Company’s internal control over financial reporting as of December 31, 2014. In making this assessment management used the criteria set forth by the Committee of Sponsoring Organizations of the Treadway Commission in Internal Control – Integrated Framework. Based on our assessment and the criteria discussed above, management believes that, as of December 31, 2014, the Company maintained effective internal control over financial reporting. Item 16A. Audit Committee Financial Experts Our Board had determined that Douglas Wallis qualified as an “audit committee financial expert” and is “independent”, as such terms are used in Section 303A.02 of the NYSE Listed Company Manual. Item 16B. Code of Ethics The Board has approved a Code of Business Conduct and Ethics (the “Code”), which is filed herewith as an exhibit to this Form 20-F to be followed by the Company’s directors, officers, employees and principal consultants and those of its subsidiaries. The Code is also to be followed, where appropriate, by the Company’s agents and representatives, including consultants where specifically required. The purpose of the Code is to, among other things, promote honest and ethical conduct, avoid conflicts of interest, protect confidential or proprietary information and comply with the applicable government laws and securities rules and regulations. The Board does not actively monitor compliance with the Code, but requires prompt notification of apparent or actual breaches so that it may investigate and take action. The Code has been circulated to all employees. Item 16C. Principal Accountant Fees and Services The following table presents fees for professional audit services for the audit of the Company’s annual financial statements for fiscal year 2014 and 2013 and fees billed for other services rendered during 2014 and 2013 by Davidson & Company LLP and James Stafford, Inc., respectively, the company’s external auditors: Fiscal 2014

   Fiscal 2013Type of Service/FeeAudit Fees (1)

   $

   15,000

   $

   24,480Audit Related Fees (2)

   $

   2,381

   $

   8,500Tax Fees (3)

   $

   3,576

   $

   3,576All Other Fees

   $

   -

   $

   -
 (1) Audit Fees consist of fees for professional services rendered for the audit of the company's consolidated financial statements included in its Annual Report on 20-F, the review of the interim financial statements included in its reports filed 50


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with the Canadian securities regulators, and for the services that are normally provided in connection with regulatory filings or engagements. (2) Includes fees associated with assurance and related services that are reasonably related to the performance of the audit or review of the Company's financial statements. This category includes fees related to consultation regarding generally accepted accounting principles. (3) Tax Fees consist of fees for tax compliance, tax advice and tax planning. The fee includes the preparation of the Company's income tax returns, franchise tax reports, and other tax filings. Although our Audit Committee currently does not have a formal policy in place to pre-approve all audit and non-audit services provided by our independent auditor and the fees for such non-audit services, the Company's audit committee has adopted a policy to review on an annual basis the performance, objectivity and independence of our independent auditor. Item 16D. Exemptions from the Listing Standards for Audit Committees Not applicable. Item 16E. Purchases of Equity Securities by the Company and Affiliated Purchasers None. Item 16F. Change in Registrant’s Certifying Accountant Fiscal Year 2014 On February 3, 2014, the Company’s former auditor Leed Advisors Inc. resigned at the Company’s request. Resignation of Leed Advisors Inc. Upon mutual agreement, Leed Advisors Inc., resigned as our principal accountant effective February 3, 2014 and we appointed James Stafford, Inc. as our independent registered public accounting firm for the year ended December 31, 2013. Our Audit Committee and Board considered and approved the decision to change accountants. The audit report of Leed Advisors Inc. on our financial statements for the fiscal years ended December 31, 2012 prepared in accordance with IFRS did not contain an adverse opinion, a disclaimer of opinion, a modification or a qualification. During our most recent fiscal year and any subsequent interim period preceding such resignation, there were no disagreements with Leed Advisors Inc. on any matter of accounting principles or practices, financial statement disclosure, or auditing scope or procedure, which disagreements, if not resolved to the satisfaction of Leed Advisors Inc., would have caused it to make reference to the subject matter of the disagreements in connection with its report. None of the following events occurred within our two most recent fiscal years and any subsequent interim period preceding Leed Advisors Inc.’s resignation: (A)

   Leed Advisors Inc. advised us that the internal controls necessary for us to develop reliable financial statements did not exist;(B)

   Leed Advisors Inc. advised us that information came to Leed Advisors Inc.’s attention that has led it to no longer be able to rely on our management’s representations, or that had made it unwilling to be associated with the financial statements prepared by our management;(C)

   Leed Advisors Inc. advised us of the need to expand significantly the scope of its audit, or that information came to Leed Advisors Inc.’s attention during our two most recent fiscal years and any subsequent interim period, that if further investigated may: (i)

   materially impact the fairness or reliability of either: a previously issued audit report or the underlying financial statements, or the financial statements issued or to be issued covering the fiscal period(s) subsequent to the date of the most recent financial statements covered by an audit report (including information that may prevent it from rendering an unqualified audit report on those financial statements); or(ii)

   cause it to be unwilling to rely on our management’s representations or be associated with our financial statements; and 51


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due to Leed Advisors Inc.’s resignation (due to audit scope limitations or otherwise), or for any other reason, Leed Advisors Inc. did not so expand the scope of its audit or conduct such further investigation; or (D)

   Leed Advisors Inc. advised us that information came to Leed Advisors Inc.’s attention that it had concluded materially impacts the fairness or reliability of either: (i)

   a previously issued audit report or the underlying financial statements, or(ii)

   the financial statements issued or to be issued covering the fiscal period(s) subsequent to the date of the most recent financial statements covered by an audit report (including information that, unless resolved to Leed Advisors Inc.’s satisfaction, would prevent it from rendering an unqualified audit report on those financial statements); and due to Leed Advisors Inc.’s resignation (due to audit scope limitations or otherwise), or for any other reason, the issue had not been resolved to Leed Advisors Inc.’s satisfaction prior to its resignation. Appointment of James Stafford, Inc. Our board of directors appointed James Stafford, Inc. to be our principal accountant effective February 3, 2014. We did not consult James Stafford, Inc. regarding (i) the application of accounting principles to a specified transaction, either completed or proposed, or the type of audit opinion that might be rendered on our financial statements, or (ii) any matter that was either the subject of a disagreement or a reportable event as described in Item 16F(a)(1)(v) of Form 20-F. Fiscal Year 2015 Resignation of James Stafford Inc. Upon mutual agreement, James Stafford, Inc. resigned as our principal accountant effective April 16, 2015 and we appointed Davidson & Company LLP as our independent registered public accounting firm for the year ended December 31, 2014. Our Audit Committee and Board considered and approved the decision to change accountants. The audit report of James Stafford, Inc. on our financial statements for the fiscal year ended December 31, 2013 prepared in accordance with IFRS did not contain an adverse opinion, a disclaimer of opinion, a modification or a qualification. During our most recent fiscal year and any subsequent interim period preceding such resignation, there were no disagreements with James Stafford, Inc. on any matter of accounting principles or practices, financial statement disclosure, or auditing scope or procedure, which disagreements, if not resolved to the satisfaction of James Stafford, Inc., would have caused it to make reference to the subject matter of the disagreements in connection with its report. None of the following events occurred within our two most recent fiscal years and any subsequent interim period preceding James Stafford, Inc.’s resignation: (A)

   James Stafford, Inc. advised us that the internal controls necessary for us to develop reliable financial statements did not exist;(B)

   James Stafford, Inc. advised us that information came to James Stafford, Inc. ’s attention that has led it to no longer be able to rely on our management’s representations, or that had made it unwilling to be associated with the financial statements prepared by our management;(C)

   James Stafford, Inc. advised us of the need to expand significantly the scope of its audit, or that information came to James Stafford, Inc. ’s attention during our two most recent fiscal years and any subsequent interim period, that if further investigated may: (i)

   materially impact the fairness or reliability of either: a previously issued audit report or the underlying financial statements, or the financial statements issued or to be issued covering the fiscal period(s) subsequent to the date of the most recent financial statements covered by an audit report (including information that may prevent it from rendering an unqualified audit report on those financial statements); or(ii)

   cause it to be unwilling to rely on our management’s representations or be associated with our financial statements; and due to James Stafford, Inc. ’s resignation (due to audit scope limitations or otherwise), or for any other reason, James Stafford, Inc. did not so expand the scope of its audit or conduct such further investigation; or (D)

   James Stafford, Inc. advised us that information came to James Stafford, Inc. ’s attention that it had concluded materially impacts the fairness or reliability of either: (i)

   a previously issued audit report or the underlying financial statements, or 52


---

(ii)

   the financial statements issued or to be issued covering the fiscal period(s) subsequent to the date of the most recent financial statements covered by an audit report (including information that, unless resolved to James Stafford, Inc. ’s satisfaction, would prevent it from rendering an unqualified audit report on those financial statements); and due to James Stafford, Inc. ’s resignation (due to audit scope limitations or otherwise), or for any other reason, the issue had not been resolved to James Stafford, Inc. ’s satisfaction prior to its resignation. Appointment of Davidson & Company LLP Our board of directors appointed Davidson & Company LLP to be our principal accountant effective April 10, 2015. We did not consult Davidson & Company LLP regarding (i) the application of accounting principles to a specified transaction, either completed or proposed, or the type of audit opinion that might be rendered on our financial statements, or (ii) any matter that was either the subject of a disagreement or a reportable event as described in Item 16F(a)(1)(v) of Form 20-F. Item 16G. Corporate Governance Not applicable. Item 16H. Mine Safety Disclosure Not applicable. 53


---

Part III Item 17. Financial Statements In lieu of responding to this item, we have responded to Item 18 of this annual report. Item 18. Financial Statements The Company’s audited financial statements for fiscal year ended December 31, 2014 as required under Item 18 are attached hereto starting on page F-1 of this Form 20-F. All of the financial information is presented herein in accordance with International Financial Reporting Standards, as issued by the International Accounting Standards Board. Item 19. Exhibits Exhibit

   Description of ExhibitNumber1.1

   Articles of the Company*4.1

  Stock Option Plan11.1

   Code of Business Conduct and Ethics.*12.1

   Certification of Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.12.2

   Certification of Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.13.1

   Certification of Chief Executive Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.13.2

   Certification of Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.15.1

   Letter dated September 8, 2017 by Leed Advisors Inc. as required by Item 16F of Form 20-F.15.2

   Letter dated September 8, 2017 by James Stafford Inc. as required by Item 16F of Form 20-F.15.4

   Audit Committee Charter*
 *Filed with previous Form 20-Fs 54


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SIGNATURE The Registrant hereby certifies that it meets all of the requirements for filing on Form 20-F and that it has duly caused and authorized the undersigned to sign this registration statement on its behalf. PACIFIC THERAPEUTICS LTD.Date: September 8, 2017

   By: /s/ Alejandro OchoaName: Alejandro OchoaTitle: Chief Executive OfficerBy: /s/ Abbey AbdiyeName: Abbey AbdiyeTitle: Chief Financial Officer
 55


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PACIFIC THERAPEUTICS LTD.(A Development Stage Company)FINANCIAL STATEMENTS Years Ended
December 31, 2014, 2013 and 2012(Expressed in Canadian Dollars)


---

INDEPENDENT AUDITORS' REPORT
 To the Shareholders of: 
    Pacific Therapeutics Ltd. Report on the Financial StatementsWe have audited the accompanying financial statements of Pacific Therapeutics Ltd., which comprise the statements of financial position as at December 31, 2012, and December 31, 2011 and the statements of comprehensive loss, changes in equity and statement of cash flows for the years then ended, and a summary of significant accounting policies and other explanatory information. Management's Responsibility for the Financial StatementsManagement is responsible for the preparation and fair presentation of these financial statements in accordance with International Financial Reporting Standards and for such internal control as management determines is necessary to enable the preparation of financial statements that are free from material misstatement, whether due to fraud or error. Auditor's ResponsibilityOur responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits in accordance with Canadian generally accepted auditing standards and Public Company Accounting Oversight Board (United States) auditing standards. Those standards require that we comply with ethical requirements and plan and perform the audit to obtain reasonable assurance about whether the financial statements are free from material misstatement. An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial statements. The procedures selected depend on the auditor's judgment, including the assessment of the risks of material misstatement of the financial statements, whether due to fraud or error. In making those risk assessments, the auditor considers internal control relevant to the entity's preparation and fair presentation of the financial statements in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the entity's internal control. 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 financial statements. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion. OpinionIn our opinion, the financial statements present fairly, in all material respects, the financial position of Pacific Therapeutics Ltd. as at December 31, 2012 and December 31, 2011, and tis financial performance and its cash flows for the years then ended, in accordance with International Financial Reporting Standards as issued by the International Accounting Standards Board. Emphasis of MatterThe accompanying financial statements have been prepared assuming that the Company will continue as a going concern. As discussed in Note 1 to the financial statements, the Company has suffered recurring losses from operations and has a net capital deficiency that raise substantial doubt about its ability to continue as a going concern. Management’s plans in regard to these matters are also described in Note 1. The financial statements do not include any adjustments that might result from the outcome of this uncertainty.   Chartered Accountants
    Surrey, British Columbia
    April 29, 2013


---

JAMESSTAFFORDJames Stafford, Inc. Chartered Professional Accountants Suite 350 – 1111 Melville Street Vancouver, British Columbia Canada V6E 3V6 Telephone +1 604 669 0711 Facsimile +1 604 669 0754 www.JamesStafford.ca
 INDEPENDENT AUDITOR’S REPORT To the Shareholders of Pacific Therapeutics Ltd. We have audited the accompanying financial statements of Pacific Therapeutics Ltd. (the “Company”) which comprise the statement of financial position as at 31 December 2013 and the statements of loss and comprehensive loss, cash flows and changes in shareholders’ deficiency for the year ended 31 December 2013, and a summary of significant accounting policies and other explanatory information. Management’s Responsibility for the Financial Statements Management is responsible for the preparation and fair presentation of these 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 financial statements that are free from material misstatement, whether due to fraud or error. Auditor’s Responsibility Our responsibility is to express an opinion on these financial statements based on our audit. We conducted our audit in accordance with Canadian generally accepted auditing standards and 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 financial statements are free from material misstatement. An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial statements. The procedures selected depend on the auditor’s judgment, including the assessment of the risks of material misstatement of the financial statements, whether due to fraud or error. In making those risk assessments, the auditor considers internal control relevant to the entity’s preparation and fair presentation of the financial statements in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the entity’s internal control. 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 financial statements. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion. Opinion In our opinion, the financial statements present fairly, in all material respects, the financial position of the Company as at 31 December 2013 and the results of its operations and its cash flows for the year ended 31 December 2013 in accordance with International Financial Reporting Standards as issued by the International Accounting Standards Board.    Emphasis of Matter The accompanying financial statements have been prepared assuming that the Company will continue as a going concern. As discussed in Note 1 to the financial statements, the Company has suffered recurring losses from operation and has a net capital deficiency. These conditions raise substantial doubt about its ability to continue as a going concern. Management’s plans regarding those matters are also described in Note 1. The financial statements do not include any adjustments that might result from the outcome of this uncertainty. Our opinion is not modified with respect to this matter. Other Matter The financial statements of the Company for the years ended 31 December 2012 and 2011 were audited by another auditor who expressed an unmodified opinion on those statements on 29 April 2013.   Chartered Accountants Vancouver, Canada 17 April 2014


---

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM To the Shareholders and Directors of Pacific Therapeutics Ltd. We have audited the accompanying financial statements of Pacific Therapeutics Ltd., which comprise the statement of financial position as of December 31, 2014, and the related statements of loss and comprehensive loss, changes in shareholders' deficiency, and cash flows for the year then ended, and a summary of significant accounting policies and other explanatory information. Management’s Responsibility for the Financial Statements Management is responsible for the preparation and fair presentation of these 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 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 financial statements based on our audit. We conducted our audit 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 financial statements are free from material misstatement. An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial statements. The procedures selected depend on the auditors’ judgment, including the assessment of the risks of material misstatement of the financial statements, whether due to fraud or error. In making those risk assessments, the auditor considers internal control relevant to the entity’s preparation and fair presentation of the financial statements in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the entity’s internal control. 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 financial statements. We believe that the audit evidence we have obtained in our audit is sufficient and appropriate to provide a basis for our audit opinion.


---

Opinion In our opinion, these financial statements present fairly, in all material respects, the financial position of Pacific Therapeutics Ltd. as at December 31, 2014 and its financial performance and its cash flows for the year then ended, in accordance with International Financial Reporting Standards as issued by the International Accounting Standards Board. Emphasis of Matter Without qualifying our opinion, we draw attention to Note 1 in the financial statements which indicates that Pacific Therapeutics Ltd. has suffered recurring losses from operations and has a net capital deficiency. These matters, along with the other matters set forth in Note 1, indicate the existence of material uncertainties that raises substantial doubt about its ability to continue as a going concern. Management's plans in regard to these matters are also described in Note 1. The financial statements do not include any adjustments that might result from the outcome of this uncertainty. Other Matters The financial statements of Pacific Therapeutics Ltd. for the years ended December 31, 2013 and 2012 were audited by another auditor who expressed an unmodified opinion on those statements on April 17, 2014. "DAVIDSON & COMPANY LLP" Chartered Accountants Vancouver, Canada April 30, 2015


---

PACIFIC THERAPEUTICS LTD.(A Development Stage Company)Statements of Financial Position(Expressed in Canadian Dollars)
  AS AT:

   31 Dec 14

   

   31 Dec 13$

   

   $ASSETSCURRENTCash and cash equivalents

   1,513

   

   180,692Goods and Services Tax Receivable

   1,312

   

   7,391Prepaid expenses and deposits

   -

   

   36,6052,825

   

   224,688NON-CURRENT ASSETSPROPERTY AND EQUIPMENT(Note 5)

   -

   

   2,443INTANGIBLE ASSETS(Note 6)

   64,490

   

   59,91367,315

   

   287,044LIABILITIESCURRENTTrade payable and accrued liabilities

   267,474

   

   226,201Convertible note (Note 8)

   26,642

   

   30,900Derivative component of convertible note (Note 8)

   36,188

   

   -Due to related parties (Note 9)

   612,772

   

   470,087943,076

   

   727,188SHAREHOLDERS' DEFICIENCYShare capital (Note 10)

   2,760,010

   

   2,699,210Share subscriptions received

   30,000

   

   -Warrant and option reserve (Note 10)

   289,766

   

   123,704Deficit

   (3,955,537

   )

   (3,263,058

   )(875,761

   )

   (440,144

   )67,315

   

   287,044
 Nature and Continuance of Operations(Note 1) Subsequent Events(Note 15) On behalf of the Board: “Douglas H. Unwin”

   Director

   “Doug Wallis”

   DirectorDouglas H. Unwin

   

   Doug Wallis
 The accompanying notes are an integral part of these financial statements.


---

PACIFIC THERAPEUTICS LTD.(A Development Stage Company)Statements of Loss and Comprehensive Loss(Expressed in Canadian Dollars)
  Year ended

   

   

   Year ended

   

   

   Year ended31 Dec 14

   

   

   31 Dec 13

   

   

   31 Dec 12ExpensesAdvertising and promotion

   $

   67,923

   

   **$**

   187,511

   

   **$**

   43,637Amortization of property and equipment (Note 5)

   

   1,216

   

   

   2,421

   

   

   2,819Amortization of intangible assets (Note 6)

   

   5,618

   

   

   4,708

   

   

   3,944Bank charges and interest

   

   11,872

   

   

   34,854

   

   

   105,043Donation

   

   500

   

   

   -

   

   

   -Insurance

   

   30,194

   

   

   22,461

   

   

   24,948Investor relations

   

   25,075

   

   

   61,250

   

   

   51,950Interest derivative accretion (Note 8)

   

   11,005

   

   

   -

   

   

   -Office and miscellaneous

   

   5,428

   

   

   7,042

   

   

   7,076Professional fees

   

   168,490

   

   

   178,947

   

   

   80,923Rent and occupancy costs

   

   14,543

   

   

   13,284

   

   

   17,743Research and development

   

   -

   

   

   -

   

   

   50,941Share based payments

   

   152,028

   

   

   42,192

   

   

   75,026Telephone and utilities

   

   2,006

   

   

   1,798

   

   

   2,314Transfer agent

   

   24,107

   

   

   5,251

   

   

   7,915Travel

   

   11,906

   

   

   8,679

   

   

   13,130Wages and benefits

   

   160,947

   

   

   157,916

   

   

   100,843692,858

   

   

   728,314

   

   

   588,252Other Expenses (Income)Foreign exchange loss/(gain)

   

   (440

   )

   

   911

   

   

   -Gain on derivative liability (Note 8)

   

   -

   

   

   (30,889

   )

   

   18,641Loss/(Gain) on sale/retirement of assets

   

   1,227

   

   

   -

   

   

   (1,425

   )Write-off of license (Note 6)


   

   -

   

   

   42,510

   

   

   -Net Loss and Comprehensive Loss

   $

   (693,645

   )

   $

   (740,846

   )

   $

   (605,468

   )Loss per share Basic and Diluted

   $

   (0.02

   )

   $

   (0.03

   )

   $

   (0.03

   )Weighted average number of common shares outstanding

   

   37,830,595

   

   

   27,561,948

   

   

   21,637,193
 The accompanying notes are an integral part of these financial statements.


---

PACIFIC THERAPEUTICS LTD.(A Development Stage Company)Statements of Changes in Shareholders’ Deficiency(Expressed in Canadian Dollars)
  Common

   

   

   Subscriptions

   

   Warrant andshares

   Share capital

   

   received

   

   option reserve

   

   Deficit

   

   Total$

   

   $

   

   $

   

   $

   

   $Balance at December 31, 2011

   20,989,157

   1,765,754

   

   -

   

   162,052

   

   (2,094,115

   )

   (166,309

   )Common shares issued for cash @ $0.15

   1,531,002

   229,651

   

   -

   

   -

   

   -

   

   229,651Subscriptions received 600,000 shares @ $0.05

   -

   -

   

   30,000

   

   -

   

   -

   

   30,000Exercise of common share warrants @ $0.15

   66,666

   10,000

   

   -

   

   -

   

   -

   

   10,000Expiration of stock options

   -

   -

   

   -

   

   (36,665

   )

   36,665

   

   -Share issue costs

   -

   (9,689

   )

   -

   

   -

   

   -

   

   (9,689

   )Warrant reserve

   -

   -

   

   -

   

   5,799

   

   -

   

   5,799Share-based payments

   -

   -

   

   -

   

   75,026

   

   -

   

   75,026Loss for the year

   -

   -

   

   -

   

   -

   

   (605,468

   )

   (605,468

   )Balance at December 31, 2012

   22,586,825

   1,995,716

   

   30,000

   

   206,212

   

   (2,662,918

   )

   (430,990

   )Common shares issued for cash @ $0.05

   13,830,000

   691,500

   

   (30,000

   )

   -

   

   -

   

   661,500Share issue costs

   -

   (40,006

   )

   -

   

   16,006

   

   -

   

   (24,000

   )Units exchanged for debt @ $0.05

   1,040,000

   52,000

   

   -

   

   -

   

   -

   

   52,000Share based payments

   -

   -

   

   -

   

   42,192

   

   -

   

   42,192Expiry of options and finders warrants

   -

   -

   

   -

   

   (140,706

   )

   140,706

   

   -Loss for the year

   -

   -

   

   -

   

   -

   

   (740,846

   )

   (740,846

   )Balance at December 31, 2013

   37,456,825

   2,699,210

   

   -

   

   123,704

   

   (3,263,058

   )

   (440,144

   )Common shares issued for cash @ $0.05

   120,000

   4,800

   

   -

   

   1,200

   

   -

   

   6,000Units exchanged for debt @ $0.05

   1,400,000

   56,000

   

   -

   

   14,000

   

   -

   

   70,000Subscriptions received for shares @ $0.05

   -

   -

   

   30,000

   

   -

   

   -

   

   30,000Share based payments

   -

   -

   

   -

   

   152,028

   

   -

   

   152,028Options expired unexercised

   -

   -

   

   -

   

   (1,166

   )

   1,166

   

   -Loss for the year

   -

   -

   

   -

   

   -

   

   (693,645

   )

   (693,645

   )Balance at December 31, 2014

   38,976,825

   2,760,010

   

   30,000

   

   289,766

   

   (3,955,537

   )

   (875,761

   )
 The accompanying notes are an integral part of these financial statements.


---

PACIFIC THERAPEUTICS LTD.(A Development Stage Company)Statements of Cash Flows(Expressed in Canadian Dollars)
  Year ended

   

   Year ended

   

   Year ended31 Dec 14

   

   31 Dec 13

   

   31 Dec 12$

   

   $

   

   $Cash flows used in operating activitiesNet loss and comprehensive loss

   (693,645

   )

   (740,846

   )

   (605,468

   )Adjustments for items not affecting cashAmortization of property and equipment

   1,216

   

   2,421

   

   2,819Amortization of intangible assets

   5,618

   

   4,708

   

   3,944Amortization of deemed discounts on ISAs, ClassB series I preferred shares, shareholder loans,and convertible note

   -

   

   13,261

   

   100,476Accretion of convertible note

   11,005

   

   -

   

   -Accrued interest on convertable note

   1,825

   

   900

   

   -Share based payments

   152,028

   

   42,192

   

   75,026Loss (gain) on derivative liability

   -

   

   (30,889

   )

   18,641Write-off of license

   -

   

   42,510

   

   -Loss/(Gain) on sale/retirement of assets

   1,227

   

   -

   

   (1,425

   )Changes in non-cash working capital balancesGoods and Services Tax recoverable

   6,079

   

   (6,582

   )

   13,167Prepaid expenses

   36,605

   

   60,839

   

   (92,325

   )Trade payable and accrued liabilities

   111,273

   

   64,620

   

   180,162(366,769

   )

   (546,866

   )

   (304,983

   )Cash flows used in investing activitiesAdditions to property and equipment

   -

   

   -

   

   (6,200

   )Disposals of property and equipment

   -

   

   -

   

   6,300Additions to intangible assets

   (10,195

   )

   (13,569

   )

   (9,875

   )(10,195

   )

   (13,569

   )

   (9,775

   )Cash flows from financing activitiesIssue of common shares for cash

   6,000

   

   661,500

   

   250,265Share issue cost

   -

   

   (24,000

   )

   10,000Due to related parties (Note 9)

   142,685

   

   93,773

   

   25,523Subscriptions received

   30,000

   

   -

   

   -Convertible note

   50,000

   

   -

   

   30,000Repay convertible note

   (30,900

   )

   -

   

   -197,785

   

   731,273

   

   315,788Change in cash and cash equivalents

   (179,179

   )

   170,838

   

   3,760Cash and cash equivalents, beginning of year

   180,692

   

   9,854

   

   6,094Cash and cash equivalents, end of year

   1,513

   

   180,692

   

   9,854
 Supplemental disclosure with respect to cash flows (Note 14) The accompanying notes are an integral part of these financial statements.


---

Pacific Therapeutics Ltd.(A Development Stage Company)Notes to Financial StatementsYears Ended December 31, 2014, 2013 and 2012
 1. NATURE AND CONTINUANCE OF OPERATIONS Pacific Therapeutics Ltd. (the “Company" or "PTL") was incorporated under the laws of the Province of British Columbia, Canada on September 12, 2005. The Company is a development stage company focused on developing proprietary drugs to treat certain types of lung disease including fibrosis. On October 14, 2011, the Company became a reporting company in British Columbia and was approved by the Canadian SecuritiesExchange (“CSE”) and opened for trading on November 16, 2011. PTL has financed its cash requirements primarily from share issuances and payments from research collaborators. The Company's ability to realize the carrying value of its assets is dependent on successfully bringing its technologies to market and achieving future profitable operations, the outcome of which cannot be predicted at this time. It will be necessary for the Company to raise additional funds for the continuing development of its technologies. The Company’s financial statements as at December 31, 2014 and for the year then ended have been prepared on a going concern basis, which contemplates the realization of assets and settlement of liabilities and commitments in the normal course of business. The Company has a net loss of $693,645for the year ended December 31, 2014 (2013 – $740,846, 2012 - $605,468) and has a working capital deficiency of $940,251at December 31, 2014 (2013 – $502,500). The Company is subject to risks and uncertainties common to drug discovery companies, including technological change, potential infringement on intellectual property of and by third parties, new product development, regulatory approval and market acceptance of its products, activities of competitors and its limited operating history. Management is aware, in making its assessment, of material uncertainties related to events or conditions that may cast significant doubt upon the Company’s ability to continue as a going concern. The financial statements do not include any adjustments that might result from the outcome of this uncertainty. 2. STATEMENT OF COMPLIANCE AND BASIS OF PRESENTATION (a) Statement of Compliance These financial statements of the Company for the years ended December 31, 2014, 2013 and 2012 have been prepared in accordance with International Financial Reporting Standards (“IFRS”) as issued by the International Accounting Standards Board (“IASB”) and the interpretations of the International Financial Reporting Interpretations Committee (IFRIC”). These financial statements were approved and authorized for issue by the Board of Directors on April 30, 2015. (b) Basis of Presentation These financial statements were prepared on a historical cost basis, except for cash flow information, and are presented in Canadian dollars which is the Company’s functional currency. (c) Use of Estimates The Company makes estimates and assumptions about the future that affect the reported amounts of assets and liabilities. Estimates and judgments are continually evaluated based on historical experience and other factors, including expectations of future events that are believed to be reasonable under the circumstances. In the future, actual experience may differ from these estimates and assumptions. The effect of a change in an accounting estimate is recognized prospectively by including it in comprehensive income in the period of the change, if the change affects that period only, or in the period of the change and future periods, if the change affects both. Significant assumptions about the 7


---

Pacific Therapeutics Ltd.(A Development Stage Company)Notes to Financial StatementsYears Ended December 31, 2014, 2013 and 2012
 future and other sources of estimation uncertainty that management has made at the statement of financial position date, that could result in a material adjustment to the carrying amounts of assets and liabilities, in the event that actual results differ from assumptions that have been made that relate to the following key estimates: Intangible Assets – impairment The application of the Company’s accounting policy for intangible assets expenditures requires judgment in determining whether it is likely that future economic benefits will flow to the Company, which may be based on assumptions about future events or circumstances. Estimates and assumptions may change if new information becomes available. If, after expenditures are capitalized, information becomes available suggesting that the recovery of expenditures is unlikely, the amount capitalized is written off in profit or loss in the period the new information becomes available. Intangible Assets – useful lives Following initial recognition, the Company carries the value of intangible assets at cost less accumulated amortization and any accumulated impairment losses. Amortization is recorded on a straight-line basis based upon management’s estimate of the useful life and residual value. The estimates are reviewed at least annually and are updated if expectations change as a result of technical obsolescence or legal and other limits to use. A change in the useful life or residual value willimpact the reported carrying value of the intangible assets resulting in a change in related amortization expense. Share-based payments and compensation The Company has applied estimates with respect to the valuation of shares issued for non-cash consideration. Shares are valued at the fair value of the equity instruments granted at the date the Company receives the goods or services. The Company measures the cost of equity-settled transactions with employees by reference to the fair value of the equity instruments at the date at which they are granted. Estimating fair value for share-based payment transactions requires determining the most appropriate valuation model, which is dependent on the terms and conditions of the grant. This estimate also requires determining the most appropriate inputs to the valuation model including the fair value of the underlying common shares, the expected life of the share option, volatility and dividend yield and making assumptions about them. The fair value of the underlying common shares is assessed as the most recent issuance price per common share for cash proceeds. The assumptions and models used for estimating fair value for share-based payment transactions are discussed in Note 10. 3. SIGNIFICANT ACCOUNTING POLICIES The following is a summary of significant accounting policies used in the preparation of these financial statements: (a) Cash and cash equivalents Cash and cash equivalents are comprised of cash on hand, deposits in banks and highly liquid investments having original terms to maturity of 90 days or less. 8


---

Pacific Therapeutics Ltd.(A Development Stage Company)Notes to Financial StatementsYears Ended December 31, 2014, 2013 and 2012
 (b) Loss per share Basic loss per share is calculated based on the weighted average number of shares outstanding during the period. The treasury stock method is used for determining the dilutive effect of options and warrants issued in calculating diluted earnings per share. Under this method, the dilutive effect on loss per share is recognized on the use of the proceeds that could be obtained upon exercise of options, warrants and similar instruments. It assumes that the proceeds would be used to purchase common shares at the average market price during the year. For the periods presented, this calculation proved to be anti-dilutive, and therefore diluted per share amounts do not differ from basic per share amounts. (c) Research and development Research costs are expensed in the period incurred. Development costs are expensed in the period incurred unless the Company believes a development project meets the criteria for deferral and amortization. No such costs have been deferred as at December 31, 2014 and 2013. Scientific Research and Experimental Development ("SR&ED") tax credits are recorded on a cash basis due to the uncertainty surrounding final approval of the SR&ED tax credit application. Tax credits received are recorded as a reduction in research and development costs incurred in the year. (d) Property and equipment Property and equipment is recorded at cost. Amortization is recorded annually at rates calculated to write off the assets over their estimated useful lives as follows: Computer equipment

   45% diminishing balanceFurniture and fixtures

   20% diminishing balanceLab equipment

   50% diminishing balanceLeasehold improvements

   straight-line over the term of the lease
 In the year of acquisition, these rates are reduced by one-half. (e) Intangible assets Technology licenses acquired from third parties that include licenses and rights to technologies are initially recorded at fair value based on consideration paid and amortized on a straight-line basis over the estimated useful life of the underlying technologies. Patent costs associated with the preparation, filing, and obtaining of patents are capitalized and amortized on a straight-line basis over the useful lives of the underlying technologies and patents, usually for a period not exceeding 15 years. Management evaluates the recoverability of technology licenses and patents on an annual basis based on the expected utilization of the underlying technologies. If the estimated net recoverable value for each cash-generating unit, calculated based on undiscounted future cash flows, is less than the carrying value, the asset is written down to its fair value. The amounts shown for technology licenses and patent costs do not necessarily reflect present or future values and the ultimate amount recoverable will be dependent upon the successful development and commercialization of products based on these rights. (f) Impairment Non-financial assets are tested for impairment whenever events or changes in circumstances indicate that an asset’s carrying amount may be less than its recoverable amount. Management uses judgment to estimate these inputs and any changes to these inputs could have a material impact on the 9


---

Pacific Therapeutics Ltd.(A Development Stage Company)Notes to Financial StatementsYears Ended December 31, 2014, 2013 and 2012
 impairment calculation. For impairment testing, non-financial assets that do not generate independent cash flows are grouped together into cash-generating units (CGUs), which represent the levels at which largely independent cash flows are generated. An impairment loss is recognized in earnings to the extent that the carrying value of an asset, CGU or group of CGU’s exceeds its estimated recoverable amount. The recoverable amount of an asset, CGU or group of CGU’s is the greater of its value in use and its fair value less cost to sell. Value in use is calculated as the present value of the estimated future cash flows discounted at appropriate discount rates. An impairment loss relating to a specific asset reduces the carrying value of the asset. An impairment loss relating to a group of CGU’s is allocated on a pro-rata basis to reduce the carrying value of the assets in the units comprising the group. A previously recognized impairment loss related to non-financial assets is assessed at each reporting date for any indications that the loss has decreased or no longer exists. An impairment loss related to non-financial assets is reversed if there is a subsequent increase in the recoverable amount. An impairment loss is reversed only to the extent that the asset’s carrying value does not exceed the carrying value that would have been determined, net of depreciation or amortization, if no loss had been recognized. (g) Share-based payments Share-based payments to employees are measured at the fair value of the instruments issued and amortized over the vesting periods. Share-based payments to non-employees are measured at the fair value of the goods or services received or the fair value of the equity instruments issued, if it is determined the fair value of the goods or services cannot be reliably measured, and are recorded at the date the goods or services are received. The amount recognized as an expense is adjusted to reflect the number of awards expected to vest. The offset to the recorded cost is to warrants and options reserve. Consideration received on the exercise of stock options is recorded as share capital and the related amount in warrants and options reserve is transferred to share capital. Charges for options that are forfeited before vesting are reversed from share-based payments reserve. For those options that expire or are forfeited after vesting, the recorded value is transferred to deficit. (h) Income taxes The Company uses the asset and liability method of accounting for income taxes. Under this method, deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax basis. Deferred tax assets and liabilities are measured using substantively enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. Deferred income tax assets result from unused loss carry-forwards, resource related pools and other deductions. 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. Deferred tax assets are reviewed at each reporting date and are reduced to the extent that it is no longer probable that the related tax benefit will be realized. (i) Financial instruments (a) Financial assets The Company classifies its financial assets in the following categories: held-to-maturity, fair value through profit or loss (“FVTPL”), loans and receivables, and available-for-sale (“AFS”). 10


---

Pacific Therapeutics Ltd.(A Development Stage Company)Notes to Financial StatementsYears Ended December 31, 2014, 2013 and 2012
 The classification depends on the purpose for which the financial assets were acquired. The Company's accounting policy for each category is as follows: Fair value through profit or loss This category comprises derivatives, or assets acquired or incurred principally for the purpose of selling or repurchasing it in the near term. They are carried in the statement of financial position at fair value with changes in fair value recognized through profit or loss. Loans and receivables These assets are non-derivative financial assets with fixed or determinable payments that are not quoted in an active market. They are carried at amortized cost less any provision for impairment. Individually significant receivables are considered for impairment when they are past due or when other objective evidence is received that a specific counterparty will default. Held-to-maturity These assets are non-derivative financial assets with fixed or determinable payments and fixed maturities that the Company's management has the positive intention and ability to hold to maturity. These assets are measured at amortized cost using the effective interest method. If there is objective evidence that the investment is impaired, determined by reference to external credit ratings and other relevant indicators, the financial asset is measured at the present value of estimated future cash flows. Any changes to the carrying amount of the investment, including impairment losses, are recognized through profit or loss. Available-for-sale Non-derivative financial assets not included in the above categories are classified as available-for- sale. They are carried at fair value with changes in fair value recognized directly in equity. Where a decline in the fair value of an available-for-sale financial asset constitutes objective evidence of impairment, the amount of the loss is removed from equity and recognized through other comprehensive income (loss). All financial assets except for those at fair value through profit or loss are subject to review for impairment at least at each reporting date. Financial assets are impaired when there is any objective evidence that a financial asset or a group of financial assets is impaired. Different criteria to determine impairment are applied for each category of financial assets, which are described above. The Company has classified its cash and cash equivalents at fair value through profit or loss. The Company’s receivables are classified as loans and receivables. (b) Financial liabilities The Company classifies its financial liabilities into one of two categories, depending on the purpose for which the liability was acquired. The Company's accounting policy for each category is as follows: 11


---

Pacific Therapeutics Ltd.(A Development Stage Company)Notes to Financial StatementsYears Ended December 31, 2014, 2013 and 2012
 Fair value through profit or loss- This category comprises derivatives, or liabilities acquired or incurred principally for the purpose of selling or repurchasing it in the near term. They are carried in the statement of financial position at fair value with changes in fair value recognized through profit or loss. Other financial liabilities:This category consists of liabilities carried at amortized cost using the effective interest method. The Company’s accounts payable and accrued liabilities, convertible note and due to related parties are classified as other financial liabilities. The Company’s derivative liability component of the convertible note is classified as fair value through profit or loss. 4. RECENT ACCOUNTING PRONOUNCEMENTS At the date of authorization of these financial statements, the IASB and International Financial Reporting Interpretation Committee (“IFRIC”) have issued the following new and revised standards, amendments and interpretations which are not yet effective during the year ended December 31, 2014: Effective for annual periods beginning on or after July 1, 2014 IAS 19,Defined Benefit Plans and Employee Contributions

Amended to clarify the application of IAS 19 to plans that require employees or third parties to contribute toward the cost of benefits. Effective for annual periods beginning on or after January 1, 2015 IFRS 7,Financial Instruments – Disclosure

Amended to require additional disclosures on transition from IAS 39 to IFRS 9. Effective for annual periods beginning on or after January 1, 2016 IFRS 11,Accounting for Acquisitions of Interests in Joint Operations

Amended to provide specific guidance on accounting for the acquisition of an interest in a joint operation that is a business. IAS 16 & IAS 38,Clarification of Acceptable Methods of Depreciation and Amortization

Amended to (i) clarify that the use of a revenue-based depreciation and amortization method is not appropriate, and (ii) provide a rebuttable presumption for intangible assets. IAS 27 & IFRS 1,Equity Method in Separate Financial Statements

IAS 27 is amended to restore the option to use the equity method to account for investments in subsidiaries, joint ventures and associates in an entity’s separate financial statements.

IFRS 1 is amended to permit use of the business combinations exemption for investments in 12


---

Pacific Therapeutics Ltd.(A Development Stage Company)Notes to Financial StatementsYears Ended December 31, 2014, 2013 and 2012
 subsidiaries accounted for using the equity method in the separate financial statements of the first-time adopter. Effective for annual periods beginning on or after January 1, 2017 IFRS 15,Revenue from Contracts with Customers:

IFRS 15 is a new standard to establish principles for reporting the nature, amount, timing, and uncertainty of revenue and cash flows arising from an entity’s contracts with customers. It provides a single model in order to depict the transfer of promised goods or services to customers. IFRS 15 supersedes IAS 11, Construction Contracts, IAS 18, Revenue, IFRIC 13, Customer Loyalty Programs, IFRIC 15, Agreements for the Construction of Real Estate, IFRIC 18, Transfers of Assets from Customers, and SIC-31, Revenue – Barter Transactions involving Advertising Service. Effective for annual periods beginning on or after January 1, 2018 IFRS 9,Financial Instruments – Classification and Measurement

IFRS 9 is a new standard on financial instruments that will replace IAS 39, Financial Instruments: Recognition and Measurement.

IFRS 9 addresses classification and measurement of financial assets and financial liabilities as well as derecognition of financial instruments. IFRS 9 has two measurement categories for financial assets: amortized cost and fair value. All equity instruments are measured at fair value. A debt instrument is at amortized cost only if the entity is holding it to collect contractual cash flows and the cash flows represent principal and interest. Otherwise it is at fair value through profit or loss. The Company has not early adopted these standards, amendments and interpretations and anticipates that the application of these standards, amendments and interpretations will not have a material impact on the financial position and financial performance of the Company. 13


---

Pacific Therapeutics Ltd.(A Development Stage Company)Notes to Financial StatementsYears Ended December 31, 2014, 2013 and 2012
 5. PROPERTY AND EQUIPMENT CostBalance at:

   

   Computer

   

   

   Furniture and

   

   

   Leasehold

   

   

   Lab

   

   

   TotalEquipment

   

   

   Fixtures

   

   

   Improvements

   

   

   EquipmentDecember 31, 2012

   $

   5,876

   

   $

   -

   

   $

   -

   

   $

   -

   

   $

   5,876Additions

   

   -

   

   

   -

   

   

   -

   

   

   6,200

   

   

   6,200December 31, 2013

   

   5,876

   

   

   -

   

   

   -

   

   

   6,200

   

   

   12,076Retirement of assets

   

   (5,876

   )

   

   -

   

   

   -

   

   

   (6,200

   )

   

   (12,076

   )Additions

   

   -

   

   

   -

   

   

   -

   

   

   -

   

   

   -December 31, 2014

   $

   -

   

   $

   -

   

   $

   -

   

   $

   -

   

   $

   -AmortizationBalance at:

   

   Computer

   

   

   Furniture and

   

   

   Leasehold

   

   

   Lab

   

   

   TotalEquipment

   

   

   Fixtures

   

   

   Improvements

   

   

   EquipmentDecember 31, 2012

   $

   5,662

   

   $

   -

   

   $

   -

   

   $

   1,550

   

   $

   7,212Additions

   

   -

   

   

   -

   

   

   -

   

   

   -

   

   

   -Amortization for the year

   

   96

   

   

   -

   

   

   -

   

   

   2,325

   

   

   2,421December 31, 2013

   $

   5,758

   

   $

   -

   

   $

   -

   

   $

   3,875

   

   $

   9,633Amortization for the period

   

   53

   

   

   -

   

   

   -

   

   

   1,163

   

   

   1,216Additions

   

   -

   

   

   -

   

   

   -

   

   

   -

   

   

   -Retirement of assets

   

   (5,811

   )

   

   -

   

   

   -

   

   

   (5,038

   )

   

   (10,849

   )December 31, 2014

   $

   -

   

   $

   -

   

   $

   -

   

   $

   -

   

   $

   -Carrying amountsBalance at:

   

   Computer

   

   

   Furniture and

   

   

   Leasehold

   

   

   Lab

   

   

   TotalEquipment

   

   

   Fixtures

   

   

   Improvements

   

   

   EquipmentDecember 31, 2013

   $

   118

   

   $

   -

   

   $

   -

   

   $

   2,325

   

   $

   2,443December 31, 2014

   $

   -

   

   $

   -

   

   $

   -

   

   $

   -

   

   $

   -
 14


---

Pacific Therapeutics Ltd.(A Development Stage Company)Notes to Financial StatementsYears Ended December 31, 2014, 2013 and 2012
 6. INTANGIBLE ASSETS CostTechnology

   

   

   Patents (ii)

   

   TotalLicenses (i)December 31, 2012

   $

   42,510

   

   $

   64,315

   $

   106,825Additions

   

   -

   

   

   13,569

   

   13,569Write-off

   

   (42,510

   )

   

   -

   

   (42,510

   )December 31, 2013

   

   -

   

   

   77,884

   

   77,884Additions

   

   -

   

   

   10,195

   

   10,195December 31, 2014

   $

   -

   

   $

   88,079

   $

   88,079AmortizationTechnology

   

   

   Patents (ii)

   

   TotalLicenses (i)December 31, 2012

   $

   -

   

   $

   13,263

   $

   13,263Amortization for the year

   

   -

   

   

   4,708

   

   4,708December 31, 2013

   

   -

   

   

   17,971

   

   17,971Amortization for the year

   

   -

   

   

   5,618

   

   5,618December 31, 2014

   $

   -

   

   $

   23,589

   $

   23,589Carrying amountsTechnologyLicenses (i)

   

   

   Patents (ii)

   

   TotalDecember 31, 2013

   $

   -

   

   $

   59,913

   $

   59,913December 31, 2014

   $

   -

   

   $

   64,490

   $

   64,490
  (i)

   On January 9, 2013, the technology license agreement with Dalhousie University was terminated due to breach of contract for non-payment of maintenance amounts due, accordingly the technology license was written down to nil.(ii)

   Due to a finite life of patents which begins from the date of application; the Company amortizes all patent costs over the expected life of the patent. 15


---

Pacific Therapeutics Ltd.(A Development Stage Company)Notes to Financial StatementsYears Ended December 31, 2014, 2013 and 2012
 7. IRREVOCABLE SUBSCRIPTION AGREEMENTS (“ISA”) During the year ended December 31, 2011 the Company entered into certain Irrevocable Subscription Agreements for proceeds of $300,000 which was allocated as follows: As at December 31,

   

   2014

   

   

   2013

   

   

   2012$

   

   

   $

   

   

   $Net amount allocated to ISA

   

   -

   

   

   -

   

   

   230,481Accretion of deemed discount

   

   -

   

   

   -

   

   

   69,519Total subscription proceeds

   

   -

   

   

   -

   

   

   300,000
 Under the ISA agreements, the proceeds were placed in escrow and were subject to an interest rate of 1% per month, as well as certain other conversion options. On January 31, 2012, the Company terminated the ISA arrangements. During the year ended December 31, 2013, the Company recorded total interest expense of $Nil (2012 - $72,521) and recorded a 1% interest per month recorded on the ISA funds held in escrow of $Nil (2012 – $3,002), and accretion of the amount allocated to certain bonus shares of $Nil (2012 - $69,519). 8. CONVERTIBLE NOTES AND DERIVATIVE LIABILITY On September 11, 2014 the Company issued a convertible note for $50,000 due on September 11, 2015 with an interest rate of 1% per month payable quarterly. The note is unsecured but convertible at the option of the holder into common shares of the Company at a price based on the weighted average closing price of the Company's shares on the Canadian Stock Exchange for the ten (10) trading days immediately preceding the conversion date, less fifteen per cent (15%). The convertible note has both debt and derivative liability characteristics. The Company initially valued the note by calculating the derivative liability component then applying the residual value to the debt component. The derivative liability component of the loan was calculated using the Black-Scholes Pricing Model and was estimated to be $36,188at September 11, 2014 and December 31, 2014. The initial fair value of the derivative liability component is amortized over the remaining life of the convertible note. The debt component at December 31, 2014 was valued as follows: 2014Loan proceeds

   $

   50,000Derivative component

   

   (36,188

   )Accretion

   

   11,005Accrued interest

   

   1,825$

   26,642
 16


---

Pacific Therapeutics Ltd.(A Development Stage Company)Notes to Financial StatementsYears Ended December 31, 2014, 2013 and 2012
 The fair value of the derivative liability component of the loan of $36,188 was calculated at September 11, 2014 and December 31, 2014 using the Black-Scholes Pricing Model using the following assumptions: Dividend yield

   0%Expected volatility

   160.63%Risk free interest rate

   1.60%Expected life in years

   1
 On September 24, 2012 the Company issued a convertible note (the “Note”) with a face value of $30,000, issued 200,000 warrants (“Bonus Warrants”) and received $30,000 in cash. The Bonus Warrants expired in 2 years and had an exercise price of $0.22. The Note had a term of one year and was repayable by the Company at any time. The note was repaid in October 2014. The holder of the Note could convert the whole Note or any portion into units at any time. Each unit would consist of 1 common share (the “Share Option”) and 1 warrant (the “Warrant Option”), with each Warrant Option exercisable to acquire an additional common share for a period of 2 years from the date the Warrant Option was issued The conversion option expired upon repayment of the Note. The Note accrued interest at the rate of 1% per month, payable in quarterly installments. The fair value of the Bonus Warrants, Share Options and Warrant options of $43,070 were determined using the Black-Scholes Pricing Model and the Geske Pricing Model. 9. RELATED PARTY TRANSACTIONS AND BALANCES Due to related Parties Due to related partiesconsistsof short term amounts loaned, services rendered and expenses paid on behalf of the Company by shareholders of the Company that are unsecured, non-interest bearing, and payable on demand. As at December 31

   

   2014

   

   

   2013Amounts owing to Derick Sinclair CFO of the Company for loans andconsulting, accounting fees and interest on ISA.

   $

   124,724

   

   $

   86,760Amounts owing to Greg Beniston a director of the Company for legal fees

   

   19,928

   

   

   17,117Amounts owing to Doug Wallis a director of the Company for interest on ISA

   

   2,964

   

   

   -Amount owing to Doug Unwin the CEO and director of the Company for loans,salary, expenses and interest on ISA.

   

   465,156

   

   

   366,210$

   612,772

   

   $

   470,087
 17


---

Pacific Therapeutics Ltd.(A Development Stage Company)Notes to Financial StatementsYears Ended December 31, 2014, 2013 and 2012
 Related Party Transactions and Key Management and Personnel Compensation Payment or accruals for related parties were for services provided to the company were: For the year ended December 31

   

   2014

   

   

   2013

   

   

   2012Salary paid or accrued for Doug Unwin CEO

   $

   160,000

   

   $

   155,000

   

   $

   100,398Consulting fees paid or accrued to Derick Sinclair CFO

   

   36,000

   

   

   34,500

   

   

   18,000Accounting fees paid or accrued to a company controlled by Derick Sinclair CFO

   

   6,000

   

   

   6,000

   

   

   1,500Legal fees for services from Greg Beniston a consultant and director of the Company

   

   3,121

   

   

   8,575

   

   

   3,200Share-based payments for options issued to Officers and Directors

   

   67,835

   

   

   32,824

   

   

   42,390Total key management personnel compensation

   $

   272,956

   

   $

   236,899

   

   $

   165,488
 During the year ended December 31, 2014 the Company granted options to directors and officers valued at $67,835 (2013 $42,192, 2012 - $42,390). The 2014 options consisted of 500,000, 5 year $0.10 incentive stock options that vested at date of grant and 500,000, 1 year $0.06 incentive options that vested at date of grant. The 2013 options consisted of 450,000 5 year $0.10 incentive stock options that vested at date of grant (Note 10). 10. SHARE CAPITAL Class A Common Shares AuthorizedUnlimited

   Class A common shares without par value1,500,000

   Class B Series I preferred shares without par value1,000,000

   Class B Series II preferred shares without par valueIssued38,976,825

   Class A common shares without par valueNIL

   Class B Series I preferred shares without par valueNIL

   Class B Series II preferred shares without par value
 On October 3, 2014 the Company closed the first tranche of a non-brokered private placement and issued 1,520,000 units at $0.05 per unit for cash proceeds of $6,000 and to retire debts totaling $70,000. The debts related to consulting services by arm’s length parties for $20,000 and reduction of $50,000 in balance owing to a related party. Each unit is comprised of one common share and one share purchase warrant exercisable for one common share at an exercise price of $0.15 until October 3, 2015. Each share purchase warrant included was assessed a value of $0.01 based on the residual value method. As such, a total of $15,200 was allocated to Warrant reserves. On February 13, 2013 the Company closed the first tranche of a non-brokered private placement and issued 1,800,000 units at $0.05 per unit for gross proceeds of $90,000, of which $30,000 was recorded during the year ended December 31, 2012. Each unit is comprised of one common share and one-half share purchase warrant, each whole warrant being exercisable for one common share at an exercise price of $0.22 until February 12, 2015. The Company paid finder’s fees of $5,000 and issued 100,000 finders warrants to finders in the first tranche. The finders’ warrants have the same terms as the 18


---

Pacific Therapeutics Ltd.(A Development Stage Company)Notes to Financial StatementsYears Ended December 31, 2014, 2013 and 2012
 warrants that are part of the above Units. The fair value of the 100,000 finders’ warrants was $2,742 as estimated at the date of issue using the Black-Scholes pricing model. On May 1, 2013, the Company closed the second tranche of a non-brokered private placement and issued an additional 2,200,000 units at $0.05 per unit for gross proceeds of $110,000. Each unit is comprised of one common share and one-half share purchase warrant, each whole warrant being exercisable for one common share at an exercise price of $0.22 until May 1, 2015. The Company paid finder’s fees of $10,000 and issued 200,000 finders warrants to finders in the second tranche. The finders’ warrants have the same terms as the warrants that are part of the above Units. The fair value of the 200,000 finders’ warrants was $5,413 as estimated at the date of issue using the Black-Scholes pricing model. On October 8, 2013 the Company closed the first tranche of a non-brokered private placement and issued 2,160,000 units for gross proceeds of $108,000. 2,160,000 warrants were issued with an expiration date of October 8, 2016. Each unit is comprised of one common share and one share purchase warrant, each warrant being exercisable for one common share at an exercise price of $0.10 for three years from the closing date of the placement. Finders’ fees were paid in the amount of $4,500 cash and issued 90,000 finders warrants having the same terms as the warrants issued as part of the units. The fair value of the 100,000 finders’ warrants was $2,646 as estimated at the date of issue using the Black-Scholes pricing model. On October 18, 2013 the Company closed the second tranche and issued 1,980,000 units for gross proceeds of $99,000. 1,980,000 warrants were issued with an expiration date of October 18, 2016.Each unit is comprised of one common share and one share purchase warrant, each warrant being exercisable for one common share at an exercise price of $0.10 for three years from the closing date of the placement. Finders fees were paid in the amount of $2,000 cash and issued 40,000 finders warrants having the same terms as the warrants issued as part of the units. The fair value of the 40,000 finders’ warrants was $3,306 as estimated at the date of issue using the Black-Scholes pricing model. On November 5, 2013 the Company closed the third tranche and issued 6,730,000 units for gross proceeds of $336,500. 6,730,000 warrants were issued with an expiration date of November 5, 2016.Each unit is comprised of one common share and one share purchase warrant, each warrant being exercisable for one common share at an exercise price of $0.10 for three years from the closing date of the placement Finders’ fees were paid in the amount of $2,500 cash and issued 50,000 finders warrants having the same terms as the warrants issued as part of the units. The fair value of the 50,000 finders’ warrants was $1,899 as estimated at the date of issue using the Black-Scholes pricing model. On January 31, 2012 66,666 common share warrants with an exercise price of $0.15 were exercised by an officer of the company for 66,666 common shares and proceeds of $10,000. On June 20, 2012, the Company completed a private placement of 732,670 units at $0.15 per unit for gross proceeds of $109,901. Each unit is comprised of one common share and one warrant to purchase one common share at $0.22 per share exercisable until June 20, 2014. On June 20, 2012, certain finders were issued 56,666 units with the same terms as in the foregoing, which were valued at $8,500. On September 21, 2012, the Company completed a private placement of 741,666 units at $0.15 per unit for gross proceeds of $111,250. Each unit is comprised of one common share and one warrant to purchase one common share at $0.22 per share exercisable until September 21, 2014. Certain finders were issued 5,500 units with the same terms as in the foregoing, which were valued at $825. 19


---

Pacific Therapeutics Ltd.(A Development Stage Company)Notes to Financial StatementsYears Ended December 31, 2014, 2013 and 2012
 Share subscriptions received: At December 31, 2014 the Company had received $30,000 (December 31, 2013 - $Nil) from two investors for 600,000 units at $0.05 per unit. The shares were issued by the Company on March 20, 2015.Each unit is comprised of one common share and one share purchase warrant exercisable for one common share at an exercise price of $0.15 until March 20, 2016. Stock options and share based payments: As at December 31, 2014, 2013 and 2012, the following stock options were outstanding and exercisable: Expiry Date

   ExercisePrice $

   31 Dec 14

   31 Dec 13

   31 Dec 1213-Aug-13

   0.27

   -

   -

   225,00004-Nov-14

   0.27

   -

   150,000

   150,00005-Mar-15

   0.27

   375,000

   375,000

   375,00011-Jun-15

   0.06

   500,000

   -

   -30-Oct-15

   0.10

   200,000

   -

   -10-Jan-17

   0.10

   400,000

   -

   -03-Jul-17

   0.10

   475,000

   475,000

   475,00021-Dec-17

   0.10

   450,000

   450,000

   450,00004-Apr-18

   0.10

   350,000

   350,000

   -16-Sep-18

   0.10

   100,000

   100,000

   -30-Oct-18

   0.10

   100,000

   -

   -07-Mar-19

   0.10

   525,000

   -

   -30-Oct-20

   0.10

   200,000

   -

   -Balance

   0.11

   3,675,000

   1,900,000

   1,675,000
 The options outstanding and exercisable atDecember 31, 2014, have a weighted average remaining contractual life of 3.2 years (December 31, 2014 – 3.1 years). During the year ended December 31, 2014 1,000,000 (2013 - 350,000) of the 1,925,000 (2013 - 450,000) stock options were issued to Officers and Directors of the Company. Stock option activity was as follows: December 31, 2014

   December 31, 2013

   December 31, 2012Options

   

   Exercise

   

   Options

   

   Exercise

   

   Options

   

   ExerciseOutstanding

   

   Price $

   

   Outstanding

   

   Price $

   

   Outstanding

   

   Price $Balance beginning of year

   

   1,900,000

   

   $

   0.15

   

   

   1,675,000

   

   $

   0.18

   

   

   1,650,000

   

   $

   0.25Exercised

   

   -

   

   

   -

   

   

   -

   

   

   -

   

   

   -

   

   

   -Expired/Cancelled

   

   (150,000

   )

   

   0.27

   

   

   (225,000

   )

   

   0.27

   

   

   (1,000,000

   )

   

   0.24Issued

   

   1,925,000

   

   

   0.09

   

   

   450,000

   

   

   0.10

   

   

   1,025,000

   

   

   0.10Balance at year end

   

   3,675,000

   

   $

   0.11

   

   

   1,900,000

   

   $

   0.15

   

   

   1,675,000

   

   $

   0.17
 20


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Pacific Therapeutics Ltd.(A Development Stage Company)Notes to Financial StatementsYears Ended December 31, 2014, 2013 and 2012
 The fair value of share based awards is determined using the Black-Scholes Option Pricing model. The model utilizes certain subjective assumptions including the expected life of the option and expected future stock price volatility. Changes in these assumptions can materially affect the estimated fair value of the Company’s stock options. The Company used the Black-Scholes Option Pricing Model for the grants on January 10, 2014, March 3, 2014 and June 11, 2014 and for multiple stock option grants occurring in 2013 and 2012. The assumptions used in the Black-Scholes Option Pricing Model for employees, directors and consultants were: December 31, 2014

   December 31, 2013

   December 31, 2012Dividend yield

   0%

   0%

   0%Expected volatility

   299% - 308%

   164% - 166%

   91% - 112%Risk free interest rate

   0.78% - 1.63%

   1.23% - 1.87%

   1.19%Expected life in years

   1 - 5

   5

   2 - 3Grant date fair value per option

   $0.05 - $0.08

   $0.08 - $0.09

   $0.04 - $0.11Forfeiture rate

   4%

   4%

   4%
 Warrants: As at December 31, 2014, 2013 and 2012, the following share purchase warrants were issued and outstanding: Expiry

   ExerciseDate

   Price $

   31 Dec 14

   31 Dec 13

   31 Dec 1215-Nov-13

   $0.15

   -

   -

   602,22319-Jun-14

   $0.22

   -

   56,666

   56,66620-Jun-14

   $0.22

   -

   732,670

   732,67031-Jul-14

   $0.15

   -

   2,473,334

   2,473,33428-Aug-14

   $0.25

   -

   60,000

   60,00021-Sep-14

   $0.22

   -

   747,166

   747,16624-Sep-14

   $0.22

   -

   200,000

   -16-Nov-14

   $0.15

   -

   600,000

   600,00012-Feb-15

   $0.22

   1,000,000

   1,000,000

   -01-May-15

   $0.22

   1,300,000

   1,300,000

   -03-Oct-15

   $0.15

   1,520,000

   -

   -28-Feb-16

   $0.10

   700,000

   -

   -01-Oct-16

   $0.10

   2,160,000

   2,160,000

   -08-Oct-16

   $0.10

   90,000

   90,000

   -18-Oct-16

   $0.10

   1,980,000

   1,980,000

   -18-Oct-16

   $0.10

   40,000

   40,000

   -05-Nov-16

   $0.10

   6,730,000

   6,730,000

   -05-Nov-16

   $0.10

   50,000

   50,000

   -15,570,000

   18,219,836

   5,272,059
 21


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Pacific Therapeutics Ltd.(A Development Stage Company)Notes to Financial StatementsYears Ended December 31, 2014, 2013 and 2012
 The warrants outstanding and exercisable at December 31, 2014, have a weighted average remaining contractual life of 1.5 years (2013 – 0.8 years). Warrant activity was as follows: 2014

   

   

   2013

   

   

   2012Warrants

   

   

   Exercise

   

   

   Warrants

   

   

   Exercise

   

   

   Warrants

   

   

   ExerciseOutstanding

   

   

   Price $

   

   

   Outstanding

   

   

   Price $

   

   

   Outstanding

   

   

   Price $Opening balance

   

   18,219,836

   

   

   0.14

   

   

   5,272,059

   

   

   0.17

   

   

   3,830,423

   

   

   0.16Expired

   

   (4,869,836

   )

   

   0.18

   

   

   (602,223

   )

   

   0.15

   

   

   (28,000

   )

   

   0.10Exercised

   

   -

   

   

   -

   

   

   -

   

   

   -

   

   

   (66,666

   )

   

   0.15Issued

   

   2,220,000

   

   

   0.13

   

   

   13,550,000

   

   

   0.12

   

   

   1,536,502

   

   

   0.22Closing balance

   

   15,570,000

   

   

   0.12

   

   

   18,219,836

   

   

   0.14

   

   

   5,272,259

   

   

   0.18
 11. INCOME TAXES The reconciliation of income tax attributable to continuing operations computed at the statutory tax rate of 26% (2013 and 2012 – 25%) to income tax expense is: 2014

   

   2013

   

   2012$

   

   $

   

   $Earnings (loss) for the year

   (693,645

   )

   (740,846

   )

   (605,468

   )Income tax benefit at Canadian statutory rates

   (180,000

   )

   (192,620

   )

   (151,367

   )Change in statutory, foreign tax, foreign exchange rates and other

   (24,000

   )

   (31,132

   )

   19,947Permanent Differences

   40,000

   

   -

   

   -Change in unrecognized deductible temporary differences

   164,000

   

   223,752

   

   131,420Total income tax expense (recovery)

   -

   

   -

   

   -
 Deferred taxes are recognized for the future income tax consequences attributable to differences between the carrying values of assets and liabilities and their respective income tax bases. Deferred tax assets are evaluated periodically and if realization is not considered likely, a valuation allowance is provided. 22


---

Pacific Therapeutics Ltd.(A Development Stage Company)Notes to Financial StatementsYears Ended December 31, 2014, 2013 and 2012
 (a) Deferred tax asset and liabilities: 2014

   

   2013$

   

   $Deferred tax assets (liabilities):Operating loss carry-forwards

   909,000

   

   771,000Share issue cost

   8,000

   

   6,000Property and equipment

   1,000

   

   -Intangible assets

   (1,000

   )

   (4,000

   )Derivative liability

   

   

   -Convertible note

   

   

   -917,000

   

   773,000Valuation allowance

   (917,000

   )

   (773,000

   )Net deferred tax assets

   -

   

   -
 (b) Loss carry-forwards: The Company has accumulated non-capital losses of approximately $3,497,000 (2013 -$2,964,000) which will expire in between 2026 and 2034 (2013 – 2014 and 2033). 12. CAPITAL DISCLOSURE The Company considers its capital under management to be comprised of shareholders’ equity and any debt that it may issue. The Company’s objectives when managing capital are to continue as a going concern and to maximize returns for shareholders over the long term. The Company is not subject to any capital restrictions. There has been no change in the Company’s objectives in managing its capital. 13. FINANCIAL INSTRUMENTS AND RISK As at December 31, 2014, the Company’s financial instruments consist of cash and cash equivalents, tradepayables,due to related parties, a convertible note and a derivative liability. The carrying value of cash and cash equivalents, tradepayables, and due to related partiesapproximate their fair values because of the short term nature of these instruments. The fair value of the convertible note is its face value of $50,000 while the derivative liability is carried at fair value determined using level 3 measurement techniques (see below). Credit Risk Financial instruments that potentially subject the Company to concentrations of credit risk consist principally of cash and cash equivalents. To minimize the credit risk the Company places these instruments with a high credit quality financial institution. Liquidity Risk Of the Company’s financial liabilities, $612,771 are due on demand, $267,474are due in 30-90 days and $50,000 are due in 254 days.The Company manages liquidly risk through management of its capital resources discussed above. 23


---

Pacific Therapeutics Ltd.(A Development Stage Company)Notes to Financial StatementsYears Ended December 31, 2014, 2013 and 2012
 Foreign Exchange Risk The Company is not exposed to foreign exchange risk on its financial instruments. Interest Rate Risk At December 31,2014, the Company is not exposed to significant interest rate risk as its interest bearing debt is short term at fixed rates. Fair Value The Company provides information about financial instruments that are measured at fair value, grouped into Level 1 to 3 based on the degree to which the inputs used to determine the fair value are observable. Level 1 fair value measurements are those derived from quoted prices in active markets for identical assets or liabilities.Level 2 fair value measurements are those derived from inputs other than quoted prices included within Level 1, that are observable either directly or indirectly.Level 3 fair value measurements are those derived from valuation techniques that include inputs that are not based on observable market data. Cash and cash equivalents are measured using level 1 fair value inputs. The derivative component of the convertible note is measured using level 3 fair value inputs. 14. SUPPLEMENTIAL CASH FLOW INFORMATION During the year ended December 31, 2014, the Company had the following non-cash transactions: The issuance of 1,400,000 units to retire $70,000 in accounts payable (Note 10)Recognition of a derivative liability of $36,188 on issuance of a convertible note (Note 8) The Company did not have any non-cash transactions during the years ended December 31, 2013 and 2012. 15. SUBSEQUENT EVENTS On February 24, 2015 the Company issue a total of 400,000 options to purchase common shares to a director and a consultant under the 2014 stock option plan as approved at the Company’s previous annual general meeting. The issuance of the options is subject to regulatory approval. The Company issued 250,000,3 year options with an exercise price of $0.25 to under an agreement with Small Cap Invest Ltd. and the remaining 150,000, 5 year options with an exercise price of $0.10 to a director of the Company. On March 20, 2015 the Company closed the second tranche of a non-brokered private placement and issued 2,000,000 units at $0.05 per unit for cash proceeds of $41,000 (of which $30,000 was received in 2014 and $11,000 received in 2015) and to retire debts totaling $59,000. Each unit is comprised of one common share and one share purchase warrant exercisable for one common share at an exercise price of $0.15 until March 20, 2016. 24


---

Pacific Therapeutics Ltd.(A Development Stage Company)Notes to Financial StatementsYears Ended December 31, 2014, 2013 and 2012
 On April 1, 2015 the Company announced it had received regulatory approval to reprice warrants outstanding as at March 30, 2015, to an exercise price of three cents for a period of 30 days. After the 30 days have lapsed, any warrants that have not been exercised will revert back to the original terms of the warrant. This offer will be available to all eligible warrantholders of record on March 30, 2015, for 30 days starting April 1, 2015. The Company has a total of 15.49 million warrants eligible to participate in the repricing offer, which could be exercised for an aggregate total of up to $464,700. On April 28, 2015 the Company announced it had received regulatory approval to extend the time frame to exercise the previously announced, on April 1, 2015. The repricing of warrants outstanding as at March 30, 2015 to an exercise price of three cents,has now been extended to May 15, 2015.All other terms and conditions remain the same as announced on April 1, 2015. 25


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