Document:

EX-4.5

 Exhibit 4.5 

CYNAPSUS THERAPEUTICS INC. 
 CONSOLIDATED FINANCIAL
STATEMENTS 
 DECEMBER 31, 2014 
 (Expressed in
Canadian Dollars) 

 CYNAPSUS THERAPEUTICS INC. 

December 31, 2014 
  

 
 TABLE OF CONTENTS 

 

					
	 	  	Page	 
	 Independent Auditors’ Report
	  	 	1	  
		
	 Consolidated Statement of Financial Position
	  	 	2	  
		
	 Consolidated Statement of Loss and Comprehensive Loss
	  	 	3	  
		
	 Consolidated Statement of Changes in Equity
	  	 	4	  
		
	 Consolidated Statement of Cash Flows
	  	 	5	  
		
	 Notes to the Consolidated Financial Statements
	  	 	6 - 30	  

 INDEPENDENT AUDITORS’ REPORT OF REGISTERED PUBLIC ACCOUNTING FIRM 

To the Shareholders of Cynapsus Therapeutics Inc. 
 We have
audited the accompanying consolidated financial statements of Cynapsus Therapeutics Inc., which comprise the consolidated statement of financial position as at December 31, 2014 and the consolidated statements of loss and comprehensive loss,
changes in equity and cash flows for the year then ended, and a summary of significant accounting policies and other explanatory information. 

Management’s responsibility for the consolidated financial statements 

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

Our responsibility is to express an opinion on these consolidated financial statements based on our audit. We conducted our audit in accordance with Canadian
generally accepted auditing standards. Those standards require that we comply with ethical requirements and plan and perform the audit to obtain reasonable assurance about whether the consolidated financial statements are free from material
misstatement. 
 An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the consolidated financial
statements. The procedures selected depend on the auditors’ judgment, including the assessment of the risks of material misstatement of the consolidated financial statements, whether due to fraud or error. In making those risk assessments, the
auditors consider internal control relevant to the entity’s preparation and fair presentation of the consolidated financial statements in order to design audit procedures that are appropriate in the circumstances, 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 consolidated 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 consolidated financial statements present fairly, in all material respects, the financial position of Cynapsus Therapeutics Inc. 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. 

Other matter 
 The consolidated financial statements of
Cynapsus Therapeutics Inc. for the year ended December 31, 2013 were audited by another auditor who expressed an unmodified opinion on these statements on April 8, 2014. 

 

			
			

	Toronto, Canada		Chartered Professional Accountants
	March 16, 2015		Licensed Public Accountants

  
 Page 1 

 CYNAPSUS THERAPEUTICS INC. 

Consolidated Statement of Financial Position 
  

 
 As at December 31, 2014 

(in Canadian dollars) 
  

											
	 	  	NOTES	  	December 31,
2014	 	 	December 31,
2013	 
	 	  	 	  	$	 	 	$	 
	 ASSETS
	  		  				 			
	 Current assets
	  		  				 			
	 Cash and cash equivalents
	  	8	  	 	17,448,497	  	 	 	2,289,046	  
	 Prepaid expenses and other current assets
	  		  	 	269,779	  	 	 	118,329	  
		  		  	  
	  
	 	 	  
	  
	 
	 Total current assets
				 	17,718,276	  		 	2,407,375	  
	 Non-current assets
										
	 Property, plant and equipment
		9		 	257,830	  		 	13,737	  
	 Intangible assets
		10		 	574,522	  		 	727,957	  
		  		  	  
	  
	 	 	  
	  
	 
	 Total assets
				 	18,550,628	  		 	3,149,069	  
		  		  	  
	  
	 	 	  
	  
	 
	 LIABILITIES
										
	 Current liabilities
										
	 Accounts payable and accrued liabilities
		11, 17		 	3,080,631	  		 	2,315,082	  
	 Deferred grant proceeds
		16		 	—  	  		 	239,968	  
		  		  	  
	  
	 	 	  
	  
	 
	 Total current liabilities
				 	3,080,631	  		 	2,555,050	  
		  		  	  
	  
	 	 	  
	  
	 
	 SHAREHOLDERS’ EQUITY
										
	 Share capital
		13		 	31,740,941	  		 	16,156,398	  
	 Equity reserves
										
	 Warrants
		13		 	13,452,183	  		 	4,211,014	  
	 Share-based payments
		13		 	2,787,525	  		 	1,918,672	  
	 Deficit
				 	(32,510,652	) 		 	(21,692,065	) 
		  		  	  
	  
	 	 	  
	  
	 
	 Total shareholders’ equity
				 	15,469,997	  		 	594,019	  
		  		  	  
	  
	 	 	  
	  
	 
	 Total liabilities and shareholders’ equity
				 	18,550,628	  		 	3,149,069	  
		  		  	  
	  
	 	 	  
	  
	 

 COMMITMENTS AND CONTINGENT LIABILITIES (Note 18) 

SUBSEQUENT EVENTS (Note 20) 
 APPROVED ON BEHALF OF THE BOARD:

  

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

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

  
 Page 2 

 CYNAPSUS THERAPEUTICS INC. 

Consolidated Statement of Loss and Comprehensive Loss 
  

 
 For the year ended December 31, 2014

 (in Canadian dollars, except per share and share figures) 
  

													
	 	  	NOTES	 	  	December 31,
2014	 	 	December 31,
2013	 
	 	  	 	 	  	$	 	 	$	 
	 EXPENSES
	  				  				 			
	 Research and development
	  	 	14	  	  	 	6,193,167	  	 	 	1,661,823	  
	 Operating, general and administrative
	  	 	15	  	  	 	5,006,101	  	 	 	2,820,935	  
	 Share-based payments
	  	 	13	  	  	 	975,627	  	 	 	516,274	  
	 Amortization of intangible assets
	  	 	10	  	  	 	58,986	  	 	 	58,986	  
	 Depreciation of property, plant and equipment
	  	 	9	  	  	 	16,131	  	 	 	2,050	  
	 Foreign exchange (gain) loss
	  				  	 	(691,578	) 	 	 	44,520	  
	 Recovery on scientific research
	  				  	 	(91,717	) 	 	 	(44,232	) 
	 Research grant
	  	 	16	  	  	 	(694,628	) 	 	 	(424,187	) 
	 Other income
	  				  	 	—  	  	 	 	(2,200	) 
	 Severance and prior years’ bonuses
	  	 	11, 17	  	  	 	—  	  	 	 	762,103	  
	 Debenture accretion and interest costs
	  	 	12	  	  	 	—  	  	 	 	187,975	  
	 Gain on debenture exchange
	  	 	12	  	  	 	—  	  	 	 	(1,153,000	) 
	 Loss on disposal of property, plant and equipment
	  	 	9	  	  	 	—  	  	 	 	1,325	  
	 Loss on impairment of intangible assets
	  	 	10	  	  	 	94,449	  	 	 	—  	  
	 Other interest (income) expense and related charges
	  				  	 	(47,951	) 	 	 	915	  
		  				  	  
	  
	 	 	  
	  
	 
	 Loss and comprehensive loss for the year
						 	10,818,587	  		 	4,433,287	  
		  				  	  
	  
	 	 	  
	  
	 
	 Loss per share – basic and diluted 
						 	0.16	  		 	0.13	  
	 Weighted average number of shares outstanding – basic and diluted
						 	67,710,167	  		 	34,672,871	  

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

  
 Page 3 

 CYNAPSUS THERAPEUTICS INC. 

Consolidated Statement of Changes in Equity 
  

 
 For the year ended December 31, 2014

 (in Canadian dollars) 
  

																					
	 	  	Share
Capital	 	  	Equity
Reserves –
Warrants	 	 	Equity
Reserves –
Share-based
Payments	 	 	Deficit	 	 	Total	 
	 	  	$	 	  	$	 	 	$	 	 	$	 	 	$	 
	 Balance as at December 31, 2012
	  	 	10,528,756	  	  	 	317,423	  	 	 	1,402,398	  	 	 	(17,258,778	) 	 	 	(5,010,201	) 
	 Prospectus offering, first closing, net of transaction costs
	  	 	2,908,293	  	  	 	2,619,761	  	 	 	—  	  	 	 	—  	  	 	 	5,528,054	  
	 Prospectus offering, second closing, net of transaction costs
	  	 	580,013	  	  	 	556,079	  	 	 	—  	  	 	 	—  	  	 	 	1,136,092	  
	 Debenture exchange, net of transaction costs
	  	 	2,139,336	  	  	 	717,751	  	 	 	—  	  	 	 	—  	  	 	 	2,857,087	  
	 Share-based payments
	  	 	—  	  	  	 	—  	  	 	 	516,274	  	 	 	—  	  	 	 	516,274	  
	 Loss for the year
	  	 	—  	  	  	 	—  	  	 	 	—  	  	 	 	(4,433,287	) 	 	 	(4,433,287	) 
		  	  
	  
	 	  	  
	  
	 	 	  
	  
	 	 	  
	  
	 	 	  
	  
	 
	 Activity for the year
		 	5,627,642	  		 	3,893,591	  		 	516,274	  		 	(4,433,287	) 		 	5,604,220	  
		  	  
	  
	 	  	  
	  
	 	 	  
	  
	 	 	  
	  
	 	 	  
	  
	 
	 Balance as at December 31, 2013
		 	16,156,398	  		 	4,211,014	  		 	1,918,672	  		 	(21,692,065	) 		 	594,019	  
		  	  
	  
	 	  	  
	  
	 	 	  
	  
	 	 	  
	  
	 	 	  
	  
	 
	 Prospectus offering, net of transaction costs
		 	13,037,024	  		 	9,803,212	  		 	—  	  		 	—  	  		 	22,840,236	  
	 Exercise of warrants
		 	2,320,627	  		 	(562,043	) 		 	—  	  		 	—  	  		 	1,758,584	  
	 Exercise of share-based payments
		 	226,892	  		 	—  	  		 	(106,774	) 		 	—  	  		 	120,118	  
	 Share-based payments
		 	—  	  		 	—  	  		 	975,627	  		 	—  	  		 	975,627	  
	 Loss for the year
		 	—  	  		 	—  	  		 	—  	  		 	(10,818,587	) 		 	(10,818,587	) 
		  	  
	  
	 	  	  
	  
	 	 	  
	  
	 	 	  
	  
	 	 	  
	  
	 
	 Activity for the year
		 	15,584,543	  		 	9,241,169	  		 	868,853	  		 	(10,818,587	) 		 	14,875,978	  
		  	  
	  
	 	  	  
	  
	 	 	  
	  
	 	 	  
	  
	 	 	  
	  
	 
	 Balance as at December 31, 2014
		 	31,740,941	  		 	13,452,183	  		 	2,787,525	  		 	(32,510,652	) 		 	15,469,997	  
		  	  
	  
	 	  	  
	  
	 	 	  
	  
	 	 	  
	  
	 	 	  
	  
	 

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

  
 Page 4 

 CYNAPSUS THERAPEUTICS INC. 

Consolidated Statement of Cash Flows 
  

 
 For the year ended December 31, 2014

 (in Canadian dollars) 
  

													
	 	  	NOTES	 	  	December 31,
2014	 	 	December
31, 2013	 
	 	  	 	 	  	$	 	 	$	 
	 Operating activities
	  				  				 			
	 Loss for the year
	  				  	 	(10,818,587	) 	 	 	(4,433,287	) 
	 Items not affecting cash:
	  				  				 			
	 Share-based payments
	  	 	13	  	  	 	975,627	  	 	 	516,274	  
	 Amortization of intangible assets
	  	 	10	  	  	 	58,986	  	 	 	58,986	  
	 Depreciation of property, plant and equipment
	  	 	9	  	  	 	16,131	  	 	 	2,050	  
	 Debenture accretion
	  	 	12	  	  	 	—  	  	 	 	132,428	  
	 Accrual of debenture interest
	  	 	12	  	  	 	—  	  	 	 	55,547	  
	 Unrealized gain on foreign exchange
	  				  	 	(691,578	) 	 	 	—  	  
	 Loss on impairment of intangible assets
	  	 	10	  	  	 	94,449	  	 	 	—  	  
	 Loss on disposal of property, plant and equipment
	  	 	9	  	  	 	—  	  	 	 	1,325	  
	 Gain on debenture exchange
	  	 	12	  	  	 	—  	  	 	 	(1,153,000	) 
		  				  	  
	  
	 	 	  
	  
	 
							 	(10,364,972	) 		 	(4,819,677	) 
	 Changes in non-cash working capital:
												
	 Change in prepaid expenses and other current assets
						 	(151,450	) 		 	(55,814	) 
	 Change in accounts payables and accrued liabilities
						 	765,549	  		 	452,684	  
	 Deferred grant proceeds
		 	16	  		 	(239,968	) 		 	239,968	  
		  				  	  
	  
	 	 	  
	  
	 
	 Net cash used in operating activities
						 	(9,990,841	) 		 	(4,182,839	) 
		  				  	  
	  
	 	 	  
	  
	 
	 Investing activities
												
	 Purchase of property, plant and equipment
		 	9	  		 	(260,224	) 		 	(11,442	) 
		  				  	  
	  
	 	 	  
	  
	 
	 Net cash used in investing activities
						 	(260,224	) 		 	(11,442	) 
		  				  	  
	  
	 	 	  
	  
	 
	 Financing activities
												
	 Gross proceeds from issuance of shares and warrants
		 	13	  		 	25,000,000	  		 	7,317,536	  
	 Commissions and share issuance costs
		 	13	  		 	(2,159,764	) 		 	(667,186	) 
	 Gross proceeds from exercise of warrants
		 	13	  		 	1,758,584	  		 	—  	  
	 Gross proceeds from exercise of share-based payments
		 	13	  		 	120,118	  		 	—  	  
	 Partial repayment of debentures (principal and interest)
		 	12	  		 	—  	  		 	(217,424	) 
		  				  	  
	  
	 	 	  
	  
	 
	 Net cash provided by financing activities
						 	24,718,938	  		 	6,432,926	  
		  				  	  
	  
	 	 	  
	  
	 
	 Effect of exchange rate changes on cash and cash equivalents
						 	691,578	  		 	—  	  
		  				  	  
	  
	 	 	  
	  
	 
	 Increase in cash and cash equivalents
						 	15,159,451	  		 	2,238,645	  
	 Cash and cash equivalents, beginning of year
						 	2,289,046	  		 	50,401	  
		  				  	  
	  
	 	 	  
	  
	 
	 Cash and cash equivalents, end of year
						 	17,448,497	  		 	2,289,046	  
		  				  	  
	  
	 	 	  
	  
	 

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

  
 Page 5 

 CYNAPSUS THERAPEUTICS INC. 

Notes to the Consolidated Financial Statements 

December 31, 2014 
 (in Canadian dollars) 

 
  

	1.	NATURE OF OPERATIONS 

 Cynapsus Therapeutics Inc. (“Cynapsus” or the
“Company”) is a specialty pharmaceutical company developing an improved dosing formulation of an approved drug used to treat the symptoms of Parkinson’s disease. The Company’s shares are listed (CTH: TSX) on the TMX Group
Inc.’s Toronto Stock Exchange (“Exchange”) and traded in the U.S. on OTCQX International (CYNAF: OTCQX). Cynapsus was incorporated under the federal laws of Canada. The head office, principal address, registered address and records
office of the Company are located at 828 Richmond Street West, Toronto, Ontario, Canada, M6J 1C9. 
  

	2.	BASIS OF PREPARATION 

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

These consolidated financial statements of the Company and its subsidiary were prepared in accordance with International Financial Reporting
Standards (“IFRS”), as issued by the International Accounting Standards Board (“IASB”). On March 16, 2015, the Board of Directors approved and authorized these consolidated financial statements for the year ended
December 31, 2014. 
 Certain comparative figures have been reclassified to conform with the financial statement presentation adopted
for the current year. 
 In the opinion of management, all adjustments considered necessary for fair presentation of the Company’s
financial position, results of operations and cash flows have been included. 
  

	3.	NEW ACCOUNTING POLCIES 

 IFRIC 21 – International Financial Reporting Standards
Interpretations Committee Interpretation 21, Levies (“IFRIC 21”) was issued in May 2013. IFRIC 21 provides guidance on when to recognize a liability to pay a levy imposed by a government that is accounted for in accordance with IAS
37 Provisions, Contingent Liabilities and Contingent Assets. IFRIC 21 is effective for annual periods beginning on or after January 1, 2014 and is to be applied retrospectively. The Company adopted IFRIC 21 in its consolidated financial
statements for the annual period beginning on January 1, 2014. The adoption did not have a material impact on the consolidated financial statements. 

IAS 32 Financial Instruments: Presentation (“IAS 32”) was amended by the IASB in December 2011 to clarify certain aspects of
the requirements on offsetting. The amendments focus on the criterion that an entity currently has a legally enforceable right to set off the recognized amounts and the criterion that an entity intends either to settle on a net basis, or to realize
the asset and settle the liability simultaneously. The adoption of the amendments to this standard on January 1, 2014 had no material impact on the consolidated financial statements of the Company. 

IAS 36 Impairment of Assets (“IAS 36”) was amended by the IASB in May 2013 to clarify the requirements to disclose the
recoverable amounts of impaired assets and require additional disclosures about the measurement of impaired assets when the recoverable amount is based on fair value less costs of disposal, including the discount rate when a present value technique
is used to measure the recoverable amount. The adoption of the amendments to this standard on January 1, 2014 had no material impact on the consolidated financial statements of the Company. 

  
 Page 6 

 CYNAPSUS THERAPEUTICS INC. 

Notes to the Consolidated Financial Statements 

December 31, 2014 
 (in Canadian dollars) 

 
  

	4.	FUTURE ACCOUNTING CHANGES 

 Certain pronouncements that were issued by the IASB or the
International Financial Reporting Interpretations Committee are mandatory for accounting periods beginning on or after January 1, 2015. Many are not applicable or do not have a significant impact to the Company and have been excluded. The
following pronouncement has not yet been adopted and is being evaluated to determine its impact on the Company. 
 IFRS 9 Financial
Instruments (“IFRS 9”) was issued by the IASB in July 2014 and will replace IAS 39 Financial Instruments: Recognition and Measurement (“IAS 39”) and all previous versions of IFRS 9. IFRS 9 uses a single approach to
determine whether a financial asset is measured at amortized cost, fair value through profit or loss, or fair value through other comprehensive income. The approach in IFRS 9 is based on how an entity manages its financial instruments in the context
of its business model and the contractual cash flow characteristics of the financial assets. Most of the requirements in IAS 39 for classification and measurement of financial liabilities were carried forward unchanged to IFRS 9, except that an
entity choosing to measure a financial liability at fair value will present the portion of any change in fair value due to changes in the entity’s own credit risk in other comprehensive income, rather than within profit or loss. The new
standard also requires a single impairment method to be used, replacing the multiple impairment methods in IAS 39. IFRS 9 is effective for annual periods beginning on or after January 1, 2018. Earlier adoption is permitted. 

 

	5.	SIGNIFICANT ACCOUNTING JUDGMENTS, ESTIMATES AND ASSUMPTIONS 

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

The estimates and underlying assumptions are reviewed on a regular basis. Revisions to accounting estimates are recognized in the period in
which the estimate is revised and in any future periods affected. The areas which require management to make significant judgments, estimates and assumptions in determining carrying values include, but are not limited to: 

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

  
 Page 7 

 CYNAPSUS THERAPEUTICS INC. 

Notes to the Consolidated Financial Statements 

December 31, 2014 
 (in Canadian dollars) 

 
  

	5.	SIGNIFICANT ACCOUNTING JUDGMENTS, ESTIMATES AND ASSUMPTIONS (continued) 

  

 Share-based payments 

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

See Note 18, Commitments and Contingent Liabilities. 
  

	6.	SIGNIFICANT ACCOUNTING POLICIES 

 The significant accounting policies used in the
preparation of these consolidated financial statements are described below. 
 Subsidiaries 

Subsidiaries are entities over which the Company has control. Control is achieved when the Company is exposed, or has rights, to variable
returns from its involvement with the investee and has the ability to affect those returns through its power over the investee. The Company has a shareholding of more than one half of the voting rights in its subsidiary. The effects of potential
voting rights that are currently exercisable are considered when assessing whether control exists. Subsidiaries are fully consolidated from the date control is transferred to the Company, and are deconsolidated from the date control ceases. 

Financial instruments 

Financial assets and liabilities are recognized when the Company becomes a party to the contractual provisions of the instrument. Financial
assets are derecognized when the rights to receive cash flows from the assets have expired or have been transferred and the Company has transferred substantially all risks and rewards of ownership. Financial assets and liabilities are offset and the
net amount is reported in the consolidated statement of financial position when there is a legally enforceable right to offset the recognized amounts and there is an intention to settle on a net basis, or realize the asset and settle the liability
simultaneously. 
 At initial recognition, the Company classifies its financial instruments in the following categories depending on the
purpose for which the instruments were acquired: 
  

	 	(i)	Financial assets and liabilities at fair value through profit or loss: A financial asset or liability is classified in this category if acquired principally for the purpose of selling or repurchasing in the short
term. Financial instruments in this category are recognized initially and subsequently at fair value. Transaction costs are expensed in the consolidated statement of loss and comprehensive loss. Gains and losses arising from changes in fair value
are presented in the consolidated statement of loss and comprehensive loss in the period in which they arise. 

  
 Page 8 

 CYNAPSUS THERAPEUTICS INC. 

Notes to the Consolidated Financial Statements 

December 31, 2014 
 (in Canadian dollars) 

 
  

	6.	SIGNIFICANT ACCOUNTING POLICIES (continued) 

  

	 	(ii)	Available-for-sale investments: Available-for-sale investments are non-derivatives that are either designated in this category or not classified in any of the other categories. Available-for-sale investments are
recognized initially at fair value plus transaction costs and are subsequently carried at fair value. Gains or losses arising from changes in fair value are recognized in other comprehensive income. When an available-for-sale investment is sold or
impaired, the accumulated gains or losses are moved from accumulated other comprehensive income to the consolidated statement of loss and comprehensive loss and are included in other gains and losses. 

 

	 	(iii)	Loans and receivables: Loans and receivables are non-derivative financial assets with fixed or determinable payments that are not quoted in an active market. Loans and receivables are initially recognized at the
amount expected to be received, less, when material, a discount to reduce the loans and receivables to fair value. Subsequently, loans and receivables are measured at amortized cost using the effective interest method less a provision for
impairment. 

  

	 	(iv)	Financial liabilities at amortized cost: Financial liabilities at amortized cost are initially recognized at the amount required to be paid, less transaction costs, and when material, a discount to reduce the
payables to fair value. Subsequently, financial liabilities at amortized cost are measured at amortized cost using the effective interest method. Financial liabilities are classified as current liabilities if payment is due within twelve months.
Otherwise, they are presented as non-current liabilities. 

 Impairment of financial assets 

A financial asset not carried at fair value is assessed at each reporting date to determine whether there is objective evidence that it is
impaired. A financial asset is impaired if objective evidence indicates that a loss event has occurred after the initial recognition of the asset, and that the loss event had a negative effect on the estimated future cash flows of that asset that
can be measured reliably. 
 Objective evidence that financial assets are impaired can include default or delinquency by a debtor,
restructuring of an amount due to the Company on terms that the Company would not consider otherwise or indicators that a debtor will enter bankruptcy. 

The Company considers evidence of impairment for receivables at both a specific asset and collective level. All individually significant
receivables found not to be specifically impaired are then collectively assessed for any impairment that has been incurred but not yet identified. Receivables that are not significant are collectively assessed for impairment by grouping together
receivables with similar risk characteristics. 
 In assessing collective impairment, the Company uses historical trends of the probability
of default, timing of recoveries and the amount of loss incurred, adjusted for management’s judgment as to whether current economic and credit conditions are such that the actual losses are likely to be greater or less than suggested by
historical trends. 
 An impairment loss in respect of a financial asset measured at amortized cost is calculated as the difference between
its carrying amount and the present value of the estimated future cash flows discounted at the assets’ original effective interest rate. Losses are recognized in profit or loss and reflected in an allowance account against receivables. Interest
on the impaired asset continues to be recognized through the unwinding of the discount. When a subsequent event causes the amount of impairment loss to decrease, the decrease in impairment loss is reversed through profit or loss. 

  
 Page 9 

 CYNAPSUS THERAPEUTICS INC. 

Notes to the Consolidated Financial Statements 

December 31, 2014 
 (in Canadian dollars) 

 
  

	6.	SIGNIFICANT ACCOUNTING POLICIES (continued) 

  

 Cash and cash equivalents 

Cash and cash equivalents include business savings accounts and short-term, highly liquid investments that are readily convertible to known
amounts of cash, with original maturities of ninety days or less and which are not subject to significant risk of changes in value. As at December 31, 2014, the Company had nil in cash equivalents (December 31, 2013 - $30,000). 

Prepaid expenses and other current assets 

Prepaid expenses consist of amounts paid in advance for items that have future value to the Company. Other current assets consist of amounts
due from tax credits receivable. 
 Property, plant and equipment 

Property, Plant and Equipment is recorded at cost, less accumulated depreciation and accumulated impairment losses. The initial cost of
property, plant and equipment comprises its purchase price. The useful lives of property, plant and equipment are reviewed at least once per year. When parts of an item of property, plant and equipment have different useful lives, they are accounted
for as separate items (major components) of property, plant and equipment. Property, plant and equipment are depreciated using the diminishing balance or straight-line method based on their estimated useful lives as follows: 

 

	 	•	 	Computer equipment – 30% diminishing balance per annum 

  

	 	•	 	Furniture and fixtures – 20% diminishing balance per annum 

  

	 	•	 	Leasehold improvements – straight-line over the remaining term of the lease 

Intangible assets 

Intangible assets are comprised of a license for intellectual property, and intellectual property that was acquired. The license for
intellectual property is recorded at cost net of accumulated impairment losses. The intellectual property acquired is recorded at cost and is amortized on a straight-line basis over an estimated useful life of 15 years net of any accumulated
impairment losses. 
 Impairment of non-financial assets 

The carrying amounts of the Company’s non-financial assets are reviewed at each reporting date to determine whether there is any
indication of impairment. If any such indication exists, then the asset’s recoverable amount is estimated. 
 The recoverable amount of
an asset or cash-generating unit is the greater of its value in use and its fair value less cost to sell. In assessing value in use, the estimated future cash flows are discounted to their present value using a pre-tax discount rate that reflects
current market assessments of the time value of money and the risks specific to the asset. For the purposes of impairment testing, assets that cannot be tested individually are grouped together into the smallest group of assets that generate cash
inflows from continuing use that are largely independent of the cash flows of other assets or groups of assets (the “cash-generating unit”, or “CGU”). 

  
 Page 10 

 CYNAPSUS THERAPEUTICS INC. 

Notes to the Consolidated Financial Statements 

December 31, 2014 
 (in Canadian dollars) 

 
  

	6.	SIGNIFICANT ACCOUNTING POLICIES (continued) 

  

 The Company’s corporate assets do not generate separate cash inflows. If there is an
indication that a corporate asset may be impaired, then the recoverable amount is determined for the CGU to which the corporate asset belongs. 

An impairment loss is recognized if the carrying amount of an asset or its CGU exceeds its estimated recoverable amount. Impairment losses are
recognized in profit or loss. Impairment losses recognized in respect of CGUs are allocated to reduce the carrying amount of the assets in the unit (group of units) on a pro rata basis. 

Impairment losses recognized in prior periods are assessed at each reporting date for any indications that the loss has decreased or no longer
exists. An impairment loss is reversed if there has been a change in the estimates used to determine the recoverable amount. An impairment loss is reversed only to the extent that the asset’s carrying amount does not exceed the carrying amount
that would have been determined, net of depreciation and amortization, if no impairment loss had been recognized. 
 Accounts payable and
accrued liabilities 
 Accounts payable and accrued liabilities are obligations to pay for goods and services that have been acquired in
the ordinary course of business from suppliers and are classified as current liabilities if payment is due within one year or less. If not, they are presented as non-current liabilities. 

Share capital 
 The
Company records proceeds from share issuances net of issue costs and any tax effects. Common shares issued for consideration other than cash are valued based on their estimated market value on the earlier of the date the shares are issued or the
goods or services are received from the counterparty. 
 Research and development costs 

The Company conducts research and development programs and incurs costs related to these activities, including employee compensation,
materials, professional services and services provided by contract research organizations. Research and development costs, net of contractual reimbursements from development partners, are expensed in the periods in which they are incurred.
Development costs currently do not meet the criteria for deferral. 
 General provisions 

Provisions are recognized when (a) the Company has a present obligation (legal or constructive) as a result of a past event, and
(b) it is probable that an outflow of resources embodying economic benefits will be required to settle the obligation and a reliable estimate can be made of the amount of the obligation. Where the Company expects some or all of a provision to
be reimbursed, the reimbursement is recognized as a separate asset but only when the reimbursement is virtually certain. The expense relating to any provision is presented in the consolidated statement of loss and comprehensive loss net of any
reimbursement. If the effect of the time value of money is material, provisions are discounted using a current pre-tax rate that reflects, where appropriate, the risks specific to the liability. Where discounting is used, the increase in the
provision due to the passage of time is recognized as a finance cost. 

  
 Page 11 

 CYNAPSUS THERAPEUTICS INC. 

Notes to the Consolidated Financial Statements 

December 31, 2014 
 (in Canadian dollars) 

 
  

	6.	SIGNIFICANT ACCOUNTING POLICIES (continued) 

  

 Employee entitlements 

Employee entitlements to annual leave are recognized as the employees earn them. A provision, stated at current cost, is made for the estimated
liability at period end. 
 Income taxes 

Income taxes comprise current and deferred taxes. Current taxes are the expected tax payable on the taxable income for the year using tax rates
enacted or substantively enacted at the end of the reporting period and any adjustment to tax payable in respect of previous years. Deferred taxes are recognized in respect of temporary differences arising between the tax bases of assets and
liabilities and their carrying amounts in the consolidated financial statements. Deferred income taxes are determined on a non-discounted basis using tax rates and laws that have been enacted or substantively enacted at the consolidated statement of
financial position date and are expected to apply when the deferred tax asset or liability is settled. Deferred tax assets are recognized to the extent that it is probable that the assets can be recovered. 

Share-based payments 
 The
Company has a stock option plan that is described in Note 13(iv). Share-based payments to employees are measured at the fair value of the instruments issued and amortized over the vesting period. 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 offset to the recorded cost is applied to share-based payments reserve. Consideration received on the exercise of stock options is recorded as share capital and the related share-based payments reserve is transferred to share capital.

 Research grants 

Research grants are recognized as a recovery on scientific research in the consolidated statement of loss and comprehensive loss when there is
reasonable assurance that the Company will comply with the conditions attached to them and that the grants will be received. The Company only recognizes grant proceeds on the consolidated statement of loss and comprehensive loss when the proceeds
have been spent on research expenses. Grant amounts received before are recorded as deferred grant proceeds. 
 Foreign currency
translation 
 The consolidated financial statements are presented in Canadian dollars, the functional currency of the Company and its
subsidiary. Revenue and expenses denominated in foreign currencies are translated into Canadian dollars using the exchange rate in effect at the transaction date. Monetary assets and liabilities denominated in foreign currencies are translated using
the rate in effect at the consolidated statement of financial position date. Non-monetary items that are measured in terms of historical cost in a foreign currency are translated using the exchange rate as at the date of the initial transaction.
Non-monetary items measured at fair value in a foreign currency are translated using the exchange rate at the date when the fair value was determined. Related exchange gains and losses are included in the determination of loss for the year. 

  
 Page 12 

 CYNAPSUS THERAPEUTICS INC. 

Notes to the Consolidated Financial Statements 

December 31, 2014 
 (in Canadian dollars) 

 
  

	6.	SIGNIFICANT ACCOUNTING POLICIES (continued) 

  

 Loss per share 

Basic loss per share is calculated using the weighted number of shares outstanding. Diluted loss per share is calculated assuming that any
proceeds from the exercise of dilutive stock options and warrants would be used to repurchase common shares at the average market price during the year, with the incremental number of shares being included in the denominator of the diluted loss per
share calculation. The diluted loss per share calculation excludes any potential conversion of options and warrants that would increase earnings per share or decrease loss per share. All shares issuable from options and warrants were excluded from
the computation of diluted loss per share because they were anti-dilutive for the years ended December 31, 2014 and 2013. On February 28, 2013, the Company completed a share consolidation of the Company’s issued and outstanding common
shares on the basis of one (1) new common share for every ten (10) common shares issued and outstanding. All common shares, options, warrants and per share amounts have been restated to give retrospective effect to the share consolidation.

  

	7.	RISK MANAGEMENT 

 Financial risk management 

In the normal course of business, the Company is exposed to a number of financial risks that can affect its operating performance. These risks
are credit risk, liquidity risk and market risk. The Company’s overall risk management program and prudent business practices seek to minimize any potential adverse effects on the Company’s financial performance. There were no changes in
the Company’s approach to risk management during the years ended December 31, 2014 and 2013. 
  

	 	(i)	Credit risk 

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

 

	 	(ii)	Liquidity risk 

 The Company’s approach to managing liquidity risk is to ensure that
it will have sufficient liquidity to meet liabilities when due (See Note 2). As at December 31, 2014, the Company had cash of $17,448,497 and other current assets of $269,779 (December 31, 2013—$2,289,046 and $118,329) to settle current
liabilities of $3,080,631 (December 31, 2013—$2,555,050). The Company’s accounts payable and accrued liabilities have contractual maturities of less than 30 days and are subject to normal trade terms; however, some accounts payable have
been outstanding for more than one year. The Company believes movement in interest rates is reasonably possible over the next 12 months. Since cash has varying terms and rates, sensitivity to a plus or minus 1% change in rates could affect the
Company’s net loss by approximately $45,000. 

  
 Page 13 

 CYNAPSUS THERAPEUTICS INC. 

Notes to the Consolidated Financial Statements 

December 31, 2014 
 (in Canadian dollars) 

 
  

	7.	RISK MANAGEMENT (continued) 

  

 Market risk 
  

	 	(i)	Interest rate risk 

 The Company had a cash balance of $17,448,497 as at
December 31, 2014. The Company’s current policy is to invest excess cash in a business savings account and investment-grade short-term deposit certificates issued by its banking institutions. The Company periodically monitors the
investments it makes and is satisfied with the credit ratings of its banks. The Company considers interest rate risk to be minimal as investments are short-term. 
  

	 	(ii)	Foreign currency risk 

 The Company’s functional and presentation currency is the
Canadian dollar and all amounts in the consolidated financial statements are expressed in Canadian dollars, unless otherwise noted. Most purchases are transacted in Canadian dollars. The Company funds certain research and development expenses in the
United States and Europe on a cash call basis using the US dollar and the euro converted from its Canadian dollar bank accounts held in Canada. Management believes the foreign exchange risk derived from currency conversions is not significant and
therefore does not hedge its foreign exchange risk. As at December 31, 2014, the Company had cash of $12,370,423 and accounts payable of $1,539,496 denominated in US dollars (December 31, 2013—$253,050 and $474,868). A plus or minus 10%
change in foreign exchange rates could affect the Company’s net loss by approximately $1,070,000. 
  

	 	(iii)	Price risk 

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

	 	(iv)	Fair value 

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

The Company has designated its cash equivalents as held-for-trading, measured at fair value. Cash is classified as loans and receivables,
measured at amortized cost. Accounts payable and accrued liabilities are classified as other financial liabilities, which are measured at amortized cost. 

The carrying amounts for cash, accounts payable and accrued liabilities on the consolidated statement of financial position approximate fair
value because of the short term of these instruments. 
 The Company’s financial instruments that are carried at fair value consist of
cash equivalents that do not have quoted market prices. They have been classified as level 2 within the fair value hierarchy. 

  
 Page 14 

 CYNAPSUS THERAPEUTICS INC. 

Notes to the Consolidated Financial Statements 

December 31, 2014 
 (in Canadian dollars) 

 
  

	7.	RISK MANAGEMENT (continued) 

  

 Capital risk management 

The Company manages its capital structure and makes adjustments to it, based on the funds available to the Company, in order to support its
research and development activities. The Company’s capital structure consists of share capital and equity reserves. The Board of Directors does not establish quantitative return on capital criteria for management but rather relies on the
expertise of the Company’s management to sustain future development of the business. 
 The products which the Company currently has in
its pipeline are in the research stage; as such the Company is dependent on external financing to fund its activities. In order to carry out the planned research and development and pay for administration costs, the Company will spend its existing
working capital and raise additional amounts as needed. 
 Management reviews its capital management approach on an ongoing basis and
believes that this approach, given the relative size of the Company, is reasonable. 
 There were no changes in the Company’s approach
to capital management during the years ended December 31, 2014 and 2013. The Company and its subsidiary are not subject to externally imposed capital requirements. 
  

	8.	CASH AND CASH EQUIVALENTS 

 The following is a summary of cash and cash equivalents as at
December 31: 
  

									
	 	  	2014	 	  	2013	 
	 	  	$	 	  	$	 
	 Cash in accounts at a Canadian chartered bank
	  	 	17,448,497	  	  	 	2,259,046	  
	 Guaranteed investment certificates issued by a Canadian chartered bank
	  	 	—  	  	  	 	30,000	  
		  	  
	  
	 	  	  
	  
	 
			 	17,448,497	  		 	2,289,046	  
		  	  
	  
	 	  	  
	  
	 

  
 Page 15 

 CYNAPSUS THERAPEUTICS INC. 

Notes to the Consolidated Financial Statements 

December 31, 2014 
 (in Canadian dollars) 

 
  

	9.	PROPERTY, PLANT AND EQUIPMENT 

 The following is a summary of property, plant and
equipment as at December 31, 2014 and 2013: 
  

																	
	 	  	Computer
Equipment	 	  	Furniture
and Fixtures	 	  	Leasehold
Improvements	 	  	Total	 
	 	  	$	 	  	$	 	  	$	 	  	$	 
	 Cost
	  				  				  				  			
	 Balance as at December 31, 2012
	  	 	15,270	  	  	 	9,318	  	  	 	—  	  	  	 	24,588	  
	 Additions
	  	 	11,442	  	  	 	—  	  	  	 	—  	  	  	 	11,442	  
	 Disposals
	  	 	(9,508	) 	  	 	—  	  	  	 	—  	  	  	 	(9,508	) 
		  	  
	  
	 	  	  
	  
	 	  	  
	  
	 	  	  
	  
	 
	 Balance as at December 31, 2013
		 	17,204	  		 	9,318	  		 	—  	  		 	26,522	  
		  	  
	  
	 	  	  
	  
	 	  	  
	  
	 	  	  
	  
	 
	 Additions
		 	182,569	  		 	44,775	  		 	32,880	  		 	260,224	  
		  	  
	  
	 	  	  
	  
	 	  	  
	  
	 	  	  
	  
	 
	 Balance as at December 31, 2014
		 	199,773	  		 	54,093	  		 	32,880	  		 	286,746	  
		  	  
	  
	 	  	  
	  
	 	  	  
	  
	 	  	  
	  
	 
					
	 Accumulated Depreciation
																
	 Balance as at December 31, 2012
		 	11,958	  		 	6,960	  		 	—  	  		 	18,918	  
	 Depreciation
		 	1,578	  		 	472	  		 	—  	  		 	2,050	  
	 Disposals
		 	(8,183	) 		 	—  	  		 	—  	  		 	(8,183	) 
		  	  
	  
	 	  	  
	  
	 	  	  
	  
	 	  	  
	  
	 
	 Balance as at December 31, 2013
		 	5,353	  		 	7,432	  		 	—  	  		 	12,785	  
		  	  
	  
	 	  	  
	  
	 	  	  
	  
	 	  	  
	  
	 
	 Depreciation
		 	5,581	  		 	3,550	  		 	7,000	  		 	16,131	  
		  	  
	  
	 	  	  
	  
	 	  	  
	  
	 	  	  
	  
	 
	 Balance as at December 31, 2014
		 	10,934	  		 	10,982	  		 	7,000	  		 	28,916	  
		  	  
	  
	 	  	  
	  
	 	  	  
	  
	 	  	  
	  
	 
					
	 Net book value
																
	 Net book value as at December 31, 2013
		 	11,851	  		 	1,886	  		 	—  	  		 	13,737	  
		  	  
	  
	 	  	  
	  
	 	  	  
	  
	 	  	  
	  
	 
	 Net book value as at December 31, 2014
		 	188,839	  		 	43,111	  		 	25,880	  		 	257,830	  
		  	  
	  
	 	  	  
	  
	 	  	  
	  
	 	  	  
	  
	 

  
 Page 16 

 CYNAPSUS THERAPEUTICS INC. 

Notes to the Consolidated Financial Statements 

December 31, 2014 
 (in Canadian dollars) 

 
  

	10.	INTANGIBLE ASSETS 

 The following is a summary of intangible assets as at
December 31, 2014 and 2013: 
  

													
	 	  	APL-130277
Patents	 	  	License
Agreement	 	  	Total	 
	 	  	$	 	  	$	 	  	$	 
	 Cost
	  				  				  			
	 Balance as at December 31, 2012, 2013 and 2014
	  	 	718,150	  	  	 	200,000	  	  	 	918,150	  
		  	  
	  
	 	  	  
	  
	 	  	  
	  
	 
				
	 Accumulated Amortization
												
	 Balance as at December 31, 2012
		 	47,876	  		 	83,331	  		 	131,207	  
	 Amortization
		 	47,876	  		 	11,110	  		 	58,986	  
		  	  
	  
	 	  	  
	  
	 	  	  
	  
	 
	 Balance as at December 31, 2013
		 	95,752	  		 	94,441	  		 	190,193	  
		  	  
	  
	 	  	  
	  
	 	  	  
	  
	 
	 Amortization
		 	47,876	  		 	11,110	  		 	58,986	  
	 Impairment
		 	—  	  		 	94,449	  		 	94,449	  
		  	  
	  
	 	  	  
	  
	 	  	  
	  
	 
	 Balance as at December 31, 2014
		 	143,628	  		 	200,000	  		 	343,628	  
		  	  
	  
	 	  	  
	  
	 	  	  
	  
	 
				
	 Net book value
												
	 Net book value as at December 31, 2013
		 	622,398	  		 	105,559	  		 	727,957	  
		  	  
	  
	 	  	  
	  
	 	  	  
	  
	 
	 Net book value as at December 31, 2014
		 	574,522	  		 	—  	  		 	574,522	  
		  	  
	  
	 	  	  
	  
	 	  	  
	  
	 

 On December 22, 2011, the Company completed the acquisition of 100% of the outstanding common shares of
Adagio and certain indebtedness of Adagio. The acquisition was accounted for as a purchase of assets by the Company, as Adagio did not meet the definition of a business. The aggregate purchase price was $702,987 including common shares valued at
$520,000 and $182,987 of costs related to the acquisition. After the inclusion of Adagio’s assets ($71) and liabilities ($15,234), $718,150 was recorded to intangible assets. 

On June 10, 2005, the Company entered into a license agreement with a research and development company relating to technologies associated
with the Company’s previous drug development candidate. The license is for patents that have been issued in certain jurisdictions, which will expire in February 2023, and are currently pending in other jurisdictions. On December 31, 2014,
due to an investor presentation issued by the licensee emphasising a different product line in their development pipeline, and not showing any progress on the licensed project, the Company reviewed the carrying value of the intangible asset for
potential impairment. The Company determined that there are no expected future cash flows attributable to this asset and recorded an impairment charge of $94,449 to write down the carrying value of the intangible asset to zero. 

  
 Page 17 

 CYNAPSUS THERAPEUTICS INC. 

Notes to the Consolidated Financial Statements 

December 31, 2014 
 (in Canadian dollars) 

 
  

	11.	ACCOUNTS PAYABLE AND ACCRUED LIABILITIES 

 The following is a summary of accounts payable
and accrued liabilities as at December 31: 
  

									
	 	  	2014	 	  	2013	 
	 	  	$	 	  	$	 
	 Trade payables
	  	 	2,240,026	  	  	 	1,050,911	  
	 Due to related parties (Note 17)
	  	 	128,713	  	  	 	170,236	  
	 Bonus accruals to related parties (Note 17)
	  	 	508,710	  	  	 	715,068	  
	 Other accrued liabilities
	  	 	203,182	  	  	 	378,867	  
		  	  
	  
	 	  	  
	  
	 
			 	3,080,631	  		 	2,315,082	  
		  	  
	  
	 	  	  
	  
	 

  

	12.	GAIN ON DEBENTURES EXCHANGE 

 On March 1, 2013, holders of $4,030,244 in Series A to
Series E debentures agreed to an exchange of debt for shares and warrants, with the remaining $217,424 repaid (See Note 13(ii)). The fair value of the common shares and warrants issued was estimated at the time of grant to be $2,154,428 and
$722,816, respectively (see Note 13(ii)). This resulted in a gain on the settlement of the debentures of $1,153,000. The related share and warrant issue cost was $20,157. As a result, $2,139,336 was recorded in share capital and $717,751 was
recorded in equity reserves – warrants for the year ended December 31, 2013. 
 The changes in the value of debentures were as
follows: 
  

					
	 	  	Debentures	 
	 	  	$	 
	 Balance, December 31, 2012
	  	 	4,059,693	  
	 Debenture accretion expense
	  	 	132,428	  
	 Accrual of debenture interest expense
	  	 	55,547	  
	 Issuance of shares in exchange for debentures
	  	 	(2,154,428	) 
	 Issuance of warrants in exchange for debentures
	  	 	(722,816	) 
	 Gain on exchange of debentures
	  	 	(1,153,000	) 
	 Repayment of Series A1, A2, B and E5 debentures
	  	 	(217,424	) 
		  	  
	  
	 
	 Balance, December 31, 2013 and December 31, 2014
		 	—  	  
		  	  
	  
	 

  
 Page 18 

 CYNAPSUS THERAPEUTICS INC. 

Notes to the Consolidated Financial Statements 

December 31, 2014 
 (in Canadian dollars) 

 
  

	13.	SHARE CAPITAL 

  

	 	i)	Authorized common shares 

 Unlimited number of common shares with no par value 

 

	 	ii)	Issued and outstanding common shares 

  

					
	 	  	Number of
Common Shares	 
	 	  	#	 
	 Balance, December 31, 2012
	  	 	14,214,922	  
	 Shares issued for cash
	  	 	15,907,688	  
	 Shares issued for debt from debenture exchange
	  	 	8,761,399	  
		  	  
	  
	 
	 Balance, December 31, 2013
		 	38,884,009	  
	 Shares issued for cash
		 	38,461,538	  
	 Shares issued for cash from exercise of warrants
		 	2,655,235	  
	 Shares issued for cash from exercise of share-based payments
		 	333,667	  
		  	  
	  
	 
	 Balance, December 31, 2014
		 	80,334,449	  
		  	  
	  
	 

 On March 1, 2013, the Company announced that it completed its short form prospectus offering (the
“Offering”) of 13,061,688 units at a price of $0.46 per unit for aggregate gross proceeds of $6,008,376. Each unit consisted of one common share and one share purchase warrant. Each warrant entitles the holder to acquire one additional
common share at an exercise price of $0.575 per share from the closing date for a period of 60 months, except that the warrants will be cancelled if they are not exercised within 30 days after prior written notice from the Company that the closing
price of its common shares on the principal stock exchange of the Company has been $1.38 or greater for 20 consecutive trading days. The Company paid the agent a work fee of $87,500 plus applicable taxes and reimbursed the agent for certain expenses
incurred in connection with the Offering. The Company also paid the agent a cash commission of $47,088 and issued 102,365 non-transferable compensation warrants, each exercisable to purchase one common share on the same terms as the warrants issued
in the Offering. In addition, the Company paid other registered dealers and brokers cash commissions of $117,500 and issued 255,434 non-transferable compensation warrants, each exercisable to purchase one common share on the same terms as the
warrants issued in the Offering. 
 The grant date fair value of the warrants and broker warrants were estimated at $2,802,779 and $76,927
respectively, using the Black-Scholes option pricing model based on the following assumptions: risk free interest rate of 1.19%, expected life of 5 years, expected dividend rate of 0%, and expected volatility of 114%. The issue cost allocated to
warrants was $259,945. 
 In addition, on February 28, 2013, the Company completed a share consolidation of the Company’s issued
and outstanding common shares concurrent on the basis of one (1) new common share for every ten (10) common shares issued and outstanding. All common shares, options, warrants and per share amounts have been restated to give retrospective
effect to the share consolidation. 
 Concurrent with the closing of the Offering, the Company and holders of the Series A to E debentures
agreed to convert $4,030,244 in debt for common shares and warrants. This resulted in 8,761,399 common shares and 4,380,700 debenture warrants being issued. The common shares were valued at 

  
 Page 19 

 CYNAPSUS THERAPEUTICS INC. 

Notes to the Consolidated Financial Statements 

December 31, 2014 
 (in Canadian dollars) 

 
  

	13.	SHARE CAPITAL (continued) 

  

	 	ii)	Issued and outstanding common shares (continued) 

  

 
$2,154,428 based on their estimated fair value from the concurrent Offering. Each debenture warrant entitles the holder to acquire one common share at a price of $0.575 for a period of 24 months
after the closing date. 
 The grant date fair value of the warrants was estimated at $722,816 using the Black-Scholes option pricing model
based on the following assumptions: risk free interest rate of 0.97%, expected life of 2 years, expected dividend rate of 0%, and expected volatility of 114%. The issue cost allocated to warrants was $5,065. 

On March 21, 2013, the Company announced that it completed a second closing of the Offering. The Company issued 2,846,000 units at a price
of $0.46 per unit for aggregate gross proceeds of $1,309,160. Each unit consisted of one common share and one share purchase warrant. Each warrant entitles the holder to acquire one additional common share at an exercise price of $0.575 per share
from the closing date for a period of 60 months, except that the warrants will be cancelled if they are not exercised within 30 days after prior written notice from the Company that the closing price of its common shares on the principal stock
exchange of the Company has been $1.38 for 20 consecutive trading days. The Company paid to the agent a cash commission of $33,064 and issued 71,880 non-transferable compensation warrants, each exercisable to purchase one common share on the same
terms as the warrants issued in the Offering. In addition, the Company paid other registered dealers and brokers cash commissions of $71,668 and issued 155,800 non-transferable compensation warrants, each exercisable to purchase one common share on
the same terms as the warrants issued in the Offering. 
 The grant date fair value of the warrants and broker warrants were estimated at
$610,695 and $48,951 respectively, using the Black-Scholes option pricing model based on the following assumptions: risk free interest rate of 1.23%, expected life of 5 years, expected dividend rate of 0%, and expected volatility of 113 %. The issue
cost allocated to warrants was $103,567. 
 On April 15, 2014, the Company announced that it completed its previously announced short
form prospectus offering of units. Pursuant to the offering, the Company issued an aggregate of 38,461,538 units at a price of $0.65 per unit for gross proceeds of $25,000,000. Each unit consists of one common share of the Company and one common
share purchase warrant of the Company. The units immediately separated on closing into common shares and warrants. Each warrant entitles the holder to purchase one common share at a price equal to $0.81 per share for a period of 60 months after the
closing of the offering, except that, subject to certain exceptions, the warrants will be cancelled if they are not exercised within 30 days after written notice from the Company that the closing price of its common shares on the principal stock
exchange of the Company has been $1.95 per common share or more for 20 consecutive trading days. The Company paid a Canadian agent a work fee in the amount of $65,500, plus HST, and reimbursed the Canadian agent and the U.S. agent for certain
expenses incurred in connection with the offering. In addition, the Company paid the Canadian agent and U.S. agent cash commissions equal to a total of 7% of the offering, and issued 2,676,923 non-transferable compensation warrants, each exercisable
to purchase one common share on the same terms as the warrants issued in the offering. 
 The grant date fair value of the warrants and
broker warrants were estimated at $10,983,969, using the Black-Scholes option pricing model based on the following assumptions: risk-free interest rate of 

  
 Page 20 

 CYNAPSUS THERAPEUTICS INC. 

Notes to the Consolidated Financial Statements 

December 31, 2014 
 (in Canadian dollars) 

 
  

	13.	SHARE CAPITAL (continued) 

  

	 	ii)	Issued and outstanding common shares (continued) 

  

 
1.41%, expected life of five years, expected dividend rate of 0%, and expected volatility of 110%, which was based on the historical share prices of the Company. The issue cost allocated to the
warrants was $1,180,757. 
 As part of the April 15, 2014 offering, Dexcel Pharma, a strategic pharmaceutical investor and significant
shareholder of Cynapsus, and which also has two directors on the Board of Directors of the Company, subscribed for 6,153,846 units having an aggregate subscription price of $4,000,000. 

 

	 	iii)	Equity Reserve – Warrants 

 The number of warrants outstanding as at
December 31, 2013 and 2014 and changes during the years then ended are presented below: 
  

													
	 	  	Number of
Warrants	 	  	Equity
Reserve	 	  	Weighted
Average
Exercise
Price/Share	 
	 	  	#	 	  	$	 	  	$	 
	 Balance, December 31, 2012
	  	 	1,257,896	  	  	 	317,423	  	  	 	0.860	  
	 Expired February 2, 2013
	  	 	(580,000	) 	  	 	—  	  	  	 	1.000	  
	 Issued for cash on March 1, 2013 (net of costs) (see Note 13(ii))
	  	 	13,061,688	  	  	 	2,542,834	  	  	 	0.575	  
	 Issued as broker compensation on March 1, 2013 (see Note 13(ii))
	  	 	357,799	  	  	 	76,927	  	  	 	0.575	  
	 Issued for debt on March 1, 2013 (net of costs) (see Note 13(ii))
	  	 	4,380,700	  	  	 	717,751	  	  	 	0.575	  
	 Issued for cash on March 21, 2013 (net of costs) (see Note 13(ii))
	  	 	2,846,000	  	  	 	507,128	  	  	 	0.575	  
	 Issued as broker compensation on March 21, 2013 (see Note 13(ii))
	  	 	227,680	  	  	 	48,951	  	  	 	0.575	  
		  	  
	  
	 	  	  
	  
	 	  			
	 Balance, December 31, 2013
		 	21,551,763	  		 	4,211,014	  		 	0.580	  
	 Issued for cash on April 15, 2014 (net of costs)
		 	38,461,538	  		 	9,088,474	  		 	0.810	  
	 Issued as broker compensation on April 15, 2014
		 	2,676,923	  		 	714,738	  		 	0.810	  
	 Exercised
		 	(2,655,235	) 		 	(562,043	) 		 	0.663	  
		  	  
	  
	 	  	  
	  
	 	  			
	 Balance, December 31, 2014
		 	60,034,989	  		 	13,452,183	  		 	0.734	  
		  	  
	  
	 	  	  
	  
	 	  			

  
 Page 21 

 CYNAPSUS THERAPEUTICS INC. 

Notes to the Consolidated Financial Statements 

December 31, 2014 
 (in Canadian dollars) 

 
  

	13.	SHARE CAPITAL (continued) 

  

	 	iii)	Equity Reserve – Warrants 

 A summary of warrants exercised during the year ended
December 31, 2014 is as follows: 
  

											
	Number of
Warrants	 	 	Cash
Proceeds	 	 	Exercise
Price	 
	#	 	 	$	 	 	$	 
	 	10,000	  	 	 	10,000	  	 	 	1.000	  
	 	20,000	  	 	 	12,500	  	 	 	0.625	  
	 	1,652,582	  	 	 	948,235	  	 	 	0.575	  
	 	972,653	  	 	 	787,849	  	 	 	0.810	  
				 	  
	  
	 	 			
	 	2,655,235	  		 	1,758,584	  				
				 	  
	  
	 	 			

 Warrants outstanding and exercisable as at December 31, 2014 were as follows: 

 

																			
	 Number of
Warrants 
	 	  	Exercise
Price	 	  	Exercise
Trigger*	 	  	Equity
Reserve 	 	  	Expiry Date	  	 Description

	#	 	  	$/ Share	 	  	$/ Share	 	  	$	 	  	 	  	 
	 	4,120,186	  	  	 	0.575	  	  	 	—  	  	  	 	675,067	  	  	March 1, 2015	  	2013 Debenture exchange
	 	190,000	  	  	 	1.000	  	  	 	1.50	  	  	 	43,147	  	  	July 18, 2017	  	2012 Private placement
	 	330,400	  	  	 	0.625	  	  	 	—  	  	  	 	75,341	  	  	October 24, 2017	  	2012 Private placement
	 	127,496	  	  	 	0.625	  	  	 	—  	  	  	 	29,036	  	  	November 23, 2017	  	2012 Private placement
	 	12,139,899	  	  	 	0.575	  	  	 	1.38	  	  	 	2,367,394	  	  	March 1, 2018	  	2013 Prospectus offering, first closing
	 	2,961,200	  	  	 	0.575	  	  	 	1.38	  	  	 	531,897	  	  	March 1, 2018	  	2013 Prospectus offering, second closing
	 	40,165,808	  	  	 	0.810	  	  	 	1.95	  	  	 	9,567,234	  	  	April 15, 2019	  	2014 Prospectus offering
	 	—  	  	  	 	—  	  	  	 	—  	  	  	 	163,067	  	  	Various	  	Expired and unexercised
	  
	  
	 	  				  				  	  
	  
	 	  		  	
	 	60,034,989	  										 	13,452,183	  				
	  
	  
	 	  				  				  	  
	  
	 	  		  	

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

The weighted average grant date fair value of the warrants issued during the year ended December 31, 2014 is $0.24 (year ended
December 31, 2013 - $0.19). The weighted average contractual life remaining for the warrants as at December 31, 2014 is 3.71 years (December 31, 2013 - 3.55 years). 
  

	 	iv)	Reserve – Share-based payments 

 The Company has in place a stock option plan for
the purchase of common shares by its directors, officers, employees and other service providers. No amounts are paid or payable by the recipient on receipt of the option. The options carry neither rights to dividends nor voting rights. Options may
be 

  
 Page 22 

 CYNAPSUS THERAPEUTICS INC. 

Notes to the Consolidated Financial Statements 

December 31, 2014 
 (in Canadian dollars) 

 
  

	13.	SHARE CAPITAL (continued) 

  

	 	iv)	Reserve – Share-based payments (continued) 

  

 
exercised at any time from the date of vesting to the date of their expiry. The number of options granted is approved by the Board of Directors. All options expire up to 365 days after the
resignation of an employee or director and expire 90 days after the resignation of a consultant. 
 The aggregate number of common shares
reserved for issuance under the stock option plan is a maximum of 10% of the issued and outstanding common shares of the Company. As at December 31, 2014, there were a total of 5,450,649 options outstanding, representing 6.8% of the issued and
outstanding common shares of the Company. No one person shall be granted options representing more than 5% of the issued and outstanding common shares of the Company in a 12-month period. Option grants to persons providing consulting and investor
services may not exceed 2% of the issued and outstanding common shares of the Company in any 12-month period. The options are non-assignable and non-transferable and may be granted for a term not exceeding five years. The exercise price of the
options is fixed by the Board of Directors of the Company and shall not be lower than the discounted market price (as defined by the TSX) of the shares at the time of grant, subject to all applicable regulatory requirements. 

The number of stock options outstanding as at December 31, 2014 and 2013, and changes during the years then ended are as follows: 

 

									
	 	  	Number of
Options	 	  	Weighted
Average
Exercise
Price/Share	 
	 	  	#	 	  	$	 
	 Options outstanding as at December 31, 2012
	  	 	1,259,750	  	  	 	1.10	  
	 Granted
	  	 	1,790,316	  	  	 	0.38	  
	 Forfeited
	  	 	(34,688	) 	  	 	1.00	  
	 Expired
	  	 	(324,062	) 	  	 	1.42	  
		  	  
	  
	 	  	  
	  
	 
	 Options outstanding as at December 31, 2013
		 	2,691,316	  		 	0.58	  
		  	  
	  
	 	  	  
	  
	 
	 Granted
		 	3,581,000	  		 	0.87	  
	 Exercised
		 	(333,667	) 		 	0.36	  
	 Forfeited
		 	(143,000	) 		 	0.43	  
	 Expired
		 	(345,000	) 		 	1.00	  
		  	  
	  
	 	  	  
	  
	 
	 Options outstanding as at December 31, 2014
		 	5,450,649	  		 	0.76	  
		  	  
	  
	 	  	  
	  
	 

 On March 1, 2013, the Company granted stock options to acquire 373,316 common shares. The stock options
were granted to the President and CEO of the Company at an exercise price of $0.46 per share for a period of 5 years from the date of the grant. One-third of the options granted vested in 6 months, one-third vested in 12 months and one-third vested
in 18 months. 
 On May 1, 2013, the Company granted stock options to acquire 1,392,000 common shares. The stock options were granted to
officers, directors, employees and consultants of the Company at an exercise price equal to $0.36 per share and expire 5 years from the date of grant. One third of the options granted vested immediately, one-third vested in 6 months and one-third
vested in 12 months. 

  
 Page 23 

 CYNAPSUS THERAPEUTICS INC. 

Notes to the Consolidated Financial Statements 

December 31, 2014 
 (in Canadian dollars) 

 
  

	13.	SHARE CAPITAL (continued) 

  

	 	iv)	Reserve – Share-based payments (continued) 

  

 On May 28, 2013, the Company granted stock options to acquire 25,000 common shares. The
stock options were granted to a director of the Company at an exercise price of $0.31 per share for a period of 5 years from the date of the grant. One third of the options granted vested immediately, one-third vested in 6 months and one-third
vested in 12 months. 
 On May 20, 2014, the Company granted 2,256,000 options to directors and officers of the Company at an exercise
price of $0.65 per share for a period of 5 years from the date of the grant. One third of the options vested immediately, one-third vested in 6 months and one-third will vest in 12 months. 

On December 5, 2014, the Company granted 1,325,000 options to directors, officers, employees and consultants of the Company at an exercise
price of $1.24 per share and expiring in 5 years from the date of the grant. For 650,000 of these options, one-eighth vested immediately, and at each six-month anniversary from the date of the grant, another one-eighth will vest, such that all
options will have vested in 42 months. For 590,000 options, one-third will vest in 6 months, one third will vest in 12 months, and one-third will vest in 18 months. The remaining 85,000 options vested immediately. 

Weighted average assumptions used in the Black-Scholes option pricing model to determine the fair value of stock options granted during each
respective year ended December 31 are as follows: 
  

									
	 	  	2014	 	 	2013	 
	 Exercise price
	  	$	0.79	  	 	$	0.35	  
	 Grant date share price
	  	$	0.87	  	 	$	0.36	  
	 Risk-free interest rate
	  	 	1.32	% 	 	 	1.10	% 
	 Expected dividend yield
	  	 	—  	  	 	 	—  	  
	 Expected volatility
	  	 	108	% 	 	 	111	% 
	 Expected option term
	  	 	4.3 years	  	 	 	5 years	  
	 Weighted average fair value of options granted during the year
	  	$	0.55	  	 	$	0.30	  
		  	  
	  
	 	 	  
	  
	 

 For the year ended December 31, 2014, share-based compensation expense attributable to the operating,
general and administrative function was $738,584 (December 31, 2013 - $354,629) and to the research and development function was $237,043 (December 31, 2013 - $161,644). 

  
 Page 24 

 CYNAPSUS THERAPEUTICS INC. 

Notes to the Consolidated Financial Statements 

December 31, 2014 
 (in Canadian dollars) 

 
  

	13.	SHARE CAPITAL (continued) 

  

	 	iv)	Reserve – Share-based payments (continued) 

  

 Stock options issued and outstanding as at December 31, 2014 were as follows: 

 

													
	 Number of Options
Outstanding
	 	  	Number of Options
Vested and
Exercisable	 	  	Effective
Exercise Price/
Share	 	  	 Expiry Date

	#	 	  	#	 	  	$	 	  	 
	 	27,500	  	  	 	27,500	  	  	 	1.00	  	  	March 3, 2015
	 	72,500	  	  	 	72,500	  	  	 	1.00	  	  	August 12, 2015
	 	10,000	  	  	 	10,000	  	  	 	1.00	  	  	November 10, 2015
	 	60,000	  	  	 	60,000	  	  	 	1.00	  	  	March 4, 2016
	 	40,000	  	  	 	40,000	  	  	 	1.00	  	  	August 19, 2016
	 	295,000	  	  	 	295,000	  	  	 	1.00	  	  	March 23, 2017
	 	26,000	  	  	 	26,000	  	  	 	1.00	  	  	May 30, 2017
	 	25,000	  	  	 	25,000	  	  	 	1.00	  	  	August 29, 2017
	 	373,316	  	  	 	373,316	  	  	 	0.46	  	  	March 1, 2018
	 	950,000	  	  	 	950,000	  	  	 	0.36	  	  	May 1, 2018
	 	25,000	  	  	 	25,000	  	  	 	0.31	  	  	May 28, 2018
	 	2,221,333	  	  	 	1,486,667	  	  	 	0.65	  	  	May 20, 2019
	 	1,325,000	  	  	 	166,250	  	  	 	1.24	  	  	December 5, 2019
	  
	  
	 	  	  
	  
	 	  				  	
	 	5,450,649	  		 	3,557,233	  						
	  
	  
	 	  	  
	  
	 	  				  	

 The total number of common shares that were issuable pursuant to stock options that were exercisable as at
December 31, 2014 is 3,557,233 (December 31, 2013 - 1,970,109). The weighted average exercise price of these options as at December 31, 2014 is $0.76 (December 31, 2013 - $0.66). 

The weighted average contractual life remaining for the exercisable and outstanding shares issuable on exercise of stock options as at
December 31, 2014 is 3.59 years and 3.98 years, respectively (December 31, 2013 - 3.47 years and 3.68 years). 
  

	 	v)	Escrow shares 

 On December 22, 2011, Cynapsus completed the acquisition of Adagio.
Immediately following the acquisition, 2,406,162 common shares of the Company issued to Adagio shareholders were subject to corporate and/or executive escrow. In March 2013, the Company completed two closings of a short form prospectus offering for
gross proceeds of $7,317,160. As a result, all the common shares held under the corporate escrow were released, with 699,530 shares remaining under the executive escrow agreement. 

On December 22, 2014, the remaining 349,765 shares that were still under executive escrow were released as scheduled. 

  
 Page 25 

 CYNAPSUS THERAPEUTICS INC. 

Notes to the Consolidated Financial Statements 

December 31, 2014 
 (in Canadian dollars) 

 
  

	14.	RESEARCH AND DEVELOPMENT 

 Components of research and development expenses for the years
ended December 31 were as follows: 
  

									
	 	  	2014	 	  	2013	 
	 	  	$	 	  	$	 
	 Salaries, benefits and bonuses
	  	 	685,487	  	  	 	83,509	  
	 Other research and development
	  	 	5,507,680	  	  	 	1,578,314	  
		  	  
	  
	 	  	  
	  
	 
			 	6,193,167	  		 	1,661,823	  
		  	  
	  
	 	  	  
	  
	 

  

	15.	OPERATING, GENERAL AND ADMINISTRATIVE 

 Components of operating, general and
administrative expenses for the years ended December 31 were as follows: 
  

									
	 	  	2014	 	  	2013	 
	 	  	$	 	  	$	 
	 Salaries, benefits, bonuses and board fees
	  	 	1,707,238	  	  	 	1,266,111	  
	 Other operating general, and administrative
	  	 	3,298,863	  	  	 	1,554,824	  
		  	  
	  
	 	  	  
	  
	 
			 	5,006,101	  		 	2,820,935	  
		  	  
	  
	 	  	  
	  
	 

  

	16.	RESEARCH GRANT 

 On August 8, 2012, the Company announced that it had been awarded a
grant of US$947,925 ($942,977) from The Michael J. Fox Foundation (“MJFF”) for Parkinson’s Research to support clinical studies to develop APL-130277. The grant was awarded under the Foundation’s The Edmond J. Safra Core Programs
for Parkinson’s Research, Clinical Intervention Awards aimed at supporting human clinical trials testing promising Parkinson’s therapies that may significantly and fundamentally improve treatment for people with Parkinson’s. Funds
awarded by MJFF are to be used solely for the project and are conditioned by meeting certain milestones and deliverables. 
 The first
milestone payment of US$297,825 ($289,516) was received on September 20, 2012 and was fully used by December 31, 2012. The second milestone payment of US$412,087 ($410,053) was received on January 30, 2013 and fully used by
December 31, 2013. On December 16, 2013, the Company received the final milestone payment of US$238,012 ($254,102). As at March 31, 2014, all of the final milestone payment had been used, and nil (December 31, 2013 - $239,968) is
recorded as deferred grant proceeds. 
 On July 3, 2014, the Company was awarded a new grant of US$500,000 from MJFF to support clinical
studies to develop APL-130277, a sublingual thin film strip reformulation of apomorphine. This second MJFF grant will be used to fund the Company’s CTH-105 clinical study. The first milestone payment of US$100,000 ($112,000) was received on
September 4, 2014 and was recognized as research grant income in the third quarter of 2014. The second milestone payment of US$300,000 ($342,660) was received on December 9, 2014 and was recognized as research grant income in the fourth
quarter of 2014. 
 As part of the MJFF grant agreement, Cynapsus has made a commitment to support further Parkinson’s research by
making up to US$1,000,000 in contributions to MJFF based on future sales of APL-130277 beginning the year that the Company posts net sales of APL-130277 in excess of US$5,000,000 (See Note 18, Commitments and Contingent Liabilities). 

  
 Page 26 

 CYNAPSUS THERAPEUTICS INC. 

Notes to the Consolidated Financial Statements 

December 31, 2014 
 (in Canadian dollars) 

 
  

	17.	RELATED PARTY TRANSACTIONS 

 Key management personnel are those persons having authority
and responsibility for planning, directing and controlling the activities of the Company, including directors and senior executives. Compensation paid or payable to key management was composed of the following during the years ended
December 31: 
  

									
	 	  	2014	 	  	2013	 
	 	  	$	 	  	$	 
	 Short-term salaries, benefits and bonuses to executives
	  	 	1,333,789	  	  	 	990,870	  
	 Prior years’ bonuses to executives
	  	 	—  	  	  	 	529,068	  
	 Director fees
	  	 	281,438	  	  	 	143,100	  
	 Share-based payments
	  	 	1,373,900	  	  	 	497,503	  
		  	  
	  
	 	  	  
	  
	 
			 	2,989,127	  		 	2,160,541	  
		  	  
	  
	 	  	  
	  
	 

 Prior years’ bonuses recognized in 2013 represent bonuses awarded for performance in 2010 to 2012 but
which were contingent on the raising of additional capital and were at the discretion of the Board of Directors. During 2013, the Company completed two closings of a short-form prospectus offering for gross proceeds of $7,317,160 (see Note 13) and
as a result, these bonuses became payable. 
 Share-based payments presented above represent the grant date fair value of options issued
during the year to key management. 
 As at December 31, 2014, included in accounts payable and accrued liabilities was $128,713
(December 31, 2013 - $170,236) due to officers and directors of the Company (See Note 11). These amounts are unsecured and non-interest bearing with no fixed terms of repayment. As at December 31, 2014, there were accrued bonuses to related
parties of $508,710 (December 31, 2013 - $715,068). All accrued amounts were subsequently paid in full (see Note 11). 
 The Company’s
executive agreements provide for additional payments in the event of termination without cause (see Note 18). 
 On March 11, 2015, the
Company announced the results of the End of Phase 2 meeting with the U.S. Food and Drug Administration (“FDA”), which triggered a milestone payment to former Adagio shareholders of 1,119,403 common shares. Of the total, 602,442 shares were
issued to the Company’s President and CEO (see Note 20). 
  

	18.	COMMITMENTS AND CONTINGENT LIABILITIES 

 As at December 31, 2014, the Company had
research and development and other service contract commitments, as well as minimum future payments under operating leases for the periods presented as follows: 
  

													
	 	  	Less than
1 year	 	  	1 - 2
years	 	  	Total	 
	 	  	$	 	  	$	 	  	$	 
	 Purchase Obligations
	  	 	1,615,000	  	  	 	224,000	  	  	 	1,839,000	  
	 Operating Leases
	  	 	110,000	  	  	 	45,000	  	  	 	155,000	  
		  	  
	  
	 	  	  
	  
	 	  	  
	  
	 
	 Total Contractual Obligations
		 	1,725,000	  		 	269,000	  		 	1,994,000	  
		  	  
	  
	 	  	  
	  
	 	  	  
	  
	 

  
 Page 27 

 CYNAPSUS THERAPEUTICS INC. 

Notes to the Consolidated Financial Statements 

December 31, 2014 
 (in Canadian dollars) 

 
  

	18.	COMMITMENTS AND CONTINGENT LIABILITIES (continued) 

  

 Subsequent to December 31, 2014, the Company entered into additional research and other
service contracts, resulting in additional purchase obligations of $1,435,000 due within two years. As a result, the total current purchase obligations are $3,274,000. 

Of the total purchase obligations, one contract contains a change of control clause in which, subject to certain conditions, the Company agrees
to pay the vendor an amount equal to fees based on the minimum billable hours for the remainder of the agreement term. As a triggering event has not taken place, these contingent payments have not been recognized in these financial statements. The
Company does not have a practicable estimate for the amount of this contingent liability due to the nature of the triggering event. As at December 31, 2014, the maximum amount of any contingent liability, based on a remaining term of
16 months, was $650,000, which was included in the amount of unrecognized purchase obligations. 
 The Company is a party to certain
management contracts for its executive officers. Minimum management contract termination commitments remaining under the agreements, for termination without cause, are approximately $1,189,000 and are all payable within one year. 

On December 22, 2011, the Company completed the acquisition of 100% of the outstanding common shares of Adagio and certain indebtedness of
Adagio (the “Transaction”). The Transaction was structured as a share exchange with Adagio shareholders receiving newly issued common shares of the Company in exchange for all of the issued and outstanding shares of Adagio. On
January 28, 2015, the Company and the former Adagio shareholders, whom are substantially represented by key management and therefore are related parties, signed an amendment to the Adagio Share Purchase Agreement to better reflect the
contemplated agreement between the parties. Adagio shareholders are entitled to the following remaining payments pursuant to the Transaction: 
  

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

  

	 	b)	a payment of $2,500,000 conditional upon the successful completion of the APL-130277 final safety study, to be satisfied by the issuance of common shares at a deemed value equal to the 30 day VWAP immediately prior
to the first public announcement of the results of such study. This study had not been started as of December 31, 2014. 

With respect to the payments described in (a) and (b) above, the VWAP of the common shares may not be less than the “discounted
market price” as defined in the policies of the Exchange. Subsequent to December 31, 2014, all parties signed an agreement to change the conditions of payment (a) described above. See Note 17, Related Party Disclosures and Note 20,
Subsequent Events. 
 On July 3, 2014, as a condition of the MJFF grant agreement, the Company has made a commitment to support further
Parkinson’s research by making up to US$1,000,000 in contributions to MJFF conditional on future sales of APL-130277. See Note 16, Research Grant. 

  
 Page 28 

 CYNAPSUS THERAPEUTICS INC. 

Notes to the Consolidated Financial Statements 

December 31, 2014 
 (in Canadian dollars) 

 
  

	19.	INCOME TAXES 

  

	 	a)	Provision for income taxes: 

 Major items causing the Company’s income tax rate to differ
from the Canadian combined federal and provincial statutory rate of approximately 26.5% (2013 - 26.5%) are as follows: 
  

									
	 	  	2014	 	  	2013	 
	 	  	$	 	  	$	 
	 Loss before income taxes
	  	 	(10,818,587	) 	  	 	(4,433,287	) 
			
	 Expected income tax recovery
	  	 	(2,867,000	) 	  	 	(1,175,000	) 
	 Adjustments to benefit resulting from:
	  				  			
	 Expired non capital losses
	  	 	355,000	  	  	 	133,000	  
	 Share-based compensation
	  	 	259,000	  	  	 	137,000	  
	 Other
	  	 	17,000	  	  	 	(295,000	) 
	 Expenses not deductible for tax purposes
	  	 	9,000	  	  	 	47,000	  
	 Change in income tax rates
	  	 	—  	  	  	 	(229,000	) 
	 Gain on debentures exchange
	  	 	—  	  	  	 	(306,000	) 
	 Change in benefit of tax assets not recognized
	  	 	2,227,000	  	  	 	1,688,000	  
		  	  
	  
	 	  	  
	  
	 
	 Deferred income tax recovery
		 	—  	  		 	—  	  
		  	  
	  
	 	  	  
	  
	 

  

	 	b)	Unrecognized deferred tax assets 

 Deferred income tax assets have not been recognized in
respect of the following deductible temporary differences: 
  

									
	 	  	2014	 	  	2013	 
	 	  	$	 	  	$	 
	 Non-capital loss carryforwards
	  	 	26,316,000	  	  	 	16,676,000	  
	 Scientific research and experimental development expenditures
	  	 	4,697,000	  	  	 	3,987,000	  
	 Share issuance costs
	  	 	2,784,000	  	  	 	649,000	  
	 Other temporary differences
	  	 	(1,117,000	) 	  	 	477,000	  
		  	  
	  
	 	  	  
	  
	 
	 Total
		 	32,680,000	  		 	21,789,000	  
		  	  
	  
	 	  	  
	  
	 

 Deferred tax assets have not been recognized in respect of these items because it is not probable that future
taxable profit will be available against which the Company can use the benefits. 

  
 Page 29 

 CYNAPSUS THERAPEUTICS INC. 

Notes to the Consolidated Financial Statements 

December 31, 2014 
 (in Canadian dollars) 

 
  

	19.	INCOME TAXES (continued) 

  

	 	c)	The Company had approximately $26,316,000 of non-capital losses as at December 31, 2014, which under certain circumstances can be used to reduce the taxable income of future
years. The non-capital losses expire as follows: 

  

					
	 Available To
	  	Amount	 
	 	  	$	 
	 2025
	  	 	426,000	  
	 2026
	  	 	1,730,000	  
	 2027
	  	 	1,198,000	  
	 2028
	  	 	1,508,000	  
	 2029
	  	 	1,524,000	  
	 2030
	  	 	1,177,000	  
	 2031
	  	 	1,858,000	  
	 2032
	  	 	1,923,000	  
	 2033
	  	 	3,981,000	  
	 2034
	  	 	10,991,000	  
		  	  
	  
	 
			 	26,316,000	  
		  	  
	  
	 

 The Company also had approximately $778,520 of investment tax credit, and $144,525 of Ontario research and
development tax credit as at December 31, 2014, which under certain circumstances can be used to reduce income tax payable in future years. 
  

	20.	SUBSEQUENT EVENTS 

  

	 	(a)	Summary of warrants exercised since the year ended December 31, 2014 is as follows: 

  

											
	 Number of

Warrants
	  	Cash
Proceeds	 	  	Exercise
Price	 	  	 Expiry Date

	#	  	$	 	  	$	 	  	 
	4,120,186	  	 	2,369,107	  	  	 	0.575	  	  	March 1, 2015
	763,476	  	 	438,999	  	  	 	0.575	  	  	March 1, 2018
	1,523,209	  	 	1,233,799	  	  	 	0.810	  	  	April 15, 2019
	  
	  	  
	  
	 	  				  	
	6,406,871		 	4,041,905	  						
	  
	  	  
	  
	 	  				  	

  

	 	(b)	On March 10, 2015, 55,000 stock options held by a former director with an exercise price of $1.00 were exercised. 

On March 10, 2015, 17,333 stock options held by a former director with an exercise price of $0.65 were exercised. 

On March 10, 2015, 54,000 stock options held by a former director with an exercise price of $0.36 were exercised. 

 

	 	(c)	On March 11, 2015, the Company announced the results of the End of Phase 2 meeting with the FDA, which triggered the milestone payment to former Adagio shareholders of 1,119,403 common shares. The fair value of
these shares, $1,500,000, was recorded as an expense in 2015. See Note 17, Related Party Transactions and Note 18, Commitments and Contingent Liabilities. 

  
 Page 30EX-4.6

 Exhibit 4.6 

CYNAPSUS THERAPEUTICS INC. 
 Condensed Interim
Consolidated Financial Statements 
 For the Three Months Ended March 31, 2015 

(Expressed in Canadian Dollars) 
 Unaudited 

 CYNAPSUS THERAPEUTICS INC. 

Interim Consolidated Statements of Financial Position 
  

 
 UNAUDITED 

(in Canadian dollars) 
  

											
	 	  	NOTES	  	March 31,
2015	 	 	December 31,
2014	 
	 	  	 	  	$	 	 	$	 
	 ASSETS
	  		  				 			
	 Current assets
	  		  				 			
	 Cash
	  		  	 	36,661,012	  	 	 	17,448,497	  
	 Prepaid expenses and other current assets
	  		  	 	828,186	  	 	 	269,779	  
		  		  	  
	  
	 	 	  
	  
	 
	 Total current assets
				 	37,489,198	  		 	17,718,276	  
	 Non-current assets
										
	 Property, plant and equipment
		6		 	382,689	  		 	257,830	  
	 Intangible assets
		7		 	562,553	  		 	574,522	  
		  		  	  
	  
	 	 	  
	  
	 
	 Total assets
				 	38,434,440	  		 	18,550,628	  
		  		  	  
	  
	 	 	  
	  
	 
	 LIABILITIES
										
	 Current liabilities
										
	 Accounts payable and accrued liabilities
		8, 14		 	2,431,677	  		 	3,080,631	  
		  		  	  
	  
	 	 	  
	  
	 
	 Total current liabilities
				 	2,431,677	  		 	3,080,631	  
				
	 SHAREHOLDERS’ EQUITY
										
	 Share capital
		9		 	58,407,376	  		 	31,740,941	  
	 Equity reserves
										
	 Warrants
		9		 	12,188,765	  		 	13,452,183	  
	 Share-based payments
		9		 	3,011,706	  		 	2,787,525	  
	 Deficit
				 	(37,605,084	) 		 	(32,510,652	) 
		  		  	  
	  
	 	 	  
	  
	 
	 Total shareholders’ equity
				 	36,002,763	  		 	15,469,997	  
		  		  	  
	  
	 	 	  
	  
	 
	 Total liabilities and shareholders’ equity
				 	38,434,440	  		 	18,550,628	  
		  		  	  
	  
	 	 	  
	  
	 

 COMMITMENTS AND CONTINGENT LIABILITIES (Note 15) 

SUBSEQUENT EVENTS (Note 16) 
 APPROVED ON BEHALF OF THE BOARD:

  

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

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

  
 2 

 CYNAPSUS THERAPEUTICS INC. 

Interim Consolidated Statements of Loss and Comprehensive Loss 
  

 
 UNAUDITED 

(in Canadian dollars) 
  

											
	 	  	 	  	For the three months ended	 
	 	  	NOTES	  	March 31,
2015	 	 	March 31,
2014	 
	 	  	 	  	$	 	 	$	 
	 EXPENSES
	  		  				 			
	 Research and development
	  	10	  	 	2,871,101	  	 	 	448,692	  
	 Operating, general and administrative
	  	11	  	 	1,778,150	  	 	 	958,363	  
	 Share-based payments
	  	9	  	 	274,068	  	 	 	17,076	  
	 Amortization of intangible assets
	  	7	  	 	11,969	  	 	 	14,746	  
	 Depreciation of property, plant and equipment
	  	6	  	 	8,287	  	 	 	659	  
	 Acquisition milestone share-based payment
	  	13, 14	  	 	1,500,000	  	 	 	—  	  
	 Unrealized foreign exchange (gain) loss
	  		  	 	(1,182,432	) 	 	 	22,898	  
	 Recovery on scientific research
	  		  	 	(30,000	) 	 	 	(10,000	) 
	 Research grant
	  	12	  	 	(127,710	) 	 	 	(239,969	) 
	 Interest income net of interest expense and related charges
	  		  	 	(9,001	) 	 	 	(2,193	) 
		  		  	  
	  
	 	 	  
	  
	 
	 Loss and comprehensive loss for the period
				 	5,094,432	  		 	1,210,272	  
		  		  	  
	  
	 	 	  
	  
	 
	 Loss per share – basic and diluted 
				 	0.06	  		 	0.03	  
	 Weighted average number of shares outstanding – basic and diluted
				 	83,740,263	  		 	39,459,170	  

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

  
 3 

 CYNAPSUS THERAPEUTICS INC. 

Interim Consolidated Statements of Changes in Equity 
  

 
 UNAUDITED 

(in Canadian dollars) 
  

																					
	 	  	Share
Capital	 	  	Equity
Reserves –
Warrants	 	 	Equity
Reserves –
Share-based
Payments	 	 	Deficit	 	 	Total	 
	 	  	$	 	  	$	 	 	$	 	 	$	 	 	$	 
	 Balance as at December 31, 2014
	  	 	31,740,941	  	  	 	13,452,183	  	 	 	2,787,525	  	 	 	(32,510,652	) 	 	 	15,469,997	  
		  	  
	  
	 	  	  
	  
	 	 	  
	  
	 	 	  
	  
	 	 	  
	  
	 
	 Private placement, net of transaction costs
		 	19,513,550	  		 	—  	  		 	—  	  		 	—  	  		 	19,513,550	  
	 Exercise of warrants
		 	5,517,292	  		 	(1,263,418	) 		 	—  	  		 	—  	  		 	4,253,874	  
	 Acquisition milestone share-based payment
		 	1,500,000	  		 	—  	  		 	—  	  		 	—  	  		 	1,500,000	  
	 Exercise of share-based payments
		 	135,593	  		 	—  	  		 	(49,887	) 		 	—  	  		 	85,706	  
	 Share-based payments
		 	—  	  		 	—  	  		 	274,068	  		 	—  	  		 	274,068	  
	 Loss for the period
		 	—  	  		 	—  	  		 	—  	  		 	(5,094,432	) 		 	(5,094,432	) 
		  	  
	  
	 	  	  
	  
	 	 	  
	  
	 	 	  
	  
	 	 	  
	  
	 
	 Activity for the period
		 	26,666,435	  		 	(1,263,418	) 		 	224,181	  		 	(5,094,432	) 		 	20,532,766	  
		  	  
	  
	 	  	  
	  
	 	 	  
	  
	 	 	  
	  
	 	 	  
	  
	 
	 Balance as at March 31, 2015
		 	58,407,376	  		 	12,188,765	  		 	3,011,706	  		 	(37,605,084	) 		 	36,002,763	  
		  	  
	  
	 	  	  
	  
	 	 	  
	  
	 	 	  
	  
	 	 	  
	  
	 
	 Balance as at December 31, 2013
		 	16,156,398	  		 	4,211,014	  		 	1,918,672	  		 	(21,692,065	) 		 	594,019	  
		  	  
	  
	 	  	  
	  
	 	 	  
	  
	 	 	  
	  
	 	 	  
	  
	 
	 Exercise of warrants
		 	971,295	  		 	(246,800	) 		 	—  	  		 	—  	  		 	724,495	  
	 Share-based payments
		 	—  	  		 	—  	  		 	17,076	  		 	—  	  		 	17,076	  
	 Loss for the period
		 	—  	  		 	—  	  		 	—  	  		 	(1,210,272	) 		 	(1,210,272	) 
		  	  
	  
	 	  	  
	  
	 	 	  
	  
	 	 	  
	  
	 	 	  
	  
	 
	 Activity for the period
		 	971,295	  		 	(246,800	) 		 	17,076	  		 	(1,210,272	) 		 	(468,701	) 
		  	  
	  
	 	  	  
	  
	 	 	  
	  
	 	 	  
	  
	 	 	  
	  
	 
	 Balance as at March 31, 2014
		 	17,127,693	  		 	3,964,214	  		 	1,935,748	  		 	(22,902,337	) 		 	125,318	  
		  	  
	  
	 	  	  
	  
	 	 	  
	  
	 	 	  
	  
	 	 	  
	  
	 

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

  
 4 

 CYNAPSUS THERAPEUTICS INC. 

Interim Consolidated Statements of Cash Flows 
  

 
 UNAUDITED 

(in Canadian dollars) 
  

													
	 	  	 	 	  	For the three months ended	 
	 	  	NOTES	 	  	March 31,
2015	 	 	March 31,
2014	 
	 	  	 	 	  	$	 	 	$	 
	 Operating activities
	  				  				 			
	 Loss for the period
	  				  	 	(5,094,432	) 	 	 	(1,210,272	) 
	 Items not affecting cash:
	  				  				 			
	 Share-based payments
	  	 	9	  	  	 	274,068	  	 	 	17,076	  
	 Amortization of intangible assets
	  	 	7	  	  	 	11,969	  	 	 	14,746	  
	 Depreciation of property, plant and equipment
	  	 	6	  	  	 	8,287	  	 	 	659	  
	 Acquisition milestone share-based payment
	  	 	13	  	  	 	1,500,000	  	 	 	—  	  
	 Unrealized (gain) loss on foreign exchange
	  				  	 	(1,182,432	) 	 	 	22,898	  
		  				  	  
	  
	 	 	  
	  
	 
							 	(4,482,540	) 		 	(1,154,893	) 
	 Changes in non-cash working capital:
												
	 Change in prepaid expenses and other current assets
						 	(558,407	) 		 	(40,952	) 
	 Change in accounts payables and accrued liabilities
						 	(648,954	) 		 	(240,573	) 
	 Deferred grant proceeds
						 	—  	  		 	(239,968	) 
		  				  	  
	  
	 	 	  
	  
	 
	 Net cash used in operating activities
						 	(5,689,901	) 		 	(1,676,386	) 
		  				  	  
	  
	 	 	  
	  
	 
	 Investing activities
												
	 Purchase of property, plant and equipment
		 	6	  		 	(133,146	) 		 	—  	  
		  				  	  
	  
	 	 	  
	  
	 
	 Net cash used in investing activities
						 	(133,146	) 		 	—  	  
		  				  	  
	  
	 	 	  
	  
	 
	 Financing activities
												
	 Gross proceeds from issuance of shares
		 	9	  		 	20,981,579	  		 	—  	  
	 Commissions and share issuance costs
		 	9	  		 	(1,468,029	) 		 	—  	  
	 Gross proceeds from exercise of warrants
		 	9	  		 	4,253,874	  		 	724,495	  
	 Gross proceeds from exercise of share-based payments
		 	9	  		 	85,706	  		 	—  	  
	 Deferred financing costs
						 	—  	  		 	(55,229	) 
		  				  	  
	  
	 	 	  
	  
	 
	 Net cash provided by financing activities
						 	23,853,130	  		 	669,266	  
		  				  	  
	  
	 	 	  
	  
	 
	 Effect of exchange rate changes on cash and cash equivalents
						 	1,182,432	  		 	(22,898	) 
		  				  	  
	  
	 	 	  
	  
	 
	 Increase (decrease) in cash and cash equivalents
						 	19,212,515	  		 	(1,030,018	) 
	 Cash and cash equivalents, beginning of period
						 	17,448,497	  		 	2,289,046	  
		  				  	  
	  
	 	 	  
	  
	 
	 Cash and cash equivalents, end of period
						 	36,661,012	  		 	1,259,028	  
		  				  	  
	  
	 	 	  
	  
	 

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

  
 5 

 CYNAPSUS THERAPEUTICS INC. 

Notes to the Unaudited Condensed Interim Consolidated Financial Statements 

March 31, 2015 
 (in
Canadian dollars) 
  
  

	1.	NATURE OF OPERATIONS 

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

 

	2.	BASIS OF PREPARATION 

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

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

On May 7, 2015, the Board of Directors approved and authorized these condensed interim consolidated financial statements for the three
months ended March 31, 2015. 
 Certain comparative figures have been reclassified to conform with the financial statement presentation
adopted for the current period. 
 In the opinion of management, all adjustments considered necessary for fair presentation of the
Company’s financial position, results of operations and cash flows have been included. Operating results for the three month period ended March 31, 2015 are not necessarily indicative of the results that may be expected for the year ending
December 31, 2015. 
  

	3.	FUTURE ACCOUNTING CHANGES 

 Certain pronouncements that were issued by the IASB or the
International Financial Reporting Interpretations Committee are mandatory for accounting periods beginning on or after January 1, 2016. Many are not applicable or do not have a significant impact to the Company and have been excluded. The
following pronouncement has not yet been adopted and is being evaluated to determine its impact on the Company. 
 IFRS 9 Financial
Instruments (“IFRS 9”) was issued by the IASB in July 2014 and will replace IAS 39 Financial Instruments: Recognition and Measurement (“IAS 39”) and all previous versions of IFRS 9. IFRS 9 uses a single approach
to determine whether a financial asset is measured at amortized cost, fair 

  
 6 

 CYNAPSUS THERAPEUTICS INC. 

Notes to the Unaudited Condensed Interim Consolidated Financial Statements 

March 31, 2015 
 (in Canadian dollars) 

  
  

	3.	FUTURE ACCOUNTING CHANGES (continued) 

  

value through profit or loss, or fair value through other comprehensive income. The approach in IFRS 9 is based on how an entity manages its
financial instruments in the context of its business model and the contractual cash flow characteristics of the financial assets. Most of the requirements in IAS 39 for classification and measurement of financial liabilities were carried forward
unchanged to IFRS 9, except that an entity choosing to measure a financial liability at fair value will present the portion of any change in fair value due to changes in the entity’s own credit risk in other comprehensive income, rather than
within profit or loss. The new standard also requires a single impairment method to be used, replacing the multiple impairment methods in IAS 39. IFRS 9 is effective for annual periods beginning on or after January 1, 2018. Earlier adoption is
permitted. 
  

	4.	SIGNIFICANT ACCOUNTING JUDGMENTS, ESTIMATES AND ASSUMPTIONS 

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

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

	5.	RISK MANAGEMENT 

 Financial risk management 

In the normal course of business, the Company is exposed to a number of financial risks that can affect its operating performance. These risks
are credit risk, liquidity risk and market risk. The Company’s overall risk management program and prudent business practices seek to minimize any potential adverse effects on the Company’s financial performance. There were no changes in
the Company’s approach to risk management during the three months ended March 31, 2015. 
  

	 	(i)	Credit risk 

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

 

	 	(ii)	Liquidity risk 

 The Company’s approach to managing liquidity risk is to ensure that
it will have sufficient liquidity to meet liabilities when due. As at March 31, 2015, the Company had cash of $36,661,012 and prepaid 

  
 7 

 CYNAPSUS THERAPEUTICS INC. 

Notes to the Unaudited Condensed Interim Consolidated Financial Statements 

March 31, 2015 
 (in Canadian dollars) 

  
  

	5.	RISK MANAGEMENT (continued) 

  

expenses and other current assets of $828,186 (December 31, 2014 - $17,448,479 and $269,779, respectively) to settle current liabilities of
$2,431,677 (December 31, 2014 - $3,080,631). The Company’s accounts payable and accrued liabilities have contractual maturities of less than 30 days and are subject to normal trade terms. 

Market risk 
  

	 	(i)	Interest rate risk 

 The Company had a cash balance of $36,661,012 as at March 31,
2015. The Company’s current policy is to invest excess cash in a business savings account and investment-grade short-term deposit certificates issued by its banking institutions. The Company periodically monitors the investments it makes and is
satisfied with the credit ratings of its banks. The Company considers interest rate risk to be minimal as investments are short-term. 
  

	 	(ii)	Foreign currency risk 

 The Company’s functional and presentation currency is the
Canadian dollar and all amounts in the condensed interim consolidated financial statements are expressed in Canadian dollars, unless otherwise noted. Most purchases are transacted in Canadian dollars. The Company funds the majority of research and
development expenses in the United States from its US dollar bank account held in Canada and certain expenses in Europe on a cash call basis using the euro converted from its Canadian dollar bank accounts held in Canada. Management believes the
foreign exchange risk derived from currency conversions is not significant and therefore does not hedge its foreign exchange risk. As at March 31, 2015, the Company had cash of $30,635,493 and accounts payable of $878,796 denominated in US
dollars (December 31, 2014 - $12,370,423 and $1,539,496). A plus or minus 10% change in foreign exchange rates could affect the Company’s net loss by approximately $3,000,000. 

 

	 	(iii)	Price risk 

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

	 	(iv)	Fair value 

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

Cash is classified as loans and receivables, measured at amortized cost. Accounts payable and accrued liabilities are classified as other
financial liabilities, which are measured at amortized cost. 
 The carrying amounts for cash, accounts payable and accrued liabilities on
the consolidated statement of financial position approximate fair value because of the short term of these instruments. 

  
 8 

 CYNAPSUS THERAPEUTICS INC. 

Notes to the Unaudited Condensed Interim Consolidated Financial Statements 

March 31, 2015 
 (in Canadian dollars) 

  
  

	5.	RISK MANAGEMENT (continued) 

  

Capital risk management 

The Company manages its capital structure and makes adjustments to it, based on the funds available to the Company, in order to support its
research and development activities. The Company’s capital structure consists of share capital and equity reserves. The Board of Directors does not establish quantitative return on capital criteria for management but rather relies on the
expertise of the Company’s management to sustain future development of the business. 
 The product candidates which the Company
currently has in its pipeline are in the research stage; as such, the Company is dependent on external financing to fund its activities. In order to carry out the planned research and development and pay for administration costs, the Company will
spend its existing working capital and raise additional amounts as needed. 
 Management reviews its capital management approach on an
ongoing basis and believes that this approach, given the relative size of the Company, is reasonable. 
 There were no changes in the
Company’s approach to capital management during the three months ended March 31, 2015. The Company and its subsidiary are not subject to externally imposed capital requirements. 

 

	6.	PROPERTY, PLANT AND EQUIPMENT 

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

																	
	 	  	Computer
Equipment	 	  	Furniture
and Fixtures	 	  	Leasehold
Improvements	 	  	Total	 
	 	  	$	 	  	$	 	  	$	 	  	$	 
	 Cost
	  				  				  				  			
	 Balance as at December 31, 2014
	  	 	199,773	  	  	 	54,093	  	  	 	32,880	  	  	 	286,746	  
	 Additions
	  	 	124,485	  	  	 	—  	  	  	 	8,661	  	  	 	133,146	  
		  	  
	  
	 	  	  
	  
	 	  	  
	  
	 	  	  
	  
	 
	 Balance as at March 31, 2015
		 	324,258	  		 	54,093	  		 	41,541	  		 	419,892	  
		  	  
	  
	 	  	  
	  
	 	  	  
	  
	 	  	  
	  
	 
					
	 Accumulated Depreciation
																
	 Balance as at December 31, 2014
		 	10,934	  		 	10,982	  		 	7,000	  		 	28,916	  
	 Depreciation
		 	1,964	  		 	2,155	  		 	4,168	  		 	8,287	  
		  	  
	  
	 	  	  
	  
	 	  	  
	  
	 	  	  
	  
	 
	 Balance as at March 31, 2015
		 	12,898	  		 	13,137	  		 	11,168	  		 	37,203	  
		  	  
	  
	 	  	  
	  
	 	  	  
	  
	 	  	  
	  
	 
					
	 Net book value
																
	 Net book value as at December 31, 2014
		 	188,839	  		 	43,111	  		 	25,880	  		 	257,830	  
		  	  
	  
	 	  	  
	  
	 	  	  
	  
	 	  	  
	  
	 
	 Net book value as at March 31, 2015
		 	311,360	  		 	40,956	  		 	30,373	  		 	382,689	  
		  	  
	  
	 	  	  
	  
	 	  	  
	  
	 	  	  
	  
	 

  
 9 

 CYNAPSUS THERAPEUTICS INC. 

Notes to the Unaudited Condensed Interim Consolidated Financial Statements 

March 31, 2015 
 (in Canadian dollars) 

  
  

 

	7.	INTANGIBLE ASSETS 

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

													
	 	  	APL-130277
Patents	 	  	License
Agreement	 	  	Total	 
	 	  	$	 	  	$	 	  	$	 
	 Cost
	  				  				  			
	 Balance as at December 31, 2014 and March 31, 2015
	  	 	718,150	  	  	 	200,000	  	  	 	918,150	  
		  	  
	  
	 	  	  
	  
	 	  	  
	  
	 
				
	 Accumulated Amortization
												
	 Balance as at December 31, 2014
		 	143,628	  		 	200,000	  		 	343,628	  
	 Amortization
		 	11,969	  		 	—  	  		 	11,969	  
		  	  
	  
	 	  	  
	  
	 	  	  
	  
	 
	 Balance as at March 31, 2015
		 	155,597	  		 	200,000	  		 	355,597	  
		  	  
	  
	 	  	  
	  
	 	  	  
	  
	 
				
	 Net book value
												
	 Net book value as at December 31, 2014
		 	574,522	  		 	—  	  		 	574,522	  
		  	  
	  
	 	  	  
	  
	 	  	  
	  
	 
	 Net book value as at March 31, 2015
		 	562,553	  		 	—  	  		 	562,553	  
		  	  
	  
	 	  	  
	  
	 	  	  
	  
	 

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

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

 

	8.	ACCOUNTS PAYABLE AND ACCRUED LIABILITIES 

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

									
	 	  	March 31,
2015	 	  	December 31,
2014	 
	 	  	$	 	  	$	 
	 Trade payables
	  	 	1,807,531	  	  	 	2,240,026	  
	 Due to related parties (Note 14)
	  	 	201,299	  	  	 	128,713	  
	 Bonus accruals to related parties (Note 14)
	  	 	100,000	  	  	 	508,710	  
	 Other accrued liabilities
	  	 	322,847	  	  	 	203,182	  
		  	  
	  
	 	  	  
	  
	 
			 	2,431,677	  		 	3,080,631	  
		  	  
	  
	 	  	  
	  
	 

  
 10 

 CYNAPSUS THERAPEUTICS INC. 

Notes to the Unaudited Condensed Interim Consolidated Financial Statements 

March 31, 2015 
 (in Canadian dollars) 

  
  

 

	9.	SHARE CAPITAL 

  

	 	i)	Authorized common shares 

 Unlimited number of common shares with no par value 

 

	 	ii)	Issued and outstanding common shares 

  

					
	 	  	Number of
Common Shares	 
	 	  	#	 
	 Balance as at December 31, 2014
	  	 	80,334,449	  
	 Shares issued for cash
	  	 	22,039,472	  
	 Shares issued as acquisition milestone share-based payment
	  	 	1,119,403	  
	 Shares issued for cash from exercise of warrants
	  	 	6,691,771	  
	 Shares issued for cash from exercise of share-based payments
	  	 	126,333	  
		  	  
	  
	 
	 Balance as at March 31, 2015
		 	110,311,428	  
		  	  
	  
	 

 On March 31, 2015, the Company announced the completion of a private placement of 22,039,472 common
shares of the Company for gross proceeds of $20,981,579. The issue price of $0.952 per share represents a 20% discount to the 5-day volume-weighted average price per common share on the TSX as of the close of business on March 27, 2015. The
common shares issued are subject to a hold period, which will expire four months plus one day from the date of issue. 
 As part of the
March 31, 2015 private placement, the Dexcel Pharma group, a strategic pharmaceutical investor and significant shareholder of Cynapsus, and which also has two directors on the Board of Directors of the Company, subscribed for 4,342,105 common
shares having an aggregate subscription price of $4,133,684 (see Note 14, Related Party Transactions). 
 On March 11, 2015, pursuant to
an amended agreement, the Company issued 1,119,403 common shares to former Adagio shareholders as acquisition milestone share-based payment (see Note 13, Acquisition Milestone Share-based Payment). 

 

	 	iii)	Equity Reserve – Warrants 

 The number of warrants outstanding as at
December 31, 2014 and March 31, 2015 and changes during the three months ended March 31, 2015 are presented below: 
  

													
	 	  	Number of
Warrants	 	  	Equity
Reserve	 	  	Weighted
Average
Exercise
Price/Share	 
	 	  	#	 	  	$	 	  	$	 
	 Balance as at December 31, 2014
	  	 	60,034,989	  	  	 	13,452,183	  	  	 	0.734	  
	 Exercised
	  	 	(6,691,771	) 	  	 	(1,263,418	) 	  	 	0.636	  
		  	  
	  
	 	  	  
	  
	 	  	  
	  
	 
	 Balance as at March 31, 2015
		 	53,343,218	  		 	12,188,765	  		 	0.746	  
		  	  
	  
	 	  	  
	  
	 	  	  
	  
	 

  
 11 

 CYNAPSUS THERAPEUTICS INC. 

Notes to the Unaudited Condensed Interim Consolidated Financial Statements 

March 31, 2015 
 (in Canadian dollars) 

  
  

	9.	SHARE CAPITAL (continued) 

  

	 	iii)	Equity Reserve – Warrants (continued) 

  

A summary of warrants exercised during the three months ended March 31, 2015 is as follows: 

 

											
	Number of
Warrants	 	 	Cash
Proceeds	 	 	Exercise
Price	 
	#	 	 	$	 	 	$	 
	 	4,963,662	  	 	 	2,854,106	  	 	 	0.575	  
	 	1,728,109	  	 	 	1,399,768	  	 	 	0.810	  
	  
	  
	 	 	  
	  
	 	 			
	 	6,691,771	  		 	4,253,874	  				
	  
	  
	 	 	  
	  
	 	 			

 Warrants issued and outstanding as at March 31, 2015 were as follows: 

 

															
	 Number of
Warrants
	 	  	Exercise
Price	 	  	Exercise
Trigger*	 	  	Expiry Date	  	 Description

	#	 	  	$/ Share	 	  	$/ Share	 	  	 	  	 
	 	190,000	  	  	 	1.000	  	  	 	1.50	  	  	July 18, 2017	  	2012 Private placement
	 	330,400	  	  	 	0.625	  	  	 	—  	  	  	October 24, 2017	  	2012 Private placement
	 	127,496	  	  	 	0.625	  	  	 	—  	  	  	November 23, 2017	  	2012 Private placement
	 	11,323,423	  	  	 	0.575	  	  	 	1.38	  	  	March 1, 2018	  	2013 Prospectus offering, first closing
	 	2,934,200	  	  	 	0.575	  	  	 	1.38	  	  	March 1, 2018	  	2013 Prospectus offering, second closing
	 	38,437,699	  	  	 	0.810	  	  	 	1.95	  	  	April 15, 2019	  	2014 Prospectus offering
	  
	  
	 	  				  				  		  	
	 	53,343,218	  												
	  
	  
	 	  				  				  		  	

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

There were no warrants issued during the three months ended March 31, 2015. The weighted average grant date fair value of the warrants
issued during the year ended December 31, 2014 was $0.24. The weighted average contractual life remaining for the warrants as at March 31, 2015 is 3.72 years (December 31, 2014 - 3.71 years). 

 

	 	iv)	Reserve – Share-based payments 

 The Company has in place a stock option plan for
the purchase of common shares by its directors, officers, employees and other service providers. No amounts are paid or payable by the recipient on receipt of the option. The options carry neither rights to dividends nor voting rights. Options may
be exercised at any time from the date of vesting to the date of their expiry. The number of options granted is approved by the Board of Directors. All options expire up to 365 days after the resignation of an employee or director and expire 90 days
after the resignation of a consultant. 
 The aggregate number of common shares reserved for issuance under the stock option plan is a
maximum of 10% of the issued and outstanding common shares of the Company. As at March 31, 2015, there were a total of 5,324,316 options outstanding, representing 4.8% of the issued and 

  
 12 

 CYNAPSUS THERAPEUTICS INC. 

Notes to the Unaudited Condensed Interim Consolidated Financial Statements 

March 31, 2015 
 (in Canadian dollars) 

  
  

	9.	SHARE CAPITAL (continued) 

  

	 	iv)	Reserve – Share-based payments (continued) 

  

outstanding common shares of the Company. No one person shall be granted options representing more than 5% of the issued and outstanding common
shares of the Company in a 12-month period. Option grants to persons providing consulting and investor services may not exceed 2% of the issued and outstanding common shares of the Company in any 12-month period. The options are non-assignable and
non-transferable and may be granted for a term not exceeding five years. The exercise price of the options is fixed by the Board of Directors of the Company and shall not be lower than the discounted market price (as defined by the TSX) of the
shares at the time of grant, subject to all applicable regulatory requirements. 
 The number of stock options outstanding as at
December 31, 2014 and March 31, 2015, and changes during the three months ended March 31, 2015 are as follows: 
  

									
	 	  	Number of
Options	 	  	Weighted
Average
Exercise
Price/Share	 
	 	  	#	 	  	$	 
	 Options outstanding as at December 31, 2014
	  	 	5,450,649	  	  	 	0.76	  
	 Exercised
	  	 	(126,333	) 	  	 	0.68	  
		  	  
	  
	 	  	  
	  
	 
	 Options outstanding as at March 31, 2015
		 	5,324,316	  		 	0.76	  
		  	  
	  
	 	  	  
	  
	 

 For the three months ended March 31, 2015, share-based compensation expense attributable to the operating,
general and administrative function was $80,334 (March 31, 2014 - $34,661) and to the research and development function was $193,735 (March 31, 2014 - recovery of $17,585). 

Stock options issued and outstanding as at March 31, 2015 were as follows: 

 

													
	 Number of Options
Outstanding
	 	  	Number of Options
Vested and
Exercisable	 	  	Effective
Exercise Price/
Share	 	  	 Expiry Date

	#	 	  	#	 	  	$	 	  	 
	 	90,000	  	  	 	90,000	  	  	 	1.00	  	  	August 12, 2015
	 	5,000	  	  	 	5,000	  	  	 	1.00	  	  	November 10, 2015
	 	50,000	  	  	 	50,000	  	  	 	1.00	  	  	March 4, 2016
	 	40,000	  	  	 	40,000	  	  	 	1.00	  	  	August 19, 2016
	 	275,000	  	  	 	275,000	  	  	 	1.00	  	  	March 23, 2017
	 	26,000	  	  	 	26,000	  	  	 	1.00	  	  	May 30, 2017
	 	15,000	  	  	 	15,000	  	  	 	1.00	  	  	August 29, 2017
	 	373,316	  	  	 	373,316	  	  	 	0.46	  	  	March 1, 2018
	 	896,000	  	  	 	896,000	  	  	 	0.36	  	  	May 1, 2018
	 	25,000	  	  	 	25,000	  	  	 	0.31	  	  	May 28, 2018
	 	2,204,000	  	  	 	1,469,334	  	  	 	0.65	  	  	May 20, 2019
	 	1,325,000	  	  	 	166,250	  	  	 	1.24	  	  	December 5, 2019
	  
	  
	 	  	  
	  
	 	  				  	
	 	5,324,316	  		 	3,430,900	  						
	  
	  
	 	  	  
	  
	 	  				  	

  
 13 

 CYNAPSUS THERAPEUTICS INC. 

Notes to the Unaudited Condensed Interim Consolidated Financial Statements 

March 31, 2015 
 (in Canadian dollars) 

  
  

	9.	SHARE CAPITAL (continued) 

  

	 	iv)	Reserve – Share-based payments (continued) 

  

The total number of common shares that were issuable pursuant to stock options that were exercisable as at March 31, 2015 is 3,430,900
(December 31, 2014 - 3,557,233). The weighted average exercise price of these options as at March 31, 2015 is $0.63 (December 31, 2014 - $0.76). 

The weighted average contractual life remaining for the exercisable and outstanding shares issuable on exercise of stock options as at
March 31, 2015 is 3.37 years and 3.76 years, respectively (December 31, 2014 - 3.59 years and 3.98 years). 
  

	10.	RESEARCH AND DEVELOPMENT 

 Components of research and development expenses for the three
months ended March 31, 2015 and March 31, 2014 were as follows: 
  

									
	 	  	March 31,
2015	 	  	March 31,
2014	 
	 	  	$	 	  	$	 
	 Salaries, benefits and bonuses
	  	 	374,527	  	  	 	27,250	  
	 Other research and development
	  	 	2,496,574	  	  	 	421,442	  
		  	  
	  
	 	  	  
	  
	 
			 	2,871,101	  		 	448,692	  
		  	  
	  
	 	  	  
	  
	 

  

	11.	OPERATING, GENERAL AND ADMINISTRATIVE 

 Components of operating, general and
administrative expenses for the three months ended March 31 2015 and March 31, 2014 were as follows: 
  

									
	 	  	March 31,
2015	 	  	March 31,
2014	 
	 	  	$	 	  	$	 
	 Salaries, benefits, bonuses and board fees
	  	 	451,504	  	  	 	345,516	  
	 Other operating general, and administrative
	  	 	1,326,646	  	  	 	612,847	  
		  	  
	  
	 	  	  
	  
	 
			 	1,778,150	  		 	958,363	  
		  	  
	  
	 	  	  
	  
	 

  

	12.	RESEARCH GRANT 

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

  
 14 

 CYNAPSUS THERAPEUTICS INC. 

Notes to the Unaudited Condensed Interim Consolidated Financial Statements 

March 31, 2015 
 (in Canadian dollars) 

  
  

	12.	RESEARCH GRANT (continued) 

  

Company received the final milestone payment of US$238,012 ($254,102). As at December 31, 2013, $239,969 was recorded as deferred grant
proceeds, and was fully used and recognized into income in the three months ended March 31, 2014. 
 On July 3, 2014, the Company
was awarded a second grant of US$500,000 from MJFF to support clinical studies to develop APL-130277. This MJFF grant was used to fund the Company’s CTH-105 clinical study. Funds awarded by MJFF are to be used solely for the specified project
and are conditioned on meeting certain milestones and deliverables. The first milestone payment of US$100,000 ($112,000) was received on September 4, 2014 and was recognized as research grant income in the third quarter of 2014. The second
milestone payment of US$300,000 ($342,660) was received on December 9, 2014 and was recognized as research grant income in the fourth quarter of 2014. The final milestone payment of US$100,000 ($127,710) was received on March 13, 2015 and
was recognized as research grant income in the first quarter of 2015. 
 As part of the MJFF grant agreement, Cynapsus is required to support
further Parkinson’s research by making up to US$1,000,000 in contributions to MJFF based on future sales of APL-130277 beginning the year that the Company posts net sales of APL-130277 in excess of US$5,000,000. 

 

	13.	ACQUISITION MILESTONE SHARE-BASED PAYMENT 

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

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

  

	 	b)	a payment of $2,500,000 conditional upon the successful completion of the APL-130277 final safety study, to be satisfied by the issuance of common shares at a deemed value equal to the 30 day VWAP immediately prior to
the first public announcement of the results of such study. This study had not been started as of March 31, 2015. 

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

  
 15 

 CYNAPSUS THERAPEUTICS INC. 

Notes to the Unaudited Condensed Interim Consolidated Financial Statements 

March 31, 2015 
 (in Canadian dollars) 

  
  

	13.	ACQUISITION MILESTONE SHARE-BASED PAYMENT (continued) 

  

On March 11, 2015, the Company announced the results of the end of Phase 2 meeting with the FDA, which triggered the milestone payment
described in (a) above to former Adagio shareholders of 1,119,403 common shares at a deemed value of $1.34 per common share. The fair value of these shares, in the amount of $1,500,000, was recorded as an expense. See Note 14, Related
Party Transactions. 
  

	14.	RELATED PARTY TRANSACTIONS 

 Key management personnel are those persons having authority
and responsibility for planning, directing and controlling the activities of the Company, including directors and senior executives. Compensation paid or payable to key management was composed of the following during the three months ended
March 31, 2015 and March 31, 2014: 
  

									
	 	  	2015	 	  	2014	 
	 	  	$	 	  	$	 
	 Short-term salaries, benefits and bonuses to executives
	  	 	297,122	  	  	 	207,655	  
	 Director fees
	  	 	126,130	  	  	 	70,428	  
		  	  
	  
	 	  	  
	  
	 
			 	423,252	  		 	278,083	  
		  	  
	  
	 	  	  
	  
	 

 As at March 31, 2015, included in accounts payable and accrued liabilities was $201,299 (December 31,
2014 - $128,713) due to officers and directors of the Company (See Note 8, Accounts Payable and Accrued Liabilities). These amounts are unsecured and non-interest bearing with no fixed terms of repayment. As at March 31, 2015, $100,000 was
accrued as bonuses to related parties (December 31, 2014 - $508,710). 
 The Company’s executive agreements provide for additional
payments in the event of termination without cause (see Note 15, Commitments and Contingent Liabilities). 
 On March 11, 2015, the
Company announced the results of the end of Phase 2 meeting with the U.S. Food and Drug Administration (“FDA”), which triggered a milestone payment to former Adagio shareholders of 1,119,403 common shares. Of the total, 602,442 shares were
issued to the Company’s President and Chief Executive Officer (see Note 13, Acquisition Milestone Share-based Payment). 
 As part of
the March 31, 2015 private placement, the Dexcel Pharma Group, a strategic pharmaceutical investor and significant shareholder of Cynapsus, and which also has two directors on the Board of Directors of the Company, subscribed for 4,342,105
common shares having an aggregate subscription price of $4,133,684 (see Note 9, Share Capital). 
  

	15.	COMMITMENTS AND CONTINGENT LIABILITIES 

 As at March 31, 2015, the Company had
research and development and other service contract commitments, as well as minimum future payments under operating leases for the periods presented as follows: 
  

													
	 	  	Less than
1 year	 	  	1 - 2
years	 	  	Total	 
	 	  	$	 	  	$	 	  	$	 
	 Purchase Obligations
	  	 	2,150,000	  	  	 	137,000	  	  	 	2,287,000	  
	 Operating Leases
	  	 	110,000	  	  	 	18,000	  	  	 	128,000	  
		  	  
	  
	 	  	  
	  
	 	  	  
	  
	 
	 Total Contractual Obligations
		 	2,260,000	  		 	155,000	  		 	2,415,000	  
		  	  
	  
	 	  	  
	  
	 	  	  
	  
	 

  
 16 

 CYNAPSUS THERAPEUTICS INC. 

Notes to the Unaudited Condensed Interim Consolidated Financial Statements 

March 31, 2015 
 (in Canadian dollars) 

  
  

	15.	COMMITMENTS AND CONTINGENT LIABILITIES (continued) 

  

Subsequent to March 31, 2015, the Company entered into additional research and development contracts, resulting in additional purchase
obligations of $1,422,000 within one year. As a result, the total current purchase obligations as at May 7, 2015 are $3,709,000. 
 Of
the total purchase obligations, one consulting contract contains a change of control clause in which, subject to certain conditions, the Company agrees to pay the vendor an amount equal to fees based on the minimum billable hours for the remainder
of the agreement term. As a triggering event has not taken place, these contingent payments have not been recognized in these financial statements. The Company does not have a practicable estimate for the expected value of this contingent liability
due to the nature of the triggering event. As at March 31, 2015, the maximum amount of any contingent liability, based on a remaining term of 15 months, was $535,000, which was included in the amount of unrecognized purchase obligations. 

The Company is a party to certain management contracts for its executive officers. Minimum management contract termination commitments
remaining under the agreements, for termination without cause, are approximately $1,252,325 and are all payable within one year. 
 See also
Note 12, Research Grant and Note 13, Acquisition Milestone Share-Based Payment. 
  

	16.	SUBSEQUENT EVENTS 

 On April 2, 2015, the Company granted stock options to acquire
3,980,000 common shares. The stock options were granted to officers, directors and employees of the Company at an exercise price equal to $1.36 per share and expire 5 years from the date of grant. The closing price of the shares of the Company
on the Toronto Stock Exchange (CTH: TSX) on the day prior to the grant was $1.36. Following the grant of these options, there were a total of 9,304,316 options outstanding, representing 8.4% of the issued and outstanding common shares of the
Corporation as of March 31, 2015. 

  
 17

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