REPLICEL LIFE SCIENCES INC. (Form: 20-F, Received: 03/18/2014 07:11:51)

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549

FORM 20-F

(Mark One)

[ ] REGISTRATION STATEMENT PURSUANT TO SECTION 12(b) OR (g) OF THE SECURITIES EXCHANGE ACT OF 1934

[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the fiscal year ended December 31, 2013

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

For the transition period from ____________ to ____________________

[ ] SHELL COMPANY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

Date of event requiring this shell company report:

Commission file number 000-50112

REPLICEL LIFE SCIENCES INC.
(Exact name of Registrant as specified in its charter)

Not Applicable
(Translation of Registrant’s name into English)

British Columbia, Canada
(Jurisdiction of incorporation or organization)

Suite 2020 – 401 West Georgia Street
Vancouver, British Columbia, Canada V6B 5A1
(Address of principal executive offices)

David Hall, President & CEO,
Telephone: (604) 248-8730
Suite 2020 – 401 West Georgia Street
Vancouver, British Columbia, Canada V6B 5A1
Facsimile: (604) 248-8690
(Name, Telephone, E-mail and/or Facsimile number and Address of Company Contact Person)

Securities registered or to be registered pursuant to Section 12(b) of the Act.

Title of each class	Name of each exchange on which registered
Not Applicable	Not Applicable

Securities registered or to be registered pursuant to Section 12(g) of the Act.

Common Shares Without Par Value
(Title of Class)

Securities for which there is a reporting obligation pursuant to Section 15(d) of the Act.

Not Applicable
(Title of Class)

Indicate the number of outstanding shares of each of the issuer’s classes of capital or common stock as of the close of the period covered by the annual report: 48,118,609 common shares as of December 31, 2013

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.
[ ] YES [X] NO

If this report is an annual or transition report, indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934.
[ ] YES [X] NO

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

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).
(Not applicable to the registrant at this time) [ ] YES [ ] NO

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, or a non-accelerated filer. See definition of “accelerated filer and large accelerated filer” in Rule 12b-2 of the Exchange Act. (Check one):

Large accelerated filer [ ]

Accelerated filer [ ]

Non-accelerated filer [X]

Indicate by check mark which basis of accounting the registrant has used to prepare the financial statements included in this filing:

U.S. GAAP [ ]	International Financial Reporting Standards as issued	Other [ ]
	by the International Accounting Standards Board [X]

If “Other” has been checked in response to the previous question, indicate by check mark which financial statement item the registrant has elected to follow.
[ ] Item 17 [ ] Item 18

If this is an annual report, indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).
[ ] YES [X] NO

(APPLICABLE ONLY TO ISSUERS INVOLVED IN BANKRUPTCY PROCEEDINGS DURING THE PAST FIVE YEARS)

Indicate by check mark whether the registrant has filed all documents and reports required to be filed by Sections 12, 13 or 15(d) of the Securities Exchange Act of 1934 subsequent to the distribution of securities under a plan confirmed by a court.
[ ] YES [ ] NO

GENERAL INFORMATION REGARDING FORWARD-LOOKING STATEMENTS

This annual report on Form 20-F contains forward-looking statements. Forward-looking statements are projections in respect of future events or our future financial performance. In some cases, you can identify forward-looking statements by terminology such as “may”, “should”, “intend”, “expect”, “plan”, “anticipate”, “believe”, “estimate”, “predict”, “potential”, or “continue”, or the negative of these terms or other comparable terminology. Forward-looking information presented in such statements or disclosures may, among other things, include:

our belief that chronic tendon injuries resulting from sports-related or occupational overuse is a significant unmet medical need;
our belief that RCT-01 has advantages over current treatments such as the use of non-steroidal anti- inflammatory medication or corticosteroids which are limited in efficacy;
we plan to initiate a phase 2 clinical trial to test the safety and efficacy of injections of RCT-01 on patients suffering from chronic achilles tendinosis in Canada in 2014 and the details of the phase 2 trials;
we plan to initiate a phase 1 trial for RCS-01 in 2014;
we plan to initiate a phase 2 dose-finding trail for RCH-01 in 2014;
we believe that the RCI-02 dermal injector device will have applications in certain other dermatological procedures and development is expected to be completed in 2014;
our belief that chronic tendon injuries resulting from sports-related or occupational overuse is a significant unmet medical need;
the potential of our products;
forecasts of expenditures;
the sources of financing;
expectations regarding our ability to raise capital;
our business outlook;
plans and objectives of management for future operations; and
anticipated financial performance.

Various assumptions or factors are typically applied in drawing conclusions or making the forecasts or projections set out in forward-looking information. Those assumptions and factors are based on information currently available to our company, including information obtained from third-party industry analysts and other third party sources. In some instances, material assumptions and factors are presented or discussed elsewhere in this Annual Report in connection with the statements or disclosure containing the forward-looking information. You are cautioned that the following list of material factors and assumptions is not exhaustive. The factors and assumptions include, but are not limited to:

no unforeseen changes in the legislative and operating framework for the business of our company;
a stable competitive environment; and
no significant event occurring outside the ordinary course of business such as a natural disaster or other calamity.

These statements are only predictions and involve known and unknown risks, uncertainties and other factors, including the risks in the section entitled “Risk Factors” commencing on page 7, which may cause our or our industry’s actual results, levels of activity or performance to be materially different from any future results, levels of activity or performance expressed or implied by these forward-looking statements. These risks and uncertainties include:

negative results from our clinical trials, including that our autologous cell therapy technology may not work as planned or may not be effective;
the effects of government regulation on our business;
the viability and marketability of our autologous cell therapy technology;
our failure to successfully implement our marketing plan;

the development of superior technology by our competitors;
the failure of consumers and the medical community to accept our technology as safe and effective;
risks associated with our ability to obtain and protect rights to our intellectual property;
risks and uncertainties associated with our ability to raise additional capital; and
other factors beyond our control.

Although we believe that the expectations reflected in the forward-looking statements are reasonable, we cannot guarantee future results, levels of activity or performance. Further, any forward-looking statement speaks only as of the date on which such statement is made, and, except as required by applicable law, we undertake no obligation to update any forward-looking statement to reflect events or circumstances after the date on which such statement is made or to reflect the occurrence of unanticipated events. New factors emerge from time to time, and it is not possible for management to predict all of such factors and to assess in advance the impact of such factors on our business or the extent to which any factor, or combination of factors, may cause actual results to differ materially from those contained in any forward-looking statement.

As used in this annual report, the terms “we”, “us”, “our”, and “RepliCel” mean RepliCel Life Sciences Inc., a British Columbia, Canada, corporation, and our wholly-owned subsidiary, TrichoScience Innovations Inc., as applicable. All references to common shares are to the common shares of our company, unless otherwise stated. Information on our website, www.replicel.com, is not incorporated by reference into this annual report.

APPLICATION OF INTERNATIONAL FINANCIAL REPORTING STANDARDS

Effective from January 1, 2011, we adopted International Financial Reporting Standards (“ IFRS ”), as issued by the International Accounting Standards Board. Unless otherwise stated, all information presented herein has been prepared in accordance with IFRS and all prior period amounts have been reclassified to conform with IFRS.

CURRENCY

Unless otherwise stated, “$”, when used in this Form 20-F, refers to Canadian dollars and US$ refers to United States dollars.

TABLE OF CONTENTS

PART I		6
ITEM 1.	Identity of Directors, Senior Management and Advisers	6
ITEM 2.	Offer Statistics and Expected Timetable	6
ITEM 3.	Key Information	6
ITEM 4.	Information on RepliCel Life Sciences Inc.	12
ITEM 4A	Unresolved Staff Comments	19
ITEM 5.	Operating and Financial Review and Prospects	19
ITEM 6.	Directors, Senior Management and Employees	23
ITEM 7.	Major Shareholders and Related Party Transactions	30
ITEM 8.	Financial Information	32
ITEM 9.	The Offer and Listing	33
ITEM 10.	Additional Information	36
ITEM 11.	Quantitative and Qualitative Disclosures About Market Risk	42
ITEM 12.	Description of Securities Other Than Equity Securities	42

PART II		42
ITEM 13.	Defaults, Dividend Arrearages and Delinquencies	42
ITEM 14.	Material Modifications to the Rights of Security Holders and Use of Proceeds	42
ITEM 15.	Controls and Procedures	43
ITEM 16A.	Audit Committee Financial Expert	44
ITEM 16B.	Code of Ethics	44
ITEM 16C.	Principal Accountant Fees and Services	45
ITEM 16D.	Exemption from the Listing Standards for Audit Committees	46
ITEM 16E.	Purchases of Equity Securities by the Issuer and Affiliated Purchasers	46
ITEM 16F.	Change in Registrant’s Certifying Accountant	46
ITEM 16G.	Corporate Governance	46
ITEM 16H.	Mine Safety Disclosure	46
ITEM 17.	Financial Statements	46
ITEM 18.	Financial Statements	47
ITEM 19.	Exhibits	47

PART I

ITEM 1. Identity of Directors, Senior Management and Advisers

Not applicable.

ITEM 2. Offer Statistics and Expected Timetable

Not applicable.

ITEM 3. Key Information

A. Selected Financial Data

The following financial data summarizes selected financial data for our company prepared in accordance with IFRS for the three fiscal years ended December 31, 2013, 2012, and 2011. The information presented below for the three year period ended December 31, 2013, 2012, and 2011 is derived from our financial statements which were examined by our independent auditor. The information set forth below should be read in conjunction with our audited annual financial statements and related notes thereto included in this annual report, and with the information appearing under the heading “Item 5 – Operating and Financial Review and Prospects”.

Selected Financial Data
(Stated in Canadian Dollars – Calculated in accordance with IFRS)

	Year ended Dec. 31, 2013 (audited)	Year ended Dec. 31, 2012 (audited)	Year ended Dec. 31, 2011 (audited)	Year ended Dec. 31, 2010 (audited)
Net sales or operating revenues	$ 4,120,400	$ -	$ -	$ -
Total expenses	3,737,412	3,363,175	3,713,439	2,542,525
Net income (loss) before tax	383,468	(3,363,175)	(3,713,439)	(2,542,525)
Income tax	412,040	-	-	-
Total comprehensive loss	(28,572)	(3,363,175)	(3,713,439)	(2,542,525)
Basic and diluted loss per share	(0.00)	(0.08)	(0.10)	(0.12)
Total assets	2,052,401	505,488	631,419	1,308,742
Net assets	1,474,659	21,158	401,450	685,447
Share capital	9,430,914	8,319,082	6,266,739	3,344,320
Weighted average number of common shares outstanding (adjusted to reflect changes in capital)	45,246,932	42,680,615	34,942,240	21,567,675
Long-term debt	-	-	-	-

Disclosure of Exchange Rate History

Since June 1, 1970, the government of Canada has permitted a floating exchange rate to determine the value of the Canadian dollar as compared to the United States dollar. On March 18, 2014, the exchange rates in effect for Canadian dollars exchanged for United States dollars, expressed in terms of Canadian dollars (based on the noon buying rate of the Bank of Canada), was Cdn $1.1052 for each one US dollar. For the past five fiscal years ended December 31, 2013 and for the monthly periods subsequent to that date, the following exchange rates were in effect for Canadian dollars exchanged for United States dollars, expressed in terms of Canadian dollars (based on the noon buying rates in New York City, for cable transfers in Canadian dollars, as certified for customs purposes by the Federal Reserve Bank of New York):

Year	Average
December 31, 2009	1.1409
December 31, 2010	1.0223
December 31, 2011	0.9887
December 31, 2012	0.9996
December 31, 2013	1.0636

Month	High / Low
September 2013	1.0533/1.0237
October 2013	1.0456/1.0287
November 2013	1.0599/1.0415
December 2013	1.0696/1.0577
January 2014	1.1171/1.0614
February 2014	1.1140/1.0980

B. Capitalization and Indebtedness

Not applicable.

C. Reasons for the Offer and Use of Proceeds

Not applicable.

D. Risk Factors

Much of the information included in this annual report includes or is based upon estimates, projections or other “forward-looking statements”. Such forward-looking statements include any projections or estimates made by our company and our management in connection with our business operations. While these forward-looking statements, and any assumptions upon which they are based, are made in good faith and reflect our current judgment regarding the direction of our business, actual results will almost always vary, sometimes materially, from any estimates, predictions, projections, assumptions or other future performance suggested herein. Such estimates, projections or other forward-looking statements involve various risks and uncertainties as outlined below. We caution the reader that important factors in some cases have affected and, in the future, could materially affect actual results and cause actual results to differ materially from the results expressed in any such estimates, projections or other forward-looking statements.

The common shares of our company are considered speculative. You should carefully consider the following risks and uncertainties in addition to other information in this annual report in evaluating our company and our business before purchasing any shares of our company. Our business, operating and financial condition could be harmed due to any of the following risks.

Risks Relating to our Business

Our company currently does not generate recurring revenue from its operations, and as a result, it faces a high risk of business failure.

We have generated $4,120,400 in licensing revenues from our operations to date. This revenue was the payment of an upfront fee of $4,120,400 pursuant to a Collaboration and Technology Development Transfer Agreement with Shiseido Company, Limited. This revenue was not recurring revenue from our operations and we may not obtain similar revenue in the future.

As of December 31, 2013, we had accumulated $10,261,968 in losses since inception. Our business is focused on developing autologous cell therapies that treat functional cellular deficits including chronic tendon injuries, androgenetic alopecia and skin aging. In order to generate revenues, we will incur substantial expenses in the development of our business. We therefore expect to incur significant losses in the foreseeable future. Our company recognizes that if we are unable to generate significant revenues from our activities, our entire business may fail. There is no history upon which to base any assumption as to the likelihood that we will be successful in our plan of operation, and we can provide no assurance to investors that we will generate operating revenues or achieve profitable operations in the future.

We had cash in the amount of $1,958,005 and a working capital of $1,659,722 as of December 31, 2013 and we anticipate that we will require a minimum of approximately $4,000,000 to proceed with our plan of operations for the twelve month period ended December 31, 2014. In order to fund our plan of operations for the next twelve months, we may seek to sell additional equity or debt securities or obtain a credit facility. The sale of convertible debt securities or additional equity securities could result in additional dilution to our shareholders. The incurrence of indebtedness would result in increased debt service obligations and could result in operating and financing covenants that would restrict our operations and liquidity.

Our auditors’ opinion on our December 31, 2013 financial statements includes an explanatory paragraph in respect of there being substantial doubt about our ability to continue as a going concern.

We have incurred a net loss of $10,261,968 for the cumulative period from September 7, 2006 (inception) to December 31, 2013. We anticipate generating losses for at least the next 12 months. Therefore, there is substantial doubt about our ability to continue operations in the future as a going concern, as described by our auditors with respect to the financial statements for the year ended December 31, 2013. Our financial statements do not include any adjustments relating to the recoverability and classification of recorded assets, or the amounts of and classification of liabilities that might be necessary in the event that we cannot continue in existence. Our business operations may fail if our actual cash requirements exceed our estimates and we are not able to obtain further financing. If we cannot continue as a viable entity, our shareholders may lose some or all of their investment in our company.

Our business is at an early stage of development and difficulties obtaining regulatory approval, technical deficiencies and other challenges may hinder the development and marketing of our autologous cell therapies.

Our autologous cell therapy technology is at an early stage of development and we may not develop a cell replication technology that can be commercialized. We are still in the early stages of identifying and conducting research on our technology. Our technology will require significant research and development and preclinical and clinical testing prior to regulatory approval, if required, being obtained in the United States or other countries. We may not be able to obtain regulatory approvals, if required, to complete necessary clinical trials for our cell replication technology, or to commercialize it. Our technology may prove to have undesirable and unintended side effects, or other characteristics adversely affecting its safety, efficacy or cost-effectiveness could prevent or limit its use. Our technology may fail to provide its intended benefit, or achieve benefits equal to or better than our competitor’s products at the time of testing or production and, if so, our business may fail.

Our clinical trials may fail to produce successful results or could be suspended due to unacceptable safety risks, which could cause our business to fail.

Clinical trials are subject to extensive regulatory requirements, and are very expensive, time-consuming and difficult to design and implement, in part because they may be subject to rigorous regulatory requirements. Our products may fail to achieve necessary safety and efficacy endpoints during clinical trials. We believe that our clinical trials will take a substantial period of time to complete. Furthermore, failure can occur at any stage of the trials, and we could encounter problems that cause us to abandon or repeat clinical trials. The commencement and completion of clinical trials may be delayed by several factors, including: unforeseen safety issues; lack of effectiveness during clinical trials; slower than expected rates of patient recruitment; and inability to monitor patients adequately during or after treatment. In addition, we or regulatory officials may suspend our clinical trials at any time if it appears that we are exposing participants to unacceptable health risks. If our clinical trials fail to produce successful results, or are suspended due to unacceptable safety risks, our business may fail.

Our success depends on the acceptance of our cell replication technology by the medical community and consumers as a safe and effective solution.

The success of our cell replication technology will depend on its acceptance by potential consumers and the medical community. Because our technology is new in the treatment of functional cellular deficits including chronic tendon injuries, androgenetic alopecia and skin aging, the long term effects of using our new cell replication technology are unknown. The results of short-term clinical trials do not necessarily predict long-term clinical benefit or reveal adverse effects. If results obtained from future commercial experience indicate that our cell replication technology is not as safe or effective as other treatments, adoption of this technology by consumers and the medical community may suffer and our business will be harmed.

We face significant competition.

The life sciences industry is highly competitive. We anticipate that we will continue to face increased competition as existing companies develop new or improved products and as new companies enter the market with new technologies. Many of our competitors are significantly larger than us and have greater financial, technical, research, marketing, sales, distribution and other resources than us. There can be no assurance that our competitors will not succeed in developing or marketing technologies and products that are more effective or commercially attractive than the products we are developing or that such competitors will not succeed in obtaining regulatory approval, or introducing or commercializing any such products, prior to us. Such developments could have a material adverse effect on our business, financial condition and results of operations. Also, even if we are able to compete successfully, there can be no assurance that we could do so in a profitable manner.

If we are not able to effectively protect our existing intellectual property, our business may suffer a material negative impact and may fail.

The success of our company will be dependent on our ability to protect and develop our technology. We currently have registered patents for our cell replication technology in Australia, the United States, Japan and the European Union. If we are unable to protect our intellectual property, our business may be materially adversely affected. Further, we cannot be sure that our activities do not and will not infringe on the intellectual property rights of others. If we are compelled to prosecute infringing parties, defend our intellectual property or defend ourselves from intellectual property claims made by others, we may face significant expense and liability, as well as the diversion of management’s attention from our business, any of which could negatively impact our business or financial condition.

The actual protection afforded by a patent varies on a product-by-product basis, from country to country and depends on many factors, including the type of patent, the scope of its coverage, the availability of regulatory related extensions, the availability of legal remedies in a particular country and the validity and enforceability of the patents. Our ability to maintain and solidify our proprietary position for our products will depend on our success in obtaining effective claims and enforcing those claims once granted. Our registered patents and those that may be issued in the future, or those licensed to us, may be challenged, invalidated, unenforceable or circumvented, and the rights granted under any issued patents may not provide us with proprietary protection or competitive advantages against competitors with similar products. We also rely on trade secrets to protect some of our technology, especially where it is believed that patent protection is appropriate or obtainable. However, trade secrets are difficult to maintain. While we use reasonable efforts to protect our trade secrets, our employees, consultants, contractors or scientific and other advisors may unintentionally or willfully disclose our proprietary information to competitors. Enforcement of claims that a third party has illegally obtained and is using trade secrets is expensive, time consuming and uncertain. In addition, non-U.S. courts are sometimes less willing than U.S. courts to protect trade secrets. If our competitors independently develop equivalent knowledge, methods and know-how, we would not be able to assert our trade secrets against them and our business could be harmed.

The successful acquisition and maintenance of patent rights is critical to our business and any failure in this regard could hinder the development and marketing of our technology.

We currently have patent applications pending in several other countries around the world. Our pending patent applications may not result in the issuance of any patents. The applications may not be sufficient to meet the statutory requirements for patentability in all cases or may be the subject of interference proceedings by patent offices. These proceedings determine the priority of inventions and, thus, the right to a patent for technology. In the past, our patent applications have experienced delays and our patent applications may be delayed in the future. If others file patent applications or obtain patents similar to those we have licensed, such patents may restrict the use of our discoveries. We cannot predict the ultimate scope and validity of existing patents and patents that may be granted to third parties, nor can we predict the extent to which we may wish or be required to obtain licenses to use such patents, or the availability and cost of acquiring such licenses. To the extent that licenses are required, the owners of the patents could bring legal actions against us to claim damages or to stop our manufacturing and marketing of the affected technology. If we become involved in patent litigation, it could consume a substantial portion of our resources.

Our company may be subject to changes and uncertainties in laws and government regulations.

Our company is subject to regulation by domestic and foreign governmental agencies with respect to many aspects of developing autologous cell replication technology. In addition, relevant new legislation or regulation could occur. Any such new legislation or regulation, the application of laws and regulations from jurisdictions whose laws do not currently apply to our company’s business, or the application of existing laws and regulations to cell replication technology, could have a material adverse effect on our company’s business, prospects, financial condition and results of operations.

Risks Relating to our Management

We are dependent on the services of certain key consultants and the loss of any of these key consultants may have a materially adverse effect on our company.

While engaged in the business of developing a new cell replication technology, our company’s ability to continue to develop a competitive edge in the marketplace will depend, in large part, on our ability to attract and maintain qualified key management personnel. Competition for such personnel is intense, and we may not be able to attract and retain such personnel. Our company’s growth has depended, and in the future will continue to depend, on the efforts of our key management consultants. Loss of any of these people would have a material adverse effect on our company. Currently, our company does not have key-man life insurance.

Conflicts of interest may arise as a result of our company’s directors and officers being directors or officers of other life sciences companies.

Certain of our company’s directors and officers are, or may become, directors or officers of other life sciences companies. While we are engaged in the business of developing a new autologous cell replication technology, such associations may give rise to conflicts of interest from time to time. Our company’s directors are required by law to act honestly and in good faith with a view to our company’s best interests and to disclose any interest that they may have in any project or opportunity of our company. If a conflict of interest arises at a meeting of our company’s board of directors, any director in a conflict must disclose his interest and abstain from voting on such matter. In determining whether or not our company will participate in any project or opportunity, our company’s directors will primarily consider the degree of risk to which our company may be exposed and our financial position at the time.

Our articles contain provisions indemnifying our officers and directors against all costs, charges and expenses incurred by them.

Our articles contain provisions limiting the liability of our officers and directors for all acts, receipts, neglects or defaults of themselves and all of our other officers or directors or for any loss, damage or expense incurred by our company which may happen in the execution of the duties of such officers or directors. Such limitations on liability may reduce the likelihood of derivative litigation against our company’s officers and directors and may discourage or deter our shareholders from suing our company’s officers and directors based upon breaches of their duties to our company, though such an action, if successful, might otherwise benefit our company and our shareholders.

As a majority of our directors and officers are residents of countries other than the United States, investors may find it difficult to enforce, within the United States, any judgments obtained against our company, directors and officers.

We are governed by the laws of British Columbia, Canada. A majority of our directors and officers are nationals and/or residents of countries other than the United States, and all or a substantial portion of such persons' assets are located outside the United States. Consequently, it may be difficult for United States investors to effect service of process in the United States upon those directors or officers who are not residents of the United States, or to realize in the United States upon judgments of United States courts predicated upon civil liabilities under United States legislation. There is substantial doubt whether an original action based solely upon such civil liabilities could be brought successfully in Canada against any of such persons or our company.

Risks Relating to our Common Stock

If our business is unsuccessful, our shareholders may lose their entire investment.

Although shareholders will not be bound by or be personally liable for our expenses, liabilities or obligations beyond their total original capital contributions, should we suffer a deficiency in funds with which to meet our obligations, the shareholders as a whole may lose their entire investment in our company.

Trading of our company’s common shares on the OTC Bulletin Board and the TSX Venture Exchange is limited and sporadic, making it difficult for our company’s shareholders to sell their shares or liquidate their investments.

The trading price of our company’s common shares has been and may continue to be subject to wide fluctuations. The stock market has generally experienced extreme price and volume fluctuations that have often been unrelated or disproportionate to the operating performance of companies with little or no current business operations. There can be no assurance that trading prices and price earnings ratios previously experienced by our company’s common shares will be matched or maintained. These broad market and industry factors may adversely affect the market price of the common shares, regardless of our company’s operating performance. In the past, following periods of volatility in the market price of a company’s securities, securities class-action litigation has often been instituted. Such litigation, if instituted, could result in substantial costs for our company and a diversion of management’s attention and resources.

Investors’ interests in our company will be diluted and investors may suffer dilution in their net book value per share if we issue additional options to any of our officers, directors, employees or consultants.

Because our company’s success is highly dependent upon our directors, officers and consultants, we have granted, and may again in the future grant, options to some or all of our key officers, directors, employees and consultants to purchase our common shares as non-cash incentives. Options may be granted at exercise prices below that of our common shares prevailing in the public trading market at the time or may be granted at exercise prices equal to market prices at times when the public market is depressed. To the extent that significant numbers of such options may be granted and exercised, the interests of our company’s other shareholders may be diluted.

Investors’ interests in our company will be diluted and investors may suffer dilution in their net book value per share if our company issues additional shares or raises funds through the sale of equity securities.

In the event that our company is required to issue additional shares in order to raise financing, investors’ interests in our company will be diluted and investors may suffer dilution in their net book value per share depending on the price at which such securities are sold. The dilution may result in a decline in the market price of our company’s shares.

Penny stock rules limit the ability of our shareholders to sell their stock.

The SEC has adopted regulations which generally define “penny stock” to be any equity security that has a market price (as defined) less than $5.00 per share or an exercise price of less than $5.00 per share, subject to certain exceptions. Our securities are covered by the penny stock rules, which impose additional sales practice requirements on broker-dealers who sell to persons other than established customers and accredited investors. The penny stock rules require a broker-dealer, prior to a transaction in a penny stock not otherwise exempt from the rules, to deliver a standardized risk disclosure document in a form prepared by the SEC, which provides information about penny stocks and the nature and level of risks in the penny stock market. The broker-dealer also must provide the customer with current bid and offer quotations for the penny stock, the compensation of the broker-dealer and its salesperson in the transaction and monthly account statements showing the market value of each penny stock held in the customer’s account. The bid and offer quotations, and the broker-dealer and salesperson compensation information, must be given to the customer orally or in writing prior to effecting the transaction and must be given to the customer in writing before or with the customer’s confirmation. In addition, the penny stock rules require that prior to a transaction in a penny stock not otherwise exempt from these rules, the broker-dealer must make a special written determination that the penny stock is a suitable investment for the purchaser and receive the purchaser’s written agreement to the transaction. These disclosure requirements may have the effect of reducing the level of trading activity in the secondary market for the stock that is subject to these penny stock rules. Consequently, these penny stock rules may affect the ability of broker-dealers to trade our securities.

The Financial Industry Regulatory Authority, or FINRA, has adopted sales practice requirements which may also limit a shareholder's ability to buy and sell our stock.

In addition to the “penny stock” rules described above, FINRA has adopted rules that require that in recommending an investment to a customer, a broker-dealer must have reasonable grounds for believing that the investment is suitable for that customer. Prior to recommending speculative low priced securities to their non-institutional customers, broker-dealers must make reasonable efforts to obtain information about the customer’s financial status, tax status, investment objectives and other information. Under interpretations of these rules, FINRA believes that there is a high probability that speculative low priced securities will not be suitable for at least some customers. FINRA requirements make it more difficult for broker-dealers to recommend that their customers buy our common stock, which may limit your ability to buy and sell our stock and have an adverse effect on the market for our shares.

We do not intend to pay dividends on any investment in the shares of stock of our company.

We have never paid any cash dividends and currently do not intend to pay any dividends for the foreseeable future. To the extent that we require additional funding currently not provided for in our financing plan, our funding sources may prohibit the payment of a dividend. Because we do not intend to declare dividends, any gain on an investment in our company will need to come through an increase in the stock’s price. This may never happen and investors may lose all of their investment in our company.

ITEM 4. Information on RepliCel Life Sciences Inc.

A. History and Development of RepliCel Life Sciences Inc.

Name

Our legal name is “RepliCel Life Sciences Inc.”. We changed our name from “Newcastle Resources Ltd.” on June 22, 2011.

Principal Office

Our principal office is located at Suite 2020 – 401 West Georgia Street, Vancouver, British Columbia, Canada V6B 5A1. Our telephone number is (604) 248-8730 and our facsimile number is (604) 248-8690.

Corporate Information and Important Events

Our company was incorporated under the laws of the Province of Ontario (specifically under the Business Corporations Act (Ontario)) on April 24, 1967 under the name “Jolly Jumper Products of America Limited”. On September 25, 1987, our name was changed to “Sun Valley Hot Springs Ranch Inc.”. We changed our name to “Tri-Valley Free Trade Inc.” on March 26, 1991 and to “Tri-Valley Investments Corporation” on June 19, 1995. On October 2, 1998, we changed our name to “TriLateral Venture Corporation”. On May 6, 2004, we changed our name to “Pan American Gold Corporation” and on November 10, 2008, we changed our name to “Newcastle Resources Ltd.”. On June 22, 2011 we filed a continuance in British Columbia and changed our name to “RepliCel Life Sciences Inc.” We are a reporting issuer under the securities laws of the Provinces of British Columbia and Ontario. Under the Business Corporations Act (British Columbia), our company has an indefinite life span.

On November 10, 2008, our issued and outstanding common shares were consolidated on the basis of one (1) common share for every (30) common shares held and our name was changed to Newcastle Resources Ltd. The reverse split and name change were effected with the OTC Bulletin Board on November 28, 2008, at which time our trading symbol was changed to “NCSLF”.

On December 22, 2010, we closed a Share Exchange Agreement with TrichoScience Innovations Inc. (“TrichoScience”) whereby we acquired the issued and outstanding shares of TrichoScience. During the year ended December 31, 2011, 100% of the former TrichoScience shareholders tendered their shares in exchange for our common shares and TrichoScience became a 100% owned subsidiary of our company. The TrichoScience shareholders who received our shares in connection with the closing deposited the shares with a trustee pursuant to the terms of a pooling agreement between us and the trustee. The common shares are subject to a timed release schedule under which 15% of the shares will be released on the first day of each of the fiscal quarters occurring after the first anniversary of the closing.

Concurrent with the reverse acquisition, we also acquired all of the issued and outstanding common shares of 583885 B.C. Ltd. (“583885”) in exchange for 4,400,000 of our common shares. 583885 did not have any assets or liabilities at the date of acquisition and was a private company controlled by our incoming Chief Executive Officer (“CEO”). 3,400,000 of our shares controlled by our CEO were deposited with an escrow agent pursuant to the terms of an escrow agreement between us and the escrow agent. These shares are released upon satisfaction of certain performance conditions as set out in the escrow agreement and each release of shares from escrow will be considered a compensatory award. The other 1,000,000 common shares issued were not subject to escrow provisions.

On June 22, 2011 we filed a continuance application with the corporate registrar of the Province of British Columbia and pursuant to which we continued our jurisdiction of incorporation from the Province of Ontario to the Province of British Columbia. In connection with the continuance, we adopted new articles and changed our name to “RepliCel Life Sciences Inc.”. We continued to the Province of British Columbia with our authorized capital consisting of an unlimited number of common shares without par value, an unlimited number of Class A preference shares without par value and an unlimited number of Class C preference shares without par value.

On November 29, 2011, 13,000,000 of the Class C preference shares, being all the issued and outstanding Class C shares, were converted on a 5:1 ratio, into 2,600,000 common shares by the holders thereof. All of the common shares issued on conversion of the Class C shares were deposited with a trustee pursuant to the terms of pooling agreements. The common shares are subject to a timed release schedule under which 15% of the shares will be released on the first day of each of the fiscal quarters beginning January 1, 2013.

On December 5, 2011, we filed articles of amendment with the corporate registrar of the Province of British Columbia, cancelling the Class C preference shares.

On February 29, 2012, we completed a private placement of 66,304 units at a price of US$1.50 per unit for gross proceeds of US$99,456. Each unit issued consists of one common share and one common share purchase warrant. Each warrant entitles the holder to purchase an additional common share at US$2.50 per share for a period of 24 months from the closing of the financing.

On March 29, 2012, we completed a private placement of 876,042 units at a price of US$1.50 per unit for gross proceeds of US$1,314,063. Each unit issued consists of one common share and one common share purchase warrant. Each warrant entitles the holder to purchase an additional common share at US$2.50 per share for a period of 24 months from the closing of the financing.

On April 18, 2012, we completed a private placement of 502,667 units at a price of US$1.50 per unit for gross proceeds of US$754,000. Each unit issued consists of one common share and one common share purchase warrant. Each warrant entitles the holder to purchase an additional common share at US$2.50 per share for a period of 24 months from the closing of the financing. A finder’s fee of $36,000 was issued in connection with the financing.

On April 20, 2012, we completed a private placement of 430,033 units at a price of US$1.50 per unit for gross proceeds of US$645,050. Each unit issued consists of one common share and one common share purchase warrant. Each warrant entitles the holder to purchase an additional common share at US$2.50 per share for a period of 24 months from the closing of the financing.

On February 7, 2013, we amended the exercise price of the warrants expiring March 1, 2014, March 29, 2014, April 18, 2014 and April 20, 2014 from US$2.50 to US$0.50 per share. The warrants entitle holders to purchase an aggregate of 1,875,046 common shares.

On April 10, 2013, we completed a private placement of 1,643,555 units at price of $0.31 per unit for gross proceeds of $509,502, of which $24,851 was included in share subscriptions as at December 31, 2012. A finder’s fee of $9,920 was paid in cash in connection with the private placement. Each unit issued consists of one common share and one common share purchase warrant. Each warrant entitles the holder to purchase an additional common share at $0.50 per share for a period of 24 months from the closing of the financing.

On May 21, 2013, we completed a private placement of 400,000 units at price of $0.31 per unit for gross proceeds of $124,000. Each unit issued consists of one common share and one common share purchase warrant. Each warrant entitles the holder to purchase an additional common share at $0.50 per share for a period of 24 months from the closing of the financing.

On July 19, 2013, we completed a private placement of 1,050,000 shares at price of $0.50 per unit for gross proceeds of $525,000. A finder’s fee of $36,750 was paid in cash in connection with the private placement.

Capital Expenditures

During the last three fiscal years ended December 31, 2013, we did not undertake any capital expenditures. On March 11, 2011, we acquired an additional 2,050,000 shares of TrichoScience at a price of $1.00 per share. This acquisition was internally financed from the proceeds of our March 2011 private placement for gross proceeds of US$2,550,000.

Takeover offers

We are not aware of any indication of any public takeover offers by third parties in respect of our common shares during our last and current financial years.

B. Business Overview and Plan of Operations

Overview

We are a regenerative medicine company focused on developing autologous cell therapies that treat functional cellular deficits. The diseases currently being addressed are chronic tendinosis, skin aging, and androgenetic alopecia (pattern baldness). Each disease state is consistent with a deficit of a specific cell type which we believe is critical to normal function. All treatments under development are based on our innovative technology which utilizes cells isolated from a patient’s own healthy hair follicles. These products are built on our proprietary manufacturing platforms and are covered by issued and filed patents as well as trade secrets. We are also developing a programmable cell injector device designed for dermal injections.

The Potential of Autologous Cell Therapy

Our treatments use autologous cell therapy (“ACT”), which is one of the most rapidly developing areas of regenerative medicine in the development of novel treatments for numerous human disorders. ACT involves isolating an individual’s own cells from harvested tissues and growing more of those cells, or ‘expanding’ those cells, in controlled conditions in a laboratory. These purified, expanded cells are then reintroduced to the donor to treat a specific condition. The benefits of autologous (derived from the same person) therapy (as compared to heterologous or derived from a different person) include minimized risks of systemic immunological (anaphylactic) reactions, bio-incompatibility, and disease transmission. Furthermore, the effects of ACT may be longer lasting than pharmacological or surgical interventions.

RCT-01: Treatment for Chronic Tendinosis

Background

Tendinosis refers to a chronic disease of the tendon. It is a function of an imbalance of tendon breakdown and tendon repair initiated first by an injury which does not heal properly. This leads to cycles of compromised repair and subsequent re-injury until such time as there is no healing and a degenerative process has set in. Typically, this chronic condition is linked to aging, overuse, and to general health. We believe that the current standard of care is failing to provide a satisfactory solution to this chronic condition.

Treatment

We believe that chronic tendon injuries resulting from sports-related or occupational overuse is a significant unmet medical need. Tendons consist of specialized connective tissues that attach muscles to bones, transmitting force and supporting the musculoskeletal system. When mechanical loads exceed the strength of a tendon or tensile range is lost due to aging, micro-tears of the collagen fibers within tendon occurs. Once a tendon is injured, healing can occur intrinsically via tenocyte activation within the injured site or extrinsically via recruitment of collagen-producing cells from the surrounding area. Naturally healed tendon does not return to the same physiological state as ‘intact’ tendon, but does allow for normal function. Inadequate rest and improper healing often result in re-injury and rupture.

Current treatments manage pain and facilitate healing processes; however, they do not mediate complete recovery and leave patients demobilized for several months during treatment. We believe that improved therapeutic strategies are therefore in considerable demand. Our fibroblast technology for tendinosis, which we refer to as RCT-01, has been developed over five years of research, experimentation and trials. RCT-01 is a tissue-engineered product made from a procedure using collagen-producing fibroblasts isolated from non-bulbar dermal sheath (NBDS) cells within the hair follicle that are replicated in culture. These fibroblasts are efficient producers of type I collagen and they have the potential to replicate efficiently in culture. The use of these fibroblasts are, therefore, ideal for treating chronic tendon disorders that arise due to either a degeneration of tenocyte collagen producing cells or a deficit of active collagen producing tenocyte cells. Because RCT-01 directly provides a source of collagen expressing cells to the site of injury, addressing the underlying cause of tendinosis, we believe it has advantages over current treatments such as the use of non-steroidal anti-inflammatory medication or corticosteroids which are limited in efficacy. Another advantage of RCT-01 is the autologous nature of the cellular product, thereby reducing the likelihood of adverse immune reactions upon administration.

Phase 1 Clinical Trial

Phase 1 human pilot clinical trials were conducted by our collaborative partner, Dr. David Connell, which focused on tendinosis of the Achilles, patellar and lateral elbow (commonly referred to as tennis elbow) using skin tissue derived fibroblasts. In these trials, where 90 patients were injected with cultured, autologous fibroblasts, no adverse events were reported. We have expanded on Dr. Connell’s approach by isolating NBDS fibroblasts from the hair follicle that express upwards of five times the amount of type I collagen than fibroblasts derived from skin tissue as pursued by Dr. Connell.

Proposed Phase 2 Clinical Trial

We have plans to initiate a phase 2 clinical trial to test the safety and efficacy of injections of RCT-01 on patients suffering from chronic Achilles tendinosis in Canada in 2014. The proposed trial will enroll 82 subjects who have failed traditional tendon treatments and who are otherwise in good health. The mechanics of our treatment involve the extraction of as few as 20 hair follicles from the back of a patient’s scalp via a single punch biopsy. NBDS cells are isolated from the hair follicle sheath, replicated in a current Good Manufacturing Practices (cGMP) facility to produce RCT-01. Study participants will return to the clinic to receive injections of RCT-01 under ultrasound guidance directly into the area of damaged tendon. The collagen rich fibroblast cells are expected to initiate and complete the healing of the chronically injured tendon. After injections are performed, subjects will return to the clinic for assessments of safety, function and pain, as well as changes in tendon thickness, echotexture, interstitial tears and neovascularity. The primary endpoint of efficacy will be measured at six months. We will pursue further indications of other tendon populations including patellar tendinosis (jumper’s knee) and lateral and medial epicondylitis (tennis and golfer’s elbow).

Intellectual Property

We have developed and filed patent applications relating to compositions, methods and uses of NBDS cells for the treatment and repair of tendons. We have also licensed a family of patent applications relating to the compositions and uses of dermally derived cells in the treatment of tendons and ligaments.

Competitors

Typically the pain associated with tendinosis is controlled by many treatment modalities including the use of analgesic and anti-inflammatory medications, rest, physical therapy, ice, orthotics, ergonomic adjustments, laser therapy, platelet-rich plasma injections, dextrose injections and surgery. However, there is currently no therapy to treat the underlying, causative nature of the disease.

Orthocell, an Australian company, is pursuing an autologous cell-based technology where they harvest and expand tenocyte cells isolated from a biopsy taken from a patient’s own tendons. A pilot study of 17 patients with severe refractory lateral epicondylitis showed improved clinical function and structural repair at the origin of the common extensor tendon after the treatment. A larger clinical trial needs to be conducted in order to generate significant data. Furthermore, the necessity to remove tendon in order to cultivate the tenocyte cells is an invasive procedure. In contract, our procedure only requires the removal of up to 20 hair follicles from the back of the scalp.

RCS-01: Treatment for Aging and Sun Damaged Skin

Background

Skin is considered one of the most prominent indicators of one’s age and health. Maintenance of healthy skin is dictated by intrinsic and extrinsic factors. While intrinsic factors (i.e. chronologic age, sex and genetic makeup) cannot be modified, the adverse effects caused by extrinsic factors such as UV radiation and smoking can be prevented or minimized by lifestyle modification. Although these extrinsic effects can be modulated, the extent to which they can be modified varies significantly among individuals, which largely depends on one’s ability to detoxify and repair such damage.

The dermis and epidermis components of the skin lose thickness with age. Solar radiation, particularly UVA, is known to penetrate deep into the dermal layer, damaging fibroblasts, collagen and other fibroblasts expressed proteins, which are the major cellular components of the dermis. Similarly, there are some studies reporting that air pollutants/nanoparticles may also penetrate transepidermally, negatively impacting the dermal layer. The damages caused by external stimuli include DNA strand breaks and mutations, which, if not repaired properly, can lead to cell death. Similarly, oxidative stress caused by smoking leads to not only damages to DNA but also to other cellular components such as proteins and lipids.

Accumulation of damage to cellular proteins and DNA from years of exposure to extrinsic insults can lead to physiological changes of the skin that are irreversible. Such changes are often associated with a reduction in fibroblast cells, disorganization of collagen fibrils and decreased production of collagen, elastin and other glycoproteins that provide structural support and stability to the extra cellular matrix (“ECM”) network. Such changes to the dermal components are detrimental to maintaining mechanical tensile ability and structural integrity of the skin.

Treatment

Our NBDS-derived fibroblast therapy, which we refer to as RCS-01, provides a promising platform to treat intrinsically and extrinsically aged/damaged skin by providing UV-naïve collagen-producing fibroblast cells directly to the affected area. Our unique manufacturing technology allows for isolation of fibroblasts derived from anagen-hair follicle mesenchymal tissues, which elicit more efficient replication potential in culture. Additionally, our proprietary culture procedures potentiate these cells to maintain plasticity, allowing the cells to adapt to the microenvironment and respond to the mechanical or surrounding stimuli after injection, leading to robust production of type I collagen and elastin and their proper alignment within the tissue.

Proposed Phase 1 Clinical Trial

We are currently conducting preclinical work on RCS-01 in conjunction with RCT-01. We plan to initiate a phase 1 trial for RCS-01 in 2014.

Competition

The facial injectables market comprises four product types: botulinum toxin, hyaluronic acid, fillers (particle and polymer fillers, collagen) and stem cells. These injectables can be used in the facial area to correct facial lines and folds and to rejuvenate and add volume to the face. As effective as they may be at treating wrinkles, fillers have a risk of allergic reaction and the formation of tiny bumps under the skin. A bluish skin discoloration known as the Tyndall effect is also possible. The color change can last for several months, but there are treatments available. In very rare cases, skin cells may die if the wrinkle fillers are not used properly. Typically, the wrinkle fillers with longer-lasting effects are the ones more likely to cause side effects.

Fibrocell Sciences has an approved fibroblast therapy for skin aging. Their FDA-approved autologous fibroblast cellular product for improving the appearance of moderate to severe nasolabial fold wrinkles (smile lines) in adults is called LAVIV® (azficel-T). We believe our source cells and manufacturing technology is disruptive both in duration of time to replicate the cells and in the amount of collagen and extracellular matrix expressed.

RCH-01: Treatment for Hair Loss

Background

Androgenetic alopecia (pattern hair loss) can affect up to 70% of men and 40% of women during the course of their lives. Although it is not a disease that causes physical pain, it does cause mental pain. Currently, over $3 billion is spent each year on hair loss treatments that provide limited results. Androgenetic alopecia is largely an inherited disease. It can be inherited by males and females from either the mother’s or father’s side of the family. Women with this trait develop thinning hair, but do not commonly become completely bald.

Androgenetic alopecia is a process by which hair follicles shrink and produce smaller hairs thus reducing hair density. These miniaturized hair fibers have a shorter growth cycle and are structurally smaller. They produce thinner and shorter hair, which results in less scalp coverage. Eventually these follicles can regress to a state where they produce no hair at all.

Treatment

We believe our dermal sheath cup (DSC) cell therapy offers several advantages over current hair loss solutions. The current gold standard in hair loss treatment is hair transplant surgery which requires the surgical removal of a prominent band of hair-bearing scalp or multiple micro-biopsies from the back of the head. This band of resected tissue or biopsies are then dissected into hair follicles consisting of one to three hairs which are then implanted into balding areas on the scalp. Often a number of similar procedures are required to achieve the desired result and the patient is limited by the number of hairs that can be redistributed. In contrast, RCH-01 involves the extraction of as few as 20 hair follicles from the back of the patient’s scalp where healthy cycling hair follicles reside. We believe these cells are responsible for the continued health of the hair follicle and the normal cycling of the hair fiber. DSC cells are isolated from the hair follicles and are then replicated in culture at a cGMP compliant facility utilizing our proprietary cellular replication process, and are then reintroduced back into balding areas on a patient’s scalp. The implanted cells are expected to rejuvenate damaged quiescent hair follicles leading to the growth of new healthy hair fibers. The anticipated long-term result of RCH-01 injections is the restoration and maintenance of a patient’s hair.

Phase I Clinical Trial

The primary protocol objective of the study was to assess the local (at treatment sites) safety profile of injections of autologous DSC cells at six months post-injection compared to placebo. Secondary protocol objectives were to assess systemic (overall) safety and efficacy (hair growth at treatment sites) at six months post-injection and local safety at 24 months post-injection. The six-month interim analysis was designed to provide us with safety information to support the regulatory filing for a phase II clinical trial. The six-month interim analysis results support the continued development of DSC cells for the treatment of androgenetic alopecia. Participants of the phase I clinical trial will be followed for five years. The primary objective of the study is to provide long-term safety profile of injections of cultured DSC cells five years after injection compared to control.

Proposed Phase 2 Clinical Trial

We expect to initiate a phase 2 dose-finding trail for RCH-01 in 2014. The proposed trial will enroll approximately160 male subjects in good health with mild to moderate androgenetic alopecia. After injections of RCH-01 are performed, subjects will return to the clinic for assessment of total, terminal and vellus hair density and cumulative hair thickness, as well as safety. The primary endpoint of efficacy will be measured at 12 months post final injection.

Collaboration Agreement

We have also entered into a technology transfer, licensing and collaboration agreement with Shiseido Company, Limited, one of the world’s largest cosmetic companies. Both companies will work towards establishing a clinical research program in Asia, with the goal of increasing the available human clinical data on RCH-01. Collaborative technology transfer will continue between the companies as any new improvements to the RCH-01 technology are developed by either party. This agreement gives Shiseido an exclusive geographic license to use our RCH-01 hair regeneration technology in Japan, China, South Korea, Taiwan and the ASEAN countries representing a population of approximately 2.1 billion people.

Intellectual Property

Patents have been filed on the use of hair follicle derived stem cells (EP 1 509 597 B1) entitled “Method for isolating hair follicle mesenchymal stem cells”. This family of patents describes methods for isolating stem cells from hair follicles, and the growth and use of these stem cells for the treatment of a variety of medical conditions (including hair loss). Within this portfolio, there are granted patents in Australia (AU 2003246521), Europe (EP1 509 597 B1), the United States (8,431,400) and Japan (2010-274731) which were issued unopposed. Additional related patent applications are also pending in other jurisdictions.

Competition

There are many current hair loss treatments available.

Medical hair restoration consists of a variety of surgical hair restoration treatments designed to reduce baldness. Follicular unit hair transplant surgery is by far the dominant hair restoration treatment and involves the surgical removal of large portions of hair-bearing scalp from the back of the head. These sections of scalp skin are then dissected by hand into smaller hair follicle clusters or even single follicles (follicular units) and transplanted to the balding areas of a patient’s scalp.

Follicular unit extraction or is another type of hair transplant technique in which a small round punch is used to extract follicular units from a patient’s baldness-resistant donor areas. These 1-, 2-, 3- and 4-hair follicular unit grafts are then transplanted into a patient’s balding areas. This is a time consuming and tedious procedure and a physician is often limited to transplanting 500 to 600 follicular unit grafts in one day. While the FUE procedure has grown in popularity, largely due to the minimally invasive way in which follicular unit grafts are removed, the standard strip excision method is still the leading hair transplant procedure accounting for 77.5% of surgical hair restoration procedures according to the International Society of Hair Restoration Surgery’s 2011 practice census results.

Only two drug hair restoration treatments approved by the United States Food and Drug Administration are available today: minoxidil and finasteride. Minoxidil is marketed as Rogaine® and finasteride is marketed as Propecia®. These two products can be effective in hair loss prevention and may grow new hair. However, once a patient begins using Rogaine® or Propecia®, he or she must continue to use the products indefinitely. As with any drug, adverse reactions can sometimes occur.

Histogen is developing a hair stimulating complex that is based on the products of newborn cells grown under embryonic conditions. Histogen completed a 26 male-subject clinical trial on its Hair Stimulating Complex. This double-blind, placebo-controlled study evaluated the safety in the clinical application of the product as an injectable for hair growth. No adverse events were seen at any time point, including the one year follow-up. In October 2012, Histogen announced initial results from its Phase I/II clinical trial stating that a significant improvement was seen across all targeted hair growth parameters with an 86% responder rate. The double blind trial was undertaken to further examine the safety and efficacy of intradermal injections of their hair stimulating complex in 56 men with androgenetic alopecia.

Follica Inc. is developing a treatment that stimulates the re-growth of hair follicles by harnessing their natural wound-healing response.

RCI-02: Dermal Injector Device

Background

To support our RCH-01 and RCS-01 products, we are developing a second generation dermal injector device. The RCI-02 Injector, now in production design, will be able to deliver programmable volumes of substances not only into specific layers of the skin, but also into muscle tissues in a slow and constant form without any pressure or shear stress, ensuring the injected substance is viable and healthy after application. By improving the conditions of substance delivery, we improve the chances of success in the treatment of the patient. A significant feature of the new device is the incorporation of a cooling element at the injection site, thus removing the need for an anesthetic. This is a significant improvement over current syringe-type devices where an anesthetic is required prior to injection.

We believe that this device will have applications in certain other dermatological procedures requiring injections of specific volumes of material at specific depths and as such, will look at licensing opportunities in these areas. In addition to the programmable variables of volume and depth, the device will also have interchangeable heads for different injection procedures (single and multi-needle). We expect development to be completed in 2014.

Intellectual Property

We have filed patent applications relating to devices for the delivery of therapeutically useful cells, as well as to compositions and methods for repairing tendons.

Competition

Launched in 2009, the Restylane® Injector offers even volume distribution, improved ergonomics over syringes, better depth control and preloaded devices. The injector is preloaded with 200 controlled doses of 10 μl per injection. The injector is used for Restylane Skinboosters Vital and Restylane Skinboosters Vital Light.

The Anteis Injection System was launched in 2010 by Anteis, , a Swiss company focused on developing aesthetic dermatology products and ophthalmology devices. They have developed an automated injection device for local injections of Anteis aesthetic products (fillers and rejuvenation products). It features depth control, injection speed and volume control helping to reduce pain, bruising and swelling. A 32 gage needle is used for injections which helps to further reduce pain and the need for an anesthetic before treatment. The device received the Frost & Sullivan 2011 European New Product Innovation Award and the Reddot Design Award in 2010.

C. Organizational Structure

We currently are the parent company of one wholly-owned subsidiary, TrichoScience. TrichoScience is federally incorporated under the Business Corporations Act (Canada).

D. Property, Plant and Equipment

Our head office is located at Suite 2020 – 401 West Georgia Street, Vancouver, BC V6B 5A1. We have entered into an operatory lease agreement for our office premises, the term for which expires on October 15, 2015. Research and development is being conducted under contract with the University of British Columbia by Kevin McElwee, PhD at the UBC Dermatology facilities in Vancouver and by Dr. Rolf Hoffmann in Germany. We have no current plans to construct or lease dedicated laboratory facilities.

ITEM 4A Unresolved Staff Comments

Not applicable.

ITEM 5. Operating and Financial Review and Prospects

The information in this section is presented in accordance with IFRS for 2013, 2012 and 2011. IFRS differs in certain significant respects from U.S. GAAP. Historical results of operations, percentage relationships and any trends that may be inferred therefrom are not necessarily indicative of the operating results of any future period.

A. Operating Results

Year Ended December 31, 2013 Compared to Year Ended December 31, 2012

During the year ended December 31, 2013, we completed a Collaboration and Technology Development Transfer Agreement with Shiseido Company, Limited (“Shiseido”). Shiseido paid us an upfront fee of $4,120,400 (¥400,000,000). We recorded gross revenue from its licensing agreement with Shiseido in the amount of $4,120,400, less withholding taxes of $412,040 we received $3,708,360 during the third quarter of 2013. There was no revenue from operations for the year ended December 31, 2012.

Research and Development expenses totaled $1,561,963 for the year ended December 31, 2013 compared to $1,065,075 for the year ended December 31, 2012. Research expense for the year ended December 31, 2013 was $1,321,728 compared to $426,341 in the prior year period. The increase was the result of advancing the pre-clinical work for RCT-01, development of the RCI-02 injector device prototype, improvements in the cell replication process for RCH-01 in preparation for our submission to regulatory authorities and incremental expenditure on intellectual property. During the year ended December 31, 2013, we incurred costs of $240,235 relating to our clinical trials compared to $638,734 for the year ended December 31, 2012. Clinical trial costs have declined as we near the completion and monitoring phase of the Phase I clinical trial for RCH-01.

General and administrative expenses totaled $2,175,209 for the year ended December 31, 2013 compared to $3,408,894 for the year ended December 31, 2012. The decrease is primarily attributable to a decline in marketing and investor relations activities (2013: $228,791, 2012: $639,997), and a reduction in stock based compensation (2013: $395,092, 2012: $1,381,589) which resulted from the forfeiture of options held by certain employees and consultants during the year. Consulting (2013: $185,000, 2012: $123,200), legal (2013: $151,876, 2012: $95,383), office (2013: $224,474, 2012: $198,377), salaries (2013: $597,941, 2012: $656,803), and travel (2013: $155,730, 2012: $125,102) all increased during the year ended December 31, 2013, and helped offset the overall decrease in general and administrative expenses. The increase in legal and travel fees relates to negotiations associated with the Shiseido licensing and technology transfer agreement, while the increase in office expenses is due to the lease signed October 2012 for new premises and associated operating costs.

During the year ended December 31, 2013 we amended the exercise price of the warrants denominated in a foreign currency from US$2.50 to US$0.50 per share, resulting in a loss on the fair value of the derivative liability of $140,182 (2012: gain $1,116,445). These warrants are due to expire at various times between March 1, 2014 and April 20, 2014.

During the year ended December 31, 2013 we received an assessment as a result of Canada Revenue Agency’s audit of the Scientific Research & Experimental Development claim filed by TrichoScience for the period ending December 21, 2010. As a result of the assessment, TrichoScience received a refundable investment tax credit in the amount of $150,783 (2012: $nil).

Total comprehensive loss for the year ended December 31, 2013 was $28,572 or $nil per share on a basic and diluted basis compared to a net loss of $3,363,175 or $0.08 per share on a basic and diluted basis for the year ended December 31, 2012.

Year Ended December 31, 2012 Compared to Year Ended December 31, 2011

We had no revenue from operations during the years ended December 31, 2012 or 2011.

Research and Development expenses totalled $1,065,075 for the year ended December 31, 2012 compared to $1,019,408 for the year ended December 31, 2011. During the year ended December 31, 2012, we incurred costs of $638,734 relating to our clinical trials compared to $637,649 in the year ended December 31, 2011. We incurred research consulting fees of $329,909 and intellectual property costs of $96,432 in 2012 compared to research consulting fees of $292,207 and intellectual property costs of $89,552 in 2011. These increases were all the result of increased operational activities in 2012 related to our Phase I trial for RCH-01 and on-going clinical development.

General and administrative expenses totalled $3,408,894 for the year ended December 31, 2012 compared to $2,713,918 for the year ended December 31, 2011. The increase in general and administrative expenses was primarily the result of increased insurance (2012: $54,591, 2011: $48,006), marketing and investor relations fees (2012: $639,997, 2011: $334,709), office (2012: $198,377, 2011: $170,975), salaries (2012: $656,803, 2011: $623,027), and transfer agent and filing fees (2012: $54,755, 2011: $26,973). The increases in insurance, marketing and investor relations fees, office costs, salaries and transfer agent and filing fees were due to increased operational activities in 2012.

We recognized a stock based compensation charge of $1,381,589 for the year ended December 31, 2012 (2011: $947,272) for stock options granted under our stock option plan. The overall increase in stock-based compensation expense in 2012 compared to 2011 was primarily due to the issuance of 1,190,000 stock options that were granted to employees and consultants of our company; 250,000 share purchase warrants which were issued as compensation to a consultant of our company and the release of 500,000 shares from escrow during the year ended December 31, 2012. During the year ended December 31, 2012 we recorded a $1,116,445 gain on the change in fair value of warrants denominated in a foreign currency due to fluctuations in exchange rates.

We incurred a net loss for the year ended December 31, 2012 of $3,363,175 or $0.08 per share on a basic and diluted basis compared to a net loss of $3,713,439 or $0.10 per share on a basic and diluted basis for the year ended December 31, 2011.

B. Liquidity and Capital Resources

We had working capital of $1,659,722 as at December 31, 2013 compared to working capital of $67,768 as at December 31, 2012 and $382,863 as at December 31, 2011.

		Year Ended			Year Ended			Year Ended
		December 31,			December 31,			December 31,
		2013			2013			2012

Net cash provided by (used in) operating activities	$	494,592		$	(2,957,711	)	$	(3,115,623	)
Net cash used in investing activities		(7,854	)		(9,090	)		(12,929	)
Net cash provided by financing activities		1,086,981			2,785,944			2,482,170
Increase (decrease) in cash during the year	$	1,573,719		$	(180,857	)	$	(646,382	)
Cash and cash equivalents, beginning of year		384,286			565,143			1,211,525
Cash and cash equivalents, end of year	$	1,958,005		$	384,286		$	565,143

Year Ended December 31, 2013 Compared to Year Ended December 31, 2012

Operating Activities

During the year ended December 31, 2013, $494,592 was provided in net cash from operating activities compared to a use of cash of $2,957,711 for the year ended December 31, 2012. The increase in cash provided by operating activities was a result of the Shiseido licensing deal completed in the third quarter of 2013.

Investing Activities

During the year ended December 31, 2013, the net cash used in investing activities was $7,854 compared to net cash used in investing activities of $9,090 for the year ended December 31, 2012. Investing activities relate solely to the purchase of equipment.

Financing Activities

During the year ended December 31, 2013, we issued 1,050,000 common shares at a price of $0.50 per share for gross proceeds of $525,000 and 2,043,555 common shares issued at a price of $0.31 per unit for gross proceeds of $633,502, of which $24,851 was included in share subscriptions at December 31, 2012. Finder’s fees of $46,670 were paid in connection with the transaction. Each unit issued consists of one common share and one common share purchase warrant. Each warrant entitles the holder to purchase an additional common share at $0.50 per share for a period of 24 months from the closing of the financing. Additional working capital will be required for general and administrative expenses and to further our business plans.

Year Ended December 31, 2012 Compared to Year Ended December 31, 2011

Operating Activities

During the year ended December 31, 2012, we used net cash in operating activities of $2,957,711 compared to $3,115,623 for the year ended December 31, 2011. The decrease in cash used in operating activities was the result of a reduction in accounting and audit fees as well as consulting fees in 2012. Cash used in operational activities in 2011 also included large payments in 2011 of accounts payable and accrued liabilities working capital balances at December 31, 2010.

Investing Activities

During the year ended December 31, 2012, the net cash used in investing activities was $9,090 compared to net cash used in investing activities of $12,929 for the year ended December 31, 2011. Investing activities relate mainly to the purchase of computer equipment.

Financing Activities

During the year ended December 31, 2012, we completed private placements consisting of 1,875,046 units at US$1.50 per unit for proceeds of US$2,812,569 ($2,796,740). Each unit issued consists of one common share and one common share purchase warrant. Each warrant entitles the holder to purchase an additional common share at US$2.50 per share for a period of 24 months from the closing of the financing. We paid $35,647 as finder’s fees in connection with the private placement. At December 31, 2012, we had working capital of $67,768.

During the year ended December 31, 2011, we issued 2,550,000 common shares at US$1.00 per share for proceeds of US$2,550,000. We issued 101,200 common shares as finder’s fees in connection with the private placement. At December 31, 2011, we had working capital of $382,863.

Going Concern

Due to the uncertainty of our ability to meet our current operating and capital expenses, in the auditor’s report on our annual financial statements for the year ended December 31, 2013, our auditors included an explanatory paragraph on their report in respect of there being substantial doubt about our ability to continue as a going concern.

We anticipate that we will require a minimum of approximately $4,000,000 to proceed with our plan of operations for the twelve month period ended December 31, 2014. We have no current material commitments for capital expenditures.

We do not currently have sufficient capital resources to fund our plan of operations for the next twelve months, as described in Item 4.B of this Form 20-F. We plan to raise additional capital through the sale of debt or equity securities or through other forms of financing in order to raise the funds necessary to pursue our plan of operations. We currently do not have any arrangements in place for the completion of any financings and there is no assurance that we will be successful in completing any financings. There can be no assurance that additional financing will be available when needed or, if available, on commercially reasonable terms. If we are not able to obtain additional financing on a timely basis, we may not be able to pursue our plan of operations or meet our obligations as they come due, and may be forced to scale down, or perhaps even cease, business operations.

Cash on hand is currently our only source of liquidity. We do not have any lending arrangements in place with banking or financial institutions and we do not know whether we will be able to secure such funding arrangements in the near future.

Critical Accounting Policies and Estimates

We make estimates and assumptions about the future that affect the reported amounts of assets and liabilities. Estimates and judgments are continually evaluated based on historical experience and other factors, including expectations of future events that are believed to be reasonable under the circumstances. In the future, actual experience may differ from these estimates and assumptions.

The effect of a change in an accounting estimate is recognized prospectively by including it in comprehensive income in the period of the change, if the change affects that period only, or in the period of the change and future periods, if the change affects both.

Information about critical judgments in applying accounting policies that have the most significant risk of causing material adjustment to the amounts reported in our annual audited financial statements for the year ended December 31, 2013 are as follows:

Share Based Payments and Derivatives Liabilities related to Equities

We measure the cost of equity-settled transactions with employees by reference to the fair value of the equity instruments at the date at which they are granted. Estimating fair value for share-based payment transactions requires determining the most appropriate valuation model, which is dependent on the terms and conditions of the grant. This estimate also requires determining the most appropriate inputs to the valuation model including the expected life of the share option, volatility and dividend yield and making assumptions about them. The assumptions and models used for estimating the fair value for share-based payment transactions are disclosed in Note 8(e) of our annual audited financial statements for the year ended December 31, 2013.

Similar methodology to the share-based payments is used to determine the fair value of derivative liabilities related to warrants denominated in U.S. dollars. The assumptions and models used for estimating the fair value for derivative liabilities are disclosed in Note 8(g) to our annual audited financial statements for the year ended December 31, 2013.

Income Taxes

Significant judgment is required in determining the provision for income taxes. There are many transactions and calculations undertaken during the ordinary course of business for which the ultimate tax determination is uncertain. We recognize liabilities and contingencies for anticipated tax audit issues based on our current understanding of the tax law. For matters where it is probable that an adjustment will be made, we record our best estimate of the tax liability including the related interest and penalties in the current tax provision. Our management believes they have adequately provided for the probable outcome of these matters; however, the final outcome may result in a materially different outcome than the amount included in the tax liabilities.

In addition, we will recognize deferred tax assets relating to tax losses carried forward to the extent there are sufficient taxable temporary differences relating to the same taxation authority and the same taxable entity against which the unused tax losses can be utilized. However, utilization of the tax losses also depends on the ability of the taxable entity to satisfy certain tests at the time the losses are recouped.

C. Research and Development, Patents and Licenses etc.

Research and Development expenses totaled $1,561,963 for the year ended December 31, 2013 compared to $1,065,075 for the year ended December 31, 2012. Research expense for the year ended December 31, 2013 was $1,135,321 compared to $426,341 in the prior year period. The increase was the result of advancing the pre-clinical work for RCT-01, development of the RCI-02 injector device prototype, improvements in the cell replication process for RCH-01 in preparation for our submission to regulatory authorities and incremental expenditure on intellectual property. During the year ended December 31, 2013, we incurred costs of $240,235 relating to our clinical trials compared to $638,734 for the year ended December 31, 2012. Clinical trial costs have declined as we near the completion and monitoring phase of the Phase I clinical trial for RCH-01. We currently have registered patents for our cell replication technology in Australia, the European Union, United States and Japan.

D. Trend Information

We do not currently know of any trends, uncertainties, demands, commitments or events that are reasonably likely to have a material effect on our net sales or revenue, income from continuing operations, profitability, liquidity or capital resources, or that would cause reported financial information not necessarily to be indicative of future operating results or financial condition.

E. Off-Balance Sheet Arrangements

We do not have any off-balance sheet arrangements that have or are reasonably likely to have a current or future effect on our financial condition, changes in financial condition, revenues or expenses, results of operations, liquidity, capital expenditures or capital resources that are material to investors.

F. Contractual Obligations

Our only contractual obligations are an operating lease agreement for our office premises. The term of the lease is for three years with it ending on October 31, 2015 and the annual commitments under the lease is as follows:

2014	2015
$ 133,200	$ 111,000

G. Safe Harbor

Not applicable.

ITEM 6. Directors, Senior Management and Employees

A. Directors and Senior Management

There are no family relationships between any of the directors, senior management or employees. We have no arrangement or understanding with any major shareholders or other persons pursuant to which any of our directors or officers was selected as a director or officer. The following table sets out information regarding our directors and senior management, and any employees upon whose work our company is dependent.

Name and Age	Present Position with our Company	Age	Date of Commencement with our Company
David Hall	Chief Executive Officer, President and Director	60	December 22, 2010
Tom Kordyback	Chief Financial Officer	62	August 22, 2011
Dr. Rolf Hoffmann	Chief Medical Officer and Director	52	December 22, 2010
Dr. Kevin McElwee	Chief Scientific Officer	44	December 22, 2010
Peter Jensen ⁽¹⁾	Chairman of the Board and Director	62	December 22, 2010
John Challis ⁽¹⁾	Director	67	March 11, 2011
Peter Lewis ⁽¹⁾	Director	58	May 27, 2011
Darrell Panich	VP Clinical Affairs	42	March 15, 2010
Gemma Fetterley	VP Finance, Secretary and Treasurer	35	March 11, 2011

⁽¹⁾ Member of the audit committee and nominating, compensation and corporate governance committee.

David Hall – Chief Executive Officer, President and Director

Mr. Hall has almost two decades of experience in the life sciences industry. From 1994 through 2008, he served in roles as Chief Financial Officer, Chief Compliance Officer and Senior Vice President of Government & Community Relations for Angiotech Pharmaceuticals Inc. He also acted as the Corporate Secretary and Treasurer of Angiotech. Mr. Hall is highly committed to governmental policy issues related to the biotech industry. He is a past Chairman of Life Sciences BC and currently serves as a director of Advantage BC. He has served as the Chairman of the Biotech Industry Advisory Committee to the BC Competition Council and as a member of the BC Task Force on PharmaCare. Mr. Hall is also a member of the University of British Columbia’s Tech Equity Investment Committee, a director and Chairman of the Audit Committee of GLG Lifetech Corporation and Chairman of Perceptronix Medical.

Tom Kordyback, CA – Chief Financial Officer

Mr. Kordyback has over 25 years of experience in corporate finance and management for emerging growth companies. He has held senior financial positions with Glenayre Electronics Inc. and Telelink Communications Inc. In 1995, he joined Creo Inc. as their Chief Financial Officer where he oversaw private financings totaling more than $80 million and led the company’s Initial Public Offering on the NASDAQ stock exchange for $90 million. He remained at Creo until 2000. Mr. Kordyback also served as a director and member of the Audit, Compensation and Merger and Acquisitions Committees for Extreme CCTV Inc., a developer and manufacturer of state-of-the-art surveillance systems listed on the TSX. In 2008, the company was sold to Bosch Security Systems, Inc. for CDN $93 million. Mr. Kordyback currently serves as director of Silver Sun Resources Corp., a public Canadian-based resource company.

Prof. Rolf Hoffmann, MD – Chief Medical Officer and Director

Dr. Hoffmann is a European-based clinical researcher who has spent decades researching the fields of pattern hair loss, alopecia areata, endocrinology of the hair follicle and hair follicle morphogenesis. Together with Dr. McElwee, he is the applicant of a landmark patent on the use of hair follicle cup cells and their use in hair diseases. He is working clinically in his private practice, as a teaching professor in the Department of Dermatology for Marburg University, as well as a researcher on histopathogically on hair diseases, where he has published chapters in text books. Dr. Hoffmann has participated in dozens of clinical hair studies and consulted for a variety of large companies on hair matters. He is the inventor of TrichoScan®, a computerized technique to measure hair growth. Since then, he has run a successful privately owned company to market the device for dermatologists and to offer it as a service for clinical trials.

Dr. Kevin McElwee, PhD – Chief Scientific Officer

Dr. McElwee is an Associate Professor in the Department of Dermatology and Skin Health at the University of British Columbia, and Director of the Hair Research Laboratory in the Vancouver Coastal Health Research Institute at Vancouver General Hospital (VGH). His research is funded by competitive grants awarded by multiple organizations including the Canadian Institute for Health Research (the equivalent of the National Institute for Health in the USA). Dr. McElwee is one of only a small group of research scientists worldwide who studies hair biology and associated diseases. He has worked as a hair research scientist for 12 years and has published over 70 medical journal articles, research abstracts and academic book chapters on hair loss research. Dr. McElwee received his Bachelor of Science degree from the University of Aberdeen, Scotland and his PhD from the University of Dundee, Scotland. Postdoctoral training included three years at the Jackson Laboratory in Maine and four years at the University of Marburg, Germany, studying various hair loss diseases.

Peter Jensen – Chairman of the Board and Director

Mr. Jensen holds a Bachelor of Science and two Law degrees from McGill University. Prior to his law degrees, he was engaged in diabetes research and medical clinic management. In 1981, he commenced the practice of law in the corporate and securities fields in British Columbia. Mr. Jensen has a wide range of legal counseling experience internationally and has a depth of experience in trans-border transactions. Mr. Jensen has been and is a director of a number of private and publicly traded companies and has assisted in the raising of finance for these companies in Canada, the United States, Europe and Asia.

John Challis – Director

Dr. Challis is the past President and CEO of the Michael Smith Foundation for Health Research, British Columbia’s health research funding organization. Dr. Challis received his PhD from the University of Cambridge and began his career as a research scientist at the University of Oxford. In 1976, he came to Canada as a faculty member at McGill University and joined the faculty at the University of Western Ontario two years later. Dr. Challis served as founding Scientific Director of the Lawson Research Institute at St. Joseph’s Health Centre and as the Centre’s vice-president (research). In 1995, he joined the University of Toronto as Professor and Chair of the Department of Physiology and in 2001 he was appointed the founding Scientific Director of the Canadian Institute of Health Research, Institute of Human Development, Child and Youth Health. Dr. Challis served as Vice-President, Research and Associate Provost at the University of Toronto between 2003 and 2007.

In 2007, Dr. Challis was awarded the McLaughlin Medal from the Royal Society of Canada for important research of sustained excellence in medical science. In March 2009, Dr. Challis received the President’s Distinguished Scientist Award from the Society for Gynaecologic Investigation (SGI). Currently, he holds the rank of University Professor Emeritus, University of Toronto, Departments of Physiology, Medicine and Obstetrics and Gynaecology. Dr. Challis is an internationally-recognized researcher in the fields of physiology, obstetrics and gynaecology. He is a Fellow of the Royal Society of Canada, Fellow of the Royal College of Obstetricians and Gynecologists, and Fellow of the Canadian Academy of Health Sciences. He has published more than 500 scientific papers and articles, trained more than 70 graduate students and postdoctoral fellows and has served as President of several professional associations in his field of research.

Peter Lewis, CA – Director

Mr. Lewis is a partner with Lewis and Company, a firm specializing in taxation law since 1993. His areas of expertise include tax planning, acquisitions and divestitures, reorganizations and estate planning. He is a sought after educator, having taught and presented taxation courses at the Institute of Chartered Accountants of British Columbia and the Canadian Tax Foundation.

Darrell Panich, MSc, PMP, CPM - Vice President, Clinical Affairs

Mr. Panich is an experienced clinical trial management specialist. He has managed multinational clinical research studies in more than 15 different countries for over 20 different pharmaceutical and biotechnology companies. He obtained his Master of Science degree from the University of Alberta while conducting clinical research in neuroscience. Mr. Panich has obtained certifications in project management from the Project Management Institute (Project Management Professional; PMP) and Project Management Leadership Group (Certified Project Manager; CPM).

Gemma Fetterley, CA - VP Finance and Secretary

Ms. Fetterley is a Chartered Accountant and holds a degree in Economics from the University of British Columbia. Ms. Fetterley has spent several years in public practice specializing in the brokerage industry, as well as audit and advisory work for both private and public clients. She recently held a senior management finance role with the Vancouver Organizing Committee for the 2010 Olympic and Paralympic Winter Games, and has a wide range of experience in accounting and finance.

B. Compensation

The following table sets out the compensation provided to our directors and senior management for performance of their duties during the fiscal year ended December 31, 2013:

SUMMARY COMPENSATION TABLE
Name and principal position	Year	Salary ($)	Share- based awards ($)	Option- based awards ⁽¹⁾ ($)	Non-equity incentive compensation plan compensation ($)		Pensio n value ($)	All other Compen sation ($)	Total Compen sation ($)
Name and principal position	Year	Salary ($)	Share- based awards ($)	Option- based awards ⁽¹⁾ ($)	Annual incentiv e plans	Long- term incentiv e plans	Pensio n value ($)	All other Compen sation ($)	Total Compen sation ($)
David Hall CEO, President and Director	2013	385,000	N/A	N/A	N/A	N/A	N/A	N/A	385,000
Tom Kordyback Chief Financial Officer	2013	N/A	N/A	38,490	N/A	N/A	N/A	N/A	38,490
Dr. Rolf Hoffmann Chief Medical Officer and Director	2013	201,395 ⁽²⁾	N/A	N/A	N/A	N/A	N/A	N/A	201,395
Dr. Kevin McElwee Chief Scientific Officer Founder of TrichoScience	2013	56,786 ⁽³⁾	N/A	N/A	N/A	N/A	N/A	N/A	56,786
Peter Jensen Chairmen and Director	2013	N/A	N/A	3,849	N/A	N/A	N/A	21,250 ⁽⁴⁾	25,099
John Challis Director	2013	N/A	N/A	38,490	N/A	N/A	N/A	14,000 ⁽⁵⁾	49,490
Peter Lewis Director	2013	N/A	N/A	38,490	N/A	N/A	N/A	15,750 ⁽⁶⁾	54,240
Darrell Panich VP, Clinical Affairs	2013	133,000	N/A	38,490	N/A	N/A	N/A	N/A	171,490
Gemma Fetterley VP, Finance and Secretary	2013	120,417	N/A	38,490	N/A	N/A	N/A	N/A	158,907

⁽¹⁾	The valuation of option-based awards is based on the fair value of the options at the time of the grant is based on the Black Scholes model and includes the following assumptions; weighted average risk free rate, weighted average expected life, expected volatility and dividend yield. For options that vest, only the vested options are valued. Details of options granted during 2013 are included in the table below under the heading “Share Ownership - Stock Option Plan”.
⁽²⁾	Paid to companies controlled by Dr. Hoffmann.
⁽³⁾	Paid to a company controlled by Dr. McElwee.
⁽⁴⁾	Mr. Jensen was paid $21,250 in director’s fees by our company for the fiscal year ended December 31, 2013.
⁽⁵⁾	Mr. Challis was paid $14,000 in director’s fees by our company for the fiscal year ended December 31, 2013.
⁽⁶⁾	Mr. Lewis was paid $15,750 in director’s fees by our company for the fiscal year ended December 31, 2013.

Pension, Retirement or Similar Benefits

We do not provide pension, retirement or similar benefits to directors and executive officers. No funds were set aside or accrued by our company during the fiscal year ended December 31, 2013 to provide pension, retirement or similar benefits to our directors or officers pursuant to any existing plan provided or contributed to by us or our subsidiaries.

C. Board Practices

Our directors are re-elected at the annual general meeting of our shareholders and our officers are re-appointed by our board of directors at a directors’ meeting following the annual general meeting. Each of our current directors and officers will hold their respective office until their successor is elected or appointed, unless such office is earlier vacated under any of the relevant provisions of our by-laws or the Business Corporations Act (British Columbia).

The following sets out terms of the consulting agreement between our company and David Hall. Mr. Hall is the only director of our company who is entitled to receive benefits upon termination of employment, as described below.

Consulting Agreement: David Hall

Pursuant to an employment agreement effective as of January 1, 2011 between David Hall, our company and TrichoScience, Mr. Hall serves as President and Chief Executive Officer of our company and TrichoScience for a base salary of $30,000 per month. The initial term of this agreement is for five years and is automatically renewable for subsequent two year terms. Under the agreement, Mr. Hall will be eligible to participate in a bonus plan as and when established by our company, which currently is anticipated to provide for bonuses based on a target bonus of 100 percent of the base salary earned by Mr. Hall during each fiscal year in accordance with milestones to be established by our board of directors. Mr. Hall may also be eligible to receive additional stock option grants or awards under other equity based incentive plans from time to time. In the case of general grants of options or awards to executives, Mr. Hall shall receive not less than 10% of such general grant unless our board presents material reasons for lesser or non-participation. If, within 24 months of a change of control of our company, Mr. Hall’s employment is terminated for any reason other than for just cause, we will pay Mr. Hall: any unpaid base salary earned but unpaid; a lump sum amount as severance compensation equal to 36 months of base salary and an additional 2 months of base salary for each additional full year of employment completed after the first year of Mr. Hall’s employment, up to a combined maximum of 48 months’ base salary; a lump sum amount as compensation for loss of any benefits made available to Mr. Hall, including any benefit coverage under any group, health, dental, life or disability insurance plan up to a total amount of $100,000 plus an additional $2,000 for each additional full year of employment complete after the first year of Mr. Hall’s employment, to a combined maximum of $124,000; the balance of any payments due under any bonus plan; and a further lump sum payment equal to two times the greater of: (i) the average of the payments made to Mr. Hall under the bonus plan in each of the two immediately preceding fiscal years; and (ii) the amount of Mr. Hall’s target bonus under the bonus plan for the fiscal year in which Mr. Hall’s employment is terminated.

Consulting Agreement: Darrell Panich

Pursuant to an employment agreement effective as of March 15, 2010 between Darrell Panich and TrichoScience, Mr. Panich serves as Vice President Clinical Affairs of our company and TrichoScience for a base salary of $125,000 per annum. Under the agreement, Mr. Panich will be eligible to participate in a bonus plan as and when established by our company, which currently is anticipated to provide for bonuses based on a target bonus of 20 percent of the base salary earned by Mr. Panich during each fiscal year in accordance with milestones to be established by our board of directors. Mr. Panich may also be eligible to receive additional stock option grants or awards under other equity based incentive plans from time to time. If, within 12 months of a change of control of our company, Mr. Panich’s employment is terminated for any reason other than for just cause, we will pay Mr. Panich: any unpaid base salary earned but unpaid; a lump sum amount as severance compensation equal to three months of base salary for three years of employment and one additional month of base salary for each year of employment after the first three years; vacation pay and, if granted a performance bonus.

Consulting Agreement: Gemma Fetterley

Pursuant to an employment agreement effective as of March 11, 2011 between Gemma Fetterley and our Company, Ms. Fetterley serves as Vice President Finance of our company and TrichoScience for a base salary of $110,000 per annum. Under the agreement, Ms. Fetterley will be eligible to participate in a bonus plan as and when established by our company, which currently is anticipated to provide for bonuses based on a target bonus of 20 percent of the base salary earned by Ms. Fetterley during each fiscal year in accordance with milestones to be established by our board of directors. Ms. Fetterley may also be eligible to receive additional stock option grants or awards under other equity based incentive plans from time to time. If, within 12 months of a change of control of our company, Ms. Fetterley’s employment is terminated for any reason other than for just cause, we will pay Ms. Fetterley: any unpaid base salary earned but unpaid; a lump sum amount as severance compensation equal to three months of base salary for three years of employment and one additional month of base salary for each year of employment after the first three years; vacation pay and, if granted a performance bonus.

Audit Committee

Our audit committee is comprised of Peter Lewis, John Challis and Peter Jensen. The audit committee reviews and approves the scope of the audit procedures employed by our independent auditors, reviews the results of the auditor’s examination, the scope of audits, the auditor’s opinion on the adequacy of internal controls and quality of financial reporting and our accounting and reporting principles, policies and practices, as well as our accounting, financial and operating controls. The audit committee also reports to the board of directors with respect to such matters and recommends the selection of independent auditors. Before financial statements that are to be submitted to the shareholders at an annual general meeting are considered by the board of directors, such financial statements are submitted to the audit committee for review, following which the report of the audit committee on the financial statements is submitted to the board of directors.

Nominating, Compensation and Corporate Governance Committee

Our nominating, compensation and corporate governance committee is comprised of Peter Lewis, John Challis and Peter Jensen. The purpose of the nominating, compensation and corporate governance committee (the “Committee”) is to identify individuals qualified to become directors on the Board of Directors of the Corporation (the “Board”) or any of its committees, consistent with criteria approved by the Board, and to select, or to recommend that the Board select, such director nominees, whether at the next annual meeting of the shareholders or otherwise. Periodically evaluate the qualifications and independence of each director on the Board or its various committees and recommend to the Board, as the Committee may deem appropriate, any recommended changes in the composition of the Board or any of its committees. Develop and recommend to the Board corporate governance principles applicable to the Corporation and annually assess the performance of the Board.

D. Employees

As of December 31, 2013, we had five full time employees and nine contractors, the majority of which are located in Vancouver, British Columbia. These employees and contractors have expertise in biotechnology management, clinical trials, financial management and communications.

E. Share Ownership

Our directors, senior management and key employees beneficially own, directly or indirectly, the number of shares set out in the table below:

Name and Office Held	Number of Common Shares ⁽¹⁾	Percentage of Common Shares ⁽²⁾
David Hall Chief Executive Officer, President and Director	2,400,000 ⁽³⁾	5.0%
Tom Kordyback Chief Financial Officer	100,993	*
Dr. Rolf Hoffmann Chief Medical Officer and Director	5,056,979	10.4%
Dr. Kevin McElwee Chief Scientific Officer	4,241,716	8.8%
Peter Jensen Chairmen and Director	500,000	1.0%
Peter Lewis Director	50,000	*
John Challis Director	-	-
Darrell Panich VP, Clinical Affairs	-	-
Gemma Fetterley VP, Finance and Secretary	-	-

*	Less than 1%.
⁽¹⁾	Does not include options to acquire common shares of our company held by the persons set forth in the table. For a description of options held by the persons set forth in the table above, see below under the heading “Stock Option Plan”.
⁽²⁾	Based on 48,565,089 common shares issued and outstanding as of March 18, 2014.
⁽³⁾	Does not include 1,000,000 common shares held by Mr. Hall’s wife over which Mr. Hall does not exercise control or direction.

Stock Option Plan

On December 22, 2010, our board of directors approved the adoption of the 2010 Stock Option Plan, which was ratified and approved by our shareholders on January 5, 2011. The 2010 Stock Option Plan provides for the grant of incentive stock options to purchase our common shares to our directors, officers, employees and consultants. The Plan is administered by our board of directors. The maximum number of our common shares which may be reserved and set aside for issuance under the stock option plan is 10% of the issued and outstanding common shares of our company’s stock on the date of issue. In connection with our listing on the TSX Venture Exchange, we agreed not to issue any options over 10% of the issued and outstanding shares at the time of listing, which was 48,118,609 shares of our common stock, until the time that our shareholders have approved the plan. Each option, upon its exercise, entitles the grantee to one common share. The exercise price of common shares subject to an option will be determined by the board of directors at the time of grant. Stock options may be granted under our stock option plan for an exercise period of up to ten years from the date of grant of the option or such lesser periods as may be determined by our board of directors.

The following table sets forth the amount and terms of options to acquire common shares of our company we have granted to our directors, senior management and key employees:

Name and Office Held	Number of Options	Date of Grant	Exercise Price	Expiry Date
Tom Kordyback Chief Financial Officer	100,000	September 5, 2013	$0.55	September 5, 2020
Dr. Rolf Hoffmann Chief Medical Officer and Director	350,000	December 22, 2010	US$0.50	July 13, 2017
Dr. Kevin McElwee Chief Scientific Officer	350,000	December 22, 2010	US$0.50	July 13, 2017
Peter Jensen Chairmen and Director	65,000	December 22, 2010	US$0.50	July 13, 2017
Peter Jensen Chairmen and Director	10,000	September 5, 2013	$0.55	September 5, 2020
John Challis Director	100,000	September 5, 2013	$0.55	September 5, 2020
Peter Lewis Director	100,000	September 5, 2013	$0.55	September 5, 2020
Darrell Panich VP, Clinical Affairs	100,000	March 11, 2011	US$1.00	March 11, 2018
Darrell Panich VP, Clinical Affairs	100,000	September 5, 2013	$0.55	September 5, 2020
Gemma Fetterley VP, Finance and Secretary	100,000	March 11, 2011	US$1.00	March 11, 2018
Gemma Fetterley VP, Finance and Secretary	100,000	September 5, 2013	$0.55	September 5, 2020

ITEM 7. Major Shareholders and Related Party Transactions

A. Major Shareholders

The following table sets forth persons known to us to be the beneficial owner of more than five percent (5%) of each class of our shares issued and outstanding as of March 18, 2014. All of these persons acquired their shares of our company in connection with our acquisition of TrichoScience and 583885.

Name	Number of Common Shares ⁽¹⁾	Percentage of Common Shares ⁽²⁾
Dr. Rolf Hoffmann	5,056,979	10.4%
Dr. Kevin McElwee	4,241,716	8.8%
Dr. Jerry Shapiro	4,145,316	8.6%
Matthew Wayrynen	2,778,033 ⁽³⁾	5.7%
David Hall	2,400,000 ⁽⁴⁾	5.0%

⁽¹⁾	Does not include options to acquire common shares of our company held by the persons set forth in the table.
⁽²⁾	Based on 48,565,089 common shares issued and outstanding as of March 18, 2014. Beneficial ownership is determined in accordance with the rules of the SEC and generally includes voting or investment power with respect to securities. Except as otherwise indicated, we believe that the beneficial owners of the common stock listed above, based on information furnished by such owners, have sole investment and voting power with respect to such shares, subject to community property laws where applicable.
⁽³⁾	Does not include 1,009,932 common shares held by a company that Mr. Wayrynen serves as a director.
⁽⁴⁾	Does not include 1,000,000 common shares held by Mr. Hall’s wife over which Mr. Hall does not exercise control or direction.

The voting rights of our major shareholders do not differ from the voting rights of holders of our shares who are not major shareholders. Each of the above listed securities entitles the holder to one vote at our company’s shareholder meetings.

The following table sets forth the number of our issued and outstanding common shares that are held by record holders in the United States. We have no Class A preference shares outstanding:

Class	Number of Shareholders	Total Shares Held
Common Shares	18	1,390,621
Percentage of Common Shares	8.2%	2.9% ⁽¹⁾

⁽¹⁾	Based on 48,565,089 common shares issued and outstanding as of March 18, 2014.

To our knowledge we are not directly or indirectly owned or controlled by another company, a foreign government or any other natural or legal person, severally or jointly.

To our knowledge, there are no arrangements the operation of which may, at a subsequent date, result in a change in the control of our company.

B. Related Party Transactions

The following sets forth all material transactions and loans from January 1, 2012 to the current date between our company and: (a) enterprises that directly or indirectly through one or more intermediaries, control or are controlled by, or are under common control with, our company; (b) associates; (c) individuals owning, directly or indirectly, an interest in the voting power of our company that gives them significant influence over our company and close members of any such individuals’ families; (d) key management personnel of our company, including directors and senior management of our company and close members of such individuals’ families; and (e) enterprises in which a substantial interest in the voting power is owned, directly or indirectly, by any person described in (c) or (d) or over which such a person is able to exercise significant influence. For the purposes of this section, shareholders beneficially owning a 10% interest in the voting power of our company are presumed to have a significant influence:

Related party balances

The following amounts due to related parties are included in trade payables and accrued liabilities:

		December 31, 2013		December 31, 2012
Companies controlled by directors of our company	$	27,736	$	31,318
Directors or officers of our company		-		21,015
	$	27,736	$	52,333

These amounts are unsecured, non-interest bearing and have no fixed terms of repayment.

Related party transactions

We incurred the following transactions with companies that are controlled by directors and/or officers of our company. The transactions were measured at the exchange amount which approximates fair value, being the amount established and agreed to by the parties.

		December 31, 2013		December 31, 2012		December 31, 2011
Research and development	$	258,180	$	274,246	$	238,607
General and administrative		-		-		61,371
	$	258,180	$	274,246	$	299,977

Key management compensation

Key management personnel are persons responsible for planning, directing and controlling the activities of an entity, and include executive directors, the Chief Executive Officer and the Chief Financial Officer.

		December 31, 2013		December 31, 2012		December 31, 2011
General and administrative – salaries	$	436,000	$	411,000	$	425,209
Stock-based compensation		125,487		161,565		313,665
	$	561,487	$	572,565	$	738,874

C. Interests of Experts and Counsel

Not applicable.

ITEM 8. Financial Information

A. Financial Statements and Other Financial Information

Our financial statements are stated in Canadian dollars and are prepared in accordance with IFRS as issued by the IASB. In this Form 20-F, unless otherwise specified, all dollar amounts are expressed in Canadian dollars. Financial statements included with this annual report are listed below:

1.	Audited Annual Financial Statements as at December 31, 2013 and 2012:
	Independent Auditor’s Report of BDO Canada LLP, dated March 18, 2014
	Consolidated Statement of Financial Position as at December 31, 2013 and 2012;
	Consolidated Statements of Comprehensive Loss for the years ended December 31, 2013, 2012, and 2011;
	Consolidated Statements of Changes in Equity for the years ended December 31, 2013, 2012, and 2011;
	Consolidated Statements of Cash Flows for the years ended December 31, 2013, 2012, and 2011; and
	Notes to the Consolidated Financial Statements.

The audited consolidated financial statements for the years ended December 31, 2013 and 2012 can be found under “Item 17. Financial Statements”.

Legal Proceedings

There are no legal or arbitration proceedings which may have, or have had in the recent past, a significant effect on our financial position or profitability.

Dividend Distributions

Holders of our common shares are entitled to receive such dividends as may be declared from time to time by our board, in its discretion, out of funds legally available for that purpose. We intend to retain future earnings, if any, for use in the operation and expansion of our business and do not intend to pay any cash dividends in the foreseeable future.

B. Significant Changes

The following is a summary of significant changes in our financial affairs since December 31, 2013:

On January 2, 2014 under our Stock Option Plan, 200,000 options were granted to employees and consultants of our company. The options vest over three years and are exercisable at $0.55 per share until January 2, 2019.

On January 13, 2014, our common shares commenced trading on the TSX Venture Exchange (the “TSXV”) as a Tier 1 issuer under its current trading symbol “RP”. Our common shares were delisted from the Canadian Securities Exchange at the close of trading on January 10, 2014. In connection with our listing on the TSXV, 23,508,682 common shares, which represents approximately 49% of our issued and outstanding shares were escrowed, with 25% of the escrowed shares being released upon listing and a further 25% every six months. In addition, stock options to acquire up to 1,400,000 shares are also subject to escrow under the same release schedule.

On February 20, 2014 under our Stock Option Plan, 100,000 options were granted to employees and consultants of our company. The options vest over one year and are exercisable at $0.85 per share until February 20, 2021.

In February and March 2014, 446,480 warrants denominated in a foreign currency were exercised that were granted in February, March and April 2012 at US$0.50 per share. We received proceeds of US$223,240.

ITEM 9. The Offer and Listing

A. Offer and Listing Details

Price History

Since April 16, 2004, our common shares have been quoted on the OTC Bulletin Board, currently under the symbol “REPCF”. The following table sets forth the annual high and low market prices for our common shares on the OTC Bulletin Board for the five most recent full fiscal years:

OTC Bulletin Board
Annual Highs and Lows	High (U.S.$)	Low (U.S.$)
2009	2.00	0.10
2010	4.00	0.17
2011	3.05	1.75
2012	2.60	0.75
2013	0.78	0.35

Since October 1, 2012, our common shares have been quoted on the CNSX, under the symbol “RP”. Our common shares were delisted from the Canadian Securities Exchange at the close of trading on January 10, 2014. The following table sets forth the annual high and low market prices for our common shares on the CNSX since the listing date:

CNSX
Annual Highs and Lows	High (CAD$)	Low (CAD$)
2012	0.75	0.75
2013	0.55	0.25
2014	0.50	0.50

Since January 13, 2014, our common shares have been quoted on the TSXV, under the symbol “RP”. The following table sets forth the annual high and low market prices for our common shares on the TSXV since the listing date:

TSXV
Annual Highs and Lows	High (CAD$)	Low (CAD$)
2014	0.93	0.58

The high and low market prices for our common shares for each full fiscal quarter for the two most recent full fiscal years on the OTC Bulletin Board were as follows:

OTC Bulletin Board
Quarterly Highs and Lows	High (U.S.$)	Low (U.S.$)
2012
First Quarter	2.55	1.60
Second Quarter	2.60	0.70
Third Quarter	1.00	0.66
Fourth Quarter	0.91	0.46
2013
First Quarter	0.70	0.39
Second Quarter	0.78	0.35
Third Quarter	0.70	0.42
Fourth Quarter	0.55	0.35

The high and low market prices for our common shares for each full fiscal quarter since listing on the CNSX were as follows:

CNSX
Quarterly Highs and Lows	High (CAD$)	Low (CAD$)
2012
Fourth Quarter	0.75	0.75
2013
First Quarter	0.75	0.41
Second Quarter	0.50	0.50
Third Quarter	0.50	0.25
Fourth Quarter	0.50	0.25

The high and low market prices for our common shares for each full fiscal quarter since listing on the TSXV are not available, as we have not been listed for a full fiscal quarter since listing on January 13, 2014.

The high and low market prices of our common shares for each of the most recent six months on the OTC Bulletin Board were as follows:

OTC Bulletin Board
Monthly Highs and Lows	High (U.S.$)	Low (U.S.$)
September 2013	0.50	0.45
October 2013	0.50	0.35
November 2013	0.55	0.46
December 2013	0.55	0.47
January 2014	0.75	0.55
February 2014	0.828	0.543

The high and low market prices of our common shares for each month on which they traded on the CNSX were as follows:

CNSX
Monthly Highs and Lows	High (CAD$)	Low (CAD$)
September 2013	0.25	0.25

October 2013	0.25	0.25
November 2013	0.25	0.25
December 2013	0.50	0.25
January 2014	0.50	0.50

The high and low market prices of our common shares for each month since listing on the TSXV were as follows:

TSXV
Monthly Highs and Lows	High (CAD$)	Low (CAD$)
January 2014	0.85	0.60
February 2014	0.93	0.60

The trading price and volume of our company’s common shares has been and may continue to be subject to wide fluctuations. The stock market has generally experienced extreme price and volume fluctuations that have often been unrelated or disproportionate to the operating performance of companies with little or no current business operations. Because our common shares are only sporadically traded on the OTC Bulletin Board and the TSXV, shareholders may find it difficult to liquidate their shares, or purchase new shares, at certain times.

All of our common shares are issued in registered form. The transfer of our common shares is managed by our transfer agent, Computershare Investor Services Inc., 3rd Floor – 510 Burrard Street, Vancouver, British Columbia, V6C 3B9 (Telephone: 604.661.0271; Facsimile: 604.661.9549) .

B. Plan of Distribution

Not applicable.

C. Markets

Since April 16, 2004, our common shares have been quoted on the OTC Bulletin Board under the symbol “REPCF”; since October 1, 2012, on the Canadian National Stock Exchange under the symbol “RP”; since January 13, 2014 on the TSX Venture Exchange; and, since September 2012, on the Berlin Stock Exchange under the symbol P6P1 and code number A1JHCB. Our shares are not currently listed for trading on any other market or quotation system. On January 10, 2014, we delisted from the Canadian National Stock Exchange.

D. Selling Shareholders

Not applicable.

E. Dilution

Not applicable.

F. Expenses of the Issue

Not applicable.

ITEM 10. Additional Information

A. Share Capital

Not applicable.

B. Memorandum and Articles of Association

We have been continued under the laws of the Province of British Columbia, Canada and have been assigned the number C0913693.

Our Articles do not contain a description of our objects and purposes.

Our Articles do not restrict a director’s power to vote on a proposal, arrangement or contract in which the director is materially interested, vote compensation to themselves or any other members of their body in the absence of an independent quorum or exercise borrowing powers. There is no mandatory retirement age for our directors and our directors are not required to own securities of our company in order to serve as directors.

Our authorized capital consists of an unlimited number of common shares without par value and an unlimited number of Class A preference shares without par value. Our Class A preference shares may be issued in one or more series and our directors may fix the number of shares which is to comprise each series and designate the rights, privileges, restrictions and conditions attaching to each series. There are no Class A preference shares issued and outstanding.

Holders of our common shares are entitled to vote at all meetings of shareholders, except meetings at which only holders of a specified class of shares are entitled to vote, receive any dividend declared by us and, subject to the rights, privileges, restrictions and conditions attaching to any other class of shares, receive the remaining property of our company upon dissolution.

The provisions in our Articles attaching to our common shares and Class A preference shares may be altered, amended, repealed, suspended or changed by the affirmative vote of the holders of not less than two-thirds of the common shares and two-thirds of the Class A preference shares, respectively, present in person or by proxy at any such meeting of holders.

Our Articles provide for directors to hold office until the expiry of his term (which is stipulated to be immediately before the next election or appointment of directors at an annual general meeting of our shareholders) or until his successor is elected or appointed, unless his office is earlier vacated in accordance with our Articles or with the provisions of the Business Corporations Act (British Columbia) . A director appointed or elected to fill a vacancy on the board of directors holds office for the unexpired term of his predecessor.

An annual meeting of shareholders must be held at such time in each year that is not later than fifteen months after the last preceding annual meeting and at such place as our board of directors may from time to time determine. The holders of not less than five percent of our issued shares that carry the right to vote at a meeting may requisition our directors to call a meeting of shareholders for the purposes stated in the requisition. The quorum for the transaction of business at any meeting of shareholders is two persons who are entitled to vote at the meeting in person or by proxy. Only persons entitled to vote, our directors, president, secretary, lawyers and auditors, and others who, although not entitled to vote, are otherwise entitled or required to be present, are entitled to be present at a meeting of shareholders, provided that only persons entitled to vote may be counted in the quorum.

Except as provided in the Investment Canada Act , there are no limitations specific to the rights of non-Canadians to hold or vote our common shares under the laws of Canada or British Columbia, or in our charter documents. See the section entitled “Exchange Controls” below for a discussion of the principal features of the Investment Canada Act for non-Canadian residents proposing to acquire our common shares.

Our Articles do not contain provisions that would have an effect of delaying, deferring or preventing a change in control of our company, other than authorizing the issuance by our board of directors of preferred stock in series and limiting the persons who may call special meetings of shareholders. Our Articles do not contain any provisions that would operate only with respect to a merger, acquisition or corporate restructuring of our company.

Our Articles do not contain any provisions governing the ownership threshold above which shareholder ownership must be disclosed.

Our Articles are not significantly different from the requirements of the Business Corporations Act (British Columbia), and the conditions imposed by our Articles governing changes in capital are not more stringent than what is required by the

Business Corporations Act (British Columbia).

C. Material Contracts

The material contracts which our company and TrichoScience have entered into during the last two years are set out below. All references to “we”, “us” or “our” in the descriptions of the agreements below refer to TrichoScience.

• On April 12, 2012, we entered into an arrangement with a private US company to perform professional services related to the dissemination of corporate marketing materials. In return for these services, we have paid US$338,000. There is no formal agreement with respect to this arrangement.

• On May 24, 2012, we signed a collaborative research agreement with the University of British Columbia and the Vancouver Coastal Health Authority (together, the “Institutions”). Under the collaborative research agreement, the Institutions agreed to undertake hair cell research and we agreed to pay research costs totaling $196,488. We will gain the rights to any intellectual property arising from the collaborative research agreement. We agreed to make the following payments to the Institutions in installments, as follows: $98,244 on 30 calendar days from signature of the agreement (paid); and $98,244 on Oct 1, 2012 (paid). On February 22, 2013 we signed a novation agreement and amendment No. 2 whereby we would pay UBC $57,049 on August 1, 2013 (paid) and $57,049 on December 1, 2013 (paid).

• On June 21, 2012, we entered into a professional services agreement (the “Value Agreement”) with Value Relations GmbH (“Value Relations”). The Value Agreement is for a period of twelve months commencing on June 21, 2012 (the “Execution Date”) and expiring on May 31, 2013. Value Relations shall act as our strategic investor relations consultant in Germany, Austria and Switzerland. The agreement expired on May 31, 2013 and was not renewed. The compensation paid by us to Value Relations, including any non-cash compensation was €30,000 on the execution date (paid); grant stock options to purchase up to 300,000 common shares at an exercise price of USD$1.10 per share (these options were cancelled on August 31, 2013); €15,000 on the date which is six months after the execution date (paid); and €15,000 on the date which is nine months after the execution date (paid).

• On July 23, 2012, we entered into a professional services agreement (the “Kaplan”) with AIM Capital d/b/a Barry Kaplan Associates (“Kaplan”). The Kaplan Agreement is for a period of three months commencing on July 23, 2012 and expiring on October 23, 2012. Kaplan has agreed to conduct investor relations activities for our company and to raise our company’s profile in the financial marketplace and the financial press using informational reports and public filings of our company. Pursuant to the terms of the Kaplan Agreement, we paid Kaplan a monthly fee of US$8,500 (paid); and a retainer of US$8,500 (paid).

• On October 1, 2012, we entered into a lease agreement for our office premises. The term of the lease is for three years, ending on October 31, 2015. The outstanding commitment at December 31, 2013 was $244,200.

• On January 15, 2013, we entered into an arrangement with a Berlin-based investor relations firm, Deutsche Investors-Relations GmbH (“Deutsche IR”). The arrangement is for a period of twelve months commencing on January 15, 2013 and expiring January 15, 2014, for compensation of €3,350 per month. Pursuant to the terms of the arrangement, Deutsche IR has agreed to conduct investor relations activities for our company and to raise our profile in the financial marketplace and the financial press using informational reports and public filings of our company. The arrangement was terminated on September 1, 2013.

• On July 9, 2013 we entered into a Collaboration and Technology Transfer Agreement with Shiseido Co., Ltd. (“Shiseido”)for an exclusive geographic license for our RCH-01 hair regeneration technology. Under the agreement, Shiseido will pay us an upfront fee of ¥400,000,000 ($4,120,400) (paid). In addition, Shiseido will pay us sales milestones up to ¥3,000,000,000. We are also entitled to royalties on sales. Under the agreement, the collaboration between Shiseido includes the disclosure and discussion of future clinical trials and related documentation in relation the transferred technology. Each party is responsible for its own costs and expenses. Our responsibility with respect to the collaboration is limited to the transfer of technology to Shiseido (completed).

• On September 1, 2013 we entered into an agreement with Westwicke Partners (“Westwicke”) as its investor relations agency to assist in our communications with investors. Westwicke Partners provides strategic investor relations and capital markets advisory services exclusively to public and private companies in the healthcare sector. The agreement is for a period of 12 months, expiring August 31, 2014 for compensation of US$15,000 per month.

• On November 29, 2013, we signed a collaborative research agreement with the University of British Columbia and the Vancouver Coastal Health Authority (together, the “Institutions”). Under the collaborative research agreement, the Institutions agreed to undertake hair cell research and we agreed to pay research costs totaling $179,650. We will gain the rights to any intellectual property arising from the collaborative research agreement. We agreed to make the following payments to the Institutions in installments, as follows: $44,912.50 on January 1, 2014, $44,912.50 on April 1, 2014, $44,912.50 on July 1, 2014, and $44,912.50 on October 1, 2014.

• On February 26, 2014, we entered into an agreement with Ubika Communication, a division of Ubika Corporation to provide capital market exposurein exchange for an initial payment of $10,000 and a $2,500 per month fee for a period of 12 months. Ubika Communication provides capital market exposure services via their flagship website portal smallcapower.com (SCP) which is also featured on the Financial Post website. SCP represents a unique way for small cap companies to bridge between the traditional investor relations business model and the online world that is becoming increasingly important for maximizing shareholder value.

D. Exchange Controls

There are presently no governmental laws, decrees or regulations in Canada which restrict the export or import of capital, or which impose foreign exchange controls or affect the remittance of interest, dividends or other payments to non-resident holders of our common shares. However, any remittances of dividends to shareholders not resident in Canada are subject to withholding tax in Canada. See the section entitled “Taxation” below.

Except as provided in the Investment Canada Act , there are no limitations specific to the rights of non-Canadians to hold or vote our common shares under the laws of Canada or British Columbia or in our charter documents. The following summarizes the principal features of the Investment Canada Act for non-Canadian residents proposing to acquire our common shares.

This summary is of a general nature only and is not intended to be, and should not be construed to be, legal advice to any holder or prospective holder of our common shares, and no opinion or representation to any holder or prospective holder of our common shares is hereby made. Accordingly, holders and prospective holders of our common shares should consult with their own legal advisors with respect to the consequences of purchasing and owning our common shares.

The Investment Canada Act governs the direct or indirect acquisition of control of an existing Canadian business by non-Canadians. Under the Investment Canada Act , non-Canadian persons or entities acquiring “control” (as defined in the Investment Canada Act ) of a corporation carrying on business in Canada are required to either notify, or file an application for review with, Industry Canada, unless a specific exemption, as set out in the Investment Canada Act, applies. Industry Canada may review any transaction which results in the direct or indirect acquisition of control of a Canadian business, where the gross value of corporate assets exceeds certain threshold levels (which are higher for investors from members of the World Trade Organization, including United States residents, or World Trade Organization member-controlled companies) or where the activity of the business is related to Canada’s cultural heritage or national identity. No change of voting control will be deemed to have occurred, for purposes of the Investment Canada Act , if less than one-third of the voting control of a Canadian corporation is acquired by an investor. In addition, the Investment Canada Act permits the Canadian government to review any investment where the responsible Minister has reasonable grounds to believe that an investment by a non-Canadian could be injurious to national security. No financial threshold applies to a national security review. The Minister may deny the investment, ask for undertakings, provide terms or conditions for the investment or, where the investment has already been made, require divestment. Review can occur before or after closing and may apply to corporate re-organizations where there is no change in ultimate control.

If an investment is reviewable under the Investment Canada Act , an application for review in the form prescribed is normally required to be filed with Industry Canada prior to the investment taking place, and the investment may not be implemented until the review has been completed and the Minister responsible for the Investment Canada Act is satisfied that the investment is likely to be of net benefit to Canada. If the Minister is not satisfied that the investment is likely to be of net benefit to Canada, the non-Canadian applicant must not implement the investment, or if the investment has been implemented, may be required to divest itself of control of the Canadian business that is the subject of the investment. The Minister is required to provide reasons for a decision that an investment is not of net benefit to Canada.

Certain transactions relating to our common shares will generally be exempt from the Investment Canada Act , subject to the Minister’s prerogative to conduct a national security review, including:

	(a)	the acquisition of our common shares by a person in the ordinary course of that person’s business as a trader or dealer in securities;

	(b)	the acquisition of control of our company in connection with the realization of security granted for a loan or other financial assistance and not for a purpose related to the provisions of the Investment Canada Act; and

	(c)	the acquisition of control of our company by reason of an amalgamation, merger, consolidation or corporate reorganization following which the ultimate direct or indirect control in fact of our company, through ownership of our common shares, remains unchanged.

E. Taxation

Material Canadian Federal Income Tax Consequences

We consider that the following general summary fairly describes the principal Canadian federal income tax consequences applicable to a holder of our common shares who is a resident of the United States, who is not, will not be and will not be deemed to be, a resident of Canada for purposes of the Income Tax Act (Canada) and any applicable tax treaty and who does not use or hold, and is not deemed to use or hold, his common shares in the capital of our company in connection with carrying on a business in Canada (a “ non-resident holder ”).

This summary is based upon the current provisions of the Income Tax Act , the regulations thereunder (the “ Regulations ”), the current publicly announced administrative and assessing policies of the Canada Revenue Agency and the Canada-United States Tax Convention (1980), as amended (the “ Treaty ”). This summary also takes into account the amendments to the Income Tax Act and the Regulations publicly announced by the Minister of Finance (Canada) prior to the date hereof (the “ Tax Proposals ”) and assumes that all such Tax Proposals will be enacted in their present form. However, no assurances can be given that the Tax Proposals will be enacted in the form proposed, or at all. This summary is not exhaustive of all possible Canadian federal income tax consequences applicable to a holder of our common shares and, except for the foregoing, this summary does not take into account or anticipate any changes in law, whether by legislative, administrative or judicial decision or action, nor does it take into account provincial, territorial or foreign income tax legislation or considerations, which may differ from the Canadian federal income tax consequences described herein.

This summary is of a general nature only and is not intended to be, and should not be construed to be, legal, business or tax advice to any particular holder or prospective holder of our common shares, and no opinion or representation with respect to the tax consequences to any holder or prospective holder of our common shares is made. Accordingly, holders and prospective holders of our common shares should consult their own tax advisors with respect to the income tax consequences of purchasing, owning and disposing of our common shares in their particular circumstances.

Dividends

Dividends paid on our common shares to a non-resident holder will be subject under the Income Tax Act to withholding tax which tax is deducted at source by our company. The withholding tax rate for dividends prescribed by the Income Tax Act is 25% but this rate may be reduced under the provisions of an applicable tax treaty. Under the Treaty, the withholding tax rate is reduced to 15% on dividends paid by our company to residents of the United States and is further reduced to 5% where the beneficial owner of the dividends is a corporation resident in the United States that owns at least 10% of the voting shares of our company.

Capital Gains

A non-resident holder is not subject to tax under the Income Tax Act in respect of a capital gain realized upon the disposition of a common share of our company unless such share is “taxable Canadian property” (as defined in the Income Tax Act ) of the non-resident holder. Our common shares generally will not be taxable Canadian property of a non-resident holder unless the non-resident holder alone or together with non-arm’s length persons owned, or had an interest in an option in respect of, not less than 25% of the issued shares of any class of our capital stock at any time during the 60 month period immediately preceding the disposition of the shares. In the case of a non-resident holder resident in the United States for whom shares of our company are taxable Canadian property, no Canadian taxes will generally be payable on a capital gain realized on such shares by reason of the Treaty unless the value of such shares is derived principally from real property situated in Canada.

Material United States Federal Income Tax Consequences

The following is a general discussion of certain possible United States Federal foreign income tax matters under current law, generally applicable to a U.S. Holder (as defined below) of our common shares who holds such shares as capital assets. This discussion does not address all aspects of United States Federal income tax matters and does not address consequences peculiar to persons subject to special provisions of Federal income tax law, such as those described below as excluded from the definition of a U.S. Holder. In addition, this discussion does not cover any state, local or foreign tax consequences. See

Taxation Certain Canadian Federal Income Tax Consequences above.

The following discussion is based upon the Internal Revenue Code of 1986, as amended (the “ Code ”), Treasury Regulations, published Internal Revenue Service (“ IRS ”) rulings, published administrative positions of the IRS and court decisions that are currently applicable, any or all of which could be materially and adversely changed, possibly on a retroactive basis, at any time. In addition, this discussion does not consider the potential effects, both adverse and beneficial, of any recently proposed legislation which, if enacted, could be applied, possibly on a retroactive basis, at any time. No assurance can be given that the IRS will agree with such statements and conclusions, or will not take, or a court will not adopt, a position contrary to any position taken herein.

The following discussion is for general information only and is not intended to be, nor should it be construed to be, legal, business or tax advice to any holder or prospective holder of our common shares, and no opinion or representation with respect to the United States Federal income tax consequences to any such holder or prospective holder is made. Accordingly, holders and prospective holders of common shares are urged to consult their own tax advisors with respect to Federal, state, local, and foreign tax consequences of purchasing, owning and disposing of our common shares.

U.S. Holders

As used herein, a “U.S. Holder” includes a holder of less than 10% of our common shares who is a citizen or resident of the United States, a corporation created or organized in or under the laws of the United States or of any political subdivision thereof, any entity which is taxable as a corporation for United States tax purposes and any other person or entity whose ownership of our common shares is effectively connected with the conduct of a trade or business in the United States. A U.S. Holder does not include persons subject to special provisions of Federal income tax law, such as tax-exempt organizations, qualified retirement plans, financial institutions, insurance companies, real estate investment trusts, regulated investment companies, broker-dealers, non-resident alien individuals or foreign corporations whose ownership of our common shares is not effectively connected with the conduct of a trade or business in the United States and shareholders who acquired their shares through the exercise of employee stock options or otherwise as compensation.

Distributions

The gross amount of a distribution paid to a U.S. Holder will generally be taxable as dividend income to the U.S. Holder for United States federal income tax purposes to the extent paid out of our current or accumulated earnings and profits, as determined under United States federal income tax principles. Distributions which are taxable dividends and which meet certain requirements will be “unqualified dividend income” and taxed to U.S. Holders at a maximum United States federal rate of 15%. Distributions in excess of our current and accumulated earnings and profits will be treated first as a tax-free return of capital to the extent the U.S. Holder’s tax basis in the common shares and, to the extent in excess of such tax basis, will be treated as a gain from a sale or exchange of such shares.

Capital Gains

In general, upon a sale, exchange or other disposition of common shares, a U.S. Holder will generally recognize a capital gain or loss for United States federal income tax purposes in an amount equal to the difference between the amount realized on the sale or other distribution and the U.S. Holder’s adjusted tax basis in such shares. Such gain or loss will be a United States source gain or loss and will be treated as a long-term capital gain or loss if the U.S. Holder’s holding period of the shares exceeds one year. If the U.S. Holder is an individual, any capital gain will generally be subject to United States federal income tax at preferential rates if specified minimum holding periods are met. The deductibility of capital losses is subject to significant limitations.

Foreign Tax Credit

A U.S. Holder who pays (or has had withheld from distributions) Canadian income tax with respect to the ownership of our common shares may be entitled, at the option of the U.S. Holder, to either a deduction or a tax credit for such foreign tax paid or withheld. Generally, it will be more advantageous to claim a credit because a credit reduces United States Federal income taxes on a dollar-for-dollar basis, while a deduction merely reduces the taxpayer’s income subject to tax. This election is made on a year-by-year basis and generally applies to all foreign income taxes paid by (or withheld from) the U.S. Holder during that year. There are significant and complex limitations which apply to the tax credit, among which is an ownership period requirement and the general limitation that the credit cannot exceed the proportionate share of the U.S. Holder’s United States income tax liability that the U.S. Holder’s foreign source income bears to his or its worldwide taxable income. In determining the application of this limitation, the various items of income and deduction must be classified into foreign and domestic sources. Complex rules govern this classification process. The availability of the foreign tax credit and the application of these complex limitations on the tax credit are fact specific and holders and prospective holders of our common shares should consult their own tax advisors regarding their individual circumstances.

Passive Foreign Investment Corporation

We do not believe that we are a passive foreign investment corporation (a “ PFIC ”). However, since PFIC status depends upon the composition of a company’s income and assets and the market value of its assets and shares from time to time, there is no assurance that we will not be considered a PFIC for any taxable year. If we were treated as a PFIC for any taxable year during which a U.S. Holder held shares, certain adverse tax consequences could apply to the U.S. Holder.

If we are treated as a PFIC for any taxable year, gains recognized by such U.S. Holder on a sale or other disposition of shares would be allocated ratably over the U.S. Holder’s holding period for the shares. The amount allocated to the taxable year of the sale or other exchange and to any year before we became a PFIC would be taxed as ordinary income. The amount allocated to each other taxable year would be subject to tax at the highest rate in effect for individuals or corporations, as applicable, and an interest charge would be imposed on the amount allocated to such taxable year. Further, any distribution in respect of shares in excess of 125% of the average of the annual distributions on shares received by the U.S. Holder during the preceding three years or the U.S. Holder’s holding period, whichever is shorter, would be subject to taxation as described above. Certain elections may be available to U.S. Holders that may mitigate some of the adverse consequences resulting from PFIC status. However, regardless of whether such elections are made, dividends paid by a PFIC will not be “qualified dividend income” and will generally be taxed at the higher rates applicable to other items of ordinary income.

U.S. Holders and prospective holders should consult their own tax advisors regarding the potential application of the PFIC rules to their ownership of our common shares.

F. Dividends and Paying Agents

Not applicable.

G. Statements by Experts

Not applicable.

H. Documents on Display

Documents concerning our company referred to in this annual report may be viewed by appointment during normal business hours at our registered and records office at Suite 800 - 885 West Georgia Street, Vancouver, British Columbia, Canada V6C 3H1.

I. Subsidiary Information

We have one subsidiary: TrichoScience Innovations Inc., a company incorporated on September 7, 2006 under the Business Corporations Act (Canada).

ITEM 11. Quantitative and Qualitative Disclosures About Market Risk

We are exposed to various market risks including currency risks, credit risks, liquidity risks and interest rate risks, which may affect our results of operations and financial condition and, consequently, the value of our company. Generally, our management believes that our current financial assets and financial liabilities, due to their short-term nature, do not pose significant financial risks. Please refer to Note 13 of our annual financial statements contained herein for a qualitative and quantitative discussion of our exposure to market risks at December 31, 2013.

ITEM 12. Description of Securities Other Than Equity Securities

Not applicable.

PART II

ITEM 13. Defaults, Dividend Arrearages and Delinquencies

Not applicable.

ITEM 14. Material Modifications to the Rights of Security Holders and Use of Proceeds

Not applicable.

ITEM 15. Controls and Procedures

A. Disclosure Controls and Procedures

As required by paragraph (b) of Rules 13a-15 or 15d-15 under the Exchange Act, our principal executive officer and principal financial officer evaluated our company’s disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) of the Exchange Act) as of the end of the period covered by this annual report on Form 20-F. Based on this evaluation, these officers concluded that as of the end of the period covered by this Annual Report on Form 20-F, our disclosure controls and procedures were not effective to ensure that the information required to be disclosed by our company in reports it files or submits under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the rules and forms of the Securities and Exchange Commission. These disclosure controls and procedures include controls and procedures designed to ensure that such information is accumulated and communicated to our company’s management, including our company’s principal executive officer and principal financial officer, to allow timely decisions regarding required disclosure. The conclusion that our disclosure controls and procedures were not effective was due to the presence of material weaknesses in internal control over financial reporting as identified below under the heading “Management’s Report on Internal Control Over Financial Reporting.” Management anticipates that such disclosure controls and procedures will not be effective until the material weaknesses are remediated. Our company intends to remediate the material weaknesses as set out below.

Because of the inherent limitations in all control systems, no evaluation of controls can provide absolute assurance that all control issues, if any, within our company have been detected.

B. Management’s Report on Internal Control Over Financial Reporting

Our company’s management is responsible for establishing and maintaining adequate internal control over financial reporting (as defined in Rules 13a-15(f) and 15d-15(f) of the Exchange Act) for our company. Our company’s internal control over financial reporting is designed to provide reasonable assurance, not absolute assurance, regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles in the United States of America. Internal control over financial reporting includes those policies and procedures that: (i) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of our company’s assets; (ii) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles in the United States of America, and that our company’s receipts and expenditures are being made only in accordance with authorizations of our management and directors; and (iii) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of assets that could have a material effect on our financial statements.

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

Our management, including our principal executive officer and principal financial officer, conducted an evaluation of the design and operation of our internal control over financial reporting as of December 31, 2013 based on the criteria set forth in Internal Control – Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission. This evaluation included review of the documentation of controls, evaluation of the design effectiveness of controls, testing of the operating effectiveness of controls and a conclusion on this evaluation. Based on this evaluation, our management concluded our internal control over financial reporting was not effective as at December 31, 2013 due to the following material weaknesses: (i) inadequate segregation of duties and effective risk assessment; and (ii) insufficient written policies and procedures for accounting, financial reporting and corporate governance.

Our company has taken steps to enhance and improve the design of our internal controls over financial reporting, however these steps were not complete as of December 31, 2013. During the period covered by this annual report on Form 20-F, we have not been able to remediate the material weaknesses identified above.

Plan for Remediation of Material Weaknesses

We intend to take appropriate and reasonable steps to make the necessary improvements to remediate these deficiencies. We intend to consider the results of our remediation efforts and related testing as part of our year-end 2013 assessment of the effectiveness of our internal control over financial reporting.

Subject to receipt of additional financing, we have undertaken, or intend to undertake, the below remediation measures to address the material weaknesses described in this annual report. Such remediation activities include the following:

1.	we intend to continue to update the documentation of our internal control processes, including formal risk assessment of our financial reporting processes.

The remediation efforts set out above are largely dependent upon our company securing additional financing to cover the costs of implementing the changes required. If we are unsuccessful in securing such funds, remediation efforts may be adversely affected in a material manner.

Our internal control over financial reporting was not subject to attestation by our independent registered public accounting firm pursuant to the rules of the Securities and Exchange Commission that permit us to provide only management’s report in this annual report.

Because of the inherent limitations in all control systems, no evaluation of controls can provide absolute assurance that all control issues, if any, within our company have been detected. These inherent limitations include the realities that judgments in decision-making can be faulty and that breakdowns can occur because of simple error or mistake.

C. Changes in Internal Controls Over Financial Reporting

There were no changes in internal controls over financial reporting during the year ended December 31, 2013 that have materially affected or are reasonably likely to materially affect, our internal control over financial reporting. However, as a result of the evaluation of our internal control over financial reporting as of December 31, 2013, conducted by our principal executive officer and principal financial officer, we expect to make such changes in the year ended December 31, 2014.

ITEM 16A. Audit Committee Financial Expert

Our board of directors has determined that at least one member of its audit committee, being Mr. Peter Lewis, qualifies as an “audit committee financial expert” as defined in Item 16A(b) of Form 20-F. Mr. Lewis is also “independent” as that term is defined in Nasdaq Marketplace Rule 5605(a)(2).

ITEM 16B. Code of Ethics

Code of Ethics

Effective July 15, 2004, our board of directors adopted a Code of Business Conduct and Ethics that applies to, among other persons, our president (being our principal executive officer) and our chief financial officer (being our principal financial and accounting officer), as well as persons performing similar functions. As adopted, our Code of Business Conduct and Ethics sets forth written standards that are designed to deter wrongdoing and to promote:

	(1)	honest and ethical conduct, including the ethical handling of actual or apparent conflicts of interest between personal and professional relationships;

	(2)	full, fair, accurate, timely, and understandable disclosure in reports and documents that we file with, or submit to, the Securities and Exchange Commission and in other public communications made by us;

	(3)	compliance with applicable governmental laws, rules and regulations;

	(4)	the prompt internal reporting of violations of the Code of Business Conduct and Ethics to an appropriate person or persons identified in the Code of Business Conduct and Ethics; and

(5)

accountability for adherence to the Code of Business Conduct and Ethics.

Our Code of Business Conduct and Ethics requires, among other things, that all of our company’s personnel shall be accorded full access to our president and secretary with respect to any matter which may arise relating to the Code of Business Conduct and Ethics. Further, all of our company’s personnel are to be accorded full access to our company’s board of directors if any such matter involves an alleged breach of the Code of Business Conduct and Ethics by our President or Secretary.

In addition, our Code of Business Conduct and Ethics emphasizes that all employees, and particularly managers and/or supervisors, have a responsibility for maintaining financial integrity within our company, consistent with generally accepted accounting principles, and federal, provincial and state securities laws. Any employee who becomes aware of any incidents involving financial or accounting manipulation or other irregularities, whether by witnessing the incident or being told of it, must report it to his or her immediate supervisor or to our company’s president. If the incident involves an alleged breach of the Code of Business Conduct and Ethics by the president, the incident must be reported to any member of our board of directors. Any failure to report such inappropriate or irregular conduct of others is to be treated as a severe disciplinary matter. It is against our company policy to retaliate against any individual who reports in good faith the violation or potential violation of our company’s Code of Business Conduct and Ethics by another.

Our Code of Business Conduct and Ethics was filed with the Securities and Exchange Commission as Exhibit 14.1 to our annual report filed on July 15, 2004. We will provide a copy of the Code of Business Conduct and Ethics to any person without charge, upon request. Requests can be sent to: RepliCel Life Sciences Inc., Suite 2020 -401 West Georgia Street, Vancouver, British Columbia, Canada V6B 5A1.

ITEM 16C. Principal Accountant Fees and Services

Audit Fees

Our board of directors appointed BDO Canada LLP, Chartered Accountants, as independent auditors to audit our consolidated financial statements for the fiscal year ended December 31, 2013. The aggregate fees billed by BDO Canada LLP for audit services rendered for the audit of our annual financial statements and interim reviews of our quarterly financial statements for the fiscal years ended December 31, 2013 and December 31, 2012 were $73,834 and $78,364, respectively.

Audit Related Fees

For the fiscal year ended December 31, 2013, and 2012, the aggregate fees billed for audit related services by BDO Canada LLP were $Nil and $Nil, respectively.

Tax Fees

For the fiscal years ended December 31, 2013 and 2012, the aggregate fees billed for tax compliance, tax advice and tax planning by BDO Canada LLP were $3,675 and $3,150, respectively.

All Other Fees

For the fiscal years ended December 31, 2013 and 2012, the aggregate fees billed by BDO Canada LLP for other non-audit professional services, other than those services listed above, were $Nil and $Nil, respectively.

Pre-Approval Policies and Procedures

Our audit committee pre-approves all services provided by our independent auditors. All of the services and fees described under the categories of “Audit Fees”, “Audit Related Fees”, “Tax Fees” and “All Other Fees” were reviewed and approved by the audit committee before the respective services were rendered, and none of such services were approved by the audit committee pursuant to paragraph (c)(7)(i)(C) of Rule 2-01 of Regulation S-X.

The audit committee has considered the nature and amount of the fees billed by BDO Canada LLP, Chartered Accountants, and believes that the provision of the services for activities unrelated to the audit is compatible with maintaining the independence of BDO Canada LLP, Chartered Accountants.

ITEM 16D. Exemption from the Listing Standards for Audit Committees

Not applicable.

ITEM 16E. Purchases of Equity Securities by the Issuer and Affiliated Purchasers

In 2012, neither we nor any affiliated purchaser (as defined in the Securities Exchange Act of 1934) purchased any of our common shares.

ITEM 16F. Change in Registrant’s Certifying Accountant

None.

ITEM 16G. Corporate Governance

Not applicable.

ITEM 16H. Mine Safety Disclosure

Not applicable.

ITEM 17. Financial Statements

Financial Statements Filed as Part of this Report:

1.	Audited Annual Consolidated Financial Statements as at December 31, 2013 and 2012:
	Independent Auditor’s Report of BDO Canada LLP, dated March 18, 2014
	Consolidated Statement of Financial Position as at December 31, 2013 and 2012;
	Consolidated Statement of Comprehensive Loss for the years ended December 31, 2013, 2012, and 2011;
	Consolidated Statements of Cash Flows for the years ended December 31, 2013, 2012, and 2011;
	Consolidated Statement of Changes in Equity for the years ended December 31, 2013, 2012, and 2011; and
	Notes to the Consolidated Financial Statements.

REPLICEL LIFE SCIENCES INC.

INDEPENDENT AUDITOR’S REPORT AND CONSOLIDATED FINANCIAL STATEMENTS

For the year-ended December 31, 2013

( Stated in Canadian Dollars )

	Tel: 604 688 5421	BDO Canada LLP
	Fax: 604 688 5132	600 Cathedral Place
	www.bdo.ca	925 West Georgia Street
		Vancouver BC V6C 3L2 Canada

Independent Auditor’s Report

To the shareholders of RepliCel Life Sciences Inc.

We have audited the accompanying consolidated financial statements of RepliCel Life Sciences Inc., which comprise the consolidated statement of financial position as at December 31, 2013 and December 31, 2012 and the consolidated statements of comprehensive loss, cash flows, and changes in equity for the years ended December 31, 2013, 2012 and 2011, 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 IASB, and for such internal control as management determines is necessary to enable the preparation of financial statements that are free from material misstatement, whether due to fraud or error.

Auditor's Responsibility

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

An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the consolidated financial statements. The procedures selected depend on the auditor's 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 auditor considers 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 presentation of the consolidated financial statements.

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

Opinion

In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of RepliCel Life Sciences Inc. as at December 31, 2013 and December 31, 2012 and its financial performance and its cash flows for the years ended December 31, 2013, 2012 and 2011 in accordance with International Financial Reporting Standards.

Emphasis of Matter

Without qualifying our opinion, we draw attention to Note 2a in the accompanying financial statements which indicates the Company has incurred operating losses since inception, which raises substantial doubt about the Company’s ability to continue as a going concern. The accompanying financial statements do not include any adjustments that might result from the outcome of these uncertainties.

/s/ BDO Canada LLP

Chartered Accountants,

Vancouver, British Columbia
March 18, 2014

BDO Canada LLP, a Canadian limited liability partnership, is a member of BDO International Limited, a UK company limited by guarantee, and forms part of the international BDO network of independent member firms.

REPLICEL LIFE SCIENCES INC.

Consolidated Statements of Financial Position

For the year-ended December 31,2013

(Stated in Canadian Dollars)

	Notes		December 31, 2013			December 31, 2012
Assets

Current assets
Cash and cash equivalents		$	1,958,005		$	384,286
Sales taxes recoverable			24,504			47,713
Prepaid expenses and deposits			46,568			51,894
			2,029,077			483,893
Non-current assets
Equipment	7		23,324			21,595

Total assets		$	2,052,401		$	505,488


Liabilities

Current liabilities
Accounts payable and accrued liabilities	10	$	369,355		$	416,125


Non-current liabilities
Warrants denominated in a foreign currency	8g		208,387			68,205
Total liabilities			577,742			484,330


Shareholders’ equity
Common shares	8		9,430,914			8,319,082
Share subscriptions	8		-			24,851
Contributed surplus	8		2,305,713			1,910,621
Accumulated deficit			(10,261,968	)		(10,233,396	)
Total shareholders’ equity			1,474,659			21,158

Total liabilities and shareholders’ equity		$	2,052,401		$	505,488

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

Approved on behalf of the Board:

/s/ “Peter Jensen”		/s/ “David Hall”
Director		Director

REPLICEL LIFE SCIENCES INC.

Consolidated Statements of Comprehensive Loss

For the year - ended December 31, 2013

(Stated in Canadian Dollars)

		December 31,			December 31,			December 31,
		2013			2012			2011
Revenue
Licensing fees (Note 9)	$	4,120,400		$	-		$	-

Expenses
Research and development (Note 9)		1,561,963			1,065,075			1,019,408
General and administrative (Note 6, 7, and 9)		2,175,209			3,408,894			2,713,918

Income (loss) before other items		383,228			(4,473,969	)		(3,733,326	)
Other items:
Change in fair value of warrants denominated in a foreign currency (Note 8g)		(140,182	)		1,116,445			-
Foreign exchange gain (loss)		(10,361	)		(5,651	)		39,386
Scientific research and development credit (Note 12)		150,783			-			-
Loss on disposal of equipment		-			-			(19,499	)

Net income (loss) before tax		383,468			(3,363,175	)		(3,713,439	)
Income tax (Note 9, 11)		(412,040	)		-			-
Total comprehensive loss	$	(28,572	)	$	(3,363,175	)	$	(3,713,439	)

Total comprehensive loss attributable to non-controlling interest		-			-			(219,476	)
Total comprehensive loss attributable to owners’ of the parent		(28,572	)		(3,363,175	)		(3,493,960	)

Basic and diluted loss per share	$	(0.00	)	$	(0.08	)	$	(0.10	)

Weighted average shares outstanding		45,246,932			42,680,615			34,942,240

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

REPLICEL LIFE SCIENCES INC.

Consolidated Statements of Cash Flows

For the year - ended December 31, 2013

(Stated in Canadian Dollars)

		December 31,			December 31,			December 31,
		2013			2012			2011

Operating activities

Comprehensive loss	$	(28,572	)	$	(3,363,175	)	$	(3,713,439	)
Add items not involving cash:
Depreciation		6,125			6,082			7,591
Loss on disposal of equipment		-			-			19,499
Stock-based compensation		395,092			1,381,589			947,272
Change in fair value of warrants		140,182			(1,116,445	)		-

Changes in non-cash working capital balances:
Sales taxes recoverable		23,209			(20,668	)		13,832
Prepaid expenses and deposits		5,326			(31,250	)		2,948
Accounts payable and accrued liabilities		(46,770	)		186,156			(393,326	)
Net cash provided by (used in) operating activities		494,592			(2,957,711	)		(3,115,623	)

Investing activities

Purchase of Equipment		(7,854	)		(9,090	)		(12,929	)
Net cash used in investing activities		(7,854	)		(9,090	)		(12,929	)

Financing activities

Gross proceeds on issuance of common shares		1,133,651			2,796,740			2,482,170
Finder’s fee		(46,670	)		(35,647	)		-
Proceeds of share subscriptions		-			24,851			-
Net cash provided by financing activities		1,086,981			2,785,944			2,482,170

Increase (decrease) in cash and cash equivalents
during the year		1,573,719			(180,857	)		(646,382	)

Cash and cash equivalents, beginning of the year		384,286			565,143			1,211,525

Cash and cash equivalents, end of the year	$	1,958,005		$	384,286		$	565,143

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

REPLICEL LIFE SCIENCES INC.

Consolidated Statements of Changes in Equity

For the year ended December 31 , 2013

(Stated in Canadian Dollars)

			Common Stock
						Share			Contributed		Accumulated
	Shares		Amount			Subscriptions			Surplus		Deficit			Total

Balance, January 1, 2013	45,025,054	$	8,319,082		$	24,851		$	1,910,621	$	(10,233,396	)	$	21,158
Shares issued for cash at CAD $0.31 – Note 8b	2,043,555		633,502			(24,851	)		-		-			608,651
Shares issued for cash at CAD $0.50 – Note 8b	1,050,000		525,000			-			-		-			525,000
Finders fees – Note 7b	-		(46,670	)		-			-		-			(46,670	)
Stock based compensation – Note 7	-					-			395,092		-			395,092
Net earnings for the year	-		-			-			-		(28,572	)		(28,572	)
Balance, December 31, 2013	48,118,609	$	9,430,914		$	-		$	2,305,713	$	(10,261,968	)	$	1,474,659


			Common Stock
						Share			Contributed		Accumulated
	Shares		Amount			Subscriptions			Surplus		Deficit			Total

Balance, January 1, 2012	43,150,008	$	6,266,739		$	-		$	1,004,932	$	(6,870,221	)	$	401,450
Shares issued for cash at USD $1.50 – Note 8b	1,875,046		2,761,093			-			-		-			2,761,093
Warrants denominated in a foreign currency – Note 8g	-		(963,100	)		-			-		-			(963,100	)
Escrow Release – Note 8f	-		254,350			-			-		-			254,350
Stock based compensation – Note 8	-		-			-			905,689		-			905,689
Share subscriptions	-		-			24,851			-		-			24,851
Net loss for the year	-		-			-			-		(3,363,175	)		(3,363,175	)
Balance, December 31, 2012	45,025,054	$	8,319,082		$	24,851		$	1,910,621	$	(10,233,396	)	$	21,158

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

REPLICEL LIFE SCIENCES INC.

Consolidated Statements of Changes in Equity

FortheyearendedDecember31,2013

(Stated in Canadian Dollars)


						Attributable to the Owners’ of the Parent
			Common Stock																					Attributable To Non-
					Share	Series B Preferred Shares				Series C Preferred Shares						Contributed		Accumulated						Controlling
	Shares		Amount		Subscriptions	Shares			Amount	Shares			Amount			Surplus		Deficit			Total			Interest			Total

Balance, January 1, 2011	27,053,960	$	3,344,320	$	-	5,577,580		$	-	7,577,580		$	204		$	235,705	$	(3,219,782	)	$	360,447		$	325,000		$	685,447
Net loss for the year	-		-		-	-			-	-			-			-		(3,493,960	)		(3,493,960	)		(219,479	)		(3,713,439	)
Private placement – Note 8b	2,651,200		2,482,170		-	-			-	-			-			-		-			2,482,170			-			2,482,170
Increase in non-controlling interest attributable to issuance of shares for cash to parent – Note 6	-		-		-	-			-	-			-			-		(505,345	)		(505,345	)		505,345			-
Exchange of shares – Note 6	10,844,846		262,000		-	5,422,420			-	5,422,420			-			-		348,866			610,866			(610,866	)		-
Cancellation of shares – Note 6	2,600,002		204		-	(11,000,000	)		-	(13,000,000	)		(204	)		-		-			-			-			-
Escrow release – Note 8f	-		178,045		-	-			-	-			-			-		-			178,045			-			178,045
Stock based compensation – Note 8e	-		-		-	-			-	-			-			769,227		-			769,227			-			767,227
Balance, December 31, 2011	43,150,008	$	6,266,739	$	-	-		$	-	-		$	-		$	1,004,932	$	(6,870,221	)	$	401,450		$	-		$	401,450

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

REPLICEL LIFE SCIENCES INC.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

For the year - ended December 31, 2013

(Stated in Canadian Dollars)

1.	Corporate Information

	RepliCel Life Sciences Inc. (“the Company” or “RepliCel”) was incorporated under the Ontario Business Corporations Act on April 24, 1967. The Company’s reporting jurisdiction is British Columbia. Its common shares are listed for trading in Canada on the TSXV, trading under the symbol RP, and in the United States on the OTCQB, trading under the symbol REPCF.

	RepliCel is a regenerative medicine company focused on developing autologous cell therapies that treat functional cellular deficits including chronic tendon injuries, androgenetic alopecia and skin aging. Initiation of Phase 2 trials are planned for 2014 on RepliCel’s RCT-01 treatment for Achilles tendinosis and RCH-01 treatment for androgenetic alopecia. Shiseido Company, Limited has an exclusive geographic license for RCH-01 in certain Asian countries including Japan, China and South Korea. Both product candidates are based on RepliCel’s innovative technology which utilizes cells isolated from a patient’s own healthy hair follicles to address specific cellular deficits. These products are built on the company’s proprietary manufacturing platforms. RepliCel is also developing a unique programmable cell injector device designed for dermal injections. In addition to addressing the delivery requirements for RCT-01 and RCH- 01, this device should have applications in many current dermatological injection procedures with the added benefit of physician controlled programmable depth and volumes.

	The address of the Company’s corporate office and principal place of business is Suite 2020 – 401 West Georgia Street, Vancouver, BC, V6B 5A1.

2.	Basis of Presentation

	These consolidated financial statements for the year-ended December 31, 2013have been prepared in accordance with International Financial Reporting Standards (“IFRS”) as issued by the International Accounting Standards Board (“IASB”).

	The financial statements are presented in Canadian dollars, which is also the Company’s functional currency, unless otherwise indicated.

	The financial statements were authorized for issue by the Board of Directors on March 18, 2014.

	The preparation of financial statements in compliance with IFRS requires management to make certain critical accounting estimates. It also requires management to exercise judgment in applying the Company’s accounting policies. The areas involving a higher degree of judgment of complexity, or areas where assumptions and estimates are significant to the financial statements are disclosed in Note 3.

	a) Going Concern of Operations

	These consolidated financial statements have been prepared on a going concern basis, which assumes that the Company will continue to realize its assets and discharge its obligations and commitments in the normal course of operations. At December 31, 2013 the Company, is in the research stage, has accumulated losses of $10,261,968 since its inception and expects to incur further losses in the development of its business. The Company has working capital of 1,659,722 (2012: $67,768) at December 31, 2013, however it will require additional funding to continue its research and development activities, which casts substantial doubt about the Company’s ability to continue as a going concern.

REPLICEL LIFE SCIENCES INC.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

For the year-ended December 31, 2013

(Stated in Canadian Dollars)

2 .	Basis of Presentation - continued

	a) Going Concern of Operations - continued

	The Company’s ability to continue as a going concern is dependent upon its ability to generate future profitable operations and/or to obtain the necessary financing to meet its obligations and repay its liabilities arising from normal business operations when they come due. Management has a plan in place to address this concern and intends to obtain additional funds by equity financing to the extent there is a shortfall from operations. While the Company is continuing its best efforts to achieve the above plans, there is no assurance that any such activity will generate funds for operations.

	If the going concern assumptions were not appropriate for these consolidated financial statements, then adjustments would be necessary to the carrying value of assets and liabilities, the reported net loss and the financial position classifications used.

	b) Change in Presentation

	The Company has reclassified certain expenses to conform to the presentation adopted by similar companies in the life sciences field. There was no change to net operating loss for the change in presentation of research and development costs.

3.	Critical Accounting Estimates and Judgements

	RepliCel Life Sciences Inc. makes estimates and assumptions about the future that affect the reported amounts of assets and liabilities. Estimates and judgments are continually evaluated based on historical experience and other factors, including expectations of future events that are believed to be reasonable under the circumstances. In the future, actual experience may differ from these estimates and assumptions.

	The effect of a change in an accounting estimate is recognized prospectively by including it in comprehensive income in the period of the change, if the change affects that period only, or in the period of the change and future periods, if the change affects both.

	Information about critical judgments in applying accounting policies that have the most significant risk of causing material adjustment to the amounts reported in these financial statements are discussed below:

	*Share Based Payments and Derivatives Liabilities related to Equities*

	The Company measures the cost of equity-settled transactions with employees by reference to the fair value of the equity instruments at the date at which they are granted. Estimating fair value for share-based payment transactions requires determining the most appropriate valuation model, which is dependent on the terms and conditions of the grant. This estimate also requires determining the most appropriate inputs to the valuation model including the expected life of the share option, volatility and dividend yield and making assumptions about them. The assumptions and models used for estimating the fair value for share-based payment transactions are disclosed in Note 8(e).

	Similar methodology to the share-based payments is used to determine the fair value of derivative liabilities related to warrants denominated in U.S. dollars. The assumptions and models used for estimating the fair value for derivative liabilities are disclosed in Note 8(g).

REPLICEL LIFE SCIENCES INC.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

For the year-ended December 31, 2013

(Stated in Canadian Dollars)

3.	Critical Accounting Estimates and Judgements - continued

	*Income Taxes*

	Significant judgment is required in determining the provision for income taxes. There are many transactions and calculations undertaken during the ordinary course of business for which the ultimate tax determination is uncertain. The Company recognizes liabilities and contingencies for anticipated tax audit issues based on the Company’s current understanding of the tax law. For matters where it is probable that an adjustment will be made, the Company records its best estimate of the tax liability including the related interest and penalties in the current tax provision. Management believes they have adequately provided for the probable outcome of these matters; however, the final outcome may result in a materially different outcome than the amount included in the tax liabilities.

	In addition, the Company will recognize deferred tax assets relating to tax losses carried forward to the extent there are sufficient taxable temporary differences relating to the same taxation authority and the same taxable entity against which the unused tax losses can be utilized. However, utilization of the tax losses also depends on the ability of the taxable entity to satisfy certain tests at the time the losses are recouped.

4.	Summary of Significant Accounting Policies

	The accounting policies set out below have been applied consistently to all years presented in these consolidated financial statements

	a)	Cash and cash equivalents

	Cash and cash equivalents include cash on hand and guarantee investment certificates with financial institutions and other short-term, highly liquid investments with original maturities of three months or less that are readily convertible to known amounts of cash and subject to an insignificant risk of change in value.

	b)	Equipment

	*Recognition and Measurement*

	On initial recognition, equipment is valued at cost, being the purchase price and directly attributable cost of acquisition or construction required to bring the asset to the location and condition necessary to be capable of operating in the manner intended by the Company, including appropriate borrowing costs and the estimated present value of any future unavoidable costs of dismantling and removing items. The corresponding liability is recognized within provisions.

	Equipment is subsequently measured at cost less accumulated depreciation, less any accumulated impairment losses.

	When parts of an item of equipment have different useful lives, they are accounted for as separate items (major components) of equipment.

	*Major Maintenance and Repairs*

	Subsequent costs are included in the asset’s carrying amount or recognized as a separate asset, as appropriate, only when it is probable that future economic benefits associated with the item will flow to the Company and the cost of the item can be measured reliably. All other repairs and maintenance are charged to the profit or loss during the financial period in which they are incurred.

REPLICEL LIFE SCIENCES INC.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

For the year-ended December 31, 2013

(Stated in Canadian Dollars)

4.	Summary of Significant Accounting Policies - continued

Equipment - continued


	*Gains and Losses*

	Gains and losses on disposal of an item of equipment are determined by comparing the proceeds from disposal with the carrying amount, and are recognized net within other income in profit or loss.

	*Depreciation*

	Depreciation and amortization rates applicable to each category of equipment are as follows:


	Furniture and equipment	20%
	Computer equipment	30%

Depreciation methods, useful lives and residual values are reviewed at each financial year-end and adjusted if appropriate.

Impairment of Non-Financial Assets


	Other non-financial assets are subject to impairment tests whenever events or changes in circumstances indicate that their carrying amount may not be recoverable. Where the carrying value of an asset exceeds its recoverable amounts, which is the higher of value in use and fair value less costs to sell, the asset is written down accordingly.

	Where it is not possible to estimate the recoverable amount of an individual asset, the impairment test is carried out on the asset’s cash-generating unit, which is the lowest group of assets in which the asset belongs for which there are separately identifiable cash inflows that are largely independent of the cash inflows from other assets. The Company has one cash- generating unit for which impairment testing is assessed.

	An impairment loss is charged to the profit or loss, except to the extent it reverses gains previously recognized in other comprehensive loss/income.


	d)	Revenue

Revenue consists of an upfront fee received under a Collaboration and Technology Development Transfer Agreement. The Company recognizes revenue when (i) the entity has transferred to the buyer the significant risks and rewards of ownership of the goods, (ii) the entity retains neither continuing managerial involvement to the degree usually associated with ownership nor effective control over the goods, (iii) the amount of revenue can be measured reliably, (iv) it is probable that the economic benefits associated with the transaction will flow to the entity, and (vi) the costs incurred or to be incurred in respect of the transaction can be measured reliably. Licensing revenue, in the form of non-refundable upfront payments, is recognized at the date the Company no longer maintains substantive contractual obligations.

REPLICEL LIFE SCIENCES INC.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

For the year-ended December 31, 2013

(Stated in Canadian Dollars)

4.	Summary of Significant Accounting Policies – continued

	e)	Basic and Diluted Loss per Share

	Basic loss per share is calculated by dividing the net loss by the weighted average number of common shares outstanding for the relevant period.

	Diluted earnings/loss per common share is computed by dividing the net income or loss applicable to common shares by the sum of the weighted average number of common shares issued and outstanding and all additional common shares that would have been outstanding, if potentially dilutive instruments were converted.

	The number of shares potentially issuable at December 31, 2013 that were not included in the computation of loss per share totaled 9,678,601 (2012: 7,475,046; 2011: 5,035,000) consisting of 3,810,000 (2012: 3,650,000; 2011: 2,835,000) outstanding stock options; 1,700,000 (2012: 1,700,000; 2011: 2,200,000) contingently issuable common shares held in escrow to be released upon the occurrence of certain milestones (Note 8(f)); and 4,168,601 warrants (2012: 2,125,046; 2011: Nil).

	f)	Income Taxes

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

	Current income taxes are recognized for the estimated income taxes payable or receivable on taxable income or loss for the current year and any adjustment to income taxes payable in respect of previous years. Current income taxes are determined using tax rates and tax laws that have been enacted or substantively enacted by the year-end date.

	Deferred tax assets and liabilities are recognised where the carrying amount of an asset or liability in the consolidated statement of financial position differs from its tax base, except for differences arising on:

- the initial recognition of goodwill;
- the initial recognition of an asset or liability in a transaction which is not a business combination and at the time of the transaction affects neither accounting or taxable profit; and
- investments in subsidiaries and jointly controlled entities where the Group is able to control the timing of the reversal of the difference and it is probable that the difference will not reverse in the foreseeable future.

Recognition of deferred tax assets is restricted to those instances where it is probable that taxable profit will be available against which the difference can be utilised.

The amount of the asset or liability is determined using tax rates that have been enacted or substantively enacted by the reporting date and are expected to apply when the deferred tax liabilities/(assets) are settled/(recovered).

Deferred tax assets and liabilities are offset when the Group has a legally enforceable right to offset current tax assets and liabilities and the deferred tax assets and liabilities relate to taxes levied by the same tax authority on either:

- the same taxable group company; or
- different group entities which intend either to settle current tax assets and liabilities on a net basis, or to realise the assets and settle the liabilities simultaneously, in each future period in which significant amounts of deferred tax assets or liabilities are expected to be settled or recovered.

REPLICEL LIFE SCIENCES INC.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

For the year-ended December 31, 2013

(Stated in Canadian Dollars)

4.	Summary of Significant Accounting Policies – continued

	g)	Scientific research and development credit

	Scientific research and development credits are received on capital expenditure are generally deducted in arriving at the carrying amount of the asset purchased. Grants relating to expenditure are recorded in other income when received.

	h)	Intangible Assets

	*Externally acquired intangible assets*

	Externally acquired intangible assets are initially recognised at cost and subsequently amortised on a straight-line basis over their useful economic lives.

	In-process research and development programmes acquired in combinations are recognised as an asset even if subsequent expenditure is written off because the criteria specified in the policy for development costs below are not met.

Internally generated intangible assets (development costs)

Expenditure on internally developed products is capitalised if it can be demonstrated that:

- it is technically feasible to develop the product for it to be sold;
- adequate resources are available to complete the development;
- there is an intention to complete and sell the product;
- the Group is able to sell the product;
- sale of the product will generate future economic benefits; and
- expenditure on the project can be measured reliably.

Capitalised development costs are amortised over the periods the Group expects to benefit from selling the products developed. Development expenditure not satisfying the above criteria and expenditure on the research phase of internal projects are recognised in the consolidated statement of comprehensive income as incurred.

The Company expenses research costs until such time FDA approval is obtained.

Foreign Currency Translation

Foreign currency accounts are presented in Canadian dollars, which is also the functional currency.

At the transaction date, each asset, liability, revenue and expense denominated in a foreign currency is translated into Canadian dollars by the use of the exchange rate in effect at that date. At the year-end date, unsettled monetary assets and liabilities are translated into Canadian dollars by using the exchange rate in effect at the year-end date and the related translation differences are recognized in net income.

Non-monetary assets and liabilities that are measured at historical cost are translated into Canadian dollars by using the exchange rate in effect at the date of the initial transaction and are not subsequently restated. Non-monetary assets and liabilities that are measured at fair value or a re-valued amount are translated into Canadian dollars by using the exchange rate in effect at the date the value is determined and the related translation differences are recognized in net income or other comprehensive loss consistent with where the gain or loss on the underlying non-monetary asset or liability has been recognized.

REPLICEL LIFE SCIENCES INC.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

For the year-ended December 31, 2013

(Stated in Canadian Dollars)

4.	Summary of Significant Accounting Policies - continued

	j)	Share-based Payments

	The Company adopted a stock option plan during the year ended December 31, 2010 (Note 8(c)). In addition, certain of the Company’s founders have entered into option agreements with consultants and employees of the Company.

	Employees (including senior executives) of the Company receive remuneration in the form of share-based payment transactions, whereby employees render services as consideration for equity instruments (equity-settled transactions).

	*Equity-settled transactions*

	The cost of equity-settled transactions is recognized, together with a corresponding increase in contributed surplus in equity, over the period in which the performance and/or service conditions are fulfilled. The cumulative expense recognized for equity-settled transactions at each reporting date until the vesting date reflects the extent to which the vesting period has expired and the Company’s best estimate of the number of equity instruments that will ultimately vest. The income statement expense or credit for a period represents the movement in cumulative expense recognized as at the beginning and end of that period and is recognized as stock based compensation expense (Note 8(c)).

	No expense is recognized for awards that do not ultimately vest, except for equity-settled transactions where vesting is conditional upon a market or non-vesting condition, which are treated as vesting irrespective of whether or not the market or non-vesting condition is satisfied, provided that all other performance and/or service conditions are satisfied.

	Where the terms of an equity-settled transaction award are modified, the minimum expense recognized is the expense as if the terms had not been modified, if the original terms of the award are met. An additional expense is recognized for any modification that increases the total fair value of the share-based payment transaction, or is otherwise beneficial to the employee as measured at the date of modification.

	Where an equity-settled award is cancelled, it is treated as if it vested on the date of cancellation, and any expense not yet recognized for the award is recognized immediately. This includes any award where non-vesting conditions within the control of either the entity or the employee are not met. However, if a new award is substituted for the cancelled award, and designated as a replacement award on the date that it is granted, the cancelled and new awards are treated as if they were a modification of the original award, as described in the previous paragraph. All cancellations of equity-settled transaction awards are treated equally. No expense is recognized for awards that do not ultimately vest.

	The dilutive effect of outstanding options is reflected as additional share dilution in the computation of diluted earnings per share.

	*Cash-settled transactions*

	The cost of cash-settled transactions is measured initially at fair value at the grant date using a binomial model. This fair value is expensed over the period until the vesting date with recognition of a corresponding liability. The liability is remeasured to fair value at each reporting date up to and including the settlement date, with changes in fair value recognized as employee benefits expense.

	k)	Leased assets

	Where substantially all of the risks and rewards incidental to ownership of a leased asset have been transferred to the Group (a "finance lease"), the asset is treated as if it had been purchased outright. The amount initially recognised as an asset is the lower of the fair value of the leased property and the present value of the minimum lease payments payable over the term of the lease. The corresponding lease commitment is shown as a liability. Lease payments are analysed between capital and interest. The interest element is charged to the consolidated statement of comprehensive income over the period of the lease and is calculated so that it represents a constant proportion of the lease liability. The capital element reduces the balance owed to the lessor.

REPLICEL LIFE SCIENCES INC.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

For the year-ended December 31, 2013

(Stated in Canadian Dollars)

4.	Summary of Significant Accounting Policies - continued

	k)	Leased assets - continued

	Where substantially all of the risks and rewards incidental to ownership are not transferred to the Group (an "operating lease"), the total rentals payable under the lease are charged to the consolidated statement of comprehensive income on a straight-line basis over the lease term. The aggregate benefit of lease incentives is recognised as a reduction of the rental expense over the lease term on a straight-line basis.

	l)	Events After the Financial Position Date

	Events after the financial position date that provide additional information about the Company’s position at the financial position date (adjusting event) are reflected in the consolidated financial statements. Events after the financial position date that are not adjusting events, if any, are disclosed when material to the consolidated financial statements.

	m)	Financial Instruments

	The Company classifies its financial instruments in the following categories: at fair value through profit or loss, loans and receivables, held-to-maturity investments, available-for-sale and financial liabilities. The classification depends on the purpose for which the financial instruments were acquired. Management determines the classification of its financial instruments at initial recognition.

	Financial assets are classified at fair value through profit or loss when they are either held for trading for the purpose of short-term profit taking, derivatives not held for hedging purposes, or when they are designated as such to avoid an accounting mismatch or to enable performance evaluation where a group of financial assets is managed by key management personnel on a fair value basis in accordance with a documented risk management or investment strategy. Such assets are subsequently measured at fair value with changes in carrying value being included in profit or loss.

	Loans and receivables are non-derivative financial assets with fixed or determinable payments that are not quoted in an active market and are subsequently measured at amortized cost. They are included in current assets, except for maturities greater than 12 months after the end of the reporting period. These are classified as non-current assets.

	Held-to-maturity investments are non-derivative financial assets that have fixed maturities and fixed or determinable payments, and it is the Company’s intention to hold these investments to maturity. They are subsequently measured at amortized cost. Held-to-maturity investments are included in non-current assets, except for those which are expected to mature within 12 months after the end of the reporting period.

	Available-for-sale financial assets are non-derivative financial assets that are designated as available-for-sale or are not suitable to be classified as financial assets at fair value through profit or loss, loans and receivables or held-to-maturity investments and are subsequently measured at fair value. These are included in current assets. Unrealized gains and losses are recognized in other comprehensive income, except for impairment losses and foreign exchange gains and losses.

	Non-derivative financial liabilities (excluding financial guarantees) are subsequently measured at amortized cost. Regular purchases and sales of financial assets are recognized on the trade-date – the date on which the Company commits to purchase the asset.

REPLICEL LIFE SCIENCES INC.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

For the year-ended December 31, 2013

(Stated in Canadian Dollars)

4.	Summary of Significant Accounting Policies - continued

	m)	Financial Instruments - continued

	Financial assets are derecognized when the rights to receive cash flows from the underlying instruments have expired or have been transferred and the Company has transferred substantially all risks and rewards of ownership.

At each reporting date, the Company assesses whether there is objective evidence that a financial instrument has been impaired. In the case of available-for-sale financial instruments, a significant and prolonged decline in the value of the instrument is considered to determine whether an impairment has arisen.

As of December 31, 2013, the Company has derivative liabilities of $208,387 (2012: $68,205; 2011: $Nil) in warrants denominated in a foreign currency.

IFRS 7 fair value measurement hierarchy

IFRS 7 requires certain disclosures which require the classification of financial assets and financial liabilities measured at fair value using a fair value hierarchy that reflects the significance of the inputs used in making the fair value measurement (see note 4). The fair value hierarchy has the following levels:

	(a)	quoted prices (unadjusted) in active markets for identical assets or liabilities (Level 1);
	(b)	inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either directly (i.e. as prices) or indirectly (i.e. derived from prices) (Level 2); and
	(c)	inputs for the asset or liability that are not based on observable market data (unobservable inputs) (Level 3).

The level in the fair value hierarchy within which the financial asset or financial liability is categorised is determined on the basis of the lowest level input that is significant to the fair value measurement. Financial assets and financial liabilities are classified in their entirety into only one of the three levels.

Impairment of Financial Assets

At each reporting date, the Company assesses whether there is objective evidence that a financial asset carried at amortized cost is impaired. If such evidence exists, the impairment loss is the difference between the amortized costs of the loan or receivable and the present value of the estimated future cash flows, discounted using the instrument’s original effective interest rate. The carrying amount of the asset is reduced by this amount either directly or indirectly through the use of an allowance account. Impairment losses on financial assets carried at amortized cost are reversed in subsequent periods if the amount of the loss decreases and the decrease can be related objectively to an event occurring after the impairment was recognized.

Share Capital


	Equity instruments are contracts that give a residual interest in the net assets of the Company. Financial instruments issued by the Company are classified as equity only to the extent that they do not meet the definition of a financial liability or financial asset.

	The Group’s ordinary shares are classified as equity instruments. During the years ended December 31, 2013 and 2012 the Company did not have any Class B preferred shares or Class C convertible preferred shares outstanding. During the year ended December 31, 2011 the Company had Class B preferred shares and Class C convertible preferred shares outstanding which are also classified as equity instruments.

REPLICEL LIFE SCIENCES INC.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

For the year-ended December 31, 2013

(Stated in Canadian Dollars)

5.	Accounting Standards, Amendments and Interpretations

New Standards, Amendments and Interpretations Effective for the first time from January 1, 2013

Certain pronouncements were issued by the IASB or the IFRS Interpretations Committee that are mandatory for accounting periods beginning on or after January 1, 2013 or later periods. The following new standards, amendments and interpretations have been adopted in these consolidated financial statements.

IFRS 10 Consolidated Financial Statements

IFRS 10 builds on existing principles by identifying the concept of control as the determining factor in whether an entity should be included within the consolidated financial statements of the parent company. The standard provides additional guidance to assist in the determination of control where this is difficult to assess. The adoption of this standard did not have a material impact on the consolidated financial statements.

IFRS 13 Fair Value Measurement

IFRS 13 aims to improve consistency and reduce complexity by providing a precise definition of fair value and a single source of fair value measurement and disclosure requirements for use across IFRS. The requirements, which are largely aligned between IFRS and US GAAP, do not extend the use of fair value accounting but provide guidance on how it should be applied where its use is already required or permitted by other standards within IFRS.

The adoption of IFRS 13 by the Company has had no material impact on the consolidated financial statements. The fair value of the derivative liability has been determined directly by reference to published price quotations in an active market. Prior to adoption of IFRS 13 the Company measured the derivative liability on the same basis.

Amendment to IAS 1 Presentation of Financial Statements

The amendments to IAS 1 revise the presentation of other comprehensive income (OCI). Separate subtotals are required for items which may subsequently be recycled through profit or loss and items that will not be recycled through profit or loss. The adoption of this standard did not have a material impact on the consolidated financial statements.

	b)	Standards, Amendments and Interpretations Not Yet Effective

	Certain pronouncements were issued by the IASB or the IFRS Interpretations Committee that are not mandatory for accounting periods beginning on or after January 1, 2013. They have not been early adopted in these financial statements, and are expected to affect the Company in the period of initial application. In all cases the Company intends to apply these standards from application date as indicated below

Amendment to IAS 32 Financial Instruments: Presentations

The amendments to IAS 32 pertained to the application guidance on the offsetting of financial assets and financial liabilities, focused on four main areas: the meaning of ‘currently has a legally enforceable right of set-off’, the application of simultaneous realization and settlement, the offsetting of collateral amounts and the unit of account for applying the offsetting requirements. The standard is effective for annual periods beginning on or after January 1, 2014. The Company is in the process of evaluating the impact that the adoption of this standard may have on its financial statements.

REPLICEL LIFE SCIENCES INC.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

For the year-ended December 31, 2013

(Stated in Canadian Dollars)

5.	Accounting Standards, Amendments and Interpretations - continued


	b)	Standards, Amendments and Interpretations Not Yet Effective - continued

Amendment to IFRS 7, Financial Instruments: Disclosure

Amended standard IFRS 7 Financial Instruments: Disclosure outlines the disclosures required when initially applying IFRS 9 Financial Instruments. The standard is effective for annual periods beginning on or after January 1, 2015. The Company is in the process of evaluating the impact that the adoption of this standard may have on its financial statements.

IFRS 9 Financial Instruments

IFRS 9 Financial Instruments is part of the IASB's wider project to replace IAS 39 Financial Instruments: Recognition and Measurement. IFRS 9 retains but simplifies the mixed measurement model and establishes two primary measurement categories for financial assets: amortized cost and fair value. The basis of classification depends on the entity's business model and the contractual cash flow characteristics of the financial asset. The standard is effective for annual periods beginning on or after January 1, 2015. The Company is in the process of evaluating the impact of the new standard.

There are no other IFRS or IFRIC Interpretations that are not yet effective that would be expected to have a material impact on the Company.

6.	Reverse Takeover Transaction and 583885 B.C. Ltd.

	On December 22, 2010, RepliCel closed a Share Exchange Agreement with TrichoScience Innovations Inc. (“TrichoScience”) whereby RepliCel (formerly Newcastle Resources Ltd.) would acquire the issued and outstanding shares of TrichoScience. During the year ended December 31, 2011, 100% of the former TrichoScience shareholders tendered their shares in exchange for RepliCel shares and TrichoScience became a 100% owned subsidiary of RepliCel. The TrichoScience shareholders who received shares of RepliCel in connection with the closing deposited the common shares with a trustee pursuant to the terms of a pooling agreement between RepliCel and the trustee. The common shares are subject to a timed release schedule under which 15% of the shares will be released on the first day of each of the fiscal quarters occurring after the first anniversary of the closing.

	Concurrent with the reverse acquisition, RepliCel also acquired all of the issued and outstanding common shares of 583885 B.C. Ltd. (“583885”) in exchange for 4,400,000 common shares of RepliCel. 583885 did not have any assets or liabilities at the date of acquisition and was a private company controlled by RepliCel’s incoming Chief Executive Officer (“CEO”). 3,400,000 shares of RepliCel controlled by the Company’s CEO were deposited with an escrow agent pursuant to the terms of an escrow agreement between RepliCel and the escrow agent. These shares are released upon satisfaction of certain performance conditions as set out in the escrow agreement and each release of shares from escrow will be considered a compensatory award. The Compensatory award is recorded as an expense at the fair value of the consideration given based on the price of RepliCel’s common shares on the acquisition date. This amount was determined to be US$0.50 per share, based on the price of the shares being offered in the private placement that closed concurrent with the share exchange to arm’s length parties at a price of US$0.50.

	At December 31, 2013, there were 1,700,000 common shares held in escrow and no performance conditions were met (Year ended December 31, 2012 and 2011 the performance condition with respect to 500,000 and 350,000 shares had been achieved, respectively). Stock based compensation of $Nil (representing the fair value of the shares issued) was recognized for these shares during the year ended December 31, 2013 (December 31, 2012: $254,350; December 31, 2011: $178,045). The other 1,000,000 common shares issued were not subject to escrow provisions and thus were fully vested, non- forfeitable at the date of issuance.

REPLICEL LIFE SCIENCES INC.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

For the year-ended December 31, 2013

(Stated in Canadian Dollars)

6.	Reverse Takeover Transaction and 583885 B.C. Ltd. - continued

	*Non-Controlling Interest*

At closing, certain shareholders of TrichoScience did not exchange their shares for shares of RepliCel (the “Non-Accepting Shareholders”) and, as such, are treated as a non-controlling interest in the consolidated financial statements. In a reverse acquisition, the non-controlling interest reflects the non-controlling shareholders’ proportionate interest in the pre-combination carrying amounts of the legal acquiree’s net assets.

During the year ended December 31, 2011, RepliCel purchased 2,050,000 newly issued common shares of TrichoScience for $2,050,000 (“Investment Two”). As a result, the non-controlling interest increased by $505,345 representing the non-controlling interests’ proportionate share in Investment Two.

During the year ended December 31, 2011, the remaining 4,724,800 shares of TrichoScience were tendered for exchange by the Non-Accepting Shareholders in exchange for 10,844,848 common shares with an ascribed fair value of $262,000, 5,422,420 Series B Preferred Shares and 5,422,420 Series C Preferred Shares of the Company. As a result the non-controlling interest was eliminated and the Company recorded an adjustment of $348,866 into deficit attributable to the Owners’ of the Parent, representing a decrease in the non-controlling interest of the net book value of the net assets of TrichoScience.

At December 31, 2011, 100% percent of the non-accepting shareholders had tendered their shares in exchange for RepliCel shares. As a result, TrichoScience is now 100% owned subsidiary of RepliCel. As a result, the Class B preferred shares were extinguished for no consideration. There is no non-controlling interest at December 31, 2013 (December 2012: $nil; December 31, 2011: $nil).

Class B and C Preferred Shares

Pursuant to the Share Exchange Agreement, Class B and C preferred shares were created and issued. No amount of the value assigned to share capital issued with the Share Exchange Agreement was allocated to the Class B preferred shares or the Class C convertible preferred shares due to these shares having assessed nominal value of $204 at the time of closing. The Class B preferred shares have been extinguished, as the Company has achieved the following milestones during the year ended December 31, 2011:

- RepliCel purchased common shares of TrichoScience in aggregate amount of not less than $3,000,000 and RepliCel raised the proceeds to make these investments by selling its shares at not less than $1 per share (completed); and

- RepliCel acquired at least 90% of the issued and outstanding common shares of TrichoScience (completed).

During the year-ended December 31, 2011, 13,000,000 of the Company’s Class C preferred shares (each, a “Class C Share”), being all the issued and outstanding Class C Shares, were converted, on a 5:1 ratio, into 2,600,002 common shares of the Company (each, a “Common Share”) by the holders thereof. All of the Common Shares issued on conversion of the Class C Shares have been deposited with a trustee pursuant to the terms of pooling agreements between RepliCel, the trustee and the respective shareholders. The Common Shares are subject to a timed release schedule under which 15% of the shares will be released on the first day of each of the fiscal quarters beginning January 1, 2013.

REPLICEL LIFE SCIENCES INC.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

For the year-ended December 31, 2013

(Stated in Canadian Dollars)


7.	Equipment

		Furniture
		and		Computer
		Equipment		Equipment		Total

Cost:
At December 31, 2012	$	14,249	$	21,540	$	35,789
Additions		-		7,854		7,854
Disposals		-		-		-
At December 31, 2013		14,249		29,394		43,643

Depreciation:
At December 31, 2012		4,069		10,125		14,194
Charge for the year		1,889		4,236		6,125
Elimination on disposal		-		-		-
At December 31, 2013		5,958		14,361		20,319
Net book value at December 31, 2013	$	8,291	$	15,033	$	23,324

		Furniture
		and		Computer
		Equipment		Equipment		Total

Cost:
At December 31, 2011	$	6,995	$	19,704	$	26,699
Additions		7,254		1,836		9,090
Disposals		-		-		-
At December 31, 2012		14,249		21,540		35,789

Depreciation:
At December 31, 2011		1,868		6,244		8,112
Charge for the year		2,201		3,881		6,082
Elimination on disposal		-		-		-
At December 31, 2012		4,069		10,125		14,194
Net book value at December 31, 2012	$	10,180	$	11,415	$	21,595

REPLICEL LIFE SCIENCES INC.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

For the year-ended December 31, 2013

(Stated in Canadian Dollars)

8.	Share Capital

	a)	Authorized:

		Unlimited common shares without par value
		Unlimited Class A non-voting, convertible, redeemable, non-cumulative 6% preferred shares without par value

	b)	Issued and Outstanding:

		During the year-ended December 31, 2013:

		(i)	The Company completed private placements totalling 2,043,555 units at a price of CAD$0.31 per unit for gross proceeds of $633,502, of which $24,851 was included in share subscriptions at December 31, 2012. A finder’s fee of $9,920 was paid in cash in connection with the private placement. Each unit issued consists of one common share and one common share purchase warrant. Each warrant entitles the holder to purchase an additional common share at CAD$0.50 per share for a period of 24 months from the closing of the financing.

		(ii)	The Company completed a private placement of 1,050,000 shares at a price of CAD$0.50 per share for gross proceeds of $525,000. A finder’s fee of $36,750 was paid in cash in connection with the private placement.

		During the year-ended December 31, 2012:

		(i)	The Company completed a private placement of 1,875,046 units at US$1.50 per unit for proceeds of $2,796,740 (US$2,812,569). A finder’s fee of $35,647 (US$36,000) was paid in cash in connection with the private placement. Each unit issued consists of one common share of the Company and one common share purchase warrant. Each warrant entitles the holder to purchase an additional common share at US$2.50 per share for a period of 24 months from the closing of the Financing. As the share purchase warrants are denominated in a currency other than the Company’s functional currency, the fair value of the share purchase warrants is recognized as a derivative liability. The fair value on issuance was determined to be $1,184,650. These warrants have been included in the share warrant data presented in Note 8g.

		During the year-ended December 31, 2011:

		(i)	The Company completed a private placement of 2,550,000 common shares at US$1.00 per share for proceeds of $2,482,170 (US$2,550,000). A finder’s fee of 101,200 common shares was issued in connection with the private placement with a fair value of $98,164 (US$101,200).

		(ii)	The Company acquired 4,724,800 common shares of TrichoScience pursuant to the Non-Accepting Shareholders tendering their shares in exchange for 10,844,848 common shares, 5,422,420 Class B preferred shares and 5,422,420 Class C preferred shares in RepliCel. (Note 6).

	c)	Stock Option Plans:

		(i)	On December 22, 2010, the Company approved a Company Stock Option Plan whereby the Company may grant directors, officers, employees and consultants’ stock options. The maximum number of shares reserved for issue under the plan cannot exceed 10% of the outstanding common shares of the Company as at the date of the grant. The stock options can be exercisable for a maximum of 7 years from the grant date and with various vesting terms.

REPLICEL LIFE SCIENCES INC.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

For the year-ended December 31, 2013

(Stated in Canadian Dollars)


8.	Share Capital - continued


c)	Stock Option Plans - continued

	(ii)	Under various Founders’ Stock Option Agreements, certain founders of TrichoScience granted stock options to acquire TrichoScience shares to employees and consultants of TrichoScience. These founders’ options are exercisable at $1 per share expiring after six to seven years. Pursuant to the Share Exchange Agreement, the Founders Stock Option Agreements were converted into rights to receive the number of Founders’ RepliCel shares acquired by conversion of the founders TrichoScience shares under the Share Exchange Agreement. All other terms remained the same. This modification of stock options resulted in no incremental value and therefore no additional stock based compensation expense was recognized for the modification.

	d)	Fair value of Company Options Issued from January 1, 2012 to December 31, 2013

		During the year ended December 31, 2013, 2,000,000 options were granted to employees and consultants of the Company, and no options were cancelled (2012: 1,190,000 granted, and 75,000 cancelled; 2011: 1,350,000 and nil respectively). During the year ended December 31, 2013, 1,840,000 (2012: 300,000; 2011: nil) were forfeited.

		The weighted-average grant date fair value of options granted was estimated using the following weighted average assumptions:

		2013		2012		2011
Risk fee rate		2.07%		1.62%		2.88%
Expected life (years)		7		7		7
Volatility		89%		89%		81%
Expected Dividend	$	-	$	-	$	-
Expected forfeiture rate		0%		0%		0%
Exercise price	$	0.51	$	1.56	$	1.06
Grant date fair value	$	0.33	$	1.04	$	0.72

The volatility assumption is based on the pattern and level of historical volatility of a sample of entities in the life sciences industry for the first seven years in which the shares of those entities were publicly traded.

Options Issued to Employees

The fair value at grant date is determined using a Black-Scholes option pricing model that takes into account the exercise price, the term of the option, the impact of dilution, the share price at grant date and expected price volatility of the underlying share, the expected dividend yield, the expected forfeiture rate and the risk free interest rate for the term of the option.

Options Issued to Non-Employees

Options issued to non-employees, are measured based on the fair value of the goods or services received, at the date of receiving those goods or services. If the fair value of the goods or services received cannot be estimated reliably, the options are measured by determining the fair value of the options granted, using a valuation model.

REPLICEL LIFE SCIENCES INC.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

For the year-ended December 31, 2013

(Stated in Canadian Dollars)

8.	Share Capital - continued

	e)	Stock-based Compensation

		The Company recognized a fair value of $395,092, as stock based compensation expense for stock options granted under the Company Stock Option Plan and the Founders Stock Option Agreements; $nil for the release of escrow shares, and $nil for the fair value of warrants denominated in a foreign currency which were issued as compensation in the statement of comprehensive loss for the year-ended December 31, 2013; (For the year-ended December 31, 2012 - $905,689, $254,350, and $221,500 respectively and for the year-ended December 31, 2011- $769,227, $178,045 and $Nil, respectively).

A summary of the status of the stock options outstanding under the Company Stock Option Plan for the nine months ended December 31, 2013 is as follows:


	Number of Options			Weighted Average Exercise Price
Outstanding, January 1, 2013	3,650,000		$	CAD 0.98
Granted	2,000,000			CAD 0.51
Exercised	-			-
Forfeited	(1,840,000	)		CAD 1.25
Cancelled	-			-
Outstanding, December 31, 2013	3,810,000		$	CAD 0.64
Exercisable, December 31, 2013	2,447,500		$	CAD 0.65

Outstanding, January 1, 2012	2,835,000		$	CAD 0.74
Granted	1,190,000			CAD 1.47
Exercised	-			-
Forfeited	(300,000	)		CAD 0.50
Cancelled	(75,000	)		CAD 1.50
Outstanding, December 31, 2012	3,650,000		$	CAD 0.98
Exercisable, December 31, 2012	2,113,750		$	CAD 0.77

Outstanding, January 1, 2011	1,485,000		$	US 0.50
Granted	1,350,000			US 1.00
Exercised	-			-
Forfeited	-			-
Cancelled	-			-
Outstanding, December 31, 2011	2,835,000		$	US 0.74
Exercisable, December 31, 2011	1,822,500		$	US 0.59

As at December 31, 2013, the range of exercise prices for options outstanding under the Company Stock Option Plan is CAD$0.41 - US$1.00 (2012: $0.50 - $2.35; 2011: $0.50) and the weighted average remaining contractual life for stock options under the Company Stock Option Plan is 4.96 years (2012: 5.16 years; 2011: 6.45 years).

REPLICEL LIFE SCIENCES INC.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

For the year-ended December 31, 2013

(Stated in Canadian Dollars)

8.	Share Capital - continued

	f)	Escrow Shares

		Pursuant to the Acquisition described in Note 6, at December 31, 2013:

		i)	1,700,000 (December 31, 2012: 1,700,000; December 31, 2011: 2,200,000) common shares are held in escrow and are to be released upon the occurrence of certain milestones relating to the Company’s hair cell replication technology. These shares have been excluded from the calculation of loss per share. During the year ended December 31, 2013, no shares were released from escrow (year-ended December 31, 2012: 500,000; year-ended December 31, 2011: 350,000). The Company recognized a fair value of $nil, (December 31, 2012: $254,350; December 31, 2011: $178,045) as stock based compensation expense in the statement of operations for the period. During the year ended December 31, 2013, nil shares were released from escrow (December 31, 2012: 500,000; December 31, 2011: 1,200,000).

		ii)	1,754,894 (December 31, 2012: 14,499,156; December 31, 2011: 25,600,000) common shares are held in escrow under a pooling agreement and are subject to a timed release schedule under which:

			a)	15% will be released on the first day of the Company’s fiscal quarter beginning after the one year anniversary of the share exchange (the “First Quarter”);

			b)	15% will be released on the first day of each of the Company’s next five fiscal quarters after the First Quarter;

			c)	the remaining 10% will be released on the first day of the ninth fiscal quarter after the First Quarter.

As the release of these shares is certain, they have been included in the calculation of loss per share. At December 31 2013, 23,845,106 shares have been released from escrow (December 31, 2012: 11,100,844; December 31, 2011: nil). During the year ended December 31, 2013 the company released from escrow 12,744,262 shares (2012: 11,100,844; 2011: nil).

Warrants denominated in a foreign currency

The continuity of the number of warrants denominated in another currency, each exercisable into one common share, is as follows:


	Warrants		Weighted Average	Expiry
	Outstanding		Exercise Price
Outstanding, December 31, 2011	-	$	-
February 29, 2012	66,304		US 0.50	March 1, 2014
March 29, 2012	876,042		US 0.50	March 29, 2014
April 18, 2012	502,667		US 0.50	April 18, 2014
April 20, 2012	430,033		US 0.50	April 20, 2014
May 17, 2012	250,000		US 2.00	May 17, 2016
Outstanding, December 31, 2013	2,125,046	$	US 0.68

As the warrants are denominated in a currency other than the Company’s functional currency, they meet the definition of a financial liability and accordingly are presented as such on the Company’s consolidated statement of financial position and are fair valued at each reporting period.

REPLICEL LIFE SCIENCES INC.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

For the year-ended December 31, 2013

(Stated in Canadian Dollars)

8.	Share Capital - continued

	g)	Warrants denominated in a foreign currency - continued

		During the year-ended December 31, 2013, the Company amended the exercise price of the warrants expiring March 1, 2014, March 29, 2014, April 18, 2014 and April 20, 2014 from US$2.50 to US$0.50 per share. The warrants entitle holders to purchase an aggregate of 1,875,046 common shares. The assumptions used to determine the fair value of $208,387 at December 31, 2013 were as follows: (1) risk-free rate of 1.10% – 1.14%; (2) dividend yield of nil; (3) an expected volatility of 89%; (4) an expected life of 2 – 29 months; (5) share price of US$0.50; and (6) an exercise price of US$0.50 – US$2.00.

		During the year-ended December 31, 2012, the fair value on issuance was determined to be $1,184,650, of which $221,550 was included in stock based compensation for the year-ended December 31, 2012 as warrants were initially issued as compensation and the remaining balance of $963,100 was debited against share capital. The assumptions used to determine the fair value of $68,205 at December 31, 2012 were as follows: (1) risk-free rate of 1.14% – 1.21%; (2) dividend yield of nil; (3) an expected volatility of 89%; (4) an expected life of 14 – 41 months; (5) market price of US$0.46; and (6) an exercise price of US$2.00 – US$2.50.

		The change in the fair value of the warrants for the year-ended December 31, 2013 was a loss of $140,182 (December 31, 2012 – gain of $1,116,445) and was recorded in the consolidated statement of comprehensive loss.


		December 31, 2013		December 31, 2012
Warrants denominated in a foreign currency, opening balance	$	68,205	$	-
Fair value of warrants issued		-		1,184,650
Change in fair value of warrants		140,182		(1,116,445	)
Warrants denominated in a foreign currency, closing balance	$	208,387	$	68,205

Warrants

The continuity of the number of warrants, each exercisable into one common share, is as follows:


			Weighted
	Warrants		Average
	Outstanding		Exercise Price	Expiry
Outstanding, December 31, 2011	-	$	-
February 29, 2012	66,304		US 0.50	March 1, 2014
March 29, 2012	876,042		US 0.50	March 29, 2014
April 18, 2012	502,667		US 0.50	April 18, 2014
April 20, 2012	430,033		US 0.50	April 20, 2014
May 17, 2012	250,000		US 2.00	May 17, 2016
April 10, 2013	1,643,555		CAD 0.50	April 10, 2015
May 21, 2013	400,000		CAD 0.50	May 21, 2015
Outstanding, December 31, 2013	4,168,601	$	0.50

REPLICEL LIFE SCIENCES INC.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

For the year-ended December 31, 2013

(Stated in Canadian Dollars)


9.	Licensing Revenue

	On July 9, 2013 the Company entered into a Collaboration and Technology Transfer Agreement (the “Agreement”) with Shiseido Company, Limited (“Shiseido”). The agreement provided the Company with an upfront payment of $4,120,400 (¥400,000,000), less withholding taxes of $412,040, for the transfer of technology to Shiseido to develop and commercialize the Company’s technologies to treat hair loss and promote growth with cell-based technology within certain territories (Japan, China, South Korea, Taiwan, and ASEAN Countries). Under the agreement, the collaboration between Shiseido includes the disclosure and discussion of future clinical trials and related documentation in relation the transferred technology. Each party is responsible for its own costs and expenses. The Company is also eligible to receive future milestone payments and royalties. The Company determined that the future milestone payments and royalties were substantive and contingent, and did not allocate any of the upfront consideration to these milestones. The Company’s responsibility with respect to the collaboration is limited to the transfer of technology to Shiseido (completed). Shiseido is responsible for all further development of the transferred technology within the territories described above.

	At inception of the arrangement, the Company determined that the full amount of the upfront payment ($4,120,400) was the value of the technology transferred. No amount of the upfront fee was allocated future to research and development. The Company did not receive any additional milestone payments or royalties during the year ended December 31, 2013 (2012: $nil).

	The total revenue recognized under this arrangement was $4,120,400 and $nil for the years ended December 31, 2013 and 2012, respectively.

10.	Related Party Transactions

	Related party balances

	The following amounts due to related parties are included in trade payables and accrued liabilities:


		December 31, 2013		December 31, 2012
Companies controlled by directors of the Company	$	27,736	$	31,318
Directors or officers of the Company		-		21,015
	$	27,736	$	52,333

These amounts are unsecured, non-interest bearing and have no fixed terms of repayment.

Related party transactions

The Company incurred the following transactions with companies that are controlled by directors and/or officers of the Company. The transactions were measured at the exchange amount which approximates fair value, being the amount established and agreed to by the parties.


		December 31, 2013		December 31, 2012		December 31, 2011
Research and development	$	258,180	$	274,246	$	238,607
General and administrative		-		-		61,371
	$	258,180	$	274,246	$	299,977

REPLICEL LIFE SCIENCES INC.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

For the year-ended December 31, 2013

(Stated in Canadian Dollars)

10.	Related Party Transactions - c ontinued

	Key management compensation

	Key management personnel are persons responsible for planning, directing and controlling the activities of an entity, and include executive directors, the Chief Executive Officer and the Chief Financial Officer.


		December 31, 2013		December 31, 2012		December 31, 2011
General and administrative – salaries	$	436,000	$	411,000	$	425,209
Stock-based compensation		125,487		161,565		313,665
	$	561,487	$	572,565	$	738,874

11.

Income Taxes a) Income tax recognized in profit or loss:

		2013		2012		2011

Canadian current tax expense	$	-	$	-	$	-
Foreign current tax expense		412,040		-		-
Deferred tax expense		-		-		-
Total		412,040		-		-

b) Reconciliation of accounting and taxable income, for the years ended December 31 are as follows:

		2013			2012			2011

Net income (loss) for the year before taxes	$	383,467		$	(3,363,175	)	$	(3,713,439	)
Combined federal and provincial income tax rate		25.75%			25.0%			26.50%
Expected income tax expense (recovery)		99,000			(841,000	)		(984,000	)
Increase (decrease) resulting from
Foreign tax rate differential		(76,000	)		-			-
Stock-based compensation		102,000			63,000			243,000
Non-deductible items		11,040			5,000			10,000
Tax adjustment from rate change and other		(6,000	)		4,000			23,000
Change in unrecognized deferred tax assets		282,000			769,000			708,000
Income tax expense	$	412,040		$	-		$	-

Effective July 1, 2013, the British Columbia provincial rate increased from 10.00% to 11.00% . The tax rate for the Federal corporate tax remained the same at 15.00% .

REPLICEL LIFE SCIENCES INC.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

For the year-ended December 31, 2013

(Stated in Canadian Dollars)

11.

Income Taxes - continued

c) The components of the deferred tax asset (liability) balances for the years ended December 31, are as follows:

		2013			2012			2011


Deferred tax assets
Non-capital losses	$	1,613,000		$	1,854,000		$	1,112,000
Equipment and other		98,000			90,000			63,000
Temporary differences relating to intellectual property
costs		45,960			17,000			17,000
Foreign tax credit		412,040			-			-
Un-deducted SR&ED expenditure pool		74,000			-			-

Unrecognized deferred tax assets		(2,243,000	)		(1,961,000	)		(1,192,000	)
	$	-		$	-		$	-

Deferred tax assets in respect of losses and other temporary differences are recognized when it is more likely than not, that they will be recovered against profits in future periods. No deferred tax asset has been recognized as this criteria has not been met.

At December 31, 2013, the Company has Canadian non capital losses totalling approximately $6,204,200 that will expire beginning in 2026:

Year of Expiry		Amount
2026	$	5,500
2027		16,200
2028		533,200
2029		862,700
2030		-
2031		2,079,600
2032		2,288,100
2033		418,900
	$	6,204,200

12.	Refundable Tax Credit

	During the year-ended December 31, 2013 the Company received an assessment as a result of Canada Revenue Agency’s audit of the Scientific Research & Experimental Development claim filed by TrichoScience for the period ending December 21, 2010. As a result of the assessment, TrichoScience received a refundable investment tax credit in the amount of $150,783.

REPLICEL LIFE SCIENCES INC.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

For the year-ended December 31, 2013

(Stated in Canadian Dollars)

13.	Financial Instruments and Risk Management

	As at December 31, 2013, the Company’s financial instruments are comprised of cash, accounts payable and accrued liabilities, and warrants denominated in a foreign currency. The fair values of cash, accounts payable and accrued liabilities approximate their carrying value due to their short-term maturity.

	The Company is exposed through its operations to the following financial risks:

- Currency risk
- Credit risk
- Liquidity risk
- Interest rate risk

In common with all other businesses, the Company is exposed to risks that arise from its use of financial instruments. This note describes the Company’s objectives, policies and processes for managing those risks and the methods used to measure them. Further quantitative information in respect of these risks is presented throughout these financial statements.

There have been no substantive changes in the Company’s exposure to financial instrument risks, its objectives, policies and processes for managing those risks or the methods used to measure them from previous periods unless otherwise stated in this note.

Currency risk is the risk that the fair value or future cash flows of a financial instrument will fluctuate because of changes in foreign exchange rates. The Company has an exposure to the European Euros as certain expenditures and commitments are denominated in European Euros and the Company is subject to fluctuations as a result of exchange rate variations to the extent that transactions are made in this currency. In addition, the Company holds an amount of cash in US dollars and is therefore exposed to exchange rate fluctuations on these cash balances. The Company does not hedge its foreign exchange risk. At December 31, 2013 the Company held US dollar cash balances of $26,385 (US$24,807) (December 31, 2012: $371,930 or US$373,836). A 1% increase/decrease in the US dollars foreign exchange rate would have an impact of ±$264 (US$248) on the cash balance held December 31, 2013.

Credit risk is the risk of an unexpected loss if a customer or third party to a financial instrument fails to meet its contractual obligations. The Company’s credit risk is primarily attributable to its cash. The Company limits exposure to credit risk by maintaining its cash with large financial institutions. The Company’s maximum exposure to credit risk is the carrying value of its financial assets.

Liquidity risk is the risk that the Company will not be able to meet its financial obligations as they fall due. The Company manages liquidity risk through the management of its capital structure, more specifically, the issuance of new common shares, to ensure there is sufficient capital in order to meet short term business requirements, after taking into account the Company’s holdings of cash and potential equity financing opportunities. The Company believes that these sources will be sufficient to cover the known short and long-term requirements at this time. There is no assurance that potential equity financing opportunities will be available to meet these obligations.

The following table sets out the contractual maturities (representing undiscounted contractual cash-flows) of financial liabilities as at December 31, 2013:


Year of expiry		Accounts payable and accrued liabilities		Total
Within 1 year	$	369,355	$	369,355

REPLICEL LIFE SCIENCES INC.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

For the year-ended December 31, 2013

(Stated in Canadian Dollars)


13.	Financial Instruments and Risk Management - continued

Interest rate risk is the risk that the fair value or future cash flows of a financial instrument will fluctuate because of changes in market interest rates. As the Company’s cash is currently held in an interest bearing bank account, management considers the interest rate risk to be limited.

Classification of financial instruments

Financial assets included in the statement of financial position are as follows:


		Level		December 31,		December
	Classification			2013		31, 2012

Cash and cash equivalents	Loans and receivables	Level 1	$	1,958,005	$	384,286
			$	1,958,005	$	384,286

Financial liabilities included in the statement of financial position are as follows:

Classification

Level

December 31,

December 31,

2013

2012

Non-derivative financial liabilities:

Accounts payable and accrued liabilities

Financial liabilities at amortized cost

Level 2

369,355

416,125

Derivative financial liabilities:

Warrants denominated in a foreign currency

Fair value through profit or loss

Level 2

208,387

68,205

577,742

484,330

There were no changes to the Company’s fair value measurement levels during the year ended December 31, 2013 (2012: no change). The Company does not have any level 3 fair value measurements (2012: none).

14.	Commitments

	The Company has entered into an operating lease agreement for its office premises. The term of the lease is for three years ending on October 31, 2015 and the annual commitments under the lease are as follows:


2014		2015
$ 133,200	$	111,000

REPLICEL LIFE SCIENCES INC.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

For the year-ended December 31, 2013

(Stated in Canadian Dollars)

15.	Capital Management

	The Company’s objective when managing capital is to safeguard the Company’s ability to continue as a going concern in order to pursue business opportunities. In order to facilitate the management of its capital requirements, the Company prepares periodic budgets that are updated as necessary. The Company manages its capital structure and makes adjustments to it to effectively support the Company’s objectives. In order to continue advancing its technology and to pay for general administrative costs, the Company will use 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. The Company considers shareholders equity and working capital as components of its capital base. The Company can access or increase capital through the issuance of shares, and by sustaining cash reserves by reducing its capital and operational expenditure program. Management primarily funds the Company’s expenditures by issuing share capital, rather than using capital sources that require fixed repayments of principal and/or interest. The Company is not subject to externally imposed capital requirements and does not have exposure to asset-backed commercial paper or similar products, with the exception of pooling and escrow shares which are subject to restrictions. The Company believes it will be able to raise additional equity capital as required, but recognizes the uncertainty attached thereto.

	The Company’s investment policy is to hold cash in interest bearing bank accounts, which pay comparable interest rates to highly liquid short-term interest bearing investments with maturities of one year or less and which can be liquidated at any time without penalties.

	There has been no change in the Company’s approach to capital management during the year-ended December 31, 2013.

16.	Non-cash Transactions

	Investing and financing activities that do not have a direct impact on current cash flows are excluded from the consolidated statements of cash flow. There were no non-cash transactions during the year-ended December 31, 2013 or 2012.

	During the year-ended December 31, 2011, the Company acquired 4,724,800 common shares of TrichoScience in exchange for 10,844,846 common shares, 5,422,420 Series B Preferred Shares and 5,422,420 Series C Preferred Shares of the Company, which was excluded from the consolidated statement of cash flows for $262,000. During the year-ended December 31, 2011, 13,000,000 of the Company’s Class C preferred shares (each, a “Class C Share”), were converted, on a 5:1 ratio, into 2,600,000 common shares of the Company (each, a “Common Share”) by the holders thereof.

17.	Segmental Reporting

	The Company is organized into one business unit based on its hair cell replication technology and has one reportable operating segment.

REPLICEL LIFE SCIENCES INC.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

For the year-ended December 31, 2013

(Stated in Canadian Dollars)

18.

Events after the Reporting Date

On January 2, 2014 under the Company Stock Option Plan, 200,000 options were granted to employees and consultants of the Company. The options vest over three years and are exercisable at $0.55 per share until January 2, 2019.

On January 13, 2014, the Company’s common shares commenced trading on the TSX Venture Exchange (the “TSXV”) as a Tier 1 issuer under its current trading symbol “RP”. RepliCel’s common shares were delisted from the Canadian Securities Exchange at the close of trading on January 10, 2014. In connection with the Company’s listing on the TSXV, 23,508,682 shares of its common stock (each, a “Share”), which represents approximately 49% of the Company’s issued and outstanding shares were escrowed, with 25% of the escrowed Shares being released upon listing and a further 25% every six months. In addition, stock options to acquire up to 1,400,000 shares are also subject to escrow under the same release schedule.

On February 20, 2014 under the Company Stock Option Plan, 100,000 options were granted to employees and consultants of the Company. The options vest over one year and are exercisable at $0.85 per share until February 20, 2021.

Subsequent to December 31, 2013, 446,480 Warrants denominated in a foreign currency were exercised that were granted in February, March and April 2012 at US$0.50 per share. The Company received proceeds of US$223,240.

ITEM 18. Financial Statements

Refer to Item 17 - Financial Statements

ITEM 19. Exhibits

The following exhibits are being filed as part of this annual report, or are incorporated by reference where indicated:

(1)	Articles of Incorporation and By-laws
1.1	Certificate of Continuation dated June 22, 2011 (incorporated by reference from our Annual Report on Form 20-F, filed on April 26, 2012).
1.2	Articles adopted on May 10, 2011 (incorporated by reference from our Annual Report on Form 20-F, filed on April 26, 2012).
1.3	Notice of Articles dated December 5, 2011 (incorporated by reference from our Annual Report on Form 20-F, filed on April 26, 2012).
(4)	Material Contracts
4.1	Share Exchange Agreement dated October 29, 2010 with TrichoScience Innovations Inc. and the shareholders of TrichoScience Innovations Inc. (incorporated by reference from our Shell Company Report on Form 20-F, filed on December 27, 2010).
4.2	Pooling Agreement dated December 22, 2010 (incorporated by reference from our Shell Company Report on Form 20-F, filed on December 27, 2010).
4.3	Share Exchange Agreement dated October 29, 2010 with 583885 B.C. Ltd. and the shareholders of 583885 B.C. Ltd. (incorporated by reference from our Shell Company Report on Form 20-F, filed on December 27, 2010).
4.4	Escrow Agreement dated December 22, 2010 (incorporated by reference from our Shell Company Report on Form 20-F, filed on December 27, 2010).
4.5	Corporate Consulting Services Agreement dated June 1, 2010 among TrichoScience Innovations Inc. and 583885 B.C. Ltd. (incorporated by reference from our Shell Company Report on Form 20-F, filed on December 27, 2010).
4.6*	Collaboration and Technology Transfer Agreement with RepliCel Life Sciences Inc. dated July 9, 2013 (portions of the exhibit has been omitted pursuant to a request for confidential treatment).
(8)	List of Significant Subsidiaries
8.1	TrichoScience Innovations Inc., a company incorporated under the federal laws of Canada, all of the shares of which are beneficially owned by our company.
(11)	Code of Ethics
11.1	Code of Ethics (incorporated by reference from our Registration Statement on Form 20-F, as amended, filed on July 15, 2004).
(12)	302 Certification
12.1*	Section 302 Certification under Sarbanes-Oxley Act of 2002 for David Hall

12.2*	Section 302 Certification under Sarbanes-Oxley Act of 2002 for Tom Kordyback.
(13)	906 Certification
13.1*	Section 906 Certification under Sarbanes-Oxley Act of 2002 for David Hall.
13.2*	Section 906 Certification under Sarbanes-Oxley Act of 2002 for Tom Kordyback.
(15)	Other
15.1*	Consent of BDO Canada LLP

* Filed herewith

SIGNATURES

The registrant hereby certifies that it meets all of the requirements for filing on Form 20-F and that it has duly caused and authorized the undersigned to sign this annual report on its behalf.

REPLICEL LIFE SCIENCES INC.

Per:	/s/ “David Hall”
	David Hall
	Chief Executive Officer, President and Director

Dated: March 18, 2014


Per:	/s/ “Tom Kordyback”
	Tom Kordyback
	Chief Financial Officer

Dated: March 18, 2014

EXECUTION VERSION

*Denotes certain parts that have not been disclosed and have been filed separately with the Secretary, Securities and Exchange Commission, and is subject to a confidential treatment request pursuant to Rule 24b-2 of the Securities Exchange Act of 1934, as amended.

COLLABORATION AND TECHNOLOGY TRANSFER AGREEMENT

This Collaboration and Technology Transfer Agreement (this “ Agreement ”), dated as of July 9, 20l3 (the “ Effective Date ”), is entered into by Shiseido Co., Ltd., having an address of 7-5-5 Ginza, Chuo-ku, Tokyo, Japan (together with its Affiliates, hereinafter referred to as “ Shiseido ”) and RepliCel Life Sciences Inc., a British Columbia corporation having an address of 2020 - 401 West Georgia Street, Vancouver, BC, Canada V6B 5Al (together with its Affiliates, hereinafter referred to as “ RepliCel ”). RepliCel and Shiseido are individually referred to in this Agreement as a “ Party ” and collectively as “ Parties ”.

RECITALS

WHEREAS, RepliCel specializes in autologous cell therapy technologies based on its core understanding of the unique biological function of hair follicle cells;

WHEREAS, Shiseido is global leader in cosmetics and is a multi-brand company which operates its businesses throughout the world including Europe, United States and Asia, and has strength in its R&D activity including skin biology and hair biology research for decades;

WHEREAS, RepliCel and Shiseido have been engaged in highly productive discussions related to the Parties’ mutual desire to collaborate on the advancement and implementation of RepliCel’s core technologies relating to cell-based hair loss and hair growth treatments;

WHEREAS, the Parties recognize each other’s existing strengths and potential synergies between them, and believe that their cooperation regarding the advancement and implementation of cell-based hair loss and hair growth treatments will substantially benefit each of the Parties and will further the potential areas for future collaboration and cooperation among the Parties; and

WHEREAS, the Parties entered into a Collaboration and Technology Transfer Framework Agreement on May 16, 2013 (the “ Framework Agreement ”), and now wish to set forth a definitive Agreement for their collaboration and for the transfer of technology by RepliCel to Shiseido in support thereof.

NOW, THEREFORE, the Parties hereby agree to the following:

AGREEMENT

Article 1
Definitions

For purposes of this Agreement, the following capitalized terms used in this Agreement, whether used in the singular or plural, shall have the following meanings:

EXECUTION VERSION

1.1 “ Affiliate ” means a related entity which is controlled and owned (greater than 50% ownership) by a Party to this Agreement. For the purpose of this Agreement, TrichoScience is deemed an Affiliate of RepliCel;

1.2 “ ASEAN Countries ” means Brunei Darussalam, Cambodia, Indonesia, Laos, Malaysia, Myanmar, Philippines, Singapore, Thailand and Vietnam;

1.3 “ Change of Control ” means, in respect of any Party (excluding their respective Affiliates), (1) the acquisition by any third party of a beneficial ownership interest in more than fifty per cent (50%) of the issued and outstanding shares of such Party’s voting securities, (2) a merger, acquisition, consolidation, reorganization, regrouping or sale of all or substantially all of such Party’s assets to a third party unless, following such transaction, the owners of such Party immediately prior to such transaction continue to own beneficially more than fifty per cent (50%) of the issued and outstanding shares of such Party’s voting securities, or (3) a liquidation or dissolution of such Party.

1.4 “ Collaboration Product ” means the cell-based technologies using dermal sheath cup cells to treat hair loss and promote hair growth developed and based upon the Transfer Technology, including any Improvements. For sake of clarity, Collaboration Product includes RCH-01 and any Improvements;

1.5 “ Confidential Information ” means all information furnished by one Party (the “ Discloser ”) to the other Party (the “ Recipient ”) and designated at the time of disclosure as “Confidential”, “Proprietary” or some similar designation in tangible or intangible form and made available by or on behalf of the Discloser to the Recipient in connection with or pursuant to this Agreement. Orally communicated information will be Confidential Information if it is reduced to writing as being Confidential Information within thirty (30) business days after the initial disclosure. Confidential Information does not include any information that was publicly known or becomes publicly known (other than via action or inaction of the), is already in the possession of the Recipient prior to its receipt, is obtained by the Recipient from a third party not subject to any confidentiality obligations, or is independently developed by the Recipient. Notwithstanding the foregoing, the terms and conditions of this Agreement shall be regarded and treated as Confidential Information;

1.6 “ Core Intellectual Property Rights ” means the Shiseido Core Intellectual Property Rights and RepliCel Core Intellectual Property Right;

1.7 “ Field ” means the Shiseido Field and the RepliCel Field;

1.8 “ Improvement ” means any and all enhancement, addition, modification or upgrade to the Transfer Technology, RepliCel Core Intellectual Property Rights, and/or Shiseido Core Intellectual Property Rights which utilize, incorporate, derive from, or are based on the Transfer Technology;

1.9 “ New Patent Rights ” means any and all new Patents filed after the Effective Date, which covers any part of Improvement. For avoidance of doubt, New Patent Rights shall not include Shiseido Core Patent Rights and RepliCel Core Patent Rights;

EXECUTION VERSION

1.10 “ Non-Assertion Patents ” means the non-published Shiseido Core Patent Rights which Shiseido owned or acquired the right to grant licenses prior to the Effective Date, whether by initial title, assignment, succession or any other acquisition;

1.11 “ Patents ” means all patents and patent applications, including any continuations, divisionals, provisionals or any substitute applications, any patent issued with respect to any such patent applications, any reissue, reexamination, renewal or extension (including any supplemental patent certificate) of any such patent, and any confirmation patent or registration patent or patent of addition based on any such patent, and all foreign counterparts of any of the foregoing;

1.12 “ Shiseido Core Intellectual Property Rights ” means the Shiseido Core Patent Rights and the Shiseido Know-How;

1.13 “ Shiseido Core Patent Rights ” means the currently existing Patents of Shiseido as of the Effective Date, relating to cell-based technologies to treat hair loss and promote hair growth, including but not limited to the patents as set forth in Exhibit F ;

1.14 “ Shiseido Field ” means the use, manufacture or having manufactured, sale, offer for sale, import and export of the Collaboration Products;

1.15 “ Shiseido Know-How ” means all information, trade secrets, materials and formulations that are owned or controlled by Shiseido as of the Effective Date relating to cell-based technologies to treat hair loss and promote hair growth;

1.16 “ Shiseido Territory ” means Japan, China (including Hong Kong and Macau), South Korea, Taiwan and the ASEAN Countries;

1.17 “ RCH-01 ” has the meaning set forth in Exhibit A ;

1.18 “ RepliCel Core Intellectual Property Rights ” means the RepliCel Core Patent Rights and the RepliCel Know-How;

1.19 “ RepliCel Core Patent Rights ” means the currently existing Patents of RepliCel as of the Effective Date, relating to cell-based technologies to treat hair loss and promote hair growth, including but not limited to the patents as set forth in Exhibit E ;

1.20 “ RepliCel Field ” means any use, manufacture or having manufactured, sale, offer for sale, import and export of the Collaboration Products outside of the Shiseido Territory;

1.21 “ RepliCel Know-How ” means all information, trade secrets, materials and formulations of RepliCel as of the Effective Date relating to cell-based technologies to treat hair loss and promote hair growth, including but not limited to the information set forth in Exhibits A, B and C ;

1.22 “ RepliCel Territory ” means all countries and territories outside the Shiseido Territory;

1.23 “ Technology Transfer ” had the meaning set forth in Section 2.1;

1.24 “ Territory ” means the Shiseido Territory and RepliCel Territory;

EXECUTION VERSION

1.25 “ Transfer Technology ” means RepliCel’s technologies to treat hair loss and promote hair growth with cell-based technology referred to by the Parties as RCH-01, and includes the RepliCel Core Intellectual Property Rights and any Confidential Information provided by RepliCel to Shiseido. For the sake of clarity, any and all enhancement, addition, modification or upgrade to RCH-01, which RepliCel will produce not jointly with Shiseido, shall be a part of Transfer Technology; and

1.26 “ TrichoScience ” means TrichoScience Innovation, Inc.

Article 2
Transfer of Technology and Collaboration

2.1 Technology Transfer. RepliCel will transfer to Shiseido the Transfer Technology for use in the Shiseido Field within the Shiseido Territory (the “ Technology Transfer ”) as further set forth herein.

2.1.1 Unless otherwise agreed to in writing by the Parties, RepliCel will use commercially reasonable efforts to transfer RepliCel Know-How listed in Exhibit B as Pre-Clinical Data and Clinical Protocol Documentation to Shiseido within the proposed timeline as set forth in Exhibit C .

2.1.2 For avoidance of doubt, it is the mutual intent of the Parties that, by the end of the training plan detailed in Exhibit C , both Parties will verify and confirm that Shiseido’s scientists who have attended the training will have been trained and would be competent to prepare the cell-based products as taught in Vancouver and Innsbruck.

2.1.3 Further, after completion of the training plan in accordance with Exhibit C , upon reasonable request by Shiseido, RepliCel will provide further assistance and information to enable Shiseido to use the Transfer Technology in Japan for development of Collaboration Product to the extent practicably possible.

2.1.4 The Parties may, upon mutual written agreement, amend Exhibits B and C in order to comply with internal operations and travel schedules from time to time. Notwithstanding the foregoing, Exhibits B and/or C shall not be amended if such amendment will prevent Shiseido from receiving the RepliCel Know.

2.2 Collaboration.

2.2.1 Following the Technology Transfer, the Parties shall collaborate with each other to develop the Collaboration Product jointly based on the Transfer Technology (“ Joint Development ”). For the purpose of this Section 2.2, collaboration shall include, amongst other things, disclosure and discussion of future clinical trials information and related documentation in relation to Collaboration Products.

2.2.2 Each Party shall be responsible for its own costs and expenses to conduct the Joint Development unless otherwise determined by JSC (hereinafter defined).

2.3 Joint Steering Committee.

EXECUTION VERSION

2.3.1 Promptly after the Effective Date, the Parties will establish a Joint Steering Committee (“ JSC ”) to oversee progress towards and to ensure the Technology Transfer and Joint Development through Technology Transfer, Clinical and Regulatory, and Research and Development Collaboration subcommittees (each a “ Subcommittee ”, collectively, “ Subcommittees ”).

2.3.2 The JSC and/or the relevant Subcommittee, as appropriate, will determine the appropriate activities to be undertaken by the Parties, along with a budget for such activities. Decisions by the JSC and the Subcommittees will be made by unanimous written consent with each Party having one vote. Disagreements between the Parties in decision making of the JSC or any Subcommittee will be resolved via good faith discussions between the Parties.

2.3.3 The Parties will each appoint members to the JSC and the Subcommittees. The initial JSC and the Subcommittees will be comprised of the individuals as set forth in Exhibit D , which may be revised by a written notice of either Party to the other Party.

2.3.4 The JSC will oversee and Shiseido will use commercially reasonable efforts to (i) select and establish a CPC facility, (ii) develop the Collaboration Product, (iii) seek, obtain, maintain regulatory approval of Collaboration Products in the Shiseido Field in the Shiseido Territory, and (iv) commercialize the Collaboration Product in the Shiseido Field and Shiseido Territory.

2.3.5 The JSC shall meet at least twice a year (“ Regular Meeting ”) (for example, on May and on November) unless otherwise agreed to by the Parties. At the Regular Meeting, each Party shall make a report on the status of the Joint Development, and creation of any Improvements and New Patent Rights.

2.4 Manufacturing and Supply of Collaboration Product in the Shiseido Territory. The Parties understand that:

2.4.1 The Parties acknowledge that Shiseido has manufacturing expertise that may be leveraged in order to manufacture the Collaboration Product. Shiseido will use commercially reasonable efforts to manufacture and supply biomaterial for pre-clinical research and development and for the clinical trials at Shiseido’s sole cost.

2.4.2 Shiseido will use, at its own cost and under its control, commercially reasonably efforts to manufacture, formulating, package, label, and final release of Collaboration Product for clinical trial and commercial purposes, in the Shiseido Field, in the Shiseido Territory.

Article 3
Rights of Use and Licenses

3.1 Subject to the terms and conditions of this Agreement, RepliCel grants to Shiseido an exclusive license with a right to sublicense, under the RepliCel Core Intellectual Property Rights to use, manufacture, have manufactured, sell, offer for sale, import or export the Transfer Technology and the Collaboration Product, in the Shiseido Field, in the Shiseido Territory.

3.2 Subject to the terms and conditions of this Agreement, Shiseido agrees to grant to RepliCel under commercially reasonable terms to be agreed in writing by the Parties from time to time, an exclusive license with a right to sublicense, under the Shiseido Core Intellectual Property Rights to use, manufacture, or have manufactured, sell, offer for sale, import or export of the Collaboration Product, in the RepliCel Field, in the RepliCel Territory.

EXECUTION VERSION

3.3 Notwithstanding the above, a Party may only grant a sublicense as set forth above if:

3.3.1 The other Party is first notified in writing in advance of the sublicensing Party’s granting of any sublicense under the other Party’s Core Intellectual Property Rights;

3.3.2 A sublicensee under the other Party’s Core Intellectual Property Rights (“ Sublicensee ”) is bound in writing to (i) the scope of the license being equal to or less than the scope granted to the sublicensing Party by the other Party; and (ii) the confidentiality obligations of this Agreement;

3.3.3 The sublicensing Party guarantees the performance by the Sublicensee under the sublicense;

3.3.4 Any Improvements made by the Sublicensee will be cross-licensed to the other Party as set forth in Section 3.4 below; and

3.3.5 Any additional sublicense consideration received by Shiseido in cash or cash equivalent (excluding milestone and royalty payments as set forth in Article 4), if any, thereunder shall be shared equally with RepliCel; provided however, in the event Shiseido seeks to grant a sublicense to a CPC facility in connection with the potential manufacturing, development and commercialization of Collaboration Product, Shiseido will promptly notify RepliCel and both Parties will negotiate prior to Shiseido’s grant of the sublicense in good faith the terms of the consideration which Shiseido will receive from such sublicensee and will pay RepliCel.

3.4 Each Party will grant to the other Party a royalty-free cross-license for any New Patent Rights and Improvements created by the Party and/or its Sublicensees, in the licensee Party’s respective Field and Territory.

Article 4
Milestone and Royalty Payments

4.1 Milestone and Royalty Payments. The Parties agree that milestone and royalty payments will be made by Shiseido to RepliCel as consideration for the Technology Transfer and grant of the licenses by RepliCel to Shiseido under this Agreement, based on the schedule outlined below:

4.1.1 An initial payment of four hundred million yen (¥400,000,000) within thirty (30) days following the Effective Date;

4.1.2 ***, within ninety (90) days following the closing of Shiseido’s fiscal quarter during which Shiseido ***

4.1.3 ***, within ninety (90) days following the closing of Shiseido’s fiscal quarter during which Shiseido ***;

EXECUTION VERSION

4.1.4 ***, within ninety (90) days following the closing of Shiseido’s fiscal quarter during which Shiseido ***; and

4.1.5 Within ninety (90) days following the closing of Shiseido’s fiscal year, a royalty of *** (which shall be calculated in accordance with Exhibit G ) from the sale of the Collaboration Product in the fiscal year within each country of the Shiseido Territory. The royalty will be payable for a period of ten (10) years following the first commercial launch of the Collaboration Product in each country within the Shiseido Territory.

4.2 For the purpose of this Article 4, any and all revenue from net sales or gross profits, as applicable, received by a Sublicensee pursuant to this Agreement shall be considered and included within Shiseido’s net sales or gross profits, as applicable as set forth herein. For avoidance of doubt, the net sales and gross profits of Shiseido do not include the sublicense fee paid by the Sublicensee to Shiseido pursuant to Section 3.3.5.

4.3 Payments . Any and all payments under this Agreement shall be made in Japanese Yen by way of wire transfer to the account of RepliCel designated by RepliCel in writing. All payments to be made by Shiseido to RepliCel under this Agreement shall be net without any reduction, except to the extent Shiseido is required to withhold any tax on the payment of the compensation under the Japanese tax laws. Shiseido shall be entitled to deduct relevant tax and shall make remittance of the payment to RepliCel after deducting such withholding tax. Upon written request from a Party, the Parties shall cooperate and promptly take any and all necessary procedures to enjoy any tax relief available under any applicable tax treaty for any withholding tax under the party’s tax laws.

4.4 Interest Due . In case of any delay in payment by Shiseido to RepliCel or its designee not occasioned by Force Majeure (as set forth in Section 9.1), interest on the overdue payment shall accrue at an annual interest rate equal to the lesser of: (a) the prime rate as reported in the Money Rates set forth in The Wall Street Journal , plus three (3) percentage points, as determined for each month on the last Business Day of the previous month, or (b) the maximum amount permitted by law, in either instance assessed from the date that payment was initially due. The foregoing interest shall be due from Shiseido without any special notice, and shall be in addition to any other remedies that RepliCel may have pursuant to this Agreement.

4.5 Reporting and Audit .

4.5.1 Record Maintenance and Retention. Shiseido shall maintain complete and accurate books and records relating to any amounts payable to RepliCel under this Agreement, which books and records shall contain sufficient information to permit RepliCel to determine the accuracy of any reports delivered by Shiseido to RepliCel. Shiseido shall retain such books and records for at least two (2) years following the reporting period to which they pertain.

4.5.2 Audit of Records. Within twelve (12) months after any calendar year and upon thirty (30) days prior written notice to Shiseido, RepliCel, through a reputable independent certified public accounting firm, mutually agreed by the Parties, shall have the right (at the expense of RepliCel) to audit such books and records no more than once per calendar year during normal business hours for the sole purpose of verifying reports and payments made under this Agreement. Shiseido shall provide the independent certified public accounting firm any requested information as is necessary to conduct such audit. Within thirty (30) days from the date that RepliCel receives a final written report of the audit conducted by the independent certified public accounting firm, but in no event later than the date upon which RepliCel requests remittance of any underpayment under Section 4.5.3, RepliCel shall provide to Shiseido a copy of such report.

EXECUTION VERSION

4.5.3 Effects of Underpayment. If the independent certified public accounting firm makes a determination of underpayment by Shiseido, Shiseido shall remit to RepliCel, within thirty (30) days of receiving notice from RepliCel, any underreported percentage of net sales amounts or other amounts due to RepliCel, together with interest from the original due date for payment, as provided in Section 4.4. If Shiseido contests such determination of underpayment, it may withhold only the disputed portion of the underreported percentage of net sales amount due to RepliCel. Additionally, if an audit under Section 4.5.2 has revealed an uncontested underreporting or underpayment in excess of seven and a half percent (7.5%) of the total amount due to RepliCel pursuant to Section 4.1 for the calendar year under audit, then Shiseido shall pay to RepliCel within such thirty (30) day period the cost of such audit attributable to the independent certified public accounting firm. If a contested amount is ultimately determined to be due to RepliCel, Shiseido shall pay to RepliCel such contested amount due to RepliCel, together with interest from the original due date of any such contested amount due to RepliCel, promptly following resolution of any such dispute. In addition, if such contested amount due to RepliCel combined with the uncontested amount due is an aggregate underpayment in excess of seven and a half percent (7.5%) of the total amount due to RepliCel under Section 4.1 for the calendar year under audit, Shiseido shall bear the cost of such audit attributable to the independent certified public accounting firm, plus interest from the date of Shiseido’s receipt of an invoice from RepliCel setting forth the cost of the audit.

4.5.4 Effects of Overpayment. If the independent certified public accounting firm makes a determination of overpayment by Shiseido, RepliCel shall remit to Shiseido any overpaid amounts, within thirty (30) days of receiving written notice from Shiseido of such overpayment. In such instance, RepliCel shall not be required to pay interest to Shiseido on any overpayment received by RepliCel from Shiseido. If RepliCel contests such determination of overpayment, it may withhold only the disputed portion of the overpaid percentage of gross sales amount owed to Shiseido. If contested amounts are ultimately determined to be due to Shiseido, RepliCel shall pay to Shiseido such contested amounts due to Shiseido, together with interest from the date which is thirty (30) days after RepliCel received such written notice from Shiseido of such overpayment, promptly following resolution of any such dispute.

Article 5
Intellectual Property Rights

5.1 Core Intellectual Property Rights. Each of RepliCel and Shiseido will continue to own all right, title and interest to their respective Core Intellectual Property Rights. Each Party will be responsible for and have control over the filing, prosecution, maintenance, defense and enforcement of any trade secrets, Patents that it owns or controls. Notwithstanding the foregoing, RepliCel shall refrain from letting all issued RepliCel Core Patents Rights expire.

EXECUTION VERSION

5.2 New Patent Rights and Improvements.

5.2.1 When an Improvement is created under this Agreement, the Parties shall notify each other pursuant to Section 2.3.5.

5.2.2 Each of RepliCel and Shiseido will own any and all New Patent Rights and Improvements created solely by its employees.

5.2.3 The Parties will own jointly any and all New Patent Rights and Improvements jointly created by employees of the Parties

5.2.4 If either Party proposed to enter into any research and/or development arrangement for a Collaboration Product with a university, university professor, or a contract research organization or individual contractors who is not an employee of such Party, such Party will first present the arrangement to, and determine with, JSC on case by case basis, the appropriate treatment with respect to the ownership of any New Patent Rights and Improvements created and/or developed thereunder.

5.2.5 To the extent any such New Patent Rights or Improvements will be jointly owned by the Parties, (i) the Parties agree to jointly oversee and share equally the costs, and cooperate as necessary for filing, prosecution, maintenance, defense and enforcement of any such New Patent Rights and Improvements and (ii) the Parties are prohibited to file a joint patent application of New Patent Right or Improvement under only one Party’s name, or under both Parties name, without consent from the other Party.

5.2.6 In the event that RepliCel or Shiseido does not intend to bear the costs relating to seeking Patent protection for jointly owned Improvement, such Party shall waive its share of ownership of the New Patent Rights originated from such jointly owned Improvements. Notwithstanding the forgoing, a waiver by RepliCel will be deemed waiver only in respect of a specific Shiseido Territory unless as otherwise expressly waived in writing by RepliCel, and a waiver by Shiseido will be deemed waiver only in respect of a specific RepliCel Territory unless otherwise expressly waived in writing by Shiseido.

5.2.7 In respect of any Improvements solely developed and owned by RepliCel, if RepliCel expressly confirms its intention not to seek protection with the relevant local intellectual property registration office in Shiseido Territory, RepliCel may assign to Shiseido the right such Improvement and to file for protection in the Shiseido Territory, the details and terms of such assignment to be determined by JSC on case by case basis.

5.3 Cooperation.

5.3.1 The Parties will further agree to cooperate as necessary with respect to intellectual property rights, including for example, the filing, prosecution, maintenance, patent term extension of all Patents, with respect to the Collaboration Product. In addition, the Parties will agree that the activities undertaken as the Joint Development will constitute a joint research agreement between RepliCel and Shiseido as defined in the U.S. Create Act of 2004.

5.3.2 In the event any of the Shiseido Core Patent Rights overlap in whole or in part with any RepliCel Know-How, the Parties will discuss in good faith through JSC to determine how to mitigate public disclosure of such RepliCel Know-How, or withdraw the Shiseido Core Patent Rights from registration and/or application, if deemed necessary by the JSC.

EXECUTION VERSION

5.4 Infringement Claims Against Third Parties . Each Party shall promptly inform the other Party in writing of any suspected infringement that may arise under either Party’s intellectual property rights with respect to the Transfer Technology and/or Collaboration Product.

5.4.1 RepliCel grants to Shiseido “ senyou jisshiken ”, that is, the right, at its own cost, to bring an infringement action against any third party that infringes the RepliCel Core Intellectual Property Rights or New Patent Rights of RepliCel in the Shiseido Field in the Shiseido Territory. RepliCel shall provide the cooperation requested by Shiseido to the extent the cooperation is necessary for Shiseido’s enforcement activities. RepliCel will have the right to join, at its own cost, in any such action.

5.4.2 Shiseido hereby grants to RepliCel “ senyou jisshiken ”, that is, the right, at its own cost, to bring an infringement action against any third party that infringes the Shiseido Core Intellectual Property Rights (to the extent licensed to RepliCel) or New Patent Rights of Shiseido in the RepliCel Field in the RepliCel Territory. Shiseido shall provide cooperation requested by RepliCel to the extent the cooperation is necessary for RepliCel’s enforcement activities. Shiseido will have the right to join, at its own cost, in any such action.

5.5 Non-Assertion. Shiseido acknowledges and covenants not to sue RepliCel, its officers, directors, employees, its clients or its business partners for any claims of patent infringement of any Non-Assertion Patents and/or assert Non-Assertion Patents against RepliCel for using RepliCel Know-How throughout the world; provided RepliCel can evidence in writing existence of such RepliCel Know-How prior to filing by Shiseido of that Non-Assertion Patent allegedly infringed. In the event that there are any disagreements as to whether such RepliCel Know-How existed prior to such filing date or infringes such an alleged Non-Assertion Patent, the issue will be resolved by JSC in good faith.

Article 6
Representations, Warranties and Indemnification

6.1 Representations and Warranties of RepliCel.

6.1.1 RepliCel (excluding its Affiliates) represents and warrants that:

6.1.1.1 RepliCel, including its Affiliates, is the owner of all rights and titles in the Transfer Technology;

6.1.1.2 this Agreement has been duly executed and delivered by it and constitutes a valid and binding obligation enforceable against it in accordance with its terms, except as enforceability shall be limited by laws at RepliCel’s bankruptcy, fraudulent conveyance, insolvency, reorganization, moratorium and other laws relating to or affecting creditors’ rights generally;

6.1.1.3 the execution, delivery and performance of this Agreement have been duly authorized by all necessary action on the part of RepliCel, its officers and directors and does not conflict with any agreement, instrument or understanding, oral or written, to which RepliCel is a party or by which it may be bound, and, to the best of its knowledge, does not violate any material law or regulation of any court, governmental body or administrative or other agency having authority over it;

EXECUTION VERSION

6.1.1.4 RepliCel has full power and authority to perform the obligations set forth herein, and that RepliCel (excluding its Affiliates) and TrichoScience are not subject to any other agreement, order, decree or injunction by a court of competent jurisdiction which may prevent or materially delay the consummation of the transactions contemplated by this Agreement; and

6.1.1.5 RepliCel (excluding its Affiliates) and TrichoScience are duly organized, validly existing and in good standing under the laws of the jurisdiction where they are organized, respectively.

6.1.2 RepliCel (excluding its Affiliates) covenants that, during the term of this Agreement, it and TrichoScience, will not knowingly enter into any agreements, oral or written, that would in any way impair its ability to fulfill its obligations under this Agreement.

6.2 Representations and Warranties of Shiseido.

6.2.1 Shiseido (excluding its Affiliates) represents and warrants that:

6.2.1.1 this Agreement has been duly executed and delivered by it and constitutes a valid and binding obligation enforceable against it in accordance with its terms, except as enforceability shall be limited by laws at Shiseido’s bankruptcy, fraudulent conveyance, insolvency, reorganization, moratorium and other laws relating to or affecting creditors’ rights generally;

6.2.1.2 the execution, delivery and performance of this Agreement have been duly authorized by all necessary action on the part of Shiseido, its officers and directors and does not conflict with any agreement, instrument or understanding, oral or written, to which Shiseido is a party or by which it may be bound, and, to the best of its knowledge, does not violate any material law or regulation of any court, governmental body or administrative or other agency having authority over it;

6.2.1.3 Shiseido has full power and authority to perform the obligations set forth herein, and that Shiseido (excluding its Affiliates) is not subject to any other agreement, order, decree or injunction by a court of competent jurisdiction which may prevent or materially delay the consummation of the transactions contemplated by this Agreement; and

6.2.1.4 Shiseido (excluding its Affiliates) is duly organized, validly existing and in good standing under the laws of Japan.

6.2.2 Shiseido (excluding its Affiliates) covenants that, during the term of this Agreement, it will not knowingly enter into any agreements, oral or written, that would in any way impair its ability to fulfill its obligations under this Agreement.

6.3 LIMITATIONS ON WARRANTIES AND LIABILITIES. THE LIMITED WARRANTIES CONTAINED IN ARTICLE 6 ARE THE SOLE WARRANTIES GIVEN BY THE PARTIES HEREUNDER AND ARE MADE EXPRESSLY IN LIEU OF AND EXCLUDE ANY IMPLIED WARRANTIES OF MERCHANTABILITY, FITNESS FOR A PARTICULAR PURPOSE, NON-INFRINGEMENT OR OTHERWISE, AND ALL OTHER EXPRESS OR IMPLIED REPRESENTATIONS AND WARRANTIES PROVIDED BY COMMON LAW, STATUTE OR OTHERWISE ARE HEREBY DISCLAIMED BY BOTH PARTIES. IN NO EVENT SHALL EITHER PARTY BE LIABLE TO THE OTHER PARTY FOR INDIRECT, PUNITIVE, SPECIAL, CONSEQUENTIAL OR EXEMPLARY DAMAGES OF ANY KIND, INCLUDING WITHOUT LIMITATION, LOSS OF PROFITS AND LOSS OR INTERRUPTION OF BUSINESS.

EXECUTION VERSION

6.4 Indemnifications of RepliCel. RepliCel (excluding its Affiliates) shall defend, indemnify and hold harmless Shiseido and their employees, officers, agents and directors against any loss, damages, action, suit, claim, demand, liability, expense, bodily injury, death, or property damage (a “ Loss ”) that may be brought, instituted or arise against or be incurred by such persons to the extent such Loss is based on or arises out of the breach by RepliCel of any of its covenants, representations or warranties set forth in this Agreement or improper business practices; provided, however, that the foregoing indemnification shall not apply to any Loss to the extent such Loss is caused by the gross negligent or willful misconduct of Shiseido.

6.4.2 Until the second anniversary of the date of first commercial production of the Collaboration Product, RepliCel (excluding its Affiliates) will indemnify and hold Shiseido harmless, from any claims by a third party of an infringement of such third party’s patent rights as result of Shiseido’s use of the Transfer Technology.

6.4.3 The indemnifications of RepliCel as set forth in Section 6.4.2 are limited up to the amount paid as milestone and royalty payments by Shiseido to RepliCel pursuant to Article 4.

6.4.4 Without prejudice to Shiseido’s indemnification rights under Section 6.4.2, for avoidance of doubt, RepliCel will not be held liable for any claim that arises in connection with the manufacturing, formulation, packaging, labeling of the Collaboration Product in the Shiseido Field in the Shiseido Territory.

6.5 Indemnifications by Shiseido. Shiseido (excluding its Affiliates) shall defend, indemnify and hold harmless RepliCel and their employees, officers, agents and directors against any Loss that may be brought, instituted or arise against or be incurred by such persons to the extent such Loss is based on or arises out of the breach by Shiseido of any of its covenants, representations or warranties set forth in this Agreement or improper business practices; provided, however, that the foregoing indemnification shall not apply to any Loss to the extent such Loss is caused by the gross negligent or willful misconduct of RepliCel.

6.6 Claims Procedures. A Party entitled to be indemnified by the other Party pursuant to Sections 6.4 or 6.5 hereof (an “ Indemnified Party ”) shall give written notice to the other Party (an “ Indemnifying Party ”) promptly, and in any event no later than sixty (60) calendar days, after such Indemnified Party has actual knowledge of any threatened or asserted claim as to which indemnity may be sought, and shall permit the Indemnifying Party to assume control over the defense of any such claim or any litigation resulting therefrom; provided that:

EXECUTION VERSION

6.6.1 counsel for the Indemnifying Party, who shall conduct the defense of such claim or any litigation resulting therefrom, shall be approved by the Indemnified Party (which approval shall not be unreasonably withheld), and the Indemnified Party may participate in such defense at such Indemnified Party’s expense through its own counsel, unless agreed by the Parties otherwise;

6.6.2 the failure of any Indemnified Party to give notice as provided herein shall not relieve the Indemnifying Party of its obligations under this Agreement to the extent that such failure to give notice did not result in prejudice to the Indemnifying Party;

6.6.3 the Indemnifying Party, in the defense of any such claim or litigation, shall not, except with the written approval of the Indemnified Party (which approval shall not be unreasonably withheld), consent to entry of any judgment or enter into any settlement which (i) would result in injunctive or other relief being imposed against the Indemnified Party; or (ii) does not include as an unconditional term thereof the giving by the claimant or plaintiff to such Indemnified Party of a release from all liability in respect to such claim or litigation; and 6.6.4 the Indemnified Party shall furnish such information regarding itself or the claim in question as the Indemnifying Party may reasonably request in writing, and shall be reasonably required in connection with the defense of such claim or litigation resulting therefrom.

6.7 Compliance. The Parties shall comply fully with all applicable laws and regulations in connection with their respective activities under this Agreement.

6.8 Insurance.

6.8.1 Each of the Parties shall obtain and maintain at its own cost and expense and at it sole discretion, any combination of insurance or self-insurance for its commercial liability, including, but not limited to, personal injury and product liability insurance, with respect to its activities hereunder.

6.8.2 For each Party, such insurance or self-insurance shall be in such amounts and subject to such deductibles as Shiseido and RepliCel may agree based upon standards prevailing in the industry at the time. Such insurance or self-insurance shall be written to cover claims incurred, discovered, manifested, or made in connection with clinical development and commercial sale of Products in the respective Territory. Upon written request, each of Shiseido and RepliCel shall provide to the other Party copies of its Certificates of Insurance.

6.8.3 All insurance policies required of either Party under this Agreement shall, at each Party’s discretion with respect to its insurance, be through self-insurance or a combination of self-insurance and commercially placed insurance. Where the Party uses commercially placed insurance, such insurance shall be issued by reputable, financially sound companies.

6.8.4 All of the foregoing liability policies shall be primary and non-contributory and contain a waiver of subrogation in favor of the other Party or the other Party’s designee.

6.9 Responsibility and Control. Shiseido and RepliCel shall each be solely responsible for the safety of its own employees, agents, Affiliates or independent contractors with respect to its performance under this Agreement, and each shall hold the other Party harmless with regard to any liability for damages or personal injuries resulting from acts of its respective employees, agents, Affiliates or independent contractors.

EXECUTION VERSION

Article 7
Term and Termination

7.1 Term. The term of this Agreement shall be from the Effective Date, up to and until ten (10) years following the commercial launch of a Collaboration Product in each country within the Shiseido Territory.

7.2 Termination for Material Breach. Either Party may terminate this Agreement upon thirty (30) days prior written notice to the other Party upon a material breach by the other Party of any of its obligations under this Agreement (and such obligations specifically include a failure by a Party to pay any amount owing hereunder, and/or failure to transfer the Transfer Technology in timely fashion); provided, however, that such termination shall become effective only if the breaching Party shall fail to: (i) remedy or cure the breach within such thirty (30) day period, or initiate a remedy or cure within such period if it is not practicable to complete the cure in such period; or (ii) within such thirty (30) day period, provide written notice of the breaching Party’s dispute of the alleged breach or failure to cure and its invocation of the dispute resolution provisions set forth in Section 9.5. If the non-breaching Party elects not to terminate this Agreement, the non-breaching Party shall be entitled to seek, subject to Section 9.5, any equitable remedies and damages permitted by law, except to the extent otherwise limited by this Agreement.

7.3 Termination for Non-Performance

7.3.1 If either Party wishes to withdraw from this Agreement during the term of this Agreement, the Party (the “ Withdrawing Party ”) will notify such intent in writing to the other Party (the “ Surviving Party ”). The Surviving Party shall have a right to terminate this Agreement upon receiving such withdrawal notification.

7.3.2 In the event that the Surviving Party decides to terminate, both Parties shall discuss the process and milestone to be taken after the termination in good faith at the JSC; provided, however (i) if Shiseido is the Surviving Party, Shiseido shall be granted fully paid-up, royalty free license as provided for in Article 3; and (ii) if RepliCel is the Surviving Party, Shiseido shall provide RepliCel with a fully paid-up, royalty free license as provided for in Article 3, to the extent the license has been granted by Shiseido to RepliCel as of the date of the termination.

7.4 Effect of Early Termination of the Agreement

7.4.1 If this Agreement is terminated early by Shiseido based upon the material breach of this Agreement by RepliCel as provided in Section 7.2, then (i) Shiseido shall have no further obligation to pay any further milestone or royalty payments as provided in Article 4 of this Agreement, and (ii) RepliCel shall be obligated to return any and all Confidential Information of Shiseido back to Shiseido. Furthermore, Shiseido shall be granted a fully paid-up, royalty free license as provided for in Article 3.

EXECUTION VERSION

7.4.2 If this Agreement is terminated early by RepliCel based upon the material breach of this Agreement by Shiseido as provided in Section 7.2, then Shiseido must immediately (i) cease any and all sales of a Collaboration Product, (ii) make any and all payments that are outstanding and due (all the outstanding payment shall become due at the termination described hereunder) , (iii) return any and all Confidential Information of RepliCel to RepliCel, and (iv) provide RepliCel with a fully paid-up, royalty free license as provided for in Article 3, to the extent the license has been granted by Shiseido to RepliCel as of the date of the termination.

Article 8
Confidentiality

8.1 The Parties acknowledge and agree that they:

8.1.1 shall protect and hold the Confidential Information received by the other Party (including the terms and conditions of this Agreement) in the strictest confidence;

8.1.2 shall not use the Confidential Information of the other Party for any purpose other than for purposes of this Agreement; and

8.1.3 shall not and shall provide that no other person shall use, disclose, divulge or otherwise disseminate the Confidential Information of the other Party to any person, other than to its directors, officers, employees, lawyers, accountants, consultants and other professional advisors, (i) without the prior written approval of the disclosing Party, and (ii) only upon the execution by such person receiving such information of a confidentiality agreement in form and substance acceptable to the disclosing Party; unless or until compelled to disclose by judicial or administrative procedures or by other requirements of law or requested by its regulatory authority (in which event, they shall only make such disclosure upon prior written notice to the disclosing Party and shall make its best efforts to afford the disclosing Party an opportunity to contest the application of such law or court order to the Confidential Information to seek other methods to avoid public disclosure of the Confidential Information). Notwithstanding the foregoing, each Party agrees that it will only disclose the royalty rate if it is compelled to do so by securities regulatory bodies or stock exchange rules. Parties acknowledge that it is not anticipated that the royalty rate will need to be disclosed.

8.2 The confidentiality obligations under this Article 8 shall survive ten (10) years after the expiration or earlier termination of this Agreement.

Article 9
Miscellaneous Provisions

9.1 Force Majeure . Neither Party shall be responsible in damages to the other Party for any failure or delay in performance of any of its obligations hereunder due to any war, earthquake, riot, fire, flood, explosion or other disaster or similar event or any governmental act or regulation or action or embargo, any act of God and any other event beyond such Party’s control (the “ Force Majeure Event ”) provided however that such Party shall take all steps reasonably possible to mitigate damages caused by such failure or delay. In the event that a Party (the “ Affected Party ”) shall claim that a Force Majeure Event has occurred thereby resulting in the failure or delay in its performance hereunder, the Affected Party shall give to the other Party a notice in writing within ten (10) days from the date of occurrence of such Force Majeure Event and shall provide sufficient written evidence thereof, including the nature and effect of the Force Majeure Event on its obligations.

EXECUTION VERSION

9.2 Assignability . This Agreement is not assignable by either Party without a prior written consent of the other Party except to a wholly-owned Affiliate of such Party. Any permitted assignee of either Party shall, as a condition to such assignment, assume all obligations of its assignor arising under this Agreement following such assignment. This Agreement shall be binding upon and inure to the benefit of the Parties and their respective legal representatives, successors and permitted assigns.

9.3 Change of Control. In the event of Change of Control of either Party (excluding its Affiliates), that Party shall notify the other Party (the “ Notified Party ”) in writing immediately after the Change of Control had occurred, and JSC will consider and determine the appropriate collaboration arrangement going forward. Without prejudice to any other terms of this Agreement, the Notified Party may terminate the Agreement immediately upon written notice. In the event that the Notified Party decides to terminate, both Parties shall discuss the process and milestone to be taken after the termination in good faith at the JSC.

9.4 Non-solicitation. During the term of this Agreement and continuing through the second anniversary of the expiration or the termination of this Agreement, the Parties agree that neither Party will, and each Party will ensure that its Affiliates do not, directly or indirectly, solicit or attempt to solicit for employment any persons employed by the other Party or contracted by the other Party as agents, consultants or contractors unless the other Party gives its express written consent thereto in writing. Nothing in this Section 9.4 will be construed to prohibit a Party from (a) hiring an employee of the other Party who has responded to a general solicitation of employment not specifically directed at that employee or contractor; or (b) responding to unsolicited inquiries about employment or contract opportunities or possibilities from headhunters, other agents acting for unidentified parties or any individual.

9.5 Governing Law. This Agreement shall be governed by and construed in accordance with the laws of the State of New York, the United States of America without giving effect to the conflict of laws provisions thereof. Any and all controversies, differences or disputes arising out of or in relation to this Agreement or for the breach or termination thereof, which cannot be amicably settled by the Parties working together in good faith, will be finally resolved via arbitration conducted in accordance with the rules of the International Centre for Dispute Resolution, in (i) Vancouver, British Columbia, Canada, if the arbitration is initiated by Shiseido, or (ii) Tokyo, Japan, if the arbitration is initiated by RepliCel.

9.6 Press Release. The Parties acknowledge that with respect to this Agreement press releases may be sought or required pursuant to applicable stock exchange rules and regulations. Upon execution of this Agreement, the Parties shall coordinate to effect worldwide press releases in mutually agreeable form. Neither party shall issue a press release with respect to the subject matter of this Agreement without obtaining the prior consent (including by way of e-mail) of the other party, which shall not be unreasonably withheld.

9.7 Entire Agreement. This Agreement sets forth the entire agreement and understanding of the Parties relating to the matters referred to herein, supersedes all prior discussions and negotiations between the Parties, and may only be amended by a written document, duly executed by both Parties. For purpose of clarity, this Agreement upon execution amends, restates, replaces and repeals in its entirety the Framework Agreement.

EXECUTION VERSION

9.8 Relationship. The relationship of the Parties under this Agreement is that of independent contractors. No Party shall be deemed to be the agent of the other, and no Party is authorized to take any action binding upon any other Party.

9.9 Expenses. Each party shall bear its own expenses incurred in the negotiation and execution of this Agreement. Additionally, each Party would bear its own expenses arising out of the preparation and negotiation of this Agreement, with no liability for such expenses to the other Party, whether or not the transactions described herein completes.

9.10 Notice. All communications between the Parties with respect to any of the provisions of this Agreement will be sent to the addresses set forth below, or to such other addresses as designated by one Party to the other Party by notice pursuant hereto, by internationally recognized courier or by prepaid, certified air mail (which shall be deemed received by the other Party on the seventh (7th) business day following deposit in the mails), or by facsimile transmission or other electronic means of communication (which shall be deemed received when transmitted), with confirmation by letter sent at or before the close of business the next following business day:

If to RepliCel:

RepliCel Life Sciences Inc.
Attention: Mr. David Hall
2020 - 401 West Georgia Street,
Vancouver, BC,
Canada V6B 5Al
Facsimile: +1-604-248-8690
E-mail: dhall@replicel.com

If to Shiseido, at:

Shiseido Co., LTD.
Technical & Production Planning Department
Attention: Mr. Masashi Ogo
1-6-2, Higshi-shimbashi, Minato-ku, Tokyo 105-8310, Japan
Facsimile: +81-3-6218-5803
E-mail: masashi.ogo@to.shiseido.co.jp

9.11 No Waiver . No failure on the part of any Party hereto to exercise, and no delay on the part of any Party hereto in exercising, any right or remedy under this Agreement will operate as a waiver thereof; nor will any single or partial exercise of any right or remedy preclude any other or further exercise thereof or the exercise of any other right or remedy. The rights and remedies provided in this Agreement are cumulative and not exclusive of any other rights or remedies provided by law or otherwise.

9.12 Amendment. This Agreement may be amended, and any term of this Agreement may be modified, only by a written instrument executed by a duly authorized representative of each Party.

EXECUTION VERSION

9.13 Survival .

9.13.1 Article 3, Article 4, Section 5.2.3, Section 5.2.5, Section 5.5, Section 6.3, Section 6.4, Section 6.5, Section 6.6, Article 8, Section 9.4, Section 9.10, Section 9.11 and Section 9.13 shall survive the expiration of this Agreement.

9.13.2 Article 4, Section 5.2.3, Section 5.2.5, Section 5.5, Section 6.3, Section 6.4, Section 6.5, Section 6.6, Section 7.3.2, Section 7.4, Article 8, Section 9.3, Section 9.4, Section 9.10, Section 9.11 and Section 9.13 shall survive the termination of this Agreement.

9.14 Title . Titles of the Articles herein are for the convenience of reference only and shall not affect the construction of this Agreement.

9.15 Severability . If any provision of this Agreement is held to be illegal, invalid or unenforceable under any applicable present or future law, and if the rights or obligations of any party hereto under this Agreement will not be materially and adversely affected thereby, (a) such provision will be fully severable, (b) this Agreement will be construed and enforced as if such illegal, invalid or unenforceable provision had never comprised a part hereof, (c) the remaining provisions of this Agreement will remain in full force and effect and will not be affected by the illegal, invalid or unenforceable provision or by its severance herefrom, and (d) in lieu of such illegal, invalid or unenforceable provision, there will be added automatically as part of this Agreement, a legal, valid and enforceable provision as similar in terms to such illegal, invalid or unenforceable provision as may be possible.

9.16 Counterparts. This Agreement may be executed in two (2) or more counterparts, each of which shall be deemed an original, but all of which together shall constitute one and the same instrument, and shall become operative when each Party has executed and delivered at least one counterpart. This Agreement may be delivered by facsimile, email transmission of PDF files, or similar electronic transmission evidencing execution, and such execution shall be effective as a valid and binding agreement between the Parties for all purposes.

EXECUTION VERSION

IN WITNESS WHEREOF, the Parties hereto have caused this Agreement to be executed by their duly authorized representatives, effective as of the Effective Date.

RepliCel Life Sciences Inc.	Shiseido Co. Ltd.

Name: Mr. David Hall	Name: Mr.Youichi Shimatami
Title: President and CEO	Title: Corporate Officer

Attachments:
Exhibit A	RCH-01 Description
Exhibit B	Pre-Clinical Data and Clinical Protocol Documentation
Exhibit C	RCH-01 Technology Transfer Training Plan
Exhibit D	Joint Research Steering Committee
Exhibit E	RepliCel Core Patent Rights
Exhibit F	Shiseido Core Patent Rights

EXECUTION VERSION

Exhibit A
RCH-01 Description

RCH-01 is a cell-based product for injection made from autologous dermal sheath cup cells (DSCC) harvested from human hair follicles. RCH-01 is currently being tested for the treatment of androgenetic alopecia (pattern baldness) in both sexes. Additional indications include scarring alopecia, diffuse hair loss, chemotherapy or radiation induced hair loss and other hair related medical issues.

Briefly, harvested DSCC are cultured and replicated in a proprietary culture medium using RepliCel’s specialized cell culture procedures. Once replicated in sufficient number; the cultured autologous DSCC (RCH-DSC) are prepared for injection into human scalp then frozen for storage and shipping. Prior to injection, RCH-01 is thawed and drawn into a syringe which is placed in a patented injection device holder referred to by the Parties as RCI-01 or RCI-02 which controls the angle, depth and distribution of cells injected into the scalp.

EXECUTION VERSION

Exhibit B
Pre-Clinical Data and Clinical Protocol Documentation

TS001-2009 (Phase I/IIa in Tbilisi, Georgia)

	1.	Study Protocol.
	2.	Injection Procedure Manual.
	3.	Biopsy Procedure Manual.
	4.	Interim Analysis Study Report.
	5.	12-Month Safety Data Summary.

TS001-2013 (Phase I/IIa Extension in Tbilisi, Georgia)

	1.	Protocol (once finalized)
	2.	Investigator’s Brochure (once finalized)

RCH-01-001-2013 (Phase II study in Germany)

	1.	Protocol synopsis
	2.	Protocol (once finalized)
	3.	Injection Procedure Manual (once finalized)
	4.	Biopsy Procedure Manual (once finalized)
	5.	IMPD (once finalized)

Regulatory Affairs

	1.	Presentation made to PEI (Nov 2012).
	2.	Minutes from PEI meeting (Nov 2012).
	3.	Presentation made to PEI (Feb 2013).
	4.	Minutes from PEI meeting (Feb 2013).

Manufacturing SOPs

	1.	QMA 804-01-02_Allocation of PBS 500 ml-Rev01_EN.doc
	2.	QMA 804-01-01_Incoming check-Rev01_EN.doc
	3.	QMA 804-01-03_Processing the biopsy and Isolation of Cup cells-Rev01_EN.doc
	4.	QMA 804-01-04_Microscopic Imaging of the DSCC cells-Rev01_EN.doc
	5.	QMA 804-01-05_Medium addition 6 Well-Rev01_EN.doc
	6.	QMA 804-01-06_Half Medium change 6 well-Rev01_EN.doc
	7.	QMA 804-01-09_Medium Change T75-Rev01_EN.doc
	8.	QMA 804-01-07_Medium Change 6well-Rev01_EN.doc
	9.	QMA 804-01-11_Medium Change 2 x T175-Rev01_EN.doc
	10.	QMA 804-01-13_Medium Change 6 x T175-Rev01_EN.doc
	11.	QMA 804-01-14 Sterilcontrol of the Culture Media-Rev01_EN.doc
	12.	QMA 804-01-15_Filling glass vials with cryomedium for the placebo samples and-Rev01_EN.doc
	13.	QMA 804-01-16 Cellharvest 6 1175 without placebo-Rev01_EN.doc
	14.	QMA 804-01-17 Cellharvest 6 1175 with single placebo -Rev01_EN.doc
	15.	QMA 804-01-18 Cellharvest 6 1175 with double placebo -Rev01_EN.doc

EXECUTION VERSION

	16.	QMA 804-02-01_Manufacturing cryomedium 400 ml psp-Rev01_EN.doc
	17.	QMA 804-02-02_Preparing of FCS for DSCC culture-Rev01_EN.doc
	18.	QMA 804-01-08_Passage 6well_T75-Rev01_EN.doc
	19.	QMA 804-01-12_Passage DSCC 2 x 1175 auf 6 x T175-Rev01_EN.doc
	20.	QMA 804-01-10_Passage 175_ 2 x T175-Rev01_EN.doc
	21.	QMA 804-02-03_Manufacturing bFGF stock solution-Rev01_EN.doc
	22.	QMA 804-02-04_Manufacturing biopsy transport solution-Rev01_EN.doc
	23.	QMA 804-02-05_Manufacturing EGF stock solution-Rev01_EN.doc
	24.	QMA 804-02-06_Manufacturing PDGF stock solution-Rev01_EN.doc
	25.	QMA 804-02-07_Manufacturing gentamycin-STL and dividing into aliquots-Rev01_EN.doc
	26.	QMA 804-02-08_Manufacturing HFMM complete medium-Rev01_EN.doc
	27.	QMA 804-02-09 Manufacturing HFMM complete medium wo Genta-Rev01_EN.doc
	28.	QMA 804-02-10_Manufacturing TrypLE Select Aliquots-Rev01_EN.doc
	29.	QMA 804-02-11_Manufacturing HFMM BM with 20% FCS-Rev01_EN.doc
	30.	QMA 804-03-01 Batch Record-REv01_EN.doc
	31.	And other SOP files as determined in the final manufacturing process for the phase II clinical trial
	32.	Cell culture ingredients list and concentrations (for manufacture of HFMM under license)
	33.	Data relevant to the use of individual ingredients for RCH-DSCC cell growth and/or gene expression.

Phase II trial data

	1.	Phase II clinical trial data (once finalized)
	2.	Phase II quality control data (once finalized)
	3.	Phase II potency assay data (once finalized)
	4.	Phase II release criteria data (once finalized)

EXECUTION VERSION

Exhibit C
RCH-01 Technology Transfer Training Plan (Clinical Affairs)

Week 1 (Vancouver)

	1.	Day 1 Arrival settle in
	2.	Day 2 TS001-2009 (Phase I/IIa in Tbilisi, Georgia)

a.	Study Protocol
	i.	Visits and rationale for assessments
	ii.	Injection Procedure Manual
	iii.	Biopsy Procedure Manual
b.	Timelines for completion
c.	6-Month Interim Analysis Results (Efficacy and Safety)
d.	12-Month Safety Data Summary

3.	Day 3 TS001-2013 (Phase I/IIa Extension in Tbilisi, Georgia)
	a.	Protocol (once finalized)
		i.	Visits and rationale for assessments
	b.	Timelines for completion
4.	Day 4 RCH-01-001-2013 (Phase II study in Germany)
	a.	Protocol synopsis
		i.	“de-code” protocol numbering scheme
	b.	Applicable advice from the PEI re: protocol design
	c.	Injection Procedure Manual (differences from TS001-2009)
5.	Day 5 RCH-01-001-2013 (Phase II study in Germany)
	a.	Follow up and initial discussion of adaptations for Japan.
	b.	Discussion of collaborative clinical research plans

RCH-01 Technology Transfer Training Plan (Manufacturing)

Week 2 (Vancouver)

1.	Day 1
	a.	Introductions to lab and clinic
	b.	Introductions to personnel
	c.	Building security cards and keys
	d.	UBC lab safety session (required for all visiting scientists)
	e.	Discussion of plans for the time in the laboratory and any changes
2.	Day 2-3
	a.	Observe on-going lab research to familiarize with general lab protocols
	b.	Discussion session on SOPs (familiarization with protocols)
	c.	Observe tissue dissection process and plating in culture media
	d.	Conduct tissue dissection process and plate tissues
3.	Day 3-5

EXECUTION VERSION

	a.	Discussion session on cell culture media and ingredients (potential improvements etc.)
	b.	Discussion session on current research data (microarray etc.)
	c.	Monitor cell cultures and start of cell culture SOPs

Week 3

1.	Day 1-5
	a.	Conduct additional tissue dissection process and plate tissues
	b.	Monitor cell cultures and continue culture SOPs

Week 4

1.	Day 1-5
	a.	Discussion session on current research data (Vancouver microarray etc.)
	b.	Visit to RepliCel office and discussion of research collaboration plans
	c.	Monitor cell cultures and continue culture SOPs

Week 5

1.	Day 1-5
	a.	Conduct additional tissue dissection process and plate tissues
	b.	Monitor cell cultures and continue culture SOPs
	c.	Discussion of quality control techniques used for RepliCel’s Phase II
	d.	Discussion and adaptation of quality control techniques for Japan
	e.	Additional visit to Replicel office for finalization of research collaboration plans

Week 6

1.	Day 1-5
	a.	Monitor cell cultures and continue culture SOPs
	b.	Complete the cultures of the initial tissues dissected in week 1
	c.	Conduct basic quality control procedures (alkaline phosphatise quantisation etc.)
	d.	Development of final plans for collaborative lab research

Innsbruck

Depending on the level of confidence and progress made in Vancouver, the visit to Innsbruck may last 6 weeks at a minimum or more if more training (repetition of SOPs) is needed.

Week 1

1.	Day 1
	a.	Arrival, settle in
2.	Day 2
	a.	Introductions to lab
	b.	Introductions to personnel
	c.	Discussion of plans for the time in Innsbruck and any changes
	d.	Observe ongoing lab research to familiarize with general lab protocols (non GMP)
		i.	Flow cytometry labeling of cells

EXECUTION VERSION

		ii.	Quantisation of alkaline phosphatase
		iii.	Immunohistochemistry labeling of cells
3.	Day 3
	a.	Discussion session on SOPs from the Innsbruck point of view
	b.	Introduction and training in GMP level procedures
4.	Day 4
	a.	Conduct cell culture media preparation SOPs
5.	Day 5
	a.	Conduct tissue dissection process and plate tissues

Week 2

Day 1-5 a. Monitor cell cultures and start of cell culture SOPs

Week 3

1.	Day 1-5
	a.	Conduct tissue dissection process and plate tissues
	b.	Monitor cell cultures and conduct cell culture SOPs
	c.	Meeting with doctors Rainer Marksteiner, Petra Rueck, and Rolf Hoffmann

Week 4

1.	Day 1-5
	a.	Conduct tissue dissection process and plate tissues
	b.	Monitor cell cultures and conduct cell culture SOPs
	c.	Assist with flow cytometry labelling of cells, quantisation of alkaline phosphatase, immunohistochemistry labelling of cells.

Week 5

1.	Day 1-5
	a.	Conduct tissue dissection process and plate tissues
	b.	Monitor cell cultures and conduct cell culture SOPs
	c.	Assist with cell analysis protocols (non GMP)
		i.	Flow cytometry labeling of cells
		ii.	Quantisation of alkaline phosphatase
		iii.	Immunohistochemistry labeling of cells

Week 6

1.	Day 1-5
	a.	Monitor cell cultures and conduct cell culture SOPs
	b.	Cell harvesting process using week 1 cultures (also week 2 cultures if they are ready and possibly other cultures previously set up)
	c.	Meeting and discussion for SOPs; comments queries, questions

EXECUTION VERSION

Exhibit D
Joint Steering Committee

The Joint Steering Committee (JSC) will establish all sub-committees including the Technology Transfer Committee, Clinical and Regulatory Committee and Research and Development Collaboration Committee. The JSC will establish each sub-committee as well as the reporting mechanism to the JSC. Each committee will establish their timelines and reporting mechanisms.

The JSC will be responsible for all decision making regarding all important issues not expressly agreed in this Agreement in order to (i) make this collaboration fruitful and (ii) make a smooth withdrawal from this collaboration if this Agreement is expired or terminated.

The JSC will be charged with setting the mandates and responsibilities of each of the Technology Transfer, the Clinical and Regulatory and the Research and Development committees. Initial membership is as outlined below.

If in the instance that RepliCel licenses or collaborates with a third party outside of Shiseido's territory, RepliCel will facilitate an introduction of the new collaborator or licensee to Shiseido through the JSC. RepliCel will not impede any efforts of Shiseido to speak to the new licensee or collaborator.

All Committees will include Hisae Nakamura from RepliCel as the permanent liaison officer charged with managing all committee work. In addition, respective Party may invite its guest(s) to the respective committee as an observer. The JSC will include as founding members the following:

Joint Steering Committee Members

1.	RepliCel
	a.	David Hall
	b.	Kevin McElwee
	c.	Rolf Hofmann
	d.	Hisae Nakamura
2.	Shiseido
	a.	Youichi Shimatani
	b.	Masashi Ogo
	c.	Jiro Kishimoto

Sub-Committees

Technology Transfer Committee

1.	RepliCel
	a.	Kevin McElwee
	b.	Rolf Hofmann
	c.	Hisae Nakamura
2.	Shiseido
	a.	Tsutomu Soma

EXECUTION VERSION

	b.	Jiro Kishimoto
	c.	Masashi Ogo

Clinical and Regulatory Committee

1.	RepliCel
	a.	Petra Rueck
	b.	Kevin McElwee
	c.	Rolf Hofmann
	d.	Hisae Nakamura
2.	Shiseido
	a.	Jiro Kishimoto
	b.	Ritsuro Ideta
	c.	Takashi Satoh

Research and Development Committee

1.	RepliCel
	a.	Kevin McElwee
	b.	Rolf Hofmann
	c.	Hisae Nakamura
2.	Shiseido
	a.	Jiro Kishimoto
	b.	Tsutomu Soma
	c.	Yuzo Yoshida
	d.	Kiyotaka Hasegawa

EXECUTION VERSION

Exhibit E
RepliCel Core Patent Rights

EXECUTION VERSION

Exhibit F
Shiseido Core Patent Rights

Application Number	Filing Date	Country	Title
*******	*******	*******	*******

EXECUTION VERSION

Exhibit G
Net Sales and Gross Profits

Net Sales = Gross Sales less returns and discounts/rebates

Gross Sales includes all revenue derived from sales of Collaboration Product, collaboration access license fees including any renewal fees and cell processing fees.

The price of the cell processing fee will be targeted to be at least 2 times the cost of the cell processing. In the instance that the cell processing fee is less than 2 times the cost of the cell processing, then there will be a joint discussion disclosing the costs of the cell processing at JSC. All inputs to financial calculations can be subject to audit by RepliCel.

Gross Profits = Net Sales minus cost of cell processing.

CERTIFICATIONS

I, David Hall, certify that:

1.	I have reviewed this annual report on Form 20-F of RepliCel Life Sciences Inc.;

2.	Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3.	Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the company as of, and for, the periods presented in this report;

4.	The company’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the company and have:

	(a)	Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the company, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

	(b)	Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

	(c)	Evaluated the effectiveness of the company’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

	(d)	Disclosed in this report any change in the company’s internal control over financial reporting that occurred during the period covered by the annual report that has materially affected, or is reasonably likely to materially affect, the company’s internal control over financial reporting; and

5.	The company’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the company’s auditors and the audit committee of the company’s board of directors (or persons performing the equivalent functions):

	(a)	All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the company’s ability to record, process, summarize and report financial information; and

	(b)	Any fraud, whether or not material, that involves management or other employees who have a significant role in the company’s internal control over financial reporting.

Date: March 18, 2014

/s/ “David Hall”
David Hall
Chief Executive Officer

CERTIFICATIONS

I, Tom Kordyback, certify that:

1.	I have reviewed this annual report on Form 20-F of RepliCel Life Sciences Inc.;

2.	Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3.	Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the company as of, and for, the periods presented in this report;

4.	The company’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the company and have:

	(a)	Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the company, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

	(b)	Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

	(c)	Evaluated the effectiveness of the company’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

	(d)	Disclosed in this report any change in the company’s internal control over financial reporting that occurred during the period covered by the annual report that has materially affected, or is reasonably likely to materially affect, the company’s internal control over financial reporting; and

5.	The company’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the company’s auditors and the audit committee of the company’s board of directors (or persons performing the equivalent functions):

	(a)	All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the company’s ability to record, process, summarize and report financial information; and

	(b)	Any fraud, whether or not material, that involves management or other employees who have a significant role in the company’s internal control over financial reporting.

Date: March 18, 2014

/s/ “Tom Kordyback”
Tom Kordyback
Chief Financial Officer
(Principal Financial and Accounting Officer)

CERTIFICATION PURSUANT TO
18 U.S.C. SECTION 1350, AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

The undersigned, David Hall, Chief Executive Officer of RepliCel Life Sciences Inc., hereby certifies, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that:

(1)	the annual report on Form 20-F of RepliCel Life Sciences Inc. for the fiscal year ended December 31, 2013 (the “Report”) fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

(2)	the information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of RepliCel Life Sciences Inc.

Dated: March 18, 2014

	/s/ “David Hall”
	David Hall
	Chief Executive Officer
	RepliCel Life Sciences Inc.

A signed original of this written statement required by Section 906, or other document authenticating, acknowledging, or otherwise adopting the signature that appears in typed form within the electronic version of this written statement required by Section 906, has been provided to RepliCel Life Sciences Inc. and will be retained by RepliCel Life Sciences Inc. and furnished to the Securities and Exchange Commission or its staff upon request.

CERTIFICATION PURSUANT TO
18 U.S.C. SECTION 1350, AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

The undersigned, Tom Kordyback, Chief Financial Officer of RepliCel Life Sciences Inc., hereby certifies, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that:

(1)	the annual report on Form 20-F of RepliCel Life Sciences Inc. for the fiscal year ended December 31, 2013 (the “Report”) fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

(2)	the information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of Newcastle Resources Ltd.

Dated: March 18, 2014

	/s/ “Tom Kordyback”
	Tom Kordyback
	Chief Financial Officer
	RepliCel Life Sciences Inc.

	Tel: 604 688 5421	BDO Canada LLP
	Fax: 604 688 5132	600 Cathedral Place
	www.bdo.ca	925 West Georgia Street
		Vancouver BC V6C 3L2 Canada

Consent of Independent Registered Public Accounting Firm

RepliCel Life Sciences Inc.
Vancouver, Canada

We hereby consent to the incorporation by reference in the Registration Statement on Form S8 (No. 333-188742) of RepliCel Life Sciences Inc. of our report dated March 18, 2014, relating to the consolidated financial statements, which appears in this Form 20-F. Our report contains an explanatory paragraph regarding the Company’s ability to continue as a going concern.

/s/ BDO Canada LLP

Vancouver, Canada

March 18, 2014