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  Exhibit 4.6    
    

SQI Diagnostics Inc.  

Interim Consolidated Financial Statements

(Unaudited) 

For the Three and Nine Month Periods Ended June 30, 2011 and 2010  

 

 
 

  SQI Diagnostics Inc.
  
    Interim Consolidated Balance Sheets
  (Unaudited)
  (Amounts are in thousands of dollars)    

 

 

											
	 
	 	Note 	 	As at

June 30,

2011

(Unaudited) 	 	As at

September 30,

2010

(audited) 	 
	 Assets
	 	 	 	 	 	 	 	 	 	 
	 Current
	 	 	 	 	 	 	 	 	 	 
	 Cash and cash equivalents
	 	 	 	 	 $	2,817	 	 $	9,408	 
	 Amounts receivable
	 	 	 	 	 	 12	 	 	 3	 
	 Inventory
	 	 	 4	 	 	 512	 	 	 260	 
	 Prepaids and deposits
	 	 	 	 	 	 425	 	 	 165	 
	 Due from related party
	 	 	 5	 	 	 —	 	 	 66	 
	 	 	 	 	 	 	 	 	 
	 
	 	 	 	 	 	 3,766	 	 	 9,902	 
	 Due from related party
	 	 	 5	 	 	 —	 	 	 32	 
	 Deferred costs
	 	 	 17	 	 	 433	 	 	 —	 
	 Property and equipment
	 	 	 6	 	 	 2,717	 	 	 2,713	 
	 Patents and trademarks
	 	 	 	 	 	 572	 	 	 469	 
	 	 	 	 	 	 	 	 	 
	 
	 	 	 	 	 $	7,488	 	 $	13,134	 
	 	 	 	 	 	 	 	 	 
	 Liabilities
	 	 	 	 	 	 	 	 	 	 
	 Current
	 	 	 	 	 	 	 	 	 	 
	 Accounts payable and accrued liabilities
	 	 	 	 	 $	1,528	 	 $	972	 
	 	 	 	 	 	 	 	 	 
	 Shareholders' Equity
	 	 	 	 	 	 	 	 	 	 
	 Capital stock
	 	 	 8	 	 	 35,377	 	 	 35,026	 
	 Warrants
	 	 	 9	 	 	 1,614	 	 	 1,799	 
	 Employee share purchase loan
	 	 	 8	 	 	 —	 	 	 (10	)
	 Contributed surplus
	 	 	 11	 	 	 9,274	 	 	 8,8832	 
	 Deficit
	 	 	 	 	 	 (40,305	)	 	 (33,485	)
	 	 	 	 	 	 	 	 	 
	 
	 	 	 	 	 	 5,960	 	 	 12,162	 
	 	 	 	 	 	 	 	 	 
	 
	 	 	 	 	 $	7,488	 	 $	13,134	 
	 	 	 	 	 	 	 	 	 

 

  Subsequent Events (Note 17)

Contingencies (Note 14)  

 

 

					
	 
	 	 
	 	 

	Approved by the Board	 	"Peter Winkley"

 	 	"Claude Ricks"

 
	 	 	Director (Signed)	 	Director (Signed)

 

 See accompanying notes 

2

 
 
 

  SQI Diagnostics Inc.
  
    Interim Consolidated Statement of Operations and Deficit
  (Unaudited)
  (Amounts are in thousands of dollars except per share amounts)

 

 

																		
	 
	 	Note 	 	Three Month

Period

Ended

June 30,

2011 	 	Three Month

Period

Ended

June 30,

2010 	 	Nine Month

Period

Ended

June 30,

2011 	 	Nine Month

Period

Ended

June 30,

2010 	 
	 Revenue
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	 	 Product sales
	 	 	 	 	 $	9	 	 $	—	 	 $	22	 	 $	—	 
	 	 Consulting fees
	 	 	 7	 	 	 —	 	 	 6	 	 	 9	 	 	 21	 
	 	 	 	 	 	 	 	 	 	 	 	 	 
	 
	 	 	 	 	 	 9	 	 	 6	 	 	 31	 	 	 21	 
	 	 	 	 	 	 	 	 	 	 	 	 	 
	 Expenses
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	 	 Salaries and wages
	 	 	 	 	 	 275	 	 	 139	 	 	 607	 	 	 404	 
	 	 General and administrative
	 	 	 7	 	 	 125	 	 	 123	 	 	 449	 	 	 324	 
	 	 Professional and consulting fees
	 	 	 17	 	 	 469	 	 	 140	 	 	 669	 	 	 437	 
	 	 Sales and marketing
	 	 	 	 	 	 114	 	 	 116	 	 	 329	 	 	 309	 
	 	 Stock-based compensation
	 	 	 13	 	 	 144	 	 	 69	 	 	 372	 	 	 184	 
	 	 Research and development costs
	 	 	 	 	 	 1,443	 	 	 1,111	 	 	 4,056	 	 	 3,438	 
	 	 Amortization — patents & trademarks
	 	 	 	 	 	 31	 	 	 29	 	 	 88	 	 	 85	 
	 	 Amortization — property & equipment
	 	 	 	 	 	 113	 	 	 101	 	 	 337	 	 	 310	 
	 	 	 	 	 	 	 	 	 	 	 	 	 
	 
	 	 	 	 	 	 2,714	 	 	 1,828	 	 	 6,907	 	 	 5,491	 
	 	 	 	 	 	 	 	 	 	 	 	 	 
	 Operating loss before interest
	 	 	 	 	 	 (2,705	)	 	 (1,822	)	 	 (6,876	)	 	 (5,470	)
	 Interest Income
	 	 	 	 	 	 14	 	 	 8	 	 	 56	 	 	 20	 
	 Interest Expense
	 	 	 	 	 	 —	 	 	 2	 	 	 —	 	 	 (2	)
	 	 	 	 	 	 	 	 	 	 	 	 	 
	 Net loss
	 	 	 	 	 	 (2,691	)	 	 (1,812	)	 	 (6,820	)	 	 (5,452	)
	 Deficit at beginning of period
	 	 	 	 	 	 (37,614	)	 	 (29,052	)	 	 (33,485	)	 	 (25,412	)
	 	 	 	 	 	 	 	 	 	 	 	 	 
	 Deficit at end of period
	 	 	 	 	 $	(40,305	)	 $	(30,864	)	 $	(40,305	)	 $	(30,864	)
	 	 	 	 	 	 	 	 	 	 	 	 	 
	 Weighted average number of shares
	 	 	 	 	 	 33,936	 	 	 30,790	 	 	 33,849	 	 	 29,553	 
	 	 	 	 	 	 	 	 	 	 	 	 	 
	 Basic and diluted loss per share
	 	 	 	 	 $	(0.08	)	 $	(0.06	)	 $	(0.20	)	 $	(0.18	)
	 	 	 	 	 	 	 	 	 	 	 	 	 

 

 See accompanying notes 

3

 
 
 

  SQI Diagnostics Inc.
  
    Interim Consolidated Statement of Cash Flows
  (Unaudited)
  (Amounts are in thousands of dollars)    

 

 

																	
	 
	 	Three Month

Period

Ended

June 30,

2011 	 	Three Month

Period

Ended

June 30,

2010 	 	Nine Month

Period

Ended

June 30,

2011 	 	Nine Month

Period

Ended

June 30,

2010 	 
	 Cash flow from operating activities
	 	 	 	 	 	 	 	 	 	 	 	 	 
	 	 Loss for the period
	 	 $	(2,691	)	 $	(1,812	)	 $	(6,820	)	 $	(5,452	)
	 	 Add items not affecting cash
	 	 	 	 	 	 	 	 	 	 	 	 	 
	 	 	 	 Amortization — patents & trademarks
	 	 	 31	 	 	 29	 	 	 88	 	 	 85	 
	 	 	 	                         — property and equipment
	 	 	 113	 	 	 101	 	 	 337	 	 	 310	 
	 	 	 	 Stock-based compensation
	 	 	 144	 	 	 69	 	 	 372	 	 	 184	 
	 	 	 	 Loss on sale of property and equipment
	 	 	 	 	 	 —	 	 	 43	 	 	 —	 
	 	 	 	 Interest accrual
	 	 	 	 	 	 —	 	 	 (1	)	 	 —	 
	 	 	 	 	 	 	 	 	 	 
	 
	 	 	 (2,403	)	 	 (1,613	)	 	 (5,981	)	 	 (4,873	)
	 	 Changes in non-cash working capital items
	 	 	 	 	 	 	 	 	 	 	 	 	 
	 	 	 	 Amounts receivable
	 	 	 (9	)	 	 (47	)	 	 (8	)	 	 (95	)
	 	 	 	 Investment tax credit recoverable
	 	 	 300	 	 	 (295	)	 	 —	 	 	 (295	)
	 	 	 	 Due from related party
	 	 	 99	 	 	 —	 	 	 99	 	 	 7	 
	 	 	 	 Inventory
	 	 	 1	 	 	 (153	)	 	 (252	)	 	 (458	)
	 	 	 	 Prepaids and deposits
	 	 	 (122	)	 	 (75	)	 	 (260	)	 	 (95	)
	 	 	 	 Accounts payable and accrued liabilities
	 	 	 795	 	 	 100	 	 	 555	 	 	 305	 
	 	 	 	 	 	 	 	 	 	 
	 
	 	 	 (1,339	)	 	 (2,083	)	 	 (5,847	)	 	 (5,504	)
	 	 	 	 	 	 	 	 	 	 
	 Cash flows used in investing activities
	 	 	 	 	 	 	 	 	 	 	 	 	 
	 	 Purchase of property and equipment
	 	 	 (36	)	 	 (266	)	 	 (368	)	 	 (369	)
	 	 Additions to patents and trademarks
	 	 	 (94	)	 	 (21	)	 	 (191	)	 	 (99	)
	 	 Sale of property and equipment
	 	 	 —	 	 	 —	 	 	 2	 	 	 —	 
	 	 	 	 	 	 	 	 	 	 
	 
	 	 	 (130	)	 	 (287	)	 	 (557	)	 	 (468	)
	 	 	 	 	 	 	 	 	 	 
	 Cash flows from financing activities
	 	 	 	 	 	 	 	 	 	 	 	 	 
	 	 Repayment of loans payable
	 	 	 —	 	 	 (1	)	 	 —	 	 	 (3	)
	 	 Repayment of shareholder loan
	 	 	 10	 	 	 —	 	 	 10	 	 	 —	 
	 	 Proceeds from private placement and exercise of warrants and options, net of share issuance costs
	 	 	 40	 	 	 2,093	 	 	 236	 	 	 8,561	 
	 	 Deferred costs
	 	 	 (433	)	 	 —	 	 	 (433	)	 	 —	 
	 	 	 	 	 	 	 	 	 	 
	 
	 	 	 (383	)	 	 2,092	 	 	 (187	)	 	 8,558	 
	 	 	 	 	 	 	 	 	 	 
	 Increase (decrease) in cash during the period
	 	 	 (1,852	)	 	 (278	)	 	 (6,591	)	 	 2,586	 
	 Cash at beginning of period
	 	 	 4,669	 	 	 6,044	 	 	 9,408	 	 	 3,180	 
	 	 	 	 	 	 	 	 	 	 
	 Cash at end of period
	 	 $	2,817	 	 $	5,766	 	 $	2,817	 	 $	5,766	 
	 	 	 	 	 	 	 	 	 	 
	 Supplemental disclosure
	 	 	 	 	 	 	 	 	 	 	 	 	 
	 Cash paid for interest
	 	 	 —	 	 $	(2	)	 	 —	 	 $	2	 

 

 See accompanying notes 

4

 

 
 
  
  SQI Diagnostics Inc.    
    
    NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS    
    
    (Unaudited)    
    

 1.     NATURE OF OPERATIONS  

SQI
Diagnostics Inc., (the "Company"), has its head office and development centre in Toronto, Ontario. The Company is a life sciences company that develops proprietary and commercializes
proprietary technologies and products for advanced microarray diagnostics. Our goal is to become a leader in the development and commercialization of microarray and multiplexed diagnostics by offering
our customers a comprehensive "turnkey" solution that increases the efficiency and ease of diagnostic testing and test development. 

During
fiscal 2009 the Company obtained Health Canada licenses and self authorization to sell in the EU and during fiscal 2010 received United States Food & Drug Administration ("FDA")
clearance of its SQiDworks and IgX PLEX Rheumatoid Arthritis (RA) system. During fiscal 2010 the Company obtained a Health Canada license for its IgX PLEX CeliacTM microarray test kits that
run on the Company's automated SQiDworksTM platform. During the nine months ended June 30, 2011 the company obtained FDA clearance for its IgX PLEX CeliacTM panel and
obtained a Health Canada license and self authorization to sell in the EU its second generation fully quantitative IgX PLEX CeliacTM panel. The Company has earned limited revenues from its
IgX PLEX RATM and IgX PLEX CeliacTM test kits run on installed SQiDworksTM platforms to date, and as such is considered to be a development stage company. The Company
has a pipeline of additional autoimmune diagnostic products in various stages of development and commercialization. The Company expects to generate revenues from its IgXPLEX RA and IgXPLEX Celiac
products as it grows its installed base of customers as well as from products to be launched as they complete commercialization. The continuation of the Company's research, development and
commercialization activities is dependent upon the Company's ability to successfully generate product revenues, or to finance its cash requirements through further equity financings. 

 2.     SIGNIFICANT ACCOUNTING POLICIES  

These
consolidated financial statements have been prepared by management in accordance with Canadian generally accepted accounting principles and follow the same accounting policies and methods of
their application as the most recent audited consolidated financial statements for the years ended September 30, 2010 and 2009. These statements should be read in conjunction with the Company's
above noted annual consolidated financial statements. The significant accounting policies are discussed below. 

 Basis of Consolidation  

The
consolidated financial statements include the accounts of the Company and its wholly owned subsidiary. Inter-company balances and transactions are eliminated upon consolidation. 

 Cash and Cash Equivalents  

Cash
and cash equivalents include bank deposits and highly liquid money market investments such as bankers acceptance notes, treasury bills, cashable money market funds, and cashable guaranteed
investment certificates. 

 Inventory  

Inventory
is valued at the lower of cost and replacement cost, with cost determined on a first-in, first-out basis. 

 Property and Equipment  

Property
and equipment are recorded at cost and are amortized on the straight-line basis over their estimated useful lives as follows: 

 

 

						
	 	Computer hardware	 	—	 	3 years
	 	Computer software	 	—	 	3 years
	 	Laboratory fixtures and equipment	 	—	 	10 years
	 	Office equipment	 	—	 	10 years
	 	Leasehold improvements	 	—	 	10 years

 

 
 Patents and Trademarks  

The
costs relating to initial patent and trademark fees are deferred and amortized over 10 years on a straight-line basis. Patents and trademarks are recorded net of accumulated
amortization of $715,000 (September 30, 2010 — $627,000). 

5

 

SQI Diagnostics Inc. 

 NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS (Continued) 

 (Unaudited) 

 2.     SIGNIFICANT ACCOUNTING POLICIES (Continued) 

 Research and Development Costs  

Research
costs are charged to operations in the period in which they are incurred. Development costs are expensed as incurred or deferred if they meet the criteria for deferral under Canadian
generally accepted accounting principles and are expected to provide future benefits with reasonable certainty. 

At
June 30, 2011, the Company was developing IgXPLEX diagnostics assays for celiac, vasculitis, lupus (SLE), Crohn's (IBD), antiphospholipid syndrome and our second generation, fully
quantitative IgXPLEX RA assay. The Company continued its work to complete scientific discovery and assay design work for a diagnostic assay to detect and measure infliximab (also referred to as
anti-TNF) in the blood of autoimmune patients. Deferral criteria have not been met, and accordingly, all development costs have been expensed in the period. 

 Impairment of Long-Lived Assets  

Long-lived
assets comprise property and equipment and intangible assets with finite lives (patents and trademarks). The Company recognizes an impairment loss for a long-lived
asset when events or changes in circumstances cause its carrying value to exceed the total undiscounted cash flows expected from its use and eventual disposition. An impairment loss is measured as the
excess of the carrying value of the asset over its fair value. 

 Revenue Recognition  

Product
sales are recognized upon the shipment of products to customers, if a signed contract exists, the sales price is fixed and determinable, collection of the resulting receivables is reasonably
assured and any uncertainties with regard to customer acceptance are insignificant. Sales are recorded net of discounts and sales returns. 

The
Company also provides consulting services from time to time. Consulting fee revenue is recognized when services are completed, amounts are invoiced to customers and collectability is reasonably
assured. 

 Stock-Based Compensation and Other Stock-Based Payments  

The
Company applies a fair value based method of accounting for all stock-based payments. Accordingly, stock-based payments are measured at the fair value of the consideration received or the fair
value of the equity instruments issued or liabilities incurred, whichever is more reliably measurable. Stock-based compensation is charged to operations over the vesting period and the offset is
credited to contributed surplus. Consideration received upon the exercise of stock options is credited to share capital at which time the related contributed surplus is transferred to
share capital. 

 Foreign Currency Translation  

Monetary
assets and liabilities denominated in foreign currencies are translated to Canadian dollars at exchange rates in effect at the balance sheet date. Non-monetary assets and
liabilities are translated at rates of exchange in effect at each transaction date. Revenue and expenses are translated at the rate of exchange at each transaction date. Gains or losses on translation
are included in operations. 

 Income Taxes  

The
Company follows the liability method of accounting for income taxes. Under this method, future income tax assets and liabilities are determined based on temporary differences between financial
reporting and tax bases of assets and liabilities, as well as for the benefit of losses available to be carried forward to future years for tax purposes. Future income tax assets and liabilities are
measured using enacted or substantively enacted tax rates and laws that will be in effect when the differences are expected to reverse. Future income tax assets are recorded in the financial
statements if realization is considered more likely than not. 

 Investment Tax Credits  

Investment
tax credits are accrued when qualifying expenditures are incurred and there is reasonable assurance that the credits will be realized. Investment tax credits earned with respect to current
expenditures for qualified research and development activities are included in the statements of operations as a reduction of research and development costs. Investment tax credits associated with
capital expenditures are reflected as reductions in the carrying amounts of capital assets. During the three and nine months ended June 30, 2011 the company recorded $Nil and $300,000,
respectively, as a reduction of research and development costs ($295,000 for the three and nine months ended June 30, 2010). 

6

 

SQI Diagnostics Inc. 

 NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS (Continued) 

 (Unaudited) 

 2.     SIGNIFICANT ACCOUNTING POLICIES (Continued) 

 Financial Instruments  

Financial
instruments are measured initially at fair value and thereafter based on their classification. 

The
Company has classified and measured its financial instruments as follows: 

 

						
	 	Financial Instrument

 
	 	Classification

 
	 	Measurement Basis

 

	 	 Cash and cash equivalents
	 	Held-for-trading	 	Fair value
	 	 Amounts receivable
	 	Loans and receivable	 	Amortized cost
	 	 Investment tax credits receivable
	 	Loans and receivable	 	Amortized cost
	 	 Due from related party
	 	Loans and receivable	 	Amortized cost
	 	 Accounts payable and accruals
	 	Other financial liabilities	 	Amortized cost

 

 
 Comprehensive Income  

The
Company has not presented a statement of comprehensive income as it has no other comprehensive income. 

 Loss Per Share  

Basic
loss per share is computed using the weighted average number of common shares outstanding during the period. Diluted loss per share is computed using the weighted average number of common and
potential common shares outstanding during the period. Potential common shares consist of the incremental common shares issuable upon the exercise of stock options and warrants determined using the
treasury stock method. 

 Use of Estimates  

The
preparation of financial statements in conformity with Canadian generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of
assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amount of revenue and expenses during the period. Actual results
could differ from those estimates. 

Significant
areas requiring the use of management estimates relate to the determination of the useful lives of property and equipment and patents and trademarks for amortization purposes, valuation of
ITC's receivable, valuation of stock options and warrants and valuation allowance on future tax assets. 

 3.     RECENT ACCOUNTING PRONOUNCEMENTS  

	(i)
	Adoption of New Accounting Pronouncements

 Business Combinations  

In
January 2009, the CICA issued Section 1582, Business Combinations, which replaces former guidance on business combinations. Section 1582 establishes principles and requirements
of the acquisition method for business combinations and related disclosures. In addition, the CICA issued Sections 1601, Consolidated Financial Statements, and 1602, Non-Controlling
Interests, which replaces the existing guidance. Section 1601 establishes standards for the preparation of consolidated financial statements, while
section 1602 provides guidance on accounting for a non-controlling interest in a subsidiary in consolidated financial statements subsequent to a business combination. 

These
standards apply prospectively to business combinations for which the acquisition date is on or after the beginning of the first annual reporting period beginning on or after January 1,
2011 with earlier application permitted. The Company adopted the new standards on October 1, 2010.  

	(ii)
	Recent Accounting Pronouncements Issued and Not Yet Applied

 International Financial Reporting Standards  

The
CICA plans to converge Canadian Generally Accepted Accounting Principles with International Financial Reporting Standards ("IFRS") over a transition period expected to end in 2011, when IFRS will
be fully adopted. The transition date of October 1, 2010 for the Company will require restatement for comparative purposes of amounts reported by the Company for the year ended
September 30, 

7

 

SQI Diagnostics Inc. 

 NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS (Continued) 

 (Unaudited) 

 3.     RECENT ACCOUNTING PRONOUNCEMENTS (Continued) 

2011.
The Company continues to monitor, assess and quantify the impact of the convergence of Canadian GAAP and IFRS on its financial statements. 

 4.     INVENTORY  

Inventory
consists of component parts that are to be used in the future production of SQiDworksTM Platform and IgXPLEX consumable assays. 

 5.     DUE FROM RELATED PARTY  

 

 

									
	 	 
	 	June 30,

2011

($000s) 	 	September 30,

2010

($000s) 	 
	 	 
	 	(unaudited)
	 	(audited)
	 
	 	 Amount due from an officer and director (i) and (ii)
	 	 $	—	 	 $	98	 
	 	 Less: Current portion
	 	 	 —	 	 	 (66	)
	 	 	 	 	 	 	 
	 	 
	 	 $	—	 	 $	32	 
	 	 	 	 	 	 	 

 

 
	(i)
	Amount
due was secured, principal amount of $98,000 repayable in three equal payments on September 1, 2010, 2011 and 2012. Terms of the promissory
note were amended on April 16, 2010 as follows: interest bearing at Canada Revenue Agency prescribed rate for taxable benefits to employees and shareholders on interest-free and
low-interest loans, which was 1% per annum at June 30, 2011. Prior to amendment, the loan was bearing interest at 4.25% per annum during the year ended December 31, 2009 and
non-interest bearing from October 1, 2009 to April 15, 2010.

	(ii)
	As
at June 30, 2011, the loan was paid in full. 

 6.     PROPERTY AND EQUIPMENT  

 

 

												
	 	As at June 30, 2011 (unaudited):

 
	 	Cost

($000s) 	 	Accumulated

Amortization

($000s) 	 	Net

($000s) 	 
	 	 Computer hardware
	 	 $	266	 	 $	174	 	 $	92	 
	 	 Computer software
	 	 	 179	 	 	 143	 	 	 36	 
	 	 Laboratory fixtures and equipment
	 	 	 4,343	 	 	 1,888	 	 	 2,455	 
	 	 Office equipment
	 	 	 176	 	 	 135	 	 	 41	 
	 	 Leasehold improvements
	 	 	 265	 	 	 172	 	 	 93	 
	 	 	 	 	 	 	 	 	 
	 	 
	 	 $	5,229	 	 $	2,512	 	 $	2,717	 
	 	 	 	 	 	 	 	 	 

 

  

 

 

												
	 	As at September 30, 2010 (audited):

 
	 	Cost

($000s) 	 	Accumulated

Amortization

($000s) 	 	Net

($000s) 	 
	 	 Computer hardware
	 	$	193	 	$	141	 	$	52	 
	 	 Computer software
	 	 	153	 	 	130	 	 	23	 
	 	 Laboratory fixtures and equipment
	 	 	4,172	 	 	1,670	 	 	2,502	 
	 	 Office equipment
	 	 	176	 	 	128	 	 	48	 
	 	 Leasehold improvements
	 	 	263	 	 	157	 	 	106	 
	 	 	 	 	 	 	 	 	 
	 	 
	 	$	4,957	 	$	2,226	 	$	2,731	 
	 	 	 	 	 	 	 	 	 

 

 8

 

SQI Diagnostics Inc. 

 NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS (Continued) 

 (Unaudited) 

 
  7.     RELATED PARTY TRANSACTIONS  

Transactions
with related parties occur in the normal course of business and are measured at the exchange amount. Related party transactions have been listed below, unless they have been disclosed
elsewhere in the financial statements. 

Included
in general and administrative expense for the three month period ended June 30, 2011 is $13,000 (three month period ended June 30,
2010 — $12,000) compared to $38,000 for the nine month period ended June 30, 2011 (nine month period ended June 30, 2010 $37,000), related to
recovery of occupancy costs from a corporation in which an officer of the Company is also an officer. Consulting fee revenue of NIL for the three month ended June 30, 2011 (three month ended
June 30, 2010 — $6,000) was earned from this corporation compared to $9,000 for the nine month period ended June 30, 2011 (nine month period ended
June 30, 2010 $21,000). At quarter-end, $1,000 (September 30, 2010 — $1,000) due from this corporation is included in amounts
receivable. 

 8.     CAPITAL STOCK  

	(a)
	The
Company has authorized an unlimited number of common shares. Issued common shares are detailed in the schedule below: 

 

 

									
	 	 
	 	Number

(000s) 	 	Value

($000s) 	 
	 	 Balance, September 30, 2010 (audited)
	 	 	 33,758	 	 $	35,026	 
	 	 	 	 	 	 	 
	 	 Options exercised
	 	 	 8	 	 	 22	 
	 	 	 	 	 	 	 
	 	 Balance, December 31, 2010
	 	 	 33,766	 	 $	35,048	 
	 	 	 	 	 	 	 
	 	 Options exercised
	 	 	 40	 	 	 104	 
	 	 Warrants exercised (Note 9(i))
	 	 	 107	 	 	 193	 
	 	 Share issuance costs
	 	 	 —	 	 	 (16	)
	 	 	 	 	 	 	 
	 	 Balance, March 31, 2011
	 	 	 33,913	 	 $	35,329	 
	 	 	 	 	 	 	 
	 	 Options exercised
	 	 	 33	 	 	 48	 
	 	 	 	 	 	 	 
	 	 Balance, June 30, 2011
	 	 	 33,946	 	 $	35,377	 
	 	 	 	 	 	 	 

 

 
	(b)
	During
the period ended September 30, 2007, the Company made a non-interest bearing loan to an officer, which was used to acquire
100,000 common shares. The loan has been accounted for as a share purchase loan and, accordingly, the $10,000 loan balance has been deducted from share capital. The loan was paid in full during
the three months ended June 30, 2011. 

 9.     WARRANT CAPITAL  

The
following summarizes the change in warrants: 

 

 

									
	 	 
	 	Nine Months Ended

June 30,

2011

($000s) 	 	Year Ended

September 30,

2010

($000s) 	 
	 	 
	 	 
	 	(audited)
	 
	 	 Balance, beginning of period
	 	 $	1,799	 	 $	461	 
	 	 Issued on private placement
	 	 	 —	 	 	 1,424	 
	 	 Finder warrants
	 	 	 —	 	 	 187	 
	 	 Exercise of warrants (i)
	 	 	 (60	)	 	 (213	)
	 	 Expiry of warrants (ii)
	 	 	 (125	)	 	 (60	)
	 	 	 	 	 	 	 
	 	 Balance, end of period
	 	 $	1,614	 	 $	1,799	 
	 	 	 	 	 	 	 

 

 
	(i)
	During
the quarter-ended March 31, 2011, 106,520 warrants with an expiry of January 22, 2011 were exercised for proceeds of $133,000.
Upon exercise $60,000 was transferred to share capital. 

9

 

SQI Diagnostics Inc. 

 NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS (Continued) 

 (Unaudited) 

 9.     WARRANT CAPITAL (Continued) 

	(ii)
	During
the quarter-ended December 31, 2010 143,886 warrants with an expiry of December 4, 2010 expired unexercised, and
$125,000 was transferred to contributed surplus upon expiry. 

 10.   WARRANTS  

The
Company had the following warrants outstanding at June 30, 2011: 

 

 

						
	 	Number of Warrants

(000s) 	 	Purchase Price 	 	Expiry Date 
	 	1,199	 	$4.00	 	December 4, 2011
	 	237	 	$1.90	 	December 23, 2011
	 	1,140	 	$5.00	 	August 12, 2012
	 	57	 	$2.50	 	August 12, 2012
	 	 	 	 	 	 
	
 	
 2,633	
 	

 	
 	

 
	 	 	 	 	 	 

 

  11.   CONTRIBUTED SURPLUS  

The
following summarizes the change in contributed surplus: 

 

 

									
	 	 
	 	Nine Months Ended

June 30,

2011

($000s) 	 	Year Ended

September 30,

2010

($000s) 	 
	 	 
	 	 
	 	(audited)
	 
	 	 Balance, beginning of period
	 	 $	8,832	 	 $	8,431	 
	 	 Stock-based compensation (Note 13)
	 	 	 372	 	 	 402	 
	 	 Options exercised (Note 12 (i))
	 	 	 (55	)	 	 (61	)
	 	 Warrants expired (Note 9(ii))
	 	 	 125	 	 	 60	 
	 	 	 	 	 	 	 
	 	 Balance, end of period
	 	 $	9,274	 	 $	8,832	 
	 	 	 	 	 	 	 

 

  12.   STOCK OPTIONS  

The
Company maintains a Stock Option Plan (the "Plan") for the benefit of directors, officers, employees and consultants. The maximum number of common shares reserved for issuance under the
Plan, together with any other employee stock option plans, options for services and employee share purchase plans, will not exceed 10% of the issued and outstanding shares at the time of the option
grant. Options granted pursuant to the Plan will have terms not to exceed five years, and are granted at an option price which will not be less than the fair market price at the time the options are
granted. All options granted to individual optionees, other than consultants, generally vest in three equal installments over a period of 36 months. 

10

 

SQI Diagnostics Inc. 

 NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS (Continued) 

 (Unaudited) 

 12.   STOCK OPTIONS (Continued) 

The
following summarizes the stock option activities under the Plan: 

 

 

															
	 	 
	 	Nine Month Period Ended

June 30, 2011 	 	Nine Month Period Ended

June 30, 2010 	 
	 	 
	 	Number

of Options

(000s) 	 	Weighted

Average

Exercise

Price 	 	Number

of Options

(000s) 	 	Weighted

Average

Exercise

Price 	 
	 	 Beginning balance
	 	 	 1,814	 	 $	1.77	 	 	 2,368	 	 $	1.31	 
	 	 Granted
	 	 	 175	 	 $	2.88	 	 	 209	 	 $	2.32	 
	 	 Exercised (i)
	 	 	 (81	)	 $	1.45	 	 	 (830	)	 $	0.81	 
	 	 Cancelled/Expired
	 	 	 	 	 	 	 	 	 (122	)	 $	0.88	 
	 	 Forfeited
	 	 	 (49	)	 $	2.26	 	 	 (2	)	 $	1.74	 
	 	 	 	 	 	 	 	 	 	 	 
	 	 Ending balance
	 	 	 1,859	 	 $	1.85	 	 	 1,623	 	 $	1.67	 
	 	 	 	 	 	 	 	 	 	 	 
	 	 Exercisable
	 	 	 1,519	 	 $	1.74	 	 	 1,021	 	 $	1.37	 
	 	 	 	 	 	 	 	 	 	 	 

 

 
	(i)
	On
exercise of stock options, $55,000 (nine months ended June 30, 2010 — $0) was transferred from contributed
surplus to share capital. 

The
Company had the following stock options outstanding under the Plan at June 30, 2011: 

 

						
	 	Number of Options

(000s) 	 	Exercise Price 	 	Expiry Date 
	 	58	 	$1.20	 	August 29, 2011
	 	143	 	$1.74	 	August 7, 2012
	 	50	 	$1.50	 	October 23, 2012
	 	758	 	$1.60	 	February 26, 2013
	 	255	 	$1.75	 	August 26, 2013
	 	78	 	$1.30	 	May 22, 2014
	 	25	 	$3.26	 	November 3, 2014
	 	107	 	$2.25	 	February 22, 2015
	 	50	 	$2.10	 	May 27, 2015
	 	175	 	$2.50	 	August 16, 2015
	 	100	 	$2.90	 	October 4, 2015
	 	60	 	$2.85	 	January 31, 2016
	 	 	 	 	 	 
	
 	
 1,859	
 	

 	
 	

 
	 	 	 	 	 	 

 

  13.   STOCK-BASED COMPENSATION  

The
fair value of the options granted during the nine month period ended June 30, 2011 was $327,000 (nine month period ended June 30,
2010 — $315,000), which will be recognized over the vesting period of 36 months. The total compensation expense for three and nine month period ended
June 30, 2011 was $144,000 and $372,000 respectively (three and nine month period ended June 30, 2010 — $69,000 and $184,000 respectively). The
total amount credited to contributed surplus for the nine month period ended June 30, 2011 was $144,000 and $372,000 respectively (three and nine month period ended June 30,
2010 — $69,000 and $184,000 respectively). 

11

 

SQI Diagnostics Inc. 

 NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS (Continued) 

 (Unaudited) 

 13.   STOCK-BASED COMPENSATION (Continued) 

The
fair value of each option granted has been estimated at the date of grant or the date when it became measurable using the Black-Scholes option pricing model with the following weighted average
assumptions at the measurement date: 

 

								
	 
	 	Nine Months Ended

June 30,

2011 	 	Nine Months Ended

June 30,

2010 	 
	 Dividend yield
	 	 	 0%	 	 	 0%	 
	 Expected volatility
	 	 	 80%	 	 	 80%	 
	 Risk-free interest rate
	 	 	 2.31%	 	 	 1.98%	 
	 Expected life (years)
	 	 	 5.00	 	 	 5.00	 
	 	 	 	 	 	 
	 Weighted average grant date fair value
	 	 $	1.87	 	 $	1.51	 
	 	 	 	 	 	 

 

 
The
Company has assumed no forfeiture rate as adjustments for actual forfeitures are made in the year they occur. 

 14.   CONTINGENCIES  

In
the ordinary course of business, the Company may be contingently liable for litigation and claims with customers, suppliers, former employees or competitors. Management believes that adequate
provisions have been recorded in accounts where required. 

 15.   CAPITAL RISK MANAGEMENT  

The
Company's objective when managing capital is to safeguard the Company's ability to continue as a going concern so that it can complete its lead assay commercialization efforts and receive the
required regulatory approvals to sell and market its products and provide returns for shareholders and benefits for other stakeholders. 

The
capital structure of the Company consists of shareholders' equity. The Company is not subject to externally imposed capital requirements. 

 16.   FINANCIAL RISK MANAGEMENT  

	a)
	Credit Risk

Credit
risk is the risk that one party to a financial instrument will cause a financial loss for the other party by failing to discharge an obligation. The Company's cash and cash equivalents are
exposed to credit risk. The credit risk on cash and cash equivalents is small because the counterparties are highly rated Canadian banks.  

	b)
	Interest Rate Risk

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. The Company's cash and cash equivalents
are exposed to cash flow interest rate risk as the Company invests cash and cash equivalents at floating rates of interest in highly liquid instruments. Fluctuations in interest rates would not
significantly impact interest income.  

	c)
	Currency Risk

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 is exposed to currency risk due to
its purchases in US dollars. A 1% change in the foreign exchange rate would result in a change of approximately $13,000 in the reported profit and loss.  

	d)
	Liquidity Risk

Liquidity
risk is the risk that the Company will encounter difficulty in meeting obligations associated with financial liabilities. The Company's accounts payable and accrued liabilities are all
current. The Company ensures that it has sufficient capital to meet short term financial obligations after taking into account its cash on hand. 

12

 

SQI Diagnostics Inc. 

 NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS (Continued) 

 (Unaudited) 

 17.   SUBSEQUENT EVENTS  

On
July 4, 2011 the Company announced that it has entered into an agreement to acquire all of the share capital of Scienion AG, a German-based microarray manufacturing equipment and microarray
print and development services company for a purchase price of $15,000,000 in cash and the issuance of 735,294 common shares in the capital of SQI. The closing of the transaction is subject to
a number of customary closing conditions and regulatory approvals, and is subject to financing. 

On
July 7, 2011 the Company announced that it has filed a preliminary short form PREP based prospectus with the Ontario Securities Commission and a registration statement on
form F-10 with the U.S. Securities and Exchange Commission in connection with a proposed offering of common shares. The anticipated amount of the offering is approximately
$30,000,000 of which $15,000,000 will be used in payment of the cash portion of the purchase price of the Company's acquisition of Scienion. The completion of the public offering is subject to and
conditional upon the receipt of all necessary approvals, including regulatory approval. 

At
June 30, 2011, the Company had incurred costs relating to the planned offering in the amount of $433,000 (September 30, 2010 — $Nil). These
amounts have been reflected in deferred costs and will be offset against share capital upon completion of the offering. The Company also incurred cost relating to the acquisition as at June 30,
2011 in the amount of $324,000 (June 30, 2010 — $Nil). These amounts have been included in professional and consulting fees. 

13

QuickLinks

Exhibit 4.6

SQI Diagnostics Inc. Interim Consolidated Balance Sheets (Unaudited) (Amounts are in thousands of dollars)

SQI Diagnostics Inc. Interim Consolidated Statement of Operations and Deficit (Unaudited) (Amounts are in thousands of dollars except per share amounts)

SQI Diagnostics Inc. Interim Consolidated Statement of Cash Flows (Unaudited) (Amounts are in thousands of dollars)

NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTSQuickLinks
 -- Click here to rapidly navigate through this document

 

 
 

  Exhibit 4.7    
    

 
 
  
  SQI Diagnostics Inc.    
    
    SUPPLEMENTAL NOTE REGARDING THE RECONCILIATION OF THE INTERIM
  CONSOLIDATED FINANCIAL STATEMENTS FOR THE THREE AND NINE MONTH PERIODS

ENDED JUNE 30, 2011 AND 2010 WITH U.S. GAAP    
    
    (unaudited)
  Dated September 1, 2011    

The
Company follows Canadian generally accepted accounting principles ("Canadian GAAP") which is different in some respects from the accounting principles applicable in the United States
("U.S. GAAP") and from practices prescribed by the United States Securities and Exchange Commission. These differences in Canadian GAAP and U.S. GAAP that would require
restatement of any of the Company's reported financial statements and certain additional disclosures required under U.S. GAAP are detailed below: 

	(i.)
	Leasehold
Improvements 

The
company amortizes leasehold improvements over their expected useful life. U.S. GAAP requires that leasehold improvements be amortized over the lesser of their useful life or the term of the
lease. As the Company does not have a term lease in place for its premises, expenditures relating to leasehold improvements are booked to general and administrative expense in the statement of
operations. Accordingly, the following adjustments would be required under U.S. GAAP: 

(amounts
in thousands of dollars) 

 

 

									
	 	 
	 	June 30,

2011 	 	September 30,

2010 	 
	 	 Property and equipment — Canadian GAAP
	 	$	2,717	 	$	2,731	 
	 	 Remove net book value of Leasehold Improvements
	 	 	(93	)	 	(106	)
	 	 	 	 	 	 	 
	 	 Property and equipment — U.S. GAAP
	 	$	2,624	 	$	2,625	 
	 	 	 	 	 	 	 

 

  

 

 

									
	 	 
	 	June 30,

2011 	 	September 30,

2010 	 
	 	 Deficit — Canadian GAAP
	 	$	(40,305	)	$	(33,485	)
	 	 Net Adjustment
	 	 	(93	)	 	(106	)
	 	 	 	 	 	 	 
	 	 Deficit — U.S. GAAP
	 	$	(40,398	)	$	(33,591	)
	 	 	 	 	 	 	 

 

  

 

 

															
	 	 
	 	Three Month

Period Ended

June 30, 2011 	 	Three Month

Period Ended

June 30, 2010 	 	Nine Month

Period Ended

June 30, 2011 	 	Nine Month

Period Ended

June 30, 2010 	 
	 	 Net loss — Canadian GAAP
	 	 $	(2,691	)	 $	(1,812	)	 $	(6,820	)	 $	(5,452	)
	 	 Net adjustment to expense Leasehold Improvements and remove amortization of Leasehold Improvements
	 	 	 3	 	 	 (9	)	 	 13	 	 	 (4	)
	 	 	 	 	 	 	 	 	 	 	 
	 	 Net loss — U.S. GAAP
	 	 $	(2,688	)	 $	(1,821	)	 $	(6,807	)	 $	(5,456	)
	 	 	 	 	 	 	 	 	 	 	 

 

  

 

 

															
	 	 
	 	Three Month

Period Ended

June 30, 2011 	 	Three Month

Period Ended

June 30, 2011 	 	Nine Month

Period Ended

June 30, 2011 	 	Nine Month

Period Ended

June 30, 2011 	 
	 	 Cash provided by (used in) operations — Canadian GAAP
	 	 $	(1,339	)	 $	(2,083	)	 $	(5,847	)	 $	(5,504	)
	 	 Expense Leasehold Improvements
	 	 	 —	 	 	 (16	)	 	 (2	)	 	 (23	)
	 	 	 	 	 	 	 	 	 	 	 
	 	 Cash used in operations — U.S. GAAP
	 	 $	(1,339	)	 $	(2,099	)	 $	(5,849	)	 $	(5,527	)
	 	 	 	 	 	 	 	 	 	 	 
	 	 Cash provided by (used in) investing — Canadian GAAP
	 	 $	(130	)	 $	(287	)	 $	(557	)	 $	(468	)
	 	 Remove additions to Leasehold Improvements
	 	 	 —	 	 	 16	 	 	 2	 	 	 23	 
	 	 	 	 	 	 	 	 	 	 	 
	 	 Cash provided by (used in) investing — U.S. GAAP
	 	 $	(130	)	 $	(271	)	 $	(555	)	 $	(445	)
	 	 	 	 	 	 	 	 	 	 	 

 

 F-1

 

SQI Diagnostics Inc. 

 SUPPLEMENTAL NOTE REGARDING THE RECONCILIATION OF THE INTERIM

CONSOLIDATED FINANCIAL STATEMENTS FOR THE THREE AND NINE MONTH PERIODS

ENDED JUNE 30, 2011 AND 2010 WITH U.S. GAAP (Continued) 

 (unaudited)

Dated September 1, 2011 

 
 	(ii.)
	The
Company is a development stage company. Accordingly, the following tables detailing the Company's Statements of Operations, Shareholders' Equity and
Cash Flows from inception (December 1, 1999) to June 30, 2011 are required to be presented: 

 Statement of Operations

(amounts in thousands of dollars)  

 

 

							
	 	 
	 	From Inception to

June 30,

2011 	 
	 	 Revenue
	 	 	 	 
	 	 	 Product Sales
	 	$	32	 
	 	 	 Consulting Fees
	 	 	1,269	 
	 	 	 	 	 
	 	 
	 	 	1,301	 
	 	 	 	 	 
	 	 Expenses
	 	 	 	 
	 	 	 Salaries and wages
	 	 	4,462	 
	 	 	 General and administrative
	 	 	3,671	 
	 	 	 Professional and consulting fees
	 	 	3,680	 
	 	 	 Sales and marketing
	 	 	1,211	 
	 	 	 Stock-based compensation
	 	 	1,972	 
	 	 	 Research and development costs
	 	 	23,231	 
	 	 	 Amortization — patents and trademarks
	 	 	817	 
	 	 	 Amortization — property and equipment
	 	 	2,618	 
	 	 	 	 	 
	 	 
	 	 	41,662	 
	 	 	 	 	 
	 	 Loss before the undernoted items
	 	$	(40,361	)
	 	 Interest income
	 	 	437	 
	 	 Interest expense
	 	 	(87	)
	 	 Settlement of litigation
	 	 	(205	)
	 	 Loss on disposal of property and equipment
	 	 	(182	)
	 	 	 	 	 
	 	 
	 	 	(37	)
	 	 	 	 	 
	 	 Net loss and deficit accumulated during the development stage, end of period
	 	$	(40,398	)
	 	 	 	 	 

 

 F-2

 

SQI Diagnostics Inc. 

 SUPPLEMENTAL NOTE REGARDING THE RECONCILIATION OF THE INTERIM

CONSOLIDATED FINANCIAL STATEMENTS FOR THE THREE AND NINE MONTH PERIODS

ENDED JUNE 30, 2011 AND 2010 WITH U.S. GAAP (Continued) 

 (unaudited)

Dated September 1, 2011 

 Statement of Shareholders' Equity

(amounts in thousands of dollars, shares in thousands)  

 

 

																		
	 	 
	 	Share Capital 	 	 
	 	 
	 	 
	 
	 	 
	 	 
	 	 
	 	Defict

Accumulated in

Development

Stage 	 
	 	 
	 	Number

of shares 	 	Amount 	 	Contributed

Surplus 	 	Warrant

Capital 	 
	 	 Balance At Inception
	 	 	2	 	$	850	 	 	 	 	 	 	 	 	—	 
	 	 Net loss
	 	 	 	 	 	 	 	 	 	 	 	 	 	$	(4,631	)
	 	 	 	 	 	 	 	 	 	 	 	 	 
	 	 Balance Dec 14, 2002, 2001 and 2000
	 	 	2	 	$	850	 	 	—	 	 	 	 	$	(4,631	)
	 	 	 	 	 	 	 	 	 	 	 	 	 
	 	 Net loss
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	(3,112	)
	 	 	 	 	 	 	 	 	 	 	 	 	 
	 	 Balance December 14 2003
	 	 	2	 	$	850	 	 	—	 	 	 	 	$	(7,743	)
	 	 	 	 	 	 	 	 	 	 	 	 	 
	 	 Issued in connection with a private placement
	 	 	10	 	 	1,516	 	 	 	 	 	 	 	 	 	 
	 	 Stock split
	 	 	5,977	 	 	—	 	 	 	 	 	 	 	 	 	 
	 	 Issued in connection with a private placement
	 	 	669	 	 	2,788	 	 	 	 	 	 	 	 	 	 
	 	 Forgiveness of indebtedness to parent on reorganization
	 	 	 	 	 	 	 	$	7,120	 	 	 	 	 	 	 
	 	 Share issuance costs
	 	 	 	 	 	(342	)	 	 	 	 	 	 	 	 	 
	 	 Stock based compensation
	 	 	 	 	 	 	 	 	9	 	 	 	 	 	 	 
	 	 Net loss
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	(1,559	)
	 	 	 	 	 	 	 	 	 	 	 	 	 
	 	 Balance December 14, 2004
	 	 	6,658	 	$	4,812	 	$	7,129	 	 	—	 	$	(9,302	)
	 	 	 	 	 	 	 	 	 	 	 	 	 
	 	 Issued on exercise of warrants
	 	 	100	 	 	10	 	 	 	 	 	 	 	 	 	 
	 	 Stock based compensation
	 	 	 	 	 	 	 	 	341	 	 	 	 	 	 	 
	 	 Net loss
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	(1,804	)
	 	 	 	 	 	 	 	 	 	 	 	 	 
	 	 Balance December 14, 2005
	 	 	6,758	 	$	4,822	 	$	7,470	 	 	—	 	$	(11,106	)
	 	 	 	 	 	 	 	 	 	 	 	 	 
	 	 Conversion of convertible debentures
	 	 	2,073	 	 	4,147	 	 	 	 	 	 	 	 	 	 
	 	 Convertible debenture issuance costs
	 	 	 	 	 	(454	)	 	 	 	 	 	 	 	 	 
	 	 Stock based compensation
	 	 	 	 	 	 	 	 	268	 	 	 	 	 	 	 
	 	 Net loss
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	(1,653	)
	 	 	 	 	 	 	 	 	 	 	 	 	 
	 	 Balance December 14, 2006
	 	 	8,831	 	$	8,515	 	$	7,738	 	 	—	 	$	(12,759	)
	 	 	 	 	 	 	 	 	 	 	 	 	 

 

 F-3

 

SQI Diagnostics Inc. 

 SUPPLEMENTAL NOTE REGARDING THE RECONCILIATION OF THE INTERIM

CONSOLIDATED FINANCIAL STATEMENTS FOR THE THREE AND NINE MONTH PERIODS

ENDED JUNE 30, 2011 AND 2010 WITH U.S. GAAP (Continued) 

 (unaudited)

Dated September 1, 2011 

 

 

																		
	 	 
	 	Share Capital 	 	 
	 	 
	 	 
	 
	 	 
	 	 
	 	 
	 	Defict

Accumulated in

Development

Stage 	 
	 	 
	 	Number

of shares 	 	Amount 	 	Contributed

Surplus 	 	Warrant

Capital 	 
	 	 Shares of Emblem Capital
	 	 	8,000	 	$	867	 	 	 	 	 	 	 	 	 	 
	 	 Share consolidation of Emblem Shares at 6 for 1
	 	 	(6,667	)	 	 	 	 	 	 	 	 	 	 	 	 
	 	 Elimination of share capital due to reverse take over
	 	 	 	 	 	(867	)	 	 	 	 	 	 	 	 	 
	 	 Common shares of Umedik exchanged for shares SQI
	 	 	(8,831	)	 	 	 	 	 	 	 	 	 	 	 	 
	 	 Net asset value of SQI ascribed to issued shares
	 	 	 	 	 	595	 	 	 	 	 	 	 	 	 	 
	 	 Issued on exercise of warrants
	 	 	78	 	 	8	 	 	 	 	 	 	 	 	 	 
	 	 Share issued to former shareholders of Umedik
	 	 	14,719	 	 	 	 	 	 	 	 	 	 	 	 	 
	 	 Proceeds from private placement units
	 	 	3,568	 	 	5,212	 	 	 	 	 	 	 	 	 	 
	 	 Amount of private placement allocated to warrants
	 	 	 	 	 	(89	)	 	 	 	 	89	 	 	 	 
	 	 Share issuance costs
	 	 	 	 	 	(128	)	 	 	 	 	 	 	 	 	 
	 	 Stock based compensation
	 	 	 	 	 	 	 	 	53	 	 	 	 	 	 	 
	 	 Net loss
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	(3,098	)
	 	 	 	 	 	 	 	 	 	 	 	 	 
	 	 Balance, September 30, 2007
	 	 	19,698	 	$	14,113	 	$	7,791	 	$	89	 	$	(15,857	)
	 	 	 	 	 	 	 	 	 	 	 	 	 
	 	 Issued on exercise of warrants
	 	 	52	 	 	5	 	 	 	 	 	 	 	 	 	 
	 	 Issued in connection with private placement
	 	 	2,439	 	 	3,660	 	 	 	 	 	 	 	 	 	 
	 	 Issued on exercise of options
	 	 	28	 	 	39	 	 	(6	)	 	 	 	 	 	 
	 	 Share issuance costs, inluding broker warrants
	 	 	 	 	 	(494	)	 	 	 	 	185	 	 	 	 
	 	 Stock based compensation
	 	 	 	 	 	 	 	 	283	 	 	 	 	 	 	 
	 	 Net loss
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	(3,765	)
	 	 	 	 	 	 	 	 	 	 	 	 	 
	 	 Balance, September 30, 2008
	 	 	22,217	 	$	17,323	 	$	8,068	 	$	274	 	$	(19,622	)
	 	 	 	 	 	 	 	 	 	 	 	 	 
	 	 Issued on exercise of warrants
	 	 	1,111	 	 	689	 	 	 	 	 	 	 	 	 	 
	 	 Issued in connection with private placement
	 	 	3,732	 	 	4,664	 	 	 	 	 	 	 	 	 	 
	 	 Issued on exercise of options
	 	 	133	 	 	35	 	 	(17	)	 	 	 	 	 	 
	 	 Share issuance costs, inluding broker warrants
	 	 	 	 	 	(345	)	 	 	 	 	187	 	 	 	 
	 	 Stock based compensation
	 	 	 	 	 	 	 	 	380	 	 	 	 	 	 	 
	 	 Net loss
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	(5,899	)
	 	 	 	 	 	 	 	 	 	 	 	 	 
	 	 Balance, September 30, 2009
	 	 	27,193	 	$	22,366	 	$	8,431	 	$	461	 	$	(25,521	)
	 	 	 	 	 	 	 	 	 	 	 	 	 
	 	 Issued on exercise of warrants
	 	 	970	 	 	2,008	 	 	60	 	 	(213	)	 	 	 
	 	 Proceeds from private placement units
	 	 	4,678	 	 	12,295	 	 	 	 	 	 	 	 	 	 
	 	 Amount of private placement allocated to warrants
	 	 	 	 	 	(1,424	)	 	 	 	 	1,424	 	 	 	 
	 	 Issued on exercise of options
	 	 	917	 	 	755	 	 	(61	)	 	 	 	 	 	 
	 	 Expiry of warrants
	 	 	 	 	 	 	 	 	 	 	 	(60	)	 	 	 
	 	 Share issuance
	 	 	 	 	 	(974	)	 	 	 	 	187	 	 	 	 
	 	 Stock based compensation
	 	 	 	 	 	 	 	 	402	 	 	 	 	 	 	 
	 	 Net loss
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	(8,070	)
	 	 	 	 	 	 	 	 	 	 	 	 	 
	 	 Balance, September 30, 2010
	 	 	33,758	 	$	35,026	 	$	8,832	 	$	1,799	 	$	(33,591	)
	 	 	 	 	 	 	 	 	 	 	 	 	 
	 	 Issued on exercise of warrants
	 	 	107	 	 	193	 	 	 	 	 	(60	)	 	 	 
	 	 Issued on exercise of options
	 	 	81	 	 	174	 	 	(55	)	 	(125	)	 	 	 
	 	 Expiry of warrants
	 	 	 	 	 	 	 	 	125	 	 	 	 	 	 	 
	 	 Share issuance
	 	 	 	 	 	(16	)	 	 	 	 	 	 	 	 	 
	 	 Stock based compensation
	 	 	 	 	 	 	 	 	372	 	 	 	 	 	 	 
	 	 Net loss
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	(6,807	)
	 	 	 	 	 	 	 	 	 	 	 	 	 
	 	 Balance, June 30, 2011
	 	 	33,946	 	$	35,377	 	$	9,274	 	$	1,614	 	$	(40,398	)
	 	 	 	 	 	 	 	 	 	 	 	 	 

 

 F-4

 

SQI Diagnostics Inc. 

 SUPPLEMENTAL NOTE REGARDING THE RECONCILIATION OF THE INTERIM

CONSOLIDATED FINANCIAL STATEMENTS FOR THE THREE AND NINE MONTH PERIODS

ENDED JUNE 30, 2011 AND 2010 WITH U.S. GAAP (Continued) 

 (unaudited)

Dated September 1, 2011 

 
 
 Cash Flow Statement

(amounts in thousands of dollars)  

 

 

							
	 	 
	 	From Inception to

June 30,

2011 	 
	 	 Cash provided by (used in)
	 	 	 	 
	 	 Operations
	 	 	 	 
	 	 Net loss
	 	$	(40,398	)
	 	 Items not affecting cash
	 	 	 	 
	 	 	 Amortization — patents and trademarks
	 	 	817	 
	 	 	                         — property and equipment
	 	 	2,618	 
	 	 	 Patents written off
	 	 	97	 
	 	 	 Stock-based compensation
	 	 	2,108	 
	 	 	 Loss on sale of property and equipment
	 	 	225	 
	 	 	 Interest accrual
	 	 	(11	)
	 	 Changes in non-cash working capital items
	 	 	 	 
	 	 	 Amounts receivable
	 	 	(623	)
	 	 	 Investment tax credit recoverable
	 	 	610	 
	 	 	 Due from related party
	 	 	106	 
	 	 	 Inventory
	 	 	(1,142	)
	 	 	 Prepaids and deposits
	 	 	(423	)
	 	 	 Accounts payable and accrued liabilities
	 	 	1,668	 
	 	 	 	 	 
	 	 
	 	 	(34,348	)
	 	 	 	 	 
	 	 Investing
	 	 	 	 
	 	 	 Purchase of property and equipment
	 	 	(4,832	)
	 	 	 Additions to patents and trademarks
	 	 	(1,651	)
	 	 	 Sale of property and equipment
	 	 	2	 
	 	 	 Due from related party
	 	 	(97	)
	 	 	 	 	 
	 	 
	 	 	(6,578	)
	 	 	 	 	 
	 	 Financing
	 	 	 	 
	 	 	 Loans from related parties
	 	 	7,120	 
	 	 	 Advances (repayment) of loan/notes payable
	 	 	3	 
	 	 	 Proceeds from private placement and exercise of warrants and options, net of share issuance costs
	 	 	35,789	 
	 	 	 Deferred Share Issuance Costs
	 	 	(433	)
	 	 	 Cash acquired on reverse takeover
	 	 	607	 
	 	 	 Share subscription proceeds received
	 	 	657	 
	 	 	 	 	 
	 	 
	 	 	43,743	 
	 	 	 	 	 
	 	 Net change in cash and cash equivalents during the period and cash at end of period
	 	$	2,817	 
	 	 	 	 	 
	 	 Supplemental disclosure
	 	 	 	 
	 	 Equipment reallocated from inventory and segregated for use by the Company
	 	$	631	 
	 	 Cash paid for interest
	 	$	109	 

 

 	(iii.)
	Statements
of Cash Flows 

Canadian
GAAP permits the disclosure of a subtotal of the amount of funds provided by operations before changes in non-cash operating working capital items in the consolidated statements
of cash flows. United States GAAP does not permit this subtotal to be included. 

F-5

 

SQI Diagnostics Inc. 

 SUPPLEMENTAL NOTE REGARDING THE RECONCILIATION OF THE INTERIM

CONSOLIDATED FINANCIAL STATEMENTS FOR THE THREE AND NINE MONTH PERIODS

ENDED JUNE 30, 2011 AND 2010 WITH U.S. GAAP (Continued) 

 (unaudited)

Dated September 1, 2011 

	(iv.)
	The
Company grants stock options to directors, officers, employees and consultants as described in Note 12. The company has used the fair value
method of accounting for stock options since the inception of the plan in accordance with Canadian GAAP and U.S GAAP. Other disclosures related to share-based compensation are
as follows:

	a.
	The
total intrinsic value of options exercised during the three and nine months ended June 30, 2011 was $61,000 and $128,000, respectively (three and
nine months ended June 30, 2010 $452,000 and $1,364,000, respectively)

	b.
	The
total number of options outstanding June 30, 2011 had a weighted average remaining term of 2.6 years (June 30,
2010 — 2.3 years), and a total intrinsic value of $3,029,000 (June 30, 2010 — $1,022,000)

	c.
	The
total number of options vested and exercisable at June 30, 2011 had a weighted average remaining term of 2.5 years (June 30,
2010 — 1.7 years), and a total intrinsic value of $2,006,000 (June 30, 2010 — $556,00)

	d.
	As
at June 30, 2011 compensation costs not yet recognized relating to stock option awards outstanding was $888,000 (June 30,
2010 — $864,000). Compensation costs will be recognized over the remaining weighted average period of approximately 1.6 years (June 30,
2010 — 2.4 years)

	e.
	Estimated
forfeiture rate did not result in a material impact on the stock based compensation expense.

	(v.)
	Breakdown
of accounts payable and accrued liabilities are as follows (amounts in thousands of dollars): 

 

 

									
	 	 
	 	June 30,

2011 	 	September 30,

2010 	 
	 	 Trade payables
	 	$	685	 	$	763	 
	 	 Accruals
	 	 	777	 	 	200	 
	 	 Payroll Liabilities
	 	 	66	 	 	9	 
	 	 	 	 	 	 	 
	 	 
	 	$	1,528	 	$	972	 
	 	 	 	 	 	 	 

 

 	(vi.)
	Patents
and trademarks 

The
aggregate amortization expense related to patents and trademarks for the next five years as at June 30, 2011 is as follows (amounts in thousands of dollars): 

 

 

						
	 	 2012
	 	 	95	 
	 	 2013
	 	 	69	 
	 	 2014
	 	 	69	 
	 	 2015
	 	 	69	 
	 	 2016
	 	 	69	 

 

 	(vii.)
	Recently
adopted accounting pronouncements 

In
June 2009, the FASB launched the FASB Accounting Standards Codification, or the Codification, as the single source of authoritative U.S. GAAP recognized by the FASB. The Codification
reorganizes various U.S. GAAP pronouncements into accounting topics and displays them using a consistent structure. Rules and interpretive releases of the SEC under authority of federal
securities laws are also sources of authoritative U.S. GAAP for SEC registrants. The Codification is effective for interim and annual periods ending after September 15, 2009. The
adoption of this standard had no impact on the Company's financial statements. 

In
February 2010, the FASB issued ASU No. 2010-09, "Subsequent Events (ASC Topic 855), Amendments to Certain Recognition and Disclosure Requirements." This Standard
update requires a SEC Filer to (1) evaluate subsequent events through the date that the financial statements are issued or available to be issued, (2) defines "SEC Filer" as an entity
that is required to file or furnish its financial statements with either the SEC or, with respect to an entity subject to Section 12(i) of the Securities Exchange Act of 1934, as amended, the
appropriate agency under that Section, (3) not be bound to disclosing the date through which subsequent events have been evaluated, (4) note the definition of  public entity is not longer
defined nor necessary for Topic 855, (5) note the scope of the reissuance disclosure requirements is refined to include
revised financial statements only. These Updates are effective for interim or annual periods ending after June 15, 2010. ASU No. 2010-09 has no effect on the Company's
financial position, statements of operations, or cash flows at this time. 

F-6

 

SQI Diagnostics Inc. 

 SUPPLEMENTAL NOTE REGARDING THE RECONCILIATION OF THE INTERIM

CONSOLIDATED FINANCIAL STATEMENTS FOR THE THREE AND NINE MONTH PERIODS

ENDED JUNE 30, 2011 AND 2010 WITH U.S. GAAP (Continued) 

 (unaudited)

Dated September 1, 2011 

In
May 2009, the FASB issued new guidance for accounting for subsequent events. The new guidance, which is now part of ASC 855-10, Subsequent Events (formerly,
SFAS No. 165, Subsequent Events) is consistent with existing auditing standards in defining subsequent events as events or transactions that occur after the balance sheet date but before
the financial statements are issued or are available to be issued, but it also requires the disclosure of the date through which an entity has evaluated subsequent events and the basis for that date.
The new guidance defines two types of subsequent events: "recognized subsequent events" and "non-recognized subsequent events." Recognized subsequent events provide additional evidence
about conditions that existed at the balance sheet date and must be reflected in the Company's financial statements. Non-recognized subsequent events provide evidence about conditions that
arose after the balance sheet date and are not reflected in the financial statements of a company. Certain non-recognized subsequent events may require disclosure to prevent the financial
statements from being misleading. The new guidance was effective on a prospective basis for interim or annual periods ending after June 15, 2009. The Company adopted the provisions of ASC
855-10 as required. 

F-7

QuickLinks

Exhibit 4.7

SUPPLEMENTAL NOTE

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