rbm20fa.htm

20-F/A 1 rbm20fa.htm 20F/A rbm20fa.htm

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 20-F/A

 REGISTRATION STATEMENT PURSUANT TO SECTION 12(b) OR (g) OF THESECURITIES EXCHANGE ACT OF 1934

þ ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the fiscal year ended 31 December 2010

 TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIESEXCHANGE ACT OF 1934

 SHELL COMPANY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THESECURITIESEXCHANGE ACT OF 1934

Commission file number 000-50571

RESPONSE BIOMEDICAL CORP.

(Exact Name of Registrant as Specified in its Charter)

BRITISH COLUMBIA, CANADA

(Jurisdiction of Incorporation or Organization)

1781-75th AVENUE W., VANCOUVER, B.C. CANADA, V6P 6P2

(Address of Principal Executive Offices)

Patricia Massitti, pmassitti@responsebio.com, 1781-75th AVENUE W., VANCOUVER, B.C. CANADA, V6P 6P2

(Name, Telephone, E-mail and/or Facsimile Number and Address of Company Contact Person)

Securities registered or to be registered pursuant to Section 12(b) of the Act: NONE.

Securities registered or to be registered pursuant to Section 12(g) of the Act: COMMON SHARES WITHOUT PAR VALUE.

Securities for which there is a reporting obligation pursuant to Section 15(d) of the Act: NONE.

As at 31 December 2010, the close of the period covered by the annual report, the number of common shares of the issuer outstanding was 38,950,262

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).

[] 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 by [X] Other

the International Accounting Standards Board

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

[X] 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

EXPLANATORY NOTE

This Amendment No. 1 on Form 20-F/A to the Annual Report on Form 20-F of Response Biomedical Corp. (the “Original Form 20-F”) for the year ended December 31, 2010 originally filed with the Securities and Exchange Commission on March 11, 2011, is being filed to restate our consolidated financial statements and other financial information contained in Items 3, 4, 5, 8 and 17. These items have been amended and restated in their entirety.

As a result of this restatement, we have also amended and restated our disclosures in Item 15, Controls and Procedures, and have included new certifications pursuant to Section 302 and 906 of the Sarbanes-Oxley Act of 2002 as reflected in Exhibits 12.1, 12.2, 13.1 and 13.2. We have also revised certain of our risk factors in Item 3.D, business disclosure in Item 4 and disclosures related to significant shareholders in Items 6.A., 7.A. and 10.C. In addition, we have included a revised report of our independent registered public accounting firm, Ernst and Young, LLP, as well as a revised consent of such firm, as Exhibit 15.2 and corrected certain other exhibit listings.

Except as set forth above, this Form 20-F/A does not modify or update other disclosures in the Original Form 20-F, including the nature and character of such disclosure to reflect events occurring after the filing date of the Original Form 20-F. While we are amending only certain portions of our Original Form 20-F, for convenience and ease of reference, we are filing the entire Form 20-F, except for certain exhibits. The disclosures in this Form 20-F/A do not reflect events occurring after the date of the Original Form 20-F. Accordingly, this Form 20-F/A should be read in conjunction with our other filings made with the Securities and Exchange Commission subsequent to the filing of the Original Form 20-F, as information in such filings may update or supersede certain information contained in those filings as well as in this amendment. For information regarding certain events subsequent to the date of the Original Form 20-F, see our amended unaudited consolidated financial statements as at and for the three month period ended March 31, 2011, together with the related amended management’s discussion and analysis, and our amended unaudited consolidated financial statements as at and for the three and six month periods ended June 30, 2011, together with the related amended management’s discussion and analysis, which are being filed with Canadian securities regulators on the SEDAR system (www.sedar.com) concurrently herewith (collectively, the “Amended Quarterly Filings”) and will be filed on Form 6-K..

Unless the context otherwise requires, references herein to "Response," "the Company," "we," "us," or "our" refer to Response Biomedical Corp. and its consolidated subsidiaries, unless the context otherwise dictates.

Background of the Restatement

On August 11, 2011, the Company’s Chief Executive Officer (“CEO”) resigned. A new, interim CEO joined the Company and promptly began evaluating the Company’s contracts, customer relationships, correspondence with the U.S. Food and Drug Administration (“FDA”), transactions history and other matters. During the course of this evaluation, he researched questions regarding certain transactions related to (i) a specific large shipment to a distributor near the end of 2010 and (ii) shipments made in June 2011 to a different distributor subsequent to the Company’s receipt of a letter in late May 2011 from the FDA stating that the specific products were not approved by the FDA for sale in the United States. The new CEO promptly alerted the Audit Committee that he had concerns about these transactions, about the Company’s internal controls, policies, and procedures related to these specific transactions, and more generally regarding distributor contract management.

The Audit Committee decided to conduct an investigation of the issues identified by the new CEO. The Board of Directors concurred in that decision. The Audit Committee began the investigation supported by the efforts of selected internal staff at the Company. These internal staff were selected based on their professional experience, their familiarity with the issues, the fact that they were not the decision-makers in the questioned revenue recognition matters, their concerns about the transactions as expressed to the new CEO and Audit Committee, and the new CEO’s judgment that these individuals would be key future executives in the new management team. The Audit Committee also notified the firm’s legal counsel and the firm’s independent registered public accounting firm, Ernst & Young LLP.

On September 30, 2011, upon completion of a preliminary phase of the investigation, the Company announced that it had determined that the financial statements for the year ending December 31, 2010 and the fiscal quarters ending March 31, 2011 and June 30, 2011 should be restated to reverse certain transactions that were improperly recorded in the financial statements and possibly to record other corrections to those financial statements.

After working through September with counsel advice on the investigation, the Audit Committee supplemented its investigation by retaining a leading international law firm to conduct an independent investigation of the facts and

circumstances leading to the need for the restatements. The Audit Committee Chair has been in weekly contact with counsel as the independent investigation has progressed. Elements of outside counsel’s investigation are continuing.

The Company’s internal investigation surrounding the restated financial statements for the year ended December 31, 2010 and the fiscal quarter ended March 31, 2011 and June 30, 2011 has been completed. Other initiatives by the Company related to the findings requiring the financial restatements, including the work by outside counsel, are continuing.

On November 9, 2011, we filed this Form 20-F/A and the Amended Quarterly Filings. We also issued a press release to announce the final restated financial information and conclusions of our Audit Committee's investigation. Our interim Chief Executive Officer and our Corporate Controller, who serves as our principal financial and accounting officer, have concluded that prior material weaknesses have been identified and reported through these revised filings. The Company will provide updates on progress in remediating internal controls and procedures in its quarterly filings for the quarter ending September 30, 2011 and in its annual filings for the fiscal year ending December 31, 2011.

Audit Committee Findings and Recommendations

Upon reviewing the results of the internal investigation, and consistent with the initial observations of the external legal review, the Audit Committee determined that revenue should not have been recognized on one transaction in the fourth quarter of 2010. Specifically, a single transaction with a reseller was identified for $0.5 million where (a) the purchaser (a distributor) had not ordered the product, (b) contingencies not shown on the invoice determined the date if and when the product was to be paid for by the distributor, and (c) additional contingencies needed to be satisfied before the distributor could sell the product without violating other contracts. These qualifications were not communicated to the Company's independent registered public accounting firm at the conclusion of 2010 or early in 2011 during the audit of the Company’s 2010 financials which did not facilitate a proper audit of the Company’s consolidated financial statements.

In addition, management deemed it appropriate to allocate an adjustment made to cost of sales in the fourth quarter of 2010 to the respective earlier quarters of 2010. As a result, an adjustment of $0.2 million was made to allocate the cost of sales related to the first three quarters of 2010 from the fourth quarter.

Summary of the Restatement Adjustments

The following tables summarize the impact of the restatement on our financial statements for the fourth quarter and year ended December 31, 2010. Selected information about the impact of the restatement on our quarterly periods is provided in Note 4 to our consolidated financial statements.


	Three Months Ended December 31, 2010									Year Ended December 31, 2010
	As previously reported			Adjustments			As restated			As previously reported			Adjustments			As restated
	(in thousands, except per share data)									(in thousands, except per share data)
Statement of Operations
Total revenue	$	2,253		$	(498	)	$	1,755		$	7,611		$	(498	)	$	7,113
Total cost of revenue		2,522			(224	)		2,298			7,129			(31	)		7,098
Total operating expenses		2,038			-			2,038			9,216			-			9,216
Loss from operations		(2,307	)		(274	)		(2,581	)		(8,734	)		(467	)		(9,201	)
Net Loss		(2,530	)		(278	)		(2,808	)		(9,611	)		(471	)		(10,082	)
Net loss per common share, basic and diluted	$	(0.08	)	$	(0.01	)	$	(0.09	)		(0.31	)		(0.01	)		(0.32	)

The Audit Committee’s findings and recommendations with respect to the periods ended March 31, 2011 and June 30, 2011, and a summary of restatement adjustments with respect to those periods, are set forth in the Amended Quarterly Filings.

Controls

As further discussed in Item 15, Controls and Procedures, during the course of the investigation our management and Audit Committee identified internal control deficiencies relating to the control environment, documentation, training and testing of controls, documentation and communication of contract terms, revenue recognition and anti-fraud protection. Our Audit Committee also made several recommendations to management and the Board of Directors, which have been approved. These recommendations include:

1.	Updating the Company’s controls, policies and procedures to reflect the reorganization and restructuring from 2010 and further organizational changes implemented in recent months.

Improving the documentation of controls and the testing of controls, including the use of a qualified outside consultants in order to ensure that the internal controls in place over financial reporting are effective or to remediate any controls that, subsequent to the appropriate testing being completed, were concluded to be ineffective.

3.	Updating the Company’s controls and procedures regarding order entry and processing.

4.	Additional training of staff and management on revenue recognition.

5.	Implementing a document control system regarding all contracts with distributors and other key organizations working with the Company.

6.	Implementing a Whistleblower Policy to facilitate reporting directly to the Company’s Audit Committee any suspected improper activity.

7.	Improving the overall control environment through the continuing initiatives of the interim CEO, recruiting of a new Chief Executive Officer and additional managers, in addition to the changes to management effected earlier in 2011.

The non-financial statement elements of the internal investigation are continuing, and the Company continues to evaluate and work to improve the Company’s internal financial controls and procedures. The Company will provide updates on progress toward these goals in its upcoming financial reports.

FORWARD-LOOKING STATEMENTS AND RISK FACTORS

This annual report contains certain forward-looking statements, including statements about:

·	The development of new services and products and the maintenance and expansion of or sales and marketing efforts in the existing markets for our current services and products;

·	Implementing aspects of our business plan and strategies;

·	Our financing goals and plans;

·	Our existing working capital and cash flows and whether and how long these funds will be sufficient to fund our operations; and

·	Our raising of additional capital through future equity and debt financings.

The forward-looking statements in this annual report reflect management’s current views and expectations with respect to our business, strategies, services and products, future results and events, and financial performance. In general, all statements other than statements of historical fact, including future results of operations or financial position, made in this annual report should be considered forward looking. Our forward-looking statements are primarily located in the following sections of this annual report: “Item 3 – D. Risk Factors”, “Item 4 – Information on the Company”, and “Item 5 - Operating and Financial Review and Prospects”. In addition, the words “believe,” “expect,” “intend,” “anticipate,” “estimate,” “desire,” “goal,” “may,” “will,” variations of such words, and similar expressions identify forward-looking statements, but are not the exclusive means of identifying such statements and their absence does not mean that the statement is not forward-looking. Although we do not make forward-looking statements unless we believe we have a reasonable basis for doing so, we cannot guarantee their accuracy, and actual results may differ materially from those we anticipated due to a number of uncertainties, many of which are unforeseen. You should not place undue reliance on these forward-looking statements, which apply only as of the date of this annual report. Our actual results could differ materially from those anticipated in or implied by these forward-looking statements for many reasons, including, among others, the risks we face as described in the section entitled “Risk Factors” and elsewhere in this annual report.

Forward-looking statements involve known and unknown risks and uncertainties, including those discussed in this annual report. We make cautionary statements in the “Risk Factors” section of this annual report beginning on page 4, and in other parts herein. You should read these cautionary statements as being applicable to all related forward-looking statements wherever they appear in this annual report.

We are not obligated nor do we undertake to publicly update or revise any forward-looking statements, whether as a result of new information, future events or otherwise, except as otherwise required by law. In light of these risks, uncertainties and assumptions, the forward-looking events discussed in this annual report and other statements made from time to time by our representatives or us might not occur.

TERMS OF REFERENCE AND EXCHANGE RATES

As used in this annual report, unless the context otherwise indicates, the terms “we”, “us”, “our”, “Response” or the “Company” mean Response Biomedical Corp. and its wholly-owned subsidiaries, Response Biomedical Inc. and Response Development Inc.

The information set forth in this annual report is as of 31 December 2010 unless another date is indicated. All references to dollars ($) in this document are to Canadian funds, unless otherwise indicated. On 31 December 2010, the exchange rate for conversion of U.S. dollars into Canadian dollars was U.S. $1.00 = Cdn. $0.995. The exchange rate for conversion of U.S. dollars into Canadian dollars as at 31 January 2011 was U.S. $1.00 = Cdn. $1.002. All exchange rates represent the closing rate of the Bank of Canada.

The following table sets forth the high and low rates of exchange of U.S. dollars into Canadian dollars for each month during the previous six months and the average of such exchange rates during the five most recent fiscal years ended 31 December 2010. The average rates presented in the table below represent the average of the exchange rates on the last day of each month during a year or a period.

	Exchange Rate Canadian Dollar/U.S. Dollar
	High	Low
Month ended 31 December 2010	$1.022	$0.993
Month ended 30 November 2010	$1.029	$0.998
Month ended 31 October 2010	$1.037	$0.999
Month ended 30 September 2010	$1.060	$1.022
Month ended 31 August 2010	$1.067	$1.011
Month ended 31 July 2010	$1.068	$1.026
	Average
Fiscal year ended 31 December 2010	$1.030
Fiscal year ended 31 December 2009	$1.142
Fiscal year ended 31 December 2008	$1.066
Fiscal year ended 31 December 2007	$1.075
Fiscal year ended 31 December 2006	$1.134

TABLE OF CONTENTS

GLOSSARY		1

PART 1		3

Item 1.	Identity of Directors, Senior Management and Advisers	3
Item 2.	Offer Statistics and Expected Timetable	3
Item 3.	Key Information Selected Financial Data	18
Item 4.	Information on the Company	35
Item 4A.	Unresolved Staff Comments	35
Item 5.	Operating and Financial Review and Prospects	35
Item 6.	Directors, Senior Management and Employees	44
Item 7.	Major Shareholders and Related Party Transactions	60
Item 8.	Financial Information	62
Item 9.	The Offer and Listing	63
Item 10.	Additional Information	66
Item 11.	Quantitative and Qualitative Disclosures about Market Risk	75
Item 12.	Description of Securities Other Than Equity Securities	75

PART II		75

Item 13.	Defaults, Dividend Arrearages and Delinquencies	75
Item 14.	Material Modifications to the Rights of Security Holders and Use of Proceeds	75
Item 15.	Controls and Procedures	75
Item 16A.	Audit Committee Financial Expert	77
Item 16B.	Code of Ethics	77
Item 16C.	Principal Accountant Fees and Services	77
Item 16D.	Exemptions From the Listing Standards For Audit Committees	77
Item 16E.	Purchases of Equity Securities by the Issuer and Affiliated Purchasers	78
Item 16F.	Change in Registrant’s Certifying Accountant	78
Item 16G.	Corporate Governance	78

PART III		78

Item 17.	Financial Statements	78
Item 18.	Financial Statements	877
Item 19.	Exhibits	3

GLOSSARY

This glossary contains general terms used in the discussion of the in vitro diagnostics industry, as well as specific technical terms used in the descriptions of our technology and business.

Analyte - something that is to be measured or quantified, and for the purposes of this document, is synonymous with antigen.

Anthrax - an acute infectious disease caused by the spore-forming bacterium Bacillus anthracis that most commonly occurs in wild and domestic lower vertebrates (cattle, sheep, goats, camels, antelopes, and other herbivores), but it can also occur in humans when they are exposed to infected animals or tissue from infected animals. Anthrax is a potential agent for use in biological warfare.

Antibody - a protein produced by blood plasma cells that binds specifically to foreign substances as part of the immune response. Antibodies are synthesized in direct response to an antigen, which is the substance that triggers the immune system.

Antigen - a substance, usually a protein, that induces the production of antibodies by the immune system.

Assay - a test for a particular chemical and/or biological agent to determine its presence, effect or concentration.

Botulinum Toxin - the single most poisonous substance known to humans poses a major biowarfare threat because of its extreme potency and lethality, its ease of production, transport and misuse, and the potential need for prolonged intensive care of affected persons.

BNP (B-type natriuretic peptide) – a fragment of proBNP, a neurohormone that is released by the heart into the bloodstream during heart failure in response to increased blood pressure and volume overload. ProBNP is split into two fragments: BNP and NT-proBNP that are released into the bloodstream. Both the BNP and NT-proBNP molecules are a sensitive and specific indicator of congestive heart failure.

Clinical trial - organized studies with human volunteers or patients designed to provide statistically relevant clinical data for determining the efficacy and safety of new therapeutic agents, diagnostics and medical devices.

Congestive heart failure (CHF) - a chronic, progressive disease in which the heart muscle weakens impeding the heart's ability to pump enough blood to support the body's demands.

Device - an item, other than a drug, that has application in medical therapy. Usually the term device is restricted to items used directly on the patient and does not include diagnostic equipment or tests.

Diagnostic - reagents, instruments and systems intended for use in the diagnosis of disease or other conditions, including a determination of the state of health.

DNA (Deoxyribonucleic acid) - the chemical basis for heredity and the carrier of genetic information for all forms of life.

ED (Emergency Department) – also known as Accident & Emergency (A&E), Emergency Room (ER), Emergency Ward (EW), or Casualty Department is a medical treatment facility, specializing in acute care of patients who present without prior appointment, either by their own means or by ambulance. The emergency department is usually found in a hospital or other primary care center.

FDA (Food and Drug Administration) - the government agency that regulates the manufacture, safety, use and efficacy of biological and pharmaceutical therapeutics, diagnostics and other medical products in the United States.

Immune response - the events that occur when a protein is introduced into the body by an infectious microorganism, transplanted tissue, vaccines or the host's own tissue (e.g., auto-immune diseases). The immune response is characterized by the production of antibodies from activated B-cells and the activation of T-cells.

Immunoassay or Immunodiagnostic - an assay method for diagnostic tests that uses antibodies to detect and quantify proteins, bacteria or other biological molecules.

Influenza - an acute contagious viral infection characterized by inflammation of the respiratory tract and by fever, chills, muscular pain, and prostration. The three types of influenza viruses, types A, B, and C, are classified in the virus family Orthomyxoviridae, and they are similar, but not identical, in structure and morphology. Types A and B are more similar in physical and biologic characteristics to each other than they are to type C. Type A is the most common and usually causes the most serious epidemics. Type B outbreaks also can cause epidemics, but the disease it produces is generally milder than that caused by Type A. Type C viruses have never been connected with a large epidemic.

In vitro - an event that occurs outside a living organism, such as cell culture studies conducted in petri dishes or a diagnostic test that uses a blood or tissue sample.

Lateral Flow Immunoassay – an Immunoassay in which a liquid sample containing the target Analyte migrates transversely along a membrane by capillary or wicking action.

NT-proBNP – a fragment of proBNP, a neurohormone that is released by the heart into the bloodstream during heart failure in response to increased blood pressure and volume overload. ProBNP is split into two fragments: BNP and NT-proBNP that are released into the bloodstream. Both the BNP and NT-proBNP molecules are a sensitive and specific indicator of congestive heart failure.

Orthopox - a genus (group) of virus that includes smallpox (variola), cowpox, monkey pox and others. These viruses cause infectious diseases that are harmful to man.

PCR (polymerase chain reaction) - a technique for enzymatically replicating DNA that allows a small amount of DNA to be amplified exponentially. PCR is commonly used in medical and biological research labs for a variety of tasks, such as the detection of hereditary diseases, the identification of genetic fingerprints, the diagnosis of infectious diseases, the cloning of genes, paternity testing, and DNA computing.

Platform Technology - a technology that has broad applicability in terms of its potential uses.

Point-of-Care (POC) – simple, non-laboratory-based diagnostic tests performed near the patient using portable hand-held devices, compact desktop analyzers, single-use test cartridges or dipsticks (e.g., in the emergency room, clinic or physician’s office).

Protein - a molecule made up of one or more chains of amino acids that serve regulatory (hormones), protective (antibodies), structural (muscle) or catalytic (enzyme) functions.

Reagents – a generic term used to describe the various chemicals that form part of, and are used to conduct, a diagnostic test.

RSV (Respiratory Syncytial Virus) – a virus that causes respiratory tract infections. It is the major cause of lower respiratory tract infection and hospital visits during infancy and childhood.

Sensitivity - the lowest level of Antigen, which can be measured by an Assay. The ability to detect the presence of disease in a population that has the disease.

Specificity - the ability of an Assay to measure or detect the Antigen and not closely related materials. The ability to correctly identify individuals that do not have the disease in a population that does not have the disease.

Staphylococcus aureus (Staph A) - is a bacteria which lives harmlessly on human skin but when it enters the human body usually through a break in the skin, it can cause infection anywhere in the body.

TPD (Therapeutics Products Directorate) - part of the Health Products and Food Branch of Health Canada, the government agency which regulates the manufacture, safety, efficacy and sale of human diagnostic and therapeutic products in Canada.

RESPONSE BIOMEDICAL CORP.

FORM 20-F

FOR THE FISCAL YEAR ENDED 31 DECEMBER 2010

PART 1

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 table sets forth the selected consolidated financial data for our five most recent fiscal years ended 31 December 2010. This data has been derived from our audited consolidated financial statements. Our audited consolidated financial statements included with this annual report have been prepared in accordance with Canadian generally accepted accounting principles (“Canadian GAAP”), which conform to United States generally accepted accounting principles (“U.S. GAAP”) except as disclosed in Note 17 thereto. The following financial data should be read in conjunction with our consolidated financial statements and notes thereto and “Item 5 – Operating and Financial Review and Prospects”.

The following financial data is expressed in Canadian dollars. The exchange rate for conversion from U.S. to Canadian dollars is provided above, under the heading “Terms of Reference and Exchange Rates”.

	Years ended 31 December
Statement of Loss Data		2010			2009			2008			2007			2006
REVENUE
Product Sales		$	6,756,942		$	8,153,049		$	4,899,841		$	3,557,244		$	3,786,337
Contract Service & Research Revenue		$	356,066		$	1,793,220		$	976,496		$	526,872		$	633,721
LOSS, CDN GAAP		$	(10,081,911	)	$	(9,543,531	)	$	(13,663,656	)	$	(13,901,041	)	$	(9,328,167	)
Basic and Diluted Loss per common share, CDN GAAP		$	(0.32	)	$	(0.43	)	$	(0.97	)	$	(1.15	)	$	(1.02	)
Weighted average number of common shares outstanding, CDN GAAP			31,173,823			22,209,392			14,067,597			12,050,926			9,106,020

Loss from Operations, U.S. GAAP		$	(9,200,786	)		(8,598,639	)	$	(13,107,532	)	$	(14,023,709	)	$	(9,405,908	)
LOSS, U.S. GAAP		$	(10,081,911	)		(9,551,781	)	$	(13,766,781	)	$	(14,152,666	)	$	(9,306,622	)
Basic and Diluted Loss from operations per common share, U.S. GAAP		$	(0.30	)	$	(0.39	)	$	(0.93	)	$	(1.16	)	$	(1.03	)
Basic & Diluted Loss per common share, U.S. GAAP		$	(0.32	)	$	(0.43	)	$	(0.98	)	$	(1.17	)	$	(1.02	)
Weighted average number of common shares outstanding, U.S. GAAP			31,173,823			22,209,392			14,067,597			12,050,926			9,106,020
Weighted average number of common shares outstanding, U.S. GAAP			31,173,823			22,209,392			14,067,597			12,050,926			9,106,020

2010

2009

2008

2007

2006

BALANCE SHEET DATA
Total Assets:
CDN & U.S. GAAP	$	19,523,931	$	21,464,196	$	19,394,907	$	17,938,351	$	12,966,931
Net Assets:
CDN & U.S. GAAP	$	8,054,075	$	9,646,542	$	6,760,128	$	11,073,221	$	10,755,176

Share Capital:
CDN GAAP	$	97,014,620	$	89,084,660	$	80,107,580	$	71,393,556	$	56,868,133
U.S. GAAP	$	96,945,332	$	89,015,372	$	80,038,292	$	71,324,268	$	56,798,845
Number of shares outstanding as at year end		38,950,262		254,672,008		170,338,675		129,977,631		113,464,862

B.	Capitalization and Indebtedness

Not applicable.

C.	Reasons for the Offer and Use of Proceeds

Not applicable.

D.	Risk Factors

The following discussion contains forward-looking statements regarding our Company, business, prospects and results of operations that involve risks and uncertainties. Our actual results could differ materially from the results that may be anticipated by such forward-looking statements and discussed elsewhere in this annual report. Factors that could cause or contribute to such differences include, but are not limited to, those discussed below, as well as

those discussed elsewhere in this annual report. If any of the following risks occur, our business, financial condition or operating results could be harmed. In that case, the trading price of our common stock could decline.

Risks Related to Our Company

We may need to raise additional capital to fund operations. If we are unsuccessful in attracting capital to our Company, we will not be able to continue operations or will be forced to sell assets to do so. Alternatively, capital may not be available to our Company on favorable terms, or at all. If available, financing terms may lead to significant dilution to the shareholders’ equity in our Company.

We are not profitable and have negative cash flow from operations. Based on our current cash resources, expected cash burn, and anticipated revenues, we expect that we can maintain operations until late 2011. We may need to raise additional capital to fund our operations. We have relied primarily on debt and equity financings to fund our operations and commercialize our products. Additional capital may not be available, at such times or in amounts as needed by us. Even if capital is available, it might be on adverse terms. Any additional equity financing will be dilutive to our shareholders. If access to sufficient capital is not available as and when needed, our business will be materially impaired and we may be required to cease operations, curtail one or more product development programs, attempt to obtain funds through collaborative partners or others that may require us to relinquish rights to certain technologies or product candidates, or we may be required to significantly reduce expenses, sell assets, seek a merger or joint venture partner, file for protection from creditors or liquidate all our assets.

Our inability to generate sufficient cash flows may result in our Company not being able to continue as a going concern.

We have incurred significant losses to date. As at 31 December 2010, we had an accumulated deficit of $ 100,782,221 and had not generated positive cash flow from operations. Accordingly, there is significant uncertainty about our ability to continue as a going concern. We will seek additional financing to support our continued operation; however, there are no assurances that any such financing can be obtained on favorable terms, if at all. In view of these conditions, our ability to continue as a going concern is dependent upon our ability to obtain such financing and, ultimately, on achieving profitable operations. The outcome of these matters cannot be predicted at this time. The consolidated financial statements for the year ended 31 December 2010 do not include any adjustments to the amounts and classification of assets and liabilities that might be necessary should we be unable to continue in business. Such adjustments could be substantial.

We have incurred substantial operating losses to date. We expect these losses to continue for the near future. If we are unable to generate sufficient revenue, positive cash flow or earnings, or raise sufficient capital to maintain operations, we may not be able to continue operating our business and be forced to sell our Company or liquidate our assets.

We have evolved from a pure development company to a commercial enterprise but to date have realized minimal operating revenues from product sales. As of 31 December 2010, we have incurred cumulative losses since inception of $ 100,782,221. For the fiscal years ending 31 December 2010, 2009 and 2008, we incurred losses of $10,081,911, $9,543,531 and $13,663,656, respectively. We are currently not profitable and expect operating losses to continue. Generating revenues and profits will depend significantly on our ability to successfully develop, commercialize, manufacture and market our products. The time necessary to achieve market success for any individual product is uncertain. No assurance can be given that product development efforts will be successful, that required regulatory approvals can be obtained on a timely basis, if at all, or that approved products can be successfully manufactured or marketed. Consequently, we cannot assure that we will ever generate significant revenue or achieve or sustain profitability. As well, there can be no assurance that the costs and time required to complete commercialization will not exceed current estimates. We may also encounter difficulties or problems relating to research, development, manufacturing, distribution and marketing of our products. In the event that we are unable to generate adequate revenues, cash flow or earnings, to support our operations, or we are unable to raise sufficient capital to do so, we may be forced to cease operations and either sell our business or liquidate our assets.

A larger-than-required and high cost Facility lease and associated cash used to repay additional financial obligations associated with the Facility will negatively impact our operating results and financial position.

In May 2007, we entered into an agreement to lease a multi-use, 46,000 square foot facility in Vancouver, British Columbia, Canada. For additional information regarding the facility, see “Property, Plants and Equipment”.

This facility, which the company occupied as its main operation center in 2008, is significantly larger than required for our near term production requirements. The excess space is difficult to sublease due to the current layout of the

company’s manufacturing operations and the significant availability of space in other buildings in the local real estate market. In addition to rental payments for the facility, the company is obligated to repay with interest over the next 12 years the $7,081,793 balance due as of 31 December 2010 on the repayable leasehold improvement allowance.

The Company believes that the financial obligation associated with this facility lease and associated liabilities represent a total facilities cost significantly above the current real estate market prevailing lease rates. This factor, together with the excessive size of the facility, may adversely affect the company’s financial performance.

Should there be a downturn in our business or the markets in which we compete, we may not have a need to expand our facility as we have planned. As a result, we may then seek an alternative use for all or a portion of the property, seek to sub-lease some or all of our property and we may not exercise the option to extend the lease, any of which may have a negative impact on our operating results. We may experience unanticipated decreases in productivity and other losses due to inefficiencies relating to any such transition, or delays in obtaining any required approvals or clearances from regulatory agencies related to the validation of any new manufacturing facilities. For instance, the scale-up of manufacturing at our planned facility could result in lower than expected manufacturing output and higher than expected product costs.

Current and future conditions in the global economy may have a material adverse effect on our business prospects, financial condition and results of operations.

During the second half of fiscal year 2008, the global financial crisis, particularly affecting the credit and equity markets, accelerated and the global recession deepened, with an exceptionally weak global economy in 2009 and 2010. Though we cannot predict the extent, timing or ramifications of the global financial crisis and the global recession in 2011, we believe that the downturn in the world’s major economies and the constraints in the credit markets have heightened or could heighten a number of material risks to our business, results of operations, cash flows and financial condition, as well as our future prospects, including the following:

Credit availability and access to equity markets — Continued issues involving liquidity and capital adequacy affecting lenders could affect our ability to fully obtain credit facilities or additional debt and could affect the ability of any lenders to meet their funding requirements when we need to borrow. Further, the high level of volatility in the equity markets and the decline in our stock price may make it difficult for us to access the equity markets for additional capital at attractive prices, if at all. If we are unable to obtain credit, or access the capital markets, where required, our business could be negatively impacted.

Credit availability to our customers — We believe that many of our customers are reliant on liquidity from global credit markets and, in some cases, require external financing to fund their operations. As a consequence, if our customers lack liquidity, it would likely negatively impact their ability to pay amounts due to us.

·	Commitments from our customers — There is a greater risk that customers may be slower to make purchase commitments during the current economic downturn, which may negatively impact the sales of our new and existing products.

Supplier difficulties — If one or more of our suppliers experiences difficulties that result in a reduction or interruption in supplies or services to us, or they fail to meet any of our manufacturing requirements, our business could be adversely impacted until we are able to secure alternative sources, if any.

Many of these and other factors affecting the diagnostic technology industry are inherently unpredictable and beyond our control.

Management’s determination that material weaknesses exist in our internal control over financial reporting could have a material adverse impact on the Company.

We are required to maintain internal control over financial reporting to provide reasonable assurance regarding the reliability of financial reporting and the preparation of our financial statements for external purposes. In Item 15 of this annual report, management reports that material weaknesses exist in the Company’s internal control over financial reporting. Due to these material weaknesses, management has concluded that as of the end of the period covered by this annual report, the Company’s disclosure controls and procedures were not effective. Consequently, our business and results of operations could be harmed, we may be unable to report properly or timely the results of our operations, and investors may lose faith in the reliability of our financial statements. We or our current or former officers, directors and employees may be subject to investigation by the SEC or Canadian securities regulators, and civil or criminal sanctions, or shareholder lawsuits, any of which could result in significant expense, whether directly or indirectly through the Company’s statutory or contractual obligations to indemnify such persons, and require significant investments of management time, which may prevent management from focusing its efforts on our business operations. Ineffective internal control over financial reporting may also increase the risk of, or result in, fraud or misuse of our corporate assets. As a consequence, the market price of our securities may be harmed.

We may not be able to accurately predict future sales through our distributors, which could harm our ability to efficiently manage our internal resources to match market demand.

A significant portion of our product sales is made through distributors, including strategic alliance partners, both domestically and internationally. As a result, our financial results, quarterly product sales, trends and comparisons are affected by seasonal factors and fluctuations in the buying patterns of end-user customers, our distributors, and by the changes in inventory levels of our products held by these distributors. For example, higher utilization rates of our BNP and NT-proBNP tests may be due to a higher number of ED visits by patients exhibiting shortness of breath, a symptom of heart failure and of influenza. However, higher utilization may also result from greater awareness, education and acceptance of the uses of our tests, as well as from additional users within the hospitals.

We are not always able to verify the inventory levels of our distributors. While we attempt to assist our distributors in maintaining targeted stocking levels of our products, we may not be successful. Attempting to assist our distributors in maintaining targeted stocking levels of our products involves the exercise of judgment and use of assumptions about future uncertainties including end-user customer demand and, as a result, actual results could differ from our estimates. Inventory levels of our products held by distributors may exceed or fall below the levels we consider desirable on a going-forward basis, which may harm our future financial results. This may result from unexpected buying patterns of our distributors or from our inability to efficiently manage or invest in internal resources, such as manufacturing capacity, to meet the actual demand for our products. In addition, if we begin direct distribution in any territory following the expiration or termination of a distribution agreement for that territory, it is likely that our product sales in that territory will decrease as our prior distributor sells its remaining inventory of our products.

We rely significantly on third party manufacturers for some of our products and rely on third party manufacturers of certain equipment necessary for us to scale-up our internal capacity to manufacture products. If these third party manufacturers experience difficulties, our ability to serve various markets with our products may be significantly restricted.

All of our test kits (“Kits”) are currently produced in-house and our portable fluorescence readers (“Readers”) are manufactured and supplied to us under contract. We have qualified a local contract manufacturer for the Readers, see “Operations and Manufacturing”. To meet the projected demand for our products, we will require additional equipment to scale up our manufacturing processes. Some of this equipment will require customization that may increase the lead-time from the supplier. If demand for our products significantly exceeds forecast, or if the third party manufacturers of Readers or manufacturing equipment are unable to deliver to us on schedule, we may not be able to meet customer requirements.

Sole-source suppliers provide some of our raw materials. In the event a sole-sourced material became unavailable, there may be a delay in obtaining an alternate source, and the alternate source may require significant development to meet product specifications. It is also possible that we may not be able to locate an acceptable alternate source at all. Consequently, we may face difficulty in manufacturing, or be entirely unable to manufacture, some of our products.

Single-source suppliers provide some key components, in particular antibodies, used in the manufacture of our products. Except for one of the antibodies we use in our West Nile Virus Test and one of the antibodies we use in our B-type natriuretic peptide (“BNP”) Test, we do not have supply agreements with any of our antibody suppliers. We are currently negotiating supply agreements for some of the other key reagents that we use. Although we maintain inventories of some key components, including antibodies, any loss or interruption in the supply of a sole-sourced component or raw material would have a material adverse effect on our ability to manufacture these products until a new source of supply is qualified and, as a result, may temporarily or even permanently prevent us from being able to sell our products. A new antibody used in one of our tests would likely have properties different from the previous formulation, such that considerable time and resources may be required to develop a new formulation that would meet the required performance levels, and further, there is no assurance we would be able to successfully develop a new formulation which would be commercially acceptable. In addition, an uncorrected impurity or variation in a raw material, either unknown to us or incompatible with our manufacturing processes could result in products that, if developed, may require us to enter into additional supplier arrangements for additional reagents to correct the variation or impurity. The impurity or variation may also negatively affect the performance of our products, hindering our ability to sell our products. If we are not able to enter into such additional supplier arrangements on commercially reasonable terms, or at all, there could be a material adverse effect on our ability to manufacture products.

Interruption in the supply of any sole-sourced component or raw material would likely have a material adverse effect on our profit margins, our ability to develop and manufacture products on a timely and competitive basis, and the timing of market introductions and subsequent sales of products.

We may not be able to adequately protect our technology and proprietary rights, and third parties may claim that we infringe on their proprietary rights. If we cannot protect our technology, companies with greater resources than us may be able to use our technology to make products that directly compete with ours. Additionally, third parties claiming that we infringe on their proprietary rights may be able to prevent us from marketing our products or force us to enter into license agreements to do so. Both situations may negatively impact our ability to generate revenues, cash flows and earnings.

The success of our technology and products is highly dependent on our intellectual property portfolio, for which we have sought protection through a variety of means, including patents both issued and pending and trade secrets (see “Intellectual Property”). There can be no assurance that any additional patents will be issued on existing or future patent applications or on patent applications licensed from third parties. Even when patents have been issued there can be no assurance that the claims allowed will be sufficiently broad to protect our technologies or that the patents will provide protection against competitive products or otherwise be commercially valuable. No assurance can be given that any patents issued to or licensed to us will not be challenged, invalidated, infringed, circumvented or held unenforceable. In addition, enforcement of our patents in foreign countries will depend on the laws and procedures in those foreign jurisdictions. Monitoring and identifying unauthorized use of our technologies or licensed technologies may prove difficult, and the cost of litigation may impair the ability to guard adequately against such infringement. If we are unable to successfully defend our intellectual property, third parties may be able to use our technology to commercialize products that compete with ours. Further, defending intellectual property can be a very costly and time-consuming process. The costs and delays associated with such a defense may negatively impact our financial position.

There are many patent claims in the area of lateral flow immunoassays and some patent infringement lawsuits have occurred amongst parties other than us with respect to patents in this area. Our commercial success may depend upon our products not infringing on any intellectual property rights of others and upon no such claims of infringement being made. In the event that a third party was able to substantiate a claim against us, it could result in us not being able to sell our products in certain markets or at all. Further, as a result we may be required to enter into license agreements with said third parties on terms that would negatively impact our ability to conduct our business. Even if such claims were found to be invalid, the dispute process would likely have a materially adverse effect on our business, results of operations and prospects. To date, to the best of our knowledge, there have been no threats of litigation, legal actions or other claims made against any of our intellectual property. Although we

attempted to identify patents that pose a risk of infringement, there is no assurance that we have identified all U.S. and foreign patents that present such a risk.

In addition to patent protection, we also rely on trade secrets, proprietary know-how and technological advances which we seek to protect, in part, through confidentiality agreements with our collaborative partners, employees and consultants. There can be no assurance that these agreements will not be breached, that we will have adequate remedies for any breach, or that the trade secrets and proprietary know-how will not otherwise become known or be independently discovered by others, which could negatively impact our ability to compete in the marketplace.

Our use of third parties in countries such as China to manufacture products under license from us may result in the future theft of intellectual property and the consequent enablement of one or more competitors in certain markets.

Compliance with changing regulations and standards for accounting, corporate governance and public disclosure may result in additional expenses.

Changing laws, regulations and standards relating to corporate governance and public disclosure, new SEC and BC Securities Commission regulations, and Toronto Stock Exchange (“TSX”) rules, are creating additional complexities and expenses for companies such as ours. In 2005, the Accounting Standards Board announced that Canadian GAAP is to be converged with International Financial Reporting Standards “(IFRS)”. On February 13 2008, the CICA confirmed that the use of IFRS is required for fiscal years beginning on or after January 1, 2011. According to Section 4.1 of National Instrument 52-107, which governs GAAP requirements in Canada, SEC issuers may use U.S. GAAP. The Company satisfies the definition of an SEC issuer and consequently will convert its primary basis of accounting from Canadian GAAP to U.S. GAAP as of January 1, 2011. We will make every effort to convert our statements in time to comply with the new standard but we cannot make a guarantee that our efforts will be successful. Also, if the SEC determines at some point in 2011 to incorporate IFRS into the U.S. domestic reporting system, the first time U.S. issuers would report under that system would be approximately 2015 or 2016. Transitioning to IFRS is likely to impact how management communicates with investors, as well as how some companies conduct business with customers and vendors. The new financial reporting regime will affect internal operations and the transition will require sophisticated planning due to the many interrelated changes it will entail within the Company. The eventual conversion to IFRS will add complexity and costs to our business and require a significant investment of our time and resources to complete. The investments we make to adapt to, and comply with, evolving standards may result in increased general and administrative expenses and a diversion of management time and attention from strategic revenue generating and cost management activities. If we fail to comply with applicable regulatory requirements and standards, such as our failure to maintain effective internal controls and procedures for financial reporting, as described above, we could be subject to investigation by the applicable regulatory authorities, trading halts, and civil or criminal sanctions, in addition to the consequences described in the preceding risk factor.

We may be subject to product liability claims, which may adversely affect our operations.

We may be held liable or incur costs to settle liability claims if any of the products we sell cause injury or are found unsuitable. Although we currently maintain product liability insurance, we cannot be assured that this insurance is adequate, and, at any time, it is possible that such insurance coverage may cease to be available on commercially reasonable terms, if at all. A product liability claim could result in liability to us greater than our total assets or insurance coverage. Moreover, product liability claims could have an adverse impact on our business even if we have adequate insurance coverage.

We rely significantly on third party distributors and alliance partners to market and sell our products. If we are unable to successfully negotiate or maintain acceptable agreements with potential distributors, our ability to access various markets with our products may be significantly restricted. Further, we may not be able to negotiate agreements that would permit us to sell our products at a profit. In addition, our distributors may fail to honor existing agreements, accurately translate our documents into their foreign languages, obtain required foreign regulatory approvals, make timely payments of amounts owed, or achieve sales targets we believe they should attain.

Our marketing strategy in both the environmental and the medical diagnostics markets depends significantly on our ability to establish, maintain and expand collaborative arrangements with third party distributors and alliance partners for marketing and distribution in various markets around the world. In some markets we now have several years of experience and hope to expand. In other markets we have not yet signed a distributor and thus have at present no distributor selling our products. There can be no assurance that we will be able to negotiate or maintain acceptable collaborative arrangements enabling us to sell our products in certain markets or be able to sell our products at acceptable prices or volumes. Consequently, we may not be able to generate sufficient revenue or gross margins to be profitable.

We rely on one particular third party distributor to market and sell our products in China

We sell in China through an exclusive distributor for RAMP branded products, O&D Biotech Co. Ltd., China (O&D), and an exclusive distributor for private labeled products, Wondfo Biotech Co. Ltd. (Wondfo). Sales to O&D accounted for 39% of our total product sales in the year ended December 31, 2010. If O&D underperforms we may not be able to generate alternative distribution channels rapidly enough to prevent a significant disruption in China sales which would have an adverse impact on our business performance.

We rely significantly on alliance partners to comply with their agreements with us. If we are unable to successfully negotiate or maintain acceptable agreements with alliance partners, or if our alliance partners do not comply with their agreements, our business may be severely negatively impacted.

In certain product areas and markets we rely on partnering with multinational companies with global reach and resources to achieve commercialization of our infectious diseases products and cardiovascular products .Our ability to establish, maintain and enforce such arrangements is uncertain given the stage to which our business has developed and our resources. We will rely heavily on our alliance partners to comply with any agreement struck and to be successful in the fulfillment of their obligations including, for example, obligations relating to clinical and regulatory matters, and relating to sales, marketing and distribution. We may have limited or no control on our alliance partners in the pursuit of their obligations. Their failure to successfully carry out their obligations or our failure to establish, maintain or enforce such arrangements could have a material negative effect on our business.

Manufacturing risks and inefficiencies may adversely affect our ability to produce products and could reduce our gross margins and increase our research and development expenses.

We are subject to manufacturing risks, including our limited manufacturing experience with newer products and processes which may hinder our ability to scale-up manufacturing. Additionally, unanticipated acceleration or deceleration of customer demand may lead to manufacturing inefficiencies. We must manufacture our products in compliance with regulatory requirements, in sufficient quantities and on a timely basis, while maintaining acceptable product quality and manufacturing costs. Significant additional resources, implementation of additional automated and semi-automated manufacturing equipment and changes in our manufacturing processes and organization have been, and are expected to continue to be, required for scale-up to meet increasing customer demand once commercialization begins, and this work may not be successfully or efficiently completed.

In addition, although we expect some of our newer products and products under development to share production attributes with our existing products, production of these products may require the development of new manufacturing technologies and expertise. It may not be possible for us, or any other party, to manufacture these products at a cost or in quantities to make these products commercially viable.

Manufacturing and quality problems have arisen and may arise in the future as we attempt to scale-up our manufacturing capacity and implement automated and semi-automated manufacturing methods. We rely on third parties for the manufacture of much of our automated and semi-automated manufacturing equipment. Consequently, implementation of automated and semi-automated manufacturing methods may not be achieved in a timely manner or at a commercially reasonable cost, or at all. In addition, we continue to make investments to improve our manufacturing processes and to design, develop and purchase manufacturing equipment that may not yield the improvements that we expect. Unanticipated acceleration and deceleration of customer demand for our products has resulted, and may continue to result, in inefficiencies or constraints related to our manufacturing, which has harmed and may in the future harm our gross margins and overall financial results. Such inefficiencies or constraints may also result in delays, lost potential product sales or loss of current or potential customers due to their dissatisfaction.

We may not be able to effectively and efficiently manage the planned growth of our operations and, as a result, we may find ourselves unable to effectively compete in the marketplace with our products resulting in lost revenue, poor operational performance and sustained losses.

We anticipate growth in the scope of the operating and financial systems and the geographic area of operations as new products are developed and commercialized. This growth will result in increases in responsibilities for both existing and new management personnel. Managing growth effectively will require us to continue to implement and improve operational, financial and management information systems, and to successfully attract, hire on favorable terms, develop, motivate and manage employees. This growth may require additional locations and new capital equipment. If we are unable to successfully manage our expansion, we may experience an inability to take advantage of new sales opportunities, poor employee morale, an inability to attract new employees and management, an inability to generate adequate financial and other relevant reports, poor quality control and customer service and difficulty managing our operating expenses and working capital. As a consequence, we may find ourselves unable to compete effectively in the market place with our products leading to loss of revenue and poor operational performance, including sustained losses.

The research and development of our products carries substantial technical risk. We may not be able to successfully commercialize future products. As a consequence, our ability to expand our product portfolio to generate new revenue opportunities may be severely limited.

Our future growth will depend upon, among other factors, our ability to successfully develop new products and to make product improvements to meet evolving market needs. Although we believe that we have scientific and technical resources available, future products will nevertheless be subject to the risks of failure inherent in the development of products based on innovative technologies. Any specific new product in research and development may face technical challenges that could significantly increase the costs to develop that product, cause delays to commercialization or prevent us from commercializing that product at all. Although we expect to continue to expend resources on research and development efforts, to enhance existing products and develop future ones, we are unable to predict whether research and development activities will result in any commercially viable products. There can be no assurance that we will be able to successfully develop future products and tests, which would prevent us from introducing new products in the marketplace and negatively impact our ability to grow our revenues and become profitable.

To continue developing new products or enhance existing ones, we may need to obtain licenses to certain technologies and rights from third parties, and such licenses may not be available on acceptable terms, or at all. If our product development efforts are hindered, we may face considerable challenges competing in the market place with our existing products or be unable to introduce new products.

Although we believe we are able to conduct our business based on our current intellectual property portfolio and existing license agreements for certain assays and other technologies with third parties, there is a risk that additional non-core technology licenses may be required in the development of new products or to enhance the performance characteristics of our existing products or to sell current products into additional markets. We believe that such licenses would generally be available on a non-exclusive basis in the various markets where we would like to obtain them; however, there is no guarantee that they will be available on acceptable terms, or at all. We may also need to achieve certain performance requirements or abstain from certain activities in order to retain those licenses we have today. If we are unable to license or retain existing licenses to any required non-core technology, it may impede our product development capabilities and resulting product offerings, which may put us at a competitive disadvantage in the market place and negatively affect our ability to generate revenue or profits.

We depend on our key personnel to develop, manufacture, obtain regulatory approval, market through distributors, and sell our products and to assure that all general and administrative functions are performed on a timely and accurate basis. The loss of key current personnel or difficulty in recruiting additional personnel or finding appropriate consultants in areas where, the company has significant needs could adversely affect our business.

We are highly dependent upon the members of our management and scientific staff, who could leave our Company at any time. The loss of these key individuals could impede our ability to achieve our business goals. We face competition for qualified employees from numerous industry and academic sources and there can be no assurance that we will be able to retain qualified personnel on acceptable terms. We currently do not have key man insurance in place on any of our key employees.

In the event that we are unable to retain key personnel, and recruit qualified key personnel on favorable terms, we may not be able to successfully manage our business operations, including sales and marketing activities, product research and development and manufacturing. As a consequence, we may not be able to effectively develop and manufacture new products, negotiate strategic alliances or generate revenue from existing products.

We may not be able to attract and retain the caliber of talent necessary to succeed.

Our Company requires high-level management and scientific talent to compete effectively in the marketplace. We may not be able to attract and retain the talent required to sustain or grow our business.

A substantial portion of our business is in China where we have no direct presence to closely monitor and understand the rapidly evolving market.

Over 50% of our product revenue derives from sales of our products through our distribution channel partners in China. China is a dynamic and rapidly evolving market for medical technology including the near-patient diagnostic testing market in which the Company competes. We have neither a direct presence nor personnel in China to allow us to closely monitor and understand this market. We may not be able to anticipate changes in this market as a consequence, which could materially and adversely impact our product sales.

Our Company is organized under the laws of British Columbia, Canada, and certain of our directors and officers and substantially all of our assets are located outside of the United States, which may make enforcement of United States judgments against us difficult.

We are organized under the laws of British Columbia, Canada, substantially all of our assets are located outside of the United States, we do not currently maintain a permanent place of business within the United States and certain of our directors and officers are resident outside the United States. As a result, it may be difficult for U.S. investors to effect service of process or enforce within the United States any judgments obtained against us or those officers or directors, including judgments predicated upon the civil liability provisions of the securities laws of the United States or any state thereof. In addition, there is uncertainty as to whether the courts of Canada would recognize or enforce judgments of United States courts obtained against us or our directors and officers predicated upon the civil liability provisions of the securities laws of the United States or any state thereof, or be competent to hear original actions brought in Canada against us or our directors and officers predicated upon the securities laws of the United States or any state thereof.

Valuation of stock-based payments, which we are required to be perform for purposes of recording compensation expense under FASB – ASC 718 “Compensation - Stock Compensation”, involves significant assumptions that are subject to change and difficult to predict.

On 1 January 2006, we adopted FAS 123(R), which is now codified as FASB ASC 718 Compensation – Stock Compensation, which requires that we record compensation expense in the statement of income for stock-based payments, such as stock options, using the fair value method. As long as stock-based awards are utilized as part of our compensation strategy, the requirements of ASC 718 have had, and will continue to have, a material effect on our future financial results reported under Generally Accepted Accounting Principles, and make it difficult for us to accurately predict our future financial results.

For instance, estimating the fair value of stock-based payments is highly dependent on assumptions regarding the future exercise behavior of our employees and changes in our stock price. Our stock-based payments have characteristics significantly different from those of freely traded options, and changes to the subjective input assumptions of our stock-based payment valuation models can materially change our estimates of the fair values of our stock-based payments. In addition, the actual values realized upon the exercise, expiration, early termination or forfeiture of stock-based payments might be significantly different than our estimates of the fair values of those awards as determined at the date of grant.

ASC 718 could also adversely impact our ability to provide accurate guidance on our future financial results as assumptions that are used to estimate the fair value of stock-based payments are based on estimates and judgments that may differ from period to period. For instance, we may be unable to accurately predict the timing, amount and form of future stock-based payments to employees. We may also be unable to accurately predict the amount and timing of the recognition of tax benefits associated with stock-based payments as they are highly dependent on the exercise behavior of our employees and the price of our stock relative to the exercise and price fair value of each outstanding stock option.

For those reasons, among others, ASC 718 may create variability and uncertainty in the compensation expense we will record in future periods, potentially negatively impacting our ability to provide accurate financial guidance. This variability and uncertainty could further adversely impact our stock price and increase our expected stock price volatility as compared to prior periods.

Risks Related to Our Industry

As we generate a large part of our revenues from international product sales and services for international customers, we are subject to risks inherent in international business, including currency exchange risk, difficulty in collecting accounts receivable, and possible marketing restrictions. Consequently, we may be restricted from selling our products in certain jurisdictions or our products may not be able to be sold at a profit.

During 2010, 0.7% of our total revenue was generated from within Canada, 62.2% from Asia, 16.7% from the United States, 13.3% from Europe, and approximately 7.1% from other countries. There are various operational and financial risks associated with such international activity. We may face difficulties and risks in our international business, including changing economic or political conditions, export restrictions, currency risks, export controls relating to technology, compliance with existing and changing regulatory requirements, tariffs and other trade barriers, longer payment cycles, problems in collecting accounts receivable, limitations on the Company’s distributors in certain markets to obtain sufficient US currency to pay our invoices, reimbursement levels, reduced protection for intellectual property, potentially adverse tax consequences, limits on repatriation of earnings, the burdens of complying with a wide variety of foreign laws, nationalization, war, insurrection, terrorism and other political risks and factors beyond our control. As a consequence, these potential international risks may prevent us from selling our products in certain jurisdictions, may make it very difficult or even impossible to collect on accounts receivable or may impose a variety of additional expenses on our business such that we cannot sell our products at a profit. For international sales, we price and invoice our products primarily in U.S. dollars and consequently incur a U.S./Canadian foreign exchange risk. We also expect that there may be a greater requirement in the future for sales to European customers to be priced and invoiced in Euros. Any significant adverse change in currency exchange rates may negatively impact our profit margins such that we may not be able to generate positive cash flow or earnings from our operations. To date, we have not made any provision for a currency-hedging program. We periodically evaluate options to mitigate our exposure to currency fluctuations, but there can be no assurance that we will be able to do so.

Products in the biomedical industry, including ours, may be subject to government regulation. Obtaining government approvals can be costly and time consuming. Any failure to obtain necessary regulatory approval will restrict our ability to sell those products and impede our ability to generate revenue.

As we operate in the biomedical industry, some of our products are subject to a wide variety of government regulation (federal, state and municipal) both within the United States and in other international jurisdictions. See “Point-of-Care (POC) Clinical Diagnostics – Regulatory Approval”. For example, the FDA and comparable regulatory agencies in other countries impose substantial pre-market approval requirements on the introduction of medical products through lengthy and detailed clinical testing programs and other costly and time consuming procedures. Satisfaction of these requirements is expensive and can take a long period of time depending upon the type, complexity and novelty of the product. The FDA also changes the requirements for approval and sale of certain types of products from time to time—often increasing the performance standards, clinical evaluation, or other aspects of performance required to obtain or retain FDA regulatory approval of specific products. For example, the FDA in recent years has issue a new set of rules regarding cTnI tests for the cardiovascular market.

All medical devices manufactured for sale in the United States, regardless of country of origin, must be manufactured in accordance with Good Manufacturing Practices specified in regulations under the Federal Food, Drug, and Cosmetic Act. These practices control the product design process as well as every phase of production from incoming receipt of raw materials, components and subassemblies to product labeling, tracing of consignees after distribution and follow-up and reporting of complaint information. Both before and after a product is commercialized, we have ongoing responsibilities under the regulations of the FDA and other agencies. Noncompliance with applicable laws and the requirements of the FDA and other agencies can result in, among other things, fines, injunctions, civil penalties, recall or seizure of products, total or partial suspension of production, failure of the government to grant pre-market clearance or pre-market approval for devices, withdrawal of marketing clearances or approvals, and criminal prosecution. The FDA has the authority to request recall, repair, replacement

or refund of the cost of any device manufactured or distributed by us. The FDA also administers certain controls over the import and export of medical devices to and from the United States, respectively.

The United States Clinical Laboratory Improvement Acts of 1988 (CLIA) also affects our medical products. This law is intended to assure the quality and reliability of all medical testing in the United States regardless of where tests are performed. The regulations require laboratories performing clinical tests to meet specified standards in the areas of personnel qualification, administration, participation in proficiency testing, patient test management, quality control, quality assurance and inspections.

Sales and pricing of medical products, including ours, are affected by third-party reimbursement. Depending on our manufacturing costs, we may not be able to profitably sell our products at prices that would be acceptable to third party reimbursement programs. Consequently, we may have difficulty generating revenue, resulting in reduced profit margins and potential operating losses.

Sales of our medical products are dependent, in part, on the availability of levels of reimbursement from third-party payers, such as government agencies and private insurance companies. Reimbursement policies by such third-party payers could reduce or eliminate such reimbursements and thereby adversely affect future sales of our products. Third-party payers are increasingly challenging prices paid for medical products and the cost effectiveness of such products. Significant uncertainty exists as to the reimbursement status of newly cleared health care products. There can be no assurance that proposed products will be considered cost effective or that reimbursement from third party payers will be available or, if available, that reimbursement will not be limited, thereby adversely affecting our ability to sell products or sell our products at a profit.

Third party payers can indirectly affect the pricing or the relative attractiveness of our products by regulating the maximum amount of reimbursement provided for testing services. If the reimbursement amounts for testing services are decreased in the future, it may decrease the amount that physicians and hospitals are able to charge patients for such services and therefore the prices that we, or our distributors, can charge for our products. Consequently our ability to generate revenue and/or profits may be negatively impacted for both existing and new products.

Our business is substantially dependent on market acceptance of our products. As well, our environmental and biodefense business is affected by industry, governmental and public perceptions of these products in general. Failure to obtain or retain market acceptance for some or all of our products would have a negative impact on our revenue and ability to operate profitably.

The commercial success of our clinical tests is highly dependent upon the acceptance and adoption of the tests by the medical community. The medical community tends to be very conservative with regards to adopting new technologies and products. Often substantial data and evidence supporting product performance is required to generate market acceptance. If we are unsuccessful in generating market acceptance, our ability to generate revenue and hence profits would be severely limited.

The commercial success of our environmental and biodefense tests is dependent upon their acceptance by the public safety community and government funding agencies as being useful and cost effective. In addition, the purchase of our biodefense products in the United States (our largest potential market) by the public safety community is highly dependent on the availability of federal and state government funds dedicated to “homeland security”. In the event that homeland security funds became unavailable for use (to purchase our products or otherwise) or the release of such funds was significantly delayed, it would have a negative effect on our ability to generate revenue or profits.

In addition, on July 19, 2002, the U.S. Office of Science and Technology Policy (“OSTP”), now under the Office of Homeland Security, published a memorandum directed to federal mail managers and first responders to federal mail centers that raised concerns regarding the use and performance capabilities of commercially available anthrax detection equipment, and further included recommendations to the community to cease purchasing such equipment. The recommendations in this memorandum were based on an evaluation of commercially available anthrax detection equipment by the CDC, which concluded that such equipment did not pass acceptable standards for effectiveness. As both of these U.S. government agencies are considered to be influential opinion leaders, this recommendation had a negative impact on the market acceptance and adoption of biodefense products generally, including our products. Subsequently, beginning in June 2003, an 18-month study to evaluate handheld anthrax tests was performed by AOAC International and funded by DHS and the U.S. Department of Defense. In November 2004, the RAMP® System received AOAC Official Methods SM Certificate 070403 stating that the RAMP® Anthrax Test performed as we claimed. All other commercially available rapid on-site anthrax detection systems that were tested failed to meet the AOAC’s performance standard. A further intensive, independent field testing

program conducted by AOAC International and sponsored by the DHS, culminated in the announcement in September 2006 that our RAMP® Anthrax Test is the first and only biodetection product approved for field use by first responders in the United States for the detection of anthrax. We believe that we have adequately addressed the concerns raised by the CDC and OSTP with the public safety community, however there can be no assurance that the marketplace will continue to respond favorably. Further, it is possible that the U.S. government will enact regulations that prohibit, restrict or limit the use of equipment or funding for on-site biodefense testing, see “On-Site Environmental Testing Market, Industry Trends” and “On-Site Environmental Testing Market, Competition”.

Federal, state and foreign regulations regarding the manufacture and sale of medical devices continue to evolve and are constantly subject to change. We cannot predict what regulations may come into effect in the future and what impact, if any, such regulatory changes may have on our business.

A majority of the Company’s sales are through distributors in foreign markets who sell our products or modifications of our products in their local country markets. Sales through these distributors in these markets are usually subject to the regulators in those markets. Frequently our distributors are responsible for obtaining and maintaining regulatory approval in their territories and are thus subject to all of those requirements. In the future, should the Company elect to build its own sales and marketing operations in certain countries outside the US we would be subject to extensive regulations in each of those countries. The Company may not be successful in such new initiatives.

We operate, primarily selling through distributors but also potentially in the future directly, in highly competitive markets around the world, with continual developments in new technologies and products. Some of our competitors have significantly greater resources than we do. Others, while smaller, may have a very strong market or other leadership position in a specific local market where we or our distributors compete. We or our distributors may not be able to compete successfully based on many factors, including product price or performance characteristics, sales and marketing effort or customer support capabilities. An inability to successfully compete could lead to us having limited prospects for establishing market share or generating revenues.

The diagnostic industry is characterized by extensive research efforts, ongoing technological progress and intense competition. There are many public and private companies, including well-known diagnostic companies, engaged in marketing and developing products for the markets we have targeted. Many of these companies have substantially greater financial, technical and human resources than we do. Our competitors may be more successful in convincing potential customers to adopt their products over ours and hence gain greater market share. Competitors with greater financial resources may also have an advantage when dealing with suppliers, particularly sole source suppliers providing antibodies or unique reagents. Additionally, they may develop technologies and products that are more effective than any products developed by us, or that would render our technologies and products obsolete or non-competitive.

We believe our primary current competitors globally in the POC cardiovascular diagnostics market are: Biosite Incorporated (“Biosite”) who entered into a merger agreement with Alere Inc. (“Alere”) in 2007; Abbott Point of Care Inc. (“Abbott”); Mitsubishi Chemical Medience Corporation (“Mitsubishi”);; and Dade Behring, Inc. (“Dade”). Biosite,Abbott, and Mitsubishi have quantitative POC systems, and Dade produces a small quantitative bench-top system, for the detection of some cardiac markers. These three companies are currently marketing and selling their products in the cardiovascular testing market in which we compete, see “POC Clinical Diagnostics Market, Competition”.

In addition, in various emerging regional markets such as China there may be local competitors who sell only in that specific country. Some of these local competitors may be very strong competitors in their local markets due to factors which may include lower cost production, stronger sales/marketing distribution capabilities, customer familiarity and preference for local suppliers, and local government environments which may favor local companies and their products.

In the environmental biodefense testing market, our primary competitors are Alexeter Technologies LLC (“Alexeter”), Idaho Technology Inc., and Cepheid Inc. (“Cepheid”). Alexeter sells rapid on-site immunoassay tests that are read by an instrument and Cepheid has a polymerase chain reaction (“PCR”) test system being sold in this marketplace.

In the vector environmental testing market, our primary competitor is Medical Analysis Systems, Inc. (“MAS”), which is wholly owned by Thermo Fisher Scientific, Inc. MAS markets and sells a product for the rapid detection of West Nile virus.

We believe the primary competitors in the POC Flu A/B and RSV testing market are Binax, Inc. (“Binax”) and Quidel Corporation (“Quidel”). Both companies have qualitative POC tests for the detection of Flu A+B and RSV.

Many of our competitors have access to substantially greater technical and financial resources. In the event that we are not able to compete successfully in the marketplace, we may face limited adoption of our products by potential customers or erosion of current market share, which would seriously impede our ability to generate revenue.

In addition to the specific competitive risks from rapid diagnostic manufacturers that we face in the market for our tests, we face intense competition in the general market for diagnostic testing including companies making laboratory-based tests and analyzers, and clinical reference laboratories. Currently, the majority of diagnostic products used by physicians and other healthcare providers are performed by independent clinical reference laboratories and hospital-based laboratories using automated testing systems. Therefore, in order to achieve market acceptance for our products we will be required to demonstrate that our products provide clinical benefit and are cost-effective and time saving alternatives to automated tests traditionally used by clinical reference laboratories or hospital-based laboratories.

The impact of consolidation of several major competitors in the market for immunoassay testing is difficult to predict and may harm our business.

The market for immunoassay-based diagnostic testing is rapidly changing as a result of recent consolidation in the industry. Within the past 60 months, Siemens acquired Bayer Diagnostics, Diagnostic Products Corp. and Dade; and Biosite entered into a merger agreement with Alere. In the past three years there have been many acquisitions in the medical diagnostics market including several by Alere, helping the company expand its presence in the market for rapid diagnostic tests used in hospitals and doctors' offices. Siemens and Alere both have significant existing businesses in diagnostics and/or related markets for healthcare equipment and services. Given the period of time since the announcement of these transactions, it is unclear how these completed and proposed acquisitions will impact the competitive landscape for our products or for hospital-based diagnostic testing in general. However, because these competitors sell a broad range of product offerings to our prospective hospital customers and because of the substantially greater financial resources and more established marketing, sales and service organizations that they each have, we believe there is greater risk that these new consolidated competitors may offer discounts as a competitive tactic or may hold other competitive advantages as a result of their ability to sell a broader menu of important hospital infrastructure equipment and information systems on a combined or bundled basis. In addition, as these larger competitors expand their marketing focus to China and other emerging markets, they may pose an increasing competitive threat to the Company and the Company’s local distributors in these markets.

Our business and industry is affected by seasonality, including governmental budget cycles. We may not be able to successfully scale up operations to meet demand during peak seasonal periods or scale down operations during periods of low demand, which could result in lost revenue and/or negative cash flows and losses.

Our operating results may fluctuate from quarter to quarter due to many seasonal factors. Many of our prospective customers are government related organizations at a federal, state/provincial or municipal level. Consequently, our sales may be tied to government budget and purchasing cycles. Sales may also be slower in the traditional vacation months, could be accelerated in the first or fourth calendar quarters by customers whose annual budgets are about to expire (especially affecting purchases of our fluorescent Readers), may be distorted by unusually large Reader shipments from time to time, or may be affected by the timing of customer cartridge ordering patterns. Seasonality may require us to invest significantly in additional resources, including equipment, labor and inventory to meet demand during peak seasonal periods. There can be no assurance that we will be successful in putting in place the resources to meet anticipated demand, which could lead to lost revenue opportunities. If we cannot scale down our operations and expenses sufficiently during periods of low demand for our products, we may experience significantly negative cash flow and operating losses. If we are unable to adequately forecast seasonal activity, we may experience periods of inventory shortages or excesses that would negatively impact our working capital position.

Companies operating in our industry may be impacted by potential healthcare reform. Such healthcare reform may include pricing restrictions on medical products, including ours, that may restrict our ability to sell our products at a profit.

Healthcare reform bills that have been before the United States Congress contemplate changes in the structure, financing and delivery of healthcare services in the United States. These and any future healthcare reforms may

have a substantial impact on the operations of companies in the healthcare industry, including us. Such reforms could include product pricing restrictions or additional regulations governing the usage of medical products. No assurances can be given that any such proposals, or other current or future legislation in the United States or in other countries, will not adversely affect our product development and commercialization efforts, results of operations or financial condition. At this time, we are unaware of any recent legislation or pending legislative proposals that will negatively affect our business.

If products in the biodefense testing industry and other environmental testing segments, including ours, become subject to government legislation in the future, obtaining necessary government approvals may be very costly and time consuming. Failure to obtain government approvals will restrict our ability to sell our products and impede our ability to generate revenue.

In the biodefense and vector environmental testing markets, there is currently an absence of regulatory checks and balances and there is significant market uncertainty and misinformation. While we believe it is likely that future regulatory requirements in these markets will come into effect, the form and substance of these regulations remain highly uncertain. The effect of government regulations may be to prevent or to delay marketing and pricing of any new products for a considerable or indefinite period or to require additional studies prior to approval. Federal, state and foreign regulations, or lack thereof, regarding the sale of environmental testing devices are subject to change. We cannot predict the impact, if any, such changes may have on our business.

Risks Related to Our Common Stock

The price of our common stock may be volatile, and a shareholder’s investment in our common stock could suffer a decline in value.

There has been significant volatility in the volume and market price of our common stock, and this volatility may continue in the future. This volatility may be caused by a variety of factors, including the lack of readily available quotations, the absence of consistent administrative supervision of “bid” and “ask” quotations and generally lower trading volume. In addition, factors such as quarterly variations in our operating results, changes in financial estimates by securities analysts or our failure to meet our or their projected financial and operating results, litigation involving us, general trends relating to the medical device industry, actions by governmental agencies, national economic and stock market considerations as well as other events and circumstances beyond our control could have a significant impact on the future market price of our common stock and the relative volatility of such market price. The Company has experienced in the past, and may continue to experience in the future, substantial variation from quarter to quarter in revenues and thus profitability. This variation may be due to large “stocking” orders by certain distributors, the timing of periodic orders from distributors to maintain their inventories, large one-time-sales of certain products such as biodefense related products, seasonal sales of products such as flu diagnostic tests, and other factors.

Because our common stock is considered a “penny stock,” a shareholder may have difficulty selling shares in the secondary trading market.

In addition, our common stock is subject to certain rules and regulations relating to “penny stock” (generally defined as any equity security that is not quoted on the Nasdaq Stock Market and that has a price less than US$5.00 per share, subject to certain exemptions). Broker-dealers who sell penny stocks are subject to certain “sales practice requirements” for sales in certain nonexempt transactions (e.g., sales to persons other than established customers and institutional “accredited investors”), including requiring delivery of a risk disclosure document relating to the penny stock market and monthly statements disclosing recent price information for the penny stock held in the account, and certain other restrictions. For as long as our common stock is subject to the rules on penny stocks, the market liquidity for such securities could be significantly limited. This lack of liquidity may also make it more difficult for us to raise capital in the future through sales of equity in the public or private markets.

Because our common stock is not traded on a national securities exchange in the U.S., a U.S. shareholder’s ability to sell shares in the secondary trading market may be limited.

Our common stock is currently listed for trading in Canada on the Toronto Stock Exchange. Our common stock is also quoted in the United States on the OTC Bulletin Board. Shareholders may find it more difficult to dispose of or to obtain accurate quotations as to the price of our securities than if the securities were traded on a national securities exchange like The New York Stock Exchange, the Nasdaq Stock Market or the NYSE Amex LLC.

We may cease to be a foreign private issuer, which would subject us to increased regulatory requirements under U.S. securities laws and would subject our affiliates to the beneficial ownership reporting, short-swing trading and other requirements of Section 16 of the U.S. Securities Exchange Act.

We currently qualify as a foreign private issuer, as defined by the U.S. Securities and Exchange Commission ("SEC"). As a foreign private issuer, we are permitted by the SEC to file an annual report on Form 20-F and copies of certain home country materials on Form 6-K in lieu of filing annual, quarterly and current reports on Forms 10-K, 10-Q and 8-K; we are exempt from SEC proxy statement requirements and certain SEC tender offer requirements; we are permitted to sell securities outside the United States without resale restrictions under the U.S. Securities Act; U.S. holders of our restricted securities may resell such securities to persons outside the United States who receive such securities without resale restrictions under the U.S. Securities Act and our affiliates are exempt from Section 16 of the U.S. Exchange Act.

We will cease to be a foreign private issuer and cease to be eligible for the foregoing exemptions and privileges if, on the last business day of June 2011, or on the last business day of any subsequent second fiscal quarter:

·	A majority of our voting securities are beneficially owned by U.S. residents, and

·	Any one of the following: (i) a majority of our directors are U.S. citizens or residents, (ii) a majority of our executive officers are U.S. citizens or residents, (iii) a majority of our assets are located in the United States, or (iv) our business is principally administered in the United States.

As of February 28, 2011, a majority of our directors and a majority of our officers were U.S. citizens or residents and a single U.S. resident owned 37.4% of our outstanding voting securities. We are unable to assure you that we will continue to qualify as a foreign private issuer as of the end of June 2011. If we fail to qualify as a foreign private issuer as of the end of June 2011, then the SEC will consider us a domestic issuer that is subject to the same requirements as a U.S. public company, and we would expect the foregoing exemptions and privileges to cease to be available to us and our security holders effective January 1, 2012. We expect that any loss of our status as a foreign private issuer would have an adverse effect on our ability to raise funds through the sale of securities, on the cost of our compliance with U.S. securities law requirements and on the ability of U.S. holders of our restricted securities to resell such securities outside the United States. In addition, our affiliates would become subject to the beneficial ownership reporting, short-swing trading and other requirements of Section 16 of the U.S. Securities Exchange Act.

As we have a large number of warrants and stock options outstanding, our shareholders will experience dilution from these options and warrants in the event that they are exercised.

As of 31 January 2011, we had outstanding stock options to purchase an aggregate of 803,388 shares, at exercise prices between $0.41 and $11.00 and warrants to purchase an aggregate of 6,020,322 shares, at a weighted average exercise price of $2.36, which in total represents 15% of our fully diluted outstanding share capitalization at that date. To the extent that these outstanding options and warrants are exercised, considerable dilution to the interests of our shareholders will occur.

Item 4. Information on the Company

A.	History and development of the Company.

Response Biomedical Corp. was incorporated on August 20, 1980 under the predecessor to the Business Corporations Act in British Columbia, Canada and is located at 1781 – West 75th Avenue, Vancouver, BC, Canada, V6P 6P2 with a telephone number of (604) 456-6010.

We are a Canadian company engaged in the research, development, commercialization and distribution of diagnostic technologies for the medical POC and on-site environmental testing markets. POC and on-site diagnostic tests are simple, non-laboratory-based tests performed using portable hand-held devices, compact desktop analyzers, single-use test cartridges or dipsticks. Since entering the diagnostic sector in November 1990, we have established a number of product development initiatives that have resulted in a core proprietary technology called RAMP®, see “The RAMP® Technology”. We use this proprietary enabling technology for the commercialization of highly sensitive and quantitative (producing a positive/negative result) diagnostic tests in a simple-to-use, portable format. This format comprises a fluorescence Reader common to all tests, and single-use, disposable test cartridges (“Cartridges”) that contain an analyte specific, lateral flow immunoassay. Each Cartridge incorporates a proprietary internal calibrator that accounts for sources of variability inherent in conventional lateral flow immunoassay-based tests, making RAMP® potentially competitive in performance to laboratory-based systems.

Our business strategy is to use RAMP® to develop diagnostic tests for POC and on-site testing markets where there is a need for rapid and accurate results. We have the ability to conduct all research and test development in-house and oversee any clinical testing required to satisfy the regulatory requirements in target markets. We typically seek to retain all manufacturing rights for our fluorescence Readers and test kits. All our kits are currently produced in-house and our Readers are manufactured and supplied to us under contract. We have one qualified contract manufacturer for the Readers, located in British Columbia, Canada (see “Risk Factors” and “Operations and Manufacturing”). We currently market and sell RAMP® products through a combination of direct sales and select distributors, depending on the market segment and geographical area, see “POC Clinical Diagnostics Market” and “On Site Environmental Testing Market ”.

Over the past six years we have focused on developing a complete POC cardiovascular test menu on our proprietary RAMP® platform as well as developing tests for the detection of infectious diseases such as Flu A+B and RSV. In addition, we have taken advantage of complementary menu expansion opportunities where partners would provide commitment in the form of funding and sales and marketing resources. Importantly, expanding our manufacturing capacity was and is critical to supporting the expected growth in our business.

We have made the following capital expenditures and dispositions over the three fiscal years ended 31 December 2010:

Year Ended	Capital Expenditures ($)		Capital Dispositions ($)
31 December 2010		91,561	Nil
31 December 2009		140,097	Nil
31 December 2008		8,453,169		6,364
Total		8,684,827		6,364

Capital expenditures during the year ended December 31, 2008 consisted of investments in leasehold improvements to a new facility which were funded by our landlord in the amount of approximately $7,110,000 offset by lease inducements liability, with the remainder largely for equipment relating to the manufacture of our products, office furniture and equipment as well as investments in information systems software and hardware. We moved into this facility on 31 March 2008.

Capital expenditures during the two years ended December 31, 2010 consisted of various manufacturing, office and computer equipment. As of 31 December 2010, and as of 31 January 2011, we had capital expenditure commitments for equipment of $Nil and $Nil, respectively. As of 31 December 2010, and as of 31 January 2011, we had commitments for the lease of our facility until 31 January 2023 of $26,777,683 and $26,612,868, respectively.

In July 2010, pursuant to a subscription agreement between the Company and Caduceus Private Investments III, LP (since renamed OrbiMed Private Investments III, LP), OrbiMed Associates III, LP and Caduceus Asia Partners, LP (since renamed OrbiMed Asia Partners, LP) (collectively, the “OrbiMed Funds”) dated June 27, 2010 (the “OrbiMed Agreement”), we issued to the OrbiMed Funds an aggregate of 13,333,333 common shares at a price of $0.60 per share, for gross proceeds of $8,000,000 before share issuance costs of $525,080 for net proceeds of $7,474,920.

B.	Business Overview

POC Clinical Diagnostics

In November 2004, we began development of a rapid test for Staphylococcus aureus (“Staph A”) in collaboration with 3M. In reviewing all opportunities to best build the infectious diseases business, 3M determined that market conditions were not optimal for the Rapid Staph A test and that resources would be better utilized by focusing efforts on markets of greater opportunity; therefore, in November 2007, it was announced that development work for Rapid Staph A was put on hold and we were substituting other opportunities with greater market potential. Should market conditions change, the Rapid Staph A initiative can be revisited at that time. In June 2007, we announced that we were granted a medical device license by Health Canada to market our RAMP® NT-proBNP Test in Canada. In November 2007 our NT-proBNP test received regulatory clearance in China from the State Food and Drug Administration (“SFDA”) allowing O&D, our distributor for China, to market this test in China.

In June 2007, we announced that we had filed an FDA 510(k) submission seeking clearance to market a rapid influenza A+B test in the United States. In November 2007, we announced that we were collecting additional non-clinical data to support our U.S. FDA submission.

In April 2008, we received regulatory clearance from the FDA to market the RAMP® Flu A/B Test and the RAMP® 200 Reader.

In June 2008, we granted Roche the rights to market our line of cardiovascular POC tests worldwide. The RAMP® cardiovascular product line includes the Roche Cardiac 200 Reader and assays for the detection of Troponin I, CK-MB, Myoglobin and NT-proBNP. In July 2008, we received regulatory clearance from the FDA to market the RAMP® NT-proBNP Assay as an aid to the rapid diagnosis of heart failure. The RAMP® NT-proBNP Assay is clinically concordant with the Roche Elecsys proBNP Test and allows the hospital to have standardized clinical decision points for NT-proBNP in their emergency rooms, other non-laboratory environments and central laboratories.

In October 2008, we saw the first major clinical test commercialized by a partner in the United States when 3M launched the 3M™ Rapid Detection Flu A+B Test at the 48th Annual ICAAC®/IDSA Meeting in Washington D.C. The rapid flu test provides hospital and physician office laboratories reliable and objective electronic results in approximately 15 minutes and in a clinical study has been shown to be more sensitive for Influenza A and B than the leading hospital competitor, the BinaxNOW Influenza A+B Test ®.

In December 2008, we initiated a clinical trial, in collaboration with 3M, of our RAMP® test to detect RSV. The test is a qualitative immunochromatographic assay indicated for use as an in vitro diagnostic product to identify the presence of the RSV antigen. Rapid detection of RSV aids hospital laboratories and physician office laboratories in the rapid diagnosis of RSV, which infects virtually all children by the age of two.

In February 2009, we initiated a clinical trial to support a 510(k) submission for a CLIA-waiver for the RAMP® NT-proBNP assay. The CLIA-waiver filing with the FDA was carried out in 2010. Simultaneously, we also undertook a project to develop a next-generation Troponin I (TnI) assay. The development of the improved RAMP® TnI test will align the results obtained to more closely reflect those obtained on the most commonly used central laboratory analyzers today.

In April 2009, Roche Diagnostics launched the “Cardiac 200” line of products in the U.S.

In October 2009, we were granted a Special 510(k) U.S. FDA clearance for an update to our RAMP® Influenza A/B Assay Package Insert to include analytical reactivity information for a strain of the 2009 H1N1 virus cultured from positive respiratory specimens. Although the RAMP® Influenza A/B Assay has been shown to detect the 2009 influenza A (H1N1) virus in cultured isolates, the performance characteristics of this device with clinical specimens that are positive for the 2009 influenza A (H1N1) virus have not been established. The RAMP® Influenza A/B Assay can distinguish between influenza A and B viruses, but it cannot differentiate influenza subtypes.

In October 2009, 3M also launched the RSV test in the United States.

In December 2009, we added a second distributor for its diagnostic products in China, Guangzhou Wondfo Biotech Co., Ltd. (Wondfo).

In September 2010, we announced that 3M had provided notice that it would not proceed with development of the next generation flu product.

On Site Environmental Testing

Following use of anthrax as a weapon for terrorist attacks in the United States in October 2001, we saw an opportunity to adapt the RAMP® technology for the rapid detection and identification of agents used in acts of bioterrorism and initiated development of a test for the rapid, on-site detection of Bacillus anthracis, the causative agent for anthrax ("Anthrax Test"). Development of the Anthrax Test was substantially completed in April 2002 following successful initial validation by the Maryland State Department of Health where testing confirmed that the RAMP® Anthrax Test could reliably detect anthrax spores at levels lower than an infectious dose of 10,000 spores. These results were supported by further independent testing conducted by Defense Research and Development Canada in Suffield. The Anthrax Test was launched commercially in May 2002. In September 2006, our RAMP® Anthrax Test was the first and only biodetection technology approved for field use by first responders in the United States for the detection of anthrax in an independent testing program conducted by AOAC and sponsored by the U.S. Department of Homeland Security. Since then, we have commercialized tests for ricin (“Ricin Test”), botulinum toxin (“Bot Tox Test”) and orthopox (including smallpox) (“Pox Test”), three priority bio-threat agents. Commercial sales of the Ricin Test and the Bot Tox Test commenced in November 2002 and the Pox Test was launched in May 2003.

In June 2003, we began development of a test to detect the presence of West Nile Virus in mosquitoes and certain birds, common carriers of the virus. Following verification testing of the product at the Canadian National Microbiology Laboratory and the United States Centers for Disease Control in late summer 2003, and field-testing of the product in Pennsylvania in the fall of 2003, we introduced the RAMP® West Nile Virus Test to the market in November 2003.

Contract Service Fees and Collaborative Research Arrangements

From time to time, various third parties (primarily medical diagnostic companies) have approached us to request that we develop RAMP® tests for certain specific indications. In many cases, these indications have been outside of our own product development efforts. Nevertheless, we have, where thought appropriate, agreed to conduct initial feasibility research on behalf of these third parties, provided that the third party funds the costs of the research. Upon completion of the research project and depending on the results, we may explore the merits of developing the product opportunity with the third party. In fiscal 2010, these collaborative research arrangements represented 5% of our total revenues, whereas for fiscal 2009 and 2008 they represented approximately 18% and 17% of our total revenues, respectively.

Revenue Breakdown

The following tables provide a breakdown of our total revenues by geography and product category respectively for the years ended 31 December 2010, 2009, and 2008:

Country / Region	2010 ($)		2009 ($)		2008 ($)
United States		1,191,386		4,300,984		3,288,566
Asia		4,421,568		3,047,731		1,314,621
Europe		945,117		2,046,417		567,866
Canada		52,872		76,484		663,507
Other		502,065		474,653		41,777
Total		7,113,008		9,946,269		5,876,337

Category	2010 ($)		2009 ($)		2008 ($)
Clinical products		6,001,957		6,828,651		3,683,706
Vector products		310,090		806,417		495,018
Biodefense products		444,895		517,981		721,117
Total product revenues		6,756,942		8,153,049		4,899,841
Contract		356,066		1,793,220		976,496
Total Revenues		7,113,008		9,946,269		5,876,337

Contract revenue was generated primarily through contract research and development fees paid by third parties through collaborative arrangements. Research arrangements typically involved investigating the feasibility of developing certain clinical or environmental diagnostic tests utilizing the RAMP® Technology.

Our revenues are affected by seasonality. Some of our prospective customers are government related organizations at a federal, state/provincial or municipal level. Consequently, our sales may be tied to government budget and purchasing cycles. Sales may also be slower in the traditional vacation months, could be accelerated in the first or fourth calendar quarters by customers whose annual budgets are about to expire (especially affecting purchases of our fluorescent readers), may be distorted by unusually large reader shipments from time to time, may be affected by the timing of customer cartridge ordering patterns or may be affected by the launch of new and existing products in new territories. These factors may require us to invest significantly in additional resources including, equipment, labor and inventory to meet demand during peak seasonal periods.

The RAMP® Technology

RAMP® is a platform technology that combines a sensitive, portable fluorescence detection system with simple lateral flow immunoassays. Although lateral flow immunoassay technology has been available for over 25 years, the market for early generation rapid immunoassays has been limited by their inability to provide the accurate, quantitative results required by the majority of test situations.

RAMP® maintains key positive attributes of lateral flow immunoassays - simplicity, specificity, reliability and rapid results – but includes a method to overcome the performance limitations of early generation immunoassays that suffer from relatively poor sensitivity and precision. By introducing a population of known antibodies that are impacted by the same conditions as the test antibodies, the ratio of a measurement of the signal from the two sets of antibodies effectively factors out uncontrolled variability, thereby providing an accurate result. Furthermore, the use of a fluorescent label in the cartridge combined with a custom optical scanner in the Reader results in what is believed to be a reliable and sensitive detection system. The RAMP® System has demonstrated its capability to detect and quantify a wide variety of analytes with sensitivity and accuracy comparable to centralized lab systems, including multiple analytes simultaneously.

Minimal training is required to use the RAMP® System. A test is performed by adding a sample (e.g., blood, urine, saliva, water, or unknown powders) containing the analyte of interest (e.g., Myoglobin, anthrax spores) mixed with a proprietary buffer and labeled antibodies to the sample well of a Cartridge. The Cartridge is then inserted into the Reader, which scans the test strip and provides the result in 20 minutes or less, depending on the assay. In the absence of rapid on-site and POC test results like the RAMP® test, health care providers and first responders may be forced to wait up to three days for a confirmatory result from a government- or hospital -run lab.

POC Clinical Diagnostics Market

In vitro diagnostics (“IVD”) are reagents, instruments and systems used for diagnosis of disease or other conditions by testing and reporting the level of various substances in fluids taken from the body such as blood, mucous, and urine. IVD tests are routinely performed in centralized laboratories. POC testing is a segment of the IVD market that moves the detection and reporting functions of diagnostic tests from the central lab to locations closer to the patient. POC testing can offer clinicians and patients the advantage of rapid results. The cost savings and improved outcomes that can come from a more rapid test result are drivers of growth in the POC testing market.

POC testing frequently employs portable devices, and single-use test cartridges or dipsticks. POC tests are performed in a wide range of settings including clinics, physician offices, operating rooms, emergency departments and patients’ homes - anywhere that a patient or physician can benefit from a rapid test result to guide medical care.

They typically have a simple format, require minimal sample manipulation, produce results quickly and can be used by non-laboratory personnel with minimum or no training. There are more than 250 immunoassay-based tests for areas such as cardiac markers, hormones, therapeutic drugs, infectious diseases and cancer. Nonetheless, the quantitative immunoassay-based segment of the IVD market remains relatively untapped by POC products. The primary reason for this has been the inability of POC immunoassay tests to provide levels of accuracy and precision that the majority of test situations require. Consequently, immunoassay-based medical tests that require precise quantification of target analytes have largely remained the domain of laboratory-based analyzers. Based on the success of first generation POC tests, we believe there is significant demand for a quantitative POC platform that provides results similar to laboratory-based analyzers.

Our Cardiovascular Testing Products

A major focus of our development programs has been clinical tests for the quantification of cardiac markers. Cardiac markers are biochemical substances that are released by the heart after it has been damaged or stressed. Elevated levels of these markers can be indicative of a heart attack. There are three primary markers for the detection of a heart attack: Myoglobin, CK-MB, and Troponin I. Response has developed POC tests for each of these markers, which are presently sold worldwide by Roche Diagnostics and our international distributor network.

After developing the RAMP® Reader and Myoglobin Test, we submitted the Reader and the test to the FDA for review and market clearance in May 2001. Clearance was subsequently obtained in January 2002 for sales and distribution in the U.S. market. As a consequence, our Myoglobin assay and the RAMP® Reader have been available for commercial sale in the U.S. since early 2002. Based on the outcome of this FDA clearance, we then focused throughout the remainder of 2002 and 2003 on developing and preparing the two subsequent tests, CK-MB and Troponin I, for submission to the FDA. We completed our clinical trial studies for these two tests in the fall of 2003 and submitted our data for FDA clearance in December 2003. Clearance was subsequently obtained in May 2004

Recognizing that testing for congestive heart failure (“CHF”) had become a critical complement to cardiac testing (e.g., for heart attacks), we secured a license from Shionogi in October 2004 to develop a rapid quantitative test for BNP, a key CHF marker, in Japan. In July 2005, we secured a license from Roche to develop, manufacture and sell POC tests for the detection of NT pro-BNP in markets where we do not sell BNP tests. In May 2006, we announced that Shionogi had secured regulatory clearance to market the BNP test in Japan, following which initial sales occurred in July 2006. In December 2006, the RAMP® NT-proBNP Assay was CE marked for sale in Europe and a 510(K) application was submitted to the FDA for clearance to market the test in the U.S. In July 2008, we received regulatory clearance from the FDA to market the RAMP® NT-proBNP Assay as an aid to the rapid diagnosis of heart failure. The RAMP® NT-proBNP Assay is clinically concordant with the Roche Elecsys proBNP Test and allows the hospital to have standardized clinical decision points for NT-proBNP in both their emergency rooms and central laboratories. In February 2009, Roche Diagnostics agreed to provide funding to complete a submission for a CLIA-waiver for the RAMP® NT-proBNP assay and also for the development of a next-generation Troponin I Assay. An FDA CLIA-waiver submission for NT-proBNP was made in the second half of 2010.

Overview of Cardiac Marker Testing

Serial measurement of biochemical markers is now universally accepted as an important determinant in the diagnosis of a heart attack. The ideal cardiac marker is one that has high clinical sensitivity and specificity, appears soon after the onset of a heart attack, remains elevated for several days following a heart attack, and can be assayed with a rapid turnaround time.1 Today, there is no single marker that meets all of these criteria, thus necessitating testing for multiple cardiac markers. The biochemical markers that are commonly used by physicians to aid in the diagnosis of a heart attack are Myoglobin, CK-MB, Troponin I, and Troponin T. As seen in the figure below, cardiac markers follow a specific, predictable pattern of release kinetics following a coronary event. The differences

1 Adams JE, III, Clin Chem Acta, 1999.

in the time that it takes each marker to reach peak concentration has made it common practice for clinicians to make use of at least two different markers in tandem, an early marker such as Myoglobin and a later one such as Troponin I. More recently, international guidelines recommend the use of serial Troponin assays for definitive diagnosis of heart attacks.

Release of Cardiac Markers into the Bloodstream Following a Heart Attack2

The turn-around times (“TAT”) for results from a hospital lab can vary from as little as thirty minutes to more than two hours due to the necessity of test ordering and specimen collection, specimen transport, sample preparation, test completion and reporting. In rural settings and physicians’ offices, the TAT can be many hours or even days. Evidence-based clinical practice guidelines recommend that the results from cardiac marker testing be available within 60 minutes of patient presentation and ideally within thirty minutes. POC testing with products such as RAMP® could provide doctors with the information they need to diagnose and treat heart attack patients in a much shorter timeframe (e.g., less than 20 minutes from blood draw to result). In most cases, this is more likely to be within the critical window of time to minimize irreversible heart damage or death. The RAMP® System is expected to aid in the diagnosis of heart attack by enabling physicians to easily and frequently monitor changes in the levels of a patient’s cardiac markers. Early access to this information enables physicians to use accelerated care protocols, which are intended to drive earlier and better treatment decisions. According to statistics published by the U.S. Centers for Disease Control and Prevention (“CDC”), approximately 6 million people visit U.S. hospital emergency departments (“EDs”) each year with complaints of chest pain, a primary symptom of heart attack.

Overview of CHF Testing

Congestive heart failure (“CHF”) is a chronic, progressive disease in which the heart muscle weakens and becomes impaired, thus impeding the heart's ability to pump enough blood to support the body's metabolic demands.

CHF is the only cardiovascular disorder to show a marked increase in incidence in the past 40 years and it is expected to continue rising due in part to the aging population and better survival prospects of patients with other cardiovascular diseases.3 Many patients hospitalized with acute CHF will be re-admitted to the hospital with repeat incidence of the disease.

Previous methods for the diagnosis and assessment of CHF, which include physical examinations and chest x-rays, are not usually conclusive, making accurate diagnoses difficult. The introduction of testing for BNP and NT-proBNP dramatically changed the ability of physicians to make a qualified diagnosis and monitor the success of treatment because the level of these molecules is elevated in the blood when the heart is forced to work harder. These tests have proven to be more accurate than any other single physical or laboratory gauge of heart failure.4 Both BNP and NT-proBNP are fragments of proBNP, a neurohormone that is released by the heart in response to increased blood pressure and volume overload causing stretching of the ventricular muscle of the heart during heart failure. Both of these markers are elevated in the blood during heart failure and are sensitive and specific indicators of congestive heart failure.

2 Wu AHB, Introduction to Coronary Artery Disease (CAD) and Biochemical Markers, 1998.

3 McCullough, PA, Nowak, RM, McCord J, et al. B-type natriuretic peptide and clinical judgment in emergency diagnosis of heart failure. Clin Inv Rep. 2002;106:416-422.

4 http://www.stjohnsmercy.org/healthinfo/newsletters/heart/Aug02.asp

Our Infectious Diseases Testing Products

In November 2004, we began development of a rapid test for Staphylococcus aureus (“Staph A”) in collaboration with 3M. In reviewing all opportunities to best build the infectious diseases business, 3M determined that market conditions were not optimal for the Rapid Staph A test and that resources would be better utilized by focusing efforts on markets of greater opportunity; therefore in November 2007 it was announced that development work for Rapid Staph A had been put on hold and we were substituting other opportunities with greater market potential. Should market conditions change, the Rapid Staph A initiative can be revisited at that time. Both companies remain committed to development of tests in the infectious diseases area with priority to large and growing markets in which 3M can maximize its marketing strengths.

In October 2005, we started development of a high-sensitivity, rapid test for the detection of Influenza A following initial results that suggested a RAMP® Influenza A Test could be capable of producing highly sensitive and reliable information that was not yet available in commercially available rapid immunoassays. In November 2005, we began development of a test for the detection of Influenza B. In March 2006, following additional market research and independent confirmation of the performance of our Influenza A and Influenza B tests, we combined the development of the two assays into a unique RAMP® test to simultaneously detect both Influenza A or Influenza B in a single test cartridge. In December 2006, we announced plans to initiate a multi-centre clinical study of our RAMP® Influenza A/Influenza B Assay during the current influenza season. In June 2007, we announced that we had filed an FDA 510(k) submission seeking clearance to market a rapid influenza A/B test in the United States. In November 2007 we announced that we were collecting additional non-clinical data to support our U.S. FDA submission. In April 2008, we announced FDA 510(k) market clearance for the RAMP® Rapid Influenza A/B Assay and the RAMP® 200 reader, on which the test is run. In October 2009, we began development of the next generation Influenza A/B product, with funding provided by 3M Health Care.

In December 2008, we initiated a clinical trial, in collaboration with 3M, of our RAMP® test to detect Respiratory Syncytial Virus (RSV). The test is a qualitative immunochromatographic assay indicated for use as an in vitro diagnostic product to identify the presence of the RSV antigen. Rapid detection of RSV aids hospital laboratories and physician office laboratories in the rapid diagnosis of RSV, which infects virtually all children by the age of two. In April 2009, we filed for U.S. FDA 510(k) market clearance, which was granted in July 2009. The product was launched in the U.S. in October, 2009.

In September 2010, we announced that 3M had provided notice that it would not proceed with completing development of the next generation flu product.

Overview of Infectious Diseases Testing

Influenza A/ B

Influenza viruses cause seasonal epidemics associated with high morbidity and mortality, especially affecting those with underlying medical conditions and the elderly.5 Influenza is characterized by rapid start of high fever, chills, myalgia, headache, sore throat, and cough. However, even during periods of large outbreak, clinical diagnosis can be difficult due to the presence of other respiratory viruses.6 The rapid and accurate diagnosis of Influenza is important for determining appropriate treatment strategies and decreasing unnecessary use of antibiotics.7 The laboratory diagnosis of Influenza infections is based on either detection of the Influenza virus directly or isolation of the virus in cell culture, or detection of nucleic acid by polymerase chain reaction (“PCR”), each of which can take several hours to days before results become available.

With the recent development of different treatments for Influenza A and B and the need to begin therapy within the first 48 hours of infection8, the demand for rapid and accurate Influenza tests has grown. Being able to rapidly identify patients with Influenza at the clinic or hospital allows sites to reduce infections occurring in hospitals and reduces the amount of unnecessary or incorrect treatment and administration.

5 Nicholson KG, Wood JM, Zambon M (2003) Influenza. Lancet 362:1733– 1745.

6 http://www.cdc.gov/flu/about/qa/disease.htm.

7 http://www.cdc.gov/flu/professionals/treatment/0506antiviralguide.htm.

8 http://www.cdc.gov/flu/keyfacts.htm.

Most of the rapid Influenza tests on the market are qualitative strip tests that produce a change in color if the Influenza virus is present in sufficient quantities. Several independent evaluations demonstrate the limited clinical sensitivity or ability to detect small amounts of the Influenza virus, of the current, commercially available rapid Influenza tests.9 10 11 12 While the specificity, or ability to detect the Influenza correctly, if in sufficient quantity, of these rapid tests is generally high (median 90–95%), their limited sensitivity and false negative results remain a major concern.

Respiratory Syncytial Virus (RSV)

Respiratory syncytial (sin-SISH-uhl) virus, or RSV, is a respiratory virus that infects the lungs and breathing passages. Most otherwise healthy people recover from RSV infection in 1- 2 weeks. However, infection can be severe in some people, such as certain infants, young children, and older adults. In fact, RSV is the most common cause of bronchiolitis (inflammation of the small airways in the lung) and pneumonia in children under one year of age in the United States. In addition, RSV is more often being recognized as an important cause of respiratory illness in older adults.13

Marketing Plan

Our RAMP® cardiovascular tests are intended for use primarily in hospital emergency rooms, laboratories and walk-in clinics around the world. We have obtained clearance to market these tests in the U.S., Canada, the European Union, and China in addition to other, less regulated jurisdictions. Our Japanese sales and marketing partner, Shionogi, has obtained clearance to market our BNP test in Japan, and commenced sales in July 2006.

In the United States, our sales and marketing functions for cardiac products transitioned to Roche Diagnostics in early 2009. We also have agreements with regional distributors that sell RAMP® products in the following regions: Asia Pacific, Latin America, Europe, the Middle East and Africa. On April 2007, we entered into an international supply and distribution agreement with O&D Biotech Co. Ltd. in Beijing, China to be our exclusive distributor and service agent for our RAMP Reader and Myoglobin, CK-MB, Troponin I and NT-proBNP products in the People’s Republic of China with the exception of Hong Kong Special Administrative Region and Macau Special Administrative Region. On December 25, 2009 we entered into a Private Label Agreement with Wondfo Biotech Co. Ltd. in Guangzhou, Guangdong Province, People’s Republic of China, excluding Hong Kong and Macau, to be our exclusive distributor for the marketing and sale of the cardiac reader, cardiac assays and cardiac controls under the Private Label OEM Products, bearing the Wondfo name, brand, logo or trademark or products bearing a third party name brand, logo, or trademark.

In December 2006 we entered into a strategic alliance with the Medical Division of the 3M Company, whereby 3M has exclusive rights to sell and market RAMP® tests for the detection of hospital- and community-acquired infectious diseases with the exception of sexually transmitted diseases.

In June 2008, we granted Roche Diagnostics the rights to market our line of cardiovascular POC tests. The RAMP® cardiovascular product line includes the Roche Cardiac 200 Reader and assays for the detection of Troponin I, CK-MB, Myoglobin and NT-proBNP. As is the case with 3M, we are responsible for development and manufacture of the RAMP® based products, while Roche is responsible for all sales, marketing and distribution of the cardiac marker tests. However, we have not signed any other marketing partners for our clinical products at the present time, other than as described above, and there is no guarantee that any additional distributors or partners can be secured on acceptable terms, see “Risk Factors”. The distributors we have signed for our cardiac tests would not necessarily be capable of selling into other segments of the clinical markets. In December of 2008, with Roche sales and marketing in place, we discontinued the use of U.S. regional sales managers employed by Response. The cardiac products were launched under the Roche brand in the U.S. in April, 2009.

9 Fader RC. Comparison of the BinaxNOW Flu A Enzyme Immunochromatographic Assay and R-mix Shell Vial Culture for the 2003-2004 Influenza Season. Journal of Clinical Microbiology, December 2005;43(12), 6133-6135.

10 Landry ML, Cohen S, Ferguson D. Comparison of BinaxNOW and Directigen for rapid detection of influenza A and B. Journal of Clinical Virology. 2004, 31, 113-115.

11 Weinberg A, Walker ML. Evaluation of Three Immunoassay Kites for Rapid Detection of Influenza Virus A and B. Clinical and Diagnostic Laboratory Immunology. March 2005, 367-370.

12 Storch GA. Rapid diagnostic tests for influenza. Current Opinion in Pediatrics 2003, 15:77-84.

13 Centers for Disease Control & Prevention – http://www.cdc.gov/RSV/

Generally, RAMP® clinical products will be targeted in the two major locations at which clinical or human health POC testing is currently being used or is likely to occur, namely:

Hospital POC market: Examples of tests in this market include tests for diagnosing heart attacks, CHF, blood clots, stroke, infectious disease, and therapeutic drug monitoring for use in emergency rooms, operating suites, intensive care units, intermediate care units, recovery units, general wards, outpatient clinics, nursing homes and emergency transport services; and,

Physicians office and satellite facility market: Examples of tests in this market include tests for diagnosing heart attacks, CHF, infectious diseases and wellness for use in physicians' offices, walk-in clinics, and outpatient surgery centers. In the U.S., this market is limited until products are CLIA-waived, meaning that the test can be performed by any primary care healthcare professional.

Today, our tests are largely conducted in hospitals except for in Japan where the primary target users are physicians’ offices.

Competition

The medical POC test market is comprised of five basic segments: clinical chemistry, hematology, immunoassay, blood glucose and urinalysis, plus miscellaneous other tests. Dozens of companies sell qualitative POC tests in these segments. Few companies however, participate in the quantitative POC immunoassay market. The following table summarizes our key known competitors in the POC testing market.

Competitors in Medical POC Testing Markets

	Test Market Segment
Company	Cardiac Markers	CHF Marker	Drugs of Abuse	Flu and Infectious Disease	Pregnancy / Ovulation	Blood Gases/ Electrolytes	Coagulation
Abbott Point of Care Inc.	Ö (1)	Ö				Ö	Ö
Becton Dickinson Corporation (4)				Ö
Dade Behring	Ö	Ö
Alere Inc.	Ö	Ö	Ö	Ö	Ö	Ö	Ö
Mitsubishi Chemical Medience Corporation (3)	Ö	Ö
Roche Diagnostics (2)	Ö	Ö	Ö			Ö	Ö
Quidel Corporation (4)				Ö	Ö

(1)	Only Troponin I, CK-MB and BNP cardiac tests at this time.

(2)	The Cardiac Reader measures Troponin T rather than TnI and does not measure CK-MB. This platform uses semi-quantitative technology. This limits the upper end of their NT-proBNP assay to only 20% of the entire clinical range.

(3)	Mitsubishi Pathfast weighs 33kg, which for some would not be considered a POC system but rather a small laboratory analyzer.

(4)	These companies sell rapid Influenza tests that are visually read, require precise timing and do not require an instrument.

Certain of the competitors listed in the table above have stated their intention to broaden their category offerings. In addition to the key competitors listed above, we believe that each of the major diagnostics companies has an active interest in POC testing and, as well as being potential competitors are also potential business partners.

Alere Inc. has sold a three-in-one quantitative immunoassay and reader system for cardiac markers (CK-MB, Troponin I and Myoglobin) since 1999 and is currently one of the leading participants in quantitative POC cardiovascular testing on the basis of market share, revenues and technology. They also sell a “shortness of breath” panel cartridge, which includes Myoglobin, CK-MB, Troponin I, BNP and d-dimer. While BNP is available as a stand-alone cartridge, this system can only perform Troponin I tests as part of a panel. In 2007, Biosite was acquired by Inverness Alere Inc. in a transaction valued at $1.68 billion. Based on published list prices for the Biosite products and data from the completed multi-site clinical study entitled “Evaluation of a point-of-care assay

for cardiac markers for patients suspected of acute myocardial infarction14”, we believe that RAMP® has several advantages over the competing Biosite products including product performance and menu flexibility. These results were recently replicated in an unpublished trial.

Since 2003, Abbott Point of Care, (formerly iStat Corporation) has sold a 10-minute Troponin I test for use on the i-STAT Portable Clinical Analyzer, a biosensor based technology. In 2005, Abbott Point of Care launched a CK-MB test and in 2006, launched a POC BNP test. In addition, Abbott Point of Care offers several tests for other markers in whole blood, predominantly electrolytes and blood gases. We believe the requirement for different sample types for the i-STAT markers for heart attack (TnI and CK-MB) and congestive heart failure (BNP) is a significant disadvantage as compared to the RAMP® system.

Quidel Corporation has sold rapid, qualitative tests for the detection of Influenza A and B since 2001 as they QuickVue® Influenza A+B test. Binax, Inc., a division of Alere Inc., has been selling Influenza A and Influenza B tests under the BinaxNOW® brand since 2002 and a combined Influenza A + B test since 2004. Both of these tests have received CLIA waived status, which allows for their use in physician office laboratories. Other tests available include Becton-Dickinson and Thermo Electron Corp., which produce rapid Influenza A+B tests that are not currently CLIA waived.

Other technologies that may compete against RAMP® in the future by delivering highly sensitive, quantitative results, for some POC tests include immunosensors or biosensors and nanotechnology-based approaches. Biosensor methods use specific binding molecules such as antibodies to generate a measurable signal as a direct result of binding to their target molecule (or analyte). These technologies are extremely complex and have been under development for many years with limited commercial success to date. Immunobiosensors, to date, have limited sensitivity and are not competitive with RAMP®. Although methods of testing using biosensors and nanotechnology can be fast, they generally suffer from a significant lack of accuracy, repeatability and reliability, and can be expensive to produce. Biosensors are now in limited use for selected diagnostic applications, most notably for blood glucose monitoring using non-immunoassay methods. Nanotechnology is a relatively new and growing field that deals with the use of inert micro-etched wafers, or chips, to provide templates for chemical, biochemical, and biological processes.

Much of the research effort for recent diagnostic testing has been directed toward the development of DNA hybridization probe tests. These tests identify specific gene sequences that can be associated with certain genetically based disorders, infectious diseases and the prediction of predisposition to certain medical conditions such as cancer. Several companies, such as Becton-Dickinson and Gen-Probe Inc. are now marketing specific probe tests for infectious diseases such as tuberculosis, hepatitis, Legionnaires disease and vaginitis. DNA probe technology is useful for gene markers that have been shown to be associated with specific disease states or clinical conditions. Although more useful gene sequences are being discovered all the time, we believe they will not displace the need for high-sensitivity immunoassays; there is, for instance, no genetic change when a person has a heart attack. In addition, the RAMP® format may be applicable to hybridization probe methods if a need is found for these tests to be quantitative and at the POC.

An emerging and potentially eclipsing application of genetic testing is in the blood virus screening market. Currently, most tests for infectious diseases, such as AIDS, (HIV-1 and HIV-2); detect antibodies to the virus in the patient, which indicates exposure. While direct virus tests are not sensitive enough, genetic tests with amplification, such as polymerase chain reaction, may provide a sensitive and effective means to detect virus infection before the antibody levels rise. At this time, there are no RAMP® assays for HIV.

Regulatory Approval

The FDA, Health Canada and comparable agencies in foreign countries impose substantial requirements upon the development, manufacturing and marketing of drugs and medical devices through the regulation of laboratory and clinical testing procedures, manufacturing, marketing and distribution by requiring labeling, registration, notification, clearance or approval, record keeping and reporting, see “Risk Factors”.

Prior to sale in the United States, RAMP® clinical products will typically require pre-marketing clearance through a filing with the FDA called a 510(k) submission. A 510(k) submission claims substantial equivalence to an accepted reference method or a similar, previously cleared product known as a “predicate device” and minimally takes about

13 Wu AH, Smith A, Christenson RH, Murakami MM, Apple FS, Clin Chim Acta. 2004 Aug 16:346(2):211-9

100 days for approval once a submission is made. Some RAMP® tests may have applications, intended uses or detect analytes for which there are no equivalent products on the market. In such cases, the test will require pre-market approval (“PMA”), a process that requires clinical trials to demonstrate clinical utility, as well as safety and efficacy of the product. Including clinical trials, the PMA process can take approximately two years.

Marketing clearance for the RAMP® Myoglobin Assay and RAMP® Reader was received in 2002. Marketing clearances for the RAMP® CK-MB Assay and the RAMP® Troponin I Assay were received in May 2004. The marketing clearance for the RAMP® Influenza A/B Assay and the RAMP® 200 reader was received in April 2008. The marketing clearance for the RAMP® NT-proBNP Assay on the RAMP® Reader was received in July 2008. The marketing clearance for the RAMP® RSV Assay was received in July 2009.

For our products to be sold in the physicians’ office lab market in the U.S., we will need to obtain waiver status under the Clinical Laboratory Improvement Amendments of 1988 (“CLIA”). A CLIA-waived test is a test that employs methodologies that are so simple and accurate as to render the likelihood of erroneous results negligible and/or pose no reasonable risk of harm to the patient if the test is performed incorrectly. CLIA-waived tests are also intended to be run by less experienced and untrained personnel.

In Canada, in vitro diagnostics are regulated by the Therapeutic Products Directorate of Health Canada (“TPD”) and are licensed for sale through submission to the TPD. The timeline for approval is similar to that of the FDA’s 510(k) process. As of January 2003, all new and existing class II, III and IV Medical Device Licenses (“MDL”) in Canada also require a valid ISO 13485 or ISO 13488 Quality System Certificate from a registrar recognized by the Canadian Medical Devices Conformity Assessment System (“CMDCAS”). We achieved registration to the ISO 13485:2003 standard in April 2004. An MDL was issued for the Myoglobin Assay and Reader in 2002. MDLs were received for the RAMP® CK-MB Assay and RAMP® Troponin I Assay in August 2004; for the RAMP® NT-proBNP Assay in June 2007, and for RAMP® liquid cardiac marker controls used by laboratories to verify kit performance and user technique. These controls are manufactured for Response by a U.S. company who holds the 510(k) clearance with the FDA. An MDL was received for the RAMP® Influenza A/B Assay and RAMP® 200 reader in May 2009. An MDL was received for the RAMP® RSV Assay in May 2010.

As of 7 December 2003, all medical devices sold in the countries of the European Union (“EU”) are required to be compliant with the EU In-Vitro Diagnostic Directive (“IVDD”). All new in-vitro diagnostic devices must bear a mark, called the CE Mark, to be registered and legally marketed in the EU after that date. The regulatory requirements for marketing are based on the classification of the individual products and EU member countries are not allowed to impose any additional requirements on medical device manufacturers other than the language used in product labeling. In April 2003, we fulfilled the requirements of the IVDD Essential Requirements for the three RAMP® cardiac tests and Reader; in December 2006, we registered the NT-proBNP test as well as the RAMP® liquid cardiac marker controls used by laboratories to verify kit performance and user technique; in May 2009, we registered the RAMP® 200 reader and in December 2009, we registered the Influenza A/B Test. Through the EC Declaration of Conformity, we are entitled to apply the CE Mark to these products. As with the FDA, future RAMP® tests may have different classifications which would require ISO 13485 registration as well as a technical file review by a registration organization, known as a Notified Body, prior to authorization to apply the CE Mark.

In other parts of the world, the regulatory process varies greatly and is subject to rapid change. Many developing countries only require an import permit from their own government agency or proof of approval from the regulatory agency in the manufacturer’s country of origin. We require our marketing and distribution partners to ensure that all regulatory requirements are met in order to sell RAMP® tests in their respective territories. In May 2004 and November 2004, our distributor in China received regulatory clearance to market the RAMP® Reader and three RAMP® cardiac marker tests. In November 2007 this distributor received clearance to market the RAMP® NT-proBNP Assay. In February 2005, our distributor in Russia received regulatory clearance to market our RAMP® Reader and RAMP® cardiac marker tests.

Clinical consultants are used to support in-house resources where necessary to develop protocols and prepare regulatory submissions for government agencies such as the FDA and the TPD. We completed multi-center clinical trials for the RAMP® Myoglobin Assay and the RAMP® Reader in 2001, for the RAMP® CK-MB Assay and the RAMP® Troponin I Assay in November 2003, for the RAMP® NT-proBNP Assay in November 2006 and for the Flu A/B Assay and the RAMP® 200 reader in May 2007, and for the RAMP® RSV Assay in November 2008.

On-Site Environmental Testing Market

Environmental tests are generally considered to be products and services used to detect and quantify substances and microbes in the environment that have potentially harmful effects to humans. We participate in two distinct areas of the environmental market. The first is biodefense, where RAMP® products are used for the detection and identification of threatening biological agents, and the second is the vector infectious diseases testing market, where a RAMP® product is used to test samples from mosquito pools for West Nile Virus to monitor the threat to humans.

Biodefense Market

We have developed and are selling RAMP® tests for the rapid detection and identification of anthrax, ricin, botulinum toxin and orthopox viruses (including smallpox). Our target market for our RAMP® Biodefense tests is primarily public safety institutions (or "first responders") such as fire and police departments, military installations, emergency response teams and hazardous materials (HAZMAT) units. Government agencies and corporations that handle mail are also candidates for an on-site test for anthrax. The rapid detection and identification of biological agents is an important capability affecting the management of a bioterrorism event, forming the basis of emergency response, medical treatment and consequence management. In addition, the rapid identification of biological agents facilitates the quick dismissal of hoaxes and panic-based reports, thereby reducing the logistical burden on first responders who will be required to maintain a higher level of preparedness than in the past. In the aftermath of the terrorist attacks on September 11, 2001, there was an increased desire to be prepared for potential terrorist attacks, particularly on the part of the U.S. government, as evidenced by numerous initiatives, including the creation of the U.S. Department of Homeland Security (“DHS”).. The first priority of the DHS is to protect the United States against further terrorist attacks. Component agencies analyze threats and intelligence, guard borders and airports, protect critical infrastructure, and coordinate the response of the U.S. for future emergencies.

In recent years, we have found that significant funds and government focus appear to have been diverted away from anti-terrorism activities toward other human safety issues.

Marketing Plan

We market and sell our biodefense products through a network of regional distributors in the United States, and country-specific national distributors in certain other countries. These efforts are supplemented by direct sales in some geographical territories. Since October 2002, RAMP® biodefense systems have been sold in Canada, the United States, Saipan, Guam, Japan, Italy, Australia, Ireland, Israel, Korea, China, Singapore and the United Arab Emirates. Customers include UNMOVIC, the United States Air Force, the United States Army, Canadian Department of Defense, Health Canada, and the Royal Canadian Mounted Police. RAMP® Systems are being used in major U.S. markets including Chicago, Orlando, Philadelphia, Los Angeles, West Palm Beach, Atlanta, and Houston.

Competition

The following table summarizes our known competitors in the rapid on-site environmental biodefense testing market (note that this table may not include all biological agents for which these companies may have tests):

	Biological Agent
Company	Anthrax	Ricin	Botulinum Toxin	Orthopox	Brucella	Plague	Tularemia	SEB
Alexeter Technologies LLC (1)	Ö	Ö	Ö	Ö	Ö	Ö	Ö	Ö
New Horizons Diagnostics	Ö	Ö	Ö			Ö	Ö	Ö
ADVNT Inc.	Ö	Ö	Ö			Ö		Ö
Idaho Technology Inc. (2)	Ö	Ö	Ö	Ö	Ö	Ö	Ö
Tetracore, Inc.	Ö	Ö	Ö	Ö	Ö	Ö	Ö	Ö
Smiths Detection BioSeeq Plus (3)	Ö			Ö		Ö	Ö
QTL/MSA	Ö	Ö						Ö

(1) Product includes a portable reader based on reflectance technology.

(2) Product includes a portable reader based on PCR technology.

(3) Product includes a portable reader based on PCR technology.

A number of independent studies have been conducted on biodefense tests. The RAMP® Anthrax Test has been evaluated at four sites in the United States and Canada: DRDC Suffield,15 a division of the Canadian Department of National Defense; the Maryland State Department of Health;16 Intertox Inc.,17 a Seattle-based public and occupational health firm; and, Edgewood Chemical Biological Center, part of the U.S. Army's Aberdeen proving ground, and more recently the AOAC testing.18 Data from these four evaluations show that the RAMP® Anthrax Test meets or exceeds its product claims of reliably detecting less than 4,000 live spores, with 99 percent confidence in specificity. The CDC defines a lethal dose of anthrax as 10,000 spores. In November 2004, the RAMP® System was the only commercially available rapid on-site anthrax detection system of those tested that met the new performance standards introduced by AOAC for rapid immunoassay-based anthrax detection systems and to receive the AOAC Official Methods Certificate 070403 stating that the RAMP® Anthrax Test performed as we claimed and that we are authorized to display the AOAC Performance Tested certification mark. All other commercially available rapid on-site anthrax detection systems tested failed to meet the AOAC’s performance standard. A further intensive, independent field testing program conducted by AOAC and sponsored by the DHS, culminated in the announcement in September 2006 that our RAMP® Anthrax Test is the first and only biodetection product approved for field use by first responders in the United States for the detection of anthrax. We currently have approximately 346 RAMP® biodefense systems in field use by our customers (see “On-Site Environmental Testing Market, Industry Trends” and “Risk Factors”).

Other competitors including GenPrime and Scott Health and Safety, sell products that allow the user to screen for biological materials, but do not identify a specific biothreat agent such as anthrax. We also believe that a number of diagnostics companies have an active interest in rapid on-site biodefense testing and have the potential to become either competitors or business affiliates.

Regulatory Approval

There are currently no regulatory approvals or clearances required to market on-site environmental biodefense tests in North America. There appears to be some support from the market for regulatory oversight of such testing, and regulatory agencies such as the Department of Homeland Security may in the future impose substantial requirements upon the development, manufacturing and marketing of devices through the regulation of laboratory and clinical testing procedures, manufacturing, marketing and distribution by requiring labeling, registration, pre-market notification, clearance or approval, record keeping and reporting. While additional regulatory requirements will make it more difficult for poorly performing products to participate in the market, they could also significantly increase the time and cost for companies to bring new tests to market, creating a barrier to entry.

The lack of regulatory oversight in the biodefense industry means there is virtually no independent data available for a customer to verify a manufacturer’s product claims. Since launching our Anthrax Test, we have received third party validation of the product’s performance; see “On-Site Environmental Testing Market, Competition”. However, currently, companies do not require any form of regulatory clearance to market handheld assays for the detection of biodefense threats such as anthrax, see “Risk Factors”.

15 Defence Research and Development Canada, July, 2002.

16 Maryland State Department of Health, March 2002.

17 Intertox Inc., July 2002.

18 The U.S. Army Aberdeen Proving Ground, November 2004.

The performance and field-testing programs conducted by the AOAC in 2004 through 2006 were developed in collaboration with and funded by the DHS. One of the goals of the testing programs was to develop industry performance standards. The final form and substance of these possible standards and the impact on the industry is currently unclear.

Environmental Infectious Diseases Testing Market

In June 2003, we began development and commercialization of our first product for the environmental infectious diseases testing market, a rapid, on-site test to detect the presence of West Nile Virus in mosquitoes and Corvid birds, common carriers of the virus. Following verification testing of the product at the Canadian National Microbiology Laboratory and the CDC in late summer 2003, and field-testing of the product in Pennsylvania in the fall of 2003, we commenced commercial sales of the RAMP® West Nile Virus Test in November 2003.

West Nile Virus causes flu-like symptoms in humans and in certain circumstances can attack the central nervous systems leading to paralysis and death. By 1999, the presence of West Nile Virus was detected in North America in the New York City area. By the end of 2001, the virus had spread to 27 states with 66 confirmed human cases of illness, including nine deaths. During 2001, West Nile virus was detected for the first time in Canada.

Transmission of the disease to humans occurs when a mosquito bites an infected host, usually a crow or blue jay, and then in turn bites a human being. Very little West Nile Virus is needed to cause viral replication and manifest as symptoms in an infected person. In North America, West Nile Virus has a specific season, which begins around May and ends around September, when the temperature drops, and the mosquito population drops.

Market and Marketing Plan

Currently, public health management of West Nile Virus (“WNV”) is primarily handled through surveillance and testing for the virus in mosquito populations on a regional basis throughout North America. Testing protocols differ widely from region to region. When we entered the market in 2003, all WNV testing was performed using either a product called VecTest, an inexpensive, portable immunoassay that had been on the market since 2000, or laboratory-based PCR tests, which are considered the “gold standard” due to their accuracy. However PCR is relatively time-consuming (approximately 4 hours) and expensive, conversely, VecTest has other performance disadvantages such as lesser sensitivity in detecting the virus in mosquitoes. The performance and cost gap between VecTest and PCR afforded us the opportunity to introduce our RAMP® System as an effective screening alternative.

The market for our West Nile Virus Test is comprised of the following end users: state public health/veterinary labs; mosquito control districts; and, universities. U.S. state government testing figures for 2002 - 2003 indicated that the average state tested approximately 3,500 mosquito pools and 1,000 birds. It is estimated that approximately 279,000 tests are performed throughout North America each year to screen for West Nile Virus. We launched our WNV Test expecting that initial sales would be derived from a mixture of both direct sales and sales generated via distribution partners. On December 1, 2003, we entered into a sole distribution agreement with ADAPCO Inc., the largest distributor of mosquito control products in the United States.

Regulatory Approval

There is no regulatory clearance required for our RAMP® West Nile Virus Test because it is only used for testing mosquitoes. If we develop a Flu A or H5N1 screening test for birds, it will require regulatory clearance in some countries, such as the United States, where such tests are regulated by the Center for Veterinary Biologics division of the Department of Agriculture.

Operations and Manufacturing

We sell RAMP® Systems for clinical and environmental use. A RAMP® System consists of a Reader and Kits of applicable RAMP® tests. Manufacturing of the Readers is currently outsourced to an electronics manufacturer that we have qualified, located in British Columbia. We manufacture all Kits in-house in order to maximize return on investment, protect proprietary technology, and ensure compliance with government and internal quality standards. Kit manufacturing includes reagent and component production, cartridge assembly and final packaging.

In advance of expected growth of our products, we invested significantly, since 2007, to increase automation, quality and capacity of our manufacturing operations. We coordinate all support operations including customer support, technical and instrument service, production planning, shipping and receiving from our corporate headquarters in Vancouver, British Columbia. In March 2008, we moved into a leased, multi-use, 46,000 square

foot facility in Vancouver, British Columbia. The facility houses all of our operations and will allow us to achieve our projected manufacturing capacity targets during the term of the agreement. Our manufacturing scale up is ongoing, and our test production capacity has increased from approximately 500,000 tests per shift per year to approximately 2 million tests per shift per year. The initial term of the agreement is 15 years with two 5-year renewal options.

Where possible, we require distribution and marketing partners to provide a twelve-month rolling forecast in order to ensure timely and adequate product supply and to allow efficient production, materials, shipping and inventory planning, see “Risk Factors". We plan to meet cost and quality targets through strict scale-up validation procedures and by negotiating supplier agreements for key materials. Final packaging, inventory storage and product distribution to marketing partners will be managed in accordance with individual partner agreements.

The primary raw materials for a test cartridge consist of: antibody reagents, nitrocellulose membrane and injection molded plastic parts to act as housing for the cartridge assembly. There are several different components required to perform the test that are included with the kit. These are a sample transfer device, a solution for diluting the test sample and reagent-containing tips (for placing the sample being tested into the cartridge). The antibody reagents are generally the most costly and critical component of a RAMP® test and can account for in excess of 30% of the standard material cost.

Suppliers

We own the design, molds and tooling for the RAMP® Readers; however, we have them manufactured and supplied to us under contract. We have qualified a contract manufacturer located in British Columbia who manufactures and assembles RAMP® Readers to our design and specifications. The contract manufacturer has multiple manufacturing sites worldwide and easily has the manufacturing capacity to meet our anticipated volume requirements in the future.

Most of the raw materials for the RAMP® System are easily obtained or manufactured by a wide variety of suppliers and we maintain contact with alternative sources of supply, which we can turn to in the event parts are unavailable from our primary suppliers. As most of these raw materials are commodity items, they are generally available at prices and in quantities comparable to what we obtain from our primary suppliers. The main exceptions to this are the specific antibody reagents used for each test. Antibodies are often only available from a limited number of commercial sources and can vary widely in quantity, quality and expense, depending on the test. From time to time, antibodies can also be sourced from research, academic and government organizations. The performance characteristics of our tests will vary depending on the different antibodies used. Further, the antibodies are typically combined with a variety of reagents to enhance performance, shelf life, or stability of each test, not unlike the ingredients in a food recipe. A significant amount of our proprietary technology and know-how relates to the specific antibodies used in our tests and the additional mix of reagents used to enhance them.

In certain situations where we locate a particular antibody or other key reagent of importance, if we believe it is prudent to do so, we may consider entering into a supply contract with the reagent supplier to help ensure a more consistent and reliable supply of reagent material. Alternatively, we can inventory large quantities of the material if the cost is not prohibitive.

To mitigate the possibility that an antibody from one of our primary suppliers becomes unavailable, we periodically evaluate the availability of alternate suppliers. However, as the new antibody may have properties different from the previous one, considerable cost and effort would likely be required to optimize a new reagent mix such that the new test would meet the required performance levels, and further, there is no assurance we would successfully be able to develop a new test which would be commercially acceptable. In addition, an uncorrected impurity or variation in a raw material, either unknown to us or incompatible with our manufacturing processes could result in products that, if developed, may require us to enter into additional supplier arrangements for additional reagents to correct the variation or impurity. Consequently, a major interruption in the supply or the unavailability of a sole-sourced

antibody would likely have a material adverse effect on our ability to manufacture these products until a new source of supply is located and sufficient development is conducted to commercialize the new test. If we are not able to enter into new supplier arrangements on commercially reasonable terms, or at all, there could be a material adverse effect on our ability to manufacture products, see “Risk Factors”.

Customer and Technical Services

For sales growth, we believe it is important to ensure that customer service and technical support for our products be provided at a level of excellence defined by the end customers. Customer service (order entry, product information, pricing and availability), conducted by trained and service-oriented representatives, is one of our goals in delivering RAMP® products to customers.

Technical support includes providing the end-user with general information on the safe and effective use and application of the product. As part of our ongoing efforts to support our customers, we are developing a library of informational documents to assist clinical customers in implementation and maintenance of our test systems in accordance with local, state/provincial and national accreditation agencies. A formal procedure for recording, reviewing and responding to customers' technical questions, issues, or any problems that result in a customer complaint has been implemented under our Quality System. We maintain the required traceability of our products to the end user in the event we are required to institute a recall of any sort. In the event a potential liability arises as a result of a performance issue or failure of our RAMP® tests in the field, we carry product liability insurance coverage that we believe is appropriate for our current business, see “Risk Factors”.

Intellectual Property

We rely on a combination of patents, trademarks, confidential procedures, contractual provisions and similar measures to protect our proprietary information. To develop and maintain our competitive position, we also rely upon continuing invention, trade secrets and technical know-how.

It has been our practice to periodically file for patent and trademark protection in the U.S. and other countries with significant markets, such as Canada, Western European countries, Japan and China. No assurance can be given that patents or trademarks will be issued to us pursuant to our applications or that our patent portfolio will provide us with a meaningful level of commercial protection. We file patent applications on our own behalf as assignee and, when appropriate, have filed and expect to continue to file, applications jointly with our collaborators. Our ability to obtain and enforce patents is uncertain and we cannot guarantee that any patents will issue from any pending or future patent applications owned by or licensed to us, see “Risk Factors”.

We hold an exclusive license to technology from the University of British Columbia, which has resulted in one issued U.S. patent, and three issued foreign patents. In addition Response holds an additional six patents in the U.S. and have had our key patent granted in the EU and Australia. This key patent is also pending in Canada, China, Japan and Hong Kong. These patents have expiration dates ranging from 2016 to 2024. We have pending applications for seven additional U.S. patents and numerous foreign counterparts as well as one pending patent filed with joint inventorship and assignment with one of our partners. We also have two issued Design Patents related to the Ramp® 200 reader. We have two registered trademarks. We have also licensed technology from third parties on a non-exclusive basis to allow us to grow our business in specific areas. For example, we entered into a non-exclusive license agreement with Roche for certain intellectual property controlled by Roche, which enables us to develop, manufacture and sell a rapid test for NT-proBNP to assist in the diagnosis and management of congestive heart failure. We may require additional licenses for new products. Such licenses could include substantial up-front payments, as well as ongoing royalties on product sales.

We seek to protect our trade secrets and technology by entering into confidentiality agreements with employees and third parties (such as potential licensees, customers, strategic partners and consultants). In addition, we have implemented certain security measures in our laboratories and offices. Despite such efforts, no assurance can be given that the confidentiality of our proprietary information can be maintained. Also, to the extent that consultants or contracting parties apply technical or scientific information independently developed by them to our projects, disputes may arise as to the proprietary rights to such data.

C. Organizational Structure

Response Biomedical Corp. was incorporated on August 20, 1980 under the predecessor to the Business Corporations Act (British Columbia, Canada) and is the parent of its wholly-owned subsidiary, Response Biomedical Inc., a U.S. company with nominal assets and liabilities and no operations of its own.

D. Property, Plants and Equipment

Facilities

In May 2007, we entered into an agreement to lease a multi-use, 46,000 square foot facility in Vancouver, British Columbia. The facility has housed all of our operations since March 31, 2008 and requires us to pay approximately $160,000 per month in rent and operating expenses. Initial capital modifications to the facility were paid by the landlord and managed by us. The agreement has an initial term of 15 years with two five-year renewal options. To secure the lease, we are required to maintain a security deposit with the landlord in the form of an irrevocable letter of credit in the amount of $870,610. For additional information regarding the productive capacity and extent of utilization of our current facility and our plans and projected capacity with respect to the potential new facility, see “Operations and Manufacturing”. As part of the agreement we received a repayable leasehold improvement allowance for an amount of $7.8 million, used for additional improvements to the facility. The allowance is being repaid over the term of the operating lease at approximately $88,500 per month including interest at an annual rate of 11%, compounded monthly.

Some of the research and development work conducted by us is performed in a biohazard level (“BL”) 1 laboratory. Certain of our activities, however, are performed in a BL2 contained laboratory, which has special ventilation requirements. The BL2 facility is certified on an annual basis in accordance with these requirements.

As part of our development and manufacturing process, biomedical waste, primarily in the form of blood samples, is generated. This material is disposed of through specially contracted waste pickup. We do not handle or produce dangerous biological materials and there are no special environmental issues that affect our production capability. All of the materials used to test the Biodefense assays are inactivated and handled under appropriate laboratory conditions.

Equipment and Other Property

As at 31 December 2010, we owned tangible fixed assets with a net book value of $9,599,605, consisting primarily of leasehold improvements totaling $7,937,990, manufacturing equipment and molds of $1,095,929, office furniture and equipment totaling $426,549, computer equipment of $54,445 and laboratory furniture and equipment totaling $84,692.

Item 4A. Unresolved Staff Comments

Not applicable.

Item 5. Operating and Financial Review and Prospects

The following discussion and analysis should be read in conjunction with the audited consolidated financial statements and the related notes therein, which are prepared in accordance with Canadian GAAP. These accounting principles differ in certain respects from U.S. GAAP. The differences as they affect our consolidated financial statements are described in Note 17 to the audited consolidated financial statements as at and for the years ended 31 December 2010 and 2009.

We have not been profitable since inception and expect to continue incurring operational losses as we continue to commercialize our products. These losses are due primarily to the cost of commercialization of our products and the cost of our research and development programs. Since inception, we have financed our operations and capital expenditures primarily through equity and debt offerings and, to a much lesser extent, government grants. See “Risk Factors".

While we continue to generate revenues from product sales, these revenues are not yet sufficient to sustain our operating requirements and growth. We will be required to obtain additional sources of funding from equity or debt financing or to the extent negotiated, partnering, licensing and collaborative research agreements. All or a portion of

the payments that may be received under these arrangements will likely be conditional on our achieving certain development milestones.

During the continued economic downturn, there is greater risk that end-user customers of our product may be slower to make purchase commitments, which may negatively impact sales of our new and existing products.

A.	Operating Results

General

Beginning in the fourth quarter of fiscal 2002, we transitioned from a research and development company to a company with commercial sales of RAMP® products. In the beginning these sales were predominantly in the biodefense marketplace, however in the last three years this has shifted predominantly to our clinical products. To support our continued growth, we have put in place a manufacturing infrastructure and negotiated key partnerships to support the sales and marketing of our various products. Research and development is being focused on developing new partner-funded tests to be commercialized by our strategic partners and to enhance existing products used on the RAMP® technology. As at 31 December 2010, cumulative product sales related to RAMP® systems (including cartridge sales) of approximately $33,349,000 have been realized. We received FDA regulatory clearance for our RAMP® reader and Myoglobin tests in Dec 2001, CK-MB and Troponin I tests in May 2004 and commercially launched our cardiac products in the U.S. in January 2005. We subsequently received FDA regulatory clearance for our Influenza A/B test and our RAMP® 200 reader in April 2008 and similar FDA clearances for our NT-proBNP test in July 2008, as well as our RSV test in July 2009. 3M has a license to commercialize our infectious diseases line of products and Roche Diagnostics has a similar license for our cardiovascular line of products. Roche Diagnostics launched the cardiovascular line of products in the U.S. in the second quarter of 2009. For the rest of world, we presently have a managing director of international sales for Asia and a managing director of international sales for Europe, the Middle East and Africa who manage a number of international distributors, responsible for distribution of RAMP® products outside the United States and Japan. Our Japanese partner, Shionogi, distributes and markets our BNP systems in Japan. Current revenues are derived primarily from the sale of Troponin I tests, Shionospot BNP tests, NT-proBNP tests, Flu A/B tests, West Nile Virus tests, RAMP® Reader and RAMP® 200 readers. The reader available to Roche and 3M for marketing is the Roche Cardiac 200 Reader and 3M Rapid Detection Reader, respectively.

Year Ended 31 December 2010 Compared with Year Ended 31 December 2009

For the year ended 31 December, 2010, the Company reported a loss of $10,081,911 or $0.32 per share, compared to a loss of $9,543,531 or $0.43 per share in 2009. The increase in the loss for the year ended December 31, 2010 is attributed to lower contract service fees and revenue from collaborative research arrangements, lower gross margins from product sales and increased employee severance costs due to an organizational restructuring offset by lower operating expenses in the research and development department and marketing and business development department.

Revenues and Cost of Sales

Total revenue for the year ended 31 December 2010 decreased 28% to $7,113,008 compared to $9,946,269 in 2009.

Revenues from product sales for the year ended 31 December 2010 decreased 17% to $6,756,942 compared to $8,153,049 in 2009.

Clinical products revenue for the year ended 31 December 2010 decreased 12% to $6,001,957 compared to $6,828,651 in 2009. The decrease in revenue is primarily a result of reduced sales to Roche and 3M. While the Company recognized revenues from shipments to its new distributor Wondfo in China, the decrease in 2010 is primarily a result of significantly reduced shipments to Roche in 2010 as they did not require inventories to be re-stocked at the same levels as the initial launch in 2009. In addition, the Company recognized an increase in cardiac revenues from continued growth by O&D in China, offset by reduced infectious diseases revenue from 3M, in the U.S. In the short term, the clinical products revenue may fluctuate depending on the pace at which the international markets develop and the timing of orders from its distributors and marketing partners. In the long-term, the Company expects clinical products revenue to increase as distributors and marketing partners expand their customer base and newly launched products penetrate the marketplace.

Biodefense products revenue for the year ended 31 December 2010 decreased 14% to $444,895 compared to $517,981 in 2009. The decrease is primarily due to reduced funding from governmental agencies to First Responder groups for deployed detection capabilities and a general decrease in concern over biological attacks. In the future, the Company expects the sale of Biodefense products to continue at similar or declining levels.

Vector products (West Nile Virus) revenue for the year ended 31 December 2010 decreased 62% to $310,090 compared to $806,417 in 2009. This decrease is primarily due to loss of a major customer by our key vector product distributor. In the future, the Company expects the sale of West Nile Virus products to fluctuate at varying levels.

Contract service fees and revenue from collaborative research arrangements for the year ended 31 December 2010 decreased 80% to $356,066 compared to $1,793,220 for 2009.The variability is due to the timing and performance of services required to recognize service revenue from the Company’s collaborations. In the future, the Company expects fluctuations in contract service revenue as a result of the size and number of projects in development and timing of the performance of services required to recognize service revenue.

Cost of sales for the year ended 31 December 2010 decreased to $7,097,538 compared to $7,933,704 in 2009. Cost of product sales includes direct manufacturing labour costs, direct materials costs, inventory allowances, royalties, allocated overhead including depreciation and stock-based compensation related to the granting of stock options to employees engaged in manufacturing activities.

Overall a negative gross margin from product sales was realized for the year ended 31 December 2010 at (5%) as compared to a gross margin of 3% in 2009. The gross margin for the year ended 31 December 2010 included an increase in the provision for scrap and short-dated product and an increase in royalty fees offset by continued standard labour cost improvements. In the short-term, the Company expects variation in gross margin depending on product mix and test sales volumes. In the longer term the Company expects gross margins to improve as sales volumes increase.

Expenses

Research and development expenditures for the year ended December 31, 2010 decreased 27% to $4,106,266 compared to $5,635,692 in 2009. The decrease in 2010 is primarily the result of reduced expenditures for development projects totaling $906,000, lower payroll expenses totaling $527,000 and lower legal fees mainly related to the renewal of patents in the amount of $100,000 offset by higher amortization expenses of $19,000. In the future, the Company expects fluctuations in research and development expenditures as a result of the size and number of projects in development and the timing of clinical trial activities.

General and administrative expenditures for the year ended December 31, 2010 increased 12% to $3,696,819 from $3,299,042 in 2009. The increase in 2010 is primarily as a result of one-time employee severance costs due to a corporate restructuring initiative that lead to a reduction in workforce in all departments totaling $804,000 and higher professional fees in the amount of $29,000. The increased costs due to one-time restructuring charges are offset by lower stock based compensation expense totaling $345,000 resulting from fully expensed stock options, lower amortization expenses totaling $43,000, reduced audit fees, public company corporate communication costs and other administrative expenses totaling $66,000. In the future, the Company expects general and administrative expenditures to trend downward.

Sales and marketing expenditures for the year ended December 31, 2010 decreased 15% to $1,413,171 compared to $1,668,220 in 2009. The decrease in 2010 is primarily due to reduced professional fees in the amount of $104,000, lower payroll expenditures in the amount of $89,000, lower legal costs totaling $35,000 and lower administrative expenses totaling $8,000. In the future, the Company expects sales and marketing expenditures to increase marginally as the Company invests in business development activities to expand partnership opportunities into new international territories.

Other Income/Expenses

For the year ended 31 December 2010, interest expense amounted to $806,065 compared to $857,731 in 2009. This interest expense is primarily related to the interest portion of the repayable leasehold improvement allowance on the facility lease agreement.

During the year ended 31 December 2010, the company earned interest income of $14,833 compared to $9,016 in 2009. The interest earned is primarily from the cash equivalents and restricted funds invested in secured investment vehicles. The variation in interest earned is due to fluctuations in the interest rate, the amount of and terms of investments from time to time.

During the year ended 31 December 2010, the Company had a foreign exchange loss of $89,893 compared to a foreign exchange loss of $104,427 in 2009. Foreign exchange gains and losses are largely due to U.S. dollar balances of cash and cash equivalents, accounts receivable and accounts payable affected by the fluctuations in the value of the U.S. dollar as compared to the Canadian dollar. The Company uses the exchange rate posted on the Bank of Canada website for the last business day of each month. The exchange rate as at 31 December 2010 was $0.9946 U.S. per CDN dollar [31 December 2009 - $1.0466, 31 December 2008 - $1.2246].

Selected Quarterly Information 2010 and 2009

The table below sets forth selected data from our unaudited consolidated financial statements prepared in accordance with Canadian GAAP for the eight previous quarters ended 31 December 2010.

	4th Quarter $		3rd Quarter $		2nd Quarter $		1st Quarter $		Total $
2010
Total Revenue		1,755,015		1,553,001		2,255,513		1,549,479		7,113,008
Loss		2,807,694		2,581,786		1,963,601		2,728,830		10,081,911
Loss per Share – Basic and Diluted		0.09		0.07		0.08		0.11		0.32
Total Assets		19,523,931		22,340,511		18,007,570		19,292,983		19,523,931
2009
Total Revenue		2,450,930		2,047,523		2,735,415		2,712,401		9,946,269
Loss		2,735,908		3,177,221		1,898,987		1,731,415		9,543,531
Loss per Share – Basic and Diluted		0.12		0.12		0.09		0.10		0.43
Total Assets		21,464,196		23,451,278		26,829,265		17,950,788		21,464,196

Quarter-to-quarter variability in product revenue is driven primarily by the following factors:

·	The timing of clinical product orders from the Company’s marketing partners and distributors;

·	The variability in demand of clinical and non-clinical product orders from the Company’s marketing partners and distributors;

·	Additional revenues from the launch of cardiac products by Wondfo in China in the first half of 2010;

·	Additional revenues from the launch of cardiac products by Roche Diagnostics in the U.S. in the first quarter of 2009;

·	Seasonality related to RSV and Influenza A+B products;

·	Seasonality related to the demand for RAMP West Nile Virus products as well as significant penetration of this market and

·	The launch of new and existing products in new territories from time to time.

Quarter to quarter variability in contract service fees and revenue from collaborative research arrangements is primarily due to the size and number of projects in development and the timing of the performance of services required to recognize service revenue from the Company’s collaborations.

The quarter to quarter fluctuations in losses reported are primarily the result of the variability of gross margins on product sales resulting from changes in product mix, charges incurred due to the scale up and automation of the Company’s manufacturing operations, changes in staffing levels for personnel in one or all departments, variability in expenses across all departments, the timing of recognition of contract service fees and revenues from collaborative research arrangements, fluctuations in interest income and foreign exchange gains or losses.

Information 2010, 2009, 2008

The following table sets forth consolidated financial data for our last three fiscal years.

	2010			2009			2008
	$			$			$
Product Revenue		6,756,942			8,153,049			4,899,841
Cost of Sales		7,097,538			7,933,704			5,227,156
Gross Profit/Loss		(340,596	)		219,345			(327,315	)
Gross Margin on Product Sales		(5	%)		3	%		(7	%)
Services Revenue		356,066			1,793,220			976,496
Total Revenue		7,113,008			9,946,269			5,876,337
Expenses		9,216,256			10,602,954			13,653,588
Loss for the Year		10,081,911			9,543,531			13,663,656
Loss per share – Basic and Diluted		0.32			0.43			0.97
Total Assets		19,523,931			21,464,196			19,394,907
Total Long-Term Obligations(1)		8,656,744			9,123,132			9,558,668

1)The long-term obligation balance represents the repayable leasehold improvement allowance and non-repayable lease inducements recorded as a result of our 15 year lease agreement for a new premise as described in note 8 to the consolidated financial statements as at 31 December 2010.

Year Ended 31 December 2009 Compared with Year Ended 31 December 2008

For the year ended 31 December 2009, the Company reported a loss of $9,543,531 or $0.04 per share compared to a loss of $13,663,656 or $0.10 per share in 2008. The decrease in the loss of 30% for the year compared to the same period in 2008 is primarily due to a strategic business decision to reduce operating expenses across all departments, higher gross profit on product sales, higher contract service fee and revenues from collaborative research arrangements.

Revenues and Cost of Sales

Total revenue for the year ended 31 December 2009 increased 69% to $9,946,269 compared to $5,876,337 in 2008.

Revenues from product sales for the year ended 31 December 2009 increased 66% to $8,153,049 compared to $4,899,841 in 2008.

Clinical products revenue for the year ended 31 December 2009 increased 85% to $6,828,651 compared to $3,683,706 in 2008. This increase is a result of Roche Diagnostics’ launch of the Company’s cardiac products in the U.S., increased penetration of co-branded RAMP® products by a distributor in the Chinese marketplace, as well as an increase in demand from other existing distributors and marketing partners. In the long-term, the Company expects clinical products revenue to increase as recently launched products penetrate the marketplace. In the short term, the clinical products revenue may fluctuate depending on the timing of orders from its distributors and marketing partners.

Vector products (West Nile Virus) revenue for the year ended 31 December 2009 increased 12% to $806,417 compared to $721,117 in 2008. This increase is primarily due to the variability in timing of shipments to distributors. In the future, the Company expects the sale of West Nile Virus products to fluctuate at varying levels.

Biodefense products revenue for the year ended 31 December 2009 increased 5% to $517,981 compared to $495,018 in 2008. The increase is primarily due to timing of shipments. In the future, the Company expects the sale of Biodefense products to continue at similar levels.

Contract service fees and revenue from collaborative research arrangements for the year ended 31 December 2009 increased 84% to $1,793,220 compared to $976,496 in 2008. The increase is due to a greater number of collaborative research arrangements funded by its development partners compared to the same period in 2008. In the future, the Company expects fluctuations in contract service revenue as a result of the timing of the performance of services required to recognize service revenue.

Cost of sales for the year ended 31 December 2009 increased 52% to $7,933,704 compared to $5,227,156 in 2008. Cost of product sales includes direct manufacturing labour and materials costs, allocated overhead including depreciation, and stock-based compensation related to the granting of stock options to employees engaged in manufacturing activities. The increase is primarily due to the increase in product sales for the year.

Overall gross margin from product sales for the year ended 31 December 2009 was positive 3% compared to negative 7% in 2008. The increase in gross margin is primarily due to an increase in test sales volume resulting in lower per unit overhead charges partially offset by increased facility costs and amortization expense for manufacturing equipment put into service in 2009 as a result of the Company’s scale up efforts. In the short-term, the Company continues to expect variation in gross margin depending on product mix and test sales volumes. In the longer-term the Company expects improved gross margins as sales volumes continue to increase.

Expenses

Research and development expenditures for the year ended 31 December 2009 decreased 17% to $5,635,692 from $6,776,691 in 2008. The decrease is due to reduced expenditures in 2009 as a result of the completion of development of the Ramp 200 reader in 2008 totaling $892,000, reduced professional fees, primarily related to clinical trials, in the amount of $259,000 and lower payroll costs totaling $83,000 as a result of reductions in incentive compensation. The decrease is partially offset by additional amortization costs of $69,000 for an increased asset base and additional stock based compensation expense of $28,000 primarily due to the year-end true up adjustment relating to forfeiture rates.

General and administrative expenditures for the year ended 31 December 2009 decreased 26% to $3,299,042 from $4,451,224 in 2008. The decrease is due to reduced payroll costs of $416,000 as a result of reductions in staff, incentive compensation and recruiting fees, a strategic management fee of $250,000 incurred in 2008, $Nil for 2009, for services provided by a non-management member of the Board of Directors, reduced allocations for rent and facility overhead charges totaling $435,000 and reduced audit and other fee accruals totaling $249,000. The decrease is partially offset by additional stock based compensation expense of $277,000 primarily due to the year-end true up adjustment relating to forfeiture rates and increased legal fees of $45,000 for general corporate matters.

Marketing and business development expenditures for the year ended 31 December 2009 decreased 31% to $1,668,220 from $2,425,673 in 2008. The decrease is due to reduced payroll costs of $495,000 as a result of reductions in staff, bonuses and incentive compensation, reduced travel and conference fees totaling $104,000 as a result of fewer direct sales staff in North America and a greater reliance on partner efforts, lower selling expenses of $74,000 as a result of reduced promotional activities and lower legal fees in the amount of $41,000 related to business development requirements. The decrease is partially offset by an increase in professional fees totaling $83,000 mainly as a result of consultants hired for business development activities.

Other Income/Expenses

For the year ended 31 December 2009, interest expense amounted to $857,731 compared to $785,790 in 2008. The increase is due to the interest portion on the repayment of the repayable leasehold improvement allowance related to the facility lease agreement.

During the year ended 31 December 2009, the Company earned interest income of $9,016 compared to $119,905 in 2008. The decrease is as a result of lower average funds on deposit and declining interest rates.

During the year ended 31 December 2009, the Company had a foreign exchange loss of $104,427 as compared to a foreign exchange gain of $6,113 in 2008. Foreign exchange gains and losses are largely due to US dollar balances of cash and cash equivalents, accounts receivable and accounts payable affected by the fluctuations in the value of the US dollar as compared to the Canadian dollar. The Company uses the exchange rate posted on the Bank of Canada website for the last business day of each month. The exchange rate as at 31 December 2009 was $0.9515 US per CDN dollar [31 December 2008 - $0.8170, 31 December 2007 - $1.012]

B.	Liquidity and Capital Resources

General

We financed our operations primarily through equity and debt financings. As of 31 December 2010, we had raised approximately $97 million from the sale and issuance of equity securities and convertible debt, net of issue costs.

As at 31 December 2010, the Company had a working capital balance of $6,202,048 a decrease $796,481 compared to $6,998,529 as at 31 December 2009. For the year ended 31 December 2010, the Company relied primarily on proceeds from the issuance of common shares through a private placement, cash on hand and cash generated from gross margin on product sales and repayments related to contract service fees and revenues from collaborative research arrangements to fund its expenditures.

For the year ended 31 December 2010, the Company reported losses of $10,081,911 compared to a loss of $9,543,531 in 2009. The Company has sustained continuing losses since its formation and at 31 December 2010, had a deficit of $100,782,221 and for the year ended 31 December 2010 incurred negative cash flows from operations of $8,156,578 compared to $8,078,120 in 2009. These conditions raise substantial doubt about the Company’s ability to continue as a going concern.

Based on our current cash resources, expected cash burn, and anticipated revenues, we expect that we can maintain operations until late 2011. We may need to raise additional capital to fund our operations. We have relied primarily on debt and equity financings to fund our operations and commercialize our products. Additional capital may not be available, at such times or in amounts as needed by us. Even if capital is available, it might be on adverse terms. Any additional equity financing will be dilutive to our shareholders. If access to sufficient capital is not available as and when needed, our business will be materially impaired and we may be required to cease operations, curtail one or more product development programs, attempt to obtain funds through collaborative partners or others that may require us to relinquish rights to certain technologies or product candidates, or we may be required to significantly reduce expenses, sell assets, seek a merger or joint venture partner, file for protection from creditors or liquidate all our assets.

Material Commitments for Capital Expenditures

At 31 December 2010, we had outstanding purchase order commitments totaling $Nil for capital purchases related to our operating activities.

Year Ended 31 December 2010 Compared with Year Ended 31 December 2009.

During the year ended 31 December 2010, we received net proceeds of $7,474,920 from a private placement of common shares as compared to $11,392,232 received through the sale of equity securities through a public offering during the year ended 31 December 2009.

During the year ended 31 December 2010, we received net proceeds of $374,093 from the exercise of warrants and stock options into shares, as compared to $Nil for the year ended 31 December 2009.

Our working capital balance was $6,202,048 as at 31 December 2010, a decrease of $796,481 compared to $6,998,529 as at 31 December 2009. For the years ended 31 December 2009 and 2010, we relied primarily on proceeds from the sale of equity securities through a private placement, cash on hand, cash generated from gross margin on product sale and prepayments relating to contract service fees and revenues from collaborative research arrangements to fund its expenditures.

For the year ended 31 December 2010, we incurred a loss of $10,081,911 versus a loss of $9,543,531 in 2009. Although our loss has decreased, we anticipate continued losses. We intend to continue to fund our operations from a combination of the issuance of equity securities, revenue from product sales, contract service fees, revenue from collaborative research arrangements, and possibly additional debt financing.

As at 31 December 2010, we had 6,020,322 warrants outstanding at a weighted average exercise price of $2.36 per share, which if fully exercised, would result in the receipt of approximately $14.2 million. We also had 853,932 stock options outstanding of which 416,105 were exercisable at prices between $1.20 and $10.63 per share and which, if fully exercised, would result in the receipt of approximately $2.8 million.

Year Ended 31 December 2009 Compared with Year Ended 31 December 2008

During the year ended 31 December 2009, we received net proceeds of $11,392,232 from the sale of equity securities through private placement, as compared to $4,679,248 for the year ended 31 December 2008.

During the year ended 31 December 2009, we received net proceeds of $Nil from the exercise of warrants and stock options into shares, as compared to $3,934,169 for the year ended 31 December 2008.

Our working capital balance was $6,998,529 as at 31 December 2009, an increase of $4,051,741 compared to $2,946,788 as at 31 December 2008. With the growth of our operations, the requirements for working capital increased; accordingly, during the year ended 31 December 2009, we closed a public offering financing generating net proceeds of $11,392,232. For the year ended 31 December 2009, we relied primarily on cash on hand, proceeds from the private placement, and exercise of share purchase warrants and stock options to fund our expenditures.

For the year ended 31 December 2009, we incurred a loss of $9,543,531 versus a loss of $13,663,656 in 2008.

As at 31 December 2009, we had 6,169,829 warrants outstanding at a weighted average exercise price of $2.36 per share, which if fully exercised, would result in the receipt of approximately $14.6 million. We also had 1,073,133 stock options outstanding of which 273,236 were exercisable at prices between $1.20 and $10.63 per share and which, if fully exercised, would result in the receipt of approximately $1.9 million.

C.	Research and Development, Patents and Licenses

As at 31 December 2010, we were an operating stage company. Our primary expenditures were on research and development of the RAMP® diagnostic system and associated Kits. The following table summarizes research and development, and includes share-based compensation, as well as patent and licensing expenses, both in dollar terms as well as a percentage of total operating expenses, for the last three fiscal years.

Fiscal Year	Research & Development Expenses ($) (1)		Percentage of Operating Expenses			Patent and Licensing Expenses ($)		Percentage of Operating Expenses
2010		4,106,267		45	%		137,287		1	%
2009		5,635,692		53	%		268,091		3	%
2008		6,776,691		50	%		162,800		1	%

(1)	Includes share-based compensation related to research and development personnel.

D.	Trend Information

There are several external trends, which we believe will have an impact on our business and prospects:

·	The medical device market is already characterized by a high degree of regulation governing the manufacture, sale and use of various medical devices. This trend is expected to continue.

In all markets, the effect of government regulations may be to prevent or to delay marketing and pricing of any new products for a considerable or indefinite period or to require additional studies prior to approval. Federal, state and foreign regulations, or lack thereof, regarding the sale of environmental testing devices are subject to change. We cannot predict what impact, if any, such changes may have on our business.

·	The inability to predict the biodefense market is likely to remain for some time.

E.	Off-balance Sheet arrangements

We have not had any off-balance sheet arrangements during the year ended 31 December 2010, nor did we have any off-balance sheet arrangements as at 31 December 2009, or as at 31 January 2011.

F.	Tabular Disclosure of Contractual Obligations

As at 31 December 2010, we had the following contractual obligations:

Commitments and Obligations	Total $		Less than 1 Year $		1-3 Years $		3-5 Years $		> 5 Years $
Equipment Operating Lease		276,788		51,898		103,796		103,796		17,298
License Fees		126,327		31,109		73,218		22,000		-
Purchase Commitments		784,245		103,754		301,686		378,805		-
Repayable Leasehold Allowance		12,829,429		1,061,746		2,123,492		2,123,492		7,520,700
Facility Sublease		13,948,254		916,041		1,940,616		2,098,458		8,993,139
Total		27,965,043		2,164,547		4,542,808		4,726,551		16,531,137

G.	Safe harbor

Statements in this report relating to matters that are not historical fact are forward-looking statements based on current expectations, forecasts and assumptions that involve risks and uncertainties that could cause actual outcomes and results to differ materially. Factors that could cause or contribute to such differences include, but are not limited to, general economic conditions, changes in technology, reliance on third party manufacturing, managing rapid growth, global sales risks, limited intellectual property protection and other risks and uncertainties described in the Company’s public filings with securities regulatory authorities.

Item 6. Directors, Senior Management and Employees

A.	Directors and Senior Management

Our current directors and officers, their positions and the periods during which each has served in their positions are as follows:

Name	Age		Position	Period Served
Richard J. Bastiani, PhD.		68	Director, Chairman of the Board	Since March 2006
Richard K. Bear		48	Director	Since March 2006
Anthony F. Holler, MD		59	Director	Since March 2006
Todd R. Patrick		48	Director	Since March 2006
Peter Thompson		51	Director	Since July 2010
Jonathan Wang		42	Director	Since July 2010
S. Wayne Kay		60	Director Chief Executive Officer	Since September 2007 Since September 2007
Livleen Kaler		33	Vice President, Finance & Administration and Chief Financial Officer	Since June 2009
Paul C. Harris, Ph.D.		57	Chief Scientific Officer	Since 1998

Pursuant to the terms of the OrbiMed Agreement, Caduceus Private Investments III, LP (since renamed OrbiMed Private Investments III, LP) (“OrbiMed”) is entitled to two designees on our Board of Directors (the “OrbiMed Designees”). Drs. Thompson and Wang are the current OrbiMed Designees. The Company agreed in the OrbiMed Agreement that as long as the OrbiMed Funds and their affiliates hold not less than 5,800,000 of our common shares:

·	the Company will include the OrbiMed Designees on management’s slate of nominees for election to the Board of Directors at each successive annual meeting of shareholders;

·	any vacancies created by the death, resignation or removal of either or both of the OrbiMed Designees are to be promptly filled by the Board of Directors upon receipt of instructions from OrbiMed;

·	the Company will not increase the size of the Board of Directors above seven without the consent of the OrbiMed Designees; and

·	an OrbiMed Designee shall have the right to serve on and be appointed to each of the committees of the Board of Directors.

The business background and principal occupations of the directors and senior management are as follows:

Richard Bastiani, Ph.D. - Director, Chairman of the Board

Dr. Bastiani has served as one of our directors since March 2006. Formerly the Chairman of ID Biomedical Corporation until GlaxoSmithKline acquired it in December 2005, Dr. Bastiani has a long history in the life sciences industry with considerable operational expertise in developing and commercializing innovative technology, and building successful businesses. He has served on the board of Abaxis Inc., which specializes in POC diagnostics, since September 1995. Dr. Bastiani retired in November 1998. From August 1995 to October 1998, he was President of Dendreon, a biotechnology company developing cell–based therapies for treatment of cancer. From 1972 to 1995, Dr. Bastiani held a number of positions, including President, with Syva Company in Palo Alto, California. Dr. Bastiani holds a PhD in Organic Chemistry from Michigan State University.

Richard Bear - Director

Mr. Bear has served as one of our directors since March 2006. Mr. Bear has been the Chief Financial Officer of CRH Medical Corporation since March 2006. Mr. Bear was the Chief Financial Officer of ID Biomedical Corporation from June 2005 until GlaxoSmithKline acquired the company in December 2005. He served as Vice President, Finance of ID Biomedical from June 2002 through May 2005. Prior to joining ID Biomedical, Mr. Bear was with XO Communications from September 1995 until May 2002, where he held the positions of Vice President/General Manager and Vice President of Finance. Mr. Bear received his degree in Business Administration from the University of Washington and is a Certified Public Accountant (CPA).

Dr. Anthony F. Holler - Director

Dr. Holler has served as one of our directors since March 2006. Dr. Holler was one of the original founders of ID Biomedical Corporation in 1991 and was a member of its Board of Directors since inception. He held a number of executive positions with ID Biomedical, including Chief Executive Officer, until GlaxoSmithKline acquired the company in December 2005. Prior to founding ID Biomedical, Dr. Holler served as an emergency physician at University Hospital at the University of British Columbia. He is a member of the British Columbia College of Physicians and Surgeons. Dr. Holler also serves as Chairman of the Board of CRH Medical Corporation and is the Chairman of the board of Trevali Resources Corp. and Inviro Medical Inc. Dr. Holler holds a Bachelor of Science degree and a medical degree from the University of British Columbia.

Todd Patrick - Director

Mr. Patrick has served as one of our directors since March 2006. On November 1, 2010, Mr. Patrick became the President and Chief Executive Officer of C3 Jian, a Los Angeles, CA biotechnology company developing new diagnostic and therapeutic technologies designed to improve oral health. Mr. Patrick has been a director of C3 Jian since January 2010. In 1998, Mr. Patrick was appointed President and Chief Operating Officer of ID Biomedical Corporation, a position he held until December 2005 when GlaxoSmithKline acquired the company. Mr. Patrick originally joined ID Biomedical in 1994 as the President of its then newly–created vaccine subsidiary, ID Vaccine. Prior to joining ID Biomedical, Mr. Patrick was employed by the University of California, Los Angeles (UCLA) as the Director of the Office of Intellectual Property Administration, where he was responsible for the patenting and licensing of intellectual property arising out of UCLA. He is a director of CRH Medical Corporation and the Chairman of the board of Seattle Biomedical Research Institute. Mr. Patrick holds a Bachelor of Economics degree and a Masters in Business Administration from the University of Washington.

Peter Thompson - Director

Dr. Thompson has served as one of our directors since July 2010. Dr. Thompson is a proven biotechnology executive and entrepreneur with over 20 years of experience in the industry. He co-founded Trubion Pharmaceuticals, and served as CEO and Chairman from its inception through its successful IPO on NASDAQ and as a public company until his retirement in 2009. Dr. Thompson is the former Vice President & General Manager of Chiron Informatics at Chiron Corporation and held various executive positions in Becton Dickinson, including Vice President, Research and Technology Department of BD Bioscience prior to joining Chiron. Dr. Thompson is a co-founder of iMetrikus, a clinical decision support company, where he served as CEO and Chairman. He is a Venture Partner at Orbimed Advisors and the founder and Managing Director of Strategicon Partners, an investment and management services company. He serves as a Director on the Boards of Anthera Pharmaceuticals (NASDAQ: ANTH), Methylgene (TSX: MYG), Response Biomedical (TSX: RBM), Cleave Biosciences (Co-Founder), Principia Biosciences, & CoDa Therapeutics. Dr. Thompson is an Ernst & Young Entrepreneur of the Year awardee,

an inventor on numerous patents, a board-certified internist and oncologist, and was on staff at the National Cancer Institute following his internal medicine training at Yale University.

Jonathan Wang - Director

Dr. Wang has served as one of our directors since July 2010. He is a Senior Managing Director, Asia at OrbiMed. He is a co-founder and partner at OrbiMed's Asia-focused VC fund. Previously, he was General Manager at Burrill Greater China Group and worked for WI Harper Group and Walden International, two pioneers in the Asia-related VC industry. At WI Harper, Dr. Wang was a Managing Director, overseeing the firm's life sciences activities worldwide. Dr. Wang is a Board Director at ForteBio, Inc., EA, Inc. and PharmAbcine, Inc. He is also co-founder of and former Chairman of The BayHelix Group, a premier organization of Chinese life sciences business leaders. He holds a Ph.D. in Molecular Neurobiology from Columbia University where he obtained scientific training under the supervision of Dr. Eric Kandel, a Nobel Laureate. He was rewarded the prestigious Howard Hughes Medical Institute (HHMI) Research Fellowship for his research at Columbia. Dr. Wang also earned an M.B.A. from Stanford University.

S. Wayne Kay - Director and Chief Executive Officer

Mr. Kay has served as a director and Chief Executive Officer of the Company since September 2007. From October 2004 to September 2007, Mr. Kay provided executive consulting services to several early stage companies, mainly in the San Francisco Bay and San Diego areas. During that time he also served as an executive advisor and interim Chief Executive Officer to the U.S. healthcare/life sciences venture capital fund, Kleiner Perkins Caufield and Byers. From January 2001 through October 2004, Mr. Kay was the President, Chief Executive Officer and a director of Quidel Corporation, a leading company in the discovery, development, manufacturing and marketing of rapid diagnostic solutions at the POC in infectious diseases and reproductive health. During his tenure he designed and managed a strategy responsible for building and sustaining market leadership of rapid influenza testing. Mr. Kay received his Masters degree in Business Administration in 1982 from Pepperdine University and his Bachelor of Business Administration degree from the University of San Francisco.

Livleen Kaler, CMA – Vice President, Finance and Administration and Chief Financial Officer

Ms. Kaler has served as our Vice President, Finance and Administration and Chief Financial Officer since June 2009. From December 2008 until June 2009, Ms. Kaler served as our Director, Finance and Administration. From December 2006 until December 2008, Ms. Kaler served as our Controller. Ms. Kaler has over 10 years of financial management experience in several industries. From January 2006 until December 2006, she served as the Director of Finance at Infosat Communications, a subsidiary of Bell Canada and a leading North American provider and integrator of satellite communication solutions. Ms. Kaler, who joined Infosat in August 2002, successfully led the financial integration of three North American acquisitions, managed the accounting and finance functions through a period of exponential revenue growth, and was responsible for consolidated financial statements for 2 US subsidiaries and 5 Canadian offices during her tenure at Infosat. Ms. Kaler earned her Accounting and Finance diploma from the College of New Caledonia, attended the University of Northern British Columbia and received her designation as a Certified Management Accountant (CMA) in 2001 from the Society of Management Accountants of British Columbia.

Paul C. Harris, Ph.D. - Chief Scientific Officer

Dr. Harris has been our Vice President, Research and Development since June 1998 and Chief Scientific Officer since August 2010. Dr. Harris brings over 30 years of experience in the medical diagnostic and device industry including previous positions as Director of R&D at STC Technologies, Director of Systems Engineering and Manufacturing Operations at Microprobe Corporation and Vice President, Engineering at Cellpro lnc. As director of Systems Development at Genetic Systems division of Sanofi Diagnostics Pasteur for eight years, he led a team to develop the Combo System, the first automated system to test for AIDS and hepatitis, and later, the OMNI Procession analyzer. Dr. Harris received his Ph.D. degree in 1980 from the University of California, Irvine in Molecular Biology and Biochemistry, specializing in Immunology.

B.	Compensation

Objectives of Response’s Executive Compensation Program

Our executive compensation program is designed to attract the talent needed to grow and further our strategic interests, motivate and reward sustained high levels of both employee performance and business results and to retain and reward leaders who create long-term value for our shareholders.

The elements of our executive compensation plan are structured to fulfill the following objectives:

1.	Attract and Retain

We use compensation as a tool to attract and retain high performing senior executive talent including a combination of base salary, an annual short-term incentive plan and stock options. Response periodically benchmarks the base salary element against local and national market data provided by several salary survey sources. All positions below the executive level also include base salary, an annual short-term incentive plan and stock options. The salary range maximums for positions below the executive level are at the 50th percentile of corresponding positions in those companies we compare against for our compensation levels and practices.

2.	Pay for Performance

The compensation of each of our senior executives is designed to reflect their individual performance and short and longer-term Company results. Base salary increases and annual incentives achieved are directly impacted by how well each senior executive has performed as an individual as well as the overall business success.

Compensation Elements for Senior Executives

The compensation package for senior executives is composed of the following salary elements: base salary, short-term incentive and stock options. The overall compensation package has at risk components that vary from year to year depending on our business results and individual performance.

1.	Base Salary

Providing a market competitive base salary is necessary to attract new talent and retain skilled executive talent. Actual salary levels are determined based on the individual’s performance, responsibilities and experience. In establishing the base salary for each senior executive, we target the market median (50th percentile) paid for comparable executive positions.

On an annual basis the base salaries of executives are reviewed as part of the performance management process. All employees, including senior executives, have individual objectives against which their performance is assessed through the performance review discussions with their manager. The performance review ratings are used for determining increases to base salary.

The Chief Executive Officer recommends base salary increases for senior executives to the Compensation Committee of the Board. In the case of the Chief Executive Officer the Board reviews and assesses the competitiveness of the Chief Executive Officer’s compensation. The Compensation Committee of the Board evaluates the Chief Executive Officer’s performance against the prior year’s objectives and finalizes the evaluation. At the beginning of each year the Compensation Committee works with the Chief Executive Officer to set performance objectives for the following year. Mr. Kay is a participant in the Short Term Incentive Plan and the Stock Option Plan.

2.	Short Term Incentive Plan

The objectives of the short term incentive plan are to: ensure focus on critical Company objectives and goals that support the achievement of our mission, ensure alignment of both team and individual objectives and activities with those identified for us, ensure individual rewards are linked to our performance to predetermined goals and metrics, and motivate and reward strong team and individual performance.

All employees, including senior executives, participate in the short-term incentive plan, which provides an annual cash award based on Company and individual contributions toward defined company performance metrics.

The Chief Executive Officer is eligible for an incentive of up to 30% of base salary.

The Vice President, Finance & Administration and Chief Financial Officer is eligible for an incentive of up to 25% of base salary.

The Chief Scientific Officer is eligible for an incentive of up to 40% of base salary. This incentive is higher than the normal incentive of up to 25% of base salary in order to increase his total compensation and tie a significant portion of that compensation to the achievement of critical Company milestones.

The Corporate Performance Goals for 2010:

·	Focus on continued growth of Clinical product sales globally;

·	Raise sufficient capital to take the Company to cash flow positive state by the end of 2011;

·	Focused Cardiac product revenue growth in international territories especially in China, Europe, and the Middle East;

·	Petition FDA for NT-proBNP CLIA-waiver;

·	Complete clinical trial for next-generation Troponin l assay; and

·	Pursue other clinical diagnostic players (i.e., tumor markers, renal disease monitoring, gynaecological diagnostics, coagulation, TDM, dental pathogens, etc.).

Following a year-end assessment the Board reviews and approves the aggregate of all awards payable and they are a paid out within the first six months of the following year. In 2010, in order to conserve cash, the Senior Executives and the Board decided not to pay out short term incentive for the year.

3.	Stock Options

The purpose of our stock option plan is to provide us with a share-related mechanism to attract, retain and motivate qualified executives, employees and consultants, to incent such individuals to contribute toward our long-term goals, and to encourage such individuals to acquire our shares as long-term investments.

All eligible employees, including senior executives, participate in the stock option plan. Options within the ranges specified for each position are granted to employees for performance and retention.

The Compensation Committee of the Board reviews and approves the recommended stock option grants.

4.	Perquisites

Senior executives benefit from automobile and accommodation allowances. The 2010 annual value of perquisites for each of the Chief Executive Officer, Chief Operating Officer, Vice President, Finance &Administration and Chief Financial Officer, and Chief Scientific Officer were in aggregate worth less than $50,000 or 10% of such senior executive’s total salary for the year ended 31 December, 2010.

Chief Executive Officer and Executive Officers

Set out below are particulars of compensation paid by our Company to the following persons (the “Named Executive Officers”):

a.	Our Company’s Chief Executive Officer;

b.	Our Company’s Chief Operating Officer;

c.	Each of our Company’s three most highly compensated executive officers, other than the Chief Executive Officer and Chief Operating Officer, who were serving as executive officers at the end of the most recently completed financial year and whose total salary and bonus exceeds $150,000 per year; and

d.	Any additional individuals for whom disclosure would have been provided under (c) but for the fact that the individual was not serving as an officer of our Company at the end of the most recently completed financial year.

As at 31 December 2010, we had the following Named Executive Officers: S. Wayne Kay, Chief Executive Officer, Livleen Kaler, Vice President, Finance & Administration and Chief Financial Officer, and Dr. Paul C. Harris, Chief Scientific Officer.

Summary Compensation Table

The following table is a summary of compensation paid or payable to the Named Executive Officers for each of our three most recently completed financial years:

		Annual Compensation			Long-term Compensation
NEO Name and Principal Position	Year	Salary ($)	Short-term Incentive (4) ($)	Other Annual Compensation (5) ($)	Securities Under Options Granted (#)
S. Wayne Kay, Chief Executive Officer	2010 2009 2008	364,095 403,224 369,112	Nil Nil 85,684	Nil Nil Nil	50,000 Nil 50,000
Duane A. Morris,(1) Chief Operating Officer	2010 2009 2008	447,820 259,215 237,286	Nil Nil 130,213	Nil Nil Nil	Nil Nil 25,000
Livleen Kaler,(2) Vice President, Finance and Administration and Chief Financial Officer	2010 2009 2008	150,000 142,160 N/A	Nil Nil N/A	Nil Nil N/A	Nil 15,000 N/A
Paul C. Harris, PhD Chief Scientific Officer	2010 2009 2008	171,011 171,045 209,797	Nil Nil 68,140	Nil Nil Nil	12,500 Nil 10,000
Ingo Beck,(3) Senior Director, Manufacturing	2010 2009 2008	171,873 N/A N/A	Nil N/A N/A	Nil N/A N/A	Nil N/A N/A

1.	Duane A. Morris ceased to be the Chief Operating Officer on October 29, 2010. The 2010 salary figure includes an amount related to severance, which is payable in April 2011.

2.	Livleen Kaler was appointed Vice President, Finance and Administration and Chief Financial Officer on 10 June 2009. For 2009, the compensation noted also includes her income from 1 January 2009 until 9 June 2009, when she served as our Director, Finance & Administration.

3.	Ingo Beck is not a Named Executive Officer but he is included as his salary exceeded $150,000 in 2010.

4.	2008 Short Term Incentive includes amounts paid in 2008 for incentives earned in 2007.

5.	Perquisites and other personal benefits do not exceed the lesser of $50,000 or 10% of the total annual salary for any Named Executive Officer.

Long-Term Incentive Plans

We have no long-term incentive plan in place and there were no awards made under any long-term incentive plan to the Named Executive Officers during our most recently completed financial year. A “Long-Term Incentive Plan” is a plan under which awards are made based on performance over a period longer than one financial year, other than a plan for options, stock appreciation rights or restricted share compensation.

Performance Graph

	2005		2006		2007		2008		2009		2010
RBM		100		146		162		18		26		7
S&P/TSX Composite		100		115		123		80		104		119

The following graph shows the total cumulative return over five years for a shareholder of Response on an investment of $100 compared to the S&P/TSX composite index.

Response’s total shareholder return decreased 93% over the last five years. Response’s share price climbed 62% from 2005 to 2007, prior to a severe decline in 2008. This decline in late 2008 was consistent with that of the broader market decline as shown in the S&P/TSX composite index and rose slightly but remained low throughout 2009 and fell further in 2010 (see graph). In comparing Named Executive Officer compensation over the same five-year period, compensation (base salary and short-term incentive plan) increased by 35% compared to the cumulative 93% erosion in shareholder return. The 35% increase in salaries from 2005 to 2010 is due to personnel changes in the CEO and COO positions and resulted from market based salaries required to attract appropriate personnel to replace the incumbents. The Compensation Committee is of the view that the market price of our shares in 2010 has been predominately affected by external factors over which we have no control and does not reflect our overall performance.

Options Granted During the Most Recently Completed Financial Year

The following table sets out incentive stock options granted during the most recently completed financial year to Named Executive Officers:

NEO

Name

Common
Shares

Under
Options
Granted

(#)

Percentage of
Total Options
Granted to
Employees in
Financial Year

Exercisable
or Base
Price
($ /
Security)

Market Value of
Securities
Underlying
Options on the
Date of Grant

($ / Security) (1)

Expiration Date

S. Wayne Kay

50,000

0.43

November 9, 2015

Duane A. Morris

Nil

N/A

Livleen Kaler

Nil

N/A

Paul C. Harris

12,500

0.41

December 1, 2015

(1)	The market value is calculated as the closing market price of our shares on the TSX on the day prior to grant date for each option.

Aggregated Option Exercises During the Most Recently Completed Financial Year and Financial Year End Option Values

The following table sets out incentive stock options exercised by the Named Executive Officers, during the most recently completed financial year as well as the financial year-end value of stock options held by the Named Executive Officers.

NEO Name	Common Shares Acquired on Exercise (#)	Aggregate Value Realized ($)		Unexercised Options at Financial Year-End Exercisable / Unexercisable (#)		Value of Unexercised In-the-Money Options at Financial Year-End Exercisable / Unexercisable ($) (1)
S. Wayne Kay	Nil		N/A		87,500/162,500	Nil/Nil
Duane A. Morris(2)	Nil		N/A	27,500/Nil		Nil/Nil
Livleen Kaler	Nil		N/A		7,750/22,250	Nil/Nil
Paul C. Harris	Nil		N/A		28,125/24,375	Nil/Nil

(1)

In-the-Money Options are those where the market value of the underlying securities as at the most recent financial year-end exceeds the option exercise price. The market value is calculated as the closing market price of our shares as at 31 December 2010, (i.e. the financial year end) on the TSX, which was $0.345 less the exercise price for each option.

(2)	Duane A. Morris ceased to be an employee of the Company on October 29, 2010. The above noted options expired on 27 January, 2011.

Termination of Employment, Change in Responsibilities and Employment Contracts

As of 31 January 2011, of the Named Executive Officers serving at the end of the most recently completed financial year, S. Wayne Kay, Livleen Kaler and Dr. Paul C. Harris have employment agreements with us.

Employment Agreement - S. Wayne Kay

Effective September 11, 2007, we entered into an employment agreement with Mr. Kay pursuant to which he agreed to provide his services to us in the capacity of Chief Executive Officer for a term to continue until terminated.

Under the agreement, Mr. Kay is: paid an annual salary of US$350,000 equalized for taxes paid as a result of being employed by a Canadian versus US employer; eligible to participate in our stock option plan, with an initial grant of an option to purchase up to 1,500,000 of our common shares; eligible to participate in our employee medical, dental and life insurance plans; to be reimbursed for reasonable out of pocket expenses including commuting and accommodation costs of up to $2,000 per month; and, eligible to earn incentive bonuses for nominally 30% of his annual salary. The agreement provides for a severance payment of one month’s salary in the event that there is cause for dismissal. The agreement further provides for a salary continuation equal to 12 months salary plus two additional months’ salary for each year he is employed by us up to a maximum of 18 months in the event that we terminate Mr. Kay’s employment without cause. The agreement provides that within thirty (30) days of a Change of Control Mr. Kay may voluntarily terminate his employment by providing written notice to us. The termination and end of employment will be effective six (6) months from the date of the notice. Mr. Kay will be paid and continue to be employed for the six (6) months and then he will be entitled to a lump sum payment equal to 24 months of salary and if the transaction in which the Change in Control occurs is effected at a value that reflects or implies a Market Capitalization at: (a) equal or greater than US $100 million but less than US $150 million an additional lump sum payment of .01 times that Market Capitalization or (b) equal to or greater than US $150 million, an additional lump sum payment of US$1.5 million, such payments to be made six months after termination and end of employment.

Employment Agreement – Livleen Kaler

Effective 9 June 2009, we entered into an employment agreement with Ms. Kaler pursuant to which she agreed to provide her services to us in the capacity of Chief Financial Officer for a term to continue until terminated. Under the agreement, Ms. Kaler is: paid an annual salary of $150,000, eligible to participate in our stock option plan, with an initial grant of an option to purchase up to 150,000 of our common shares and a subsequent grant of an option to purchase up to 150,000 for a total of 300,000 common shares; to participate in our employee medical, dental and life insurance plans; to be reimbursed for reasonable out of pocket expenses; and eligible to earn incentive bonuses for nominally 25% of her annual salary. The agreement provides for a severance payment of one month’s salary in the event that there is cause for dismissal. The agreement further provides for a severance payment equal to 3 months salary plus two additional months’ salary for each year she is employed by us up to a maximum of 18 months in the event that we terminate Ms. Kaler’s employment without cause. The agreement provides that within thirty (30) days of a Change of Control Ms. Kaler may voluntarily terminate her employment by providing written notice to us. The termination and end of employment will be effective six (6) months from the date of termination, or earlier if agreed to by the acquiring Company. In such case Ms. Kaler will be paid and continue to be employed for 6 months and then she will be entitled to a lump sum payment equal to 12 months of salary.

Employment Agreement - Paul C. Harris, PhD

Effective 1 January 2008, we entered into an employment agreement with Dr. Harris pursuant to which he agreed to provide his services to us in the capacity of Chief Scientific Officer for a term to continue until terminated. Under the agreement, Dr. Harris is: paid an annual salary of US$214,300; eligible to participate in our stock option plan; to participate in our employee medical, dental and life insurance plans; to be reimbursed for reasonable out of pocket expenses; and eligible to earn incentive bonuses for nominally 40% of his annual salary. The agreement provides for a severance payment of one month’s salary in the event that there is cause for dismissal. The agreement further provides for a severance payment equal to three months salary plus two additional months’ salary for each year he is employed by us or under contract to us up to a maximum of 12 months in the event that we terminate Dr. Harris’ employment without cause. The agreement provides that within thirty (30) days of a Change of Control Dr. Harris may voluntarily terminate his employment by providing written notice to us. The termination and end of employment will be effective six (6) months from the date of termination, or earlier if agreed to by the acquiring Company. In such a case, Dr. Harris shall be paid and continue to be employed for said six months and then he will be entitled to a lump sum payment equal to 12 months of salary.

Compensation of Directors

During our fiscal year ended 31 December 2010, no director who is not also a Named Executive Officer, received compensation for services provided to us in their capacities as directors, consultants or otherwise, except as described below.

For the year ended 31 December 2010 fees totaling $79,500 were incurred.

During our fiscal year ended 31 December 2010, we made no stock option awards to directors who are not also Named Executive Officers.

C.	Board Practices

All directors hold office until the next annual general meeting of our shareholders or until they resign or are removed from office in accordance with our articles and the Business Corporations Act.

No directors have service contracts with us. Each director has formally consented to serve as a director with us.

To assist in the discharge of its responsibilities, the Board has designated an Audit Committee, a Compensation Committee and a Nomination and Corporate Governance Committee. The following describes the current committees of the Board and their members.

The Audit Committee

Audit Committee Charter

Our audit committee charter, as adopted on 27 April 2005 and as amended 10 November 2006, 24 April 2007 and 17 March 2008 is attached as Exhibit 15.1. A summary of the terms of reference include the following:

The Audit Committee (the “Committee”) is appointed by the Board of Directors (the “Board”) to assist the Board in monitoring: (1) the integrity of our financial statements; (2) the independent auditor's qualifications and independence; (3) the performance of our internal financial controls, audit functions and the performance of the independent auditors; and (4) our compliance with legal and regulatory requirements.

The Committee shall consist of at least three members of the Board. Each member of the Committee shall be independent for purposes of National Instrument 52-110 (“NI 52-110”), subject only to the specific exemptions from such requirements contained in NI 52-110. Each member of the Committee shall be financially literate for purposes of NI 52-110, subject only to the specific exemptions from such requirements contained in NI 52-110.

The Board, at its organizational meeting held in conjunction with each annual general meeting of the shareholders, shall appoint the members of the Committee for the ensuing year. The Board may at any time remove or replace any member of the Committee and may fill any vacancy in the Committee.

The Committee shall have access to such officers and employees and to our external auditors, and to such information respecting Response Biomedical, as it considers necessary or advisable in order to perform its duties and responsibilities. The Committee shall have the authority to authorize the engagement of independent advisors, including legal, accounting and financial advisors as it deems necessary to perform its duties and responsibilities and to set and pay the compensation of such advisors.

The external auditors shall have a direct line of communication to the Committee through its chair and may bypass management if deemed necessary. The Committee, through its chair, may directly contact any of our employees as it deems necessary, and any employee may bring before the Committee any matter involving questionable, illegal or improper financial practices or transactions.

Composition and Relevant Experience

At the present time, the audit committee is comprised of Richard K. Bear (Chair) (independent and financially literate in accordance with NI 52-110), Dr. Richard J. Bastiani (independent and financially literate), Todd R. Patrick (independent and financially literate) and Dr. Peter Thompson (independent and financially literate). Our Board of Directors has determined that Mr. Bear qualifies as an “audit committee financial expert” as defined by Item 16A of Form 20-F. A description of the education and experience of each audit committee member may be found above under the heading, “Directors and Officers”.

Pre-Approval of Non-Audit Services

All audit and non-audit services performed by our auditors for the 12-month period ended 31 December 2010 were pre-approved by our audit committee. In accordance with our audit committee charter, all audit and non-audit services performed by our auditors will continue to be pre-approved by our audit committee.

External Auditor Services (By Category)

See Item 16C – Principal Accountant fees and services for the fees billed by our external auditors in each of the last two fiscal years.

The Compensation Committee

The Compensation Committee is composed of Dr. Anthony F. Holler (Chair), Todd R. Patrick and Dr. Jonathan Wang. All members are independent directors (determined in accordance with MI 52-110). The Compensation Committee provides, on behalf of the Board, detailed review, oversight and approval of the our policies, practices and procedures relating to human resources to ensure ongoing, long-term development and deployment of high-caliber senior management resources. The committee: reviews the performance of the Chief Executive Officer and is responsible for succession planning for the Chief Executive Officer position; reviews compensation to ensure the relationship between senior management performance and compensation is appropriate and set with reference to competitive benchmarks, and monitors succession planning for senior management.

The Nomination and Corporate Governance Committee

The Nomination and Corporate Governance Committee is currently composed of Dr. Peter Thompson (Chair), Dr. Anthony F. Holler, Todd R. Patrick and Richard K. Bear, all of whom are independent directors (determined in accordance with MI 52-110). The committee: identifies and recommend candidates for election to the Board in consultation with the Chief Executive Officer, makes recommendations relating to the duties and membership of committees of the Board, advises the Board on all matters relating to corporate governance directorship practices, including the criteria for selecting directors, and policies relating to tenure and retirement of directors, recommends processes to evaluate the performance and contributions of individual directors and the Board as a whole and approve procedures designed to provide that adequate orientation and training are provided to new members of the Board, monitors the effectiveness of the committees of the Board and ensures that all of the required committees are put in place, assists management in establishing a succession plan for all senior officers, develops policies to govern our approach to corporate governance issues, and provides a forum for concerns of individual directors about matters not easily or readily discussed in a full Board meeting, reviews the size of the Board, its composition and its efficiency in order to make the necessary corrections in relation to our long-term needs and in accordance with our strategic development plan, and ensures that our policies on continuous disclosure and communications with analysts are updated as required and are provided to all new directors and management.

Employees

As at 31 January 2011, we had 66 full time and part time employees and two consultant positions. As at 31 December 2010, we had 74 full and part time employees on staff and two consultants. As at 31 December 2009, we had 115 full and part time employees on staff and 1.5 consultants. As at 31 December 2008, we had 110 full and part time employees on staff and three consultants.

Of the 74 full and part-time employees as at 31 December 2010, 72 employees worked out of our Vancouver location and two employees worked from separate locations in the United States. Our 66 employees and two consultants as at 31 January 2011 are distributed among our operational groups as follows. The research and development team consists of 18 employees, which have a core competency in immunoassay development, engineering, regulatory and quality management. Specialized engineers are employed to implement specific design requirements of the RAMP® system. In this way we are committed to long-term development of the product. The operations group consists of 35 employees and has experience developing and implementing operating systems and directing manufacturing operations for in vitro diagnostic medical device manufacturing firms. The sales, marketing and business development group consists of 5 employees and has experience in bringing POC diagnostics products to market. The administrative group, including the Chief Executive Officer and Vice President, Finance and Administration and Chief Financial Officer, consists of 8 employees and two consultants and has experience in the

areas of finance, accounting, investor relations, information technology, human resources, administration and strategic and operational planning.

E.	Share Ownership

The following table sets out details of our shares, options and warrants that are directly or indirectly held by directors and executive officers as at 31 January 2011 based on 38,950,262 common shares issued and outstanding on such date:

Name	Number of Common Shares	Percentage of Outstanding Common Shares	Number of Common Shares held under Options and Warrants	Exercice Price	Expiration Date
S. Wayne Kay	67,670	<1.0%	150,000 50,000 50,000 335,000(1) 585,000	$10.70 $1.20 $0.43 $2.00	11 September 2012 2 December 2013 09 November 2015 31 October 2011
Richard J. Bastiani, PhD	133,333	<1.0%	40,000 5,000 5,000 5,000 66,666(1) 121,666	$5.80 $8.80 $1.20 $1.15 $2.00	30 March 2011 4 December 2012 2 December 2013 10 December 2014 31 October 2011
Richard K. Bear	66,660	<1.0%	40,000 5,000 5,000 5,000 33,330(1) 88,330	$5.80 $8.80 $1.20 $1.15 $2.00	30 March 2011 4 December 2012 2 December 2013 10 December 2014 31 October 2011
Anthony F. Holler, MD	368,350	~1.45 %	40,000 5,000 5,000 5,000 91,666(1) 146,666	$5.80 $8.80 $1.20 $1.15 $2.00	30 March 2011 4 December 2012 2 December 2013 10 December 2014 31 October 2011
Todd R. Patrick	182,900	<1.0%	40,000 5,000 5,000 5,000 33,500(1) 88,500	$5.80 $8.80 $1.20 $1.15 $2.00	30 March 2011 4 December 2012 2 December 2013 10 December 2014 31 October 2011
Peter Thompson, PhD	Nil	N/A	Nil	N/A	N/A
Jonathan Wang, MD	Nil	N/A	Nil	N/A	N/A
Paul C. Harris, Ph.D	22,800	<1.0%	12,500 8,750 8,750 10,000 12,500 52,500	$5.80 $5.20 $8.80 $1.20 $0.41	7 March 2011 3 October 2011 4 December 2012 2 December 2013 1 December 2015
Livleen Kaler	2,750	<1.0%	10,000 5,000 15,000 30,000	$8.80 $1.20 $1.50	3 April 2012 2 December 2013 19 June 2014
TOTAL	844,463	2.2%	953,662

1	Represents warrants to purchase common shares. All other entries represent options to purchase common shares

F.	Stock Option Plan

On 3 June 2008 the Board approved the adoption of a new stock option plan (the “2008 Plan”) replacing the previous plan that was approved by our shareholders on 3 May 2005 (the “2005 Plan”). The shareholders of our Company approved the 2008 Plan on June 3, 2008. The 2008 Plan is listed as Exhibit 4.16.

The purpose of the 2008 Plan is to provide us with a share-related mechanism to attract, retain and motivate qualified executives, employees and consultants, to provide incentive to such individuals to contribute toward our long-term goals, and to encourage such individuals to acquire our shares as long-term investments.

The Compensation Committee shall, from time to time and in its sole discretion, determine those executives, employees and consultants, if any, to whom options are to be granted; provided, however, that no option may be granted to a consultant that is in the United States or that is a U.S. Person (as defined in the 2008 Plan) unless such consultant is a U.S. Eligible Consultant. A U.S. Eligible Consultant means a consultant that is a natural person that provides bona fide services to us, and said services are not in connection with the offer or sale of securities in a capital-raising transaction and do not directly or indirectly promote or maintain a market for our securities.

The number of shares issuable to any one option holder under the 2008 Plan, together with all of our other previously established or proposed share compensation arrangements, shall not exceed five percent of our total number of issued and outstanding common shares in the capital of Response Biomedical on a non-diluted basis. The number of shares which may be issued to insiders under the 2008 Plan, together with all of our other previously established or proposed share compensation arrangements, in aggregate, shall not at any time exceed 10 percent of the Outstanding Issue. Outstanding Issue means the number of shares that are outstanding (on a non-diluted basis) immediately prior to the share issuance or grant of option in question. The number of shares which may be issuable under the 2008 Plan, together with all of our other previously established or proposed share compensation arrangements, within a one-year period:

·	To insiders in aggregate, shall not exceed 10 percent of the Outstanding Issue;

·	To any one option holder who is an insider and any associates of such insider, shall not exceed five percent of the Outstanding Issue; and

·	To any non-employee director shall not exceed one percent of the Outstanding Issue.

For the purposes of this section, options issued pursuant to an entitlement granted prior to the option holder becoming an insider may be excluded in determining the number of shares issuable to insiders.

The number of shares which will be available for purchase pursuant to options granted pursuant to the 2008 Plan will not exceed 17,000,000 shares, less any shares issued upon the exercise of options to acquire shares granted under either our 1996 Stock Option Plan or our 2005 Plan.

Except as otherwise provided in the 2008 Plan, the grant date and the expiry date of an option shall be the dates fixed by the Committee at the time the option is granted and shall be set out in the option certificate issued in respect of such option.

Any option granted under the 2008 Plan to an option holder who is a citizen or resident of the United States (a “U.S. Option Holder”) within the meaning of the U.S. Internal Revenue Code of 1986, as amended, (the “Code”), will be an incentive stock option (an “ISO”) within the meaning of Section 422 of the Code if so designated by us in the option certificate evidencing such option. No provision of the 2008 Plan, as it may be applied to a U.S. Option Holder with respect to options, which are designated as ISOs, shall be construed so as to be inconsistent with any provision of Section 422 of the Code. Grants of options to U.S. Option Holders, which are not designated as an ISO

in the option certificate evidencing such option or otherwise do not qualify as ISOs, will be treated as non-statutory stock options for U.S. federal tax purposes.

Stock Options

The following table summarizes all of our outstanding stock options as at 31 January 2011.

Date of Grant	Number of Options		Exercise Price		Expiry Date
8‐Mar-06		12,500		5.80	6‐Mar‐11
30‐Mar-06		160,000		5.80	30‐Mar‐11
20‐Apr-06		4,000		11.00	20‐Apr‐11‐11
20‐May-06		2,000		7.80	20‐May‐11
23‐May-06		1,350		7.80	23‐May‐11
7‐Jun-06		385		7.50	7‐Jun‐11
19‐Jun-06		385		7.50	19‐Jun‐11
5‐Jul-06		550		7.20	5‐Jul‐11
17‐Jul-06		770		5.50	17‐Jul‐11
1‐Aug-06		385		6.50	1‐Aug‐11
25‐Aug-06		1,130		4.90	25‐Aug‐11
28‐Aug-06		7,500		5.10	28‐Aug‐11
3‐Oct-06		10,235		5.20	3‐Oct‐11
18‐Jan‐07		19,900		6.60	18‐Jan-12
3‐Apr‐07		25,330		8.80	3‐Apr-12
14‐Jun‐07		1,261		10.50	14‐Jun-12
11‐Sep‐07		150,000		10.70	11‐Sep-12
26‐Sep‐07		25,920		10.20	26‐Sep-12
4‐Dec‐07		38,270		8.80	4‐Dec-12
2‐Apr-08		17,972		6.90	2‐Apr-13
21‐Apr-08		1,500		7.30	21‐Apr-13
2‐Dec-08		121,270		1.20	2‐Dec-13
19‐Jun-09		15,000		1.50	19‐Jun-14
10‐Dec-09		57,485		1.15	10‐Dec-14
9‐Nov-10		50,000		0.43	9‐Nov-15
1‐Dec-10		78,290		0.41	1‐Dec-15
TOTAL:		803,388

Item 7. Major Shareholders and Related Party Transactions

A. Major Shareholders

We are not directly or indirectly owned or controlled by another corporation, by any foreign government or by any other person or entity. The following table sets forth certain information concerning the beneficial ownership of our common shares as to each person known to us that is the beneficial owner of 5 percent or more of our outstanding shares as at February 28, 2011.

Title of Class	Identity of Person or Group	Number of Shares (1)			Percent of Class (2)
Common Shares	OrbiMed Advisors, LLC		9,151,200	(3)		23•	%
Common Shares	OrbiMed Advisors Limited		5,376,300	(4)		14•	%

(1)	Includes securities for which the person has or shares the underlying benefits of ownership, including the power to direct the voting or the disposition of the securities or to receive the economic benefit of ownership of the securities.

(2)

Percent of class is calculated by dividing the number of shares beneficially owned by the person, by the number of our common shares outstanding as at 28 February 2011, which was 38,950,262. [Based on the Schedule 13D filed by OrbiMed Advisors LLC (“OrbiMed Advisors”), OrbiMed Advisors Limited (“OrbiMed Limited”), OrbiMed Asia GP, L.P. (“OrbiMed Asia”), OrbiMed Capital GP III LLC (“OrbiMed Capital”) and Samuel D. Isaly (“Isaly”) on August 9, 2010, as amended on October 4, 2010, October 22, 2010 and January 13, 2011 (the “OrbiMed Schedule 13D”). Consists of 9,065,300 shares held by OrbiMed Private Investments III, LP (“OPI III”) and 85,900 shares held by OrbiMed Associates III, LP (“OrbiMed Associates”). OrbiMed Capital, OrbiMed Advisors and Isaly may be deemed directly or indirectly, including by reason of their mutual affiliation, to be the beneficial owners of the shares held by OPI III. The 9,065,300 shares held by OPI III constitute approximately •% of the issued and outstanding shares as at February 28, 2011. Isaly owns a controlling interest in OrbiMed Advisors pursuant to the terms of its limited liability company agreement. OrbiMed Advisors is the sole managing member of OrbiMed Capital and OrbiMed Capital is the sole general partner of OPI III. As a result, Isaly, OrbiMed Advisors and OrbiMed Capital share power to direct the vote and to direct the disposition of the shares held by OPI III. OrbiMed Advisors and Isaly may be deemed directly or indirectly, including by reason of their mutual affiliation, to be the beneficial owners of the shares held by OrbiMed Associates. The 85,900 Shares held by OrbiMed Associates constitute approximately •% of the issued and outstanding shares as at February 28, 2011. Isaly owns a controlling interest in OrbiMed Advisors pursuant to the terms of its limited liability company agreement. As a result, Isaly and OrbiMed Advisors share power to direct the vote and to direct the disposition of the Shares held by OrbiMed Associates.

(3)

Based on the OrbiMed Schedule 13D. Consists of 5,376,300 shares held by OrbiMed Asia Partners, LP (“OAP”). OrbiMed Asia GP, L.P. (“OrbiMed Asia”) is the sole general partner of OAP pursuant to the terms of the limited partnership agreement of OAP and OrbiMed Limited is the sole general partner of OrbiMed Asia pursuant to the terms of the limited partnership agreement of OrbiMed Asia. As a result, OrbiMed Asia has the power to direct the vote and to direct the disposition of the shares held by OAP described in Item 3 and such power is exercised through OrbiMed Limited. OrbiMed Limited exercises this investment power through an investment committee (the “Committee”) comprised of Isaly, Carl L. Gordon, Nancy T. Chang, Jonathan J. Wang and Sunny Sharma, each of whom disclaims beneficial ownership of the shares held by OAP, except to the extent of their pecuniary interest therein, if any. As a result, OrbiMed Asia and OrbiMed Limited may be deemed directly or indirectly, including by reason of their mutual affiliation, to be the beneficial owners of the shares held by OAP and to share power to direct the vote and the disposition of the shares held by OAP.

Our Annual Report on Form 20F for the year ended 31 December 2009 as filed on 31 March 2010 included Beutel, Goodman & Company Ltd. as a beneficial owner of 9.84% and 3M Company as a beneficial owner of 5.81% of the common shares of Response Biomedical. Beutel Goodman is no longer a shareholder of Response has they have since sold 100% of their investment in Response. 3M Company’s investment in Response was diluted to less than 5% ownership as a result of OrbiMed’s investment in the private placement financing in July 2010.

Our major shareholders do not have different voting rights than other shareholders.

As at 31 January 2011, we had 31 registered shareholders with addresses in the United States holding approximately 17,706,468 common shares or approximately 45 percent of the total number of issued and outstanding shares. U.S.

residents own 2,103,246 of the warrants outstanding as at 31 January 2011. Residents of the United States may beneficially own common shares and warrants registered in the names of non-residents of the United States.

B.	Related Party Transactions

Conflicts of Interest

Some of our directors and officers are also directors and officers of other reporting companies. It is possible, therefore, that a conflict may arise between their duties as a director or officer of our Company and their duties as a director or officer of such other companies. The officers and directors are required to disclose all such conflicts in accordance with the Business Corporations Act and to govern themselves in respect thereof in accordance with the obligations imposed upon them by law.

In the event that any of our directors or officers has an interest in any proposed material transactions or transactions that are unusual in their nature or conditions involving our Company, they are required to disclose their interest to the Board of Directors either in writing or in person at a meeting of the directors. Any such transaction is then considered and approved by a majority of the disinterested directors. Additionally, any non-arm’s length or related party transaction that requires the approval of the TSX will be subject to more restricted filing and disclosure requirements. Related party transactions are required to be disclosed in our financial statements.

Indebtedness of Related Parties

None of our (a) affiliates, (b) associates, (c) shareholders with a significant influence over our Company (or close family members of such shareholders), (d) directors or executive officers or any of their close family members, or (e) any enterprise substantially owned by any person described in (c) or (d) have been indebted to us since 1 January 2010, or whose indebtedness to another entity has been the subject of a guarantee, support agreement or similar arrangement provided by us, during the three most recently completed fiscal years.

Other Transactions of Related Parties

None of our (a) affiliates, (b) associates, (c) shareholders with a significant influence over our Company (or close family members of such shareholders), (d) directors or executive officers or any of their close family members, or (e) any enterprise substantially owned by any person described in (c) or (d) have been involved in material transactions or proposed material transactions, or transactions that are unusual in their nature or conditions involving our Company since 1 January 2010, except as disclosed elsewhere in this report.

For the year ended 31 December 2010, directors’ fees totaling $79,500 were incurred by the Company for routine services provided by non-management members of the Board of Directors [2009 - $84,000; 2008 - $87,000].

The Company retains a law firm in which a corporate partner was a non-management member of the Board of Directors until 3 May 2010. For the year ended 31 December 2010 and during the period in which the corporate partner was a non-management member of the Board of Directors, the Company incurred legal expenses from this law firm totaling $15,797 [2009 - 175,888; 2008 - $29,477].

During the year ended 31 December 2010, the Company closed a private placement on 28 July 2010 consisting of 13,333,333 common shares at a price of $0.60 per share, for total gross proceeds of $8,000,000 before share issuance costs of $525,080 for net proceeds of $7,474,920. Of the total share issue costs, $51,414 were paid in connection with due diligence legal expenses incurred by a Company which subsequent to the financing became a related party to the Company. No such fees were incurred during the years ended December 31, 2009 or 2008.

C.	Interests of Experts and Counsel

Not applicable.

Item 8. Financial Information

Consolidated Statements and other Financial Information

Our audited consolidated financial statements, including our consolidated balance sheets, consolidated statements of loss and deficit, and consolidated statements of cash flows for the years ended 31 December 2010, 2009 and 2008, and the notes to those financial statements and the auditors’ report thereon, are included in this annual report under Item 17.

Export Sales

For our fiscal year ended 31 December 2010, we generated revenues from customers outside of Canada of $7,060,136 or 99 percent of total revenue of $7,113,008. As our main geographic markets are outside our home country, it is expected that export sales will account for the majority of revenues from product sales in future years.

Legal or Arbitration Proceedings

We are currently not party to any legal or arbitration proceedings.

Dividend Policy

We have not declared or paid any dividends on the outstanding common shares since our inception and we do not anticipate that we will do so in the foreseeable future. The declaration of dividends on our common shares is within the discretion of the Board of Directors and will depend on the assessment of, among other factors, earnings, capital requirements and our operating and financial condition. At the present time, anticipated capital requirements are such that we intend to follow a policy of retaining earnings in order to finance the further development of the business.

Significant Changes

There have been no significant changes since 31 December 2010.

Item 9. The Offer and Listing

A. Listing Details

Our common shares traded on the TSX Venture Exchange under the symbol "RBM" from October 1991 until we graduated to the more senior TSX on 21 December 2007. In July 2003, our common shares commenced trading on the Frankfurt Stock Exchange in Germany under the symbol “RBQ”. Since May 2005, our shares have been quoted in the United States on the OTC Bulletin Board under the symbol RPBIF. Our common shares are not traded on any exchange in the United States.

The following table sets forth the high and low sales prices of our common shares on the TSX and TSX Venture Exchange (as applicable), for (i) each of the last five full fiscal years, (ii) each full financial quarter in the last two full fiscal years and any subsequent period, and (iii) each of the most recent six months:

	Common Share Price Canadian Dollars (1)
	High		Low
Most Recent Six Months:
Month ended 31 January 2011	$	0.53	$	0.32
Month ended 31 December 2010	$	0.43	$	0.30
Month ended 30 November 2010	$	0.47	$	0.37
Month ended 31 October 2010	$	0.47	$	0.41
Month ended 30 September 2010	$	0.69	$	0.40
Month ended 31 August 2010	$	0.82	$	0.63
Financial Quarters for Last Two Fiscal Years and any Subsequent Period:
Year ended 31 December 2010:
Quarter ended 31 December 2010	$	0.47	$	0.30
Quarter ended 30 September 2010	$	0.86	$	0.40
Quarter ended 30 June 2010 (2)	$	1.50	$	0.46
Quarter ended 31 March 2010 (2)	$	2.50	$	1.20
Year ended 31 December 2009:
Quarter ended 31 December 2009(2)	$	1.70	$	1.10
Quarter ended 30 September 2009(2)	$	1.90	$	1.20
Quarter ended 30 June 2009(2)	$	2.50	$	1.10
Quarter ended 31 March 2009(2)	$	2.00	$	1.00
Last Five Full Fiscal Years:
Fiscal year ended 31 December 2010(2)	$	2.50	$	0.30
Fiscal year ended 31 December 2009(2)	$	2.50	$	1.00
Fiscal year ended 31 December 2008(2)	$	8.20	$	0.80
Fiscal year ended 31 December 2007(2)	$	13.50	$	6.00
Fiscal year ended 31 December 2006(2)	$	11.50	$	4.70

(1)	All high and low sales prices up to 20 December 2007, represent prices of our common shares on the TSX Venture Exchange. All high and low sales prices from 21 December 2007 represent prices of our common shares on the TSX.

(2)	On 26 May 2010, the Company implemented a share consolidation of the Company’s outstanding common shares on a ten (old) for one (new) basis. The share price prior to that date has been multiplied by a factor of 10 to compensate for the share consolidation.

The following table sets forth the high and low sales prices of our common shares on the OTCBB for (i) each of the last three full fiscal years when we were listed on the OTCBB, (ii) each full financial quarter in the last two full fiscal years and any subsequent period, and (iii) each of the most recent six months:

	Common Share Price U.S. Dollars (1)
	High		Low
Most Recent Six Months:
Month ended 31 January 2011	$	0.50	$	0.33
Month ended 31 December 2010	$	0.41	$	0.30
Month ended 30 November 2010	$	0.47	$	0.35
Month ended 31 October 2010	$	0.45	$	0.40
Month ended 30 September 2010	$	0.63	$	0.38
Month ended 31 August 2010	$	0.75	$	0.58
Financial Quarters for Last Two Fiscal Years and any Subsequent Period:
Year ended 31 December 2010:
Quarter ended 31 December 2010	$	0.47	$	0.30
Quarter ended 30 September 2010	$	0.75	$	0.38
Quarter ended 30 June 2010 (1)	$	1.50	$	0.42
Quarter ended 31 March 2010(1)	$	2.20	$	1.10
Year ended 31 December 2009:
Quarter ended 31 December 2009 (1)	$	1.70	$	1.00
Quarter ended 30 September 2009 (1)	$	1.80	$	0.20
Quarter ended 30 June 2009 (1)	$	2.40	$	0.80
Quarter ended 31 March 2009 (1)	$	1.70	$	0.50
Last Five Full Fiscal Years:
Fiscal year ended 31 December 2010 (1)	$	2.20	$	0.30
Fiscal year ended 31 December 2009 (1)	$	2.40	$	0.20
Fiscal year ended 31 December 2008 (1)	$	8.20	$	0.50
Fiscal year ended 31 December 2007 (1)	$	14.00	$	4.50
Fiscal year ended 31 December 2006 (1)	$	8.00	$	4.10

(1)	On 26 May 2010, the Company implemented a share consolidation of the Company’s outstanding common shares on a ten (old) for one (new) basis. The share price prior to that date has been multiplied by a factor of 10 to compensate for the share consolidation.

Our authorized capital consists of an unlimited number of common shares without par value, of which 38,950,262 were issued and outstanding as of 31 January 2011.

Our common shares, which have no par value, are issued in registered form. The transfer agent and registrar for our common shares is Computershare Trust Company of Canada, 3rd Floor, 510 Burrard Street, Vancouver, BC V6C 3B9. Our common shares have not been subject to any significant trading suspensions in the last three years.

B. Plan of Distribution

Not applicable.

C. Markets

See Item 9.A.

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 were incorporated under the predecessor to the Business Corporations Act on 20 August 1980 under number 214840. We have no restrictions on our business imposed by the Business Corporations Act. At a meeting of shareholders held on June 21, 2005, shareholders approved certain changes to our constating documents in connection with our transition under the new Business Corporations Act that came into force on March 29, 2004, replacing the predecessor legislation that governed us, including among other things, a new form of articles of association and an increase in our authorized share capital from 100,000,000 common shares to an unlimited number of common shares without par value. The new articles require that a special resolution of the holders of common shares (which is required for substantive changes to the rights attached to the common shares or the creation of any new class of shares) have a two-thirds rather than a three-quarters majority of the votes cast. We are authorized to issue an unlimited number of common shares without par value, of which 38,950,262 common shares were issued and outstanding as of 31 January 2011. We do not have preferred shares or other classes of shares authorized.

All of the common shares rank equally as to voting rights, participation in a distribution of assets on a liquidation, dissolution or winding-up of our Company and the entitlement to dividends. The holders of the common shares are entitled to receive notice of all meetings of shareholders and to attend and vote at the meetings. Each common share carries with it the right to one vote. There are no limitations on the rights of holders to own common shares.

In the event of liquidation, dissolution or winding-up of our Company or other distribution of assets, the holders of the common shares will be entitled to receive, on a pro-rata basis, all of the assets remaining after we have paid out our liabilities. Although we currently do not pay dividends, a capital distribution in the form of dividends, if any, will be declared by the Board of Directors.

Provisions as to modification, amendment or variation of the rights attached to the common shares are contained in our articles and the Business Corporations Act. Generally speaking, substantive changes to the rights attached to the common shares or the creation of any new class of shares requires the approval of the holders of common shares by special resolution (at least two-thirds of the votes cast). The Business Corporations Act allows our shareholders to approve corporate matters by written consent resolution or at a general meeting.

There are no restrictions on the repurchase or redemption by us of common shares as long as we remain solvent. There are no indentures or agreements limiting the payment of dividends. There are no conversion rights, special liquidation rights, sinking fund provisions, pre-emptive rights or subscription rights attached to any common shares. Holders of common shares are not liable to further capital calls by us.

We currently have no shareholder rights plan or “poison pill” device in place that could prevent or delay a takeover bid for our Company. The Business Corporations Act allows for the adoption of such a plan and would require the approval of our shareholders by resolution.

The Directors have the power to convene general meetings of our shareholders and to set the record date for such meetings to determine the shareholders of record entitled to receive notice of and attend and vote at such meetings. Meetings must be held annually, at least every 15 months, and if they are not convened by the directors, may be requisitioned by shareholders in certain circumstances. The shareholders holding at least 5 percent of the voting shares may also requisition a general meeting for the purpose of transacting special business provided certain conditions are met.

If one of our directors votes on a proposal, arrangement or contract in which the director is materially interested, the director is liable to account to us for any profit made as a consequence of our entering into or performing the proposed arrangement or contract, unless the arrangement or contract is reasonable and fair and is approved by a special resolution of the shareholders. A director is not deemed to be interested or have been interested at any time in a proposal, arrangement or transaction merely because it relates to the remuneration of a director in that capacity. The directors have the power to borrow money from any source and upon any terms and conditions of our behalf.

There is no requirement that the directors hold shares in our Company to qualify as directors and there is no age limit requirement for directors.

Shareholders of our Company have the right to inspect many of the records kept at our records office, including our certificate of incorporation, our register of shareholders, our register of directors, minutes of shareholder meetings, consent resolutions of shareholders and our audited financial statements and accompanying auditor’s reports.

Under the Business Corporations Act, a shareholder of our Company has the right to apply to court on the grounds that we are acting or propose to act in a way that is prejudicial to the shareholders. On such an application, the court may make such order as it sees fit including an order to prohibit any act proposed by our Company. In addition, the Business Corporations Act allows a shareholder or director of our Company, with leave of the court, to bring an action in our name and on our behalf to enforce an obligation owed to us that could be enforced by us or to obtain damages for any breach of such an obligation.

C.	Material Contracts

On June 27, 2010, the Company entered into a subscription agreement with the OrbiMed Funds (the “OrbiMed Agreement”) whereby the Company issued an aggregate of 13,333,333 common shares to the OrbiMed Funds at a price of $0.60 per share for gross proceeds of approximately $8 million. Pursuant to the OrbiMed Agreement, the Company granted to OrbiMed certain board rights as described in Item 6.A. above. In addition, the Company agreed that so long as the OrbiMed Funds or their affiliates hold any of our shares, the Company will use its commercially reasonable efforts to either maintain the listing or quotation of our common shares on the Toronto Stock Exchange (or any successors thereto) and the OTC Bulletin Board, or establish and maintain the listing of our common shares on a U.S. national stock exchange. The Company also agreed that, subject to certain exemptions, until July 28, 2012, upon any issuance by the Company or any of its subsidiaries of securities for cash consideration, indebtedness or a combination of units thereof, each OrbiMed Fund shall have the right to participate in up to an amount of such financing so as to maintain such OrbiMed Fund’s relative ownership interest in the Company on the same terms, conditions and price provided for in such financing.

D.	Exchange Controls

There is no governmental law, decree, regulation or other legislation in Canada that affects the export or import of capital, or the remittance of dividends, interest or other payments to non-resident holders of our common shares, other than withholding tax requirements. See “Item 10E – Canadian Federal Income Taxation” and “Certain United States Federal Income Tax Consequences.”

There is no limitation imposed by Canadian law or by our charter or other constituent documents on the right of a non-resident to hold or vote our common shares, other than as provided in the Investment Canada Act (Canada) (the “Investment Act”). The following discussion summarizes the principal features of the Investment Act for a non-Canadian who proposes to acquire common shares of our Company. It is general only, it is not a substitute for independent advice from an investor’s own advisor, and it does not anticipate statutory or regulatory amendments.

The Investment Act contains two separate review processes. Under the first process the Investment Act generally prohibits implementation of a reviewable investment by an individual, government or agency thereof, corporation, partnership, trust or joint venture (each an “entity”) that is not a “Canadian” as defined in the Investment Act (a “non-Canadian”), unless after review the Director of Investments appointed by the minister responsible for the Investment Act is satisfied that the investment is likely to be of net benefit to Canada. An investment in our common shares by a non-Canadian other than a “WTO Investor” (as defined in the Investment Act and which term includes entities which are nationals or are controlled by nationals of member states of the World Trade Organization) when we are not controlled by a WTO Investor, would be reviewable under the Investment Act if it was an investment or acquire control of us and the value of our assets, as determined in accordance with the regulations promulgated under the Investment Act, was Canadian $5 million or more, or if an order for review was made by the federal cabinet on the grounds that the investment related to Canada’s cultural heritage or national identity, regardless of the value of our assets. An investment in our common shares by a WTO Investor, or by a non-Canadian when we were controlled by a WTO Investor, would be reviewable under the Investment Act if it was an investment in 2010 to acquire control of us and the value of our assets, as determined in accordance with the regulations promulgated under the Investment Act, exceeds Canadian $299 million. (This threshold will increase to Canadian $600 million upon the coming into force of recently passed regulations under the Investment Act.) Under

the second review process the minister responsible for the Investment Act can review any investment to acquire control of us made by a non-Canadian if the minister believes that the investment may be injurious to national security. Under this second process the minister has the ability to prevent an investment or order divestiture where the investment has already occurred. A non-Canadian would acquire control of us for the purposes of the Investment Act if the non-Canadian acquired a majority of our common shares. The acquisition of less than a majority but one third or more of the common shares would be presumed to be an acquisition of control of us unless it could be established that, on the acquisition, we were not controlled in fact by the acquirer through the ownership of common shares.

Certain transactions relating to our common shares would be exempt from the first review process described above, including:

(a)	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 voting interests by any person in the ordinary course of a business carried on by that person that consists of providing, in Canada, venture capital on terms and conditions not inconsistent with such terms and conditions as may be fixed by the minister responsible for the Investment Act,

(c)	Acquisition of control of us 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 Act, and

(d)	Acquisition of control of us by reason of an amalgamation, merger, consolidation or corporate reorganization following which the ultimate direct or indirect control in fact of us, through the ownership of common shares, remained unchanged.

Certain transactions relating to our common shares would also be exempt from the second review process described above, including those transactions listed above in paragraphs (c) and (d).

Taxation

Canadian Federal Income Taxation

The following discussion summarizes the principal Canadian federal income tax considerations generally applicable to a person (an “Investor”) who acquires one or more of our common shares and who at all material times for the purposes of the Income Tax Act (Canada) (the “Canadian Act”) deals at arm’s length with us, holds all common shares solely as capital property, is a non-resident of Canada, and does not, and is not deemed to, use or hold any common share in the course of carrying on business in Canada. It is assumed that the common shares will not at any time derive 50% or more of their fair market value from any combination of real or immovable property situated in Canada, “Canadian resource properties”, “timber resources properties” (as those terms are defined under the Canadian Act), or options or rights in respect of such properties.

This summary is based on the current provisions of the Canadian Act, including the regulations thereunder, and the Canada-United States Income Tax Convention (1980) (the “Treaty”) as amended. This summary takes into account all specific proposals to amend the Canadian Act and the regulations thereunder publicly announced by the government of Canada to the date hereof and our understanding of the current published administrative and assessing practices of Canada Revenue Agency. It is assumed that all such amendments will be enacted substantially as currently proposed, and that there will be no other material change to any other law or practice, although no assurances can be given in these respects. Except to the extent otherwise expressly set out herein, this summary does not take into account any provincial, territorial or foreign income tax law or treaty.

This summary is not, and is not to be construed as, tax advice to any particular Investor. Each prospective and current Investor is urged to obtain independent advice as to the Canadian income tax consequences of an investment in common shares applicable to the Investor’s particular circumstances.

An Investor generally will not be subject to tax pursuant to the Canadian Act on any capital gain realized by the Investor on a disposition of a common share.

Any dividend on a common share, including a stock dividend, paid or credited, or deemed to be paid or credited, by us to an Investor will be subject to Canadian withholding tax at the rate of 25% on the gross amount of the dividend, or such lesser rate as may be available under an applicable income tax treaty. Pursuant to the Treaty, the rate of withholding tax applicable to a dividend paid on a common share to an Investor who beneficially owns the dividend

and is a resident of the United States for the purposes of the Treaty and entitled to the benefits thereunder will be reduced to: (i) 5% if the Investor is a company that owns, or is considered for purposes of the Treaty to own, at least 10% of our voting stock; or (ii) 15% in any other case. We will be required to withhold any such tax from the dividend and remit the tax directly to the Canada Revenue Agency for the account of the Investor.

CERTAIN UNITED STATES FEDERAL INCOME TAX CONSIDERATIONS

The following is a general summary of certain material U.S. federal income tax considerations applicable to a U.S. Holder (as defined below) arising from and relating to the acquisition, ownership, and disposition of common shares of the Company.

This summary is for general information purposes only and does not purport to be a complete analysis or listing of all potential U.S. federal income tax considerations that may apply to a U.S. Holder arising from and relating to the acquisition, ownership, and disposition of common shares. In addition, this summary does not take into account the individual facts and circumstances of any particular U.S. Holder that may affect the U.S. federal income tax consequences to such U.S. Holder, including specific tax consequences to a U.S. Holder under an applicable tax treaty. Accordingly, this summary is not intended to be, and should not be construed as, legal or U.S. federal income tax advice with respect to any U.S. Holder. Each U.S. Holder should consult its own tax advisor regarding the U.S. federal, U.S. federal alternative minimum, U.S. federal estate and gift, U.S. state and local tax, and foreign tax consequences relating to the acquisition, ownership and disposition of common shares.

No legal opinion from U.S. legal counsel or ruling from the Internal Revenue Service (the “IRS”) has been requested, or will be obtained, regarding the U.S. federal income tax consequences of the acquisition, ownership, and disposition of common shares. This summary is not binding on the IRS, and the IRS is not precluded from taking a position that is different from, and contrary to, the positions taken in this summary. In addition, because the authorities on which this summary is based are subject to various interpretations, the IRS and the U.S. courts could disagree with one or more of the positions taken in this summary.

Scope of this Summary

Authorities

This summary is based on the Internal Revenue Code of 1986, as amended (the “Code”), Treasury Regulations (whether final, temporary, or proposed), published rulings of the IRS, published administrative positions of the IRS, the Convention Between Canada and the United States of America with Respect to Taxes on Income and on Capital, signed 26 September 1980, as amended (the “Canada-U.S. Tax Convention”), and U.S. court decisions that are applicable and, in each case, as in effect and available, as of the date of this document. Any of the authorities on which this summary is based could be changed in a material and adverse manner at any time, and any such change could be applied on a retroactive or prospective basis which could affect the U.S. federal income tax considerations described in this summary. This summary does not discuss the potential effects, whether adverse or beneficial, of any proposed legislation that, if enacted, could be applied on a retroactive or prospective basis.

U.S. Holders

For purposes of this summary, the term "U.S. Holder" means a beneficial owner of common shares that is for U.S. federal income tax purposes:

·	an individual who is a citizen or resident of the U.S.;

·	a corporation (or other entity taxable as a corporation for U.S. federal income tax purposes) organized under the laws of the U.S., any state thereof or the District of Columbia;

·	an estate whose income is subject to U.S. federal income taxation regardless of its source; or

·	a trust that (1) is subject to the primary supervision of a court within the U.S. and the control of one or more U.S. persons for all substantial decisions or (2) has a valid election in effect under applicable Treasury regulations to be treated as a U.S. person.

Non-U.S. Holders

For purposes of this summary, a “non-U.S. Holder” is a beneficial owner of common shares that is not a U.S. Holder. This summary does not address the U.S. federal income tax consequences to non-U.S. Holders arising from and relating to the acquisition, ownership, and disposition of common shares. Accordingly, a non-U.S. Holder should consult its own tax advisor regarding the U.S. federal, U.S. federal alternative minimum, U.S. federal estate and gift, U.S. state and local tax, and foreign tax consequences (including the potential application of and operation of any income tax treaties) relating to the acquisition, ownership, and disposition of common shares.

U.S. Holders Subject to Special U.S. Federal Income Tax Rules Not Addressed

This summary does not address the U.S. federal income tax considerations applicable to U.S. Holders that are subject to special provisions under the Code, including, but not limited to, the following U.S. Holders: (a) U.S. Holders that are tax-exempt organizations, qualified retirement plans, individual retirement accounts, or other tax-deferred accounts; (b) U.S. Holders that are financial institutions, underwriters, insurance companies, real estate investment trusts, or regulated investment companies; (c) U.S. Holders that are dealers in securities or currencies or U.S. Holders that are traders in securities that elect to apply a mark-to-market accounting method; (d) U.S. Holders that have a “functional currency” other than the U.S. dollar; (e) U.S. Holders that own common shares as part of a straddle, hedging transaction, conversion transaction, constructive sale, or other arrangement involving more than one position; (f) U.S. Holders that acquired common shares in connection with the exercise of employee stock options or otherwise as compensation for services; (g) U.S. Holders that hold common shares other than as a capital asset within the meaning of Section 1221 of the Code (generally, property held for investment purposes); (h) partnerships and other pass-through entities (and investors in such partnerships and entities); or (j) U.S. Holders that own or have owned (directly, indirectly, or by attribution) 10% or more of the total combined voting power of the outstanding shares of the Company. This summary also does not address the U.S. federal income tax considerations applicable to U.S. Holders who are (a) U.S. expatriates or former long-term residents of the U.S. subject to Section 877 of the Code, (b) persons that have been, are, or will be a resident or deemed to be a resident in Canada for purposes of the Tax Act; (c) persons that use or hold, will use or hold, or that are or will be deemed to use or hold common shares in connection with carrying on a business in Canada; (d) persons whose common shares constitute “taxable Canadian property” under the Tax Act; or (e) persons that have a permanent establishment in Canada for the purposes of the Canada-U.S. Tax Convention. U.S. Holders that are subject to special provisions under the Code, including, but not limited to, U.S. Holders described immediately above, should consult their own tax advisor regarding the U.S. federal, U.S. federal alternative minimum, U.S. federal estate and gift, U.S. state and local tax, and foreign tax consequences relating to the acquisition, ownership and disposition of common shares.

If an entity that is classified as a partnership for U.S. federal income tax purposes holds common shares, the U.S. federal income tax consequences to such partnership and the partners of such partnership generally will depend on the activities of the partnership and the status of such partners. Partners of entities that are classified as partnerships for U.S. federal income tax purposes should consult their own tax advisor regarding the U.S. federal income tax consequences arising from and relating to the acquisition, ownership, and disposition of common shares.

Tax Consequences Not Addressed

This summary does not address the U.S. state and local, U.S. federal estate and gift, U.S. federal alternative minimum tax or foreign tax consequences to U.S. Holders of the acquisition, ownership, and disposition of common shares. Each U.S. Holder should consult its own tax advisor regarding the U.S. state and local, U.S. federal estate and gift, U.S. federal alternative minimum tax and foreign tax consequences of the acquisition, ownership, and disposition of common shares.

U.S. Federal Income Tax Consequences of the Acquisition, Ownership, and Disposition of Common Shares

If the Company is not considered a “passive foreign investment company” (a “PFIC”, as defined below) at any time during a U.S. Holder’s holding period, the following sections will generally describe the U.S. federal income tax consequences to U.S. Holders of the acquisition, ownership, and disposition of the Company’s common shares.

Distributions on Common Shares

A U.S. Holder that receives a distribution, including a constructive distribution, with respect to the Company’s common shares will be required to include the amount of such distribution in gross income as a dividend (without reduction for any foreign income tax withheld from such distribution) to the extent of the current or accumulated “earnings and profits” of the Company, as computed for U.S. federal income tax purposes. To the extent that a distribution exceeds the current and accumulated “earnings and profits” of the Company, such distribution will be treated (a) first, as a tax-free return of capital to the extent of a U.S. Holder’s tax basis in the common shares and, (b) thereafter, as gain from the sale or exchange of such common shares (see “Disposition of Common Shares” below). However, the Company may not maintain the calculations of earnings and profits in accordance with U.S. federal income tax principles, and each U.S. Holder should therefore assume that any distribution by the Company

with respect to common shares will constitute ordinary dividend income. Dividends paid on common shares generally will not be eligible for the “dividends received deduction.”

For taxable years beginning before January 1, 2013, a dividend paid by the Company to a U.S. Holder who is an individual, estate or trust generally will be taxed at the preferential tax rates applicable to long-term capital gains if (a) the Company is a “qualified foreign corporation” (as defined below), (b) the U.S. Holder receiving such dividend is an individual, estate, or trust, and (c) certain holding period requirements are met. The Company generally will be a “qualified foreign corporation” under Section 1(h)(11) of the Code (a “QFC”) if (a) the Company is eligible for the benefits of the Canada-U.S. Tax Convention, or (b) common shares of the Company are readily tradable on an established securities market in the U.S. However, even if the Company satisfies one or more of such requirements, the Company will not be treated as a QFC if the Company is a PFIC for the taxable year during which the Company pays a dividend or for the preceding taxable year. (See the section below under the heading "Passive Foreign Investment Company Rules").

If the Company is QFC, but a U.S. Holder is not eligible to qualify for the preferential tax rate applicable to dividends discussed above, a dividend paid by the Company to a U.S. Holder, including a U.S. Holder that is an individual, estate, or trust, generally will be taxed at ordinary income tax rates (and not at the preferential tax rates applicable to long-term capital gains). The dividend rules are complex, and each U.S. Holder should consult its own tax advisor regarding the dividend rules.

Disposition of Common Shares

A U.S. Holder will recognize gain or loss on the sale or other taxable disposition of common shares in an amount equal to the difference, if any, between (a) the amount of cash plus the fair market value of any property received and (b) such U.S. Holder’s tax basis in the common shares sold or otherwise disposed of. Subject to the PFIC rules discussed below, any such gain or loss generally will be capital gain or loss, which will be long-term capital gain or loss if common shares are held for more than one year.

Gain or loss recognized by a U.S. Holder on the sale or other taxable disposition of common shares generally will be treated as “U.S. source” for purposes of applying the U.S. foreign tax credit rules unless the gain is subject to tax in Canada and is resourced as “foreign source” under the Canada-U.S. Tax Convention and such U.S. Holder elects to treat such gain or loss as “foreign source.”

Preferential tax rates apply to long-term capital gains of a U.S. Holder that is an individual, estate, or trust. There are currently no preferential tax rates for long-term capital gains of a U.S. Holder that is a corporation. Deductions for capital losses are subject to significant limitations under the Code.

Receipt of Foreign Currency

The amount of any distribution paid in foreign currency to a U.S. Holder in connection with the ownership of common shares, or on the sale, exchange or other taxable disposition of common shares, generally will be equal to the U.S. dollar value of such foreign currency based on the exchange rate applicable on the date of receipt (regardless of whether such foreign currency is converted into U.S. dollars at that time). A U.S. Holder that receives foreign currency and converts such foreign currency into U.S. dollars at a conversion rate other than the rate in effect on the date of receipt may have a foreign currency exchange gain or loss, which generally would be treated as U.S. source ordinary income or loss. If the foreign currency received is not converted into U.S. dollars on the date of receipt, a U.S. Holder will have a basis in the foreign currency equal to its U.S. dollar value on the date of receipt. Each U.S. Holder should consult its own U.S. tax advisor regarding the U.S. federal income tax consequences of receiving, owning, and disposing of foreign currency.

Foreign Tax Credit

A U.S. Holder who pays (whether directly or through withholding) foreign income tax with respect to dividends paid on common shares generally will be entitled, at the election of such U.S. Holder, to receive either a deduction or a credit for such foreign income tax paid. Generally, a credit will reduce a U.S. Holder’s U.S. federal income tax liability on a dollar-for-dollar basis, whereas a deduction will reduce a U.S. Holder’s income subject to U.S. federal income tax. This election is made on a year-by-year basis and applies to all foreign taxes paid (whether directly or through withholding) by a U.S. Holder during a year.

Complex limitations apply to the foreign tax credit, including the general limitation that the credit cannot exceed the proportionate share of a U.S. Holder’s U.S. federal income tax liability that such U.S. Holder’s “foreign source”

taxable income bears to such U.S. Holder’s worldwide taxable income. In applying this limitation, a U.S. Holder’s various items of income and deduction must be classified, under complex rules, as either “foreign source” or “U.S. source.” In addition, this limitation is calculated separately with respect to specific categories of income. Dividends paid by the Company generally will constitute “foreign source” income and generally will be categorized as “passive income.”

Subject to specific rules, foreign taxes paid with respect to any distribution in respect of stock in a PFIC are generally eligible for the foreign tax credit. The rules relating to distributions by a PFIC and their eligibility for the foreign tax credit are complicated, and a U.S. Holder should consult with their own tax advisor regarding the availability of the foreign tax credit with respect to distributions by a PFIC.

The foreign tax credit rules are complex, and each U.S. Holder should consult its own tax advisor regarding the foreign tax credit rules.

Information Reporting; Backup Withholding Tax For Certain Payments

Under U.S. federal income tax law and regulations, certain categories of U.S. Holders must file information returns with respect to their investment in, or involvement in, a foreign corporation. Penalties for failure to file certain of these information returns are substantial. U.S. Holders of common shares should consult with their own tax advisors regarding the requirements of filing information returns, and if applicable, any “mark-to-market election” or “QEF election” (each as defined below).

Payments made within the U.S., or by a U.S. payor or U.S. middleman, of dividends on, and proceeds arising from certain sales or other taxable dispositions of, common shares generally will be subject to information reporting and backup withholding tax, at the rate of 28% (and increasing to 30% for payments made after 31 December 2012), if a U.S. Holder (a) fails to furnish such U.S. Holder’s correct U.S. taxpayer identification number (generally on Form W-9), (b) furnishes an incorrect U.S. taxpayer identification number, (c) is notified by the IRS that such U.S. Holder has previously failed to properly report items subject to backup withholding tax, or (d) fails to certify, under penalty of perjury, that such U.S. Holder has furnished its correct U.S. taxpayer identification number and that the IRS has not notified such U.S. Holder that it is subject to backup withholding tax. However, U.S. Holders that are corporations generally are excluded from these information reporting and backup withholding tax rules. Any amounts withheld under the U.S. backup withholding tax rules will be allowed as a credit against a U.S. Holder’s U.S. federal income tax liability, if any, or will be refunded, if such U.S. Holder furnishes required information to the IRS on a timely basis. Each U.S. Holder should consult its own tax advisor regarding the information reporting and backup withholding tax rules.

Passive Foreign Investment Company Rules

If the Company were to constitute a PFIC (as defined below) for any year during a U.S. Holder’s holding period, then certain different and potentially adverse tax consequences would apply to such U.S. Holder’s acquisition, ownership and disposition of common shares.

The Company generally will be a PFIC under Section 1297 of the Code if, for a taxable year, (a) 75% or more of the gross income of the Company for such taxable year is passive income (the “income test”) or (b) 50% or more of the assets held by the Company either produce passive income or are held for the production of passive income, based on the quarterly average of the fair market value of such assets (the “asset test”). “Gross income” generally means all revenues less the cost of goods sold, and “passive income” includes, for example, dividends, interest, certain rents and royalties, certain gains from the sale of stock and securities, and certain gains from commodities transactions.

In addition, for purposes of the PFIC income test and asset test described above, if the Company owns, directly or indirectly, 25% or more of the total value of the outstanding shares of another corporation, the Company will be treated as if it (a) held a proportionate share of the assets of such other corporation and (b) received directly a proportionate share of the income of such other corporation. In addition, for purposes of the PFIC income test and asset test described above, “passive income” does not include any interest, dividends, rents, or royalties that are received or accrued by the Company from a “related person” (as defined in Section 954(d)(3) of the Code), to the extent such items are properly allocable to the income of such related person that is not passive income.

Under certain attribution rules, if the Company is a PFIC, U.S. Holders will be deemed to own their proportionate share of any subsidiary of the Company which is also a PFIC (a ‘‘Subsidiary PFIC’’), and will be subject to U.S.

federal income tax on (i) a distribution on the shares of a Subsidiary PFIC or (ii) a disposition of shares of a Subsidiary PFIC, both as if the holder directly held the shares of such Subsidiary PFIC.

The Company does not believe that it was a PFIC for the taxable year ended 31 December 2010. However, the Company may have been a PFIC during prior years in which the Company did not have significant product sales revenues or contract service revenues. The determination of whether the Company will be a PFIC for a taxable year depends, in part, on the application of complex U.S. federal income tax rules, which are subject to differing interpretations. In addition, whether the Company will be a PFIC for its current taxable year depends on the assets and income of the Company over the course of each such taxable year and, as a result, cannot be predicted with certainty as of the date of this document. Consequently, there can be no assurance regarding the Company’s PFIC status for any taxable year during which U.S. Holders hold common shares, and there can be no assurance that the IRS will not challenge the determination made by the Company concerning its PFIC status.

Under the default PFIC rules, a U.S. Holder would be required to treat any gain recognized upon a sale or disposition of our common shares as ordinary (rather than capital), and any resulting U.S. federal income tax may be increased by an interest charge which is not deductible by non-corporate U.S. Holders. Rules similar to those applicable to dispositions will generally apply to distributions in respect of our common shares which exceed a certain threshold level.

While there are U.S. federal income tax elections that sometimes can be made to mitigate these adverse tax consequences (including, without limitation, the “QEF Election” and the “Mark-to-Market Election”), such elections are available in limited circumstances and must be made in a timely manner. U.S. Holders are urged to consult their own tax advisers regarding the potential application of the PFIC rules to the ownership and disposition of our common shares, and the availability of certain U.S. tax elections under the PFIC rules.

U.S. Holders should be aware that, for each taxable year, if any, that the Company or any Subsidiary PFIC is a PFIC, the Company can provide no assurances that it will satisfy the record keeping requirements of a PFIC, or that it will make available to U.S. Holders the information such U.S. Holders require to make a QEF Election under Section 1295 of the Code with respect of the Company or any Subsidiary PFIC. Each U.S. Holder should consult its own tax advisor regarding the availability of, and procedure for making, a QEF Election with respect to the Company and any Subsidiary PFIC.

F.	Dividends and Paying Agents

Not applicable.

G.	Statement by Experts

Not applicable.

H.	Documents on Display

Copies of the Company’s reports and other information, including this annual report and the exhibits thereto, as filed with the Securities and Exchange Commission can be obtained from www.sec.gov. Copies of all documents filed with the securities commissions in Canada can be obtained from www.sedar.com.

I.	Subsidiary Information

Not applicable.

Item 11. Quantitative and Qualitative Disclosures about Market Risk

We conduct a considerable amount of our business outside of Canada and many of our purchase and sales transactions in our fiscal year ended 31 December 2010 were made in U.S. dollars. For this purpose, we maintain U.S. currency accounts for transactions in U.S. dollars. Our business transactions gave rise to a foreign exchange loss of $85,484 in fiscal year 2010, a foreign exchange loss of $104,427 in fiscal year 2009, and a foreign exchange gain of $6,113 in fiscal year 2008. We do not have any foreign currency hedging instruments in place.

As at 31 December 2010, a hypothetical 10% change (+/-) in the value of the U.S. dollar relative to the value of the Canadian dollar, based on the closing buying rate for cable transfers in foreign currencies as certified for customs purposes by the Bank of Canada on 31 December 2010, would have had approximately an $85,000 effect on our contractual obligations as reported in Item 5.F. Tabular Disclosure of Contractual Obligations”.

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

Disclosure Controls and Procedures

The Company initially carried out an evaluation, under the supervision and with the participation of our management, including our former Chief Executive Officer and former Chief Financial Officer, of the effectiveness of the design and operation of the disclosure controls and procedures (as defined in Rule 13a-15(e) under the United States Securities Exchange Act of 1934, as amended) of the Company as at 31 December 2010 in connection with the preparation of the Company’s Original Form 20-F. The Company disclosed in its Original Form 20-F that, based upon the evaluation, the former Chief Executive Officer and former Chief Financial Officer concluded that, as at 31 December 2010, our disclosure controls and procedures were effective.

In connection with the restatements of certain of our financial statements described in more detail elsewhere in this Form 20-F/A, management of the Company, including our new interim Chief Executive Officer and our new Corporate Controller, who serves as our principal financial and accounting officer, re-evaluated the effectiveness of the Company’s disclosure controls and procedures as of 31 December 2010. As a result of that re-evaluation, the Company’s interim Chief Executive Officer and Corporate Controller have determined that due to the material weaknesses in internal control over financial reporting described below, the Company’s disclosure controls and procedures were not effective as of 31 December 2010. Additional information regarding the restatement is contained in Note 4 to the Notes to Consolidated Financial Statements included in this Form 20-F/A.

Internal Control Over Financial Reporting

Our management is responsible for establishing and maintaining adequate internal control over financial reporting (as defined in Rule 13a-15(f) under the United States Securities Exchange Act of 1934, as amended) for us. The Original Form 20-F stated that our management, with the participation of our Chief Executive Officer and Chief Financial Officer, assessed the effectiveness of our internal control over financial reporting as of 31 December 2010 using the criteria set forth by the Committee of Sponsoring Organizations of the Treadway Commission (COSO) in Internal Control-Integrated Framework. Based upon their assessment, our management concluded in the Original Form 20-F that, as of 31 December 2010, our internal control over financial reporting was effective. The Company’s

internal control over financial reporting was not subject to attestation by its independent registered public accounting firm for the fiscal year ended 31 December 2010.

In connection with the restatements of certain of our financial statements described in more detail elsewhere in this Form 20-F/A, our new management, with the participation of our new Chief Executive Officer and new Corporate Controller, re-assessed the effectiveness of our internal control over financial reporting as of 31 December 2010. In making this re-assessment, our management used the criteria set forth by the Committee of Sponsoring Organizations of the Treadway Commission (COSO) in Internal Control-Integrated Framework. As a result of this re-assessment, management identified the following control deficiencies that constituted material weakness as of 31 December 2010:

Control environment – The Company did not maintain an effective control environment. The control environment, which is the responsibility of senior management, sets the tone of the organization, influences the control consciousness of its people, and is the foundation for all other components of internal control over financial reporting. We did not maintain a tone and control consciousness that consistently emphasized adherence to accurate financial reporting and enforcement of our policies and procedures. This control deficiency fostered a lack of sufficient appreciation for internal control over financial reporting, allowed for management override of internal controls in certain circumstances and resulted in an ineffective process for monitoring the adherence to our policies and procedures.

Documentation, training and testing – The Company did not update its written policies and procedures with respect to internal control over financial reporting following the Company’s 2010 management reorganization and restructuring to reflect changes in the management team and reporting authorities. The Company’s written policies and procedures were not consistently followed, due to inadequate training of staff and the failures noted elsewhere. The Company believes that no testing of internal control over financial reporting was conducted by its management in connection with the Original Form 20-F.

Documentation and communication of contract terms – The Company did not maintain effective document control and records of contracts with its distributors. Certain terms of contracts were documented in oral or side agreements and were not properly disclosed to the Company’s board of directors and its external auditors or legal advisors.

Revenue recognition – The Company did not maintain effective revenue recognition controls and policies. When persuasive evidence of a purchase order did not exist, when oral or side agreements existed, when contingencies existed with respect to the acceptance of the product, or when distributors did not have the ability or intent to pay independent of payment by the end-user customer, this information was not properly communicated to the Company’s board of directors, external auditors and legal advisors. Goods were shipped and revenue recognized in violation of the Company’s written policies and procedures.

5.	Anti-fraud program – The Company did not maintain an effective anti-fraud program designed to detect and prevent fraud, such as a whistle-blower program and an ongoing program to manage identified fraud risks.

Each of these deficiencies could result in a material misstatement of the Company’s consolidated financial statements, and certain of these deficiencies resulted in the material misstatement to the Company’s consolidated financial statements, as described in more detail elsewhere in this Form 20-F/A and in Note 4 to the Notes to Consolidated Financial Statements included in this Form 20-F/A.

In response to the control deficiencies described above, the Company’s management, under the direction of its interim Chief Executive Officer and Corporate Controller, is developing and intends to implement a remediation plan, which is presently expected to include the following:

1.	Updating the Company’s controls, policies and procedures to reflect the reorganization and restructuring from 2010 and further organizational changes implemented in recent months.

3.	Updating the Company’s controls and procedures regarding order entry and processing.

4.	Additional training of staff and management on revenue recognition.

5.	Implementing a document control system regarding all contracts with distributors and other key organizations working with the Company.

6.	Implementing a Whistleblower Policy to facilitate reporting directly to the Company’s Audit Committee any suspected improper activity.

7.	Improving the overall control environment through the recruiting of a new Chief Executive Officer and additional managers, in addition to the changes to management effected earlier in 2011.

The Company’s new management believes that the measures described above will enhance the remediation of the control deficiencies that have been identified, and is committed to improving the Company’s disclosure controls and procedures and internal control over financial reporting. The Company’s management is committed to continuing to improve the Company’s internal control processes and will continue to diligently and vigorously review the Company’s financial reporting controls and procedures. As the Company continues to evaluate and work to improve its internal control over financial reporting, it may determine to take additional measures to address control deficiencies or determine to modify, or in appropriate circumstances not to complete, certain of the remediation measures described above.

Changes in Internal Control Over Financial Reporting

Except as noted above, no change in our internal control over financial reporting occurred during the fiscal year ended 31 December 2010 that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

Item 16A. Audit Committee Financial Expert

Our Board of Directors has determined that Richard Bear qualifies as an “audit committee financial expert” as defined by Item 16A of Form 20-F. Mr. Bear is chair of the audit committee and is a non-management director. Mr. Bear is “independent” under the independence standards of the Nasdaq Stock Market.

Item 16B. Code of Ethics

We have a Code of Ethics as described under Item 16B of Form 20-F, that applies to all employees, including the Chief Executive Officer and Vice President, Finance and Administration and Chief Financial Officer, to clearly address the guidance provided by the SEC in this area. A copy of the code of ethics may be obtained free of charge, upon written request to our Corporate Secretary at 1781-75th Avenue West, Vancouver, B.C., Canada, V6P 6P2.

Item 16C. Principal Accountant Fees and Services

The aggregate fees billed by our external auditors in each of the last two fiscal years are as follows:

Financial Year Ending	Audit Fees		Audit Related Fees (1)		Tax Fees (2)		All Other Fees (3)
2010	$	131,709	$	6,189	Nil		$	9,926
2009	$	210,533	$	116,905	$	5,550	$	77,493

(1)	Fees charged for assurance and related services reasonably related to the performance of an audit, and not included under "Audit Fees". In 2009, includes fees related to SOX compliance.

(2)	Fees charged for tax compliance, tax advice and tax planning services.

(3)	Fees incurred in relation to the public offering in May 2009, recorded to share issue costs.

Before we engage our external auditors to render audit or non-audit services, the engagement is pre-approved by our audit committee. Our audit committee reviews our external auditors’ engagements letters for audit and non-audit services. All of the services provided by our external auditors during 2010 and 2009 were pre-approved by the audit committee in this manner.

Item 16D. Exemptions From the Listing Standards For Audit Committees

Not applicable.

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

Not applicable.

Item 16F. Change in Registrant’s Certifying Accountant

Not applicable.

Item 16G. Corporate Governance

Not applicable. Our common shares are quoted on the OTC Bulletin Board in the United States.

PART III

Item 17. Financial Statements

We are filing with this annual report, pursuant to Item 17, audited consolidated financial statements of our Company, including the consolidated balance sheets, consolidated statements of loss and deficit and consolidated statements of cash flows, as at 31 December 2010 and 2009 and for the years ended 31 December 2010, 2009 and 2008, the notes to those statements and the auditors’ report thereon.

All financial statements included herein are stated in accordance with Canadian generally accepted accounting principles. Such financial statements have been reconciled to United States generally accepted accounting principles. For the historical exchange rates, which were in effect for United States dollars against Canadian dollars, see “Terms of Reference and Exchange Rates” at the beginning of this annual report.

Item 18. Financial Statements

We have elected to provide financial statements pursuant to Item 17 of Form 20-F.

MANAGEMENT’S RESPONSIBILITY FOR

FINANCIAL REPORTING

The consolidated financial statements contained in this annual report have been approved by the board of directors and were prepared by management using Canadian generally accepted accounting principles. Management is responsible for the preparation and integrity of the consolidated financial statements and all other information in the annual report, and for ensuring that this information is consistent, where appropriate, with the information contained in the consolidated financial statements.

Management has developed and is maintaining a system of policies and procedures and internal controls to obtain reasonable assurance that the Company’s assets are safeguarded, transactions are authorized and financial information is reliable.

The Board of Directors is responsible for ensuring that management fulfills its responsibility for financial reporting and internal control. The Board of Directors exercises this responsibility principally through the Audit Committee. The Audit Committee consists of directors not involved in the daily operations of the Company. The Audit Committee meets with management and the external auditors to satisfy itself that management’s responsibilities are properly discharged and to review the consolidated financial statements prior to their presentation to the Board of Directors for approval.

The external auditors, Ernst & Young LLP, conducted an independent audit of the consolidated financial statements in accordance with Canadian generally accepted auditing standards. Their report expresses their opinion on the consolidated financial statements of the Company. The external auditors have free and full access to the Audit Committee with respect to their findings.

/s/ Peter A. Thompson		/s/ Anastasios Tsonis

Peter Thompson Interim Chief Executive Officer		Anastasios Tsonis Corporate Controller

INDEPENDENT AUDITORS’ REPORT OF REGISTERED PUBLIC ACCOUNTING FIRM

To the Shareholders of Response Biomedical Corporation

We have audited the accompanying consolidated financial statements of Response Biomedical Corporation (the “Company”), which comprise the consolidated balance sheets as at December 31, 2010 and 2009, and the consolidated statements of loss, comprehensive loss and deficit, and cash flows for each of the years in the three-year period ended December 31, 2010, 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 Canadian generally accepted accounting principles, and for such internal control as management determines is necessary to enable the preparation of consolidated financial statements that are free from material misstatement, whether due to fraud or error.

Auditors’ responsibility

Our responsibility is to express an opinion on these consolidated financial statements based on our audits. We conducted our audits in accordance with Canadian generally accepted auditing standards and the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we comply with ethical requirements and plan and perform the audit to obtain reasonable assurance about whether the consolidated financial statements are free from material misstatement. We were not engaged to perform an audit of the Company’s internal control over financial reporting. Our audits included consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion.

An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the consolidated financial statements. The procedures selected depend on the auditors’ judgment, including the assessment of the risks of material misstatement of the consolidated financial statements, whether due to fraud or error. An audit also includes examining, on a test basis, evidence supporting the amounts and disclosures in the consolidated financial statements, evaluating the appropriateness of accounting policies used and the reasonableness of accounting estimates made by management, as well as evaluating the overall presentation of the consolidated financial statements.

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

Opinion

In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of Response Biomedical Corporation as at December 31, 2010 and 2009, and the results of its operations and its cash flows for each of the years in the three-year period ended December 31, 2010 in accordance with Canadian generally accepted accounting principles.

Other matter

As discussed in Note 4 to the consolidated financial statements, the December 31, 2010 consolidated financial statements have been restated to correct errors in accounting for revenue, inventory, long-term prepaids and accrued and other liabilities.

Emphasis of Matter

Without qualifying our opinion, we draw attention to Note 1 in the financial statements which indicates that the Company had a deficit of $100,782,221 as at December 31, 2010. These conditions, along with other matters as set forth in Note 1, indicate substantial doubt about the Company's ability to continue as a going concern.

Vancouver, Canada

Chartered accountants

March 10, 2011, except as to Notes 4, 19 and 20, which are as of November 7, 2011

Consolidated Financial Statements

Response Biomedical Corporation

(Expressed in Canadian dollars)

December 31, 2010 and 2009

(Restated November 7, 2011)

Response Biomedical Corporation

Incorporated under the laws of British Columbia

CONSOLIDATED BALANCE SHEETS

[See Note 1 - Basis of Presentation and Going Concern Uncertainty]

(Expressed in Canadian dollars)
(Restated November 7, 2011)	December 31,			December 31,
	2010			2009
	$			$
	Restated
	[Note 4]

ASSETS
Current
Cash and cash equivalents		4,330,117			5,073,471
Trade receivables, net [note 6]		1,218,670			2,059,635
Other receivables		100,885			45,996
Inventories [note 7]		3,040,755			2,185,160
Prepaid expenses and other		201,853			238,158
Total current assets		8,892,280			9,602,420
Long-term prepaids		61,400			1,329
Restricted investments [notes 5 and 10[iii]]		905,112			901,093
Property, plant and equipment [note 8]		9,599,605			10,845,786
Intangible assets [note 9]		65,534			113,568
		19,523,931			21,464,196

LIABILITIES AND SHAREHOLDERS’ EQUITY
Current
Accounts payable [note 6]		724,731			1,049,242
Accrued and other liabilities [notes 6 and 13]		948,734			524,763
Lease inducements - current portion [note 10]		168,939			168,939
Repayable leasehold improvement allowance, current portion [note 10]		297,449			266,598
Deferred revenue - current portion [note 11]		550,379			594,349
Total current liabilities		2,690,232			2,603,891
Lease inducements [note 10]		1,872,399			2,041,338
Repayable leasehold improvement allowance [note 10]		6,784,345			7,081,794
Deferred revenue [note 11]		122,880			90,631
		11,469,856			11,817,654
Commitments and contingencies [notes 15 and 20]
Shareholders’ equity
Share capital [note 12[b]]		97,014,620			89,084,660
Contributed surplus [note 12[b]]		11,821,676			11,262,192
Deficit		(100,782,221	)		(90,700,310	)
Total shareholders’ equity		8,054,075			9,646,542
		19,523,931			21,464,196
See accompanying notes

On behalf of the Board:
/s/ Peter A. Thompson		/s/ Lewis J. Shuster
Dr. Peter A. Thompson (Director)		Lewis J. Shuster (Director)

Response Biomedical Corporation

CONSOLIDATED STATEMENTS OF LOSS,

COMPREHENSIVE LOSS AND DEFICIT

(Expressed in Canadian dollars)
(Restated November 7, 2011)

Years ended December 31,	2010			2009			2008
	$			$			$
	Restated
	[Note 4]

REVENUE
Product sales [note 16]		6,756,942			8,153,049			4,899,841
Cost of sales [notes 7 and 12[d]]		7,097,538			7,933,704			5,227,156
Gross profit on product sales		(340,596	)		219,345			(327,315	)

Contract service fees and revenues from collaborative
research arrangements [note 16]		356,066			1,793,220			976,496
		15,470			2,012,565			649,181
EXPENSES
Research and development [note 12[d]]		4,106,266			5,635,692			6,776,691
General and administrative [notes 6, 12[d] and 13]		3,696,819			3,299,042			4,451,224
Sales and Marketing [note 12[d]]		1,413,171			1,668,220			2,425,673
		9,216,256			10,602,954			13,653,588

OTHER EXPENSES (INCOME)
Interest expense [note 10 [iii]]		806,065			857,731			785,790
Interest income		(14,833	)		(9,016	)		(119,905	)
Gain on disposal of assets		-			-			(523	)
Foreign exchange loss (gain)		89,893			104,427			(6,113	)
		881,125			953,142			659,249
Loss and comprehensive loss for the year		(10,081,911	)		(9,543,531	)		(13,663,656	)

Deficit, beginning of year		(90,700,310	)		(81,156,779	)		(67,493,123	)
Deficit, end of year		(100,782,221	)		(90,700,310	)		(81,156,779	)

Loss per common share - basic and diluted		(0.32	)		(0.43	)		(0.97	)
Weighted average number of common shares outstanding [note 12[b]]		31,173,823			22,209,393			14,067,597
See accompanying notes

Response Biomedical Corporation

CONSOLIDATED STATEMENTS OF CASH FLOWS

(Expressed in Canadian dollars)
(Restated November 7, 2011)

Years ended December 31	2010			2009			2008
	$			$			$
	Restated
	[Note 4]

OPERATING ACTIVITIES
Loss for the year		(10,081,911	)		(9,543,531	)		(13,663,656	)
Add (deduct) items not involving cash:
Amortization of property, plant and equipment [note 8]		1,318,149			1,437,493			1,109,448
Amortization of intangible assets [note 9]		67,627			14,633			69,698
Amortization of deferred lease inducements [note 10]		(168,939	)		(168,939	)		(135,749	)
Gain on disposal of property, plant and equipment		-			-			(523	)
Restricted investments		(4,019	)		2,155			2,813
Stock-based compensation [note 12 [d]]		640,431			1,037,713			737,147
Amortization of deferred costs		-			-			10,176
Deferred lease inducements		-			-			95,784
Foreign exchange		77,630			124,147			(91,339	)
Other non-cash items		-			44,793			-
Changes in non-cash working capital
Trade receivables		840,965			(1,068,095	)		(248,916	)
Other receivables		(54,889	)		14,480			1,270,728
Inventories		(855,595	)		226,169			(1,257,823	)
Prepaid expenses and other		(23,766	)		218,002			21,909
Accounts payable		(324,511	)		463,936			(1,531,628	)
Accrued and other liabilities		423,971			(1,416,509	)		626,092
Deferred revenue		(11,721	)		535,433			(56,933	)
Cash used in operating activities		(8,156,578	)		(8,078,120	)		(13,042,772	)

INVESTING ACTIVITIES
Purchase of property, plant and equipment		(71,968	)		(113,464	)		(7,130,662	)
Purchase of intangible assets		(19,593	)		(13,904	)		(59,926	)
Proceeds on disposal of property, plant and equipment		-			-			6,364
Cash used in investing activities		(91,561	)		(127,368	)		(7,184,224	)

FINANCING ACTIVITIES
Repayable lease inducement received		-			-			5,825,180
Repayment of repayable lease inducement [note 10(iii)]		(266,598	)		(243,778	)		(222,248	)
Proceeds from issuance of common shares, and warrants, net of share issue costs and prepaid subscriptions		7,849,013			11,392,232			8,613,416
Cash provided by financing activities		7,582,415			11,148,454			14,216,348

Effect of changes in foreign currency rates on cash and cash equivalents		(77,630	)		(124,147	)		91,339

Increase (decrease) in cash during the year		(743,354	)		2,818,819			(5,919,309	)
Cash and cash equivalents, beginning of year		5,073,471			2,254,652			8,173,961
Cash and cash equivalents, end of year		4,330,117			5,073,471			2,254,652

Supplemental Disclosure
Interest paid in cash		799,024			823,002			785,790
Non-cash activity:
Non-repayable leasehold improvement allowance received		-			-			1,262,581

See accompanying notes

Response Biomedical Corporation

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Years ended December 31, 2010, 2009, 2008

(Expressed in Canadian dollars)

(Restated November 7, 2011)

1. DESCRIPTION OF BUSINESS, BASIS OF PRESENTATION AND GOING CONCERN UNCERTAINTY

Response Biomedical Corporation (the “Company”) was incorporated on August 20, 1980 under the predecessor to the Business Corporations Act (British Columbia). The Company is engaged in the research, development, commercialization and distribution of diagnostic technologies for the medical point of care (“POC”) and on-site environmental testing markets. POC and on-site diagnostic tests (or assays) are simple, non-laboratory based tests performed using portable hand-held devices, compact desktop analyzers, single-use test cartridges and/or dipsticks. Since 1996, the Company has developed and commercialized a proprietary diagnostic system called RAMP®.

The RAMP System is a portable fluorescence immunoassay-based diagnostic technology that combines the performance of a clinical lab with the convenience of a dipstick test - establishing a new paradigm in diagnostic testing. Immunoassays are extremely sensitive and specific tests used to identify and measure small quantities of materials, such as proteins. Any biological molecule and most inorganic materials can be targeted. Accordingly, the RAMP technology is applicable to multiple distinct market segments and many products within those segments. RAMP tests are now commercially available for use in the early detection of heart attack, congestive heart failure, influenza A+B, the respiratory syncytial virus, environmental detection of West Nile Virus, and biodefense applications including the rapid on-site detection of anthrax, smallpox, ricin and botulinum toxin.

These consolidated financial statements have been prepared in accordance with Canadian generally accepted accounting principles (“Canadian GAAP”) on a going concern basis, which presumes that the Company will be able to realize its assets and discharge its liabilities in the normal course of business for the foreseeable future.

The Company has sustained continuing losses since its formation resulting in a deficit of $100,782,221 as at December 31, 2010 and has not generated positive cash flow from operations. There is significant uncertainty about the Company’s ability to continue as a going concern.

Management has been able, thus far, to finance the operations through a series of debt and equity financings. On July 28, 2010, the Company closed a private placement for net cash proceeds of approximately $7,474,920. Management will continue, as appropriate, to seek other sources of financing on favourable terms; however, there are no assurances that any such financing can be obtained on favourable terms, if at all. In view of these conditions, the ability of the Company to continue as a going concern is dependent upon its ability to obtain such financing and, ultimately, on achieving profitable operations. The outcome of these matters cannot be predicted at this time. The consolidated financial statements do not include any adjustments to the amounts and classification of assets and liabilities that might be necessary should the Company be unable to continue in business.

The accompanying consolidated financial statements reflect, in the opinion of management, all adjustments (which include reclassifications and normal recurring adjustments) necessary to present fairly the financial position at December 31, 2010 and 2009 and its results of operations and its cash flows for the years then ended.

2. SIGNIFICANT ACCOUNTING POLICIES

These consolidated financial statements have been prepared in accordance with Canadian GAAP. A reconciliation of amounts presented in accordance with United States generally accepted accounting principles (“U.S. GAAP”) is detailed in Note 18. A summary of the significant accounting policies is as follows:

Response Biomedical Corporation

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Years ended December 31, 2010, 2009, 2008

(Expressed in Canadian dollars)

(Restated November 7, 2011)

2. SIGNIFICANT ACCOUNTING POLICIES (cont’d)

Basis of consolidation

These consolidated financial statements include the accounts of Response Biomedical Corporation and its wholly-owned subsidiary, Response Biomedical Inc., an active U.S. company with nominal assets and liabilities and no operations of its own.

Use of estimates

The preparation of these consolidated financial statements in conformity with Canadian GAAP requires management to make estimates and assumptions that affect the amounts reported in the consolidated financial statements and accompanying notes. Areas of significant estimates include stock-based compensation expense, the estimated life of property, plant and equipment, recoverability of long-lived assets and provisions for inventory obsolescence. Actual results could differ from those estimates.

Cash equivalents

Cash equivalents consist of investments having a maturity of 90 days or less at the time of acquisition.

Inventories

Raw material inventory is carried at the lower of actual cost, determined on a first-in first-out basis, and replacement cost. Finished goods and work in process inventories are carried at the lower of weighted average cost and net realizable value. Cost of finished goods and work in process inventories includes direct materials, direct labour and applicable overhead.

Property, plant and equipment

Property, plant and equipment is recorded at cost and amortized over the estimated useful lives using the straight-line method as follows:

Office and laboratory furniture and equipment	5 years
Office and laboratory computer equipment	3 years
Computer software	2 years
Manufacturing equipment	5 years
Manufacturing molds	2 years
Leasehold improvements	Term of lease

Intangible assets

Intangible assets consist of certain computer software recorded at cost and amortized using the straight-line method over 2 years.

Response Biomedical Corporation

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Years ended December 31, 2010, 2009, 2008

(Expressed in Canadian dollars)

(Restated November 7, 2011)

2. SIGNIFICANT ACCOUNTING POLICIES (cont’d)

Leases

Leases are classified as either capital or operating leases. Leases which transfer substantially all the benefits and risks of ownership of the property to the Company are accounted for as capital leases. All other leases are accounted for as operating leases wherein rental payments are expensed in a manner that results in the total rent payments being recognized on a straight-line basis over the term of the lease.

Deferred lease inducements

Lease inducements arising from rent-free inducements and non-repayable leasehold improvement allowances received from the landlord are being amortized over the term of the lease on a straight-line basis.

Revenue recognition

Product sales are recognized when legal title passes to distributors or customers, the sales price is fixed and determinable, collection of the resulting receivables is reasonably assured and no uncertainties with regard to customer acceptance exist. Sales are recorded net of discounts and sales returns.

Contract service fees are recorded as revenue as the services are performed pursuant to the terms of the contract provided collectability is reasonably assured. Upfront fees from collaborative research arrangements which are on-refundable, require the ongoing involvement of the Company and are directly linked to specific milestones are deferred and amortized into income as services are rendered. Upfront fees from collaborative research arrangements which are non-refundable, require the ongoing involvement of the Company and are not directly linked to specific milestones are deferred and amortized into income on a straight-line basis over the term of ongoing development. Upfront fees from collaborative research arrangements which are refundable are deferred and recognized once the refundability period has lapsed.

Foreign currency translation

Monetary items denominated in foreign currencies, including those of the Company’s U.S. integrated subsidiary, are translated into Canadian dollars using exchange rates in effect at the balance sheet date. Non-monetary assets and liabilities are translated at historical exchange rates. Revenue and expense items are translated at the average exchange rate for the period. Foreign exchange gains and losses are included in the determination of loss for the year.

Research and development costs

Research costs are expensed in the year incurred. Development costs are expensed in the year incurred unless the Company believes a development project meets Canadian GAAP criteria for deferral and amortization. To date, no development costs have been deferred.

Response Biomedical Corporation

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Years ended December 31, 2010, 2009, 2008

(Expressed in Canadian dollars)

(Restated November 7, 2011)

2. SIGNIFICANT ACCOUNTING POLICIES (cont’d)

Loss per common share

Basic loss per common share is calculated using the weighted average number of common shares outstanding during the year, excluding contingently issuable shares. Diluted loss per common share is equivalent to basic loss per common share as the outstanding options and warrants are anti-dilutive.

Future income taxes

The Company accounts for income taxes using the liability method of tax allocation. Future income taxes are recognized for the future income tax consequences attributable to differences between the carrying values of

assets and liabilities and their respective income tax bases. Future income tax assets and liabilities are measured using substantively enacted income tax rates expected to apply to taxable income in the years in which temporary differences are expected to reverse. The effect on future income tax assets and liabilities of a change in substantively enacted rates is included in earnings in the period that includes the substantive enactment date. Future income tax assets, net of a valuation allowance, are recorded in the consolidated financial statements if realization is considered more likely than not.

Stock-based compensation

The Company grants stock options to executive officers, directors, employees and consultants pursuant to a stock option plan described in Note 12[c].

The Company uses the fair value method of accounting for all stock-based awards for non-employees and for all stock-based awards to employees that were granted, modified or settled since January 1, 2003. The fair value of stock options is determined using the Black-Scholes option-pricing model, which requires certain assumptions, including future stock price volatility and expected time to exercise. Changes to any of these assumptions could produce different fair values for stock-based compensation.

The Company estimates forfeitures in arriving at its stock option expense. These estimates are based on a number of factors and assumptions which are reviewed each period end. Changes to these assumptions could result in different stock-based compensation expense in the current and subsequent periods.

3. RECENT ACCOUNTING PRONOUNCEMENTS

In 2005, the Accounting Standards Board announced that Canadian GAAP is to be converged with IFRS. On February 13, 2008 the CICA confirmed that the use of IFRS is required for fiscal years beginning on or after January 1, 2011. According to Section 4.1 of National Instrument 52-107, which governs GAAP requirements in Canada for Canadian listed entities, SEC Issuers may use U.S. GAAP. The Company satisfies the definition of an SEC issuer and consequently has converted its primary basis of accounting from Canadian GAAP to U.S. GAAP as of January 1, 2011. For the year ended December 31, 2010, the differences between Canadian GAAP and U.S. GAAP are reconciled in Note 18.

Response Biomedical Corporation

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Years ended December 31, 2010, 2009, 2008

(Expressed in Canadian dollars)

(Restated November 7, 2011)

4. RESTATEMENT

Subsequent to the period, it was determined that the previously issued annual consolidated financial statements for the year ended December 31, 2010 required correction for the following errors:

a) The December 31, 2010 annual consolidated financial statements recognized revenue of $497,819, which did not meet the criteria for revenue recognition. Accordingly, these restated annual consolidated financial statements for the year ended December 31, 2010 include an adjustment to decrease revenue by $497,819, decrease cost of sales of $228,868, and a decrease of foreign exchange loss of $15,666 with a corresponding increase in the net loss and comprehensive loss for the year. As a result of this previous adjustment, an additional adjustment of $179,176 was required to write-off the inventory sold at the time as it was determined it was no longer saleable. As a consequence of this adjustment to sales a milestone payment was reversed resulting in a reduction of long term prepaid expenses and accrued and other liabilities of $61,300.

b) The December 31, 2010 annual consolidated financial statements recognized a foreign exchange loss of $85,484 for the year ended December 31, 2010. An incorrect US dollar rate was used as at December 31, 2010 resulting in an adjustment to decrease cash by $16,875, decrease trade receivables by $16,732, decrease accounts payable by $4,456, and decrease accrued and other liabilities by $9,076 with a corresponding increase in the net loss and comprehensive loss for the year.

The effect of these adjustments on the consolidated balance sheet is summarized below as at December 31, 2010:

	As previously reported			Adjustment			As Restated
	$			$			$
Cash (b)		4,346,992			(16,875	)		4,330,117
Trade receivables (a)(b)		1,717,554			(498,884	)		1,218,670
Long-term prepaids (a)		122,700			(61,300	)		61,400
Accounts payable (b)		729,187			(4,456	)		724,731
Accrued liabilities(b)		1,050,802			(102,068	)		948,734
Deficit (a)		(100,311,686	)		(470,535	)		(100,782,221	)

Response Biomedical Corporation

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Years ended December 31, 2010, 2009, 2008

(Expressed in Canadian dollars)

(Restated November 7, 2011)

4. RESTATEMENT (cont’d)

The effect of these adjustments on the consolidated statement of loss and comprehensive loss is summarized below for the year ended December 31, 2010:

	As previously reported			Adjustment			As Restated
	$			$			$
Revenue (a)		7,254,762			(497,819	)		6,756,943
Cost of sales (a)		7,129,230			(31,692	)		7,097,538
Foreign exchange loss (gain) (a)(b)		85,484			4,409			89,893
Loss and comprehensive loss for the year (a)(b)		(9,611,376	)		(470,535	)		(10,081,911	)
Loss per common share - basic and diluted (a)(b)		(0.31	)		(0.01	)		(0.32	)

The effect of these adjustments on the consolidated statement of cash flow is summarized below for the year ended December 31, 2010:

	As previously reported			Adjustment			As Restated
	$			$			$
Loss and comprehensive loss for the year (a)		(9,611,376	)		(470,535	)		(10,081,911	)
Add (deduct) items not involving cash(a)(b)		1,853,249			77,630			1,930,879
Changes in non-cash working capital(a)(b)		(398,451	)		392,905			(5,546	)
Cash used in operating activities		(8,156,578	)		-			(8,156,578	)
Effect of changes in foreign currency rates on cash and cash equivalents(a)(b)		(60,755	)		(16,875	)		(77,630	)
Increase (decrease) in cash during the year		(665,724	)		(16,875	)		(682,599	)
Cash and cash equivalents, end of year		4,346,992			(16,875	)		4,330,117

Response Biomedical Corporation

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Years ended December 31, 2010, 2009, 2008

(Expressed in Canadian dollars)

(Restated November 7, 2011)

5. CAPITAL MANAGEMENT

The Company’s objectives when managing its capital are to safeguard the Company’s ability to continue as a going concern so it may provide returns to shareholders and benefits to other stakeholders. This is accomplished by pricing products and services commensurately with the Company’s strategies that attempt to maximize long-term profits and cash flows, and to obtain funding on terms that maximize shareholder value. The Company monitors the debt to equity ratio, which it defines as total liabilities divided by shareholders’ equity as disclosed in the consolidated balance sheets.

The Company has three externally imposed capital requirements which are recorded as restricted investments in the long-term asset section of the consolidated balance sheets:

a)	To secure the facility lease, the Company is maintaining a security deposit with the landlord in the form of an irrevocable letter of credit [Note 10[iii]].

b)	As security on a credit facility, the Company is required to hold a $27,500 investment deposit with the lending institution providing the capital.

c)	As security on services provided to the Company, the Company is required to hold a $2,500 investment deposit to the company providing these services.

The Company has not revised its capital management strategies during the year ended December 31, 2010.

6. FINANCIAL INSTRUMENTS

For certain of the Company’s financial instruments, including cash and cash equivalents, trade receivables, other receivables, accounts payable and accrued and other liabilities the carrying amounts approximate fair values due to their short-term nature.

The CICA issued Section 3862 – “Financial Instruments – Disclosures” and Section 3863 – “Financial Instruments – Presentation” to enhance the disclosure requirements and carrying forward unchanged the presentation requirements pertaining to the nature and extent of risks arising from financial instruments and how those risks are managed. These standards were adopted by the Company in 2008, with no impact on the presentation and disclosure of the Company’s financial instruments.

In June 2009, the CICA issued amendments to Section 3862 – Financial Instruments – Disclosures to expand the disclosures required in respect of fair value measurements recognized in financial statements. For the purpose of these expanded disclosures, a three-level hierarchy has been introduced as follows:

Level 1 – Quoted prices (unadjusted) in active markets for identical assets or liabilities;

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

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

Response Biomedical Corporation

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Years ended December 31, 2010, 2009, 2008

(Expressed in Canadian dollars)

(Restated November 7, 2011)

6. FINANCIAL INSTRUMENTS (cont’d)

Since the Company does not have significant financial instruments requiring fair value measurements other than cash, Section 3862, as amended, does not have a material effect on the Company for the year ended December 31, 2010.

Under CICA Handbook Section 3855, financial instruments must be classified into one of these five categories: held-for-trading, held-to-maturity, loans and receivables, available-for-sale financial assets or other financial liabilities. Held-for-trading financial instruments are initially measured at fair value and subsequent changes in fair value are recognized in net income. Available-for-sale financial instruments are initially measured at fair value with subsequent changes in fair value recorded in other comprehensive income until the investment is derecognized or impaired at which time the amounts would be recorded in net income. Held-to-maturity investments are measured at amortized cost using the effective interest method with changes in amortized cost recorded to net income. Loans and receivables and other financial liabilities are initially measured at amortized cost with subsequent changes in amortized cost recorded to net income.

Transaction costs (except for transaction costs related to held-for-trading financial statements which are expensed as incurred) are included in the carrying amounts of financial instruments on the balance sheet.

The Company has classified its cash and cash equivalents as held-for-trading. Restricted investments are classified as held-to-maturity. Trade receivables and other receivables are classified as loans and receivables. Accounts payable, accrued and other liabilities and repayable leasehold improvement allowance are classified as other financial liabilities.

Carrying value and fair value of financial assets and liabilities as at December 31, 2010 and December 31, 2009 are summarized as follows:

	December 31, 2010				December 31, 2009

	Carrying Value		Fair Value		Carrying Value		Fair Value
	$		$		$		$
Held-for-trading		4,330,117		4,330,117		5,073,471		5,073,471
Loans and receivables		1,319,555		1,319,555		2,105,631		2,105,631
Held-to-maturity		905,112		905,112		901,093		901,093
Other financial liabilities		8,755,259		8,755,259		8,922,397		8,922,397

Risks

The Company’s activities expose it to various risks including liquidity risk, credit risk and market risks such as currency risk, interest rate risk and other price risk. The Company’s risk management activities are designed to mitigate possible adverse side effects on the Company’s performance with a primary focus on preservation of cash. Risk management activities are managed by the finance and accounting department.

Response Biomedical Corporation

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Years ended December 31, 2010, 2009, 2008

(Expressed in Canadian dollars)

(Restated November 7, 2011)

6. FINANCIAL INSTRUMENTS (cont’d)

Market Risk

Currency Risk

The Company is subject to foreign exchange risk as a significant portion of its revenues and expenditures are denominated in U.S. dollars. Significant losses may occur due to significant balances of cash held in U.S. dollars that may be affected negatively by a decline in the value of the U.S. dollar as compared to the Canadian dollar. The Company mitigates foreign exchange risk by maintaining a U.S. dollar bank account for all U.S. revenues and expenditures, thereby minimizing currency exchange. A 10% depreciation or appreciation of the Canadian dollar against the U.S. dollar would result in an increase/decrease of approximately $189,000 in the Company's loss as a result of revaluing the Company’s balance sheet items as at December 31, 2010.

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 exposure to interest rate risk is limited as its restricted investments are long-term in nature and the interest rate related to its repayable leasehold improvement allowance is fixed over the term of the lease.

Credit Risk

Credit risk is the risk of a financial loss if a customer or counterparty to a financial instrument fails to meet its obligations under a contract. The risk arises primarily from the Company’s receivables from customers.

The Company’s exposure to credit risk is dependent upon the characteristics of each customer. The Company performs ongoing credit checks on its customers and requires orders to be prepaid by certain customers.

As at December 31, 2010, four customers represent 84% [2009 - four customers represent 77%; 2008 – four customers represent 78%] of the trade receivables balance and at December 31, 2010 one customer represents 65% of the trade receivables balance. For the year ended December 31, 2010, one customer represents 39%, one customer represents 14%, one customer represents 10% and one customer represents 5% of total product sales and in total 4 customers represent 69% [2009 – five customers represent 77%; 2008 – four customers represent 64%] of product sales. For the year ended December 31, 2010 four customers represent 100% [2009 - three customers represent 100%; 2008 – two customers represent 100%] of total service revenues. The Company reviews the collectability of its accounts receivable on a regular basis and establishes an allowance for doubtful accounts based on its best estimates of any potentially uncollectible accounts. As at December 31, 2010, the balance of the Company’s allowance for doubtful accounts was $Nil [December 31, 2009 - $1,800]. The Company has good credit history with its customers and the amounts due from them are received as expected.

Response Biomedical Corporation

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Years ended December 31, 2010, 2009, 2008

(Expressed in Canadian dollars)

(Restated November 7, 2011)

6. FINANCIAL INSTRUMENTS (cont’d)

Credit Risk (cont’d)

Pursuant to their respective terms, trade accounts receivables are aged as follows:


	December 31,		December 31,
	2010		2009
	$		$
Current		970,120		1,713,206
1-30 days past due		25,835		60,925
31-60 days past due		-		42,832
61-90 days past due		831		210,109
Over 90 days past due		221,884		34,363
		1,218,670		2,061,435
Allowance for doubtful accounts		-		(1,800	)
		1,218,670		2,059,635

Some of the Company’s raw materials and services are provided by sole-source suppliers. In the event a sole-sourced material or service becomes unavailable, there may be a delay in obtaining an alternate source, and the alternate source may require significant development and time to meet product specifications. For the year ended December 31, 2010, the Company made purchases of approximately $587,500 from eight such key sole source suppliers [2009 - eight suppliers for total of $752,000; 2008 - eight suppliers for total of $419,000].

For the year ended December 31, 2010, the company incurred approximately $804,000 in severance costs as a result of a corporate restructuring initiative that lead to a reduction in workforce in all departments. These charges were recorded in the General and Administrative department and of such charges $254,073 remains outstanding as an accrued liability payment as at December 31, 2010.

Response Biomedical Corporation

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Years ended December 31, 2010, 2009, 2008

(Expressed in Canadian dollars)

(Restated November 7, 2011)

6. FINANCIAL INSTRUMENTS (cont’d)

Liquidity Risk

Liquidity risk is the risk that the Company will not be able to meet its financial obligations as they are due. The Company continuously monitors actual and forecasted cash flows to ensure there is sufficient working capital to satisfy its operating requirements.

Pursuant to their respective terms, accounts payables, accrued liabilities, and the repayable leasehold improvement allowance are aged as follows:

	2011	2012	2013	2014	2015	Thereafter
	$	$	$	$	$	$
Accounts Payable	724,731	-	-	-	-	-
Accrued Liabilities	948,734	-	-	-	-	-
Repayable Leasehold Improvement Allowance (Note 10(iii))	297,449	331,869	370,272	413,120	460,926	5,208,158
	1,970,914	331,869	370,272	413,120	460,926	5,208,158

7. INVENTORIES

	December 31,	December 31,
	2010	2009
	$	$
Raw materials	876,181	693,752
Work in process	567,777	811,371
Finished goods	1,596,797	680,037
	3,040,755	2,185,160

As at December 31, 2010, the inventory allowance was $222,453 [December 31, 2009 - $85,675]. For the year ended December 31, 2010, inventory write-downs and obsolescence charges were $824,536 [2009 - $278,054; 2008 - $253,690].

Response Biomedical Corporation

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Years ended December 31, 2010, 2009, 2008

(Expressed in Canadian dollars)

(Restated November 7, 2011)

8. PROPERTY, PLANT AND EQUIPMENT
			Accumulated		Net book
	Cost		amortization		value
	$		$		$

December 31, 2010
Office furniture and equipment		955,451		528,902		426,549
Office computer equipment		280,086		231,932		48,154
Laboratory furniture and equipment		569,901		515,039		54,862
Laboratory computer equipment		449,923		420,093		29,830
Computer software		44,957		38,666		6,291
Manufacturing equipment		2,114,201		1,019,507		1,094,694
Manufacturing molds		601,173		599,938		1,235
Leasehold improvements		9,769,669		1,831,679		7,937,990
		14,785,361		5,185,756		9,599,605
December 31, 2009
Office furniture and equipment		950,374		342,109		608,265
Office computer equipment		257,607		187,870		69,737
Laboratory furniture and equipment		568,132		489,337		78,795
Laboratory computer equipment		419,016		393,986		25,030
Computer software		38,325		37,605		720
Manufacturing equipment		2,109,096		644,779		1,464,317
Manufacturing molds		601,174		597,192		3,982
Leasehold improvements		9,769,669		1,174,729		8,594,940
		14,713,393		3,867,607		10,845,786

Amortization expense for the year ended December 31, 2010 amounted to $1,318,149 [2009 - $1,437,493; 2008 - $1,109,448].

Response Biomedical Corporation

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Years ended December 31, 2010, 2009, 2008

(Expressed in Canadian dollars)

(Restated November 7, 2011)

8. PROPERTY, PLANT AND EQUIPMENT (cont’d)

The following table shows amortization expense allocated by type of cost:

	December 31,	December 31,	December 31,
	2010	2009	2008
	$	$	$
Cost of sales	855,263	903,490	637,632
Research and development		296,353	213,451
General and administrative	95,957	140,128	134,816
Marketing and business development		97,522	123,549
	1,318,149	1,437,493	1,109,448

Long-lived assets to be held and used by the Company are periodically reviewed to determine whether any events or changes in circumstances indicate that the carrying amount of the asset may not be recoverable. For long-lived assets to be held and used, the Company bases its evaluation on such impairment indicators such as the nature of the assets, the future economic benefit of the assets, any historical or future profitability measurements, as well as other external market conditions or factors that may be present. In the event that facts and circumstances indicate that the carrying amount of an asset may not be recoverable and an estimate of future undiscounted cash flows is less than the carrying amount of the asset, an impairment loss will be recognized for the difference between the carrying value and the fair value.

The following plant and equipment were not yet in service and hence not amortized:
	December 31,		December 31,
	2010		2009
	$		$
Office furniture and equipment		-		6,448
Manufacturing equipment		105,117		107,847
Leasehold improvements		-		16,202
		105,117		130,497

Response Biomedical Corporation

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Years ended December 31, 2010, 2009, 2008

(Expressed in Canadian dollars)

(Restated November 7, 2011)

9. INTANGIBLE ASSETS
			Accumulated		Net book
	Cost		Amortization		value
	$		$		$
December 31, 2010
Computer software		363,210		297,676		65,534
December 31, 2009
Computer software		343,617		230,049		113,568

Amortization expense for the year ended December 31, 2010 amounted to $67,627 [2009 - $14,633; 2008 - $69,698].

The following table shows amortization expense allocated by type of cost:
	December 31,		December 31,		December 31,
	2010		2009		2008
	$		$		$
Cost of sales		5,595		2,673		12,731
Research and development		45,248		2,908		13,851
General and administrative		7,693		6,167		29,379
Marketing and business development		9,091		2,885		13,737
		67,627		14,633		69,698

Intangible assets to be held and used by the Company are periodically reviewed to determine whether any events or changes in circumstances indicate that the carrying amount of the asset may not be recoverable. For intangible assets to be held and used, the Company bases its evaluation on such impairment indicators such as the nature of the assets, the future economic benefit of the assets, any historical or future profitability measurements, as well as other external market conditions or factors that may be present. In the event that facts and circumstances indicate that the carrying amount of an asset may not be recoverable and an estimate of future undiscounted cash flows is less than the carrying amount of the asset, an impairment loss will be recognized for the difference between the carrying value and the fair value.

Response Biomedical Corporation

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Years ended December 31, 2010, 2009, 2008

(Expressed in Canadian dollars)

(Restated November 7, 2011)

10. LEASE INDUCEMENTS

During the year ended December 31, 2007 the Company entered into a 15 year facility lease agreement [Note 15[e][i]]. The agreement provides for lease inducements to be provided by the landlord to the Company.

	Cost		reduction		value
	$		$		$
December 31, 2010
Rent-free inducement [i]		814,164		158,308		655,856
Non-repayable leasehold improvement allowance [ii]		1,700,800		315,318		1,385,482
		2,514,964		473,626		2,041,338
Repayable leasehold improvement allowance [iii]		7,814,418		732,624		7,081,794
		10,329,382		1,206,250		9,123,132
December 31, 2009
Rent-free inducement [i]		814,164		104,030		710,134
Non-repayable leasehold improvement allowance [ii]		1,700,800		200,657		1,500,143
		2,514,964		304,687		2,210,277
Repayable leasehold improvement allowance [iii]		7,814,418		466,026		7,348,392
		10,329,382		770,713		9,558,669

	December 31,		December 31,
	2010		2009
Summarized as to:	$		$
Current Portion
Rent-free inducement [i]		54,278		54,278
Non-repayable leasehold improvement allowance [ii]		114,661		114,661
		168,939		168,939
Repayable leasehold improvement allowance [iii]		297,449		266,598
Current Portion		466,388		435,537
Long-Term Portion
Rent-free inducement [i]		601,578		655,856
Non-repayable leasehold improvement allowance [ii]		1,270,821		1,385,482
		1,872,399		2,041,338
Repayable leasehold improvement allowance [iii]		6,784,345		7,081,794
Long-Term Portion		8,656,744		9,123,132
Total		9,123,132		9,558,669

Response Biomedical Corporation

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Years ended December 31, 2010, 2009, 2008

(Expressed in Canadian dollars)

(Restated November 7, 2011)

10. LEASE INDUCEMENTS (cont’d)

The lease inducements disclosed on the consolidated balance sheets as a result of these benefits is comprised of the following:

[i]

In 2007, the Company negotiated a long-term facility lease agreement which included an eight and one half month rent-free period from May 17, 2007 to February 1, 2008. The lease inducement benefit arising from the rent-free period is being amortized on a straight-line basis over the term of the operating lease as a reduction to rental expense. Amortization expense for the year ended December 31, 2010 amounted to $54,278 [2009 - $54,278; 2008 - $49,753], respectively.

[ii]

The Company received a non-repayable allowance for an amount of $1.7 million for expenditures related to general upgrades to the facility. The lease inducement benefit arising from the non-repayable leasehold improvement allowance is being amortized on a straight-line basis over the balance of the term of the lease beginning April 1, 2008 as a reduction to rental expense. Amortization expense for the year ended December 31, 2010 amounted to $114,661 [2009 - $114,661; 2008 - $85,996], respectively.

[iii]

The Company received a repayable leasehold improvement allowance for an amount of $7.8 million used for additional improvements to the facility. This lease inducement is being repaid over the term of the operating lease commencing February 1, 2008 at approximately $88,500 per month including interest calculated at an interest rate negotiated between the Company and the landlord. Principal repayments for the year ended December 31, 2010 amounted to $266,598 [2009 - $243,778; 2008 - $222,248], respectively.

Future principal repayments due to be paid are estimated as follows:

December 31,	$
2011	297,449
2012	331,869
2013	370,272
2014	413,120
2015	460,926
Thereafter	5,208,158
	7,081,794

To secure the lease, the Company is maintaining a security deposit with the landlord in the form of an irrevocable letter of credit in the amount of $871,980 collateralized by a term deposit with market value of $875,052 [2009 - $871,059; 2008 - $872,757], which is presented as part of restricted investments in the long-term asset section of the consolidated balance sheets.

Response Biomedical Corporation

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Years ended December 31, 2010, 2009, 2008

(Expressed in Canadian dollars)

(Restated November 7, 2011)

11. DEFERRED REVENUE
	December 31,			December 31,
	2010			2009
	$			$
Beginning balance:
Product sales		169,279			149,547
Contract service fees and revenues from
collaborative research arrangements		515,701			-
		684,980			149,547
Additions:
Product sales		308,244			189,054
Contract service fees and revenues from
collaborative research arrangements		176,560			1,435,362
		1,169,784			1,773,963
Recognition of revenue:
Product sales		(323,190	)		(169,322	)
Contract service fees and revenues from
collaborative research arrangements		(173,335	)		(919,661	)
Ending balance:
Product sales		154,333			169,279
Contract service fees and revenues from
collaborative research arrangements		518,926			515,701
Total		673,259			684,980

Summarized as to:
Current Portion
Product sales		66,641			78,649
Contract service fees and revenues from
collaborative research arrangements		483,738			515,700
Current Portion		550,379			594,349
Long-Term Portion
Product sales		87,692			90,631
Contract service fees and revenues from
collaborative research arrangements		35,188			-
Long-Term Portion		122,880			90,631
Total		673,259			684,980

Response Biomedical Corporation

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Years ended December 31, 2010, 2009, 2008

(Expressed in Canadian dollars)

(Restated November 7, 2011)

12. SHARE CAPITAL AND CONTRIBUTED SURPLUS

[a]	Authorized - Unlimited common shares without par value.

[b] Common share consolidation

The Company effected a share consolidation in accordance with the authority granted by shareholders at the Company’s annual general and special meeting on May 4, 2010 to permit it to implement a consolidation of the Company’s outstanding common shares on a 10 (old) for 1 (new) basis. The common shares began trading on the Toronto Stock Exchange (“TSX”) and the OTC Bulletin Board in the United States on a consolidated adjusted basis on May 28, 2010.

The share consolidation affected all of the Company’s outstanding common shares, stock options and common share purchase warrants. As a result of the consolidation, each shareholder of the Company holds 1 post-consolidation common share for every 10 pre-consolidation common shares. In the event that a shareholder was entitled to receive a fractional share upon the share consolidation, such fraction was rounded down to the nearest whole number. As a result of the consolidation, each common share warrant holder and stock option holder is now entitled to purchase one-tenth of one common share at the same exercise price as set out in the warrant certificate and stock option agreement, respectively. The Company has reflected the consolidation retroactively. Consequently, all share capital, common shares, stock options, common share purchase warrants and per share amounts are presented post-consolidation.

Issued

	Issued and Outstanding				Contributed
	Number		Amount		Surplus
		#	$		$
Balance, December 31, 2008		17,033,820		80,107,580		7,809,327
Issued for cash:
Public offering, net ofissue costs [ii]		8,433,332		8,977,080		2,415,152
Stock-based compensation [note 12 [d]]		-		-		1,037,713
Balance, December 31, 2009		25,467,152		89,084,660		11,262,192
Issued forcash:
Private Placement, net ofissue cos ts [i]		13,333,333		7,474,920		-
Exe rcise of s tock options		270		324		-
Exe rcise of warrants		149,507		373,769		-
Issue d for non-cash consideration:
Value of warrants exercised [ii]		-		80,785		(80,785	)
Stock-ba sed compensation related to
stock options exercised		-		162		(162	)
Stock-based compensation [note 12 [d]]		-		-		640,431
Balance, December 31, 2010		38,950,262		97,014,620		11,821,676

Response Biomedical Corporation

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Years ended December 31, 2010, 2009, 2008

(Expressed in Canadian dollars)

(Restated November 7, 2011)

12. SHARE CAPITAL AND CONTRIBUTED SURPLUS (cont’d)

[i] The Company closed a private placement on July 28, 2010 consisting of 13,333,333 common shares at a

price of $0.60 per share, for total gross proceeds of $8,000,000 before share issuance costs of $525,080 for net proceeds of $7,474,920.

[ii]

The Company closed a public offering on May 21, 2009 consisting of 8,433,332 units at a price of $1.50 per share, for total gross proceeds of $12,650,000 before share issuance costs of $1,257,768 for net proceeds of $11,392,232.

Each unit is comprised of one common share and one-half of one transferable common share purchase warrant for a total of 4,216,666 common share purchase warrants. Each whole warrant entitles the holder thereof to purchase one common share of the Company at a price of $2.50 per share for a period of 24 months from the closing date.

In connection with the financings, the Company paid cash commissions of $742,588, legal and professional fees of $266,976 and other share issuance costs of $248,204. In addition to this, the Company also issued 253,000 broker’s warrants with each warrant entitling the holder thereof to purchase one common share of the Company at a price of $2.50 per share for a period of 24 months from the closing date.

The fair value of the 4,469,666 common share purchase warrants issued was determined using the Black-Scholes option pricing model using the following assumptions:

Dividend yield		0	%
Expected volatility		101	%
Risk-free interest rate		0.92	%
Expected life in years		2.00
Fair value per warrant	$	0.60

The fair value of the warrants was calculated using the Black Scholes option pricing model and then subtracted from the gross proceeds received to determine the amount to be allocated to the shares. Accordingly, share issue costs of $991,118 and $266,650 were allocated to share capital and contributed surplus proportional to the fair value of the shares and warrants, respectively.

[iii]

The Company closed a private placement on October 28, 2008 and October 31, 2008 consisting of 3,108,440 and 291,890 units, respectively, at a price of $1.50 per share, for total gross proceeds of $5,100,500. Eachunit is comprised of one common share and one-half of one transferable common share purchase warrant. Each whole warrant entitles the holder thereof to purchase one common share of the Company at a price of $2.00 per share for a period of 36 months from the closing date.

Response Biomedical Corporation

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Years ended December 31, 2010, 2009, 2008

(Expressed in Canadian dollars)

(Restated November 7, 2011)

12. SHARE CAPITAL AND CONTRIBUTED SURPLUS (cont’d)

[iii]

Issued (cont’d)

In connection with the financings, the Company paid cash commissions of $291,386 and legal and professional fees of $129,866 for total net proceeds of $4,679,248, of which $3,716,620 was allocated to the common shares issued and $962,628 was allocated to contributed surplus to reflect the fair value of the common share purchase warrants.

The fair value of the 1,700,163 share purchase warrants issued was determined using the Black-Scholes option pricing model using the following assumptions:

	October 28,			October 31,
	2008 warrants			2008 warrants
Dividend yield		0	%		0	%
Expected volatility		71	%		71	%
Risk-free interest rate		2.18	%		2.11	%
Expected life in years		3.00			3.00
Fair value per warrant	$	0.60		$	0.80

Accordingly, $932,533 of the proceeds, less $77,018 in issue costs, was allocated as the fair value of the October 28, 2008 warrants, and $116,756 less $9,642 in issue costs, was allocated as the fair value of the October 31, 2008 warrants for a total aggregate value of $962,628 which was recorded in contributed surplus in the consolidated balance sheets.

Response Biomedical Corporation

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Years ended December 31, 2010, 2009, 2008

(Expressed in Canadian dollars)

(Restated November 7, 2011)

12. SHARE CAPITAL AND CONTRIBUTED SURPLUS (cont’d)

[c]	Stock option plan

At the Annual General Meeting held June 3, 2008, the Company’s shareholders’ approved a new stock option plan (“2008 Plan”) to be compliant with the Toronto Stock Exchange (“TSX”) rules following the listing of the Company’s shares on the TSX in December 2007.Of the 1,700,000 stock options authorized for grant under the 2008 Plan, 438,122 stock options are available for grant at December 31, 2010.

At December 31, 2010, the following stock options were outstanding:

				Options outstanding				Options exercisable
				December 31, 2010				December 31, 2010
				Weighted				Number of
		Number of		average		Weighted		options		Weighted
Range of		shares under		remaining average exercise				currently average exercise
exercise price		option		contractual life		price		exercisable		price
		$	#	(years)				$	#	$
	0.41 - 1.99		329,662		3.91		0.90		40,670		1.20
	4.00 - 4.99		1,130		0.65		4.90		1,130		4.90
	5.00 - 5.99		191,006		0.28		5.74		191,004		5.74
	6.00 - 6.99		70,419		1.38		6.71		43,832		6.69
	7.00 - 7.99		6,170		0.87		7.59		5,045		7.65
	8.00 - 8.99		64,903		1.67		8.80		32,604		8.80
	9.00 - 9.99		7,500		0.37		9.10		7,500		9.10
	10.00 - 11.00		183,142		1.67		10.63		94,320		10.63
	1.15 - 11.00		853,932		2.18		5.27		416,105		6.83

The options expire at various dates from March 6, 2011 to December 1, 2015.

Response Biomedical Corporation

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Years ended December 31, 2010, 2009, 2008

(Expressed in Canadian dollars)

(Restated November 7, 2011)

12. SHARE CAPITAL AND CONTRIBUTED SURPLUS (cont’d)

[c]	Stock option plan (cont’d)

Stock option transactions and the number of stock options outstanding are summarized as follows:

	Number of optioned		Weighted average
	common shares		exercise price
	#		$
Balance, December 31, 2008	1,073,260		6.50
Options granted	104,605		1.20
Options forfeited	(2,889	)	3.20
Options expired	(101,843	)	7.10
Options exercised	-		-
Balance, December 31, 2009	1,073,133		5.90
Options granted	130,238		0.42
Options forfeited	(250,534	)	5.10
Options expired	(98,635	)	6.50
Options exercised	(270	)	1.20
Balance, December 31, 2010	853,932		5.27

The exercise price equaled the closing trading price of the common shares on the date preceding the date of grant for all options granted.

[d]	Stock-based compensation

For the year ended December 31, 2010, the Company recognized compensation expense of $640,431 [2009 - $1,037,713; 2008 - $737,147], respectively, as a result of stock options granted to officers, directors and employees, with a corresponding credit to contributed surplus.

The fair value of the stock options granted was determined using the Black Scholes option pricing model using the following weighted average assumptions:

	2010			2009			2008
Dividend yield		0	%		0	%		0	%
Expected volatility		175	%		98	%		78	%
Risk-free interest rate		1.61	%		1.24	%		1.88	%
Expected life in years		3.48			3.35			3.00
Fair value per stock option	$	0.38		$	0.09		$	0.12

Response Biomedical Corporation

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Years ended December 31, 2010, 2009, 2008

(Expressed in Canadian dollars)

(Restated November 7, 2011)

12. SHARE CAPITAL AND CONTRIBUTED SURPLUS (cont’d)

[d]	Stock-based compensation (cont’d)

The following table shows stock-based compensation allocated by type of cost:

	2010		2009		2008
	$		$		$
General and administrative		445,619		790,446		513,082
Research and development		109,943		129,316		100,900
Cost of sales		45,636		55,523		50,322
Marketing and business development		39,233		62,428		72,843
		640,431		1,037,713		737,147

On an annual basis, the Company reviews its forfeiture rates and revises the estimate if necessary. For the year ended December 31, 2010, the Company revised the forfeiture rates for officers, directors and employees and, as a result, recorded additional stock based compensation expense of approximately $66,000 [2009 –$289,000; 2008 – $Nil].

[e]	Escrow shares

Pursuant to an escrow agreement dated December 31, 1995 and approved by the shareholders on June 19, 1996, 82,500 common shares were held in escrow. At the shareholders meeting on June 21, 2004, the shareholders approved a resolution to amend the terms of the escrow agreement, such that the escrow release is now based on a six-year time release formula, in accordance with the policies of the TSX Venture Exchange. Previously, the escrow shares were to be released based on the Company’s cumulative cash flow. Commencing March 2005, common shares held in escrow may be released upon request, in twelve tranches over a period of six years, with tranches released every six months. Each of the first four tranches consists of 4,125 common shares or 5% of the total escrow shares and each of the remaining eight tranches consist of 8,250 common shares or 10% of the total escrow shares. As at December 31, 2010, 82,500 common shares have been released from escrow leaving a balance of escrow shares of Nil.

Response Biomedical Corporation

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Years ended December 31, 2010, 2009, 2008

(Expressed in Canadian dollars)

(Restated November 7, 2011)

12. SHARE CAPITAL AND CONTRIBUTED SURPLUS (cont’d)

[f]	Common share purchase warrants (cont’d)

At December 31, 2010, the following common share purchase warrants are outstanding:

	Number of
	common shares
Issue Date	issuable	Exercise price $	Expiry date
October 28, 2008	1,554,218	2.00	October	28, 2011
October 31, 2008	145,945	2.00	October	31, 2011
May 21, 2009	4,320,159	2.50	May 21, 2011
	6,020,322	2.36

The above warrants have subsequently expired un-exercised.

Common share purchase warrant transactions are summarized as follows:

	Number of			Weighted average
	warrants			exercise price
		#			$
Balance, December 31, 2008		1,700,163				2.00
Warrants issued		4,469,666				2.50
Balance, December 31, 2009		6,169,829				2.36
Warrants exercised		(149,507	)			2.50
Balance, December 31 , 2010		6,020,322				2.36

Response Biomedical Corporation

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Years ended December 31, 2010, 2009, 2008

(Expressed in Canadian dollars)

(Restated November 7, 2011)

13. RELATED PARTY TRANSACTIONS

[i] For the year ended December 31, 2010, fees totaling $79,500 were incurred by the Company for routine general and administrative services provided by non-management members of the Board of Directors [2009 - $84,000; 2008 - $87,000]. As at December 31, 2010, $40,250 remained outstanding and was included in the balance of accrued and other liabilities.

[ii] The Company retains a law firm in which a corporate partner was a non-management member of the Board of Directors until May 3, 2010. For the year ended December 31, 2010 and during the period in which the corporate partner was a non-management member of the Board of Directors, the Company incurred legal expenses from this law firm totaling $15,797 [2009 - $175,888; 2008 - $29,477] of which $2,815 were share issuance costs directly related to the private placement in the year [Note 12[i]]. As at December 31, 2010, there are no outstanding amounts to this law firm.

[iii] During the year ended December 31, 2010, the Company closed a private placement on July 28, 2010 consisting of 13,333,333 common shares at a price of $0.60 per share, for total gross proceeds of $8,000,000 before share issuance costs of $525,080 for net proceeds of $7,474,920 [Note 12[i]]. Of the total share issue costs, $51,414 was paid in connection with due diligence legal expenses incurred by a Company which subsequent to the financing became a related party to the Company. As at December 31, 2010, $31,317 remained outstanding and was included in the balance of accrued and other liabilities. No such fees were incurred during the years ended December 31, 2009 or 2008.

[iv] During June 2008 strategic consulting service fees in the amount of $250,000 were incurred by the Company for extraordinary services provided by a non-management member of the Board of Directors. This amount was paid in June 30, 2009. No such fees were incurred during the years ended December 31, 2010 or 2009.

All related party transactions are recorded at their exchange amounts, established and agreed between the related parties.

Response Biomedical Corporation

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Years ended December 31, 2010, 2009, 2008

(Expressed in Canadian dollars)

(Restated November 7, 2011)

14. INCOME TAXES

At December 31, 2010 the Company had approximately $47,758,000 of non-capital loss carry forwards, approximately $2,667,000 of federal investment tax credits and approximately $1,114,000 of provincial investment tax credits available to reduce taxable income and taxes payable for future years. These losses and investment tax credits expire as follows:

	Provincial investment	Federal investment	Non-capital loss
	tax credit	tax credits	carryforwards
Year of Expiry	$	$	$
2011	213,000	-	-
2012	129,000	-	-
2013	93,000	-	-
2014	20,000	-	4,101,000
2015	58,000	-	6,880,000
2016	142,000	-	-
2017	205,000	-	-
2018	198,000	-	-
2019	56,000	227,000	-
2020	-	430,000	-
2021	-	384,000	-
2022	-	233,000	-
2023	-	168,000	-
2024	-	36,000	-
2025	-	105,000	-
2026	-	256,000	7,669,000
2027	-	370,000	8,560,000
2028	-	357,000	4,107,000
2029	-	101,000	7,217,000
2030	-	-	9,224,000
	1,114,000	2,667,000	47,758,000

In addition, the Company has unclaimed tax deductions of approximately $11,639,000 related to scientific research and experimental development expenditures available to carry forward indefinitely to reduce taxable income of future years and other deductible temporary differences of approximately $17,687,000.

Response Biomedical Corporation

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Years ended December 31, 2010, 2009, 2008

(Expressed in Canadian dollars)

(Restated November 7, 2011)

14. INCOME TAXES (cont’d)

Significant components of the Company’s future tax assets as of December 31, 2010 are shown below:

	2010		2009
	$		$
Future Tax Assets:
Book amortization in excees of tax capital cost allowance	1,428,000		1,078,000
Non-capital loss carryforwards	11,939,000		10,839,000
Research and development deductions and credits	6,027,000		6,874,000
Share issue costs	380,000		452,000
Unearned revenue	168,000		77,000
Unrealized foreign exchange	59,000		70,000
Free rent liability	164,000		178,000
Non-repayable lease inducements	346,000		375,000
Repayable lease inducements	1,770,000		1,837,000
Other	106,000		94,000
Total future tax assets	22,387,000		21,874,000
Valuation allowance	(22,387,000	)	(21,874,000	)
Net future tax assets	-		-

The potential income tax benefits relating to these future tax assets have not been recognized in the consolidated financial statements as their realization does not meet the requirements of “more likely than not” under the liability method of tax accounting. Accordingly, a valuation allowance has been recorded and no future tax assets have been recognized as at December 31, 2010 and 2009.

The reconciliation of income tax attributable to operations computed at the statutory tax rate to income tax expense (recovery), using a 28.5% [2009 - 30%; 2008 - 31%] statutory tax rate, at December 31, 2010 is:

	2010		2009		2008
	$		$		$
Income taxes (recovery) at statutory rates	(2,873,000	)	(2,863,000	)	(4,236,000	)
Expenses not deductible for tax purposes	190,000		343,000		264,000
Non-capital losses for which no benefit has been recognized	2,628,000		1,938,000		2,547,000
Other temporary differences for which no benefit has been
recognized	55,000		582,000		1,425,000
	-		-		-

Response Biomedical Corporation

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Years ended December 31, 2010, 2009, 2008

(Expressed in Canadian dollars)

(Restated November 7, 2011)

15. COMMITMENTS

[a]	License agreements

[i]

The Company entered into an exclusive license agreement with the University of British Columbia (“UBC”) effective March 1996, as amended October 2003, to use and sublicense certain technology (“UBC Technology”) and any improvements thereon, and to manufacture, distribute and sell products in connection therewith. In consideration for these rights, the Company paid a non-refundable license fee of $5,000 upon execution of the agreement and $5,000 in January 1997, and is required to pay quarterly royalties based on 2% of revenue generated from the sale of products that incorporate the UBC Technology. In addition, in the event the Company sublicenses the UBC Technology, the Company is required to pay to UBC a royalty comprised of 20% of the first $1,000,000 of sublicensing revenue per calendar year and 10% of sublicensing revenue that exceeds $1,000,000 in each calendar year. Commencing in 2003 and for a period of nine years thereafter, royalties payable to UBC are subject to a $2,500 quarterly minimum plus a $500 annual license maintenance fee. Effective January 1, 2006 the annual license fee increased to $1,000. These payments are accrued and expensed in the year incurred. The agreement terminates on the expiration date in 2016, or invalidity of the patents or upon bankruptcy or insolvency of the Company. For the year ended December 31, 2010, the Company incurred an expense of $11,000 [2009 - $11,000; 2008 - $11,000], respectively, for royalty and license fees.

[ii]

The Company entered into a non-exclusive license agreement, effective July 2005, as amended September 2008, to use and sublicense certain technology (“Technology”) for one of the Company’s cardiac tests. In consideration for these rights, the Company paid a non-refundable license issuance fee of $2,000,000 in the first two years after execution of the agreement and is required to pay quarterly royalties based on the greater of 8% of revenue generated from, or U.S. $1.30 per unit from the sale of, products that incorporate the Technology. For the year ended December 31, 2010, the Company incurred an expense of $272,840 [2009 - $40,086; 2008 - $35,559] for royalties.

Response Biomedical Corporation

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Years ended December 31, 2010, 2009, 2008

(Expressed in Canadian dollars)

(Restated November 7, 2011)

15. COMMITMENTS (cont’d)

[a]	License agreements (cont’d)

[iii]

The company entered into a non-exclusive license and supply agreement, effective September 30, 2009 to purchase certain proprietary materials “Materials” and use related intellectual property to manufacture, sell and have sold lateral flow immunoassay products. In consideration for these rights, the Company is to pay a non-refundable, non-creditable license fee, of U.S. $85,000 in 17 equal quarterly payments of U.S. $5,000 commencing December 31, 2009. For the year ended December 31, 2010, the Company incurred an expense of $25,344 [2009 - $Nil; 2008 - $Nil] for license fees.

The minimum annual purchase commitments for the above licenses are as follows:

December 31,	$
2011	103,754
2012	125,703
2013	175,983
2014	184,783
2015	194,022
	784,245

[b] Indemnification of directors and officers

Under the Articles of the Company, applicable law and agreements with its directors and officers, the Company, in circumstances where the individual has acted legally, honestly and in good faith, may or is required to indemnify its directors and officers against certain losses. The Company's liability in respect of the indemnities is not limited. The maximum potential of the future payments is unlimited. However, the Company maintains appropriate liability insurance that limits the exposure and enables the Company to recover any future amounts paid, less any deductible amounts pursuant to the terms of the respective policies, the amounts of which are not considered material.

[c] Indemnification of third parties

The Company has entered into license and research agreements with third parties that include indemnification provisions that are customary in the industry. These indemnifications generally require the Company to compensate the other party for certain damages and costs incurred as a result of third party claims or damages arising from these transactions. The nature of the indemnification obligations prevents the Company from making a reasonable estimate of the maximum potential amount that it could be required to pay. To date, the Company has not made any indemnification payments under such agreements and no amount has been accrued in these consolidated financial statements with respect to these indemnification obligations.

Response Biomedical Corporation

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Years ended December 31, 2010, 2009, 2008

(Expressed in Canadian dollars)

(Restated November 7, 2011)

15. COMMITMENTS (cont’d)

[d]	Supply agreement

The Company entered into a supply agreement, effective September 2003 for certain reagents for the Company’s RAMP West Nile Virus Test. In addition to paying for the reagent purchased, the Company is required to pay the supplier semi-annual royalties equal to 10% of net revenue generated from the sale of the Company’s RAMP West Nile Virus Test. The initial term of the agreement was three years from the effective date and is automatically renewed for successive periods of one year until either party terminates the Agreement. For the year ended December 31, 2010, the Company incurred an expense of $28,640 [2009 - $75,600; 2008 - $64,588] for royalties to the supplier.

[e]	Lease agreements

[i]In 2007, the Company entered into a long-term agreement to lease a single tenant 46,000 square foot facility to house all of the Company’s operations beginning March 2008. Rent is payable from February 1, 2008 to January 31, 2023. The Company is required to pay the landlord total gross monthly payments of approximately $160,000, which is comprised of base rent, administrative and management fees, estimated property taxes and repayments of the repayable lease inducement [Note 10[iii]].

For the year ended December 31, 2010, $1,515,196 [2009 - $1,498,776; 2008 - $1,642,263] was incurred for expenses related to base rent, administrative and management fees, estimated property taxes, rent-free inducement and interest on repayments of the repayable lease inducement offset by amortization of both the rent-free inducement [Note 10[i]] and non-repayable leasehold improvement allowance [Note 10[ii]].

[ii]

The Company entered into a number of operating leases for administrative equipment.

[iii]

The minimum annual cost of lease commitments is estimated as follows:

	Premise*	Equipment	Total
December 31,	$	$	$
2011	1,977,787	51,898	2,029,685
2012	2,013,341	51,898	2,065,239
2013	2,050,767	51,898	2,102,665
2014	2,090,193	51,898	2,142,091
2015	2,131,757	51,898	2,183,655
Thereafter	16,513,838	17,298	16,531,136
	26,777,683	276,788	27,054,471

* Includes base rent, administrative and management fees, estimated property taxes and repayable lease inducement payments

Response Biomedical Corporation

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Years ended December 31, 2010, 2009, 2008

(Expressed in Canadian dollars)

(Restated November 7, 2011)

15. COMMITMENTS (cont’d)

[f]	Commitment to purchase equipment

As at December 31, 2010, the Company has outstanding purchase order commitments totaling $Nil (2009 - $4,500) for capital purchases related to operating activities of the Company.

16. SEGMENTED INFORMATION

The Company operates in one business segment, the research, development, commercialization and distribution of diagnostic technologies, with primarily all of its assets and operations located in Canada. The Company’s revenues are generated from product sales primarily in Asia, United States, Europe and Canada. Expenses are primarily incurred from purchases made from suppliers in Canada and the United States.

For the year ended December 31, 2010, 100% of the Company’s contract service fees and revenues from collaborative research arrangements were generated from four customers [2009 – 100% from three customers; 2008 – 100% from two customers].

Contract service fees and revenues from collaborative research arrangements by geographic location were as follows:

	2010	2009	2008
	$	$	$
Europe	132,789	1,244,788	59,286
United States	188,089	548,432	917,210
Asia	35,188	-	-
Total	356,066	1,793,220	976,496

Response Biomedical Corporation

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Years ended December 31, 2010, 2009, 2008

(Expressed in Canadian dollars)

(Restated November 7, 2011)

16. SEGMENTED INFORMATION (cont’d)

For the year ended December 31, 2010, $4,639,693 in product sales were generated from four customers [2009 - $5,431,073; 2008 - $3,110,944].

Product sales by customer location were as follows:
	2010	2009	2008
	$	$	$
Asia (Japan, China and Other)	4,386,380	3,047,731	1,314,621
United States	1,003,297	3,752,552	2,371,357
Europe	812,328	801,629	508,579
Canada	52,872	76,484	663,507
Other	502,065	474,653	41,777
Total	6,756,942	8,153,049	4,899,841

Product sales by type of product were as follows:

Product sales by type of product were as follows:
	2010	2009	2008
	$	$	$
Clinical products	6,001,957	6,828,651	3,683,706
Bio-defense products	444,895	517,981	721,117
Vector products (West Nile Virus)	310,090	806,417	495,018
Total	6,756,942	8,153,049	4,899,841

17. COMPARATIVE FIGURES

Certain comparative figures have been reclassified from the amounts previously reported to conform to the presentation adopted in the current year.

Response Biomedical Corporation

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Years ended December 31, 2010, 2009, 2008

(Expressed in Canadian dollars)

(Restated November 7, 2011)

18. RECONCILIATION OF GENERALLY ACCEPTED ACCOUNTING PRINCIPLES

The consolidated financial statements have been prepared in accordance with Canadian GAAP which differ in certain respects from those principles and practices that the Company would have followed had its consolidated financial statements been prepared in accordance with U.S. GAAP.

	2010			2009			2008
	$			$			$
Consolidated Statements of Loss
Loss for the year under Canadian GAAP		(10,081,911	)		(9,543,531	)		(13,663,656	)
Excess of fair value over nominal value paid
for escrow shares released during the year [a]		-			(8,250	)		(103,125	)
Total loss and comprehensive loss
according to U.S. GAAP		(10,081,911	)		(9,551,781	)		(13,766,781	)
Basic and diluted net loss per share
according to U.S. GAAP		(0.32	)		(0.43	)	$	( 0.98	)

The following are the material measurement variations in accounting principles, practices and methods used in preparing these consolidated financial statements from those generally accepted in the United States.

	December 31, 2010						December 31, 2009
	Canadian			U.S.			Canadian			U.S.
	GAAP			GAAP			GAAP			GAAP
	$			$			$			$
Consolidated Balance Sheets
Contributed surplus		11,821,676			12,627,522			11,262,192			12,068,038
Deficit		(100,782,221	)		(101,518,779	)		(90,700,310	)		(91,436,868	)

[a] Under U.S. GAAP for compensatory shares, the excess of the fair value of the shares in escrow over the nominal value paid is be recorded as services are performed. During the year, 16,500 shares were released from escrow (2009 – 16,500; 2008 – 33,000) for a total of 82,500 shares released to date. As at December 31, 2010 all the shares previously held in escrow account have been released. For the year ended December 31, 2010 there is no reconciliation difference related to these escrow share (2009 - $8,250; 2008 - $103,125).

Response Biomedical Corporation

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Years ended December 31, 2010, 2009, 2008

(Expressed in Canadian dollars)

(Restated November 7, 2011)

18. RECONCILIATION OF GENERALLY ACCEPTED ACCOUNTING PRINCIPLES (cont’d)

[b]	Accounts payable and accrued liabilities comprise:

Under Canadian GAAP, accounts payable and accrued liabilities are presented in the consolidated financial statements on an aggregate basis. U.S. GAAP requires that the accounts payable and accrued liabilities be presented in the consolidated financial statements as follows:

	December 31,	December 31,
	2010	2009
	$	$
Trade accounts payable	717,648	1,040,198
Employee-related accounts payable and accruals	391,760	174,190
Other accrued liabilities	564,057	359,617
	1,673,465	1,574,005
[c] Adoption of new accounting pronouncements

In April 2010, the FASB issued ASU No. 2010 — 17 — Revenue Recognition — Milestone Method (Topic 605): Milestone Method of Revenue Recognition. This standard provides guidance on defining a milestone and determining when it may be appropriate to apply the milestone method of revenue recognition for certain research and development transactions. Under this new standard, a company can recognize as revenue consideration that is contingent upon achievement of a milestone in the period in which it is achieved, only if the milestone meets all criteria to be considered substantive. This standard will be effective for us on a prospective basis for periods beginning after January 1, 2011. The adoption of this standard will not have a material effect on the Company’s consolidated financial statements.

Effective December 31, 2010 the Company adopted the provisions of FASB issued SFAS No. 168, The FASB Accounting Standards Codification ("Codification") and the Hierarchy of Generally Accepted Accounting Principles ("SFAS 168") - a replacement of FASB Statement No. 162, The Hierarchy of Generally Accepted Accounting Principles. Under the provisions of SFAS 168, the Codification will become the source of authoritative U.S. GAAP recognized by the FASB to be applied by nongovernmental entities. The rules and interpretive releases of the SEC under authority federal securities laws are also sources of authoritative GAAP for SEC registrants. On the effective date of SFAS 168, the Codification will supersede all then-existing non-SEC accounting and reporting standards. All other non-grandfathered non-SEC accounting literature not included in the Codification will become non-authoritative. The adoption of this standard did not have a material effect on the Company’s consolidated financial statements.

Effective December 31, 2009, the Company adopted the provisions of ASC 855-10 - Subsequent Events, to establish general standards of accounting for and the disclosure of events that occur after the balance sheet date but before the financial statements are issued or are available to be issued. The adoption of ASC 855-10 did not have a material impact on the Company’s consolidated financial statements.

Response Biomedical Corporation

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Years ended December 31, 2010, 2009, 2008

(Expressed in Canadian dollars)

(Restated November 7, 2011)

19. SUBSEQUENT EVENT

Termination of Roche Distribution Agreement

On May 27, 2011, the FDA informed the Company that the NTproBNP assay does not have 510 (k) clearance on the RAMP® 200 reader. Subsequently, the Company received notification from its U.S. distributor that they have issued a stop shipment on all RAMP® 200 branded products. A subsequent review of this FDA notification by the Company led to the conclusion that the Company's cardiovascular panel, including its assays for NT-proBNP, troponin, myoglobin, and CK-MB, while cleared for sale in the US on the RAMP® Reader, would need to have new FDA submissions approved to allow sale in the US on the RAMP® 200 Reader. As a result of the above, the Company received notification from Roche Diagnostics that they have terminated, effective September 30, 2011, the sales and distribution agreement between Roche and the Company dated June 25, 2008. Roche Diagnostics terminated the agreement because the Company has not obtained the necessary approvals from the U.S. Food and Drug Administration (FDA) to permit Roche Diagnostics to market the Company’s cardiovascular POC tests in the United States using the RAMP® 200 Reader.

Legal Claim

On July 29, 2011, the Company received a Notice of Claim with respect to a contract dispute with a former PhD student. The outcome of the claim is not determinable at this point. The Company does not believe that the claim will have a material adverse effect on the Company’s financial condition or results of operations.

Restructuring

In 2011, there was a significant amount of turnover at the senior management level. Due to the respective employment agreements, severance payments of up to $1.0 million will be paid over 2011 and 2012.

20. CONTINGENCIES

The circumstances leading to the financial statement adjustments described in note 4 includes contingencies that needed to be satisfied before the distributor could sell the products without violating other contracts. These circumstances give rise to loss contingencies that are reasonably possible of occurrence but for which the potential amount of losses cannot be reasonably estimated.

The circumstance leading to the termination of the sales and distribution agreement described in note 19 also give rise to loss contingencies that have a reasonable possibility of occurring but for which the potential amount of losses cannot be reasonably estimated.

Response Biomedical Corporation

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Years ended December 31, 2010, 2009, 2008

(Expressed in Canadian dollars)

(Restated November 7, 2011)

Item 19. Exhibits

Exhibit Name of Exhibit

Number

1.1	(1) Certificate of Incorporation dated 20 August 1980

1.2	(1) Company Act Name Change dated 15 October 1991

1.3	(2) Articles of the Company dated 21 June 2005

2.1	(1) Escrow Agreement dated 29 July 2004

4.1	(8) Alexandria New Facility Lease Agreement dated 24 April 2007

4.2	(8) Alexandria – First Amendment to Lease Agreement dated 18 May 2007

4.1	(7) Creation Technologies Supply Agreement dated 19 August 2005

4.2	(8) Roche License Agreement – NT-proBNP dated 26 July 2005*

4.3	(8) Roche License Agreement –Amendment 2 concluded 26 July 2005 – dated 24 June

2008*

4.6	(8) Roche Sales and Supply Agreement dated 25 June 2008*

4.7	(8) Shionogi Supply Agreement dated 12 May 2006

4.8	(8) Shionogi Supply Agreement – Amendment 1dated 11 July 2008

4.9	(8) 3M Master Manufacturing and Supply Agreement dated 30 November 2006 (Redacted)*

4.10	(6) 3M/Response Investment Agreement dated 30 November 2006

4.11	(8) Contract – S. Wayne Kay, Chief Executive Officer

4.12	(8) Contract – D. Morris, Chief Operating Officer

4.13	(9) Contract – L. Kaler, Vice President Finance and Administration

4.14	(8) Contract – Paul Harris, Vice President, Research and Development

4.15	(8) Short Term Incentive Plan dated 18 March 2008

4.16	(8) 2008 Stock Option Plan

4.17	(8) Irrevocable Commercial Letter of Credit dated 1 May 2007

4.18	Form of Indemnification Agreement between Response Biomedical Corp. and applicable officers

4.19	(9) Demand Operating Facility Agreement dated 26 April 2007 with Schedule A

4.20	(1) 1996 Stock Option Plan, as amended 21 June 2004

4.21	(5)	(7)	2005 Stock Option Plan as amended 22 June 2006
4.22	(8	)	Warrant Certificate – Othmar Iseli dated 28 October 2008
4.23	(8	)	Warrant Certificates – various – dated 28 October 2008
4.24	(9	)	Underwriting Agreement Public Offering dated 7 May 2009
4.25	(9	)	Executed Warrant Indenture dated 21 May 2009
4.26	(9	)	Form of Warrants
4.27	(9	)	Broker’s Warrant Certificate dated 21 May 2009
4.28	(9	)	Form of Subscription Agreement

Response Biomedical Corporation

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Years ended December 31, 2010, 2009, 2008

(Expressed in Canadian dollars)

(Restated November 7, 2011)

4.29	(10	)	Subscription Agreement dated June 27, 2010
8.1	(9	)	List of our subsidiaries
12.1			Section 302 Certification of Interim Chief Executive Officer
12.2			Section 302 Certification of Corporate Controller
13.1			Section 906 Certification of Interim Chief Executive Officer
13.2			Section 906 Certification of Corporate Controller
15.1	(9	)	Audit Committee Charter
15.2			Consent of Auditor

(1)	Previously filed as an exhibit to, and incorporated herein by reference from, our Annual Report onof Form 20-F for the year ended 31 December 2004, as filed on 2 May 2005.

(2)	Previously filed as an exhibit to, and incorporated herein by reference from, our Registration Statement on Form 20-F filed on 4 February 2004.

(3)	Previously filed as an exhibit to, and incorporated herein by reference from, our Annual Report on Form 20-F for the year ended 31 December 2005, as filed on 30 June 2006.

(4)	Previously filed as exhibits to, and incorporated herein by reference from, our Report on Form 6-K filed on 4 April 2006.

(5)	Previously filed as an exhibit to, and incorporated herein by reference from, our Report on Form 6-K filed on 23 June 2005.

(6)	Previously filed as an exhibit to, and incorporated herein by reference from, our Report on Form 6-K filed on 19 December 2006.

(7)	Previously filed as an exhibit to, and incorporated herein by reference from, our Report on Form 6-K filed on 2 April 2008.

(8)	Previously filed as an exhibit to, and incorporated herein by reference from, our Annual Report of Form 20-F for the year ended 31 December 2008 as filed on 31 March 2009.

(9)	Previously filed as an exhibit to, and incorporated herein by reference from, our Annual Report of Form 20-F for the year ended 31 December 2009 as filed on 31 March 2010.

(10)	Previously filed as an exhibit to, and incorporated herein by reference from, our Report on Form 6-K filed on 5 May 2011.

Response Biomedical Corporation

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Years ended December 31, 2010, 2009, 2008

(Expressed in Canadian dollars)

(Restated November 7, 2011)

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.

Response Biomedical Corp.

/s/ Peter A. Thompson_________________________

Dr. Peter A. Thompson

Chief Executive Officer

Date: 9 November 2011