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Lignol Reports Fiscal 2013 Financial Results

These consolidated financial statements have been prepared on a going concern basis which assumes that the Company will continue its operations for the foreseeable future and contemplates the realization of assets and the settlement of liabilities in the normal course of business. The conditions and risks noted above cast significant doubt on the validity of that assumption.

These financial statements do not give effect to any adjustments to the amounts and classification of assets and liabilities that may be necessary and could potentially be material, should the Company be unable to continue as a going concern.

Liquidity and Capital Resources

LEC has historically financed its working capital requirements largely through public and private sales of equity securities, and more recently through access to a line of credit. The ongoing funding requirements of its wholly owned subsidiary LIL were met out of these funds together with funds received directly by LIL in the form of government grants and corporate contributions. LEC's recent investments in ARW and TBF have also been made out of its general working capital and from the Company's line of credit with DCF.

At April 30, 2013, LEC and its subsidiaries, had $2.4 million in cash and cash equivalents and up to $2.9 million in future funding receivable from contracted government and corporate funding agreements, and $10.9 million in current liabilities. The Company had a $3.1 million surplus in net shareholders' equity after taking into account an accumulated deficit of $35.7 million.

The $2.9 million in funding receivable in the future from contracted government and corporate funding agreements has not yet been recognized in the financial statements. This remaining balance of funding is available in the future subject to the satisfaction of certain conditions specified in the relevant agreements, which includes LIL completing the body of work required in respect of the previous round of funding, demonstrating the ability to incur in the future the budgeted program expenditures, and continuing to meet all of its reporting requirements. Receipt of this additional funding is also conditional in certain cases upon having sufficient matching funds and completion of the funding agreements and there can be no assurance that this funding will be received. The funding receivable under these awards is intended to be applied against future expenses incurred under various development programs.

As noted in the LEC Going Concern note above, in order to continue funding its operations, LEC will continue to explore a number of different options. There can be no assurance that LEC will be able to obtain further financing on favourable terms and in such event, LEC's working capital may not be sufficient to meet its stated business objectives (see also "Risks and Uncertainties").

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