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SQI Diagnostics Reports Third Quarter 2017 Results
Toronto, Ontario
August 24, 2017
SQI Diagnostics Inc. (“SQI” or the “Company”) (TSX-V: SQD; OTCQX: SQIDF),

today reported its financial and operational results for the three and nine months ended June 30, 2017.

SQI is a Toronto-based life sciences and diagnostics company that develops and commercializes proprietary technologies and products for advanced multiplexed diagnostics.

“We’re excited with our recent commercial progress”, said Andrew Morris, SQI’s President and CEO. “Three new customers in 2017, accelerating commercialization with our existing customer base and a robust sales pipeline each demonstrate upward progress of the execution of our business model.”

Financial and Business Highlights for the Quarter

We progressed significantly in the technology transfer for our predictive diagnostic customer which was announced in March. To begin generating significant revenues from kit sales, SQI needs to complete and validate the transfer of the 7-plex test currently used by this customer. We believe the technology risk for this process is low and we are advancing steadily towards a finished product. Currently this customer is running thousands of tests each month for patients in its CLIA – licensed lab in California.

The large comparative study we reported last quarter for our human diagnostic DNA customer was launched this quarter and is well underway. We believe this study and other final validation work is on-going and could be complete by the end of the calendar year. Management believes this will lead to commercial production of this product and recurring sales of kits following successful validation.

We advanced our commercial relationship with a new pharma customer reported last quarter. This project advanced quickly from the development to the commercial-ready stage. On July 6th, we announced that we had sold a sqid-X system to IRX Therapeutics of New York which will be used to run a modified version of one of SQI’s “off the shelf” multiplex biomarker kits. The instrument was delivered August 11th, and following customer training to be completed in August, the customer will complete their internal validation procedures for the system and kits. We will then begin selling the kits on a monthly basis for use in their manufacturing operations. The first of these orders was received and will be shipped following customer training.

We advanced more customers along our sales pipeline. This news is contained in press releases issued subsequent to the quarter end announcing the commercial agreement with IRX Pharma and another global biotech customer on July 18, 2017.

Q3 2017 Financial Results Overview

Revenue for the three months ended June 30, 2017 was $176,000 compared to $235,000 for the same period last year. Revenue for the nine months ended June 30, 2017 was $842,000 compared to $712,000 for the same period last year. During the nine months ended June 30, 2017, the Company recorded revenue from the sale of a sqidlite™ platform as well the sale of custom kits. The Company continued to earn revenue from development projects in both its drug development and diagnostic sectors. While revenues were down somewhat quarter over quarter this is primarily related to the reduction in service-based revenues during the transition from doing intensive product development for our diagnostic customers. During this transition, our customers are completing validation on systems in their labs and our revenues from validation kit sales are lower than the service-based revenue. Post-validation, management believes that revenues from kit sales will increase to levels greater than experienced during validation trials.

For the quarter, the Company recorded a net loss of $1,607,000 ($0.02 net loss per share) compared to the net loss of $1,446,000 ($0.01 net loss per share) for the quarter-ended June 30, 2016. For the nine months ended June 30, 2017, the Company recorded a net loss of $4,393,000 ($0.05 net loss per share) which is greater than the net loss of $3,791,000 ($0.05 net loss per share) for the nine months ended June 30, 2016. Per share values are based on the weighted average shares outstanding in the relevant period. For the quarter-ended June 30, 2017, there was an average of 103,875,000 shares outstanding. The increase in net loss for the three and nine months ended June 30, 2017 compared to the same periods in the year prior is a result of higher costs for product commercialization and development and increased marketing costs associated with the shift to a more sales-focused company.

R&D expenditures, excluding amortization and stock based compensation, for the three months ended June 30, 2017 were $848,000 compared to $846,000 for the same period last year. R&D expenditures, excluding amortization and stock based compensation, for the nine months ended June 30, 2017 were $2,273,000 compared to $2,011,000 for the same period last year. R&D expenditures were consistent over the three-month periods and higher for the nine-month periods. The increase in R&D expenditures in the nine-month period ended June 30, 2017 is a result of incentive payments made to employees in the R&D group. Also, R&D expenditures were reduced in 2016 by SR&ED investment tax credits of $360,000 which represented tax credits claimed for the 2014 and 2015 tax years. R&D expenditures in 2017 were offset by SR&ED investment tax credits of $229,000 related to the 2016 tax year. Research and development expenditures focused on two customer projects, the xPlex product development as well as an internal development project that, if successful, will significantly reduce our overall consumable kit costs.

Corporate and general expenses excluding stock-based compensation, totaled $299,000 for the three months ended June 30, 2017 as compared to $351,000 for the three months ended June 30, 2016. Corporate and general expenses excluding stock based compensation, totaled $949,000 for the nine months ended June 30, 2017 as compared to $1,138,000 for the nine months ended June 30, 2016. Corporate and general expenses are lower over the comparable periods due to reduced administrative personnel costs and lower professional fees.

Sales and marketing expenses were primarily related to sales and marketing consultant fees and to travel in the quarter. Sales and marketing expenses, excluding stock based compensation, totaled $286,000 for the three months ended June 30, 2017 compared to $158,000 for the three months ended June 30, 2016. Sales and marketing expenses, excluding stock based compensation, totaled $809,000 for the nine months ended June 30, 2017 compared to $485,000 for the nine months ended June 30, 2016. Sales and marketing expenses were higher for the three and nine months ended June 30, 2017 compared to the same period in the previous year, primarily due to the addition of sales and customer service personnel and to the payment of bonuses to employees.

At June 30, 2017, current assets were $3,865,000 compared to $4,244,000 at September 30, 2016. As at June 30, 2017, the Company’s current assets exceeded current liabilities by $3,317,000 compared to a surplus of $3,420,000 at September 30, 2016.

Conference Call Details

President and CEO, Andrew Morris, along with Company management, will host a conference call to review financial results and discuss business developments for the period. Details are as below:

Conference Call Details:
Date: Thursday August 24, 2017
Time: 10:00 a.m. ET
Live Call: 1-888-231-8191 (Canada and the United States)
Conference ID: 69024615
Webcast: http://event.on24.com/r.htm?e=1485269&s=1&k=1CDD37AEE11E04340E5A76915B9AB81C

An archived copy of the conference call will be available for 90 days on the Company website at www.sqidiagnostics.com/about/investors and also at http://event.on24.com/r.htm?e=1485269&s=1&k=1CDD37AEE11E04340E5A76915B9AB81C

Detailed financial statements and the management’s discussion and analysis (MD&A) will also be made available on the Company website at www.sqidiagnostics.com and at www.sedar.com.

Investor Relations contact:

Chief Executive Officer
Andrew Morris
416.674.9500 ext. 229
amorris@sqidiagnostics.com

Vice President of Finance
Patricia Lie
416.674.9500 ext. 277
plie@sqidiagnostics.com

About SQI Diagnostics

SQI Diagnostics is a life sciences and diagnostics company that develops clinical grade multiplexed microarray and molecular assays run on its automated instrumentation for the pharmaceutical research, animal health, and clinical diagnostics markets. SQI develops custom research and diagnostic assays that are multiplexed; meaning the simplification, consolidation and automation of many individual tests into one. This increases sample throughput, reduces time, cost and chance for human error, and provides excellent data quality. For more information, please visit sqidiagnostics.com.

Forward-looking Statements

This press release contains certain statements including, without limitation, the words “may”, “plan”, “will”, “estimate”, “continue”, “anticipate”, “intend”, “expect”, “believe”, “in the process”, “benefits”, “leading to”, “position” “possible”, “is subject to” and other similar expressions which may constitute “forward-looking statements” within the meaning of applicable securities laws. Forward-looking statements reflect the Company's current expectations and assumptions, and are subject to a number of risks and uncertainties that could cause actual results to differ materially from those anticipated. Readers are cautioned not to place undue reliance on these forward-looking statements. These forward-looking statements involve risks and uncertainties including, but not limited to: our ability to market and sell our products including our novel multiplexing technologies and detection platforms; our ability to maintain any technical or product advantages; the success of our Diagnostic Tools and Services business and our intent to build near-term revenue streams from this business; the successful regulatory filing and receipt of regulatory approvals for our later stage quantitative diagnostic consumable kits; adverse changes in general economic conditions; international risk and currency exchange fluctuations; competitor activity; technology changes; regulatory approvals and the impact of healthcare reform legislation; and, SQI's ability to raise additional funds in the future.

Such statements, risks and uncertainties are detailed in the Company’s ongoing filings with the securities regulatory authorities, and are available to the public at www.sedar.com. The Company undertakes no obligation to publicly update or revise any forward-looking statements either as a result of new information, future events or otherwise, except as required by applicable securities laws.

Neither TSX Venture Exchange nor its Regulation Services Provider (as that term is defined in the policies of the TSX Venture Exchange) accepts responsibility for the adequacy or accuracy of this release.