SQI Diagnostics Reports First Quarter 2023 Results

Rhea-AI Summary

SQI Diagnostics Inc. (TSXV: SQD, OTCQB: SQIDF) reported financial results for Q1 2023, with sales rising to $0.4M, a significant increase from $0.1M in Q1 2022, driven by its COVID-19 testing business acquisition. Gross profit remained stable at $0.1M, while net loss decreased to ($3.1M) from ($3.4M). Key expenses dropped, including corporate costs $1.1M down from $1.6M, and R&D expenses at $1.4M from $1.7M. Despite the positive sales spike, the company has a working capital deficit of ($9.2M) and ongoing liquidity concerns, needing to secure capital to maintain operations beyond March 31, 2023.

Positive

• Sales increased to $0.4M in Q1 2023 from $0.1M in Q1 2022.
• Net loss reduced to ($3.1M) in Q1 2023 from ($3.4M) in Q1 2022.
• Corporate expenses decreased to $1.1M in Q1 2023 from $1.6M in Q1 2022.
• R&D expenses reduced to $1.4M in Q1 2023 from $1.7M in Q1 2022.

Negative

• Working capital deficit of ($9.2M) as of December 31, 2022.
• Significant doubt about the company's ability to continue as a going concern without raising additional capital.
• No viable financing options identified as of the report date.

TORONTO, March 1, 2023 /PRNewswire/ - SQI Diagnostics Inc. (TSXV: SQD) (OTCQB: SQIDF), a leader in the science of lung health that develops and manufactures respiratory health and precision medicine tests today reported its financial and operational results for the first quarter ended December 31, 2022.

Q1 2023 Financial Highlights

• Sales of $.4M in Q1 2023 were significantly higher, compared to $0.1M in Q1 2022. The increase in sales is attributed to the COVID-19 human testing business acquired during the second quarter of fiscal 2022.
• Gross profit was $0.1M in Q1 2023, compared to $0.1M in Q1 2022.
• Corporate & General expenses were $1.1M in Q1 2023, compared to $1.6M in Q1 2022. The decrease is mainly related to lower stock-based compensation due to the pausing of vesting of certain milestone options as well as lower salaries & wages as the current CEO and the previous CEO were paid in Q1 2022.
• The R&D expense category, which includes Manufacturing, Quality and Engineering was $1.4M in Q1 2023, compared to $1.7M in Q1 2022. The decrease was due to lower lab costs as a result of a significant reduction in consulting costs, lower stock-based compensation costs partially offset by higher salaries & wages due to an increase in R&D personnel as well as salary adjustments to reflect market rates for select personnel.
• Net loss was ($3.1M) of ($0.01) per share, compared to ($3.4M) or ($0.01) per share.
• Cash and cash equivalents were $0.6M as of December 31, 2022.
• Net working capital was $(9.2M) as of December 31, 2022, compared to $2.7M on December 31, 2022; the working capital deficit is due primarily to the $7.5M short term credit facility used to acquire the COVID-19 PCR business from Precision Biomonitoring Inc in Q2 2022.

Q1 2023 Corporate Highlights

• The Company secured an Interim Order from Health Canada for its RALI-Dx™ IL-6 Severity Triage Test in November 2022. The RALI-Dx™ IL-6 Severity Triage Test is the first of its kind to enter the Canadian market.
• On November 10, 2022, The Company entered into a funding agreement (the "Contribution Agreement") with the Federal Economic Development Agency for Southern Ontario ("FedDev Ontario") to support the Company's manufacturing scale-up and commercialization of its pipeline of products in development. Under the terms of the Contribution Agreement, the Company will be able to draw down up to $2 million of funding in the form of interest-free contributions.
• On October 19, 2022, the maturity date of its secured $7,500,000 credit facility with Pivot Financial (the "Pivot Credit Facility") was extended to January 31, 2023 from October 28, 2022. Subsequent to the quarter ended December 31, 2023, the maturity date of the Pivot Credit Facility was extended to February 28, 2023 and again to April 30, 2023.

Liquidity and Going Concern Risk

While management considers that the preparation of its financial statements under the going concern basis is appropriate, there is significant doubt about the Company's ability to continue as a going concern as the Company has a working capital deficit of $9.2M as at December 31, 2022 and for the three month period ended December 31, 2022 the Company incurred a net loss of $3.1M. The Company's ability to continue as a going concern is dependent upon the Company's ability to raise additional capital through equity and/or debt financings and achieve profitable operations. While the Company continues to pursue commercial sales, strategic partnering activities and funding opportunities, there are no assurances that it will be successful in generating revenues or raising additional investment capital to generate sufficient cash flows to continue as a going concern and there is significant doubt about the Company's ability to continue as a going concern without achieving such revenue or financing in the near term. Should the Company be unable to continue as a going concern, it may be unable to realize the carrying value of its assets and to meet its liabilities as they become due.

As of the writing of the date hereof, the Company has not received any viable term sheets from potential sources of financing and management does not currently believe that the Company will have sufficient cash to continue operations as currently conducted beyond March 31, 2023 without successfully raising additional equity and/or debt capital. The Company will announce additional details relating to any new financing or financings, if any, in due course in the event that it is successful in negotiating and entering into definitive documentation relating to same. Please see the Company's Condensed Interim Consolidated Financial Statements for the three months ended December 31, 2022 and December 31, 2021 and related Management Discussion & Analysis filed on SEDAR on March 1, 2023 for additional details regarding the Company's current cash position and risks relating thereto.

About SQI Diagnostics

SQI Diagnostics is a leader in the science of lung health. The Company develops and manufactures respiratory health and precision medicine tests that run on SQI's fully automated systems. The Company's tests simplify and improve COVID-19 antibody monitoring, Rapid Acute Lung Injury testing, donor organ transplant informatics, and immunological protein and antibody testing. SQI Diagnostics is driven to create and market life-saving testing technologies that help more people in more places live longer, healthier lives. For more information, please visit www.sqidiagnostics.com.

Contact:

Chief Financial Officer
Morlan Reddock
437-235-6563
mreddock@sqidiagnostics.com

FORWARD-LOOKING INFORMATION

This press release contains certain words and statements, which may constitute "forward-looking statements" within the meaning of applicable securities laws relating to future events or future performance and reflect the current expectations and assumptions of the Company regarding its growth, results of operations, performance, business prospects and opportunities. These statements generally can be identified by use of forward-looking words such as "may", "would", "could", "will", "should", "expect", "plan", "estimate", "anticipate", "intends", "believe", "potential", or "continue" or the negative thereof or similar variations. The Company's actual results and performance discussed herein could differ materially from those expressed or implied by such statements. Such statements are qualified in their entirety by the inherent risks and uncertainties surrounding future expectations. Important factors that could cause actual results to differ materially from expectations include, among other things, general economic and market factors, competition, the effect of the global pandemic and consequent economic disruption, and the factors detailed in the Company's ongoing filings with the securities regulatory authorities, available at www.sedar.com. Although the forward-looking statements contained herein are based on what we consider to be reasonable assumptions based on information currently available to us, there can be no assurance that actual events, performance or results will be consistent with these forward looking statements, and our assumptions may prove to be incorrect. Readers are cautioned not to place undue reliance on these forward-looking statements. 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 law.

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.

View original content to download multimedia:https://www.prnewswire.com/news-releases/sqi-diagnostics-reports-first-quarter-2023-results-301760255.html

SOURCE SQI Diagnostics Inc.

FAQ

What are the Q1 2023 financial results for SQIDF?

SQI Diagnostics reported Q1 2023 sales of $0.4M, a net loss of ($3.1M), and a working capital deficit of ($9.2M).

How did SQI Diagnostics perform compared to Q1 2022?

Sales increased significantly from $0.1M in Q1 2022, with net loss improving from ($3.4M).

What are the liquidity concerns for SQIDF?

The company faces significant doubt about its ability to continue operations beyond March 31, 2023, without raising capital.

How are the corporate expenses of SQIDF changing?

Corporate expenses decreased to $1.1M in Q1 2023 from $1.6M in Q1 2022.

What recent developments have occurred for SQI Diagnostics?

The company secured an Interim Order from Health Canada for a new triage test and entered a funding agreement with FedDev Ontario.