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  Exhibit 4.8    
    

SQI Diagnostics Inc.  

Management's Discussion and Analysis of Financial

Condition and Results of Operations 

June 30, 2011  

 

 Management's Discussion and Analysis of Financial Condition and Results of Operations  

        This discussion and analysis covers the unaudited financial statements for the quarters ended June 30,
2011 and 2010, prepared in accordance with Canadian generally accepted accounting principles ("Canadian GAAP"). The fiscal year end of SQI Diagnostics Inc. ("SQI" or "Company") is
September 30th.

        All amounts are expressed in Canadian dollars unless otherwise indicated.  

        This discussion and analysis was prepared by management using information available as at
August 25, 2011.

        This document contains forward-looking statements that relate to future events or future performance and reflect our expectations and assumptions regarding our
growth, results of operations, performance and business prospects and opportunities. Such forward-looking statements reflect our current beliefs and are based on information currently available to us.
In some cases, forward-looking statements can be identified by terminology such as "our goal", "may", "would", "could", "will", "should", "expect", "plan", "intend", "anticipate", "believe",
"estimate", "predict", "potential", "continue" or the negative of these terms or other similar expressions concerning matters that are not historical facts. The forward-looking statements in this
document include, among others, statements
regarding our future operating results, economic performance and product development efforts, and statements in respect of:

	•
	our expected future losses and accumulated deficit
levels;

	•
	our requirement for, and our ability to obtain, future funding on favourable terms or
at all;

	•
	market competition and technological advances of competitive
products;

	•
	our expectations regarding the acceptance of our products by the
market;

	•
	our expectations regarding the progress and the successful and timely completion of the various
stages of the regulatory clearance process;

	•
	our strategy to develop new products and to enhance the capabilities of existing
products;

	•
	our strategy with respect to research and
development;

	•
	our dependence on expanding our customer base;

	•
	our plans to market, sell and distribute our
products;

	•
	our plans in respect of strategic partnerships for research and
development;

	•
	our ability to obtain a sufficient supply of the components needed for
our systems;

	•
	the effect of operating as a public company in the United States and our plans
for compliance;

	•
	our plans to acquire Scienion;

	•
	our plans to retain and recruit personnel;

	•
	our ability to satisfy customer demand for our
systems;

	•
	our plans to correct defects or errors in our
systems;

	•
	the effect of litigation on our business;

	•
	our strategy with respect to the protection of our intellectual property;
and

	•
	our expectations with respect to existing and future corporate alliances and licensing
transactions with third parties, and the receipt and timing of any payments to be made by us or to us in respect of such arrangements.

        A number of factors could cause actual events, performance or results, including those in respect of the foregoing items, to differ materially from the events,
performance and results discussed in the forward-looking statements. Factors that could cause actual events, performance or results to differ materially from those set forth in the forward-looking
statements include, but are not limited to:

	•
	the extent of our future losses;

	•
	our ability to obtain the capital required to fund development and
operations;

2

 

	•
	development or commercialization of similar products by our
competitors;

	•
	our ability to develop and market our products;

	•
	our ability to comply with applicable governmental and securities regulations
and standards;

	•
	our ability to develop and commercialize our
technologies;

	•
	delays or failures in our ability to develop and implement new diagnostic
products;

	•
	our reliance on a few key and significant
customers;

	•
	our ability to attract and retain skilled and experienced
personnel;

	•
	the impact of changes in the business strategies and development priorities of our strategic
partners;

	•
	loss of suppliers or increases to the cost of the components of our
systems;

	•
	the impact of legislative changes to the healthcare system and regulatory
process;

	•
	the expense of compliance initiatives as a result of operating as a public company in the
United States;

	•
	our ability to maintain effective internal control over financial
reporting;

	•
	our ability to complete the proposed acquisition of Scienion and successfully integrate
its business;

	•
	damage to our manufacturing facility or its failure to accommodate future
sales growth;

	•
	the impact of unknown defects or errors and product liability
claims;

	•
	the impact of liability from the use of hazardous and biological materials and
other claims;

	•
	our ability to successfully manage fluctuations in
revenue;

	•
	foreign currency fluctuations;

	•
	our ability to obtain patent protection and protect our intellectual property rights and not
infringe on the intellectual property rights of others;

	•
	the expense and potential harm to our business of intellectual property
litigation;

	•
	stock market volatility;

	•
	changing market conditions;

	•
	the fact that further equity financing may substantially dilute the interests of our
shareholders; and  

	•
	other risks detailed from time-to-time in our ongoing quarterly filings,
annual information forms, annual reports and annual filings with applicable securities regulators, and those which are discussed under the heading "Risk Factors".

        Although the forward-looking statements contained in this management discussion and analysis 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. These forward-looking statements are made as of the date of this document.

 OVERVIEW  

        SQI Diagnostics Inc. is a life sciences Company that develops and commercializes proprietary technologies and products for
advanced microarray diagnostics. Our goal is to become a leader in the development and commercialization of microarray and multiplexed diagnostics by offering our customers a comprehensive "turnkey"
solution that increases the efficiency and ease of diagnostic testing and test development. 

        Our
target customers — clinical, academic and diagnostic development laboratories — require diagnostic
processing equipment and consumable tests ("systems") that are capable of processing large numbers of patient samples at low cost and with minimal labour requirements ("high-throughput
systems"). High-throughput systems have not been widely employed in autoimmune disease, allergen or companion diagnostics testing and 

3

 

only
limited use of high-throughput systems exists in infectious disease testing. To our knowledge, no fully-automated high-throughput systems exist that are capable of
addressing the combined multiplex testing needs of these markets. A fully-automated system capable of providing multiple biomarker measurements in a single test array has the potential to increase a
laboratory's throughput with significantly less labour, consumables and other costs 

        Our
proprietary microarray tests and automated systems are designed to simplify antigen, protein and antibody testing workflow, increase throughput, reduce costs and provide excellent
data quality. In many instances, our technology enables analysis that was traditionally unavailable. 

        Our
high-throughput SQiDworks diagnostic platform is a fully-automated microarray processing and analytical instrument, which provides significant cost savings and other
benefits over existing technologies. Additionally, the incremental cost savings of tests run on our fully-automated platform versus existing technologies increase as the complexity of the
test increases. 

        Our
IgX PLEX mircoarrays have the ability to accurately measure multiple biomarkers in a single test. Additionally, our microarray technology uses less patient blood and has fewer steps
than traditional methods, which increases the predictive value of the test. The increased predictive value of the test may allow the healthcare provider to choose a treatment plan earlier in the
course of the disease. 

        Our
proprietary multiplex assay development process and microarray manufacturing capabilities, combined with our automated systems, are designed to significantly reduce the complexity
and cost to our customers to commercialize microarray tests using their own biomarkers. 

        The
Company has been primarily involved in research, development and commercialization activities related to its core technology platform since 2003. The Company has expended significant
resources to create and protect its technology platform through the filing of patents and in building an automated instrument and multiplexed assay platform. The Company has invested in fostering
partnerships with clinicians who are leaders in our disease areas of focus and with potential novel biomarker collaborators. The Company has also incurred costs associated with gathering market
intelligence concerning prospective customers, developing a direct sales platform and in marketing and selling to prospective customers. 

        The
Company has developed its fully automated SQiDworks and semi-automated SQiDmanTM microarray-based test platforms that enable laboratory customers to generate
multiple patient test results with less than one unit of traditional 'test effort'. The Company has received marketing clearance from the United States Food & Drug Administration
("FDA"), Canadian regulatory approval for, and has CE Marked, its fully automated, high throughput SQiDworks platform. SQiDworks is the only fully-automated microarray processing system to achieve
these regulatory clearances. 

        The
SQiDworks platforms are to be used to run a menu of tests used to aid in the diagnosis of a wide range of diseases in targeted market segments. The Company has received clearance
from the FDA and Canadian regulatory approval for qualitative rheumatoid arthritis (RA) test kits used to detect and measure a panel of biomarkers to aid in the diagnosis of rheumatoid arthritis. The
Company has also received clearance from the FDA and Canadian regulatory approval for qualitative celiac disease test kits. The quantitative RA assay has been licensed in Canada and CE Marked in
Europe. The quantitative celiac assay has been licensed in Canada and CE Marked in Europe. 

        The
Company is currently marketing its quantitative celiac assay during the remainder of the 2011 calendar year. 

        The
Company is focusing on the continued development of a pipeline of other tests that can be processed on the SQiDworks platform. The Company is moving these assays through the
development pipeline and expects to advance additional test kits through the regulatory process during fiscal 2011 as discussed further in this document. The Company is also focused on the release of
SQiDlite, our second generation diagnostic platform. This platform will be a fully-automated microarray processing and analytic platform. It is intended to be a bench-top system able to
process multiple sizes of microarray devices from single 8-well strips up to a single 96 well microarray plate. This system is based on the same technology and uses many of the same
components as our SQiDworks system. It is targeted at small to medium sized diagnostic customers. Subsequent to the fiscal 

4

 

period
end, the Company previewed a prototype of the SQiDlite system at the American Association for Clinical Chemistry Annual Conference (24-28 July 2011). 

        We
plan to add additional services targeted at laboratory and other customers to leverage our expertise in assay design and microarray printing. This initiative is intended to enable our
customers to expand the use of our SQiDworks and SQiDlite platforms by converting their content to microarrays. Subsequent to the period end, we presented the results of a collaborative research study
where we included biomarkers of interest to a target customer to our in-development vasculitis panel. Our additional services will enable customers to add target biomarkers to an existing
panel of biomarkers that they can then offer to their customers, or they may request an entire panel of protein-based biomarkers to be developed into a Research Use Only (RUO) microarray for which
they may decide to seek Lab Developed Test regulatory clearance. 

        Subsequent
to quarter-end, the Company announced the proposed acquisition of all of the issued and outstanding shares of Scienion AG, a German company that we believe is a
market leader for microarray development, production arrayer printing systems and contract print and development services for the life science industry. Scienion develops and markets a range of
commercial microarray printing equipment and provides custom print and commercial print services. The Company believes that the combination of its platform, assays and, as developed, its test menu
with, if the acquisition is completed, Scienion's industry leading print technologies, will enable the combined Company to become a leader in end-to-end microarray-based
diagnostic systems, microarray printing and assay development services. 

 Status of Development Program  

        The Company's development program includes several major components which the Company expects will advance its commercialization
strategy. The status of each component is summarized and discussed in further detail below: 

 

									
	 
	 	 
	 	Approval Status 
	Product

 
	 	Development Status 	 	Canada 	 	United States 	 	Europe 
	 SQiDworksTM Diagnostics Platform
	 	Complete	 	Licensed	 	Cleared as a system with

IgX PLEX RA Assay	 	CE Marked
	 SQiDlite Platform
	 	Development	 	 	 	 	 	 
	 SQiDman Analyzer
	 	Development — RUO	 	Not required — RUO	 	Not required — RUO	 	Not required — RUO
	 IgX PLEX Rheumatoid Arthritis Assay (Qualitative)
	 	Complete	 	Licensed	 	Cleared	 	 
	 IgX PLEX Rheumatoid Arthritis Assay (Quantitative) *
	 	Complete	 	Licensed	 	 	 	CE Marked
	 IgX PLEX Celiac (Qualitative)
	 	Complete	 	Licensed	 	Cleared	 	 
	 IgX PLEX Celiac Panel (Quantitative)
	 	Complete	 	Licensed	 	 	 	CE Marked
	 IgX PLEX Vasculitis Panel (Quantitative)
	 	Final Development	 	 	 	 	 	 
	 IgX PLEX Celiac DGP Panel (Quantitative)
	 	Final Development	 	 	 	 	 	 
	 IgX PLEX Rheumatoid Arthritis Panel with expanded markers (Quantitative)
	 	Final Development	 	 	 	 	 	 
	 IgX PLEX Lupus Panel (Quantitative)
	 	Development	 	 	 	 	 	 
	 IgX PLEX TNF Assay (Quantitative)
	 	Development	 	 	 	 	 	 
	 IgX PLEX IBD — Crohn's Disease (Quantitative)
	 	Proof of Concept	 	 	 	 	 	 
	 IgX PLEX APS (Quantitative)
	 	Proof of Concept	 	 	 	 	 	 

 

 

	*
	Marketed
in Canada under the name "QuantiSpot Rheumatoid Arthritis" 

 

        The Company's SQiDworks and SQiDman platforms are also capable of running RUO and Investigational Use Only (IUO) test kits and the Company is
exploring sales opportunities related to these applications of its 

5

 

platform
with the Company's products as well as through the potential development of target customers' content. Delivering RUO/IUO product based on customer owned content would require collaboration
and assay development though this effort would be materially less than that experienced with the Company's pipeline of regulatory-cleared products. This creates additional new revenue opportunities
for the Company. 

        The
Company continues to focus on its in-market tests and believes that it must continuously improve and update its products. The Company has identified and has moved into
development enhancements to the existing RA and celiac test panels. These enhancements include fully quantitative IgX PLEX microarray technology and expanded biomarker content. The Health Canada
approval for IgX PLEX Celiac Quantitative test kit represents the first approval of the Company's second generation fully quantitative test. The enhancements to the RA panel are in the advanced stages
of development. 

        All
in-development tests will utilize this second generation, fully quantitative multiplexing technology; the Company believes these enhancements will provide significant
market advantages compared to our competitors. 

        The
Company's development pipeline includes multiplexed test for vasculitis, lupus and IBD-Crohn's. These tests are advancing through the development pipeline with the goal
of moving some if not all of these tests into the regulatory filed stage during the remainder of fiscal 2011 and 2012. 

 Status of Commercialization Activities and Other Events in the Fiscal Year to Date  

        During the quarter-ended June 30, 2011, the Company invested in its sales and marketing team, its science, commercialization,
and regulatory groups, and in infrastructure. The Company's sales efforts are focusing on the North American market and European targets to generate sales to targeted customers of the currently
approved system, including the SQiDworks fully automated analytical platform and RA and celiac tests. 

        Following
is an overview of the Company's achievements for the fiscal year to date: 

	(a)
	The
Company continued to develop its commercial relationship with Gamma Dynacare Medical Labs (GDML) during the quarter-ended June 30, 2011 and
achieved additional sales of our RA product in this quarter. The Company is working closely with GDML to develop its multiplexed RA business and in January 2011 GDML released its newsletter
that focused on our RA multiplexed product. This marketing material described the benefits of multiplexing rheumatoid arthritis biomarkers on an automated platform to all of GDML's
customers and is featured on GDML's website. The Company believes that this and similar marketing efforts will drive the continued growth of our RA product at GDML.

	(b)
	The
Company has provided quantitative celiac test kits on an investigational use only basis to GDML enabling their internal review of the product's
performance. The internal review by GDML, which is progressing well, is expected to lead to the expansion of the current contract to include the sale to them of our quantitative celiac test kits. GDML
has released another newsletter with Celiac 4 plex quantitative being the focus of attention.

	(c)
	Progressed
a number of pipeline diagnostic tests through our discovery and development program;

	(i)
	During
the quarter-ended June 30, 2011, the Company received FDA clearance for its automated SQiDworks diagnostics platform and its IgX PLEX celiac
qualitative assay for marketing in the United States and Health Canada approval for our quantitative celiac test.

	(ii)
	The
Company's vasculitis assay continues to progress through the assay development pipeline and is expected to complete clinical validation in the fourth
quarter of calendar 2011. Collaborative studies demonstrating the utility of the Company's assays were presented at the 15th International Vasculitis and ANCA Workshop
May 15th — 18th, 2011.

	(iii)
	The
Company's quantitative lupus test panel is in the assay development stage. Moving the lupus panel through development is a significant achievement.
The current development results show that SQI is able to effectively multiplex up to 16 protein biomarkers, including double stranded DNA. This is our largest panel to date and management
believes that, if approved, it will provide SQI with the only such product in the market. Management also believes that the successful completion and clearance of the lupus product will be
transformative to the Company's commercial position. The Company expects to 

6

 

initiate
clinical validation of this product during calendar 2011, and to complete regulatory filings shortly thereafter.  

	(iv)
	The
Company's IBD-Crohn's candidate test panel is in the proof-of-concept stage and is being actively developed with
the expectation of being completed and filed for regulatory approvals during calendar 2012.

	(v)
	Development
continued on the anti-TNF test candidate, based on the expanded performance requirements requested by our partner, Mount Sinai
Services. The Company continues to complete the commercialization of this product and expects to have a commercial product available by the end of calendar 2011.

	(vi)
	Initiated
the platform development program for SQiDlite and continued platform development to commercialize our SQiDman platform, with a target to complete
development on a timeline to coincide with customer requirements for potential collaborations. The SQiDman platform is currently not targeted at IVD applications but in the near-term may
be used by our collaborators and customers to assist in the development of their content into SQI-developed microarray RUO/IUO or LDT products. The development of the SQiDlite platform
addresses the needs of smaller and mid-market IVD customers and of the research market. The SQiDlite platform will be developed as an automated device with the flexibility to process and
analyze varying sizes of consumables up to the current 96-well consumable used in the SQiDworks;

	(d)
	Partnering
Summary 

        The
following table provides an overview of our partnering collaborations and the relevant pipeline product as at the period end: 

 

 

					
	Partner Institute

 
	 	Pipeline Product 	 	Purpose 
	 Cleveland Clinic
	 	Rheumatoid arthritis, IBD	 	Serum Samples

Clinical Validation

Collaboration
	 Beth Israel Deaconess Medical Center
	 	Celiac, anti-TNF	 	Serum Samples

Collaboration/Publication
	 Hospital Clinic De Barcelona, Spain
	 	Vasculitis	 	Serum Samples

Collaboration/Publication
	 University Hospital Maastricht, The Netherlands
	 	Vasculitis	 	Serum Samples

Collaboration
	 The University of North Carolina at Chapel Hill
	 	Vasculitis	 	Collaboration

Serum Samples

Clinical Validation

 

 

	*
	All
Partnering Institutes are located in the USA unless otherwise annotated. 

 

 CORPORATE FINANCING TRANSACTIONS  

        During the three months ended June 30, 2011 a total of 33,334 employee stock options were exercised at a price of $1.20
for total proceeds of $40,000. 

 CRITICAL ACCOUNTING POLICIES AND SIGNIFICANT ESTIMATES  

        These financial statements are prepared in accordance with Canadian GAAP. 

        The
significant accounting policies that management believes are the most critical in fully understanding and evaluating the reported financial results include the following: 

 Patents and Trademarks  

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

7

 

 Research and Development Costs  

        Research costs are charged to earnings in the period in which they are incurred. Development costs are expensed as incurred or deferred
if they meet the criteria for deferral under Canadian generally accepted accounting principles and are expected to provide future benefits with reasonable certainty. At June 30, 2011, the
Company has developed a pipeline of novel tests for its diagnostic system. Deferral criteria have not yet been met, and accordingly, all development costs have been expensed. 

 Stock-Based Compensation and Other Stock-Based Payments  

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

 Share Issuance Costs  

        Costs incurred in connection with the issuance of capital stock are netted against the proceeds received. 

 Income Taxes  

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

 Use of Estimates  

        The preparation of financial statements in conformity with Canadian generally accepted accounting principles requires management to
make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported
amount of revenue and expenses during the year. Actual results could differ from those estimates. Significant areas requiring the use of management estimates relate to the determination of the useful
lives of property and equipment and patents and trademarks for amortization purposes, valuation of investment tax credits receivable, valuation of stock options and warrants and valuation allowance on
future tax assets. 

 Recent Accounting Pronouncements  

(i)    Adoption of New Accounting Pronouncements

Business Combinations

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

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

8

 

Recent Accounting Pronouncements Issued and Not Yet Applied

(ii)    International Financial Reporting Standards (IFRS)

        Effective
January 1, 2011 the CICA has adopted International Financial Reporting Standards ("IFRS"). The Company will be required to adopt IFRS for its 2012 fiscal year and will
be required to provide IFRS comparative information for the previous fiscal year. The Company continues to assess and plan for the conversion to IFRS. We have identified the main differences between
existing Canadian GAAP and IFRS standards and begun quantifying the reporting differences. The Company has a conversion plan in place and believes it has the resources in place to meet the conversion
timelines. The following are the main differences and the expected impact on our business processes and information systems: 

 

  

			
	Key Accounting Areas

 
	 	Expected impact on the Company

 

	IFRS 1 First time adoption of IFRS	 	 The Company has selected the applicable exemptions under IFRS.
	

 	
 	
 Additional reconciliations and disclosure upon the initial conversion to IFRS will be included in the initial statements presented under IFRS commencing in the first quarter of fiscal 2012. The Company has begun the
process of assessing and preparing the additional reconciliation. The Company is reviewing the disclosure requirements including the disclosure of other corporations which have already adopted IFRS.
	

  IAS 16 Property Plant and Equipment	

 	

  The Company has commenced a study of the useful life of each component of property plant and equipment and will restate, if applicable, the historic amortization expense. Based on the preliminary results of the study the
Company does not expect a material adjustment upon adoption of IFRS.
	

  IAS 36 Impairment of Assets	

 	

  The Company will evaluate potential impairments using discounted cash flow analysis as required under IFRS. Based on our preliminary review the Company does not expect a material adjustment upon adoption of IFRS.
	

  IAS 12 Income Tax	

 	

  The Company has accumulated non-capital losses, undeducted scientific research and development costs, and investment tax credits that have not been reflected in the financial statements. These items will need to be assessed
based on the IFRS criteria to ensure proper classification on the balance sheet. The Company believes that these items will not meet the criteria for inclusion on the balance sheet and will continue to be disclosed in the notes to the annual
financial statements.
	

  IFRS 2 Share based payments	

 	

  IFRS 2 requires that each tranche of options with graded vesting be treated as a separate award. IFRS 2 also requires an estimate of forfeitures to be factored into the determination of compensations
costs.
	

 	
 	
 The Company expects to utilize the exemptions under IFRS 1 when converting to the new standard. The Company has begun to calculate the impact on all unvested tranches of options at the date of transition. Based
on our preliminary calculation we expect the adjustment to increase the opening deficit by $180,000.
	

  IAS 1 Financial Statement Presentation	

 	

  Additional disclosure required as well as selection between presentation alternative will be addressed in the initial statements presented under IFRS.
	

 	
 	
 The Company is analyzing the impact of the changes on its financial statements through a review of the standards as well as a review of the financial reports of corporations with earlier adoption dates.

 

 9

 
 

  

			
	Key Accounting Areas

 
	 	Expected impact on the Company

 

	 	 	 The Company does not believe there will be a material change to its financial statement presentation.

 

         The Company believes it has the financial reporting expertise in place to complete the transition to IFRS and does not believe the transition will materially
impact its business activities. As the review of accounting policies is further finalized, we will review internal controls over financial reporting and the disclosure controls and policies and, where
necessary, changes will be made. 

        At
this point, the only area of impact is expected to result from IFRS 2 Share based payments. The implementation of the changes as a result of adopting IFRS 2 is not
expected to have a material impact on the Company's internal controls over financial reporting or its disclosure controls and policies. 

10

 

 SELECTED FINANCIAL INFORMATION  

 Third Quarter Commentary  

        The table below summarizes quarterly financial information for the 3 month periods shown. 

 

 

														
	 
	 	June 30, 2011 	 	March 31, 2011 	 	December 31, 2010 	 	September 30, 2010 	 
	 
	 	(000s)
	 	(000s)
	 	(000s)
	 	(000s)
	 
	 Revenue
	 	$	9	 	$	4	 	$	18	 	$	14	 
	 Net Loss
	 	$	2,691	 	$	1,874	 	$	2,255	 	$	2,621	 
	 Net Loss Per Share
	 	$	(0.08	)	$	(0.07	)	$	(0.08	)	$	(0.06	)
	 Weighted Average Shares
	 	 	33,936	 	 	33,852	 	 	33,759	 	 	32,705	 

 

  

 

 

														
	 
	 	June 30, 2010 	 	March 31, 2010 	 	December 31, 2009 	 	September 30, 2009 	 
	 
	 	(000s)
	 	(000s)
	 	(000s)
	 	(000s)
	 
	 Revenue
	 	$	6	 	$	10	 	$	5	 	$	7	 
	 Net Loss
	 	$	1,812	 	$	2,020	 	$	1,620	 	$	1,616	 
	 Net Loss Per Share
	 	$	(0.06	)	$	(0.07	)	$	(0.06	)	$	(0.06	)
	 Weighted Average Shares
	 	 	30,790	 	 	29,917	 	 	27,930	 	 	27,271	 

 

         Revenue
for the quarter-ended June 30, 2011 was $9,000 compared to $6,000 for the quarter-ended June 30, 2010. Revenue for the nine months ended June 30, 2011 was
$31,000 compared to $21,000 for the nine months ended June 30, 2010. Revenue for the three and nine months ended June 30, 2011 included sales of its QuantiSpot RA test kits, there were
no product sales during the same period in 2010. Revenue in the three and nine months ended June 30, 2010 resulted from consulting services provided to a related party; these services were not
performed in the quarters ended March 31, 2011 and June 30, 2011. 

        For
the quarter-ended June 30, 2011, the Company recorded a net loss of $2,691,000 ($0.08 net loss per share) compared to a net loss of $1,812,000 ($0.06 net loss per share) for
the quarter-ended June 30, 2010. Per share values are based on the weighted average shares outstanding in the period. The net loss for the
nine months ended June 30, 2011 was $6,820,000 ($0.20 net loss per share) compared to a net loss of $5,452,000 ($0.18 net loss per share) for the nine months ended June 30, 2010. For the
quarter-ended June 30, 2011 there was an average of 33,936,000 shares outstanding (nine months ended June 30, 2011 — 33,849,000). 

        The
net loss was greater for the three and nine months ended June 30, 2011 compared to the three and nine months ended June 30, 2010. The Company's intensified R&D efforts
that began in the 2010 fiscal year have resulted, year to date, in increases in all R&D costs. These costs are primarily related to expenses in the discovery efforts for and development of assays as
detailed below. Additional other expenses incurred included ordinary increases in wage and wage-related expenses owing to an increase in personnel, increased lab expenditures to support
the greater number of projects, and other direct costs including serum acquisition and development and validation partner costs. Sales and marketing expense was higher in the nine months ended
June 30, 2011 owing to additional travel and contract resources in sales and marketing as the Company continued to increase its sales effort for approved IgX PLEX assays in Canada and the
United States and in anticipation of further product approvals. Professional and consulting costs were higher in the three and nine months ended June 30, 2011 due to legal and accounting
costs incurred related to the acquisition of Scienion AG. 

        R&D
expenditures for the quarter-ended June 30, 2011 were $1,443,000 compared to the $1,111,000 for the quarter-ended June 30, 2010. R&D expenditures for the nine month
period ended June 30, 2011 were $4,056,000 compared to the $3,438,000 for the nine month period ended June 30, 2010. The increase in R&D expense for the three month period ended
June 30, 2011 compared to the three months ending June 30, 2010 resulted from the SRED investment tax credit being recorded in the quarter-ended June 30, 2010, whereas the 2011
credit was recorded in the quarter-ended March 31, 2011. Increased R&D costs in the three months ended June 30, 2011 were offset by reductions in R&D recruiting and reduced regulatory
costs compared to the same quarter in 2010. The increase in R&D expense for the nine month period ended June 30, 2011 compared to the nine months ending June 30, 2010 resulted from
increased R&D activity with an increased number of assay 

11

 

panels
in development and to continued regulatory validation efforts related to the celiac products. In the nine months ended June 30, 2011, in addition to the celiac assay in regulatory
validation, the Company had five panels in development and 1 additional panel in early discovery and development. In the third quarter of fiscal 2010 the Company had 5 panels in
discovery and development. Also contributing to the increase in R&D costs is the annualized effect in the nine months ended June 30, 2011 of personnel additions made over the nine months ended
June 30, 2010 as the Company accelerated its R&D efforts. 

        Corporate
expenses include, primarily, salaries and related expenses (including benefits and payroll taxes) of the Company other than salaries and related expenses paid to personnel
engaged in research and development. General and Administrative expenses include facility costs, insurance costs, and foreign exchange expenses. Corporate and general expenses totalled $400,000 for
the three months ended June 30, 2011 compared to $262,000 for the three months ended June 30, 2010. Corporate and general expenses totalled $1,056,000 for the nine months ended
June 30, 2011 compared to $728,000 for the nine months ended June 30, 2010. The increase from the three and nine months ended June 30, 2010 compared to the same periods in 2011
was primarily a result of higher salary costs, increased personnel and increased occupancy costs. Corporate expenses also included a loss on the disposition of equipment in the nine months ended
June 30, 2011; there was no similar loss in the nine months ended June 30, 2010. 

        Professional
consulting (legal, accounting, Board of Directors compensation, recruiting, administrative contractor, and investor relations) costs in the three months ended
June 30, 2011 were $469,000 compared to $140,000 for the three months ended June 30, 2010. Professional consulting costs were $669,000 for the nine months ended June 30, 2011
compared $437,000 for the nine months ended June 30, 2010. The increase in professional and consulting costs in the three and nine months ended June 30, 2011 were primarily related to
legal and consulting costs related to the acquisition of Scienion. 

        Sales
and Marketing expenses were primarily related to sales and marketing consultant fees and to travel related to selling activities in the quarter. Sales and marketing expenses
totalled $114,000 for the three months ended June 30, 2011 compared to $116,000 for the three months ended June 30, 2010. Sales and marketing expenses totalled $329,000 for the nine
months ended June 30, 2011 compared to $309,000 for the nine months ended June 30, 2010. The increase in sales and marketing expenses for the nine months ended June 30, 2011
compared to the nine months ended June 30, 2010 were primarily related to additional consulting costs paid to increase staffing to support product pipeline and commercialization efforts. Sales
and Marketing costs in the quarter-ended June 30, 2010 included costs for an additional sales contractor; this cost was not incurred in 2011. 

        Operational
expenses were partially offset by interest income earned on short-term investments of $14,000 for the three ended June 30, 2011 (nine
months — $56,000) compared to $8,000 for three months ended June 30, 2010 (nine months — $20,000). The Company
invests its cash in variable term cashable government investment certificates and short-term money market deposits. 

        Non-cash
stock based compensation charges totalled $144,000 for the three months ended June 30, 2011 (nine months — $372,000)
compared to $69,000 for the three months ended June 30, 2010 (nine months — $184,000). The related stock option issuances are described further below in
the Outstanding Share Capital section. 

 OUTLOOK  

        Management expects losses to continue for the current fiscal year as investment continues in product development and commercialization
efforts on its pipeline of autoimmune test kits and platforms, as well as investment in sales and marketing. During the remainder of the 2011 fiscal year the Company intends to focus on sales of its
growing autoimmune test menu and placing SQiDworks systems in Canadian, US and European customers for system evaluation. We expect that some, or all, of these evaluation placements will lead to
commercial acceptance and revenues from sales of consumable test kits in the future. The Company delivered one such evaluation placement in the 2010 fiscal year to GDML. Subsequent to
GDML's 90 day internal acceptance and validation testing the Company executed a commercial agreement and has generated revenue since the fourth quarter of fiscal 2010. GDML is
presently evaluating the Company's quantitative celiac test kits and management is optimistic that this evaluation will lead to additional revenues from GDML attributed to IgX 

12

 

PLEX
Quantitative Celiac kits in fiscal 2011. The Company also intends to focus on its expanding tools and services product offerings to generate additional sales opportunities during the remainder of
the 2011 fiscal year. 

 Related Party Transactions  

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

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

 Sources and Uses of Cash  

        Operational activities for the quarter-ended June 30, 2011 were financed by cash on hand. 

        At
June 30, 2011, current assets were $3,766,000 compared to $9,902,000 at September 30, 2010. Working capital as at June 30, 2011 was $2,238,000 compared to
$8,930,000 at September 30, 2010. 

        Cash
used in investing activities for the quarter-ended June 30, 2011 was $130,000 compared to $287,000 for the quarter-ended June 30, 2010. Increased investing activities
in the three months ended June 30, 2010 was a result of additional laboratory equipment purchased to expand research and development efforts. Cash used in investing activities for the nine
months ended June 30, 2011 was $557,000 compared to $468,000 for the nine months ended June 30, 2010. Increased additions to property and equipment in the current nine month period
reflect the Company's investment in (1) an overhaul of its out-dated network and data storage infrastructure to expand its data storage capacity required to support the research and
development program and to enhance its disaster recovery system to protect the vast amounts of data generated through product development and validation, and (2) a SQiDworks platform for
internal use for platform development activities. 

        During
the nine months ended June 30, 2011 a total of 81,668 options were exercised at an average price of $1.45 for total proceeds of $119,000. 

        During
the nine months ended June 30, 2011 106,520 warrants with an expiry date of January 22, 2011 were exercised for total proceeds
of $133,000. 

 Risks  

        The Company is subject to various risks. Factors that could cause results or events to differ materially from management's current
expectations include, but are not limited to: 

	•
	We have incurred losses and expect to do so in the foreseeable future;   

	•
	Our future capital needs are uncertain and we will need to raise additional funds in the future, which may not be
available on a timely basis or on commercially reasonable terms;   

	•
	Market competition and technological advances of similar diagnostics products could reduce the attractiveness of our
products or render them obsolete;   

	•
	If our products fail to achieve and sustain sufficient market acceptance, our revenue will be adversely affected;  

	•
	We are subject to complex regulatory compliance requirements and the failure to obtain, or the withdrawal of, regulatory
clearance or approval for our products could adversely affect our ability to market our products and/or require us to incur significant costs to comply with such requirements; 

13

 

	•
	We may not be able to develop new products or enhance the capabilities of our existing diagnostics products to keep pace
with rapidly changing technology and customer requirements;   

	•
	Research and development of diagnostic products requires significant testing and investment and may not result in
commercially viable products within the timeline anticipated, if at all;   

	•
	We may need additional capacity to meet our manufacturing needs at the end of 2012; and   

	•
	Our future success depends upon our ability to expand our customer base and introduce new products and services. 

        Please
refer to our annual information form dated June 15, 2011 for a complete discussion of risks and uncertainties. 

        The
Company's SQiDworks automated analytical platform and its lead IgX PLEX RA multiplexed test kit, which have received regulatory clearances in Canada, Europe and the
United States, are believed to be the first microarray technologies in the autoimmune disease market to receive such clearances. The Company has continued to build on this regulatory success
with the Health Canada licensing of its IgX PLEX Celiac Qualitative test and its IgX PLEX Celiac Quantitative test, also CE Marked in Europe. With the Health Canada approval for the first second
generation fully quantitative assay, the Company anticipates that its quantitative celiac product line will progress commercially, later this year with the release of a 6-plex quantitative
panel that adds additional emerging biomarkers for markets in Canada, the US and Europe. 

        Our
tests are designed to run only on the SQiDworks platform. In order to obtain approval for the SQiDworks platform and the Company's consumable tests for sale in the
United States, our largest target market, the FDA typically requires the conduct of clinical validation studies to compare the performance of a new test to predicate tests currently approved
for sale in the US. Upon successful completion of validation studies conducted at both SQI's labs and at multiple third party labs, the data derived are then presented to the FDA in the form of a
510(k) Pre-market Notification. It is typical for the external validation studies to take several months to complete and upon receipt of a completed 510(k) submission the FDA may take up
to 180 days to render a decision on the application, not including any "time-outs" which the Company may take to prepare responses to various inquiries from the FDA. The Company
believes the experience gained in obtaining the clearance of the SQiDworks, RA test and celiac test, will enable it to complete and file applications for clearance of the subsequently developed
pipeline of assays more efficiently. This in turn may result in shorter review periods at the FDA than was experienced with the SQiDworks-RA system. The timing of such clearances is
dependent on several factors some of which are not controlled by the Company. 

        During
the current reporting period the Company did not earn significant revenues from its test kits or SQiDworks platform. Management believes that material revenues from the sale of
its test kits may be achieved in the 2011 calendar year; this is subject to certain risks including without limitation, the continued success of the development program and regulatory approvals of the
products. The continuation of the Company's research, development and commercialization activities along with investment in marketing and sales is dependent upon the Company's ability to successfully
manage its growth, investment in continued pipeline development and its cash requirements. 

        We
are exposed to market risks related to changes in interest rates and foreign currency exchange rates, which could affect the value of our current assets and liabilities. We do not
believe that the results of operations or cash flows would be affected to any significant degree by a sudden change in market interest rates relative to our cash investment, due to the prime interest
rate based nature of the investment. We have not entered into any forward currency contracts or other financial derivatives to hedge foreign exchange risk. We are subject to foreign exchange rate
changes that could have a material effect on future operating results or cash flows. 

        Management
will continue to review the Company's financial needs and to seek additional capital financing as required from sources that may include equity financing, debt financing,
collaborative projects and licensing arrangements; however, there can be no assurance that such additional funding will be available or if available, whether acceptable terms will be offered. On July
07, 2011, management announced that the Company had filed a preliminary short form base PREP prospectus with the Ontario Securities Commission and a registration 

14

 

statement
on Form F-10 with the U.S. Securities and Exchange Commission in connection with a proposed offering of common shares. 

 Outstanding Share Capital  

        As at June 30, 2011, there were 33,946,000 common shares issued and outstanding. 

        The
following tables describe the securities that have been issued that are convertible under certain conditions into common shares: 

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

 

 

					
	Number of Warrants 	 	Purchase Price 	 	Expiry Date 
	

 1,199,000	 	$4.00	 	December 4, 2011
	237,000	 	$1.90	 	December 23, 2011
	

 1,140,000	 	$5.00	 	August 12, 2012
	57,000	 	$2.50	 	August 12, 2012
	 	 	 	 	 
	

 2,633,000	 	 	 	 
	 	 	 	 	 

 

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

 

 

					
	Number of Options

(000s) 	 	Exercise Price 	 	Expiry Date 
	

 58,000	 	$1.20	 	August 29, 2011
	143,000	 	$1.74	 	August 7, 2012
	

 50,000	 	$1.50	 	October 23, 2012
	758,000	 	$1.60	 	February 15, 2013
	

 255,000	 	$1.75	 	August 26, 2013
	78,000	 	$1.30	 	May 21, 2014
	

 25,000	 	$3.26	 	November 03, 2014
	107,000	 	$2.25	 	February 22, 2015
	

 50,000	 	$2.10	 	May 27, 2015
	175,000	 	$2.50	 	August 16, 2015
	

 100,000	 	$2.90	 	October 4, 2015
	60,000	 	$2.85	 	January 31, 2016
	 	 	 	 	 
	

 1,859,000	 	 	 	 
	 	 	 	 	 

 

  Off-Balance Sheet Arrangements  

        The Company has no off-balance sheet arrangements. 

 Future Prospects  

        In its current state of evolution, management believes that the Company has assembled the necessary intellectual, financial, and human
capital to advance its current pipeline of autoimmune test panels and the SQiDworks system through the completion of clinical validation studies and regulatory filings in Canada, the U.S. and Europe.
The Company believes that completion of its quantitative RA and celiac products justifies the current intensified investment in development and commercialization of its pipeline of an additional group
of at least eight autoimmune microarray diagnostic panels over the next eighteen months. It further believes that successful completion of these tests in development, and collaborations with its
partners, may lead to the identification and commercialization of other test panels, not currently contemplated or in development, addressing unmet medical needs in the diagnosis or therapies for
autoimmune, infectious disease and allergy management. 

15

 

        Management
believes that the successful completion of its acquisition of Scienion, announced July 4, 2011 will enable us to: 

	•
	combine our assay commercialization capabilities, our range of cleared and in-development processing and
analytical systems for running microarray tests and the expertise of the two companies for highly technical microarray printing capabilities;   

	•
	strengthen our technology leadership position in microarray printing, surface chemistry, and automation of microarray
processes;   

	•
	accelerate the commercialization of our pipeline of RUO and IVD systems through the use of Scienion's arrayer equipment
and complete "print solutions";   

	•
	provide us with access to Scienion's base of more than 400 customers, many of whom are potential customers for our
service offerings and RUO and IVD products;   

	•
	provide sales support for Scienion's equipment, products and services in North America;   

	•
	give us access to Scienion's sales and engineering field service to leverage our suite of diagnostic products and services
in Europe and Asia; and   

	•
	diversify our revenues and add financial strength. 

        SQI's
operational objectives are straightforward: generate revenue from products in the regulatory jurisdictions for which we have acquired regulatory approvals or licenses; continue
successful commercialization and continuous improvement of a menu of autoimmune test kits; and, expand partnerships and other strategic relationships to enhance our product offerings or revenues.
Success in these steps will allow the Company to further validate its multiplexing model, value proposition and to roll-out and sell its products to customers in its target markets. 

        Our
goal is to become an industry leader in the development and commercialization of microarray and multiplexing diagnostic systems. We intend to accomplish this
goal through: 

	•
	Product development efforts. We are continuing to focus our research and development on high-volume,
high-margin, multiplexed tests for diseases for which there are existing tests that have reimbursement programs in place and predicate technologies that have received FDA clearance.  

	•
	Strategic market penetration. We have identified and are marketing our turnkey SQiDworks platform and approved assays to a
specific group of laboratories which process high volumes of tests and typically adopt new technologies to gain market share.   

	•
	Leveraging our core technology and expertise to access new markets and new customers. Our technology and microarray
development processes enable us to provide customized third party microarray formatted test development and manufacturing services.   

	•
	Seeking partnerships and strategic acquisitions. With our proposed acquisition of Scienion, we intend to become the
industry leader in printing solutions, which we expect will enable us to quickly expand our third party development and microarray manufacturing services. We intend to continue to seek partnerships
that will enable us to expand into new markets, broaden and deepen our lines of business and develop and strengthen our relationships with our customers.   

	•
	Leading through innovation. We intend to continue our research and development in each of our lines of business in order
to become the industry leader in multiplexing microarrays. 

        The
Company will continue to invest in research and development activities related to its core platform technologies of microarray-based assays and detection devices. 

 DISCLOSURE CONTROLS AND PROCEDURES, AND INTERNAL CONTROL OVER FINANCIAL REPORTING  

        The accompanying financial statements have been prepared by management in accordance with Canadian generally accepted accounting
principles. For quarterly reporting periods, the Company's financial statements 

16

 

are
approved by the Audit Committee and the Board of Directors. For annual reporting periods, the Company's financial statements are approved by the Board of Directors upon recommendation by the Audit
Committee. The integrity and objectivity of these financial statements are the responsibility of management.
In addition, management is responsible for all other information in this report and for ensuring that this information is consistent, where appropriate, with the information contained in the financial
statements. 

        In
support of this responsibility, management maintains a system of internal controls to provide reasonable assurance as to the reliability of financial information and the safeguarding
of assets. 

        In
particular, the CEO and CFO are responsible for establishing and maintaining disclosure controls and procedures ("DC&Ps") and internal controls over financial reporting ("ICFRs") for
the Company, and have: 

	(a)
	designed
such DC&Ps, or caused them to be designed under supervision, to provide reasonable assurance that material information is made known during the
period in which the annual and quarterly filings are being prepared;

	(b)
	designed
such ICFRs, or caused them to be designed under supervision, to provide reasonable assurance regarding the reliability of financial reporting and
the preparation of financial statements for external purposes in accordance with Canadian GAAP;

	(c)
	evaluated
the design and effectiveness of the Company's DC&Ps as of the quarter-ended June 30, 2011;

	(d)
	have
concluded that a material design weakness in the ICFRs may exist in terms of the inadequate segregation of certain duties, which is typical of
development stage companies; mitigating factors, including dual-payment authorization policies and transparent internal financial transaction reporting processes, serve to minimize the
risk that such design weakness could result in a material misstatement of results for the quarter-ended June 30, 2011; and

	(e)
	have
concluded that, other than the item described above in sub-point (d), there are no additional material design weaknesses in the DC&Ps or
ICFRs, and that the effectiveness of the DC&Ps is sufficient to expect the prevention or detection of material misstatements of results. 

        The
financial statements include amounts that are based on the best estimates and judgments of management. 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 three directors, all of whom are independent and 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 financial statements prior to their presentation to the Board of
Directors for approval. 

17

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  Exhibit 4.9    
    

 
 

FORM 51-102F3
  MATERIAL CHANGE REPORT
  (Amended)

 

 

			
	ITEM 1.	 	 Reporting Issuer
	

 	
 	
SQI Diagnostics Inc.

36 Meteor Drive

Toronto, ON

M9W 1A4
	
ITEM 2.	
 	
 Date of Material Change
	

 	
 	
July 4, 2011.
	
ITEM 3.	
 	
 Press Release
	

 	
 	
A press release in the form of Schedule A attached hereto was disseminated on July 4, 2011 via Canada Newswire.
	
ITEM 4.	
 	
 Summary of Material Change
	

 	
 	
SQI Diagnostics Inc. ("SQI" or the "Company") (TSX-V: SQD), a medical systems automation company focused on evolving laboratory-based biomarker testing, announced that it has entered into an agreement to acquire
all of the share capital of Scienion AG ("Scienion"), a German-based microarray manufacturing equipment and microarray print and development services company for a purchase price of CDN$15 million in cash and the issuance of 735,294 common
shares in the capital of SQI.
	

 	
 	
The closing of the transaction is subject to a number of customary closing conditions and regulatory approvals, and is subject to financing. The parties to the transaction include: Peppermint Holding GmbH;
Peppermint Venture Capital GmbH & Co. KG; Max-Planck-Gesellschaft zur Förderung der Wissenschaften e.V.; S-Venture Capital Dortmund GmbH; NRW.BANK Venture Fonds GmbH & Co. KG; IBB
Beteiligungsgesellschaft mbH; KfW, Anstalt des öffentlichen Rechts; VC Fonds Berlin GmbH; S-Capital Dortmund GmbH & Co. KG; and certain other individuals.
	
ITEM 5.	
 	
 Full Description of Material Change
	

 	
 	
On July 4, 2011 the Company entered into an agreement with those of Scienion's shareholders having the required percentage of ownership of share capital to "drag along" the other shareholders pursuant to the
Scienion shareholders' agreement (the "Vendors") to purchase all of the shares of Scienion for aggregate consideration to be satisfied by a closing cash payment of CDN$15,000,000 of which approximately €5,500,000 will be utilized to
satisfy certain debt settlements and CDN$1,750,000 will be placed in escrow pursuant to the terms of a holdback escrow agreement) and the issuance of 735,294 SQI common shares.
	

 	
 	
The parties to the acquisition have provided representations and warranties, which include representations and warranties with respect to Scienion made by Dr. Holger Eickhoff, the Managing Director of Scienion,
in favour of SQI. Additionally, the Vendors will each be giving standard representations and warranties with respect to their ownership of Scienion's shares. The representations and warranties will be repeated at closing.

 

 

 
 

 

			
	 	 	The closing of the acquisition is subject to standard conditions precedent in respect of the acquisition which include resignation by all members of Scienion's supervisory board, a release of Scienion by the Vendors and
all members of Scienion's supervisory board, trade working capital together with Scienion's bank account balances are to be satisfactory to SQI, any required approvals of the TSX Venture Exchange with respect to the issuance of SQI's common shares as
partial consideration for the purchase price, Scienion having no debts or other obligations other than the debt in respect of the debt settlement amount and a loan in the amount of €300,000 on Scienion's balance sheet, the closing of a
financing of at least CDN$30,000,000, and SQI's receipt of Scienion's audited financial statements which will not adversely differ from Scienion's unaudited financial statements in any material respects.
	

 	
 	
The acquisition agreement may be terminated if the closing does not occur on or before September 30, 2011. Additionally, either party may terminate the acquisition upon payment of a break fee in the amount of
CDN$250,000 if a party terminates its obligations as a result of the non-terminating party's breach of its obligations or failure to use commercially reasonable efforts to satisfy any conditions precedent within such non-terminating party's
control.
	

 	
 	
The Vendors have agreed to indemnify SQI in respect of claims or losses arising as a result of certain events which include breaches of representations and warranties and covenants, and certain tax matters.
Additionally, SQI has agreed to indemnify the Vendors in respect of claims or losses arising as a result of certain events, which include breaches of representations and warranties and covenants. These indemnities are subject to the following
limitations:
	 
	 	  •       Neither SQI nor the Vendors will be liable with respect
to any breach of the majority of representations and warranties and covenants after March 31, 2013;

	 
	 	  •       The Vendors will not be liable with respect to any tax
matters under the acquisition agreement in respect of which they are providing an indemnity after June 30, 2013;

	 
	 	  •       Neither SQI nor the Vendors will be liable with respect
to any inaccuracy or misrepresentation in any fundamental representation or warranty after five years from the closing date; and

	 
	 	  •       Neither SQI nor the Vendors will be liable with respect
to certain breaches of covenants after two years following the date the relevant party gained knowledge of such breach.

	

 	
 	
The liability of the Vendors under the indemnities has been capped under certain circumstances such that, generally, no Vendor will be liable in excess of the holdback amount. However, with respect to any brokerage
fees to be paid by Scienion or with respect to certain fundamental representations and warranties and covenants, each Vendor may be severally liable up to each Vendor's share of the purchase price. Further, there is no cap on the Vendors' liability
with respect to certain tax matters, the Vendors' legal fees, intentional misrepresentation or fraud.
	

 	
 	
SQI's liability under the indemnities has been capped under certain circumstances such that, generally, SQI will not be liable in excess of CDN$250,000. However, with respect to certain fundamental representations and
warranties and certain covenants, SQI may be liable up to CDN$2,500,000. Further, SQI may be liable up to €2,500,000 in the event of a breach of certain covenants relating to Scienion's solvency. Additionally, there is no cap on SQI's
liability with respect to intentional misrepresentation or fraud.
	
ITEM 6.	
 	
 Reliance on subsection 7.1(2) of National Instrument 51-102
	

 	
 	
Not applicable.
	
ITEM 7.	
 	
 Omitted Information
	

 	
 	
No significant facts have been omitted from this report.
	
 	
 	

 

 

 2

 
 

 

			
	ITEM 8.	 	 Senior Officer
	

 	
 	
Andrew Morris

Chief Financial Officer

Phone: (416) 674-9500 ext. 229

E-mail: amorris@sqidiagnostics.com
	
ITEM 9.	
 	
 Date of Report
	

 	
 	
DATED at Toronto, Ontario this 14th day of July 2011.

 

 3

 

 
 

  SCHEDULE "A"
  
    NOT FOR DISTRIBUTION TO U.S. NEWSWIRE SERVICES OR FOR DISSEMINATION IN THE UNITED STATES.
  ANY FAILURE TO COMPLY WITH THIS RESTRICTION MAY CONSTITUTE A VIOLATION OF
U.S. SECURITIES LAW.    
    

  

 
 

  SQI Diagnostics to Acquire Scienion AG, a Leader in Microarray Manufacturing    
    

        Toronto, Ontario, July 4, 2011 — SQI
Diagnostics Inc. ("SQI" or the "Company") (TSX-V: SQD), a life sciences company that
develops and commercializes proprietary technologies and products for advanced microarray diagnostics, today announced that it has entered into an agreement to acquire all of the share capital of
Scienion AG, a German-based microarray manufacturing equipment and microarray print and development services company for a purchase price of CDN$15 million in cash and the issuance of
735,294 common shares in the capital of SQI. 

        SQI
believes Scienion is a market leader in microarray printing development, microarray production systems and contract microarray print and development services for the life sciences
industry. The Company's proposed acquisition of Scienion will further the Company's entry into the market for providing enabling technologies for multiplexed protein, antibody, antigen and molecular
(genetic) microarrays. 

        Specifically,
the Company believes that the proposed acquisition will: 

	•
	enable it to combine its assay commercialization leadership, its range of cleared and in-development
processing and analytical systems for running microarray tests and the expertise of the two companies for highly technical microarray printing capabilities;   

	•
	strengthen the Company's technology leadership position in microarray printing, surface chemistry, and automation of
microarray processes;   

	•
	accelerate the commercialization of the Company's pipeline of in vitro
diagnostic products through the use of Scienion's arrayer equipment and complete "print solution";   

	•
	provide the Company with access to Scienion's base of more than 400 customers, many of whom are potential customers
for the Company's service offerings and research use only and in vitro diagnostic products;   

	•
	provide sales support for Scienion's equipment, products and services in North America;   

	•
	give the Company access to Scienion's sales and engineering support foothold to leverage the Company's suite of diagnostic
products and services in Europe; and   

	•
	diversify the Company's revenues and add financial strength: annual revenues for Scienion were over CDN$5 million
for the fiscal year ended December 31, 2010 with approximately CDN$400,000 in earnings before interest, taxes, depreciation and amortization. 

        The
closing of the transaction is subject to a number of customary closing conditions and regulatory approvals, and is subject to financing. The parties to the transaction include:
Peppermint Holding GmbH; Peppermint Venture Capital GmbH & Co. KG; Max-Planck-Gesellschaft zur Förderung der Wissenschaften e.V.;
S-Venture Capital Dortmund GmbH; NRW.BANK Venture Fonds GmbH & Co. KG; IBB Beteiligungsgesellschaft mbH; KfW, Anstalt des öffentlichen Rechts; VC
Fonds Berlin GmbH; S-Capital Dortmund GmbH & Co. KG; and certain other individuals. 

1

 

        This
press release shall not constitute an offer to sell or the solicitation of an offer to buy any securities of the Company in any jurisdiction in which such offer, solicitation or
sale would be unlawful. The securities to be offered may not be offered or sold within the United States absent registration under the United States Securities Act of 1933, as amended,
and applicable state securities laws, or pursuant to an applicable exemption from the registration requirements thereof. 

 About Scienion  

        Scienion AG provides systems and services for the contact-free printing of biological and chemical agents for human
diagnostics, pharmaceutics, veterinary, plant and food analytics and research. Scienion provides flexible off the shelf solutions for research and development and customized solutions for production
purposes. Scienion has leading technology in the area of ultra low volume liquid handling, particularly for the handling of precious and sensitive compounds of biological or chemical origin.
Scienion's dispensers allow for contact-free and precise drop spotting in the pico- to nano-liter range and are suited for microarray based
analytics — as for tests with DNA, oligonucleotides, peptides, proteins, antibodies, glycans or for dispensing cells onto various carriers. For more information,
please visit www.scienion.de. The contents of the website are specifically not incorporated by reference in this press release. 

 About SQI Diagnostics  

        SQI Diagnostics is a life sciences company that develops and commercializes proprietary technologies and products for advanced
microarray diagnostics. The Company's proprietary microarray tests and fully-automated systems are designed to simplify protein and antibody testing workflow, increase throughput, reduce costs and
provide excellent data quality. For more information, please visit www.sqidiagnostics.com. The contents of the Company's website are specifically not incorporated by reference in this
press release. 

For
further information please contact: 

 

 

					
	Chief Financial Officer

Andrew Morris

416.674.9500 ext. 229

amorris@sqidiagnostics.com	 	Media and Investor Relations

Adam Peeler

416.815.0700 ext. 225

apeeler@equicomgroup.com	 	 

 

  FORWARD-LOOKING INFORMATION  

        This press release contains certain forward-looking statements, including, without limitation, statements
containing the words "may", "plan", "will", "estimate", "continue", "anticipate", "intend", "expect", "in the process" and other similar expressions which constitute "forward-looking information"
within the meaning of applicable securities laws. Forward-looking statements reflect the Company's current expectation and assumptions, and are subject to a number of risks and uncertainties that
could cause actual results to differ materially from those anticipated. These forward-looking statements involve risks and uncertainties including, but not limited to, our expectations regarding the
completion of the proposed acquisition of Scienion AG, including obtaining the necessary financing and regulatory approvals, assuming the completion of the proposed acquisition, the integration of the
businesses of SQI and Scienion, the Scienion business being less profitable than expected, potential undisclosed liabilities associated with the proposed acquisition, exchange rates fluctuations and
interest rates fluctuations, general economic and market segment conditions, competitor activity, technology changes, regulatory approvals and international risk and currency exchange. More specific
risks include that SQI management will not be able to integrate the two businesses, or that the entities will not realize some or all of the expected synergies set out above or other synergies
expected by management due to incompatibilities in the merging business, the inability of management to bring about such synergies or a changing business environment rendering such synergies
inadvisable or uneconomical. After integrating the businesses, the suite of product and service offerings may not perform as expected if shifting demand moves in a direction away from the expected
business model of the merged entity, if competitors are able to take market share away from the merged entity or if changing technology adversely impacts the merged businesses. In addition, while the
Company expects Scienion's customers to continue and expend their relationship with the merged entity, there can be no assurance that such relationships will continue as expected, if at all. Such
statements reflect the current views of the Company with respect to future events and are subject to certain risks and  

2

 

 uncertainties and other risks detailed from time-to-time in the Company's ongoing filings with the securities regulatory authorities, which filings can be found at
www.sedar.com. Actual results, events, and performance may differ materially. 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
securities laws.

 DEFINITION OF NON-GAAP MEASURES: EBITDA  

        This announcement contains reference to EBITDA. This measurement represents operating income before
depreciation, amortization, interest, income taxes and non-controlling interest. This measurement is a widely accepted financial indicator of a company's ability to service and incur debt.
It should not be considered as an alternative to operating income or net earnings, as an indicator of operating performance or cash flows, or as a measurement of liquidity, but as additional
information. Because EBITDA is not a measurement defined by generally accepted accounting principles in Canada or Germany, it may not be comparable to the EBITDA of other
companies.

        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.

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FORM 51-102F3 MATERIAL CHANGE REPORT (Amended)

SCHEDULE "A" NOT FOR DISTRIBUTION TO U.S. NEWSWIRE SERVICES OR FOR DISSEMINATION IN THE UNITED STATES. ANY FAILURE TO COMPLY WITH THIS RESTRICTION MAY CONSTITUTE A VIOLATION OF U.S. SECURITIES LAW.

SQI Diagnostics to Acquire Scienion AG, a Leader in Microarray Manufacturing

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