Said Andrew Morris, SQI's President and CEO: "Our transformation from an R&D company to a company with recurring revenue is accelerating. New installations, client acquisition and test volumes are ahead of target and we are advancing towards fiscal 2016 annual revenues of $1 million."
"We're especially pleased with our increased customer traction because the more testing platforms we place, the more recurring kit sales we will generate. Our recent rights offering gave us the funds to build up our platform inventory and intensify our sales and marketing efforts in securing the new customers who will produce new levels of recurring revenues."
SQI's proprietary technology is used to create custom tests for clients in the drug development market that can now deliver as many as 30 unique results from a single SQI test. In doing this, it removes the work needed to develop, run, and purchase materials for 30 separate single tests. This high level of multiplexing significantly reduces the cost and labour to develop, validate, and run diagnostic tests. In the last quarter, the company secured a contract to develop a product that will deliver over 40 results with a single test.
Financial and Business Highlights for the Quarter
- SQI continues its transition into a revenue generating commercial enterprise with revenues for the nine months ended June 30, 2016 of $712,000 compared to $443,000 for fiscal 2015.
- In the first quarter of F16 we entered into a three year, multiproduct agreement with an existing Global Pharma customer. In the second quarter of F16 we delivered our first substantial commercial order of test kits to this customer, which was run on the sqidlite system in their lab. We have also received a second purchase order for test kits from this same customer and expect additional orders in the current quarter from the other products we have developed for them.
- The first milestone in the platform sale to our DNA customer – the delivery and validation of the platform at our facility – is in progress and will be complete this quarter. We continue to earn service revenue from this customer for the development of their test which has grown to an approximately 80-plex DNA-based test to detect infections in human blood.
- As previously announced, we completed an agreement with a customer in our diagnostic testing sector to develop a 40-plex product. SQI completed the first milestone, a proof of principle test that produced very positive results during the quarter and achieved our proof-of-principle milestone. We expect to continue development of the full commercial product in the current quarter.
- We launched our xPlex product in the current quarter with the delivery a sqid-X system and xPlex kits to a large biotech customer. The xPlex product includes kits and software that allow our pharmaceutical and biotechnology customers to develop multiplexed tests for themselves. Using their in-development drugs, our kits and platforms installed at their facilities eliminates the need for them to transfer their proprietary drugs to SQI and expands the number of people actively developing products across our entire xPlex customer base.
- On April 18, 2016, Dr. Swati Gupta, PhD, Director of Immunology for Allergan Inc., presented a case study at the 10th Annual Workshop on Recent Issues in Bioanalysis in Orlando, Florida. The title of the talk was "SQI Ig_plex Dual-Layer Multiplexing Capabilities in Immunogenicity Assays" and it provided novel case studies from products that were developed on SQI's multiplexing platform used in immunogenicity testing. The presentation compared SQI tests to traditional bridging assays using a competitor's technology. The presentation provided data emphasizing SQI's improved drug tolerance, sensitivity, the ability to run all targets in one test and how to use the technology to profile for safety and efficacy of therapeutics. This added validation speaks to SQI's quality position and winning value proposition.
- On July 14, 2016 the Company announced a Rights Offering to shareholders of record on July 21, 2016, on the basis of one Right for each six (6) Common Shares held. Each Right will entitle the holder thereof to subscribe for one Common Share upon payment of the subscription price of $0.27 per Common Share until 4:00 p.m. (Toronto time) on August 16, 2016. In connection with the Rights Offering, SQI has entered into a stand-by purchase agreement with certain insiders who together currently own, directly or indirectly, or exercise control or direction over, approximately 43.19% of SQI's Common Shares. Under the Stand-By Purchase Agreement, the Stand-By Purchasers have agreed to subscribe for, and the Company has agreed to issue, all common shares offered under the Rights Offering that are not otherwise purchased by Shareholders. There are currently 69,347,003 Common Shares issued and outstanding. Assuming the exercise of all Rights or the entire take-up of the stand-by commitment, the Rights Offering will raise gross proceeds of approximately $3,121,000.
Q3 2016 Financial Results Overview
Revenue for the three months ended June 30, 2016 was $235,000 compared to $180,000 for the same period last year. Revenue for the nine months ended June 30, 2016 was $712,000 compared to $265,000 for the same period last year. The Company continued to earn revenue from multiple development projects in its drug development business and its diagnostic sector and from the sale of commercial test kits.
For the quarter, the Company recorded a net loss of $1,446,000 ($0.02 net loss per share) as compared to the net loss of $1,571,000 ($0.03 net loss per share) for the quarter-ended June 30, 2015. The loss for the nine months ended June 30, 2016 was $3,791,000 as compared to $4,549,000 for the same period last year. The net loss for the three and nine months ended June 30, 2016 is lower than the loss for the three and nine months ended June 30, 2015. The decrease in the loss is attributable to the increases in revenues over the three and nine months ended June 30, 2016 and decreased costs over the relevant periods as well as the effects of the SR&ED tax credit recorded in the nine month period.
R&D expenditures, excluding amortization, SR&ED investment tax credits recoverable and stock- based compensation, for the three months ended June 30, 2016, were $846,000 compared to $709,000 for the same period in 2015. R&D expenditures, excluding amortization, SR&ED investment tax credits recoverable and stock based compensation, for the nine months ended June 30, 2016 were $2,371,000 compared to $2,181,000 for the same period in 2015. R&D costs were higher for the three and nine month periods ended June 30, 2016 compared to the same periods in 2015 due to additional personnel and laboratory costs incurred in the science and engineering teams to ensure customer timelines were achieved. During the nine months ended June 30, 2016 the Company engaged consultants to review and file SR&ED claims for fiscal 2014 and 2015 this has resulted in an investment tax credit recoverable of $360,000 being recorded in the period.
Corporate and general expenses, excluding stock-based compensation, totaled $351,000 for the three months ended June 30, 2016 (nine months – $1,138,000) compared to $541,000 for the three months ended June 30, 2015 (nine months – $1,359,000). Corporate and general expenses decreased during the three and nine month periods due to staffing changes and decreased professional and consulting fees.
Sales and marketing expenses, excluding stock based compensation, for the three months ended June 30, 2016 totaled $158,000 (nine months – $485,000) compared to $208,000 for the three months ended June 30, 2015 (nine months – $566,000). Sales and marketing expenses were lower over the three and nine month periods due to staffing changes. The Company lost one sales contractor and is currently in the process of filling that position. In January of 2016 the Company hired a customer solutions manager.
At June 30, 2016, current assets were $2,171,000 compared to $2,555,000 at September 30, 2015. As at June 30, 2016 the Company has a $1,413,000 working capital surplus compared to a surplus of $1,787,000 at September 30, 2015.
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:
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=1233981&s=1&k=009FF5B092BEDB12EDEE167098D58AE2.
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.
For more information, please contact:
Chief Executive Officer
416.674.9500 ext. 229
Vice President of Finance
416.674.9500 ext. 277
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.
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.
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SOURCE SQI Diagnostics Inc.