SQI Diagnostics : Management's Discussion and Analysis

SQI DIAGNOSTICS INC.

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

September 30, 2021

Management's Discussion and Analysis of Financial Condition

And Results of Operations

This Management's Discussion and Analysis ("MD&A") covers the annual financial statements of SQI Diagnostics Inc. (the "Company" or "SQI") for the years ended September 30, 2021 and 2020. The annual audited financial statements and MD&A for the year ended September 30, 2021 can be found on SEDAR at www.sedar.com.

All amounts are expressed in Canadian dollars unless otherwise indicated.

This discussion and analysis were prepared by management using information available as of January 25, 2022.

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", "positioned" 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, product development efforts, and statements in respect of:

• our requirement for, and our ability to obtain, future funding;
• our expected future losses and accumulated deficit levels;
• technological advances of competitive products and general market competition;
• 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, including with respect to the development, viability and commercialization of our EXACT COVID-19 Antibody Test, the RALI-Dx™ and the RALI-fast™ products;
• 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 ability to obtain a sufficient supply of the components needed for our products;
• our ability to respond to legislative changes in the healthcare environment;
• our plans to retain and recruit personnel;
• our ability to develop and manufacture product to meet customer demands
• our plans to correct defects or errors in our systems; and
• our strategy with respect to the protection of our intellectual property.

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

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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:

• uncertain future capital needs and additional financing;
• history of losses;
• market competition;
• market acceptance of products;
• complex regulatory compliance requirements;
• rapidly changing technology and customer requirements;
• research and development activities;
• marketing and distribution;
• reliance on key suppliers;
• legislative or regulatory change;
• key personnel;
• development or manufacturing delays;
• unknown defects or errors;
• foreign exchange fluctuations;
• intellectual property protection;
• the economic effects of a pandemic, endemic or outbreak of an infectious disease, including, but not limited to, COVID-19;
• the impact of COVID-19 on our results;
• uncertainty surrounding regulatory approval for the Company's COVID-19-related testing products;
• volatility of share price and an active market for our shares;
• the completion of the closing of the PBI Acquisition (as defined herein), including the financing of its cash consideration, and expected impacts of such acquisition;
• 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.

COMPANY OVERVIEW

SQI is a leader in the science of lung health and a developer of COVID-19-related testing products. We develop and manufacture respiratory health and precision medicine tests that run on SQI's fully automated systems. Our tests have been developed to simplify the diagnostic testing process, including with respect to COVID-19 antibody monitoring, Rapid Acute Lung Injury testing, donor organ transplant informatics and immunological protein and antibody testing. We're driven to create and market life-saving testing technologies that help more people in more places live longer, healthier lives.

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Research and Development Activities / Product Pipeline

As a science-driven company, SQI brings rigor, discipline and data-drivendecision-making to every aspect of our work. That is how we developed some of the world's most advanced respiratory testing and organ health technologies, and that will continue to be our focus going forward. Since the start of the COVID-19 pandemic, we are also focused on making and marketing life-saving testing technology that puts health back in people's hands.

The EXACT COVID-19 Antibody Test measures the IgG, IgM and IgA antibodies of SARS-COV-2 in people who have been infected with COVID-19, people who have been vaccinated or asymptomatic people wanting to know if they have been exposed. The test is > 99% accurate and results are delivered in 24-48 hours following sample delivery to our New York State partner service laboratory. The Company anticipates filing with the New York State Department of Health ("NYSDOH") for approval of the use of the EXACT COVID-19 Antibody Test and collection kit in the second quarter of fiscal year 2022. If the EXACT COVID-19 Antibody Test receives NYSDOH approval, the test is expected to be available as a direct-to-consumer product which would allow people to avoid travelling to a clinic or hospital to be tested for the presence of the SARS-COV-2 antibodies.

The RALI-Dx™IL-6 Severity Triage Test and the RALI-fast™IL-6 Severity Triage POC Test each help clinicians identify which patients with SARS-CoV-2 are predicted to have a severe inflammatory response and should or should not be admitted to the hospital. Both tests measure the critical biomarker IL-6, which plays a key role in the cytokine storm phase of the COVID-19 disease. RALI- Dx™ delivers results from the lab in less than an hour while RALI-fast™ delivers results at the patient point-of-care in about 15 minutes. The Company applied for an Interim Order from Health Canada for RALI-Dx™IL-6 Severity Triage Test in the first quarter of fiscal year 2022 and currently expects to apply for an Interim Order for RALI-fast™ in fiscal year 2022.

We also remain focused on our organ transplant pipeline of products. SQI is pioneering an advanced diagnostic test that increases the chance of successful lung transplant by assessing the health of the donor organ before transplant surgery. The Company's TORdx™ LUNG Test measures inflammation at the molecular level to assess the health of the donor lung, enabling surgeons to transplant healthy lungs that otherwise would have been rejected; there is currently no other such test. Upon receipt of regulatory approval of the TORdx™ LUNG Test, clinical development is planned for diagnostic tests designed to increase the chance of successful kidney and liver transplant.

SQI's clinical research partner at University Health Network (UHN), is increasing the procurement, stabilization and transportation of healthy donor lungs available for transplant by supporting perfusion centers across North America. Implementation of Ex-Vivo Lung Perfusion (EVLP) procedures (FDA approved in 2019) has enabled lung transplant centers to increase the availability of donor lungs for transplant by nearly two-fold at some centers. Upon receipt of FDA market approval for the TORdx™ LUNG Test, SQI intends to leverage its product offering within the EVLP market and direct to transplant hospitals.

Under autoimmune disease testing, SQI has an approved direct-to-consumer Celiac Disease and a Rheumatoid Arthritis (RA) Test that help users to assess the likelihood of developing disease.

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Business Strategy

To optimize available human and financial resources, the Company's planned go-to-market strategy for products in development is to leverage its partnership with Azova Inc. (www.azova.com)to the fullest extent possible. We believe our COVID-19 EXACT Antibody Test will be a significant driver for our testing business.

Our business strategy is to become a rapid diagnostics leader by maximizing our research and development, our product offerings and our testing services platforms. Our initial revenue streams are focused on advanced diagnostics that target COVID-19 testing, organ transplant, and autoimmune disease. We believe the consumer market wants access to convenient, accurate rapid diagnostic healthcare tests. Our development and marketing strategy includes:

• Successful clinical development completion and regulatory approval of our diagnostic products
• Successful marketing and sales of our DTC and B2B diagnostic tests via strategic business partnerships such as our recent agreement with Azova Inc.
• Expansion of our commercial testing operations in the U.S. via partner labs
• Upgrading our Toronto manufacturing infrastructure to produce up to 4 million EXACT COVID-19 Antibody tests annually
• Acquisition of key talent to build our business
• Potential in-licensing and out-licensing of technologies and products such as our recently announced partnership with Owlstone Medical
• Additional development of new products that complement our offerings through research and development

Our strategy of merging innovative diagnostics with differentiated health management services help us to comprehensively support health care professionals, patients, and consumers across the globe. We are committed to improving the quality of our external communications and sharpening our messaging to clarify our mission and are focused on the timely and transparent communication of product announcements, company hires, partnerships and other material information relating to the Company.

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