Issue of Equity

SQS Software Quality Systems AG

25 January 2011

SQS Software Quality Systems AG ("SQS" or the "Company")

Issue of Equity

SQS, the global leader in independent software testing and quality management services, is pleased to confirm that, as a result of the performance of its subsidiary VeriSoft in the final year of its earn out, the Company has issued 234,552 new SQS ordinary €1 shares to the vendors of VeriSoft (the "Verisoft New Ordinary Shares") pursuant to the Verisoft acquisition agreement.

The Company announced the acquisition of 75% of VeriSoft, a group of independent software testing companies based in India, on 16 June 2008 for a consideration of up to INR 121 million (€1.8 million). Initial consideration of INR 40 million (€0.6 million) was paid in cash on completion with the remainder becoming payable in newly issued ordinary SQS shares subject to the achievement of specific earn out targets.

The Verisoft New Ordinary Shares are subject to lock-in provisions such that one third of the shares are released from lock-in restrictions every six months. The first release date is 24 January 2011. The Company has reserved the right to waive the lock-in provisions to satisfy market demand.

SQS retains the option to acquire the remaining 25% of the shares in VeriSoft between April 2011 and April 2016 for a consideration which is determined by VeriSoft's achieved profit after taxes and SQS' price/earnings ratio at the time the option is exercised. This option is exercisable either by SQS or the vendors and 50% of the consideration for the option can be satisfied by the issue of new SQS ordinary shares to the vendors.

SQS has also issued 28,265 new SQS ordinary €1 shares to employees of the Company (the "Employee New Ordinary Shares") pursuant to an employee share purchase programme approved at the Company's AGM in May 2009.

The Employee New Ordinary Shares were purchased at a price of €1.80 per share and the Company received, in aggregate, €50,877 in cash consideration.

The Employee New Ordinary Shares are subject to lock-in provisions until 31 December 2012.

Application has been made for the Verisoft New Ordinary Shares and Employee New Ordinary Shares to be admitted to trading on AIM ("Admission") and dealings are expected to commence on 28 January 2011. 

Following Admission, SQS will have 27,893,289 Ordinary Shares in issue.

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