Avisa Diagnostics Inc. — Annual Report 2021

May 1, 2021

AVISA DIAGNOSTICS INC. (formerly FogChain Corp.)

Consolidated Financial Statements Year Ended December 31, 2020 and 2019 (Expressed In US Dollars)

AVISA DIAGNOSTICS INC.

(Formerly FogChain Corp.)

Index	Page
Independent Auditor’s Report	3-4
Consolidated Statements of Financial Position	5
Consolidated Statements of Loss and Comprehensive Loss	6-7
Consolidated Statements of Changes in Shareholders’ Equity (Deficit)	8
Consolidated Statements of Cash Flows	9
Notes to the Consolidated Financial Statements	10-25

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INDEPENDENT AUDITOR'S REPORT

To the Shareholders of Avisa Diagnostics Inc. (formerly FogChain Corp.)

Opinion

We have audited the consolidated financial statements of Avisa Diagnostics Inc. (formerly FogChain Corp.) (the “Company”), which comprise the consolidated statements of financial position as at December 31, 2020 and 2019, and the consolidated statements of loss and comprehensive loss, changes in shareholders’ equity (deficit) and cash flows for the years then ended, and notes to the consolidated financial statements, including a summary of significant accounting policies (collectively referred to as the “financial statements”).

In our opinion, the accompanying financial statements present fairly, in all material respects, the financial position of the Company as at December 31, 2020 and 2019, and its financial performance and its cash flows for the years then ended in accordance with International Financial Reporting Standards.

Basis for Opinion

We conducted our audit in accordance with Canadian generally accepted auditing standards. Our responsibilities under those standards are further described in the Auditor's Responsibilities for the Audit of the Financial Statements section of our report. We are independent of the Company in accordance with the ethical requirements that are relevant to our audit of the financial statements in Canada, and we have fulfilled our other ethical responsibilities in accordance with these requirements. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion.

Material Uncertainty Related to Going Concern

We draw attention to Note 1 to the financial statements, which describes events or conditions that indicate a material uncertainty exists that may cast significant doubt on the Company's ability to continue as a going concern. Our opinion is not modified in respect of this matter.

Other Information

Management is responsible for the other information. The other information comprises the information included in Management’s Discussion and Analysis.

Our opinion on the financial statements does not cover the other information and we do not express any form of assurance conclusion thereon.

In connection with our audit of the financial statements, our responsibility is to read the other information identified above and, in doing so, consider whether the other information is materially inconsistent with the financial statements or our knowledge obtained in the audit, or otherwise appears to be materially misstated. If, based on the work we have performed, we conclude that there is a material misstatement of this other information, we are required to report that fact. We have nothing to report in this regard.

Responsibilities of Management and Those Charged with Governance for the Financial Statements

Management is responsible for the preparation and fair presentation of the financial statements in accordance with International Financial Reporting Standards, and for such internal control as management determines is necessary to enable the preparation of financial statements that are free from material misstatement, whether due to fraud or error.

In preparing the financial statements, management is responsible for assessing the Company's ability to continue as a going concern, disclosing, as applicable, matters related to going concern and using the going concern basis of accounting unless management either intends to liquidate the Company or to cease operations, or has no realistic alternative but to do so.

Those charged with governance are responsible for overseeing the Company's financial reporting process.

(cont’d)

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Auditor's Responsibilities for the Audit of the Financial Statements

Our objectives are to obtain reasonable assurance about whether the financial statements as a whole are free from material misstatement, whether due to fraud or error, and to issue an auditor's report that includes our opinion. Reasonable assurance is a high level of assurance, but is not a guarantee that an audit conducted in accordance with Canadian generally accepted auditing standards will always detect a material misstatement when it exists. Misstatements can arise from fraud or error and are considered material if, individually or in the aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of these financial statements. As part of an audit in accordance with Canadian generally accepted auditing standards, we exercise professional judgment and maintain professional skepticism throughout the audit. We also:

• Identify and assess the risks of material misstatement of the financial statements, whether due to fraud or error, design and perform audit procedures responsive to those risks, and obtain audit evidence that is sufficient and appropriate to provide a basis for our opinion. The risk of not detecting a material misstatement resulting from fraud is higher than for one resulting from error, as fraud may involve collusion, forgery, intentional omissions, misrepresentations, or the override of internal control.

• Obtain an understanding of internal control relevant to the audit in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control.

• Evaluate the appropriateness of accounting policies used and the reasonableness of accounting estimates and related disclosures made by management.

• Conclude on the appropriateness of management’s use of the going concern basis of accounting and based on the audit evidence obtained, whether a material uncertainty exists related to events or conditions that may cast significant doubt on the Company’s ability to continue as a going concern. If we conclude that a material uncertainty exists, we are required to draw attention in our auditor’s report to the related disclosures in the financial statements or, if such disclosures are inadequate, to modify our opinion. Our conclusions are based on the audit evidence obtained up to the date of our auditor’s report. However, future events or conditions may cause the Company to cease to continue as a going concern.

• Evaluate the overall presentation, structure and content of the financial statements, including the disclosures, and whether the financial statements represent the underlying transactions and events in a manner that achieves fair presentation.

We communicate with those charged with governance regarding, among other matters, the planned scope and timing of the audit and significant audit findings, including any significant deficiencies in internal control that we identify during our audit.

We also provide those charged with governance with a statement that we have complied with relevant ethical requirements regarding independence, and to communicate with them all relationships and other matters that may reasonably be thought to bear on our independence, and where applicable, related safeguards.

The engagement partner on the audit resulting in this independent auditor's report is Rakesh Patel.

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DALE MATHESON CARR-HILTON LABONTE LLP CHARTERED PROFESSIONAL ACCOUNTANTS

Vancouver, BC

April 30, 2021

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AVISA DIAGNOSTICS INC.

(Formerly FogChain Corp.)

Consolidated Statements of Financial Position (Expressed in US Dollars)

Notes	December 31, 2020 December 31, 2019
ASSETS Cash 4 Receivables 5 Prepaids and deposits Equipment 7	$ 110,002 $ 426,267 994 64,898 2,587 2,843
	113,583 494,008 8,572 28,597
	$ 122,155 $ 522,605
LIABILITIES Trade payables and accrued liabilities 8 Deferred revenue Due to related parties 11 Government grant 9 Government loan payable 9 SHAREHOLDERS' EQUITY (DEFICIT) Share capital 10 Reserve 10 Accumulated other comprehensive loss Deficit	$ 166,100 $ 107,758 - 19,110 320,399 228,745 8,000 -
	494,499 355,613 153,441 -
	647,940 355,613
	10,479,795 10,479,795 429,792 398,480 (13,584) (5,257) (11,421,788) (10,706,026)
	(525,785) 166,992
	$ 122,155 $ 522,605
Nature and Continuance of Operations (Note 1) Commitment (Note 12) Subsequent Events (Note 17) Approved on behalf of the board of directors: “Brian Birk” “David S. Joseph” __________ _______ Director Director

The accompanying notes are an integral part of these consolidated financial statements.

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AVISA DIAGNOSTICS INC.

(Formerly FogChain Corp.)

Consolidated Statements of Loss and Comprehensive Loss (Expressed in US Dollars)

Note	Year ended December 31, 2020 Year ended December 31, 2019
Sales 13 Cost of Services GROSS PROFIT Operating expenses Amortization 6,7 Bad debt Consulting fees 11 Finance charge 9 Marketing Office and administration Professional fees Regulatory and transfer agent fees Rent and utilities 11 Salaries and benefits 11 Share-based compensation 10, 11 Software costs Travel NET LOSS BEFORE OTHER ITEMS Other items Interest income Impairment of intangibles 6 Impairment of goodwill 6 Grant income 9 NET LOSS FOR THE YEAR Other comprehensive loss that may be reclassified to profit Unrealized foreign exchange loss COMPREHENSIVE LOSS FOR THE YEAR	$ 277,830$ 838,857 148,549 407,052
	129,281 431,805
	20,025 965,665 - 19,723 7,990 164,184 17,096 - 3,559 36,762 141,289 183,534 165,772 190,038 27,517 43,551 19,906 41,586 452,342 1,232,967 31,312 133,790 12,947 19,761 900 70,168
	900,655 3,101,729
	(771,374) (2,669,924)
	497 2,002 - (1,212,010) - (253,961) 55,115 -
	55,612 (1,463,969)
	(715,762) (4,133,893) and loss (8,327) (731)
	(8,327) (731)
	$ (724,089) $ (4,134,624)

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**Loss per common share ***
-basic and diluted	$	(0.14)	$	(0.84)
Weighted average number of common shares outstanding
-basic and diluted		78,365,224		73,812,279

• On April 20, 2021, the Company effected a share consolidation on the basis of 15:1. The calculation of basic and diluted loss per common share for all periods presented has been adjusted retrospectively, on the basis of 5,224,348 and 4,920,819 as the weighted average number of common shares outstanding, respectively.

The accompanying notes are an integral part of these consolidated financial statements.

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AVISA DIAGNOSTICS INC.

(Formerly FogChain Corp.)

Consolidated Statement of Changes in Shareholders' Equity (Deficit) (Expressed in US Dollars)

Share Capital

					Number of
					Class A
					Convertible						Accumulated
		Number of			Restricted						Other				Total
		Common			Common						Comprehensive				Shareholders'
	Note	Shares		Amount	Shares		Amount		Reserve		Loss		Deficit		Equity (Deficit)
Balance at December 31, 2018		75,623,098	$	10,434,750	18,630,000	$	3,105	$	264,690	$	(4,526)	$	(6,572,133)	$	4,125,886
Shares returned to treasury	10	(120,874)		-	-		-		-		-		-		-
Conversion of shares	10	1,863,000		311	(1,863,000)		(311)		-		-		-		-
Share-based payments	10	1,000,000		41,940	-		-		-		-		-		41,940
Share-based compensation	10	-		-	-		-		133,790		-		-		133,790
Net loss for the year		-		-	-		-		-		-		(4,133,893)		(4,133,893)
Othercomprehensiveloss		-		-	-		-		-		(731)		-		(731)
Balance at December 31, 2019		78,365,224		10,477,001	16,767,000		2,794		398,480		(5,257)		(10,706,026)		166,992
Share-based compensation	10	-		-	-		-		31,312		-		-		31,312
Net loss for the year		-		-	-		-		-		-		(715,762)		(715,762)
Othercomprehensiveloss		-		-	-		-		-		(8,327)		-		(8,327)
Balance at December 31, 2020		78,365,224	$	10,477,001	16,767,000	$	2,794	$	429,792	$	(13,584)	$	(11,421,788)	$	(525,785)

The accompanying notes are an integral part of these consolidated financial statements.

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AVISA DIAGNOSTICS INC.

(Formerly FogChain Corp.)

Consolidated Statements of Cash Flows

(Expressed in US Dollars)

	Year ended December 31, 2020 Year ended December 31, 2019
Cash provided by (used in): Operating: Net loss for the year Items not involving cash: Amortization Share-based compensation Bad debt Consulting fees - non-cash Accrued interest on loan Impairment of intangibles Impairment of goodwill Changes in non-cash operating working capital items: Receivables Prepaids and deposits Trade payables and accrued liabilities Deferred revenue Due to related parties Investing Acquisition of equipment Financing Government loan and grant Effect of foreign exchange on cash flows Decrease in cash during the year Cash, beginning of the year Cash, end of theyear	$ (715,762) $ (4,133,893) 20,025 965,665 31,312 133,790 - 19,723 - 41,940 17,096 - - 1,212,010 - 253,961
	(647,329) (1,506,804) 63,904 (19,492) 256 15,387 58,343 (83,442) (19,110) 19,110 91,654 228,745
	(452,283) (1,346,496)
	- (27,918)
	- (27,918)
	144,345 -
	144,345 -
	(8,327) (731)
	(316,265) (1,375,145) 426,267 1,801,412
	$ 110,002 $ 426,267

Supplemental cash flow information:

During the year ended December 31, 2020 there were no significant non-cash transactions.

• During the year ended December 31, 2019 the Company incurred the following significant non-cash transactions: • A fair value of $41,940 on common shares issued for consulting services (note 10); and

• A reallocation of $311 to common shares on the conversion of 1,863,000 Class A restricted shares (note 10).

The accompanying notes are an integral part of these consolidated financial statements.

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AVISA DIAGNOSTICS INC. (Formerly FogChain Corp.) Notes to the Consolidated Financial Statements Year Ended December 31, 2020 (Expressed in US Dollars)

1. NATURE OF OPERATIONS AND GOING CONCERN UNCERTAINTY

Avisa Diagnostics Inc. (formerly FogChain Corp.) (the "Company") was incorporated on February 7, 1984 under the Business Corporations Act (Ontario). The Company’s common shares trade on the Canadian Securities Exchange (“CSE”) under the symbol FOG and on the OTCQB trading under the symbol FOGCF. Effective November 4, 2020, the CSE has deemed the Company’s listed securities to be inactive and changed its symbol to FOG.X.

The Company’s head office, principal address and records office is Suite 2050-1055 West Georgia Street, PO Box 11121, Royal Centre, Vancouver, BC V6E 3P3. The registered office is Suite 4400-181 Bay Street, Toronto, Ontario M5J 2T3.

The Company was previously a fully integrated, end-to-end software development life cycle and quality assurance solutions provider. The Company’s suite of services and technology was designed to provide application development at scale with greater speed, efficiency and at a lower cost. The Company’s software architecture assisted developers with a suite of tools to build, test, and monitor new applications in a unified environment. However, the Company’s business is now limited to identifying and evaluating assets or businesses for an acquisition.

On December 17, 2019, the Company entered into a share exchange agreement with Canadian Teleradiology Services Inc., a privately held Canadian company incorporated under the Canada Business Act (Ontario) . On June 22, 2020, the share exchange agreement was terminated.

On August 21, 2020, the Company entered into a business combination and amalgamation agreement with Global Star Education Group Limited, a privately held Canadian company. On November 2, 2020, the business combination and amalgamation agreement was terminated.

On April 20, 2021, according to the Merger Agreement and Plan of Reorganization dated February 1, 2021 (“Merger Agreement”), the Company acquired the issued and outstanding shares of Avisa Pharma Inc. (“Avisa”), a privately held medical device company incorporated in Delaware, that has developed a quantitative, point-of-care diagnostic breath test for rapidly detecting bacterial pneumonia and pulmonary infections. (Note 17).

Upon completion of the reverse takeover transaction, the Company changed its name to Avisa Diagnostics Inc. and will continue the business of Avisa. The listing of the resulting issuer is conditionally approved by the CSE and the resumption of trading is expected in May 2021.

These financial statements have been prepared on a going concern basis which assumes that the Company will be able to realize its assets and discharge its liabilities in the normal course of business for the foreseeable future. The continuing operations of the Company are dependent upon its ability to evaluate and complete a business combination. At December 31, 2020, the Company has an accumulated deficit of $11,421,788 (December 31, 2019 - $10,706,026) including a loss for the year ended December 31, 2020 of $715,762 (December 31, 2019 - $4,133,893). These uncertainties may cast significant doubt upon the Company’s ability to continue as a going concern. These financial statements do not include any adjustments relating to the recoverability and classification of assets and liabilities which might be necessary should the Company be unable to continue in existence.

In March 2020, the World Health Organization declared coronavirus COVID-19 a global pandemic. This contagious disease outbreak, which has continued to spread, and any related adverse public health developments, has adversely affected workforces, economies, and financial markets globally, potentially leading to an economic downturn. While the impact of COVID-19 is expected to be temporary, the current circumstances are dynamic and the impacts of COVID-19 on business operations cannot be reasonably estimated at this time. There can be no assurance that the Company will not be impacted by adverse consequences that may be brought about by the pandemic’s impact on its business, results of operations, financial position and cash flows in the future.

The consolidated financial statements were authorized for issue on April 30, 2021 by the directors of the Company.

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AVISA DIAGNOSTICS INC. (Formerly FogChain Corp.) Notes to the Consolidated Financial Statements Year Ended December 31, 2020 (Expressed in US Dollars)

2. BASIS OF PRESENTATION

Statement of compliance with International Financial Reporting Standards (“IFRS”)

These financial statements have been prepared in accordance with International Financial Reporting Standards (“IFRS”) as issued by the International Accounting Standards Board (“IASB”) and Interpretations issued by the International Financial Reporting Interpretations Committee (“IFRIC”).

Basis of presentation and consolidation

The consolidated financial statements of the Company have been prepared on an accrual basis except for cash flow information, and are based on historical costs, modified where applicable. The consolidated financial statements are presented in US Dollars unless otherwise noted.

These consolidated financial statements include accounts of the Company and its wholly-owned subsidiary, Fogchain USA Inc. Inter-company transactions and balances are eliminated upon consolidation.

Subsidiaries are corporations in which the Company is able to control the financial operating, investing and financing activities and policies, which is the authority usually connected with holding majority voting rights. The consolidated financial statements include the accounts of the Company and its controlled entity from the date on which control was acquired. The Company’s subsidiary uses the same reporting period and the same accounting policies as the Company.

All significant inter-company balances and transactions have been eliminated on consolidation.

Significant accounting judgements, estimates and assumptions

The preparation of financial statements in conformity with IFRS requires management to make certain estimates, judgments and assumptions that affect the reported amounts of assets and liabilities at the date of the financial statements and the reported expenses during the period. Actual results could differ from these estimates.

Significant assumptions about the future and other sources of estimation uncertainty that management has made at the end of the reporting period, that could result in a material adjustment to the carrying amounts of assets and liabilities in the event that actual results differ from assumptions made, relate to, but are not limited to, the following:

Share-based payments

The Company uses the Black-Scholes Option Pricing Model to determine the fair value of options and warrants in order to calculate share-based payments expense and the fair value of agent warrants. The Black-Scholes Option Pricing Model involves six key inputs to determine fair value of an option: risk-free interest rate, exercise price, market price at date of issue, expected dividend yield, expected life, and expected volatility. Certain of the inputs are estimates that involve considerable judgment and are or could be affected by significant factors that are out of the Company’s control. The Company is also required to estimate the future forfeiture rate of options based on historical information in its calculation of share-based payments expense.

Recognition and valuation of deferred tax assets

The recognition of deferred tax assets is based upon whether it is probable that sufficient and suitable taxable profits will be available in the future or whether taxable temporary differences will reverse such that deferred tax assets can be utilized. Recognition therefore involves a degree of estimation and judgement regarding the future financial performance or the timing of the reversed deferred tax liabilities where deferred tax assets have been recognized.

Research and development costs

Evaluating whether or not costs incurred by the Company in developing its technology meet the criteria for capitalizing as intangible assets. Management determined that some products are able to complete intangible assets and are able, with sufficient certainty, to demonstrate that assets will generate future economic benefits. Development costs of these products are capitalized at cost value. Research and development costs of other products are recognized as period expense.

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AVISA DIAGNOSTICS INC. (Formerly FogChain Corp.) Notes to the Consolidated Financial Statements Year Ended December 31, 2020 (Expressed in US Dollars)

2. BASIS OF PRESENTATION (cont’d)

Significant accounting judgements, estimates and assumptions (cont’d)

Revenue recognition

Revenue is measured at the fair value of the consideration received or receivable, net of estimated discounts. The Company considers the terms of the sales contracts as well as industry practices, taking into consideration the type of customer, the estimated time required on each project and the specific circumstances of each arrangement. The Company recognizes revenues when services are completed and billed.

Comprehensive income (loss)

Comprehensive income (loss) is the change in the Company’s net assets that results from transactions, events and circumstances from sources other than the Company’s shareholders and includes items that are not included in the statement of loss. For the year ended December 31, 2020, other comprehensive income is related to the effects of currency translation adjustments.

Business combination

Considerable judgment is required to determine whether a set of assets acquired and liabilities assumed constitute a business and may require the Company to make certain judgments, taking into account all facts and circumstances. A business consists of inputs, including non-current assets and processes, including operational processes, than when applied to those inputs have the ability to create outputs and provide a return to the Company and its shareholders.

In business combinations, it generally requires time to obtain the information necessary to identify and measure the following as of the acquisition date:

a) The identifiable assets acquired and liabilities assumed;

b) The consideration transferred in exchange for an interest in the acquiree;

c) The resulting goodwill.

If the initial accounting for a business combination is incomplete by the end of the reporting period in which the combination occurs, the Company reports in its consolidated financial statements provisional amounts for the items for which the accounting is incomplete.

During the measurement period, the Company will retrospectively adjust the provisional amounts recognized at the acquisition date to reflect new information obtained about facts and circumstances that existed as of the acquisition date and, if known, would have affected the measurement of the amounts recognized as of that date. During the measurement period, the Company will also recognize additional assets or liabilities if new information is obtained about facts and circumstances that existed as of the acquisition date and, if known, would have resulted in the recognition of those assets and liabilities as of that date. The measurement period ends as soon as the Company receives the information it was seeking about facts and circumstances that existed as of the acquisition date.

Estimates of useful lives of property and equipment and intangible assets

Management's judgment involves consideration of intended use, industry trends and other factors in determining the expected useful lives of depreciable assets and to determine depreciation methods.

Cash generating units and impairment of non-financial assets

Judgment is required to assess the Company’s determination of cash generating units (“CGU”) for the purpose of impairment testing. The process to calculate the recoverable amount of a cash generating unit requires use of valuation methods such as the discounted cash flow method which uses assumptions of key variables including future cash flows, discount rate and terminal growth rates.

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AVISA DIAGNOSTICS INC. (Formerly FogChain Corp.) Notes to the Consolidated Financial Statements Year Ended December 31, 2020 (Expressed in US Dollars)

3. SIGNIFICANT ACCOUNTING POLICIES

Cash and cash equivalents

Cash and cash equivalents include cash on hand and other short-term highly liquid investments with original maturities of three months or less.

Foreign currency translation

The financial statements are presented in US dollars.

The functional currency for the Company is the Canadian dollar and the functional currency for Fogchain Inc. is the US dollar.

Transactions in currencies other than the entity’s functional currency are translated at the exchange rates in effect on the date of the transaction. Monetary assets and liabilities denominated in foreign currencies are translated at the rate of the exchange in effect as at the statement of financial position date. Non-monetary assets and liabilities denominated in foreign currencies are translated at the exchange rates prevailing at the time of the acquisition of the assets or assumption of the liabilities. Foreign currency differences arising on translation are recognized in profit or loss. When converting to presentation currency, all resulting exchange gains or losses are recognized as a foreign currency translation adjustment and included as a separate component of equity, Accumulated Other Comprehensive Loss.

Goodwill

Goodwill is the amount that results when the fair value of consideration transferred for an acquired business exceeds the net fair value of the identifiable assets and liabilities acquired. When the Company enters into a business combination, the acquisition method of accounting is used. Goodwill is assigned, as of the date of the business combination, to cash generating units that are expected to benefit from the business combination.

Intangibles and equipment

Intangible assets and equipment are recorded at cost less accumulated depreciation and impairment charges. Such cost consists of the purchase price, any costs directly attributable to bringing the asset to the location and condition necessary for its intended use.

Depreciation is calculated over the estimated useful lives as follows:

Computer equipment	2	to 3 years	Straight-line method
Software	3	years	Straight-line method
Customer list	5	years	Straight-line method

Impairment

The Company reviews the carrying amounts of its non-financial assets, including equipment, when events or changes in circumstances indicate the assets may not be recoverable. If any such indication exists, the recoverable amount of the asset is estimated in order to determine the extent of the impairment loss, if any. Where it is not possible to estimate the recoverable amount of an individual asset, the Company estimates the recoverable amount of the cash generating unit to which the asset belongs. Assets carried at fair value are excluded from impairment analysis.

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AVISA DIAGNOSTICS INC. (Formerly FogChain Corp.) Notes to the Consolidated Financial Statements Year Ended December 31, 2020 (Expressed in US Dollars)

3. SIGNIFICANT ACCOUNTING POLICIES (cont’d)

Impairment (cont’d)

Recoverable amount is the higher of fair value less costs of disposal and value in use. In assessing value in use, the estimated future cash flows to be derived from continuing use of asset or cash generating unit are discounted to their present value using a pre-tax discount rate that reflects current market assessments of the time value of money and the risks specific to the asset. Fair value less costs of disposal is the amount obtainable from the sale of an asset or cash generating unit in an arm’s length transaction between knowledgeable, willing parties, less the costs of disposal.

Fair value less costs of disposal is estimated using recent market prices for similar items that would be received in an orderly transaction between market participants at the measurement date. If the recoverable amount of an asset or cash generating unit is reduced to its recoverable amount, an impairment loss is recognized immediately in the consolidated statement of loss and comprehensive loss. Where an impairment loss subsequently reverses, the carrying amount of the asset or cash generating unit is increased to the revised estimate of its recoverable amount, such that the increased carrying amount does not exceed the carrying amount that would have been determined had no impairment loss been recognized.

Income taxes

The Company follows the liability method of accounting for taxes. Under this method, deferred tax assets and liabilities are recognized based on the estimated tax effects of temporary differences in the carrying amount of assets and liabilities in the consolidated financial statements and their respective tax bases. Deferred tax assets and liabilities are calculated using the enacted or substantively enacted income tax rates that are expected to apply when the asset is recovered or the liability is settled. Deferred tax assets or liabilities are not recognized when they arise on the initial recognition of an asset or liability in a transaction (other than in a business combination) that, at the time of the transaction, affects neither accounting nor taxable profit.

Deferred tax assets for deductible temporary differences and tax loss carry forwards are recognized to the extent that it is probable that future taxable profits will be available against which the temporary differences or tax loss carry forwards can be utilized. The carrying amount of deferred tax assets is reviewed at each reporting date, and is reduced if it is no longer probable that sufficient future taxable profits will be available against which the temporary differences or tax loss carry forwards can be utilized.

Current tax is calculated based on net earnings for the year, adjusted for items that are non-taxable or taxed in different periods, using income tax rates that are enacted or substantively enacted at each reporting date. Income taxes are recognized in equity or other comprehensive income, consistent with the items to which they relate.

Warrants

Equity financing transactions may involve issuance of common shares or units. A unit comprises a certain number of commons shares and a certain number of share purchase warrants.

The Company has adopted a residual value method with respect to the measurement of shares and warrants issued as private placement units. The residual value method first allocates value to the more easily measurable component based on fair value and then the residual value, if any, to the less easily measurable component. The Company considers the fair value of common shares issued in the private placements to be the more easily measurable component and the common shares are valued at their fair value, as determined by the closing market price on the announcement date. The balance, if any, is allocated to the attached warrants. Any fair value attributed to the warrants is recorded in the reserve account.

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AVISA DIAGNOSTICS INC. (Formerly FogChain Corp.) Notes to the Consolidated Financial Statements Year Ended December 31, 2020 (Expressed in US Dollars)

3. SIGNIFICANT ACCOUNTING POLICIES (cont’d)

Share-based compensation

The Company has a share option plan. The fair value of share-based compensation to employees is measured at grant date using the Black-Scholes Option Pricing Model, and is recognized over the vesting period using the graded vesting method. The fair value of share-based compensation to non-employees is measured at the date the goods or services are received, at either the fair value of the goods or services received or the fair value of the equity instruments issued using the Black-Scholes Option Pricing Model, if the fair value of the goods or services received cannot be readily measured.

For both employees and non-employees, the fair value is recognized as an expense with a corresponding increase in the reserve. The amount recognized as expense is adjusted to reflect the number of share options expected to vest. For share options granted with vesting terms conditional upon the achievement of a performance condition, and the performance condition is not a market condition, the Company revises its estimates of the length of the vesting period, if necessary, when information arises that indicates that the length of the vesting period differs from previous estimates. When this occurs, the change in estimate is accounted for prospectively.

Compensation expense is recorded in the consolidated statement of loss and comprehensive loss as share-based compensation expense with a corresponding credit to reserve. When stock options are exercised, the proceeds, together with the amount recorded in the reserve account, are recorded in share capital.

Financial instruments

The following table shows the classification of the Company’s financial instruments under IFRS 9:

Financial assets
Cash	FVTPL
Receivables	Amortized cost
Financial liabilities
Trade payables	Amortized cost
Due to related parties	Amortized cost
Government grant	Amortized cost
Loanpayable	Amortized cost

The Company classifies its financial assets in one of the following categories: (1) financial assets at fair value through profit or loss (“FVTPL”), (2) at amortised cost or (3) financial assets at fair value through other comprehensive income (“FVTOCI”). The classification depends on the purpose for which the financial assets were acquired. Management determines the classification of its financial assets at initial recognition.

Financial assets at FVTPL

Financial assets carried at FVTPL are initially recorded at fair value and transaction costs are expensed in the statement of loss. Realized and unrealized gains and losses arising from changes in the fair value of the financial asset held at FVTPL are included in the statement of loss in the period in which they arise.

Amortized cost

Financial assets and liabilities at amortized cost are initially recognized at fair value and subsequently carried at amortized cost less any impairment. They are classified as current assets or non-current assets based on their maturity date.

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AVISA DIAGNOSTICS INC. (Formerly FogChain Corp.) Notes to the Consolidated Financial Statements Year Ended December 31, 2020 (Expressed in US Dollars)

3. SIGNIFICANT ACCOUNTING POLICIES (cont’d)

Financial instruments (cont’d)

Financial assets at FVTOCI

Investments in equity instruments at FVTOCI are initially recognized at fair value plus transaction costs. Subsequently, they are measured at fair value, with gains and losses arising from changes in fair value recognized in other comprehensive income. There is no subsequent reclassification of fair value gains and losses to profit or loss following the de-recognition of the investment.

Financial assets are derecognized when they mature or are sold, and substantially all the risks and rewards of ownership have been transferred. Gains and losses on de-recognition of financial assets classified as FVTPL or amortized cost are recognized in the statement of loss. Gains or losses on financial assets classified as FVTOCI remain within accumulated other comprehensive income.

The Company’s financial instruments at December 31, 2020 are as follows:

		Level 1		Level 2		Level 3
Financial assets
Cash and cash equivalents	$	110,002	$	–	$	–
Financial liabilities
Trade payables	$	–	$	113,537	$	–
Due to related parties	$	–	$	320,399	$	–
Government grant	$	–	$	8,000	$	–
Loanpayable	$	–	$	153,441	$	–

Fair value hierarchy

The Company uses the following hierarchy for determining and disclosing the fair value of the financial instruments by valuation technique:

• i) Level 1 – Applies to assets or liabilities for which there are quoted prices in active markets for identical assets or liabilities.

• ii) Level 2 – Applies to assets or liabilities for which there are inputs other than quoted prices included in Level 1 that are observable for the asset or liability, either directly such as quoted prices for similar assets or liabilities in active markets or indirectly such as quoted prices for identical assets or liabilities in markets with insufficient volume or infrequent transactions.

• iii) Level 3 – Applies to assets or liabilities for which there are unobservable market data.

Cash deposits have been measured at fair value using Level 1 inputs. The carrying value of receivables, accounts payables, loan payable and due to related parties approximate their fair value because of the short-term nature of these instruments or their ability of prompt liquidation.

Impairment of financial assets

At each reporting date, the Company assesses whether there is objective evidence that a financial asset is impaired. If such evidence exists, an impairment loss is recognized in the statement of comprehensive loss. Impairment losses on financial assets carried at amortized cost, including receivables, are calculated as the difference between the amortized cost of the receivable and the present value of the estimated future cash flows, discounted using the instrument’s original effective interest rate. Impairment losses on financial assets carried at amortized cost are reversed in subsequent periods if the amount of the loss decreases and the decrease can be related objectively to an event occurring after the impairment was recognized.

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AVISA DIAGNOSTICS INC. (Formerly FogChain Corp.) Notes to the Consolidated Financial Statements Year Ended December 31, 2020 (Expressed in US Dollars)

3. SIGNIFICANT ACCOUNTING POLICIES (cont’d)

Earnings/loss per share amounts

Basic per share amounts are calculated by dividing the net earnings or loss by the weighted average number of shares outstanding during the reporting period.

Diluted per share amounts are calculated by using the treasury stock method, by adjusting the weighted average number of shares outstanding for the potential number of issued instruments which may have a dilutive effect on net earnings or loss. This method assumes that proceeds received from the exercise of in-the-money instruments are used to repurchase common shares at the average market price for the period.

Revenues

The Company generates revenues by providing fully integrated, end-to-end software development life cycle and quality assurance solutions. The Company’s suite of services and technology provides application development at scale with greater speed, efficiency and at a lower cost. Revenues from IT support services are recognized when services are provided and billed.

The Company follows a five step recognition and measurement approach for revenue arising from contracts with customers:

1. Identify the contracts with customers

2. Identify the performance obligations in the contract

3. Determine the transaction price

4. Allocate the transaction price to the performance obligations in the contract

5. Recognize revenue when the entity satisfies a performance obligation

Government grants and loans

Government grants are not recognized until there is reasonable assurance that the Company will comply with the conditions attached to them and that the grant will be received. Government grants are recognized in profit or loss on a systematic basis over the periods in which the Company recognizes as expenses the related costs for which the grants are intended to compensate.

The benefit of a government loan at a below-market rate of interest is treated as a government grant, measured as the difference between proceeds received and the fair value of the loan based on prevailing market interest rates.

A forgivable loan from the government is treated as a government grant as long as there is reasonable assurance that the Company will meet the terms for forgiveness of the loan.

Accounting standard issued but not yet effective

Certain accounting standards or amendments to existing accounting standards that have been issued but have future effective dates are either not applicable or are not expected to have a significant impact on the Company’s financial statements.

4. CASH

	December 31, 2020 December 31, 2019
Cash at bank Short-term investments	$ 92,082 $ 349,150 17,920 77,117
	$ 110,002 $ 426,267

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AVISA DIAGNOSTICS INC.

(Formerly FogChain Corp.)

Notes to the Consolidated Financial Statements Year Ended December 31, 2020 (Expressed in US Dollars)

5. RECEIVABLES

	December 31, 2020 December 31, 2019
Trade receivables Goods and services tax recoverable	$ - $ 58,080 994 6,818
	$ 994 $ 64,898

6. INTANGIBLE ASSETS

	Software(a) Customer List(b) Goodwill(b) Total
Acquisition costs: Balance, December 31, 2018 Impairment Balance, December 31, 2019 and 2020 Accumulated amortization: Balance, December 31, 2018 Amortization Balance, December 31, 2019 and 2020 Balance, December 31, 2019 and 2020	$ 2,703,383 $ 661,611 $ 253,961 $ 3,618,955 (815,043) (396,967) (253,961) (1,465,971)
	$ 1,888,340 $ 264,644 $ - $ 2,152,984
	$ 1,073,297 $ 132,322 $ - $ 1,205,619 815,043 132,322 - 947,365
	$ 1,888,340 $ 264,644 $ - $ 2,152,984
	$ - $ - $ - $ -

The Company tests assets for impairment of intangible assets when events or circumstances may indicate the carrying value is no longer recoverable. The asset is impaired when the recoverable amount is less than the net book value. The recoverable amount is the higher of (i) an asset‘s fair value less costs to sell and (ii) its value-in-use. In performing the annual impairment test the Company identified evidence of impairment in certain assets and an analysis was performed on the recoverable amount.

• a) On June 1, 2018, the Company entered into a computer software assignment and asset purchase agreement (“RadJav Purchase Agreement”) to acquire the RadJav rapid application development platform (“RadJav”) and other related assets from Higher Edge Software, LLC. During the year ended December 31, 2019, the Company reassessed for impairment and determined that the recoverable amount of software is less than the carrying value. Accordingly, the Company recorded an impairment charge of $815,043 during the year ended December 31, 2019.

There were no transactions during the year ended December 31, 2020.

• b) On August 29, 2018, the Company entered into a purchase agreement to acquire the rights, title and interest of certain assets of Quilmont LLC (“Quilmont”), a software development technology and solutions provider. For accounting purposes, the assets acquired were considered to be a business acquisition under IFRS 3 Business Combinations (“IFRS 3”). As such, the difference between the fair value of consideration paid and the fair value of the Company’s identifiable assets and liabilities was recognized as goodwill.

The fair value less costs, primarily based on the Company’s market capitalization as at December 31, 2019, were less than the net carrying amount of the CGU. The annual impairment test of goodwill was performed on December 31, 2019 and the Company recorded an impairment loss of $253,961 on the goodwill and an impairment charge of $396,967 on the customer list.

There were no transactions during the year ended December 31, 2020.

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AVISA DIAGNOSTICS INC.

(Formerly FogChain Corp.)

Notes to the Consolidated Financial Statements Year Ended December 31, 2020 (Expressed in US Dollars)

7. EQUIPMENT

		Computer Equipment
Cost: At December 31, 2018 Additions At December 31,2019 and 2020		$ 20,757 27,918
		$ 48,675
Accumulated amortization: At December 31, 2018 Amortization At December 31, 2019 Amortization At December 31,2020		$ 1,778 18,300
		20,078 20,025
		$ 40,103
Net book value: At December 31,2019		$ 28,597
At December 31,2020		$ 8,572
8. TRADE PAYABLES AND ACCRUED LIABILITIES
	December31,2020 December31,2019
Trade payables Accrued liabilities	$ 113,537 $ 100,878 52,563 6,880
	$166,100 $107,758

9. GOVERNMENT LOAN AND GRANT

In response to the COVID-19 pandemic, the US Government passed the Coronavirus Aid, Relief, and Economic Security (CARES) Act on March 27, 2020. The CARES Act provides fast and direct economic assistance for entrepreneurs and small businesses through the US Small Business Administration (“SBA”).

During the year, the Company received a loan issued under the CARES Act program – Paycheck Protection Program (the “PPP loan”).

The Company received a PPP loan of $191,460 bearing interest at 1% per annum maturing on April 21, 2022 (the “Maturity Date”). The PPP loan was made available on certain terms and conditions, and in reliance on attestations made by the Company in the loan agreement. Under the PPP, the Company may apply to have certain amounts forgiven under the direction of the Administrator of the SBA providing that the Company satisfies certain criteria. Repayment of the PPP loan will commence earlier of when the SBA remits the forgiveness amount to the lender or the Maturity Date.

Upon initial receipt, the Company recorded the PPP loan at a fair value of $136,346, based on a prevailing market rate of 18.5%. The Company recorded the result of the benefit received from the below-market interest rate PPP loan of $55,115 as a grant income on the statement of loss and comprehensive loss.

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AVISA DIAGNOSTICS INC. (Formerly FogChain Corp.) Notes to the Consolidated Financial Statements Year Ended December 31, 2020 (Expressed in US Dollars)

9. GOVERNMENT LOAN AND GRANT (cont’d)

The funds from the PPP loan are limited to pay payroll costs, costs related to the continuation of healthcare benefits and insurance premiums, employee salaries and commissions, interest on mortgage obligation, rent and utility payments, interest on debt incurred before February 15, 2020, and refinancing an SBA Economic Injury Disaster Loan (“EIDL”) loan made between January 31, 2020 and April 3, 2020. As such, the PPP loan has been amortized and recognized in the statement of loss and comprehensive loss over the year ended December 31, 2020; the period in which the Company has recognized the related expenditures for which the balances were intended to compensate. During the year ended December 31, 2020, the Company recorded $17,096 as a finance charge.

	December 31,2020 December 31,2019
Balance, beginning of year Loan received Interest free benefit Finance charge Balance,end ofyear	$ – $ – 191,460 – (55,115) – 17,096 –
	$ 153,441 $ –

In addition, the Company received a non-interest bearing advance of $8,000 under the EIDL program. As the Company received an EIDL advance and a PPP loan, the EIDL advance portion will be applied against the PPP forgiveness amount as repayment to the SBA upon approval of the PPP forgiveness application. The advance of $8,000 has been treated as a government grant, given reasonable assurance that the Company will meet the terms for forgiveness of the loan.

10. SHARE CAPITAL

a) Authorized share capital

Unlimited common shares without par value

Unlimited Class A convertible restricted voting common shares without par value (“Restricted Shares”).

The Restricted Shares entitles the holder to receive notice to attend and vote at meetings, however, it prohibits the shareholder from voting for the election or removal of directors of the Company. Each Restricted Share shall be convertible into 1 common share, without payment of additional consideration, at the option of the holder thereof as follows:

• (i) at any time that is not a Restricted Period[ 1] or with the consent of the board of directors;

• (ii) if the Company determines that it has ceased to be a foreign issuer for the purposes of United States securities laws, and has notified the holders of the Restricted Shares of such determination;

• (iii) if there is an offer to purchase the common shares, and the Issuer has notified the holders of the Restricted Shares of such offer and commencing on the date the offer is made until completion or termination of such offer.

1 – “Restricted Period” means any time at which the board of directors reasonably believes that the Company is a domestic issuer under applicable United States securities laws or would become a domestic issuer as a result of the issuance of Common Shares upon the conversion of Restricted Voting Common Shares.

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AVISA DIAGNOSTICS INC.

(Formerly FogChain Corp.)

Notes to the Consolidated Financial Statements Year Ended December 31, 2020 (Expressed in US Dollars)

10. SHARE CAPITAL (cont’d)

b) Issued

During the year ended December 31, 2020, the Company had no transactions affecting share capital.

During the year ended December 31, 2019, the Company:

• (i) cancelled and returned 120,874 common shares to treasury forfeited by two shareholders. No consideration was exchanged for this forfeiture.

• (ii) issued a total of 1,863,000 common shares on the conversion of 1,863,000 Restricted Shares. The Company reallocated a value of $311 on the conversion of these shares.

• (iii) issued 1,000,000 common shares at a fair value of $41,940 as consideration for consulting services.

c) Escrow shares

18,630,000 Restricted Shares and 3,240,000 common shares issued to the principals of the Company were subject to escrow conditions required by applicable securities laws and the CSE requirements over a period of 36 months. As at December 31, 2020, 2,794,500 Restricted Shares and 486,000 common shares are held within escrow.

d) Reserve

The reserve records the fair value recognized on stock options granted and on the share purchase warrants issued in connection to the private placement until such time that the stock options or share purchase warrants are exercised, at which time the corresponding amount will be transferred to share capital.

e) Stock options and warrants

The Company maintains a 10% rolling share option plan (the “Plan”) that enables management to grant options to directors, officers, employees and other service providers. The Company follows the CSE policies where the number of common shares which may be issued pursuant to options granted under the Plan may not exceed 10% of the issued and outstanding shares of the Company from time to time at the date of granting of options and have a maximum of 10 years. Each option agreement with the grantee sets forth, among other things, the number of options granted, the exercise price and the vesting conditions of the options as determined by the Board of Directors.

There were no stock option granted during the year ended December 31, 2020.

On October 1, 2018, the Company granted an aggregate of 1,920,000 stock options to directors, officers, employees and consultants of the Company at an exercise price of CDN$0.28 per share expiring on October 1, 2022. The stock options granted are subject to vesting terms over a 2 year period. During the year ended December 31, 2020, the Company recorded $31,312 (2019 - $133,790) in share-based compensation for stock options that vested during the current year.

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AVISA DIAGNOSTICS INC. (Formerly FogChain Corp.)

Notes to the Consolidated Financial Statements Year Ended December 31, 2020 (Expressed in US Dollars)

10. SHARE CAPITAL (cont’d)

Stock options and share purchase warrant transactions are summarized as follows:

	Stock Options Number Weighted Average Exercise Price	Warrants
		Number Weighted Average Exercise Price
Outstanding, December 31, 2018 Forfeited Outstanding, December 31, 2019 Forfeited Expired Outstanding,December 31,2020	1,908,750 CAD$ 0.28 (1,250) CAD$ 0.28	686,255 CAD$ 0.54 - CAD$-
	1,907,500 CAD$ 0.28 (325,000) CAD$ 0.28 - CAD$-	686,255 CAD$ 0.54 - CAD$ - (686,255) CAD$-
	1,582,500 CAD$0.28	- CAD$-
Number currentlyexercisable	1,582,500 CAD$0.28	- CAD$-

As at December 31, 2020, the following stock options were outstanding:

				Weighted Average	Weighted Average
	Expiry	Date	Number of Shares	Exercise Price	Period
Stock options	October	1,2022	1,582,500	CAD$0.28	1.75years

11. RELATED PARTY BALANCES AND TRANSACTIONS

Key management personnel are persons responsible for planning, directing and controlling activities of an entity, and include executive and non-executive directors and officers. During the years ended December 31, 2020 and 2019, the remuneration of the key management personnel, which were recorded in salaries and benefits, were as follows:

December31,	2020 2019
Chief Executive Officer VP Product Marketing & Corporate Secretary Chief Strategy Officer Chief Financial Officer Director Total	$ 62,448 $ 192,000 57,225 155,000 65,000 185,000 6,715 - 7,500 -
	$ 198,888 $ 532,000

Other related party transactions and balances

• (i) The Company recorded $28,841 (December 31, 2020 - $116,958) in share-based compensation for key management personnel.

• (ii) The Company leases office space on a month to month basis from Newton Energy, Inc. (“Newton”), a company with a common director and shareholder, James Cerna, for a monthly rent of $1,500 plus $210 in telecommunication services. Effective July 1, 2020, the lease arrangement was terminated.

During the year ended December 31, 2020, the Company paid a total of $10,260 (2019 - $20,520) in rent and telecommunications charges. As at December 31, 2020, $Nil (December 31, 2019 - $8,550) was owed to Newton which was recorded in trade payables.

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AVISA DIAGNOSTICS INC. (Formerly FogChain Corp.) Notes to the Consolidated Financial Statements Year Ended December 31, 2020 (Expressed in US Dollars)

11. RELATED PARTY BALANCES AND TRANSACTIONS (cont’d)

• (iii) As at December 31, 2020, $142,364 (December 31, 2019 - $93,614) was owed to James Cerna for accrued salaries and bonuses.

• (iv) As at December 31, 2020, $116,798 (December 31, 2019 - $75,131) was owed to Anthony Cerna, officer of the Company for accrued salaries and bonuses.

• (v) As at December 31, 2020, $60,000 (December 31, 2019 – $60,000) was owed to Patrick Quilter, a former director and officer of the Company for accrued bonuses.

• (vi) As at December 31, 2020, $1,237 (December 31, 2019 - $Nil) was owed to Rob Kang, chief financial officer of the Company for consulting services and recorded in due to related parties.

12. COMMITMENT

On June 1, 2018, the Company entered into an agreement with a private company to provide administrative services to the Company for a period of three years in exchange for a monthly fee of CAD$10,000 plus applicable taxes. At the end of the service term, the terms of the agreement are automatically renewed on an annual basis until either party provides notice of termination. Effective January 1, 2020, the administrative service fee was reduced to CAD$5,000 plus applicable taxes.

13. SEGMENTED INFORMATION

The Company operates in two industry segments, being project development services, support and maintenance services and consulting services.

December31,		2020		2019
Sales for the year
Support and maintenance	$	11,610	$	17,754
Project development		-		34,380
Consulting		266,220		786,723
	$	277,830	$	838,857

During the year ended December 31, 2020, there were two customers that made up in excess of 10% (2019 – two customers) of total revenue, comprised of 93% (2019 – 84%) of total revenue, respectively.

14. INCOME TAXES

The following table reconciles the expected income tax recovery at the Canadian Federal and Provincial statutory rate of 27% (2019 - $27%) to the amounts recognized in the consolidated statements of loss and comprehensive loss:

loss:
		2020	2019
Loss before income taxes	$	(715,762)	$ (4,133,893)
Expected income tax at statutory tax rates	$	(205,000)	$ (1,210,000)
Permanent difference		9,000	524,000
Change in statutory, foreign tax, foreign exchange rates and other		(219,000)	423,000
Adjustments and changeinunrecognized deductible temporary differences		415,000	263,000
Total income tax expense	$	-	$-

Page | 23

AVISA DIAGNOSTICS INC. (Formerly FogChain Corp.) Notes to the Consolidated Financial Statements Year Ended December 31, 2020 (Expressed in US Dollars)

14. INCOME TAXES (cont’d)

Significant components of deductible and taxable temporary differences, unused tax losses and unused tax credits that have not been included on the consolidated statement of financial position are as follows:

	2020 Expiry dates 2019 Expiry dates
Share issue costs Non-capital losses Capital assets Canadian eligible capital Exploration and evaluation assets Allowable capital losses	$ 259,000 2023 $ 389,000 2023 10,027,000 2028 to 2040 7,952,000 2028 to 2039 - No expiry (99,000) No expiry 122,000 No expiry 122,000 No expiry 1,726,000 No expiry 1,726,000 No expiry 19,618,000 No expiry 19,618,000 No expiry
	$31,752,000 $29,708,000

15. FINANCIAL INSTRUMENTS AND RISK MANAGEMENT

The Company can be exposed, in varying degrees, to a variety of financial related risks. The type of risk exposure and the way in which such exposure is managed is provided as follows:

Credit risk

Credit risk is the risk that one party to a financial instrument will fail to discharge an obligation and cause the other party to incur a financial loss. The Company’s primary exposure to credit risk is on its cash held in bank accounts which is held with reputable US and Canadian banks. Therefore, credit risk is assessed as low.

The Company’s secondary exposure to credit risk is on its receivables. The Company’s credit risk is low as current receivables consist of 100% refundable Canadian government sales taxes.

Liquidity risk

Liquidity risk is the risk that the Company will not be able to meet its financial obligations as they fall due. The Company manages liquidity risk by maintaining cash balances to ensure that it is able to meet its short term and long term obligations as and when they fall due. Liquidity risk is assessed as high.

As at December 31, 2020, the Company had working capital deficiency of $380,916 (December 31, 2019 – working capital $138,395).

Market risk

Market risk is the risk of loss that may arise from changes in market factors such as interest rates, foreign exchange rates, and commodity and equity prices.

(a) Interest rate risk

Interest rate risk is the risk that the value of a financial instrument will change due to a change in the level of interest rates. The Company is exposed to interest rate risk as its bank account earns interest income at variable rates and is subject to the movement in interest rates. Management considers the interest rate risk to be minimal.

(b) Foreign currency risk

The Company is exposed to foreign currency risk on fluctuations related to cash, receivables, and accounts payable and accrued liabilities that are denominated in Canadian Dollars. Management does not hedge its exposure to foreign exchange risk and does not believe the Company’s net exposure to foreign currency risk is significant.

As at December 31, 2020, the Company had net financial liabilities of CAD$143,104. A 10% change in the US dollar versus the Canadian dollar would give rise to a gain/loss of approximately $14,310.

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AVISA DIAGNOSTICS INC.

(Formerly FogChain Corp.)

Notes to the Consolidated Financial Statements Year Ended December 31, 2020 (Expressed in US Dollars)

15. FINANCIAL INSTRUMENTS AND RISK MANAGEMENT (cont’d)

(c) Price risk Price risk is the risk that the revenue will change due to the change in the prices. The Company is not exposed to price risk.

16. CAPITAL MANAGEMENT

The Company manages its capital to maintain its ability to continue as a going concern and to provide returns and benefits to shareholders. The capital structure of the Company consists of equity comprised of issued share capital and any debt that it may issue.

The Company manages its capital structure and makes adjustments to it in light of economic conditions. The Company, upon approval from its Board of Directors, will balance its overall capital structure through new share issues or by undertaking other activities as deemed appropriate under the specific circumstances. There was no change to the capital management from the prior period.

17. SUBSEQUENT EVENTS

a) On March 23, 2021, the Company entered into a debt settlement agreement to settle CAD$85,000 in outstanding debt to a private company for administrative services provided to the Company (Note 12). On April 15, 2021, the Company issued 1,545,454 common shares at a price of CAD $0.055 to settle this debt.

b) Pursuant to the Merger Agreement (Note 1), the Company acquired all of the issued and outstanding shares of Avisa. Immediately prior to the completion of the merger, the Company consolidated its issued and outstanding share capital on the basis of 15:1. Accordingly, the Company issued the shareholders of Avisa approximately 34,351,221 common shares and 15,208,674 restricted voting shares in the capital of the Company on a post-consolidation basis.

In connection with the Merger, Avisa closed a private placement of 1,540,741 subscription receipts for gross proceeds of $693,336. Pursuant to the terms of the Avisa Subscription Receipts, each Avisa Subscription Receipt is convertible into one Avisa common share, without payment of additional consideration or further action on the part of the holder of Avisa Subscription Receipts, upon satisfaction of the Escrow Release Conditions. On April 20, 2021, the Company issued 1,540,741 post consolidation common shares on conversion of the Avisa subscription receipts.

Effective upon completion of the Transaction, the former directors and officers of the Company resigned.

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