Sirona Biochem Corp. — Audit Report / Information 2020

Mar 4, 2021

SIRONA BIOCHEM CORP.

CONSOLIDATED FINANCIAL STATEMENTS

OCTOBER 31, 2020 AND 2019

(Expressed in Canadian Dollars)

Independent Auditor’s Report

To the Shareholders of Sirona Biochem Corp.

Report on the Audit of the Consolidated Financial Statements

Opinion

We have audited the consolidated financial statements of Sirona Biochem Corp., which comprise the consolidated statements of financial position as at October 31, 2020 and 2019, and the consolidated statements of loss and comprehensive loss, changes in shareholders’ equity (deficiency) and cash flows for the years then ended, and notes to the consolidated financial statements, including a summary of significant accounting policies.

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

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 Consolidated 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 consolidated financial statements in Canada, and we have fulfilled our 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 2 in the consolidated financial statements, which indicates that the Company is dependent upon its ability to generate product sales, negotiate agreements with upfront payments, raise additional funding from debt and equity financing and attain and maintain profitable operations. As stated in Note 2, these events or conditions, along with other matters as set forth in Note 2, indicate that 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”, but does not include the consolidated financial statements and our auditor’s report thereon.

Our opinion on the consolidated 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 consolidated financial statements, our responsibility is to read the other information, and in doing so, consider whether the other information is materially inconsistent with the consolidated 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 Consolidated Financial Statements

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

In preparing the consolidated 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.

Auditor’s Responsibilities for the Audit of the Consolidated Financial Statements

Our objectives are to obtain reasonable assurance about whether the consolidated 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 consolidated 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 consolidated 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 consolidated 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 consolidated financial statements, including the disclosures, and whether the consolidated financial statements represent the underlying transactions and events in a manner that achieves fair presentation.

• Obtain sufficient appropriate audit evidence regarding the financial information of the entities or business activities within the Group to express an opinion on the consolidated financial statements. We are responsible for the direction, supervision and performance of the group audit. We remain solely responsible for our audit opinion.

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 audits.

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 Keith Macdonald.

CHARTERED PROFESSIONAL ACCOUNTANTS

Vancouver, BC, Canada March 1, 2021

SIRONA BIOCHEM CORP. CONSOLIDATED STATEMENTS OF FINANCIAL POSITION

(Expressed in Canadian dollars)

As at		October 31,2020	October 31,2020	October 31,2019	October 31,2019
	ASSETS
Current Assets
Cash and cash equivalents		$	1,535,873	$	3,734,647
Trade and other receivables (Note 6)			138,217		121,384
Tax receivables (Note 7)			357,752		333,011
Share subscription receivable			-		2,400
Prepaid expenses and deposits(Note 8)			68,122		65,453
			2,099,964		4,256,895
Equipment, net of accumulated depreciation			37,275		-
		$	2,137,239	$	4,256,895
	LIABILITIES
Current Liabilities
Trade and other payables (Note 9)		$	726,342	$	415,711
Convertible debentures (Note 10)			-		247,544
Current portion of long-term debt (Note 11)			264,194		220,191
Currentportion of lease liability (Note 12)			39,260		36,585
			1,029,796		920,031
Long-term debt (Note 11)			850,432		942,612
Lease liability (Note 12)			87,993		101,774
Employee benefits(Note 14)			121,623		102,941
			2,089,844		2,067,358
	SHAREHOLDERS' EQUITY
Share capital (Note 15)			29,079,178		28,523,089
Contributed surplus (Note 15)			6,563,182		5,037,510
Equity portion of convertible debentures (Note	10)		-		22,335
Foreign translation reserve			(101,536)		(33,692)
Accumulated deficit			(35,493,429)		(31,359,705)
			47,395		2,189,537
		$	2,137,239	$	4,256,895

Subsequent events (Note 21)

APPROVED ON BEHALF OF THE BOARD:

"Howard Verrico" Director " Alex Marazzi" Director Howard Verrico Alex Marazzi

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

4

SIRONA BIOCHEM CORP.

CONSOLIDATED STATEMENTS OF LOSS AND COMPREHENSIVE LOSS FOR THE YEARS ENDED OCTOBER 31,

(Expressed in Canadian dollars)

			2020		2019
Revenue(Note 13)		$	105,711	$	135,743
Expenses
Research expenses (net)			1,308,928		1,264,404
Consulting fees			238,592		820,273
Office and administration			251,075		221,347
Accounting and audit fees (Note 16)			257,432		261,582
Wages, salaries and benefits (Note 16)			134,007		126,333
Management fees (Note 16)			161,280		151,200
Director fees (Note 16)			-		46,000
Bonuses (Note 16)			-		260,000
Travel and entertainment			20,110		59,277
Rental expenses			35,333		29,710
Depreciation			9,695		-
Investor relations			121,779		227,778
Legal fees			61,186		37,446
Filing fees and transfer agent fees			53,087		42,660
Exchange (gain)/loss			(1,604)		(4,505)
Share-basedpayments(Notes 15 and 16)			1,623,149		1,056,963
			(4,168,338)		(4,464,725)
Other income/(expenses)
Interest and	other income		40,667		25,680
Finance expense(net) (Notes 10,11 and 12)			(13,129)		(116,738)
			27,538		(91,058)
Loss for the year before income taxes			(4,140,800)		(4,555,783)
Income tax recovery (Note 17)			7,076		6,208
Net loss for the year			(4,133,724)		(4,549,575)
Other comprehensive income (loss) for the year
Items that may be reclassified to income/loss
Foreign currencytranslation			(67,844)		5,125
Comprehensive loss for the year		$	(4,201,568)	$	(4,544,450)
Loss per share- basic and diluted		$	(0.02)	$	(0.02)
Weighted avaerage number of common shares outstanding - basic and diluted			226,027,744		201,230,966

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

5

SIRONA BIOCHEM CORP.

CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY (DEFICIENCY)

(Expressed in Canadian dollars, except share number)

	(Expressed in Canadian dollars, except share number)
	Contributed Equity portion of Foreign translation Accumulated Total equity Number Amount surplus convertible debentures reserve deficit (deficiency) Issued common shares
BALANCE, OCTOBER 31, 2018	179,325,982 20,396,599 $ 4,164,638 $ 26,744 $ (38,817) $ (26,810,130) $ (2,260,966) $
Net loss for the year Private placements, net of issuance costs (Note 15) Issuance of shares for the interest of short term loan (Note 15) Conversion of convertible debentures (Note 10) Issuance of stock options (Notes 15 and 16) Exercise of options (Note 15) Exercise of warrants (Note 15) Foreign currencytranslation	- - - - - (4,549,575) (4,549,575) 21,585,000 1,686,870 1,452,111 - - - 3,138,981 400,000 36,000 - - - - 36,000 4,861,428 701,810 - (4,409) - - 697,401 - - 1,056,963 - - - 1,056,963 10,580,000 3,877,369 (1,411,369) - - - 2,466,000 7,277,594 1,824,441 (224,833) - - - 1,599,608 - - - - 5,125 - 5,125
BALANCE, OCTOBER 31, 2019	224,030,004 28,523,089 $ 5,037,510 $ 22,335 $ (33,692) $ (31,359,705) $ 2,189,537 $
BALANCE, OCTOBER 31, 2019	224,030,004 28,523,089 $ 5,037,510 $ 22,335 $ (33,692) $ (31,359,705) $ 2,189,537 $
Net loss for the year Conversion of convertible debentures (Note 10) Issuance of stock options (Notes 15 and 16) Exercise of options (Note 15) Exercise of warrants (Note 15) Foreign currencytranslation	- - - - - (4,133,724) (4,133,724) 1,785,716 272,335 - (22,335) - - 250,000 - - 1,623,149 - - - 1,623,149 370,000 258,630 (92,130) - - - 166,500 123,600 25,124 (5,347) - - - 19,777 - - - - (67,844) - (67,844)
BALANCE, OCTOBER 31, 2020	226,309,320 29,079,178 $ 6,563,182 $ - $ (101,536) $ (35,493,429) $ 47,395 $

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

6

SIRONA BIOCHEM CORP. CONSOLIDATED STATEMENTS OF CASH FLOWS FOR THE YEARS ENDED OCTOBER 31,

(Expressed in Canadian Dollars)

		2020		2019
Operating activities
Net loss for the year	$	(4,133,724)	$	(4,549,575)
Items not requiring use of cash:
Depreciation		9,695		-
Income taxes expense (recovery)		(7,076)		(6,208)
Interest accretion		2,456		25,092
Share-based payments		1,623,149		1,056,963
Changes in operating assets and liabilities:
Trade and other receivables and tax receivables		(34,498)		(145,379)
Prepaid expenses and deposits		(2,669)		62,400
Trade and other payables		411,881		59,308
Employee benefits		18,682		24,126
Interestpaid		-		(86,217)
Cash used in operatingactivities		(2,112,104)		(3,559,490)
Investing activities
Purchase of equipment		(46,970)		-
Cashprovided by (used in)investingactivities		(46,970)		-
Financing activities
Shares issued for cash, net of share issuance costs		-		3,138,981
Option and warrants exercised		87,427		4,065,608
Repayment of long-term debt		(113,201)		-
Repayment of lease liability		(20,182)		(40,601)
Repayment of short-term loan		-		(200,000)
Cashprovided by (used in)financingactivities		(45,956)		6,963,988
(Decrease) increase in cash and cash equivalents		(2,205,030)		3,404,498
Effect of exchange rate fluctuations		6,256		(8,927)
Cash and cash equivalents,beginningofyear		3,734,647		339,076
Cash and cash equivalents, end of year	$	1,535,873	$	3,734,647
Cash and cash equivalents is comprised of:
Cash	$	514,979	$	3,734,647
Guaranteed investment certificate		1,020,894		-
	$	1,535,873	$	3,734,647

See Note 20 for supplementary cash flow information.

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

7

SIRONA BIOCHEM CORP. NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

Years Ended October 31, 2020 and 2019

(Expressed in Canadian dollars)

1. NATURE OF OPERATIONS

The Company was incorporated on October 19, 2006 under the Business Corporations Act of British Columbia. The Company is a development stage public company listed for trading on the TSX Venture Exchange (the “Exchange”) under the symbol SBM. The Company is a cosmetic ingredient and drug discovery company with a proprietary technology platform developed at its laboratory facility in France with a specialization in the stabilization of carbohydrate molecules. The principle activities of the Company are dedicated to the development of safer, more effective cosmetic and pharmaceutical active ingredients which are licensed to partners in exchange for upfront, milestone and royalty payments.

The head office, principal address and registered and records office of the Company are located at WeWork – 595 Burrard Street, Vancouver, BC, V7X 1L4.

2. BASIS OF PRESENTATION AND GOING CONCERN

Statement of compliance

These consolidated financial statements of the Company and its subsidiary are prepared in accordance with International Financial Reporting Standards (“IFRS”) as issued by the International Accounting Standards Board (“IASB”).

These consolidated financial statements were approved and authorized for issue by the Audit Committee and Board of Directors on March 1, 2021.

Going concern

These consolidated financial statements have been prepared on a going concern basis, which contemplates that the Company will continue in operation for the foreseeable future and be able to realize its assets and discharge its liabilities and commitments in the normal course of business. To date, the Company has not achieved a scalable commercialization of its products. As of October 31, 2020, the Company has an accumulated deficit of $35,493,429 (2019 - $31,359,705). For the year ended October 31, 2020, the Company incurred a net loss of $4,133,724 (2019 – $4,549,575) and used net cash in operating activities of $2,112,104 (2019 – $3,559,490).

The Company’s ability to continue as a going concern is dependent upon its ability to generate product sales, negotiate collaboration or license agreements with upfront payments, raise additional funding via debt and equity financing, and ultimately attain and maintain profitable operations. While the Company is striving to act on these initiatives, there is no assurance that these and other strategies will be successful or sufficient to permit the Company to continue as a going concern.

These circumstances comprise a material uncertainty which may cast significant doubt as to the Company’s ability to continue as a going concern. These consolidated financial statements do not reflect adjustments to the carrying values of the Company’s assets and liabilities, revenue and expenses, and the statement of financial position classifications used, that would be necessary if the going concern assumption were not appropriate. Such adjustments could be material.

Basis of measurement

These consolidated financial statements have been prepared on a historical costs basis except for certain financial instruments which are measured at their fair value as explained in the accounting policies set out below. In addition, these consolidated financial statements have been prepared using the accrual basis of accounting except for cash flow information.

8

SIRONA BIOCHEM CORP. NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

For the Years Ended October 31, 2020 and 2019

(Expressed in Canadian dollars)

Functional and presentation currency

These consolidated financial statements are presented in Canadian dollars, which is the Company’s functional and reporting currency. The functional currency of its wholly owned subsidiary, TFChem S.A.R.L. (“TFC”), is the Euro.

Use of estimates

The preparation of these consolidated financial statements in conformity with IFRS requires management to make judgments and estimates and form assumptions that affect the application of accounting policies and the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the date of the financial statements and the reported amount of revenues and expenses for the periods reported. The estimates and associated assumptions are based on historical experience and various other factors that are considered to be relevant. Actual results could differ from these estimates.

Estimates and underlying assumptions are reviewed on an ongoing basis, and may change if new information becomes available. Revisions to accounting estimates are recognized in the period in which the estimates are revised and in any future periods affected. See Note 4.

3. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

The accounting policies set out below have been applied consistently to all periods presented in the consolidated financial statements.

Principles of consolidation

These consolidated financial statements include the accounts of the Company and its wholly-owned subsidiary, TFC, a biopharmaceutical company based in Rouen, France.

Subsidiaries are entities controlled by the Company. The Company controls an entity when it is exposed to, or has rights to, variable returns from its involvement with the entity and has the ability to affect those returns through its power over the entity. The financial statements of a subsidiary are included in the consolidated financial statements from the date that control commences until the date that control ceases.

All significant inter-company balances and transactions between the Company and its wholly-owned subsidiary have been eliminated in preparing the consolidated financial statements.

Foreign currency

Foreign currency transactions

Transactions in foreign currencies are translated to the respective functional currencies of the Company and its subsidiary at the exchange rate in effect at the transaction date. Monetary assets and liabilities denominated in other than the functional currency are translated at the exchange rates in effect at the financial position date. The resulting exchange gains and losses are recognized in profit or loss. Nonmonetary assets and liabilities denominated in other than the functional currency that are measured at fair value are translated to the functional currency at the exchange rate at the date that the fair value is determined. Non-monetary items that are measured in terms of historical cost in other than the functional currency are translated using the exchange rate at the date of transaction.

Foreign operations

For consolidation purposes, the assets and liabilities of foreign operations are translated to the presentation currency using the exchange rate prevailing at the financial position date. The income and expenses of foreign operations are translated to the presentation currency using the average rates of exchange during the year. All resulting exchange differences are recorded as other comprehensive loss and accumulated in a separate component of shareholders’ equity, described as foreign translation reserve.

9

SIRONA BIOCHEM CORP. NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

For the Years Ended October 31, 2020 and 2019

(Expressed in Canadian dollars)

Financial instruments

Classification

On initial recognition, the Company determines the financial instruments classification as per the following categories:

• instruments measured at amortized cost;

• instruments measured at fair value through other comprehensive income (FVOCI) or through net income (FVTPL).

The financial instruments' classification under IFRS 9 is based on the business model in which a financial asset is managed and on its contractual cash flow characteristics. Derivatives embedded in contracts where the host is a financial instrument in the scope of the standard are never separated. Instead, the hybrid financial instrument as a whole is assessed for classification.

A financial asset is measured at amortized cost if it meets both of the following conditions and is not designated at FVTPL:

• it is held within a business model whose objective is to hold assets to collect contractual cash flows; and

• its contractual terms give rise on specified dates to cash flows that are solely payments of principal and interest on the principal amount outstanding.

Equity investments held for trading are classified as FVTPL. For all other equity investments that are not held for trading, the Company, on initial recognition, may irrevocably elect to present subsequent changes in the investment's fair value in other comprehensive income (OCI). This election is made on an investment-by-investment basis.

Financial liabilities are measured at amortized cost unless they must be measured at FVTPL (such as derivatives) or if the Company elects to measure them at FVTPL.

Measurement

Financial instruments at amortized cost

Financial instruments at amortized cost are initially measured at fair value, and subsequently at amortized cost, using the effective interest method, less any impairment loss. Interest income, foreign exchange gains and losses and impairment are recognized in the consolidated statements of loss and comprehensive loss.

Financial instruments at fair value

Financial instruments are initially and subsequently measured at fair value and transaction costs are accounted for in the consolidated statements of loss and comprehensive loss. When the Company elects to measure a financial liability at FVTPL, gains or losses related to the Company's own credit risk are accounted for in the consolidated statements of loss and comprehensive loss.

10

SIRONA BIOCHEM CORP. NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

For the Years Ended October 31, 2020 and 2019

(Expressed in Canadian dollars)

Impairment

The Company recognizes loss allowances for expected credit losses (“ECL”) on:

• financial assets measured at amortized cost;

• debt investments measured at FVOCI; and

• contract assets (as defined in IFRS 15).

The Company measures loss allowances on amounts receivable at an amount equal to lifetime ECL. When determining whether the credit risk of a financial asset has increased significantly since initial recognition and when estimating ECL, the Company considers reasonable and supportable information that is relevant and available without undue cost or effort. This includes both quantitative and qualitative information and analysis, based on the Company’s historical experience and informed credit assessment and including forward-looking information.

The Company assumes that the credit risk on a financial asset has increased significantly if it is more than 30 days past due. The Company considers a financial asset to be in default when:

• the borrower is unlikely to pay its credit obligations to the Company in full, without recourse by the Company to actions such as realizing security (if any is held); or

• the financial asset is more than 90 days past due.

Lifetime ECLs are the ECLs that result from all possible default events over the expected life of a financial instrument.

The maximum period considered when estimating ECLs is the maximum contractual period over which the Company is exposed to credit risk.

Measurement of ECLs

ECLs are a probability-weighted estimate of credit losses. Credit losses are measured as the present value of all cash shortfalls (i.e. the difference between the cash flows due to the Company in accordance with the contract and the cash flows that the Company expects to receive).

ECLs are discounted at the effective interest rate of the financial asset.

Presentation of allowance for ECL in the consolidated statements of financial position

Loss allowances for financial assets measured at amortized cost are deducted from the gross carrying amount of the assets.

Write-off

The gross carrying amount of a financial asset is written off (either partially or in full) to the extent that there is no realistic prospect of recovery. This is generally the case when the Company determines that the debtor does not have assets or sources of income that could generate sufficient cash flows to repay the amounts subject to the write-off. However, financial assets that are written off could still be subject to enforcement activities in order to comply with the Company’s procedures for recovery of amounts due.

11

SIRONA BIOCHEM CORP. NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

For the Years Ended October 31, 2020 and 2019

(Expressed in Canadian dollars)

Derecognition

Financial assets

The Company derecognizes a financial asset when, and only when, the contractual rights to the cash flows from the financial asset have expired or when contractual rights to the cash flows have been transferred.

Financial liabilities

The Company derecognizes a financial liability when, and only when, it is extinguished, meaning when the obligation specified in the contract is discharged, cancelled or expired. The difference between the carrying amount of the extinguished financial liability and the consideration paid or payable, including non-cash assets transferred or liabilities assumed, is recognized in the consolidated statement of loss and comprehensive loss.

Cash and cash equivalents

Cash and cash equivalents consist of cash and highly liquid instruments that are readily convertible to cash with a maturity of three months or less when initially purchased. There were no cash equivalents as at October 31, 2020 and 2019.

Trade receivables

Trade receivables are amounts due from customers for goods sold or services performed in the ordinary course of business. They are classified in current assets, except for the portion expected to be realized or paid beyond 12 months of the consolidated statements of financial position date, if any, which are classified as non-current. Trade receivables are recognized initially at the amount of consideration that is unconditional, unless they contain significant financing components, when they are recognized at fair value. Trade receivables are held with the objective of collecting contractual cash flows and classified as subsequently at amortized cost using the effective interest method.

Equipment

Items of equipment are measured at cost less accumulated depreciation and accumulated impairment losses. Cost includes expenditures that are directly attributable to the acquisition of the asset and bringing the asset to the location and condition necessary for it to be capable of operating in the manner intended by management. The cost of replacing a part of an item of equipment is recognized in the carrying amount of the item if it is probable that the future economic benefits embodied within the part will flow to the Company and its cost can be measured reliably. The costs of day-to-day servicing of equipment (i.e. repairs and maintenance) are recognized under Expenses in the statements of loss and comprehensive loss as incurred.

Depreciation is calculated based on the cost of the asset, less its estimated residual value. Depreciation is recognized in the statements of loss and comprehensive loss on a straight-line basis over the estimated useful lives of each asset. The estimated useful lives for the Company’s equipment at October 31, 2020 is as follows:

• Industrial equipment 4 to 7 years

An item of equipment is derecognized when it is either disposed of or when it is determined that no further economic benefit is expected from the item’s future use or disposal. Gains and losses on disposal of an item of equipment is determined by comparing the proceeds from disposal, less associated costs of disposal, with the carrying amount of equipment, and is recognized in Other income/(expenses) in the statements of loss and comprehensive loss.

12

SIRONA BIOCHEM CORP. NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

For the Years Ended October 31, 2020 and 2019

(Expressed in Canadian dollars)

Leases

At inception of a contract, the Company must assess whether a contract is, or contains, a lease. A contract is, or contains, a lease if the contract conveys the right to control the use of an identified asset over a period of time in exchange for consideration. The Company must assess whether the contract involves the use of an identified asset, whether it has the right to obtain substantially all of the economic benefits from the use of the asset during the term of the contract and if it has the right to direct the use of the asset. As a lessee, the Company recognizes a right-of-use asset and a lease liability at the commencement date of the lease.

Right-of-use asset

The right-of-use asset is initially measured at cost, which is comprised of the initial amount of the lease liability adjusted for any lease payments made and any initial direct costs incurred at or before the commencement date, plus any decommissioning and restoration costs, less any lease incentives received. The right-of-use asset is subsequently depreciated from the commencement date to the earlier of the end of the lease term, or the end of the useful life of the asset. In addition, the right-of-use asset may be reduced due to impairment losses, if any, and adjusted for certain re-measurements of the lease liability.

Lease liability

A lease liability is initially measured at the present value of the lease payments that are not paid at the commencement date discounted by the interest rate implicit in the lease or, if that rate cannot be readily determined, the incremental borrowing rate. The lease liability is subsequently measured at amortized cost using the effective interest method. Lease payments included in the measurement of the lease liability comprise: fixed payments; variable lease payments that depend on an index or a rate; amounts expected to be payable under any residual value guarantee; the exercise price under any purchase option that the Company would be reasonably certain to exercise; lease payments in any optional renewal period if the Company is reasonably certain to exercise an extension option; and penalties for any early termination of a lease unless the Company is reasonably certain not to terminate early. The Company has elected to not include non-lease components related to premises leases in the determination of the lease liability.

The Company has elected not to recognize right-of-use assets and lease liabilities for short-term leases that have a lease term of twelve months or less and leases of low-value assets. The lease payments associated with these leases are charged directly to income on a straight-line basis over the lease term.

Impairment of non-financial assets

The carrying amounts of the Company’s non-financial assets are reviewed at each reporting date to determine whether there is any indication of impairment. If any such indication exists, then the asset’s recoverable amount is estimated.

The recoverable amount of an asset or cash-generating unit is the greater of its value in use and its fair value less costs to sell. In assessing value in use, the estimated future cash flows 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 to sell is defined as the estimated price that would be received on the sale of the asset in an orderly transaction between market participants at the measure date. For the purposes of impairment testing, assets that cannot be tested individually are grouped together into the smallest group of assets that generates cash inflows from continuing use that are largely independent of the cash inflows of other groups of assets.

An impairment loss is recognized if the carrying amount of an asset or its cash-generating unit exceeds its estimated recoverable amount. Impairment losses are recognized in profit or loss. Impairment losses recognized in respect of the cash generating units are allocated first to reduce the carrying amount of any

13

SIRONA BIOCHEM CORP. NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS For the Years Ended October 31, 2020 and 2019

(Expressed in Canadian dollars)

goodwill allocated to the units, and then to reduce the carrying amounts of the other assets in the unit on a pro-rata basis.

An impairment loss in respect of goodwill is not reversed. In respect of other assets, impairment losses recognized in prior periods are assessed at each reporting date for any indications that the loss has decreased or no longer exists. An impairment loss is reversed only to the extent that the asset’s carrying amount does not exceed the carrying amount that would have been determined net of depreciation or amortization, if no impairment loss had been recognized. A reversal of an impairment loss is recognized immediately in profit or loss.

Provisions

Provisions for legal or constructive obligations are recognized when the Company has a present legal or constructive obligation that has arisen as a result of a past event and it is probable that a future outflow of resources will be required to settle the obligation, provided that a reliable estimate can be made of the amount of the obligation. Provisions are measured at the present value of the expenditures expected to be required to settle the obligation using a pre-tax rate that reflects current market assessments of the time value of money and the risk specific to the obligation. The increase in the provision due to passage of time is recognized as interest expense.

Share capital

The Company’s ordinary common shares are classified as equity. Incremental costs directly attributable to the issue of ordinary shares, warrants and stock options, net of any tax effects, are recognized as a deduction from equity.

Revenue recognition

The Company from time to time enters into licensing and collaboration agreements. The terms of the agreements may include non-refundable signing and licensing fees, milestone payments and royalties on any product sales derived from licensing arrangements.

The Company will only recognize revenue if a contract meets the following parameters: when it has approval and commitment from both parties, the rights of the parties are identified, payment terms are identified, the contract has commercial substance and collectability of consideration is probable. Once it is determined that a contract exists, the Company will evaluate the performance obligations within the agreement. Performance obligations will be analysed to determine whether they are distinct or whether they must be accounted for as a single unit of multiple related distinct goods and services. The Company will then perform an analysis to determine the total transaction price that it expects to receive from satisfying the performance obligations in the agreement.

If the contract also provides for development and regulatory milestone payments, royalties and salesbased milestone payments, these amounts are contingent on the occurrence of a future event and therefore give rise to variable consideration. The Company estimates variable consideration at the most likely amount to which it expects to be entitled. Estimated amounts are included in the transaction price when it becomes highly probable that the amount will not be subject to significant reversal when the uncertainty associated with the variable consideration is resolved. Estimates of variable consideration and determination of whether to include estimated amounts in the transaction price are based largely on an assessment of anticipated performance and all information (historical, current and forecasted) that is reasonably available. Based on this information and related analysis, any quarterly adjustments to revenue are recognized as necessary in the period they become known.

14

SIRONA BIOCHEM CORP. NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

For the Years Ended October 31, 2020 and 2019

(Expressed in Canadian dollars)

The upfront license fee is not considered a significant financing component because it is used to meet working capital demands that can be higher in the early stages of a contract and to protect the Company from the other party failing to adequately complete some or all of its obligations under the contract.

Sales-based royalty revenue and sales-based milestone payments will be recognized when the later of the following events occurs: the subsequent sale occurs or the performance obligation to which some or all of the sales-based royalty or sales-based milestone payment has been allocated has been satisfied. The calculated transaction price will then be allocated to the separate performance obligations based upon the relative standalone selling price of the performance obligations. If a standalone selling price cannot be determined a residual approach may be used to estimate the standalone selling price when the selling price for a good or service is highly variable or uncertain.

Contract asset

The Company’s right to consideration in exchange for goods or services that have been transferred to a customer when that right is conditioned on something other than the passage of time (for example, the Company’s future performance).

Contract liability

The Company’s obligation to transfer goods or services to a customer for which consideration has been received (or the amount is due) from the customer.

Research and development

Expenditures on research activities, undertaken with the prospect of gaining new scientific or technical knowledge and understanding, are recognized in profit or loss as incurred. Development activities involve a plan or design for the production of new or substantially improved products and processes. Development expenditures are capitalized only if development costs can be measured reliably, the product or process is technically and commercially feasible, future economic benefits are probable, and the Company intends to and has sufficient resources to complete development and to use or sell the asset. No development expenditures have been deferred to date.

Research and development costs includes fees paid to contract research organizations and other vendors who conduct certain research and development activities on behalf of the Company. The amount of expenses recognized in a period related to research arrangements with third parties is based on estimates of work performed using an accrual basis of accounting. These estimates are based on services provided, contractual terms and experience with similar contracts. The Company monitors these factors and adjusted the estimates accordingly.

Employee benefits

Short-term employee benefits

Short-term employee benefit obligations are measured on an undiscounted basis and are expensed as the related service is provided. A liability is recognized for the amount expected to be paid under short-term cash bonus if the Company has a present legal or constructive obligation to pay this amount as a result of past service provided by the employee, and the obligation can be estimated reliably.

Long term employee benefits

A provision is recognized for benefits accruing to employees when it is probable that settlement will be required and it is capable of being measured reliably. Provisions recognized in respect of employee benefits which are not due to be settled within one year are measured at the present value of the estimated future cash outflows to be made by the Company in respect of services provided by employees up to the reporting date. As of October 31, 2020, and 2019, the employee benefit provision represents the retirement allowance payable accrued by TFC.

15

SIRONA BIOCHEM CORP. NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

For the Years Ended October 31, 2020 and 2019

(Expressed in Canadian dollars)

Share-based payment transactions

The Company awards shares of the Company’s stock or stock options to directors, officers, employees and/or third-party goods/service providers and uses the fair-value based method of accounting for sharebased compensations for all awards granted. The resulting compensation expense, based on the fair value of the awards granted is charged to profit or loss over the period that the employees unconditionally become entitled to the award or when goods/services are rendered, with a corresponding increase to contributed surplus. Any consideration received on exercise of stock options or purchase of shares, together with the amount initially recorded in contributed surplus, is credited to share capital.

The Board of Directors grants stock options with vesting periods determined at the sole discretion of the Board and at prices reflecting the share price on the date the options were granted. An individual is classified as an employee when the individual is an employee for legal or tax purposes (“direct employee”) or provides services similar to those performed by a direct employee, including directors of the Company.

The fair value of employee stock options granted is measured using the Black-Scholes option pricing model as of the grant date, taking into account the terms and conditions upon which the options are granted. The cumulative expense recognized at each reporting date until the vesting date reflects the extent to which the vesting period has expired and the Company’s best estimate of the number of options that will ultimately vest. The compensation expense for a period represents the movement in cumulative expense recognized as at the beginning and end of that period.

Where the terms of a stock option are modified, the minimum expense recognized is the expense as if the terms had not been modified. An additional expense is recognized for any modification which increases the total fair value of the stock-based compensation arrangement, or is otherwise beneficial to the employee as measured at the date of modification over the remaining vesting period.

Share-based payments to non-employees are measured at the fair value of the goods or services received or the fair value of the equity instruments issued, if it is determined the fair value of the goods or services cannot be reliably measured, and are recorded at the date the goods or services are received.

Government assistance and research & development tax credits

Government assistance and research and development tax credits are recorded as either a reduction of the cost of the applicable assets or credited against the related expense incurred in profit or loss, as determined by the terms and conditions of the agreements under which the assistance is provided to the Company or the nature of the expenditures which give rise to the credits.

Government assistance is recorded at fair value when there is reasonable assurance that the grants will be received, and the Company will comply with all attached conditions. Research and development tax credits are accrued when qualifying expenditures are made and there is reasonable assurance that the credits will be realized.

The benefit of loans from government at a below-market interest rate are measured and recognized as the difference between the amount expected to be received less, when material, a discount to reduce the loan to fair value. The benefit amount is presented with the carrying value of the loans as long-term debt in the consolidated financial statements of financial position. The benefit amount will be amortized over the repayment period of the loans and the accretion of the loans will be amortized using the effective interest method.

16

SIRONA BIOCHEM CORP. NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

For the Years Ended October 31, 2020 and 2019

(Expressed in Canadian dollars)

Income taxes

The Company follows the asset and liability method of accounting for income tax. Income tax expense comprises current and deferred tax. Income tax expense is recognized in the statement of comprehensive loss except to the extent that it relates to items recognized directly in equity, in which case it is recognized in equity.

Current tax is the expected tax payable on the taxable income for the year, using tax rates enacted or substantively enacted at the reporting date, and any adjustment to tax payable in respect of previous years.

Deferred tax is recognized on temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for taxation purposes. Deferred tax is not recognized on the initial recognition of assets or liabilities in a transaction that is not a business combination, nor is it recognized for taxable temporary differences arising on the initial recognition of goodwill. Deferred tax is measured at the tax rates that are expected to be applied to temporary differences when they reverse, based on the laws that have been enacted or substantively enacted by the reporting date. Deferred tax assets and liabilities are offset if there is a legally enforceable right to offset, and they relate to income taxes levied by the same tax authority on the same taxable entity, or on different tax entities, but they intend to settle current tax liabilities and assets on a net basis or their tax assets and liabilities will be realized simultaneously. A deferred tax asset is recognized to the extent that it is probable that future taxable profits will be available against which the temporary difference can be utilized. Deferred tax assets are reviewed at each reporting date and are reduced to the extent that it is no longer probable that the related tax benefit will be realized.

Related party transactions

Parties are considered to be related if one party has the ability, directly or indirectly, to control the other party or exercise significant influence over the other party in making financial and operating decisions. Parties are also considered to be related if they are subject to common control, related parties may be individuals or corporate entities. A transaction is considered to be a related party transaction when there is a transfer of resources or obligations between related parties.

Other comprehensive income (loss)

Other 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 would not normally be included in net income (loss) such as unrealized gains or losses on available-for-sale investments and translation gains or losses on translation of foreign operations to the presentation currency of the Company.

Segment reporting

Operating segments are defined as components of an enterprise about which separate discrete information is available for evaluation by the chief operating decision maker, or decision-making group, in deciding how to allocate resources and in assessing performance. The Company views its operations and manages its business in one operating segment.

Earnings (loss) per share

Basic earnings (loss) per share is computed by dividing the profit (loss) for the year attributable to ordinary common shareholders of the Company by the weighted average number of common shares outstanding during the year, adjusted for treasury shares. Diluted earnings (loss) per share is calculated using the treasury stock method.

Under the treasury stock method, the dilution is computed based upon the number of common shares issued should “in the money” options or warrants, if any, be exercised. When the effects of outstandingly stock-based compensation arrangements would be anti-dilutive, diluted loss per share is not calculated.

17

SIRONA BIOCHEM CORP. NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

For the Years Ended October 31, 2020 and 2019

(Expressed in Canadian dollars)

As at October 31, 2020 and 2019, stock options and warrants were not included in the computation of loss per share as they are out of the money and such inclusion would be anti-dilutive.

4. CRITICAL JUDGMENTS AND KEY SOURCES OF ESTIMATION UNCERTAINTY

Critical accounting judgments

The critical judgments that the Company’s management has made in the process of applying the Company’s accounting policies that have the most significant effect on the amounts recognized in these consolidated financial statements are as follows:

Evaluation of the Company’s ability to continue as a going concern

Management has applied judgements in the assessment of the Company's ability to continue as a going concern when preparing these consolidated financial statements. Management prepares the consolidated financial statements on a going concern basis unless management either intends to liquidate the entity or to cease trading, or has no realistic alternative but to do so. In assessing whether the going concern assumption is appropriate, management takes into account all available information about the future, which is at least, but is not limited to, twelve months from the end of the reporting period. The assessment of the Company’s ability to execute its strategy and finance the operations through achieving positive cash flow from operations or by obtaining additional funding through debt or equity financing involves judgments. Management monitors future cash requirements to assess the Company’s ability to realize assets and discharge its liabilities in the normal course of operations.

Determination of functional currency of the Company

The functional currency for each of the Company and its subsidiary is the currency of the primary economic environment in which each entity operates. The determination of each entity’s functional currency requires analysing facts that are considered primary factors, and if the result is not conclusive, the secondary factors. The analysis requires management to apply significant judgment since primary and secondary factors may be mixed. In determining its functional currency, management analysed both the primary and secondary factors, including the currency of each entity’s operating cash flow, and sources of financing.

Capitalization of development costs

Management applies judgement in evaluating whether or not development costs incurred by the Company in the internal development of intangible assets meet the criteria for capitalizing. Management determined that as at October 31, 2020, it was not able to demonstrate with sufficient certainty that it is probable the economic benefits will flow to the Company. Accordingly, all internal development costs incurred to date have been expensed.

Key sources of estimation uncertainty

Significant assumptions about the future and other sources of estimation uncertainty that management has made at the statement of the financial position date, 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:

Impairment of trade and other receivables

The assessment of the ultimate collectability of amounts receivable and the determination of the expected credit losses requires significant estimates and assumptions. See Note 3.

18

SIRONA BIOCHEM CORP. NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

For the Years Ended October 31, 2020 and 2019

(Expressed in Canadian dollars)

- Long term employee benefits

The present value of long-term employee benefits is determined by discounting the estimated future cash outflows using interest rates of high-quality corporate bonds that have terms to maturity approximating the terms of the related employee benefits. Determination of the benefit costs requires assumptions such as the discount rate to measure the employee benefits provision, the projected age of employees upon retirement, the probability of survival, the probability of employee turnover, and the amount of the employees’ last month salary prior to retirement. Actual results may differ from results which are estimated based on assumptions.

Revenue recognition and deferred revenue

The assessment of the timing of revenue recognition and the determination of deferred revenue requires significant estimates and assumptions. See Note 3.

Research and development expenses

The amount of research and development expenses recognized related to research arrangements with third parties is based on estimates of work performed using the accrual basis of accounting. These estimates are based on the services provided, contractual terms and experience with similar contracts.

COVID-19

On March 11, 2020, the COVID-19 outbreak was declared a pandemic by the World Health Organization. The outbreak and efforts to contain the virus may have a significant impact on the Company’s business. A prolonged economic slowdown could result in purchase order delays or the inability to collect receivables and it is possible that in the future there will be negative impacts on the Company’s operations that could have a material adverse effect on its financial results. Although the Company has adjusted some of its operating procedures in response to COVID-19, operations have not experienced any significant negative impact to date. The extent to which the pandemic impacts future operations and financial results, and the duration of any such impact, depends on future developments, which are highly uncertain and unknown at this time.

5. NEW AND FUTURE ACCOUNTING STANDARDS AND INTERPRETATIONS

New accounting standards and interpretations

The new IFRS pronouncements listed below became effective on November 1, 2019 and were adopted by the Company during the current year:

IFRS 16 Leases

The Company adopted the requirements of IFRS 16 Leases (“IFRS 16”) effective November 1, 2019 (see Note 3). This new standard replaces IAS 17 Leases (“IAS 17”) and the related interpretative guidance. IFRS 16 applies a control model to the identification of leases, distinguishing between a lease and a service contract on the basis of whether the customer controls the asset. Control is considered to exist if the customer has the right to obtain substantially all of the economic benefits from the use of an identified asset and the right to direct the use of that asset. For those assets determined to meet the definition of a lease, IFRS 16 introduces significant changes to the accounting by lessees, introducing a single, onbalance sheet accounting model that is similar to the current finance lease accounting, with limited exceptions for short-term leases (leases with a term of 12 months or less) or leases of low-value assets (assets with a value of less than approximately US$5,000). IFRS 16 includes an overall disclosure objective and requires a company to disclose (a) information about right-of-use assets and expenses and cash flows related to leases; (b) a maturity analysis of lease liabilities; and (c) any additional companyspecific information that is relevant to satisfying the disclosure objective.

19

SIRONA BIOCHEM CORP. NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

For the Years Ended October 31, 2020 and 2019

(Expressed in Canadian dollars)

On the transition date of November 1, 2019, the Company was leasing premises, a scientific instrument, and several low-value items. As at the transition date, the premises lease had expired and it is currently on a month-by-month basis while being renegotiated.

The scientific instrument (see Note 12) was leased in June 2016, with the financed amount of €175,000 ($256,000) being classified as a capital asset (industrial equipment) and a finance lease, with the capital asset being depreciated on a straight-line basis over the seven-year term of the lease. Under the transitional provisions of IFRS 16, when using partial retrospective application, for leases previously classified as finance leases under IAS 17, the right-of-use asset and lease liability are measured at the same amounts as under IAS 17 at the date of initial adoption. At November 1, 2019, the net book value of the capital asset would have been approximately €90,000 ($132,000). In a prior year, the industrial equipment was written off as a research expense in the statement of loss and comprehensive loss.

At the transition date, the Company elected not to recognize right-of-use assets and lease liabilities for leases of low-value assets and continues to recognize these leases as operating leases.

Future accounting standards and interpretations

New IFRS pronouncements that have been issued but are not yet effective at the date of these financial statements are listed below. The Company plans to apply the new standards or interpretations in the annual period for which they are first required.

Business combinations

Narrow-scope amendments to IFRS 3 were issued in October 2018 and apply to annual reporting periods beginning on or after January 1, 2020. The amendments clarify the definition of a business, provide guidance in determining whether an acquisition is a business combination or a combination of a group of assets, emphasize that the output of a business is to provide goods and services to customers and provide a supplementary guidance.

Presentation of financial statements

An amendment to IAS 1 was issued in January 2020 and applies to annual reporting periods beginning on or after January 1, 2023. The amendment clarifies the criterion for classifying a liability as non-current relating to the right to defer settlement of a liability for at least 12 months after the reporting period.

6. TRADE AND OTHER RECEIVABLES

	**October **	**31, 2020 **	**October **	31, 2019
Trade receivables	$	107,151	$	67,225
Other receivables		31,066		54,159
	$	138,217	$	121,384

As of October 31, 2020, there was no allowance for doubtful accounts provision. In determining the recoverability of a trade or other receivable, the Company performs a risk analysis considering the type and age of the outstanding receivable, as well as the Company’s exposure to credit and currency risks. See Note 18.

20

SIRONA BIOCHEM CORP. NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

For the Years Ended October 31, 2020 and 2019

(Expressed in Canadian dollars)

7. TAX RECEIVABLES

TAX RECEIVABLES
	October	31, 2020		October 31, 2019
R&D tax credit	$	348,899	$	305,563
GST/HST receivables		8,853		27,448
	$	357,752	$	333,011

Tax receivables are mainly related to the R&D tax credit and value added taxes (“VAT”). The Company expects full recovery of the R&D tax credit, VAT and other tax receivables and GST/HST receivables based on the past receipt history and consequently has not recorded any allowance against these receivables.

8. PREPAID EXPENSES AND DEPOSITS

	October	**31, **	2020	October	**31, **	2019
Prepaid expenses and deposits	$		67,345	$		64,719
Other			777			734
	$		68,122	$		65,453

9. TRADE AND OTHER PAYABLES

	October	31, 2020	October	31, 2019
Trade payables	$	620,500	$	313,598
Other payables		105,842		102,113
	$	726,342	$	415,711

10. CONVERTIBLE DEBENTURES

On November 30, 2018, the Company issued 3,478,571 convertible notes (“Notes D”) with a principal amount of $487,000 in exchange for an equivalent amount of Notes B. Each Note is convertible at the option of the holder into one common share of the Company at a conversion price of $0.14 per share during the 12-month term of the Notes D. The Notes D will mature in 12 months from the date of issuance and bear interest at the rate of 12% per annum, payable quarterly, until the Notes D are converted or repaid. The Company is entitled to repay the principal amount of the Notes D, together with accrued and unpaid interest, at any time commencing four months after the date of issuance.

The Company initially recorded $471,826 related to the fair value of the debt component of the Notes D using a market interest rate for comparable companies of 16.3% for an equivalent, non-convertible, loan at the date of issue. The residual amount of $11,076, net of taxes ($4,098) was assigned to the equity conversion component and included in shareholders’ equity. The Company amortizes the debt component of the Notes D using an effective interest rate of 15.39% over the term of the Notes D. For the year ended October 31, 2020, $9,902 (2019: $52,178) in finance expense was recorded in the consolidated statement of loss and comprehensive loss. During the year ended October 31, 2020, $250,000 (2019: $237,000) of Notes D were converted into the Company’s common shares and a total of 1,785,716 (2019: 1,692,857) common shares were issued upon conversion. The equity component of the Notes D of $7,790 (2019: $7,384) with the fully accreted debt component was reclassified into share capital of the Company upon the conversion.

21

SIRONA BIOCHEM CORP. NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

For the Years Ended October 31, 2020 and 2019

(Expressed in Canadian dollars)

On August 31, 2018, the Company issued 3,168,571 convertible notes (“Notes C”) for total gross proceeds of $443,600. Each Note is convertible at the option of the holder into one common share of the Company at a conversion price of $0.14 per share during the 12-month term of the Notes C. The Notes C will mature in 12 months from the date of issuance and bear interest at the rate of 12% per annum, payable quarterly, until the Notes C are converted or repaid. The Company is entitled to repay the principal amount of the Notes C, together with accrued and unpaid interest, at any time commencing four months after the date of issuance.

The Company initially recorded $429,774 related to the fair value of the debt component of the Notes C using a market interest rate for comparable companies of 16.3% for an equivalent, non-convertible, loan at the date of issue. The residual amount of $10,093, net of taxes ($3,733) was assigned to the equity conversion component and included in shareholders’ equity. The Company amortizes the debt component of the Notes C using an effective interest rate of 15.39% over the term of the Notes C. For the year ended October 31, 2020, $nil (2019: $45,253) in finance expense was recorded in the consolidated statement of loss and comprehensive loss. During the year ended October 31, 2019, $443,600 of Notes D were converted into the Company’s common shares and a total of 3,168,571 common shares were issued upon conversion. The equity component of the Notes D of $13,826 with the fully accreted debt component were reclassified into share capital of the Company upon the conversion.

During May 2017, the Company issued 3,261,111 convertible notes (“Notes B”) for total gross proceeds of $587,000. Each Note is convertible at the option of the holder into one common share of the Company at a conversion price of $0.18 per share during the 18-month term of the Notes B. The Notes B will mature in 18 months from the date of issuance and bear interest at the rate of 12% per annum, payable quarterly, until the Notes B are converted or repaid. The Company is entitled to repay the principal amount of the Notes B, together with accrued and unpaid interest, at any time commencing four months after the date of issuance.

The Company initially recorded $564,498 related to the fair value of the debt component of the Notes B using a market interest rate for comparable companies of 16.3% for an equivalent, non-convertible, loan at the date of issue. The residual amount of $16,651, net of taxes ($5,851) was assigned to the equity conversion component and included in shareholders’ equity. The Company amortizes the debt component of the Notes B using the effective interest rate of 14.86% over the term of the Notes B. For the year ended October 31, 2020, $nil (2019: $13,861) in finance expense was recorded in the consolidated statement of loss and comprehensive loss. During the year ended October 31, 2018, $100,000 of principal amount of Notes B was repaid. On November 30, 2018, $487,000 of principal amount of Notes B was exchanged for an equivalent amount of Notes D.

22

SIRONA BIOCHEM CORP. NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS For the Years Ended October 31, 2020 and 2019

(Expressed in Canadian dollars)

At October 31, 2020 and 2019, the carrying amounts of the convertible debentures were as follows:

				Notes
		B		C		D		Total
Balance at October 31, 2018	$	486,283	$	431,943	$	-	$	918,226
Exchange of Notes B for Notes D		(487,000)		-		487,000		-
Equity conversion component		-		-		(15,174)		(15,174)
Accretion		717		11,657		12,718		25,092
Conversion to common shares		-		(443,600)		(237,000)		(680,600)
Balance at October 31, 2019		-		-		247,544		247,544
Accretion		-		-		2,456		2,456
Conversion to common shares		-		-		(250,000)		(250,000)
Balance at October 31,2020	$	-	$	-	$	-	$	-

During the years ended October 31, 2020 and 2019, the following amounts were included in finance expense:

expense:
				Notes
		B		C		D		Total
2020
Interest paid	$	-	$	-	$	7,446	$	7,446
Accretion		-		-		2,456		2,456
	$	-	$	-	$	9,902	$	9,902
				Notes
		B		C		D		Total
2019
Interest paid	$	13,144	$	33,596	$	39,460	$	86,200
Accretion		717		11,657		12,718		25,092
	$	13,861	$	45,253	$	52,178	$	111,292

11. LONG-TERM DEBT

During the year ended October 31, 2015, TFC entered into two loan agreements with BPifrance Financement (“BPI”) for a total amount of $1,262,604 (€840,000). The loans were provided to TFC as a regional innovation fund to assist with TFC’s research project and the loans are non-interest bearing with fixed repayment terms, commencing April 1, 2018. The Company estimated that 14.9% was the reasonable interest rate a comparable biotechnology company in France would likely have paid in obtaining loans. During the year ended October 31, 2015, the Company received the first draw of the loan totalling $757,562 (€504,000). During the year ended October 31, 2017, the Company received the second draw of the loan totalling $505,042 (€336,000). Repayment terms of BPI loan are as follows:

• 23.42% of profit, excluding taxes, of sales or concessions of patent licenses or know-how collected during the year related to the research project, financed by the BPI loan;

• 23.42% of profit, excluding taxes, generated by the marketing and the sale to a third party or the Company’s own use; and

• Minimum repayments per year were postponed and commenced in December 2019.

23

SIRONA BIOCHEM CORP. NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

For the Years Ended October 31, 2020 and 2019

(Expressed in Canadian dollars)

At October 2020 and 2019, long-term debt was as follows:

		October 31, 2020		October 31, 2019
Total long-term debt	$	1,114,626	$	1,162,803
Current portion		(264,194)		(220,191)
Long-term portion	$	850,432	$	942,612

Minimum payments under the long-term debt at October 31, 2020, are as follows:

	2021		$		264,194				€		170,000
	2022				341,726						220,000
	2023				403,858						260,000
	2024				104,848						67,500
			$		1,114,626				€		717,500

As a result of COVID-19, BPI has granted the Company a six-month extension on the repayment terms.

12. LEASE LIABILITY

In June 2016, TFC entered into a lease agreement with NATIXIS Lease to lease a scientific instrument. The lease agreement bears interest of 2.7% annually, and expires in seven years on May 6, 2023, with monthly lease payments of $3,518 (€2,265) or an annual lease payment of $42,216 (€27,180). Management has assessed that the lease is a finance lease. The lease is guaranteed by BPI. Minimum payments under the finance lease at October 31, 2020, are as follows:

2021	$ 42,216
2022	42,216
2023	42,216
2024	7,036
	133,684
Less: amount representinginterest	(6,431)
Principal	127,253
Currentportion	(39,260)
Long-termportion	$87,993

As a result of COVID-19, NATIXIS granted the Company a six-month payment deferral period from April 2020 to September 2020.

13. LICENSING AGREEMENTS

Agreement with Wanbang Biopharmaceuticals (“Wanbang”)

On January 23, 2014, and as amended on April 13, 2016, the Company (as licensor) entered into a licensing and co-development agreement (the “LCDA”) with Wanbang (as licensee).

24

SIRONA BIOCHEM CORP. NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

For the Years Ended October 31, 2020 and 2019

(Expressed in Canadian dollars)

Subject to the terms of the LCDA, the Company granted to Wanbang an exclusive (for the People’s Republic of China, excluding the Hong Kong and Macau S.A.R.), non-sublicensable and non-transferable license (the “License”) during the term of the LCDA and for the purpose of applying for regulatory approvals, conducting clinical research, developing, registering, launching, manufacturing, having manufactured, marketing, importing, offering for sale, distributing and selling the Company’s SGLT2 inhibitor (the “Product”) as well as any other indication that may have clinical effect derived from the Product.

The Company and Wanbang are co-developing a process for the manufacturing and upscale of an active ingredient in connection with the Product and optimizing the related chemical supply chain pursuant the specified development plan, with each party bearing their own costs and expenses incurred during the codevelopment activities. In addition, the Company and Wanbang are conducting pre-clinical and clinical trials in accordance with the Chinese Food and Drug Administration (the “CFDA”), with the results of the trials being jointly owned. Wanbang has the right to develop and commercialize other indications that may have a clinical effect and combination products with, any proceeds arising from agreements with third parties being shared equally between Wanbang and the Company.

In consideration for the grant of the License, Wanbang will pay the Company the following Milestone Payments:

• i. US$200,000 ($203,440) upon signing of the LCDA (paid in fiscal 2014 and recognized as revenue);

• ii. US$300,000 ($391,500) upon signing of the LCDA (paid in fiscal 2016 and recognized as revenue);

• iii. US$500,000 ($623,381) upon successful filing of an Investigational New Drug application and all supplements under the CFDA (the “Second-Line Tests”) (paid in fiscal 2018 and recognized as revenue);

• iv. US$500,000 ($648,527) upon receipt of Clinical Trial Approval (the “CTA”) by CFDA for a Phase 1 Study in the Territory (paid in fiscal 2018 and recognized as revenue);

• v. US$1,500,000 upon receipt of CTA by CFDA for a Phase III Study;

• vi. US$2,500,000 upon successful completion of a first Phase III Study; and

• vii. US$4,000,000 upon a New Drug Application and all supplements approval by CFDA.

During the royalty period (as defined), Wanbang will pay the Company royalties at a rate equal to 5% of all License Net Sales (as defined).

The LCDA will continue unless terminated by either party. If Wanbang decides to discontinue the development of the Product, and if at any time subsequent the Company wishes to take over and use the Data (as defined), then the Company will pay the specified fee for the full transfer of the Data to the Company as full and final compensation of Wanbang’s expenses and efforts contributed in the process of developing and creating the Data.

Manufacturing and Supply Agreement with Rodan & Fields, LLC (“R&F”)

On September 13, 2019, the Company entered into a manufacturing and supply agreement, pursuant to which the Company shall manufacture, test, label, package, store and supply R&F a minimum of 10 kilograms per year of skin lightening compound TFC-1067 for use in the United States, Canada, Australia and Japan for beginning in 2020. In consideration for these services, R&F will make license fee and

25

SIRONA BIOCHEM CORP. NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

For the Years Ended October 31, 2020 and 2019 (Expressed in Canadian dollars)

milestone payments to the Company. As at October 31, 2020, the Company had received US$50,000 ($67,225).

This agreement runs for a five-year term, with R&F having the option to extend the term for an additional three years, and is cancellable upon R&F providing the Company 30 days’ written notice. On termination of the agreement, R&F will reimburse the Company for any materials unique to R&F and which remain in the Company’s possession.

License Agreement with Obagi Medical Products (“Obagi”)

On January 14, 2014, the Company entered into a license agreement, pursuant to which the Company granted an exclusive, worldwide license to Obagi for the commercialization of skin lightening compound TFC-849 in the skin condition field. During the year ended October 31, 2018, TFC-849 proved difficult to manufacture in a commercially viable process and the license agreement was terminated in during the year ended October 31, 2019. As at October 31, 2019, the Company had received US$104,500 of which US$50,000 ($64,500) was recorded as revenue in 2019.

14. EMPLOYEE BENEFITS

As at October 31, 2020 and 2019, the employee benefits amount represents the retirement allowance provision accrued by TFC. The obligation of TFC is limited to legal obligations applicable in France. For each employee, a calculation is made based on future benefits they have earned during their service in the current and prior years. The benefit is discounted to determine its present value. The calculation is made annually using the projected benefit method using the following assumptions:

• Discount rate: 0.45% (2019: 0.56%);

• Increase in salaries: 0.01% (2019: 1.5%);

• Turnover: ranging from 2% to 7% (2019: 5.1%) for under 60 (2019: under 55) years old and 0% (2019: 0%) over 60 (2019: over 55) years old; and

• Payroll tax rate: 40% (2019: 39.5%).

The assumptions used are in accordance with French legislation and practice.

During the year ended October 31, 2020, the $18,682 (2019: $24,126) increase in the employee benefits provision was the result of changes actuarial assumptions and other minor items. This amount is recorded in research expenses in the statements of loss and comprehensive loss.

15. SHARE CAPITAL

Share capital

• a) Authorized: Unlimited common shares without par value.

• b) Issued: As of October 31, 2020, 226,309,320 (2019: 224,030,004) common shares were issued and outstanding.

During the year ended October 31, 2020, 370,000 (2019: 10,580,000) shares were issued for the exercise of options and 123,600 (2019: 7,277,594) shares were issued for the exercise of warrants. Total cash

26

SIRONA BIOCHEM CORP. NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

For the Years Ended October 31, 2020 and 2019

(Expressed in Canadian dollars)

proceeds of $65,250 (2019: $2,466,000) has been received for options exercised and $19,777 (2019: $1,599,608) for warrants exercised. The $92,130 (2019: $1,411,369) value of options and $5,347 (2019: $224,833 value of warrants exercised originally recorded to contributed surplus at issuance was reclassified to share capital upon exercise.

During the year ended October 31, 2020, 1,785,716 (2019: 4,861,428) shares were issued for the convertible debentures. See note 10.

On July 10, 2019, the Company completed a private placement for total gross proceeds of $1,500,000. The private placement consists of 3,750,000 units at $0.40 per unit. Each unit consists of one common share of the Company and one transferable share purchase warrant. Each warrant is exercisable into an additional common share of the Company for a period of three years at a price of $0.60 per warrant. The Company estimated the fair value of the warrants at $659,612 and recorded the amount in contributed surplus. The Company issued 205,960 broker’s warrants fair valued at $64,662 and paid cash of $10,284 to the finder in connection with the private placement.

On February 27, 2019, the Company completed a private placement for total gross proceeds of $1,783,500. The private placement consists of 17,835,000 units at $0.10 per unit. Each unit consists of one common share of the Company and one transferable share purchase warrant. Each warrant is exercisable into an additional common share of the Company for a period of three years at a price of $0.16 per warrant. The Company estimated the fair value of the warrants at $688,747 and recorded the amount in Contributed surplus. The Company issued 621,630 broker’s warrants fair valued at $39,090 and paid cash of $62,136 to the finder in connection with the private placement.

During the year ended October 31, 2019, the Company repaid the $200,000 short-term loan and issued 400,000 common shares to pay accrued interest of $36,000.

c) Shareholders rights plan:

Effective March 12, 2020 (the “Effective Date”), and approved by the shareholders on May 22, 2020, the Company adopted a shareholder rights plan (the “Rights Plan”) to prevent, to the extent possible, a creeping take-over of the Company and to ensure that any offer to acquire shares of the Company is made to all shareholders and cannot be completed unless shareholders holding at least 50% of the outstanding shares (other than the offeror and related parties) are tendered in acceptance of the offer, to ensure, to the extent possible, the fair treatment of all shareholders in connection with any take-over bid for the securities of the Company and to ensure that the Board of Directors is provided with sufficient time to evaluate unsolicited take-over bids and to explore and develop alternatives to maximize shareholder value. On March 12, 2020, the Company entered into a shareholder rights plan agreement (the “SRPA”) with Computershare Investor Services Inc. (the “Rights Agent”). Pursuant to the SRPA:

• The Company will issue one Right in respect of each common share outstanding on March 12, 2020 (the “Record Time”) and will issue one Right in respect of each common share issued after the Record Time and prior to the earlier of the Separation Time (see below) and the Expiration Time (see below); and

• Certificates representing shares which are issued after the Record Time, but prior to the earlier of the Separation Time and the Expiration Time will evidence one Right for each share represented thereby until the earlier of the Separation Time or the Expiration Time,

27

SIRONA BIOCHEM CORP. NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

For the Years Ended October 31, 2020 and 2019

(Expressed in Canadian dollars)

with each Right entitling the holder to purchase a share of the Company upon the terms and subject to the conditions in the SRPA.

Subject to specified adjustments, each Right entitles the holder, from and after the Separation Time and prior to the Expiration Time, to purchase one common share for the Exercise Price (as defined) as at the Business Day (as defined) immediately preceding the day of exercise of the Right. Notwithstanding any other provision of the SRPA, any rights held by the Company or its subsidiary are void. Until the Separation Time: (i) the Rights are not exercisable and cannot be exercised; (ii) each Right is evidenced by the certificate for the associated voting share registered in the name of the holder; and (iii) each Right is transferrable only together with, and will be transferred by a transfer of, the associated share. From and after the Separation Time and prior to the Expiration Time the rights are exercisable and the registration and transfer of Rights is separate from and independent of voting shares.

The SRPA will expire on the earlier of the Termination Time and the time at which the annual meeting of shareholders of the Company held in 2023 terminates (the “Expiration Time”).

Separation Time means the close of business on the 10[th] Trading Day (as defined) after the earlier of (all terms are as defined):

• The Share Acquisition Date;

• The date of commencement of or the first public announcement of the intent of any person to commence a Take-over bid (other than a Permitted Bid or a Competing Permitted Bid); and

• The date on which a Permitted Bid or Competing Permitted Bid cease to qualify as such.

Warrants

A summary of warrant activities for the years ended October 31, 2020 and 2019 is as follows:

				Weighted
				average
				remaining
	Number of	Weighted average		contractual life
	Warrants	exerciseprice		(year)
Balance at October 31, 2018	13,497,504	$	0.23	1.97
Warrants exercised	(7,277,594)		0.22	-
Warrants expired	(1,823,750)		0.30	-
Warrants granted exercisable on or before February 27, 2022	17,835,000		0.16	2.58
Broker warrants granted exercisable on or before February 27, 2022	621,360		0.16	2.58
Warrants granted exercisable on or before July 16, 2022	3,750,000		0.60	2.96
Broker warrantsgranted exercisable on or before July16,2022	205,960		0.60	2.96
Balance at October 31, 2019	26,808,480		0.23	2.55
Warrants exercised	(123,600)		0.16	-
Balance at October 31,2020	26,684,880	$	0.23	1.30

28

SIRONA BIOCHEM CORP. NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS For the Years Ended October 31, 2020 and 2019

(Expressed in Canadian dollars)

At October 31, 2020, the warrants outstanding and exercisable were as follows:

			Number of
			Warrants as at
ExpiryDate	Exercise	Price	October 31,2020
October 16, 2021	$	0.18	6,195,100
October 16, 2021 - broker	$	0.18	35,660
February 27, 2022	$	0.16	16,042,000
February 27, 2022 - broker	$	0.16	456,160
July 16, 2022	$	0.60	3,750,000
July16,2022 - broker	$	0.60	205,960
			26,684,880

The fair value of the warrants granted was estimated using the Black-Scholes option pricing model with the following estimated assumptions:

	2020	2019
Risk-free interest rate	-	1.54% to 1.78%
Dividend yield	-	0%
Volatility	-	87% to 99.39%
Expected life	-	3 years
Shareprice ofgrant date	-	$0.125 to$0.48

Stock options

The Company’s stock option plan is administered by the board of directors in accordance with Exchange requirements summarized below:

• i. maximum available for grant is up to 10% of the Company’s issued shares outstanding at any one time;

• ii. grant price and exercise price may not be less than the discounted market price of the shares at the time of grant, as permitted by Exchange policy;

• iii. non-transferable, vesting schedule subject to Board discretion when granted and exercisable up to 10 years from grant date;

• iv. eligibility includes employees, directors, officers and consultants of the Company subject to a 5% limitation on options granted annually to any one individual director or officer and 2% to any one consultant; and

• v. exercisable up to 90 days following cessation of the optionee’s position with the Company. If the cessation of office, directorship or consulting arrangement was due to death, the option may be exercised within a maximum period of one year after death, subject to expiry date of such option.

Expected life of stock options

When the Company grants 10-year options, management estimates that the period of time from the date of grant to the date of exercise is five years. Pursuant to IFRS 2 Share-based Payment , the effects of an expected early exercise can be accounted for by using an estimate of the option’s expected life as an input

29

SIRONA BIOCHEM CORP. NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

For the Years Ended October 31, 2020 and 2019

(Expressed in Canadian dollars)

into the option pricing model. Accordingly, for 10-year options, an expected life of five years is used as an input when estimating fair value.

A summary of stock option activities for the years ended October 31, 2020 and 2019 is as follows:

At October 31, 2020, the stock options outstanding and exercisable were as follows:

At October 31, 2020, the	stock options outstanding and exercisable were as follows:
Expiry Date	Exercise Price Number of Options as at October 31, 2019 Granted During the Year Exercised During the Year Expired/ Cancelled During the Year Number of Options as at October 31, 2020 Number of Options Exercisable as at October 31, 2020
June 1, 2020 November 3, 2021 January 21, 2021(1) June 21, 2021 June 30, 2021 September 8, 2021 March 1, 2022 January 21, 2023 June 7, 2024 June 26, 2025 September 21, 2026 November 20, 2027 February 26, 2029 January 21, 2030 Weighted average exercise price	$0.50 300,000 - - (300,000) - - $0.15 70,000 - - (70,000) - - $0.45 - 1,000,000 - - 1,000,000 250,000 $0.20 100,000 - - - 100,000 100,000 $0.30 - 300,000 - - 300,000 300,000 $0.22 - 100,000 - - 100,000 100,000 $0.12 100,000 - - - 100,000 100,000 $0.45 - 225,000 (225,000) - - - $0.52 300,000 - - - 300,000 300,000 $0.16 3,300,000 - - - 3,300,000 3,300,000 $0.20 300,000 - - - 300,000 300,000 $0.15 1,250,000 - - - 1,250,000 1,250,000 $0.12 500,000 - - - 500,000 500,000 $0.45 - 5,575,000 (145,000) - 5,430,000 5,430,000
	6,220,000 7,200,000 (370,000) (370,000) 12,680,000 11,930,000
	0.19 $ 0.44 $ 0.45 $ 0.43 $ 0.32 $ 0.19 $

(1) These options expired unexercised subsequent to year end.

30

SIRONA BIOCHEM CORP. NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

For the Years Ended October 31, 2020 and 2019

(Expressed in Canadian dollars)

During the year ended October 31, 2020, the Company granted the following stock options to officers and employees of, and consultants to, the Company:

• On January 21, 2020 (consultant), an option to purchase up to 1,000,000 common shares of the Company at a price of $0.45 per share for a period of one year as they are released from escrow as follows: no escrow – 250,000; a definitive agreement with Wanbang (see Note 13) – 250,000; a definitive agreement with Huaxiparm – 250,000; and a definitive agreement with Elanco – 250,000. These options expired unexercised on January 21, 2021.

• On January 21, 2020 (consultant), the Company entered into an agreement for business consulting services whereby the consultant was engaged to provide consultation, advice and strategic relationships with other companies and acquisition of projects and similar activities to further the business and development of the Company for a period of 12 months commencing January 19, 2020. Additionally, the consultant may provide marketing and publicity materials and organize roadshows for the Company with the precise nature of the duties being determined from time to time by mutual agreement with the CEO of the Company. As compensation for these services, the consultant received $101,250 plus an option to purchase up to 225,000 common shares of the Company at an exercise price of $0.45 per share for a period of three years.

• On January 21, 2020 (directors), options to purchase up to 700,000 common shares of the Company at a price of $0.45 per share for a period of five years.

• On January 21, 2020 (officers and employee), options to purchase up to 3,625,000 common shares of the Company at a price of $0.45 per share for a period of 10 years.

• On January 21, 2020 (consultant), an option to purchase up to 500,000 common shares of the Company at a price of $0.45 per share for a period of 10 years.

• On January 21, 2020 (consultant), the company entered into an agreement for consulting services, whereby the consultant was engaged to provide his knowledge and experience in areas of interest to the Company, including with respect to the regulatory environment in the People’s Republic of China. As compensation for these services, the consultant received an option to purchase up to 605,000 common shares of the Company at a price of $0.45 per share for a period of 10 years.

• • On February 18, 2020 (consultant), the Company entered into an agreement for an investor marketing and lead generation campaign, whereby the consultant was engaged to provide advertising and related services to the Company for a period of 12 months. As compensation for these services, the consultant received $65,250 plus an option purchase up to 145,000 common shares of the Company at a price of $0.45 per share for a period of 5 years expiring on January 21, 2025.

• On June 30, 2020 (consultant), an option to purchase up to 300,000 common shares of the Company at a price of $0.30 per share for a period of one year.

• On September 8, 2020 (consultant), an option to purchase up to 100,000 common shares of the Company at a price of $0.22 per share for a period of one year.

31

SIRONA BIOCHEM CORP. NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

For the Years Ended October 31, 2020 and 2019

(Expressed in Canadian dollars)

At October 31, 2019, the stock options outstanding and exercisable were as follows:

Expiry Date	Exercise Price Number of Options as at October 31, 2018 Granted During the Year Exercised During the Year Expired/ Cancelled During the Year Number of Options as at October 31, 2019 Number of Options Exercisable as at October 31, 2019
November 22, 2018 January 1, 2019 April 2, 2019 April 25, 2019 May 31, 2019 October 21, 2019 August 31, 2019 September 1, 2019 November 1, 2019 February 25, 2020 April 1, 2020 June 1, 2020 June 1, 2020 March 1, 2021 June 21, 2021 November 3, 2021 January 10, 2022 March 1, 2022 September 26, 2022 November 20, 2022 January 10, 2023 February 26, 2024 April 25, 2024 June 7, 2024 June 26, 2025 September 21, 2026 November 20, 2027 February 26, 2029 April 25, 2029 June 14, 2029 Weighted average exercise price	$0.15 1,100,000 - - (1,100,000) - - $0.10 - 100,000 (100,000) - - - $0.10 800,000 - (800,000) - - - $0.11 750,000 - (750,000) - - - $0.15 200,000 - - (200,000) - - $0.15 - - - - - $0.15 400,000 - - (400,000) - - $0.50 - 500,000 (100,000) (400,000) - - $0.45 - 500,000 (500,000) - - - $0.15 300,000 - - (300,000) - - $0.19 - 200,000 (200,000) - - - $0.50 - 1,000,000 (1,000,000) - - - $0.50 - 1,000,000 (700,000) - 300,000 300,000 $0.17 - 600,000 (600,000) - - - $0.20 300,000 - (100,000) (100,000) 100,000 100,000 $0.15 400,000 - (330,000) - 70,000 70,000 $0.18 100,000 - (100,000) - - - $0.12 - 200,000 (100,000) - 100,000 100,000 $0.15 1,300,000 - (1,300,000) - - - $0.15 500,000 - (500,000) - - - $0.18 100,000 - (100,000) - - - $0.10 - 400,000 (400,000) - - - $0.19 - 1,300,000 (1,300,000) - - - $0.52 - 300,000 - - 300,000 300,000 $0.16 3,300,000 - - - 3,300,000 3,300,000 $0.20 900,000 - (600,000) - 300,000 300,000 $0.15 1,450,000 - (200,000) - 1,250,000 1,250,000 $0.12 - 500,000 - - 500,000 500,000 $0.19 - 600,000 (600,000) - - - $0.45 - 200,000 (200,000) - - -
	11,900,000 7,400,000 (10,580,000) (2,500,000) 6,220,000 6,220,000
	0.15 $ 0.32 $ 0.23 $ 0.21 $ 0.19 $ 0.15 $

The weighted average contractual life remaining of all stock options as at October 31, 2020 is 6.45 years (2019: 5.93 years). During the year ended October 31, 2020, 7,200,000 stock options were granted with a weighted average exercise price of $0.44 (2019: 7,400,000 and $0.32).

The fair value of the options granted was estimated using the Black-Scholes option pricing model with the following weighted average estimated assumptions:

	2020	2019
Risk-free interest rate	0.24% to 1.65%	1.40% to 1.85%
Dividend yield	0%	0%
Volatility	81.88% to 159.49%	84.24% to 152.63%
Expected life(*)	1 to 5 years	1 to 5 years
Shareprice ofgrant date	$0.19 to$0.31	$0.085 to$0.52

(*) During the year ended October 31, 2020, 5,575,00 (2019 – 1,300,000) 10-year options were granted, all of which had an estimated expected life of 5 years.

32

SIRONA BIOCHEM CORP. NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

For the Years Ended October 31, 2020 and 2019

(Expressed in Canadian dollars)

For the year ended October 31, 2020, share-based compensation in the amount of $1,623,149 (2019 - $1,056,963) was recognized in the Company’s consolidated statements of loss and comprehensive loss.

16. RELATED PARTY TRANSACTIONS

Related party transactions impacting the consolidated financial statements primarily relate to transactions with key management personnel. Key management personnel include those persons having authority and responsibility for planning, directing and controlling the activities of the Company as a whole. The Company has determined that key management personnel consist of executive and non-executive members of the Company’s Board of Directors and corporate officers.

During the years ended October 31, 2020 and 2019, the Company incurred the following expenses to officers or directors of the Company or companies with common directors:

		2020		2019
Management fees (a)	$	161,280	$	151,200
Director fees (b)		-		46,000
Accounting fees (d)		147,840		138,600
Salaries (e)		114,240		107,100
Bonuses (a), (c), (d) and (e)		-		260,000
Share-based payments (f)		1,175,447		281,424
Total	$	1,598,807	$	984,324

• (a) For the year ended October 31, 2020, $161,280 (2019: $151,200) in management fees and bonuses totalling $Nil (2019: $94,000) were paid/incurred to a company controlled by Howard Verrico, for acting as CEO, secretary and director. See below.

• (b) For the year ended October 31, 2020, $Nil (2019: $46,000) in director fees were paid/incurred to two companies controlled by directors and one individual.

• (c) For the year ended October 31, 2020, a bonus of $Nil (2019: $39,000) was paid/incurred to Geraldine Deliencourt-Godefroy, the Company’s Chief Scientific Officer.

• (d) For the year ended October 31, 2020, $147,840 (2019: $138,600) in accounting fees and bonuses totalling $Nil (2019: $74,000) were paid/incurred to Christopher Hopton for acting as CFO. See below.

• (e) For the year ended October 31, 2020, $114,240 (2019: $107,100) in salary and bonuses totalling $Nil (2019: $53,000) were paid to the VP, Operations.

• (f) For the year ended October 31, 2020, 4,325,000 (2019: 1,800,000) stock options were granted to management and directors and $1,175,447 (2019: $281,424) of share-based payments expense was recorded.

No bonuses were approved during the year ended October 31, 2020. During the year ended October 31, 2019, the directors of the Company approved bonuses totalling $110,000 in March 2019 and major transaction bonuses totalling $150,000 in June 2019.

During the year ended October 31, 2020, an aggregate of $24,000 (2019: $20,000) in rental payments were made paid/incurred to the Company’s CEO and CFO.

33

SIRONA BIOCHEM CORP. NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

For the Years Ended October 31, 2020 and 2019

(Expressed in Canadian dollars)

These related party transactions are in the normal course of operations and have been valued in these consolidated financial statements at the exchange amount which is the amount of consideration established and agreed to by the related parties.

On June 1, 2013, and as subsequently amended, the Company entered into indefinite consulting agreements for management services with Howard Verrico and Christopher Hopton, whereby Howard currently receives $13,440 (plus GST) per month and Christopher currently receives $12,320 per month (plus GST) until the agreements are terminated by either party. Effective June 1, 2019, compensation was increased from $12,000 and $11,000 per month, respectively, on the recommendation of the Compensation Committee.

Pursuant to the agreements, Howard and Christopher are eligible to receive discretionary cash bonuses, change of control payments and buyout bonuses. In the event that Howard or Christopher resign or their agreements are terminated with 12 months after a change of control (as defined), they will receive two times the compensation received immediately preceding such termination. In addition to the change of control payments, if the change of control results in a buyout of the Company transaction (as defined), on closing of the buyout transaction Howard will receive a cash bonus equal to 1.4% (plus GST) of the transaction value and Christopher will 1% (plus GST).

17. INCOME TAXES

A reconciliation of income taxes at statutory rates is as follows:

	2020		2019
Net income(loss)for theyear	$ (4,140,800)	$	(4,549,575)
Expected income tax expense (recovery)	(1,124,610)		(1,235,460)
Net adjustment for non-deductible amounts	440,254		256,613
Change in tax assets not recognized	677,280		972,639
Total income tax recovery	$(7,076)	$	(6,208)

There are no deferred tax assets presented in the statements of financial position.

Subject to confirmation with regulatory authorities, deductible temporary differences, unused tax losses and unused tax credits for which no deferred tax assets have been recognized are attributable to the following:

		2020		2019
Deferred income tax assets (liabilities):
Non-capital loss carry forwards	$	28,528,000	$	25,914,000
Net capital loss		600,000		600,000
Equipment and intangibles		1,010,000		874,000
Share issue costs		91,000		109,000
Employee benefits		122,000		103,000
Rentalcosts		27,000		6,000
	$	30,378,000	$	27,606,000

34

SIRONA BIOCHEM CORP. NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

For the Years Ended October 31, 2020 and 2019

(Expressed in Canadian dollars)

The Company has Canadian non-capital losses of approximately $24,877,000 (2019 - $22,932,000) which will be available to reduce future taxable income in Canada. These non-capital losses will begin to expire in 2026 until 2040.

The Canadian non-capital losses, if not utilized, will expire in the years presented below:

2026	$	12,000
2027		121,000
2028		788,000
2029		439,000
2030		1,071,000
2031		1,850,000
2032		2,259,000
2033		1,980,000
2034		2,181,000
2035		1,613,000
2036		5,628,000
2037		1,771,000
2038		444,000
2039		2,843,000
2040		1,877,000
	$	24,877,000

18. FINANCIAL INSTRUMENTS, RISK MANAGEMENT AND CAPITAL MANAGEMENT

The Company’s activities expose it to a variety of financial risks. The Company’s overall business strategies, tolerance of risk and general risk management philosophy are determined by the directors in accordance with prevailing economic and operating conditions.

The Company has the following financial instruments as of October 31, 2020 and October 31, 2019:

Financial assets Cash and cash equivalents Trade and other receivables Share subscription receivable Financial liabilities Trade and other payables Convertible debentures Long-term debt Lease obligation	October 31, 2020 October 31, 2019 Categories $ $
	Amortized cost 1,535,873 3,734,647 Amortized cost 138,217 121,384 Amortized cost - 2,400 Amortized cost 726,342 415,711 Amortized cost - 247,544 Amortized cost 1,114,626 1,162,803 Amortized cost 127,253 138,359

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SIRONA BIOCHEM CORP. NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

For the Years Ended October 31, 2020 and 2019

(Expressed in Canadian dollars)

Fair value of financial instruments

The Company classifies its fair value measurements in accordance with the three level fair value hierarchies as follows:

Level 1 - quoted prices (unadjusted) in active markets for identical assets or liabilities;

Level 2 - inputs other than quoted prices included in Level 1 that are observable for the asset or liability, either directly (i.e., as prices) or indirectly (i.e., derived from prices); and

Level 3 - inputs for the asset or liability that are not based on observable market data (unobservable inputs).

The fair value of cash and cash equivalents, trade and other receivables, share subscription receivable and trade and other payables approximate their carrying values due to the short-term nature of these instruments. The fair value of employee benefits is determined at each statement of financial position date. The fair value of convertible debentures, lease obligation, short-term loan and long-term debt are determined by discounting future payments of loan principals and interests under the loans at prevailing market interest rates at each reporting date. The difference between the fair value and carrying amount is minimal.

During the year, there were no transfers between Level 1, Level 2 and Level 3 classified assets and liabilities.

Financial risk management objectives and policies

The risks associated with these financial instruments and the policies on how to mitigate these risks are set out below. Management monitors these exposures to ensure appropriate measures are implemented on a timely and effective manner.

Credit risk is the risk that one party to a financial instrument will fail to discharge its contractual obligations and cause the other party to incur a financial loss and arises principally from the Company’s cash and cash equivalents and trade and other receivables. This risk is managed by placing cash and cash equivalents with major financial institutions which have a high credit quality as determined by the rating agencies. To mitigate credit risk with respect to trade receivables, the Company subjects all major customers to its credit evaluation process. See Note 6.

• (i) Since the Company’s functional currency is the Canadian dollar, it has a foreign exchange risk regarding its Euro obligations since it has a subsidiary in France. A significant change in the currency exchange rates between the Euro relative to the Canadian dollar could have an effect on the Company’s results of operations, financial position and cash flows. The Company has not entered into any derivative financial instruments to manage exposures to currency fluctuations. A 1% fluctuation in the Canadian dollar against the Euro would have a before-tax effect of approximately an $11,000 increase or decrease in accumulated other comprehensive income, based on amounts held at year end.

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SIRONA BIOCHEM CORP. NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

For the Years Ended October 31, 2020 and 2019

(Expressed in Canadian dollars)

At October 31, 2020, the Company’s monetary assets and liabilities denominated in the Euro and were approximately as follows:

were approximately as follows:
		€		US$
Monetary assets		119,000		76,000
Monetaryliabilities		1,142,000		-
Net monetaryassets(liabilities)		(1,023,000)		76,000
Gain/loss on a 1% increase/decrease on the revaluation of monetary
assets and liabilities denominated in the Euro and US$		(10,200)		800
	$	(15,900)	$	1,100

• (ii) The Company’s exposure to interest rate risk relates to its ability to earn short term interest on cash balances at variable rates. The Company is exposed to interest rate risk on its cash and cash equivalents. The Company has no floating interest rate loans. Management does not believe that the impact of interest rate fluctuation will be significant.

• (iii) Liquidity risk arises through the excess of financial obligations due over available financial assets at any point in time. The Company’s objective in managing liquidity risk is to maintain sufficient, readily available capital in order to meet its liquidity requirements. Funding risk is the risk that market conditions will impact the Company’s ability to raise capital through equity markets under acceptable terms and conditions. Given the cash and cash equivalents balance of $1,521,641 at October 31, 2020 and under current market conditions, both liquidity and funding risk have been assessed as relatively low.

The following table summarizes the significant remaining contracted payments of the Company’s financial liabilities and capital expenditures as at October 31, 2020:

Total	Due by period
	< 1year 1 - 2years 2 - 3years 3 - 4years > 5years
Trade and other payables 726,342 $ Long-term debt 1,114,626 Lease liability,undiscounted 133,684	726,342 $ - $ - $ - $ - $ 264,194 341,726 403,858 104,848 - 42,216 42,216 42,216 7,036 -
1,974,652 $	1,032,752 $ 383,942 $ 446,074 $ 111,884 $ - $

Capital management

The Company’s objectives when managing capital are to safeguard the Company’s ability to continue as a going concern and to maintain a flexible capital structure which will allow it to pursue technology research. Therefore, the Company monitors the level of risk incurred in its technology research relative to its capital structure which is comprised of working capital and shareholders’ equity (deficiency).

The Company manages its capital in a manner consistent with the risk characteristics of the assets it holds. All sources of financing are analysed by management and approved by the board of directors.

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SIRONA BIOCHEM CORP. NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

For the Years Ended October 31, 2020 and 2019

(Expressed in Canadian dollars)

The Company is meeting these objectives primarily through its on-going cash management procedures, which include monthly comparison of actual results against budget and periodic forecasting of cash flow requirements.

19. GEOGRAPHIC SEGMENTS

The Company is located and operated in Canada and France.

The Company’s net loss by geographic location for the years ended October 31, 2020 and 2019 is as follows:

Net loss		Year ended		Year ended
		October 31, 2020		October 31, 2019
Canada	$	3,483,545	$	3,842,079
France		650,179		707,496
Total	$	4,133,724	$	4,549,575

The Company’s total assets by geographic location as at October 31, 2020 and 2019 is as follows:

Total assets		October 31, 2020		October 31, 2019
Canada	$	1,572,775	$	3,743,572
France		564,464		513,323
Total	$	2,137,239	$	4,256,895

20. SUPPLEMENTARY CASH FLOW INFORMATION

During the year ended October 31, 2020, the net change in the Company’s financing liabilities was as follows:

follows:
	Convertible			Long-Term
		Debentures		Debt	Lease	Liability
Balance at October 31, 2019	$	247,544	$	1,162,803	$	138,359
Cash repayment		-		(113,201)		(20,182)
Accretion		2,456		-		-
Conversion to common shares		(250,000)		-		-
Foreign exchange movement		-		65,024		9,076
Balance at October 31,2020	$	-	$	1,114,626	$	127,253

During the year ended October 31, 2020, an option to purchase 225,000 common shares was excercised and the proceeds of $101,250 payable to the Company were offset against the balance payable by the Company to the consultant.

During the year end October 31, 2019, 400,000 common shares were issued to pay accrued interest of $36,000

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SIRONA BIOCHEM CORP. NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

For the Years Ended October 31, 2020 and 2019

(Expressed in Canadian dollars)

21. SUBSEQUENT EVENTS

Subsequent to the year ended October 31, 2020, the following events occurred:

On December 4, 2020, the Company entered into a Content Marketing and Community Management Support contract with a consultant in Luxembourg, whereby the consultant will support the Company in online media/PR activities as well as in the development of its social media community. The contract is for a period of one year commencing January, 1, 2021. As compensation for these services the consultant will receive $56,760 and received an option to purchase up to 129,000 common shares of the Company at a price of $0.22 for a period of three years. On February 17, 2021, the consultant exercised its option thereby owing the Company $28,380, such payable to be offset against 50% of the compensation payable by the Company to the consultant.

On January 22, 2021, the Company granted an option to purchase up to 150,000 common shares of the Company at a price of $0.38 for a period of one year to consultant providing public and investor relation services on a month-by-month basis.

On February 1, 2021, options to purchase up to 100,000 common shares of the Company at a price of $0.38 per share for a period of five years were granted to two directors of the Company.

In January and February 2021, 1,221,500 warrants were exercised for proceeds of $199,670 and 604,000 options were exercised for proceeds of $166,880, of which 129,000 options are as described above.

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