StageZero Life Sciences Ltd. - Interim / Quarterly Report 2020

NOTICE TO READER

The Company is amending its management's discussion and analysis for the three month periods ended March 31, 2020 and 2019 ("Q1 2020 MDA") as a result of the Company’s decision to file the amended and restated condensed consolidated interim financial statements for the same periods. Accordingly, updates have been made to the Company's Q1 2020 MDA as previously filed to clarify and provide additional disclosure

The previously filed financial statements for the three months ended March 31, 2020 ("Q1 2020 FS") and Q1 2020 MDA were originally filed by the Company on SEDAR on June 1, 2020. The Q1 2020 FS and Q1 2020 MDA as filed on June 18, 2020, respectively, replace and supersede each of the previously filed Q1 2020 FS and Q1 2020 MDA. This notice supersedes previously filed versions.

StageZero Life Science, Limited Management’s Discussion & Analysis [Expressed in US dollars, unless otherwise noted]

STAGEZERO LIFE SCIENCES, LIMITED MANAGEMENT’S DISCUSSION AND ANALYSIS For the three -month periods ended March 31, 2020 AND 2019 [Expressed in US dollars unless otherwise noted]

The following discussion and analysis (“MD&A”) provides management’s perspective on the financial position and results of operations of StageZero Life Sciences, Limited (“StageZero Life Sciences” or the “Company”) on a consolidated basis for the year and three-month periods ended March 31, 2020, and it should be read in conjunction with the audited consolidated financial statements for the years ended December 31, 2019 and 2018, which have been prepared by management in accordance with International Financial Reporting Standards (“IFRS”) as issued by the International Accounting Standards Board (“IASB”) and using the accounting policies described therein. The reporting currency is US dollars (“USD”) unless otherwise specified. The most recent audited consolidated financial statements and annual information form (“AIF”) are available on SEDAR at www.sedar.com and on the StageZero Life Sciences website: www.stagezerolifesciences.com.

The Company’s functional currency is the USD.

The audit committee of the board of directors (the “Audit Committee”) and the board of directors (the “Board”) have reviewed and approved the contents of this MD&A, which was current as at June 18, 2020.

The use of “Company” and “StageZero Life Sciences” in all forms refers to StageZero Life Sciences, Limited and its subsidiary, unless otherwise noted. The use of “our”, “we” and “us” in this document refers to StageZero Life Sciences or its management. Our registered offices are located in Richmond Hill, Ontario, Canada, near Toronto, and we have a subsidiary company: StageZero Life Sciences Holdings., which owns 100% of StageZero Life Sciences Inc. in the United States. As of December 31, 2019 and 2018, the Company’s investments in Tianjin and GeneNews Diagnostics are valued at nil and had limited to no activity during the periods discussed in this MD&A.

CAUTION REGARDING FORWARD-LOOKING STATEMENTS

This MD&A contains certain forward-looking statements identified by words such as “believe”, “anticipate”, “estimate”, “expect”, “intend”, “may”, “will”, “would” and similar expressions as well as negative variations thereof, although not all forward-looking statements contain these identifying words. There are a number of risks, uncertainties and other factors that could cause our actual results to differ materially from those indicated or implied by forwardlooking statements. See “Risk Factors”. We cannot guarantee the outcome of plans, intentions or expectations disclosed in forward-looking statements and you should not place undue reliance on these forward-looking statements. Any forward-looking statements represent our estimates as at the time such statements are made only and they should not be relied upon as representing our estimates as at any subsequent date. We do not assume any obligation to update or revise any forward-looking statements, whether as a result of new information, future events or otherwise, except as required by law.

Specifically, this MD&A contains forward-looking statements regarding (i) our ability to secure new financing on reasonable terms and continue to operate as a going concern; (ii) the success and profitability and our ability to support the commercialization of our product and in-licensed tests; (iii) the impact of the trading patterns in our share price; (iv) the impact of dilution on existing shareholders given the nature of new financings which we obtain; (v) the impact of regulators’ actions, including the Toronto Stock Exchange and the Ontario Securities Commission, on our business; (vi) the success of our collaborations and strategic partnerships to generate sufficient revenue to support our operations; (vii) the demand for our products; (viii) our ability to obtain any necessary regulatory approvals for our products and processes; (ix) the likelihood of ColonSentry[®] or our other products gaining reimbursement by thirdparty payers, such as private health insurers, managed-health organizations and state-sponsored health insurance plans for each jurisdiction in which our products are offered; (x) our ability to protect our competitive position through patents, trade secrets, trademarks, know-how and other intellectual property rights; (xi) our compliance with privacy laws; (xii) our sales, marketing and distribution strategy; (xiii) our ability to manage corporate growth, commercial expansion and interruptions of operations; (xiv) changes to key personnel; (xv) changes to foreign exchange rates; (xvi) changes in interest rates; (xvii) litigation; (xviii) material weakness in financial controls; (xix) fluctuations in

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StageZero Life Science, Limited Management’s Discussion & Analysis [Expressed in US dollars, unless otherwise noted]

quarterly results; (xx) the current enterprise value assigned by the market; and (xxi) general business and economic conditions.

In developing the forward-looking statements in this MD&A, we have applied several material assumptions, including those related to general business and economic conditions as well as our ability to attract new financing on reasonable terms.

GOING CONCERN UNCERTAINTY

We have experienced recurring losses and are dependent on our ability to raise additional funds to continue operations. These circumstances create material uncertainties that cast significant doubt as to the ability of the Company to continue as a going concern and, hence, the appropriateness of the use of accounting principles applicable to a going concern. The Company is actively pursuing additional financing to further develop certain of the Company’s scientific initiatives, but there is no assurance these initiatives will be successful, timely or sufficient. Consequently, the Company’s ability to continue as a going concern is dependent on its ability to secure additional financing.

The Company has received notices of missed payments with vendors and is in discussion with these vendors to address payment arrangements. These negotiations are ongoing and there can be no assurance that we will be successful in reaching agreements. The Company addresses payment plans with all affected vendors when sufficient funding is received.

There is material uncertainty that may cast significant doubt about the Company’s ability to continue as a going concern. These consolidated financial statements have been prepared on a going concern basis, which assumes that the future operations will allow for the realization of assets and the discharge of liabilities in the normal course of business. These consolidated financial statements do not include any adjustments to the carrying value and classification of assets and liabilities that might be necessary should the Company be unable to continue as a going concern, and such adjustments could be material.

BUSINESS

StageZero Life Sciences is focused on developing and commercializing proprietary molecular diagnostic tests for early detection of diseases and for personalized health management, with a primary focus on cancer-related indications.

We have developed a powerful approach to identifying unique RNA-based biomarkers from whole blood. We call this proprietary platform technology the Sentinel Principle®, and it has the ability to detect virtually any disease or medical condition from a simple blood sample. The Sentinel Principle® technology is protected by pioneering foundational patents. The science behind the Sentinel Principle® led to the development of our flagship product, ColonSentry®, a blood-based test for assessing an individual’s current risk of having colorectal cancer. Additionally, our program called Aristotle, focused on finding and staging multiple disease states in the body, has demonstrated the ability to detect multiple cancers from a single sample of blood.

StageZero Life Sciences, through its Sentinel Principle®, is one of the founders of the Liquid Biopsy principle. The Sentinel Principle® is an award winning technology developed by StageZero Life Sciences based on the scientific observation that circulating blood cells reflect, in a detectable way, what is occurring throughout the body. This is a result of the constant and dynamic interaction of blood with cells, tissues and organs of the human body. Many clinical studies have demonstrated that gene expression profiles from blood can be used to develop personalized signatures capable of differentiating patients with cancer from healthy patients across a broad spectrum of pathologies. ColonSentry® , our diagnostic test for colorectal cancer, specifically measures gene expression in white blood cells. Tumors are known to affect the gene expression profiles of circulating white blood cells. This occurs due to a unique interaction between tumor cells and the immune system that has been referred to as “immunoediting.” Immunoediting is the response of the immune system to a tumor and comprises three stages: elimination (in which the immune system identifies cancerous and/or precancerous cells and attempts to eradicate them), equilibrium (in which the surviving tumor cells begin mutating rapidly), and escape (in which tumor cells proliferate uncontrollably, leading to tumor progression). Each of these stages induces leukocyte gene expression changes that constitute a unique, detectable molecular signature.

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StageZero Life Science, Limited Management’s Discussion & Analysis [Expressed in US dollars, unless otherwise noted]

Our flagship test, ColonSentry[®] , is offered to the U.S. population through our wholly-owned laboratory in Richmond, Virginia, and we offer early cancer diagnostics and risk stratification for colorectal, lung, prostate and breast cancers, through several novel, proprietary molecular diagnostic platforms. We have adopted a population health model whereby the early cancer diagnostic tests are offered as risk stratification at the beginning of the cancer diagnostic process so that those patients who are at highest risk are prioritized for advanced diagnostic procedures. The Company has added focus to its commercialization path by accelerating the adoption of our menu of proprietary cancer tests with hospitals, clinical integrated networks, physician groups and other healthcare organizations. We are currently in implementation discussions with several groups.

Covid-19

StageZero Life Sciences, due to its extensive knowledge of mRNA testing and its CLIA certified, CAP accredited laboratory, it is uniquely positioned to offer testing for the SARS-CoV-2 virus. Since April, 2020 the Company is offering 2 types of COVID-19 tests: PCR, and antibody tests. The PCR tests identify an active infection. The antibody tests identify antibodies in the blood that are indicative of a past infection.

The Company has partnered with both current service providers and new service providers to offer the testing. The tests offered are from Thermo Fisher Scientific, BTNX Inc. and Beckman Coulter.

By utilizing current relationships and in-house expertise that was created for our cancer screening tests, the Company has been able to pivot to serve a substantial need. The path to returning to any type of normal, lies with testing and a vaccine. We are pleased to be able to contribute to the testing. The US government has publicly stated that it wants to see 3 million COVID-19 tests done a day. This creates a massive opportunity and an urgent need.

Initial interest came from large employers and health care systems. The Company has decided to focus on delivering testing to frontline workers via employers, utilizing our telehealth platform. Our marketing channels for our cancer screening tests have focused on Healthcare groups, large employers, physician groups and individuals. The Company is approaching COVID-19 testing in the same way, thereby utilizing efficiencies that already exist.

Interest has come from the Mercer VIP Program, the City of Alpharetta (in the state of Georgia), Udo Test, amongst others.

COMMERCIAL ACTIVITIES

The Company has a national, clinical reference laboratory specializing in personalized blood-based tests to find, understand and treat cancers, which operates from a single facility in Richmond, Virginia, that is capable of servicing the entire United States, Canada and Europe

The focus is on Four Primary Growth Areas:

Small Independent Practices: ranging in size from 1 to 10 providers, with reimbursement for the tests via billing to insurers and patient-pay, is an important sector of the market. We are steadily increasing the number of practices using our tests, especially on a routine, weekly basis, and have significantly restructured and upgraded our billing procedures. We expect this segment to contribute about 10-15% of our test volume.

High-Risk Populations/self-funded employer plans: early detection of cancer as well as risk stratification into normal, high and “raised” risk is of critical importance in workers exposed to carcinogens. The Company is working with multiple high-risk employer partners across the country and has initiated screening within these high-risk groups. We are also in discussion with several self-funded employer plans and have significant interest in our programs. Reimbursement to the Company is direct and either immediate, or within 45 days upon invoice.

TeleMedicine/Patient Directed Testing: the emerging $16 billion sector within healthcare growing at 18.5% per year. Patients want healthcare, including laboratory diagnostic testing, at their convenience and without the need to travel or wait. To this end, the Company, for three years now, has been building out its capability in Telehealth to allow Patient Directed Testing. This requires a system by which patients can request the tests, pay for them and receive the results; a national network of physicians to review and authorize the tests as well as contact those with elevated results; national capability to draw the blood via mobile as well as “brick and mortar” blood draw sites. We now have

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StageZero Life Science, Limited Management’s Discussion & Analysis [Expressed in US dollars, unless otherwise noted]

this and continue to expand it. This is an area of significant growth and payment to us is immediate. Our TeleHealth capabilities are a key component to our ability to offer testing for COVID-19.

Large Healthcare Systems: are one of our largest opportunities and we are in discussion with several large systems. The company is working on implementation of our programs into these systems. Implementation is complex as there are many stakeholders within a large system and all have to be coordinated. Contracts will be executed and announced once implementation is fully in place. Payment to the Company is by invoice and within 45 days. We anticipate that the high-risk population/self-funded employer plans, the Patient Directed Testing/Telehealth and large healthcare systems will contribute approximately 85-90% of our test volume.

Aristotle , as potentially the first multiple cancer diagnostic test from a single sample of blood, will expand our offering into this commercial framework which is being expanded now. This is a $35 billion opportunity, and the early diagnosis of cancer via an affordable, patient-friendly test will have an impact at the population level that is simply not achievable now.

Flat Fee Model

The typical path to commercialization of new, novel diagnostics is often lengthy and involves many steps, with limited uptake and adoption. By offering the StageZero Life Sciences diagnostic testing portfolio through large health systems and networks as well as to high-risk groups/employers and via telemedicine, we expect to be able to shorten this cycle thereby driving adoption and increasing utilization of our tests. By contracting with StageZero Life Sciences to provide blood-based, early cancer risk stratification tests, a health system has access to novel tests and StageZero Life Sciences receives an established payment amount for each processed sample. This model can be adopted if the health system provides services through integrated provider networks, self-funded employee plans or value based reimbursement systems. Payment to the Company is therefore reliable and predictable.

Lab Operations

2019 saw the lab continue full operation and refine all systems. We had a request in 2018 from a local, known lab to share space with us and we took the decision to reduce our footprint and consolidate into approximately twenty -five percent of our previous space. This will save us approximately $2.5 million in costs over the term of the lease. Operations are now more contiguous and streamlined, and we have expansion capability to meet increased testing for several years to come. We are now processing PCR and antibody tests for COVID-19 in addition to our cancer screening tests. Current capacity for COVID-19 testing is 1,000 tests per day.

Changes were made the billing system in 2019 as StageZero Life Sciences brought certain functions in house. Recovery of reimbursement for tests previously run and billed continue, as do billing and recovery for current tests. We expect our rate of collections to continue to improve but it will take many months to fully resolve. Our focus has been to focus on collection for tests run in the last twelve months of billings, new tests not yet billed as well as previous tests billed but not followed up to conclusion.

The Company focus is now mostly on flat fee billing which is a more reliable predictor of revenue collection.

The Company’s MyCancerRisk Data Analytics™ Platform is being developed to track and analyze aggregate cancer screening data in order to monitor performance on testing and early intervention. This platform is expected to bring significant value to large healthcare systems and self-insured organizations who want to monitor compliance with cancer screening, risk stratify their patient populations, and improve early intervention.

TESTS OFFERED

Both on our own and in partnership with other groups, we are working to secure multi-year agreements with hospitals, clinically integrated networks, large physician groups and healthcare organizations for StageZero Life Sciences' risk assessment tests to assist in the early detection of cancer. This is in addition to the work that is being done with highrisk populations and their employers, and in the telemedicine arena. The multiple cancers from a single sample of blood that Aristotle will provide will significantly add to this.

ColonSentry[®]

The ColonSentry[®] test assesses an individual’s current risk, or probability, of having colorectal cancer through a convenient, and revolutionary, blood test. Colorectal cancer (“CRC”) is one of the biggest killers in the United States,

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StageZero Life Science, Limited Management’s Discussion & Analysis [Expressed in US dollars, unless otherwise noted]

claiming more than 50,000 lives per year. Although CRC is a preventable and treatable form of cancer when detected early, people often delay or avoid being tested until symptoms appear. Patient discomfort with common test options like colonoscopy or stool-based tests continues to drive high noncompliance with recommended screening guidelines, resulting in late-stage detection when CRC is least curable.

The American Cancer Society’s 80-by-18 initiative was a multi-partner goal to improve colorectal cancer screening rates to 80% in the eligible population by the end of 2018. At present, less than 60% of the eligible population has been screened. Novel efforts to improve screening through risk stratification tools are essential to getting the ‘unscreened’ population to be screened, whether through colonoscopy (90% of the screened population) or stool based (10%) procedures. ColonSentry[®] , as a blood based risk stratification test, helps primary care physicians and gastroenterologists facilitate the discussion about colon cancer screening with the eligible population who have refused to undergo other tests such as colonoscopy or FIT.

Early CDT[®] -Lung

StageZero in-licensed EarlyCDT-Lung in 2014. However in 2019 the Company shifted its focus to later stage cancer diagnosis. StageZero has the ability to refer patients to the test. However, it no longer processes the test in its lab.

Prostate Health Index (“PHI”)

In April 2014, the PHI Test Agreement with Beckman, which allowed us to add Beckman’s PHI test to our menu of cancer assays, was announced. The PHI test is a convenient blood test that is three times more specific in detecting prostate cancer than the prostate-specific antigen (“PSA”) test. While the PSA test is currently the most widely used screening test for prostate cancer, it is generally recognized that PSA results can often indicate the possibility of prostate cancer when none is present. The PSA test is based on the fact that men with higher levels of PSA are more likely to have prostate cancer. However, higher levels of PSA can also be caused by a benign enlargement or inflammation of the prostate, leading to many false-positives for cancer and ultimately unnecessary, invasive biopsies with an increased potential for patient harm. The PHI test helps physicians distinguish prostate cancer from benign conditions by using three different PSA markers (PSA, free PSA and pro2 PSA) as part of a sophisticated calculation to more reliably determine the probability of cancer in patients with elevated PSA levels.

BreastSentry ™

In October 2014 we in-licensed two blood-based biomarker assays—pro-NT and pro-ENK—intended to aid physicians in identifying those women who are at risk for developing breast cancer. These assays were developed by sphingotec GmbH, known for the discovery and development of biomarker assays.

BreastSentry™ measures the fasting plasma levels of Neurotensin (pro-NT) and Enkephalin (pro-ENK) which are highly predictive of a woman's risk for developing breast cancer. Various longitudinal studies have shown that elevated levels of pro-NT and decreased levels of pro-ENK are strong, independent risk factors for the development of breast cancer. The combined test levels have been incorporated into a sophisticated algorithm in order to provide an additional level of personal data to create an enriched, personalized score. BreastSentry™ is used to determine a woman’s risk for developing breast cancer relative to the risk in an average risk population.

Breast cancer is the second leading cause of cancer deaths in women in the United States and is exceeded only by lung cancer.

Many breast cancer cases are not due to genetic inheritance and, unlike other blood tests on the market that look for genetic indicators for the possibility to develop breast cancer, pro-NT and pro-ENK are biomarkers that, when measured in a convenient blood test, indicate the current level of a woman’s risk for breast cancer. The tests may be particularly applicable to those 50% of women who have dense breast tissue and where mammograms have less utility. BreastSentry™ has been validated as a laboratory developed test.

COVID-19 Tests

On March 31, 2020 StageZero Life Sciences announced it was preparing to offer PCR and antibody tests for COVID19. Testing was initiated in late April 2020.

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StageZero Life Science, Limited Management’s Discussion & Analysis [Expressed in US dollars, unless otherwise noted]

The COVID-19-PCR test is a real-time reverse transcription polymerase chain reaction (rRT-PCR) test for the qualitative detection of nucleic acid from SARS-CoV-2 in nasopharyngeal specimens from individuals suspected of having COVID-19. Test results indicate whether the patient currently has the COVID-19 infection.

The COVID-19 IgG/IgM Antibody Test, an in-vitro immunoassay for the direct and qualitative detection of antiSARS-CoV-2 IgM and anti-SARS-CoV-2 IgG in human serum, plasma or venipuncture whole blood to aid in the diagnosis of COVID-19 in conjunction with clinical presentation and results of other laboratory tests. Detection of IgM antibodies indicates recent infection, while IgG antibodies gradually appear and increase in the late stage of infection. It is not known how long these antibodies persist in the blood after infection. This test is for professional in-vitro diagnostic use only. Blood samples are drawn from the patient and shipped to our CLIA certified, CAP accredited lab in Richmond, Virginia.

FINANCING ACTIVITIES AND CAPITAL STRUCTURE

During 2019, we closed on significant financing initiatives to support the roll-out into our Four Primary Growth Area initiatives.

First Tranche of a Unit Private Placement

On March 25, 2019 the Company closed the first tranche (the “First Tranche”) of a unit financing (the “Unit Financing”) and issued 20,000,000 units for gross proceeds of $748,300 (Cdn$1,000,000). Each Unit (“Unit”) consists of one common share plus one-half of one warrant at a price of Cdn$0.05 per Unit. Each whole warrant is exercisable into one common share at an exercise price of Cdn$0.09 for a period of thirty-six months from issuance, until March 25, 2022. The Unit pricing of Cdn$0.05 is at an approximately 16% discount to the 5-day VWAP of Cdn$0.06 at February 8, 2019.

Second Tranche of a Unit Private Placement

On April 23, 2019, the Company closed the second tranche (the “Second Tranche”) of a unit financing (the “Unit Financing”) and issued 6,375,000 units for gross proceeds of $389,691 (Cdn$510,000). Each Unit (“Unit”) consists of one common share plus one-half of one warrant at a price of Cdn$0.08 per Unit. Each whole warrant is exercisable into one common share at an exercise price of Cdn$0.10 for a period of thirty-six months from issuance, until April 23, 2022. The Unit pricing of Cdn$0.08 is at an approximately 16% discount to the 5-day VWAP of Cdn$0.095 at March 9, 2019.

Unit Private Placement in July 2019

On July 10, 2019 the Company closed the first tranche (the “First Tranche”) of a unit financing (the “Unit Financing”) and issued 23,177,546 units for gross proceeds of $2,009,405 (Cdn$2,665,418). Each Unit (“Unit”) consists of one common share plus one-half of one warrant at a price of Cdn$0.115 per Unit. Each whole warrant is exercisable into one common share at an exercise price of Cdn$0.185 for a period of thirty-six months from issuance, until July 10, 2022.

On July 24, 2019, the Company closed the second tranche (the “Second Tranche”) of a unit financing (the “Unit Financing”) and issued 9,069,999 units for gross proceeds of $797,304 (Cdn$1,043,050). Each Unit (“Unit”) consists of one common share plus one-half of one warrant at a price of Cdn$0.115 per Unit. Each whole warrant is exercisable into one common share at an exercise price of Cdn$0.185 for a period of thirty-six months from issuance, until July 24, 2022.

Convertible Security Funding Agreement

On June 8, 2018, we announced the closing of the Convertible Security Funding Agreement (the “Agreement”) with Lind Asset Management XI, LLC (“Lind”) for up to Cdn$7.5 million in convertible securities. Under the terms of the Agreement, Lind advanced Cdn$2 million, less a closing fee of Cdn$100,000, in consideration for the issuance of a convertible security with a face value of Cdn$2.4 million (the “First CSFA”). Lind can increase the funding under the First CSFA by an additional Cdn$1,000,000 during its thirty-month term.

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StageZero Life Science, Limited Management’s Discussion & Analysis [Expressed in US dollars, unless otherwise noted]

increase the funding under the Second CSFA by up to Cdn$1,500,000. If the Second CSFA occurs, the Company would pay Lind a closing fee equal to 5% of the amount advanced in the Second CSFA.

Each CSFA has a thirty-month term from the date of issuance and bears interest of 8% per annum on the amount funded that is attributed to its face value upon the issuance of each convertible security. The Company's obligations under the Agreement are secured by all of the Company's present and after-acquired property other than intellectual property, including a pledge of its equity interests in its subsidiaries.

Shares underlying each CSFA are restricted from trading for a period of four months and one day from the time of issuance of the applicable CSFA (the "Lock-up Period"). Lind may convert the CSFA’s in monthly installments over the term at a conversion price equal to 85% of the 5-day trailing volume-weighted average price (“VWAP”) of the Company's common shares prior to the date that notice of conversion is provided by Lind. The Agreement contains restrictions on how much of the CSFA’s may be converted in any particular month and how many common shares Lind may hold at any given time. Lind is entitled to accelerate its conversion right to the full amount of the face value or demand repayment of the face value in cash upon a default and other specified events. To the extent that the full face value of a CSFA has not been converted at maturity, the balance of the face value is to be paid in cash at the end of the thirty-month term.

The Company has the option to buy-back the CSFA’s in cash at any time by paying a buy-back premium equal to 5% of the outstanding balance of the applicable CSFA.

The Agreement and the issuance of securities thereunder were conditionally approved by the TSX, with up to 6,048,902 common shares issuable under the Agreement or Warrants, subject to approval by the Company’s shareholders. At the Company’s June 28, 2018 shareholder meeting, we received shareholder approval to issue up to an additional 40,000,000 common shares to Lind under the Agreement. Any additional issuances of common shares under the Agreement will be subject to further shareholder approval.

Lind increased the funding under the First CSFA by an additional Cdn$750,000 on April 9, 2019. Lind advanced Cdn$750,000, less a closing fee of Cdn$37,500, in consideration for the issuance of a CSFA with a face value of Cdn$900,000 (the “First CSFA”).

In addition, the Company issued 13,531,800 warrants to Lind in respect of the First Convertible Security, exercisable for 36 months at an exercise price of Cdn$0.096 per share. The number of warrants issued in connection with the First Convertible Security are equal to 50% of the amount advanced by Lind (Cdn$2,000,000) divided by the VWAP of the common shares of the Company on the TSX for the five trading days immediately preceding the closing date. In respect of the additional fund of First CSFA, the Company issued 2,552,756 warrants exercisable for 36 months at an exercise price of Cdn$0.1909 per share.

In total, face value Cdn$2,810,000 of First CSFA was converted to common shares to Lind in connection with a Convertible Security Funding Agreement and the balance is Cdn$645,000 pending conversion.

In January, 2019, the Company announced the closing of the Second Convertible Security Funding Agreement (the “Second CSFA”) with Lind for up to Cdn$0.5 million in convertible securities. Under the terms of the Second CSFA, Lind advanced Cdn$500,000, less a closing fee of Cdn$35,000, in consideration for the issuance of a convertible security with a face value of Cdn$0.6 million (the “Second CSFA”). In respect of the Second CSFA, the Company issued 18,889,308 warrants exercisable for 36 months at an exercise price of Cdn$0.0344 per share.

In respect of the Second CSFA, the Company issued 18,889,308 warrants exercisable for 36 months at an exercise price of Cdn$0.0344 per share. Warrants calculated in the same manner will also be issued to Lind if it elects to increase the size of any convertible security as described above. All subsequent warrants issued to Lind pursuant to the Agreement will be exercisable for 36 months from the date of issuance at an exercise price equal to 130% of the five-day VWAP of the common shares immediately prior to the applicable closing date. The Warrants provide for cashless exercise by the holder in the event that the Company ceases to be a foreign private issuer, as that term is defined under the United States Securities Act of 1933.

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StageZero Life Science, Limited Management’s Discussion & Analysis

[Expressed in US dollars, unless otherwise noted]

In addition, face value Cdn$600,000 of outstanding debt and interest, in connection with the Second CSFA, were converted by Lind to 7,776,234 common shares, which is completed the conversion of the Second CSFA.

Notes payable to shareholders and director

On May 3, 2018, we announced an agreement for a financing (the “Note Financing”) whereby two insiders of the Company, who are shareholders of the Company, including one, who is also a director of the Company, and JTS Ventures Inc. D/B/A JTS Health Partners (each, a “Holder”), loaned $250,000 to the Company and were issued convertible notes (the “Notes”) in consideration therefor,

On April 23, 2019, one Holder converted above convertible notes for 3,532,752 common shares and 1,766,376 Warrants.

On July 22, 2019, the note payable to the shareholder who is also a director for $250,000 dated May 3, 2018 and principle of note payable $49,234 dated October 31 with associated interest were returned to the Holder. The total principal of notes payable to that director is $590,776 as at December 31, 2019 .

During the period from October 3, 2018 until December 31, 2019, the Company has additional demand note agreements with the above director for loans totaling $440,000 to the Company. The Notes are payable on demand with simple interest earned at 5% per annum and are secured by a security interest in the Company’s patents and trademarks.

Date Principal $	Interest Rate
	%
31-Oct-18 110,000	5%
19-Nov-18 120,000	5%
18-Dec-18 80,000	5%
18-Dec-18 70,000	5%
31-Dec-19 60,000	5%
Total 440,000

Accounted through current and long-term liabilities

		Note payable
	Note payable to HDL [a]	to shareholders and a director	Convertible debenture [c]		Total
		[b]
	120,000	692,907	61,806		874,713
Short-term
	560,075	-		-	560,075
Long-term

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StageZero Life Science, Limited Management’s Discussion & Analysis [Expressed in US dollars, unless otherwise noted]

			680,075	692,907	61,806	1,434,788
At March	31,	2020

Continuing Financing Initiatives

On January 24, 2020 the Company closed a unit financing (the “Unit Financing”) and issued 16,860,220 units for gross proceeds of Cdn$674,409. Each Unit (“Unit”) consists of one common share plus one-half of one warrant at a price of Cdn$0.04 per Unit. Each whole warrant is exercisable into one common share at an exercise price of Cdn$0.06 for a period of thirty-six months from issuance, until January 24, 2023.

On February 19, 2020, the Company closed a private placement of convertible debentures (each a “Debenture”) for gross proceeds of Cdn$1,180,000. The Debentures, issued in increments of $1,000, bear interest at a rate of 6% per annum, have a term of 18 months from the date of issue and are convertible in units (“Units”) at a conversion price of $0.04 per Unit. Each Unit consists of one (1) common share (“Common Share”) of the Company and one-half (1/2) of a Common Share purchase warrant. Each whole warrant (a “Warrant”) is exercisable into one Common Share of the Company at an exercise price of CAD$0.07 per Common Share for a period of twenty-four (24) months from the date of issuance of the Debentures. Securities issued pursuant to the Offering are subject to a statutory hold period lasting four (4) months and a day after the issuance of the securities.

As the conversion price is variable due to currency differences, resulting in the recognition of an embedded derivative, the Company designated the entire convertible instrument as a financial liability at fair value through profit or loss and recognized any changes in the fair value in the consolidated statement of loss and comprehensive loss. The fair value of the convertible debenture was calculated using a combination of discounted cash flows, option pricing models and reference to recent transactions.

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Fair value of
convertible
debenture [d]
$
At January 1, 2020 -
Issuance during the period 888,065
Revaluation during the period 118,113
Foreign exchange (63,808)
At March 31, 2020 942,370
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OUTLOOK

At the heart of the Company’s mission to improve health outcomes is our ability to provide physicians and their patients with actionable clinical data for cancer risk assessment and diagnosis. ColonSentry, as the first blood-based, early colorectal cancer diagnostic test to be developed from the Sentinel Principle platform and validated in both a 10,000 patient prospective study and a 100,000 patient post-marketing study, is evidence of the strength of the science. Aristotle, our next-generation diagnostic test, can test for ten cancers from a single sample of blood, with data to date indicating high sensitivity and specificity across the individual cancers. The Sentinel Principle platform is therefore proven, not promised. It is anticipated that full clinical validation will be completed within two years.

Access to patient friendly, blood-based tests that can detect disease at its earliest stages is truly disruptive, especially when multiple disease states can be screened for from a single sample of blood. Aristotle does that - in this case for multiple cancers - and will allow early diagnosis to commence at the population health level. This has implications for self- funded employer plans who have employees in high-risk environments (Fire Fighters, oil and gas, coal and chemical plants, pilots and flight attendants, drivers), large healthcare systems - especially those with outreach programs and benefit plans, the military, as well as individual States who have specific populations they need screened.

As a prelude to this, in 2018 StageZero Life Sciences began the process of collecting and sharing aggregated data in an effort to build a data-driven product to help practices and healthcare systems better understand their patient

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StageZero Life Science, Limited Management’s Discussion & Analysis [Expressed in US dollars, unless otherwise noted]

populations and build more effective programs to improve patient compliance with cancer screening, preventive health programs, and early interventions. During 2019 we expanded this effort as we initiated research programs with key high-risk groups and focused on supporting these programs into the roll-out of our four distinct commercial paths. We expect data as an asset to continue to be a key strategy for us.

In 2019 and early 2020, we have:

Aggressively expanded the programs under MyCancerRisk™ to High Risk Patient Populations and their employers. Pilot program data shows 34% of those tested had a raised risk result for cancer.
Initiated the Patient Directed Testing program with 8,000+ draw sites and TeleHealth Physician Networks.
Initiated test implementation planning with Large HealthCare Systems. This to run parallel with contract completion. Management’s objective is to have test introduction logistics completed with signature of agreements.
Consolidated planning with large employers of high-risk employees to initiate extensive screening programs.
Continued to expand the Small Clinical Practice base and upgrade Billing and revenue collection systems.
Initiated full clinical validation of Aristotle.

We continue to develop four distinct revenue streams:

High Risk Patients - cash price collected immediately
Telemedicine - cash price or invoiced to Networks with payment within 45 days
Large HealthCare Systems - fixed price per test, invoiced and paid within 45 days
Small Clinical Practices - standard billing to insurers/CMS. Process being significantly upgraded.

SIGNIFICANT ACCOUNTING POLICIES

This Management’s Discussion and Analysis should be read in conjunction with the Company’s annual consolidated financial statements for the year ended December 31, 2019 and 2018. The unaudited amended and restated condensed consolidated interim statements financial statements for the three-month periods ended March 31, 2020 and 2019 have been prepared using the same accounting policies that were described in Note 3 to the annual financial statements.

Significant accounting estimates and assumptions

The preparation of consolidated financial statements requires the use of estimates and assumptions to be made in applying the accounting policies that affect the reported amounts of assets, liabilities, revenues and expenses, and the disclosure of contingent assets and liabilities. We base estimates and related assumptions on previous experience and other factors that we consider reasonable under the circumstances. These form the basis of assumptions about the carrying values of assets and liabilities that are not readily apparent from other sources.

We review estimates and underlying assumptions on an ongoing basis. We recognize revisions to accounting estimates in the period in which the estimate is revised if the revision affects only that period or in the period of the revision and future periods if the revision affects both current and future periods. Significant accounts that require estimates as the basis for determining the stated amounts include share-based compensation, impairment analysis and fair value of warrants and fair value of structured notes and conversion liabilities.

Principles of Consolidation

The Company’s consolidated financial statements incorporate the financial statements of the Company and its wholly owned subsidiary companies, StageZero Life Sciences Holdings and, effective March 15, 2016, StageZero Life Sciences Inc. Subsidiaries are those entities over which the Company has control. Control is achieved when the Company is exposed to or has rights to variable returns from its involvement with the investee and has the ability to affect those returns through its power over the investee. The financial statements of subsidiaries, including entities that the Company controls, are included in the consolidated financial statements from the date that control commences until the date that control ceases. The financial statements of the subsidiaries are prepared for the same reporting periods as the Company, using consistent accounting policies. Intercompany transactions and balances have been eliminated in full.

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StageZero Life Science, Limited Management’s Discussion & Analysis [Expressed in US dollars, unless otherwise noted]

Share-based compensation

We measure the cost of equity-settled transactions with employees by reference to the fair value of equity instruments at the date on which they are granted or their terms are modified, if applicable. Estimating fair value for share-based payments requires determining the most appropriate valuation model for a grant of these instruments, which is dependent on the terms and conditions of the grant. The estimate also requires determining the most appropriate inputs to the Black-Scholes option pricing model, including the expected life of the instrument, risk-free rate, volatility and dividend yield. Actual results could differ from these estimates.

Fair value of warrants

In determining the fair value of the warrant liability, the Company used the Black-Scholes option pricing model with the following assumptions: volatility rate, dividend yield, risk-free rate and the remaining expected life of the warrant. The inputs used in the Black-Scholes model are taken from observable markets. In particular, changes in the fair value of the warrants can have a material impact on the reported loss and comprehensive loss for the applicable reporting period.

Fair value of structured notes, convertible debt and conversion liabilities

In determining the fair values of the structured notes, convertible debt and conversion liabilities, the Company used a binomial lattice model with the following assumptions: volatility rate, risk-free rate and the remaining expected life. The inputs used in the binomial lattice model are taken from observable markets. In particular, changes in the fair value of the structured notes and conversion liabilities can have a material impact on the reported loss and comprehensive loss for the applicable reporting period. For certain convertible debentures, the Company designates the entire convertible instrument as a financial liability at fair value through profit and loss. The fair value of such instruments are determined using a combination of discounted cash flow, option pricing models and reference to recent transactions.

Impairment analysis

The Company assesses its intangible assets for recoverability whenever indicators of impairment exist. When the carrying value of an asset is greater than its recoverable amount, which is the higher of its value in use or fair value less costs to sell, an impairment loss is recognized.

New standards adopted

IFRS 16, Leases (“IFRS 16”)

In January 2016, the IASB issued IFRS 16, a new standard that replaces IAS 17, Leases. IFRS 16 provides a single lessee accounting model, requiring the recognition of assets and liabilities for all leases, unless the lease term is less than 12 months or the underlying asset has a low value. IFRS 16 substantially carries forward the lessor accounting in IAS 17 with the distinction between operating leases and finance leases being retained.

The Company adopted IFRS 16 on January 1, 2019. Before adopting IFRS 16, the Company accounted for all lease payments from the operating lease directly in profit or loss. When the Company adopted IFRS 16 on January 1, 2019, all lease liabilities were recognized in the statement of financial position at the date of initial application.

The following table reconciles the Company’s operating lease obligations of December 31, 2018. As previously disclosed in the Company’s consolidated financial statements to the lease obligations recognized on initial application of IFRS 16 at January 1, 2019.

Aggregate lease commitments as disclosed at December 31, 2018	$ 1,181,041
Less: Recognition exemption short-term leases (leases that expire on or prior to December 31, 2019)	-
Adjusted lease commitments	1,181,041
Less: Impact of present value	346,158
Opening IFRS 16 lease liability as at January 1, 2019	$ 834,883

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StageZero Life Science, Limited Management’s Discussion & Analysis [Expressed in US dollars, unless otherwise noted]

FINANCIAL INSTRUMENTS AND FINANCIAL RISK-MANAGEMENT OBJECTIVES AND POLICIES

We are exposed to liquidity, credit and market risks; the management of these is overseen by the Company’s senior management.

Financial instruments

The fair value of warrants is estimated using the Black-Scholes option pricing model incorporating various inputs including the underlying price volatility and discount rate, see note 8 . All other notes payable were initially recognized at fair value, and subsequently they were measured at amortized cost using the effective interest rate method, whereby the fair value of the notes payable approximates their carrying value. As at March 31, 2020, the Company’s warrant liability, conversion liability and notes payable, are carried on the consolidated statements of financial position at fair value and have been classified as Level 3, in the fair value hierarchy.

Liquidity risk

Liquidity risk represents the contingency that we may be unable to gather the funds required with respect to our financial obligations at the appropriate time and under reasonable conditions. We attempt to manage this risk in order to ensure that we have sufficient liquidity at all times to be able to honor our current and future financial obligations under normal conditions and in exceptional circumstances. Our financing strategies to ensure the management of this risk include accessing the capital markets through the issuance of equity or debt securities.

The Company’s ability to continue as a going concern depends upon its ability to achieve profitable operations and raise additional capital. In the past three years, the Company has earned limited revenue. During 2019, the Company completed a series of common share, structured notes payable, capital commitment, common share and warrant and convertible debenture financings. The Company expects to continue to pursue further financings as or until operations become profitable.

Credit risk

The Company’s financial assets that are exposed to credit risk consist primarily of cash and other receivables. Cash consists of deposits with major commercial banks and is therefore subject to minimal credit risk.

Market risk

Market risk is the risk that the fair value or future cash flows of a financial instrument will fluctuate because of changes in market prices. Market risk comprises foreign exchange rate risk and interest rate risk.

Foreign exchange rate risk

The Company operates in Canada and the United States and transacts business primarily with US partners and suppliers. During the year ended March 31, 2020, a 5% appreciation (depreciation) in the Cdn$ to US dollar foreign exchange rate, with all else being equal, would have affected net income by approximately $110,901 [2019 – $265,000]. The Company’s exposure to foreign currency changes for all other currencies is not material.

Interest rate risk

Interest rate risk is the risk that the fair value or future cash flows of a financial instrument will fluctuate because of changes in market interest rates. The interest rate for the Company’s notes payable to HDL was renegotiated during the first quarter of 2016 and interest began to be accrued at Wall Street Journal Prime Rate plus 4.00% per annum effective April 1, 2016, while the note payable to a shareholder and director as was issued in 2016 is fixed at 2% per annum, the note payable to shareholders and director, issued after 2017 is fixed at 5% per annum, and the convertible debentures are fixed at 8%. Accordingly, there have been no significant impacts on the Company’s consolidated statements of loss and comprehensive loss from changes in interest rates.

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StageZero Life Science, Limited Management’s Discussion & Analysis [Expressed in US dollars, unless otherwise noted]

COVID-19 Pandemic in 2020

In March 2020, the World Health Organization (“WHO”) classified the COVID-19 outbreak as a pandemic, based on the rapid increase in exposure globally. The full impact of the COVID-19 outbreak continues to evolve as of the date of this report. As such, it is uncertain what the full magnitude of the pandemic will have on the Company’s financial condition, liquidity, and future results of operations. Management is actively monitoring the global situation on its financial condition, liquidity, operations, suppliers, industry, and workforce. Given the daily evolution of the COVID19 outbreak and the global responses to curb its spread, the Company is not able to estimate the effects of the COVID19 outbreak on its results of operations, financial condition, or liquidity at this time.

SELECTED FINANCIAL INFORMATION

The following tables set forth selected financial information for the periods indicated:

Consolidated statements of financial position

Consolidated statements of financial position
	Period ended	Year ended
	March 31, 2020	December 31, 2019
(in thousands of dollars)	$	$
Cash	122	71
Total current assets	525	376
Total non-current assets	1,480	1,589
Total assets	2,005	1,965
Total current liabilities	4,636	4,219
Total non-current liabilities	3,409	2,237
Total liabilities	8,045	6,456
Total shareholders’ deficiency	(6,040)	(4,491)

Results of operations for the periods ended March 31, 2020 and 2019

For the three months ended March 31, 2020, we reported a consolidated net loss of $2.4 million, or $0.01 loss per common share, as compared with a consolidated net loss of $4.4 million, or $0.03 loss per common share, for the same period in 2019.

Consolidated statements of loss and comprehensive loss

(in thousands of dollars, except per share amounts)	Period ended
	March 31, 2020 March 31, 2019
	$ $
Total revenues Expenses Cost of goods sold General and administrative Loss from revaluation of warrants Change in fair value of conversion liabilities Change in fair value of convertible debenture Finance costs	31 53

	220 247
	586 931
	1,294 3,072
	- 4
	118 -
	250 229
Total expenses	2,468 4,483

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StageZero Life Science, Limited Management’s Discussion & Analysis [Expressed in US dollars, unless otherwise noted]

Total comprehensive loss for the year	(2,437)	(4,430)
Basic and diluted loss per common share	(0.01)	(0.03)

EXPENSES BY NATURE

Expenses included in the consolidated statements of loss and comprehensive loss for the periods ended March 31, 2020 and 2019, are as follows:

		March	31, 2020	March 31, 2019Restated - Note 18	March 31, 2019Restated - Note 18	March 31, 2019Restated - Note 18
	Cost of			Cost of
	goods	General and		goods	General and
	sold	administrative	Total	sold	administrative	Total
	$	$	$	$	$	$
Salaries and short-term	46,797	396,576	443,373	60,860	382,746	443,606
benefits
Share-based compensation	7,549	128,499	136,048	1,209	37,668	38,877
Additional rent	12,615	3,154	15,769	10,567	2,642	13,209
Depreciation	53,706	19,755	73,461	61,263	13,568	74,831
Other	99,326	331,840	431,166	113,027	462,605	575,632
Foreign exchange loss(gain)	-	(294,177)	(294,177)	-	32,215	32,215
	219,993	585,648	805,640	246,926	931,444	1,178,370

Total cost of goods sold decreased by 11% for the three months period ended March 31, 2020 compared with the same period in 2019, primarily from decreased direct materials costs, and decreased headcount and related costs, rent and depreciation. As inventory levels were adequate, there were no purchases of materials in the first quarter of 2020

Total general and administrative expenses decreased by 43% for the three-month period ended March 31, 2020, compared with the same period in 2019 due to a large foreign exchange gain and reduced overhead costs.

Finance costs

Finance costs for the three months ended March 31, 2020 were $249,698 as compared with $229,077 in the same period in 2019 primarily due to IFRS 16 adoption to recognize interest expenses for leasing liability and combined with the costs associated the interest accrual for Convertible Security Funding Agreements with Lind.

Finance costs for the periods ended March 31, 2020 and 2019

	Three Months Ended	Three Months Ended
	March 31, 2020	March 31, 2019
		As Restated(Note 18)
	$	$
Interest on note payable to HDL	27,548	27,667
Interest on note payable to shareholders and director	8,010	14,151
Interest on convertible debenture	39,803	119,407
Interest costs on lease liability	25,983	29,839
Broker warrants relating to convertible debenture financing	46,078	-
Commitment fee	-	26,057

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StageZero Life Science, Limited Management’s Discussion & Analysis [Expressed in US dollars, unless otherwise noted]

Transaction costs relating to issuance of debt	102,276	11,956
	249,698	229,077

USE OF PROCEEDS

The Company began the period with $0.07 million in available funds. During the three months ended March 31, 2020, operations used $1.2 million. During the same period $0.5 million from the issuance of units for the Private Placement and $0.9 million from issuance of convertible notes payable (net) was received, offset by a $0.04 million payment of principal of the note payable to HDL and $0.06 repayment of lease liability. The Company closed the year with $0.12 million in available funds.

The stated use of proceeds from the first quarter ended March 31, 2020 financings was to continue the expansion of StageZero’s telehealth platform, increase marketing of the telehealth platform, prepare for product launches (notably, Aristotle[®] ), and for general corporate purposes. The advent of the COVID-19 pandemic and associated business challenges, and subsequent opportunity to introduce COVID-19 testing, directed the Company to introduce COVID19 Tests to StageZero’s product line up, to scale up its Richmond Laboratory and prepare to launch COVID-19 Tests via StageZero’s existing telehealth system.

Variance in Use of Proceeds

The following table provides disclosure by the Company regarding its intended use of proceeds described in the management’s discussion and analysis of the Company for the quarter ended March 31, 2020 against the Company’s actual use of such proceeds up to March 31, 2020. All amounts listed below in general and administrative expenditures exclude non-cash expenses. The amounts presented in the table below are approximate.

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Intended use of funds in Q1 Actual use of funds Q1
Purpose 2020 (US$) 2020. (US$)
General Corporate Purposes $ 643,000 $ 491,000
Operations (Aristotle [®] and COVID- 186,000 186,000
19 Testing capabilities)
Expand Richmond Laboratory 100,000 100,000
Supplies for Aristotle [®] and COVID- 211,000 211,000
19 Tests
Product Launches related to 160,000 312,000
telehealth and COVID-19 Tests
Repayment of debt 100,000 100,000
TOTAL $ 1,400,000 $ 1,400,000
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StageZero Life Science, Limited Management’s Discussion & Analysis [Expressed in US dollars, unless otherwise noted]

LIQUIDITY AND CAPITAL RESOURCES Summary of cash flows

LIQUIDITY AND CAPITAL RESOURCES Summary of cash flows
	Three-month Periods ended March 31
	2020 2019
Cash flows related to operating activities Cash flows related to financing activities Cash flows related to investing activities	$ $
	(1,238,983) (903,992)
	1,295,119 1,007,957
	(5,747) -

Operating activities

The use of cash and cash equivalents in operating activities in the year ended December 31, 2019 was consistent with that of 2018.

Financing activities [accounted through shareholders’ deficiency]

	Share capital
	Shares Amount # $
Balance at January 1, 2019	153,638,880 76,819,572
Issuance of common shares with Unit financing	58,622,545 1,602,752
Conversion of structured note payable and convertible liability Conversion of convertible notes payable	39,017,599 1,270,131
	20,611,960 590,624
Balance at December 31, 2019	271,890,984 80,283,079

Issuance of common shares with Unit financing	16,797,720 350,517
Conversion of structured note payable and convertible liability	16,785,975 355,531

Balance at March 31, 2020	305,474,679 80,989,127

[i] 2018 Unit Private placements

On May 22, 2018, the Company closed the first tranche (the “First Tranche”) of a unit financing (the “Unit Financing”) and issued 15,532,513 units for gross proceeds of $979,935 (Cdn$1,242,601). Each Unit (“Unit”) consists of one common share plus one-half of one warrant at a price of Cdn$0.08 per Unit. Each whole warrant is exercisable into one common share at an exercise price of Cdn$0.12 for a period of thirty-six months from issuance, until May 22, 2021. Unit pricing of Cdn$0.08 occurring at an approximately 12% discount to the market price of Cdn$0.09 at April 10, 2018 and the warrant pricing of Cdn$0.12 occurring at a 33% premium to the market price of Cdn$0.09 at April 10, 2018. In lieu of making a cash payment by the Company, certain unrelated noteholders accepted Units for an aggregate of $300,980 (Cdn$380,831), and a director, who is also a shareholder, participated for $445,213 (Cdn$561,770) in lieu of debt repayment in cash [ note 8[b] ] and received 7,022,126 common shares and 3,511,063 warrants.

On August 24, 2018, the Company announced a second tranche closing (the “Second Tranche”) of the Unit Financing, subject to shareholder approval. At its annual and special meeting of shareholders on June 28, 2018, shareholders voted for the issuance of up to 4,917,487 Units, representing 7,376,231 common shares. Insiders would not participate in the Second Tranche of the Unit Financing and it is not expected that the transaction will result in a change of control. Each Unit consists of one common share plus one-half of one warrant at a price of Cdn$0.08 per Unit. Each whole

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StageZero Life Science, Limited Management’s Discussion & Analysis [Expressed in US dollars, unless otherwise noted]

warrant is exercisable into one common share at an exercise price of Cdn$0.12 for a period of thirty-six months after the closing date of the Second Tranche of the Unit Financing. $18,502 cash was received for issuing 300,000 shares and 150,000 warrants.

[ii] 2019 Unit Private placement in March and April

[iii] 2019 Unit Private placements in July

On July 10, 2019 the Company closed the first tranche (the “First Tranche”) of a unit financing (the “Unit Financing”) and issued 23,177,546 units for gross proceeds of $2,037,438 (Cdn$2,665,418). Each Unit (“Unit”) consists of one common share plus one-half of one warrant at a price of Cdn$0.115 per Unit. Each whole warrant is exercisable into one common share at an exercise price of Cdn$0.185 for a period of thirty-six months from issuance, until July 10, 2022.

Stock options

There were 29,870,235 stock options outstanding under the employee stock option plan at December 31, 2019 [2018– 17,341,046]; 22,145,640 [2018 – 11,797,086] of which were vested and exercisable at a weighted-average price per share of Cdn$0.13 [2018 – Cdn$0.22]. During the year ended December 31, 2019, no options were exercised, 3,825,000 options expired or were forfeited, and 15,524,189 options were granted [2018 – nil, 2,984,969 and 7,105,000 , respectively].

Financing activities [accounted through current and long-term liabilities] Notes payable

otes payable
		Note payable
	Note	to	Convertible
	payable to	shareholders	debenture	Total
	HDL [a]	and a director	[c]
		[b]
	$	$	$	$
At January 1, 2019	692,308	1,160,734	1,005,957	2,858,999
Issuance of new notes payable	-	60,000	334,373	394,373
Imputed interest	110,219	39,895	396,277	546,391
Payment of principal	(110,000)	-	-	(110,000)

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StageZero Life Science, Limited Management’s Discussion & Analysis [Expressed in US dollars, unless otherwise noted]

Payment of interest	-	-	(38,649)	(38,649)
Extinguishment of principal from issuance of Units	-	(314,576)	-	(314,576)
Conversion of structured notes upon issuance of common shares	-	(261,156)	(1,419,189)	(1,680,345)
Foreign exchange	-	-	49,859	49,859
At December 31, 2019	692,527	684,897	328,628	1,706,052
Imputed interest	27,548	8,010	39,083	74,641
Payment of principal	(40,000)	-	-	(40,000)
Conversion of structured notes upon issuance of common shares	-	-	(284,755)	(284,757)
Foreign exchange	-	-	(21,148)	(21,148)
At March 31, 2020	680,075	692,907	61,806	1,434,788

The notes payable were initially recognized at fair value, and subsequently they were measured at amortized cost using the effective interest rate method. The initial fair values were calculated using a valuation technique that uses parameters obtained from observable markets, including credit spread and interest rate volatility. The prevailing interest rate used in the valuation was 16% at initial recognition.

[a] Note payable to HDL

The note is payable to Health Diagnostic Laboratories (HDL) and the Company is required to make monthly payments of $10,000 until the outstanding debt has been paid in full

[b] Note payable to shareholders and director

	At December 31, 2019	Addition	Imputed interest	Principal Extinguishment	Conversion	At March 31, 2020
	$	$	$	$	$	$
Note payable to shareholders and director	684,897	-	8,010	-		692,907

Beginning in December 2015, a major shareholder, who is also a director of the Company, has provided interim financing to the Company, repayable on demand and earning simple interest at 5%.

With the Unit Private Placement 2018, a director, who is also a shareholder, participated for $445,213 (Cdn$561,770) in lieu of debt repayment in cash and received 7,022,126 common shares and 3,511,063 warrants.

Two shareholders of the Company, one of whom, is also a director each loaned $250,000 to the Company and were issued convertible notes (the “Notes”) in consideration therefor, subject to shareholder approval. Such approval was received at the Company’s June 28, 2018 shareholder meeting.

Each Note has a term of twelve months with simple interest earned at 5% per annum. Each Note is convertible at the Holder’s discretion into units of the Company (“Note Units”) at a subscription price of Cdn$0.095 per Note Unit, each Note Unit consisting of one common share and one-half of a Warrant, each whole Warrant exercisable for one common share at a price of Cdn$0.12 per common share for a period of three years from conversion of the Notes into common shares. The Note Units are only issuable to the Holder if he chooses the conversion option as payment upon demand. The Note Unit pricing of Cdn$0.095 is at a 5% premium to the market price of Cdn$0.09 at May 10, 2018.

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StageZero Life Science, Limited Management’s Discussion & Analysis [Expressed in US dollars, unless otherwise noted]

If the Notes are outstanding for the full twelve months, each Holder would be entitled to principal and interest of $262,500 (Cdn$358,117) or if converted into Note Units, 3,550,936 common shares and 1,775,468 Warrants. In total for both Holders, the maximum number of common shares issuable upon the conversion of the Notes is 10,652,808 common shares, consisting of 7,101,872 common shares underlying the Notes and 3,550,936 common shares underlying the Warrants. The Warrants will only be issued upon the conversion of the Note.

On April 23, 2019, one Holder converted above convertible notes for 3,532,752 common shares and 1,766,376 Warrants.

On October 25, 2018, the Company entered into agreements with the above insiders of the Company, who are shareholders of the Company. The shareholder who is a director, loaned $200,000 to the Company and was issued convertible notes (the “Notes”) in consideration approved by shareholders. JTS Ventures Inc. D/B/A JTS Health Partners (each, a “Holder”), loaned $50,000 to the Company and was issued convertible notes (the “Notes”) in consideration. The Notes have a term of twenty-four months with simple interest earned at 5% per annum. The Lenders have the right to convert the accrued interest and principal into common shares of the Borrower through the Term. The conversion rate is calculated as the 5 day volume weighted average price of the common shares of the Corporation (each a “Common Share”) for the period ending October 24, 2018 of C$ 0.053180 plus C$ 0.005 premium, totaling C$ 0.05818. The number of Common Shares issuable by the Borrower upon conversion is calculated as the total accrued balance of principal and interest owing on the date of demand for conversion, converted from USD to C$ at the Bank of Canada’s exchange rate of USD to C$ on October 24, 2018 of 1.3029 and divided by the common share price in C$.

During the period from October 31, 2018 until March 31, 2020, the Company had demand note agreements with the shareholder, who is also a director of the Company for loans totaling $440,000 to the Company and the company issued demand notes (the “Notes”), payable on demand with simple interest earned at 5% per annum.

The above notes are all secured by a security interest in the Company’s patents and trademarks.

[c] Convertible debentures

[i] 2016 debenture

On December 23, 2016, the Company closed debentures, for gross proceeds of $536,462 (Cdn$721,000) (the "Debentures"). The Debentures have a term of three years and bear interest at a rate of 8% per annum. The interest is payable semi-annually in arrears, in cash. Payment of principal is payable in cash or common shares of the Company at the discretion of the Company, subject to the approval of the TSX. If the Company elects to pay the principal in common shares, the number of Common Shares issued will be determined based on a 10% discount to the 5-day volume weighted average trading price ending on the trading day immediately preceding the date that the principal amount is due. Each Debenture will be convertible, at the option of the holder, into common shares at a conversion price of Cdn$0.50, beginning six months after the initial closing date. Each Debenture will be convertible, at the option of the Company, at a conversion price of Cdn$0.50, beginning twelve months after the closing date, provided the price of the common shares has been at or above Cdn$0.75 for 20 consecutive trading days. On July 18, 2017, a holder converted $79,190 (Cdn$100,000) into 200,000 common shares.

[ii] 2018 debenture

On June 8, 2018, the Company entered into the Convertible Security Funding Agreement (the “Agreement”) with Lind Asset Management XI, LLC (“Lind”) for up to Cdn$7.5 million in convertible securities. Under the terms of the Agreement, Lind advanced $1,541,800, less a closing fee of Cdn$100,000, in consideration for the issuance of a convertible security with a face value of Cdn$2.4 million (the “First CSFA”). Lind can increase the funding under the First CSFA by an additional Cdn$1,000,000 during its thirty-month term.

The Agreement also provides for the issuance of a second CSFA on mutual agreement of the Company and Lind and satisfaction of conditions including that 75% of the face amount of the First CSFA has been repaid or converted, in which case Lind may fund up to another Cdn$3,000,000 (the “Second Tranche”). Similar to the First CSFA, Lind can also increase the funding under the Second CSFA by up to Cdn$1,500,000. If the Second CSFA occurs, the Company would pay Lind a closing fee equal to 5% of the amount advanced in the Second CSFA.

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StageZero Life Science, Limited Management’s Discussion & Analysis [Expressed in US dollars, unless otherwise noted]

Each CSFA has a thirty-month term from the date of issuance and bears interest of 8% per annum on the amount funded that is attributed to its face value upon the issuance of each CSFA. The Company's obligations under the Agreement are secured by all of the Company's present and after-acquired property other than intellectual property, including a pledge of its equity interests in its subsidiaries.

Shares underlying each CSFA are restricted from trading for a period of four months and one day from the time of issuance of the applicable CSFA (the "Lock-up Period"). Lind may convert the CSFA’s in monthly installments over the term at a conversion price equal to 85% of the 5-day trailing volume-weighted average price (“VWAP”) of the Company's common shares prior to the date that notice of conversion is provided by Lind. The Agreement contains restrictions on how much may be converted in any particular month and how many common shares Lind may hold at any given time. Lind is entitled to accelerate its conversion right to the full amount of the face value or demand repayment of the face value in cash upon a default and other specified events. To the extent that the full, face value of a convertible security has not been converted at maturity, the balance of the face value is to be paid in cash at the end of the thirty-month term.

The Company has the option to buy-back the CSFA’s in cash at any time by paying a buy-back premium equal to 5% of the outstanding balance of the applicable convertible security, except that no such premium is payable if the Company elects to buy back the First Convertible Security within the Lock-Up Period.

The Agreement and the issuance of securities thereunder were conditionally approved by the TSX, with up to 6,048,902 common shares issuable under the Agreement or Warrants. At the Company’s June 28, 2018 shareholder meeting, the company received shareholder approval to issue up to an additional 40,000,000 common shares to Lind under the Agreement. Any additional issuances of common shares under the Agreement will be subject to further shareholder approval.

In addition, the Company issued 13,531,800 warrants to Lind in respect of the First CSFA, exercisable for 36 months at an exercise price of Cdn$0.096 per share. The number of warrants issued in connection with the First CSFA are equal to 50% of the amount advanced by Lind (Cdn$2,000,000) divided by the VWAP of the common shares of the Company on the TSX for the five trading days immediately preceding the closing date. On April 23, 2019, in respect of the Additional Funding Cdn$750,000, the Company issued 2,552,756 warrants exercisable for 36 months at an exercise price of Cdn$0.1909 per share.

Warrants calculated in the same manner will also be issued to Lind if it elects to increase the size of any convertible security as described above. All subsequent warrants issued to Lind pursuant to the Agreement will be exercisable for 36 months from the date of issuance at an exercise price equal to 130% of the five-day VWAP of the common shares immediately prior to the applicable closing date. The Warrants provide for cashless exercise by the holder in the event that the Company ceases to be a foreign private issuer, as that term is defined under the United States Securities Act of 1933.

In addition, face value Cnd$600,000 of outstanding debt and interest, in connection with the Second CSFA, were converted by Lind to 4,249,879 common shares, which is completed the conversion of the Second CSFA.

Each convertible security has a thirty-month term from the date of issuance and bears interest of 8% per annum on the amount funded that is attributed to its face value upon the issuance of each convertible security. The Company's

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StageZero Life Science, Limited Management’s Discussion & Analysis [Expressed in US dollars, unless otherwise noted]

obligations under the Agreement are secured by all of the Company's present and after-acquired property other than intellectual property, including a pledge of its equity interests in its subsidiaries.

The Company has the option to buy-back the convertible securities in cash at any time by paying a buy-back premium equal to 5% of the outstanding balance of the applicable convertible security.

In total, face value Cdn$3,175,000 of First Convertible Security was converted to common shares to Lind in connection with a CSFA and the balance is Cdn$125,000 pending conversion.

On December 23, 2019, number of 17,079,208 common shares of the Corporation have been reserved, allotted and set aside for issuance to holders of 2019 Debentures, totaling $464,766 (Cdn$621,000), pursuant to the conversion of the principal amount of the 2019 Debentures (the “Conversion Shares”), subject to the terms and conditions contained in the Indenture and the Debenture Certificate. Applying the formula set out in Article 4 of the Indenture, the directors of the Corporation, acting in good faith and in the best interests of the Corporation hereby fix the sum of CDN $0.03636 per share, being 90% of the VWAP of the Common Shares on the Toronto Stock Exchange for the five consecutive trading days immediately preceding (but not including) December 23, 2019 (the “Maturity Date”, as defined in the Indenture), as the conversion price and consideration for the issuance of each of the Conversion Shares issuable pursuant to the conversion of the 2019 Debentures..

Upon conversion of Cnd $0.03636 in principal amount of a 2019 Debenture as payment in full of the conversion price for each Conversion Share being in issued in respect thereof, such Conversion Share shall be validly issued as fully paid and non-assessable;

Convertible Debenture Private Placement in February 2020

The company closed a private placement of convertible debentures (each a “Debenture”) for gross proceeds of Cdn$1,180,000 on February 19, 2020 (the “Offering”). The Debentures, issued in increments of $1,000, bear interest at a rate of 6% per annum, have a term of 18 months from the date of issue and are convertible in units (“Units”) at a conversion price of $0.04 per Unit. Each Unit consists of one (1) common share (“Common Share”) of the Company and one-half (1/2) of a Common Share purchase warrant. Each whole warrant (a “Warrant”) is exercisable into one Common Share of the Company at an exercise price of CAD$0.07 per Common Share for a period of twenty-four (24) months from the date of issuance of the Debentures. Securities issued pursuant to the Offering are subject to a statutory hold period lasting four (4) months and a day after the issuance of the securities.

	Fair value of
	convertible
	debenture [d]
	$
At January1,2020	-
Issuance during the period	888,065
Revaluation during the period	118,113
Foreign exchange	(63,808)
At March31,2020	942,370

Warrants

The following warrants were issued and outstanding at March 31, 2020:

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StageZero Life Science, Limited Management’s Discussion & Analysis [Expressed in US dollars, unless otherwise noted]

	Warrants	Exercisable into common shares	Exercise Price	Expiry date
	#	#	Cdn$
Date issued:
August 11, 2016 [GEM]	338,702	338,702	0.2	11-Aug-21
September 30, 2016 [GEM]	1,647,677	1,647,677	0.2	30-Sep-21
November 4, 2016 [GEM]	1,000,000	1,000,000	0.2	4-Nov-21
December 30, 2016 [GEM]	1,300,000	1,300,000	0.2	30-Dec-21
February 17, 2017 [GEM]	1,610,000	1,610,000	0.2	17-Feb-22
May 9, 2017 [GEM]	103,621	103,621	0.2	9-May-22
May 22, 2018 [Unitholders]	7,766,256	7,766,256	0.12	22-May-21
June 7, 2018 [Lind]	13,531,800	13,531,800	0.096	7-Jun-21
August 24, 2018 [Unitholders]	150,000	150,000	0.12	24-Aug-21
January 09, 2019 [Lind]	18,889,308	18,889,308	0.034	9-Jan-22
March 25, 2019 [Unitholders]	10,000,000	10,000,000	0.09	25-Mar-22
April 23, 2019 [Lind]	2,552,756	2,552,756	0.191	23-Apr-22
April 23, 2019 [Unitholders]	1,766,376	1,766,376	0.12	23-Apr-22
April 23, 2019 [Unitholders]	3,187,500	3,187,500	0.1	23-Apr-22
July 10, 2019 [Unitholders]	11,588,773	11,588,773	0.185	10-Jul-22
July 24, 2019 [Unitholders]	4,534,999	4,534,999	0.185	24-Jul-22
January 16, 2020 [Unitholders]	8,430,110	8,430,110	0.06	16-Jan-23
January 16, 2020 [Hampton Security Company]	221,900	221,900	0.06	16-Jan-23
February 19, 2020 [Hampton Security Company]	1,618,750	1,618,750	0.07	19-Aug-21
	90,238,528	90,238,528
		#	$
At January 1, 2019		27,448,056	419,905
January 09, 2019 to Lind_[ [b]]_		18,889,308	207,321
March 25, 2019 to Unitholders_[ [b]]_		10,000,000	745,200
April 23, 2019 to Lind_[ [b]]_		2,552,756	169,042
April 23, 2019 to Unitholders_[ [b]]_		4,953,876	392,518
July 10, 2019 to Unitholders_[ [b]]_		11,588,773	1,056,810
July 24, 2019 to Unitholders_[ [b]]_		4,534,999	298,469
Foreign exchange adjustment during the period			142,315
Revaluation			(2,434,347)
At December 31, 2019		79,967,768	997,233
January 16, 2020 to Unitholders_[ [b]]_		8,430,110	166,470
January 16, 2020 to Hampton Security Company_[ [b]]_		221,900	-
February 19, 2020 to Hampton Security Company_[ [b]]_		1,618,750	-
Foreign exchange adjustment during the period			(240,546)
Revaluation			1,294,312

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StageZero Life Science, Limited Management’s Discussion & Analysis [Expressed in US dollars, unless otherwise noted]

At March 31, 2020	90,238,528 2,217,469
Short-term portion of warrant liability	-
Long-term portion of warrant liability	2,217,469

Warrants issued in First Tranche of Unit Private Placement on March 25, 2019

In connection with the Unit Private Placement, on March 25, 2019, 10,000,000 warrants were issued and are exercisable at a price of Cdn$0.09 per common share, expiring on March 25, 2022.

In connection with the Unit Private Placement, on April 23, 2019, 3,187,500 warrants were issued and are exercisable at a price of Cdn$0.10 per common share, expiring on April 23, 2022.

In connection with the Unit Private Placement, on July 10, 2019, 11,588,773 warrants were issued and are exercisable at a price of Cdn$0.185 per common share, expiring on July 10, 2022.

In connection with the Unit Private Placement, on July 24, 2019, 4,534,999 warrants were issued and are exercisable at a price of Cdn$0.185 per common share, expiring on July 24, 2022.

Warrants issued to Lind on January 9, 2019

The Company issued 18,889,308 Common Share purchase warrants (“Warrants”) to Lind in respect of the Convertible Security on January 9, 2019. Each Warrant is exercisable for one Common Shares for 36 months at an exercise price of $0.0344 per Common Share. The number of Warrants issued in connection with the Convertible Security are equal to 100% of the amount advanced by Lind (CDN$500,000) divided by the VWAP of the Common Shares on the TSX for the five trading days immediately preceding the execution date of the Agreement. The Warrants provide for cashless exercise by the holder in the event that the Company ceases to be a foreign private issuer, as such term is defined under the United States Securities Act of 1933.

Warrants issued to Lind on April 22, 2019

The Company issues 2,552,756 warrants to Lind in respect of the Additional Funding with an exercise price of CDN$0.1909, which is 130% of the 5-day VWAP at April 10, 2019, and exercisable for 36 months. The number of warrants issued in connection with the Additional Funding is equal to 50% of the CDN$750,000 advanced by Lind divided by the VWAP of the common shares of the company on the TSX for the five trading days immediately preceding the closing date.

Warrants issued for convertible note payable extinguishment on April 23, 2019

In connection with convertible note payable extinguishment on April 23, 2019, 1,766,376 warrants were issued and are exercisable at a price of Cdn$0.12 per common share, expiring on April 23, 2022.

Warrants issued for Unit Private Placement on January 16, 2020

In connection with the Unit Private Placement, January 16, 2020, 8,430,110 warrants were issued and are exercisable at a price of Cdn$0.06 per common share, expiring on January 16, 2023.

Warrants issued to Hampton Security Company on January 16, 2020

The Company issued 221,900 warrants to Hampton Security Company in respect of the broker warrants for Unit Private Placement on January 16, 2020 with an exercise price of Cdn$0.06, and exercisable for 36 months. As these warrants were issued to a broker for financing services, the issuance was accounted for a sharebased compensation and the fair value on issuance was recorded in contributed surplus.

Warrants issued to Hampton Security Company on February 19, 2020

The Company issued 1,618,750 warrants to Hampton Security Company in respect of the broker warrants for Convertible Debentures closed on February 19, 2020 with an exercise price of Cdn$0.07, and

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StageZero Life Science, Limited Management’s Discussion & Analysis [Expressed in US dollars, unless otherwise noted]

exercisable for 18 months. As these warrants were issued to a broker for financing services, the issuance was accounted for a share-based compensation and the fair value on issuance was recorded in contributed surplus

Adequacy of financial resources

The Company has earned limited revenue. The inability of the Company to raise planned funds through private placements or other methods of financing has contributed to the Company’s current financial situation where it has very limited cash resources. As such, the Company missed making vendor and loan payments, while it pursued various financing alternatives. The Company has negotiated and continues to address payment plans with affected vendors as funding has been received. Further details of financings completed and challenges addressed during 2019 are discussed in detail above – see GOING CONCERN UNCERTAINTY (page 2) and FINANCING ACTIVITIES AND CAPITAL STRUCTURE (page 3).

Subsequent to December 31, 2019, the Company issued 16,860,220 units for gross proceeds of Cdn$674,409 from a private placement. In addition, on February 19, 2020 the Company closed a private placement of convertible debentures (each a “Debenture”) for gross proceeds of Cdn$1,180,000

There can be no assurance that additional funding will be available on acceptable terms or at all, when and if required. If adequate funds are not available when required, the Company may have to substantially reduce or eliminate planned expenditures or delay programs designed to expand the commercial business of the Company. If the Company is unable to obtain additional funding when and if required, the Company may be unable to continue operations. As there can be no certainty as to the resolution of the above matters, there is material uncertainty that may cast significant doubt about the Company’s ability to continue as a going concern. – see GOING CONCERN UNCERTAINTY (Page 2)

As at December 31, 2019, our cash balance was $0.07 million [December 31, 2018 – $0.10 million], we had a working capital deficiency of $3.8 million [December 31, 2018 – working capital deficiency of $5.1 million] and a deficit of $97.3 million [December 31, 2018 – $93.8 million].

OFF-BALANCE SHEET ARRANGEMENTS

We do not engage in off-balance sheet accounting to structure any of our financial arrangements. We do not have any interests in unconsolidated special-purpose or structured finance entities.

CONTRACTUAL OBLIGATIONS

The Company adopted IFRS 16 on January 1, 2019, which requires the recognition of assets and liabilities for all leases, unless the lease term is less than 12 months or the underlying asset has a low value.

On December 5, 2017, the Company renegotiated the lease of its premises effective January 1, 2018 to September 30, 2023. The property and office space lease bears interest at an estimated rate of 14.4%. The lease liability as at March 31, 2020 is $718,212 (March 31, 2019 – 816,633). Effective August 1, 2018, the Company subleased 74.46% of its leased space for a commensurate share of the rental cost for the remaining term of its lease.

Aggregate lease commitments as disclosed at December 31, 2018	$ 1,181,041
Less: Recognition exemption short-term leases (leases that expire on or prior to December 31, 2019	-
Adjusted lease commitments	1,181,041
Less: Impact of present value	346,158

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StageZero Life Science, Limited Management’s Discussion & Analysis [Expressed in US dollars, unless otherwise noted]

$ 834,883

Opening IFRS 16 lease liability as at January 1, 2019

The Company may be involved from time to time in various legal claims and regulatory proceedings arising in the ordinary course of business, including arbitrations, class actions, civil litigation and investigations (including those described in more detail below). Some of these matters may include, but are not limited to, intellectual property disputes, professional liability, employee related matters and inquiries, including subpoenas and other civil investigative demands from governmental bodies and Medicare or Medicaid payers and managed care payers reviewing billing practices or requesting comment on allegations of billing irregularities that are brought to their attention through billing audits or third parties. Such inquiries may relate to the Company or other healthcare providers.

RELATED-PARTY TRANSACTIONS

The key management personnel of the Company at December 31, 2019 are the directors, including the Chairman and Chief Executive Officer and the interim Chief Financial Officer. A former director of the Company, who retired from the Board of Directors in September, 2019 is the Chairman of the Board for the Company’s former third-party billing company and this same director has provided interim financing to the Company between December 2015 and December, 2019 . With the Unit Private Placement 2019, this director participated for $445,213 (Cdn$561,770) in lieu of debt repayment in cash and received 7,022,126 common shares and 3,511,063 warrants. In 2019 Unit Private Placement, this director participated for $314,576 (Cdn$411,183) in lieu of debt repayment in cash and received 3,575,503 common shares and 1,787,752 warrants.

A director and shareholder of the Company provided interim financing in 2019.

Compensation for key management personnel of the Company is detailed below for the year ended December 31, 2019 and 2018:

nd 2018:
	Three Months Ended March 31
	2020	2019
	$	$
Salaries, fees and short-term benefits	136,988	133,597
Share-based compensation	122,508	16,950
	259,496	150,547

As at March 31, 2020, key management personnel controlled 5.8% (2019-13.4%) of the issued and outstanding common shares of the Company and $622,500 (2019-$646,418) of compensation remains unpaid to current and former key management personnel.

Year	Year of	Range of exercise prices per	At	At
issued	expiry	share	March 31, 2019	March 31, 2018
		$	#
2014	2019	0.75 to 1.20	-	400,000
2015	2020	0.02 to 0.45	1,677,920	2,166,880
2016	2021	0.135 to 0.19	710,000	1,273,333
2017	2022	0.125 to 0.355	2,000,000	2,385,000
2018	2023	0.08 to 0.11	3,050,000	4,250,000

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StageZero Life Science, Limited Management’s Discussion & Analysis [Expressed in US dollars, unless otherwise noted]

2019 2024 0.08 to 0.10 11,045,826 -	2019 2024 0.08 to 0.10 11,045,826 -
18,483,746	10,475,213

SELECTED QUARTERLY FINANCIAL DATA

Selected quarterly financial data for our last eight fiscal quarters follows:

in thousands of dollars, except per-share amounts	2020 as amended		2019 as amended	2019 as amended		2018 as amended	2018 as amended	2018 as amended
	Q1	Q4	Q3	Q2	Q1	Q4	Q3	Q2
Revenues Net gain (loss)	31	50	23	13	53	71	98	13
	(2,436)	116	1,635	(803)	(4,430)	(162)	(770)	(2,108)
Basic and diluted loss per common share	(0.01)	0.00	0.01	(0.00)	(0.03)	(0.00)	(0.01)	(0.02)

The selected quarterly financial data for each quarter presented were amended in relation to the restatements and amendments noted in the amended and restated condensed consolidated interim financial statements for the three months periods ended March 31, 2020 and 2019 and the prior period adjustment note disclosure in the consolidated financial statement for years ended December 31, 2019 and 2018.

RESPONSIBILITIES, CONTROLS AND POLICIES Management’s responsibility for financial reporting

Evaluation of disclosure controls and procedures

Our Chairman and CEO, and Interim Chief Financial Officer are responsible for establishing and maintaining disclosure controls and procedures for the Company. As such, we maintain a set of disclosure controls and procedures designed to ensure that information required to be disclosed in filings is recorded, processed, summarized and reported within the time periods specified by the Canadian Securities Administrators rules and forms. In designing and evaluating the disclosure controls and procedures, management recognizes that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving the desired control objectives, and management necessarily is required to apply its judgment in evaluating the cost-benefit relationship of possible controls and procedures.

Our Chairman and CEO, and Interim Chief Financial Officer have evaluated our disclosure controls and procedures as at December 31, 2019 and have concluded that disclosure controls and procedures are effective.

Management’s report on internal controls over financial reporting

Our Chairman and CEO, and Interim Chief Financial Officer are responsible for establishing and maintaining effective internal controls over financial reporting. Our internal controls over financial reporting are designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with IFRS. Because of their inherent limitations, internal controls over financial reporting may not prevent or detect misstatements. Therefore, even those systems determined to be effective can provide only reasonable assurance with respect to financial statement preparation and presentation.

Our Chairman and Chief Executive Officer, and Interim Chief Financial Officer evaluated the effectiveness of our internal controls over financial reporting as at December 31, 2019 and identified the material weakness outlined below. We plan to continue to address this weakness in 2020.

Material weakness

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StageZero Life Science, Limited Management’s Discussion & Analysis [Expressed in US dollars, unless otherwise noted]

The material weaknesses we identified in our internal controls over financial reporting at December 31, 2019 were as follows: We did not have sufficient accounting resources with relevant technical accounting skills to address issues related to its financial statement close process. In addition, we did not sufficiently design internal controls to provide the appropriate level of oversight regarding the financial recordkeeping and review of the Company’s financial reporting. This weakness will continue to be addressed through 2020.

In making this assessment, management used the framework set forth by the Committee of Sponsoring Organizations of the Treadway Commission (“COSO”) in Internal Control – Integrated Framework (2013).

Consistent with our stage of development, we continue to rely on risk-mitigating procedures during our financial closing process in order to provide comfort that the financial statements are presented fairly in accordance with IFRS.

Changes in internal controls over financial reporting

Our Chairman and Chief Executive Officer, and Interim Chief Financial Officer have evaluated whether there were changes to our internal controls over financial reporting during the year ended December 31, 2019, that have materially affected or are reasonably likely to materially affect our internal controls over financial reporting. No such changes were identified through evaluation of the Company. As the Company continues to improve its internal controls over financial reporting, we have begun monthly reviews of the Company’s detailed accounting records, and quarterly onsite reviews of processes in place at the Company. In light of the remediation occurring, our internal controls are expected to be changed, but only once the planned changes are finalized.

RISKS AND UNCERTAINTIES

We operate in a high-risk industry and are subject to numerous risks and uncertainties that may have adverse effects on our business, results of operations and financial condition. An investment in StageZero Life Sciences and our securities should be carefully considered in light of the risks described below and the current economic and market conditions. These risks are not the only ones that the Company faces. Additional risks that are not presently known to us or that we currently believe are immaterial may also significantly impair the business, results of operations and financial condition.

Capital requirements, financing and going concern

From inception to now, the Company has had no significant independent sources of income except for nominal sales of its product and proceeds from various collaborations, and it has accumulated significant losses. While the Company has added to its commercial test menu which we believe will lead to an increase in its commercial sales, there can be no guarantee that this will occur or will grow to a level necessary to finance its business. The ability to operate profitably and generate positive cash flow in the future will be affected by a variety of factors, including the availability of additional capital to fund operations and to form strategic partnerships to access marketing and distribution capabilities; the ability to penetrate the market with commercial products and the ability to obtain reimbursement coverage for its tests.

For the foreseeable future, the Company will continue to be financed from the proceeds of equity financings and, to the extent available, from debt. Revenues from sales of tests are inconsistent, and there can be no assurance that revenues from these sources will be anything more than nominal in the near term or will be sufficient to fund operating costs.

The ability to continue as a going concern is also contingent upon our ability to obtain additional sources of capital to finance operations in the future. Efforts will be required to obtain this additional capital, but there is no assurance that additional capital will be available on acceptable terms, if at all. Similarly, revenue from sales is not sufficient to fund operations. The inability to obtain sufficient additional capital may have a material adverse effect on the business, results of operations and/or financial condition. If additional financing is raised through the issuance of equity or convertible debt securities, the interests of the Company's shareholders may be diluted.

As a result, the Company’s consolidated financial statements for the three months ended March 31, 2020 contain a going concern note (note 2) with respect to this uncertainty. Substantial doubt about the ability to continue as a going concern may materially and adversely affect the price of the Company’s common shares, and it may be more difficult to obtain financing. The going concern note in the consolidated financial statements may also adversely affect our relationships with current and future collaborators and investors, who may grow concerned about the ability to meet

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StageZero Life Science, Limited Management’s Discussion & Analysis [Expressed in US dollars, unless otherwise noted]

ongoing financial obligations. If potential collaborators decline to do business with the Company or potential investors decline to participate in any future financings due to such concerns, the ability to increase its financial resources may be limited.

These financial statements have been prepared on a going concern basis, which contemplates the realization of assets and the satisfaction of liabilities and commitments in the normal course of business. The consolidated financial statements do not include any adjustment to reflect the possible future effects on the recoverability and classification of assets or the amounts and classification of liabilities that may result from the outcome of this uncertainty.

No record of profit

The Company has incurred significant losses to date, and there can be no assurance that future business activities will be profitable. Since inception, the Company has incurred costs to develop and enhance its technology, to develop and commercialize its products and services, to establish strategic relationships, to acquire complementary technologies and to build administrative support systems. There has been negative operational cash flow to date. Losses from operations of $2.4 million for the three months ended March 31, 2020, and $4.4 million for the three months ended March 31, 2019 were incurred. The ability to operate profitably and generate positive cash flow in the future will be affected by a variety of factors, including the ability to generate revenue and our quarterly operating results, the pace at which the Company secures additional marketing partners and customers, its ability to further develop and test its technology on schedule and on budget, the intensity of the competition it experiences and the availability of additional capital to pursue the Company’s business plan, including the development of new services. The inability to generate sufficient funds from operations is having a materially adverse effect on the business, results of operations and financial condition.

Share price

StageZero is an emerging company and operates within the biotechnology, molecular diagnostic and genomic biomarker industry (the “Industry”). We may experience large fluctuations in our share price as is common to many public companies in the Industry. Factors which contribute to share price fluctuations may include announcements relating to our science, products, patents or clinical studies, or regulatory or reimbursement changes, or finance efforts, as well as the trading of our shares by insiders may have an adverse effect on the share price. In addition, our shares have experienced substantial volatility in the past, often based on factors unrelated to our performance. These factors include global economic developments; discoveries and commercialization of competitor’s offerings in the Industry; and market perceptions of the attractiveness of certain industries including the Industry; the limited extent of analytical coverage concerning our business if investment banks with research capabilities do not follow our securities; the lessening in trading volume and general market interest in our securities, which may affect a holder’s ability to trade significant numbers of our common shares; and the size of our public float, which may limit the ability of some institutions to invest in our securities.

Dilution

We may consider issuing additional convertible debt or equity securities, which may rank prior to the common shares, in the future to fund potential acquisitions or investments, or for general corporate purposes. Our articles of amalgamation provide that StageZero has an unlimited number of non-voting preference shares, of voting special shares (entitling the holder to a dividend if and when declared by the Board in parity with the common shares and convertible into common shares) and of voting common shares that may be issued. If we issue convertible debt or equity securities to raise additional funds, our existing shareholders may experience dilution, and the new convertible debt or equity securities may have advantageous rights, preferences and privileges when compared to those of our existing shareholders. We are unable to predict the future amount of such issuances or dilution.

Public market regulators

The Company is subject to compliance with the rules and regulations of the Toronto Stock Exchange (“TSX”) and is regularly required to obtain approval from TSX with respect to raising capital and debt.

COVID-19

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StageZero Life Science, Limited Management’s Discussion & Analysis [Expressed in US dollars, unless otherwise noted]

of this report. As such, it is uncertain what the full magnitude of the pandemic will have on the Company’s financial condition, liquidity, and future results of operations. Management is actively monitoring the global situation on its financial condition, liquidity, operations, suppliers, industry, and workforce. Given the daily evolution of the COVID19 outbreak and the global responses to curb its spread, the Company is not able to estimate the effects of the COVID19 outbreak on its results of operations, financial condition, or liquidity at this time.

Other collaborations and strategic partnerships

We have entered into license or other agreements in order to sell diagnostic tests developed by third parties that have been added to our lab’s menu of tests and may do so in the future. These agreements include ones that are nonexclusive, short-term or subject to termination on notice and that require minimum license or other payments to be made by StageZero Life Sciences, Inc. As a result, these arrangements may terminate earlier than desired or result in fewer sales and lower revenues than expected.

The success of any license arrangement to sell a diagnostic test developed by a third party will be in part dependent on the financial health and reputation of the licensor and the intellectual property associated with the products and tests licensed to StageZero Life Sciences, Inc.. See “Risk Factors – StageZero Life Sciences, Inc. as licensee in the event of bankruptcy of a licensor.”

We have also entered into a number of agreements and alliances with corporate, academic, hospital and physician collaborators. These collaborations are typical in the Industry. We are highly reliant on such alliances to facilitate our research and development and commercialization programs. As an example, access to patient samples for research is essential to our continuing research. Although beneficial to us, these collaborations may expose us to additional risks. Should current collaborations and new alliances prove difficult or impossible to maintain, we may be adversely affected.

Markets and competition

The Industry is subject to rapid technological change, which may significantly alter the marketplace or result in changes in the regulatory and legislative environment. Our ability to successfully commercialize products or processes for diagnosing and managing colorectal cancer, prostate cancer, breast cancer and other diseases in our development pipeline may depend, in part, on future market conditions, which are impossible to predict. The Industry is populated with larger and more sophisticated companies whose financial and human resources far outweigh ours. Any one or several of these competitors could announce findings or competitive approaches or products at any time that could diminish or even eliminate competitive advantages we currently hold. The failure to adapt to any of the factors noted above could have a material adverse effect on our business, results of operations and financial condition.

Health-care reform and controls on health-care spending may limit the price charged for any of our products or the amounts that can be sold. In particular, in the United States, the federal government and private insurers have changed the manner in which health-care services are provided and reimbursed. Potential approaches and changes in recent years include controls on health-care spending, the creation of large purchasing groups and revisions to the methodology that Medicare uses for payment of laboratory tests. In the future, the US government may institute further controls and different reimbursement schemes and limits on Medicare and Medicaid spending or reimbursement. These controls, reimbursement schemes and limits might affect the revenues we could collect from sales of any products in the United States. Uncertainties regarding future health-care reform and private market practices could adversely affect our ability to sell any products profitably in the United States. Election of new or different government officials in large market countries could lead to dramatic changes in pricing, regulatory approval legislation and reimbursement, which could have material impacts on product approvals and commercialization.

Commercialization

Successful commercialization of our products will depend on a number of factors, including successful commercialization by StageZero Life Sciences, Inc. as well as our ability to

raise sufficient capital to fund current and future commercialization efforts;
build a commercial team and supporting organizational infrastructure;
establish partnerships and alliances with third parties to secure commercial capabilities that we may not wish to build;
market and distribute our products;

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distinguish our products from others available on the market;
obtain any necessary regulatory approvals for our facilities, products and processes;
gain reimbursement by third-party payers, such as private health insurers, managed-health organizations, and state-sponsored health insurance plans for each jurisdiction in which our products are offered;
educate physicians and change physician behavior to secure clinical adoption of our products;
promote awareness of our products to increase market penetration;
the ability to penetrate non-traditional revenue streams including, but not limited to, self-funded entities and self-insured organizations/associations, and
publish in peer-reviewed journals.

There is no assurance that we will be successful in these areas.

We believe that there may be different applications for products successfully derived from our technologies and that the anticipated market for products under development will continue to expand. We cannot give assurance, however, that these beliefs will prove to be correct. The commercial viability of our products is in the process of being established and we face competition from existing or new products. Physicians, patients, third-party payers or the medical community in general may not accept or use any products that we or our collaborative partners may develop or in-license.

The USPSTF issued an update to the colorectal cancer screening guidelines in 2016. The USPSTF recommends screening for colorectal cancer in adults starting at age 50 years and continuing until age 75 years and advises that the risks and benefits of different screening methods vary. ColonSentry[®] has not been evaluated by the USPSTF as a screening method.

Third-party payers are increasingly attempting to contain health-care costs by limiting both coverage and the level of reimbursement for new health-care products. As a result, there is significant uncertainty as to whether the use of tests that incorporate new technology, such as ColonSentry[®] , will be eligible for coverage by third-party payers or, if eligible for coverage, what the reimbursement rates will be for those products. If we are unable to obtain positive coverage decisions from third-party payers or favorable rates of reimbursement for ColonSentry[®] tests at adequate levels, the commercial success of ColonSentry[®] technology would be constrained, and associated US revenues would be significantly limited.

Regulatory authorizations

The Industry is highly regulated. Ultimate commercial success may depend on our ongoing ability (whether directly or through StageZero Life Sciences Inc. or other vehicles) to obtain the necessary regulatory authorizations for facilities, products and processes. In addition, the process of obtaining regulatory authorization from governmental authorities to commercialize our products varies from country to country and by types of products and testing services. Depending on the circumstances, the process can be costly and time consuming, with ensuing delays in commercialization of a product or service. Regulatory authorization may be granted in part only or may be refused, which would negatively affect sales and profitability.

In the United States, medical devices, including screening tests, are subject to extensive regulation by the US Food and Drug Administration (“FDA”) under the federal Food, Drug, and Cosmetic Act (“FD&C Act”) and its implementing regulations and by other federal and state statutes and regulations. The laws and regulations govern, among other things, medical device development, testing, labeling, storage, premarket clearance or approval, advertising and promotion, and product sales and distribution.

To be commercially distributed in the United States, medical devices must receive from the FDA either clearance of a premarket notification (“510(k)”) or a premarket approval (“PMA”) pursuant to the FD&C Act prior to marketing, unless subject to an exemption. Devices deemed to pose relatively less risk are placed in either Class I or II. Many Class I devices and some Class II devices are exempt from 510(k) premarket clearance. Those devices exempt from FDA premarket review must nonetheless comply with post-market “general controls,” unless the FDA has chosen to exercise “enforcement discretion” and not regulate them. Devices deemed by the FDA to pose the greatest risk are placed in Class III, requiring a PMA. The PMA pathway is costly, lengthy and uncertain. The PMA review process

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typically takes one to three years but can take longer. The FDA’s 510(k) clearance pathway usually takes from three to twelve months, but can last longer, particularly for a novel type of product.

ColonSentry[®] is currently regulated as a laboratory developed test (“LDT”) in the United States under the clinical laboratory improvement amendments (“CLIA”) as well as applicable state laws. Generally, tests that are designed, developed, validated and used within a single laboratory have been considered to be LDTs. The FDA has enforcement discretion with respect to LDTs. On October 3, 2014, the FDA issued two draft guidance documents regarding oversight of LDTs. According to the draft guidance, the FDA intends to begin regulating LDTs using a risk-based, phased-in approach, in combination with continued exercise of enforcement discretion for certain regulatory requirements and certain types of LDTs. According to the draft guidance, all laboratories with LDTs, except for those only performing forensic testing or certain LDTs for transplantation, would need to comply with some basic statutory device requirements, regardless of the risks of the test, including adverse event reporting, corrections and removals reporting and registration and listing or notification. In addition, tests defined as high or moderate risk that are not subject to an exemption would need to be the subject of a PMA or 510(k) that is submitted to the FDA in a phased-in manner. The draft guidance has been the subject of considerable controversy, and it is unclear whether the proposed oversight regulations will be finalized, and, if so, what they will contain. In addition, the US Congress may act to provide further direction to the FDA on the regulation of LDTs. As of this date, it is unclear as to whether the FDA will finalize this guidance.

Even if required regulatory authorizations are obtained for our products, we will be subject to ongoing government regulation. As well, the manufacture, marketing and sale of our products will be subject to strict and ongoing regulation. After a device, including a device exempt from FDA premarket review, is placed on the market in the United States, numerous regulatory requirements apply. These include the quality system regulation (which imposes elaborate testing, control, documentation and other quality assurance procedures), labeling regulations, registration and listing regulations, the medical device reporting regulation (which requires that manufacturers report to the FDA if their device may have caused or contributed to a death or serious injury or malfunctioned in a way that would likely cause or contribute to a death or serious injury if it were to recur), and the reports of corrections and removals regulation (which requires manufacturers to report recalls and field actions to the FDA if initiated to reduce a risk to health posed by the device or to remedy a violation of the FD&C Act). Compliance with such regulations may be expensive and may consume substantial financial and management resources. If we or any marketing collaborators fail to comply with applicable regulatory requirements, we may be subject to sanctions including fines, product recalls or seizures; injunctions; total or partial suspension of production; civil penalties; withdrawal of regulatory authorizations; or criminal prosecution. Any of these sanctions could delay or prevent the promotion, marketing or sale of our products.

Reimbursement

If we, IDL or our marketing partners cannot obtain acceptable prices or adequate reimbursement for our products, our ability to generate revenues is significantly diminished. Our ability to successfully commercialize products will depend significantly on the ability to obtain acceptable prices and the availability of reimbursement to the patient from third-party payers, such as government and private insurance plans. These third-party payers frequently require companies to provide predetermined discounts from list prices, and they are increasingly challenging the prices charged for medical products, including laboratory tests. Our products may not be considered cost-effective, and reimbursement to the patient may not be available or sufficient to allow us to sell our products on a competitive basis. We and our marketing partners may not be able to negotiate favorable reimbursement rates for our products. In addition, the continuing efforts of third-party payers to contain or reduce the costs of health care through various means may limit our commercial opportunity and reduce any associated revenue and profits. In addition, increasing emphasis on managed care will continue to put pressure on the pricing of medical and health-care products. Cost control initiatives could decrease the price that we or any current or potential collaborators could receive for any products and could adversely affect our profitability. In addition, in the United States and many other countries, changes to reimbursement policies and rules may affect the reimbursement of our products. If we fail to obtain acceptable prices or an adequate level of reimbursement for our products, the demand for products and their sales would be adversely affected or there may not be a commercially viable market.

Legal claims and regulatory proceedings

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described in more detail below). These matters may include but are not limited to intellectual property disputes, professional liability, employee-related matters and inquiries, including subpoenas and other civil investigative demands from governmental bodies and Medicare, Medicaid or managed-care payer review of billing practices or requests for comment on allegations of billing irregularities that are brought to their attention through billing audits or third parties. Such inquiries may relate to the Company or to other health-care providers.

The company operates in the clinical laboratory testing industry and therefore may be named in the future in suits brought under the qui tam provisions (“whistleblower provisions”) of the United States False Claims Act and comparable state laws. Suits under these provisions typically allege that an entity has made false statements and/or certifications in connection with claims for payment from federal or state health-care programs. The suits may remain under seal (hence, unknown to the Company) for some time while the government decides whether to intervene on behalf of the qui tam plaintiff. Such claims are an inevitable part of doing business in the health-care field today.

We believe that the Company complies in all material respects with all statutes, regulations and other requirements applicable to its operations. The clinical laboratory testing industry is, however, subject to extensive regulation with respect to sales and billing practices, quality control and privacy of health information. Many of these statutes and regulations have not yet been interpreted by the courts. There can be no assurance that applicable statutes and regulations will not be interpreted or applied by a prosecutorial, regulatory or judicial authority in a manner that would adversely affect the Company. Potential sanctions for violation of these statutes and regulations include significant fines and the loss of various licenses, certificates and authorizations, which are critical to our business. Such actions could also result in damage to our reputation and adversely affect our relationships with third parties.

Compliance with privacy laws

The Company is subject to privacy and security regulations in the United States with respect to the use and disclosure of protected health information. Subject to limited exceptions, the regulations restrict the Company’s ability to use or disclose patient identifiable information without patient consent for purposes other than payment, treatment or healthcare operations. There are significant fines or penalties for noncompliance with these requirements. In addition, any breach of the Company’s security systems that results in personal information being obtained by unauthorized persons could adversely affect the reputation of the Company.

Ability to manage corporate growth, commercial expansion and interruptions of operations

Responding to consumer demands, expansion into other geographical markets and targeted growth in our business has placed and is likely to continue to place significant strains on our administrative and operational resources and our internal systems, procedures and controls. If the Company experiences rapid acceptance of our tests, the need to manage such growth will add to the demands on our management, resources, systems, procedures and controls. There can be no assurance that our administrative infrastructure, systems, procedures and controls will be adequate to support our operations, or that our officers and personnel will be able to manage any significant expansion of operations. If we are unable to manage growth effectively, our business, financial condition and results of operations could be materially adversely affected.

We also depend on the efficient and uninterrupted operation of our single laboratory and its computer and communications software, computer hardware systems and other information technology, all located in Richmond, Virginia, US. Our activities and performance could cease or suffer if the laboratory or these systems were to fail or if we were unable to successfully expand their capacity when necessary.

Research and processes used by us and our partners require the use of sophisticated equipment, which may require a significant amount of time to obtain and install. Although we endeavor to properly maintain our equipment through proper service contracts and an inventory of key spare parts on hand, our activities could suffer if certain equipment or all or a portion of our facilities were to become inoperable for a period of time. This could occur for a variety of reasons, including catastrophic events such as weather-related damage, massive power failures, equipment failures and/or delays in obtaining components or replacements, construction delays or defects and other events that may be outside our control. Such a situation would result in a material adverse effect on our business, reputation, financial condition and results of operation.

Key personnel

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StageZero Life Science, Limited Management’s Discussion & Analysis [Expressed in US dollars, unless otherwise noted]

We rely on certain key personnel for the management and development of our businesses. The experience, knowledge and contributions of our existing management team and our directors are and will continue to be important. As such, the loss of services from or retirement of such key personnel could have a material adverse effect on us. In addition, the Company expects to be seeking additional full-time employees to increase its in-house capability to manage and operate its lab. There is competition for qualified personnel, and there can be no assurance that we will be able to attract and retain such personnel necessary for our businesses.

Foreign exchange rate risk

We operate in Canada and the United States and transact business primarily with US partners and suppliers. The Company’s functional currency is the USD. During the year ended March 31, 2020, a 5% appreciation (depreciation) in the Cdn$ to US dollar foreign exchange rate, with all else being equal, would have affected net income by approximately $110,901 [2019 – $256,000]. The Company’s exposure to foreign currency changes for all other currencies is not material.

Interest rate risk

Interest rate risk is the risk that the fair value or future cash flows of a financial instrument will fluctuate because of changes in market interest rates. The interest rate for the Company’s notes payable to HDL was renegotiated during the first quarter of 2016 and interest began to be accrued at Wall Street Journal Prime Rate plus 4.00% per annum effective April 1, 2016, while the note payable to a shareholder and director as was issued in 2016 is fixed at 2% per annum, the note payable to shareholders and director as was issued in 2018 is fixed at 5% per annum, and the convertible debentures are fixed at 8%. Accordingly, there have been no significant impacts on the Company’s consolidated statements of loss and comprehensive loss from changes in interest rates.

Licensee in the event of bankruptcy of a licensor

Rather than owning all intellectual property on which it relies, the Company licenses certain intellectual property and is substantially dependent on such licenses in order to market and sell such products. In the event that the licensor of any license the Company holds files a petition in bankruptcy, there can be no assurance that the rights under the Company’s licenses will not be curtailed or otherwise affected, even if the company actively pursues enforcement of the license agreement.

If a licensor files for bankruptcy, among other results, the licensed intellectual property may be sold to a third party and such sale may extinguish the Company’s rights under any existing license agreements. This could cause a significant hardship for the Company as the licensee and have a material adverse effect on its business, and therefore, our business.

Material weakness in financial controls

See Management’s Responsibilities for Financial reporting in RESPONSIBILITIES, CONTROLS AND POLICIES above.

Although we are working on remedying the weakness as quickly as possible, we cannot at this time estimate how long it will take, and the initiatives may not prove to be successful in remedying the material weakness. If the remedial measures are insufficient to address these material weaknesses or if further significant deficiencies or material weaknesses in internal control over financial reporting are discovered or occur in the future, management’s ability to evaluate the financial reporting may be adversely affected. This would affect certifications, when required, regarding the effectiveness of our internal controls over financial reporting required by National Instrument 52-109 – Certification of Disclosure in our annual and interim filings. In addition, if we are not able to successfully remedy the material weakness, and if as a result StageZero is unable to produce accurate and timely financial statements or is required to restate its financial results, StageZero’s stock price may be adversely affected.

Litigation

Patent litigation is costly, time consuming and may subject us to liabilities. Our involvement in any patent litigation, interference, opposition or other administrative proceedings will likely cause us to incur substantial expenses. The efforts of our key personnel will be significantly diverted. In addition, an adverse determination in litigation could subject us to significant liabilities.

Securities legislation in Canada has changed to make it easier for shareholders to sue. These changes could lead to frivolous law suits, which could take substantial time, money, resources and attention or could force us to settle such

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StageZero Life Science, Limited Management’s Discussion & Analysis [Expressed in US dollars, unless otherwise noted]

claims rather than seek adequate judicial remedy or dismissal of such claims because of the costs associated with the defense of such claims.

Fluctuation in quarterly results

We expect our quarterly operating results to fluctuate as a result of many factors, including the Company’s ability to generate revenue, changes in the demand for our technology, the introduction of competing technologies, market acceptance of such enhancements or services, delays in the introduction of such enhancements or services, changes in our pricing policies or those of our competitors, the ability of the Company to obtain reimbursement for tests and the time to collect these amounts, the mix of services sold, foreign currency exchange rates and general economic conditions.

Current enterprise value assigned by the market

During the three months ended March 31, 2020, our market capitalization fluctuated between approximately Cdn$6.1 million and Cdn$57.1 million. As at March 31, 2020, the market capitalization had increased by approximately Cdn$4.4 million from the value at December 31, 2019. All stakeholders in our business may be affected by our current market capitalization and may ascribe a higher business risk to the Company as a result. This may have a material effect on our business, results of operations and financial condition.

PRIOR PERIOD ADJUSTMENTS

Intangible Asset

As part of the Purchase Agreement with Cobalt (see note 7(a)), to acquire the remaining 50% of StageZero Life Sciences Inc. (formerly IDL) on March 4, 2016, the Company did not allocate any portion of the purchase price to the fair value of identifiable intangible assets representing reacquired rights to its lead product ColonSentry. The allocation of the consideration paid should have included 50% of the fair value of the reacquired rights in the amount of $1,039,349 in each of the agreement’s two year remaining life. The impact of this adjustment is an increase in deficit of $1,039,349 as the reacquired rights would have been fully amortized by December 31, 2018.

Convertible Debenture and Warrants

On June 8, 2018, the Company entered into the convertible securities funding agreement (CSFA) (see note 7(c)) with Lind for up to Cdn$7.5 million in convertible securities. The First CSFA also included the issuance of 13,531,800 warrants. As part of the allocation of the initial advance of $1,541,800 less a closing fee of Cdn$100,000, the Company incorrectly recorded the fair value of the associated warranty liability as a financing cost rather than as a reduction of the host debt instrument. The allocation of the components of the debenture also resulted in an incorrect allocation to share capital on partial settlements as well as interest expense. A summary for the changes in each financial statement line item as at March 31, 2019 are as follows:

Right of Use Asset and Lease Liability

On January 1, 2019, the Company adopted IFRS 16 and recognized right of use asset and lease liability. The Company incorrectly classified its sublease arrangement with the subtenant as an operating lease, which resulted in overstatement of right-of-use asset, understatement of rent receivable and misstatements in the related subsequent measurement of amortization and interest charges.

Share-based Compensation

The Company has identified an error relating to the vesting of stock options, which resulted in an understatement of share-based compensation for the three months period ended March 31, 2019.

Accrual

The Company has identified a cutoff error relating to certain unpaid invoices, which resulted in an understatement of expenses for the three months period ended March 31, 2019.

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StageZero Life Science, Limited Management’s Discussion & Analysis [Expressed in US dollars, unless otherwise noted]

Condensed Consolidated Interim Statement of Loss and Comprehensive Loss for the period ended March 31, 2019

		Impact of
		convertible		Impact of right	of	Impact of stock
	Prior to	debenture and		use asset and		base		Subsequent to
	restatement	warrants		lease liability		compensation	Accrual	restatement
	$		$		$	$	$	$
Cost of goods sold	284,932		-	(41,327)		-	3,321	246,926
General and administrative	861,275	33,846		5,988		25,260	72,767	931,444
Loss from revaluation of warrants	4,035,678	(963,414)			-	-	-	3,072,264
Change in fair value of conversion	138,771	(135,252)			-	-	-	3,519
liabilities
Finance costs	710,310	(511,071)		29,838		-	-	229,077
Total loss and comprehensive loss	(5,977,785)	1,643,583		5,501		(25,260)	(76,088)	(4,530,049)
Basic and diluted loss per common	(0.05)							(0.03)
share

Condensed Consolidated Interim Statement of Changes in Shareholders’ Deficiency for the period ended March 31, 2019

		Impact of	Impact of
		convertible	right of use	Impact of
	Prior to	debenture and	asset and	stock base	Impact of	Impact of	Subsequent to
	restatement	warrants	lease liability	compensation	goodwill	accrual	restatement
	$	$	$	$	$	$	$
Share capital	77,443,816	(408,086)	-	-	-	-	77,035,730
Contributed surplus	10,468,927	-	-	25,260	-	-	10,494,187
Accumulated other	1,304,968	-	-	-	-	-	1,304,968
comprehensive income
Deficit	(99,580,787)	2,194,380	302,758	(25,260)	(1,039,349)	(76,084)	(98,224,342)
Total shareholders’ deficiency	(10,363,076)	1,786,294	302,758	-	(1,039,349)	(76,084)	(9,389,457)

Condensed Consolidated Interim Statement of Cash Flows for the period ended March 31, 2019

		Impact of	Impact of right
		convertible	of use asset
	Prior to	debenture and	and lease	Subsequent to
	restatement	warrants	liability	restatement
	$	$	$
Cash used in operating	(946,692)	42,700	-	(903,992)
activities
Cash used in financing	1,064,489	(56,532)	-	1,007,957
activities
Cash used in investing	(13,832)	-	13,832	-
activities

AMENDMENT

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StageZero Life Science, Limited Management’s Discussion & Analysis [Expressed in US dollars, unless otherwise noted]

Subsequent to the issuance of the Company’s unaudited, condensed consolidated interim financial statements for the three months periods ended March 31, 2020 and 2019, management had determined that these financial statements needed to be amended to correct for various content and disclosure deficiency. A description of each amendment and a summary of changes in each financial statement line item as at March 31, 2020 are as follows.

Convertible Debenture and Warrants

The Company has determined that an adjustment is required to the fair value of certain convertible debentures and warrant liabilities as at March 31, 2020 based on its additional review of its valuation process. Additionally, the Company subsequently designated certain convertible debenture at fair value through profit or loss in its entirety, instead of bifurcating the embedded conversion feature, which resulted in reclassification adjustments on the balance sheet as at March 31, 2020.

Rent Receivable

The Company determined that a portion of the rent receivable should be classified as current asset based on its review of the timing of rent payment.

Inventory

The Company identified certain inventory relating to sales made during the three months period ended March 31, 2020 that were not recognized as cost of goods sold. Adjustment was made to recognize the appropriate cost of goods sold.

Reclassification

The Company identified certain expenses that were incorrectly recorded against revenue. Adjustments were made to reclassify the expenses to appropriate financial statement line items.

Condensed Consolidated Interim Statement of Financial Position for the period ended March 31, 2020

		Impact of
		convertible
	Prior to	debenture and	Impact of rent	Impact of	Impact of	Subsequent to
	amendment	warrants	receivable	inventory	reclassification	amendment
	$	$	$	$	$	$
Assets
Current
Cash	121,513	-	-	-	-	121,513
Other receivables, net	42,112	-	-	-	-	42,112
Inventory	121,725	-	-	(27,035)	-	94,690
Short-term portion of	112,112	-	-	-	-	112,112
prepaid expenses and
deposits
Rent receivable	-	-	154,558	-	-	154,558
Totalcurrent assets	397,462	-	154,558	(27,035)	-	524,985
Non-current assets
Property, plant and	840,971	-	-	-	-	840,971
equipment, net
Right of use property,	135,367	-	-	-	-	135,367
net

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StageZero Life Science, Limited Management’s Discussion & Analysis [Expressed in US dollars, unless otherwise noted]

Long-term portion rent	636,515	-	(157,553)	-	-	478,962
receivable
Long-term portion of	25,000	-	-	-	-	25,000
prepaid expenses
deposits
Total non-current	1,637,853	-	(157,553)	-	-	1,480,300
assets
Total asset	2,035,315	-	(2,995)	(27,035)	-	2,005,285
Liabilities and
shareholders’
deficiency
Current
Trade and other	2,649,909	-	-	-	-	2,649,909
payables
Short-term portion of	154,289	-	-	-	-	154,289
right of use liability
Fair value of convertible	-	942,370	-	-	-	942,370
debenture
Conversion liability	360,090	(345,384)	-	-	-	14,706
Short-term portion of	1,373,928	(499,213)	-	-	-	874,715
notespayable
Totalcurrent liabilities	4,538,216	97,773	-	-	-	4,635,989
Non-current liabilities
Long-term portion of	2,654,217	(436,748)	-	-	-	2,217,469
warrant liability
Long-term portion of	563,923	-	-	-	-	563,923
right of use liability
Long-term portion of	560,072	-	-	-	-	560,072
notes payable
Long-term liabilities	67,340	-	-	-	-	67,340
Total non-current	3,845,552	(436,748)	-	-	-	3,408,804
liabilities
Total liabilities	8,383,768	(338,975)	-	-	-	8,044,793
Shareholders’
deficiency
Share capital	80,989,127	-	-	-	-	80,989,127
Contributed surplus	11,332,810	46,079	-	-	-	11,378,889
Accumulated other	1,304,968	-	-	-	-	1,304,968
comprehensive
income
Deficit	(99,975,358)	292,896	(2,995)	(27,035)	-	(99,712,492)
Total shareholders’	(6,348,453)	338,975	(2,995)	(27,035)	-	(6,039,508)
deficiency

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StageZero Life Science, Limited Management’s Discussion & Analysis [Expressed in US dollars, unless otherwise noted]

Total liabilities and	2,035,315	-	(2,995)	(27,035)	-	2,005,285
shareholders’
deficiency

Condensed Consolidated Interim Statement of Loss and Comprehensive Loss for the period ended March 31, 2020

	Impact	of
	convertible
	Prior to debenture and		Impact	of rent	Impact	of	Impact	of	Subsequent to
	amendment warrants		receivable		inventory		reclassification		amendment
	$	$		$		$		$	$
Revenue	11,368		-		-		-	20,000	31,368
Cost of goods sold	177,673		-		-		27,035	15,285	219,993
General and	663,561	(85,624)		2,995			-	4,715	585,648
administrative
	841,234	(85,624)		2,995			27,035	20,001	805,641
Loss before the	(829,866)	85,624		(2,995)		(27,035)		-	(774,272)
undernoted
Loss from revaluations of	1,688,831	(394,519)			-		-	-	1,294,312
warrants
Change in fair value of	(69,134)	69,134			-		-	-	-
conversion liabilities
Change in fair value of	-	118,113			-		-	-	118,113
conversion debentures
Finance costs	249,698		-		-		-	-	249,698
	1,869,395	(207,272)			-		-	-	1,662,123

Total loss and	(2,699,261)	292,896		(2,995)		(27,035)		-	(2,436,395)
comprehensive loss for
theperiod

Condensed Consolidated Interim Statement of Changes in Shareholders’ Deficiency for the period ended March 31, 2020

	Convertible	Convertible
	Prior to debenture and				Impact of		Subsequent to
	amendment warrants		Rent receivable Inventory		reclassification		amendment
	$	$	$	$	$		$
Share capital	80,989,127	-	-		-	-	80,989,127
Contributed surplus	11,332,810	46,079	-		-	-	11,378,889
Accumulated other	1,304,968	-	-		-	-	1,304,968
comprehensive income
Deficit	(99,975,358)	292,896	(2,995)	(27,035)		-	(99,712,492)
	(6,348,453)	338,975	(2,995)	(27,035)		-	(6,039,508)

Condensed Consolidated Interim Statement of Cash Flows for the period ended March 31, 2020

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StageZero Life Science, Limited Management’s Discussion & Analysis [Expressed in US dollars, unless otherwise noted]

		Convertible	Convertible	Convertible
	Prior to	debenture		and					Subsequent to
	amendment	warrants		Rent receivable Inventory			Reclassification		amendment
	$		$	$	$		$		$
Cash used in operating	(1,080,288)		(158,695)		-	-		-	(1,238,983)
activities
Cash used in financing	1,086,310		210,103		(1,294)	-		-	1,295,119
activities
Cash used in investing	(7,041)			-	1,294	-		-	(5,747)
activities
	(1,019)			51,408	-	-		-	50,389

OTHER INFORMATION

Additional information relating to StageZero Life Sciences can be found on SEDAR at www.sedar.com or on our website at www.stagezerolifesciences.com.

MD & A

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StageZero Life Sciences Ltd. — Interim / Quarterly Report 2020

44586_rns_2020-06-18_6cdceeec-5db1-4606-a182-c0e0545e0fff.pdf

NOTICE TO READER

STAGEZERO LIFE SCIENCES, LIMITED MANAGEMENT’S DISCUSSION AND ANALYSIS For the three -month periods ended March 31, 2020 AND 2019 [Expressed in US dollars unless otherwise noted]

CAUTION REGARDING FORWARD-LOOKING STATEMENTS

GOING CONCERN UNCERTAINTY

BUSINESS

Covid-19

COMMERCIAL ACTIVITIES

Flat Fee Model

Lab Operations

TESTS OFFERED

ColonSentry[®]

Early CDT[®] -Lung

Prostate Health Index (“PHI”)

BreastSentry ™

COVID-19 Tests

FINANCING ACTIVITIES AND CAPITAL STRUCTURE

First Tranche of a Unit Private Placement

Second Tranche of a Unit Private Placement

Unit Private Placement in July 2019

Convertible Security Funding Agreement

Notes payable to shareholders and director

Continuing Financing Initiatives

OUTLOOK

SIGNIFICANT ACCOUNTING POLICIES

Significant accounting estimates and assumptions

Principles of Consolidation

Share-based compensation

Fair value of warrants

Fair value of structured notes, convertible debt and conversion liabilities

Impairment analysis

New standards adopted

IFRS 16, Leases (“IFRS 16”)

FINANCIAL INSTRUMENTS AND FINANCIAL RISK-MANAGEMENT OBJECTIVES AND POLICIES

Financial instruments

Liquidity risk

Credit risk

Market risk

Foreign exchange rate risk

Interest rate risk

COVID-19 Pandemic in 2020

SELECTED FINANCIAL INFORMATION

Consolidated statements of financial position

Results of operations for the periods ended March 31, 2020 and 2019

Consolidated statements of loss and comprehensive loss

EXPENSES BY NATURE

Finance costs

USE OF PROCEEDS

Variance in Use of Proceeds

LIQUIDITY AND CAPITAL RESOURCES Summary of cash flows

Operating activities

Financing activities [accounted through shareholders’ deficiency]

[i] 2018 Unit Private placements

[ii] 2019 Unit Private placement in March and April

[iii] 2019 Unit Private placements in July

Stock options

Financing activities [accounted through current and long-term liabilities] Notes payable

[a] Note payable to HDL

[b] Note payable to shareholders and director

[c] Convertible debentures

[i] 2016 debenture

[ii] 2018 debenture

Convertible Debenture Private Placement in February 2020

Warrants

Warrants issued in First Tranche of Unit Private Placement on March 25, 2019

Warrants issued to Lind on January 9, 2019

Warrants issued to Lind on April 22, 2019

Warrants issued for convertible note payable extinguishment on April 23, 2019

Warrants issued for Unit Private Placement on January 16, 2020

Warrants issued to Hampton Security Company on January 16, 2020

Warrants issued to Hampton Security Company on February 19, 2020

Adequacy of financial resources

OFF-BALANCE SHEET ARRANGEMENTS

CONTRACTUAL OBLIGATIONS

RELATED-PARTY TRANSACTIONS

SELECTED QUARTERLY FINANCIAL DATA

RESPONSIBILITIES, CONTROLS AND POLICIES Management’s responsibility for financial reporting

Evaluation of disclosure controls and procedures

StageZero Life Sciences Ltd. Interim / Quarterly Report 2020