StageZero Life Sciences Ltd. — Interim / Quarterly Report 2022

Nov 15, 2022

StageZero Life Sciences Ltd.

Nine-month periods ended September 30, 2022 and 2021

Unaudited, condensed consolidated interim financial statements and associated notes

[Expressed in US dollars, unless otherwise noted]

1

StageZero Life Sciences Ltd.

Unaudited Condensed Consolidated Interim Financial Statements

Nine months period ended September 30, 2022 and 2021 [Expressed in US dollars, unless otherwise noted]

Consolidated Financial Statements

Consolidated Statements of Financial Position	3
Consolidated Statements of Loss and Comprehensive Loss	4
Consolidated Statements of Changes in Shareholders’ Equity (Deficiency)	5
Consolidated Statements of Cash Flows	6
Notes to the Consolidated Financial Statements	7-25

2

STAGEZERO LIFE SCIENCES LTD. CONDENSED CONSOLIDATED INTERIM STATEMENTS OF FINANCIAL POSITION [EXPRESSED IN US DOLLARS]

	Notes	September 30, 2022	December 31, 2021
		$	$
ASSETS
Current
Cash		33,252	1,724,724
Trade and other receivables	12	42,350	126,897
Inventories	4	238,390	408,801
Short-termportion ofprepaid expenses and deposits		142,191	124,759
Total current assets		456,183	2,385,181
Non-current assets
Property, plant and equipment, net		346,254	526,060
Goodwill		7,363,919	7,363,919
Right of use assets		213,945	345,829
Long-termportion ofprepaid expenses and deposits	16	25,000	25,000
Total non-current assets		7,949,118	8,260,808
Total assets		8,405,301	10,645,989
LIABILITIES AND SHAREHOLDERS’ EQUITY (DEFICIENCY)
Current
Trade and other payables	5	4,515,626	2,073,098
Deferred revenues	15	82,293	195,231
Short-term portion of lease liabilities	16	253,004	221,620
Contingent consideration liability	3	-	1,832,805
Fair value of convertible debenture	7	137,267	-
Short-term portion of warrant liability	7	6,493	63,525
Short-termportion of notespayable	6	724,510	358,389
Total current liabilities		5,719,193	4,744,668
Non-current liabilities
Long-term portion of warrant liability	7	580,619	2,296,001
Long-term loan	6[c]	44,544	44,544
Long-term portion of lease liabilities	16	-	193,756
Long-term portion of notes payable	6	576,221	537,915
Long-term liabilities		67,340	67,340
Total non-current liabilities		1,267,724	3,139,556
Total liabilities		6,987,917	7,884,224
Shareholders’ equity (deficiency)
Share capital	8[a]	101,074,110	100,520,978
Contributed surplus	8[d]	12,579,095	12,559,288
Accumulated other comprehensive income		1,305,457	1,305,457
Deficit		(113,514,278)	(111,623,958)
Total shareholders’ deficiency		1,417,384	2,761,765
Total liabilities and shareholders’ deficiency		8,405,301	10,645,989
Commitments and contingencies	16
Subsequent event	18

See accompanying notes to the consolidated financial statements.

Approved by the Company’s board of directors and authorized for issue on November 14, 2022: (signed) James R. Howard-Tripp, Director (signed) Garth MacRae, Director

3

STAGEZERO LIFE SCIENCES LTD. CONDENSED CONSOLIDATED INTERIM STATEMENTS OF LOSS AND COMPREHENSIVE LOSS [EXPRESSED IN US DOLLARS]

Note s	Three months periods ended September 30 2022 2021	Nine-month period ended
		September 30 2022 2021
REVENUES 15 Cost of revenue 9	799,404 684,324	3,118,595 3,565,872 3,106,635 2,350,342
	661,081 807,347
Grossprofit	138,323 (123,023)	11,960 1,215,530
EXPENSES Research and development 10 Sales and marketing 10 General and administrative 9
	99,404 227,755	420,070 299,237
	51,106 228,262 1,378,022 1,656,761	632,748 1,050,320
		4,993,414 4,664,690
Total Expenses	1,528,532 2,112,778	6,046,232 6,014,247
Loss from operations	(1,390,209) (2,235,801)	(6,034,272) (4,798,717)
Loss (gain) from fair valuation of warrants 7 Loss/(gain) from fair valuation of contingent consideration 3 Change in fair value of convertible debenture 6[b] Finance and transaction costs 14	(1,126,231) (791,799) (288,237) (157,091) 12 (34,283) 69,343 969,052	(2,444,594) (1,923,421)
		(1,832,805) (157,091)
		12 1,118,074
		160,435 1,352,226
	(1,345,113) (14,121)	(4,116,952) 389,788
Total loss and comprehensive loss for theyear
	(45,096) (2,221,680)	(1,917,320) (5,188,505)
Basic and diluted loss per common share 8[c]	(0.00) (0.02)	(0.02) (0.06)

See accompanying notes to the consolidated financial statements.

4

STAGEZERO LIFE SCIENCES LTD. CONDENSED CONSOLIDATED INTERIM STATEMENTS OF CHANGES IN SHAREHOLDERS’ EQUITY (DEFICIENCY) [EXPRESSED IN US DOLLARS]

	Share capital Contributed surplus Accumulated other comprehensive income Deficit Total
	Shares Amount # $ $ $ $ $
	[note 8[b]] [note 8]
Balance at January 1, 2022	90,733,283 100,520,978 12,559,288 1,305,457 (111,623,958) 2,761,765
Net loss for the six months period	- - - - (1,917,320) (1,917,320)
Share-based compensation	- - (91,424) - - (91,424)
Issuance of broker warrants	111,230 111,230
Issuance of common shares with private placement	10,800,000 665,243 - - - 665,243
Share issuance costs	(112,111) (112,111)
Balance at September 30, 2022	101,533,283 101,074,110 12,579,095 1,305,457 (113,709,436) 1,417,384
	Share capital Contributed surplus Accumulated other comprehensive income Deficit Total
	Shares Amount # $ $ $ $ $
	[note 8[b]] [note 8]
Balance at January 1, 2021	60,716,595 89,332,865 12,268,731 1,304,968 (104,140,040) (1,233,476)
Net loss for the period	- - - - (5,188,505) (5,188,505)
Share-based compensation	- - 335,990 - - 335,990
Issuance of common shares with warrant exercise	2,181,617 2,337,918 - - - 2,337,918
Issuance of common shares with option exercise	258,332 243,052 (46,610) - - 196,442
Issuance of common shares with acquisition	12,500,000 4,992,751 - - - 4,992,751
Conversion of convertible note payable	3,201,737 2,131,510 - - - 2,131,510
Balance at September 30, 2021	78,858,281 99,038,096 12,558,111 1,304,968 (109,328,545) 3,572,631

See accompanying notes to the consolidated financial statements.

5

STAGEZERO LIFE SCIENCES LTD. CONDENSED CONSOLIDATED INTERIM STATEMENTS OF CASH FLOWS [EXPRESSED IN US DOLLARS]

Notes	Three-month period ended September 30 Nine-month period ended September 30 2022 2021 2022 2021
OPERATING ACTIVITIES Net profit (loss) for the period Non-cash adjustments Share-based compensation 8[d] Depreciation 9 Change in right of use property Change in fair value of convertible debenture Non-cash interest expense Non-cash change in interest on lease liability Foreign exchange (Gain)/Loss on revaluation of contingent consideration (Gain)/loss on revaluation of warrants
	(45,096) (2,221,679) (1,917,320) (5,188,505)
	- 216,507 - 289,413
	169,444 213,325 311,690 325,791
	49,456 57,230 131,884 148,732
	12 (34,283) 12 1,118,074
	58,930 27,162 123,208 96,724
	10,486 17,889 37,300 58,535
	158,391 (212,593) 149,906 (204,819)
	(288,237) (157,091) (1,832,805) (157,091)
	(1,126,231) (791,799) (2,444,594) (1,923,421)
Changes in non-cash working capital balances related to operations Trade and other receivables Contract Liability Prepaid expenses and deposits Inventory Trade and other payables Rent receivable	(1,012,845) (2,885,332) (5,440,719) (5,436,567)
	20,465 (12,117) 84,547 (118,370)
	(98,247) 169,898 (112,938) (54,949)
	68,172 75,412 (17,432) (64,955)
	3,307 (188,987) 170,411 (366,325)
	948,079 287,305 2,442,528 (154,321)
	- - 96,113
Cash used in operating activities	(71,069) (2,553,821) (2,873,603) (6,099,374)
FINANCING ACTIVITIES Short-term loan proceeds Payment of principal to Health Diagnostic Laboratories Inc. 6[a] Repayment of lease liability Proceeds from issuance of units Proceeds from stock option exercise Proceeds from warrant exercise Payment of note payable and interest Cash share issue costs
	181,346 197,376 16,001
	- (30,000) (40,000) (90,000)
	(67,651) (65,683) (199,672) (193,853)
	- 1,336,544 -
	- - 196,442
	- - 1,289,271
	- (2,477) - (23,373)
	- (112,117) -
Cash provided by financing activities	113,695 (98,160) 1,182,131 1,194,488
INVESTING ACTIVITIES Purchase of property, plant and equipment Proceed from disposal of property, plant and equipment	- - - (142,633) - - - 42,076
Cash used in investing activities	- - - (100,557)
Net decrease in cash during the period Cash, beginning of period	42,626 (2,651,981) (1,691,472) (5,005,443)
	(9,374) 4,243,725 1,724,724 6,597,187
Cash, end of period	33,252 1,591,743 33,252 1,591,743

See accompanying notes to the consolidated financial statements.

6

STAGEZERO LIFE SCIENCES LTD. NOTES TO CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS FOR THE NINE-MONTH PERIOD ENDED SEPTEMBER 30, 2022 AND 2021 [EXPRESSED IN US DOLLARS]

1. NATURE OF OPERATIONS AND GOING CONCERN

StageZero Life Sciences, Limited (“StageZero Life Sciences”, the “Company”, “we”, “us”, “our”) is a vertically integrated healthcare company at the nexus of three of the fastest growing and most exciting sectors of healthcare today; Early Cancer Detection, Liquid Biopsy, and Global Telehealth. The Company is focused on minimizing the risk of cancer and other chronic diseases through early detection and intervention. The company continues to develop and commercialize proprietary molecular diagnostic tests for early detection of diseases and personalized health management, with a primary focus on cancer-related indications. The Company has developed a proprietary platform technology, the Sentinel Principle®, to identify novel biomarkers from whole blood. The Company’s lead product, Aristotle®, is a blood-based molecular diagnostic assessment that can detect an individual’s current risk for potentially having a variety of cancers.

During the nine-months September 30, 2022 and 2021, the Company offered various COVID-19 tests, such as polymerase chain reaction (“PCR”) tests and antibody tests. PCR tests can detect COVID-19 nucleic acid from a patient’s nasopharyngeal swab or saliva specimen and are used to diagnose an active COVID-19 infection. Antibody tests detect whether the patient has developed COVID-19 antibodies, indicating that they have had the virus in the past. In addition, the Company acquired the CareOncology businesses of Health Clinics Ltd, and Health Clinics USA Corp (“CareOncology”) in the third quarter of 2021 (Note 4). CareOncology is a virtual clinic that operates on a global telehealth platform and provides clinical consultations, interventions and monitoring services for patients diagnosed with cancer through the CareOncology Protocol (TREAT Program). CareOncology is also developing the AVRT program, which evaluates a patient’s potential risk of developing cancer and a variety of other chronic illnesses and provides monitoring/interventions that are intended to target the inflammatory and metabolic pathways that underly the progression of many diseases.

The Company is incorporated under the laws of the Province of Ontario and is domiciled in Ontario, Canada. Its shares are publicly traded under the stock symbol SZLS on the Toronto Stock Exchange. The Company’s registered office is located at Unit 30, 70 East Beaver Creek Road, Richmond Hill, Ontario, L4B 3B2.

StageZero Life Sciences Ltd. has wholly owned subsidiary companies, StageZero Holdings Inc., which owns 100% of StageZero Life Sciences Inc. (“Inc.”), Care Oncology, Inc, and SZ Physician Holdings, Inc, all in the United States, and Clinics Operations, Ltd. (also referred to as CareOncology UK).

These condensed consolidated interim 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. The Company reported a consolidated net loss of $0.05 million for the three months ended September 30, 2022 [September 2021 – loss of 2.2 million]. a loss of $1.9 million for the ninemonth period ended September 30, 2022 [2021 – loss of $5.2 million] As at September 30, 2022, the Company had working capital deficit of $5.3 million [December 31, 2021, working capital deficit of $2.4 million] and a deficit of $113.5 million [December 31, 2021 – $112 million].

These circumstances create material uncertainties that cast significant doubt as to the ability of the Company to continue as a going concern and, hence, as to 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 commercial and scientific initiatives; but there is no assurance these initiatives will be successful, timely or sufficient.

2. BASIS OF PRESENTATION

These consolidated financial statements have been prepared on a historical cost basis, except for the revaluation of certain financial instruments. The Company’s principal accounting policies outlined below have been applied consistently to all periods presented in these condensed consolidated interim financial statements.

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STAGEZERO LIFE SCIENCES LTD. NOTES TO CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS FOR THE NINE-MONTH PERIOD ENDED SEPTEMBER 30, 2022 AND 2021 [EXPRESSED IN US DOLLARS]

Statement of compliance

These condensed consolidated interim financial statements have been prepared using accounting policies consistent with International Financial Reporting Standards (“IFRS”), and in accordance with International Accounting Standards (“IAS”) 34, Interim Financial Reporting, as issued by the International Accounting Standards Board (“IASB”). These condensed consolidated interim financial statements should be read in conjunction with the audited consolidated financial statements for the year ended December 31, 2021, which have been prepared in accordance with IFRS as issued by the IASB. The accounting policies followed in these condensed consolidated interim financial statements are consistent with those applied in the Company’s consolidated financial statements for the year ended December 31, 2021. These condensed consolidated interim financial statements were approved and authorized for publication by the Board of Directors on November 14, 2022.

COVID 19

The Company’s operations could be significantly adversely affected by the effects of a widespread global outbreak of a contagious disease, including the recent outbreak of respiratory illness caused by COVID-19. The Company cannot accurately predict the impact COVID-19 will have on its operations and the ability of others to meet their obligations with the Company, including uncertainties relating to the ultimate geographic spread of the virus, the severity of the disease, the duration of the outbreak, and the length of travel and quarantine restrictions imposed by governments of affected countries. In addition, a significant outbreak of contagious diseases in the human population could result in a widespread health crisis that could adversely affect the economies and financial markets of many countries, resulting in an economic downturn that could further affect the Company’s operations and ability to finance its operations.

Accounting standards, amendments, and interpretations not yet adopted or effective

As discussed in the notes to the Company’s audited financial statements for the year ended December 31, 2021 certain new standards, amendments, and interpretations have been issued which are not yet effective for the Company’s consolidated financial statements for the periods presented. The Company has not early adopted any standards, amendments, or interpretations, which are issued but not yet effective.

3. ACQUISITION OF CARE ONCOLOGY BUSINESS

On June 30, 2022, the Earn Out Consideration was remeasured using a Monte Carlo simulation due to the uncertain nature of the potential future revenue scenarios, using the following inputs: Equity volatility of 125.5%; asset volatility of 114.5%; risk-free rates of 1.63% and 1.35%, for Canada and the U.S., respectively; a correlation factor of 59.8% between revenue and share price; and an overall discount rate of 15.8%. The result of the valuation model was to value the Earn Out Consideration at $288,237. As a result of the remeasurement a gain of $1,544,568 was recorded in the consolidated statements of loss and comprehensive loss.

4. INVENTORIES

Inventories comprise of lab supplies and test kits.

	At September 30, 2022	At December 31, 2021
	$	$
Inventories	238,390	488,801
Impairmentprovision	-	(80,000)
Total Inventories	238,390	408,801

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STAGEZERO LIFE SCIENCES LTD. NOTES TO CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS FOR THE NINE-MONTH PERIOD ENDED SEPTEMBER 30, 2022 AND 2021 [EXPRESSED IN US DOLLARS]

5. TRADE AND OTHER PAYABLES

The Company’s exposure to liquidity and currency risks related to trade and other payables is presented in note 12.

At September 30, 2022	At September 30, 2022	At December 31, 2021
$		$
Trade payables	2,226,062	734,654
Accrued directors' compensation	525,000	385,000
Accrued salary related expenses	1,143,135	260,103
Other accrued liabilities	621,429	693,341
Total trade payables and accrued liabilities	4,515,626	2,073,098

6. NOTES PAYABLE AND CONVERTIBLE DEBENTURES

Notes payable consists of:

		At September 30, 2022	At December 31, 2021
		$	$
Note payable to HDL [a]		696,221	657,912
Notepayable to shareholders and a director [b]		604,510	238,389
Total		1,300,731	896,301
Less: currentportion of notespayable		(724,510)	(358,389)
Long-term portion of notes payable		576,221	537,915
Convertible debenture held at fair value consists of:
At September 30, 2022			At December 31, 2021
$			$
Convertible debenture [d]		137,267	-
Long-term loan consists of:
		At September 30, 2022	At December 31, 2021
		$	$
CEBA Loan [c]		44,544	44,544

[a] Note payable to HDL

In May 2015, StageZero Holdings issued a note payable in the amount of $1.0 million to Health Diagnostic Laboratories (HDL) to purchase additional shares of StageZero Life Sciences Inc. increasing its share from 33⅓% to 50% and in March 2016, StageZero Holdings assumed an additional $1.0 million note payable to HDL to own 100% of StageZero Life Sciences Inc. Effective March 1, 2017, the Company agreed to pay principal of $2,095,843.

On March 1, 2017 the Company and HDL’s representative reached an agreement pursuant to which StageZero Holdings would pay the principal amount of $2,095,843, to be paid in a $25,000 upfront payment and monthly

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STAGEZERO LIFE SCIENCES LTD. NOTES TO CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS FOR THE NINE-MONTH PERIOD ENDED SEPTEMBER 30, 2022 AND 2021 [EXPRESSED IN US DOLLARS]

payments of $15,000 beginning March 1, 2017 to July 1, 2017, followed by monthly payments of $10,000 until the outstanding debt has been paid in full.

The note payable was initially recognized at fair value, and subsequently measured at amortized cost using the effective interest rate method. The initial fair values were calculated with a valuation technique that uses parameters obtained from observable markets, including credit spread and interest rate volatility. The prevailing interest rate used in the valuations was 16% at initial recognition. The loan is unsecured, and the balance of the note is expected to be repaid in full by 2034. During nine months ended September 30, 2022, the Company paid $40,000 [2021 - $90,000]

[b] Notes payable to shareholders and director

At September 30, 2022, the convertible notes payable balance is $544,389 including accrued interest payable, which approximates the fair value. The notes are secured by a security interest in the Company’s patents and trademarks.

[c] Long-term debt

During 2020 and the second quarter of 2021, the Company received a Cdn$60,000 Canada Emergency Business Account (“CEBA”) loan from the Government of Canada via its commercial bank. The loan is interest free until December 31, 2023, with a maturity date of December 31, 2025. If Cdn$40,000 of the loan has been repaid by December 31, 2023, the remaining balance (maximum Cdn$20,000) will be forgiven. Should the loan not be repaid by December 31, 2023, interest at 5% will be charged per annum commencing on January 1, 2024 until maturity on December 31, 2025. The loan is unsecured.

[d] Convertible debenture

Convertible Debenture Private Placement in August 2022

The Company closed a private placement of convertible debentures (each a “Debenture”) for gross proceeds of Cdn$177,000 on August, 2022 (the “Offering”). Each Unit is composed of (i) a $1,000 unsecured convertible debenture (“Debenture”), bearing interest at a rate of 8% per annum, having a term of eighteen (18) months from the date of issuance and is convertible into common shares (“Common Shares”) of the Company, at a conversion price of $0.11 per Common Share, and (ii) 9090 Common Share purchase warrants (each a “Warrant”). Each Warrant is exercisable into one (1) Common Share of the Company at an exercise price of CAD$0.15 per Common Share for a period of eighteen (18) months from the date of issuance of the Units. 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
	$
At January1, 2022	-
Issuance during the period Revaluation during the period Less: Conversion	137,255 12 -
At September 30, 2022	137,267
7. WARRANT LIABILITY	# $
At January1, 2021	24,103,444 3,356,484
Warrant exercise during the year (2,181,617) (740,169) Warrant expired during the year (2,216,805) (216,287) Warrant issued due to the conversion for convertible debentures 1,600,903 1,023,159 Warrant issued due to private placement 10,125,002 1,295,175

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STAGEZERO LIFE SCIENCES LTD. NOTES TO CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS FOR THE NINE-MONTH PERIOD ENDED SEPTEMBER 30, 2022 AND 2021 [EXPRESSED IN US DOLLARS]

Foreign exchange adjustment during the year		(3,455)
Fair value changes		(2,355,382)
At December 31, 2021	31,430,927	2,359,526
Warrant issued due to private placement*	12,408,930	737,586
Warrant expired during the year	(214,203)	-
Foreign exchange adjustment during the year		(90,360)
Fair value changes		($2,419,640)
At September 30, 2022	43,625,654	587,112
Short-term portion of warrant liability		6,493
Long-termportion of warrant liability		580,619

Above warrant issued 2021 due to private placement included 750,000 brokers warrants that was accounted as sharebased compensation. Included in warrants exercised during the year, 613,500 represented brokers warrants. Above warrant issued 2022 due to private placement included 800,000 brokers warrants that was accounted as sharebased compensation.

The following warrants were issued and outstanding at September 30, 2022:

	Warrants	Exercisable into common shares	Exercise Price	Expiry Date
	#	#	Cdn$
Date issued:
25-Mar-19	722,606	722,606	0.72	31-Jan-23
23-Apr-19	319,094	319,094	1.528	31-Jan-23
23-Apr-19	220,797	220,797	0.96	31-Jan-23
23-Apr-19	390,626	390,626	0.8	31-Jan-23
10-Jul-19	1,448,596	1,448,596	1.48	31-Jan-23
24-Jul-19	343,405	343,405	1.48	31-Jan-23
24-Jul-19	223,469	223,469	1.48	24-Jul-22
16-Jan-20	765,103	765,103	0.48	16-Jan-23
16-Jan-20	25,000	25,000	0.48	16-Jan-23
19-Feb-20	202,343	202,343	0.56	31-Jan-23
29-Jun-20	951,120	951,120	0.72	29-Jun-23
29-Jun-20	8,234,306	8,234,306	0.72	29-Jun-23
29-Jun-20	8,125	8,125	0.68	29-Jun-23
29-Jun-20	297,645	297,645	0.68	29-Jun-23
8-Jul-20	31,250	31,250	0.56	31-Jan-23
9-Jul-20	78,125	78,125	0.56	31-Jan-23
15-Oct-20	50,782	50,782	0.56	31-Jan-23
15-Oct-20	54,688	54,688	0.56	31-Jan-23
27-Oct-20	15,625	15,625	0.56	31-Jan-23
27-Nov-20	162,728	162,728	1.1	27-Nov-23
4-Dec-20	4,621,856	4,621,856	1.1	4-Dec-23
4-Dec-20	323,530	323,530	1.1	4-Dec-23

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STAGEZERO LIFE SCIENCES LTD. NOTES TO CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS FOR THE NINE-MONTH PERIOD ENDED SEPTEMBER 30, 2022 AND 2021 [EXPRESSED IN US DOLLARS]

25-Jan-21	62,500	62,500	0.56	31-Jan-23
28-Jan-21	273,438	273,438	0.56	31-Jan-23
29-Jan-21	490,625	490,625	0.56	31-Jan-23
29-Jan-21	343,750	343,750	0.56	31-Jan-23
25-Feb-21	23,438	23,438	0.56	31-Jan-23
1-Mar-21	9,375	9,375	0.56	31-Jan-23
9-Mar-21	234,375	234,375	0.56	31-Jan-23
25-Mar-21	31,250	31,250	0.56	31-Jan-23
18-Aug-21	62,500	62,500	0.56	31-Jan-23
19-Aug-21	69,653	69,653	0.56	31-Jan-23
26-Nov-21	750,000	750,000	0.56	26-Nov-25
26-Nov-21	9,375,002	9,375,002	0.56	26-Nov-25
2-Mar-22	800,000	800,000	0.2206	2-Mar-26
2-Mar-22	10,000,000	10,000,000	0.2206	2-Mar-26
18-Aug-22	1,608,930	1,608,930	0.15	18-Feb-24
	43,625,654	43,625,654

The weighted average exercise price for total outstanding warrants as at September 30, 2022 is Cdn$ 0.61. The exchange rate of USD to Cdn$ was 1.37 at September 30, 2022.

[a] Warrants issued 2020

Warrants issued for Unit Private Placement on January 16, 2020

In connection with the Unit Private Placement, January 16, 2020, 1,053,765 warrants were issued and are exercisable at a price of Cdn$0.48 per common share, expiring on January 16, 2023.

Warrants issued to Hampton Security Company on January 16, 2020

The Company issued 27,737 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$0.48, exercisable for 36 months. As these warrants were issued to a broker for financing services, the issuance was accounted for as share-based 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 202,343 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$0.56, and exercisable for 18 months. As these warrants were issued to a broker for financing services, the issuance was accounted for as sharebased compensation and the fair value on issuance was recorded in contributed surplus.

Warrants issued for Unit Private Placement on June 29, 2020

In connection with the Unit Private Placement, June 29, 2020, 951,120 warrants were issued and are exercisable at a price of Cdn$0.72 per common share, expiring on June 29, 2023.

Warrants issued for Public Offering on June 29, 2020

In connection with the Public Offering, June 29, 2020, 8,272,010 warrants were issued and are exercisable at a price of Cdn$0.72 per common share, expiring on June 29, 2023.

Warrants issued to National Bank Financial Inc. on June 29, 2020

The Company issued 297,645 warrants to National Bank Financial Inc . in respect of the broker warrants for the Public Offering on June 29, 2020 with an exercise price of Cdn$0.68, and exercisable for 36 months. As these warrants were

12

STAGEZERO LIFE SCIENCES LTD. NOTES TO CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS FOR THE NINE-MONTH PERIOD ENDED SEPTEMBER 30, 2022 AND 2021 [EXPRESSED IN US DOLLARS]

issued to a broker for financing services, the issuance was accounted for as share-based compensation and share issuance costs and the fair value on issuance was recorded in contributed surplus.

Warrants issued to Fidelity Clearing Canada ULC on June 29, 2020

The Company issued 297,645 warrants to Fidelity Clearing Canada ULC in respect of the broker warrants for Public Offering on June 29, 2020 with an exercise price of Cdn$0.68, and exercisable for 36 months. As these warrants were issued to a broker for financing services, the issuance was accounted for as share-based compensation and share issuance costs and the fair value on issuance was recorded in contributed surplus.

Warrants issued for Unit Private Placement on November 27, 2020

In connection with the Unit Private Placement, November 27, 2020, 162,728 warrants were issued and are exercisable at a price of Cdn$1.10 per common share, expiring on November 27, 2023.

Warrants issued for Public Offering on December 04, 2020

In connection with the Public Offering, December 04, 2020, 4,621,850 warrants were issued and are exercisable at a price of Cdn$1.10 per common share, expiring on December 04, 2023.

Warrants issued to National Bank Financial Inc. on December 04, 2020

The Company issued 323,530 warrants to National Bank Financial Inc . in respect of the broker warrants for the Public Offering on December 04, 2020 with an exercise price of Cdn$1.10, and exercisable for 36 months. As these warrants were issued to a broker for financing services, the issuance was accounted for as share-based compensation and share issuance costs and the fair value on issuance was recorded in contributed surplus.

Warrants issued to Fidelity Clearing Canada ULC on December 04, 2020

The Company issued 323,530 warrants to Fidelity Clearing Canada ULC in respect of the broker warrants for Public Offering on December 04, 2020 with an exercise price of Cdn$1.10, and exercisable for 36 months. As these warrants were issued to a broker for financing services, the issuance was accounted for as share-based compensation and share issuance costs and the fair value on issuance was recorded in contributed surplus.

[b] Warrants issued 2021

Warrants issued due to the conversions of convertible debentures

The Company issued 1,600,903 warrants to unitholders in respect of the conversion of convertible debentures with the exercise price of Cdn$0.56, and with extended exercisable till January 31, 2023.

Warrants issued for Unit Private Placement on November 26, 2021

The Company closed a private placement of its common shares (“Common Shares”) and warrants to purchase Common Shares (“Warrants”) with institutional investors for gross proceeds of approximately CAD$4.2 million (the “Private Placement”). Pursuant to the Private Placement, the Company issued 9,375,002 Common Shares and Warrants to purchase up to an aggregate of 9,375,002 Common Shares at a purchase price of CAD$0.448 per Common Share and associated Warrant. Each Warrant entitles the holder to purchase one Common Share at an exercise price of CAD$0.56 per Common Share for a period of four years following the issuance date. H.C. Wainwright & Co. acted as the exclusive placement agent for the Private Placement. 750,000 broker warrants have been issued to H.C. Wainwright & Co. at an exercise price of CAD$0.56 per Common Share for a period of four years following the issuance date.

[c] Warrants issued 2022

Warrants issued for Unit Private Placement on March 3, 2022

The Company closed a private placement of its common shares (“Common Shares”) and warrants to purchase Common Shares (“Warrants”) with institutional investors for gross proceeds of approximately CAD$1.87 million (the “Private Placement”). Pursuant to the Private Placement, the Company issued 10,000,000 Common Shares and Warrants to purchase up to an aggregate of 10,000,000 Common Shares at a purchase price of CAD$0.187 per Common Share and associated Warrant. Each Warrant entitles the holder to purchase one Common Share at an

13

STAGEZERO LIFE SCIENCES LTD. NOTES TO CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS FOR THE NINE-MONTH PERIOD ENDED SEPTEMBER 30, 2022 AND 2021 [EXPRESSED IN US DOLLARS]

exercise price of CAD$0.2206 per Common Share for a period of four years following the issuance date. H.C. Wainwright & Co. acted as the exclusive placement agent for the Private Placement. 800,000 broker warrants have been issued to H.C. Wainwright & Co. at an exercise price of CAD$0.2206 per Common Share for a period of four years following the issuance date.

Warrants issued for Unit Private Placement on August 18, 2022

The Company closed a private placement of its common shares (“Common Shares”) and warrants to purchase Common Shares (“Warrants”) with institutional investors for gross proceeds of approximately CAD$177,000 (the “Private Placement”). Each Unit is composed of (i) a $1,000 unsecured convertible debenture (“Debenture”), bearing interest at a rate of 8% per annum, having a term of eighteen (18) months from the date of issuance and is convertible into common shares (“Common Shares”) of the Company, at a conversion price of $0.11 per Common Share, and (ii) 9090 Common Share purchase warrants (each a “Warrant”). Each Warrant is exercisable into one (1) Common Share of the Company at an exercise price of CAD$0.15 per Common Share for a period of eighteen (18) months from the date of issuance of the Units. 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.

[d] Warrants extension in February 2022

The Company announced that it extended the expiry date of 5,478,845 outstanding common share purchase warrants (the “Warrants”) to January 31, 2023. The Warrants consist of certain of the Company’s Warrants that are currently due to expire in 2022. The Warrants were originally issued pursuant to non-brokered private placements and debenture conversions. None of the Warrants to be extended are held, directly or indirectly, by any insiders of the Company. The effective date for amendments to the Warrants is February 18, 2022, subject to the requisite approval of the Exchange.

[e] Financial liability accounting

Because such warrants were denominated in Cdn$ [a currency different from the Company’s functional currency], they were recognized as a financial liability at fair value through profit or loss, except for broker warrants issued to Hampton Security Company, National Bank Financial Inc., Fidelity Clearing Canada ULC, H.C. Wainwright & Co., LLC. which were compensation warrants and were recorded as contributed surplus in accordance with IFRS 2, Sharebased Payments. The fair value of each warrant is estimated on the date of grant and on the valuation date using the Black-Scholes option pricing model. The Black-Scholes option pricing model requires four subjective assumptions, including future stock price volatility of the Company’s common shares which trade on the TSX (“Expected volatility”), the risk-free interest rate (sourced to Government of Canada Bond Yields for the noted term); expected dividend yield and expected time until exercise (“Expected life”), which greatly affect the calculated values.

The fair values of the warrants issued during 2021 and the nine months of 2022 were determined at the date of grant with the following assumptions (all with an expected dividend yield of nil):

						Weighted-average
	Expiry date (mm/dd/yy)	Expected volatility	Risk-free	interest rate	Expected life	fair value at measurement date (in Cdn$)
Date issued:
25-Jan-21	1/31/2023	161%	0.18%		3.2 months	0.0000
28-Jan-21	1/31/2023	161%	0.18%		3.2 months	0.0000
29-Jan-21	1/31/2023	161%	0.18%		3.2 months	0.0000
29-Jan-21	1/31/2023	161%	0.18%		3.2 months	0.0000
25-Feb-21	1/31/2023	161%	0.18%		3.2 months	0.0000

14

STAGEZERO LIFE SCIENCES LTD. NOTES TO CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS FOR THE NINE-MONTH PERIOD ENDED SEPTEMBER 30, 2022 AND 2021 [EXPRESSED IN US DOLLARS]

1-Mar-21	1/31/2023	161%	0.18%		3.2 months	0.0000
9-Mar-21	1/31/2023	161%	0.18%		3.2 months	0.0001
25-Mar-21	1/31/2023	161%	0.18%		3.2 months	0.0001
18-Aug-21	1/31/2023	161%	0.18%		3.2 months	0.0001
19-Aug-21	1/31/2023	161%	0.18%		3.2 months	0.0001
26-Nov-21	11/26/2025	161%	2.70%	3	years and 2 months	0.029
2-Mar-22	3/2/2026	161%	2.79%	3	years and 5 months	0.0447
18-Aug-22	2/18/2024	161%	4.00%	1	years and 5 months	0.0279

• (i) warrants valued based on public warrant price (TSX: SZLS-WT-T)

• (ii) warrants valued based on public warrant price (TSX: SZLS-WS-T)

The fair values of the warrants, except for broker warrants issued to Hampton Security Company, National Bank Financial Inc., Fidelity Clearing Canada ULC and H.C. Wainwright, was computed at September 30, 2022 using the Black-Scholes option pricing model with the following assumptions (all with dividend yield of nil):

Black-Scholes option pricing model with the following assumptions (all with dividend yield of	nil):
Expiry date (mm/dd/yy) Expected volatility Risk-free interest rate Expected life	Weighted-average fair value at measurement date
	(in Cdn$)
Date issued:
25-Mar-19 1/31/2023 161% 0.18% 3.2 months	0.0000
April 23, 2019 * 1/31/2023 161% 0.18% 3.2 months	0.0000
23-Apr-19 1/31/2023 161% 0.18% 3.2 months	0.0000
23-Apr-19 1/31/2023 161% 0.18% 3.2 months	0.0000
10-Jul-19 1/31/2023 161% 0.18% 3.2 months	0.0000
24-Jul-19 1/31/2023 161% 0.18% 3.2 months	0.0000
16-Jan-20 1/16/2023 161% 0.18% 3.2 months	0.0000
June 29, 2020 (i) 6/29/2023 n/a n/a n/a	0.0000
June 29, 2020 (i) 6/29/2023 n/a n/a n/a	0.0000
8-Jul-20 1/31/2023 161% 0.18% 3.2 months	0.0000
9-Jul-20 1/31/2023 161% 0.18% 3.2 months	0.0000
28-Sep-20 1/31/2023 161% 0.18% 3.2 months	0.0000
29-Sep-20 1/31/2023 161% 0.18% 3.2 months	0.0000
27-Oct-20 1/31/2023 161% 0.18% 3.2 months	0.0000
December 4, 2020 (ii) 12/4/2023 n/a n/a n/a December 4, 2020 (ii) 12/4/2023 n/a n/a n/a 25-Jan-21 1/31/2023 161% 0.18% 3.2 months 28-Jan-21 1/31/2023 161% 0.18% 3.2 months 29-Jan-21 1/31/2023 161% 0.18% 3.2 months 29-Jan-21 1/31/2023 161% 0.18% 3.2 months 25-Feb-21 1/31/2023 161% 0.18% 3.2 months 1-Mar-21 1/31/2023 161% 0.18% 3.2 months 9-Mar-21 1/31/2023 161% 0.18% 3.2 months	0.0000
	0.0000
	0.0000
	0.0000
	0.0000
	0.0000
	0.0000
	0.0001
	0.0001

15

STAGEZERO LIFE SCIENCES LTD. NOTES TO CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS FOR THE NINE-MONTH PERIOD ENDED SEPTEMBER 30, 2022 AND 2021 [EXPRESSED IN US DOLLARS]

25-Mar-21	1/31/2023	161%	0.18%		3.2 months	0.0001
18-Aug-21	1/31/2023	161%	0.18%		3.2 months	0.0001
19-Aug-21	1/31/2023	161%	0.18%		3.2 months	0.0001
26-Nov-21	11/26/2025	161%	2.70%	3	years and 2 months	0.029
2-Mar-22	3/2/2026	161%	2.79%	3	years and 5 months	0.0447
18-Aug-22	2/18/2024	161%	4.00%	1	years and 5 months	0.0279

• The indicated warrants were valued using a Barrier Option Pricing Model in order to reflect the Acceleration clause noted in the related warrant agreements in addition to the usual inputs used in the Black Scholes Model.

(i) warrants valued based on public warrant price (TSX: SZLS-WT-T)

(ii) warrants valued based on public warrant price (TSX: SZLS-WS-T) The exchange rate of USD to Cdn$ was Cdn$ 1.37 at September 30, 2022.

8. SHARE CAPITAL

On September 18, 2020, a share consolidation of 1:8 was completed. All references to the common shares, warrants, stock options, and earnings per share have been updated in the notes to reflect the 1:8 share consolidation.

[a] Authorized

An unlimited number of non-voting preference shares, issuable in one or more series. Issued: none (2021: none). An unlimited number 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. Issued: none (2021: none).

An unlimited number of voting common shares. Issued: see consolidated statements of changes in shareholders’ equity (deficiency).

[b] Financings

[i] Unit Private Placement on November 26, 2021

The Company closed a private placement of its common shares (“Common Shares”) and warrants to purchase Common Shares (“Warrants”) with institutional investors for gross proceeds of $3,377,021 (CAD$4.2 million). Net of the cash finder’s fee and expense allowance totaling $253,562 and clearing fee of $16,250, the net proceeds Company received was $3,107,209. Pursuant to the Private Placement, the Company issued 9,375,002 Common Shares and Warrants to purchase up to an aggregate of 9,375,002 Common Shares at a purchase price of CAD$0.448 per Common Share and associated Warrant. Pursuant to the private placement, the Company incurred legal expenses in the amount of $60,097 and issued 750,000 broker warrants that was in the amount of $155,029 by using Black– Scholes model (Note 9). The above share issuance cost was allocated to reduce the share capital and warrants liabilities in the amount of $268,314 and $216,624 respectively.

[ii] Unit Private Placement on March 3, 2022

The Company closed a private placement of its common shares ("Common Shares") and warrants to purchase Common Shares ("Warrants") with an institutional investor for gross proceeds of $1,476,160 (CAD$1.87 million) (the "Private Placement"). Net with cash finder’s fee and expense allowance totaling $123,655 and clearing fee $15,961, the net proceeds Company received is $1,336,544. Pursuant to the Private Placement, the Company issued 10,000,000 Common Shares and Warrants to purchase up to an aggregate of 10,000,000 Common Shares at a purchase price of CAD$0.187 per Common Share and associated Warrant. Each Warrant will entitle the holder to purchase one Common Share at an exercise price of CAD$0.2206 per Common Share for a period of four years following the issuance date. Pursuant to the private placement, the Company issued 800,000 broker warrants that was in the amount of $112,110 by using Black–Scholes model (Note 8). The above share issuance cost was allocated to reduce the share capital and warrants liabilities in the amount of $136,667 and $115,060 respectively.

16

STAGEZERO LIFE SCIENCES LTD. NOTES TO CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS FOR THE NINE-MONTH PERIOD ENDED SEPTEMBER 30, 2022 AND 2021 [EXPRESSED IN US DOLLARS]

[iii] Unit Private Placement on August 18, 2022

The Company closed a private placement of units (each a “Unit”) for gross proceeds of $137,255 (CAD$177,000) (the "Private Placement"). Each Unit is composed of (i) a $1,000 unsecured convertible debenture (“Debenture”), bearing interest at a rate of 8% per annum, having a term of eighteen (18) months from the date of issuance and is convertible into common shares (“Common Shares”) of the Company, at a conversion price of $0.11 per Common Share, and (ii) 9090 Common Share purchase warrants (each a “Warrant”). Each Warrant is exercisable into one (1) Common Share of the Company at an exercise price of CAD$0.15 per Common Share for a period of eighteen (18) months from the date of issuance of the Units. 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. The net proceeds of the Private Placement will be used to accelerate the Company's Global Growth Strategy and further support the commercialization of Aristotle® , AVRT and TREAT.

[c] Weighted-average number of shares

On September 18, 2020 the Company announced that trading of the common shares on the TSX on a postConsolidation basis commenced at market opening on September 18, 2020. The Company’s options, warrants, including its TSX-listed warrants, and convertible debentures have also proportionately been adjusted in accordance with their terms effective September 18, 2020. All shares and purchase amounts in these consolidated financial statements have been retroactively restated to reflect the 1 for 8 consolidation. The weighted-average number of shares outstanding (post-consolidation) for period ended September 30, 2022, is 96,675,004 [December 31, 2021 – 70,715,834].

The Company has not adjusted its weighted-average number of shares outstanding for the purpose of calculating the diluted loss per share, as any adjustment would be antidilutive. All issued and outstanding stock options at September 30, 2022 of 4,813,024 [December 31, 2021 –6,019,899] and warrants of 43,625,654 (post-consolidation) [December 31, 2021 – 31,430,927] are deemed anti-dilutive such that the basic and net loss per share are equal.

[d] Employee stock option plan

On May 25, 2000, the Company adopted a stock option plan (the “Plan”) pursuant to which the Board may grant stock options to directors, officers, employees or consultants of the Company. The current terms of the Plan, approved by the Company’s shareholders on June 30, 2016, provide that the maximum number of common shares available for issuance under the Plan does not exceed 15% of the Company’s issued and outstanding shares at any time. All options granted have a term of five years from the date of grant. The vesting schedule of all granted options is determined at the discretion of the Board. The exercise price of an option must be not less than the closing price of the Company’s common shares on the TSX on the trading day immediately preceding the date the option is granted. As at As at September 30, 2022, there were 4,813,024 [December 31, 2021 –6,019,899] options outstanding, representing 4.9% [2021 – 6.63%] of the Company’s issued and outstanding common shares. All exercised options are settled by the issuance of the Company’s common shares.

There were no option cancellations or modifications to the Plan during the during the nine months period ended September 30, 2022 and 2021.

In compliance with current accounting standards, the fair value of each stock option is estimated on the date of grant using the Black-Scholes option pricing model. The Black-Scholes model requires four subjective assumptions, including future stock price volatility and expected time until exercise, which greatly affect the calculated values. The following assumptions were used to calculate the weighted-average fair values of the stock options granted during the years ended:

years ended:
	September 30, 2022	September 30, 2021
Expected option life in years	2.23	4.2
Expected volatility	149%	174%
Risk-free interest rate	3.83%	1.20%
Vesting period inyears	0.5	0.5

17

STAGEZERO LIFE SCIENCES LTD. NOTES TO CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS FOR THE NINE-MONTH PERIOD ENDED SEPTEMBER 30, 2022 AND 2021 [EXPRESSED IN US DOLLARS]

The following table summarizes the measurement date weighted-average fair value of stock options granted during the periods ended September 30, 2022 and 2021:

		Number of options granted	Grant date weighted- average fair value
		#	(In Cdn$)
Three	months ended September 30, 2022	-
			-
Three	months ended September 30, 2021	1,500,000	0.405

The following is a summary of the status of the Plan at September 30, 2022 and 2021, and changes during the periods then ended:

	Period ended September 30, 2022	Period ended September 30, 2022	Period ended
			September 30, 2021
	Number of options Weighted- average exercise price		Number of options Weighted-average exercise price
	# Cdn$		# Cdn$
Outstanding, beginning of period	6,019,899 0.638		5,076,360 0.75
Granted	- -		1,500,000 0.405
Exercised	- -		(258,336) 0.9561
Expired or forfeited			(223,125) 1.579
	1206875 0.59
	(,,)
Outstanding, end ofperiod	4,813,024 0.649		6,094,899 0.38
Exercisable, end ofperiod	4,813,024 0.649		5,094,899 0.38

The following table summarizes information about stock options outstanding at September 30, 2022:

Range prices	of exercise per share	Number outstanding	Number exercisable	Weighted- average exercise price	Weighted-average remaining contractual life
Cdn$		#	#	Cdn$	years
	0.41	500,000	500,000	$0.38	3.91
	$0.44	1,712,500	1,712,500	$0.35	2.85
	$0.64	118,750	118,750	$0.57	0.74
	$0.80	1,862,399	1,862,399	$0.73	1.89
	$0.88	453,750	453,750	$0.78	0.50
	$1.16	156,250	156,250	$1.02	0.22
	$1.52	9,375	9,375	$1.47	4.75
		4,813,024	4,813,024

18

STAGEZERO LIFE SCIENCES LTD. NOTES TO CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS FOR THE NINE-MONTH PERIOD ENDED SEPTEMBER 30, 2022 AND 2021 [EXPRESSED IN US DOLLARS]

9. EXPENSES BY NATURE

Expenses included in the consolidated statements of loss for nine months period ended September 30, 2022 and 2021, are as follows:

	For nine months period ended
	September 30, 2022 September 30, 2021
	Cost of revenue General and administrativ e Total Cost of revenue General and administrativ e Total $ $ $ $ $ $
Salaries and benefits Share-based compensation Rent and facilities Depreciation Professional fee Public entity costs Lab supplies and equipment maintenance Office equipment maintenance Shipping and courier Other Foreign exchange loss (gain)
	2,157,752 2,461,198 4,618,950 828,581 1,928,017 2,756,598
	- (91,424) (91,424) 17,103 318,920 336,023
	94,180 1,481 95,661 63,793 1,878 65,671
	152,857 158,833 311,690 162,656 163,135 325,791
	- 1,202,169 1,202,169 - 1,488,520 1,488,520
	- 265,158 265,158 - 255,307 255,307
	567,830 - 567,830 684,912 - 684,912
	- 247,688 247,688 - 151,199 151,199
	98,808 18,822 117,630 235,687 29,651 265,338
	35,207 800,704 835,911 357,610 587,033 944,643
	- (71,215) (71,215) (258,970) (258,970)
	3,106,635 4,993,414 8,100,049 2,350,342 4,664,690 7,015,031

==> picture [54 x 47] intentionally omitted <==

For three months period ended

		September 30, 2022			September 30, 2021
	Cost of	General and administrativ	Total	Cost of	General and administrativ	Total
	revenue			revenue
		e			e
	$	$	$	$	$	$
Salaries and benefits	490,214	581,100	1,071,314	458,223	261,124	719,346
Share-based compensation	-	-	-	2,783	213,724	216,507
Rent and facilities	26,049	293	26,342	44,418	8	44,426
Depreciation	50,953	118,491	169,444	49,937	163,387	213,325
Professional fee	-	335,395	335,395	-	763,134	763,134
Public entity costs	-	116,395	116,395	-	(36,409)	(36,409)

19

STAGEZERO LIFE SCIENCES LTD. NOTES TO CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS FOR THE NINE-MONTH PERIOD ENDED SEPTEMBER 30, 2022 AND 2021 [EXPRESSED IN US DOLLARS]

Lab supplies and equipment maintenance	66,532	-	66,532	(98,856)	-	(98,856)
Officer equipment maintenance	-	85,482	85,482	-	79,194	79,194
Shipping and courier	5,035	18,822	23,857	56,652	27,053	83,704
Other	22,298	182,567	204,865	294,190	452,290	746,480
Foreign exchange loss (gain)	-	(60,523)	(60,523)	-	(266,744)	(266,744)
	661,081	1,378,022	2,039,103	807,347	1,656,761	2,464,107

Expenses in sales and marketing primarily are salary and marketing/advertising costs. Expenses in research and development are a combination of compensation and lab supplies.

10. RELATED-PARTY TRANSACTIONS

The key management personnel of the Company at September 30, 2022 and 2021 are the directors, including the Chairman and Chief Executive Officer and the Chief Financial Officer.

Compensation for key management personnel of the Company is detailed below for nine months ended September 30, 2022 and 2021:

	Three Months Ended September 30	Three Months Ended September 30	Nine Months Ended September 30	Nine Months Ended September 30
	2022	2021	2022	2021
	$	$	$	$
Salaries, fees and short-term benefits	129,642	159,981	477,913	435,525
Share-based compensation	-	199,390	-	279,853
	129,642	359,371	477,913	715,378

As at September 30, 2022, key management personnel controlled 2.5% (2021-5.4%) of the issued and outstanding common shares of the Company and $659,167 (2021-$340,000) of compensation remains unpaid to current and former key management personnel and is included in trade and other payables. Such amounts are unsecured, non-interest bearing with no fixed terms of repayment.

Stock options held by key management personnel to purchase common shares have the following expiry dates and exercise prices:

				Number of outstanding
Year issued	Year of expiry	Range of exercise prices per share	At September	30, 2022 At December	31, 2021
		$	#	#
2017	2022	1.16		125,000	250,000
2018	2023	0.64-0.88		381,250	381,250
2019	2024	0.8		1,371,357	1,380,728
2020	2025	0.44		1,187,500	1,200,000
2021	2026	0.41		-	1,500,000
				3,065,107	4,711,978

20

STAGEZERO LIFE SCIENCES LTD. NOTES TO CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS FOR THE NINE-MONTH PERIOD ENDED SEPTEMBER 30, 2022 AND 2021 [EXPRESSED IN US DOLLARS]

11. SEGMENT INFORMATION

The Company has three reportable operating segments: StageZero laboratory operations, Care Oncology UK and Care Oncology US. The Company measures each reportable operating segment’s performance based on revenue and segment net operating income/(loss), which is the metric utilized by the Company to assess the performance of operating segments. None of the three reporting units are reliant on any single external customer.

The Company does not report total assets or total liabilities based on its reportable operating segments .

		Nine months	ended September 30, 2022	ended September 30, 2022	ended September 30, 2022
	StageZero laboratory operations	Care Oncology UK	Care Oncology US		StageZero Ltd		Total
	$	$	$			$	$
Revenue	690,156	915,392	1,513,048			-	3,118,596
Cost of sales	1,619,546	379,627	1,107,463			-	3,106,636
Gross profit (loss)	(929,390)	535,765	405,585			-	11,960
Selling, R&D, general and administrative
expenses	2,542,236	744,868	834,656			-	4,121,760
Operating income (loss)	(3,471,626)	(209,103)	(429,071)				(4,109,800)
Net interest, finance and other costs	55,092				(2,247,571)		(778,024)
Income before income taxes	(3,526,718)	(209,103)	(429,071)		2,247,571		(1,917,321)
		Nine months	ended September	30,	2021
	StageZero laboratory operations	Care Oncology UK	Care Oncology US		StageZero Ltd		Total
	$	$	$			$	$
Revenue	3,292,474	106,003	167,395			-	3,565,872
Cost of sales	2,167,668	69,013	113,661			-	2,350,342
Gross profit (loss)	1,124,806	36,990	53,734			-	1,215,530
Selling, general and administrative expenses	3,514,311	49,715	156,368			-	3,720,394
Operating income (loss)	(2,389,505)	(12,725)	(102,634)				(2,504,864)
Net interest, finance and other costs	58,535				2,625,109		2,683,644
Income before income taxes	(2,448,040)	(12,725)	(102,634)		2,625,109		(5,188,508)

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STAGEZERO LIFE SCIENCES LTD. NOTES TO CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS FOR THE NINE-MONTH PERIOD ENDED SEPTEMBER 30, 2022 AND 2021 [EXPRESSED IN US DOLLARS]

		Three months ended September	Three months ended September	30, 2022
	StageZero laboratory operations	Care Oncology UK	Care Oncology US	StageZero Ltd	Total
	$	$	$	$	$
Revenue	142,499	303,554	353,352	-	799,405
Cost of sales	337,754	83,025	240,303	-	661,082
Gross profit (loss)	(195,255)	220,529	113,049	-	138,323
Selling, R&D, general and administrative expenses	675,604	240,705	96,682	-	1,012,991
Operating income (loss)	(870,859)	(20,176)	16,367	-	(874,668)
Net interest, finance and other costs	55,092	-	-	(884,663)	(829,571)
Income before income taxes	(925,951)	(20,176)	16,367	884,663	(45,097)
		Three months ended September 30, 2021
	StageZero laboratory operations	Care Oncology UK	Care Oncology US	StageZero Ltd	Total
	$	$	$	$	$
Revenue	410,926	106,003	167,395	-	684,324
Cost of sales	624,673	69,013	113,661	-	807,347
Gross profit (loss)	(213,747)	36,990	53,734	-	(123,023)
Selling, general and administrative expenses	929,820	49,715	156,368	-	1,135,903
Operating income (loss)	(1,143,567)	(12,725)	(102,634)	-	(1,258,926)
Net interest, finance and other costs				962,754	962,754
Income before income taxes	(1,143,567)	(12,725)	(102,634)	(962,754)	(2,221,680)

12. FINANCIAL INSTRUMENTS AND FINANCIAL RISK-MANAGEMENT OBJECTIVES AND POLICIES

The Company is exposed to liquidity, credit and market risk, the management of which is overseen by the Company’s senior management.

[a] 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 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 September 30, 2022, the Company’s warrant liability and notes payable, are carried on the consolidated statements of financial position at fair value, warrant liability has been classified as Level 2, and notes payable have been classified as Level 3, in the fair value hierarchy.

[b] Liquidity risk

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STAGEZERO LIFE SCIENCES LTD. NOTES TO CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS FOR THE NINE-MONTH PERIOD ENDED SEPTEMBER 30, 2022 AND 2021 [EXPRESSED IN US DOLLARS]

Liquidity risk represents the contingency that the Company is unable to gather the funds required with respect to its financial obligations at the appropriate time and under reasonable conditions. The Company attempts to manage this risk in order to ensure that it has sufficient liquidity at all times to be able to honor its current and future financial obligations under normal conditions and in exceptional circumstances. Financing strategies to ensure the management of this risk include resorting to 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 nine months 2022 and 2021, 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.

The tables below summarize the maturity profile of the Company’s financial instruments as at September 30, 2022 and December 31, 2021:

	Financial instrument maturationperiods	Financial instrument maturationperiods	Financial instrument maturationperiods
	1 year or less	1 to 5 years	5 years or more	Total
At September 30, 2022	$	$	$	$
Financial assets
Cash	33,252	-	-	33,252
Trade and other receivables	42,350	-	-	42,350
Financial liabilities
Trade and other payables	4,652,881	-	-	4,652,881
Note payable	768,601	480,000	840,000	2,088,601
Long-term loan	-	44,544	-	44,544
Long-term liabilities	-	67,340	-	67,340

		Financial instrument maturation	Financial instrument maturation	periods
	1 year or less	1 to 5 years	5 years or more	Total
At December 31, 2021	$	$	$	$
Financial assets
Cash	1,724,724	-	-	1,724,724
Trade and other receivables	126,897	-	-	126,897
Financial liabilities
Trade and other payables	2,073,098	-	-	2,073,098
Note payable	358,389	480,000	960,000	1,798,389
Long-term loan	-	44,544	-	44,544
Long-term liabilities	-	67,340	-	67,340

[c] Credit risk

23

STAGEZERO LIFE SCIENCES LTD. NOTES TO CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS FOR THE NINE-MONTH PERIOD ENDED SEPTEMBER 30, 2022 AND 2021 [EXPRESSED IN US DOLLARS]

The Company’s financial assets that are exposed to credit risk consist primarily of cash and other receivables.

[d] Market risk

Market risk is comprised of foreign exchange rate risk and interest rate risk.

Foreign exchange rate risk

The Company operates in the United Kingdom, Canada and the United States. During the period ended September 30, 2022, 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 $31,751.

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.

13. CAPITAL RISK MANAGEMENT

The Company’s objective when managing capital is to safeguard its accumulated capital in order to maintain the ability to continue as a going concern and provide returns to shareholders and benefits to other stakeholders. The capital structure of the Company consists of issues of notes payable, common shares and warrants totaling $103.0 million as at September 30, 2022

To address this risk, the Company manages its capital structure and makes adjustments to it in light of economic conditions. Upon approval of the Board, the Company balances its overall capital structure through new share or debt issuances, or by undertaking other activities as deemed appropriate in the circumstances.

The Company is not subject to any capital requirements imposed by a lending institution or regulatory body, other than of the Toronto Stock Exchange (“TSX”) which requires adequate working capital or financial resources such that, in the opinion of TSX, it will be able to continue as a going concern.

The Company’s ability to continue as a going concern depends upon its ability to achieve profitable operations and raise additional capital. From 2019 to 2022, the Company completed a series of common share, structured notes payable, capital commitment, common share and warrant and convertible debenture financings.

14. FINANCE AND TRANSACTION COSTS

Interest on note payable to HDL Interest on note payable to shareholder and director Interest on convertible debenture Interest costs on lease liability Transaction costs due to acquisition Other interest costs	Three-monthperiod ended Nine-monthperiod ended
	September 30 September 30 2022 2021 2022 2021 $ $ $ $
	25,947 33,602 78,306 80,025
	2,502 2,502 7,500 7,500
	- 10,761 - 9,199
	10,416 19,708 37,230 58,535
	- 902,479 - 1,196,968
	30,481 - 37,402 -
	69,346 969,052 160,438 1,352,226

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STAGEZERO LIFE SCIENCES LTD. NOTES TO CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS FOR THE NINE-MONTH PERIOD ENDED SEPTEMBER 30, 2022 AND 2021 [EXPRESSED IN US DOLLARS]

15. REVENUE

Disaggregation of Revenue:

	Three-monthperiod ended Nine-monthperiod ended
	September 30 September 30
	2022 2021 2022 2021 $ $ $ $
Laboratory Testing Clinical Consultation
	142,498 410,926 690,155 3,292,474
	656,906 273,398 2,428,440 273,398
	799,404 684,324 3,118,595 3,565,872

Disaggregation of Deferred Revenue:

	Nine-monthperiod ended
	September 30
	2022 2021 $ $
Laboratory Testing Clinical Consultation
	- -
	82,293 -
	82,293 -

16. LEASES

The Company’s portfolio of leases consists of office spaces with lease terms that will expire in September 2023 with a right to renew. The Company currently does not have leases with variable lease payments, residual value guarantees, or leases not yet commenced to which the Company is committed. Lease liabilities have been measured by discounting future lease payments using our incremental borrowing rate as rates implicit in the leases were not readily determinable. The weighted-average rate applied was 14%. The landlord keeps $25,000 as security according to leasing agreements.

Lease liabilities

Accounting of factors affecting the lease liabilities during the nine months period ended September 30, 2022 and,2021 were as follows:

	Period ended September 30	Period ended September 30
	2022	2021
	$	$
Lease liability as at January 1	415,376	600,224
Interest expense	37,300	58,540
Lease payments	(199,672)	(193,853)
Lease liabilities	253,004	464,911
Less currentportion of lease liabilities	253,004	211,907
Long-termportion of lease liabilities	-	253,004

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STAGEZERO LIFE SCIENCES LTD. NOTES TO CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS FOR THE NINE-MONTH PERIOD ENDED SEPTEMBER 30, 2022 AND 2021 [EXPRESSED IN US DOLLARS]

The maturity of the contractual undiscounted lease obligation payments as at September 30, 2022 is as follows:

	$
2022	67,651
2023	205,646
Total undiscounted payments	273,297
Less: imputed interest	20,293
Lease liability	253,004

17. COMMITMENTS AND CONTINGENCIES

From time to time, the Company may be involved in litigation relating to claims arising out of operations in the normal course of our business. As at September 30, 2022 and 2021, there was no pending or threatened litigation related to the Company's operations. There are also no proceedings in which any of the Company's directors, officers or affiliates is an adverse party or has a material interest adverse to the Company's interest.

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