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DIAGNOS Inc.

Interim Condensed Consolidated Financial Statements - Unaudited Three-month and Six-month Periods ended September 30, 2023

Note to reader: These Interim Condensed Consolidated Financial Statements have not been reviewed by our auditor.

DIAGNOS Inc.

Interim Consolidated Statements of Financial Position

(amounts in Canadian dollars)

		As at
		September 30, 2023	March 31, 2023
	Note		$
ASSETS
Current
Cash		139,395	296,639
Short-term investments		300,000	-
Accounts receivable	5	126,848	263,269
Prepaid expenses		69,984	14,892
		636,227	574,800
Non-current
Capital assets	7	318,728	248,231
Total assets		954,955	823,031
LIABILITIES
Current
Accounts payable and accrued liabilities	6	518,850	460,014
Deferred revenue		22,381	6,710
Loans		184,550	168,888
Leases	7	83,159	83,159
		808,940	718,771
Non-current
Loans		191,044	203,378
Leases	7	230,430	152,727
Convertible debentures	8	2,476,743	1,696,362
		2,898,217	2,052,467
Total liabilities		3,707,157	2,771,238
SHAREHOLDERS' DEFICIENCY
Share capital	9	36,483,978	35,914,525
Reserve	10	9,716,362	9,588,048
Deficit		(49,028,122)	(47,526,360)
Foreign exchange differences		75,580	75,580
		(2,752,202)	(1,948,207)
Total liabilities and shareholders' deficiency		954,955	823,031

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

Approved by the Board of Directors;

(signed) André Larente	(signed) Francis Bellido
Director	Director

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DIAGNOS Inc.

Interim Consolidated Statements of Loss and Comprehensive Loss

(amounts in Canadian dollars)

		Three-month period ended		Six-month period ended
		September 30,		September 30,
	Note	2023	2022	2023	2022
			$	$
Revenue	11	32,707	146,533	76,030	295,547
Expenses
Costs of services and research and development		279,567	192,406	496,135	437,326
Selling and administrative		370,463	428,486		838,143	1,010,143
	12	650,030	620,892		1,334,278	1,447,469
Loss before other items		(617,323)	(474,359)	(1,258,248)	(1,151,922)
Other income		9,030	6,257	16,602	12,478
Interest expense		(141,297)	(52,608)	(260,116)	(98,424)
Net loss		(749,590)	(520,710)	(1,501,762)	(1,237,868)
Basic and diluted net loss per share		(0.01)	(0.01)	(0.02)	(0.02)
Weighted-average number of common shares
outstanding		72,264,803	69,474,151	71,684,543	69,474,151

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

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DIAGNOS Inc.

Interim Consolidated Statements of Changes in Equity

(amounts in Canadian dollars)

		Six-month period ended September 30, 2023
				Investments	Foreign	Total
	Share capital	Reserve	Deficit	revaluation	exchange	shareholders'
				reserve	differences	deficiency
note	9	10
			$
Balance, beginning of period	35,914,525	9,588,048	(47,526,360)	-	75,580	(1,948,207)
Net loss	-	-	(1,501,762)	-	-	(1,501,762)
Issuance of common shares	569,453	(81,602)	-	-	-	487,851
Issuance of warrants	-	30,163	-	-	-	30,163
Conversion options	-	96,087	-	-	-	96,087
Issue expenses	-	(3,098)	-	-	-	(3,098)
Stock-based compensation expense	-	86,764	-	-	-	86,764
Balance, end of period	36,483,978	9,716,362	(49,028,122)	-	75,580	(2,752,202)
		Six-month period ended September 30, 2022
				Investments	Foreign	Total
	Share capital	Reserve	Deficit	revaluation	exchange	shareholders'
				reserve	differences	deficiency
			$
Balance, beginning of period	35,679,831	9,175,574	(44,992,462)	(53,082)	76,629	(113,510)
Net loss	-	-	(1,237,868)	-	-	(1,237,868)
Issuance of warrants	-	52,500	-	-	-	52,500
Conversion options	-	17,803	-	-	-	17,803
Issue expenses	-	(502)	-	-	-	(502)
Stock-based compensation expense	-	71,884	-	-	-	71,884
Balance, end of period	35,679,831	9,317,259	(46,230,330)	(53,082)	76,629	(1,209,693)

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

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DIAGNOS Inc.

Interim Consolidated Statements of Cash Flows

(amounts in Canadian dollars)

	Six-month period ended September 30,
	2023	2022
		$
Cash flows from operating activities
Net loss	(1,501,762)	(1,237,868)
Items not affecting cash
Depreciation of capital assets	56,657	53,622
Accretion on leases	13,316	11,131
Accretion on convertible debentures	100,235	35,122
Accretion on governmental loan	12,522	7,233
Governmental grant amortization	(9,194)	(6,478)
Stock-based compensation expense	86,764	71,884
	(1,241,462)	(1,065,354)
Payment of interest	109,901	43,529
Net change in operating working capital items	155,836	38,616
	(975,725)	(983,209)
Cash flows from investing activities
Proceeds from disposal of short-term investments	300,000	500,000
Acquisition of short term investments	(600,000)	-
Additions to capital assets	(7,279)	(4,812)
	(307,279)	495,188
Cash flows from financing activities
Issuance of convertible debentures and warrants,
net of issue expenses	843,775	347,500
Issuance of common shares, net of issue expenses	447,374	-
Lease payments	(55,488)	(43,212)
Payment of interest	(109,901)	(43,529)
	1,125,760	260,759
Net change in cash	(157,244)	(227,262)
Cash, beginning of period	296,639	420,914
Cash, end of period	139,395	193,652

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

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DIAGNOS Inc.

Notes to Interim Condensed Consolidated Financial Statements

September 30, 2023, March 31, 2023 and September 30, 2022 (amounts in Canadian dollars)

1. Going concern assumption

These interim condensed consolidated financial statements have been prepared on a going concern basis, which assumes that the Corporation will continue to operate for the foreseeable future and will be able to realize its assets and discharge its liabilities in the normal course of business.

In order to address these uncertainties, the Corporation is evaluating the implementation of some or all of the following measures:

• Reduce operating costs
• Continue to seek debt financing
• Continue to seek equity financing
• Continue to evaluate possible M&A opportunities

The Corporation believes that if it were to be successful in implementing some or all of the above risk mitigating measures, it will be able to continue as a going concern. There remains however, significant risk and uncertainty associated with implementing any of these measures which are dependent on a number of factors of which some may be outside of the Corporation's control.

As at September 30, 2023, the Corporation is current in its payroll taxes and is not in default with regards to its debt.

These interim condensed consolidated financial statements do not reflect any adjustments that would be necessary if the going concern basis was not appropriate. Such adjustments, if required, may be material.

2. Statutes of incorporation and nature of activities

DIAGNOS Inc. ("the Corporation") is incorporated under the Canada Business Corporations Act and the subsidiaries under the applicable regulations in their respective countries. The main office is located at 7005 Taschereau Blvd., Suite 265, Brossard, Quebec, Canada. The shares of the Corporation are listed on the TSX Venture Exchange.

The Corporation provides software-based services to assist health specialists in the detection of diabetic retinopathy.

These interim condensed consolidated financial statements have been approved and authorized for filing by the Board of Directors of the Corporation on November 28, 2023.

3. Basis of consolidation and summary of accounting policies

Basis of consolidation

These interim condensed consolidated financial statements include the accounts of the Corporation and those of its subsidiaries. Subsidiaries consist of entities over which the Corporation has right, or is exposed, to variable returns from its involvement with the investee and has the ability to affect those returns through its power over the investee. Subsidiaries' financial statements are included in the consolidated financial statements from the date that control commences until the date that control ceases. Subsidiaries' year end and quarter end as well as accounting policies are aligned with those adopted by the Corporation.

Percentage of interest in the Corporation's subsidiaries is as follows:

Name of entity	Location of entity	Percentage of ownership
Diagnos Internacional SA de CV	Mexico	99.8%
Diagnos Healthcare (India) Private Limited	India	99.74%

Inter-company transactions and balances and any unrealized revenue and expense are eliminated in preparing the consolidated financial statements.

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DIAGNOS Inc.

Notes to Interim Condensed Consolidated Financial Statements

September 30, 2023, March 31, 2023 and September 30, 2022 (amounts in Canadian dollars)

3. Basis of consolidation and summary of accounting policies (continued)

Summary of accounting policies

These interim condensed consolidated financial statements were prepared in accordance with standard IAS 34 - Interim Financial Reporting and do not include all of the information required for a full set of financial statements prepared in accordance with International Financial Reporting Standards ("IFRS"). They, however, include specific complimentary notes in order to provide information necessary to assess the financial situation of the Corporation at period end since its last annual consolidated financial statements dated March 31, 2023.

The accounting policies used to prepare these interim condensed consolidated financial statements are those described in the last annual consolidated financial statements of the Corporation and have been applied throughout the period unless otherwise stated.

4. Critical accounting judgments and key sources of estimation uncertainty

In preparing these interim condensed consolidated financial statements, management has made judgments and estimates that affect the application of accounting policies and the reported amounts of assets and liabilities, income and expense. Actual results may differ from these estimates. The significant judgments made by management in applying the Corporation's accounting policies and the key sources of estimation uncertainty were the same as those described in the last annual financial statements.

5. Accounts receivable
	As at
	September 30, 2023	March 31, 2023
	$
Customers	13,706	50,191
Tax credits on research and development expenses	50,000	148,595
Demand loan bearing annual interest rate of 4%	20,000	20,000
Advances, no interest bearing	19,708	20,495
Sales taxes	21,977	22,530
Others	1,457	1,458
	126,848	263,269

During the quarter ended September 30, 2023, the Corporation received a tax credit amount of $148,595 on research and development expenses for the fiscal year ended March 31, 2023.

All amounts are due in the short term. The net carrying amounts are a reasonable approximation of their fair value.

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DIAGNOS Inc.

Notes to Interim Condensed Consolidated Financial Statements

September 30, 2023, March 31, 2023 and September 30, 2022 (amounts in Canadian dollars)

6. Accounts payable and accrued liabilities

	As at,
	September 30, 2023	March 31, 2023
	$
Suppliers	331,606	288,213
Interests	62,639	31,928
Salaries and benefits	124,605	139,873
	518,850	460,014
7. Leases
	As at
	September 30, 2023	March 31, 2023
	$
Finance leases	313,589	235,886
Leases - short term	83,159	83,159
Leases - long term	230,430	152,727

During the quarter ended September 30, 2023, the Corporation entered into one lease agreement for computer equipment. The minimum monthly payment amounts to $2,457 for a term of 60 months ending in August 2028. The cost of the equipment under the lease of $119,875 is included in capital assets as part of right-of-use assets.

The following table presents a reconciliation of changes in leases:
	Six-month period ended September 30,
	2023	2022
		$
Balance, beginning of period	235,886	229,203
Computer equipment	119,875	-
Accretion	13,316	11,131
Payments	(55,488)	(43,212)
Balance, end of period	313,589	197,122

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DIAGNOS Inc.

Notes to Interim Condensed Consolidated Financial Statements

September 30, 2023, March 31, 2023 and September 30, 2022 (amounts in Canadian dollars)

8. Convertible debentures
	As at
	September 30, 2023	March 31, 2023
	$
Unsecured convertible debentures	2,945,000	2,130,000
Fair value discount	(415,736)	(384,344)
Issue expenses	(52,521)	(49,294)
	2,476,743	1,696,362

During the quarter ended June 30, 2023, as part of a private placement, the Corporation issued unsecured convertible debentures (each a "Q1-Debenture") for gross proceeds of $865,000. The Q1-Debentures bear interest at an annual rate of 10%, and will mature on May 18, 2025. At the sole option of the Q1-Debenture holders, the principal amount of the Q1-Debentures may be converted at any time into common shares of the Corporation at a price of $0.37 per common share. As part of the private placement, 865,000 stock warrants were issued to the Q1-Debenture holders entitling the holder to purchase one common share of the Corporation per stock warrant at a price of $0.45 per common share for a period of 18 months ending November 18, 2024.

The fair value of the Q1-Debentures has been established at $738,750 using the discounted cash flows valuation method with the following weighted average assumptions:

Maturity:	2 years	Nominal interest rate:	10%
Interest payment frequency:	2 per year	Effective interest rate:	19.94%

Of the difference of $126,250 between the nominal value of the Q1-Debentures, $865,000, and the fair value of $738,750, an amount of $96,087 has been allocated to the conversion options and an amount of $30,163 has been allocated to the stock warrants prorated based on their respective fair values using the Black-Scholes option pricing model with the following weighted average assumptions:

Conversion options:

Expected life:	2 years	Risk-free interest rate:	4.64%
Liquidity discount:	25%	Volatility:	87.74%

Stock warrants:

Expected life:	18 months	Risk-free interest rate:	5.14%
Liquidity discount:	25%	Volatility:	89.90%

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DIAGNOS Inc.

Notes to Interim Condensed Consolidated Financial Statements

September 30, 2023, March 31, 2023 and September 30, 2022 (amounts in Canadian dollars)

8. Convertible debentures (continued)

The following table presents a reconciliation of changes in convertible debentures:

	Six-month period ended September 30,
	2023	2022
		$
Balance, beginning of period	1,696,362	673,565
Proceeds from private placement	865,000	350,000
Fair value discount	(126,250)	(70,303)
Accretion	100,235	35,122
Issue expenses paid in cash	(18,127)	(1,998)
Conversion into common shares	(50,000)	-
Accretion on conversion	9,523	-
Balance, end of period	2,476,743	986,386

9. Share capital

Share capital is composed of common shares without par value of which 72,478,311 are issued and outstanding as at September 30, 2023 (March 31, 2023 - 70,610,514). All the shares have identical rights with respect to the distribution of dividends and the repayment of capital. Each share confers the right to one vote at the annual general meeting of shareholders. The Corporation is authorized to issue an unlimited number of common shares.

The following table presents the changes to share capital which have occurred during the six-month period ended September 30, 2023:

	Number of common	$
	shares
Balance, beginning of period	70,610,514	35,914,525
Exercice of stock warrants	1,590,525	437,373
Fair value of stock warrants exercised	-	73,341
Conversion of debentures	227,272	48,738
Exercice of stock options	50,000	10,001
Balance, end of period	72,478,311	36,483,978

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