DIAGNOS : Q4 2023 MD&A – Download as

DIAGNOS Inc.

2023 Management Discussion & Analysis

DIAGNOS Inc.

2023 Management Discussion and Analysis

Description and objective

This Management Discussion and Analysis ("MD&A") analyses the consolidated financial position of DIAGNOS Inc. and its subsidiaries ("DIAGNOS", the "Corporation" or "We") as at March 31, 2023 and for the quarter and year ended March 31, 2023 and should be read in conjunction with the March 31, 2023 consolidated financial statements and accompanying notes.

This MD&A is a narrative explanation, through the eyes of management, of the Corporation's performance during the periods covered by the financial statements, and of the Corporation's financial condition and future prospects. This MD&A complements and supplements the Corporation's financial statements, but does not form part of the Corporation's financial statements.

The objective of this MD&A is to improve the Corporation's overall financial disclosures by providing a balanced discussion of the Corporation's financial performance and financial condition.

The currency used is the Canadian dollar unless otherwise stated.

Date of information

This MD&A is dated July 13, 2023 and was approved by the Board of Directors of the Corporation on the same date.

Forward-looking statements

This MD&A contains certain forward-looking statements with respect to the Corporation. By their nature, these forward-looking statements necessarily imply risks and uncertainties that could cause actual results to differ materially from those contemplated by these forward-looking statements. These risks and uncertainties include risks associated with the going concern assumption, market acceptance, competitive developments, the world economic situation and other factors. Except for ongoing obligations under securities laws to disclose all material information to investors, we disclaim any intention or obligation to update or revise any forward-looking statements, whether as a result of new information, future events or otherwise.

Non-GAAP financial measure

This MD&A contains non-GAAP financial measures. A non-GAAP financial measure is a numerical measure of an issuer's historical or future financial performance, financial position or cash flow that is not specified, defined or determined under the Corporation's GAAP (as that term is defined in Regulation 52-107respecting Acceptable Accounting Principles and Auditing Standards) and is not presented in the Corporation's financial statements.

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DIAGNOS Inc.

2023 Management Discussion and Analysis

Non-GAAP financial measure (continued)

Non-GAAP financial measures presented in this document are:

• Research and development refundable tax credit provisions in proportion to research and development expenses. This is an indicator of the scientific research and experimental development activities in proportion to the overall research and development expenses.
• Working capital; the working capital amount is obtained by subtracting the sum of the amounts for (i) accounts payable and accrued liabilities and (ii) other current liabilities from the sum of the amounts for (i) cash, (ii) non- restricted short-term investments, (iii) accounts receivable and (iv) other current assets. The working capital amount is an indicator for assessing short-term solvency.

Going concern assumption

The March 31, 2023 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.

The Corporation's current level of revenue is not sufficient to cover its expenses and ongoing commitments. The Corporation's ability to generate positive cash flows from its operating activities is dependent on achieving and maintaining profitable operations. Until it is able to generate positive cash flows from its operating activities, the Corporation will need, from time to time, to raise funds through financing activities.

Since inception, the Corporation has been able to finance its activities and operate on a going concern basis through issuances of common shares, stock warrants, convertible notes, convertible debentures and demand loans. While the Corporation has been successful in securing financing in the past, there can be no assurance it will be able to do so in the future, that such sources of funding or initiatives will be available on terms acceptable to the Corporation. If the Corporation is unable to obtain sufficient additional funding in the near-term, it may be unable to continue its operations, and amounts from the sale of assets might be less than the amounts reflected in the interim consolidated financial statements.

As at March 31, 2023, the Corporation is current in its payroll taxes and is not in default with regards to its debt.

The March 31, 2023 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.

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DIAGNOS Inc.

2023 Management Discussion and Analysis

Description of the Corporation and activities

The common shares of DIAGNOS are currently listed on (i) the TSX Venture Exchange of the Toronto Stock Exchange under the symbol "ADK" and (ii) the OTCQB, under the symbol "DGNOF".

DIAGNOS group of entities, as at March 31, 2023, is organized as follows:

DIAGNOS Inc.

(Canada)

Diagnos Healthcare (India)	Diagnos Internacional SA de CV
Private Ltd -	(Mexico) -
99.74% ownership	99.8% ownership

Diagnos Healthcare (India) Private Limited and Diagnos Internacional SA de CV are currently inactive.

DIAGNOS markets CARA (Computer Assisted Retinal Analysis), a software platform which assists health specialists in the detection of diabetic retinopathy. CARA is an in-house hosted web-based application that integrates fundus cameras with an image processing engine over a secure internet connection and has been developed by, and is proprietary to, DIAGNOS.

The CARA suite of applications allows an eye care specialist to more clearly visualize both normal retinal landmarks (optic nerve, vascular system, macula, fovea), as well as pathological changes (exudates, haemorrhages, micro- aneurisms, neo-vascularisation).

Services rendered by the Corporation vary from image enhancement only, to turn-key screening solutions.

Business model

The Corporation's main market is the screening of diabetic patients for diabetic retinopathy.

Screening projects are classified into two main categories; managed and standalone. Managed projects are those which require a full-time technician for each screening unit to manage the screening logistics, whereas standalone projects comprise one part-time technician and/or remote technical support to manage several screening units. In standalone projects, a camera is usually deployed at the screening site for the duration of the contract, after the part- time technician and/or remote technical support has trained site staff on how to acquire and transfer images.

Revenue arises from fees charged to analyse the retina of the eye image through the CARA web platform, usually on a per-transaction basis. The per-transaction fee varies based on the degree of deployment; managed or standalone. Revenue may also arise from fixed-amount subscription to the CARA platform.

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DIAGNOS Inc.

2023 Management Discussion and Analysis

Main risks

The main risks related to its business model that the Corporation is exposed to include (i) concentration of customers since the Corporation's main source of revenue is derived from only one specific segment of healthcare, diabetic retinopathy, and (ii) product acceptance, since the CARA technology is not intended to make any diagnosis but rather to help the healthcare professionals in making diabetic retinopathy diagnosis assessments.

Significant events during the period

Financing activities

During the period covered by this MD&A;

• the Corporation raised $2,315,000 from the issuance of unsecured convertible debentures. The breakdown per quarter is as follows:

Quarter ended	Gross proceeds
September 30th, 2022	$350,000
December 31st, 2022	$850,000
March 31st, 2023	$250,000
June 30th, 2023	$865,000
	$2,315,000

• the Corporation received an aggregate amount of $257,000 from the exercise of stock warrants and stock options during the month of May 2023.

Summary of quarterly results

The following financial information for the eight most recently completed three-month periods is derived from the Corporation's financial statements.

		2023			2022
	Q4	Q3	Q2	Q1	Q4	Q3	Q2	Q1
	March 31,	Dec. 31,	Sept. 30,	June 30,	March 31,	Dec. 31,	Sept. 30,	June 30,
	2023	2022	2022	2022	2022	2021	2021	2021
		$				$
Revenue	68,285	121,917	146,533	149,014	152,103	129,836	80,933	75,961
Net loss	(728,967)	(513,981)	(520,710)	(717,158)	(725,395)	(605,093)	(557,705)	(720,023)
Comprehensive loss	(730,016)	(513,981)	(520,710)	(717,158)	(726,010)	(605,095)	(556,521)	(719,333)

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