Telo Genomics : Consolidated Financial Statements

Consolidated Financial Statements (Expressed in Canadian Dollars)

Telo Genomics Corp.

For the Years Ended June 30, 2023 and 2022

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Crowe MacKay LLP

Elveden House 1700,

717 - 7 Avenue SW

Calgary, AB T2P 0Z3

Main [phone]

Fax [phone]

www.crowemackay.ca

Independent Auditor's Report

To the Shareholders of Telo Genomics Corp.

Opinion

We have audited the consolidated financial statements of Telo Genomics Corp. (the "Group"), which comprise the consolidated statement of financial position as at June 30, 2023 and the consolidated statements of loss and comprehensive loss, changes in equity and cash flows for the year then ended, and notes to the consolidated financial statements, including a summary of significant accounting policies.

In our opinion, the accompanying consolidated financial statements present fairly, in all material respects, the consolidated financial position of the Group as at June 30, 2023, and its consolidated financial performance and its consolidated cash flows for the year then ended in accordance with International Financial Reporting Standards.

Basis for Opinion

We conducted our audit in accordance with Canadian generally accepted auditing standards. Our responsibilities under those standards are further described in the Auditor's Responsibilities for the Audit of the Consolidated Financial Statements section of our report. We are independent of the Group in accordance with the ethical requirements that are relevant to our audit of the consolidated financial statements in Canada, and we have fulfilled our other ethical responsibilities in accordance with these requirements. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion.

Material Uncertainty Related to Going Concern

We draw attention to Note 4 to the consolidated financial statements which describes the material uncertainty that may cast significant doubt on the Group's ability to continue as a going concern. Our opinion is not modified in respect of this matter.

Key Audit Matters

Key audit matters are those matters that, in our professional judgment, were of most significance in our audit of the consolidated financial statements of the current period. These matters were addressed in the context of our audit of the consolidated financial statements as a whole, and in forming our opinion thereon, and we do not provide a separate opinion on these matters. Other than the matter described in the Material Uncertainty Related to Going Concern section, we have determined there are no key audit matters to be communicated in our report.

Other matter

The consolidated financial statements of Telo Genomics Corp. for the year ended June 30, 2022 were audited by another auditor who expressed an unmodified opinion on those statements on September 26, 2022.

Other Information

Management is responsible for the other information. The other information comprises:

• Management's Discussion and Analysis

Our opinion on the consolidated financial statements does not cover the other information and we do not express any form of assurance conclusion thereon.

In connection with our audit of the consolidated financial statements, our responsibility is to read the other information identified above and, in doing so, consider whether the other information is materially inconsistent with the consolidated financial statements or our knowledge obtained in the audit, or otherwise appears to be materially misstated.

We obtained the other information prior to the date of this auditor's report. If, based on the work we have performed on this other information, we conclude that there is a material misstatement of this other information, we are required to report that fact in this auditor's report. We have nothing to report in this regard.

Responsibilities of Management and Those Charged with Governance for the Consolidated Financial Statements

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

In preparing the consolidated financial statements, management is responsible for assessing the Group's ability to continue as a going concern, disclosing, as applicable, matters related to going concern and using the going concern basis of accounting unless management either intends to liquidate the Group or to cease operations, or has no realistic alternative but to do so.

Those charged with governance are responsible for overseeing the Group's financial reporting process.

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

Our objectives are to obtain reasonable assurance about whether the consolidated financial statements as a whole are free from material misstatement, whether due to fraud or error, and to issue an auditor's report that includes our opinion. Reasonable assurance is a high level of assurance, but is not a guarantee that an audit conducted in accordance with Canadian generally accepted auditing standards will always detect a material misstatement when it exists. Misstatements can arise from fraud or error and are considered material if, individually or in the aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of these consolidated financial statements.

As part of an audit in accordance with Canadian generally accepted auditing standards, we exercise professional judgment and maintain professional skepticism throughout the audit. We also:

• Identify and assess the risks of material misstatement of the consolidated financial statements, whether due to fraud or error, design and perform audit procedures responsive to those risks, and obtain audit evidence that is sufficient and appropriate to provide a basis for our opinion. The risk of not detecting a material misstatement resulting from fraud is higher than for one resulting from error, as fraud may involve collusion, forgery, intentional omissions, misrepresentations, or the override of internal control.
• Obtain an understanding of internal control relevant to the audit in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Group's internal control.
• Evaluate the appropriateness of accounting policies used and the reasonableness of accounting estimates and related disclosures made by management.

• Conclude on the appropriateness of management's use of the going concern basis of accounting and, based on the audit evidence obtained, whether a material uncertainty exists related to events or conditions that may cast significant doubt on the Group's ability to continue as a going concern. If we conclude that a material uncertainty exists, we are required to draw attention in our auditor's report to the related disclosures in the consolidated financial statements or, if such disclosures are inadequate, to modify our opinion. Our conclusions are based on the audit evidence obtained up to the date of our auditor's report. However, future events or conditions may cause the Group to cease to continue as a going concern.
• Evaluate the overall presentation, structure and content of the consolidated financial statements, including the disclosures, and whether the consolidated financial statements represent the underlying transactions and events in a manner that achieves fair presentation.
• Obtain sufficient appropriate audit evidence regarding the financial information of the entities or business activities within the Group to express an opinion on the consolidated financial statements. We are responsible for the direction, supervision and performance of the group audit. We remain solely responsible for our audit opinion.

We communicate with those charged with governance regarding, among other matters, the planned scope and timing of the audit and significant audit findings, including any significant deficiencies in internal control that we identify during our audit.

We also provide those charged with governance with a statement that we have complied with relevant ethical requirements regarding independence, and to communicate with them all relationships and other matters that may reasonably be thought to bear on our independence, and where applicable, related safeguards.

From the matters communicated with those charged with governance, we determine those matters that were of most significance in the audit of the consolidated financial statements of the current period and are therefore the key audit matters. We describe these matters in our auditor's report unless law or regulation precludes public disclosure about the matter or when, in extremely rare circumstances, we determine that a matter should not be communicated in our report because the adverse consequences of doing so would reasonably be expected to outweigh the public interest benefits of such communication.

The engagement partner on the audit resulting in this independent auditor's report is Todd Freer.

"Crowe MacKay LLP"

Chartered Professional Accountants

Calgary, Canada

October 30, 2023

Telo Genomics Corp.

Consolidated Statements of Financial Position (Expressed in Canadian dollars)

	Note	As at June 30,	As at June 30,
	2023	2022
Assets		$	$
Current assets	6
Cash and cash equivalents	2,673,247	2,692,965
Amounts receivable		63,763	37,977
Prepaid expenses		105,934	55,606
		2,842,944	2,786,548
Non-current assets
Property and equipment	7	66,260	30,312
Intangible asset	8	16,371	16,371
		82,631	46,683
Total assets		2,925,575	2,833,231
Liabilities and Equity
Current liabilities
Accounts payable and accrued liabilities	11	280,369	190,072
Long-term loan	9	32,500	40,000
Total liabilities		312,869	230,072
Equity
Share capital	10	21,687,372	19,105,745
Shares to be issued	10	42,000	-
Contributed surplus	10	6,001,551	5,794,859
Deficit		(25,118,217)	(22,297,445)
Total equity		2,612,706	2,603,159
Total liabilities and equity		2,925,575	2,833,231

Approved on behalf of the board of directors
/s/ Dr. Sabine Mai	/s/ Hugh Rogers
Director	Director
Going concern (Note 4)

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Telo Genomics Corp.

Consolidated Statements of Loss and Comprehensive Loss (Expressed in Canadian dollars)

		For the year	For the year
		ended	ended
		June 30,	June 30,
	Notes	2023	2022
Expenses		$	$
General and administrative	11,12	1,457,042	986,628
Research and development	11,12	1,363,730	1,123,826
		(2,820,772)	(2,110,454)
Net loss and comprehensive loss		(2,820,772)	(2,110,454)
for the year

Basic and diluted loss per share Weighted average number of common

shares used in computing basic and diluted loss per share

(0.05)(0.04)

60,152,278 58,661,088

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Telo Genomics Corp.

Consolidated Statements of Changes in Equity (Expressed in Canadian dollars)

For the years ended June 30, 2023 and 2022

	Number of	Share	Contributed	Deficit	Total
	Shares	capital	Surplus
		$	$	$	$
Balance, June 30, 2021	55,542,893	18,234,410	5,638,139	(20,186,991)	3,685,558
Private placement:
Gross proceeds	390,000	195,000	-	-	195,000
Finders fees - cash	-	(13,650)	-	-	(13,650)
Finders fees - warrants	-	(5,312)	5,312	-	-
Other share issuance costs	-	(3,011)	-	-	(3,011)
Warrant exercises	3,491,540	698,308	-	-	698,308
Share-based compensation	-	-	151,408	-	151,408
Net loss for the year	-	-	-	(2,110,454)	(2,110,454)
Balance, June 30, 2022	59,424,433	19,105,745	5,794,859	(22,297,445)	2,603,159

	Number of	Share	Shares to	Contributed
	Shares	capital	be issued	Surplus	Deficit	Total
		$	$	$	$	$
Balance, June 30, 2022	59,424,433	19,105,745	-	5,794,859	(22,297,445)	2,603,159
Private placement:
Gross proceeds	11,335,500	2,833,875	-	-	-	2,833,875
Finders fees - cash	-	(173,504)	-	-	-	(173,504)
Finders fees - warrants	-	(101,759)	-	101,759	-	-
Other share issuance costs	-	(92,220)	42,000	-	-	(50,220)
Share-based compensation	-	-	-	160,168	-	160,168
Issuance of shares on exercise of	400,000	115,235	-	(55,235)	-	60,000
options
Net loss for the year	-	-	-	-	(2,820,772)	(2,820,772)
Balance, June 30, 2023	71,159,933	21,687,372	42,000	6,001,551	(25,118,217)	2,612,706

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Telo Genomics Corp.

Consolidated Statements of Cash Flows (Expressed in Canadian dollars)

		For the year	For the year
	Notes	ended June 30,	ended June 30,
	2023	2022
		$	$
Operating activities:
Net loss for the year		(2,820,772)	(2,110,454)
Depreciation of property and equipment	7,12	33,114	56,956
Share-based compensation	10(d),12	160,168	151,408
Changes in non-cash working capital accounts
Amounts receivable		(25,786)	58,753
Prepaid expenses		(50,328)	(28,070)
Accounts payable and accrued liabilities		74,045	76,416
Cash used in operating activities		(2,629,559)	(1,794,991)
Investing activity:	7
Property and equipment additions	(69,062)	(25,193)
Cash flows used in investing activity		(69,062)	(25,193)
Financing activities:	10(b)
Proceeds from issuance of common shares	2,833,875	195,000
Finders' fees - cash	10(b)	(173,504)	(13,650)
Share issuance costs	10(b)	(33,968)	(3,011)
Proceeds from exercise of warrants	10(e)	-	698,308
Proceeds from exercise of options	10(d)	60,000	-
Loan repayment	9	(7,500)	-
Cash flows from financing activities		2,678,903	876,647
Decrease in cash and cash equivalents		(19,718)	(943,537)
Cash and cash equivalents, beginning of year		2,692,965	3,636,502
Cash and cash equivalents, end of year		2,673,247	2,692,965
Supplemental Disclosures:		101,759
Warrants issued for finders' fees		5,312
Share issuance cost included in accounts payable and accrued		16,252	-
liabilities		42,000
Shares to be issued		-
Contributed surplus reclassified to share capital on exercise of stock		55,235	-
options

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Telo Genomics Corp.

For the Years Ended June 30, 2023 and 2022 Notes to the Consolidated Financial Statements (Expressed in Canadian dollars)

1. Reporting entity
   Telo Genomics Corp. (the "Company") was incorporated in Canada on May 25, 2014 and its shares are listed on the TSX Venture Exchange as a Tier 2 issuer under the symbol "TELO", the OTCQB under the symbol "TDSGF" and the Frankfurt Stock Exchange in Germany under the symbol "3D0". The Company's registered office is located at 1200-750 West Pender Street, Vancouver, BC V6C 2T8 and its corporate head office is located at MaRS Centre, South Tower, 101 College Street, Suite 200, Toronto, Ontario, M5G 1L7.
   The Company, through its wholly owned subsidiary Telo Genomics Holdings Corp., is developing diagnostic and prognostic products that may save lives, improve the quality of life, and reduce the cost of care associated with numerous diseases that display genomic instability.
2. Statement of compliance
   The consolidated financial statements have been prepared in accordance with International Financial Reporting Standards ("IFRS") as issued by the International Accounting Standards Board ("IASB").
   The consolidated financial statements were approved and authorized for issue by the Board of Directors on October 27, 2023.
3. Basis of preparation
4. 1. Basis of measurement
      These consolidated financial statements have been prepared on the historical cost basis except for certain financial instruments at fair value through profit or loss which are measured at fair value. These consolidated financial statements have been prepared using the accrual basis of accounting, except of cash flow information.
   2. Basis of consolidation
      These consolidated financial statements comprise the financial statements of the Company and its wholly owned subsidiary, Telo Genomics Holdings Corp., a corporation incorporated under the Canadian Business Corporations Act.
      Subsidiaries are fully consolidated from the date of acquisition, being the date in which the Company obtains control, and continue to be consolidated until the date that such control ceases. The financial statements of the subsidiaries are prepared for the same reporting period as the parent company using consistent accounting policies. All intra-group balances, income and expenses, equity and dividends resulting from intra-group transactions have been eliminated upon consolidation.
   3. Functional and presentation currency
      These consolidated financial statements are presented in Canadian dollars, which is the functional currency of the Company and its subsidiary.
   4. Significant accounting judgments, estimates and assumptions
      The preparation of the consolidated financial statements requires management to use judgment in applying its accounting policies and estimates and assumptions about the future.
      Estimates and other judgments are continuously evaluated and are based on management's experience and other factors, including expectations about future events that are believed to be reasonable under the circumstances.

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Telo Genomics Corp.

For the Years Ended June 30, 2023 and 2022 Notes to the Consolidated Financial Statements (Expressed in Canadian dollars)

3. Basis of preparation (continued)

1. Significant accounting judgments, estimates and assumptions (continued) Significant estimates
   The preparation of the consolidated financial statements in accordance with IFRS requires the Company to make estimates when applying accounting policies. The most significant estimates are as follows:
2. • Property and equipment - Property and equipment is depreciated over the estimated useful life of the assets. Changes in the estimated useful lives could significantly increase or decrease the amount of depreciation recorded during the year and the carrying value of property and equipment.
   • Share-basedcompensation - The fair value of share-based payments and warrants is subject to the limitations of the Black-Scholes option pricing model that incorporates market data and involves uncertainty in estimates used by management in the assumptions. Because the Black-Scholes option pricing model requires the input of highly subjective assumptions, including the volatility of share prices, changes in subjective input assumptions can materially affect the fair value estimate.

Significant judgments

The preparation of the consolidated financial statements in accordance with IFRS requires the Company to make judgments, apart from those involving estimates, in applying accounting policies. The most significant judgments in applying the Company's financial statements are as follows:

• Going concern - The assessment of whether the going concern assumption is appropriate requires management to take into account all available information about the future, which is at least, but not limited to,12 months from the end of the reporting period. The Company is aware that material uncertainties exist related to events or conditions that may cast significant doubt upon the Company's ability to continue as a going concern.
• Research and development - Management monitors the progress of its research and development activities. Significant judgment is required to distinguish between the research and development phases and if development cost capitalization criteria are met. Development costs are recognized as an asset when the following criteria are met:
• 1. technical feasibility; (ii) intention to complete the project; (iii) the ability to generate future economic benefits; (iv) availability of technical and financial resources; and (v) the ability to measure the expenditures reliably. Management considers these factors in aggregate and applies significant judgment to determine whether the product is feasible. To date, management's assessment has concluded that the capitalization criteria have not been met; hence, research and development costs have been expensed as incurred.

4. Going concern

These consolidated financial statements have been prepared on a going concern basis which contemplates the realization of assets and the payment of liabilities in the ordinary course of business. Should the Company be unable to continue as a going concern, it may be unable to realize the carrying value of its assets and to meet its liabilities as they become due.

The Company is a research and development stage company and as such is primarily dependent on the funding from investors to continue as a going concern. In the future, the Company's ability to continue as a going concern will be dependent upon its ability to attain profitable operations and generate funds there from, and/or to continue to obtain funding through equity or debt financings sufficient to meet current and future obligations.

These consolidated financial statements do not reflect any other adjustments or reclassification of assets and liabilities which would be necessary if the Company were unable to continue its operations. Such adjustments could be material. The disclosed factors indicate the existence of material uncertainties that may cast significant doubt about the Company's ability to continue as a going concern.

During the year ended June 30, 2023, the Company incurred a net loss of $2,820,772 (2022 - $2,110,454) and has an accumulated deficit of $25,118,217 (2022 - $22,297,445).

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