01 Quantum Inc. — Interim / Quarterly Report 2023

Mar 21, 2023

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01 Communique Laboratory Inc.

Interim Consolidated Financial Statements

for the period ended January 31, 2023

(Unaudited)

TSX-V : ONE; OTCQB: OONEF

Dated: March 20, 2023

01 COMMUNIQUE LABORATORY INC.

Consolidated Statements of Financial Position

(In Canadian dollars) Unaudited

As at January 31, 2023 and 2022

	31-Jan-23 31-Oct-22
Assets Current assets Cash and cash equivalents Guaranteed investment certificate (note 4) Accounts receivable (note 2(a)) Prepaid expenses and other assets Plant and equipment (note 5) Investment Total assets Liabilities and Shareholders' Deficit Current liabilities Accounts payable Deferred revenue Lease liability (note 6) Canadian emergency business loan (note 16) Non-current liabilities Lease liability (note 6) Canadian emergency business loan (note 16) Total liabilities Shareholders' deficit Share capital (note 7(a)) Contributed surplus Warrants (note 7(c)) Deficit Contingencies (note 10) Total liabilities and shareholders' deficit	$ 463,720 $ 487,179 120,000 150,000 132,116 316,270 54,086 64,131
	769,922 1,017,580 77,170 90,911 1,500 1,500
	$848,592 $1,109,991
	$ 144,303 $ 272,784 5,092 5,487 46,883 46,349 40,000 -
	236,278 364,620 8,377 20,517 - 40,000
	244,655 385,137 44,282,090 44,214,590 6,142,441 6,083,350 16,875 16,875 (49,837,469) (49,589,961)
	603,937 724,854
	$848,592 $1,109,991

See accompanying notes to the consolidated financial statements.

4

01 COMMUNIQUE LABORATORY INC.

Interim Consolidated Statements of Operations and Comprehensive Loss (In Canadian dollars) Unaudited

For the three month periods ended January 31, 2023 and 2022

Revenue (note 8,11) Expenses: (note 13) Selling, general and administrative Research and development Withholding taxes	three months ended 31-Jan-23 31-Jan-22
	$ 106,803 $ 189,031 199,225 201,502 147,683 175,549 10,250 18,389
	357,158 395,440
Loss before other income and expense Interest income Interest expense	(250,355) (206,409) 3,644 186 (797) (1,418)
Loss for theperiod and comprehensive loss	$ (247,508) $ (207,641)
Loss per common share (note 9) Basic Diluted Weighted average number of common shares (note 9) Basic Diluted	$ (0.00) $ (0.00) $ (0.00) $ (0.00) 96,101,646 94,451,221 96,101,646 94,451,221

5

01 COMMUNIQUE LABORATORY INC.

Interim Consolidated Statements of Changes in Shareholders' Equity (In Canadian dollars) Unaudited

For the three month periods ended January 31, 2023 and 2022

						Total
	Number of	Share	Contributed			shareholders’
January 31,2023	shares	Capital	Surplus	Warrants	Deficit	equity
Balance October 31, 2022	95,802,054	$44,214,590	$6,083,350	$ 16,875	$(49,589,961)	$ 724,854
Comprehensive loss for the
period	-	-	-	-	(247,508)	(247,508)
Private placement (note 6
(a) (i))	562,500	67,500	-	-	-	67,500
Stock based compensation
expense (note 6 (b))	-	-	59,091	-	-	59,091
Balance, January 31,2023	96,364,554	$44,282,090	$6,142,441	$16,875	$(49,837,469)	$ 603,937

January31,2022	Total Number of Share Contributed shareholders' shares Capital Surplus Warrants Deficit deficit
Balance October 31, 2021 Comprehensive loss for the period Stock based compensation expense Balance, January 31, 2022	94,451,221 $43,963,582 $5,890,297 $93,533 $(48,927,957) $1,019,455 (207,641) (207,641) 49,600 49,600
	94,451,221 $43,963,582 $5,937,197 $93,533 $(49,135,598) $858,714

See accompanying notes to consolidated financial statements.

6

01 COMMUNIQUE LABORATORY INC.

Consolidated Statements of Cash Flows (In Canadian dollars) Unaudited

For the three month periods ended January 31, 2023 and 2022

Cash provided by (used in): Operating activities: Loss and comprehensive loss for the period Adjustments to reconcile loss for the period to net cash flows from operating activities: Depreciation of property and equipment Amortization of right-of-use asset (note 16) Stock-based compensation expense Change in non-cash working capital (note 10) Financing activities: Proceeds from private placement Lease payments made Investing activities: Proceeds from guaranteed investment certificate Decrease in cash Cash, beginning of period Cash, end of period	three months ended 31-Jan-23 31-Jan-22
	$ (247,508) $ (207,641) 2,522 2,386 11,219 11,219 59,091 46,900 65,323 24,030
	(109,353) (123,106) 67,500 - (11,606) (10,572)
	55,894 (10,572) 30,000 - (23,459) (133,678) 487,179 994,924
	$463,720 $861,246

See accompanying notes to consolidated financial statements.

7

Notes to Consolidated Financial Statements (In Canadian dollars) Unaudited

01 COMMUNIQUE LABORATORY INC.

Three month periods ended January 31, 2023 and 2022

01 Communique Laboratory Inc. (the "Company") was incorporated on October 7, 1992 under the laws of Ontario. The Company’s cybersecurity business unit focuses on its IronCAP™ patented cryptographic system. The Company’s remote access business unit focuses on its I’m InTouch suite of secure remote access services and products.

The Company's head office is located at 789 Don Mills Road, Suite 700, Toronto, Ontario M3C 1T5 and its common shares are traded on the TSX Venture Exchange ("TSX-V") under the symbol ONE and quoted on the OTCQB market in the United States under the symbol OONEF.

1. Significant Accounting Policies:

The accounting policies set out below have been applied consistently to all years presented in these consolidated financial statements, unless otherwise indicated:

(a) Statement of compliance:

These consolidated financial statements, including comparatives, are prepared by management in accordance with International Financial Reporting Standards ("IFRS") as issued by the International Accounting Standards Board (“IASB”) effective for the Company’s reporting for the three month periods ended January 31, 2023 and 2022. These consolidated financial statements reflect management's best estimates and judgment based on information currently available.

These consolidated financial statements were authorized for issue by the Board of Directors on March 20, 2023.

(b) Basis of presentation:

These consolidated financial statements include the accounts of the Company and its wholly owned subsidiaries, 01 Communique (GP) Inc. and 01 Communique Laboratory Hong Kong Limited. Intercompany transactions and balances are eliminated on consolidation.

Subsidiaries consist of entities over which the Company is exposed to, or has rights to, variable returns as well as the ability to affect those returns through the power to direct the relevant activities of the entity. Generally, the Company has a shareholding of more than one half of the voting rights in its subsidiaries. The effects of potential voting rights that are currently exercisable are considered when assessing whether control exists. Subsidiaries are fully consolidated from the date control is transferred to the Company, and are deconsolidated from the date control ceases. The financial statements include all the assets, liabilities, revenues, expenses and cash flows of the Company and its subsidiaries after eliminating inter-entity balances and transactions.

8

Notes to Consolidated Financial Statements (In Canadian dollars) Unaudited

01 COMMUNIQUE LABORATORY INC.

Three month periods ended January 31, 2023 and 2022

The consolidated financial statements have been prepared on the historical cost basis, except for certain items which may be accounted for at fair value as further discussed in subsequent notes, using the Significant accounting policies and measurement bases summarized below.

The consolidated financial statements have been prepared using the accrual basis of accounting, except for cash flow information.

The consolidated financial statements are presented in Canadian dollars, which is the Company's functional currency.

Presentation of the consolidated statements of financial position differentiates between current and non-current assets and liabilities. The consolidated statements of operations and comprehensive loss are presented using the functional classification for expenses.

These consolidated financial statements have been prepared on a going concern basis, which assumes that the Company will continue in operation for the foreseeable future and be able to realize its assets and discharge its liabilities in the normal course of business. The Company has sustained substantial losses and negative cash flows from operations in recent years and its ability to continue as a going concern is dependent on the Company’s ability to generate future profitable operations and cash flows and/or obtain additional financing.

Should the Company not be able to generate sufficient cash flows to become profitable in the future and generate sufficient working capital to fund operations, it will become necessary to secure additional sources of financing. However, there can be no assurances that any such financing will be available to the Company on acceptable terms or at all. These consolidated financial statements do not give effect to any adjustments which would be necessary should the Company be unable to continue as a going concern and, therefore, be required to realize its assets and discharge its liabilities in other than the normal course of business and at amounts different from those reflected in these consolidated financial statements.

9

Notes to Consolidated Financial Statements (In Canadian dollars) Unaudited

01 COMMUNIQUE LABORATORY INC.

Three month periods ended January 31, 2023 and 2022

2. Financial Instruments and Financial Risk Management:

• (a) Financial instruments:

The Company has classified its financial instruments as follows:

		31-Jan- 23		31-Oct-22
Financial assets:
Financial assets measured at amortized cost:
Cash	$	463,720	$	487,179
Guaranteed investment certificate		120,000		150,000
Accounts receivable		132,116		316,270
Financial assets measured at FVTPL:
Investment		1,500		1,500
Financial liabilities:
Financial liabilities measured at amortized cost:
Accounts payable and accrued liabilities		144,303		272,784
Canadian emergency business loan		40,000		40,000
Accounts receivable comprise the following:
		31-Jan-23		31-Oct-22
Trade receivables	$	65,073	$	239,859
Investment tax credits receivable		35,000		35,000
HST receivable		32,043		41,411
	$	132,116	$	316,270

• (b) Financial risk management:

(i) Overview:

The Company has exposure to credit risk, liquidity risk and market risk. The Company's Board of Directors has overall responsibility for the establishment and oversight of the Company's risk management framework and reviews the Company's policies on an ongoing basis.

10

Notes to Consolidated Financial Statements (In Canadian dollars) Unaudited

01 COMMUNIQUE LABORATORY INC.

Three month periods ended January 31, 2023 and 2022

(a) Credit risk:

Credit risk is the risk of financial loss to the Company if a customer or counterparty to a financial instrument fails to meet its contractual obligations, and arises principally from the Company's cash and accounts receivable. The carrying amount of financial assets represents the maximum credit exposure.

The Company's exposure to credit risk with its customers is influenced mainly by the individual characteristics of each customer. The Company generally does not require collateral for sales on credit. The Company closely monitors extensions of credit and has not experienced significant credit losses in the past. At January 31, 2023 and October 31, 2022, the Company had a nil balance in the allowance for doubtful accounts and had no material past due trade receivables.

The Company invests its cash with the objective of maintaining safety of principal and providing adequate liquidity to meet all current payment obligations. The Company invests its cash with Canadian chartered banks that are of high credit quality. Given these high credit ratings, the Company does not expect these counterparties to fail to meet their obligations.

Concentrations of credit risk:

There was one customer that comprised 96% (2022 – 97%) of the Company's total revenue for the three months ended January 31, 2023. No other customers exceeded 10% of revenue during the current or prior period. The customer comprising 96% of revenue in 2022 (2022 – 97%) comprised 100% of trade receivables, as at January 31, 2023 (2022 – 100%).

(b) Liquidity risk:

Liquidity risk is the risk that the Company will not be able to meet its financial obligations as they come due. The Company's approach to managing liquidity is to ensure that it will have sufficient liquidity to meet its liabilities when due. To the extent that the Company does not believe it has sufficient liquidity to meet these obligations, management will consider securing additional funds through equity or debt transactions.

However, the Company has sustained substantial losses in recent years and its ability to continue as a going concern is dependent on the Company's ability to generate future profitable operations and cash flows and/or obtain additional financing, which would be contingent upon market and other conditions in the future, which are beyond the Company's control.

11

Notes to Consolidated Financial Statements (In Canadian dollars) Unaudited

01 COMMUNIQUE LABORATORY INC.

Three month periods ended January 31, 2023 and 2022

At January 31, 2023, the Company had financial assets, consisting of cash, guaranteed investment certificate and accounts receivable of $715,836 (Oct. 31, 2022 - $953,449) and financial liabilities, consisting of accounts payable and accrued liabilities, the Canadian emergency business loan and the lease liability of $239,563 (Oct. 31, 2022 - $379,650).

The Company manages its liquidity risk by continuously monitoring forecasted and actual cash flows.

(c) Market risk:

Market risk is the risk that the fair value or future cash flows of a financial instrument will fluctuate because of changes in market prices. Market risk is comprised of currency risk, interest rate risk and market price risk. The Company is exposed to currency risk and interest rate risk.

Currency risk:

Net monetary assets and liabilities due in U.S. dollars include accounts payable of USD 10,621 (Oct. 31, 2022 - USD 21,478) and cash of USD 311,545 (Oct. 31, 2022 – USD 331,564). Net monetary assets due in Japanese Yen include accounts payable of 655,564 Yen (Oct. 31, 2022 - 2,607,152 Yen), $6,507 CAD equivalent, (Oct. 31, 2022 - $23,985) and accounts receivable of 6,555,641 Yen, $65,073 CAD equivalent (October 31, 2022 - 26,071,630 Yen, $239,859 CAD equivalent).

The Company reports its results in Canadian dollars. The Company markets its products in Canada, the United States ("U.S.") and other jurisdictions, including Japan. Sales to Japanese customers are primarily denominated in the Japanese Yen and sales to U.S. and other customers outside Canada in U.S. dollars. Substantially all of the Company's sales are either in U.S. dollars or the Japanese Yen. As a result, the Company is subject to currency risk from sales made and expenses incurred in U.S. dollars and the Japanese Yen. The Company does not hedge the risk related to fluctuations in the exchange rate between the U.S. dollar or the Japanese Yen and the Canadian dollar from either the date of the sales transaction to the collection date due or from the date an expense is incurred to the date the payment is made. As at January 31, 2023, the Company had net monetary assets in U.S. dollars of USD 300,924 (Oct. 31, 2022 – USD 310,086) and net monetary assets in the Japanese Yen of 5,900,077 (October 31, 2022 – 23,464,478 Japanese Yen). An increase or decrease in the U.S. to Canadian dollar exchange rate by 10% as at January 31, 2023 would have resulted in a gain in the amount of $41,227 (2022 - $43,800) or a loss of $41,227 (2022 - $43,800), respectively. An increase or decrease in the Japanese Yen to Canadian dollar exchange rate by 10%

12

Notes to Consolidated Financial Statements (In Canadian dollars) Unaudited

01 COMMUNIQUE LABORATORY INC.

Three month periods ended January 31, 2023 and 2022

as at January 31, 2023 would have resulted in a gain in the amount of $5,856 (2022 - nil) or a loss of $5,856 (2022 - nil), respectively.

Interest rate risk:

The Company is exposed to interest rate risk on its fixed rate financial instruments. Fixed rate instruments subject the Company to fair value interest rate risk, as the fair value of the financial instrument fluctuates due to changes in market interest rates. Financial instruments subject to interest rate risk include demand deposits and the liability component of the debenture.

• (ii) Fair values of financial instruments:

All financial instruments measured at fair value are categorized into one of three hierarchy levels, described below, for disclosure purposes. Each level is based on the transparency of the inputs used to measure the fair values of assets and liabilities:

Level 1 – Values based on unadjusted quoted prices in active markets that are accessible at the measurement date for identical assets of liabilities.

Level 2 – Values based on quoted prices in markets that are not active or model inputs that are observable either directly or indirectly for substantially the full term of the asset or liability.

Level 3 – Values based on prices or valuations techniques that require inputs that are both unobservable and significant to the overall fair value measurement.

As at January 31, 2023 and October 31, 2022, the Company measures its investment at fair value, and it is categorized as level 3.

3. Capital Risk Management:

The Company's primary objective with respect to its capital management is to ensure that it has sufficient cash resources to fund operations and discharge liabilities as they become due. Management performs regular reviews of its forecasted cash flow requirements to ensure cash flow needs are addressed.

The Board does not establish quantitative return on capital criteria for management, but rather relies on the expertise of the Company’s management to sustain future development of the business. The Company considers its capital to consist of shareholders’ equity.

Management reviews its capital management approach on an ongoing basis and believes that this approach, given the relative size of the Company, is reasonable. There were no significant

13

Notes to Consolidated Financial Statements (In Canadian dollars) Unaudited

01 COMMUNIQUE LABORATORY INC.

Three month periods ended January 31, 2023 and 2022

changes in the Company’s approach to capital management during the three month periods ended January 31, 2023 and 2022.

The Company and its subsidiaries are not subject to any capital requirements imposed by a lending institution or regulatory body, other than of the TSX Venture Exchange (“TSXV”) which requires adequate working capital or financial resources of the greater of (i) $50,000 and (ii) an amount required to maintain operations and cover general and administrative expenses for a period of 6 months. As at January 31, 2023 and October 31, 2022, the Company believes it is compliant with the policies of the TSXV.

4. Guaranteed Investment Certificate:

		31-Jan-23	31-Oct-22
i)	One year prime linked cashable guaranteed investment	$ 120,000	$ 150,000
	certificate. At the date of issuance the rate was 3% per
	annum. Maturity date is October 9, 2023.
		$ 120,000	$ 150,000

14

Notes to Consolidated Financial Statements (In Canadian dollars) Unaudited

01 COMMUNIQUE LABORATORY INC.

Three month periods ended January 31, 2023 and 2022

5. Property and Equipment:

			Furniture and
			fixtures and
	Computer	Communications	leasehold	Right of Use
	systems	equipment	improvements		Asset	Total
Cost
Balance at October 31,
2021	$ 558,655	$ 3,394	$ 99,513	$	134,634	$ 796,196
Additions	16,759	-	-		-	16,759
Dispositions	-	-	-		-	-
Balance at October 31,
2022	$ 575,414	$ 3,394	$ 99,513	$	134,634	$ 812,955
Additions	-	-	-		-	-
Balance at January 31,
2023	$575,414	$3,394	$99,513	$	134,634	$812,955
Depreciation
Balance at October 31,
2021	$ 544,941	$ 877	$ 98,616	$	26,178	$ 670,612
Additions	5,319	340	897		44,876	51,432
Dispositions	-	-	-		-	-
Balance at October 31,
2022	$ 550,260	$ 1,217	$ 99,513	$	71,054	$ 722,044
Additions	2,437	85	-		11,219	13,741
Balance at January 31,
2023	$552,697	$1,302	$99,513	$	82,273	$735,785
Carry amounts
Balance at October 31,
2022	$ 25,154	$ 2,177	$ -	$	63,580	$ 90,911
Balance at January 31,
2023	$22,717	$2,092	$-	$	52,361	$77,170

6. Lease Commitment:

The Company's head office, located at 789 Don Mills Road, Suite 700, Toronto, Ontario M3C 1T5, is leased and considered to be a right-of-use asset. On March 1, 2021 the lease was amended with the expiry date extended to March 31, 2024 with no renewal term. Lease payments (including the Company’s share of property taxes, operating costs, utilities and extra services) were $11,606 (2022- $10,572).

The lease liability has been measured by discounting future lease payments at the incremental borrowing rate at March 1, 2021. The incremental borrowing rate applied was determined to be 5.0% per annum for the lease and represents the Company's best estimate of the rate of interest that it would expect to pay to borrow, on a collateralized basis, over a similar term, an amount

15

01 COMMUNIQUE LABORATORY INC. Notes to Consolidated Financial Statements (In Canadian dollars) Unaudited

Three month periods ended January 31, 2023 and 2022

equal to the lease payments in the current economic environment. As a result, the Company recorded an increase in capital assets, right of use asset, of $134,634 and an increase in lease liability of $134,634. The carrying value included as part of property and equipment as at January 31, 2023 is $52,361 (Oct. 31, 2022 - $63,580). The lease liability has been broken down between current and non-current amounts. The current lease liability as at October 31, 2022 is $46,883 (Oct. 31, 2022 - $46,349) and the non-current lease liability is $8,377 (Oct. 31, 2022 – $20,517).

The following details the changes in the lease liability for the three month period ended January 31, 2023:

Balance, October 31, 2022	$ 66,866
Interest expenses	739
Undiscounted contractual lease payments made	(12,345)
Balance,January31,2023	$55,260

7. Shareholders' Equity:

(a) Share capital authorized, issued and outstanding:

		31-Jan-23		31-Oct-22
Authorized:
50,000 Series A preference shares
Unlimited preference shares,
issuable in series
Unlimited common shares
Issued: 96,364,554
common shares
(2022 – 95,802,054)	$	44,282,090	$	44,214,590

The following details the changes in issued and outstanding shares for the three month period ended January 31, 2023.

	Common	shares
	Number	Amount
Balance, October 31, 2022	95,802,054	$ 44,214,590
Private placement (note 7 (a)(i))	562,500	67,500
Balance, January31, 2023	96,364,554	$ 44,282,090

16

Notes to Consolidated Financial Statements (In Canadian dollars) Unaudited

01 COMMUNIQUE LABORATORY INC.

Three month periods ended January 31, 2023 and 2022

(i) Private Placement:

On December 14, 2022, the Company completed a financing issuing by way of a private placement of 562,500 units at a price of $0.12 per unit for gross proceeds of $67,500.

(b) Employee option plan:

The Company maintains a share option plan (the "Plan") for the benefit of management, directors, officers, contractors and employees. The Plan is a "rolling" stock option plan, pursuant to which the maximum number of common shares that may be reserved for issuance under outstanding stock options will be 10% of the Company's issued and outstanding common shares, as constituted on the date of any grant of options under the Plan.

Options are granted under the Plan at the discretion of the Board of Directors at exercise prices determined as the trading prices of the Company's common shares on the TSX-V on the day preceding the effective date of the grant. In general, options granted under the Plan vest over the period of up to a maximum of five years from the grant date and expire by no later than the fifth anniversary of the date of grant.

Changes in outstanding options were as follows:

					Weighted
					average
					exercise
			Number		price
Options outstanding, October	31,	2022	5,425,000	$	0.14
Granted			1,285,000		0.12
Expired			(1,285,000)		0.07
Options outstanding, January	31,	2023	5,425,000	$	0.16

The following table summarizes information about stock options outstanding at January 31, 2023:

Range of exercise prices	Options outstanding Weighted average Weighted remaining average Number contractual exercise outstanding life (years) price	Options exercisable Weighted average Number exercise exercisable price 1,890,000 $ 0.09 450,000 $ 0.14 950,000 $ 0.35 3,290,000$0.17
$0.05 to $0.10 $0.14 to $0.23 $0.36 to $0.38	1,890,000 0.9 $ 0.09 2,335,000 3.7 $ 0.13 1,200,000 2.4 $ 0.32
	5,425,000 2.6 $0.16

17

Notes to Consolidated Financial Statements (In Canadian dollars) Unaudited

01 COMMUNIQUE LABORATORY INC.

Three month periods ended January 31, 2023 and 2022

There were 1,285,000 options granted during the three months ended January 31, 2023 (2022 – Nil). The average grant date fair value of options granted during the three months ended January 31, 2023 was $0.09. The fair value of each option granted has been estimated on the date of grant using the Black-Scholes fair value option-pricing model with the following assumptions used for grants for the three months ended January 31, 2023 : expected dividend yield of nil, expected volatility of 110%, weighted average risk-free interest rate of 3% and expected lives of four years.

Stock option expenses for the three months ended January 31, 2023 was $59,091 (2022 - $49,600).

Details of the stock options granted for the three months ended January 31, 2023 follows:

		Number	Exercise
Grant date	Expiry date	granted	price	Vesting date
20-Jan-23	20-Jan-27	1,285,000	$ 0.12	28,913 on each of:
				20-Jul-23
				20-Jan-24
				20-Jul-24
				20-Jan-25

(c) Warrants:

There were no changes in the share purchase warrants for the three months ended January 31, 2023. The following table summarizes information about warrants outstanding at October 31, 2022 and January 31, 2023:

			Weighted
			average	Weighted
			remaining	average
		Number	contractual life	exercise
	Exercise price	outstanding	(years)	price
Warrants issued on private
placement expiring on September
6, 2024	$ 0.35	281,250	1.60	$ 0.35

18

Notes to Consolidated Financial Statements (In Canadian dollars) Unaudited

01 COMMUNIQUE LABORATORY INC.

Three month periods ended January 31, 2023 and 2022

8. Revenues:

The significant categories of revenue recognized for the three month periods ended January 31, 2023 and 2022 are as follows :

	2023	2022
Royalty, development fees, engineering and
maintenance	$ 102,502	$ 183,886
Subscription fees	4,301	5,145
	$106,803	$189,031

9. Loss per Common Share:

The computations for basic and diluted loss per share for the three month periods ended January 31, 2023 and 2022 are as follows:

		2023		2022
Loss for the period	$	(247,508)	$	(207,641)
Weighted average number of common
shares outstanding:
Basic		96,101,646		94,451,221
Diluted		96,101,646		94,451,221
Loss per common share:
Basic	$	(0.00)	$	(0.00)
Diluted		(0.00)		(0.00)

As the Company is in a loss position for the three month periods ended January 31, 2023 and 2022, the inclusion of options and warrants in the calculation of diluted earnings per share would be anti-dilutive, and accordingly, were excluded from the diluted loss per share calculation.

19

Notes to Consolidated Financial Statements (In Canadian dollars) Unaudited

01 COMMUNIQUE LABORATORY INC.

Three month periods ended January 31, 2023 and 2022

10. Change in Non-Cash Operating Working Capital:

For the three month periods ended:

		31-Jan-23		31-Jan-22
Accounts receivable	$	184,154	$	33,422
Prepaid expenses and other assets		10,045		8,239
Accounts payable and accrued liabilities (note 12)		(128,481)		(16,763)
Deferred revenue		(395)		(868)
	$	65,323	$	24,030

11. Segmented Information:

The Company currently operates in one business segment, which is the development and marketing of its remote access software and its cryptographic software. The Company markets its products primarily in the United States, Asia/Pacific and Canada.

Revenue attributable to geographic location based on the location of the customer for the three month periods ended January 31, 2023 and 2022 is as follows:

		2023	2022
United States	$	1,620	$ 2,590
Canada		2,681	2,555
Asia/Pacific		102,502	183,886
	$	106,803	$189,031

Substantially all of the Company's identifiable assets as at January 31, 2023 and October 31, 2022 are located in Canada.

20

Notes to Consolidated Financial Statements (In Canadian dollars) Unaudited

01 COMMUNIQUE LABORATORY INC.

Three month periods ended January 31, 2023 and 2022

12. Related Party Transactions:

The remuneration of directors and other key management personnel of the Company during the three month periods ended January 31, 2023 and 2022 was as follows:

		2023		2022
Salaries and contractor fees	$	69,000	$	55,000
Stock-based compensation		45,291		6,750
Total	$	114,291	$	61,750

The Company's President and Chief Executive Officer (“CEO”) invoices the Company for his services that pertain to research and development pursuant to a contractor agreement. Fees paid under this agreement during 2023 were $24,500 (2022 - $16,500) and have been included in research and development expenses and are included in the salaries and contractor fees amounts in the above table. In addition, the CEO received a salary for 2023 of $21,000 (2022 - $21,000) which has been recorded in selling, general and administrative expenses, and is included in the salaries and contractor fees amounts in the above table.

Salary and contractor fees included in the above table owing to directors and other key management personnel and so included in accounts payable and accrued liabilities at January 31, 2023 is $5,890 (2021 - $7,300). They are unsecured, non-interest bearing with no fixed terms of payment and were paid subsequent to the end of the year.

13. Contingencies:

The Company is engaged in legal actions from time to time arising in the ordinary course of business. None of these actions, individually or in the aggregate, is expected to have a material adverse effect on the consolidated financial position or results of operations.

In March 2020, the COVID-19 outbreak was declared a global pandemic by the World Health Organization. The situation is dynamic and the ultimate duration and magnitude of the impact on the economy, capital markets and the Company's financial position cannot be reasonably estimated at this time. The Company is monitoring developments and will adapt its business plans accordingly. The actual and threatened spread of COVID-19 globally could adversely impact the Company's operations and ability to raise capital. To date the Company has been able to adapt its operations thereby minimizing the impact from the pandemic.

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01 COMMUNIQUE LABORATORY INC. Notes to Consolidated Financial Statements (In Canadian dollars) Unaudited

Three month periods ended January 31, 2023 and 2022

14. Operating Expenses:

The Company presents functional consolidated statements of operations in which expenses are aggregated according to the function to which they relate. The Company has identified the major functions as selling, general and administrative expenses; and research and development expenses. The following tables present the expenses based on their nature:

for the three months ended 31-Jan-23	Selling, general Research and and administration development Total
Salaries, contractors, commissions and benefits Stock-based compensation Other operating expenses	$ 74,688 $ 122,225 $ 196,913 59,091 - 59,091 65,446 25,458 90,904
	$199,225 $147,683 $346,908
for the three months ended 31-Jan-22	Selling, general Research and and administration development Total
Salaries, contractors, commissions and benefits Stock-based compensation Other operating expenses	$ 89,184 $ 148,854 $ 238,038 46,900 - 46,900 65,418 26,695 92,113
	$201,502 $175,549 $377,051

15. Investment in Talent Summit:

The Company made a minority investment in Talent Summit, a private company incorporated in The Bahamas. An amount of $1,500 has been recorded as an asset at the cost paid for the investment. An additional $30,000 is included in prepaid expenses and other assets as a deposit against a future investment in Talent Summit. Management has estimated that the fair value of the investment at January 31, 2023 is unchanged at $1,500.

16. Government Assistance:

The Canada Emergency Business Account (“CEBA”) provides interest-free bank loans, guaranteed by the government of Canada, of up to $60,000 to small businesses that qualify. The Company’s loan payable consists of a $60,000 CEBA loan that is interest free and repayable by December 31, 2023 with up to $20,000 of the loan being forgiven conditional upon the Company repaying the full amount due of $60,000 by maturity which is December 31, 2023. If these loans are not repaid by December 31, 2023, they will be extended for an additional 3-year term bearing an interest rate of 5% per annum and maturing on December 25, 2025. Management has assessed that it is likely the Company would be able to repay the balance of the loans by December 31, 2023 and accordingly, the total forgivable amount of $20,000 was recorded as government assistance income in 2021.

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