Acceleware Ltd. — Interim / Quarterly Report 2023

Aug 18, 2023

Acceleware Ltd.

Condensed Interim Financial Statements (Unaudited) For the Six Months Ended June 30, 2023 and 2022

(in Canadian dollars)

Acceleware Ltd.

Condensed Interim Financial Statements For the Six Months Ended June 30, 2023 and 2022 (in Canadian dollars)

Contents

Contents
Condensed Statements of Financial Position	3
Condensed Statements of Comprehensive Loss	4
Condensed Statements of Changes in Shareholders’ Equity	5
Condensed Statements of Cash Flows	6
Notes to Condensed Interim Financial Statements	7

1

Acceleware Ltd.

NOTICE OF NO AUDITOR REVIEW OF INTERIM FINANCIAL STATEMENTS

Under National Instrument 51-102, Part 4, subsection 4.3(3)(a), if an auditor has not performed a review of the interim financial statements, they must be accompanied by a notice indicating that the financial statements have not been reviewed by an auditor.

The accompanying unaudited interim financial statements of Acceleware Ltd. (the “Company”) have been prepared by and are the responsibility of the Company’s management.

The Company’s independent auditor has not performed a review of these financial statements in accordance with standards established by the Canadian Institute of Chartered Accountants for a review of interim financial statements by an entity’s auditor.

2

Acceleware Ltd.

Condensed Statements of Financial Position (Unaudited)

(in Canadian dollars)

As at:		June 30, 2023		December 31,2022
Assets
Current
Cash and cash equivalents	$	139,039	$	1,146,468
Trade and other receivables_(note 7)_		552,556		1,034,940
Deposits and prepaid expenses		257,851		263,325
		949,446		2,444,733
Non-current
Right of use assets		63,727		84,099
Total assets	$	1,013,173	$	2,528,832
Liabilities and Equity
Current
Accounts payable and accrued liabilities	$	2,064,739	$	2,308,103
Other current liabilities_(note 5)_		866,112		772,272
		2,930,851		3,080,375
Non-current
Deferred revenue_(note 9)_		4,350,000		4,350,000
Convertible debentures_(note 6)_		1,347,716		1,257,041
Derivative liabilities (note 6)		144,800		647,300
Other non-current liabilities		340,692		353,130
Total liabilities		9,114,059		9,687,846
Shareholders’ Equity
Share capital_(note 8a)_		24,941,130		24,521,588
Reserves_(note 8b)_		8,649,772		8,620,071
Deficit		(41,691,788)		(40,300,673)
Total shareholders’ equity		(8,100,886)		(7,159,014)
Total liabilities and shareholders’ equity	$	1,013,173	$	2,528,832

Going concern and subsequent events (notes 3, 5, 7, and 8(a))

Approved on behalf of the Board:

“signed”

Bohdan Romaniuk , Director

“signed” Geoff Clark , Director

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

3

Acceleware Ltd.

Condensed Statements of Comprehensive Loss (Unaudited)

(in Canadian dollars)

For the: Three months ended June 30, 2023 (unaudited)	Three months ended June 30, 2022 (unaudited) Six months ended June 30, 2023 (unaudited)	Six months ended June 30, 2022 (unaudited)
Revenue(note 9) $ 69,407 Expenses Cost of revenue — General and administrative 529,487 Research and development 637,633	$ 119,548 $ 172,954 18,748 — 499,471 852,426 1,021,035 955,978	$ 201,955 18,748 973,127 2,533,159
1,167,120	1,539,254 1,808,404	3,525,034
(Loss) income from operations (1,097,713) Finance expense_(notes 5 and 6) (125,120) Change in fair value of derivative financial instruments(note 6)_ 88,400 Foreign exchange gain (loss) (1,065)	(1,419,706) (1,635,450) (98,802) (256,801) 627,000 502,500 475 (1,364)	(3,323,079) (101,092) 627,000 1,262
(37,785) Total comprehensive loss for the period attributable to shareholders $ (1,135,498)	528,673 244,335 $ (891,033) $ (1,391,115)	527,170 $ (2,795,909)
Loss per share Basic and diluted $ (0.01)	$ (0.01) $ (0.01)	$ (0.03)
Weighted average shares outstanding 116,277,007	108,355,340 115,977,939	108,299,346

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

4

Acceleware Ltd.

Statements of Changes in Shareholders’ Equity (Unaudited)

(in Canadian dollars)

	Share capital Commonshares Amount	Reserves Total shareholders’ equity Warrants Contributed surplus Total Reserves Deficit
Balance at December 31, 2021 # Total comprehensive loss Exercise of stock options for cash_(note 8a) Share-based payments Current period expense Stock options exercised(note 8a)_	108,095,340 $ 23,178,884 $ — — 260,000 41,850 — — — 39,532	— $ 7,856,632 $ 7,856,632 $ (35,158,505) $ (4,122,989) — — — (2,795,909) (2,795,909) — — — — 41,850 — 178,470 178,470 — 178,470 — (39,532) (39,532) — —
Balance at June 30, 2022 #	108,355,340 $ 23,260,266 $	— $ 7,995,570 $ 7,995,570 $ (37,954,414) $ (6,698,578)
Balance at December 31, 2022 # Total comprehensive loss Exercise of stock options for cash_(note 8a) Share-based payments Current period expense Stock options exercised(note 8a)_	115,072,007 $ 24,521,588 $ — — 1,205,000 211,700 — — — 207,842	532,600 $ 8,087,471 $ 8,620,071 $ (40,300,673) $ (7,159,014) — — — (1,391,115) (1,391,115) — — — — 211,700 — 237,543 237,543 — 237,543 — (207,842) (207,842) — —
Balance at June 30, 2023 #	116,277,007 $ 24,941,130 $	532,600 $ 8,117,172 $ 8,649,772 $ (41,691,788) $ (8,100,886)

The accompanying notes are an integral part of these financial statements

5

Acceleware Ltd.

Condensed Statements of Cash Flows (Unaudited)

(in Canadian dollars)

For the: Three months ended June 30, 2023 (unaudited)	Three months ended June 30, 2022 (unaudited)	Six months ended June 30, 2023 (unaudited)	Six months ended June 30, 2022 (unaudited)
Cash flows from (used for) operating activities Comprehensive loss before tax $ (1,135,498) Items not involving cash: Amortization expense 10,186 Decommissioning expense 2,437 Share-based payments expense 205,096 Change in fair value of derivative financial instruments_(note 6) (88,400) Interest expense(notes 5 and 6)_ 122,734 Changes in non-cash working capital items Trade and other receivables 39,605 Deposits and prepaid expenses 14,468 Accounts payable and accrued liabilities (120,171) Deferred government assistance — Contract liabilities (14,251) Deferred revenue —	$ (891,033) $ 15,716 1,115 76,799 (627,000) 97,687 689,080 76,262 (2,376,112) (109,012) (4,815) 700,000	(1,391,115) $ 20,372 4,873 237,543 (502,500) 252,457 482,384 5,474 (400,857) — (16,487) —	(2,795,909) 39,367 101,115 178,470 (627,000) 100,030 773,987 27,819 (1,904,085) (725,231) (21,148) 1,100,000
(963,794)	(2,351,313)	(1,307,856)	3,752,585
Cash flows from financing activities Net proceeds from issuance of common shares_(note 8a) — Payments on lease obligations (10,681) Increase (decrease) in other non- current liabilities(note 8a)_ 109,100 Net proceeds from convertible debentures —	— (9,671) (305,000) 695,000	211,700 (20,373) 109,100 —	41,850 (19,363) — 2,161,657
98,419	380,329	300,427	2,184,144
Increase (decrease) in cash and cash equivalents (865,375) Cash and cash equivalents, beginning of period 1,004,414	(1,970,984) 2,350,055	(1,007,429) 1,146,468	(1,568,441) 1,947,512
Cash and cash equivalents, end ofperiod $ 139,039	$ 379,071 $	139,039 $	379,071
Comprised of: Cash on hand $ 119,248 Cash equivalents 19,791	$ 359,279 $ 19,792	119,248 $ 19,791	359,279 19,792
$ 139,039	$ 379,071 $	139,039 $	379,071

6

Acceleware Ltd.

Notes to Condensed Interim Financial Statements June 30, 2023 and 2022

(in Canadian dollars)

1. General information

Acceleware Ltd. (the “Company” or “Acceleware”) is a clean-tech company based in Calgary, Alberta. The Company is developing an enhanced heavy oil and oil sands production technology based on radio frequency (“RF”) heating that is designed to reduce the environmental impact of oil production while also reducing cost. That same RF heating technology is also being applied to the decarbonization of certain other industrial heating applications currently in development. Acceleware also specializes in the development and marketing of special purpose computational software products for the oil and gas and other markets. The Company is incorporated under the Alberta Business Corporations Act, has its registered offices at 1900, 520 - 3rd Avenue SW, Calgary, Alberta, Canada, and trades on the TSX Venture Exchange under the symbol AXE.

2. Basis of presentation

(a) Statement of compliance

These condensed interim financial statements have been prepared in accordance with International Financial Reporting Standards (“IFRS”) as issued by the International Accounting Standards Board (“IASB”) applicable to the preparation of condensed interim financial statements, including International Accounting Standard 34, “Interim Financial Reporting” (“IAS 34”) and have been prepared following the same accounting policies and method of computation as the annual financial statements for the year ended December 31, 2022. The disclosures provided below are incremental to those included with the annual financial statements. Certain information and disclosures normally included in the notes to the annual financial statements have been condensed or have been disclosed on an annual basis only. Accordingly, these condensed interim financial statements should be read in conjunction with the annual financial statements for the year ended December 31, 2022, which have been prepared in accordance with IFRS as issued by the IASB.

These financial statements were approved by the Board of Directors on August 17, 2023.

(b) Functional and presentation currency

The financial statements are presented in Canadian dollars, which is the Company’s functional and presentation currency.

(c) Basis of measurement

The financial statements have been prepared on the historical cost basis except for certain financial instruments which are measured at fair value.

(d) Use of estimates and judgments

The preparation of financial statements in conformity with IFRS requires management to make judgments, estimates and assumptions that affect the application of accounting policies and the reported amounts of assets, liabilities, income and expenses. The estimates and underlying assumptions are based on historical experience and various other factors that are believed to be reasonable under the circumstances, the result of which form the basis of making the judgments about carrying values of assets and liabilities that are not readily apparent from other sources. Actual amounts may differ from these estimates.

Estimates, judgments and underlying assumptions are reviewed on an ongoing basis and revisions to accounting estimates are recognized in the period in which such estimates are revised if the revision affects only that period or in the period of the revision and future periods if the review affects both the current and future periods.

7

Acceleware Ltd.

Notes to Condensed Interim Financial Statements June 30, 2023 and 2022 (in Canadian dollars)

3. Going concern

These financial statements have been prepared on a going concern basis, which assumes that the Company will be able to realize its assets and discharge its liabilities in the normal course of business. The Company has a deficit balance of $41,691,788 (December 31, 2022 - $40,300,673) and net loss of $1,391,115 for the six months ended June 30, 2023 (six months ended June 30, 2022 - $2,795,909) largely due to investments in new product development and in the penetration of new markets. In particular, the Company invested $955,978 net of government assistance of $434,023 for the six months ended June 30, 2023 (six months ended June 30, 2022 - $2,533,159 net of government assistance of $1,329,025), in research and development, principally for the Company’s proprietary RF heating technology (“RF XL” or “RF heating”).

These factors indicate the existence of material uncertainty that may cast significant doubt on the Company’s ability to continue as a going concern. The Company actively manages its cash flow and investment in new products to match its cash generated from operations including government assistance. In order to maximize cash generated from operations, the Company plans to focus on high gross margin revenue streams such as software and RF heating services; focus on selected core vertical markets; minimize operating expenses where possible; and limit capital expenditure. As the Company continues to develop its RF heating technology, new research and development investments will be financed through a combination of internal cash flow from the high-performance computing software business, government assistance, industry partners and external financing. Management believes that successful execution of its business plan will result in sufficient cash flow and new financing to fund projected operational and investment requirements. However, no assurances can be given that the Company will be able to achieve all or part of the objectives discussed above, or that sufficient financing from outside sources will be available. Further, if the Company’s operations are unable to generate cash flow levels at or above current projections, the Company may not have sufficient funds to meet its obligations over the next twelve months.

Should such events occur, Management is committed to implementing all or a portion of its contingency plan. This plan has been developed and designed to provide additional cash flow, and includes, but is not limited to, deferring certain additional product development initiatives, and reducing sales, marketing and general and administrative expenses, while seeking outside financing. The failure of the Company to achieve one or all of the above items may have a material adverse impact on the Company’s financial position, results of financial performance and cash flows.

The ability of the Company to continue as a going concern is dependent upon successful execution of its plans noted above. The outcome of these initiatives cannot be predicted at this time. These financial statements do not include any adjustments relating to the recoverability and classification of recorded asset amounts or the amounts and classification of liabilities that might be necessary should the Company be unable to continue as a going concern for a reasonable period of time.

4. Significant accounting policies

The significant accounting policies used in the preparation of these condensed interim financial statements are unchanged from those disclosed in the Company’s financial statements for the year ended December 31, 2022.

8

Notes to Condensed Interim Financial Statements June 30, 2023 and 2022 (in Canadian dollars)

Acceleware Ltd.

5. Other liabilities

On December 3, 2022, the Company signed a promissory note payable for $678,774, bearing interest at 9.45% per annum and secured with a general security agreement over the Company’s assets. The principal amount of the promissory note is included in other current liabilities on the statement of financial position. As of June 30, 2023, $726,574 of principal and accrued interest remains outstanding and the counterparty has agreed to amended terms. Repayment is expected on or about November 30, 2023 and the interest rate has increased to 11.85% per annum.

Accounts payable and accrued liabilities include deferred compensation amounts owing to management of $816,942 (December 31, 2022 - $779,665).

6. Convertible debentures

Fair value of the conversion option with the anti-dilution option was measured using a Black-Scholes option pricing model. The forced conversion option was measured using a binomial option pricing model and the net present value of financing costs saved upon exercise of the option. The pre-payment option was determined to have no material value. The following assumptions were used as inputs into the pricing models:

	June 30, 2023	AtInception
Expected volatility	1.10 - 1.23	0.76 - 1.25
Risk-free interest rate	4.22%	1.49% – 2.41%
Share price on measurement date	$0.20	$0.74
Expected dividend yield	Nil	Nil
Expected life	0.75 – 2.75 years	2 - 4 years

The value of each component, allocated amongst the debt host and embedded derivatives is as follows:

				Derivative
		Principal	Debt	Liabilities
Balance, December 31, 2022	$	1,904,341	1,257,041	647,300
Fair value adjustment		(502,500)	—	(502,500)
Accretion		90,675	90,675	—
Balance, June 30, 2023		1,492,516	1,347,716	144,800

7. Government assistance

In 2018 the Company entered into contribution agreements with Sustainable Development Technology Canada (“SDTC”) and Emissions Reduction Alberta (“ERA”) to provide $10,000,000 of non-dilutive and non-repayable funding for the commercial-scale pilot test of the RF XL technology. In response to the global pandemic, SDTC contributed an additional $250,000 in 2020 and an additional $262,500 in 2021 bringing the total committed contribution to $10,512,500 as at March 31, 2023. Under the terms of the agreements, SDTC and ERA provide milestone-based funding at the beginning of a milestone. During the three and six months ended June 30, 2023, the Company received $nil (three and six months ended June 30, 2022 – $722,352 less a holdback receivable of $77,143).

9

Acceleware Ltd.

Notes to Condensed Interim Financial Statements June 30, 2023 and 2022 (in Canadian dollars)

7. Government assistance (cont’d)

Effective January 1, 2021 and amended November 2022, Acceleware entered into an investment agreement with Alberta Innovates to provide up to $5,900,000 of non-dilutive and non-repayable funding for the commercial-scale pilot test of the RF XL technology. The Company received milestone payments of $500,000 during the three and six months ended June 30, 2023 (three and six months ended June 30, 2022 - $500,000).

The remaining amount committed but not yet received from SDTC and ERA, including holdbacks receivable, is $500,000 (December 31, 2022 - $1,000,000). Total project costs incurred since inception for the commercial-scale pilot test as at June 30, 2023 are approximately $27,265,000 (Inception to December 31, 2022 - $25,960,000).

Proceeds generated from the sale of produced oil from the pilot test are recorded as an offset to project costs within research and development expenses. There were proceeds of $55,424 received from the sale of produced oil in the three and six months ended June 30, 2023 (three and six months ended June 30, 2022 - $50,531).

A new grant funding agreement was entered into with a Canadian not-for-profit corporation as of July 13, 2023 which provides non-dilutive and non-repayable funding of up to $3,000,000 for costs incurred between January 1, 2022 and March 31, 2024 on the commercial-scale pilot test of the RF XL technology. The funding is provided in arrears based on completion of certain milestones. The Company has not received any payments as of August 17, 2023.

8. Share capital and other components of shareholders’ equity

(a) Share capital

The authorized share capital of the Company consists of an unlimited number of common shares, and unlimited number of first preferred shares, of which conditions are to be determined; and an unlimited number of second preferred shares, of which conditions are to be determined.

During the six months ended June 30, 2023, 1,205,000 stock options (six months ended June 30, 2022 – 260,000) were exercised for cash proceeds of $211,700 (six months ended June 30, 2022 - $41,850). Non-cash compensation charges of $207,842 (six months ended June 30, 2022 - $39,532) were reclassified from contributed surplus to share capital on the exercise of these options.

The Company announced a non-brokered private placement on June 6, 2023 for up to $2,000,000 for the issuance of units at a price of $0.23 per unit. Each unit is comprised of one common share of Acceleware and one common share purchase warrant. Each warrant will entitle the holder to acquire one common share of Acceleware for $0.30 for a period of 24-months from the date of issuance. In the event that the common shares trade at a closing price at or greater than $0.69 per common share for a period of thirty (30) consecutive trading days, Acceleware may accelerate the expiry date of the warrants by giving notice to the holders thereof and in such case the warrants will expire on the 30[th] day after the date on which such notice is given by Acceleware. The Company expects to close on or about August 21, 2023. Proceeds of $109,100 were received as of June 30, 2023 and are recorded in other current liabilities.

(b) Warrants

On November 10, 2022, the Company closed a non-brokered private placement consisting of 6,666,667 units. Each unit consists of one common share and one common share purchase warrant. Each warrant entitles the holder to purchase an additional common share of the Company at a price of $0.36 per unit for a period of two years from the date of issue. As of June 30, 2023 (June 30, 2022 – nil), no warrants have been exercised.

10

Acceleware Ltd.

Notes to Condensed Interim Financial Statements June 30, 2023 and 2022 (in Canadian dollars)

8. Share capital and other components of shareholders’ equity (cont’d)

(c) Share-based payments

At June 30, 2023, the Company had one equity-settled share-based compensation plan. The Company accounts for options granted under this plan in accordance with the fair value method of accounting for share-based compensation. The estimated fair value of the options that are ultimately expected to vest is recorded over the option’s vesting period and charged to share-based compensation expenses.

There were 5,465,000 options granted in the six months ended June 30, 2023 (six months ended June 30, 2022 – no options were granted). The options have a weighted average exercise price of $0.23 per common share and expire five years from the date of grant. Of the 5,465,000 options granted, 2,420,000 shall vest on the first anniversary of the grant date, 2,145,000 shall vest on the second anniversary of the grant date, 450,000 shall vest when the share price of the common shares of the Company closes at or above $0.29 for ten consecutive trading days, and 450,000 shall vest when the share price of the common shares of the Company closes at or above $0.345 for ten consecutive trading days.

The changes to the number of options outstanding and their weighted average exercise price are as follows:

Number	Weighted Average Exercise Price
Balance, December 31, 2022 9,331,164	$ 0.21
Granted 5,465,000 Exercised (1,205,000) Expired (2,356,166)	0.23 0.18 0.30
Balance,June 30,2023 11,234,998	$0.21

Number	Weighted Average Exercise Price
Balance, December 31, 2021 9,749,164	$ 0.21
Exercised (260,000) Forfeited (66,000)	0.16 0.29
Balance,June 30,2022 9,423,164	$0.20

11

Acceleware Ltd.

Notes to Condensed Interim Financial Statements June 30, 2023 and 2022

(in Canadian dollars)

8. Share capital and other components of shareholders’ equity (cont’d)

(c) Share-based payments (cont’d)

Summary of options outstanding and exercisable as at June 30, 2023 is as follows:

Exercise price outstanding Grant Date	Number outstanding Weighted average remaining contractual life(years)	Weighted average exercise price Number exercisable
$0.10 - $0.135 Jan 2019 to Jun 2020 $0.20 - $0.23 Oct 2018, Apr 2023 $0.29 - $0.30 May2021 to Sept 2021	3,423,532 0.97 5,615,000 4.68 2,196,466 3.16	$0.12 3,423,532 0.23 150,000 0.29 1,914,432
	11,234,998 3.25	$0.21 5,487,964

Summary of options outstanding and exercisable as at June 30, 2022 is as follows:

Exercise price outstanding Grant Date	Number outstandi ng Weighted average remaining contractual life (years)	Weighted average exercise price Number exercisable
$0.10 - $0.135 Jan 2019 to Jun 2020 $0.20 - $0.21 Feb 2017 to Oct 2018 $0.29 – $0.30 Jan 2018 to Sept 2021	4,013,532 1.98 1,869,632 0.49 3,540,000 2.84	$0.12 4,013,532 0.21 1,869,632 0.29 1,869,000
	9,423,164 2.01	$0.20 7,752,164

(d) Earnings per share

The calculation of weighted average shares outstanding for the diluted loss per share calculation excludes the impact of the options outstanding as at June 30, 2023 and 2022 as the effect is anti-dilutive.

12

Acceleware Ltd.

Notes to Condensed Interim Financial Statements June 30, 2023 and 2022 (in Canadian dollars)

9. Revenue

The Company sub-classifies revenue within the following components: software revenue, maintenance revenue, services revenue and data revenue. The following table shows the breakdown of revenue:

		Three	months		Three months		Six months		Six months
			ended		ended		ended		ended
		June	30, 2023		June 30, 2022		June 30, 2023		June 30, 2022
Software	$		10,045	$	85,368	$	29,225	$	103,007
Maintenance			35,552		34,180		72,419		98,948
Services			23,810		—		71,310		—
	$		69,407	$	119,548	$	172,954	$	201,955

(a) Data revenue

Since 2018, the Company entered into Project Funding Agreements and Test Data Purchase Agreements (the “Agreements”) with three major oil-sands producers, the terms of which provide the customer with the right to access and use data obtained from the commercial-scale pilot of RF XL technology Acceleware is conducting at Marwayne, Alberta. Under the terms of the Agreements, Acceleware will receive total funding of up to $6,000,000, paid in installments upon completion of each milestone. Each milestone payment is non-refundable.

Under IFRS 15 Revenue from Contracts with Customers , these contracts did not meet all requirements for revenue recognition over-time, therefore revenue recognition defaults to the end of the contract. For each completed milestone, the Company has no outstanding obligation to deliver goods or services. Revenue of up to $5,850,000 for this contract will be recognized once heating is complete or the contract is terminated, whichever is earlier. Software and maintenance revenue related to these data contracts of $nil was recognized in the six months ended June 30, 2023 (six months ended June 30, 2022 - $100,000).

(b) Major Customers

The Company derived significant revenues from two major customers each of which exceeded 10% of total revenues for the three months ended June 30, 2023. Revenue from these customers was $65,403 at June 30, 2023 (June 30, 2022 – two major customers for a total revenue of $97,507).

The Company derived significant revenues from three major customers each of which exceeded 10% of total revenues for the six months ended June 30, 2023. Revenue from these customers was $160,097 at June 30, 2023 (June 30, 2022 – two major customers for a total revenue of $148,166).

13

Acceleware Ltd.

Notes to Condensed Interim Financial Statements June 30, 2023 and 2022 (in Canadian dollars)

10. Operating segments

The Company has two operating segments, referred to as “High-Performance Computing” (“HPC”) and “RF Heating”. The operating segments are reportable segments in accordance with IFRS 8 Operating Segments. The Company‘s HPC segment sells proprietary high-performance computing software and related consulting services and training programs primarily to the oil and gas industry. The RF Heating segment is engaged in research, development, and commercialization activities related to the Company’s proprietary enhanced heavy oil and oil sands production technology.

Expenses associated with corporate support functions are allocated to the Company’s segments based on the segment’s percentage of total labour expenses for the allocation period. All intersegment transactions between the HPC and RF Heating segments have been eliminated.

For the three months ended June 30, 2023

RF Heating	HPC Total
Revenue $ 25,310 Expenses General and administrative 464,861 Research and development 637,633	44,097 69,407 64,626 529,487 — 637,633
1,102,494	64,626 1,167,120
(Loss) income from operations (1,074,184)	(23,529) (1,097,713)

For the three months ended June 30, 2022

		RF Heating		HPC		Total
Revenue	$	85,000	$	34,548	$	119,548
Expenses
Cost of revenue		18,748		—		18,748
General and administrative		376,404		123,067		499,471
Research and development		1,021,035		—		1,021,035
		1,416,187		123,067		1,539,254
(Loss) income from operations		(1,331,187)		(88,519)		(1,419,706)

14

Acceleware Ltd.

Notes to Condensed Interim Financial Statements June 30, 2023 and 2022

(in Canadian dollars)

10. Operating segments (cont’d)

For the six months ended June 30, 2023

		RF Heating		HPC		Total
Revenue	$	77,310	$	95,644	$	172,954
Expenses
General and administrative		755,039		97,387		852,426
Research and development		955,978		—		955,978
		1,711,017		97,387		1,808,404
(Loss) income from operations	$	(1,630,707)	$	(4,743)	$	(1,635,450)

For the six months ended June 30, 2022

		RF Heating		HPC		Total
Revenue	$	85,000	$	116,955	$	201,955
Expenses
Cost of revenue		18,748		—		18,748
General and administrative		733,967		239,160		973,127
Research and development		2,533,159		—		2,533,159
		3,285,874		239,160		3,525,034
(Loss) income from operations	$	(3,200,874)	$	(122,205)	$	(3,323,079)

15

Acceleware Ltd.

Notes to Condensed Interim Financial Statements June 30, 2023 and 2022 (in Canadian dollars)

11. Related Party Transactions

• (a) For the three months ended June 30, 2023, the Company incurred expenses in the amount of $46,703 (three months ended June 30, 2022 - $45,938) and $92,641 for the six months ended June 30, 2023 (six months ended June 30, 2022 - $91,875) with a company controlled by an officer of the Company as fees for duties performed in managing operations, and this amount is included in research and development expense. As at June 30, 2023 $211,941 was included in accounts payable and accrued liabilities (December 31, 2022 - $206,902). These fees were incurred in the normal course of operations and in the opinion of management represent fair value for services rendered.

• (b) For the three months ended June 30, 2023, the Company incurred expenses in the amount of $402 (three months ended June 30, 2022 - $12,456) and $11,807 for the six months ended June 30, 2023 (six months ended June 30, 2022- $39,358) with a company controlled by an officer of the Company for legal fees, and this amount is included in general and administrative expense. As at June 30, 2023, $1,447 was included in accounts payable and accrued liabilities (December 31, 2022 - $16,670). These fees were incurred in the normal course of operations and in the opinion of management represent fair value for services rendered.

• (c) For the three months ended June 30, 2023, the Company incurred expenses in the amount of $36,000 (three months ended June 30, 2022 - $36,000) and $72,000 for the six months ended June 30, 2023 (six months ended June 30, 2022 - $72,000) with a company controlled by the spouse of an officer of the Company for management and other services, and this amount is included in general and administrative expense. As at June 30, 2023, $49,050 was included in accounts payable and accrued liabilities (December 31, 2022 - $44,750). These fees were incurred in the normal course of operations and in the opinion of management represent fair value for services rendered.

• (d) Key management includes the Company’s directors and members of the executive management team. Compensation awarded to key management included:

		Three months		Three months		Six months		Six months
		ended		ended		ended		ended
		June 30, 2023		June 30, 2022		June 30, 2023		June 30, 2022
Salaries and short-term employee
benefits	$	211,737	$	228,220	$	429,877	$	495,898
Share-based expenses		130,000		45,722		156,901		115,755
	$	341,737	$	273,942	$	586,778	$	611,653

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