Wavefront Technology Solutions Inc. — Interim / Quarterly Report 2020

Jan 30, 2020

Unaudited Condensed Consolidated Interim Financial Statements of

WAVEFRONT TECHNOLOGY SOLUTIONS INC.

Three months ended November 30, 2019 and 2018

TABLE OF CONTENTS

CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS

TABLE OF CONTENTS CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS	TABLE OF CONTENTS CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS
Condensed consolidated interim statements of financial position		1
Condensed consolidated interim statements of net loss and comprehensive loss		2
Condensed consolidated interim statements of changes in shareholders' equity		3
Condensed consolidated interim statements of cash flows		4
NOTES	TO THE CONDENSED CONSOLIDATED INTERIM FINANICAL STATEMENTS
Note 1	Nature of operations and corporate information	5
Note 2	Statement of compliance	5
Note 3	Property, plant and equipment	9
Note 4	Right-of-use assets and lease liabilities	10
Note 5	Share capital	12
Note 6	Loss per share	13
Note 7	Financial instruments	14
Note 8	Related party transaction	16
Note 9	Segmented information	17

NOTICE OF NO AUDITOR REVIEW OF INTERIM FINANCIAL STATEMENTS

In accordance with National Instrument 51-102 released by the Canadian Securities Administrators, the Company is disclosing that its auditors have not reviewed the unaudited condensed consolidated interim financial statements for the periods ended November 30, 2019 and 2018.

WAVEFRONT TECHNOLOGY SOLUTIONS INC. Condensed Consolidated Interim Statements of Financial Position As at November 30, 2019 and August 31, 2019

(Canadian dollars) (Unaudited)

ASSETS CURRENT ASSETS Cash and cash equivalents Trade and other receivables Inventories Prepaid expenses and other current assets	Note 3	November 30, 2019 2,643,098 $ 424,714 80,008 188,589	August 31, 2019 2,598,160 $ 594,728 107,213 40,361
NON-CURRENT ASSETS Deposits Property, plant and equipment Right-of-use assets	3 4	3,336,409 14,150 775,502 175,416	3,340,462 14,150 821,352 -
		4,301,477 $	4,175,964 $
LIABILITIES AND SHAREHOLDERS' EQUITY CURRENT LIABILITIES Unearned revenue Trade accounts payable and accrued liabilities Lease liabilities	4	338,441 711,676 123,016	265,099 588,751 -
NON-CURRENT LIABILITIES Lease liabilities	4	1,173,133 53,475	853,850 -
		1,226,608 $	853,850 $
SHAREHOLDERS' EQUITY Share capital Warrants Contributed surplus Accumulated other comprehensive income Deficit	5 b 5 d	67,299,083 467,716 9,414,471 563,875 (74,670,276)	67,299,083 467,716 9,414,471 566,338 (74,425,494)
		3,074,869	3,322,114
		4,301,477 $	4,175,964 $

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

Page 1 of 17

WAVEFRONT TECHNOLOGY SOLUTIONS INC. Condensed Consolidated Interim Statements of Net Loss and Comprehensive Loss Three month period ended November 30, 2019 and 2018 (Canadian dollars)

(Unaudited)

Note Revenue 9 Cost of sales	November 30, 2019 700,685 $ 33,978	November 30, 2018 943,753 $ 84,829
Gross Profit Loss on disposal of property, plant and equipment 3 General and administrative Amortization and depreciation 3, 4 Sales and marketing Research and development	666,707 - 587,233 93,669 168,927 60,316	858,924 934 703,599 44,701 161,349 27,752
	910,145	938,335
OPERATING LOSS	(243,438)	(79,411)
OTHER INCOME (EXPENSES) Financing costs Financing income Foreign exchangegain(loss)	(3,269) 7,763 (5,838)	(1,459) 8,145 26,778
	(1,344)	33,464
NET LOSS OTHER COMPREHENSIVE INCOME (LOSS) Items that may be reclassified subsequently to net loss Translationgain(loss)on foreign operations	(244,782) (2,463)	(45,947) 4,797
COMPREHENSIVE LOSS	(247,245) $	(41,150) $
WEIGHTED AVERAGE NUMBER OF SHARES Basic and diluted 6 LOSS PER COMMON SHARE Basic and diluted 6	87,572,573 (0.003) $	87,442,903 (0.001) $

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

Page 2 of 17

WAVEFRONT TECHNOLOGY SOLUTIONS INC. Condensed Consolidated Interim Statements of Changes in Shareholders' Equity Three month period ended November 30, 2019 and 2018

(Canadian dollars)

(Unaudited)

Balance at August 31, 2018 Net Loss Translation gain on foreign operations Private placement Exercise of options Recognition of shared-basedpayments	Share capital	Warrants	Contributed surplus	Accumulated other comprehensive (loss)income	Deficit	Total
	67,216,013 - - - 66,305 -	484,481 - - - - -	9,421,036 - - - (22,805) 14,065	567,298 - 4,797 - - -	(73,992,005) (45,947) - - - -	3,696,823 $ (45,947) 4,797 - 43,500 14,065
Balance at November 30, 2018 Net Loss Translation loss on foreign operations Expiry of broker warrants Exercise of options Recognition of shared-basedpayments	67,282,318 - - 16,765 - -	484,481 - - (16,765) - -	9,412,296 - - - - 2,175	572,095 - (5,757) - - -	(74,037,952) (387,542) - - - -	3,713,238 (387,542) (5,757) - - 2,175
Balance at August 31, 2019 Net Loss Translation loss on foreign operations	67,299,083 - -	467,716 - -	9,414,471 - -	566,338 - (2,463)	(74,425,494) (244,782) -	3,322,114 (244,782) (2,463)
Balance at November 30, 2019	67,299,083 $	467,716 $	9,414,471 $	563,875 $	(74,670,276) $	3,074,869 $

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

Page 3 of 17

WAVEFRONT TECHNOLOGY SOLUTIONS INC. Condensed Consolidated Interim Statements of Cash Flows Three month period ended November 30, 2019 and 2018 (Canadian dollars) (Unaudited)

OPERATING ACTIVITIES Net loss Changes to net loss not including cash Amortization and depreciation Impact of foreign translation Interest expense Share-based payments Loss on disposal of property, plant and equipment, and inventory Changes to working capital Change in trade and other receivables Change in trade and other payables Change in unearned revenue Change in inventory Interest paid Change in deposits Change inprepaid expenses	Note 3, 4 5 c	November 30, November 30, 2019 2018 (244,782) $ (45,947) $ 93,669 44,701 (2,320) (17,276) (3,269) (1,459) - 14,065 - 934 170,014 265,432 122,925 (13,144) 73,342 101,013 27,205 (40,315) 3,269 1,459 - (9,361) (148,228) 40,798
Cash from operatingactivities		91,825 340,900
FINANCING ACTIVITIES Proceeds from exercise of options Payment for theprincipalportion of lease liability	5 c 4	- 43,500 (36,515) -
Cash from(used in)financingactivities		(36,515) 43,500
INVESTING ACTIVITIES Purchase of property, plant and equipment Proceeds on disposal ofproperty, plant and equipment	3 3	(10,254) (12,400) - 5,602
Cash used in investingactivities		(10,254) (6,798)
Foreign exchangegain(loss)on cash held in foreign currency		(118) 21,251
NET INCREASE IN CASH AND CASH EQUIVALENTS CASH AND CASH EQUIVALENTS,BEGINNING OF PERIOD		44,938 398,853 2,598,160 2,587,328
CASH AND CASH EQUIVALENTS, END OF PERIOD		2,643,098 $ 2,986,181 $
CASH AND CASH EQUIVALENTS Cash denominated in CDN Cash denominated in USD Foreign currencytranslation amount		1,828,002 $ 1,784,440 $ 613,362 905,345 201,735 296,396
CASH AND CASH EQUIVALENTS, END OF PERIOD		2,643,098 $ 2,986,181 $

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

Page 4 of 17

WAVEFRONT TECHNOLOGY SOLUTIONS INC. Notes to the Condensed Consolidated Interim Financial Statements Three months ended November 30, 2019 and 2018 (Canadian dollars) (Unaudited)

1. NATURE OF OPERATIONS AND CORPORATE INFORMATION

Wavefront Technology Solutions Inc. (“Wavefront” or the “Company”) is an oil field service provider focused on offering the oil and gas industry proprietary, leading edge technology primarily for oil and gas well stimulation and applications related to Improved/Enhanced Oil (“IOR/EOR”) recovery. For oil and gas well stimulation, Wavefront’s core technology, marketed under the brand name, “Powerwave[TM] ”, has proven to decrease both chemical cost and job execution time thus minimizing total job cost without negatively impacting post-stimulation results. In IOR/EOR applications, Powerwave has been shown to improve oil production rates; decrease oil production decline rates; and increase estimated ultimate oil recovery. Wavefront operates in the global marketplace dealing directly with exploration and production (“E&P’s”) companies and through an international network of distributors and agents.

The Company is incorporated under the Canada Business Corporations Act. Its shares are listed on the TSX Venture Exchange under the symbol of WEE and also trade on the OTCQB Venture Market under the symbol of WFTSF.

The address of the registered head office of the Company is 5621 – 70 Street NW, Edmonton, Alberta. The Company is domiciled in Canada.

2. STATEMENT OF COMPLIANCE

a) Statement of compliance

These unaudited condensed consolidated interim financial statements (the “Financial Statements”) have been prepared in accordance with International Accounting Standard 34, Interim Financial Reporting using accounting policies under International Financial Reporting Standards (“IFRS”) for interim financial information. These Financial Statements have been prepared using the same accounting policies and methods of computation as the annual consolidated financial statements for the fiscal year ended August 31, 2019, with the exception of the impact of certain amendments to accounting standards or new interpretations issued by the IASB, which were applicable from September 1, 2019, as described below in Note 2(c).

These Financial Statements were approved for issue on January 27, 2020.

b) Principles of consolidation

These consolidated financial statements incorporate the financial statements of the Company and the entity controlled by the Company (its wholly owned subsidiary, Wavefront Technology Solutions USA Inc.). Control is achieved when the Company has the power to, directly or indirectly govern the financial and operating policies of an entity so as to obtain benefits from its activities. In assessing control, potential voting rights that are presently exercisable or convertible are taken into account. Although the Company is domiciled in Canada, the Company’s principal focus is on

Page 5 of 17

WAVEFRONT TECHNOLOGY SOLUTIONS INC. Notes to the Condensed Consolidated Interim Financial Statements Three months ended November 30, 2019 and 2018 (Canadian dollars) (Unaudited)

international operations, and as such revenue generation is mainly outside Canada. Revenues derived in Canada three months ended November 30, 2019 was $3,150 (November 30, 2018 - $9,200).

The financial statements of the subsidiary are included in the consolidated financial statements from the date that control commences until the date that control ceases.

All subsidiary companies are wholly-owned and inter-company transactions, balances, revenues and expenses and unrealized gains and losses have been eliminated on consolidation.

Unearned revenue, which was included in the contract liability balance at the beginning of the period, that was recognized in the three months ended November 30, 2019 was $nil (November 30, 2018 - $43,426).

• c) Changes in accounting policies

The following standards, that are applicable to the Company, have been adopted for the first time effective September 1, 2019:

Leases (“IFRS 16”)

In January 2016, the IASB issued IFRS 16, Leases (IFRS 16), which replaces IAS 17 Leases (IAS 17), IFRIC 4, Determining whether an Arrangement contains a Lease (IFRIC 4), SIC-15, Operating Leases-Incentives , and SIC-27 Evaluating the Substance of Transactions Involving the Legal Form of a Lease . IFRS 16 introduces significant changes to lessee accounting by removing the distinction between operating and finance lease and requiring the recognition of a right-of-use asset and a lease liability at commencement of all leases, except for short-term leases and leases of low value assets when such recognition exemptions are adopted.

The Company adopted IFRS 16 effective September 1, 2019 using the cumulative catch-up approach. Under this approach, the cumulative effect of initially applying IFRS 16 was adjustment to the opening balance of retained earnings at the date of initial application. Accordingly, comparative information for the Company’s financial statements has not been restated.

The adoption of IFRS 16 resulted in the following adjustment:

Page 6 of 17

WAVEFRONT TECHNOLOGY SOLUTIONS INC. Notes to the Condensed Consolidated Interim Financial Statements Three months ended November 30, 2019 and 2018 (Canadian dollars) (Unaudited)

	September 1,2019
	Before IFRS 16 After IFRS 16 Increase (Decrease)
Non-current assets Right-of-use asset	- 213,005 213,005
Total increase in assets	- 213,005 213,005
Current liabilities Leaseliability	- 161,537 161,537
Non-current liabilities Leaseliability	- 161,537 161,537 - 51,468 51,468
	- 213,005 213,005
Shareholders' equity Retained earnings	(74,425,494) - 74,425,494
Total changes in liabilities and equity	(74,425,494) 213,005 74,851,504

The weighted average lessees’ incremental borrowing rate applied to lease liabilities recognized in the statement of financial position on September 1, 2019 is 4.95%.

Upon the initial adoption of IFRS 16, the Company elected to measure its right-of use assets at an amount equal to the lease liability, adjusted by the amount of any prepaid or accrued lease payments recognized in the statement of financial position immediately before the date of initial application (if any). No adjustment to opening retained earnings was required. Further, the Company adopted IFRS 16 using the following exemptions and practical expedients permitted under the standard:

• Elected to rely on the on the previous assessment on whether leases are onerous;

• Elected to not recognize right-of-use assets and lease liabilities for leases for which the lease term ends within 12 months of the date of initial application, and/or for leases of low-value assets;

• Elected to exclude the initial direct costs from the measurement of the right-of-use asset at the date of initial application; and

• Elected to use hindsight when determining the lease term when the contract contains options to extend or terminate the lease.

Prior to the adoption of IFRS 16, future operating lease obligations were disclosed in the commitments and contingencies note. There were no adjustments to be made to the commitments note included as at August 31, 2019.

Page 7 of 17

WAVEFRONT TECHNOLOGY SOLUTIONS INC. Notes to the Condensed Consolidated Interim Financial Statements Three months ended November 30, 2019 and 2018 (Canadian dollars) (Unaudited)

The adoption of IFRS 16 increases the Company’s assets and liabilities, depreciation expense related to the right-of-use assets, and interest expense on the lease liabilities, while reducing general and administrative costs. Further, while cash payments associated with operating leases were previously presented under operating activities, under IFRS 16 such cash payments are allocated between financing activities for the repayment of the principal of the lease liability, and operating activities for the payment of the interest component on the lease liability. The overall impact to cash flow for the Company remains unchanged.

Policies applicable from September 1, 2019:

The Company assesses whether a contract is or contains a lease, at inception of the contract. The Company recognizes a right-of-use asset and a corresponding lease liability with respect to all lease arrangements in which it is the lessee, except for short-term leases (defined as leases with a lease term of 12 months or less) and leases of low value assets (such as cell phones). For these leases, the Company recognizes the lease payments as an operating expense on a straight-line basis over the term of the lease unless another systematic basis is more representative of the time pattern in which economic benefits from the leased assets are consumed.

The lease liability is initially measured at the present value of the lease payments that are not paid at the commencement date, discounted by using the rate implicit in the lease. If this rate cannot be readily determined, the lessee uses its incremental borrowing rate. Lease payments include fixed payments, variable payments that are based on an index or a rate, and other factors as prescribed under IFRS 16.

The lease liability is subsequently measured by increasing the carrying amount to reflect interest on the lease liability (using the effective interest method) and by reducing the carrying amount to reflect the lease payments made.

Lessees will also be required to remeasure the lease liability upon the occurrence of certain events (e.g., a change in the lease term, or a change in future lease payments resulting from a change in an index or rate used to determine those payments). The Company did not make any such adjustments during the periods presented.

The Company will recognize the lease payments as an operating expense on a straight-line basis over the term of the lease unless another systematic basis is more representative of the pattern in which the economic benefits will be consumer.

The right-of-use assets comprise the initial measurement of the corresponding lease liability, lease payments made at or before the commencement day, less any lease incentives received and any initial direct costs. They are subsequently measured at cost less accumulated depreciation and impairment losses.

Page 8 of 17

WAVEFRONT TECHNOLOGY SOLUTIONS INC. Notes to the Condensed Consolidated Interim Financial Statements Three months ended November 30, 2019 and 2018 (Canadian dollars) (Unaudited)

Whenever the Company incurs an obligation for costs to dismantle and remove a leased asset, restore the site on which it is located or restore the underlying asset to the condition required by the terms and conditions of the lease, a provision is recognized and measured under IAS 37. To the extent that the costs relate to a right-of-use asset, the costs are included in the related right-of-use asset, unless those costs are incurred to produce inventories.

Right-of-use assets are depreciated over the shorter period of lease term and useful life of the underlying asset. If a lease transfers ownership of the underlying asset or the cost of the right-of-use asset reflects that the Company expects to exercise a purchase option, the related right-of-use asset is depreciated over the useful life of the underlying asset. The depreciation starts at the commencement date of the lease.

The Company applies IAS 36 to determine whether the right-of-use asset is impaired.

Variable rents that do not depend on an index or rate are not included in the measurement of the lease liability and the right-of-use asset. The related payments are recognized as an expense in the period in which the event or condition that triggers those payments occurs and are included in ‘general and administrative’ expenses in the condensed consolidated statement of net loss and comprehensive loss.

When assessing the lease term, Management will consider all facts and circumstances that create an economic incentive to exercise an extension option or to not exercise a termination option. This judgment is based on factors such as contract rates compared to market rates, economic reasons, significance of leasehold improvements, termination and relocation costs, installation of specialized assets, residual value guarantees, and any sublease term.

3. PROPERTY, PLANT AND EQUIPMENT

As at November 30, 2019	Tools and equipment	Computer, automotive and office equipment	Leasehold improvements Total
Cost Balance at August 31, 2019 Additions Disposals Impact of foreign translation	3,411,429 $ 10,254 - (86)	797,377 $ - - (80)	591,147 $ 4,799,953 $ - 10,254 - - - (166)
Balance at November 30, 2019	3,421,597	797,297	591,147 4,810,041

Page 9 of 17

WAVEFRONT TECHNOLOGY SOLUTIONS INC. Notes to the Condensed Consolidated Interim Financial Statements Three months ended November 30, 2019 and 2018 (Canadian dollars) (Unaudited)

				Computer,
		Tools		automotive
		and		and office		Leasehold
As at November 30, 2019		equipment		equipment	improvements			Total
Accumulated depreciation
Balance at August 31, 2019		(2,763,238)		(715,141)		(500,222)		(3,978,601)
Depreciation		(22,964)		(18,783)		(14,333)		(56,080)
Disposals		-		-		-		-
Impact of foreign translation		76		66		-		142
Balance at November 30, 2019		(2,786,126)		(733,858)		(514,555)		(4,034,539)
Net book value
Balance at November 30,2019	$	635,471	$	63,439	$	76,592	$	775,502

Depreciation expense on property, plant and equipment for the three months ended November 30, 2019 was $56,080 (November 30, 2018 - $44,701).

As at November 30, 2019 property, plant and equipment includes tools and equipment under construction, with a recorded value of $230,081 (August 31, 2019 - $219,827) that is not being depreciated.

As at November 30, 2019 the Company reviewed the raw materials and consumable inventory it had on hand and determined that not all of this inventory would be consumed with the Company’s next operating cycle. Based on this analysis, the Company reclassified $215,723 (August 31, 2019 - $220,409) of raw material and consumable inventory to equipment under construction within the tools and equipment asset segment.

As at November 30, 2019, the Company assessed impairment indicators for the Company’s Powerwave CGU and concluded that no impairment indicators were present.

4. RIGHT-OF-USE ASSETS AND LEASE LIABILITIES

The Company’s leases consist of a lease for its office and warehouse space, and various short-term and/or low value leases for other equipment, such as phones and office equipment.

The Company leases a building for its office and warehouse space in Edmonton, Alberta. The original lease was 10 years, with the remaining lease term having 15 months, expiring January 2021. The building lease does not include a lease extension option. The Company reassesses leases when a significant event or significant change in circumstances within the Company’s control has occurred.

The Company also leases cellular telephone and other equipment with terms of three years or shorter. The Company accounts for these leases as short-term leases or leases for low-value assets.

Page 10 of 17

WAVEFRONT TECHNOLOGY SOLUTIONS INC. Notes to the Condensed Consolidated Interim Financial Statements Three months ended November 30, 2019 and 2018 (Canadian dollars) (Unaudited)

Additions Depreciation Payment As at September 1, 2019	Right-of-use asset Lease liability
	Building Total
	213,005 $ (213,005) $ - - (37,589) - - 36,514
As at November 30, 2019	175,416 $ (176,491) $

Amounts recognized in the condensed consolidated interim statement	November 30,	November 30,
of net loss and comprehensive loss		2019
Depreciation expense on right-of-use asset	$	37,589
Interest expense on lease liabilities		2,486
Expense related to variable lease payments not included in the
measurement of the lease liability		9,484
Expense related to leases of low value assets		4,500
Expense related to leases of short-term leases		-
Total	$	54,059

Variable lease payments include operating and maintenance expenses, property taxes, and other variable costs. The estimated balance of future variable lease payments is estimated to approximate $69,459. Overall the variable payments constitute up to 27.6% of the Company’s entire lease payments

Amounts recognized in consolidated statements	November 30,	November 30,
of cash flows		2019
Cash payments for interest portion of lease liabilities	$	(2,486)
Cashpayments for leases not included in measurement of lease liability		(14,884)
Cash outflows in operatingactivities		(17,370)
Cashpayments for theprincipalportion of lease liabilities		(36,514)
Cash outflows in financingactivities		(36,514)
Total cash outflows for leases	$	(53,884)

Page 11 of 17

WAVEFRONT TECHNOLOGY SOLUTIONS INC. Notes to the Condensed Consolidated Interim Financial Statements Three months ended November 30, 2019 and 2018 (Canadian dollars) (Unaudited)

The Company also leases cellular telephone and other equipment with terms of three years or shorter. These leases are generally short-term or for low-value assets that the Company has elected not to recognize in the right-of-use assets and lease liabilities.

5. SHARE CAPITAL

The Company’s authorized and issued share capital is as follows:

a) Authorized share capital

Unlimited common shares without par value.

b) Issued common shares

The Company’s issued share capital is as follows:

The changes in the Company’s outstanding common shares were as follows:

Balance,beginningofperiod	November 30,2019
	Stated Number capital 87,572,573 67,299,083 $
Balance, end ofperiod	87,572,573 67,299,083 $

c) Stock-based compensation plan

The Company maintains an Employee, Director, Officer and Consultant Stock Option Plan under which the Company may grant incentive stock options for up to 10,771,558 shares of the Company at an exercise price not be less than the “Discounted Market Price” (as defined in the policies of the TSX Venture Exchange), provided that the exercise price shall not be less than $0.05 per share. All stock options awarded are exercisable for a period of up to ten years and vest, at a minimum, in equal tranches at three month intervals over a period of eighteen months.

Page 12 of 17

WAVEFRONT TECHNOLOGY SOLUTIONS INC. Notes to the Condensed Consolidated Interim Financial Statements Three months ended November 30, 2019 and 2018 (Canadian dollars) (Unaudited)

Movements in stock options during the period

A summary of the status of the Company’s Stock Option Plan is presented below:

Outstanding,beginningofperiod	November30,2019
	Number Weighted average exercise price
	2,775,000 $ 0.24
Outstanding, end ofperiod	2,775,000 $ 0.24

Fair value of stock options granted during the period

The fair value for the compensation costs of stock options issued to both employees and nonemployees were calculated using the Black-Scholes option pricing model resulting in an additional charge to general and administrative expense with a corresponding increase in share based payment reserve.

During the three months ended November 30, 2019, the Company incurred $nil (November 30, 2018 - $14,065) in compensation expense relating to outstanding stock options.

d) Contributed surplus

d) Contributed surplus
Balance,beginningofperiod	November30,2019
	9,414,471 $
Balance, end ofperiod	9,414,471 $

6. LOSS PER SHARE

The weighted average number of common shares outstanding for basic and diluted loss per share is 87,572,573 (November 30, 2018 – 87,442,903).

In determining diluted loss per share, the weighted average number of shares outstanding for the period ended November 30, 2019 excluded 408,604 (November 30, 2018 – nil) for stock options and warrants eligible for exercise where the average market price of the common shares for the year exceeds the exercise price because the result was anti-dilutive in both periods.

Page 13 of 17

WAVEFRONT TECHNOLOGY SOLUTIONS INC. Notes to the Condensed Consolidated Interim Financial Statements Three months ended November 30, 2019 and 2018 (Canadian dollars) (Unaudited)

7. FINANCIAL INSTRUMENTS

a) Categories of financial instruments

The Company has classified its financial instruments as follows:

Financial assets Cash and cash equivalents Trade and other receivables Deposits Right of-use asset Financial liabilities Unearned revenue Trade accounts payable and accrued liabilities Leased liabilities	November 30, 2019
	2,643,098 $ 424,714 14,150 175,416 338,441 711,676 176,491

b) Foreign currency risk

The follow tables provide an indication of the Company’s exposure to changes in the value of the U.S. dollar relative to the Canadian dollar as at and for the periods ended November 30, 2019 and August 31, 2019. The analysis is based on financial assets and liabilities denominated in U.S. dollars at the statement of financial position date (“statement of financial position exposure”), and U.S. dollar denominated revenue and operating expenses during the year (“operating exposure”).

Financial assets Cash and cash equivalents Trade and other receivables Financial liabilities Unearned revenue Trade accounts payable and accruedliabilities	November 30, August 31, 2019 2019 U.S.Dollars U.S.Dollars 613,362 $ 579,110 $ 303,781 429,801 (254,678) (199,488) (44,731) (33,434)
Net statement of financialposition exposure	617,734 775,989

Based on the Company’s foreign currency exposure, as noted above, with other variables unchanged, a 5% change in the Canadian dollar against the US dollar as at November 30, 2019 would have impacted on comprehensive net loss by $30,887 (August 31, 2019 - $38,799).

Page 14 of 17

WAVEFRONT TECHNOLOGY SOLUTIONS INC. Notes to the Condensed Consolidated Interim Financial Statements Three months ended November 30, 2019 and 2018 (Canadian dollars) (Unaudited)

c) Credit risk

Assets that subject the Company to credit risk consist primarily of cash and cash equivalents, trade and other receivables, and, if applicable, any indemnifications. The Company apples the simplified approach to trade and other receivables and recognizes a loss allowance provision based on lifetime expected credit losses (ECLs). The loss provision is based on the Company’s historical collection and loss experience and incorporates forward-looking factors, where appropriate. The loss provision is included in administrative costs in the Financial Statements and is net of any recoveries that were provided for in a prior period.

Trade receivables are included in trade and other receivables on the statements of financial position and consist of the following:

Trade receivables are included in trade and other receivables on the and consist of the following:	statements of financial position
Trade and other receivables Current Past due but not impaired Aged between 31 - 90 days Aged between 91 - 120 days Agedgreater than 121 days	November 30, August 31, 2019 2019 226,430 $ 265,795 $ 77,818 180,527 59,801 77,477 62,392 70,929
Total trade Allowance for doubtful accounts	426,441 594,728 (1,727) -
	424,714 $ 594,728 $

Reconciliation of allowance for doubtful accounts:

Balance, beginning of period Increase in allowance Net of write-offs and recoveries Impact of foreignexchange	November 30, August 31, 2019 2019 - $ 441,194 $ 1,727 - - (431,843) - (9,351)
Balance,end ofperiod	1,727 $ - $

The maximum exposure to credit risk at the reporting date by geographical region was (carrying amount):

Page 15 of 17

WAVEFRONT TECHNOLOGY SOLUTIONS INC. Notes to the Condensed Consolidated Interim Financial Statements Three months ended November 30, 2019 and 2018 (Canadian dollars) (Unaudited)

North America Middle East Other International	November 30, August 31, 2019 2019 33,587 $ 53,774 $ 273,322 457,827 117,805 83,127
	424,714 $ 594,728 $

d) Liquidity risk

Liquidity risk is the risk that an entity will encounter difficulty in meeting its obligations associated with financial liabilities as they become due. The Company manages liquidity risk through various sources, including cash generated from operations, cash management and by monitoring forecast cash flows.

The timing of undiscounted cash flows of financial liabilities based on the earliest date on which the Company may be required to pay is outlined below.

Trade accounts payable and accrued liabilities Commitments and variable lease payments Lease liabilities	0 to 3 months	4 to 12 months	Year 2	Years After 5 3 to 5 years
	228,800 $ 45,273 39,000	482,877 $ 54,575 143,000	- $ - -	- $ - $ - - - -
	313,073 $	680,452 $	- $	- $ - $

8. RELATED PARTY TRANSACTION

Expense transaction

The Company entered into a Consulting Agreement with a director of the Company to provide certain services for a monthly fee of US $5,000 per month. During the three months ended November 30, 2019, the Company recorded $nil (November 30, 2018 – $6,541) in consulting expense, with $nil (August 31, 2018 - $nil) included in accounts payable and accrued liabilities. Effective September 30, 2018, the Consulting Agreement was terminated.

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WAVEFRONT TECHNOLOGY SOLUTIONS INC. Notes to the Condensed Consolidated Interim Financial Statements Three months ended November 30, 2019 and 2018 (Canadian dollars) (Unaudited)

9. SEGMENTED INFORMATION

The Company is an oil field service provider and operates with one reportable segment that covers all aspects of the Company’s business.

Wavefront considers the basis on which it is organized, including the economic characteristics and geographic areas, in identifying its reportable segment. The operating segment(s) of the Company is defined as component(s) of the Company for which separate financial information is available and is evaluated regularly by the chief operating decision maker in allocating resources and assessing performance. The chief operating decision maker of the Company is the President and Chief Executive Officer. The Company has one group of similar products due to having a similar underlying technology, class of customers, and economic characteristics.

Geographic information

North America Middle East Other International		Revenue		August 31, 2019 3,417,726 $ 655,681 102,557 Assets
	November 30, 2019	November 30, 2018	November 30, 2019
	39,841 $ 644,204 16,640	90,181 $ 751,652 101,920	3,730,949 $ 432,489 138,039
	700,685 $	943,753 $	4,301,477 $	4,175,964 $

For its geographic segments, the Company has allocated assets based on their physical location and revenue based on the location of the customer. Of the revenues recognized for the period ended November 30, 2019 in the Middle East, revenues of $330,900 (November 30, 2018 - $326,375) were derived from Kuwait, and revenues of $239,063 (November 30, 2018 - $258,059) were derived from the Kingdom of Saudi Arabia.

Significant customers

Sales in the period ended November 30, 2019 from the top three customers amounted to $330,900, $312,122 and $28,757, which represented 47.2%, 44.5% and 4.1% respectively, of total revenue. Sales in the period ended November 30, 2018, from the top three customers amounted to $328,895, $326,375 and $167,219 which represented 34.8%, 34.6% and 17.7% respectively, of total revenue.

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