EXHIBIT 99.1

Empower Clinics Inc.

Condensed Interim Consolidated Financial Statements

For the three and six months ended June 30, 2022 and 2021

Unaudited - Expressed in US dollars

1

Notice of Disclosure of Non-Auditor Review of the Condensed Interim Consolidated Financial Statements for the three and six months ended June 30, 2022 and 2021

Pursuant to subsection 4.3(3)(a) of National Instrument 51-102 - Continuous Disclosure Obligations, issued by the Canadian Securities Administrators, 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 condensed interim consolidated financial statements of Empower Clinics Inc. (the “Company”) for the interim periods ended June 30, 2022 and 2021, have been prepared in accordance with the International Accounting Standard 34 - Interim Financial Reporting as issued by the International Accounting Standards Board, and are the responsibility of the Company’s management.

The Company’s independent auditors, MNP LLP, have not performed a review of these condensed interim consolidated financial statements.

November 2, 2022

2

EMPOWER CLINICS INC.

CONDENSED INTERIM CONSOLIDATED STATEMENTS OF FINANCIAL POSITION

As at June 30, 2022 and December 31, 2021

(Unaudited - Expressed in US dollars)

	Note		June 30, 2022			December 31, 2021
			$			$
ASSETS
Current assets
Cash				793,935			866,170
Restricted cash				-			1,238,366
Assets classified as held for sale	5			-			97,314
Accounts receivable	6			781,188			565,575
Inventory	7			731,337			205,048
Prepaid expenses				222,493			187,868
				2,528,953			3,160,341
Property and equipment	8			1,075,041			1,131,504
Other assets	17	(b),22		745,531			745,531
Total assets				4,349,525			5,037,376
LIABILITIES
Current liabilities
Accounts payable and accrued liabilities	10,22			3,173,203			3,725,430
Consideration payable	4			200,363			200,363
Liabilities classified as held for sale	5			-			61,520
Current portion of loans payable	11			211,166			128,480
Current portion of notes payable	12			178,126			173,266
Convertible note payable	14			-			205,406
Current portion of lease liability	15			397,254			387,100
Current portion of warrant liability	16			426,083			1,504,703
Conversion feature	13			424,462			-
Subscription deposits	17	(b)		-			1,316,825
				5,010,657			7,703,093
Loans payable	11			900,773			1,053,983
Convertible debentures	13			908,684			-
Lease liability	15			2,411,190			2,650,367
Deferred revenue				68,055			22,874
Total liabilities				9,299,359			11,430,317
SHAREHOLDERS’ DEFICIENCY
Issued capital	17	(b)		53,515,213			52,875,084
Shares to be issued				60,287			60,287
Contributed surplus				3,113,829			2,908,315
Warrant reserve				586,384			58,380
Accumulated other comprehensive income				108,553			39,938
Deficit				(62,334,100	)		(62,334,945	)
Total shareholders’ deficiency				(4,949,834	)		(6,392,941	)
Total liabilities and shareholders’ deficiency				4,349,525			5,037,376

Nature of operations and going concern (Note 1)

Commitments and contingencies (Note 24)

Events after the reporting period (Note 25)

Approved and authorized for issue on behalf of the Board of Directors:

/s/ “Steven McAuley” Director /s/ “Andreis Bunkse” Director

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

3

EMPOWER CLINICS INC.

CONDENSED INTERIM CONSOLIDATED STATEMENTS OF INCOME (LOSS) AND COMPREHENSIVE INCOME (LOSS)

For the three and six months ended June 30, 2022 and 2021

(Unaudited - Expressed in US dollars, except number of shares outstanding)

				Three months ended June 30,						Six months ended June 30,
	Note			2022			2021			2022			2021
					$		$				$			$
Revenue					1,553,980			861,826			2,660,930			2,820,628
Direct expenses excluding depreciation and amortization					819,568			831,594			1,691,647			1,573,961
Gross margin					734,412			30,232			969,283			1,246,667
Operating expenses		18			1,564,474			727,747			2,872,917			1,626,952
Legal and professional fees					269,547			373,298			635,227			1,238,318
Depreciation and amortization expense		8			54,698			133,556			108,343			254,226
Share-based payments		17	(c),22		82,634			169,572			205,925			605,558
Loss from operations					(1,236,941	)		(1,373,941	)		(2,853,129	)		(2,478,387	)
Other expenses (income)
Accretion expense		11-13			136,502			8,833			189,305			10,610
Interest expense		11-15			109,726			17,375			191,941			46,250
Provision for credit losses					14,771			-			19,292			-
Gain on lease termination					-			(1,152	)		-			(1,152	)
Gain on change in fair value of warrant liability		16			(2,109,836	)		(950,352	)		(2,761,221	)		22,842,813
Gain on change in fair value of conversion feature		13			(1,450,057	)		-			(771,054	)		-
Impairment of property and equipment		8			1,096			-			20,432			-
Financing expense		13,17	(b)		-			-			700,542			-
Other income, net					(104,998	)		(36,436	)		(309,296	)		(36,436	)
					(3,402,796	)		(961,732	)		(2,720,059	)		22,862,085
Net income (loss) from continuing operations					2,165,855			(412,209	)		(133,070	)		(25,340,472	)
Net income (loss) from discontinued operations					-			(167,111	)		133,915			(452,404	)
Net income (loss) for the period					2,165,855			(579,320	)		845			(25,792,876	)
Other comprehensive income
Foreign currency translation					125,371			36			68,615			88
Comprehensive income (loss) for the period					2,291,226			(579,284	)		69,460			(25,792,788	)
Income (loss) per share from continuing operations, basic and diluted					0.01			(0.00	)		(0.00	)		(0.08	)
Income (loss) per share from discontinued operations, basic and diluted					-			(0.00	)		0.00			(0.00	)
Income (loss) per share, basic and diluted					0.01			(0.00	)		0.00			(0.08	)
Weighted average number of shares outstanding
Basic and diluted					348,336,255			333,402,526			346,930,213			318,346,842

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

4

EMPOWER CLINICS INC.

CONDENSED INTERIM CONSOLIDATED STATEMENTS OF CHANGES IN CASH FLOWS

For the six months ended June 30, 2022 and 2021

(Unaudited - Expressed in US dollars)

	Six months ended  June 30,
	2022			2021
	$			$
Operating activities
Net loss from continuing operations		(133,070	)		(25,340,472	)
Items not involving cash:
Depreciation and amortization expense		108,343			254,226
Share-based payments		205,925			605,558
Accretion expense		189,305			10,610
Interest expense		191,941			46,250
Provision for credit losses		19,292			-
Gain on termination of leases		-			(1,152	)
(Gain) loss on change in fair value of warrant liability		(2,761,221	)		22,842,813
Gain on change in fair value of conversion feature		(771,054	)		-
Vesting of escrow shares		87,020			-
Impairment of property and equipment		20,432			-
Financing expense		700,542			-
Other (income) expense, net		(148,776	)		42,021
Changes in working capital		(1,302,716	)		(71,038	)
Net cash used in operating activities of continuing operations		(3,594,037	)		(1,611,184	)
Net cash used in operating activities of discontinued operations		(7,482	)		(372,217	)
Investing activities
Purchase of property and equipment		(76,766	)		(745,913	)
Proceeds from disposal of Sun Valley		181,664			-
Net cash provided by (used in) investing activities of continuing operations		104,898			(745,913	)
Financing activities
Proceeds from issue of convertible debentures		3,170,980			-
Proceeds from issue of units		745,625			-
Transaction costs in private placements		(209,133	)		-
Proceeds from stock options exercised		19,656			205,559
Proceeds from warrants exercised		224,479			4,433,444
Repayment of loans payable		(89,206	)		(612,091	)
Repayment of notes payable		(207,134	)		(437,985	)
Lease payment		(192,049	)		(106,423	)
Interest payment		(107,447	)		(413,852	)
Net cash provided by financing activities of continuing operations		3,355,771			3,068,652
Net cash used in financing activities of discontinued operations		-			(37,218	)
Effect of foreign exchange on cash		68,615			-
Net change in cash		(72,235	)		302,120
Cash, beginning of the period		866,170			4,889,824
Cash, end of the period		793,935			5,191,944

Supplemental disclosure with respect to cash flows (Note 20)

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

5

EMPOWER CLINICS INC.

CONDENSED INTERIM CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY (DEFICIENCY)

(Unaudited - Expressed in US dollars, except share numbers)

	Number of common shares		Issued capital		Share subscriptions receivable			Shares to  be issued		Contributed surplus			Warrant reserves			Accumulated other comprehensive income		Deficit			Total
	#		$		$			$		$			$			$		$			$
Balance, December 31, 2020		283,811,903		22,969,566		(745,531	)		60,287		2,223,269			80,638			-		(30,078,630	)		(5,490,401	)
Share issued for services		1,220,410		65,772		-			-		-			-			-		-			65,772
Exercise of options		3,464,666		297,396		-			-		(91,837	)		-			-		-			205,559
Exercise of warrants classified within warrant liability		42,725,547		29,062,433		-			-		-			-			-		-			29,062,433
Exercise of warrants classified within warrant reserve		2,180,000		71,933		-			-		-			(70,838	)		-		-			1,095
Share-based payments		-		-		-			-		605,558			-			-		-			605,558
Reclassification of expired warrants		-		-		-			-		9,800			(9,800	)		-		-			-
Foreign currency translation		-		-		-			-		-			-			88		-			88
Net loss for the period		-		-		-			-		-			-			-		(25,792,876	)		(25,792,876	)
Balance, June 30, 2021		333,402,526		52,467,100		(745,531	)		60,287		2,746,790			-			88		(55,871,506	)		(1,342,772	)
Balance, December 31, 2021		339,445,021		52,875,084		-			60,287		2,908,315			58,380			39,938		(62,334,945	)		(6,392,941	)
Vesting of escrow shares		-		87,020		-			-		-			-			-		-			87,020
Shares issued in private placement		5,500,000		-		-			-		-			-			-		-			-
Shares issued for services		775,000		95,091		-			-		-			-			-		-			95,091
Exercise of options		250,000		20,067		-			-		(411	)		-			-		-			19,656
Exercise of warrants classified within liability		2,238,637		421,108		-			-		-			-			-		-			421,108
Share issued on conversion of convertible debt		300,000		16,843		-			-		-			-			-		-			16,843
Share-based payments		-		-		-			-		205,925			-			-		-			205,925
Issuance of warrants classified within warrant reserve		-		-		-			-		-			528,004			-		-			528,004
Foreign currency translation		-		-		-			-		-			-			68,615		-			68,615
Net income for the period		-		-		-			-		-			-			-		845			845
Balance, June 30, 2022		348,508,658		53,515,213		-			60,287		3,113,829			586,384			108,553		(62,334,100	)		(4,949,834	)

6

EMPOWER CLINICS INC.

NOTES TO THE CONDENSED INTERIM CONSOLIDATED FINANCIAL STATEMENTS

For three and six months ended June 30, 2022 and 2021

(Unaudited - Expressed in US dollars, except where noted)

1. NATURE OF OPERATIONS AND GOING CONCERN

Empower Clinics Inc. (“Empower” or the “Company”) was incorporated under the laws of the State of Nevada on February 20, 1997 and subsequently continued as a federally incorporated Canadian company pursuant to a continuation under the Canada Business Corporations Act on November 27, 2008. The registered office of the Company is located at Suite 505 - 1771 Robson Street, Vancouver, British Columbia, Canada, V6G 1C9. The Company’s shares are traded on the Canadian Securities Exchange under the symbol “CBDT”.

The Company is an integrated healthcare company that provides body and mind wellness for patients through its medical clinics, digital and telemedicine care, medical diagnostics laboratories and sale of medical devices.

Going concern

These condensed interim consolidated financial statements have been prepared under the assumption that the Company will be able to continue operating as a going concern, which assumes the Company will be able to realize its assets and discharge its liabilities in the normal course of operations for the foreseeable future. The Company has a history of losses and negative cash flows from operating activities, and as at June 30, 2022, the Company had a working capital deficiency of $2,481,704 (December 31, 2021 - $4,542,752) and an accumulated deficit of $62,334,100 (December 31, 2021 - $62,334,945). These circumstances present a material uncertainty that casts significant doubt over the Company’s ability to continue as a going concern.

The Company anticipates that it will pursue growth opportunities through acquisitions, the expansion of clinic locations and through new product development in order to drive revenue and generate positive cash flows from operations. The ability of the Company to continue operating as a going concern is dependent on its ability to raise sufficient additional funds to finance development activities and/or its ability to achieve profitable operations and positive cash flows from operations. There is no certainty that management’s plans described above will be successful or that sufficient financing will be available on terms acceptable to the Company or at all.

These condensed interim consolidated financial statements do not reflect adjustments (if any) to the recorded amounts and classification of assets and liabilities, which could be necessary if the use of the going concern assumption is ultimately determined to be inappropriate. Such adjustments, if any, could be material.

2. BASIS OF PREPARATION

a) Statement of compliance

These condensed interim consolidated financial statements were approved by the Company’s Board of Directors and authorized for issue on November 2, 2022.

These condensed interim consolidated financial statements have been prepared in accordance with International Accounting Standard 34 Interim Financial Reporting, using accounting policies consistent with International Financial Reporting Standards (“IFRS”) as issued by the International Accounting Standards Board (“IASB”) and interpretations of the International Financial Reporting Interpretations Committee (“IFRIC”). As such, these condensed interim consolidated financial statements do not contain all the disclosures required by IFRS for annual financial statements and should be read in conjunction with the Company’s audited annual financial statements for the years ended December 31, 2021, 2020 and 2019.

b) Basis of presentation

These condensed interim consolidated financial statements have been prepared using the historical cost basis, except for certain financial assets and liabilities which are measured at fair value, as specified by IFRS for each type of asset, liability, income and expense as set out in the accounting policies below.

c) Functional and presentation currency

These condensed interim consolidated financial statements are presented in United States dollars (“USD”), except as otherwise noted, which is the functional currency of the Company. The functional currency of each subsidiary is listed below. References to C$ or CAD are to Canadian dollars.

7

EMPOWER CLINICS INC.

NOTES TO THE CONDENSED INTERIM CONSOLIDATED FINANCIAL STATEMENTS

For three and six months ended June 30, 2022 and 2021

(Unaudited - Expressed in US dollars, except where noted)

2. BASIS OF PREPARATION (Continued)

d) Reclassification of prior year amounts

The Company has reclassified certain items on the condensed interim consolidated statements of loss and comprehensive loss, the condensed interim consolidated statements of cash flows, and the condensed interim consolidated statements of changes in shareholders’ deficiency to conform with current period presentation.

e) Basis of consolidation

These condensed interim consolidated financial statements include the accounts of the Company and its subsidiaries. All intercompany transactions and balances are eliminated on consolidation. Control exists where the parent entity has power over the investee and is exposed, or has rights, to variable returns from its involvement with the investee and has the ability to affect those returns through its power over the investee. Subsidiaries are consolidated from the date control commences until the date control ceases.

These condensed interim consolidated financial statements incorporate the accounts of the Company and the following subsidiaries:

Name of subsidiary	Country of Incorporation	Percentage Ownership	Functional Currency	Principal Activity
11000900 Canada Inc. (1)	Canada	100%	CAD	Clinic operations
Empower Healthcare Assets Inc. (2)	USA	100%	USD	Holding company
Empower Healthcare Corp.	Canada	100%	USD	Holding company
Empower Healthcare Corp.	USA	100%	USD	Clinic operations
Kai Medical Canada Corp. (3)	Canada	100%	CAD	Product sales
Kai Medical Laboratory, LLC (4)	USA	100%	USD	Diagnostic testing
Lawrence Park Health and Wellness Clinic Inc. (4)	Canada	100%	CAD	Clinic operations
Medi + Sure Canada Inc. (5)	Canada	100%	CAD	Product sales
Medi Collective Corp. (6)	Canada	100%	CAD	Clinic operations
Medi-Collective: Brown’s Line FHO Inc. (7)	Canada	100%	CAD	Clinic operations
S.M.A.A.R.T. Holding Co. (9)	USA	100%	USD	Inactive
SMAART, Inc. (9)	USA	100%	USD	Inactive
Sun Valley Alternative Health Centres NV, LLC (8)	USA	100%	USD	Disposed
Sun Valley Health Franchising, LLC (8)	USA	100%	USD	Disposed
Sun Valley Health Mesa, LLC (8)	USA	100%	USD	Disposed
Sun Valley Health Tucson, LLC (8)	USA	100%	USD	Disposed
Sun Valley Health West, LLC (8)	USA	100%	USD	Disposed
Sun Valley Health, LLC (8)	USA	100%	USD	Disposed
Sun Valley Heath Holdings, LLC (8)	USA	100%	USD	Disposed
THCF Access Point (9)	USA	100%	USD	Inactive
The Hemp and Cannabis Co. (9)	USA	100%	USD	Inactive

(1)	Lawrence Park Health and Wellness Clinic Inc. and 11000900 Canada Inc. were acquired on December 31, 2020 (Note 5).
(2)	Empower Healthcare Assets Inc. was incorporated in the state of Delaware on April 16, 2019.
(3)	Kai Medical Canada Corp. was incorporated on June 17, 2021.
(4)	Kai Medical Laboratory, LLC was acquired on October 5, 2020.
(5)	Medi + Sure Canada Inc. was acquired on July 30, 2021 (Note 4).
(6)	Medi Collective Corp. was incorporated on May 12, 2021.
(7)	Medi-Collective: Brown’s Line FHO Inc. was incorporated on June 17, 2021.
(8)	These entities (together “Sun Valley”) were acquired on April 30, 2019 and results were consolidated until disposal on March 8,2022.
(9)	The Hemp and Cannabis Co., THCF Access Point S.M.A.A.R.T Holding Co., and SMAART, Inc have been inactive since 2018.

8

EMPOWER CLINICS INC.

NOTES TO THE CONDENSED INTERIM CONSOLIDATED FINANCIAL STATEMENTS

For three and six months ended June 30, 2022 and 2021

(Unaudited - Expressed in US dollars, except where noted)

3.  SIGNIFICANT ACCOUNTING POLICIES

The accounting policies applied in the preparation of these condensed interim consolidated financial statements are consistent with those applied and disclosed in note 3 to the annual consolidated financial statements for the years ended December 31, 2021, 2020 and 2019.

4.  ACQUISITION OF MEDISURE

On July 30, 2021, the Company acquired 100% ownership of Medi + Sure Canada Inc. (“MediSure”). Founded in 2010, MediSure produces diabetes testing products for sale in the Canadian market.

Consideration in the transaction had an aggregate fair value of $2,720,525 (C$3,403,767) comprised of cash consideration of $794,021 (C$1,000,000), a promissory note of $200,363 (C$250,000), and 4,582,483 common shares with a fair value of $1,726,141 (C$2,153,767). The promissory note is payable on July 30, 2022. Due to the short-term nature of the note, effects of discounting were deemed to be immaterial. Of the total common shares issued, 2,036,659 shares are subject to contractually imposed trading restrictions through July 2023 with 254,582 common shares released from escrow every three months commencing on October 30, 2021 (the “restricted trading shares”). The fair value of the restricted trading shares was not subject to a discount for lack of marketability as the trading restrictions are imposed via a contract as opposed to via securities legislation.

The transaction has been accounted for as a business combination under IFRS 3 Business Combinations.

The following table summarizes the preliminary purchase price allocation:

Assets acquired	$
Accounts receivable		123,299
Inventory		161,209
Prepaid expense		4,841
Property and equipment		129,997
Intangible assets		146,300
		565,646
Liabilities assumed
Bank indebtedness		782
Accounts payable and accrued liabilities		88,445
Lease liability		124,640
Shareholder loan		10,715
Net assets at fair value, as at July 30, 2021		341,064
Consideration
Cash consideration		794,021
Fair value of promissory note (consideration payable)		200,363
Fair value of 2,545,824 share consideration		958,967
Fair value of 2,036,659 restricted share consideration		767,174
Total consideration		2,720,525
Goodwill		2,379,461

The acquired accounts receivable contained $3,338 of GST receivable and $119,961 of trades receivable. Acquired property and equipment was comprised of right-of-use assets with a fair value of $124,640 office equipment with a fair value of $5,357. The lease liability represents one lease with a fair value of $124,640 on the date of acquisition, which is the net present value of the minimum future lease payments determined using the following assumptions: (1) remaining number of payments - 60; (2) monthly payment - $2,405 (C$3,000); and (3) incremental borrowing rate - 6.00% per annum.

The shareholder loan balance at acquisition consisted of a vehicle loan with a payout balance of $10,715 (C$13,407).

The goodwill generated as a result of this acquisition related to other intangible assets that did not qualify for separate recognition. During the Company’s annual recoverability test on December 31, 2021, the goodwill was found to be fully impaired and was written off.

9

EMPOWER CLINICS INC.

NOTES TO THE CONDENSED INTERIM CONSOLIDATED FINANCIAL STATEMENTS

For three and six months ended June 30, 2022 and 2021

(Unaudited - Expressed in US dollars, except where noted)

5.  DISCONTINUED OPERATIONS - SUN VALLEY

On March 8, 2022, the Company completed the sale of Sun Valley for total cash consideration of $181,664. Discontinued operations are comprised of Sun Valley’s operations until the date of disposal. Sun Valley’s results of operations, cash flow information, and details of the are set out below.

Results of discontinued operations for the three and six months ended June 30, 2022 and 2021:

	Three months ended June 30,					Six months ended June 30,
	2022		2021			2022			2021
	$		$			$			$
Revenue		-		32,374			73,042			121,668
Direct expenses excluding depreciation and amortization		-		2,101			2,007			3,786
Gross margin		-		30,273			71,035			117,882
Clinic operating expenses		-		163,968			100,877			475,445
Provision for credit losses		-		-			12,000			-
Legal and professional fees		-		9,838			276			14,654
Depreciation and amortization expense		-		20,187			-			60,114
Interest expense		-		3,391			-			5,816
Loss (gain) on termination of leases		-		-			21,329			(4,471	)
Impairment of property and equipment		-		-			-			18,728
Other income, net		-		-			(12,675	)		-
Loss from discontinued operations		-		(167,111	)		(50,772	)		(452,404	)
Gain on sale of discontinued operations		-		-			184,687			-
Net income (loss) from discontinued operations		-		(167,111	)		133,915			(452,404	)

Details of the sale of discontinued operations are presented as follow:

	March 8, 2022
	$
Assets
Property and equipment		23,139
Liabilities
Deferred revenue		1,694
Accounts payable and accrued liabilities		23,509
Bank indebtedness		959
Net liabilities		(3,023	)
Cash consideration received		181,664
Gain on sale of discontinued operations		184,687

10

EMPOWER CLINICS INC.

NOTES TO THE CONDENSED INTERIM CONSOLIDATED FINANCIAL STATEMENTS

For three and six months ended June 30, 2022 and 2021

(Unaudited - Expressed in US dollars, except where noted)

6.  ACCOUNTS RECEIVABLE

The Company had the following in accounts receivable at June 30, 2022 and December 31, 2021:

	June 30, 2022			December 31, 2021
	$			$
Trade receivables		582,157			454,481
Lease receivables		191,670			-
Expected credit losses		(140,771	)		(121,479	)
GST receivable		105,913			193,853
Other receivables		42,219			38,720
Total		781,188			565,575

The Company estimates a provision for lifetime expected credit losses for receivables aged greater than 91 days. As at June 30, 2022, the Company had $140,771 (December 31, 2021 - $121,479) recorded as a provision for expected credit losses.

7. INVENTORY

At June 30, 2022 and December 31, 2021, inventory was comprised of the following:

	June 30, 2022		December 31, 2021
	$		$
Diagnostics, COVID-19 testing supplies and reagents		476,157		325
Diabetes diagnostic products		255,180		204,723
Total		731,337		205,048

8. PROPERTY AND EQUIPMENT

The following table presents a continuity of property and equipment for the six months ended June 30, 2022 and the year ended December 31, 2021:

	Right-of-use assets			Furniture and equipment			Leasehold improvements			Testing equipment			Asset under Construction			Total
	$			$			$			$			$			$
Cost
Balance, December 31, 2020		788,490			154,275			177,858			928,149			-			2,048,772
Additions		2,959,976			333,979			1,077,418			42,320			573,829			4,987,522
Disposals		(275,677	)		(15,180	)		(32,086	)		-			-			(322,943	)
Impairment		(3,206,016	)		(8,916	)		(1,171,224	)		-			(580,363	)		(4,966,519	)
Foreign exchange gain (loss)		29,884			(1,958	)		(2,005	)		323			6,534			32,778
Transferred to assets held for sale		(296,657	)		(30,625	)		(49,961	)		-			-			(377,243	)
Balance, December 31, 2021		-			431,575			-			970,792			-			1,402,367
Additions		-			10,388			20,828			45,550			-			76,766
Impairment		-			-			(20,884	)		-			-			(20,884	)
Foreign exchange (loss) gain		-			(3,556	)		56			(1,572	)		-			(5,072	)
Balance, June 30, 2022		-			438,407			-			1,014,770			-			1,453,177

11

EMPOWER CLINICS INC.

NOTES TO THE CONDENSED INTERIM CONSOLIDATED FINANCIAL STATEMENTS

For three and six months ended June 30, 2022 and 2021

(Unaudited - Expressed in US dollars, except where noted)

8. PROPERTY AND EQUIPMENT (Continued)

	Right-of-use assets			Furniture and equipment			Leasehold improvements			Testing equipment			Asset under Construction		Total
	$			$			$			$			$		$
Accumulated depreciation
Balance, December 31, 2020		(311,960	)		(42,955	)		(74,805	)		(29,005	)		-		(458,725	)
Depreciation		(255,200	)		(106,785	)		(81,117	)		(116,602	)		-		(559,704	)
Disposals		162,421			15,180			32,086			-			-		209,687
Impairment		172,437			-			75,552			-			-		247,989
Foreign exchange (loss) gain		(6	)		133			1			7			-		135
Transferred to assets held for sale		232,308			9,164			48,283			-			-		289,755
Balance, December 31, 2021		-			(125,263	)		-			(145,600	)		-		(270,863	)
Depreciation		-			(47,699	)		(452	)		(60,192	)		-		(108,343	)
Impairment		-			-			452			-			-		452
Foreign exchange gain		-			569			-			49			-		618
Balance, June 30, 2022		-			(172,393	)		-			(205,743	)		-		(378,136	)

Carrying amount
Balance, December 31, 2021	-	306,312	-	825,192	-	1,131,504
Balance, June 30, 2022	-	266,014	-	809,027	-	1,075,041

Events during the six months ended June 30, 2022:

Additions to property and equipment primarily relate to purchases of assets and the costs of renovating leased clinics in Medi-Collective.

As a result of identification of indicators of impairment, leasehold improvements were found to have carrying value greater than their recoverable value. Therefore, leasehold improvements were fully impaired by $20,432.

Events during the year ended December 31, 2021:

Right-of-use assets

During the year ended December 31, 2021, the Company entered into several lease agreements for clinics in the Medi-Collective which resulted in the recognition of right-of-use assets in the amount of $2,142,721. The right-of-use assets were measured as the present value of the minimum contractual lease payments discounted at the Company’s estimated incremental borrowing rate of 6%.

On August 31, 2021, a lease agreement for one of the Company’s clinics was modified which resulted in a substantial modification of the cash flows associated with the lease. In accordance with IFRS 16, the lease was de-recognized and recorded at its present value on the date of modification. As a result of the lease modification, the disposal of previous lease contains $39,513 of cost and $24,590 of accumulated depreciation, and the new right-of-use asset was recognized at $180,664. Following an impairment test conducted on the CGU to which the right-of-use asset was assigned, the asset was found to be impaired, and the Company recognized impairment loss of $182,375.

On April 1, 2021, the Company amended the terms of its lease agreement for the Kai Medical testing laboratory. As a result of the amendment, the Company derecognized the right-of-use asset with cost of $74,183 and accumulated depreciation of $29,075; these amounts are included in disposals of right-of-use assets. The Company recorded the right-of-use asset for the amended lease term and payments discounted at a rate of 6% per annum in the amount of $511,951. Following an impairment test conducted on the CGU to which the right-of-use asset was assigned, the asset was found to be impaired, and the Company recognized impairment loss of $732,437.

The acquisition of MediSure resulted in the recognition of a right-of-use asset with a value of $124,640 (Note 6). Following an impairment test conducted on the September 30, 2021 balances of the CGU to which the right-of-use asset was assigned, the right-of use asset was found to be impaired, and the Company recognized impairment loss of $118,543.

As a result of the closure of Sun Valley clinics during the year ended December 31, 2021, the Company disposed of right-of-use assets with cost of $134,887 and accumulated depreciation of $81,662.

12

EMPOWER CLINICS INC.

NOTES TO THE CONDENSED INTERIM CONSOLIDATED FINANCIAL STATEMENTS

For three and six months ended June 30, 2022 and 2021

(Unaudited - Expressed in US dollars, except where noted)

8. PROPERTY AND EQUIPMENT (Continued)

As a result of the non-binding agreement entered-into on July 21, 2021 for the sale of 100% of the Company’s interest in Sun Valley, the Company transferred right of use assets with cost of $296,657 and accumulated depreciation of $232,308 to assets held for sale.

Furniture and equipment, leasehold improvements, testing equipment and assets under construction

For the year ended December 31, 2021, additions to furniture and equipment primarily relate to purchases of assets to furnish the Company’s new clinic openings in the Medi-Collective and additions to testing equipment primarily relates to purchases of additional testing equipment in Kai Medical.

For the year ended December 31, 2021, additions to leasehold improvements primarily relates to renovations conducted at the Kai Medical laboratory and costs of renovating leased clinics in the Medi-Collective.

For the year ended December 31, 2021, additions to assets under construction primarily represents costs of renovating clinics that are not yet available for use.

During the year ended December 31, 2021, closures of Sun Valley clinics resulted in disposals in furniture and equipment and leasehold improvements with cost of $15,180 and $32,086, respectively, and accumulated depreciation of $15,180 and $32,086, respectively. The closures also resulted in the recognition of impairment of $8,917 and $9,811 in furniture and equipment and leasehold improvements, respectively which is included in net loss from discontinued operations.

As a result of the non-binding agreement entered into on July 21, 2021 for the sale of 100% of the Company’s interest in Sun Valley, the Company transferred furniture and equipment with costs of $30,625 and accumulated depreciation of $9,164 and leasehold improvements with cost of $49,961 and accumulated depreciation of $48,283 to assets held for sale.

As a result of an impairment test conducted on the September 30, 2021 balances of the Diagnostics & Technology CGU, the Company recognized impairment of leasehold improvements of $547,064. As a result of an impairment test conducted on the December 31, 2021, balances of the Health & Wellness CGU, the Company recognized further impairment of leasehold improvements of $1,119,159.

9. INTANGIBLE ASSETS AND GOODWILL

Intangible assets

The following table presents a continuity of intangible assets for the six months ended June 30, 2022 and the year ended December 31, 2021:

	Patient records			Customer relationships			Brands, trademarks, licenses and domain names			Management software			Total
	$			$			$			$			$
Cost
Balance, December 31, 2021		378,763			-			376,699			51,100			806,562
Acquisition of MediSure		-			146,300			-			-			146,300
Impairment		(379,688	)		(146,300	)		(376,699	)		(51,100	)		(953,787	)
Foreign exchange gain		925			-			-			-			925
Balance, December 31, 2021 and June 30, 2022		-			-			-			-			-
Accumulated amortization
Balance, December 31, 2020		(319,856	)		-			(131,699	)		(51,100	)		(502,655	)
Amortization		(11,169	)		-			(36,750	)		-			(47,919	)
Impairment		331,025			-			168,449			51,100			550,574
Balance, December 31, 2021 and June 30, 2022		-			-			-			-			-
Carrying amount
Balance, December 31, 2021 and June 30, 2022		-			-			-			-			-

13

EMPOWER CLINICS INC.

NOTES TO THE CONDENSED INTERIM CONSOLIDATED FINANCIAL STATEMENTS

For three and six months ended June 30, 2022 and 2021

(Unaudited - Expressed in US dollars, except where noted)

9. INTANGIBLE ASSETS AND GOODWILL (Continued)

Events during the year ended December 31, 2021:

The acquisition of MediSure resulted in the recognition of an intangible customer relationship asset with a fair value of $146,300 (Note 6) which was assigned to the Diagnostics & Technology CGU. Following identification of indicators of impairment in both Diagnostics & Technology CGU and Health & Wellness CGU, the carrying amounts for all intangible assets was found to exceed the recoverable amount and the intangible assets assigned to the CGUs were found to be fully impaired. As a result, the Company recognized $146,300 in impairment charges related to the MediSure customer relationships and recognized total impairment loss of $403,213.

Goodwill

A continuity of goodwill for the six months ended June 30, 2022 and the year ended December 31, 2021 is as follows:

	$
Balance, December 31, 2020	2,082,146
Acquisition of MediSure	2,379,461
Impairment	(4,461,607	)
Balance, December 31, 2021 and June 30, 2022	-

Events during the year ended December 31, 2021:

During the year ended December 31, 2021, goodwill from the Lawrence Park & Atkinson acquisition was allocated to a group of CGUs within the Health & Wellness operating segment while goodwill from the Kai Medical acquisition was allocated to a group of CGUs within the Diagnostics & Technology operating segment. Goodwill from MediSure acquisition on July 30, 2021, was allocated to a group of CGUs within the Diagnostics & Technology operating segment.

As a result of indicators of impairment in Diagnostics & Technology CGU, the Company performed an impairment assessment of the CGU for the period ended September 30, 2021. The Company determined that the CGU’s carrying amount exceeded its recoverable amount and found that the entire amount of goodwill allocated to the CGU of $2,690,198 was impaired. The goodwill was comprised of $310,737 resulting from the acquisition of Kai Medical (Note 4) and $2,379,461 resulting from the acquisition of MediSure (Note 6). The CGU’s recoverable amount was determined using a value in use calculation with the following key assumptions: (1) discount rate - 17%; (2) income tax rate - 27%; (3) terminal growth rate - 2%; (4) working capital - 8% of sales.

The Company conducted an annual impairment test on the Health & Wellness CGU by preparing a value in use calculation to determine its recoverable amount. The Company determined that the CGU’s carrying amount exceeded its recoverable amount and found that the entire amount of goodwill allocated to the CGU of $1,771,409 was impaired. Significant assumptions in the value in use calculation were based on the number of clinics to be opened in the next two years and the expected revenues and margins from these clinics as well as the following key assumptions: (1) discount rate - 17%; (2) income tax rate - 27%; (3) terminal growth rate - 3%; (4) working capital - 5% of sales.

10. ACCOUNTS PAYABLE AND ACCRUED LIABILITIES

The Company had the following in accounts payable and accrued liabilities at June 30, 2022 and December 31, 2021:

	June 30, 2022		December 31, 2021
	$		$
Trade payables		1,785,327		1,896,895
Accrued liabilities		56,211		423,475
Accrued payroll liabilities		539,676		618,378
Accrued tax liabilities		791,989		786,682
Total		3,173,203		3,725,430

14

EMPOWER CLINICS INC.

NOTES TO THE CONDENSED INTERIM CONSOLIDATED FINANCIAL STATEMENTS

For three and six months ended June 30, 2022 and 2021

(Unaudited - Expressed in US dollars, except where noted)

11. LOANS PAYABLE

A continuity of loans payable for the period of six months ended June 30, 2022 and the year end December 31, 2021 is as follows:

	June 30, 2022			December 31, 2021
	$			$
Balance, beginning of the period		1,182,463			2,132,227
PPP loan addition		-			86,378
Accretion expense		4,917			33,324
Interest expense		29,919			63,676
Repayment		(89,206	)		(1,008,721	)
Gain on loan forgiveness		(14,984	)		(124,047	)
Unrealized foreign exchange gain		(1,170	)		(374	)
Balance, end of the period		1,111,939			1,182,463
Less: Current portion		211,166			128,480
Non-current portion		900,773			1,053,983

During the three and six months ended June 30, 2022, the Company made scheduled payments on loans payable of $59,402 and $89,206, respectively (2021 - $44,273 and $912,471, respectively). Of the total amount paid during the three months and six months ended June 30, 2022, $17,508 and $29,919 respectively (2021 - $28,522 and $302,106, respectively) were for interest payments.

CEBA loans

The Company and its subsidiaries have three CEBA loans with principal amounts of $48,015 (C$60,000), $32,010 (C$40,000) and $32,010 (C$40,000), respectively. All three loans mature on December 31, 2025. The loans are interest free until December 31, 2023, at which time they accrue interest at 5% per annum. The loans have a possibility of forgiveness of 33% of their principal amounts if they are repaid on or before December 31, 2023. For the three and six months ended June 30, 2022, accretion expense was $391 and $782 (2021 - $2,010 and $2,381), respectively. These loans do not incur any interest.

Kai Medical Secured Loans

The Company has three outstanding secured loans through Kai Medical as follows:

· The Company has a bank loan with principal amount of $1,585,000. The loan has floating interest rate that equals Wall Street Journal Prime rate plus 2.00% per annum, payable each month, and matures on June 7, 2028. This loan does not incur any accretion expense. During the three and six months ended June 30, 2022, interest expense was $15,778 and $26,473 (2021 - $14,020 and $28,522), respectively.

· The Company has a loan from the U.S Small Business Administration (the “SBA”) with the principal amount of $150,000 and interest rate of 3.75% per annum. The loan matures on June 24, 2050. On March 15, 2022, the loan was announced by the SBA to have payment deferment extension. As a result of the change, the Company recognized $14,984 as gain on remeasurement of the loan’s carrying value and included this in clinic operating expense. During the three and six months ended June 30, 2022, accretion expense was $496 and $1,108 (2021 - $389 and $1,088), respectively, and interest expense recorded on these loans was $1,512 and $3,010 (2021 - $1,456 and $2,899), respectively.

· The Company has a Payback Protection Program (“PPP”) loan from the SBA with principal amount of $86,378 and interest rate of 1.00% per annum. The loan matures on March 1, 2026. For the three and six months ended June 30, 2022, accretion expense was $1,503 and $3,027 (2021 - $nil and $nil), respectively, and interest expense recorded on these loans was $218 and $436 (2021 - $nil and $nil), respectively.

15

EMPOWER CLINICS INC.

NOTES TO THE CONDENSED INTERIM CONSOLIDATED FINANCIAL STATEMENTS

For three and six months ended June 30, 2022 and 2021

(Unaudited - Expressed in US dollars, except where noted)

12. NOTES PAYABLE

A continuity of notes payable for the period of the six months ended June 30, 2022 and the year end December 31, 2021 is as follows:

	June 30, 2022		December 31, 2021
	$		$
Balance, beginning of period		173,266		708,361
Interest expense		4,860		14,443
Repayment		-		(553,324	)
Realized foreign exchange loss		-		3,786
Balance, end of the period		178,126		173,266
Less: Current portion		178,126		173,266
Non-current portion		-		-

During the year ended December 31, 2021, the Company repaid a promissory note with the principal of $437,985 and its accrued interest of $94,636. The Company also repaid $20,703 for the accrued interest from a separate promissory note. As at June 30, 2022 and December 31, 2021, the Company had one remaining note payable with a principal balance of $140,000. Interest accrues at a rate of 7% per annum and is repayable on demand.

During the three and six months ended June 30, 2022, interest expense on the note payable was $2,443 and $4,860 (2021 - $2,443 and $9,503) respectively. As at June 30, 2022, the notes payable includes accrued interest of $38,126 (December 31, 2021 - $33,266)

13. CONVERTIBLE DEBENTURES

The continuity of convertible debentures for the six months ended June 30, 2022 is presented as follow:

	$
Balance, December 31, 2021	-
Additions from private placements, net of transaction costs	703,199
Interest expense	68,910
Accretion expense	184,388
Repayment	(19,195	)
Reclassification to share capital	(9,722	)
Unrealized foreign exchange gain	(18,896	)
Balance, June 30, 2022	908,684
Less: Current portion	-
Non-current portion	908,684

The continuity of the conversion features associated with convertible debentures for the six months ended June 30, 2022 is presented as follows:

	$
Balance, December 31, 2021	-
Amount allocated to the conversion features	1,202,637
Gain on change in fair value of conversion features	(771,054	)
Reclassification to share capital	(7,121	)
Balance, June 30, 2022	424,462
Less: Current portion	424,462
Non-current portion	-

16

EMPOWER CLINICS INC.

NOTES TO THE CONDENSED INTERIM CONSOLIDATED FINANCIAL STATEMENTS

For three and six months ended June 30, 2022 and 2021

(Unaudited - Expressed in US dollars, except where noted)

13. CONVERTIBLE DEBENTURES (Continued)

On January 6, 2022, the Company closed a private placement financing, in which the Company issued 1,900 convertible debenture units at a price of C$1,000 per convertible debenture unit for gross proceeds of $1,491,249 (C$1,900,000). Each convertible debenture unit consists of a convertible debenture and 5,000 warrants. Each warrant entitles the holder to acquire one common share at a price of C$0.30 per share until January 6, 2024. The attached warrants were classified as derivative liabilities and measured at $532,398 (Note 16). Each convertible debenture unit matures on January 6, 2024, and bears interest at 6% per annum. The convertible debentures units are convertible to common shares at the conversion price of C$0.20. The fair value of the conversion feature at the grant date was estimated at $616,992. The fair value of the debt component on inception was estimated to be $341,859.

In connection with the issuance, the Company incurred total transaction costs of $468,720, of which $127,934 (C$163,000) was paid in cash. The Company settled $88,690 (C$113,000) of the transaction costs by issuing 565,000 units to the finders. Each unit is comprised of one common share and one common share purchase warrant. Each warrant entitles the holder to acquire one common share at a price of C$0.30 per share until January 6, 2024. As a result, $56,457 was allocated to share capital and $32,233 was allocated to warrant reserve (Note 17(d)). The Company also issued to certain eligible finders 1,330,000 warrants that entitles the holder to acquire one common share at a price of C$0.20 per share until January 6, 2024. The fair value of these warrants was estimated at $252,096 using the Black-Scholes model and was allocated to warrant reserve (Note 17(d)). Of the total transaction costs, $361,269 was allocated to the warrant and conversion feature liabilities and recorded as a finance expense on the statements of loss and comprehensive loss. The remaining $107,451 was attributed to the debt component of the convertible debenture and will be accreted over the term of the debt.

During the three and six months ended June 30, 2022, the accretion expense on these convertible debentures was $63,446 and $109,560, respectively (2021 - $nil and $nil, respectively). During the three and six months ended June 30, 2022, the interest expense on these convertible debentures was $21,922 and $42,641, respectively (2021 - $nil and $nil, respectively).

On March 25, 2022, the Company closed a private placement, in which the Company issued 2,100 convertible debenture units at a price of C$1,000 per convertible debenture units for gross proceeds of $1,679,731 (C$2,100,000). Each convertible debenture units consists of a convertible debenture and 5,000 warrants. Each warrant entitles the holder to acquire one common share at a price of C$0.30 per share until March 25, 2024. The attached warrants were classified as derivative liabilities and measured at $483,477 (Note 16). Each convertible debenture unit matures on March 25, 2024, and bears interest at 6% per annum. The convertible debenture units are convertible to common shares at the conversion price of C$0.20. The fair value of the conversion feature at the grant date was estimated at $585,646. The fair value of the debt component on inception was estimated to be $610,608.

In connection with the issuance, the Company incurred total transaction costs of $390,129, of which $157,577 (C$197,000) was to be settled in cash. The Company issued 210,000 common shares and 1,890,000 warrants to a finder. Each warrant issued to the finder entitles the holder to acquire one common share at a price of C$0.20 per share until March 25, 2024. The fair value of common shares issued to the finder was $38,634. The fair value of warrants issued to the finder was estimated at $193,918 using the Black-Scholes model, which was allocated to warrant reserve (Note 17(d)). Of the total transaction costs, $248,312 was allocated to the warrant and conversion feature liabilities and recorded as a finance expense on the statements of loss and comprehensive loss. The remaining $141,817 was attributed to the debt component of the convertible debenture and will be accreted over the term of the debt.

During the three and six months ended June 30, 2022, the accretion expense on these convertible debentures was $70,666 and $74,828, respectively (2021 - $nil and $nil, respectively). During the three and six months ended June 30, 2022, the interest expense on these convertible debentures was $24,613 and $26,269, respectively (2021 - $nil and $nil, respectively).

During the six months ended June 30, 2022, there were 60 convertible debentures converted into common shares. As a result, an amount of $9,722 of convertible debentures and $7,121 of conversion feature liability were extinguished and reclassified to equity (Note 17(b)).

17

EMPOWER CLINICS INC.

NOTES TO THE CONDENSED INTERIM CONSOLIDATED FINANCIAL STATEMENTS

For three and six months ended June 30, 2022 and 2021

(Unaudited - Expressed in US dollars, except where noted)

14. CONVERTIBLE NOTE PAYABLE

On January 21, 2022, the Company repaid a convertible note with principal of $198,851 (C$250,000) and accrued interest of $8,283 (C$10,414). The convertible note accrued interest at 2% per annum. At initial recognition, the conversion feature was determined to have $nil value as the note was convertible at a share price equal to the closing share price on the date prior to conversion for total shares equal to the face value of the note divided by the closing share price and as such, the settlement value was fixed at the face value of the obligation

During the three and six months ended June 30, 2022, the Company incurred interest of $nil and $nil, respectively (2021 - $1,494 and $2,480, respectively) on the convertible note payable.

15. LEASE LIABILITY

The following table presents a continuity of the Company’s lease liability:

	Health & Wellness			Diagnostics & Technology			Corporate			Discontinued operations			Total
	$			$			$			$			$
Balance, December 31, 2020		45,595			273,052			3,059			174,680			496,386
Additions		2,323,385			636,591			-			-			2,959,976
Interest expense		32,330			37,553			31			5,382			75,296
Payments		(100,779	)		(149,963	)		(3,090	)		(79,346	)		(333,178	)
Termination of leases		(18,050	)		(46,260	)		-			(57,696	)		(122,006	)
Lease liabilities classified as held for sale		-			-			-			(43,020	)		(43,020	)
Foreign exchange loss		5,675			(1,662	)		-			-			4,013
Balance, December 31, 2021		2,288,156			749,311			-			-			3,037,467
Interest expense		66,629			21,623			-			-			88,252
Payments		(192,073	)		(88,228	)		-			-			(280,301	)
Foreign exchange gain		(34,731	)		(2,243	)		-			-			(36,974	)
Balance, June 30, 2022		2,127,981			680,463			-			-			2,808,444
Less: Current portion		255,917			141,337			-			-			397,254
Lease liability		1,872,064			539,126			-			-			2,411,190

For the six months ended June 30, 2022, clinic operating expenses include $105,526 (2021 - $24,753), respectively, in relation to short-term and low value leases.

16. WARRANT LIABILITY

Certain warrants issued by the Company are classified as a derivative liability under the principles of IFRS 9, as the exercise price is in Canadian dollar while the functional currency of the Company is the US dollar. Accordingly, warrants are remeasured to fair value at each reporting date with the change in fair value charged to change in fair value of warrant liability.

18

EMPOWER CLINICS INC.

NOTES TO THE CONDENSED INTERIM CONSOLIDATED FINANCIAL STATEMENTS

For three and six months ended June 30, 2022 and 2021

(Unaudited - Expressed in US dollars, except where noted)

16. WARRANT LIABILITY (Continued)

	Weighted average exercise price		Warrants			Warrant liability
	(C$)		#			$
Balance, December 31, 2020		-		54,215,452			7,713,697
Issued		0.16		350,000			-
Exercised		0.16		(42,982,247	)		(23,029,605	)
Expired		0.13		(294,108	)		-
Loss on change in fair value of warrant liability				-			16,820,611
As at December 31, 2021		0.18		11,289,097			1,504,703
Issued		0.30		25,500,000			1,879,230
Exercised		0.13		(2,238,637	)		(196,629	)
Expired		0.11		(1,444,380	)		-
Reinstated Warrants (see below)		0.10		1,250,000			-
Loss on change in fair value of warrant liability				-			(2,761,221	)
Balance, June 30, 2022				33,106,080			426,083
Less: Current portion							426,083
Warrant liability							-

The following table summarizes the warrants outstanding and exercisable as at June 30, 2022:

Expiry date	Number of warrants		Weighted average exercise price (C$)		Weighted average remaining life (in years)
July 15, 2022		1,160,000		0.12		0.04
September 9, 2022		3,746,080		0.31		0.19
November 9, 2022		2,200,000		0.12		0.36
October 5, 2023		500,000		0.05		1.27
January 6, 2024		15,000,000		0.30		1.52
March 25, 2024		10,500,000		0.30		1.74
Total		33,106,080		0.28		1.31

On January 6, 2022, the Company closed a private placement financing of 5,500,000 units at $0.16 (C$0.20) per unit comprised one common share and one common share purchase warrant. Of the total units issued, 750,000 units were used to settle accounts payable to the Chief Executive Officer (“CEO”) of the Company (Note 22). Each warrant entitles holder to acquire one common share at a price of C$0.30. The fair value of warrants on initial recognition was estimated to be $863,355, of which $117,730 related to the settlement with the related party.

In connection with the issuance of convertible debenture units on January 6, 2022, the Company classified the attached warrants as derivative liabilities. These warrants were estimated at $532,398.

In connection with the issuance of convertible debenture units on March 25, 2022, the Company classified the attached warrants as derivative liabilities. These warrants were estimated at $483,477.

During the six months ended June 30, 2022, the Company received approval to reinstate 1,250,000 of the warrants that expired on April 16, 2022 (the “Reinstated Warrants”). The warrants were originally issued to the CEO of the Company, had an exercise price of C$0.10, and an original expiry date of April 16, 2022. The Reinstated Warrants have an exercise price of C$0.10 and an expiry date to be determined by the Exchange upon removal of a cease trade order imposed on the Company’s common shares.

19

EMPOWER CLINICS INC.

NOTES TO THE CONDENSED INTERIM CONSOLIDATED FINANCIAL STATEMENTS

For three and six months ended June 30, 2022 and 2021

(Unaudited - Expressed in US dollars, except where noted)

17. EQUITY

a) Authorized share capital

Unlimited number of common shares without nominal or par value. At June 30, 2022, there were 348,508,658 issued and outstanding common shares (December 31, 2021 - 339,445,021). The Company does not currently pay dividends and entitlement will only arise upon declaration.

b) Issued – common shares

During the six months ended June 30, 2022, the Company completed the following transactions:

Vesting of escrow shares

i. For the six months ended June 30, 2022, the Company recognized a share-based payment of $87,020 in connection with the vesting of escrow shares.

Shares issued in private placement

ii. On January 6, 2022, the Company closed a private placement financing of 5,500,000 units at $0.16 (C$0.20) per unit for gross proceeds of $863,355 (C$1,100,000) comprised of one common share and one common share purchase warrant. Each warrant entitles holder to acquire one common share at a price of C$0.30. Of the total units issued, 750,000 units with a fair value of $117,730 (C$150,000) were used to settle accounts payable to the CEO of the Company (Note 22). Total fair value of the warrant liabilities was measured at $863,355, of which $117,730 was related to the settlement with the related party (Note 16). The fair value of the warrant liability was estimated to be the full value of the transaction and accordingly, $nil was allocated to share capital. In connection with the issuance of units in this private placement, the Company incurred cash transaction costs of $41,204 (C$52,500) in cash and issued 262,500 common share purchase warrants to a finder with fair value of $49,757 (Note 17(d)). These transaction costs were recorded as a financing expense.

Shares issued for services

iii.

In connection with the private placement financing on January 6, 2022 related to the issuance of the convertible debenture units, the Company incurred $468,720 in transaction costs, of which $88,690 (C$113,000) was settled by issuance of 565,000 units to a finder. Each unit comprises one common share and one common share purchase warrants. Each common share purchase warrants entitles the holder to purchase one common share at C$0.20 until January 6, 2024. The allocated values of common share and common share purchase warrants were determined using the relative fair value method. As a result, $56,457 was allocated to share capital and $32,233 to warrant reserve.

iv.

In connection with the issuance of convertible debenture units in private placement financing on March 25, 2022, the Company issued 210,000 common shares to a finder as compensation for services. As a result, share capital increased by $38,634.

Exercise of options

v. On January 10, 2022, the Company issued 250,000 common shares pursuant to the exercise of 250,000 options. The options had an exercise price of $0.08 (C$0.10) and proceeds totalled of $19,656 (C$25,000). Upon exercise, $411 was transferred from contributed surplus to share capital.

Exercise of warrants classified within warrant liability

vi. During the six months ended June 30, 2022, the Company issued common shares as a result of warrant exercises as follows:

Issue date	Number of warrants exercised and shares issued		Weighted average exercise price		Weighted average exercise price		Cash received		Warrant liability transferred to issued capital		Issued capital
	#		C$		$		$		$		$
March 23, 2022		1,313,637		0.14		0.11		150,491		100,405		250,896
March 25, 2022		925,000		0.10		0.08		73,988		96,224		170,212
Total		2,238,637		0.23		0.10		224,479		196,629		421,108

20

EMPOWER CLINICS INC.

NOTES TO THE CONDENSED INTERIM CONSOLIDATED FINANCIAL STATEMENTS

For three and six months ended June 30, 2022 and 2021

(Unaudited - Expressed in US dollars, except where noted)

17. EQUITY (Continued)

Shares issued on conversion of convertible debentures

vii. On May 16, 2022, the Company issued 300,000 common shares and extinguished the converted convertible debentures pursuant to the conversion of 60 convertible debentures that were issued in the private placement on January 6,2022. As a result of the conversion, share capital increased by $16,843.

During the year ended December 31, 2021, the Company completed the following transactions:

Vesting of escrow shares

x. For the year ended December 31, 2021, the Company recognized a share-based payment of $187,964 in connection with the vesting of escrow shares.

Subscription deposits

xi.	On December 30, 2021, the Company received $78,459 (C$100,000) subscription deposit in advance for an on-going financing. The financing was subsequently closed on January 6, 2022.
xii.	As at December 31, 2021, the Company had $1,238,366 (C$1,570,000) in restricted cash held in trust pertaining to proceeds received in advance of the closing of the private placement of convertible debentures and units that subsequently closed on January 6, 2022.

Share subscription receivable

xiii. As at December 31, 2021, the Company reclassified the share subscriptions receivable of $745,531 arising from the exercise of 7,000,000 share options by the CEO (Note 22) to other asset.

Shares issued for services

xiv.	On February 26, 2021, the Company issued 1,207,206 common shares for $0.05 (C$0.06) per common share for total fair value consideration of $59,598 (C$75,600) for marketing services.
xv.	On June 11, 2021, the Company issued 13,204 common shares for $0.52 (C$0.63) per common share for total fair value consideration of $6,847 (C$7,500) for marketing services. The shares were subsequently returned to the treasury and cancelled on November 8, 2021 for the total fair value of $6,682 (C$7,500), with the difference going to operating expense.
xvi.	On July 22, 2021, the Company issued 21,176 common shares for $0.41 (C$0.51) per common share for total fair value consideration of $8,594 (C$10,800) for marketing services.
xvii.	On September 29, 2021, the Company issued 34,090 common shares for $0.35 (C$0.44) per common share for total fair value consideration of $11,773 (C$15,000) for marketing services.
xviii.	On December 6, 2021, the Company issued 31,250 common shares for $0.19 (C$0.24) per common share for total fair value consideration of $5,869 (C$7,500) for marketing services.

Exercise of options

xix. During the year ended December 31, 2021, 3,714,666 stock options with a weighted average exercise price of $0.06 (C$0.07) were exercised for proceeds of $217,403 (C$271,233) resulting in the issuance of 3,714,666 common shares. Upon exercise, $102,031 was transferred from contributed surplus to issued capital.

Exercise of warrants classified within warrant reserve

xx. 420,000 agent purchase warrants with a weighted average exercise price of $0.12 (C$0.15) were exercised for proceeds of $48,346 (C$61,200) resulting in the issuance of 420,000 common shares. Upon exercise, $23,588 was transferred from warrant reserve to issued capital.

21

EMPOWER CLINICS INC.

NOTES TO THE CONDENSED INTERIM CONSOLIDATED FINANCIAL STATEMENTS

For three and six months ended June 30, 2022 and 2021

(Unaudited - Expressed in US dollars, except where noted)

17. EQUITY (Continued)

xxi.

1,760,000 agent compensation warrants with an exercise price of $0.05 (C$0.04) were exercised for proceeds of $69,510 (C$88,000) resulting in the issuance of units comprised of 1,760,000 common shares and 1,760,000 warrants. Using the Black-Scholes option pricing model, the Company determined that the fair value of warrants issued as part of the units was $1,056,940, which exceeded the total of the initial agent purchase warrants reserve amount of $47,251 and cash of $69,510 equal to $116,761. Accordingly, applying the residual method, the Company allocated $116,761 to warrant reserve and $nil to share capital. The fair value of warrants issued as part of units was determined using the Black-Scholes option pricing model with the following assumptions: a 1.67 year expected average life, exercise price of $0.09 (C$0.12), share price of $0.69 (C$0.87); 100% volatility; risk-free interest rate of 0.29%; and an expected dividend yield of 0%. The fair value of these agent purchase warrants was recorded to warrant liability.

xxii.

On October 25, 2021, 880,000 warrants with an exercise price of $0.10 (C$0.12) were exercised for proceeds of $85,591 (C$$105,600) resulting in the issuance of 880,000 common shares. Upon exercise, $58,380 was transferred from warrant reserve to share capital.

Exercise of warrants classified within warrant liability

xxiii. During the year ended December 31, 2021, the Company issued common shares as a result of warrant exercises as follows:

Issue date	Number of warrants exercise and shares issued	Weighted average exercise price	Weighted average exercise price	Cash received	Warrant liability transferred to issued capital	Issued capital
	#	C$	$	$	$	$
January 4, 2021	856,000	0.16	0.13	107,411	76,582	183,993
January 6, 2021	2,178,817	0.16	0.13	274,821	253,452	528,273
January 14, 2021	1,059,000	0.16	0.13	133,902	140,479	274,381
January 12, 2021	550,000	0.16	0.13	69,041	79,362	148,403
January 14, 2021	1,000,000	0.10	0.08	79,026	188,759	267,785
January 14, 2021	1,000,000	0.12	0.09	94,832	182,209	277,041
January 19, 2021	500,000	0.16	0.13	62,819	71,449	134,268
January 25, 2021	400,000	0.16	0.13	50,243	63,176	113,419
January 27, 2021	863,911	0.16	0.13	108,200	111,363	219,563
February 4, 2021	450,000	0.16	0.12	56,127	58,811	114,938
February 8, 2021	500,000	0.16	0.13	62,730	65,118	127,848
February 11, 2021	150,000	0.16	0.13	18,918	49,666	68,584
February 16, 2021	1,201,400	0.16	0.13	151,548	729,646	881,194
February 17, 2021	268,245	0.16	0.13	33,763	204,737	238,500
February 19, 2021	1,250,000	0.16	0.13	158,554	1,394,935	1,553,489
February 24, 2021	1,500,000	0.05	0.04	59,770	25,396	85,166
February 24, 2021	1,000,000	0.10	0.08	79,694	1,235,875	1,315,569
February 24, 2021	1,369,864	0.16	0.13	174,672	1,626,802	1,801,474
February 24, 2021	200,000	0.12	0.10	19,127	244,251	263,378
February 26, 2021	2,500,000	0.12	0.09	236,500	2,117,056	2,353,556
February 26, 2021	211,179	0.16	0.13	26,637	171,488	198,125
March 2, 2021	500,000	0.10	0.08	39,601	357,139	396,740
March 2, 2021	2,000,000	0.12	0.10	190,084	1,407,808	1,597,892
March 8, 2021	225,000	0.16	0.13	28,436	126,190	154,626
March 8, 2021	5,500,000	0.12	0.09	521,327	4,203,738	4,725,065
March 10, 2021	10,750,000	0.12	0.09	1,020,815	5,963,892	6,984,707
March 12, 2021	1,867,131	0.12	0.10	179,345	1,224,589	1,403,934
March 17, 2021	250,000	0.12	0.10	24,067	160,329	184,396
March 10, 2021	1,500,000	0.08	0.06	94,959	-	94,959
April 5, 2021	150,000	0.16	0.13	19,162	-	19,162
April 5, 2021	300,000	0.12	0.10	28,743	147,856	176,599
April 30, 2021	175,000	0.10	0.08	14,245	75,910	90,155
May 20, 2021	250,000	0.12	0.10	24,855	100,054	124,909
June 23, 2021	150,000	0.12	0.10	14,650	67,161	81,811
June 24, 2021	100,000	0.12	0.10	9,742	43,871	53,613
October 25, 2021	256,700	0.12	0.10	24,884	60,456	85,340
Total	42,982,247	0.13	0.10	4,293,250	23,029,605	27,322,855

22

EMPOWER CLINICS INC.

NOTES TO THE CONDENSED INTERIM CONSOLIDATED FINANCIAL STATEMENTS

For three and six months ended June 30, 2022 and 2021

(Unaudited - Expressed in US dollars, except where noted)

17. EQUITY (Continued)

Acquisition of MediSure

xxiv. On July 30, 2021, as part of the consideration in the acquisition of MediSure, the Company issued 4,582,483 common shares with a fair value of $1,726,141 (Note 4).

c) Share options

The Company has an incentive share option plan in place under which it is authorized to grant share options to executive officers, directors, employees, and consultants. The stock option plan allows the Company to grant share options up to a maximum of 10.0% of the number of issued shares of the Company.

Share option transactions and the number of share options outstanding during the six months ended June 30, 2022 and the year ended December 31, 2021 are summarized as follows:

	Number of share options			Weighted average exercise price
	#			C$
Outstanding, December 31, 2020		9,834,428			0.08
Issued		3,061,364			0.46
Cancelled		(1,936,667	)		0.06
Expired		(430,000	)		0.05
Exercised		(3,714,666	)		0.07
Outstanding, December 31, 2021		6,814,459			0.16
Issued		900,000			0.28
Expired		(750,000	)		0.13
Exercised		(250,000	)		0.10
Outstanding, June 30, 2022		6,714,459			0.25
Exercisable, June 30, 2022		5,430,431			0.25

As at June 31, 2022, there were 2,275,000 options outstanding that had been granted to related parties, of which 2,008,333 was exercisable.

The weighed average remaining contractual life of share options outstanding as at June 30, 2022 was 3.07 years (December 31, 2021 - 3.03 years). The weighted average fair value of options granted for the six months ended June 30, 2022 was $0.18 (2021 - $0.33). The range of exercise prices for options outstanding at June 30, 2022 was C$0.05 to C$0.57 (December 31, 2021 - C$0.05 to C$0.57).

The fair value of share options recognized as an expense during the three and six months ended June 30, 2022, was $82,634 $205,925, respectively (2021 - $169,572 and $605,558, respectively). The following are the assumptions used for the Black Scholes option pricing model valuation of share options granted during the six months ended June 30, 2022 and 2021:

	2022			2021
Risk-free interest rate		0.84	%	0.17%-0.30		%
Expected life	3-5 years			5 years
Expected volatility		100	%		100.0	%
Forfeiture rate		0.0	%		0.0	%
Dividend rate		0.0	%		0.0	%

The risk-free rate of periods within the expected life of the share options is based on the Canadian government bond rate. The annualized volatility and forfeiture rate assumptions are based on historical results.

23

EMPOWER CLINICS INC.

NOTES TO THE CONDENSED INTERIM CONSOLIDATED FINANCIAL STATEMENTS

For three and six months ended June 30, 2022 and 2021

(Unaudited - Expressed in US dollars, except where noted)

17. EQUITY (Continued)

d) Warrants classified within warrant reserve

Warrants classified within warrant reserve consist of warrants issued as share-based payments. Outstanding and exercisable warrants classified within warrant reserve for the six months ended June 30, 2022 and the year ended December 31, 2021 are summarized as follows:

	Number of warrants			Weighted average exercise price
	#			C$
Outstanding, December 31, 2020		2,303,900			0.13
Issued		1,760,000			0.12
Exercised		(3,060,000	)		0.12
Expired		(123,900	)		0.16
Outstanding, December 31, 2021		880,000			0.12
Issued		4,047,500			0.21
Outstanding, June 30, 2022		4,927,500			0.20

In connection with the issuance of units in the private placement closed on January 6, 2022, the Company issued 262,500 common share purchase warrants to a finder. Each warrant entitles the holder to acquire one common share at the exercise price of C$0.20 until January 6, 2024. The fair value of these warrants was estimated at $49,757 using Black-Scholes model.

In connection with the issuance of Debenture Units in the private placement closed on January 6, 2022, the Company settled an amount of $88,690 (C$113,000) of transaction costs by issuing 565,000 units to a finder (Note 13), leading to the issuance of 565,000 warrants. Each warrant entitles the holder to acquire one common share at a price of C$0.30 per share until January 6, 2024. As a result, warrant reserve increased by $32,233. The Company also issued 1,330,000 warrants to certain eligible finders. Each warrant entitles the holder to acquire one common share at a price of C$0.20 per share until January 6, 2024. The fair value of these warrants was estimated at $252,096 using Black-Scholes model.

In connection with issuance of Debenture Units in the private placement closed on March 25, 2022, the Company issued 1,890,000 warrants to a finder. Each warrant issued to the finder entitles the holder to acquire one common share at a price of C$0.20 per share until March 25, 2024. The fair value of warrants issued to the finder was estimated at $193,918 using Black-Scholes model.

The assumptions used in Black-Scholes option pricing model to measure warrants issued during the six months ended June 30, 2022, classified within warrant reserve were as follow:

	2022
Expected life	2 years
Annualized volatility		100	%
Dividend rate		0	%
Risk-free rate		0.84	%

18. OPERATING EXPENSES

For the three and six months ended June 30, 2022 and 2021, operating expenses comprised of the following:

	Three months ended June 30,					Six months ended June 30,
	2022		2021			2022		2021
	$		$			$		$
Salaries and benefits		819,118		334,243			1,575,585		681,537
Rent		81,992		(7,021	)		105,526		24,753
Advertising and promotion		204,795		148,102			359,226		305,591
Telephone and internet		39,872		59,478			91,977		165,594
Penalties		-		-			8,527		11,048
Other		418,697		192,945			732,076		438,429
		1,564,474		727,747			2,872,917		1,626,952

24

EMPOWER CLINICS INC.

NOTES TO THE CONDENSED INTERIM CONSOLIDATED FINANCIAL STATEMENTS

For three and six months ended June 30, 2022 and 2021

(Unaudited - Expressed in US dollars, except where noted)

19. SEGMENT INFORMATION

The Company’s business activities for the six months ended June 30, 2022, were conducted through three reportable segments corresponding with its business model. The segments are as follows: (a) Health & Wellness, comprising clinic operations with revenue resulting from patient visits and telemedicine services; (b) Diagnostics & Technology, comprising the diagnostic testing services provided by Kai Medical, and the sale of medical equipment by Kai Medical Canada Corp. and MediSure; and (c) corporate costs. The operations related to Sun Valley have been disclosed as discontinued operations (Note 5). Financial performance and balances by operating segments are displayed below:

For the six months ended June 30, 2022	Health & Wellness			Diagnostics & Technology			Corporate			Consolidated
	$			$			$			$
Total revenue		705,641			1,955,289			-			2,660,930
Total operating expenses1		(1,583,241	)		(2,197,818	)		(1,733,000	)		(5,514,059	)
Total other expenses, net		200,562			(81,435	)		2,600,932			2,720,059
Net loss from continuing operations		(677,038	)		(323,964	)		867,932			(133,070	)

For the six months ended June 30, 2021	Health & Wellness			Diagnostics & Technology			Corporate			Consolidated
	$			$			$			$
Total revenue		505,946			2,314,682			-			2,820,628
Total operating expenses1		(331,136	)		(2,381,970	)		(2,585,909	)		(5,299,015	)
Total other expenses, net		(4,381	)		(1,177	)		(22,856,527	)		(22,862,085	)
Net loss from continuing operations		170,429			(68,465	)		(25,442,436	)		(25,340,472	)

As at June 30, 2022	Health & Wellness		Diagnostics & Technology		Corporate		Consolidated
	$		$		$		$
Asset		765,324		1,482,640		2,101,561		4,349,525
Liabilities		2,347,433		2,659,226		4,292,700		9,299,359

As at December 31, 2021	Health & Wellness		Diagnostics & Technology		Corporate		Consolidated
	$		$		$		$
Asset		602,473		1,487,963		2,849,626		4,940,062
Liabilities		2,677,910		2,840,420		5,850,467		11,368,797

¹Includes direct expenses, operating expenses, legal and professional fees, depreciation and amortization, and share-based payments

25

EMPOWER CLINICS INC.

NOTES TO THE CONDENSED INTERIM CONSOLIDATED FINANCIAL STATEMENTS

For three and six months ended June 30, 2022 and 2021

(Unaudited - Expressed in US dollars, except where noted)

20. SUPPLEMENTAL DISCLOSURE WITH RESPECT TO CASH FLOWS

Additional disclosure with respect to cash flows for the six months ended June 30, 2022 and 2021 is presented in the table below:

	2022			2021
	$			$
Changes in non-cash working capital items:
Accounts receivable		(234,905	)		-
Prepaid expenses		(34,625	)		-
Inventory		(526,289	)		-
Accounts payable and accrued liabilities		(552,078	)		-
Deferred revenue		45,181			-
Non-cash transactions:
Vesting of escrow shares		87,020			-
Units issued as settlement of accounts payable		117,730			-
Shares issued for services, net of shares returned to treasury		95,091			65,772
Shares issued on conversion of convertible debentures		16,843			-

Vesting of escrow shares during the six months ended June 30, 2022 is contained within legal and professional fees.

Income tax payments for the six months ended June 30, 2022 were $nil (2021 - $nil). As at June 30, 2022, the Company has accrued $635,000 (December 31, 2021 - $635,000) in late tax filing penalties related to income taxes in the United States.

Interest paid for the six months ended June 30, 2022 was $107,447 (2021 - $413,852), of which $nil was from accrued interest prior to December 31, 2021.

21. FINANCIAL INSTRUMENTS AND RISK MANAGEMENT

a) Fair value measurement of financial assets and liabilities

The Company has established a fair value hierarchy that reflects the significance of inputs of valuation techniques used in making fair value measurements as follows:

Level 1 - quoted prices in active markets for identical assets or liabilities;

Level 2 - inputs other than quoted prices included in Level 1 that are observable for the asset or liability, either directly (i.e. as prices) or indirectly (i.e. from derived prices); and

Level 3 - inputs for the asset or liability that are not based on observable market data.

The carrying values of cash, accounts receivable, inventory, prepaid expenses, and accounts payable and accrued liabilities approximate their carrying values due to their short-term nature.

The Company has no assets or liabilities that would be categorized as Level 2 in the fair value hierarchy.

As at June 30, 2022 and December 31, 2021, the warrant liability and conversion feature of convertible debt were categorized as level 3 in the fair value hierarchy. No other financial assets or liabilities were categorized as level 3.

b) Risk Management

The Company examines its various financial risks to which it is exposed and assesses the impact and likelihood of occurrence. The risks may include credit risk, currency risk, liquidity risk and interest rate risk. The Company’s risk management program strives to evaluate the unpredictability of financial markets and its objective is to minimize the potential adverse effects of such risks on the Company’s financial performance., where financially feasible to do so. When deemed material, these risks may be monitored by the Company’s finance group and they are regularly discussed with the Board of Directors.

26

EMPOWER CLINICS INC.

NOTES TO THE CONDENSED INTERIM CONSOLIDATED FINANCIAL STATEMENTS

For three and six months ended June 30, 2022 and 2021

(Unaudited - Expressed in US dollars, except where noted)

21. FINANCIAL INSTRUMENTS AND RISK MANAGEMENT (Continued)

i. Credit risk

Counterparty credit risk is the risk that the financial benefits of contracts with a specific counterparty will be lost if a counterparty defaults on its obligations under the contract. This includes amounts owed to the Company by these counterparties, less any amounts owed to the counterparty by the Company where a legal right of offset exists and includes the fair values of contracts with individual counterparties which are recorded in the consolidated financial statements.

The Company’s credit risk is predominantly related to cash balances held in financial institutions and amounts receivable from credit card processors. The maximum exposure to credit risk is equal to the carrying value of such financial assets. As at March 31, 2022, the Company expects to recover the full amount of such assets.

The objective of managing counterparty credit risk is to minimize potential losses in financial assets. The Company assesses the quality of its counterparties, taking into account their credit worthiness and reputation, past performance and other factors.

Cash is only deposited with or held by major financial institutions where the Company conducts its business. In order to manage credit and liquidity risk, the Company invests only in highly rated investment grade instruments that have maturities of one year or less. Limits are also established based on the type of investment, the counterparty, and the credit rating.

ii. Currency risk

The Company’s functional currency is the US dollar and therefore the Company’s income (loss) and comprehensive income (loss) are impacted by fluctuations in the value of foreign currencies in relation to the US dollar.

The table below summarizes the net monetary assets and liabilities held in foreign currencies:

	June 30, 2022		December 31, 2021
	$		$
Canadian dollar net monetary liabilities		929,513		594,561

The effect on net loss and comprehensive loss for the six months ended June 30, 2022, of a 10.0% change in the foreign currencies against the US dollar on the above-mentioned net monetary liabilities of the Company is estimated to be an increase/decrease in foreign exchange gain or loss of $92,951 (2021 - $54,051) assuming that all other variables remained constant.

iii. Liquidity risk

Liquidity risk is the risk that the Company will encounter difficulty in meeting obligations associated with its financial liabilities that are settled by delivering cash or another financial asset. The Company has a planning and budgeting process in place to help determine the funds required to support the Company’s normal operating requirements and its expansion plans.

In the normal course of business, the Company enters into contracts and performs business activities that give rise to commitments for future minimum payments. The Company has no concentrations of liquidity risk. A summary of future operating commitments is presented in note 24.

As at June 30, 2022, the Company had a cash balance of $793,935 (December 31, 2021 - $866,170) and current liabilities of $5,010,657 (December 31, 2021 - $7,703,093)

vi. Interest rate risk

Interest rate risk is the risk that future cash flows will fluctuate as a result of changes in market interest rates. A change of 100 basis points in the interest rates would not be material to these interim financial statements.

27

EMPOWER CLINICS INC.

NOTES TO THE CONDENSED INTERIM CONSOLIDATED FINANCIAL STATEMENTS

For three and six months ended June 30, 2022 and 2021

(Unaudited - Expressed in US dollars, except where noted)

22. RELATED PARTY TRANSACTIONS

The Company’s related parties include subsidiaries, associates, joint ventures, affiliated entities and key management personnel and any transactions with such parties for goods and/or services that are made on regular commercial terms. During the six months ended June 30, 2022 and 2021, the Company did not enter into any transactions with related parties outside of compensation to key management personnel as disclosed below.

Key management are those personnel having the authority and responsibility for planning, directing, and controlling the Company. Salaries and benefits, bonuses, and termination benefits are included in operating expenses and share-based payments are recorded as share-based payment expense or share capital.

Key management compensation for the three and six months ended June 30, 2022 and 2021 includes:

	Three months ended June 30,				Six months ended June 30,
	2022		2021		2022		2021
	$		$		$		$
Salaries and benefits		207,972		213,415		458,437		429,274
Share-based payments		11,923		112,889		37,980		346,375
Directors’ fees		11,000		7,500		22,000		12,500
		230,895		333,804		518,417		788,149

In connection with the issuance of units via private placement closed on January 6, 2022, the Company issued 750,000 units to settle an amount of $117,730 that was due to the CEO.

As at June 30, 2022, $53,824 (December 31, 2021 - $172,934) was due to the CEO and a director for salaries and benefits, and director’s fee. The amounts are unsecured and due on demand.

As at June 30, 2022 and December 31, 2021, the other assets balance of $745,531 represents a loan with the CEO resulting from share subscriptions receivable. The amount was previously classified within equity as the loan was previously collateralized by the common shares of the Company owned by the CEO. During the year ended December 31, 2021, the terms of the loan were modified such that the loan is no longer collateralized by the CEO’s common shares. The receivable has no specified interest or terms of repayment. Management assessed credit risk of the share subscription receivable as low as the Company has offsetting payables to the CEO and an ongoing service contract.

During the six months ended the Company reinstated 1,250,000 warrants to the CEO of the Company (see Note 16).

23. MANAGEMENT OF CAPITAL

The Company’s objectives of capital management are intended to safeguard the Company’s normal operating requirements on an ongoing basis. As at June 30, 2022 and December 31, 2021, the capital of the Company comprised of the following:

	June 30, 2022			December 31, 2021
	$			$
Total shareholder’s deficiency		(4,949,834	)		(6,392,941	)
Notes payable		178,126			173,266
Convertible notes payable		-			205,406
Current portion of loans payable		211,166			128,480
Loans payable		900,773			1,053,983
Convertible debenture		908,684			-
		(2,751,085	)		(4,831,806	)
Less: Cash		(793,935	)		(866,170	)
		(3,545,020	)		(5,697,976	)

28

EMPOWER CLINICS INC.

NOTES TO THE CONDENSED INTERIM CONSOLIDATED FINANCIAL STATEMENTS

For three and six months ended June 30, 2022 and 2021

(Unaudited - Expressed in US dollars, except where noted)

23. MANAGEMENT OF CAPITAL (Continued)

The Board of Directors 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. Management reviews its capital management approach on an ongoing basis and believes that this approach, given the relative size of the Company, is reasonable. In order to facilitate the management of its capital requirements, the Company prepares expenditure budgets that are updated as necessary depending on various factors, including successful capital deployment and general industry conditions. The Company also has in place a planning, budgeting and forecasting process which is used to identify the amount of funds required to ensure

the Company has appropriate liquidity to meet short and long-term operating objectives. The Company is dependent on cash flows generated from its clinical operations and from external financing to fund its activities. In order to maintain or adjust its capital structure, the Company may issue new shares or debt.

At June 30, 2022 and December 31, 2021, the Company was not subject to any externally imposed capital requirements.

24. COMMITMENTS AND CONTINGENCIES

A summary of undiscounted liabilities and future operating commitments as at June 30, 2022 are as follows:

	Total		Within 1 year		2 - 5 years		Greater than 5 years
	$		$		$		$
Maturity analysis of financial liabilities
Accounts payables and accrued liabilities		3,173,203		3,173,203		-		-
Consideration payable		200,363		200,363		-		-
Loans payable		1,515,019		220,949		867,145		426,925
Notes payable		178,126		178,126		-		-
Convertible debentures		3,330,559		181,972		3,148,587		-
Lease payments		3,432,698		554,377		1,968,340		909,981
Total financial liabilities		11,829,968		4,508,990		5,984,072		1,336,906

25. EVENTS AFTER THE REPORTING PERIOD

On July 5, 2022, the Company granted 1,100,000 stock options to various employees and consultants. Each stock option is exercisable into one common share of the Company at an exercise price of C$0.08 per share until July 5, 2027, of which 800,000 stock options vest quarterly over 9 months, and 300,000 stock options vest monthly over 36 months.

Subsequent to June 30, 2022, there were 4,906,080 warrants and 90,000 options expired unexercised, and 475,000 options were forfeited upon termination of employment.

29