6-K

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 6-K

REPORT OF FOREIGN PRIVATE ISSUER PURSUANT TO RULE 13a-16 OR 15d-16 UNDER THE SECURITIES EXCHANGE ACT OF 1934

For the month of November 2022 Commission File No. 000-30087

EMPOWER CLINICS INC.

(Translation of registrant's name into English)

Suite 505, 1771 Robson Street Vancouver, BC

Canada V6G 1C9

(Address of principal executive office)

Indicate by check mark whether the registrant files or will file annual reports under cover of Form 20-F or Form 40-F

Form 20-F ☒      Form 40-F ☐

Indicate by check mark if the registrant is submitting the Form 6-K in paper as permitted by Regulation S-T Rule 101(b)(1) ☐

Indicate by check mark if the registrant is submitting the Form 6-K in paper as permitted by Regulation S-T Rule 101(b)(7) ☐

EXHIBIT INDEX

Exhibits	Description
99.1	Condensed Interim Consolidated Financial Statements For the three and six months ended September 30, 2022 and 2021
99.2	Management’s Discussion & Analysis For the three months and six months ended September 30, 2022 and 2021
99.3	CEO Certification of Interim Filings
99.4	CFO Certification of Interim Filings
99.5	Press Release dated November 28, 2022

2

SIGNATURE

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

EMPOWER CLINICS INC.

Date: November 28, 2022

/s/ Steven McAuley

Steven McAuley

Chairman and Chief Executive Officer

3

EX-99.1

EXHIBIT 99.1

Empower Clinics Inc.

Condensed Interim Consolidated Financial Statements

For the three and nine months ended September 30, 2022 and 2021

Unaudited - Expressed in US dollars

Notice of Disclosure of Non-Auditor Review of the Condensed Interim Consolidated Financial Statements for the three and nine months ended September 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 September 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 28, 2022

EMPOWER CLINICS INC.

CONDENSED INTERIM CONSOLIDATED STATEMENTS OF FINANCIAL POSITION

As at September 30, 2022 and December 31, 2021

(Unaudited - Expressed in US dollars)

	Note		September 30,  2022			December 31, 2021
			$			$
ASSETS
Current assets
Cash				469,712			866,170
Restricted cash				-			1,238,366
Assets classified as held for sale		5		-			97,314
Accounts receivable		6		471,471			565,575
Inventory		7		612,769			205,048
Prepaid expenses				142,711			187,868
				1,696,663			3,160,341
Property and equipment		8		1,007,960			1,131,504
Other assets		17(b),22		745,531			745,531
Total assets				3,450,154			5,037,376
LIABILITIES
Current liabilities
Accounts payable and accrued liabilities		10,22		3,576,581			3,725,430
Consideration payable		4		180,803			200,363
Liabilities classified as held for sale		5		-			61,520
Current portion of loans payable		11		206,479			128,480
Notes payable		12		180,596			173,266
Conversion feature		13		89,639			-
Convertible note payable		14		-			205,406
Current portion of lease liability		15		387,303			387,100
Warrant liability		16		71,501			1,504,703
Subscription deposits		17(b)		-			1,316,825
				4,692,902			7,703,093
Loans payable		11		870,804			1,053,983
Convertible debentures		13		1,018,225			-
Lease liability		15		2,202,893			2,650,367
Deferred revenue				17,612			22,874
Total liabilities				8,802,436			11,430,317
SHAREHOLDERS’ DEFICIENCY
Issued capital		17(b)		53,515,212			52,875,084
Shares to be issued				60,287			60,287
Contributed surplus				3,159,395			2,908,315
Warrant reserve				586,384			58,380
Accumulated other comprehensive income				117,606			39,938
Deficit				(62,791,166	)		(62,334,945	)
Total shareholders’ deficiency				(5,352,282	)		(6,392,941	)
Total liabilities and shareholders’ deficiency				3,450,154			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

1

EMPOWER CLINICS INC.

CONDENSED INTERIM CONSOLIDATED STATEMENTS OF LOSS AND COMPREHENSIVE LOSS

For the three and nine months ended September 30, 2022 and 2021

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

		Three months ended September 30,						Nine months ended September 30,
	Note	2022			2021			2022			2021
		$			$			$			$
Revenue			1,573,809			405,707			4,234,739			3,226,335
Direct expenses excluding depreciation and amortization			642,187			18,377			2,333,834			1,592,338
Gross margin			931,622			387,330			1,900,905			1,633,997
Operating expenses	18,22		1,317,585			695,005			4,190,502			2,321,957
Legal and professional fees (recovery)			419,671			(104,000	)		1,054,898			1,134,318
Depreciation and amortization expense	8		55,115			162,103			163,458			416,329
Share-based payments	17(c),22		45,566			236,201			251,491			841,759
Loss from operations			(906,315	)		(601,979	)		(3,759,444	)		(3,080,366	)
Other expenses (income)
Provision for credit losses			15,301			-			34,593			-
Accretion expense	11-13		167,911			8,151			357,216			18,761
Interest expense	11-15		101,951			55,105			293,892			101,355
Gain on termination of leases			-			(2,831	)		-			(3,983	)
(Gain) loss on change in fair value of warrant liability	16		(354,582	)		(3,121,006	)		(3,115,803	)		19,721,807
Gain on change in fair value of conversion feature	13		(334,822	)		-			(1,105,876	)		-
Impairment of property and equipment	8		-			1,297,625			20,432			1,297,625
Impairment of intangible assets	9		-			354,550			-			354,550
Impairment of goodwill	9		-			2,690,198			-			2,690,198
Financing expense	13,17(b)		-			-			700,542			-
Other income, net			(45,008	)		(172,112	)		(354,304	)		(208,548	)
			(449,249	)		1,109,680			(3,169,308	)		23,971,765
Net loss from continuing operations			(457,066	)		(1,711,659	)		(590,136	)		(27,052,131	)
Net (loss) income from discontinued operations			-			(60,527	)		133,915			(512,931	)
Net loss for the period			(457,066	)		(1,772,186	)		(456,221	)		(27,565,062	)
Other comprehensive income
Foreign currency translation adjustment			9,053			(3,251	)		77,668			(3,163	)
Comprehensive loss for the period			(448,013	)		(1,775,437	)		(378,553	)		(27,568,225	)
Loss per share from continuing operations, basic and diluted			(0.00	)		(0.01	)		(0.00	)		(0.08	)
Income (loss) per share from discontinued operations, basic and diluted			0.00			(0.00	)		0.00			(0.00	)
Loss per share, basic and diluted			(0.00	)		(0.01	)		(0.00	)		(0.09	)
Weighted average number of shares outstanding
Basic			348,508,658			336,581,932			347,464,708			324,310,350
Diluted			348,508,658			336,581,932			347,464,708			324,310,350

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

2

EMPOWER CLINICS INC.

CONDENSED INTERIM CONSOLIDATED STATEMENTS OF CASH FLOWS

For the nine months ended September 30, 2022 and 2021

(Unaudited - Expressed in US dollars)

	Nine months ended September 30,
	2022			2021
	$			$
Operating activities
Net loss from continuing operations		(590,136	)		(27,052,131	)
Items not involving cash:
Depreciation and amortization expense		163,458			416,329
Share-based payments		251,491			841,758
Provision for credit losses		34,593			-
Accretion expense		357,216			18,761
Interest expense		293,892			101,355
Gain on termination of leases		-			(3,983	)
(Gain) loss on change in fair value of warrant liability		(3,115,803	)		19,721,807
Gain on change in fair value of conversion feature		(1,105,876	)		-
Vesting of escrow shares		87,020			-
Impairment of property and equipment		20,432			1,297,625
Impairment of intangible assets		-			354,550
Impairment of goodwill		-			2,690,198
Financing expense		700,542			-
Other income		(327,926	)		(71,494	)
Net changes in non-cash working capital items		(483,161	)		(1,173,056	)
Net cash used in operating activities of continuing operations		(3,714,258	)		(2,858,281	)
Net cash used in operating activities of discontinued operations		(7,482	)		(427,632	)
Investing activities
Investment in MediSure, net		-			(794,803	)
Purchase of property and equipment		(53,723	)		(1,611,379	)
Proceeds from disposal of Sun Valley		181,664			-
Net cash provided by (used in) investing activities of continuing operations		127,941			(2,406,182	)
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			211,535
Proceeds from warrants exercised		224,479			4,433,443
Advance of loans payable		-			49,942
Repayment of loans payable		(96,836	)		(664,050	)
Repayment of notes payable		(198,851	)		(437,985	)
Repayment of consideration payable		(19,560	)		-
Lease payments		(279,962	)		(122,963	)
Interest payments		(236,725	)		(453,562	)
Net cash provided by financing activities of continuing operations		3,119,673			3,016,360
Net cash used in financing activities of discontinued operations		-			(50,339	)
Effect of foreign exchange on cash		77,668			(3,163	)
Net change in cash		(396,458	)		(2,729,237	)
Cash, beginning of the period		866,170			4,889,824
Cash, end of the period		469,712			2,160,587

Supplemental disclosure with respect to cash flows (Note 20)

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

3

EMPOWER CLINICS INC.

CONDENSED INTERIM CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS’ DEFICIENCY

For the nine months ended September 30, 2022 and 2021

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

	Number of common shares		Issued capital		Share subscriptions receivable			Shares to  be issued		Contributed surplus			Warrant reserve			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	)
Vesting of escrow shares		-		144,454		-			-		-			-			-			-			144,454
Shares issued for services		1,275,676		86,812		-			-		-			-			-			-			86,812
Shares issued for acquisition of MediSure		4,582,483		1,726,141		-			-		-			-			-			-			1,726,141
Exercise of options		3,589,666		308,469		-			-		(96,934	)		-			-			-			211,535
Exercise of warrants presented within warrant liability		42,725,547		29,062,433		-			-		-			-			-			-			29,062,433
Exercise of warrants presented within warrant reserve		2,180,000		71,933		-			-		-			(70,838	)		-			-			1,095
Share-based payments		-		-		-			-		697,304			-			-			-			697,304
Reclassification of expired warrants		-		-		-			-		9,800			(9,800	)		-			-			-
Foreign currency translation adjustment		-		-		-			-		-			-			(3,163	)		-			(3,163	)
Net loss for the period		-		-		-			-		-			-			-			(27,565,062	)		(27,565,062	)
Balance, September 30, 2021		338,165,275		54,369,808		(745,531	)		60,287		2,833,439			-			(3,163	)		(57,643,692	)		(1,128,852	)
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
Issuance of warrants presented within warrant reserve		-		-		-			-		-			528,004			-			-			528,004
Exercise of options		250,000		20,067		-			-		(411	)		-			-			-			19,656
Exercise of warrants presented within warrant liability		2,238,637		421,108		-			-		-			-			-			-			421,108
Shares issued on conversion of convertible debentures		300,000		16,842		-			-		-			-			-			-			16,842
Share-based payments		-		-		-			-		251,491			-			-			-			251,491
Foreign currency translation adjustment		-		-		-			-		-			-			77,668			-			77,668
Net loss for the period		-		-		-			-		-			-			-			(456,221	)		(456,221	)
Balance, September 30, 2022		348,508,658		53,515,212		-			60,287		3,159,395			586,384			117,606			(62,791,166	)		(5,352,282	)

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

4

EMPOWER CLINICS INC.

NOTES TO THE CONDENSED INTERIM CONSOLIDATED FINANCIAL STATEMENTS

For the three and nine months ended September 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 “EPW”.

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 September 30, 2022, the Company had a working capital deficiency of $2,996,239 (December 31, 2021 - $4,542,752) and an accumulated deficit of $62,791,166 (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 28, 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.

5

EMPOWER CLINICS INC.

NOTES TO THE CONDENSED INTERIM CONSOLIDATED FINANCIAL STATEMENTS

For the three and nine months ended September 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 cash flows, and the condensed interim consolidated statements of changes in shareholders’ deficiency to conform with current period presentation.

Reclassification in the condensed interim consolidated statement of cash flows for the nine months ended September 30, 2021 is as follows:

Former classification	Reclassified to	Amount reclassified
		$
Other income	Gain on termination of leases	15,219
Proceeds from agent warrants exercised	Proceeds from warrants exercised	48,346
Proceeds from agent compensation warrants exercised	Proceeds from warrants exercised	69,510
Repayment of loans payable	Interest payments	301,921
Repayment of notes payable	Interest payments	115,339
Lease payments	Interest payments	36,302
Lease payments	Net cash used in financing activities of discontinued operations	50,339

Reclassification in the condensed interim consolidated statement of changes in shareholders’ deficiency for the nine months ended September 30, 2021 includes the reclassification of agent share purchase warrants and agent compensation warrants to warrants presented within warrant reserve. As a result, the effects from exercise of agent share purchase warrants and exercise of agent compensation warrants are now presented under exercise of warrants classified within warrant reserve.

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.

6

EMPOWER CLINICS INC.

NOTES TO THE CONDENSED INTERIM CONSOLIDATED FINANCIAL STATEMENTS

For the three and nine months ended September 30, 2022 and 2021

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

2.   BASIS OF PREPARATION (Continued)

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.
(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.

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 matured on July 30, 2022 and is now due on demand. 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.

7

EMPOWER CLINICS INC.

NOTES TO THE CONDENSED INTERIM CONSOLIDATED FINANCIAL STATEMENTS

For the three and nine months ended September 30, 2022 and 2021

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

4. ACQUISITION OF MEDISURE (Continued)

The following table summarizes the 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.

During the nine months ended September 30, 2022, the Company repaid $19,560 (C$25,010) of the consideration payable.

5. DISCONTINUED OPERATIONS OF 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, and details of the sale are set out below.

8

EMPOWER CLINICS INC.

NOTES TO THE CONDENSED INTERIM CONSOLIDATED FINANCIAL STATEMENTS

For the three and nine months ended September 30, 2022 and 2021

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

5. DISCONTINUED OPERATIONS OF SUN VALLEY (Continued)

Results of discontinued operations for the three and nine months ended September 30, 2022 and 2021:

	Three months ended September 30,					Nine months ended September 30,
	2022		2021			2022			2021
	$		$			$			$
Revenue		-		71,915			73,042			193,583
Direct expenses excluding depreciation and amortization		-		2,415			2,007			6,201
Gross margin		-		69,500			71,035			187,382
Clinic operating expenses		-		135,389			100,877			610,834
Provision for credit losses		-		-			12,000			-
Legal and professional fees (recovery)		-		(10,474	)		276			4,180
Depreciation and amortization expense		-		7,318			-			67,432
Interest expense (recovery)		-		(2,206	)		-			3,610
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		-		60,527			50,772			512,931
Gain on sale of discontinued operations		-		-			184,687			-
Net (loss) income from discontinued operations		-		(60,527	)		133,915			(512,931	)

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

	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

6.   ACCOUNTS RECEIVABLE

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

	September 30, 2022		December 31, 2021
	$		$
Trade receivables, net		269,618		333,002
Lease receivables, net		56,059		-
GST receivable		110,534		193,853
Other receivables		35,260		38,720
		471,471		565,575

The Company estimates a provision for lifetime expected credit losses for receivables aged greater than 90 days. As at September 30, 2022, trade receivables are presented net of a provision for lifetime expected credit losses of $129,646 (December 31, 2021 - 121,479) and lease receivables are presented net of a provision for lifetime expected credit losses of $24,732 (December 31, 2021 - $nil).

9

EMPOWER CLINICS INC.

NOTES TO THE CONDENSED INTERIM CONSOLIDATED FINANCIAL STATEMENTS

For the three and nine months ended September 30, 2022 and 2021

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

7. INVENTORY

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

	September 30, 2022		December 31, 2021
	$		$
Diagnostics, COVID-19 testing supplies and reagents		442,647		325
Diabetes diagnostic products		170,122		204,723
		612,769		205,048

8. PROPERTY AND EQUIPMENT

The following table presents a continuity of property and equipment for the nine months ended September 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	)		(8,917	)		(1,171,224	)		-			(580,363	)		(4,966,520	)
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		-			431,574			-			970,792			-			1,402,366
Additions		-			13,435			20,884			45,550			-			79,813
Impairment		-			-			(20,884	)		-			-			(20,884	)
Foreign exchange loss		-			(16,779	)		-			(6,761	)		-			(23,484	)
Balance, September 30, 2022		-			428,230			-			1,009,581			-			1,437,811

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		-		75,553		-		-	247,990
Foreign exchange (loss) gain	(6	)	134		-		7		-	135
Transferred to assets held for sale	232,308		9,164		48,283		-		-	289,755
Balance, December 31, 2021	-		(125,262	)	-		(145,600	)	-	(270,862	)
Depreciation	-		(71,792	)	(452	)	(91,214	)	-	(163,458	)
Impairment	-		-		452		-		-	452
Foreign exchange gain	-		3,665		-		352		-	4,017
Balance, September 30, 2022	-		(193,389	)	-		(236,462	)	-	(429,851	)

Carrying amount
Balance, December 31, 2021	-	306,312	-	825,192	-	1,131,504
Balance, September 30, 2022	-	234,841	-	773,119	-	1,007,960

Events during the nine months ended September 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 a carrying value greater than their recoverable value and as such, net book value of $20,432 was impaired (2021 - $1,297,625).

10

EMPOWER CLINICS INC.

NOTES TO THE CONDENSED INTERIM CONSOLIDATED FINANCIAL STATEMENTS

For the three and nine months ended September 30, 2022 and 2021

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

8. PROPERTY AND EQUIPMENT (Continued)

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 Leases, 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 cash-generating unit (“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 4). 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.

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.

11

EMPOWER CLINICS INC.

NOTES TO THE CONDENSED INTERIM CONSOLIDATED FINANCIAL STATEMENTS

For the three and nine months ended September 30, 2022 and 2021

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

9. INTANGIBLE ASSETS AND GOODWILL

Intangible assets

The following table presents a continuity of intangible assets for the nine months ended September 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, 2020		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, September 30, 2022 and December 31, 2021		-			-			-			-			-
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, September 30, 2022 and December 31, 2021		-			-			-			-			-
Carrying amount

Balance, September 30, 2022 and December 31, 2021 - - - - -

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 4) 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 were found to exceed the recoverable amounts 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 nine months ended September 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 September 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.

12

EMPOWER CLINICS INC.

NOTES TO THE CONDENSED INTERIM CONSOLIDATED FINANCIAL STATEMENTS

For the three and nine months ended September 30, 2022 and 2021

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

9. INTANGIBLE ASSETS AND GOODWILL (Continued)

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 and $2,379,461 resulting from the acquisition of MediSure (Note 4). 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 as at September 30, 2022 and December 31, 2021:

	September 30, 2022		December 31, 2021
	$		$
Trade payables		2,065,897		1,896,895
Accrued liabilities		121,766		423,475
Accrued payroll liabilities		590,028		618,378
Accrued tax liabilities		798,890		786,682
		3,576,581		3,725,430

11. LOANS PAYABLE

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

	September 30, 2022			December 31, 2021
	$			$
Balance, beginning of the period		1,182,463			2,132,227
PPP loan addition		-			86,378
Accretion expense		7,409			33,324
Interest expense		43,352			63,676
Repayment		(134,998	)		(1,008,721	)
Gain on loan forgiveness		-			(124,047	)
Gain on remeasurement		(14,984	)		-
Unrealized foreign exchange gain		(5,959	)		(374	)
Balance, end of the period		1,077,283			1,182,463
Less: Current portion		206,479			128,480
Non-current portion		870,804			1,053,983

During the three and nine months ended September 30, 2022, the Company made scheduled payments on loans payable of $45,792 and $134,998, respectively (2021 - $44,706 and $965,971, respectively). Of the total amount paid during the three months and nine months ended September 30, 2022, $11,686 and $38,162, respectively, (2021 - $14,070 and $301,921, respectively) were for interest payments.

13

EMPOWER CLINICS INC.

NOTES TO THE CONDENSED INTERIM CONSOLIDATED FINANCIAL STATEMENTS

For the three and nine months ended September 30, 2022 and 2021

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

11. LOANS PAYABLE (Continued)

CEBA loans

As at September 30, 2022, the Company and its subsidiaries have three CEBA loans with principal amounts of $29,182 (C$40,000), $43,773 (C$60,000) and $29,182 (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. These loans currently do not incur any interest expense. For the three and nine months ended September 30, 2022, accretion expense was $386 and $1,168 (2021 - $386 and $2,725), respectively.

Kai Medical Secured Loans

During the year ended December 31, 2021, a loan held in Kai Medical with carrying value of $87,611 was forgiven by the U.S Small Business Administration (the “SBA”). For the three and nine months ended September 30, 2021, accretion expense recorded on this loan was $5,614 and $11,566, respectively, and interest expense was $146 and $582, respectively.

As at September 30 2022, 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 nine months ended September 30, 2022, interest expense was $11,685 and $38,162 (2021 - $27,004 and $43,628), respectively.

· The Company has a loan from 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 nine months ended September 30, 2022, accretion expense was $551 and $1,659 (2021 - $824 and $2,283), respectively, and interest expense recorded on the loan was $1,526 and $4,536 (2021 - $1,470 and $4,369), 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 nine months ended September 30, 2022, accretion expense was $1,554 and $4,582 (2021 - $1,327 and $2,187), respectively, and interest expense recorded on the loan was $223 and $654 (2021 - $216 and $361), respectively.

12. NOTES PAYABLE

A continuity of notes payable for the periods of the nine months ended September 30, 2022 and the year end December 31, 2021 is as follows:

	September 30, 2022		December 31, 2021
	$		$
Balance, beginning of period		173,266		708,361
Interest expense		7,330		14,443
Repayment		-		(553,324	)
Realized foreign exchange loss		-		3,786
Balance, end of the period		180,596		173,266
Less: Current portion		180,596		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. For the three and nine months ended September 30, 2021, interest expense on this loan was $nil and $4,643, respectively. During the year ended December 31, 2021, the Company also repaid $20,703 for the accrued interest from a separate promissory note.

14

EMPOWER CLINICS INC.

NOTES TO THE CONDENSED INTERIM CONSOLIDATED FINANCIAL STATEMENTS

For the three and nine months ended September 30, 2022 and 2021

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

12. NOTES PAYABLE (Continued)

As at September 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 nine months ended September 30, 2022, interest expense on notes payable was $2,470 and $7,330 (2021 - $3,625 and $8,485), respectively. As at September 30, 2022, the notes payable includes accrued interest of $40,596 (December 31, 2021 - $33,266).

13. CONVERTIBLE DEBENTURES

The continuity of convertible debentures for the nine months ended September 30, 2022 is as follows:

	$
Balance, December 31, 2021	-
Additions from private placements, net of transaction costs	703,199
Interest expense	114,583
Accretion expense	349,807
Repayment	(61,653	)
Reclassification to share capital	(9,719	)
Unrealized foreign exchange gain	(77,992	)
Balance, September 30, 2022	1,018,225
Less: Current portion	-
Non-current portion	1,018,225

The continuity of the conversion feature associated with convertible debentures for the nine months ended September 30, 2022 is as follows:

	$
Balance, December 31, 2021	-
Amount allocated to the conversion features	1,202,638
Gain on change in fair value of conversion features	(1,105,876	)
Reclassification to share capital	(7,123	)
Balance, September 30, 2022	89,639
Less: Current portion	89,639
Non-current portion	-

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 matures on January 6, 2024, and bears interest at 6% per annum. The convertible debentures 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 financing 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 nine months ended September 30, 2022, the accretion expense on these convertible debentures was $81,064 and $190,623, respectively (2021 - $nil and $nil, respectively). During the three and nine months ended September 30, 2022, the interest expense on these convertible debentures was $21,329 and $63,970, respectively (2021 - $nil and $nil, respectively).

15

EMPOWER CLINICS INC.

NOTES TO THE CONDENSED INTERIM CONSOLIDATED FINANCIAL STATEMENTS

For the three and nine months ended September 30, 2022 and 2021

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

13. CONVERTIBLE DEBENTURES (Continued)

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 unit for gross proceeds of $1,679,731 (C$2,100,000). 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 March 25, 2024. The attached warrants were classified as derivative liabilities and measured at $483,477 (Note 16). Each convertible debenture matures on March 25, 2024, and bears interest at 6% per annum. The convertible debentures 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 at the grant date 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 nine months ended September 30, 2022, the accretion expense on these convertible debentures was $84,356 and $159,184, respectively (2021 - $nil and $nil, respectively). During the three and nine months ended September 30, 2022, the interest expense on these convertible debentures was $24,343 and $50,613, respectively (2021 - $nil and $nil, respectively).

During the nine months ended September 30, 2022, there were 60 convertible debentures converted into common shares. As a result, an amount of $9,719 of convertible debentures and $7,123 of conversion feature liability were extinguished and reclassified to equity (Note 17(b)).

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 nine months ended September 30, 2022, the Company incurred interest of $nil and $nil, respectively (2021 - $999 and $2,985, respectively) on the convertible note payable.

16

EMPOWER CLINICS INC.

NOTES TO THE CONDENSED INTERIM CONSOLIDATED FINANCIAL STATEMENTS

For the three and nine months ended September 30, 2022 and 2021

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

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		96,992			31,635			-			-			128,627
Payments		(283,885	)		(124,704	)		-			-			(408,589	)
Foreign exchange gain		(159,276	)		(8,033	)		-			-			(167,309	)
Balance, September 30, 2022		1,941,987			648,209			-			-			2,590,196
Less: Current portion		244,750			142,553			-			-			387,303
Lease liability		1,697,237			505,656			-			-			2,202,893

During the three and nine months ended September 30, 2022, lease interest expense was $40,375 and $128,627, respectively (2021 - $21,645 and $36,302, respectively).

For the nine months ended September 30, 2022, clinic operating expenses include $195,418 (2021 - $47,573) in relation to short-term and low value leases.

16. WARRANT LIABILITY

Certain warrants issued by the Company are classified as derivative liabilities under the principles of IFRS 9 Financial instruments, 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 in the consolidated statement of loss and comprehensive loss.

	Weighted average exercise price		Number of warrants			Warrant liability
	C$		#			$
Balance, December 31, 2020		0.14		54,215,452			7,713,697
Issued		0.13		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		0.23		(6,350,460	)		-
Loss on change in fair value of warrant liability							(3,115,803	)
Balance, September 30, 2022		0.17		28,200,000			71,501
Less: Current portion							71,501
Warrant liability							-

17

EMPOWER CLINICS INC.

NOTES TO THE CONDENSED INTERIM CONSOLIDATED FINANCIAL STATEMENTS

For the three and nine months ended September 30, 2022 and 2021

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

16. WARRANT LIABILITY (Continued)

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 common share purchase warrant entitles holder to acquire one common share at a price of C$0.30 until January 6, 2024. The fair value of the warrants on initial recognition was estimated to be $863,355, of which $745,625 was cash proceeds and $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. The fair value of these warrants on initial recognition was 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. The fair value of these warrants on initial recognition was estimated at $483,477.

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

Expiry date	Number of warrants		Weighted average exercise price		Weighted average remaining life
	#		C$		Years
November 9, 2022		2,200,000		0.12		0.11
October 5, 2023		500,000		0.05		1.01
January 6, 2024		15,000,000		0.30		1.27
March 25, 2024		10,500,000		0.30		1.48
		28,200,000		0.28		1.25

17. EQUITY

a) Authorized share capital

Unlimited number of common shares without nominal or par value. At September 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 nine months ended September 30, 2022, the Company completed the following transactions:

Vesting of escrow shares

i. For the nine months ended September 30, 2022, legal and professional fees includes 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 until January 6, 2024. 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) 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.

18

EMPOWER CLINICS INC.

NOTES TO THE CONDENSED INTERIM CONSOLIDATED FINANCIAL STATEMENTS

For the three and nine months ended September 30, 2022 and 2021

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

17. EQUITY (Continued)

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 warrant. Each common share purchase warrant 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 warrant 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 presented within warrant liability

vi. During the nine months ended September 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
		2,238,637		0.23		0.10		224,479		196,629		421,108

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 $16,842.

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

Vesting of escrow shares

i. 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 and recorded it within legal and professional fees on consolidated statements of loss and comprehensive loss.

Subscription deposits

ii.	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.
iii.	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.

19

EMPOWER CLINICS INC.

NOTES TO THE CONDENSED INTERIM CONSOLIDATED FINANCIAL STATEMENTS

For the three and nine months ended September 30, 2022 and 2021

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

17. EQUITY (Continued)

Share subscription receivable

iv. 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

v.	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.
vi.	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.
vii.	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.
viii.	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.
ix.	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

x. 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 presented within warrant reserve

xi.	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.
xii.	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.
xiii.	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.

20

EMPOWER CLINICS INC.

NOTES TO THE CONDENSED INTERIM CONSOLIDATED FINANCIAL STATEMENTS

For the three and nine months ended September 30, 2022 and 2021

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

17. EQUITY (Continued)

Exercise of warrants presented within warrant liability

xiv. 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 12, 2021		550,000		0.16		0.13		69,041		79,362		148,403
January 14, 2021		1,059,000		0.16		0.13		133,902		140,479		274,381
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
		42,982,247		0.13		0.10		4,293,250		23,029,605		27,322,855

Acquisition of MediSure

xv. 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% of the number of issued shares of the Company.

21

EMPOWER CLINICS INC.

NOTES TO THE CONDENSED INTERIM CONSOLIDATED FINANCIAL STATEMENTS

For the three and nine months ended September 30, 2022 and 2021

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

17. EQUITY (Continued)

Share option transactions and the number of share options outstanding during the nine months ended September 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		2,000,000			0.17
Expired		(840,000	)		0.13
Forfeited		(475,000	)		0.11
Exercised		(250,000	)		0.10
Outstanding, September 30, 2022		7,249,459			0.24
Exercisable, September 30, 2022		5,948,765			0.25

The following table summarizes the options outstanding as at September 30, 2022:

Expiry date	Number of share options		Weighted average exercise price		Weighted average remaining life
	#		C$		Years
March 4, 2023		120,000		0.05		0.42
March 24, 2023		200,000		0.47		0.48
March 30, 2023		300,000		0.05		0.50
July 21, 2023		425,000		0.19		0.81
October 5, 2023		775,000		0.05		1.01
October 19, 2023		250,000		0.26		1.05
November 12, 2023		200,000		0.06		1.12
December 13, 2024		100,000		0.25		2.21
December 7, 2025		1,000,000		0.10		3.19
December 22, 2025		18,095		0.21		3.23
February 3, 2026		950,000		0.25		3.35
February 26, 2026		11,364		0.22		3.41
March 4, 2026		800,000		0.57		3.43
May 7, 2026		300,000		0.57		3.60
September 22, 2026		100,000		0.43		3.98
November 8, 2026		200,000		0.37		4.11
January 20, 2027		200,000		0.30		4.31
February 11, 2027		500,000		0.28		4.37
February 14, 2027		200,000		0.27		4.38
July 5, 2027		600,000		0.08		4.76
		7,249,459		0.24		2.82

As at September 30, 2022, there were 1,875,000 options outstanding that had been granted to related parties, of which 1,739,583 were exercisable.

The weighed average remaining contractual life of share options outstanding as at September 30, 2022 was 2.82 years (December 31, 2021 - 3.03 years). The weighted average fair value of options granted for the nine months ended September 30, 2022 was $0.08 (2021 - $0.32). The range of exercise prices for options outstanding at September 30, 2022 was C$0.05 to C$0.57 (December 31, 2021 - C$0.05 to C$0.57). The weighted average share price on exercise date for the option exercises during the nine months ended September 30, 2022 was C$0.37 (2021 - C$0.91).

22

EMPOWER CLINICS INC.

NOTES TO THE CONDENSED INTERIM CONSOLIDATED FINANCIAL STATEMENTS

For the three and nine months ended September 30, 2022 and 2021

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

17. EQUITY (Continued)

The fair value of share options recognized as an expense during the three and nine months ended September 30, 2022, was $45,566 and $251,491, respectively (2021 - $236,201 and $841,759, respectively). During the nine months ended September 30, 2022, there were 475,000 options were forfeited as a result of the resignation of the Chief Financial Officer (“CFO”) of the Company.

The following are the assumptions used for the Black Scholes option pricing model valuation of share options granted during the nine months ended September 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.

d) Warrants presented within warrant reserve

Warrants presented within warrant reserve consist of warrants issued as share-based payments. Outstanding and exercisable warrants presented within warrant reserve for the nine months ended September 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			0.20
Outstanding, September 30, 2022		4,927,500			0.19

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

Expiry date	Number of warrants		Weighted average exercise price		Weighted average remaining life
	#		C$		Years
March 8, 2023		880,000		0.12		0.44
March 25, 2024		4,047,500		0.20		1.37
		4,927,500		0.19		1.20

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, 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.

23

EMPOWER CLINICS INC.

NOTES TO THE CONDENSED INTERIM CONSOLIDATED FINANCIAL STATEMENTS

For the three and nine months ended September 30, 2022 and 2021

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

17. EQUITY (Continued)

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 nine months ended September 30, 2022, presented 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 nine months ended September 30, 2022 and 2021, operating expenses comprised of the following:

	Three months ended September 30,				Nine months ended September 30,
	2022		2021		2022		2021
	$		$		$		$
Salaries and benefits		807,387		301,996		2,382,972		983,533
Rent		89,892		20,135		195,418		47,573
Advertising and promotion		216,588		202,848		575,814		508,439
Telephone and internet		42,231		50,230		134,208		215,824
Office supplies and expenses		85,453		42,048		342,095		119,244
Recruiting fees		2,847		-		122,777		-
Other		73,187		77,748		437,218		447,344
		1,317,585		695,005		4,190,502		2,321,957

19. SEGMENT INFORMATION

The Company’s business activities for the nine months ended September 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:

24

EMPOWER CLINICS INC.

NOTES TO THE CONDENSED INTERIM CONSOLIDATED FINANCIAL STATEMENTS

For the three and nine months ended September 30, 2022 and 2021

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

19. SEGMENT INFORMATION (Continued)

For the nine months ended September 30, 2022	Health & Wellness			Diagnostics & Technology			Corporate			Consolidated
	$			$			$			$
Total revenue		989,642			3,245,097			-			4,234,739
Total operating expenses1		(2,060,431	)		(3,194,381	)		(2,739,371	)		(7,994,183	)
Total other expenses, net		99,042			(79,594	)		3,149,860			3,169,308
Net (loss) income from continuing operations		(971,747	)		(28,878	)		410,489			(590,136	)

For the nine months ended September 30, 2021	Health & Wellness			Diagnostics & Technology			Corporate			Consolidated
	$			$			$			$
Total revenue		750,698			2,475,637			-			3,226,335
Total operating expenses1		(556,987	)		(2,619,799	)		(3,129,915	)		(6,306,701	)
Total other expenses, net		(3,168	)		(4,231,746	)		(19,736,851	)		(23,971,765	)
Net loss from continuing operations		(11,947	)		(4,375,908	)		(22,664,276	)		(27,052,131	)

As at September 30, 2022	Health & Wellness		Diagnostics & Technology		Corporate		Consolidated
	$		$		$		$
Assets		528,437		1,297,633		1,624,084		3,450,154
Liabilities		2,146,452		2,704,149		3,951,835		8,802,436

As at December 31, 2021	Health & Wellness		Diagnostics & Technology		Corporate		Consolidated
	$		$		$		$
Assets		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

20. SUPPLEMENTAL DISCLOSURE WITH RESPECT TO CASH FLOWS

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

	2022			2021
	$			$
Changes in non-cash working capital items:
Accounts receivable		59,511			(70,448	)
Inventory		(407,721	)		(674,796	)
Prepaid expenses		19,011			(32,806	)
Accounts payable and accrued liabilities		(148,700	)		(368,312	)
Deferred revenue		(5,262	)		(26,694	)
Net changes in non-cash working capital items		(483,161	)		(1,173,056	)
Non-cash transactions that do not impact profit or loss:
Non-cash additions of property and equipment		26,146			-
Units issued as settlement of accounts payable		117,730			-
Shares issued for services, net of shares returned to treasury		95,091			86,812
Shares issued on conversion of convertible debentures		16,842			-

25

EMPOWER CLINICS INC.

NOTES TO THE CONDENSED INTERIM CONSOLIDATED FINANCIAL STATEMENTS

For the three and nine months ended September 30, 2022 and 2021

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

20. SUPPLEMENTAL DISCLOSURE WITH RESPECT TO CASH FLOWS (Continued)

During the nine months ended September 30, 2022, addition to property and equipment was $79,813, of which $26,146 was related to medical and lab equipment that had been paid in advance during the year ended December 31, 2021.

Income tax payments for the nine months ended September 30, 2022 were $nil (2021 - $nil). As at September 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.

Total interest paid for the nine months ended September 30, 2022 was $236,725 (2021 - $457,172), of which $8,283 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, restricted cash, accounts receivable, accounts payable and accrued liabilities, consideration payable, and notes payable approximate their respective fair values due to their short-term nature. These financial instruments are measured at amortized cost.

As at September 30, 2022 and December 31, 2021, the warrant liability and conversion feature of convertible debentures were categorized as Level 3 in the fair value hierarchy and they are measured at fair value through profit or loss.

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.

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 September 30, 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.

26

EMPOWER CLINICS INC.

NOTES TO THE CONDENSED INTERIM CONSOLIDATED FINANCIAL STATEMENTS

For the three and nine months ended September 30, 2022 and 2021

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

21. FINANCIAL INSTRUMENTS AND RISK MANAGEMENT (Continued)

ii. Currency risk

The Company’s functional currency is the USD 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 USD.

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

	September 30, 2022		December 31, 2021
	$		$
Canadian dollar net monetary liabilities		1,875,116		594,561

The effect on net loss and comprehensive loss for the nine months ended September 30, 2022, of a 10% change in the foreign currencies against the USD on the above-mentioned net monetary liabilities of the Company is estimated to have an increase or decrease in foreign exchange gain or loss of $187,512 (December 31, 2021 - $54,051).

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 September 30, 2022, the Company had a cash balance of $469,712 (December 31, 2021 - $866,170) and current liabilities of $4,692,902 (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. As at September 30, 2022, the Company had a bank loan with carrying amount of $881,498 that has floating interest rate and therefore, the Company is exposed to interest rate risk. An increase or decrease of 100 basis points in the interest rates would result in an increase of $7,212 or decrease of $7,163 in interest expense on condensed interim consolidated statements of loss and comprehensive loss.

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 nine months ended September 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.

27

EMPOWER CLINICS INC.

NOTES TO THE CONDENSED INTERIM CONSOLIDATED FINANCIAL STATEMENTS

For the three and nine months ended September 30, 2022 and 2021

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

22. RELATED PARTY TRANSACTIONS (Continued)

Key management compensation for the three and nine months ended September 30, 2022 and 2021 includes:

	Three months ended September 30,					Nine months ended September 30,
	2022			2021		2022		2021
	$			$		$		$
Salaries and benefits		171,288			75,565		629,725		504,839
Share-based payment (recovery) expense		(4,509	)		-		33,471		346,375
Directors’ fees		11,000			7,500		33,000		20,000
		177,779			83,065		696,196		871,214

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.

During the nine months ended September 30, 2022, there were 475,000 options forfeited due to the resignation of the CFO. The Company recognized $57,189 in share-based payments related to vesting of these options and recognized a recovery of $24,753 on the unvested portion upon termination of the CFO’s employment.  

As at September 30, 2022, $113,833 (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 September 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.

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 September 30, 2022 and December 31, 2021, the capital of the Company comprised of the following:

	September 30, 2022			December 31, 2021
	$			$
Total shareholder’s deficiency		(5,352,282	)		(6,392,941	)
Notes payable		180,596			173,266
Convertible notes payable		-			205,406
Current portion of loans payable		206,479			128,480
Loans payable		870,804			1,053,983
Convertible debentures		1,018,225			-
		(3,076,178	)		(4,831,806	)

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

28

EMPOWER CLINICS INC.

NOTES TO THE CONDENSED INTERIM CONSOLIDATED FINANCIAL STATEMENTS

For the three and nine months ended September 30, 2022 and 2021

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

24. COMMITMENTS AND CONTINGENCIES

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

	Total		Within 1 year		2 - 5 years		Greater than 5 years
	$		$		$		$
Maturity analysis of liabilities
Accounts payables and accrued liabilities		3,576,581		3,576,581		-		-
Consideration payable		180,803		180,803		-		-
Loans payable		1,467,368		221,824		867,145		378,399
Notes payable		180,596		180,596		-		-
Convertible debentures		3,126,341		173,200		2,953,142		-
Lease payments		3,134,800		531,164		1,823,218		780,418
Total liabilities		11,666,489		4,864,168		5,643,505		1,158,817

25. EVENTS AFTER THE REPORTING PERIOD

Subsequent to September 30, 2022, there were 2,200,000 warrants that expired unexercised.

On November 21, 2022, the Company announced a proposed private placement of:

i.	secured convertible debenture units (each a “Debenture Unit”) at a price of $1,000 per Debenture Unit for aggregate proceeds of $250,000, and
ii.	common shares units (each a “Share Unit”) at a price of $0.05 per Share Unit, for aggregate proceeds of $1,000,000.

Each Debenture Unit will be comprised of one senior secured convertible debenture with principal of $1,000 (each, a “Debenture”) and 20,000 warrants of the Company (each a “Warrant”). The Debentures bear interest at a rate of 10.0% per annum and mature two years following the date of issuance. The principal amount of each Debenture may be converted into common shares of the Company at any time prior to maturity at a conversion price of $0.05 per common share. Each Warrant is exercisable into common shares of the Company at $0.075 per common share for two years following the date of issuance.

The Company also announced the settlement of all amounts owing under 3,700 outstanding convertible debentures, plus accrued interest thereon, in the aggregate amount of $3,786,400 (the “Outstanding Debentures”) in exchange for the issuance of a new secured convertible debenture having a principal amount of the Outstanding Debenture (the “New Debenture”). The New Debenture bears interest at a rate of 10% per annum and matures two years following the date of issuance. The Outstanding Debentures were convertible into Shares at a conversion price of $0.20 per common share. The New Debenture will be convertible at $0.05 per common share. The Company also modified the terms of 18,500,000 warrants that were issued with the Outstanding Debentures to reduce the exercise price per common share from $0.30 to $0.075 per common share and extended the expiry date to two years from the date of issuance of the New Debentures.

29

EX-99.2

EXHIBIT 99.2

Empower Clinics Inc.

Management’s Discussion & Analysis

For the three and nine months ended September 30, 2022 and 2021

Expressed in United States dollars

1

Empower Clinics Inc.

Management’s Discussion & Analysis

For the three and nine months ended September 30, 2022 and 2021

(Expressed in United States dollars, except where noted)

Preface

In this Management’s Discussion & Analysis (“MD&A), “Empower”, the “Company”, or the words “we”, “us”, and “our” refer to Empower Clinics Inc. together with its subsidiaries.

This MD&A comments on our financial condition, financial performance, and results of operations for the three and nine months ended September 30, 2022, and 2021. All amounts are expressed in US dollars unless otherwise noted. Past performance may not be indicative of future performance. This MD&A is supplemental and should be read in conjunction with the unaudited condensed interim consolidated financial statements and accompanying notes for the three and nine months ended September 30, 2022 and 2021 (the “Interim Financial Statements”) and the audited consolidated financial statements and accompanying notes for the years ended December 31, 2021 and 2020 (the “Annual Financial Statements”) and the annual Management’s Discussion & Analysis for the years ended December 31, 2021 and 2020 (the “Annual MD&A”).

All financial information contained in this MD&A and in the Interim Financial Statements is prepared in accordance with International Financial Reporting Standards (“IFRS”), including IAS 34 Interim Financial Reporting, as issued by the International Accounting Standards Board (“IASB”), except for non-GAAP information as noted and where a reconciliation to IFRS is provided.

The first, second, third and fourth quarters of the Company’s fiscal years are referred to as “Q1”, “Q2”, “Q3” and “Q4”, respectively. The year-to-date periods ended September 30, 2022 and 2021 are referred to as “YTD 2022” and “YTD 2021, respectively. The years ended December 31, 2021 and 2020 are also referred to as “fiscal 2021” and “fiscal 2020”, respectively.

In preparing this MD&A, we have considered all information available to us up to November 28, 2022.

This MD&A contains forward-looking information within the meaning of Canadian securities laws. Refer to “Cautionary Note Regarding Forward-Looking Statements”. All statements made by management are subject to the risks and uncertainties identified in the “Risks and Uncertainties” section of this document.

This MD&A has been prepared by reference to the MD&A disclosure requirements established under National Instrument 51-102 Continuous Disclosure Obligations of the Canadian Securities Administrators. Additional information regarding the Company is available on our website at www.EmpowerClinics.com and on SEDAR at www.SEDAR.com.

Nature of Operations and Outlook

Headquartered in Vancouver, British Columbia, Empower is a federally incorporated Canadian company that is publicly traded on the Canadian Securities Exchange under the symbol “EPW”, quoted on the OTCQB under the symbol “EPWCF” and quoted on the Frankfurt Stock Exchange under the symbols “8EC.F”, “8EC.MU”, and “8EC.SG”.

Empower is a leader in integrated healthcare and diagnostic solutions in the United States and Canada and is reshaping the model for patient-first integrated healthcare and wellness by leveraging our experience with clinic management, technology, quality products, medical and paramedical expertise. Supported by an experienced leadership team and in partnership with renowned pharmacy brands, Empower is aggressively growing its clinical and digital presence across North America. Our Health & Wellness and Diagnostics & Technology business units are positioned to positively impact the integrated health of our patients, while simultaneously providing long term value for our shareholders.

Empower Clinics

On April 5, 2022, Empower Clinics launched COVID-19 testing solutions for cruise travel passengers in Vancouver, Canada. From launch through to September 30, 2022, Empower delivered more than 20,000 COVID-19 tests comprised of both rapid antigen tests and RT-PCR tests. Cruise lines and tour operators were among the repeat customers which contributed to the high volume of tests performed over the course of the operating season.

2

Empower Clinics Inc.

Management’s Discussion & Analysis

For the three and nine months ended September 30, 2022 and 2021

(Expressed in United States dollars, except where noted)

The Medi-Collective

Empower launched The Medi-Collective (“TMC”), the evolution of Empower’s network of integrated healthcare clinics in Canada providing body and mind wellness, and treating patients with primary care, paramedical services and specialty services. TMC is a multi-disciplinary group of medical practitioners dedicated to applying a collaborative working model with the goal of delivering effective community healthcare and positive wellness. TMC’s practice starts and ends with the people who make up our community, from our top-quality practitioners striving for excellence every day, to the patients and clients we care for. Fueled by the belief that effective healthcare is as much a mental approach as a physical one and by bringing together the power of positive attitudes with the most advanced medical methodologies, we create the best possible opportunity to produce the best possible outcomes for everyone involved, physically and mentally.

In partnership with renowned pharmacy brands, TMC is a channel for accessible and modern healthcare while providing communities with high-quality service through professionally trained medical practitioners. TMC’s clinics provide patient accessibility through digital and telemedicine care offerings. TMC operates software platforms to manage patients through the medical consultation process that is a compliant Electronic Health Record system and patient management portal. It provides improved management of patients while improving the ability of our doctors, admins, and staff to treat and serve patients’ needs. The telemedicine platform allows patients to register and select an appointment time to conduct a private consultation with one of the physicians remotely through a secure video link, thereby extending the reach of our clinic operations beyond the physical clinic locations.

As of the date of this MD&A, The Medi-Collective has six operational clinic locations, two of which exclusively offer paramedical services, while the other four provide an integrated offering of paramedical and primary care services.

The Company is working to leverage its integrated clinic offering of products and services to market and sell other Empower offerings such as MediSure’s diabetes management solutions and Vitamin D test kits to existing and incoming TMC clients. Management is committed to providing shareholder value and conducts regular operational reviews to ensure efficient and profitable operations. A recent operational review resulted in management’s decision to close two underperforming clinic locations. This decision allows the Company to direct its resources to more profitable and viable clinic locations. In fiscal 2022 and beyond, the Company will seek to improve the profitability of its existing clinics while exploring additional clinic opportunities.

MediSure Canada

On July 30, 2021, the Company acquired Medi+Sure Canada Inc. (“MediSure”). Founded in 2010, MediSure has been dedicated to producing affordable, quality diabetes products that bring economic value to the diabetes testing market while delivering world-class training and educational support to those living with the disease. MediSure’s distribution channels primarily consist of pharmacies, distributors, correctional facilities and care homes. During fiscal 2021, MediSure’s product sales included diabetic glucose meters and blood sugar tests meeting all ISO standards. With a pipeline of broader product offerings, Management expects the acquisition to bolster Empower’s direct-to-consumer testing products initiative.

On April 25, 2022, MediSure, launched the at-home Vitamin D test kit, approved by Health Canada under the MediSure brand. Vitamin D deficiency affects roughly 10% of Canadians and can contribute to adverse health effects. MediSure Vitamin D test kits provide consumers with the ability to monitor their vitamin D levels at home without a medical professional and are available directly to consumers and the healthcare community. As of the date of this MD&A, the Company had shipped 25,000 units of its Vitamin D test kits to its network of partnered pharmacies, wholesalers, and distributors. The Company anticipates sales and revenue will continue to increase in late 2022 and beyond.

On July 12, 2022, the Company, through its subsidiary MediSure, launched its latest product innovation, MediSure Empower Blood Glucose Monitor (BGM). The BGM requires a smaller blood sample size than other blood glucose monitors, allowing for alternative sampling sites other than fingers. It utilizes test strips with improved accuracy, delivers results in less than six seconds and has Bluetooth connectivity so that results can be maintained on a smartphone or tablet. Through the BGM, MediSure is fulfilling its mission of providing affordable, high-quality diabetic management products to all Canadians. The BGM is available for sale through the MediSure website and in select pharmacies.

MediSure has entered into a standing offer agreement with Public Works and Government Services Canada to provide diabetic testing supplies and glucometers.

3

Empower Clinics Inc.

Management’s Discussion & Analysis

For the three and nine months ended September 30, 2022 and 2021

(Expressed in United States dollars, except where noted)

MediSure Laboratory (formerly Kai Medical Laboratory)

On June 20, 2022, the Company announced that it had completed the rebranding of Kai Medical Laboratory to MediSure Laboratory, providing a harmonized brand for the Company’s medical diagnostics and laboratory testing across the U.S. and Canada.

MediSure Laboratory is an accredited laboratory consisting of experienced scientists, medical professionals and staff providing reliable testing solutions to the healthcare community and employer groups while having an unwavering commitment to quality and scientific innovations. MediSure Laboratory also sells direct-to-consumer testing solutions for self-administration (COVID-19 rapid antigen testing), providing a convenient means for monitoring and improving consumers’ health.

MediSure Laboratory offers services in the state of Texas, and surrounding states supporting the testing needs for commercial accounts and consumers. Immediate plans include expansion of MediSure Laboratory’s specimen processing programs that include wellness panels, molecular testing, and the development of at-home self-administered test protocols.

In fiscal 2022, MediSure Laboratory began the process of applying for additional U.S. Federal Drug and Administration certifications for the sales of additional medical devices in the United States. Once certifications have been obtained, the Company anticipates that sales from new medical devices such as blood glucose monitors, and hormone and vitamin testing, will bolster revenue in the U.S. MediSure Laboratory is also engaged in research and development of further diagnostic solutions.

Overall outlook

The Company continues to be active and opportunistic with respect to mergers and acquisitions, with the goal of advancing its business plan and increase shareholder value where possible. The Company may seek to acquire third party channel partners to increase its patient base, profitability, and to increase shareholder value through the effective utilization of its existing operations.

Financial Highlights

The following table presents selected financial highlights from the results of operations for the three and nine months ended September 30, 2022 and 2021.

	Three months ended						Nine months ended
	September 30, 2022			September 30,  2021			September 30, 2022			September 30, 2021
	$			$			$			$
Total revenue		1,573,809			405,707			4,234,739			3,226,335
Gross margin		931,622			387,330			1,900,905			1,633,997
Net loss from continuing operations		(457,066	)		(1,711,659	)		(590,136	)		(27,052,131	)
Net income (loss) from discontinued operations		-			(60,527	)		133,915			(512,931	)
Net loss for the period		(457,066	)		(1,772,186	)		(456,221	)		(27,565,062	)
Adjusted EBITDA(1) loss		(775,927	)		(28,732	)		(3,024,784	)		(1,609,747	)

⁽¹⁾ Adjusted EBITDA is a non-GAAP financial measure that is calculated as net loss from continuing operations before depreciation and amortization, interest, accretion, share-based compensation, gain or loss from changes in fair value of warrant liability, change in fair value of conversion options, impairment of property and equipment, impairment of intangible assets, impairment of goodwill, and financing expense.

4

Empower Clinics Inc.

Management’s Discussion & Analysis

For the three and nine months ended September 30, 2022 and 2021

(Expressed in United States dollars, except where noted)

The following table presents selected financial highlights of the Company’s financial condition as at September 30, 2022 and December 31, 2021.

	September 30,  2022			December 31, 2021
	$			$
Cash		469,712			866,170
Working capital deficiency		(2,996,239	)		(4,542,752	)
Current liabilities		4,692,902			7,703,093
Non-current liabilities		4,109,534			3,727,224

Third Quarter Financial Review

The following table summarizes the results of operations for the three months ended September 30, 2022, and 2021:

	Q3 2022			Q3 2021
	$			$
Revenue		1,573,809			405,707
Gross margin		931,622			387,330
Operating expenses		1,317,585			695,005
Legal and professional fees		419,671			(104,000	)
Depreciation and amortization expense		55,115			162,103
Share-based payments		45,566			236,201
Loss from operations		(906,315	)		(601,979	)
Provision for credit losses		15,301			-
Gain on change in fair value of warrant liability		(354,582	)		(3,121,006	)
Gain on change in fair value of conversion feature		(334,822	)		-
Impairment of property and equipment		-			1,297,625
Impairment of intangible assets		-			354,550
Impairment of goodwill		-			2,690,198
Other expenses (income), net		224,854			(111,687	)
Net loss from continuing operations		(457,066	)		(1,711,659	)
Net loss from discontinued operations		-			(60,527	)
Foreign currency translation adjustment		9,053			(3,251	)
Net loss and comprehensive loss		(448,013	)		(1,775,437	)

Revenue

Revenue in Q3 2022 was $1,573,809 compared to $405,707 in the prior year period. The Company’s revenue was earned from patient visits to existing clinics throughout the Medi-Collective network, COVID-19 testing performed by Empower and sales of diagnostic devices by MediSure. Of total revenue in Q3 2022, $748,857 (2021 - $206,639) related to COVID-19 testing and $540,952 (2021 - $177,220) related to the sale of diabetes testing equipment. The remaining revenue of $284,000 (2021 - $21,848) resulted from patient visits at clinics.

Gross margin

Gross margin in Q3 2022 was $931,622 compared to a gross margin of $387,330 in the prior year period and is calculated as revenue less the direct expenses of clinic services and product sales. The Company experienced an increase in gross margin compared to prior year period due to a significant increase in sales from Diagnostic & Technology division relating to Empower’s COVID-19 testing.

5

Empower Clinics Inc.

Management’s Discussion & Analysis

For the three and nine months ended September 30, 2022 and 2021

(Expressed in United States dollars, except where noted)

Operating expenses

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

	Q3 2022		Q3 2021
	$		$
Salaries and benefits		807,387		301,996
Rent		89,892		20,135
Advertising and promotion		216,588		202,848
Telephone and internet		42,231		50,230
Office supplies and expenses		85,453		42,048
Recruiting fees		2,847		-
Other		73,187		77,748
		1,317,585		695,005

Operating expenses in Q3 2022 were $1,317,585, which increased from $695,005 during the prior year period. The increase was primarily related to increased salaries and benefits as a result of operations relating to Empower’s COVID-19 testing clinics and ongoing operations in Medi-Collective clinics.

Legal and professional fees

Legal and professional fees in Q3 2022 were $419,671, compared to a recovery of $104,000 during the prior year period. During the current period, legal and professional fees were primarily comprised of accounting fees and consulting fees pertaining to the year end audit and general corporate matters. During the prior year period, legal and professional fees had a recovery which was primarily due to the reversal of an over accrual from prior periods which was partially offset by consulting fees from the acquisition of MediSure.

Depreciation and amortization expense

Depreciation and amortization expense in Q3 2022 was $55,115 compared to $162,103 during the prior year period. The decrease in this expense was due to long-lived assets being impaired during fiscal 2021. Depreciation and amortization expense for current year period was primarily from furniture and testing equipment.

Share-based payments

The Company recorded share-based payments during Q3 2022 of $45,566 compared to $236,201 during the prior year period due to fewer options granted in current year period as well as a recovery of expense of unvested options resulting from the resignation of the Chief Financial Officer (“CFO”).

Provision for credit losses

In Q3 2022, the Company recorded a provision for expected credit losses of $15,301 compared to $nil in the prior year period. The increase was mainly due to aged trade receivables and aged lease receivables from a sub-lease contract that is expected to be uncollectible.

Gain on change in fair value of warrant liability

In Q3 2022, the Company recorded a gain on change in the fair value of warrant liability of $354,582 compared to a gain of $3,121,006 during the prior year period due to the revaluation of outstanding warrants upon exercise and at the quarter end. The gain was primarily driven by a decrease in the Company’s share price during the current year period, which is a key input in the Black-Scholes option pricing model used to determine the fair value of the warrant liability.

Gain on change in fair value of conversion feature

In Q3 2022, the Company recorded a gain on change in fair value of conversion feature of $334,822 compared to $nil during the prior year period due to the revaluation of the conversion feature relating to the Company’s convertible debentures. The gain was driven by a decrease in the Company’s share price during the current year period, which is a key input in the Black-Scholes option pricing model used to determine the fair value of the conversion feature.

6

Empower Clinics Inc.

Management’s Discussion & Analysis

For the three and nine months ended September 30, 2022 and 2021

(Expressed in United States dollars, except where noted)

Impairment of property, plant and equipment

In Q3 2022, the Company recognized an impairment of property and equipment of $nil compared to $1,297,625 in the prior year period. The impairment charge in the prior year period comprised of $762,981 related to right of use assets, and $534,644 related to leasehold improvements. The impairment charges resulted from management’s review of the recoverability of the assets and a conclusion that their carry amount exceeded their recoverable amount.

Impairment of intangible assets

In Q3 2022, the Company recognized an impairment of intangible assets of $nil compared to $354,550 in the prior year period. The impairment charge in the prior year period consisted of customer relationships of $146,300, and $208,250 related to brands, trademarks and licenses. The impairment charges resulted from management’s review of the recoverability of the assets and a conclusion that their carrying amount exceeded their recoverable amount.

Impairment of goodwill

In Q3 2022, the Company recognized an impairment of goodwill of $nil compared to $2,690,198 in the prior year period. The impairment in the prior year period consisted of $310,737 in goodwill generated in the acquisition of Kai Medical, and $2,379,461 in goodwill resulting from the acquisition of MediSure. The impairment charges were the result of management’s assessment that the carrying amount of goodwill allocated to the Diagnostics & Technology division exceeded its recoverable amount.

Other expenses (income), net

For the three months ended September 30, 2022 and 2021, other expenses (income) were comprised of the following:

	Q3 2022			Q3 2021
	$			$
Accretion expense		167,911			8,151
Interest expense		101,951			55,105
Gain on termination of leases		-			(2,831	)
Other income, net		(45,008	)		(172,112	)
		224,854			(111,687	)

The Company had other expenses of $224,854 during Q3 2022 compared to other income of $111,687 during the prior year period. Other expense in Q3 2022 mainly comprises interest and accretion expense which were partially offset with the rental income from the sub-lease of the TMC clinics. Other income in Q3 2021 was primarily due to loan forgiveness, offset by interest and accretion expenses.

Third Quarter Cash Flows

	Q3 2022			Q3 2021
	$			$
Net cash used in operating activities from continuing operations		(94,075	)		(1,247,009	)
Net cash used in operating activities from discontinued operations		-			(55,415	)
Net cash used in investing activities from continuing operations		(3,103	)		(1,660,269	)
Net cash used in financing activities from continuing operations		(236,098	)		(52,292	)
Net cash used in financing activities from discontinued operations		-			(13,121	)
Effects of foreign exchange on cash		9,053			(3,251	)
Net change in cash		(324,223	)		(3,031,357	)

7

Empower Clinics Inc.

Management’s Discussion & Analysis

For the three and nine months ended September 30, 2022 and 2021

(Expressed in United States dollars, except where noted)

Review of the Company’s cash flows from continuing operations during Q3 2022 compared to Q3 2021:

Cash used in operating activities from continuing operations during Q3 2022 was $94,075 compared to $1,247,009 during the prior year period. The significant decrease in net cash used in operating activities was mainly due to the increase sales volume and, in turn, gross margin as well as increase in operational efficiency.

Cash used in investing activities from continuing operations during Q3 2022 was $3,103 compared to cash used of $1,660,269 during the prior year period. The decrease was due to fewer purchases of furniture and equipment during Q3 2022. Cash used in investing activities in Q3 2021 was mainly due to purchases of property and equipment as well as the acquisition of MediSure.

Cash used in financing activities from continuing operations in Q3 2022 was $236,098 compared to cash used of $52,292 in the prior year period. Cash used in financing activities during Q3 2022 was primarily related to lease payments, loan payments and interest payments on convertible debentures. Cash used in financing activities during Q3 2021 was due to the repayment of debt offset by an advance from loan payable.

Year to Date Financial Review

The following table summarizes the results of operations for the nine months ended September 30, 2022, and 2021:

	YTD 2022			YTD 2021
	$			$
Total revenue		4,234,739			3,226,335
Gross margin		1,900,905			1,633,997
Operating expenses		4,190,502			2,321,957
Legal and professional fees		1,054,898			1,134,318
Depreciation and amortization expense		163,458			416,329
Share-based payments		251,491			841,759
Loss from operations		(3,759,444	)		(3,080,366	)
Provision for credit losses		34,593			-
(Gain) loss on change in fair value of warrant liability		(3,115,803	)		19,721,807
Gain on change in fair value of conversion feature		(1,105,876	)		-
Impairment of property and equipment		20,432			1,297,625
Impairment of intangible assets		-			354,550
Impairment of goodwill		-			2,690,198
Financing expenses		700,542			-
Other expenses (income), net		296,804			(92,415	)
Net loss from continuing operations		(590,136	)		(27,052,131	)
Net income (loss) for discontinued operations		133,915			(512,931	)
Foreign currency translation adjustment		77,668			(3,163	)
Net loss and comprehensive loss		(378,553	)		(27,568,225	)

Revenue

Revenue in YTD 2022 was $4,234,739 compared to $3,226,335 in the prior year period. The Company’s revenue was earned from patient visits to existing clinics throughout the Medi-Collective network, sales of diagnostic equipment from MediSure, and from COVID-19 testing performed by Kai Medical and Empower. Of total revenue in YTD 2022, $1,748,009 (2021 - $2,298,417) related to COVID-19 testing and $1,497,089 (2021 - $177,220) related to the sale of diabetes testing equipment. The remaining revenue of $989,641 (2021 - $750,698) resulted from patient visits at clinics.

8

Empower Clinics Inc.

Management’s Discussion & Analysis

For the three and nine months ended September 30, 2022 and 2021

(Expressed in United States dollars, except where noted)

Gross margin

Gross margin in YTD 2022 was $1,900,905 compared to a gross margin of $1,633,997 in the prior year period and is calculated as revenue less the direct expenses of clinic services and product sales. Gross margin increased due to the increase in revenue against costs of revenue as the Company strives to improve the profitability of its core operations.

Operating expenses

For the nine months ended September 30, 2022 and 2021, operating expenses were comprised of the following:

	YTD 2022		YTD 2021
	$		$
Salaries and benefits		2,382,972		983,533
Rent		195,418		47,573
Advertising and promotion		575,814		508,439
Telephone and internet		134,208		215,824
Office supplies and expenses		342,095		119,244
Recruiting fees		122,777		-
Other		437,218		447,344
Total		4,190,502		2,321,957

Operating expenses in YTD 2022 were $4,190,502, which increased from $2,321,957 during the prior year period. The increase was primarily related to increased salaries and benefits of $690,874 from clinic operations in the Medi-Collective beginning in late 2021 as well as increased salaries of $617,171 from MediSure and Empower’s COVID-19 testing clinics. Rent expense also increased as Empower entered a new contract for the short-term lease of a COVID-19 testing site, starting in April 2022.

Legal and professional fees

Legal and professional fees in YTD 2022 were $1,054,898 compared to $1,134,318 during the prior year period. In YTD 2022, legal and professional fees were primarily comprised of accounting fees and consulting fees pertaining to the year end audit and assessment of a testing site. In YTD 2021, legal and professional fees were mainly comprised of business advisory and consulting expenses as well as costs incurred in connection with the acquisitions of Kai Medical USA, Lawrence Park & Atkinson clinics, and MediSure, which was partially offset by the reversal of provisions made in prior quarters.

Depreciation and amortization expense

Depreciation and amortization expense in YTD 2022 was $163,458 compared to $416,329 during the prior year period. The decrease in this expense was due to long-lived assets being impaired during fiscal 2021. Depreciation and amortization expense for current year period was primarily from furniture and testing equipment.

Share-based payments

The Company recorded share-based payments during YTD 2022 of $251,491 compared to $841,759 during the prior year period due to fewer options granted in current year period as well as a recovery of expense of unvested options resulting from the resignation of the CFO.

Provision for credit losses

In YTD 2022, the Company recorded a provision for expected credit losses of $34,593 compared to $nil in the prior year period. The increase was mainly due to aged trade receivables and aged lease receivables from a sub-lease contract that is expected to be uncollectible.

Gain (loss) on change in fair value of warrant liability

In YTD 2022, the Company recorded a gain on change in the fair value of warrant liability of $3,115,803 compared to a loss of $19,721,807 during the prior year period due to the revaluation of outstanding warrants upon exercise and at the quarter end. The gain was primarily driven by a decrease in the Company’s share price during YTD 2022, which is a key input in the Black-Scholes option pricing model used to determine the fair value of the warrant liability.

9

Empower Clinics Inc.

Management’s Discussion & Analysis

For the three and nine months ended September 30, 2022 and 2021

(Expressed in United States dollars, except where noted)

Gain on change in fair value of conversion feature

During YTD 2022, the Company recorded a gain on change in fair value of conversion feature of $1,105,876 compared to $nil during the prior year period relating to the revaluation of the conversion feature of Company’s convertible debenture to fair value. The gain was primarily driven by the decrease in the Company’s share price during the current year period, which is a key input in the Black-Scholes option pricing model used to determine the fair value of the conversion feature.

Impairment of property, plant and equipment

In YTD 2022, the Company recognized an impairment of property, plant, and equipment of $20,432 compared to $1,297,625 in the prior year period. The impairment loss during YTD 2022 was attributable to leasehold improvement following identification of impairment indicators and management’s assessment that carrying amount was greater than recoverable amount. The impairment charge in YTD 2021 comprised of $762,981 related to right of use assets, and $534,644 related to leasehold improvements. The impairment charges resulted from management’s review of the recoverability of the assets and a conclusion that their carry amount exceeded their recoverable amount.

Impairment of intangible assets

In YTD 2022, the Company recognized an impairment of intangible assets of $nil compared to $354,550 in the prior year period. The impairment charge in YTD 2021 consisted of customer relationships of $146,300, brands, trademarks and licenses of $208,250. The impairment charges resulted from management’s review of the recoverability of the assets and a conclusion that their carrying amount exceeded their recoverable amount.

Impairment of goodwill

In YTD 2022, the Company recognized an impairment of goodwill of $nil compared to $2,690,198 in the prior year period. The impairment in Q3 2021 consisted of $310,737 in goodwill generated in the acquisition of Kai Medical, $2,379,461 resulting from the acquisition of MediSure. The impairment charges were the result of management’s assessment that the carrying amount of goodwill allocated to the Diagnostics & Technology division exceeded its recoverable amount.

Financing expense

Financing expense was $700,542 in YTD 2022 compared to $nil in the prior year period. Financing expense was recognized on a relative fair value basis for the costs attributable to the warrants issued in private placements and classified as a liability and the derivative conversion feature associated with convertible debentures.

Other expenses (income), net

For the nine months ended September 30, 2022 and 2021, other expenses (income) were comprised of the following:

	YTD 2022			YTD 2021
	$			$
Accretion expense		357,216			18,761
Interest expense		293,892			101,355
Gain on termination of leases		-			(3,983	)
Other income, net		(354,304	)		(208,548	)
		296,804			(92,415	)

The Company had other expenses of $296,804 during YTD 2022 compared to other income of $92,415 during the prior year period. Other expenses in YTD 2022 were mainly comprised of interest and accretion, offset by lease allowance receivable of $156,233 from the head landlords in two of the Company’s TMC clinics and rental income of $68,989 from the sub-leases as well as gain from foreign exchange. Provision for credit losses related to the rental income was $23,386. Other income in YTD 2021 was primarily comprised of income from loan forgiveness and government grant, offset by interest and accretion expenses.

10

Empower Clinics Inc.

Management’s Discussion & Analysis

For the three and nine months ended September 30, 2022 and 2021

(Expressed in United States dollars, except where noted)

Year-to-date Cash Flows

	YTD 2022			YTD 2021
	$			$
Net cash used in operating activities from continuing operations		(3,714,258	)		(2,858,281	)
Net cash used in operating activities from discontinued operations		(7,482	)		(427,632	)
Net cash provided by (used in) investing activities from continuing operations		127,941			(2,406,182	)
Net cash provided by financing activities from continuing operations		3,119,673			3,016,360
Net cash used in financing activities from discontinued operations		-			(50,339	)
Effects of foreign exchange on cash		77,668			(3,163	)
Net change in cash		(396,458	)		(2,729,237	)

Review of the Company’s cash flows from continuing operations during YTD 2022 compared to YTD 2021:

Cash used in operating activities of continuing operations during YTD 2022 was $3,714,258 compared to $2,858,281 during the prior year period. Greater amount of cash used in operating activities was resulted from a significant increase in clinic operating expenses during the current year period compared to the prior year period.

Cash provided by investing activities of continuing operations during YTD 2022 was $127,941 compared to cash used of $2,406,182 during the prior year period. The increase in YTD 2022 was related to the proceeds from the sale of the Sun Valley.

Cash provided by financing activities of continuing operations in YTD 2022 was $3,119,673 compared to $3,016,360 in the prior year period. Cash from financing activities during YTD 2022 was primarily related to proceeds from private placements which were partly offset by the lease and loan payments. Cash from financing activities during YTD 2021 was due to the exercise of warrants which was offset by repayment of debt.

Summary of Quarterly Results

The following summarizes the quarterly results of the Company for the last eight most recently completed quarters:

In 000s, except per share numbers	Q3 2022			Q2 2022		Q1 2022			Q4 2021
	$			$		$			$
Total revenue		1,574			1,554		1,107			1,142
Net (loss) income from continuing operations		(457	)		2,166		(2,299	)		(4,684	)
Net (loss) income per share - basic and diluted		(0.00	)		0.01		(0.01	)		(0.01	)
Cash dividends declared		-			-		-			-
Total assets		3,450			4,350		6,028			5,037

In 000s, except per share numbers	Q3 2021			Q2 2021			Q1 2021			Q4 2020
	$			$			$			$
Total revenue		406			862			1,958			738
Net loss from continuing operations		(1,712	)		(412	)		(24,928	)		(15,289	)
Net loss per share - basic and diluted		(0.01	)		(0.00	)		(0.11	)		(0.06	)
Cash dividends declared		-			-			-			-
Total assets		7,986			10,771			11,139			9,230

The Company is expected to remain subject to many of the risks common to early-stage enterprises for the foreseeable future, including challenges related to laws, regulations, licensing, integrating and retaining qualified employees; making effective use of limited resources; achieving market acceptance of existing and future solutions; competing against companies with greater financial and technical resources; acquiring and retaining customers; and developing new solutions.

11

Empower Clinics Inc.

Management’s Discussion & Analysis

For the three and nine months ended September 30, 2022 and 2021

(Expressed in United States dollars, except where noted)

Non-GAAP Financial Measures

Earnings before interest, taxes, depreciation, and amortization (“EBITDA”) and Adjusted EBITDA are non-GAAP financial measures and accordingly, they are not earnings measures recognized by IFRS and do not carry standard prescribed significance. Moreover, the Company’s method for calculating Adjusted EBITDA may differ from that used by other companies using the same designation.

Accordingly, we caution readers that Adjusted EBITDA should not be substituted for determining net income (loss) as an indicator of operating results or as a substitute for cash flows from operating and investing activities. Management believes that, in addition to conventional measures prepared in accordance with IFRS, certain investors use this information to evaluate the Company’s performance and ability to generate cash flow. Accordingly, the presentation of these measures is to provide additional information and should not be considered in isolation or as a substitute for measures of performance prepared in accordance with IFRS.

The following table provides a reconciliation of Adjusted EBITDA to the Interim Financial Statements:

	Q3 2022			Q3 2021			YTD 2022			YTD 2021
	$			$			$			$
Net loss for continuing operations		(457,066	)		(1,711,659	)		(590,136	)		(27,052,131	)
Add (subtract):
Depreciation and amortization expense		55,115			162,103			163,458			416,329
Interest expense		101,951			55,105			293,892			101,355
Accretion expense		167,911			8,151			357,216			18,761
EBITDA (loss)		(132,089	)		(1,486,300	)		224,430			(26,515,686	)
Share-based payments		45,566			236,201			251,491			841,759
(Gain) loss on change in fair value of warrant liability		(354,582	)		(3,121,006	)		(3,115,803	)		19,721,807
Gain on change in fair value of conversion feature		(334,822	)		-			(1,105,876	)		-
Impairment of property and equipment		-			1,297,625			20,432			1,297,625
Impairment of intangible assets		-			354,550			-			354,550
Impairment of goodwill		-			2,690,198			-			2,690,198
Financing expense		-			-			700,542			-
Adjusted EBITDA loss		(775,927	)		(28,732	)		(3,024,784	)		(1,609,747	)

Events After the Reporting Period

The Company’s Financial Statements filed on SEDAR at www.SEDAR.com contain a complete discussion of subsequent events affecting the Company.

Liquidity and Capital Resources

Liquidity and going concern

Liquidity risk is the risk that the Company will encounter difficulties in meeting obligations associated with its financial liabilities and other contractual obligations. The Company’s strategy for managing liquidity is based on achieving positive cash flows from operations to internally fund operating and capital requirements.

Factors that may affect the Company’s liquidity are continuously monitored. These factors include the number of patient visits, average patient spend per visit, number of COVID-19 tests performed, operating costs, capital costs, income tax refunds, foreign currency fluctuations, seasonality, market immaturity and a highly fluid environment related to state and federal law passage and regulations.

12

Empower Clinics Inc.

Management’s Discussion & Analysis

For the three and nine months ended September 30, 2022 and 2021

(Expressed in United States dollars, except where noted)

In the event that the Company is adversely affected by any of these factors and, as a result, the operating cash flows are not sufficient to meet the Company’s working capital requirements there is no guarantee that the Company would be able to raise additional capital on acceptable terms to fund a potential cash shortfall. Consequently, the Company is subject to liquidity risk.

As at September 30, 2022, the Company had an accumulated deficit of $62,791,166 (December 31, 2021 - $62,334,945). The Company’s operations are mainly funded with equity and debt financing, which is dependent upon many external factors, and thus funds may be difficult to raise when required. Management continues to evaluate the need for additional financing and is of the opinion that additional financing will be available to continue its planned activities in the normal course. Nonetheless, there is no assurance that the Company will be able to raise sufficient funds in the future to complete its planned activities. The foregoing indicates the existence of a material uncertainty that may cast substantial doubt as to whether the Company would continue as a going concern and realize its assets and settle its liabilities and commitments in the normal course of business.

The Company’s Interim Financial Statements have been prepared on the basis of accounting principles applicable to a going concern, which assume the realization of assets and discharge of liabilities in the normal course of business. The Interim Financial Statements do not give effect to any adjustments that would be necessary should the Company not be able to continue as a going concern. Such adjustments could be material.

The Company will need to procure additional financing in order to fund its ongoing operation. The Company intends to obtain such financing through equity financing, and there can be no assurance that the Company can raise the required capital it needs to build and expand as expected, nor that the capital markets will fund the business of the Company. Without this additional financing, the Company may be unable to achieve positive cash flow and earnings as quickly as anticipated, these uncertainties cast a significant doubt about the Company’s ability to continue as a going concern.

As at September 30, 2022, the Company had a cash balance of $469,712, and current liabilities of $4,692,902. In comparison, as at December 31, 2021, the Company had a cash balance of $866,170, restricted cash of $1,238,366, and current liabilities of $7,703,093.

Contractual obligations

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

	Total		Within 1 year		2-5 years		Greater than 5 years
			$		$		$
Maturity analysis of liabilities
Accounts payables and accrued liabilities		3,576,581		3,576,581		-		-
Consideration payable(1)		180,803		180,803		-		-
Loans payable		1,467,368		221,824		867,145		378,399
Notes payable		180,596		180,596		-		-
Convertible notes payable		3,126,341		173,200		2,953,142		-
Lease payments		3,134,800		531,164		1,823,218		780,418
Total liabilities		11,666,489		4,864,168		5,643,505		1,158,817

⁽¹⁾  Consideration payable of $180,803 to the seller of MediSure

The Board of Directors of the Company has overall responsibility for the establishment and oversight of the Company’s risk management policies on an annual basis. The Company’s Board of Directors identifies and evaluates the Company’s financial risks and is charged with the responsibility of establishing controls and procedures to ensure financial risks are mitigated.

The Company’s objectives when managing capital are to pursue and complete the identification and evaluation of assets, properties, or businesses with a view to acquisition. The Company does not have any externally imposed capital requirements to which it is subject.

13

Empower Clinics Inc.

Management’s Discussion & Analysis

For the three and nine months ended September 30, 2022 and 2021

(Expressed in United States dollars, except where noted)

The Company manages the capital structure and adjusts it in light of changes in economic conditions and the risk characteristics of the underlying assets. To maintain or adjust the capital structure, the Company may attempt to issue new common shares or adjust the amount of cash.

The Company’s investment policy is to invest excess cash in investment instruments at high credit, quality financial institutions with terms to maturity selected with regards to the expected time of expenditures from continuing operations.

Off-Balance Sheet Arrangements

The Company has not entered into any material off-balance sheet arrangements such as guarantee contracts, contingent interests in assets transferred to unconsolidated entities, derivative financial obligations or arrangements with respect to any obligations under a variable interest equity arrangement.

Related Party Transactions

The Company’s related parties include key management personnel and any transactions with such parties for goods and/or services that are made on regular commercial terms. During Q3 2022 and Q3 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.

Key management compensation includes:

	Q3 2022			Q3 2021		YTD 2022		YTD 2021
	$			$		$		$
Salaries and benefits		171,288			75,565		629,725		504,839
Share-based payments		(4,509	)		-		33,471		346,375
Directors’ fees		11,000			7,500		33,000		20,000
		177,779			83,065		696,196		871,214

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.

During the nine months ended September 30, 2022, there were 475,000 options forfeited due to the resignation of the CFO. The Company recognized $57,189 in share-based payment related to the CFO and recovered $24,753 from unvested options upon the termination of employment.

As at September 30, 2022, $113,833 (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 September 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 the credit risk of the share subscription receivable as low as the Company has offsetting payables to the CEO and an ongoing service contract.

International Financial Reporting Standards

The Interim Financial Statements have been prepared in accordance with IFRS as issued by the IASB, effective as of September 30, 2022. The Company’s significant accounting policies are described in Note 3 to the Annual Financial Statements.

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Empower Clinics Inc.

Management’s Discussion & Analysis

For the three and nine months ended September 30, 2022 and 2021

(Expressed in United States dollars, except where noted)

Critical Accounting Policies and Estimates

The preparation of the Company’s Interim Financial Statements in conformity with IFRS requires management to make estimates based on assumptions about future events that affect the reported amounts of assets and liabilities and disclosures of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period.

The estimates and associated assumptions are based on historical experience and various other factors that are believed to be reasonable under the circumstances, the results of which form the basis of making the judgements about carrying values of assets and liabilities that are not readily apparent from other sources. Actual results could differ from those estimates.

The estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimates are recognized prospectively in the period in which the estimate is revised.

Management considers the policies described in Note 3 of the Annual Financial Statements to be the most critical in understanding the judgements that are involved in the preparation of the Company’s Interim Financial Statements and the uncertainties that could impact its results of operations, financial condition, and cash flows.

Changes in Accounting Standards

The accounting policies applied in the preparation of the Company’s Interim Financial Statements, are consistent with those applied and disclosed in Note 3 to the Company’s Annual Financial Statements.

Outstanding Share Data

The authorized capital of the Company consists of an unlimited number of common shares without par value. The Company had the following securities outstanding as at the date of this MD&A:

Type of Security	Number Outstanding
Common Shares		348,508,658
Stock Options		7,249,459
Warrants		30,927,500

Risks and Uncertainties

For a detailed listing of the risk factors faced by the Company, please refer to the Company’s Annual MD&A filed on SEDAR.

Financial Instruments and Other Instruments

The Company’s financial instruments consist of cash, accounts receivable, accounts payable and accrued liabilities, consideration payable, notes payable, loans payable, convertible debentures, and conversion features associated with convertible debentures. Cash, restricted cash, and conversion feature are classified as fair value through profit or loss and recorded at fair value. The remaining items are measured at amortized cost. The fair values of cash, restricted cash, accounts receivable, accounts payable and accrued liabilities are equal to their carrying values due to their short-term maturity. Unless otherwise noted, it is management’s opinion that the Company is not exposed to significant interest, currency or credit risks arising from these financial instruments. The fair value of arms-length financial instruments approximates their carrying value due to the relatively short term to maturity.

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Empower Clinics Inc.

Management’s Discussion & Analysis

For the three and nine months ended September 30, 2022 and 2021

(Expressed in United States dollars, except where noted)

Cautionary Note Regarding Forward-Looking Statements

Certain statements in this MD&A, other than statements of historical fact, constitute forward-looking statements and forward-looking information within the meaning of applicable securities laws (collectively “forward-looking statements”). Forward-looking statements are based upon Empower’s and its management’s current internal expectations, estimates, projections, assumptions and beliefs. In some cases, words such as “plan”, “expect”, “intend”, “believe”, “anticipate”, “estimate”, “may”, “will”, “potential”, “proposed” and other similar words, or statements that certain events or conditions “may” or “will” occur, are intended to identify forward-looking statements. Forward-looking statements are provided for the purposes of assisting the reader in understanding management’s current expectations and plans relating to the future based on current assumptions, and readers are cautioned that such statements may not be appropriate for other purposes.

The forward-looking statements in this MD&A include statements with respect to: (i) the Company’s future business and development prospects and strategies, including the ongoing potential impact, both positive and negative, of the COVID-19 pandemic on the Company’s operations; (ii) the expected number, and timing of the opening of, new medical clinics; (iii) the Company’s expectations regarding revenues, expenses and anticipated cash needs; (iv) the expected methods to be used by the Company to distribute and sell its medical devices, and offer its vaccination and laboratory testing services; (v) the expected growth in the number of purchasers of the Company’s medical devices, and users of the Company’s vaccination and laboratory testing services; (vi) the Company’s proposed operations in Canada and the United States; (vii) laws and regulations applicable to the Company, and the impact thereof; (viii) competitive conditions in the medical and health and wellness sectors; (ix) the grant, renewal and impact of any licenses required to conduct the Company’s activities; and (x) the expected benefits to the Company of the Company’s recent and proposed acquisitions.

The Company has made certain assumptions with respect to the forward-looking statements regarding, among other things: (i) the Company’s ability to generate sufficient cash flow from operations and obtain financing, if needed, on acceptable terms or at all; (ii) general economic, financial market, regulatory and political conditions in which the Company operates; (iii) the ability of the Company to ship its products and maintain supply chain stability; (iv) consumer interest in the Company’s products and services; (v) anticipated and unanticipated costs of providing services; (v) government regulation of the Company’s activities; (vi) the timely receipt and maintenance of any required regulatory approvals; (vii) the Company’s ability to obtain qualified staff, equipment and services in a timely and cost efficient manner; (viii) the Company’s ability to conduct operations in a safe, efficient and effective manner; and (x) the Company’s expansion plans and timeframe for completion of such plans.

Forward-looking statements are not guarantees of future performance and involve known and unknown risks, uncertainties and other factors that may cause actual results or events to differ materially from those anticipated in the forward-looking statements. Undue reliance should not be placed on forward-looking statements, as there can be no assurance that the plans, intentions or expectations upon which they are based will occur. The actual results or performance of the Company could differ materially from those anticipated in the forward-looking statements as a result of the risk factors set forth below and under the heading “Risk and Uncertainties”, including risks related to: the impact of regulatory oversight and changes on the Company’s business; the Company’s ability to maintain supply chain stability; the duration and severity of impact of the COVID-19 pandemic; the Company’s ability to successfully negotiate third party agreements; continued or further volatility in and/or degradation of general economic, market, industry or business conditions related to COVID-19 or otherwise; changes in applicable legislation and regulatory requirements; product liability; recalls; uninsured and uninsurable events; reliance on third party transportation; cyber security and privacy; future levels of revenues; consumer demand for the Company’s products; the Company’s ability to manage disruptions in the financial markets or obtain credit, if needed; future levels of capital; expected expenditures; the success or timing of completion of ongoing or anticipated capital projects; the adequacy of the Company’s capital resources and liquidity, including availability of sufficient cash flow to execute the Company’s business plan (either within the expected timeframe or at all); potential actions of third parties; and other factors beyond the Company’s control.

Readers are cautioned that these factors are difficult to predict and that the assumptions used in developing the forward-looking statements may prove to be incorrect. Readers are also cautioned that the list of risk factors contained in this MD&A is not exhaustive. Accordingly, readers are cautioned that the Company’s actual results may vary from the forward-looking statements, and the variations may be material.

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Empower Clinics Inc.

Management’s Discussion & Analysis

For the three and nine months ended September 30, 2022 and 2021

(Expressed in United States dollars, except where noted)

Although the Company believes that the expectations reflected in the forward‐looking statements are reasonable, it can give no assurance that such expectations will prove to be correct, and the forward‐looking statements are expressly qualified in their entirety by this cautionary statement. The purpose of the forward‐looking statements is to provide the reader with a description of management’s expectations, and the forward‐looking statements may not be appropriate for any other purpose. The forward-looking statements are made as at the date of this MDA& and the Company undertakes no obligation to update or revise any of the forward‐looking statements, whether as a result of new information, future events or otherwise, except as required by applicable Canadian securities laws.

This MD&A may contain market and industry data and forecasts obtained from third party sources, industry publications and publicly available information. Third party sources generally state that their information has been obtained from sources believed to be reliable, but there can be no assurance as to the accuracy or completeness of such information. Although management believes it to be reliable, the Company has not independently verified any of the data from third party sources referred to in this MD&A, or analyzed or verified the underlying studies or surveys relied upon or referred to by such sources.

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EX-99.3

 EXHIBIT 99.3

 

EX-99.4

EXHIBIT 99.4

 

EX-99.5

EXHIBIT 99.5

Empower Clinics Reports Q3 2022 Results

288% year over year increase in revenue in Q3 2022

VANCOUVER, B.C.: November 28, 2022 – EMPOWER CLINICS INC (CSE:CBDT)(Frankfurt:8EC)(OTCQB:EPWCF) (“Empower” or the “Company”) an integrated healthcare company - serving patients through medical centers, telemedicine platforms, a medical device company, and a high complexity medical diagnostics laboratory – announced today it has filed its unaudited condensed interim consolidated financial statements and related Management’s Discussion and Analysis for the three and nine months ended September 30, 2022, both of which are available at www.SEDAR.com. All financial information in this press release is reported in United States dollars, unless otherwise indicated.

We are pleased to deliver substantial revenue growth, with revenues almost tripling this quarter on a year over year basis. This is the second consecutive quarter that we’ve maintained strong revenue growth when compared to last year”, said Steven McAuley, Chairman and CEO of Empower Clinics. “We realized strong returns on our investment to launch fully certified COVID-19 testing solutions and centers in the Vancouver waterfront area. MediSure Canada continues to experience healthy sales growth across its entire suite of medical devices and at-home testing solutions, including the immediate adoption of products launched just this year. MediSure Labs now has new leadership with a proven track record to help realize its revenue potential. The Medi-Collective is successfully recruiting doctors and adding specialty services like cardiology and dermatology. Recognizing macro-economic challenges, we will operate as efficiently as possible and looking forward to 2023, we will focus our growth efforts on U.S. healthcare opportunities, in large markets and sectors that we are already invested in.”

Q3 2022 Highlights

· Total revenues from continuing operations of $1,573,809 for Q3 2022 compared to revenues of $405,707 for Q3 2021, representing a 288% increase year over year. The increase in revenue is primarily attributed to the launch of Empower Clinic’s COVID-19 testing clinics for cruise ship passengers and increased sales from MediSure.

· Gross margin from continuing operations was 59% for Q3 2022, compared to 95% in Q3 2021, representing 37% decrease.

· Net loss from continuing operations was $457,066 or $0.00 per share compared to a net loss from continuing operations of $1,711,659 or $0.01 per share for Q3 2021. The net loss for current period was primarily driven by an increase in operating expenses related to Empower Clinic’s COVID-19 testing site and ongoing operations in Medi-Collective clinics.

· Cash as at September 30, 2022 of $469,712, compared to cash of $866,170 at December 31, 2021.

· Cash used in operating activities from continuing operations was $94,075 for Q3 2022, compared to $1,247,009 for Q3 2021.

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Financial Summary

$, except where noted	Three months ended September 30,						Nine months ended September 30,
	2022			2021			2022			2021
Total revenues		1,573,809			405,707			4,234,739			3,226,335
Direct clinic expenses		(642,187	)		(18,377	)		(2,333,834	)		(1,592,338	)
Loss from operations		(906,315	)		(601,979	)		(3,759,444	)		(3,080,366	)
Net loss from continuing operations		(457,066	)		(1,711,659	)		(590,136	)		(27,052,131	)
Adjusted EBITDA loss		(775,927	)		(28,732	)		(3,024,784	)		(1,609,747	)
Net loss per share, continuing operations, basic and diluted		(0.00	)		(0.01	)		(0.00	)		(0.08	)

Financial Performance

As part of total revenues, revenues from the Health & Wellness segment for Q3 2022 were $284,001 compared to Q3 2021 revenues of $244,752. This increase over the prior year period is attributable to higher revenues from Medi-Collective’s clinics.

Diagnostics & Technology revenue includes the sale of MediSure products and COVID-19 testing conducted by Kai Medical Laboratory and Empower Clinics. Diagnostics & Technology revenue for Q3 2022 were $1,289,808 with 58% attributable to COVID-19 testing, compared to Q3 2021 revenues of $160,955. This increase over the prior year period is attributable to the launch of COVID-19 testing solutions for cruise travel passengers in Vancouver, Canada.

Direct expenses excluding depreciation and amortization for Q3 2022 were $642,187 compared to Q3 2021 direct clinic expenses of $18,377. The increase in direct expense was due to the increased direct personnel costs related to the launch of COVID-19 testing in Vancouver, Canada.

Loss from operations for Q3 2022 was $906,315 compared to Q3 2021 of $601,979. This increase in loss from prior year period is attributed to additional expenses related to insurance, travel and recruitment costs within clinic operating expenses.

Net loss from continuing operations for Q3 2022 was $457,066, compared to net loss in Q3 2021 of $1,711,659. In Q3 2021, the Company recognized an aggregate of $4,342,373 in impairment charges, while no such impairment was recognized in Q3 2022. This was offset by a gain on change in fair value of the warrant liability of $3,131,006 in Q3 2021 compared to a lower gain in Q3 2022 of $354,582 and the addition of a gain on change in fair value of a conversion feature associated with convertible debentures issued by the Company.

Adjusted EBITDA is a non-GAAP financial measure that is calculated as net loss from continuing operations before depreciation and amortization, interest, accretion, share-based compensation, and changes in the fair value of derivative liabilities. Adjusted EBITDA loss in Q3 2022 was $775,927 compared to $28,732 in Q3 2021. Adjusted EBITDA is a metric used by management to monitor the Company’s revenues compared to its cash operating costs in an effort to trend toward improved profitability.

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During Q3 2022, the Company used $94,075 of cash in the operating activities from continuing operations. The Company invested cash of $3,103 for the purchase of furniture and equipment and used $236,098 of cash in financing activities for lease payments and repayments of loans and notes payable.

Please refer to the Company’s condensed interim consolidated financial statements, related notes and accompanying Management Discussion and Analysis for a full review of the operations.

About Empower

Empower is an integrated healthcare company that provides body and mind wellness for patients through its clinics, with digital and telemedicine care, and world-class medical diagnostics laboratories. Supported by an experienced leadership team, Empower is aggressively growing its clinical and digital presence across North America. Our Health & Wellness and Diagnostics & Technology business units are positioned to positively impact the integrated health of our patients, while simultaneously providing long term value for our shareholders.

ON BEHALF OF THE BOARD OF DIRECTORS:

Steven McAuley

Chief Executive Officer

CONTACTS:

Investors	Tamara Mason	Steven McAuley
	Business Development & Communications	CEO
	1-855-855-9058	1-855-855-9058
	t.mason@empowerclinics.com	s.mcauley@empowerclinics.com

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DISCLAIMER FOR FORWARD-LOOKING STATEMENTS

This news release contains certain “forward-looking statements” or “forward-looking information” (collectively “forward looking statements”) within the meaning of applicable Canadian securities laws. Statements other than statements of historical fact are forward-looking statements and are based on expectations, estimates and projections as at the date of this news release, and include statements regarding the Company’s ability to positively impact the integrated health of its patients while simultaneously providing long term value for shareholders. Forward-looking statements can frequently be identified by words such as “plans”, “continues”, “expects”, “projects”, “intends”, “believes”, “anticipates”, “estimates”, “may”, “will”, “potential”, “proposed” and other similar words, or information that certain events or conditions “may” or “will” occur. Such statements are only projections, are based on assumptions known to management at this time, and are subject to risks and uncertainties that may cause actual results, performance or developments to differ materially from those contained in the forward-looking statements, including: that the Company’s products may not work as expected; that the Company may not be able to maintain or expand its current COVID-19 testing; that legislative changes may have an adverse effect on the Company’s business and product development; that the Company may not be able to obtain adequate financing to pursue its business plan; that general business, economic, competitive, political and social uncertainties; failure to obtain any necessary approvals in connection with any proposed transactions; and other factors beyond the Company’s control. No assurance can be given that any of the events anticipated by the forward-looking statements will occur or, if they do occur, what benefits the Company will obtain from them. Readers are cautioned not to place undue reliance on the forward-looking statements in this release, which are qualified in their entirety by these cautionary statements. The Company is under no obligation, and expressly disclaims any intention or obligation, to update or revise any forward-looking statements in this release, whether as a result of new information, future events or otherwise, except as expressly required by applicable laws.

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