Mr. Andrew Cheung reports

01 COMMUNIQUE PROVIDES UPDATE ON BUSINESS DEVELOPMENTS AND THIRD QUARTER FISCAL 2023 RESULTS

01 Communique Laboratory Inc. has released its results for the third quarter of fiscal 2023, which ended July 31, 2023.

Andrew Cheung, chief executive officer of the company, commented: "Global recognition of threat from quantum computers has never been higher. Following through with their recommendation in July, 2022, the National Institute of Standards and Technologies (NIST) published three standards of postquantum cryptography (PQC) algorithms on Aug. 24 last month (FIPS 203, FIPS 204 and FIPS 205). Lockstep with NIST's progress, these standards are already part of our IronCAP tool kits. Being the forerunner in building practical PQC applications such as quantum-safe e-mail security, quantum-safe blockchain, quantum-safe remote access etc., I am confident that IronCAP will add significant value to help our partners to provide enhanced security against bad actors using quantum computers."

Mr. Cheung continued: "As announced during our last quarterly results, with the major portion of our development efforts having been completed we expect a reduction in our operating expenses and switching focus on integrating applications and features enhancements for our partners. This is clearly reflected in our Q3 results with a new partner signing up and a significant reduction on our quarterly loss. We expect this trend to continue in upcoming quarters."

Operational highlights:

• As announced on July 10, 2023, 01 entered into a partnership with Keyfactor, the identity-first security solution for modern enterprises. 01's partnership fosters the development, in conjunction with joint marketing, of quantum-safe X.509 certificates for the Enterprise Certification Authority solution (EJBCA) as well as cybersecurity solutions for global businesses, organizations and governments to help them achieve cyber resilience.
• On June 6, 01's quantum-safe blockchain end points protection patent was officially issued in the United States. The U.S. patent number is 11,669,833 and can be found on the U.S. Patent and Trademark Office site.
• 01 has received a notice of allowance for its Japanese patent application No. 2020-534978 about the IronCAP Modern McEliece code-based postquantum cryptography technology. Official patent issuance is in the process.
• Earlier in fiscal 2023, 01 completed integrating IronCAP into one of its partner's military-grade hardware security modules (HSM) making postquantum cryptography functionality seamless. Joint marketing activities have been in process since April, 2023, beginning with 01's participation at the RSA Conference held in San Francisco as part of its partner's PQC Palooza event where together the companies promoted postquantum cryptography to enterprise customers. Throughout the third quarter other activities have taken place which have been very encouraging with expectations of more partnerships on the horizon.
• As announced on June 14, 01 released IronCAP X v2.0, which it believes to be the world's first commercially available quantum-safe end-to-end e-mail security product for enterprises of all sizes.
• Global partners have been signed and integration efforts have begun with the goal to capitalize on the quantum-readiness transformation market embraced by enterprises of all sizes internationally.

Financial highlights:

• Revenue for the third quarter was $106,197 (2022 -- $236,002), a $129,805 decrease. Royalty revenue remained fairly steady quarter-over-quarter. Royalties are received from the company's remote access business which is marketed on a subscription fee basis with recurring royalties. The overall decrease in revenue is a result of one-time development fees recognized in 2022 for the completed portion of a quantum-safe blockchain project.
• The loss for the third quarter was $119,652 (2022 -- $190,242). The adjusted loss, excluding stock-based compensation and depreciation, which are non-cash expenses, for the second quarter was $73,998 (2022 -- $135,374), a reduction of $61,376. The company completed the quarter with $370,360 of cash and a guaranteed investment certificate.
• Cash operating expenses, which exclude stock-based compensation and depreciation, for the third quarter were $173,395 (2022 -- $361,036), a reduction of $187,036 primarily the result of:
  • Completion of a number of research and development projects, which included enhancements to the company's remote access product, integration of IronCAP into the company's partner's HSM and the integration of IronCAP into existing public blockchains, has contributed to the reduction in development expenses for fiscal 2023;
  • Contributing factors to the lower selling, general and administrative expenses included costs incurred in fiscal 2022 for non-recurring legal expenses pertaining to the prosecution of patent applications, including the patent received in fiscal 2023 as well as investor relations campaigns that were completed in fiscal 2022;
  • As a result, the company has been able to reduce cash operating expenses with a goal to keep them in line with the continuing recurring revenue.

Grant of stock options

The company granted stock options pursuant to its stock option plan to directors and executives of the company to purchase up to an aggregate of 1.24 million common shares in the company. The options were granted on Sept. 20, 2023, and are exercisable at a price of 12 cents per share for a period of four years from the date of grant. The options vest over a period of two years, with 25 per cent vesting on each of March 20, 2024, Sept. 20, 2024, March 20, 2025, and Sept. 20, 2025. The options, and the shares issuable upon exercise, will be subject to applicable securities and regulatory laws. After granting these stock options, there will be a total of 6,365,000 options outstanding under the stock option plan.

Conference call reminder and information

01 Communique will host a live teleconference allowing for questions and answers later today at 10 a.m. EST (Sept. 21, 2023) to discuss the company's results as well as providing an update on the business prospects for IronCAP and IronCAP X.

Dial-in

Within Canada: 647-374-4685 or 647-558-0588

Within the United States: 646-558-8656 or 669-900-9128

Webinar ID when prompted is 832 7263 0612.

Passcode: 286832739

About 01 Communique Laboratory Inc.

Established in 1992, 01 Communique has always been at the forefront of technology. The company's cybersecurity business unit focuses on postquantum cybersecurity with the development of its IronCAP product line. IronCAP's technologies are patent protected in the U.S. by its patents No. 11,271,715 and No. 11,669,833. The company's remote access business unit provides its customers with a suite of secure remote access services and products under its I'm InTouch and I'm OnCall product offerings. The remote access offerings are protected in the U.S. by its patents No. 6,928,479/No. 6,938,076/No. 8,234,701; in Canada by its patents No. 2,309,398/No. 2,524,039; and in Japan by its patent No. 4,875,094.

We seek Safe Harbor.