CVR Medical Corp. Condensed Interim Consolidated Financial Statements Six Months Ended June 30, 2018 (Expressed in Canadian Dollars) (Unaudited)

Transcription

1 Condensed Interim Consolidated Financial Statements Six Months Ended 2018 (Expressed in Canadian Dollars)

2 Condensed Interim Consolidated Statements of Financial Position (Expressed in Canadian Dollars) 2018 (unaudited) December 31, 2017 (audited) $ $ Assets Current Cash 80, ,764 Prepaid expenses 85,445 72,974 Taxes and other receivables 54,113 39,525 Total Current Assets 219, ,263 Equipment 1,126 1,281 Intangible assets (Note 7) 1,470,000 1,470,000 Total Assets 1,690,903 2,166,544 Liabilities and Shareholders Equity Liabilities Current Accounts payable 131,155 16,424 Accrued liabilities 6,575 20,000 Due to related parties (Note 6) 100,770 99,867 Total Liabilities 238, ,291 Shareholders Equity Share capital (Note 9) 24,923,083 21,515,696 Option reserve (Note 10) 2,188,735 2,176,681 Deficit (25,659,415) (21,662,124) Total Shareholders Equity 1,452,403 2,030,253 Total Liabilities and Shareholders Equity 1,690,903 2,166,544 Going Concern (Note 2) Events After the Reporting Period (Note 11) Approved on behalf of the Board: Peter Bakema Director Wayne Hellman Director The accompanying notes are an integral part of these condensed interim consolidated financial statements.

3 Condensed Interim Consolidated Statements of Comprehensive Loss Three Months Ended Six Months Ended $ $ $ $ Expenses Amortization Consulting fees (Note 6) 294, , , ,396 Interest expense and bank charges Foreign exchange loss 6,116 12,384 11,290 23,216 Office and general 143, , , ,456 Professional fees 82,311 14, ,560 36,320 Rent 1,400 2,730 5,600 8,630 Share-based compensation 8, ,821 Travel and entertainment 46,952 15,470 76,875 59,706 Transfer agent and filing fees 24,433 31,717 50,223 63,228 Research and development costs (Notes 6 and 8) 1,163, ,774 2,066,793 1,664,392 Loss before other income (1,763,023) (1,205,576) (3,058,521) (3,309,669) Other income (expense) Interest income 3,618 3,618 Write-off of advance to CVR Global, Inc. (Note 8) (478,143) (1,008,269) (938,770) (2,106,597) Net and comprehensive loss (2,241,166) (2,210,227) (3,997,291) (5,412,648) Loss per share basic and diluted (0.03) (0.04) (0.06) (0.10) Weighted average number of shares outstanding 71,741,681 59,354,124 68,758,070 52,476,609 The accompanying notes are an integral part of these condensed interim consolidated financial statements.

4 Condensed Interim Consolidated Statement of Changes in Equity Common Shares Number Amount Option Reserve Deficit Total $ $ $ $ Balance, December 31, ,549,544 12,401,308 2,109,894 (13,168,168) 1,343,034 Units issued pursuant to private placements 16,174,626 6,835,249 6,835,249 Share issuance costs (604,002) 227,132 (376,870) Exercise of stock options 1,225, ,058 (239,808) 257,250 Exercise of warrants 2,320, ,453 (448) 928,005 Shares issued for services 243,850 97,540 97,540 Share-based compensation 229, ,821 Net and comprehensive loss (5,412,648) (5,412,648) Balance, ,513,033 20,155,606 2,326,591 (18,580,816) 3,901,381 Balance, December 31, ,938,033 21,515,696 2,176,681 (21,662,124) 2,030,253 Units issued pursuant to private placements 6,113,613 2,445,445 2,445,445 Share issuance costs (150,260) 12,054 (138,206) Exercise of warrants 2,780,505 1,112,202 1,112,202 Net and comprehensive loss (3,997,291) (3,997,291) Balance, ,832,151 24,923,083 2,188,735 (25,659,415) 1,452,403 The accompanying notes are an integral part of these condensed interim consolidated financial statements.

5 Cash (used in) provided by: Operating activities Net loss Condensed Interim Consolidated Statements of Cash Flows Six Months Ended $ $ (3,997,291) (5,412,648) Items not involving cash: Amortization Share-based compensation 229,821 Shares issued for services 97,540 Write-off of advance to CVR Global, Inc. 938,770 2,106,597 Net changes in non-cash working capital items: Taxes and other receivables (14,588) (11,062) Prepaid expenses (12,471) (152,774) Accounts payable 114,731 (72,591) Accrued liabilities (13,425) (31,404) Due to related parties 903 (4,773) Net cash used in operating activities (2,983,216) (3,251,178) Cash flows from financing activities Shares issued for exercise of stock options 257,250 Shares issued for exercise of warrants 1,089, ,005 Shares issued for cash, net of issuance costs 2,330,050 6,458,379 Net cash provided by financing activities 3,419,441 7,643,634 Cash flows from investing activities Advance to CVR Global, Inc (938,770) (2,106,597) Purchase of equipment (1,553) Net cash used in investing activities (938,770) (2,108,150) (Decrease) Increase in cash (502,545) 2,284,306 Cash, beginning of period 582, ,232 Cash, ending of period 80,219 2,415,538 Non-cash investing and financing activities: Fair value of brokers warrants for share issuance costs 12, ,132 The accompanying notes are an integral part of these condensed interim consolidated financial statements.

6 1. Corporate Information (formerly Big Bar Resources Corporation) (the Company ) was incorporated on December 10, 1980 under the British Columbia Business Corporations Act and is engaged in an equal parts joint operation with CVR Global, Inc. ( CVR Global ). The joint operation operates in the medical industry focused on the commercialization of proprietary subsonic, infrasonic, and low frequency sound wave analysis technology and has patents to a diagnostic device designed to detect and measure carotid arterial stenosis. The Company s common shares trade on the TSX Venture Exchange ( Exchange ). The Company s registered office is West Esplanade, North Vancouver, British Columbia, V7M 3J3. 2. Basis of Presentation a) Statement of compliance These condensed interim consolidated financial statements have been prepared in accordance with International Financial Reporting Standards ( IFRS ) as issued by the International Accounting Standards Board ( IASB ) applicable to the preparation of interim financial statements, including IAS 34, Interim Financial Reporting. The condensed interim consolidated financial statements should be read in conjunction with the annual financial statements for the year ended December 31, 2017, which have been prepared in accordance with IFRS as issued by IASB. The Company uses the same accounting policies and methods of computation as in the annual financial statements for the year ended December 31, The consolidated financial statements were authorized for issue by the Board of Directors on August 27, b) Basis of presentation These unaudited condensed interim consolidated financial statements include the accounts of the Company and its wholly owned subsidiary, CVRM, Inc., a company incorporated on February 9, 2018, in the State of Delaware. All inter-company balances and transactions have been eliminated on consolidation. The consolidated financial statements of the Company have been prepared on an accrual basis and are based on historical costs, modified where applicable. The consolidated financial statements are presented in Canadian dollars, which is also the Company s functional currency. c) Going concern of operations The condensed interim consolidated financial statements have been prepared on a going concern basis which assumes that the Company will be able to realize its assets and discharge its liabilities in the normal course of business. The Company has incurred significant net losses and negative cash flows from operations. The Company incurred a net loss of $3,997,291 during the six months ended 2018, and, as of that date the Company s deficit was $25,659,415. The continuation of the Company as a going concern is dependent on its ability to obtain additional equity capital to finance existing operations and attaining future profitable operations. These consolidated financial statements do not include any adjustments relating to the recoverability and classification of recorded asset amounts, the amount and classification of liabilities that would be necessary should the Company be unable to continue as a going concern. d) Critical judgments in applying accounting policies The preparation of these consolidated financial statements requires management to make certain estimates, judgments and assumptions that affect the reported amounts of assets and liabilities at the date of the financial statements and reported amounts of expenses during the period. Actual results could differ from these estimates. These consolidated financial statements include estimates which, by their nature, are uncertain. The impacts of such estimates are pervasive throughout the consolidated financial statements, and may require accounting adjustments based on future occurrences. Revisions to accounting estimates are recognized in the period in which the estimate is revised and future periods if the revision affects both current and future periods. These estimates are based on historical experience, current and future economic conditions and other factors, including expectations of future events that are believed to be reasonable under the circumstances. Assumptions about the future and other sources of estimation uncertainty that management has made at the reporting date that could result in a material adjustment to the carrying amounts of assets and liabilities, in the event that actual results differ from assumptions made, relate to, but are not limited to, the following:

7 2. Basis of Presentation (continued) d) Critical judgments in applying accounting policies (continued) i) Income Taxes Significant judgment is required in determining the provision for income taxes. There are many transactions and calculations undertaken during the ordinary course of business for which the ultimate tax determination is uncertain. The Company recognizes liabilities and contingencies for anticipated tax audit issues based on the Company s current understanding of the tax law. For matters where it is probable that an adjustment will be made, the Company records its best estimate of the tax liability including the related interest and penalties in the current tax provision. ii) Investment in Joint Operation The application of the Company s accounting policy for the investment in joint venture requires judgement in determining whether it is likely that the future economic benefits will flow to the Company, which may be based on assumptions about future events or circumstances. Estimates and assumptions made may change if new information becomes available. iii) Share-Based Payment Transactions The Company measures the cost of equity-settled transactions with employees by reference to the fair value of the equity instruments at the date at which they are granted. Estimating fair value for sharebased payment transactions requires determining the most appropriate valuation model, which is dependent on the terms and conditions of the grant. The estimate also requires determining the most appropriate inputs to the valuation model including the expected life of the stock option, volatility and dividend yield and making assumptions about them. The assumptions and models used for estimating fair value for share-based payment transactions are disclosed in Note Recent Accounting Pronouncements Certain pronouncements were issued by the IASB or the IFRS Interpretations Committee that are mandatory for annual periods beginning after January 1, 2019, or later periods. The following new IFRSs that have not been early adopted in these consolidated financial statements will not have a material effect on the Company s future results and financial position: i) IFRS 16, Leases (New; to replace IAS 17, IFRIC 4, SIC-15 and SIC-27). Other accounting standards or amendments to existing accounting standards that have been issued but have future effective dates are either not applicable or are not expected to have a significant impact on the Company s consolidated financial statements. 4. Financial Risk Factors The Company s risk exposures and the impact on the Company s financial instruments are summarized below: Liquidity Risk Liquidity risk is the risk that the Company will not be able to meet its financial obligations as they become due. The Company s approach to managing liquidity risk is to ensure that it will have sufficient liquidity to meet liabilities when due. As at 2018, the Company has a cash balance of $80,219 (December 31, $582,764) and current liabilities of $238,500 (December 31, $136,291). The Company s accounts payable and accrued liabilities have contractual maturities of less than 60 days and are subject to normal trade terms. The ability of the Company to continue to commercialize diagnostic devices and maintain its working capital is dependent on its ability to secure additional equity or debt financing. The liquidity risk is assessed as high. Credit Risk Credit risk is the risk that one party to a financial instrument will fail to discharge an obligation and cause the other party to incur a financial loss. The Company s credit risk is primarily attributable to cash. Cash consists of bank accounts held with a Canadian Chartered Bank from which management believes the risk of loss is remote. The Company s maximum exposure to credit risk is equal to the carrying value of the financial assets.

8 4. Financial Risk Factors (continued) Interest Rate Risk Interest rate risk is the risk that the fair value of future cash flows of a financial instrument will fluctuate because of changes in market interest rates. The Company has cash balances and no interest-bearing debt. The Company s current policy is to invest excess cash in investment-grade short-term deposit certificates issued by its banking institution. The Company periodically monitors the investments it makes and is satisfied with the credit rating of its banks. The Company is not exposed to any significant interest rate risk. Foreign Exchange Risk Foreign exchange risk is the risk that the Company will be subject to foreign currency fluctuations in satisfying obligations related to foreign activities. Advances from related parties and expenditures incurred with CVR Global may be denominated in U.S. dollars. Foreign exchange risk arises from purchase transactions as well as financial assets and liabilities denominated in these foreign currencies. The Company does not use derivative instruments to hedge exposure to foreign exchange rate risk. However, management of the Company believes there is no significant exposure to foreign currency fluctuations. Classification of financial instruments Financial assets included in the statement of financial position are as follows: December 31, Fair value through profit and loss: $ $ Cash 80, ,764 Financial liabilities included in the statement of financial position are as follows: March 31, December 31, Non-derivative financial liabilities $ $ Accounts payable 131,155 16,424 Due to related parties 100,770 99, Capital Management 231, ,291 The Company considers its cash, common shares, stock options, and warrants as capital. The Company s objectives when managing capital are to safeguard the Company s ability to continue as a going concern in order to pursue the commercialization of diagnostic devices and to maintain a flexible capital structure which optimizes the costs of capital at an acceptable risk level. The Company manages the capital structure and makes adjustments to 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 shares, issue new debt, acquire or dispose of assets. 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. In order to maximize ongoing development efforts, the Company does not pay out dividends. The Company s investment policy is to invest its short-term excess cash in highly liquid short-term interest-bearing investments with maturities of one year or less from the original date of acquisition, selected with regards to the expected timing of expenditures from continuing operations. The Company is not subject to externally imposed capital requirements and there were no changes in its approach to capital management during the six months ended 2018.

9 6. Related Party Transactions i) During the six months ended 2018, the Company incurred $263,936 (US$206,394) ( $203,049 (US$152,190)) in research and development costs related to key management compensation paid to the Chief Executive Officer ( CEO ) of the Company, Chief Operating Officer ( COO ) of the Company, a director of the Company and a company controlled by the CEO of the Company and a director of the Company. The key management compensation consists of 50% of the fees to each of the parties above, with the remaining 50% being incurred by CVR Global Inc. and included in the write-off of advance to CVR Global, Inc. ii) During the six months ended 2018, the Company incurred $29,000 ( $39,000) in consulting fees and $7,506 (US$5,875) (2017 $nil) in research and development costs related to key management compensation to the former CFO of the Company. As at 2018, the Company owed $3,150 (December 31, $7,180) to the former CFO of the Company. The amount is unsecured, non-interest bearing and due on demand. iii) During the six months ended 2018, the Company incurred $59,515 (US$44,917) ( $nil) in consulting fees to the CFO of the Company. As at 2018, the Company owed $61,578 (US$46,527) (December 31, $nil) to the CFO of the Company. The amount is unsecured, non-interest bearing and due on demand. iv) During the six months ended 2018, the Company incurred $nil ( $21,000) in consulting fees to a company controlled by a former director of the Company. As at 2018, the Company owed $nil (December 31, $16,000) to the former director of the Company. The amount is unsecured, non-interest bearing and due on demand. v) During the six months ended 2018, the Company incurred $nil ( $12,500) in consulting fees and $nil ( $91,905) in share-based compensation to a company controlled by a former director of the Company. As at 2018, the Company owed $7,500 (December 31, $7,500) to the former director of the Company. The amount is unsecured, non-interest bearing and due on demand. vi) During the six months ended 2018, the Company incurred a total of $36,000 ( $7,500) in consulting fees and $15,919 (US$12,083) ( $nil) in director fees to three directors of the Company. As at 2018, the Company owed a total of $28,542 (December 31, $nil) to the three directors of the Company. The amounts are unsecured, non-interest bearing and due on demand. vii) As at 2018, the Company owed a shareholder of the Company $nil (December 31, $23,213 (US$18,464)) and $nil (December 31, $7,000) for advances. viii) As at 2018, the Company owed a shareholder of the Company $nil (December 31, $38,974 (US$31,000)) for advances. 7. Asset Purchase Agreement Effective September 16, 2016, the Company acquired patents (the Patents ) underlying a diagnostic device developed by CVR Global Inc. ( CVR Global ) for the detection and measurement of carotid arterial stenosis (the Device ) in consideration for 7,000,000 common shares in the capital stock of the Company (the Transaction ). Upon closing of the Transaction, CVR Global and the Company formed a joint operation pursuant to which the Company will contribute the Patents and working capital, and CVR Global will contribute certain additional patents and intellectual property, as well as management know-how and marketing expertise, for an initial equal equity interest by both parties in the joint operation. During the six months ended 2018, the Company recorded research and development costs of $1,501,565 ( $1,664,392) from the joint operation. The Patents and the Device are not in use and no amortization was recognized during the six months ended On June 1, 2018, the Company and CVR Global entered into a Restructuring Agreement, whereby the Company will acquire CVR Global s 50% interest in the joint operation and the joint operation will be terminated in favor of commercialization of the CSS Device in the Company s wholly-owned subsidiary, CVRM, Inc. At 2018, the transaction has not yet closed (Note 11).

10 8. Advance to CVR Global During the year ended December 31, 2017, the Company advanced $5,757,173 to CVR Global, to be used for the commercialization of the Device, separate from the joint operation as described in Note 7. During the six months ended 2018, the Company advanced an additional $3,005,563 to CVR Global. During the six months ended 2018, a total of $52,444 (US$41,029) ( $636,795 (US$477,250)) of the funds advanced were used by CVR Global Inc. to repay loans and related accrued interest in connection with funding its operations. As at 2018, the Company was owed $938,770 (December 31, $2,019,967). The advance is noninterest bearing, unsecured and is due on demand. Due to uncertainty of collection, the Company wrote off the receivable of $2,019,967 from CVR Global at December 31, Furthermore, the Company wrote off the additional receivable of $938,770 at If there is a recovery of the receivable in a future period, it will be recognized in income. 9. Share Capital Authorized share capital consists of unlimited number of common shares without par value. On February 26, 2018, the Company closed the first tranche of a private placement of 840,000 units at $0.40 per unit for gross proceeds of $336,000. Each unit consists of one common share of the Company and one-half of one transferable common share purchase warrant. Each full warrant is exercisable at a price of $0.70 until February 26, No value was attributed to the warrants. In connection with the private placement, the Company paid commissions of $9,840, issued 24,600 brokers warrants with a fair value of $2,056, and incurred other costs related to the private placement of $5,053, which have been recorded as share issue costs. On February 28, 2018, the Company issued 261,905 common shares pursuant to the exercise of 261,905 warrants at $0.40 per share for total proceeds of $104,762. On March 6, 2018, the Company closed the second tranche of a private placement of 816,572 units at $0.40 per unit for gross proceeds of $326,629. Each unit consists of one common share of the Company and one-half of one transferable common share purchase warrant. Each full warrant is exercisable at a price of $0.70 until March 6, No value was attributed to the warrants. On March 16, 2018, the Company closed the third tranche of a private placement of 215,000 units at $0.40 per unit for gross proceeds of $86,000. Each unit consists of one common share of the Company and one-half of one transferable common share purchase warrant. Each full warrant is exercisable at a price of $0.70 until March 16, No value was attributed to the warrants. On March 21, 2018, the Company closed the fourth tranche of a private placement of 1,281,646 units at $0.40 per unit for gross proceeds of $512,658. Each unit consists of one common share of the Company and one-half of one transferable common share purchase warrant. Each full warrant is exercisable at a price of $0.70 until March 21, No value was attributed to the warrants. In connection with the private placement, the Company paid commissions of $28,800, issued 72,000 brokers warrants with a fair value of $3,879, and incurred other costs related to the private placement of $14,288, which have been recorded as share issue costs. On April 6, 2018, the Company issued 2,518,600 shares pursuant to the exercise of warrants with an amended price of $0.40 per share for gross proceeds of $1,007,440. The exercise price of the warrants was temporarily amended from $0.70 per share to $0.40 per share. In connection with the warrant amendment, the Company paid a commission of $22,811 and issued an additional 2,518,600 warrants to the holders that exercised their warrants, which are exercisable at $1.50 per share until April 9, On May 2, 2018, the Company closed a private placement of 1,250,000 units at $0.40 per unit for gross proceeds of $500,000. Each unit consists of one common share of the Company and one-half of one transferable common share purchase warrant. Each full warrant is exercisable at a price of $0.70 until May 2, No value was attributed to the warrants. In connection with the private placement, the Company paid commissions of $30,000, and issued 75,000 brokers warrants with a fair value of $2,543, which have been recorded as share issue costs. On June 18, 2018, the Company closed a private placement of 1,710,395 units at $0.40 per unit for gross proceeds of $684,158. Each unit consists of one common share of the Company and one-half of one transferable common share purchase warrant. Each full warrant is exercisable at a price of $0.70 until June 18, No value was attributed to the warrants. In connection with the private placement, the Company paid commissions of $27,415, and issued 102,805 brokers warrants with a fair value of $3,576, which have been recorded as share issue costs.

11 10. Stock Options and Warrants The Company s Board of Directors approved a stock incentive plan in accordance with the policies of the Exchange. The Board of Directors is authorized to grant options to directors, officers, consultants or employees to acquire up to 10% of the issued and outstanding common shares of the Company. The exercise price will not be less than the market price of the common shares less applicable discounts permitted by the Exchange. The options that may be granted under this plan must be exercisable for over a period of not exceeding 10 years. The following table summarizes information about the options at 2018 and December 31, 2017, and the changes for the periods then ended: Number of options 2018 December 31, 2017 Weighted Weighted average average exercise Number of exercise price options price $ $ Options outstanding Beginning of period 4,150, ,000, Granted 300, Exercised (2,150,000) 0.21 Expired (100,000) 0.33 Options outstanding End of period 4,050, ,150, Options exercisable End of period 4,050, ,150, The following table summarizes information about stock options outstanding and exercisable at 2018: Exercise Price $ Options outstanding Options Exercisable Weighted average remaining contracted life (years) ,850,000 3,850, , , Share purchase warrants The following table summarizes information about the warrants at 2018 and December 31, 2017, and the changes for the periods then ended: 2018 December 31, 2017 Weighted Weighted Number of warrants average exercise price Number of warrants average exercise price $ $ Warrants outstanding Beginning of period 15,452, ,464, Issued 5,849, ,807, Exercised (2,780,505) 0.67 (4,820,013) 0.40 Warrants outstanding End of period 18,521, ,452,

12 10. Stock Options and Warrants (continued) The Company s warrants are exercisable only for common shares. The following table summarizes information about warrants outstanding and exercisable at 2018: Exercise Price $ Option reserve Expiry date Warrants Outstanding Weighted average remaining contracted life (years) 0.70 August 22, ,197, September 15, ,382, October 19, ,261, October 21, , February 26, , March 6, , March 16, , March 21, , May 2, , June 18, , April 9, ,518, The option reserve records items recognized as share-based compensation expense and fair value of warrants issued for services until such time that the options and warrants are exercised, at which time the corresponding amount will be transferred to share capital. 11. Events After the Reporting Period a) On June 1, 2018, the Company and CVR Global entered into a Restructuring Agreement, whereby the Company will acquire CVR Global s 50% interest in the joint operation (Note 7) and the joint operation will be terminated in favor of commercialization of the CSS Device in the Company s wholly-owned subsidiary, CVRM, Inc. The Company and CVR Global will license all necessary patents and technology for the commercialization of the CSS Device and CVR Global will terminate and relinquish its share of profits from the joint operation. Additionally, CVMR, Inc. entered into a Commercialization Agreement, whereby CVRM, Inc. will retain CVR Global as the exclusive developer and manufacturer of the CSS Device with funding to be provided by CVRM Inc. As consideration under the Restructuring Agreement, the Company will issue 30,000,000 common shares to CVR Global which will be placed in escrow and released upon achievement of four key milestones, as follows: 3,000,000 common shares upon approval and signing of Restructuring Agreement and licensing of patents and technology to CVRM, Inc.; 2,000,000 common shares upon submission of the CSS Devise to the FDA; 10,000,000 common shares upon FDA clearance and approval of the CSS Device; 15,000,000 common shares upon achievement of US$50,000,000 in revenue from the sales of the CSS Device. In addition, the Company will grant a 7% royalty on all CSS Device sales and 3% royalty on all associated disposable sales. The Restructuring Agreement has been approved by the Board of Directors, has been conditionally approved by the TSX Venture Exchange and is now subject to approval of the Company s shareholders. As of the date of these financial statements, the transaction has not yet closed. b) On July 25, 2018, the Company agreed issue 50,000 common shares and grant 150,000 stock options to a consultant pursuant to a letter agreement dated September 25, 2017 to compile an executive informationally overview and quarterly updates on the Company. The stock options will be exercisable at $0.35 per share for a term of 3 years. The issuance of the common shares is subject to approval of the TSX Venture Exchange. c) On July 25, 2018, the Company entered into a Promissory Note, whereby it received a loan of US$25,000 from a third party. The loan bears interest at 30% per annum, is secured by shares of the Company which are currently owned by CVR Global, Inc., and has a term of 6 months.

13 11. Events After the Reporting Period (continued) d) On August 6, 2018, the Company entered into a Promissory Note, whereby it received a loan of US$200,000 from a third party. The loan bears interest at 30% per annum, is secured by shares of the Company which are currently owned by CVR Global, Inc., and has a term of 6 months.