01 Quantum Inc. — Interim / Quarterly Report 2020

Jun 11, 2020

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01 Communique Laboratory Inc.

Interim Consolidated Financial Statements

for the period ended April 30, 2020

(Unaudited)

TSX-V : ONE

Dated: June 10, 2020

01 Communique Laboratory Inc. Interim Consolidated Statements of Financial Position (Unaudited)

	30-Apr-20 31-Oct-19
Assets Current assets Cash and cash equivalents Guaranteed investment certificate (note 3(a), 4) Accounts receivable (note 3 (a)) Prepaid expenses and other assets Right-of-use asset (note 2) Plant and equipment (note 14) Total assets Liabilities and Shareholders' Deficit Current liabilities Accounts payable and accrued liabilities Deferred revenue Lease liability (note 2) Liability component of debenture (note 6) Non-current liabilities Lease liability (note 2) Shareholders' deficit Share capital (note 7) Contributed surplus Share purchase warrants (note 7 (a)) Agent compensation options (note 7 (b)) Deficit Going concern (note 1 (b)) Related party transaction (note 9) Contractual obligations and contingencies (note 11) Total liabilities and shareholders' deficit	$ 115,454 $ 283,712 110,000 300,000 76,007 96,055 23,516 11,124
	324,977 690,891 41,461 - 15,534 16,335
	$381,972 $707,226
	$ 134,231 $ 140,962 9,809 8,907 33,938 - 383,062 390,703
	561,040 540,572 7,715 - 41,414,233 41,414,233 5,742,066 5,668,916 615,185 598,247 99,200 99,200 (48,057,467) (47,613,942)
	(186,783) 166,654
	$381,972 $707,226

See accompanying notes to unaudited interim consolidated financial statements

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01 Communique Laboratory Inc. Interim Consolidated Statements of Operations and Comprehensive Loss (Unaudited)

For the 3 and 6 month periods ended April 30, 2020 and 2019

Revenue Expenses: Selling, general and administrative Researchand development	for the 3 months ended 30-Apr-20 30-Apr-19 $ 73,297 $ 74,685 162,918 151,137 131,404 94,930	for the 6 months ended 30-Apr-20 30-Apr-19
		$ 114,667 $ 124,720 304,570 281,149 202,499 179,178
	294,324 246,066	507,069 460,327
Loss before accretion on liability component of debenture, interest, other income, and taxes Interest on debenture Accretionon liability portionofdebenture	(221,027) (171,381) 15,000 15,000 4,762 4,762	(392,402) (335,607) 30,000 30,000 9,297 9,297
Loss before other income, expense and taxes	(240,789) (191,143)	(431,699) (374,904)
Interest income Interest expense	150 1,913 679 -	875 2,710 1,429 -
Loss before taxes	(241,317) (189,230)	(432,253) (372,194)
Withholding taxes	7,816 6,813	11,272 11,158
Loss for theperiod and comprehensive loss	$ (249,133) $ (196,043)	$ (443,525) $ (383,352)
Basic Diluted Weighted average number of common shares Basic Diluted	$ (0.00) $ (0.00) $ (0.00) $ (0.00) 80,235,472 76,543,807 80,235,472 76,543,807	$ (0.00) $ (0.00) $ (0.00) $ (0.00) 80,235,472 76,543,807 80,235,472 76,543,807

See accompanying notes to unaudited interim consolidated financial statements

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01 Communique Laboratory Inc. Interim Consolidated Statements of Changes in Shareholders’ Equity (Unaudited) For the 3 and 6 month periods ended April 30, 2020 and 2019

Six month period ended April30,2020	Number of shares Share Capital Contributed Surplus Warrants Compensation Options Deficit Total shareholders’ deficit
Balance October 31, 2019 Comprehensive loss for the period Cancellation of warrants Equity component of new debenture Stock based compensation expense Balance April 30, 2020	80,235,472 $41,414,233 $5,668,916 $598,247 $ 99,200 $(47,613,942) $ 166,654 (443,525) (443,525) (4,762) (4,762) 21,700 21,700 73,150 73,150 80,235,472 $41,414,233 $5,742,066 $615,185 $99,200 $(48,057,467) $ (186,783)

Six month period ended April30,2019 Balance October 31, 2018 Comprehensive loss for the period Stock based compensation expense Equity portion of debenture amendment Balance April 30, 2019	Number of shares Share Capital Contributed Surplus Warrants Compensation Options Deficit Total shareholders’ deficit
	76,543,807 $41,186,529 $5,464,721 $464,811 $99,200 $(47,300,185) $ (84,924) - - - - - (383,352) (383,352) - - 83,496 - - - 83,496 16,113 16,113
	76,543,807 $41,186,529 $5,548,217 $480,924 $99,200 $(47,683,537) $ (368,667)

See accompanying notes to unaudited interim consolidated financial statements

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01 Communique Laboratory Inc. Interim Consolidated Statements of Cash Flows (Unaudited) For the 3 and 6 month periods ended April 30, 2020 and 2019

Cash provided by (used in): Operating activities: Comprehensive loss for the period Adjustments to reconcile loss for the period to net cash flows from operating activities: Depreciation of property and equipment Amortization of right-of-use asset Stock-based compensation expense Accretion on liability portion of debenture Interest income Change in non-cash working capital Interest income received Financing activities: Increase in lease liabilities Proceeds from guaranteed investment certificate Total cash provided by financing activities Investing activities: Right-of-use asset Purchase of property and equipment Total cash used in investing activities Increase (decrease) in cash and cash equivalents Cash and cash equivalents, beginning of period Cash and cash equivalents, end of period Cash and cash equivalents comprise: Cash	three months ending 30-Apr-20 30-Apr-19 $ (249,133) $ (196,043) 1,459 1,294 11,061 41,750 44,550 4,762 4,762 (150) (1,913) 2,247 (986) (188,004) (148,336) 150 1,913 (187,854) (146,423) - - (60,000) 200,000 (60,000) 200,000 - - (1,443) (3,845) (1,443) (3,845) (249,297) 49,732 364,751 62,294 $115,454 $112,026 $ 112,026	six months ending 30-Apr-20 30-Apr-19
		$ (443,525) $ (383,352) 2,952 2,696 22,122 - 73,150 83,496 9,297 9,297 (875) (2,710) 35,765 (58,626)
		(301,114) (349,199) 875 2,710
		(300,239) (346,489) 7,715 - 190,000 350,000
		197,715 350,000 (63,583) - (2,151) (5,245)
		(65,734) (5,245) (168,258) (1,734) 283,712 113,760
		$115,454 $112,026
		$ 115,454

See accompanying notes to unaudited interim consolidated financial statements

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01 Communique Laboratory Inc. Notes to the consolidated financial statements (Unaudited) Six month periods ended April 30, 2020 and 2019

Notice to reader of the interim consolidated financial statements

These unaudited interim condensed consolidated financial statements (“interim consolidated financial statements”) of 01 Communique Laboratory Inc. (the “Company”), which include the accompanying interim consolidated statement of financial position as at April 30, 2020 and the interim consolidated statements of operations and comprehensive income (loss), changes in shareholders’ equity and cash flows for the three and six month periods ended April 30, 2020 and 2019, are the responsibility of the Company’s management. These interim consolidated financial statements have not been audited or reviewed on behalf of the shareholders by the independent external auditors of the Company, Shimmerman Penn LLP. The unaudited interim consolidated financial statements have been prepared by management and include the selection of appropriate accounting principles, judgments and estimates necessary to prepare these financial statements in accordance with accounting principles generally accepted in Canada. These unaudited interim consolidated financial statements are prepared under International Financial Reporting Standards (“IFRS”) and reflect management’s best estimates and judgment based on information currently available.

01 Communique Laboratory Inc. (the "Company") was incorporated on October 7, 1992 under the laws of Ontario. The Company is focused on cybersecurity with its IronCAP patent-pending cryptographic technology. The Company’s legacy I’m InTouch product offering provides the Company’s customers with a suite of secure remote access services and products. These consolidated financial statements are prepared under International Financial Reporting Standards ("IFRS") and reflect management's best estimates and judgment based on information currently available.

The Company's head office is located at 789 Don Mills Road, Suite 700, Toronto, Ontario M3C 1T5 and its common shares are traded on the TSX Venture Exchange ("TSX-V") under the symbol ONE. The Company was incorporated on October 7, 1992 under the laws of Ontario.

(1) Significant Accounting Policies:

(a) Statement of compliance and basis of presentation:

These interim consolidated financial statements, including comparatives, have been prepared in accordance with International Accounting Standard 34, Interim Financial Reporting (“IAS 34”) as issued by the International Accounting Standards Board (“IASB”) and on a basis consistent with the accounting policies disclosed in the Company’s annual audited consolidated financial statements for the year ended October 31, 2019. The accounting standards applied in these interim consolidated financial statements are based on IFRS issued and outstanding as of the date the Board of Directors authorized the financial statements for issue.

The interim consolidated financial statements were authorized for issue by the Board of Directors on June 10, 2020.

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The interim consolidated financial statements are prepared in Canadian dollars and include the accounts of the Company and its wholly owned subsidiary, 01 Communique (GP) Inc. Intercompany transactions and balances are eliminated on consolidation.

The interim consolidated financial statements have been prepared on the historical cost basis, except for certain items which may be accounted for at fair value as further discussed in subsequent notes.

Presentation of the interim consolidated statements of financial position differentiates between current and noncurrent assets and liabilities. The interim consolidated statements of operations and comprehensive income are presented using the functional classification for expenses.

(b) Going concern:

The Company has sustained substantial losses and negative cash flows from operations in recent years and its ability to continue as a going concern is dependent on the Company's ability to generate future profitable operations and cash flows and/or obtain additional financing. In addition to the loss from operations and negative cash flows the Company has a working capital deficiency as at April 30, 2020 of $209,840.

Management's plan to reduce the operating loss and ultimately become profitable and produce positive cash flows from operations is heavily dependent on: (i) a successful outcome from its strategic initiatives to realize monetary value from the development and commercialization of its Post-Quantum Cryptography and PostQuantum Blockchain technologies; (ii) increasing product and service revenue from its I'm InTouch product offering through downloads from the Company’s web site; and (iii) its relationship with a key customer Hitachi Solutions Create, Ltd. However, there can be no assurances the Company will be successful on any of these three initiatives.

Should the Company not be able to generate sufficient cash flows from any combination of these three initiatives to become profitable in the future and generate sufficient working capital to fund operations, then it will become necessary to secure additional sources of financing; however, there can be no assurances that any such financing will be available to the Company or that such funds will be available on acceptable terms and within an acceptable period of time.

The outcome of these matters, which cannot be predicted at this time, represents a material uncertainty which may cast significant doubt with regard to the Company's ability to continue as a going concern. The consolidated financial statements do not give effect to any adjustments which would be necessary should the Company be unable to continue as a going concern and, therefore, be required to realize its assets and discharge its liabilities in other than the normal course of business and at amounts different from those reflected in the Company’s consolidated financial statements.

(2) New Accounting Standard Adopted:

Effective November 1, 2019, the Company adopted IFRS 16, Leases, issued by the International Accounting Standards Board (“IASB”) and IFRS Interpretations Committee. IFRS 16 specifies how to recognize, measure, present and disclose leases. The standard provides a single accounting model, requiring the recognition of

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assets and liabilities for all major leases previously classified as operating leases. IFRS 16 supersedes the lease accounting guidance in IAS 17, Leases as well as some lease related interpretations.

• (a) The Company's accounting policy under IFRS 16 is as follows:

• (i) Definition of a lease:

• At inception of a contract, the Company assesses whether a contract is, or contains, a lease based on whether the contract conveys the right to control the use of an identified asset for a period of time in exchange for consideration. The Company applied the definition of a lease under IFRS 16 to existing contracts as of November 1, 2019.

• (ii) As a lessee: The Company has leased premises at 789 Don Mills Road in Toronto, ON which is considered a right-of-use asset.

The Company recognizes a right-of-use asset and a lease liability at the lease commencement date. The rightof-use asset is initially measured at cost, based on the initial amount of the lease liability. The asset is depreciated to the earlier of the end of the useful life of the right-of-use asset or the lease term using the straight-line method as this most closely reflects the expected pattern of consumption of the future economic benefits. The lease term can include periods covered by an option to extend if the Company is reasonably certain to exercise that option providing the lease has such a provision. In addition, the right-of-use asset is periodically adjusted for certain remeasurements of the lease liability, if required.

The lease liability is initially measured at the present value of the lease payments that are not paid at the commencement date, discounted using the interest rate implicit in the lease or, if that rate cannot be readily determined, the Company's incremental borrowing rate. The lease liability is measured at amortized cost using the effective interest method. It is remeasured when there is a change in future lease payments, if there is a change in the Company's estimate of the amount expected to be payable under a residual value guarantee, or if the Company changes its assessment of whether it will exercise a purchase, extension or termination option.

When the lease liability is remeasured in this way, a corresponding adjustment is made to the carrying amount of the right-of-use asset, or is recorded in profit or loss if the carrying amount of the right-of-use asset has been reduced to zero.

The Company has elected to apply the practical expedient not to recognize right-of-use assets and lease liabilities for (1) short-term leases, that have a lease term of 12 months or less, as well as for (2) leases of low value assets. The lease payments associated with these leases are recognized as expenses on a straight-line basis over the lease term.

(b) Impact of transition to IFRS 16:

The Company has opted to apply the standard retrospectively without restatement of prior periods for the year ended October 31, 2020.

The Company’s leased premise, considered a right-of-use asset, commenced April 1, 2019 for a period of 24 months without a renewal provision. The lease liability has been measured by discounting future lease payments at the incremental borrowing rate at November 1, 2019. The weighted average incremental borrowing

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rate applied was determined to be 5.0% per annum for the lease and represents the Company's best estimate of the rate of interest that it would expect to pay to borrow, on a collateralized basis, over a similar term, an amount equal to the lease payments in the current economic environment.

The following table summarizes the impact of adopting IFRS 16 at November 1, 2019:

Assets Non-current assets Right-of-use assets Liabilities Current liabilities Lease liabilities Non-current liabilities Lease liabilities	1-Nov-19 1-Nov-19 prior to adoption after adoption of IFRS16 of IFRS16
	- 63,583 - 44,413 - 19,170

The application of IFRS 16 to leases, previously classified as operating leases resulted on the recognition of right-of-use assets of $63,583 and finance lease liabilities of current and non-current liabilities of $63,583. There was no impact on opening retained earnings on implementation of IFRS 16.

(3) Financial Instruments and Financial Risk Management:

(a) Financial instruments:

The Company has classified its financial instruments as follows:

30-Apr-20 Financial assets: Other financial assets, measured at amortized cost: Cash and cash equivalents $ 115,454 Guaranteed investment certificate 110,000 Loans and receivables, recorded at cost: Accounts receivable 76,007 Financial liabilities, recorded at amortized cost: Accounts payable and accrued liabilities 134,231 Current lease liability 33,938 Current liability component of debenture 383,062 Non-current lease liability 7,715 Accounts receivable are comprised of the following:

31-Oct-19

$ 283,712 300,000 96,055 140,962 - 390,703 -

Trade receivables Investment tax credits receivable Other	30-Apr-20 $ 51,732 12,000 12,275 $76,007	31-Oct-19
		$ 74,399 12,000 9,656
		$96,055

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(b) Financial risk management:

(i) Overview:

The Company has exposure to credit risk, liquidity risk and market risk. The Company's Board of Directors has overall responsibility for the establishment and oversight of the Company's risk management framework and reviews the Company's policies on an ongoing basis.

(ii) Credit risk:

Credit risk is the risk of financial loss to the Company if a customer or counterparty to a financial instrument fails to meet its contractual obligations, and arises principally from the Company's accounts receivable. The carrying amount of financial assets represents the maximum credit exposure.

The Company's exposure to credit risk with its customers is influenced mainly by the individual characteristics of each customer. The Company generally does not require collateral for sales on credit. The Company closely monitors extensions of credit and has not experienced significant credit losses in the past. At April 30, 2020 and October 31, 2019, the Company had a nil balance in the allowance for doubtful accounts and had no material past due trade receivables.

The Company invests its cash with the objective of maintaining safety of principal and providing adequate liquidity to meet all current payment obligations. The Company invests its cash in cash equivalents with Canadian chartered banks that are of high credit quality. Given these high credit ratings, the Company does not expect any counterparties to these cash equivalents to fail to meet their obligations.

(iii) Concentrations of credit risk:

There was one company that comprised 92% (2019 – 91%) and 89% (2019 - 89%) of the Company’s total of revenue for the three and six months ended April 30, 2020 respectively. No other customers exceeded 10% of revenue during the current or prior periods. The customer comprising 92% (2019 – 91%) of revenue represents 68% (2019 – 75%) of accounts receivable as at April 30, 2020.

(iv) Liquidity risk:

Liquidity risk is the risk that the Company will not be able to meet its financial obligations as they come due. The Company's approach to managing liquidity is to ensure that it will have sufficient liquidity to meet its liabilities when due. To the extent that the Company does not believe it has sufficient liquidity to meet these obligations, management will consider securing additional funds through equity or debt transactions.

However, the Company has sustained substantial losses in recent years and its ability to continue as a going concern is dependent on the Company's ability to generate future profitable operations and cash flows and/or obtain additional financing, which would be contingent upon market and other conditions in the future, which are beyond the Company's control.

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At April 30, 2020, the Company had other financial assets consisting of cash and cash equivalents, guaranteed investment certificate and accounts receivable of $301,461 (October 31, 2019 - $679,767) and other financial liabilities of $551,231 (October 31, 2019 - $531,665), consisting of accounts payable and accrued liabilities, lease liabilities and debentures. The Company has a $400,000 Debenture which is due April 24, 2021. The Company has split the Debenture and Warrant components of the Debenture into the debt and equity components and recorded the debt component as a liability and the equity component as equity. The Debenture’s amortized cost as at April 30, 2020 is $383,062 (October 31, 2019 - $390,703) (note 6).

The Company manages its liquidity risk by continuously monitoring forecast and actual cash flows.

(v) Market risk:

Market risk is the risk that the fair value or future cash flows of a financial instrument will fluctuate because of changes in market prices. Market risk is comprised of currency risk, interest rate risk and market price risk. The Company is exposed to currency risk and interest rate risk.

Currency risk:

Net monetary liabilities due in U.S. dollars include accounts payable of $8,109 (October 31, 2019 – $13,882), cash of $69,583 (October 31, 2019 - $117,362) and accounts receivable of $36,951 (October 31, 2019 - $56,327).

The Company reports its results in Canadian dollars. The Company markets its products in Canada, the United States ("U.S.") and other jurisdictions, including Japan. Sales to Japanese customers are primarily denominated in U.S. dollars. Substantially all of the Company's sales are in U.S. dollars. As a result, the Company is subject to currency risk from sales made in U.S. dollars. The Company does not hedge the risk related to fluctuations in the exchange rate between the U.S. and the Canadian dollar from the date of the sales transaction to the collection date due. As at April 30, 2020, the Company had net monetary assets due in U.S. dollars of $11,000 (October 31, 2019 - $160,000). An increase or decrease in the U.S. to Canadian dollar exchange rate by 10% as at April 30, 2020 would have resulted in a gain in the amount of $1,100 (October 31, 2019 - $21,000) or a loss of $1,100 (October 31, 2019 - $21,000), respectively.

The Company has performed a sensitivity analysis for foreign exchange exposure over the six month period ended April 30, 2020. The analysis used a modeling technique that compares the U.S. dollar equivalent of all revenue and expenses incurred in U.S. dollars, at the actual exchange rate, to a hypothetical 10% movement in the foreign currency exchanges rates against the Canadian dollar, with all other variables held constant. Foreign currency exchanges rates used were based on the market rates in effect during the six month period ended April 30, 2020. The sensitivity analysis indicated that a hypothetical 10% movement in the foreign currency exchange rate from the Canadian dollar to the U.S. dollar would result in a change to the net loss for the six month period ended April 30, 2020 of $5,300 (2019 – $7,500). There can be no assurances that the above projected exchange rate change will materialize. Interest rate risk: The Company is exposed to interest rate risk on its fixed rate financial instruments. Fixed rate instruments subject the Company to fair value interest rate risk, as the fair value of the financial instrument fluctuates due to changes in market interest rates. Financial instruments subject to interest rate risk include demand deposits and the liability component of the debenture.

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(vi) Fair values of financial instruments:

All financial instruments measured at fair value are categorized into one of three hierarchy levels, described below, for disclosure purposes. Each level is based on the transparency of the inputs used to measure the fair values of assets and liabilities:

Level 1 – Values based on unadjusted quoted prices in active markets that are accessible at the measurement date for identical assets of liabilities.

Level 2 – Values based on quoted prices in markets that are not active or model inputs that are observable either directly or indirectly for substantially the full term of the asset or liability.

Level 3 – Values based on prices or valuations techniques that require inputs that are both unobservable and significant to the overall fair value measurement.

There are no financial instruments that are measured at fair value on a regular basis.

(4) Guaranteed Investment Certificate:

There are two one year cashable guaranteed investment certificates (“GICs”) bearing interest at the rate of 1.68% and 1.4% per annum respectively and maturing August 19, 2020 and February 12, 2021. The amount of the GICs as at April 30, 2020 were $50,000 and $60,000 respectively (October 31, 2019 - $300,000).

(5) Capital Risk Management:

The Company's primary objective with respect to its capital management is to ensure that it has sufficient cash resources to fund operations and discharge liabilities as they become due. Management performs regular reviews of its forecasted cash flow requirements to ensure cash flow needs are addressed. Refer to note 1(b) of these consolidated financial statements for the Company's plans in place in order to achieve these objectives.

The capital structure of the Company is composed of the liability component of the debenture.

The Company is not subject to externally imposed capital requirements.

(6) Debenture:

On April 24, 2015 the Company issued $400,000 principal amount of secured Debentures that had an original term of 36 months. The Company previously amended such Debentures to extend their term to April 24, 2020. In connection with the issuance of such Debentures the Company also had issued a total of 800,000 common share purchase warrants each of which, after certain amendments, entitled the holder to acquire one common share at a price of $0.10 up until April 24, 2020, subject to an accelerated expiry provision which was triggered during the 2019 fiscal year.

On January 24, 2020, the Company agreed with the holders of such Debentures to redeem all of the Debentures currently outstanding without any prepayment penalty and issue new secured Debentures under the same terms and conditions of the previously amended Debentures, other than the maturity date extension to April 24, 2021.

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In connection with the issuance of the new Debentures the Company has cancelled the original 800,000 common share purchase warrants issued and issued an aggregate of 800,000 new common share purchase warrants. Each such warrant is exercisable at any time prior to April 24, 2021 into one common share in the capital of the Company at an exercise price of $0.13 per share.

In accordance with the provisions of IFRS, as they apply to the Debentures, the Company split the Debenture and Warrant components of the January 24, 2020 Debentures into their debt and equity components and record the debt component as a liability and the equity component as equity. In determining the valuation of the liability and the equity components, the Company calculates the value of the liability component first, using a discount rate appropriate for what a similar debt instrument, absent any warrants, would have commanded at that time. The residual of the proceeds over the inherent value of the liability component is attributed to the equity portion of the Debenture. Accretion charges on the liability component aggregating $9,297 are calculated using the discount rate of 20% and have been recorded in the statement of operations and comprehensive loss.

(7) Share Capital:

Authorized:

50,000 Series A preference shares Unlimited preference shares, issuable in series Unlimited common shares

There was no change in issued and outstanding common shares for the six month period ended April 30, 2020:

Shares outstanding April 30, 2020 and October 31, 2019	Number Amount
	80,235,472 $ 41,414,233

a) Warrants:

The changes in issued and outstanding warrants for the six month period ended April 30, 2020 were as follows:

Share purchase warrants outstanding as at October 31, 2019 Cancelled during the period (note 6) Equity portion of new debenture(note 6)	Weighted average Number Value exercise price 7,805,748 $ 598,247 $ 0.14 (800,000) (4,762) 0.10 800,000 21,700 0.13 7,805,748 $ 615,185 $ 0.14
Balance, April 30, 2020

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b) Agent compensation options:

There was no change in issued and outstanding agent compensation options for the six month period ended April 30, 2020:

Agent compensation options outstanding April 30, 2020 and October 31, 2019	Weighted average Number Value exercise price 800,000 $ 99,200 $ 0.10

• c) The changes to the Company’s stock option plan for the six month period ended April 30, 2020 were as follows:

Outstanding October 31, 2019 Granted during the period Outstanding April 30, 2020	Number Weighted average exercise price
	6,235,000 $ 0.06
	600,000 $ 0.10
	6,835,000 $ 0.07

• (d) The following table summarizes information with respect to the Company’s stock option plan as at April 30, 2020:

Range of exerciseprices	Number Outstanding	Options Outstanding Weighted Weighted Average average remaininglife exercise	Options Exercisable Weighted Number Average exercisable Exercise
$0.05 $0.07 $0.08 to $0.10	3,185,000 1,860,000 1,790,000	1.0 $0.05 2.5 $0.07 3.3 $0.10	3,185,000 $0.05 1,860,000 $0.07 1,190,000 $0.10
	6,835,000	2.0 $0.07	6,222,500 $0.06

During the six month periods ended April 30, 2020, the Company recorded compensation expense related to stock options granted of $73,150 (2019 - $83,496).

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(8) Loss Per Share:

The computations for basic and diluted income (loss) per share are as follows:

For the three months ended Profit (Loss) for the period $ Weighted average number of common shares outstanding Basic Diluted Income (loss) per common share Basic $ Diluted $ For the six months ended Profit (Loss) for the period $ Weighted average number of common shares outstanding Basic Diluted Income (loss) per common share Basic $ Diluted $	30-April-20 (249,133) $ 80,235,807 80,235,807 (0.00) $ (0.00) $ 30-April-20 (443,525) $ 80,235,807 80,235,807 (0.00) $ (0.00) $	30-April-19 (198,043) 76,543,807 76,543,807 (0.00) (0.00) 30-April-19 (383,352) 76,543,807 76,543,807 (0.00) (0.00)

As the Company is in a loss position for the three and six months ended April 30, 2020 and 2019, the inclusion of options and warrants in the calculation of diluted earnings per share would be anti-dilutive, and accordingly, were excluded from the diluted loss per share calculation.

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(9) Related Party Transactions:

The remuneration of directors and other key management personnel of the Company during the three and six month periods ended April 30, 2020 and 2019 were as follows:

Salaries and contractor fees Stock based compensation	For the 3 months ending 30-Apr-20 30-Apr-19 $ 55,000 $ 50,000 41,750 44,550 $96,750 $94,550	For the 6 months ending 30-Apr-20 30-Apr-19
		$ 111,250 $ 105,000 73,150 74,557
		$184,400 $179,557

The Company’s President and CEO invoices the Company for his services that pertain to research and development pursuant to a contractor agreement. Fees paid under this agreement during the three and six month periods ended April 30, 2020 were $16,500 (2019 - $11,500) and $31,750 (2019 - $25,500) respectively, and have been included in research and development expenses and are disclosed in the salaries amounts in the above table. This transaction is in the normal course of operations and is measured at the exchange amount, which is the amount of consideration established and agreed to by the related parties. The President and CEO’s salary for the three and six months ended April 30, 2020 was $21,000 (2019 – 21,000) and $42,000 (2019 - $42,000) respectively.

(10) Change in Non-cash Operating Working Capital:

Change in non-cash working capital Accounts receivable Prepaid expenses and other assets Accounts payable & accruals Lease liability Deferred revenue	three months ending 30-Apr-20 30-Apr-19 $ (2,617) $ 25,611 (13,752) (15,884) 28,443 (11,773) (11,034) - 1,207 1,060 $ 2,247 $ (986)	six months ending 30-Apr-20 30-Apr-19
		$ 20,048 $ 6,708 (12,392) (16,555) (6,731) (49,787) 33,938 - 902 1,008
		$ 35,765 $ (58,626)

(11) Contractual Obligations and Contingencies:

The contractual obligations the Company has pertains to lease agreements for its premises, considered a rightof-use asset (note 2). The total contractual amount due is $23,686 for the remainder of fiscal 2020.

The Company is engaged in legal actions from time to time arising in the ordinary course of business. None of these actions, individually or in the aggregate, are expected to have a material adverse effect on the consolidated financial position or results of operations.

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(12) Segmented Information:

Revenue attributable to geographical location based on the customer is as follows:

United States Canada Japan	For the three months ended 30-Apr-20 30-Apr-19 $ 2,933 $ 4,394 3,205 2,157 67,159 68,134 $73,297 $74,685	For the six months ended 30-Apr-20 30-Apr-19
		$ 7,440 $ 8,608 5,503 4,530 101,724 111,582
		$114,667 $124,720

Substantially all of the Company’s identifiable assets as at April 30, 2020 and October 31, 2019 are located in Canada.

(13) Revenues:

The significant categories of revenue recognized during the periods are as follows:

Licensing fees Subscription and maintenance	For the three months ended 30-Apr-20 30-Apr-19 $ 67,159 $ 68,134 6,138 6,551 $73,297 $74,685	For the six months ended 30-Apr-20 30-Apr-19
		$ 101,724 $ 111,582 12,943 13,138
		$114,667 $124,720

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(14) Operating expenses:

The Company presents a functional consolidated statement of operations and comprehensive income in which expenses are aggregated according to the function to which they relate. The Company has identified the major functions as selling, general and administrative expenses; and research and development expenses. The following table presents the expenses based on their nature:

for the three months ending 30-Apr-20		Selling, general Research and and administration development Total
Salaries, contractors, commissions and benefits Stock-based compensation Other operating expenses		$ 70,254 $ 111,965 $ 182,219 41,750 - 41,750 50,914 19,440 70,354
		$162,918 $131,404 $294,323
		Selling, general and administration Research and development Total $ 45,690 $ 65,975 $ 111,665 44,550 - 44,550 60,897 28,955 89,851 $151,137 $94,930 $246,066
for the three months ended 30-Apr-19
Salaries, contractors, commissions and benefits Stock-based compensation Other operating expenses

for the six months ending 30-Apr-20		Selling, general Research and and administration development Total
Salaries, contractors, commissions and benefits Stock-based compensation Other operating expenses		$ 101,921 $ 168,353 $ 270,274 73,150 - 73,150 129,499 34,146 163,645
		$304,570 $202,499 $507,069
		Selling, general Research and and administrative development Total $ 91,283 $ 120,255 $ 211,538 83,496 - 83,496 106,370 58,923 165,293 $281,149 $179,178 $460,327
for the six months ended 30-Apr-19
Salaries, contractors, commissions and benefits Stock-based compensation Other operating expenses

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(15) Property and Equipment:

April 30, 2020 Cost Balance at October 31, 2019 Additions Balance at April 30, 2020 Depreciation Balance at October 31, 2019 Additions Balance at April 30, 2020 Carry amounts Balance at October 31, 2019 Balance at April 30, 2020	Furniture and Computer Communications fixtures and Systems Equipment leaseholds Total
	$ 549,516 $ 30,281 $ 94,805 $ 674,602 2,097 - - 2,097
	$ 551,613 $ 30,281 $ 94,805 $ 676,699
	$ 537,178 $ 27,084 $ 94,005 $ 658,267 2,798 50 50 2,898
	$ 539,976 $27,134 $ 94,055 $ 661,165
	$ 12,338 $ 3,197 $ 800 $ 16,335 $ 11,653 $ 3,147 $ 750 $ 15,534

(16) Subsequent Event – Non-brokered Private Placement:

On May 22, 2020 the Company closed a non-brokered private placement of units ("Units"). Pursuant to the offering the Company issued a total of 1,683,334 Units raising aggregate gross proceeds of $202,000. Following the closing of the offering, the Company has 81,918,806 common shares issued and outstanding.

Each Unit was issued at a price $0.12 and consists of one common share in the capital of the Company (a "Common Share") and one-half of one common share purchase warrant (each whole warrant being referred to herein as a "Warrant"). Each Warrant entitles the holder thereof to purchase one additional Common Share at an exercise price of $0.15 per Common Share at any time on or before May 29, 2022.

In connection with the offering the Company paid a finder's fee of $5,600 and issued 46,667 warrants. Each such warrant entitles the holder to acquire one common share of the Company at an exercise price of $0.12 at any time on or before May 29, 2022.

The Company will use the gross proceeds of the offering of Units for product development and general working capital purposes.

The Company’s President and CEO, Andrew Cheung, subscribed for a total of 500,000 Units pursuant to the offering. Mr. Cheung is an officer and director of the Company. Mr. Cheung now beneficially owns, or exercises control or direction over, 10,289,666 Common Shares (or, approximately 12.5% of the issued and outstanding Common Shares or approximately 14.3% of the issued and outstanding Common Shares on a partially diluted basis) (including all options and warrants owned or controlled by Mr. Cheung).

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01 Communique Laboratory Inc. Corporate Information

DIRECTORS

Andrew Cheung William A. Train President & CEO Chairman Private investor Joanna Ng Gary Kissack Jane Yang AI Technologist & Startup Lawyer, Fogler, Rubinoff LLP DLT Strategy Advisor Entrepreneur OFFICERS Andrew Cheung Brian Stringer President & CEO Chief Financial Officer Gigi Loo Controller and Corporate Secretary

INVESTOR RELATIONS e-mail to: investorrelations@01com.com

CORPORATE HEADQUARTERS

789 Don Mills Road Phone: (905) 795-2888 Common Shares Listed on: Suite 700 Fax: (905) 795-0101 TSX Venture Exchange Toronto, ON www.01com.com (TSX-V) M3C 1T5 Trading Symbol “ONE”

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