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Item 8. Financial Statements and Supplementary Data

2021-07-06 compared with 2020-08-13 · 217 added, 200 removed, 375 unchanged (53% of the section changed)

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Opinion on the Financial Statements

We have audited the accompanying consolidated balance sheets of The Alkaline Water Company Inc.

(the Company) as of March 31, 2020 and 2019, and the related statements of operations, stockholders’ equity, and cash flows for each of the years in the two-year period ended March 31, 2020, and the related notes (collectively referred to as the financial statements).

We have audited the accompanying balance sheets of The Alkaline Water Company Inc.

(the Company) as of March 31, 2021 and 2020, and the related statements of income, comprehensive income, stockholders’ deficit, and cash flows for each of the years in the two-year period ended March 31, 2021, and the related notes (collectively referred to as the financial statements).

In our opinion, the financial statements present fairly, in all material respects, the financial position of the Company as of March 31, 2021 and 2020, and the results of its operations and its cash flows for each of the years in the two-year period ended March 31, 2021, in conformity with accounting principles generally accepted in the United States of America.

Going Concern

The accompanying financial statements have been prepared assuming that the Company will continue as a going concern.

As discussed in Note 2 to the financial statements, the Company has not generated sufficient revenues to cover the operating costs as of March 31, 2021, which raises substantial doubt about its ability to continue as a going concern.

Management’s plans concerning these matters are also described in Note 2.

The financial statements do not include any adjustments that might result from the outcome of this uncertainty.

Basis for Opinion

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We believe that our audits provide a reasonable basis for our opinion.

Critical Audit Matters

The critical audit matters communicated below are matters arising from the current period audit of the financial statements that were communicated or required to be communicated to the audit committee and that:

(1) relate to accounts or disclosures that are material to the financial statements and (2) involved our especially challenging, subjective, or complex judgments.

The communication of critical audit matters does not alter in any way our opinion on the financial statements, taken as a whole, and we are not, by communicating the critical audit matters below, providing separate opinions on the critical audit matters or on the accounts or disclosures to which they relate.

Accrued Promotional Allowances – Refer to Note 1 to the financial statements

Critical Audit Matter Description

We identified promotional allowances as a critical audit matter because of the extent and subjective nature of management judgment required with respect to estimating consumer and distributor participation and retail customer promotional claims.

How the Critical Audit Matter Was Addressed in the Audit

Our audit procedures over promotional allowances, with respect to management’s judgment regarding levels of consumer and distributor participation and retail customer promotional claims, included the following, among others:

We selected a sample of promotional allowances recorded for specific distributors and retail customers and (1) developed an expectation of the accrual using current-year claim and payment data, and/or (2) vouched known claim submissions, unpaid as of period-end, to underlying supporting documentation.

We tested the promotional expenditure amount recorded as a reduction to net sales and assessed the reasonableness of management’s estimate by developing an expectation of the amount, based on historical promotional expenditure amounts recorded as a percentage of sales, and compared our expectation to the recorded promotional expenditure amount.

We performed inquiries with the Company’s sales and marketing personnel to corroborate our understanding of new and existing promotional programs that may alter the relationship between gross billings and promotional allowances, as such programs are considered by management when estimating future promotional claims.

We evaluated management’s ability to estimate promotional allowances by comparing the actual promotional allowances subsequently paid to the original estimates of management.

/s/ Prager Metis CPAs, LLC

We have served as the Company's auditor since 2019

Basking Ridge, New Jersey

August 13, 2020

Basking Ridge, NJ

THE ALKALINE WATER COMPANY INC.

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Current assets

Accounts receivable

Accounts receivable, net

Prepaid expenses

Operating lease right-of-use asset

Operating lease right-of-use asset - current portion

Total current assets

Fixed assets - net

Operating lease right-of-use asset

LIABILITIES AND STOCKHOLDERS' EQUITY

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Revolving financing

Operating lease liability

PPP loan payable

Operating lease liability - current portion

Total current liabilities

Operating lease liability

Total liabilities

Commitments and contingencies (Note 10)

Stockholders' equity

Preferred stock, $0.001 par value, 100,000,000 shares authorized, 3,400,000 Series D issued and outstanding on March 31, 2020 and 1,500,000 Series C and 3,800,000 Series D issued and outstanding at March 31, 2019

Preferred stock, $0.001 par value, 100,000,000 shares authorized, nil issued and outstanding on March 31, 2021 and 3,400,000 Series D issued and outstanding on March 31, 2020

Common stock, Class A - $0.001 par value, 200,000,000 shares authorized 87,465,178 and 45,585,592 shares issued and outstanding at March 31, 2021 and March 31, 2020, respectively

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Total liabilities and stockholders' equity

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

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

THE ALKALINE WATER COMPANY INC.

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Total operating loss

Other income (expense)

Other expense

Interest expense

Change in derivative liability

Total other expense

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WEIGHTED AVERAGE SHARES OUTSTANDING (Basic and Diluted)

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

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

THE ALKALINE WATER COMPANY

CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY

FOR THE YEARS ENDED MARCH 31, 2020 AND MARCH 31, 2019

Preferred Stock

Paid-in Capital

Balance, March 31, 2018

Shares issued in connection with offerings

Warrant exercises

Stock Option expense

Stock Option exercises

Stock Payable

Balance, March 31, 2019

Preferred Stock Conversion

Warrant exercises

Stock Option expense

Stock Option exercises

Common shares issued upon exercise of warrants

Stock Compensation expense

Stock Option exercise

Stock Payable

Balance, March 31, 2020

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

Preferred Stock Conversion

Common shares issued in connection with offerings

Common shares issued upon exercise of warrants

Common shares issued to non-employees and employees

Stock Compensation expense

Stock Option exercise

Balance, March 31, 2021

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

THE ALKALINE WATER COMPANY INC.

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Stock compensation expense

Right-of-use asset

Change in derivative liabilities

Right-of-use asset amortization

Changes in operating assets and liabilities:

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CASH FLOWS FROM FINANCING ACTIVITIES

Proceeds from revolving financing

Proceeds from (repayment of) revolving financing

Proceeds from promissory note payable

Proceeds from sale of common stock, net

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Proceeds for the exercise of warrants, net

Repayment of notes payable

Proceeds for the exercise of stock options

CASH PROVIDED BY FINANCING ACTIVITIES

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OPERATING LEASE LIABILITY

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

ISSUANCE OF COMMON SHARES TO SETTLE STOCK PAYABLE

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

THE ALKALINE WATER COMPANY INC.

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Nature of Business

The Company offers retail consumers bottled alkaline water in 500-milliliter, 700-milliliter, 1-liter, 1.5 -liter, 3-liter and 1-gallon sizes, all of which is produced through an electrolysis process that uses specialized electronic cells coated with a variety of rare earth minerals to produce 8.8 pH drinking water without the use of any manmade chemicals.

In addition to its bottled alkaline water, the Company also offers retail consumers flavor infused bottled water in the 500-milliliter size in seven flavors:

Raspberry, Watermelon, Lemon, Lemon Lime, Peach Mango, Blood Orange, and Cucumber Mint.

The Company offers retail consumers bottled alkaline water in 500-milliliter, 700-milliliter, 1-liter, 1.5 -liter, 2,-liter, 3-liter and 1-gallon sizes, all of which is produced through an electrolysis process that uses specialized electronic cells coated with a variety of rare earth minerals to produce 8.8 pH drinking water without the use of any manmade chemicals.

In addition to its bottled alkaline water, the Company also offers retail consumers flavor infused bottled water in the 500-milliliter size in six flavors:

Raspberry, Watermelon, Lemon, Lemon Lime, Peach Mango and Blood Orange.

The Company recently introduced and began selling hemp-derived CBD topical and ingestible products under the brand name "A88CBD™".

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Depreciation is calculated using the straight-line (half-life convention) method over the estimated useful life of the assets or the lease term, whichever is shorter.

The Company originally estimated the useful life of water production equipment as 5 years.

During the year ended March 31, 2019, the company reevaluated the useful life of its water production equipment as the machinery began to wear out sooner than originally expected over a 3-year period due to an increase in revenue.

The Company recorded this change and recorded the adjusted depreciation in the year ended March 31, 2019;

the effect of which was not material.

Stock-Based Compensation

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The amounts are not considered material.

After evaluating the revenue disclosure requirements, the Company does not believe that it needs to disaggregate revenues.

The Company’s bottled water product represents substantially all revenue for all periods presented.

Revenue consists of the gross sales price, less variable consideration, including estimated allowances for which provisions are made at the time of sale, and less certain other discounts and allowances.

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Potentially dilutive securities were excluded from the calculation of diluted loss per share because their effect would be anti-dilutive.

For the year ended March 31, 2020 and 2019, respectively, the Company had no shares relating to options and 1,236,510 shares relating to options, no shares relating to warrants and 3,190,479 shares relating to warrants and no shares relating to convertible preferred shares and 1,500,000 convertible preferred shares that were not included in the diluted earnings per share calculation because they were antidilutive.

For the year ended March 31, 2021, and 2020, respectively, the Company had 6,259,567 shares relating to options and no shares relating to options, 6,889,680 shares relating to warrants and no shares relating to warrants and no shares relating to convertible preferred shares that were not included in the diluted earnings per share calculation because they were antidilutive.

Business Segments

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As of March 31, 2021 and 2020, the company did not have any financial instruments that are measured on a recurring basis as Level 1, 2 or 3.

Reclassification

Certain accounts in the prior period were reclassified to conform to the current period financial statements presentation.

Correction of Previously Issued Financial Statements

The accompanying consolidated statement of operations for the year ended March 31, 2020 has been corrected for the following:

a reclassification of depreciation expense of $1,003,450 to cost of goods sold related to assets utilized in the production of inventory and an adjustment to reclassify Sales and marketing expenses of $2,712,938 as a reduction of Revenue as such amounts were related to consideration payable to a customer which the Company determined was not for distinct goods or services received.

The Company assessed the materiality of the misstatement quantitatively and qualitatively and has concluded that the correction of the classification error is immaterial to the consolidated financials taken as a whole.

As a result of the correction, Cost of Goods Sold increased from $24,302,874 to $25,306,324 with a corresponding decrease of Gross Profit from $16,839,569 to $13,123,181.

The correction had no impact on Total operating loss and Net loss.

Recent Accounting Pronouncements

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In addition, the Company's development activities since inception have been financially sustained through debt and equity financing.

We have not yet established an ongoing source of revenues sufficient to cover our operating costs, however, as a result of the $5,899,998 raised in our two private placements in April and May, 2020, expected warrant exercises including $258,899 from warrant exercises received from March 31, 2020 to date, and our credit line, we believe we will have sufficient cash to sustain operations through at least August 14, 2021.

We have not yet established an ongoing source of revenues sufficient to cover our operating costs.

There is substantial doubt about the Company’s ability to continue as a going concern within one year after the date that the financial statements are issued.

However, the Company believes that with cash on hand, anticipated warrant exercises and our line of credit will adequately fund our operations and capital needs for the next 12 months.

NOTE 3 - PROPERTY AND EQUIPMENT

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Fixed Assets, net

Depreciation expense for the years ended March 31, 2020 and 2019 was $1,011,241 and $580,669, respectively.

Depreciation expense for the years ended March 31, 2021 and March 2020 was $997,791 (of which $986,428 was part of cost of goods sold and $11,364 was part of general and administrative expenses) and $1,011,241 (of which $1,003,240 was part of cost of goods sold and $7,791 was part of general and administrative expense), respectively.

NOTE 4 - REVOLVING FINANCING

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Events of default under the Credit Agreement, some of which are subject to certain cure periods, include a failure to pay obligations when due, the making of a material misrepresentation to SCM, the rendering of certain judgments or decrees against our company and the commencement of a proceeding for the appointment of a receiver, trustee, liquidator or conservator or filing of a petition seeking reorganization or liquidation or similar relief.

The Credit Agreement contains customary representations and warranties and various affirmative and negative covenants including the right of first refusal to provide financing for our company and the financial and loan covenants, such as the loan turnover rate, minimum EBTDA, fixed charge coverage ratio and minimum liquidity requirements.

The Credit Agreement contains customary representations and warranties and various affirmative and negative covenants including the right of first refusal to provide financing for our company and the financial and loan covenants, such as the loan turnover rate, minimum EBITDA, fixed charge coverage ratio and minimum liquidity requirements.

The Company received a waiver of its loan turnover rate covenant, which was not met, from its Lender to ensure it remained in compliance as of March 31, 2021.

In March, 2020, the Lender agreed to provide the Company a $400,000 Temporary Over Advance ("TOA") under the Credit Facility Agreement.

The TOA is to be repaid as follows:

(i) the Company shall make five (5) weekly principal payments on the TOA 2 each in the amount of $20,000 commencing on May 18, 2020 and on the first Business Day of each calendar week thereafter through and including June 15, 2020, (ii) the Company shall make ten (10) weekly principal payments on the TOA, each in the amount of $30,000, commencing on June 22, 2020 and on the first Business Day of each calendar week thereafter through and including August 24, 2020 and (iii) repay the remaining principal balance on the TOA, if any, in full on or prior to August 24, 2020.

As of March 31, 2020, the balance of the TOA was $400,000.

In March, 2020, David Guarino, the Company's Chief Financial Officer, entered into a Guarantee Agreement (the "Guarantee") with the Lender in order for the Lender to agree to provide the Company the $400,000 TOA under the Credit Agreement.

Under the Guarantee, Mr.

Guarino personally, absolutely, and unconditionally, jointly and severally, guaranteed the prompt, complete and full payment of the Company's obligations to repay the TOA only, under the Credit Agreement, with the Lender.

NOTE 5 - PAYCHECK PROTECTION PROGRAM LOAN

On April 29, 2020, Alkaline 88, LLC (the "Borrower"), a wholly owned subsidiary of the Company, signed a promissory note with MidFirst Bank (the "Lender") in the amount of $325,800, pursuant to the Paycheck Protection Program (the "PPP") under Division A, Title I of the CARES Act, which was enacted March 27, 2020.

The promissory note issued by Borrower, matures on April 29, 2022, and bears interest at a rate of 1% per annum.

Borrower shall pay principal plus interest accrued under the promissory note in 18 equal monthly installments beginning on October 29, 2020.

The Note may be prepaid by the Borrower at any time prior to maturity with no prepayment penalties.

Funds from the Loan may only be used for payroll costs, costs used to continue group health care benefits, mortgage payments, rent, utilities, and interest on other debt obligations incurred before February 15, 2020.

The Company used the entire Loan amount for qualifying expenses.

Under the terms of the PPP, the Company expects the entire balance of the Loan to be forgiven since it was entirely used for qualifying expenses as described in the CARES Act.

NOTE 6 - STOCKHOLDERS' EQUITY

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The preferred stock may be divided into and issued in series, with such designations, rights, qualifications, preferences, limitations and terms as fixed and determined by our board of directors.

Grant of Series C Convertible Preferred Stock

On March 30, 2016, the Company designated 3,000,000 shares of the authorized and unissued preferred stock of our company as "Series C Preferred Stock" by filing a Certificate of Designation with the Secretary of State of the State of Nevada.

Each share of the Series C Preferred Stock will be convertible, without the payment of any additional consideration by the holder and at the option of the holder, into one fully paid and non-assessable share of our common stock at any time after (i) the Company achieves consolidated revenue equal to or greater than $15,000,000 in any 12 month period, ending on the last day of any quarterly period of our fiscal year;

or (ii) a Negotiated Trigger Event, defined as an event upon which the Series C Preferred Stock will be convertible as may be agreed by our company and the holder in writing from time to time.

Effective as of January 13, 2020, the Company issued 1,500,000 shares of its restricted common stock to Richard A.

Wright, the Company's president, chief executive officer, and director, upon conversion of his 1,500,000 shares of Series C Preferred Stock.

These shares are subject to the resale restrictions under applicable securities laws and the Company's insider trading policy.

At March 31, 2020 and 2019, there were nil and 1,500,000 shares of Series C preferred stock outstanding that were convertible into common stock.

Grant of Series D Convertible Preferred Stock

On May 3, 2017, the Company designated 3,000,000 shares of the authorized and unissued preferred stock of our company as "Series D Preferred Stock" by filing a Certificate of Designation with the Secretary of State of the State of Nevada.

On November 2, 2017, we increased the number of authorized shares of Series D Preferred Stock in our company to 5,000,000 shares by filing an Amendment to the foregoing Certificate of Designation with the Secretary of State of the State of Nevada.

Each share of the Series D Preferred Stock will be convertible, without the payment of any additional consideration by the holder and at the option of the holder, into one fully paid and non-assessable share of our common stock at any time after (i) we achieve the consolidated revenue of our company and all of its subsidiaries equal to or greater than $40,000,000 in any 12 month period, ending on the last day of any quarterly period of our fiscal year;

On November 2, 2017, The Company increased the number of authorized shares of Series D Preferred Stock in our company to 5,000,000 shares by filing an Amendment to the foregoing Certificate of Designation with the Secretary of State of the State of Nevada.

Each share of the Series D Preferred Stock will be convertible, without the payment of any additional consideration by the holder and at the option of the holder, into one fully paid and nonassessable share of our common stock at any time after (i) the Company achieved the consolidated revenue of our company and all of its subsidiaries equal to or greater than $40,000,000 in any 12 month period, ending on the last day of any quarterly period of our fiscal year;

or (ii) a Negotiated Trigger Event, defined as an event upon which the Series D Preferred Stock will be convertible as may be agreed by our company and the holder in writing from time to time.

In May, 2017, the Company issued a total of 3,000,000 shares of our Series D Preferred Stock to our directors, officers, consultants and employees.

In November, 2017, the Company issued an additional 800,000 shares of our Series D Preferred Stock as follows:

(a) 300,000 shares to Steve Nickolas pursuant to the Settlement Agreement detailed below;

and (b) 500,000 shares to Richard A.

Wright pursuant to the Exchange Agreement and stock option forfeitures detailed below.

In January, 2020, we issued 400,000 shares of our common stock upon conversion of an aggregate of 400,000 shares of our Series D Preferred Stock without the payment of any additional consideration.

At March 31, 2020 and 2019, there were 3,400,000 and 3,800,000 shares, respectively, of Series D preferred stock outstanding that were convertible into common stock.

On March 12, 2019, the Company closed an underwritten public offering of 4,600,000 shares of our common stock.

The shares were issued at a purchase price of $2.50 per share, for net proceeds of $10,450,900.

On March 18, 2020, the Company received $1 million of the $3.9 million private placement that the Company completed on April 17, 2020 (see Note 11).

Effective as of April 1, 2020, the Company issued an aggregate of 3,400,000 shares of our common stock upon conversion of an aggregate of 3,400,000 shares of our Series D Preferred Stock without the payment of any additional consideration.

Of the 3,400,000 shares that the Company issued, 1,500,000 shares were issued to Richard A.

Wright, our president, chief executive officer and director, 1,000,000 shares were issued to David A.

Guarino, our treasurer, secretary, chief financial officer, and director and 900,000 shares were issued to three other individuals.

Private Placement

On March 18, 2020, the Company received $1 million of the $3.9 million private placement that the Company completed on April 17, 2020 (see below).

Since the private placement was not completed by March 31, 2020, the Company had $1 million in stock payable on March 31, 2020.

Common Stock Issued for Services

In the year ended March 31, 2020 and March 31, 2019, the Company did not issue any common stock for services.

However, the Company accrued $81,117 and $84,583 in the year ended March 31, 2020 and March 31, 2019, based on the market value of the common stock of the Company on the date earned, respectively under an agreement that obligates the Company to issue 276,167 shares consultants for services rendered of which approximately 247,167 shares were earned in the year ended March 31, 2020 and approximately 29,000 shares were earned in the year ended March 31, 2019.

On April 17, 2020, the Company completed a private placement of 9,750,000 units of our securities at a price of $0.40 per unit for gross proceeds of $3,900,000, of which $1,000,000 was received on March 18,2020 and thus on March 31, 2020, the Company had $1 million as stock payable.

Each unit consisted of one share of our common stock and one share purchase warrant, with each share purchase warrant entitling the holder to acquire one additional share of our common stock at a price of $0.50 per share for a period of three years.

Of the 9,750,000 units the Company issued:

(i) 1,250,000 units were issued pursuant to the exemption from registration under the Securities Act of 1933, as amended provided by Section 4(a)(2) and/or Rule 506 of Regulation D promulgated under the Securities Act of 1933, as amended to one investor who is an "accredited investor" within the respective meanings ascribed to that term in Regulation D promulgated under the Securities Act of 1933, as amended;

and (ii) 8,500,000 units were issued to 5 non-U.S.

persons (as that term is defined in Regulation S of the Securities Act of 1933, as amended) in an offshore transaction relying on Regulation S and/or Section 4(a)(2) of the Securities Act of 1933, as amended.

In connection with this private placement, the Company agreed with each subscriber who purchased these units to prepare and file a registration statement with respect to (i) the shares of our common stock comprising these units and (ii) the shares of our common stock issuable upon exercise of the share purchase warrants comprising these units with the Securities and Exchange Commission within 90 days following the closing of the private placement and agreed to use commercially reasonable efforts to have the registration statement declared effective by the Securities and Exchange Commission as soon as possible.

The Company filed the foregoing registration statement on Form S-3 with the SEC on May 27, 2020, and the registration statement was declared effective by the SEC on June 8, 2020.

On May 11, 2020, the Company completed a private placement of 4,444,440 subscription receipts at a price of $0.45 per subscription receipt for total gross proceeds of $1,999,998, which is being held in escrow until the subscription receipts are converted into common shares.

To convert these subscription receipts to common shares in the Company and thereby satisfy the escrow condition, the Company needs the approval of its shareholders by July 15, 2020, or the funds held in escrow will be refunded to the subscribers.

On July 14, 2020, after receiving the Shareholder Approval, the Company issued 4,444,440 units pursuant to the foregoing private placement completed on May 11, 2020.

Accordingly, gross proceeds of $1,999,998, previously held in escrow, have been released to our company.

Each unit consists of one share of our common stock and one transferable share purchase warrant, for no additional consideration.

Each warrant will entitle the holder thereof to acquire one share of our common stock until May 11, 2023, at a price of $0.55 per share.

In the event that our common stock has a closing price on the TSX Venture Exchange (or such other exchange on which our common stock may be traded at such time) of $1.75 or greater per share for a period of 20 consecutive trading days at any time from the closing date of the private placement, the Company may accelerate the expiry date of the warrants by giving notice to the holders thereof (by disseminating a news release advising of the acceleration of the expiry date of the warrants) and, in such case, the warrants will expire on the thirtieth day after the date of such notice.

The proceeds of the private placement are expected to be used to fund our company's general working capital and expansion of production capacity.

Of the 4,444,440 units the Company issued:

(i) 444,443 units were issued pursuant to the exemption from registration under the Securities Act of 1933, as amended provided by Section 4(a)(2) and/or Rule 506 of Regulation D promulgated under the Securities Act of 1933, as amended to three investors, each of who is an "accredited investor" within the meaning ascribed to that term in Regulation D promulgated under the Securities Act of 1933, as amended;

and (ii) 3,999,997 units were issued to three non-U.S.

In connection with the private placement, the Company agreed with each subscriber who purchased these subscription receipts to prepare and file a registration statement with respect to (i) the shares of our common stock comprising these subscription receipts and (ii) the shares of our common stock issuable upon exercise of the share purchase warrants comprising these subscription receipts with the Securities and Exchange Commission within 30 days following the satisfaction of the Release Condition and agreed to use commercially reasonable efforts to have the registration statement declared effective by the Securities and Exchange Commission as soon as possible.

The Company filed the foregoing registration statement on Form S-3 with the SEC on May 27, 2020, and the registration statement was declared effective by the SEC on June 8, 2020.

On March 1, 2021, we completed a private placement of 9,523,378 units of our securities at a price of US$1.05 per unit for gross proceeds of US$9,999,546.90.

Each Unit is comprised of one share of our common stock, one-half of one Class A common share purchase warrant (each whole Class A common share purchase warrant, a "Class A Warrant") and one-half of one Class B common share purchase warrant (each whole Class B common share purchase warrant, a "Class B Warrant").

Each Class A Warrant will entitle the holder thereof to acquire one Share (each, a "Warrant Share") at $1.25 per Warrant Share for a period commencing on the date of the closing of the Offering (the "Closing Date") and ending three (3) years following the Closing Date.

Each Class B Warrant will entitle the holder thereof to acquire one Warrant Share at $1.25 per Warrant Share for a period commencing six (6) months and one day after the Closing Date and ending three (3) years following the Closing Date.

Share Issuance

In the year ended March 31, 2020, the Company did not issue any common stock for services.

However, the Company accrued $81,117 in the year ended March 31, 2020, based on the market value of the common stock of the Company on the date as March 31, 2020, under an agreement that obligates the Company to issue 276,167 shares to consultants for services rendered of which approximately 247,167 shares were earned in the year ended March 31, 2020, and approximately 29,000 shares were earned in the year ended March 31, 2019.

On April 30, 2020, the Company issued an aggregate of 247,000 shares of our common stock to non-employees in consideration for services rendered to our company.

Effective as of May 22, 2020, the Company issued 170,000 shares of our common stock to non-employees in consideration for services to be rendered to our company.

Effective as of August 18, 2020, the Company issued 90,116 shares of our common stock to non-employees in consideration for services to be rendered to our company.

The total fair value of the shares is $155,000 based on the $1.72 per share closing price of the Company's common stock on the NASDAQ stock exchange on August 18, 2020.

These shares were issued pursuant to an agreement dated July 30, 2020, whereby an entity was engaged to provide investor relations management services through its online platform for the Company for an initial term beginning on August 3, 2020 and ending on November 3, 2020.

The Company agreed to pay a one-time annual platform access fee in the amount of $40,000 plus pay for an additional deliverables during the term in the amount of $115, 000 for a total of $155,000, which amount was paid in the form of 90,116 shares of common stock of the Company.

Effective as of July 17, 2020, August 28, 2020, September 23,2020, October 16, 2020, November 18, 2020, December 16, 2020, January 14, 2021, February 22, 2021, and March 23, 2021, the Company issued 18,779 shares, 53,256 shares, 28,985 shares, 24,844 shares, 35,398 shares, 37,735 shares, 37,037 shares, 28,169 shares, and 34,482 shares, respectively of our common stock to non-employees in consideration for services to be rendered to our company.

The total fair value of the shares is $40,000, $91,600, $40,000, $40,000, $40,000, $40,000, $40,000, $40,000, and $40,000 respectively based upon the $2.13, $1.72, $1.38, $1.61, $1.13, $1.06, $1.08, $1.42, and $1.16 per share closing price of the Company's common stock on the NASDAQ stock exchange on July 17, 2020, August 28, 2020, September 23, 2020, October 16, 2020, November 19, 2020, December 18, 2020, January 14, 2021, February 22, 2021, and March 23, 2021.

These shares were issues pursuant to a consulting agreement dated June 15, 2020, whereby the Company engaged an entity to perform consulting services for the Company for a period of one year.

The Company agreed to pay a retainer in the amount of $40,000 per month, for a total of $480,000 to be paid in the form of the common stock of the Company, which shares are to be issued monthly.

This agreement was terminated in April 2021.

Effective as of January 14, 2021, the Company issued an aggregate of 205,000 shares of our common stock to an non-employee in consideration for services rendered to our Company.

The total fair value of the shares is $221,400 based on the $1.08 per share closing price of the Company's common stock on the NASDAQ stock exchange on January 14, 2021.

Restricted Awards

On April 30, 2020, the Company granted awards of an aggregate of 1,065,000 shares of our common stock as "restricted awards" under our 2020 Equity Incentive Plan to certain directors, officers, employees, and consultants.

Of these shares, 645,000 vest on the one-year anniversary of the grant date, 200,000 vest as to 50% on the one-year anniversary of the grant date and 50% vest on the second-year anniversary of the grant date, 165,000 vest as to one-third on each anniversary of the grant date and 55,000 vest immediately.

On April 30, 2020, the Company issued the immediately vested awards, 35,000 to a non-employee, and 20,000 to an employee.

The grantees have no rights or privileges as stockholders of our company with respect to the unvested shares including, without limitation, the right to vote such shares and receive all dividends or other distributions paid with respect to such shares.

Of these restricted awards granted on April 30, 2020, an award of 200,000 shares of our common stock went to Richard Wright, our president, chief executive officer and director, and an award of 100,000 shares of our common stock went to David Guarino, our chief financial officer, secretary, treasurer, and director.

The Company granted these shares as "restricted awards" under our 2020 Equity Incentive Plan.

These shares vest on the one-year anniversary of the grant date.

The grantees have no rights or privileges as a stockholder of our company with respect to the unvested shares including, without limitation, the right to vote such shares and receive all dividends or other distributions paid with respect to such shares.

The total fair value of the 1,065,000 shares of the Company's common stock granted as "restricted awards" is $1,065,000, based upon the $1.00 per share closing price of the Company's common stock on the NASDAQ stock exchange on April 29, 2020.

On August 27, 2020, the Company granted an award of 20,000 shares of our common stock as "restricted awards" under our 2020 Equity Incentive Plan to new employee.

These shares vest one-third on each anniversary date over three years.

The grantee has no rights or privileges as stockholders of our company with respect to the unvested shares including, without limitation, the right to vote such shares and receive all dividends or other distributions paid with respect to such shares.

The total fair value of the 20,000 shares of the Company's common stock granted as "restricted awards" is $30,400 based upon the $1.52 per share closing price of the Company's common stock on the NASDAQ stock exchange on August 27, 2020.

On March 31, 2021, the Company granted awards of an aggregate of 565,000 shares of our common stock as "restricted awards" under our 2020 Equity Incentive Plan to certain directors, officers, employees, and consultants.

These shares vest on the one-year anniversary of the grant date.

Of these restricted awards granted on April 30, 2020, an award of 150,000 shares of our common stock went to Richard Wright, our president, chief executive officer and director, and an award of 100,000 shares of our common stock went to David Guarino, our chief financial officer, secretary, treasurer, and director.

The Company granted these shares as "restricted awards" under our 2020 Equity Incentive Plan.

The Company's total stock compensation expense on account of the 1,065,000 shares of its common stock granted on April 30, 2020, the 20,000 shares of its common stock granted on August 27, 2020, and the 565,000 shares of its common stock granted on March 31, 2021, as "restricted awards" for the year ended March 31, 2021, was $828,967.

Additional expense will be recognized in the next 3 fiscal years of $818,067, $56,800, and $7,417, respectively.

During October 2020, the Company issued 50,000 shares of our common stock to an employee upon his exercise of vested restricted awards under our 2020 Equity Incentive Plan.

NOTE 7 - OPTIONS AND WARRANTS

Stock Option Awards

Stock Option Plans

Effective October 7, 2013, our board of directors adopted and approved our 2013 equity incentive plan.

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Non-stock option awards mean a right granted to an award recipient under the plan, which may include the grant of stock appreciation rights, restricted awards, performance compensation awards or other equity-based awards.

Issuance of Options

Effective April 28, 2017, we granted a total of 1,790,000 stock options to our directors, officers, consultants, employees.

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The aggregate intrinsic value of outstanding options was $16,916 at March 31, 2020.

On April 3, 2020, the Company granted an aggregate of 2,737,000 stock options to certain directors, officers, consultants and employees for the purchase of up to 2,737,000 shares of our common stock pursuant to our 2018 Stock Option Plan.

Each stock option is exercisable at a price of $0.53 per share until April 2, 2030.

Of these stock options, 1,217,000 vest as to 50% on the grant date and 50% on the one-year anniversary of the grant date, 640,000 vest as to one-third on the grant date and one-third on each anniversary of the grant date and 880,000 vest as to one-third on each anniversary of the grant date.

Of these options, 250,000 were granted to Richard A.

Wright, our president, chief executive officer and director, and 150,000 were granted to David A.

Guarino, our chief financial officer, secretary, treasurer, and director.

These stock options are exercisable at the exercise price of $0.53 per share until April 2, 2030.

The stock options vest as to 50% on the date of grant and 50% on the one-year anniversary of the date of grant.

The fair value of each of the 2,737,000 stock options issued was calculated as $0.53 per share, which was the Black-Scholes valuation as of the grant date, corresponding to a total fair value of $1,450,610 for these options.

In connection with the above grant, the Company repriced a total of 600,900 stock options originally issued on April 28, 2017, from their original exercise price of $1.29 to $0.53, resulting in an additional stock compensation expense of $42,664.

Effective August 10, 2020, we granted 125,000 stock options to the new employee issued restricted shares above with an exercise price of $1.71 per share.

These options vest one-third on each anniversary of the grant date.

The fair value of these 125,000 stock options issues was calculated at $1.57 per share, which was the Black-Scholes valuation (using the exercise price of $1.57, 10 years to maturity, annual risk-free interest rate of 0.6% and annualized volatility of 107%) as of the date of grant, corresponding to a total fair value of $185,625 for these options.

Effective November 18, 2020, the Company granted 45,000 stock options to the new employee issued restricted shares above with an exercise price of $1.09 per share.

These options vest one-third on each anniversary of the grant date.

The fair value of these 45,000 stock options issues was calculated at $1.03 per share, which was the Black-Scholes valuation (using the exercise price of $1.09, 10 years to maturity, annual risk-free interest rate of 0.6% and annualized volatility of 121%) as of the date of grant, corresponding to a total fair value of $46,350 for these options.

Effective March 31, 2021, the Company granted an aggregate of 1,990,000 stock options to certain directors, officers, consultants and employees for the purchase of up to 1,990,000 shares of our common stock pursuant to our 2018 Stock Option Plan.

Each stock option is exercisable at a price of $$1.09 per share until March 31, 2031.

Of these stock options, 1,060,000 vest as to 50% on the grant date and 50% on the one-year anniversary of the grant date and the remaining amount of 930,000 options vest one-half on the first anniversary date and one-half on the second anniversary date.

Of these options, 250,000 were granted to Richard A.

Wright, our president, chief executive officer and director, and 200,000 were granted to David A.

Guarino, our chief financial officer, secretary, treasurer, and director.

These stock options are exercisable at the exercise price of $1.09 per share until March 31, 2031.

The stock options vest as to 50% on the date of grant and 50% on the one-year anniversary of the date of grant.

The fair value of each of the 1,990,000 stock options issued was calculated as $1.07 per share, which was the Black-Scholes valuation as of the grant date, corresponding to a total fair value of $2,129,300 for these options.

The Company's total stock compensation expense for the year-ended March 31, 2021, relating to stock option grants was $1,621,199.

Additional stock compensation expense will be recognized in fiscal years 2022, 2023 and 2024 of $1,679,627, $484,477, and $49,661, respectively

Exercise of Options

Effective as of April 29, 2020, the Company issued an aggregate of 116,000 shares of our common stock upon exercise of stock options for gross proceeds of $61,480.

Effective as of July 9, 2020 the Company issued an aggregate of 188,081 shares of our common stock upon a cash-less exercise of stock options.

Effective as of August 4, 2020 the Company issued an aggregate of 48,158 shares of our common stock upon a cash-less exercise of stock options.

Stock option activity summary covering options is presented in the table below:

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The Company paid finder's fees of $123,572 and issued 49,428 warrants.

Exercise of Warrants

Effective as of May 20, 2020, the Company issued an aggregate of 287,666 shares of our common stock upon exercise of our common stock purchase warrants with an exercise price of $0.90 per share for aggregate gross proceeds of $258,899.

Effective as of July 28, 2020, the Company issued an aggregate of 81,400 shares of our common stock upon exercise of our common stock purchase warrants with an exercise price of CAD$2.90 per share for aggregate gross proceeds of $172,521.

Effective as of August 5, 2020, the Company issued an aggregate of 7,999 shares of our common stock upon exercise of our common stock purchase warrants with an exercise price of CAD$2.90 per share for aggregate gross proceeds of $16,802.

Effective as of August 14, 2020, the Company issued an aggregate of 8,750,000 shares of our common stock upon exercise of our common stock purchase warrants with an exercise price of $0.50 per share for aggregate gross proceeds of $4,375,000.

Effective as of October 19, 2020, the Company issued an aggregate of 166,000 shares of our common stock upon exercise of our common stock purchase warrants with an exercise price of $0.55 per share for aggregate gross proceeds of $91,666.

Effective as of February 1, 2021, the Company issued 2,000,000 shares of our common stock upon exercise of our common stock purchase warrants with an exercise price of $0.55 per share for an aggregate gross proceeds of $1,100,000.

Effective as of February 8, 2021, the Company issued 1,777,777 shares of our common stock upon exercise of our common stock purchase warrants with an exercise price of $0.55 per share for an aggregate gross proceeds of $977,777.

The following is a summary of the status of all of our warrants as of March 31, 2021, and changes during the years ended on that date:

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Life in Years

*Note - The warrant exercise price is C$ 2.90 = U.S.

$2.06 (rate 1.40709) at 03/31/20

NOTE 8 - INCOME TAXES

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Valuation allowance

At March 31, 2020, the Company had net operating loss carryforwards of approximately $34,800,000 and net operating loss carryforwards expire in 2023 through 2037.

At March 31, 2021, the Company had net operating loss carryforwards of approximately $47 million and net operating loss carryforwards expire in 2023 through 2037.

The current year's net operating loss will carryforward indefinitely.

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The Company leases property under operating leases.

The Company leases its corporate office space with a size of 3,352 square feet leased from a third party through November, 2020 at the current rate of $7,752 per month;

increasing to $7,891 in November 2019.

The Company extended its short-term lease for a warehouse, originally due to expire on March 31, 2020 to March 2021, thus the Company adopted ASC 842 for this lease at the time of the extension in January 2020.

The lease rate for the extension was $ 3,938 per month starting April 1, 2020.

As of July 1, 2020, the Company entered into a lease for 14,530 square feet of warehouse space from a third party through December 2021 at a rate of $7,992 per month for the first twelve months, then at a rate of $8,231 per month for the last six months of the lease.

The Company determined this lease was an operating lease under ASC 842 and using an interest rate of 7%, the Company determined that the ROU for this lease was $130,989 and the lease liability for this lease was $138,266, at inception of this lease, respectively.

As of October 1, 2020, the company entered into a lease for 9,166 square feet of corporate office and warehouse space from a third party through September 2023 at a rate of $10,083 per month for the first twelve months, then at a rate of $10,385 for the next 12 months, and $10,697 for the final 12 months of the lease.

The Company determined this lease was an operating lease under ASC 842 and using an interest rate of 7%, the Company determined that the ROU for this lease was $337,932 and the lease liability for this lease was $337,932, at inception of this lease, respectively.

Previously, the Company leased its corporate office space with a size of 3,352 square feet leased from a third party which leased through November 2020 at the current rate of $7,891 per month.

As of November 1, 2020, the company entered into a lease for 2,390 square feet of corporate office space from a third party through January 2024 at a rate of $5,280 per month for the first twelve months starting January 2021, then at a rate of $5,377 for the next 12 months, and $5,497 for the final 13 months of the lease.

The Company determined this lease was an operating lease under ASC 842 and using an interest rate of 7%, the Company determined that the ROU for this lease was $177,629 and the lease liability for this lease was $177,629, at inception of this lease, respectively

At inception the ROU and Lease Liability was calculated based on the net present value of the future lease payments over the term of the lease.

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Operating Lease expense for the year ended March 31, 2021 was $235,167.

The Company also had a short-term lease ending March 31, 2020 (before extension noted above) and the lease expense for this short-term lease for the year ended was $48,607.

Operating Leases:

March 31, 2020

Operating lease right-of-use asset - current portion

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Year ending March 31, 2022 - 259,821

Year ending March 31, 2023 - 191,379

Year ending March 31, 2024 - 119,150

Total lease payments

1 unchanged sentence

Total lease obligations

Note 9 - Commitments and Contingency

On September 9, 2019, the Company, AQUAhydrate, Inc.

("AQUAhydrate") and AWC Acquisition Company Inc.

(the "Merger Sub"), a wholly-owned subsidiary of the Company, entered into an Agreement and Plan of Merger (the "Merger Agreement").

The Merger Agreement provides that, among other things, the Merger Sub will merge with and into AQUAhydrate with AQUAhydrate as the surviving corporation and a wholly-owned subsidiary of the Company (the "Merger").

Subject to the terms and conditions of the Merger Agreement, in consideration for the Merger, the Company agreed to, at the closing of the Merger (the "Closing"), issue to the holders of shares of AQUAhydrate's common stock, on a pro-rata basis, such number of shares of the Company's common stock (the "Company Common Stock") that is equal to 19,565,217 less any shares of the Company Common Stock to be directed by AQUAhydrate to be issued in connection with the Merger to any placement agents or other service providers, including Roth Capital Partners LLC and Emerald Partners Pty Limited, and to any other persons for the payment of any outstanding liabilities of AQUAhydrate.

In addition, on the Closing, the Company agreed to issue to the holders of the shares of AQUAhydrate's preferred stock (after the capital reorganization), on a pro-rata basis, an additional 3,750,000 shares of the Company Common Stock as follows:

(1) an aggregate of 1,000,000 shares of the Company Common Stock which will be subject to escrow and not released until the Company achieves trailing revenue of $60 million in any twelve month period ending on the last day of any quarterly period of the fiscal year of the Company (each, a "Period") after the Closing;

(2) an aggregate of 1,250,000 shares of the Company Common Stock which will be subject to escrow and not released until the Company achieves trailing revenue of $80 million in any Period after the Closing;

and (3) an aggregate of 1,500,000 shares of the Company Common Stock which will be subject to escrow and not released until the Company achieves trailing revenue of $100 million in any Period after the Closing, provided that these shares of the Company Common Stock will be immediately released from escrow upon a change of control of the Company.

On September 9, 2019, and subject to the Merger Agreement closing, the Company agreed to issue 750,000 stock options to purchase shares of its common stock at a price of $3.00 per share until September 9, 2029 to Mark Wahlberg pursuant to a services agreement among the Company, Mr.

Wahlberg and AQUAhydrate, Inc.

The services agreement, which requires Mr.

Wahlberg to provide certain promotional services to the Company, was entered into in connection with the Merger.

The stock options vest as follows:

(i) 25% will vest one year following the effective date of the Merger, (ii) 25% will vest once the combined company resulting from the Merger (the "Combined Company") has achieved $80 million of revenue in any 12 month period, (iii) 25% will vest once the Combined Company has achieved $100 million of revenue in any 12 month period and (iv) 25% will vest once the Combined Company has achieved $125 million in revenue in any 12 month period;

provided that all stock options will immediately vest upon a change of control of the Company.

On September 9, 2019, the Company also granted to Mr.

Wahlberg a further 250,000 stock options to purchase shares of its common stock at a price of $3.00 per share until September 9, 2029, and such stock options will vest upon a change of control of the Company.

The issuance of all of the above referenced stock options to Mr.

Wahlberg is conditioned upon Mr.

Wahlberg and the Company entering in to separate stock option grant agreements.

In the event of the termination of the Merger Agreement, the aforementioned services agreement will automatically terminate and all of the above referenced options will automatically be forfeited.

On September 9, 2019, and subject to the Merger Agreement closing, the Company agreed to issue 750,000 stock options to purchase shares of its common stock at an exercise price of $3.00 per share until September 9, 2029 to SC Beverages LLC, a company controlled by Sean Combs, pursuant to a services agreement among the Company, SC Beverages LLC and AQUAhydrate, Inc.

The services agreement, which requires Mr.

Combs to provide certain promotional services to the Company, was entered into in connection with the Merger.

The stock options vest as follows:

(i) 25% will vest one year following the effective date of the Merger, (ii) 25% will vest once the Combined Company has achieved $80 million of revenue in any 12 month period, (iii) 25% will vest once the Combined Company has achieved $100 million of revenue in any 12 month period and (iv) 25% will vest once the Combined Company has achieved $125 million in revenue in any 12 month period;

provided that all stock options will immediately vest upon a change of control of the Company.

On September 9, 2019, the Company also granted to SC Beverages LLC a further 250,000 stock options to purchase shares of its common stock at a price of $3.00 per share until September 9, 2029, and such stock options will vest upon a change of control of the Company.

The issuance of all of the above referenced stock options to SC Beverages, LLC is conditioned upon SC Beverages, LLC and the Company entering in to separate stock option grant agreements.

In the event of the termination of the Merger Agreement, the aforementioned services agreement will automatically terminate and all of the above referenced options will automatically be forfeited.

On September 9, 2019, and subject to the Merger Agreement closing, the Company agreed to issue 125,000 stock options to purchase shares of its common stock at an exercise price of $3.00 per share until September 9, 2024 to Jillian Michaels, and 125,000 stock options to purchase shares of its common stock at an exercise price of $3.00 per share until September 9, 2024 to G-Money, Inc.

pursuant to an endorsement agreement among the Company, Ms.

Michaels, G-Money, Inc., Firelight, Inc.

and AQUAhydrate, Inc.

The endorsement agreement, which requires Ms.

Michaels to provide certain promotional services to the Company, was entered into in connection with the Merger.

The stock options vest as follows:

provided that all stock options will immediately vest upon a change of control of the Company.

On September 9, 2019, the Company also granted to Ms.

Michaels a further 125,000 stock options to purchase shares of its common stock at an exercise price of $3.00 per share until September 9, 2024, and granted to G-Money, Inc.

a further 125,000 stock options to purchase shares of its common stock at a price of $3.00 per share until September 9, 2024, and such stock options will vest upon a change of control of the Company.

The issuance of all of the above referenced stock options to entities affiliated with Ms.

Michaels is conditioned upon such entities and the Company entering in to separate stock option grant agreements.

In the event of the termination of the Merger Agreement, the aforementioned services agreement will automatically terminate and all of the above referenced options will automatically be forfeited.

This merger agreement was terminated in February 2020.

NOTE 10 - LOANS PAYABLE

On December 31, 2017, the Company exercised its purchase option with Lessor to purchase all four pieces of equipment leased under a master lease agreement for a total of $160,000 (the "Purchase Payment").

The Purchase Payment bore interest of 12% per annum and was payable in eleven equal monthly installments of $14,934.00 each and one final installment of $4,040.41, with the first installment due on February 1, 2018 and on the remaining eleven installments due on the first of each month thereafter with the final installment due and payable on January 1, 2019.

As of March 31, 2020, the equipment has been paid for in-full.

NOTE 10 – COMMITMENTS AND CONTINGENCIES

The Company is involved in various legal proceedings, claims and litigation arising in the ordinary course of business.

The Company does not believe that the disposition of matters that are pending or asserted will have a material effect on its consolidated financial statements.

NOTE 11 - SUBSEQUENT EVENTS

Effective as of April 1, 2020, we issued an aggregate of 3,400,000 shares of our common stock upon conversion of an aggregate of 3,400,000 shares of our Series D Preferred Stock without the payment of any additional consideration.

Of the 3,400,000 shares that we issued, 1,500,000 shares were issued to Richard A.

Wright, our president, chief executive officer and director, 1,000,000 shares were issued to David A.

Guarino, our treasurer, secretary, chief financial officer and director and 900,000 shares were issued to three other individuals, We issued these shares pursuant to the exemption from registration under the Securities Act of 1933, as amended provided by Section 4(a)(2) and/or Section 3(a)(9) of the Securities Act of 1933, as amended.

On April 3, 2020, we granted an aggregate of 2,737,000 stock options to certain directors, officers, consultants and employees for the purchase of up to 2,737,000 shares of our common stock pursuant to our 2018 Stock Option Plan.

Each stock option is exercisable at a price of $0.53 per share until April 2, 2030.

We granted the stock options to 31 U.S.

Persons and 3 non U.S.

Persons (as that term is defined in Regulation S of the Securities Act of 1933) and in issuing securities we relied on the registration exemption provided for in Regulation S and/or Section 4(a)(2) of the Securities Act of 1933.

Of these options, 250,000 were granted to Richard A.

Wright, our president, chief executive officer and director, and 150,000 were granted to David A.

Guarino, our chief financial officer, secretary, treasurer and director.

These stock options are exercisable at the exercise price of $0.53 per share until April 2, 2030.

The stock options vest as to 50% on the date of grant and 50% on the one-year anniversary of the date of grant.

On April 8, 2020, The Alkaline Water Company Inc.

(the "Company") received a deficiency letter from the Listing Qualifications Department of The NASDAQ Stock Market (the "Staff"), notifying the Company that, for the last 30 consecutive business days, the closing bid price of the Company's common stock has not been maintained at the minimum required closing bid price of at least $1.00 per share as required for continued listing on The NASDAQ Capital Market pursuant to Listing Rule 5550(a)(2) ("Minimum Bid Price Rule").

In accordance with NASDAQ Listing Rules, the Company has been given 180 calendar days, or until October 5, 2020, to regain compliance with the Minimum Bid Price Rule.

If at any time before October 5, 2020, the closing bid price of the Company's common stock is at least $1.00 for a minimum of 10 consecutive business days, the Staff will provide written notification to the Company that it complies with the Minimum Bid Price Rule.

In the event the Company does not regain compliance, the Company may be eligible for additional time to regain compliance of up to an additional 180 calendar days.

To qualify, the Company will be required to meet the continued listing requirement for market value of publicly held shares and all other initial listing standards for The Nasdaq Capital Market, with the exception of the Minimum Bid Price Rule, and will need to provide written notice of its intention to cure the deficiency during the second compliance period, by effecting a reverse stock split, if necessary.

On June 3, 2020, the Staff notified the Company that it had regained compliance with the Minimum Bid Price Rule and thus the matter is now closed.

On April 17, 2020, we completed a private placement of 9,750,000 units of our securities at a price of $0.40 per unit for gross proceeds of $3,900,000.

Of the 9,750,000 units we issued:

and (ii) 8,500,000 units were issued to 5 non-U.S.

In connection with this private placement, we agreed with each subscriber who purchased these units to prepare and file a registration statement with respect to (i) the shares of our common stock comprising these units and (ii) the shares of our common stock issuable upon exercise of the share purchase warrants comprising these units with the Securities and Exchange Commission within 90 days following the closing of the private placement and agreed to use commercially reasonable efforts to have the registration statement declared effective by the Securities and Exchange Commission as soon as possible.

We filed the foregoing registration statement on Form S-3 with the SEC on May 27, 2020, and the registration statement was declared effective by the SEC on June 8, 2020.

Effective as of April 29, 2020, we issued an aggregate of 116,000 shares of our common stock upon exercise of stock options.

25,000 were exercised at a price of $1.29 per share for gross proceeds of $32,250 and 91,000 were exercised at a price of $0.53 per share for gross proceeds of $48,230.

On April 15, 2021, we issued an aggregate of 38,834 shares of our common stock in consideration for services rendered to our company.

We issued these shares to 7 U.S.

Persons (as that term is defined in Regulation S of the Securities Act of 1933) and in issuing these shares, we relied on the exemption from the registration requirements of the Securities Act of 1933 provided by Section 4(a)(2) of the Securities Act of 1933.

On April 30, 2020, we granted awards of an aggregate of 1,065,000 shares of our common stock as "restricted awards" under our 2020 Equity Incentive Plan to certain directors, officers, employees and consultants.

Of these shares, 645,000 vest on the one-year anniversary of the grant date, 200,000 vest as to 50% on the one-year anniversary of the grant date and 50% vest on the second year anniversary of the grant date, 165,000 vest as to one-third on each anniversary of the grant date and 55,000 vest immediately.

Of these restricted awards granted on April 30, 2020, an award of 200,000 shares of our common stock went to Richard A.

Wright, our president, chief executive officer and director, and an award of 100,000 shares of our common stock went to David A.

Guarino, our chief financial officer, secretary, treasurer and director.

We granted these shares as "restricted awards" under our 2020 Equity Incentive Plan.

These shares vest on the one-year anniversary of the grant date.

On May 11, 2020, we completed a private placement of 4,444,440 subscription receipts at a price of $0.45 per subscription receipt for total gross proceeds of $1,999,998.

On July 14, 2020 after receiving the Shareholder Approval detailed below, we issued 4,444,440 units of our company upon conversion such subscription receipts issued pursuant to the foregoing private placement completed on May 11, 2020.

Accordingly, gross proceeds of $1,999,998, previously held in escrow, have been released to our company.

Each unit consists of one share of our common stock and one transferable share purchase warrant, for no additional consideration.

Each warrant will entitle the holder thereof to acquire one share of our common stock until May 11, 2023 at a price of $0.55 per share.

In the event that our common stock has a closing price on the TSX Venture Exchange (or such other exchange on which our common stock may be traded at such time) of $1.75 or greater per share for a period of 20 consecutive trading days at any time from the closing date of the private placement, we may accelerate the expiry date of the warrants by giving notice to the holders thereof (by disseminating a news release advising of the acceleration of the expiry date of the warrants) and, in such case, the warrants will expire on the thirtieth day after the date of such notice.The proceeds of the private placement are expected to be used to fund our company's general working capital and expansion of production capacity.

Of the 4,444,440 units we issued:

and (ii) 3,999,997 units were issued to three non-U.S.

In connection with the private placement, we agreed with each subscriber who purchased these subscription receipts to prepare and file a registration statement with respect to (i) the shares of our common stock comprising these subscription receipts and (ii) the shares of our common stock issuable upon exercise of the share purchase warrants comprising these subscription receipts with the Securities and Exchange Commission within 30 days following the satisfaction of the Release Condition and agreed to use commercially reasonable efforts to have the registration statement declared effective by the Securities and Exchange Commission as soon as possible.

We filed the foregoing registration statement on Form S-3 with the SEC on May 27, 2020, and the registration statement was declared effective by the SEC on June 8, 2020.

Effective as of May 20, 2020, we issued an aggregate of 287,666 shares of our common stock upon exercise of our common stock purchase warrants with an exercise price of $0.90 per share for aggregate gross proceeds of $258,899.40.

We issued 121,000 of these shares to four non-U.S.

persons (as that term is defined in Regulation S of the Securities Act of 1933) in an offshore transaction relying on Regulation S and/or Section 4(a)(2) of the Securities Act of 1933.

We issued 166,666 of these shares to one U.S.

person (as that term is defined in Regulation S of the Securities Act of 1933) relying on the exemptions from the registration requirements of the Securities Act of 1933 provided by Section 4(a)(2) of the Securities Act of 1933 and/or Rule 506 promulgated under the Securities Act of 1933.

Effective as of May 22, 2020, we issued 170,000 shares of our common stock in consideration for services to be rendered to our company.

We issued these shares to one U.S.

person (as that term is defined in Regulation S of the Securities Act of 1933) and in issuing these shares, we relied on the exemption from the registration requirements of the Securities Act of 1933 provided by Section 4(a)(2) of the Securities Act of 1933.

On July 13, 2020, we held a special meeting of our stockholders.

At the meeting, our stockholders:

(a) approved the April 17, 2020 private placement and the issuance of all securities thereunder;

and (b) approved the May 11, 2020 private placement and the issuance of all securities thereunder (collectively, the "Shareholder Approval").

On July 16, 2020, we issued an aggregate of 18,779 shares of our common stock in consideration for services rendered to our company.

Person (as that term is defined in Regulation S of the Securities Act of 1933) and in issuing these shares, we relied on the exemption from the registration requirements of the Securities Act of 1933 provided by Section 4(a)(2) of the Securities Act of 1933 and/or Rule 506 promulgated under the Securities Act of 1933.

On May 12, 2021, The Company entered into an Endorsement Agreement (the "Endorsement Agreement"), with ABG-Shaq, LLC ("ABG-Shaq"), an entity affiliated with Shaquille O'Neal, for the personal services of Mr.

O'Neal was also appointed to the Company's Advisory Board.

Pursuant to the Endorsement Agreement, the Company received the right and license to use Mr.

O'Neal's name, nickname, initials, autograph, voice, video or film portrayals, photograph, likeness and certain other intellectual property rights, in each case, solely as approved by ABG-Shaq, in connection with the advertising, promotion and sale of the Company's branded products.

O'Neal will also provide brand ambassador services related to appearances, social media and public relations matters.

As consideration for the rights and services granted under the Endorsement Agreement, the Company agreed to pay to ABG-Shaq aggregate cash payments of $3,000,000 million over the three years of the Endorsement Agreement.

The Company will also pay expenses related to the marketing and personal services provided by Mr.

In addition, the Company agreed to grant 6,681,090 shares of Series S Preferred Stock to ABG, each vested share of which is convertible into one share of the Company's common stock.

The shares of Series S Preferred Stock will vest as to 1/3 on May 12, 2021, May 1, 2022 and May 1, 2023.

The term of the Endorsement Agreement ends on May 1, 2024.

The Endorsement Agreement also includes customary exclusivity, termination and indemnification clauses.

On June 14, 2021, we issued an aggregate of 277,777 shares of our common stock upon exercise of our common stock purchase warrants with an exercise price of $0.55 per share for aggregate gross proceeds of $152,777.35.

We issued these shares to one U.S.

On June 15, 2021, we issued an aggregate of 1,000,000 shares of our common stock upon exercise of our common stock purchase warrants with an exercise price of $0.50 per share for aggregate gross proceeds of $500,000.

We issued these shares to one non-U.S.

person (as that term is defined in Regulation S of the Securities Act of 1933) in an offshore transaction relying on Regulation S and/or Section 4(a)(2) of the Securities Act of 1933.

CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-K

Item 8. Financial Statements and Supplementary Data