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Item 1. Financial Statements

2021-11-09 compared with 2021-08-16 · 98 added, 88 removed, 284 unchanged (40% of the section changed)

2 unchanged sentences

CONSOLIDATED BALANCE SHEETS

June 30, 2021

September 30, 2021

March 31, 2021

18 unchanged sentences

Stockholders' equity

Preferred stock, $ 0.001 par value, 100,000,000 shares authorized, 6,681,090 Series S nil issued and outstanding on June 30, 2021 and nil issued and outstanding on March 31, 2021

Common stock, Class A - $ 0.001 par value, 200,000,000 shares authorized 89,761,122 and 87,465,178 shares issued and outstanding at June 30, 2021 and March 31, 2021, respectively

Preferred stock, $ 0.001 par value, 100,000,000 shares authorized, 6,681,090 Series S issued and outstanding on September 30, 2021 and nil issued and outstanding on March 31, 2021

Common stock, Class A - $ 0.001 par value, 200,000,000 shares authorized 104,333,373 and 87,465,178 shares issued and outstanding at September 30, 2021 and March 31, 2021, respectively

Additional paid in capital

Stock Payable

Accumulated deficit

5 unchanged sentences

For the Three Months

June 30, 2021

June 30, 2020

For the Six Months

September 30, 2021

September 30, 2020

September 30, 2021

September 30, 2020

Cost of Goods Sold

24 unchanged sentences

Balance, June 30, 2020

Common shares issued in connection with offerings

Common shares issued upon exercise of warrants

Common shares issued to non-employees

Stock Option expense

Stock Option exercise

Balance, September 30, 2020

Balance, March 31, 2021

5 unchanged sentences

Balance, June 30, 2021

Common shares issued in connection with offerings

Common shares issued upon exercise of warrants

Common shares issued to non-employees

Stock option and RSU-related stock compensation expense

Stock Option exercise

Balance, September 30, 2021

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

1 unchanged sentence

CONSOLIDATED STATEMENTS OF CASH FLOWS

For the Three Months

June 30, 2021

June 30, 2020

For the Six Months

September 30, 2021

September 30, 2020

CASH FLOWS FROM OPERATING ACTIVITIES

1 unchanged sentence

Depreciation expense

Shares issue and vested, options and RSU amortized for employee and non-employee services

Shares issued and vested, options and RSU amortized for employee

and non-employee services

Non-cash lease expense

20 unchanged sentences

INTEREST PAID

SUPPLEMENTAL DISCLOSURE of NON-CASH INVESTING AND FINANCING ACTIVITIES

ISSUANCE OF COMMON SHARES TO SETTLE STOCK PAYABLE

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

11 unchanged sentences

These unaudited condensed consolidated financial statements should be read in conjunction with the Company's consolidated financial statements and the notes thereto as set forth in the Company's Form 10-K, filed with the SEC on July 2, 2021, which included all disclosures required by generally accepted accounting principles ("GAAP") In the opinion of management, these unaudited condensed consolidated financial statements contain all adjustments necessary to present fairly the Company's financial position on a consolidated basis and the consolidated results of operations, equity and cash flows for the interim periods presented.

The results of operations for the three months ended June 30, 2021 and 2020 are not necessarily indicative of expected operating results for the full year.

The information presented throughout the document as of and for the three months ended June 30, 2021 and 2020 is unaudited.

The condensed consolidated balance sheet at March 31, 2021 has been derived from the audited financial statements at that date but does not include all of the information and footnotes required by generally accepted accounting principles in the U.S.

The results of operations for the three and six months ended September 30, 2021 and 2020 are not necessarily indicative of expected operating results for the full year.

The information presented throughout the document as of and for the three and six months ended September 30, 2021 and 2020 is unaudited.

The consolidated balance sheet at March 31, 2021 has been derived from the audited financial statements at that date but does not include all of the information and footnotes required by generally accepted accounting principles in the U.S.

for complete financial statements.

1 unchanged sentence

The consolidated financial statements include the accounts of The Alkaline Water Company Inc.

(a Nevada Corporation) and its five wholly owned subsidiaries:

(a Nevada Corporation) and its six wholly owned subsidiaries:

A88 Infused Beverage Division Inc.

2 unchanged sentences

(a Nevada Corporation), AWC Acquisition Company Inc.

(a Nevada corporation), and Alkaline 88, LLC (an Arizona Limited Liability Company).

(a Nevada corporation), The Clean Beverage Company Inc (a Nevada corporation) and Alkaline 88, LLC (an Arizona Limited Liability Company).

All significant intercompany balances and transactions have been eliminated.

The Alkaline Water Company Inc., A88 Infused Beverage Division, Inc., A88 Infused Products Inc., A88 International, Inc., AWC Acquisition Company Inc., and Alkaline 88, LLC will be collectively referred herein to as the "Company".

The Alkaline Water Company Inc., A88 Infused Beverage Division, Inc., A88 Infused Products Inc., A88 International, Inc., AWC Acquisition Company Inc., The Clean Beverage Company, Inc., and Alkaline 88, LLC will be collectively referred herein to as the "Company".

Any reference herein to "The Alkaline Water Company Inc.", the "Company", "we", "our" or "us" is intended to mean The Alkaline Water Company Inc., including the subsidiaries indicated above, unless otherwise indicated.

8 unchanged sentences

The Company has not experienced any losses in such accounts and periodically evaluates the credit worthiness of the financial institutions and has determined the credit exposure to be negligible.

The Company had $ 4,497,905 and $ 9,130,956 in cash at June 30, 2021 and March 31, 2021, respectively.

The Company had $ 10,419,065 and $ 9,130,956 in cash at September 30, 2021 and March 31, 2021, respectively.

Accounts Receivable and Allowance for Doubtful Accounts

1 unchanged sentence

The carrying amount for accounts receivable approximates fair value.

Accounts receivable consisted of the following as of June 30, 2021 and March 31, 2021:

June 30, 2021

Accounts receivable consisted of the following as of September 30, 2021 and March 31, 2021:

September 30, 2021

March 31, 2021

7 unchanged sentences

The inventory balance is pledged as collateral for the Company's revolving financing as disclosed in Note 3.

As of June 30, 2021 and March 31, 2021, inventory consisted of the following:

June 30, 2021

As of September 30, 2021 and March 31, 2021, inventory consisted of the following:

September 30, 2021

March 31, 2021

10 unchanged sentences

The Company’s ability to continue as a going concern is dependent on the Company’s ability to generate revenues and raise capital.

The Company currently anticipates the release of the funds from escrow from the July 6, 2021 private placements subject to shareholder approval (Note 5) and funds from the exercise of outstanding warrants (Note 9) will adequately fund the Company’s planned operations and capital needs for the next 12 months.

The Company currently anticipates with cash on hand and funds from the exercise of outstanding warrants will adequately fund the Company's planned operations and capital needs for the next 12 months.

However, if our current plans change or are accelerated or we choose to increase our production capacity, we may seek to sell additional equity or debt securities or obtain additional credit facilities, including seeking investments from strategic investors.

9 unchanged sentences

The Company recognizes revenue per ASC 606.

The Company recognizes revenue when our performance obligations are satisfied.

Our primary obligation (the distribution and sale of beverage products) is satisfied upon the delivery of products to our customers, which is also when control is transferred.

The Company recognizes revenue when the Company's performance obligations are satisfied.

The Company's primary obligation (the distribution and sale of beverage products) is satisfied upon the delivery of products to the Company's customers, which is also when control is transferred.

The Company does not accept returns due to the nature of the product.

5 unchanged sentences

After evaluating the revenue disclosure requirements, the Company does not believe that any revenues are required to be disaggregated.

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.

Revenue consists of the gross sales price, less variable consideration, consisting of estimated allowances for which provisions are made at the time of sale, and less certain other discounts, allowances, and rebates that are accounted for as a reduction from gross revenue.

Shipping and handling charges that are billed to customers are included as a component of revenue.

Costs incurred by the Company for shipping and handling charges are included in selling expenses and amounted to $ 2,906,900 and $ 1,807,030 for the quarters ended June 30, 2021 and 2020, respectively.

Costs incurred by the Company for shipping and handling charges are included in selling expenses and amounted to $ 4,812,052 and $ 1,670,523 for the three months ended September 30, 2021 and 2020, respectively and $ 7,718,952 and $ 3,477,554 for the six months ended September 30, 2021 and 2020, respectively.

Concentration Risks

The Company has 1 major customer that accounts for 12 % of accounts receivable at June 30, 2021, and 2 customers that together account for 36 % ( 20 % and 16%, respectively) of the total revenues earned for the quarter ended June 30, 2021.

The Company has 2 vendors that accounted for 43 % ( 27 %, and 16 % respectively) of purchases for the quarter ended June 30, 2021.

The Company has 2 major customers that together account for 32 % ( 22 % and 10 %, respectively) of accounts receivable at June 30, 2020, and 2 customers that together account for 45 % ( 25 % and 20 %, respectively) of the total revenues earned for the quarter ended June 30, 2020.

The Company has 3 vendors that accounted for 55 % ( 27 %, 15 % and 13 % respectively) of purchases for the quarter ended June 30, 2020.

We have 2 major customers that together account for 30 % ( 18 % and 12 %, respectively) of accounts receivable at September 30, 2021, 3 customers that accounts for 43 % ( 21 %, 11 % and 11 %, respectively) of total revenues for the three months ended September 30, 2021 and 3 customers that accounts for 44 % ( 21 %, 13 % and 10 %, respectively) of the total revenues earned for the six months ended September 30, 2021.

The Company has 3 vendors that accounts for 53 % ( 32 %, 11 % and 10 % respectively) of purchases for the three months ended September 30, 2021 and 3 vendors that accounted for 53 % ( 30 %, 13 % and 10 % respectively) of purchases for the six months ended September 30, 2021.

We have 2 major customers that together account for 27 % ( 15 % and 12 %, respectively) of accounts receivable at September 30, 2020, 1 customer that accounts for 25 % of total revenues for the three months ended September 30, 2020 and 2 customers that accounts for 40 % ( 22 % and 18 %, respectively) of the total revenues earned for the six months ended September 30, 2020.

The Company has 3 vendors that accounts for 58 % ( 25 %, 21 % and 12 % respectively) of purchases for the three months ended September 30, 2020 and 3 vendors that accounted for 55 % ( 24 %, 19 % and 12 % respectively) of purchases for the six months ended September 30, 2020.

The Company uses an estimated annual effective tax rate method in computing its interim tax provision.

10 unchanged sentences

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

For the three months ended June 30, 2021 and 2020, respectively, the Company had 3,897,897 and 2,417,322 shares relating to options, 4,761,690 and 5,559,205 shares relating to warrants and 2,227,030 and nil convertible preferred shares that were not included in the diluted earnings per share calculation because they were antidilutive.

The Company had 4,371,379 and 1,951,490 shares relating to options, 2,087,104 and 1,734,443 shares relating to warrants and 2,227,030 and - 0 - million convertible preferred shares at September 30, 2021 and 2020, respectively that were not included in the diluted earnings per share calculation because they were antidilutive.

Business Segments

The Company operates on one segment in one geographic location - the United States of America and;

therefore, segment information is not presented.

The Company operates on one segment in one geographic location - the United States of America and therefore, segment information is not presented.

Fair Value of Financial Instruments

The carrying amounts of the company's financial instruments including accounts payable, accrued expenses, and notes payable approximate fair value due to the relative short period for maturity these instruments.

The carrying amounts of the Company's financial instruments including accounts payable, accrued expenses, and notes payable approximate fair value due to the relative short period for maturity of these instruments.

The Company does not use derivative financial instruments to hedge exposures to cash-flow, market, or foreign-currency risks.

7 unchanged sentences

Unobservable inputs in which there is little or no market data, which require the reporting entity to develop its own assumptions.

As of June 30, 2021 and 2020, the Company did not have any financial instruments that are measured on a recurring basis as Level 1, 2 or 3.

As of September 30, 2021 and 2020, the Company did not have any financial instruments that are measured on a recurring basis as Level 1, 2 or 3.

Correction of Previously Issued Financial Statements

The accompanying consolidated statement of operations for the three months ended June 30, 2020 has been corrected for the following:

a reclassification of depreciation expense of $ 225,315 to cost of goods sold related to assets utilized in the production of inventory and ad adjustment to reclassify sales and marketing expenses of $ 787,114 as a reduction in 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 accompanying consolidated statement of operations for the three and six months ended September 30, 2020 has been corrected for the following:

a reclassification of depreciation expense of $ 182,306 and $ 412,317 , respectively, to cost of goods sold related to assets utilized in the production of inventory and an adjustment to reclassify sales and marketing expenses of $ 595,384 and 1,382,508 , respectively, as a reduction in 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 quantitively 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 $ 8,369,526 to $ 8,594,841 and revenue decreased from $ 14,219,424 to $ 13,432,310 which combined resulted in a decrease of gross profit from $ 5,849,898 to $ 4,837,469 .

As a result of the correction for the three and six months ended September 30, 2020, cost of goods sold increased from $ 6,326,958 to $ 6,509,264 and from $ 14,696,484 to $ 15,104,105 , respectively, and revenue decreased from $ 10,755,946 to $ 10,160,552 and $ 24,975,370 to $ 23,592,862 , respectively which combined resulted in a decrease of gross profit from $ 4,428,988 to $ 3,651,288 and from $ 10,278,886 to $ 8,488,757 , respectively.

The correction had no impact on total operating loss and net loss.

The misstatement was identified by the Company and corrected initially in the year end results for the twelve months ending March 31, 2021.

Recent Accounting Pronouncements

9 unchanged sentences

The Company does not believe that the impact of adopting this standard will have a material effect on its financial statements.

The Company has evaluated other recent accounting pronouncements through June 30, 2021 and believes that none of them will have a material effect on our consolidated financial statements.

The Company has evaluated other recent accounting pronouncements through September 30, 2021 and believes that none of them will have a material effect on our consolidated financial statements.

NOTE 2 - PROPERTY AND EQUIPMENT

Fixed assets consisted of the following at:

June 30, 2021

March 31, 2021

Property and Equipment consisted of the following at:

September 30, 2021

Machinery and Equipment

1 unchanged sentence

Accumulated Depreciation

Fixed Assets, net

Depreciation expense for the quarter ended June 30, 2021 and 2020 was $ 159,015 and $ 227,911 , respectively.

Property and Equipment, net

Depreciation expense for the three months ended September 30, 2021 and 2020 was $ 159,015 and $ 184,406 , respectively.

Depreciation expense for the six months ended September 30, 2021 and 2020 was $ 318,030 and $ 412,317 , respectively.

NOTE 3 - REVOLVING FINANCING

5 unchanged sentences

The principal amount of the Revolving Facility outstanding bears interest at a rate per annum equal to (i) a fluctuating interest rate per annum equal at all times to the rate of interest announced, from time to time, within Wells Fargo Bank at its principal office in San Francisco as its "prime rate," plus (ii) 3.25%, payable monthly in arrears.

The interest rate as of March 31, 2021 was 7.0%

The interest rate as of September 30, 2021 and March 31, 2021 was 7.0%

To secure the payment and performance of the obligations under the Credit Agreement, we granted to SCM a continuing security interest in all of our assets and agreed to a lockbox account arrangement in respect of certain eligible receivables.

10 unchanged sentences

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 intends to use the entire Loan amount for qualifying expenses.

Under the terms of the PPP, certain amounts of the Loan may be forgiven if they are used for qualifying expenses as described in the CARES Act.

The loan was forgiven on October 14, 2021 as authorized by Section 1106 of the CARES Act.

NOTE 5 - STOCKHOLDERS EQUITY

11 unchanged sentences

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

As of June 30, 2021, the Company has paid $ 500,000 under this agreement and anticipates paying an additional $ 500,000 in the quarter ended September 30, 2020 and the Company will be paying $ 250,000 in each quarter in the fiscal years ended March 31, 2023 and March 31, 2024

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 Series S Preferred was value at $ 6,681,090 based on the Company's closing stock price of $ 1.00 on May 12, 2021.

The Company the value of the vested Series S Preferred Stock in the amount of $ 2,227,030 was recognized as a prepaid expense which is being expense over the initial twelve months of the agreement.

The prepaid expense at June 30, 2021 was $ 1,855,858 .

In the quarter ended June 30, 2021, the Company recognized an expense of $ 871,172 in connection with the agreement and anticipates recognizing an expense in quarter ended September 30, 2021 in the amount of 1,056,758 and $ 556,758 for the quarter ended December 31, 2021 and March 31, 2022 for a total expense of $ 3,041,444 for the year ended March 31, 2022.

The Company paid $ 500,000 and $ 1,000,000 in the three and six months ended September 30, 2021, respectively and the Company will be paying $ 250,000 in each quarter in the fiscal years ended March 31, 2023 and March 31, 2024

In addition, the Company issued 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, respectively.

The term of the Endorsement Agreement is three years, commencing on May 1, 2021 and terminating on May 1, 2024 (the " Term").

The Series S Preferred Stock was value at $ 6,681,090 based on the Company's closing stock price of $ 1.00 per share on May 12, 2021.

The Company valued the vested Series S Preferred Stock at $ 2,227,030 , which amount was recognized by the Company as a prepaid expense that is being expensed over the initial twelve months of the Endorsement Agreement's Term.

The prepaid expense at September 30, 2021 was $ 1,299,100 .

In the three and six months ended September 30, 2021, the Company recognized an expense of 1,056,758 and $ 1,927,929 , respectively, in connection with the agreement and anticipates recognizing an expense of 556,758 in the quarter ended December 31, 2021 and March 31, 2022 for a total expense of $ 3,041,444 for the year ended March 31, 2022.

In the years ended March 31, 2023 and March 31, 2024, the Company anticipates recognizing an expense in the amount of $ 3,227,030 and $ 3,227,030 respectively.

Private Placement

On July 6, 2021, we completed a private placement of 4,757,381 subscription receipts at a price of $ 1.05 per subscription receipt for total gross proceeds of $ 4,995,250 .

The subscription receipts were held in escrow until September 29, 2021 when each subscription receipt was converted into one unit consisting 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 for a period of three years from the date of issuance thereof at a price of $ 1.25 per share.

Share Issuance

Effective as April 15, 2021, the Company issued 38,834 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 based upon the per share closing price of the Company's common stock on the NASDAQ stock exchange April 15, 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.

Effective as of April 15, 2021, the Company issued 38,834 shares of our common stock to non-employees in consideration for services to be rendered to the Company.

The total fair value of the shares is $ 40,000 based upon the per share closing price of the Company's common stock on the NASDAQ stock exchange on April 15, 2021.

In addition, effective as of August 27, 2021 and September 29, 2021, the Company issued 73,684 and 16,118 , respectively shares of our common stock to non-employees in consideration for services rendered to the Company.

The total fair value of the shares is $ 140,000 and $ 25,789 , respectively, based upon the per share closing price of the Company's common stock on the NASDAQ stock exchange on August 20, 2021 and September 29, 2021.

All of these shares were issued 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.

The agreement has been terminated and no further amounts are owed by the Company under this agreement.

Effective as of August 20, 2021, the Company issued 83,000 shares of our common stock to non-employees in consideration for services to be rendered to the Company.

The total fair value of the shares is $ 141,930 based upon the per share closing price of the Company's common stock on the NASDAQ stock exchange on August 20, 2021.

Restricted Awards

2 unchanged sentences

The Company issued 162,668 shares of common stock during the three months ending June 30, 2021 in connection with the exercise of stock options of which 91,000 options were with a payment to the Company for the exercise price of $ 48,230 and the remaining amount of stock options were exercised as a cashless exercise under the plan.

Effective as of 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.

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.

Effective as of 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.

The Company issued 118,692 shares of common stock during the three months ending September 30, 2021 in connection with the exercise of stock options of which 55,000 options were with a payment to the Company for the exercise price of $ 59,950 and the remaining amount of stock options were exercised as a cashless exercise under the plan.

On July 27, 2021, the Company granted an aggregate of 454,000 stock options to certain employees for the purchase of up to 454,000 shares of common stock pursuant to the 2020 Equity Incentive Plan.

Each stock option is exercisable at a price of $ 1.75 per share until July 27, 2031.

The Company issued 1,277,777 shares of common stock during the three months ending June 30, 2021 in connection with the exercise of warrants with a payment to the Company for the exercise price of $ 652,777 .

The Company issued 9,523,376 shares of common stock during the three months ending September 30, 2021 in connection with the exercise of warrants with a payment to the Company for the exercise price of $ 11,904,220 .

On September 29, 2021, the Company issued 4,757,381 share purchase warrant and at exercise price of $ 1.25 per share.

These warrants were issued in connection with the private placement of common stock on September 29, 2021.

NOTE 7 - LEASES

14 unchanged sentences

The corporate office, lease also requires the Company to pay real estate taxes, common area maintenance costs and other occupancy costs which are included in the general and administrative expenses on the condensed consolidated statements of operations.

Operating Lease expense for the three months ended June 30, 2021 was $ 100,915 and for the three months ended June 30, 2020 was $ 34,754 .

Operating Leases:

June 30, 2021

Operating Lease expense for the three and six months ended September 30, 2021 was $ 91,611 and $ 192,526 , respectively.

Operating Lease expense for the three and six months ended September 30, 2020 was $ 59,461 and $ 94,215 , respectively.

September 30, 2021

Operating lease right-of-use asset - current portion

8 unchanged sentences

Operating leases

Maturities of undiscounted lease liabilities as of June 30, 2021 are as follows:

Supplemental cash flow information related to leases is as follows:

Maturities of undiscounted lease liabilities as of September 30, 2021 are as follows:

Operating Leases

9 unchanged sentences

NOTE 9 - SUBSEQUENT EVENTS

On July 6, 2021, we completed a private placement of 4,757,381 subscription receipts at a price of $ 1.05 per subscription receipt for total gross proceeds of $ 4,995,250.05 .

In the event of the occurrence of the escrow release condition (as defined below), each subscription receipt will automatically convert into one unit consisting 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 for a period of three years from the date of issuance thereof at a price of $ 1.25 per share.

The subscription amounts will be held by an escrow agent until the escrow release condition occurs.

The escrow release condition is the receipt by our company of an ordinary resolution of our stockholders approving the private placement and the issuance of the securities thereunder.

In the event that the escrow release condition is satisfied prior to 5:00 p.m.

(Vancouver time) on September 30, 2021, we will deliver a notice to the escrow agent confirming the escrow release condition has been satisfied.

Upon receipt of the notice, the escrow agent will, as soon as practicable thereafter, release the subscription amounts to our company and each subscription receipt will automatically convert into one unit without payment of any additional consideration.

If the escrow release condition is not satisfied by 5:00 p.m.

(Vancouver time) on September 30, 2021 or if we deliver a written default notice to the escrow agent that the escrow release condition will not be satisfied by that time, the subscription receipts will expire and be of no further force and effect, effective as of the earlier of (i) 5:00 p.m.

(Vancouver time) on September 30, 2021 (ii) the date of the receipt of the default notice, and the subscribers will be entitled to receive from the escrow agent a refund of the subscription amounts held in escrow, without interest and less applicable expenses.

As of August 16, 2021 since June 30, 2021, the Company has issued 4,761,688 shares in connection with the exercise of warrants at $ 1.25 per share for total proceeds received of approximately $ 6 million.

In addition, for the same time period, the Company has issued 63,692 shares in connection with the cashless exercise of 86,666 options.

On July 27, 2021, the Company granted an aggregate of 454,000 stock options to certain employees for the purchase of up to 454,000 shares of common stock pursuant to the 2020 Equity Incentive Plan.

Each stock option is exercisable at a price of $ 1.75 per share until July 27, 2031.

As of October 14, 2021, the Company's loan under the Paycheck Protection Program ("PPP") was forgiven as authorized by Section 1106 of the CARES Act.

The outstanding principal balance of $ 325,800 along with accrued interest of $ 4,751 totalling $ 330,551 was forgiven.

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-Q

Item 1. Financial Statements