What changed in this filing

/stocks — the workspaceLOADING

Item 8. Financial Statements and Supplementary Data

2022-07-14 compared with 2021-07-06 · 158 added, 102 removed, 490 unchanged (35% of the section changed)

1 unchanged sentence

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the Stockholders and the Board of Directors of

The Alkaline Water Company Inc.

To the Board of Directors and

Stockholders of The Alkaline Water Company Inc.

Opinion on 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.

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

(the Company) as of March 31, 2022 and 2021, and the related consolidated statements of operations, stockholders’ equity (deficit), and cash flows for each of the two years in the period ended March 31, 2022, 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, 2022 and 2021, and the results of its operations and its cash flows for each of the two years in the period ended March 31, 2022, 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.

As discussed in Note 2 to the financial statements, the Company has incurred accumulated net losses as of March 31, 2022, 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.

20 unchanged sentences

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.

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

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

• We selected a sample of accrued 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.

4 unchanged sentences

Basking Ridge, NJ

July 14, 2022

THE ALKALINE WATER COMPANY INC.

14 unchanged sentences

Revolving financing

PPP loan payable

Convertible note payable, net of debt discount

PPP loan payable - current portion

Operating lease liability - current portion

3 unchanged sentences

Commitments and contingencies (Note 10)

Stockholders' equity

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

Stockholders' equity (deficit)

Preferred stock, $ 0.001 par value, 100,000,000 shares authorized, 4,453,970 Series S issued and outstanding on March 31, 2022 and nil issued and outstanding on March 31, 2021

Common stock, Class A - $ 0.001 par value, 200,000,000 shares authorized 110,571,812 and 87,465,178 shares issued and outstanding at March 31, 2022 and March 31, 2021, respectively

Subscription Receivable

Additional paid in capital

Stock Payable

Accumulated deficit

( 109,515,580

Total stockholders' equity

Total liabilities and stockholders' equity

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

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

THE ALKALINE WATER COMPANY INC.

9 unchanged sentences

Total operating loss

Other expense

Other income (expense)

Gain on forgiveness of PPP loan payable

Interest expense

Total other expense

Total other income (expense)

LOSS PER SHARE (Basic and Diluted)

WEIGHTED AVERAGE SHARES OUTSTANDING (Basic and Diluted)

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

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

THE ALKALINE WATER COMPANY

2 unchanged sentences

Paid-in Capital

Stock Payable

Balance, March 31, 2020

Preferred Stock Conversion

Common shares issued in connection with offerings

Common shares issued upon exercise of warrants

Stock Compensation expense

Common shares issued to non-employees

Common shares issued to employees

Stock Option expense

Stock Option exercise

Stock Payable

Restricted Stock expense

Balance, March 31, 2021

Preferred Stock Conversion

Preferred stock issuance

Preferred stock conversion to common stock

Common shares issued in connection with offerings

Common shares issued in connection with convertible note

Beneficial conversion feature

Common shares issued upon exercise of warrants

Common shares issued to non-employees and employees

Stock Compensation expense

Common shares issued to non-employees

Stock option exercise

Stock option and RSU-related stock compensation expense and common shares issued upon conversion of RSU

Balance, March 31, 2022

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

( 109,515,580

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

THE ALKALINE WATER COMPANY INC.

6 unchanged sentences

Depreciation expense

Stock compensation expense

Right-of-use asset amortization

Shares issued and vested, options and RSU expensed for employee

and non-employee services

Gain on forgiveness of PPP loan payable

Amortization of debt discount

Non-cash interest expense

Non-cash lease expense

Changes in operating assets and liabilities:

11 unchanged sentences

Proceeds from sale of common stock, net

Proceeds from stock payable

Proceeds for the exercise of warrants, net

Proceeds for the exercise of stock options

Proceeds for the exercise of stock options, net

CASH PROVIDED BY FINANCING ACTIVITIES

3 unchanged sentences

INTEREST PAID

SUPPLEMENTAL DISCLOSURE of NON-CASH INVESTING and FINANCING ACTIVITIES

OPERATING LEASE RIGHT OF USE ASSET

OPERATING LEASE LIABILITY

SUPPLEMENTAL DISCLOSURE of NON-CASH INVESTING AND FINANCIAL ACTIVITIES

ISSUANCE OF COMMON SHARES TO SETTLE STOCK PAYABLE

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

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

THE ALKALINE WATER COMPANY INC.

3 unchanged sentences

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™".

Our hemp-derived CBD products are produced and sold in compliance with the Agriculture Improvement Act of 2018 (also known as the 2018 Farm Bill, Public Law 115-334).

The Company recently introduced and began selling hemp-derived CBD bottled water under the brand name "Alkaline88CBD™" and Alkaline88® Sports Drinks.

Our hemp-derived CBD bottled water is produced and sold in compliance with the Agriculture Improvement Act of 2018 (also known as the 2018 Farm Bill, Public Law 115-334).

Basis of presentation

3 unchanged sentences

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), 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.

29 unchanged sentences

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 evaluated its property and equipment for impairment and concluded for the year ended March 31, 2022, there was no impairment.

Stock-Based Compensation

3 unchanged sentences

Advertising costs are charged to operations when incurred.

Advertising expenses for the years ended March 31, 2021 and 2020 were $770,856 and $303,346 respectively

Advertising expenses for the years ended March 31, 2022 and 2021 were approximately $ 2.7 million and $ 0.8 million, respectively.

Revenue Recognition

10 unchanged sentences

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 $7,432,077 and $5,799,766 for the years ended March 31, 2021 and 2020, respectively.

Costs incurred by the Company for shipping and handling charges are included in selling expenses and amounted to $ 13,850,620 and $ 7,432,077 (which are not included in revenue) for the years ended March 31, 2022 and 2021, respectively.

Promotional and other allowances (variable consideration) recorded as a reduction to net sales, primarily include consideration given to the Company’s retail customers or distributors including, but not limited to the following:

(a) discounts granted off list prices to support price promotions to end-consumers by retailers;

(b) reimbursements given to the Company’s distributors for agreed portions of their promotional spend with retailers, including slotting, shelf space allowances and other fees for both new and existing products;

and (c) the Company’s agreed share of slotting, shelf space allowances and other fees given directly to retailers, club stores and/or wholesalers;

The Company’s promotional allowance programs with its retailers or distributors are executed through separate agreements in the ordinary course of business.

These agreements generally provide for one or more of the arrangements described above and are of varying durations, typically ranging from one week to one year.

The Company’s promotional and other allowances are calculated based on various programs with retailers and distributors, and accruals are established at the time of initial product sale for the Company’s anticipated liabilities.

The Company believes that adequate provision has been made for cash discounts, returns and spoilage based on the Company’s historical experience.

Disaggregated Net Revenues

The following table reflects disaggregated net revenue by sales channel for the years ended March 31, 2022 and March 31, 2021 are as follows:

Ecommerce/Other

Total Net Revenue

Concentration Risks

9 unchanged sentences

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, 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.

For the year ended March 31, 2022, and 2021, respectively, the Company had 1,158,353 shares and 2,908,233 shares relating to options that were not included in the diluted earnings per share calculation because they were antidilutive.

For the year ended March 31, 2022 and 2021, no shares relating to warrants and/or preferred stock, for either year, were not included in the diluted earnings per share calculation because they were antidilutive.

Business Segments

13 unchanged sentences

As of March 31, 2022 and 2021, 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 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

6 unchanged sentences

The Company adopted ASU 2018-07, "Improvements to Nonemployee Share-Base Payment Accounting" on April 1, 2019.

The Company did not issue any of its shares to nonemployees in exchange for goods or services during the year ended March 31, 2020.

Standards Required to be Adopted in Future Years.

8 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 2020 and believes that none of them will have a material effect on our consolidated financial statements.

NOTE 2 - CASH FLOWS

NOTE 2 - GOING CONCERN

The accompanying financial statements have been prepared assuming that the Company will continue as a going concern, which contemplates realization of assets and satisfaction of liabilities in the normal course of business.

Since its inception, the Company has been engaged substantially in financing activities, developing its business plan and building its initial customer and distribution base for its products.

Since its inception, the Company has been engaged substantially in developing its business plan and building its initial customer and distribution base for its products.

As a result, the Company incurred accumulated net losses from Inception (June 19, 2012) through the period ended March 31, 2022 of ($ 109,295,337 ).

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.

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.

These factors raise substantial doubt about the Company’s ability to continue as a going concern within one year from the of the date that the financial statements are issued.

The Company’s cash position may not be sufficient to support the Company’s daily operations.

Management plans to raise additional funds by way of a private or ongoing public offering.

While the Company believes in the viability of its strategy and its ability to generate sufficient revenue and to raise additional funds, there can be no assurances to that effect.

Should the Company fail to raise additional capital, it may be compelled to reduce the scope of its planned future business activities.

The ability of the Company to continue as a going concern is dependent upon the Company’s ability to further implement its business plan, to generate sufficient revenue and to raise additional funds by way of public and/or private offerings.

The consolidated financial statements do not include any adjustments related to the recoverability and classification of recorded asset amounts or the amounts and classification of liabilities that might be necessary should the Company be unable to continue as a going concern.

NOTE 3 - PROPERTY AND EQUIPMENT

6 unchanged sentences

Fixed Assets, net

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.

Depreciation expense for the years ended March 31, 2022 and March 31, 2021 was $ 801,395 and $ 997,791 (of which $ 792,268 was part of cost of goods sold and $ 9,127 was part of general and administrative expenses), respectively.

The Company records all property and equipment at cost less accumulated depreciation.

Depreciation is calculated using the straight-line (half-life convention) method over the estimated useful life of the assets (which the Company estimates to be three years).

The Company determined that certain of its machinery and equipment was no longer in service as of March 31, 2022, thus machinery and equipment was reduced by approximately $ 1 million with a corresponding reduction in accumulated depreciation.

NOTE 4 - REVOLVING FINANCING

3 unchanged sentences

Under the terms of the Credit Agreement, SCM has agreed to make cash advances to our company in an aggregate principal at any one time outstanding not to exceed the lesser of (i) $10 million (the "Revolving Loan Commitment Amount") and (ii) the Borrowing Base (defined to mean, as of any date of determination, 85% of net eligible billed receivables plus 65% of eligible unbilled receivables, minus certain reserves).

The advanced under the credit agreement as of March 31, 2022 was $ 7,043,870 .

The Credit Agreement expires on July 3, 2023, unless earlier terminated by the parties in accordance with the terms of the Credit Agreement.

11 unchanged sentences

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.

The Company received a waiver of its loan turnover rate covenant, which was not met, from its Lender and therefore, was in compliance with financial covenants as of March 31, 2022.

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

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 totaling $ 330,551 was forgiven.

NOTE 6 - STOCKHOLDERS' EQUITY (DEFICIT)

Preferred Shares

1 unchanged sentence

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 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, 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.

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.

Series S Convertible Preferred Stock

On May 12, 2021, The Alkaline Water Company Inc.

(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.

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.

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

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 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.

As of March 31, 2022, the Company has paid $ 1,000,000 under this agreement.

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, 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 March 31, 2022 was $ 185,584 .

The Company recognized an expense of $ 3,041,444 for the year ended March 31, 2022.

In the years ended March 31, 2023, March 31, 2024 and March 31, 2025, the Company anticipates recognizing an expense in the amount of $ 3,227,030 , $ 3,227,030 , and $ 185,586 respectively.

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.

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.

24 unchanged sentences

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.

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 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.

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.

11 unchanged sentences

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.

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.

Effective as of November 19, 2021, we issued 2,227,030 shares of our common stock to one entity upon conversion of 2,227,030 shares of our Series S Preferred Stock without the payment of any additional consideration.

On March 4, 2022, the Company entered into private placement subscription agreements, whereby it issued unsecured convertible notes (the "Notes") to three subscribers in the aggregate principal amounts of US$ 3,800,000 .

The Notes will mature on September 4, 2022 and will accrue interest at 8 % per annum, which interest will be payable on the date of the maturity.

Pursuant to the terms of the Notes, the holders of the Notes may convert all or any part of the principal amount outstanding under the Notes into units (the "Conversion Units") at a conversion price of US$ 0.80 per Conversion Unit.

Each Conversion Unit will consist of one share of the Company's common stock and one share purchase warrant.

Each share purchase warrant will entitle the holder thereof to acquire one share of the Company's common stock at a price of US$ 1.10 per share until March 4, 2025.

Pursuant to the aforementioned subscription agreements, in consideration for the subscribers' execution and delivery of the subscription agreements, the Company issued an aggregate of 475,000 shares to three subscribers which the Company recognized a debt discount in the amount of 345,455 which will be amortized over the term of the Notes.

As of March 31, 2022, the Notes on the Company's balance sheet is $3,528,141 comprised of the principal amount of the notes ($ 3,800,000 ) less the remaining debt discount ( 294,346 ) plus accrued interest ($ 22,488 ).

During March 2022, the Company sold a total of 281,459 common shares through the Agent under the Sales Agreement for its ATM facility.

Restricted Awards

20 unchanged sentences

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.

On May 3, 2021, the Company issued 816,665 shares of our common stock to employees upon the exercise of vested restricted awards under our 2020 Equity Incentive Plan.

On November 11, 2021, we granted awards of an aggregate of 2,000,000 shares of our common stock as "restricted awards" under our 2020 Equity Incentive Plan to certain directors, officers, employees, and consultants, fourteen persons in total.

These shares will vest on January 15, 2022.

The Company recognized an expense of $ 3,280,000 in the year ended March 31, 2022 in connection with this grant.

On December 20, 2021, the Issuer granted an award of 15,000 shares of common stock as a "restricted award" under their 2020 Equity Incentive Plan to a director.

The Company recognized an expense of $ 20,700 in the year ended March 31, 2022 in connection with the award.

On January 15, 2022, the Company issued 2,006,666 shares of our common stock to employees and directors upon the exercise of vested restricted awards under our 2020 Equity Incentive Plan.

On March 31, 2022, the Company issued 565,000 shares of our common stock to employees and directors upon the exercise of vested restricted awards under our 2020 Equity Incentive Plan.

NOTE 7 - OPTIONS AND WARRANTS

34 unchanged sentences

For the years ended March 31, 2020 and March 31, 2019 the Company has recognized compensation expense of $ 3,725,465 and $ 1,591,555 respectively, on the stock options granted in April 2017 that vested.

The unvested amounts will be amortized over the next quarter.

The fair value of the unvested shares is $54,202 as of March 31, 2020.

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

As of March 31, 2021, all of the stock options granted in April, 2017 have vested.

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.

23 unchanged sentences

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.

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.

On November 11, 2021, we granted an aggregate of 129,000 stock options to five employees for the purchase of up to 129,000 shares of our common stock pursuant to our 2020 Equity Incentive Plan.

Each stock option is exercisable at a price of US$ 1.64 per share until November 10, 2031.

The stock options will vest as to 50 % on each anniversary of the grant date.

The Company's total stock compensation expense for the year-ended March 31, 2021, relating to stock option grants was $ 1,697,537 .

4 unchanged sentences

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.

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.

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.

Effective as of January 31, 2022 the Company issued an aggregate of 1,617 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:

15 unchanged sentences

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

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.

Exercise of Warrants

6 unchanged sentences

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 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 .

Effective as of November 15, 2021, we issued an aggregate of 666,667 shares of our common stock to one individual upon exercise of our common stock purchase warrants with an exercise price of $ 1.25 per share for aggregate gross proceeds of $ 833,334 .

The following is a summary of the status of all of our warrants as of March 31, 2022, and changes during the years ended on that date:

18 unchanged sentences

Valuation allowance

( 16,300,000 )

At March 31, 2022, the Company had net operating loss carryforwards of approximately $ 65 million and net operating loss carryforwards expire in 2023 through 2037.

19 unchanged sentences

The Company leases property under operating leases.

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.

32 unchanged sentences

NOTE 11 - SUBSEQUENT EVENTS

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 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.

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 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.

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 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.

During April, 2022, we sold a total of 750,240 common shares through our Agent under the Sale Agreement for our previously established ATM facility.

Effective as of May 2, 2022, the Company issued 2,227,030 shares of our common stock upon conversion of 2,227,030 shares of Series S Preferred Stock without the payment of any additional consideration.

On May 4, 2022, the Company entered into an underwriting agreement (the "Underwriting Agreement") with Aegis Capital Corp.

(the "Underwriter").

Pursuant to the Underwriting Agreement, the Company agreed to sell in an underwritten offering (the "Offering") an aggregate of 8,333,334 shares of the Issuer's common stock at a public offering price of US$ 0.60 per share, for gross proceeds of approximately US$ 5,000,000 , less underwriting discounts and commissions.

On May 9, 2022 all 8,333,334 shares were issued to the applicable shareholders.

On June 2, 2022, our company and its subsidiary entered into a Separation Agreement and Release of All Claims (the "Separation Agreement") with Richard Wright ("Wright"), a former director and chief executive officer of our company.

The Separation Agreement provides, among other things, the following:

(a) total severance sum of $ 550,000 payable as follows:

(1) a single payment of $ 275,000 and (2) $ 275,000 paid over 24 full months at 11,458 per month;

(b) reimburse Wright for his legal expenses in connection with the preparation and negotiation of the Separation Agreement up to a maximum of US$ 25,000 and (c) issuance of 100,000 restricted stock units upon the effective date of the Separation Agreement.

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