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Item 8. Financial Statements and Supplementary Data

2023-08-17 compared with 2022-07-14 · 199 added, 236 removed, 412 unchanged (51% of the section changed)

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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.

(the Company) as of March 31, 2023 and 2022, and the related consolidated statements of operations, stockholders' equity, and cash flows for each of the years in the two-year period ended March 31, 2023, 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, 2023 and 2022, and the results of its operations and its cash flows for each of the years in the two-year period ended March 31, 2023, 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 incurred accumulated net losses as of March 31, 2022, 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, 2023 and the Company's Credit Agreement is currently set to expire on September 14, 2023, 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.

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(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 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 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.

• 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.

We determined that there were no critical audit matters.

/s/ Prager Metis CPAs, LLC

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Basking Ridge, NJ

July 14, 2022

August 16, 2023

THE ALKALINE WATER COMPANY INC.

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Operating lease right-of-use asset

LIABILITIES AND STOCKHOLDERS' EQUITY

LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)

Current liabilities

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Revolving financing

Notes payable, short-term

Convertible note payable, net of debt discount

PPP loan payable - current portion

Operating lease liability - current portion

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Commitments and contingencies (Note 10)

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

Stockholders' equity

Preferred stock, $ 0.001 par value, 100,000,000 shares authorized, 600,000 Series E issued and outstanding on March 31, 2023 and nil issued and outstanding on March 31, 2022 and 2,227,030 Series S issued and outstanding on March 31, 2023 and 4,453,970 issued and outstanding on March 31, 2022

Common stock, Class A - $ 0.001 par value, 13,333,333 shares authorized 10,005,379 and 7,371,454 shares issued and outstanding at March 31, 2023 and March 31, 2022, respectively

Discount on Preferred Stock

Subscription Receivable

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( 137,078,578

( 109,515,580

Total stockholders' equity

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Other (income) expense

Gain on forgiveness of PPP loan payable

Interest expense

Debt conversion expense

Gain on forgiveness of PPP loan payable

Total other (income) expense

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Balance, March 31, 2021

Preferred Stock Conversion

Preferred stock issuance

Preferred stock conversion to

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

Common shares issued to employees

Stock Option expense

Stock option exercise

Restricted Stock expense

Stock option and RSU-related stock compensation expense

Balance, March 31, 2022

Preferred stock issuance

Preferred stock conversion to common stock

( 109,515,580

Balance, March 31, 2022

( 109,515,580

Preferred stock series s vesting

Preferred stock series s conversion to common stock

Prefered stock and common shares issued in connection with issuance of prefered stock series e

Preferred stock series e conversion to common stock

Preferred stock series e dividend

Common Shares issued in connection with offerings

Common shares issued in connection with convertible note

Beneficial conversion feature

Common shares issued in connection with conversion of note payable

Common shares issued upon exercise of warrants

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

Stock option and RSU-related compensation expense and common shares issued opun conversion of RSUs

Balance, March 31, 2023

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Amortization of debt discount

Debt conversion expense

Non-cash interest expense

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Accrued expenses

Note payable, short-term

NET CASH USED IN OPERATING ACTIVITIES

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CASH FLOWS FROM FINANCING ACTIVITIES

Proceeds from (repayment of) revolving financing

Proceeds from (repayment of) revolving financing, net

Proceeds from promissory note payable

Proceeds from sale of common stock, net

Proceeds from sale of preferred stock, net

Proceeds for the exercise of warrants, net

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INTEREST PAID

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 consolidated financial statements.

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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.

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).

The Company also sells a line of Alkaline88® Sports Drinks.

Basis of presentation

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

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

A88 Infused Beverage Division Inc.

(a Nevada Corporation), A88 International, Inc.

(a Nevada Corporation), A88 Infused Products Inc.

(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).

(a Nevada Corporation) and its wholly owned subsidiary, 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., The Clean Beverage Company Inc.

The Alkaline Water 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.

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 its Alkaline 88, LLC subsidiary indicated above, unless otherwise indicated.

Use of Estimates

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Revenue Recognition

We recognize revenue when our performance obligations are satisfied.

The Company recognizes revenue when our performance obligations are satisfied.

Our primary performance 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.

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As an incentive to pay early the Company also typically provides a 2% discount if the customer pays within 10 days.

The Company estimates the amount of the discount that the customer is likely to take and records it as reduction in revenue.

The amounts are not considered material.

The Company estimates the amount of discount that the customer is likely to take and records it as a reduction in revenue.

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.

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

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

Costs incurred by the Company for shipping and handling charges are included in selling expenses and amounted to $ 13,258,138 and $ 13,850,620 (which are not included in revenue) for the years ended March 31, 2023 and 2022, respectively.

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(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;

(b) discounts to the Company's distributors for agreed portions of their promotional discounts to retailers;

and (c) the Company's agreed share of in-store activities and other promotional allowances and various fees charged to the Company directly by its 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.

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 month.

The accrual for promotional incentives is based on expected chargebacks from customers or distributors and typically deducted from invoices within 30 days of being earned.

Historically, adjustments to our estimated accrual for customers’ allowances have not been significant.

Disaggregated Net Revenues

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Concentration Risks

We have 3 major customers that together account for 43 % ( 19 %, 12 % and 12 %, respectively) of accounts receivable at March 31, 2022, and 2 customers that together account for 34 % ( 19 % and 15 %, respectively) of the total revenues earned for the year ended March 31, 2022.The Company has 3 vendors that accounted for 47 % ( 24 %, 12 %, and 11 % respectively) of purchases for the year ended March 31, 2022.

We have 1 major customers that account for 11 % of accounts receivable at March 31, 2023, and 2 customers that together account for 35 % ( 18 % and 17 %, respectively) of the total revenues earned for the year ended March 31, 2023.

The Company has 3 vendors that accounted for 38 % ( 17 %, 11 %, and 10 % respectively) of purchases for the year ended March 31, 2023.

In accordance with ASC 740 " Accounting for Income Taxes ", the provision for income taxes is computed using the asset and liability method.

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A valuation allowance is provided for the amount of deferred tax assets that, based on available evidence, are not expected to be realized.

Reverse Stock-Split

Effective April 5, 2023, we effected a fifteen for one reverse stock split of our authorized and issued and outstanding shares of common stock.

As a result, our authorized common stock has decreased from 200,000,000 shares of common stock, with a par value of $ 0.001 per share, to 13,333,333 shares of common stock, with a par value of $ 0.001 per share, and the number of our issued and outstanding shares of common stock has decreased from approximately 152,149,661 to approximately 10,185,898 .

Any fractional shares resulting from the reverse stock split was rounded up to the next nearest whole number.

Accordingly, all share and per-share amounts for the current period and prior periods have been adjusted to reflect the reverse stock split.

Basic and Diluted Loss Per Share

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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, 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.

F or the year ended March 31, 2023, and 2022, respectively, the Company had 547,354 shares and 77,224 shares relating to options that were not included in the diluted earnings per share calculation because they were antidilutive.

For the years ended March 31, 2023 and 2022, 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

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As of March 31, 2023 and 2022, 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, 2022 has been corrected for an adjustment to reclassify Sales and marketing expenses of $ 5,824,305 as a reduction of Net 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, Net Revenue decreased from $ 60,596,247 to $ 54,771,942 and Sales and marketing expenses decreased from $ 32,636,143 to $ 26,811,838 .

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

Recent Accounting Pronouncements

Recently Adopted Standards .

The following recently issued accounting standards were adopted during fiscal year 2020.

The Company adopted ASC 842 on April 1, 2019 which requires lessees to recognize right-of-use ("ROU") asset and lease liability for all leases.

The Company elected the package of transition practical expedients for existing contracts, which allowed us to carry forward our historical assessments of whether contracts are or contain leases, lease classification and determination of initial direct costs.

The adoption resulted in a lease liability of approximately $ 185,510 and a right of use asset of approximately $ 165,699 .

The Company's undiscounted minimum lease commitments under its operating leases are disclosed in Note 8.

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

Standards Required to be Adopted in Future Years.

In June 2016, the FASB issued ASU 2016-13, Financial Instruments - Credit Losses (Topic 326):

Measurement of Credit Losses on Financial Instruments.

ASU 2016-13 amends the guidance on the impairment of financial instruments.

This update adds an impairment model (known as the current expected credit losses model) that is based on expected losses rather than incurred losses.

Under the new guidance, an entity recognizes, as an allowance, its estimate of expected credit losses.

In November 2018, ASU 2016-13 was amended by ASU 2018-19, Codification Improvements to Topic 326, Financial Instruments - Credit Losses.

ASU 2018-19 changes the effective date of the credit loss standards (ASU 2016-13) to fiscal years beginning after December 15, 2021, including interim periods within those fiscal years.

Further, the ASU clarifies that operating lease receivables are not within the scope of ASC 326-20 and should instead be accounted for under the new leasing standard, ASC 842.

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 recent accounting pronouncements through March 31, 2023 and believes that none of them will have a material effect on our consolidated financial statements.

NOTE 2 - GOING CONCERN

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As a result, the Company incurred accumulated net losses from Inception (June 19, 2012) through the period ended March 31, 2023 of ($ 137,078,578 ).

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

In addition, the Company's development activities since inception have been financially sustained through debt and equity financing and the Company’s Credit Agreement is currently set to expire on September 14, 2023 .

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.

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Fixed Assets, net

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.

Depreciation expense for the years ended March 31, 2023 and March 31, 2022 was $ 900,140 and $ 801,395 (of which $ 889,888 and $ 792,268 was part of cost of goods sold and $ 10,252 and $ 9,127 was part of general and administrative expenses), respectively.

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

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On February 1, 2017, we entered into a credit and security agreement (the "Credit Agreement") with SCM Specialty Finance Opportunities Fund, L.P.

("SCM" or "Lender"), which subsequently changed its name to CNH Finance Fund I, L.P.

("SCM" or "Lender"), which subsequently changed its name to CNH Finance Fund I, L.P then to eCapital Healthcare Corp.

The Credit Agreement provides our company with a revolving credit facility (the "Revolving Facility"), the proceeds of which are to be used to repay existing indebtedness of our company, transaction fees incurred in connection with the Credit Agreement and for the working capital needs of our company.

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.

The advance under the credit agreement as of March 31, 2023 was $ 6,283,389 .

The Credit Agreement expires on July 3, 2023 and was further extended to September 14, 2023, unless earlier terminated by the parties in accordance with the terms of the Credit Agreement.

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, 2023 was 16.25%

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.

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

The Company agreed to pay to SCM monthly an unused line fee in amount equal to 0.083 % per month of the difference derived by subtracting (i) the average daily outstanding balance under the Revolving Facility during the preceding month, from (ii) the Revolving Loan Commitment Amount.

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The collateral management fee will be payable monthly in arrears.

Upon a termination of the Revolving Facility, we agreed to pay SCM a termination fee in an amount equal to 1 % of the Revolving Loan Commitment Amount if the termination occurs before July 3, 2023.

Upon termination of the Revolving Facility, we agreed to pay SCM a termination fee in an amount equal to 1 % of the Revolving Loan Commitment Amount if the termination occurs before September 14, 2023.

We must also pay certain fees in the event that receivables are not properly deposited in the appropriate lockbox account.

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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 and therefore, was in compliance with financial covenants as of March 31, 2022.

NOTE 5 - PAYCHECK PROTECTION PROGRAM LOAN

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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.

As of March 31, 2023, the Company has paid $ 2 million under this agreement.

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-fifteenth 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.

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The Series S Preferred Stock was value at $ 6,681,090 based on the Company's closing stock price of $ 15.00 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.

The Company valued the vested Series S Preferred Stock at $ 2,227,030 per year.

The Company recognized an expense of $ 2,227,030 for the year ended March 31, 2022 and March 31, 2023.

In the year ending March 31, 2024, the Company anticipates recognizing an expense in the amount of $ 2,227,030 .

Series E Convertible Preferred Stock

On November 23, 2022, we entered into private placement subscription agreements, whereby we issued an aggregate of 1,100,000 shares of our Series E Preferred Stock (“Series E Preferred Stock”) at a deemed price of $ 1.00 per share of Series E Preferred Stock for gross proceeds of $ 1,100,000 .

Pursuant to the subscription agreements, in consideration for the subscribers' execution and delivery of the subscription agreements, we also issued an aggregate of 58,667 shares of our common stock (the "Commitment Shares") at a deemed price of $ 3.75 per Commitment Share.

Holders of the Series E Preferred Stock (the "Holders") are entitled to receive dividends at the rate per share (as a percentage of the stated value per share) of 6 % per annum, payable on each anniversary date of the original issue date of shares of Series E Preferred Stock held by applicable Holders in a number of shares of our common stock per share of the Series E Preferred Stock equal to the quotient obtained by dividing the dollar amount of such dividend payment by applicable market price.

A stated value of each share of the Series E Preferred Stock is $ 1.00 .

Any accrued but unpaid dividends on the Series E Preferred Stock being converted will be paid in our common stock upon the conversion of the Series E Preferred Stock.

If we pay a dividend on our common stock while the shares of the Series E Preferred Stock are outstanding, the Holders will be entitled to receive a dividend per share of Series E Preferred Stock equal to the dividend per share of our common stock.

Such dividend will be payable on the same terms and conditions as the payment of the dividend on our common stock.

Each share of Series E Preferred Stock will be convertible, at any time after the date that is twelve months from the original issue date, at our option, into that number of units (each, a "Unit") determined by dividing the stated value of such share of Series E Preferred Stock by $ 3.75 (the "Conversion Price").

Each Unit will consist of one share of our common stock and one-half of one common stock purchase warrant with each whole common stock purchase warrant entitling the holder thereof to acquire one additional share of our common stock at an exercise price equal of 125% of the Conversion Price for a period of three years following the conversion date.

The Company identified the conversion into a Unit (one share of preferred stock and one-half warrant) as an embedded beneficial conversion feature (ASC 470), thus the Company valued (using Black-Scholes option-pricing model for common stock options and warrants) each component of the Unit.

The Warrant was valued at in the aggregate $ 211,470 and the Common Stock was valued at $ 888,530 .

Accordingly, the Company recognized an aggregate beneficial conversion feature of $ 211,470 upon issuance of the Series E Preferred Stock with a $ 211,470 increase in discount on preferred stock and a corresponding increase in additional paid-in capital.

The value of the warrant is being amortized over a 1 year (the period from issuance to the earliest allowable conversion date).

As of March 31, 2022, the discount on preferred stock was $ 76,898 .

A Holder may, at its option, at any time and from time to time after January 31, 2023, convert all, but no less than all, of shares of Series E Preferred Stock held by such Holder into that number of Units determined by dividing the stated value of such shares of Series E Preferred Stock by the Conversion Price.

Each share of the Series E Preferred Stock will automatically convert, upon the occurrence of a Fundamental Transaction (as defined below), into that number of Units determined by dividing the stated value of such share of Series E Preferred Stock by the Conversion Price.

The conversion right is subject to the beneficial ownership limitation, which will be 4.99% of the number of shares of our common stock outstanding immediately after giving effect to the issuance of shares of our common stock issuable upon conversion of the Series E Preferred Stock held by the applicable Holder.

The Holder may increase or decrease the beneficial ownership limitation upon not less than 61 days' prior notice to our company, but in no event will such beneficial ownership exceed 9.99%.

Except with respect to a Fundamental Transaction, as required by law, or as required by the articles of incorporation of our company, the Holders and the holders of our common stock will be entitled to notice of any stockholders' meeting and to vote as a single class upon any matter submitted to the stockholders for a vote, on the following basis:

(i) holders of our common stock will have one vote per share of our common stock held by them;

and (ii) holders of Series E Preferred Stock will have one vote per share of Series E Preferred Stock held by them.

With respect to a Fundamental Transaction, the Holders will be entitled to notice of any stockholders' meeting and to vote as a separate class and will have one vote per share of Series E Preferred Stock by them.

A Fundamental Transaction means (i) any merger or consolidation of our company with or into another entity (but excluding a merger effected solely for the purpose of changing the jurisdiction of the incorporation of our company or changing the name of our company or liquidating, dissolving or winding-up one or more subsidiaries of our company), (ii) any sale, lease, license, assignment, transfer, conveyance or other disposition of all or substantially all of our company's assets in one or a series of related transactions, (iii) any, direct or indirect, purchase offer, tender offer or exchange offer (whether by our company or another individual or entity) is completed pursuant to which holders of our common stock are permitted to sell, tender or exchange their shares for other securities, cash or property and has been accepted by the holders of 50% or more of the outstanding shares of our common stock, or (v) one or more related transactions consummating a stock or share purchase agreement or other business combination (including, without limitation, a reorganization, recapitalization, spin-off, merger or scheme of arrangement) with another individual or entity or group of individuals or entities whereby such other individual or entity or group acquires more than 50% of the outstanding shares of our common stock (not including any shares of common stock held by the other individual or entity making or party to, or associated or affiliated with the other individual or entity making or party to, such stock or share purchase agreement or other business combination).

The 500,000 shares of Series E Preferred Stock that was issued to one non-U.S.

person was converted on March 24, 2022 into 133,333 shares of the Company's common stock along with an issuance of 4,761 shares of the Company's common stock for the $ 10,333 dividend payable on the 500,000 shares of Series E Preferred Stock.

In addition, the Company has accrued $ 12,900 as of March 31, 2023 as a dividend payable on the remaining 600,000 shares of Series E Preferred Stock.

Private Placement

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.

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.

The subscription receipts were held in escrow until September 29, 2021 when each subscription receipt will automatically convert into one unit consisting of one fifteenth 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 fifteenth share of our common stock for a period of three years from the date of issuance thereof at a price of $18.75 per common share.

On November 23, 2022, we entered into private placement subscription agreements, whereby we issued an aggregate of 1,100,000 shares of our Series E Preferred Stock ("Series E Preferred Stock") at a price of $ 1.00 per share of Series E Preferred Stock for gross proceeds of $ 1,100,000 .

Public Offering

On May 9, 2022, we completed an underwritten public offering of 555,556 shares of our common stock.

The shares were issued at a public offering price of $ 9.00 per share, for total net proceeds to our company of $ 4,575,000 before deducting underwriting discounts, commissions and offering expenses payable by our company.

Share Issuance

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.

Effective as of April 15, 2021, the Company issued 2,589 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.

In addition, effective as of August 27, 2021 and September 29, 2021, the Company issued 4,912 and 1,075 shares of our common stock respectively 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.

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Effective as of November 19, 2021, we issued 148,469 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.

Each share purchase warrant will entitle the holder thereof to acquire one share of the Company's common stock at a price of $ 16.50 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 31,667 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.

In addition, the Company recognized a beneficial conversion feature in connection with the warrants in the amount of $ 1,524,750 which will be amortized over the term of the Notes.

For the three and six months ended September 30, 2022, the Company recognized interest expense in connection with the amortization of the beneficial conversion feature of $ 542,133 and $ 1,304,508 , respectively.

On July 25, 2022, the Company entered into debt settlement agreements the holders of the Notes in which the Company issued 10,459,354 common shares in settlement of the Company's Notes in an aggregate amount of $ 3,869,962 (principal of $ 3,800,000 and accrued and unpaid interest of $ 69,962 ) at settlement price per share of $ 0.37 .

The original conversion price per share of the Notes was $ 0.80 per share and the stock price at the date of the debt settlement was $ 0.429 per share.

The settlement of the debt at $ 0.37 per share resulted in a non-cash debt settlement expense of $ 2,405,612 .

Upon conversion of the Notes, the holders of the Notes received warrants to purchase 10,459,354 common shares in the Company at $ 1.10 per share.

The Company lowered the warrant exercise price from $ 1.10 to $ 0.44 for thirty days.

The holders of the Notes exercised all of the warrants resulting in the Company receiving net proceeds of $ 4,602,116 and the issuance of 10,459,354 shares of its common stock.

In connection with this exercise of the warrants, the Company expensed the unamortized amount of the above referenced beneficial conversion feature recognized in connection with the issuance of the warrants.

During March 2022, the Company sold a total of 18,764 common shares through the Agent under the Sales Agreement for its previously established ATM facility.

During April, 2022, the Company sold a total of 50,016 common shares through our Agent under the Sales Agreement for our previously established ATM facility for net proceeds of $ 631,203 .

Effective as of May 2, 2022, the Company issued 148,469 shares of our common stock upon conversion of 2,227,030 shares of Series S Preferred Stock without the payment of any additional consideration.

Effective as of June 15, 2022, the Company issued an aggregate of 8,111 shares of common stock upon the vesting of "restricted awards" granted April 30, 2020 as part of the Company's 2020 Equity Incentive Plan.

These shares were issued to 6 individuals.

Effective as of July 25, 2022, the Company issued an aggregate of 9,633,616 units of our company at a deemed price of $ 0.37 per unit to three creditors.

Each unit was comprised of one fifteenth share of common stock and one warrant.

Each warrant entitled the holder to purchase one fifteenth share of our common stock at a price of $ 6.60 per common share for a period of three years.

As a condition of the debt settlement, each of the creditors who has received the units has agreed to immediately exercise the creditor's respective warrants.

Accordingly, the creditors exercised warrants for an aggregate of $ 4,238,791 resulting in an aggregate of an additional 642,241 shares of our common stock being issued to such creditors.

Effective as of July 25, 2022, the Company issued 825,738 special warrants at a deemed price of $ 0.37 per special warrant to one creditor.

Each special warrant is automatically exercisable (without payment of any further consideration and subject to customary anti-dilution adjustments) into units on the date that is the earlier of:

(i) the date that is three business days following the date on which our company obtains a receipt from the British Columbia Securities Commission for a (final) short form prospectus qualifying the distribution of the units issuable upon exercise of the special warrants, and (ii) the date that is four months and one day after the issuance of the special warrants.

Each unit will be comprised of one fifteenth share of common stock and one warrant.

Each warrant will entitle the holder to one fifteenth share of our common stock at a price of $ 6.60 per common share.

As consideration for the debt settlement and the issuance of the special warrants, the creditor agreed to exercise the warrants immediately upon automatic exercise of the special warrants.

Effective as of August 29, 2022, the Company issued an aggregate of 152,381 shares of our common stock upon exercise of our common stock purchase warrants with an exercise price of $ 6.90 per one share for aggregate gross proceeds to the Company of $ 1,051,428 .

These warrants had an original exercise price of $ 18.75 per one share of common stock .

The Company reduced the exercise price of these warrants from $ 18.75 to $ 6.60 per one-fifteenth share for a period of 30 days, commencing on August 9, 2022, in order to entice the holders of these warrant to exercise their warrants.

Klutch Financial Corp., a company wholly owned by Aaron Keay, a director of the Company at the time of the exercise , exercised their 1,000,000 warrants during the aforementioned period allowed for the exercise price reduction.

The Company received net proceeds of $ 460,000 in connection with the exercise of these 1,000,000 warrants by Klutch Financial Corp.

Effective as of September 7, 2022, the Company issued an aggregate of 825,738 units of our company upon automatic conversion of our special warrants at a deemed price of $ 0.37 per unit to one creditor.

Each unit was comprised of one fifteenth share of common stock and one warrant.

Each warrant entitled the holder to purchase an additional share of our common stock at a price of US$ 0.44 per one fifteenth share of common stock for a period of three years.

Effective as of September 7, 2022, the Company issued an aggregate of 55,049 shares of our common stock upon exercise of our common stock purchase warrants with an exercise price of $ 0.44 per one fifteenth share of common stock for aggregate gross proceeds of $ 363,324 .

On January 11, 2023, the Company issued an aggregate of 5,525 shares of our common stock in consideration for services rendered to our company.

Of 5,525 shares of our common stock we issued, 1,282 shares were issued at a deemed price of $ 7.80 per share, 2,041 shares were issued at a deemed price of $ 7.35 per share and 1,932 shares were issued at a deemed price of $ 7.76 per share.

Effective as of March 26, 2023, the Company issued 133,333 units of our company upon conversion of 500,000 shares of our Series E Preferred Stock.

Each unit was comprised of one share of our common stock and one-half of one common stock purchase warrant.

Each whole common stock purchase warrant entitles the holder to purchase an additional share of our common stock at a price of $ 4.60 per share for a period of three years.

In addition, effective as of March 26, 2023, we paid dividends on these 500,000 shares of our Series E Preferred Stock in the amount of $ 10,333 by issuing 4,761 shares of our common stock at a price of $ 2.17 per share.

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.

On May 3, 2021, the Company issued 54,444 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 133,333 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 1,000 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 133,778 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 37,667 shares of our common stock to employees and directors upon the exercise of vested restricted awards under our 2020 Equity Incentive Plan.

On June 10, 2022, we granted an award of 6,667 shares of our common stock as a "restricted award" under our 2020 Equity Incentive Plan to Richard A.

Wright, a former director and executive officer of our company, pursuant to a Separation Agreement and Release of All Claims dated June 2, 2022 with Mr.

These shares vested as of June 10, 2022.

On July 29, 2022, we granted Frank Lazaran, our former president, chief executive officer, and current director, an award of 33,333 shares of our common stock as a "restricted award" under the employment agreement dated July 29, 2022 with Mr.

Lazaran and our 2020 equity incentive plan.

These shares vested as of July 29, 2022 with a value of $ 214,000 based on a common share price of $ 6.42 .

On November 16, 2022, we granted an award of 170,000 shares of our common stock as a "restricted award" under our 2020 Equity Incentive Plan to certain directors, officers and employees.

Of these restricted awards:

(i) 163,333 vest as to 50% on the grant date and 50% on the six-month anniversary of the grant date;

and (ii) 6,667 vest as to 50% on the six month anniversary of the grant date and 50% on the one year anniversary of the grant date.

On March 29, 2023, we granted an award of 6,667 shares of our common stock as a "restricted award" under our 2020 Equity Incentive Plan to a new director.

50% of these restricted awards will vest on the six-month anniversary of the date of grant and 50% will vest on the first-year anniversary of the date of grant.

NOTE 7 - OPTIONS AND WARRANTS

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Issuance of Options

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

The stock options are exercisable at the exercise price of $ 1.29 per share for a period of ten years from the date of grant.

360,000 of the stock options vest as follows:

(i) 120,000 upon the date of grant;

and (ii) 120,000 on each anniversary date of grant for 2 years.

1,430,000 of the stock options vest as follows:

(i) 357,500 upon the date of grant;

and (ii) 357,500 on each anniversary date of grant for 3 years.

We granted the stock options to 12 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.

During the years ended March 31, 2020, and March 31, 2019, a total of 239,000 and 161,100 options were exercised, respectively, all on a cashless exercise basis.

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.

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.

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.

On July 27, 2021, the Company granted an aggregate of 30,267 stock options to certain employees for the purchase of up to 30,267 shares of common stock pursuant to the 2020 Equity Incentive Plan.

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On November 11, 2021, we granted an aggregate of 8,600 stock options to five employees for the purchase of up to 8,600 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.

Each stock option is exercisable at a price of $ 24.60 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 .

Additional stock compensation expense will be recognized in fiscal years 2023, 2024 and 2025 of $ 1,077,899 , $ 281,363 , and $ 34,875 , respectively

On July 29, 2022, we granted Frank Lazaran, our president, chief executive officer and director, stock options to purchase 66,667 shares of our common stock pursuant to his employment agreement dated July 29, 2022 and our 2020 equity incentive plan.

Each stock option is exercisable at a price of $ 6.42 per share until July 29, 2032.

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

On August 23, 2022, we granted an aggregate of 148,667 stock options to certain employees for the purchase of up to 148,667 shares of our common stock pursuant to our 2020 Equity Incentive Plan.

Each stock option is exercisable at a price of $ 7.65 per share until August 23, 2032.

These stock options vest as to 50 % on each of the first and second anniversary of the grant date.

On November 16, 2022, we granted an aggregate of 60,000 stock options to certain directors, officers and employees of the Company for the purchase of up to 60,000 shares of our common stock pursuant to our 2020 Equity Incentive Plan.

Each stock option is exercisable at a price of $ 3.75 per share until November 16, 2032.

All of these stock options vest 50 % on each of the first and second anniversary of their grant date.

The Company valued the stock options (using Black-Scholes option-pricing model for common stock options and warrants) at an implied price of $ 3.30 or an aggregate value of $ 194,400 which will be expensed over the 2-year vesting period.

On March 29, 2023, we granted 6,667 stock options to a director for the purchase of up to 6,667 shares of our common stock pursuant to our 2020 Equity Incentive Plan.

Each stock option is exercisable at a price of $ 2.40 per share until March 29, 2033.

50 % of these stock options vest on the first-year anniversary of the date of grant and 50 % vest on the second year anniversary of the date of grant.

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.

The Company issued 10,845 shares of common stock during the three months ending June 30, 2021 in connection with the exercise of stock options of which 6,067 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.

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Exercisable at March 31, 2023

On March 1, 2018, pursuant to Warrant Amendment Agreements dated February 22, 2018 with 16 holders (the "Holders") of our common stock purchase warrants (the "Existing Warrants"), we issued an aggregate of 3,900,000 shares of our common stock upon exercise of the Existing Warrants at an exercise price of $ 0.50 per share for aggregate gross proceeds of $ 1,950,000 .

The Existing Warrants were issued by us as part of an offering that closed on March 4, 2016.

In addition, pursuant to the Warrant Amendment Agreements, we issued new common stock purchase warrants of our company (the "New Warrants") in the form of the Existing Warrants to purchase up to a number of shares of our common stock equal to the number of Existing Warrants exercised by the Holders, provided that (i) the exercise price of the New Warrants is $ 0.60 per share, subject to adjustment in the New Warrants, (ii) the expiry date of the New Warrants is September 1, 2019 and (iii) the New Warrants are non-transferable.

On May 31, 2018, the Company issued 5,131,665 Units of the Company at a price of $ 0.75 per Unit for aggregate gross proceeds of $ 3,848,749 .

Each Unit consisted of one share of common stock of the Company (each, a " Share ") and one-half of one share purchase warrant (each whole warrant, a "Warrant").

One Warrant entitles the holder thereof to purchase one additional Share of the Company (each, a " Warrant Share " ) at a price of $ 0.90 per Warrant Share for a period of two years from closing.

On October 1, 2018, the Company closed a non-brokered private placement financing (the "Financing") of 1,619,947 units (each, a "Unit") at a price of CDN$ 2.50 per Unit for gross proceeds of $ 2,979,596 .

Each Unit consists of one share of common stock of the Company (each, a "Share") and one share purchase warrant (each, a "Warrant"), with each Warrant entitling the holder thereof to purchase one additional Share at a price of CDN$ 2.90 per Share for a period of two years .

All securities issued in the Financing were subject to a Canadian holding period which expired on January 28, 2019.

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.

On September 29, 2021, the Company issued 4,757,381 share purchase warrants representing 317,159 common shares and at an exercise price of $ 18.75 per share.

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

Effective as of July 25, 2022, we issued 825,738 special warrants at a deemed price of $ 0.37 per special warrant to one creditor.

Each special warrant is automatically exercisable (without payment of any further consideration and subject to customary anti-dilution adjustments) into units on the date that is the earlier of:

Each unit will be comprised of one fifteenth share of common stock and one warrant.

Each warrant will entitle the holder to purchase one fifteenth share of our common stock at a price of $6.60 per share.

As consideration for the debt settlement and the issuance of the special warrants, the creditor agreed to exercise the warrants immediately upon automatic exercise of the special 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 Company issued 85,185 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 634,892 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:

The Company issued an aggregate of 44,444 shares of our common stock effective November 15,2021 to one individual upon exercise of our common stock purchase warrants for aggregate gross proceeds of $ 833,334 .

Effective as of July 25, 2022 the Company issued an aggregate of 697,290 shares of our common stock upon exercise of our common stock purchase warrants for aggregate gross proceeds of $ 4,238,791 .

Effective as of August 29, 2022, the Company issued an aggregate of 152,381 shares of our common stock upon exercise of our common stock purchase warrants for aggregate gross proceeds of $ 1,051,428 .

The following is a summary of the status of all of our warrants as of March 31, 2023, each warrant can be exchanged for one fifteenth share of our common stock, and changes during the years ended on that date:

Exercise Price

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The newly enacted federal income tax law, among other things, contains significant changes to corporate taxation, including a flat corporate tax rate of 21 %, limitation of the tax deduction for interest expense to 30 % of adjusted taxable income, limitation of the deduction for newly generated net operating losses to 80 % of current year taxable income and elimination of net operating loss ("NOL") carrybacks, future taxation of certain classes of offshore earnings regardless of whether they are repatriated, immediate deductions for certain new investments instead of deductions for depreciation expense over time, and modifying or repealing many business deductions and credits beginning in 2018.

The current income tax benefit of $ 4.5 generated for the year ended March 31, 2022 was offset by an equal increase in the valuation allowance.

The current income tax benefit of approximately $ 5.7 million generated for the year ended March 31, 2023 was offset by an equal increase in the valuation allowance.

The valuation allowance was increased due to uncertainties as to the Company's ability to generate sufficient taxable income to utilize the net operating loss carryforwards which is the only significant component of deferred taxes.

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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

As of April 1, 2022, the Company entered into a lease for 1,520 square feet of warehouse space from a third party through March 2025 at a rate of $ 1,812 per month for the first twelve months, then at a rate of $ 1,867 per month for the last next twelve months and then at a rate of $ 1,923 for the last twelve months.

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 $ 60,737 and the lease liability for this lease was $ 60,737 , 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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Year ending March 31, 2025

Total lease payments

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NOTE 11 - SUBSEQUENT EVENTS

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.

Effective as of April 4, 2023, we issued 133,333 units of our company upon conversion of 500,000 shares of our Series E Preferred Stock without the payment of any additional consideration.

Each unit was comprised of one fifteenth share of our common stock and one thirtieth of one common stock purchase warrant.

Each whole common stock purchase warrant entitles the holder to purchase an additional share of our common stock at a price of $ 4,69 per share for a period of three years.

In addition, effective as of April 4, 2023, we paid dividends on these 500,000 shares of our Series E Preferred Stock in the amount of $ 11,083 by issuing 4,598 shares of our common stock at a price of $ 2.410 per share.

Effective April 5, 2023, we effected a fifteen for one reverse stock split of our authorized and issued and outstanding shares of common stock.

Any fractional shares resulting from the reverse stock split will be rounded up to the next nearest whole number.

Our authorized preferred stock was not affected by the reverse stock split and continues to be 100,000,000 shares of preferred stock, with a par value of $ 0.001 per share.

Effective as of May 8, 2023, we issued 148,469 shares of our common stock upon conversion of 2,227,030 shares of our Series S Preferred Stock without the payment of any additional consideration.

Effective April 30 and May 1, the Company issued 1,443 and 59,995 shares of common stock upon the vesting of restricted stock awards to employees.

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