UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

(Mark One)

☒	QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACMT OF 1934 For the quarterly period ended June 30, 2024

	or

☐	TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from _____ to _____

Commission File Number: 001-40578

AGRIFORCE GROWING SYSTEMS LTD.

(Exact name of registrant as specified in its charter)

British Columbia		Not Applicable
(State or other jurisdiction of incorporation or organization)		(I.R.S. Employer Identification No.)

800 – 525 West 8^th Avenue Vancouver, BC, Canada		V5Z 1C6
(Address of principal executive offices)		(Zip Code)

(604) 757-0952

(Registrant’s telephone number, including area code)

N/A

(Former name or former address and former fiscal year, if changed since last report)

Securities registered pursuant to Section 12(b) of the Act:

Title of each class		Trading Symbol(s)		Name of each exchange on which registered
Common Shares		AGRI		NASDAQ Capital Market

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes ☒ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer,” “non-accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.

	Large accelerated filer ☐	Accelerated filer ☐

	Non-accelerated filer ☒	Smaller reporting company ☒

		Emerging growth company ☒

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act). Yes ☐ No ☒

As of August 13, 2024, the registrant has 92,343,334 shares of common stock, no par value per share, outstanding.

TABLE OF CONTENTS

PART I — FINANCIAL INFORMATION

Item 1.	Financial Statements	4

	Condensed Consolidated Balance Sheets as of June 30, 2024 (unaudited) and December 31, 2023	4

	Unaudited Condensed Consolidated Statements of Comprehensive Loss for the three and six months ended June 30, 2024 and June 30, 2023	5

	Unaudited Condensed Consolidated Statement of Changes in Shareholders’ Equity for the three and six months ended June 30, 2024 and June 30, 2023	6

	Unaudited Condensed Consolidated Statements of Cash Flows for the six months ended June 30, 2024 and June 30, 2023	8

	Notes to Unaudited Condensed Financial Statements	9

Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	22

Item 3.	Quantitative and Qualitative Disclosures About Market Risk	32

Item 4.	Controls and Procedures	32

PART II — OTHER INFORMATION

Item 1.	Legal Proceedings	33

Item 1A.	Risk Factors	33

Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	33

Item 3.	Defaults Upon Senior Securities	34

Item 4.	Mine Safety Disclosures	34

Item 5.	Other Information	34

Item 6.	Exhibits	34

Cautionary Note Regarding Forward-Looking Information

This Quarterly Report on Form 10-Q contains certain “forward-looking statements” within the meaning of Section 27A of the Securities Act of 1933, as amended (the “Securities Act”), and Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”). These forward-looking statements represent our expectations, beliefs, intentions or strategies concerning future events, including, but not limited to, any statements regarding our assumptions about financial performance; the continuation of historical trends; the sufficiency of our cash balances for future liquidity and capital resource needs; the expected impact of changes in accounting policies on our results of operations, financial condition or cash flows; anticipated problems and our plans for future operations; and the economy in general or the future of the agriculture technology industry, all of which were subject to various risks and uncertainties.

When used in this Quarterly Report on Form 10- Q and other reports, statements, and information we have filed with the Securities and Exchange Commission (“Commission” or “SEC”), in our press releases, in our periodic reports on Forms 10-K and 10-Q, in oral statements made by or with the approval of an executive officer, the words or phrases “believes,” “may,” “will,” “expects,” “should,” “continue,” “anticipates,” “intends,” “will likely result,” “estimates,” “projects” or similar expressions and variations thereof are intended to identify such forward-looking statements. However, any statements contained in this Quarterly Report on Form 10-Q that are not statements of historical fact may be deemed to be forward-looking statements. We caution that these statements by their nature involve risks and uncertainties, certain of which are beyond our control, and actual results may differ materially depending on a variety of important factors.

We do not assume the obligation to update any forward-looking statement. You should carefully evaluate such statements in light of factors described in this annual report. In this Quarterly Report on Form 10-Q, AgriFORCE Growing Systems Ltd. has identified important factors that could cause actual results to differ from expected or historic results. You should understand that it is not possible to predict or identify all such factors. Consequently, you should not consider any such list to be a complete list of all potential risks or uncertainties.

PART I — FINANCIAL INFORMATION

Item 1. Financial Statements

AGRIFORCE GROWING SYSTEMS LTD.

CONDENSED CONSOLIDATED BALANCE SHEETS

(Expressed in US dollars)

	Note		June 30, 2024			December 31, 2023
			(Unaudited)
ASSETS

Current
Cash			$	2,937,496		$	3,878,578
Accounts receivable				8,479
Other receivable				25,207			30,859
Prepaid expenses and other current assets		3		297,609			272,872
Inventories		4		4,621			38,857
Total current assets				3,273,412			4,221,166

Non-current
Property and equipment, net				3,574			11,801
Intangible asset, net		5		11,981,175			12,733,885
Lease deposit				78,893			63,708
Construction in progress				111,425			113,566
Investment		6		216,263			223,801
Total assets			$	15,664,742		$	17,367,927

LIABILITIES AND SHAREHOLDERS’ EQUITY

Current
Accounts payable and accrued liabilities		7	$	1,716,274		$	1,942,011
Debentures		8		925,882			4,084,643
Contract liabilities		9		-			15,336
Total current liabilities				2,642,156			6,041,990

Non-current
Lease deposit				24,819			25,684
Derivative liabilities		11		1,630,940			2,690,308
Long term loan		10		43,837			45,365
Total liabilities				4,341,752			8,803,347
Commitments and contingencies		15		-			-

Shareholders’ equity
Common shares, no par value per share - unlimited shares authorized; 84,333,892 and 5,841,045 shares issued and outstanding at June 30, 2024 and December 31, 2023, respectively*		12		61,085,023			49,828,942
Additional paid-in-capital				2,953,883			3,472,444
Obligation to issue shares		12		86,432			97,094
Accumulated deficit				(52,067,103	)		(44,507,304	)
Accumulated other comprehensive loss				(735,245	)		(326,596	)
Total shareholders’ equity				11,322,990			8,564,580

Total liabilities and shareholders’ equity			$	15,664,742		$	17,367,927

*	reflects the 1:50 reverse stock split effected on October 11, 2023.

The accompanying notes are an integral part of these Unaudited Condensed Consolidated Interim Financial Statements.

AGRIFORCE GROWING SYSTEMS LTD.

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSS (Unaudited)

(Expressed in US dollars)


	Three Months Ended June 30,						Six Months Ended June 30,
	2024			2023			2024			2023

REVENUE		41,315			-			41,315			-

COST OF SALES		33,731			-			33,731			-

Gross profit		7,584			-			7,584			-

OPERATING EXPENSES
Wages and salaries	$	330,616		$	798,926		$	719,220		$	1,714,460
Consulting		83,281			675,905			186,196			885,020
Professional fees		159,337			460,984			329,729			748,350
Office and administrative		285,056			293,768			580,258			629,529
Investor and public relations		17,366			121,947			42,646			389,865
Depreciation and amortization		162,941			171,839			329,939			340,599
Share based compensation		38,782			205,157			64,122			486,648
Sales and marketing		50,598			61,748			75,826			162,326
Lease expense		14,406			73,194			58,576			149,274
Travel and entertainment		3,475			28,481			8,158			101,125
Shareholder and regulatory		29,485			8,422			85,449			78,817
Research and development		509			13,235			4,094			49,358
Operating expenses		1,175,852			2,913,606			2,484,213			5,735,371

Operating loss		(1,168,268	)		(2,913,606	)		(2,476,629	)		(5,735,371	)

OTHER EXPENSES
Accretion of interest on debentures (Note 8)		838,876			2,107,808			2,203,081			3,980,278
Loss on conversion of convertible debt (Note 8)		1,119,750			13,902			1,392,482			433,605
Loss on debt extinguishment (Note 8)		1,887,936			-			2,298,369			-
Change in fair value of derivative liabilities (Note 11)		(716,695	)		(2,458,993	)		(692,926	)		(5,833,025	)
Foreign exchange gain		(32,121	)		(33,409	)		(86,752	)		(26,789	)
Other loss		-			-			4,252			-
Write-off of inventory		-			-			38,470			-
Write-off of deposit (Note 3)		-			-			-			12,000
Other income		(33,915	)		(15,942			(73,806	)		(54,415	)

Net loss	$	(4,232,099	)	$	(2,526,972	)	$	(7,559,799	)	$	(4,247,025	)

Other comprehensive income (loss)
Foreign currency translation		(128,744	)		196,119			(408,649	)		311,005

Comprehensive loss attributable to common shareholders	$	(4,360,843	)	$	(2,330,853	)	$	(7,968,448	)	$	(3,936,020	)

Basic and diluted net loss attributed to common share	$	(0.09	)	$	(5.06	)	$	(0.32	)	$	(8.72	)

Weighted average number of common shares outstanding – basic and diluted*		45,875,887			499,461			23,415,625			487,085

*	reflects the 1:50 reverse stock split effected on October 11, 2023.

The accompanying notes are an integral part of these Unaudited Condensed Consolidated Interim Financial Statements.

AGRIFORCE GROWING SYSTEMS LTD.

CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS’ EQUITY (unaudited)

(Expressed in US dollars, except share numbers)

For the three and six months ended June 30, 2024 and 2023

	# of Shares*		Amount		paid-in- capital			to issue shares		Accumulated deficit			comprehensive income			shareholders’ equity
	For the three months ended June 30
	Common shares				Additional			Obligation					Accumulated other			Total
	# of Shares*		Amount		paid-in- capital			to issue shares		Accumulated deficit			comprehensive income			shareholders’ equity

Balance, April 1, 2024		22,573,938	$	53,880,259	$	3,456,475		$	44,214	$	(47,835,004	)	$	(606,501	)	$	8,939,443
Shares issued for conversion of convertible debt		61,505,497		6,651,170		-			-		-			-			6,651,170
Shares issued for compensation		232,368		20,541		-			42,218		-			-			62,759
Shares issued for consulting services		15,664		2,624		-			-		-			-			2,624
Shares issued on conversion of vested prefunded warrants		6,425		530,429		(530,429	)		-		-			-			-
Share based compensation		-		-		27,837			-		-			-			27,837
Net loss		-		-		-			-		(4,232,099	)		-			(4,232,099	)
Foreign currency translation		-		-		-			-		-			(128,744	)		(128,744	)
Balance, June 30, 2024		84,333,892	$	61,085,023	$	2,953,883		$	86,432	$	(52,067,103	)	$	(735,245	)	$	11,322,990

	For the six months ended June 30
Balance, January 1, 2024	5,841,045	$	49,828,942	$	3,472,444		$	97,094		$	(44,507,304	)	$	(326,596	)	$	8,564,580
Shares issued for conversion of convertible debt	77,999,099		10,624,607		-			-			-			-			10,624,607
Shares issued for compensation	345,013		73,421		-			(10,662	)		-			-			62,759
Shares issued for consulting services	142,310		27,624		-			-			-			-			27,624
Shares issued on conversion of vested prefunded warrants	6,425		530,429		(530,429	)											-
Share based compensation	-		-		11,868			-			-			-			11,868
Net loss	-		-		-			-			(7,559,799	)		-			(7,559,799	)
Foreign currency translation	-		-					-			-			(408,649	)		(408,649	)
Balance, June 30, 2024	84,333,892	$	61,085,023	$	2,953,883		$	86,432		$	(52,067,103	)	$	(735,245	)	$	11,322,990

	# of Shares*		Amount		paid-in- capital			to issue shares		Accumulated deficit			comprehensive income			shareholders’ equity
	For the three months ended June 30
	Common shares				Additional			Obligation					Accumulated other			Total
	# of Shares*		Amount		paid-in- capital			to issue shares		Accumulated deficit			comprehensive income			shareholders’ equity

Balance, April 1, 2023		366,291	$	31,283,690	$	11,947,606		$	-	$	(34,494,147	)	$	(527,824	)	$	8,209,325
Shares issued for conversion of convertible debt		36,111		695,128		-			-		-			-			695,128
Shares issued for compensation		-		-		-			97,837		-			-			97,837
Shares issued for cash, net of issuance costs		21,475		299,599		-			-		-			-			299,599
Shares issued in private placement		20,000		204,880		-			-		-			-			204,880
Shares issued for consulting services		250		26,000		-			-		-			-			26,000
Shares issued on conversion of vested prefunded warrants		10,208		576,770		(576,770	)		-		-			-			-
Share based compensation		-		-		107,320			-		-			-			107,320
Net loss		-		-		-			-		(2,526,972	)		-			(2,526,972	)
Foreign currency translation		-		-		-			-		-			196,119			196,119
Balance, June 30, 2023		454,335	$	33,086,067	$	11,478,156		$	97,837	$	(37,021,119	)	$	(331,705	)	$	7,309,236

	For the six months ended June 30
Balance, January 1, 2023	315,916	$	27,142,762	$	16,816,695		$	-	$	(32,774,094	)	$	(642,710	)	$	10,542,653
Balance	315,916	$	27,142,762	$	16,816,695		$	-	$	(32,774,094	)	$	(642,710	)	$	10,542,653
Shares issued for conversion of convertible debt	50,327		1,743,701		-			-		-			-			1,743,701
Shares issued for compensation	3,118		105,512		-			97,837		-			-			203,349
Shares issued for cash, net of issuance costs	21,475		299,599		-			-		-			-			299,599
Shares issued in private placement	20,000		204,880		-			-		-			-			204,880
Shares issued for consulting services	550		53,735		-			-		-			-			53,735
Shares issued on conversion of vested prefunded warrants	42,949		3,535,878		(3,535,878	)		-		-			-			-
Cancelled prefunded warrants	-		-		(2,085,960	)		-		-			-			(2,085,960
Share based compensation	-		-		283,299			-		-			-			283,299
Net loss	-		-		-			-		(4,247,025	)		-			(4,247,025
Foreign currency translation	-		-		-			-		-			311,005			311,005
Balance, June 30, 2023	454,335	$	33,086,067	$	11,478,156		$	97,837	$	(37,021,119	)	$	(331,705	)	$	7,309,236
Balance	454,335	$	33,086,067	$	11,478,156		$	97,837	$	(37,021,119	)	$	(331,705	)	$	7,309,236

*	reflects the 1:50 reverse stock split effected on October 11, 2023.

The accompanying notes are an integral part of these Unaudited Condensed Consolidated Interim Financial Statements.

AGRIFORCE GROWING SYSTEMS LTD.

CONDENSED CONSOLIDATED INTERIM STATEMENTS OF CASH FLOWS (Unaudited)

(Expressed in US Dollars)


			For the six months ended June 30,
	Note		2024			2023

CASH FLOWS FROM OPERATING ACTIVITIES
Net loss for the period			$	(7,559,799	)	$	(4,247,025	)
Adjustments to reconcile net loss to net cash used in operating activities:
Depreciation and amortization				329,939			340,599
Share based compensation				11,868			283,299
Shares issued for consulting services				27,624			53,735
Shares issued for compensation				62,759			105,512
Amortization of debt issuance costs				2,149,678			3,808,460
Change in fair value of derivative liabilities		11		(692,926	)		(5,833,025	)
Loss on debt conversion		8		1,392,482			433,605
Loss on debt extinguishment		8		2,298,369			-
Loss on disposal of fixed assets				4,252			-
Write-off of deposit				-			12,000
Obligation to issue shares				-			97,837
Changes in operating assets and liabilities:
Accounts receivable				(8,479	)		-
Other receivables				5,652			(12,857	)
Prepaid expenses and other current assets				(24,737	)		388,318
Inventories				34,236			-
Advance				-			(225,000	)
Accounts payable and accrued liabilities				(225,737	)		446,943
Lease deposit asset				(18,382	)		-
Contract liabilities				(15,336	)		-
Right-of-use asset				-			57,428
Lease liabilities				-			(49,825	)
Net cash used in operating activities				(2,228,537	)		(4,339,996	)

CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from common shares issued for cash				-			565,741
Share issuance costs paid				-			(16,142	)
Proceeds from debentures – net of discount		8		2,250,000			4,615,385
Repayment of convertible debentures		8		(802,282	)		(1,741,950	)
Financing costs of debentures		8		(84,463	)		(325,962	)
Net cash provided by financing activities				1,363,255			3,097,072

Effect of exchange rate changes on cash and cash equivalent				(75,800	)		(21,056	)
Change in cash				(941,082	)		(1,263,980	)
Cash, beginning of period				3,878,578			2,269,320
Cash, end of period			$	2,937,496		$	1,005,340

Supplemental cash flow information:
Cash paid during the period for interest			$	53,403		$	171,818

Supplemental disclosure of non-cash investing and financing transactions
Initial fair value of debenture warrants (“Fifth Tranche Warrants”)			$	564,000			-
Initial fair value of conversion feature of debentures (“Fifth Tranche Debentures”)			$	359,000			-
Initial fair value of debenture warrants (“Sixth Tranche Warrants”)			$	242,000			-
Initial fair value of conversion feature of debentures (“Six Tranche Debentures”)			$	198,000			-
Initial fair value of debenture warrants (“Seventh Tranche Warrants”)			$	369,000			-
Initial fair value of conversion feature of debentures (“Seventh Tranche Debentures”)			$	297,000			-
Shares issued for conversion of convertible debt			$	10,624,607		$	1,743,701
Reclassified accrued construction in progress fees			$	-		$	39,875

The accompanying notes are an integral part of these Unaudited Condensed Consolidated Interim Financial Statements.

NOTES TO THE CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS

For the six months ended June 30, 2024 and 2023 (unaudited)

(Expressed in US Dollars, except where noted)

1. NATURE OF OPERATIONS AND BASIS OF PREPARATION

Business Overview

AgriFORCE Growing Systems Ltd. (“AgriFORCE™” or the “Company”) was incorporated as a private company by Articles of Incorporation issued pursuant to the provisions of the Business Corporations Act (British Columbia) on December 22, 2017. The Company’s registered and records office address is at 800 – 525 West 8^th Avenue, Vancouver, British Columbia, Canada, V5Z 1C6.

The Company is an innovative agriculture-focused technology company that delivers reliable, financially robust solutions for high value crops through our proprietary facility design and automation Intellectual Property to businesses and enterprises globally through our AgriFORCE™ Solutions division (“Solutions”) and delivers nutritious food products through our AgriFORCE™ Brands division (“Brands”). During 2023, the Company launched its UN(THINK) Awakened Flour™ flour, which is a nutritious flour that provides many health advantages over traditional flour.

Solutions intends to operate in the plant based pharmaceutical, nutraceutical, and other high value crop markets using its unique proprietary facility design and hydroponics based automated growing system that enable cultivators to effectively grow crops in a controlled environment (“FORCEGH+™”). The Company has designed FORCEGH+™ facilities to produce in virtually any environmental condition and to optimize crop yields to as near their full genetic potential possible whilst substantially eliminating the need for the use of pesticides and/or irradiation. The Company also has a global license to sell and distribute hydroxyl devices. During 2023, the Company completed sales and deliveries of its hydroxyl devices.

Brands is focused on the development and commercialization of plant-based ingredients and products that deliver healthier and more nutritious solutions. We will market and commercialize both branded consumer product offerings and ingredient supply.

Basis of Presentation

The accompanying Unaudited Condensed Consolidated Interim Financial Statements and related financial information of AgriFORCE Growing Systems Ltd. should be read in conjunction with the audited financial statements and the related notes thereto for the years ended December 31, 2023 and 2022 included in the Company’s Annual Report on Form 10-K filed with the Securities and Exchange Commission (“SEC”) on April 1, 2024. These unaudited interim financial statements have been prepared in accordance with the rules and regulations of the United States Securities and SEC for interim financial information. Accordingly, they do not include all of the information and footnotes required by the accounting principles generally accepted in the United States of America (“U.S. GAAP”) for complete financial statements.

In the opinion of management, the accompanying interim financial statements contain all adjustments which are necessary to state fairly the Company’s financial position as of June 30, 2024 and December 31, 2023, and the results of its operations and cash flows during the six months ended June 30, 2024 and 2023. Such adjustments are of a normal and recurring nature. The results for the six months ended June 30, 2024 are not necessarily indicative of the results to be expected for the full fiscal year ending December 31, 2024, or for any future period.

Liquidity and Management’s Plan

The Company has incurred substantial operating losses since its inception and expects to continue to incur significant operating losses for the foreseeable future. As reflected in the interim financial statements for the six months ended June 30, 2024, the Company had a net loss of $7.6 million, $2.2 million of net cash used in operating activities, and the Company had working capital of $0.6 million.

On June 24, 2024, the Company received a Staff Listing Determination Letter from Nasdaq pursuant to which the Staff has determined that as of June 21, 2024, the Company’s common shares had a per share closing bid price of $0.10 or less for ten consecutive trading days (the Company’s bid price has closed at or below $0.10 per share from June 6, 2024, through June 21, 2024). Nasdaq has granted the Company an exception to comply with the bid price rule as follows:

	1.	On or before August 1, 2024, the Company shall obtain Board of Directors approval for a reverse stock split, which was received as of that date;
	2.	On or before September 30, 2024, the Company shall obtain shareholders approval for a reverse stock split at a ratio that satisfies the minimum requirement in the Bid Price Rule;
	3.	On or before October 9, 2024, the Company shall effect a reverse stock split and, thereafter, maintain a $1 closing bid price for a minimum of ten consecutive business days;
	4.	On or before October 22, 2024, the Company shall have demonstrated compliance with the Bid Price Rule, by evidencing a closing bid price of $1 or more per share for a minimum of ten consecutive trading sessions.

The accompanying interim financial statements have been prepared on a going concern basis, which contemplates the realization of assets and satisfaction of liabilities in the normal course of business. The interim financial statements do not include any adjustments relating to the recoverability and classification of recorded asset amounts or the amounts and classification of liabilities that might result from the outcome of this uncertainty. The Company is at the development stage of its business plan. As such it is likely that additional financing will be needed by the Company to fund its operations and to develop and commercialize its technology. These factors raise substantial doubt about the Company’s ability to continue as a going concern. For the next twelve months from issuance of these interim financial statements, the Company will seek to obtain additional capital through the sale of debt or equity financings or other arrangements to fund operations; however, there can be no assurance that the Company will be able to raise needed capital under acceptable terms, if at all. The sale of additional equity may dilute existing shareholders and newly issued shares may contain senior rights and preferences compared to our currently outstanding common shares. If the Company is unable to obtain such additional financing, future operations would need to be scaled back or discontinued. Due to the uncertainty in the Company’s ability to raise capital, management believes that there is substantial doubt in the Company’s ability to continue as a going concern for twelve months from the issuance of these interim financial statements.

Reverse Stock Split

On October 11, 2023, the Company executed a one-for-fifty reverse stock split of the Company’s common shares (the “Reverse Split”). As a result of the Reverse Split, every 50 shares of the Company’s old common shares were converted into one share of the Company’s new common shares. Fractional shares resulting from the reverse split were rounded up to the nearest whole number. The Reverse Split automatically and proportionately adjusted all issued and outstanding shares of the Company’s common shares, as well as convertible debentures, convertible features, prefunded warrants, stock options and warrants outstanding at the time of the date of the Reverse Split. The exercise price on outstanding equity based-grants was proportionately increased, while the number of shares available under the Company’s equity-based plans was proportionately reduced. Share and per share data (except par value) for the periods presented reflect the effects of the Reverse Split. References to numbers of common shares and per share data in the accompanying financial statements and notes thereto for periods ended prior to October 11, 2023 have been adjusted to reflect the Reverse Split on a retroactive basis.

2. SIGNIFICANT ACCOUNTING POLICIES

Recent Accounting Pronouncements

The Company is an “emerging growth company,” as defined in Section 2(a) of the Securities Act of 1933, as amended, as modified by the Jumpstart Our Business Start-ups Act of 2012, (the “JOBS Act”). Section 107 of the JOBS Act provides that an emerging growth company can take advantage of the extended transition period provided in Section 13(a) of the Securities Exchange Act of 1934, as amended, for complying with new or revised accounting standards applicable to public companies. In other words, an emerging growth company can delay the adoption of certain accounting standards until those standards would otherwise apply to private companies.

In November 2023, FASB issued ASU 2023-07, “Segment Reporting (Topic 820): Improvements to Reportable Segment Disclosures.” ASU 2023-07 provides guidance to improve reportable segment disclosure requirements, primarily through enhanced disclosures about significant segment expenses. ASU 2023-07 is effective for fiscal years beginning after December 15, 2023. We are currently assessing the impact this guidance will have on our financial statements.

In December 2023, the FASB issued ASU 2023-09, “Income Taxes (Topic 740): Improvements to Income Tax Disclosures.” ASU 2023-09 requires companies to provide enhanced rate reconciliation disclosures, including disclosure of specific categories and additional information for reconciling items. The standard also requires companies to disaggregate income taxes paid by federal, state and foreign taxes. ASU 2023-09 is effective for fiscal years beginning after December 15, 2024. We are currently assessing the impact this guidance will have on our financial statements.

Other accounting standards that have been issued or proposed by FASB that do not require adoption until a future date are not expected to have a material impact on the consolidated financial statements upon adoption. The Company does not discuss recent pronouncements that are not anticipated to have an impact on or are unrelated to its financial condition, results of operations, cash flows or disclosures.

Inventories

Inventories consist of finished goods of milled flour and related packaging material recorded at the lower of cost or net realizable value with the cost measured using the average cost method. Inventories includes all costs that relate to bringing the inventory to its present condition and location under normal operating conditions.

Revenue Recognition

Product revenue was limited to sales from hydroxyl generators and will expand to include sales of our UN(THINK) Foods products in 2024. We recognize product revenue when we satisfy performance obligations by transferring control of the promised products or services to customers. Product revenue is recognized at a point in time when control of the promised good or service is transferred to the customer, which is at the point of shipment or delivery of the goods.

Convertible Instruments

The Company evaluates and accounts for conversion options embedded in its convertible instruments in accordance with ASC 815, Derivatives and Hedging (“ASC 815”), which provides that if three criteria are met, the Company is required to bifurcate conversion options from their host instruments and account for them as free-standing derivative financial instruments. These three criteria include circumstances in which;

(a) the economic characteristics and risks of the embedded derivative instrument are not clearly and closely related to the economic characteristics and risks of the host contract;

(b) the hybrid instrument that embodies both the embedded derivative instrument and the host contract is not re-measured at fair value under otherwise applicable generally accepted accounting principles with changes in fair value reported in earnings as they occur; and

(c) a separate instrument with the same terms as the embedded derivative instrument would be considered a derivative instrument.

ASC 815 also provides an exception to this rule when the host instrument is deemed to be conventional as defined under professional standards as “The Meaning of Conventional Convertible Debt Instrument.”. Accordingly, the Company records, when necessary, discounts to convertible notes for the intrinsic value of conversion options embedded in debt instruments based upon the differences between the fair value of the underlying common stock at the commitment date of the note transaction and the effective conversion price embedded in the note. Debt discounts under these arrangements are amortized over the term of the related debt to their earliest date of redemption. The Company also records when necessary deemed dividends for the intrinsic value of conversion options embedded in preferred shares based upon the differences between the fair value of the underlying common stock at the commitment date of the note transaction and the effective conversion price embedded in the note. ASC 815 provides that, among other things, generally, if an event is not within the entity’s control or could require net cash settlement, then the contract shall be classified as an asset or a liability.

Foreign Currency Transactions

The financial statements of the Company and its subsidiaries whose functional currencies are the local currencies are translated into USD for consolidation as follows: assets and liabilities at the exchange rate as of the balance sheet date, shareholders’ equity at the historical rates of exchange, and income and expense amounts at the average exchange rate for the period. Translation adjustments resulting from the translation of the subsidiaries’ accounts are included in “Accumulated other comprehensive income” as equity in the consolidated balance sheets. Transactions denominated in currencies other than the applicable functional currency are converted to the functional currency at the exchange rate on the transaction date. At period end, monetary assets and liabilities are remeasured to the reporting currency using exchange rates in effect at the balance sheet date. Non-monetary assets and liabilities are remeasured at historical exchange rates. Gains and losses resulting from foreign currency transactions are included within non-operating expenses.

Definite Lived Intangible Asset

Definite lived intangible asset consists of a granted patent. Amortization is computed using the straight-line method over the estimated useful life of the asset. The estimated useful life of the granted patent is 20 years and the patent was available for use starting January 2023.

Impairment of Long-Lived Assets

The Company reviews long-lived assets for impairment whenever events or changes in circumstances indicate that the carrying value of an asset may not be recoverable. In order to determine if assets have been impaired, assets are grouped and tested at the lowest level for which identifiable independent cash flows are available (“asset group”). An impairment loss is recognized when the sum of projected undiscounted cash flows is less than the carrying value of the asset group. The measurement of the impairment loss to be recognized is based on the difference between the fair value and the carrying value of the asset group. Fair value can be determined using a market approach, income approach or cost approach. The reversal of impairment losses is prohibited.

Loss per Share

The Company presents basic and diluted loss per share data for its common shares. Basic loss per common share is calculated by dividing the profit or loss attributable to common shareholders of the Company by the weighted average number of common shares outstanding during the year. The number of common shares used in the loss per shares calculation includes all outstanding common shares plus all common shares issuable for which there are no conditions to issue other than time. Diluted loss per common share is calculated by adjusting the weighted average number of common shares outstanding to assume conversion of all potentially dilutive share equivalents, such as stock options and warrants and assumes the receipt of proceeds upon exercise of the dilutive securities to determine the number of shares assumed to be purchased at the average market price during the year.

Fair Value Accounting

The fair value of the Company’s accounts receivable, accounts payable and other current liabilities approximate their carrying amounts due to the relatively short maturities of these items.

As part of the issuance of debentures on June 30, 2022, January 17, 2023, October 18, 2023, November 30, 2023, February 21, 2024, April 11, 2024 and May 22, 2024 as well as the private placement on June 20, 2023, the Company issued warrants having strike price denominated in USD. This creates an obligation to issue shares for a price that is not denominated in the Company’s functional currency and renders the warrants not indexed to the Company’s stock, and therefore, must be classified as a derivative liability and measured at fair value at the end of each reporting period. On the same basis, the Series A Warrants and the representative warrants issued as part of the IPO are also classified as a derivative liability and measured at fair value.

The fair value of the Company’s warrants is determined in accordance with FASB ASC 820, “Fair Value Measurement,” which establishes a fair value hierarchy that prioritizes the assumptions (inputs) to valuation techniques used to price assets or liabilities that are measured at fair value. The hierarchy, as defined below, gives the highest priority to unadjusted quoted prices in active markets for identical assets or liabilities and the lowest priority to unobservable inputs. The guidance for fair value measurements requires that assets and liabilities measured at fair value be classified and disclosed in one of the following categories:

●	Level 1: Defined as observable inputs, such as quoted (unadjusted) prices in active markets for identical assets or liabilities.

●	Level 2: Defined as observable inputs other than quoted prices included in Level 1. This includes quoted prices for similar assets or liabilities in active markets, quoted prices for identical or similar assets and liabilities in markets that are not active, or other inputs that are observable or can be corroborated by observable market data for substantially the full term of the assets or liabilities.

●	Level 3: Defined as unobservable inputs to the valuation methodology that are supported by little or no market activity and that are significant to the measurement of the fair value of the assets or liabilities. Level 3 assets and liabilities include those whose fair value measurements are determined using pricing models, discounted cash flow methodologies or similar valuation techniques, as well as significant management judgment or estimation.

Reclassifications

The Company has reclassified certain share base payment expenses from Wages and salaries to Share based compensation in the 2023 consolidated statements of comprehensive loss to align with the 2024 presentation.

3. PREPAID EXPENSES AND OTHER CURRENT ASSETS

	June 30, 2024		December 31, 2023
Legal retainer		31,547		8,039
Prepaid expenses		136,157		223,624
Inventory advances		110,918		30,654
Others		18,987		10,555
	$	297,609	$	272,872

During the six months ended June 30, 2023, the Company wrote off a non-refundable deposit amounting to $12,000 which was related to a land purchase agreement.

4. INVENTORIES

As at June 30, 2024, the Company had $4,621 (December 31, 2023 – $38,857) in finished goods.

5. INTANGIBLE ASSET

Intangible asset represents $11,981,175 (December 31, 2023 - $12,733,885) for intellectual property (“Manna IP”) acquired under an asset purchase agreement with Manna Nutritional Group, LLC (“Manna”) dated September 10, 2021. The Manna IP encompasses patented technologies to naturally process and convert grains, pulses, and root vegetables, into low-starch, low-sugar, high-protein, fiber-rich baking flour products, as well as a wide range of breakfast cereals, juices, natural sweeteners, and baking enhancers. The Company paid $1,475,000 in cash and issued 147,600 prefunded warrants valued at $12,106,677 (the “Purchase Price”). Subject to a 9.99% stopper and SEC Rule 144 restrictions, the prefunded warrants will vest in tranches up until March 10, 2024 (all tranches have fully vested). When vested the tranches of prefunded warrants are convertible into an equal number of common shares.

On January 3, 2023, Manna satisfied all of its contractual obligations when the patent was approved by the US Patent and Trademark Office and the title was transferred to the Company. During the year ended December 31, 2023, the Company issued 141,175 shares in relation to this transaction. As at June 30, 2024 all prefunded warrants had been converted (December 31, 2023 - 6,425 unconverted prefunded warrants).

Based on the terms above and in conformity with US GAAP, the Company accounted for purchase as an asset acquisition. The asset was available for use on January 3, 2023. The asset has a useful life of 20 years. The Company recorded $326,242 in amortization expense related to the Manna IP for the six months ended June 30, 2024 (June 30, 2023 - $334,748).

The estimated annual amortization expense for the next five years are as follows:

SCHEDULE OF FUTURE AMORTIZATION EXPENSE

Period ending:	Amount
Remaining 2024	$	323,816
2025		647,631
2026		647,631
2027		647,631
2028		647,631
2029		647,631
Thereafter		8,419,204
Total	$	11,981,175

6. INVESTMENT

On June 18, 2023, the Company signed a memorandum of understanding with Radical Clean Solutions Ltd. (“RCS”) to purchase common shares issued by RCS. The Company paid RCS $225,000 for 14% of the issued and outstanding common shares of the Company. Under the terms of the MOU, the use of proceeds is exclusively for the advance purchase of hydroxyls generating devices for commercial sales into controlled environment agriculture, food manufacturing, warehousing and transportation verticals. The Company will receive one of five board of director seats of RCS and has a right of first refusal to maintain an ownership percentage in RCS of not less than 10% of the total issued and outstanding common shares. On October 1, 2023 the Company and RCS signed a definitive agreement to convert the advance into a 14% ownership investment in RCS.

As at June 30, 2024, the carrying value of the investment in RCS was $216,263 (December 31, 2023 - $223,801) adjusted for foreign exchange differences of $8,737 (December 31, 2023 - $1,199). As at June 30, 2024, the Company assessed the investment for the presence of the following impairment indications:

●	A significant deterioration in the earnings performance, credit rating, asset quality, or business prospects of the investee

●	A significant adverse change in the regulatory, economic, or technological environment of the investee

●	A significant adverse change in the general market condition of either the geographic area or the industry in which the investee operates

●	A bona fide offer to purchase, an offer by the investee to sell, or a completed auction process for the same or similar investment for an amount less than the carrying amount of that investment

●	Factors that raise significant concerns about the investee’s ability to continue as a going concern, such as negative cash flows from operations, working capital deficiencies, or noncompliance with statutory capital requirements or debt covenants.

None of the above qualitative factors demonstrating potential impairment were present.

7. ACCOUNTS PAYABLE AND ACCRUED LIABILITIES

	June 30, 2024		December 31, 2023
Accounts payable	$	409,147	$	578,128
Accrued expenses		875,401		868,451
Others		431,726		495,432
	$	1,716,274	$	1,942,011

8. DEBENTURES

On June 30, 2022, the Company executed the definitive agreements (the “Purchase Agreements”) with arm’s length accredited institutional investors (the “Investors”) for $14,025,000 in debentures with a 10% original issue discount for gross proceeds of $12,750,000 (“First Tranche Debentures”). The First Tranche Debentures were convertible into common shares at $111.00 per share. In addition, the Investors received 82,129 warrants at a strike price of $122.10, which expire on December 31, 2025 (the “First Tranche Warrants”). The First Tranche Warrants and First Tranche Debentures each have down round provisions whereby the conversion and strike prices will be adjusted downward if the Company issues equity instruments at lower prices. The First Tranche Warrants strike price and the First Tranche Debenture conversion price will be adjusted down to the effective conversion price of the issued equity instruments. The transaction costs incurred in relation to first tranche were $1,634,894. The Debentures are senior to all other indebtedness or claims in right of payment, other than indebtedness secured by purchase money security interested.

The Investors had the right to purchase additional tranches of $5,000,000 each, up to a total additional principal amount of $33,000,000.

On January 17, 2023, the Investors purchased additional debentures totaling $5,076,923 with a 10% original issue discount for gross proceeds of $4,615,385 (the “Second Tranche Debenture”). The Second Tranche Debentures were convertible into common shares at $62.00 per share and the Investors received an additional 53,226 warrants at a strike price of $62.00, which expire on December 31, 2025 (the “Second Tranche Warrants”). The issuance of the additional tranche triggered the down round provision, adjusting the exercise prices of the First Tranche Debentures and the First Tranche Warrants to $62.00. The transaction costs incurred in relation to second tranche were $325,962.

On June 26, 2023, the Company entered into waiver and amendment agreements (“Debenture Modification Agreements”) with the Investors to modify terms of the Purchase Agreements. The Debenture Modification Agreements provide as follows:

	1.	The July 1, 2023 interest and principal payments will be settled with the Company’s Common Shares
	2.	The Conversion Price has been reduced to the lower of $22.50 or the price of subsequent dilutive issuances under the Company’s ATM program.
	3.	100% of ATM proceeds up to $1 million USD may be kept by Company, while any dollar amount over this threshold will be distributed 33% to the Company and 67% to the Investors.
	4.	The minimum tranche value for Additional Closings has been reduced from $5.0 million to $2.5 million.
	5.	The Investors have each agreed to raise no objection to one or more private placements of securities by the Company with an aggregate purchase price of up to $1,000,000 at a purchase price of at least $12.50 per common share and two-year warrant (with a per share exercise price of $25.00, and no registration rights).
	6.	The Company may not prepay any portion of the principal amount of this Debenture without the prior written consent of the Investor; However the Company must apply the approved or percentage of approved gross proceeds from the sale of its Common Stock from an at-the-market offering to prepay this Debenture (pro-rated among all Debentures) and shall be permitted to prepay the Debentures notwithstanding any contrary provision of this Debenture or the Purchase Agreement.

On August 9, 2023, the Company entered into another waiver and amendment agreement (“Agreement”) with the Investors with respect to a certain Senior Convertible Debenture (the “Debentures”) due July 17, 2025 issued by the Company to that Investor. The Agreement provides as follows:

	1.	The Company wishes to make Monthly Redemptions in shares of the Company’s Common Stock in lieu of cash payments, until further written notice from the Company to the Purchaser.
	2.	The Purchaser is willing to accept such shares as payment of the Monthly Redemption Amount provided that the Equity Conditions are met; and will consider on a case-by-case basis accepting payments in shares of Common Stock if the Equity Conditions are not met, at its sole discretion. The Company may inquire of the Purchaser at least five (5) Trading Days prior to a Monthly Redemption Date whether the Purchaser is willing to accept Shares without the Equity Conditions having been met. An email reply from the Purchaser shall be sufficient evidence of such monthly waiver.
	3.	The Purchaser will accept the August 1, 2023 Monthly Redemption Amount in shares of Common Stock valued at the August 1 Repayment Price for such date.

On October 18, 2023, the Investors purchased additional debentures totaling $2,750,000 with a 10% original issue discount for gross proceeds of $2,500,000 (the “Third Tranche Debenture”). The Third Tranche Debentures were convertible into common shares at $2.62 per share and the Investors received an additional 620,230 warrants at a strike price of $2.62, which expire on April 18, 2027 (the “Third Tranche Warrants”). The issuance of the additional tranche triggered the down round provision, adjusting the exercise prices of the First and Second Tranche Debentures and the First and Second Tranche Warrants to $2.62. The transaction costs incurred in relation to third tranche were $31,915.

On November 30, 2023, the Investors purchased additional debentures totaling $2,750,000 with a 10% original issue discount for gross proceeds of $2,500,000 (the “Fourth Tranche Debenture”). The Fourth Tranche Debentures were convertible into common shares at $0.90 per share and the Investors received an additional 1,986,112 warrants at a strike price of $0.90, which expire on May 30, 2027 (the “Fourth Tranche Warrants”). The issuance of the additional tranche triggered the down round provision, adjusting the exercise prices of the First, Second and Third Tranche Debentures and the First, Second and Third Tranche Warrants to $0.90. The transaction costs incurred in relation to fourth tranche were $30,040.

On February 21, 2024, the Investors purchased additional debentures totaling $1,100,000 with a 10% original issue discount for gross proceeds of $1,000,000 (the “Fifth Tranche Debenture”). The Fifth Tranche Debentures were convertible into common shares at $0.214 per share and the Investors received an additional 3,341,122 warrants at a strike price of $0.2354, which expire on August 21, 2027 (the “Fifth Tranche Warrants”). The issuance of the additional tranche triggered the down round provision, adjusting the exercise prices of the First, Second, Third and Fourth Tranche Debentures and the First, Second, Third and Fourth Tranche Warrants to $0.214. The transaction costs incurred in relation to fifth tranche were $50,000.

On April 11, 2024, the Investors purchased additional debentures totaling $550,000 with a 10% original issue discount for gross proceeds of $500,000 (the “Sixth Tranche Debenture”). The Sixth Tranche Debentures were convertible into common shares at $0.163 per share and the Investors received an additional 2,193,253 warrants at a strike price of $0.18, which expire on October 11, 2027 (the “Sixth Tranche Warrants”). The issuance of the additional tranche triggered the down round provision, adjusting the exercise prices of the First, Second, Third, Fourth and Fifth Tranche Debentures and Warrants to $0.163. The transaction costs incurred in relation to sixth tranche were $31,309.

On May 22, 2024, the Investors purchased additional debentures totaling $833,000 with a 10% original issue discount for gross proceeds of $750,000 (the “Seventh Tranche Debenture”). The Seventh Tranche Debentures were convertible into common shares at $0.10 per share and the Investors received an additional 5,414,500 warrants at a strike price of $0.11, which expire on November 22, 2027 (the “Fifth Tranche Warrants”). The issuance of the additional tranche triggered the down round provision, adjusting the exercise prices of the First, Second, Third, Fourth, Fifth and Sixth Tranche Debentures and the First, Second, Third, Fourth, Fifth and Sixth Tranche Warrants to $0.10. The transaction costs incurred in relation to seventh tranche were $3,154. On June 17, 2024, the Investors converted the full principal balance of the Seventh Tranche Debenture which resulted in an extinguishment of the existing debt (see below).

The First, Second, Third, Fourth, Fifth, Sixth and Seventh Tranche Debentures (the “Debentures”) have an interest rate of 5% for the first 12 months, 6% for the subsequent 12 months, and 8% per annum thereafter. Principal repayments will be made in 25 equal installments which began on September 1, 2022 for the First Tranche Debentures, July 1, 2023 for the Second Tranche Debentures, January 1, 2024 for the Third Tranche Debentures, May 1, 2024 for the Fourth Tranche Debentures, August 1, 2024 for the Fifth Tranche Debentures, October 1, 2024 for the Sixth Tranche Debentures and November 1, 2024 for the Seventh Tranche Debentures. The Debentures may be extended by nine months at the election of the Company by paying a sum equal to nine months’ interest on the principal amount outstanding at the end of the 18^th month, at the rate of 8% per annum.

The following table summarizes our outstanding debentures as of the dates indicated:

SCHEDULE OF OUTSTANDING DEBENTURES

	Maturity	Cash Interest Rate			June 30, 2024			December 31, 2023
Principal (First Tranche Debentures)	12/31/2024		5.00% - 8.00	%	$	25,000		$	3,029,676
Principal (Second Tranche Debentures)	07/17/2025		5.00% - 8.00	%		25,000			2,940,461
Principal (Third Tranche Debentures)	04/18/2026		5.00% - 8.00	%		-			2,750,000
Principal (Fourth Tranche Debentures)	06/01/2026		5.00% - 8.00	%		1,698,500			2,750,000
Principal (Fifth Tranche Debentures)	08/20/2026		5.00% - 8.00	%		1,100,000			-
Principal (Sixth Tranche Debentures)	10/10/2026		5.00% - 8.00	%		300,000			-
Debentures (gross)	10/10/2026		5.00% - 8.00	%		300,000			-
Debt issuance costs and discounts (Note 8 & 11)						(2,222,618	)		(7,385,494	)
Total Debentures (current)					$	925,882		$	4,084,643

During the six months ended June 30, 2024, the Investors converted $4,534,462 (June 30, 2023 - $1,442,400) of principal and $200,024 (June 30, 2023 - $37,532) of interest into shares of the Company resulting in a $1,392,482 (June 30, 2023 - $433,605) loss on the conversion of convertible debentures. During the six months ended June 30, 2024, the Company incurred $2,203,081 (June 30, 2023 - $3,980,278) in accretion interest and made cash repayments of $802,282 (June 30, 2023 - $1,741,950).

During the six months ended June 30, 2024, the Investors converted $5,467,932 of the First, Second, Third and Seventh Tranche Debentures into 42,513,613 shares of the Company. The conversions were determined to be an extinguishment of the existing debt and issuance of new debt for the remaining First and Second Tranches. As a result, the Company recorded a loss on debt extinguishment in the amount of $2,298,369.

9. CONTRACT BALANCES

As at June 30, 2024, contract balances consisted of $nil advance payments for product sales not yet delivered, which are recognized as a contract liability (December 31, 2023 - $15,336).

10. LONG TERM LOAN

During the year ended December 31, 2020, the Company entered into a loan agreement with Alterna Bank for a principal amount of $29,225 (CAD$40,000) (December 31, 2023 - $30,243 (CAD$40,000)) under the Canada Emergency Business Account Program (the “Program”).

The Program, as set out by the Government of Canada, requires that the funds from this loan shall only be used by the Company to pay non-deferrable operating expenses including, without limitation, payroll, rent, utilities, insurance, property tax and regularly scheduled debt service, and may not be used to fund any payments or expenses such as prepayment/refinancing of existing indebtedness, payments of dividends, distributions and increases in management compensation.

In April 2021, the Company applied for an additional loan with Alterna Bank under the Program and received $14,612 (CAD$20,000) (December 31, 2023 - $15,122 (CAD$20,000)). The expansion loan is subject to the original terms and conditions of the Program.

The loan was interest free for an initial term that ended on January 18, 2024. Any outstanding loan after initial term carries an interest rate of 5% per annum, payable monthly during the extended term i.e. January 19, 2024 to December 31, 2025. The loan is due December 31, 2026.

The balance as at June 30, 2024 was $43,837 (CAD $60,000) (December 31, 2023 was $45,365 (CAD $60,000)).

11. DERIVATIVE LIABILITIES

Warrant Liabilities

As at June 30, 2024, the Warrant Liabilities represent aggregate fair value of publicly traded 61,765 Series A warrants (“IPO Warrants”), 2,721 representative’s warrants (“Rep Warrants”), 20,000 warrants issued in a private placement (“Private Placement Warrants”), 82,129 First Tranche Warrants, 53,226 Second Tranche Warrants, 620,230 Third Tranche Warrants, 1,986,112 Fourth Tranche Warrants, 3,341,122 Fifth Tranche Warrants, 2,193,253 Sixth Tranche Warrants and 5,414,500 Seventh Tranche Warrants (“Debenture Warrants”).

The fair value of the IPO Warrants, Rep Warrants and Private Placement Warrants amounted to $31,940 (December 31, 2023 - $11,308). As at June 30, 2024 the Company utilized the Black-Scholes option-pricing model for the IPO Warrants, Rep Warrants and Private Placement Warrants and used the following assumptions: stock price $0.088 (December 31, 2023 - $0.47), dividend yield – nil (December 31, 2023 – nil), expected volatility 91% to 183% (December 31, 2023 – 105% to 117%), risk free rate of return 3.83% to 3.99% (December 31, 2023 – 3.67% to 3.88%), and expected term of 1 to 3 years (December 31, 2023 – expected term of 1.50 to 3 years).

As at June 30, 2024 the First Tranche Warrants had a fair value that amounted to $4,000 (December 31, 2023 - $24,000). As at June 30, 2024 the Company utilized the Monte Carlo option-pricing model to value the First Tranche Warrants using the following assumptions: stock price $0.088 (December 31, 2023 - $0.47), dividend yield – nil (December 31, 2023 – nil), expected volatility 110.0% (December 31, 2023 – 100.0%), risk free rate of return 4.90% (December 31, 2023 – 4.23%), and expected term of 1.50 years (December 31, 2023 – expected term of 2 years).

As at June 30, 2024 the Second Tranche Warrants had a fair value that amounted to $3,000 (December 31, 2023 - $15,000). As at June 30, 2024 the Company utilized the Monte Carlo option-pricing model to value the Second Tranche Warrants using the following assumptions: stock price $0.088 (December 31, 2023 - $0.47), dividend yield – nil (December 31, 2023 – nil), expected volatility 105.0% (December 31, 2023 – 105.0%), risk free rate of return 4.71% (December 31, 2023 – 4.12%), and expected term of 2.05 years (December 31, 2023 – expected term of 2.55 years).

As at June 30, 2024 the Third Tranche Warrants had a fair value that amounted to $32,000 (December 31, 2023 - $192,000). As at June 30, 2024 the Company utilized the Monte Carlo option-pricing model to value the Third Tranche Warrants using the following assumptions: stock price $0.088 (December 31, 2023 - $0.47), dividend yield – nil (December 31, 2023 – nil), expected volatility 85.0% (December 31, 2023 – 107.5%), risk free rate of return 4.56% (December 31, 2023 – 3.98%), and expected term of 2.80 years (December 31, 2023 – expected term of 3.30 years).

As at June 30, 2024 the Fourth Tranche Warrants had a fair value that amounted to $107,000 (December 31, 2023 - $724,000). As at June 30, 2024 the Company utilized the Monte Carlo option-pricing model to value the Fourth Tranche Warrants using the following assumptions: stock price $0.088 (December 31, 2023 - $0.47), dividend yield – nil (December 31, 2023 – nil), expected volatility 85.0% (December 31, 2023 – 107.5%), risk free rate of return 4.54% (December 31, 2023 – 3.97%), and expected term of 2.92 years (December 31, 2023 – expected term of 3.42 years).

As at June 30, 2024 the Fifth Tranche Warrants had a fair value that amounted to $191,000 (February 21, 2024 - $564,000). As at June 30, 2024 the Company utilized the Monte Carlo option-pricing model to value the Fifth Tranche Warrants using the following assumptions: stock price $0.088 (February 21, 2024 - $0.21), dividend yield – nil (February 21, 2024 – nil), expected volatility 85.0% (February 21, 2024 – 105.0%), risk free rate of return 4.51% (February 21, 2024 – 4.40%), and expected term of 3.14 years (February 21, 2024 – expected term of 3.50 years).

As at June 30, 2024 the Sixth Tranche Warrants had a fair value that amounted to $117,000 (April 11, 2024 - $242,000). As at June 30, 2024 the Company utilized the Monte Carlo option-pricing model to value the Fifth Tranche Warrants using the following assumptions: stock price $0.088 (April 11, 2024 – $0.16), dividend yield – nil (April 11, 2024 – nil), expected volatility 85.0% (April 11, 2024 – 95.0%), risk free rate of return 4.49% (April 11, 2024 – 4.73%), and expected term of 3.28 years (April 11, 2024 – expected term of 3.50 years).

As at June 30, 2024 the Seventh Tranche Warrants had a fair value that amounted to $297,000 (May 22, 2024 - $369,000). As at June 30, 2024 the Company utilized the Monte Carlo option-pricing model to value the Fifth Tranche Warrants using the following assumptions: stock price $0.088 (May 22, 2024 – $0.10), dividend yield – nil (May 22, 2024 – nil), expected volatility 85.0% (May 22, 2024 – 95.0%), risk free rate of return 4.48% (May 22, 2024 – 4.60%), and expected term of 3.39 years (May 22, 2024 – expected term of 3.50 years).

Debenture Convertible Feature

As at June 30, 2024 the fair value of the First Tranche Debentures’ convertible feature amounted to $6,000 (December 31, 2023 – $164,000). The Company utilized the Monte Carlo option-pricing model for valuing the convertible feature using the following assumptions: stock price $0.088 (December 31, 2023 - $0.47), dividend yield – nil (December 31, 2023 – nil), expected volatility 110.0% (December 31, 2023 – 100.0%), risk free rate of return 5.33% (December 31, 2023 – 5.03%), discount rate 20.25% (December 31, 2023 – 17.50%), and expected term of 0.50 year (December 31, 2023 – 1 year).

As at June 30, 2024 the fair value of the Second Tranche Debentures’ convertible feature amounted to $5,000 (December 31, 2023 – $429,000). The Company utilized the Monte Carlo option-pricing model for valuing the convertible feature using the following assumptions: stock price $0.088 (December 31, 2023 – $0.47), dividend yield – nil December 31, 2023 – nil), expected volatility 105.0% (December 31, 2023 – 105.0%), risk free rate of return 5.09% (December 31, 2023 – 4.51%), discount rate 20.00% (December 31, 2023 – 17.50%), and expected term of 1.05 years (December 31, 2023 – 1.55 years).

As at June 30, 2024 the fair value of the Fourth Tranche Debentures’ convertible feature amounted to $430,000 (December 31, 2023 – $640,000). The Company utilized the Monte Carlo option-pricing model for valuing the convertible feature using the following assumptions: stock price $0.088 (December 31, 2023 - $0.47), dividend yield – nil (December 31, 2023 – nil), expected volatility 85.0% (December 31, 2023 – 107.5%), risk free rate of return 4.71% (December 31, 2023 – 4.12%), discount rate 19.75% (December 31, 2023 – 17.25%), and expected term of 1.92 years (December 31, 2023 – 2.42 years).

As at June 30, 2024 the fair value of the Fifth Tranche Debentures’ convertible feature amounted to $327,000 (February 21, 2024 - $359,000). The Company utilized the Monte Carlo option-pricing model for valuing the convertible feature using the following assumptions: stock price $0.088 (February 21, 2024 – $0.21), dividend yield – nil (February 21, 2024 – nil), expected volatility 85.0% (February 21, 2024 – 105.0%), risk free rate of return 4.62% (February 21, 2024 – 4.54%), discount rate 19.50% (February 21, 2024 – 16.00%), and expected term of 2.14 years (February 21, 2024 – 2.50 years).

As at June 30, 2024 the fair value of the Sixth Tranche Debentures’ convertible feature amounted to $80,000 (April 11, 2024 - $198,000). The Company utilized the Monte Carlo option-pricing model for valuing the convertible feature using the following assumptions: stock price $0.088 (April 11, 2024 – $0.16), dividend yield – nil (April 11, 2024 – nil), expected volatility 85.0% (April 11, 2024 – 95.0%), risk free rate of return 4.62% (April 11, 2024 – 4.85%), discount rate 19.50% (April 11, 2024 – 19.00%), and expected term of 2.28 years (April 11, 2024 – 2.50 years).

On June 17, 2024, the Investors converted the full principal balance of the Seventh Tranche Debenture which resulted in an extinguishment of the existing debt and convertible feature. On May 22, 2024 the fair value of the Seventh Tranche Debentures’ convertible featur