UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-K

[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the fiscal year ended March 31, ~~2017~~2018

[ ] 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: 333-199612

ALGAE DYNAMICS CORP.

(Exact name of registrant as specified in its charter)

CANADA		N/A
(State or other jurisdiction of incorporation or organization)		(I.R.S. Employer Identification No.)

37 – 4120 Ridgeway Drive
Mississauga, Ontario Canada		L5L 5S9
(Address of principal executive offices)		(Postal Code)

Registrant’s telephone number, including area code: (289) 997 6740

Securities registered pursuant to Section 12(b) of the Act: None

Securities registered pursuant to Section 12(g) of the Act: None

Securities registered pursuant to Section 15 of the Act:

Common Shares, no par value

(Title of Class)

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes [ ] No [X]

Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Exchange Act. Yes [ ] No [X]

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 [X ] No No [ X ]

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 during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes [ ] No [X]

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. Yes [ ] No [X]

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” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer [ ]	Accelerated filer [ ]
Non-accelerated filer [ ]	Smaller reporting company [X]
(Do not check if a smaller reporting company) [ ]

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

Indicate the number of shares outstanding of each of the registrant’s classes of common stock, as of the latest practicable date.

Common Shares no par value - Outstanding at ~~August~~January 1116, ~~2017~~2019 -– 1320,~~337~~136,~~521~~377

DOCUMENTS INCORPORATED BY REFERENCE: None.

ALGAE DYNAMICS CORP.

TABLE OF CONTENTS

			Page
Part I
	Item 1	Business	45
	Item 1A	Risk Factors	2319
	Item 1B	Unresolved Staff Comments	3432
	Item 2	Properties
	Item 3	Legal Proceedings	3432
	Item 4	Mine Safety Disclosures	3432
Part II
	Item 5	Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities	3432
	Item 6	Selected Financial Data	3837
	Item 7	Management’s Discussion and Analysis of Financial Condition and Results of Operation	3937
	Item 7A	Quantitative and Qualitative Disclosures about Market Risk	4240
	Item 8	Financial Statements and Supplementary Data	4341
	Item 9	Changes in and Disagreements with Accountants on Accounting and Financial Disclosure7	7984
	Item 9A	Controls and Procedures	8084
	Item 9B	Other Information	8186
Part III
	Item 10	Directors and Executive Officers and Corporate Governance	8186
	Item 11	Executive Compensation	8389
	Item 12	Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters	9196
	Item 13	Certain Relationships and Related Transactions, and Director Independence	9397
	Item 14	Principal Accounting Fees and Services	9498
Part IV
	Item 15	Exhibits, Financial Statement Schedules	9599
Signatures			96100

PART I

CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING STATEMENTS

Some discussion in this Annual Report on Form 10-K contains forward-looking statements that have been made pursuant to the provisions of the Private Securities Litigation Reform Act of 1995. These statements involve risks and uncertainties and relate to future events or future financial performance. A number of important factors could cause our actual results to differ materially from those expressed in any forward-looking statements made by us in this Form 10-K. Forward-looking statements are often identified by words such as “believe,” “expect,” “estimate,” “anticipate,” “intend,” “project,” “plans,” “seek” and similar expressions or words which, by their nature, refer to future events. In some cases, you can also identify forward-looking statements by terminology such as “may,” “will,” “should,” “plans,” “predicts,” “potential” or “continue” or the negative of these terms or other comparable terminology.

In this Annual Report on Form 10-K, examples of such forward-looking information include, but are not limited to, disclosure relating to the following:

●	the Company’s research and development plans, business model, strategic objectives and growth strategy;
●	cannabis regulation in Canada;
●	the Company’s intellectual property;
●	the Company’s future growth plans;
●	the Company’s estimate of the size of the potential markets for its products;
●	the Company’s current and future capital requirements and the need for additional financing;
●	anticipated trends and challenges in the Company’s business and the markets in which it intends to operate;
●	the continuation of the Company as a going concern;

The forward-looking information in this Annual Report on Form 10-K is based on a number of assumptions which management of Algae Dynamics believes to be reasonable but that may prove to be incorrect. Algae Dynamics cannot assure investors that actual results will be consistent with the forward-looking information contained in this Annual Report on Form 10-K. With respect to the forward-looking information contained in this Annual Report on Form 10-K, Algae Dynamics has made certain assumptions, including, but not limited to the following:

●	general economic conditions in economic and financial markets;
●	the general state of the cannabis industry and its future developments;
●	the expected growth of the cannabis industry;
●	the Company’s ability to successfully execute on its business strategy and develop and expand its business pursuant to its objectives;
●	the Company’s ability to develop its business;
●	the Company’s ability to enter into anticipated contracts; and
●	the Company’s ability to obtain further financing, as needed and on terms that are acceptable.

Forward-looking information involves known and unknown risks, uncertainties and other factors that may cause actual results, performance or achievements to be materially different from any future results, performance or achievements expressed or implied by the forward-looking information. Algae Dynamics believes that the expectations reflected by forward- looking information in this Annual Report on Form 10-K are reasonable but no assurance can be given that these expectations will prove to be correct. Accordingly, such forward-looking information should not be unduly relied upon. Algae Dynamics’s actual results, performance or achievements could differ materially from those expressed in, or implied by, the forward- looking information, and, accordingly, no assurance can be given that any of the events anticipated by the forward- looking information included herein will transpire or occur, or if any of them do so, what benefits will be derived as a result. Some of these risks factors, include, but are not limited to the following:

●	the Company’s failure to properly execute on its plans and initiatives;
●	the Company’s inability to achieve the anticipated benefits of its products;
●	the Company’s inability to obtain additional financing;
●	the inability to attract or retain skilled and qualified personnel;
●	regulatory changes in the cannabis sector;
●	and other factors, many of which are beyond Algae Dynamics’s control.

These forward-looking statements are only predictions and involve known and unknown risks, uncertainties and other factors, including the risks in the section entitled “Risk Factors” below that may cause our or our industry’s actual results, levels of activity, performance or achievements to be materially different from any future results, levels of activity, performance or achievements expressed or implied by these forward-looking statements. In addition, you are directed to factors discussed in the “Management’s Discussion and Analysis of Financial Condition and Results of Operations” section as well as those discussed elsewhere in this Form 10-K.

Forward-looking statements reflect our current views with respect to future events and are based on assumptions and subject to risks and uncertainties. Given these uncertainties, you should not place undue reliance on these forward-looking statements.

Although we believe that the expectations reflected in the forward-looking statements are reasonable, we cannot guarantee future results, levels of activity or achievements. Except as required by applicable law, including the securities laws of the United States, we do not intend to update any of the forward-looking statements to conform these statements to actual results. However, readers should carefully review the risk factors set forth below or in other reports or documents the Company files from time to time with the Securities and Exchange Commission (the “SEC”), particularly the Company’s Quarterly Reports on Form 10-Q and any Current Reports on Form 8-K. All written and oral forward-looking statements made subsequent to the date of this report and attributable to us or persons acting on our behalf are expressly qualified in their entirety by this section.

Use of Certain Defined Terms

Except where the context otherwise requires and for the purposes of this report only:

●	the “Registrant,” “Company,” “we,” “us,” and “our” refer to the business of Algae Dynamics Corp., a Canadian corporation, and its subsidiary;

●	“Exchange Act” refers the United States Securities Exchange Act of 1934, as amended;

●	“SEC” refers to the United States Securities and Exchange Commission;

●	“Securities Act” refers to the United States Securities Act of 1933, as amended;

●	“U.S. dollars,” and “USD$” refer to the legal currency of the United States; and

●	“$” refer to the legal currency of Canada as the financial statements are stated in Canadian Dollars.

InThis ~~the~~Annual ~~discussion~~Report ofon ~~our~~Form ~~business~~10-K ~~below~~includes industry and market data and forecasts obtained from independent publications, wemarket ~~frequently~~research and ~~make~~analyst ~~reference~~reports, surveys and other publicly available sources. Although the Company believes these sources to abe generally reliable, market ~~report~~and ~~obtained~~industry ~~from~~data ~~Frost~~is &subject ~~Sullivan~~to ~~(hereafter~~interpretation and cannot be verified with complete certainty due to limits on ~~“F&S”)~~the ~~dated~~availability ~~August~~and ~~2015~~reliability of raw data, ~~which~~the ~~was~~voluntary ~~commissioned~~nature of the data gathering process and ~~paid~~other ~~for~~limitations byand usuncertainties inherent in any statistical survey. ~~These~~Accordingly, ~~references~~the ~~are~~accuracy ~~noted~~and bycompleteness aof ~~superscript~~this data is not guaranteed. The Company has ~~numeral~~not “1independently verified any of the data from third party sources referred to in this Annual Report on Form 10-K nor ascertained the underlying assumptions relied upon by such sources.”

ITEM 1. BUSINESS.

Business Overview

Algae Dynamics Corp (ADYNF) is focused on the development of proprietary research and products utilizing cannabis oil combined with other botanical and ~~algae~~nutraceutical ~~oil~~products. The original core of our product development strategy iswas the extraction of Omega-3 fatty acids from certain strains of algae with high concentrations of DHA (docosahexaenoic acid) to create various nutraceutical products. As a result of the many demonstrated health benefits of other ~~botanical~~ botanical oils, most notably cannabis oil, we have developed a strategy aimed at developing products that combined the health benefits of cannabis ~~algae~~oils and ~~cannabis~~nutraceutical ~~oils~~products, including algae oil. Capitalizing on the burgeoning demand for cannabis oil and other smoke-free alternatives to marijuana consumption, including for medicinal purposes, will help support our ongoing initiatives to create and market research-driven product formulations.

~~Collaborating~~In ~~with~~December ~~prominent~~2016, we announced a new initiative into the Canadian ~~universities~~cannabis isindustry. We followed that announcement with a ~~core~~press ~~part~~release in ofMarch 6, 2018 announcing our ~~plan~~intention to ~~bolster~~build ~~cannabis~~shareholder ~~extraction~~value ~~expertise~~through the pursuit of several key initiatives. Over this period, ~~develop~~we ~~premium~~have ~~products~~continued to assess how to leverage the research and development which was originally focused on the commercialization of our proprietary BioSilo® algae cultivation system and ~~add~~we have decided to suspend our ~~portfolio~~focus on the development of ~~intellectual~~this ~~property~~proprietary technology. ~~Through~~In the interim, we will source algae oil for our ~~agreements~~research-driven ~~with~~product formulations. By doing so, we have eliminated the ~~University~~immediate ofcapital ~~Waterloo~~requirements for extraction and ~~the~~formulation ~~University~~equipment. ofWe are now focused on entering into profit sharing ~~Western~~business ~~Ontario,~~ventures with potential partners who have the ~~Company~~appropriate isHealth ~~focusing~~Canada ~~primarily~~licenses onto ~~the~~produce ~~use~~and ofsell ~~extracts~~medical ~~from~~cannabis formulated products, utilizing our patented formulations which combine cannabis oil and ~~algae~~other ~~oil~~nutraceutical inproducts ~~the~~developed through ~~context~~our of$1.69Million ~~cancer as~~commitment ~~well~~to assupport ~~the~~university ~~development~~research ofand ~~new~~previously ~~pharmacotherapies~~announced C$400,000 research grant from MITACS, a not-for-profit, ~~mental~~Canadian ~~health~~national research organization together with our sponsored research programs with Canadian universities (our Sponsored Research Programs).

~~Near-term~~Strategic goals include expanding research and development work with existing and new Canadian universities, securing supply/service agreements with licensed producers, and submitting an application to Health Canada to become a licensed producer of medical marijuana and ultimately have a license to sell products derived from cannabinoids. The Company also owns a proprietary technology for the cultivation of low cost, highly pure algae biomass, which will be developed as a vertical integration strategy in the future to support the need to source algae oil for research-driven product formulations. The management team leading these initiatives has relevant experience ranging from public company management and process experience to successful fund raising and commercialization.Focus

~~The~~During ~~Company~~Health ~~has~~Canada’s ~~also~~consultations ~~formed~~relating ato ~~strong~~the ~~team~~cannabis industry and related legislation, they heard many compelling personal stories of ~~scientific~~how cannabis is making a difference to Canadians living with serious health challenges such as cancer, HIV/AIDS, multiple sclerosis, arthritis and ~~strategic~~fibromyalgia. ~~advisors~~They also heard about the role that ~~complement~~cannabis ~~ongoing~~can ~~R&D~~play ~~relationships~~in pain management and ~~initiatives.~~palliative ~~With~~care, ~~this~~and ~~strong~~the ~~foundation~~relief that cannabis, weparticularly ~~are~~strains ~~positioned~~with tohigh ~~execute~~levels onof ~~our~~CBD ~~plan~~and tolow ~~build~~levels aof ~~revenue-generating~~THC, ~~sustainable~~offers ~~opportunity~~to inchildren with asevere ~~rapidly~~forms ~~expanding~~of ~~market~~epilepsy and how cannabis has enabled patients to limit or eliminate their use of powerful narcotic drugs such as opioids.

Sponsored Research Programs

In order to support our new mission, we engaged two prominent Canadian universities to provide research and product development in the use of extracts from cannabis oil and algae oil in the context of cancer, and the development of novel pharmacotherapies for mental health, as follows:

	1.	Dr. Jonathan Blay, PhD, FRSB, FIBMS, Csci, CBiol (Professor of Pharmacy, University of Waterloo, Professor of Pathology, Dalhousie University), the University of Waterloo – to perform research and product development on cannabis oil and its constituents in the context of the development and treatment of the colorectum, pancreas, breast and prostate cancers.
	2.	Dr. Steven Laviolette, BSc, PhD (Addiction Research Group, Dept. of Anatomy & Cell Biology, Dept. of Psychiatry, Canadian Institute for Military and Veterans Health Research), University of Western Ontario - to perform research and product development on cannabis oil and its constituents in the context of depression, post-traumatic stress disorder, anxiety and schizophrenia.

Each research program is a sponsored research program in which the Company pays an agreed amount to each university and in return receives the benefits of the research and the right to acquire the associated intellectual property, based on an agreed fixed payment with no ongoing royalties. The sponsored programs run for three years at the University of Waterloo, at a cost of C$600,000 over the three-year life, and for four years at University of Western Ontario, at a cost of C$1,000,000 over the life of the program.

Collaboration and Supply Agreement

We have entered into a letter of intent with 6779264 Manitoba Ltd dba Bonify (“Bonify”) that will provide the Company with several important benefits. We and Bonify have agreed to work together in good faith to finalize definitive documents by September 30, 2017. Bonify currently holds a Cultivation License pursuant to the Access to Cannabis for Medical Purposes Regulations (“ACMPR”) in Canada with the capability to grow multiple strains of cannabis in its state of the art 320,000 square foot facility. In the letter of intent, we and Bonify agree as follows:

1. The Company will purchase cannabis oil extraction equipment for installation at Bonify’s facility; 2. Bonify will supply raw cannabis material and will extract cannabis oil from the raw material; 3. Upon receiving its Sales License, Bonify will ship cannabis oil to our research universities and to our end customers; 4. The Company may also purchase raw material from other Licensed Producers for processing by Bonify; and 5. The Company and Bonify will split revenues and operating costs equally after Bonify deducts the market value of cannabis material that it supplies.

We believe that this relationship is the fastest and surest path to revenues and profits for the Company. The term of the agreement is for 3 years from commencement of operations and may be extended by mutual agreement. Should the agreement not be extended we agree to transfer title to the equipment to Bonify. Bonify is currently in the process of obtaining its Sales License to sell cannabis-related products such as cannabis oil. The key benefits of the agreement to the Company are 1) the ability to supply cannabis oil to The University of Waterloo and University of Western Ontario for research purposes, and 2) the potential for a pathway to revenues much faster than if we simply applied for our own licenses. Our current target for commencement of operations is the second quarter after completion of necessary financing.

Licensing under ACPMR

While we believe that our agreement with Bonify, when fully operational, provides us with a pathway to revenues in the near-term, we also intend to apply for our own licenses – both a Cultivation License and a Sales License.

The Cultivation License allows the holder to:

possess, produce, provide, ship, deliver, transport and destroy dried cannabis or cannabis oil; possess, produce, and destroy cannabis in its natural form, other than marijuana or cannabis oil, for the purpose of producing cannabis oil; and possess and destroy cannabis, other than marijuana or cannabis oil, for the purpose of conducting in vitro testing that is necessary to determine the cannabinoid content of marijuana or cannabis oil.

~~The~~Algae ~~Sales~~Dynamics ~~License~~intends ~~allows~~to ~~the~~undergo ~~holder~~a significant rebranding exercise to ~~sell~~ensure ~~dried~~that ~~marijuana~~it ~~and~~is able to communicate its emphasis on the application of cannabis. ~~oil~~Beginning with a proposed name change to CanaQuest Medical Corp., our mission is to:

a(i) ~~client~~Identify ofwith the ~~Company~~help orof anour ~~individual~~research ~~who~~partners isappropriate ~~responsible~~formulations; ~~for~~(ii) Acquire the ~~client;~~lowest acost ~~hospital~~dry ~~employee,~~cannabis iffrom ~~the~~domestic ~~purpose~~and isinternational insuppliers ~~connection~~who ~~with~~have ~~their~~adequate ~~employment;~~logistics ~~another~~and ~~Licensed~~warehousing ~~Producer;~~capabilities ato ~~Licensed~~satisfy ~~Dealer~~our requirements; ~~the~~and ~~Minister~~(iii) ofContinue ~~Health;~~discussions ~~and~~we ahave ~~person~~already tocommenced ~~whom~~with ancontract ~~exemption~~manufacturers ~~relating~~who tohave ~~the~~experience ~~substance~~in ~~has~~conducting ~~been~~human ~~granted~~trials ~~under~~and ~~section~~commercializing 56research ofand ~~the~~development ~~Controlled~~as ~~Drugs~~well as managing supply and ~~Substances~~risk ~~Act~~management including through good manufacturing practices (~~CDSA~~GMP).

We ~~have~~expect ~~included~~our aformulations ~~full~~involving ~~description~~both ofTHC and botanical oil extracts will treat mental health ailments and the ~~cannabis-related~~advent ~~licensing~~of our formulations is expected to significantly distinguish our approach from “Licensed Producers” (or licensees authorized to cultivate, process atand sell cannabis products) who may not have strong relationships with the ~~end~~University research community which we believe we have cultivated over time through our business objectives. We believe our formulations may have significant potential applications in the treatment of ~~this~~anxiety, ~~Business~~addiction, ~~Description~~depression, ~~section~~schizophrenia, ~~for~~and post-traumatic stress disorder “PTSD” ~~further~~and ~~information~~will form a strong foundation to continue to seek other applications through our Sponsored Research Programs. Accordingly, we believe we have developed a strategy to maximize opportunities in an evolving industry that has international scope and ~~disclosure~~opportunity, with Canadian talent through its universities providing a mechanism to make a significant difference in the lives of medical cannabis users.

WeIntellectual doProperty ~~not require similar special licensing with respect to the extraction of Omega-3 oils from algae biomass and related sales.~~Protection

The Company is undertaking development & commercialization of cannabinoid therapeutic products from strains of cannabis to treat a variety of clinical indications. Through its relationship with Universities, the Company is collaborating to formulate proprietary solutions which significantly impact the effectiveness of cannabis compounds. In addition, we are looking to:

●	Combine the benefits of cannabis and other botanicals;
●	Enhance a highly effective suite of medicinal patented products; and
●	Utilize formulations which increase absorption capacity.

Competitive Advantage

We believe we have developed a competitive advantage relative to Licensed Producers who may have vertically integrated operations to produce medical applications for cannabis. In particular, we have shown progress in several key areas including:

Clinical Trials:

●	Clinical trial data using animal subjects performed by Dr. Laviolette, Western University, has shown positive results.
●	Our focus is targeted to areas that can provide positive, measurable feedback including anxiety, addiction, depression, schizophrenia and PTSD.
●	Our products are intended to balance THC with other botanical compounds to minimize the euphoric and related side effects.
●	We expect further product formulations and uses as our Sponsored Research Programs continue.

Relationships:

●	Focused studies by our research partners includes twelve years of cannabis compounding (THC, CBD).
●	Talented management and sustainability is evident through continuous development and talent retention including seven PhDs and three interns through our Sponsored Research Programs.
●	Our innovative approach to government funding, including the MITACS $400,000 research grant has built a reputable and collaborative approach between the private and public sector.
●	Our scientific rather than simply “claims-based” approach provides reviewable clinical data that is attracting attention from leading pharmaceutical firms and producers.
●	Our primary researcher at Western University, Ontario, Dr. Steve Laviolette, believes that the clinical implications and commercial potential for his formulations are highly significant and has concluded that “since cannabis is commonly prescribed for a host of ailments, including pain, nausea, glaucoma, multiple sclerosis, osteoarthritis, our formulation will again be hugely significant for the non-mental health patient sectors as well”.

University Affiliations:

Our strong and developing relationship with Western University positions us to execute on our business strategy and develop viable, useful products.

In particular, we believe researchers at Western University are:

●	Ahead of their field with over twelve years of cannabis compound (THC, CBD) research;
●	Have a strong understanding of the application of THC and CBD compounds to address pain, anxiety, addiction, depression, schizophrenia and post-traumatic stress disorder “PTSD”;
●	Equipped to realize the benefits of novel proprietary formalizations they developed, and which are eligible for patents which the Company will secure through our research agreements;
●	In a position to leverage their platform established for ongoing novel formulations and produce relevant clinical trial data with significant results.

In addition, the researchers at the University of Waterloo are exploring other areas that have shown positive results for the use of cannabis including:

●	Colorectum, pancreas, breast and prostate cancer;
●	Ongoing R & D – mitigation of the spread of cancerous tumors; and
●	Combined application of natural botanicals, algae essential fatty acids, and cannabis oils.

Distribution

Our focus on distribution is intended to position us to meet demand for our formulations which is expected to occur through agreements with Licensed Producers with formulation, packaging and distribution/export (GMP facilities) together with international distribution agreements and strategies to distribute product both domestically and abroad.

Product Development

We are positioned to introduce products using both THC dominated formulations with other botanicals, including combinations with plant cannabinoids as well as CBD dominated formulations with other botanicals. We believe that a strategy of introducing a combination of compounds over time and in formulations that are correlated with observed benefits will allow us to penetrate and differentiate ourselves from competitors.

Licensed Producer Partnerships

We intend to pursue our business strategy through appropriate licensing arrangements with Licensed Producers. We believe our experience and focus on nutraceutical formulations in the past several years position us to execute this strategy through relationships we have formed and continue to develop.

Next Steps:

To fully exploit our competitive advantage, we intend to:

	●	Sign agreements with Licensed Producers/Distributors to manufacture and/or sell medicinal cannabis domestically and Internationally
	●	Schedule cannabis deliveries from Jamaican Medical Cannabis Corporation (“JMCC”) for supply of high-volume dry medicinal cannabis for our formulations or for referral to third party Licensed Producers
	●	Initiate human trials to further support our research and animal clinical trial results
	●	Secure license from Health Canada for Purchase/Sale, Import/Export - the Cannabis Act (non-possession)
	●	Formalize agreement with Licensed Processor – GMP facility, to package and distribute formulations
	●	Secure funding and list on the Canadian Securities Exchange (CSE) – dual listing
	●	Build brand awareness for sales and export – scientifically supported
	●	Support Universities on-going product development - Uniqueness (scientific data)
	●	File Provisional Patent Product Applications

Medical Cannabis – History and Benefits

Cannabis, also known as marijuana, is a family of plants called Cannabaceae. There are over 700 varieties of cannabis that have been described to date. Based on characteristics such as shape, colour, height, smell, etc., usually recognised by two Main types: Cannabis Sativa, which originated in the Western hemisphere and Cannabis Indica, which originated in Central and South Asia. Cannabis as a medicine can be found in the oldest Chinese tradition few thousand years ago, and indications showed different therapeutics use such as for malaria, rheumatic pain, constipation, disorders of reproductive system and many others.

Medical Cannabis refers to the use of cannabis and its constituent cannabinoids to treat disease or improve symptoms such as pain, muscle spasticity, nausea and other indications. Cannabinoids is a blanket term covering a family of complex chemicals, both natural and man-made, that bind with cannabinoid receptors (protein molecules on the surface of cells) and effect a wide number of responses. Cannabinoid receptors in the human body are part of a system called the Endocannabinoid System. This system produces chemicals called endocannabinoids, which also bind with cannabinoid receptors. Cannabinoid receptors are found in the brain and throughout the body. Scientists have found that cannabinoid receptors in the Endocannabinoid System are involved in a vast array of functions in our bodies, including helping to modulate brain and nerve activity (including memory and pain), energy metabolism, heart function, the immune system and even reproduction. While there are a large number of active cannabinoids found in cannabis, the two most common currently used for medical purposes are THC (tetrahydrocannabinol) and CBD (cannabidiol).

Our proposed cannabis formulations and related nutraceutical products will generally utilize:

●	a multiple combination of plant strains to target medical ailments at the neurological level;
●	the use of cannabis extracted and concentrated cannabinoid oils which are known to provide targeted benefits together with botanical oils and Algae-omega3 essential fatty acids (DHA and EPA);
●	cannabis extracted and separated terpenes (aroma, additional medicinal benefits); and
●	cannabis “whole plant” oil – with natural concentrations of THC or CBD.

From research done in the field it has been concluded that THC acts on 2 types of cannabinoid receptors: CB1 and CB2. CB1 receptors are mainly found in the brain, peripheral nerves, and nervous system, whereas CB2 are found both in the neurons and immune cells. Evidence suggests that THC helps alleviate symptoms suffered both by AIDS patients and by cancer patients undergoing chemotherapy, by increasing appetite and decreasing nausea. The other main ingredient is CBD, a non-psychoactive component of cannabis which accounts for more than 50% of the known therapeutic applications A range of clinical studies indicated that CBD appears to relieve convulsion, inflammation, anxiety, nausea and short-term memory loss.

While THC has a strong binding affinity for both CB1 and CB2 receptors, CBD has no particular binding affinity. Instead, many of the therapeutic benefits of CBD are created through indirect actions. These actions include activating TRPV1 Receptors. These receptors are involved in regulating pain, body temperature, and inflammation. We believe based on our consultations with Dr. Steve Laviolette, that these properties of THC may make it more desirable than CBD alone as it directly and more effectively treats several of these ailments while CBD only has an indirect effect. This is because THC is similar to Endocannabinoids that have a similar structure to naturally occurring Endocannaboids which are also naturally released by neurons in the human body to regulate the release of neurotransmitters.

While THC is known to have a positive impact in stabilizing the release of neurotransmitters responsible for PTSD and pain, THC selectively targets molecular and neuropharmacological signaling pathways in both cortical and sub-cortical regions of the brain. In particular, the diminished functioning of GABAergic neurons in the prefrontal cortex (PFC) may lead to the loss of control of the PFC to regulate proper sub-cortical dopamine neurotransmission. The action of THC on CB1Rs can impair PFC-CB1R signaling and associated GABAergic functionality leading to dysregulation of the normal prefrontal process. This results in an increase in the extracellular glutamate levels and lower GABA which normally inhibits dopamine production. Understanding this process provides the potential for the development of safer cannabinoid-derived formulations using THC and/or the development of novel THC formulations containing neuroprotectants to mitigate these neuropsychiatric risks. Accordingly, our primary formulation combines THC with specified quantities of a specific botanical extract. While both are naturally occurring products, we believe that our formulation is sufficiently novel as it combines these compounds in specified quantities to create a different neurological result. The specific botanical extract is a unique amino acid and is known to cross the blood-brain barrier. In addition, it may regulate the extracellular glutamine concentration in the neurons and by doing so may properly regulate GABA levels and thus inhibit the release of dopamine. This same formulation may lead to THC replacing opioids: since according to Dr. Steve Laviolette, “the primary addictive effects of opioids are believed to be due to causing a long-term ‘switching on’ of overactive dopamine, our formula would be predicted to be superior to THC alone (which does cause overactive DA similar to opioids), in that our formula prevents this side effect of THC”.

Competitive Landscape

The future of medical cannabis lies in medically accepted products for the management of neuropathic pain, hypertension, post-stroke neuroprotection, multiple sclerosis, epilepsy, cancer, and other disorders. An example list of publicly traded companies that have entered or are intending to enter the medicinal cannabis markets are listed as follows:

●	Aphria Inc (Canada Licensed Marijuana producer),
●	Aurora Cannabis (producer of Cannabis and medicinal solutions following its acquisition of Cannabid Inc.), Bedrocan Cannabis Corp Canada (Pharmaceutical grade medicinal cannabis), Mettrum Health Corp Canada (Licensed producer of medical cannabis),
●	OrganiGram Holdings Inc (Canada Licensed producer of organic medical marijuana),
●	Tweed Marijuana Inc. (Canada Licensed producer of medical cannabis),
●	Cannabis Science, Inc (USA OTC traded biotech company in Colorado),
●	Medical Marijuana Inc USA (OTC traded business solutions and partnerships),
●	GW Pharmaceuticals plc UK & USA (Owns a patented (MS) product – Sativex.).

We believe that while there is significant growth in this sector, our patented processes will continue to differentiate us and position us to succeed in this market.

Sponsored Research Programs

In order to support our mission, we have engaged two prominent Canadian universities to provide research and product development in the use of extracts from cannabis oil and algae oil in the context of cancer, and the development of novel pharmacotherapies for mental health, as follows:

1) Dr. Steven Laviolette, BSc, PhD (Addiction Research Group, Dept. of Anatomy & Cell Biology, Dept. of Psychiatry, Canadian Institute for Military and Veterans Health Research), Western University - to perform research and product development on cannabis oil and its constituents in the context of depression, post-traumatic stress disorder, anxiety and schizophrenia.

2) Dr. Jonathan Blay, PhD, FRSB, FIBMS, Csci, CBiol (Professor of Pharmacy, University of Waterloo, Professor of Pathology, Dalhousie University), the University of Waterloo – to perform research and product development on cannabis oil and its constituents in the context of the development and treatment of the colorectum, pancreas, breast and prostate cancers.

Each research program is a sponsored research program in which the Company pays an agreed amount to each university and in return receives the benefits of the research and the right to acquire the associated intellectual property, based on an agreed fixed payment with no ongoing royalties. The sponsored programs run for three years at the University of Waterloo, at a cost of C$600,000 over the three-year life, and for four years at Western University, at a cost of C$1,000,000 over the life of the program.

Western University in Ontario has made significant progress in its research into anxiety, depression, schizophrenia, and post-traumatic stress disorder, drawing on twelve years of cannabis compound research. We believe this work will continue to result in patentable formulations utilizing cannabis oils and other nutraceutical products which we intend to commercialize, license and distribute. Collaborating with prominent Canadian universities is a core part of our plan to develop premium products and add to our portfolio of intellectual property. Through our Sponsored Research Programs, the Company is focusing primarily on the use of extracts from cannabis oil and nutraceutical products for the development of new pharmacotherapies in the context of cancer and for mental health and pain relief. Our intention is to utilize these patents to partner with licensed producers qualified under the Access to Cannabis for Medical Purposes Regulations (or ACMPR) and the Cannabis Act (collectively, Licensed Producers or LPs) to provide a secure source of cannabis plant material and to jointly produce patented formulated products for sale by the Licensed Producer. The Cannabis Act contains details of the application requirements for licenses and permits, which are similar in nature to the requirements of the ACMPR.

Our near-term revenue generation goal, including until we are ready to outsource the manufacturing of our formulations, is to obtain referral revenue from the sale of medicinal cannabis to Licensed Producers from JMCC our collaboration and cultivation partner (with whom we have signed a Master Supply Agreement) for supply of high-volume dry cannabis for our formulations.

Our goals also include expanding research and development work with existing and new Canadian universities, securing supply/service agreements with Licensed Producers, and submitting an application to Health Canada to acquire the necessary licenses to market and sell cannabis and cannabis related medical products as necessary to implement our business objectives. The management team leading these initiatives together with our proposed collaboration partners have the relevant experience ranging from public company management and process experience to successful fund raising and commercialization. We believe that the commercialization of these formulations will lead to significant revenue generating opportunities.

In our view, there is a significant market for formulations involving compounds derived from cannabis strains together with other nutraceutical products. There is research to support that Cannabinoid receptors which are part of the endocannabinoid system of the human body and the primary focus of the application of cannabis derived oil compounds as well as algae, are involved in a variety of physiological processes including appetite, pain-sensation, mood, and memory. Accordingly, the Company is generally focused on penetrating the medical marijuana industry both domestically and internationally and believes that its formulations, backed by scientific research produced through its Sponsored Research Programs, will augment the demand and enhance the credibility of medical cannabis products.

Recent Developments in our Commercialization Strategy

As of the date of this Annual Report on Form 10-K, the Company, through its Sponsored Research Programs, has developed a very unique formulation involving cannabis and other nutraceutical products. We have submitted provisional patent applications for these formulations. The intellectual property (IP) protection of our formulations through appropriate patents will position us to formalize negotiations and eventually enter into domestic and international production and distribution agreements with Licensed Producers, or their equivalent in other jurisdictions. Our discussions with LPs have included production, distribution and related collaborative initiatives involving our specially formulated products and we are confident that the necessary agreements will be negotiated and executed over time so that our formulations can be introduced into the marketplace and complement or expand an increasingly attractive market for medicinal and health related cannabis applications. LPs we have spoken with to date have expressed significant interest but need to evaluate the strength of our patents and related formulations before finalizing licensing and related documentation. However, based on these discussions, we are confident that we will be able to establish relationships with business partners who understand the importance of scientifically backed medicinal cannabis products and the approach taken by Dr. Steven Laviolette, who is the primary researcher at Western University under our Sponsored Research Program and whose formulations will likely be marketed under a new brand name which is still to be determined.

We believe we have the potential to secure an enforceable patent for our first formulation (which combines THC and nutraceutical products), to treat mental health ailments. We believe that our new brand will provide us with a strong name brand and trademark to identify our formulations to the public and build brand awareness. In addition, we believe the fact that the combination of active ingredients in our formulations is scientifically backed by Dr. Laviolette’s research should distinguish us from our competitors. We believe these formulations have significant potential applications in the treatment of anxiety, addiction, depression, schizophrenia, and post-traumatic stress disorder “PTSD” based on his research on animals. Dr. Steven Laviolette, Western University, has indicated to us that, “Since cannabis is commonly prescribed for a host of ailments, including pain, nausea, glaucoma, multiple sclerosis, osteoarthritis, our formulations will again be hugely significant for the non-mental health patient sectors as well.”

We have three potential formulations – which we have termed the “F” Platforms and two provisional patents which we have filed.

F1 – a unique THC + botanical extract formulation which mitigates or eliminates the negative side-effects of THC: e.g. anxiety, depression, paranoia, cognitive/memory deficits. We expect F1 to be an alternative to opioids, thus addressing addiction and dependence and effective for pain management.

F2 – a unique CBD + select nutraceutical/dietary additives aimed at synergizing the therapeutic properties of CBD in the treatment of anxiety, depression, schizophrenia, PTSD (chronic stress induced) and addiction.

F3 – expansion of research and discovery of the novel formulations utilizing other cannabinoids in addition to THC and CBD will unravel specialized applications for targeted therapies in specific mental health symptom clusters.

Capital Requirement

In order to execute on our strategy as described above, we estimate an initial capital requirement of US$15.60 million to support activities over the following twelve months, including the following:

1. Payment to the universities to support the sponsored existing and the new research programs; 2. Application to Health Canada for ~~licensing~~sale import/export license under the ~~ACPMR;~~Cannabis Act 3. ~~Purchase~~Professional and ~~installation~~other offees ~~oil~~in ~~extraction~~connection ~~equipment~~with atthe ~~Bonify’s~~development ~~facility;~~of our strategy, negotiations and formalizing agreements with our collaboration partners 4. Expenditures related to Human Trials of F1 formula 5. Purchase of cannabis 6. Working capital to support ongoing operations. and research

We have engaged investment bankers to assist with raising the required capital.

Legal and Business Context

The Company’s business of the development of unique health products and pharmaceuticals that utilize ~~hemp and~~ cannabis oils is rigorously regulated. Legal access to medicinal cannabis or medical marijuana has been a gradual and regulated process in Canada, which started as early as 1999 with the granting of exemptions under the Controlled Drugs and Substances Act (Canada). Following successful court actions in which patients reliant on medical marijuana won legal recognition of their rights to access marijuana as a medicine, the Federal Government implemented the Marijuana Medical Access Regulations (MMAR) in 2001. The MMAR created an initial regime for individuals with a prescription from their health care practitioner in the required form, to possess and use medical marijuana which they grew themselves, or which they purchased from designated producers or a Health Canada supplier.

6In general, this regime of supply was restrictive, and faced continuing court challenges from users, eventually leading to the implementation of the Marijuana for Medical Purposes Regulations (MMPR) in June 2013, providing for an expansion of supply based on a regulated private industry of licensed producers of medical marijuana.

~~Legal~~Over ~~access~~time, tocourt ~~medicinal~~challenges ~~cannabis~~were oralso ~~medical~~mounted ~~marihuana~~to ~~has~~the ~~been~~restrictions ~~a gradual and regulated process~~ in ~~Canada~~the MMPR, which ~~started~~initially asrestricted ~~early as 1999 with~~ the ~~granting~~products ofmade ~~exemptions~~available by ~~under~~Licensed ~~the~~Producers ~~Controlled~~to ~~Drugs~~only ~~and~~dried ~~Substances Act (Canada)~~marijuana. ~~Following~~In ~~successful~~2015, ~~court~~the ~~actions in~~Supreme ~~which~~Court ~~patients~~of ~~reliant~~Canada onheld ~~medical~~that ~~marihuana~~the ~~won~~restriction ~~legal~~making ~~recognition~~only ofdried medicinal ~~their~~marijuana ~~rights~~available to ~~access~~patients ~~marihuana~~was asunconstitutional. aIn ~~medicine~~response, the Federal Government ~~implemented~~broadened the ~~Marihuana~~scope ~~Medical~~of ~~Access~~available licenses ~~Regulations (MMAR) in 2001. The MMAR created an initial regime~~ for ~~individuals with~~Licensed aProducers ~~prescription~~to ~~from~~include ~~their health care practitioner in~~ the ~~required~~production ~~form, to possess~~ and ~~use~~sale ~~medical~~of ~~marihuana~~cannabis ~~which~~oils ~~they grew~~as ~~themselves,~~well oras ~~which~~fresh ~~they~~marijuana ~~purchased~~leaves ~~from~~and ~~designated producers or a Health Canada supplier~~buds.

InThe ~~general,~~ACMPR ~~this~~which ~~regime~~was ofintroduced ~~supply~~to ~~was~~address ~~restrictive~~these issues provided a more advanced and rigorous regulatory regime for the production, distribution and ~~faced~~sale ~~continuing~~of ~~court~~medical ~~challenges~~marijuana ~~from~~in ~~users~~Canada, ~~eventually~~and ~~leading~~regulated toand contemplated the ~~implementation~~sale of medical marijuana by Licensed Producers to jurisdictions outside of Canada where the ~~Marihuana~~use ~~for~~and ~~Medical~~sale ~~Purposes~~of ~~Regulations~~medical ~~(MMPR)~~marijuana inand ~~June~~derivatives ~~2013~~thereof are legally sanctioned. The ACMPR, ~~providing~~like ~~for~~prior anregulations, ~~expansion~~requires ofpatients ~~supply~~seeking ~~based~~medical onmarijuana ato ~~regulated~~obtain medical approval from their health care ~~private~~practitioner ~~industry~~and ofto ~~licensed~~provide ~~producers~~a medical document to a Licensed Producer and have simplified the requirements of the MMPR, offering easier access to medical ~~marihuana~~marijuana in Canada.

Over time, court challenges were also mounted to the restrictions in the MMPR, which initially restricted the products made available by Licensed Producers to only dried marihuana. In 2015, the Supreme Court of Canada held that the restriction making only dried medicinal marihuana available to patients was unconstitutional. In response, the Federal Government broadened the scope of available licenses for Licensed Producers to include the production and sale of cannabis oils as well as fresh marihuana leaves and buds.11

The ~~current~~Cannabis ~~ACMPR~~Act ~~provides~~was apassed ~~more~~by ~~advanced~~the ~~and~~Senate ~~rigorous~~of ~~regulatory~~Canada ~~regime~~on ~~for~~June 19, 2018. On June 20, 2018, the Government of Canada officially announced that the production, distribution and sale of cannabis for unqualified adult use will become legal on October 17, 2018, and subsequently on June 21, 2018, the Cannabis Act received royal assent. The commitment by the Government of Canada to implement the Cannabis Act did occur on October 17, 2018. On June 27, 2018, Health Canada established regulations under the Cannabis Act (the “Cannabis Regulations”). As a result, individuals who currently rely upon the medical ~~marihuana~~cannabis market to supply their medical cannabis and cannabis-based products may cease this reliance, and instead turn to the adult-use cannabis market to supply their cannabis and cannabis-based products. The Company believes that its formulations will provide it with a competitive advantage in ~~Canada~~this market since they will be backed by scientific research and complement or enhance the use of existing medicinal marijuana products. However, the Company will need to ensure that it together with its collaboration partners remain in compliance with the Cannabis Act which provides a licensing and ~~regulates~~permitting scheme for the production, testing, packaging, labelling, sending, delivery, transportation, sale, possession and ~~contemplates~~disposal of cannabis, which is implemented by the Cannabis Regulations. Provincial legislation will also implement measures authorizing the sale of ~~medical~~cannabis ~~marihuana~~that has been produced by ~~Licensed~~a ~~Producers~~person authorized under the Cannabis Act to ~~jurisdictions~~produce cannabis ~~outside~~for ofcommercial ~~Canada~~purposes. The licensing, permitting and authorization regime is implemented by the Cannabis Regulations. ~~where~~The Cannabis Act contains some details of the ~~use~~application requirements for licenses and ~~sale~~permits, which are similar in nature to the requirements of ~~medical~~the ~~marihuana~~ACMPR (e.g. they include requirements for financial information, security information and ~~derivatives~~security ~~thereof~~clearances). Below are ~~legally~~additional ~~sanctioned.~~highlights of the Cannabis Act:

Liberalizing Regulatory Environment and Competitive Conditions

The ACMPR, like prior regulations, requires patients seeking medical marihuana to obtain medical approval from their health care practitioner and to provide a medical document to a Licensed Producer. However, the ACMPR provisions have simplified the requirements of the MMPR, offering easier access to medical marihuana in Canada.

According to Health Canada, more than 98,000 patients had enrolled with Licensed Producers under the ACMPR regime by September 30, 2016. Health Canada also indicates that, as of September 30, 2016, the average amount of dried marihuana for medical purposes authorized per client was 2.6 grams per day. For further information, see the Health Canada website at:

http://www.hc-sc.gc.ca/dhpmps/marihuana/info/market-marche-eng.php.

Further information has recently been released by Canada’s Parliamentary Budget Officer (the “PBO”) in its November 1, 2016 report, which estimates that, in 2018, an estimated 4.6 million individuals aged 15 and over will use cannabis at least once, representing 655 metric tons of cannabis. This number could rise to 5.2 million individuals by 2021, representing 734 metric tons of cannabis. The PBO stated that the pre-tax price of legal cannabis is projected to be between $6.67 and $8.33 per gram, with a mid-point estimate of $7.50. For further information, see “Legalized Cannabis: Fiscal Considerations”, authored by the Office of the PBO and dated November 1, 2016.

Recent Developments

The Task Force on Cannabis Legalization and Regulation (the “Task Force”) appointed by the Federal Government recently released its report entitled “A Framework for the Legalization and Regulation of Cannabis”, dated November 30, 2016 (the “Report”). The Task Force makes a number of recommendations in the Report that are relevant to the market for recreational marihuana and, in particular, recommends that the legislation and regulations ultimately put in place by the Federal Government, among other things, do the following:

●	set a national minimum age of purchase of 18;
●	apply comprehensive restrictions to the advertising and promotion of cannabis and related merchandise;
●	allow limited promotion in areas accessible by adults, similar to those restrictions under the Tobacco Act (Canada);
●	require plain packaging for cannabis products that only display the producer company name, strain name, price, amounts of THC and cannabidiol (CBD), and warnings and other labelling requirements;
●	impose strict sanctions on false or misleading promotion as well as promotion that encourages excessive consumption, where promotion is allowed;
●	impose requirements to protect children;
●	impose a price and tax scheme based on potency to discourage purchase of high-potency products;
●	prohibit mixed products, for example cannabis-infused alcoholic beverages or cannabis products with tobacco, nicotine or caffeine; and
●	allow for personal cultivation for non-medicinal purposes of up to four plants per residence subject to additional local and safety requirements.

7According to Health Canada, more than 98,000 patients had enrolled with Licensed Producers under the ACMPR regime by September 30, 2016. Health Canada also indicates that, as of September 30, 2016, the average amount of dried marijuana for medical purposes authorized per client was 2.6 grams per day. For further information, see the Health Canada website at: http://www.hc-sc.gc.ca/dhpmps/marijuana/info/market-marche-eng.php.

OfFurther ~~particular~~information ~~importance,~~has recently been released by Canada’s Parliamentary Budget Officer (the ~~Task~~“PBO”) ~~Force~~in ~~recommended~~its November 1, 2016 report, which estimates that, in 2018, an estimated 4.6 million individuals aged 15 and over will use cannabis at least once, representing 655 metric tons of cannabis. This number could rise to 5.2 million individuals by 2021, representing 734 metric tons of cannabis. The PBO stated that the ~~Federal~~pre-tax ~~Government~~price of legal cannabis is projected to be between $6.67 and $8.33 per gram, with a mid-point estimate of $7.50. For further information, see “Legalized Cannabis: Fiscal Considerations”, authored by the Office of the PBO and dated November 1, 2016.

● continue to regulate the production of cannabis and its derivatives, drawing on the current medicinal marihuana production regime; ● use licensing and production controls to encourage a competitive market; and ● implement a tracking system to prevent diversion and to allow for product recalls.12

ARegulatory ~~full copy of the Report can be found at: http://healthycanadians.gc.ca/task-force-marijuana-groupeetude/framework-cadre/index-eng.php.~~Pathway

Health Canada recently released “Proposed Regulations Amending the Cannabis Regulations (new classes of cannabis) and Proposed Order Amending Schedules 3 and 4 to the Cannabis Act”. These proposed changes introduce three new classes of cannabis products: edibles, concentrates and topicals. The introduction of these new classes may present an opportunity for the Company to bring combination products to the market as an adult-use edible cannabis product. It is proposed that only approved food ingredients and additives will be permitted for use in this class of products – which will require the Company’s additives to qualify under such rules and which may also be influenced by the delivery mechanism for our formulations. Although health claims are not permitted on this type of product, this commercialization option represents the fastest route to market and allows for distribution through both healthcare practitioner-facilitated medical-use channels and recreational channels. Accordingly, our intention is to explore the use of these channels.

Currently the only commercialization option that will allow for making health claims and the distribution of literature to healthcare practitioners is as a prescription cannabis drug requiring a Drug Identification Number (DIN). This route requires evidence from human clinical trials that demonstrates the safety and efficacy of the products to allow for premarket authorization by Health Canada. Two cannabis drug products have received Health Canada authorization thus far. To commence a clinical trial program, we will collaborate with experienced partners who are able to obtain the No Objection Letter for the conduct of these studies and the Cannabis Research License required by Health Canada. Building a portfolio of clinical research data on our products will require time; however, has the benefit of gaining broader market acceptance and possibly inclusion on drug formularies approved by insurance providers.

Finally, Health Canada has indicated that further research is required before they will consider authorizing the inclusion of cannabis in self-care products (natural health products, over-the-counter drugs). Health Canada has also published proposed changes to the regulatory framework of self-care products with a plan to issue targeted changes to the Food and Drug Act in early 2019 for public consultation. Although these regulatory changes may not have a direct impact on the oversight of cannabis products at this time, they may also open the possibility of an expedited regulatory pathway for our formulations should an additional category for cannabis self-care products be added in time. Self-care products also require substantiating evidence for efficacy and safety derived from human clinical trials. In commencing a clinical trial program, the Company will be poised to capitalize on any changes that will facilitate the self-care market by already obtaining data to support health claims.

Markets

We believe that our focus on development of product formulations that utilize both cannabis oil and nutraceutical products, including algae oils, is a niche strategy that will give us a unique market position and allow further market penetration. While we believe that this strategy is a natural extension of existing, rapidly growing markets, there is limited data available to measure the market opportunity. With that in mind, what follows is a discussion about the cannabis oil market and the algae oil market.

Market for Cannabis Oil

The Canadian oil extraction marketplace is forecast to grow from C$1 million in 2015 to C$1.7 billion in 2020, assuming full legalization in 2018. In terms of conversion from dried marijuana to extracts/oil, due diligence has been conducted on the Colorado market, finding that 45% of dried marijuana users would eventually convert to marijuana extracts/oil. The Company assumes the market would gradually reach an approximate 45% conversion rate by 2018. Source: Mackie Research Capital Corporation, April 8, 2016 – MRCC Estimates. In addition, it is estimated that there will be 630,000 (1.7% of the population) registered medical marijuana patients in Canada by 2024, resulting in annual demand of approximately 230,000 kilograms. In 2018, it is estimated the demand by medical marijuana patients will be roughly 95,000 kilograms. Based on these forecasts, it is estimated that by 2024, the value of the Canadian medical marijuana market could be $1.9 billion to $2.6 billion. (source: Mackie Research Capital Corporation (“MRCC”) September 20, 2017). In addition, Germany and Australia and an increasing number of countries are legalizing medical marijuana, like Canada did in 1999, and government officials are making public statements suggesting that the prohibition of marijuana is ineffective policy from a public health, fiscal and social justice perspective. Licensed Canadian companies have considerable operational experience, which can be leveraged to pursue high growth opportunities in the increasing number of federal licensing opportunities in international markets.

CIBC World Markets issued a report in January 2016 that provided some early estimates of the size of the Canadian recreational marihuana market (to be legalized by July 1, 2018). Using the legalized markets in the States of Colorado and Washington as a comparison, it estimated the Canadian recreational marihuana market is in the broad range of $5 billion to $10 billion per year. This compares with estimated annual Canadian liquor sales of between $5 billion and 8.7 billion according to Deloittes. Canaccord Genuity estimates that the number of marihuana users in the first year following the legalization of marihuana will be approximately 4,000,000. Even as an early estimate, this indicates a recreational market size in the order of 4 to 8 times the size of the medical marihuana market in Canada. (please, see the link for complete report)13

http://research.cibcwm.com//economic_public/download/eijan16.pdf.

Market for Algae Oil

The market data for algae oil ~~presented below~~ is brief since our plan is to utilize algae oil in our products largely to the extent that it complements our products that contain cannabis oil. ~~Whereas~~We ~~until~~have ~~recently,~~suspended ~~our~~the ~~intention~~development ~~was~~of ~~to commercialize~~ our BioSilo® algae cultivation system. ~~for~~However, we believe that there is still scope to leverage the ~~purpose~~research and expertise gained from our understanding of ~~selling~~the ~~bulk~~medical properties and use of algae oil. In particular, asstudies ~~well~~have asshown ~~algae~~that ~~biomass~~EPA (eicosapentaenoic acid) and DHA (docosahexaenoic acid), towhich are ~~global~~long-chain ~~markets~~omega-3 fatty acids, ~~our~~are ~~current~~important ~~intention~~for proper fetal development, including neuronal, retinal, and immune function. isEPA toand ~~utilize~~DHA ~~the~~may ~~BioSilo~~affect ~~system~~many toaspects ~~the~~of ~~extent~~cardiovascular ~~required~~function including inflammation, peripheral artery disease, major coronary events, and anticoagulation. EPA and DHA have been linked to ~~support~~promising ~~our~~results ~~internal~~in ~~needs~~prevention, ~~for~~weight ~~cannabis/algae~~management, ~~oil~~and ~~blends~~cognitive function in those with very mild Alzheimer’s disease. ~~Any~~Source: ~~algae~~Advances in Nutrition -An International Review Journal January ~~oil~~2012. ~~that~~We isbelieve ~~surplus~~we tocan ~~our~~utilize ~~mission~~these ~~would~~compounds bein ~~made~~our ~~available~~formulations to ~~other~~further ~~markets~~enhance their medicinal benefit.

8Cannabis by itself has long been used for medical purposes and in recent decades has gained significant traction in becoming a common and preferred treatment for specific ailments. Cannabis is one of the fastest growing industries in North America. The Company’s new strategic initiative will seek product development and formulation opportunities that combine the benefits of botanical oils and cannabis oils and other nutraceutical products.

~~EPA~~The ~~(eicosapentaenoic~~Company’s ~~acid)~~core ~~and~~product ~~DHA~~development ~~(docosahexaenoic~~strategy ~~acid)~~has ~~are~~been ~~long-chain~~previously ~~omega-3~~focused ~~fatty~~on ~~acids.~~the ~~Studies~~production ~~have~~of ~~shown~~high-volume ~~that~~specific ~~EPA~~algae species and ~~DHA are~~extraction ~~important~~of ~~for~~Essential ~~proper~~Fatty ~~fetal~~Acids ~~development,~~(EFAs) ~~including~~which ~~neuronal,~~is ~~retinal,~~the ~~and~~foundation of ~~immune~~the ~~function.~~endocannabinoid ~~EPA~~system ~~and~~(ECS). ~~DHA~~The ~~may~~ECS ~~affect~~is ~~many~~a ~~aspects~~ group of ~~cardiovascular~~endogenous ~~function~~cannabinoid ~~including~~receptors ~~inflammation,~~located in the mammalian brain and throughout the central and peripheral ~~artery~~nervous ~~disease~~systems, ~~major~~consisting ~~coronary~~of ~~events,~~neuromodulatory lipids and ~~anticoagulation~~their receptors. ~~EPA~~The extracted ~~and~~algae Omega 3 oil with high concentrations of DHA ~~have~~and ~~been~~EPA ~~linked~~is toused ~~promising~~as ~~results~~a inhealth ~~prevention,~~supplement product. ~~weight~~In ~~management~~light of the potential synergies, ~~and~~the ~~cognitive~~Company ~~function~~will incontinue ~~those~~to ~~with~~develop ~~very~~its ~~mild~~strategy to create products and ~~Alzheimer’s~~formulations ~~disease.~~that ~~Source:~~combine ~~Advances~~the inhealth ~~Nutrition~~benefits ~~-An~~of ~~International~~cannabis ~~Review~~oils ~~Journal~~and ~~January~~algae ~~2012~~oils.

~~(DHA)~~The ~~Algae~~following ~~oil~~are ~~prices~~some ~~currently~~of ~~trade in~~ the ~~range~~health benefits of ~~$60~~algae ~~to $90 per kilogram today depending on DHA concentration~~ and ~~country~~cannabis ofthat ~~origin, however,~~the ~~algae~~Company ~~oil~~intends ~~typically~~to ~~sells~~research ~~for~~further ~~$70~~ to ~~$75~~potentially ~~per~~combine into ~~kilogram.~~synergistic ~~(source~~products: ~~F & S May 24th. 2016).~~

The opportunity in the global algae market stood at US$608.0 million in 2015 and is projected to be worth US$1.1 billion by 2024, growing at an annual rate of 7.39% therein. By volume, the market is poised to expand at a 5.32% CAGR between 2016 and 2024. Source: Transparency Market Research (TMR) Sept 20, 2016

Algae Omega-3		Cannabis
Detoxes heavy metals and toxins		Reduces stress and anxiety
Supports immune system		Reduces glaucoma and prevents macular degeneration
Fights cancer		Prevents certain cancers
Detoxifies radiation and chemotherapy		Relives pain
Lowers cholesterol and blood glucose levels		Increases appetite
Improves cardiovascular function		Stimulates antioxidant processes
Improves cognitive functioning		Fights multiple sclerosis and schizophrenia
Fights Alzheimer’s disease		Fights neurodegenerative disorders
Reduces antiplatelet effects		Reduces migraines and headaches
Reduces major coronary events		Fights epilepsy
Acts as an anti-inflammatory agent		Fights obesity and metabolic syndrome
Improves memory		Fights anorexia and osteoporosis

Algae Used Extensively for DHA Production in Healthcare and F&B Sectors

Based on application, DHA production takes the lead in the global algae market and is expected to retain its lead throughout the forecast period. Algal biomass is most extensively used in the production of DHA, which is used in the healthcare, pharmaceutical, and food and beverages sectors. Within this segment, the pharmaceutical application sub-segment held a larger share of just under 28% in 2016, which is expected to decline over the coming years to make room for the protein sales sub-segment.

Sales and Distribution

We intend to develop marketing channels including but not limited to website promotion, medical doctors, product distributors, as appropriate and in compliance with the regulatory requirements. Initially, we intend to manufacture and sell our product formulations mainly through Licensed Producers and target patients, medical doctors, and product distributors, subject to regulatory requirements and restrictions including on the promotion and labelling of medical marijuana products. The Company intends to build brand awareness by working with brand/marketing management professionals, specializing in the medical health market, to have packaged products available for sale to customers.

~~Initially,~~We webelieve ~~intend~~our efforts are starting to ~~sell~~derive ~~our~~significant ~~product~~benefits ~~formulations~~and ~~mainly~~moving ~~through~~our ~~Bonify~~business plan forward, particularly since our ~~collaboration~~potential partners ~~and~~appear ~~raw~~to ~~material~~be ~~supply~~seeing ~~partner.~~the ~~When~~significant wevalue ~~have received~~in our ~~Sales~~first ~~License~~patented ~~from~~product ~~Health~~formulation ~~Canada,~~which wehas ~~expect~~been todeveloped ~~broaden~~as ~~our~~a ~~sales~~result of the Sponsored Research Agreement with Dr. Steve Laviolette and ~~distribution~~Western ~~channels~~University. While we were not able to ~~include~~move ~~patients,~~forward ~~medical~~with ~~doctors~~certain arrangements with Licensed Producers (including 6779264 Manitoba Ltd dba Bonify as previously reported), ~~and~~there ~~product~~have ~~distributors.~~been important developments with several other licensed entities who we may partner with us as follows:

~~The~~Strategic ~~Company~~International ~~intends~~Licensed toProducer: ~~build~~We ~~brand~~have ~~awareness~~executed bya ~~working~~Master Cannabis Supply Agreement for medical cannabis product supply with a ~~brand/marketing~~strategic ~~management~~international ~~professionals~~licensed grower and producer (JMCC), ~~specializing~~that inhas ~~the~~access ~~medical~~to a significant supply of low-cost dry cannabis ~~health~~product. ~~market~~As well, the grower is licensed in Jamaica to ~~have~~facilitate ~~packaged~~the ~~products~~processing ~~available~~and ~~for~~distribution ~~sale~~of our medicinal cannabis products internationally, subject to ~~customers~~regulatory approvals.

Licensed Producers: We have engaged in several discussions with major Licensed Producers/Distributors to sell medicinal cannabis domestically and Internationally (supplied by our Strategic International Licensed Producer). As well, these companies are reviewing the strength of our IP to potentially facilitate the processing and distribution of our formulations because our formulated products do not compete with their product lines.

Licensed Processor/Pharmaceutical Company: We have engaged in several discussions with a major pharmaceutical company, international distributor and GMP manufacturer who has provided highly positive feedback of the approach Dr. Laviolette has adopted in his research and pre-clinical animal trials, the depth of research and the effective integration of the various research departments at Western University. We believe we can leverage their expertise with multiple formulations, delivery systems for improved bioavailability, including by integrating our formulation into soft gels and tablets for timed release of the formulations. We would also expect to take advantage of their supply, processing and distribution capabilities and collaborate further on R & D and human trials for our formulations.

We have reviewed our strategy and believe it is more efficient to partner with existing Licensed Producers who have facilities compliant with good manufacturing practices (GMP) necessary for the preparation of our formulations. Additionally, we are seeking our own purchase/sales, import/export license without possession under the Cannabis Act to distribute formulations and develop our brand as permitted under the Cannabis Act Regulations. We do not require similar special licensing with respect to algae-only related sales.

The Company’s strategy to achieve revenue can be summarized as follows:

●	We expect revenue generation from referral fees generated by our introduction of JMCC to licensed sellers of high volume dry medical cannabis and have signed a Supply Agreement with JMCC for that purpose.
●	We expect to generate additional revenue from our formulated products through our agreements with licensed partners.
●	We expect to provide a very specialized and unique patentable product, with more novel and patentable products to be produced over time.
●	We expect to secure a robust sales and distribution network and expand the network over time.
●	We expect to identify worldwide markets for our formulations.

While we have been in business since 2008, we have not generated any revenues to date. Our activities have been principally directed towards development of our BioSilo® algae cultivation system, as well as proving the ability of the system to scale to a level sufficient to meet commercial demand that may develop. The change in the strategy has been very much assisted by the knowledge gained from the algae cultivation plus the relationships which we have developed. The revised strategy is being very well received by suppliers and distributors as there are a number of firms who have expressed an interest to supply cannabis material for our products and to distribute it given that it has a strong basis in science and research performed through our Sponsored Research Program. These firms are also willing to enter into agreements to market the formulated product.

The Company is in the development stage and has not yet realized profitable operations and has relied on non- operational sources to fund operations. The Company has suffered recurring losses and additional future losses are anticipated as the Company has not yet been able to generate revenue. In addition, as of March 31, 2018, the Company has a working capital deficiency of $870,053 (March 31, 2017 - $852,514) and an accumulated deficit of $7,219,908 (March 31, 2017 - $6,134,941). The Company’s ability to continue as a going concern is dependent on successfully executing its business plan, which includes the raising of additional funds. The Company will continue to seek additional forms of debt or equity financing, but it cannot provide assurances that it will be successful in doing so. These circumstances raise substantial doubt as to the ability of the Company to meet its obligations as they come due and accordingly, the appropriateness of the use of accounting principles applicable to a going concern. The financial information included in this Annual Report on Form 10-K does not include any adjustments that might be necessary if the Company is unable to continue as a going concern. Such adjustments could be material.

We continue to rely on advances and sale of equity to fund operating shortfalls and do not foresee a change in this situation in the immediate future. There can be no assurances that we will be able to continue to access advances and sales of equity, without which we will not be able to continue operations. We are pursuing additional sources of financing, but there is no assurance that additional capital will be available to the Company on acceptable terms or at all.

Marketing Strategies and Competition

Advertising and marketing of medical ~~marihuana~~marijuana in Canada is regulated by the Cannabis Act, Food and Drugs Act (Canada) and the Narcotic Control Regulations issued under the Controlled Drugs and Substances Act (Canada). Licensed Producers are strictly prohibited from advertising ~~marihuana~~ marijuana products or promoting their use.

Our marketing activities will be focused on the promotion of the Company and increasing its visibility within the marketplace. Those efforts will include working with numerous client education centers (patient aggregators), which will review the available research data provided by the universities on medical cannabis oils and products available to clients. We believe this scientific data will help clients make educated decisions.

We believe we will have significant advantages in the market that will include multiple strain selection and consistently-produced cannabis oil products backed by scientific research that supports the improved effectiveness of each treatment.

We are actively preparing to respond to increased market demand that is expected to occur following the coming into force of proposed legislation to legalize and regulate recreational marihuana. We intend to participate fully in the legalized recreational marihuana marketplace, subject to compliance with applicable regulatory requirements.

According to Health Canada, there are currently 45 Licensed Producers in total and of these, just over 30 hold Sales Licenses. For further information, see the Health Canada website at: http://www.hc-sc.gc.ca/dhp-mps/marihuana/info/list-eng.php

Cannabinoids and Omega-3

Cannabis by itself has long been used for medical purposes and in recent decades has gained significant traction in becoming a common and preferred treatment for specific ailments. Cannabis is one of the fastest growing industries in North America. The Company’s new strategic initiative will seek product development and formulation opportunities that combine the benefits of algae and cannabis oils.

The Company’s core product development strategy has been the production of high volume specific algae species and extraction of Essential Fatty Acids (EFAs) which is the foundation of the endocannabinoid system (ECS). The ECS is a group of endogenous cannabinoid receptors located in the mammalian brain and throughout the central and peripheral nervous systems, consisting of neuromodulatory lipids and their receptors. The extracted algae Omega 3 oil with high concentrations of DHA is used as a health supplement product. In light of the potential synergies, the Company has developed its strategy which is aimed at developing new products and formulations that combine the health benefits of algae and cannabis oils.

Health Benefits of Algae Omega-3 and Cannabis

The following are some of the health benefits of algae and cannabis that the Company intends to research further to potentially combine into synergistic products:

Algae Omega-3		Cannabis
Detoxes heavy metals and toxins		Reduces stress and anxiety
Supports immune system		Reduces glaucoma and prevents macular degeneration
Fights cancer		Prevents certain cancers
Detoxifies radiation and chemotherapy		Relives pain
Lowers cholesterol and blood glucose levels		Increases appetite
Improves cardiovascular function		Stimulates antioxidant processes
Improves cognitive functioning		Fights multiple sclerosis and schizophrenia
Fights Alzheimer’s disease		Fights neurodegenerative disorders
Reduces antiplatelet effects		Reduces migraines and headaches
Reduces major coronary events		Fights epilepsy
Acts as an anti-inflammatory agent		Fights obesity and metabolic syndrome
Improves memory		Fights anorexia and osteoporosis

Research and Product Development Relationships and Scientific Advisors

Dr. Steven Laviolette, BSc, PhD (Addiction Research Group, Dept. of Anatomy & Cell Biology, Dept. of Psychiatry, Canadian Institute for Military and Veterans Health Research), University of Western Ontario - performs research and product development on cannabis oil and its constituents in the context of depression, post-traumatic stress disorder, anxiety and schizophrenia.

Research/Expertise:

Dr. Laviolette’s investigations into the neurobiology of addiction have focused on nicotine and opiates, both of which represent highly addictive substances and act on pathways in the brain that control reward, motivation and learning. Dr. Laviolette’s research group has characterized and identified specific regions in the mammalian brain that control the ‘switch’ from the non-addicted state, to the addicted state following exposure to drugs of abuse. Their ongoing research seeks to precisely define and identify the neurobiological mechanisms that control the addiction process at the behavioral, molecular and single neuron levels of analysis.

In addition, Dr. Laviolette’s research group is interested in exploring the neuronal mechanisms of emotional associative learning both in single neurons and in specific brain circuits. They have focused on the roles of the endocannabinoid system and specific dopamine receptor populations in the processing of emotionally salient information. Their ongoing research seeks to examine how disturbances in these brain receptor substrates may underlie the distorted sensory processing and emotional associative learning observed in individuals with schizophrenia.

His full profile may be seen on the University of Western Ontario, website:

www.uwo.ca:http://www.schulich.uwo.ca/anatomy/people/bios/faculty/laviolette_steve.html

Dr. Jonathan Blay, PhD, FRSB, FIBMS, Csci, CBiol (Professor of Pharmacy, University of Waterloo, Professor of Pathology, Dalhousie University), the University of Waterloo - performs research and product development on cannabis oil and its constituents in the context of the development and treatment of the colorectum, pancreas, breast and prostate cancers.

Research/Expertise:

● ~~Tumour~~Tumor microenvironment of solid cancers (colorectal carcinoma); ● Mechanisms of metastasis and its regulation by proteins at the cell surface; and ● Development of drugs (both synthetic and natural product-derived) that interfere with cancer metastasis.

Dr. Blay’s research group applies a range of techniques in molecular and cellular biology to understand how cell behavior and the action of existing anticancer drugs are affected by the unique physiology of the cancer. This research involves investigations of chemokine pathways, and tumor-initiating cells; as well as the capacity of both synthetic and natural product-derived agents to interfere with the steps that favor metastasis. Researchers in the group identify novel pathways that may be the targets for future anticancer drugs, both derived from natural products and synthesized with the aid of colleagues through molecular design. The goal is to perform fundamental cancer-related research on botanical oils and their constituents which will carry out studies relating to the cellular safety and known cancer-related potential of components within the oils.

His full profile may be seen on the University of Waterloo, website at

https://uwaterloo.ca/:https://uwaterloo.ca/pharmacy/people-profiles/jonathan-blay

Dr. Steven Laviolette, BSc, PhD (Addiction Research Group, Dept. of Anatomy & Cell Biology, Dept. of Psychiatry, Canadian Institute for Military and Veterans Health Research), University of Western Ontario - performs research and product development on cannabis oil and its constituents in the context of depression, post-traumatic stress disorder, anxiety and schizophrenia.

Research/Expertise:

Dr. Laviolette’s research interests explore the interface between neurobiology, psychology and emotion by using an integrative combination of in vivo neuronal electrophysiology and behavioral neuropharmacology. At the general level, Dr. Laviolette is interested in exploring the neurobiological mechanisms that control how the brain processes emotionally salient information and how disturbances in these basic neural processes may lead to disorders such as addiction and schizophrenia. Dr. Laviolette’s investigations into the neurobiology of addiction have focused on nicotine and opiates, both of which represent highly addictive substances and act on pathways in the brain that control reward, motivation and learning. Dr. Laviolette’s research group has characterized and identified specific regions in the mammalian brain that control the ‘switch’ from the non-addicted state, to the addicted state following exposure to drugs of abuse. Their ongoing research seeks to precisely define and identify the neurobiological mechanisms that control the addiction process at the behavioral, molecular and single neuron levels of analysis. In addition, Dr. Laviolette’s research group is interested in exploring the neuronal mechanisms of emotional associative learning both in single neurons and in specific brain circuits. They have focused on the roles of the endocannabinoid system and specific dopamine receptor populations in the processing of emotionally salient information. Their ongoing research seeks to examine how disturbances in these brain receptor substrates may underlie the distorted sensory processing and emotional associative learning observed in individuals with schizophrenia.

His full profile may be seen on the University of Western Ontario, website:

www.uwo.ca:http://www.schulich.uwo.ca/anatomy/people/bios/faculty/laviolette_steve.html

Dr. Kirsten Muller (PhD) – Lead Phycologist

Over 10 years’ experience researching and cultivating algae. Currently Associate Professor at the University of Waterloo and Associate Director of the Canadian Phycology Culture Centre (CPCC), which is housed within her laboratory at the University of Waterloo (500 species). She has authored over 25 papers in leading phycology journals and has received many national and international research awards. Dr. Muller won The Luigi Provasoli Award in recognition of authoring the outstanding paper published in the Journal of Phycology (Phycological Society of America) during 2011.

Dr. Brendan McConkey (PhD) – Oil Analysis

Over 7 years’ research experience as Associate Professor at the University of Waterloo. His areas of expertise include proteomics, biochemistry, toxicology, and computational biology. Research emphasis has been on interdisciplinary approaches that combine biology, chemical engineering, and computational research.

~~BioSilo®~~Strategic Partners:

~~Algae~~Mark Dynamics has engineered a proprietary algae production technology, the Algae Dynamics BioSilo®, which maximizes growth and purity, while minimizing its footprint through a modular design. It allows us to cultivate a wide variety of algae species tailored to the nutrient and purity requirements of our prospective customers. BioSilo® is a novel method of cultivating algae that combines the positive features of open pond systems with those of enclosed photobioreactor algae production systems. The system produces a continuous supply of ultra-pure algae biomass in high volumes. The design’s small footprint and scalability results in very low maintenance cost. The BioSilo ® is capable of producing a variety of species, including Chlorella and algae suited for Omega-3 rich Algae oil.Jones

An experienced senior executive with 36 years in the Global Pharmaceutical Industry with career milestones including; President and CEO of AstraZeneca Canada; President of AstraZeneca UK and AstraZeneca Germany. Global Vice President Southern Europe.

Extensive experience in drug development as joint Global Head of AstraZeneca Cardiovascular and Respiratory Therapeutic Area Team; Global commercial lead of the international development and launch of Crestor (rosuvastatin) a $6.0 B brand.

Member of the Neuro Development Board of Canada and the Kids Brain Health Foundation Canada.

Currently Non-Executive Director of the NHS Foundation Trust Liverpool Heart and Chest Hospital Liverpool UK; Advisor to the Board of Algae Dynamics.

Mark Goldberg (Phd in Pharmacology)

Over 25 years of experience in biomedical research and as a regulatory consultant. Currently serves on PlantForm Corporation’s Board of directors, a biopharma start--up that he founded. Is also a director of MedCannAccess and an Entrepreneur in Residence at Innovation Guelph. Did his postdoctoral work in biochemical and genetic toxicology at the Ontario Cancer Institute. Joined the department of Biomedical Sciences at the Ontario Veterinary College of the University of Guelph in 1982, and was a tenured faculty member until 1994. Was awarded the University of Guelph’s Forster Fellowship, given annually to the University’s top researcher in 1987. Is the author of more than 50 scientific publications, primarily in the cancer research field. Was co--founder of GlobalTox International Consultants, a toxicology and regulatory affairs firm and serves as its President and CEO for 17 years. Is board--certified by the American Board of Toxicology. Received the Chartered directors (C.Dir.) designation from the directors College.

Graeme G. Phipps (B.Sc.)

Oil Industry Expert

Over 30 years of oil & gas operational and management experience with Exxon, CanOxy/Nexen and Petro Canada. In 2005, he was Executive V P of PetroKazakhstan and was preparing to become President and CEO when it was successfully sold for US$4.2 billion to China National Petroleum Corporation. Mr. Phipps is a director of several public and private international oil & gas companies. He has extensive experience with financial transactions and investment banking.

Intellectual Property

~~Our~~We ~~intellectual~~have ~~property~~three ~~currently~~potential ~~pertains~~formulations to– ~~the~~which ~~legacy~~we ~~business~~have ~~plan~~termed ~~of commercialization of our BioSilo algae cultivation system. The development of BioSilo is commercially relevant in~~ the ~~context~~“F” ofPlatforms ~~our~~and ~~missions~~two ofprovisional ~~developing unique products that contain~~patents ~~cannabis~~which ~~and~~we ~~algae~~have ~~oils~~filed.

~~The~~F1 ~~following~~– isa ~~our~~unique ~~approach~~THC to+ ~~intellectual~~botanical ~~property~~extract ~~protection~~formulation ~~historically.~~which ~~Firstly,~~mitigates aor ~~United~~eliminates ~~States~~the ~~Patent~~negative ~~(US~~side-effects ~~8,800,202~~of ~~B2)~~THC: e.g. ~~Bioreactor~~anxiety, ~~was issued August 12~~depression, ~~2014~~paranoia, acognitive/memory ~~second~~deficits. USWe ~~patent~~expect ~~(US~~F1 ~~14/334,909)~~to ~~has~~be ~~been~~an ~~filed~~alternative ~~and~~to aopioids, ~~Patent~~thus ~~Application~~addressing ~~(CA 2,735,635)~~addiction onand ~~the~~dependence ~~same~~and ~~claims~~effective asfor ~~the~~pain Umanagement.~~S. patent has been filed for Canada.~~

~~The~~F2 ~~patent~~– ~~abstract is: “Biomass production apparatus is disclosed and comprises~~ a ~~stack~~unique ofCBD ~~trays,~~+ ~~each~~select ~~tray,~~nutraceutical/dietary inadditives ~~use,~~aimed ~~being in~~at ~~receipt~~synergizing ofthe atherapeutic ~~respective~~properties ~~layer~~ of ~~liquid,~~CBD ~~the layers being spaced apart from one another such that each layer has associated therewith a respective headspace. Light sources are provided for each layer and are disposed~~ in the ~~headspace associated with~~ ~~said~~treatment ~~each~~of ~~layer~~anxiety, todepression, ~~illuminate~~schizophrenia, atPTSD ~~least~~(chronic instress ~~part,~~induced) ~~said~~and ~~each layer”~~addiction.

11F3 – expansion of research and discovery of the novel formulations utilizing other cannabinoids in addition to THC and CBD will unravel specialized applications for targeted therapies in specific mental health symptom clusters.

Secondly, significant know-how and proprietary in-house knowledge were acquired during development at the University of Waterloo, with the result that the engineering component of intellectual property related to the BioSilo® is a significant part of the “secret sauce”. As well, the Company has identified proprietary algae species isolated by phycology (the study of algae) scientists at the University of Waterloo, Drs. K. Muller and B. McConkey. Algae Dynamics has exclusive access to these species. These species which are not genetically modified have been selected for their high nutrient values.

History of Algae Dynamics

During 2008 and 2009, we developed the BioSilo® design. In 2010, we partnered with phycology experts Dr. Muller and Dr. McConkey at the University of Waterloo. This partnership provided us with exclusive access to proprietary algae species along with phycology expertise. Through this arrangement, we operated our laboratory and advanced from bench scale algae experiments to operating a ~~one~~onemeter ~~meter~~diameter BioSilo® installation. We successfully completed the R&D validating key data points allowing the Company to deploy its technology at commercial scale, producing algae biomass of the highest quality at significantly reduced costs. We received funding in part from Ontario Power Authority “OPA” for the design and construction of the one -meter diameter BioSilo® system. Since that time, we have updated our strategy to focus on our cannabis formulations as discussed above.

The following summarizes sources of funding to date:

	Amount ($)
Ontario Power Authority (Grant)	$	250,000
Scientific Research and Experimental Development Tax Credit		72,400
Common stock issued and fully paid at March 31, 2017		4,313,931
Additional paid in capital		1,000,214
Total	$	5,636,545

On the basis of technology, open ponds cultivation technology held the dominant share in the algae market, while the closed photo bioreactors segment is projected to witness strong growth by 2024, in terms of both demand and sales. Geographically, Asia Pacific will emerge as one of the most attractive segments, registering a value-based CAGR of 8.0% during the forecast period. In terms of percentage share, North America dominates the algae market and is expected to generate US$344.49 million by 2024. Source: Transparency Market Research (TMR) Sept 20, 2016

Global Omega-3 Ingredients Market

Global Omega 3 Ingredients Market was valued at US$ 3.83 billion in 2016, to Surpass US$ 13 Billion by 2025, Fueled by Burgeoning Growth of Foodborne Diseases

“Major players in the global Omega 3 Ingredients market include Koninklijke DSM NV, BASF SE, Croda International Plc., NU-MEGA Ingredients Pty Ltd., Pronova BioPharma ASA, Omega Protein Corporation, and Ocean Nutrition Canada Limited, among others.”

Global Omega 3 Ingredients Market, By Source (Nuts and Seeds, Vegetable Oils, Marine, Soya), Type (ALA, DHA, EPA), Application (Infant Formula, Supplements & Functional Foods, Animal Feed, Pharmaceuticals), and Geography - Insights, Opportunity Analysis, and Industry Forecast till 2025

According to a new report published by Coherent Market Insights. Omega 3 ingredients are naturally-occurring polyunsaturated fatty acids and nutrients that are essential for human health. There are three types of omega 3 ingredients, namely alpha-linoleic acid (ALA), eicosapentaenoic acid (EPA) and docosahexaenoic acid (DHA).

Increasing cardiovascular disease and growing demand for supplements, especially in North America and Europe is surging demand for DHA and EPA. Consumers are increasingly inclined towards food rich in omega 3 fatty and also supplements containing the acid, due to increasing awareness about the various health benefits associated with the same. Cold water fish are the primary source of omega 3 fatty acids and have various health benefits such effective treatment of hypertriglyceridemia and other cardiovascular diseases. This in turn creates a highly conducive environment for growth of the global omega-3 market.

https://www.coherentmarketinsights.com/insight/request-sample/370

Average life expectancy worldwide during 2010–2013, was pegged at 71.0 years. Increasing life expectancy, in turn increases incidence of lifestyle and age-related diseases and conditions such as high blood pressure, diabetes, obesity, and cholesterol. Consumers across the world are looking to follow healthy lifestyles to ensure optimum calorie intake and nutrition to keep diseases at bay. This change in consumer lifestyle is characterized by increasing demand for omega 3 ingredients.

The U.S. and Japan are the largest markets for omega 3 ingredients. This is mainly attributed to high discretionary income and relatively high health awareness among the populace in these countries. China, India and Brazil are emerging economies that offer major potential for the omega 3 ingredients market. Germany and Israel have emerged as the key innovation hubs of the omega 3 ingredients industry. In Germany, the industry is driven by the joint venture of Royal DSM and Evonik in March 8, 2017, for omega 3 fatty acid products from natural marine algae for animal nutrition. This innovation will enable the production of omega 3 fatty acids for animal nutrition without using fish oil. Also, in May 6, 2014, AstraZeneca got approval of Epanova (omega 3 carboxylic acid), from U.S. Food and Drug Administration (FDA) which is used to lower the triglyceride level with severe hypertriglyceridemia.

To know the latest trends and insights prevalent in this market, click the link below:

https://www.coherentmarketinsights.com/market-insight/omega-3-ingredients-market-370

Omega 3 Ingredients and Health Benefits

Increasing various health diseases and fueling the demand for omega 3 fatty acids, due to various health benefits is expected to propel the market for omega 3 ingredients during the forecast period. For instance, a few health benefits are listed below:

● Blood fat (triglycerides): consumption of fish oil can lower the risk of heart attack and lower triglyceride levels. ● Rheumatoid arthritis: consumption of omega 3 ingredients may lower the join pain and curb stiffness. ● Depression: regular consumption of omega 3 ingredients in food products may lower the level of depression and boost the antidepressants effects. ● Baby development: consumption of DHA is helpful for neurological and visual development in infant. ● Asthma: consumption of omega 3 ingredients lower the inflammation level for asthma patients and also enhance lungs function. ● ADHD: consumption of omega 3 ingredients improves mental skills such as learning and thinking capacity of children. ● Alzheimer’s disease and dementia: consumption of omega 3 ingredients may help to protect against Alzheimer’s disease and dementia, and have a positive effect on gradual memory loss linked to aging.

Source: Coherent Market Insights Analysis (2016)

Description of Property

The Company ~~has~~initially entered into a five -year operating lease, expiring November 2018, for Unit 37-4120 Ridgeway Drive in Mississauga, Ontario, which consists of 2,224 square feet of office and production facilities. The rental for this facility has been extended for a further 3 years. The current space is adequate for the purpose of constructing an initial production/testing ~~system~~operation. The monthly base rental of the current facility is $1,~~362~~390 plus the Company’s estimated portion of property taxes and operating expenses which are currently $~~810~~847 per month. Beginning in November 2018 the base monthly rental of the current facility will be $1,853.

Regulatory Risks

Algae Dynamics will be subject to various US, federal, provincial, and local environmental laws and regulations including the health and safety of employees, and manufacturing practices. In addition, some of these laws and regulations require contemplated facilities to operate under permits that are subject to renewal or modification. A violation of these laws and regulations or permit conditions can result in substantial fines, natural resource damages, criminal sanctions, permit revocations and/or facility shutdowns.

The Company does not intend to conduct any cannabis related business in the United States due to the uncertain regulatory environment. However, it may distribute its algae produced products to the United States nutraceutical market.

United States

The processing, formulation, safety, manufacturing, packaging, labeling, advertising, and distribution of food supplement products are subject to regulation by one or more federal agencies, including the FDA, the Federal Trade Commission (“FTC”), the Consumer Product Safety Commission (“CPSC”), the United States Department of Agriculture (“USDA”), and the Environmental Protection Agency (“EPA”), and by various agencies of the states and localities in which the products are sold. The area of business that these and other authorities regulate include, among others:

● claims and advertising; ● labels; ● ingredients; and ● manufacturing, distributing, importing, selling and storing of products.

In particular, the FDA regulates the formulation, manufacturing, packaging, storage, labeling, promotion, importation, and distribution and sale of dietary supplements and food ingredients in the United States, while the FTC regulates marketing and advertising claims.

Some of our potential products may be packaged and sold directly to retailers and consumers, and therefore are subject to greater oversight and enforcement action by the FTC. In recent years, the FTC has instituted numerous enforcement actions against consumer packaged goods companies for failure to have adequate substantiation for claims made in advertising or for use of false or misleading advertising claims.

The Dietary Supplement Health and Education Act of 1994 (“DSHEA”), an amendment to the Federal Food, Drug and Cosmetic Act (“FDC Act”), established a framework governing the composition safety, labeling, manufacturing and marketing of dietary supplements. Generally, under DSHEA, dietary ingredients that were marketed in the United States prior to October 15, 1994 may be used in dietary supplements without notifying the FDA. “New” dietary ingredients (i.e., dietary ingredients that were “not marketed in the United States before October 15, 1994”) must be the subject of a new dietary ingredient notification submitted to the FDA unless the ingredient has been “present in the food supply as an article used for food” without being “chemically altered”. A new dietary ingredient notification must provide the FDA evidence of a “history of use or other evidence of safety” establishing that use of the dietary ingredient “will reasonably be expected to be safe”. A new dietary ingredient notification must be submitted to the FDA at least 75 days before the initial marketing of the new dietary ingredient. The FDA may determine that a new dietary ingredient notification does not provide an adequate basis to conclude that a dietary ingredient is reasonably expected to be safe. Such a determination could prevent the marketing of such dietary ingredient.

The FDA has issued a draft guidance governing notification of new dietary ingredients. While it is not mandatory to comply with FDA guidance, it is a strong indication of the FDA’s current views on the topic of the guidance, including the agency’s position on enforcement. Depending on the recommendations made in the guidance, if and when it is finalized, particularly those relating to animal or human testing, such guidance could make it more difficult for Algae Dynamics to successfully provide notification of new dietary ingredients. Moreover, such guidance could change the status of ingredients that the industry has viewed as “old” dietary ingredients to “new” dietary ingredients that may require submission of a new dietary ingredient notification.

The FDA or other agencies could take actions against products or product ingredients that in its determination present an unreasonable health risk to consumers which would make it illegal for us to sell such products. In addition, the FDA could issue consumer warnings with respect to the products or ingredients that Algae Dynamics sells. Such information could be based on information received through reporting of serious adverse events mandated by the FDC Act.

DSHEA permits “structure/function claims” to be included in labeling for dietary supplements without FDA pre-market approval. Such statements must be submitted to the FDA within 30 days of marketing. Such statements may describe how a particular dietary ingredient affects the structure, function, or general well-being of the body, or the mechanism of action by which a dietary ingredient may affect body structure, function, or well- being, but may not expressly or implicitly represent that a dietary supplement will diagnose, cure, mitigate, treat, or prevent a disease. A company that uses a structure/function claim in labeling must possess scientific evidence substantiating that the statement is truthful and not misleading. If the FDA determines that a particular structure/function claim is an unacceptable drug claim or an unauthorized version of a “health claim”, or, if the FDA determines that a particular claim is not adequately supported by existing scientific data or is false or misleading, we would be prevented from using the claim.

In addition, DSHEA provides that so-called “third-party literature”, e.g., a reprint of a peer-reviewed scientific publication linking a particular dietary ingredient with health benefits, may be used “in connection with the sale of a dietary supplement to consumers” without the literature being subject to regulation as labeling. The literature: (1) must not be false or misleading; (2) may not “promote” a particular manufacturer or brand of dietary supplement; (3) must present a balanced view of the available scientific information on the subject matter; (4) if displayed in an establishment, must be physically separate from the dietary supplements; and (5) should not have appended to it any information by sticker or any other method. If the literature fails to satisfy each of these requirements, the Company may be prevented from disseminating such literature in connection with Algae Dynamics products, and any dissemination could subject our products to regulatory action as an illegal drug.

In June 2007, pursuant to the authority granted to the FDA by DSHEA, the FDA published detailed Current Good Manufacturing Practice (“GMP”) regulations that govern the manufacturing, packaging, labeling and holding operations of dietary supplement manufacturers. The GMP regulations, among other things, impose significant recordkeeping requirements on manufacturers. The GMP requirements are in effect for all manufacturers, and the FDA is conducting inspections of dietary supplement manufacturers pursuant to these requirements. There remains considerable uncertainty with respect to the FDA’s interpretation of the regulations and their actual implementation in manufacturing facilities. In addition, the FDA’s interpretation of the regulations will likely change over time as the agency becomes more familiar with the industry and the regulations. The failure of a manufacturing facility to comply with the GMP regulations renders products manufactured in such facility “adulterated,” and subjects such products and the manufacturer to a variety of potential FDA enforcement actions.

In addition, under the FDA Food Safety Modernization Act (“FSMA”), which was enacted on January 4, 2011, the manufacturing of dietary ingredients contained in dietary supplements will be subject to similar or even more burdensome requirements, which will likely increase the costs of dietary ingredients and will subject suppliers of such ingredients to more rigorous inspections and enforcement. The FSMA will also require importers to take measures to ensure that the foods they import, including dietary supplements and dietary ingredients, meet domestic requirements. This could increase the cost of those articles, subject their importation to greater scrutiny, and potentially restrict their availability.

The FDA has broad authority to enforce the provisions of federal law applicable to dietary supplements, including powers to issue a public warning or notice of violation letter to a company, publicize information about illegal products, detain products intended for import, request a recall of illegal products from the market, and request the Department of Justice to initiate a seizure action, an injunction action, or a criminal prosecution in the U.S. courts. The FSMA expands the reach and regulatory powers of the FDA with respect to the production of food, including dietary supplements. The expanded reach and regulatory powers include the FDA’s ability to order mandatory recalls, administratively detain domestic products and administratively revoke manufacturing facility registrations, thereby effectively enjoining manufacturing of dietary ingredients and dietary supplements without judicial process. The regulation of dietary supplements may increase or become more restrictive in the future.

The FTC exercises jurisdiction over the advertising of dietary supplements. In recent years, the FTC has instituted numerous enforcement actions against dietary supplement companies for failure to have adequate substantiation for claims made in advertising or for the use of false or misleading advertising claims. Such actions could result in substantial financial penalties and significantly restrict the marketing of a dietary supplement.

Legislation or regulations may be introduced which, if passed, would impose substantial new regulatory requirements on the manufacture, packaging, labeling, advertising and distribution and sale of our products. In March 2009, the General Accounting Office (the “GAO”) issued a report that made four recommendations to enhance the FDA’s oversight of dietary supplements. The GAO recommended that the Secretary of the Department of Health and Human Services direct the Commissioner of the FDA to: (1) request authority to require dietary supplement companies to identify themselves as a dietary supplement company and update this information annually, provide a list of all dietary supplement products they sell and a copy of the labels and update this information annually, and report all adverse events related to dietary supplements; (2) issue guidance to clarify when an ingredient is considered a new dietary ingredient, the evidence needed to document the safety of new dietary ingredients, and appropriate methods for establishing ingredient identity; (3) provide guidance to industry to clarify when products should be marketed as either dietary supplements or conventional foods formulated with added dietary ingredients; and (4) coordinate with stakeholder groups involved in consumer outreach to identify additional mechanisms for educating consumers about the safety, efficacy, and labeling of dietary supplements, implement these mechanisms, and assess their effectiveness. These recommendations could lead to increased regulation by the FDA or future legislation concerning dietary supplements.

International

In Canada and foreign markets, prior to commencing operations and prior to making or permitting sales of our products in the market, we may be required to obtain an approval, license or certification from the relevant country’s ministry of health or comparable agency. Where a formal approval, license or certification is not required, we nonetheless seek a favorable opinion of counsel regarding our compliance with applicable laws. Prior to entering a new market in which a formal approval, license or certificate is required, we work extensively with local authorities in order to obtain the requisite approvals. The approval process generally requires us to present each product and product ingredient to appropriate regulators and, in some instances, arrange for testing of products by local technicians for ingredient analysis. The approvals may be conditioned on reformulation of our products, or may be unavailable with respect to some products or some ingredients. Product reformulation or the inability to introduce some products or ingredients into a particular market may have an adverse effect on sales. We must also comply with product labeling and packaging regulations that vary from country to country. Our failure to comply with these regulations can result in a product being removed from sale in a particular market, either temporarily or permanently.

The Company cannot determine what effect additional domestic or international governmental legislation, regulations, or administrative orders, when and if promulgated, would have on Company’s business in the future. New legislation or regulations may require the reformulation, elimination, or relabeling of certain products to meet new standards and revisions to certain sales and marketing materials, and it is possible that the costs of complying with these new regulatory requirements could be material.

The ACMPR Licensing Process

The market for cannabis (including Medical Marijuana) in Canada is regulated by the Controlled Drugs and Substances Act (CDSA), the ACMPR, the Narcotic Control Regulations, and other applicable law. Health Canada is the primary regulator of the industry as a whole. The ACMPR aims to treat cannabis like any other narcotic used for medical purposes by creating conditions for a new commercial industry that is responsible for its production and distribution.

The table below provides a general overview of the licensing process as described by Health Canada:

	Summary
Step 1	Preliminary Screening: When Health Canada receives an application, preliminary screening is conducted to ensure that the application is complete. Any incomplete applications will be returned to the applicant, and complete applications are assigned an application numbers. The assignment of an application number indicates that the application has completed the preliminary screening stage.
Step 2	Enhanced Screening: After being assigned an application number, a more thorough review of the application is conducted to ensure that there is sufficient information to assess whether the requirement of the regulations are met. Specific elements given initial consideration include: the location of the proposed site; risks to public health, safety and security; the proposed security measures; and the credentials of the proposed quality assurance person to meet the good production requirements outlined in Subdivision D of the ACMPR. Health Canada will verify that the applicant has provided notice of the application to the senior official with the local government in the jurisdiction of the proposed site. The applicant is responsible for ensuring that they are in compliance with all applicable provincial, territorial, and municipal legislation, regulations, and bylaws, including zoning restrictions, fire and electrical safety requirements, and waste management requirements. At this step, Health Canada may request additional information that is relevant to the application.
Step 3	Security Clearance: Once the screening of an application is complete, the security clearance forms for key personnel will be sent for processing. At this point, the Minister for Health will conduct criminal record checks and will review the relevant background of key personnel to assess whether the applicant poses a risk to the integrity of the control of the production and distribution of cannabis under the CDSA. The amount of time required to conduct mandatory security checks varies with each application.
Step 4	Review: Once all security clearances are obtained, an application will be thoroughly reviewed to validate the information provided. Given the extensive review process, applicants are generally required to communicate with Health Canada multiple times to clarify elements of their application. Health Canada may also request additional information. A detailed review and assessment of physical security plans will be conducted at this stage. Applicants must meet a minimum of a level 7 (as defined in the Directive on Physical Security Requirements for Controlled Substances - Licensed Dealers Security Requirements for the Storage Of Controlled Substances) to be considered for a licence. It is a requirement that physical security comply with the Directive.

	Once Health Canada is satisfied that an application is ready for a pre-licence inspection, they will contact the applicant and identify information that needs to be confirmed before a pre- licence inspection can be scheduled. This includes, but may not be limited to, confirming how the applicant has indicated in their application that they would comply with Part 1, Division 1, Subdivision C (Security Measures) of the ACMPR.
Step 5	Pre-Licence Inspection: When Health Canada is satisfied of the prior steps and when the applicant has confirmed that the site has been fully built and security measures are in place, a Pre-Licence Inspection will be scheduled. The inspection may cover, but is not limited to: Security Measures, Good Production Practices, Packaging, Labelling and Shipping, Registration, and Record Keeping. The purpose of the inspection is to verify that the information submitted to Health Canada is accurate and to assess compliance with the applicable sections of the ACMPR prior to licence approval. Any identified deficiencies will be communicated to the applicant and must be addressed prior to a licence being issued.
Step 6	Licensing: Next, the results of the Pre-Licence Inspection are reviewed along with all of the information submitted by the applicant and any other additional relevant information. If it is determined that the issuance of the licence is not likely to create risks to public health, safety or security, including the risk of cannabis being diverted to an illicit market or use, and there are no other grounds for refusing the application, a licence will be issued. Health Canada has introduced a graduated licensing process. Upon approval, applicants will first be issued a production licence. This will enable Health Canada inspectors to confirm that the first batch of marijuana produced meets the production standards and requirements outlined in the ACMPR. The Licensed Producer’s first crop of marijuana will be inspected to establish whether the marijuana meets the Licensed Producer's specified quality control standards and the Good Production Practices set out in Subdivision D of the ACMPR. Only once Health Canada is satisfied the Licensed Producer meets the requirements of the ACMPR will a licence be amended to allow sale to the public.

~~ACMPR~~Product ~~Licences~~Approvals

~~The~~Prior ~~Cultivation~~to ~~Licence~~commencing operations and prior to making or permitting sales of our products in a market, ifwe ~~received~~may be required to obtain an approval, license or certification from the relevant country’s ministry of health or comparable agency. Where a formal approval, license or certification is not required, we nonetheless may need to seek a favorable opinion of counsel regarding our compliance with applicable laws. Prior to entering a new market in which a formal approval, license or certificate is required, we intend to work extensively with local authorities in order to obtain the requisite approvals. We expect the approval process will ~~allow~~generally require us to present each product and product ingredient to appropriate regulators and, in some instances, arrange for testing of products by local technicians for ingredient analysis. The approvals may be conditioned on reformulation of our products, or may be unavailable with respect to some products or some ingredients. Product reformulation or the ~~Company~~inability to: introduce some products or ingredients into a particular market may have an adverse effect on sales. We must also comply with product labeling and packaging regulations that vary from country to country. Our failure to comply with these regulations can result in a product being removed from sale in a particular market, either temporarily or permanently.

●The Company ~~possess,~~cannot ~~produce,~~determine ~~provide,~~what ~~ship,~~effect ~~deliver,~~additional ~~transport~~domestic ~~and~~or ~~destroy~~international ~~dried~~governmental ~~cannabis~~legislation, regulations, or ~~cannabis~~administrative orders, ~~oil~~when ●and ~~possess,~~if ~~produce~~promulgated, ~~and~~would ~~destroy~~have ~~cannabis~~on inCompany’s ~~its~~business ~~natural~~in ~~form,~~the ~~other~~future. ~~than~~New ~~marijuana~~legislation or ~~cannabis~~regulations ~~oil~~may require the reformulation, ~~for~~elimination, ~~the~~or ~~purpose~~relabeling of ~~producing~~certain ~~cannabis~~products ~~oil~~to ●meet ~~possess~~new standards and ~~destroy~~revisions ~~cannabis,~~to ~~other~~certain ~~than~~sales ~~marijuana~~and ~~or cannabis oil~~marketing materials, ~~for~~and ~~the~~it ~~purpose~~is ofpossible ~~conducting in vitro testing~~ that isthe ~~necessary~~costs toof ~~determine~~complying ~~the~~with ~~cannabinoid~~these ~~content~~new ofregulatory ~~marijuana~~requirements orcould ~~cannabis~~be ~~oil~~material.

The Sales Licence, if received, will allow the Company to sell dried marijuana and cannabis oil to:

● a client of the Company or an individual who is responsible for the client ● a hospital employee, if the purpose is in connection with their employment ● another Licensed Producer ● a Licensed Dealer ● the Minister of Health ● a person to whom an exemption relating to the substance has been granted under section 56 of the Controlled Drugs and Substances Act (CDSA)

The Cultivation Licence will also allow the Company to apply for an import permit to import dried marijuana cannabis as described by the ACMPR. The Cultivation Licence will also allow the Company to apply for an export permit to export dried marijuana or cannabis other than marijuana or cannabis oil, for the purpose of conducting in vitro testing

that is necessary to determine the cannabinoid content of marijuana or cannabis oil. Last, the Cultivation Licence will allow the Company to ship dried marijuana or cannabis oil to a health care practitioner in the case referred to in subparagraph 130(1)(f)(iii) of the ACMPR.

The ACMPR also provide for licenses and import permits relating to fresh marijuana. The Licences, if received, will not include this permission until applied for separately and approved by Health Canada.

The ACMPR provides that cannabis in its natural form, other than marijuana or cannabis oil, for the purpose of producing cannabis oil, may be provided, shipped, delivered or transported if it was obtained or produced for that purpose.

Statutory Reporting Requirements

With respect to the management and administration of the Company, the ACMPR will require that:

(a) In order to confirm any information submitted in support of an application for a licence or an amendment or renewal of a licence, an inspector may, at a time during normal business hours and with the reasonable assistance of the Company, inspect the site in respect of which the application was made. (b) If the Company experiences a theft of cannabis or an unusual waste or disappearance of cannabis that cannot be explained on the basis of normally accepted business activities, the Company must report the occurrence to a member of a police force within 24 hours after becoming aware of it and provide a written report to the Minister within 10 days after becoming aware of the occurrence. (c) The Company apply for and obtain the Minister’s approval before making a change involving the replacement or the addition of (i) the senior person in charge, (ii) the responsible person in charge and, if applicable, the alternate responsible person in charge, (iii) an officer or director, or (iv) an individual authorized to place an order for cannabis on behalf of the licensed producer. (d) The Minister be notified not later than five days after the event, if a person ceases to be an officer or director of the Company. (e) The Minister be notified not later than the next business day if the responsible person in charge of the Company ceases to carry out their duties and there is no person designated as an alternate responsible person in charge. (f) The Company notify the Minister, within five days after such change, of any change to the method used for keeping records or the telephone number, the facsimile number, or the email address for the Company’s site or each building within the site where the activities are conducted under the Cultivation Licence or the Sales Licence.

With respect to future clients of the Company and proposed products sold by the Company if granted the Licences, the ACMPR requires that:

(a) In respect of fresh or dried marijuana or cannabis oil sold by the Company, the Minister be provided with a case report for each serious adverse reaction to the substance within 15 days after the day on which the Licensed Producer becomes aware of the reaction. (b) The Company annually prepare and maintain a summary report that contains a concise and critical analysis of all adverse reactions to fresh or dried marijuana or cannabis oil sold by the Company that have occurred during the previous 12 months (the serious adverse reaction reports and annual summary reports must be retained for a period of 25 years after the day on which they were made). (c) The Company report any new dried marijuana equivalency factor determined under section 79 of the ACMPR, and the method used to determine it, at least 10 days before the Company sells fresh cannabis, dried marijuana or cannabis oil, in respect of which the label referred to in section 84 or 88 of the ACMPR indicates the new factor, to a client. (d) The Company, if provided with the given name, surname, date of birth and gender of an individual by a member of a Canadian police force who requests information in the course of an investigation under the CDSA or the ACMPR, verify in a reasonable manner that the person requesting the information is a member of a Canadian police force. If the person is verified as a member of a Canadian police force, the Company must provide as soon as feasible, within 72 hours after receiving the request, the following information to that Canadian police force:

(i) an indication of whether or not the individual is one of the Company’s clients or an individual who is responsible for one of the Company’s clients, (ii) in the case of a Company client, whether the client is registered with the Minister under Part 2 of the ACMPR and, if so, whether the client’s registration with the producer is for the purpose of obtaining an interim supply of fresh or dried marijuana or cannabis oil, marijuana plants or seeds, or both, and (iii) the daily quantity of dried marijuana that is specified in the medical document supporting the client’s registration or that is specified in that individual’s registration with the Minister made under Part 2 of the ACMPR.

(e) The Company provide the Minister with any information that the Minister may require in respect of the records, documents and information referred to in Division 2 of the ACMPR, in the form and at the times that the Minister specifies.

Reporting Requirements from the Licences

In addition to the above general reporting requirements of the ACMPR, the Licences, if received, will require that the Company report the following additional information to the Office of Controlled Substances of Health Canada on a monthly basis, unless otherwise stated:

(a) The total amount of dried marijuana (kg) tested, approved and ready for sale, produced by the Company during the reporting period. (b) The total amount of dried marijuana (kg) transferred to the Company from other Licensed Producers during the reporting period. (c) The total amount of dried marijuana (kg) sold by the Company during the reporting period to (i) registered clients, (ii) other Licensed Producers, (iii) Licensed Dealers, and (iv) other clients. (d) The total number of marijuana plants sold during the reporting period. (e) The number of clients of the Company at the end of the reporting period, including only those clients whose registrations were valid on the last day of the reporting period, and the total number new clients of the Company registered during the reporting period. (f) The number of clients who attempted to register with the Company during the reporting period, but could not be registered, regardless of the reason. (g) The number of clients who placed orders or tried to place orders with the Company that could not be filled during the reporting period, regardless of the reason. (h) The total amount of the following that the Company has in stock on the final day of the reporting period (i) number of harvested plants in the drying process, (ii) cannabis (kg) that has been dried but not tested, (iii) cannabis (kg) that has been dried and tested but not approved for sale, (iv) cannabis (kg) that has been dried, tested, approved and ready for sale, (v) cannabis (kg) held as samples, (vi) number of marijuana plants identified as ready to be destroyed, (vii) dried marijuana (kg) identified as ready to be destroyed, and (ix) number of live marijuana plants.

(i) The total amount of dried marijuana (kg) that the Company imported and exported during the reporting period. (j) The total amount of dried marijuana (g) lost and/or stolen during the reporting period. (k) The total amount of dried marijuana (g) destroyed during the reporting period, specifying the reason(s) and amount(s) of each (e.g., contaminated, past expiration date, recalled). (l) The total amount of waste marijuana (e.g., plants, leaves, twigs) destroyed during the reporting period (g). (m) The total number of shipments from the Company to the following in each province or territory during the reporting period (i) registered clients, (ii) other Licensed Producers, (iii) Licensed Dealers, and (iv) other clients. (n) The average and median daily amounts of dried marijuana (g) supported by healthcare practitioners to be used by the Company’s registered clients during the reporting period for all clients whose registrations were valid on the last day of the reporting period. (o) The average and median amounts of dried marijuana (g) shipped to the Company’s registered clients during the reporting period. (p) The 10 highest and ten lowest amounts of dried marijuana shipped to registered clients during the reporting period. (q) The total number of shipments of dried marijuana to registered clients categorized into 10-gram ranges increasing in size from 0 to 10 g to 141 to 150 g. (r) A list of all healthcare practitioners who provided a medical document for a registered client in the reporting period, the location of the healthcare practitioner and the number of medical documents the healthcare practitioner signed during the reporting period. (s) The amount of dried marijuana (kg) that the Company expects to produce during each month of the upcoming three months. (t) The amount of dried marijuana (kg) that the Company expects to have in inventory during each month of the upcoming three months.

ITEM 1A. RISK FACTORS.

You should carefully consider the risks described below together with all of the other information included in our public filings before making an investment decision with regard to our securities. The statements contained in or incorporated into this Prospectus that are not historic facts are forward- looking statements are subject to risks and uncertainties that could cause actual results to differ materially from those set forth in or implied by forward- looking statements. While the risks described below are the ones we believe are most important for you to consider, these risks are not the only ones that we face. If any of the following events described in these risk factors actually occurs, our business, financial condition or results of operations could be harmed. In that case, the trading price of our common shares could decline, and you may lose all or part of your investment.

General Risk Factors

We have a limited operating history and number of commercialized products, have incurred significant losses to date and anticipate continuing to incur losses in the future, and we may not achieve or maintain profitability. As a result, our financial statements contain a “going concern” explanatory paragraph.

WeThe financial ~~are~~statements anof ~~early~~the ~~stage~~Company ~~company~~have ~~with~~been prepared on the basis of a ~~limited operating~~going ~~history~~concern, which contemplates the realization of assets and wethe ~~have~~settlement ~~only~~of ~~recently~~liabilities ~~begun~~in tothe ~~commercialize~~normal ~~our~~course ~~products~~of business. The Company ~~incurred~~is ain ~~net~~the ~~loss~~development ofstage ~~$2,585,661 for~~and ~~the~~has ~~year~~not yet ~~ended~~realized ~~March~~profitable ~~31,~~operations ~~2017~~and ~~(March~~has ~~31,~~relied ~~2016~~on non-operational ~~$1,913,995)~~sources to fund operations. WeThe ~~expect~~Company ~~losses~~has tosuffered ~~continue~~recurring losses ~~until~~and weadditional ~~get~~future ~~access~~losses toare ~~capital~~anticipated ~~to implement~~as the ~~business~~Company ~~plan~~has not yet been able to generate revenue. AsIn addition, as of March 31, ~~2017~~2018, the Company ~~had~~has a working capital ~~deficit~~deficiency of $~~852~~870,~~514~~053 (March 31, ~~2016~~2017 ~~765~~- $852,~~356~~514)~~. Net~~ ~~cash~~and ~~used~~an byaccumulated ~~operations~~deficit of ~~for~~$7,219,908 ~~the year ended~~ (March 31, 2017 is- $~~341~~6,~~945~~134,941). ~~(March~~The ~~31,~~Company’s ~~2016~~ability ~~$209,919).~~to Ascontinue as a ~~result~~going concern is dependent on successfully executing its business plan, which includes the ~~financial statements~~raising of ~~the~~additional funds. The Company ~~include~~will ancontinue ~~explanatory~~to ~~paragraph~~seek ~~stating~~additional forms of debt or equity financing, but it cannot provide assurances that ~~there~~it iswill be successful in doing so. These circumstances raise substantial doubt ~~that~~as to the ability of the Company ~~will~~to ~~continue~~ meet its obligations as athey ~~going~~come ~~concern.~~due Ifand ~~our~~accordingly, ~~revenues~~the ~~grow~~appropriateness of ~~slower~~the ~~than~~use ~~anticipated,~~of oraccounting ifprinciples ~~operating~~applicable ~~expenses~~to ~~exceed~~a ~~expectations,~~going ~~then~~concern. weThe ~~may~~accompanying financial statements do not include any adjustments that might be ~~able~~necessary toif ~~achieve~~the ~~profitability~~Company inis ~~the~~unable ~~near~~to ~~future~~continue oras ata ~~all,~~going ~~which~~concern. ~~may~~Such ~~depress~~adjustments ~~our~~could ~~stock~~be ~~price~~material.

Our products are in the early stages of commercialization, and our business may fail if we are not able to successfully generate significant revenues from these products.

Our future success will depend in part on our ability to commercialize the product candidates we are developing. Successful development of our product candidates will require significant additional investment, including costs associated with research and development, completing field trials and obtaining regulatory approval, as well as the ability to manufacture our products in large quantities at acceptable costs while also preserving high product quality. Difficulties often encountered in scaling up production include problems involving production yields, quality control and assurance, shortage of qualified personnel, production costs and process controls. In addition, we are subject to inherent risks associated with new products and technologies. These risks include the possibility that any product candidate may:

● be found unsafe; ● be ineffective or less effective than anticipated; ● fail to receive necessary regulatory approvals; ● be difficult to competitively price relative to alternative methods of production ~~of Chlorella and Omega-3~~; ● be difficult or impossible to manufacture on an economically viable scale; ● be subject to supply chain constraints for raw materials; ● fail to be developed and accepted by the market prior to the successful marketing of similar products by competitors; ● be impossible to market because it infringes on the proprietary rights of third parties; or ● be too expensive for commercial use.

Furthermore, the Company’s product candidates in its algae-related businesses may be adversely affected by the devotion of capital and resources to its cannabis initiative.

Failure to achieve expected manufacturing yields for our products could negatively impact our operating results.

Low yields may result from process design, development stage or process technology failures. We do not know whether a yield problem exists until our products are manufactured based on our design. When a yield issue is identified, the product is analyzed and tested to determine the cause. As a result, yield deficiencies may not be identified until well into the production process. We have limited experience producing our products at commercial scale, and we will not succeed if we cannot maintain or decrease our production costs and effectively scale our technology and manufacturing processes.

We have limited experience in marketing and selling our products and will need to expand our sales and marketing infrastructure.

We currently have limited sales and marketing experience and capabilities. We will need to further develop our sales and marketing capabilities in order to successfully commercialize the products we are developing, which may involve substantial costs. There can be no assurance that the members of our sales and marketing team will successfully compete against the sales and marketing teams of our current and future competitors, many of which may have more established relationships with distributors and growers. Our inability to recruit, train and retain sales and marketing personnel or their inability to effectively market and sell the products we are developing could impair our ability to gain market acceptance of our products and cause our sales to suffer.

If we are unable to maintain and further establish successful relations with third-party distributors and Licensed Producers, or they do not focus adequate resources on selling our products or are unsuccessful in selling them to end users, we may not achieve significant sales of our products.

Our future revenue growth will depend in large part on our success in establishing and maintaining this sales and distribution channel. If our distributors are unable to sell our products, or receive negative feedback from end users, they may not continue to purchase or market our products.

In addition, there can be no assurance that our distributors will focus adequate resources on selling our products to end users or will be successful in selling them. Many of our potential distributors are in the business of distributing and sometimes manufacturing other, possibly competing, products. As a result, these distributors may perceive our products as a threat to various product lines currently being distributed or manufactured by them. In addition, these distributors may earn higher margins by selling competing products or combinations of competing products. If we are unable to establish or maintain successful relationships with independent distributors, we will need to further develop our own sales and distribution capabilities, which would be expensive and time-consuming and the success of which would be uncertain.

We rely on the experience and expertise of our senior management team and other key personnel, and if we are unable to recruit or retain qualified personnel, our development and commercialization efforts may be significantly delayed.

We depend heavily on the principal members of our management, particularly Richard Rusiniak, our co-founder and Chief Executive Officer, and Paul Ramsay, our co- founder and President, the loss of whose services might significantly delay or prevent the achievement of our business objectives. We do not maintain key-man insurance on their lives.

As we expand our operations, we will need to hire additional qualified research and development and management personnel to succeed. The process of hiring, training and successfully integrating qualified personnel into our operation is a lengthy and expensive one. The market for qualified personnel is very competitive because of the limited number of people available with the necessary technical skills and understanding of our technology and anticipated products. Our failure to hire and retain qualified personnel could impair our ability to meet our research and development and business objectives and adversely affect our results of operations and financial condition.

We also have relationships with scientific collaborators at academic and other institutions, some of whom conduct research at our request or assist us in formulating our research and development strategy. These scientific collaborators are not our employees and may have commitments to, or consulting or advisory contracts with, other entities that may limit their availability to us. We have limited control over the activities of these scientific collaborators and can generally expect these individuals to devote only limited amounts of time to our activities. The inability of any of these persons to devote sufficient time and resources to our programs could harm our business. In addition, these collaborators may have arrangements with other companies to assist those companies in developing technologies that may compete with our products.

Our intellectual property is integral to our business. If we are unable to protect our patents and proprietary rights, our business could be adversely affected.

Our success depends in part on our ability to obtain and maintain patent and other proprietary rights protection for our ~~technologies~~formulation and products in the United States and other countries. If we are unable to obtain or maintain these protections, we may not be able to prevent third parties from using our proprietary rights. It is also possible that we will fail to identify patentable aspects of our research and development output before it is too late to obtain patent protection. As of ~~September~~November 129th, ~~2016, we~~ ~~had one U.S. patent allowed~~2018, ~~one~~two U.S. provisional patent application were submitted, and ~~one Canadian patent pending and~~ we anticipate filing additional patent applications inas ~~the~~our ~~medium term~~research progresses.

The patent position of biotechnology and biochemical companies generally is highly uncertain, involves complex legal and factual questions and has in recent years been the subject of much litigation. As a result, the issuance, scope, validity, enforceability and commercial value of our patent rights are highly uncertain. Our future patent applications may not result in patents being issued which protect our technology or products, in whole or in part, or which effectively prevent others from commercializing competitive technologies and products. Changes in either the patent laws or interpretation of the patent laws in the United States and other countries may diminish the value of our patents or narrow the scope of our patent protection. The laws of some foreign countries do not protect proprietary rights to the same extent as the laws of the United States, and we may encounter significant problems and costs in protecting our proprietary rights in these foreign countries.

Our patents may be challenged, narrowed, invalidated or circumvented. In addition, our issued patents may not contain claims sufficiently broad to protect us against third parties with similar technologies or products or provide us with any competitive advantage. We are not certain that our future patent applications will be issued. Moreover, our competitors could challenge or circumvent our patents or pending patent applications. It is also not possible to patent and protect all knowledge and know-how associated with our products so there may be areas that are not protected such as certain formulations and manufacturing processes. Costly and time-consuming litigation could be necessary to enforce and determine the scope of our proprietary rights, and failure to obtain or maintain trade secret protection could adversely affect our competitive business position.

Intellectual property litigation could cause us to spend substantial resources and could distract our personnel from their normal responsibilities.

Even if resolved in our favor, litigation or other legal proceedings relating to intellectual property claims may cause us to incur significant expenses, and could distract our technical and management personnel from their normal responsibilities. In addition, there could be public announcements of the results of hearings, motions or other interim proceedings or developments. If securities analysts or investors perceive these results to be negative, it could have a substantial adverse effect on the price of our common shares. Such litigation or proceedings could substantially increase our operating losses and reduce the resources available for development, sales, marketing or distribution activities. We may not have sufficient financial or other resources to adequately conduct such litigation or proceedings. Some of our competitors may be able to sustain the costs of such litigation or proceedings more effectively than we can because of their greater financial resources. Uncertainties resulting from the initiation and continuation of patent litigation or other proceedings could have a material adverse effect on our ability to compete in the marketplace.

If we are unable to protect the confidentiality of our trade secrets, our business and competitive position could be harmed.

We have taken measures to protect our trade secrets and know-how, including the use of confidentiality agreements with our employees, consultants, advisors and third-party manufacturers. It is possible that these agreements may be breached and that any remedies for a breach will not make us whole. In addition, some courts inside and outside of the United States are less willing or unwilling to protect trade secrets. We generally control and limit access to, and the distribution of, our product documentation and other proprietary information. Despite our efforts to protect these proprietary rights, our trade secret-protected know-how could fall into the public domain, unauthorized parties may copy aspects of our process and obtain and use information that we regard as proprietary. We also cannot guarantee that other parties will not independently develop our ~~know~~knowledge ~~how~~ or otherwise obtain access to our technologies.

Third parties may misappropriate our ~~algae strains~~formulations.

Third parties, including contract manufacturers, often have custody or control of our ~~algae strains~~formulations. If our ~~algae~~formulations ~~strains~~ were stolen, misappropriated or reverse engineered, they could be used by other parties who may be able to reproduce the ~~algae~~formulations ~~strains~~ for ~~their~~ their own commercial gain. If this were to occur, it would be difficult for us to challenge and prevent this type of use, especially in countries with limited intellectual property protection. Other companies may claim that we infringe their intellectual property or proprietary rights, which could cause us to incur significant expenses or prevent us from selling our products.

Other companies may claim that we infringe their intellectual property or proprietary rights, which could cause us to incur significant expenses or prevent us from selling our products.

Our success depends in part on our ability to operate without infringing the patents and proprietary rights of third parties. Product development is inherently uncertain in a rapidly evolving technological environment such as ours in which there may be numerous patent applications pending, many of which are confidential when filed, with regard to similar technologies. Patents issued to third parties may contain claims that conflict with our patents and that may place restrictions on the commercial viability of our products and technologies. Third parties could assert infringement claims against us in the future. We may become party to, or threatened with, future adversarial proceedings or litigation regarding intellectual property rights with respect to our products, product candidates and technology. We may not be aware of all such third-party intellectual property rights potentially relevant to our products and product candidates.

Any litigation, adversarial proceeding or proceeding before governmental authorities regarding intellectual property rights, regardless of its outcome, would probably be costly and require significant time and attention of our key management and technical personnel. Litigation, adversarial proceedings or proceedings before governmental authorities could also force us to:

●	stop or delay using our proprietary technology;

●	stop or delay selling, manufacturing or using products that incorporate the challenged intellectual property;

●	pay damages; and/or

●	enter into licensing or royalty agreements which, if available at all, may only be available on unfavorable terms.

Claims that we have misappropriated the confidential information or trade secrets of third parties could have a similar negative impact on our business.

If we fail to maintain and successfully manage our existing, or enter into new, strategic collaborations and other relationships, we may not be able to expand commercial development and sales of many of our products.

Our ability to enter into, maintain and manage collaborations and other relationships in our markets is fundamental to the success of our business. We may not be successful in entering into such arrangements with third parties for the sale and marketing of our products. Any failure to enter into new strategic arrangements on favorable terms or to maintain or manage our existing strategic arrangements could delay or hinder our ability to develop and commercialize our ingredients and could increase our costs of development and commercialization.

We may be exposed to product liability claims, which could harm our business.

The manufacture and sale of food additives and health products is regulated by various local, state, provincial federal and foreign environmental and public health agencies. The costs of remediation or product liability could materially adversely affect our future quarterly or annual operating results.

We may be held liable for, or incur costs to settle, liability claims if any products we develop, or any products that use or incorporate any of our technologies, cause injury or are found unsuitable during product testing, manufacturing, marketing, sale or use. These risks exist even with respect to products that have received, or may in the future receive, regulatory approval, registration or clearance for commercial use. We cannot guarantee that we will be able to avoid product liability exposure.

As part of the initial implementation process we will be putting in place product liability insurance at levels we believe will be sufficient and consistent with industry standards for companies at our stage of development. We cannot guarantee that our product liability insurance will be adequate and, at any time, it is possible that this insurance coverage may not be available on commercially reasonable terms or at all. A product liability claim could result in liability to us greater than our assets or insurance coverage. Moreover, even if we have adequate insurance coverage, product liability claims or recalls could result in negative publicity or force us to devote significant time and attention to those matters, which could harm our business.

We could be harmed by data loss or other security breaches.

As a result of certain of our direct to consumer services being web-based and the fact that we will process, store, and transmit data, including personal information, for our customers, failure to prevent or mitigate data loss or other security breaches, including breaches of our vendors’’ technology and systems, could expose us or our customers to a risk of loss or ~~misuse~~ misuse of such information, adversely affect our operating results, result in litigation or potential liability for us, and otherwise harm our business. We use third party technology and systems for a variety of reasons, including, without limitation, encryption and authentication technology, employee email, content delivery to customers, back-office support, and other functions. Although we have developed systems and processes that are designed to protect customer information and prevent data loss and other security breaches, including systems and processes designed to reduce the impact of a security breach at a third party vendor, such measures cannot provide absolute security.

~~We face risks related to system interruption and lack of redundancy~~23

We face risks related to system interruption and lack of redundancy.

We may experience occasional system interruptions and delays that make our websites and services unavailable or slow to respond and prevent us from efficiently fulfilling orders, which may reduce our net sales and the attractiveness of our products and services. If we are unable to continually add software and hardware, effectively upgrade our systems and network infrastructure, and take other steps to improve the efficiency of our systems, it could cause system interruptions or delays and adversely affect our operating results.

Our computer and communications systems and operations could be damaged or interrupted by fire, flood, power loss, telecommunications failure, earthquakes, acts of war or terrorism, acts of God, computer viruses, physical or electronic break-ins, and similar events or disruptions. Any of these events could cause system interruption, delays, and loss of critical data, and could prevent us from accepting and fulfilling customer orders, which could make our product and service offerings less attractive and subject us to liability. Our systems are not fully redundant and our disaster recovery planning may not be sufficient. In addition, we may have inadequate insurance coverage to compensate for any related losses. Any of these events could damage our reputation and be expensive to remedy.

Our business is subject to various governmental regulations, and compliance with these regulations may cause us to incur significant expenses. If we fail to maintain compliance with applicable regulations, we may be forced to recall products and cease their manufacture and distribution, which could subject us to civil or criminal penalties.

The complex legal and regulatory environment exposes us to compliance and litigation costs and risks that could materially affect our operations and financial results. These laws and regulations may change, sometimes significantly, as a result of political or economic events. They include environmental laws and regulations, tax laws and regulations, import and export laws and regulations, government contracting laws and regulations, labor and employment laws and regulations, securities and exchange laws and regulations, and other laws such as the Foreign Corrupt Practices Act. In addition, proposed laws and regulations in these and other areas could affect the cost of our business operations. We face the risk of changes in both domestic and foreign laws regarding trade, potential loss of proprietary information due to piracy, misappropriation or foreign laws that may be less protective of our intellectual property rights. Violations of any of these laws and regulations could subject us to criminal or civil enforcement actions, any of which could have a material adverse effect on our business, financial condition or results of operations.

Risks related to the Company’s Cannabis-Related Business

The direction our cannabis initiative is uncertain and may not yield commercial results.

WeIn ~~recently~~early 2017, we announced a new initiative to explore the potential opportunities in the Canadian cannabis market for the Company’s technologies. As of the date of this Report on Form 10-K, the Company’s initiatives ~~are~~continue to be at aan ~~preliminary~~early stage. ~~and ultimate~~Full implementation will ~~at the onset~~ be dependent upon ~~entering into research and development partnerships with academic institutions interested in pursuing the potential benefits of combining algae and cannabis and~~ obtaining the full funding necessary to ~~pursue~~finalize and utilize such research, as well as obtaining the funding necessary to continue ~~continuing~~ operations. While the Company is ~~pursuing~~continuing to pursue research and development and funding opportunities, there can be no assurance that such pursuit will be successful, or that any research and development efforts will result in commercially saleable products.

The Company has made substantial commitments to research collaborations with its university partners but no commercial products may result.

A central focus of the Company’s cannabis initiative is its research collaborations with Western University and the University of Waterloo. Under the applicable agreements to the Company has ~~agreed~~provided tosubstantial ~~fund~~funding of specified research into the potential of algae and cannabis to work in combination to treat cancer and depression-related diseases, and will have the opportunity to ~~exclusively~~ exclusively license any intellectual property developed from such research. However, the progress of scientific discovery is uncertain ~~and~~ and there can be no assurance that any commercial products will result from such research.

2824

The Company is Not a Licensed Producer under the ACMPR or the Cannabis Act and may not get the requisite licenses to carry out its cannabis initiative.

Initially, the Company intends to conduct its cannabis-related activities through other ~~licensed~~Licensed ~~producers~~Producers. ~~such~~In ~~as Bonify~~addition, ~~with which it has a letter of intent. However,~~ the Company eventually intends to apply to Health Canada to ~~become~~acquire a ~~licensed~~license ~~producer~~for sale of cannabis (a Sales License) under the Cannabis Act (which replaces the Access to Cannabis for Medical Purposes Regulations (Canada) (“ACMPR”)) issued pursuant to the Controlled Drugs and Substances Act (Canada) that would enable it to ~~process~~sell ~~and~~our ~~sell~~medical ~~Medical~~marijuana ~~Marijuana~~formulations directly to patients across Canada. ~~The~~ The Company has not yet applied for the licenses and there is no guarantee that the Company will ~~become~~acquire a ~~Licensed~~Sales ~~Producer~~License. Health Canada has ~~received~~or is expected to receive many applications and only a small fraction has been approved to date under the ACMPR and/or the Cannabis Act. Furthermore, the timing and success of the Company at the various steps in the licensing process is beyond the Company’s control and the sole discretion thereof lies with Health Canada. The Company’s ability to ~~process,~~ store and/or sell medical ~~Medical~~marijuana ~~Marijuana~~ in Canada is dependent on receiving a Sales ~~license~~License from Health Canada and there can be no assurance that the Company will obtain such licenses. InThe ~~the~~Company ~~event~~is ~~that it~~dependent isupon ~~unable~~others to ~~become~~conduct aseveral ~~licensed~~of ~~producer~~its itcannabis-related ~~will~~activities and bemay ~~dependent~~need ~~upon~~to ~~others~~significantly curtail operations if it is not able to ~~conduct~~enter ~~its~~into ~~cannabis-related~~the ~~activities~~required outsourcing or itcollaboration ~~will~~arrangements beor ~~required~~obtain tothe ~~curtail~~necessary ~~operations~~licenses.

Even if the Company is successful in obtaining the Sales ~~license~~License, such ~~licenses~~license will be subject to ongoing compliance and reporting requirements. Failure to comply with the requirements of the ~~licenses~~license or any failure to maintain the ~~licenses~~license would have a material adverse impact on the business, financial condition and operating results of the Company. Although the Company believes that we will meet the requirements of the ~~ACMPR~~Cannabis Act, there can be no guarantee that Health Canada will grant ~~these~~this ~~licenses~~license. Should Health Canada not grant the ~~licenses~~license, the business, financial condition and operating results of the Company would be materially adversely affected. To the extent such ~~licenses~~license ~~are~~is not obtained, the Company may be curtailed or prohibited from ~~its proposed production of Medical Marijuana or from~~ proceeding with the development of its operations as currently proposed, and would be forced to pursue alternative and possibly less certain strategies.

The Company’s cannabis-related business is subject to additional regulatory risks.

The business and activities of the Company ~~operates~~are inheavily aregulated. ~~new~~The ~~industry~~Company’s ~~which~~operations isare ~~highly~~subject ~~regulated~~to various laws, regulations and isguidelines inby agovernmental ~~market~~authorities, ~~that~~particularly isHealth ~~very~~Canada, ~~competitive~~relating ~~and~~to ~~evolving~~the ~~rapidly. The~~manufacture, ~~Company’s~~marketing, ~~ability~~management, totransportation, storage, ~~grow~~sale, ~~store~~pricing and ~~sell~~disposal ~~Medical~~of ~~Marijuana~~medical inmarijuana ~~Canada~~and iscannabis ~~dependent~~oil, onand ~~the~~also ~~licenses~~including ~~from~~laws ~~Health Canada~~ and ~~the~~regulations ~~need~~relating to health ~~maintain~~and ~~the~~safety, ~~licenses~~insurance incoverage, ~~good~~the ~~standing.~~conduct ~~Failure~~of tooperations ~~comply~~and ~~with~~ the ~~requirements~~protection of the ~~licenses~~environment. orLaws ~~any~~and ~~failure~~regulations, toapplied ~~maintain~~generally, ~~these~~grant ~~licenses~~government ~~would~~agencies ~~have~~and aself-regulatory ~~material~~bodies ~~adverse~~broad ~~impact~~administrative ondiscretion over the ~~business~~activities of the Company, ~~financial~~including ~~condition~~the ~~and~~power ~~operating~~to ~~results~~limit ofor restrict business activities as well as impose additional disclosure requirements on the Company’s products and services.

~~The~~Achievement of the Company’s ~~will~~business ~~incur~~objectives ~~ongoing~~are ~~costs~~contingent, ~~and~~in ~~obligations~~part, ~~related~~upon tocompliance with regulatory ~~compliance.~~requirements ~~Failure~~enacted toby ~~comply~~these governmental ~~with~~authorities ~~regulations~~and ~~may~~obtaining ~~result in~~all ~~additional~~regulatory ~~costs~~approvals, where necessary, for ~~corrective~~the ~~measures,~~production ~~penalties~~and orsale inof ~~restrictions~~its onproducts. The Company cannot predict the ~~Company’s~~time ~~operations.~~required Into ~~addition~~secure all appropriate regulatory approvals for its products, ~~changes~~or the extent of intesting ~~regulations,~~and ~~more~~documentation ~~vigorous~~that ~~enforcement~~may ~~thereof~~be orrequired ~~other~~by ~~unanticipated~~governmental ~~events~~authorities. ~~could~~Any ~~require~~delays ~~extensive~~in ~~changes~~obtaining, or failure to ~~the~~obtain ~~Company’s~~regulatory ~~operations,~~approvals ~~increased~~would ~~compliance~~significantly ~~costs~~delay orthe ~~give~~development ~~rise~~of tomarkets ~~material~~and ~~liabilities,~~products ~~which~~and could have a material adverse effect on the business, results ~~financial~~of ~~condition~~operations and ~~operating~~financial ~~results~~condition of the Company.

~~The~~Failure ~~industry~~to iscomply ~~subject~~with tothe ~~extensive~~laws ~~controls~~ and regulations, ~~which~~applicable to its operations may ~~significantly~~lead ~~affect~~to possible sanctions including the ~~financial~~revocation ~~condition~~or imposition of ~~market~~additional ~~participants. The~~conditions ~~marketability~~on oflicenses ~~any~~to ~~product~~operate ~~may~~the beCompany’s ~~affected~~business; bythe ~~numerous~~suspension ~~factors~~or ~~that~~expulsion ~~are~~from ~~beyond~~a ~~the~~particular market ~~Company’s~~or ~~control~~jurisdiction ~~and~~or ~~which~~of ~~cannot be~~its ~~predicted,~~key ~~such~~personnel; asthe ~~changes~~imposition toof ~~government~~additional ~~regulations,~~or ~~including~~more ~~those~~stringent ~~relating~~inspection, totesting ~~taxes~~and reporting requirements; and, ~~other~~the ~~government~~imposition ~~levies~~of ~~which~~fines ~~may be~~and ~~imposed~~censures. ~~Changes~~To inthe ~~government~~extent ~~levies,~~that ~~including~~there ~~taxes,~~are ~~could~~changes ~~reduce~~to the ~~Company’s~~existing ~~earnings~~laws and ~~could make future capital~~regulations ~~investments~~ or the ~~Company’s~~enactment ~~operations~~of ~~uneconomical.~~future ~~The~~laws ~~industry~~and isregulations ~~also~~that ~~subject~~affect tothe ~~numerous~~sale ~~legal~~or ~~challenges,~~offering ~~which~~of ~~may significantly~~the ~~affect~~Company’s ~~the~~products ~~financial~~or ~~condition~~services ofin any ~~market~~way, ~~participants~~the ~~and~~Company’s ~~which~~revenues ~~cannot~~may be ~~reliably~~adversely ~~predicted~~affected.

The regulatory environment for medical marijuana companies is rapidly-changing.

~~The~~On ~~Company’s~~June ~~proposed~~30, ~~operations~~2016, ~~are~~the ~~subject~~Government toof ~~various~~Canada ~~laws,~~established ~~regulations~~the ~~and~~Task ~~guidelines~~Force ~~relating~~on toCannabis ~~the~~Legalization ~~manufacture,~~and ~~management,~~Regulation (the “Task ~~packaging/labelling,~~Force”) ~~advertising,~~to ~~sale,~~seek ~~transportation,~~input ~~storage~~on ~~and~~the ~~disposal~~design of ~~Medical~~a ~~Marijuana~~new ~~but~~system ~~also~~to ~~including~~legalize, ~~laws~~strictly regulate and ~~regulations~~ ~~relating~~restrict access to ~~drug,~~adult-use recreational ~~controlled~~cannabis. ~~substances,~~On ~~health~~December ~~and~~13, ~~safety~~2016, the ~~conduct~~Task ofForce ~~operations~~completed its review and ~~the~~published ~~protection~~a ofreport ~~the~~outlining ~~environment~~its recommendations. ~~Changes~~On toApril ~~such~~13, ~~laws~~2017, ~~regulations~~the ~~and~~Government ~~guidelines~~of ~~due~~Canada released Bill C-45, An Act respecting cannabis and to ~~matters~~amend ~~beyond~~the Controlled Drugs and Substances Act, the ~~control~~Criminal ofCode and other Acts (Canada) (the ~~Company~~“Cannabis ~~may~~Act”). ~~cause~~The ~~adverse~~Cannabis ~~effects~~Act toregulates ~~its~~the ~~operations~~production, distribution and sale of cannabis for adult use.

Several recommendations made by the Task Force reflected in the Cannabis Act could materially and adversely affect the business, financial condition and results of operations of the Company. These recommendations include, but are not limited to, permitting home cultivation, potentially easing barriers to entry into a Canadian recreational cannabis market and restrictions on advertising and branding. It remains possible that developments under the Cannabis Act could significantly and adversely affect the business, financial condition and results of operations of the Company.

While the production of cannabis will be under the regulatory oversight of the Government of Canada, the distribution of adult-use recreational cannabis will be the responsibility of the provincial and territorial governments. To date, the prevailing plans amongst Canadian jurisdictions is that the wholesale distribution of cannabis will fall under the responsibility of their provincial liquor authorities. The legal retail business for adult-use recreational cannabis will initially fall under a framework of new provincially owned and run stand-alone cannabis outlets in Ontario, Quebec, New Brunswick, Nova Scotia and Prince Edward Island. Crown corporation run retail outlets will thus have a monopoly over the legal retailing and distribution of cannabis in these provinces, which represent approximately 67% of the Canadian population. The provinces of Alberta, Manitoba, Saskatchewan and Newfoundland and Labrador have indicated they would allow private retailers to manage the retail sales of cannabis in their provinces, while British Columbia will allow a mix of private and Crown corporation run retail stores. Accordingly, the sales and distribution framework for cannabis products is constantly evolving and may require the Company to shift its strategy in response to these changes.

There has been limited study on the effects of medical cannabis and future clinical research studies may lead to conclusions that dispute or conflict with our understanding and belief regarding the medical benefits, viability, safety, efficacy, dosing and social acceptance of cannabis.

Research in Canada, the United States and internationally regarding the medical benefits, viability, safety, efficacy and dosing of cannabis or isolated cannabinoids (CBD, and THC) remains in relatively early stages. There have been few clinical trials on the benefits of cannabis or isolated cannabinoids conducted by us or by others. Future research and clinical trials may draw opposing conclusions to statements contained in the articles, reports and studies relied upon in the preparation of this report, or could reach different or negative conclusions regarding the medical benefits, viability, safety, efficacy, dosing or other facts and perceptions related to medical cannabis, which could adversely affect social acceptance of cannabis and the demand for our products.

If we do not maintain our costs, we may not be able to commercialize our business opportunities.

Success will largely be predicated upon the Company’s s ability to use its technology to develop, sell and with the assistance of third party distributions, distribute consistent, high quality, products at competitive prices, and at a commercial scale. There can be no assurance that the Company will be able to develop, sell and distribute its products and technology at competitive prices. Failure to do so will result in smaller profit margins or losses.

There is significant competition for nutraceutical formulations based on cannabinoids.

There can be no assurance that potential competitors of the Company, which may have greater financial, R&D, sales and marketing and personnel resources than Company, are not currently developing, or will not in the future develop, products and strategies that are equally or more effective and/or economical as any products or strategies developed by the Company or which would otherwise render its products or strategies obsolete. The Company operates within competitive markets and the Company believes that it has adopted a competitive business strategy. However, the Company’s business, results, operations and financial condition could be materially adversely affected by the actions of its competitors (including their marketing and pricing strategies and product and services development). We may be forced to change the nature of our business as a result of competitive factors and there is no assurance that the Company will be able to compete successfully in the market place in which it seeks to operate.

Our prospects depend on the success of our formulations which remain at the early stages of development, and we may not generate revenue in the immediate future, if at all, from these formulations if they are not permitted by Health Canada or other regulators.

Given the stage of our product development, we can make no assurance that the research and development and patented formulations derived from our Sponsored Research Programs will result in commercially viable products. To achieve profitable operations, we, together with our collaboration partners, must successfully develop, gain regulatory approval (as required), and deliver products which contain our formulations. We currently have no products that have been approved by the United States Food and Drug Administration (FDA), Health Canada, or any similar regulatory authority. To obtain regulatory approvals for our formulations and to achieve commercial success, we may need to commission clinical trials to demonstrate that the formulations are safe for human use and that they demonstrate efficacy. We have no products which are currently in human clinical trials. Our only current potential source of revenue is from licensing agreements with collaboration partners for the use of our patented formulations. Such licensing agreements, if entered into, would provide only very limited revenues until a commercial product results from such agreement; significant revenues from such licenses may not be realized for several years. As a result, we are not currently generating revenue from our formulations and do not expect to generate significant revenue from our formulations over the next several years and may never generate revenue from the sale or licensing of our formulations, or otherwise.

Many product candidates which require testing or clinical trials never reach the stage of clinical testing and even those that do have only a small chance of successfully completing clinical development and gaining regulatory approval. Product candidates may fail for a number of reasons, including, but not limited to, being unsafe for human use or due to the failure to provide therapeutic benefits equal to or better than the standard of treatment at the time of testing. Positive results of early preclinical research may not be indicative of the results that will be obtained in later stages of preclinical or clinical research. Similarly, positive results from early stage clinical trials may not be indicative of favorable outcomes in later-stage clinical trials. We can make no assurance that any future studies, if undertaken, will yield favorable results. The early stage of our product development makes it particularly uncertain whether any of our product development efforts will prove to be successful and meet applicable regulatory requirements, and whether any of our product candidates will receive the requisite regulatory approvals, be capable of being manufactured at a reasonable cost or be successfully marketed. If we are successful in developing our current and future product candidates into approved products, we will still experience many potential obstacles such as the need to develop or obtain manufacturing, marketing and distribution capabilities. If we are unable to successfully commercialize any of our products, our financial condition and results of operations may be materially and adversely affected.

We will need to rely on contract manufacturers over whom we have limited control. If we are required to obtain Health Canada or similar approval for the formulation and distribution of our formulations, they may be subject to additional quality, cost or delivery issues with the preclinical and clinical grade materials supplied by contract manufacturers, in which case our business operations could suffer significant harm.

We currently have no manufacturing capabilities and intend to rely on contract manufacturing organizations, or CMOs, to manufacture our formulations for distribution as medical marijuana. Licensed Producers who have already obtained approval for the delivery of medical marijuana in soft-gel and other formats may require additional approvals for the distribution of our formulations as they contain additives and for preclinical studies and clinical trials if necessary to either demonstrate the efficacy of our formulations or to permit their formulation under current regulations. We expect to rely on CMOs for manufacturing, filling, packaging, storing and shipping of medical marijuana products and such manufacturing may require compliance with current good manufacturing practice, or cGMP, regulations if applicable to our products. The FDA ensures the quality of drug products by carefully monitoring drug manufacturers’ compliance with cGMP regulations. The cGMP regulations for drugs contain minimum requirements for the methods, facilities and controls used in manufacturing, processing and packing of a drug product If our CMOs increase their prices or fail to meet our quality standards, or those of regulatory agencies such as the FDA, and cannot be replaced by other acceptable CMOs, our ability to obtain regulatory approval for and commercialize our product candidates may be materially adversely affected.

If clinical trials of our product candidates is necessary and they fail to demonstrate safety and efficacy to the satisfaction of regulatory authorities or do not otherwise produce positive results, we would incur additional costs or experience delays in completing, or ultimately be unable to complete, the development and commercialization of our formulations.

We intend to develop marketing channels including but not limited to website promotion, medical doctors, product distributors, as appropriate and in compliance with the regulatory requirements which assumes that our formulations may be marketed in the same manner as medical marijuana formulations that are currently marketed without Health Canada Approval. However, if we are required to obtain Health Canada Approvals or if our formulations cannot be marketed in the same manner as medical marijuana or products governed by the Cannabis Act (including in relation to proposed amendments to permit the sale of edible cannabis products), Food and Drug Act and/or the Natural Health Product Regulations (including in relation to self-care products), we may require marketing and other approvals from regulatory authorities for the sale of our formulations which require that we conduct preclinical studies in animals and extensive clinical trials in humans to demonstrate the safety and efficacy of the product candidates. Clinical testing is expensive and difficult to design and implement, can take many years to complete and has uncertain outcomes. The outcome of preclinical studies and early clinical trials may not predict the success of later clinical trials and interim results of a clinical trial do not necessarily predict final results. A number of companies in the pharmaceutical and biotechnology industries have suffered significant setbacks in advanced clinical trials due to lack of efficacy or unacceptable safety profiles, notwithstanding promising results in earlier trials. We do not know whether the clinical trials we may conduct will demonstrate adequate efficacy and safety to result in regulatory approval to market any of our product candidates in any jurisdiction. A product candidate may fail for safety or efficacy reasons at any stage of the testing process. A major risk we face is the possibility that none of our product candidates under development will successfully gain market approval by regulatory authorities, resulting in us being unable to derive any commercial revenue from them after investing significant amounts of capital in multiple stages of preclinical and clinical testing.

If we experience delays in clinical testing, we will be delayed in commercializing our product candidates, and our business may be substantially harmed.

We cannot predict whether any clinical trials that may be required will begin as planned, will need to be restructured, or will be completed on schedule, or at all. Our product development costs or those of our collaboration partners will increase if we experience delays in clinical testing. Significant clinical trial delays could shorten any periods during which we may have the exclusive right to commercialize our product candidates or allow our competitors to bring products to market before us, which would impair our ability to successfully commercialize our product candidates and may harm our financial condition, results of operations and prospects. Our product development costs will increase if we experience delays in testing or approval or if we need to perform more or larger clinical trials than planned. Additionally, changes in regulatory requirements and policies may occur, and we may need to amend study protocols to reflect these changes. Amendments may require us to resubmit our study protocols to regulatory authorities or IRBs or ethics committees for re-examination, which may impact the cost, timing or successful completion of that trial. Delays or increased product development costs may have a material adverse effect on our business, financial condition and prospects.

Negative results from clinical trials or studies of others and adverse safety events involving the targets of our products may have an adverse impact on our future commercialization efforts.

From time to time, studies or clinical trials on various aspects of biopharmaceutical products are conducted by academic researchers, competitors or others. The results of these studies or trials, when published, may have a significant effect on the market for the biopharmaceutical product that is the subject of the study. The publication of negative results of studies or clinical trials or adverse safety events related to our product candidates, or the therapeutic areas in which our product candidates compete, could adversely affect the price of our Common Shares and our ability to finance future development of our product candidates, and our business and financial results could be materially and adversely affected.

Compliance with the reporting requirements of federal securities laws can be expensive.

We are a public reporting company in the United States, and accordingly, subject to the information and reporting requirements of the Exchange Act and other federal securities laws, and the compliance obligations of the Sarbanes-Oxley Act of 2002. The costs of preparing and filing annual and quarterly reports and other information with the SEC and furnishing audited reports to shareholders are substantial. If we do not provide current information about our Company to market makers, they will not be able to trade our stock. Failure to comply with the applicable securities laws could result in private or governmental legal action against us or our officers and directors, which could have a detrimental impact on our business and financials, the value of our stock, and the ability of shareholders to resell their stock.

If we fail to maintain an effective system of internal controls, we may not be able to accurately report our financial results or detect fraud. Consequently, investors could lose confidence in our financial reporting and this may decrease the trading price of our stock.

We must maintain effective internal controls to provide reliable financial reports and to detect and prevent fraud. If we cannot provide reliable financial reports or prevent fraud, we may not be able to manage our business as effectively as would be possible with an effective control system in place. We have not performed an in-depth analysis to determine if historical undiscovered failures of internal controls exist, and may in the future discover areas of our internal control that need improvement.

We have been assessing our internal controls to identify areas that need improvement. We are in the process of implementing changes to internal controls, but have not yet completed implementing these changes. Failure to implement these changes to our internal controls or any others that it identifies as necessary to maintain an effective system of internal controls could harm our operating results and cause investors to lose confidence in our reported financial information. Any such loss of confidence would have a negative effect on the trading price of our common shares.

Additional Risk Factors:

We have not voluntarily implemented various corporate governance measures, in the absence of which, shareholders may have more limited protections against interested director transactions, conflicts of interest and similar matters.

Federal legislation, including the Sarbanes-Oxley Act of 2002, has resulted in the adoption of various corporate governance measures designed to promote the integrity of corporate management and the securities markets. Some of these measures have been adopted in response to legal requirements. Others have been adopted by companies in response to the requirements of national securities exchanges, on which their securities are listed. Among the corporate governance measures that are required under the rules of national securities exchanges and NASDAQ are those that address board of directors’ independence, audit committee oversight and the adoption of a code of ethics. While our board of directors has adopted a Code of Ethics, we have not yet adopted any of the other corporate governance measures, and, since our securities are not currently listed on a national securities exchange or NASDAQ, we are not currently required to do so. In the event that our common shares become listed, we will be required to adopt these other corporate governance measures, and we intend to do so. It is possible that if we were to adopt some or all of these corporate governance measures, shareholders would benefit from somewhat greater assurances that internal corporate decisions were being made by disinterested directors and that policies had been implemented to define responsible conduct. For example, in the absence of audit, nominating and compensation committees comprised of at least a majority of independent directors, decisions concerning matters such as compensation packages to our senior officers and recommendations for director nominees may be made by a majority of directors who have an interest in the outcome of the matters being decided. Prospective investors should bear in mind our current lack of corporate governance measures in formulating their investment decisions.

Our Common Shares are traded over the counter, which could deprive shareholders of the full value of their shares.

Our Common Shares are currently traded over the counter on the OTC Pink, and as a result our common shares have fewer market makers, lower trading volumes and larger spreads between bid and asked prices than securities listed on an exchange such as the New York Stock Exchange or the NASDAQ Stock Market. These factors may result in higher price volatility and less market liquidity for our common shares.

We are currently delinquent in our Exchange Act filings and as a result, the Company is potentially subject to enforcement action and shareholders may not be able to resell securities under Rule 144.

As a result of the Company’s limited resources, it was unable to file certain periodic reports under the Exchange Act during 2017 and 2018. The Company is filing this Form 10-K as part of its plans to become current and intends to file past due reports as soon as practicable. In the meantime, the Company is potentially subject to enforcement action and/or revocation of its Exchange Act registration. In addition, resales of securities under SEC Rule 144 may be limited until it becomes current in its reports under the Exchange Act.

The Company endeavors to comply with all relevant laws, regulations and guidelines. To the Company’s knowledge, it is in compliance or in the process of being assessed for compliance with all such laws, regulations and guidelines as described elsewhere in this Form 10-K.

On February 24, 2016, the Federal Court of Canada issued the Allard Decision, declaring that the MMPR, as it was drafted, is unconstitutional in violation of the plaintiffs’ rights under section 7 of the Charter of Rights and Freedoms. The declaration of invalidity was suspended for six months to allow the Government of Canada to amend or issue new regulations. On March 21, 2014 the Federal Court of Canada issued an order affecting the repeal of the MMAR and the application of certain portions of the MMPR which are inconsistent with the MMAR in response to a motion brought by the plaintiffs in the Allard Decision. On August 24, 2016, the ACMPR came into force, replacing the MMPR as the regulations governing Canada’s Medical Marijuana regime which permits patients to produce a limited amount of cannabis for their own medical purposes or to designate a person to produce a limited amount of cannabis. This ACMPR could significantly reduce the addressable market for the Company’s proposed products and could materially and adversely affect the business, financial condition and results of operations of the Company.

On October 19, 2015, the Liberal Party was elected and obtained a majority government in Canada. The Liberal Party has made electoral commitments to legalize, regulate and tax recreational cannabis use in Canada. On April 20, 2016, the Liberal Party made a commitment to introduce legislation to meet their electoral commitments by the spring of 2017. On June 30, 2016, the Government of Canada launched the Task Force on Marijuana Legalization and Regulation and a public consultation for the creation of a new legislative system with respect to the legalization of cannabis (see the discussion paper entitled “Toward the Legalization, Regulation and Restriction of Access to

Marijuana” (“Discussion Paper”) (http://news.gc.ca/web/article-en.do?nid=1092399&tp=1), which sets out the objectives of the new system and identifies specific issues and options for which the Government is seeking comment). After taking consultations until August 29, 2016, the Task Force prepared and tabled their report on December 13, 2016. The report outlines a framework for a new system to legalize, regulate and restrict access to cannabis. The report contains recommendations to federal, provincial, territorial and municipal governments on how to promote and protect public health and safety, particularly among young Canadians. The advice presented in the Task Force’s report will be considered by the Government of Canada as it proceeds to develop legislation for the legalization of cannabis. The Government of Canada has introduced Bill-45 (Cannabis Act) which is an Act respecting cannabis and to amend the Controlled Drugs and Substances Act, the Criminal Code and other Acts. The impact of any such new legislative system on the Medical Marijuana industry and the Company’s business plan and operations is uncertain.

Risks related to the Common Shares

Because we will likely issue additional Common Shares, investment in the Company could be subject to substantial dilution.

We anticipate that all or at least some of our future funding, if any, will be in the form of equity financing from the sale of our Common Shares. If we do sell more Common Shares, investors’’ investment in the Company will likely be diluted. Dilution is is the difference between what you pay for your shares and the net tangible book value per share immediately after the additional shares are sold by us. If dilution occurs, any investment in the Company’s Common Shares could seriously decline in value.

Penny stock

The SEC has adopted rules that regulate broker-dealer practices in connection with transactions in penny stocks. Penny stocks are generally equity securities with a market price of less than $5.00, other than securities registered on certain national securities exchanges or quoted on the NASDAQ system, provided that current price and volume information with respect to transactions in such securities is provided by the exchange or system. The penny stock rules require a broker-dealer, prior to a transaction in a penny stock, to deliver a standardized risk disclosure document prepared by the SEC, that: (a) contains a description of the nature and level of risk in the market for penny stocks in both public offerings and secondary trading; (b) contains a description of the broker’s or dealer’s duties to the customer and of the rights and remedies available to the customer with respect to a violation of such duties or other requirements of the securities laws; (c) contains a brief, clear, narrative description of a dealer market, including bid and ask prices for penny stocks and the significance of the spread between the bid and ask price; (d) contains a toll-free telephone number for inquiries on disciplinary actions; (e) defines significant terms in the disclosure document or in the conduct of trading in penny stocks; and (f) contains such other information and is in such form, including language, type size and format, as the SEC shall require by rule or regulation.

The broker-dealer also must provide, prior to effecting any transaction in a penny stock, the customer with (a) bid and offer quotations for the penny stock; (b) the compensation of the broker-dealer and its salesperson in the transaction; (c) the number of shares to which such bid and ask prices apply, or other comparable information relating to the depth and liquidity of the market for such stock; and (d) a monthly account statement showing the market value of each penny stock held in the customer’s account.

In addition, the penny stock rules require that prior to a transaction in a penny stock not otherwise exempt from those rules, the broker-dealer must make a special written determination that the penny stock is a suitable investment for the purchaser and receive the purchaser’s written acknowledgment of the receipt of a risk disclosure statement, a written agreement as to transactions involving penny stocks, and a signed and dated copy of a written suitability statement.

These disclosure requirements may have the effect of reducing the trading activity for our common shares. Therefore, shareholders may have difficulty selling our securities.

The Company has no current plans to pay dividends on its Common Shares.

The Company does not anticipate paying any cash dividends in the foreseeable future. If the Company incurs indebtedness in the future to fund its future growth, its ability to pay dividends may be further restricted by the terms of such indebtedness.

Because a small number of existing shareholders own a large percentage of the Company’s voting shares, you will have minimal influence over shareholder decisions.

Existing management has significant share ownership in the Company and will retain control of the Company in the future. As a result of such ownership concentration, these individuals will have significant influence over the management and affairs of the Company and its business. It will also exert considerable, ongoing influence over matters subject to shareholder approval, including the election of directors and significant corporate transactions, such as a merger, sale of assets or other business combination or sale of the Company. This concentration of ownership may have the effect of delaying, deferring, or preventing a change in control, impeding a merger, consolidation, takeover or other business combination involving us, or discouraging a potential acquirer from making a tender offer or otherwise attempting to obtain control of the Company, even if such a transaction would benefit other shareholders.

If we fail to maintain proper and effective internal control over financial reporting in the future, our ability to produce accurate and timely financial statements could be impaired, which could harm our operating results, investors’’ views of us and, as a result, the value of our common shares.30

If we fail to maintain proper and effective internal control over financial reporting in the future, our ability to produce accurate and timely financial statements could be impaired, which could harm our operating results, investors’ views of us and, as a result, the value of our common shares.

Pursuant to Section 404 of the Sarbanes-Oxley Act, our management will be required to report upon the effectiveness of our internal control over financial reporting beginning with the annual report for our fiscal year ending March 31, 2016. When and if we are a “large accelerated filer” or an “accelerated filer” and are no longer an “emerging growth company,” each as defined in the Exchange Act, our independent registered public accounting firm will be required to attest to the effectiveness of our internal control over financial reporting. However, for so long as we remain an emerging growth company, we intend to take advantage of an exemption available to emerging growth companies from these auditor attestation requirements. The rules governing the standards that must be met for management to assess our internal control over financial reporting are complex and require significant documentation, testing, and possible remediation. To comply with the requirements of being a reporting company under the Exchange Act, we will need to upgrade our systems including information technology; implement additional financial and management controls, reporting systems, and procedures; and hire additional accounting and finance staff. If we or, if required, our auditors are unable to conclude that our internal control over financial reporting is effective, investors may lose confidence in our financial reporting, and the trading price of our common shares may decline.

We are an emerging growth company, and the reduced reporting requirements applicable to emerging growth companies may make our common shares less attractive to investors.

We are an emerging growth company, as defined in the Jumpstart Our Business Startups Act of 2012, or the JOBS Act and are eligible to take advantage of certain exemptions from various reporting requirements that are applicable to other public companies that are not emerging growth companies, including, but not limited to, three years of audited financial statements in addition to any required unaudited interim financial statements with correspondingly reduced “Management’s Discussion and Analysis of Financial Condition and Results of Operations” disclosure, not being required to comply with the auditor attestation requirements of Section 404 of the Sarbanes-Oxley Act of 2002, or the Sarbanes-Oxley Act, reduced disclosure obligations regarding executive compensation in its Form 10-K and our other periodic reports and proxy statements, exemptions from the requirements of holding non-binding advisory votes on executive compensation and seeking shareholder approval of any golden parachute payments not previously approved and not being required to adopt certain accounting standards until those standards would otherwise apply to private companies. We could be an emerging growth company until the last day of the fiscal year following the fifth anniversary of our initial offering in November 2014, although circumstances could cause us to lose that status earlier, including if we become a large accelerated filer (in which case we will cease to be an emerging company as of the date we become a large accelerated filer, which, generally, would occur if, at the end of a fiscal year, among other things, the market value of our common shares that is held by non-affiliates exceeds USD$700 million as of the last business day of our most recently completed second fiscal quarter), if we have total annual gross revenue of USD$1.0 billion or more during any fiscal year (in which cases we would no longer be an emerging growth company as of March 31 of such fiscal year), or if we issue more than USD$1.0 billion in non-convertible debt during any three year period before that time (in which case we would cease to be an emerging growth company immediately). Even after we no longer qualify as an emerging growth company, we may still qualify as a “smaller reporting company,” which would allow us to take advantage of many of the same exemptions from disclosure requirements including not being required to comply with the auditor attestation requirements of Section 404 of the Sarbanes-Oxley Act and reduced disclosure obligations regarding executive compensation in our periodic reports and proxy statements. We cannot predict if investors will find our common shares less attractive because we may rely on these exemptions. If some investors find our common stock less attractive as a result, there may be a less active trading market for our common shares and our share price may be more volatile.

You may face difficulties in protecting your interests, and your ability to protect your rights through the U.S. federal courts may be limited because we are incorporated under Canadian law, we conduct substantially all of our operations in Canada and most of our directors and all of our executive officers reside outside the United States.

We are incorporated in Canada and conduct substantially all of our operations in Canada. Most of our directors and all of our executive officers reside outside the United States and a substantial portion of their assets are located outside of the United States. As a result, it may not be possible for investors to enforce, outside the United States, judgments against the Company obtained in the United States in any such actions, including actions predicated upon the civil liability provisions of the United States federal and state securities laws. In addition, certain of the directors and officers of the Company are residents of Canada or other jurisdictions outside of the United States, and all or a substantial portion of the assets of those directors and officers are or may be located outside the United States. As a result, it may not be possible for investors to effect service of process within the United States upon those persons, or to enforce against them judgments obtained in United States courts, including judgments predicated upon the civil liability provisions of United States federal and state securities laws.

ITEM 1B. UNRESOLVED STAFF COMMENTS.

None.

ITEM 3. LEGAL PROCEEDINGS.

~~None~~On October 24, 2017, the Company was named in Brampton Small Claims Court entitled Questrade, Inc. v. Algae Dynamics Corp. (the “Claim”). The Claim seeks payment of Cdn$29,941 for payments allegedly owed under a Consulting Agreement with the Company in which Questrade was to provide certain financial advisory services. The Company has filed a general denial of liability on the basis that services were not provided or alternately disputing the amount claimed. A court date was held on October 11, 2018 and further submissions from both the Plaintiff and Defendant were requested by the Judge. An additional court date has been scheduled for March 14, 2019.

ITEM 4. MINE SAFETY DISCLOSURES.

Not applicable.

ITEM 5. MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES.

Public Market for Common Shares

Since January 4, 2016, our Common Shares have traded on the ~~OTCQB~~OTC operated by OTC Markets under the symbol “ADYNF”. ~~From September 17, 2015 until January 5, 2016 our shares traded on OTC Pink.~~ The table below lists the high and low closing prices per share of our Common Shares from the date our shares were first traded on September 17, 2015, as quoted on OTC Markets. Prior to September 17, 2015, there was no public market for our Common Shares.

Quarter Ended	High		Low
September 30, 2015	$	1.62	$	1.60
December 31, 2015	$	1.72	$	1.59
March 31, 2016	$	1.74	$	0.10
June 30, 2016	$	1.00	$	0.12
September 30, 2016	$	0.75	$	0.30
December 31, 2016	$	0.61	$	0.15
March 31, 2017	$	0.62	$	0.0001
June 30, 2017	$	0.3099	$	0.09
September 30, 2017	$	0.11	$	0.09
December 31, 2017	$	0.0711	$	0.0711
March 31, 2018	$	0.09	$	0.09

On ~~August~~ 11January 16, ~~2017~~2019, the ~~closing bid of our~~ Common Shares traded on the ~~OTCQB~~OTC was $0.0613 per share.

Holders

We had approximately 3766 record holders of our Common Shares as of ~~August~~January 1116, ~~2017~~2019, according to the books of our transfer agent. The number of shareholders of record excludes any estimate by us of the number of beneficial owners of shares held in street name, the accuracy of which cannot be guaranteed; however, we estimate the total number of shareholders to be approximately ~~190~~250 to ~~200~~300.

34As of January 16, 2019 there were 20,136,377 common shares of our common stock issued and outstanding.

As of August 11, 2017, there were 13,337,521 common shares of our common stock issued and outstanding.

Dividends

We currently intend to retain future earnings for the operation of our business. We have never declared or paid cash dividends on our common shares, and we do not anticipate paying any cash dividends in the foreseeable future.

In the event that a dividend is declared, common shareholders on the record date are entitled to share ratably in any dividends that may be declared from time to time on the common shares by our board of directors from funds legally available.

There are no restrictions in our articles of incorporation or bylaws that restrict us from declaring dividends.

Securities Authorized for Issuance under Equity Compensation Plans

On December 11, 2014, our board of directors and majority shareholders approved the adoption of the Algae Dynamics Corp Stock ~~Incentive~~ ~~Plan Algae Dynamics Corp Stock~~ Incentive Plan (the “Equity Incentive Plan”).

The purpose of the Equity Incentive Plan is to foster and promote our long-term financial success and increase shareholder value by motivating performance through incentive compensation. The Equity Incentive Plan is intended to encourage participants to acquire and maintain ownership interests in our company and to attract and retain the services of talented individuals upon whose judgment and special efforts the successful conduct of our business is largely dependent.

The Equity Incentive Plan became effective upon its approval by the majority of shareholders on August 28, 2014. The Plan is a fixed stock option plan, under which the aggregate number of Common Shares which may be reserved for issuance in respect of all options, restricted stock awards and restricted stock unit awards under the Plan together with any options, restricted stock awards or restricted stock unit awards under any other employee stock option plans or other share compensation arrangements of the Corporation, shall not exceed 15% of the Corporation’s total issued and outstanding Common Shares. At March 31, ~~2017~~2018, there were 13 16,~~337~~600,~~521~~ 435 common shares issued and outstanding.

The Equity Incentive Plan provides for the granting of non-qualified share options, to our employees, officers, directors and consultants.

3533

Equity Compensation Plans as of March 31, ~~2017~~2018

Number of

Number of securities remaining available for future issuance under equity

Category

securities to be issued upon exercise of outstanding options

Weighted- average exercise price of outstanding options

compensation plans (excluding securities reflected in column (A))

Equity compensation plans approved by security holders

~~695~~2,020,000

0.9945

1470,~~305,628~~065

Equity compensation plans not approved by security holders

Total

~~695~~2,020,000

0.9945

1470,~~305,628~~065

Note 1 The stock option plan is based on 15% of the number of common shares (1316,~~337~~600,~~521~~435) and the number on the table is as of March 31, ~~2017~~2018.

Recent Sales of Unregistered Securities

On June 25, 2015, 12,500 common share purchase warrants were exercised at USD$0.04 ($0.048) per warrant for total cash proceeds of USD$500 ($620).

On September 10, 2015, a consultant was issued 50,000 common shares for services rendered in the amount of $67,195, this amount has been recorded as professional fees on the statement of operations.

On November 5, 2015, 31,000 common share purchase warrants were exercised at USD$0.04 ($0.052) per warrant for total cash proceeds of USD$1,240 ($1,632).

On December 18, 2015, 51,600 common share purchase warrants were exercised at USD$0.04 ($0.054) per warrant for total cash proceeds of USD$2,064 ($2,834).

On December 22, 2015, 31,000 common share purchase warrants were exercised at USD$0.04 ($0.056) per warrant for total cash proceeds of USD$1,240 ($1,735).

On December 31, 2015, 48,400 common share purchase warrants were exercised at USD$0.04 ($0.055) per warrant for total cash proceeds of USD$1,936 ($2,683).

On December 31, 2015, a private placement was completed to issue 31,532 common shares at USD$1.11 ($1.54) per share for gross proceeds of USD$35,000 ($48,441). The shares were subscribed for by a family member of an officer.

On December 31, 2015, a consultant was issued 10,000 common shares for services rendered in the amount of USD$17,200 ($23,805). Another consultant was issued 93,000 common shares for services rendered in the amount of USD$159,960 ($221,385) (see Note 11), these amounts have been recorded as professional fees on the statement of operations.

On January 4, 2016, 31,000 common share purchase warrants were exercised at USD$0.04 ($0.056) per warrant for total cash proceeds of USD$1,240 ($1,732).

On February 17, 2016, a convertible loan plus accrued interest was converted into 29,609 common shares at USD$0.89 ($1.23 for total consideration of USD$26,500 ($36,419).

On February 25, 2016, 25,000 common share purchase warrants were exercised at USD$0.04 ($0.056) per warrant for total cash proceeds of USD$1,000 ($1,378).

On May 15, 2016, 13,874 shares to be issued to a consulting firm were issued as common shares for services rendered in the amount of USD$22,500 ($31,140) during the year ended March 31, 2016. The amount was recorded as professional fees on the statement of operations during the year ended March 31, 2016.

On May 18, 2016, 44,500 common shares purchase warrants were exercised at USD$0.04 ($0.052) per warrant for total cash proceeds of USD$1,780 ($2,318).

On May 19, 2016, the Company signed a letter of engagement with an agent in connection with proposed placements of up to US$10,000,000 ($13,427,000), which included as part of the fee the issuance of 100,000 common shares as a non-refundable retainer at a value of $101,579 based upon an estimated fair market value of USD$0.78 ($1.02) per share at the time of the agreement. The amount of the retainer has been expensed to professional fees during the year ended March 31, 2017.

On June 22, 2016, 15,264 shares to be issued to a consulting firm were issued as common shares for services rendered in the amount of USD$22,500 ($29,185) during the year ended March 31, 2016. The amount was recorded as professional fees on the statement of operations during the year ended March 31, 2016.

On June 30, 2016, 66,667 common shares were issued to a consultant in settlement of a debt at a value of $64,585 based upon an estimated fair market value of USD$0.75 ($0.97) per share at the time of issuance.

On June 30, 2016, 250,000 common shares were issued to a consulting firm as a portion of the compensation for services initiated on June 24, 2016 at a value of $201,481 based upon an estimated fair market value of USD$0.62 ($0.81) per share at the date of issue. This amount was expensed during the year ended March 31, 2017 as professional fees on the statements of operations. A second issuance of 250,000 common shares was made on October 17, 2016 at a value of $113,225 based upon an estimated fair market value of USD$0.35 ($0.45) per share at the date of issue and the final issuance of 250,000 common shares was made on October 18, 2016 at a value of $125,766 based upon an estimated fair market value of USD$0.38 ($0.50) per share at the date of issue.

On July 7, 2016, the Company committed to issue 20,000 common shares to a consultant in settlement of a debt at a value of $19,500 (USD$15,000) based upon an estimated fair market value of USD$0.75 ($0.97) per share on that date. These common shares were issued on October 17, 2016.

On December 19, 2016, 25,000 stock options were exercised at an exercise price of $0.31 per common share for gross proceeds of $7,750. The proceeds were allocated to settle a debt with the consultant who exercised the stock options.

On December 29, 2016, a consulting firm was issued 78,027 common shares for services rendered in the amount of USD$45,000 ($58,500), this amount has been recorded as professional fees on the statement of operations.

On December 29, 2016, 117,465 shares to be issued were issued as common shares, 72,465 of these shares were committed to be issued during the year ended March 31, 2016 in settlement of debt and 45,000 of these shares were committed to be issued during the year ended March 31, 2016 as compensation to three members of management.

On December 29, 2016, an aggregate of 600,000 shares were issued to three members of management as compensation at a value of $485,458 based upon an estimated fair market value of USD$0.60 ($0.81) per share at the date of issue.

On December 29, 2016, 1,316,173 shares were issued to two officers and directors as consideration for conversion of shareholder advances and accounts payable.

On January 9, 2017, the Company entered into a three-month contract with an investor relations firm. The terms of the contract specified a cash payment of USD$10,000 ($13,427) and 50,000 shares of common shares which were issued on January 10, 2017 at a value of $27,000 ($35,733) based upon an estimated fair market value of USD$0.55 ($0.728) per share. The portion applicable to the 9 days in April 2017 has been recorded as a prepaid expense ($4,916) at March 31, 2017.

On January 10, 2017, 75,000 stock options were exercised at $0.31 per common share for total proceeds of $23,250. The proceeds were used to settle a debt with the consultant who exercised the stock options.

On March 22, 2017, an aggregate of 75,000 shares were issued to three members of management as compensation valued at $29,007 based upon an estimated fair market value of $0.39 (USD$0.29) per share at the date of commitment.

On March 21, 2017, 50,000 common shares purchase warrants were exercised at $0.053 (USD$0.04) on a cashless basis with 39,500 common shares being issued.

~~Since~~Equity ~~inception,~~transactions weMarch ~~have issued 13~~31,~~337,521~~ ~~common~~2017 ~~shares~~ to 46March ~~investors. The total value of these shares issued totaled $4~~31,~~313,931 and~~ ~~were used for working capital.~~2018

2018 Equity issued

Under the terms of convertible notes issued on June 21, 2017, for USD$50,000 ($66,550), the Company agreed to issue 100,000 restricted common shares as a commitment fee. The note matured on June 21, 2018 and a total of 560,000 common shares were issued plus 200,000 purchase warrants were also issued. One purchase warrant can be exchanged for one common share for USD$0.50 at any time until June 21, 2022.

Under the terms of a convertible note issued on July 25, 2017, for USD$50,000 ($62,535), the Company agreed to issue 100,000 restricted common shares as a commitment fee. The note matured on July 25, 2018 and a total of 560,000 common shares were issued plus 200,000 purchase warrants were also issued. One purchase warrant can be exchanged for one common share for USD$0.50 at any time until July 25, 2022.

The convertible notes issued on August 14, 2017, USD$53,000 ($67,602), September 18, 2017, USD$10,000 ($12,238), October 27, 2017, USD$250,000 ($321,850), November 1, 2017 USD$20,000 ($25,770), November 13, 2017, USD$25,000 ($31,833) for a total of USD$358,000 ($459,292) have matured and the Company issued a total of 3,639,931 common shares at the conversion rate of USD$0.10. The shares (2,541,781) for the USD$250,000 convertible note were issued on January 5, 2018 and the balance of the shares for the convertible notes (1,098,150) were issued subsequent to March 31, 2018.

On November 8, 2017, the Board approved the award of an aggregate of 1,050,000 common shares to three management personnel for services rendered, these shares were subsequently cancelled and awarded as deferred share units. In addition, the Board cancelled an aggregate of 600,000 common shares awarded in a prior period to three management personnel.

On December 1, 2017, the Company entered into an agreement with 908746 Ontario Inc., the agreement is for the provision of advisory services for ongoing capital market activities including investor relations. Under the agreement, a total of 71,133 shares were issued.

Equity to be issued

On April 9, 2017, the Company signed a 12-month consulting agreement. The terms of the agreement include the provision of 100,000 common stock on signing, valued at USD$20,390 ($27,186).

The convertible notes issued on August 14, 2017, USD$53,000 ($67,602), September 18, 2017, USD$10,000 ($12,238), October 27, 2017, November 1, 2017 USD$20,000 ($25,770), November 13, 2017, USD$25,000 ($31,833) for a total of USD$358,000 ($459,292) have matured and the Company issued a total of 3,639,931 common shares at the conversion rate of $0.10. The shares (2,541,781) for the USD$250,000 convertible were issued on January 5, 2018 and the balance of the shares for the convertibles notes (1,098,150) were issued subsequent to March 31, 2018. The Company agreed to issue an additional 159,023 warrants with an exercise price of $0.75 and an expiry of January 2, 2020, on connection with the conversions.

Since inception, we have issued 20,136,377 common shares to 66 investors. The total value of these shares issued totaled $5,795,313 and were used for working capital. This information has been provided as part of the Form 10-K filing to March 31, 2018. These securities were issued pursuant to Section 4(2) of the Securities Act and/or Rule 506 and Regulation S promulgated thereunder. The holders represented their intention to acquire the securities for investment only and not with a view towards distribution. The investors were given adequate information about us to make an informed investment decision. We did not engage in any general solicitation or advertising. We directed our transfer agent to issue the with the appropriate restrictive legend affixed to the restricted stock.

These securities were issued pursuant to Section 4(2) of the Securities Act and/or Rule 506 and Regulation S promulgated thereunder. The holders represented their intention to acquire the securities for investment only and not with a view towards distribution. The investors were given adequate information about us to make an informed investment decision. We did not engage in any general solicitation or advertising. We directed our transfer agent to issue the stock certificates with the appropriate restrictive legend affixed to the restricted stock.

ITEM 6. SELECTED FINANCIAL DATA.

As a smaller reporting company, as defined in Rule 12b-2 of the Securities Exchange Act of 1934, we are not required to provide the information required by this item.

ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS.

The following discussion and analysis should be read in connection with the Company’s financial statements and related notes thereto, as included in this report.

The following is management’s discussion and analysis of certain significant factors that have affected our financial position and operating results during the periods included in the accompanying financial statements, as well as information relating to the plans of our current management.

Results of Operations and Going Concern

We incurred a net loss of $21,~~585~~101,~~661~~077 for the year ended March 31, ~~2017~~2018, (~~2016~~2017 - $12,~~913~~585,~~995~~661). We do not anticipate having a positive net income in the immediate future. Net cash ~~used~~from byoperating ~~operations~~activities for the year ended March 31, ~~2017~~2018 was $~~341~~27,~~945~~539. These financial statements have been prepared on the basis of a going concern, which contemplates the realization of assets and the settlement of liabilities in the normal course of business. The Company is in the development stage, in accordance with ASC 9:115 and has not yet realized profitable operations and has relied on non-operational sources to fund operations. In addition, as of March 31, ~~2017~~2018, the Company has a working capital deficiency of $~~852~~870,~~514~~053 (March 31, ~~2016~~2017 - $~~765~~852,~~356~~514) and has accumulated deficit of $67,~~134~~219,~~491~~908 (March 31, ~~2016~~2017 -$36,~~723~~134,~~368~~941). The Company’s ability to continue as a going concern is dependent on ~~successfully~~ successfully executing its business plan, which includes the raising of additional funds. The company will continue to seek additional ~~forms~~ forms of debt or equity financing, but it cannot provide assurances that it will be successful in doing so. These circumstances ~~raise~~ raise substantial doubt as to the ability of the company to meet its obligations as they come due and accordingly, the appropriateness, ultimately, of the use of accounting principles applicable to a going concern. The accompanying financial statements do not include any adjustment that might be necessary if the Company is unable to continue as a going concern.

Results of Operations for the year ended March 31, ~~2017~~2018 compared to the year ended March 31, ~~2016~~2017 Operating Expenses

The operating expenses ~~increased~~decreased in ~~2017~~2018 ($21,~~585~~101,~~661~~077) versus ~~2016~~2017 ($12,~~921~~585,~~210~~661) by $~~664~~1,~~451~~484,584 as the Company continued to build the ~~administrative~~ administrative infrastructure to support the development and implementation of athe ~~production~~business ~~facility~~plan. The decrease is primarily related to the decrease in the amount of expense related to investor relations.

Net Income (Loss)

We recognized a net loss of $21,~~585~~101,~~661~~077 for the year ended March 31, ~~2017~~2018 as compared to a net loss of $12,~~913~~585,~~995~~661 for the same period of ~~2016~~2017. Changes in net income (loss) are primarily attributable to changes in expenses, each of which is described above.

Liquidity and Capital Resources

Net cash ~~used~~flow byfrom operating activities was $~~341~~27,~~945~~539 and ($~~209~~341,~~919~~945) for the years ended March 31, ~~2017~~ 2018 and ~~2016~~2017, respectively. The ~~increase~~ decrease is mainly attributable to ~~commencing~~ the development of ~~the~~an ~~demonstration~~appropriate ~~production~~funding ~~facility,~~strategy ~~the~~aligned ~~costs associated~~ with ~~raising~~ ~~new~~the ~~equity~~implantation ~~and~~of the ~~costs~~business ~~associated with becoming a public company~~plan.

We had negative working capital of $~~852~~ 870,~~514~~053 as of March 31, ~~2017~~2018 compared to $~~765~~852,~~356~~514 as of March 31, ~~2016~~2017. The current level of development activity necessitates a cash requirement of approximately $4050,000 monthly.

We do not have any material commitments for capital expenditures. However, should we execute our business plan as anticipated, we would incur substantial capital expenditures and require financing in addition to the amount required to fund our present operation.37

We ~~continue to rely on advances and sale of equity to fund operating shortfalls and~~ do not ~~foresee~~have aany ~~change~~material incommitments ~~this~~for ~~situation~~capital ~~in the~~expenditures ~~immediate~~and ~~future.~~have ~~There~~designed ~~can~~our bebusiness nomodel ~~assurances~~such that we ~~will~~did ~~continue to be able to access advances and sell equity, without which we will~~ not ~~be able to continue operations. The Company intends to commence a raise via private placement or direct offering~~expect to ~~the~~have ~~public~~material ofrequirements ~~equity~~for incapital ~~our~~expenditures ~~Company as early as feasible~~ in ~~order~~the toforeseeable ~~fund operations going forward~~future.

39We continue to rely on advances and sale of equity to fund operating shortfalls and we see changes in the near future as the business strategy detailed in the business plan is implemented. There can be no assurances that we will commence receiving the anticipated revenue or that we will continue to be able to access advances and sell equity, without which we will not be able to continue operations. The Company intends to continue to raise capital via private and public offerings of equity in the future. As of March 31, 2018, we estimate that the Company will need $20 million to fully execute our business plan.

The ~~execution~~Company ~~of the business plan~~ has ~~been put on hold until the appropriate commitments have been made for funding. The Company has recently~~ revised ~~the~~its business strategy as outlined in the business plan (detailed in ITEM 1 Business) which positions the ~~Company~~ Company to participate in the developing medical cannabis market within Canada and potentially external to Canada in jurisdictions which has legalized medical cannabis. In order to process the appropriate legal documents, the Company has retained the legal firm of ~~Dentons Canada~~Rickette Harris LLP to provide recommendations in dealing with the Canadian regulatory and financing environment for the cannabis market as well as issues related to ongoing corporate matters.

~~The~~If ~~anticipated~~the ~~financing~~funding from the private or public offerings is not available in a timely manner, then management will ~~provide~~forego ~~working~~salaries and ~~capital~~operations ~~for~~will be scaled back to operate within the ~~Company~~funds available. In the normal course of business, management considers various alternatives to ~~execute~~ensure that the Company can meet some of its ~~long~~operating ~~term~~cash ~~plan~~flow requirements through financing activities, such as private placements of common shares, preferred share offerings and offerings of debt and convertible debt instruments as well as ~~facilitating~~through ~~the~~merger ~~initial~~or acquisition opportunities. Management may also consider strategic alternatives, including strategic ~~development~~investments ofand ~~extraction~~divestitures. As future operations may be financed out of ~~oil~~funds generated from financing activities, the ability to do so is dependent on, among other factors, the overall state of capital markets and investor appetite for investments in the cannabis asindustry ~~well~~and asthe Company’s securities in particular. Should the ~~formulation~~Company elect to satisfy its cash commitments through the issuance of ~~products~~securities, asby ~~part~~way of either private placement or public offering or otherwise, there can be no assurance that the ~~sponsored~~efforts ~~research~~to ~~programs~~obtain such additional funding will be successful, or achieved on terms favorable to the Company or its existing ~~with~~shareholders. If adequate funds are not available on favorable terms, the ~~Universities~~Company may have to reduce substantially or eliminate expenditures or obtain funds through other sources such as divestiture or monetization of ~~Waterloo~~certain ~~and~~assets ~~Western~~or ~~Ontario~~sublicensing (where permitted) of certain rights to certain of the Company’s technologies or products.

If the funding from the private placement or direct offering is not available in a timely manner then management will continue foregoing salaries and operations will be scaled back to operate within the funds available. In the normal course of business, management considers various alternatives to ensure that the Company can meet some of its operating cash flow requirements through financing activities, such as private placements of common shares, preferred share offerings and offerings of debt and convertible debt instruments as well as through merger or acquisition opportunities. Management may also consider strategic alternatives, including strategic investments and divestitures. As future operations may be financed out of funds generated from financing activities, the ability to do so is dependent on, among other factors, the overall state of capital markets and investor appetite for investments in the cannabis industry and the Company’s securities in particular. Should the Company elect to satisfy its cash commitments through the issuance of securities, by way of either private placement or public offering or otherwise, there can be no assurance that the efforts to obtain such additional funding will be successful, or achieved on terms favorable to the Company or its existing shareholders. If adequate funds are not available on favorable terms, the Company may have to reduce substantially or eliminate expenditures or obtain funds through other sources such as divestiture or monetization of certain assets or sublicensing (where permitted) of certain rights to certain of the Company’s technologies or products.

Additional Financing

Please see the section Recent Sales of Unregistered Securities– Notes 10 and 15 of the Audited Financial Statements.

Off-Balance Sheet Arrangements

There are no off-balance sheet arrangements that have or are reasonably likely to have a current or future effect on our financial condition, changes in financial condition, revenues or expenses, results of operations, liquidity, capital expenditures or capital resources that is material to investors.

Our principal capital resources have been through the subscription and issuance of common stock, although we have also used stockholder loans.

Going Concern

The accompanying financial statements have been prepared on a going concern basis which assumes that adequate sources of financing will be obtained as required and that our assets will be realized and liabilities settled in the ordinary course of business. Accordingly, the financial statements do not include any adjustments related to the recoverability of assets and classification of assets and liabilities that might be necessary should we be unable to continue as a going concern.

As shown in the financial statements, the Company incurred a net operating loss of $21,~~585~~101,~~661~~077 for the year ended March 31, ~~2017~~2018, (~~2016~~2017 - $12,~~913~~585,~~995~~661). The Company’s current liabilities exceed its current assets by $~~852~~870,~~514~~053 as of March 31, ~~2017~~2018.

4038

In view of the matters described in the preceding paragraph, recoverability of a major portion of the recorded asset amounts shown in the accompanying balance sheet is dependent upon continued operations of the Company, which in turn is dependent upon the Company’s ability to meet its financing requirements on a continuing basis by raising additional funds through debt or equity financing. The financial statements do not include any adjustments relating to the recoverability and classification of recorded asset amounts and classification of liabilities that might be necessary should the Company be unable to continue in existence.

Accordingly, our independent auditors included an explanatory paragraph in their report on the March 31, ~~2017~~2018 financial statements regarding concerns about our ability to continue as a going concern. Our financial statements contain additional notes and disclosure describing the circumstances that lead to this disclosure by our independent auditors.

Critical Accounting Policies

The financial statements and accompanying notes have been prepared in accordance with United States generally accepted accounting principles (“US GAAP”) applied on a consistent basis. The preparation of financial statements in conformity with US GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenue and expenses during the reporting periods.

We have identified the policies below as critical to our business operations and the understanding of our financial statements. A complete discussion of our accounting policies is included in Notes 2 and 3 of the Notes to the Financial Statements.

Use of estimates

The preparation of financial statements in accordance with United States generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could materially differ from these estimates.

Cash and Cash Equivalents

The company considers highly liquid financial instruments purchased with a maturity of three months or less to be cash equivalents.

Income Taxes

Please see ~~note~~Note 11 of the accompanying financial statements.

Fair Value of Financial Instruments

Please see ~~Note~~Notes 9 and 14 of the accompanying financial statements.

Net Loss Per Common Share

Net loss per common share is computed pursuant to section 260-10-45 of the FASB Accounting Standards Codification. Basic net loss per common share is $0.2308 computed by dividing net loss by the weighted average number of shares of common stock outstanding during the period. Diluted net loss per common share is computed by dividing net loss by the weighted average number of shares of common stock and potentially outstanding shares of common stock during the period to reflect the potential dilution that could occur from common shares issuable through stock options and warrants. Potentially dilutive securities which were not included in diluted weighted average shares for the years ended March 31, ~~2017~~2018 and ~~2016~~2017 consist of outstanding options (~~695~~2,020,000 and ~~930~~695,000) respectively and outstanding warrants (1,~~197~~575,~~500~~000 and ~~709~~1,~~583~~197,500) respectively.

4139

Stock-Based Compensation

Please see Note 10c of the accompanying financial statements.

Recent Accounting Pronouncements

ASU No. 2015-17, Income Taxes (Topic 740): Balance Sheet Classification of Deferred Taxes, was issued to simplify the classification of deferred taxes on the balance sheet. The new guidance would require that deferred taxes be classified as non-current assets and liabilities based on the tax paying jurisdiction. Application of the standard, which can be applied prospectively or retrospectively, is required for fiscal years beginning on or after December 15, 2016 and for interim periods within that year. The adoption of the amended guidance is not expected to have a material impact on the Company’s consolidated financial statements.

ASU No. 2016-01, Financial Instruments-Overall (Subtopic 825-10) - Recognition and Measurement of Financial Assets and Financial Liabilities, which addresses certain aspects of recognition, measurement, presentation, and disclosure of financial instruments. Most notably, this new guidance requires equity investments (except those accounted for under the equity method of accounting or those that result in consolidation of the investee) to be measured at fair value with changes in fair value recognized in net income. This new guidance is effective for annual reporting periods beginning after December 15, 2017. The guidance is not expected to have a material impact on the Company’s financial statements.

ASU No. 2016-02, Leases (Topic 842), On February 25, 2016, the FASB issued a new standard which requires lessees to recognize almost all leases on their balance sheet as a right-of-use asset and a lease liability. The new guidance will require the asset and liability to be initially measured at the present value of the lease payments in the statement of financial position. The new guidance will also require the company to recognize interest expense on the lease liability separately from the amortization of the right-use-asset for finance leases and recognize a single lease cost allocated on a straight-line basis over the lease term for operating leases, in the statement of comprehensive income. The new standard is effective for fiscal years beginning after December 15, 2018, including interim periods within those fiscal years with early application permitted. The Company is currently evaluating this guidance to determine the impact it may have on the Company’s financial statements.

ASU No. 2016-09, Compensation-Stock Compensation (Topic 718): Improvements to Employee Share-Based Payment Accounting. The ASU includes multiple provisions intended to simplify various aspects of the accounting for share-based payments. The areas of simplification in the update involve several aspects of accounting for share-based payment transactions, including the income tax consequences, classification of awards as either equity or liabilities, and classification on the statement of cash flows, however, some of the areas for simplification apply only to non-public entities. This guidance is effective for annual periods beginning after December 15, 2016, and interim periods within those annual periods. Early adoption is permitted for any entity in any interim or annual period, however, certain requirements apply to the early adoption. The guidance is not expected to have a material impact on the Company’s financial statements.

ASU No. 2016-15, Statement of Cash Flows (Topic 230): Classification of Certain Cash Receipts and Cash Payments. The ASU provides clarity to preparers on the treatment of eight specific items within an entity’s statement of cash flows. The guidance becomes effective for all public entities in fiscal years beginning after December 15, 2017, including interim periods therein. Early adoption of the guidance, including within an interim period, is permitted. The guidance is not expected to have a material impact on the Company’s financial statements.

ASU No. 2017-09, Compensation-Stock Compensation (Topic 718): Scope of Modification Accounting. The ASU amends the scope of modification accounting for share-based arrangements and provides guidance on the types of changes to the terms or conditions of share-based payment awards to which an entity would be required to apply modification accounting under ASC 718. The guidance becomes effective for annual reporting periods, including interim periods within those annual reporting periods, beginning after December 15, 2017. Early adoption is permitted, including adoption in any interim period. The guidance is not expected to have a material impact on the Company’s financial statements.

ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.

As a smaller reporting company, as defined in Rule 12b-2 of the Securities Exchange Act of 1934, we are not required to provide the information required by this item.

4240

ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the Board of Directors and
Stockholders of Algae Dynamics Corp.

WeOpinion ~~have~~on ~~audited~~ the ~~accompanying~~Financial balance sheets of Algae Dynamics Corp. as of March 31, 2017 and 2016, and the related statements of operations, stockholders’ deficiency, and cash flows for each of the years in the two year period ended March 31, 2017. Algae Dynamics Corp.’s management is responsible for these financial statements. Our responsibility is to express an opinion on these financial statements based on our audits.Statements

We ~~conducted~~have ~~our~~audited ~~audits~~the inaccompanying ~~accordance~~balance ~~with~~sheets ~~the standards~~ of ~~the~~Algae ~~Public~~Dynamics ~~Company~~Corp. ~~Accounting Oversight Board~~ (~~United~~the ~~States~~“Company”). ~~Those standards~~as ~~require~~of ~~that~~March we31, ~~plan~~2018 and ~~perform~~2017, and the ~~audit~~related tostatements ~~obtain~~of ~~reasonable~~operations, ~~assurance~~stockholders’ ~~about~~deficiency, ~~whether~~and ~~the~~cash ~~financial~~flows ~~statements~~for ~~are free~~each of ~~material~~the ~~misstatement.~~years ~~The~~in ~~company~~the istwo ~~not~~year period ~~required~~ended toMarch ~~have~~31, ~~nor~~2018 ~~were~~and we2017, ~~engaged~~and tothe ~~perform,~~related annotes ~~audit~~(collectively ofreferred ~~its~~to ~~internal~~as ~~control over~~the financial ~~reporting~~statements). ~~Our~~In ~~audit~~our ~~included~~opinion, the ~~consideration of internal control over~~ financial ~~reporting~~statements aspresent afairly, ~~basis for designing audit procedures that are appropriate~~ in ~~the~~all ~~circumstances~~material respects, ~~but not for~~ the ~~purpose~~financial ofposition ~~expressing an opinion on the effectiveness~~ of the ~~company’s~~Company ~~internal~~as ~~control~~of ~~over~~March ~~financial~~31, ~~reporting.~~2018 and ~~Accordingly~~2017, weand ~~express~~the noresults ~~such~~of ~~opinion.~~its Anoperations ~~audit~~and ~~also~~its ~~includes examining,~~cash onflows afor ~~test~~each ~~basis,~~of ~~evidence supporting~~ the ~~amounts~~years ~~and disclosures~~ in the ~~financial~~two ~~statements,~~year ~~assessing~~period ~~the~~ended ~~accounting principles~~March ~~used~~31, 218 and ~~significant~~2017, ~~estimates~~in ~~made~~conformity bywith ~~management,~~accounting asprinciples ~~well~~generally asaccepted ~~evaluating~~in the ~~overall~~United ~~financial~~States ~~statement~~of ~~presentation~~America. ~~We believe that our audits provide a reasonable basis for our opinion.~~

InBasis our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of Algae Dynamics Corp. as of March 31, 2017 and 2016, and the results of its operations and its cash flows for ~~each of the years in the two year period ended March 31, 2017, in conformity with accounting principles generally accepted in the United States of America.~~Opinion

~~The~~These ~~accompanying~~ financial statements ~~have~~are ~~been~~the ~~prepared~~responsibility ~~assuming~~of ~~that~~the ~~Algae~~Company’s ~~Dynamics Corp~~management. ~~will~~Our ~~continue~~responsibility asis ato ~~going~~express ~~concern.~~an Asopinion ~~discussed~~on ~~in Note 1 to~~ the Company’s financial statements, ~~Algae~~based ~~Dynamics~~on ~~Corp~~our audits.’s ~~operating~~We ~~losses,~~are ~~negative~~a ~~working~~public ~~capital~~accounting ~~and~~firm anregistered ~~accumulated deficit~~with asthe atPublic ~~March~~Company Accounting ~~31,~~Oversight ~~2017~~Board ~~raise~~(United ~~substantial~~States) ~~doubt~~(PCAOB) ~~about~~and ~~its~~are ~~ability~~required to ~~continue~~be asindependent awith ~~going~~respect ~~concern.~~to ~~The~~the ~~financial~~Company ~~statements~~in accordance dowith ~~not~~the ~~include~~U.S. ~~any~~federal ~~adjustments~~securities ~~that~~laws ~~might~~and ~~result~~the ~~from~~applicable ~~the~~rules ~~outcome~~and regulations of ~~this~~the ~~uncertainty~~Securities and Exchange Commission and the PCAOB.

~~UHY~~We conducted ~~McGOVERN~~our ~~HURLEY~~audits ~~LLP~~in ~~Chartered~~accordance ~~Professional~~with ~~Accountants~~the ~~Licensed~~standards ~~Public~~of ~~Accountants~~the ~~Toronto~~PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, ~~Canada~~whether ~~August~~due 11to error or fraud. The Company is not required to have, ~~2017~~nor were we engaged to perform, an audit of its internal control over financial reporting. As part of our audits, we are required to obtain an understanding of internal control over financial reporting, but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion.

43Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion.

The accompanying financial statements have been prepared assuming that Algae Dynamics Corp. will continue as a going concern. As discussed in Note 1 to the financial statements, Algae Dynamics Corp.’s operating losses, negative working capital and an accumulated deficit as at March 31, 2018 raise substantial doubt about its ability to continue as a going concern. The financial statements do not include any adjustments that might result from the outcome of this uncertainty.

We have served as the Company’s auditor since 2013.

	UHY McGovern Hurley, LLP

	Chartered Professional Accountants
	Licensed Public Accountants

Toronto, Ontario

January 16, 2019

ALGAE DYNAMICS CORP.

Balance Sheets

(Stated in Canadian Dollars)

	As at March 31,			As at March 31,
	2017			2016
	2018			2017
ASSETS
Current Assets
Cash	$	878		$	~~173~~87
Prepaid expenses		3225,~~878~~311			1432,~~752~~878
Amounts receivable from officer (Note 13)		-			21,064
Amounts receivable, net		1,380			11,963
Amounts receivable, net		11,963			8,002
Advances to shareholders and related parties (Note 13)		51,499			-
Total Current Assets		4478,~~928~~198			4344,~~991~~928
Equipment and leasehold improvements, net (Note 4)		4732,~~828~~121			6547,~~252~~828
Total Assets	$	92110,~~756~~319		$	~~109~~92,~~243~~756
LIABILITIES
Current Liabilities
Accounts payable and accrued liabilities (Note 13)	$	~~286~~584,~~792~~522		$	~~397~~286,~~878~~792
Advances from shareholders and related parties (Note 6)		~~22,347~~-			~~383~~22,~~990~~347
Promissory Note (Note 8a)		16,456			-
Promissory note (Note 8a)		-			16,456
Term loan (Note 7)		4852,~~894~~000			-48,894
Convertible Note (Note 8b)		26,076			-
Convertible notes (Note 8)		101,579			26,076
Derivative liability (Note 9)		~~260~~118,~~677~~676			-260,677
Warrant liability (Note 10b)		~~236~~91,~~200~~474			27236,~~479~~200
Total Current Liabilities		~~897~~948,~~442~~251			~~809~~897,~~347~~442
Going Concern (Note 1)
Commitments and Contingencies (Note 12)
STOCKHOLDERS' (DEFICIENCY)
STOCKHOLDERS’ (DEFICIENCY)
Common stock (Note 10a), no par value, unlimited amount authorized, 13,337,521 issued and outstanding as of March 31, 2017, (March 31, 2016 - 9,701,051)		4,313,931			1,466,352
Common stock (Note 10a), no par value, unlimited amount authorized, 16,600,435 issued and outstanding as of March 31, 2018, (March 31, 2017 - 13,337,521)		4,585,877			4,313,931
Additional paid in capital (Note 10c)		1,016,324			1,216,963
Additional paid in capital (Notes 10b and 10c)		1,631,025			1,016,324
Equity to be issued (Note 10a)		-165,074			~~339,949~~-
Accumulated deficit		(67,~~134~~219,~~941~~908	)		(36,~~723~~134,~~368~~941	)
Total Stockholders' (Deficiency)		(804,686	)		(700,104	)
Total Stockholders’ (Deficiency)		(837,932	)		(804,686	)
Total Liabilities and Stockholders' (Deficiency)	$	92,756		$	109,243
Total Liabilities and Stockholders’ (Deficiency)	$	110,319		$	92,756

These financial statements are approved by the Directors:

~~Signed~~signed “Cameron McDonald” ~~Signed~~signed “Blair Mullin” Director Director

The accompanying notes are an integral part of these financial statements

4442

ALGAE DYNAMICS CORP.

Statements of Operations

(Stated in Canadian Dollars)

	For the			For the
	Year Ended			Year Ended
	March 31, 2017			March 31, 2016
	March 31,			March 31,
	2018			2017
OPERATING EXPENSES
Accretion expenses (Notes 7 and 8)	$	62247,~~033~~612		$	1262,~~563~~033
Application and membership fees		1210,~~646~~220			2312,~~394~~646
Amortization expense (Note 4)		1715,~~424~~707			2017,~~198~~424
Bad debt expense (Note 13)		17,656			-
Bad debt (recovery) (Note 13)		(8,300	)		17,656
Business development		73,~~715~~810			137,~~901~~715
Convertible debt financing (Notes 8 and 9)		113,225			-
Convertible debt financing cost (Note 8 and 9)		-			113,225
Fair value change in derivative liability (Note 9)		7(264,~~359~~072	)		-7,359
Foreign exchange loss		852			1,616
Foreign exchange		3,301			852
Impairment of intangible assets (Note 5)		-			15,970
Interest		85,904			4,611
Interest		4,611			26,792
Loss on extinguishment of debt (Notes 6, 10a and 13)		-			548,711
Loss on settlement of debt (Notes 6, 10a and 13)		548,711			61,052
Management fees (recovery)		(8,125	)		8,125
Management fees		8,125			-
Occupancy costs		34,369			32,201
Occupancy costs		32,201			32,012
Office and general		6,425			7,102
Office and general		7,102			7,426
Professional fees (Notes 10a, 10b, 10c and 14e)		141,992			1,193,944
Professional fees (Notes 10a, 10b, 10c and 14e)		1,193,944			859,993
Research and development		262,007			7,629
Research and development		7,629			3,184
Stock based compensation (Note 10c)		546,812			515,624
Stock based compensation (Note 10c)		515,624			808,972
Telephone and internet services		11,933			13,304
Telephone and internet services		13,304			14,511
Travel		11,482			15,500
Travel		15,500			19,626
Total Operating Expenses		1,101,077			2,585,661
Total Operating Expenses		2,585,661			1,921,210
Net loss before income taxes		1,101,077			2,585,661
Net loss before income taxes		2,585,661			1,921,210
Income tax		-			-
Deferred income tax recovery		-			(7,215	)
Net Loss for the Year	$	1,101,077		$	2,585,661
Net Loss for the Year	$	2,585,661		$	1,913,995
Net loss per common share - basic and diluted	$	0.08		$	0.23
Net loss per common share - basic and diluted	$	0.23		$	0.20
Weighted average common shares outstanding - basic and diluted		14,277,143			11,324,138
Weighted average common shares outstanding - basic and diluted		11,324,138			9,389,903

The accompanying notes are an integral part of these financial statements

4543

ALGAE DYNAMICS CORP.

Statements of Stockholders'’ Equity (Deficiency)

(Stated in Canadian Dollars)

	Common			Common			Additional			~~Additional~~
	Shares			Shares			Paid in			~~Paid~~Equity into			~~Equity to~~Accumulated			~~Accumulated~~Stockholders’			~~Stockholders'~~
	Number			Amount			Capital			~~Capital~~be Issued			~~be Issued~~Deficit			~~Deficit~~(Deficiency)			~~(Deficiency)~~
March 31, 2015		9,256,410			542,323						515,114			-			(1,809,373	)		(751,936	)
March 31, 2016		9,701,051		$	1,466,352		$	1,216,963		$	339,949		$	(3,723,368	)	$	(700,104	)
Warrants exercised (Note 10b)		230,500			12,614						-			-			-			12,614
Warrants exercised (Notes 10a and 10b)		84,000			57,639			-			-			-			57,639
Warrant liability valuation transferred on exercise (Note 10b)		-			509,285						-			-			-			509,285
Warrants expired		-			-			(174,088	)		-			174,088			-
Stock options (Note 10c)		-			-						701,849			-			-			701,849
Stock based compensation (Notes 10a and 10c)		720,000			621,697			1,049			(107,122	)		-			515,624
Shares issued for cash (Note 10a)		31,532			48,441						-			-			-			48,441
Options exercised		100,000			58,600			(27,600	)		-			-			31,000
Shares issued for conversion of debt debt (Notes 8 and 10a)		29,609			41,305						-			172,501			-			213,806
Shares issued for conversion of debt (Note 10a)		1,475,305			1,326,650			-			(172,501	)		-			1,154,149
Shares issued as compensation (Note 10a)		153,000			312,384						-			167,448			-			479,832
Shares issued to consultants as compensation for services rendered (Note 10a)		1,257,165			782,993			-			(60,326	)		-			722,667
Net loss for the year		-			-			-			-			-(2,585,661	)		-(2,585,661	)		~~(1,913,995~~	)
March 31, 2016		9,701,051			1,466,352						1,216,983			339,949			(3,723,368	)		(700,104	)
March 31, 2017		13,337,521			4,313,931			1,016,324			-			(6,134,941	)		(804,686	)
Warrants exercised
Warrants expired (Note 10b)		-			-			(16,110	)		-			16,110			-
(Notes 10a and 10b)		84,000			57,639						-			-			-			57,639
Shares cancelled (Notes 10a and 10c)		(600,000	)		(84,000	)					-			-			(84,000	)
Warrants expired		-			-						(174,088)			-			174,088			-
Stock options (Note 10c)								134,960									134,960
Stock based compensation		720,000			621,697						1,049			(107,122	)		-			515,624
Stock based compensation transferred to Deferred Share Units, with the cancellation completed after the year end (Note 10a and 10c)		1,050,000						147,000									147,000
(Notes 10a and 10c)
Deferred Share Units issued (Note 10c)								348,851									348,851
Options exercised		100,000			58,600						(27,600	)		-			-			31,000
Commitment shares issued on convertible note (Note 10a)		200,000			25,245						-						25,245
Shares issued for conversion of debt (Note 10a)		1,475,305			1,326,650									(172,501	)		-			1,154,149
Shares issued for conversion convertible notes (Note 10a)		2,541,781			322,701												322,701
Shares issued to consultants as compensation for services rendered (Note 10a)		1,257,165			782,993						-			(60,326	)		-			722,667
Shares issued to and to be issued to consultants as compensation for services (Note 10a)		71,133			8,000			-			27,185			-			35,185
Net loss for the year		-			-						-			-			(2,585,661	)		(2,585,661	)
Conversion of convertible notes (Note 10a)											137,889						137,889
March 31, 2017		13,337,521		$	4,313,931					$	1,016,324		$	-		$	(6,134,941	)	$	(804,686	)
Net loss for the year		-			-			-			-			(1,101,077	)		(1,101,077	)
March 31, 2018		16,600,435		$	4,585,877		$	1,631,025		$	165,074		$	(7,219,908	)	$	(837,932	)

The accompanying notes are an integral part of these financial statements

4644

ALGAE DYNAMICS CORP.

Statements of Cash Flows

(Stated in Canadian Dollars)

	Year Ended			Year Ended
	March 31, 2017			March 31, 2016
	March 31,			March 31,
	2018			2017
Cash flows from operating activities
Net loss for the period	$	(2,585,661	)	$	(1,913,995	)
Net loss for the year	$	(1,101,077	)	$	(2,585,661	)
Adjustments to reconcile net income to net cash used in operating activities:
Adjustments to reconcile net loss to net cash used in operating activities:
Amortization		1715,~~424~~707			2017,~~198~~424
Stock based compensation (Note 10c)		1929,~~155,982~~943			1,~~353~~155,~~336~~982
Extinguishment of debt		~~544,066~~-			61544,~~052~~066
Impairment of intangible assets		-			15,970
Change in derivative warrant liabilities (Note 9 and 14e)		(264,072	)		(368,957	)
Deferred income tax recovery		-			(7,215	)
Shares issued and to be issued for services (Note 10a)		-			722,668
Change in warrant liability (Note 10b)		(368,957	)		-
Gain on settlement of debt		-			4,643
Shares issued and to be issued for services (Note 10a)		722,668			-
Accretion expense		247,612			62,032
Gain on settlement of debt		4,643
Realized foreign exchange loss		-			-
Accretion expense		62,032			12,563
Convertible debt financing cost		-			102,612
Realized foreign exchange loss		-			3,669
Convertible debt financing		102,612			-
Change in operating assets and liabilities
Prepaid expenses		~~(18~~7,~~126~~567	)		(918,~~233~~126	)
Accounts receivable		17,103			19,851
Amounts receivable		(40,916	)		17,103
Accounts payable		4,269			233,885
Accounts payable and accrued liabilities		232,775			4,269
Net cash flows used in operating activities		~~(341~~27,~~945~~539	)		(~~209~~341,~~919~~945	)
Cash flows from financing activities
Advances from shareholders		~~159~~(22,~~443~~347	)		83159,~~665~~443
Common shares issued		-			48,441
Term loan proceeds		-			40,000
Term loan proceeds		40,000			30,000
Convertible notes issued		128,986			140,099
Convertible notes		140,099			32,288
Convertible notes repaid		(70,482	)
Warrant exercise proceeds		2,317			12,614
Promissory note repaid		(63,775	)
Net cash flows from financing activities		341,859			207,008
Warrant exercise proceeds		-			2,317
Net change in cash		(86	)		(2,911	)
Net cash flows from financing activities		(27,618	)		341,859
Cash position - beginning of year		173			3,084
Net change in cash		(79	)		(86	)
Cash position - end of year	$	87		$	173
Cash position - beginning of year		87			173
Cash position - end of year	$	8		$	87
Supplemental Information:
Income taxes paid	$	-		$	-
Interest paid		-			-
Common shares and shares to be issued, for conversion of debt		3,639,931			208,764
Common shares and shares to be issued,
Common shares to be cancelled		(1,050,000	)		-
issued for conversion of debt					208,764
Common shares issued for debt settlement		1,475,305			-

The accompanying notes are an integral part of these financial statements

4745

Algae Dynamics Corp.

Notes to Financial Statements

(Stated in Canadian Dollars)

March 31, ~~2017~~2018 and ~~2016~~2017

1.)

Nature of the Business and Going Concern

Algae Dynamics Corp. (the “Company”) was incorporated under the Canada Business Corporations Act on October 7, 2008 as Converted Carbon of Canada Corp. On November 19, 2010, the Company amended its Articles of Incorporation to change its name to Converted Carbon Technologies Corp. and a further amendment was approved by the shareholders on August 28, 2014 to change the name to Algae Dynamics Corp.

The Company is conducting research through sponsored research agreements with two universities to support development of health products utilizing cannabis and algae oil. The Company’s planned principal operations are the development and sale of health products, design and development of a facility to extract botanical oils, and design, engineering and manufacturing of a proprietary algae cultivation system for the high-volume production of pure contaminant-free algae biomass.

In May 2016, the Company signed a Letter of Engagement with Midtown Partners & Co, LLC to raise additional equity capital to support the implementation of its business plan; an addendum to this agreement was signed on January 17, 2017. See Note 12

The Company filed a Form S-1 Registration Statement with the U.S Securities and Exchange Commission (SEC) as an initial registration of common shares. The registration was declared effective by the SEC on November 21, 2014. The Company’s stock began trading on September 17, 2015.

The Company’s activities are subject to significant risks and uncertainties, including failing to obtain patents and failing to secure additional funding to operationalize the Company’s current technology before another company develops similar technology.

These financial statements have been prepared on the basis of a going concern, which contemplates the realization of assets and the settlement of liabilities in the normal course of business. The Company is in the development stage and has not yet realized profitable operations and has relied on non-operational sources to fund operations. The Company has suffered recurring losses and additional future losses are anticipated as the Company has not yet been able to generate revenue. In addition, as of March 31, ~~2017~~2018, the Company has a working capital deficiency of $~~852~~870,~~514~~053 (March 31, ~~2016~~2017 - $~~765~~852,~~356~~514) and an accumulated deficit of $67,~~134~~219,~~941~~908 (March 31, ~~2016~~2017 - $36,~~723~~134,~~368~~941). The Company’s ability to continue as a going concern is dependent on successfully executing its business plan, which includes the raising of additional funds. The Company will continue to seek additional forms of debt or equity financing, but it cannot provide assurances that it will be successful in doing so. These circumstances raise substantial doubt as to the ability of the Company to meet its obligations as they come due and accordingly, the appropriateness of the use of accounting principles applicable to a going concern. The accompanying financial statements do not include any adjustments that might be necessary if the Company is unable to continue as a going concern. Such adjustments could be material.

4846

Algae Dynamics Corp.

Notes to Financial Statements

(Stated in Canadian Dollars)

March 31, ~~2017~~2018 and ~~2016~~2017

2.)

Presentation of Financial Statements

Basis of Presentation

~~The~~These financial statements have been prepared in accordance with U.S. Generally Accepted Accounting Principles (“US GAAP”). All adjustments considered necessary for a fair presentation of financial position, results of operations and cash flows ~~as of March 31, 2017~~ have been included.

The Company’s financial statements are prepared using the accrual basis of accounting in accordance with US GAAP and the Company’s functional and reporting currency is the Canadian dollar.

Use of Estimates and Assumptions

The preparation of the financial statements in accordance with US GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual amounts could materially differ from these estimates. The significant areas requiring the use of management estimates are related to provision for doubtful accounts, accrued liabilities, contingencies, the valuation of deferred taxes, stock based compensation, warrants, convertible debt and intangible assets. Although these estimates are based on management’s knowledge of current events and actions management may undertake in the future, actual results may ultimately differ materially from those estimates.

~~3.) Summary of Significant Accounting Policies~~47

Going Concern Consideration

Effective April 1, 2016, the Company adopted ASU 2014-15, Presentation of Financial Statements – Going Concern (Subtopic 205-40), which requires management to evaluate whether there are conditions or events, considered in the aggregate, that raise substantial doubt about the Company’s ability to continue as a going concern within one year after the date the financial statements are issued. Management’s evaluations are based on relevant conditions and events that are known and reasonably to be knowable as of August 11, 2017. Based on the following, management believes that it is probable that management will be unable to meet its obligations as they come due within one year that the financial statements are issued.

Algae Dynamics Corp.

Notes to Financial Statements

(Stated in Canadian Dollars)

March 31, ~~2017~~2018 and ~~2016~~2017

3.) Summary of Significant Accounting Policies ~~(continued)~~

Cash and Cash Equivalents

Cash and cash equivalents include cash on hand, and all highly liquid debt instruments purchased with an original maturity of three months or less. As at March 31, ~~2017~~2018 and ~~2016~~2017, there were no cash equivalents.

Prepaid Expenses

Prepaid expenses consist of services paid, for which the Company has not yet received the benefit.

Equipment and Leasehold Improvements

Equipment and leasehold improvements are stated at cost less accumulated depreciation and accumulated impairment losses. Cost includes expenditures that are directly attributable to the acquisition of the asset. Subsequent costs are included in the asset’s carrying amount or recognized as a separate asset, as appropriate, only when it is probable that future economic benefits associated with the item will flow to the Company and the cost can be measured reliably. The carrying amount of an asset is derecognized when replaced.

Repairs and maintenance costs are charged to the statements of operations, during the year in which they are incurred.

Depreciation is provided for over the estimated useful life of the asset as follows:

Computer equipment	30% on a declining balance
Production equipment	20% on a declining balance

Leasehold improvements are amortized over the term of the lease or useful life of the improvements, whichever is shorter, which is currently 5 years.

Useful lives and residual values are reviewed and adjusted, if appropriate, at the end of each reporting period. An asset’s carrying amount is written down immediately to its recoverable amount if the asset’s carrying amount is greater than its estimated recoverable amount. The cost and accumulated depreciation of assets retired or sold are removed from the respective accounts and any gain or loss is recognized in operations.

5048

Algae Dynamics Corp.

Notes to Financial Statements

(Stated in Canadian Dollars)

March 31, ~~2017~~2018 and ~~2016~~2017

3.)

Summary of Significant Accounting Policies (continued)

Intangible Assets

Intangible assets are comprised of patents. Patents represent capitalized legal costs incurred in connection with applications for patents which have a probable future economic benefit. In-process patents are not amortized. All patents subject to depreciation are amortized on a straight line basis over their estimated useful life. The Company regularly evaluates patents and patent applications for impairment or abandonment, at which point the Company charges the remaining net book value to expenses.

Impairment of Long-Lived Assets

The Company reviews its long-lived assets for impairment whenever events and circumstances indicate that the carrying value of an asset might not be recoverable. An impairment loss, measured as the amount by which the carrying amount exceeds the fair value, is recognized if the carrying amount exceeds estimated undiscounted future cash flows.

Research and Development

Research and development costs include costs directly attributable to the conduct of research and development programs, including the cost of consulting fees, materials, supplies, and the maintenance of research equipment. All costs associated with research and development are expensed as incurred. The approved refundable portion of tax credits are netted against the related expenses. Non-refundable investment tax credits are recorded in the period when reasonable assurance exists that the Company has complied with the terms and conditions required for approval of the tax credit and it is more likely than not that the Company will realize the benefits of these tax credits against the deferred taxes. Refundable investment tax credits are recorded in the period when reasonable assurance exists that the Company has complied with the terms and conditions required for approval of the tax credit and it is more likely than not that the Company will collect it.

Stock-based Compensation

The Company uses the fair value based method of accounting for all its stock-based compensation in accordance with FASB Accounting Standards Codification (“ASC”) ASC 718 “Compensation – Stock Compensation”. The estimated fair value of the options and warrants that are ultimately expected to vest based on performance related conditions, as well as the options and warrants that are expected to vest based on future service, is recorded over the instrument’s requisite service period and charged to stock-based compensation. In determining the amount of options and warrants that are expected to vest, the Company takes into account, voluntary termination behavior as well as trends of actual option and warrant forfeitures. Stock options and warrants which are indexed to a factor which is not a market, performance or service condition, in addition to the Company’s share price, are classified as liabilities and re-measured at each reporting date based on the Black-Scholes option pricing model with a charge to operations, until the date of settlement.

5149

Algae Dynamics Corp.

Notes to Financial Statements

(Stated in Canadian Dollars)

March 31, ~~2017~~2018 and ~~2016~~2017

3.)

Summary of Significant Accounting Policies (continued)

Income Taxes

Income taxes are accounted for under the asset and liability method of accounting for income taxes. Under the asset and liability method, deferred tax liabilities and assets are recognized for the estimated future tax consequences attributable to differences between the amounts reported in the financial statement carrying amounts of existing assets and liabilities and their respective tax bases. Deferred tax assets and liabilities are measured using enacted income tax rates expected to apply when the asset is realized or the liability is settled. The effect of a change in income tax rates on deferred tax liabilities and assets is recognized in income in the period in which the change occurs. Deferred tax assets are recognized to the extent that they are considered more likely than not to be realized.

FASB issued ASC 740-10 “Accounting for Uncertainty in Income Taxes”. ASC 740-10 clarifies the accounting for uncertainty in income taxes recognized in an enterprise’s financial statements. This standard requires a company to determine whether it is more likely than not that a tax position will be sustained upon examination based upon the technical merits of the position. If the more-likely-than-not threshold is met, a company must measure the tax position to determine the amount to recognize in the financial statements.

Fair Value of Financial Instruments

ASC 820 “Fair Value Measurement” defines fair value, establishes a framework for measuring fair value under generally accepted accounting principles and enhances disclosures about fair value measurements. Fair value is defined under ASC 820 as the exchange price that would be received for an asset or paid to transfer a liability (an exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date. Valuation techniques used to measure fair value under ASC 820 must maximize the use of observable inputs and minimize the use of unobservable inputs. The standard describes a fair value hierarchy based on three levels of inputs, of which the first two are considered observable and the last unobservable, that may be used to measure fair value as follows:

Level 1 – unadjusted quoted prices in active markets for identical assets or liabilities;

Level 2 – inputs other than quoted prices that are observable for the asset or liability or indirectly; and

Level 3 – inputs that are not based on observable market data.

The carrying amounts of the Company’s financial instruments including cash, amounts receivable, accounts payable and accrued liabilities, promissory note, term ~~loans~~loan, convertible ~~note~~notes and advances from shareholders and related parties approximate their fair values due to their short-term nature. Management is of the opinion that the Company is not exposed to significant interest, credit or currency risks from these financial instruments.

5250

Algae Dynamics Corp.

Notes to Financial Statements

(Stated in Canadian Dollars)

March 31, ~~2017~~2018 and ~~2016~~2017

3.)

Summary of Significant Accounting Policies (continued)

Fair Value of Financial Instruments (continued)

The Company’s equity-linked financial instruments reflected as warrant liability on the balance sheet represent financial liabilities classified as Level 3 as per ASU 2009-05. As required by the guidance, assets and liabilities are classified in their entirety based on the lowest level of input that is significant to the fair value measurement. The fair values of the warrant liability and derivative liability which are not traded in an active market have been determined using ~~the~~an ~~Black-Scholes~~ option pricing model based on assumptions that are not supported by observable market conditions.

Derivative Financial Instruments

The Company evaluates all of its agreements to determine if the financial instruments have derivatives or contain features that qualify as embedded derivatives. For derivative financial instruments that are accounted for as liabilities, the derivative instrument is initially recorded at its fair value and is then re-valued at each reporting date, with changes in the fair value reported in the statements of operations. For stock-based derivative financial instruments, the Company uses ~~the~~an ~~Black-Scholes~~ option pricing model to value the derivative instruments at inception and on subsequent valuation dates. The classification of derivative instruments, including whether such instruments should be recorded as liabilities or as equity, is evaluated at the end of each reporting period. Derivative instrument liabilities are classified in the balance sheet as current or non-current based on whether or not net-cash settlement of the derivative instrument could be required within 12 months of the balance sheet date.

Foreign Currency Transactions and Translation

Monetary assets and liabilities are translated into Canadian dollars, which is the functional currency of the Company, at the year-end exchange rate, while foreign currency expenses are translated at the exchange rate in effect on the date of the transaction. The resultant gains or losses are included in the statement of operations. Non-monetary items are translated at historical rates.

Loss per Share

Basic loss per share is calculated by dividing the net loss available to common shareholders by the weighted average number of common shares outstanding during the year. Diluted loss per share is calculated using the treasury stock method and reflects the potential dilution of securities by including warrants and contingently issuable shares, if any, in the weighted average number of common shares outstanding for a year, if dilutive. In a loss year, dilutive common shares are excluded from the loss per share calculation as the effect would be anti-dilutive. Accordingly, for the years ended March 31, ~~2017~~2018 and ~~2016~~2017, the basic loss per share was equal to diluted loss per share as there were no dilutive securities.

5351

Algae Dynamics Corp.

Notes to Financial Statements

(Stated in Canadian Dollars)

March 31, ~~2017~~2018 and ~~2016~~2017

3.)

Summary of Significant Accounting Policies (continued)

Comprehensive Income (Loss)

ASC 220 “Comprehensive Income” establishes standards for reporting and display of comprehensive income, its components and accumulated balances. The net loss is equivalent to the comprehensive loss for the periods presented.

New Accounting Pronouncements

ASU No. 2015-17, Income Taxes (Topic 740): Balance Sheet Classification of Deferred Taxes, was issued to simplify the classification of deferred taxes on the balance sheet. The new guidance would require that deferred taxes be classified as non-current assets and liabilities based on the tax paying jurisdiction. Application of the standard, which can be applied prospectively or retrospectively, is required for fiscal years beginning on or after December 15, 2016 and for interim periods within that year. The adoption of the amended guidance ison ~~not~~April ~~expected~~1, to2017 did not have a material impact on the Company’s financial statements.

ASU No. 2016-02, Leases (Topic 842), - On February 25, 2016, the FASB issued a new standard which requires lessees to recognize almost all leases on their balance sheet as a right-of-use asset and a lease liability. The new guidance will require the asset and liability to be initially measured at the present value of the lease payments in the statement of financial position. The new guidance will also require the company to recognize interest expense on the lease liability separately from the amortization of the right-use-asset for finance leases and recognize a single lease cost allocated on a straight-line basis over the lease term for operating leases, in the statement of comprehensive income. The new standard is effective for fiscal years beginning after December 15, 2018, including interim periods within those fiscal years with early application permitted. The Company is currently evaluating this guidance to determine the impact it may have on the Company’s financial statements.

5452

Algae Dynamics Corp.

Notes to Financial Statements

(Stated in Canadian Dollars)

March 31, ~~2017~~2018 and ~~2016~~2017

3.)

Summary of Significant Accounting Policies (continued)

~~ASU No.~~New ~~2016-09,~~Accounting ~~Compensation-Stock~~Pronouncements ~~Compensation~~ (~~Topic 718~~continued): Improvements to Employee Share-Based Payment Accounting. The ASU includes multiple provisions intended to simplify various aspects of the accounting for share-based payments. The areas of simplification in the update involve several aspects of accounting for share-based payment transactions, including the income tax consequences, classification of awards as either equity or liabilities, and classification on the statement of cash flows, however, some of the areas for simplification apply only to non-public entities. This guidance is effective for annual periods beginning after December 15, 2016, and interim periods within those annual periods. Early adoption is permitted for any entity in any interim or annual period, however, certain requirements apply to the early adoption. The guidance is not expected to have a material impact on the Company’s financial statements.

ASU No. 2016-1509, ~~Statement~~Compensation-Stock ofCompensation ~~Cash Flows~~ (Topic ~~230~~718): ~~Classification~~Improvements ofto ~~Certain~~Employee ~~Cash~~Share-Based ~~Receipts~~Payment ~~and Cash Payments~~Accounting. The ASU ~~provides~~includes ~~clarity~~multiple provisions intended to ~~preparers~~simplify onvarious aspects of the ~~treatment~~accounting for share-based payments. The areas of ~~eight~~simplification in ~~specific~~the ~~items~~update ~~within~~involve anseveral ~~entity’s~~aspects of accounting for share-based payment transactions, including the income tax consequences, classification of awards as either equity or liabilities, and classification on the statement of cash flows., ~~The~~however, ~~guidance~~some ~~becomes~~of ~~effective~~the areas for ~~all~~simplification apply only to non-public entities. inThis ~~fiscal~~guidance ~~years~~is effective for annual periods beginning after December 15, ~~2017~~2016, ~~including~~and interim periods ~~therein.~~within ~~Early adoption~~those ofannual ~~the~~periods. The guidance, ~~including~~as ~~within~~adopted anon ~~interim~~April ~~period~~1, is2017, ~~permitted.~~did ~~The guidance is~~ not ~~expected to~~ have a material impact on the Company’s financial statements.

ASU No. ~~2017~~2016-0915, ~~Compensation-Stock~~Statement ~~Compensation~~of Cash Flows (Topic ~~718~~230): ~~Scope~~Classification of ~~Modification~~Certain ~~Accounting.~~Cash ~~The~~Receipts ~~ASU~~and ~~amends~~Cash ~~the~~Payments. ~~scope~~The ofASU ~~modification~~provides ~~accounting~~clarity ~~for~~to ~~share-based~~preparers ~~arrangements and provides guidance~~ on the ~~types~~treatment of ~~changes~~eight tospecific ~~the~~items ~~terms~~within ~~or conditions of share-based payment awards to which~~ an entity’s ~~would~~statement beof ~~required~~cash ~~to apply modification accounting under ASC 718~~flows. The guidance becomes ~~effective~~ effective for ~~annual~~all ~~reporting~~public ~~periods,~~entities ~~including~~in ~~interim~~fiscal ~~periods~~years ~~within those annual reporting periods,~~ beginning after December 15, 2017~~. Early adoption is permitted~~, including ~~adoption in any~~ interim ~~period~~periods therein. The guidance is not expected to have a material impact on the Company’s financial statements.

55ASU No. 2017-09, Compensation-Stock Compensation (Topic 718): Scope of Modification Accounting. The ASU amends the scope of modification accounting for share-based arrangements and provides guidance on the types of changes to the terms or conditions of share-based payment awards to which an entity would be required to apply modification accounting under ASC 718. The guidance becomes effective for annual reporting periods, including interim periods within those annual reporting periods, beginning after December 15, 2017. The guidance is not expected to have a material impact on the Company’s financial statements.

Algae Dynamics Corp.

Notes to Financial Statements

(Stated in Canadian Dollars)

March 31, ~~2017~~2018 and ~~2016~~2017

4.)

Equipment and Leasehold Improvements

	March 31, 2017				March 31, 2016
	March 31, 2018				March 31, 2017
			Accumulated				Accumulated
	Cost		Depreciation		Cost		Depreciation
Computer equipment	$	3,558	$	2,~~530~~838	$	3,558	$	2,~~089~~530
Production equipment		67,367		3542,~~663~~004		67,367		2735,~~738~~663
Leasehold improvements		42,290		2736,~~194~~252		42,290		1827,~~136~~194
Total	$	113,215	$	6581,~~387~~094	$	113,215	$	4765,~~963~~387
Net carrying amount			$	4732,~~828~~121			$	6547,~~252~~828

During the year ended March 31, ~~2017~~2018, the Company recorded total ~~depreciation~~amortization of $1715,~~424~~707 (~~2016~~2017 - $2017,~~198~~424) which was recorded to depreciation expense on the statements of operations.

5.)

Intangible Assets

The Company has patents and patents pending with a cost of $Nil as of March 31, ~~2017~~2018 (~~2016~~2017 – $Nil). During the year ended March 31, ~~2017~~2018, the Company reported an impairment of $Nil (~~2016~~2017 - $~~15,970~~Nil) with respect to its intangible assets.

6.)

Advances from Shareholders and Related Parties

As at March 31, ~~2017~~2018, the Company had received cumulative net working capital advances in the amount of $~~22,347~~Nil (March 31, ~~2016~~2017 - $~~383~~22,~~990~~347) from two shareholders who are also officers and directors of the Company. During the year ended March 31, 2017, the two shareholders converted advances and accounts payable of $265,298 and $255,788 into 1,316,173 common shares of the Company. The common shares were valued at $1,065,152 based upon an estimated fair value of USD$0.60 ($0.81) per share at the time of issuance. The difference between the fair market value of the common shares and the carrying value of the advances from shareholders and the amount included in accounts payable was recorded as a loss on extinguishment of related party debt of $544,066.

During the year ended March 31, ~~2016~~2017, two shareholders converted advances and accounts payable of $75265,~~846~~298 ~~were~~and ~~settled~~$255,788 ~~with~~into 491,~~371~~316,173 common shares toof bethe ~~issued~~Company. The common shares were valued at $1,065,152 based upon an estimated fair value of (USD$10.7260) $20.38 81 per share ~~based~~at on the ~~quoted~~time ~~market~~of ~~value~~issuance. The ~~total~~difference between the fair market value of ~~consideration~~the ~~provided~~common inshares ~~exchange~~and ~~for~~ the ~~extinguishment~~carrying value of ~~debt~~the ~~was~~advances ~~$117,526,~~from ~~which~~the ~~resulted~~shareholders and the amount included in accounts payable was recorded as a loss on extinguishment of related party debt of $41548,~~681,~~711. ~~which~~The ~~was~~advances ~~recorded~~from onshareholders ~~the~~are ~~statement~~unsecured, ofpayable ~~operations~~upon demand and non-interest bearing.

~~The advances from shareholders are unsecured, payable upon demand and non-interest bearing.~~54

Algae Dynamics Corp.

Notes to Financial Statements

(Stated in Canadian Dollars)

March 31, ~~2017~~2018 and ~~2016~~2017

7.)

Term Loan

On May 4, 2016, the Company agreed to a term loan of $40,000 for bridge financing with a relative of one of the officers of the Company. The ~~loan matures on August 28, 2017 and the~~ terms ~~specify~~specified a 30% premium to be paid at that time. The 30% premium is recognized as an expense over the term of the loan and is amortized on the statements of operations. During the year ended March 31, ~~2017~~ 2018, the Company recorded accretion expense of $83,~~894~~106 (~~2016~~2017 - $~~nil~~8,894). The loan was initially scheduled to mature on August 28, 2016 but an extension of three months, followed by a second extension of three months and followed by a further extension to November 30, 2017 was agreed to with the same terms. The unsecured loan has now been extended indefinitely with the same terms until the Company has the appropriate liquidity to repay the initial loan plus the premium on repayment. The loan is non-interest bearing.

On May 6, 2015, the Company agreed to a one year term loan (maturing May 5, 2016) with a family member of an officer. The loan bore interest at 12% per annum paid quarterly. The face value of the loan was $33,000. The carrying value of the loan was recorded net of $3,000 of transaction costs. The term loan plus the accrued interest was settled on December 31, 2015 with 23,094 shares to be issued valued at (USD$1.72) $2.38 per share based on the quoted market value. The total value of consideration provided in exchange for the extinguishment of debt was $54,975, which resulted in a loss on extinguishment of debt of $19,371, which was recorded on the statement of operations for the fiscal year 2016.

8.)

Convertible

The carrying values of our secured convertible notes consist of the following as of March 31, 2018 and 2017 respectively:

Convertible Notes	March 31, 2018			March 31, 2017

USD$50,000 face value convertible note due August 15, 2017	$	-		$	(26,076	)
USD$56,000 face value convertible note due August 18, 2017		-			(16,456	)
USD$50,000 face value convertible notes due June 21, 2018		(51,869	)		-
USD$50,000 face value convertible note due July 25, 2018		(49,710	)		-
	$	(101,579	)	$	(42,532	)

(a) Promissory Note

On February 14, 2017, the Company issued a USD$50,000 ($65,350) face value convertible promissory note, due August 15, 2017 to Salamon Partners LLC (“Salamon”) anfor ~~arm’s~~net ~~length organization~~proceeds ~~for~~of aUSD$47,500, which consisted of the principal amount, net of transaction cost of USD$502,~~000~~500. ~~($65,350)~~The Salamon Note accrues interest at 12% per annum, payable in cash at maturity. ~~The~~However, ~~net~~the ~~proceeds~~principal ~~were~~amount, plus ~~USD$47~~accrued interest,~~500~~ ~~which~~may ~~consisted~~be converted at the option of the holder at any time during the term to maturity into shares of our common stock at a variable conversion price of 65% of market per share subject to adjustment for capital reorganization events and subsequent sales by the ~~principal~~Company ~~amount,~~of ~~net~~shares of ~~transaction~~its ~~cost~~common stock at a price per share below the conversion price of ~~US$2,500~~the Salamon note. The ~~principal~~Salamon ~~amount~~Note ~~becomes~~also ~~due~~embodies oncertain ~~August~~traditional 15default provisions that are linked to credit or interest risks, ~~2017~~such as bankruptcy proceedings, liquidation events and corporate existence. The ~~outstanding~~Company has concluded that the embedded conversion ~~amount~~option ~~may~~is benot ~~prepaid~~indexed atto ~~any~~our ~~time~~stock atdue to the variability in the conversion price and the down-round protection features afforded to the holder as well as the foreign exchange rate fluctuations. Therefore, the embedded conversion option ofis subject to classification in the ~~Company~~financial statements in liabilities at fair value both at inception and subsequently pursuant to ASC 480-10-25-14. On InAugust 15, 2017, the ~~event~~Company ofpaid a ~~prepayment~~total of USD$53,000 ($67,591) which consisted of the ~~penalty~~principal ~~rate~~amount ~~shall~~due beUSD$50,000 ($63,775) ~~assessed~~plus accrued interest USD$3,000 ($3,816). During the year ended March 31, 2018, the Company recorded an accretion expense of $48,499 to as ~~follows:~~discount to the carrying value of the note (2017 - $16,449)

~~i.) if the prepayment occurs within 60 days of the loan issuance, the prepayment penalty will equal twenty-five (25%) of the principal amount prepaid~~55

~~ii.)~~Algae IfDynamics ~~the prepayment occurs within 60 to 90 days of the loan issuance, the prepayment penalty will equal thirty percent (30%) of the principal amount prepaid~~Corp.

~~iii.)~~Notes ~~If the prepayment occurs within 90~~ to ~~120~~Financial ~~days of the loan, the prepayment penalty will equal thirty-five (35%) of the principal amount.~~Statements

(Stated in Canadian Dollars)

March 31, 2018 and 2017

8.)

Convertible (continued)

(b)Securities Purchase Agreement and Convertible Note

On November 18, 2016, the Company issued a USD$56,000 ($76,382) face value secured convertible note, due August 18, 2017 to GHS Investments, LLC (“GHS”) for net proceeds of USD $50,000. The GHS Note is secured and accrues interest at 12% per annum, payable in cash at maturity. However, the principal amount, plus accrued interest, may be converted at the option of the holder at any time during the term to maturity into shares of our common stock at variable conversion price of 62% of market per share subject to adjustment for capital reorganization events and subsequent sales by the Company of shares of its common stock price per share below the conversion price of the GHS note. The GHS Note also embodies certain traditional default provisions that are linked to credit or interest risks, such as bankruptcy proceedings, liquidation events and corporate existence. The Company has concluded that the embedded conversion option is not indexed to our stock due to the variability in the conversion price and the down-round protection features afforded to the holder as well as the foreign exchange rate fluctuations. Therefore, the embedded conversion option is subject to classification in the financial statements in liabilities at fair value both at inception and subsequently pursuant to ASC 480-10-25-14. During the fiscal year, the Company repaid the convertible note in full. During the year ended March 31, 2018, the Company recorded an accretion expense of $45,854 as discount to the carrying value of the note (2017 - $36,689).

(c) Convertible Notes – issued June 21, 2017

On June 21, 2017, the Company commenced a financing of up to USD$500,000 of one-year 12% convertible notes. The notes are convertible at the option of the holder into common shares of the Company at a price of USD$0.25 per share, and are subject to mandatory conversion if the volume-weighted trading price of the common shares is greater than USD$1.00 per share for twenty consecutive trading days so long as the underlying shares may be resold in compliance with the registration requirements of the Securities Act of 1933, as amended. In addition, the Company shall issue pro rata to the purchasers of the first USD$100,000 of notes an aggregate of 200,000 common shares as a commitment fee. On June 21, 2017, the Company issued two notes totaling USD$50,000 ($66,451). The Company also granted 200,000 common share purchase warrants to the holders of the USD$50,000 notes. Each warrant is exercisable into one common share at USD$0.50 for a period of five years. The Company has concluded that the embedded conversion option and warrants are not indexed to our stock due to the down-round protection features afforded to the holder and foreign exchange rate fluctuations. Therefore, the embedded conversion option and warrants are subject to classification in our financial statement in liabilities at fair value both at inception and subsequently pursuant to ASC 480-10-25-14. During the year ended March 31, 2018, the Company recorded an accretion expense of $42,914 as discount to the carrying value of the note (2017 - $Nil).

Subsequent to March 31, 2018, the principal plus accrued interest were converted into common shares (560,000) at a price of USD$0.10 per share. The issuance of subsequent convertible notes (Note 8e) with an exercise price of USD$0.10 per share correspondingly reduced the exercise price for the June 21, 2017, convertible notes issued in accordance with the terms of the convertible notes.

Algae Dynamics Corp.

Notes to Financial Statements

(Stated in Canadian Dollars)

March 31, 2018 and 2017

8.)

Convertible (continued)

(d) Convertible Notes – issued July 25, 2017

On July 25, 2017, the Company added a second one-year 12% convertible note as a continuation of the financing commenced with the convertibles notes on June 21, 2017 (Note 8a). The amount of this convertible note is USD$50,000 ($62,535). The note is convertible at the option of the holder into common shares of the Company at a price of USD$0.25 per share, and is subject to mandatory conversion if the volume-weighted trading price of the common shares is greater than USD$1.00 per share for twenty consecutive trading days so long as the underlying shares may be resold in compliance with the registration requirements of the Securities Act of 1933, as amended. In addition, the Company shall issue pro rata to the purchasers of the first USD$100,000 of notes an aggregate of 200,000 common shares as a commitment fee. The Company also granted 200,000 common share purchase warrants to the holder of the USD$50,000 note. Each warrant is exercisable into one common share at USD$0.50 for a period of five years. The Company has concluded that the embedded conversion option and warrants are not indexed to our stock due to the down-round protection features afforded to the holder and foreign exchange rate fluctuations. Therefore, the embedded conversion option and warrants are subject to classification in the financial statements in liabilities at fair value both at inception and subsequently pursuant to ASC 480-10-25-14. During the year ended March 31, 2018, the Company recorded an accretion expense of $31,030 to amortize the discount to the carrying value of the note (2017 - $Nil).

Subsequent to March 31, 2018, the principals plus accrued interest was converted into common shares (560,000) at a price of USD$0.10 per share. The issuance of subsequent convertible notes (Noe 8e) with an exercise price of USD$0.10 per share correspondingly reduced the exercise price for the July 25, 2017, convertible note issued in accordance with the terms of the convertible note.

(e) Convertible Notes – issued August to November 2017

The Company issued several convertible notes on August 14, 2017 with face value of USD$53,000 ($67,602), September 18, 2017 with face value of USD$10,000 ($12,238), October 27, 2017 with face value of USD$250,000 ($321,850), November 1, 2017 with face value of USD$20,000 ($25,770) and November 13, 2017 with face value of USD$25,000 ($31,833) for a total of USD$358,000 ($459,293). The notes have all matured two months after issuance and converted into a total of 3,639,931 common shares at the conversion rate of USD$0.10 during the year. The Company issue 2,541,781 common shares during the year with the remaining 1,098,150 shares for the October 27, 2017 USD$250,000 convertible note issued subsequent to March 31, 2018 (Note 10a). The Company agreed to issue an additional 159,023 warrants with an exercise price of $0.75 and an expiry of January 2, 2020, in connection with conversions. During the year ended March 31, 2018, the Company recorded an accretion expense of $76,471 as the discount to the carrying value of the notes (2017 - $Nil).

Accounting for the convertible notes

The Company has evaluated the terms and conditions of the convertible notes issued under the guidance of ASC 815. Because the economic characteristics and risks of the equity-linked conversion options are not clearly and closely related to a debt-type host, the conversion features require classification and measurement as derivative financial instruments. The other embedded derivative features were also not considered clearly and closely related to the host debt instruments. Further, these features individually were not afforded the exemption normally available to derivatives indexed to a company’s own stock. Accordingly, the evaluation resulted in the conclusion that this compound derivative financial instrument requires bifurcation and liability classification, at fair value. The compound derivative financial instrument consists of (i) the embedded conversion features and the (ii) down-round protection features. Current standards contemplate that the classification of financial instruments requires evaluation at each report date.

Algae Dynamics Corp.

Notes to Financial Statements

(Stated in Canadian Dollars)

March 31, ~~2017~~2018 and ~~2016~~2017

8.)

Convertible (continued)

(ad) ~~Promissory~~Convertible ~~Note~~Notes (continued)

~~The holder~~Discounts ofon the ~~note~~convertible notes ~~may,~~arise ~~after~~from a(i) ~~period~~the allocation of ~~180~~basis ~~days,~~to atother ~~its~~instruments ~~sole~~issued ~~option~~in the transaction, ~~convert~~(ii) ~~the~~fees ~~outstanding~~paid ~~principal~~directly ~~balance~~to ~~and~~the ~~accrued~~creditor ~~interest~~and of(iii) ~~12%~~initial ~~per~~recognition ~~annum~~at fair value, ~~into~~which ~~the~~is ~~Company’s~~lower ~~common~~than ~~shares~~face atvalue. aThe ~~market~~discount ~~closing~~to ~~bid~~the ~~discount~~carrying value of ~~50%~~the ifconvertible notes ~~converting~~is atbeing ~~less than~~amortized 5as ~~days~~a ofnon-cash interest expense over the ~~average~~term ~~trading~~of ~~volume,~~the ~~60%~~promissory ifnote ~~converting~~using atthe ~~more~~effective ~~than~~interest 5rate method. ~~days~~Amortization of ~~the~~discounts ~~average~~on ~~trading~~the ~~volume~~convertible ~~and~~notes ~~65%~~in ifaccretion ~~converting at~~expense ~~more~~amounted ~~than~~to 10$247,874 ~~days~~during of the ~~average~~year ended ~~trading~~March ~~volume~~31, at2018 ~~maturity~~(2017 - $53,138).

Due to the variable conversion price associated with this promissory note and the fact that the conversion price is denominated in US dollars whereas the functional currency is the Canadian dollar, the Company has determined that the conversion feature is considered a derivative liability. The value of the embedded conversion feature at the date of issuance was estimated to be $135,510 (2016 - $Nil), which was recorded as a derivative liability as of the date of issuance. The debt discount is being amortized over the term of the promissory note.

The Company used the Black-Scholes option pricing model with the following assumptions to estimate the fair value of the derivative liability at the date of issuance:

	February 14, 2017
Stock Price	$	0.27 USD
Risk free rate		0.80	%
Expected volatility		196	%
Conversion/Exercise price	$	0.095 USD
Expected dividend rate		0	%
Expected life (in years)		0.5

The Company’s computation of expected volatility is based on the quoted market close price of the Company’s shares over the period equal to the expected life of the promissory note. The Company’s computation of expected life is calculated using the contractual life.

The discount to the carrying value of the promissory note is being amortized as a non-cash interest expense over the term of the promissory note using the effective interest rate method, at a rate of 213%. During the year ended March 31, 2017, the Company accreted $16,456 (2016 - $Nil) in non-cash accretion expense in connection with the promissory note, which is included in accretion expense on the statements of operations.

Algae Dynamics Corp.

Notes to Financial Statements

(Stated in Canadian Dollars)

March 31, ~~2017~~2018 and ~~2016~~2017

89.) ~~Convertible~~ ~~(continued)~~Derivative Liability

The carrying value of the compound embedded derivative and warrant derivative liabilities are on the balance sheet, with changes in the carrying value being recorded as derivative (bgain)/loss on the statements of operations. The components of the compound embedded ~~Securities~~derivative ~~Purchase~~and ~~Agreement~~warrant derivative liabilities as of March 31, 2018 and ~~Convertible~~March ~~Note~~31, 2017 respectively are:

On November 18, 2016, the Company entered into a securities purchase agreement (the “Purchase Agreement”) with GHS Investments, LLC (“GHS”). The Purchase Agreement provides that, upon the terms and subject to the conditions set forth therein, GHS shall purchase from the Company a senior convertible note with a principal amount of USD$56,500 ($76,382) for a purchase price of USD$50,000 ($67,595).

	March 31, 2018				March 31, 2017
Financing giving rise to derivative financial	Indexed		Fair		Indexed		Fair
instruments	Shares		value		Shares		Value
Compounded embedded derivatives:
Salamon (Note 8a)			$	-		407,020	$	132,712
GHS (Note 8b)				-		339,368		127,965
June 21, 2017 convertible (Note 8c)		780,743		59,490		-		-
July 25, 2017 convertible (Note 8d)		772,757		59,186		-		-

Warrant derivative liabilities:
June 21, 2017 (Note 8c)		200,000		15,423		-		-
July 25, 2017 (Note 8d)		200,000		18,051		-		-
Midtown warrants		900,000		54,000		900,000		222,300
Connectus warrants		50,000		4,000		50,000		13,900
		2,903,500	$	210,150		1,696,388	$	496,607

~~The~~Fair ~~convertible~~Value note matures upon the earlier of successfully raising of at least USD$200,000 or August 18, 2017 and accrues interest at the rate of 10% per annum. The convertible note is convertible following ninety (90) days of the execution of the note, in whole or in part, at GHS’ option into common shares of the Company’s capital stock at a variable conversion price equal to a 38% discount from the lowest trading price in the twenty (20) trading days prior to the day that GHS requests conversion. At no time will GHS be entitled to convert any portion of the convertible note to the extent that after such conversion, GHS (together with its affiliates) would beneficially own more than 4.99% of the outstanding common shares, although GHS can modify this limit to 9.99% of the outstanding common shares.Considerations

~~The~~GAAP ~~convertible~~establishes ~~note includes customary event of default provisions, and provides for~~ a ~~default~~fair ~~interest~~value ~~rate~~hierarchy ofthat ~~20%.~~prioritizes ~~The Company has~~ the ~~right~~inputs ~~at any time prior~~ to ~~May~~valuation ~~18,~~techniques ~~2017~~used to ~~redeem~~measure ~~all,~~fair ~~but~~value. ~~not~~As ~~less than all, of the total outstanding amount then remaining~~presented ~~under~~in the ~~convertible~~tables ~~note~~below, inthis ~~cash~~hierarchy atconsists ~~a price ranging from 125% to 135%~~ of ~~the~~three ~~total~~broad ~~amount of the convertible note then outstanding.~~levels:

Due to the variable conversion price associated with this convertible note, the Company has determined that the conversion feature is considered a derivative liability. The embedded conversion feature at the date of issuance was estimated to be $117,807 (2016 $Nil), which was recorded as a derivative liability as of the date of issuance. The debt discount is being amortized over the term of the convertible note.

	Level 1 valuations:	Quoted prices in active markets for identical assets and liabilities.

	Level 2 valuations:	Quoted prices for similar assets or liabilities in active markets; quoted prices for identical or similar assets or liabilities in markets that are not active; and model-derived valuations whose inputs or significant value drivers are observable.

	Level 3 valuations:	Significant inputs to valuation model are unobservable.

The Company used the Black-Scholes option pricing model with the following assumptions to measure the fair value of the derivative liability at the date of issuance:

	November 18, 2016
Stock Price	$	0.2 USD
Risk free rate		0.67	%
Expected volatility		218	%
Conversion/Exercise price	$	0.099 USD
Expected dividend rate		0	%
Expected term (in years)		0.75

The Company’s computation of expected volatility is based on the market close price of the Company over the period equal to the expected life of the convertible note. The Company’s computation of expected life is calculated using the contractual life.

Algae Dynamics Corp.

Notes to Financial Statements

(Stated in Canadian Dollars)

March 31, ~~2017~~2018 and ~~2016~~2017

89.) ~~Convertible~~ Derivative Liability (continued)

~~(b)~~The ~~Securities~~Company ~~Purchase~~follows ~~Agreement~~the provisions of ASC 820 with respect to our financial instruments. As required by ASC 820, assets and ~~Convertible~~liabilities measured ~~Note~~at ~~(continued)~~fair value are classified in their entirety based on the lowest level of input that is significant to their fair value measurement. The derivative financial instruments which are required to be measured at fair value on a recurring basis under of ASC 815 as of March 31,2018 and 2017 respectively, are all measured at fair value using Level 1 inputs. Level 1 inputs are observable inputs that are supported by market activity.

The ~~discount~~compound toembedded ~~the~~derivative ~~carrying~~and ~~value~~warrants ofwere valued using a binomial-lattice-based valuation model. The lattice-based valuation technique was utilized because it embodies all the ~~convertible~~requisite ~~note~~assumptions is(including ~~being~~the ~~amortized~~underlying asprice, aexercise ~~non~~price, term, volatility, and risk-~~cash~~free interest-rate) ~~expense~~that ~~over~~are ~~the~~necessary ~~term~~to offair ~~the~~value these instruments. For forward contracts that contingently ~~convertible~~require ~~note~~net-cash ~~using~~settlement as the ~~effective~~principal ~~interest~~means ~~rate~~of ~~method~~settlement, atthe aCompany ~~rate~~projects ofand ~~144%~~discounts future cash flows applying probability-weighted to multiple possible outcomes. ~~During~~Estimating fair values of derivative financial instruments requires the ~~year~~development of ~~ended~~significant ~~March~~and 31subjective estimates that may, ~~2017~~and are likely to, change over the ~~Company accreted~~duration ~~$26,076~~of ~~(2016~~the -instrument ~~$Nil)~~with related changes in ~~non~~internal and external market factors. In addition, option-~~cash~~based ~~accretion~~techniques ~~expense~~are inhighly ~~connection~~volatile ~~with~~and sensitive to changes in the ~~convertible~~trading ~~note~~market price of our common stock. Because derivative financial instruments are initially and subsequently carried at fair values, ~~which~~the isincome ~~included~~will reflect the volatility in ~~accretion~~these estimate and assumption changes. The following table sets forth ~~expense~~(i) onthe range of inputs for each significant assumption and (ii) the ~~statements~~equivalent, or averages, of ~~operations.~~each significant assumption as of March 31, 2018:

OnCompound ~~September~~Embedded 2, 2015, the Company entered into a convertible note with an arm’s length third party with a principal amount of USD$25,000 ($32,400). The convertible note matured on September 1, 2016 and accrues interest at the rate of 12% per annum. The convertible note is convertible at any time after six months, in whole or in part, at the holder’s option into common shares of the Company’s capital stock at a variable conversion price equal to a 45% discount from the lowest trading price in the twenty (20) trading days prior to the day that the holder requests conversion. The discount to the carrying value of the convertible note was amortized as a noncash interest expense over the term of the convertible note using the effective interest rate method. During the year ended March 31, 2016, the Company accreted $12,563 (2015 $Nil) in noncash accretion expense in connection with the convertible note, which is included in accretion expense on the statements of operations.Derivative:

The convertible loan plus the accrued interest was converted into 29,609 common shares on February 17, 2016 at a 45% discount to the market price (USD$0.89) $1.23 based on the terms of the convertible note.

	March 31, 2018			March 31, 2017
Stock Price	$	0.09 USD		$	0.23 USD
Risk free rate		2.09	%		1.02	%
Expected volatility		322	%		308	%
Conversion/Exercise price	$	0.07 USD		$	0.15 USD
Expected dividend rate		0	%		0	%
Expected life (in years)		0.27			0.38

Derivative Liability Warrants

	March 31, 2018			March 31, 2017
Stock Price	$	0.09 USD			N/A
Risk free rate		2.56	%		N/A
Expected volatility		228	%		N/A
Conversion/Exercise price	$	0.50 USD			N/A
Expected dividend rate		0	%		N/A
Expected life (in years)		4.28			N/A

Algae Dynamics Corp.

Notes to Financial Statements

(Stated in Canadian Dollars)

March 31, ~~2017~~2018 and ~~2016~~2017

9.) Derivative Liability (continued)

The ~~convertible~~following ~~notes~~table ~~discussed~~represents inthe ~~Note~~Company’s 8derivative ~~have~~liabilities ~~variable~~activity ~~conversion~~for ~~prices~~the ~~which~~years ~~results~~ended inMarch ~~the~~31, ~~conversion~~2018 ~~feature~~and ~~being~~2017 ~~recorded as derivative liabilities.~~respectively:

The fair value of the derivative liabilities are recorded and shown separately under current liabilities. Changes in the fair value of the derivative liability is recorded in the statement of operations.

	March 31,			March 31,
	2018			2017
	Amount			Amount
Embedded conversion feature:
Derivative liabilities balance, beginning of year	$	260,677		$	-
Issuance of derivatives liabilities during the year		113,405			253,318
Change in dervivative liabilities during the year		(282,608	)		(7,359	)
Derivavtive liabilities, end of year	$	91,474		$	260,677

The Company used the Black-Scholes option pricing model with the following weighted average assumptions to estimate the fair value of the derivative liability at March 31, 2017:

	March 31,		March 31,
	2018		2017
	Amount		Amount
Liability warrants
Derivative liabilities balance, beginning of year	$	-	$	-
Issuance of derivative liabilities during the year		41,294		-
Change in derivative liabilities during the year		77,382		-
Derivavtive liabilities, end of year	$	118,676	$	-

	March 31, 2017			March 31, 2016
Stock Price	$	0.23 USD			NA
Risk free rate		0.75	%		NA
Expected volatility		288	%		NA
Conversion/Exercise price	$	0.087 USD			NA
Expected dividend rate		0	%		NA
Expected life (in years)		0.38			NA

The following table represents the Company’s derivative liability activity for the years ended March 31, 2017 and 2016:

	Amount		Amount
	2017		2016
Derivative liabilities balance, beginning of year	$	-	$	-
Issuance of derivative liabilities during the year	$	253,318	$	-
Change in derivative liabilities during the year	$	7,359	$	-
Derivative liabilities balance, end of year	$	260,677	$	-

Algae Dynamics Corp.

Notes to Financial Statements

(Stated in Canadian Dollars)

March 31, ~~2017~~2018 and ~~2016~~2017

10.)

Capital Stock

(a) Common Shares

Authorized

The Company is authorized to issue an unlimited number of common shares with no par value.

Issued and Outstanding

On June 25, 2015, 12,500 common share purchase warrants were exercised at USD$0.04 ($0.048) per warrant for total cash proceeds of USD$500 ($620).

On September 10, 2015, a consultant was issued 50,000 common shares for services rendered in the amount of $67,195, this amount has been recorded as professional fees on the statement of operations.

On November 5, 2015, 31,000 common share purchase warrants were exercised at USD$0.04 ($0.052) per warrant for total cash proceeds of USD$1,240 ($1,632).

On December 18, 2015, 51,600 common share purchase warrants were exercised at USD$0.04 ($0.054) per warrant for total cash proceeds of USD$2,064 ($2,834).

On December 22, 2015, 31,000 common share purchase warrants were exercised at USD$0.04 ($0.056) per warrant for total cash proceeds of USD$1,240 ($1,735).

On December 31, 2015, 48,400 common share purchase warrants were exercised at USD$0.04 ($0.055) per warrant for total cash proceeds of USD$1,936 ($2,683).

Algae Dynamics Corp.

Notes to Financial Statements

(Stated in Canadian Dollars)

March 31, 2017 and 2016

10.) Capital Stock (continued)

(a) Common Shares (continued)

On January 4, 2016, 31,000 common share purchase warrants were exercised at USD$0.04 ($0.056) per warrant for total cash proceeds of USD$1,240 ($1,732).

On February 17, 2016, a convertible loan plus accrued interest was converted into 29,609 common shares at USD$0.89 ($1.23 for total consideration of USD$26,500 ($36,419).

On February 25, 2016, 25,000 common share purchase warrants were exercised at USD$0.04 ($0.056) per warrant for total cash proceeds of USD$1,000 ($1,378).

On May 18, 2016, 44,500 common shares purchase warrants were exercised at USD$0.04 ($0.052) per warrant for total cash proceeds of USD$1,780 ($2,318).

On May 19, 2016, the Company signed a letter of engagement with an agent in connection with proposed placements of up to US$10,000,000 ($13,427,000), which included as part of the fee the issuance of 100,000 common shares as a non-refundable retainer at a value of $101,579 based upon an estimated fair market value of USD$0.78 ($1.02) per share at the time of the agreement (See Note 12). The amount of the retainer has been expensed to professional fees during the year ended March 31, 2017.

63On June 30, 2016, 250,000 common shares were issued to a consulting firm as a portion of the compensation for services initiated on June 24, 2016 at a value of $201,481 based upon an estimated fair market value of USD$0.62 ($0.81) per share at the date of issue. This amount was expensed during the year ended March 31, 2017 as professional fees on the statements of operations. A second issuance of 250,000 common shares was made on October 17, 2016 at a value of $113,225 based upon an estimated fair market value of USD$0.35 ($0.45) per share at the date of issue and the final issuance of 250,000 common shares was made on October 18, 2016 at a value of $125,766 based upon an estimated fair market value of USD$0.38 ($0.50) per share at the date of issue.

Algae Dynamics Corp.

Notes to Financial Statements

(Stated in Canadian Dollars)

March 31, ~~2017~~2018 and ~~2016~~2017

10.)

Capital Stock (continued)

(a) Common Shares (continued)

On December 29, 2016, 1,316,173 shares were issued to two officers and directors as consideration for conversion of shareholder advances and accounts payable. See Note 6.

On January 9, 2017, the Company entered into a three month contract with an investor relations firm. The terms of the contract specified a cash payment of USD$10,000 ($13,427) and 50,000 shares of common shares which were issued on January 10, 2017 at a value of $27,000 ($35,733) based upon an estimated fair market value of USD$0.55 ($0.728) per share. The portion applicable to the 9 days in April 2017 has been recorded as a prepaid expense ($4,916) at March 31, 2017.

64On January 10, 2017, 75,000 stock options were exercised at $0.31 per common share for total proceeds of $23,250. The proceeds were used to settle a debt with the consultant who exercised the stock options.

On March 21, 2017, 50,000 common shares purchase warrants were exercised at $0.053 (USD$0.04) on a cashless basis with 39,500 common shares being issued.

Algae Dynamics Corp.

Notes to Financial Statements

(Stated in Canadian Dollars)

March 31, ~~2017~~2018 and ~~2016~~2017

10.)

Capital Stock (continued)

(a) Common Shares (continued)

OnUnder the terms of convertible notes issued ~~January~~on 10June 21, 2017, 75for USD$50,000 ~~stock~~($66,550), ~~options~~the ~~were~~Company ~~exercised~~agreed atto ~~$0.31~~issue ~~per~~100,000 common ~~share~~shares ~~for~~valued ~~total~~using ~~proceeds~~convertible ofdebt issue date market share price at $2313,~~250~~989 as a commitment fee. The ~~proceeds~~note matured on June 21, 2018 and a total of 560,000 common shares were issued on maturity plus 200,000 purchase warrants were also issued on June 21, 2017. One purchase warrant can be exchanged ~~used~~for toone ~~settle~~common ashare ~~debt~~for ~~with~~USD$0.50 ~~the~~at ~~consultant~~any ~~who~~time ~~exercised~~until ~~the~~June ~~stock~~21, ~~options~~2022.

OnUnder the terms of a convertible note issued ~~March~~on 22July 25, 2017, anfor ~~aggregate~~USD$50,000 of($62,535), 75the Company agreed to issue 100,000 common shares ~~were~~valued ~~issued~~using toconvertible ~~three~~debt issue ~~members~~date ofmarket ~~management~~share price at $11,256 as ~~compensation~~a ~~valued~~commitment atfee. ~~$29~~The note matured on July 25,~~007~~ ~~based~~2018 and a total of 560,000 common ~~upon~~shares anwere ~~estimated~~issued ~~fair~~on ~~market~~maturity ~~value~~plus of200,000 $0purchase warrants were also issued on July 25, 2017.39 (One purchase warrant can be exchanged for one common share for USD$0.~~29)~~50 ~~per~~at ~~share~~any attime ~~the~~until ~~date~~July of25, ~~commitment~~2022.

~~On March~~During ~~21,~~the ~~2017~~year, ~~50,000~~the Company issued 2,541,781 common shares ~~purchase~~for ~~warrants~~the various convertible notes issued and matured (Note 8e). The balance of the shares to be issued for the convertible notes 1,098,150 were ~~exercised~~issued subsequent to March 31, 2018 and booked as shares to be issued as at $0March 31, 2018.~~053~~ ~~(USD~~The Company agreed to issue an additional 159,023 warrants with an exercise price of $0.~~04)~~75 onand aan ~~cashless~~expiry ~~basis~~of ~~with~~January 392,~~500~~ ~~common shares~~2020, ~~being~~in ~~issued~~connection with conversions.

On December 1, 2017, the Company entered into an agreement with 908746 Ontario Inc., for the provision of advisory services for ongoing capital market activities including investor relations. Under the terms of this agreement a total of 71,133 were issued for professional services during 2018.

Equity to be issued

On April 18, 2016, the Company signed an agreement with a consultant pursuant to which it committed to issue 250,000 common shares of the Company as compensation for services to be rendered over a period of 5 months. Two directors and officers of the Company transferred 250,000 of their personal shares to the consultant and as such the Company has agreed to reimburse the directors and officers for these common shares transferred by issuance of common shares from treasury. The commitment was valued at $86,381 based upon an estimated fair market value of USD$0.27 ($0.35) per share at the date of issue and was expensed during year ended March 31, 2017 as professional fees on the statements of operations. On January 10, 2017, the 250,000 replacement shares were issued.

	Common shares to be issued 2017			Value ($) 2017			Common shares to be issued 2016		Value ($) 2016
Balance, opening		146,603			339,949			-		-
Equity to be issued as management compensation								45,000		107,123
Equity to be issued for services		250,000			86,381			29,138		60,325
Equity to be issued for settlement of debt								72,465		172,501
Equity to be issued, issued		(396,603	)		(426,330	)		-		-
Balance, closing		Nil			Nil			146,603		339,949

Algae Dynamics Corp.

Notes to Financial Statements

(Stated in Canadian Dollars)

March 31, ~~2017~~2018 and ~~2016~~2017

10.)

Capital Stock (continued)

(a) Common Shares (continued)

Equity to be issued (continued)

	Common shares to be issued 2018		Value ($) 2018		Common shares to be issued 2017			Value ($) 2017

Balance, opening		-		-		146,603			339,949
Equity to be issued for conversion of convertible notes, Note 10a		1,098,150		137,889
Equity to be issued for services, see Note 12		100,000		27,185		250,000			86,381
Equity to be issued, issued		-		-		(396,603	)		(426,330	)

Balance, closing		1,198,150		165,074		-			-

Equity Purchase Agreement (“EPA”)

On September 10, 2015, the Company entered into the EPA. The holder of the EPA is committed to purchase up to USD$750,000 worth of the Company’s common shares (the “Put Shares”) over the 12-month term of the EPA. The Company paid to the holder of the EPA a commitment fee for entering into the EPA equal to 50,000 restricted common shares of the Company, valued at $67,195, based on the stock price in the most recent private placement as the Company’s shares had not yet begun to trade on a public market. ~~The EPA expired in September 2016~~

~~From~~On ~~time~~June ~~to time over the EPA~~23, commencing on the trading day immediately following the date on which the registration statement covering the resale of the Put Shares (the “Registration Statement”) is declared effective by the Securities and Exchange Commission (the “Commission”)2016, the Company ~~may,~~agreed in ~~its~~conjunction ~~sole~~with ~~discretion,~~RY ~~draw~~Capital ~~upon~~Group, ~~the~~LLC ~~EPA~~and ~~periodically~~GHS ~~during~~Investments, ~~the~~LLC ~~term by the Company’s delivery~~ to ~~the~~assign ~~holder of~~ the EPA, ~~a written notice requiring the holder~~ to ~~purchase a dollar amount in common~~GHS ~~shares~~Investments, LLC (the ~~“Draw Down Notice”~~holder)~~. The shares issuable pursuant to a Draw Down Notice~~, ~~when~~an ~~aggregated~~arm’s ~~with~~length ~~the shares then held by the holder on the date of the draw down may not exceed the lessor of (i) 4~~organization.~~99%~~

ofThe ~~the~~ Company’s ~~outstanding~~has ~~common~~notified ~~shares, (ii) USD$62,500 in any 30 days period or (iii) 100% of~~ the ~~aggregate~~holder ~~trading volume for the 10 trading days immediately preceding the date~~ of the ~~Draw Down Notice without the prior written consent of the holder. The purchase price per common share purchased under the~~ EPA ~~shall~~that ~~equal 65% of~~ the ~~lowest~~facility ~~closing~~will ~~bid~~not ~~for~~be ~~the~~utilized 10and ~~days~~there ~~immediately preceding~~is ~~the~~no ~~date~~cancellation offee ~~the Draw Down Notice. The Registration Statement was filed with the Commission on October 1, 2015 and was~~or ~~declared~~any ~~effective by the Commission on March 3, 2016~~commitments.

On June 23, 2016, the Company agreed in conjunction with RY Capital Group, LLC and GHS Investments, LLC to assign the EPA to GHS Investments, LLC. The changes made to the EPA included increasing the share purchase price per common share to 80% from 65% of the lowest closing bid for the 10 trading days immediately preceding the date of the draw down notice, increasing the upper limit on individual draws to USD$75,000 from USD$62,500 and including a true-up feature whereby if the lowest volume-weighted average price (“VWAP”) for the ten trading days following a draw down (the “Trading Period”) is less than 85% of the purchase price of the common shares issued in connection with a draw down, then the Company shall issue such additional common shares as maybe necessary to adjust the purchase price for such draw down to equal the VWAP during the Trading Period.

Algae Dynamics Corp.

Notes to Financial Statements

(Stated in Canadian Dollars)

March 31, ~~2017~~2018 and ~~2016~~2017

10.)

Capital Stock (continued)

(b) Warrants

As at March 31, ~~2017~~2018, the following warrants were outstanding:

										Fair Value at
										March 31, 2017
										March 31, 2018
			Number of		Weighted			Grant Date		of Vested
Expiration Date	Number of Warrants		Number of Warrants Exercisable		Weighted Average Exercise Price			Grant Date Fair Value - Equity		of Vested Warrants – Liability
	Number of		Warrants		Average			Fair Value -		Warrants–
December 31, 2018, ii)		275,000		50,000	$	USD$0.04		$	-	$	4,000
Expiration Date	Warrants		Exercisable		Exercise Price			Equity		Liability
					$	(0.05	)
June 6, 2017*		22,500		22,500	$	1.12		$	16,110	$	-
January 17, 2022, iii)		900,000		900,000	$	USD$0.65			-	$	54,000
December 31, 2017		275,000		50,000	USD $	0.04			-
					$	(0.82	)
					$	(0.05	)			$	13,900
June 21,2022, Note iv)		200,000		200,000	$	USD$0.50			-	$	15,424
January 17, 2022		900,000		900,000	USD $	0.65
					$	0.64
					$	(0.87	)			$	222,300
July 25, 2022, v)		200,000		200,000	$	USD$0.50			-	$	18,050
		1,197,500		972,500	$	0.68		$	16,110	$	236,200
					$	0.64
		1,575,000		1,350,000	$	0.64		$	-	$	91,474

* Expired unexercised subsequent to the year-ended March 31, 2017.

i)	During the year ended March 31, 2015, the Company issued 27,500 warrants of the Company valued at $19,290 for services rendered of which 22,500 warrants were granted to an officer of the Company. Each warrant entitled the holder to purchase one common share at an exercise price of $1.12 for a period ranging from 2.15 to 3 years after the date of issuance. The fair value of the warrants at the date of grant of $19,290 was estimated using the Black-Scholes option pricing model, based on the following weighted average assumptions: expected dividend yield of 0%; risk free interest rate of 1.14%; expected volatility of 182%; and expected term of 2.85 years. The warrants were not exercised by the June 6, 2017 expiry date.

ii)	In connection with a consulting agreement with Connectus, Inc. (see Note 12), the Company granted 625,000 common share purchase warrants with each warrant entitling the grantee to acquire one common share in the capital of the Company at an exercise price of USD$0.04 ($0.054) at any time prior to April 1, 2017. Of the warrants granted, 300,000 vested on September 3, 2014 with the unvested portion vesting pro-rata for each USD$250,000 ($335,675) raised in an offering, fully vesting upon USD$1,500,000 ($2,014,050) being raised. The fair value of the 625,000 warrants at the date of grant of $500,000 was estimated using the Black-Scholes option pricing model, based on the following assumptions: expected dividend yield of 0%; expected volatility of 159%; risk free interest rate of 1.25%; and expected term of 3 years. On December 27, 2016, the Company extended the agreement and the expiry date of the warrants to December 31, 2017. On January 23, 2017, the Company approved the vesting of 100,000 warrants of which 50,000 were exercised on March 21, 2017. This leaves a balance of 275,000 warrants remaining under the contract of which 50,000 were exerciseable at March 31, 2018 and March 31, 2017. The Company approved a further extension to the agreement to December 31, 2018, with the vested warrants being extended to March 31, 2019. The fair value of $4,000 of the warrants was estimated at March 31, 2018 using the Black-Scholes model, based on the following assumptions: expected dividend yield of 0%; risk free interest rate of 1.44%; expected volatility of 154%; and expected term of 2.72 years.

During the year ended March 31, 2015, the Company issued 27,500 warrants of the Company valued at $19,290 for services rendered of which 22,500 warrants were granted to an officer of the Company. Each warrant entitled the holder to purchase one common share at an exercise price of $1.12 for a period ranging from 2.15 to 3 years after the date of issuance. The fair value of the warrants at the date of grant of $19,290 was estimated using the Black-Scholes option pricing model, based on the following weighted average assumptions: expected dividend yield of 0%; risk free interest rate of 1.14%; expected volatility of 182%; and expected term of 2.85 years. The warrants were not exercised by the June 6, 2017 expiry date.

ii)

In connection with a consulting agreement with Connectus, Inc. (see Note 12), the Company granted 625,000 common share purchase warrants with each warrant entitling the grantee to acquire one common share in the capital of the Company at an exercise price of USD$0.04 ($0.054) at any time prior to April 1, 2017. Of the warrants granted, 300,000 vested on September 3, 2014 with the unvested portion vesting pro-rata for each USD$250,000 ($335,675) raised in an offering, fully vesting upon USD$1,500,000 ($2,014,050) being raised. The fair value of the 625,000 warrants at the date of grant of $500,000 was estimated using the Black-Scholes option pricing model, based on the following assumptions: expected dividend yield of 0%; expected volatility of 159%; risk free interest rate of 1.25%; and expected term of 3 years. On December 27, 2016, the Company extended the agreement and the expiry date of the warrants to December 31, 2017. On January 23, 2017, the Company approved the vesting of 100,000 warrants of which 50,000 were exercised on March 21, 2017. This leaves a balance of 275,000 warrants remaining under the contract of which 50,000 were exerciseable at March 31, 2017.

Algae Dynamics Corp.

Notes to Financial Statements

(Stated in Canadian Dollars)

March 31, 2018 and 2017

10.)

Capital Stock (continued)

(b) Warrants (continued)

iii)	During the year ended March 31, 2017, the Company issued 900,000 warrants of the Company valued at $566,100 for services rendered. Each warrant entitled the holder to purchase one common share at an exercise price of USD$$0.65 ($0.82) for a period of 5 years after the date of issuance. The fair value of the warrants at the date of grant of $566,100 was estimated using the Black-Scholes option pricing model, based on the following weighted average assumptions: expected dividend yield of 0%; risk free interest rate of 1.09%; expected volatility of 140%; and expected term of 5 years. The fair value of $54,000 of the warrants was estimated at March 31, 2018 using the Black-Scholes option pricing model, based on the following weighted average assumptions: expected dividend yield of 0%; reisk free interest rate of 1.94%; expected volatility of 126%; and expected term of 3.79 years.

iv)	On June 21, 2017, the Company issued 200,000 warrants of the Company valued at $23,359 (USD$17,550), pursuant to the financing described in Note 8(c). Each warrant entitles the holder to purchase one common share at an issue price of USD$0.50 for a period of 5 years after the date of issuance. The fair value of the warrants at the date of grant of $23,359 was estimated using the binomial-lattice-based valuation model, based on the following weighted average assumptions: stock price of USD$0.11; expected dividend yield of 0%; risk free interest rate of 1.28%; expected volatility of 223%; and expected term of 5 years. See valuation and assumptions as at March 31, 2018 in Note 9.

v)	On July 25, 2017, the Company issued 200,000 warrants of the Company valued at $17,935 (USD$14,340), pursuant to the financing described in Note 8(d). Each warrant entitles the holder to purchase one common share at an issue price of USD$0.50 for a period of 5 years after the date of issuance. The fair value of the warrants at the date of grant of $17,935 was estimated using the binomial-lattice-based valuation model, based on the following weighted average assumptions: stock price of USD$0.11; expected dividend yield of 0%; risk free interest rate of 1.90%; expected volatility of 226%; and expected term of 5 years. See valuation and assumption as at March 31, 2018 in Note 9.

Algae Dynamics Corp.

Notes to Financial Statements

(Stated in Canadian Dollars)

March 31, ~~2017~~2018 and ~~2016~~2017

10.)

Capital Stock (continued)

(b) Warrants (continued)

~~iii)~~ASC 815 ~~During~~“Derivatives ~~the~~and ~~year~~Hedging” ~~ended~~indicates ~~March~~that ~~31,~~warrants ~~2017,~~with ~~the~~exercise ~~Company~~prices ~~issued~~denominated ~~900,000~~in ~~warrants~~a ofcurrency ~~the~~other ~~Company~~than ~~valued~~an entity’s atfunctional ~~$566,100~~currency ~~for~~should ~~services~~not ~~rendered.~~be ~~Each~~classified ~~warrant~~as ~~entitled~~equity. ~~the~~As ~~holder~~a toresult, ~~purchase~~warrants ~~one~~with ~~common~~a ~~share~~USD ~~at an~~ exercise price ofhave ~~USD$0.65~~been treated ~~($0.87)~~as ~~for~~derivatives aand ~~period~~recorded ofas 5liabilities ~~years~~carried ~~after~~at ~~the~~their ~~date~~estimated ~~of issuance. The~~ fair value ~~of the warrants at the date of grant of $566~~,~~100~~ ~~was~~with ~~estimated using the Black~~period-~~Scholes~~to-period ~~option~~changes ~~pricing~~in ~~model, based on~~ the fair ~~following~~value ~~weighted~~recorded ~~average~~as ~~assumptions:~~a ~~expected~~gain ~~dividend~~or ~~yield~~loss ofin ~~0%;~~the ~~risk~~statements ~~free interest rate~~ of 1operations.~~09%; expected volatility of 140%; and expected term of 5 years.~~

~~For~~The ~~the~~continuity ~~year~~of ~~ended March 31, 2017, the Company recorded $633,000 (2016 - $Nil) as compensation expense for~~ warrants ~~issued to a consultant~~ for ~~services, plus a market adjustment for~~ the ~~year~~years ended March 31, ~~2017~~2018 ofand ~~$368,957~~2017 ~~(2016~~is ~~- $171,655). This expense was recorded~~ as ~~professional fees on the statement of operations.~~follows:

ASC 815 “Derivatives and Hedging” indicates that warrants with exercise prices denominated in a currency other than an entity’s functional currency should not be classified as equity. As a result, warrants with a USD exercise price have been treated as derivatives and recorded as liabilities carried at their fair value, with period-to-period changes in the fair value recorded as a gain or loss in the statements of operations.

	Number			Weighted Average
	of Warrants			Exercise Price
Balance, March 31, 2017		1,197,500		$	0.68
Issued		400,000		$	0.64
Expired, unexercised		(22,500	)	$	1.12
Balance, March 31, 2018		1,575,000		$	0.64

~~The continuity~~As at March 31, 2018, the fair value of the 1,575,000 (2017 – 1,197,500) warrants ~~for~~exercisable ~~the~~in ~~years~~US ~~ended~~dollars ~~March~~was 31$109,475 (2017 ~~and~~- ~~2016~~$298,700) iswhich aswas ~~follows:~~estimated using the option pricing models based on the following assumptions mentioned in Note 10 ii) to v).

	Number			Weighted Average
	of Warrants			Exercise Price
Balance, March 31, 2015		940,083		$	0.63
Exercised		(230,500	)	$	0.05
Balance, March 31, 2016		709,583			1.06
Issued		900,000		$	0.86
Exercised		(94,500	)	$	0.05
Expired, unexercised		(317,583	)	$	2.23
Balance, March 31, 2017		1,197,500		$	0.68

Of this amount, $91,474 (March 31, 2017 - $236,000) was reflected as a liability as at March 31, 2018, representing the percentage of the fair value of the warrants that is equal to the percentage of the requisite service that has been rendered at March 31, 2018.

The warrant liability is classified as Level 3 within the fair value hierarchy (See Note 14). The Company’s computation of expected volatility during the years ended March 31, 2018 and 2017 is based on the market close price of comparable public entities over the period equal to the expected life of the warrants. The Company’s computation of expected life is calculated using the contractual life.

Algae Dynamics Corp.

Notes to Financial Statements

(Stated in Canadian Dollars)

March 31, ~~2017~~2018 and ~~2016~~2017

10.)

Capital Stock (continued)

(b) Warrants (continued)

As at March 31, 2017, the fair value of the 1,175,000 (2016 – 381,700) warrants exercisable in US dollars was $298,700 (2016 - $222,803) which was estimated using the Black-Scholes option pricing model based on the following weighted average assumptions:

	March 31, 2017			March 31, 2016
Expected dividend yield		0	%		0	%
Expected volatility		229	%		150	%
Risk free interest rate		1.03	%		0.54	%
Expected term		3.85 years			0.99 years

Of this amount, $236,200 (March 31, 2016 - $27,479) was reflected as a liability as at March 31, 2017, representing the percentage of the fair value of the warrants that is equal to the percentage of the requisite service that has been rendered at March 31, 2017.

The warrant liability is classified as Level 3 within the fair value hierarchy (See Note 14). The Company’s computation of expected volatility during the years ended March 31, 2017 and 2016 is based on the market close price of comparable public entities over the period equal to the expected life of the warrants. The Company’s computation of expected life is calculated using the contractual life.

(c) Stock-based compensation

The Company’s stock-based compensation program (the “Plan”) includes stock options in which some options vest based on continuous service. For those equity awards that vest based on continuous service, compensation expense is recorded over the service period from the date of grant. The maximum number of options that may be issued under the plan is floating at an amount equivalent to 15% of the issued and outstanding common shares, or 2,490,065 as at March 31, 2018 (March 31, 2017 – 2,000,628).

The total number of options outstanding as at March 31, ~~2017~~2018 was ~~695~~2,020,000 (~~2016~~2017 – ~~930~~695,000). The weighted average grant date fair value of the options granted during the year ~~ended~~ March 31, ~~2017~~2018 was $0.3412 (~~2016~~2017 - $20.2134). The maximum number of options that may be issued under the plan is floating at an amount equivalent to 15% of the issued and outstanding common shares, or 2,000,628 as at March 31, 2017 (March 31, 2016 – 1,455,158). The total intrinsic value of options exercised during the years ended March 31, ~~2017~~2018 and ~~2016~~2017 was $~~43,636~~ Nil and $~~nil~~43,636. As of March 31, ~~2017~~2018, approximately $5787,~~000~~711 of total unrecognized compensation expense related to non-vested share options is expected to be recognized over a weighted average period of approximately 1.49 23 years.

On November 10, 2017, 850,000 options were granted to officers and consultants of the Company. The exercise price of these options is $0.15. Of this grant 680,000 options vest as to one-third on the grant date and one-third on each of the first anniversary and the second anniversary of the grant date; 170,000 options vest as to one quarter on the date of grant and one quarter at 90 days, 180 days and 270 days from the grant date. In addition, on January 15, 2018 475,000 options were granted to officers and consultants of the Company. The exercise price of these options is $0.19. Of this grant, 390,000 options vest as to one-third on the grant date and one-third on each of the first anniversary and the second anniversary of the grant date; 85,000 options vest as to one quarter on the date of grant and one quarter at 90 days, 180 days and 270 days from the grant date.

The Company’s computation of expected volatility during the years ended March 31, 2018 and 2017 is based on the market close price of comparable public entities over the period equal to the expected life of the options. The Company’s computation of expected life is calculated using the contractual life.

Algae Dynamics Corp.

Notes to Financial Statements

(Stated in Canadian Dollars)

March 31, ~~2017~~2018 and ~~2016~~2017

10.)

Capital Stock (continued)

(c) Stock-based compensation (continued)

~~During the year ended March 31, 2017, 525,000 options were granted to officers and consultants of the Company.~~ The ~~weighted average exercise~~ ~~price~~following oftable ~~these~~provides ~~options is $0.37. Of this grant, 340,000 options vest as to one-third on~~ the ~~grant~~details ~~date and one-third on each~~ of ~~the~~ ~~first anniversary and~~ the ~~second~~total anniversary of the grant date; 85,000 options vest as to one quarter on the date of grant and one quarter at 90 days, 180 days and 270 days from the grant date and 100,000 options vested immediately. Since stockshare-based ~~compensation~~ ispayments recognized only for those awards that are ultimately expected to vest, the Company has applied an estimated forfeiture rate (based on historical experience and projected employee turnover) to unvested awards for the purpose of calculating compensation expense. ~~The~~during ~~weighted average grant date fair value of these options was estimated as $0.34 using~~ the Black-Scholes option pricing model, based on the following weighted average assumptions: expected dividend yield of 0%; expected volatility of 154%; expected risk free interest rate of 0.76%; and expected term of 5 years. Ofended ~~the~~March ~~stock options issued, 100,000 were issued to a consultant of the Company in settlement of debt of $~~31,~~000.~~ ~~The~~2018 ~~proceeds~~and ~~from the exercise of the stock options ($31,000) were applied against the balance outstanding.~~2017:

During the year ended March 31, 2016, 425,000 options were granted to officers and consultants of the Company. The exercise price of these options is $2.43. Of this grant, 340,000 options vest as to one-third on the grant date and one-third vesting on each of the first anniversary and the second anniversary of the grant date; 85,000 options vest as to one quarter on the date of grant and one quarter vesting at 90 days, 180 days and 270 days from the grant date. Since stock-based compensation is recognized only for those awards that are ultimately expected to vest, the Company has applied an estimated forfeiture rate (based on historical experience and projected employee turnover) to unvested awards for the purpose of calculating compensation expense. The grant date fair value of these options was estimated as $2.21 using the Black-Scholes option pricing model, based on the following assumptions: expected dividend yield of 0%; expected volatility of 157%; expected risk free interest rate of 0.66%; and expected term of 5 years.

	March 31, 2018		March 31, 2017

Employees and directors share-based payments	$	107,154	$	342,257
Non-employee awards		27,807		51,976
Total	$	134,961	$	394,233

The ~~Company’s~~activities ~~computation~~in ~~of expected volatility during the years ended March 31, 2017 and 2016 is based on the market close price of comparable public entities over the period equal to the expected life of the~~ options. ~~The~~outstanding ~~Company’s~~are ~~computation of~~as ~~expected~~noted ~~life is calculated using the contractual life.~~below:

The following table provides the details of the total share-based payments expense during the years ended March 31, 2017 and 2016:

	Number of			Weighted Average
	Options			Exercise Price
Balance, March 31, 2016		930,000		$	2.05
Forfeited		(660,000	)	$	2.09
Granted		525,000		$	0.37
Exercised		(100,000	)	$	0.31
Balance, March 31, 2017		695,000		$	0.99
Granted		1,325,000		$	0.16
Balance, March 31, 2018		2,020,000		$	0.45

	March 31, 2017		March 31, 2016
Employees and directors share-based payments	$	342,257	$	602,521
Non-employee awards		51,976		99,328
Total	$	394,233	$	701,849

Algae Dynamics Corp.

Notes to Financial Statements

(Stated in Canadian Dollars)

March 31, ~~2017~~2018 and ~~2016~~2017

10.)

Capital Stock (continued)

(c) Stock-based compensation (continued)

The ~~activities~~following intable presents information relating to stock options outstanding ~~are~~and asexercisable ~~noted~~at ~~below:~~March 31, 2018.

		Number of			Weighted Average
			Options Outstanding					Options Exercisable
		Options			Exercise Price
						Weighted						Weighted
Balance, March 31, 2015			505,000		$	1.73
						Average				Weighted		Average
Granted			425,000		$	2.43
						Remaining				Average		Remaining
Balance, March 31, 2016			930,000		$	2.05
			Number of			Contractual		Number of		Exercise		Contractual
Forfeited			(660,000	)	$	2.09
Exercise Price			Options			Life (Years)		Options		Price		Life (Years)
Granted			525,000		$	0.37
$	1.73			185,000			1.71		185,000	$	1.73		1.71
Exercised			(100,000	)	$	0.31
$	2.43			85,000			2.77		85,000	$	2.43		2.77
Balance, March 31, 2017			695,000		$	0.99
$	0.38			425,000			3.57		311,667	$	0.38		3.57
$	0.15			850,000			4.58		311,667	$	0.15		4.58
$	0.19			475,000			4.79		151,250	$	0.19		4.79
$	0.45			2,020,000			4.08		1,044,584	$	0.45		3.65

The following table presents information relating to stock options outstanding and exercisable at March 31, 2017.

	Number of Deferred Share Units		Weighted Average Exercise Price
Granted, Deferred Share units		1,050,000	$	0.14
Granted, Deferred Share units		300,000	$	0.19
Granted, Deferred Share units		3,157,740	$	0.11
		4,507,740	$	0.12

		Options Outstanding				Options Exercisable
				Weighted						Weighted
				Average				Weighted		Average
				Remaining				Average		Remaining
Exercise		Number of		Contractual		Number of		Exercise		Contractual
	Price		Options		Life (Years)		Options		Price		Life (Years)
$	1.73		185,000		2.71		185,000	$	1.73		2.71
$	2.43		85,000		3.77		85,000	$	2.43		3.77
$	0.38		425,000		4.58		134,583	$	0.38		4.58
$	0.99		695,000		3.98		404,583	$	1.38		3.60

For the year ended March 31, 2017, the Company recorded $394,233 (2016 - $701,849) as Additional Paid in Capital for options issued to directors, officers and consultants based on continuous service. This expense was recorded as stock based compensation on the statements of operations. For the year ended March 31, 2017, the Company recorded a recovery of $393,184 (2016 -$Nil) as a result of stock options forfeited by management, this amount has been netted against stock based compensation on the statements of operations. Additionally, for the year ended March 31, 2017, the Company recorded $782,993 (2016 - $372,709) as professional fees for services rendered related to common shares issued as retainers to consultants.

Algae Dynamics Corp.

Notes to Financial Statements

(Stated in Canadian Dollars)

March 31, ~~2017~~2018 and ~~2016~~2017

10.)

Capital Stock (continued)

(c) Stock-based compensation (continued)

For the year ended March 31, 2018, the Company recorded $134,961 (2017 - $394,233) as Additional Paid in Capital for options issued to directors, officers and consultants based on continuous service. This expense was recorded as stock based compensation on the statements of operations. For the year ended March 31, 2018, the Company recorded $495,851 (2017 - $Nil) as additional capital for deferred share units issued to officers for continuous service. For the year ended March 31, 2018, the Company recorded a recovery of $84,000 (2017 -$393,184) as a result of shares forfeited by management, this amount has been offset against stock based compensation on the statements of operations. Additionally, for the year ended March 31, 2018, the Company recorded $35,186 (2017 - $782,993) as professional fees for services rendered related to common shares issued or to be issued to consultants.

11.)

Income Taxes

~~The~~Major ~~following~~items ~~table~~causing ~~reconciles~~ the Company’s effective income tax ~~benefit~~rate atto ~~the~~differ ~~Canadian~~from ~~statutory~~the ~~rate~~combined toCanadian ~~income~~federal ~~tax~~and ~~benefit~~provincial ~~at the Company’s~~statutory ~~effective~~rate ~~tax~~of ~~rates~~26.5% were as follows:

	2017			2016
	March 31, 2018			March 31, 2017
Loss before income taxes	$	(2,585,661	)	$	(1,921,210	)
	$			$
Statutory tax rate		26.5	%		26.5	%
(Loss) before income taxes		(1,101,077	)		(2,585,661	)
Expected income tax (recovery)	$	(685,000	)	$	(509,000	)
Expected income tax recovery based on statutory rate		(292,000	)		(685,000	)
Non-deductible items		276,000			143,000
Adjustment to expected income tax benefit:
Change in valuation allowance		409,000			358,785
Stock based compensation					205,000
Total income taxes (recovery)	$	-		$	(7,215	)
Change in derivative and warrant liabilities		(70,000	)		66,000
Expenses not deductible for tax purposes		145,000			5,000
Other		(13,000	)
Change in Benefit of tax assets not recognized		164,000			409,000
Deferred income tax provision (recovery)		-			-

Deferred taxes reflect the tax effects of temporary differences between the carrying amounts of assets and liabilities and their respective tax bases for financial reporting purposes. Deferred tax assets as at March 31, 2017 and 2016 are comprised of the following:

	2017			2016
Net operating loss carry forwards	$	961,000		$	599,000
Equipment and leasehold improvements		40,000			35,000
Convertible notes		43,000			-
Valuation allowance		(1,044,000	)		(634,000	)
Net deferred tax asset	$	-		$	-

The Company has net operating loss carry forwards of approximately $3,626,000 (2016 - $2,262,000) which may be carried forward to apply against future year income for Canadian income tax purposes, subject to final determination by taxing authorities, expiring in the following years:

Expiry
2029	$	65,000
2030		83,000
2031		28,000
2032		81,000
2033		91,000
2034		242,000
2035		323,000
2036		1,349,000
2037		1,364,000
Total	$	3,626,000

The deferred tax assets have not been recognized because at this stage of the Company’s development, it is not determined that future taxable profits will be available against which the Company can utilize such deferred tax assets. Tax years 2010 through 2017 remain open to examination by the taxing jurisdictions to which the Company is subject. The Company has not been notified by any taxing jurisdictions of any proposed or planned examination. The Company has non-refundable tax credits as at March 31, 2017 of $5,449 (2016 - $5,449) which expire in the year 2031.

12.) Commitments and Contingencies

The Company entered into a five year operating lease for office and production facilities. The lease commenced on December 1, 2013 and expires on November 30, 2018. The base monthly rental is $1,390 plus the Company’s estimated portion of property taxes and operating expenses which are currently $847 per month. The future commitments pursuant to this lease arrangement, including property taxes and operating expenses for the fiscal periods ending March 31 are:

2018			$	26,844
2019			$	17,896

For the year ended March 31, 2017, occupancy costs related to this lease were $26,390 (2016 – $26,015).

On March 11, 2014, and as amended on July 18, September 3, 2014, September 5, 2014, December 31, 2015 and again on December 20, 2016, the Company entered into a consulting agreement with Connectus, Inc. (“Connectus”) to assist and advise the Company in matters concerning corporate finance and the Company’s current and proposed financing activities for the period commencing April 1, 2014 and ending December 31, 2014. Pursuant to this agreement, the Company agreed to issue to Connectus, 625,000 warrants of the Company. Each warrant is exercisable at USD$0.04 ($0.054) per share for a period of three years. Of the warrants granted, 300,000 vested on September 3, 2014 with the unvested portion vesting pro-rata for each USD$250,000 ($335,675) raised in an offering, fully vesting upon USD$1,500,000 ($2,014,050) being raised. During the year ended March 31, 2015, the President of Connectus became a director of the Company. On December 31, 2015, the Company extended the contract to December 31, 2016. In consideration of the contract extension, the Company issued 93,000 common shares to Connectus as compensation, which has been recorded as professional fees on the statements of operations during the year ended March 31, 2016. On December 27, 2016, the Company extended the contract and expiry date of the warrants to December 31, 2017. On January 23, 2017 the Company approved the vesting of 100,000 warrants. Connectus assigned the warrants to Apollo Marketing, LLC.

Algae Dynamics Corp.

Notes to Financial Statements

(Stated in Canadian Dollars)

March 31, ~~2017~~2018 and ~~2016~~2017

11.)

Income Taxes (continued)

	March 31, 2018			March 31, 2017
	$			$

Non-capital loss carry-forwards		1,110,000			961,000
Convertible notes, debentures and warrants		56,000			43,000
Equipment		42,000			40,000
Valuation allowance		(1,208,000	)		(1,044,000	)

		-			-

The Company has net operating loss carry forwards of approximately $4,188,000 (2017 - $3,626,000) which may be carried forward to apply against future year income for Canadian income tax purposes, subject to final determination by taxing authorities, expiring in the following years:

Expiry year	Amount
2029	$	65,000
2030		83,000
2031		28,000
2032		81,000
2033		91,000
2034		242,000
2035		323,000
2036		1,349,000
2037		1,364,000
2038		562,000
Total	$	4,188,000

The deferred tax assets have not been recognized because at this stage of the Company’s development, it is not determined that future taxable profits will be available against which the Company can utilize such deferred tax assets. Tax years 2010 through 2018 remain open to examination by the taxing jurisdictions to which the Company is subject. The Company has not been notified by any taxing jurisdictions of any proposed or planned examination. The Company has non-refundable tax credits as at March 31, 2018 of $5,449 (2017 - $5,449) which expire in the year 2031.

Algae Dynamics Corp.

Notes to Financial Statements

(Stated in Canadian Dollars)

March 31, 2018 and 2017

12.)

Commitments and Contingencies

The Company entered into a five year operating lease for office and production facilities. The lease commenced on December 1, 2013 and expired on November 30, 2018. The base monthly rental is $1,390 plus the Company’s estimated portion of property taxes and operating expenses which are currently $847 per month. The Company has agreed to extend the lease to November 30, 2021. Under the terms of the extended lease the base monthly rental is $1,853 in 2019, $1,946 in 2020, and $2,039 in 2021. The future commitments pursuant to this lease arrangement, including property taxes and operating expenses for the fiscal periods ending March 31 are:


2019	$	28,685
2020	$	32,763
2021	$	33,875
2022	$	23,500

For the year ended March 31, 2018, occupancy costs related to this lease were $27,000 (2017 – $26,390).

On March 11, 2014, and as amended on July 18, 2014, September 3, 2014, September 5, 2014, December 31, 2015 and December 20, 2016, the Company entered into a consulting agreement with Connectus, Inc. (“Connectus”) to assist and advise the Company in matters concerning corporate finance and the Company’s current and proposed financing activities for the period commencing April 1, 2014 and ending December 31, 2014. Pursuant to this agreement, the Company agreed to issue to Connectus, 625,000 warrants of the Company. Each warrant is exercisable at USD$0.04 ($0.054) per share for a period of three years. Of the warrants granted, 300,000 vested on September 3, 2014 with the unvested portion vesting pro-rata for each USD$250,000 ($335,675) raised in an offering, fully vesting upon USD$1,500,000 ($2,014,050) being raised. During the year ended March 31, 2015, the President of Connectus became a director of the Company. On December 31, 2015, the Company extended the contract to December 31, 2016. In consideration of the contract extension, the Company issued 93,000 common shares to Connectus as compensation, which has been recorded as professional fees on the statements of operations during the year ended March 31, 2016. On December 27, 2016, the Company extended the contract and expiry date of the warrants to December 31, 2017. On January 23, 2017, the Company approved the vesting of 100,000 warrants. The vested warrants which had not been exercised at December 31, 2018 wewre extended to March 31, 2019. Connectus assigned the warrants to Apollo Marketing, LLC.

Algae Dynamics Corp.

Notes to Financial Statements

(Stated in Canadian Dollars)

March 31, 2018 and 2017

12.)

Commitments and Contingencies (continued)

On April 23, 2014, the Company entered into employment agreements with three officers of the Company effective July 1, 2014. The initial contracts contain minimum aggregate commitments of approximately $427,000 per year for three years and additional contingent payments of up to approximately $600,000 in aggregate upon the occurrence of a change of control. As a triggering event has not taken place, the contingent payments have not been reflected in these financial statements. If employment is terminated by the Company other than upon a change of control or for just cause, the officers will be entitled to an amount equal to twelve months compensation including benefits, which shall be increased by one month for each full year of service completed. The employment agreements were amended whereby any salary from the commencement of the employment agreements has been waived until such a time when the Company is able to raise additional financing. Salaries will be earned based upon the Company’s success in raising future capital in accordance with the following schedule:

Cumulative Funds Raised ¹		Effective Monthly Salary %
$	100,000	10.0%
$	175,000	15.0%
$	250,000	25.0%
$	375,000	37.5%
$	500,000	50.0%
$	750,000	62.5%
$	1,000,000	75.0%
$	1,250,000	87.5%
$	1,500,000	100.0%

1 Cumulative funds raised is inclusive of all sources including without limitation capital raised, grants received, revenue recorded, debt raised, and assets sold. The 1562.5% threshold was reached during the ~~2017~~2018 fiscal year; ~~and~~however, the Company has further deferred any regular commitments for salaries until the Company has sufficient liquidity to sustain salary payments on an ongoing basis. The Board will on a periodic basis as funds are available make non regular payments. For the year ended March 31, ~~2017~~2018 ano ~~total~~salary ofcommitments ~~$8,125~~were ~~was~~ accrued ~~and~~or expensed onin the ~~statement~~statements of operations. (2017 - $8,125)

On May 19, 2016, the Company signed a consulting agreement with an agent in connection with proposed placements of up to USD$10,000,000 ($13,427,000) in a combination of equity and or debt of the Company for a term of one year. Consideration payable under the consulting agreement include a non-refundable equity retainer of 100,000 common shares of the Company (see Note 10), a placement fee equal to 8% of the gross purchase price paid for equity of the Company, an administrative fee of 4% of the gross purchase price paid for equity, a placement fee of 4% of the gross purchase price paid for non-convertible debt and warrants to purchase common shares of the Company equal to 8% of the number of shares of common stock issuable by the Company upon exercise or conversion of any and all securities issued at each closing. On January 10, 2017, the Company entered into an addendum to the agreement signed on May 19, 2016 which provided for a grant of 900,000 warrants at an exercise price of USD$0.65 ($0.86) for a period of five years with a cashless exercise option.

73On February 23, 2017, the Company entered into a 3 year sponsored research contract with the University of Waterloo commencing on April 1, 2017. Under the terms of the agreement the Company will contribute $130,000 upon start date of the project, $130,000 on completion of Year 1 and $130,000 on completion of Year 2, plus the Company will make an in-kind contribution valued at $70,000 in each of the 3 years. Any patents initiated by the Company from the sponsored research will be assigned to the Company and in return the Company will pay the researcher $10,000 per patent filed, $40,000 per patent issued by the U.S. patent office, $50,000 per product after the first commercial sale and $50,000 per product one the gross sales exceed $1,000,000. As of March 31, 2018, the Company has made $30,000 payment pursuant to this agreement and as of November 30, 2018 the Company had made a further $100,000 payment pursuant to the terms of this agreement.

Algae Dynamics Corp.

Notes to Financial Statements

(Stated in Canadian Dollars)

March 31, ~~2017~~2018 and ~~2016~~2017

12.)

Commitments and Contingencies (continued)

On ~~February~~March 2313, 2017, the Company entered into a 34 year sponsored research contract with the University of ~~Waterloo~~Western Ontario commencing on April 1, 2017. Under the terms of the ~~agreement~~ agreement the Company will contribute $~~130~~210,000 upon ~~start~~execution ~~date~~ of the ~~project~~agreement, $~~130~~210,000 on completion of Year 1, $210,000 on completion of Year 2 and $~~130~~210,000 on completion of Year 23, plus the Company will make an in-kind contribution valued at $7062,~~000~~ 500 in each of the 34 years. Any patents initiated by the Company from the sponsored research will be assigned to the Company and in return the Company will pay the researcher researcher $10,000 per patent filed, $40,000 per patent issued by the U.S. patent office, $50,000 per product after the first commercial sale and $50,000 per product ~~once~~one the gross sales exceed $1,000,000. As of March 31, ~~2017~~2018, the Company ~~has~~had ~~not~~ made ~~any~~a $80,000 payments pursuant to this agreement. ~~Subsequent~~As toof ~~March~~November 3130, ~~2017~~2018, the ~~University~~Company ofhad ~~Waterloo~~made ~~issued~~additional payments antotaling ~~invoice for~~ $~~130~~230,000 pursuant to the terms of the agreement.

On March 1327, 2017, the Company entered into a 4 1-year ~~sponsored~~agreement ~~research contract~~ with ~~the University of Western Ontario commencing on April 1~~Questrade, ~~2017~~Inc. ~~Under~~an ~~the~~Investment ~~terms~~Dealer ofto ~~the agreement~~provide ~~the~~guidance ~~Company will contribute $210,000 upon execution of the agreement, $210,000~~ on ~~completion of Year 1, $210,000 on~~the ~~completion~~trading of ~~Year 2 and $210,000 on completion of Year 3, plus~~ the Company’s ~~will~~securities ~~make~~and anguidance ~~in-kind~~with ~~contribution~~respect ~~valued~~to atthe ~~$62,500 in~~promotion ~~each~~ of the ~~4 years~~Company. ~~Any~~The ~~patents initiated by the~~ Company ~~from~~shall ~~the~~pay ~~sponsored~~Questrade a ~~research~~monthly ~~will~~fee ~~be assigned to the Company and~~ in ~~return~~ ~~the~~an ~~Company~~amount ~~will~~equal ~~pay~~to ~~the researcher researcher~~ USD$105,~~000~~500 ~~per~~for ~~patent~~consulting ~~filed,~~services ~~$40,000~~rendered ~~per~~each ~~patent~~month ~~issued~~of by the Uterm.S. ~~patent~~The ~~office,~~contract has ~~$50,000~~been ~~per~~cancelled ~~product~~and ~~after~~ the ~~first~~Company ~~commercial~~is ~~sale~~disputing ~~and $50,000 per product once~~ the ~~gross~~amount ~~sales exceed $1,000,000. As~~ of ~~March 31, 2017,~~ the ~~Company~~payment. ~~has~~Questrade ~~not~~filed ~~made~~a ~~any~~statement ~~payments~~of ~~pursuant~~claim toin ~~this agreement. On July 25, 2017,~~ the ~~payment~~amount ~~terms were amended. A payment~~ of $5029,~~000~~941 in ~~was~~small ~~made~~claims oncourt ~~July~~and ~~28,~~the ~~2017.~~matter ~~The~~has ~~remaining~~had ~~payments~~an ~~are~~initial astrial ~~follows:~~date ~~$50,000~~with ~~due~~a onsubsequent ~~September~~date 1,scheduled ~~2017~~for ~~and December 1, 2017; $60,000 due on~~ March 114, ~~2018; $52,500 quarterly starting on April 1, 2018 and ending on January 1, 2021~~2019.

On ~~March~~April 279, 2017, the Company ~~entered~~signed ~~into~~ a ~~1-year~~12 month consulting agreement ~~with~~effective ~~Questrade~~April 15, ~~Inc.~~2017 with an ~~Investment~~arm’s ~~Dealer~~length organization, The Eversull Group, Inc. to provide ~~guidance~~financial onpublic ~~the trading~~relations, ofinvestor, ~~the~~shareholder, ~~Company’s~~press ~~securities~~relations and ~~guidance~~capital ~~with~~search ~~respect~~consulting services. toTerms of the ~~promotion~~agreement ofinclude the ~~Company.~~provision ~~The~~of ~~Company~~100,000 ~~shall~~restricted ~~pay~~shares ~~Questrade~~ annually, a minimum monthly retainer of USD$2,000 plus a 3% introduction fee infor anall ~~amount~~sources ~~equal~~of tofunding ~~USD$5~~introduced by The Eversull Group,~~500~~ ~~for~~Inc. ~~consulting~~and ~~services~~accepted ~~rendered~~by ~~each~~the ~~month~~Company. ofThe Company terminated the ~~term~~agreement.

~~See~~On ~~also~~April ~~Note~~19, 152017, the Company announced plans to form a joint venture corporation with Avanti Rx Analytics Inc. (ARA). The Company would own 96% of the joint venture and ARA would own 4%. As a result of signing the letter of Intent with Bonify on August 10, 2017 (details provided below) the Company will not be proceeding with the joint venture. The plans for this venture were cancelled after the year end.

On May 8, 2017, the Company signed a consulting agreement with Carter, Terry & Company in connection with the proposed raising of capital in a combination of equity and/or debt of the Company for a term of two years. Terms of the agreement include the issuance of 150,000 restricted common shares on signing plus future consideration payable under the consulting agreement, including a placement fee equal to 10% of the gross proceeds raised less than USD$1,000,000 and 8% for gross funds raised in excess of USD$1,000,000, plus the equivalent amount of restricted shares equal to 4% of the capital raised divided by the closing price of the stock on the date of close for a period of two years. This agreement was cancelled in 2018, Quarter 2 and the shares were not issued.

Algae Dynamics Corp.

Notes to Financial Statements

(Stated in Canadian Dollars)

March 31, 2018 and 2017

12.)

Commitments and Contingencies (continued)

On August 8 2017, the Company signed a non-binding Letter of Intent (LOI) with 6779264 Manitoba Ltd. dba Bonify (“Bonify”). Bonify is a licensed producer, pursuant to the Access to Cannabis for Medical Purposes Regulations in Canada. In the LOI, the Company and Bonify have outlined the following:

i)	The purchase and installation of cannabis oil extraction equipment with an estimated cost of $1,450,000 to be jointly agreed upon by the Company and Bonify with the equipment being located in Bonify’s facility. At the end of the agreement, full right and title to the equipment would be assigned to Bonify;

ii)	The processing of cannabis material supplied by Bonify and other licensed producers in the oil extraction facility;

iii)	The supply of cannabis oil and algae omega-3 oils to The University of Waterloo and University of Western Ontario to support the sponsored research agreements that the Company has in place with the two universities;

iv)	The sharing of direct expenses, and, after adjustment for the market value of cannabis material supplied by Bonify and third parties, sharing of revenues from the sale of cannabis oil and algae-cannabis oil products; and

v)	The negotiation of a definitive agreement no later than September 30, 2017. The definitive agreement was not completed.

This letter of intent was subsequently abandoned.

The Company, as the industry partner, is the participant in a Project Grant of up to $400,000 from the Mitacs Accelerate program, that will be delivered directly to Western University through eligible internships. The financial contribution by the Company which is $180,000 for this grant is part of the funding included in the research agreement the Company signed with the university and announced on March 13, 2017. To date, the Company has paid the initial of two installments to Mitacs, with the remaining installments being invoiced by Mitacs to the Company throughout the duration of the project. The balance of the $400,000 award ($220,000) will be provided by Mitacs. The project started on December 1, 2017 and is scheduled to operate for two (2) years. The extent of the announced award from Mitacs of $400,000 to be paid directly to the university by Mitacs is dependent on the funding provided by the Company and the number of interns employed in the project. The commitment by the Company for 2018 – 2019 is $66,000 and 2019 – 2020 is $60,000.

Algae Dynamics Corp.

Notes to Financial Statements

(Stated in Canadian Dollars)

March 31, 2018 and 2017

13.)

Related Party Transactions

Included in accounts payable and accrued liabilities as at March 31, ~~2017~~2018 is $~~8,125~~Nil (~~2016~~2017 - $528,~~030~~125) owing to two directors who are also ~~officers~~ officers and significant shareholders of the Company for unpaid management fees. In December 2016, 1,316,173 common shares were ~~issued~~ issued to the two directors to satisfy the amount of the outstanding debt. See also Notes 6, 10(a), 10(c), and 12.

~~Amounts~~Included ~~receivable~~in ~~from~~advances to shareholders and related parties is an ~~officer~~amount of $60,855 from three officers of the Company as at March 31, 2018 (2017 of- $17,656 ~~(2016 - $21,064~~) ~~is owing from a shareholder~~, who is also a director and officer of the Company for funds advanced under his employment agreement (See Note 12). The amount receivable is unsecured, non-interest bearing, repayable upon demand and $179,~~656~~356 (~~2016~~2017 - $~~Nil~~17,656) was offset by an allowance for doubtful accounts and ~~expensed~~ a recovery of $8,300 is shown as a recovery on the ~~statements~~statement of operations for the year ended March 31, ~~2017~~2018.

Management fees and consulting fees in the amount of $418,875 (~~2015~~2017 - $~~427~~418,~~000~~875) were waived by the officers of the Company during the year ended March 31, ~~2017~~2018.

7478

Algae Dynamics Corp.

Notes to Financial Statements

(Stated in Canadian Dollars)

March 31, ~~2017~~2018 and ~~2016~~2017

14.)

Financial Instruments

(a) Liquidity risk

Liquidity risk is the risk that the Company will not have sufficient cash resources to meet its financial obligations as they come due. The Company’s liquidity and operating results may be adversely affected if its access to the capital market is hindered, whether as a result of a downturn in stock market conditions generally or matters specific to the Company. The Company generates cash flow primarily from its financing activities and advances from shareholders. As at March 31, ~~2017~~2018, the Company had cash of $878 (March 31, ~~2016~~2017 - $~~173~~87) to settle current liabilities of $~~897~~948,~~442~~251 (~~2016~~2017 - $~~809~~897,~~347~~442). All of the Company’s financial ~~liabilities~~ liabilities other than the warrant liability of $~~236~~91,~~200~~474 (~~2016~~2017 - $27236,~~479~~200), the term loan of $4852,~~894~~000 (March 31, ~~2016~~2017 - $~~nil~~48,894), a ~~convertible~~ convertible note of $26101,~~076~~579 (~~2016~~2017 - $~~nil~~26,076) and a promissory note of $~~16,456~~Nil (March 31, ~~2016~~2017 - $~~nil~~16,456) and derivative liability of $~~260~~118,~~677~~ 676 (~~2016~~2017 - $~~Nil~~260,677) have contractual maturities of less than 30 days and are subject to normal trade terms. The Company regularly evaluates its cash position to ensure preservation and security of capital as well as liquidity.

In the normal course of business, management considers various alternatives to ensure that the Company can meet some of its operating cash flow requirements through financing activities, such as private placements of common stock, preferred stock offerings and offerings of debt and convertible debt instruments as well as through merger or acquisition opportunities. Management may also consider strategic alternatives, including strategic investments and divestitures. As future operations may be financed out of funds generated from financing activities, the ability to do so is dependent on, among other factors, the overall state of capital markets and investor appetite for investments in the green technology industry and the Company’s securities in particular. Should the Company elect to satisfy its cash commitments through the issuance of securities, by way of either private placement or public offering or otherwise, there can be no assurance that the efforts to obtain such additional funding will be successful, or achieved on terms favorable to the Company or its existing shareholders. If adequate funds are not available on favorable terms, the Company may have to reduce substantially or eliminate expenditures or obtain funds through other sources such as divestiture or monetization of certain assets or sublicensing (where permitted) of certain rights to certain of the Company’s technologies or products.79

Algae Dynamics Corp.

Notes to Financial Statements

(Stated in Canadian Dollars)

March 31, ~~2017~~2018 and ~~2016~~2017

14.)

Financial Instruments (continued)

(a) Liquidity risk (continued)

(b) Concentration of credit risk

Financial instruments that potentially subject the Company to concentrations of credit risk consist principally of cash deposits. Cash deposits with a major Canadian chartered bank are insured by the Canadian Deposit Insurance Corporation up to $100,000. As at March 31, ~~2017~~2018, the Company held $878 (~~2016~~2017 - $~~173~~87) with a major Canadian chartered bank.

(c) Foreign exchange risk

The Company principally operates within Canada. The Company’s functional currency is the Canadian dollar and major purchases are transacted in Canadian dollars. Management believes the foreign exchange risk derived from currency conversions is negligible and therefore does not hedge its foreign exchange risk.

(d) Interest rate risk

As at March 31, 2018 and March 31, 2017, the Company does not have any non-fixed interest-bearing debt. The Company invests any cash surplus to its operational needs in investment-grade short-term deposit certificates issued by highly rated Canadian banks. The Company periodically assesses the quality of its investments and is satisfied with the credit rating of the bank.

~~(e) Derivative liability – warrant liability~~80

In connection with consulting agreements, the Company granted warrants to purchase up to 1,525,000 common shares of the Company as disclosed in Note 10(b). The warrants have an exercise price of USD$0.04 ($0.054) for Connectus warrants and USD$0.65 ($0.85) for Midtown warrants. The Connectus warrants are exercisable at any time prior to December 31, 2017, and the Midtown warrants are exercisable at any time prior to January 16, 2022. The warrants are accounted for as derivative liabilities because the exercise price is denominated in a currency other than the Company’s functional currency.

	Fair Value at		Fair Value Measurement Using
	March 31, 2017		Level 1		Level 2		Level 3
Derivative liability – Warrants	$	236,200	$	-	$	-	$	236,200

Algae Dynamics Corp.

Notes to Financial Statements

(Stated in Canadian Dollars)

March 31, ~~2017~~2018 and ~~2016~~2017

14.)

Financial Instruments (continued)

~~Derivative~~(e) Derivative liability – ~~warrant~~embedded ~~liability~~derivative ~~(continued)~~and warrant liabilities

~~The table~~In ~~below~~connection ~~sets~~with ~~forth~~consulting aagreements, the ~~summary~~Company ofgranted ~~changes~~warrants into ~~the~~purchase ~~fair~~up ~~value~~to 1,575,000 common shares of the Company’s ~~Level~~as 3disclosed ~~financial~~in ~~liabilities~~Note 10(~~warrant~~b). ~~derivative~~The warrants ~~liability~~have an exercise price of USD$0.04 for Connectus warrants, USD$0.65 ($0.82) for Midtown warrants, USD$0.50 for the ~~years~~investment placed ~~ended~~in ~~March~~June 2017 (Note 8d) and USD$0.50 for the investment placed in July 2017 (Note 8d). The Connectus warrants are exercisable at any time prior to December 31, ~~2017~~2018, the Midtown warrants are exercisable at any time prior to January 16, 2022, the warrants for the investment undertaken in June are exerciseable prior to June 21, 2022 and ~~March~~for 31the investment undertaken in July are exerciseable prior to July 25, ~~2016:~~2022. The warrants are accounted for as derivative liabilities because the exercise price is denominated in a currency other than the Company’s functional currency.

	Year ended March 31, 2017			Year ended March 31,2016
	Fair Value at			Fair Value Measurement Using
Balance at beginning of year	$	27,479		$	364,878
	March 31, 2018			Level 1			Level 2		Level 3
Derivative instruments granted or vested		633,000
Derivative liability – Warrants	$	91,474		$	-		$	-	$	91,474
Derivative instruments exercised		(55,321	)		(509,054	)
Change in fair market value, recognized in operations as professional fees		(368,958	)		171,655
Balance at end of year	$	236,200		$	27,479

~~These~~The ~~instruments~~table ~~were~~below ~~valued~~sets ~~using~~forth ~~pricing models that incorporate the price of~~ a ~~share~~summary of ~~common~~changes ~~stock,~~in ~~expected volatility, risk free rate, expected dividend rate and expected estimated life. The Company estimated~~ the fair value of the ~~warrants~~Company’s ~~using~~Level ~~the~~3 ~~Black-Scholes model.~~financial ~~There were no transfers of assets or~~ liabilities ~~between~~(warrant ~~Level~~and derivative 1,liability) ~~Level~~for ~~2, or Level 3 during~~ the years ended March 31, ~~2017~~ 2018 and March 31, ~~2016.~~2017:

The following are the key weighted average assumptions used in connection with the estimation of fair value as at March 31, 2017:

	Year ended March 31, 2018			Year ended March 31,2017
Balance at beginning of year	$	236,200		$	27,479
Derivative instruments granted or vested		41,294			633,000
Derivative instruments exercised		-			(55,321	)
Change in fair market value, recognized in operations as an expenditure		(186,020	)		(368,958	)
Balance at end of year	$	91,474		$	236,200

	March 31, 2017			March 31, 2016
Number of shares underlying the warrants		1,175,000			381,700
Fair market value of the stock	$	0.3061		$	0.65
Exercise price		USD$0.5($0.68	)		USD$0.10($0.13	)
Expected volatility		229	%		150	%
Risk-free interest rate		1.03	%		0.54	%
Expected dividend yield		0	%		0	%
Expected warrant life (years)		3.85			0.99

These instruments were valued using pricing models that incorporate the price of a share of common stock, expected volatility, risk free rate, expected dividend rate and expected estimated life. The Company estimated the value of the warrants issued for services using the Black-Scholes model and for convertible debt financings using the binomial-lattice-based valuation model. There were no transfers of assets or liabilities between Level 1, Level 2, or Level 3 during the years ended March 31, 2018 and March 31, 2017.

7781

Algae Dynamics Corp.

Notes to Financial Statements

(Stated in Canadian Dollars)

March 31, ~~2017~~2018 and ~~2016~~2017

(f14.) ~~Derivative~~ ~~liability~~Financial –Instruments ~~conversion options~~(continued)

~~In connection with the Salamon promissory note and the GHS convertible note~~ (~~Note 8(a~~e) ~~and (b)), the Company has determined that~~ ~~the~~Derivative ~~conversion~~liability ~~features~~– ~~are~~embedded ~~considered~~ derivative ~~liabilities due to the variable conversion prices associated with the notes~~ and ~~the~~warrant ~~fact~~liabilities ~~that the conversion price is denominated in US dollars whereas the functional currency of the Company is the Canadian dollar.~~(continued)

	Fair Value at		Fair Value Measurement Using
	March 31, 2017		Level 1		Level 2		Level 3
Derivative liability – conversion options	$	260,677	$	-	$	-	$	260,677

The following are the key weighted average assumptions used in connection with the estimation of fair value as at March 31, 2018:

The table below sets forth a summary of changes in the fair value of the Company’s Level 3 financial liabilities (convertible note derivative liability) for the years ended March 31, 2017 and March 31, 2016:

	March 31, 2018			March 31, 2017
Number of shares underlying the warrants		1,575,000			1,175,000
Fair market value of the stock		USD$0.116		$	0.3061
Exercise price	$	USD$0.50(0.64	)		USD$0.50($0.68	)
Expected volatility		228	%		229	%
Risk-free interest rate		2.56	%		1.03	%
Expected dividend yield		0	%		0	%
Expected warrant life (years)		3.81			3.85

	Year ended March 31, 2017		Year ended March 31, 2016
Balance at beginning of year	$	Nil	$	-
Derivative instruments issued		253,318		-
Change in fair market value, recognized in operations as fair value change in derivative liability		7,359		-
Balance at end of year	$	260,677	$	-

These instruments were valued using pricing models that incorporate the price of a share of common stock, expected volatility, risk free rate, expected dividend rate and expected estimated life. The Company estimated the value of the conversion options using the Black-Scholes model. There were no transfers of assets or liabilities between Level 1, Level 2, or Level 3 during the year ended March 31, 2017 and March 31, 2016.

The following are the key weighted average assumptions used in connection with the estimation of fair value as at March 31, 2017:

	March 31, 2017			March 31, 2016
Stock Price	$	0.23 USD		$	-
Exercise price	$	0.087 USD			-
Expected volatility		188	%		-
Risk-free interest rate		0.75	%		-
Expected dividend yield		0	%		-
Expected term (years)		0.38			-

Algae Dynamics Corp.

Notes to Financial Statements

(Stated in Canadian Dollars)

March 31, ~~2017~~2018 and ~~2016~~2017

15.)

Subsequent Events

OnSubsequent ~~April~~to 9March 31, ~~2017~~2018, the Company ~~signed~~submitted a 12provisional ~~month~~patent ~~consulting~~which ~~agreement~~is ~~effective~~a ~~April~~result ~~15,~~of ~~2017~~the ~~with~~research anbeing ~~arm’s~~undertaken ~~length~~at ~~organization, The~~Western ~~Eversull Group Inc,. to provide financial public relations, investor, shareholder, press relations and capital search consulting~~University ~~services.~~under ~~Terms~~the terms of the ~~agreement~~Sponsored ~~include~~Research ~~the~~Agreement ~~provision~~with ofthe ~~100,000~~university. ~~restricted~~The ~~shares~~provisional ~~annually,~~patent ahas ~~minimum~~been ~~monthly~~assigned ~~retainer~~to ofthe ~~USD$~~Company. ~~2,000~~The ~~plus~~provisional apatent 3%is ~~introduction~~applicable ~~fee~~to ~~for~~the ~~all~~use ~~sources~~ of ~~funding~~botanical ~~introduced~~oils byin ~~The~~conjunction ~~Eversull~~with ~~Group~~cannabis ~~Inc.~~oils ~~and~~for ~~accepted~~medical ~~by the Company~~purposes.

OnThe ~~April 19, 2017, the~~ Company ~~announced~~has ~~the~~signed ~~formation of~~ a ~~joint~~supply ~~venture~~agreement ~~corporation~~for ~~with~~the ~~Avanti~~supply Rxof ~~Analytics~~cannabis ~~Inc.~~flower ~~(ARA)~~for ~~called ADC~~medical ~~Biomedical Corp (BIO)~~purposes. ~~The~~This ~~Company~~supply ~~would~~agreement ~~own 96% of the joint venture and ARA would own 4%. It~~ is ~~the~~in ~~intention of the joint~~compliance ~~venture~~with ~~for BIO to be~~ the ~~preferred purchaser from ARA of all BIO’s and the Company’s products containing algae, hemp oil and~~ cannabis ~~extracted~~regulations ~~oils.~~established ~~The~~by ~~term~~Health ~~of the agreement will continue for a period of 3 years~~Canada.

OnThe ~~May 8, 2017, the~~ Company ~~signed~~has engaged a ~~consulting~~consultant ~~agreement~~to ~~with~~assist ~~Carter, Terry & Company in connection~~ with ~~the~~an ~~proposed~~application ~~raising of~~to ~~capital~~Health inCanada ato ~~combination~~obtain ~~of equity and/or debt of the Company for~~ a ~~term~~license ~~of two years. Consideration payable under the consulting agreement includes a non-refundable equity retainer of 150,000 restricted shares of the Company, a placement fee equal~~ to ~~10% of~~undertake the ~~gross proceeds raised less than USD$1,000,000 8% for gross funds raised in excess of USD$1,000,000, plus the equivalent~~purchase/sale ~~amount~~and ofimport/export ~~restricted shares equal to 4%~~ of ~~the~~medical ~~capital~~cannabis ~~raised~~without ~~divided by the closing price of the stock on the date of close for a period of two years~~possession.

Subsequent to the March 31, ~~2017~~2018 year-end, the Company ~~commenced~~undertook athe ~~private~~raising ~~placement~~ of upadditional tocapital. ~~USD$500,000~~The ofcapital ~~one-year~~raise ~~12%~~initially ~~convertible notes (the “Notes”).~~consisted ~~The~~of ~~Notes~~a ~~are~~$100,000 convertible atdebenture ~~the~~which ~~option~~is ofexercisable ~~the holder~~ into common shares of the Company at a ~~price~~fixed rate of ~~USD~~$0.2025 per share~~, and~~ ~~are~~up ~~subject~~until toJuly mandatory conversion if the volume-weighted trading price of the common shares is greater than USD$1.00 per share for twenty consecutive trading days so long as the underlying shares may be resold in compliance with the registration requirements of the Securities Act of 193319, ~~as amended~~2021. In addition ~~to the issuance of the Notes~~, the Company ~~shall~~completed ~~issue~~a toprivate ~~the~~placement ~~holders~~in ~~100,000 three-year~~the ~~common~~amount ~~share~~of ~~purchase~~$947,117 ~~warrants~~issued ~~with~~at ~~an exercise price of USD~~$0.5040 ~~for~~per ~~each~~common share ~~USD$25,000~~plus ~~principal~~one-half ~~amount of Notes purchased~~warrant. ~~Furthermore,~~ ~~the~~A ~~Company~~whole ~~shall~~warrant ~~issue~~can ~~pro~~be ~~rata~~exchanged tofor ~~the~~one ~~purchasers of the first USD$100,000 of Notes in the Offering an aggregate of 200,000~~ common ~~shares~~share asat ~~a commitment fee~~$0.75 Asshare ofup ~~August~~until ~~11,~~October ~~2017. the Company had issued USD$100~~26,~~000~~ ~~of the Notes~~2020.

~~See~~On ~~Note~~July ~~10(b)~~6, ~~regarding~~2018, the ~~expiration~~Company signed an agreement with an arm’s length organization, Edgewater Consulting Corp to assist with the raising of capital funds. The agreements provides for a cash fee of $52,355 plus the allocation of 41,885 warrants ~~subsequent~~at toa ~~March~~price of 31$0.75 and the allocation of 150,000 ~~2017~~stock options at a price of $0.50. The contract also provides for the provision of consulting services at $3,000 per month to assist with the application for a public listing on a Canadian Exchange.

79On October 1, 2018, the Company signed an agreement with an arm’s length individual to assist the Company with the public offering process. The terms of the agreement provide for the issuance of 50,000 Restricted Stock Units in accordance with the Stock incentive plan and a further 50,000 warrants at a price of $0.75 with an expiry date of October 26, 2020.

In accordance with Note 8 (c), under the terms of the agreements with three of the holders of convertible notes with a maturity of 60 days the Company had a commitment to issue an additional 318,046 common shares. This commitment was settled subsequent to March 31, 2018 by issuing 159,023 warrants with an exercise price of $0.75 and an expiry of January 2, 2020.

Subsequent to March 31, 2018, certain convertible notes were converted into common shares of the Company. See Notes 8(c) and 8(d).

Subsequent to March 31, 2018, the Company granted warrants and options. See Notes 8(e) and 10(c).

ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE.

None.

ITEM 9A. CONTROLS AND PROCEDURES.

Evaluation of disclosure controls and procedures.

We conducted an evaluation, with the participation of our Chief Executive Officer and Chief Financial Officer, of the effectiveness of the design and operation of our disclosure controls and procedures, as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended, or the Exchange Act, as of March 31, ~~2017~~2018, to ensure that information required to be disclosed by us in the reports filed or submitted by us under the Exchange Act is recorded, processed, summarized and reported, within the time periods specified in the Securities Exchange Commission’s rules and forms, including to ensure that information required to be disclosed by us in the reports filed or submitted by us under the Exchange Act is accumulated and communicated to our management, including our principal executive and principal financial officer, or persons performing similar functions, as appropriate to allow timely decisions regarding required disclosure. Based on that evaluation, our Chief Executive Officer and Chief Financial Officer have concluded that as of March 31, ~~2017~~2018, our disclosure controls and procedures were not effective at the reasonable assurance level due to the material weaknesses identified and described below.

Our principal executive officers do not expect that our disclosure controls or internal controls will prevent all error and all fraud. Although our disclosure controls and procedures were designed to provide reasonable assurance of achieving their objectives and our principal executive officers have determined that our disclosure controls and procedures are effective at doing so, a control system, no matter how well conceived and operated, can provide only reasonable, not absolute assurance that the objectives of the system are met. Further, the design of a control system must reflect the fact that there are resource constraints, and the benefits of controls must be considered relative to their costs. Because of the inherent limitations in all control systems, no evaluation of controls can provide absolute assurance that all control issues and instances of fraud, if any, within the Company have been detected. These inherent limitations include the realities that judgments in decision-making can be faulty, and that breakdowns can occur because of simple error or mistake. Additionally, controls can be circumvented if there exists in an individual a desire to do so. There can be no assurance that any design will succeed in achieving its stated goals under all potential future conditions.

Remediation Plan to Address the Material Weaknesses in Internal Control over Financial Reporting.

A material weakness is a deficiency, or a combination of deficiencies, in internal control over financial reporting, such that there is a reasonable possibility that a material misstatement of our annual or interim financial statements will not be prevented or detected on a timely basis.

Management identified the following three material weaknesses that have caused management to conclude that, as of March 31, 2017, our disclosure controls and procedures, and our internal control over financial reporting, were not effective at the reasonable assurance level:84

80Management identified the following three material weaknesses that have caused management to conclude that, as of March 31, 2018, our disclosure controls and procedures, and our internal control over financial reporting, were not effective at the reasonable assurance level:

	1.	We have developed documentation of our internal control policies and procedures. Written documentation of key internal controls over financial reporting is a requirement of Section 404 of the Sarbanes-Oxley Act as of the period ending March 31, ~~2017~~2018. We plan to progressively implement the written policies and procedures commencing in the immediate future. However, until all of the internal controls and procedures are fully implemented there will continue to be some weaknesses in the system.
	2.	We do not have sufficient segregation of duties within accounting functions, which is a basic internal control. Due to our size and nature, segregation of all conflicting duties may not always be possible and may not be economically feasible. However, to the extent possible, the initiation of transactions, the custody of assets and the recording of transactions should be performed by separate individuals. Based on the current magnitude of our operations at the present time, it is impractical to employ sufficient staff to fully address the separation of duties issue. As the business plan is implemented and additional staff is required, we will be able to and intend to address this identified weakness.
	3.	Effective controls over the control environment have not been fully implemented. Specifically, management has not developed and effectively communicated to employees its accounting policies and procedures. This has resulted in inconsistent practices. Further, our Board of Directors has only ~~one~~two independent ~~member~~members. Since these entity level programs have a pervasive effect across the organization, management has determined that these circumstances constitute a material weakness. As the expansion plans are implemented, we intend to communicate our accounting policies and procedures to our employees.
	4	We did not maintain sufficient personnel with an appropriate level of technical accounting knowledge, experience and training in the application of GAAP commensurate with our complexity and our financial accounting and reporting requirements. This control deficiency is pervasive in nature. Further, there is a reasonable possibility that material misstatements of the financial statements including disclosures will not be prevented or detected on a timely basis as a result. As a result of the material weaknesses identified above, our internal control over financial reporting was not effective as of March 31, ~~2017~~2018.

The Company has initiated a program to address the above weaknesses, specifically the Company has implemented a Code of Business Ethics and Conduct policy, an Equal Opportunity policy, a Freedom from Harassment policy, a Substance Abuse policy, a Whistleblower policy and a Fraud policy. While segregation of duties is very difficult in a small company the Company has an internal policy that all major expenditures are collectively approved by the CEO, President and CFO. In addition, the Company has constituted an Audit Committee, consisting of two non-management directors with the Independent Director as the Chair.

To address the material weaknesses identified, management performed additional analyses and other procedures to ensure that the financial statements included herein fairly present, in all material respects, our financial position, results of operations and cash flows for the periods presented. Accordingly, we believe that the financial statements included in this report fairly present, in all material respects, our financial condition, results of operations and cash flows for the periods presented.

As part of the implementation strategy for the expansion of the Company we additionally plan to engage a third-party firm to assist us with the development of any additional system required. We intend to remedy our material weakness with regard to insufficient segregation of duties by hiring additional employees as funding becomes available to implement the business plan in order to segregate duties in a manner that establishes effective internal controls. All such required remedies are dependent on having the financial resources available to complete them.

This Report does not include an attestation report of the Company’s registered public accounting firm regarding internal control over financial reporting. Management's report was not subject to attestation by the Company's registered public accounting firm pursuant to temporary rules of the Securities and Exchange Commission that permit the Company to provide only management's report in this annual report.85

This Report does not include an attestation report of the Company’s registered public accounting firm regarding internal control over financial reporting. Management’s report was not subject to attestation by the Company’s registered public accounting firm pursuant to temporary rules of the Securities and Exchange Commission that permit the Company to provide only management’s report in this annual report.

Changes in internal controls.

No change in our system of internal control over financial reporting occurred during the period covered by this report, the year ended March 31, ~~2017~~2018, that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

ITEM 9B. OTHER INFORMATION.

None.

PART III

ITEM 10. DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE.

All directors of our company hold office until the next annual meeting of the security holders or until their successors have been elected and qualified. The officers of our company are appointed by our board of directors and hold office until their death, resignation or removal from office. Our directors and executive officers, their ages, positions held, and duration as such, are as follows:

Name	Position Held with the Company	Age		Date First Elected or Appointed	~~Date First Elected or Appointed~~
Paul Ramsay	President and Director	59	57	March 31, 2009	~~March 31, 2009~~
Richard Rusiniak	Chief Executive Officer and Director	70	68	March 31, 2009	~~March 31, 2009~~
Ross Eastley	Chief Financial Officer and Director	71	69	February 11, 2011	~~February 11, 2011~~
P. Blair Mullin	Director		63		August 28, 2014
Philip Blair Mullin	Director	65		August 28, 2014
W. Cameron McDonald	Director	53	51	August 28, 2014	~~August 28, 2014~~

Business Experience

The following is a brief account of the education and business experience during at least the past five years of our director and executive officer, indicating his principal occupation during that period, and the name and principal business of the organization in which such occupation and employment were carried out.

Paul Ramsay (BBA) - Co-Founder, Chairman & President

Mr. Ramsay has served as President of the Company since its founding in 2008 (formally appointed March 31, 2009). He has over 25 years of business development and management experience. He was the Co-founder and former CEO and VP Business Development of Cymat Corp, (TSX: CYM) with a market valuation over $150 million upon his resignation in 2002. He was instrumental in securing the Stabilized Aluminum Foam (SAF) license from Alcan International Ltd. He successfully negotiated a $10 Million technology development program with Industry Canada (TPC). He participated in the completion of $25 million in financing with financial institutions. Mr. Ramsay also introduced and sold several newly developed products to major corporations.

Mr. Ramsay’s qualifications to serve of the Board include over 25 years of business experience and his experience as a founder, and seller, of companies, and his experience with the Company since its founding.

Richard Rusiniak (Mechanical Engineer) - Co-Founder, Director & CEO

Mr. Rusiniak has served as Chief Executive Officer of the Company since its founding in 2008 (formally appointed March 31, 2009). He has over 30 years of management, design and process experience. He was the Co- founder and former President, CFO, and CTO of Cymat Corp (TSX: CYM) with a market valuation over $150 million upon his resignation in 2002. He negotiated an Aluminum Foam Manufacturing licence with Alcan International Ltd., and successfully commercialized the technology. He prepared full documentation and completed a $10 Million technology development program with Industry Canada (TPC). He participated in the completion of $25 million in financing with financial institutions. From 1978 to 1988, he was project manager with Long Manufacturing, as well as The Ontario Research Foundation (Ortech). Projects on which he has consulted include NASA’s Zero Gravity Program, Atomic Energy of Canada’s Re-tubing Program and Hawker Siddeley’s Bi-Level GO Train Modularization.

Mr. Rusiniak’ s qualifications to serve on Algae Dynamics’ board of directors include his years of managerial experience and technology and engineering experience and his experience with the Company since its founding.

Ross Eastley (CA) – Director & CFO

Since 2009 (formally appointed February 11, 2011) Mr. Eastley has been the Chief Financial Officer of the Company. Prior to that, he was CEO for the Canadian Society of Immigration Consultants (CSIC) from 2006 – 2009. Mr. Eastley reported to a nine-member Board, responsible for strategic planning, corporate communications, initial regulatory functions, creation of the staffing structure and management of legal processes. Former V P/Controller for Brandon University.

Mr. Eastley’s qualifications to serve on the Board include his over 30 years of accounting and CFO experience in both private and public sector organizations as well as serving as an executive Board member on a number of Boards for in excess of 20 years.

P. Blair Mullin (BA, MBA) - Director

Mr. Mullin’s principal occupation during the past five years includes managing various funds and providing management consulting services including Managing Partner of Apollo Ventures, LLC, Aldercreek Capital LLC and Apollo Marketing LLC, which provide investment capital to emerging companies. He is also President & CEO of Connectus Inc., which provides advisory services to emerging companies. Previously, Mr. Mullin served as consultant to and then CFO of DRS Inc. from 2010 to 2012; as President & CEO of Samarium Group Corporation (now Samaranta Mining Corporation) from 2009 to 2010; as Chief Financial Officer of Zi Corporation from 2006 to 2009; as Chief Financial Officer of Homax Products Inc from 2005 to 2006; as Interim Vice President Finance of Yakima Products Inc. in 2005. From 2003 to 2005, Mr. Mullin served as consultant to numerous clients engaged in manufacturing. In addition, he was a Partner in Tatum Partners (later Tatum LLC), a national executive services firm, from 2003 to 2010. From 2001 to 2003, Mr. Mullin was President and CEO of Blair Mullin & Associates, Inc., a consulting firm. From 2000 to 2001, Mr. Mullin served as President and Chief Operating Officer of International DisplayWorks, Inc., which was a successor company to Morrow Snowboards, Inc., where he served as President and CFO from 1997 to 2000. Mr. Mullin holds an MBA from University of Western Ontario and BA from Wilfrid Laurier University, in Canada.

Mr. Mullin’s qualifications to serve on Algae Dynamics’ board of directors include his 25 years of managerial experience and his experience as chief financial officer of public and private companies, Mr. Mullin is the Board’s finance and accounting expert. Mr. Mullin also brings several years of public company corporate governance experience to the Board.

Cameron McDonald (BA, BSc, MBA, Finance & Accounting) - Director

Mr. McDonald is currently the CEO of Coldwater Fisheries Inc., a leading Canadian aquaculture company. Prior to joining Coldwater Fisheries Inc. in early 2015, Mr. McDonald was a founder and executive of Global SeaFarms Corporation. From 2004 to 2009, Mr. McDonald was an Investment Banker with Canaccord Adams (now Canaccord Genuity). Canaccord was the number one ranked technology investment banking deal team in Canada in 2006 and 2007 with financings of over $500M on the TSX and AIM capital markets. Mr. McDonald has completed the Chartered Financial Analyst “CFA” program, and passed the Partners, Directors, and Officers Qualifying Exam in 2006.

Mr. McDonald’s qualifications to serve on the Company’s Board include his years of finance and management experience and his experience as a founder and CEO of Global SeaFarms Corporation.

Corporate Governance

We evaluate independence by the standards for director independence established by applicable laws, rules, and listing standards including, without limitation, the standards for independent directors established by The New York Stock Exchange, Inc., the NASDAQ National Market, and the Securities and Exchange Commission.

Subject to some exceptions, these standards generally provide that a director will not be independent if (a) the director is, or in the past three years has been, an employee of ours; (b) a member of the director’s immediate family is, or in the past three years has been, an executive officer of ours; (c) the director or a member of the director’s immediate family has received more than $120,000 per year in direct compensation from us other than for service as a director (or for a family member, as a non-executive employee); (d) the director or a member of the director’s immediate family is, or in the past three years has been, employed in a professional capacity by our independent public accountants, or has worked for such firm in any capacity on our audit; (e) the director or a member of the director’s immediate family is, or in the past three years has been, employed as an executive officer of a company where one of our executive officers serves on the compensation committee; or (f) the director or a member of the director’s immediate family is an executive officer of a company that makes payments to, or receives payments from, us in an amount which, in any twelve-month period during the past three years, exceeds the greater of $1,000,000 or two percent of that other company’s consolidated gross revenues.

Family Relationships

There are no family relationships among our directors or executive officers.

Involvement in Certain Legal Proceedings

None of our directors, executive officers, promoters or control persons has been involved in any events requiring disclosure under Item 401(f) of Regulation S-K.

Compensation Committee Interlocks and Insider Participation –

No interlocking relationship exists between our board of directors and the board of directors or compensation committee of any other company, nor has any interlocking relationship existed in the past.

Nominations to the Board of Directors

Our directors take a critical role in guiding our strategic direction and oversee the management of the Company. Board candidates are considered based upon various criteria, such as their broad-based business and professional skills and experiences, a global business and social perspective, concern for the long-term interests of the shareholders, diversity, and personal integrity and judgment.

In addition, directors must have time available to devote to Board activities and to enhance their knowledge in the growing business. Accordingly, we seek to attract and retain highly qualified directors who have sufficient time to attend to their substantial duties and responsibilities to the Company.

In carrying out its responsibilities, the Board will consider candidates suggested by shareholders. If a shareholder wishes to formally place a candidate’s name in nomination, however, he or she must do so in accordance with the provisions of the Company’s Bylaws. Suggestions for candidates to be evaluated by the proposed directors must be sent to the Board of Directors, c/o 37 – 4120 Ridgeway Drive, Mississauga, Ontario L5L 5S9

Board Leadership Structure and Role on Risk Oversight

Paul Ramsay currently serves as the Company’s President and Chairman. The Company determined this leadership structure was appropriate for the Company due to our small size and limited operations and resources. The Board of Directors will continue to evaluate the Company’s leadership structure and modify as appropriate based on the size, resources and operations of the Company.

Committees of the Board

The Board has constituted an Audit Committee consisting of two non-management directors, W. Cameron McDonald (Chair) and P. Blair Mullin. The full Board currently conducts the duties of the Compensation Committee and the Nominating Committee.

Audit Committee

The Audit Committee consists of W. Cameron McDonald and P. Blair Mullin, both non-management directors. Mr. Cameron was elected Chair and is an independent Director. ~~Mr. Mullin is not deemed independent due to his consulting agreement with the Company.~~

ITEM 11. EXECUTIVE COMPENSATION.

The particulars of the compensation paid to the following persons:

(a)	our President;
(b)	each of our two most highly compensated executive officers who were serving as executive officers at the end of the fiscal years ended March 31, ~~2016~~2018 and ~~2015~~2017; and

who we will collectively refer to as the named executive officers of our Company, are set out in the following summary compensation table, except that no disclosure is provided for any named executive officer whose total compensation did not exceed $100,000 for the respective fiscal year:

SUMMARY COMPENSATION TABLE

Name and Principal Position	Year		Salary ($)	~~Salary ($)~~	Bonus ($)	Stock Awards ($)	~~Bonus ($)~~		Option based Awards ($)	~~Stock Awards ($)~~		Non-Equity Incentive Plan Compensation ($)	~~Option based Awards(4) ($)~~	Change in Pension Value and Nonqualified Deferred Compensation Earnings ($)	All Other Compensation (4)($)	~~Non-Equity Incentive Plan Compensation ($)~~	~~Change in Pension Value and Nonqualified Deferred Compensation Earnings ($)~~	Total ($)	~~All Other Compensation ($)~~		~~Total ($)~~
Paul Ramsay,	2018	~~2017~~	Nil		Nil	$	Nil	~~Nil~~	$	$37,322	~~171,525~~	Nil	$	~~22,575~~Nil	$	~~Nil~~180,104	~~Nil~~	$	$217,426	~~3,025~~	$	~~197,125~~
		2016			Nil			Nil		$	23,044		$	265,680		Nil	Nil			Nil	$	288,724
	2017		Nil		Nil	$	171,525		$	22,575		Nil		Nil	$	3,025		$	197,125
President and Director. (1)		2015			Nil			Nil			Nil		$	142,200		Nil	Nil			Nil	$	142,200
	2016		Nil		Nil	$	23,044		$	265,680		Nil		Nil		Nil		$	288,724
		2014			N/A			N/A			N/A			N/A		N/A	N/A		$	50,000	$	50,000
President and Director. (1)	2015		Nil		Nil		Nil		$	142,200		Nil		Nil		Nil		$	142,200
Richard Rusiniak,	2018	~~2017~~	Nil		Nil		Nil	~~Nil~~	$	$37,322	~~171,525~~	Nil	$	~~22,575~~Nil	$	~~Nil~~180,104	~~Nil~~	$	$217,426	~~3,025~~	$	~~197,125~~
		2016			Nil			Nil			23,044		$	265,680		Nil	Nil			Nil	$	288,724
	2017		Nil		Nil	$	171,525		$	22,575		Nil		Nil	$	3,025		$	197,125
Chief Executive Officer and		2015			Nil			Nil			Nil		$	142,200		Nil	Nil			Nil	$	142,200
	2016		Nil		Nil	$	23,044		$	265,680		Nil		Nil		Nil		$	288,724
Director(2)
Chief Executive Officer and Director(2)	2015		Nil		Nil		Nil		$	142,200		Nil		Nil		Nil		$	142,200
		2014			Nil			Nil			Nil			Nil		Nil	Nil		$	50,000	$	50,000
Ross Eastley,	2018		Nil		Nil		Nil		$	32,510		Nil		Nil	$	135,644		$	168,154
Ross Eastley,		2017			Nil			Nil		$	171,525		$	18,813		Nil	Nil		$	2,074	$	192,412
	2017		Nil		Nil	$	171,525		$	18,813		Nil		Nil	$	2,074		$	192,412
	2016	~~2016~~	Nil		Nil	$	23,044	~~Nil~~	$	$221,400	~~23,044~~	Nil	$	~~221,400~~Nil		Nil	~~Nil~~	$	244,444	~~Nil~~	$	~~244,444~~
Chief Financial Officer and		2015			Nil			Nil			Nil		$	94,800		Nil	Nil			Nil	$	94,800
Chief Financial Officer and Director (3)	2015		Nil		Nil		Nil		$	94,800		Nil		Nil		Nil		$	94,800
Director(3)
		2014			N/A			N/A			N/A			N/A		N/A	N/A		$	20,000	$	20,000

(1)	Mr. Ramsay was appointed the President and a Director of our company on March 31, 2009.
(2)	Mr. Rusiniak was appointed the Chief Executive Officer and a Director of our company on March 31, 2009.
(3)	Mr. Eastley was appointed the Chief Financial Officer and Director of our company on February 11, 2011.
(4)	Calculated based on the Black-Scholes model at the grant date.

(1)	Mr. Ramsay was appointed the President and a Director of our company on March 31, 2009.
(2)	Mr. Rusiniak was appointed the Chief Executive Officer and a Director of our company on March 31, 2009.
(3) (4)	Mr. Eastley was appointed the Chief Financial Officer and Director of our company on February 11, 2011. Other Compensation in 2018 consisted of the allocation of Deferred Share units. A total of 4,507,740 deferred share units were allocated. The allocation consisted to 1,637,305 (valued at $180,104) to each of Mr. Ramsay and Mr. Rusiniak and 1,233,130 to Mr. Eastley (valued at $135,644)
(4)	Deferred share units valued at the time of Board allocation and then revalued at the end of each quarter.

Other than as disclosed below, there are no compensatory plans or arrangements with respect to our executive officers resulting from their resignation, retirement or other termination of employment or from a change of control.

Paul Ramsay – Employment Agreement as amended changing the salary effectiveness start time.

On March 17, 2014, we entered into an amended employment agreement with Paul Ramsay (the “Ramsay Employment Agreement”), effective in accordance with the schedule for salary effectiveness which follows, this amended the terms of the initial Employment Agreement between Mr. Ramsay and the Company that became effective on July 1, 2014.

The salary is $120,000 per annum, an annual car allowance of $9,000, a contribution to a RRSP to the maximum allowed contribution not to exceed $30,000 per year plus being able to participate in the benefits program made generally available to the Company Employees and Executives.

Schedule for Salary Effectiveness in accordance with the amendment

Cumulative Funds Raised 1	Effective Monthly Salary %
1.) $100,000		10.0	%
2.) $175,000		15.0	%
3.) $250,000		25.0	%
4.) $375,000		37.5	%
5.) $500,000		50.0	%
6.) $750,000		62.5	%
7.) $1,000,000		75.0	%
8.) $1,250,000		87.5	%
9.) $1,500,000		100.0	%

Cumulative funds raised is inclusive of all sources including without limitation capital raised, grants received, revenue recorded, debt raised, and assets sold. The 1562.5% threshold was reached during the ~~2017~~2018 fiscal year. A further amendment was passed such that the Board on a periodic basis as funds are available make non regular payments. For the year ended March 31, 2018, no salary commitments were accrued or expensed in the statements of operations (2017 - $8,125).

Termination as a result of change in control then Mr. Ramsay shall be entitled to an amount equal to (12) months compensation plus one additional month for each full year of service, 100% salary is $120,000 per annum, an annual car allowance of $9,000, a contribution to a RRSP to the maximum allowed contribution not to exceed $30,000 per year plus being able to participate in the benefit programs made generally available to the Company Employees and Executives.

Richard Rusiniak – Employment Agreement as amended changing the salary effectiveness start time.

On March 17, 2014, we entered into an amended employment agreement with Richard Rusiniak (the “Rusiniak Employment Agreement”), effective in accordance with the schedule for salary effectiveness which follows, this amended the terms of the initial Employment Agreement between Mr. Rusiniak and the Company that became effective on July 1, 2014.

8590

Schedule for Salary Effectiveness in accordance with the amendment

Cumulative Funds Raised 1	Effective Monthly Salary %
1.) $100,000		10.0	%
2.) $175,000		15.0	%
3.) $250,000		25.0	%
4.) $375,000		37.5	%
5.) $500,000		50.0	%
6.) $750,000		62.5	%
7.) $1,000,000		75.0	%
8.) $1,250,000		87.5	%
9.) $1,500,000		100.0	%

Termination as a result of change in control then Mr. Rusiniak shall be entitled to an amount equal to (12) months compensation plus one additional month for each full year of service.

Ross Eastley – Employment Agreement as amended changing the salary effectiveness start time.

On March 17, 2014, we entered into an amended employment agreement with Ross Eastley (the “Eastley Employment Agreement”), effective in accordance with the schedule for salary effectiveness which follows, this amended the terms of the initial Employment Agreement between Mr. Eastley and the Company that became effective on July 1, 2014.

The salary is $100,000 per annum, an annual car allowance of $9,000, plus being able to participate in the benefits program made generally available to the Company Employees and Executives.

Schedule for Salary Effectiveness in accordance with the amendment

Cumulative Funds Raised 1	Effective Monthly Salary %
1.) $100,000		10.0	%
2.) $175,000		15.0	%
3.) $250,000		25.0	%
4.) $375,000		37.5	%
5.) $500,000		50.0	%
6.) $750,000		62.5	%
7.) $1,000,000		75.0	%
8.) $1,250,000		87.5	%
9.) $1,500,000		100.0	%

Termination as a result of change in control then Mr. Eastley shall be entitled to an amount equal to (12) months compensation plus one additional month for each full year of service.

8691

Outstanding Equity Awards at Fiscal Year-End

OUTSTANDING EQUITY AWARDS AT FISCAL YEAR END

Option Awards

Stock Awards

~~Stock Awards~~

Equity

~~Equity~~

Incentive

~~Incentive~~

Equity Incentive

~~Equity~~Plan ~~Incentive~~Awards:

~~Plan Awards:~~

Equity Incentive

Plan Awards: Number of

~~Plan~~Market ~~Awards:~~or ~~Number~~Payout Value of

~~Market or Payout Value of~~

Number of

Number of Securities

Plan Awards: Number of Securities

weighted

Number of Shares or Units of

~~Number~~Market Value of Shares orof Units of

~~Market~~Unearned ~~Value of~~ Shares, of Units ofor Other

Unearned Shares, Units or ~~Other~~other

~~Unearned Shares, Units or other~~

Securities Underlying

Underlying Un-

Underlying Unexercised

Option

Average Option

Stock that

~~Stock~~Rights that

Rights that

~~Rights that~~

Exercisable

exercisable

Unearned

Exercise

Expiration

have not

~~have~~Have not

~~Have~~have not

have not

~~have not~~

options

Options

Price

Date

Vested

~~Vested~~

Name

(#)

($)

(#)

(#$)

($#)

(#$)

~~($)~~

(a)

(b)

(c)

(d)

(e)

(f)

(g)

(gh)

(hi)

(ij)

~~(j)~~

Paul Ramsay

40240,000

80,000

0.3815

Note 1

~~Note 1~~

Nil

~~Nil~~N/A

~~N/A~~Nil

~~Nil~~N/A

~~N/A~~

Richard Rusiniak

40,000

80,000

0.38

Note 1

Nil

N/A

Nil

N/A

130,000

86,667

0.19

Note 1

Nil

N/A

Nil

N/A

Ross Eastley

33,333

66,667

0.38

Note 1

Nil

N/A

Nil

N/A

120,000

80,000

40,000

0.38

Note12

Nil

N/A

Nil

N/A

Richard Rusiniak

240,000

80,000

0.15

Note 1

Nil

N/A

Nil

N/A

130,000

86,667

0.19

Note 1

Nil

N/A

Nil

N/A

120,000

80,000

40,000

0.38

Note 1

Nil

N/A

Nil

N/A

Ross Eastley

200,000

66,667

0.15

Note 1

Nil

N/A

Nil

N/A

130,000

86,667

0.19

Note 1

Nil

N/A

Nil

N/A

100,000

66,667

33,333

0.38

Note 1

Nil

N/A

Nil

N/A

1.	If the Optionee’s employment with the company terminates, the Option that has become exercisable pursuant to the vesting schedule shall continue to be exercisable, to the extent it is exercisable on the date such employment terminated, for ninety (90) days after such termination, but in no event after the date the Option otherwise terminates. The Option that has not become exercisable of Optionee’s employment with the Company shall be revoked.

	The Optionees forfeited all previous options (vested and unvested) awarded previously by the Company on January 4, 2016 and December 11, 2014.

~~Options Grants in the Fiscal Year Ended March 31, 2017~~92

~~There~~Options ~~were~~ Grants noin ~~stock options exercised during~~ the ~~fiscal~~Fiscal ~~year~~Year ~~ended~~Ended March 31, ~~2017 and the stock options granted and held by our executive officers at the end of the fiscal year ended March 31, 2017 is in accordance with the following table.~~2018

87There were no stock options exercised during the fiscal year ended March 31, 2018 and the stock options granted and held by our executive officers at the end of the fiscal year ended March 31, 2018 is in accordance with the following table.

EXECUTIVE OFFICERS COMPENSATION

	Fees Earned						Non-Equity	Nonqualified Deferred
	Or Paid in Cash	Stock Award		Option Award			Incentive Plan Compensation	Compensation Earnings	All Other Compensation		~~Total~~		Total
Name	($)	($)		($)			($)	($)	($)(2)		~~($)~~		($)
Paul Ramsay	Nil	$	~~171,525~~Nil	$	2237,~~575~~322	(1)	Nil	Nil	$~~3,025~~	198,604	$	~~197,125~~	$	235,926
Richard Rusiniak	Nil	$	~~171,525~~Nil	$	2237,~~575~~322	(1)	Nil	Nil	$~~3,025~~	198,604	$	~~197,125~~	$	235,926
Ross Eastley	Nil	$	~~171,525~~Nil	$	1832,~~813~~510	(1&2)	Nil	Nil	$~~,2074~~	154,144	$	~~192,412~~	$	186,654

~~(1)~~	Pursuant to a Stock incentive plan adopted at the Annual Meeting of the Shareholders on August 28, 2014 the Board approved the allocation of 120,000 stock options to Mr. Paul Ramsay and Mr. Rusiniak as Executive Officers of the Company. The allocation was approved by the Board on October 28, 2016 at an exercise price of $0.38. The options vest as to one third on the date of grant and one third vesting on October 28, 2017 and one third vesting on October 28, 2018. If the Optionee’s employment with the company terminates, the Option that has become exercisable pursuant to the vesting schedule shall continue to be exercisable, to the extent it is exercisable on the date such employment terminated, for ninety (901) ~~days after such termination, but in no event after the date the Option otherwise terminates. The Option that has not become exercisable of Optionee’s employment with the Company shall be revoked.~~	Pursuant to a stock incentive plan adopted at the Annual Meeting of the Shareholders on August 28, 2014 the Board approved the allocation of 240,000 stock options to Mr. Paul Ramsay and Mr. Rusiniak as Executive Officers of the Company. The allocation was approved by the Board on November 10, 2017 at an exercise price of $0.15. One third of the options vested on the date of grant, one third vested on November 10, 2018 and one third will vest on November 10, 2019. If the Optionee’s employment with the Company terminates, the Option that has become exercisable pursuant to the vesting schedule shall continue to be exercisable, to the extent it is exercisable on the date such employment terminated, for ninety (90) days after such termination, but in no event after the date the Option otherwise terminates. The Option that has not become exercisable at the time the Optionee’s employment with the Company terminates shall be revoked.
(2)	Pursuant to a Stock incentive plan adopted at the Annual Meeting of the Shareholders on August 28, 2014 the Board approved the allocation of 100,000 stock options to Mr. Eastley as an Executive Officer of the Company. The allocation was approved by the Board on October 28, 2016 at an exercise price of $0.38. The options vest as to one third on the date of grant and one third vesting on October 28, 2017 and one third vesting on October 28, 2018. If the Optionee’s employment with the company terminates, the Option that has become exercisable pursuant to the vesting schedule shall continue to be exercisable, to the extent it is exercisable on the date such employment terminated, for ninety (90) days after such termination, but in no event after the date the Option otherwise terminates. The Option that has not become exercisable of Optionee’s employment with the Company shall be revoked.
		In addition, the Board approved a second allocation of 130,000 stock options to Mr. Paul Ramsay, Mr. Rusiniak and Mr. Eastley as Executive Officers of the Company. The allocation was approved by the Board on January 15, 2018 at an exercise price of $0.19. The options vest as to one third on the date of grant, one third vesting on January 15, 2019 and one third vesting on January 15, 2020. If the Optionee’s employment with the Company terminates, the Option that has become exercisable pursuant to the vesting schedule shall continue to be exercisable, to the extent it is exercisable on the date such employment terminated, for ninety (90) days after such termination, but in no event after the date the Option otherwise terminates. The Option that has not become exercisable at the time the Optionee’s employment with the Company terminates shall be revoked.
		Options Compliance with the reporting requirements of the federal laws can be expensive
		We are a public reporting company in the United States, and accordingly, subject to the information and reporting requirements of the Exchange Act and other federal securities laws, and the compliance obligations of the Sarbanes-Oxley Act of 2002. The costs of preparing and filing annual and quarterly reports and other information with the SEC and furnishing audited reports to shareholders are substantial. If we do not provide current information about our Company to market makers, they will not be able to trade our stock. Failure to comply with the applicable securities laws could result in private or governmental legal action against us or our officers and directors, which could have a detrimental impact on our business and financials, the value of our stock, and the ability of shareholders to resell their stock.
		If we fail to maintain an effective system of internal controls, we may not be able to accurately report our financial results or detect fraud. Consequently, investors could lose confidence in our financial reporting and this may decrease the trading price of our stock.
		We must maintain effective internal controls to provide reliable financial reports and to detect and prevent fraud. If we cannot provide reliable financial reports or prevent fraud, we may not be able to manage our business as effectively as would be possible with an effective control system in place. We have not performed an in-depth analysis to determine if historical undiscovered failures of internal controls exist, and may in the future discover areas of our internal control that need improvement.
		We have been assessing our internal controls to identify areas that need improvement. We are in the process of implementing changes to internal controls, but have not yet completed implementing these changes.
	(2)	Pursuant to a stock incentive plan adopted at the Annual Meeting of the Shareholders on August 28, 2014 the Board approved the allocation of 200,000 stock options to Mr. Eastley as an Executive Officer of the Company. The allocation was approved by the Board on November 10, 2017 at an exercise price of $0.15. One third of the options vested on the date of grant, one third vested on November 10, 2018 and one third will vest on November 10, 2019. If the Optionee’s employment with the Company terminates, the Option that has become exercisable pursuant to the vesting schedule shall continue to be exercisable, to the extent it is exercisable on the date such employment terminated, for ninety (90) days after such termination, but in no event after the date the Option otherwise terminates. The Option that has not become exercisable at the time the Optionee’s employment with the Company terminates shall be revoked.

8893

Re-pricing of Options/SARS

We did not re-price any options previously granted to our executive officers during the fiscal years ended March 31, ~~2017~~2018 and ~~2016~~2017.

Director Compensation

Directors of our company may be paid for their expenses incurred in attending each meeting of the directors. In addition to expenses, directors may be paid a sum for attending each meeting of the directors or may receive a stated salary as director. No payment precludes any director from serving our company in any other capacity and being compensated for such service. Members of special or standing committees may be allowed similar reimbursement and compensation for attending committee meetings. During the fiscal year ended March 31, ~~2017~~2018, we did not pay any compensation other than the grant of stock options to our directors as disclosed in this 10-K filing, or pursuant to our consulting agreement with Connectus of which P. Blair Mullin is the President.

DIRECTOR COMPENSATION

Name

Fees Earned Or Paid in Cash ($)

Stock Award ($)

Option Award ($)

Non-Equity Incentive Plan Compensation ($)

Nonqualified Deferred Compensation Earnings ($)

All Other Compensation ($)

Total ($)

P. Blair Mullin

Nil

8,~~865~~329

(1&2)

Nil

8,~~865~~329

W. Cameron McDonald

Nil

8,~~865~~329

(1)

Nil

8,~~865~~329

(1)	Pursuant to a ~~Stock~~stock incentive plan adopted at the Annual Meeting of the Shareholders on August 28, 2014 the Board approved the allocation of 3060,000 stock options to Blair Mullin and Cameron McDonald as Directors of the Company. The allocation was approved by the Board on ~~October~~November 2810, ~~2016~~2017 at an exercise price of $0.3815. The options vest as to one quarter on the date of grant and one quarter vesting at 90 days, 180 days and 270 days from the grant date, the expiry date for the options is five years from the date of the grant.
(2)	On March 11, 2014, and as amended on July 18, September 3, 2014, September 5, 2014 and again on December 31, 2015 and 2016, the Company entered into a consulting agreement with Connectus, Inc. to assist and advise the Company in matters concerning corporate finance and the Company’s current and proposed financing activities for the period commencing April 1, 2014 and ending December 31, 2014. On December 27, 2016, the Company extended the contract to December 31, 2017. In consideration of the contract extension, the Company vested 100,000 warrants from the unvested warrants to Connectus, Inc. as compensation, which has been recorded as professional fees on the statements of operations. Pursuant to this agreement, the Company agreed to issue to this consulting corporation (the “Consultant”), 625,000 warrants of the Company. Each warrant is exercisable at USD$0.04 ($0.055) per share for a period of three years. Of the warrants granted, 300,000 vested on September 3, 2014 and 100,000 vested on December 27, 2016 with the unvested portion vesting pro-rata for each USD$250,000 ($324,275) raised in an offering, fully vesting upon USD$1,500,000 ($1,945,650) being raised. During the year ended March 31, 2015, the President (P. Blair Mullin) of the Consultant became a director of the Company.
	In addition, Board approved the allocation of 30,000 stock options to Blair Mullin and Cameron McDonald as Directors of the Company. The allocation was approved by the Board on January 15, 2018 at an exercise price of $0.19. The options vest as to one quarter on the date of grant and one quarter vesting at 90 days, 180 days and 270 days from the grant date, the expiry date for the options is five years from the date of the grant.
	Options Compliance with the reporting requirements of the federal laws can be expensive
	We are a public reporting company in the United States, and accordingly, subject to the information and reporting requirements of the Exchange Act and other federal securities laws, and the compliance obligations of the Sarbanes-Oxley Act of 2002. The costs of preparing and filing annual and quarterly reports and other information with the SEC and furnishing audited reports to shareholders are substantial. If we do not provide current information about our Company to market makers, they will not be able to trade our stock. Failure to comply with the applicable securities laws could result in private or governmental legal action against us or our officers and directors, which could have a detrimental impact on our business and financials, the value of our stock, and the ability of shareholders to resell their stock.

	If we fail to maintain an effective system of internal controls, we may not be able to accurately report our financial results or detect fraud. Consequently, investors could lose confidence in our financial reporting and this may decrease the trading price of our stock.

	We must maintain effective internal controls to provide reliable financial reports and to detect and prevent fraud. If we cannot provide reliable financial reports or prevent fraud, we may not be able to manage our business as effectively as would be possible with an effective control system in place. We have not performed an in-depth analysis to determine if historical undiscovered failures of internal controls exist, and may in the future discover areas of our internal control that need improvement.

	We have been assessing our internal controls to identify areas that need improvement. We are in the process of implementing changes to internal controls, but have not yet completed implementing these changes.

(2)	On March 11, 2014, and as amended on July 18, September 3, 2014, September 5, 2014 and again on December 31, 2015, 2016 and 2017, the Company entered into a consulting agreement with Connectus, Inc. to assist and advise the Company in matters concerning corporate finance and the Company’s current and proposed financing activities for the period commencing April 1, 2014 and ending December 31, 2014. On December 27, 2016, the Company extended the contract to December 31, 2017. On January 15, 2018 the contract was further extended to December 31, 2018. In consideration of the contract extension, the Company vested 100,000 warrants from the unvested warrants to Connectus, Inc. as compensation, which has been recorded as professional fees on the statements of operations. Pursuant to this agreement, the Company agreed to issue to this consulting corporation (the “Consultant”), 625,000 warrants of the Company. Each warrant is exercisable at USD$0.04 ($0.055) per share for a period of three years. Of the warrants granted, 300,000 vested on September 3, 2014 and 100,000 vested on December 27, 2016 with the unvested portion vesting pro-rata for each USD$250,000 ($324,275) raised in an offering, fully vesting upon USD$1,500,000 ($1,945,650) being raised. During the year ended March 31, 2015, the President (P. Blair Mullin) of the Consultant became a director of the Company.

Pension, Retirement or Similar Benefit Plans

There are no arrangements or plans in which we provide pension, retirement or similar benefits for directors or executive officers. We have no material bonus or profit sharing plans pursuant to which cash or non-cash compensation is or may be paid to our directors or executive officers, except that stock options may be granted at the discretion of the board of directors or a committee thereof.

Indebtedness of Directors, Senior Officers, Executive Officers and Other Management

None of our directors or executive officers or any associate or affiliate of our company during the last two fiscal years, is or has been indebted to our company by way of guarantee, support agreement, letter of credit or other similar agreement or understanding currently outstanding.

Potential Payments Upon Termination or Change-in-Control

Cumulative Funds Raised 1		~~Effective Monthly Salary %~~		Effective Monthly Salary %
$100,000			10.0	%
$	100,000				10.0	%
$175,000			15.0	%
$	175,000				15.0	%
$250,000			25.0	%
$	250,000				25.0	%
$375,000			37.5	%
$	375,000				37.5	%
$500,000			50.0	%
$	500,000				50.0	%
$750,000			62.5	%
$	750,000				62.5	%
$1,000,000			75.0	%
$	1,000,000				75.0	%
$1,250,000			87.5	%
$	1,250,000				87.5	%
$1,500,000			100.0	%
$	1,500,000				100.0	%

1	Cumulative funds raised is inclusive of all sources including without limitation capital raised, grants received, revenue recorded, debt raised, and assets sold.

ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS.

The following table sets forth, as of ~~June~~January 2916, ~~2016~~2019, certain information with respect to the beneficial ownership of our common stock by each stockholder known by us to be the beneficial owner of more than 5% of our common stock and by each of our current directors and executive officers. Each person has sole voting and investment power with respect to the shares of common stock. Beneficial ownership consists of a direct interest in the shares of common stock, except as otherwise indicated.

Name and Address of Beneficial Owner	Amount and Nature of Beneficial Ownership		Percentage of Class(1)
Paul Ramsay President and Director Suite 1005, 58 Marine Parade Drive, Toronto, Ontario, Canada M8V 4G1		4,~~415~~815,~~883~~677		2823.8192	%
Richard Rusiniak Suite 1601, 2285 Lake Shore, Building A, Toronto, Ontario, Canada M8V 3X9		4,~~579~~879,~~904~~275		2924.8823	%
Ross Eastley Suite 1103, 99 Harbour Square Toronto, Ontario, Canada M5J 2H2		~~337~~524,~~871~~538		2.2060	%
P. Blair Mullin Director 7185 Joshua Rd. Oak Hill, CA 92344		~~179~~455,~~500~~000		12.1726	%
W. Cameron McDonald # 18 – 5010 Sherbrooke Street West Westmont, Quebec Canada H3Z 1H4		90180,000		0.5989	%
Directors and Executive Officers as a Group(1)		910,~~603~~854,~~158~~490		6253.66907	%

911) Under Rule 13d-3, a beneficial owner of a security includes any person who, directly or indirectly, through any contract, arrangement, understanding, relationship, or otherwise has or shares: (i) voting power, which includes the power to vote, or to direct the voting of shares; and (ii) investment power, which includes the power to dispose or direct the disposition of shares. Certain shares may be deemed to be beneficially owned by more than one person (if, for example, persons share the power to vote or the power to dispose of the shares). In addition, shares are deemed to be beneficially owned by a person if the person has the right to acquire the shares (for example, upon exercise of an option) within 60 days of the date as of which the information is provided. In computing the percentage ownership of any person, the amount of shares outstanding is deemed to include the amount of shares beneficially owned by such person (and only such person) by reason of these acquisition rights. As a result, the percentage of outstanding shares of any person as shown in this table does not necessarily reflect the person’s actual ownership or voting power with respect to the number of shares of common stock actually outstanding on June 30, 2018. As of March 31, 2018, there were 16,600,435 shares of our company’s common stock issued and outstanding.

1) Under Rule 13d-3, a beneficial owner of a security includes any person who, directly or indirectly, through any contract, arrangement, understanding, relationship, or otherwise has or shares: (i) voting power, which includes the power to vote, or to direct the voting of shares; and (ii) investment power, which includes the power to dispose or direct the disposition of shares. Certain shares may be deemed to be beneficially owned by more than one person (if, for example, persons share the power to vote or the power to dispose of the shares). In addition, shares are deemed to be beneficially owned by a person if the person has the right to acquire the shares (for example, upon exercise of an option) within 60 days of the date as of which the information is provided. In computing the percentage ownership of any person, the amount of shares outstanding is deemed to include the amount of shares beneficially owned by such person (and only such person) by reason of these acquisition rights. As a result, the percentage of outstanding shares of any person as shown in this table does not necessarily reflect the person’s actual ownership or voting power with respect to the number of shares of common stock actually outstanding on June 30, 2017. As of March 31, 2017, there were 13,337,521 shares of our company’s common stock issued and outstanding.96

Change in Control

We are not aware of any arrangement that might result in a change in control of our company in the future.

ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE.

Except as disclosed below, there have been no transactions or proposed transactions in which the amount involved exceeds the lesser of $120,000 or one percent of the average of our total assets at year-end for the last two completed fiscal years in which any of our directors, executive officers or beneficial holders of more than 5% of the outstanding shares of our common stock, or any of their respective relatives, spouses, associates or affiliates, has had or will have any direct or material indirect interest.

As at March 31, ~~2017~~2018, the Company had received cumulative working capital advances in the amount of $~~22,347~~Nil (~~2016~~2017 - $~~383~~22,~~990~~347) from two shareholders who are also officers and directors of the Company. These advances are unsecured, non-interest bearing and payable upon demand. During the year ended March 31, ~~2017~~2018, the two shareholders converted advances of $~~265,298~~Nil and $~~255~~265,~~788~~298 of accounts payable into ~~1,316,173~~ common shares of the Company. The common shares were valued at $1,065,152 based upon an estimated fair value of USD$0.60 ($0.81) per share at the time of issuance. The difference between the fair market value of the common shares and the carrying value of the advances from shareholders and the amount included in accounts payable was recorded as a loss on extinguishment of related party debt of $544,066.

On March 11, 2014, and as amended on July 18, September 3, 2014, September 5, 2014, and again on December 31, 2015 and ~~again~~2016, onand ~~December 20~~January 22, ~~2016~~2018, the Company entered into a consulting agreement with Connectus, Inc.,,which ~~(“Connectus”)~~was later assigned to Apollo Marketing LLC, to assist and advise the Company in matters concerning corporate finance. ~~and~~The ~~the~~agreement ~~Company’s~~expires ~~current~~on ~~and proposed financing activities for the period commencing April 1, 2014 and ending~~ December 31, ~~2014~~2018. Pursuant to ~~this~~the agreement, the Company ~~agreed~~granted ~~to issue to Connectus, 625,000~~ warrants of ~~the Company. Each warrant is~~ exercisable at ~~USD~~US$0.04 ($0.~~054~~055) per share ~~for a period of three years~~. OfThere ~~the~~are ~~warrants granted~~275, ~~300,~~000 ~~vested~~warrants onoutstanding which ~~September~~are ~~3, 2014 with the unvested portion vesting pro-rata for each USD$250,000 ($335,675) raised in an offering,~~ fully ~~vesting~~vested ~~upon~~and ~~USD$1,500,000~~expire ~~($2,014,050)~~on ~~being raised. During the year ended March 31, 2015, the President of Connectus became a director of the Company. On~~ December 31, ~~2015, the Company extended the contract to December 31, 2016~~2018. InThe ~~consideration~~President of ~~the contract extension, the Company issued 93,000 common shares to~~ Connectus ~~as compensation, which has been recorded as professional fees on the statements of operations during the year ended March 31, 2016. On December 27, 2016, the Company extended the contract~~ and ~~expiry~~Managing ~~date~~Director of ~~the warrants to December 31, 2017 and Connectus assigned the warrants to~~ Apollo Marketing, ~~LLC. On January~~is ~~23,~~a ~~2017,~~director ~~the Company approved the vesting~~ of ~~100,000 warrants of which 50,000 were exercised on March 21, 2017. This leaves a balance of 275,000 warrants remaining under~~ the ~~contract of which 50,000 were exercisable at March 31, 2017~~Company.

Included in accounts payable and accrued liabilities as at March 31, ~~2017~~2018 is $~~8,125~~Nil (~~2016~~2017 - $528,~~030~~125) owing to two directors who are also ~~officers~~ officers and significant shareholders of the Company for unpaid management fees. This balance is unsecured, non-interest bearing and due on demand.

Amounts receivable from athree ~~shareholder~~shareholders as at March 31, ~~2017~~2018 of $1760,~~656~~855 (~~2016~~2017 - $2117,~~064~~656) is owing from ~~a shareholder~~shareholders, who isare also ~~a director~~directors and ~~officer~~officers of the Company for funds advanced ~~under his employment agreement~~. The amount receivable is unsecured, non-interest bearing and repayable upon demand.

Review, Approval or other transactions with family members – loans, debt conversion, private placement, ratification of transactions with related persons

We have adopted a Code of Business Ethics and Conduct and we rely on our board to review related party transactions on an ongoing basis to prevent conflicts of interest. Our board reviews a transaction in light of the affiliations of the director, officer or employee and the affiliations of such person’s immediate family. Transactions are presented to our board for approval before they are entered into or, if this is not possible, for ratification after the transaction has occurred. If our board finds that a conflict of interest exists, then it will determine the appropriate remedial action, if any. Our board approves or ratifies a transaction if it determines that the transaction is consistent with the best interests of the Company.

9397

ITEM 14. PRINCIPAL ACCOUNTING FEES AND SERVICES

The following table shows the fees paid or accrued by us for the audit and other services provided by UHY McGovern, Hurley, ~~Cunningham,~~ LLP for the fiscal periods shown.

	Fiscal Year Ended March 31, 2017		Fiscal Year Ended March 31, 2016
	Fiscal Year Ended March 31, 2018		Fiscal Year Ended March 31, 2017
Audit Fees	$	7342,~~450~~000	$	4573,~~500~~450
Audit Related Fees	$	0	$	0
Tax Fees	$	0	$	0
All Other Fees	$	0	$	~~8,600~~0
Total	$	7342,~~450~~000	$	5473,~~100~~450

Audit fees

Audit fees consist of fees recorded for professional services rendered for the audit of the Company’s financial statements and services that are normally provided in connection with statutory and regulatory filings.

Audit-Related Fees

Audit-related fees are fees billed for assurance and related services that are reasonably related to the performance of the audit or review of the Company’s financial statements and are not under “Audit Fees”.

Tax Fees

The Company does not engage its principal accountant to assist with the preparation or review of the Company’s annual tax filings. All other Fees

All other fees consist of fees recorded for professional services rendered for the Form S-1.

The Audit Committee has been recently constituted and will pre-approve all audit and non-audit services to be performed by the independent registered public accounting firm in accordance with the rules and regulations promulgated under the Securities Exchange Act of 1934, as amended. The Board pre-approved 100% of the audit, audit-related and tax services performed by the independent registered public accounting firm for the fiscal year ended March 31, ~~2017~~2018 and ~~2016~~2017. The percentage of hours expended on the principal accountant’s engagement to audit the Company’s financial statements for the most recent fiscal year that were attributed to work performed by persons other than the principal accountant’s full-time, permanent employee was 0%.

9498

PART IV

ITEM 15. EXHIBITS.

The following documents are filed as part of this Annual Report on Form 10-K:

Exhibits:

Exhibit No.		Description
3.1(a)		Articles of Incorporation (incorporated by reference from Exhibit 3.1(a) to our Registration Statement on Form S-1 filed on November 19, 2014).
3.1(b)		Articles of Amendment to Change the Corporation Name (incorporated by reference from Exhibit 3.1(b) to our Registration Statement on Form S-1filed on November 19, 2014).
3.1(c)		Articles of Amendment to Eliminate Share Transfer Restrictions and effect Reverse Stock Split (incorporated by reference to Exhibit 3.1(c) from our Registration Statement on Form S-1 filed on November 19, 2014).
4.1		Bylaws (incorporated by reference from Exhibit 3.2 to our Registration Statement on Form S-1 filed on November 19, 2014).
4.2		Specimen Stock certificate (incorporated by reference from Exhibit 4.1 to our Registration Statement on Form S-1 filed on November 19, 2014).
10.1		Employment Agreement with Richard Rusiniak (incorporated by reference from Exhibit 10.1 to our Registration Statement on Form S-1 filed on November 19, 2014).
10.2		Employment agreement with Paul Ramsay (incorporated by reference from Exhibit 10.2 to our Registration Statement on Form S-1 filed on November 19, 2014).
10.3		Employment Agreement with Ross Eastley (incorporated by reference from Exhibit 10.3 to our Registration Statement on Form S-1 filed on November 19, 2014).
10.4		Amendment to Employment Agreements with Richard Rusiniak, Paul Ramsay and Ross Eastley
10.5		Lease agreement dated October 29, 2013 with 2725312 Canada Inc. (incorporated by reference from Exhibit 10.4 to our Registration Statement on Form S-1 filed on November 19, 2014).
10.6(a)		Advisory Agreement with Connectus Inc. dated March 11, 2014, as amended (incorporated by reference from Exhibit 10.6(a) to our Registration Statement on Form S-1 filed on November 19, 2014).
10.6(b)		Amendment to Advisory Agreement with Connectus (incorporated by reference from Exhibit 10.6(b) to our Registration Statement on Form S-1 filed on November 19, 2014).
10.7(c)		First Tranche Warrant (initially with Connectus, assigned to Apollo Marketing LLC) (incorporated by reference from Exhibit 10.6(c)) to our Registration Statement on Form S-1 filed on November 19, 2014).
10.7(d)		Second Tranche warrant (initially with Connectus, assigned to Apollo Marketing LLC) (incorporated by reference from Exhibit 10.6(d) to our Registration Statement on Form S-1 filed on November 19, 2014).
10.9(a)		Stock Incentive Plan-2014 (incorporated by reference from Exhibit 10.1 to our Quarterly Report on Form 10-Q filed on February 18, 2015).

Filing Compare · CanaQuest Medical Corp.