What changed in this filing

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Item 1A. Risk Factors

2019-07-01 compared with 2018-06-29 · 678 added, 300 removed, 203 unchanged (83% of the section changed)

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Risks Related to Our Business

Because we have a limited operating history, our ability

to fully and successfully develop our business is unknown.

We were incorporated in June 6, 2011, and we have only begun

producing and distributing alkaline bottled water in 2013, and we have a limited

operating history from which investors can evaluate our business.

Our ability to

successfully develop our products, and to realize consistent, meaningful

revenues and profit, has not been established and cannot be assured.

achieve success, our products must receive broad market acceptance by consumers.

Without this market acceptance, we will not be able to generate sufficient

revenue to continue our business operation.

If our products are not widely

accepted by the market, our business may fail.

Because we have a limited operating history, we may have

difficulty realizing consistent and meaningful revenues and achieving

profitability.

We were incorporated on June 6, 2011, and we only began

producing and distributing alkaline bottled water in 2013.

Since we have a

limited operating history, our ability to successfully develop our products and

to realize consistent and meaningful revenues and to achieve profitability has

not been established and cannot be assured.

For us to realize consistent,

meaningful revenues and to achieve profitability, our products must receive

broad market acceptance by consumers.

Without this market acceptance, we will

not be able to generate sufficient revenue to continue our business operation.

If our products are not widely accepted by the market, our business may fail.

Our ability to achieve and maintain profitability and positive

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will occur because there are expenses associated with the development,

production, marketing, and sales of our product.

Our independent registered public accounting firm has

expressed substantial doubt about our ability to continue as a going concern.

production, marketing, and sales of our products.

Our financial statements are prepared using generally accepted

accounting principles in the United States of America applicable to a going

concern, which contemplates the realization of assets and liquidation of

liabilities in the normal course of business.

We have not yet established an

ongoing source of revenues sufficient to cover our operating costs and to allow

us to continue as a going concern.

As of March 31, 2018, we had an accumulated

deficit of $30,077,314.

Our ability to continue as a going concern is dependent

on our company obtaining adequate capital to fund operating losses until we

become profitable.

If we are unable to obtain adequate capital, we could be

forced to significantly curtail or cease operations.

In its report on the

financial statements for the year ended March 31, 2018, our independent

registered public accounting firm included an explanatory paragraph regarding

substantial doubt about our ability to continue as a going concern.

financial statements do not include any adjustments that might result from the

outcome of this uncertainty.

We will need additional funds to produce, market, and

distribute our product.

We will have to spend additional funds to produce, market and

distribute our product.

If we cannot raise sufficient capital, we may have to

cease operations and you could lose your investment.

We will need additional

funds to produce our product for distribution to our target market.

we have produced our product, we will have to spend substantial funds on

accounting principles in the United States applicable to a going concern, which

contemplates the realization of assets and liquidation of liabilities in the

normal course of business.

We have not yet established an ongoing source of

revenues sufficient to cover our operating costs and to allow us to continue as

a going concern.

As of March 31, 2019, we had an accumulated deficit of

Our ability to continue as a going concern is dependent on our

company obtaining adequate capital to fund operating losses until we become

If we are unable to obtain adequate capital, we could be forced to

significantly curtail or cease operations.

Our disclosure controls and procedures and internal

control over financial reporting are not effective, which may cause our

financial reporting to be unreliable and lead to misinformation being

disseminated to the public.

Our management evaluated our disclosure controls and procedures

as of March 31, 2019 and concluded that as of that date, our disclosure controls

and procedures were not effective.

In addition, our management evaluated our

internal control over financial reporting as of March 31, 2019 and concluded

that that there were material weaknesses in our internal control over financial

reporting as of that date and that our internal control over financial reporting

was not effective as of that date.

Our independent registered

public accounting firm audited our internal control over financial reporting as

of March 31, 2019 and disclaimed an opinion on our internal controls over financial

reporting as of that date.

A material weakness is a control deficiency, or

combination of control deficiencies, such that there is a reasonable possibility

that a material misstatement of the financial statements will not be prevented

or detected on a timely basis.

We have not yet remediated these material weaknesses and we

believe that our disclosure controls and procedures and internal control over

financial reporting continue to be ineffective.

Until these issues are

corrected, our ability to report financial results or other information required

to be disclosed on a timely and accurate basis may be adversely affected and our

financial reporting may continue to be unreliable, which could result in

additional misinformation being disseminated to the public.

Investors relying

upon this misinformation may make an uninformed investment decision.

We will need additional funds to continue producing,

marketing, and distributing our products.

We will have to spend additional funds to continue producing,

marketing and distributing our products.

If we cannot raise sufficient capital,

we may have to cease operations.

additional funds to continue to produce our products for distribution to our

target market.

We will have to continue to spend substantial funds on

distribution, marketing and sales efforts before we will know if we have

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limited by our size.

Because we are small and do not have much capital, we must

limit our product development, marketing, and sales activities.

Because of our relative size, we must

limit our product development, marketing, and sales activities to the amount of capital we raise.

As such, we may

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We may not ever generate sufficient

revenues to cover our operating and expansion costs and you may, therefore, lose

your entire investment.

revenues to cover our operating and expansion costs.

Changes in the non-alcoholic beverage business

environment and retail landscape could adversely impact our financial results.

environment and retail landscape could adversely impact our financial

The non-alcoholic beverage business environment is rapidly

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CORE® Hydration, SOBE®,

Arizona Ice Tea;

Vitamin Water;

and Powerade.

Snapple®, AriZona® Iced Tea, Vitaminwater®, Gatorade Perform®, and POWERADE®.

We compete indirectly with major international beverage

companies including but not limited to:

the Coca-Cola Company;

PepsiCo, Inc.;

Dr Pepper Snapple Group;

Groupe Danone;

Kraft Foods Group, Inc.;

These companies have established market presence in the United States,

and offer a variety of beverages that are substitutes to our product.

potential direct competition from such companies, because they have the

financial resources, and access to manufacturing and distribution channels to

rapidly enter the alkaline water market.

We compete directly with other alkaline

water producers and brands focused on the emerging alkaline beverage market

Aqua Hydrate;

and Alka Power.

These companies could bolster their

position in the alkaline water market through additional expenditure and

The Coca-Cola Company®, PepsiCo, Inc.,

The Nestlé Group, Dr Pepper Snapple Group, Inc, Danone S.A., The Kraft Heinz

Company, and Unilever PLC.

These companies have established market presence in

the United States and globally, and offer a variety of beverages that are

competitors to our products.

We face potential direct competition from such

companies, because they have the financial resources, and access to

manufacturing and distribution channels to rapidly enter the alkaline water

We compete directly with other alkaline water producers and brands

focused on the emerging alkaline beverage market including:

Eternal Naturally

Alkaline® Spring Water, Essentia®, CORE® Hydration, Icelandic Glacial, Real

Water®, AQUAhydrate®, Mount Valley Spring Water, QURE Water®, Penta® Water, and

These companies could bolster their position in the alkaline water

market through additional expenditure and promotion.

As a result of both direct and indirect competition, our

ability to successfully distribute, market and sell our product, and to gain

sufficient market share in the United States to realize profits may be limited,

greatly diminished, or totally diminished, which may lead to partial or total

loss of your investments in our company.

ability to successfully distribute, market and sell our products, and to gain

sufficient market share in the United States and around the world to realize

profits may be limited, greatly diminished, or totally diminished, which may

lead to partial or total loss of your investments in our company.

Alternative non-commercial beverages or processes could

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guarantee that this market will expand or that consumer demand will be

sufficiently high to allow our company to successfully market, distribute and

sell our product, or to successfully compete with current or future competition,

all of which may result in total loss of your investment.

sufficiently high enough to allow our company to successfully market, distribute

and sell our products, or to successfully compete with current or future

competition, all of which may result in total loss of your investment.

A failure to introduce new products or product extensions

into new marketplaces successfully could prevent us from achieving long-term

profitability.

We compete in an industry characterized by rapid changes in

consumer preferences, so our ability to continue developing new products to

satisfy our consumers changing preferences will determine our long-term

A failure to introduce new products or product extensions into new

marketplaces successfully could prevent us from achieving long-term

profitability.

In addition, customer preferences are also affected by factors

other than taste, such as the publicity.

If we do not adjust to respond to these

and other changes in customer preferences, our sales may be adversely affected.

In addition, a failure to obtain any required regulatory approvals for our

proposed products could have a material adverse effect on our business,

operating results and financial condition.

Our growth and profitability depends on the performance

of third-parties and our relationship with them.

of third-party brokers and distributors and on our ongoing relationships with

Our distribution network and its success depend on the

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such parties may undermine our operations, profitability, and result in total

loss to your investment.

To distribute our product, we use a

loss of your investment.

To distribute our products, we use a

broker-distributor-retailer network whereby brokers represent our products to

distributors and retailers who will in turn sell our product to consumers.

distributors and retailers who will in turn sell our products to consumers.

success of this network will depend on the performance of the brokers,

distributors and retailers of this network.

distributors and retailers within this network.

There is a risk that a broker,

distributor, or retailer may refuse to or cease to market or carry our product.

distributor, or retailer may refuse to or cease to market or carry our products.

There is a risk that the mentioned entities may not adequately perform their

functions within the network by, without limitation, failing to distribute to

sufficient retailers or positioning our product in localities that may not be

receptive to our product.

Furthermore, such third-parties financial position or

market share may deteriorate, which could adversely affect our distribution,

sufficient retailers or positioning our products in localities that may not be

receptive to our products.

Furthermore, such third-parties financial position

or market share may deteriorate, which could adversely affect our distribution,

marketing and sale activities.

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relationships with third-party brokers, distributors and retailers so that they

will promote and carry our product.

will promote and carry our products.

Any adverse consequences resulting from the

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The loss of one or more of our major customers or a

decline in demand from one or more of these customers could harm our business.

decline in demand from one or more of these customers could harm our

We have 2 major customers that together account for 46% (28%

16% and 10%, respectively) of accounts receivable at March 31, 2018, and 3

customers that together account for 47% (25%, 12%, and 10%, respectively) of the

total revenues earned for the year ended March 31, 2018.

There can be no

assurance that such customers will continue to order our products in the same

level or at all.

A reduction or delay in orders from such customers, including

reductions or delays due to market, economic or competitive conditions, could

have a material adverse effect on our business, operating results and financial

and 18%, respectively) of accounts receivable at March 31, 2019, and 2 customers

that together account for 43% (25% and 18%, respectively) of the total revenues

earned for the year ended March 31, 2019.

There can be no assurance that such

customers will continue to order our products at the same level or at all.

reduction or delay in orders from such customers, including reductions or delays

due to market, economic or competitive conditions, could have a material adverse

effect on our business, operating results and financial condition.

Our dependence on a limited number of vendors leaves us

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late deliveries, and poor product quality.

We have two vendors that accounted for 48% (35% and 13%

We have 2 vendors that accounted for 50% (34% and 16%,

respectively) of purchases for the year ended March 31, 2019.

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and results of operations.

Health benefits of alkaline water is not guaranteed or

proven, rather it is perceived by consumers.

Our business is sensitive to public perception.

product proves to be harmful to consumers or if scientific studies provide

unfavorable findings regarding their safety or effectiveness, then our image in

the marketplace would be negatively impacted.

Our results of operations may be significantly affected by the

publics perception of our company and similar companies.

Our business could be

adversely affected if any of our products or similar products distributed by

other companies proves to be harmful to consumers or if scientific studies

provide unfavorable findings regarding the safety or effectiveness of our

products or any similar products.

If our products suffer from negative consumer

perception, it is likely to adversely affect our business and results of

Consumers may have preconceptions about the health

benefits of alkaline water;

such health benefits are not guaranteed or

Health benefits of alkaline water are not guaranteed and have

not been proven.

There is a consumer perception that drinking alkaline water has

Although we do not market our products as having any potential

health benefits, there is a consumer perception that drinking alkaline water has

beneficial health effects.

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hence, loss of your investment.

We are also prohibited from touting unconfirmed

health benefits in our advertising and promotional activities for the products,

both directly and indirectly through claims made by third-party endorsers when

those endorsers have a material connection to our company.

Water scarcity and poor quality could negatively impact

our production costs and capacity.

Water is the main ingredient in our product.

Water is the main ingredient in our products.

limited resource, facing unprecedented challenges from overexploitation,

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Increase in the cost, disruption of supply or shortage of

ingredients, other raw materials or packaging materials could harm our business.

ingredients, other raw materials or packaging materials could harm our

We and our bottlers will use water, 84 trace minerals from

Himalayan salts, packaging materials for bottles such as plastic and paper

Himalayan salts and packaging materials for bottles such as plastic and paper

The prices for these ingredients, other raw materials and packaging

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materials, to the extent they cannot be recouped through increases in the prices

of finished beverage products, would increase our operating costs and could

of finished beverage products, could increase our operating costs and could

reduce our profitability.

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resulting from a higher cost of ingredients, other raw materials and packaging

materials could affect the affordability of our product and reduce sales.

materials could affect the affordability of our products and reduce sales.

An increase in the cost, a sustained interruption in the

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negatively impact our net revenues and profits.

Changes in laws and regulations relating to beverage

containers and packaging could increase our costs and reduce demand for our

We and our bottlers intend to offer our product in

non-refillable, recyclable containers in the United States.

Legal requirements

have been enacted in various jurisdictions in the United States requiring that

deposits or certain ecotaxes or fees be charged for the sale, marketing and use

of certain non-refillable beverage containers.

Other proposals relating to

beverage container deposits, recycling, ecotax and/or product stewardship have

been introduced in various jurisdictions in the United States and overseas, and

we anticipate that similar legislation or regulations may be proposed in the

future at local, state and federal levels in the United States.

increased concerns and changing attitudes about solid waste streams and

environmental responsibility and the related publicity could result in the

adoption of such legislation or regulations.

If these types of requirements are

adopted and implemented on a large scale in the geographical regions in which we

operate or intend to operate, they could affect our costs or require changes in

our distribution model, which could reduce our net operating revenues or

profitability.

Significant additional labeling or warning requirements

or limitations on the availability of our product may inhibit sales of affected

Various jurisdictions may seek to adopt significant additional

product labeling or warning requirements or limitations on the availability of

our product relating to the content or perceived adverse health consequences of

If these types of requirements become applicable to our product

under current or future environmental or health laws or regulations, they may

inhibit sales of our product.

Unfavorable general economic conditions in the United

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economic slowdown, in the United States could negatively affect the

affordability of, and consumer demand for, our product in the United States.

affordability of, and consumer demand for, our products in the United States.

Under difficult economic conditions, consumers may seek to reduce discretionary

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consume tap water.

Lower consumer demand for our product in the United States

Lower consumer demand for our products in the United States

could reduce our profitability.

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weather during the summer months may have a temporary effect on the demand for

our product and contribute to lower sales, which could have an adverse effect on

our results of operations for such periods.

Changes in, or failure to comply with, the laws and

regulations applicable to our products or our business operations could increase

our costs or reduce our net operating revenues.

The advertising, distribution, labeling, production, safety,

sale, and transportation in the United States of our product will be subject to:

the Federal Food, Drug, and Cosmetic Act;

the Federal Trade Commission Act;

state consumer protection laws;

competition laws;

federal, state,

and local workplace health and safety laws, such as the Occupational Safety and

various federal, state and local environmental protection laws;

various other federal, state, and local statutes and regulations.

requirements also apply in many jurisdictions in the United States requiring

that deposits or certain ecotaxes or fees be charged for the sale, marketing,

and use of certain non-refillable beverage containers.

The precise requirements

imposed by these measures vary.

Other types of statutes and regulations relating

to beverage container deposits, recycling, ecotaxes and/or product stewardship

also apply in various jurisdictions in the United States.

We anticipate that

additional, similar legal requirements may be proposed or enacted in the future

at the local, state and federal levels in the United States.

Changes to such

laws and regulations could increase our costs or reduce our net operating

In addition, failure to comply with environmental, health or

safety requirements and other applicable laws or regulations could result in the

assessment of damages, the imposition of penalties, suspension of production,

changes to equipment or processes, or a cessation of operations at our or our

bottlers facilities, as well as damage to our image and reputation, all of

which could harm our profitability.

Our products are considered premium and healthy beverages

and are being sold at premium prices compared to our competitors;

our products and contribute to lower sales, which could have an adverse effect

on our results of operations for such periods.

We rely on third parties to produce and bottle our

products, which creates additional risk.

We do not own or operate bottling or co-packing facilities used

for the production of the various water products in our portfolio.

those third parties to ensure the quality, safety and integrity of our products.

If the third parties that we engage to produce and bottle our products fail to

meet our demands or are found by government agencies to be out of compliance

with applicable regulatory requirements, our supplies of those products and our

future profit margins could be adversely affected.

Product contamination or tampering or issues or concerns

with respect to product quality, safety and integrity could adversely affect our

business, reputation, financial condition or results of operations.

Product contamination or tampering, the failure to maintain

high standards for product quality, safety and integrity, including with respect

to raw materials and ingredients obtained from suppliers, or allegations

(whether or not valid) of product quality issues, mislabeling, misbranding,

spoilage, allergens, adulteration or contamination with respect to products in

our portfolio may reduce demand for such products, and cause production and

delivery disruptions or increase costs, each of which could adversely affect our

business, reputation, financial condition or results of operations.

the products in our portfolio are mislabeled or become unfit for consumption or

cause injury, illness or death, or if appropriate resources are not devoted to

product quality and safety (particularly as we expand our portfolio into new

categories) or to comply with changing food safety requirements, we could decide

to, or be required to, recall products or withdraw from the marketplace and/or

we may be subject to liability or government action, which could result in

payment of damages or fines, cause certain products in our portfolio to be

unavailable for a period of time, result in destruction of product inventory, or

result in adverse publicity (whether or not valid), which could reduce consumer

demand and brand equity.

Moreover, even if allegations of product contamination

or tampering or suggestions that our products were not fit for consumption are

meritless, the negative publicity surrounding assertions against us or products

in our portfolio or processes could adversely affect our reputation or brands.

Our business could also be adversely affected if consumers lose confidence in

product quality, safety and integrity generally, even if such loss of confidence

is unrelated to products in our portfolio.

Any of the foregoing could adversely

affect our business, reputation, financial condition or results of operations.

In addition, if we do not have adequate insurance, if we do not have enforceable

indemnification from suppliers, bottlers, distributors or other third parties or

if indemnification is not available, the liability relating to such product

claims or disruption as a result of recall efforts could materially adversely

affect our business, financial condition or results of operations.

Our products are considered premium beverages and are

being sold at premium prices compared to our competitors products;

provide any assurances as to consumers continued market acceptance of our

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and brands focused on the emerging alkaline beverage market including Eternal,

Essentia, Icelandic, Real Water, Aqua Hydrate, Mountain Valley, Qure, Penta, and

Products offered by our direct competitors are sold in various

volumes and prices with prices ranging from approximately $0.99 for a half-liter

bottle to $4.99 for a one-gallon bottle, and volumes ranging from half-liter

bottles to one-gallon bottles.

We currently offer our product in a one-gallon

bottle for an SRP of $4.99, three-liter bottle for an SRP of $3.99, 1.5 liter at

an SRP of $2.49, 1 liter at an SRP of $1.99, 700 milliliter single serving at an

SRP of $1.19, and a 500 milliliter at an SRP of $0.99.

Our competitors may

introduce larger sizes and offer them at an SRP that is lower than our product.

We can provide no assurances that consumers will continue to purchase our

product or that they will not prefer to purchase a competitive product.

Essentia, Core, Icelandic, Real Water, Aqua Hydrate, Mountain Valley, Qure,

Penta, and Alka Power.

Products offered by our direct competitors are sold in

various volumes and prices with prices ranging from approximately $0.99 for a

half-liter bottle to $4.99 for a one-gallon bottle, and volumes ranging from

half-liter bottles to one-gallon bottles.

We currently offer our product in a

one-gallon bottle for a suggested resale price or an SRP of $4.99, three-liter

bottle for an SRP of $3.99, 1.5 liter at an SRP of $2.49, 1 liter at an SRP of

$1.99, 700 milliliter single serving at an SRP of $1.19, and a 500 milliliter at

an SRP of $0.99.

Our competitors may introduce larger sizes and offer them at an

SRP that is lower than our products.

We can provide no assurances that consumers

will continue to purchase our products or that they will not prefer to purchase

a competitive product.

We are subject to periodic claims and litigation that

could result in unexpected expenses and could ultimately be resolved against us.

could result in unexpected expenses and could ultimately be resolved against

From time to time, we are involved in litigation and other

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resources, and result in significant legal fees.

An unfavorable outcome of any

particular proceeding could exceed the limits of our insurance policies or the

carriers may decline to fund such final settlements and/or judgments and could

have an adverse impact on our business, financial condition, and results of

In addition, any proceeding could negatively impact our reputation

among our guests and our brand image.

We rely on key executive officers, and their knowledge of

our business would be difficult to replace.

We are highly dependent on our two executive officers, Richard

Wright and David A.

We do not have key person life insurance

policies for any of our officers The loss of management and industry expertise

of any of our key executive officers could result in delays in product

An unfavorable outcome of any particular proceeding could

exceed the limits of our insurance policies or the carriers may decline to fund

such final settlements and/or judgments and could have an adverse impact on our

business, financial condition, and results of operations.

In addition, any

proceeding could negatively impact our reputation among our guests and our

We regularly evaluate potential expansion into

international markets, and any expansion into such international operations

could subject us to risks and expenses that could adversely impact our business,

financial condition and results of operations.

To date, we have not undertaken substantial commercial

activities outside of the United States.

We have evaluated, and continue to

evaluate, potential expansion into certain other international markets.

when we seek to expand internationally in the future, our sales and operations

would be subject to a variety of risks, including fluctuations in currency

exchange rates, tariffs, import restrictions and other trade barriers,

unexpected changes in legal and regulatory requirements, longer accounts

receivable payment cycles, potentially adverse tax consequences, and difficulty

in complying with foreign laws and regulations, as well as U.S.

regulations that govern foreign activities.

Economic uncertainty in some of the

geographic regions in which we might operate could result in the disruption of

commerce and negatively impact our operations in those areas.

Also, if we choose

to pursue international expansion efforts, it may be necessary or desirable to

contract with third parties, and we may not be able to enter into such

agreements on commercially acceptable terms or at all.

Further, such

arrangements may not perform to our expectations, and we may be exposed to

various risks as a result of the activities of our partners.

We rely on key executive officers who have extensive

knowledge of our business and the industry in which we operate;

the loss of any

of these key executive officers would be difficult to replace and may adversely

affect our business.

We are highly dependent on three executive officers, Richard

Wright, David Guarino and Ronald DaVella, who have extensive knowledge of our

business and the industry in which we operate.

We do not have key person life

insurance policies for either of these officers.

The loss of Richard Wright,

David Guarino and/or Ronald DaVella could result in delays in product

development, loss of any future customers and sales and diversion of management

resources, which could adversely affect our operating results.

Our executive officers are not subject to supervision or

review by an independent board.

Our board of directors consists of Richard A.

Wright, David A.

Guarino, Aaron Keay, and Bruce Leitch.

The activities of our executive officers

are not subject to the review of an independent board of directors.

Risk Related to Our Stock

If we are unable to protect our information systems

against service interruption, misappropriation of data or breaches of security,

our operations could be disrupted, we may suffer financial losses and our

reputation may be damaged.

We rely on networks and information systems and other

technology ( information systems ), including the Internet and

third-party hosted services, to support a variety of business processes and

activities, including procurement and supply chain, manufacturing, distribution,

invoicing and collection of payments, employee processes and consumer marketing.

We use information systems to process financial information and results of

operations for internal reporting purposes and to comply with regulatory

financial reporting and legal and tax requirements.

In addition, we depend on

information systems for digital marketing activities and electronic

communications between our company and our bottlers and other customers,

suppliers and consumers.

Because information systems are critical to many of our

operating activities, our business may be impacted by system shutdowns, service

disruptions or security breaches.

These incidents may be caused by failures

during routine operations such as system upgrades or by user errors, as well as

network or hardware failures, malicious or disruptive software, unintentional or

malicious actions of employees or contractors, cyberattacks by common hackers,

criminal groups or nation-state organizations or social-activist (hacktivist)

organizations, geopolitical events, natural disasters, failures or impairments

of telecommunications networks, or other catastrophic events.

In addition, such

incidents could result in unauthorized or accidental disclosure of material

confidential information or regulated individual personal data.

information systems suffer severe damage, disruption or shutdown and our

business continuity plans do not effectively resolve the issues in a timely

manner, we could experience delays in reporting our financial results, and we

may lose revenue and profits as a result of our inability to timely manufacture,

distribute, invoice and collect payments for concentrate or finished products.

Unauthorized or accidental access to, or destruction, loss, alteration,

disclosure, falsification or unavailability of, information could result in

violations of data privacy laws and regulations, damage to the reputation and

credibility of our company and, therefore, could have a negative impact on net

operating revenues.

In addition, we may suffer financial and reputational damage

because of lost or misappropriated confidential information belonging to us, our

current or former employees, our bottling partners, other customers or

suppliers, or consumers or other data subjects, and may become exposed to legal

action and increased regulatory oversight.

We could also be required to spend

significant financial and other resources to remedy the damage caused by a

security breach or to repair or replace networks and information systems.

In addition, third-party providers of data hosting or cloud

services, as well as our bottling partners, distributors, retailers or

suppliers, may experience cybersecurity incidents that may involve data we share

Although we have taken steps to prevent cybersecurity incidents,

there can be no assurance that such steps will be adequate.

In order to address

risks to our information systems, we continue to make investments in personnel,

technologies and training of our personnel.

Risks Related to Regulations Applicable to our Industry

Changes in laws and regulations relating to beverage

containers and packaging could increase our costs and reduce our net operating

revenues or profitability.

We and our bottlers offer our products in non-refillable,

recyclable containers in the United States.

Regulations have been enacted in

various jurisdictions in the United States requiring that deposits or certain

ecotaxes or fees be charged for the sale, marketing and use of certain

non-refillable beverage containers.

Other proposals relating to beverage

container deposits, recycling, ecotax and/or product stewardship have been

introduced in various jurisdictions in the United States and overseas, and we

anticipate that similar legislation or regulations may be proposed in the future

at local, state and federal levels in the United States.

Consumers increased

concerns and changing attitudes about solid waste streams and environmental

responsibility and the related publicity could result in the adoption of such

legislation or regulations.

Current regulations or the adoption of future

regulations in the geographical regions in which we currently operate or intend

to operate could adversely affect our costs or require changes in our

distribution model, which could reduce our net operating revenues or

profitability.

Significant additional labeling or warning requirements

or limitations on the availability of our products may inhibit sales of affected

Various jurisdictions may seek to adopt significant additional

product labeling or warning requirements or limitations on the availability of

our products relating to the content or perceived adverse health consequences of

our products.

Federal laws may preempt some or all of these attempts by state or

localities to impose additional labeling or warning requirements.

If these types

of requirements become applicable to our products under current or future

environmental or health laws or regulations, they may inhibit sales of our

Moreover, if we fail to meet compliance deadlines for any such new

requirements, our products may be deemed misbranded or mislabeled and could be

subject to enforcement action, or we could be exposed to private lawsuits

alleging misleading labels or product promotion.

Changes in, or failure to comply with, the laws and

regulations applicable to our products or our business operations could increase

our costs or reduce our net operating revenues.

The advertising, distribution, labeling, production, safety,

sale, and transportation in the United States of our currently marketed products

are subject to:

the Federal Food, Drug, and Cosmetic Act;

the Federal Trade

Commission Act;

the Lanham Act;

state food and drug laws;

state consumer

protection laws;

competition laws;

federal, state, and local workplace health

and safety laws, such as the Occupational Safety and Health Act;

federal, state and local environmental protection laws;

and various other

federal, state, and local statutes and regulations.

Changes to such laws and

regulations could increase our costs or reduce our net operating revenues.

In addition, failure to comply with environmental, health or

safety requirements and other applicable laws or regulations could result in the

assessment of damages, the imposition of penalties, suspension of production,

changes to equipment or processes, or a cessation of operations at our or our

bottlers facilities, as well as damage to our image and reputation, all of

which could harm our profitability.

If we fail to comply with personal data protection laws,

we could be subject to adverse publicity, government enforcement actions and/or

private litigation, which could negatively affect our business and operating

In the ordinary course of our business, we receive, process,

transmit and store information relating to identifiable individuals

( personal data ), primarily employees and former employees.

we are subject to various U.S.

federal and state and foreign laws and

regulations relating to personal data.

These laws have been subject to frequent

changes, and new legislation in this area may be enacted in other jurisdictions

There is no assurance that our security controls over personal

data, the training of employees and vendors on data privacy and data security,

and the policies, procedures and practices we implemented or may implement in

the future will prevent the improper disclosure of personal data.

disclosure of personal data in violation of applicable personal data protection

laws could harm our reputation, cause loss of consumer confidence, subject us to

government enforcement actions (including fines), or result in private

litigation against us, which could result in loss of revenue, increased costs,

liability for monetary damages, fines and/or criminal prosecution, all of which

could negatively affect our business and operating results.

If we produce, market and/or sell beverages infused with

hemp, as defined under the Agriculture Improvement Act of 2018, we will be

subject to a myriad of different laws and regulations governing the use of hemp

in food and beverages and if we are unable to comply with such laws in a

cost-effective manner, our business could be adversely affected.

The production of a beverage infused with hemp, as hemp is

defined in the Agriculture Improvement Act of 2018 (also known as the 2018 Farm

Bill, Public Law 115-334), is contingent on U.S.

Food and Drug Administration,

or the FDA, and state laws, regulations, and guidance.

While the Agriculture

Improvement Act of 2018 removed hemp from Schedule I of the Controlled

Substances Act, the law did not change the FDAs authorities with respect to

food or drugs.

As of June 28, 2019, the FDA has not made a determination that

the use of hemp in food is safe.

The FDA has evaluated Generally Recognized as

Safe or GRAS notices for three hemp seed-derived food ingredients and determined

that the agency has no questions that those ingredients are GRAS under their

intended conditions of use.

We intend to comply in full with all federal, state,

and local laws, rules and regulations as we develop our hemp alkaline water and

other product lines.

We will not pursue the production or sale of hemp-infused

products until legally permitted.

Laws and regulations governing the use of hemp in food and

beverages in the United States are broad in scope;

subject to evolving

interpretations;

and subject to enforcement by a myriad of regulatory agencies

and law enforcement entities.

Under the Agriculture Improvement Act of 2018, a

state or Indian tribe that desires to have primary regulatory authority over the

production of hemp in the state or territory of the Indian tribe must submit a

plan to monitor and regulate hemp production to the Secretary of the United

States Department of Agriculture or USDA.

The Secretary must then approve the

state or tribal plan after determining if the plan complies with the

requirements set forth in the Agriculture Improvement Act of 2018.

The Secretary

may also audit the state or Indian tribes compliance with the

federally-approved plan.

If the Secretary does not approve the state or Indian

tribes plan, then the production of hemp in that state or territory of that

Indian tribe will be subject to a plan established by USDA.

USDA has not yet

established such a plan.

We anticipate that many states will seek to have

primary regulatory authority over the production of hemp.

States that seek such

authority may create new laws and regulations that permit the use of hemp in

food and beverages.

Federal and state laws and regulations on hemp may address

production, monitoring, manufacturing, distribution, and laboratory testing to

ensure that that the hemp has a delta-9 tetrahydrocannabinol concentration of

not more than 0.3 percent on a dry weight basis.

Federal laws and regulations

may also address the transportation or shipment of hemp or hemp products, as the

Agriculture Improvement Act of 2018 prohibits states and Indian tribes from

prohibiting the transportation or shipment of hemp or hemp products produced in

accordance with that law through the state or territory of the Indian tribe, as

Because we rely on a nationwide broker-distributor-retailer network

whereby brokers represent our products to distributors and retailers in turn

sell our product to consumers in the fifty states and the District of Columbia,

we may be subject to many different state-based regulatory regimens for hemp,

all of which could require us to incur substantial costs associated with

compliance requirements.

In addition, violations of these laws, or allegations

of such violations, could disrupt our business and result in a material adverse

effect on our operations, as well as adverse publicity and potential harm to our

We and our suppliers and vendors must take significant enterprise

risk management steps to ensure that there is no commingling of hemp and

marihuana, as marihuana is defined in the federal Controlled Substances Act.

Marihuana remains subject to the Controlled Substances Act and related

Furthermore, if we decide to produce, market and sell beverages

infused with hemp outside of the United States, we will be subject to applicable

laws and regulations in those non-U.S.

jurisdictions, which would require us to

expend significant costs associated with compliance.

In addition, it is possible that additional regulations may be

enacted in the future in the United States and globally that will be directly

applicable to our proposed product offerings infused with hemp.

predict the nature of any future laws, regulations, interpretations, or

applications, nor can we determine what effect additional governmental

regulations or administrative policies and procedures, when and if promulgated,

could have on our business.

FDAs current position is that the sale of food and

beverages that contain hemp-derived cannabidiol or CBD is prohibited under the

Federal Food, Drug, and Cosmetic Act;

therefore, if we decide to produce, market

and/or sell beverages infused with hemp-derived cannabidiol, we may be subject

to federal enforcement actions which could adversely affect our business and

harm our reputation and brand.

The FDA has jurisdiction over drugs and foods that contain CBD,

including CBD derived from hemp.

Under the Federal Food, Drug and Cosmetic Act

or the FDCA, it is a prohibited act to introduce or deliver for introduction

into interstate commerce any food (which the FDCA defines to include beverages)

that is adulterated.

The FDCA therefore prohibits the introduction or delivery

for introduction of a food that contains CBD, because the FDCA deems a food to

be adulterated if it bears or contains any food additive that is unsafe and CBD

is presently an unsafe food additive under the FDCA and FDA regulations.

FDCA also states that it is a prohibited act to introduce or deliver for

introduction into interstate commerce any food to which an FDA-approved drug has

been added, unless certain exceptions are met.The FDA has approved a drug in

which CBD is an active ingredient, and the agency has stated that based on

available evidence, none of the exceptions apply to CBD.

One of the exceptions

addresses whether the drug was marketed in food before the FDA approved the drug

and before the institution of any substantial clinical investigations involving

The FDA has stated that interested parties may present the agency with

evidence that has bearing on the issue of whether CBD was marketed in food

before the FDA approved the CBD drug in 2018 or before the institution of

substantial clinical investigations involving the CBD drug.

FDAs current

position is that this provision of the FDCA also prohibits the introduction or

delivery for introduction into interstate commerce of a food to which CBD has

Congress may decide to amend the FDCA to permit the use of

hemp-derived CBD in food.

The FDA may also decide to issue regulations or

guidance that address the use of hemp-derived CBD in food or use its enforcement

discretion with respect to hemp-derived CBD products.

On May 31, 2019, the FDA

held a public hearing, as well as providing a broader opportunity for written

public comment, for stakeholders to share their experiences and challenges with

CBD products, including information and views related to product safety.

on this hearing, any legislative or regulatory action could take years to

implement or finalize and may not include provisions that would enable our

company to produce, market and/or sell hemp beverages that contain hemp-derived

We risk becoming subject to adverse publicity and costly federal

enforcement actions should we decide to produce, market and/or sell beverages

infused with hemp-derived CBD in the United States.

We may be required to expend

significant resources in defending our company from such actions which could

adversely affect our business and results of operations and divert the attention

of management.

We may also incur the risk of sustaining considerable damage to

our reputation and brand should we become party to federal enforcement actions

resulting from the production, marketing or sale of hemp-derived CBD infused

Accordingly, if Congress amended federal laws or FDA issued

regulations or guidance permitting the use of hemp-derived CBD in food or

announcing the agencys decision to use its enforcement discretion with respect

to hemp-derived CBD products, we and our suppliers and vendors would be required

to implement significant enterprise risk management measures to ensure that

there is no commingling of CBD derived from marihuana, as marihuana is defined

in the federal Controlled Substances Act, with any future commercial supply of

hemp-derived CBD that is used to produce our products.

The FDA could force the removal of our products from the

The FDA has broad authority over the regulation of our

The FDA could, among other things, force us to remove our products

from the U.S.

market, levy fines or change their regulations on advertising.

adverse action by the FDA could have a material adverse impact on our business.

Government reviews, inquiries, investigations, and

actions could harm our business or reputation.

As our product portfolio evolves, the regulatory environment

with regard to our business is also evolving.

Government officials often

exercise broad discretion in deciding how to interpret and apply applicable laws

or regulations.

We may in the future receive formal and informal inquiries from

various governmental regulatory authorities, as well as self-regulatory

organizations or consumer protection watchdog groups, about our business and

compliance with local laws, regulations, or standards.

Any determination that

our products, operations or activities, or the activities of our employees,

contractors or agents, are not in compliance with existing laws, regulations or

standards, could adversely affect our business in a number of ways.

an inquiry does not result in the imposition of fines, interruptions to our

business, loss of suppliers or other third-party relationships, terminations of

necessary licenses and permits, or similar direct results, the existence of the

inquiry alone could potentially create negative publicity that could harm our

business and/or reputation.

Risks Related to Our Intellectual Property

It is difficult and costly to protect our intellectual

Our commercial success will depend in part on obtaining and

maintaining trademark protection and trade secret/know-how protection of our

products and brands, as well as successfully defending that intellectual

property against third-party challenges.

We will only be able to protect our intellectual

property related to our trademarks and brands to the extent that we have rights

under valid and enforceable trademarks, know-how or trade secrets that cover our

products and brands.

Changes in either the trademark laws or in interpretations

of trademark and laws in the U.S.

and other countries may diminish the value of

our intellectual property.

Accordingly, we cannot predict the breadth of claims

that may be allowed or enforced in our issued trademarks.

The degree of future

protection for our proprietary rights is uncertain because legal means afford

only limited protection and may not adequately protect our rights or permit us

to gain or keep our competitive advantage.

We may face intellectual property infringement claims

that could be time-consuming and costly to defend, and could result in our loss

of significant rights and the assessment of treble damages.

From time to time we may face intellectual property claims from

third parties.

Some of these claims may lead to litigation.

The outcome of any

such litigation can never be guaranteed, and an adverse outcome could affect us

For example, were a third party to succeed on an infringement claim

against us, we may be required to pay substantial damages (including up to

treble damages if such infringement were found to be willful).

In addition, we

could face an injunction, barring us from conducting the allegedly infringing

The outcome of the litigation could require us to enter into a license

agreement which may not be under acceptable, commercially reasonable, or

practical terms or we may be precluded from obtaining a license at all.

also possible that an adverse finding of infringement against us may require us

to dedicate substantial resources and time in developing non-infringing

alternatives, which may or may not be possible.

Finally, we may initiate claims to assert or defend our own

intellectual property against third parties.

Any intellectual property

litigation, irrespective of whether we are the plaintiff or the defendant, and

regardless of the outcome, is expensive and time-consuming, and could divert our

managements attention from our business and negatively affect our operating

results or financial condition.

We may be subject to claims by third parties asserting

that our employees or our company has misappropriated their intellectual

property, or claiming ownership of what we regard as our own intellectual

Although we try to ensure that our company, our employees, and

independent contractors (suppliers/vendors/distributors) do not use the

proprietary information or know-how of others in their work for us, we may be

subject to claims that our company, our employees, or independent contractors

(suppliers/vendors/distributors) have used or disclosed intellectual property in

violation of others rights.

These claims may cover a range of matters, such as

challenges to our trademarks, as well as claims that our employees or

independent contractors are using trade secrets or other proprietary information

of any such employees former employer or independent contractors.

we may be forced to bring claims against third parties, or defend claims they

may bring against us, to determine the ownership of what we regard as our

intellectual property.

If we fail in prosecuting or defending any such claims,

in addition to paying monetary damages, we may lose valuable intellectual

property rights or personnel.

Even if we are successful in prosecuting or

defending against such claims, litigation could result in substantial costs and

be a distraction to management.

Risks Related to Our Stock

Because we can issue additional shares of common stock,

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of our stock in the future.

Trading on the OTCQB or TSX Venture Exchange may be

volatile and sporadic, which could depress the market price of our common stock

and make it difficult for our stockholders to resell their shares.

Our common stock is quoted on the OTCQB operated by the OTC

Markets Group and listed on the TSX Venture Exchange.

Trading in stock quoted on

the OTCQB or TSX Venture Exchange is often characterized by wide fluctuations in

trading prices, due to many factors that may have little to do with our

operations or business prospects.

This volatility could depress the market price

of our common stock for reasons unrelated to operating performance.

trading of securities on the OTCQB or TSX Venture Exchange is often more

sporadic than the trading of securities listed on a stock exchange like the

NASDAQ, the NYSE or the Toronto Stock Exchange.

Accordingly, stockholders may

have difficulty reselling any of our shares.

A decline in the price of our common stock could affect

our ability to raise further working capital, it may adversely impact our

ability to continue operations and we may go out of business.

A prolonged decline in the price of our common stock could

result in a reduction in the liquidity of our common stock and a reduction in

our ability to raise capital.

Because we plan to acquire a significant portion

of the funds we need in order to conduct our planned operations through the sale

of equity securities, a decline in the price of our common stock could be

detrimental to our liquidity and our operations because the decline may cause

investors not to choose to invest in our stock.

If we are unable to raise the

funds we require for all our planned operations, we may be forced to reallocate

Trading on the Nasdaq Capital Market or TSX Venture

Exchange may be volatile, which could depress the market price of our common

stock and make it difficult for our stockholders to resell their shares.

Our common stock is listed on the Nasdaq Capital Market and the

TSX Venture Exchange.

Trading of our common stock may experience wide

fluctuations in trading prices, due to many factors that may have little to do

with our operations or business prospects.

This volatility could depress the

market price of our common stock for reasons unrelated to operating performance.

A prolonged and substantial decline in the price of our

common stock could affect our ability to raise further working capital, thereby

adversely impacting our ability to continue operations.

A prolonged and substantial decline in the price of our common

stock could result in a reduction in the liquidity of our common stock and a

reduction in our ability to raise capital.

Because we plan to acquire a

significant portion of the funds we need in order to conduct our planned

operations through the sale of equity securities, a decline in the price of our

common stock could be detrimental to our liquidity and our operations because

the decline may cause investors not to choose to invest in our stock.

unable to raise the funds we require for all our planned operations and to meet

our existing and future financial obligations, we may be forced to reallocate

funds from other planned uses and may suffer a significant negative effect on

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As a result, our business may suffer, and

not be successful and we may go out of business.

We also might not be able to

meet our financial obligations if we cannot raise enough funds through the sale

of our equity securities and we may be forced to go out of business.

we may go out of business.

Because we do not intend to pay any cash dividends on our

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The declaration, payment and

amount of any future dividends will be made at the discretion of the board of

amount of any future dividends will be made at the discretion of our board of

directors, and will depend upon, among other things, the results of operations,

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unless they sell them.

Our stock is a penny stock.

Trading of our stock may be

restricted by the SECs penny stock regulations, which may limit a stockholders

ability to buy and sell our stock.

Our stock is a penny stock.

The Securities and Exchange

Commission ( SEC ) has adopted Rule 15g-9 which generally defines penny

stock to be any equity security that has a market price (as defined in Rule

15g-9) less than $5.00 per share or an exercise price of less than $5.00 per

share, subject to certain exceptions.

Our securities are covered by the penny

stock rules, which impose additional sales practice requirements on

broker-dealers who sell to persons other than established customers and

accredited investors.

The term accredited investor refers generally to

institutions with assets in excess of $5,000,000 or individuals with a net worth

in excess of $1,000,000 or annual income exceeding $200,000 or $300,000 jointly

with their spouse.

The penny stock rules require a broker-dealer, prior to a

transaction in a penny stock not otherwise exempt from the rules, to deliver a

standardized risk disclosure document in a form prepared by the SEC, which

provides information about penny stocks and the nature and level of risks in the

penny stock market.

The broker-dealer also must provide the customer with

current bid and offer quotations for the penny stock, the compensation of the

broker-dealer and its salesperson in the transaction and monthly account

statements showing the market value of each penny stock held in the customers

The bid and offer quotations, and the broker-dealer and salesperson

compensation information, must be given to the customer orally or in writing

prior to effecting the transaction and must be given to the customer in writing

before or with the customers confirmation.

In addition, the penny stock rules

require that prior to a transaction in a penny stock not otherwise exempt from

the broker-dealer must make a special written determination that

the penny stock is a suitable investment for the purchaser and receive the

purchasers written agreement to the transaction.

These disclosure requirements

may have the effect of reducing the level of trading activity in the secondary

market for the stock that is subject to these penny stock rules.

Consequently,

these penny stock rules may affect the ability of broker-dealers to trade our

We believe that the penny stock rules discourage investor interest

in and limit the marketability of our common stock.

FINRA sales practice requirements may also limit a

stockholders ability to buy and sell our stock.

In addition to the penny stock rules promulgated by the SEC,

the Financial Industry Regulatory Authority (FINRA) has adopted rules that

require that in recommending an investment to a customer, a broker-dealer must

have reasonable grounds for believing that the investment is suitable for that

Prior to recommending speculative low priced securities to their

non-institutional customers, broker-dealers must make reasonable efforts to

obtain information about the customers financial status, tax status, investment

objectives and other information.

Under interpretations of these rules, FINRA

believes that there is a high probability that speculative low priced securities

will not be suitable for at least some customers.

FINRA requirements make it

more difficult for broker-dealers to recommend that their customers buy our

common stock, which may limit your ability to buy and sell our stock.

UNRESOLVED STAFF COMMENTS

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Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-K

Item 1A. Risk Factors