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Item 5. Market for Registrant’s Common Equity

2019-07-01 compared with 2018-06-29 · 208 added, 161 removed, 172 unchanged (68% of the section changed)

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Market Information

Our common stock is quoted on the OTC Markets Groups OTCQB

under the trading symbol WTER.

Our common stock has also been listed on the

TSX Venture Exchange in Canada under the same trading symbol WTER since April

Trading in stocks quoted on the OTCQB or listed on the TSX Venture

Exchange is often thin and is characterized by wide fluctuations in trading

prices due to many factors that may be unrelated or have little to do with a

companys operations or business prospects.

Set forth below are the range of high and low bid quotations

for the periods indicated as reported by the OTCQB.

The market quotations

reflect inter-dealer prices, without retail mark-up, mark-down or commissions

and may not necessarily represent actual transactions.

Quarter Ended

March 31, 2018

December 31, 2017

September 30, 2017

June 30, 2017

March 31, 2017

December 31, 2016

September 30, 2016

June 30, 2016

On June 28, 2018, the closing price of our common stock as

reported by the OTCQB was $2.106 per share and the closing price of our

common stock as reported by the TSX Venture Exchange was CDN$2.92.

Our common stock has been listed for trading on the Nasdaq

Capital Market since December 10, 2018 and on the TSX Venture Exchange since

April 25, 2018 under the symbol WTER.

Until the listing of our common stock on

the Nasdaq Capital Market on December 10, 2018, our common stock was quoted on

the OTC Market Groups OTCQB.

Transfer Agents

Our shares of common stock are issued in registered form.

transfer agent and registrar for our common stock is Island Stock Transfer,

transfer agent and registrar for our common stock is Transhare Corporation,

located at 15500 Roosevelt Boulevard, Suite 302, Clearwater, Florida 33760.

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Number of securities

available for future

available for

issuance under equity

compensation plans

(excluding securities reflected

(excluding securities

in column (a))

Equity compensation plans approved by security holders

(2013 Equity Incentive Plan) (1)(2)

Equity compensation plans not approved by security holders

(2018 Stock Option Plan) (3)

Equity compensation plans

approved by security holders

(2013 Equity Incentive

Equity compensation plans

not approved by security

holders (2018 Stock Option

Effective October 7, 2013, our board of directors adopted

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35,000,000 shares.

The purpose of the plan is to (a) enable our company

and any of our affiliates to attract and retain the types of employees,

consultants and directors who will contribute to our companys long range

(b) provide incentives that align the interests of employees,

consultants and directors with those of the stockholders of our company;

and (c) promote the success of our companys business.

Effective as of

December 30, 2015, we effected a 50-for-1 reverse stock split of our

authorized and issued and outstanding shares of common stock which

decreased the number of shares of stock of our company available for the

grant of awards under the plan from 35,000,000 shares to 700,000 shares.

Effective as of January 20, 2016, our board of directors amended the plan

to increase the number of shares of stock of our company available for the

grant of awards under the plan from 700,000 to 7,700,000.

The plan enabled

us to grant awards of a maximum of 7,700,000 shares of our stock and

awards that may be granted under the plan included incentive stock

options, non-qualified stock options, stock appreciation rights,

restricted awards and performance compensation awards.

The purpose of the plan is to (a) enable our company and any of our

affiliates to attract and retain the types of employees, consultants and

directors who will contribute to our companys long range success;

provide incentives that align the interests of employees, consultants and

directors with those of the stockholders of our company;

and (c) promote

the success of our companys business.

Effective as of December 30, 2015,

we effected a 50-for-1 reverse stock split of our authorized and issued

and outstanding shares of common stock which decreased the number of

shares of stock of our company available for the grant of awards under the

plan from 35,000,000 shares to 700,000 shares.

Effective as of January 20,

2016, our board of directors amended the plan to increase the number of

shares of stock of our company available for the grant of awards under the

plan from 700,000 to 7,700,000.

The plan enabled us to grant awards of a

maximum of 7,700,000 shares of our stock and awards that may be granted

under the plan included incentive stock options, non-qualified stock

options, stock appreciation rights, restricted awards and performance

compensation awards.

Our 2013 equity incentive plan has been suspended in

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elsewhere in this annual report on Form 10-K.

We offer retail consumers bottled alkaline water in 1-gallon,

3-liter, 1.5 -liter, 1-liter, 700-milliliter and 500-milliliter sizes under the

trade name Alkaline88 ® .

We offer retail consumers bottled alkaline water in

500-milliliter, 700-milliliter, 1-liter, 1.5 -liter, 3-liter and 1-gallon sizes

under the trade name Alkaline88 ® .

Our product is produced through an

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variety of rare earth minerals to produce our 8.8 pH drinking water without the

use of any chemicals.

Our product also incorporates 84 trace minerals from

Himalayan salts.

Going Concern

use of any manmade chemicals.

Our product also incorporates 84 trace minerals

from Himalayan pink rock salt.

Our product is designed to have a clean smooth

taste using only purified water and the Himalayan pink rock salt.

consumers drink our water because of the taste profile and the preconceived

health benefits (although we do not market our products as having any potential health benefits), as well as because of our brand and

trademark, which we believe is one of the most easily identifiable in the

Measured by sales volume in 2018, we believe we are now one of the

largest alkaline water companies in the United States.

Our product is presently available in all 50 states and the

District of Columbia, although over 50% of our current sales are concentrated in

the Southwest and Texas.

We distribute our product through several channels.

sell through large national distributors, including UNFI, KeHE, C&S, and

We also sell our product to retail clients, including convenience

stores, natural food products stores, large ethnic markets and national

Examples of our retail clients include Walmart, Food Lion,

Albertsons, Safeway, Kroger, Schnucks, Smart & Final, Jewel-Osco, Sprouts,

Bashas, Stater Bros.

Markets, Unified Grocers, Bristol Farms, Publix, Vallarta,

Superior Foods, Ingles, HEB and Brookshires.

The majority of our sales to

retail clients are through brokers and distributors, however, sales to our

larger retail clients are often direct to the clients own warehouse

distribution network.

Our operating subsidiary, Alkaline 88, LLC, operates primarily

as a marketing, distribution, and manufacturing company.

It has entered into

co-packing agreements with eight different bottling companies located in

Virginia, Georgia, California, Texas, Nevada and Arizona to act as co-packers

for our product.

Our current capacity at all plants exceeds approximately $8.3

million per month wholesale.

Our component materials are readily available through multiple

Our principal suppliers are Vav Plastics Inc., Amcor Inc.

and Packaging

Corporation of America.

A88 Infused Beverage Division, Inc.

In August 2018, we formed A88 Infused Beverage Division, Inc.,

or A88 Infused, a Nevada corporation and a wholly owned subsidiary of our

A88 Infuseds focus is brand extension and product innovations in the

wellness water category.

We formed A88 Infused to meet what we believe is

increasing consumer demand for enhanced and functional (value-added) beverages.

We expect A88 Infused to capitalize on this and potential consumer demand with

the development and launch of new products focused on growing trends in the

beverage space.

To prepare for the launch of products by A88 Infused, we have

expanded our packaging capabilities.

We announced in January, 2019 that

Nevada-based Western Group Packing has agreed to produce A88 Infuseds flavored

Alkaline88 ® water products and its planned hemp extract-infused water

product at its 150,000+ square foot facility located in North Las Vegas, NV.

have received verbal confirmation from many of our current retail clients of

their interest in purchasing our flavored Alkaline88 ® waters.

production of A88 Infuseds planned hemp extract product is contingent on U.S.

Food and Drug Administration, or the FDA, and state laws, regulations, and

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 extract in food is safe.

evaluated Generally Recognized as Safe (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.

In early February 2019, at the Convenience EPPS trade show in

Chicago, Illinois and in May, 2019 at the Western Association of Food Chains

Convention, we sampled and offered up for sale Alkaline88 ®

Flavored, which is available in four different, all natural, sugar-free

We believe Alkaline88 ® Flavored is the first flavored

bottled alkaline water to be sold in the United States.

A88 Infused is also developing and preparing for the initial

launch of its planned hemp extract product, which will be marketed under the

trademark Soothe .

In the event the FDA issues appropriate regulations or

guidance or determines that it has no questions that hemp extract is GRAS under

intended conditions of use that would permit A88 Infused to market hemp extract

in water without food additive approval, we expect to produce and sell

Soothe as still water in bottles.

We may also decide to market

Soothe in any states, districts or territories if applicable laws allow

for such sale or if a supplier meets and complies with the FDAs GRAS

regulations with respect to a self-certification regarding the safety and GRAS

status of the use of hemp extract.

We expect to produce Soothe as a low

calorie or no calorie, hemp extract-infused water in three flavors.

may change the composition of our planned hemp-extract-infused product as

necessary to comply with federal, state or local laws, regulations or guidance.

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

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

other product lines.

We will not pursue the production or sale of hemp

extract-infused products until legally permitted.

Our financial statements are prepared using generally accepted

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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 our 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.

Our financial statements do not include any

adjustments that might result from the outcome of this uncertainty.

We will need to raise additional funds to finance continuing

However, there are no assurances that we will be successful in

raising additional funds.

Without sufficient additional financing, it would be

unlikely for us to continue as a going concern.

Our ability to continue as a

going concern is dependent upon our ability to successfully accomplish the plans

described in this annual report and eventually secure other sources of financing

and attain profitable operations.

ongoing source of revenues sufficient to cover our operating costs, however, as

a result of the net proceeds of $10,450,900 raised via a public offering of our

common stock in March, 2019, expected warrant exercises including $1,180,486

from warrant exercises received since March 31, 2019 to date, and our credit

line, we have sufficient cash to sustain operations through at least June 30,

Our ability to continue as a going concern beyond June 30, 2020 is

dependent on our company obtaining additional capital to fund operating losses

until we become profitable.

If we are unable to obtain additional capital, we

could be forced to significantly curtail or cease operations.

Results of Operations

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additional retailers throughout the country.

As of March 31, 2018, the product

is now available in all 50 states at over 40,000 retail locations.

31, 2017, the product was available in all 50 states at over 31,000 retail

This increase has occurred primarily through the addition of a number

of top national and regional grocery retailers as customer during the year ended

March 31, 2018.

We distribute our product through several channels.

through large national distributors (UNFI, KeHe, C&S, and Core-Mark), which

together represent over 150,000 retail outlets.

We also sell our product

directly to retail clients, including convenience stores, natural food products

stores, large ethnic markets and national retailers.

Some examples of retail

Walmart, Food Lion, Albertsons, Safeway, Kroger, Schnucks, Smart

& Final, Jewel-Osco, Sprouts, Bashas, Stater Bros.

Markets, Unified

Grocers, Bristol Farms, Vallarta, Superior Foods, Ingles, HEB and Brookshires.

We distribute our product through

several channels.

We sell through large national distributors (UNFI, KeHe,

C&S, and Core-Mark), which together represent over 150,000 retail outlets.

We also sell our product directly to retail clients, including convenience

stores, natural food products stores, large ethnic markets and national

Some examples of retail clients are:

Walmart, CVS, Albertson/Safeway,

Kroger, Schnucks, Smart & Final, Jewel-Osco, Sprouts, Bashas, Stater Bros.

Markets, Unified Grocers, Bristol Farms, Vallarta, Superior Foods, Ingles, HEB

Brookshires, Publix, Shaws, Raleys, Food Lion, Harris Teeter, and Festival

Cost of goods sold is comprised of production costs, shipping

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expenses were $21,010,131 as compared to $14,055,245 for the year ended March

For the year ended March 31, 2018, the total included $7,211,399 of

sales and marketing expenses and $6,425,069 of general and administrative

expenses, consisting primarily of $1,255,183 of professional fees and $3,385,340

in stock compensation expense.

Our stock compensation expense was incurred as a

part of our issuance of certain stock options and stock grants to employees,

board members, and key consultants to develop our business.

For the year ended March 31, 2017, the total included

$4,428,572 of sales and marketing expenses and $3,164,101 of general and

administrative expenses, consisting primarily of approximately $1,107,577 in

stock compensation expense and $379,125 of professional fees.

compensation expense was incurred as a part of our issuance of certain stock

options and stock grants to employees and key consultants to develop our

Although a non-cash expense, the value of such issuances had a

material impact on our general and administrative expenses for the year ended

March 31, 2017.

Sales and marketing expenses increased by $5.8 million primarily as a

result of increased outbound freight costs of $2,728,322 and increased marketing

spend of $1,885,139 due to the 63% increase in revenue.

administrative expenses increased by $995,009 primarily resulting from an

increase in professional fees, media fees and legal fees for new

stock exchange listings on NASDAQ and the TSX Venture Exchange of approximately

$3.9 million, offset by a decrease in stock compensation expenses of $2.9

In the year ended March 31, 2018 we incurred $1.7 million in stock

compensation expense due to the settlement with related parties as described in

Note 7 to the consolidated financial statement and $1.3 million in stock

compensation provided to contractors which did not occur in the year ended March

For the year ended March 31, 2019, the total of $7,420,078 of

general and administrative expenses consisted primarily of $4,511,325 of

professional fees, media fees and legal fees, $1,423,245 in wage expense and $478,043 in stock compensation

expense, relating to stock option expense and stock expense relating to

For the year ended March 31, 2018, the total of $6,425,069 of

general and administrative expenses consisted primarily of $1,255,183 of

professional fees and $3,385,340 in stock compensation expense, relating to an

agreement to retire Series A preferred stock in exchange for Series D preffered

stock and common stock, issuance of common stock to consultants and stock option

Liquidity and Capital Resources

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Current assets as of March 31, 2019 and March 31, 2018

primarily relate to $988,905 and $603,805 in cash, $2,599,095 and $1,419,281 in

accounts receivable and $1,002,020 and $819,988 in inventory, respectively.

primarily relate to $11,032,451 and $988,905 in cash, $3,068,181 and $2,599,095

in accounts receivable and $2,058,012 and $1,002,020 in inventory, respectively.

Current assets primarily increased as a result of the capital raise in March 2019 of $10,450,900 and increases in accounts receivable and inventory resulting from the 63% increase in revenues.

Current Liabilities

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primarily relate to $2,898,958 and $2,052,988 in accounts payable, revolving

financing of $2,592,015 and $1,436,083, accrued expenses of $819,011 and

$455,916, and current portion of capital leases of $-0- and $190,207,

financing of $3,131,279 and $2,592,015, and accrued expenses of $1,095,458 and

$819,011, respectively.

Current liabilities primarily increased as a result of the 63% increase in revenues.

Our cash flows for the years ended March 31, 2019 and March 31,

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financing activities

Net (decrease) increase in cash and cash

Net increase in cash and cash equivalents

Operating Activities

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The increase in net cash used was

primarily due to the change in cash used for accounts receivable of ($1,179,814)

for the year ended March 31, 2018 compared to ($507,891) for the year ended

March 31, 2017.

primarily due to the funding of the additional professional fees, media fees and legal fees, freight and

marketing expenses and the reduction in stock compensation discussed in the

expense section above.

Investing Activities

Net cash used in investing activities was $317,855 for the year

ended March 31, 2018, as compared to $253,170 used in investing activities for

the year ended March 31, 2017.

Net cash used in investing activities was $1,356,299 for the

year ended March 31, 2019, as compared to $317,855 used in investing activities

for the year ended March 31, 2018.

The increase net cash used by investing

activities was from increased purchases of production equipment.

activities was from increased purchases of production equipment due to the

increase in our revenue.

Financing Activities

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The increase of net cash provided by financing activities was

mainly attributable to an exercise of warrants of $1,950,000 in the year ended

March 31, 2018 compared to $300,000 in the year ended March 31, 2017.

Subsequent Financing Activities

On May 25 and 30, 2018, we completed private placements of an

aggregate of 5,131,665 units of our securities at a price of $0.75 per unit for

aggregate gross proceeds of $3,848,748.75.

Each unit consisted of one share of

our common stock and one-half of one share purchase warrant, with each whole

share purchase warrant entitling the holder to acquire one additional share of

our common stock at a price of $0.90 per share for a period of two years.

mainly attributable to the sale of our common stock for total net proceeds to

our company of $17,238,430 and warrant exercises for net proceeds of

Cash Requirements

We believe that cash flow from operations will not meet our

present and near-term cash needs and thus we will require additional cash

resources, including the sale of equity or debt securities, to meet our planned

capital expenditures and working capital requirements for the next 12 months.

estimate that our capital needs over the next 12 months will be up to

approximately $3,000,000.

We will require additional cash resources to, among

other things, expand broker network, increase manufacturing capacity, expand

retail distribution and add support staff.

If our own financial resources and

future cash-flows from operations are insufficient to satisfy our capital

requirements, we may seek to sell additional equity or debt securities or obtain

additional credit facilities.

The sale of additional equity securities will

result in dilution to our stockholders.

The incurrence of indebtedness will

result in increased debt service obligations and could require us to agree to

operating and financial covenants that could restrict our operations or modify

our plans to grow the business.

Financing may not be available in amounts or on

terms acceptable to us, if at all.

Any failure by us to raise additional funds

on terms favorable to us, or at all, will limit our ability to expand our

business operations and could harm our overall business prospects.

We believe that between the net proceeds of $10,450,900 raised

via a public offering of our common stock in March, 2019 discussed above,

expected warrant exercises including $1,180,486 from warrant exercises received

to date, and our credit line, we will have sufficient cash to sustain operations

including our cash needs for the above milestones through at least June 30,

If our own financial resources and future cash-flows from operations

beyong June 30, 2020 are insufficient to sustain operations, we may seek to sell

additional equity or debt securities or obtain additional credit facilities.

sale of additional equity securities will result in dilution to our

stockholders.

The incurrence of indebtedness will result in increased debt

service obligations and could require us to agree to operating and financial

covenants that could restrict our operations or modify our plans to grow the

Financing may not be available in amounts or on terms acceptable to

us, if at all.

Any failure by us to raise additional funds on terms favorable to

us, or at all, will limit our ability to expand our business operations and

could harm our overall business prospects.

Off-Balance Sheet Arrangements

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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 5. Market for Registrant’s Common Equity