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Item 8. Financial Statements and Supplementary Data

2019-07-01 compared with 2018-06-29 · 574 added, 977 removed, 517 unchanged (75% of the section changed)

FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

THE ALKALINE WATER COMPANY INC.

CONSOLIDATED FINANCIAL STATEMENTS AS OF MARCH 31, 2018

OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

CONSOLIDATED FINANCIAL STATEMENTS:

Balance Sheets

Statements of Operations

Statements of Stockholders Equity

Statements of Cash Flows

to Consolidated Financial Statements

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING

To the Board of Directors and Stockholders of

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the Stockholders and the Board of Directors of

The Alkaline Water Company Inc.

Opinion on the Financial Statements

We have audited the accompanying consolidated balance sheets of The Alkaline Water Company Inc.

(the “Company”) as of March 31, 2018 and March 31, 2017 and the related consolidated statements of operations, stockholders’

equity, and cash flows for each of the years in the two-year period ended March 31, 2018, and the related notes and schedules (collectively referred to as the “financial statements”).

In our opinion, the financial statements present fairly, in all material respects, the financial position of the Company as of March 31, 2018 and March 31, 2017, and the results of its operations and its cash flows for each of the years in the two-year period ended March 31, 2018 in conformity with accounting principles generally accepted in the United States of America.

We have audited the accompanying balance sheet of The Alkaline Water Company Inc.

(the “Company”) as of March 31, 2019, and the related statement of operations, changes in stockholder’s equity and cash flows for the year ended March 31, 2019, and the related notes to the financial statements (collectively, the financial statements).

In our opinion, the financial statements present fairly, in all material respects, the financial position of the Company as of March 31, 2019, and the results of its operations, stockholder’s equity and its cash flows for the year ended March 31, 2019, in conformity with accounting principles generally accepted in the United States of America.

We have also audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the Company’s internal control over financial reporting as of March 31, 2019, based on criteria established in Internal Control –

Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission in 2013, and our report dated July 1, 2019, expressed a disclaimer of an opinion on the effectiveness of the Company’s internal control over financial reporting.

Basis for Opinion

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Our responsibility is to express an opinion on the Company’s financial statements based on our audits.

We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (“PCAOB”) and are required to be independent with respect to the Company in accordance with the U.S.

federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audits in accordance with the standards of the 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, whether due to error or fraud.

The company is not required to have, 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.

Our 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.

We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with U.S.

federal securities laws and the applicable rules and regulation of the Securities and Exchange Commission and the PCAOB.

We conducted our audit in accordance with the standards of the PCAOB.

Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud.

Our audit 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 the Company will continue as a going concern.

As discussed in Note 2 to the financial statements, the Company has negative working capital at March 31, 2018, has incurred recurring losses and recurring negative cash flow from operating activities, and has an accumulated deficit which raises substantial doubt about its ability to continue as a going concern.

Management’s plans concerning these matters are also described in Note 2.

The financial statements do not include any adjustments that might result from the outcome of this uncertainty.

/s/ AMC Auditing

Our audit 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 audit provides a reasonable basis for our opinion.

/s/ Prager Metis CPAs, LLC

We have served as the Company’s auditor since 2019

Basking Ridge, New Jersey

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING

To the Board of Directors and Stockholders of

Alkaline Water Company Inc.

Opinion on the Financial Statements

We have audited the accompanying consolidated balance sheet of

The Alkaline Water Company Inc.

(the Company) as of March 31, 2018 and the

related consolidated statements of operations, stockholders equity, and cash

flows for the year ended March 31, 2018, and the related notes and schedules

(collectively referred to as the financial statements).

In our opinion, the

financial statements present fairly, in all material respects, the financial

position of the Company as of March 31, 2018, and the results of its operations

and its cash flows for the year ended March 31, 2018 in conformity with

accounting principles generally accepted in the United States of America.

Basis for Opinion

These financial statements are the responsibility of the

Companys management.

Our responsibility is to express an opinion on the

Companys financial statements based on our audits.

We are a public accounting

firm registered with the Public Company Accounting Oversight Board (United

States) (PCAOB) and are required to be independent with respect to the Company

in accordance with the U.S.

federal securities laws and the applicable rules and

regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audits in accordance with the standards of the

Those standards require that we plan and perform the audit to obtain

reasonable assurance about whether the financial statements are free of material

misstatement, whether due to error or fraud.

The company is not required to

have, 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 Companys internal

control over financial reporting.

Accordingly, we express no such opinion.

Our 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.

that our audits provide a reasonable basis for our opinion.

The accompanying financial statements have been prepared

assuming that the Company will continue as a going concern.

As discussed in Note

2 to the financial statements, the Company has negative working capital at March

31, 2018, has incurred recurring losses and recurring negative cash flow from

operating activities, and has an accumulated deficit which raises substantial

doubt about its ability to continue as a going concern.

Managements plans

concerning these matters are also described in Note 2.

The financial statements

do not include any adjustments that might result from the outcome of this

/s/ AMC Auditing

We have served as the Companys auditor since

Las Vegas, Nevada

June 29, 2018

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM ON

INTERNAL CONTROL OVER FINANCIAL REPORTING

To the Stockholders and the Board of Directors of

The Alkaline Water Company Inc.

CONSOLIDATED BALANCE SHEETS

Opinion on the Internal Control Over Financial Reporting

We have audited The Alkaline Water Company Inc’s (the “Company”) internal control over financial reporting as of March 31, 2019, based on criteria established in Internal Control –

Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission in 2013.

Because of the significance of the matter described in the Basis for Disclaimer of Opinion paragraph, we have not been able to obtain sufficient appropriate audit evidence to provide a basis for an audit opinion.

Accordingly, we do not express an opinion on the effectiveness of the Company's internal control over financial reporting.

We have also audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the balance sheet of the Company as of March 31, 2019, and the related statements of operations, changes in stockholder’s equity and cash flows for the year ended March 31, 2019 and the related notes to the financial statements of the Company and our report dated July 1, 2019, expressed an unqualified opinion.

Basis for Disclaimer of Opinion

The Company’s management is responsible for maintaining effective internal control over financial reporting and for its assessment of the effectiveness of internal control over financial reporting in the accompanying Management’s Report on Internal Control over Financial Reporting.

Our responsibility is to express an opinion on the Company’s internal control over financial reporting based on our audit.

We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with U.S.

federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

Because material weaknesses have been identified, as described in ‘Management’s Annual Report on Internal Control over Financial Reporting’

we were unable to apply the appropriate procedures to test the controls during the year.

The scope of our work was not sufficient to enable us to express, and we do not express, an opinion either on management’s assessment or on the effectiveness of the Company’s 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 the entity's financial statements will not be prevented, or detected and corrected, on a timely basis.

If one or more material weaknesses exist, an entity's internal control over financial reporting cannot be considered effective.

The following material weaknesses have been included in the accompanying report ‘Management’s Annual Report on Internal Control over Financial Reporting’.

1) The Company did not prepare a risk assessment for internal control over financial reporting during the year ended March 31, 2019.

2) The Company did not retain certain evidence to support internal controls over financial reporting during the year ended March 31, 2019.

3) The Company did not document or test internal control over financial reporting during the year ending March 31, 2019.

4) The Company’s internal control over financial reporting lacked adequate oversight.

We considered the material weaknesses identified above in determining the nature, timing, and extent of audit procedures applied in our audit of the March 31, 2019 financial statements, and this report does not affect such report on the financial statements.

We conducted our audit in accordance with the standards of the PCAOB.

Those standards require that we plan and preform the audit to obtain reasonable assurance about whether effective internal control over financial reporting was maintained in all material respects.

Our audit included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists and preforming such other procedures as we considered necessary in the circumstances.

Because material weaknesses have been identified, we were not able to obtain sufficient appropriate audit evidence to provide a basis for an audit opinion.

Definition and Limitations of Internal Control Over Financial Reporting

A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles.

A company’s internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company;

(2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company;

(3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of the company’s assets that could have a material effect on the financial statements.

Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements.

Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

/s/ Prager Metis CPAs, LLC

Basking Ridge, New Jersey

THE ALKALINE WATER COMPANY INC.

BALANCE SHEETS

March 31, 2019

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Current assets

Cash and cash

Cash and cash equivalents

Accounts receivable

Prepaid expenses

current assets

Total current assets

Fixed assets - net

LIABILITIES AND

STOCKHOLDERS' DEFICIT

LIABILITIES AND STOCKHOLDERS' EQUITY

Current liabilities

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Revolving financing

Loans payable

Current portion of

capital leases

Derivative liability

current liabilities

Long-term Liabilities

Capitalized leases

long-term liabilities

Total current liabilities

Stockholders' equity

Preferred stock,

$0.001 par value, 100,000,000 shares authorized, Series

issued 1,500,000 and

Series D issued 3,800,000 at March 31, 2018 and Series

issued 20,000,000

Series C issued 3,000,000 at March 31, 2017

Common stock,

Class A - $0.001 par value, 200,000,000 shares authorized

25,991,346 and

17,532,451shares

issued and outstanding at March 31, 2018 and March 31, 2017, respectively

Preferred stock, $0.001 par value, 100,000,000 shares

authorized, Series C issued and outstanding 1,500,000 and Series D issued and outstanding issued 3,800,000 at

March 31, 2019 and 2018

Common stock, Class A - $0.001 par value,

200,000,000 shares authorized 39,573,512 and 25,991,346 shares issued and

outstanding at March 31, 2019 and March 31, 2018, respectively

Additional paid in capital

Accumulated deficit

Total stockholders' equity

Total liabilities and stockholders' equity

The accompanying notes are an integral part of these condensed

The accompanying notes are an integral part of these

consolidated financial statements.

THE ALKALINE WATER COMPANY INC.

CONSOLIDATED STATEMENT OF OPERATIONS

STATEMENT OF OPERATIONS

For the Year Ended

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Other income (expense)

Interest expense

Amortization of debt discount and accretion

Change in derivative

Total other income

EARNINGS PER SHARE (Basic)

WEIGHTED AVERAGE SHARES

OUTSTANDING (Basic)

The accompanying notes are an integral part of these condensed

Amortization of debt

derivative liability

other income (expense)

LOSS PER SHARE (Basic and Diluted)

WEIGHTED AVERAGE SHARES OUTSTANDING (Basic

The accompanying notes are an integral part of these

consolidated financial statements.

THE ALKALINE WATER COMPANY INC.

CONSOLIDATED STATEMENTS OF STOCKHOLDERS EQUITY

THE ALKALINE WATER COMPANY

CONSOLIDATED STATEMENTS

OF STOCKHOLDERS' EQUITY

FOR THE YEARS ENDED MARCH 31, 2019 AND MARCH

Preferred Stock

Paid-in Capital

Balance, March 31, 2017

Shares issued for cash

private placement

Shares issued in connection

with note payable

Shares issued to

Retirement of Preferred A stock

Conversion of Preferred C stock to

Issuance of Preferred D stock

Settlement with related parties (See

Beneficial conversion feature on convertible note

Conversion of note payable to common

Shares issued for services

Warrant exercises

Stock Options issued to

Stock Repurchase

Stock Options issued to employees

Stock Option exercises

Balance, March 31, 2018

Retirement of Preferred

Conversion of Preferred

C stock to common stock

Issuance of Preferred D

Settlement with related

parties (See Note 8)

Beneficial conversion feature on convertible note

Conversion of note

payable to common stock

Shares issued to

Shares issued in connection with

Warrant exercises

Stock Options issued to

Stock Option expense

Stock Option exercises

Balance, March 31, 2019

See Accompanying Notes to Consolidated Financial Statements.

The accompanying notes are an integral part of these

consolidated financial statements.

THE ALKALINE WATER COMPANY INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS

STATEMENTS OF CASH FLOWS

For the Year Ended

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CASH FLOWS FROM OPERATING ACTIVITIES

Adjustments to reconcile net loss

to net cash used in operating

compensation expense

Amortization of

debt discount and accretion

Adjustments to reconcile net loss to net cash used in operating

Depreciation expense

Stock compensation expense

Amortization of debt discount and accretion

Interest expense converted to equity

Interest expense

relating to amortization of capital lease discount

Interest expense relating to amortization of capital lease discount

Change in derivative liabilities

operating assets and liabilities:

Changes in operating assets and liabilities:

Accounts receivable

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Accrued expenses

CASH USED IN OPERATING ACTIVITIES

CASH FLOWS FROM INVESTING

Purchase of fixed

USED IN INVESTING ACTIVITIES

CASH FLOWS FROM FINANCING

Proceeds from

convertible note payable

Proceeds from revolving financing

Proceeds from sale

of common stock, net

NET CASH USED IN

OPERATING ACTIVITIES

CASH FLOWS FROM INVESTING ACTIVITIES

Purchase of fixed assets

INVESTING ACTIVITIES

CASH FLOWS FROM FINANCING ACTIVITIES

Proceeds from convertible note payable

Proceeds from revolving financing, net

Proceeds from sale of common stock, net

Proceeds for the exercise of warrants, net

Repayment of loan payable

Repayment of notes

Repayment of notes payable

Repayment of capital lease

Repurchase of

PROVIDED BY FINANCING ACTIVITIES

CASH PROVIDED BY FINANCING ACTIVITIES

NET CHANGE IN CASH

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Conversion of note payable to common shares

The accompanying notes are an integral part of these condensed

The accompanying notes are an integral part of these

consolidated financial statements.

1 unchanged sentence

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

NOTE 1 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

NOTE 1 –NATURE OF BUSINESS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Nature of Business

The company offers 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®

which is produced through an electrolysis process that uses specialized electronic cells coated with a variety of rare earth minerals to produce 8.8 pH drinking water without the use of any manmade chemicals.

Basis of presentation

The audited consolidated financial statements included herein,

The consolidated financial statements included herein,

presented in accordance with United States generally accepted accounting

1 unchanged sentence

dollars, have been prepared by the Company,

pursuant to the rules and regulations of the Securities and Exchange Commission.

Certain information and footnote disclosures normally included in financial

statements prepared in accordance with generally accepted accounting principles

have been condensed or omitted pursuant to such rules and regulations, although

the Company believes that the disclosures are adequate to make the information

presented not misleading.

These statements reflect all adjustments, consisting of normal

recurring adjustments, which in the opinion of management, are necessary for

fair presentation of the information contained therein.

pursuant to the rules and regulations of the Securities and Exchange

Principles of consolidation

2 unchanged sentences

(a Nevada Corporation) and its wholly owned

subsidiary, Alkaline 88, LLC (an Arizona Limited Liability Company).

subsidiaries:

A88 Infused Beverage Division, Inc.

(a Nevada Corporation), A88

International, Inc.

(a Nevada Corporation), and Alkaline 88, LLC (an Arizona

Limited Liability Company).

All significant intercompany balances and transactions have

been eliminated.

The Alkaline Water Company Inc.

(a Nevada Corporation) and

Alkaline 88, LLC (an Arizona Limited Liability Company) will be collectively

The Alkaline Water Company Inc., A88 Infused Beverage Division,

Inc., A88 International, Inc., and Alkaline 88, LLC will be collectively

referred herein to as the Company.

1 unchanged sentence

Company Inc., the Company, we, our or us is intended to mean The

Alkaline Water Company Inc., including the subsidiary indicated above, unless

Alkaline Water Company Inc., including the subsidiaries indicated above, unless

otherwise indicated.

Reverse split

Effective December 30, 2015, the Company effected a fifty for

one reverse stock split of its authorized and issued and outstanding shares of

common stock.

As a result, the authorized common stock has decreased from

1,125,000,000 shares of common stock, with a par value of $0.001 per share, to

22,500,000 shares of common stock, with a par value of $0.001 per share.

shares and per share amounts have been retroactively restated to reflect such

On January 21, 2016, stockholders of our company approved, by

written consents, an amendment to the articles of incorporation of our company

to increase the number of authorized shares of our common stock from 22,500,000

to 200,000,000.

The Company received written consents representing 20,776,000

votes from the holders of shares of its common stock and our Series A Preferred

Stock voting as a single class, representing approximately 61% of the voting

power of its outstanding common stock and its outstanding Series A Preferred

Stock voting as a single class as of the record date (January 12, 2016).

January 21, 2016, there were no written consents received by the Company

representing a vote against, abstention or broker non-vote with respect to the

Our authorized preferred stock was not affected by the reverse

stock split and continues to be 100,000,000 shares of preferred stock, with a

par value of $0.001 per share.

On January 22, 2016, the Company amended the certificate of

designation for our Series A Preferred Stock by filing an amendment to

certificate of designation with the Secretary of State of the State of Nevada.

The Company amended the certificate of designation for our Series A Preferred

Stock by deleting Section 2.2 of the certificate of designation, which

proportionately increases or decreases the number of votes per share of Series A

Preferred Stock in the event of any dividend or other distribution on our common

stock payable in its common stock or a subdivision or consolidation of the outstanding shares of its common stock.

Accordingly, holders of Series A Preferred Stock will have 10 votes per share of

Series A Preferred Stock, instead of 0.2 votes per share of Series A Preferred

On November 14, 2017, we withdrew the Certificate of Designation

establishing Series A Preferred Stock.

There were no shares of Series A

Preferred Stock outstanding immediately prior to the withdrawal.

On March 30, 2016, the Company designated 3,000,000 shares of

the authorized and unissued preferred stock of our company as Series C

Preferred Stock by filing a Certificate of Designation with the Secretary of

State of the State of Nevada.

Each share of the Series C Preferred Stock will be

convertible, without the payment of any additional consideration by the holder

and at the option of the holder, into one fully paid and non-assessable share of

our common stock at any time after (i) the Company achieves consolidated revenue

equal to or greater than $15,000,000 in any 12 month period, ending on the last

day of any quarterly period of our fiscal year;

or (ii) a Negotiated Trigger

Event, defined as an event upon which the Series C Preferred Stock will be

convertible as may be agreed by our company and the holder in writing from time

On May 3, 2017, the Company designated 3,000,000 shares of the

authorized and unissued preferred stock of our company as Series D Preferred

Stock by filing a Certificate of Designation with the Secretary of State of the

State of Nevada.

On November 2, 2017, we increased the number of authorized

shares of Series D Preferred Stock in our company to 5,000,000 shares by filing

an Amendment to the foregoing Certificate of Designation with the Secretary of

State of the State of Nevada.

Each share of the Series D Preferred Stock will be

convertible, without the payment of any additional consideration by the holder

and at the option of the holder, into one fully paid and nonassessable share of

our common stock at any time after (i) we achieve the consolidated revenue of

our company and all of its subsidiaries equal to or greater than $40,000,000 in

any 12 month period, ending on the last day of any quarterly period of our

or (ii) a Negotiated Trigger Event, defined as an event upon which

the Series D Preferred Stock will be convertible as may be agreed by our company

and the holder in writing from time to time.

Use of Estimates

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carrying value of these investments approximates fair value.

The Company had

$988,905 and $603,805 in cash and cash equivalents at March 31, 2018 and 2017,

respectively.

Accounts Receivable and Allowance for Doubtful Accounts

As of the balance

sheet date and periodically throughout the period, the Company has maintained

balances in various operating accounts in excess of federally insured limits.

The Company had $11,032,451 and $988,905 in cash and cash equivalents at March

31, 2019 and March 31, 2018, respectively.

Accounts Receivable and Allowance for Doubtful

The Company generally does not require collateral, and the

6 unchanged sentences

Allowance for doubtful accounts

Accrual for 2% 10 days discount

Net accounts receivable

4 unchanged sentences

inherent risk in the account balance and current economic conditions.

Inventory represents raw materials and finished goods

valued at the lower of cost or market with cost determined using the weight

average method which approximates first-in first-out method, and with market

defined as the lower of replacement cost or realizable value.

accounts receivable balance is pledged as collateral for the Companys revolving

financing as disclosed in Note 4.

Inventory represents raw materials and finished goods valued at

the lower of cost or market with cost determined using the weight average method

which approximates first-in first-out method, and with market defined as the

lower of replacement cost or realizable value.

The inventory balance is pledged

as collateral for the Companys revolving financing as disclosed in Note 4.

As of March 31, 2019 and 2018, inventory consisted of the

2 unchanged sentences

Total inventory

Property and Equipment

The Company records all property and equipment at cost less

3 unchanged sentences

Depreciation is calculated using the

straight-line method over the estimated useful life of the assets or the lease

term, whichever is shorter.

Depreciation periods are as follows for the relevant

fixed assets:

Equipment under capital lease

straight-line (half-life convention) method over the estimated useful life of

the assets or the lease term, whichever is shorter.

The Company originally

estimated the useful life of water production equipment as 5 years.

year ended March 31, 2019, the company reevaluated the useful life of its water

production equipment as the machinery began to wear out sooner than originally

expected over a 3 year period due to an increase in revenue.

recorded this change and recorded the adjusted depreciation in fiscal 2019;

effect of which was not material.

Stock-Based Compensation

The Company accounts for stock-based compensation to employees

in accordance with Accounting Standards Codification (ASC) 718.

compensation to employees is measured at the grant date, based on the fair value

of the award, and is recognized as expense over the requisite employee service

The Company accounts for stock-based compensation to other than

employees in accordance with ASC 505-50.

Equity instruments issued to other than

employees are valued at the earlier of a commitment date or upon completion of

the services, based on the consideration received or the fair value of the equity instruments issued and is

recognized as expense over the service period.

The Company estimates the fair

value of stock-based payments using the Black-Scholes option-pricing model for

common stock options and warrants and the closing price of the Companys common

stock for common share issuances.

The Company accounts for stock-based compensation is in

accordance with Accounting Standards Codification (ASC) 718.

compensation is measured at the grant date, based on the fair value of the

award, and is recognized as expense over the requisite service period..

Company estimates the fair value of stock-based payments using the Black-Scholes

option-pricing model for common stock options and warrants and the closing price

of the Companys common stock for common share issuances.

Advertising costs are charged to operations when incurred.

2 unchanged sentences

Revenue Recognition

The Company recognizes revenue when all of the following

conditions are satisfied:

(1) there is persuasive evidence of an arrangement;

(2) the product or service has been provided to the customer;

(3) the amount to

be paid by the customer is fixed or determinable;

and (4) the collection of such

amount is probable.

The Company records revenue when it is realizable and earned

upon shipment of the finished products.

The Company does not accept returns due

to the nature of the product.

However, the Company will provide credit to our

customers for damaged goods.

Fair Value Measurements

The valuation of our embedded derivatives and warrant

derivatives are determined primarily by the multinomial distribution (Lattice)

An embedded derivative is a derivative instrument that is embedded within

another contract, which under the convertible note (the host contract) includes

the right to convert the note by the holder, certain default redemption right

premiums and a change of control premium (payable in cash if a fundamental

change occurs).

In accordance with ASC 815 Accounting for Derivative

Instruments and Hedging Activities , as amended, these embedded derivatives

are marked-to-market each reporting period, with a corresponding non-cash gain

or loss charged to the current period.

A warrant derivative liability is also

determined in accordance with ASC 815.

Based on ASC 815, warrants which are

determined to be classified as derivative liabilities are marked-to-market each

reporting period, with a corresponding non-cash gain or loss charged to the

current period.

The practical effect of this has been that when our stock price

increases so does our derivative liability resulting in a non-cash loss charge

that reduces our earnings and earnings per share.

When our stock price declines,

the Company records a non-cash gain, increasing our earnings and earnings per

As such, fair value is a market-based measurement that should be

determined based on assumptions that market participants would use in pricing an

asset or liability.

As a basis for considering such assumptions, there exists a

three-tier fair value hierarchy, which prioritizes the inputs used in measuring

fair value as follows:

unadjusted quoted prices in active markets for identical

assets or liabilities that the Company has the ability to access as of the

measurement date.

inputs other than quoted prices included within Level 1

that are directly observable for the asset or liability or indirectly

observable through corroboration with observable market data.

unobservable inputs for the asset or liability only used

when there is little, if any, market activity for the asset or liability

at the measurement date.

This hierarchy requires the Company to use observable market

data, when available, and to minimize the use of unobservable inputs when

determining fair value.

To determine the fair value of our embedded derivatives,

management evaluates assumptions regarding the probability of certain future

Other factors used to determine fair value include our period end stock

price, historical stock volatility, risk free interest rate and derivative term.

The fair value recorded for the derivative liability varies from period to

This variability may result in the actual derivative liability for a

period either above or below the estimates recorded on our consolidated

financial statements, resulting in significant fluctuations in other income

(expense) because of the corresponding non-cash gain or loss recorded.

We recognize revenue when our performance obligations are

Our primary performance obligation (the distribution and sale of

beverage products) is satisfied upon the delivery of products to our customers,

which is also when control is transferred.

The Company does not accept returns

due to the nature of the product.

However, the Company will provide credit to

our customers for damaged goods.

The Company provides credit to its customers which typically requires payment within 30 days.

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

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

The amounts are not considered material.

After evaluating the revenue disclosure requirements the Company does not believe that it needs to disaggregate revenues.

Revenue consists of the gross sales price, less estimated

allowances for which provisions are made at the time of sale, and less certain

other discounts, allowances, and rebates that are accounted for as a reduction

from gross revenue.

Shipping and handling charges that are billed to customers

are included as a component of revenue.

Costs incurred by the Company for

shipping and handling charges are included in selling expenses and amounted to

$5,393,253 and $2,664,931 for the years ended March 31, 2019 and 2018,

respectively.

Concentration Risks

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.The Company has 2

vendors that accounted for 48% (35% and 13% respectively) of purchases for the

year ended March 31, 2018.

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.The Company has 2 vendors that

accounted for 50% (34 %, and 16% respectively) of purchases for the year ended

March 31, 2019.

In accordance with ASC 740 Accounting for Income

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Under the asset and liability method, deferred income tax

assets and liabilities are determined based on the differences between the

financial reporting and tax bases of assets and liabilities and are measured

using the currently enacted tax rates and laws.

A valuation allowance is

provided for the amount of deferred tax assets that, based on available

evidence, are not expected to be realized.

assets and liabilities are determined based on the differences between the financial reporting and tax

bases of assets and liabilities and are measured using the currently enacted tax

rates and laws.

A valuation allowance is provided for the amount of deferred tax

assets that, based on available evidence, are not expected to be realized.

Basic and Diluted Loss Per Share

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of diluted loss per share, because their effect would be anti-dilutive.

The Company had 1,236,510 and no shares relating to options, 3,190,479 and 887,348 shares relating to warrants and 1.5 million convertible preferred shares at March 31, 2019 and 2018, respectively that were not included in the diluted earnings per share calculation because they were antidilutive.

Business Segments

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value due to the relative short period for maturity these instruments.

Environmental Costs

Environmental expenditures that relate to current operations

are expensed or capitalized as appropriate.

Expenditures that relate to an

existing condition caused by past operations, and which do not contribute to

current or future revenue generation, are expensed.

Liabilities are recorded

when environmental assessments and/or remedial efforts are probable, and the

cost can be reasonably estimated.

Generally, the timing of these accruals

coincides with the earlier of completion of a feasibility study or the Companys

commitments to a plan of action based on the then known facts.

The Company incurred no environmental expenses during the years

ended March 31, 2018 and 2017, respectively.

The company does not use derivative financial instruments to hedge exposures to cash-flow, market or foreign-currency risks.

Authoritative guidance defines fair value as the price that would be received to sell an asset or paid to transfer a liability (an exit price) in an orderly transaction between market participants at the measurement date.

The guidance establishes a hierarchy for inputs used in measuring fair value that maximizes the use of observable inputs and minimizes the use of unobservable inputs by requiring that the most observable inputs be used when available.

Observable inputs are inputs that market participants would use in pricing the asset or liability, developed based on market data obtained from sources independent of the company.

Unobservable inputs are inputs that reflect the company’s assumptions of what market participants would use in pricing the asset or liability developed based on the best information available in the circumstances.

The hierarchy is broken down into three levels based on reliability of the inputs as follows:

Observable inputs such as quoted prices in active markets;

Inputs, other than the quoted prices in active markets, that are observable either directly or indirectly;

Unobservable inputs in which there is little or no market data, which require the reporting entity to develop its own assumptions.

As of March 31, 2019 and 2018, the company did not have any financial instruments that are measured on a recurring basis as Level 1, 2 or 3.

Reclassification

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conform to the current period financial statements presentation.

Accounting Pronouncements

In July 2015, the Financial Accounting Standards Board (FASB)

issued Accounting Standards Update No.

2015-11 (ASU 2015-11) "Simplifying the

Measurement of Inventory".

According to ASU 2015-11 an entity should measure

inventory within the scope of this update at the lower of cost and net

realizable value.

Net realizable value is the estimated selling prices in the

ordinary course of business, less reasonably predictable costs of completion,

disposal, and transportation.

Subsequent measurement is unchanged for inventory

measured using LIFO or the retail inventory method.

The amendments in ASU

2015-11 more closely align the measurement of inventory in GAAP with the

measurement of inventory in International Financial Reporting Standards (IFRS).

The Board has amended some of the other guidance in Topic 330 to more clearly

articulate the requirements for the measurement and disclosure of inventory.

However, the Board does not intend for those clarifications to result in any

changes in practice.

Other than the change in the subsequent measurement

guidance from the lower of cost or market to the lower of cost and net

realizable value for inventory within the scope of ASU 2015-11, there are no

other substantive changes to the guidance on measurement of inventory.

public business entities, the amendments in ASU 2015-11 are effective for fiscal

years beginning after December 15, 2016, including interim periods within those

fiscal years.

For all other entities, the amendments in ASU 2015-11 are

effective for fiscal years beginning after December 15, 2016, and interim

periods within fiscal years beginning after December 15, 2017.

The amendments in

ASU 2015-11 should be applied prospectively with earlier application permitted

as of the beginning of an interim or annual reporting period.

The Board decided that the only disclosures required at

transition should be the nature of and reason for the change in accounting

An entity should disclose that information in the first annual period

of adoption and in the interim periods within the first annual period if there

is a measurement-period adjustment during the first annual period in which the

changes are effective.

Recent Accounting Pronouncements

Recently Adopted Standards.

The following recently

issued accounting standards were adopted during fiscal year 2019:

In May 2014, the FASB issued ASU No.

2014-09, Revenue from

Contracts with Customers , which supersedes nearly all existing revenue

recognition standards under U.S.

The new standard provides a five-step

process for recognizing revenue that depicts the transfer of promised goods or

services to customers in an amount that reflects the consideration to which the

entity expects to be entitled in exchange for those goods or services.

Company adopted this ASU using the full retrospective method effective April 1,

The impact of adoption of this ASU was immaterial and, accordingly, there

were no changes to the previously issued financial statements for the year ended

March 31, 2018.

In August 2016, the Financial Accounting Standards Board

(FASB) issued Accounting Standards Update (ASU) No.

2016-15, Statement of

Cash Flows, Classification of Certain Cash Receipts and Cash Payments.

new standard is intended to reduce diversity in practice in how certain cash

receipts and cash payments are classified in the statements of cash flows and

must be adopted retrospectively for each prior reporting period presented upon

initial adoption.

ASU 2016-15 was adopted effective April 1, 2018 and did not

have a material impact on the Companys consolidated financial statements for

the years ended March 31, 2018 and 2019 .

Accordingly, there were no

transactions that required retrospective adjustments in the consolidated

statements of cash flows for the year ended March 31, 2018.

In May 2017, the FASB issued ASU No.

CompensationStock Compensation:

Scope of Modification Accounting , which

provides clarification on when modification accounting should be used for

changes to the terms or conditions of a share-based payment award.

This standard

does not change the accounting for modifications of share-based payment awards

but clarifies that modification accounting guidance should only be applied if

there is a change to the value, vesting conditions, or award classification and

would not be required if the changes are considered non-substantive.

standard was adopted by the Company in the first quarter of fiscal 2019 and did

not have a material impact on its consolidated financial statements.

Standards Required to be Adopted in Future Years.

In June 2016, the FASB issued ASU 2016-13, Financial

Instruments - Credit Losses (Topic 326):

Measurement of Credit Losses on

Financial Instruments.

ASU 2016-13 amends the guidance on the impairment of

financial instruments.

This update adds an impairment model (known as the

current expected credit losses model) that is based on expected losses rather

than incurred losses.

Under the new guidance, an entity recognizes, as an

allowance, its estimate of expected credit losses.

In November 2018, ASU 2016-13

was amended by ASU 2018-19, Codification Improvements to Topic 326, Financial

Instruments Credit Losses.

ASU 2018-19 changes the effective date of the

credit loss standards (ASU 2016-13) to fiscal years beginning after December 15,

2021, including interim periods within those fiscal years.

Further, the ASU

clarifies that operating lease receivables are not within the scope of ASC

326-20 and should instead be accounted for under the new leasing standard, ASC

The Company does not believe that the impact of adopting this standard will

have a material effect on its financial statements .

In February 2016, the FASB issued

2016-02, Leases (Topic 842).

The new guidance will require

lessees to recognize a right-of-use asset and a lease liability for virtually

all leases, other than leases with a term of 12 months or less, and to provide

additional disclosures about leasing arrangements.

The Company will adopt this

standard as of April 1, 2019, the first day of its 2020 fiscal year, using the

modified retrospective approach.

The Company will elect an optional practical

expedient to retain its current classification of leases, and as a result,

anticipates that the initial impact of adopting this new standard on its

consolidated statement of operations and consolidated statement of cash flows

will result in a lease liability of approximately $140,000 and a right of use

asset of approximately $124,000.

The Companys undiscounted minimum lease

commitments under its operating leases are disclosed in Note 9.

The Company has evaluated other recent accounting

pronouncements through June 2019 and believes that none of them will have a

material effect on our financial statements.

NOTE 2 GOING CONCERN

material effect on our consolidated financial statements.

NOTE 2 CASH FLOWS

The accompanying financial statements have been prepared

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sustained through debt and equity financing.

The ability of the Company to continue as a going concern is

dependent upon its ability to raise additional capital from the sale of common

stock and, ultimately, the achievement of significant operating revenues.

financial statements do not include any adjustments relating to the

recoverability and classification of recorded asset amounts, or amounts and

classification of liabilities that might result from this uncertainty.

We have not yet established an ongoing source of revenues

sufficient to cover our operating costs, however, as a result of the $10,450,900

(net of offering costs) raised in our public offering in March 2019, expected

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

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

operations through at least June 30, 2020.

NOTE 3 PROPERTY AND EQUIPMENT

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Machinery Construction in Progress

Machinery under Capital Lease

Office Equipment

Leasehold Improvements

Accumulated Depreciation

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installments of $14,934.00 each and one final installment of $4,040.41, with the

first installment due on February 1, 2018 and on the remaining eleven

installments due on the first of each month thereafter with the final

installment due and payable on January 1, 2019.

The Company paid for equipment to Water Engineering Solutions,

LLC, a related party, $-0- and $104,619 for the years ended March 31, 2018 and

March 31, 2017.

Water Engineering Solutions, LLC is an entity that is controlled

and owned by our former president and chief executive officer, Steven P.

Nickolas, and our current president and chief executive officer, Richard A.

The Company no longer has any business relationship with Water

Engineering Solutions, LLC and has not engaged in any business with Water

Engineering Solutions, LLC, for the entirety of fiscal year 2018.

first installment due on February 1, 2018 and on the remaining eleven installments due

on the first of each month thereafter with the final installment due and payable

on January 1, 2019.

As of March 31, 2019, the equipment was paid for in

NOTE 4 REVOLVING FINANCING

On February 1, 2017, The Alkaline Water Company Inc.

subsidiaries (the Company) entered into a Credit and Security Agreement (the

On February 1, 2017, the Company entered into a Credit and Security Agreement (the

Credit Agreement) with SCM Specialty Finance Opportunities Fund, L.P.

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The Credit Agreement has a term of three years, unless earlier

terminated by the parties in accordance with the terms of the Credit

terminated by the parties in accordance with the terms of the Credit Agreement.

The principal amount of the Revolving Facility outstanding

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rate, plus (ii) 3.25%, payable monthly in arrears.

The interest rate as of

March 31, 2019 was 8.75% .

To secure the payment and performance of the obligations under

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the Lender a $30,000 facility fee.

The Company agreed to pay to Lender monthly

The Company agreed to pay the Lender monthly

an unused line fee in amount equal to 0.083% per month of the difference derived

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ratio and minimum liquidity requirements.

The Company was in compliance with

those covenants as of March 31, 2019.

On February 13, 2018, the Lender agreed to provide the Company

a $400,000 Temporary Over Advance (TOA) under the Credit Facility Agreement.

The TOA is to be repaid as follows:

(i) the Company shall make five (5) weekly

principal payments on the TOA each in the amount of $20,000 commencing on April

23, 2018 and on the first Business Day of each calendar week thereafter through

and including May 21, 2018, (ii) the Company shall make ten (10) weekly

principle payments on the TOA, each in the amount of $30,000, commencing on May

28, 2018 and on the first Business Day of each calendar week

thereafter through and including July 30, 2018 and (iii) repay the remaining

principal balance on the TOA, if any, in full on or prior to July 30, 2018.

On February 14, 2018, David A.

Guarino entered into a Guarantee

The TOA was repaid as follows:

(i) the Company made five (5) weekly principal

payments on the TOA each in the amount of $20,000 commencing on April 23, 2018

and on the first Business Day of each calendar week thereafter through and

including May 21, 2018, (ii) the Company made ten (10) weekly principle payments

on the TOA, each in the amount of $30,000, commencing on May 28, 2018 and on the

first Business Day of each calendar week thereafter through and including July 30, 2018 and (iii) repaid

the remaining principal balance on the TOA, if any, in full on or prior to July

On February 14, 2018, David Guarino, the Company's Chief Financial Officer, entered into a Guarantee

Agreement (the Guarantee) with the Lender in order for the Lender to agree to

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severally, guaranteed the prompt, complete and full payment of the Companys

obligations to repay the TOA only, under the Credit Agreement, with the Lender.

As of March 31, 2019, the TOA has been repaid in full.

On December 31, 2018, the Lender agreed to provide the Company

a $400,000 Temporary Over Advance (TOA 2) under the Credit Facility Agreement.

The TOA2 is to be repaid as follows:

(i) the Company shall make five (5) weekly

principal payments on the TOA 2 each in the amount of $20,000 commencing on

February 18, 2019 and on the first Business Day of each calendar week thereafter

through and including March 18, 2019, (ii) the Company shall make ten (10)

weekly principal payments on the TOA 2, each in the amount of $30,000,

commencing on March 25, 2018 and on the first Business Day of each calendar week

thereafter through and including May 27, 2019 and (iii) repay the remaining

principal balance on the TOA 2, if any, in full on or prior to May 27, 2019.

of March 31, 2019, the TOA 2 was repaid in full.

On December 31, 2018, David Guarino entered into a Guarantee

Agreement (the Guarantee 2) with the Lender in order for the Lender to agree

to provide the Company the $400,000 TOA 2 under the Credit Agreement.

Guarantee 2, Mr.

Guarino personally, absolutely, and unconditionally, jointly

and severally, guaranteed the prompt, complete and full payment of the Companys

obligations to repay the TOA 2 only, under the Credit Agreement, with the

NOTE 5 DERIVATIVE LIABILITY

On May 1, 2014, the Company completed the offering and sale of

an aggregate of shares of our common stock and warrants.

Each share of common

stock sold in the offering was accompanied by a warrant to purchase one-half of

a share of common stock.

The warrants include down-round provisions that reduce

the exercise price of a warrant and convertible instrument.

As required by ASC

815 Derivatives and Hedging, if the Company either issues equity shares for a

price that is lower than the exercise price of those instruments or issues new

warrants or convertible instruments that have a lower exercise price, the

investors will be entitled to down-round protection.

The Company evaluated

whether its warrants and convertible debt instruments contain provisions that

protect holders from declines in its stock price or otherwise could result in

modification of either the exercise price or the shares to be issued under the

respective warrant agreements.

The Company determined that a portion of its

outstanding warrants and conversion instruments contained such provisions

thereby concluding were not indexed to the Companys own stock and therefore a

derivative instrument.

On August 20, 2014, the Company entered into a warrant

amendment agreement with certain holders of the Companys outstanding common

stock purchase warrants whereby the Company agreed to reduce the exercise price

of the Existing Warrants the Holders are to be issued new common stock purchase

warrants of the Company in the form of the Existing Warrants to purchase up to a

number of shares of our common stock equal to the number of Existing Warrants

exercised by the Holders

The Company analyzed the warrants and conversion feature under

ASC 815 Derivatives and Hedging to determine the derivative liability as of

March 31, 2018 was $288.

On June 28, 2019, the Credit Agreement was amended to extend the expiration date to July 1, 2021, to increase the loan commitment amount to $5 million from $4 million and to change the termination fee to 1% from 2%.

All other terms and conditions of the Credit Agreement remained the same.

NOTE 5 STOCKHOLDERS EQUITY

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terms as fixed and determined by our board of directors.

Grant of Series A Preferred Stock

On October 8, 2013, the Company issued a total of 20,000,000

shares of non-convertible Series A Preferred Stock to Steven Nickolas and

Richard Wright (10,000,000 shares to each), our directors and executive

officers, in consideration for the past services, at a deemed value of $0.001

The company valued these shares based on the cost considering the

time and average billing rate of these individuals and recorded a $20,000 stock

compensation cost for the year ended March 31, 2014.

Our authorized preferred stock was not affected by the reverse

stock split and continues to be 100,000,000 shares of preferred stock, with a

par value of $0.001 per share.

In addition, the number of issued and outstanding

shares of Series A Preferred Stock continues to be 20,000,000.

However, holders

of Series A Preferred Stock had 0.2 vote per share of Series A Preferred Stock,

instead of 10 votes per share of Series A Preferred Stock, as a result of the

reverse-stock split.

On January 22, 2016, the Company amended the certificate of

designation for our Series A Preferred Stock by filing an amendment to

certificate of designation with the Secretary of State of the State of Nevada.

The Company amended the certificate of designation for our Series A Preferred

Stock by deleting Section 2.2 of the certificate of designation, which

proportionately increases or decreases the number of votes per share of Series A

Preferred Stock in the event of any dividend or other distribution on our common

stock payable in its common stock or a subdivision or consolidation of the

outstanding shares of its common stock.

Accordingly, holders of Series A

Preferred Stock will have 10 votes per share of Series A Preferred Stock,

instead of 0.2 votes per share of Series A Preferred Stock.

On November 14, 2017, we withdrew the Certificate of

Designation establishing Series A Preferred Stock.

There were no shares of

Series A Preferred Stock outstanding immediately prior to the withdrawal.

Grant of Series C Convertible Preferred Stock

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convertible as may be agreed by our company and the holder in writing from time

Effective March 31, 2016, the Company issued a total of

3,000,000 shares of our Series C Preferred Stock to Steven Nickolas and Richard

Wright (1,500,000 shares to each), pursuant to their employment agreements dated

effective March 1, 2016.

Nickolas converted his 1,500,000 shares of Series C

Preferred Stock to Common Stock on July 11, 2017.

Wright continues to hold

his 1,500,000 shares of Series C Preferred Stock.

At March 31, 2018 and 2019, 1,500,000 shares of Series C preferred stock were convertible into common stock.

Grant of Series D Convertible Preferred Stock

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300,000 shares to Steve Nickolas pursuant to the Settlement Agreement detailed

and (b) 500,000 shares to Richard A.

Wright pursuant to the Exchange

and (b) 500,000 shares to Richard Wright pursuant to the Exchange

Agreement and stock option forfeitures detailed below.

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Securities Act of 1933.

Upon incorporation in 2011, the Company was authorized to issue 75,000,000 shares of

$0.001 par value common stock.

On May 31, 2013, the Company effected a 15-for-1

forward stock split of our $0.001 par value common stock.

All shares and per

share amounts have been retroactively restated to reflect such split.

the acquisition of Alkaline Water Corp., the Company had 109,500,000 shares of

common stock issued and outstanding.

On May 31, 2013, the Company issued

43,000,000 shares in exchange for a 100% interest in Alkaline Water Corp.

accounting purposes, the acquisition of Alkaline Water Corp.

by The Alkaline

Water Company Inc.

has been recorded as a reverse acquisition of a company and

recapitalization of Alkaline Water Corp.

based on the factors demonstrating that

Alkaline Water Corp.

Upon incorporation in 2011, the Company was authorized to issue

75,000,000 shares of $0.001 par value common stock.

On May 31, 2013, the Company

effected a 15-for-1 forward stock split of our $0.001 par value common stock.

All shares and per share amounts have been retroactively restated to reflect

Prior to the acquisition of Alkaline Water Corp., the Company had

109,500,000 shares of common stock issued and outstanding.

On May 31, 2013, the

Company issued 43,000,000 shares in exchange for a 100% interest in Alkaline

For accounting purposes, the acquisition of Alkaline Water Corp.

The Alkaline Water Company Inc.

has been recorded as a reverse acquisition of a

company and recapitalization of Alkaline Water Corp.

based on the factors

demonstrating that Alkaline Water Corp.

represents the accounting acquirer.

Consequently, after the

closing of this agreement the Company adopted the business of Alkaline Water Corp.s wholly-owned subsidiary,

Alkaline 88, LLC.

As part of the acquisition, the former management of the

Company agreed to cancel 75,000,000 shares of common stock.

Consequently, after the closing of this agreement the Company adopted the

business of Alkaline Water Corp.s wholly-owned subsidiary, Alkaline 88, LLC.

part of the acquisition, the former management of the Company agreed to cancel

75,000,000 shares of common stock.

On December 30, 2015, the Company effected a fifty for one

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common stock.

As a result, the authorized common stock has decreased from

As a result, the authorized common stock decreased from

1,125,000,000 shares of common stock, with a par value of $0.001 per share, to

22,500,000 shares of common stock, with a par value of $0.001 per share.

shares and per share amounts have been retroactively restated to reflect such

shares and per share amounts were retroactively restated to reflect such split.

On January 21, 2016, stockholders of our company approved, by

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to 200,000,000.

The Company received written consents representing 20,776,000

votes from the holders of shares of its common stock and our Series A Preferred

Stock voting as a single class, representing approximately 61% of the voting

power of its outstanding common stock and its outstanding Series A Preferred

Stock voting as a single class as of the record date (January 12, 2016).

January 21, 2016, there were no written consents received by the Company

representing a vote against, abstention or broker non-vote with respect to the

On March 12, 2019, the Company closed an underwritten public

offering of 4,600,000 shares of our common stock.

The shares were issued at a

purchase price of $2.50 per share, for net proceeds of $10,450,900.

Common Stock Issued for Services

In the year ended March 31, 2018, the company issued 262,596

shares of restricted common stock to consultants for services rendered that were

valued at $333,897.

In issuing these shares, we relied on an exemption from the

registration requirements of the Securities Act of 1933 provided by Section

4(a)(2) of the Securities Act of 1933.

Common Stock Issued in Conjunction with Notes and Warrant

On March 31, 2016, the Company entered into a promissory note

and warrant exchange agreement (the March Exchange Agreement) with six holders

of our promissory notes (each, a Note) in the aggregate principal amount of

$310,000 and warrants (each, a March Warrant) to purchase an aggregate of

88,563 shares of our common stock, whereby we exchanged the holders Notes and

March Warrants, for no additional consideration, for an aggregate of 551,246

shares of our common stock (the March Exchange), and following the March

Exchange, the Notes and March Warrants were automatically cancelled and

terminated and the holders have no further rights pursuant to the Notes, March

Warrants and any agreement or instrument pursuant to which such Notes or March

Warrants were issued.

Pursuant to the March Exchange Agreement, the Company

issued an aggregate of 551,246 shares of our common stock upon exchange of the

above mentioned Notes and March Warrants.

On of May 16, 2016, the Company entered into a warrant exchange

agreement (the May Exchange Agreement) with six holders of our warrants (each,

a May Warrant) to purchase an aggregate of 163,202 shares of our common stock,

whereby the Company exchanged the holders May Warrants, for no additional

consideration, for an aggregate of 163,202 shares of our common stock (the May

Exchange), and following the May Exchange, the May Warrants were automatically

cancelled and terminated and the holders have no further rights pursuant to the

May Warrants and any agreement or instrument pursuant to which such May Warrants

As of March 31, 2017, pursuant to a Note Exchange Agreement, we

issued an aggregate of 210,000 shares of our common stock upon exchange of the

applicable Notes.

In issuing these shares, we relied on an exemption from the

registration requirements of the Securities Act of 1933 provided by Section

3(a)(9) and/or Section 4(a)(2) of the Securities Act of 1933.

As of March 31, 2017, pursuant to a Warrant Exchange Agreement,

we issued an aggregate of 25,716 shares of our common stock upon exchange of the

applicable Warrants.

In issuing these shares, we relied on an exemption from the

registration requirements of the Securities Act of 1933 provided by Section

3(a)(9) and/or Section 4(a)(2) of the Securities Act of 1933.

In the years ended March 31, 2019, the Company did not issue any common stock for services, however, the Company accrued $84,583 under an agreement that obligates the Company to issue 50,000 shares to a consultant for services rendered of which approximately 29,000 shares were earned as of March 31, 2019.

For the year ended March 31, 2018 the company recorded $1,302,815 for common stock issued to contractors for services rendered.

NOTE 6 OPTIONS AND WARRANTS

Stock Option Awards

Effective October 7, 2013, our board of directors adopted and approved our 2013 equity incentive plan.

The plan was approved by a majority of our stockholders on October 7, 2013.

On October 31, 2014, our board of directors amended our 2013 equity incentive plan to, among other things, increase the number of shares of stock of our company available for the grant of awards under the plan from 20,000,000 shares to 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 company’s long range success;

(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 company’s 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 connection with our application to list our common stock on the TSX Venture Exchange, but the suspension does not affect any awards, including any stock options, already granted under the plan.

On April 25, 2018, our board of directors adopted the 2018 Stock Option Plan, pursuant to which we may grant stock options to acquire up to a total of 5,171,612 shares of our common stock, including any other shares of our common stock which may be issued pursuant to any other stock options granted by our company outside the plan.

We adopted the plan in connection with our application to list our common stock on the TSX Venture Exchange.

The purpose of the plan is to retain the services of valued key employees and consultants of our company and such other persons as our board of directors selects, and to encourage such persons to acquire a greater proprietary interest in our company, thereby strengthening their incentive to achieve the objectives of our stockholders, and to serve as an aid and inducement in the hiring of new employees and to provide an equity incentive to consultants and other persons selected by our board of directors.

Effective April 28, 2017, we granted a total of 1,790,000 stock

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4(a)(2) of the Securities Act of 1933.

For the years ended March

31, 2019 and March 31, 2018 the Company has recognized compensation expense of

$393,460 and $549,602 respectively, on the stock options granted in April 2017 that vested.

The unvested amounts will be amoritized over the next two years.

The fair value

of the unvested shares is $786,920 as of March 31, 2019.

The aggregate intrinsic

value of outstanding options was $4,114,439 at March 31, 2019.

option activity summary covering options is presented in the table below:

Outstanding at March 31, 2017

Expired/Forfeited

Outstanding at March 31, 2018

Expired/Forfeited

Outstanding at March 31, 2019

Exercisable at March 31, 2019

On March 1, 2018, pursuant to Warrant Amendment Agreements

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The Existing Warrants were issued by us as part of an offering that closed on

March 4, 2016 and were included in our registration statement on Form S-1 (File

March 4, 2016.

In addition, pursuant to the Warrant Amendment Agreements, we

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non-transferable.

For the years ended March 31, 2018 and March 31, 2017 the

Company has recognized compensation expense of $549,602 and $0 respectively, on

the stock options granted that vested.

The fair value of the unvested shares is

$0 as of March, 2018.

The aggregate intrinsic value of these options was $0 at

March 31, 2017.

Stock option activity summary covering options is presented in

the table below:

Outstanding at March 31, 2016

Expired/Forfeited

Outstanding at March 31, 2017

Expired/Forfeited

Outstanding at March 31, 2018

Exercisable at March 31, 2018

On May 31, 2018, the Company issued 5,131,665 Units of the

Company at a price of US$0.75 per Unit for aggregate gross proceeds of

US$3,848,749.

Each Unit consisted of one share of common stock of the Company

(each, a Share ) and one-half of one share purchase warrant (each whole

warrant, a Warrant).

One Warrant entitles the holder thereof to purchase one

additional Share of the Company (each, a Warrant Share ) at a

price of US$0.90 per Warrant Share for a period of two years from closing.

On October 1, 2018, the Company closed a non-brokered private

placement financing (the Financing) of 1,619,947 units (each, a Unit) at a

price of CDN$2.50 per Unit for gross proceeds of $2,979,596.

consists of one share of common stock of the Company (each, a Share) and one

share purchase warrant (each, a Warrant), with each Warrant entitling the

holder thereof to purchase one additional Share at a price of CDN$2.90 per Share

for a period of two years.

All securities issued in the Financing were subject

to a Canadian holding period which expired on January 28, 2019.

The Company paid

finders fees of $123,572 and issued 49,428 warrants.

The following is a summary of the status of all of our warrants

as of March 31, 2018 and changes during the period ended on that date:

as of March 31, 2019 and changes during the years ended on that date:

Exercise Price

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outstanding and exercisable at March 31, 2019:

STOCK WARRANTS OUTSTANDING AND EXERCISABLE

STOCK WARRANTS OUTSTANDING

Weighted-Average

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Life in Years

On October 22, 2014, the Company entered into a master lease

agreement with Veterans Capital Fund, LLC (the Lessor) for a secured lease

line of credit financing in an amount not to exceed $600,000.

The lease was

secured by three new alkaline generating electrolysis system machines.

wholly-owned subsidiary, Alkaline 88, LLC, and Water Engineering Solutions, LLC

acted as co-lessees.

Water Engineering Solutions, LLC is an entity that is

controlled and owned by our former President, Chief Executive Officer, director

and major stockholder, Steven P.

Nickolas, and our current President, Chief

Executive Officer, director, and major stockholder, Richard A.

to the master lease agreement, the Lessor agreed to lease to us the equipment

described in any equipment schedule signed by us and approved by the Lessor.

three leases under the master lease agreement were structured for a three-year

lease term with fixed monthly lease rental payments based on a monthly lease

rate factor of 3.4667% of the Lessors capital cost.

In connection with the

entering into the master lease agreement, the Company also entered into a

warrant agreement with the Lessor, pursuant to which the Company agreed to issue

a warrant to purchase 72,000 shares of our common stock to the Lessor and/or its

affiliates at an exercise price of $6.25 per share for a period of five

On February 25, 2015, the Company amended the master lease

agreement with Veterans Capital Fund, LLC for an increase in the secured lease

line of credit financing to an amount not to exceed $800,000.

The lease was

secured by a new fourth alkaline generating electrolysis system machines.

wholly-owned subsidiary, Alkaline 88, LLC, and Water Engineering Solutions, LLC

acted as co-lessees.

Water Engineering Solutions, LLC is an entity that is

controlled and owned by our former President, Chief Executive Officer, director

and major stockholder, Steven P.

Nickolas, and our current President, Chief

Executive Officer, director, and major stock holder, Richard A.

Pursuant to the master lease agreement, the Lessor agreed to

lease to us the equipment described in any equipment schedule signed by us and

approved by the Lessor.

Any lease under the master lease agreement will be

structured for a three-year lease term with fixed monthly lease rental payments

based on a monthly lease rate factor of 3.4667% of the Lessors capital cost.

connection with the entering into the master lease agreement, the Company

entered into a warrant agreement with the Lessor, pursuant to which the Company

agreed to cancel the previous issued warrant for 72,000 and issue a warrant to

purchase 102,000 shares of our common stock to the Lessor and/or its affiliates

at an exercise price of $5.00 per share for a period of five years.

shares vested on October 22, 2014, 13,316 shares on October 28, 2014, 13,606

shares on December 22, 2014, 6,945 shares on February 3, 2015 and 15,799 shares

on March 5, 2015.

The remaining 18,105 shares will vest on a pro rata basis

according to any amounts the Lessor funds pursuant to any lease schedules under

the master lease agreement, provided that if we draw on 90% or more of the total

lease line under the master lease agreement, then all such shares will be deemed

to be vested.

The Company recorded the bifurcated value of $309,028 of the

warrants issued as additional paid in capital, the value was determine using a

Black-Scholes, a level 3 valuation measure.

The fair value of the warrants granted during the year ended

March 31, 2018 was estimated at the date of agreement using the Black- Scholes

option-pricing model and a level 3 valuation measure, with the following

Market value of stock on purchase date

Risk-free interest rate

Dividend yield

Volatility factor

Weighted average expected life (years)

*Note The warrant exercise price is

C$ 2.90 = U.S.

$2.17 (rate 1.3352) at 03/31/19

NOTE 7 RELATED PARTY TRANSACTIONS

On October 8, 2013, the Company issued a total of 20,000,000

shares of non-convertible Series A Preferred Stock to Steven A.

Nickolas, former

Chairman and CEO as of April 7, 2017, and Richard A.

Wright (10,000,000 shares

to each), in consideration for the past services, at a deemed value of $0.001

We valued these shares based on the cost considering the time and

average billing rate of these individuals and recorded a $20,000 stock

compensation cost for the year ended March 31, 2014.

On October 30, 2018, Steven

Nickolas forfeited his 10,000,000 shares of our Series A Preferred Stock

pursuant to the Settlement Agreement detailed below.

On November 8, 2018,

Wright forfeited his 10,000,000 shares of our Series A Preferred

Stock pursuant to the Exchange Agreement as detailed below.

Effective March 31, 2016, the Company issued a total of

3,000,000 shares of our Series C Preferred Stock to Steven P.

Wright (1,500,000 shares to each), our directors and executive

officers, pursuant to their employment agreements dated effective March 1, 2016.

Nickolas converted his 1,500,000 shares of Series C Preferred Stock to

Common Stock on August 17, 2017.

Wright continues to hold his 1,500,000

shares of Series C Preferred Stock.

On April 7, 2017, our board of directors appointed Richard A.

Wright as president of our company.

On April 28, 2017, Mr.

Wright resigned as

the secretary and treasurer of our company and he was appointed as the chief

executive officer of our company.

On April 28, 2017, our board of directors appointed David A.

Guarino as chief financial officer, treasurer, secretary president of our

shares of non-convertible Series A Preferred Stock to Steven Nickolas, former

Chairman and CEO as of April 7, 2017, and Richard Wright (10,000,000 shares to

each), in consideration for the past services, at a deemed value of $0.001 per

We valued these shares based on the cost considering the time and average

billing rate of these individuals and recorded a $20,000 stock compensation cost

for the year ended March 31, 2014.

On October 30, 2018, Steven Nickolas

forfeited his 10,000,000 shares of our Series A Preferred Stock pursuant to the

Settlement Agreement detailed below.

On November 8, 2018, Richard Wright

forfeited his 10,000,000 shares of our Series A Preferred Stock pursuant to the

Exchange Agreement as detailed below.

On May 3, 2017, the Company designated 3,000,000 shares of the

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Parties ) and McDowell 78, LLC and Wright Investments Group, LLC, a

company controlled or owned by Richard A.

Wright, (collectively,

company controlled or owned by Richard Wright, (collectively,

Wright/McDowell).

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to mutual release of claims.

On November 8, 2017, Richard A.

Wright and the Company entered

in to an Exchange Agreement and Mutual Release of Claims (the Exchange

The Exchange Agreement provided, among other things, for the following:

a) in exchange for the issuance of 700,000 shares of

our common stock and 300,000 shares of our Series D Preferred Stock described

above, Richard A.

Wright forfeited his 10,000,000 shares of our Series A

Preferred Stock, to be cancelled for no further consideration;

and b) Richard A.

Wright also agreed to a release of claims against the Company.

Also on November

8, 2017, Richard A.

Wright forfeited stock options to purchase 1,500,000 shares

of our companys common stock at an exercise price of $0.52 per share in

exchange for the Company agreeing to issue Richard A.

Wright an additional

200,000 shares of Series D Preferred Stock.

On November 8, 2017, Richard Wright and the Company entered in

to an Exchange Agreement and Mutual Release of Claims (the Exchange

The Exchange Agreement provided, among other things, for the

a) in exchange for the issuance of 700,000 shares of our common stock

and 300,000 shares of our Series D Preferred Stock described above, Richard

Wright forfeited his 10,000,000 shares of our Series A Preferred Stock, to be

cancelled for no further consideration;

and b) Richard Wright also agreed to a

release of claims against the Company.

Also on November 8, 2017, Richard Wright

forfeited stock options to purchase 1,500,000 shares of our companys common

stock at an exercise price of $0.52 per share in exchange for the Company

agreeing to issue Richard Wright an additional 200,000 shares of Series D

Preferred Stock.

The Company recognized an expense in the amount of $875,200 relating to the issuance of the 700,000 shares of common stock and $200 relating to the issuance of the 200,000 shares of Series D preferred stock.

On September 14, 2017, October 17, 2017 and November 22, 2017

Wright Investment Group LLC, an entity controlled by Richard A.

Wright, chief

Wright Investment Group LLC, an entity controlled by Richard Wright, chief

executive officer, president and director, advanced $200,000, $400,000 and

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(TOA 1) under the Credit Facility Agreement (the Credit Agreement).

Guarantee, Mr.

Guarino personally, absolutely, and unconditionally, jointly and

severally, guaranteed the prompt, complete and full payment of the Companys

obligations to repay the TOA only, under the Credit Agreement, with the

Employment Agreement with Steven P.

the Guarantee 1, Mr.

Guarino personally, absolutely, and unconditionally,

jointly and severally, guaranteed the prompt, complete and full payment of the

Companys obligations to repay the TOA 1 only, under the Credit Agreement, with

The TOA 1 was repaid in full as of March 31, 2019.

On December 31, 2018, David A.

Guarino entered into a Guarantee

Agreement (the Guarantee 2) with the Lender in order for the Lender to agree

to provide the Company a second $400,000 TOA under the Credit Agreement (TOA

Under the Guarantee 2, Mr.

Guarino personally, absolutely, and

unconditionally, jointly and severally, guaranteed the prompt, complete and full

payment of the Companys obligations to repay the TOA 2 only, under the Credit

Agreement, with the Lender.

Employment Agreement with Steven Nickolas

On March 30, 2016, the Company entered into an employment

agreement dated effective March 1, 2016 with Steven P.

Nickolas, our former

agreement dated effective March 1, 2016 with Steven Nickolas, our former

president, chief executive officer and director, pursuant to which Mr.

33 unchanged sentences

Nickolas as the President and Chief Executive Officer of our

Employment Agreement with Richard A.

On March 30, 2016, the Company entered into an employment

agreement dated effective March 1, 2016 with Richard A.

Wright, our vice-

president, secretary, treasurer and director, pursuant to which Mr.

agreed to perform such duties as are regularly and customarily performed by the

vice president, secretary and treasurer of a corporation, and any other duties

consistent with Mr.

Wrights position in our company.

Pursuant to the terms of

the employment agreement, the Company have agreed to (i) pay Mr.

Wright $14,000

per month or such other amount as may be determined by our board of directors

from time to time;

and (ii) issue to Mr.

Wright 1,500,000 shares of our Series C

Preferred Stock (issued effective as of March 31, 2016).

The Company also agreed

that each of the following events constitute a Negotiated Trigger Event as

defined in the Certificate of Designation for the Series C Preferred Stock:

the occurrence of a change of control event;

(ii) the death of Mr.

(iii) the termination of the employment agreement for any reason.

In addition, the Company may (i) grant awards under our 2013

equity incentive plan to Mr.

Wright from time to time and (ii) pay to Mr.

an annual discretionary performance bonus in an amount to be determined by our

board of directors in its sole discretion.

Wright will also be eligible to

participate in other bonus programs offered by our company to our senior staff

from time to time.

In addition, Mr.

Wright will be entitled to participate in all

of our employee benefit plans provided by our company to our senior officers.

the Company do not provide such plans at any time, the Company agreed to

reimburse Mr.

Wright for the reasonable cost of any such plans obtained

The Company also agreed to (i) provide Mr.

Wright with vehicle leased

in our companys name, with lease payments not exceeding $700/month or such

other amount as may be determined by our board of directors;

an allowance of $5,000 per month or such other amount as may be determined by

our board of directors, which may be used by Mr.

Wright as he sees fit,

including without limitation, the funding of non-qualified retirement plans;

(iii) reimburse Mr.

Wright for any expenses that he incurs in connection with

his duties under his employment agreement.

Wright will be entitled in each

year to five weeks paid vacation, in addition to weekends and statutory

holidays, to be taken in installments of no more than three consecutive weeks of

paid time off.

The initial term of the employment agreement is three years

and, on the third anniversary of the effective date of the employment and on

each annual anniversary date thereafter, the term of the employment agreement

will automatically be extended by one additional year unless either party gives

90 days written notice to the other of its intention not to renew the

employment agreement.

If, within 90 days of the occurrence of a change of control

Wright resigns from his employment relationship with our company or

our company terminates his employment agreement for any reason other than for

just cause, then the Company agreed to pay Mr.

Wright severance in an amount

equal to the following:

36 months salary plus an amount, if any, equal to the

one months salary multiplied by the number of calendar years,

starting on the effective date of the employment agreement, that Mr.

employed by our company under his employment agreement.

The Company may terminate Mr.

Wrights employment at any time

for other than just cause by delivering to Mr.

Wright written notice of

In such a case, the Company agreed to pay Mr.

Wright severance in

an amount equal to the following:

36 months salary plus an amount, if any,

equal to the following:

one months salary multiplied by the number of calendar

years, starting on the effective date of the employment, that Mr.

employed by our company under his employment agreement.

Subject to applicable employment laws or similar legislation,

the Company may terminate Mr.

Wrights employment in the event he has been

unable to perform his duties for a period of eight consecutive months or a

cumulative period of 12 months in any consecutive 24 month period, because of a

physical or mental disability.

Wrights employment will automatically

terminate on his death.

In the event Mr.

Wrights employment with our company

terminates by reason of Mr.

Wrights death or disability, then upon and

immediately effective on the date of termination the Company agreed to promptly

pay and provide Mr.

Wright (or in the event of Mr.

Wrights death, Mr.

any unpaid salary and any outstanding and accrued regular and special

vacation pay through the date of termination;

reimbursement for any unreimbursed

expenses incurred through to the date of termination;

and any outstanding

amounts due under any awards which will be dealt with in accordance with our

2013 equity incentive plan and the award agreement.

In the event Mr.

employment is terminated due to a disability, the Company agreed to pay to Mr.

Wright the severance referred to above.

The Company may terminate Mr.

Wrights employment for just

cause at any time by delivering to Mr.

Wright written notice of termination.

the event that Mr.

Wrights employment with our company is terminated by our

company for just cause, Mr.

Wright will not be entitled to any additional

payments or benefits (except as otherwise provided in his employment agreement),

other than for amounts due and owing to Mr.

Wright by our company as of the date

of termination, except for any awards under our 2013 equity incentive plan will

be dealt with in accordance with the plan and award agreement.

Provided that Mr.

Wright has acted within the scope of his

authority, the Company agreed to indemnify and save harmless Mr.

(including his heirs and legal representatives) against any and all costs,

claims and expenses (including any amounts paid to settle any actions or satisfy

any judgments) which:

he may suffer or incur by reason of any matter or thing

which he may in good faith do or have done or caused to be done as an employee,

officer or director of our company, any of its subsidiaries or of any of their

respective affiliates;

or was reasonably incurred by him in respect of any

civil, criminal or administrative action or proceeding to which he is made a

party by reason of being or having been an employee, officer or director of our

company, any of its subsidiaries or of any of their respective affiliates;

provided that, the foregoing indemnification will apply only if:

honestly and in good faith with a view to the best interests of our company, any of

its subsidiaries or any of their respective affiliates;

and in the case of a

criminal or administrative action or proceeding that is enforced by a monetary

penalty, he had reasonable grounds for believing that his conduct was lawful.

Wright agreed to indemnify and save harmless our company

against, and agree to hold it harmless from, any and all damages, injuries,

claims, demands, actions, liability, costs and expenses (including reasonable

legal fees) incurred or made against our company arising from or connected with

the performance or non-performance of his employment by him or the beach of any

warranty, representation or covenant herein by him, other than claims by him

pursuant to his employment agreement.

If and to the extent the Company maintain directors and

officers liability insurance for the protection of our executives in connection

with acts and omissions occurring during their employment with our company, the

Company agreed that Mr.

Wright will be included as an officer and director who

is covered by such policy on a basis no less favorable than made available to

other executives of our company.

On April 7, 2017, our board of directors appointed Richard A.

Wright as president of our company.

On April 28, 2017, Mr.

Wright resigned as

the secretary and treasurer of our company and he was appointed as the chief

executive officer of our company.

NOTE 8 INCOME TAXES

5 unchanged sentences

The deferred income tax

assets are comprised of the following at March 31, 2018:

assets are comprised of the following at March 31, 2019 and 2018:

Deferred income tax assets:

5 unchanged sentences

carryforward indefinitely.

The valuation allowance was decreased by $490,000 during the

year ended March 31, 2018 as a result of the reduction of U.S.

In December 2017, the U.S.

Tax Cuts and Jobs Act of 2017 (“Tax Act”) was enacted into law which significantly revises the Internal Revenue Code of 1986, as amended.

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

The valuation allowance was decreased by $490,000 during the year ended March 31, 2018 as a result of the reduction in the U.S.

tax rate to 21%.

The current income tax benefit of ($490,000) and $1,750,000 generated for the

years ended March 31, 2018 and 2017, respectively, was offset by an equal

decreased in the valuation allowance.

The valuation allowance was increased due

to uncertainties as to the Companys ability to generate sufficient taxable

income to utilize the net operating loss carryforwards and other deferred income

The current income tax benefit of $2,050,000 generated for the year ended March 31, 2019 was offset by an equal increase in the valuation allowance.

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

The Company recognizes interest and penalties related to

1 unchanged sentence

As of March 31,

2018, the Company has no unrecognized uncertain tax positions, including

2019 and 2018 the Company has no unrecognized uncertain tax positions, including

interest and penalties.

The Companys federal income tax returns for tax years ended

March 31, 2016 and beyond remain subject to examination by the Internal Revenue

The returns for Arizona, the Companys most significant state tax

jurisdication, remain subject to examinination by the Arizona Department of

Revenue for tax years ended March 31, 2015 and beyond.

NOTE 9 COMMITMENTS AND CONTINGENCIES

The Company has long-term leases for its office, warehouse, and

office equipment under cancelable operating leases from April 1, 2016 through

December 26, 2020.

At March 31, 2018, future minimum contractual obligations

were as follows:

Year ending March 31, 2019

office equipment under non cancelable operating leases from April 1, 2016

through December 26, 2020.

At March 31, 2019, future minimum contractual

obligations were as follows:

Year ending March 31, 2020

1 unchanged sentence

Total Minimum Lease Payments:

Rent expense for the years ended March 31, 2019 and 2018 was

$114,822 and $102,445, respectively.

On April 1, 2016, the Company entered into an 18-month lease

8 unchanged sentences

monthly payment of $2,375 for the period June 1, 2018 to March 31, 2019.

March 11, 2019, the Company extended the lease one additional year until March

31, 2020 at a rate of $2,450 per month.

On September 26, 2017, the Company entered into a 39-month

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27-39 of the lease.

The Company shall have the option to extend this lease for

one (1) additional three (3) year term for increased monthly rent.

NOTE 11 CAPITAL LEASE

On October 22, 2014, the Company entered into a master lease

agreement with Veterans Capital Fund, LLC (the Lessor) for a secured lease

line of credit financing in an amount not to exceed $600,000.

The lease was

secured by three new alkaline generating electrolysis system machines.

wholly-owned subsidiary, Alkaline 88, LLC, and Water Engineering Solutions, LLC

acted as co-lessees.

Water Engineering Solutions, LLC is an entity that is

controlled and owned by our former President, Chief Executive Officer, director

and major stockholder, Steven P.

Nickolas, and our current President, Chief

Executive Officer, director, and major stockholder, Richard A.

to the master lease agreement, the Lessor agreed to lease to us the equipment

described in any equipment schedule signed by us and approved by the Lessor.

three leases under the master lease agreement were structured for a three-year

lease term with fixed monthly lease rental payments based on a monthly lease

rate factor of 3.4667% of the Lessors capital cost.

In connection with the

entering into the master lease agreement, the Company also entered into a

warrant agreement with the Lessor, pursuant to which the Company agreed to issue

a warrant to purchase 72,000 shares of our common stock to the Lessor and/or its

affiliates at an exercise price of $6.25 per share for a period of five

On February 25, 2015, the Company amended the master lease

agreement with Veterans Capital Fund, LLC to increase the secured lease line of

credit financing to an amount not to exceed $800,000.

The lease was secured by a

new fourth alkaline generating electrolysis system machine.

Our wholly-owned

subsidiary, Alkaline 88, LLC, and Water Engineering Solutions, LLC acted as

Water Engineering Solutions, LLC is an entity that is controlled and

owned by our former President, Chief Executive Officer, director and major

stockholder, Steven P.

Nickolas, and our current President, Chief Executive

Officer, director, and major stock holder, Richard A.

Pursuant to the

master lease agreement, the Lessor agreed to lease to us the equipment described

in any equipment schedule signed by us and approved by the Lessor.

under the master lease agreement will be structured for a three-year lease term

with fixed monthly lease rental payments based on a monthly lease rate factor of

3.4667% of the Lessors capital cost.

In connection with the entering into the

master lease agreement, the Company entered into a warrant agreement with the

Lessor, pursuant to which the Company agreed to cancel the previous issued

warrant for 72,000 and issue a warrant to purchase 102,000 shares of our common

stock to the Lessor and/or its affiliates at an exercise price of $5.00 per

share for a period of five years.

18,000 shares vested on October 22, 2014,

13,316 shares on October 28, 2014, 13,606 shares on December 22, 2014, 6,945

shares on February 3, 2015 and 15,799 shares on March 5, 2015.

The remaining

18,105 shares will vest on a pro rata basis according to any amounts the Lessor

funds pursuant to any lease schedules under the master lease agreement, provided

that if we draw on 90% or more of the total lease line under the master lease

agreement, then all such shares will be deemed to be vested.

recorded the bifurcated value of $309,028 of the warrants issued as additional

paid in capital, the value was determine using a Black-Scholes, a level 3

valuation measure.

During the year ended March 31, 2015 the Company agreed to

lease the four pieces of specialized equipment used to make our alkaline water

with a value of $735,781 under the above Master Lease agreement.

evaluated this lease under ASC 840-30 Leases- Capital Leases and concluded

that these lease where a capital asset.

NOTE 10 LOANS PAYABLE

On December 31, 2017, the Company exercised its purchase option

with Lessor to purchase all four pieces of equipment leased under the above

referenced master lease agreement for a total of $160,000 (the Purchase

The Purchase Payment bears interest of 12% per annum and is payable

in eleven equal monthly installments of $14,934.00 each and one final

installment of $4,040.41, with the first installment due on February 1, 2018 and

on the remaining eleven installments due on the first of each month thereafter

with the final installment due and payable on January 1, 2019.

with Lessor to purchase all four pieces of equipment leased under a master lease

agreement for a total of $160,000 (the Purchase Payment).

The Purchase Payment

bore interest of 12% per annum and was payable in eleven equal monthly

installments of $14,934.00 each and one final installment of $4,040.41, with the

first installment due on February 1, 2018 and on the remaining eleven

installments due on the first of each month thereafter with the final

installment due and payable on January 1, 2019.

As of March 31, 2019, the

equipment has been paid for in-full.

NOTE 11 CONVERTIBLE NOTES PAYABLE

8 unchanged sentences

to be agreed upon by our company and the Lender (each, an Advance).

During the year ended March 31, 2017, the lender made advances

totaling $1,000,000.

This amount together with accrued interest of $30,000 was

converted to 1,030,000 common shares on March 31, 2017.

In June, 2017, Turnstone Capital Inc.

7 unchanged sentences

converted the

$500,000 plus accrued interest of 14,583 to 514,583 common shares for services

During the year ended March, 31 2017, the Company entered into

a promissory notes totaling $360,000 of which $50,000 was repaid and the

remaining amount of $310,000 was converted into equity on March 31, 2016.

During the year ended March 31, 2017, the Company entered into

promissory notes totaling $260,000 of which $50,000 was repaid and the remaining

amount of $210,000 was converted into equity on March 31, 2017.

On March 31, 2016, the Company entered into a promissory and

warrant exchange agreement (the March Exchange Agreement) with six

holders of our promissory notes (each, a Note) in the aggregate principal

amount of $310,000 and warrants (each, a March Warrant) to purchase an

aggregate of 88,563 shares of our common stock, whereby the Company exchanged

the holders Notes and March Warrants, for no additional consideration, for an

aggregate of 551,246 shares of our common stock (the March Exchange), and

following the March Exchange, the Notes and March Warrants were automatically

cancelled and terminated and the holders have no further rights pursuant to the

Notes, March Warrants and any agreement or instrument pursuant to which such

Notes or March Warrants were issued.

$500,000 plus accrued interest of $14,583 to 514,583 common shares at the conversion price of $1.00 per share.

Upon conversion the remaining unamortized debt discount of $295,000 was immediately amortized.

NOTE 12 SUBSEQUENT EVENTS

On April 25, 2018, the Companys common shares were listed and

began trading on the TSX Venture Exchange under the symbol WTER.

On April 25, 2018, our board of directors adopted the 2018

Stock Option Plan, pursuant to which we may grant stock options to acquire up to

a total of 5,171,612 shares of our common stock, including any other shares of

our common stock which may be issued pursuant to any other stock options granted

by our company outside the plan.

We adopted the plan in connection with our

application to list our common stock on the TSX Venture Exchange.

April 25, 2018, the Company suspended 2013 Equity Incentive Plan in order to

comply with policies of the TSX Venture Exchange.

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 US$0.75 per unit

for aggregate gross proceeds of US$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 US$0.90 per share for a period of two

Of the 5,131,665 units we issued:

(i) 906,666 units were issued

pursuant to the exemption from registration under the Securities Act of 1933, as

amended provided by Section 4(a)(2) and/or Rule 506 of Regulation D promulgated

under the Securities Act of 1933, as amended to four investors who were

accredited investors within the respective meanings ascribed to that term in

Regulation D promulgated under the Securities Act of 1933, as amended;

4,224,999 units were issued to 26 non-U.S.

persons (as that term is defined in

Regulation S of the Securities Act of 1933, as amended) in an offshore

transaction relying on Regulation S and/or Section 4(a)(2) of the Securities Act

of 1933, as amended.

In connection with these private placements, we agreed with

each subscriber who purchased these units to prepare and file a registration

statement with respect to (i) the shares of our common stock comprising these

units and (ii) the shares of our common stock issuable upon exercise of the

share purchase warrants comprising these units with the Securities and Exchange

Commission within 90 days following the closing of the private placements and

agreed to use commercially reasonable efforts to have the registration statement

declared effective by the Securities and Exchange Commission as soon as possible

after filing.

Effective as of April 12, 2019, we issued an aggregate of

74,000 shares of our common stock upon exercise of our common stock purchase

warrants with an exercise price of CAD$2.90 per share for an aggregate gross

proceeds of $160,486

Effective as of April 26, 2019, we issued an aggregate of

1,700,000 shares of our common stock upon exercise of our common stock purchase

warrants with an exercise price of US$0.60 per share for aggregate gross

proceeds of US$1,020,000.

The closing of the exercise of these warrants occurred

on May 7, 2019.

All of these shares were issued to non-U.S.

persons (as the

term is defined in Regulation S of the Securities Act of 1933, as amended) in an

offshore transaction relying on Regulation S and/or Section 4(a)(2) of the

Securities act of 1933, as amended.

On June 28, 2019, the Credit Agreement was amended to extend the expiration date to July 1, 2021 , to increase the loan commitment amount to $5 million from $4 million and to change the termination fee to 1% from 2%.

All other terms and conditions of the Credit Agreement remained the same.

CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON

1 unchanged sentence

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

What changed 10-K

Item 8. Financial Statements and Supplementary Data