What changed in this filing

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Item 5. Market for Registrant’s Common Equity

2020-08-13 compared with 2019-07-01 · 38 added, 355 removed, 25 unchanged (94% of the section changed)

MARKET FOR REGISTRANTS COMMON EQUITY, RELATED

STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES

MARKET FOR REGISTRANT'S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES

Market Information

Our common stock has been listed for trading on the Nasdaq

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

April 25, 2018 under the symbol WTER.

Until the listing of our common stock on

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

the OTC Market Groups OTCQB.

Our common stock has been listed for trading on the Nasdaq Capital Market since December 10, 2018 and on the Canadian Securities Exchange since May 19, 2020 under the symbol "WTER".

From April 25, 2018 to May 15, 2020, our common stock was listed on the TSX Venture Exchange.

Transfer Agents

Our shares of common stock are issued in registered form.

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

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

co-transfer agent for our common stock is TSX Trust Company, located at 650 West

Georgia Street, Suite 2700, Vancouver, British Columbia V6B 4N9, Canada.

The transfer agent and registrar for our common stock is Transhare Corporation, located at 2849 Executive Dr, STE 200 Clearwater, Florida 33762.

The co-transfer agent for our common stock is TSX Trust Company, located at 650 West Georgia Street, Suite 2700, Vancouver, British Columbia V6B 4N9, Canada.

Holders of Common Stock

As of June 28, 2019, there were approximately 48 holders of

record of our common stock.

As of such date 41,347,512 shares were issued and

The payment of dividends, if any, in the future, rests within

the sole discretion of our board of directors.

The payment of dividends will

depend upon our earnings, our capital requirements and our financial condition,

as well as other relevant factors.

We have not declared any cash dividends since

our inception and have no present intention of paying any cash dividends on our

common stock in the foreseeable future.

There are no restrictions in our articles of incorporation or

bylaws that prevent us from declaring dividends.

The Nevada Revised Statutes,

however, do prohibit us from declaring dividends where, after giving effect to

the distribution of the dividend:

We would not be able to pay our debts as they become due

in the usual course of business;

Our total assets would be less than the sum of our total

liabilities plus the amount that would be needed to satisfy the rights of

stockholders who have preferential rights superior to those receiving the

distribution.

Securities Authorized for Issuance under Equity Compensation

The following table summarizes certain information regarding

our equity compensation plans as of March 31, 2019 .

As of August 13, 2020, there were approximately 45 holders of record of our common stock.

As of such date 64,325,115 shares were issued and outstanding.

The payment of dividends, if any, in the future, rests within the sole discretion of our board of directors.

The payment of dividends will depend upon our earnings, our capital requirements and our financial condition, as well as other relevant factors.

We have not declared any cash dividends since our inception and have no present intention of paying any cash dividends on our common stock in the foreseeable future.

Securities Authorized for Issuance under Equity Compensation Plans

The following table summarizes certain information regarding our equity compensation plans as of March 31, 2020 .

Plan category

6 unchanged sentences

Number of securities

available for

remaining available for

issuance under equity

8 unchanged sentences

holders (2018 Stock Option

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 companys long range success;

provide incentives that align the interests of employees, consultants and

directors with those of the stockholders of our company;

and (c) promote

the success of our companys business.

Effective as of December 30, 2015,

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

and outstanding shares of common stock which decreased the number of

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

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

Effective as of January 20,

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

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

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

The plan enabled us to grant awards of a

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

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

options, stock appreciation rights, restricted awards and performance

compensation awards.

Our 2013 equity incentive plan has been suspended in

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.

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.

Equity compensation plans approved by security holders (2020 Equity Incentive Plan) (4)

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 February 28, 2020 our board of directors adopted and approved our 2020 equity incentive plan, pursuant to which we may grant stock options to acquire up to a maximum of 9,000,000 shares of our common stock and non-stock option awards to acquire up to a maximum of 1,650,000 shares of our common stock.

The plan was approved by a majority of our stockholders on March 30,2020.

On April 28, 2020, our board of directors amended our 2020 equity incentive plan to remove the requirement that the company obtain the acceptance of the plan by the TSX Venture Exchange prior to granting any awards under the plan.

The purpose of our 2020 equity incentive plan is to:

(i) enable our company and any affiliate of our company to attract and retain the types of employees, consultants, directors and such other persons as the plan administrator may select who will contribute to our company's long range success;

(ii) provide incentives that align the interests of employees, consultants, directors and such other persons as the plan administrator may select with those of our company's stockholders;

and (iii) promote the success of our company's business.

Under the plan, either stock options or non-stock option awards may be granted.

Non-stock option awards means a right granted to an award recipient under the plan, which may include the grant of stock appreciation rights, restricted awards, performance compensation awards or other equity-based awards.

Recent Sales of Unregistered Securities

Since the beginning of our fiscal year ended March 31, 2019, we

have not sold any equity securities that were not registered under the

Securities Act of 1933 that were not previously reported in a quarterly report

on Form 10-Q or in a current report on Form 8-K.

Purchases of Equity Securities by the Issuer and Affiliated

Since the beginning of our fiscal year ended March 31, 2020, we have not sold any equity securities that were not registered under the Securities Act of 1933 that were not previously reported in a quarterly report on Form 10-Q or in a current report on Form 8-K.

Purchases of Equity Securities by the Issuer and Affiliated Purchasers

SELECTED FINANCIAL DATA

Not applicable.

MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL

CONDITION AND RESULTS OF OPERATIONS

The following discussion should be read in conjunction with our

financial statements and the related notes that appear elsewhere in this annual

The following discussion contains forward-looking statements that

reflect our plans, estimates and beliefs.

Our actual results could differ

materially from those discussed in the forward looking statements.

could cause or contribute to such differences include those discussed below and

elsewhere in this annual report on Form 10-K.

We offer retail consumers bottled alkaline water in

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

under the trade name Alkaline88 ® .

Our product is produced through an

electrolysis process that uses specialized electronic cells coated with a

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

use of any manmade chemicals.

Our product also incorporates 84 trace minerals

from Himalayan pink rock salt.

Our product is designed to have a clean smooth

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

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

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

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

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

largest alkaline water companies in the United States.

Our product is presently available in all 50 states and the

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

the Southwest and Texas.

We distribute our product through several channels.

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

We also sell our product to retail clients, including convenience

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

Examples of our retail clients include Walmart, Food Lion,

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

Bashas, Stater Bros.

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

Superior Foods, Ingles, HEB and Brookshires.

The majority of our sales to

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

larger retail clients are often direct to the clients own warehouse

distribution network.

Our operating subsidiary, Alkaline 88, LLC, operates primarily

as a marketing, distribution, and manufacturing company.

It has entered into

co-packing agreements with eight different bottling companies located in

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

for our product.

Our current capacity at all plants exceeds approximately $8.3

million per month wholesale.

Our component materials are readily available through multiple

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

and Packaging

Corporation of America.

A88 Infused Beverage Division, Inc.

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

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

A88 Infuseds focus is brand extension and product innovations in the

wellness water category.

We formed A88 Infused to meet what we believe is

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

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

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

beverage space.

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

expanded our packaging capabilities.

We announced in January, 2019 that

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

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

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

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

their interest in purchasing our flavored Alkaline88 ® waters.

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

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

While the Agriculture Improvement Act of 2018 removed hemp from

Schedule I of the Controlled Substances Act, the law did not change the FDAs

authorities with respect to food or drugs.

As of June 28, 2019, the FDA has not

made a determination that the use of hemp extract in food is safe.

evaluated Generally Recognized as Safe (GRAS) notices for three hemp

seed-derived food ingredients and determined that the agency has no questions

that those ingredients are GRAS under their intended conditions of use.

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

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

Convention, we sampled and offered up for sale Alkaline88 ®

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

We believe Alkaline88 ® Flavored is the first flavored

bottled alkaline water to be sold in the United States.

A88 Infused is also developing and preparing for the initial

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

trademark Soothe .

In the event the FDA issues appropriate regulations or

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

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

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

Soothe as still water in bottles.

We may also decide to market

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

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

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

status of the use of hemp extract.

We expect to produce Soothe as a low

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

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

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

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

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

other product lines.

We will not pursue the production or sale of hemp

extract-infused products until legally permitted.

Our financial statements are prepared using generally accepted

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

concern, which contemplates the realization of assets and liquidation of

liabilities in the normal course of business.

We have not yet established an

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

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

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

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

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

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

dependent on our company obtaining additional capital to fund operating losses

until we become profitable.

If we are unable to obtain additional capital, we

could be forced to significantly curtail or cease operations.

Results of Operations

Years Ended March 31, 2019 and March 31, 2018

The following summary of our results of operations should be

read in conjunction with our audited consolidated financial statements for the

years ended March 31, 2019 and March 31, 2018 which are included herein:

March 31, 2019

March 31, 2018

Cost of goods sold

Net Loss (after operating expenses and other

Revenue and Cost of Goods Sold

We had revenue from sales of our product for the year ended

March 31, 2019 of $32,199,528 as compared to $19,812,199 for the year ended

March 31, 2018, an increase of 63%, generated by sales of our alkaline water.

The increase in sales is due to the expanded distribution of our products to

additional retailers throughout the country.

We distribute our product through

several channels.

We sell through large national distributors (UNFI, KeHe,

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

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

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

Some examples of retail clients are:

Walmart, CVS, Albertson/Safeway,

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

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

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

Cost of goods sold is comprised of production costs, shipping

and handling costs.

For the year ended March 31, 2019, we had cost of goods sold

of $19,252,768, or 60% of net sales, as compared to cost of goods sold of

$11,687,017, or 59% of net sales, for the year ended March 31, 2018.

increase in cost of goods sold as a percentage of net sales compared to the same

period last year was due to increased raw material cost and associated freight

as a result of our east coast expansion.

Our operating expenses for the years ended March 31, 2019 and

March 31, 2018 are as follows:

March 31, 2019

March 31, 2018

Sales and marketing expenses

General and administrative expenses

Depreciation expenses

Total operating expenses

During the year ended March 31, 2019, our total operating

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

Liquidity and Capital Resources

Working Capital

At March 31, 2019

At March 31, 2018

Current assets

Current liabilities

Working capital (deficiency)

Current Assets

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

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

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

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

Current Liabilities

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

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

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

$819,011, respectively.

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

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

2018 are as follows:

Net Cash used in operating

Net Cash used in investing activities

Net Cash provided by

financing activities

Net increase in cash and cash equivalents

Operating Activities

Net cash used in operating activities was $8,128,613 for the

year ended March 31, 2019, as compared to $2,625,849 used in operating

activities for the year ended March 31, 2018.

The increase in net cash used was

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

marketing expenses and the reduction in stock compensation discussed in the

expense section above.

Investing Activities

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

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

for the year ended March 31, 2018.

The increase net cash used by investing

activities was from increased purchases of production equipment due to the

increase in our revenue.

Financing Activities

Net cash provided by financing activities for the year ended

March 31, 2019 was $19,528,458, as compared to $3,328,804 for the year ended

March 31, 2018.

The increase of net cash provided by financing activities was

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

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

Cash Requirements

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

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

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

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

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

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

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

additional equity or debt securities or obtain additional credit facilities.

sale of additional equity securities will result in dilution to our

stockholders.

The incurrence of indebtedness will result in increased debt

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

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

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

us, if at all.

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

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

could harm our overall business prospects.

Off-Balance Sheet Arrangements

We have no off-balance sheet arrangements that have or are

reasonably likely to have a current or future effect on our financial condition,

changes in financial condition, revenues or expenses, results of operations,

liquidity, capital expenditures or capital resources that is material to our

stockholders.

QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT

Not applicable.

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

What changed 10-K

Item 5. Market for Registrant’s Common Equity