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Item 8. Financial Statements and Supplementary Data

2020-08-13 compared with 2019-07-01 · 403 added, 919 removed, 172 unchanged (88% of the section changed)

4 unchanged sentences

Opinion on the Financial Statements

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.

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

(the Company) as of March 31, 2020 and 2019, and the related statements of operations, stockholders’ equity, and cash flows for each of the years in the two-year period ended March 31, 2020, and the related notes (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, 2020 and 2019, and the results of its operations and its cash flows for each of the years in the two-year period ended March 31, 2020, in conformity with accounting principles generally accepted in the United States of America.

Basis for Opinion

These financial statements are the responsibility of the Company’s management.

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 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.

These financial statements are the responsibility of the Company’s management.

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.

Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements.

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.

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.

/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 Company’s auditor since 2019

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.

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

August 13, 2020

THE ALKALINE WATER COMPANY INC.

BALANCE SHEETS

CONSOLIDATED BALANCE SHEETS

March 31, 2020

1 unchanged sentence

Current assets

Cash and cash equivalents

Accounts receivable

Prepaid expenses

Operating lease right-of-use asset

Total current assets

5 unchanged sentences

Revolving financing

Derivative liability

Operating lease liability

Total current liabilities

Stockholders' equity

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

Preferred stock, $0.001 par value, 100,000,000 shares authorized, 3,400,000 Series D issued and outstanding on March 31, 2020 and 1,500,000 Series C and 3,800,000 Series D issued and outstanding at March 31, 2019

Common stock, Class A - $0.001 par value, 200,000,000 shares authorized 45,585,592 and 39,573,512 shares issued and outstanding at March 31, 2020 and March 31, 2019, respectively

Additional paid in capital

Stock Payable

Accumulated deficit

1 unchanged sentence

Total liabilities and stockholders' equity

The accompanying notes are an integral part of these

consolidated financial statements.

The accompanying notes are an integral part of these consolidated financial statements.

THE ALKALINE WATER COMPANY INC.

STATEMENT OF OPERATIONS

CONSOLIDATED STATEMENT OF OPERATIONS

For the Year Ended

3 unchanged sentences

Operating expenses

Sales and marketing

and administrative

Sales and marketing expenses

General and administrative

Total operating expenses

1 unchanged sentence

Other income (expense)

Amortization of debt

derivative liability

other income (expense)

Interest expense

Change in derivative liability

Total other (expense)

LOSS PER SHARE (Basic and Diluted)

WEIGHTED AVERAGE SHARES OUTSTANDING (Basic

The accompanying notes are an integral part of these

consolidated financial statements.

WEIGHTED AVERAGE SHARES OUTSTANDING (Basic and Diluted)

The accompanying notes are an integral part of these consolidated financial statements.

THE ALKALINE WATER COMPANY

CONSOLIDATED STATEMENTS

OF STOCKHOLDERS' EQUITY

CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY

FOR THE YEARS ENDED MARCH 31, 2020 AND MARCH 31, 2019

2 unchanged sentences

Balance, March 31, 2018

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

Shares issued in connection with offerings

Warrant exercises

Stock Options issued to employees

Stock Option expense

Stock Option exercises

Balance, March 31, 2019

Shares issued in connection with

Preferred Stock Conversion

Warrant exercises

1 unchanged sentence

Stock Option exercises

Stock Payable

Balance, March 31, 2020

The accompanying notes are an integral part of these

consolidated financial statements.

The accompanying notes are an integral part of these consolidated financial statements.

THE ALKALINE WATER COMPANY INC.

STATEMENTS OF CASH FLOWS

CONSOLIDATED STATEMENTS OF CASH FLOWS

For the Year Ended

2 unchanged sentences

CASH FLOWS FROM OPERATING ACTIVITIES

Adjustments to reconcile net loss to net cash used in operating

Adjustments to reconcile net loss to net cash used in operating activities

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

Right-of-use asset

Change in derivative liabilities

4 unchanged sentences

Accrued expenses

NET CASH USED IN

OPERATING ACTIVITIES

NET CASH USED IN OPERATING ACTIVITIES

CASH FLOWS FROM INVESTING ACTIVITIES

Purchase of fixed assets

INVESTING ACTIVITIES

CASH USED IN INVESTING ACTIVITIES

CASH FLOWS FROM FINANCING ACTIVITIES

Proceeds from convertible note payable

Proceeds from revolving financing, net

Proceeds from revolving financing

Proceeds from sale of common stock, net

Proceeds from stock payable

Proceeds for the exercise of warrants, net

Repayment of notes payable

Repayment of capital lease

CASH PROVIDED BY FINANCING ACTIVITIES

3 unchanged sentences

INTEREST PAID

NON-CASH INVESTING AND FINANCING TRANSACTION

Conversion of note payable to common shares

The accompanying notes are an integral part of these

consolidated financial statements.

SUPPLEMENTAL DISCLOSURE of NON-CASH INVESTING and FINANCING ACTIVITIES:

OPERATING LEASE RIGHT OF USE ASSET

OPERATING LEASE LIABILITY

The accompanying notes are an integral part of these consolidated financial statements.

THE ALKALINE WATER COMPANY INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

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

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

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.

The Company offers retail consumers bottled alkaline water in 500-milliliter, 700-milliliter, 1-liter, 1.5 -liter, 3-liter and 1-gallon sizes, all of 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.

In addition to its bottled alkaline water, the Company also offers retail consumers flavor infused bottled water in the 500-milliliter size in seven flavors:

Raspberry, Watermelon, Lemon, Lemon Lime, Peach Mango, Blood Orange, and Cucumber Mint.

The Company recently introduced and began selling hemp-derived CBD topical and ingestible products under the brand name “A88CBD™”.

Our hemp-derived CBD products are produced and sold in compliance with the Agriculture Improvement Act of 2018 (also known as the 2018 Farm Bill, Public Law 115-334).

Basis of presentation

The consolidated financial statements included herein,

presented in accordance with United States generally accepted accounting

principles and stated in U.S.

dollars, have been prepared by the Company,

pursuant to the rules and regulations of the Securities and Exchange

The consolidated financial statements included herein, presented in accordance with United States generally accepted accounting principles and stated in U.S.

dollars, have been prepared by the Company, pursuant to the rules and regulations of the Securities and Exchange Commission.

Principles of consolidation

The consolidated financial statements include the accounts of

The Alkaline Water Company Inc.

(a Nevada Corporation) and its wholly owned

subsidiaries:

The consolidated financial statements include the accounts of The Alkaline Water Company Inc.

(a Nevada Corporation) and its five wholly owned 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., A88 Infused Beverage Division,

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

referred herein to as the Company.

Any reference herein to The Alkaline Water

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

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

otherwise indicated.

(a Nevada Corporation), A88 International, Inc.

(a Nevada Corporation), A88 Infused Products Inc.

(a Nevada Corporation), AWC Acquisition Company 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., A88 Infused Beverage Division, Inc., A88 Infused Products Inc., A88 International, Inc., AWC Acquisition Company Inc., and Alkaline 88, LLC will be collectively referred herein to as the "Company".

Any reference herein to "The Alkaline Water Company Inc.", the "Company", "we", "our" or "us" is intended to mean The Alkaline Water Company Inc., including the subsidiaries indicated above, unless otherwise indicated.

Use of Estimates

The preparation of financial statements in conformity with

accounting principles generally accepted in the United States of America

requires management to make estimates and assumptions that affect the reported

amounts of assets and liabilities and disclosure of contingent assets and

liabilities at the date of the financial statements and the reported amounts of

revenues and expenses during the reporting period.

Actual results could differ

significantly from those estimates.

The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period.

Actual results could differ significantly from those estimates.

Cash and Cash Equivalents

The Company considers all highly liquid instruments with an

original maturity of three months or less to be considered cash equivalents.

carrying value of these investments approximates fair value.

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

majority of its trade receivables are unsecured.

The carrying amount for

accounts receivable approximates fair value.

Accounts receivable consisted of the following as of March 31,

2019 and 2018:

The Company considers all highly liquid instruments with an original maturity of three months or less to be considered cash equivalents.

The carrying value of these investments approximates fair value.

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.

In addition, the Company has maintained balances in its attorney’s client trust account in both C$ and US$.

The Company has not experienced any losses in such accounts and periodically evaluates the credit worthiness of the financial institutions and has determined the credit exposure to be negligible.

The Company had $4,561,682 and $11,032,451 in cash at March 31, 2020 and March 31, 2019, respectively.

Accounts Receivable and Allowance for Doubtful Accounts

The Company generally does not require collateral, and the majority of its trade receivables are unsecured.

The carrying amount for accounts receivable approximates fair value.

Accounts receivable consisted of the following as of March 31, 2020 and 2019:

Trade receivables, net

Allowance for doubtful accounts

Accrual for 2% 10 days discount

Net accounts receivable

Accounts receivable are periodically evaluated for

collectability based on past credit history with clients.

Provisions for losses

on accounts receivable are determined on the basis of loss experience, known and

inherent risk in the account balance and current economic conditions.

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

Accounts receivable are periodically evaluated for collectability based on past credit history with clients.

Provisions for losses on accounts receivable are determined on the basis of loss experience, known and inherent risk in the account balance and current economic conditions.

The accounts receivable balance is pledged as collateral for the Company's 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 Company's revolving financing as disclosed in Note 4.

As of March 31, 2020 and 2019, inventory consisted of the following:

Raw materials

2 unchanged sentences

Property and Equipment

The Company records all property and equipment at cost less

accumulated depreciation.

Improvements are capitalized while repairs and

maintenance costs are expensed as incurred.

Depreciation is calculated using the

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.

The Company records all property and equipment at cost less accumulated depreciation.

Improvements are capitalized while repairs and maintenance costs are expensed as incurred.

Depreciation is calculated using the 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.

During the 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.

The Company recorded this change and recorded the adjusted depreciation in the year ended March 31, 2019;

the effect of which was not material.

Stock-Based Compensation

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.

The Company accounts for stock-based compensation is in accordance with Accounting Standards Codification ("ASC") 718.

Stock-based 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.

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 Company's common stock for common share issuances.

Advertising costs are charged to operations when incurred.

Advertising expenses for the years ended March 31, 2019 and 2018 were $374,500

and $479,524 respectively

Advertising expenses for the years ended March 31, 2020 and 2019 were $303,346 and $374,500 respectively

Revenue Recognition

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.

We recognize revenue when our performance obligations are satisfied.

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.

3 unchanged sentences

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.

Revenue consists of the gross sales price, less variable consideration, including estimated allowances for which provisions are made at the time of sale, and less certain other discounts and allowances.

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 $5,799,766 and $5,393,253 for the years ended March 31, 2020 and 2019, respectively.

Concentration Risks

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

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

Taxes , the provision for income taxes is computed using the asset and

liability method.

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.

We have 2 major customers that together account for 36% (22% and 14%, respectively) of accounts receivable at March 31, 2020, and 2 customers that together account for 40% (24% and 16%, respectively) of the total revenues earned for the year ended March 31, 2020.The Company has 3 vendors that accounted for 52% (21%, 20%, and 11% respectively) of purchases for the year ended March 31, 2020.

In accordance with ASC 740 " Accounting for Income Taxes ", the provision for income taxes is computed using the asset and liability method.

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.

Basic and Diluted Loss Per Share

Basic and diluted earnings or loss per share (EPS) amounts in

the consolidated financial statements are computed in accordance ASC 260 10

Earnings per Share , which establishes the requirements for presenting

Basic EPS is based on the weighted average number of common shares

Diluted EPS is based on the weighted average number of common

shares outstanding and dilutive common stock equivalents.

Basic EPS is computed

by dividing net income or loss available to common stockholders (numerator) by

the weighted average number of common shares outstanding (denominator) during

Potentially dilutive securities were excluded from the calculation

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.

Basic and diluted earnings or loss per share ("EPS") amounts in the consolidated financial statements are computed in accordance ASC 260- 10 " Earnings per Share ", which establishes the requirements for presenting EPS.

Basic EPS is based on the weighted average number of common shares outstanding.

Diluted EPS is based on the weighted average number of common shares outstanding and dilutive common stock equivalents.

Basic EPS is computed by dividing net income or loss available to common stockholders (numerator) by the weighted average number of common shares outstanding (denominator) during the period.

Potentially dilutive securities were excluded from the calculation of diluted loss per share, because their effect would be anti-dilutive.

For the year ended March 31, 2020 and 2019, respectively, the Company had no shares relating to options and 1,236,510 shares relating to options, no shares relating to warrants and 3,190,479 shares relating to warrants and no shares relating to convertible preferred shares and 1,500,000 convertible preferred shares that were not included in the diluted earnings per share calculation because they were antidilutive.

Business Segments

The Company operates on one segment in one geographic location

- the United States of America and;

therefore, segment information is not

The Company operates on one segment in one geographic location - the United States of America and;

therefore, segment information is not presented.

Fair Value of Financial Instruments

The carrying amounts of the companys financial instruments

including accounts payable, accrued expenses, and notes payable approximate fair

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

The carrying amounts of the company's financial instruments including accounts payable, accrued expenses, and notes payable approximate fair value due to the relative short period for maturity these instruments.

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

2 unchanged sentences

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.

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:

4 unchanged sentences

Reclassification

Certain accounts in the prior period were reclassified to

conform to the current period financial statements presentation.

Certain accounts in the prior period were reclassified to conform to the current period financial statements presentation.

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.

The following recently issued accounting standards were adopted during fiscal year 2020.

The Company adopted ASC 842 on April 1, 2019 which requires lessees to recognize right-of-use ("ROU") asset and lease liability for all leases.

The Company elected the package of transition practical expedients for existing contracts, which allowed us to carry forward our historical assessments of whether contracts are or contain leases, lease classification and determination of initial direct costs.

The adoption resulted in a lease liability of approximately $185,510 and a right of use asset of approximately $165,699.

The Company’s undiscounted minimum lease commitments under its operating leases are disclosed in Note 8.

The Company adopted ASU 2018-07, “Improvements to Nonemployee Share-Base Payment Accounting” on April 1, 2019.

The Company did not issue any of its shares to nonemployees in exchange for goods or services during the year ended March 31, 2020.

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 consolidated financial statements.

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 842.

The Company does not believe that the impact of adopting this standard will have a material effect on its financial statements.

The Company has evaluated other recent accounting pronouncements through June 2020 and believes that none of them will have a material effect on our consolidated financial statements.

NOTE 2 - CASH FLOWS

The accompanying financial statements have been prepared

assuming that the Company will continue as a going concern, which contemplates

the recoverability and/or acquisition and sale of assets and the satisfaction of

liabilities in the normal course of business.

Since its inception, the Company

has been engaged substantially in financing activities, developing its business

plan and building its initial customer and distribution base for its products.

As a result, the Company incurred accumulated net losses from Inception (June

19, 2012) through the period ended March 31, 2019 of ($38,694,879).

the Companys development activities since inception have been financially

sustained through debt and equity financing.

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.

The accompanying financial statements have been prepared assuming that the Company will continue as a going concern, which contemplates realization of assets and satisfaction of liabilities in the normal course of business.

Since its inception, the Company has been engaged substantially in financing activities, developing its business plan and building its initial customer and distribution base for its products.

As a result, the Company incurred accumulated net losses from Inception (June 19, 2012) through the period ended March 31, 2020 of ($53,521,700).

In addition, the Company's development activities since inception have been financially sustained through debt and equity financing.

We have not yet established an ongoing source of revenues sufficient to cover our operating costs, however, as a result of the $5,899,998 raised in our two private placements in April and May, 2020, expected warrant exercises including $258,899 from warrant exercises received from March 31, 2020 to date, and our credit line, we believe we will have sufficient cash to sustain operations through at least August 14, 2021.

NOTE 3 - PROPERTY AND EQUIPMENT

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Machinery and Equipment

Machinery Construction in Progress

Office Equipment

1 unchanged sentence

Fixed Assets, net

Depreciation expense for the years ended March 31, 2019 and

2018 was $580,669 and $418,777, respectively.

On February 1, 2018, we exercised our purchase option to

purchase four alkaline generating electrolysis system machines leased under the

master lease agreement entered into on October 22, 2014, as amended on February

25, 2015 with Veterans Capital Fund, LLC for a total of $160,000.

price 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.

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

Depreciation expense for the years ended March 31, 2020 and 2019 was $1,011,241 and $580,669, respectively.

NOTE 4 - REVOLVING FINANCING

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

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

The Credit Agreement provides the Company with a revolving

credit facility (the Revolving Facility), the proceeds of which are to be used

to repay existing indebtedness of the Company, transaction fees incurred in

connection with the Credit Agreement and for working capital needs of the

Under the terms of the Credit Agreement, the Lender has agreed

to make cash advances to the Company in an aggregate principal at any one time

outstanding not to exceed the lesser of (i) $4 million (the Revolving Loan

Commitment Amount) and (ii) the Borrowing Base (defined to mean, as of any date

of determination, 85% of net eligible billed receivables plus 65% of eligible

unbilled receivables, minus certain reserves, and is subject to certain customer

specific requirements).

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

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

The principal amount of the Revolving Facility outstanding

bears interest at a rate per annum equal to (i) a fluctuating interest rate per

annum equal at all times to the rate of interest announced, from time to time,

within Wells Fargo Bank at its principal office in San Francisco as its prime

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

the Credit Agreement, the Company granted to the Lender a continuing security

interest in all of the Companys assets and agreed to a lockbox account

arrangement in respect of certain eligible receivables.

In connection with the Credit Agreement, the Company paid to

the Lender a $30,000 facility fee.

The Company agreed to pay the Lender monthly

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

by subtracting (i) the average daily outstanding balance under the Revolving

Facility during the preceding month, from (ii) the Revolving Loan Commitment

On February 1, 2017, we entered into a credit and security agreement (the "Credit Agreement") with SCM Specialty Finance Opportunities Fund, L.P.

("SCM" or "Lender"), which subsequently changed its name to CNH Finance Fund I, L.P.

The Credit Agreement provides our company with a revolving credit facility (the "Revolving Facility"), the proceeds of which are to be used to repay existing indebtedness of our company, transaction fees incurred in connection with the Credit Agreement and for the working capital needs of our company.

Under the terms of the Credit Agreement, SCM has agreed to make cash advances to our company in an aggregate principal at any one time outstanding not to exceed the lesser of (i) $7 million (the "Revolving Loan Commitment Amount") and (ii) the Borrowing Base (defined to mean, as of any date of determination, 85% of net eligible billed receivables plus 65% of eligible unbilled receivables, minus certain reserves).

The Credit Agreement expires on July 1, 2022, unless earlier terminated by the parties in accordance with the terms of the Credit Agreement.

The principal amount of the Revolving Facility outstanding bears interest at a rate per annum equal to (i) a fluctuating interest rate per annum equal at all times to the rate of interest announced, from time to time, within Wells Fargo Bank at its principal office in San Francisco as its "prime rate," plus (ii) 3.25%, payable monthly in arrears.

The interest rate as of March 31, 2020 was 7.0%

To secure the payment and performance of the obligations under the Credit Agreement, we granted to SCM a continuing security interest in all of our assets and agreed to a lockbox account arrangement in respect of certain eligible receivables.

The Company agreed to pay to SCM monthly an unused line fee in amount equal to 0.083% per month of the difference derived by subtracting (i) the average daily outstanding balance under the Revolving Facility during the preceding month, from (ii) the Revolving Loan Commitment Amount.

The unused line fee will be payable monthly in arrears.

The Company also

agreed to pay the Lender as additional interest a monthly collateral management

fee equal to 0.35% per month calculated on the basis of the average daily

balance under the Revolving Facility outstanding during the preceding month.

collateral management fee will be payable monthly in arrears.

Upon a termination

of the Revolving Facility, the Company agreed to pay the Lender a termination

fee in an amount equal to 2% of the Revolving Loan Commitment Amount if the

termination occurs before February 1, 2020.

The Company must also pay certain

fees in the event that receivables are not properly deposited in the appropriate

lockbox account.

The interest rate will be increased by 5% in the event of a

default under the Credit Agreement.

Events of default under the Credit

Agreement, some of which are subject to certain cure periods, include a failure

to pay obligations when due, the making of a material misrepresentation to the

Lender, the rendering of certain judgments or decrees against the Company and

the commencement of a proceeding for the appointment of a receiver, trustee,

liquidator or conservator or filing of a petition seeking reorganization or

liquidation or similar relief.

The Credit Agreement contains customary representations and

warranties and various affirmative and negative covenants including the right of

first refusal to provide financing for the Company and the financial and loan

covenants, such as the loan turnover rate, minimum EBTDA, fixed charge coverage

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 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

provide the Company the $400,000 TOA under 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 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.

We also agreed to pay SCM as additional interest a monthly collateral management fee equal to 0.35% per month calculated on the basis of the average daily balance under the Revolving Facility outstanding during the preceding month.

The collateral management fee will be payable monthly in arrears.

Upon a termination of the Revolving Facility, we agreed to pay SCM a termination fee in an amount equal to 1% of the Revolving Loan Commitment Amount if the termination occurs before July 1, 2022.

We must also pay certain fees in the event that receivables are not properly deposited in the appropriate lockbox account.

The interest rate will be increased by 5% in the event of a default under the Credit Agreement.

Events of default under the Credit Agreement, some of which are subject to certain cure periods, include a failure to pay obligations when due, the making of a material misrepresentation to SCM, the rendering of certain judgments or decrees against our company and the commencement of a proceeding for the appointment of a receiver, trustee, liquidator or conservator or filing of a petition seeking reorganization or liquidation or similar relief.

The Credit Agreement contains customary representations and warranties and various affirmative and negative covenants including the right of first refusal to provide financing for our company and the financial and loan covenants, such as the loan turnover rate, minimum EBTDA, fixed charge coverage ratio and minimum liquidity requirements.

The Company received a waiver of its loan turnover rate covenant, which was not met, from its Lender to ensure it remained in compliance as of March 31, 2020.

In March, 2020, 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 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

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.

(i) the Company shall make five (5) weekly principal payments on the TOA 2 each in the amount of $20,000 commencing on May 18, 2020 and on the first Business Day of each calendar week thereafter through and including June 15, 2020, (ii) the Company shall make ten (10) weekly principal payments on the TOA, each in the amount of $30,000, commencing on June 22, 2020 and on the first Business Day of each calendar week thereafter through and including August 24, 2020 and (iii) repay the remaining principal balance on the TOA, if any, in full on or prior to August 24, 2020.

As of March 31, 2020, the balance of the TOA was $400,000.

In March, 2020, 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 provide the Company the $400,000 TOA under the Credit Agreement.

Under the Guarantee, Mr.

Guarino personally, absolutely, and unconditionally, jointly and severally, guaranteed the prompt, complete and full payment of the Company's obligations to repay the TOA only, under the Credit Agreement, with the Lender.

NOTE 5 - STOCKHOLDERS' EQUITY

Preferred Shares

On October 7, 2013, the Company amended its articles of

incorporation to create 100,000,000 shares of preferred stock by filing a

Certificate of Amendment to Articles of Incorporation with the Secretary of

State of Nevada.

The preferred stock may be divided into and issued in series,

with such designations, rights, qualifications, preferences, limitations and

terms as fixed and determined by our board of directors.

On October 7, 2013, the Company amended its articles of incorporation to create 100,000,000 shares of preferred stock by filing a Certificate of Amendment to Articles of Incorporation with the Secretary of State of Nevada.

The preferred stock may be divided into and issued in series, with such designations, rights, qualifications, preferences, limitations and terms as fixed and determined by our board of directors.

Grant of Series C Convertible Preferred Stock

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

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

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 to time.

Effective as of January 13, 2020, the Company issued 1,500,000 shares of its restricted common stock to Richard A.

Wright, the Company's president, chief executive officer, and director, upon conversion of his 1,500,000 shares of Series C Preferred Stock.

These shares are subject to the resale restrictions under applicable securities laws and the Company's insider trading policy.

At March 31, 2020 and 2019, there were nil and 1,500,000 shares of Series C preferred stock outstanding that were convertible into common stock.

Grant of Series D Convertible Preferred Stock

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.

In May, 2017, the Company issued a

total of 3,000,000 shares of our Series D Preferred Stock to our directors,

officers, consultants and employees.

In November, 2017, the Company issued an

additional 800,000 shares of our Series D Preferred Stock as follows:

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

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

Agreement and stock option forfeitures detailed below.

We issued these shares

relying on the registration exemption provided for in Section 4(a)(2) of the

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

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.

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

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

common stock.

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 were retroactively restated to reflect such split.

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.

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.

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 non-assessable 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 fiscal year;

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.

In May, 2017, the Company issued a total of 3,000,000 shares of our Series D Preferred Stock to our directors, officers, consultants and employees.

In November, 2017, the Company issued an additional 800,000 shares of our Series D Preferred Stock as follows:

(a) 300,000 shares to Steve Nickolas pursuant to the Settlement Agreement detailed below;

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

Wright pursuant to the Exchange Agreement and stock option forfeitures detailed below.

In January, 2020, we issued 400,000 shares of our common stock upon conversion of an aggregate of 400,000 shares of our Series D Preferred Stock without the payment of any additional consideration.

At March 31, 2020 and 2019, there were 3,400,000 and 3,800,000 shares, respectively, of Series D preferred stock outstanding that were convertible into common stock.

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.

On March 18, 2020, the Company received $1 million of the $3.9 million private placement that the Company completed on April 17, 2020 (see Note 11).

Since the private placement was not completed by March 31, 22020, the Company had $1 million in stock payable on March 31, 2020.

Common Stock Issued for Services

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.

In the year ended March 31, 2020 and March 31, 2019, the Company did not issue any common stock for services.

However, the Company accrued $81,117 and $84,583 in the year ended March 31, 2020 and March 31, 2019, based on the market value of the common stock of the Company on the date earned, respectively under an agreement that obligates the Company to issue 276,167 shares consultants for services rendered of which approximately 247,167 shares were earned in the year ended March 31, 2020 and approximately 29,000 shares were earned in the year ended March 31, 2019.

NOTE 6 - OPTIONS AND WARRANTS

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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.

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.

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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.

We adopted the plan in connection with our prior 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

options to our directors, officers, consultants employees.

The stock options are

exercisable at the exercise price of $1.29 per share for a period of ten years

from the date of grant.

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.

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 mean 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.

Effective April 28, 2017, we granted a total of 1,790,000 stock options to our directors, officers, consultants employees.

The stock options are exercisable at the exercise price of $1.29 per share for a period of ten years from the date of grant.

360,000 of the stock options vest as follows:

120,000 upon the date of grant;

and (ii) 120,000 on each anniversary date of

(i) 120,000 upon the date of grant;

and (ii) 120,000 on each anniversary date of grant for 2 years.

1,430,000 of the stock options vest as follows:

(i) 357,500 upon the date

and (ii) 357,500 on each anniversary date of grant.

We granted the

stock options to 12 U.S.

(i) 357,500 upon the date of grant;

and (ii) 357,500 on each anniversary date of grant for 3 years.

We granted the stock options to 12 U.S.

Persons and 3 non U.S.

Persons (as that term is defined

in Regulation S of the Securities Act of 1933) and in issuing securities we

relied on the registration exemption provided for in Regulation S and/or Section

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:

Persons (as that term is defined in Regulation S of the Securities Act of 1933) and in issuing securities we relied on the registration exemption provided for in Regulation S and/or Section 4(a)(2) of the Securities Act of 1933.

During the years ended March 31, 2020 and March 31, 2019, a total of 239,000 and 161,100 options were exercised, respectively, all on a cashless exercise basis.

For the years ended March 31, 2020 and March 31, 2019 the Company has recognized compensation expense of $1,591,555 and $393,460 respectively, on the stock options granted in April 2017 that vested.

The unvested amounts will be amortized over the next quarter.

The fair value of the unvested shares is $54,202 as of March 31, 2020.

The aggregate intrinsic value of outstanding options was $16,916 at March 31, 2020.

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

Outstanding at March 31, 2018

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Exercisable at March 31, 2020

On March 1, 2018, pursuant to Warrant Amendment Agreements

dated February 22, 2018 with 16 holders (the Holders ) of our common

stock purchase warrants (the existing warrants), we issued an aggregate of

3,900,000 shares of our common stock upon exercise of the Existing Warrants at

an exercise price of $0.50 per share for aggregate gross proceeds of $1,950,000.

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

March 4, 2016.

In addition, pursuant to the Warrant Amendment Agreements, we

issued new common stock purchase warrants of our company (the New

Warrants ) 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, provided that (i) the exercise price of the New Warrants is

$0.60 per share, subject to adjustment in the New Warrants, (ii) the expiry date

of the New Warrants is September 1, 2019 and (iii) the New Warrants are

non-transferable.

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, 2019 and changes during the years ended on that date:

On March 1, 2018, pursuant to Warrant Amendment Agreements dated February 22, 2018 with 16 holders (the "Holders") of our common stock purchase warrants (the "Existing Warrants"), we issued an aggregate of 3,900,000 shares of our common stock upon exercise of the Existing Warrants at an exercise price of $0.50 per share for aggregate gross proceeds of $1,950,000.

The Existing Warrants were issued by us as part of an offering that closed on March 4, 2016.

In addition, pursuant to the Warrant Amendment Agreements, we issued new common stock purchase warrants of our company (the "New Warrants") 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, provided that (i) the exercise price of the New Warrants is $0.60 per share, subject to adjustment in the New Warrants, (ii) the expiry date of the New Warrants is September 1, 2019 and (iii) the New Warrants are non-transferable.

On May 31, 2018, the Company issued 5,131,665 Units of the Company at a price of $0.75 per Unit for aggregate gross proceeds of $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 $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.

Each Unit 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 finder's 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, 2020 and changes during the years ended on that date:

Exercise Price

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Warrants exercisable at March 31, 2020

The following table summarizes information about stock warrants

outstanding and exercisable at March 31, 2019:

The following table summarizes information about stock warrants outstanding and exercisable at March 31, 2020:

STOCK WARRANTS OUTSTANDING

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Life in Years

*Note The warrant exercise price is

C$ 2.90 = U.S.

*Note - The warrant exercise price is C$ 2.90 = U.S.

$2.06 (rate 1.40709) at 03/31/20

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 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

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 April 28, 2017, Mr.

Wright and Mr.

Guarino were each issued

1,000,000 shares each of the Series D Preferred Stock.

On October 25, 2017, Mr.

Wright and the Company entered into a

stock option forfeiture and general release agreement whereby Mr.

forfeited stock options to purchase 148,000 shares of the Companys common

On October 31, 2017, our company and its subsidiaries entered

into a Settlement Agreement and Mutual Release of Claims (the Settlement

Agreement ) with Steven P.

Nickolas, the Nickolas Family Trust, Water

Engineering Solutions, LLC and Enhanced Beverages, LLC, companies and trust that

are controlled or owned by Mr.

Nickolas, (collectively, the Nickolas

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

company controlled or owned by Richard Wright, (collectively,

Wright/McDowell).

The Settlement Agreement provides, among other things, the

a) simultaneous with the full execution of the Settlement Agreement,

we agreed to pay Mr.

Nickolas $110,000 in one lump sum (paid);

b) in exchange of

700,000 shares of our common stock and 300,000 shares of our Series D Preferred

Stock described above, Mr.

Nickolas forfeited his 10,000,000 shares of our

Series A Preferred Stock, to be cancelled for no further consideration;

the full execution of the Settlement Agreement, Mr.

Nickolas and our company

agreed to file the stipulations to dismiss the complaints and counterclaim filed

by each of them with prejudice, with each side to bear its own costs and

attorneys fees.

In addition, our company and Wright/McDowell agreed that they

will effectuate the dismissal of an arbitration proceeding against the Nickolas

Parties with prejudice, with each side to bear its own attorneys fees and

Nickolas acknowledged and agreed that the employment agreement

Nickolas and our company was terminated as of April 7, 2017 and no

further amounts are owed to Mr.

Nickolas under the employment agreement and we

agreed to waive restrictive covenants set out in the employment agreement;

agreed to assume financial responsibility for certain obligations owed by Mr.

Nickolas acknowledged and agreed that 1,500,000 stock options

with an exercise price of $0.52 issued to Mr.

Nickolas on or about March 1, 2016

has expired and a total of 148,000 stock options issued to Mr.

before 2016 will automatically expire 90 days from October 6, 2017, the date Mr.

Nickolas ceased being a director of our company;

and h) the parties also agreed

to mutual release of claims.

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 Wright, chief

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

$400,000, respectively, to the Company for a total of $1,000,000 advanced.

$1,000,000 in advancements were repaid to Wright Investment Group, LLC on March

On February 14, 2018, David A.

Guarino entered into a Guarantee

Agreement (the Guarantee 1) with CNH Specialty Finance (the Lender) in order

for the Lender to agree to provide the Company a $400,000 Temporary Over Advance

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

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 Nickolas, our former

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

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

president and chief executive officer of a corporation, and any other duties

consistent with Mr.

Nickolass position in our company.

Pursuant to the terms of

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

$15,000 per month or such other amount as may be determined by our board of

directors from time to time;

and (ii) issue to Mr.

Nickolas 1,500,000 shares of

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

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:

(i) the occurrence of a change of control event;

(ii) the death

and (iii) the termination of the employment agreement for any

On November 18, 2016, our company provided notice to Steven

Nickolas, our CEO and President, of our board of directors finding that there

is just cause for termination of Mr.

Nickolass employment and of our

companys intent to terminate the employment of Mr.

Nickolas for just cause

pursuant to the provision of the Employment Agreement with Mr.

Nickolas dated

March 1, 2016.

Under the Employment Agreement, Mr.

Nickolas had 30 days to cure

the failures and breaches creating just cause for termination.

failed to cure such failure and breaches and, on April 7, 2017, our company

terminated the employment of Mr.

Nickolas for cause.

In addition, our company

Nickolas as the President and Chief Executive Officer of our

NOTE 7 - INCOME TAXES

Deferred income taxes reflect the net tax effects of temporary

differences between the carrying amounts of assets and liabilities for financial

reporting purposes and the amounts used for income tax purposes.

recorded the valuation allowance due to the uncertainty of future realization of

federal and state net operating loss carryforwards.

The deferred income tax

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

Deferred income taxes reflect the net tax effects of temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for income tax purposes.

The Company recorded the valuation allowance due to the uncertainty of future realization of federal and state net operating loss carryforwards.

The deferred income tax assets are comprised of the following at March 31, 2020 and 2019:

Deferred income tax assets:

Valuation allowance

At March 31, 2019, the Company had net operating loss

carryforwards of approximately $21,700,000 and net operating loss carryforwards

expire in 2023 through 2037.

The current years net operating loss will

carryforward indefinitely.

At March 31, 2020, the Company had net operating loss carryforwards of approximately $34,800,000 and net operating loss carryforwards expire in 2023 through 2037.

The current year's net operating loss will carryforward indefinitely.

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%.

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 current income tax benefit of $3,270,000 generated for the year ended March 31, 2020 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

uncertain tax positions in general and administrative expense.

As of March 31,

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 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

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.

Reconciliation between the statutory rate and the effective tax rate is as follows at March 31, 2020 and 2019:

Effective Tax Rate Reconciliation:

Federal statutory tax rate

State taxes, net of federal benefit

Change in valuation allowance

Effective Tax Rate

The Company recognizes interest and penalties related to uncertain tax positions in general and administrative expense.

As of March 31, 2020 and 2019 the Company has no unrecognized uncertain tax positions, including interest and penalties.

The Company's federal income tax returns for tax years ended March 31, 2017 and beyond remain subject to examination by the Internal Revenue Service.

The returns for Arizona, the Company's most significant state tax jurisdiction, remain subject to examination by the Arizona Department of Revenue for tax years ended March 31, 2016 and beyond.

NOTE 8 - LEASES

The Company adopted ASC 842 on April 1, 2019 which requires lessees to recognize right-of-use ("ROU") asset and lease liability for all leases.

The Company leases property under operating leases.

The Company leases its corporate office space with a size of 3,352 square feet leased from a third party through November, 2020 at the current rate of $7,752 per month;

increasing to $7,891 in November 2019.

The Company extended its short-term lease for a warehouse, originally due to expire on March 31, 2020 to March 2021, thus the Company adopted ASC 842 for this lease at the time of the extension in January 2020.

The lease rate for the extension was $ 3,938 per month starting April 1, 2020.

At inception the ROU and Lease Liability was calculated based on the net present value of the future lease payments over the term of the lease.

When available, the Company uses the rate implicit in the lease discount payments as the incremental borrowing rate to calculate the net present value;

however, the rate implicit in the lease is not readily determinable for our corporate office lease.

In this case, the Company estimated its incremental borrowing rate as the interest rate it could borrow an amount equal to the lease payments over a similar term, with similar collateral as the lease, and in a similar economic environment.

The Company estimated its rate using available evidence such as rates imposed by third-party lenders to the Company in recent financings or observable risk-free interest rate and credit spreads for commercial debt of a similar duration, with credit spreads correlating to the Company's estimated creditworthiness.

For operating leases that include rent holidays and rent escalation clauses, the Company recognizes lease expense on a straight-line basis over the lease term from the date it takes possession of the leased property.

The Company records the straight-line lease expense and any contingent rent, if applicable, in general and administrative expenses on the condensed consolidated statements of operations.

The corporate office, lease also requires the Company to pay real estate taxes, common area maintenance costs and other occupancy costs which are included in the general and administrative expenses on the condensed consolidated statements of operations.

Operating Lease expense for the year ended March 31, 2020 was $93,717.

The Company also had a short-term lease ending March 31, 2020 (before extension noted above) and the lease expense for this short-term lease for the year ended was $48,607.

Operating Leases:

March 31, 2020

Operating lease right-of-use asset - current portion

Operating lease right-of-use asset - non-current portion

Total Operating lease right-of-use asset

Operating lease liability - current portion

Operating lease liability - non-current portion

Total Operating lease liability

Weighted average remaining lease term (in years):

Operating leases

Weighted average discount rate:

Operating leases

Maturities of undiscounted lease liabilities as of March 31, 2020 are as follows:

Operating Leases

Year ending March 31, 2021

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

agreement for certain warehouse space requiring a monthly payment of $1,125.

September 12, 2017, the Company extended the lease until March 31, 2020,

requiring a monthly rent payment of $1,187.50 for the period October 1, 2017 to

September 30, 2018 and a monthly rent payment of $1,250.00 for the period

October 1, 2018 to March 31, 2020.

On December 1, 2016, the Company entered into a 16-month lease

agreement for certain warehouse space requiring a monthly payment of $2,250.

May 7, 2018, the Company extended the lease until March 30, 2019, requiring a

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

lease agreement for its corporate headquarters in Scottsdale, Arizona requiring

a monthly payment of $7,611.83, with a monthly lease increase to $7,751.83 per

month in months 15-26 of the lease and to $7,981.17 per month in the months

27-39 of the lease.

Total lease payments

Imputed interest

Total lease obligations

Note 9 - Commitments and Contingency

On September 9, 2019, the Company, AQUAhydrate, Inc.

("AQUAhydrate") and AWC Acquisition Company Inc.

(the "Merger Sub"), a wholly-owned subsidiary of the Company, entered into an Agreement and Plan of Merger (the "Merger Agreement").

The Merger Agreement provides that, among other things, the Merger Sub will merge with and into AQUAhydrate with AQUAhydrate as the surviving corporation and a wholly-owned subsidiary of the Company (the "Merger").

Subject to the terms and conditions of the Merger Agreement, in consideration for the Merger, the Company agreed to, at the closing of the Merger (the "Closing"), issue to the holders of shares of AQUAhydrate's common stock, on a pro-rata basis, such number of shares of the Company's common stock (the "Company Common Stock") that is equal to 19,565,217 less any shares of the Company Common Stock to be directed by AQUAhydrate to be issued in connection with the Merger to any placement agents or other service providers, including Roth Capital Partners LLC and Emerald Partners Pty Limited, and to any other persons for the payment of any outstanding liabilities of AQUAhydrate.

In addition, on the Closing, the Company agreed to issue to the holders of the shares of AQUAhydrate's preferred stock (after the capital reorganization), on a pro-rata basis, an additional 3,750,000 shares of the Company Common Stock as follows:

(1) an aggregate of 1,000,000 shares of the Company Common Stock which will be subject to escrow and not released until the Company achieves trailing revenue of $60 million in any twelve month period ending on the last day of any quarterly period of the fiscal year of the Company (each, a "Period") after the Closing;

(2) an aggregate of 1,250,000 shares of the Company Common Stock which will be subject to escrow and not released until the Company achieves trailing revenue of $80 million in any Period after the Closing;

and (3) an aggregate of 1,500,000 shares of the Company Common Stock which will be subject to escrow and not released until the Company achieves trailing revenue of $100 million in any Period after the Closing, provided that these shares of the Company Common Stock will be immediately released from escrow upon a change of control of the Company.

On September 9, 2019, and subject to the Merger Agreement closing, the Company agreed to issue 750,000 stock options to purchase shares of its common stock at a price of $3.00 per share until September 9, 2029 to Mark Wahlberg pursuant to a services agreement among the Company, Mr.

Wahlberg and AQUAhydrate, Inc.

The services agreement, which requires Mr.

Wahlberg to provide certain promotional services to the Company, was entered into in connection with the Merger.

The stock options vest as follows:

(i) 25% will vest one year following the effective date of the Merger, (ii) 25% will vest once the combined company resulting from the Merger (the "Combined Company") has achieved $80 million of revenue in any 12 month period, (iii) 25% will vest once the Combined Company has achieved $100 million of revenue in any 12 month period and (iv) 25% will vest once the Combined Company has achieved $125 million in revenue in any 12 month period;

provided that all stock options will immediately vest upon a change of control of the Company.

On September 9, 2019, the Company also granted to Mr.

Wahlberg a further 250,000 stock options to purchase shares of its common stock at a price of $3.00 per share until September 9, 2029, and such stock options will vest upon a change of control of the Company.

The issuance of all of the above referenced stock options to Mr.

Wahlberg is conditioned upon Mr.

Wahlberg and the Company entering in to separate stock option grant agreements.

In the event of the termination of the Merger Agreement, the aforementioned services agreement will automatically terminate and all of the above referenced options will automatically be forfeited.

On September 9, 2019, and subject to the Merger Agreement closing, the Company agreed to issue 750,000 stock options to purchase shares of its common stock at an exercise price of $3.00 per share until September 9, 2029 to SC Beverages LLC, a company controlled by Sean Combs, pursuant to a services agreement among the Company, SC Beverages LLC and AQUAhydrate, Inc.

The services agreement, which requires Mr.

Combs to provide certain promotional services to the Company, was entered into in connection with the Merger.

The stock options vest as follows:

(i) 25% will vest one year following the effective date of the Merger, (ii) 25% will vest once the Combined Company has achieved $80 million of revenue in any 12 month period, (iii) 25% will vest once the Combined Company has achieved $100 million of revenue in any 12 month period and (iv) 25% will vest once the Combined Company has achieved $125 million in revenue in any 12 month period;

provided that all stock options will immediately vest upon a change of control of the Company.

On September 9, 2019, the Company also granted to SC Beverages LLC a further 250,000 stock options to purchase shares of its common stock at a price of $3.00 per share until September 9, 2029, and such stock options will vest upon a change of control of the Company.

The issuance of all of the above referenced stock options to SC Beverages, LLC is conditioned upon SC Beverages, LLC and the Company entering in to separate stock option grant agreements.

In the event of the termination of the Merger Agreement, the aforementioned services agreement will automatically terminate and all of the above referenced options will automatically be forfeited.

On September 9, 2019, and subject to the Merger Agreement closing, the Company agreed to issue 125,000 stock options to purchase shares of its common stock at an exercise price of $3.00 per share until September 9, 2024 to Jillian Michaels, and 125,000 stock options to purchase shares of its common stock at an exercise price of $3.00 per share until September 9, 2024 to G-Money, Inc.

pursuant to an endorsement agreement among the Company, Ms.

Michaels, G-Money, Inc., Firelight, Inc.

and AQUAhydrate, Inc.

The endorsement agreement, which requires Ms.

Michaels to provide certain promotional services to the Company, was entered into in connection with the Merger.

The stock options vest as follows:

provided that all stock options will immediately vest upon a change of control of the Company.

On September 9, 2019, the Company also granted to Ms.

Michaels a further 125,000 stock options to purchase shares of its common stock at an exercise price of $3.00 per share until September 9, 2024, and granted to G-Money, Inc.

a further 125,000 stock options to purchase shares of its common stock at a price of $3.00 per share until September 9, 2024, and such stock options will vest upon a change of control of the Company.

The issuance of all of the above referenced stock options to entities affiliated with Ms.

Michaels is conditioned upon such entities and the Company entering in to separate stock option grant agreements.

In the event of the termination of the Merger Agreement, the aforementioned services agreement will automatically terminate and all of the above referenced options will automatically be forfeited.

This merger agreement was terminated in February 2020.

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 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

On September 20, 2016, we entered into a loan facility

agreement (the Loan Agreement) with Turnstone Capital Inc.

(the Lender),

whereby the Lender agreed to make available to our company a loan in the

aggregate principal amount of $1,500,000 (the Loan Amount).

Pursuant to the

Loan Agreement, the Lender agreed to make one or more advances of the Loan

Amount to our company as requested from time to time by our company in an amount

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

In June, 2017, Turnstone Capital Inc.

advanced an additional

$500,000 under the Loan Agreement.

The Company evaluated this transaction under

ASC 470-20-30 Debt liability and equity component and determined that

a debt discount of $295,000 was provided and will be amortized over the

remaining term of the Loan Agreement.

On September 29, 2017, Turnstone Capital Inc.

converted the

$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.

On December 31, 2017, the Company exercised its purchase option 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, 2020, the equipment has been paid for in-full.

NOTE 11 - SUBSEQUENT EVENTS

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

ACCOUNTING AND FINANCIAL DISCLOSURE

Effective as of April 1, 2020, we issued an aggregate of 3,400,000 shares of our common stock upon conversion of an aggregate of 3,400,000 shares of our Series D Preferred Stock without the payment of any additional consideration.

Of the 3,400,000 shares that we issued, 1,500,000 shares were issued to Richard A.

Wright, our president, chief executive officer and director, 1,000,000 shares were issued to David A.

Guarino, our treasurer, secretary, chief financial officer and director and 900,000 shares were issued to three other individuals, We issued these shares pursuant to the exemption from registration under the Securities Act of 1933, as amended provided by Section 4(a)(2) and/or Section 3(a)(9) of the Securities Act of 1933, as amended.

On April 3, 2020, we granted an aggregate of 2,737,000 stock options to certain directors, officers, consultants and employees for the purchase of up to 2,737,000 shares of our common stock pursuant to our 2018 Stock Option Plan.

Each stock option is exercisable at a price of $0.53 per share until April 2, 2030.

Of these stock options, 1,217,000 vest as to 50% on the grant date and 50% on the one-year anniversary of the grant date, 640,000 vest as to one-third on the grant date and one-third on each anniversary of the grant date and 880,000 vest as to one-third on each anniversary of the grant date.

We granted the stock options to 31 U.S.

Persons and 3 non U.S.

Of these options, 250,000 were granted to Richard A.

Wright, our president, chief executive officer and director, and 150,000 were granted to David A.

Guarino, our chief financial officer, secretary, treasurer and director.

These stock options are exercisable at the exercise price of $0.53 per share until April 2, 2030.

The stock options vest as to 50% on the date of grant and 50% on the one-year anniversary of the date of grant.

On April 8, 2020, The Alkaline Water Company Inc.

(the "Company") received a deficiency letter from the Listing Qualifications Department of The NASDAQ Stock Market (the "Staff"), notifying the Company that, for the last 30 consecutive business days, the closing bid price of the Company's common stock has not been maintained at the minimum required closing bid price of at least $1.00 per share as required for continued listing on The NASDAQ Capital Market pursuant to Listing Rule 5550(a)(2) ("Minimum Bid Price Rule").

In accordance with NASDAQ Listing Rules, the Company has been given 180 calendar days, or until October 5, 2020, to regain compliance with the Minimum Bid Price Rule.

If at any time before October 5, 2020, the closing bid price of the Company's common stock is at least $1.00 for a minimum of 10 consecutive business days, the Staff will provide written notification to the Company that it complies with the Minimum Bid Price Rule.

In the event the Company does not regain compliance, the Company may be eligible for additional time to regain compliance of up to an additional 180 calendar days.

To qualify, the Company will be required to meet the continued listing requirement for market value of publicly held shares and all other initial listing standards for The Nasdaq Capital Market, with the exception of the Minimum Bid Price Rule, and will need to provide written notice of its intention to cure the deficiency during the second compliance period, by effecting a reverse stock split, if necessary.

On June 3, 2020, the Staff notified the Company that it had regained compliance with the Minimum Bid Price Rule and thus the matter is now closed.

On April 17, 2020, we completed a private placement of 9,750,000 units of our securities at a price of $0.40 per unit for gross proceeds of $3,900,000.

Each unit consisted of one share of our common stock and one share purchase warrant, with each share purchase warrant entitling the holder to acquire one additional share of our common stock at a price of $0.50 per share for a period of three years.

Of the 9,750,000 units we issued:

(i) 1,250,000 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 one investor who is an "accredited investor" within the respective meanings ascribed to that term in Regulation D promulgated under the Securities Act of 1933, as amended;

and (ii) 8,500,000 units were issued to 5 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 this private placement, 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 placement and agreed to use commercially reasonable efforts to have the registration statement declared effective by the Securities and Exchange Commission as soon as possible.

We filed the foregoing registration statement on Form S-3 with the SEC on May 27, 2020, and the registration statement was declared effective by the SEC on June 8, 2020.

Effective as of April 29, 2020, we issued an aggregate of 116,000 shares of our common stock upon exercise of stock options.

25,000 were exercised at a price of $1.29 per share for gross proceeds of $32,250 and 91,000 were exercised at a price of $0.53 per share for gross proceeds of $48,230.

On April 30, 2020, we issued an aggregate of 207,000 shares of our common stock in consideration for services rendered to our company.

We issued these shares to 7 U.S.

Persons (as that term is defined in Regulation S of the Securities Act of 1933) and in issuing these shares, we relied on the exemption from the registration requirements of the Securities Act of 1933 provided by Section 4(a)(2) of the Securities Act of 1933.

On April 30, 2020, we granted awards of an aggregate of 1,065,000 shares of our common stock as "restricted awards" under our 2020 Equity Incentive Plan to certain directors, officers, employees and consultants.

Of these shares, 645,000 vest on the one-year anniversary of the grant date, 200,000 vest as to 50% on the one-year anniversary of the grant date and 50% vest on the second year anniversary of the grant date, 165,000 vest as to one-third on each anniversary of the grant date and 55,000 vest immediately.

The grantees have no rights or privileges as stockholders of our company with respect to the unvested shares including, without limitation, the right to vote such shares and receive all dividends or other distributions paid with respect to such shares.

Of these restricted awards granted on April 30, 2020, an award of 200,000 shares of our common stock went to Richard A.

Wright, our president, chief executive officer and director, and an award of 100,000 shares of our common stock went to David A.

Guarino, our chief financial officer, secretary, treasurer and director.

We granted these shares as "restricted awards" under our 2020 Equity Incentive Plan.

These shares vest on the one-year anniversary of the grant date.

The grantees have no rights or privileges as a stockholder of our company with respect to the unvested shares including, without limitation, the right to vote such shares and receive all dividends or other distributions paid with respect to such shares.

On May 11, 2020, we completed a private placement of 4,444,440 subscription receipts at a price of $0.45 per subscription receipt for total gross proceeds of $1,999,998.

On July 14, 2020 after receiving the Shareholder Approval detailed below, we issued 4,444,440 units of our company upon conversion such subscription receipts issued pursuant to the foregoing private placement completed on May 11, 2020.

Accordingly, gross proceeds of $1,999,998, previously held in escrow, have been released to our company.

Each unit consists of one share of our common stock and one transferable share purchase warrant, for no additional consideration.

Each warrant will entitle the holder thereof to acquire one share of our common stock until May 11, 2023 at a price of $0.55 per share.

In the event that our common stock has a closing price on the TSX Venture Exchange (or such other exchange on which our common stock may be traded at such time) of $1.75 or greater per share for a period of 20 consecutive trading days at any time from the closing date of the private placement, we may accelerate the expiry date of the warrants by giving notice to the holders thereof (by disseminating a news release advising of the acceleration of the expiry date of the warrants) and, in such case, the warrants will expire on the thirtieth day after the date of such notice.The proceeds of the private placement are expected to be used to fund our company's general working capital and expansion of production capacity.

Of the 4,444,440 units we issued:

(i) 444,443 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 three investors, each of who is an "accredited investor" within the meaning ascribed to that term in Regulation D promulgated under the Securities Act of 1933, as amended;

and (ii) 3,999,997 units were issued to three non-U.S.

In connection with the private placement, we agreed with each subscriber who purchased these subscription receipts to prepare and file a registration statement with respect to (i) the shares of our common stock comprising these subscription receipts and (ii) the shares of our common stock issuable upon exercise of the share purchase warrants comprising these subscription receipts with the Securities and Exchange Commission within 30 days following the satisfaction of the Release Condition and agreed to use commercially reasonable efforts to have the registration statement declared effective by the Securities and Exchange Commission as soon as possible.

We filed the foregoing registration statement on Form S-3 with the SEC on May 27, 2020, and the registration statement was declared effective by the SEC on June 8, 2020.

Effective as of May 20, 2020, we issued an aggregate of 287,666 shares of our common stock upon exercise of our common stock purchase warrants with an exercise price of $0.90 per share for aggregate gross proceeds of $258,899.40.

We issued 121,000 of these shares to four non-U.S.

persons (as that term is defined in Regulation S of the Securities Act of 1933) in an offshore transaction relying on Regulation S and/or Section 4(a)(2) of the Securities Act of 1933.

We issued 166,666 of these shares to one U.S.

person (as that term is defined in Regulation S of the Securities Act of 1933) relying on the exemptions from the registration requirements of the Securities Act of 1933 provided by Section 4(a)(2) of the Securities Act of 1933 and/or Rule 506 promulgated under the Securities Act of 1933.

Effective as of May 22, 2020, we issued 170,000 shares of our common stock in consideration for services to be rendered to our company.

We issued these shares to one U.S.

person (as that term is defined in Regulation S of the Securities Act of 1933) and in issuing these shares, we relied on the exemption from the registration requirements of the Securities Act of 1933 provided by Section 4(a)(2) of the Securities Act of 1933.

On July 13, 2020, we held a special meeting of our stockholders.

At the meeting, our stockholders:

(a) approved the April 17, 2020 private placement and the issuance of all securities thereunder;

and (b) approved the May 11, 2020 private placement and the issuance of all securities thereunder (collectively, the "Shareholder Approval").

On July 16, 2020, we issued an aggregate of 18,779 shares of our common stock in consideration for services rendered to our company.

We issued these shares to one U.S.

Person (as that term is defined in Regulation S of the Securities Act of 1933) and in issuing these shares, we relied on the exemption from the registration requirements of the Securities Act of 1933 provided by Section 4(a)(2) of the Securities Act of 1933 and/or Rule 506 promulgated under the Securities Act of 1933.

CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE

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