What changed in this filing

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Item 1. Business

2021-07-06 compared with 2020-08-13 · 70 added, 66 removed, 113 unchanged (55% of the section changed)

32 unchanged sentences

Corporate Overview

We offer 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, we also offer 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.

We recently introduced and began selling hemp-derived CBD topical and ingestible products under the brand name "A88CBD™".

Founded in 2012, The Alkaline Water Company (NASDAQ and CSE:

WTER) is headquartered in Scottsdale, Arizona.

Its flagship product, Alkaline88®, is a leading premier alkaline water brand available in bulk and single-serve sizes along with eco-friendly aluminum packaging options.

With its innovative, state-of-the-art proprietary electrolysis process, Alkaline88® delivers perfect 8.8 pH balanced alkaline drinking water with trace minerals and electrolytes and boasts our trademarked label ‘Clean Beverage.’ Quickly being recognized as a growing lifestyle brand, Alkaline88® launched A88 Infused™ in 2019 to meet consumer demand for flavor-infused products.

A88 Infused™ flavored water is available in six unique all-natural flavors, with new flavors coming soon.

Additionally, in 2020, the Company launched A88 Infused Beverage Division Inc., which includes the Company’s CBD water and flavor-infused water.

For the Company’s topical and ingestible offerings, A88 Infused Products Inc.

includes both the Company’s lab-tested full-spectrum hemp salves, balms, lotions, essential oils, and bath salts, along with broad-spectrum hemp, powder packs, oil tinctures, capsules, and gummies.

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).

Our bottled alkaline water product is presently available in all 50 states and the District of Columbia.

Our bottled alkaline water product is presently available in over 75,000 stores in all 50 states, the District of Columbia, the Caribbean and in Mexico.

We distribute our product through several channels.

We sell through large national distributors, including UNFI, KeHE, C&S, and Core-Mark.

We also sell our product to retail clients, including convenience stores, natural food products stores, large ethnic markets and national retailers.

Examples of our retail clients include Walmart, CVS, Family Dollar, Food Lion, Albertson's, Safeway, Kroger, Schnucks, Smart & Final, Jewel-Osco, Sprouts, Bashas', Stater Bros.

We sell through large national distributors (UNFI, KeHE, C&S, and Core-Mark), which together represent over 150,000 retail outlets.

We also sell our products directly to retail clients, including convenience stores, natural food products stores, large ethnic markets and national retailers and through Direct Store Distributors in selected markets, including Mahaska, Nevada Beverage, and Hensley, covering Nevada, Arizona, and Midwest region.

Combined, they service over 16,000 customers in five states.

Each one carries our full line of non-CBD waters.

Some examples of retail clients are:

Walmart, CVS, Rite-Aid Family Dollar, Food Lion, Albertson's/Safeway, Kroger companies, Schnucks, Smart & Final, Jewel-Osco, Sprouts, Bashas', Stater Bros.

Markets, Unified Grocers, Bristol Farms, Publix, Vallarta, Superior Foods, Ingles, Shaw’s, Raley’s, Harris Teeter, Festival Foods, HEB and Brookshire's.

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Our component materials are readily available through multiple vendors.

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

and Packaging Corporation of America.

Our principal suppliers are Vav Plastics Inc., Amcor Inc., Smurfit, and Goodpac.

A88 Infused Beverage Division, Inc.

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We expect A88 Infused to capitalize on this and potential consumer demand with the development and launch of new products focused on growing trends in the beverage space.

To prepare for the launch of products by A88 Infused, we have expanded our packaging capabilities.

We announced in January, 2019 that Nevada-based Western Group Packing has agreed to produce A88 Infused's flavored Alkaline88 ® water products and its planned hemp extract-infused water product at its 150,000+ square foot facility located in North Las Vegas, NV.

We received our first order for our A88 Infused's flavored Alkaline88 ® water products, which are now available in Blood Orange, Lemon, Lemon-Lime, Peach Mango, Watermelon, Cucumber Mint, and Raspberry, in August, 2019.

In February, 2020, we announced the receipt of first commitments from over 10,000 stores nationwide to purchase our flavored Alkaline88 ® water products.

A88 Infused is also developing and preparing for the initial launch of its planned hemp extract product, which will be marketed under the trademark Soothe™ .

The production of A88 Infused's planned hemp extract product is contingent on U.S.

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

While the Agriculture Improvement Act of 2018 removed hemp from Schedule I of the Controlled Substances Act, the law did not change the FDA's authorities with respect to food or drugs.

Our first infused water products were launched in 2019 and consist of A88 Infused's flavored water products, which are now available in Blood Orange, Lemon, Lemon-Lime, Peach Mango, Watermelon and Raspberry.

They are produced in Waco Texas at Waco Bottling.

Currently A88 Infused's flavored water products are on thousands of shelves nationwide in many of the same retailers that carry our flagship brand Alkaline88,including, 99 Cent Only ,Albertson (Randalls, Safeway), Associated Foods, Associated Wholesale Grocers, B&G Wholesale, Gelson’s Market, HEB , HY-VEE, Ingles, Save A Lot Super Store Industries, Supervalu, Wakefern, and national distributors UNFI and KEHE.

A88 Infused Products, Inc.

In September 2019, we formed A88 Infused Products, Inc., or “A88 Products,” a Nevada corporation and a wholly‑owned subsidiary of our company.

A88 Product's focus is brand extension and product innovations in the CBD infused products category, which include ingestibles and topical products.

For its ingestibles line, the A88™ Infused Beverage Division Inc.

currently produces CBD infused tinctures, gummies, fruit chews and capsules, and will produce CBD infused drinks, beverage shots, and powder packs.

For its topicals line, A88™ Infused Products Inc.

currently produces salves, balms, lotions, bath bombs, essential oils, and bath-salt all made with lab-tested full-spectrum hemp.

We formed A88 Products to meet what we believe is increasing consumer demand for a variety of CBD infused wellness products.

We expect A88 Products to capitalize on this and potential consumer demand with the development and launch of new products focused on growing trends in the space.

On February 20, 2020, A88 Products began selling its line of CBD infused topical products through ecommerce at www.a88cbd.com.

Currently, all of A88 Products’ CBD products are available for purchase on its E-commerce websites, www.a88cbd.com and www.a88hemp.com, various third party ecommerce sites, and a growing number of brick and mortar retail locations throughout the United States.

As of the date of this annual report, the FDA has not made a determination that the use of hemp extract in food is safe.

The FDA has evaluated Generally Recognized as Safe (GRAS) notices for four hemp seed-derived food ingredients and determined that the agency has no questions that those ingredients are GRAS under their intended conditions of use.

In the event the FDA issues appropriate regulations or guidance or determines that it has no questions that hemp extract is GRAS under intended conditions of use that would permit A88 Infused to market hemp extract in water without food additive approval, we expect to produce and sell Soothe™ as still water in bottles.

We may also decide to market Soothe™ in any states, districts or territories if applicable laws allow for such sale or if a supplier meets and complies with the FDA's GRAS regulations with respect to a self-certification regarding the safety and GRAS status of the use of hemp extract.

We expect to produce Soothe™ as a low calorie or no calorie, hemp extract-infused water in three flavors.

We expect to produce A88CBD water as a low calorie or no calorie, hemp extract-infused water in three flavors and 5 functional formulas (Relax, Revive, Recover etc.).

We may change the composition of our planned hemp-extract-infused product as necessary to comply with federal, state or local laws, regulations or guidance.

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In order for us to implement our business plan over the next 12 months, we have identified the following milestones that we expect to achieve:

• Expansion of Broker Network - We expect to continue to develop our working relationship with our national broker network.

We continually meet, train, and go on sales call with our national broker network in order to take advantage of the momentum currently being created by their efforts.

Expansion of Broker Network - We expect to continue to develop our working relationship with our national retail broker network.

We continually meet, train, and go on sales call with our national retail broker network in order to take advantage of the momentum currently being created by their efforts and sell into clubs stores and big box retailers.

New brokers will also be added in the on-premise and international sales channels to support initiatives that began in Fiscal 2020 and 2021.

We anticipate a considerable amount of travel and ongoing expenses to be incurred as part of this expansion.

Strategically Located DSD Partners – We expect to add Direct Store Distributors (“DSD”) partners in the Northeast, Northwest and Mid-Atlantic to further accelerate our retail account penetration, specifically in the convenience store channel.

Increase Manufacturing Capacity - (i) Flagship Alkaline88 ® product:

we expect to add one to two new co-packer facilities, strategically located to reduce freight costs and meet current volumes and future growth objectives;

we expect to add three new co-packer facilities, strategically located to reduce freight costs and meet current volumes and future growth objectives;

and (ii) A88 Infused:

we expect to add three to five new co-packer facilities strategically located to meet anticipated volumes by product type and future growth objectives.

• Expand Retail Distribution - We continue to expand our retail presence.

• Addition of Support Staff - In order to support expansion efforts and to continue the training and support of our broker network, we anticipate that we will need to hire approximately three to five more people on the corporate level for the specific purpose of supporting the broker, distributor and retailers and their logistical and accounting requirements.

(iii) A88 Infused Products Inc:

we expect to add three new co-packer facilities strategically located to meet anticipated volumes by product type and future growth objectives

Expand Retail Distribution - We continue to expand our retail presence through securing new customers and growing the number of SKUs of our products carried by existing customers.

Expand On-Premise Distribution - In addition to adding qualified personnel to lead this area we will be bringing on numerous new brokers and distributors to support our on-premise channels which include, hotels, national parks, airports, universities, restaurants, resorts, health clubs, recreation and other on-premise facilities and businesses

Expand International Distribution – We anticipate adding new brokers, distributors and co-packers to support our international sales initiatives in Canada, Mexico the Caribbean and potential parts of Asia

Addition of Support Staff and Officers - In order to support expansion efforts and to continue the training and support of our broker network, we anticipate that we will need to hire approximately five to 10 more people on the corporate level for the specific purpose of supporting and overseeing e-commerce, hospitality/on-premise sales, DSD sales, expanded manufacturing, distributor and retailer relationships, and marketing to support utilizing our brand ambassador.

We continue to seek and interview candidates to fill our growing need for additional staffing

E-commerce Expansion:

We will hire personnel to head up and support and aggressive ecommerce expansion of our flagship products and other functional beverages.

This will be supported with an aggressive marketing plan.

Traditional Marketing Program:

With the May 2021 signing of our partnership with Shaquille O’Neal and Authentic Brand Group we will embark on our first ever national marketing plan.

We anticipate adding a Chief Marketing Officer to work in conjunction with our agencies in establishing sales and branding objectives over the three year term of the brand ambassador agreement.

• Capital Considerations - Our business plan can be adjusted based on the available capital to the business.

o On April 17, 2020, we completed a private placement of 9,750,000 units of our securities at a price of US$0.40 per unit for gross proceeds of US$3,900,000 (the "April Private Placement").

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 US$0.50 per share for a period of three years.

In the event that our common stock has a closing price on an exchange on which our common stock may be traded at such time of US$1.75 or greater per share for a period of 20 consecutive trading days at any time from the closing date of the April 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.

A special meeting of stockholders held on July 13, 2020 approved the April Private Placement.

o On July 14, 2020, we issued 4,444,440 units of our company upon conversion of the subscription receipts issued pursuant to a private placement completed on May 11, 2020 (the "May Private Placement").

Accordingly, gross proceeds of US$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 US$0.55 per share.

In the event that our common stock has a closing price of US$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 conversion of the subscription receipts was the result of our company satisfying the escrow release condition, which was the receipt by our company of an ordinary resolution of our stockholders approving the private placement and the issuance of the securities thereunder.

o We believe the proceeds from the April Private Placement and the May Private Placement, plus anticipated warrant exercises, will adequately fund our operations and capital needs for the next 12 months.

The milestones set forth above reflect our current judgment and belief regarding the direction of our business.

Actual events, expenditures and results will almost always vary, sometimes materially, from any estimates, predictions, projections or assumptions suggested herein.

If our own financial resources and future cash-flows from operations are insufficient to satisfy our capital requirements, we may seek to sell additional equity or debt securities or obtain additional credit facilities.

On February 22, 2021, we entered into a sales agreement (the "Sales Agreement") with Roth Capital Partners, LLC, as sales agent (the "Agent"), pursuant to which we may offer and sell, from time to time, through or to the Agent, as sales agent and/or principal (the "Offering") up to $20,000,000 in shares of our common stock.

Subject to the terms and conditions of the Sales Agreement, the Agent agreed to use its commercially reasonable efforts to sell the shares from time to time, based upon our instructions.

Under the Sales Agreement, the Agent may sell the shares by any method permitted by law deemed to be an "at the market offering" as defined in Rule 415 promulgated under the Securities Act of 1933, as amended.

We have no obligation to sell any of the shares and may at any time suspend offers under the Sales Agreement.

The Offering will terminate upon (a) the election of the Agent upon the occurrence of certain adverse events, (b) five days' advance notice from one party to the other, or (c) the sale of all of the shares specified in the Sales Agreement.

Under the terms of the Sales Agreement, the Agent will be entitled to a commission at a fixed rate of 3.0% of the gross proceeds from each sale of the shares under the Sales Agreement.

We will also reimburse the Agent for certain expenses incurred in connection with the Sales Agreement.

We believe cash on hand, plus anticipated warrant exercises, our line of credit and the Sales Agreement will adequately fund our current planned operations and capital needs for the next 12 months.

However, if our current plans change or are accelerated or we choose increase our production capacity, we may seek to sell additional equity or debt securities or obtain additional credit facilities, including seeking investments from strategic investors.

The sale of additional equity securities will result in dilution to our stockholders.

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Any failure by us to raise additional funds on terms favorable to us, or at all, will limit our ability to expand our business operations and could harm our overall business prospects.

The milestones set forth above reflect our current judgment and belief regarding the direction of our business.

Actual events, expenditures and results will almost always vary, sometimes materially, from any estimates, predictions, projections or assumptions suggested herein.

Distribution Method for Our Products

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and (e) the mass retail market.

We have distribution agreements with large national distributors (UNFI, KeHe, CoreMark, and C&S), representing over 150,000 retail establishments.

Our current retailers include convenience stores, natural food products stores, large ethnic markets and national retailers.

Currently, we sell all of our products to our retailers through brokers and distributors.

Our larger retail clients bring the water in through their own warehouse distribution network.

Our current retail clients are made up of a variety of the following;

convenience stores, including 7-11's;

large national retailers, including Walmart, CVS, Family Dollar, Albertson's/Safeway, Kroger companies, and regional grocery chains such as Schnucks, Smart & Final, Jewel-Osco, Sprouts, Bashas', Bristol Farms, Stater Brothers, Publix, Vallarta, Superior Foods, Brookshire's, HEB and other companies throughout the United States.

We are also adding certain DSD distribution partners in certain strategic markets throughout the United States to assist in our retail account penetration, specifically in the convenience store channel.

Through common carriers we ship our water to distribution centers (DC) around the country.

We distribute to the natural food channel by delivering to primarily KeHE and UNFI distributors who then deliver to specific store locations within their customer networks.

Combined, they reach over 60,000 retailers nationwide.

The convenience channel is served by Core-Mark, McLane, and select market DSDs that service 110,000 retailers.

We deliver directly to the DCs of our large national and regional grocery, drug, and specialty retailers.

These retailers include Walmart, CVS, Family Dollar, Albertson's/Safeway, Kroger companies, and regional grocery chains such as Schnucks, Smart & Final, Jewel-Osco, Sprouts, Bashas', Bristol Farms, Stater Brothers, Unified Grocers, Publix, Vallarta, Superior Foods, Ingles, Shaw's, Raley's Harris Teeter, Festival Foods, Brookshire's, HEB and other companies throughout the United States.

In total we are now in more than 70% of the top 75 grocery retailers in the United States.

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Products offered by our direct competitors are sold in various volumes and prices with prices ranging from approximately $0.99 for a half-liter bottle to $4.99 for a one-gallon bottle, and volumes ranging from half-liter bottles to one-gallon bottles.

We currently offer our product in a one-gallon bottle for a suggested resale price or an SRP of $4.99, three-liter bottle for an SRP of $3.99, 1.5 liter at an SRP of $2.49, 1 liter at an SRP of $1.99, 700 milliliter single serving at an SRP of $1.19, and a 500 milliliter at an SRP of $0.99.

We currently offer our product in a one-gallon bottle for a suggested resale price or a SRP of $4.99, three-liter bottle for a SRP of $3.99, 2 liter bottle at a SRP of $2.99, 1.5 liter at a SRP of $2.49, 1 liter at a SRP of $1.99, 700 milliliter single serving at a SRP of $1.19, an aluminum 500ml at a SRP of $2.49, and a 500 milliliter at a SRP of $0.99.

Our competitors may introduce larger sizes and offer them at an SRP that is lower than our products.

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The trademark for Alkaline88 ® has been registered in the USA, Canada, Hong Kong, and has been applied for in China.

While there can be no assurance that registered trademarks will protect our proprietary information, we intend to assert our intellectual property rights against any infringer.

Although any assertion of our rights could result in a substantial cost to, and diversion of effort by, our company, management believes that the protection of our intellectual property rights will be a key component of our sales and operating strategy.

The electrolysis process through which our product is produced is proprietary to us and, while the process is not patented, we seek to protect the process through the maintenance of trade secrets and know-how agreements.

Seasonality of Business

The sales of our products are influenced to some extent by weather conditions in the markets in which we operate.

Unusually cold or rainy weather during the summer months may have a temporary effect on the demand for our product and contribute to lower sales, which could have an adverse effect on our results of operations for such periods.

Government Regulation

The advertising, distribution, labeling, production, safety, sale, and transportation in the United States of our products will be subject to the Federal Food, Drug, and Cosmetic Act;

the Federal Trade Commission Act;

the Lanham Act;

state consumer protection laws;

competition laws;

federal, state and local workplace health and safety laws;

various federal, state and local environmental protection laws;

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

Legal requirements apply in many jurisdictions in the United States requiring that deposits or certain ecotaxes or fees be charged for the sale, marketing, and use of certain non-refillable beverage containers.

The precise requirements imposed by these measures vary and are constantly evolving.

Other types of statutes and regulations relating to beverage container deposits, recycling, ecotaxes and/or product stewardship also apply in various jurisdictions in the United States.

We anticipate that additional, similar legal requirements may be proposed or enacted in the future at the local, state and federal levels in the United States.

Other trade marks that have been registered and are currently being used in our marketing efforts include Clean Beverage ® , Smooth Hydration ® , Ionized H20 ® , A88 ® , Hello Hydration ® , A88 Infused ® , and Refreshingly Different CBD ® .

Any third-party bottling facility that we may choose to utilize in the future and any other such operations will be subject to various environmental protection statutes and regulations, including those relating to the use of water resources and the discharge of wastewater.

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

What changed 10-K

Item 1. Business