UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 2015
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR
15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
Commission file number 000-55096
THE ALKALINE WATER COMPANY INC.
(Exact name of registrant as specified in its charter)
Nevada |
99-0367049 |
(State or other jurisdiction of |
(I.R.S. Employer |
incorporation or organization) |
Identification No.) |
|
|
7730 E Greenway Road, Suite 203, Scottsdale, AZ
|
85260 |
(Address of principal executive offices) |
(Zip Code) |
(480) 656-2423
(Registrants telephone
number, including area code)
Not Applicable
(Former name, former address
and former fiscal year, if changed since last report)
Indicate by check mark whether the registrant (1) has filed all
reports required to be filed by Section 13 or 15(d) of the Securities Exchange
Act of 1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days.
Yes
[X] No [ ]
Indicate by check mark whether the registrant has submitted
electronically and posted on its corporate Web site, if any, every Interactive
Data File required to be submitted and posted pursuant to Rule 405 of Regulation
S-T (§232.405 of this chapter) during the preceding 12 months (or for such
shorter period that the registrant was required to submit and post such files).
Yes [X] No [ ]
Indicate by check mark whether the registrant is a large
accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller
reporting company. See definitions of large accelerated filer, accelerated
filer and smaller reporting company in Ruble 12b-2 of the Exchange Act.
Large accelerated filer [ ] |
Accelerated
filer
[ ] |
Non-accelerated filer [ ] (Do not
check if a smaller reporting company) |
Smaller reporting company [X]
|
Indicate by check mark whether the registrant is a shell
company (as defined in Rule 12b-2 of the Exchange Act).
Yes [
] No [X]
Indicate the number of shares outstanding of each of the
issuers classes of common stock, as of the latest practicable date.
134,394,622 shares of common stock issued and outstanding as of August
13, 2015 .
1
THE ALKALINE WATER COMPANY INC.
QUARTERLY PERIOD
ENDED JUNE 30, 2015
Index to Report on Form 10-Q
2
PART I FINANCIAL INFORMATION
Item 1. Financial Statements
THE ALKALINE WATER COMPANY INC.
CONSOLIDATED
BALANCE SHEETS
(unaudited)
|
|
June 30, 2015 |
|
|
March 31, 2015 |
|
|
|
(Unaudited) |
|
|
|
|
ASSETS |
|
|
|
|
|
|
Current assets: |
|
|
|
|
|
|
Cash |
$ |
193,955 |
|
$ |
90,113 |
|
Accounts receivable |
|
489,586 |
|
|
416,373 |
|
Inventory |
|
212,121 |
|
|
193,355 |
|
Prepaid Expenses |
|
17,500 |
|
|
17,500 |
|
Total current assets |
|
913,162 |
|
|
717,341 |
|
|
|
|
|
|
|
|
Fixed assets, net |
|
1,131,721 |
|
|
1,199,900 |
|
Equipment deposits - related party |
|
24,998 |
|
|
- |
|
Total assets |
$ |
2,069,881 |
|
$ |
1,917,241 |
|
|
|
|
|
|
|
|
LIABILITIES AND
STOCKHOLDERS' DEFICIT |
|
|
|
|
|
|
Current liabilities: |
|
|
|
|
|
|
Accounts payable |
$ |
760,432 |
|
$ |
562,499 |
|
Accounts payable - related party |
|
- |
|
|
43,036 |
|
Accrued expenses |
|
171,000 |
|
|
160,437 |
|
Revolving financing |
|
208,870 |
|
|
242,875 |
|
Current portion of
capital leases |
|
216,501 |
|
|
209,544 |
|
Note payable, net of debt discount |
|
177,583 |
|
|
- |
|
Convertible notes
payable, net of debt discount |
|
11,899 |
|
|
- |
|
Derivative liability |
|
363,104 |
|
|
194,940 |
|
Total current liabilities |
|
1,909,389 |
|
|
1,413,331 |
|
|
|
|
|
|
|
|
Long-term liabilities |
|
|
|
|
|
|
Capitalize leases |
|
204,209 |
|
|
233,770 |
|
Total
Long-term liabilities |
|
204,209 |
|
|
233,770 |
|
|
|
|
|
|
|
|
Total
liabilities |
|
2,113,598 |
|
|
1,647,101 |
|
|
|
|
|
|
|
|
Stockholders' deficit: |
|
|
|
|
|
|
|
|
|
|
|
|
|
Preferred stock -
$0.001 par value, 100,000,000 shares authorized. |
|
|
|
|
|
|
Series A issued 20,000,000 |
|
20,000 |
|
|
20,000 |
|
Common stock, Class A, $0.001
par value, 1,125,000,000 shares authorized,
139,914,398 and 81,602,175
shares issued and outstanding as of June 30, 2015
and March 31, 2014,
respectively |
|
139,915 |
|
|
124,496 |
|
Additional paid in capital |
|
13,003,348 |
|
|
11,777,994 |
|
Common stock issuable |
|
- |
|
|
- |
|
Deficit accumulated |
|
(13,206,980 |
) |
|
(11,652,350 |
) |
Total stockholders' deficit |
$ |
(43,717 |
) |
$ |
270,140 |
|
|
|
|
|
|
|
|
Total liabilities and
stockholders' deficit |
$ |
2,069,881 |
|
$ |
1,917,241 |
|
See Accompanying Notes to Condensed Consolidated Financial
Statements.
3
THE ALKALINE WATER COMPANY INC.
CONSOLIDATED
STATEMENT OF OPERATIONS
(unaudited)
|
|
For the quarter ended |
|
|
For the quarter ended |
|
|
|
June
30, 2015 |
|
|
June
30, 2014 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Revenue |
$ |
1,513,578 |
|
$ |
572,049 |
|
|
|
|
|
|
|
|
Cost of goods sold |
|
976,804 |
|
|
406,125 |
|
|
|
|
|
|
|
|
Gross profit |
|
536,774 |
|
|
165,924 |
|
|
|
|
|
|
|
|
Operating expenses: |
|
|
|
|
|
|
Sales and marketing expenses |
|
626,681 |
|
|
226,780 |
|
General and
administrative |
|
1,151,540 |
|
|
2,138,753 |
|
Depreciation expense |
|
71,029 |
|
|
16,534 |
|
|
|
|
|
|
|
|
Total
operating expenses |
|
1,849,250 |
|
|
2,382,067 |
|
|
|
|
|
|
|
|
Other Income (expenses): |
|
|
|
|
|
|
Interest expense |
|
(3,125 |
) |
|
(2,524 |
) |
Interest expense on redeemable
preferred stock |
|
- |
|
|
(40,382 |
) |
Interest expense
on capital lease |
|
(52,566 |
) |
|
- |
|
Fees paid on credit line |
|
(11,716 |
) |
|
(7,057 |
) |
Amortization of debt
discount |
|
(6,583 |
) |
|
(414,370 |
) |
Other expenses |
|
- |
|
|
(11 |
) |
Loss on sales
leaseback |
|
- |
|
|
(20,773 |
) |
Change in derivative liability |
|
(168,164 |
) |
|
264,051 |
|
|
|
|
|
|
|
|
Total other
expense |
|
(242,154 |
) |
|
(221,066 |
) |
|
|
|
|
|
|
|
Net loss |
$ |
(1,554,630 |
) |
$ |
(2,437,209 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted average number of
common shares outstanding - basic |
|
131,870,049 |
|
|
94,019,973 |
|
|
|
|
|
|
|
|
Net loss per share - basic |
$ |
(0.01 |
) |
$ |
(0.03 |
) |
See Accompanying Notes to Condensed Consolidated Financial
Statements.
4
THE ALKALINE WATER COMPANY INC.
CONSOLIDATED
STATEMENTS OF CASH FLOWS
(unaudited)
|
|
For the quarter ended |
|
|
For the quarter ended |
|
|
|
June
30, 2015 |
|
|
June
30, 2014 |
|
CASH FLOWS FROM OPERATING
ACTIVITIES |
|
|
|
|
|
|
Net loss |
$ |
(1,554,630 |
) |
|
(2,437,209 |
) |
Adjustments to
reconcile net income to net cash used in operating activities: |
|
|
|
|
|
|
Depreciation expense |
|
71,029 |
|
|
16,534 |
|
Shares issued for services |
|
642,872 |
|
|
1,399,127 |
|
Amortization of debt discount |
|
6,583 |
|
|
414,370 |
|
Interest expense relating to amortization of capital lease discount |
|
25,524 |
|
|
- |
|
Interest
expense on redemmable preferred stock on intial issuance |
|
- |
|
|
- |
|
Change in derivative liabilities |
|
168,164 |
|
|
(264,051 |
) |
Changes in operating assets and
liabilities: |
|
|
|
|
|
|
Accounts receivable |
|
(73,213 |
) |
|
6,011 |
|
Inventory |
|
(18,766 |
) |
|
(295,864 |
) |
Prepaid expenses and other current assets |
|
- |
|
|
(4,694 |
) |
Accounts payable |
|
197,933 |
|
|
170,837 |
|
Accounts payable - related party |
|
(43,036 |
) |
|
(18,403 |
) |
Accrued expenses |
|
10,563 |
|
|
14,936 |
|
Accrued interest |
|
- |
|
|
(19,829 |
) |
|
|
|
|
|
|
|
Net cash used in
operating activities |
|
(566,977 |
) |
|
(1,018,235 |
) |
|
|
|
|
|
|
|
CASH FLOWS FROM INVESTING
ACTIVITIES |
|
|
|
|
|
|
Purchase of fixed assets |
|
(2,850 |
) |
|
(17,435 |
) |
Proceeds from
sale lease back |
|
- |
|
|
208,773 |
|
Equipment Deposits - related party |
|
(24,998 |
) |
|
(711,500 |
) |
|
|
|
|
|
|
|
Net cash used in investing activities |
|
(27,848 |
) |
|
(520,162 |
) |
|
|
|
|
|
|
|
CASH FLOWS FROM FINANCING ACTIVITIES |
|
|
|
|
|
|
Proceeds from notes
payable |
|
250,000 |
|
|
- |
|
Proceeds from convertible notes payable |
|
50,000 |
|
|
|
|
Proceeds from revolving
financing |
|
(34,005 |
) |
|
46,138 |
|
Proceeds from sale of common stock, net |
|
480,800 |
|
|
2,361,999 |
|
Repayment of capital
lease |
|
(48,128 |
) |
|
(5,204 |
) |
Repayment of redeemable preferred
shares |
|
- |
|
|
(247,170 |
) |
Net cash provided by
financing activities |
|
698,667 |
|
|
2,155,763 |
|
|
|
|
|
|
|
|
NET CHANGE IN CASH |
|
103,842 |
|
|
617,366 |
|
|
|
|
|
|
|
|
CASH AT BEGINNING OF PERIOD |
|
90,113 |
|
|
2,665 |
|
|
|
|
|
|
|
|
CASH AT END OF PERIOD |
$ |
193,955 |
|
$ |
620,031 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
SUPPLEMENTAL INFORMATION: |
|
|
|
|
|
|
Interest paid |
$ |
30,167 |
|
$ |
- |
|
Income taxes paid |
$ |
- |
|
$ |
- |
|
|
|
|
|
|
|
|
NON-CASH INVESTING AND FINANCING ACTIVITIES: |
|
|
|
|
|
|
Preferred stock
conversion to common stock |
$ |
- |
|
$ |
252,830 |
|
Deferred discount on conversion
of preferred stock |
|
- |
|
|
56,098 |
|
Fair value of
derivate liability at isuance of Warrants |
|
- |
|
|
240,023 |
|
See Accompanying Notes to Condensed Consolidated Financial
Statements.
5
THE ALKALINE WATER COMPANY INC.
NOTES TO CONDENSED
CONSOLIDATED FINANCIAL STATEMENTS
(unaudited)
NOTE 1 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Basis of presentation
The interim condensed 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, without audit, pursuant to the rules and regulations of the Securities
and Exchange Commission. Certain information and footnote disclosures normally
included in financial statements prepared in accordance with generally accepted
accounting principles have been condensed or omitted pursuant to such rules and
regulations, although the Company believes that the disclosures are adequate to
make the information presented not misleading.
These statements reflect all adjustments, consisting of normal
recurring adjustments, which in the opinion of management, are necessary for
fair presentation of the information contained therein. It is suggested that
these condensed interim consolidated financial statements be read in conjunction
with the financial statements of the Company for the period of inception (June
19, 2012) to June 30, 2014 and notes thereto included in the Companys Annual
Report on Form 10-K dated June 30, 2014 and Companys Annual Report on Form 10-K
dated July 14, 2015. The Company follows the same accounting policies in the
preparation of interim reports. Results of operations for the interim period are
not indicative of annual results.
Principles of consolidation
For the period from June 19, 2012 to June 30, 2015, the
consolidated financial statements include the accounts of Alkaline Water Corp.
(an Arizona Corporation) and Alkaline 88 LLC (formerly Alkaline 84, LLC) (an
Arizona Limited Liability Company). For the period from April 1, 2013 to
December 31, 2013 the consolidated financial statements include the accounts of
The Alkaline Water Company Inc. (a Nevada Corporation), Alkaline Water Corp. (an
Arizona Corporation) and Alkaline 84, LLC (an Arizona Limited Liability
Company).
All significant intercompany balances and transactions have
been eliminated. The Alkaline Water Company Inc. (a Nevada Corporation),
Alkaline Water Corp. (an Arizona Corporation) and Alkaline 88, LLC (an Arizona
Limited Liability Company) 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.
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. The
carrying value of these investments approximates fair value. We had $193,955 and
$90,113 in cash and cash equivalents at June 30, 2015 and March 31, 2015,
respectively.
6
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 June 30, 2015 and March 31, 2015:
|
|
June 30, |
|
|
March 31, |
|
|
|
2015 |
|
|
2015 |
|
Trade receivables |
$ |
500,075 |
|
$ |
426,862 |
|
Less: Allowance for doubtful accounts |
|
(10,489 |
) |
|
(10,889 |
|
Net accounts receivable |
$ |
489,586 |
|
$ |
416,373 |
|
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.
Inventory
Inventory represents packaging items, empty bottles, finished
goods and other items 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. As
of June 30, 2015 and March 31, 2015 inventory consisted of the following:
|
|
June 30, |
|
|
March 31 , |
|
|
|
2015 |
|
|
2015 |
|
Raw materials |
$ |
151,487 |
|
$ |
145,329 |
|
Finished goods |
|
60,634 |
|
|
48,026 |
|
Total inventory |
$ |
212,121 |
|
$ |
193,355 |
|
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 method over the estimated
useful life of the assets or the lease term, whichever is shorter. Depreciation
periods are as follows for the relevant fixed assets:
Equipment |
5 years |
Equipment under capital lease |
3 years or term of the lease
|
Stock-based Compensation
The Company accounts for stock-based compensation to employees
in accordance with Accounting Standard Codification (ASC) 718. Stock-based
compensation to employees is measured at the grant date, based on the fair value
of the award, and is recognized as expense over the requisite employee service
period. The Company accounts for stock-based compensation to other than
employees in accordance with ASC 505-50. Equity instruments issued to other than
employees are valued at the earlier of a commitment date or upon completion of
the services, based on the fair value of the equity instruments and is
recognized as expense over the service period. The Company estimates the fair
value of stock-based payments using the Black-Scholes option-pricing model for
common stock options and warrants and the closing price of the Companys common
stock for common share issuances.
Revenue recognition
We recognize revenue when all of the following conditions are
satisfied: (1) there is persuasive evidence of an arrangement; (2) the product
or service has been provided to the customer; (3) the amount to be paid by the
customer is fixed or determinable; and (4) the collection of such amount is
probable.
7
The Company records revenue when it is realizable and earned
upon shipment of the finished products. We do not accept returns due to the
nature of the product. However, we will provide credit to our customers for
damaged goods.
Fair Value Measurements
The valuation of our embedded derivatives and warrant
derivatives are determined primarily by the multinomial distribution (Lattice)
model. An embedded derivative is a derivative instrument that is embedded within
another contract, which under the convertible note (the host contract) includes
the right to convert the note by the holder, certain default redemption right
premiums and a change of control premium (payable in cash if a fundamental
change occurs). In accordance with Accounting Standards Codification ("ASC") 815
Accounting for Derivative Instruments and Hedging Activities, as amended,
these embedded derivatives are marked-to-market each reporting period, with a
corresponding non-cash gain or loss charged to the current period. A warrant
derivative liability is also determined in accordance with ASC 815. Based on ASC
815, warrants which are determined to be classified as derivative liabilities
are marked-to-market each reporting period, with a corresponding non-cash gain
or loss charged to the current period. The practical effect of this has been
that when our stock price increases so does our derivative liability resulting
in a non-cash loss charge that reduces our earnings and earnings per share. When
our stock price declines, we record a non-cash gain, increasing our earnings and
earnings per share. As such, fair value is a market-based measurement that
should be determined based on assumptions that market participants would use in
pricing an asset or liability. As a basis for considering such assumptions,
there exists a three-tier fair value hierarchy, which prioritizes the inputs
used in measuring fair value as follows:
Level 1 |
Unadjusted quoted prices in active markets for identical
assets or liabilities that the Company has the ability to access as of the
measurement date. |
|
|
Level 2 |
Inputs other than quoted prices included within Level 1
that are directly observable for the asset or liability or indirectly
observable through corroboration with observable market data. |
|
|
Level 3 |
Unobservable inputs for the asset or liability only used
when there is little, if any, market activity for the asset or liability
at the measurement date. |
This hierarchy requires the Company to use observable market
data, when available, and to minimize the use of unobservable inputs when
determining fair value. To determine the fair value of our embedded derivatives,
management evaluates assumptions regarding the probability of certain future
events. Other factors used to determine fair value include our period end stock
price, historical stock volatility, risk free interest rate and derivative term.
The fair value recorded for the derivative liability varies from period to
period. This variability may result in the actual derivative liability for a
period either above or below the estimates recorded on our consolidated
financial statements, resulting in significant fluctuations in other income
(expense) because of the corresponding non-cash gain or loss recorded.
Concentration
The Company has 3 major customers that together account for 53%
(25%, 17%, 11%, respectively) of accounts receivable at June 30, 2015, and 4
customers that together account for 52% (17% 14%, 11%, and 10%, respectively) of
the total revenues earned for the three month ending June 30, 2015.
The Company has 5 vendors that accounted for 85% (22%, 18%,
17%, 17% and 11%, respectively) of purchases for the three months ending June
30, 2015.
The Company has 4 major customers that together account for 64%
(23%, 18%, 12% and 11%, respectively) of accounts receivable at March 31, 2015,
and 3 customers that together account for 47% (14%, 12%, and 11%, respectively)
of the total revenues earned for the year ended March 31, 2015.
8
The Company has 5 vendors that accounted for 77% (19%, 16%,
16%, 15%and 11%, respectively) of purchases for the year ended March 31,
2015.
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 Accounting
Standard Codification (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.
Reclassification
Certain accounts in the prior period were reclassified to
conform to the current period financial statements presentation.
Recent pronouncements
During the three months ended June 30, 2015 and through August
10, 2015, there were several new accounting pronouncements issued by the
Financial Accounting Standards Board. Each of these pronouncements, as
applicable, has been or will be adopted by the Company. Management does not
believe the adoption of any of these accounting pronouncements has had or will
have a material impact on the Companys condensed consolidated financial
statements.
NOTE 2 GOING CONCERN
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 June 30, 2015 of $(13,206,980). In addition,
the Companys development activities since inception have been financially
sustained through debt and equity financing.
The ability of the Company to continue as a going concern is
dependent upon its ability to raise additional capital from the sale of common
stock and, ultimately, the achievement of significant operating revenues. These
financial statements do not include any adjustments relating to the
recoverability and classification of recorded asset amounts, or amounts and
classification of liabilities that might result from this uncertainty.
NOTE 3 PROPERTY AND EQUIPMENT
Fixed assets consisted of the following at:
9
|
|
June
30, |
|
|
March
31, |
|
|
|
2015 |
|
|
2015 |
|
Machinery and Equipment |
$ |
628,616 |
|
$ |
625,766 |
|
Machinery under Capital Lease |
|
735,781 |
|
|
735,781 |
|
Office Equipment |
|
53,631 |
|
|
53,631 |
|
Leasehold Improvements |
|
3,979 |
|
|
3,979 |
|
Less: Accumulated Depreciation |
|
(290,286 |
) |
|
(219,257 |
) |
Fixed Assets, net |
$ |
1,131,721 |
|
$ |
1,199,900 |
|
Depreciation expense for the three month periods ending June
30, 2015 and 2014 was $71,029 and $16,534, respectively.
NOTE 4 EQUIPMENT DEPOSITS RELATED PARTY
Under the terms of the exclusive manufacturing agreement
entered into on April 15, 2013 between the Company and Water Engineering
Solutions LLC, a related party, the Company paid $690,000 on May 1 2014 for
specialized equipment used in the production of our alkaline water. Under this
agreement, the Company paid deposits on equipment as follows: May 1, 2014
$690,000, June 27, 2014 $21,500, July 1, 2014 $115,000, August 7, 2014 $10,000,
August 5, 2014 $5,000, August 19, 2014 $2,000, August 22, 2014 $100,000, October
14, 2014 $70,000, November 4, 2014 $7,676 and November 7, 2014 $5,002. The
Company received equipment valued at $274,769 and reduced the deposit on
equipment. During the three month period ending June 30, 2015 the company made a
net deposit on equipment of $24,998 to Water Engineering Solutions. Water
Engineering Solutions LLC is an entity that is controlled and majority owned by
Steven P. Nickolas and Richard A. Wright for the production of our alkaline
water.
NOTE 5 REVOLVING FINANCING
On February 20, 2014, The Alkaline Water Company Inc., and
subsidiaries, Alkaline 88, LLC and Alkaline Water Corp., entered into a
revolving accounts receivable funding agreement with Gibraltar Business Capital,
LLC (Gibraltar). Under the agreement, from time to time, the Company agreed to
tender to Gibraltar all of our accounts (which is defined as our rights to
payment whether or not earned by performance, (i) for property that has been or
is to be sold, leased, licensed, assigned or otherwise disposed of, or (ii) for
services rendered or to be rendered, or (iii) as otherwise defined in the
Uniform Commercial Code of the State of Illinois). Gibraltar will have the
right, but will not be obligated, to purchase such accounts tendered in its sole
discretion. If Gibraltar purchases such accounts, Gibraltar will make cash
advances to us as the purchase price for the purchased accounts.
The Company assumed full risk of non-payment and
unconditionally guaranteed the full and prompt payment of the full face amount
of all purchased accounts. We also agreed to direct all parties obligated to pay
the accounts to send all payments for all accounts directly to Gibraltar. All
collections from accounts will be applied to our indebtedness, which is defined
as the amount owed by us to Gibraltar from time to time, i.e., all cash
advances, plus all charges, plus all other amounts owning from us to Gibraltar
pursuant to the agreement, less all collections retained by Gibraltar from
either purchased accounts or from us which are applied to indebtedness, unless
Gibraltar elects to hold any such collections to establish reserves to secure
payment of any purchased accounts.
In consideration of Gibraltars purchase of the accounts, the
Company agreed to pay Gibraltar interest on the indebtedness outstanding at the
rate of 8% per annum plus the prime rate in effect at the end of each month with
the prime rate for these purposes never being less than 3.25% per annum,
calculated on a 360-day year and payable monthly. In addition, the Company
agreed to pay to Gibraltar a monthly collateral/management fee in the amount of
0.5% calculated on the average daily borrowing amount for the given month and an
unused line fee of 0.25% monthly based on the difference between the actual line
of credit and the average daily borrowing amount for the given month. The
Company also agreed to pay to Gibraltar upon execution of the agreement and as
of the commencement of each renewal term, a closing cost of 1% of the initial
indebtedness in addition to the amount of any other credit accommodations
granted from Gibraltar, which amount will be deducted from the first cash
advances.
The initial indebtedness is $500,000. The Company may request
an increase to the initial indebtedness in $500,000 increments up to $5,000,000,
subject the Companys financial performance and/or projections are satisfactory
to Gibraltar, and absent an event of default. The Company also granted to
Gibraltar a security interest in all of our presently-owned and
hereafter-acquired personal and fixture property, wherever located. The
agreement will continue until the first to occur of (i) demand by Gibraltar;
or (ii) 24 months from the first day of the month following the date that the
first purchased account is purchased and will be automatically renewed for
successive periods of 12 months thereafter unless, at least 30 days prior to the
end of the term, we give Gibraltar notice of our intention to terminate the
agreement. In addition, we will be able to exit the agreement at any time for a
fee of 2% of the line of credit in place at the time of prepayment. The amount
borrowed on this facility as of June 30, 2015 was $208,870 and as of March 31,
2015 was $242,875.
10
NOTE 6 DERIVATIVE LIABILITY
On November 7, 2013, we sold to certain institutional investors
10% Series B Convertible Preferred Shares which are subject to mandatory
redemption and include down-round provisions that reduce the exercise price of a
warrant and convertible instrument. As required by ASC 815 Derivatives and
Hedging, if the Company either issues equity shares for a price that is lower
than the exercise price of those instruments or issues new warrants or
convertible instruments that have a lower exercise price, the investors will be
entitled to down-round protection. The Company evaluated whether its warrants
and convertible debt instruments contain provisions that protect holders from
declines in its stock price or otherwise could result in modification of either
the exercise price or the shares to be issued under the respective warrant
agreements. The Company determined that a portion of its outstanding warrants
and conversion instruments contained such provisions thereby concluding they
were not indexed to the Companys own stock and therefore a derivative
instrument.
Between April 16, 2014 and April 24, 2014, the Company redeemed
247 shares of the 10% Series B Preferred Stock for $247,171 plus accrued
interest of $46,456 and a $10,212 penalty related to the delayed registration.
The effect of this redemption resulted in a reduction of $56,098 derivative
liability.
On May 1, 2014, the Company completed the offering and sale of
an aggregate of 17,333,329 shares of our common stock and warrants to purchase
an aggregate of 8,666,665 shares of our common stock, for aggregate gross
proceeds of $2,599,999. Each share of common stock sold in the offering was
accompanied by a warrant to purchase one-half of a share of common stock at an
exercise price of $0.15 per share for a period of five years from the date of
issuance. Each share of common stock, together with each warrant was sold at a
price of $0.15. The warrants include down-round provisions that reduce the
exercise price of a warrant and convertible instrument. As required by ASC 815
Derivatives and Hedging, if the Company either issues equity shares for a
price that is lower than the exercise price of those instruments or issues new
warrants or convertible instruments that have a lower exercise price, the
investors will be entitled to down-round protection. The Company evaluated
whether its warrants and convertible debt instruments contain provisions that
protect holders from declines in its stock price or otherwise could result in
modification of either the exercise price or the shares to be issued under the
respective warrant agreements. The Company determined that a portion of its
outstanding warrants and conversion instruments contained such provisions
thereby concluding were not indexed to the Companys own stock and therefore a
derivative instrument.
On August 20, 2014, the Company entered into a warrant
amendment agreement with certain holders of the Companys outstanding common
stock purchase warrants whereby the Company agreed to reduce the exercise price
of the Existing Warrants to $0.10 per share in consideration for the immediate
exercise of the Existing Warrants by the Holders and the Holders are to be
issued new common stock purchase warrants of the Company in the form of the
Existing Warrants to purchase up to a number of shares of our common stock equal
to the number of Existing Warrants exercised by the Holders, provided that the
exercise price of the New Warrants will be $0.125 per share, subject to
adjustment in the New Warrants. Each New Warrant has a term of five years from
the date of issuance. Each share of common stock, together with each warrant was
sold at a price of $0.125. The warrants include down-round provisions that
reduce the exercise price of a warrant and convertible instrument. As required
by ASC 815 Derivatives and Hedging, if the Company either issues equity shares
for a price that is lower than the exercise price of those instruments or issues
new warrants or convertible instruments that have a lower exercise price, the
investors will be entitled to down-round protection. The Company evaluated
whether its warrants and convertible debt instruments contain provisions that
protect holders from declines in its stock price or otherwise could result in
modification of either the exercise price or the shares to be issued under the
respective warrant agreements. The Company determined that a portion of its
outstanding warrants and conversion instruments contained such provisions
thereby concluding they were not indexed to the Companys own stock and
therefore a derivative instrument. The derivative liability was increased by
$167,384 as a result of the issued warrants.
11
On August 21, 2014, pursuant to the Warrant Amendment
Agreement, the Company issued an aggregate of 9,829,455 shares of the Companys
common stock upon exercise of the Existing Warrants at an exercise price of
$0.10 per share for aggregate gross proceeds of $982,945. An aggregate of
8,666,664 shares of our common stock issued upon exercise of the Existing
Warrants. The derivative liability was reduced by $168,273 as a result of the
warrants exercised.
Pursuant to the engagement agreement dated March 12, 2014 with
H.C. Wainwright & Co., LLC (Wainwright), Wainwright agreed to act as our
exclusive placement agent in connection with the offering. Pursuant to the
engagement agreement, the Company, we issued warrants to purchase an aggregate
of 5.5% of the aggregate number of shares of our common stock sold in the
offering, or 953,333, to Wainwright and its designees. These warrants have an
exercise price of $0.1875 per share and expire on April 16, 2019. The warrants
include down-round provisions that reduce the exercise price of a warrant and
convertible instrument. As required by ASC 815 Derivatives and Hedging, if the
Company either issues equity shares for a price that is lower than the exercise
price of those instruments or issues new warrants or convertible instruments
that have a lower exercise price, the investors will be entitled to down-round
protection. The Company evaluated whether its warrants and convertible debt
instruments contain provisions that protect holders from declines in its stock
price or otherwise could result in modification of either the exercise price or
the shares to be issued under the respective warrant agreements. The Company
determined that a portion of its outstanding warrants and conversion instruments
contained such provisions thereby concluding they were not indexed to the
Companys own stock and therefore a derivative instrument.
The range of significant assumptions which the Company used to
measure the fair value of warrant liabilities (a level 3 input) at April 24,
2014 is as follows:
|
|
Conversion feature |
|
Stock price |
$ |
0 .3275
|
|
Term (Years) |
|
Less than 1 |
|
Volatility |
|
331% |
|
Exercise prices |
$ |
0.43 |
|
Dividend yield |
|
0% |
|
The range of significant assumptions which the Company used to
measure the fair value of warrant liabilities (a level 3 input) at May 1, 2014
is as follows:
|
|
|
|
|
Placement Agent |
|
|
|
Issuance Warrants |
|
|
Warrants |
|
Stock price |
$ |
0.15 |
|
$ |
0.15 |
|
Term (Years) |
|
5 |
|
|
5 |
|
Volatility |
|
306% |
|
|
306% |
|
Exercise prices |
$ |
0.15 |
|
$ |
0.1875 |
|
Dividend yield |
|
0% |
|
|
0% |
|
The range of significant assumptions which the Company used to
measure the fair value of warrant liabilities (a level 3 input) at August 20,
2014 is as follows:
|
|
New Warrants |
|
Stock price |
$ |
0.12 |
|
Term (Years) |
|
5 |
|
Volatility |
|
247% |
|
Exercise prices |
$ |
0.125 |
|
Dividend yield |
|
0% |
|
The range of significant assumptions which the Company used to
measure the fair value of warrant liabilities (a level 3 input) at August 21,
2014 is as follows:
12
|
|
Existing Warrants |
|
Stock price |
$ |
0.17 |
|
Term (Years) |
|
5 |
|
Volatility |
|
247% |
|
Exercise prices |
$ |
0.10 |
|
Dividend yield |
|
0% |
|
The range of significant assumptions which the Company used to
measure the fair value of warrant liabilities (a level 3 input) at March 31,
2015 is as follows:
|
|
Warrants (including placement agent) |
|
Stock price |
$ |
0.1081 |
|
Term (Years) |
|
4 to 5 |
|
Volatility |
|
148% |
|
Exercise prices |
$ |
0.55 to 0.125 |
|
Dividend yield |
|
0% |
|
During the period ended June 30, 2015 the Company issued shares
of stock at $0.07 which reduced the exercise price of the Existing Warrants.
The range of significant assumptions which the Company used to
measure the fair value of warrant liabilities (a level 3 input) at June 30, 2015
is as follows:
|
|
Warrants (including placement agent) |
|
Stock price |
$ |
0.128 |
|
Term (Years) |
|
4 to 5 |
|
Volatility |
|
140% |
|
Exercise prices |
$ |
0.55 to 0.07 |
|
Dividend yield |
|
0% |
|
The following table sets forth the fair value hierarchy within
our financial assets and liabilities by level that were accounted for at fair
value on a recurring basis as of May 1, 2014.
|
|
|
|
|
Fair Value Measurement at May 1, 2014 |
|
|
|
Carrying |
|
|
|
|
|
|
|
|
|
|
|
|
Value at |
|
|
|
|
|
|
|
|
|
|
|
|
May 1, 2014 |
|
|
Level 1 |
|
|
Level 2 |
|
|
Level 3 |
|
Liabilities: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Derivative warrant liability |
$ |
216,236 |
|
$ |
- |
|
$ |
- |
|
$ |
216,236 |
|
Derivative placement agent warrant liability |
$ |
23,787 |
|
$ |
- |
|
$ |
- |
|
$ |
23,787 |
|
Total derivative liability |
$ |
240,023 |
|
$ |
- |
|
$ |
- |
|
$ |
240,023 |
|
The following table sets forth the fair value hierarchy added
to our financial liabilities by level that were accounted for at fair value on a
recurring basis as of August 21, 2014.
|
|
|
|
|
Fair Value Measurement at August 21, 2014 |
|
|
|
Carrying |
|
|
|
|
|
|
|
|
|
|
|
|
Value
at |
|
|
|
|
|
|
|
|
|
|
|
|
August 21, 2014 |
|
|
Level 1 |
|
|
Level 2 |
|
|
Level 3 |
|
Liabilities: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Derivative warrant liability |
$ |
149,687 |
|
$ |
- |
|
$ |
- |
|
$ |
149,687 |
|
The following table sets forth the fair value hierarchy within
our financial assets and liabilities by level that were accounted for at fair
value on a recurring basis as of March 31, 2015.
13
|
|
|
|
|
Fair Value Measurement at March 31, 2015 |
|
|
|
Carrying |
|
|
|
|
|
|
|
|
|
|
|
|
Value at |
|
|
|
|
|
|
|
|
|
|
|
|
March 31, 2015 |
|
|
Level 1 |
|
|
Level 2 |
|
|
Level 3 |
|
Liabilities: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Derivative convertible debt liability |
$ |
- |
|
$ |
- |
|
$ |
- |
|
$ |
- |
|
Derivative warrant liability convertible preferred stock |
$ |
176,486 |
|
$ |
- |
|
$ |
- |
|
$ |
176,486 |
|
Derivative warrants liability on common
stock issuance including placement agent
warrants |
$ |
18,454 |
|
$ |
- |
|
$ |
- |
|
$ |
18,454 |
|
Total derivative liability |
$ |
194,940 |
|
$ |
- |
|
$ |
- |
|
$ |
194,940 |
|
The following table sets forth the fair value hierarchy within
our financial assets and liabilities by level that were accounted for at fair
value on a recurring basis as of June 30, 2015.
|
|
|
|
|
Fair Value Measurement at June 30, 2015 |
|
|
|
Carrying |
|
|
|
|
|
|
|
|
|
|
|
|
Value at |
|
|
|
|
|
|
|
|
|
|
|
|
June 30, 2015 |
|
|
Level 1 |
|
|
Level 2 |
|
|
Level 3 |
|
Liabilities: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Derivative convertible debt liability |
$ |
- |
|
$ |
- |
|
$ |
- |
|
$ |
- |
|
Derivative warrant liability convertible preferred stock |
$ |
336,841 |
|
$ |
- |
|
$ |
- |
|
$ |
336,841 |
|
Derivative warrants liability on common
stock issuance including placement agent
warrants |
$ |
26,262 |
|
$ |
- |
|
$ |
- |
|
$ |
26,262 |
|
Total derivative liability |
$ |
363,103 |
|
$ |
- |
|
$ |
- |
|
$ |
363,103 |
|
The Company analyzed the warrants and conversion feature under
ASC 815 Derivatives and Hedging to determine the derivative liability. The
Company estimated the fair value of these derivatives using a multinomial
distribution (Lattice) valuation model. The fair value of these warrant
liabilities at March 31, 2015 was $194,940 and the conversion feature liability
was $0. At June 30, 2015 the fair value of these warrant liabilities was
$363,103 and the conversion feature liability was $0. Changes in the derivative
liability for the period ended June 30, 2015 consist of:
|
|
Three Months |
|
|
|
Ended |
|
|
|
June 30, 2015 |
|
Derivative liability at March 31, 2015 |
$ |
194,940
|
|
Change in derivative liability mark to market |
|
168,164 |
|
Derivative liability at March 31, 2015 |
$ |
363,103 |
|
NOTE 7 PREFERRED SHARES SUBJECT TO MANDATORY
REDEMPTION
Convertible preferred shares
On November 7, 2013, the Company sold to certain institutional
investors an aggregate of 500 shares of our 10% Series B Convertible Preferred
Stock (Series B Preferred Stock) at a stated value of $1,000 per share of
Series B Preferred Stock for gross proceeds of $500,000. Additionally the
investors also received Series A, Series B and Series C common stock purchase
warrants. The Series A warrants will be exercisable into 1,162,791 shares of our
common stock at an exercise price of $0.55 per share, the Series B warrants will
be exercisable into 1,162,791 shares of our common stock at an exercise price of $0.43 per
share and the Series C warrants will be exercisable into 1,162,791 shares our
common stock at an exercise price of $0.55 per share. Holders of the Series B
Preferred Stock will be entitled to receive cumulative dividends at the rate per
share (as a percentage of the stated value per share) of 10% per annum, payable
semi-annually. Each share of the Series B Preferred Stock will be convertible at
the option of the holder thereof into that number of shares of common stock
determined by dividing the stated value of such share of the Series B Preferred
Stock by the conversion price of $0.43, subject to later adjustment. On November
4, 2013, we also entered into a registration rights agreement with the investors
pursuant to which we are obligated to file a registration statement to register
the resale of the shares of common stock issuable upon conversion of the Series
B Preferred Stock and upon exercise of the Warrants.
14
Between April 16, 2014 and April 22, 2014, the holders of our
Series B Preferred Stock exercised their right to have the Company redeem their
shares whereby we redeemed 247.17 shares of Series B Preferred Stock for
$303,839, which included accrued interest of $46,456 and a penalty for late
registration of $10,212. The remaining portion of the Series B Preferred Stock,
or 252.83 shares, was converted into 796,566 of our common shares at a
conversion price of $0.3174 per share.
Effective November 7, 2013, the Company issued common stock
purchase warrants to the placement agent and its designees as compensation for
the services provided by the placement agent in connection with our private
placement of 500.00028 shares Series B Preferred Stock, which was completed on
November 7, 2013. The warrants issued to the placement agent and its designees
are exercisable into an aggregate of 116,279 shares of our common stock with an
exercise price of $0.55 per share and have a term of exercise of five years. The
Company issued the warrants to six accredited investors and paid certain
transactional costs of $78,000. For the period ended December 31, 2014 the
Company recorded $54,288 of amortization of the debt discount and deferred
financing cost.
The Series B Preferred Stock included down-round provisions
that reduce the exercise price of a warrant and convertible instrument as
required by ASC 815 Derivatives and Hedging. The aggregate of the derivative
liability at issuance was $955,927, which was recorded as amortization of debt
discount at issuance and amortized $360,082 cost over the redemption period.
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.
Grant of Series A Preferred Stock
On October 8, 2013, the Company issued a total of 20,000,000
shares of non-convertible Series A Preferred Stock to Steven A. Nickolas and
Richard A. Wright (10,000,000 shares to each), our directors and executive
officers, in consideration for the past services, at a deemed value of $0.001
per share. The company valued these shares based on the cost considering the
time and average billing rate of these individuals and recorded a $20,000 stock
compensation cost for the year ended March 31, 2014.
Common Stock
We are authorized to issue 1,125,000,000 shares of $0.001 par
value common stock. On May 31, 2013, we effected a 15-for-1 forward stock split
of our $0.001 par value common stock. All shares and per share amounts have been
retroactively restated to reflect such split. Prior to the acquisition of
Alkaline Water Corp., we had 109,500,000 shares of common stock issued and
outstanding. On May 31, 2013, we issued 43,000,000 shares in exchange for a 100%
interest in Alkaline Water Corp. For accounting purposes, the acquisition of
Alkaline Water Corp. by The Alkaline Water Company Inc. has been recorded as a
reverse acquisition of a company and recapitalization of Alkaline Water Corp.
based on the factors demonstrating that Alkaline Water Corp. represents the
accounting acquirer. Consequently, after the closing of this agreement we
adopted the business of Alkaline Water Corp.s wholly-owned subsidiary, Alkaline 88, LLC. As part of the
acquisition, the former management of the Company agreed to cancel 75,000,000
shares of common stock.
15
Sale of Restricted Shares
During the period from May 7, 2015 through June 30, 2015 the
Company sold units of our securities at a price of $0.07 per unit. Each unit
consists of one share of our common stock and one non-transferable common stock
purchase warrant, with each common stock purchase warrant entitling the holder
to acquire one additional share of our common stock at a price of $0.10 per
share for a period of two years. The Company sold 6,868,572 units during the
period ended June 30, 2015 consisting of 6,868,572 shares of common stock and
6,868,572 warrants for gross proceeds of $480,800.
The evaluated these transaction using ASC 480-10
Distinguishing liabilities from equity and ASC 505 -10 Equity.
The Company sold 6,868,572units and issued 6,868,572shares of common stock and
issued 6,868,572warrants. The warrant was valued using the Black-Scholes option
pricing model with the following assumptions:
Market value of stock on purchase date |
$0.075 |
to |
$0.142 |
Risk-free interest rate |
.59% |
to |
.72% |
Dividend yield |
|
0.00% |
|
Volatility factor |
121% |
to |
121% |
Weighted average expected life (years) |
|
2 |
|
The proceeds were allocated as follows:
Common stock |
$ |
253,793 |
|
Warrant |
|
227,007 |
|
Total Proceeds |
$ |
480,800 |
|
On May 1, 2014, the Company completed the offering and sale of
an aggregate of 17,333,329 shares of our common stock and warrants to purchase
an aggregate of 8,666,665 shares of our common stock, for aggregate gross
proceeds of $2,599,999. Each share of common stock the Company sold in the
offering was accompanied by a warrant to purchase one-half of a share of common
stock at an exercise price of $0.15 per share for a period of five years from
the date of issuance. Each share of common stock, together with each warrant was
sold at a price of $0.15.
Pursuant to the engagement agreement dated March 12, 2014 with
H.C. Wainwright & Co., LLC (Wainwright), Wainwright agreed to act as our
exclusive placement agent in connection with the offering. Pursuant to the
engagement agreement, the Company paid Wainwright a cash placement fee equal to
8% of the aggregate gross proceeds from the offering, or $208,000, and a
non-accountable expense allowance equal to 1% of the aggregate gross proceeds
from the offering, or $26,000. In addition, we issued warrants to purchase an
aggregate of 5.5% of the aggregate number of shares of our common stock sold in
the offering, or 953,333, to Wainwright and its designees. These warrants have
an exercise price of $0.1875 per share and expire on April 16, 2019.
Common Stock Issued for Services
On May 15, 2014, the Company issued 100,000 restricted common
shares to consultant for services rendered and were valued at the market value
on that date of $0.150 per share.
On June 2, 2014, the Company issued 100,000 restricted common
shares to consultant for services rendered and were valued at the market value
on that date of $0.130 per share.
On June 6, 2014, the Company issued 1,000,000 restricted common
shares to consultant for services rendered and were valued at the market value
on that date of $0.134 per share.
16
On June 11, 2014, the Company issued 250,000 restricted common
shares to consultant for services rendered and were valued at the market value
on that date of $0.121 per share.
On July 3, 2014, the Company entered into an agreement with a
third-party to provide consulting services. The compensation in the agreement
was $25,000 in cash upon execution of the agreement and the issuance of 350,000
of the Companys common shares as follows: 175,000 common shares upon execution
of the agreement, 70,000 common shares on or before July 15, 2014, 70,000 common
shares on or before August 15, 2014 and 35,000 common shares on or before
September 15, 2014.
On August 1, 2014, the Company issued 1,000,000 common shares
to a consultant for services rendered that were valued at the market value on
that date of $0.175 per share.
On August 7, 2014, the Company entered into an agreement with a
third-party to provide consulting services. The compensation in the agreement
was for 2,000,000 of the Companys common shares to be issued as follows:
500,000 common shares on the date of the execution of the agreement, 500,000
common shares on the date that is 45 days from the execution date, 500,000
common shares on the date that is 90 days from the execution date, and 500,000
common shares on the date that is 135 days from the execution date.
On September 2, 2014, the Company issued 50,000 common shares
to consultant for services rendered that were valued at the market value on that
date of $0.135 per share.
On September 30, 2014, the Company issued 300,000 common shares
to consultant for services rendered that were valued at the market value on that
date of $0.108 per share.
On October 1, 2014, the Company issued 40,000 common shares to
consultant for services rendered that were valued at the market value on that
date of $0.113 per share.
On February 18, 2015, the Company issued 50,000 common shares
to consultant for services rendered that were valued at the market value on that
date of $0.07 per share.
On February 18, 2015, the Company issued 1,225,000 common
shares to consultants for services rendered that were valued at the market value
on that date of $0.10 per share.
On February 18, 2015, the Company issued 3,550,000 common
shares to employees for services rendered that were valued at the market value
on that date of $0.10 per share.
On April 7, 2015, the Company issued 2,000,000 restricted
common shares to consultant for services rendered that were valued at the market
value on that date of $0.070 per share.
On April 10, 2015, the Company issued 1,500,000 restricted
common shares to consultant for services rendered that were valued at the market
value on that date of $0.097 per share.
On April 27, 2015, the Company issued 2,000,000 restricted
common shares to consultant for services rendered that were valued at the market
value on that date of $0.080 per share.
On May 1, 2015, the Company issued 250,000 restricted common
shares to consultant for services rendered that were valued at the market value
on that date of $0.080 per share.
On May 6, 2015, the Company issued 300,000 restricted common
shares to consultant for services rendered that were valued at the market value
on that date of $0.097 per share.
On June 15, 2015 the Company issued 1,500,000 restricted common
shares to consultant for services rendered that were valued at the market value
on that date of $0.094 per share.
Common Stock Issued for in conjunction with Notes
17
On May 22, 2015, the Company issued 1,000,000 restricted common
shares in conjunction with a $250,000 note payable that were valued at the
market value on that date of $0.079 per share.
NOTE 9 OPTIONS AND WARRANTS
Stock Option Awards
On October 9, 2013, the Company granted a total of 6,000,000
stock options to Steven A. Nickolas and Richard A. Wright (3,000,000 stock
options to each). The stock options are exercisable at the exercise price of
$0.605 per share for a period of ten years from the date of grant. The stock
options vest as follows: (i) 1,000,000 upon the date of grant; and (ii) 500,000
per quarter until fully vested.
On May 12, 2014, the Company granted a total of 820,000 stock
options to employees and consultants. The stock options are exercisable at the
exercise price of $0.15 per share for a period of ten years from the date of
grant. 502,500 stock options vested upon the date of grant, 116,250 stock
options vest on December 31, 2014, 116,250 stock options vest on December 31,
2014 and 85,000 stock options vest on December 31, 2014.
On May 12, 2014, the Company granted a total of 1,200,000 stock
options Steven A. Nickolas and Richard A. Wright (600,000 stock options to
each). The stock options are exercisable at the exercise price of $0.165 per
share for a period of ten years from the date of grant. 1,200,000 stock options
vested upon the date of grant.
On May 16, 2014, the Company granted a total of 250,000 stock
options to a consultant. The stock options are exercisable at the exercise price
of $0.143 per share for a period of ten years from the date of grant. 62,500
stock options vested upon the date of grant, 62,500 stock options vest on
December 31, 2014, 62,500 stock options vest on December 31, 2014 and 62,500
stock options vest on December 31, 2014.
On May 21, 2014, the Company granted a total of 6,000,000 stock
options Steven A. Nickolas and Richard A. Wright (3,000,000 stock options to
each). The stock options are exercisable at the exercise price of $0.1455 per
share for a period of ten years from the date of grant. 3,000,000 stock options
vested upon the date of grant and the 3,000,000 stock options will vest on
November 21, 2014.
On October 31, 2014, the Company amended the 2013 Equity
Incentive Plan to, among other things, increase the number of shares of stock of
the company available for the grant of awards under the plan from 20,000,000
shares to 35,000,000 shares.
On October 31, 2014, the Company reduced the exercise price of
an aggregate of 6,000,000 stock options granted on October 9, 2013 to Steven P.
Nickolas and Richard A. Wright, our directors and executive officers, to $0.15
per share and extended the exercise date to October 9, 2023.
On February 18, 2015, the Company reduced the exercise price of
an aggregate of 1,600,000 stock options granted on to Steven P. Nickolas and
Richard A. Wright, our directors and executive officers, to $0.115 per share an
exercise date to February 18, 2020, with vested immediately.
On February 18, 2015, the Company granted a total of 1,300,000
stock options to employees and consultants. The stock options are exercisable at
the exercise price of $0.10 per share for a period of ten years from the date of
grant. 887,500 stock options vested by March 31, 2015, 137,500 stock options
vest on June 30, 2015, 137,500 stock options vest on September 30, 2015 and
137,500 stock options vest on December 31, 2015.
For the three month period ended June 30, 2015 and June 30,
2014 the Company has recognized compensation expense of $12,912 and $1,206,877,
respectively, on the stock options granted that vested. The fair value of the
unvested shares is $25,824 as of June 30, 2015. The aggregate intrinsic value of
these options was $7,673 at June 30, 2015. Stock option activity summary
covering options is presented in the table below:
18
|
|
|
|
|
|
|
|
Weighted-
|
|
|
|
|
|
|
Weighted- |
|
|
Average |
|
|
|
|
|
|
Average |
|
|
Remaining |
|
|
|
Number of |
|
|
Exercise |
|
|
Contractual |
|
|
|
Shares |
|
|
Price |
|
|
Term (years) |
|
Outstanding at March 31, 2014 |
|
6,000,000 |
|
$ |
0.61 |
|
|
8.8 |
|
Granted |
|
17,352,000 |
|
$ |
0.14 |
|
|
9.1 |
|
Exercised |
|
(182,000 |
) |
$ |
0.01 |
|
|
9.5 |
|
Expired/Forfeited |
|
(6,000,000 |
) |
$ |
- |
|
|
8.5 |
|
Outstanding at March 31, 2015 |
|
17,170,000 |
|
$ |
0.14 |
|
|
8.5 |
|
Granted |
|
- |
|
|
- |
|
|
- |
|
Exercised |
|
- |
|
|
- |
|
|
- |
|
Expired/Forfeited |
|
- |
|
$ |
- |
|
|
- |
|
Outstanding at June 30, 2015 |
|
17,170,000 |
|
|
0.14 |
|
|
7.7 |
|
Exercisable at June 30, 2015 |
|
16,832,500 |
|
$ |
0.14 |
|
|
8.5 |
|
Warrants
The following is a summary of the status of all of our warrants
as of June 30, 2015 and changes during the period ended on that date:
|
|
|
|
|
Weighted- |
|
|
|
Number |
|
|
Average |
|
|
|
of Warrants |
|
|
Exercise Price |
|
Outstanding at March 31, 2014 |
|
8,310,415 |
|
$ |
0.52 |
|
Granted |
|
29,249,253 |
|
|
0.13 |
|
Exercised |
|
(14,529,256 |
) |
|
(0.31 |
) |
Cancelled |
|
- |
|
|
0.00 |
|
Outstanding at March 31, 2015 |
|
23,030,412 |
|
|
0.14 |
|
Granted |
|
7,582,858 |
|
|
0.10 |
|
Exercised |
|
- |
|
|
- |
|
Cancelled |
|
- |
|
|
- |
|
Outstanding at June 30, 2015 |
|
30,613,270 |
|
|
0.13 |
|
Warrants exercisable at June 30, 2015 |
|
28,896,530 |
|
$ |
0.13 |
|
The following table summarizes information about stock warrants
outstanding and exercisable at June 30, 2015:
|
STOCK WARRANTS OUTSTANDING AND EXERCISABLE |
|
|
Weighted- |
|
|
Average |
|
Number of |
Remaining |
|
Warrants |
Contractual |
Exercise Price |
Outstanding |
Life in Years |
$0.1000 |
10,966,118 |
2.2 |
$ 0.12500 |
14,529,255 |
3.7 |
$ 0.1875 |
953,333 |
3.8 |
$ 0.2500 |
2,325,582 |
1.7 |
$ 0.5500 |
116,279 |
.1 |
$ 0.6000 |
5,963 |
2.2 |
The Company agreed to reduce the exercise price of certain
existing warrants to $0.10 per share in consideration for the immediate exercise
of the existing warrants by the holders. As consideration, the holders were
issued new common stock purchase warrants of the Company 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 the exercise price of the new warrants
will be $0.125 per share.
19
On August 21, 2014, pursuant to a Warrant Amendment Agreement,
the Company issued an aggregate of 9,829,455 shares of the Companys common
stock upon the exercise of Existing Warrants at an exercise price of $0.10 per
share for aggregate gross proceeds of $982,945. Simultaneously, the Company
issued new warrants to purchase an aggregate of 9,829,455 shares of our common
stock with a term of 5 years and exercise price of $0.125 per warrant share. The
Company recorded this issuance in additional paid-in capital.
On October 7, 2014, pursuant to a Warrant Amendment Agreement,
the Company issued an aggregate of 4,699,800 shares of the Companys common
stock upon exercise of the Existing Warrants at an exercise price of $0.10 per
share for aggregate gross proceeds of $469,980. Simultaneously, the Company
issued new warrants to purchase an aggregate of 4,699,800 shares of our common
stock with a term of 5 years and exercise price of $0.125 per warrant share. The
Company recorded this issuance in additional paid-in capital.
On October 22, 2014, the Company entered into a master lease
agreement with Veterans Capital Fund, LLC (the Lessor) for the secured lease
line of credit financing in an amount not to exceed $600,000. The lease is
expected to be secured by three new alkaline generating electrolysis system
machines. Our wholly-owned subsidiary, Alkaline 88, LLC, and Water Engineering
Solutions, LLC acted as co-lessees. Water Engineering Solutions, LLC is an
entity that is controlled and owned by our President, Chief Executive Officer,
director and major stockholder, Steven P. Nickolas, and our Vice-President,
Secretary, Treasurer and director, Richard A. Wright. Pursuant to the master
lease agreement, the Lessor agreed to lease to us the equipment described in any
equipment schedule signed by us and approved by the Lessor. It is expected that
any lease under the master lease agreement will be structured for a three year
lease term with fixed monthly lease rental payments based on a monthly lease
rate factor of 3.4667% of the Lessors capital cost. In connection with the
entering into the master lease agreement, the Company also entered into a
warrant agreement with the Lessor, pursuant to which the Company agreed to issue
a warrant to purchase 3,600,000 shares of our common stock to the Lessor and/or
its affiliates at an exercise price of $0.125 per share for a period of five
years. 900,000 shares vested.
On February 25, 2015, the Company amended the master lease
agreement with Veterans Capital Fund, LLC for the increase in the secured lease
line of credit financing to an amount not to exceed $800,000. The lease was
secured by new alkaline generating electrolysis system machines by our
wholly-owned subsidiary, Alkaline 88, LLC, and Water Engineering Solutions, LLC.
Water Engineering Solutions, LLC is an entity that is controlled and owned by
our President, Chief Executive Officer, director and major stockholder, Steven
P. Nickolas, and our Vice-President, Secretary, Treasurer and director, Richard
A. Wright. Pursuant to the master lease agreement, the Lessor agreed to lease to
us the equipment described in any equipment schedule signed by us and approved
by the Lessor. It is expected that any lease under the master lease agreement
will be structured for a three year lease term with fixed monthly lease rental
payments based on a monthly lease rate factor of 3.4667% of the Lessors capital
cost. In connection with the entering into the master lease agreement, the
Company entered into a warrant agreement with the Lessor, pursuant to which the
Company agreed to cancel the previous issued warrant for 3,600,000 and issue a
warrant to purchase 5,100,000 shares of our common stock to the Lessor and/or
its affiliates at an exercise price of $0.10 per share for a period of five
years. 900,000 shares vested on October 22, 2014, 665,822 shares on October 28,
2014, 680,277 shares on December 22, 2014, 347,271 shares on February 3, 2015
and 789,940 shares on March 5, 2015. The remaining 905,267 shares will vest on a
pro rata basis according to any mounts the Lessor funds pursuant to any lease
schedules under the master lease agreement, provided that if we draw on 90% or
more of the total lease line under the master lease agreement, then all such
shares will be deemed to be vested. The Company recorded the bifurcated value of
$309,028 of the warrants issued as additional paid in capital, the value was
determine using a Black-Scholes, a level 3 valuation measure.
20
On June 29, 2015 the Company entered into a $50,000 Convertible
promissory note was convertible into Common stock at $0.07 per share. The
Convertible promissory note had an 8% annual interest rate, 1 year term and
rights to 714,286 warrants with a two year term an exercise price of $0.10 per
share. The Company evaluated this transaction under ASC 470-20-30 Debt
liability and equity component determine that a accretion of $38,101 was
provided and will be amortized over the 1 year term of the note. As of June 30,
2015 $0 was amortized. The Company determine that the bifurcated value of the
transaction was:
Notes payable |
$ |
11,899 |
|
Intrinsic value of Conversion right Common stock |
|
23,798 |
|
Fair value of the warrant |
|
14,303 |
|
Total proceeds |
$ |
50,000 |
|
The fair value of the warrants granted during the period ended
June 30, 2015 was estimated at the date of master lease agreement using the
Black-Scholes option-pricing model and a level 3 valuation measure, with the
following assumptions:
Market value of stock on purchase date |
$0.075 |
to |
$0.142 |
Risk-free interest rate |
.59% |
to |
.72% |
Dividend yield |
|
0.00% |
|
Volatility factor |
121% |
to |
121% |
Weighted average expected life (years) |
|
2 |
|
NOTE 10 RELATED PARTY TRANSACTIONS
On October 31, 2014, the Company amended the 2013 Equity
Incentive Plan to, among other things, increase the number of shares of stock of
the Company available for the grant of awards under the plan from 20,000,000
shares to 35,000,000 shares.
On October 31, 2014, the Company reduced the exercise price of
an aggregate of 6,000,000 stock options granted to Steven P. Nickolas and
Richard A. Wright, our directors and executive officers, to $0.15 per share as
noted below:
|
|
|
New Exercise |
|
|
|
|
Old Exercise |
Price per |
|
Number of Stock |
Name of
Optionee |
Grant Date |
Price per Share |
Share |
Expiration Date |
Options |
Steven P. Nickolas |
October 9, 2013 |
$0.605 |
$0.15 |
October 9, 2023 |
3,000,000 |
Richard A. Wright
|
October 9, 2013 |
$0.605 |
$0.15 |
October 9, 2023 |
3,000,000 |
On May 21, 2014, the Company granted a total of 6,000,000 stock
options Steven A. Nickolas and Richard A. Wright (3,000,000 stock options to
each). The stock options are exercisable at the exercise price of $0.1455 per
share for a period of ten years from the date of grant. 3,000,000 stock options
vested upon the date of grant and 3,000,000 stock options will vest on November
21, 2014.
On October 9, 2013, the Company granted a total of 6,000,000
stock options to Steven A. Nickolas and Richard A. Wright (3,000,000 stock
options to each). The stock options are exercisable at the exercise price of
$0.605 per share for a period of ten years from the date of grant. The stock
options vest as follows: (i) 1,000,000 upon the date of grant; and (ii) 500,000
per quarter until fully vested.
On October 8, 2013, the Company issued a total of 20,000,000
shares of non-convertible Series A Preferred Stock to Steven A. Nickolas and
Richard A. Wright (10,000,000 shares to each), our directors and executive
officers, in consideration for the past services, at a deemed value of $0.001
per share. 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.
21
On April 2, 2014, the Company entered into a sale-leaseback
transaction with Water Engineering Solutions LLC, an entity that is controlled
and owned by an officer, director and shareholder, for specialized equipment
with an original cost of $208,773 and that was acquired in August 2013. The
Company received proceeds of $188,000 in April 2014. The lease terms are 60
monthly payments of $3,812, payable 30 days after installation of the equipment
and a purchase option of $1.00. The Company recorded a loss on sales leaseback
of $20,773.
As of March 31, 2014, the Company had $0 in equipment deposits
with an entity that is controlled and owned by an officer, director and
shareholder of the Company. During the year ended March 31, 2014, the Company
provided $201,900 of deposits on equipment used to produce our alkaline water to
an entity that is controlled and owned by an officer, director and shareholder
of the Company. During the month of March 2014, these funds were returned to the
Company.
During the year ended March 31, 2014 the Company acquired
equipment of $208,773 and $10,287 from an entity that is controlled and
majority-owned by an officer, director and shareholder of the Company.
On January 17, 2014 the Company entered into an equipment lease
with Water Engineering Solutions LLC, an entity that is controlled and owned by
an officer, director and shareholder, for specialized equipment used to make our
alkaline water totaling $190,756 and agreed to a 60-month term at $2,512 per
month and a final payment of $28,585. On February 12, 2014 the Company amended
this lease, as noted above, with equipment deposits of $201,900 being returned
to the Company. In addition the lease terms were amended to 60 monthly payments
of $3,864, payable 30 days after installation of the equipment and a purchase
option of $1.00.
On August 1, 2013, the Company entered into a 3-year sub-lease
agreement requiring a monthly payment of $2,085 for office space in Scottsdale,
Arizona, with a basic monthly lease increase of 8% and 7% on each anniversary
date. The Company or the landlord can cancel the lease with 30 days notice. The
sub-lessor is an entity owned by the Companys Chief Executive Officer and
President.
Under the terms of the exclusive manufacturing agreement
entered into on April 15, 2013 between the Company and Water Engineering
Solutions LLC, a related party, the Company paid $690,000 on May 1 2014 for
specialized equipment used in the production of our alkaline water. Under this
agreement, the Company paid deposits on equipment as follows: May 1, 2014
$690,000, June 27, 2014 $21,500, July 1, 2014 $115,000, August 7, 2014 $10,000,
August 5, 2014 $5,000, August 19, 2014 $2,000, August 22, 2014 $100,000, October
14, 2014 $70,000, November 4, 2014 $7,676 and November 7, 2014 $5,002. The
Company received equipment valued at $278,769 and reduced the deposit on
equipment. Water Engineering Solutions, LLC is an entity that is controlled and
majority owned by Steven P. Nickolas and Richard A. Wright for the production of
our alkaline water.
During the year ended March 31, 2014, the Company had a total
of $62,092, in general and administrative expenses with related parties. Of that
total for year ended March 31, 2014, $33,592 was consulting fees to an officer,
director and shareholder of the Company, $12,000 was rent to an entity that is
controlled and owned by an officer, director and shareholder of the Company and
$16,500 was professional fees to an entity that is controlled and owned by an
officer, director and shareholder.
During the year ended March 31, 2014, the Company recorded as
other related party income a total of $40,029 to an entity that is controlled
and owned by an officer, director and shareholder of the Company. The income
reflects the Companys estimate of vehicle rent and labor of an employee when
utilized by the related party.
NOTE 11 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. 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:
22
|
|
2015 |
|
|
2014 |
|
Deferred income tax assets:
|
$ |
1,270,000 |
|
$ |
260,000 |
|
Valuation allowance |
|
(1,270,000 |
) |
|
(260,000 |
) |
Net total |
$ |
- |
|
$ |
- |
|
At March 31, 2014, the Company had net operating loss
carryforwards of approximately $3,190,000 and net operating loss carryforwards
expire in 2023 through 2034.
The valuation allowance was increased by $1,010,000 during the
year ended March 31, 2015. The current income tax benefit of $1,270,000 and
$260,000 generated for the years ended March 31, 2015 and 2014, respectively,
was offset by an equal increase in the valuation allowance. The valuation
allowance was increased due to uncertainties as to the Companys ability to
generate sufficient taxable income to utilize the net operating loss
carryforwards and other deferred income tax items.
The Company recognizes interest and penalties related to
uncertain tax positions in general and administrative expense. As of June 30,
2015, the Company has no unrecognized uncertain tax positions, including
interest and penalties.
NOTE 12 CAPITAL LEASE
On January 17, 2014, the Company entered into an equipment
lease with Water Engineering Solutions LLC, an entity that is controlled and
owned by an officer, director and shareholder, for specialized equipment used to
make our alkaline water with a stated value of $190,756 and agreed to a 60 month
term at $3,864 per month and a purchase option of $1 which commenced on May 1,
2014.
On April 2, 2014, the Company entered into a capital lease
agreement with Water Engineering Solutions LLC, an entity that is controlled and
owned by an officer, director and shareholder, for specialized equipment used to
make our alkaline water with a stated value of $188,000, terms of 60 monthly
payments of $3,812, payable 30 days after installation of the equipment and a
purchase option of $1.00 which commenced on July 1, 2014.
On October 22, 2014 the Company agreed to purchase the
specialized equipment use to make our alkaline water that were previously
reflected as capital lease on January 17, 2014 and April 2, 2014. During the
quarter ended December 31, 2014, the Company purchased these capital leases of
specialized equipment for $347,161, the lease liability on the date of
purchase.
On October 22, 2014, the Company entered into a master lease
agreement with Veterans Capital Fund, LLC (the Lessor) for the secured lease
line of credit financing in an amount not to exceed $600,000. The lease is
expected to be secured by three new alkaline generating electrolysis system
machines. Our wholly-owned subsidiary, Alkaline 88, LLC, and Water Engineering
Solutions, LLC acted as co-lessees. Water Engineering Solutions, LLC is an
entity that is controlled and owned by our President, Chief Executive Officer,
director and major stockholder, Steven P. Nickolas, and our Vice-President,
Secretary, Treasurer and director, Richard A. Wright. Pursuant to the master
lease agreement, the Lessor agreed to lease to us the equipment described in any
equipment schedule signed by us and approved by the Lessor. It is expected that
any lease under the master lease agreement will be structured for a three year
lease term with fixed monthly lease rental payments based on a monthly lease
rate factor of 3.4667% of the Lessors capital cost. In connection with the
entering into the master lease agreement, the Company also entered into a
warrant agreement with the Lessor, pursuant to which the Company agreed to issue
a warrant to purchase 3,600,000 shares of our common stock to the Lessor and/or
its affiliates at an exercise price of $0.125 per share for a period of five
years. 900,000 shares vested.
On February 25, 2015, the Company amended the master lease
agreement with Veterans Capital Fund, LLC for the increase in the secured lease
line of credit financing to an amount not to exceed $800,000. The lease was
secured by new alkaline generating electrolysis system machines by our
wholly-owned subsidiary, Alkaline 88, LLC, and Water Engineering Solutions, LLC.
Water Engineering Solutions, LLC is an entity that is controlled and owned by
our President, Chief Executive Officer, director and major stockholder, Steven
P. Nickolas, and our Vice-President, Secretary, Treasurer and director, Richard
A. Wright. Pursuant to the master lease agreement, the Lessor agreed to lease to
us the equipment described in any equipment schedule signed by us and approved
by the Lessor. It is expected that any lease under the master lease agreement will
be structured for a three year lease term with fixed monthly lease rental
payments based on a monthly lease rate factor of 3.4667% of the Lessors capital
cost. In connection with the entering into the master lease agreement, the
Company entered into a warrant agreement with the Lessor, pursuant to which the
Company agreed to cancel the previous issued warrant for 3,600,000 and issue a
warrant to purchase 5,100,000 shares of our common stock to the Lessor and/or
its affiliates at an exercise price of $0.10 per share for a period of five
years. 900,000 shares vested on October 22, 2014, 665,822 shares on October 28,
2014, 680,277 shares on December 22, 2014, 347,271 shares on February 3, 2015
and 789,940 shares on March 5, 2015. The remaining 905,267 shares will vest on a
pro rata basis according to any mounts the Lessor funds pursuant to any lease
schedules under the master lease agreement, provided that if we draw on 90% or
more of the total lease line under the master lease agreement, then all such
shares will be deemed to be vested. The Company recorded the bifurcated value of
$309,028 of the warrants issued as additional paid in capital, the value was
determine using a Black-Scholes, a level 3 valuation measure.
23
During the year ended March 31, 2015 the Company agreed to
lease the specialized equipment used to make our alkaline water with a value of
$735,781 under the above Master Lease agreement. The Company evaluated this
lease under (ASC) 840-30 Leases- Capital Leases and concluded that these lease
where a capital asset.
NOTE 13 NOTES PAYABLE
On May 11, 2015, the Company entered into a securities purchase
agreement with Assurance Funding Solutions LLC, pursuant to which the Company
issued a secured term note of our company in the aggregate principal amount of
$250,000, together with 1,000,000 shares of our common stock, in consideration
for $250,000. The secured term note bears interest at the rate of 15% per annum
and matures on May 11, 2016. We may prepay the note by paying the holder 110% of
the principal amount outstanding together with accrued but unpaid interest
thereon, provided that we provide written notice to the holder at least 30 days
prior to the date of prepayment. Pursuant to the securities purchase agreement,
we paid Assurance Funding Solutions LLC $10,000 for legal fees incurred by it
and granted it piggyback registration rights. In connection with the securities
purchase agreement, we also entered into a general security agreement dated May
11, 2015 with Assurance Funding Solutions LLC. The Company evaluated this
transaction under ASC 470-20-30 Debt liability and equity component
determine that a Debt Discount of $79,000 was provided and will be amortized
over the 1 year term of the note. As of June 30, 2015 $72,417 was unamortized
and amortization of debt discount for the three months period was $6,583.
NOTE 14 CONVERTIBLE NOTES PAYABLE
On June 29, 2015 the Company entered into a $50,000 Convertible
promissory note was convertible into Common stock at $0.07 per share. The
Convertible promissory note had an 8% annual interest rate, 1 year term and
rights to 714,286 warrants with a two year term an exercise price of $0.10 per
share. The Company evaluated this transaction under ASC 470-20-30 Debt
liability and equity component determine that a accretion of $38,101 was
provided and will be amortized over the 1 year term of the note. As of June 30,
2015 $0 was amortized. The Company determine that the bifurcated value of the
transaction was:
|
|
|
|
Notes payable |
$ |
11,899 |
|
Intrinsic value of Conversion right Common stock |
|
23,798 |
|
Fair value of the warrant |
|
14,303 |
|
Total proceeds |
$ |
50,000 |
|
NOTE 15 SUBSEQUENT EVENTS
During the period from July 1, 2015 through July 16, 2015 the
Company sold units of our securities at a price of $0.07 per unit. Each unit
consists of one share of our common stock and one non-transferable common stock
purchase warrant, with each common stock purchase warrant entitling the holder
to acquire one additional share of our common stock at a price of $0.10 per
share for a period of two years. The Company sold 1,071,429 units during the period ended June 30, 2015 consisting of 1,071,429 shares
of common stock and 1,071,429 warrants for $75,000 proceeds.
24
Between July 1, 2015 and July 16, 2015 the Company entered into
$100,000 of Convertible promissory note were convertible into Common stock at
$0.07 per share. The Convertible promissory note had an 8% annual interest rate,
1 year term and rights to 1,428,572 warrants with a two year term an exercise
price of $0.10 per share.
Between July 16, 2015 and August 11, 2015 1,338,797warrants
were exercised in a cashless exercise and 1,457,771 warrants were forfeited.
25
Item 2. Managements Discussion and Analysis of Financial
Condition and Results of Operations
Forward-Looking Statements
This report contains forward-looking statements. All
statements other than statements of historical fact are forward-looking
statements for purposes of federal and state securities laws, including, but
not limited to, any projections of earnings, revenue or other financial items;
any statements of the plans, strategies and objections of management for future
operations; any statements concerning proposed new services or developments; any
statements regarding future economic conditions or performance; any statements
or belief; and any statements of assumptions underlying any of the foregoing.
Forward-looking statements may include the words may,
could, estimate, intend, continue, believe, expect or anticipate
or other similar words. These forward-looking statements present our estimates
and assumptions only as of the date of this report. Accordingly, readers are
cautioned not to place undue reliance on forward-looking statements, which speak
only as of the dates on which they are made. Except as required by applicable
law, including the securities laws of the United States, we do not intend, and
undertake no obligation, to update any forward-looking statement.
Although we believe the expectations reflected in any of our
forward-looking statements are reasonable, actual results could differ
materially from those projected or assumed in any of our forward-looking
statements. Our future financial condition and results of operations, as well as
any forward-looking statements, are subject to change and inherent risks and
uncertainties. The factors impacting these risks and uncertainties include, but
are not limited to:
- our current lack of working capital;
- inability to raise additional financing;
- the fact that our accounting policies and methods are fundamental to how
we report our financial condition and results of operations, and they may
require our management to make estimates about matters that are inherently
uncertain;
- deterioration in general or regional economic conditions;
- adverse state or federal legislation or regulation that increases the
costs of compliance, or adverse findings by a regulator with respect to
existing operations;
- inability to efficiently manage our operations;
- inability to achieve future sales levels or other operating results; and
- the unavailability of funds for capital expenditures.
As used in this quarterly report on Form 10-Q, the terms we,
us our, the Company and Alkaline refer to The Alkaline Water Company
Inc., a Nevada corporation, and its wholly-owned subsidiary, Alkaline Water
Corp., and Alkaline Water Corp.s wholly-owned subsidiary, Alkaline 88, LLC,
unless otherwise specified.
Results of Operations
Our results of operations for the three months ended June 30,
2015 and June 30, 2014 are as follows:
|
|
For the three |
|
|
For the three |
|
|
|
months ended |
|
|
months ended |
|
|
|
June 30, |
|
|
June 30, |
|
|
|
2015 |
|
|
2014 |
|
Revenue |
$ |
1,513,578 |
|
$ |
572,049 |
|
Cost of goods sold |
|
976,804 |
|
|
406,125 |
|
Gross profit |
|
536,774 |
|
|
165,924 |
|
Net Loss (after operating expenses and other
expenses) |
$ |
(1,554,630 |
) |
$ |
(2,437,209 |
) |
26
Revenue and Cost of Goods Sold
We had revenue from sales of our product for the three months
ended June 30, 2015 of $1,513,578, as compared to $572,049 three months ended
June 30, 2015, an increase of 164% generated by sales of our alkaline water. The
increase in sales is due to the expanded distribution of our products to
additional retailers throughout the country. As of June 30, 2015, the product is
now available in all 50 states at an estimated 17,500 retail locations. As of
December 31, 2013 the product was in 5 states and only 500 stores. This increase
has occurred primarily through the addition of 36 of the top national grocery
retailers as customer. The Company distributes its product through several
channels. The Company sells through large national distributors (UNFI, KeHe,
Tree of Life, C&S, Core-Mark and Natures Best), which together represent
over 150,000 retail outlets. The Company also sells its product directly to
retail clients, including convenience stores, natural food products stores,
large ethnic markets and national retailers. Some examples of retail clients
are, Albertsons, Safeway, Kroger, Schnucks, Smart & Final, Jewel-Osco,
Sprouts, Bashas, Stater Bros. Markets, Unified Grocers, Bristol Farms,
Vallarta, Superior Foods, Ingles, HEB and Brookshires.
Cost of goods sold is comprised of production costs, shipping
and handling costs. For the three months ended June 30, 2015, we had cost of
goods sold of $976,804, or 64.5% of net sales, as compared to cost of goods sold
of $406,125or 71% of net sales, for three months ended June 30, 2014. The
increase in gross profit is a result of reduced raw material cost through
greater volume purchases from our suppliers.
Expenses
Our operating expenses for the three months ended June 30, 2015
and June 30, 2014 are as follows:
|
|
|
For the three |
|
|
For the three |
|
|
|
|
months ended |
|
|
months ended |
|
|
|
|
June 30, |
|
|
June 30, |
|
|
|
|
2015 |
|
|
2014 |
|
|
Sales and marketing expenses
|
$ |
626,681 |
|
$ |
226,780 |
|
|
General and administrative expenses |
|
1,151,540 |
|
|
2,138,753 |
|
|
General and administrative
expenses related party |
|
- |
|
|
- |
|
|
Depreciation expenses |
|
71,029 |
|
|
16,534 |
|
|
Total operating expenses |
$ |
1,849,250 |
|
$ |
2,382,067 |
|
During the for the three months ended June 30, 2015, our total
operating expenses were $1,849,250, as compared to $2,382,067for the three
months ended June 30, 2014.
For the three months ended June 30, 2015, the total included
$626,681 of sales and marketing expenses and $1,151,540 of general and
administrative expenses, consisting primarily of approximately $642,872 of stock
option compensation expense, and $103,540 of professional fees. Our stock and
stock option compensation expense was incurred as a part of our issuance of
certain stock options and stock grants to employees and key consultants to
develop our business. Although a non-cash expense, the value of such issuances
had a material impact on our general and administrative expenses for the three
months ended June 30, 2015.
For the three months ended June 30, 2014 the total included
$226,780 of sales and marketing expenses and $2,138,753 of general and
administrative expenses, consisting primarily of approximately $1,399,127 of
shares stock option compensation expense, and $219,396 of professional fees. Our
stock and stock option compensation expense was incurred as a part of our
issuance of certain stock options and stock grants to employees and key
consultants to develop our business. Although a non-cash expense, the value of
such issuances had a material impact on our general and administrative expenses
for the three months ended June 30, 2014.
27
Liquidity and Capital Resources
Working Capital
|
|
June 30, 2015 |
|
|
March 31, 2015 |
|
Current assets |
$ |
913,162 |
|
$ |
717,341 |
|
Current liabilities |
|
1,909,389 |
|
|
1,413,331 |
|
Working capital (deficiency)
|
$ |
(996,227 |
) |
$ |
(695,990 |
)
|
Current Assets
Current assets as of June 30, 2015 and March 31, 2015 primarily
relate to $193,955 and $90,113 in cash, $489,586 and $416,373 in accounts
receivable and $212,121and $193,355 in inventory, respectively.
Current Liabilities
Current liabilities as of June 30, 2015 and March 31, 2015
primarily relate to $760,432 and $562,498 in accounts payable, revolving
financing of $208,870 and $242,875 and $363,104 and $194,940 in derivative
liability, note payable of $177,583 and $0, current portion of capital leases of
$216,501 and $209,544 and accrued expenses of $171,000 and $160,437
respectively.
Cash Flow
Our cash flows for the years ended June 30, 2015 and June 30,
2014 are as follows:
|
|
For the three |
|
|
For the three |
|
|
|
months ended |
|
|
months ended |
|
|
|
June 30, |
|
|
June 30, |
|
|
|
2015 |
|
|
2014 |
|
Net Cash used in operating
activities |
$ |
(566,977 |
) |
$ |
(1,018,235 |
) |
Net Cash used in investing activities |
|
(27,848 |
) |
|
(520,162 |
) |
Net Cash provided by
financing activities |
|
698,667 |
|
|
2,155,763 |
|
Net increase in cash and cash equivalents |
$ |
103,842 |
|
$ |
617,366 |
|
Operating Activities
Net cash used in operating activities was $566,977 for the
three months ended June 30, 2015, as compared to $1,018,235 used in operating
activities for the three months ended June 30, 2014. The decrease in net cash
used in operating activities was primarily due to reduction in inventory build,
and better overall cash management.
Investing Activities
Net cash used in investing activities was $27,848 for the three
months ended June 30, 2015, as compared to $520,162 used in investing activities
for the three months ended June 30, 2014. The decrease in net cash used by
investing activities was the result of no purchases of production equipment
during the three months ended June 30, 2015.
Financing Activities
Net cash provided by financing activities for the three months
ended June 30, 2015 was $698,667, as compared to $2,155,763 for the three months
ended June 30, 2014. The decrease of net cash provided by financing activities
was mainly attributable to reduced sales of our common stock.
28
2015 Private Placement financing
During the three months ended June 30, 2015, we sold an
aggregate of 6,868,572units of our securities at a price of $0.07 per unit for
aggregate gross proceeds of $480,800. Each unit consists of one share of our
common stock and one non-transferable common stock purchase warrant, with each
common stock purchase warrant entitling the holder to acquire one additional
share of our common stock at a price of $0.10 per share for a period of two
years.
Subsequent to June 30, 2015, we sold an aggregate of 1,071,429
units of our securities at a price of $0.07 per unit for aggregate gross
proceeds of $75,000. Each unit consists of one share of our common stock and one
non-transferable common stock purchase warrant, with each common stock purchase
warrant entitling the holder to acquire one additional share of our common stock
at a price of $0.10 per share for a period of two years.
Convertible notes payable
Through July 16, 2015 we entered into several Convertible
promissory note with 8% interest, 1 year term for $150,000 and issue 2,134,858
warrants with a two year term with an exercise price of $0.10 per share and
convertible into Common stock at $0.07 per share.
2015 Secured Notes
On May 11, 2015, we entered into a securities purchase
agreement with Assurance Funding Solutions LLC, pursuant to which we sold a
secured term note of our company in the aggregate principal amount of $250,000,
together with 1,000,000 shares of our common stock, in consideration for
$250,000. The secured term note bears interest at the rate of 15% per annum and
matures on May 11, 2016. We may prepay the note by paying the holder 110% of the
principal amount outstanding together with accrued but unpaid interest thereon,
provided that we provide written notice to the holder at least 30 days prior to
the date of prepayment. Pursuant to the securities purchase agreement, we paid
Assurance Funding Solutions LLC $10,000 for legal fees incurred by it and
granted it piggyback registration rights. In connection with the securities
purchase agreement, we also entered into a general security agreement dated May
11, 2015 with Assurance Funding Solutions LLC.
Cash Requirements
We believe that cash flow from operations will not meet our
present and near-term cash needs and thus we will require additional cash
resources, including the sale of equity or debt securities, to meet our planned
capital expenditures and working capital requirements for the next 12 months. We
estimate that our capital needs over the next 12-month will be $1,000,000 to
$3,000,000. We will require additional cash resources to, among other things,
increase manufacturing capacity, expand retail distribution and add support
staff. If our own financial resources and future cash-flows from operations are
insufficient to satisfy our capital requirements, we may seek to sell additional
equity or debt securities or obtain additional credit facilities. The sale of
additional equity securities will result in dilution to our stockholders. The
incurrence of indebtedness will result in increased debt service obligations and
could require us to agree to operating and financial covenants that could
restrict our operations or modify our plans to grow the business. Financing may
not be available in amounts or on terms acceptable to us, if at all. Any failure
by us to raise additional funds on terms favorable to us, or at all, will limit
our ability to expand our business operations and could harm our overall
business prospects.
Off-Balance Sheet Arrangements
We have no off-balance sheet arrangements that have or are
reasonably likely to have a current or future effect on our financial condition,
changes in financial condition, revenues or expenses, results of operations,
liquidity, capital expenditures or capital resources that is material to our
stockholders.
Item 3. Quantitative and Qualitative Disclosures About
Market Risk
Not applicable.
Item 4. Controls and Procedures
29
Evaluation of Disclosure Controls and Procedures
We maintain "disclosure controls and procedures", as that term
is defined in Rule 13a-15(e), promulgated by the Securities and Exchange
Commission pursuant to the Securities Exchange Act of 1934. Disclosure controls
and procedures include controls and procedures designed to ensure that
information required to be disclosed in our company's reports filed under the
Securities Exchange Act of 1934 is recorded, processed, summarized and reported
within the time periods specified in the Securities and Exchange Commission's
rules and forms, and that such information is accumulated and communicated to
our management, including our principal executive officer and our principal
financial officer to allow timely decisions regarding required disclosure.
As required by paragraph (b) of Rules 13a-15 under the
Securities Exchange Act of 1934, our management, with the participation of our
principal executive officer and our principal financial officer, evaluated our
company's disclosure controls and procedures as of the end of the period covered
by this quarterly report on Form 10-Q. Based on this evaluation, our management
concluded that as of the end of the period covered by this quarterly report on
Form 10-Q, our disclosure controls and procedures were effective.
Changes in Internal Control Over Financial Reporting
There were no changes in our internal control over financial
reporting during the fiscal quarter ended June 30, 2015 that have materially
affected, or are reasonably likely to materially affect our internal control
over financial reporting.
PART IIOTHER INFORMATION
Item 1. Legal Proceedings.
We are not a party to any material legal proceedings.
Item 1A. Risk Factors.
Information regarding risk factors appears in our Annual Report
on Form 10-K filed on July 14, 2015. There have been no material changes since
July 14, 2015 from the risk factors disclosed in that Form 10-K.
Item 2. Unregistered Sales of Equity Securities and Use of
Proceeds.
Between July 15, 2015 and July 17, 2015, we issued an aggregate
of 905,716 shares of our common stock at a price of $0.07 per share to a warrant
holder upon full exercise of the warrant to purchase an aggregate of 1,665,117
shares of our common stock on a cashless basis. In issuing these shares, we
relied on an exemption from the registration requirements of the Securities Act
of 1933 provided by Section 4(a)(2) of the Securities Act of 1933.
On July 24, 2015, we issued 78,081 shares of our common stock
at a price of $0.07 per share to a warrant holder upon full exercise of the
warrant to purchase an aggregate of 166,666 shares of our common stock on a
cashless basis. In issuing these shares, we relied on an exemption from the
registration requirements of the Securities Act of 1933 provided by Section
4(a)(2) of the Securities Act of 1933.
On August 11, 2015, we issued an aggregate of 365,000 shares of
our common stock at a price of $0.07 per share to a warrant holder upon full
exercise of the warrant to purchase an aggregate of 365,000 shares of our common
stock on a cashless basis. In issuing these shares, we relied on an exemption
from the registration requirements of the Securities Act of 1933 provided by
Section 4(a)(2) of the Securities Act of 1933.
On June 29, 2015, we entered into a loan agreement with one
lender, pursuant to which we issued a convertible promissory note in the
principal amount of $50,000 and 714,286 warrants in exchange for the loan in the
amount of $50,000. The convertible promissory note bears simple interest at the
rate of 8% per annum and matures on June 29, 2016. The lender has the option to
convert the amount due under the convertible promissory note into shares of our
common stock at a conversion price of $0.07 per share. Each warrant is
exercisable into one share of our common stock at an exercise price of $0.10 until June 29, 2017. In
issuing these shares, we relied on an exemption from the registration
requirements of the Securities Act of 1933 provided by Section 4(a)(2) of the
Securities Act of 1933.
30
On June 30, 2015, we entered into loan agreements with three
lenders, pursuant to which we issued three convertible promissory notes in the
aggregate principal amount of $75,000 and an aggregate of 1,071,429 warrants in
exchange for the loans in the aggregate amount of $75,000. The convertible
promissory notes bear simple interest at the rate of 8% per annum and mature on
June 30, 2016. The lenders have the option to convert the amount due under the
convertible promissory notes into shares of our common stock at a conversion
price of $0.07 per share. Each warrant is exercisable into one share of our
common stock at an exercise price of $0.10 until June 30, 2017. In issuing these
shares, we relied on an exemption from the registration requirements of the
Securities Act of 1933 provided by Section 4(a)(2) of the Securities Act of
1933.
On July 13, 2015, we entered into a loan agreement with one
lender, pursuant to which we issued a convertible promissory note in the
principal amount of $25,000 and 357,143 warrants in exchange for the loan in the
amount of $25,000. The convertible promissory note bears simple interest at the
rate of 8% per annum and matures on July 13, 2016. The lender has the option to
convert the amount due under the convertible promissory note into shares of our
common stock at a conversion price of $0.07 per share. Each warrant is
exercisable into one share of our common stock at an exercise price of $0.10
until July 13, 2017. In issuing these shares, we relied on an exemption from the
registration requirements of the Securities Act of 1933 provided by Section
4(a)(2) of the Securities Act of 1933.
Item 3. Defaults Upon Senior Securities.
None.
Item 4. Mine Safety Disclosures.
Not applicable.
Item 5. Other Information.
None.
Item 6. Exhibits.
Exhibit |
|
Number |
Description |
|
|
(1) |
Underwriting
Agreement |
1.1 |
Engagement Agreement dated October 7, 2013 with H.C.
Wainwright & Co., LLC (incorporated by reference from our Registration
Statement on Form S-1, filed on November 27, 2013) |
1.2 |
Amendment Agreement to Engagement Agreement dated
November 1, 2013 with H.C. Wainwright & Co., LLC (incorporated by
reference from our Registration Statement on Form S-1/A, filed on January
9, 2014) |
1.3 |
Amendment Agreement to Engagement Agreement dated
November 25, 2013 with H.C. Wainwright & Co., LLC (incorporated by
reference from our Registration Statement on Form S-1, filed on November
27, 2013) |
1.4 |
Termination Agreement for Engagement Agreement dated
March 12, 2014 with H.C. Wainwright & Co., LLC (incorporated by
reference from our Registration Statement on Form S-1, filed on March 12,
2014) |
1.5 |
Engagement Agreement dated March 12, 2014 with H.C.
Wainwright & Co., LLC (incorporated by reference from our Registration
Statement on Form S-1, filed on March 12, 2014) |
(2) |
Plan of Acquisition, Reorganization, Arrangement,
Liquidation or Succession |
2.1 |
Share Exchange Agreement dated May 31, 2013 with Alkaline
Water Corp. and its shareholders (incorporated by reference from our
Current Report on Form 8-K, filed on June 5, 2013)
|
31
(3) |
Articles of
Incorporation and Bylaws |
3.1 |
Articles of Incorporation (incorporated by reference from
our Form S-1 Registration Statement, filed on October 28, 2011) |
3.2 |
Certificate of Change (incorporated by reference from our
Quarterly Report on Form 10-Q, filed on August 13, 2013) |
3.3 |
Articles of Merger (incorporated by reference from our
Quarterly Report on Form 10-Q, filed on August 13, 2013) |
3.4 |
Certificate of Amendment (incorporated by reference from
our Current Report on Form 8-K, filed on October 11, 2013) |
3.5 |
Certificate of Designation (incorporated by reference
from our Current Report on Form 8-K, filed on October 11, 2013) |
3.6 |
Certificate of Designation (incorporated by reference
from our Current Report on Form 8-K, filed on November 12, 2013)
|
3.7 |
Amended and Restated Bylaws (incorporated by reference
from our Current Report on Form 8-K, filed on March 15, 2013) |
(10) |
Material Contracts |
10.1 |
Contract Packer Agreement dated November 14, 2012 between
Alkaline 84, LLC and AZ Bottled Water, LLC (incorporated by reference from
our Current Report on Form 8-K, filed on June 5, 2013) |
10.2 |
Private Placement Subscription Agreement dated February
21, 2013 with Alkaline 84, LLC and Bank Gutenberg AG (incorporated by
reference from our Quarterly Report on Form 10-Q, filed on May 17, 2013)
|
10.3 |
Private Placement Subscription Agreement dated April 17,
2013 with Alkaline 84, LLC and Bank Gutenberg AG (incorporated by
reference from our Quarterly Report on Form 10-Q, filed on May 17, 2013)
|
10.4 |
Private Placement Subscription Agreement dated May 17,
2013 with Alkaline 84, LLC and Bank Gutenberg AG (incorporated by
reference from our Current Report on Form 8-K, filed on June 5, 2013)
|
10.5 |
Private Placement Subscription Agreement dated May 29,
2013 with Bank Gutenberg AG (incorporated by reference from our Current
Report on Form 8-K, filed on June 5, 2013) |
10.6 |
2013 Equity Incentive Plan (incorporated by reference
from our Current Report on Form 8-K, filed on October 11, 2013) |
10.7 |
Form of Securities Purchase Agreement dated as of
November 4, 2013, by and among The Alkaline Water Company Inc. and the
purchasers named therein (incorporated by reference from our Current
Report on Form 8-K, filed on November 5, 2013) |
10.8 |
Form of Registration Rights Agreement dated as of
November 4, 2013, by and among The Alkaline Water Company Inc. and the
purchasers named therein (incorporated by reference from our Current
Report on Form 8-K, filed on November 5, 2013) |
10.9 |
Form of Common Stock Purchase Warrant (incorporated by
reference from our Current Report on Form 8-K, filed on November 5, 2013)
|
10.11 |
Stock Option Agreement dated October 9, 2013 with Steven
P. Nickolas (incorporated by reference from our Quarterly Report on Form
10-Q, filed on November 13, 2013) |
10.12 |
Stock Option Agreement dated October 9, 2013 with Richard
A. Wright (incorporated by reference from our Quarterly Report on Form
10-Q, filed on November 13, 2013) |
10.13 |
Contract Packer Agreement dated October 7, 2013 with
White Water, LLC (incorporated by reference from our Quarterly Report on
Form 10-Q, filed on November 13, 2013) |
10.14 |
Manufacturing Agreement dated August 15, 2013 with Water
Engineering Solutions, LLC (incorporated by reference from our
Registration Statement on Form S-1, filed on November 27, 2013) |
10.15 |
Equipment Lease Agreement dated January 17, 2014
(incorporated by reference from our Current Report on Form 8-K, filed on
January 27, 2014) |
10.16 |
Revolving Accounts Receivable Funding Agreement dated
February 20, 2014 (incorporated by reference from our Current Report on
Form 8-K, filed on February 25, 2014) |
10.17 |
Form of Securities Purchase Agreement dated as of April
28, 2014, between The Alkaline Water Company Inc. and the purchasers named
therein (incorporated by reference from our Current Report on Form 8-K,
filed on May 6, 2014) |
10.18 |
Form of Common Stock Purchase Warrant (incorporated by
reference from our Current Report on Form 8-K, filed on May 6, 2014)
|
32
10.19 |
Form of Placement Agent Common Stock Purchase Warrant
(incorporated by reference from our Current Report on Form 8-K, filed on
May 6, 2014) |
10.20 |
Stock Option Agreement dated May 12, 2014 with Steven P.
Nickolas (incorporated by reference from our Current Report on Form 8-K,
filed on May 14, 2014) |
10.21 |
Stock Option Agreement dated May 12, 2014 with Richard A.
Wright (incorporated by reference from our Current Report on Form 8-K,
filed on May 14, 2014) |
10.22 |
Stock Option Agreement dated May 21, 2014 with Steven P.
Nickolas (incorporated by reference from our Current Report on Form 8-K,
filed on May 23, 2014) |
10.23 |
Stock Option Agreement dated May 21, 2014 with Richard A.
Wright (incorporated by reference from our Current Report on Form 8-K,
filed on May 23, 2014) |
10.24 |
Amendment #1 dated February 12, 2014 to Equipment Lease
Agreement (incorporated by reference from our Quarterly Report on Form
10-Q, filed on August 13, 2014) |
10.25 |
Equipment Sale/Lease Back Agreement dated April 2, 2014
(incorporated by reference from our Quarterly Report on Form 10-Q, filed
on August 13, 2014) |
10.26 |
Agreement dated August 12, 2014 with H.C. Wainwright
& Co., LLC (incorporated by reference from our Current Report on Form
8-K, filed on August 21, 2014) |
10.27 |
Form of Warrant Amendment Agreement (incorporated by
reference from our Current Report on Form 8-K, filed on August 21, 2014) |
10.28 |
Form of Common Stock Purchase Warrant (incorporated by
reference from our Current Report on Form 8-K, filed on August 21, 2014) |
10.29 |
Form of Warrant Amendment Agreement (incorporated by
reference from our Current Report on Form 8-K, filed on October 9, 2014) |
10.30 |
Form of Common Stock Purchase Warrant (incorporated by
reference from our Current Report on Form 8-K, filed on October 9, 2014) |
10.31 |
Master Lease Agreement dated October 28, 2014 with
Veterans Capital Fund, LLC (incorporated by reference from our Current
Report on Form 8-K, filed on November 4, 2014) |
10.32 |
Warrant Agreement dated October 28, 2014 with Veterans
Capital Fund, LLC (incorporated by reference from our Current Report on
Form 8-K, filed on November 4, 2014) |
10.33 |
Registration Rights Agreement dated October 28, 2014 with
Veterans Capital Fund, LLC (incorporated by reference from our Current
Report on Form 8-K, filed on November 4, 2014) |
10.34 |
2013 Equity Incentive Plan (incorporated by reference
from our Current Report on Form 8-K, filed on November 4, 2014) |
10.35 |
Form of Amending Agreement to Stock Option Agreement
(incorporated by reference from our Current Report on Form 8-K, filed on
November 4, 2014) |
10.36 |
Stock Option Agreement dated February 18, 2015 with
Steven P. Nickolas (incorporated by reference from our Current Report on
Form 8-K, filed on April 14, 2015) |
10.37 |
Stock Option Agreement dated February 18, 2015 with
Richard A. Wright (incorporated by reference from our Current Report on
Form 8-K, filed on April 14, 2015) |
10.38 |
Securities Purchase Agreement dated as of May 11, 2015
with Assurance Funding Solutions LLC (incorporated by reference from our
Annual Report on Form 10-K, filed on July 14, 2015) |
10.39 |
Secured Term Note dated May 2015 issued to Assurance
Funding Solutions LLC (incorporated by reference from our Annual Report on
Form 10-K, filed on July 14, 2015) |
10.40 |
General Security Agreement dated as of May 11, 2015 with
Assurance Funding Solutions LLC (incorporated by reference from our Annual
Report on Form 10-K, filed on July 14, 2015) |
(31) |
Rule 13a-14 Certifications |
31.1* |
Certification of Principal Executive Officer Pursuant to
Section 302 of the Sarbanes-Oxley Act of 2002 |
31.2* |
Certification of Principal Financial Officer Pursuant to
Section 302 of the Sarbanes-Oxley Act of 2002 |
(32) |
Section 1350 Certifications |
32.1* |
Certification of Principal Executive Officer Pursuant to
Section 906 of the Sarbanes-Oxley Act of 2002 |
32.2* |
Certification of Principal Financial Officer Pursuant to
Section 906 of the Sarbanes-Oxley Act of 2002 |
(101) |
Interactive Data File |
101.INS* |
XBRL Instance Document |
101.SCH* |
XBRL Taxonomy Extension Schema |
101.CAL* |
XBRL Taxonomy Extension Calculation Linkbase |
101.DEF* |
XBRL Taxonomy Extension Definition Linkbase |
101.LAB* |
XBRL Taxonomy Extension Label Linkbase |
101.PRE* |
XBRL Taxonomy Extension Presentation Linkbase |
*Filed herewith.
33
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of
1934, the registrant has duly caused this report to be signed on its behalf by
the undersigned, thereunto duly authorized.
THE ALKALINE WATER COMPANY INC.
Date: August 18, 2015 |
By: |
/s/ Steven P. Nickolas |
|
|
Steven P. Nickolas |
|
|
President, Chief Executive
Officer and Director |
|
|
(Principal Executive
Officer) |
|
|
|
|
|
|
|
|
|
|
|
|
Date: August 18, 2015 |
By: |
/s/ Richard A. Wright |
|
|
Richard A. Wright |
|
|
Vice-President, Secretary,
Treasurer and Director |
|
|
(Principal Financial Officer and
Principal Accounting |
|
|
Officer) |
34
Exhibit 31.1
CERTIFICATION PURSUANT TO
SECTION 302 OF THE
SARBANES-OXLEY ACT OF 2002
I, Steven P. Nickolas, certify that:
1. |
I have reviewed this quarterly report on Form 10-Q of The
Alkaline Water Company Inc.; |
|
|
|
2. |
Based on my knowledge, this report does not contain any
untrue statement of a material fact or omit to state a material fact
necessary to make the statements made, in light of the circumstances under
which such statements were made, not misleading with respect to the period
covered by this report; |
|
|
|
3. |
Based on my knowledge, the financial statements, and
other financial information included in this report, fairly present in all
material respects the financial condition, results of operations and cash
flows of the registrant as of, and for, the periods presented in this
report; |
|
|
|
4. |
The registrants other certifying officer and I are
responsible for establishing and maintaining disclosure controls and
procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and
internal control over financial reporting (as defined in Exchange Act
Rules 13a-15(f) and 15d-15(f)) for the registrant and have: |
|
|
|
|
(a) |
Designed such disclosure controls and procedures, or
caused such disclosure controls and procedures to be designed under our
supervision, to ensure that material information relating to the
registrant, including its consolidated subsidiaries, is made known to us
by others within those entities, particularly during the period in which
this report is being prepared; |
|
|
|
|
(b) |
Designed such internal control over financial reporting,
or caused such internal control over financial reporting to be designed
under our supervision, 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; |
|
|
|
|
(c) |
Evaluated the effectiveness of the registrants
disclosure controls and procedures and presented in this report our
conclusions about the effectiveness of the disclosure controls and
procedures, as of the end of the period covered by this report based on
such evaluation; and |
|
|
|
|
(d) |
Disclosed in this report any change in the registrants
internal control over financial reporting that occurred during the
registrants most recent fiscal quarter (the registrants fourth fiscal
quarter in the case of an annual report) that has materially affected, or
is reasonably likely to materially affect, the registrants internal
control over financial reporting; and |
5. |
The registrants other certifying officer and I have
disclosed, based on our most recent evaluation of internal control over
financial reporting, to the registrants auditors and the audit committee
of the registrants board of directors (or persons performing the
equivalent functions): |
|
|
|
|
(a) |
All significant deficiencies and material weaknesses in
the design or operation of internal control over financial reporting which
are reasonably likely to adversely affect the registrants ability to
record, process, summarize and report financial information; and |
|
|
|
|
(b) |
Any fraud, whether or not material, that involves
management or other employees who have a significant role in the
registrants internal control over financial
reporting. |
August 18, 2015
/s/ Steven P. Nickolas
Steven P. Nickolas
President, Chief Executive Officer and Director
(Principal Executive
Officer)
Exhibit 31.2
CERTIFICATION PURSUANT TO
SECTION 302 OF THE
SARBANES-OXLEY ACT OF 2002
I, Richard A. Wright, certify that:
1. |
I have reviewed this quarterly report on Form 10-Q of The
Alkaline Water Company Inc.; |
|
|
|
2. |
Based on my knowledge, this report does not contain any
untrue statement of a material fact or omit to state a material fact
necessary to make the statements made, in light of the circumstances under
which such statements were made, not misleading with respect to the period
covered by this report; |
|
|
|
3. |
Based on my knowledge, the financial statements, and
other financial information included in this report, fairly present in all
material respects the financial condition, results of operations and cash
flows of the registrant as of, and for, the periods presented in this
report; |
|
|
|
4. |
The registrants other certifying officer and I are
responsible for establishing and maintaining disclosure controls and
procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and
internal control over financial reporting (as defined in Exchange Act
Rules 13a-15(f) and 15d-15(f)) for the registrant and have: |
|
|
|
|
(a) |
Designed such disclosure controls and procedures, or
caused such disclosure controls and procedures to be designed under our
supervision, to ensure that material information relating to the
registrant, including its consolidated subsidiaries, is made known to us
by others within those entities, particularly during the period in which
this report is being prepared; |
|
|
|
|
(b) |
Designed such internal control over financial reporting,
or caused such internal control over financial reporting to be designed
under our supervision, 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; |
|
|
|
|
(c) |
Evaluated the effectiveness of the registrants
disclosure controls and procedures and presented in this report our
conclusions about the effectiveness of the disclosure controls and
procedures, as of the end of the period covered by this report based on
such evaluation; and |
|
|
|
|
(d) |
Disclosed in this report any change in the registrants
internal control over financial reporting that occurred during the
registrants most recent fiscal quarter (the registrants fourth fiscal
quarter in the case of an annual report) that has materially affected, or
is reasonably likely to materially affect, the registrants internal
control over financial reporting; and |
5. |
The registrants other certifying officer and I have
disclosed, based on our most recent evaluation of internal control over
financial reporting, to the registrants auditors and the audit committee
of the registrants board of directors (or persons performing the
equivalent functions): |
|
|
|
|
(a) |
All significant deficiencies and material weaknesses in
the design or operation of internal control over financial reporting which
are reasonably likely to adversely affect the registrants ability to
record, process, summarize and report financial information; and |
|
|
|
|
(b) |
Any fraud, whether or not material, that involves
management or other employees who have a significant role in the
registrants internal control over financial
reporting. |
August 18, 2015
/s/ Richard A.
Wright
Richard A. Wright
Vice-President, Secretary, Treasurer and Director
(Principal Financial
Officer and Principal Accounting Officer)
Exhibit 32.1
CERTIFICATION PURSUANT TO
SECTION 906 OF THE
SARBANES-OXLEY ACT OF 2002
The undersigned, Steven P. Nickolas, hereby certifies, pursuant
to Section 906 of the Sarbanes-Oxley Act of 2002, that
1. |
the quarterly report on Form 10-Q of The Alkaline Water
Company Inc. for the period ended June 30, 2015 fully complies with the
requirements of Section 13(a) or 15(d) of the Securities Exchange Act of
1934; and |
|
|
2. |
the information contained in the Form 10-Q fairly
presents, in all material respects, the financial condition and results of
operations of The Alkaline Water Company Inc. |
August 18, 2015
|
/s/
Steven P. Nickolas |
|
Steven P. Nickolas |
|
President, Chief Executive Officer and Director
|
|
(Principal Executive Officer)
|
Exhibit 32.2
CERTIFICATION PURSUANT TO
SECTION 906 OF THE
SARBANES-OXLEY ACT OF 2002
The undersigned, Richard A. Wright, hereby certifies, pursuant
to Section 906 of the Sarbanes-Oxley Act of 2002, that
1. |
the quarterly report on Form 10-Q of The Alkaline Water
Company Inc. for the period ended June 30, 2015 fully complies with the
requirements of Section 13(a) or 15(d) of the Securities Exchange Act of
1934; and |
|
|
2. |
the information contained in the Form 10-Q fairly
presents, in all material respects, the financial condition and results of
operations of The Alkaline Water Company Inc. |
August 18, 2015
|
/s/
Richard A. Wright |
|
Richard A. Wright |
|
Vice-President, Secretary, Treasurer and
Director |
|
(Principal Financial Officer and Principal
Accounting |
|
Officer) |
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