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 September 30, 2014
[ ] 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.
118,170,825 shares of common stock issued and outstanding
as of November 14, 2014.
1
THE ALKALINE WATER COMPANY INC.
QUARTERLY PERIOD ENDED
SEPTEMBER 30, 2014
Index to Report on Form 10-Q
2
PART I FINANCIAL INFORMATION
Item 1. Financial Statements
3
THE ALKALINE WATER COMPANY INC.
FORMERLY GLOBAL LINES INC.
CONSOLIDATED BALANCE
SHEETS
|
|
September 30, 2014 |
|
|
March 31, 2014 |
|
|
|
(Unaudited) |
|
|
|
|
ASSETS
|
|
|
|
|
|
|
Current assets: |
|
|
|
|
|
|
Cash |
$ |
400,483
|
|
$ |
2,665 |
|
Accounts receivable |
|
452,675 |
|
|
166,404 |
|
Inventory |
|
443,206 |
|
|
57,965 |
|
Prepaid Expenses and other current
assets |
|
9,804 |
|
|
- |
|
Deferred financing cost
|
|
8,500 |
|
|
54,288 |
|
|
|
|
|
|
|
|
Total current assets |
|
1,314,668 |
|
|
281,322 |
|
|
|
|
|
|
|
|
Fixed assets, net |
|
716,394 |
|
|
286,986 |
|
Equipment deposits - related party |
|
668,772 |
|
|
- |
|
|
|
|
|
|
|
|
Total assets |
$ |
2,699,834 |
|
$ |
568,308 |
|
|
|
|
|
|
|
|
LIABILITIES AND STOCKHOLDERS' DEFICIT |
|
|
|
|
|
|
Current liabilities: |
|
|
|
|
|
|
Accounts payable |
$ |
609,510 |
|
$ |
320,154 |
|
Accounts payable -
related party |
|
- |
|
|
18,403 |
|
Accrued expenses |
|
50,922 |
|
|
56,601 |
|
Accrued interest |
|
2,400 |
|
|
19,829 |
|
Revolving financing |
|
312,991 |
|
|
83,348 |
|
Current portion of
capital leases |
|
64,578 |
|
|
- |
|
Derivative liability |
|
165,949 |
|
|
337,988 |
|
|
|
|
|
|
|
|
Total current
liabilities |
|
1,206,350 |
|
|
836,323 |
|
|
|
|
|
|
|
|
Long-term liabilities |
|
|
|
|
|
|
Capitalize leases-
related party |
|
293,129 |
|
|
- |
|
Total Long-term
liabilities |
|
293,129 |
|
|
- |
|
|
|
|
|
|
|
|
Total
liabilities |
|
1,499,479 |
|
|
836,323 |
|
|
|
|
|
|
|
|
Redeemable convertible Preferred stock |
|
- |
|
|
83,820 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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, 114,931,026 and 81,602,175 shares
issued and outstanding as of September 30, 2014 and March 31, 2014,
respectively |
|
114,931 |
|
|
81,602 |
|
Additional paid in
capital |
|
10,292,594 |
|
|
4,059,464 |
|
Common stock issuable |
|
- |
|
|
- |
|
Deficit accumulated
during development stage |
|
(9,227,170 |
) |
|
(4,512,901 |
) |
|
|
|
|
|
|
|
Total stockholders' deficit |
$ |
1,200,355 |
|
$ |
(351,835 |
) |
|
|
|
|
|
|
|
Total liabilities and
stockholders' deficit |
$ |
2,699,834 |
|
$ |
568,308 |
|
See Accompanying Notes to Condensed Consolidated Financial
Statements.
F-1
THE ALKALINE WATER
COMPANY INC.
FORMERLY GLOBAL LINES
INC.
CONSOLIDATED STATEMENTS OF
OPERATIONS
(Unaudited)
|
|
For the three months |
|
|
For the three months |
|
|
For the period ended |
|
|
For the period ended |
|
|
|
ended |
|
|
ended |
|
|
|
|
|
|
|
|
|
September 30, 2014 |
|
|
September 30, 2013 |
|
|
September 30, 2014 |
|
|
September 30, 2013 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Revenue |
$ |
1,022,823
|
|
$ |
129,745
|
|
$ |
1,594,872
|
|
$ |
162,267
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cost of goods sold |
|
648,818 |
|
|
72,900 |
|
|
1,054,943 |
|
|
90,957 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gross profit |
|
374,005 |
|
|
56,845 |
|
|
539,929 |
|
|
71,310 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating expenses: |
|
|
|
|
|
|
|
|
|
|
|
|
Sales and marketing expenses |
|
415,973 |
|
|
104,229 |
|
|
642,753 |
|
|
188,422 |
|
General and
administrative |
|
2,284,084 |
|
|
408,723 |
|
|
4,422,837 |
|
|
476,232 |
|
General and administrative - related
party |
|
- |
|
|
22,246 |
|
|
- |
|
|
62,092 |
|
Depreciation expense
|
|
41,534 |
|
|
7,489 |
|
|
58,068 |
|
|
9,338 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total operating expenses |
|
2,741,591 |
|
|
542,687 |
|
|
5,123,658 |
|
|
736,084 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other Income (expenses): |
|
|
|
|
|
|
|
|
|
|
|
|
Interest expense |
|
(9,803 |
) |
|
- |
|
|
(12,326 |
) |
|
(3,555 |
) |
Interest expense on
redeemable preferred stock |
|
- |
|
|
- |
|
|
(40,383 |
) |
|
- |
|
Fees paid on credit line |
|
(11,485 |
) |
|
- |
|
|
(18,542 |
) |
|
- |
|
Amortization of debt
discount |
|
- |
|
|
- |
|
|
(414,370 |
) |
|
- |
|
Other expenses |
|
6 |
|
|
- |
|
|
(5 |
) |
|
- |
|
Loss on sales leaseback
|
|
20,773 |
|
|
- |
|
|
- |
|
|
|
|
Change in derivative liability |
|
91,035 |
|
|
- |
|
|
355,086 |
|
|
- |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total other expense
|
|
90,526 |
|
|
- |
|
|
(130,540 |
) |
|
(3,555 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
Net loss |
$ |
(2,277,060 |
) |
$ |
(485,842 |
) |
$ |
(4,714,269 |
) |
$ |
(668,329 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted average number of
common shares outstanding - basic |
|
107,731,694 |
|
|
77,500,000 |
|
|
100,877,507 |
|
|
78,758,117 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net loss per share - basic
|
$ |
(0 |
) |
$ |
(0.01 |
) |
$ |
(0.05 |
) |
$ |
(0.01 |
)
|
See Accompanying Notes to Condensed Consolidated Financial
Statements.
F-2
THE ALKALINE WATER COMPANY INC.
FORMERLY GLOBAL LINES INC.
CONSOLIDATED STATEMENTS OF
CASH FLOWS
(Unaudited)
|
|
For the six months |
|
|
For the six months |
|
|
|
ended |
|
|
ended |
|
|
|
September 30, 2014 |
|
|
September 30, 2013 |
|
|
|
|
|
|
|
|
CASH FLOWS FROM OPERATING
ACTIVITIES |
|
|
|
|
|
|
Net loss |
$ |
(4,714,269 |
) |
$ |
(668,329 |
) |
Adjustments to
reconcile net income |
|
|
|
|
|
|
to net cash used in operating
activities: |
|
|
|
|
|
|
Depreciation expense |
|
58,068 |
|
|
9,338 |
|
Interest expense
converted to common stock |
|
- |
|
|
3,555 |
|
Shares issued for services |
|
3,014,306 |
|
|
137,500 |
|
Amortization of
debt discount |
|
414,370 |
|
|
- |
|
Change in derivative liabilities |
|
(355,086 |
) |
|
- |
|
Changes in operating assets and
liabilities: |
|
|
|
|
|
|
Accounts
receivable |
|
(286,271 |
) |
|
(33,525 |
) |
Inventory |
|
(385,241 |
) |
|
(96,214 |
) |
Prepaid
expenses and other current assets |
|
(18,304 |
) |
|
(46,333 |
) |
Accounts payable |
|
291,176 |
|
|
65,852 |
|
Accounts
payable - related party |
|
(18,403 |
) |
|
- |
|
Accrued expenses |
|
(5,679 |
) |
|
12,762 |
|
Accrued
interest |
|
(17,429 |
) |
|
- |
|
|
|
|
|
|
|
|
Net cash used in
operating activities |
|
(2,022,762 |
) |
|
(615,394 |
) |
|
|
|
|
|
|
|
CASH FLOWS FROM INVESTING
ACTIVITIES |
|
|
|
|
|
|
Purchase of fixed assets |
|
(317,673 |
) |
|
(263,223 |
) |
Proceeds from
sale lease back |
|
208,773 |
|
|
- |
|
Equipment Deposits - related party |
|
(668,772 |
) |
|
(90,000 |
) |
|
|
|
|
|
|
|
Net cash used in investing activities
|
|
(777,672 |
) |
|
(353,223 |
) |
|
|
|
|
|
|
|
CASH FLOWS FROM FINANCING ACTIVITIES
|
|
|
|
|
|
|
Proceeds from notes
payable |
|
- |
|
|
75,000 |
|
Proceeds from revolving financing |
|
229,643 |
|
|
- |
|
Proceeds from sale of
common stock, net |
|
2,361,999 |
|
|
525,000 |
|
Proceeds from the exercise of warrants,
net |
|
874,650 |
|
|
- |
|
Proceeds from shares to
be issued |
|
- |
|
|
500,000 |
|
Repayment of capital lease |
|
(20,870 |
) |
|
- |
|
Repayment of redeemable
preferred shares |
|
(247,170 |
) |
|
- |
|
|
|
|
|
|
|
|
Net cash provided by
financing activities |
|
3,198,252 |
|
|
1,100,000 |
|
|
|
|
|
|
|
|
NET CHANGE IN CASH |
|
397,818 |
|
|
131,383 |
|
|
|
|
|
|
|
|
CASH AT BEGINNING OF PERIOD
|
|
2,665 |
|
|
64,607 |
|
|
|
|
|
|
|
|
CASH AT END OF PERIOD |
$ |
400,483 |
|
$ |
195,990 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
SUPPLEMENTAL INFORMATION: |
|
|
|
|
|
|
Interest paid |
$ |
- |
|
$ |
- |
|
Income taxes paid |
$ |
- |
|
$ |
- |
|
|
|
|
|
|
|
|
NON-CASH INVESTING AND FINANCING ACTIVITIES:
|
|
|
|
|
|
|
Debt converted to
common stock |
$ |
- |
|
$ |
229,870
|
|
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 |
|
389,710 |
|
|
- |
|
Fair value of
derivative liability at exercise |
|
150,566 |
|
|
- |
|
See Accompanying Notes to Condensed Consolidated Financial
Statements.
F-3
THE ALKALINE WATER COMPANY INC.
(FORMERLY GLOBAL LINES
INC.)
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(unaudited)
NOTE 1 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Basis of presentation
The interim 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 March 31, 2014 and notes thereto included in the Companys Annual
Report on Form 10-K dated June 30, 2014. 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 September 30, 2014, 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
September 30, 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 $400,483 and
$195,990 in cash and cash equivalents at September 30, 2014 and 2013,
respectively.
F-4
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 September 30, 2014 and March 31, 2014:
|
|
September
30 |
|
|
March 31
|
|
|
|
2014 |
|
|
2014 |
|
Trade receivables |
$ |
461,643
|
|
$ |
176,404
|
|
Less: Allowance for doubtful accounts |
|
(8,968 |
) |
|
(10,000 |
) |
Net accounts receivable |
$ |
452,675 |
|
$ |
166,404 |
|
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 September 30, 2014 and March 31 2014, inventory consisted of the following:
|
|
September
30 |
|
|
March 31
|
|
|
|
2014 |
|
|
2014 |
|
Raw materials |
$ |
398,258
|
|
$ |
24,022 |
|
Finished goods |
|
44,948 |
|
|
33,943 |
|
Total inventory |
$ |
443,206 |
|
$ |
57,965 |
|
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:
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.
F-5
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.
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 4 major customers that together account for 58%
(17%, 16%, 13% and 12%, respectively) of accounts receivable at September 30,
2014, and 3 customers that together account for 39% (15%, 13% and 11%,
respectively) of the total revenues earned for the six month period ended
September 30, 2014.
The Company has 3 vendors that accounted for 55% (19%, 19%, and
17%, respectively) of purchases for the six month period ended September 30,
2014.
F-6
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
In June 2014, the FASB issued ASU No. 2014-10, Development
Stage Entities (Topic 915): Elimination of Certain Financial Reporting
Requirements, Including an Amendment to Variable Interest Entities Guidance in
Topic 810, Consolidation. The amendments in this update remove the definition of
a development stage entity from the Master Glossary of the Accounting Standards
Codification, thereby removing the financial reporting distinction between
development stage entities and other reporting entities from GAAP. In addition,
the amendments eliminate the requirements for development stage entities to (1)
present inception to-date information in the statements of income, cash flows,
and shareholder equity, (2) label the financial statements as those of a
development stage entity, (3) disclose a description of the development stage
activities in which the entity is engaged, and (4) disclose in the first year in
which the entity is no longer a development stage that in prior years it had
been in the development stage. The Company early adopt ASU No. 2014-10 during
the second quarter of the year ended March 31, 2015.
In August 2014, the FASB issued ASU No. 2014-15, Presentation
of Financial Statements Going Concern (Subtopic 205-40), Disclosure of
Uncertainties about an Entitys Ability to Continue as a Going Concern.
Continuation of a reporting entity as a going concern is presumed as the basis
for preparing financial statements unless and until the entitys liquidation
becomes imminent. Preparation of financial statements under this presumption is
commonly referred to as the going concern basis of accounting. Currently, there
is no guidance under U.S. GAAP about managements responsibility to evaluate
whether there is substantial doubt about an entitys ability to continue as a
going concern or to provide related footnote disclosures. The amendments in this
Update provide that guidance. In doing so, the amendments should reduce
diversity in the timing and content of footnote disclosures. The amendments
require management to assess an entitys ability to continue as a going concern
by incorporating and expanding upon certain principles that are currently in
U.S. auditing standards. Specifically, the amendments (1) provide a definition
of the term substantial doubt, (2) require an evaluation every reporting period
including interim periods, (3) provide principles for considering the mitigating
effect of managements plans, (4) require certain disclosures when substantial
doubt is alleviated as a result of consideration of managements plans, (5)
require an express statement and other disclosures when substantial doubt is not
alleviated, and (6) require an assessment for a period of one year after the
date that the financial statements are issued (or available to be issued). For
the period ended September 30, 2014, management evaluated the Companys ability
to continue as a going concern and concluded that substantial doubt has not been
alleviated about the Companys ability to continue as a going concern. While the
Company continues to explore further significant sources of financing,
managements assessment was based on the uncertainty related to the amount and
nature of such financing over the next twelve months.
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 September 30, 2014 of
$(9,227,170). In addition, the Companys development activities since inception
have been financially sustained through debt and equity financing.
F-7
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:
|
|
September
|
|
|
March |
|
|
|
30, 2014
|
|
|
31, 2014
|
|
Machinery and Equipment |
$ |
372,375
|
|
$ |
273,597
|
|
Machinery under Capital Lease |
|
378,576 |
|
|
|
|
Office Equipment |
|
54,612 |
|
|
53,631 |
|
Leasehold Improvements |
|
13,120 |
|
|
3,979 |
|
Less: Accumulated
Depreciation |
|
(102,289 |
) |
|
(44,221 |
) |
Fixed Assets, net |
$ |
716,394 |
|
$ |
286,986 |
|
Depreciation expense for the periods ended September 30, 2014
and 2013 was $58,068 and $9,338, respectively.
NOTE 4 EQUIPMENT DEPOSITS RELATED PARTY
The Company paid deposits on equipment to Water Engineering
Solutions, LLC, a related party, 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 and August 22, 2014 $100,000. The Company received
equipment valued at $274,769 and reduced the deposit on equipment. As of
September 30, 2014, the total amount of deposits for equipment is $668,772. The
equipment is being manufactured by and under an exclusive manufacturing contract
from Water Engineering Solutions, LLC, 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. The Company 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.
F-8
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. On September 30, 2014 the
amount borrowed on this facility was $312,991.
NOTE 6 DERIVATIVE LIABILITY
On November 7, 2013, we sold to certain institutional investors
10% Series B Convertible Preferred Shares (Series B Preferred Stock) 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 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 $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.
F-9
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.
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 $982,945.50. 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:
F-10
|
|
Issuance Warrants
|
|
|
Placement agent
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:
|
|
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 September 30,
2014 is as follows:
|
|
Warrants (including placement agent) |
|
Stock price |
$ |
0.1081
|
|
Term (Years) |
|
4 to 5 |
|
Volatility |
|
223% |
|
Exercise prices |
$ |
0.55 to 0.125 |
|
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, 2013.
|
|
|
|
|
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
|
|
F-11
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, 2013.
|
|
|
|
|
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 September 30, 2014.
|
|
|
|
|
Fair Value Measurement at September 30,
2014 |
|
|
|
Carrying |
|
|
|
|
|
|
|
|
|
|
|
|
Value at |
|
|
|
|
|
|
|
|
|
|
|
|
September 30, 2014 |
|
|
Level 1 |
|
|
Level 2 |
|
|
Level 3 |
|
Liabilities: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Derivative convertible debt
liability |
$ |
- |
|
$ |
- |
|
$ |
- |
|
$ |
- |
|
Derivative warrant liability convertible
preferred stock |
$ |
29,928 |
|
$ |
- |
|
$ |
- |
|
$ |
29,928 |
|
Derivative warrants liability
on common stock issuance
including placement agent warrants |
$ |
136,020 |
|
$ |
- |
|
$ |
- |
|
$ |
136,020 |
|
Total derivative liability |
$ |
165,948 |
|
$ |
- |
|
$ |
- |
|
$ |
165,948 |
|
The Company analyzed the warrants and conversion feature under
ASC 815 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 September 30, 2014 was
$165,948 and the conversion feature liability was $0. At March 31, 2014 the fair
value of these warrant liabilities was $209,320 and the conversion feature
liability was $128,668. Changes in the derivative liability for the period ended
September 30, 2014 consist of:
|
|
Three Months |
|
|
|
Ended |
|
|
|
September 30, 2014 |
|
Derivative liability at March
31, 2014 |
$ |
337,998
|
|
Redemption of convertible preferred stock |
|
(56,098 |
) |
Warrants issued May 1, 2014
|
|
216,236 |
|
Placement agent warrants May 1, 2014 |
|
23,787 |
|
Exercise of Warrants August
21, 2014 |
|
(168,273 |
)
|
Issuance of warrants August 21, 2014 |
|
167,384 |
|
Change in derivative
liability mark to market |
|
(355,086 |
)
|
Derivative liability at September 30, 2014
|
$ |
165,948 |
|
NOTE 7 PREFERRED SHARES SUBJECT TO MANDATORY REDEMPTION
Redeemable 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.
F-12
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 September 30, 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.
NOTE 8 STOCKHOLDERS EQUITY
Preferred Stock
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 period ended September 30, 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.
F-13
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.
Sales of Registered Shares of Common Stock
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.
Sale of Restricted Shares of Common Stock
On October 8, 2013, the Company issued an aggregate of
1,250,000 shares of our common stock to three investors in a non-brokered
private placement, at a purchase price of $0.40 per share for gross proceeds of
$500,000. In addition, the Company issued 1,250,000 warrants with an exercise
price of $0.50 per share and 650,000 warrants with an exercise prices of $0.60
per share to a finder in connection with this private placement. Each unit
consisted of one share purchase warrant entitling the holder to purchase, for a
period of two years from issuance, one share of our common stock at an exercise
price of $0.50 per share and one-half of one share purchase warrant, with each
whole share purchase warrant entitling the holder to purchase, for a period of
two years from issuance, one share of our common stock at an exercise price of
$0.60 per share.
On May 31, 2013, the Company sold 1,312,500 units at $0.40 per
share for total cash of $525,000. Each unit consisted of one share of common
stock, one warrant which entitles the holder to purchase one share of common
stock for a period of 2 years with an exercise price of $0.50 per share, and 1/2
warrant which entitles the holder to purchase 1/2 share of common stock for a
period of 2 years with an exercise price of $0.60 per share.
On May 31, 2013, the Company converted principal amount of
$225,000 and accrued interest of $4,870 into 574,675 units at $0.40 per share
for total debt converted of $229,870. Each unit consisted of one share of common
stock, one warrant which entitles the holder to purchase one share of common
stock for a period of 2 years with an exercise price of $0.50 per share, and 1/2
warrant which entitles the holder to purchase 1/2 share of common stock for a
period of 2 years with an exercise price of $0.60 per share.
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.
F-14
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.
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 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.
Exercise of Options
On September 30, 2014 an option holder exercised their 182,000
options with an exercise price of $0.01 per option share partial settlement of
their accounts payable.
Exercise of Warrants
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.
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. Simultaneously the
Company issued 9,829,455 new warrants with a term of 5 years and exercise price
of $0.125 per warrant share. Pursuant to the agreement 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 10% of the
aggregate gross proceeds from the offering, or $98,295, and a non-accountable
expense allowance of $10,000. The Company record this issuance, net of the fees
paid as Additional-Paid-In-Capital.
F-15
NOTE 9 OPTIONS AND WARRANTS
Stock Option Awards
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 September 30, 2014, 116,250 stock options vest on September 30,
2014 and 85,000 stock options vest on December 31, 2014.
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
September 30, 2014, 62,500 stock options vest on September 30, 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 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 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.
For the period ended September 30, 2014 and September 30, 2013
the Company has recognized compensation expense of $2,198,838 and $0,
respectively, on the stock options granted that vested. The fair value of the
unvested shares is $19,751 as of September 30, 2014 with the total unrecognized
compensation cost related to non-vested stock options which is expected to be
recognized over a weighted-average period of approximately 1 year. The aggregate
intrinsic value of these options was $0 at September 30, 2014.
Stock option activity summary covering options is presented in
the table below:
|
|
|
|
|
|
|
|
Weighted- |
|
|
|
|
|
|
Weighted- |
|
|
Average |
|
|
|
|
|
|
Average |
|
|
Remaining |
|
|
|
Number of |
|
|
Exercise |
|
|
Contractual |
|
|
|
Shares |
|
|
Price |
|
|
Term (years) |
|
Outstanding at March 31, 2014
|
|
6,000,000 |
|
$ |
0.61 |
|
|
9.3 |
|
Granted |
|
8,452,000 |
|
$ |
0.15 |
|
|
9.6 |
|
Exercised |
|
(182,000 |
) |
$ |
0.01. |
|
|
10.0 |
|
Expired/Forfeited |
|
- |
|
$ |
- |
|
|
- |
|
Outstanding at September 30,
2014 |
|
14,270,000 |
|
$ |
0.34 |
|
|
9.6 |
|
Exercisable at September 30, 2014 |
|
10,122,500 |
|
$ |
0.34 |
|
|
9.6 |
|
F-16
Warrants
The following is a summary of the status of all of our warrants
as of September 30, 2014 and changes during the six months ended on that
date:
|
|
|
|
|
Weighted- |
|
|
|
Number |
|
|
Average |
|
|
|
of Warrants
|
|
|
Exercise Price
|
|
Outstanding at March 31, 2014
|
|
8,310,415 |
|
$ |
0.53 |
|
Granted |
|
19,449,453 |
|
|
0.14 |
|
Exercised |
|
(9,829,456 |
) |
|
0.10 |
|
Cancelled |
|
- |
|
|
0.00 |
|
Outstanding at September 30,
2014 |
|
17,930,412 |
|
|
0.26 |
|
Warrants exercisable at September 30, 2014
|
|
16,767,621 |
|
$ |
0.26 |
|
The following table summarizes information about stock warrants
outstanding and exercisable at September 30, 2014:
|
|
STOCK WARRANTS OUTSTANDING AND EXERCISABLE
|
|
|
|
|
|
|
Weighted- |
|
|
|
|
|
|
Average |
|
|
|
Number of |
|
|
Remaining |
|
|
|
Warrants |
|
|
Contractual |
|
Exercise Price |
|
Outstanding |
|
|
Life in Years |
|
$ 0.12500 |
|
9,829,455 |
|
|
4.9 |
|
$ 0.1875 |
|
953,333 |
|
|
4.6 |
|
$ 02500 |
|
2,325,582 |
|
|
0.1 |
|
$ 0.5000 |
|
3,137,175 |
|
|
0.8 |
|
$ 0.5500 |
|
116,279 |
|
|
0.8 |
|
$ 0.6000 |
|
1,568,588 |
|
|
2.7 |
|
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.
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. Simultaneously the
Company issued 9,829,455 new warrants with a term of 5 years and exercise price
of $0.125 per warrant share. The Company record this issuance as
Additional-Paid-In-Capital.
NOTE 10 RELATED PARTY TRANSACTIONS
On October 8, 2013, the Company issued a total of 20,000,000
shares of non-convertible Series A Preferred Stock to Steven A. Nickolas 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 period ended September 30, 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.
F-17
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.
On January 17, 2014, amended on February 12, 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 $3,864 per month.
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 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.
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.
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 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 and August
22, 2014 $100,000. The Company received equipment valued at $278,769 and reduce
the deposit on equipment. Water Engineering Solutions, LLC, an entity that is
controlled and majority owned by Steven P. Nickolas and Richard A. Wright, for
the production of our alkaline water.
NOTE 11 - SALES LEASEBACK
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 acquired in August 2013. Under the terms of
the sale leaseback agreement, the Company received proceeds of $188,000 in April
2014 and reduced installation cost in the period July 1, 2014 through September
30, 2014 of $20,773.
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, we 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.
NOTE 13 SUBSEQUENT EVENTS
On October 7, 2014, the Company entered into a warrant
amendment agreement (the Warrant Amendment Agreement) with a holder of certain
existing outstanding common stock purchase warrants (the Existing 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 Holder and the Holder is to be issued new common stock purchase
warrants of the company (the New Warrants) in the form of the Existing
Warrants to purchase up to a number of shares of our common stock equal to the
number of Existing Warrants exercised by the Holder, provided that the exercise
price of the New Warrants will be $0.125 per share, subject to adjustment in the
New Warrants.
F-18
On October 7, 2014, pursuant to the Warrant Amendment
Agreement, the Company issued an aggregate of 4,699,800 shares of our common
stock upon exercise of the Existing Warrants at an exercise price of $0.10 per
share for aggregate gross proceeds of $469,980. In addition, the Company issued
New Warrants to purchase an aggregate of 4,699,800 shares of our common stock at
an exercise price of $0.125 per share for a period of two years from the date of
issuance.
Effective as of October 28, 2014, we 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, we paid the Lessor a one-time
non-refundable commitment fee of $12,000. Effective as of October 28, 2014, we
also entered into a warrant agreement with the Lessor, pursuant to which we
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 October 28, 2014 and the
remaining 270,000 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 draws on 90% or more of the total lease line
under the master lease agreement, then all such shares will be deemed to be
vested. We issued the warrant to an accredited investor. The issuance the
warrant was exempt from registration pursuant to Section 4(a)(2) of the
Securities Act of 1933 and Rule 506 promulgated thereunder.
On October 31, 2014, the Company amended its 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 Steven P. Nickolas and Richard
A. Wright, our directors and executive officers, to $0.15 per share as noted
below:
Name of Optionee |
Grant Date |
Old Exercise Price per
Share |
New Exercise
Price per
Share |
Expiration Date |
Number of Stock
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 |
F-19
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. |
Throughout this Quarterly Report references to we, our,
us, Alkaline, the Company, and similar terms refer to The Alkaline Water
Company Inc.
Results of Operations
Our results of operations for the three months ended September
30, 2014 and September 30, 2013 and the six months ended September 30, 2014 and
September 30, 2013 are as follows:
|
|
For the three |
|
|
For the three |
|
|
For the six |
|
|
For the six |
|
|
|
months ended |
|
|
months ended |
|
|
months ended |
|
|
months ended |
|
|
|
September 30, |
|
|
September 30, |
|
|
September 30, |
|
|
September 30, |
|
|
|
2014 |
|
|
2013 |
|
|
2014 |
|
|
2013 |
|
Revenue |
$ |
1,022,823
|
|
$ |
129,745
|
|
$ |
1,594,872
|
|
$ |
162,267
|
|
Cost of goods sold |
|
648,848 |
|
|
72,900 |
|
|
1,054,943 |
|
|
90,957 |
|
Gross profit |
|
374,005 |
|
|
56,845 |
|
|
539,929 |
|
|
71,310 |
|
Net loss (after operating |
|
|
|
|
|
|
|
|
|
|
|
|
expenses and other expenses)
|
$ |
(2,277,060 |
) |
$ |
(485,842 |
) |
$ |
(4,714,269 |
) |
$ |
(668,329 |
)
|
4
Revenue and Cost of Goods Sold
We had revenue from sales of our product for the three months
ended September 30, 2014 of $1,022,823, as compared to $129,745 for the three
month period ended September 30, 2013. The increase in sales is due to the
expanded distribution of our products to additional retailers throughout the
country. Cost of goods sold is comprised of production costs, shipping and
handling costs.
We had revenue from sales of our product for the six months
ended September 30, 2014 of $1,594,872, as compared to $162,267 for the six
month period ended September 30, 2013, generated by sales of our beverage
products. Cost of goods sold is comprised of production costs, shipping and
handling costs. For the six months ended September 30, 2014, we had cost of
goods sold of $1,054,943 as compared to $90,957 in cost of goods sold for the
comparable period.
Expenses
Our operating expenses for the three months ended September 30,
2014, the three months ended September 30, 2013, the six month period ended
September 30, 2014 and the six month period ended September 30, 2013 are as
follows:
|
|
For the three |
|
|
For the three |
|
|
For the six |
|
|
For the six |
|
|
|
months ended |
|
|
months ended |
|
|
months ended |
|
|
months ended |
|
|
|
September 30, |
|
|
September 30, |
|
|
September 30, |
|
|
September 30, |
|
|
|
2014 |
|
|
2013 |
|
|
2014 |
|
|
2013 |
|
Sales and marketing expenses
|
$ |
415,973
|
|
$ |
104,229
|
|
$ |
642,733
|
|
$ |
188,422
|
|
General and administrative expenses |
|
2,284,084 |
|
|
408,723 |
|
|
4,422,837 |
|
|
476,232 |
|
General and administrative
expenses related party |
|
- |
|
|
22,246 |
|
|
- |
|
|
62,092 |
|
Depreciation expenses |
|
41,534 |
|
|
7,489 |
|
|
58,068 |
|
|
9,338 |
|
Total operating expenses |
$ |
2,741,591 |
|
$ |
542,687 |
|
$ |
5,123,658 |
|
$ |
736,084 |
|
During the three months ended September 30, 2014 and September
30, 2013, we had a total of $2,284,084 and $408,723 respectively, in general and
administrative expenses. The primary factor in the increase which is included in
general and administrative expense was the fair value of shares and options of
$991,961 and $0 for the three months ended September 30, 2014 and 2013,
respectively. Administrative expense with related parties was $0 and $22,246 for
the three month periods ended September 30, 2014 and 2013, respectively.
During the six months ended September 30, 2014 and September
30, 2013, we had a total of $4,422,837 and $476,232 respectively, in general and
administrative expenses. The primary factor in the increase which is included in
general and administrative expense was the fair value of shares and options of
$2,198,838 and $0 for the three months ended September 30, 2014 and 2013,
respectively. Administrative expense with related parties was $0 and $62,092 for
the three month periods ended September 30, 2014 and 2013, respectively.
Liquidity and Capital Resources
Working Capital
Our working capital as of September 30, 2014 and March 31, 2014
was as follows:
|
|
September 30, 2014 |
|
|
March 31, 2014 |
|
Current assets |
$ |
1,314,668 |
|
$ |
281,322 |
|
Current liabilities |
|
1,206,350 |
|
|
836,323 |
|
Working capital |
$ |
108,318 |
|
$ |
(555,001 |
) |
5
Current Assets
Current assets as of September 30, 2014 primarily relate to
$400,483 in cash, $452,675 in accounts receivable and $443,206 in inventory.
Current assets as of March 31, 2014 primarily relate to $2,665 in cash, $166,404
in accounts receivable and $57,965 in inventory.
Current Liabilities
Current liabilities as at September 30, 2014 primarily relate
$609,510 in accounts payable and $165,949 in derivative liability. Current
liabilities at March 31, 2014 primarily relate to $320,154 in accounts payable
and $337,988 in derivative liability.
Cash Flow
Our cash flows for the three months ended September 30, 2014
and 2013 are as follows:
|
|
Six months ended |
|
|
Six months ended |
|
|
|
September 30, 2014 |
|
|
September 30, 2013 |
|
Net cash used in operating
activities |
$ |
(2,022,762 |
) |
$ |
(615,394 |
) |
Net cash used in investing activities |
|
(777,672 |
) |
|
(353,223 |
) |
Net cash provided by
financing activities |
|
3,198,252 |
|
|
1,100,000 |
|
Net increase in cash and cash equivalents |
$ |
397,818 |
|
$ |
131,383 |
|
Operating activities
Net cash used in operating activities was $2,022,762 for the
six months ended September 30, 2014, as compared to $615,394 used in operating
activities for the six months ended September 30, 2013. The increase in net cash
used in operating activities was primarily due to net loss from operations and
increase in inventory.
Investing activities
Net cash used in investing activities was $777,672 for the six
months ended September 30, 2014, as compared to $353,223 used in investing
activities for the six months ended September 30, 2013. The increase in net cash
used by investing activities was primarily from the equipment deposits to
related parties.
Financing activities
Net cash provided by financing activities for the six months
ended September 30, 2014 was $3,198,252, as compared to $1,100,000 for the six
months ended September 30, 2013. The increase of net cash provided by financing
activities was mainly attributable to capital provided through sales of our
common stock.
August 2014 Warrant Exercise
On August 12, 2014, we entered into an agreement with
Wainwright whereby Wainwright agreed to act as our exclusive agent to facilitate
the exercise of the outstanding warrants on a reasonable best efforts basis. We
agreed to pay Wainwright a transaction fee equal to 10% of the aggregate gross
proceeds received by us in connection with the exercise of the warrants. In
addition, we agreed to reimburse Wainwright $10,000 for its legal fees and
expenses, provided that no reimbursement will be payable by us to Wainwright if
the exercise of the warrants results in gross proceeds to us of less than
$500,000.
On August 20, 2014, we entered into a warrant amendment
agreement with certain holders of our outstanding common stock purchase
warrants, whereby we 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 were to be issued new common
stock purchase warrants of our 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.
6
On August 21, 2014, pursuant to the warrant amendment
agreement, we issued an aggregate of 9,829,455 shares of our common stock upon
exercise of the existing warrants at an exercise price of $0.10 per share for
aggregate gross proceeds of $982,945.50. In addition, we issued new warrants to
purchase an aggregate of 9,829,455 shares of our common stock at an exercise
price of $0.125 per share for a period of five years from the date of
issuance.
October 2014 Warrant Exercise
On October 7, 2014, we entered into a warrant amendment
agreement with Neil William Rogers, whereby we agreed to reduce the exercise
price of the 4,699,800 share purchase warrants held by him to $0.10 per share in
consideration for the immediate exercise of the existing warrants by Mr. Rogers
and Mr. Rogers was to be issued new common stock purchase warrants of our
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
Mr. Rogers, provided that the exercise price of the new warrants will be $0.125
per share, subject to adjustment in the new warrants.
On October 7, 2014, pursuant to the warrant amendment
agreement, we issued an aggregate of 4,699,800 shares of our common stock upon
exercise of the existing warrants at an exercise price of $0.10 per share for
aggregate gross proceeds of $469,980. In addition, we issued new warrants to
purchase an aggregate of 4,699,800 shares of our common stock at an exercise
price of $0.125 per share for a period of two years from the date of
issuance.
Revolving Accounts Receivable Funding Agreement with
Gibraltar Business Capital, LLC
On February 20, 2014, our company, The Alkaline Water Company
Inc., and our 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, we
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.
We 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 (as defined below) 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, we
agreed to pay Gibraltar interest on the 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 owing 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) 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, we 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. We 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 to us,
which amount will be deducted from the first cash advances.
The Initial Indebtedness is $500,000. We may request an
increase to the Initial Indebtedness in $500,000 increments up to $5,000,000,
subject to our financial performance and/or projections are satisfactory to
Gibraltar, and absent an event of default.
7
We 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.
On February 20, 2014, Gibraltar made the first cash advance in
the amount of $32,645.48. On September 30, 2014, the amount borrowed on this
facility was $129,486.
Lease Line of Credit Financing
Effective as of October 28, 2014, we 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 addition, because the Lessor from time to time may be
required to fund various deposits and/or partial funding for the equipment that
will be placed under the lease line of credit, we are expected to pay a daily
rental equal to 1/30th of the monthly lease rental payment pro-rated to the
amount funded by the Lessor from the initial funding (deposit) to the initial
term start date of the specific lease schedule associated with the equipment
funded. A prepayment of any lease schedule is subject to all applicable state
and federal tax law requirements and a 5% penalty will be assessed to the then
remaining lease payments.
So long as no default has occurred, we have the option to (i)
purchase all but not less than all of the equipment under this master lease for
the then fair market value (which will not exceed 25% of the Lessors capital
costs); (ii) extend the lease term for a minimum of 12 months at the then
renewal lease rate factor not to exceed the current monthly lease rental; or
(iii) return all but not less than all of the equipment at the conclusion of the
lease term along with a 5% re-stocking fee.
In connection with the entering into the master lease
agreement, we paid the Lessor a one-time non-refundable commitment fee of
$12,000.
Effective as of October 28, 2014, we also entered into a
warrant agreement with the Lessor, pursuant to which we 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 October 28, 2014 and the remaining 270,000
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 draws on 90% or more of the total lease line under the master lease
agreement, then all such shares will be deemed to be vested. We issued the
warrant to an accredited investor. The issuance the warrant was exempt from
registration pursuant to Section 4(a)(2) of the Securities Act of 1933 and Rule
506 promulgated thereunder.
Effective as of October 28, 2014, we also entered into a
registration rights agreement with the Lessor, pursuant to which we gave
piggyback registration right to the Lessor. Subject to certain limitations, each
time that we propose to register a public offering solely of our common stock,
other than pursuant to a registration statement on Form S-4 or Form S-8, we
agreed to offer the Lessor the right to request inclusion of 3,600,000 shares
underlying the warrant issued under the warrant agreement with the Lessor, if
such shares are not eligible for sale under Rule 144 promulgated under the
Securities Act of 1933, and use our best efforts to cause such shares to be
registered.
8
Cash Requirements
We believe that our cash flows 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 months will be $1,100,000 to
$4,100,000, depending on how we can continue to expand the distribution of our
products across the country. We will require additional cash resources to
purchase equipment, increase the production of our products, implement our
strategy to expand our sales and marketing initiatives and increase brand
awareness. If our own financial resources and then current 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 did not have any 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 investors.
Item 3. Quantitative and Qualitative Disclosures About
Market Risk
This item is not applicable as we are currently considered a
smaller reporting company.
Item 4. Controls and Procedures
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 September 30, 2014 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.
9
Item 1A. Risk Factors.
Information regarding risk factors appears in our Annual Report
on Form 10-K filed on June 30, 2014. There have been no material changes since
June 30, 2014 from the risk factors disclosed in that Form 10-K.
Item 2. Unregistered Sales of Equity Securities and Use of
Proceeds.
None.
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) |
(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)
|
10
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)
|
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) |
11
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) |
(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.
12
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: November 14, 2014 |
By: |
/s/ Steven P. Nickolas |
|
|
Steven P. Nickolas |
|
|
President, Chief Executive Officer and Director
|
|
|
(Principal Executive Officer) |
|
|
|
|
|
|
|
|
|
|
|
|
Date: November 14, 2014 |
By: |
/s/ Richard A. Wright |
|
|
Richard A. Wright |
|
|
Vice-President, Secretary, Treasurer and
Director |
|
|
(Principal Financial Officer and Principal
Accounting |
|
|
Officer) |
13
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.; |
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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; |
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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; |
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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: |
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|
(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; |
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(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; |
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|
(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 |
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(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): |
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(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 |
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|
(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. |
November 14, 2014
/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. |
November 14, 2014
/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 September 30, 2014 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. |
November 14, 2014
|
/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 September 30, 2014 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. |
November 14, 2014
|
/s/
Richard A. Wright |
|
Richard A. Wright |
|
Vice-President, Secretary, Treasurer and
Director |
|
(Principal Financial Officer and Principal
Accounting |
|
Officer) |
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