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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended June 30, 2023

[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

Commission File Number: 001-38754

THE ALKALINE WATER COMPANY INC.
(Exact name of registrant as specified in its charter)

Nevada 99-0367049
(State or other jurisdiction of incorporation or
organization)
(I.R.S. Employer Identification No.)
 
8541 E. Anderson Drive, Suite 100, Scottsdale, AZ 85255
(Address of principal executive offices) (Zip Code)

(480) 656-2423
(Registrant's telephone number, including area code)

Not Applicable
(Former name, former address and former fiscal year, if changed since last report)

Securities registered pursuant to Section 12(b) of the Act

Title of Each Class Trading Symbol(s) Name of each exchange on which registered
     
Common stock, par value $0.001 per share WTER The Nasdaq Stock Market LLC

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 every Interactive Data File required to be submitted 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 such files).


Yes [X] No [ ]

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of "large accelerated filer," "accelerated filer," "smaller reporting company," and "emerging growth company" in Rule 12b-2 of the Exchange Act.

Large accelerated filer [ ] Accelerated filer [ ]
Non-accelerated filer [X] Smaller reporting company [X]
  Emerging growth company [ ]

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. [ ]

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 issuer's classes of common stock, as of the latest practicable date.

10,895,805 shares of common stock issued and outstanding as of September 21, 2023.


PART I - FINANCIAL INFORMATION

Item 1. Financial Statements

 


THE ALKALINE WATER COMPANY INC.
CONSOLIDATED BALANCE SHEETS
(unaudited)

    June 30, 2023     March 31, 2023  
ASSETS            
Current assets            
Cash $ 414,648   $ 1,038,754  
Accounts receivable, net   5,059,617     6,520,232  
Inventory   5,544,390     5,591,351  
Prepaid expenses   2,285,188     2,679,274  
Operating lease right-of-use asset - current portion   80,289     122,114  
             
Total current assets   13,384,132     15,951,725  
             
Fixed assets - net   1,804,617     2,058,132  
Operating lease right-of-use asset   15,184     20,246  
             
Total assets $ 15,203,933   $ 18,030,103  
             
LIABILITIES AND STOCKHOLDERS' DEFICIT            
Current liabilities            
Accounts payable $ 12,609,187   $ 11,616,247  
Accrued expenses   2,406,839     1,996,387  
Revolving financing   6,188,332     6,403,447  
Notes payable, short-term   1,967,661     3,192,313  
Operating lease liability - current portion   89,916     136,214  
             
             
Total current liabilities   23,261,935     23,344,608  
             
Operating lease liability   16,812     22,223  
             
Total liabilities   23,278,747     23,366,831  
             
Commitments and contingencies (Note 8)        
             
Stockholders' deficit            
Preferred stock, $0.001 par value, 100,000,000 shares authorized, 100,000 Series E issued and outstanding on June 30, 2023 and 600,000 Series E issued and outstanding on March 31, 2023 and nil Series S issued and outstanding on June 30, 2023 and 2,227,030 Seires S issued and outstanding on March 31, 2023   100     2,827  
Common stock, Class A - $0.001 par value, 13,333,333 shares authorized 10,395,805 and 10,005,379 shares issued and outstanding at June 30, 2023 and March 31, 2023, respectively   10,395     10,005  
Discount on Preferred Stock   (8,010 )   (76,898 )
Additional paid in capital   131,912,605     131,805,916  
Accumulated deficit   (139,989,904 )   (137,078,578 )
             
             
Total stockholders' deficit   (8,074,814 )   (5,336,728 )
             
Total liabilities and stockholders' deficit $ 15,203,933   $ 18,030,103  

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


THE ALKALINE WATER COMPANY INC.
CONSOLIDATED STATEMENT OF OPERATIONS
(unaudited)

    For the Three Months  
    June 30, 2023     June 30, 2022  
Net Revenue $ 14,933,785   $ 16,318,786  
             
Cost of Goods Sold   11,162,216     13,399,774  
             
Gross Profit   3,771,569     2,919,012  
             
Operating expenses            
Sales and marketing expenses   4,614,499     6,346,229  
General and administrative   1,574,240     2,863,993  
             
Total operating expenses   6,188,739     9,210,222  
             
Total operating loss   (2,417,170 )   (6,291,210 )
             
Other (income) expense            
Interest expense   (423,768 )   (1,202,198 )
             
Total other (income) expense   (423,768 )   (1,202,198 )
             
Net loss $ (2,840,938 ) $ (7,493,408 )
             
LOSS PER SHARE (Basic and Diluted) $ (0.28 ) $ (0.96 )
             
WEIGHTED AVERAGE SHARES OUTSTANDING (Basic and Diluted)   10,293,276     7,844,653  

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


THE ALKALINE WATER COMPANY
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
(unaudited)

    Preferred Stock     Common Stock   Additional     Discount of       Accumulated        
    Number   Par Value     Number   Par Value   Paid-in Capital     Preferred E   Stock Payable   Deficit   Total  
                                                     
Balance, March 31, 2022   4,453,970   $ 4,454     7,371,454   $ 7,371   $ 109,967,281   $ -   $ (62,388 ) $ (109,515,580 ) $ 401,138  
                                                       
Common shares issued in connection with offerings               605,572     606     5,205,598           62,388           5,268,592  
                                                       
Stock option exercise               1,130     1     (1 )                     -  
                                                       
Preferred stock conversion to common stock and vesting of endorsement shares   (2,226,940 )   (2,227 )   148,469     148     2,229,109                       2,227,030  
                                                       
Stock option and RSU-related stock compensation expense              

14,778

    15     222,002                       222,017  
                                                       
Net (loss)                                             (7,493,408 )   (7,493,408 )
                                                       
Balance, June 30, 2022   2,227,030   $ 2,227     8,141,403   $ 8,141   $ 117,623,989   $ -   $ -   $ (117,008,988 ) $ 625,369  
                                                       
                                                       
Balance, March 31, 2023   2,827,030   $ 2,827     10,005,379   $ 10,005   $ 131,805,916   $ (76,898 ) $ -   $ (137,078,578 ) $ (5,336,728 )
                                                       
Preferred stock conversion to common stock and vesting of endorsement shares   (2,227,030 )   (2,227 )   148,469     148     558,837                       556,758  
                                                       
Preferred stock series e conversion to common stock   (500,000 )   (500 )   133,333     133     367                       -  
                                                       
Preferred stock series e issuance of dividend in shares               4,598     5     11,078                       11,083  
                                                       
Preferred stock series e amortization of discount                                 68,888           (68,888 )   -  
                                                       
Preferred stock series e dividend accrual                                             (1,500 )   (1,500 )
                                                       
Stock option and RSU-related compensation expense and common shares issued upon conversion of RSUs, net of forfeited stock options               61,438     61     (463,550 )                     (463,489 )
                                                       
Common shares issues in connection with reverse stock split               42,588     43     (43 )                     -  
                                                       
Net (loss)                                             (2,840,938 )   (2,840,938 )
                                                       
Balance, June 30, 2023   100,000   $ 100     10,395,805   $ 10,395   $ 131,912,605   $ (8,010 ) $ -   $ (139,989,904 ) $ (8,074,814 )

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


THE ALKALINE WATER COMPANY INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(unaudited)

    For the Three Months  
    June 30, 2023   June 30, 2022  
CASH FLOWS FROM OPERATING ACTIVITIES            
  Net loss $ (2,840,938 ) $ (7,493,408 )
               
  Adjustments to reconcile net loss to net cash used in operating activities            
  Depreciation expense   253,515     187,432  
  Shares issued and vested, options and RSU expensed for employee and non-employee services   93,269     2,449,047  
  Amortization of debt discount   -     935,102  
  Non-cash interest expense   -     49,710  
  Non-cash lease expense   (4,822 )   (275 )
  Changes in operating assets and liabilities:            
  Accounts receivable   1,460,615     (495,350 )
  Inventory   46,961     (2,094,675 )
  Prepaid expenses and other current assets   394,086     (1,434,887 )
  Accounts payable   992,940     1,492,615  
  Accrued expenses   420,035     3,910,039  
  Note payable, short-term   (1,224,652 )   -  
               
  NET CASH USED IN OPERATING ACTIVITIES   (408,991 )   (2,494,650 )
               
CASH FLOWS FROM INVESTING ACTIVITIES            
  Purchase of fixed assets   -     (854,997 )
               
               
  CASH USED IN INVESTING ACTIVITIES   -     (854,997 )
               
CASH FLOWS FROM FINANCING ACTIVITIES            
  Proceeds from (repayment of) revolving financing, net   (215,115 )   (504,083 )
  Proceeds from sale of common stock, net   -     5,268,592  
               
  CASH PROVIDED BY FINANCING ACTIVITIES   (215,115 )   4,764,509  
               
NET CHANGE IN CASH   (624,106 )   1,414,862  
               
CASH AT BEGINNING OF PERIOD   1,038,754     1,531,062  
               
CASH AT END OF PERIOD $ 414,648   $ 2,945,924  
               
INTEREST PAID $ 423,768   $ 215,164  
               
TAXES PAID $ -   $ -  

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


THE ALKALINE WATER COMPANY INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(unaudited)

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

Basis of presentation - The accompanying unaudited financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America ("GAAP") and the rules of the Securities and Exchange Commission. Certain information and note disclosures normally included in annual financial statements prepared in accordance with GAAP have been condensed or omitted pursuant to those rules and regulations. The March 31, 2023 balance sheet was derived from audited financial statements. The financial statements include adjustments consisting of normal recurring items, which, in the opinion of management, are necessary for a fair presentation of the financial position of the Company and its results of operations for the interim dates and periods set forth herein. The results for any of the interim periods are not necessarily indicative of the results to be expected for the full year or any other period. This Quarterly Report on Form 10-Q should be read in conjunction with the Company's Annual Report on Form 10-K for the year ended March 31, 2023.

Nature of Business

The Company offers retail consumers bottled alkaline water in 500-milliliter, 700-milliliter, 1-liter, 1.5 -liter, 2,-liter, 3-liter and 1-gallon sizes, all of which is produced through an electrolysis process that uses specialized electronic cells coated with a variety of rare earth minerals to produce 8.8 pH drinking water without the use of any manmade chemicals. The Company also sells a line of Alkaline88® Sports Drinks.

Principles of consolidation

The consolidated financial statements include the accounts of The Alkaline Water Company Inc. (a Nevada Corporation) and its wholly owned subsidiary, Alkaline 88, LLC (an Arizona Limited Liability Company). All significant intercompany balances and transactions have been eliminated. The Alkaline Water Company Inc. and Alkaline 88, LLC will be collectively referred herein to as the "Company". Any reference herein to "The Alkaline Water Company Inc.", the "Company", "we", "our" or "us" is intended to mean The Alkaline Water Company Inc., including its Alkaline 88, LLC subsidiary 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.

Stock Split

Effective April 5, 2023, we effected a fifteen for one reverse stock split of our authorized and issued and outstanding shares of common stock. As a result, our authorized common stock has decreased from 200,000,000 shares of common stock, with a par value of $0.001 per share, to 13,333,333 shares of common stock, with a par value of $0.001 per share, and the number of our issued and outstanding shares of common stock has decreased from approximately 152,149,661 to approximately 10,185,898. Any fractional shares resulting from the reverse stock split will be rounded up to the next nearest whole number. Our authorized preferred stock was not affected by the reverse stock split and continues to be 100,000,000 shares of preferred stock, with a par value of $0.001 per share. (See Note 5 - Common Stock.)


Accounts Receivable and Allowance for Doubtful Accounts

The Company generally does not require collateral, and the majority of its trade receivables are unsecured. The carrying amount for accounts receivable approximates fair value.

Accounts receivable consisted of the following as of June 30, 2023 and March 31, 2023:

    June 30, 2023     March 31, 2023  
Trade receivables, net $ 6,314,617   $ 7,775,232  
Less: Allowance for doubtful accounts   (1,255,000 )   (1,255,000 )
Net accounts receivable $ 5,059,617   $ 6,520,232  

Accounts receivable are periodically evaluated for collectability based on past credit history with clients. Provisions for losses on accounts receivable are determined on the basis of loss experience, known and inherent risk in the account balance and current economic conditions. The accounts receivable balance is pledged as collateral for the Company's revolving financing as disclosed in Note 4.

Inventory

Inventory represents raw materials and finished goods valued at the lower of cost or market with cost determined using the weight average method which approximates first-in first-out method, and with market defined as the lower of replacement cost or realizable value. The inventory balance is pledged as collateral for the Company's revolving financing as disclosed in Note 4.

As of June 30, 2023 and March 31, 2023, inventory consisted of the following:

    June 30, 2023     March 31, 2023  
Raw materials $ 3,405,609   $ 3,661,144  
Finished goods   2,138,781     1,930,207  
Total inventory $ 5,544,390   $ 5,591,351  
 

Revenue Recognition

We recognize revenue when our performance obligations are satisfied. Our primary performance obligation (the distribution and sale of beverage products) is satisfied upon the delivery of products to our customers, which is also when control is transferred. The Company does not accept returns due to the nature of the product. However, the Company will provide credit to our customers for damaged goods. The Company provides credit to its customers which typically requires payment within 30 days. As an incentive to pay early the Company also typically provides a 2% discount if the customer pays within 10 days. The Company estimates the amount of the discount that the customer is likely to take and records it as reduction in revenue. The amounts are not considered material. The Company's bottled water product represents substantially all revenue for all periods presented.

Revenue consists of the gross sales price, less variable consideration, including estimated allowances for which provisions are made at the time of sale, and less certain other discounts and allowances. Shipping and handling charges that are billed to customers are included as a component of revenue. Costs incurred by the Company for shipping and handling charges are included in selling expenses and amounted to $3,104,780 and $3,813,376 (which are not included in revenue) for the quarter ended June 30, 2023 and 2022, respectively.

Promotional and other allowances (variable consideration) recorded as a reduction to net sales, primarily include consideration given to the Company's retail customers or distributors including, but not limited to the following: (a) discounts granted off list prices to support price promotions to end-consumers by retailers; (b) discounts to the Company's distributors for agreed portions of their promotional discounts to retailers; and (c) the Company's agreed share of in-store activities and other promotional allowances and various fees charged to the Company directly by its retailers, club stores and/or wholesalers. The Company's promotional allowance programs with its retailers or distributors are executed through separate agreements in the ordinary course of business. These agreements generally provide for one or more of the arrangements described above and are of varying durations, typically ranging from one week to one month. The accrual for promotional incentives is based on expected chargebacks from customers or distributors and typically deducted from invoices within 30 days of being earned. Historically, adjustments to our estimated accrual for customers' allowances have not been significant.


Disaggregated Net Revenues

The following table reflects disaggregated net revenue by sales channel for the years ended June 30, 2023 and June 30, 2022 are as follows:

    June 30, 2023     June 30, 2022  
Retailers $ 9,255,018   $ 10,582,084  
Distributors   5,595,816     5,442,469  
Ecommerce/Other   82,951     294,233  
Total Net Revenue $ 14,933,785   $ 16,318,786  

Concentration Risks

The Company has 1 major customer that account for 14% of accounts receivable at June 30, 2023, and 3 customers that together account for 37% (15%, 12% and 10%, respectively) of the total revenues earned for the quarter ended June 30, 2023. The Company has 1 vendors that account for 24% of purchases for the quarter ended June 30, 2023.

The Company had 2 major customers that accounted for 25% (13% and 12% respectively) of accounts receivable at June 30, 2022, and 2 customers that together accounted for 31% (18% and 13%, respectively) of the total revenues earned for the quarter ended June 30, 2022. The Company had 2 vendors that accounted for 48% (31%, and 17% respectively) of purchases for the quarter ended June 30, 2022.

Correction of Previously Issued Financial Statements

The accompanying condensed consolidated statement of operations for the three months ended March 31, 2022 has been corrected for an adjustment to reclassify Sales and marketing expenses of $575,617 as a reduction of Net revenue as such amounts were related to consideration payable to a customer which the Company determined was not for distinct goods or services received. The Company assessed the materiality of the misstatement quantitatively and qualitatively and has concluded that the correction of the classification error is immaterial to the consolidated financials taken as a whole. As a result of the correction, Net Revenue decreased from $16,894,403 to $16,318,786 and Sales and marketing expenses decreased from $6,921,846 to $6,346,229. The correction had no impact on Total operating loss and Net loss.

Business Segments

The Company operates as a single operating segment for the purposes of presenting financial information and evaluating performance. As such, the accompanying consolidated financial statements present financial information in a format that is consistent with the internal financial information used by management.

Recent Accounting Pronouncements

The Company has evaluated recent accounting pronouncements through June 30, 2023 and believes that none of them will have a material effect on our consolidated financial statements.


NOTE 2 - GOING CONCERN

The accompanying financial statements have been prepared assuming that the Company will continue as a going concern, which contemplates realization of assets and satisfaction of liabilities in the normal course of business. Since its inception, the Company has been engaged substantially in developing its business plan and building its initial customer and distribution base for its products. As a result, the Company incurred accumulated net losses from Inception (June 19, 2012) through the period ended June 30, 2023 of ($139,989,904). In addition, the Company's development activities since inception have been financially sustained through debt and equity financing. These factors raise substantial doubt about the Company's ability to continue as a going concern within one year from the of the date that the financial statements are issued.

The Company's cash position may not be sufficient to support the Company's daily operations. Management plans to raise additional funds by way of a private or ongoing public offering. While the Company believes in the viability of its strategy and its ability to generate sufficient revenue and to raise additional funds, there can be no assurances to that effect. Should the Company fail to raise additional capital, it may be compelled to reduce the scope of its planned future business activities.

The ability of the Company to continue as a going concern is dependent upon the Company's ability to further implement its business plan, to generate sufficient revenue and to raise additional funds by way of public and/or private offerings.

The consolidated financial statements do not include any adjustments related to the recoverability and classification of recorded asset amounts or the amounts and classification of liabilities that might be necessary should the Company be unable to continue as a going concern.

NOTE 3 - PROPERTY AND EQUIPMENT

Fixed assets consisted of the following at:

Fixed assets consisted of the following at:   June 30, 2023     March 31, 2023  
Machinery and Equipment $ 6,523,778   $ 6,523,778  
Office Equipment   55,439     55,439  
Less: Accumulated Depreciation   (4,774,600 )   (4,521,085 )
Fixed Assets, net $ 1,804,617   $ 2,058,132  

Depreciation expense for the quarter ended June 30, 2023 and 2022 was $253,515 and $187,432, respectively.

NOTE 4 - REVOLVING FINANCING

On February 1, 2017, we entered into a credit and security agreement (the "Credit Agreement") with SCM Specialty Finance Opportunities Fund, L.P. ("SCM" or "Lender"), which subsequently changed its name to CNH Finance Fund I, L.P. and then to eCapital Healthcare Corp.

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

Under the terms of the Credit Agreement, SCM has agreed to make cash advances to our company in an aggregate principal at any one time outstanding not to exceed the lesser of (i) $10 million (the "Revolving Loan Commitment Amount") and (ii) the Borrowing Base (defined to mean, as of any date of determination, 85% of net eligible billed receivables plus 65% of eligible unbilled receivables, minus certain reserves). The advanced under the credit agreement as of June 30, 2023 was $6,064,975.

The Credit Agreement expired on September 14, 2023.


The principal amount of the Revolving Facility outstanding bears interest at a rate per annum equal to (i) a fluctuating interest rate per annum equal at all times to the rate of interest announced, from time to time, within Wells Fargo Bank at its principal office in San Francisco as its "prime rate," plus (ii) 3.25%, payable monthly in arrears. The interest rate as of June 30, 2023 was 16.5%

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

The Company agreed to pay to SCM monthly an unused line fee in amount equal to 0.083% per month of the difference derived by subtracting (i) the average daily outstanding balance under the Revolving Facility during the preceding month, from (ii) the Revolving Loan Commitment Amount. The unused line fee will be payable monthly in arrears. We also agreed to pay SCM as additional interest a monthly collateral management fee equal to 0.35% per month calculated on the basis of the average daily balance under the Revolving Facility outstanding during the preceding month. The collateral management fee will be payable monthly in arrears. We must also pay certain fees in the event that receivables are not properly deposited in the appropriate lockbox account.

The interest rate will be increased by 5% in the event of a default under the Credit Agreement. Events of default under the Credit Agreement, some of which are subject to certain cure periods, include a failure to pay obligations when due (the Credit Agreement expired on September 14, 2023 and while the Company is in discussions with SCM, there is an event of default due to the expiration of the agreement), the making of a material misrepresentation to SCM, the rendering of certain judgments or decrees against our company and the commencement of a proceeding for the appointment of a receiver, trustee, liquidator or conservator or filing of a petition seeking reorganization or liquidation or similar relief.

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

NOTE 5 - STOCKHOLDERS' EQUITY (DEFICIT)

Preferred Shares

On October 7, 2013, the Company amended its articles of incorporation to create 100,000,000 shares of preferred stock by filing a Certificate of Amendment to Articles of Incorporation with the Secretary of State of Nevada. The preferred stock may be divided into and issued in series, with such designations, rights, qualifications, preferences, limitations and terms as fixed and determined by our board of directors.

Series S Convertible Preferred Stock

On May 12, 2021, The Alkaline Water Company Inc. (the "Company") entered into an Endorsement Agreement (the "Endorsement Agreement"), with ABG-Shaq, LLC ("ABG-Shaq"), an entity affiliated with Shaquille O'Neal, for the personal services of Mr. O'Neal. Pursuant to the Endorsement Agreement, the Company received the right and license to use Mr. O'Neal's name, nickname, initials, autograph, voice, video or film portrayals, photograph, likeness and certain other intellectual property rights, in each case, solely as approved by ABG-Shaq, in connection with the advertising, promotion and sale of the Company's branded products. Mr. O'Neal will also provide brand ambassador services related to appearances, social media and public relations matters. The Endorsement Agreement also includes customary exclusivity, termination, and indemnification clauses.

As consideration for the rights and services granted under the Endorsement Agreement, the Company agreed to pay to ABG-Shaq aggregate cash payments of $3 million over the three years of the Endorsement Agreement. The Company will also pay expenses related to the marketing and personal services provided by Mr. O'Neal. As of June 30, 2023, the Company has paid $2 million under this agreement.


In addition, the Company agreed to grant 6,681,090 shares of Series S Preferred Stock to ABG, each vested share of which is convertible into one-fifteenth share of the Company's common stock. The shares of Series S Preferred Stock will vest as to 1/3 on May 12, 2021, May 1, 2022, and May 1, 2023, respectively. The term of the Endorsement Agreement is three years, commencing on May 1, 2021 and terminating on May 1, 2024 (the " Term"). The Series S Preferred Stock was value at $6,681,090 based on the Company's closing stock price of $15.00 per share on May 12, 2021. The Company valued the vested Series S Preferred Stock at $2,227,030 per year.

The Company recognized an expense of $2,227,030 for the year ended March 31, 2022 and March 31, 2023. In the three months ending June 30, 2023 and June 30, 2022, the Company recognized an expense in the amount of $556,757.

Series E Convertible Preferred Stock

On November 23, 2022, we entered into private placement subscription agreements, whereby we issued an aggregate of 1,100,000 shares of our Series E Preferred Stock ("Series E Preferred Stock") at a deemed price of $1.00 per share of Series E Preferred Stock for gross proceeds of $1,100,000. Pursuant to the subscription agreements, in consideration for the subscribers' execution and delivery of the subscription agreements, we also issued an aggregate of 58,667 shares of our common stock (the "Commitment Shares") at a deemed price of $3.75 per Commitment Share.

Holders of the Series E Preferred Stock (the "Holders") are entitled to receive dividends at the rate per share (as a percentage of the stated value per share) of 6% per annum, payable on each anniversary date of the original issue date of shares of Series E Preferred Stock held by applicable Holders in a number of shares of our common stock per share of the Series E Preferred Stock equal to the quotient obtained by dividing the dollar amount of such dividend payment by applicable market price. A stated value of each share of the Series E Preferred Stock is $1.00. Any accrued but unpaid dividends on the Series E Preferred Stock being converted will be paid in our common stock upon the conversion of the Series E Preferred Stock. If we pay a dividend on our common stock while the shares of the Series E Preferred Stock are outstanding, the Holders will be entitled to receive a dividend per share of Series E Preferred Stock equal to the dividend per share of our common stock. Such dividend will be payable on the same terms and conditions as the payment of the dividend on our common stock.

Each share of Series E Preferred Stock will be convertible, at any time after the date that is twelve months from the original issue date, at our option, into that number of units (each, a "Unit") determined by dividing the stated value of such share of Series E Preferred Stock by $3.75 (the "Conversion Price"). Each Unit will consist of one share of our common stock and one-half of one common stock purchase warrant with each whole common stock purchase warrant entitling the holder thereof to acquire one additional share of our common stock at an exercise price equal of 125% of the Conversion Price for a period of three years following the conversion date.

The Company identified the conversion into a Unit (one share of preferred stock and one-half warrant) as an embedded beneficial conversion feature (ASC 470), thus the Company valued (using Black-Scholes option-pricing model for common stock options and warrants) each component of the Unit. The Warrant was valued at in the aggregate $211,470 and the Common Stock was valued at $888,530. Accordingly, the Company recognized an aggregate beneficial conversion feature of $211,470 upon issuance of the Series E Preferred Stock with a $211,470 increase in discount on preferred stock and a corresponding increase in additional paid-in capital. The value of the warrant is being amortized over a 1 year (the period from issuance to the earliest allowable conversion date). As of June 30, 2023, the discount on preferred stock was $8,010.

500,000 shares of Series E Preferred Stock was converted on March 24, 2023 into 133,333 shares of the Company's common stock along with an issuance of 4,761 shares of the Company's common stock for the $10,333 dividend payable on the 500,000 shares of Series E Preferred Stock.

Effective as of April 4, 2023, we issued 133,333 units of our company upon conversion of 500,000 shares of our Series E Preferred Stock without the payment of any additional consideration. Each unit was comprised of one fifteenth share of our common stock and one thirtieth of one common stock purchase warrant. Each whole common stock purchase warrant entitles the holder to purchase an additional share of our common stock at a price of $4.69 per share for a period of three years. In addition, effective as of April 4, 2023, we paid dividends on these 500,000 shares of our Series E Preferred Stock in the amount of $11,083 by issuing 4,598 shares of our common stock at a price of $2.410 per share.


In addition, the Company has accrued $3,317 as of June 30, 2023 as a dividend payable on the 100,000 remaining shares of Series E Preferred Stock.

Common Stock

Effective April 5, 2023, we effected a fifteen for one reverse stock split of our authorized and issued and outstanding shares of common stock. As a result, our authorized common stock has decreased from 200,000,000 shares of common stock, with a par value of $0.001 per share, to 13,333,333 shares of common stock, with a par value of $0.001 per share, and the number of our issued and outstanding shares of common stock has decreased from approximately 152,149,661 to approximately 10,185,898. Any fractional shares resulting from the reverse stock split will be rounded up to the next nearest whole number. Our authorized preferred stock was not affected by the reverse stock split and continues to be 100,000,000 shares of preferred stock, with a par value of $0.001 per share.

Effective as of May 8, 2023, we issued 148,469 shares of our common stock upon conversion of 2,227,030 shares of our Series S Preferred Stock without the payment of any additional consideration.

Effective April 30 and May 1, the Company issued 1,443 and 59,995 shares of common stock upon the vesting of restricted stock awards to employees.

NOTE 6 - OPTIONS AND WARRANTS

The Company in the three months ended June 30, 2023, recorded an expense in the amount of $342,760 in connection with the granting of stock options and $114,139 in connection with the granting of RSUs in prior years. This expense was offset by $920,388 which was the amount previously expensed in connection with 1,621,000 stock options that were forfeited during the three months ended June 30, 2023.

NOTE 7 - LEASES

As of October 1, 2020, the company entered into a lease for 9,166 square feet of corporate office and warehouse space from a third party through September 2023 at a rate of $10,083 per month for the first twelve months, then at a rate of $10,385 for the next 12 months, and $10,697 for the final 12 months of the lease. The Company determined this lease was an operating lease under ASC 842 and using an interest rate of 7%, the Company determined that the ROU for this lease was $337,932 and the lease liability for this lease was $337,932, at inception of this lease, respectively. Previously, the Company leased its corporate office space with a size of 3,352 square feet leased from a third party which leased through November 2020 at the current rate of $7,891 per month.

As of November 1, 2020, the company entered into a lease for 2,390 square feet of corporate office space from a third party through January 2024 at a rate of $5,280 per month for the first twelve months starting January 2021, then at a rate of $5,377 for the next 12 months, and $5,497 for the final 13 months of the lease. The Company determined this lease was an operating lease under ASC 842 and using an interest rate of 7%, the Company determined that the ROU for this lease was $177,629 and the lease liability for this lease was $177,629, at inception of this lease, respectively.


As of April 1, 2022, the Company entered into a lease for 1,520 square feet of warehouse space from a third party through March 2025 at a rate of $1,812 per month for the first twelve months, then at a rate of $1,867 per month for the last next twelve months and then at a rate of $1,923 for the last twelve months. The Company determined this lease was an operating lease under ASC 842 and using an interest rate of 7%, the Company determined that the ROU for this lease was $60,737 and the lease liability for this lease was $60,737, at inception of this lease, respectively.

At inception the ROU and Lease Liability was calculated based on the net present value of the future lease payments over the term of the lease. When available, the Company uses the rate implicit in the lease discount payments as the incremental borrowing rate to calculate the net present value; however, the rate implicit in the lease is not readily determinable for our corporate office lease. In this case, the Company estimated its incremental borrowing rate as the interest rate it could borrow an amount equal to the lease payments over a similar term, with similar collateral as the lease, and in a similar economic environment. The Company estimated its rate using available evidence such as rates imposed by third-party lenders to the Company in recent financings or observable risk-free interest rate and credit spreads for commercial debt of a similar duration, with credit spreads correlating to the Company's estimated creditworthiness.

For operating leases that include rent holidays and rent escalation clauses, the Company recognizes lease expense on a straight-line basis over the lease term from the date it takes possession of the leased property. The Company records the straight-line lease expense and any contingent rent, if applicable, in general and administrative expenses on the condensed consolidated statements of operations. The corporate office, lease also requires the Company to pay real estate taxes, common area maintenance costs and other occupancy costs which are included in the general and administrative expenses on the condensed consolidated statements of operations.

Operating Lease expense for the three months ended June 30, 2023 was $52,791 and for the three months ended June 30, 2022 was $65,169.

Operating Leases:   June 30, 2023  
Operating lease right-of-use asset - current portion $ 80,289  
Operating lease right-of-use asset - non-current portion   15,184  
       
Total Operating lease right-of-use asset $ 95,473  
       
Operating lease liability - current portion $ 89,916  
Operating lease liability - non-current portion   16,812  
       
Total Operating lease liability $ 106,728  
       
Weighted average remaining lease term (in years):      
Operating leases   0.9  
       
Weighted average discount rate:      
Operating leases   7%  

Maturities of undiscounted lease liabilities as of June 30, 2023 are as follows:

    Operating Leases  
Year ending March 31, 2024   87,371  
Year ending March 31, 2025   23,075  
Total lease payments   110,446  
Less: Imputed interest   (3,718 )
Total lease obligations   106,728  

NOTE 8 - COMMITMENTS AND CONTINGENCIES

The Company is involved in various legal proceedings, claims and litigation arising in the ordinary course of business. The Company does not believe that the disposition of matters that are pending or asserted will have a material effect on its consolidated financial statements.

NOTE 9 - SUBSEQUENT EVENTS

On July 12, 2023, the Company entered into a settlement agreement and stipulation ("Settlement Agreement") with Silverback Capital Corporation ("Silverback") in connection with the settlement of $1,809,256.03 of bona fide obligations the Company owed to certain of its creditors. The Settlement Agreement was subject to a fairness hearing, and on September 6, 2023, the Circuit Courts within the Twelfth Judicial Circuit of Palm Beach County, Florida held a fairness hearing and, on September 12, 2023 entered an order granting approval of the Settlement Agreement. If the Settlement Agreement is satisfied in full, the Company shall reduce the Company's debt obligations equal to $1,809,256.03 in exchange for 30,000 common shares to cover Silverback's expenses and the issuance of settlement shares of the Company's common stock pursuant to the terms of section 3(a)(10) of the Securities Act of 1933, in multiple tranches, at a price that is seventy percent (70%) of the average of the three lowest bid prices during the ten (10) trading days immediately preceding the delivery of such tranche. At no time may Silverback beneficially own more than 4.99% of the Company's outstanding common stock.

As of September 20, 2023, the Company issued 500,000 shares of WTER common stock, to be valued at 70% of the three lowest bid prices during the ten (10) trading days immediately preceding the delivery of such shares.


Item 2. Management's 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 applicable 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 and Canada, 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:

• 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.

Our financial statements are stated in United States Dollars ($ or US$) unless otherwise stated and are prepared in accordance with United States Generally Accepted Accounting Principles.

In this quarterly report, unless otherwise specified, all references to "common shares" refer to the common shares in our capital stock.

As used in this quarterly report on Form 10-Q, the terms "we", "us" "our", the "Company" and "Alkaline" refer to The Alkaline Water Company Inc., a Nevada corporation, and its wholly owned subsidiary Alkaline 88, LLC (an Arizona Limited Liability Company), unless otherwise specified.


Inflationary Pressure

We have seen significant margin contraction as a result of inflationary pressures over the last 12 months. We've taken a number of steps that will allow us to increase our margins in the year ended March 31, 2024. These steps include (1) an approximate 9% across the board price increase (effective across all banners for the entire fiscal 2024); (2) a potential leveling off or small reduction in freight costs due to the geographic distribution of our new co-packers and suppliers; and (3) our buying power allowing us to lock in price breaks on raw materials over the next 12 months.

Results of Operations

Our results of operations for the three months ended June 30, 2023 and June 30, 2022 are as follows:

  For the
three
months
ended
June 30,
2023
  For the
three
months
ended
June 30,
2022
 
Revenue$14,933,785 $16,318,786 
Cost of goods sold 11,162,216  13,399,774 
Gross profit$3,771,569 $2,919,012 
Net Loss$(2,840,938)$(7,493,408)

Revenue and Cost of Goods Sold

We had revenue from sales of our product for the three months ended June 30, 2023 of $14,933,785 as compared to $16,318,786 for the three months ended June 30, 2022, a decrease of 8%. The decrease in sales is due to the expanded promotional allowances of our products to retailers throughout the country. We distribute our product through several channels. We sell through large national distributors (UNFI, KeHe, C&S, and Core-Mark), which together represent over 150,000 retail outlets. We also sell our product directly to retail clients, including convenience stores, natural food products stores, large ethnic markets and national retailers. Some examples of retail clients are: Walmart, CVS, Sam's Club, Family Dollar, Albertson/Safeway, Kroger companies, Schnucks, Smart & Final, Jewel-Osco, Sprouts, Bashas', Stater Bros. Markets, Unified Grocers, Bristol Farms, Publix, Vallarta, Superior Foods, Ingles, Shaw's, Raley's, Harris Teeter, Festival Foods, HEB and Brookshire's.

Cost of goods sold is comprised of production costs, shipping and handling costs. For the three months ended June 30, 2023, we had cost of goods sold of $11,162,216, or 75% of revenue, as compared to cost of goods sold of $13,399,774 or 82% of revenue, for the three months ended June 30, 2022. The decrease in cost of goods sold is due to decreased raw material costs.

Expenses

Our operating expenses for the three months ended June 30, 2023 and June 30, 2022 are as follows:

  For the three
months ended
June 30,
2023
  For the three
months ended
June 30,
2022
 
Sales and marketing expenses$4,614,499 $6,346,229 
General and administrative expenses 1,574,240  2,863,993 
Total operating expenses$6,188,739 $9,210,222 

For the three months ended June 30, 2023, our total operating expenses were $6,188,739 as compared to $9,210,222 for the three months ended June 30, 2022.


For the three months ended June 30, 2023, the total included $4,614,499 of sales and marketing expenses. Compared to the three months ended June 30, 2022, sales and marketing expenses for the three months ended June 30, 2023 decreased due to lower freight costs to our customers of approximately $0.7 million, lower advertising and promotion of approximately $0.3 million, and lower professional fees of approximately 0.5 million.

For the three months ended June 30, 2023, general and administrative expenses of $1,574,240 consisted primarily of approximately $0.4 million of professional fees, media fees and legal fees, and approximately $1.1 million of wages and wage related expenses. For the three months ended June 30, 2022, general and administrative expenses of $2,863,993, consisted primarily of approximately $0.4 million of professional fees, media fees and legal fees and approximately $1.8 million of wages and wage related expenses.

Liquidity and Capital Resources

Working Capital

  June 30, 2023  March 31, 2023 
Current assets$

13,384,132

 $15,951,725 
Current liabilities 23,261,935  23,344,608 
Working capital$

(9,877,803

)$(7,392,883)

Current Assets

Current assets as of June 30, 2023 and March 31, 2023 primarily include $414,648 and $1,038,754 in cash, $5,059,617 and $6,520,232 in accounts receivable and $5,544,390 and $5,591,351 in inventory, respectively.

Current Liabilities

Current liabilities as of June 30, 2023 and March 31, 2023 primarily include $12,609,187 and $11,616,247 in accounts payable, revolving financing of $6,188,332 and $6,403,447, and accrued expenses of $2,406,839 and $1,996,387, respectively.

Cash Flow

Our cash flows for the three months ended June 30, 2023 and June 30, 2022 are as follows:

  For the three
months ended
June 30,
2023
  For the three
months ended
June 30,
2022
 
Net Cash used in operating activities$(408,991)$(2,494,650)
Net Cash used in investing activities (-0-) (854,997)
Net Cash provided/(used) by financing activities (215,115) 4,764,509 
Net increase (decrease) in cash$(624,106)$1,414,862 

Operating Activities

Net cash used in operating activities was $408,991 for the three months ended June 30, 2023, as compared to $2,494,650 used in operating activities for the three months ended June 30, 2022. The decrease in net cash used in operating activities was primarily due to the reduction in net loss after adjustments to reconcile net income to net cash in the amount of $1.3 million.


Investing Activities

Net cash used in investing activities was $-0- for the three months ended June 30, 2023, as compared to $854,997 used in investing activities for the three months ended June 30, 2022. The cash used in investing activities for the three months ended June 30, 2022 was primarily due to the purchase of equipment for 2 new co-packing plants and the purchase of a new model for our 1-gallon bottle.

Financing Activities

Net cash used by financing activities for the three months ended June 30, 2023 was $215,115, as compared to net cash provided by financing activities in the amount of $4,764,509 for the three months ended June 30, 2022. The decrease in net cash provided was a result of no proceeds from the sale of common stock, net in the three months ended June 30, 2023 compared to approximately $5.3 million of proceeds from the sale of common stock, net in the three months ended June 30, 2022.

Cash Requirements

Our ability to operating as a going concern is dependent on obtaining adequate capital to fund operating losses until we become profitable. We announced on July 9, 2022 that we have begun implementing a combination of cost-reduction measures and margin enhancements. The cost reduction measures include a) organizational restructuring; b) reductions in professional services; and c) reductions in marketing and promotional expenses and the margin enhancements will include a) packaging changes; b) improved manufacturing efficiencies; c) pricing and promotional optimization; and d) decreases in freight costs due to an enhanced distribution network.

Our cash on hand, plus the implementation of our cost-reduction and margin enhancement strategy, anticipated financing or equity offerings is planned to fund our current planned operations and capital needs. However, if our current plans change or are accelerated, we may seek to sell additional equity or debt securities or obtain additional credit facilities, including seeking investments from strategic investors. The sale of additional equity securities will result in dilution to our stockholders. The incurrence of indebtedness will result in increased debt service obligations and could require us to agree to operating and financial covenants that could restrict our operations or modify our plans to grow the business. Financing may not be available in amounts or on terms acceptable to us, if at all. Any failure by us to raise additional funds on terms favorable to us, or at all, will limit our ability to expand our business operations and could harm our overall business prospects.

Off-Balance Sheet Arrangements

We have no off-balance sheet arrangements that have or are reasonably likely to have a current or future effect on our financial condition, changes in financial condition, revenues or expenses, results of operations, liquidity, capital expenditures or capital resources that is material to our stockholders.

Item 3. Quantitative and Qualitative Disclosures About Market Risk

Not applicable.

Item 4. Controls and Procedures

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 not effective. The ineffectiveness of our disclosure controls and procedures was due to the material weaknesses in our internal control over financial reporting disclosed in our annual report on Form 10-K for the fiscal year ended March 31, 2023.

Changes in Internal Control over Financial Reporting

There were no changes in our internal control over financial reporting during the fiscal quarter ended June 30, 2023 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.


PART II-OTHER INFORMATION

Item 1. Legal Proceedings

We know of no material pending legal proceedings to which our company or any of our subsidiaries is a party or of which any of our properties, or the properties of any of our subsidiaries, is the subject. In addition, we do not know of any such proceedings contemplated by any governmental authorities.

We know of no material proceedings in which any of our directors, officers or affiliates, or any registered or beneficial stockholder is a party adverse to our company or any of our subsidiaries or has a material interest adverse to our company or any of our subsidiaries.

Item 1A. Risk Factors

Information regarding risk factors appears in our Annual Report on Form 10-K filed on August 17, 2023. There have been no material changes since August 17, 2023 from the risk factors disclosed in that Form 10-K.

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds

Except as disclosed below, since the beginning of our fiscal quarter ended June 30, 2023, we have not sold any equity securities that were not registered under the Securities Act of 1933 that were not previously reported in a current report on Form 8-K.

On July 12, 2023, we entered into a settlement agreement and stipulation ("Settlement Agreement") with Silverback Capital Corporation ("Silverback") in connection with the settlement of $1,809,256.03 of bona fide obligations we owed to certain of our creditors. The Settlement Agreement was subject to a fairness hearing, and on September 6, 2023, the Circuit Courts within the Twelfth Judicial Circuit of Palm Beach County, Florida held a fairness hearing and, on September 12, 2023 entered an order granting approval of the Settlement Agreement. If the Settlement Agreement is satisfied in full, we must reduce our debt obligations equal to $1,809,256.03 in exchange for 30,000 common shares to cover Silverback's expenses and the issuance of settlement shares of our common stock pursuant to the terms of section 3(a)(10) of the Securities Act of 1933, in multiple tranches, at a price that is seventy percent (70%) of the average of the three lowest bid prices during the ten (10) trading days immediately preceding the delivery of such tranche. At no time may Silverback beneficially own more than 4.99% of our outstanding common stock.

As of September 20, 2023, we issued 500,000 shares of our common stock, to be valued at 70% of the three lowest bid prices during the ten (10) trading days immediately preceding the delivery of such shares.

Item 3. Defaults Upon Senior Securities

On February 1, 2017, we entered into a credit and security agreement (the "Credit Agreement") with SCM Specialty Finance Opportunities Fund, L.P. ("SCM" or "Lender"), which subsequently changed its name to CNH Finance Fund I, L.P. and then to eCapital Healthcare Corp. The Credit Agreement provides our company with a revolving credit facility (the "Revolving Facility"), the proceeds of which are to be used to repay existing indebtedness of our company, transaction fees incurred in connection with the Credit Agreement and for the working capital needs of our company.

Under the terms of the Credit Agreement, SCM has agreed to make cash advances to our company in an aggregate principal at any one time outstanding not to exceed the lesser of (i) $10 million (the "Revolving Loan Commitment Amount") and (ii) the Borrowing Base (defined to mean, as of any date of determination, 85% of net eligible billed receivables plus 65% of eligible unbilled receivables, minus certain reserves). The advanced under the credit agreement as of June 30, 2023 was $6,064,975.

The Credit Agreement expired on September 14, 2023.


The principal amount of the Revolving Facility outstanding bears interest at a rate per annum equal to (i) a fluctuating interest rate per annum equal at all times to the rate of interest announced, from time to time, within Wells Fargo Bank at its principal office in San Francisco as its "prime rate," plus (ii) 3.25%, payable monthly in arrears. The interest rate as of June 30, 2023 was 16.5%.

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

We agreed to pay to SCM monthly an unused line fee in amount equal to 0.083% per month of the difference derived by subtracting (i) the average daily outstanding balance under the Revolving Facility during the preceding month, from (ii) the Revolving Loan Commitment Amount. The unused line fee will be payable monthly in arrears. We also agreed to pay SCM as additional interest a monthly collateral management fee equal to 0.35% per month calculated on the basis of the average daily balance under the Revolving Facility outstanding during the preceding month. The collateral management fee will be payable monthly in arrears. We must also pay certain fees in the event that receivables are not properly deposited in the appropriate lockbox account.

The interest rate will be increased by 5% in the event of a default under the Credit Agreement. Events of default under the Credit Agreement, some of which are subject to certain cure periods, include a failure to pay obligations when due (the Credit Agreement expired on September 14, 2023 and while we are in discussions with SCM, there is an event of default due to the expiration of the agreement), the making of a material misrepresentation to SCM, the rendering of certain judgments or decrees against our company and the commencement of a proceeding for the appointment of a receiver, trustee, liquidator or conservator or filing of a petition seeking reorganization or liquidation or similar relief.

The amount of the owed under the Credit Agreement as of September 20, 2023 was $4,865,545.

Item 4. Mine Safety Disclosures

Not applicable.

Item 5. Other Information

See Item 2 of Part II of this quarterly report on Form 10-Q for the information responsive to this item.

Item 6. Exhibits

Exhibit
Number
Description
(3)Articles of Incorporation and Bylaws
3.1Articles of Incorporation (incorporated by reference from our Form S-1 Registration Statement, filed on October 28, 2011)
3.2Certificate of Change (incorporated by reference from our Quarterly Report on Form 10-Q, filed on August 13, 2013)
3.3Articles of Merger (incorporated by reference from our Quarterly Report on Form 10-Q, filed on August 13, 2013)
 
3.4Certificate of Amendment to Articles of Incorporation (incorporated by reference from our Current Report on Form 8-K, filed on October 11, 2013)
3.5Certificate of Designation (incorporated by reference from our Current Report on Form 8-K, filed on October 11, 2013)
3.6Certificate of Designation (incorporated by reference from our Current Report on Form 8-K, filed on November 12, 2013)
3.7Certificate of Change (incorporated by reference from our Current Report on Form 8-K, filed on December 30, 2015)
3.8Certificate of Amendment to Articles of Incorporation (incorporated by reference from our Current Report on Form 8-K, filed on January 25, 2016)
3.9Certificate of Amendment to Certificate of Designation (incorporated by reference from our Current Report on Form 8-K, filed on January 25, 2016)
3.10Certificate of Designation (incorporated by reference from our Current Report on Form 8-K, filed on April 5, 2016)
3.11Certificate of Withdrawal of Certificate of Designation (incorporated by reference from our Current Report on Form 8-K, filed on April 4, 2017)
3.12Certificate of Designation (incorporated by reference from our Current Report on Form 8-K, filed on May 4, 2017)
3.13Certificate of Amendment to Certificate of Designation (incorporated by reference from our Current Report on Form 8-K, filed on November 6, 2017)
3.14Certificate of Withdrawal of Certificate of Designation (incorporated by reference from our Quarterly Report on Form 10-Q, filed on November 20, 2017)
3.15Certificate of Designation (incorporated by reference from our Current Report on Form 8-K, filed on May 19, 2021)
3.16Certificate of Designation (incorporated by reference from our Current Report on Form 8-K, filed on November 23, 2022)
3.17Certificate of Change (incorporated by reference from our Current Report on Form 8-K, filed on April 5, 2023)
3.18Amended and Restated Bylaws (incorporated by reference from our Current Report on Form 8-K, filed on October 15, 2018)
(10)Material Contracts
10.1Contract 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)
10.2Contract 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)
10.3Manufacturing 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)
10.4Equipment Lease Agreement dated January 17, 2014 (incorporated by reference from our Current Report on Form 8-K, filed on January 27, 2014)
10.5Revolving Accounts Receivable Funding Agreement dated February 20, 2014 (incorporated by reference from our Current Report on Form 8-K, filed on February 25, 2014)
10.6Form 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)
 
 
10.7Form of Common Stock Purchase Warrant (incorporated by reference from our Current Report on Form 8-K, filed on May 6, 2014)
10.8Form of Placement Agent Common Stock Purchase Warrant (incorporated by reference from our Current Report on Form 8-K, filed on May 6, 2014)
10.9Amendment #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)
10.10Equipment Sale/Lease Back Agreement dated April 2, 2014 (incorporated by reference from our Quarterly Report on Form 10-Q, filed on August 13, 2014)
10.11Agreement 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)
10.12Form of Warrant Amendment Agreement (incorporated by reference from our Current Report on Form 8-K, filed on August 21, 2014)
10.13Form of Common Stock Purchase Warrant (incorporated by reference from our Current Report on Form 8-K, filed on August 21, 2014)
10.14Form of Warrant Amendment Agreement (incorporated by reference from our Current Report on Form 8-K, filed on October 9, 2014)
10.15Form of Common Stock Purchase Warrant (incorporated by reference from our Current Report on Form 8-K, filed on October 9, 2014)
10.16Master 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)
10.17Warrant 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)
10.18Registration 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)
10.19Form of Amending Agreement to Stock Option Agreement (incorporated by reference from our Current Report on Form 8-K, filed on November 4, 2014)
10.20Securities Purchase Agreement dated as of May 11, 2015 with Assurance Funding Solutions LLC (incorporated by reference from our Annual Report on Form 10-K, filed on July 14, 2015)
10.21Secured Term Note dated May 2015 issued to Assurance Funding Solutions LLC (incorporated by reference from our Annual Report on Form 10-K, filed on July 14, 2015)
10.22General Security Agreement dated as of May 11, 2015 with Assurance Funding Solutions LLC (incorporated by reference from our Annual Report on Form 10-K, filed on July 14, 2015)
10.23Securities Purchase Agreement dated as of August 20, 2015 with Assurance Funding Solutions LLC (incorporated by reference from our Quarterly Report on Form 10-Q, filed on November 23, 2015)
10.24Secured Term Note dated August 20, 2015 issued to Assurance Funding Solutions LLC (incorporated by reference from our Quarterly Report on Form 10-Q, filed on November 23, 2015)
10.25General Security Agreement dated as of August 20, 2015 with Assurance Funding Solutions LLC (incorporated by reference from our Quarterly Report on Form 10-Q, filed on November 23, 2015)
10.26Loan Agreement dated November 30, 2015 with Neil Rogers (incorporated by reference from our Current Report on Form 8-K, filed on December 4, 2015)
10.27Promissory Note dated November 30, 2015 issued to Neil Rogers (incorporated by reference from our Current Report on Form 8-K, filed on December 4, 2015)
10.28Escrow Agreement dated November 30, 2015 with Neil Rogers and Escrow Agent (incorporated by reference from our Current Report on Form 8-K, filed on December 4, 2015)
10.292013 Equity Incentive Plan (incorporated by reference from our Current Report on Form 8-K, filed on January 25, 2016)
10.30Loan Agreement dated January 25, 2016 with Turnstone Capital Inc. (incorporated by reference from our Current Report on Form 8-K, filed on January 25, 2016)
10.31Promissory Note dated January 25, 2016 issued to Turnstone Capital Inc. (incorporated by reference from our Current Report on Form 8-K, filed on January 25, 2016)
10.32Escrow Agreement dated January 25, 2016 with Turnstone Capital Inc. and Escrow Agent (incorporated by reference from our Current Report on Form 8-K, filed on January 25, 2016)
10.33Amendment Agreement dated January 25, 2016 with Neil Rogers (incorporated by reference from our Current Report on Form 8-K, filed on January 25, 2016)
 
10.34Employment Agreement dated effective March 1, 2016 with Steven P. Nickolas (incorporated by reference from our Current Report on Form 8-K, filed on April 5, 2016)
10.35Employment Agreement dated effective March 1, 2016 with Richard A. Wright (incorporated by reference from our Current Report on Form 8-K, filed on April 5, 2016)
10.36Form of Promissory Note and Warrant Exchange Agreement (incorporated by reference from our Current Report on Form 8-K, filed on June 16, 2016)
10.37Loan Facility Agreement dated September 20, 2016 with Turnstone Capital Inc. (incorporated by reference from our Current Report on Form 8-K, filed on September 22, 2016)
10.38Credit and Security Agreement dated February 1, 2017 with SCM Specialty Finance Opportunities Fund, L.P. (incorporated by reference from our Current Report on Form 8-K, filed on February 7, 2017)
10.39Payoff Agreement dated February 1, 2017 with Gibraltar Business Capital, LLC (incorporated by reference from our Current Report on Form 8-K, filed on February 7, 2017)
10.40Form of Stock Option Agreement (incorporated by reference from our Current Report on Form 8-K, filed on May 4, 2017)
10.41Settlement Agreement and Mutual Release of Claims dated October 31, 2017 with Steven P. Nickolas, Nickolas Family Trust, Water Engineering Solutions, LLC, Enhanced Beverages, LLC, McDowell 78, LLC and Wright Investments Group, LLC (incorporated by reference from our Current Report on Form 8-K, filed on November 6, 2017)
10.42Exchange Agreement and Mutual Release of Claims dated November 8, 2017 with Ricky Wright (incorporated by reference from our Current Report on Form 8-K, filed on November 14, 2017)
10.43Stock Option Forfeiture & General Release dated November 8, 2017 by Ricky Wright and Sharon Wright (incorporated by reference from our Current Report on Form 8-K, filed on November 14, 2017)
10.44Form of Warrant Amendment Agreement (incorporated by reference from our Current Report on Form 8-K, filed on February 22, 2018)
10.45Form of Common Stock Purchase Warrant (incorporated by reference from our Current Report on Form 8-K, filed on March 5, 2018)
10.462018 Stock Option Plan (incorporated by reference from our Current Report on Form 8-K, filed on April 25, 2018)
10.47Form of Subscription Agreement (incorporated by reference from our Current Report on Form 8-K filed on May 31, 2018)
10.48Form of Subscription Agreement (incorporated by reference from our Current Report on Form 8-K filed on October 3, 2018)
10.49Underwriting Agreement, dated March 8, 2019, by and between The Alkaline Water Company Inc. and Canaccord Genuity LLC, as representative of the underwriters named therein (incorporated by reference from our Current Report on Form 8-K, filed on March 11, 2019)
10.50Employment Agreement dated April 25, 2019 with Ronald DaVella (incorporated by reference from our Current Report on Form 8-K filed on May 3, 2019)
10.51Sixth Amendment to Credit and Security Agreement dated June 27, 2019 with CNH Finance Fund I, L.P. (incorporated by reference from our Annual Report on Form 10-K filed on July 1, 2019)
10.52Agreement and Plan of Merger, dated as of September 9, 2019 among The Alkaline Water Company Inc., AQUAhydrate, Inc. and AWC Acquisition Company Inc. (incorporated by reference from our Current Report on Form 8-K filed on September 12, 2019)
10.53Amendment to the Agreement and Plan of Merger, dated as of October 31, 2019 among The Alkaline Water Company Inc., AQUAhydrate, Inc. and AWC Acquisition Company Inc. (incorporated by reference from our Current Report on Form 8-K filed on November 6, 2019)
10.54Form of Subscription Agreement (incorporated by reference from our Current Report on Form 8-K filed on April 20, 2020)
10.552020 Equity Incentive Plan (incorporated by reference from our Current Report on Form 8-K filed on April 28, 2020)
10.56Form of Subscription Agreement (incorporated by reference from our Current Report on Form 8-K filed on May 13, 2020)
10.57Sales Agreement, dated as of February 22, 2021, by and between The Alkaline Water Company Inc. and Roth Capital Partners, LLC** (incorporated by reference from our Current Report on Form 8-K filed on February 23, 2021)
 
10.58Form of Subscription Agreement (incorporated by reference from our Current Report on Form 8-K filed on March 2, 2021)
10.59Endorsement Agreement executed May 12, 2021 by The Alkaline Water Company Inc. and ABG-Shaq, LLC (incorporated by reference from our Current Report on Form 8-K filed on May 13, 2021)
10.60Form of Subscription Agreement (incorporated by reference from our Current Report on Form 8-K filed on July 6, 2021)
10.61Employment Agreement dated effective April 25, 2022 with Richard A. Wright (incorporated by reference from our Current Report on Form 8-K filed on April 29, 2022)
10.62**Underwriting Agreement, dated May 4, 2022, between The Alkaline Water Company Inc. and Aegis Capital Corp. (incorporated by reference from our Current Report on Form 8-K filed on May 6, 2022)
10.63Separation Agreement & Release of All Claims dated June 2, 2022 by and between Richard Wright, The Alkaline Water Company Inc. and Alkaline 88, LLC (incorporated by reference from our Current Report on Form 8-K filed on June 2, 2022)
10.64Employment Agreement dated July 29, 2022 with Frank Lazaran (incorporated by reference from our Quarterly Report on Form 10-Q filed on August 15, 2022)
10.65Employment Agreement dated as of November 16, 2022 with David Guarino (incorporated by reference from our Current Report on Form 8-K filed on November 17, 2022)
10.66Employment Agreement dated as of November 16, 2022 with Frank Chessman (incorporated by reference from our Quarterly Report on Form 10-Q filed on February 28, 2023)
10.64Employment Agreement dated July 29, 2022 with Frank Lazaran (incorporated by reference from our Quarterly Report on Form 10-Q filed on August 15, 2022)
10.65*Settlement Agreement and Stipulation dated July 12, 2023 with Silverback Capital Corporation
(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*INS XBRL Instance Document-the instance document does not appear in the Interactive Data File as its XBRL tags are embedded within the Inline XBRL document
101.SCH*Inline XBRL Taxonomy Extension Schema Document
101.CAL*Inline XBRL Taxonomy Extension Calculation Linkbase Document
101.DEF*Inline XBRL Taxonomy Extension Definition Linkbase Document
101.LAB*Inline XBRL Taxonomy Extension Label Linkbase Document
101.PRE*Inline XBRL Taxonomy Extension Presentation Linkbase Document
104Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101)

*Filed herewith.

**Non-material schedules and exhibits have been omitted pursuant to Item 601(a)(5) of Regulation S-K. The Company hereby undertakes to furnish supplemental copies of any of the omitted schedules and exhibits upon request by the SEC.


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: September 22, 2023

By:/s/ Frank Chessman
  Frank Chessman
  President and Chief Executive Officer
  (Principal Executive Officer)
   

Date: September 22, 2023

By:/s/ David A. Guarino
  David A. Guarino
  Chief Financial Officer and Treasurer
  (Principal Financial Officer and Principal
  Accounting Officer)
 

























Exhibit 31.1

CERTIFICATION PURSUANT TO
SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002

I, Frank Chessman, 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 registrant's 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 registrant's 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 registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and

5. The registrant's other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of the registrant's 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 registrant's 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 registrant's internal control over financial reporting.

September 22, 2023

/s/ Frank Chessman                            
Frank Chessman
President and Chief Executive Officer
(Principal Executive Officer)



Exhibit 31.2

CERTIFICATION PURSUANT TO
SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002

I, David A. Guarino, 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 registrant's 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 registrant's 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 registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and

5. The registrant's other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of the registrant's 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 registrant's 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 registrant's internal control over financial reporting.

September 22, 2023

/s/ David A. Guarino                                        
David A. Guarino
Chief Financial Officer and Treasurer
(Principal Financial Officer and Principal Accounting Officer)



Exhibit 32.1

CERTIFICATION PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

The undersigned, Frank Chessman, hereby certifies, pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that:

1. the quarterly report on Form 10-Q of The Alkaline Water Company Inc. for the period ended June 30, 2023 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.

September 22, 2023

 

/s/ Frank Chessman

 

Frank Chessman

 

President and Chief Executive Officer

 

(Principal Executive Officer)





Exhibit 32.2

CERTIFICATION PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

The undersigned, David A. Guarino, hereby certifies, pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that:

1. the quarterly report on Form 10-Q of The Alkaline Water Company Inc. for the period ended June 30, 2023 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.

September 22, 2023

 

/s/ David A. Guarino

 

David A. Guarino

 

Chief Financial Officer and Treasurer

 

(Principal Financial Officer and Principal Accounting Officer)




v3.23.3
Document and Entity Information - shares
3 Months Ended
Jun. 30, 2023
Sep. 21, 2023
Cover [Abstract]    
Document Type 10-Q  
Amendment Flag false  
Document Period End Date Jun. 30, 2023  
Entity Registrant Name THE ALKALINE WATER COMPANY INC.  
Entity Central Index Key 0001532390  
Current Fiscal Year End Date --03-31  
Entity Incorporation, State or Country Code NV  
Entity File Number 001-38754  
Entity Tax Identification Number 99-0367049  
Entity Address, Address Line One 8541 E. Anderson Drive  
Entity Address, Address Line Two Suite 100  
Entity Address, City or Town Scottsdale  
Entity Address, State or Province AZ  
Entity Address, Postal Zip Code 85255  
City Area Code 480  
Local Phone Number 656-2423  
Entity Filer Category Non-accelerated Filer  
Entity Common Stock, Shares Outstanding   10,895,805
Entity Current Reporting Status Yes  
Document Fiscal Year Focus 2023  
Document Fiscal Period Focus Q3  
Entity Small Business true  
Entity Emerging Growth Company false  
Entity Shell Company false  
Trading Symbol WTER  
Security Exchange Name NASDAQ  
Title of 12(b) Security Common stock  
Entity Interactive Data Current Yes  
Document Transition Report false  
Document Quarterly Report true  
v3.23.3
CONSOLIDATED BALANCE SHEETS (unaudited) - USD ($)
Jun. 30, 2023
Mar. 31, 2023
Current assets    
Cash $ 414,648 $ 1,038,754
Accounts receivable, net 5,059,617 6,520,232
Inventory 5,544,390 5,591,351
Prepaid expenses 2,285,188 2,679,274
Operating lease right-of-use asset - current portion 80,289 122,114
Total current assets 13,384,132 15,951,725
Fixed assets - net 1,804,617 2,058,132
Operating lease right-of-use asset 15,184 20,246
Total assets 15,203,933 18,030,103
Current liabilities    
Accounts payable 12,609,187 11,616,247
Accrued expenses 2,406,839 1,996,387
Revolving financing 6,188,332 6,403,447
Notes payable, short-term 1,967,661 3,192,313
Operating lease liability - current portion 89,916 136,214
Total current liabilities 23,261,935 23,344,608
Operating lease liability 16,812 22,223
Total liabilities 23,278,747 23,366,831
Commitments and contingencies
Stockholders' equity    
Preferred stock, $0.001 par value, 100,000,000 shares authorized, 100,000 Series E issued and outstanding on June 30, 2023 and 600,000 Series E issued and outstanding on March 31, 2023 and nil Series S issued and outstanding on June 30, 2023 and 2,227,030 Seires S issued and outstanding on March 31, 2023 100 2,827
Common stock, Class A - $0.001 par value, 13,333,333 shares authorized 10,395,805 and 10,005,379 shares issued and outstanding at June 30, 2023 and March 31, 2023, respectively 10,395 10,005
Discount on Preferred Stock (8,010) (76,898)
Additional paid in capital 131,912,605 131,805,916
Accumulated deficit (139,989,904) (137,078,578)
Total stockholders' equity (8,074,814) (5,336,728)
Total liabilities and stockholders' equity $ 15,203,933 $ 18,030,103
v3.23.3
CONSOLIDATED BALANCE SHEETS (unaudited) (Parenthetical) - $ / shares
Jun. 30, 2023
Mar. 31, 2023
Preferred stock, par value per share $ 0.001 $ 0.001
Preferred stock, shares authorized 100,000,000 100,000,000
Common stock, par value per share $ 0.001 $ 0.001
Common stock, shares authorized 13,333,333 13,333,333
Common stock, shares, issued 10,395,805 10,005,379
Common stock, shares, outstanding 10,395,805 10,005,379
Series E Preferred Stock [Member]    
Preferred stock, shares issued 100,000 600,000
Preferred stock, shares outstanding 100,000 600,000
Series S Preferred Stock [Member]    
Preferred stock, shares issued 0 2,227,030
Preferred stock, shares outstanding 0 2,227,030
v3.23.3
CONSOLIDATED STATEMENT OF OPERATIONS (unaudited) - USD ($)
3 Months Ended
Jun. 30, 2023
Jun. 30, 2022
Statement of Operations [Abstract]    
Net Revenue $ 14,933,785 $ 16,318,786
Cost of Goods Sold 11,162,216 13,399,774
Gross Profit 3,771,569 2,919,012
Operating expenses    
Sales and marketing expenses 4,614,499 6,346,229
General and administrative 1,574,240 2,863,993
Total operating expenses 6,188,739 9,210,222
Total operating loss (2,417,170) (6,291,210)
Other (income) expense    
Interest expense (423,768) (1,202,198)
Total other (income) expense (423,768) (1,202,198)
Net loss $ (2,840,938) $ (7,493,408)
LOSS PER SHARE (Basic) $ (0.28) $ (0.96)
LOSS PER SHARE (Diluted) $ (0.28) $ (0.96)
WEIGHTED AVERAGE SHARES OUTSTANDING (Basic) 10,293,276 7,844,653
WEIGHTED AVERAGE SHARES OUTSTANDING (Diluted) 10,293,276 7,844,653
v3.23.3
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY (unaudited) - USD ($)
Preferred Stock [Member]
Common Stock [Member]
Additional Paid-in Capital [Member]
Discount of Preferred E [Member]
Stock Payable [Member]
Accumulated Deficit [Member]
Total
Beginning balance at Mar. 31, 2022 $ 4,454 $ 7,371 $ 109,967,281 $ 0 $ (62,388) $ (109,515,580) $ 401,138
Beginning balance (in shares) at Mar. 31, 2022 4,453,970 7,371,454          
Common shares issued in connection with offerings   $ 606 5,205,598   62,388   5,268,592
Common shares issued in connection with offerings (in shares)   605,572          
Stock option exercise   $ 1 (1)       0
Stock option exercise (in shares)   1,130          
Preferred stock conversion to common stock and vesting of endorsement shares $ (2,227) $ 148 2,229,109       2,227,030
Preferred stock conversion to common stock (in shares) (2,226,940) 148,469          
Stock option and RSU-related compensation expense and common shares issued upon conversion of RSUs, net of forfeited stock options   $ 15 222,002       222,017
Stock option and RSU-related compensation expense and common shares issued upon conversion of RSUs, net of forfeited stock options (in shares)   14,778          
Net (loss)           (7,493,408) (7,493,408)
Ending balance at Jun. 30, 2022 $ 2,227 $ 8,141 117,623,989 0 0 (117,008,988) 625,369
Ending balance (in shares) at Jun. 30, 2022 2,227,030 8,141,403          
Beginning balance at Mar. 31, 2023 $ 2,827 $ 10,005 131,805,916 (76,898) 0 (137,078,578) (5,336,728)
Beginning balance (in shares) at Mar. 31, 2023 2,827,030 10,005,379          
Preferred stock conversion to common stock and vesting of endorsement shares $ (2,227) $ 148 558,837       556,758
Preferred stock conversion to common stock (in shares) (2,227,030) 148,469          
Preferred stock series e conversion to common stock $ (500) $ 133 367       0
Preferred stock series e conversion to common stock (in shares) (500,000) 133,333          
Preferred stock series e issuance of dividend in shares   $ 5 11,078       11,083
Preferred stock series e issuance of dividend in shares (in shares)   4,598          
Preferred stock series e amortization of discount       68,888   (68,888) 0
Preferred stock series e dividend accrual           (1,500) (1,500)
Stock option and RSU-related compensation expense and common shares issued upon conversion of RSUs, net of forfeited stock options   $ 61 (463,550)       (463,489)
Stock option and RSU-related compensation expense and common shares issued upon conversion of RSUs, net of forfeited stock options (in shares)   61,438          
Common shares issues in connection with reverse stock split   $ 43 (43)       0
Common shares issues in connection with reverse stock split (in shares)   42,588          
Net (loss)           (2,840,938) (2,840,938)
Ending balance at Jun. 30, 2023 $ 100 $ 10,395 $ 131,912,605 $ (8,010) $ 0 $ (139,989,904) $ (8,074,814)
Ending balance (in shares) at Jun. 30, 2023 100,000 10,395,805          
v3.23.3
CONSOLIDATED STATEMENTS OF CASH FLOWS (unaudited) - USD ($)
3 Months Ended
Jun. 30, 2023
Jun. 30, 2022
CASH FLOWS FROM OPERATING ACTIVITIES    
Net loss $ (2,840,938) $ (7,493,408)
Adjustments to reconcile net loss to net cash used in operating activities    
Depreciation expense 253,515 187,432
Shares issued and vested, options and RSU expensed for employee and non-employee services 93,269 2,449,047
Amortization of debt discount 0 935,102
Non-cash interest expense 0 49,710
Non-cash lease expense (4,822) (275)
Changes in operating assets and liabilities:    
Accounts receivable 1,460,615 (495,350)
Inventory 46,961 (2,094,675)
Prepaid expenses and other current assets 394,086 (1,434,887)
Accounts payable 992,940 1,492,615
Accrued expenses 420,035 3,910,039
Note payable, short-term (1,224,652) 0
NET CASH USED IN OPERATING ACTIVITIES (408,991) (2,494,650)
CASH FLOWS FROM INVESTING ACTIVITIES    
Purchase of fixed assets 0 (854,997)
CASH USED IN INVESTING ACTIVITIES 0 (854,997)
CASH FLOWS FROM FINANCING ACTIVITIES    
Proceeds from (repayment of) revolving financing, net (215,115) (504,083)
Proceeds from sale of common stock, net 0 5,268,592
CASH PROVIDED BY FINANCING ACTIVITIES (215,115) 4,764,509
NET CHANGE IN CASH (624,106) 1,414,862
CASH AT BEGINNING OF PERIOD 1,038,754 1,531,062
CASH AT END OF PERIOD 414,648 2,945,924
INTEREST PAID 423,768 215,164
TAXES PAID $ 0 $ 0