The accompanying notes are an integral part of these condensed
consolidated financial statements.
THE ALKALINE WATER COMPANY INC.
|
CONSOLIDATED STATEMENT OF CASH FLOWS
|
(unaudited)
|
|
|
For the Six Months
|
|
|
|
September 30, 2017
|
|
|
September 30, 2016
|
|
CASH FLOWS FROM OPERATING ACTIVITIES
|
|
|
|
|
|
|
Net loss
|
$
|
(2,879,482
|
)
|
$
|
(2,289,307
|
)
|
|
|
|
|
|
|
|
Adjustments to reconcile net loss to net cash used in operating
|
|
|
|
|
|
|
Depreciation expense
|
|
192,559
|
|
|
180,397
|
|
Stock compensation expense
|
|
1,670,294
|
|
|
319,125
|
|
Amortization of debt
discount and accretion
|
|
295,000
|
|
|
137,369
|
|
Interest expense converted to equity
|
|
14,583
|
|
|
|
|
Interest expense relating
to amortization of capital lease discount
|
|
51,505
|
|
|
51,504
|
|
Change in derivative liabilities
|
|
-
|
|
|
(6,357
|
)
|
Changes in operating
assets and liabilities:
|
|
|
|
|
|
|
Accounts receivable
|
|
(429,564
|
)
|
|
(168,448
|
)
|
Inventory
|
|
185,641
|
|
|
(112,901
|
)
|
Prepaid expenses and other
current assets
|
|
(32,914
|
)
|
|
(10,294
|
)
|
Accounts
payable
|
|
107,956
|
|
|
110,383
|
|
Accrued expenses
|
|
155,917
|
|
|
138,266
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
NET CASH USED IN OPERATING
ACTIVITIES
|
|
(668,505
|
)
|
|
(1,650,263
|
)
|
|
|
|
|
|
|
|
CASH FLOWS FROM INVESTING ACTIVITIES
|
|
|
|
|
|
|
Purchase of fixed assets
|
|
(226,446
|
)
|
|
(79,696
|
)
|
Equipment Deposits -
related party
|
|
-
|
|
|
(104,619
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
CASH USED IN INVESTING ACTIVITIES
|
|
(226,446
|
)
|
|
(184,315
|
)
|
|
|
|
|
|
|
|
CASH FLOWS FROM FINANCING ACTIVITIES
|
|
|
|
|
|
|
Proceeds from notes
payable
|
|
-
|
|
|
510,000
|
|
Proceeds from convertible note payable
|
|
500,000
|
|
|
-
|
|
Proceeds from revolving
financing
|
|
409,943
|
|
|
87,918
|
|
Proceeds from sale of common stock, net
|
|
-
|
|
|
425,000
|
|
Proceeds from the exercise of warrants, net
|
|
-
|
|
|
300,000
|
|
Repayment of notes payable
|
|
-
|
|
|
(373,727
|
)
|
Repayment of capital lease
|
|
(136,966
|
)
|
|
(117,021
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
CASH PROVIDED BY FINANCING
ACTIVITIES
|
|
772,977
|
|
|
832,170
|
|
|
|
|
|
|
|
|
NET CHANGE IN CASH
|
|
(121,974
|
)
|
|
(1,002,408
|
)
|
|
|
|
|
|
|
|
CASH AT BEGINNING OF PERIOD
|
|
603,805
|
|
|
1,192,119
|
|
|
|
|
|
|
|
|
CASH AT END OF PERIOD
|
$
|
481,831
|
|
$
|
189,711
|
|
|
|
|
|
|
|
|
INTEREST PAID
|
$
|
154,497
|
|
$
|
36,023
|
|
The accompanying notes are an integral part of these condensed
consolidated financial statements.
F-28
THE ALKALINE WATER COMPANY INC.
|
|
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
|
(unaudited)
|
NOTE 1 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Basis of presentation
The consolidated financial statements included herein,
presented in accordance with United States generally accepted accounting
principles and stated in U.S. dollars, have been prepared by the Company,
pursuant to the rules and regulations of the Securities and Exchange Commission.
Certain information and footnote disclosures normally included in financial
statements prepared in accordance with generally accepted accounting principles
have been condensed or omitted pursuant to such rules and regulations, although
the Company believes that the disclosures are adequate to make the information
presented not misleading. The interim financial statements are condensed and
should be read in conjunction with the Company's latest annual financial
statements and that interim disclosures generally do not repeat those in the
annual statements.
These statements reflect all adjustments, consisting of normal
recurring adjustments, which in the opinion of management, are necessary for
fair presentation of the information contained therein.
Principles of consolidation
The consolidated financial statements include the accounts of
The Alkaline Water Company Inc. (a Nevada Corporation), Alkaline Water Corp. (an
Arizona Corporation) and Alkaline 88, LLC (an Arizona Limited Liability
Company).
All significant intercompany balances and transactions have
been eliminated. The Alkaline Water Company Inc. (a Nevada Corporation),
Alkaline Water Corp. (an Arizona Corporation) and Alkaline 88, LLC (an Arizona
Limited Liability Company) will be collectively referred herein to as the
Company. Any reference herein to The Alkaline Water Company Inc., the
Company, we, our or us is intended to mean The Alkaline Water Company
Inc., including the subsidiaries indicated above, unless otherwise indicated.
Reverse split
Effective December 30, 2015, the Company effected a fifty for
one reverse stock split of its authorized and issued and outstanding shares of
common stock. As a result, the authorized common stock has decreased from
1,125,000,000 shares of common stock, with a par value of $0.001 per share, to
22,500,000 shares of common stock, with a par value of $0.001 per share. All
shares and per share amounts have been retroactively restated to reflect such
split.
On January 21, 2016, stockholders of our company approved, by
written consents, an amendment to the articles of incorporation of our company
to increase the number of authorized shares of our common stock from 22,500,000
to 200,000,000.
The Company received written consents representing 20,776,000
votes from the holders of shares of its common stock and our Series A Preferred
Stock voting as a single class, representing approximately 61% of the voting
power of its outstanding common stock and its outstanding Series A Preferred
Stock voting as a single class as of the record date (January 12, 2016). On
January 21, 2016, there were no written consents received by the Company
representing a vote against, abstention or broker non-vote with respect to the
proposal.
F-29
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. In addition, the number of issued and outstanding
shares of Series A Preferred Stock continues to be 20,000,000. However, holders
of Series A Preferred Stock had 0.2 vote per share of Series A Preferred Stock,
instead of 10 votes per share of Series A Preferred Stock, as a result of the
reverse stock split.
On January 22, 2016, the Company amended the certificate of
designation for our Series A Preferred Stock by filing an amendment to
certificate of designation with the Secretary of State of the State of Nevada.
The Company amended the certificate of designation for our Series A Preferred
Stock by deleting Section 2.2 of the certificate of designation, which
proportionately increases or decreases the number of votes per share of Series A
Preferred Stock in the event of any dividend or other distribution on our common
stock payable in its common stock or a subdivision or consolidation of the
outstanding shares of its common stock. Accordingly, holders of Series A
Preferred Stock will have 10 votes per share of Series A Preferred Stock,
instead of 0.2 votes per share of Series A Preferred Stock.
On March 30, 2016, the Company designated 3,000,000 shares of
the authorized and unissued preferred stock of our company as Series C
Preferred Stock by filing a Certificate of Designation with the Secretary of
State of the State of Nevada. Each share of the Series C Preferred Stock will be
convertible, without the payment of any additional consideration by the holder
and at the option of the holder, into one fully paid and non-assessable share of
our common stock at any time after (i) the Company achieves consolidated revenue
equal to or greater than $15,000,000 in any 12 month period, ending on the last
day of any quarterly period of our fiscal year; or (ii) a Negotiated Trigger
Event, defined as an event upon which the Series C Preferred Stock will be
convertible as may be agreed by our company and the holder in writing from time
to time.
On May 3, 2017, we designated 3,000,000 shares of the
authorized and unissued preferred stock of our company as Series D Preferred
Stock by filing a Certificate of Designation with the Secretary of State of the
State of Nevada. On November 2, 2017, we increased the number of authorized
shares of Series D Preferred Stock in our company to 5,000,000 shares by filing
an Amendment to the foregoing Certificate of Designation with the Secretary of
State of the State of Nevada. Each share of the Series D Preferred Stock will be
convertible, without the payment of any additional consideration by the holder
and at the option of the holder, into one fully paid and non-assessable share of
our common stock at any time after (i) we achieve the consolidated revenue of
our company and all of its subsidiaries equal to or greater than $40,000,000 in
any 12 month period, ending on the last day of any quarterly period of our
fiscal year; or (ii) a Negotiated Trigger Event, defined as an event upon which
the Series D Preferred Stock will be convertible as may be agreed by our company
and the holder in writing from time to time.
Use of Estimates
The preparation of financial statements in conformity with
accounting principles generally accepted in the United States of America
requires management to make estimates and assumptions that affect the reported
amounts of assets and liabilities and disclosure of contingent assets and
liabilities at the date of the financial statements and the reported amounts of
revenues and expenses during the reporting period. Actual results could differ
significantly from those estimates.
Cash and Cash Equivalents
The Company considers all highly liquid instruments with an
original maturity of three months or less to be considered cash equivalents. The
carrying value of these investments approximates fair value. The Company had
$481,831 and $603,805 in cash and cash equivalents at September 30, 2017 and
March 31, 2017, respectively.
Accounts receivable and allowance for doubtful accounts
The Company generally does not require collateral, and the
majority of its trade receivables are unsecured. The carrying amount for
accounts receivable approximates fair value.
F-30
Accounts receivable are periodically evaluated for
collectability based on past credit history with clients. Provisions for losses
on accounts receivable are determined on the basis of loss experience, known and
inherent risk in the account balance and current economic conditions.
Inventory
Inventory represents raw and blended chemicals and other items
valued at the lower of cost or market with cost determined using the weight
average method which approximates first-in first-out method, and with market
defined as the lower of replacement cost or realizable value.
As of September 30, 2017 and March, 31 2017, inventory
consisted of the following:
|
|
September 30,
2017
|
|
|
March 31, 2017
|
|
|
|
|
|
|
|
|
Raw materials
|
$
|
453,858
|
|
$
|
587,689
|
|
Finished goods
|
|
180,489
|
|
|
232,300
|
|
Total inventory
|
$
|
634,347
|
|
$
|
819,989
|
|
Property and equipment
The Company records all property and equipment at cost less
accumulated depreciation. Improvements are capitalized while repairs and
maintenance costs are expensed as incurred. Depreciation is calculated using the
straight-line method over the estimated useful life of the assets or the lease
term, whichever is shorter. Depreciation periods are as follows for the relevant
fixed assets:
Equipment
|
|
5 years
|
|
Equipment under capital lease
|
|
5 years
|
|
Stock-based Compensation
The Company accounts for stock-based compensation to employees
in accordance with Accounting Standards Codification (ASC) 718. Stock-based
compensation to employees is measured at the grant date, based on the fair value
of the award, and is recognized as expense over the requisite employee service
period. The Company has elected to account for forfeitures as they occur.
Company accounts for stock-based compensation to other than employees in
accordance with ASC 505-50. Equity instruments issued to other than employees
are valued at the earlier of a commitment date or upon completion of the
services, based on the fair value of the equity instruments and is recognized as
expense over the service period. The Company estimates the fair value of
stock-based payments using the Black-Scholes option-pricing model for common
stock options and warrants and the closing price of the Companys common stock
for common share issuances.
Revenue recognition
The Company recognizes revenue when all of the following
conditions are satisfied: (1) there is persuasive evidence of an arrangement;
(2) the product or service has been provided to the customer; (3) the amount to
be paid by the customer is fixed or determinable; and (4) the collection of such
amount is probable.
The Company records revenue when it is realizable and earned
upon shipment of the finished products. 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.
Fair value measurements
F-31
The valuation of our embedded derivatives and warrant
derivatives are determined primarily by the multinomial distribution (Lattice)
model. An embedded derivative is a derivative instrument that is embedded within
another contract, which under the convertible note (the host contract) includes
the right to convert the note by the holder, certain default redemption right
premiums and a change of control premium (payable in cash if a fundamental
change occurs). In accordance with ASC 815
Accounting for Derivative
Instruments and Hedging Activities
, as amended, these embedded derivatives
are marked-to-market each reporting period, with a corresponding non-cash gain
or loss charged to the current period. A warrant derivative liability is also
determined in accordance with ASC 815. Based on ASC 815, warrants which are
determined to be classified as derivative liabilities are marked-to-market each
reporting period, with a corresponding non-cash gain or loss charged to the
current period. The practical effect of this has been that when our stock price
increases so does our derivative liability resulting in a non-cash loss charge
that reduces our earnings and earnings per share. When our stock price declines,
the Company records a non-cash gain, increasing our earnings and earnings per
share. As such, fair value is a market-based measurement that should be
determined based on assumptions that market participants would use in pricing an
asset or liability. As a basis for considering such assumptions, there exists a
three-tier fair value hierarchy, which prioritizes the inputs used in measuring
fair value as follows:
Level 1
|
unadjusted quoted prices in active markets for identical
assets or liabilities that the Company has the ability to access as of the
measurement date.
|
|
|
Level 2
|
inputs other than quoted prices included within Level 1
that are directly observable for the asset or liability or indirectly
observable through corroboration with observable market data.
|
|
|
Level 3
|
unobservable inputs for the asset or liability only used
when there is little, if any, market activity for the asset or liability
at the measurement date.
|
This hierarchy requires the Company to use observable market
data, when available, and to minimize the use of unobservable inputs when
determining fair value.
To determine the fair value of our embedded derivatives,
management evaluates assumptions regarding the probability of certain future
events. Other factors used to determine fair value include our period end stock
price, historical stock volatility, risk free interest rate and derivative term.
The fair value recorded for the derivative liability varies from period to
period. This variability may result in the actual derivative liability for a
period either above or below the estimates recorded on our consolidated
financial statements, resulting in significant fluctuations in other income
(expense) because of the corresponding non-cash gain or loss recorded.
Income taxes
In accordance with ASC 740
Accounting for Income
Taxes
, the provision for income taxes is computed using the asset and
liability method. Under the asset and liability method, deferred income tax
assets and liabilities are determined based on the differences between the
financial reporting and tax bases of assets and liabilities and are measured
using the currently enacted tax rates and laws. A valuation allowance is
provided for the amount of deferred tax assets that, based on available
evidence, are not expected to be realized.
Basic and diluted loss per share
Basic and diluted earnings or loss per share (EPS) amounts in
the consolidated financial statements are computed in accordance ASC 260 10
Earnings per Share
, which establishes the requirements for presenting
EPS. Basic EPS is based on the weighted average number of common shares
outstanding. Diluted EPS is based on the weighted average number of common
shares outstanding and dilutive common stock equivalents. Basic EPS is computed
by dividing net income or loss available to common stockholders (numerator) by
the weighted average number of common shares outstanding (denominator) during
the period. Potentially dilutive securities were excluded from the calculation
of diluted loss per share, because their effect would be anti-dilutive.
F-32
Reclassification
Certain accounts in the prior period were reclassified to
conform to the current period financial statements presentation.
Newly issued accounting pronouncements
In July 2015, the Financial Accounting Standards Board (FASB)
issued Accounting Standards Update No. 2015-11 (ASU 2015-11) "Simplifying the
Measurement of Inventory". According to ASU 2015-11 an entity should measure
inventory within the scope of this update at the lower of cost and net
realizable value. Net realizable value is the estimated selling prices in the
ordinary course of business, less reasonably predictable costs of completion,
disposal, and transportation. Subsequent measurement is unchanged for inventory
measured using LIFO or the retail inventory method. The amendments in ASU
2015-11 more closely align the measurement of inventory in GAAP with the
measurement of inventory in International Financial Reporting Standards (IFRS).
The Board has amended some of the other guidance in Topic 330 to more clearly
articulate the requirements for the measurement and disclosure of inventory.
However, the Board does not intend for those clarifications to result in any
changes in practice. Other than the change in the subsequent measurement
guidance from the lower of cost or market to the lower of cost and net
realizable value for inventory within the scope of ASU 2015-11, there are no
other substantive changes to the guidance on measurement of inventory. For
public business entities, the amendments in ASU 2015-11 are effective for fiscal
years beginning after December 15, 2016, including interim periods within those
fiscal years. For all other entities, the amendments in ASU 2015-11 are
effective for fiscal years beginning after December 15, 2016, and interim
periods within fiscal years beginning after December 15, 2017. The amendments in
ASU 2015-11 should be applied prospectively with earlier application permitted
as of the beginning of an interim or annual reporting period.
The Board decided that the only disclosures required at
transition should be the nature of and reason for the change in accounting
principle. An entity should disclose that information in the first annual period
of adoption and in the interim periods within the first annual period if there
is a measurement-period adjustment during the first annual period in which the
changes are effective.
On March 30, 2016, the FASB issued Accounting Standards Update
(ASU) 2O16-09) Improvements to Employee Share-based Accounting which amends ASC
718, Compensation Stock Compensation . The ASU includes provisions intended to
simplify various provisions related to how share-based payments are
accounted for and presented in the financial statements. Compensation cost is
ultimately only recognized for awards with performance and/or service conditions
that vest (or for awards with market conditions for which the requisite service
period is satisfied). Under the new guidance, entities are permitted to make an
accounting policy election related to how forfeitures will impact the
recognition of compensation cost. Currently entities are required to develop an
assumption regarding the forfeiture rate on the grant date, which impacts the
estimated amount of compensation cost recorded over the requisite service
period. The forfeiture estimates are updated throughout the service period so
that compensation cost is ultimately only recognized for awards that vest.
Under the new guidance, entities are permitted to make an
accounting policy to either estimate forfeitures each period, as required today
or to account for forfeitures as they occur. The Company elects to account for
forfeitures as they occur. ASU 2O16-O9 is effective for public business entities
for annual reporting periods beginning after December 15, 2O16 and interim
periods within that reporting period.
The Company has evaluated other recent accounting
pronouncements through September 2017 and believes that none of them will have a
material effect on our financial statements.
F-33
NOTE 2 GOING CONCERN
The accompanying financial statements have been prepared
assuming that the Company will continue as a going concern, which contemplates
the recoverability and/or acquisition and sale of assets and the satisfaction of
liabilities in the normal course of business. Since its inception, the Company
has been engaged substantially in financing activities, developing its business
plan and building its initial customer and distribution base for its products.
As a result, the Company incurred accumulated net losses from Inception (June
19, 2012) through the period ended September 30, 2017 of ($26,269,516). In
addition, the Companys development activities since inception have been
financially sustained through debt and equity financing.
The ability of the Company to continue as a going concern is
dependent upon its ability to raise additional capital from the sale of common
stock and, ultimately, the achievement of significant operating revenues. These
financial statements do not include any adjustments relating to the
recoverability and classification of recorded asset amounts, or amounts and
classification of liabilities that might result from this uncertainty.
NOTE 3 PROPERTY AND EQUIPMENT
Fixed assets consisted of the following at:
|
|
September 30, 2017
|
|
|
March 31, 2017
|
|
Machinery and Equipment
|
$
|
1,200,293
|
|
$
|
1,012,000
|
|
Machinery under Capital Lease
|
|
735,781
|
|
|
735,781
|
|
Machinery - Construction in Progress
|
|
224,662
|
|
|
185,848
|
|
Office Equipment
|
|
79,681
|
|
|
79,681
|
|
Leasehold Improvements
|
|
-
|
|
|
3,979
|
|
Less: Accumulated Depreciation
|
|
(1,086,382
|
)
|
|
(897,141
|
)
|
Fixed Assets, net
|
$
|
1,154,035
|
|
$
|
1,120,148
|
|
Depreciation expense for the six months ended September 30, 2017 and
September 30 2016 was $193,221and $180,397, respectively.
NOTE 4 REVOLVING FINANCING
On February 1, 2017, The Alkaline Water Company Inc. and its
subsidiaries (the Company) entered into a Credit and Security Agreement (the
Credit Agreement) with SCM Specialty Finance Opportunities Fund, L.P. (the
Lender).
The Credit Agreement provides the Company with a revolving
credit facility (the Revolving Facility), the proceeds of which are to be used
to repay existing indebtedness of the Company, transaction fees incurred in
connection with the Credit Agreement and for working capital needs of the
Company.
Under the terms of the Credit Agreement, the Lender has agreed
to make cash advances to the Company in an aggregate principal at any one time
outstanding not to exceed the lesser of (i) $3 million (the Revolving Loan
Commitment Amount) and (ii) the Borrowing Base (defined to mean, as of any date
of determination, 85% of net eligible billed receivables plus 65% of eligible
unbilled receivables, minus certain reserves).
The Credit Agreement has a term of three years, unless earlier
terminated by the parties in accordance with the terms of the Credit Agreement.
The principal amount of the Revolving Facility outstanding
bears interest at a rate per annum equal to (i) a fluctuating interest rate per
annum equal at all times to the rate of interest announced, from time to time,
within Wells Fargo Bank at its principal office in San Francisco as its prime
rate, plus (ii) 3.25%, payable monthly in arrears.
F-34
To secure the payment and performance of the obligations under
the Credit Agreement, the Company granted to the Lender a continuing security
interest in all of the Companys assets and agreed to a lockbox account
arrangement in respect of certain eligible receivables.
In connection with the Credit Agreement, the Company paid to
the Lender a $30,000 facility fee. The Company agreed to pay to Lender monthly
an unused line fee in amount equal to 0.083% per month of the difference derived
by subtracting (i) the average daily outstanding balance under the Revolving
Facility during the preceding month, from (ii) the Revolving Loan Commitment
Amount. The unused line fee will be payable monthly in arrears. The Company also
agreed to pay the Lender as additional interest a monthly collateral management
fee equal to 0.35% per month calculated on the basis of the average daily
balance under the Revolving Facility outstanding during the preceding month. The
collateral management fee will be payable monthly in arrears. Upon a termination
of the Revolving Facility, the Company agreed to pay the Lender a termination
fee in an amount equal to 2% of the Revolving Loan Commitment Amount if the
termination occurs before February 1, 2020. The Company must also pay certain
fees in the event that receivables are not properly deposited in the appropriate
lockbox account.
The interest rate will be increased by 5% in the event of a
default under the Credit Agreement. Events of default under the Credit
Agreement, some of which are subject to certain cure periods, include a failure
to pay obligations when due, the making of a material misrepresentation to the
Lender, the rendering of certain judgments or decrees against the Company and
the commencement of a proceeding for the appointment of a receiver, trustee,
liquidator or conservator or filing of a petition seeking reorganization or
liquidation or similar relief.
The Credit Agreement contains customary representations and
warranties and various affirmative and negative covenants including the right of
first refusal to provide financing for the Company and the financial and loan
covenants, such as the loan turnover rate, minimum EBTDA, fixed charge coverage
ratio and minimum liquidity requirements.
NOTE 5 DERIVATIVE LIABILITY
On May 1, 2014, the Company completed the offering and sale of
an aggregate of shares of our common stock and warrants. Each share of common
stock sold in the offering was accompanied by a warrant to purchase one-half of
a share of common stock. The warrants include down-round provisions that reduce
the exercise price of a warrant and convertible instrument. As required by ASC
815 Derivatives and Hedging, if the Company either issues equity shares for a
price that is lower than the exercise price of those instruments or issues new
warrants or convertible instruments that have a lower exercise price, the
investors will be entitled to down-round protection. The Company evaluated
whether its warrants and convertible debt instruments contain provisions that
protect holders from declines in its stock price or otherwise could result in
modification of either the exercise price or the shares to be issued under the
respective warrant agreements. The Company determined that a portion of its
outstanding warrants and conversion instruments contained such provisions
thereby concluding were not indexed to the Companys own stock and therefore a
derivative instrument.
On August 20, 2014, the Company entered into a warrant
amendment agreement with certain holders of the Companys outstanding common
stock purchase warrants whereby the Company agreed to reduce the exercise price
of the Existing Warrants the Holders are to be issued new common stock purchase
warrants of the Company in the form of the Existing Warrants to purchase up to a
number of shares of our common stock equal to the number of Existing Warrants
exercised by the Holders
The Company analyzed the warrants and conversion feature under
ASC 815 Derivatives and Hedging to determine the derivative liability as of
September 30, 2017 was $3,407.
NOTE 6 STOCKHOLDERS EQUITY
Preferred Shares
F-35
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. The Series A Preferred
Stock had 10 votes per share (reduced to 0.2 votes per share as a result of the
fifty for one reverse stock split, which became effective as of December 30,
2015) and are not convertible into shares of our common stock.
Grant of Series A Preferred Stock
On October 8, 2013, the Company issued a total of 20,000,000
shares of non-convertible Series A Preferred Stock to Steven P. Nickolas and
Richard A. Wright (10,000,000 shares to each), our directors and executive
officers, in consideration for the past services, at a deemed value of $0.001
per share. The Company valued these shares based on the cost considering the
time and average billing rate of these individuals and recorded a $20,000 stock
compensation cost for the year ended March 31, 2014.
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. In addition, the number of issued and outstanding
shares of Series A Preferred Stock continues to be 20,000,000. However, holders
of Series A Preferred Stock had 0.2 vote per share of Series A Preferred Stock,
instead of 10 votes per share of Series A Preferred Stock, as a result of the
reverse-stock split.
On January 22, 2016, the Company amended the certificate of
designation for our Series A Preferred Stock by filing an amendment to
certificate of designation with the Secretary of State of the State of Nevada.
The Company amended the certificate of designation for our Series A Preferred
Stock by deleting Section 2.2 of the certificate of designation, which
proportionately increases or decreases the number of votes per share of Series A
Preferred Stock in the event of any dividend or other distribution on our common
stock payable in its common stock or a subdivision or consolidation of the
outstanding shares of its common stock. Accordingly, holders of Series A
Preferred Stock will have 10 votes per share of Series A Preferred Stock,
instead of 0.2 votes per share of Series A Preferred Stock.
Grant of Series C Convertible Preferred Stock
On March 30, 2016, the Company designated 3,000,000 shares of
the authorized and unissued preferred stock of our company as Series C
Preferred Stock by filing a Certificate of Designation with the Secretary of
State of the State of Nevada. Each share of the Series C Preferred Stock will be
convertible, without the payment of any additional consideration by the holder
and at the option of the holder, into one fully paid and non-assessable share of
our common stock at any time after (i) the Company achieves consolidated revenue
equal to or greater than $15,000,000 in any 12 month period, ending on the last
day of any quarterly period of our fiscal year; or (ii) a Negotiated Trigger
Event, defined as an event upon which the Series C Preferred Stock will be
convertible as may be agreed by our company and the holder in writing from time
to time.
Effective March 31, 2016, the Company issued a total of
3,000,000 shares of our Series C Preferred Stock to Steven P. Nickolas and
Richard A. Wright (1,500,000 shares to each), pursuant to their employment
agreements dated effective March 1, 2016. On August 17, 2017, Steven P. Nickolas
converted his 1,500,000 shares of Series C Preferred Stock to 1,500,000 shares
of Common Stock.
Grant of Series D Convertible Preferred Stock
On May 3, 2017, the Company designated 3,000,000 shares of the
authorized and unissued preferred stock of our company as Series D Preferred
Stock by filing a Certificate of Designation with the Secretary of State of the
State of Nevada. On November 2, 2017, we increased the number of authorized
shares of Series D Preferred Stock in our company to 5,000,000 shares by filing
an Amendment to the foregoing Certificate of Designation with the Secretary of
State of the State of Nevada. Each share of the Series D Preferred Stock will be
convertible, without the payment of any additional consideration by the holder
and at the option of the holder, into one fully paid and non-assessable share of
our common stock at any time after (i) we achieve the consolidated revenue of
our company and all of its subsidiaries equal to or greater than $40,000,000 in any 12
month period, ending on the last day of any quarterly period of our fiscal year;
or (ii) a Negotiated Trigger Event, defined as an event upon which the Series D
Preferred Stock will be convertible as may be agreed by our company and the
holder in writing from time to time. The company then issued a total of
3,000,000 shares of our Series D Preferred Stock to our directors, officers,
consultants and employees. We issued these shares relying on the registration
exemption provided for in Section 4(a)(2) of the Securities Act of 1933.
F-36
Common Stock
The Company was authorized to issue 1,125,000,000 shares of
$0.001 par value common stock. On May 31, 2013, the Company effected a 15-for-1
forward stock split of our $0.001 par value common stock. All shares and per
share amounts have been retroactively restated to reflect such split. Prior to
the acquisition of Alkaline Water Corp., the Company had 109,500,000 shares of
common stock issued and outstanding. On May 31, 2013, the Company issued
43,000,000 shares in exchange for a 100% interest in Alkaline Water Corp. For
accounting purposes, the acquisition of Alkaline Water Corp. by The Alkaline
Water Company Inc. has been recorded as a reverse acquisition of a company and
recapitalization of Alkaline Water Corp. based on the factors demonstrating that
Alkaline Water Corp. represents the accounting acquirer. Consequently, after the
closing of this agreement the Company adopted the business of Alkaline Water
Corp.s wholly-owned subsidiary, Alkaline 88, LLC. As part of the acquisition,
the former management of the Company agreed to cancel 75,000,000 shares of
common stock.
On December 30, 2015, the Company effected a fifty for one
reverse stock split of its authorized and issued and outstanding shares of
common stock. As a result, the authorized common stock has decreased from
1,125,000,000 shares of common stock, with a par value of $0.001 per share, to
22,500,000 shares of common stock, with a par value of $0.001 per share. All
shares and per share amounts have been retroactively restated to reflect such
split.
On January 21, 2016, stockholders of our company approved, by
written consents, an amendment to the articles of incorporation of our company
to increase the number of authorized shares of our common stock from 22,500,000
to 200,000,000.
The Company received written consents representing 20,776,000
votes from the holders of shares of its common stock and our Series A Preferred
Stock voting as a single class, representing approximately 61% of the voting
power of its outstanding common stock and its outstanding Series A Preferred
Stock voting as a single class as of the record date (January 12, 2016). On
January 21, 2016, there were no written consents received by the Company
representing a vote against, abstention or broker non-vote with respect to the
proposal.
Common Stock Issued for Services
Effective April 28, 2017, we issued 610,000 shares of common
stock to six persons, one of whom is a director and officer of our company. Of
these shares, 560,000 are restricted from transfer for a period of two years.
In consideration for services rendered and to be rendered to
our company pursuant to a services agreement dated July 26, 2016, we issued
consultant 262,596 shares of our common stock on August 23, 2017.
NOTE 7 OPTIONS AND WARRANTS
Stock Option Awards
Effective April 28, 2017, we granted a total of 1,790,000 stock
options to our directors, officers, consultants employees. The stock options are
exercisable at the exercise price of $1.29 per share for a period of six and
one-half years from the date of grant. 360,000 of the stock options vest as
follows: (i) 120,000 upon the date of grant; and (ii) 120,000 on each
anniversary date of grant. 1,430,000 of the stock options vest as follows: (i)
357,500 upon the date of grant; and (ii) 357,500 on each anniversary date of
grant. We granted the stock options to 12 U.S. Persons and 3 non U.S. Persons
(as that term is defined in Regulation S of the Securities Act of 1933) and in
issuing securities we relied on the registration exemption provided for in Regulation
S and/or Section 4(a)(2) of the Securities Act of 1933.
F-37
In June 2017, two option holders elected to exercise their
stock options. A total of 181,000 stock options were surrendered in exchange for
121,288 common stock shares.
NOTE 8 RELATED PARTY TRANSACTIONS
On November 18, 2016, our company provided notice to Steven P.
Nickolas, our then-president and chief executive officer, of our board of
directors finding that there was just cause for termination of Mr. Nickolass
employment and of our companys intent to terminate the employment of Mr.
Nickolas for just cause pursuant to the provision of the Employment Agreement
with Mr. Nickolas dated March 1, 2016. Under the Employment Agreement, Mr.
Nickolas had 30 days to cure the failures and breaches creating just cause for
termination. Mr. Nickolas failed to cure such failure and breaches and, on April
7, 2017, our company terminated the employment of Mr. Nickolas for cause. In
addition, our company removed Mr. Nickolas as the president and chief executive
officer of our company.
On April 7, 2017, our board of directors appointed Richard A.
Wright as president of our company. On April 28, 2017, Mr. Wright resigned as
the secretary and treasurer of our company and he was appointed as the chief
executive officer of our company.
On April 28, 2017, our board of directors appointed David
Guarino as chief financial officer, treasurer, secretary president of our
company.
On May 3, 2017, the Company designated 3,000,000 shares of the
authorized and unissued preferred stock of our company as Series D Preferred
Stock by filing a Certificate of Designation with the Secretary of State of the
State of Nevada. Mr. Wright and Mr. Guarino were each issued 1,000,000 shares
each of the Series D Preferred Stock.
On September 14, 2017, Wright Investment Group LLC, an entity
controlled by Richard A. Wright, chief executive officer, president and
director, advanced $200,000 to the Company.
NOTE 9 CAPITAL LEASE
On October 22, 2014, the Company entered into a master lease
agreement with Veterans Capital Fund, LLC (the Lessor) for the secured lease
line of credit financing in an amount not to exceed $600,000. The lease is
expected to be secured by three new alkaline generating electrolysis system
machines. Our wholly-owned subsidiary, Alkaline 88, LLC, and Water Engineering
Solutions, LLC acted as co-lessees. Water Engineering Solutions, LLC is an
entity that is controlled and owned by our former president and chief executive
officer, Steven P. Nickolas, and our current president and chief executive
officer, Richard A. Wright. Pursuant to the master lease agreement, the Lessor
agreed to lease to us the equipment described in any equipment schedule signed
by us and approved by the Lessor. It is expected that any lease under the master
lease agreement will be structured for a three year lease term with fixed
monthly lease rental payments based on a monthly lease rate factor of 3.4667% of
the Lessors capital cost. In connection with the entering into the master lease
agreement, the Company also entered into a warrant agreement with the Lessor,
pursuant to which the Company agreed to issue a warrant to purchase 72,000
shares of our common stock to the Lessor and/or its affiliates at an exercise
price of $6. 25 per share for a period of five years, 18,000 shares vested.
On February 25, 2015, the Company amended the master lease
agreement with Veterans Capital Fund, LLC for the increase in the secured lease
line of credit financing to an amount not to exceed $800,000. The lease was
secured by new alkaline generating electrolysis system machines by our
wholly-owned subsidiary, Alkaline 88, LLC, and Water Engineering Solutions, LLC.
Water Engineering Solutions, LLC is an entity that is controlled and owned by
our former president and chief executive officer, Steven P. Nickolas, and our
current president and chief executive officer, Richard A. Wright. Pursuant to
the master lease agreement, the Lessor agreed to lease to us the equipment
described in any equipment schedule signed by us and approved by the Lessor. It
is expected that any lease under the master lease agreement will be structured
for a three year lease term with fixed monthly lease rental payments based on a monthly lease rate factor of 3.4667% of the Lessors
capital cost. In connection with the entering into the master lease agreement,
the Company entered into a warrant agreement with the Lessor, pursuant to which
the Company agreed to cancel the previously issued warrant certificate for
72,000 warrants and issue a warrant certificate for warrants to purchase 102,000
shares of our common stock to the Lessor and/or its affiliates at an exercise
price of $5.00 per share for a period of five years. 18,000 shares vested on
October 22, 2014, 13,316 shares on October 28, 2014, 13,606 shares on December
22, 2014, 6,945 shares on February 3, 2015 and 15,799 shares on March 5, 2015.
The remaining 18,105 shares will vest on a pro rata basis according to any
mounts the Lessor funds pursuant to any lease schedules under the master lease
agreement, provided that if the Company draws on 90% or more of the total lease
line under the master lease agreement, then all such shares will be deemed to be
vested. The Company recorded the bifurcated value of $309,028 of the warrants
issued as additional paid in capital, the value was determine using a
Black-Scholes, a level 3 valuation measure.
F-38
During the year ended March 31, 2015 the Company agreed to
lease specialized equipment used to make our alkaline water with a value of
$735,781 under the above master lease agreement. The Company evaluated this
lease under ASC 840-30 Leases-Capital Leases and concluded that the lease is a
capital asset. As of September 30, 2017 the balance owed to Veterans Capital
Fund, LLC under the lease is $112,752.
NOTE 10 NOTES PAYABLE
On September 20, 2016, we entered into a loan facility
agreement (the Loan Agreement) with Turnstone Capital Inc., whereby Turnstone
Capital Inc. agreed to make available to our company a loan in the aggregate
principal amount of $1,500,000 (the Loan Amount). In June, 2017, the Loan
Agreement was amended to increase the Loan amount to $1,700,000. Pursuant to the
Loan Agreement, Turnstone Capital Inc. agreed to make one or more advances of
the Loan Amount to our company as requested from time to time by our company in
an amount to be agreed upon by our company and the Lender (each, an Advance).
During the year ended March 31, 2017, Turnstone Capital Inc.
made advances totaling $1,000,000. This amount together with accrued interest of
$30,000 was converted to 1,030,000 shares of our common stock on March 31, 2017.
In June, 2017, Turnstone Capital Inc. advanced an additional
$500,000 under the Loan Agreement. The Company evaluated this transaction under
ASC 470-20-30 Debt liability and equity component
and determined that
a debt discount of $295,000 was provided and will be amortized over the
remaining term of the Loan Agreement.
On September 29, 2017, Turnstone Capital Inc. converted the
$500,000 plus accrued interest of 14,583 to 514,583 common shares.
NOTE 11 SUBSEQUENT EVENTS
On October 17, 2017, Wright Investment Group LLC, an entity
controlled by Richard A. Wright, advanced $400,000 to the Company.
On October 25, 2017, Richard A. Wright forfeited stock options
to purchase a total of 148,000 shares of the Companys common stock at prices
ranging between $5.75 and $7.50.
On October 31, 2017, our company and its subsidiaries entered
into a Settlement Agreement and Mutual Release of Claims (the
Settlement
Agreement
) with Steven P. Nickolas, the Nickolas Family Trust, Water
Engineering Solutions, LLC and Enhanced Beverages, LLC, companies and trust that
are controlled or owned by Mr. Nickolas, (collectively, the
Nickolas
Parties
) and McDowell 78, LLC and Wright Investments Group, LLC, a
company controlled or owned by Richard A. Wright, (collectively,
Wright/McDowell). The Settlement Agreement provides, among other things, the
following: a) simultaneous with the full execution of the Settlement Agreement,
we agreed to pay Mr. Nickolas $110,000 in one lump sum (paid); b) in exchange of
700,000 shares of our common stock and 300,000 shares of our Series D Preferred
Stock described above, Mr. Nickolas forfeited his 10,000,000 shares of our
Series A Preferred Stock, to be cancelled for no further consideration; c) upon
the full execution of the
Settlement Agreement, Mr. Nickolas and our company agreed to file the stipulations to dismiss the complaints and counterclaim filed by each of them with prejudice, with each side to bear its own costs and attorney’s fees. In addition, our
company and Wright/McDowell agreed that they will effectuate the dismissal of an arbitration proceeding against the Nickolas Parties with prejudice, with each side to bear its own attorneys’ fees and costs; e) Mr. Nickolas acknowledged and
agreed that the employment agreement between Mr. Nickolas and our company was terminated as of April 7, 2017 and no further amounts are owed to Mr. Nickolas under the employment agreement and we agreed to waive restrictive covenants set out in the
employment agreement; f) we agreed to assume financial responsibility for certain obligations owed by Mr. Nickolas; g) Mr. Nickolas acknowledged and agreed that 1,500,000 stock options with an exercise price of $0.52 issued to Mr. Nickolas on or
about March 1, 2016 has expired and a total of 148,000 stock options issued to Mr. Mr. Nickolas before 2016 will automatically expire 90 days from October 6, 2017, the date Mr. Nickolas ceased being a director of our company; and h) the parties also
agreed to mutual release of claims.
F-39
On November 8, 2017, Richard A. Wright and the Company entered in to an Exchange Agreement and Mutual Release of Claims (the “Exchange Agreement”). The Exchange Agreement provided, among other things, for the following: a) in exchange
for the issuance of 700,000 shares of our common stock and 300,000 shares of our Series D Preferred Stock described above, Richard A. Wright forfeited his 10,000,000 shares of our Series A Preferred Stock, to be cancelled for no further
consideration; and b) Richard A. Wright also agreed to a release of claims against the Company. Also on November 8, 2017, Richard A. Wright forfeited stock options to purchase 1,500,000 shares of our company’s common stock at an exercise price
of $0.52 per share in exchange for the Company agreeing to issue Richard A. Wright an additional 200,000 shares of Series D Preferred Stock.
On November 14, 2017, we withdrew the Certificate of Designation establishing Series A Preferred Stock. There were no shares of Series A Preferred Stock outstanding immediately prior to the withdrawal.
F-40
Managements Discussion and Analysis of Financial
Condition
and Results of Operations
Our managements discussion and analysis provides a narrative
about our financial performance and condition that should be read in conjunction
with the audited and unaudited consolidated financial statements and related
notes thereto included in this prospectus. This discussion contains forward
looking statements reflecting our current expectations and estimates and
assumptions about events and trends that may affect our future operating results
or financial position. Our actual results and the timing of certain events could
differ materially from those discussed in these forward-looking statements due
to a number of factors, including, but not limited to, those set forth in the
sections of this prospectus titled Risk Factors beginning at page 4 above and
Forward-Looking Statements beginning at page 11 above.
Overview
We offer retail consumers bottled alkaline water in 500ml,
700ml, 1-liter, 3-liter and 1-gallon sizes under the trade name
Alkaline88
®
. Our product is produced through an electrolysis process
that uses specialized electronic cells coated with a variety of rare earth
minerals to produce our 8.8 pH drinking water without the use of any chemicals.
Our product also incorporates 84 trace minerals from Pink Himalayan Rock
Salts.
Going Concern
Our financial statements are prepared using generally accepted
accounting principles in the United States of America applicable to a going
concern, which contemplates the realization of assets and liquidation of
liabilities in the normal course of business. We have not yet established an
ongoing source of revenues sufficient to cover our operating costs and to allow
us to continue as a going concern. As of September, 2017, we had an accumulated
deficit of $26,269,516. Our ability to continue as a going concern is dependent
on our company obtaining adequate capital to fund operating losses until we
become profitable. If we are unable to obtain adequate capital, we could be
forced to significantly curtail or cease operations.
In its report on our financial statements for the year ended
March 31, 2017, our independent registered public accounting firm included an
explanatory paragraph regarding substantial doubt about our ability to continue
as a going concern. Our financial statements do not include any adjustments that
might result from the outcome of this uncertainty.
We will need to raise additional funds to finance continuing
operations. However, there are no assurances that we will be successful in
raising additional funds. Without sufficient additional financing, it would be
unlikely for us to continue as a going concern. Our ability to continue as a
going concern is dependent upon our ability to successfully accomplish the plans
described in this prospectus and eventually secure other sources of financing
and attain profitable operations.
Results of Operations
Our results of operations for the three months ended September
30, 2017 and September 30, 2016 are as follows:
|
|
Three
|
|
|
Three
|
|
|
|
Months Ended
|
|
|
Months
Ended
|
|
|
|
September 30,
|
|
|
September 30,
|
|
|
|
2017
|
|
|
2016
|
|
Revenue
|
$
|
4,841,528
|
|
$
|
3,007,538
|
|
Cost of goods sold
|
|
2,753,879
|
|
|
1,896,112
|
|
Gross profit
|
|
2,087,649
|
|
|
1,111,426
|
|
Net Loss (after operating expenses and other
expenses)
|
|
(1,107,728
|
)
|
|
(1,275,676
|
)
|
27
Our results of operations for the six months ended September
30, 2017 and September 30, 2016 are as follows:
|
|
Six
|
|
|
Six
|
|
|
|
Months Ended
|
|
|
Months Ended
|
|
|
|
September 30, 2017
|
|
|
September 30,
2016
|
|
Revenue
|
$
|
10,021,722
|
|
$
|
5,954,287
|
|
Cost of goods sold
|
|
5,705,823
|
|
|
3,686,825
|
|
Gross profit
|
|
4,315,899
|
|
|
2,267,462
|
|
Net Loss (after operating expenses and other
expenses)
|
|
(2,879,482
|
)
|
|
(2,289,307
|
)
|
Our results of operations for the years ended March 31, 2017
and March 31, 2016 are as follows:
|
|
Year Ended
|
|
|
Year Ended
|
|
|
|
March 31,
2017
|
|
|
March 31,
2016
|
|
Revenue
|
$
|
12,763,630
|
|
$
|
7,088,806
|
|
Cost of goods sold
|
|
7,350,394
|
|
|
4,432,459
|
|
Gross profit
|
|
5,413,236
|
|
|
2,656,347
|
|
Net Loss (after operating expenses and other
expenses)
|
|
(3,454,600
|
)
|
|
(8,281,584
|
)
|
Revenue and Cost of Goods Sold
We had revenue from sales of our product for the three months
ended September 30, 2017 of $4,841,528, as compared to $3,007,538 for the three
months ended September 30, 2016, an increase of 61% generated by sales of our
alkaline water. The increase in sales is due to the expanded distribution of our
products to additional retailers throughout the country. We had revenue from
sales of our product for the six months ended September 30, 2017 of $10,021,722,
as compared to $5,954,287 for the six months ended September 30, 2016, an
increase of 68% generated by sales of our alkaline water. The increase in sales
is due to the expanded distribution of our products to additional retailers
throughout the country. We had revenue from sales of our product for the year
ended March 31, 2017 of $12,763,630 as compared to $7,088,806 for the year ended
March 31, 2016, an increase of 80%, generated by sales of our alkaline water.
The increase in sales is due to the expanded distribution of our products to
additional retailers throughout the country.
As of September 30, 2017, the product is now available in all
50 states at an estimated 32,000 retail locations. As of September 30, 2016, the
product was available in all 50 states at an estimated 29,000 retail locations.
This increase has occurred primarily through the addition of 5 of the top
national grocery retailers as customer during the year ended March 31, 2017. We
distribute our product through several channels. We sell through large national
distributors (UNFI, KeHe and C&S), 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, Albertsons, Safeway,
Kroger, Schnucks, Smart & Final, Jewel-Osco, Sprouts, Bashas, Stater Bros.
Markets, Unified Grocers, Bristol Farms, Vallarta, Superior Foods, Ingles, HEB
and Brookshires.
Cost of goods sold is comprised of production costs, shipping
and handling costs. For the three months ended September 30, 2017, we had cost
of goods sold of $2,753,879, or 57% of revenue, as compared to cost of goods
sold of $1,896,112 or 63% of revenue, for the three months ended September 30,
2016. The increase in gross profit rate is a result of reduced raw material cost
through greater volume purchases from our suppliers. For the six months ended
September, 30, 2017, we had cost of goods sold of $5,705,823, or 57% of revenue,
as compared to cost of goods sold of $3,686,825 or 63% of revenue, for the six
months ended September 30, 2016. The increase in gross profit rate is a result
of reduced raw material cost through greater volume purchases from our
suppliers. For the year ended March 31, 2017, we had cost of goods sold of
$7,350,394, or 57.6% of net sales, as compared to cost of goods sold of
$4,432,459, or 62.5% of net sales, for the year ended March 31, 2016. The
decrease in cost of goods sold as a percentage of net sales compared to the same
period last year was due to reduced raw material cost through greater volume
purchases from our suppliers.
Expenses
28
Our operating expenses for the three months ended September 30,
2017 and September 30, 2016 are as follows:
|
|
Three
|
|
|
Three
|
|
|
|
Months Ended
|
|
|
Months Ended
|
|
|
|
September 30,
2017
|
|
|
September 30,
2016
|
|
Sales and marketing expenses
|
$
|
1,818,344
|
|
$
|
1,060,390
|
|
General and administrative expenses
|
|
876,922
|
|
|
1,056,741
|
|
Depreciation expenses
|
|
96,942
|
|
|
90,958
|
|
Total operating expenses
|
$
|
2,792,208
|
|
$
|
2,208,089
|
|
Our operating expenses for the six months ended September 30,
2017 and September 30, 2016 are as follows:
|
|
Six
|
|
|
Six
|
|
|
|
Months Ended
|
|
|
Months Ended
|
|
|
|
September 30,
2017
|
|
|
September 30,
2016
|
|
Sales and marketing expenses
|
$
|
3,488,361
|
|
$
|
2,146,389
|
|
General and administrative expenses
|
|
2,967,314
|
|
|
1,897,515
|
|
Depreciation expenses
|
|
193,221
|
|
|
180,397
|
|
Total operating expenses
|
$
|
6,648,896
|
|
$
|
4,224,301
|
|
Our operating expenses for the year ended March 31, 2017 and
March 31, 2016 are as follows:
|
|
Year Ended
|
|
|
Year Ended
|
|
|
|
March 31,
2017
|
|
|
March 31,
2016
|
|
Sales and marketing expenses
|
$
|
4,428,672
|
|
$
|
2,931,870
|
|
General and administrative expenses
|
|
3,164,101
|
|
|
6,883,287
|
|
Depreciation expenses
|
|
359,556
|
|
|
318,328
|
|
Total operating expenses
|
$
|
7,952,229
|
|
$
|
10,133,485
|
|
For the three months ended September 30, 2017, our total
operating expenses were $2,792,208, as compared to $2,208,089 for the three
months ended September 30, 2016.
For the three months ended September 30, 2017, the total
included $1,818,344 of sales and marketing expenses and $876,922 of general and
administrative expenses, consisting primarily of approximately $330,792 of stock
option compensation expense, and $273,001 of professional fees.
For the three months ended September 30, 2016 the total
included $1,060,390 of sales and marketing expenses and $1,056,741 of general
and administrative expenses, consisting primarily of approximately $176,500 of
stock option compensation expense, and $370,118 of professional fees.
For the six months ended September 30, 2017, our total
operating expenses were $6,648,896, as compared to $4,224,301 for the six months
ended September 30, 2016.
For the six months ended September 30, 2017, the total included
$3,488,361 of sales and marketing expenses and $2,967,314 of general and
administrative expenses, consisting primarily of approximately $1,670,294 of
stock option compensation expense, and $572,348 of professional fees.
For the six months ended September 30, 2016 the total included
$2,146,389 of sales and marketing expenses and $1,897,515 of general and
administrative expenses, consisting primarily of approximately $319,125 of stock
option compensation expense, and $649,881 of professional fees.
For the year ended March 31, 2017, our total operating expenses
were $7,952,229, as compared to $10,133,485 for the year ended March 31, 2016.
For the year ended March 31, 2017, the total included $4,428,672 of sales and
marketing expenses and $3,164,101 of general and administrative expenses,
consisting primarily of $1,111,196 of wages and related expenses, $1,107,577 of
professional fees and $379,125 in stock compensation expense. Our stock
compensation expense was incurred as a part of our issuance of certain stock
options and stock grants to employees and key consultants to develop our
business.
29
For the year ended March 31, 2016, the total included
$2,931,870 of sales and marketing expenses and $6,883,287 of general and
administrative expenses, consisting primarily of approximately $4,039,291 in
stock compensation expense and $646,244 of professional fees. Our stock
compensation expense was incurred as a part of our issuance of certain stock
options and stock grants to employees and key consultants to develop our
business. Although a non-cash expense, the value of such issuances had a
material impact on our general and administrative expenses for the year ended
March 31, 2016.
Liquidity and Capital Resources
Working Capital
|
|
|
At
|
|
|
At
|
|
|
At
|
|
|
|
|
September 30 ,
2017
|
|
|
March 31,
2017
|
|
|
March 31,
2016
|
|
|
Current assets
|
$
|
3,305,184
|
|
|
3,150,321
|
|
$
|
2,549,023
|
|
|
Current liabilities
|
|
4,025,798
|
|
|
3,429,437
|
|
|
2,153,472
|
|
|
Working capital (deficiency)
|
$
|
(720,614
|
)
|
|
(279,116
|
)
|
$
|
395,551
|
|
Current Assets
Current assets as of September 30, 2017 primarily relate to
$481,831 in cash, $1,848,845 in accounts receivable and $634,347 in inventory.
Current assets as of March 31, 2017 and March 31, 2016 primarily relate to
$603,805 and $1,192,119 in cash, $1,419,281 and $911,390 in accounts receivable
and $819,988 and $434,708 in inventory, respectively.
Current Liabilities
Current liabilities as of September 30, 2017 primarily relate
to $1,451,780 in accounts payable, revolving financing of $1,846,026, current
portion of capital leases of $112,752 and accrued expenses of $611,833. Current
liabilities as of March 31, 2017 and March 31, 2016 primarily relate to
$1,343,824 and $847,452 in accounts payable, revolving financing of $1,436,083
and $475,273, accrued expenses of $455,916 and $251,613, notes payable of $-0-
and $324,368, current portion of capital leases of $190,207 and $243,623 and
$3,407.
Cash Flow
Our cash flows for the six months ended September 30, 2017 and
September 30, 2016 are as follows:
|
|
|
Six Months
|
|
|
SixMonths
|
|
|
|
|
Ended
|
|
|
Ended
|
|
|
|
|
September 30,
|
|
|
September 30,
|
|
|
|
|
2017
|
|
|
2016
|
|
|
Net Cash used in operating
activities
|
$
|
(668,505
|
)
|
$
|
(1,650,263
|
)
|
|
Net Cash used in investing activities
|
|
(226,446
|
)
|
|
(184,315
|
)
|
|
Net Cash provided by
financing activities
|
|
772,977
|
|
|
832,170
|
|
|
Net decrease in cash and cash equivalents
|
$
|
(121,974
|
)
|
$
|
(1,002,408
|
)
|
Our cash flows for the years ended March 31, 2017 and March 31,
2016 are as follows:
|
|
|
Year
|
|
|
Year
|
|
|
|
|
Ended
|
|
|
Ended
|
|
|
|
|
March 31,
|
|
|
March 31,
|
|
|
|
|
2017
|
|
|
201
6
|
|
|
Net Cash used in operating
activities
|
$
|
(2,553,253
|
)
|
$
|
(3,109,541
|
)
|
|
Net Cash used in investing activities
|
|
(253,170
|
)
|
|
(344,961
|
)
|
|
Net Cash provided by
financing activities
|
|
2,219,109
|
|
|
4,556,508
|
|
|
Net decrease in cash and cash
equivalents
|
$
|
(587,314
|
)
|
$
|
1,102,006
|
|
30
Operating Activities
Net cash used in operating activities was $668,505 for the six
months ended September 30, 2017, as compared to $1,650,263 used in operating
activities for the six months ended September 30, 2016. The decrease in net cash
used in operating activities was primarily due to a $945,371 reduction of net
loss after adding back non cash adjustments in the six months ended September
30, 2017 compared to the six months ended September 30, 2016.
Net cash used in operating activities was $2,593,253 for the
year ended March 31, 2017, as compared to $3,109,541 used in operating
activities for the year ended March 31, 2016.
Investing Activities
Net cash used in investing activities was $226,446 for the six
months ended September 30, 2017, as compared to $184,315 used in investing
activities for the six months ended September 30, 2016. The increase in net cash
used by investing activities was the result of an increase of purchase of fixed
assets and equipment deposits.
Net cash used in investing activities was $253,170 for the year
ended March 31, 2017, as compared to $344,961 used in investing activities for
the year ended March 31, 2016. The net cash used by investing activities was
from purchase of production equipment.
Financing Activities
Net cash provided by financing activities for the six months
ended September 30, 2017 was $772,977, as compared to $832,170 for the six
months ended September 30, 2016. The decrease of net cash provided by financing
activities was mainly attributable to a decrease in proceeds received from
financing activities of $412,975 offset by a decrease in repayment from
financing activities of $353,782.
Net cash provided by financing activities for the year ended
March 31, 2017 was $2,258,109, as compared to $4,556,508 for the year ended
March 31, 2016. The decrease of net cash provided by financing activities was
mainly attributable to a reduced amount of sales of our common stock.
Cash Requirements
We believe that cash flow from operations will not meet our
present and near-term cash needs and thus we will require additional cash
resources, including the sale of equity or debt securities, to meet our planned
capital expenditures and working capital requirements for the next 12 months. We
estimate that our capital needs over the next 12 months will be up to
approximately $3,000,000. We will require additional cash resources to, among
other things, expand broker network, increase manufacturing capacity, expand
retail distribution and add support staff. If our own financial resources and
future cash-flows from operations are insufficient to satisfy our capital
requirements, we may seek to sell additional equity or debt securities or obtain
additional credit facilities. The sale of additional equity securities will
result in dilution to our stockholders. The incurrence of indebtedness will
result in increased debt service obligations and could require us to agree to
operating and financial covenants that could restrict our operations or modify
our plans to grow the business. Financing may not be available in amounts or on
terms acceptable to us, if at all. Any failure by us to raise additional funds
on terms favorable to us, or at all, will limit our ability to expand our
business operations and could harm our overall business prospects.
Off-Balance Sheet Arrangements
We have no off-balance sheet arrangements that have or are
reasonably likely to have a current or future effect on our financial condition,
changes in financial condition, revenues or expenses, results of operations,
liquidity, capital expenditures or capital resources that is material to
investors.
31
Changes in and Disagreements with Accountants
on
Accounting and Financial Disclosure
We have been notified that Seale & Beers, CPAs was acquired
by AMC Auditing, LLC. As a result, effective as of November 18, 2016, Seale&
Beers, CPAs resigned as our independent registered public accounting firm and we
engaged AMC Auditing, LLC as our independent registered public accounting firm.
The change of our independent registered public accounting firm from Seale&
Beers, CPAs to AMC Auditing, LLC was approved by our board of directors.
The report of Seale & Beers, CPAs on our financial
statements for our fiscal years ended March 31, 2016 and 2015 did not contain an
adverse opinion or disclaimer of opinion, or qualification or modification as to
uncertainty, audit scope, or accounting principles, except that such report on
our financial statements contained an explanatory paragraph in respect to the
substantial doubt about our ability to continue as a going concern.
During our fiscal years ended March 31, 2016 and 2015 and in
the subsequent interim period through the date of resignation, there were no
disagreements, resolved or not, with Seale & Beers, CPAs on any matter of
accounting principles or practices, financial statement disclosure, or auditing
scope and procedures, which disagreement, if not resolved to the satisfaction of
Seale & Beers, CPAs, would have caused Seale & Beers, CPAs to make
reference to the subject matter of the disagreement in connection with its
report.
During our fiscal years ended March 31, 2016 and 2015 and in
the subsequent interim period through the date of resignation, there were no
reportable events as described in Item 304(a)(1)(v) of Regulation S-K.
During our fiscal years ended March 31, 2016 and 2015 and in
the subsequent interim period through the date of appointment, we have not
consulted with AMC Auditing, LLC regarding either the application of accounting
principles to a specified transaction, either completed or proposed, or the type
of audit opinion that might be rendered on our financial statements, nor has AMC
Auditing, LLC provided to us a written report or oral advice that AMC Auditing,
LLC concluded was an important factor considered by us in reaching a decision as
to the accounting, auditing or financial reporting issue. In addition, during
such periods, we have not consulted with AMC Auditing, LLC regarding any matter
that was either the subject of a disagreement (as defined in Item 304(a)(1)(iv)
of Regulation S-K and the related instructions) or a reportable event (as
described in Item 304(a)(1)(v) of Regulation S-K).
Directors and Executive Officers
Directors and Executive Officers
All directors of our company hold office until the next annual
meeting of our stockholders or until their successors have been elected and
qualified, or until their death, resignation or removal. The executive officers
of our company are appointed by our board of directors and hold office until
their death, resignation or removal from office.
Our directors and executive officers, their ages, positions
held, and duration of such, are as follows:
32
Name
|
Position Held
with
Our Company
|
Age
|
Date First
Elected
or Appointed
|
Richard A. Wright
|
President, Chief Executive
Officer,
Vice-President, Chief
Operating Officer, and Director
|
59
|
May 31, 2013
|
David Guarino
|
Chief Financial Officer,
Secretary, Treasurer and
Director
|
53
|
April 28, 2017
|
Aaron Keay
|
Chairman of the Board and
Director
|
40
|
July 22, 2016
|
Bruce Leitch
|
Director
|
59
|
September 8, 2016
|
Business Experience
The following is a brief account of the education and business
experience of our current executive officers during at least the past five
years, indicating their principal occupation during the period, and the name and
principal business of the organization by which they were employed:
Richard A. Wright
Mr. Wright is a Certified Public Accountant. He graduated
Magnum Cum Laude in 1978 from Mount Union University in Alliance, Ohio. He has
done graduate level MBA courses at Case Western Reserve College in Cleveland,
Ohio. In 2008, Mr. Wright became the Chief Financial Officer for PCT
International. PCT is a leading worldwide developer and manufacturer of last
mile and access network solutions for broadband communication networks. PCT
focuses on innovative and cost-effective solutions that allow service providers
to improve system integrity and expand service offerings. It has manufacturing
plants in USA and China and sells their products in 42 countries. In 2010, Mr.
Wright began his own tax and accounting CPA firm in Scottsdale, Arizona, Wright
Tax Solutions PLC. Mr. Wright also began Wright Investment Group, LLC, a small
equity participation firm that helps provide seed capital through micro loans
and financial expertise to start-up enterprises.
Effective as of May 31, 2013, Mr. Wright was appointed as
vice-president, treasurer and a director of our company. On August 7, 2013, our
board of directors appointed Mr. Wright as secretary of our company. On August
28, 2016, our board of directors appointed Mr. Wright as chief operating officer
of our company. On April 7, 2017, our board of directors appointed Mr. Wright as
president of our company. On April 28, 2017, Mr. Wright resigned as the
secretary and treasurer of our company and our board of directors appointed Mr.
Wright as the chief executive officer of our company.
David Guarino
On April 28, 2017, Mr. Guarino was appointed as the chief
financial officer, secretary and treasurer and a director of our company. Mr.
Guarino currently holds a bachelor of science in accounting and a masters of
accountancy from the University of Denver. From 2008 to 2013, Mr. Guarino was
President and a Director of Kahala Corp, a worldwide franchisor of multiple
quick service restaurant brands with locations in 49 states and over 25
countries. From 2014 to 2015, Mr. Guarino was President of HTI International
Holdings, Inc., a technology company focused on forward osmosis water filtration
technology. From 2015 until April, 2017, Mr. Guarino has been a consultant to
our company.
Aaron Keay
Mr. Keay has been the President and Managing Partner of Inform
Capital Partner, a corporate finance advisory and merchant banking firm, from
2008 to present. He was the Chairman, CEO and director of Inform Resources
Corp., a mining company listed on the TSX Venture Exchange (the
TSXV
),
from August 2010 until July 10, 2014. Mr. Keay was the CEO, President and
director of IDM Mining Ltd. (formerly Revolution Resources), a mining company
listed on the Toronto Stock Exchange, from 2009 until January 7, 2015. He was a
director of OrganiGram Holdings Inc., an industrial company specializing in the production of condition
specific medical marihuana under license from Health Canada listed on the TSXV,
from September 14, 2010 until July 17, 2014. Mr. Keay was a director of Plateau
Uranium Inc. (formerly Macusani Yellowcake Inc.), a uranium exploration and
development company listed on the TSXV, from April 5, 2013 until September 4,
2014. He was a director of Aftermath Silver Inc. (formerly Full Metal Zinc
Ltd.), a mineral exploration and development company listed on the TSXV, from
February 2011 until December 12, 2013. Mr. Keay holds a Bachelor of Human
Kinetics from the University of British Columbia. On July 22, 2016, Mr. Keay was
appointed as a director of our company and on August 17, 2017, Mr. Keay was
appointed as the Chairman of the Board.
33
Bruce Leitch
Mr. Leitch has been a director of our company since September
8, 2016. During the past five years Mr. Leitch has been actively engaged as a
management consultant with respect to business development strategies and
overseeing the corporate governance requirements for various private companies.
The bulk of his time has been spent as the V.P. Corporate Finance and a Director
for Citadel LED Lighting Corp., a private company engaged in the importation of
innovative LED lighting products with applications in the retail, hospitality,
outdoor lighting and commercial buildings and facilities market sectors.
Mr. Leitch has extensive experience with consumer products
companies, and is well versed in all aspects of branding, marketing, cross
marketing through strategic relationships, interacting with advertising agencies
to create highly focused and effective sales campaigns, along with being very
conversant in wholesale distribution networks, logistics, managing multiple
channels of product distribution and supply chain management. Mr. Leitch has
extensive experience in the capital markets and the securities industry, having
worked for several major financial services institutions as well as having been
an officer, director and principal of several public and private companies.
Family Relationships
There are no family relationships between any director or
executive officer.
Involvement in Certain Legal Proceedings
None of our directors and executive officers has been involved
in any of the following events during the past ten years:
|
(a)
|
any petition under the federal bankruptcy laws or any
state insolvency laws filed by or against, or an appointment of a
receiver, fiscal agent or similar officer by a court for the business or
property of such person, or any partnership in which such person was a
general partner at or within two years before the time of such filing, or
any corporation or business association of which such person was an
executive officer at or within two years before the time of such
filing;
|
|
|
|
|
(b)
|
any conviction in a criminal proceeding or being subject
to a pending criminal proceeding (excluding traffic violations and other
minor offences);
|
|
|
|
|
(c)
|
being subject to any order, judgment, or decree, not
subsequently reversed, suspended or vacated, of any court of competent
jurisdiction, permanently or temporarily enjoining such person from, or
otherwise limiting, the following activities: (i) acting as a futures
commission merchant, introducing broker, commodity trading advisor,
commodity pool operator, floor broker, leverage transaction merchant, any
other person regulated by the Commodity Futures Trading Commission, or an
associated person of any of the foregoing, or as an investment adviser,
underwriter, broker or dealer in securities, or as an affiliated person,
director or employee of any investment company, bank, savings and loan
association or insurance company, or engaging in or continuing any conduct
or practice in connection with such activity; engaging in any type of
business practice; or (iii) engaging in any activity in connection with
the purchase or sale of any security or commodity or in connection with
any violation of federal or state securities laws or federal commodities
laws;
|
|
|
|
|
(d)
|
being the subject of any order, judgment or decree, not
subsequently reversed, suspended or vacated, of any federal or state
authority barring, suspending or otherwise limiting for more than 60 days
the right of such person to engage in any activity described in paragraph
(c)(i) above, or to be associated with persons engaged in any such
activity;
|
34
|
(e)
|
being found by a court of competent jurisdiction (in a
civil action), the Securities and Exchange Commission to have violated a
federal or state securities or commodities law, and the judgment in such
civil action or finding by the Securities and Exchange Commission has not
been reversed, suspended, or vacated;
|
|
|
|
|
(f)
|
being found by a court of competent jurisdiction in a
civil action or by the Commodity Futures Trading Commission to have
violated any federal commodities law, and the judgment in such civil
action or finding by the Commodity Futures Trading Commission has not been
subsequently reversed, suspended or vacated;
|
|
|
|
|
(g)
|
being the subject of, or a party to, any federal or state
judicial or administrative order, judgment, decree, or finding, not
subsequently reversed, suspended or vacated, relating to an alleged
violation of: (i) any federal or state securities or commodities law or
regulation; or (ii) any law or regulation respecting financial
institutions or insurance companies including, but not limited to, a
temporary or permanent injunction, order of disgorgement or restitution,
civil money penalty or temporary or permanent cease- and-desist order, or
removal or prohibition order; or (iii) any law or regulation prohibiting
mail or wire fraud or fraud in connection with any business entity;
or
|
|
|
|
|
(h)
|
being the subject of, or a party to, any sanction or
order, not subsequently reversed, suspended or vacated, of any
self-regulatory organization (as defined in Section 3(a)(26) of the
Securities Exchange Act of 1934), any registered entity (as defined in
Section 1(a)(29) of the Commodity Exchange Act), or any equivalent
exchange, association, entity or organization that has disciplinary
authority over its members or persons associated with a
member.
|
Executive Compensation
Summary Compensation
The particulars of compensation paid to the following
persons:
|
(a)
|
all individuals serving as our principal executive
officer during the year ended March 31, 2017
|
|
|
|
|
(b)
|
each of our two most highly compensated executive
officers who were serving as executive officers at the end of the year
ended March 31, 2017; and
|
|
|
|
|
(c)
|
up to two additional individuals for whom disclosure
would have been provided under (b) but for the fact that the individual
was not serving as our executive officer at March 31,
2017,
|
who we will collectively refer to as the named executive
officers, for all services rendered in all capacities to our company and
subsidiaries for the years ended March 31, 2017 and 2016 are set out in the
following summary compensation table:
Summary Compensation Table
Years ended March 31, 2017 and 2016
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Non-
|
Non-
|
|
|
|
|
|
|
|
|
Equity
|
qualified
|
|
|
|
|
|
|
|
|
Incentive
|
Deferred
|
All
|
|
Name
|
|
|
|
|
|
Plan
|
Compensa-
|
Other
|
|
and
|
|
|
|
Stock
|
Option
|
Compensa-
|
tion
|
Compensa-
|
|
Principal
|
|
Salary
|
Bonus
|
Awards
|
Awards
|
tion
|
Earnings
|
tion
|
Total
|
Position
|
Year
|
($)
|
($)
|
($)
|
($)
|
($)
|
($)
|
($)
|
($)
|
|
|
|
|
|
|
|
|
|
|
Steven P. Nickolas
|
2017
|
180,000
|
Nil
|
Nil
|
Nil
|
Nil
|
Nil
|
24,035
|
204,035
|
Former President,
|
2016
|
144,000
|
35,000
|
Nil
|
780,000
|
Nil
|
Nil
|
27,640
|
986,640
|
Chief Executive
|
|
|
|
|
|
|
|
|
|
Officer and
|
|
|
|
|
|
|
|
|
|
Director
(1)
|
|
|
|
|
|
|
|
|
|
Richard A. Wright
|
2017
|
168,000
|
Nil
|
Nil
|
Nil
|
Nil
|
Nil
|
22,002
|
190,002
|
President, Chief
|
2016
|
132,000
|
35,000
|
Nil
|
780,000
|
Nil
|
Nil
|
19,544
|
966,544
|
Executive Officer,
|
|
|
|
|
|
|
|
|
|
Vice-President,
|
|
|
|
|
|
|
|
|
|
Chief Operating
|
|
|
|
|
|
|
|
|
|
Officer, Director
|
|
|
|
|
|
|
|
|
|
and Former
|
|
|
|
|
|
|
|
|
|
Secretary and
|
|
|
|
|
|
|
|
|
|
Treasurer
(1)
|
|
|
|
|
|
|
|
|
|
35
Notes:
(1)
|
On April 7, 2017, our company removed Mr. Nickolas as the
president and chief executive officer of our company. On October 6, 2017,
Mr. Nickolas resigned as a director of our company.
|
|
|
(2)
|
On April 7, 2017, our board of directors appointed Mr.
Wright as president of our company. On April 28, 2017, Mr. Wright resigned
as the secretary and treasurer of our company and our board of directors
appointed Mr. Wright as the chief executive officer of our
company.
|
Effective October 7, 2013, our board of directors adopted and
approved the 2013 Equity Incentive Plan. The plan was approved by a majority of
our stockholders on October 7, 2013. On October 31, 2014, our board of directors
amended the 2013 Equity Incentive Plan to, among other things, increase the
number of shares of stock of our company available for the grant of awards under
the plan from 20,000,000 shares to 35,000,000 shares. The purpose of the plan is
to (a) enable our company and any of our affiliates to attract and retain the
types of employees, consultants and directors who will contribute to our
companys long range success; (b) provide incentives that align the interests of
employees, consultants and directors with those of the stockholders of our
company; and (c) promote the success of our companys business. Effective as of
December 30, 2015, we effected a 50-for-1 reverse stock split of our authorized
and issued and outstanding shares of common stock which decreased the number of
shares of stock of our company available for the grant of awards under the plan
from 35,000,000 shares to 700,000 shares. Effective as of January 20, 2016, our
board of directors amended the plan to increase the number of shares of stock of
our company available for the grant of awards under the plan from 700,000 to
7,700,000. The plan enables us to grant awards of a maximum of 7,700,000 shares
of our stock and awards that may be granted under the plan includes incentive
stock options, non-qualified stock options, stock appreciation rights,
restricted awards and performance compensation awards.
Effective October 9, 2013, we granted a total of 6,000,000
stock options to Steven P. Nickolas and Richard A. Wright (3,000,000 stock
options to each). The stock options were exercisable at the exercise price of
$0.605 per share for a period of ten years from the date of grant. The stock
options vested as follows: (i) 1,000,000 upon the date of grant; and (ii)
500,000 per quarter until fully vested. On October 31, 2014, we reduced the
exercise price of these stock options to $0.15 per share.
Effective May 12, 2014, we granted a total of 1,200,000 stock
options Steven P. Nickolas and Richard A. Wright (600,000 stock options to
each). The stock options are exercisable at the exercise price of $0.165 per
share for a period of five years from the date of grant. 600,000 stock options
vested upon the date of grant.
Effective May 21, 2014, we granted a total of 6,000,000 stock
options to Steven P. Nickolas and Richard A. Wright (3,000,000 stock options to
each). The stock options are exercisable at the exercise price of $0.1455 per
share for a period of ten years from the date of grant. 3,000,000 of these stock
options vested upon the date of grant and the other 3,000,000 stock options
vested on November 21, 2014.
Effective February 18, 2015, we granted a total of 1,600,000
stock options to Steven P. Nickolas and Richard A. Wright (800,000 stock options
each). The stock options are exercisable at the exercise price of $0.115 per
share for a period of five years from the date of grant. All of these stock
options vested upon the date of grant.
Effective January 29, 2016, we granted a total of 3,000,000
stock options to Steven P. Nickolas and Richard A. Wright (1,500,000 stock
options each). The stock options are exercisable at the exercise price of $0.52
per share until October 7, 2023. All of these stock options vested effective
January 29, 2016.
We estimated compensation expense of $1,560,000 on the stock
options granted that vested during the year ended March 31, 2016, divided
equally between Steven P. Nickolas and Richard A. Wright in the amount of
$780,000 each. The aggregate intrinsic value of these options was $4,290,000 at
March 31, 2016.
36
Employment Agreement with Steven P. Nickolas
On March 30, 2016, we entered into an employment agreement
dated effective March 1, 2016 with Steven P. Nickolas, our former president and
chief executive officer and a former director of our company, pursuant to which
Mr. Nickolas agreed to perform such duties as are regularly and customarily
performed by the president and chief executive officer of a corporation, and any
other duties consistent with Mr. Nickolass position in our company. Pursuant to
the terms of the employment agreement, we agreed to (i) pay Mr. Nickolas $15,000
per month or such other amount as may be determined by our board of directors
from time to time; and (ii) issue to Mr. Nickolas 1,500,000 shares of our Series
C Preferred Stock (issued effective as of March 31, 2016). We also agreed that
each of the following events constitute a Negotiated Trigger Event as defined
in the Certificate of Designation for the Series C Preferred Stock: (i) the
occurrence of a change of control event; (ii) the death of Mr. Nickolas; and
(iii) the termination of the employment agreement for any reason.
In addition, we agreed to (i) provide Mr. Nickolas with vehicle
leased in our companys name, with lease payments not exceeding $700/month or
such other amount as may be determined by our board of directors; (ii) pay Mr.
Nickolas an allowance of $5,000 per month or such other amount as may be
determined by our board of directors, which may be used by Mr. Nickolas as he
sees fit, including without limitation, the funding of non-qualified retirement
plans; (iii) reimburse Mr. Nickolas for any expenses that he incurs in
connection with his duties under his employment agreement.
On November 18, 2016, our company provided notice to Mr.
Nickolas of our board of directors finding that there is just cause for
termination of Mr. Nickolass employment and of our companys intent to
terminate the employment of Mr. Nickolas for just cause pursuant to the
provision of the employment agreement with Mr. Nickolas dated March 1, 2016.
Under the employment agreement, Mr. Nickolas had 30 days to cure the failures
and breaches creating just cause for termination. Mr. Nickolas failed to cure
such failure and breaches and, on April 7, 2017, our company terminated the
employment of Mr. Nickolas for cause. In addition, our company removed Mr.
Nickolas as the president and chief executive officer of our company. On October
6, 2017, Mr. Nickolas resigned as a director of our company.
On October 31, 2017, our company and its subsidiaries entered
into the Settlement Agreement with Steven P. Nickolas, the Nickolas Family
Trust, Water Engineering Solutions, LLC and Enhanced Beverages, LLC, companies
and trust that are controlled or owned by Mr. Nickolas, and McDowell 78, LLC and
Wright Investments Group, LLC, a company controlled or owned by Richard A.
Wright. The Settlement Agreement provides that Mr. Nickolas acknowledged and
agreed that the employment agreement between Mr. Nickolas and our company was
terminated as of April 7, 2017 and no further amounts are owed to Mr. Nickolas
under the employment agreement and we agreed to waive restrictive covenants set
out in the employment agreement.
Cash Bonus to Steven P. Nickolas
Effective March 15, 2016, we agreed to pay Mr. Nickolas a cash
bonus in the amount of $35,000 for past services that he has provided to our
company.
Employment Agreement with Richard A. Wright
On March 30, 2016, we entered into an employment agreement
dated effective March 1, 2016 with Richard A. Wright, our vice-president,
secretary, treasurer and director, pursuant to which Mr. Wright agreed to
perform such duties as are regularly and customarily performed by the vice
president, secretary and treasurer of a corporation, and any other duties
consistent with Mr. Wrights position in our company. Pursuant to the terms of
the employment agreement, we have agreed to (i) pay Mr. Wright $14,000 per month
or such other amount as may be determined by our board of directors from time to
time; and (ii) issue to Mr. Wright 1,500,000 shares of our Series C Preferred
Stock (issued effective as of March 31, 2016). We also agreed that each of the
following events constitute a Negotiated Trigger Event as defined in the
Certificate of Designation for the Series C Preferred Stock: (i) the occurrence
of a change of control event; (ii) the death of Mr. Wright; and (iii) the
termination of the employment agreement for any reason.
In addition, we may (i) grant awards under our 2013 equity
incentive plan to Mr. Wright from time to time and (ii) pay to Mr. Wright an
annual discretionary performance bonus in an amount to be determined by our
board of directors in its sole discretion. Mr. Wright will also be eligible to
participate in other bonus programs offered by our company to our senior staff
from time to time.
37
In addition, Mr. Wright will be entitled to participate in all
of our employee benefit plans provided by our company to our senior officers. If
we do not provide such plans at any time, we agreed to reimburse Mr. Wright for
the reasonable cost of any such plans obtained privately. We also agreed to (i)
provide Mr. Wright with vehicle leased in our companys name, with lease
payments not exceeding $700/month or such other amount as may be determined by
our board of directors; (ii) pay Mr. Wright an allowance of $5,000 per month or
such other amount as may be determined by our board of directors, which may be
used by Mr. Wright as he sees fit, including without limitation, the funding of
non-qualified retirement plans; (iii) reimburse Mr. Wright for any expenses that
he incurs in connection with his duties under his employment agreement. Mr.
Wright will be entitled in each year to five weeks paid vacation, in addition
to weekends and statutory holidays, to be taken in installments of no more than
three consecutive weeks of paid time off.
The initial term of the employment agreement is three years
and, on the third anniversary of the effective date of the employment and on
each annual anniversary date thereafter, the term of the employment agreement
will automatically be extended by one additional year unless either party gives
90 days written notice to the other of its intention not to renew the
employment agreement.
Provided that Mr. Wright has acted within the scope of his
authority, we agreed to indemnify and save harmless Mr. Wright (including his
heirs and legal representatives) against any and all costs, claims and expenses
(including any amounts paid to settle any actions or satisfy any judgments)
which: he may suffer or incur by reason of any matter or thing which he may in
good faith do or have done or caused to be done as an employee, officer or
director of our company, any of its subsidiaries or of any of their respective
affiliates; or was reasonably incurred by him in respect of any civil, criminal
or administrative action or proceeding to which he is made a party by reason of
being or having been an employee, officer or director of our company, any of its
subsidiaries or of any of their respective affiliates; provided that, the
foregoing indemnification will apply only if: he acted honestly and in good
faith with a view to the best interests of our company, any of its subsidiaries
or any of their respective affiliates; and in the case of a criminal or
administrative action or proceeding that is enforced by a monetary penalty, he
had reasonable grounds for believing that his conduct was lawful.
Mr. Wright agreed to indemnify and save harmless our company
against, and agree to hold it harmless from, any and all damages, injuries,
claims, demands, actions, liability, costs and expenses (including reasonable
legal fees) incurred or made against our company arising from or connected with
the performance or non-performance of his employment by him or the beach of any
warranty, representation or covenant herein by him, other than claims by him
pursuant to his employment agreement.
If and to the extent we maintain directors and officers
liability insurance for the protection of our executives in connection with acts
and omissions occurring during their employment with our company, we agreed that
Mr. Wright will be included as an officer and director who is covered by such
policy on a basis no less favorable than made available to other executives of
our company.
On April 28, 2017, Richard A. Wright resigned as the secretary
and treasurer of our company and he was appointed as the chief executive officer
of our company.
Cash Bonus to Richard A. Wright
Effective March 15, 2016, we agreed to pay Mr. Wright a cash
bonus in the amount of $35,000 for past services that he has provided to our
company.
Grant of Series C Convertible Preferred Stock
On March 30, 2016, we designated 3,000,000 shares of the
authorized and unissued preferred stock of our company as Series C Preferred
Stock by filing a Certificate of Designation with the Secretary of State of the
State of Nevada. Each share of the Series C Preferred Stock will be convertible,
without the payment of any additional consideration by the holder and at the
option of the holder, into one fully paid and non-assessable share of our common
stock at any time after (i) we achieve the consolidated revenue of our company
and all of its subsidiaries equal to or greater than $15,000,000 in any 12 month
period, ending on the last day of any quarterly period of our fiscal year; or
(ii) a Negotiated Trigger Event, defined as an event upon which the Series C
Preferred Stock will be convertible as may be agreed by our company and the
holder in writing from time to time.
38
Effective March 31, 2016, we issued a total of 3,000,000 shares
of our Series C Preferred Stock (1,500,000 shares to each) to Steven P.
Nickolas, a former director and executive officer of our company, and Richard A.
Wright, a director and executive officer of our company, pursuant to their
employment agreements dated effective March 1, 2016.
On August 17, 2017, we issued 1,500,000 shares of our common
stock to Steven P. Nickolas upon conversion of 1,500,000 shares of our Series C
Preferred Stock held by Mr. Nickolas. The shares of our Series C Preferred Stock
became convertible into shares of our common stock without the payment of any
additional consideration by Mr. Nickolas and at the option of Mr. Nickolas
because the termination of the employment agreement between our company and Mr.
Nickolas was an event constituting a Negotiated Trigger Event as defined in
the Certificate of Designation for our Series C Preferred Stock.
Grant of Series D Convertible Preferred Stock
On May 3, 2017, we designated 3,000,000 shares of the
authorized and unissued preferred stock of our company as Series D Preferred
Stock by filing a Certificate of Designation with the Secretary of State of the
State of Nevada. Each share of the Series D Preferred Stock will be convertible,
without the payment of any additional consideration by the holder and at the
option of the holder, into one fully paid and non-assessable share of our common
stock at any time after (i) we achieve the consolidated revenue of our company
and all of its subsidiaries equal to or greater than $40,000,000 in any 12 month
period, ending on the last day of any quarterly period of our fiscal year; or
(ii) a Negotiated Trigger Event, defined as an event upon which the Series D
Preferred Stock will be convertible as may be agreed by our company and the
holder in writing from time to time.
Effective May 3, 2017, we issued a total of 1,000,000 shares of
our Series D Preferred Stock to Richard A. Wright.
Retirement or Similar Benefit Plans
There are no arrangements or plans in which we provide
retirement or similar benefits for our directors or executive officers.
Resignation, Retirement, Other Termination, or Change in
Control Arrangements
Other than the provisions of the employment agreement with Mr.
Wright described below, we have no contract, agreement, plan or arrangement,
whether written or unwritten, that provides for payments to our directors or
executive officers at, following, or in connection with the resignation,
retirement or other termination of our directors or executive officers, or a
change in control of our company or a change in our directors or executive
officers responsibilities following a change in control.
If, within 90 days of the occurrence of a change of control
event, Mr. Wright resigns from his employment relationship with our company or
our company terminates his employment agreement for any reason other than for
just cause, then we agreed to pay Mr. Wright severance in an amount equal to the
following: 36 months salary plus an amount, if any, equal to the following: one
months salary multiplied by the number of calendar years, starting on the
effective date of the employment agreement, that Mr. Wright is employed by our
company under his employment agreement.
We may terminate Mr. Wrights employment at any time for other
than just cause by delivering to Mr. Wright written notice of termination. In
such a case, we agreed to pay Mr. Wright severance in an amount equal to the
following: 36 months salary plus an amount, if any, equal to the following: one
months salary multiplied by the number of calendar years, starting on the
effective date of the employment, that Mr. Wright is employed by our company
under his employment agreement.
Subject to applicable employment laws or similar legislation,
we may terminate Mr. Wrights employment in the event he has been unable to
perform his duties for a period of eight consecutive months or a cumulative
period of 12 months in any consecutive 24 month period, because of a physical or
mental disability. Mr. Wrights employment will automatically terminate on his
death. In the event Mr. Wrights employment with our company terminates by
reason of Mr. Wrights death or disability, then upon and immediately effective
on the date of termination we agreed to promptly pay and provide Mr. Wright (or
in the event of Mr. Wrights death, Mr. Wrights estate); any unpaid salary and
any outstanding and accrued regular and special vacation pay through the date of
termination; reimbursement for any unreimbursed expenses incurred through to the
date of termination; and any outstanding amounts due under any awards which will be dealt with in accordance with our 2013 equity
incentive plan and the award agreement. In the event Mr. Wrights employment is
terminated due to a disability, we agreed to pay to Mr. Wright the severance
referred to above.
39
We may terminate Mr. Wrights employment for just cause at any
time by delivering to Mr. Wright written notice of termination. In the event
that Mr. Wrights employment with our company is terminated by our company for
just cause, Mr. Wright will not be entitled to any additional payments or
benefits (except as otherwise provided in his employment agreement), other than
for amounts due and owing to Mr. Wright by our company as of the date of
termination, except for any awards under our 2013 equity incentive plan will be
dealt with in accordance with the plan and award agreement.
Outstanding Equity Awards at Fiscal Year-End
The following table sets forth for each named executive officer
certain information concerning the outstanding equity awards as of March 31,
2017:
40
|
Option awards
|
Stock awards
|
|
|
|
|
|
|
|
|
|
Equity
|
|
|
|
|
|
|
|
|
|
incentive
|
|
|
|
|
|
|
|
|
Equity
|
plan
|
|
|
|
|
|
|
|
|
incentive
|
awards:
|
|
|
|
|
|
|
|
|
plan
|
Market
|
|
|
|
Equity
|
|
|
|
Market
|
awards:
|
or
|
|
|
|
incentive
|
|
|
|
value
|
Number
|
payout
|
|
|
|
plan
|
|
|
Number
|
of
|
of
|
value of
|
|
|
|
awards:
|
|
|
of
|
shares
|
unearned
|
unearned
|
|
Number
|
Number
|
Number
|
|
|
shares
|
of
|
shares,
|
shares,
|
|
of
|
of
|
of
|
|
|
or units
|
units
of
|
units
or
|
units
|
|
securities
|
securities
|
securities
|
|
|
of stock
|
stock
|
other
|
or other
|
|
underlying
|
underlying
|
underlying
|
|
|
that
|
that
|
rights
|
rights
|
|
unexercised
|
unexercised
|
unexercised
|
Option
|
|
have
|
have
|
that have
|
that
|
|
options
|
options
|
unearned
|
exercise
|
Option
|
not
|
not
|
not
|
have not
|
|
(#)
|
(#)
|
options
|
price
|
expiration
|
vested
|
vested
|
vested
|
vested
|
Name
|
exercisable
|
unexercisable
|
(#)
|
($)
|
date
|
(#)
|
($)
|
(#)
|
($)
|
Steven P. Nickolas
(1)
|
60,000
|
Nil
|
Nil
|
7.50
|
October 9,
2023
(2)
|
Nil
|
Nil
|
Nil
|
Nil
|
|
12,000
|
Nil
|
Nil
|
8.25
|
May 12,
2019
(2)
|
Nil
|
Nil
|
Nil
|
Nil
|
|
60,000
|
Nil
|
Nil
|
7.275
|
May 21,
2024
(2)
|
Nil
|
Nil
|
Nil
|
Nil
|
|
16,000
|
Nil
|
Nil
|
5.75
|
February 18,
2020
(2)
|
Nil
|
Nil
|
Nil
|
Nil
|
|
1,500,000
|
Nil
|
Nil
|
0.52
|
October 7,
2023
(2)
|
Nil
|
Nil
|
Nil
|
Nil
|
Richard A. Wright
|
60,000
|
Nil
|
Nil
|
7.50
|
October 9,
2023
(3)
|
Nil
|
Nil
|
Nil
|
Nil
|
|
12,000
|
Nil
|
Nil
|
8.25
|
May 12,
2019
(3)
|
Nil
|
Nil
|
Nil
|
Nil
|
|
60,000
|
Nil
|
Nil
|
7.275
|
May 21,
2024
(3)
|
Nil
|
Nil
|
Nil
|
Nil
|
|
16,000
|
Nil
|
Nil
|
5.75
|
February 18,
2020
(3)
|
Nil
|
Nil
|
Nil
|
Nil
|
|
1,500,000
|
Nil
|
Nil
|
0.52
|
October 7,
2023
(4)
|
Nil
|
Nil
|
Nil
|
Nil
|
Notes:
(1)
|
On April 7, 2017, our company removed Mr. Nickolas as the
president and chief executive officer of our company. On October 6, 2017,
Mr. Nickolas resigned as a director of our company.
|
(2)
|
Pursuant to the Settlement Agreement entered into on
October 31, 2017, Mr. Nickolas acknowledged and agreed that 1,500,000
stock options with an exercise price of $0.52 issued to Mr. Nickolas on or
about March 1, 2016 has expired and a total of 148,000 stock options
issued to Mr. Nickolas before 2016 will automatically expire 90 days from
October 6, 2017, the date Mr. Nickolas ceased being a director of our
company.
|
(3)
|
Effective August 17, 2017, these stock options were
cancelled without consideration in connection with the grant of 1,000,000
shares of Series D Preferred Stock to Mr. Wright, effective May 3,
2017.
|
(4)
|
Pursuant to the Stock Option Forfeiture & General
Release dated November 8, 2017 executed by Richard A. Wright and Sharon
Wright, Mr. Wrights spouse, Mr. Wright acquired 200,000 shares of our
Series D Preferred Stock in exchange for forfeiting, terminating and
cancelling Mr. Wrights stock options to purchase 1,500,000 shares of our
common stock at an exercise price of $0.52 per share, effective as of
November 8, 2017.
|
41
Compensation of Directors
During the fiscal year ended March 31, 2017, directors who were
not our named executive officers did not receive any compensation.
Effective April 28, 2017, we granted 350,000 stock options to
Aaron Keay, a director of our company. These stock options are exercisable at
the exercise price of $1.29 per share for a period of ten years from the date of
grant and vest as follows: (i) 87,500 upon the date of grant; and (ii) 87,500 on
each anniversary date of grant.
Effective April 28, 2017, we granted 100,000 stock options to
Bruce Leitch, a director of our company. These stock options are exercisable at
the exercise price of $1.29 per share for a period of ten years from the date of
grant and vest as follows: (i) 25,000 upon the date of grant; and (ii) 25,000 on
each anniversary date of grant.
We have no formal plan for compensating our directors for their
services in their capacity as directors. Our directors are entitled to
reimbursement for reasonable travel and other out-of-pocket expenses incurred in
connection with attendance at meetings of our board of directors. Our board of
directors may award special remuneration to any director undertaking any special
services on their behalf other than services ordinarily required of a director.
Security Ownership of Certain Beneficial Owners and
Management
The following table sets forth, as of November 22, 2017,
certain information with respect to the beneficial ownership of our common stock
by each stockholder known by us to be the beneficial owner of more than 5% of
any class of our voting securities and by each of our directors, our executive
officers and by our executive officers and directors as a group.
Name of
Beneficial Owner
|
Title
of
Class
|
Amount and Nature of
Beneficial
Ownership
(1)
|
Percentage of
Class
(2)
|
Steven P. Nickolas
14301 North 87 St.,
Suite 109
Scottsdale, AZ 85260
|
Common Stock
|
2,348,000
(3)
|
10.62%
|
Series D
Preferred
Stock
(6)
|
300,000
|
7.89%
|
Richard A. Wright
14646 N. Kierland Blvd.
Suite 255
Scottsdale, AZ 85254
|
Common Stock
|
1,038,872
(4)
|
4.73%
|
Series C
Preferred
Stock
(5)
|
1,500,000
|
100%
|
Series D
Preferred
Stock
(6)
|
1,500,000
|
39.47%
|
David Guarino
|
Common Stock
|
740,000
|
3.37%
|
Series D
Preferred
Stock
(6)
|
1,000,000
|
26.32%
|
Aaron Keay
|
Common Stock
|
87,500
(7)
|
*
|
Bruce Leitch
|
Common Stock
|
25,000
(8)
|
*
|
All executive officers and
directors as a group (4 persons)
|
Common Stock
|
1,891,372
|
8.57%
|
Series C
Preferred Stock
(5)
|
1,500,000
|
100%
|
Series D
Preferred Stock
(6)
|
2,500,000
|
65.79%
|
Notes
* Less than 1%.
42
(1)
|
Except as otherwise indicated, we believe that the
beneficial owners of the common stock listed above, based on information
furnished by such owners, have sole investment and voting power with
respect to such shares, subject to community property laws where
applicable. Beneficial ownership is determined in accordance with the
rules of the Securities and Exchange Commission and generally includes
voting or investment power with respect to securities. Common stock
subject to options or warrants currently exercisable or exercisable within
60 days, are deemed outstanding for purposes of computing the percentage
ownership of the person holding such option or warrants, but are not
deemed outstanding for purposes of computing the percentage ownership of
any other person.
|
|
|
(2)
|
Percentage of common stock is based on 21,958,062 shares
of our common stock issued and outstanding as of November 22, 2017.
Percentage of Series C Preferred Stock is based on 1,500,000 shares of
Series C Preferred Stock issued and outstanding as of November 22, 2017.
Percentage of Series D Preferred Stock is based on 3,800,000 shares of
Series D Preferred Stock issued and outstanding as of November 22,
2017.
|
|
|
(3)
|
Consists of 2,200,000 shares of our common stock and
148,000 stock options exercisable within 60 days. Except for the number of
stock options, these numbers are approximate numbers based on information
currently available to our company.
|
|
|
(4)
|
Consists of 700,000 shares of our common stock, 169,572
shares of our common stock owned by Lifewater Industries, LLC and 169,300
shares of our common stock owned by WiN Investments, LLC. Richard A.
Wright exercises voting and dispositive power with respect to the shares
of our common stock that are beneficially owned by Lifewater Industries,
LLC and WiN Investments, LLC.
|
|
|
(5)
|
Each share of the Series C Preferred Stock will be
convertible, without the payment of any additional consideration by the
holder and at the option of the holder, into one fully paid and
non-assessable share of our common stock at any time after (i) we achieve
the consolidated revenue of our company and all of its subsidiaries equal
to or greater than $15,000,000 in any 12 month period, ending on the last
day of any quarterly period of our fiscal year; or (ii) a Negotiated
Trigger Event, defined as an event upon which the Series C Preferred Stock
will be convertible as may be agreed by our company and the holder in
writing from time to time.
|
|
|
(6)
|
Each share of the Series D Preferred Stock will be
convertible, without the payment of any additional consideration by the
holder and at the option of the holder, into one fully paid and
non-assessable share of our common stock at any time after (i) we achieve
the consolidated revenue of our company and all of its subsidiaries equal
to or greater than $40,000,000 in any 12 month period, ending on the last
day of any quarterly period of our fiscal year; or (ii) a Negotiated
Trigger Event, defined as an event upon which the Series D Preferred Stock
will be convertible as may be agreed by our company and the holder in
writing from time to time.
|
|
|
(7)
|
Consists of 87,500 stock options exercisable within 60
days.
|
|
|
(8)
|
Consists of 25,000 stock options exercisable within 60
days.
|
Changes in Control
We are unaware of any contract or other arrangement the
operation of which may at a subsequent date result in a change in control of our
company.
Transactions with Related Persons, Promoters and Certain
Control Persons
and Corporate Governance
Other than as disclosed below, there has been no transaction,
since April 1, 2014, or currently proposed transaction, in which our company was
or is to be a participant and the amount involved exceeds $40,230.13, being the
lesser of $120,000 or one percent of the average of our total assets at year-end
for the last two completed fiscal years, and in which any of the following
persons had or will have a direct or indirect material interest:
|
(a)
|
Any director or executive officer of our
company;
|
|
|
|
|
(b)
|
Any person who beneficially owns, directly or indirectly,
more than 5% of any class of our voting securities;
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(c)
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Any person who acquired control of our company when it
was a shell company or any person that is part of a group, consisting of
two or more persons that agreed to act together for the purpose of
acquiring, holding, voting or disposing of our common stock, that acquired
control of our company when it was a shell company; and
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(d)
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Any member of the immediate family (including spouse,
parents, children, siblings and in- laws) of any of the foregoing
persons.
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Related Party Transactions with Water Engineering Solutions,
LLC
On April 2, 2014, we entered into an equipment sale/lease back
agreement with Water Engineering Solutions, LLC for specialized equipment with
an original cost of $208,773 acquired in August 2013. Under the terms of the
agreement, Water Engineering Solutions, LLC bought back the equipment for
$188,000 in April 2014 and the equipment was leased back to us for $188,000 at a
rate of 8% per annum for a term of 60 months with the residual amount of $1.00.
For the term of the agreement, we agreed to deliver to Water Engineering
Solutions, LLC lease payments in the amount of $3,811.96 per month, commencing
on May 2, 2014. In addition, the agreement provides that the title will pass to
us upon completion of the term and payment of $1.00 residual amount.
43
Under the terms of the exclusive manufacturing agreement
entered into on April 15, 2013 between our company and Water Engineering
Solutions LLC, we paid $690,000 on May 1, 2014 and $21,500 on June 27, 2014,
$115,000 on July 1, 2014, $10,000 on August 2, 2014 and $100,000 on August 22,
2014 for specialized equipment used in the production of our alkaline water.
Under the terms of the exclusive manufacturing agreement
entered into on April 15, 2013 between our company and Water Engineering
Solutions LLC, an entity that is controlled and majority owned by Steven P.
Nickolas, a stockholder who beneficially owns, directly or indirectly, more than
5% of a class of our voting securities and a former officer and director of our
company, and Richard A. Wright, an officer, director and stockholder of our
company, and during the years ended March 31, 2017 and March 31, 2016, we paid
$104,619 and $312,500, respectively, to Water Engineering Solutions LLC for
custom engineered equipment used in the production of our alkaline water.
Other Related Party Transactions
On August 1, 2013 we entered into a 3-year sub-lease agreement
requiring a monthly payment of $2,085 for office space in Scottsdale, Arizona,
with a basic monthly lease increase of 8% and 7% on each anniversary date. The
sub-lessor was an entity owned by Steven P. Nickolas, a stockholder who
beneficially owns, directly or indirectly, more than 5% of a class of our voting
securities, and a former officer and director. This sub-lease agreement was
terminated at the end of the 3-year term.
During the period from June 19, 2012 to June 30, 2014, we had a
total of $65,378 in general and administrative expenses with related parties. Of
the total, $33,592 was to four different entities consisting of consulting fees
to Beverage Science Laboratories ($25,000), Water Enhanced Technologies, Inc.
($3,000) and WiN Investments, LLC ($2,000), entities controlled and owned by
Steven P. Nickolas, a stockholder who beneficially owns, directly or indirectly,
more than 5% of a class of our voting securities, and a former officer and
director, and Water Engineering Solutions, LLC ($3,592), an entity controlled
and owned by Steven P. Nickolas and Richard A. Wright. In addition, $12,000 was
rent to Steven P. Nickolas and $16,500 was professional fees to Wright Tax
Solutions, LLC ($12,500) and Wright Investment Group ($4,000), entities
controlled and owned by Richard A. Wright and $7,638 for health insurance for
Steven P. Nickolas $9,000 auto allowance for Steve A Nickolas and $3,385 auto
allowance for Richard A. Wright.
On November 8, 2017, we entered into an Exchange Agreement and
Mutual Release of Claims (the
Exchange Agreement
) with Richard A.
Wright, our president, chief executive officer and director.
The Exchange Agreement provides, among other things, the
following:
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1.
|
Within five business date of the full execution of the
Exchange Agreement, we agreed to instruct our transfer agent to issue Mr.
Wright 700,000 shares of our common stock (issued on November 9,
2017);
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2.
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Within 10 business days of the full execution of the
Exchange Agreement, we agreed to issue 300,000 shares of our Series D
Preferred Stock (issued on November 9, 2017);
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3.
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In exchange of 700,000 shares of our common stock and
300,000 shares of our Series D Preferred Stock described above, Mr. Wright
forfeited his 10,000,000 shares of our Series A Preferred Stock, to be
cancelled for no further consideration; and
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4.
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The parties also agreed to mutual release of
claims.
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On November 8, 2017, Richard A. Wright and Sharon Wright, Mr.
Wrights spouse, executed a Stock Option Forfeiture & General Release (the
Stock Option Forfeiture Agreement
).
The Stock Option Forfeiture Agreement provides, among other
things, the following:
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1.
|
In exchange for, among other things, receipt of 200,000
shares of our Series D Preferred Stock (issued on November 9, 2017), Mr.
Wright agreed that Mr. Wrights stock options to purchase 1,500,000 shares
of our common stock at an exercise price of $0.52 per share were
forfeited, terminated and otherwise cancelled as of November 8, 2017;
and
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2.
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Mr. Wright also agreed to release of claims against our
company.
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44
On November 8, 2017, Mr. Wrights stock options to purchase
1,500,000 shares of our common stock at an exercise price of $0.52 per share
were forfeited, terminated and otherwise cancelled.
On October 31, 2017, our company and its subsidiaries entered
into a Settlement Agreement and Mutual Release of Claims with Steven P.
Nickolas, the Nickolas Family Trust, Water Engineering Solutions, LLC and
Enhanced Beverages, LLC, companies and trust that are controlled or owned by Mr.
Nickolas, and McDowell 78, LLC and Wright Investments Group, LLC, a company
controlled or owned by Richard A. See Legal Proceedings above for more
information on the Settlement Agreement and Mutual Release of Claims.
On September 14, 2017, Wright Investment Group LLC, an entity
controlled by Richard A. Wright, our president, chief executive officer and
director, advanced $200,000 to our company. On October 17, 2017, Wright
Investment Group LLC advanced $400,000 to our company.
Compensation for Executive Officers and Directors
Effective April 28, 2017, we issued 130,000 shares of common
stock to David Guarino, who was appointed as the chief financial officer,
secretary, treasurer and a director of our company on the same date. These
shares are restricted from transfer for a period of two years. In addition,
effective May 3, 2017, we issued 1,000,000 shares of our Series D Preferred
stock to Mr. Guarino.
For additional information regarding compensation for our
executive officers and directors, see Executive Compensation.
Director Independence
We currently act with four directors consisting of Richard A.
Wright, David Guarino, Aaron Keay, and Bruce Leitch. Our common stock is quoted
on the OTCQB operated by the OTC Markets Group, which does not impose any
director independence requirements. Under NASDAQ rule 5605(a)(2), a director is
not independent if he or she is also an executive officer or employee of the
corporation or was, at any time during the past three years, employed by the
corporation. Using this definition of independent director, we have two
independent directors, Aaron Keay and Bruce Leitch.
Where You Can Find More Information
We are not required to deliver an annual report to our
stockholders unless our directors are elected at a meeting of our stockholders
or by written consents of our stockholders. If our directors are not elected in
such manner, we are not required to deliver an annual report to our stockholders
and will not voluntarily send an annual report.
We file annual, quarterly and current reports, proxy statements
and other information with the Securities and Exchange Commission. Such filings
are available to the public over the Internet at the Securities and Exchange
Commissions website at http://www.sec.gov.
We have filed with the Securities and Exchange Commission a
registration statement on Form S-1 under the Securities Act of 1933 with respect
to the securities offered under this prospectus. This prospectus, which forms a
part of that registration statement, does not contain all information included
in the registration statement. Certain information is omitted and you should
refer to the registration statement and its exhibits.
You may review a copy of the registration statement at the
Securities and Exchange Commissions public reference room at 100 F Street, N.E.
Washington, D.C. 20549 on official business days during the hours of 10 a.m. to
3 p.m. You may obtain information on the operation of the public reference room
by calling the Securities and Exchange Commission at 1-800-SEC-0330. You may
also read and copy any materials we file with the Securities and Exchange
Commission at the Securities and Exchange Commissions public reference room.
Our filings and the registration statement can also be reviewed by accessing the
Securities and Exchange Commissions website at
http://www.sec.gov
.
45
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The Alkaline Water Company Inc.
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Prospectus
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Up to 3,900,000 Shares of Common Stock Underlying the
Warrants
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November 22, 2017
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46
Information Not Required in Prospectus
Other Expenses of Issuance and Distribution
The following table sets forth the costs and expenses payable
by us in connection with the issuance and distribution of the securities being
registered hereunder. All of the amounts shown are estimates, except for the
Securities and Exchange Commission registration fees.
Securities and
Exchange Commission registration fees
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$
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525.65
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|
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Accounting fees and expenses
|
$
|
25,000
|
|
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|
Legal fees and expenses
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$
|
100,000
|
|
|
|
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|
Miscellaneous fees and
expenses
|
$
|
4,474.35
|
|
|
|
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Total
|
$
|
130,000
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|
Indemnification of Directors and Officers
The Nevada Revised Statutes provide that:
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a corporation may indemnify any person who was or is a
party or is threatened to be made a party to any threatened, pending or
completed action, suit or proceeding, whether civil, criminal,
administrative or investigative, except an action by or in the right of
the corporation, by reason of the fact that he is or was a director,
officer, employee or agent of the corporation, or is or was serving at the
request of the corporation as a director, officer, employee or agent of
another corporation, partnership, joint venture, trust or other
enterprise, against expenses, including attorneys fees, judgments, fines
and amounts paid in settlement actually and reasonably incurred by him in
connection with the action, suit or proceeding if he or she acted in good
faith and in a manner which he or she reasonably believed to be in or not
opposed to the best interests of the corporation, and, with respect to any
criminal action or proceeding, had no reasonable cause to believe his or
her conduct was unlawful;
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a corporation may indemnify any person who was or is a
party or is threatened to be made a party to any threatened, pending or
completed action or suit by or in the right of the corporation to procure
a judgment in its favor by reason of the fact that he or she is or was a
director, officer, employee or agent of the corporation, or is or was
serving at the request of the corporation as a director, officer, employee
or agent of another corporation, partnership, joint venture, trust or
other enterprise against expenses, including amounts paid in settlement
and attorneys fees actually and reasonably incurred by him or her in
connection with the defense or settlement of the action or suit if he or
she acted in good faith and in a manner which he or she reasonably
believed to be in or not opposed to the best interests of the corporation.
Indemnification may not be made for any claim, issue or matter as to which
such a person has been adjudged by a court of competent jurisdiction,
after exhaustion of all appeals therefrom, to be liable to the corporation
or for amounts paid in settlement to the corporation, unless and only to
the extent that the court in which the action or suit was brought or other
court of competent jurisdiction determines upon application that in view
of all the circumstances of the case, the person is fairly and reasonably
entitled to indemnity for such expenses as the court deems proper; and
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to the extent that a director, officer, employee or agent
of a corporation has been successful on the merits or otherwise in defense
of any action, suit or proceeding, or in defense of any claim, issue or
matter therein, the corporation must indemnify him or her against
expenses, including attorneys fees, actually and reasonably incurred by
him or her in connection with the defense.
|
The Nevada Revised Statutes provide that we may make any
discretionary indemnification only as authorized in the specific case upon a
determination that indemnification of the director, officer, employee or agent
is proper in the circumstances. The determination must be made:
47
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by our stockholders;
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by our board of directors by majority vote of a quorum
consisting of directors who were not parties to the action, suit or
proceeding;
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if a majority vote of a quorum consisting of directors
who were not parties to the action, suit or proceeding so orders, by
independent legal counsel in a written opinion;
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if a quorum consisting of directors who were not parties
to the action, suit or proceeding cannot be obtained, by independent legal
counsel in a written opinion; or
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by court order.
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Our bylaws provide for the mandatory indemnification of our
directors and officers to the fullest extent legally permissible under the
Nevada Revised Statutes from time to time against all expenses, liability and
loss reasonably incurred or suffered by such person in connection with he or she
having been or being a party to, threatening to be made a party to, or involved
in any action, suit or proceeding, whether civil, criminal, administrative or
investigative, by reason of the fact that he or she is or was a director or an
officer of the company. Advance payment of expenses by the company to such
director or officer, as these expenses are incurred in defending a civil or
criminal action, suit or proceeding, are subject to an undertaking by or on
behalf of the director or officer to repay the amount of such payment if it is
ultimately determined by a court of competent jurisdiction that he or she is not
entitled to be indemnified by our company. The right of indemnification under
our bylaws is not exclusive of any other right to indemnification a director or
an officer may have.
Our bylaws allow us to purchase and maintain insurance on
behalf of any person who is or was a director or officer of our company against
any liability asserted against such person and incurred in any such capacity or
arising out of such status, whether or not we would have the power to indemnify
such person. We have not purchased such insurance.
Recent Sales of Unregistered Securities
All references to numbers of shares of common stock and per
share information in this section do not give retroactive effect to the 50-for-1
reverse stock split of our shares of common stock effected as of December 30,
2015.
On July 31, 2014, we issued 245,000 shares of our common stock
to a third-party consultant for partial consideration for the services to be
provided under a consulting agreement dated effective as of June 4, 2014. In
addition, we agreed to issue to the consultant 70,000 shares of our common stock
on or before August 15, 2014 (issued) and 35,000 shares of our common stock on
or before September 15, 2014. We issued and intend to issue these shares to an
accredited investor. The issuance of these shares was and will be exempt from
registration pursuant to Section 4(a)(2) of the Securities Act of 1933 and Rule
506 promulgated thereunder.
In consideration for the consulting services to be rendered to
our company under a consulting agreement dated effective as of August 7, 2014,
we agreed to issue a third-party consultant an aggregate of 2,000,000 shares of
our common stock to be issued as follows: 500,000 shares on the date of the
execution of the agreement, 500,000 shares on the date that is 45 days from the
execution date, 500,000 shares on the date that is 90 days from the execution
date, and 500,000 shares on the date that is 135 days from the execution date.
We issued and intend to issue these shares to an accredited investor. The
issuance of these shares was and will be exempt from registration pursuant to
Section 4(a)(2) of the Securities Act of 1933 and Rule 506 promulgated
thereunder.
On August 20, 2014, we entered into a warrant amendment
agreement (the
Warrant Amendment Agreement
) with certain holders (the
Holders
) of our outstanding common stock purchase warrants (the
Existing Warrants
), whereby we agreed to reduce the exercise price of
the Existing Warrants to $0.10 per share in consideration for the immediate
exercise of the Existing Warrants by the Holders and the Holders are to be
issued new common stock purchase warrants of our company (the
New
Warrants
) in the form of the Existing Warrants to purchase up to a number
of shares of our common stock equal to the number of Existing Warrants exercised
by the Holders, provided that the exercise price of the New Warrants will be
$0.125 per share, subject to adjustment in the New Warrants.
On August 21, 2014, pursuant to the Warrant Amendment
Agreement, we issued an aggregate of 9,829,455 shares of our common stock upon
exercise of the Existing Warrants at an exercise price of $0.10 per share for
aggregate gross proceeds of $982,945.50. In addition, we issued New Warrants to
purchase an aggregate of 9,829,455 shares of our common stock at an exercise
price of $0.125 per share for a period of five years from the date of issuance.
An aggregate of 8,666,664 shares of our common stock issued upon exercise of the
Existing Warrants were registered under the Securities Act of 1933 pursuant to
our registration statement on Form S-1, as amended (No. 333-192599), which was
declared effective by the Securities and Exchange Commission on April 16, 2014
and in issuing the rest of shares of our common stock upon exercise of the
Existing Warrants, we relied on an exemption from the registration requirements
of the Securities Act of 1933 provided by Section 4(a)(2) of the Securities Act
of 1933 and Rule 506 promulgated thereunder. In issuing the New Warrants, we
relied on an exemption from the registration requirements of the Securities Act
of 1933 provided by Section 4(a)(2) of the Securities Act of 1933.
48
On October 7, 2014, we entered into a warrant amendment
agreement (the
Rogers Warrant Amendment Agreement
) with Neil William
Rogers, a holder of our outstanding common stock purchase warrants (the
Rogers Existing Warrants
), whereby we agreed to reduce the exercise
price of the Rogers Existing Warrants to $0.10 per share in consideration for
the immediate exercise of the Rogers Existing Warrants by Mr. Rogers and Mr.
Rogers was to be issued new common stock purchase warrants of our company (the
Rogers New Warrants
) in the form of the Rogers Existing Warrants to
purchase up to a number of shares of our common stock equal to the number of
Rogers Existing Warrants exercised by Mr. Rogers, provided that the exercise
price of the Rogers New Warrants will be $0.125 per share, subject to adjustment
in the Rogers New Warrants.
On October 7, 2014, pursuant to the Rogers Warrant Amendment
Agreement, we issued an aggregate of 4,699,800 shares of our common stock upon
exercise of the Rogers Existing Warrants at an exercise price of $0.10 per share
for aggregate gross proceeds of $469,980. In addition, we issued Rogers New
Warrants to purchase an aggregate of 4,699,800 shares of our common stock at an
exercise price of $0.125 per share for a period of two years from the date of
issuance. These securities were issued to one non-U.S. person (as that term is
defined in Regulation S of the Securities Act of 1933) in an offshore
transaction relying on Regulation S and/or Section 4(a)(2) of the Securities Act
of 1933.
Effective as of October 28, 2014, we entered into a warrant
agreement with Veterans Capital Fund, LLC (
Veterans
), pursuant to which
we agreed to issue a warrant to purchase 3,600,000 shares of our common stock to
Veterans and/or its affiliates at an exercise price of $0.125 per share for a
period of five years. 900,000 shares vested on October 28, 2014 and the
remaining 270,000 shares will vest on a pro rata basis according to any amounts
Veterans funds pursuant to any lease schedules under a master lease agreement
between our company and Veterans dated October 28, 2014, provided that if we
draw on 90% or more of the total lease line under the master lease agreement,
then all such shares will be deemed to be vested. We issued the warrant to an
accredited investor. The issuance of the warrant was exempt from registration
pursuant to Section 4(a)(2) of the Securities Act of 1933 and Rule 506
promulgated thereunder.
Effective as of October 28, 2014, we also entered into a
registration rights agreement with Veterans, pursuant to which we gave piggyback
registration right to Veterans. Subject to certain limitations, each time that
we propose to register a public offering solely of our common stock, other than
pursuant to a registration statement on Form S-4 or Form S-8, we agreed to offer
Veterans the right to request inclusion of 3,600,000 shares underlying the
warrant issued under the warrant agreement with Veterans, if such shares are not
eligible for sale under Rule 144 promulgated under the Securities Act of 1933,
and use our best efforts to cause such shares to be registered.
In consideration for consulting services to be rendered to our
company, we issued an aggregate of 3,200,000 shares of our common stock to three
consultants effective as of February 18, 2015. The issuance of these shares was
exempt from registration pursuant to Section 4(a)(2) of the Securities Act of
1933.
In consideration for consulting services to be rendered to our
company pursuant to a consulting agreement effective as of April 7, 2015, we
issued 2,000,000 shares of our common stock to a consultant effective as of
April 7, 2015. The issuance of these shares was exempt from registration
pursuant to Section 4(a)(2) of the Securities Act of 1933.
In consideration for consulting services to be rendered to our
company pursuant to a service agreement effective as of April 10, 2015, we
issued 1,500,000 shares of our common stock to a consultant effective as of
April 10, 2015 and agreed to issue up to an additional 1,500,000 shares of our
common stock upon the 180th day anniversary of the service agreement. The
issuance of these shares was and is expected to be exempt from registration
pursuant to Section 4(a)(2) of the Securities Act of 1933.
In consideration for consulting services to be rendered to our
company pursuant to a consulting agreement effective as of May 1, 2015, we
issued an aggregate of 250,000 shares of our common stock to a consultant
effective as of May 1, 2015. The issuance of these shares was exempt from registration
pursuant to Section 4(a)(2) of the Securities Act of 1933.
49
On May 7, 2015, we sold 1,428,571 units of our securities at a
price of $0.07 per unit for gross proceeds of $100,000. Each unit consists of
one share of our common stock and one non-transferable common stock purchase
warrant, with each common stock purchase warrant entitling the holder to acquire
one additional share of our common stock at a price of $0.10 per share for a
period of two years. We issued the securities to one U.S. person (as that term
is defined in Regulation S of the Securities Act of 1933) relying on Rule 506 of
Regulation D and/or Section 4(a)(2) of the Securities Act of 1933.
On May 8, 2015, we sold 714,286 units of our securities at a
price of $0.07 per unit for gross proceeds of $50,000. Each unit consists of one
share of our common stock and one non-transferable common stock purchase
warrant, with each common stock purchase warrant entitling the holder to acquire
one additional share of our common stock at a price of $0.10 per share for a
period of two years. We issued the securities to one U.S. person (as that term
is defined in Regulation S of the Securities Act of 1933) relying on Rule 506 of
Regulation D and/or Section 4(a)(2) of the Securities Act of 1933.
On May 11, 2015, we entered into a securities purchase
agreement with Assurance Funding Solutions LLC (
Assurance
), pursuant to
which we sold a secured term note of our company in the aggregate principal
amount of $250,000, together with 1,000,000 shares of our common stock, in
consideration for $250,000. The secured term note bears interest at the rate of
15% per annum and matures on May 11, 2016. We may prepay the note by paying the
holder 110% of the principal amount outstanding together with accrued but unpaid
interest thereon, provided that we provide written notice to the holder at least
30 days prior to the date of prepayment. Pursuant to the securities purchase
agreement, we paid Assurance $10,000 for legal fees incurred by it and granted
it piggyback registration rights. In connection with the securities purchase
agreement, we also entered into a general security agreement dated May 11, 2015
with Assurance. The issuance and sale of securities by us under the securities
purchase agreement with Assurance was exempt from registration pursuant to
Section 4(a)(2) of the Securities Act of 1933 and Rule 506 promulgated
thereunder.
On June 11, 2015, we sold 714,286 units of our securities at a
price of $0.07 per unit for gross proceeds of $50,000. Each unit consists of one
share of our common stock and one non-transferable common stock purchase
warrant, with each common stock purchase warrant entitling the holder to acquire
one additional share of our common stock at a price of $0.10 per share for a
period of two years. We issued the securities to one U.S. person (as that term
is defined in Regulation S of the Securities Act of 1933) relying on Rule 506 of
Regulation D and/or Section 4(a)(2) of the Securities Act of 1933.
On June 19, 2015, we sold 2,582,857 units of our securities at
a price of $0.07 per unit for gross proceeds of $180,800. Each unit consists of
one share of our common stock and one non-transferable common stock purchase
warrant, with each common stock purchase warrant entitling the holder to acquire
one additional share of our common stock at a price of $0.10 per share for a
period of two years. We issued the securities to one U.S. person (as that term
is defined in Regulation S of the Securities Act of 1933) relying on Rule 506 of
Regulation D and/or Section 4(a)(2) of the Securities Act of 1933.
On June 26, 2015, we sold 714,286 units of our securities at a
price of $0.07 per unit for gross proceeds of $50,000. Each unit consists of one
share of our common stock and one non-transferable common stock purchase
warrant, with each common stock purchase warrant entitling the holder to acquire
one additional share of our common stock at a price of $0.10 per share for a
period of two years. We issued the securities to one U.S. person (as that term
is defined in Regulation S of the Securities Act of 1933) relying on Rule 506 of
Regulation D and/or Section 4(a)(2) of the Securities Act of 1933.
On June 29, 2015, we sold 714,286 units of our securities at a
price of $0.07 per unit for gross proceeds of $50,000. Each unit consists of one
share of our common stock and one non-transferable common stock purchase
warrant, with each common stock purchase warrant entitling the holder to acquire
one additional share of our common stock at a price of $0.10 per share for a
period of two years. We issued the securities to one U.S. person (as that term
is defined in Regulation S of the Securities Act of 1933) relying on Rule 506 of
Regulation D and/or Section 4(a)(2) of the Securities Act of 1933.
50
On June 29, 2015, we entered into a loan agreement with one
lender, pursuant to which we issued a convertible promissory note in the
principal amount of $50,000 and 714,286 warrants in exchange for the loan in the
amount of $50,000. The convertible promissory note bears simple interest at the
rate of 8% per annum and matures on June 29, 2016. The lender has the option to
convert the amount due under the convertible promissory note into shares of our
common stock at a conversion price of $0.07 per share. Each warrant is
exercisable into one share of our common stock at an exercise price of $0.10
until June 29, 2017. In issuing these shares, we relied on an exemption from the
registration requirements of the Securities Act of 1933 provided by Section
4(a)(2) of the Securities Act of 1933.
On June 30, 2015, we entered into loan agreements with three
lenders, pursuant to which we issued three convertible promissory notes in the
aggregate principal amount of $75,000 and an aggregate of 1,071,429 warrants in
exchange for the loans in the aggregate amount of $75,000. The convertible
promissory notes bear simple interest at the rate of 8% per annum and mature on
June 30, 2016. The lenders have the option to convert the amount due under the
convertible promissory notes into shares of our common stock at a conversion
price of $0.07 per share. Each warrant is exercisable into one share of our
common stock at an exercise price of $0.10 until June 30, 2017. In issuing these
shares, we relied on an exemption from the registration requirements of the
Securities Act of 1933 provided by Section 4(a)(2) of the Securities Act of
1933.
On June 30, 2015, we sold 714,286 units of our securities at a
price of $0.07 per unit for gross proceeds of $50,000. Each unit consists of one
share of our common stock and one non-transferable common stock purchase
warrant, with each common stock purchase warrant entitling the holder to acquire
one additional share of our common stock at a price of $0.10 per share for a
period of two years. We issued the securities to one U.S. person (as that term
is defined in Regulation S of the Securities Act of 1933) relying on Rule 506 of
Regulation D and/or Section 4(a)(2) of the Securities Act of 1933.
On June 30 2015, we sold 357,143 units of our securities at a
price of $0.07 per unit for gross proceeds of $25,000. Each unit consists of one
share of our common stock and one non-transferable common stock purchase
warrant, with each common stock purchase warrant entitling the holder to acquire
one additional share of our common stock at a price of $0.10 per share for a
period of two years. We issued the securities to one U.S. person (as that term
is defined in Regulation S of the Securities Act of 1933) relying on Rule 506 of
Regulation D and/or Section 4(a)(2) of the Securities Act of 1933.
On June 30, 2015, we sold 357,143 units of our securities at a
price of $0.07 per unit for gross proceeds of $25,000. Each unit consists of one
share of our common stock and one non-transferable common stock purchase
warrant, with each common stock purchase warrant entitling the holder to acquire
one additional share of our common stock at a price of $0.10 per share for a
period of two years. We issued the securities to one U.S. person (as that term
is defined in Regulation S of the Securities Act of 1933) relying on Rule 506 of
Regulation D and/or Section 4(a)(2) of the Securities Act of 1933.
On June 30, 2015, we sold 357,143 units of our securities at a
price of $0.07 per unit for gross proceeds of $25,000. Each unit consists of one
share of our common stock and one non-transferable common stock purchase
warrant, with each common stock purchase warrant entitling the holder to acquire
one additional share of our common stock at a price of $0.10 per share for a
period of two years. We issued the securities to one U.S. person (as that term
is defined in Regulation S of the Securities Act of 1933) relying on Rule 506 of
Regulation D and/or Section 4(a)(2) of the Securities Act of 1933.
On July 1, 2015, we sold 357,143 units of our securities at a
price of $0.07 per unit for gross proceeds of $25,000. Each unit consists of one
share of our common stock and one non-transferable common stock purchase
warrant, with each common stock purchase warrant entitling the holder to acquire
one additional share of our common stock at a price of $0.10 per share for a
period of two years. We issued the securities to one U.S. person (as that term
is defined in Regulation S of the Securities Act of 1933) relying on Rule 506 of
Regulation D and/or Section 4(a)(2) of the Securities Act of 1933.
On July 2, 2015, we sold 500,000 units of our securities at a
price of $0.07 per unit for gross proceeds of $35,000. Each unit consists of one
share of our common stock and one non-transferable common stock purchase
warrant, with each common stock purchase warrant entitling the holder to acquire
one additional share of our common stock at a price of $0.10 per share for a
period of two years. We issued the securities to one U.S. person (as that term
is defined in Regulation S of the Securities Act of 1933) relying on Rule 506 of
Regulation D and/or Section 4(a)(2) of the Securities Act of 1933.
51
On July 6, 2015, we sold 357,143 units of our securities at a
price of $0.07 per unit for gross proceeds of $25,000. Each unit consists of one
share of our common stock and one non-transferable common stock purchase
warrant, with each common stock purchase warrant entitling the holder to acquire
one additional share of our common stock at a price of $0.10 per share for a
period of two years. We issued the securities to one U.S. person (as that term
is defined in Regulation S of the Securities Act of 1933) relying on Rule 506 of
Regulation D and/or Section 4(a)(2) of the Securities Act of 1933.
On July 7, 2015, we entered into a loan agreement with one
lender, pursuant to which we issued a convertible promissory note in the
principal amount of $25,000 and 357,143 warrants in exchange for the loan in the
amount of $25,000. The convertible promissory note bears simple interest at the
rate of 8% per annum and matures on July 7, 2016. The lender has the option to
convert the amount due under the convertible promissory note into shares of our
common stock at a conversion price of $0.07 per share. Each warrant is
exercisable into one share of our common stock at an exercise price of $0.10
until July 7, 2017. In issuing these securities, we relied on an exemption from
the registration requirements of the Securities Act of 1933 provided by Section
4(a)(2) of the Securities Act of 1933.
On July 13, 2015, we entered into a loan agreement with one
lender, pursuant to which we issued a convertible promissory note in the
principal amount of $25,000 and 357,143 warrants in exchange for the loan in the
amount of $25,000. The convertible promissory note bears simple interest at the
rate of 8% per annum and matures on July 13, 2016. The lender has the option to
convert the amount due under the convertible promissory note into shares of our
common stock at a conversion price of $0.07 per share. Each warrant is
exercisable into one share of our common stock at an exercise price of $0.10
until July 13, 2017. In issuing these shares, we relied on an exemption from the
registration requirements of the Securities Act of 1933 provided by Section
4(a)(2) of the Securities Act of 1933.
On July 13, 2015, we sold 214,286 units of our securities at a
price of $0.07 per unit for gross proceeds of $15,000.02. Each unit consists of
one share of our common stock and one non-transferable common stock purchase
warrant, with each common stock purchase warrant entitling the holder to acquire
one additional share of our common stock at a price of $0.10 per share for a
period of two years. We issued the securities to one U.S. person (as that term
is defined in Regulation S of the Securities Act of 1933) relying on Rule 506 of
Regulation D and/or Section 4(a)(2) of the Securities Act of 1933.
Between July 15, 2015 and July 17, 2015, we issued an aggregate
of 905,716 shares of our common stock at a price of $0.07 per share to a warrant
holder upon full exercise of the warrant to purchase an aggregate of 1,665,117
shares of our common stock on a cashless basis. In issuing these shares, we
relied on an exemption from the registration requirements of the Securities Act
of 1933 provided by Section 4(a)(2) of the Securities Act of 1933.
On July 17, 2015, we entered into a loan agreement with one
lender, pursuant to which we issued a convertible promissory note in the
principal amount of $25,000 and 357,143 warrants in exchange for the loan in the
amount of $25,000. The convertible promissory note bears simple interest at the
rate of 8% per annum and matures on July 17, 2016. The lender has the option to
convert the amount due under the convertible promissory note into shares of our
common stock at a conversion price of $0.07 per share. Each warrant is
exercisable into one share of our common stock at an exercise price of $0.10
until July 17, 2017. In issuing these securities, we relied on an exemption from
the registration requirements of the Securities Act of 1933 provided by Section
4(a)(2) of the Securities Act of 1933.
On July 24, 2015, we issued 78,081 shares of our common stock
at a price of $0.07 per share to a warrant holder upon full exercise of the
warrant to purchase an aggregate of 166,666 shares of our common stock on a
cashless basis. In issuing these shares, we relied on an exemption from the
registration requirements of the Securities Act of 1933 provided by Section
4(a)(2) of the Securities Act of 1933.
In consideration for the services rendered to our company
pursuant to an agreement dated July 31, 2015, we issued 5,000 shares of our
common stock to a service provider. The issuance of these shares was exempt from
registration pursuant to Section 4(a)(2) of the Securities Act of 1933.
On August 4, 2015, we sold 1,500,000 units of our securities at
a price of $0.07 per unit for gross proceeds of $105,000. Each unit consists of
one share of our common stock and one non-transferable common stock purchase
warrant, with each common stock purchase warrant entitling the holder to acquire
one additional share of our common stock at a price of $0.10 per share for a
period of two years. We issued the securities to one U.S. person (as that term
is defined in Regulation S of the Securities Act of 1933) relying on Rule 506 of
Regulation D and/or Section 4(a)(2) of the Securities Act of 1933.
52
On August 7, 2015, we sold 357,143 units of our securities at a
price of $0.07 per unit for gross proceeds of $25,000.01. Each unit consists of
one share of our common stock and one non-transferable common stock purchase
warrant, with each common stock purchase warrant entitling the holder to acquire
one additional share of our common stock at a price of $0.10 per share for a
period of two years. We issued the securities to one U.S. person (as that term
is defined in Regulation S of the Securities Act of 1933) relying on Rule 506 of
Regulation D and/or Section 4(a)(2) of the Securities Act of 1933.
On August 8, 2015, we sold 357,143 units of our securities at a
price of $0.07 per unit for gross proceeds of $25,000.01. Each unit consists of
one share of our common stock and one non-transferable common stock purchase
warrant, with each common stock purchase warrant entitling the holder to acquire
one additional share of our common stock at a price of $0.10 per share for a
period of two years. We issued the securities to one U.S. person (as that term
is defined in Regulation S of the Securities Act of 1933) relying on Rule 506 of
Regulation D and/or Section 4(a)(2) of the Securities Act of 1933.
On August 11, 2015, we issued an aggregate of 365,000 shares of
our common stock at a price of $0.07 per share to a warrant holder upon full
exercise of the warrant to purchase an aggregate of 365,000 shares of our common
stock on a cashless basis. In issuing these shares, we relied on an exemption
from the registration requirements of the Securities Act of 1933 provided by
Section 4(a)(2) of the Securities Act of 1933.
On August 19, 2015, we sold 720,000 units of our securities at
a price of $0.07 per unit for gross proceeds of $50,400.00. Each unit consists
of one share of our common stock and one non-transferable common stock purchase
warrant, with each common stock purchase warrant entitling the holder to acquire
one additional share of our common stock at a price of $0.10 per share for a
period of two years. We issued the securities to one U.S. person (as that term
is defined in Regulation S of the Securities Act of 1933) relying on Rule 506 of
Regulation D and/or Section 4(a)(2) of the Securities Act of 1933.
On August 19, 2015, we sold 285,715 units of our securities at
a price of $0.07 per unit for gross proceeds of $20,000.05. Each unit consists
of one share of our common stock and one non-transferable common stock purchase
warrant, with each common stock purchase warrant entitling the holder to acquire
one additional share of our common stock at a price of $0.10 per share for a
period of two years. We issued the securities to one U.S. person (as that term
is defined in Regulation S of the Securities Act of 1933) relying on Rule 506 of
Regulation D and/or Section 4(a)(2) of the Securities Act of 1933.
On August 20, 2015, we entered into a securities purchase
agreement with Assurance, pursuant to which we sold a secured term note of our
company in the principal amount of $240,000, together with 1,000,000 shares of
our common stock, in consideration for $200,000. The secured note matures on
August 20, 2016. The principal amount of the note is to be paid at the rate of
$20,000 per month, commencing on September 20, 2015 and the 20th calendar day of
each successive month until the maturity date. We may prepay the note by paying
the holder 110% of the principal amount outstanding together with accrued but
unpaid interest thereon, provided that we provide written notice to the holder
at least 30 days prior to the date of prepayment. Pursuant to the securities
purchase agreement, we paid Assurance $2,500 for legal fees incurred by it and
granted it piggyback registration rights. In connection with the securities
purchase agreement, we also entered into a general security agreement dated
August 20, 2015 with Assurance. The issuance and sale of securities by us under
the securities purchase agreement with Assurance was exempt from registration
pursuant to Section 4(a)(2) of the Securities Act of 1933 and Rule 506
promulgated thereunder.
In consideration for the consulting services rendered to our
company pursuant to an amendment effective as of August 25, 2015 to the service
agreement dated April 10, 2015, we issued 1,500,000 shares of our common stock
to a consultant effective as of August 25, 2015. The issuance of these shares
was exempt from registration pursuant to Section 4(a)(2) of the Securities Act
of 1933.
In consideration for services rendered to our company pursuant
to a marketing authorization agreement dated November 4, 2014, we issued 300,000
shares of our common stock to a service provider effective as of August 27,
2015. The issuance of these shares was exempt from registration pursuant to
Section 4(a)(2) of the Securities Act of 1933.
On September 24, 2015, we entered into a securities purchase
agreement with one lender, pursuant to which we issued a convertible promissory
note in the principal amount of $82,500 and 1,600,000 warrants in consideration
for $75,000. The convertible promissory note matures seven months from the date
of payment and bears a one-time interest charge of 8%, payable on the maturity
date. The lender has the option to convert the amount due under the convertible
promissory note into shares of our common stock at a conversion
price of $0.07 per share. Each warrant is exercisable into one share of our
common stock at an exercise price of $0.07 for a period of five years. In
issuing these securities, we relied on an exemption from the registration
requirements of the Securities Act of 1933 provided by Section 4(a)(2) of the
Securities Act of 1933.
53
On October 2, 2015, we entered into a loan agreement with one
lender, pursuant to which we issued a promissory note in the principal amount of
$50,000 and 714,286 warrants in exchange for the loan in the amount of $50,000.
The promissory note bears interest at the rate of 8% per annum, payable
quarterly, and matures on May 2, 2016. The lender has the option to convert the
amount due under the promissory note into shares of our common stock at a
conversion price of $0.07 per share. Each warrant is exercisable into one share
of our common stock at an exercise price of $0.07 until October 2, 2017. We also
granted the lender a registration right. In issuing these securities, we relied
on an exemption from the registration requirements of the Securities Act of 1933
provided by Section 4(a)(2) of the Securities Act of 1933.
On October 2, 2015, we entered into a loan agreement with one
lender, pursuant to which we issued a promissory note in the principal amount of
$10,000 and 142,857 warrants in exchange for the loan in the amount of $10,000.
The promissory note bears interest at the rate of 8% per annum, payable
quarterly, and matures on May 2, 2016. The lender has the option to convert the
amount due under the promissory note into shares of our common stock at a
conversion price of $0.07 per share. Each warrant is exercisable into one share
of our common stock at an exercise price of $0.07 until October 2, 2017. We also
granted the lender a registration right. In issuing these securities, we relied
on an exemption from the registration requirements of the Securities Act of 1933
provided by Section 4(a)(2) of the Securities Act of 1933.
On October 2, 2015, we entered into a loan agreement with one
lender, pursuant to which we issued a promissory note in the principal amount of
$25,000 and 357,143 warrants in exchange for the loan in the amount of $25,000.
The promissory note bears interest at the rate of 8% per annum, payable
quarterly, and matures on May 2, 2016. The lender has the option to convert the
amount due under the promissory note into shares of our common stock at a
conversion price of $0.07 per share. Each warrant is exercisable into one share
of our common stock at an exercise price of $0.07 until October 2, 2017. We also
granted the lender a registration right. In issuing these securities, we relied
on an exemption from the registration requirements of the Securities Act of 1933
provided by Section 4(a)(2) of the Securities Act of 1933.
On October 5, 2015, we entered into a loan agreement with one
lender, pursuant to which we issued a promissory note in the principal amount of
$25,000 and 357,143 warrants in exchange for the loan in the amount of $25,000.
The promissory note bears interest at the rate of 8% per annum, payable
quarterly, and matures on May 5, 2016. The lender has the option to convert the
amount due under the promissory note into shares of our common stock at a
conversion price of $0.07 per share. Each warrant is exercisable into one share
of our common stock at an exercise price of $0.07 until October 5, 2017. We also
granted the lender a registration right. In issuing these securities, we relied
on an exemption from the registration requirements of the Securities Act of 1933
provided by Section 4(a)(2) of the Securities Act of 1933.
On October 28, 2015, we entered into a securities purchase
agreement with one lender, pursuant to which we sold a term note of our company
in the aggregate principal amount of $125,000, together with 500,000 shares of
our common stock, in consideration for $125,000. The term note bears interest at
the rate of 15% per annum and matures on October 28, 2016. We may prepay the
note by paying the holder 110% of the principal amount outstanding together with
accrued but unpaid interest thereon, provided that we provide written notice to
the holder at least 30 days prior to the date of prepayment. Pursuant to the
securities purchase agreement, we paid the lender $2,500 for legal fees incurred
by it and granted it piggyback registration rights. The issuance and sale of
securities by us under the securities purchase agreement was exempt from
registration pursuant to Section 4(a)(2) of the Securities Act of 1933 and Rule
506 promulgated thereunder.
On November 13, 2015, we entered into a loan agreement with one
lender, pursuant to which we issued a promissory note in the principal amount of
$50,000 and 714,286 warrants in exchange for the loan in the amount of $50,000.
The promissory note bears interest at the rate of 8% per annum, payable
quarterly, and matures on June 13, 2016. The lender has the option to convert
the amount due under the promissory note into shares of our common stock at a
conversion price of $0.07 per share. We may prepay the note in full (with a 110%
premium of face) or in part at any time. Each warrant is exercisable into one
share of our common stock at an exercise price of $0.10 until November 13, 2017.
We also granted the lender a registration right. In issuing these
securities, we relied on an exemption from the registration requirements of the
Securities Act of 1933 provided by Section 4(a)(2) of the Securities Act of
1933.
54
On November 30, 2015, we entered into a warrant exchange
agreement (the Rogers Warrant Exchange Agreement) with Neil Rogers, a holder
of our outstanding common stock purchase warrants (the Rogers Warrants),
whereby we exchanged the Rogers Warrants, for no additional consideration, for
such number of shares of our common stock that is equal to 100% of the number of
the Rogers Warrants (the Rogers Exchange), and following the Rogers Exchange,
the Rogers Warrants were automatically cancelled and terminated and Mr. Rogers
has no further rights pursuant to the Rogers Warrants and any agreement or
instrument pursuant to which such Rogers Warrants were issued.
On November 30, 2015, pursuant to the Rogers Warrant Exchange
Agreement, we issued 4,699,800 shares of our common stock upon exchange of the
4,699,800 Rogers Warrants.
As of November 30, 2015, we entered into a loan agreement with
Neil Rogers, whereby the Mr. Rogers loaned $750,000 to our company in exchange
for a non-negotiable promissory note in the principal amount of $750,000. The
note bears interest at the rate of 15% per annum and matures on the date that is
60 days after November 30, 2015. The loan agreement provides that our
obligations to Mr. Rogers will be secured by an escrow agreement, pursuant to
which we will deposit into escrow a certificate representing $1.5 million worth
of shares of our common stock. As of November 30, 2015, we entered into the
escrow agreement with Mr. Rogers and an escrow agent. Pursuant to the escrow
agreement, we deposited a share certificate (the Certificate) representing
26,315,789 shares of our common stock (the Escrowed Shares), valued at $1.5
million, to the escrow agent. Pursuant to the escrow agreement, (i) in the event
that there is any event of default that is not cured in accordance with the loan
agreement, the escrow agent is to deliver the Certificate to Mr. Rogers and (ii)
in the event that our company repays the loan pursuant to the loan agreement and
there is no event of default that is not cured in accordance with the loan
agreement at the time of repayment, the escrow agent is to deliver the
Certificate to the transfer agent of our company and request the transfer agent
to cancel the Escrowed Shares. Pursuant to the loan agreement, we also granted
piggyback registration rights to Mr. Rogers with respect to the Escrowed Shares.
We issued these securities to one non-U.S. person (as that term is defined in
Regulation S of the Securities Act of 1933) in an offshore transaction relying
on Regulation S and/or Section 4(a)(2) of the Securities Act of 1933. On January
25, 2016, we entered into an amendment agreement with Neil Rogers, whereby the
parties agreed to extend the date that: (a) all sums due and payable under the
loan agreement dated November 30, 2015 are to be paid from 60 days after
November 30, 2015 to March 31, 2016; and (b) all outstanding principal and
interest under the non-negotiable promissory note dated November 30, 2015 to be
due and payable from 60 days after November 30, 2015 to March 31, 2016.
On December 1, 2015, we entered into a warrant exchange
agreement (the December Warrant Exchange Agreement) with 11 holders of our
outstanding common stock purchase warrants (the December Warrants), whereby we
exchanged each holders December Warrants, for no additional consideration, for
such number of shares of our common stock that is equal to 100% of the number of
such holders December Warrants (the December Exchange), and following the
December Exchange, the December Warrants were automatically cancelled and
terminated and the holders have no further rights pursuant to the December
Warrants and any agreement or instrument pursuant to which such December
Warrants were issued.
On December 1, 2015, pursuant to the December Warrant Exchange
Agreement, we issued an aggregate of 6,689,554 shares of our common stock upon
exchange of the 6,689,554 December Warrants. In issuing these shares, we relied
on an exemption from the registration requirements of the Securities Act of 1933
provided by Section 3(a)(9) of the Securities Act of 1933.
As of January 25, 2016, we entered into a loan agreement with
Turnstone Capital Inc., whereby Turnstone Capital Inc. loaned $750,000 to our
company in exchange for a non-negotiable promissory note in the principal amount
of $750,000. The note bears interest at the rate of 15% per annum and matures on
March 31, 2016. The loan agreement provides that our obligations to the lender
will be secured by an escrow agreement, pursuant to which we will deposit into
escrow a certificate representing 1,500,000 shares of our common stock. As of
January 25, 2016, we entered into the escrow agreement with the lender and an
escrow agent. Pursuant to the escrow agreement, we intend to deposit a share
certificate representing the escrowed shares with the escrow agent. Pursuant to
the escrow agreement, (i) in the event that there is any event of default that
is not cured in accordance with the loan agreement, the escrow agent is to
deliver the share certificate to the lender and (ii) in the event that our
company repays the loan pursuant to the loan agreement and there is no event of
default that is not cured in accordance with the loan agreement at the time of
repayment, the escrow agent is to deliver the share certificate to the transfer
agent of our company and request the transfer agent to cancel the escrowed shares. Pursuant to the loan agreement, we
also granted piggyback registration rights to the lender with respect to the
escrowed shares. We issued these securities to one non-U.S. person (as that term
is defined in Regulation S of the Securities Act of 1933) in an offshore
transaction relying on Regulation S and/or Section 4(a)(2) of the Securities Act
of 1933.
55
Effective January 29, 2016, we granted a total of 3,000,000
stock options to Steven P. Nickolas and Richard A. Wright (1,500,000 stock
options each). The stock options are exercisable at the exercise price of $0.52
per share until October 7, 2023. All of these stock options vested effective
January 29, 2016.
In consideration for settling the debt in the amount of $5,601
incurred for past services performed by a former employee of our company, we
issued 10,000 shares of our common stock to a former employee of our company
effective as of January 28, 2016. The issuance of these shares was exempt from
registration pursuant to Section 4(a)(2) of the Securities Act of 1933.
In consideration for services to be rendered to our subsidiary,
we issued an aggregate of 240,000 shares of our common stock to two employees of
our subsidiary effective as of March 1, 2016. The issuance of these shares was
exempt from registration pursuant to Section 4(a)(2) of the Securities Act of
1933.
In consideration for settling the debts in the aggregate
amounts of $29,700 incurred for past services performed by former employees of
our company, we issued an aggregate of 30,000 shares of our common stock to two
former employees of our company effective as of March 1, 2016. The issuance of
these shares was exempt from registration pursuant to Section 4(a)(2) of the
Securities Act of 1933.
Effective March 31, 2016, we issued a total of 3,000,000 shares
of our Series C Preferred Stock (1,500,000 shares to each) to Steven P.
Nickolas, a former director and executive officer, and Richard A. Wright, a
director and executive officer, pursuant to their employment agreements dated
effective March 1, 2016. We issued these shares relying on the registration
exemption provided for in Section 4(a)(2) of the Securities Act of 1933.
As of March 31, 2016, we entered into a promissory note and
warrant exchange agreement (the
March Exchange Agreement
) with six
holders of our promissory notes (each, a
March Note
) in the aggregate
principal amount of $310,000 and warrants (each, a
March Warrant
) to
purchase an aggregate of 88,563 shares of our common stock, whereby we exchanged
the holders March Notes and March Warrants, for no additional consideration,
for an aggregate of 551,246 shares of our common stock (the
March
Exchange
), and following the March Exchange, the March Notes and March
Warrants were automatically cancelled and terminated and the holders have no
further rights pursuant to the March Notes, March Warrants and any agreement or
instrument pursuant to which such March Notes or March Warrants were issued.
As of March 31, 2016, pursuant to the March Exchange Agreement,
we issued an aggregate of 551,246 shares of our common stock upon exchange of
the above mentioned March Notes and March Warrants. In issuing these shares, we
relied on an exemption from the registration requirements of the Securities Act
of 1933 provided by Section 3(a)(9) and/or Section 4(a)(2) of the Securities Act
of 1933.
As of May 16, 2016, we entered into a warrant exchange
agreement (the
May Exchange Agreement
) with six holders of our warrants
(each, a
May Warrant
) to purchase an aggregate of 163,202 shares of our
common stock, whereby we exchanged the holders May Warrants, for no additional
consideration, for an aggregate of 163,202 shares of our common stock (the
May Exchange
), and following the May Exchange, the May Warrants were
automatically cancelled and terminated and the holders have no further rights
pursuant to the May Warrants and any agreement or instrument pursuant to which
such May Warrants were issued.
On June 14, 2016, pursuant to the May Exchange Agreement, we
issued an aggregate of 163,202 shares of our common stock upon exchange of the
above mentioned May Warrants. In issuing these shares, we relied on an exemption
from the registration requirements of the Securities Act of 1933 provided by
Section 3(a)(9) and/or Section 4(a)(2) of the Securities Act of 1933 and/or Rule
506 promulgated under the Securities Act of 1933.
On July 20, 2016, we issued 25,600 shares of our common stock
at a price of $0.33 per share to a warrant holder upon full exercise of the
warrant to purchase an aggregate of 32,000 shares of our common stock on a
cashless basis. In issuing these shares, we relied on an exemption from the
registration requirements of the Securities Act of 1933 provided by Section
4(a)(2) of the Securities Act of 1933.
56
On August 18, 2016, we issued 20,000 shares of our common stock
to a consultant as partial consideration for settling any outstanding claims
relating to the consultants services and consulting agreements that the
consultant had or may have against our company. In issuing these shares, we
relied on an exemption from the registration requirements of the Securities Act
of 1933 provided by Section 4(a)(2) of the Securities Act of 1933.
On September 20, 2016, we agreed to issue 58,720 shares of our
common stock to a consultant for services rendered that were valued at the
market value on that date of $1.70 per share. In issuing these shares, we intend
to rely on an exemption from the registration requirements of the Securities Act
of 1933 provided by Section 4(a)(2) of the Securities Act of 1933.
In consideration for services rendered to our company, we
issued an aggregate of 118,720 shares of our common stock to four consultants of
our company effective as of March 31, 2017. In issuing these shares, we relied
on an exemption from the registration requirements of the Securities Act of 1933
provided by Section 4(a)(2) of the Securities Act of 1933.
As of February 24, 2017 and February 27, 2017, we entered into
a promissory note exchange agreement (the
Note Exchange Agreements
)
with four holders of our promissory notes (each, a
2017 Note
) in the
aggregate principal amount of $210,000, whereby we exchanged the holders 2017
Notes, for no additional consideration, for an aggregate of 210,000 shares of
our common stock (the
Note Exchange
), and following the Note Exchange,
the 2017 Notes were automatically cancelled and terminated and the holders have
no further rights pursuant to the 2017 Notes and any agreement or instrument
pursuant to which such 2017 Notes were issued.
As of March 31, 2017, pursuant to the Note Exchange Agreements,
we issued an aggregate of 210,000 shares of our common stock upon exchange of
the above mentioned 2017 Notes. In issuing these shares, we relied on an
exemption from the registration requirements of the Securities Act of 1933
provided by Section 3(a)(9) and/or Section 4(a)(2) of the Securities Act of
1933.
As of October 25, 2016, we entered into a warrant exchange
agreement (the
Warrant Exchange Agreement
) with four holders of our
warrants (each, an
October Warrant
) to purchase an aggregate of 25,716
shares of our common stock, whereby we exchanged the holders October Warrants,
for no additional consideration, for an aggregate of 25,716 shares of our common
stock (the
Warrant Exchange
), and following the Warrant Exchange, the
October Warrants were automatically cancelled and terminated and the holders
have no further rights pursuant to the October Warrants and any agreement or
instrument pursuant to which such October Warrants were issued.
As of March 31, 2017, pursuant to the Warrant Exchange
Agreements, we issued an aggregate of 25,716 shares of our common stock upon
exchange of the above mentioned October Warrants. In issuing these shares, we
relied on an exemption from the registration requirements of the Securities Act
of 1933 provided by Section 3(a)(9) and/or Section 4(a)(2) of the Securities Act
of 1933.
Effective as of March 31, 2017, we issued an aggregate of
1,030,000 shares of our common stock in connection with the conversion of an
aggregate of $1,030,000 of principal and accrued interest outstanding under the
Loan Facility Agreement, dated September 15, 2016. The shares were issued at a
conversion price of $1.00 per share. We issued the shares to two non U.S.
Persons (as that term is defined in Regulation S of the Securities Act of 1933)
and in issuing securities we relied on the registration exemption provided for
in Regulation S and/or Section 4(a)(2) of the Securities Act of 1933.
Effective May 3, 2017, we issued a total of 3,000,000 shares of
our Series D Preferred Stock to our directors, officers, consultants and
employees. We issued these shares relying on the registration exemption provided
for in Section 4(a)(2) of the Securities Act of 1933.
Effective April 28, 2017, we granted a total of 1,790,000 stock
options to our directors, officers, consultants employees. The stock options are
exercisable at the exercise price of $1.29 per share for a period of six and
one-half years from the date of grant. 360,000 of the stock options were to vest
as follows: (i) 120,000 upon the date of grant; and (ii) 120,000 on each
anniversary date of grant. 1,430,000 of the stock options vest as follows: (i)
357,500 upon the date of grant; and (ii) 357,500 on each anniversary date of
grant. We granted the stock options to 12 U.S. Persons and 3 non U.S. Persons
(as that term is defined in Regulation S of the Securities Act of 1933) and in
issuing securities we relied on the registration exemption provided for in
Regulation S and/or Section 4(a)(2) of the Securities Act of 1933.
57
Effective April 28, 2017, we issued 585,000 shares of common
stock to five persons, one of whom is a director and officer of our company. Of
these shares, 560,000 are restricted from transfer for a period of two years
from April 28, 2017. We issued these shares relying on the registration
exemption provided for in Section 4(a)(2) of the Securities Act of 1933.
On August 17, 2017, we issued 1,500,000 shares of our common
stock to Steven P. Nickolas upon conversion of 1,500,000 shares of our Series C
Preferred Stock held by Mr. Nickolas. The shares of our Series C Preferred Stock
became convertible into shares of our common stock without the payment of any
additional consideration by Mr. Nickolas and at the option of Mr. Nickolas
because the termination of the employment agreement between our company and Mr.
Nickolas was an event constituting a Negotiated Trigger Event as defined in
the Certificate of Designation for our Series C Preferred Stock. We issued these
shares relying on the registration exemption provided for in Section 4(a)(2) of
the Securities Act of 1933.
On September 29, 2017, we issued 514,583 shares of common stock
to Turnstone Capital Inc. upon conversion of $500,000 in principal plus $14,583
in accrued interest under its loan facility agreement with our company. We
issued these shares to one non-U.S. person (as that term is defined in
Regulation S of the Securities Act of 1933) in an offshore transaction relying
on Regulation S and/or Section 4(a)(2) of the Securities Act of 1933.
In consideration for services rendered and to be rendered to
our company pursuant to a services agreement dated July 26, 2016, we issued a
consultant 262,596 shares of our common stock on August 23, 2017. We issued
these shares relying on the registration exemption provided for in Section
4(a)(2) of the Securities Act of 1933.
Pursuant to the Settlement Agreement entered into on October
31, 2017, we issued 700,000 shares of our common stock (issued on November 1,
2017) and 300,000 shares of our Series D Preferred Stock (issued on November 3,
2017) to Steven P. Nickolas, our former president and chief executive officer
and a former director of our company. We issued these shares relying on the
registration exemption provided for in Section 4(a)(2) of the Securities Act of
1933.
Pursuant to the Exchange Agreement dated November 8, 2017
between our company and Richard A. Wright, we issued 700,000 shares of our
common stock on November 9, 2017 and 300,000 shares of our Series D Preferred
Stock on November 9, 2017 to Richard A. Wright. We issued these shares relying
on the registration exemption provided for in Section 4(a)(2) of the Securities
Act of 1933.
Pursuant to the Stock Option Forfeiture Agreement dated
November 8, 2017 executed by Richard A. Wright and Sharon Wright, Richard A.
Wrights spouse, we issued 200,000 shares of our Series D Preferred Stock to
Richard A. Wright on November 9, 2017. We issued these shares relying on the
registration exemption provided for in Section 4(a)(2) of the Securities Act of
1933.
58
Exhibits
Exhibit Number
|
Description
|
(2)
|
Plan of Acquisition,
Reorganization, Arrangement, Liquidation or Succession
|
2.1
|
Share Exchange Agreement dated May 31, 2013
with Alkaline Water Corp. and its shareholders (incorporated by reference
from our Current Report on Form 8-K, filed on June 5, 2013)
|
(3)
|
Articles of Incorporation
and Bylaws
|
3.1
|
Articles of Incorporation (incorporated by
reference from our Form S-1 Registration Statement, filed on October 28,
2011)
|
3.2
|
Certificate of Change
(incorporated by reference from our Quarterly Report on Form 10-Q, filed
on August 13, 2013)
|
3.3
|
Articles of Merger (incorporated by reference
from our Quarterly Report on Form 10-Q, filed on August 13, 2013)
|
3.4
|
Certificate of Amendment to
Articles of Incorporation (incorporated by reference from our Current
Report on Form 8-K, filed on October 11, 2013)
|
3.5
|
Certificate of Designation (incorporated by
reference from our Current Report on Form 8-K, filed on October 11, 2013)
|
3.6
|
Certificate of Designation
(incorporated by reference from our Current Report on Form 8-K, filed on
November 12, 2013)
|
3.7
|
Certificate of Change (incorporated by
reference from our Current Report on Form 8-K, filed on December 30, 2015)
|
3.8
|
Certificate of Amendment to
Articles of Incorporation (incorporated by reference from our Current
Report on Form 8-K, filed on January 25, 2016)
|
3.9
|
Certificate of Amendment to Certificate of
Designation (incorporated by reference from our Current Report on Form
8-K, filed on January 25, 2016)
|
3.10
|
Certificate of Designation
(incorporated by reference from our Current Report on Form 8-K, filed on
April 5, 2016)
|
3.11
|
Certificate of Withdrawal of Certificate of
Designation (incorporated by reference from our Current Report on Form
8-K, filed on April 4, 2017)
|
3.12
|
Certificate of Designation
(incorporated by reference from our Current Report on Form 8-K, filed on
May 4, 2017)
|
3.13
|
Certificate of Amendment to Certificate of
Designation (incorporated by reference from our Current Report on Form
8-K, filed on November 6, 2017)
|
3.14
|
Certificate of Withdrawal of
Certificate of Designation (incorporated by reference from our Quarterly
Report on Form 10-Q, filed on November 20, 2017)
|
3.15
|
Amended and Restated Bylaws (incorporated by
reference from our Current Report on Form 8-K, filed on March 15, 2013)
|
(4)
|
Instruments Defining the
Rights of Security Holders, including Indentures
|
4.1
|
Form of Warrant Certificate (incorporated by
reference from our Registration Statement on Form S-1/A, filed on February
8, 2016)
|
(5)
|
Opinion regarding
Legality
|
5.1
|
Opinion of Clark Wilson LLP regarding the
legality of the securities being registered (incorporated by reference
from our Registration Statement on Form S-1/A, filed on February 8, 2016)
|
(10)
|
Material Contracts
|
10.1
|
Contract Packer Agreement dated November 14,
2012 between Alkaline 84, LLC and AZ Bottled Water, LLC (incorporated by
reference from our Current Report on Form 8-K, filed on June 5, 2013)
|
10.2
|
Stock Option Agreement dated
October 9, 2013 with Steven P. Nickolas (incorporated by reference from
our Quarterly Report on Form 10-Q, filed on November 13, 2013)
|
10.3
|
Stock Option Agreement dated October 9, 2013
with Richard A. Wright (incorporated by reference from our Quarterly
Report on Form 10-Q, filed on November 13, 2013)
|
10.4
|
Contract Packer Agreement dated
October 7, 2013 with White Water, LLC (incorporated by reference from our
Quarterly Report on Form 10-Q, filed on November 13, 2013)
|
59
Exhibit Number
|
Description
|
10.5
|
Manufacturing Agreement dated
August 15, 2013 with Water Engineering Solutions, LLC (incorporated by
reference from our Registration Statement on Form S-1, filed on November
27, 2013)
|
10.6
|
Equipment Lease Agreement dated January 17,
2014 (incorporated by reference from our Current Report on Form 8-K, filed
on January 27, 2014)
|
10.7
|
Revolving Accounts Receivable
Funding Agreement dated February 20, 2014 (incorporated by reference from
our Current Report on Form 8-K, filed on February 25, 2014)
|
10.8
|
Form of Securities Purchase Agreement dated as
of April 28, 2014, between The Alkaline Water Company Inc. and the
purchasers named therein (incorporated by reference from our Current
Report on Form 8-K, filed on May 6, 2014)
|
10.9
|
Form of Common Stock Purchase
Warrant (incorporated by reference from our Current Report on Form 8-K,
filed on May 6, 2014)
|
10.10
|
Form of Placement Agent Common Stock Purchase
Warrant (incorporated by reference from our Current Report on Form 8-K,
filed on May 6, 2014)
|
10.11
|
Stock Option Agreement dated
May 12, 2014 with Steven P. Nickolas (incorporated by reference from our
Current Report on Form 8-K, filed on May 14, 2014)
|
10.12
|
Stock Option Agreement dated May 12, 2014 with
Richard A. Wright (incorporated by reference from our Current Report on
Form 8-K, filed on May 14, 2014)
|
10.13
|
Stock Option Agreement dated
May 21, 2014 with Steven P. Nickolas (incorporated by reference from our
Current Report on Form 8-K, filed on May 23, 2014)
|
10.14
|
Stock Option Agreement dated May 21, 2014 with
Richard A. Wright (incorporated by reference from our Current Report on
Form 8-K, filed on May 23, 2014)
|
10.15
|
Amendment #1 dated February 12,
2014 to Equipment Lease Agreement (incorporated by reference from our
Quarterly Report on Form 10-Q, filed on August 13, 2014)
|
10.16
|
Equipment Sale/Lease Back Agreement dated April
2, 2014 (incorporated by reference from our Quarterly Report on Form 10-Q,
filed on August 13, 2014)
|
10.17
|
Agreement dated August 12, 2014
with H.C. Wainwright & Co., LLC (incorporated by reference from our
Current Report on Form 8-K, filed on August 21, 2014)
|
10.18
|
Form of Warrant Amendment Agreement
(incorporated by reference from our Current Report on Form 8-K, filed on
August 21, 2014)
|
10.19
|
Form of Common Stock Purchase
Warrant (incorporated by reference from our Current Report on Form 8-K,
filed on August 21, 2014)
|
10.20
|
Form of Warrant Amendment Agreement
(incorporated by reference from our Current Report on Form 8-K, filed on
October 9, 2014)
|
10.21
|
Form of Common Stock Purchase
Warrant (incorporated by reference from our Current Report on Form 8-K,
filed on October 9, 2014)
|
10.22
|
Master Lease Agreement dated October 28, 2014
with Veterans Capital Fund, LLC (incorporated by reference from our
Current Report on Form 8-K, filed on November 4, 2014)
|
10.23
|
Warrant Agreement dated October
28, 2014 with Veterans Capital Fund, LLC (incorporated by reference from
our Current Report on Form 8-K, filed on November 4, 2014)
|
10.24
|
Registration Rights Agreement dated October 28,
2014 with Veterans Capital Fund, LLC (incorporated by reference from our
Current Report on Form 8-K, filed on November 4, 2014)
|
10.25
|
2013 Equity Incentive Plan
(incorporated by reference from our Current Report on Form 8-K, filed on
November 4, 2014)
|
10.26
|
Form of Amending Agreement to Stock Option
Agreement (incorporated by reference from our Current Report on Form 8-K,
filed on November 4, 2014)
|
10.27
|
Stock Option Agreement dated
February 18, 2015 with Steven P. Nickolas (incorporated by reference from
our Current Report on Form 8-K, filed on April 14, 2015)
|
10.28
|
Stock Option Agreement dated February 18, 2015
with Richard A. Wright (incorporated by reference from our Current Report
on Form 8-K, filed on April 14, 2015)
|
10.29
|
Securities Purchase Agreement
dated as of May 11, 2015 with Assurance Funding Solutions LLC
(incorporated by reference from our Annual Report on Form 10-K, filed on
July 14, 2015)
|
60
Exhibit Number
|
Description
|
10.30
|
Secured Term Note dated May
2015 issued to Assurance Funding Solutions LLC (incorporated by reference
from our Annual Report on Form 10-K, filed on July 14, 2015)
|
10.31
|
General Security Agreement dated as of May 11,
2015 with Assurance Funding Solutions LLC (incorporated by reference from
our Annual Report on Form 10-K, filed on July 14, 2015)
|
10.32
|
Securities 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)
|
10.33
|
Secured 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)
|
10.34
|
General 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)
|
10.35
|
Form of Warrant Exchange Agreement
(incorporated by reference from our Current Report on Form 8-K, filed on
December 1, 2015)
|
10.36
|
Loan Agreement dated November
30, 2015 with Neil Rogers (incorporated by reference from our Current
Report on Form 8-K, filed on December 4, 2015)
|
10.37
|
Promissory 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)
|
10.38
|
Escrow 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)
|
10.39
|
2013 Equity Incentive Plan (incorporated by
reference from our Current Report on Form 8-K, filed on January 25, 2016)
|
10.40
|
Loan 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)
|
10.41
|
Promissory 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)
|
10.42
|
Escrow 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)
|
10.43
|
Amendment Agreement dated January 25, 2016 with
Neil Rogers (incorporated by reference from our Current Report on Form
8-K, filed on January 25, 2016)
|
10.44
|
Stock Option Agreement dated
January 29, 2016 with Steven P. Nickolas (incorporated by reference from
our Current Report on Form 8-K, filed on February 4, 2016)
|
10.45
|
Stock Option Agreement dated January 29, 2016
with Richard A. Wright (incorporated by reference from our Current Report
on Form 8-K, filed on February 4, 2016)
|
10.46
|
Form of Subscription Agreement
(incorporated by reference from our Registration Statement on Form S-1/A,
filed on February 8, 2016)
|
10.47
|
Form of Warrant Certificate (incorporated by
reference from our Registration Statement on Form S- 1/A, filed on
February 8, 2016)
|
10.48
|
Employment 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)
|
10.49
|
Employment 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)
|
10.50
|
Form of Promissory Note and
Warrant Exchange Agreement (incorporated by reference from our Current
Report on Form 8-K, filed on June 16, 2016)
|
10.51
|
Form of Warrant Exchange Agreement
(incorporated by reference from our Current Report on Form 8-K, filed on
June 16, 2016)
|
10.52
|
Loan 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)
|
10.53
|
Credit 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)
|
10.54
|
Payoff 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)
|
61
Exhibit Number
|
Description
|
10.55
|
Form of Stock Option Agreement
(incorporated by reference from our Current Report on Form 8- K, filed on
May 4, 2017)
|
10.56
|
Settlement 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)
|
10.57
|
Exchange 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)
|
10.58
|
Stock 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)
|
(16)
|
Letter re Change in
Certifying Accountant
|
16.1
|
Letter from Seale & Beers, CPAs dated
November 18, 2016 (incorporated by reference from our Current Report on
Form 8-K, filed on November 18, 2016)
|
(21)
|
Subsidiaries
|
21.1
|
Subsidiaries of The Alkaline Water Company Inc.
|
|
Alkaline Water Corp., Arizona
corporation
|
|
Alkaline 88, LLC, Arizona limited liability
company
|
(23)
|
Consents of Experts and
Counsel
|
23.1*
|
Consent of AMC Auditing
|
23.2
|
Consent of Clark Wilson LLP
(included in Exhibit 5.1)
|
(101)
|
Interactive Data File
|
101.INS*
|
XBRL Instance Document
|
101.SCH*
|
XBRL Taxonomy Extension Schema
|
101.CAL*
|
XBRL Taxonomy Extension
Calculation Linkbase
|
101.DEF*
|
XBRL Taxonomy Extension Definition Linkbase
|
101.LAB*
|
XBRL Taxonomy Extension Label
Linkbase
|
101.PRE*
|
XBRL Taxonomy Extension Presentation Linkbase
|
*Filed herewith.
Undertakings
The undersigned registrant hereby undertakes:
1.
|
To file, during any period in which offers or sales are
being made, a post-effective amendment to this registration
statement:
|
|
(i)
|
To include any prospectus required by section 10(a)(3) of
the Securities Act of 1933;
|
|
|
|
|
(ii)
|
To reflect in the prospectus any facts or events arising
after the effective date of the registration statement (or the most recent
post-effective amendment thereof) which, individually or in the aggregate,
represent a fundamental change in the information in the registration
statement. Notwithstanding the foregoing, any increase or decrease in
volume of securities offered (if the total dollar value of securities
offered would not exceed that which was registered) and any deviation from
the low or high end of the estimated maximum offering range may be
reflected in the form of prospectus filed with the Securities and Exchange
Commission pursuant to Rule 424(b) if, in the aggregate, the changes in
volume and price represent no more than 20% change in the maximum
aggregate offering price set forth in the Calculation of Registration
Fee table in the effective registration statement;
and
|
62
|
(iii)
|
To include any material information with respect to the
plan of distribution not previously disclosed in the registration
statement or any material change to such information in the registration
statement;
|
2.
|
That, for the purpose of determining any liability under
the Securities Act of 1933, each such post-effective amendment shall be
deemed to be a new registration statement relating to the securities
offered therein, and the offering of such securities at that time shall be
deemed to be the initial bona fide offering thereof;
|
|
|
3.
|
To remove from registration by means of a post-effective
amendment any of the securities being registered which remain unsold at
the termination of the offering; and
|
|
|
4.
|
That, for the purpose of determining liability under the
Securities Act of 1933 to any purchaser, if the undersigned registrant is
subject to Rule 430C, each prospectus filed pursuant to Rule 424(b) as
part of a registration statement relating to an offering, other than
registration statements relying on 430B or other than prospectuses filed
in reliance on Rule 430A, shall be deemed to be part of and included in
the registration statement as of the date it is first used after
effectiveness. Provided, however, that no statement made in a registration
statement or prospectus that is part of the registration statement or made
in a document incorporated or deemed incorporated by reference into the
registration statement or prospectus that is part of the registration
statement will, as to a purchaser with a time of contract of sale prior to
such first use, supersede or modify any statement that was made in the
registration statement or prospectus that was part of the registration
statement or made in any such document immediately prior to such date of
first use.
|
|
|
5.
|
That, for the purpose of determining liability of the
registrant under the Securities Act of 1933 to any purchaser in the
initial distribution of the securities, the undersigned registrant
undertakes that in a primary offering of securities of the undersigned
registrant pursuant to this registration statement, regardless of the
underwriting method used to sell the securities to the purchaser, if the
securities are offered or sold to such purchaser by means of any of the
following communications, the undersigned registrant will be a seller to
the purchaser and will be considered to offer or sell such securities to
such purchaser:
|
|
(i)
|
Any preliminary prospectus or prospectus of the
undersigned registrant relating to the offering required to be filed
pursuant to Rule 424;
|
|
|
|
|
(ii)
|
Any free writing prospectus relating to the offering
prepared by or on behalf of the undersigned registrant or used or referred
to by the undersigned registrant;
|
|
|
|
|
(iii)
|
The portion of any other free writing prospectus relating
to the offering containing material information about the undersigned
registrant or its securities provided by or on behalf of the undersigned
registrant; and
|
|
|
|
|
(iv)
|
Any other communication that is an offer in the offering
made by the undersigned registrant to the
purchaser;
|
Insofar as indemnification for
liabilities arising under the Securities Act of 1933 may be permitted to
directors, officers and controlling persons of the registrant pursuant to the
foregoing provisions, or otherwise, the registrant has been advised that in the
opinion of the Securities and Exchange Commission such indemnification is
against public policy as expressed in the Securities Act of 1933 and is,
therefore, unenforceable. In the event that a claim for indemnification against
such liabilities (other than the payment by the registrant of expenses incurred
or paid by a director, officer or controlling person of the registrant in the
successful defense of any action, suit or proceeding) is asserted by such
director, officer or controlling person in connection with the securities being
registered, the registrant will, unless in the opinion of its counsel the matter
has been settled by controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by it is against public
policy as expressed in the Securities Act of 1933 and will be governed by the
final adjudication of such issue.
The undersigned registrant hereby undertakes that:
1.
|
For purposes of determining any liability under the
Securities Act of 1933, the information omitted from the form of
prospectus filed as part of this registration statement in reliance upon
Rule 430A and contained in a form of prospectus filed by the registrant pursuant to Rule
424(b) (1) or (4) or 497(h) under the Securities Act of 1933 shall be deemed to
be part of this registration statement as of the time it was declared effective.
|
63
2.
|
For the purpose of determining any liability under the
Securities Act of 1933, each post-effective amendment that contains a form
of prospectus shall be deemed to be a new registration statement relating
to the securities offered therein, and the offering of such securities at
that time shall be deemed to be the initial bona fide offering
thereof.
|
64
Signatures
Pursuant to the requirements of the Securities Act of 1933, the
registrant has duly caused this registration statement to be signed on its
behalf by the undersigned, thereunto duly authorized in the City of Scottsdale,
State of Arizona, on November 22, 2017.
The Alkaline Water Company Inc.
By:
/s/ Richard A.
Wright
|
|
Richard A. Wright
|
|
President, Chief Executive Officer and Director
|
|
(Principal Executive Officer)
|
|
Pursuant to the requirements of the Securities Act of 1933,
this registration statement has been signed by the following persons in the
capacities and on the dates indicated.
/s/ Richard A.
Wright
|
|
Richard A. Wright
|
|
President, Chief Executive Officer and Director
|
|
(Principal Executive Officer)
|
|
Date: November 22, 2017
|
|
/s/ David A.
Guarino
|
|
David A. Guarino
|
|
Chief Financial Officer, Treasurer and Director
|
|
(Principal Financial Officer and Principal
|
|
Accounting Officer)
|
|
Date: November 22, 2017
|
|
/s/ Aaron
Keay
|
|
Aaron Keay
|
|
Director
|
|
Date: November 22, 2017
|
|
65
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