10-Q

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

FORM 10-Q

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

For the quarterly period ended June 30, 2021

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

Commission File Number: 001-38754

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

Nevada	99-0367049
(State or other jurisdiction of incorporation or organization)	(I.R.S. Employer Identification No.)

8541 E. Anderson Drive, Suite 100, Scottsdale, AZ	85255
(Address of principal executive offices)	(Zip Code)

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

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

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

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

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.
Yes [X]   No [ ]

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).

Yes [X] No [ ]

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

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

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

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).
Yes [ ]   No [X]

Indicate the number of shares outstanding of each of the issuer's classes of common stock, as of the latest practicable date.

94,586,502 shares of common stock issued and outstanding as of August 16, 2021.

PART I - FINANCIAL INFORMATION

Item 1. Financial Statements

 THE ALKALINE WATER COMPANY INC.
CONSOLIDATED BALANCE SHEETS

		June 30, 2021 (unaudited)			March 31, 2021
ASSETS
Current assets
Cash	$	4,497,905		$	9,130,956
Accounts receivable, net		8,221,373			8,458,176
Inventory		5,037,575			4,407,720
Prepaid expenses		3,066,889			1,037,961
Operating lease right-of-use asset - current portion		213,397			236,446
Total current assets		21,037,139			23,271,259
Fixed assets - net		912,612			1,010,183
Operating lease right-of-use asset		227,342			269,167
Total assets	$	22,177,093		$	24,550,609
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities
Accounts payable	$	7,708,547		$	7,055,348
Accrued expenses		1,361,920			1,306,106
Revolving financing		5,107,111			4,324,412
PPP loan payable - current portion		329,071			328,570
Operating lease liability - current portion		235,055			229,605
Total current liabilities		14,741,704			13,244,041
Operating lease liability		227,342			292,582
Total liabilities		14,969,046			13,536,623
Commitments and contingencies (Note 10)
Stockholders' equity
Preferred stock, $0.001 par value, 100,000,000 shares authorized, 6,681,090 Series S nil issued and outstanding on June 30, 2021 and nil issued and outstanding on March 31, 2021		6,681			-
Common stock, Class A - $0.001 par value, 200,000,000 shares authorized 89,761,122 and 87,465,178 shares issued and outstanding at June 30, 2021 and March 31, 2021, respectively		89,761			87,464
Additional paid in capital		84,468,451			80,857,742
Stock Payable		-			-
Accumulated deficit		(77,356,846	)		(69,931,220	)
Total stockholders' equity		7,208,047			11,013,986
Total liabilities and stockholders' equity	$	22,177,093		$	24,550,609

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

THE ALKALINE WATER COMPANY INC.

CONSOLIDATED STATEMENT OF OPERATIONS

(unaudited)

		For the Three Months
		June 30, 2021			June 30, 2020
Revenue	$	14,113,578		$	13,432,310
Cost of Goods Sold		9,311,011			8,594,841
Gross Profit		4,802,567			4,837,469
Operating expenses
Sales and marketing expenses		7,156,400			3,718,231
General and administrative		4,964,374			3,949,917
Total operating expenses		12,120,774			7,668,148
Total operating loss		(7,318,207	)		(2,830,679	)
Other expense
Interest expense		(107,419	)		(190,324	)
Total other expense		(107,419	)		(190,324	)
Net loss	$	(7,425,626	)	$	(3,021,003	)
LOSS PER SHARE (Basic and Diluted)	$	(0.08	)	$	(0.05	)
WEIGHTED AVERAGE SHARES OUTSTANDING (Basic and Diluted)		88,342,316			57,231,724

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

THE ALKALINE WATER COMPANY

CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY

(unaudited)

	Preferred Stock					Common Stock				Additional					Accumulated
	Number			Par Value		Number		Par Value		Paid-in Capital		Stock Payable			Deficit			Total
Balance, March 31, 2020	3,400,000		$	3,400		45,585,592	$	45,585	$	54,094,848	$	1,000,000		$	(53,521,700	)	$	1,622,133
Preferred stock conversion	(3,400,000	)		(3,400	)	3,400,000		3,400										-
Common shares issued in connection with offerings						9,750,000		9,750		3,890,250		(1,000,000	)					2,900,000
Common shares issued upon exercise of warrants						287,666		288		258,612								258,900
Common shares issued to non-employees and employees						472,000		472		486,828								487,300
Stock Option expense										661,959								661,959
Stock Option exercise						116,000		116		61,364								61,480
Stock Payable												1,999,998						1,999,998
Net (loss)															(3,021,003	)		(3,021,003	)
Balance, June 30, 2020	-		$	-		59,611,258	$	59,611	$	59,453,861	$	1,999,998		$	(56,542,703	)	$	4,970,767
Balance, March 31, 2021	-		$	-		87,465,178	$	87,464	$	80,857,742	$	-		$	(69,931,220	)	$	11,013,986
Preferred stock issuance	6,681,090			6,681						2,220,350								2,227,031
Common shares issued upon exercise of warrants						1,277,777		1,278		651,499								652,777
Common shares issued to non-employees and employees						855,499		856		39,144								40,000
Stock option and RSU - related stock compensation expense										651,648								651,648
Stock option exercise						162,668		163		48,068								48,231
Net (loss)															(7,425,626	)		(7,425,626	)
Balance, June 30, 2021	6,681,090		$	6,681		89,761,122	$	89,761	$	84,468,451	$	-		$	(77,356,846	)	$	7,208,047

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

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

		For the Three Months
		June 30, 2021			June 30, 2020
CASH FLOWS FROM OPERATING ACTIVITIES
Net loss	$	(7,425,626	)	$	(3,021,003	)
Adjustments to reconcile net loss to net cash used in operating activities
Depreciation expense		159,015			227,911
Shares issue and vested, options and RSU amortized for employee and non-employee services		2,918,680			1,149,259
Non-cash lease expense		5,084			(2,200	)
Changes in operating assets and liabilities:
Accounts receivable		236,803			295,467
Inventory		(629,855	)		25,498
Prepaid expenses and other current assets		(2,028,928	)		(116,358	)
Accounts payable		653,199			(25,440	)
Accrued expenses		56,315			61,195
NET CASH USED IN OPERATING ACTIVITIES		(6,055,313	)		(1,405,671	)
CASH FLOWS FROM INVESTING ACTIVITIES
Purchase of fixed assets		(61,444	)		(68,519	)
CASH USED IN INVESTING ACTIVITIES		(61,444	)		(68,519	)
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from (repayment of) revolving financing		782,699			(3,015,907	)
Proceeds from promissory note payable		-			325,800
Proceeds from sale of common stock, net		-			2,900,000
Proceeds from stock payable		-			1,999,998
Proceeds for the exercise of warrants, net		652,777			258,899
Proceeds for the exercise of stock options, net		48,230			61,480
CASH PROVIDED BY FINANCING ACTIVITIES		1,483,706			2,530,270
NET CHANGE IN CASH		(4,633,051	)		1,056,080
CASH AT BEGINNING OF PERIOD		9,130,956			4,561,682
CASH AT END OF PERIOD	$	4,497,905		$	5,617,762
INTEREST PAID	$	105,197		$	164,101
TAXES PAID	$	-		$	-

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

THE ALKALINE WATER COMPANY INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(unaudited)

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

Nature of Business

The Company offers retail consumers bottled alkaline water in 500-milliliter, 700-milliliter, 1-liter, 1.5 -liter, 2-liter, 3-liter and 1-gallon sizes, all of which is produced through an electrolysis process that uses specialized electronic cells coated with a variety of rare earth minerals to produce 8.8 pH drinking water without the use of any manmade chemicals. In addition to its bottled alkaline water, the Company also offers retail consumers flavor infused bottled water in the 500-milliliter size in six flavors: Raspberry, Watermelon, Lemon, Lemon Lime, Peach Mango and Blood Orange. The Company recently introduced and began selling hemp-derived CBD topical and ingestible products under the brand name "A88CBD™". Our hemp-derived CBD products are produced and sold in compliance with the Agriculture Improvement Act of 2018 (also known as the 2018 Farm Bill, Public Law 115-334).

Basis of presentation

These unaudited financial statements represent the condensed consolidated financial statements of The Alkaline Water Company and its wholly owned subsidiaries (collectively, the "Company"). These unaudited condensed consolidated financial statements should be read in conjunction with the Company's  consolidated financial statements and the notes thereto as set forth in the Company's Form 10-K, filed with the SEC on July 2, 2021, which included all disclosures required by generally accepted accounting principles ("GAAP") In the opinion of management, these unaudited condensed consolidated financial statements contain all adjustments necessary to present fairly the Company's financial position on a consolidated basis and the consolidated results of operations, equity and cash flows for the interim periods presented. The results of operations for the three months ended June 30, 2021 and 2020 are not necessarily indicative of expected operating results for the full year. The information presented throughout the document as of and for the three months ended June 30, 2021 and 2020 is unaudited. The condensed consolidated balance sheet at March 31, 2021 has been derived from the audited financial statements at that date but does not include all of the information and footnotes required by generally accepted accounting principles in the U.S. for complete financial statements.

Principles of consolidation

The consolidated financial statements include the accounts of The Alkaline Water Company Inc. (a Nevada Corporation) and its five wholly owned subsidiaries: A88 Infused Beverage Division Inc. (a Nevada Corporation), A88 International, Inc. (a Nevada Corporation), A88 Infused Products Inc. (a Nevada Corporation), AWC Acquisition Company Inc. (a Nevada corporation),  and Alkaline 88, LLC (an Arizona Limited Liability Company). All significant intercompany balances and transactions have been eliminated. The Alkaline Water Company Inc., A88 Infused Beverage Division, Inc., A88 Infused Products Inc., A88 International, Inc., AWC Acquisition Company Inc., and Alkaline 88, LLC will be collectively referred herein to as the "Company". Any reference herein to "The Alkaline Water Company Inc.", the "Company", "we", "our" or "us" is intended to mean The Alkaline Water Company Inc., including the subsidiaries indicated above, unless otherwise indicated.

Use of Estimates

The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ significantly from those estimates.

Cash and Cash Equivalents

The Company considers all highly liquid instruments with an original maturity of three months or less to be considered cash equivalents. The carrying value of these investments approximates fair value. As of the balance sheet date and periodically throughout the period, the Company has maintained balances in various operating accounts in excess of federally insured limits. In addition, the Company has maintained balances in its attorney's client trust account in both C$ and US$. The Company has not experienced any losses in such accounts and periodically evaluates the credit worthiness of the financial institutions and has determined the credit exposure to be negligible. The Company had $4,497,905 and $9,130,956 in cash at June 30, 2021 and March 31, 2021, 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.

Accounts receivable consisted of the following as of June 30, 2021 and March 31, 2021:

		June 30, 2021 (unaudited)			March 31, 2021
Trade receivables, net	$	8,561,373		$	8,798,176
Less: Allowance for doubtful accounts		(340,000	)		(340,000	)
Net accounts receivable	$	8,221,373		$	8,458,176

Accounts receivable are periodically evaluated for collectability based on past credit history with clients. Provisions for losses on accounts receivable are determined on the basis of loss experience, known and inherent risk in the account balance and current economic conditions. The accounts receivable balance is pledged as collateral for the Company's revolving financing as disclosed in Note 3.

Inventory

Inventory represents raw materials and finished goods valued at the lower of cost or market with cost determined using the weight average method which approximates first-in first-out method, and with market defined as the lower of replacement cost or realizable value. The inventory balance is pledged as collateral for the Company's revolving financing as disclosed in Note 3.

As of June 30, 2021 and March 31, 2021, inventory consisted of the following:

		June 30, 2021 (unaudited)		March 31, 2021
Raw materials	$	2,091,450	$	3,055,091
Finished goods		2,946,125		1,352,629
Total inventory	$	5,037,575	$	4,407,720

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 (half-life convention) method over the estimated useful life of the assets, which the Company has determined to be 3 years.

Going Concern

The accompanying consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America on a going concern basis, which contemplates the realization of assets and the satisfaction of liabilities and commitments in the normal course of business.

The Company has not generated sufficient revenues from product sales to provide for cash flows to enable the Company to finance its operations internally thus there is substantial doubt about the Company’s ability to continue as a going concern within one year from the date of filing. The Company’s ability to continue as a going concern is dependent on the Company’s ability to generate revenues and raise capital.

The Company currently anticipates the release of the funds from escrow from the July 6, 2021 private placements subject to shareholder approval (Note 5) and funds from the exercise of outstanding warrants (Note 9) will adequately fund the Company’s planned operations and capital needs for the next 12 months.  However, if our current plans change or are accelerated or we choose to increase our  production capacity, we may seek to sell additional equity or debt securities or obtain additional credit facilities, including seeking investments from strategic investors. The sale of additional equity securities will result in dilution to our stockholders. 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 continue as a going concern.

Stock-Based Compensation

The Company accounts for stock-based compensation in accordance with Accounting Standards Codification ("ASC") 718. Stock-based compensation is measured at the grant date, based on the fair value of the award, and is recognized as expense over the requisite 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 Company's common stock for common share issuances.

Revenue Recognition

The Company recognizes revenue per ASC 606. The Company recognizes revenue when our performance obligations are satisfied. Our primary obligation (the distribution and sale of beverage products) is satisfied upon the delivery of products to our customers, which is also when control is transferred. The Company does not accept returns due to the nature of the product. However, the Company will provide credit to our customers for damaged goods. The Company provides credit to its customers which typically require payment within 30 days. As an incentive to pay early the Company also typically provides a 2% discount if the customer pays within 10 days. The Company estimates the amount of the discount that the customer is likely to take and recognizes it as variable consideration. The amounts are not considered material. After evaluating the revenue disclosure requirements, the Company does not believe that any revenues are required to be disaggregated.

Revenue consists of the gross sales price, less variable consideration, including estimated allowances for which provisions are made at the time of sale, and less certain other discounts and allowances. Shipping and handling charges that are billed to customers are included as a component of revenue. Costs incurred by the Company for shipping and handling charges are included in selling expenses and amounted to $2,906,900 and $1,807,030 for the quarters ended June 30, 2021 and 2020, respectively.

Concentration Risks

The Company has 1 major customer that accounts for 12% of accounts receivable at June 30, 2021, and 2 customers that together account for 36% (20% and 16%, respectively) of the total revenues earned for the quarter ended June 30, 2021. The Company has 2 vendors that accounted for 43% (27%, and 16% respectively) of purchases for the quarter ended June 30, 2021.

The Company has 2 major customers that together account for 32% (22% and 10%, respectively) of accounts receivable at June 30, 2020, and 2 customers that together account for 45% (25% and 20%, respectively) of the total revenues earned for the quarter ended June 30, 2020. The Company has 3 vendors that accounted for 55% (27%, 15% and 13% respectively) of purchases for the quarter ended June 30, 2020.

Income Taxes

The Company uses an estimated annual effective tax rate method in computing its interim tax provision. This effective tax rate is based on forecasted annual pre-tax income (loss), permanent tax differences and statutory tax rates. Deferred income taxes are recognized for differences between the basis of assets and liabilities for financial statement and income tax purposes. The differences relate principally to net operating loss carryforwards. Deferred tax assets and liabilities represent the future tax consequence for those differences, which will either be taxable or deductible when the assets and liabilities are recovered or settled. Valuation allowances are established when necessary to reduce deferred tax assets to the amount 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.

For the three months ended June 30, 2021 and 2020, respectively, the Company had 3,897,897 and 2,417,322 shares relating to options, 4,761,690 and 5,559,205 shares relating to warrants and 2,227,030 and nil convertible preferred shares that were not included in the diluted earnings per share calculation because they were antidilutive.

Business Segments

The Company operates on one segment in one geographic location - the United States of America and; therefore, segment information is not presented.

Fair Value of Financial Instruments

The carrying amounts of the company's financial instruments including accounts payable, accrued expenses, and notes payable approximate fair value due to the relative short period for maturity these instruments.

The company does not use derivative financial instruments to hedge exposures to cash-flow, market or foreign-currency risks.

Authoritative guidance defines fair value as the price that would be received to sell an asset or paid to transfer a liability (an exit price) in an orderly transaction between market participants at the measurement date. The guidance establishes a hierarchy for inputs used in measuring fair value that maximizes the use of observable inputs and minimizes the use of unobservable inputs by requiring that the most observable inputs be used when available. Observable inputs are inputs that market participants would use in pricing the asset or liability, developed based on market data obtained from sources independent of the company. Unobservable inputs are inputs that reflect the company's assumptions of what market participants would use in pricing the asset or liability developed based on the best information available in the circumstances. The hierarchy is broken down into three levels based on reliability of the inputs as follows:

Level 1: Observable inputs such as quoted prices in active markets;

Level 2: Inputs, other than the quoted prices in active markets, that are observable either directly or indirectly; and

Level 3: Unobservable inputs in which there is little or no market data, which require the reporting entity to develop its own assumptions.

As of June 30, 2021 and 2020, the Company did not have any financial instruments that are measured on a recurring basis as Level 1, 2 or 3.

Correction of Previously Issued Financial Statements

The accompanying consolidated statement of operations for the three months ended June 30, 2020 has been corrected for the following: a reclassification of depreciation expense of $225,315 to cost of goods sold related to assets utilized in the production of inventory and ad adjustment to reclassify sales and marketing expenses of $787,114 as a reduction in revenue as such amounts were related to consideration payable to a customer which the Company determined was not for distinct goods or services received. The Company assessed the materiality of the misstatement quantitively and qualitatively and has concluded that the correction of the classification error is immaterial to the consolidated financials taken as a whole. As a result of the correction, cost of goods sold increased from $8,369,526 to $8,594,841 and revenue decreased from $14,219,424 to $13,432,310 which combined resulted in a decrease of gross profit from $5,849,898 to $4,837,469. The correction had no impact on total operating loss and net loss.

Recent Accounting Pronouncements

Standards Required to be Adopted in Future Years.

In June 2016, the FASB issued ASU 2016-13, Financial Instruments - Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments. ASU 2016-13 amends the guidance on the impairment of financial instruments. This update adds an impairment model (known as the current expected credit losses model) that is based on expected losses rather than incurred losses. Under the new guidance, an entity recognizes, as an allowance, its estimate of expected credit losses. In November 2018, ASU 2016-13 was amended by ASU 2018-19, Codification Improvements to Topic 326, Financial Instruments - Credit Losses. ASU 2018-19 changes the effective date of the credit loss standards (ASU 2016-13) to fiscal years beginning after December 15, 2021, including interim periods within those fiscal years. Further, the ASU clarifies that operating lease receivables are not within the scope of ASC 326-20 and should instead be accounted for under the new leasing standard, ASC 842. The Company does not believe that the impact of adopting this standard will have a material effect on its financial statements.

The Company has evaluated other recent accounting pronouncements through June 30, 2021 and believes that none of them will have a material effect on our consolidated financial statements.

NOTE 2 - PROPERTY AND EQUIPMENT

Fixed assets consisted of the following at:

Fixed assets consisted of the following at:		June 30, 2021 (unaudited)			March 31, 2021
Machinery and Equipment	$	4,873,788		$	4,812,344
Office Equipment		55,439			55,439
Less: Accumulated Depreciation		(4,016,615	)		(3,857,600	)
Fixed Assets, net	$	912,612		$	1,010,183

Depreciation expense for the quarter ended June 30, 2021 and 2020 was $159,015 and $227,911, respectively.

NOTE 3 - REVOLVING FINANCING

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

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

Under the terms of the Credit Agreement, SCM has agreed to make cash advances to our company in an aggregate principal at any one time outstanding not to exceed the lesser of (i) $7 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 expires on July 1, 2022, 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. The interest rate as of March 31, 2021 was 7.0%

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

The Company agreed to pay to SCM monthly an unused line fee in amount equal to 0.083% per month of the difference derived by subtracting (i) the average daily outstanding balance under the Revolving Facility during the preceding month, from (ii) the Revolving Loan Commitment Amount. The unused line fee will be payable monthly in arrears. We also agreed to pay SCM as additional interest a monthly collateral management fee equal to 0.35% per month calculated on the basis of the average daily balance under the Revolving Facility outstanding during the preceding month. The collateral management fee will be payable monthly in arrears. Upon a termination of the Revolving Facility, we agreed to pay SCM a termination fee in an amount equal to 1% of the Revolving Loan Commitment Amount if the termination occurs before July 1, 2022. We must also pay certain fees in the event that receivables are not properly deposited in the appropriate lockbox account.

The interest rate will be increased by 5% in the event of a default under the Credit Agreement. Events of default under the Credit Agreement, some of which are subject to certain cure periods, include a failure to pay obligations when due, the making of a material misrepresentation to SCM, the rendering of certain judgments or decrees against our company and the commencement of a proceeding for the appointment of a receiver, trustee, liquidator or conservator or filing of a petition seeking reorganization or liquidation or similar relief.

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

NOTE 4 - PAYCHECK PROTECTION PROGRAM LOAN

On April 29, 2020, Alkaline 88, LLC (the "Borrower"), a wholly owned subsidiary of the Company, signed a promissory note with MidFirst Bank (the "Lender") in the amount of $325,800, pursuant to the Paycheck Protection Program (the "PPP") under Division A, Title I of the CARES Act, which was enacted March 27, 2020.

The promissory note issued by Borrower, matures on April 29, 2022 and bears interest at a rate of 1% per annum. Borrower shall pay principal plus interest accrued under the promissory note in 18 equal monthly installments beginning on October 29, 2020. The Note may be prepaid by the Borrower at any time prior to maturity with no prepayment penalties. Funds from the Loan may only be used for payroll costs, costs used to continue group health care benefits, mortgage payments, rent, utilities, and interest on other debt obligations incurred before February 15, 2020. The Company intends to use the entire Loan amount for qualifying expenses. Under the terms of the PPP, certain amounts of the Loan may be forgiven if they are used for qualifying expenses as described in the CARES Act.

NOTE 5 - STOCKHOLDERS' EQUITY

Preferred Shares

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

Series S Convertible Preferred Stock

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

As consideration for the rights and services granted under the Endorsement Agreement, the Company agreed to pay to ABG-Shaq aggregate cash payments of $3 million over the three years of the Endorsement Agreement. The Company will also pay expenses related to the marketing and personal services provided by Mr. O'Neal. As of June 30, 2021, the Company has paid $500,000 under this agreement and anticipates paying an additional $500,000 in the quarter ended September 30, 2020 and the Company will be paying $250,000 in each quarter in the fiscal years ended March 31, 2023 and March 31, 2024

In addition, the Company agreed to grant 6,681,090 shares of Series S Preferred Stock to ABG, each vested share of which is convertible into one share of the Company's common stock. The shares of Series S Preferred Stock will vest as to 1/3 on May 12, 2021, May 1, 2022, and May 1, 2023. The term of the Endorsement Agreement ends on May 1, 2024. The Series S Preferred was value at $6,681,090 based on the Company's closing stock price of $1.00 on May 12, 2021. The Company the value of the vested Series S Preferred Stock in the amount of $2,227,030 was recognized as a prepaid expense which is being expense over the initial twelve months of the agreement. The prepaid expense at June 30, 2021 was $1,855,858.

In the quarter ended June 30, 2021, the Company recognized an expense of $871,172 in connection with the agreement and anticipates recognizing an expense in quarter ended September 30, 2021 in the amount of 1,056,758 and $556,758 for the quarter ended December 31, 2021 and March 31, 2022 for a total expense of $3,041,444 for the year ended March 31, 2022.  In the years ended March 31, 2023 and March 31, 2024, the Company anticipates recognizing an expense in the amount of $3,227,030 and $3,227,030 respectively.

Common Stock

Share Issuance

Effective as April 15, 2021, the Company issued 38,834 shares, respectively of our common stock to non-employees in consideration for services to be rendered to our company. The total fair value of the shares is $40,000 based upon the per share closing price of the Company's common stock on the NASDAQ stock exchange April 15, 2021. These shares were issues pursuant to a consulting agreement dated June 15, 2020, whereby the Company engaged an entity to perform consulting services for the Company for a period of one year. The Company agreed to pay a retainer in the amount of $40,000 per month, for a total of $480,000 to be paid in the form of the common stock of the Company, which shares are to be issued monthly.

Restricted Awards

On May 3, 2021, the Company issued 816,665 shares of our common stock to employees upon the exercise of vested restricted awards under our 2020 Equity Incentive Plan.

NOTE 6 - OPTIONS AND WARRANTS

The Company issued 162,668 shares of common stock during the three months ending June 30, 2021 in connection with the exercise of stock options of which 91,000 options were with a payment to the Company for the exercise price of $48,230 and the remaining amount of stock options were exercised as a cashless exercise under the plan.

Effective as of June 14, 2021, we issued an aggregate of 277,777 shares of our common stock upon exercise of our common stock purchase warrants with an exercise price of $0.55 per share for aggregate gross proceeds of $152,777.35. We issued these shares to one U.S. person (as that term is defined in Regulation S of the Securities Act of 1933) and in issuing these shares, we relied on the exemption from the registration requirements of the Securities Act of 1933 provided by Section 4(a)(2) of the Securities Act of 1933 and/or Rule 506 promulgated under the Securities Act of 1933.

Effective as of June 15, 2021, we issued an aggregate of 1,000,000 shares of our common stock upon exercise of our common stock purchase warrants with an exercise price of $0.50 per share for aggregate gross proceeds of $500,000. 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.

NOTE 7 - LEASES

As of July 1, 2020, the Company entered into a lease for 14,530 square feet of warehouse space from a third party through December 2021 at a rate of $7,992 per month for the first twelve months, then at a rate of $8,231 per month for the last six months of the lease. The Company determined this lease was an operating lease under ASC 842 and using an interest rate of 7%, the Company determined that the ROU for this lease was $130,989 and the lease liability for this lease was $138,266, at inception of this lease, respectively.

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

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

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

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

Operating Lease expense for the three months ended June 30, 2021 was $100,915 and for the three months ended June 30, 2020 was $34,754.

Operating Leases:		June 30, 2021
Operating lease right-of-use asset - current portion	$	213,397
Operating lease right-of-use asset - non-current portion		227,342
Total Operating lease right-of-use asset	$	440,739
Operating lease liability - current portion	$	235,055
Operating lease liability - non-current portion		227,342
Total Operating lease liability	$	462,397
Weighted average remaining lease term (in years):
Operating leases		1.1
Weighted average discount rate:
Operating leases		7%

Maturities of undiscounted lease liabilities as of June 30, 2021 are as follows:

	Operating Leases
Year ending March 31, 2022	189,758
Year ending March 31, 2023	191,379
Year ending March 31, 2024	119,150
Total lease payments	500,287
Less: Imputed interest	(37,890	)
Total lease obligations	462,397

NOTE 8 - COMMITMENTS AND CONTINGENCIES

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

NOTE 9 - SUBSEQUENT EVENTS

On July 6, 2021, we completed a private placement of 4,757,381 subscription receipts at a price of $1.05 per subscription receipt for total gross proceeds of $4,995,250.05.

In the event of the occurrence of the escrow release condition (as defined below), each subscription receipt will automatically convert into one unit consisting of one share of our common stock and one transferable share purchase warrant, for no additional consideration. Each warrant will entitle the holder thereof to acquire one share of our common stock for a period of three years from the date of issuance thereof at a price of $1.25 per share.

The subscription amounts will be held by an escrow agent until the escrow release condition occurs. The escrow release condition is the receipt by our company of an ordinary resolution of our stockholders approving the private placement and the issuance of the securities thereunder. In the event that the escrow release condition is satisfied prior to 5:00 p.m. (Vancouver time) on September 30, 2021, we will deliver a notice to the escrow agent confirming the escrow release condition has been satisfied. Upon receipt of the notice, the escrow agent will, as soon as practicable thereafter, release the subscription amounts to our company and each subscription receipt will automatically convert into one unit without payment of any additional consideration. If the escrow release condition is not satisfied by 5:00 p.m. (Vancouver time) on September 30, 2021 or if we deliver a written default notice to the escrow agent that the escrow release condition will not be satisfied by that time, the subscription receipts will expire and be of no further force and effect, effective as of the earlier of (i) 5:00 p.m. (Vancouver time) on September 30, 2021 (ii) the date of the receipt of the default notice, and the subscribers will be entitled to receive from the escrow agent a refund of the subscription amounts held in escrow, without interest and less applicable expenses.

As of August 16, 2021 since June 30, 2021, the Company has issued 4,761,688 shares in connection with the exercise of warrants at $1.25 per share for total proceeds received of approximately $6 million. In addition, for the same time period, the Company has issued 63,692 shares in connection with the cashless exercise of 86,666 options.

On July 27, 2021, the Company granted an aggregate of 454,000 stock options to certain employees for the purchase of up to 454,000 shares of common stock pursuant to the 2020 Equity Incentive Plan.  Each stock option is exercisable at a price of $1.75 per share until July 27, 2031.

Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations

Forward-Looking Statements

This report contains "forward-looking statements." All statements other than statements of historical fact are "forward-looking statements" for purposes of applicable securities laws, including, but not limited to, any projections of earnings, revenue or other financial items; any statements of the plans, strategies and objections of management for future operations; any statements concerning proposed new services or developments; any statements regarding future economic conditions or performance; any statements or belief; and any statements of assumptions underlying any of the foregoing. Forward-looking statements may include the words "may," "could," "estimate," "intend," "continue," "believe," "expect" or "anticipate" or other similar words. These forward-looking statements present our estimates and assumptions only as of the date of this report. Accordingly, readers are cautioned not to place undue reliance on forward- looking statements, which speak only as of the dates on which they are made. Except as required by applicable law, including the securities laws of the United States and Canada, we do not intend, and undertake no obligation, to update any forward-looking statement.

Although we believe the expectations reflected in any of our forward-looking statements are reasonable, actual results could differ materially from those projected or assumed in any of our forward-looking statements. Our future financial condition and results of operations, as well as any forward-looking statements, are subject to change and inherent risks and uncertainties. The factors impacting these risks and uncertainties include, but are not limited to:

• lack of working capital'

• inability to raise additional financing;

• the fact that our accounting policies and methods are fundamental to how we report our financial condition and results of operations, and they may require our management to make estimates about matters that are inherently uncertain;

• deterioration in general or regional economic conditions;

• adverse state or federal legislation or regulation that increases the costs of compliance, or adverse findings by a regulator with respect to existing operations;

• inability to efficiently manage our operations;

• inability to achieve future sales levels or other operating results; and

• the unavailability of funds for capital expenditures.

Unless otherwise indicated, all reference to "dollars", "$", "USD" or "US$" are to United States dollars and all reference to "CDN$" are to Canadian dollars.

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

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

As used in this quarterly report on Form 10-Q, the terms "we", "us" "our", the "Company" and "Alkaline" refer to The Alkaline Water Company Inc., a Nevada corporation, and its wholly-owned subsidiaries A88 Infused Beverage Division, Inc. (a Nevada Corporation hereinafter referred to as "A88 Infused"), A88 Infused Products, Inc. (a Nevada Corporation), A88 International, Inc. (a Nevada Corporation), and Alkaline 88, LLC (an Arizona Limited Liability Company), unless otherwise specified.

COVID-19

In December 2019, a novel strain of COVID-19 was reported in China. Since then, the COVID-19 has spread globally including across North America and the United States. The spread of COVID-19 from China to other countries has resulted in the World Health Organization (WHO) declaring the outbreak of COVID-19 as a "pandemic," or a worldwide spread of a new disease, on March 11, 2020.

Specifically, we caution that our business could be materially and adversely affected by the risks, or the public perception of the risks, related to the outbreak of COVID-19. To date, we have managed to operate successfully throughout the pandemic without any material disruptions to our supply chain.  Although retailers which carry our products may be considered essential businesses and therefore be allowed to remain operational, they may experience significantly reduced demand. The risk of a pandemic, or public perception of the risk, could cause customers to avoid public places, including retail properties, and could cause temporary or long-term disruptions in our supply chains and/or delays in the delivery of our inventory to our customers. Further, such risks could also adversely affect retail customers' financial condition, resulting in reduced spending on our products, which are marketed as premium products. "Shelter-in-place" or other such orders by governmental entities could also disrupt our operations, if our employees or the employees of our sourcing partners who cannot perform their responsibilities from home, are not able to report to work. Risks related to an epidemic, pandemic or other health crisis, such as COVID-19, could also lead to the complete or partial closure of one or more of our co-packing facilities or operations of our sourcing partners.

Results of Operations

Our results of operations for the three months ended June 30, 2021 and June 30, 2020 are as follows:

		For the three months ended June 30, 2021			For the three months ended June 30, 2020
Revenue	$	14,113,578		$	13,432,310
Cost of goods sold		9,311,011			8,594,841
Gross profit	$	4,802,567		$	4,837,469
Net Loss	$	(7,425,626	)	$	(3,021,003	)

Revenue and Cost of Goods Sold

We had revenue from sales of our product for the three months ended June 30, 2021 of $14,113,578 as compared to $13,432,310 for the three months ended June 30, 2020, an increase of 5%. The increase in sales is due to the expanded distribution of our products to additional retailers throughout the country and increased demand due to Covid-19. We distribute our product through several channels. We sell through large national distributors (UNFI, KeHE, C&S, and Core-Mark), which together represent over 150,000 retail outlets. We also sell our products directly to retail clients, including convenience stores, natural food products stores, large ethnic markets and national retailers and through Direct Store Distributors in selected markets, including Mahaska, Nevada Beverage, and Hensley, covering Nevada, Arizona, and Midwest region. Combined, they service over 16,000 customers in five states. Each one carries our full line of non-CBD waters. Some examples of retail clients are: Walmart, CVS, Rite-Aid Family Dollar, Food Lion, Albertson's/Safeway, Kroger companies, Schnucks, Smart & Final, Jewel-Osco, Sprouts, Bashas', Stater Bros. Markets, Unified Grocers, Bristol Farms, Publix, Vallarta, Superior Foods, Ingles, Shaw's, Raley's, Harris Teeter, Festival Foods, HEB and Brookshire's. The majority of our sales to retail clients are through brokers and distributors, however, sales to our larger retail clients are often direct to the client's own warehouse distribution network. Our CBD products are presently available for purchase on our E-commerce websites, www.a88cbd.com and www.a88hemp.com, in addition to a growing number of brick and mortar retail locations.

Cost of goods sold is comprised of production costs, shipping and handling costs. For the three months ended June 30, 2021, we had cost of goods sold of $9,311,011, or 66% of revenue, as compared to cost of goods sold of $8,594,841 or 64% of revenue, for the three months ended June 30, 2020.

Expenses

Our operating expenses for the three months ended June 30, 2021 and June 30, 2020 are as follows:

		For the three months ended June 30, 2021		For the three months ended June 30, 2020
Sales and marketing expenses	$	7,156,400	$	3,718,231
General and administrative expenses		4,964,374		3,949,917
Total operating expenses	$	12,120,774	$	7,668,148

For the three months ended June 30, 2021, our total operating expenses were $12,120,774 as compared to $7,668,148  for the three months ended June 30, 2020.

For the three months ended June 30, 2021, the total included $7,156,400 of sales and marketing expenses. Compared to the three months ended June 30, 2020, sales and marketing expenses increased due to higher sales and marketing cost, initial expenses relating to brand ambassador and higher freight cost to customers. General and administrative expenses of $4,964,374, consisted primarily of approximately $2.6 million of professional fees, media fees and legal fees, stock compensation expense of approximately $1.1 million and approximately $1.0 million of wages and wage related expenses.

For the three months ended June 30, 2020, the total included $3,718,231 after reclassification of depreciation expense of sales and marketing expenses.  General and administrative expenses of $3,949,917 after reclassification of depreciation expense, consisted primarily of approximately $1.6 million of professional fees, media fees and legal fees, stock compensation expense of approximately $1.1 million and approximately $0.7 million of wages and wage related expenses.

Liquidity and Capital Resources

Working Capital

		June 30, 2021		March 31, 2021
Current assets	$	21,037,139	$	23,271,259
Current liabilities		14,741,704		13,244,041
Working capital	$	6,295,435	$	10,027,218

Current Assets

Current assets as of June 30, 2021 and March 31, 2021 primarily include $4,497,905 and $9,130,956 in cash, $8,221,373 and $8,458,176 in accounts receivable and $5,037,575 and $4,407,720 in inventory, respectively.

Current Liabilities

Current liabilities as of June 30, 2021 and March 31, 2021 primarily include $7,708,548 and $7,055,348 in accounts payable, revolving financing of $5,107,111 and $4,324,412, and accrued expenses of $1,361,920 and $1,306,106, respectively. 

Cash Flow

Our cash flows for the three months ended June 30, 2021 and June 30, 2020 are as follows:

		For the three months ended June 30, 2021			For the three months ended June 30, 2020
Net Cash used in operating activities	$	(6,055,313	)	$	(1,405,671	)
Net Cash used in investing activities		(61,444	)		(68,519	)
Net Cash provided by financing activities		1,483,706			2,530,270
Net increase (decrease) in cash	$	(4,633,051)		$	1,056,080

Operating Activities

Net cash used in operating activities was $6,055,313 for the three months ended June 30, 2021, as compared to $1,405,671 used in operating activities for the three months ended June 30, 2020. The increase in net cash used in operating activities was primarily due to the increase in net loss of approximately $4.4 million.  The increase in net loss was attributable to higher corporate sales and marketing costs and higher cost of goods sold and freight costs.

Investing Activities

Net cash used in investing activities was $61,444 for the three months ended June 30, 2021, as compared to $68,519 used in investing activities for the three months ended June 30, 2020.

Financing Activities

Net cash provided by financing activities for the three months ended June 30, 2021 was $1,483,706, as compared to $2,530,270 for the three months ended June 30, 2020.

Financing Activities Subsequent to June 30, 2021

On July 6, 2021, we completed a private placement of 4,757,381 subscription receipts at a price of US$1.05 per subscription receipt for total gross proceeds of US$4,995,250.05. In the event of the occurrence of the escrow release condition (as defined below), each subscription receipt will automatically convert into one unit consisting of one share of our common stock and one transferable share purchase warrant, for no additional consideration. Each warrant will entitle the holder thereof to acquire one share of our common stock for a period of three years from the date of issuance thereof at a price of US$1.25 per share. The subscription amounts will be held by an escrow agent until the escrow release condition occurs. The escrow release condition is the receipt by our company of an ordinary resolution of our stockholders approving the private placement and the issuance of the securities thereunder. In the event that the escrow release condition is satisfied prior to 5:00 p.m. (Vancouver time) on September 30, 2021, we will deliver a notice to the escrow agent confirming the escrow release condition has been satisfied. Upon receipt of the notice, the escrow agent will, as soon as practicable thereafter, release the subscription amounts to our company and each subscription receipt will automatically convert into one unit without payment of any additional consideration. If the escrow release condition is not satisfied by 5:00 p.m. (Vancouver time) on September 30, 2021 or if we deliver a written default notice to the escrow agent that the escrow release condition will not be satisfied by that time, the subscription receipts will expire and be of no further force and effect, effective as of the earlier of (i) 5:00 p.m. (Vancouver time) on September 30, 2021 (ii) the date of the receipt of the default notice, and the subscribers will be entitled to receive from the escrow agent a refund of the subscription amounts held in escrow, without interest and less applicable expenses.

Effective as of July 28, 2021, we issued an aggregate of 1,071,428 shares of our common stock upon exercise of our common stock purchase warrants with an exercise price of $1.25 per share for aggregate gross proceeds of $1,339,285.

Effective as of July 29, 2021, we issued an aggregate of 1,995,237 shares of our common stock upon exercise of our common stock purchase warrants with an exercise price of $1.25 per share for aggregate gross proceeds of $2,494,046.25.

Effective as of August 10, 2021, we issued an aggregate of 174,810 shares of our common stock upon exercise of our common stock purchase warrants with an exercise price of $1.25 per share for aggregate gross proceeds of $218,512.50.

Cash Requirements

On February 22, 2021, we entered into a sales agreement (the "Sales Agreement") with Roth Capital Partners, LLC, as sales agent (the "Agent"), pursuant to which we may offer and sell, from time to time, through or to the Agent, as sales agent and/or principal (the "Offering") up to $20,000,000 in shares of our common stock. Subject to the terms and conditions of the Sales Agreement, the Agent agreed to use its commercially reasonable efforts to sell the shares from time to time, based upon our instructions. Under the Sales Agreement, the Agent may sell the shares by any method permitted by law deemed to be an "at the market offering" as defined in Rule 415 promulgated under the Securities Act of 1933, as amended. We have no obligation to sell any of the shares and may at any time suspend offers under the Sales Agreement. The Offering will terminate upon (a) the election of the Agent upon the occurrence of certain adverse events, (b) five days' advance notice from one party to the other, or (c) the sale of all of the shares specified in the Sales Agreement. Under the terms of the Sales Agreement, the Agent will be entitled to a commission at a fixed rate of 3.0% of the gross proceeds from each sale of the shares under the Sales Agreement. We will also reimburse the Agent for certain expenses incurred in connection with the Sales Agreement.

We believe cash on hand, plus the anticipated release of the funds from escrow from the July 6, 2021 private placement awaiting stockholder approval, anticipated warrant exercises, our line of credit and the Sales Agreement will adequately fund our current planned operations and capital needs for the next 12 months. However, if our current plans change or are accelerated or we choose increase our production capacity, we may seek to sell additional equity or debt securities or obtain additional credit facilities, including seeking investments from strategic investors. The sale of additional equity securities will result in dilution to our stockholders. The incurrence of indebtedness will result in increased debt service obligations and could require us to agree to operating and financial covenants that could restrict our operations or modify our plans to grow the business. Financing may not be available in amounts or on terms acceptable to us, if at all. Any failure by us to raise additional funds on terms favorable to us, or at all, will limit our ability to expand our business operations and could harm our overall business prospects.

Off-Balance Sheet Arrangements

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

Item 3. Quantitative and Qualitative Disclosures About Market Risk

Not applicable.

Item 4. Controls and Procedures

Disclosure Controls and Procedures

We maintain "disclosure controls and procedures", as that term is defined in Rule 13a-15(e), promulgated by the Securities and Exchange Commission pursuant to the Securities Exchange Act of 1934. Disclosure controls and procedures include controls and procedures designed to ensure that information required to be disclosed in our company's reports filed under the Securities Exchange Act of 1934 is recorded, processed, summarized and reported within the time periods specified in the Securities and Exchange Commission's rules and forms, and that such information is accumulated and communicated to our management, including our principal executive officer and our principal financial officer to allow timely decisions regarding required disclosure.

As required by paragraph (b) of Rules 13a-15 under the Securities Exchange Act of 1934, our management, with the participation of our principal executive officer and our principal financial officer, evaluated our company's disclosure controls and procedures as of the end of the period covered by this quarterly report on Form 10-Q. Based on this evaluation, our management concluded that as of the end of the period covered by this quarterly report on Form 10-Q, our disclosure controls and procedures were not effective. The ineffectiveness of our disclosure controls and procedures was due to the material weaknesses in our internal control over financial reporting disclosed in our annual report on Form 10-K for the fiscal year ended March 31, 2021.

Changes in Internal Control over Financial Reporting

There were no changes in our internal control over financial reporting during the fiscal quarter ended June 30, 2021 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

PART II-OTHER INFORMATION

Item 1. Legal Proceedings

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

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

Item 1A. Risk Factors

Information regarding risk factors appears in our Annual Report on Form 10-K filed on July 6, 2021. There have been no material changes since July 6, 2021 from the risk factors disclosed in that Form 10-K.

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

Since the beginning of our fiscal year ended March 31, 2021, we have not sold any equity securities that were not registered under the Securities Act of 1933 that were not previously reported in a quarterly report on Form 10-Q or in a current report on Form 8-K.

Item 3. Defaults Upon Senior Securities

None.

Item 4. Mine Safety Disclosures

Not applicable.

Item 5. Other Information

None.

Item 6. Exhibits   

Exhibit Number	Description
(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	Certificate of Designation (incorporated by reference from our Current Report on Form 8-K, filed on May 19, 2021)
3.16	Amended and Restated Bylaws (incorporated by reference from our Current Report on Form 8-K, filed on October 15, 2018)
(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	Contract Packer Agreement dated October 7, 2013 with White Water, LLC (incorporated by reference from our Quarterly Report on Form 10-Q, filed on November 13, 2013)
10.3	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)
10.4	Equipment Lease Agreement dated January 17, 2014 (incorporated by reference from our Current Report on Form 8-K, filed on January 27, 2014)
10.5	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)
10.6	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)
10.7	Form of Common Stock Purchase Warrant (incorporated by reference from our Current Report on Form 8-K, filed on May 6, 2014)

10.8	Form of Placement Agent Common Stock Purchase Warrant (incorporated by reference from our Current Report on Form 8-K, filed on May 6, 2014)
10.9	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)
10.10	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)
10.11	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)
10.12	Form of Warrant Amendment Agreement (incorporated by reference from our Current Report on Form 8-K, filed on August 21, 2014)
10.13	Form of Common Stock Purchase Warrant (incorporated by reference from our Current Report on Form 8-K, filed on August 21, 2014)
10.14	Form of Warrant Amendment Agreement (incorporated by reference from our Current Report on Form 8-K, filed on October 9, 2014)
10.15	Form of Common Stock Purchase Warrant (incorporated by reference from our Current Report on Form 8-K, filed on October 9, 2014)
10.16	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)
10.17	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)
10.18	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)
10.19	Form of Amending Agreement to Stock Option Agreement (incorporated by reference from our Current Report on Form 8-K, filed on November 4, 2014)
10.20	Securities Purchase Agreement dated as of May 11, 2015 with Assurance Funding Solutions LLC (incorporated by reference from our Annual Report on Form 10-K, filed on July 14, 2015)
10.21	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)
10.22	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)
10.23	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)
10.24	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)
10.25	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)
10.26	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)
10.27	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)
10.28	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)
10.29	2013 Equity Incentive Plan (incorporated by reference from our Current Report on Form 8-K, filed on January 25, 2016)
10.30	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)
10.31	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)
10.32	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)
10.33	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)
10.34	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)

10.35	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)
10.36	Form of Promissory Note and Warrant Exchange Agreement (incorporated by reference from our Current Report on Form 8-K, filed on June 16, 2016)
10.37	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)
10.38	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)
10.39	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)
10.40	Form of Stock Option Agreement (incorporated by reference from our Current Report on Form 8-K, filed on May 4, 2017)
10.41	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)
10.42	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)
10.43	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)
10.44	Form of Warrant Amendment Agreement (incorporated by reference from our Current Report on Form 8-K, filed on February 22, 2018)
10.45	Form of Common Stock Purchase Warrant (incorporated by reference from our Current Report on Form 8-K, filed on March 5, 2018)
10.46	2018 Stock Option Plan (incorporated by reference from our Current Report on Form 8-K, filed on April 25, 2018)
10.47	Form of Subscription Agreement (incorporated by reference from our Current Report on Form 8-K filed on May 31, 2018)
10.48	Form of Subscription Agreement (incorporated by reference from our Current Report on Form 8-K filed on October 3, 2018)
10.49	Underwriting Agreement, dated March 8, 2019, by and between The Alkaline Water Company Inc. and Canaccord Genuity LLC, as representative of the underwriters named therein (incorporated by reference from our Current Report on Form 8-K, filed on March 11, 2019)
10.50	Employment Agreement dated April 25, 2019 with Ronald DaVella (incorporated by reference from our Current Report on Form 8-K filed on May 3, 2019)
10.51	Sixth Amendment to Credit and Security Agreement dated June 27, 2019 with CNH Finance Fund I, L.P. (incorporated by reference from our Annual Report on Form 10-K filed on July 1, 2019)
10.52	Agreement and Plan of Merger, dated as of September 9, 2019 among The Alkaline Water Company Inc., AQUAhydrate, Inc. and AWC Acquisition Company Inc. (incorporated by reference from our Current Report on Form 8-K filed on September 12, 2019)
10.53	Amendment to the Agreement and Plan of Merger, dated as of October 31, 2019 among The Alkaline Water Company Inc., AQUAhydrate, Inc. and AWC Acquisition Company Inc. (incorporated by reference from our Current Report on Form 8-K filed on November 6, 2019)
10.54	Form of Subscription Agreement (incorporated by reference from our Current Report on Form 8-K filed on April 20, 2020)
10.55	2020 Equity Incentive Plan (incorporated by reference from our Current Report on Form 8-K filed on April 28, 2020)
10.56	Form of Subscription Agreement (incorporated by reference from our Current Report on Form 8-K filed on May 13, 2020)
10.57	Sales Agreement, dated as of February 22, 2021, by and between The Alkaline Water Company Inc. and Roth Capital Partners, LLC** (incorporated by reference from our Current Report on Form 8-K filed on February 23, 2021)

10.58	Form of Subscription Agreement (incorporated by reference from our Current Report on Form 8-K filed on March 2, 2021)
10.59	Endorsement Agreement executed May 12, 2021 by The Alkaline Water Company Inc. and ABG-Shaq, LLC (incorporated by reference from our Current Report on Form 8-K filed on May 13, 2021)
10.60	Form of Subscription Agreement (incorporated by reference from our Current Report on Form 8-K filed on July 6, 2021)
(31)	Rule 13a-14 Certifications
31.1*	Certification of Principal Executive Officer Pursuant to Section 302 of the Sarbanes Oxley Act of 2002
31.2*	Certification of Principal Financial Officer Pursuant to Section 302 of the Sarbanes Oxley Act of 2002
(32)	Section 1350 Certifications
32.1*	Certification of Principal Executive Officer Pursuant to Section 906 of the Sarbanes Oxley Act of 2002
32.2*	Certification of Principal Financial Officer Pursuant to Section 906 of the Sarbanes Oxley Act of 2002
(101)	Interactive Data File
101.INS*	INS XBRL Instance Document–the instance document does not appear in the Interactive Data File as its XBRL tags are embedded within the Inline XBRL document
101.SCH*	XBRL Taxonomy Extension Schema Document
101.CAL*	XBRL Taxonomy Extension Calculation Linkbase Document
101.DEF*	XBRL Taxonomy Extension Definition Linkbase Document
101.LAB*	XBRL Taxonomy Extension Label Linkbase Document
101.PRE*	XBRL Taxonomy Extension Presentation Linkbase Document
104	Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101)

*Filed herewith.

Signatures

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

	THE ALKALINE WATER COMPANY INC.
Date: August 16, 2021	By:	/s/ Richard A. Wright
		Richard A. Wright
		President and Chief Executive Officer
		(Principal Executive Officer)

 

Date: August 16, 2021	By:	/s/ David A. Guarino
		David A. Guarino
		Chief Financial Officer and Treasurer
		(Principal Financial Officer and Principal
		Accounting Officer)

 

EX-31.1

Exhibit 31.1

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

I, Richard A. Wright, certify that:

1.	I have reviewed this quarterly report on Form 10-Q of The Alkaline Water Company Inc.;
2.	Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
3.	Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
4.	The registrant's other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
	(a)	Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
	(b)	Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
	(c)	Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
	(d)	Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and
5.	The registrant's other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions):
	(a)	All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and
	(b)	Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting.

August 16, 2021

/s/ Richard A. Wright

Richard A. Wright

President and Chief Executive Officer

(Principal Executive Officer)

EX-31.2

Exhibit 31.2

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

I, David A. Guarino, certify that:

1.	I have reviewed this quarterly report on Form 10-Q of The Alkaline Water Company Inc.;
2.	Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
3.	Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
4.	The registrant's other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
	(a)	Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
	(b)	Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
	(c)	Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
	(d)	Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and
5.	The registrant's other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions):
	(a)	All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and
	(b)	Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting.

August 16, 2021

/s/ David A. Guarino

David A. Guarino

Chief Financial Officer and Treasurer

(Principal Financial Officer and Principal Accounting Officer)

EX-32.1

Exhibit 32.1

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

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

1.	the quarterly report on Form 10-Q of The Alkaline Water Company Inc. for the period ended June 30, 2021 fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and
2.	the information contained in the Form 10-Q fairly presents, in all material respects, the financial condition and results of operations of The Alkaline Water Company Inc.

August 16, 2021

/s/ Richard A. Wright

Richard A. Wright

President and Chief Executive Officer

(Principal Executive Officer)

EX-32.2

Exhibit 32.2

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

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

1.	the quarterly report on Form 10-Q of The Alkaline Water Company Inc. for the period ended June 30, 2021 fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and
2.	the information contained in the Form 10-Q fairly presents, in all material respects, the financial condition and results of operations of The Alkaline Water Company Inc.

August 16, 2021

/s/ David A. Guarino

David A. Guarino

Chief Financial Officer and Treasurer

(Principal Financial Officer and Principal Accounting Officer)

XML

Document and Entity Information - shares	3 Months Ended
	Jun. 30, 2021	Aug. 16, 2021
Cover [Abstract]
Document Type	10-Q
Amendment Flag	false
Document Period End Date	Jun. 30, 2021
Entity Registrant Name	THE ALKALINE WATER COMPANY INC.
Entity Central Index Key	0001532390
Current Fiscal Year End Date	--03-31
Entity Incorporation, State or Country Code	NV
Entity File Number	001-38754
Entity Tax Identification Number	99-0367049
Entity Address, Address Line One	8541 E. Anderson Drive
Entity Address, Address Line Two	Suite 100
Entity Address, City or Town	Scottsdale
Entity Address, State or Province	AZ
City Area Code	480
Entity Address, Postal Zip Code	85255
Local Phone Number	656-2423
Entity Filer Category	Non-accelerated Filer
Entity Common Stock, Shares Outstanding		94,586,502
Entity Current Reporting Status	Yes
Document Fiscal Year Focus	2022
Document Fiscal Period Focus	Q1
Entity Small Business	true
Entity Emerging Growth Company	false
Entity Shell Company	false
Trading Symbol	WTER
Security Exchange Name	NASDAQ
Title of 12(b) Security	Common stock
Entity Interactive Data Current	Yes
Document Transition Report	false
Document Quarterly Report	true

XML

CONSOLIDATED BALANCE SHEETS - USD ($)	Jun. 30, 2021	Mar. 31, 2021
Current assets
Cash	$ 4,497,905	$ 9,130,956
Accounts receivable, net	8,221,373	8,458,176
Inventory	5,037,575	4,407,720
Prepaid expenses	3,066,889	1,037,961
Operating lease right-of-use asset - current portion	213,397	236,446
Total current assets	21,037,139	23,271,259
Fixed assets - net	912,612	1,010,183
Operating lease right-of-use asset	227,342	269,167
Total assets	22,177,093	24,550,609
Current liabilities
Accounts payable	7,708,547	7,055,348
Accrued expenses	1,361,920	1,306,106
Revolving financing	5,107,111	4,324,412
PPP loan payable - current portion	329,071	328,570
Operating lease liability - current portion	235,055	229,605
Total current liabilities	14,741,704	13,244,041
Operating lease liability	227,342	292,582
Total liabilities	14,969,046	13,536,623
Commitments and contingencies
Stockholders' equity
Preferred stock, $0.001 par value, 100,000,000 shares authorized, 6,681,090 Series S nil issued and outstanding on June 30, 2021 and nil issued and outstanding on March 31, 2021	6,681	0
Common stock, Class A - $0.001 par value, 200,000,000 shares authorized 89,761,122 and 87,465,178 shares issued and outstanding at June 30, 2021 and March 31, 2021, respectively	89,761	87,464
Additional paid in capital	84,468,451	80,857,742
Stock Payable	0	0
Accumulated deficit	(77,356,846)	(69,931,220)
Total stockholders' equity	7,208,047	11,013,986
Total liabilities and stockholders' equity	$ 22,177,093	$ 24,550,609

XML

CONSOLIDATED BALANCE SHEETS (Parenthetical) - $ / shares	Jun. 30, 2021	Mar. 31, 2021
Preferred stock, par value per share	$ 0.001	$ 0.001
Preferred stock, shares authorized	100,000,000	100,000,000
Preferred stock, shares issued
Preferred stock, shares outstanding
Common stock, par value per share	$ 0.001	$ 0.001
Common stock, shares authorized	200,000,000	200,000,000
Common stock, shares, issued	89,761,122	87,465,178
Common stock, shares, outstanding	89,761,122	87,465,178
Series S Preferred Stock [Member]
Preferred stock, shares issued	6,681,090
Preferred stock, shares outstanding	6,681,090

XML

CONSOLIDATED STATEMENT OF OPERATIONS (unaudited) - USD ($)	3 Months Ended
	Jun. 30, 2021	Jun. 30, 2020
Statement of Operations [Abstract]
Revenue	$ 14,113,578	$ 13,432,310
Cost of Goods Sold	9,311,011	8,594,841
Gross Profit	4,802,567	4,837,469
Operating expenses
Sales and marketing expenses	7,156,400	3,718,231
General and administrative	4,964,374	3,949,917
Total operating expenses	12,120,774	7,668,148
Total operating loss	(7,318,207)	(2,830,679)
Other expense
Interest expense	(107,419)	(190,324)
Total other expense	(107,419)	(190,324)
Net loss	$ (7,425,626)	$ (3,021,003)
LOSS PER SHARE (Basic and Diluted)	$ (0.08)	$ (0.05)
WEIGHTED AVERAGE SHARES OUTSTANDING (Basic and Diluted)	88,342,316	57,231,724

XML

CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY (unaudited) - USD ($)	Preferred Stock [Member]	Common Stock [Member]	Additional Paid-in Capital [Member]	Stock Payable [Member]	Accumulated Deficit [Member]	Total
Beginning balance at Mar. 31, 2020	$ 3,400	$ 45,585	$ 54,094,848	$ 1,000,000	$ (53,521,700)	$ 1,622,133
Beginning balance (in shares) at Mar. 31, 2020	3,400,000	45,585,592
Preferred stock conversion	$ (3,400)	$ 3,400				0
Preferred stock conversion (in shares)	(3,400,000)	3,400,000
Common shares issued in connection with offerings		$ 9,750	3,890,250	(1,000,000)		2,900,000
Common shares issued in connection with offerings (in shares)		9,750,000
Common shares issued upon exercise of warrants		$ 288	258,612			258,900
Common shares issued upon exercise of warrants (in shares)		287,666
Common shares issued to non-employees and employees		$ 472	486,828			487,300
Common shares issued to non-employees and employees (in shares)		472,000
Stock Option expense			661,959			661,959
Stock Option exercise		$ 116	61,364			61,480
Stock Option exercise (in shares)		116,000
Stock Payable				1,999,998		1,999,998
Net (loss)					(3,021,003)	(3,021,003)
Ending balance at Jun. 30, 2020	$ 0	$ 59,611	59,453,861	1,999,998	(56,542,703)	4,970,767
Ending balance (in shares) at Jun. 30, 2020	0	59,611,258
Beginning balance at Mar. 31, 2021	$ 0	$ 87,464	80,857,742	0	(69,931,220)	11,013,986
Beginning balance (in shares) at Mar. 31, 2021	0	87,465,178
Preferred stock issuance	$ 6,681		2,220,350			2,227,031
Preferred stock issuance (in shares)	6,681,090
Common shares issued upon exercise of warrants		$ 1,278	651,499			652,777
Common shares issued upon exercise of warrants (in shares)		1,277,777
Common shares issued to non-employees and employees		$ 856	39,144			40,000
Common shares issued to non-employees and employees (in shares)		855,499
Stock option and RSU - restricted stock compensation expense			651,648			651,648
Stock Option exercise		$ 163	48,068			$ 48,231
Stock Option exercise (in shares)		162,668				162,668
Net (loss)					(7,425,626)	$ (7,425,626)
Ending balance at Jun. 30, 2021	$ 6,681	$ 89,761	$ 84,468,451	$ 0	$ (77,356,846)	$ 7,208,047
Ending balance (in shares) at Jun. 30, 2021	6,681,090	89,761,122

XML

CONSOLIDATED STATEMENTS OF CASH FLOWS - USD ($)	3 Months Ended
	Jun. 30, 2021	Jun. 30, 2020
CASH FLOWS FROM OPERATING ACTIVITIES
Net loss	$ (7,425,626)	$ (3,021,003)
Adjustments to reconcile net loss to net cash used in operating activities
Depreciation expense	159,015	227,911
Shares issue and vested, options and RSU amortized for employee and non-employee services	2,918,680	1,149,259
Right-of-use asset amortization	5,084	(2,200)
Changes in operating assets and liabilities:
Accounts receivable	236,803	295,467
Inventory	(629,855)	25,498
Prepaid expenses and other current assets	(2,028,928)	(116,358)
Accounts payable	653,199	(25,440)
Accrued expenses	56,315	61,195
NET CASH USED IN OPERATING ACTIVITIES	(6,055,313)	(1,405,671)
CASH FLOWS FROM INVESTING ACTIVITIES
Purchase of fixed assets	(61,444)	(68,519)
CASH USED IN INVESTING ACTIVITIES	(61,444)	(68,519)
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from (repayment of) revolving financing	782,699	(3,015,907)
Proceeds from promissory note payable	0	325,800
Proceeds from sale of common stock, net	0	2,900,000
Proceeds from stock payable	0	1,999,998
Proceeds for the exercise of warrants, net	652,777	258,899
Proceeds for the exercise of stock options	48,230	61,480
CASH PROVIDED BY FINANCING ACTIVITIES	1,483,706	2,530,270
NET CHANGE IN CASH	(4,633,051)	1,056,080
CASH AT BEGINNING OF PERIOD	9,130,956	4,561,682
CASH AT END OF PERIOD	4,497,905	5,617,762
INTEREST PAID	105,197	164,101
TAXES PAID	$ 0	$ 0

XML

NATURE OF BUSINESS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

3 Months Ended

Jun. 30, 2021

Accounting Policies [Abstract]

NATURE OF BUSINESS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES [Text Block]

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

Nature of Business

The Company offers retail consumers bottled alkaline water in 500-milliliter, 700-milliliter, 1-liter, 1.5 -liter, 2-liter, 3-liter and 1-gallon sizes, all of which is produced through an electrolysis process that uses specialized electronic cells coated with a variety of rare earth minerals to produce 8.8 pH drinking water without the use of any manmade chemicals. In addition to its bottled alkaline water, the Company also offers retail consumers flavor infused bottled water in the 500-milliliter size in six flavors: Raspberry, Watermelon, Lemon, Lemon Lime, Peach Mango and Blood Orange. The Company recently introduced and began selling hemp-derived CBD topical and ingestible products under the brand name "A88CBD™". Our hemp-derived CBD products are produced and sold in compliance with the Agriculture Improvement Act of 2018 (also known as the 2018 Farm Bill, Public Law 115-334).

Basis of presentation

These unaudited financial statements represent the condensed consolidated financial statements of The Alkaline Water Company and its wholly owned subsidiaries (collectively, the "Company"). These unaudited condensed consolidated financial statements should be read in conjunction with the Company's  consolidated financial statements and the notes thereto as set forth in the Company's Form 10-K, filed with the SEC on July 2, 2021, which included all disclosures required by generally accepted accounting principles ("GAAP") In the opinion of management, these unaudited condensed consolidated financial statements contain all adjustments necessary to present fairly the Company's financial position on a consolidated basis and the consolidated results of operations, equity and cash flows for the interim periods presented. The results of operations for the three months ended June 30, 2021 and 2020 are not necessarily indicative of expected operating results for the full year. The information presented throughout the document as of and for the three months ended June 30, 2021 and 2020 is unaudited. The condensed consolidated balance sheet at March 31, 2021 has been derived from the audited financial statements at that date but does not include all of the information and footnotes required by generally accepted accounting principles in the U.S. for complete financial statements.

Principles of consolidation

The consolidated financial statements include the accounts of The Alkaline Water Company Inc. (a Nevada Corporation) and its five wholly owned subsidiaries: A88 Infused Beverage Division Inc. (a Nevada Corporation), A88 International, Inc. (a Nevada Corporation), A88 Infused Products Inc. (a Nevada Corporation), AWC Acquisition Company Inc. (a Nevada corporation),  and Alkaline 88, LLC (an Arizona Limited Liability Company). All significant intercompany balances and transactions have been eliminated. The Alkaline Water Company Inc., A88 Infused Beverage Division, Inc., A88 Infused Products Inc., A88 International, Inc., AWC Acquisition Company Inc., and Alkaline 88, LLC will be collectively referred herein to as the "Company". Any reference herein to "The Alkaline Water Company Inc.", the "Company", "we", "our" or "us" is intended to mean The Alkaline Water Company Inc., including the subsidiaries indicated above, unless otherwise indicated.

Use of Estimates

The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ significantly from those estimates.

Cash and Cash Equivalents

The Company considers all highly liquid instruments with an original maturity of three months or less to be considered cash equivalents. The carrying value of these investments approximates fair value. As of the balance sheet date and periodically throughout the period, the Company has maintained balances in various operating accounts in excess of federally insured limits. In addition, the Company has maintained balances in its attorney's client trust account in both C$ and US$. The Company has not experienced any losses in such accounts and periodically evaluates the credit worthiness of the financial institutions and has determined the credit exposure to be negligible. The Company had $4,497,905 and $9,130,956 in cash at June 30, 2021 and March 31, 2021, 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.

Accounts receivable consisted of the following as of June 30, 2021 and March 31, 2021:

		June 30, 2021 (unaudited)			March 31, 2021
Trade receivables, net	$	8,561,373		$	8,798,176
Less: Allowance for doubtful accounts		(340,000	)		(340,000	)
Net accounts receivable	$	8,221,373		$	8,458,176

Accounts receivable are periodically evaluated for collectability based on past credit history with clients. Provisions for losses on accounts receivable are determined on the basis of loss experience, known and inherent risk in the account balance and current economic conditions. The accounts receivable balance is pledged as collateral for the Company's revolving financing as disclosed in Note 3.

Inventory

Inventory represents raw materials and finished goods valued at the lower of cost or market with cost determined using the weight average method which approximates first-in first-out method, and with market defined as the lower of replacement cost or realizable value. The inventory balance is pledged as collateral for the Company's revolving financing as disclosed in Note 3.

As of June 30, 2021 and March 31, 2021, inventory consisted of the following:

		June 30, 2021 (unaudited)		March 31, 2021
Raw materials	$	2,091,450	$	3,055,091
Finished goods		2,946,125		1,352,629
Total inventory	$	5,037,575	$	4,407,720

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 (half-life convention) method over the estimated useful life of the assets, which the Company has determined to be 3 years.

Going Concern

The accompanying consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America on a going concern basis, which contemplates the realization of assets and the satisfaction of liabilities and commitments in the normal course of business.

The Company has not generated sufficient revenues from product sales to provide for cash flows to enable the Company to finance its operations internally thus there is substantial doubt about the Company’s ability to continue as a going concern within one year from the date of filing. The Company’s ability to continue as a going concern is dependent on the Company’s ability to generate revenues and raise capital.

The Company currently anticipates the release of the funds from escrow from the July 6, 2021 private placements subject to shareholder approval (Note 5) and funds from the exercise of outstanding warrants (Note 9) will adequately fund the Company’s planned operations and capital needs for the next 12 months.  However, if our current plans change or are accelerated or we choose to increase our  production capacity, we may seek to sell additional equity or debt securities or obtain additional credit facilities, including seeking investments from strategic investors. The sale of additional equity securities will result in dilution to our stockholders. 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 continue as a going concern.

Stock-Based Compensation

The Company accounts for stock-based compensation in accordance with Accounting Standards Codification ("ASC") 718. Stock-based compensation is measured at the grant date, based on the fair value of the award, and is recognized as expense over the requisite 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 Company's common stock for common share issuances.

Revenue Recognition

The Company recognizes revenue per ASC 606. The Company recognizes revenue when our performance obligations are satisfied. Our primary obligation (the distribution and sale of beverage products) is satisfied upon the delivery of products to our customers, which is also when control is transferred. The Company does not accept returns due to the nature of the product. However, the Company will provide credit to our customers for damaged goods. The Company provides credit to its customers which typically require payment within 30 days. As an incentive to pay early the Company also typically provides a 2% discount if the customer pays within 10 days. The Company estimates the amount of the discount that the customer is likely to take and recognizes it as variable consideration. The amounts are not considered material. After evaluating the revenue disclosure requirements, the Company does not believe that any revenues are required to be disaggregated.

Revenue consists of the gross sales price, less variable consideration, including estimated allowances for which provisions are made at the time of sale, and less certain other discounts and allowances. Shipping and handling charges that are billed to customers are included as a component of revenue. Costs incurred by the Company for shipping and handling charges are included in selling expenses and amounted to $2,906,900 and $1,807,030 for the quarters ended June 30, 2021 and 2020, respectively.

Concentration Risks

The Company has 1 major customer that accounts for 12% of accounts receivable at June 30, 2021, and 2 customers that together account for 36% (20% and 16%, respectively) of the total revenues earned for the quarter ended June 30, 2021. The Company has 2 vendors that accounted for 43% (27%, and 16% respectively) of purchases for the quarter ended June 30, 2021.

The Company has 2 major customers that together account for 32% (22% and 10%, respectively) of accounts receivable at June 30, 2020, and 2 customers that together account for 45% (25% and 20%, respectively) of the total revenues earned for the quarter ended June 30, 2020. The Company has 3 vendors that accounted for 55% (27%, 15% and 13% respectively) of purchases for the quarter ended June 30, 2020.

Income Taxes

The Company uses an estimated annual effective tax rate method in computing its interim tax provision. This effective tax rate is based on forecasted annual pre-tax income (loss), permanent tax differences and statutory tax rates. Deferred income taxes are recognized for differences between the basis of assets and liabilities for financial statement and income tax purposes. The differences relate principally to net operating loss carryforwards. Deferred tax assets and liabilities represent the future tax consequence for those differences, which will either be taxable or deductible when the assets and liabilities are recovered or settled. Valuation allowances are established when necessary to reduce deferred tax assets to the amount 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.

For the three months ended June 30, 2021 and 2020, respectively, the Company had 3,897,897 and 2,417,322 shares relating to options, 4,761,690 and 5,559,205 shares relating to warrants and 2,227,030 and nil convertible preferred shares that were not included in the diluted earnings per share calculation because they were antidilutive.

Business Segments

The Company operates on one segment in one geographic location - the United States of America and; therefore, segment information is not presented.

Fair Value of Financial Instruments

The carrying amounts of the company's financial instruments including accounts payable, accrued expenses, and notes payable approximate fair value due to the relative short period for maturity these instruments.

The company does not use derivative financial instruments to hedge exposures to cash-flow, market or foreign-currency risks.

Authoritative guidance defines fair value as the price that would be received to sell an asset or paid to transfer a liability (an exit price) in an orderly transaction between market participants at the measurement date. The guidance establishes a hierarchy for inputs used in measuring fair value that maximizes the use of observable inputs and minimizes the use of unobservable inputs by requiring that the most observable inputs be used when available. Observable inputs are inputs that market participants would use in pricing the asset or liability, developed based on market data obtained from sources independent of the company. Unobservable inputs are inputs that reflect the company's assumptions of what market participants would use in pricing the asset or liability developed based on the best information available in the circumstances. The hierarchy is broken down into three levels based on reliability of the inputs as follows:

Level 1: Observable inputs such as quoted prices in active markets;

Level 2: Inputs, other than the quoted prices in active markets, that are observable either directly or indirectly; and

Level 3: Unobservable inputs in which there is little or no market data, which require the reporting entity to develop its own assumptions.

As of June 30, 2021 and 2020, the Company did not have any financial instruments that are measured on a recurring basis as Level 1, 2 or 3.

Correction of Previously Issued Financial Statements

The accompanying consolidated statement of operations for the three months ended June 30, 2020 has been corrected for the following: a reclassification of depreciation expense of $225,315 to cost of goods sold related to assets utilized in the production of inventory and ad adjustment to reclassify sales and marketing expenses of $787,114 as a reduction in revenue as such amounts were related to consideration payable to a customer which the Company determined was not for distinct goods or services received. The Company assessed the materiality of the misstatement quantitively and qualitatively and has concluded that the correction of the classification error is immaterial to the consolidated financials taken as a whole. As a result of the correction, cost of goods sold increased from $8,369,526 to $8,594,841 and revenue decreased from $14,219,424 to $13,432,310 which combined resulted in a decrease of gross profit from $5,849,898 to $4,837,469. The correction had no impact on total operating loss and net loss.

Recent Accounting Pronouncements

Standards Required to be Adopted in Future Years.

In June 2016, the FASB issued ASU 2016-13, Financial Instruments - Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments. ASU 2016-13 amends the guidance on the impairment of financial instruments. This update adds an impairment model (known as the current expected credit losses model) that is based on expected losses rather than incurred losses. Under the new guidance, an entity recognizes, as an allowance, its estimate of expected credit losses. In November 2018, ASU 2016-13 was amended by ASU 2018-19, Codification Improvements to Topic 326, Financial Instruments - Credit Losses. ASU 2018-19 changes the effective date of the credit loss standards (ASU 2016-13) to fiscal years beginning after December 15, 2021, including interim periods within those fiscal years. Further, the ASU clarifies that operating lease receivables are not within the scope of ASC 326-20 and should instead be accounted for under the new leasing standard, ASC 842. The Company does not believe that the impact of adopting this standard will have a material effect on its financial statements.

The Company has evaluated other recent accounting pronouncements through June 30, 2021 and believes that none of them will have a material effect on our consolidated financial statements.

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PROPERTY AND EQUIPMENT

3 Months Ended

Jun. 30, 2021

Property, Plant and Equipment [Abstract]

PROPERTY AND EQUIPMENT [Text Block]

NOTE 2 - PROPERTY AND EQUIPMENT

Fixed assets consisted of the following at:

Fixed assets consisted of the following at:		June 30, 2021 (unaudited)			March 31, 2021
Machinery and Equipment	$	4,873,788		$	4,812,344
Office Equipment		55,439			55,439
Less: Accumulated Depreciation		(4,016,615	)		(3,857,600	)
Fixed Assets, net	$	912,612		$	1,010,183

Depreciation expense for the quarter ended June 30, 2021 and 2020 was $159,015 and $227,911, respectively.

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REVOLVING FINANCING

3 Months Ended

Jun. 30, 2021

Receivables [Abstract]

REVOLVING FINANCING [Text Block]

NOTE 3 - REVOLVING FINANCING

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

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

Under the terms of the Credit Agreement, SCM has agreed to make cash advances to our company in an aggregate principal at any one time outstanding not to exceed the lesser of (i) $7 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 expires on July 1, 2022, 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. The interest rate as of March 31, 2021 was 7.0%

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

The Company agreed to pay to SCM monthly an unused line fee in amount equal to 0.083% per month of the difference derived by subtracting (i) the average daily outstanding balance under the Revolving Facility during the preceding month, from (ii) the Revolving Loan Commitment Amount. The unused line fee will be payable monthly in arrears. We also agreed to pay SCM as additional interest a monthly collateral management fee equal to 0.35% per month calculated on the basis of the average daily balance under the Revolving Facility outstanding during the preceding month. The collateral management fee will be payable monthly in arrears. Upon a termination of the Revolving Facility, we agreed to pay SCM a termination fee in an amount equal to 1% of the Revolving Loan Commitment Amount if the termination occurs before July 1, 2022. We must also pay certain fees in the event that receivables are not properly deposited in the appropriate lockbox account.

The interest rate will be increased by 5% in the event of a default under the Credit Agreement. Events of default under the Credit Agreement, some of which are subject to certain cure periods, include a failure to pay obligations when due, the making of a material misrepresentation to SCM, the rendering of certain judgments or decrees against our company and the commencement of a proceeding for the appointment of a receiver, trustee, liquidator or conservator or filing of a petition seeking reorganization or liquidation or similar relief.

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

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PAYCHECK PROTECTION PROGRAM LOAN

3 Months Ended

Jun. 30, 2021

Debt Disclosure Abstract

PAYCHECK PROTECTION PROGRAM LOAN [Text Block]

NOTE 4 - PAYCHECK PROTECTION PROGRAM LOAN

On April 29, 2020, Alkaline 88, LLC (the "Borrower"), a wholly owned subsidiary of the Company, signed a promissory note with MidFirst Bank (the "Lender") in the amount of $325,800, pursuant to the Paycheck Protection Program (the "PPP") under Division A, Title I of the CARES Act, which was enacted March 27, 2020.

The promissory note issued by Borrower, matures on April 29, 2022 and bears interest at a rate of 1% per annum. Borrower shall pay principal plus interest accrued under the promissory note in 18 equal monthly installments beginning on October 29, 2020. The Note may be prepaid by the Borrower at any time prior to maturity with no prepayment penalties. Funds from the Loan may only be used for payroll costs, costs used to continue group health care benefits, mortgage payments, rent, utilities, and interest on other debt obligations incurred before February 15, 2020. The Company intends to use the entire Loan amount for qualifying expenses. Under the terms of the PPP, certain amounts of the Loan may be forgiven if they are used for qualifying expenses as described in the CARES Act.

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STOCKHOLDERS' EQUITY

3 Months Ended

Jun. 30, 2021

Stockholders' Equity Note [Abstract]

STOCKHOLDERS' EQUITY [Text Block]

NOTE 5 - STOCKHOLDERS' EQUITY

Preferred Shares

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

Series S Convertible Preferred Stock

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

As consideration for the rights and services granted under the Endorsement Agreement, the Company agreed to pay to ABG-Shaq aggregate cash payments of $3 million over the three years of the Endorsement Agreement. The Company will also pay expenses related to the marketing and personal services provided by Mr. O'Neal. As of June 30, 2021, the Company has paid $500,000 under this agreement and anticipates paying an additional $500,000 in the quarter ended September 30, 2020 and the Company will be paying $250,000 in each quarter in the fiscal years ended March 31, 2023 and March 31, 2024

In addition, the Company agreed to grant 6,681,090 shares of Series S Preferred Stock to ABG, each vested share of which is convertible into one share of the Company's common stock. The shares of Series S Preferred Stock will vest as to 1/3 on May 12, 2021, May 1, 2022, and May 1, 2023. The term of the Endorsement Agreement ends on May 1, 2024. The Series S Preferred was value at $6,681,090 based on the Company's closing stock price of $1.00 on May 12, 2021. The Company the value of the vested Series S Preferred Stock in the amount of $2,227,030 was recognized as a prepaid expense which is being expense over the initial twelve months of the agreement. The prepaid expense at June 30, 2021 was $1,855,858.

In the quarter ended June 30, 2021, the Company recognized an expense of $871,172 in connection with the agreement and anticipates recognizing an expense in quarter ended September 30, 2021 in the amount of 1,056,758 and $556,758 for the quarter ended December 31, 2021 and March 31, 2022 for a total expense of $3,041,444 for the year ended March 31, 2022.  In the years ended March 31, 2023 and March 31, 2024, the Company anticipates recognizing an expense in the amount of $3,227,030 and $3,227,030 respectively.

Common Stock

Share Issuance

Effective as April 15, 2021, the Company issued 38,834 shares, respectively of our common stock to non-employees in consideration for services to be rendered to our company. The total fair value of the shares is $40,000 based upon the per share closing price of the Company's common stock on the NASDAQ stock exchange April 15, 2021. These shares were issues pursuant to a consulting agreement dated June 15, 2020, whereby the Company engaged an entity to perform consulting services for the Company for a period of one year. The Company agreed to pay a retainer in the amount of $40,000 per month, for a total of $480,000 to be paid in the form of the common stock of the Company, which shares are to be issued monthly.

Restricted Awards

On May 3, 2021, the Company issued 816,665 shares of our common stock to employees upon the exercise of vested restricted awards under our 2020 Equity Incentive Plan.

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OPTIONS AND WARRANTS

3 Months Ended

Jun. 30, 2021

Share-based Payment Arrangement [Abstract]

OPTIONS AND WARRANTS [Text Block]

NOTE 6 - OPTIONS AND WARRANTS

The Company issued 162,668 shares of common stock during the three months ending June 30, 2021 in connection with the exercise of stock options of which 91,000 options were with a payment to the Company for the exercise price of $48,230 and the remaining amount of stock options were exercised as a cashless exercise under the plan.

Effective as of June 14, 2021, we issued an aggregate of 277,777 shares of our common stock upon exercise of our common stock purchase warrants with an exercise price of $0.55 per share for aggregate gross proceeds of $152,777.35. We issued these shares to one U.S. person (as that term is defined in Regulation S of the Securities Act of 1933) and in issuing these shares, we relied on the exemption from the registration requirements of the Securities Act of 1933 provided by Section 4(a)(2) of the Securities Act of 1933 and/or Rule 506 promulgated under the Securities Act of 1933.

Effective as of June 15, 2021, we issued an aggregate of 1,000,000 shares of our common stock upon exercise of our common stock purchase warrants with an exercise price of $0.50 per share for aggregate gross proceeds of $500,000. 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.

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LEASES

3 Months Ended

Jun. 30, 2021

Leases [Abstract]

LEASES [Text Block]

NOTE 7 - LEASES

As of July 1, 2020, the Company entered into a lease for 14,530 square feet of warehouse space from a third party through December 2021 at a rate of $7,992 per month for the first twelve months, then at a rate of $8,231 per month for the last six months of the lease. The Company determined this lease was an operating lease under ASC 842 and using an interest rate of 7%, the Company determined that the ROU for this lease was $130,989 and the lease liability for this lease was $138,266, at inception of this lease, respectively.

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

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

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

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

Operating Lease expense for the three months ended June 30, 2021 was $100,915 and for the three months ended June 30, 2020 was $34,754.

Operating Leases:		June 30, 2021
Operating lease right-of-use asset - current portion	$	213,397
Operating lease right-of-use asset - non-current portion		227,342
Total Operating lease right-of-use asset	$	440,739
Operating lease liability - current portion	$	235,055
Operating lease liability - non-current portion		227,342
Total Operating lease liability	$	462,397
Weighted average remaining lease term (in years):
Operating leases		1.1
Weighted average discount rate:
Operating leases		7%

Maturities of undiscounted lease liabilities as of June 30, 2021 are as follows:

	Operating Leases
Year ending March 31, 2022	189,758
Year ending March 31, 2023	191,379
Year ending March 31, 2024	119,150
Total lease payments	500,287
Less: Imputed interest	(37,890	)
Total lease obligations	462,397

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COMMITMENTS AND CONTINGENCIES

3 Months Ended

Jun. 30, 2021

Commitments and Contingencies Disclosure [Abstract]

COMMITMENTS AND CONTINGENCIES [Text Block]

NOTE 8 - COMMITMENTS AND CONTINGENCIES

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

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SUBSEQUENT EVENTS

3 Months Ended

Jun. 30, 2021

Subsequent Events [Abstract]

SUBSEQUENT EVENTS [Text Block]

NOTE 9 - SUBSEQUENT EVENTS

On July 6, 2021, we completed a private placement of 4,757,381 subscription receipts at a price of $1.05 per subscription receipt for total gross proceeds of $4,995,250.05.

In the event of the occurrence of the escrow release condition (as defined below), each subscription receipt will automatically convert into one unit consisting of one share of our common stock and one transferable share purchase warrant, for no additional consideration. Each warrant will entitle the holder thereof to acquire one share of our common stock for a period of three years from the date of issuance thereof at a price of $1.25 per share.

The subscription amounts will be held by an escrow agent until the escrow release condition occurs. The escrow release condition is the receipt by our company of an ordinary resolution of our stockholders approving the private placement and the issuance of the securities thereunder. In the event that the escrow release condition is satisfied prior to 5:00 p.m. (Vancouver time) on September 30, 2021, we will deliver a notice to the escrow agent confirming the escrow release condition has been satisfied. Upon receipt of the notice, the escrow agent will, as soon as practicable thereafter, release the subscription amounts to our company and each subscription receipt will automatically convert into one unit without payment of any additional consideration. If the escrow release condition is not satisfied by 5:00 p.m. (Vancouver time) on September 30, 2021 or if we deliver a written default notice to the escrow agent that the escrow release condition will not be satisfied by that time, the subscription receipts will expire and be of no further force and effect, effective as of the earlier of (i) 5:00 p.m. (Vancouver time) on September 30, 2021 (ii) the date of the receipt of the default notice, and the subscribers will be entitled to receive from the escrow agent a refund of the subscription amounts held in escrow, without interest and less applicable expenses.

As of August 16, 2021 since June 30, 2021, the Company has issued 4,761,688 shares in connection with the exercise of warrants at $1.25 per share for total proceeds received of approximately $6 million. In addition, for the same time period, the Company has issued 63,692 shares in connection with the cashless exercise of 86,666 options.

On July 27, 2021, the Company granted an aggregate of 454,000 stock options to certain employees for the purchase of up to 454,000 shares of common stock pursuant to the 2020 Equity Incentive Plan.  Each stock option is exercisable at a price of $1.75 per share until July 27, 2031.

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NATURE OF BUSINESS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Policies)

3 Months Ended

Jun. 30, 2021

Accounting Policies [Abstract]

Nature of Business [Policy Text Block]

Nature of Business

The Company offers retail consumers bottled alkaline water in 500-milliliter, 700-milliliter, 1-liter, 1.5 -liter, 2-liter, 3-liter and 1-gallon sizes, all of which is produced through an electrolysis process that uses specialized electronic cells coated with a variety of rare earth minerals to produce 8.8 pH drinking water without the use of any manmade chemicals. In addition to its bottled alkaline water, the Company also offers retail consumers flavor infused bottled water in the 500-milliliter size in six flavors: Raspberry, Watermelon, Lemon, Lemon Lime, Peach Mango and Blood Orange. The Company recently introduced and began selling hemp-derived CBD topical and ingestible products under the brand name "A88CBD™". Our hemp-derived CBD products are produced and sold in compliance with the Agriculture Improvement Act of 2018 (also known as the 2018 Farm Bill, Public Law 115-334).

Basis of presentation [Policy Text Block]

Basis of presentation

These unaudited financial statements represent the condensed consolidated financial statements of The Alkaline Water Company and its wholly owned subsidiaries (collectively, the "Company"). These unaudited condensed consolidated financial statements should be read in conjunction with the Company's  consolidated financial statements and the notes thereto as set forth in the Company's Form 10-K, filed with the SEC on July 2, 2021, which included all disclosures required by generally accepted accounting principles ("GAAP") In the opinion of management, these unaudited condensed consolidated financial statements contain all adjustments necessary to present fairly the Company's financial position on a consolidated basis and the consolidated results of operations, equity and cash flows for the interim periods presented. The results of operations for the three months ended June 30, 2021 and 2020 are not necessarily indicative of expected operating results for the full year. The information presented throughout the document as of and for the three months ended June 30, 2021 and 2020 is unaudited. The condensed consolidated balance sheet at March 31, 2021 has been derived from the audited financial statements at that date but does not include all of the information and footnotes required by generally accepted accounting principles in the U.S. for complete financial statements.

Principles of consolidation [Policy Text Block]

Principles of consolidation

The consolidated financial statements include the accounts of The Alkaline Water Company Inc. (a Nevada Corporation) and its five wholly owned subsidiaries: A88 Infused Beverage Division Inc. (a Nevada Corporation), A88 International, Inc. (a Nevada Corporation), A88 Infused Products Inc. (a Nevada Corporation), AWC Acquisition Company Inc. (a Nevada corporation),  and Alkaline 88, LLC (an Arizona Limited Liability Company). All significant intercompany balances and transactions have been eliminated. The Alkaline Water Company Inc., A88 Infused Beverage Division, Inc., A88 Infused Products Inc., A88 International, Inc., AWC Acquisition Company Inc., and Alkaline 88, LLC will be collectively referred herein to as the "Company". Any reference herein to "The Alkaline Water Company Inc.", the "Company", "we", "our" or "us" is intended to mean The Alkaline Water Company Inc., including the subsidiaries indicated above, unless otherwise indicated.

Use of Estimates [Policy Text Block]

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 [Policy Text Block]

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. As of the balance sheet date and periodically throughout the period, the Company has maintained balances in various operating accounts in excess of federally insured limits. In addition, the Company has maintained balances in its attorney's client trust account in both C$ and US$. The Company has not experienced any losses in such accounts and periodically evaluates the credit worthiness of the financial institutions and has determined the credit exposure to be negligible. The Company had $4,497,905 and $9,130,956 in cash at June 30, 2021 and March 31, 2021, respectively.

Accounts Receivable and Allowance for Doubtful Accounts [Policy Text Block]

Accounts Receivable and Allowance for Doubtful Accounts

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

Accounts receivable consisted of the following as of June 30, 2021 and March 31, 2021:

		June 30, 2021 (unaudited)			March 31, 2021
Trade receivables, net	$	8,561,373		$	8,798,176
Less: Allowance for doubtful accounts		(340,000	)		(340,000	)
Net accounts receivable	$	8,221,373		$	8,458,176

Accounts receivable are periodically evaluated for collectability based on past credit history with clients. Provisions for losses on accounts receivable are determined on the basis of loss experience, known and inherent risk in the account balance and current economic conditions. The accounts receivable balance is pledged as collateral for the Company's revolving financing as disclosed in Note 3.

Inventory [Policy Text Block]

Inventory

Inventory represents raw materials and finished goods valued at the lower of cost or market with cost determined using the weight average method which approximates first-in first-out method, and with market defined as the lower of replacement cost or realizable value. The inventory balance is pledged as collateral for the Company's revolving financing as disclosed in Note 3.

As of June 30, 2021 and March 31, 2021, inventory consisted of the following:

		June 30, 2021 (unaudited)		March 31, 2021
Raw materials	$	2,091,450	$	3,055,091
Finished goods		2,946,125		1,352,629
Total inventory	$	5,037,575	$	4,407,720

Property and equipment [Policy Text Block]

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 (half-life convention) method over the estimated useful life of the assets, which the Company has determined to be 3 years.

Going Concern [Policy Text Block]

Going Concern

The accompanying consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America on a going concern basis, which contemplates the realization of assets and the satisfaction of liabilities and commitments in the normal course of business.

The Company has not generated sufficient revenues from product sales to provide for cash flows to enable the Company to finance its operations internally thus there is substantial doubt about the Company’s ability to continue as a going concern within one year from the date of filing. The Company’s ability to continue as a going concern is dependent on the Company’s ability to generate revenues and raise capital.

The Company currently anticipates the release of the funds from escrow from the July 6, 2021 private placements subject to shareholder approval (Note 5) and funds from the exercise of outstanding warrants (Note 9) will adequately fund the Company’s planned operations and capital needs for the next 12 months.  However, if our current plans change or are accelerated or we choose to increase our  production capacity, we may seek to sell additional equity or debt securities or obtain additional credit facilities, including seeking investments from strategic investors. The sale of additional equity securities will result in dilution to our stockholders. 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 continue as a going concern.

Stock-Based Compensation [Policy Text Block]

Stock-Based Compensation

The Company accounts for stock-based compensation in accordance with Accounting Standards Codification ("ASC") 718. Stock-based compensation is measured at the grant date, based on the fair value of the award, and is recognized as expense over the requisite 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 Company's common stock for common share issuances.

Revenue Recognition [Policy Text Block]

Revenue Recognition

The Company recognizes revenue per ASC 606. The Company recognizes revenue when our performance obligations are satisfied. Our primary obligation (the distribution and sale of beverage products) is satisfied upon the delivery of products to our customers, which is also when control is transferred. The Company does not accept returns due to the nature of the product. However, the Company will provide credit to our customers for damaged goods. The Company provides credit to its customers which typically require payment within 30 days. As an incentive to pay early the Company also typically provides a 2% discount if the customer pays within 10 days. The Company estimates the amount of the discount that the customer is likely to take and recognizes it as variable consideration. The amounts are not considered material. After evaluating the revenue disclosure requirements, the Company does not believe that any revenues are required to be disaggregated.

Revenue consists of the gross sales price, less variable consideration, including estimated allowances for which provisions are made at the time of sale, and less certain other discounts and allowances. Shipping and handling charges that are billed to customers are included as a component of revenue. Costs incurred by the Company for shipping and handling charges are included in selling expenses and amounted to $2,906,900 and $1,807,030 for the quarters ended June 30, 2021 and 2020, respectively.

Concentration Risks [Policy Text Block]

Concentration Risks

The Company has 1 major customer that accounts for 12% of accounts receivable at June 30, 2021, and 2 customers that together account for 36% (20% and 16%, respectively) of the total revenues earned for the quarter ended June 30, 2021. The Company has 2 vendors that accounted for 43% (27%, and 16% respectively) of purchases for the quarter ended June 30, 2021.

The Company has 2 major customers that together account for 32% (22% and 10%, respectively) of accounts receivable at June 30, 2020, and 2 customers that together account for 45% (25% and 20%, respectively) of the total revenues earned for the quarter ended June 30, 2020. The Company has 3 vendors that accounted for 55% (27%, 15% and 13% respectively) of purchases for the quarter ended June 30, 2020.

Income Taxes [Policy Text Block]

Income Taxes

The Company uses an estimated annual effective tax rate method in computing its interim tax provision. This effective tax rate is based on forecasted annual pre-tax income (loss), permanent tax differences and statutory tax rates. Deferred income taxes are recognized for differences between the basis of assets and liabilities for financial statement and income tax purposes. The differences relate principally to net operating loss carryforwards. Deferred tax assets and liabilities represent the future tax consequence for those differences, which will either be taxable or deductible when the assets and liabilities are recovered or settled. Valuation allowances are established when necessary to reduce deferred tax assets to the amount expected to be realized.

Basic and Diluted Loss Per Share [Policy Text Block]

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.

For the three months ended June 30, 2021 and 2020, respectively, the Company had 3,897,897 and 2,417,322 shares relating to options, 4,761,690 and 5,559,205 shares relating to warrants and 2,227,030 and nil convertible preferred shares that were not included in the diluted earnings per share calculation because they were antidilutive.

Business Segments [Policy Text Block]

Business Segments

The Company operates on one segment in one geographic location - the United States of America and; therefore, segment information is not presented.

Fair Value of Financial Instruments [Policy Text Block]

Fair Value of Financial Instruments

The carrying amounts of the company's financial instruments including accounts payable, accrued expenses, and notes payable approximate fair value due to the relative short period for maturity these instruments.

The company does not use derivative financial instruments to hedge exposures to cash-flow, market or foreign-currency risks.

Authoritative guidance defines fair value as the price that would be received to sell an asset or paid to transfer a liability (an exit price) in an orderly transaction between market participants at the measurement date. The guidance establishes a hierarchy for inputs used in measuring fair value that maximizes the use of observable inputs and minimizes the use of unobservable inputs by requiring that the most observable inputs be used when available. Observable inputs are inputs that market participants would use in pricing the asset or liability, developed based on market data obtained from sources independent of the company. Unobservable inputs are inputs that reflect the company's assumptions of what market participants would use in pricing the asset or liability developed based on the best information available in the circumstances. The hierarchy is broken down into three levels based on reliability of the inputs as follows:

Level 1: Observable inputs such as quoted prices in active markets;

Level 2: Inputs, other than the quoted prices in active markets, that are observable either directly or indirectly; and

Level 3: Unobservable inputs in which there is little or no market data, which require the reporting entity to develop its own assumptions.

As of June 30, 2021 and 2020, the Company did not have any financial instruments that are measured on a recurring basis as Level 1, 2 or 3.

Correction of Previously Issued Financial Statements [Policy Text Block]

Correction of Previously Issued Financial Statements

The accompanying consolidated statement of operations for the three months ended June 30, 2020 has been corrected for the following: a reclassification of depreciation expense of $225,315 to cost of goods sold related to assets utilized in the production of inventory and ad adjustment to reclassify sales and marketing expenses of $787,114 as a reduction in revenue as such amounts were related to consideration payable to a customer which the Company determined was not for distinct goods or services received. The Company assessed the materiality of the misstatement quantitively and qualitatively and has concluded that the correction of the classification error is immaterial to the consolidated financials taken as a whole. As a result of the correction, cost of goods sold increased from $8,369,526 to $8,594,841 and revenue decreased from $14,219,424 to $13,432,310 which combined resulted in a decrease of gross profit from $5,849,898 to $4,837,469. The correction had no impact on total operating loss and net loss.

Recent Accounting Pronouncements [Policy Text Block]

Recent Accounting Pronouncements

Standards Required to be Adopted in Future Years.

In June 2016, the FASB issued ASU 2016-13, Financial Instruments - Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments. ASU 2016-13 amends the guidance on the impairment of financial instruments. This update adds an impairment model (known as the current expected credit losses model) that is based on expected losses rather than incurred losses. Under the new guidance, an entity recognizes, as an allowance, its estimate of expected credit losses. In November 2018, ASU 2016-13 was amended by ASU 2018-19, Codification Improvements to Topic 326, Financial Instruments - Credit Losses. ASU 2018-19 changes the effective date of the credit loss standards (ASU 2016-13) to fiscal years beginning after December 15, 2021, including interim periods within those fiscal years. Further, the ASU clarifies that operating lease receivables are not within the scope of ASC 326-20 and should instead be accounted for under the new leasing standard, ASC 842. The Company does not believe that the impact of adopting this standard will have a material effect on its financial statements.

The Company has evaluated other recent accounting pronouncements through June 30, 2021 and believes that none of them will have a material effect on our consolidated financial statements.

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NATURE OF BUSINESS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Tables)

3 Months Ended

Jun. 30, 2021

Accounting Policies [Abstract]

Schedule of accounts receivable [Table Text Block]

		June 30, 2021 (unaudited)			March 31, 2021
Trade receivables, net	$	8,561,373		$	8,798,176
Less: Allowance for doubtful accounts		(340,000	)		(340,000	)
Net accounts receivable	$	8,221,373		$	8,458,176

Schedule of inventory current [Table Text Block]

		June 30, 2021 (unaudited)		March 31, 2021
Raw materials	$	2,091,450	$	3,055,091
Finished goods		2,946,125		1,352,629
Total inventory	$	5,037,575	$	4,407,720

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PROPERTY AND EQUIPMENT (Tables)

3 Months Ended

Jun. 30, 2021

Property, Plant and Equipment [Abstract]

Schedule of property plant and equipment [Table Text Block]

Fixed assets consisted of the following at:		June 30, 2021 (unaudited)			March 31, 2021
Machinery and Equipment	$	4,873,788		$	4,812,344
Office Equipment		55,439			55,439
Less: Accumulated Depreciation		(4,016,615	)		(3,857,600	)
Fixed Assets, net	$	912,612		$	1,010,183

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LEASES (Tables)

3 Months Ended

Jun. 30, 2021

Leases [Abstract]

Schedule of operating lease expense [Table Text Block]

Operating Leases:		June 30, 2021
Operating lease right-of-use asset - current portion	$	213,397
Operating lease right-of-use asset - non-current portion		227,342
Total Operating lease right-of-use asset	$	440,739
Operating lease liability - current portion	$	235,055
Operating lease liability - non-current portion		227,342
Total Operating lease liability	$	462,397
Weighted average remaining lease term (in years):
Operating leases		1.1
Weighted average discount rate:
Operating leases		7%

Schedule of maturities of undiscounted lease liabilities [Table Text Block]

	Operating Leases
Year ending March 31, 2022	189,758
Year ending March 31, 2023	191,379
Year ending March 31, 2024	119,150
Total lease payments	500,287
Less: Imputed interest	(37,890	)
Total lease obligations	462,397

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NATURE OF BUSINESS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Narrative) (Details)	3 Months Ended
	Jun. 30, 2021 USD ($) customers vendors shares	Jun. 30, 2020 USD ($) customers vendors shares	Mar. 31, 2021 USD ($)
Nature Of Business And Summary Of Significant Accounting Policies [Line Items]
Cash	$ 4,497,905		$ 9,130,956
Property, plant and equipment, estimated useful lives, years	3 years
Selling expenses	$ 2,906,900	$ 1,807,030
Reclassification Of Depreciation Expenses To Cost Of Goods Sold		225,315
Reclassification of Depreciation Expenses to General and Administrative Expense		787,114
Cost of Goods and Services Sold	9,311,011	8,594,841
Revenue	14,113,578	13,432,310
Gross Profit	$ 4,802,567	4,837,469
Previously Reported [Member]
Nature Of Business And Summary Of Significant Accounting Policies [Line Items]
Cost of Goods and Services Sold		8,369,526
Revenue		14,219,424
Gross Profit		$ 5,849,898
Accounts Receivable [Member]
Nature Of Business And Summary Of Significant Accounting Policies [Line Items]
Number of major customers | customers	1	2
Concentration Risk, Percentage	12.00%	32.00%
Accounts Receivable [Member] | Customer 1 [Member]
Nature Of Business And Summary Of Significant Accounting Policies [Line Items]
Concentration Risk, Percentage		22.00%
Accounts Receivable [Member] | Customer 2 [Member]
Nature Of Business And Summary Of Significant Accounting Policies [Line Items]
Concentration Risk, Percentage		10.00%
Revenues [Member]
Nature Of Business And Summary Of Significant Accounting Policies [Line Items]
Number of major customers | customers	2	2
Concentration Risk, Percentage	36.00%	45.00%
Revenues [Member] | Customer 1 [Member]
Nature Of Business And Summary Of Significant Accounting Policies [Line Items]
Concentration Risk, Percentage	20.00%	25.00%
Revenues [Member] | Customer 2 [Member]
Nature Of Business And Summary Of Significant Accounting Policies [Line Items]
Concentration Risk, Percentage	16.00%	20.00%
Purchases [Member]
Nature Of Business And Summary Of Significant Accounting Policies [Line Items]
Number of major vendors | vendors	2	3
Concentration Risk, Percentage	43.00%	55.00%
Purchases [Member] | Vendor 1 [Member]
Nature Of Business And Summary Of Significant Accounting Policies [Line Items]
Concentration Risk, Percentage	27.00%	27.00%
Purchases [Member] | Vendor 2 [Member]
Nature Of Business And Summary Of Significant Accounting Policies [Line Items]
Concentration Risk, Percentage	16.00%	15.00%
Purchases [Member] | Vendor 3 [Member]
Nature Of Business And Summary Of Significant Accounting Policies [Line Items]
Concentration Risk, Percentage		13.00%
Employee Stock Option [Member]
Nature Of Business And Summary Of Significant Accounting Policies [Line Items]
Antidilutive securities excluded from computation of earnings per share, amount | shares	3,897,897	2,417,322
Warrant [Member]
Nature Of Business And Summary Of Significant Accounting Policies [Line Items]
Antidilutive securities excluded from computation of earnings per share, amount | shares	4,761,690	5,559,205
Convertible Preferred Stock [Member]
Nature Of Business And Summary Of Significant Accounting Policies [Line Items]
Antidilutive securities excluded from computation of earnings per share, amount | shares	2,227,030	0

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NATURE OF BUSINESS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - Schedule of Accounts Receivable (Details) - USD ($)	Jun. 30, 2021	Mar. 31, 2021
Accounting Policies [Abstract]
Trade receivables, net	$ 8,561,373	$ 8,798,176
Less: Allowance for doubtful accounts	(340,000)	(340,000)
Net accounts receivable	$ 8,221,373	$ 8,458,176

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NATURE OF BUSINESS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES -Schedule of Inventory, Current (Details) - USD ($)	Jun. 30, 2021	Mar. 31, 2021
Accounting Policies [Abstract]
Raw materials	$ 2,091,450	$ 3,055,091
Finished goods	2,946,125	1,352,629
Total inventory	$ 5,037,575	$ 4,407,720

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PROPERTY AND EQUIPMENT (Narrative) (Details) - USD ($)	3 Months Ended
	Jun. 30, 2021	Jun. 30, 2020
Property, Plant and Equipment [Line Items]
Depreciation expense	$ 159,015	$ 227,911

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PROPERTY AND EQUIPMENT - Schedule of Property, Plant and Equipment (Details) - USD ($)	Jun. 30, 2021	Mar. 31, 2021
Property, Plant and Equipment [Line Items]
Less: Accumulated Depreciation	$ (4,016,615)	$ (3,857,600)
Property and Equipment, net	912,612	1,010,183
Machinery and Equipment [Member]
Property, Plant and Equipment [Line Items]
Property, Plant and Equipment	4,873,788	4,812,344
Office Equipment [Member]
Property, Plant and Equipment [Line Items]
Property, Plant and Equipment	$ 55,439	$ 55,439

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REVOLVING FINANCING (Narrative) (Details)	3 Months Ended
	Jun. 30, 2021
Line of Credit Facility, Borrowing Capacity, Description	Under the terms of the Credit Agreement, SCM has agreed to make cash advances to our company in an aggregate principal at any one time outstanding not to exceed the lesser of (i) $7 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).
Line of Credit Facility, Interest Rate Description	The principal amount of the Revolving Facility outstanding bears interest at a rate per annum equal to (i) a fluctuating interest rate per annum equal at all times to the rate of interest announced, from time to time, within Wells Fargo Bank at its principal office in San Francisco as its "prime rate," plus (ii) 3.25%, payable monthly in arrears. The interest rate as of March 31, 2021 was 7.0%
Line of Credit Facility, Commitment Fee Percentage	0.083%
Line of Credit Facility, Interest Rate During Period	0.35%
Line of Credit Facility, Termination Fee	1.00%
Line of Credit Facility, Interest Increase Upon Default	5.00%

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PAYCHECK PROTECTION PROGRAM LOAN (Narrative) (Details) - Promissory Note [Member]	Apr. 29, 2020 USD ($)
Short-term Debt [Line Items]
Amount of promissory note	$ 325,800
Maturity date of promissory note	Apr. 29, 2022
Interest rate on promissory note	1.00%
Payment term of promissory note	Borrower shall pay principal plus interest accrued under the promissory note in 18 equal monthly installments beginning on October 29, 2020.

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STOCKHOLDERS' EQUITY (Narrative) (Details) - USD ($)			1 Months Ended	3 Months Ended		12 Months Ended
	May 12, 2021	May 03, 2021	Apr. 15, 2021	Jun. 30, 2021	Jun. 30, 2020	May 12, 2022	Jun. 15, 2021	Mar. 31, 2021	Oct. 07, 2013
Stockholders Equity Note [Line Items]
Preferred stock, shares authorized				100,000,000				100,000,000	100,000,000
Stock compensation expense				$ 871,172
Stock compensation expense in quarter ended September 30, 2021				1,056,758
Stock compensation expense for quarter ended December 31, 2021				556,758
Total stock compensation expense for year ended March 31, 2022				3,041,444
Stock compensation expense for years ended March 31, 2023				3,227,030
Stock compensation expense years ended March 31, 2024				3,227,030
Aggregate cash payments	$ 3,000,000			500,000
Additional aggregate cash payments				500,000
Aggregate cash payments for fiscal year 2023				250,000
Aggregate cash payments for fiscal year 2024				250,000
Value of common stock shares issued upon conversion					$ 0
Non-employees [Member] | One U.S. person [Member]
Stockholders Equity Note [Line Items]
Stock Issued During Period, Shares, Issued for Services (shares)			38,834
Stock Issued During Period, Value, Issued for Services			$ 40,000
Monthly retainer for consulting services							$ 40,000
Retainer for consulting services							$ 480,000
2020 Equity Incentive Plan [Member]
Stockholders Equity Note [Line Items]
Number of restricted common stock shares granted		816,665
Series S Preferred Stock [Member]
Stockholders Equity Note [Line Items]
Number of common stock shares issued upon conversion	6,681,090
Price per share	$ 1.00
Value of common stock shares issued upon conversion	$ 6,681,090
Vesting of stock recognized as prepaid expense						$ 2,227,030
Prepaid expense				$ 1,855,858

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OPTIONS AND WARRANTS (Narrative) (Details) - USD ($)		1 Months Ended	3 Months Ended
	Jun. 14, 2021	Jun. 15, 2021	Jun. 30, 2021	Jun. 30, 2020
Share-based Payment Arrangement [Abstract]
Stock issued upon exercise of stock option			162,668
Number of stock options issued			91,000
Proceeds from stock options exercised			$ 48,230	$ 61,480
Class of warrant or right, exercises in period	277,777	1,000,000
Warrant exercise price	$ 0.55	$ 0.50
Proceeds from warrants exercised	$ 152,777.35	$ 500,000	$ 652,777	$ 258,899

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LEASES (Narrative) (Details)	1 Months Ended			3 Months Ended
	Nov. 30, 2020 USD ($) ft²	Oct. 31, 2020 USD ($) ft²	Jul. 31, 2020 USD ($) ft²	Jun. 30, 2021 USD ($) ft²	Jun. 30, 2020 USD ($)
Leases [Abstract]
Area of property under operating lease | ft²	2,390	9,166	14,530	3,352
Lease and rent expense per month	$ 5,280	$ 10,083	$ 7,992	$ 7,891
Lease rate for extension	5,377	10,385	$ 8,231
Lease rate for second extension period	$ 5,497	$ 10,697
Weighted average discount rate: Operating leases	7.00%	7.00%	7.00%	7.00%
Operating lease right-of-use asset	$ 177,629	$ 337,932	$ 130,989	$ 440,739
Operating lease liability	$ 177,629	$ 337,932	$ 138,266	462,397
Short-term lease cost				$ 100,915	$ 34,754

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LEASES - Schedule of Operating Leases (Details) - USD ($)	Jun. 30, 2021	Mar. 31, 2021	Nov. 30, 2020	Oct. 31, 2020	Jul. 31, 2020
Leases [Abstract]
Operating lease right-of-use asset - current portion	$ 213,397	$ 236,446
Operating lease right-of-use asset - Non current portion	227,342	269,167
Total Operating lease right-of-use asset	440,739		$ 177,629	$ 337,932	$ 130,989
Operating lease liability - current portion	235,055	229,605
Operating lease liability - non-current portion	227,342	$ 292,582
Total Operating lease liability	$ 462,397		$ 177,629	$ 337,932	$ 138,266
Weighted average remaining lease term (in years): Operating leases	1 year 1 month 6 days
Weighted average discount rate: Operating leases	7.00%		7.00%	7.00%	7.00%

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LEASES - Schedule of maturities of undiscounted lease liabilities (Details)	Jun. 30, 2021 USD ($)
Leases [Abstract]
Year ending March 31, 2022	$ 189,758
Year ending March 31, 2023	191,379
Year ending March 31, 2024	119,150
Total lease payments	500,287
Less: Imputed interest	(37,890)
Total lease obligations	$ 462,397

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SUBSEQUENT EVENTS (Narrative) (Details) - USD ($)			1 Months Ended		2 Months Ended	3 Months Ended
	Jul. 06, 2021	Jun. 14, 2021	Jul. 27, 2021	Jun. 15, 2021	Aug. 16, 2021	Jun. 30, 2021	Jun. 30, 2020
Subsequent Event [Line Items]
Proceeds from warrants exercised		$ 152,777.35		$ 500,000		$ 652,777	$ 258,899
Proceeds from issuance of common stock						$ 0	$ 2,900,000
Stock issued upon cashless exercise of options						162,668
Number of stock options issued						91,000
Subsequent Event [Member]
Subsequent Event [Line Items]
Number of common stock issued upon exercise of warrants					4,761,688
Exercise price of warrants					$ 1.25
Proceeds from warrants exercised					$ 6,000,000
Stock issued upon cashless exercise of options					63,692
Cashless exercise of options					86,666
Number of stock options issued			454,000
Stock options granted, exercise price			$ 1.75
Subsequent Event [Member] | Private Placement [Member]
Subsequent Event [Line Items]
Number of shares issued in subscription	4,757,381
Per share price of subscription receipt	$ 1.05
Proceeds from issuance of private placement	$ 4,995,250.05
Term of warrant	3 years
Exercise price of warrants	$ 1.25