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

FORM S-4

REGISTRATION STATEMENT
UNDER THE SECURITIES ACT OF 1933

THE ALKALINE WATER COMPANY INC.

(Exact name of registrant as specified in its charter)

 

Nevada

(State or other jurisdiction of incorporation or organization)

 

2080

(Primary Standard Industrial Classification Code Number)

 

99-0367049

(I.R.S. Employer Identification Number)

 

14646 N. Kierland Blvd., Suite 255
Scottsdale, AZ 85254
Telephone: (480) 656-2423

(Address, including zip code, and telephone number,
including area code, of registrant's principal executive offices)

 

Incorp Services, Inc.
3773 Howard Hughes Pkwy., Suite 500S
Las Vegas, NV 89169-6014
Telephone: (702) 866-2500

(Name, address, including zip code, and telephone number,
including area code, of agent for service)

 

 

Copy of Communications To:

 


Clark Wilson LLP
Suite 900 - 885 West Georgia Street
Vancouver, British Columbia
V6C 3H1, Canada
Telephone: (604) 891-7707
Attention: Virgil Z. Hlus

 

AQUAhydrate, Inc.
5870 West Jefferson Blvd., Suite D
Los Angeles, CA 90016
Telephone: (310) 559-5058
Attention: Matthew Howison

 

Glaser Weil Fink Howard Avchen & Shapiro LLP
520 Newport Center Drive, Suite 420
Newport Beach, CA 92660
Telephone: (949) 287-6315
Attention: George Wall

Approximate date of commencement of proposed sale of the securities to the public: As soon as practicable after the effectiveness of this registration statement and the satisfaction or waiver of all other conditions under the Agreement and Plan of Merger dated as of September 9, 2019, as amended from time to time, among The Alkaline Water Company Inc., AQUAhydrate, Inc. and AWC Acquisition Corp. described herein.

If the securities being registered on this Form are being offered in connection with the formation of a holding company and there is compliance with General Instruction G, check the following box [   ]

If this Form is filed to register additional securities for an offering pursuant to Rule 462(b) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. [   ]


If this Form is a post-effective amendment filed pursuant to Rule 462(d) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. [   ]

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or 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

[X]

Non-accelerated filer

[   ]

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 to Section 7(a)(2)(B) of the Securities Act. [   ]

If applicable, place an X in the box to designate the appropriate rule provision relied upon in conducting this transaction:
 Exchange Act Rule 13e-4(i) (Cross-Border Issuer Tender Offer) [   ]
 Exchange Act Rule 14d-1(d) (Cross-Border Third-Party Tender Offer) [   ]

CALCULATION OF REGISTRATION FEE

Title of Each Class
of Securities to be
Registered

Amount to be
Registered(1)

Proposed Maximum
Offering Price
Per Share

Proposed Maximum
Aggregate Offering
Price(2)

Amount of
Registration Fee(3)

Common Stock


23,315,217


Not Applicable


$134,843.75


$16.34

Notes

(1)

Represents the maximum number of shares of common stock, par value of $0.001 per share, of The Alkaline Water Company Inc., a Nevada corporation, to be issued (i) to holders of common stock and preferred stock, par value of $0.001 per share, of AQUAhydrate, Inc., a Nevada corporation, and (ii) to any finders or placement agents or to any persons for the payment of liabilities of AQUAhydrate, Inc., in connection with consummation of the merger described in this registration statement.

 

 

(2)

Estimated solely for purposes of calculating the registration fee in accordance with Rule 457(f) of the Securities Act of 1933. No market exists for shares of AQUAhydrate, Inc., and AQUAhydrate, Inc. has an accumulated capital deficit. Therefore, the proposed maximum aggregate offering price is based upon one-third of the aggregate par value of the shares of common stock and preferred stock of AQUAhydrate, Inc. issued and outstanding as of November 8, 2019.

 

 

(3)

Determined in accordance with Section 6(b) of the Securities Act of 1933 at a rate equal to $121.20 per $1,000,000 of the proposed maximum aggregate offering price.

The registrant hereby amends this registration statement on such date or dates as may be necessary to delay its effective date until the registrant shall file a further amendment which specifically states that this registration statement shall thereafter become effective in accordance with Section 8(a) of the Securities Act of 1933 or until the registration statement shall become effective on such date as the Securities and Exchange Commission, acting pursuant to said Section 8(a), may determine.


The information in this joint proxy statement/prospectus is not complete and may be changed. These securities may not be sold until the registration statement filed with the Securities and Exchange Commission is effective. This joint proxy statement/prospectus is not an offer to sell these securities and it is not soliciting an offer to buy these securities in any jurisdiction where the offer or sale is not permitted.

Subject to Completion, Dated November 8, 2019

THE ALKALINE WATER COMPANY INC. AQUAHYDRATE, INC.

Dear Stockholders of The Alkaline Water Company Inc. and AQUAhydrate, Inc.:

The board of directors of each of The Alkaline Water Company Inc. ("Alkaline") and AQUAhydrate, Inc. ("AQUAhydrate") has approved a merger (the "Merger") of AWC Acquisition Company Inc., a wholly owned subsidiary of Alkaline ("Merger Sub"), with and into AQUAhydrate, with AQUAhydrate continuing as a wholly owned subsidiary of Alkaline. The merger will be effected by AQUAhydrate and Alkaline under an Agreement and Plan of Merger (the "Merger Agreement") by and among AQUAhydrate, Alkaline and Merger Sub, dated as of September 9, 2019, as amended from time to time. The Merger will result in a diversified, premium bottled water-focused public company that meets the hydration demands of both the family and active lifestyle sectors.

The Merger Agreement provides that, prior to the closing of the Merger, AQUAhydrate will obtain the approval of the AQUAhydrate stockholders for the adoption of the Seventh Amended and Restated Articles of Incorporation and amend and restate the articles of incorporation of AQUAhydrate to effect a capital reorganization (the "Capital Reorganization"). The Capital Reorganization will result in the conversion of all outstanding shares of current preferred stock of AQUAhydrate, other than the Series I Preferred shares, into shares of common stock of AQUAhydrate (each, an "AQUAhydrate Common Share"). The Series I Preferred shares will be converted into AQUAhydrate Common Shares and a new class of the preferred stock (each, an "AQUAhydrate New Preferred Shares").

At the effective time of the Merger, which will be promptly after the Capital Reorganization, (i) the holders of AQUAhydrate Common Shares will receive an aggregate of 19,565,217 shares of common stock of Alkaline (each, an "Alkaline Common Share"), less any Alkaline Common Shares to be issued in connection with the Merger to any finders or placement agents or to any persons for the payment of outstanding liabilities of AQUAhydrate, on a pro-rata basis in the proportion the number of AQUAhydrate Common Shares held by such holders, and (2) the holders of AQUAhydrate New Preferred Shares will receive an aggregate of 3,750,000 Alkaline Common Shares on a pro-rata basis in the proportion the number of shares of AQUAhydrate New Preferred Shares held by such holders, subject to a performance escrow release. All of the issued and outstanding AQUAhydrate Common Shares and AQUAhydrate New Preferred Shares immediately prior to the effective time of the Merger will be cancelled.

Based on the number of Alkaline Common Shares outstanding as of ♦, 2019, and the aggregate number of Alkaline Common Shares to be issued pursuant to the Merger Agreement, immediately following completion of the Merger, Alkaline stockholders immediately prior to the completion of the Merger are expected to own approximately ♦% of the outstanding Alkaline Common Shares and former AQUAhydrate securityholders (including holders of AQUAhydrate Common Shares and AQUAhydrate New Preferred Shares and any other persons (including finders, placement agents and creditors) to whom Alkaline Common Shares will be issued pursuant to the Merger Agreement) are expected to own approximately ♦% of the outstanding Alkaline Common Shares.

The Alkaline Common Shares are currently listed on the Nasdaq Capital Market and TSX Venture Exchange under the symbol "WTER." There is no public market for the common stock or preferred stock of AQUAhydrate. Following the completion of the Merger, we anticipate that the Alkaline Common Shares will continue to be listed on the Nasdaq Capital Market, but the Alkaline Common Shares may be delisted from TSX Venture Exchange if the stockholders of Alkaline approve the delisting.

Alkaline and AQUAhydrate will each hold meetings of their respective stockholders in connection with the Merger and related matters. We cannot complete the Merger unless a sufficient number of Alkaline stockholders approve the issuance of the Alkaline Common Shares in connection with the Merger, AQUAhydrate stockholders approve the Capital Reorganization and the Merger Agreement and the transactions contemplated thereby, including the Merger, and the other related proposals being submitted to the Alkaline stockholders and AQUAhydrate stockholders are approved. Your vote is very important, regardless of the number of shares you own. Whether or not you plan to attend the Alkaline or AQUAhydrate meeting in person, please vote your shares as promptly as possible so that your shares may be represented and voted at your meeting. Please note that a failure to vote your shares or return your proxy card may result in a failure to establish a quorum for the Alkaline meeting or the AQUAhydrate meeting.


2

After careful consideration, the board of directors of each of Alkaline and AQUAhydrate has approved the Merger Agreement and the Merger. The Alkaline board of directors unanimously recommends that Alkaline stockholders vote "FOR" each of the proposals being submitted to a vote of the Alkaline stockholders at the Alkaline meeting. The AQUAhydrate board of directors (with one director abstaining because of an interest in the transaction) recommends that AQUAhydrate stockholders vote "FOR" each of the proposals being submitted to a vote of the AQUAhydrate stockholders at the AQUAhydrate meeting.

The obligations of Alkaline and AQUAhydrate to complete the Merger are subject to the satisfaction or waiver of the conditions in the Merger Agreement. Additional information about Alkaline, AQUAhydrate and the Merger is contained in the accompanying joint proxy statement/prospectus. You should read the entire joint proxy statement/prospectus carefully. In particular, we urge you to read the information under "Risk Factors" beginning on page 35.

We thank you for your consideration and continued support.

Sincerely

Richard. A Wright Matthew Howison
President and Chief Executive Officer President
The Alkaline Water Company Inc. AQUAhydrate, Inc.

Neither the Securities and Exchange Commission nor any state securities commission has approved or disapproved of these securities or determined if this joint proxy statement/prospectus is truthful or complete. Any representation to the contrary is a criminal offense.

This joint proxy statement/prospectus is dated _____________, 2019 and is first being sent or given to the stockholders of Alkaline and AQUAhydrate on or about _____________, 2019


3

This joint proxy statement/prospectus incorporates important business and financial information about Alkaline and AQUAhydrate that is not included in or delivered with this document. This information is available without charge to Alkaline and AQUAhydrate stockholders upon written or oral request. Requests should be made to Alkaline or AQUAhydrate at the following address.

The Alkaline Water Company Inc.
Attention: President
14646 N. Kierland Blvd., Suite 255
Scottsdale, AZ 85254
Telephone: (480) 656-2423

AQUAhydrate, Inc.
Attention: President
5870 West Jefferson Blvd., Suite D
Los Angeles, CA 90016
Telephone: (310) 559-5058

To obtain timely delivery, you must request the information no later than five business days before the date of the Alkaline or AQUAhydrate meeting, as applicable.

See "Where You Can Find More Information" beginning on page 155 of the accompanying joint proxy statement/prospectus for further information.


4

ABOUT THIS JOINT PROXY STATEMENT/PROSPECTUS

This joint proxy statement/prospectus, which forms part of a registration statement on Form S-4 filed with the U.S. Securities and Exchange Commission (the "SEC") by Alkaline, constitutes a prospectus of Alkaline under Section 5 of the Securities Act of 1933, as amended (the "Securities Act"), with respect to the Alkaline Common Shares to be issued to AQUAhydrate stockholders and others in connection with the Merger. This joint proxy statement/prospectus also constitutes a joint proxy statement for both Alkaline and AQUAhydrate. This joint proxy statement/prospectus also constitutes a notice of meeting with respect to the meeting of Alkaline stockholders and a notice of meeting with respect to the meeting of AQUAhydrate stockholders.

You should rely only on the information contained in this joint proxy statement/prospectus. No one has been authorized to provide you with information that is different from that contained in this joint proxy statement/prospectus. This joint proxy statement/prospectus is dated _______________, 2019. You should not assume that the information contained in this joint proxy statement/prospectus is accurate as of any date other than that date. Neither the mailing of this joint proxy statement/prospectus to Alkaline stockholders or AQUAhydrate stockholders nor the issuance by Alkaline of Alkaline Common Shares pursuant to the Merger Agreement will create any implication to the contrary.

This joint proxy statement/prospectus does not constitute an offer to sell, or a solicitation of an offer to buy, any securities, or the solicitation of a proxy, in any jurisdiction to or from any person to whom it is unlawful to make any such offer or solicitation. Information contained in this joint proxy statement/prospectus regarding AQUAhydrate has been provided by AQUAhydrate and information contained in this joint proxy statement/prospectus regarding Alkaline has been provided by Alkaline.


5

THE ALKALINE WATER COMPANY INC.
14646 N. Kierland Blvd., Suite 255
Scottsdale, AZ 85254

NOTICE OF ANNUAL MEETING OF STOCKHOLDERS

TO BE HELD ON ♦, 2020

Dear Stockholders of The Alkaline Water Company Inc.:

The annual meeting of stockholders of The Alkaline Water Company Inc. ("Alkaline") will be held on ♦, 2020 at ♦, Arizona time, at the offices of Greenberg Traurig, LLP, 2375 East Camelback Road, Suite 700, Phoenix AZ 85016 for the following purposes:

1.

To approve the issuance of shares of common stock of Alkaline in connection with the transactions contemplated by the Agreement and Plan of Merger, dated as of September 9, 2019, as amended from time to time, by and among Alkaline, AWC Acquisition Company Inc. and AQUAhydrate, Inc., a copy of which (including each amendment thereto through the date hereof) is attached as Schedule "A" to the accompanying joint proxy statement/prospectus;

2.

To approve the creation of a new Control Person (as defined in the policies of the TSX Venture Exchange) of Alkaline and the resulting change of control of Alkaline for the purpose of Nasdaq Listing Rule 5635;

3.

To approve the adjournment of the annual meeting of the stockholders of Alkaline, if necessary, to solicit additional proxies if sufficient votes to approve the proposals set forth above and below have not been obtained;

4.

To elect Richard A. Wright, David A. Guarino, Aaron Keay, Bruce Leitch, and Brian Sudano as the directors of Alkaline;

5.

To ratify the appointment of Prager Metis CPAs, LLC as the independent registered public accounting firm of Alkaline;

6.

To approve the 2019 equity incentive plan of Alkaline;

7.

To approve the delisting of common stock of Alkaline from the TSX Venture Exchange; and

8.

To transact such other business as may properly come before the annual meeting or any adjournment thereof.

THE ALKALINE BOARD OF DIRECTORS RECOMMENDS THAT ALKALINE
STOCKHOLDERS VOTE "FOR" EACH OF THE PROPOSALS.

These items of business are more fully described in the accompanying joint proxy statement/prospectus. Please read the joint proxy statement/prospectus carefully in deciding how to vote.

The Alkaline board of directors has fixed the close of business on ♦, 2019 as the record date for the determination of the stockholders entitled to notice of, and to vote at, the annual meeting or any adjournment thereof. Only the stockholders of record on the record date are entitled to vote at the annual meeting.

Whether or not you plan on attending the annual meeting, we ask that you vote by proxy by following the instructions provided in the enclosed proxy card as promptly as possible. If your shares are held of record by a broker, bank, or other nominee, please follow the voting instructions sent to you by your broker, bank, or other nominee in order to vote your shares.

Even if you have voted by proxy, you may still vote in person if you attend the annual meeting. Please note, however, that if your shares are held of record by a broker, bank, or other nominee and you wish to vote at the annual meeting, you must obtain a valid proxy issued in your name from that record holder.

Sincerely,

By Order of the Board of Directors


6

_________________________________________
Richard A. Wright

President and Chief Executive Officer

♦, 2019


7

AQUAHYDRATE, INC.
5870 West Jefferson Blvd., Suite D
Los Angeles, CA 90016

NOTICE OF SPECIAL MEETING OF STOCKHOLDERS

TO BE HELD ON ♦, 2020

To the Stockholders of AQUAhydrate, Inc.:

A special meeting of stockholders (the "AQUAhydrate Meeting") of AQUAhydrate, Inc., a Nevada corporation ("AQUAhydrate"), will be held on ♦, 2019 at ♦, local time, at ♦, for the following purpose:

1.

To consider and vote upon a proposal to amend and restate AQUAhydrate's Sixth Amended and Restated Articles of Incorporation by the adoption of the Seventh Amended and Restated Articles of Incorporation (the "Capital Reorganization"), which is referred to as "AQUAhydrate Proposal 1";

2.

To consider and vote upon a proposal to approve the Agreement and Plan of Merger dated September 9, 2019, as amended from time to time (the "Merger Agreement"), which is referred to as "AQUAhydrate Proposal 2";

3.

To approve the adjournment of the AQUAhydrate Meeting, if necessary or appropriate, to solicit additional proxies if there are not sufficient votes to approve AQUAhydrate Proposal 1 and AQUAhydrate Proposal 2 (which is referred to as "AQUAhydrate Proposal 3"); and

4.

To transact such other business as may properly come before the AQUAhydrate Meeting or any adjournment thereof.

The board of directors of AQUAhydrate (the "AQUAhydrate Board") has determined that AQUAhydrate Proposal 1 and AQUAhydrate Proposal 2 are fair to, and in the best interests of, AQUAhydrate and its stockholders and recommend that stockholders vote in favor of both proposals. For more information concerning the recommendations of the AQUAhydrate Board, see the sections "The Merger - AQUAhydrate Reasons for the Merger" and "The Merger - Background of the Merger" beginning on pages 60 and 58, respectively, of the joint proxy statement/prospectus to which this notice is attached.

Approval of AQUAhydrate Proposal 1 and AQUAhydrate Proposal 2 each requires the affirmative vote of (i) the holders of a majority of the shares of AQUAhydrate common stock, Series F Preferred shares, Series G Preferred shares, Series H Preferred shares and Series I Preferred shares voting together as a single class, (ii) the holders of Series F Preferred shares voting as a single class, (iii) the holders of Series G Preferred shares voting as a single class, (iv) the holders of Series H Preferred shares voting as a single class and (v) the holders of Series I Preferred shares voting as a single class. The holders of Series A Preferred shares, Series B Preferred shares, Series C Preferred shares, Series D Preferred shares and Series E Preferred shares are not entitled to vote on AQUAhydrate Proposal 1 or AQUAhydrate Proposal 2.

Approval of AQUAhydrate Proposal 1 is a condition to the consummation of the merger (the "Merger") pursuant to the Merger Agreement and approval of AQUAhydrate Proposal 2 is a condition to the consummation of AQUAhydrate Proposal 1. If AQUAhydrate Proposal 2 is not approved the Capital Reorganization will not be consummated and if AQUAhydrate Proposal 1 is not approved the transactions contemplated by the Merger Agreement will not be consummated.

In considering the recommendation of the AQUAhydrate Board, stockholders should be aware that some of directors and executive officers may have interests in the Capital Reorganization and Merger Agreement that are different from, or in addition to, the interests they may have as stockholders. See "The Merger-Interests of AQUAhydrate Directors and Executive Officers in the Merger" beginning on page 62 of the joint proxy statement/prospectus to which this notice is attached.

Only stockholders of record of common stock, Series F Preferred shares, Series G Preferred shares, Series H Preferred shares and Series I Preferred shares at the close of business on ♦, 2019 are entitled to notice of and to vote at the AQUAhydrate Meeting. A list of stockholders entitled to vote at the AQUAhydrate Meeting will be available for inspection at AQUAhydrate's offices in Los Angeles, California, for any purpose relevant to the AQUAhydrate Meeting during normal business hours for a period of ten days before the meeting and at the AQUAhydrate Meeting. References to the AQUAhydrate Meeting in this joint proxy statement/prospectus are to such stockholder meeting as adjourned or postponed.


8

YOUR VOTE IS IMPORTANT. WHETHER OR NOT YOU EXPECT TO ATTEND THE AQUAHYDRATE STOCKHOLDER MEETING, PLEASE SUBMIT YOUR PROXY IN ONE OF THE FOLLOWING WAYS:

Stockholders have a statutory right to dissent from the Merger and demand payment of the fair value of their shares as determined in a judicial proceeding in accordance with Nevada Revised Statutes Section 92A.300 through 92A.500, inclusive of the Nevada Revised Statues, plus interest from the effective date of the Merger. In addition, although AQUAhydrate is incorporated in the State of Nevada, because a majority of the holders of AQUAhydrate's voting securities have addresses in California and AQUAhydrates's other contacts with the State of California, the provisions of California law relating to the rights of dissenting stockholders in a merger (Chapter 13 of the California Corporations Code) apply to the Merger. Under California law, stockholders who purposely assert dissenter's rights may require a corporation to purchase their shares for the fair market value in cash. The fair value or fair market value may be more or less than the amount AQUAhydrate stockholder will receive pursuant to the Merger Agreement.  In order to qualify for these rights, AQUAhydrate stockholders must comply with the procedural requirements under the relevant statutes.

The enclosed proxy statement/prospectus provides a detailed description of the Capital Reorganization, the Merger and the Merger Agreement as well as AQUAhydrate's capital stock. You are urged to read this joint proxy statement/prospectus and the schedules carefully and in their entirety.

Sincerely,

By Order of the Board of Directors


_______________________________
Matthew Howison

President

♦, 2019


9

TABLE OF CONTENTS

QUESTIONS AND ANSWERS ABOUT THE MERGER AND MEETINGS 14
Why am I receiving this joint proxy statement/prospectus? 14
What is included in these materials? 14
What items will be voted at the Alkaline Meeting? 14
What items will be voted at the AQUAhydrate Meeting? 15
What is the Capital Reorganization? 15
What is the Merger? 15
What was the effect of the First Merger Amendment? 15
Why are the two companies proposing to merge? 16
As an Alkaline stockholder or AQUAhydrate stockholder, what will happen to my securities? 17
What will happen to options or warrants of AQUAhydrate? 18
What is the value of the Merger consideration? 18
Who will be the directors of the Combined Company following the Merger? 18
Who will be the officers of the Combined Company following the Merger? 18
When do you expect the Merger will be consummated? 18
What are the material U.S. federal income tax consequences of the merger to U.S. holders of shares of common stock or preferred stock of AQUAhydrate? 18
What do I need to do now? 19
When and where will the stockholder meetings be held? 19
Who can vote at the stockholder meetings? 19
How many votes do I have? 20
How do I vote my shares? 20
What is the difference between a stockholder of record and a "street name" holder? 20
What does it mean if I receive more than one proxy card? 21
How is the validity of my proxy card determined? 21
What approvals by the stockholders of Alkaline are required for the proposals before the Alkaline Meeting? 21
What approvals by the stockholders of AQUAhydrate are required for the proposals before the AQUAhydrate Meeting? 21
How are votes counted? 22
What happens if I do not make specific voting choices? 22
What is the quorum requirement? 23
How does the board of directors recommend that I vote? 23
What interests do the directors and officers of Alkaline and AQUAhydrate have in the approval of the respective proposals to be put before the Alkaline Meeting and the AQUAhydrate Meeting?  23
Are stockholders entitled to appraisal and dissenter's rights in connection with the Merger? 24
Can I change my vote after submitting my proxy? 25
How can I attend the meeting? 25
Who pays the cost of proxy preparation and solicitation? 26
Who can help answer my questions? 26
JOINT PROXY STATEMENT/PROSPECTUS SUMMARY 27
Risk Factors 27
Information About the Companies 28
The Alkaline Water Company Inc. 28
AWC Acquisition Company Inc. 28
AQUAhydrate, Inc. 28
The Merger 29
The Merger Agreement 30
Material U.S. Federal Income Tax Consequences 33
Comparison of Rights of Holders of Alkaline Shares and AQUAhydrate Shares 34
Management Following the Merger 34
Security Ownership of Management 35
RISK FACTORS 35


10


Risks Relating to the Merger 35
Risks Related to Alkaline's Business 39
Risks Related to AQUAhydrate's Business 46
Risks Related to Regulations Applicable to Alkaline's and AQUAhydrate's Industry 48
Risks Related to Alkaline's Intellectual Property 51
Risks Related to Alkaline's Stock 52
FORWARD-LOOKING STATEMENTS 52
ALKALINE PROPOSAL 1  APPROVAL OF THE ISSUANCE OF COMMON STOCK UNDER THE MERGER AGREEMENT 54
ALKALINE PROPOSAL 2  APPROVAL OF THE CREATION OF A NEW CONTROL PERSON AND THE RESULTING CHANGE OF CONTROL 55
ALKALINE PROPOSAL 3 APPROVAL OF THE ADJOURNMENT OF THE ALKALINE MEETING TO SOLICIT ADDITIONAL PROXIES 55
AQUAHYDRATE PROPOSAL 1  APPROVAL OF THE AMENDMENT AND RESTATEMENT OF AQUAHYDRATE'S ARTICLES OF INCORPORATION 56
AQUAHYDRATE PROPOSAL 2 APPROVAL OF THE MERGER AND THE MERGER AGREEMENT 56
AQUAHYDRATE PROPOSAL 3 APPROVAL OF THE ADJOURNMENT OF THE AQUAHYDRATE MEETING TO SOLICIT ADDITIONAL PROXIES 57
THE MERGER 57
General Overview of the Merger 57
Background of the Merger 58
Alkaline Reasons for the Merger 59
AQUAhydrate Reasons for the Merger 60
Interests of the Alkaline Directors and Executive Officers in the Merger 61
Interests of the AQUAhydrate Directors and Executive Officers in the Merger 62
Regulatory Approvals Required for the Merger 62
Stock Exchange Listing 63
Anticipated Accounting Treatment 63
Dissenters' Rights 63
THE MERGER AGREEMENT 70
Principal Terms of the Merger Agreement 70
AQUAhydrate Capital Reorganization 70
Effective Time of the Merger 71
Manner and Basis of Converting AQUAhydrate Common Shares after the Capital Reorganization 71
Manner and Basis of Converting AQUAhydrate New Preferred Shares after the Capital Reorganization 72
Escrow Agreements 73
Treatment of Stock Options and Other Stock-Based Compensation 74
Treatment of Warrants 74
Stock Certificates 74
Effect of the Merger 74
Representations and Warranties 74
Closing Conditions 76
Conduct of Business 77
Indemnification; Directors' and Officers' Insurance 78
Standstill 79
Amendment 80
Termination 80
Important Statement Regarding the Merger Agreement 81
MATERIAL U.S. FEDERAL INCOME TAX CONSEQUENCES 81
Tax consequences of the Capital Reorganization to AQUAhydrate stockholders 82


11


Tax consequences of the Merger to Alkaline, AQUAhydrate and Merger Sub 82
Tax consequences of the Merger to AQUAhydrate stockholders 83
Merger reporting requirements 83
Sale or other disposition 83
Information reporting and backup withholding 83
DESCRIPTION OF SECURITIES OF ALKALINE 84
COMPARISON OF RIGHTS OF HOLDERS OF ALKALINE SHARES AND AQUAHYDRATE SHARES 86
MANAGEMENT FOLLOWING THE MERGER 100
Directors and Executive Officers 100
Business Experience 100
Family Relationships 102
Involvement in Certain Legal Proceedings 102
Director Independence 102
Executive Compensation 103
Transaction with Related Persons 103
INFORMATION WITH RESPECT TO ALKALINE 104
DESCRIPTION OF BUSINESS 104
DESCRIPTION OF PROPERTY 110
LEGAL PROCEEDINGS 110
MARKET PRICE OF AND DIVIDENDS ON ALKALINE'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS 111
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION  AND RESULTS OF OPERATIONS 113
CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE 117
INFORMATION WITH RESPECT TO AQUAHYDRATE 118
DESCRIPTION OF BUSINESS 118
MARKET PRICE OF AND DIVIDENDS ON AQUAHYDRATE'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS  118
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION  AND RESULTS OF OPERATIONS 119
ALKALINE PROPOSAL 4 ELECTION OF DIRECTORS 123
Business Experience of Nominees 124
Executive Officers 126
Family Relationships 126
Involvement in Certain Legal Proceedings 126
Corporate Governance 127
Delinquent Section 16(a) Reports 132
Executive Compensation 132
Security Ownership of Certain Beneficial Owners and Management 137
Transactions with Related Persons 138
ALKALINE PROPOSAL 5 RATIFICATION OF THE APPOINTMENT OF THE INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM  143
ALKALINE PROPOSAL 6 APPROVAL OF 2019 EQUITY INCENTIVE PLAN 144


12


ALKALINE PROPOSAL 7 APPROVAL OF THE DELISTING OF COMMON STOCK OF ALKALINE FROM THE TSX VENTURE EXCHANGE 153
INTEREST OF CERTAIN PERSONS IN MATTERS TO BE ACTED UPON 153
LEGAL MATTERS 153
EXPERTS 153
INTERESTS OF NAMED EXPERTS AND COUNSEL 154
"HOUSEHOLDING" OF PROXY MATERIALS 154
ALKALINE STOCKHOLDER PROPOSALS 154
WHERE YOU CAN FIND MORE INFORMATION 155
OTHER MATTERS 155
   
INDEX TO ALKALINE FINANCIAL STATEMENTS 156
INDEX TO AQUAHYDRATE FINANCIAL STATEMENTS F-36
INDEX TO UNAUDITED PRO FORMA FINANCIAL STATEMENTS F-37
SCHEDULE "A" MERGER AGREEMENT A-1
SCHEDULE "B" RIGHTS OF DISSENTING OWNERS - NEVADA B-1
SCHEDULE "C" RIGHTS OF DISSENTING OWNERS - CALIFORNIA C-1
SCHEDULE "D" SEVENTH AMENDED AND RESTATED ARTICLES OF INCORPORATION OF AQUAHYDRATE D-1
SCHEDULE "E" 2019 EQUITY INCENTIVE PLAN E-1
SCHEDULE "F" AUDIT COMMITTEE CHARTER F-1
SCHEDULE "G" COMPENSATION COMMITTEE CHARTER G-1
SCHEDULE "H" BOARD OF DIRECTOR NOMINATION PROCESS H-1

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References to "Alkaline" in this joint proxy statement/prospectus refer to The Alkaline Water Company Inc. and its consolidated subsidiaries, unless otherwise specified. References to "AQUAhydrate" refer to AQUAhydrate, Inc. References to the "Combined Company" refer to Alkaline and its consolidated subsidiaries, including AQUAhydrate, after the completion of the Merger. References to the "Surviving Company" refer to AQUAhydrate after the Merger. Except as otherwise noted, references to "we," "us" or "our" refer to Alkaline or AQUAhydrate as the context requires. References to "Merger Sub" refer to AWC Acquisition Company Inc., a newly formed, direct, wholly-owned subsidiary of Alkaline.

References to the "Merger Agreement" refer to that certain Agreement and Plan of Merger, dated as of September 9, 2019, as amended from time to time, among Alkaline, AQUAhydrate, and Merger Sub. References to the "First Merger Amendment" refer to that certain Amendment to the Merger Agreement, dated as of October 31, 2019, among Alkaline, AQUAhydrate and Merger Sub, and unless the context requires otherwise, references to the "Merger Agreement" include references to the First Merger Amendment. References to the "Merger" refer to the merger of Merger Sub with and into AQUAhydrate, with AQUAhydrate surviving as the Surviving Company and as a direct, wholly-owned subsidiary of Alkaline as contemplated under the Merger Agreement.

References to "Alkaline common stock" refer to common stock, par value $0.001 per share, of Alkaline, references to "Alkaline shares" refer to shares of Alkaline common stock and references to "Alkaline stockholders" refer to holders of Alkaline common stock.


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References to "AQUAhydrate common stock" refer to common stock, par value $0.001 per share, of AQUAhydrate, and references to "AQUAhydrate common stockholders" refer to holders of AQUAhydrate common stock. References to "AQUAhydrate preferred stock" refer to preferred stock, par value $0.001 per share, of AQUAhydrate, and references to "AQUAhydrate preferred stockholders" refer to holders of AQUAhydrate preferred stock. References to "AQUAhydrate capital stock" refer to AQUAhydrate common stock and AQUAhydrate preferred stock, collectively, and references to "AQUAhydrate stockholders" refer to holders of AQUAhydrate common stock and holders of AQUAhydrate preferred stock, collectively, and references to "AQUAhydrate shares" refer to shares of AQUAhydrate common stock and shares of AQUAhydrate preferred stock, collectively.

All references to currency in this joint proxy statement/prospectus are in United States dollars unless otherwise stated and all financial statements are prepared in accordance with United States generally accepted accounting principles.

Please read this joint proxy statement/prospectus carefully. You should rely only on the information contained in this joint proxy statement/prospectus. We have not authorized anyone to provide you with different information. You should not assume that the information provided by this joint proxy statement/prospectus is accurate as of any date other than the date on the front cover of this joint proxy statement/prospectus.


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QUESTIONS AND ANSWERS ABOUT THE MERGER AND MEETINGS

Why am I receiving this joint proxy statement/prospectus?

You are receiving this joint proxy statement/prospectus because you were an Alkaline stockholder of record or an AQUAhydrate stockholder of record as of the close of business on the record date for the annual meeting of Alkaline stockholders (the "Alkaline Meeting") or the special meeting of AQUAhydrate stockholders (the "AQUAhydrate Meeting"), respectively.

Alkaline is soliciting a proxy from holders of Alkaline common stock to approve the issuance of Alkaline common stock under the Merger Agreement and other matters at the Alkaline Meeting.

The accompanying AQUAhydrate proxy card is being solicited by AQUAhyrate on behalf of the AQUAhyrate board of directors in connection with the AQUAhydrate Meeting.

You are receiving this document because the Merger and related transactions cannot be completed without the approval of the AQUAhydrate stockholders, and the Merger cannot be completed without the approval of the Alkaline stockholders.

This document serves as:

What is included in these materials?

These materials include:

What items will be voted at the Alkaline Meeting?

Alkaline stockholders will vote on:


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What items will be voted at the AQUAhydrate Meeting?

AQUAhydrate stockholders will vote on:

Approval of AQUAhydrate Proposal 1 is a condition to the consummation of the Merger and approval of AQUAhydrate Proposal 2 is a condition of the capital reorganization. Unless both proposals are approved, neither of the transactions will be consummated.

What is the Capital Reorganization?

The Merger Agreement provides that, prior to the closing of the Merger, AQUAhydrate will obtain the approval of the AQUAhydrate stockholders for the adoption of the Seventh Amended and Restated Articles of Incorporation and amend and restate the articles of incorporation of AQUAhydrate to effect a capital reorganization (the "Capital Reorganization"). The Capital Reorganization will result in the conversion of all outstanding shares of current preferred stock of AQUAhydrate, other than the Series I Preferred shares, into shares of AQUAhydrate common stock (each, an "AQUAhydrate Common Share") and the conversion of the Series I Preferred shares into AQUAhydrate Common Share and a new class of the preferred stock (each, an "AQUAhydrate New Preferred Shares"). See "AQUAhydrate Capital Reorganization" beginning on page 70 of this joint proxy statement/prospectus for more information.

What is the Merger?

Alkaline, AWC Acquisition Company Inc. ("Merger Sub"), a wholly-owned subsidiary of Alkaline, and AQUAhydrate have entered into an Agreement and Plan of Merger (the "Merger Agreement"), dated September 9, 2019, as amended from time to time. Under the Merger Agreement, Merger Sub will merge with and into AQUAhydrate, with AQUAhydrate surviving as a wholly-owned subsidiary of Alkaline (the "Merger"). The completion of the capital reorganization is a condition to the consummation of the Merger. If the Merger is consummated, AQUAhydrate stockholders will receive shares of Alkaline common stock as consideration.

What was the effect of the First Merger Amendment?

On October 31, 2019, Alkaline, Merger Sub and AQUAhydrate entered into an Amendment (the "First Merger Amendment") to the Merger Agreement to extend the date after which either Alkaline or AQUAhydrate can terminate the Merger Agreement if the Merger has not been consummated to January 31, 2020 (from October 31, 2019).


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Why are the two companies proposing to merge?

Alkaline

In evaluating the Merger Agreement and the transactions contemplated thereby and recommending that Alkaline's stockholders vote in favor of the transactions contemplated by the Merger Agreement, Alkaline's board of directors, in consultation with Alkaline's senior management and outside legal counsel, considered numerous positive factors relating to the Merger Agreement, the Merger and the other transactions contemplated thereby including the following material factors:

AQUAhydrate

Since formation of AQUAhydrate in 2003 management has worked hard to build the AQUAhydrate brand. AQUAhydrate raised more than $65 million from investors. However, due in large part to the competitive environment, AQUAhydrate was not able to penetrate the market in a significant enough way to continue to promote the brand by itself. In September, 2018, AQUAhydrate began searching for a merger partner.

On September 9, 2019 AQUAhydrate entered into the Merger Agreement with Alkaline. The board of directors of AQUAhydrate believes that the Combined Company will benefit from the increased scale of operations and the clear synergies in production, distribution and logistics. AQUAhydrate and Alkaline have complementary product portfolios which target different demographics in fast growing market. In addition, Alkalines's capital resources are expected to enable AQUAhydrate to continue to develop and grow its brand. Moreover, since AQUAhydrate stockholders will receive stock in the Combined Company they will participate in the continued growth of the Combined Company. Alkalines' public listing also provides AQUAhydrate stockholders increased liquidity for their shares.


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As an Alkaline stockholder or AQUAhydrate stockholder, what will happen to my securities?

Alkaline

Alkaline stockholders will not receive anything as a result of the Merger, but will continue to hold the same amount of Alkaline shares held immediately prior to the Merger; however, current Alkaline stockholders as a whole will have a reduced ownership and voting interest in the Combined Company after the Merger.

Based on the number of Alkaline Common Shares outstanding as of ♦, 2019, and the aggregate number of Alkaline Common Shares to be issued pursuant to the Merger Agreement, immediately following completion of the Merger, Alkaline stockholders immediately prior to the completion of the Merger are expected to own approximately ♦% of the outstanding Alkaline Common Shares and former AQUAhydrate securityholders (including holders of AQUAhydrate Common Shares and AQUAhydrate New Preferred Shares and any other persons to whom Alkaline Common Shares will be issued pursuant to the Merger Agreement) are expected to own approximately ♦% of the outstanding Alkaline Common Shares.

AQUAhydrate

At the effective time of the Merger, which will be soon after the Capital Reorganization, (i) the holders of AQUAhydrate Common Shares will receive an aggregate of 19,565,217 shares of Alkaline common stock (each, an "Alkaline Common Share"), less any Alkaline Common Shares to be issued in connection with the Merger to any finders or placement agents or to any persons for the payment of outstanding liabilities of AQUAhydrate on a pro-rata basis in the proportion the number of AQUAhydrate Common Shares held by such holders, and (ii) the holders of the shares of AQUAhydrate New Preferred Shares will receive an aggregate of 3,750,000 Alkaline Common Shares on a pro-rata basis in the proportion the number of shares of AQUAhydrate New Preferred Shares held by such holders, subject to a performance escrow release. All of the issued and outstanding AQUAhydrate Common Shares and AQUAhydrate New Preferred Shares immediately prior to the effective time of the Merger will be cancelled. AQUAhydrate currently anticipates that approximately ♦ shares of Alkaline common stock will be issued to finders and placement agents and approximately ♦ shares of Alkaline common stock will be issued to persons for the payment of liabilities of AQUAhydrate. See "Manner and Basis of Converting AQUAhydrate Common Shares after the Capital Reorganization" and "Manner and Basis of Converting AQUAhydrate New Preferred Shares after the Capital Reorganization" beginning on page 71 of this joint proxy statement/prospectus for more information.

However, the Merger Agreement provides that the Alkaline Common Shares to be received by the AQUAhydrate stockholders as Merger consideration will be held in escrow following completion of the Merger. 75% of the Alkaline Common Shares to be issued to the holders of AQUAhydrate Common Shares after the Capital Reorganization will be subject to escrow for a period of six months from the date of the effective time of the Merger; provided that the shares issued to four holders of a significant number of AQUAhydrate shares will be subject to escrow for a longer period. In addition, the Merger Agreement provides that 25% of the Alkaline Common Shares to be issued to the holders of AQUAhydrate Common Shares after the Capital Reorganization will be subject to escrow for a period of 12 months (or a longer period if there are unresolved indemnity claims) from the date of the effective time of the Merger in connection with the indemnities provided by the AQUAhydrate stockholders in favor of Alkaline and a representative of the AQUAhydrate stockholders. See "The Merger - Manner and Basis of Converting AQUAhydrate Common Shares after the Capital Reorganization", "The Merger - Manner and Basis of Converting AQUAhydrate Preferred Shares after the Capital Reorganization" and "The Merger - Escrow Agreements" beginning on pages 71, 72, and 73, respectively, of this joint proxy statement/prospectus for more information


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What will happen to options or warrants of AQUAhydrate?

Prior to the effective time of the Merger, AQUAhydrate will take such action is as necessary to provide that each option or warrant to acquire AQUAhydrate Common Shares or AQUAhydrate preferred stock will be of no further force and effect at the effective time of the Merger (either because such option or warrant will have been exercised prior to the effective time of the Merger or will have been otherwise cancelled and terminated). See "Treatment of Stock Options and Other Stock-Based Compensation" and "Treatment of Warrants" beginning on page 74 of this joint proxy statement/prospectus for more information

What is the value of the Merger consideration?

The market value of the Merger consideration that AQUAhydrate stockholders will receive will depend on the price per Alkaline Common Share at the effective time of the Merger. That price will not be known at the time of the AQUAhydrate Meeting or the Alkaline Meeting and may be less or more than the current market price or the market price at the time of the stockholder meetings.

The Alkaline Common Shares are currently listed on the Nasdaq Capital Market and TSX Venture Exchange under the symbol "WTER." On ♦, 2019, the last reported sales prices of Alkaline common stock on the Nasdaq Capital Market and the TSX Venture Exchange were $♦ per share and CDN$♦ per share, respectively.

Who will be the directors of the Combined Company following the Merger?

Immediately following the Merger, the Combined Company's board of directors is expected to be composed of seven directors, being four nominees of Alkaline and three nominees of AQUAhydrate. Alkaline's nominees are expected to be Richard A. Wright, Aaron Keay, Brian Sudano and Bruce Leitch, each of whom is a current director of Alkaline. AQUAhydrate's nominees are expected to be Ira Tochner, Matthew Howison and ♦.

Who will be the officers of the Combined Company following the Merger?

Immediately following the Merger, the Combined Company's executive management team is expected be composed of members of the Alkaline executive management team and the AQUAhydrate executive management team prior to the Merger, including Richard A. Wright, Chief Executive Officer of Alkaline and Matthew Howison, President of AQUAhydrate and the other incumbent executive officers described under "Management Following the Merger" beginning on page 100 of this joint proxy statement/prospectus.

When do you expect the Merger will be consummated?

The Merger is anticipated to occur in the first calendar quarter of 2020 after the Alkaline Meeting and the AQUAhydrate Meeting, each to be held on ♦, 2020, but the exact timing cannot be predicted. For more information, please see the section titled "The Merger Agreement - Closing Conditions" beginning on page 74 this joint proxy statement/prospectus.

What are the material U.S. federal income tax consequences of the merger to U.S. holders of shares of common stock or preferred stock of AQUAhydrate?

The Merger is intended to be treated for U.S. federal income tax purposes as a reorganization within the meaning of Section 368(a) of the Internal Revenue Code, as amended (the "Code"). Assuming the Merger qualifies as a reorganization, a holder of shares of common stock and preferred stock of AQUAhydrate will not recognize any gain or loss for U.S. federal income tax purposes upon the Capital Reorganization and the exchange of the holder's shares of AQUAhydrate preferred or common stock for shares of Alkaline common stock pursuant to the Merger. You are urged to consult your own tax advisor regarding the particular consequences to you of the Capital Reorganization and the Merger.

A holder who is a U.S. person (as defined in the section titled "Material U.S. Federal Income Tax Consequences") generally will recognize capital gain or loss on a sale, exchange, certain redemptions, or other taxable disposition of Alkaline shares in an amount equal to the difference, if any, between (i) the amount realized upon the disposition of such Alkaline shares and (ii) the holder's adjusted tax basis in such Alkaline shares.


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For a more complete discussion of the material U.S. federal income tax consequences of the Merger, see "Material U.S. Federal Income Tax Consequences" beginning on page 81.

What do I need to do now?

Alkaline and AQUAhydrate urge you to carefully read and consider the information contained in this joint proxy statement/prospectus. Alkaline and AQUAhydrate request that you cast your vote on each of the proposals described in this joint proxy statement/prospectus. You are invited to attend the Alkaline Meeting or the AQUAhydrate Meeting, as applicable, but you do not need to attend the meeting in person to vote your shares. Even if you do not plan to attend the meeting, please vote by proxy by following instructions provided in the proxy card.

When and where will the stockholder meetings be held?

The Alkaline Meeting will be held on ♦, 2020 at ♦, Arizona time, at the offices of Greenberg Traurig, LLP, 2375 East Camelback Road, Suite 700, Phoenix AZ 85016.

The AQUAhydrate meeting will be held on ♦, 2020 at ♦, California time, at the offices of ♦.

Who can vote at the stockholder meetings?

Alkaline

The Alkaline board of directors has fixed the close of business on ♦, 2019 as the record date for the determination of the stockholders entitled to notice of, and to vote at, the Alkaline Meeting or any adjournment. If you were a stockholder of record on the record date, you are entitled to vote at the Alkaline Meeting.

As of the record date, ♦ shares of Alkaline common stock were issued and outstanding and no other voting securities were issued and outstanding. Therefore, a total of ♦ votes are entitled to be cast at the Alkaline Meeting.

AQUAhydrate

The record date for the AQUAhydrate Stockholder Meeting is ♦, 2019. Only stockholders of record of AQUAhydrate common stock and Series F Preferred shares, Series G Preferred shares, Series H Preferred shares and Series I Preferred shares as of the close of business on the record date are entitled to notice of, and to vote at, the AQUAhydrate Meeting.

As of the record date, ♦ shares of AQUAhydrate common stock (each having one vote), ♦ shares of Series F Preferred shares (each having ♦ votes), ♦ shares of Series G Preferred shares (each having ♦ votes), ♦ shares of Series H Preferred shares (each having ♦ votes), and ♦ shares of Series I Preferred shares (each having ♦ votes) were issued and outstanding. No other voting securities were issued and outstanding.

Therefore, (i) a total of ♦ votes are entitled to be cast at the AQAUhydrate Meeting for determining a majority of the shares of AQUAhydrate common stock, Series F Preferred shares, Series G Preferred shares, Series H Preferred shares and Series I Preferred shares voting together as a single class, (ii) a total of ♦ votes are entitled to be cast at the AQUAhydrate Meeting for determining a majority of Series F Preferred shares voting as a single class, (iii) a total of ♦ votes are entitled to be cast at the AQUAhydrate Meeting for determining a majority of Series G Preferred shares voting as a single class, (iv) a total of ♦ votes are entitled to be cast at the AQUAhydrate Meeting for determining a majority of Series H Preferred shares voting as a single class, and (v) a total of ♦ votes are entitled to be cast at the AQUAhydrate Meeting for determining a majority of Series I Preferred shares voting as a single class.


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How many votes do I have?

Alkaline

On each proposal to be voted upon, you have one vote for each share of Alkaline common stock that you owned on the record date. There is no cumulative voting.

AQUAhydrate

On each proposal to be voted upon, you have one vote for each share of AQUAhydrate common stock, ♦ vote for each share of Series F Preferred shares, ♦ vote for each share of Series G Preferred shares, ♦ vote for each share of Series H Preferred shares and ♦ vote for each share of Series I Preferred shares that you owned on the record date.

How do I vote my shares?

Alkaline

If you are a stockholder of record, you may vote in person at the Alkaline Meeting or by proxy.

If you hold your shares in "street name" and:

AQUAhydrate

If you are a stockholder of record, you may vote in person at the AQUAhydrate Meeting.

If you hold shares in your own name, you may submit your proxy using any of the following methods:

If you have timely and properly submitted your proxy, clearly indicated your vote and have not revoked your proxy, your shares will be voted as indicated.

What is the difference between a stockholder of record and a "street name" holder?

If your shares are registered directly in your name with Alkaline's transfer agent, Transhare Corporation, then you are a stockholder of record with respect to those shares.

If your shares are held in a stock brokerage account or by a bank, or other nominee, then the broker, bank, or other nominee is the stockholder of record with respect to those shares. However, you still are the beneficial owner of those shares, and your shares are said to be held in "street name." Street name holders generally cannot vote their shares directly and must instead instruct the broker, bank, or other nominee how to vote their shares. Street name holders are also invited to attend the Alkaline Meeting.


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What does it mean if I receive more than one proxy card?

If you receive more than one proxy card, it means that you hold shares registered in more than one name, in different accounts or, if you are an AQUAhydrate stockholder, you hold shares of separate classes or series of AQUAhydrate shares. To ensure that all of your shares are voted, please vote by proxy by following instructions provided in each proxy card. If some of your shares are held in "street name," you should have received voting instruction with these materials from your broker, bank or other nominee. Please follow the voting instruction provided to ensure that your vote is counted.

How is the validity of my proxy card determined?

Alkaline

The chair of the Alkaline Meeting will determine all questions as to the validity, form, eligibility (including time of receipt) and acceptance of proxies at the Alkaline Meeting. His determination will be final and binding. The chair of the Alkaline Meeting has the right to waive any irregularities or conditions as to the manner of voting.

AQUAhydrate

The inspectors of election will determine all questions as to the validity, form, eligibility (including time of receipt) and acceptance of proxies at the AQUAhydrate Meeting. Their determination will be final and binding. The AQUAhyrate board of directors has the right to waive any irregularities or conditions as to the manner of voting. AQUAhyrate may accept your proxy by any form of communication permitted by applicable law so long as AQUAhyrate is reasonably assured that the communication is authorized by you.

What approvals by the stockholders of Alkaline are required for the proposals before the Alkaline Meeting?

When a quorum is present or represented at the Alkaline Meeting, the vote of the stockholders of a majority of Alkaline's stock having voting power present in person or represented by proxy will be sufficient to elect members of the Alkaline board of directors or to decide any question brought before the Alkaline Meeting.

For the election of directors, the nominees who receive more "For" votes than the combined votes of "Against" votes and votes that are abstained will be elected as directors. There is no cumulative voting in the election of directors.

For all other proposals, to be approved, each proposal must receive more "For" votes than the combined votes of "Against" votes and votes that are abstained.

The policy of the TSX Venture Exchange (the "TSXV") on delisting an issuer's shares from that exchange requires that majority of the minority approval of stockholders be obtained. This means that shares held by promoters, directors, officers and insiders (as contemplated in the policies of the TSXV) must be excluded from voting on the proposal to delist the Alkaline common stock, and that accordingly the shares held by Richard A. Wright and David A. Guarino will be excluded from voting on this proposal.

What approvals by the stockholders of AQUAhydrate are required for the proposals before the AQUAhydrate Meeting?

Approval of AQUAhydrate Proposal 1 and AQUAhydrate Proposal 2 each requires the affirmative vote of (i) the holders of a majority of the shares of AQUAhydrate common stock, Series F Preferred shares, Series G Preferred shares, Series H Preferred shares and Series I Preferred shares voting together as a single class, (ii) the holders of the Series F Preferred shares voting as a single class, (iii) the holders of Series G Preferred shares voting as a single class, (iv) the holders of Series H Preferred shares voting as a single class, and (v) the holders of Series I Preferred shares voting as a single class.

Approval of AQUAhydrate Proposal 3 requires the affirmative vote of the majority of the outstanding shares entitled to vote and that are present in person or by proxy at the AQUAhydrate Meeting.


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Members of the board of directors, Yucaipa American Alliance Fund II, L.P., Yucaipa American Alliance (Parallel) Fund II, L.P. and entities affiliated with Sean Combs and Mark Wahlberg currently own 4,926,159 shares of AQUAhydrate common stock, 49,999,999 shares of Series F Preferred shares, 28,003,642 shares of Series G Preferred shares, 105,466,441 shares of Series H Preferred shares, shares of Series I Preferred shares. AQUAhydrate anticipates that all such shares will be voted in favor of AQUAhydrate Proposal 1 and AQUAhydrate Proposal 2.

How are votes counted?

Alkaline

For the election of directors, you may vote "For", "Against", or "Abstain" for each nominee for director. Votes that are abstained will have the same effect as "Against" votes. Broker non-votes will have no effect on the outcome of the vote on the election of directors.

For all other proposals, you may vote "For", "Against", or "Abstain" for each proposal. Votes that are abstained will have the same effect as "Against" votes. Broker non-votes will have no effect on the outcome of the vote on these proposals.

A "broker non-vote" occurs when a broker, bank, or other nominee holding shares for a beneficial owner in street name does not vote on a particular proposal because it does not have discretionary voting power with respect to that proposal and has not received instructions with respect to that proposal from the beneficial owner of those shares, despite voting on at least one other proposal for which it does have discretionary authority or for which it has received instructions.

AQUAhydrate

For all proposals you may vote "For", "Against", or "Abstain" for each proposal. Votes that are abstained will have the same effect as "Against" votes.

If you vote "abstain" on your proxy card, or do not vote in person or by proxy, it will have the same effect as a vote "Against" AQUAhydrate Proposal 1 and AQUAhydrate Proposal 2. Abstentions will have the same effect as votes "Against" AQUAhydrate Proposal 3, but failures to vote will have no effect on the approval of the AQUAhydrate Proposal 3.

What happens if I do not make specific voting choices?

Alkaline

If you are a stockholder of record and you submit your proxy without specifying how you want to vote your shares, then the proxy holder will vote your shares in the manner recommended by the Alkaline board of directors on all proposals.

If you hold your shares in the street name and you do not give instructions to your broker, bank or other nominee to vote your shares, under the rules that govern brokers, banks, and other nominees who are the stockholders of record of the shares held in street name, it generally has the discretion to vote uninstructed shares on routine matters but has no discretion to vote them on non-routine matters.

AQUAhydrate

If you are a stockholder of record and you submit your proxy without specifying how you want to vote you your shares, then the proxy holder will vote your shares in the manner recommend by the AQUAhydrate board of directors on all proposals.


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What is the quorum requirement?

Alkaline

A quorum of stockholders is necessary for the transaction of business at the Alkaline Meeting. Stockholders holding at least 33⅓% of Alkaline's stock issued and outstanding and entitled to vote at the Alkaline Meeting, present in person or represented by proxy, constitute a quorum at the Alkaline Meeting. Your shares will be counted towards the quorum requirement only if you or the registered holder of your shares, properly vote by proxy or present in person at the Alkaline Meeting. Votes that are abstained and broker non-votes will be counted towards the quorum requirement. If there is no quorum, the Alkaline Meeting may be adjourned by the vote of a majority of the shares represented either in person or by proxy.

AQUAhydrate

The holders of a majority of the outstanding shares entitled to vote represented in person or by proxy will constitute a quorum and will permit AQUAhyrate to conduct the proposed business at the AQUAhyrate Meeting. Proxies received but marked as abstentions will be counted as shares that are present and entitled to vote for purposes of determining the presence of a quorum.

How does the board of directors recommend that I vote?

Alkaline

Our board of directors recommends that you vote your shares:

AQUAhydrate

Our board of directors recommends that you vote your shares:

What interests do the directors and officers of Alkaline and AQUAhydrate have in the approval of the respective proposals to be put before the Alkaline Meeting and the AQUAhydrate Meeting?

Alkaline

Upon completion of the Merger, certain of Alkaline's directors and executive officers will continue to be directors and executive officers of the Combined Company. And certain of the directors and executive officers of Alkaline hold Series D Preferred Stock in Alkaline which have conversion rights attached, and these conversion rights may be triggered on completion of the Merger. See "The Merger - Interests of the Alkaline Directors and Executive Officers in the Merger" beginning on page 61 for additional information.


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AQUAhydrate

SC Beverages LLC, a company controlled by Sean Combs, entered into a Services Agreement with Alkaline in connection with the Merger. Sean Combs is a beneficial owner of Series I Preferred shares and, pursuant to a shareholder agreement, Mr. Combs designated Tarik Brooks as a director of AQUAhydrate.

Matthew Howison, acting President and a director of AQUAhydrate, and Alkaline have had discussions regarding Mr. Howison's role with Alkaline following the Merger.  However, the parties do not have a definitive agreement or understanding regarding any such role or the compensation therefor. Mr. Howison is also a founder and partner of Emerald Partners Pty Limited ("Emerald Partners"). If the Merger is consummated Emerald Partners will receive $275,000 in cash and 233,152 Alkaline Common Shares pursuant to a financial advisory agreement with AQUAhydrate.

See "The Merger - Interests of the AQUAhydrate Directors and Executive Officers in the Merger" beginning on page 62 for additional information.

Are stockholders entitled to appraisal and dissenter's rights in connection with the Merger?

Alkaline

No. Alkaline stockholders are not entitled to appraisal or dissenter's rights in connection with the Merger or any of the other transactions described in this joint proxy statement/prospectus. See "Dissenters' Rights" beginning on page 63.

AQUAhydrate

Yes. Under Nevada law, AQUAhydrate stockholders who do not wish to accept the Merger consideration have a statutory right to dissent from the Merger and demand payment of the fair value of their AQUAhydrate shares (excluding any appreciation or depreciation in anticipation of the Merger, unless exclusion of any appreciation or depreciation would be inequitable). The fair value of the shares may be more or less than the amount AQUAhydrate stockholders will receive pursuant to the Merger Agreement. Chapter 92A (Section 300 through 500 inclusive) of the Nevada Revised Statutes (the "NRS") provides that a AQUAhydrate stockholder may elect to have AQUAhydrate purchase the AQUAhydrate shares held by such AQUAhydrate stockholder for a cash price that is equal to the "fair value" of such shares, as determined in a judicial proceeding. The fair value of the AQUAhydrate shares means the value of such shares immediately before the effectuation of the Merger, excluding any appreciation or depreciation in anticipation of the Merger, unless exclusion of any appreciation or depreciation would be inequitable.

If an AQUAhydrate stockholder wishes to exercise his, her or its dissenters' rights or preserve the right to do so, he, she or it should carefully review Chapter 92A (Section 300 through 500 inclusive) of the Nevada Revised Statutes (a copy of which is attached as Schedule "B" to this joint proxy statement/prospectus), particularly the special procedural steps required to perfect such rights. These rights may be lost if the procedural requirements of NRS 78.3793 along with the provisions of NRS 92A.300 to 92A.500 are not fully and precisely satisfied. See "Dissenters' Rights" beginning on page 63.

In addition, although AQUAhydrate is incorporated in the State of Nevada, because of the location of a majority of its stockholders and AQUAhydrates's other significant contacts with the State of California, the provisions of California law relating to the rights of dissenting stockholders in a merger apply to the Merger. Chapter 13 (a copy of which is attached as Schedule "C" to this joint proxy statement/prospectus) of the California Corporations Code (the "California Code") also provides for dissenting stockholders to be obtain payment in cash for the "fair market value" of AQUAhydrate shares held by the holder. See "Dissenters' Rights" beginning on page 63 for a discussion on the dissent rights available under California law, and a summary of the key differences between the dissent rights provided under California law and Nevada law.


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Pursuant to the Second Amended and Restated Investors' Rights Agreement dated May 2, 2017, certain AQUAhydrate stockholders have agreed not to exercise dissent rights.

Can I change my vote after submitting my proxy?

Alkaline

Yes. You may revoke your proxy and change your vote at any time before the final vote at the Alkaline Meeting. If you are a stockholder of record, you may vote again on a later date via the Internet or by telephone (only your latest Internet or telephone proxy submitted prior to the Alkaline Meeting will be counted), by signing and returning a new proxy card with a later date by mail, by fax or by email, or by attending the Alkaline Meeting and voting in person. Your attendance at the Alkaline Meeting will not automatically revoke your proxy unless you vote again at the Alkaline Meeting or specifically request in writing that your prior proxy be revoked. You may also request that your prior proxy be revoked by delivering us at The Alkaline Water Company Inc., 14646 N. Kierland Blvd., Suite 255, Scottsdale, Arizona 85254, Attn: Richard A. Wright a written notice of revocation prior to the Alkaline Meeting.

If you hold your shares in the street name, you will need to follow the voting instruction provided by your broker, bank or other nominee regarding how to revoke or change your vote.

AQUAhydrate

Yes. You may revoke your proxy and change your vote at any time before the final vote at the AQUAhydrate Meeting. You may vote again on a later date by signing and returning a new proxy card with a later date by mail, by fax or by email, or by attending the AQUAhydrate Meeting and voting in person. Your attendance at the AQUAhydrate Meeting will not automatically revoke your proxy unless you vote again at the AQUAhydrate Meeting or specifically request in writing that your prior proxy be revoked. You may also request that your proxy be revoked by delivering to us a written notice of your revocation of the proxy prior to the AQUAhydrate Meeting. Any such notice may be delivered to AQUAhydrate, Inc. 5870 W. Jefferson Blvd., Suite D, Los Angeles, CA 90016, Attn: Matthew Howison.

How can I attend the meeting?

Alkaline

You may call us at 480-656-2423 if you want to obtain information or directions to be able to attend the Alkaline Meeting and vote in person.

You may be asked to present valid picture identification, such as a driver's license or passport, before being admitted to the Alkaline Meeting. If you hold your shares in street name, you also will need proof of ownership to be admitted to the Alkaline Meeting. A recent brokerage statement or letter from your broker, bank or other nominee is an example of proof of ownership.

AQUAhydrate

AQUAhydrate stockholders (or their authorized representatives) and AQUAhydrate's invited guests may attend the AQUAhydrate Meeting. All attendees should be prepared to present government-issued photo identification (such as a driver's license or passport) for admittance.


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Who pays the cost of proxy preparation and solicitation?

Alkaline and AQUAhydrate pay their respective costs of proxy preparation and solicitation, including the reasonable charges and expenses of brokers, banks or other nominees for forwarding proxy materials to street name holders.

Alkaline and AQUAhydrate are soliciting proxies primarily by mail. In addition, Alkaline's and AQUAhydrates respective directors, officers and regular employees may solicit proxies by telephone, facsimile, mail, other means of communication or personally. These individuals will receive no additional compensation for such services.

Alkaline and AQUAhydrate will ask brokers, banks, and other nominees to forward the proxy materials to their principals and to obtain their authority to execute proxies and voting instructions. Alkaline and AQUAhydrate will reimburse them for their reasonable charges and expenses.

Who can help answer my questions?

Alkaline

If you are an Alkaline stockholder and would like additional copies of this joint proxy statement/prospectus without charge or if you have questions about the Merger, including the procedures for voting your shares, you should contact:

The Alkaline Water Company Inc.
14646 N. Kierland Blvd., Suite 255
Scottsdale, AZ 85254
Telephone: (480) 656-2423

AQUAhydrate

If you are an AQUAhydrate stockholder and would like additional copies of this joint proxy statement/prospectus without charge or if you have questions about the Merger, including the procedures for voting your shares, you should contact:

AQUAhydrate, Inc.
5870 West Jefferson Blvd., Suite D
Los Angeles, CA 90016
Telephone: (310) 559-5058


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JOINT PROXY STATEMENT/PROSPECTUS SUMMARY

This section highlights selected information in this joint proxy statement/prospectus. The summary may not contain all of the information important to you. To understand the proposals to be voted upon at the Alkaline Meeting or the AQUAhydrate Meeting, you should read this entire document carefully, including the schedules to this joint proxy statement/prospectus. See also "Where You Can Find More Information" beginning on page 155. The Merger Agreement, as amended from time to time, a copy of which (including each amendment thereto through the date hereof) is attached as Schedule "A" to this joint proxy statement/prospectus, contains the terms and conditions of the Merger.

Risk Factors

Both Alkaline and AQUAhydrate are subject to various risks associated with their businesses and their industries. In addition, the Merger, including the possibility that the Merger may not be completed, poses a number of risks to each company and its respective stockholders, including, but not limited to, the following:


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Information About the Companies

The Alkaline Water Company Inc.

14646 N. Kierland Blvd., Suite 255
Scottsdale, AZ 85254
Telephone: (480) 656-2423

Alkaline offers retail consumers bottled alkaline water in 500-milliliter, 700-milliliter, 1-liter, 1.5-liter, 3-liter and 1-gallon sizes, and bottled flavored infused water in 500-milliliter sizes coming in raspberry, watermelon, lemon and blood-orange flavors, all under the trade name Alkaline88®. Alkaline's product is produced through an electrolysis process that uses specialized electronic cells coated with a variety of rare earth minerals to produce our 8.8 pH drinking water without the use of any manmade chemicals. Alkaline's product also incorporates 84 trace minerals from Himalayan pink rock salt. Alkaline's product is designed to have a clean smooth taste using only purified water and the Himalayan pink rock salt. Alkaline believe consumers drink Alkaline's water because of the taste profile and the preconceived health benefits (although Alkaline does not market these products as having any potential health benefits), as well as because of its brand and trademark, which Alkaline believes is one of the most easily identifiable in the category. Measured by sales volume in 2018, Alkaline believes it is now one of the largest alkaline water companies in the United States.

AWC Acquisition Company Inc.

14646 N. Kierland Blvd., Suite 255
Scottsdale, AZ 85254
Telephone: (480) 656-2423

Merger Sub is a Nevada corporation and a newly incorporated, direct, wholly-owned subsidiary of Alkaline. Merger Sub was incorporated on August 9, 2019 for the sole purpose of effecting the Merger. To date, Merger Sub has not conducted any activities other than those incidental to its incorporation, the execution of the Merger Agreement and the preparation of applicable filings under U.S. securities laws made in connection with the Merger.

AQUAhydrate, Inc.

5870 West Jefferson Blvd., Suite D
Los Angeles, CA 90016
Telephone: (310) 559-5058

AQUAhydrate produces and distributes a lifestyle beverage geared towards the new generation of millennial consumers. The product is available in 500-milliliter, 700-milliliter, 1-liter1.5-liter and 1-gallon sizes under the AQUAhydrate brand. The product is ultra-purified, supplemented with all natural electrolytes and trace minerals and then elevated to an alkaline pH of over 9 using electrolysis. AQUAhydrate is great tasting high-performance water specially formulated for people with an active lifestyle. AQUAhydrate offers superior hydration without sugar, calories, or artificial additives. Using a proprietary blend of 72 trace minerals, AQUAhydrate is enhanced with 2x the electrolytes of competitive brands. Electrolytes are minerals in your blood and other body fluids that carry an electric charge. Electrolytes affect the amount of water in your body, the acidity of your blood (pH), your muscle function, and other important processes. You lose electrolytes when you sweat. AQUAhydrate isn't dosed with sodium and potassium like many competitors. Instead, AQUAhydrate uses ConcenTrace, an all-natural mineral blend sourced from the mineral-rich Salt Flats of Utah. ConcenTrace provides 70+ electrolytes and trace minerals - even beyond what comes in standard sports drinks.

The product is available in stores in 47 states and may also be ordered online through Amazon, Walmart and GNC.


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The Merger

General Overview of the Merger

If the Merger is completed, Merger Sub will merge with and into AQUAhydrate, with AQUAhydrate surviving as a wholly-owned subsidiary of Alkaline.

Prior to the Merger, AQUAhydrate agreed to conduct the Capital Reorganization, whereby, all outstanding shares of current preferred stock of AQUAhydrate, other than the Series I Preferred shares of AQUAhydrate, will be converted into common stock of AQUAhydrate and the Series I Preferred shares of AQUAhydrate will be converted into common stock and a new class of the preferred stock of AQUAhydrate.

At the effective time of the Merger, which will be soon after the Capital Reorganization, (i) the holders of AQUAhydrate Common Shares and certain creditors and service providers of AQUAhydrate will receive an aggregate of 19,565,217 Alkaline Common Shares, and (2) the holders of the shares of the new class of AQUAhydrate preferred stock will receive an aggregate of 3,750,000 Alkaline Common Shares, which are subject to a performance escrow release.

Alkaline stockholders immediately prior to the completion of the Merger are expected to own approximately ♦% of the outstanding Alkaline Common Shares and former AQUAhydrate securityholders (including holders of AQUAhydrate Common Shares and AQUAhydrate New Preferred Shares and any other persons to whom Alkaline Common Shares will be issued pursuant to the Merger Agreement) are expected to own approximately ♦% of the outstanding Alkaline Common Shares.

Alkaline and AQUAhydrate currently expect the closing of the Merger to occur during the first calendar quarter of 2020.

For a detailed discussion on the background of the Merger and the reasons for the Merger, see the sections "The Merger - Background of the Merger", "The Merger - Alkaline Reasons for the Merger" and "The Merger - AQUAhydrate Reasons for the Merger" at pages 58, 58 and 60, respectively, of this joint proxy statemement/prospectus.

Interests of the Alkaline Directors and Executive Officers in the Merger

In considering the recommendation of the Alkaline board of directors to Alkaline stockholders to vote in favor of the Merger Agreement and the transactions contemplated thereby, including the Merger, and the other matters to be acted upon by Alkaline stockholders at the Alkaline Meeting, Alkaline stockholders should be aware that certain directors and executive officers of Alkaline will have interests in the Merger that may be different from, or in addition to, the interests of Alkaline stockholders generally or which may conflict with the interests of Alkaline stockholders. The following discussion sets forth a brief summary of certain of those interests:

Interests of the AQUAhydrate Directors and Executive Officers in the Merger 

In considering the recommendation of the AQUAhydrate board of directors to AQUAhydrate stockholders to vote in favor of the Merger Agreement and the transactions contemplated thereby, including the Merger, and the other matters to be acted upon by AQUAhydrate stockholders at the AQUAhydrate Meeting, AQUAhydrate stockholders should be aware that certain directors and executive officers of AQUAhydrate will have interests in the Merger that may be different from, or in addition to, the interests of AQUAhydrate stockholders generally or which may conflict with the interests of AQUAhydrate stockholders. The following discussion sets forth a brief summary of certain of those interests:


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See "The Merger - Interests of the AQUAhydrate Directors and Executive Officers in the Merger" beginning on page 62 for additional information.

Regulatory Approvals Required for the Merger

Completion of the Merger is subject to the approval of the TSX Venture Exchange. Alkaline and AQUAhydrate must also comply with applicable federal and state securities laws and the rules and regulations of the Nasdaq Stock Market in connection with the issuance of Alkaline Common Shares and the filing of this joint proxy statement/prospectus with the SEC.

Stock Exchange Listing

The Alkaline Common Shares are listed for trading on the Nasdaq Capital Market and the TSX Venture Exchange under the symbol "WTER." Alkaline agreed to use its reasonable best efforts to obtain the acceptance by the Nasdaq Capital Market and the TSX Venture Exchange of the transactions contemplated by the Merger Agreement including the Merger and the issuance of the Alkaline Common Shares in connection with the Merger and to cause the Alkaline Common Shares to be issued in connection with the Merger to be listed on the Nasdaq Capital Market and TSX Venture Exchange, subject to official notice of issuance, prior to the Merger.

Anticipated Accounting Treatment 

The Merger will be accounted for as an acquisition of a business. Alkaline will record assets acquired and liabilities assumed from AQUAhydrate at their respective fair values at the date of completion of the Merger. Any excess of the purchase price over the net fair value of such assets and liabilities will be recorded as goodwill.

Dissenters' Rights

Holders of Alkaline common stock are not entitled to dissent rights in connection with the Merger.

AQUAhydrate stockholders are entitled under Nevada law and California law to dissent rights in connection with the Merger. For more information about such rights, see the provisions of NRS Sections 92A.300 - 92A.500 attached hereto as Schedule "B", the provisions of Chapter 13 of the California Code attached hereto as Schedule "C" and the section entitled "The Merger-Dissenters' Rights" at page 63 of this joint proxy statement/prospectus. The Merger Agreement, however, provides as a condition to the closing of the Merger, that AQUAhydrate stockholders not exercise appraisal rights with respect to more than 5% of the outstanding shares of AQUAhydrate common stock.

Pursuant to the Second Amended and Restated Investors' Rights Agreement of AQUAhydrate dated May 2, 2017, certain AQUAhydrate stockholders have agreed not to exercise dissent rights.

The Merger Agreement

AQUAhydrate Capital Reorganization


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The Merger Agreement provides that, prior to the closing of the Merger, AQUAhydrate will obtain the approval of the AQUAhydrate stockholders to effect the Capital Reorganization. The Capital Reorganization will result in the conversion of all outstanding shares of current preferred stock of AQUAhydrate, other than the Series I Preferred shares, into AQUAhydrate Common Shares and the conversion of the Series I Preferred shares into AQUAhydrate Common Shares and a new class of AQUAhydrate preferred stock.

Following the Capital Reorganization, it is expected that there will be ♦ AQUAhydrate Common Shares and ♦ shares of the new class of AQUAhydrate preferred stock issued and outstanding.

Effective Time of the Merger

The Merger Agreement provides that the closing of the Merger will take place as soon as practicable (and in any event, within two business days) after the satisfaction or waiver of all conditions to the Merger and, at the closing, the parties will cause the articles of merger to be executed and filed with the Secretary of State of Nevada in accordance with the relevant provisions of the NRS.

Manner and Basis of Converting AQUAhydrate Common Shares after the Capital Reorganization

At the effective time of the Merger, as a result of the Merger and without any action on the part of Alkaline, Merger Sub, or AQUAhydrate or the holder of any capital stock of Alkaline, Merger Sub, or AQUAhydrate, each share of the AQUAhydrate common stock or preferred stock that is owned by Alkaline or AQUAhydrate (as treasury stock or otherwise) or any of their respective direct or indirect wholly-owned subsidiaries as of immediately prior to the effective time of the Merger will automatically be cancelled and retired and will cease to exist, and no consideration will be delivered in exchange therefor. Each AQUAhydrate Common Share issued and outstanding immediately prior to the effective time of the Merger (other than cancelled shares and dissenting shares) will be converted into the right to receive such number of Alkaline Common Shares that is equal to 19,565,217 less any Alkaline Common Shares to be issued in connection with the Merger to any finders or placement agents, and to any other persons for the payment of liabilities of AQUAhydrate, divided by the number of shares of AQUAhydrate common stock outstanding immediately prior to the effective time of the Merger, which will be soon after the Capital Reorganization. No certificates or scrip representing fractional Alkaline Common Shares will be issued. In the event that any holder of the AQUAhydrate Common Shares would otherwise be entitled to receive a fractional Alkaline Common Share (after aggregating all shares and fractional shares issuable to such holder), then such holder will receive an aggregate number of Alkaline Common Shares rounded down to the nearest whole share.

The exact number of Alkaline Common Shares to be received will be subject to changes due to the changes in the number of issued and outstanding shares of common stock or preferred stock AQUAhydrate both prior to and subsequent to the Capital Reorganization and immediately prior to the Merger and the changes in the number of Alkaline Common Shares to be received by the service providers and the creditors of AQUAhydrate.

Manner and Basis of Converting AQUAhydrate New Preferred Shares after the Capital Reorganization 

Each shares of the new class of AQUAhydrate preferred stock issued and outstanding immediately prior to the effective time of the Merger, which will be soon after the Capital Reorganization, (other than cancelled shares and dissenting shares) will be converted into the right to receive such number of Alkaline Common Shares that is equal to the quotient of 3,750,000 divided by the number of AQUAhydrate New Preferred Shares outstanding immediately prior to the effective time of the Merger. No certificates or scrip representing fractional shares will be issued. In the event that any holder of the AQUAhydrate New Preferred Shares would otherwise be entitled to receive a fractional Alkaline Common Share (after aggregating all shares and fractional shares issuable to such holder), then such holder will receive an aggregate number of Alkaline Common Shares rounded down to the nearest whole share.

The exact number of Alkaline Common Shares to be received will be subject to changes due to the changes in the number of issued and outstanding shares of Series I Preferred shares both prior to and subsequent to the Capital Reorganization and immediately prior to the Merger.


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Escrow Agreements

All of the Alkaline Common Shares issued in connection with the Merger will be placed in escrow by Alkaline, the release of which will be contingent upon certain events and conditions. The closing of the Merger is contingent on the execution of certain escrow agreements governing the escrow and release of the Alkaline Common Shares. For a detailed discussion on the terms of these escrow agreements, see the section "The Merger Agreement - Escrow Agreements" beginning on page 73 of this joint proxy statement/prospectus.

Treatment of Stock Options and Other Stock-Based Compensation

Prior to the effective time of the Merger, AQUAhydrate agreed take such actions as may be necessary to provide that each option to acquire shares of AQUAhydrate common stock or AQUAhydrate preferred stock then outstanding under the AQUAhydrate stock option plan, as well as any arrangement for the issuance of AQUAhydrate stock options not covered by the AQUAhydrate stock option plan, will be of no further force or effect as of the effective time of the Merger, either because such stock option will have been exercised prior to the effective time of the Merger or will have been otherwise cancelled and terminated as of or prior to the effective time of the Merger.

Treatment of Warrants

Prior to the effective time of the Merger, AQUAhydrate agreed to take such action as may be necessary to ensure that each outstanding and unexercised warrant to purchase AQUAhydrate common stock or AQUAhydrate preferred stock will be of no further force or effect as of the effective time of the Merger, either because such warrant will have been exercised prior to the effective time of the Merger or will have been otherwise cancelled and terminated as of or prior to the effective time of the Merger. Without limiting the foregoing, AQUAhydrate agreed to take such action as may be necessary to ensure that AQUAhydrate and the Surviving Company, as applicable, will not, at the effective time of the Merger, be bound by any rights or agreements which would entitle any person, other than Alkaline and its subsidiaries, to own any capital stock of AQUAhydrate or the Surviving Company or to receive any payment in respect thereof.

Stock Certificates

At the effective time of the Merger, all shares of AQUAhydrate common stock and AQUAhydrate preferred stock will no longer be outstanding and will be cancelled and retired and will cease to exist, and each holder of a certificate formerly representing any shares of AQUAhydrate common stock and AQUAhydrate preferred stock or any book-entry shares which immediately prior to the effective time of the Merger represented shares of AQUAhydrate common stock and AQUAhydrate preferred stock will cease to have any rights with respect thereto, except the right to receive the merger consideration.

Effect of the Merger

Upon the consummation of the Merger, Merger Sub will merge with and into AQUAhydrate, the separate corporate existence of Merger Sub will cease, and AQUAhydrate will continue its corporate existence under the NRS as the Surviving Company in the Merger and a wholly-owned subsidiary of Alkaline. From and after the effective time of the Merger, all property, rights, privileges, immunities, powers, franchises, licenses, and authority of AQUAhydrate and Merger Sub will vest in the Surviving Company, and all debts, liabilities, obligations, restrictions, and duties of each of AQUAhydrate and Merger Sub will become the debts, liabilities, obligations, restrictions, and duties of the Surviving Company.

Representations and Warranties

The Merger Agreement contains a number of representations and warranties made by Alkaline, AQUAhydrate and Merger Sub that are subject in some cases to exceptions and qualifications (including exceptions that do not have, and would not reasonably be expected to have, individually or in the aggregate, a material adverse effect on the party making the representations and warranties). The representations and warranties in the Merger Agreement are to survive for a period of 12 months following the closing of the Merger. For a full description of the representations and warranties given by the parties to the Merger Agreement, see Articles 4 and 5 of the Merger Agreement appended hereto as Schedule "A".


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Closing Conditions

The obligations of Alkaline and AQUAhydrate to effect the Merger is subject to the satisfaction or waiver of certain conditions. For a full description of the closing conditions to the Merger, see Article 6 of the Merger Agreement  appended hereto as Schedule "A".

Conduct of Business

Each of Alkaline and AQUAhydrate agreed, during the period from the date of the Merger Agreement until the closing of the Merger, to use commercially reasonable efforts to conduct their respective businesses in the ordinary course of business consistent with past practice.

Standstill

Each of Alkaline and AQUAhydrate agreed that, from the date of the Merger Agreement and for a period of 120 days following such date, except as expressly provided for in the Merger Agreement, neither party will directly or indirectly, or permit any of its representatives to undertake certain activities that may lead to a proposal for any transaction, the consummation of which could reasonably be expected to impede, interfere with, prevent or materially delay the transactions contemplated by the Merger Agreement, or which could reasonably be expected to materially reduce the benefits to the other party under the Merger Agreement.

Notwithstanding the above, if at any time following the date of the Merger Agreement and prior to the closing of the Merger, either party receives a bona fide written transaction proposal that did not result from a breach of the applicable standstill provisions in the Merger Agreement, and the applicable board of directors, acting in good faith and after consultation with outside legal counsel, determines that such proposal could reasonably lead to a superior transaction proposal, and failure to take such action would be inconsistent with such board's fiduciary duties, it may, respond to a request made by the person making such transaction proposal, subject to certain conditions.

Amendment

At any time prior to the effective time of the Merger, the Merger Agreement may be amended or supplemented in any and all respects, whether before or after receipt of the requisite stockholder votes of Alkaline and AQUAhydate, by written agreement signed by each of Alkaline and AQUAhydate, provided however, that following the receipt of such requisite stockholder votes there will be no amendment or supplement to the provisions of the Merger Agreement which by law or in accordance with the rules of any relevant self-regulatory organization would require further approval by the Alkaline stockholders or the AQUAhydrate stockholders.

Termination

The Merger Agreement may be terminated at any time prior to the effective time of the Merger (whether before or after the receipt of the requisite stockholder votes) by the mutual written consent of Alkaline and AQUAhydrate. The Merger Agreement may be terminated by either Alkaline or AQUAhydrate on the occurrence or non-occurrence of certain other events. See the section "The Merger Agreement - Termination" beginning on page 80 of this joint proxy statement/prospectus.

Material U.S. Federal Income Tax Consequences

AQUAhydrate intends the Capital Reorganization, and each of Alkaline and AQUAhydrate intends the Merger, to qualify as a "reorganization" within the meaning of Section 368(a) of the Code. Assuming the Capital Reorganization and the Merger each qualify as a reorganization, in general, and subject to the qualifications and limitations set forth in the section entitled "Material U.S. Federal Income Tax Consequences," beginning on page 81 of this joint proxy statement/prospectus, a summary of the material U.S. federal income tax consequences to a holder who is a U.S. person (as defined herein) of AQUAhydrate common stock and AQUAhydrate preferred stock should be as follows:


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This summary of material U.S. federal income tax consequences is for general information purposes only and is not intended to be, and should not be construed as, tax advice. Holders of AQUAhydrate capital stock are urged to consult their independent tax advisors with respect to the application of U.S. federal income tax laws to their particular situations as well as any tax consequences arising under the U.S. federal estate or gift tax rules, or under the laws of any state, local, foreign or other taxing jurisdiction or under any applicable tax treaty.

Comparison of Rights of Holders of Alkaline Shares and AQUAhydrate Shares

Holders of AQUAhydrate Common Shares and AQUAhydrate preferred stock will have different rights once they become stockholders of Alkaline following the Merger due to differences between the organizational documents of Alkaline and AQUAhydrate. These differences are described in more detail in the section "Comparison of Rights of Holders of Alkaline Shares and AQUAhydrate Shares" beginning on page 86 of this joint proxy statement/prospectus.

Management Following the Merger

Pursuant to the Merger Agreement, following completion of the Merger, the size of the board of directors of the Combined Company will be increased to seven, and the initial directors are expected to be comprised of four nominees of Alkaline, being Richard A. Wright, Aaron Keay, Brian Sudano and Bruce Leitch, and three nominees of AQUAhydrate, being Matthew Howison, Ira Tochner and ♦.

At or prior to the completion of the Merger, it is expected that David A. Guarino will resign as a director of Alkaline.


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Security Ownership of Management

Alkaline

Directors and executive officers of Alkaline and their affiliates hold ♦ shares of Alkaline common stock, representing approximately ♦% of the outstanding shares of Alkaline common stock as of the record date for the Alkaline Meeting.

AQUAhydrate

Directors and executive officers of AQUAhydrate and their affiliates hold ♦ shares of AQUAhydrate common stock (representing approximately ♦% of the outstanding shares of AQUAhydrate common stock as of the record date for the AQUAhydrate Meeting), ♦ Series A Preferred shares (representing approximately ♦% of the outstanding Series A Preferred shares as of the record date for the AQUAhydrate Meeting), ♦ Series B Preferred shares (representing approximately ♦% of the outstanding Series B Preferred shares as of the record date for the AQUAhydrate Meeting), ♦ Series C Preferred shares (representing approximately ♦% of the outstanding Series C Preferred shares as of the record date for the AQUAhydrate Meeting), ♦ Series D Preferred shares (representing approximately ♦% of the outstanding Series D Preferred shares as of the record date for the AQUAhydrate Meeting); ♦ Series E Preferred shares (representing approximately ♦% of the outstanding Series E Preferred shares as of the record date for the AQUAhydrate Meeting), ♦ Series F Preferred shares (representing approximately ♦% of the outstanding Series F Preferred shares as of the record date for the AQUAhydrate Meeting); ♦ Series G Preferred shares (representing approximately ♦% of the outstanding Series G Preferred shares as of the record date for the AQUAhydrate Meeting), ♦ Series H Preferred shares (representing approximately ♦% of the outstanding Series H Preferred shares as of the record date for the AQUAhydrate Meeting), and ♦ Series I Preferred shares (representing approximately ♦% of the outstanding Series I Preferred shares as of the record date for the AQUAhydrate Meeting).

RISK FACTORS

In addition to the other information included in this joint proxy statement/prospectus, Alkaline stockholders and AQUAhydrate stockholders should consider carefully the following risk factors before deciding how to vote their Alkaline shares at the Alkaline Meeting and/or AQUAhydrate shares at the AQUAhydrate Meeting. If any of the risks described below actually occur, the respective businesses, operating results, financial condition or share prices of Alkaline, AQUAhydrate or the Combined Company could be materially adversely affected. The risks discussed below may not prove to be exhaustive and are based on certain assumptions made by Alkaline and AQUAhydrate, which later may prove to be incorrect or incomplete.

Risks Relating to the Merger

Because the maximum number of Alkaline Common Shares to be issued under the Merger Agreement is fixed and the market price of the Alkaline Common Shares has fluctuated and will continue to fluctuate, AQUAhydrate stockholders cannot be sure of the value of the Merger consideration they will receive in the Merger.

The maximum number of Alkaline Common Shares to be issued under the Merger Agreement is fixed at an aggregate of 23,315,217 Alkaline Common Shares (including any Alkaline Common Shares to be issued in connection with the Merger to any finders or placement agents and any other persons for the payment of liabilities of AQUAhydrate). As a result, the value of the share consideration will depend on the market price of Alkaline Common Shares at the time the Merger is completed. The market price of the Alkaline Common Shares has fluctuated since the date of the announcement of the Merger Agreement and will continue to fluctuate from the date of this joint proxy statement/prospectus to the date of the AQUAhydrate Meeting and the date the Merger is completed, which could occur a considerable amount of time after the date of the AQUAhydrate Meeting, and thereafter. Accordingly, at the time of the AQUAhydrate Meeting, AQUAhydrate stockholders will not know or be able to determine the market value of the Merger consideration they would be entitled to receive upon completion of the Merger. Stock price changes may result from a variety of factors, including, among others, general market and economic conditions, changes in Alkaline's and AQUAhydrate's respective businesses, operations and prospects, risks inherent in their respective businesses, changes in market assessments of the likelihood that the Merger will be completed and/or the value that may be generated by the Merger, and changes with respect to expectations regarding the timing of the Merger and regulatory considerations.


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The market price of Alkaline Common Shares after the Merger will continue to fluctuate and may be affected by factors different from those that are currently affecting or historically have affected the market price of Alkaline Common Shares or the sale price of AQUAhydrate Common Shares.

Upon completion of the Merger, holders of common stock and preferred stock of AQUAhydrate will become holders of Alkaline Common Shares. The market price of Alkaline Common Shares may fluctuate significantly following completion of the Merger, and holders of AQUAhydrate Common Shares could lose the value of their investment in Alkaline Common Shares if, among other things, the Combined Company is unable to achieve the expected growth in earnings, or if the operational cost savings estimates in connection with the integration of the AQUAhydrate and Alkaline business are not realized, or if the transaction costs relating to the Merger are greater than expected. The market price also may decline if the Combined Company does not achieve the perceived benefits of the Merger as rapidly or to the extent anticipated, or if the effect of the Merger on the Combined Company's financial position, results of operations or cash flows is not consistent with the expectations of management of Alkaline and AQUAhydrate. The issuance of Alkaline Common Shares in the Merger could on its own have the effect of depressing the market price for Alkaline Common Shares. In addition, many AQUAhydrate stockholders may decide not to hold the Alkaline Common Shares they receive as a result of the Merger. Any such sales of Alkaline Common Shares could have the effect of depressing the market price for Alkaline Common Shares.

In addition, in the future Alkaline may issue additional securities to raise capital. Alkaline may also acquire interests in other companies by issuing Alkaline Common Shares to finance the acquisition, in whole or in part. Alkaline may also issue securities convertible into Alkaline Common Shares. Moreover, general fluctuations in stock markets could have a material adverse effect on the market for, or liquidity of, the Alkaline Common Shares, regardless of Alkaline's actual operating performance.

Alkaline and AQUAhydrate may have difficulty attracting, motivating, integrating and retaining executives and other key employees in light of the Merger.

Alkaline's success after the transaction will depend in part on the ability of Alkaline to retain key executives and other employees of AQUAhydrate and integrate AQUAhydrate's Los Angeles office and staff with Alkaline's business. Uncertainty about the effect of the Merger on Alkaline and AQUAhydrate employees may have an adverse effect on each of Alkaline and AQUAhydrate separately and consequently the combined business. This uncertainty may impair Alkaline's and/or AQUAhydrate's ability to attract, retain and motivate key personnel. Employee retention may be particularly challenging during the pendency of the Merger, as employees of Alkaline and AQUAhydrate may experience uncertainty about their future roles in the combined business. If key employees of Alkaline or AQUAhydrate depart or are at risk of departing, including because of issues relating to the uncertainty and difficulty of integration, financial security or a desire not to become employees of the combined business, Alkaline may have to incur significant costs in retaining such individuals or in identifying, hiring and retaining replacements for departing employees and may lose significant expertise and talent, and the Combined Company's ability to realize the anticipated benefits of the Merger may be materially and adversely affected. No assurance can be given that the Combined Company will be able to attract or retain key employees to the same extent that Alkaline or AQUAhydrate has been able to attract or retain employees in the past.

Completion of the Merger is subject to a number of conditions, and if these conditions are not satisfied or waived, the Merger will not be completed.

The obligations of Alkaline and AQUAhydrate to complete the Merger are subject to satisfaction or waiver of a number of conditions in addition to receipt of certain specified regulatory approvals, including, among other conditions: (i) the Merger Agreement will have been duly approved by the requisite vote of the AQUAhydrate stockholders; (ii) the issuance of Alkaline Common Shares under the Merger agreement will have been duly approved by the requisite vote of the Alkaline stockholders; (iii) the Merger and the transactions contemplated by the Merger Agreement will have been accepted by the TSX Venture Exchange; (iv) the number of dissenting AQUAhydrate shares that are the subject of appraisal demand notices that have not been withdrawn will not exceed 5% of the total number of AQUAhydrate Common Shares issued and outstanding prior to the effective time of the Merger; (v) accuracy of the representations and warranties made in the Merger agreement by the other party, subject to the applicable materiality standards set forth in the Merger Agreement; (vi) performance in all material respects by the other party of the covenants and agreements required to be performed by such party at or prior to completion of the Merger; and (vii) since the date of the Merger Agreement, there will not have been any event, change or effect that would, individually or in the aggregate, reasonably be expected to have a material adverse effect on the other party. For a more complete summary of the conditions that must be satisfied or waived prior to completion of the Merger, see "The Merger Agreement - Closing Conditions" beginning on page 76 of this joint proxy statement/prospectus. There can be no assurance that the conditions to completion of the Merger will be satisfied or waived or that the Merger will be completed within the expected time frame, or at all.


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Alkaline and AQUAhydrate may waive one or more conditions to the Merger without resoliciting stockholder approval for the Merger.

Certain conditions to Alkaline's and AQUAhydrate's obligations to complete the Merger may be waived, in whole or in part, to the extent legally allowed, either unilaterally or by agreement of Alkaline and AQUAhydrate. In the event of a waiver of a condition, the boards of directors of Alkaline and AQUAhydrate will evaluate the materiality of any such waiver to determine whether a supplement to this joint proxy statement/prospectus, an amendment to the registration statement of which this joint proxy statement/prospectus is a part or a resolicitation of proxies is necessary. If the Alkaline board of directors or the AQUAhydrate board of directors determines any such waiver is not significant enough to require resolicitation of stockholders, it will have the discretion to complete the Merger without seeking further stockholder approval.

Whether or not the Merger is completed, the announcement and pendency of the Merger could impact or cause disruptions in the businesses of Alkaline and AQUAhydrate, which could have an adverse effect on the businesses and operating results of Alkaline and AQUAhydrate.

Whether or not the Merger is completed, the announcement and pendency of the Merger could cause disruptions in or otherwise negatively impact the reputations, businesses and operating results of Alkaline and AQUAhydrate, including among others: (i) the attention of Alkaline's and AQUAhydrate's management may be directed toward completion of the Merger and transaction-related considerations and may be diverted from the day-to-day operations and pursuit of other opportunities that could have been beneficial to the businesses of Alkaline and AQUAhydrate, and (ii) customers, distributors, independent sales agencies, vendors or suppliers may seek to modify or terminate their business relationships with Alkaline or AQUAhydrate, or delay or defer decisions concerning Alkaline or AQUAhydrate. These disruptions could be exacerbated by a delay in the completion of the Merger or termination of the Merger Agreement and could have an adverse effect on the reputations, businesses, operating results or prospects of Alkaline and AQUAhydrate if the Merger is not completed or the business, operating results or prospects of the Combined Company if the Merger is completed.

Failure of the Merger to be completed, the termination of the Merger Agreement or a significant delay in the consummation of the Merger could negatively impact Alkaline and AQUAhydrate.

If the Merger is not consummated, the reputation, ongoing businesses, financial condition and results of operations of Alkaline and AQUAhydrate may be materially adversely affected and the market price of the Alkaline common stock may decline significantly, particularly to the extent that the current market price reflects a market assumption that the Merger will be consummated. If the consummation of the Merger is delayed, including by the receipt of a competing acquisition proposal, the reputations, businesses, financial condition and results of operations of Alkaline and AQUAhydrate may be materially adversely affected.

In addition, Alkaline and AQUAhydrate have each incurred and will incur substantial expenses in connection with the negotiation and completion of the transactions contemplated by the Merger Agreement, as well as the costs and expenses of filing, printing and mailing this joint proxy statement/prospectus and all filing and other fees paid to the SEC and other regulatory agencies in connection with the Merger. If the Merger is not completed, Alkaline and AQUAhydrate would have to recognize these expenses without realizing the expected benefits of the Merger. Any of the foregoing, or other risks arising in connection with the failure of or delay in consummating the Merger, including the diversion of management attention from pursuing other opportunities and the constraints in the Merger Agreement on the ability to make significant changes to Alkaline and AQUAhydrate's ongoing business during the pendency of the Merger, could have a material adverse effect on Alkaline and AQUAhydrate's businesses, financial condition and results of operations.


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During the pendency of the Merger, Alkaline and AQUAhydrate may not be able to enter into a business combination with another party on favorable terms because of restrictions in the Merger Agreement, which could adversely affect their respective businesses.

Covenants in the Merger Agreement impede the ability of Alkaline and AQUAhydrate to make acquisitions, subject to certain exceptions relating to fiduciaries duties, or complete other transactions that are not in the ordinary course of business pending completion of the Merger. As a result, if the Merger is not completed, the parties may be at a disadvantage to their competitors during that period. In addition, while the Merger Agreement is in effect, each party is generally prohibited from soliciting, initiating, encouraging or entering into certain extraordinary transactions, such as a merger, sale of assets or other business combination, with any third party, subject to certain exceptions. These restrictions apply even if such transactions could be favorable to such party's stockholders. See "The Merger Agreement - Conduct of Business" and "The Merger Agreement - Standstill" beginning on pages 77 and 78, respectively.

AQUAhydrate stockholders are entitled to dissent rights in connection with the Merger, and to the extent they exercise their dissent rights, it could have a material adverse effect on the financial condition of the Combined Company.

The Merger Agreement provides as a condition to the closing of the Merger, that AQUAhydrate stockholders not exercise dissent rights with respect to more than 5% of the outstanding AQUAhydrate Common Shares. If the condition is satisfied and the Merger is completed, to the extent AQUAhydrate stockholders exercise their dissent rights the Combined Company could be required to pay such AQUAhydrate stockholders in cash the fair value of their AQUAhydrate shares, as well as interest and legal fees, which could have a material, adverse effect on the financial condition of the Combined Company.

Current Alkaline stockholders as a whole and AQUAhydrate stockholders as a whole will have a reduced ownership and voting interest in the Combined Company after the Merger.

Upon completion of the Merger, Alkaline stockholders will own approximately ♦% of the Combined Company and the number of Alkaline Common Shares to be issued pursuant to the Merger represent approximately ♦% of the Combined Company. Alkaline stockholders and AQUAhydrate stockholders currently have the right to vote for their respective directors and on other matters affecting their respective companies. When the Merger occurs, each AQUAhydrate stockholder who receives Alkaline Common Shares in the Merger is expected to become a stockholder of the Combined Company with a percentage ownership of the Combined Company that will be smaller than the stockholder's percentage ownership of AQUAhydrate. Correspondingly, each Alkaline stockholder is expected to remain a stockholder of the Combined Company with a percentage ownership of the Combined Company that will be smaller than the stockholder's percentage ownership of Alkaline prior to the Merger. As a result of these reduced ownership percentages, current Alkaline stockholders as a whole will have less voting power in the Combined Company than they now have with respect to Alkaline, and current AQUAhydrate stockholders as a whole will have less voting power in the Combined Company than they now have with respect to AQUAhydrate.

The Alkaline Common Shares to be received by AQUAhydrate stockholders as a result of the Merger will have different rights from outstanding AQUAhydrate shares.

AQUAhydrate stockholders' rights are currently governed by the AQUAhydrate sixth amended and restated articles of incorporation and bylaws. Prior to the Merger, AQUAhydrate will complete the Capital Reorganization which will result in the conversion of all outstanding shares of current preferred stock of AQUAhydrate, other than the Series I Preferred shares, into AQUAhydrate Common Shares. The Series I Preferred shares will be converted into AQUAhydrate Common Shares and AQUAhydrate New Preferred Shares. Under the Merger, the AQUAhydrate Common Shares and AQUAhydrate New Preferred Shares will be converted into the right to receive Alkaline Common Shares such that, following completion of the Merger, AQUAhydrate stockholders will no longer be stockholders of AQUAhydrate, but will be stockholders of Alkaline. After the Merger, the Combined Company stockholders' rights will be governed by Alkaline's articles of incorporation and bylaws. See "Comparison of Rights of Holders of Alkaline Shares And AQUAhydrate Shares" beginning on page 86 for a discussion of the different rights associated with AQUAhydrate shares and Alkaline Common Shares.


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The directors and executive officers of AQUAhydrate and Alkaline have interests in the Merger that are different from, or in addition to, those of other AQUAhydrate and Alkaline stockholders, which could have influenced their decisions to support or approve the Merger.

In considering whether to approve the proposals at the meetings, AQUAhydrate and Alkaline stockholders should recognize that the directors and executive officers of AQUAhydrate and Alkaline have interests in the Merger that are in addition to their interests as stockholders of AQUAhydrate or Alkaline. These interests may include, among others, that certain directors and executive officers of AQUAhydrate and Alkaline will become directors and executive officers of, or may enter into employment or consulting agreements with, the Combined Company, certain directors and executive officers of Alkaline hold Series D Preferred Stock of Alkaline which may become convertible into shares of Alkaline common stock on completion of the Merger, and a certain director and executive officer of AQUAhydrate has interests in a service provider that is expected to receive shares of Alkaline Common stock on completion of the Merger. These interests, among others, may influence the directors and executive officers of AQUAhydrate to support or approve the proposals at the AQUAhydrate Meeting or the directors and executive officers of Alkaline to support or approve the proposals at the Alkaline Meeting. See "The Merger - Interests of the AQUAhydrate Directors and Executive Officers in the Merger" and "The Merger - Interests of the Alkaline Directors and Executive Officers in the Merger" beginning on pages 62 and 61, respectively.

The future results of the Combined Company may be adversely impacted if the Combined Company does not effectively manage its expanded operations following completion of the Merger.

Following completion of the Merger, the size of the Combined Company's business will be significantly larger than the current size of either Alkaline's or AQUAhydrate's respective businesses. The Combined Company's ability to successfully manage this expanded business will depend, in part, upon management's ability to implement an effective integration of the two companies and its ability to manage a combined business with significantly larger size and scope with the associated increased costs and complexity. There can be no assurances that the management of the Combined Company will be successful or that the Combined Company will realize the expected operating efficiencies, cost savings and other benefits currently anticipated from the Merger.

The celebrity brand ambassadors may not be able to effectively promote the Combined Company.

It is a condition of the Merger that none of Alkaline's service agreements with Mark Wahlberg, Sean 'Diddy' Combs and Jillian Michaels to promote the products of the Combined Company as brand ambassadors will have been terminated on or before the closing of the Merger. The Combined Company may not be able to realize the anticipated benefits from these service agreements for reasons beyond the control of the Combined Company, including that the celebrities are unable to devote meaningful amounts of time to promote the products, the decline in popularity of the celebrities or in the unlikely event of a dramatic change in the health or condition of any of the celebrities. The Combined Company is required to issue consideration to the celebrities under their service agreements, regardless of the perceived effectiveness of the services provided.

Risks Related to Alkaline's Business

Because we have a limited operating history, we may have difficulty realizing consistent and meaningful revenues and achieving profitability.

We were incorporated on June 6, 2011, and we only began producing and distributing alkaline bottled water in 2013. Since we have a limited operating history, our ability to successfully develop our products and to realize consistent and meaningful revenues and to achieve profitability has not been established and cannot be assured. For us to realize consistent, meaningful revenues and to achieve profitability, our products must receive broad market acceptance by consumers. Without this market acceptance, we will not be able to generate sufficient revenue to continue our business operation. If our products are not widely accepted by the market, our business may fail.


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Our ability to achieve and maintain profitability and positive cash flow is dependent upon our ability to generate revenues, manage development costs and expenses, and compete successfully with our direct and indirect competitors. We anticipate operating losses in upcoming future periods. This will occur because there are expenses associated with the development, production, marketing, and sales of our products.

Our financial statements are prepared using generally accepted accounting principles in the United States applicable to a going concern, which contemplates the realization of assets and liquidation of liabilities in the normal course of business. We have not yet established an ongoing source of revenues sufficient to cover our operating costs. As of June 30, 2019, we had an accumulated deficit of $43,751,067. Our ability to continue as a going concern is dependent on our company obtaining adequate capital to fund operating losses until we become profitable. If we are unable to obtain adequate capital, we could be forced to significantly curtail or cease operations.

Our disclosure controls and procedures and internal control over financial reporting are not effective, which may cause our financial reporting to be unreliable and lead to misinformation being disseminated to the public.

Our management evaluated our disclosure controls and procedures as of June 30, 2019 and concluded that as of that date, our disclosure controls and procedures were not effective. In addition, our management evaluated our internal control over financial reporting as of March 31, 2019 and concluded that that there were material weaknesses in our internal control over financial reporting as of that date and that our internal control over financial reporting was not effective as of that date. Our independent registered public accounting firm audited our internal control over financial reporting as of March 31, 2019 and disclaimed an opinion on our internal control over financial reporting as of that date. A material weakness is a control deficiency, or combination of control deficiencies, such that there is a reasonable possibility that a material misstatement of the financial statements will not be prevented or detected on a timely basis.

We have not yet remediated these material weaknesses and we believe that our disclosure controls and procedures and internal control over financial reporting continue to be ineffective. Until these issues are corrected, our ability to report financial results or other information required to be disclosed on a timely and accurate basis may be adversely affected and our financial reporting may continue to be unreliable, which could result in additional misinformation being disseminated to the public. Investors relying upon this misinformation may make an uninformed investment decision.

We will need additional funds to continue producing, marketing, and distributing our products.

We will have to spend additional funds to continue producing, marketing and distributing our products. If we cannot raise sufficient capital, we may have to cease operations. We will need additional funds to continue to produce our products for distribution to our target market.

We will have to continue to spend substantial funds on distribution, marketing and sales efforts before we will know if we have commercially viable and marketable/sellable products.

There is no guarantee that sufficient sale levels will be achieved.

There is no guarantee that the expenditure of money on distribution and marketing efforts will translate into sufficient sales to cover our expenses and result in profits. Consequently, there is a risk that you may lose all of your investment.

Our development, marketing, and sales activities are limited by our size.

Because of our relative size, we must limit our product development, marketing, and sales activities to the amount of capital we raise. As such, we may not be able to complete our production and business development program in a manner that is as thorough as we would like. We may not ever generate sufficient revenues to cover our operating and expansion costs.

Changes in the non-alcoholic beverage business environment and retail landscape could adversely impact our financial results.


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The non-alcoholic beverage business environment is rapidly evolving as a result of, among other things, changes in consumer preferences, including changes based on health and nutrition considerations and obesity concerns; shifting consumer tastes and needs; changes in consumer lifestyles; and competitive product and pricing pressures. In addition, the non-alcoholic beverage retail landscape is very dynamic and constantly evolving, not only in emerging and developing markets, where modern trade is growing at a faster pace than traditional trade outlets, but also in developed markets, where discounters and value stores, as well as the volume of transactions through e-commerce, are growing at a rapid pace. If we are unable to successfully adapt to the rapidly changing environment and retail landscape, our share of sales, volume growth and overall financial results could be negatively affected.

Intense competition and increasing competition in the commercial beverage market could hurt our business.

The commercial retail beverage industry, and in particular its non-alcoholic beverage segment, is highly competitive. Market participants are of various sizes, with various market shares and geographical reach, some of whom have access to substantially more sources of capital.

We compete generally with all liquid refreshments, including bottled water and numerous specialty beverages, such as: CORE® Hydration, SOBE®, Snapple®, AriZona® Iced Tea, Vitaminwater®, Gatorade Perform®, and POWERADE®.

We compete indirectly with major international beverage companies including but not limited to: The Coca-Cola Company®, PepsiCo, Inc., The Nestlé Group, Dr Pepper Snapple Group, Inc, Danone S.A., The Kraft Heinz Company, and Unilever PLC. These companies have established market presence in the United States and globally, and offer a variety of beverages that are competitors to our products. We face potential direct competition from such companies, because they have the financial resources, and access to manufacturing and distribution channels to rapidly enter the alkaline water market. We compete directly with other alkaline water producers and brands focused on the emerging alkaline beverage market including: Eternal Naturally Alkaline® Spring Water, Essentia®, CORE® Hydration, Icelandic Glacial™, Real Water®, Mount Valley Spring Water™, QURE Water®, Penta® Water, and Alka Power™. These companies could bolster their position in the alkaline water market through additional expenditure and promotion.

As a result of both direct and indirect competition, our ability to successfully distribute, market and sell our products, and to gain sufficient market share in the United States and around the world to realize profits may be limited, greatly diminished, or totally diminished, which may lead to partial or total loss of your investments in our company.

Alternative non-commercial beverages or processes could hurt our business.

The availability of non-commercial beverages, such as tap water, and machines capable of producing alkaline water at the consumer's home or at store-fronts could hurt our business, market share, and profitability.

Expansion of the alkaline beverage market or sufficiency of consumer demand in that market for operations to be profitable are not guaranteed.

The alkaline water market is an emerging market and there is no guarantee that this market will expand or that consumer demand will be sufficiently high enough to allow our company to successfully market, distribute and sell our products, or to successfully compete with current or future competition, all of which may result in total loss of your investment.

A failure to introduce new products or product extensions into new marketplaces successfully could prevent us from achieving long-term profitability.

We compete in an industry characterized by rapid changes in consumer preferences, so our ability to continue developing new products to satisfy our consumers' changing preferences will determine our long-term success. A failure to introduce new products or product extensions into new marketplaces successfully could prevent us from achieving long-term profitability. In addition, customer preferences are also affected by factors other than taste, such as the publicity. If we do not adjust to respond to these and other changes in customer preferences, our sales may be adversely affected. In addition, a failure to obtain any required regulatory approvals for our proposed products could have a material adverse effect on our business, operating results and financial condition.


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Our growth and profitability depends on the performance of third-party brokers and distributors and on our ongoing relationships with them.

Our distribution network and its success depend on the performance of third parties. Any non-performance or deficient performance by such parties may undermine our operations, profitability, and result in total loss of your investment. To distribute our products, we use a broker-distributor-retailer network whereby brokers represent our products to distributors and retailers who will in turn sell our products to consumers. The success of this network will depend on the performance of the brokers, distributors and retailers within this network. There is a risk that a broker, distributor, or retailer may refuse to or cease to market or carry our products. There is a risk that the mentioned entities may not adequately perform their functions within the network by, without limitation, failing to distribute to sufficient retailers or positioning our products in localities that may not be receptive to our products. Furthermore, such third-parties' financial position or market share may deteriorate, which could adversely affect our distribution, marketing and sale activities. We also need to maintain good commercial relationships with third-party brokers, distributors and retailers so that they will promote and carry our products. Any adverse consequences resulting from the performance of third-parties or our relationship with them could undermine our operations, profitability and may result in total loss of your investment.

The loss of one or more of our major customers or a decline in demand from one or more of these customers could harm our business.

We had 2 major customers that together accounted for 35% (23% and 12%, respectively) of accounts receivable at June 30, 2019, and 2 customers that together accounted for 40% (22% and 18%, respectively) of the total revenues earned for the quarter ended June 30, 2019. We had 2 major customers that together accounted for 46% (28% and 18%, respectively) of accounts receivable at March 31, 2019, and 2 customers that together accounted for 43% (25% and 18%, respectively) of the total revenues earned for the year ended March 31, 2019. There can be no assurance that such customers will continue to order our products at the same level or at all. A reduction or delay in orders from such customers, including reductions or delays due to market, economic or competitive conditions, could have a material adverse effect on our business, operating results and financial condition.

Our dependence on a limited number of vendors leaves us vulnerable to having an inadequate supply of required products, price increases, late deliveries, and poor product quality.

We had 3 vendors that accounted for 58% (28%, 16% and 14% respectively) of purchases for the quarter ended June 30, 2019. We had 2 vendors that accounted for 50% (34% and 16%, respectively) of purchases for the year ended March 31, 2019. Like other companies in our industry, we occasionally experience shortages and are unable to purchase our desired volume of products. Increasingly, our vendors are combining and merging together, leaving us with fewer alternative sources. If we are unable to maintain an adequate supply of products, our revenue and gross profit could suffer considerably. Finally, we cannot provide any assurance that our products will be available in quantities sufficient to meet customer demand. Any limits to product access could materially and adversely affect our business and results of operations.

Our business is sensitive to public perception. If any product proves to be harmful to consumers or if scientific studies provide unfavorable findings regarding their safety or effectiveness, then our image in the marketplace would be negatively impacted.

Our results of operations may be significantly affected by the public's perception of our company and similar companies. Our business could be adversely affected if any of our products or similar products distributed by other companies proves to be harmful to consumers or if scientific studies provide unfavorable findings regarding the safety or effectiveness of our products or any similar products. If our products suffer from negative consumer perception, it is likely to adversely affect our business and results of operations.


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Consumers may have preconceptions about the health benefits of alkaline water; such health benefits are not guaranteed or proven.

Health benefits of alkaline water are not guaranteed and have not been proven. Although we do not market our alkaline water products as having any potential health benefits, there is a consumer perception that drinking alkaline water has beneficial health effects. Consequently, negative changes in consumers' perception of the benefits of alkaline water or negative publicity surrounding alkaline water may result in loss of market share or potential market share and hence, loss of your investment. We are also prohibited from touting unconfirmed health benefits in our advertising and promotional activities for the products, both directly and indirectly through claims made by third-party endorsers when those endorsers have a material connection to our company.

Water scarcity and poor quality could negatively impact our production costs and capacity.

Water is the main ingredient in our products. It is also a limited resource, facing unprecedented challenges from overexploitation, increasing pollution, poor management, and climate change. As demand for water continues to increase, as water becomes scarcer, and as the quality of available water deteriorates, we may incur increasing production costs or face capacity constraints that could adversely affect our profitability or net operating revenues in the long run.

Increase in the cost, disruption of supply or shortage of ingredients, other raw materials or packaging materials could harm our business.

We and our bottlers will use water, 84 trace minerals from Himalayan salts and packaging materials for bottles such as plastic and paper products. The prices for these ingredients, other raw materials and packaging materials fluctuate depending on market conditions. Substantial increases in the prices of our or our bottlers' ingredients, other raw materials and packaging materials, to the extent they cannot be recouped through increases in the prices of finished beverage products, could increase our operating costs and could reduce our profitability. Increases in the prices of our finished products resulting from a higher cost of ingredients, other raw materials and packaging materials could affect the affordability of our products and reduce sales.

An increase in the cost, a sustained interruption in the supply, or a shortage of some of these ingredients, other raw materials, or packaging materials and containers that may be caused by a deterioration of our or our bottlers' relationships with suppliers; by supplier quality and reliability issues; or by events such as natural disasters, power outages, labor strikes, political uncertainties or governmental instability, or the like, could negatively impact our net revenues and profits.

Unfavorable general economic conditions in the United States could negatively impact our financial performance.

Unfavorable general economic conditions, such as a recession or economic slowdown, in the United States could negatively affect the affordability of, and consumer demand for, our products in the United States. Under difficult economic conditions, consumers may seek to reduce discretionary spending by forgoing purchases of our products or by shifting away from our beverages to lower-priced products offered by other companies, including non-alkaline water. Consumers may also cease purchasing bottled water and consume tap water. Lower consumer demand for our products in the United States could reduce our profitability.

Adverse weather conditions could reduce the demand for our products.

The sales of our products are influenced to some extent by weather conditions in the markets in which we operate. Unusually cold or rainy weather during the summer months may have a temporary effect on the demand for our products and contribute to lower sales, which could have an adverse effect on our results of operations for such periods.


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We rely on third parties to produce and bottle our products, which creates additional risk.

We do not own or operate bottling or co-packing facilities used for the production of the various water products in our portfolio. We rely on those third parties to ensure the quality, safety and integrity of our products. If the third parties that we engage to produce and bottle our products fail to meet our demands or are found by government agencies to be out of compliance with applicable regulatory requirements, our supplies of those products and our future profit margins could be adversely affected.

Product contamination or tampering or issues or concerns with respect to product quality, safety and integrity could adversely affect our business, reputation, financial condition or results of operations.

Product contamination or tampering, the failure to maintain high standards for product quality, safety and integrity, including with respect to raw materials and ingredients obtained from suppliers, or allegations (whether or not valid) of product quality issues, mislabeling, misbranding, spoilage, allergens, adulteration or contamination with respect to products in our portfolio may reduce demand for such products, and cause production and delivery disruptions or increase costs, each of which could adversely affect our business, reputation, financial condition or results of operations. If any of the products in our portfolio are mislabeled or become unfit for consumption or cause injury, illness or death, or if appropriate resources are not devoted to product quality and safety (particularly as we expand our portfolio into new categories) or to comply with changing food safety requirements, we could decide to, or be required to, recall products or withdraw from the marketplace and/or we may be subject to liability or government action, which could result in payment of damages or fines, cause certain products in our portfolio to be unavailable for a period of time, result in destruction of product inventory, or result in adverse publicity (whether or not valid), which could reduce consumer demand and brand equity. Moreover, even if allegations of product contamination or tampering or suggestions that our products were not fit for consumption are meritless, the negative publicity surrounding assertions against us or products in our portfolio or processes could adversely affect our reputation or brands. Our business could also be adversely affected if consumers lose confidence in product quality, safety and integrity generally, even if such loss of confidence is unrelated to products in our portfolio. Any of the foregoing could adversely affect our business, reputation, financial condition or results of operations. In addition, if we do not have adequate insurance, if we do not have enforceable indemnification from suppliers, bottlers, distributors or other third parties or if indemnification is not available, the liability relating to such product claims or disruption as a result of recall efforts could materially adversely affect our business, financial condition or results of operations.

Our products are considered premium beverages and are being sold at premium prices compared to our competitors' products; we cannot provide any assurances as to consumers' continued market acceptance of our current and future products.

We will compete directly with other alkaline water producers and brands focused on the emerging alkaline beverage market including Eternal, Essentia, Core, Icelandic, Real Water, Mountain Valley, Qure, Penta, and Alka Power. Products offered by our direct competitors are sold in various volumes and prices with prices ranging from approximately $0.99 for a half-liter bottle to $4.99 for a one-gallon bottle, and volumes ranging from half-liter bottles to one-gallon bottles. We currently offer our product in a one-gallon bottle for a suggested resale price or an SRP of $4.99, three-liter bottle for an SRP of $3.99, 1.5 liter at an SRP of $2.49, 1 liter at an SRP of $1.99, 700 milliliter single serving at an SRP of $1.19, and a 500 milliliter at an SRP of $0.99. Our competitors may introduce larger sizes and offer them at an SRP that is lower than our products. We can provide no assurances that consumers will continue to purchase our products or that they will not prefer to purchase a competitive product.

We are subject to periodic claims and litigation that could result in unexpected expenses and could ultimately be resolved against us.

From time to time, we are involved in litigation and other proceedings, including matters related to product liability claims, stockholder class action and derivative claims, commercial disputes and intellectual property, as well as trade, regulatory, employment, and other claims related to our business. Any of these proceedings could result in significant settlement amounts, damages, fines or other penalties, divert financial and management resources, and result in significant legal fees. An unfavorable outcome of any particular proceeding could exceed the limits of our insurance policies or the carriers may decline to fund such final settlements and/or judgments and could have an adverse impact on our business, financial condition, and results of operations. In addition, any proceeding could negatively impact our reputation among our guests and our brand/image.


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We regularly evaluate potential expansion into international markets, and any expansion into such international operations could subject us to risks and expenses that could adversely impact our business, financial condition and results of operations.

To date, we have not undertaken substantial commercial activities outside of the United States. We have evaluated, and continue to evaluate, potential expansion into certain other international markets. If and when we seek to expand internationally in the future, our sales and operations would be subject to a variety of risks, including fluctuations in currency exchange rates, tariffs, import restrictions and other trade barriers, unexpected changes in legal and regulatory requirements, longer accounts receivable payment cycles, potentially adverse tax consequences, and difficulty in complying with foreign laws and regulations, as well as U.S. laws and regulations that govern foreign activities. Economic uncertainty in some of the geographic regions in which we might operate could result in the disruption of commerce and negatively impact our operations in those areas. Also, if we choose to pursue international expansion efforts, it may be necessary or desirable to contract with third parties, and we may not be able to enter into such agreements on commercially acceptable terms or at all. Further, such arrangements may not perform to our expectations, and we may be exposed to various risks as a result of the activities of our partners.

We rely on key executive officers who have extensive knowledge of our business and the industry in which we operate; the loss of any of these key executive officers would be difficult to replace and may adversely affect our business.

We are highly dependent on three executive officers, Richard Wright, David A. Guarino and Ronald DaVella, who have extensive knowledge of our business and the industry in which we operate. We do not have "key person" life insurance policies for either of these officers. The loss of Richard Wright, David A. Guarino and/or Ronald DaVella could result in delays in product development, loss of any future customers and sales and diversion of management resources, which could adversely affect our operating results.

If we are unable to protect our information systems against service interruption, misappropriation of data or breaches of security, our operations could be disrupted, we may suffer financial losses and our reputation may be damaged.

We rely on networks and information systems and other technology ("information systems"), including the Internet and third-party hosted services, to support a variety of business processes and activities, including procurement and supply chain, manufacturing, distribution, invoicing and collection of payments, employee processes and consumer marketing. We use information systems to process financial information and results of operations for internal reporting purposes and to comply with regulatory financial reporting and legal and tax requirements. In addition, we depend on information systems for digital marketing activities and electronic communications between our company and our bottlers and other customers, suppliers and consumers. Because information systems are critical to many of our operating activities, our business may be impacted by system shutdowns, service disruptions or security breaches. These incidents may be caused by failures during routine operations such as system upgrades or by user errors, as well as network or hardware failures, malicious or disruptive software, unintentional or malicious actions of employees or contractors, cyberattacks by common hackers, criminal groups or nation-state organizations or social-activist (hacktivist) organizations, geopolitical events, natural disasters, failures or impairments of telecommunications networks, or other catastrophic events. In addition, such incidents could result in unauthorized or accidental disclosure of material confidential information or regulated individual personal data. If our information systems suffer severe damage, disruption or shutdown and our business continuity plans do not effectively resolve the issues in a timely manner, we could experience delays in reporting our financial results, and we may lose revenue and profits as a result of our inability to timely manufacture, distribute, invoice and collect payments for concentrate or finished products. Unauthorized or accidental access to, or destruction, loss, alteration, disclosure, falsification or unavailability of, information could result in violations of data privacy laws and regulations, damage to the reputation and credibility of our company and, therefore, could have a negative impact on net operating revenues. In addition, we may suffer financial and reputational damage because of lost or misappropriated confidential information belonging to us, our current or former employees, our bottling partners, other customers or suppliers, or consumers or other data subjects, and may become exposed to legal action and increased regulatory oversight. We could also be required to spend significant financial and other resources to remedy the damage caused by a security breach or to repair or replace networks and information systems.


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In addition, third-party providers of data hosting or cloud services, as well as our bottling partners, distributors, retailers or suppliers, may experience cybersecurity incidents that may involve data we share with them. Although we have taken steps to prevent cybersecurity incidents, there can be no assurance that such steps will be adequate. In order to address risks to our information systems, we continue to make investments in personnel, technologies and training of our personnel.

Risks Related to AQUAhydrate's Business

Because we have a limited operating history, we may have difficulty realizing consistent and meaningful revenues and achieving profitability.

We were incorporated on July 24, 2003, and have operated as AQUAhydrate since 2010. Since we have a limited operating history, our ability to successfully develop our products and to realize consistent and meaningful revenues and to achieve profitability has not been established and cannot be assured. For us to realize consistent, meaningful revenues and to achieve profitability, our products must receive broad market acceptance by consumers. Without this market acceptance, we will not be able to generate sufficient revenue to continue our business operation. If our products are not widely accepted by the market, our business may fail.

Our ability to achieve and maintain profitability and positive cash flow is dependent upon our ability to generate revenues, manage development costs and expenses, and compete successfully with our direct and indirect competitors. We anticipate operating losses in upcoming future periods. This will occur because there are expenses associated with the development, production, marketing, and sales of our products.

Our financial statements are prepared using generally accepted accounting principles in the United States applicable to a going concern, which contemplates the realization of assets and liquidation of liabilities in the normal course of business. We have not yet established an ongoing source of revenues sufficient to cover our operating costs. As of June 30, 2019, we had an accumulated deficit of $79,093,570. Our ability to continue as a going concern is dependent on our company obtaining adequate capital to fund operating losses until we become profitable. If we are unable to obtain adequate capital, we could be forced to significantly curtail or cease operations.

We will need additional funds to continue producing, marketing, and distributing our products.

We will have to spend additional funds to continue producing, marketing and distributing our products. If we cannot raise sufficient capital, we may have to cease operations. We will need additional funds to continue to produce our products for distribution to our target market.

We will have to continue to spend substantial funds on distribution, marketing and sales efforts before we will know if we have commercially viable and marketable/sellable products.

There is no guarantee that sufficient sale levels will be achieved.

There is no guarantee that the expenditure of money on distribution and marketing efforts will translate into sufficient sales to cover our expenses and result in profits. Consequently, there is a risk that you may lose all of your investment.

Our development, marketing, and sales activities are limited by our size.

Because of our relative size, we must limit our product development, marketing, and sales activities to the amount of capital we raise. As such, we may not be able to complete our production and business development program in a manner that is as thorough as we would like. We may not ever generate sufficient revenues to cover our operating and expansion costs.


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Changes in the non-alcoholic beverage business environment and retail landscape could adversely impact our financial results.

The non-alcoholic beverage business environment is rapidly evolving as a result of, among other things, changes in consumer preferences, including changes based on health and nutrition considerations and obesity concerns; shifting consumer tastes and needs; changes in consumer lifestyles; and competitive product and pricing pressures. In addition, the non-alcoholic beverage retail landscape is very dynamic and constantly evolving, not only in emerging and developing markets, where modern trade is growing at a faster pace than traditional trade outlets, but also in developed markets, where discounters and value stores, as well as the volume of transactions through e-commerce, are growing at a rapid pace. If we are unable to successfully adapt to the rapidly changing environment and retail landscape, our share of sales, volume growth and overall financial results could be negatively affected.

Intense competition and increasing competition in the commercial beverage market could hurt our business.

The commercial retail beverage industry, and in particular its non-alcoholic beverage segment, is highly competitive. Market participants are of various sizes, with various market shares and geographical reach, some of whom have access to substantially more sources of capital.

We compete generally with all liquid refreshments, including bottled water and numerous specialty beverages, such as: CORE® Hydration, SOBE®, Snapple®, AriZona® Iced Tea, Vitaminwater®, Gatorade Perform®, and POWERADE®.

We compete indirectly with major international beverage companies including but not limited to: The Coca-Cola Company®, PepsiCo, Inc., The Nestlé Group, Dr Pepper Snapple Group, Inc, Danone S.A., The Kraft Heinz Company, and Unilever PLC. These companies have established market presence in the United States and globally, and offer a variety of beverages that are competitors to our products. We face potential direct competition from such companies, because they have the financial resources, and access to manufacturing and distribution channels to rapidly enter the premium water market. We compete directly with other premium water producers and brands focused on the emerging premium water market including: Eternal Naturally Alkaline® Spring Water, Essentia®, CORE® Hydration, Icelandic Glacial™, Real Water®, Mount Valley Spring Water™, QURE Water®, Penta® Water, and Alka Power™. These companies could bolster their position in the premium water market through additional expenditure and promotion.

As a result of both direct and indirect competition, our ability to successfully distribute, market and sell our products, and to gain sufficient market share in the United States and around the world to realize profits may be limited, greatly diminished, or totally diminished, which may lead to partial or total loss of your investments in our company.

Alternative non-commercial beverages or processes could hurt our business.

The availability of non-commercial beverages, such as tap water, and machines capable of producing electrolyte enhanced and/or alkaline water at the consumer's home or at store-fronts could hurt our business, market share, and profitability.

Expansion of the premium water market or sufficiency of consumer demand in that market for operations to be profitable are not guaranteed.

The premium water market is an emerging market and there is no guarantee that this market will expand or that consumer demand will be sufficiently high enough to allow our company to successfully market, distribute and sell our products, or to successfully compete with current or future competition, all of which may result in total loss of your investment.


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Risks Related to Regulations Applicable to Alkaline's and AQUAhydrate's Industry

Changes in laws and regulations relating to beverage containers and packaging could increase our costs and reduce our net operating revenues or profitability.

We and our bottlers offer our products in non-refillable, recyclable containers in the United States. Regulations have been enacted in various jurisdictions in the United States requiring that deposits or certain ecotaxes or fees be charged for the sale, marketing and use of certain non-refillable beverage containers. Other proposals relating to beverage container deposits, recycling, ecotax and/or product stewardship have been introduced in various jurisdictions in the United States and overseas, and we anticipate that similar legislation or regulations may be proposed in the future at local, state and federal levels in the United States. Consumers' increased concerns and changing attitudes about solid waste streams and environmental responsibility and the related publicity could result in the adoption of such legislation or regulations. Current regulations or the adoption of future regulations in the geographical regions in which we currently operate or intend to operate could adversely affect our costs or require changes in our distribution model, which could reduce our net operating revenues or profitability.

Significant additional labeling or warning requirements or limitations on the availability of our products may inhibit sales of affected products.

Various jurisdictions may seek to adopt significant additional product labeling or warning requirements or limitations on the availability of our products relating to the content or perceived adverse health consequences of our products. Federal laws may preempt some or all of these attempts by state or localities to impose additional labeling or warning requirements. If these types of requirements become applicable to our products under current or future environmental or health laws or regulations, they may inhibit sales of our products. Moreover, if we fail to meet compliance deadlines for any such new requirements, our products may be deemed misbranded or mislabeled and could be subject to enforcement action, or we could be exposed to private lawsuits alleging misleading labels or product promotion.

Changes in, or failure to comply with, the laws and regulations applicable to our products or our business operations could increase our costs or reduce our net operating revenues.

The advertising, distribution, labeling, production, safety, sale, and transportation in the United States of our currently marketed products are subject to: the Federal Food, Drug, and Cosmetic Act; the Federal Trade Commission Act; the Lanham Act; state food and drug laws; state consumer protection laws; competition laws; federal, state, and local workplace health and safety laws, such as the Occupational Safety and Health Act; various federal, state and local environmental protection laws; and various other federal, state, and local statutes and regulations. Changes to such laws and regulations could increase our costs or reduce our net operating revenues.

In addition, failure to comply with environmental, health or safety requirements and other applicable laws or regulations could result in the assessment of damages, the imposition of penalties, suspension of production, changes to equipment or processes, or a cessation of operations at our or our bottlers' facilities, as well as damage to our image and reputation, all of which could harm our profitability.

If we fail to comply with personal data protection laws, we could be subject to adverse publicity, government enforcement actions and/or private litigation, which could negatively affect our business and operating results.

In the ordinary course of our business, we receive, process, transmit and store information relating to identifiable individuals ("personal data"), primarily employees and former employees. As a result, we are subject to various U.S. federal and state and foreign laws and regulations relating to personal data. These laws have been subject to frequent changes, and new legislation in this area may be enacted in other jurisdictions at any time. There is no assurance that our security controls over personal data, the training of employees and vendors on data privacy and data security, and the policies, procedures and practices we implemented or may implement in the future will prevent the improper disclosure of personal data. Improper disclosure of personal data in violation of applicable personal data protection laws could harm our reputation, cause loss of consumer confidence, subject us to government enforcement actions (including fines), or result in private litigation against us, which could result in loss of revenue, increased costs, liability for monetary damages, fines and/or criminal prosecution, all of which could negatively affect our business and operating results.


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If we produce, market and/or sell beverages infused with hemp, as defined under the Agriculture Improvement Act of 2018, we will be subject to a myriad of different laws and regulations governing the use of hemp in food and beverages and if we are unable to comply with such laws in a cost-effective manner, our business could be adversely affected.

The production of a beverage infused with hemp, as "hemp" is defined in the Agriculture Improvement Act of 2018 (also known as the 2018 Farm Bill, Public Law 115-334), is contingent on U.S. Food and Drug Administration, or the FDA, and state laws, regulations, and guidance. While the Agriculture Improvement Act of 2018 removed hemp from Schedule I of the Controlled Substances Act, the law did not change the FDA's authorities with respect to food or drugs. As of the date of this joint proxy statement/prospectus, the FDA has not made a determination that the use of hemp in food is safe. The FDA has evaluated Generally Recognized as Safe or GRAS notices for three hemp seed-derived food ingredients and determined that the agency has no questions that those ingredients are GRAS under their intended conditions of use. We intend to comply in full with all federal, state, and local laws, rules and regulations as we develop our hemp alkaline water and other product lines. We will not pursue the production or sale of hemp-infused products until legally permitted.

Laws and regulations governing the use of hemp in food and beverages in the United States are broad in scope; subject to evolving interpretations; and subject to enforcement by a myriad of regulatory agencies and law enforcement entities. Under the Agriculture Improvement Act of 2018, a state or Indian tribe that desires to have primary regulatory authority over the production of hemp in the state or territory of the Indian tribe must submit a plan to monitor and regulate hemp production to the Secretary of the United States Department of Agriculture or USDA. The Secretary must then approve the state or tribal plan after determining if the plan complies with the requirements set forth in the Agriculture Improvement Act of 2018. The Secretary may also audit the state or Indian tribe's compliance with the federally-approved plan. If the Secretary does not approve the state or Indian tribe's plan, then the production of hemp in that state or territory of that Indian tribe will be subject to a plan established by USDA. USDA has not yet established such a plan. We anticipate that many states will seek to have primary regulatory authority over the production of hemp. States that seek such authority may create new laws and regulations that permit the use of hemp in food and beverages.

Federal and state laws and regulations on hemp may address production, monitoring, manufacturing, distribution, and laboratory testing to ensure that that the hemp has a delta-9 tetrahydrocannabinol concentration of not more than 0.3 percent on a dry weight basis. Federal laws and regulations may also address the transportation or shipment of hemp or hemp products, as the Agriculture Improvement Act of 2018 prohibits states and Indian tribes from prohibiting the transportation or shipment of hemp or hemp products produced in accordance with that law through the state or territory of the Indian tribe, as applicable. Because we rely on a nationwide broker-distributor-retailer network whereby brokers represent our products to distributors and retailers in turn sell our product to consumers in the fifty states and the District of Columbia, we may be subject to many different state-based regulatory regimens for hemp, all of which could require us to incur substantial costs associated with compliance requirements. In addition, violations of these laws, or allegations of such violations, could disrupt our business and result in a material adverse effect on our operations, as well as adverse publicity and potential harm to our reputation. We and our suppliers and vendors must take significant enterprise risk management steps to ensure that there is no commingling of hemp and marihuana, as "marihuana" is defined in the federal Controlled Substances Act. Marihuana remains subject to the Controlled Substances Act and related regulations.

Furthermore, if we decide to produce, market and sell beverages infused with hemp outside of the United States, we will be subject to applicable laws and regulations in those non-U.S. jurisdictions, which would require us to expend significant costs associated with compliance.

In addition, it is possible that additional regulations may be enacted in the future in the United States and globally that will be directly applicable to our proposed product offerings infused with hemp. We cannot predict the nature of any future laws, regulations, interpretations, or applications, nor can we determine what effect additional governmental regulations or administrative policies and procedures, when and if promulgated, could have on our business.


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FDA's current position is that the sale of food and beverages that contain hemp-derived cannabidiol or CBD is prohibited under the Federal Food, Drug, and Cosmetic Act; therefore, if we decide to produce, market and/or sell beverages infused with hemp-derived cannabidiol, we may be subject to federal enforcement actions which could adversely affect our business and harm our reputation and brand.

The FDA has jurisdiction over drugs and foods that contain CBD, including CBD derived from hemp. Under the Federal Food, Drug and Cosmetic Act or the FDCA, it is a prohibited act to introduce or deliver for introduction into interstate commerce any food (which the FDCA defines to include beverages) that is adulterated. The FDCA therefore prohibits the introduction or delivery for introduction of a food that contains CBD, because the FDCA deems a food to be adulterated if it bears or contains any food additive that is unsafe and CBD is presently an unsafe food additive under the FDCA and FDA regulations. The FDCA also states that it is a prohibited act to introduce or deliver for introduction into interstate commerce any food to which an FDA-approved drug has been added, unless certain exceptions are met. The FDA has approved a drug in which CBD is an active ingredient, and the agency has stated that based on available evidence, none of the exceptions apply to CBD. One of the exceptions addresses whether the drug was marketed in food before the FDA approved the drug and before the institution of any substantial clinical investigations involving the drug. The FDA has stated that interested parties may present the agency with evidence that has bearing on the issue of whether CBD was marketed in food before the FDA approved the CBD drug in 2018 or before the institution of substantial clinical investigations involving the CBD drug. FDA's current position is that this provision of the FDCA also prohibits the introduction or delivery for introduction into interstate commerce of a food to which CBD has been added.

Congress may decide to amend the FDCA to permit the use of hemp-derived CBD in food. The FDA may also decide to issue regulations or guidance that address the use of hemp-derived CBD in food or use its enforcement discretion with respect to hemp-derived CBD products. On May 31, 2019, the FDA held a public hearing, as well as providing a broader opportunity for written public comment, for stakeholders to share their experiences and challenges with CBD products, including information and views related to product safety. Based on this hearing, any legislative or regulatory action could take years to implement or finalize and may not include provisions that would enable our company to produce, market and/or sell hemp beverages that contain hemp-derived CBD. We risk becoming subject to adverse publicity and costly federal enforcement actions should we decide to produce, market and/or sell beverages infused with hemp-derived CBD in the United States. We may be required to expend significant resources in defending our company from such actions which could adversely affect our business and results of operations and divert the attention of management. We may also incur the risk of sustaining considerable damage to our reputation and brand should we become party to federal enforcement actions resulting from the production, marketing or sale of hemp-derived CBD infused beverages.

Accordingly, if Congress amended federal laws or FDA issued regulations or guidance permitting the use of hemp-derived CBD in food or announcing the agency's decision to use its enforcement discretion with respect to hemp-derived CBD products, we and our suppliers and vendors would be required to implement significant enterprise risk management measures to ensure that there is no commingling of CBD derived from marihuana, as "marihuana" is defined in the federal Controlled Substances Act, with any future commercial supply of hemp-derived CBD that is used to produce our products.

The FDA could force the removal of our products from the U.S. market.

The FDA has broad authority over the regulation of our products. The FDA could, among other things, force us to remove our products from the U.S. market, levy fines or change their regulations on advertising. Any adverse action by the FDA could have a material adverse impact on our business.

Government reviews, inquiries, investigations, and actions could harm our business or reputation.

As our product portfolio evolves, the regulatory environment with regard to our business is also evolving. Government officials often exercise broad discretion in deciding how to interpret and apply applicable laws or regulations. We may in the future receive formal and informal inquiries from various governmental regulatory authorities, as well as self-regulatory organizations or consumer protection watchdog groups, about our business and compliance with local laws, regulations, or standards. Any determination that our products, operations or activities, or the activities of our employees, contractors or agents, are not in compliance with existing laws, regulations or standards, could adversely affect our business in a number of ways. Even if such an inquiry does not result in the imposition of fines, interruptions to our business, loss of suppliers or other third-party relationships, terminations of necessary licenses and permits, or similar direct results, the existence of the inquiry alone could potentially create negative publicity that could harm our business and/or reputation.


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Risks Related to Alkaline's Intellectual Property

It is difficult and costly to protect our intellectual property.

Our commercial success will depend in part on obtaining and maintaining trademark protection and trade secret/know-how protection of our products and brands, as well as successfully defending that intellectual property against third-party challenges. We will only be able to protect our intellectual property related to our trademarks and brands to the extent that we have rights under valid and enforceable trademarks, know-how or trade secrets that cover our products and brands. Changes in either the trademark laws or in interpretations of trademark and laws in the U.S. and other countries may diminish the value of our intellectual property. Accordingly, we cannot predict the breadth of claims that may be allowed or enforced in our issued trademarks. The degree of future protection for our proprietary rights is uncertain because legal means afford only limited protection and may not adequately protect our rights or permit us to gain or keep our competitive advantage.

We may face intellectual property infringement claims that could be time-consuming and costly to defend, and could result in our loss of significant rights and the assessment of treble damages.

From time to time we may face intellectual property claims from third parties. Some of these claims may lead to litigation. The outcome of any such litigation can never be guaranteed, and an adverse outcome could affect us negatively. For example, were a third party to succeed on an infringement claim against us, we may be required to pay substantial damages (including up to treble damages if such infringement were found to be willful). In addition, we could face an injunction, barring us from conducting the allegedly infringing activity. The outcome of the litigation could require us to enter into a license agreement which may not be under acceptable, commercially reasonable, or practical terms or we may be precluded from obtaining a license at all. It is also possible that an adverse finding of infringement against us may require us to dedicate substantial resources and time in developing non-infringing alternatives, which may or may not be possible.

Finally, we may initiate claims to assert or defend our own intellectual property against third parties. Any intellectual property litigation, irrespective of whether we are the plaintiff or the defendant, and regardless of the outcome, is expensive and time-consuming, and could divert our management's attention from our business and negatively affect our operating results or financial condition.

We may be subject to claims by third parties asserting that our employees or our company has misappropriated their intellectual property, or claiming ownership of what we regard as our own intellectual property.

Although we try to ensure that our company, our employees, and independent contractors (suppliers/vendors/distributors) do not use the proprietary information or know-how of others in their work for us, we may be subject to claims that our company, our employees, or independent contractors (suppliers/vendors/distributors) have used or disclosed intellectual property in violation of others' rights. These claims may cover a range of matters, such as challenges to our trademarks, as well as claims that our employees or independent contractors are using trade secrets or other proprietary information of any such employee's former employer or independent contractors. As a result, we may be forced to bring claims against third parties, or defend claims they may bring against us, to determine the ownership of what we regard as our intellectual property. If we fail in prosecuting or defending any such claims, in addition to paying monetary damages, we may lose valuable intellectual property rights or personnel. Even if we are successful in prosecuting or defending against such claims, litigation could result in substantial costs and be a distraction to management.


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Risks Related to Alkaline's Stock

Because we can issue additional shares of common stock, our stockholders may experience dilution in the future.

We are authorized to issue up to 200,000,000 shares of common stock and 100,000,000 shares of preferred stock, of which 43,685,592 shares of common stock are issued and outstanding, 1,500,000 shares of Series C Preferred Stock are issued and outstanding, and 3,800,000 shares of Series D Preferred Stock are issued and outstanding as of ♦, 2019. Our board of directors has the authority to cause us to issue additional shares of common stock and preferred stock, and to determine the rights, preferences and privileges of shares of our preferred stock, without consent of our stockholders. Consequently, the stockholders may experience more dilution in their ownership of our stock in the future.

Trading on the Nasdaq Capital Market or TSX Venture Exchange may be volatile, which could depress the market price of our common stock and make it difficult for our stockholders to resell their shares.

Our common stock is listed on the Nasdaq Capital Market and the TSX Venture Exchange. Trading of our common stock may experience wide fluctuations in trading prices, due to many factors that may have little to do with our operations or business prospects. This volatility could depress the market price of our common stock for reasons unrelated to operating performance.

A prolonged and substantial decline in the price of our common stock could affect our ability to raise further working capital, thereby adversely impacting our ability to continue operations.

A prolonged and substantial decline in the price of our common stock could result in a reduction in the liquidity of our common stock and a reduction in our ability to raise capital. Because we plan to acquire a significant portion of the funds we need in order to conduct our planned operations through the sale of equity securities, a decline in the price of our common stock could be detrimental to our liquidity and our operations because the decline may cause investors not to choose to invest in our stock. If we are unable to raise the funds we require for all our planned operations and to meet our existing and future financial obligations, we may be forced to reallocate funds from other planned uses and may suffer a significant negative effect on our business plan and operations, including our ability to develop new products and continue our current operations. As a result, our business may suffer, and we may go out of business.

Because we do not intend to pay any cash dividends on our shares of common stock in the near future, our stockholders will not be able to receive a return on their shares unless they sell them.

We intend to retain any future earnings to finance the development and expansion of our business. We do not anticipate paying any cash dividends on our common stock in the near future. The declaration, payment and amount of any future dividends will be made at the discretion of our board of directors, and will depend upon, among other things, the results of operations, cash flows and financial condition, operating and capital requirements, and other factors as the board of directors considers relevant. There is no assurance that future dividends will be paid, and if dividends are paid, there is no assurance with respect to the amount of any such dividend. Unless we pay dividends, our stockholders will not be able to receive a return on their shares unless they sell them.

FORWARD-LOOKING STATEMENTS

This joint proxy statement/prospectus contains forward-looking statements. Forward-looking statements are projections of events, revenues, income, future economic performance or management's plans and objectives for future operations. In some cases, you can identify forward-looking statements by the use of terminology such as "may", "should", "expect", "plan", "anticipate", "believe", "estimate", "predict", "potential" or "continue" or the negative of these terms or other comparable terminology. Examples of forward-looking statements made in this joint proxy statement/prospectus include statements about:

 the proposals to be voted on by the AQUAhydrate stockholders and the Alkaline stockholders at the AQUAhydrate Meeting and the Alkaline Meeting, respectively,


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 Alkaline and AQUAhydrate receiving the requisite approvals to complete the Merger,

 that AQUAhydrate will complete the Capital Reorganization,

 that the Merger will be completed on the terms and conditions of the Agreement, or at all,

 the closing date for the Merger,

 the amount and value of the Merger consideration to be issued to the AQUAhydrate stockholders,

 the anticipated tax and accounting treatment of the Capital Reorganization and the Merger,

 the anticipated strategic and financial benefits of the Merger to Alkaline and AQUAhydrate,

 the amount and timing of business synergies associated with the Merger,

 the implementation and growth of the Combined Company's business model and strategic plans for its business and products,

 the Combined Company's ability to enter into and maintain strategic relationships with distributors, retailers and other partners, and the potential benefits of such relationships,

 the development or continued existence for Alkaline's and AQUAhyrdate's products,

 expectations regarding cash flow generation,

 the ability of Alkaline's and AQUAhydrate's celebrity brand ambassadors to effectively promote their products,

 industry trends in the markets in which Alkaline and AQUAhydrate compete,

 the listing of the Alkaline Common Shares on the TSX Venture Exchange and the Nasdaq Capital Market following the closing of the Merger,

 the constitution of the board of directors and the appointment of officers of Alkaline following the closing of the Merger, and

 the products to be offered by Alkaline and AQUAhydrate following the Merger, including products containing CBD.

These statements are only predictions and involve known and unknown risks, uncertainties and other factors, including:

 the fact that AQUAhydrate stockholders have dissent rights,

 Alkaline and AQUAhydrate being unable to realize the anticipated synergies from the Merger,

 the pro forma financial information may not reflect the Combined Company's financial condition or results of operations following the completion of the Merger

 Alkaline or AQUAhydrate not receiving the requisite approvals for the Merger; the fact that consumers may not embrace and purchase any of Alkaline's or AQUAhydrate's infused water products,

 additional competitors selling alkaline water and enhanced water products in bulk containers, reducing Alkaline's and AQUAhydrate's sales,

 the fact that Alkaline and AQUAhydrate do not own or operate any of their production facilities and that co-packers may not renew current agreements and/or not satisfy increased production quotas,

 the fact that Alkaline and AQUAhydrate have a limited number of suppliers of their unique bulk bottles,

 the potential for supply-chain interruption due to factors beyond Alkaline's and AQUAhydrate's control,

 the fact that there may be a recall of products due to unintended contamination,

 the fact that there may be lawsuits commenced against Alkaline or AQUAhydrate,


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 Alkaline and AQUAhydrate being unable to retain key personnel,

 Alkaline and AQUAhydrate being unable to effectively protect their intellectual property,

 the risk that certain contractual milestones might not be achieved,

 the inherent uncertainties associated with operating as an early-stage company,

 the inherent uncertainties with mergers, acquisitions and other business combinations,

 changes in customer demand and the fact that consumers may not embrace enhanced water products as expected or at all,

 the extent to which Alkaline and AQUAhydrate are successful in gaining new long-term relationships with new retailers and retaining existing relationships with retailers,

 the unexpected illness or other incapacity of any of AQUAhydrate's high profile investors subject to endorsement agreements with AQUAhydrate or Alkaline,

 Alkaline's and AQUAhydrate's ability to raise the additional funding that they will need to continue to pursue their business, planned capital expansion and sales activity,

 competition in the industry in which Alkaline and AQUAhydrate operate,

 governmental regulations being implemented regarding the production and sale of alkaline water or any other products, including products containing CBD,

 the fact that consumers may not embrace and purchase any of Alkaline's CBD infused products,

 the fact that Alkaline may not be permitted by the FDA or other regulatory authority to market or sell any of its CBD infused products,

 general economic and business conditions, and

 the risks in the section of this joint proxy statement/prospectus entitled "Risk Factors",

any of which may cause our company's or our industry's actual results, levels of activity, performance or achievements to be materially different from any future results, levels of activity, performance or achievements expressed or implied by these forward-looking statements.

While these forward-looking statements and any assumptions upon which they are based are made in good faith and reflect our current judgment regarding the direction of our business, actual results will almost always vary, sometimes materially, from any estimates, predictions, projections, assumptions or other future performance suggested herein. Except as required by applicable law, including the securities laws of the United States and Canada, we do not intend to update any of the forward-looking statements to conform these statements to actual results.

ALKALINE PROPOSAL 1
APPROVAL OF THE ISSUANCE OF COMMON STOCK UNDER THE MERGER AGREEMENT

At the Alkaline Meeting, Alkaline stockholders will be asked to approve the issuance of Alkaline Common Shares pursuant to the Merger Agreement. The terms of, reasons for and other aspects of the Merger Agreement, the Merger and the issuance of Alkaline Common Shares pursuant to the Merger Agreement are described in detail in the other sections in this joint proxy statement/prospectus.

Alkaline stockholders must approve the issuance of Alkaline Common Shares in the Merger because such approval is required under applicable Nasdaq rules. Specifically, Nasdaq Rule 5635(a) requires a Nasdaq-listed company to obtain stockholder approval prior to the issuance of common stock in connection with the acquisition of the stock or assets of another company if the potential issuance is equal to 20% or more of the number of shares of common stock or voting power outstanding before the issuance. The maximum number of Alkaline Common Shares to be issued under the Merger Agreement is fixed at an aggregate of 23,315,217 Alkaline Common Shares (including any Alkaline Common Shares to be issued in connection with the Merger to any finders or placement agents and any other persons for the payment of liabilities of AQUAhydrate), which number represents approximately ♦% of the outstanding Alkaline Common Shares as of the date of this joint proxy statement/prospectus.


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Alkaline's board of directors recommends that the Alkaline stockholders vote FOR the issuance of Alkaline Common Shares under the Merger Agreement.

ALKALINE PROPOSAL 2
APPROVAL OF THE CREATION OF A NEW CONTROL PERSON AND THE RESULTING CHANGE OF CONTROL

At the Alkaline Meeting, Alkaline stockholders will be asked to approve the creation of a new Control Person (as defined in the policies of the TSXV) and the resulting change of control of Alkaline for the purpose of Nasdaq Listing Rule 5635.

Under Section 5.14(a) of the TSXV Policy 5.3, the TSXV requires stockholder approval for any transaction which results in the creation of a new Control Person. The TSXV will generally consider a person that holds more than 20% of the outstanding voting shares of the issuer to be a Control Person.

Further, Nasdaq Listing Rule 5635(b) requires an issuer listed on Nasdaq to obtain stockholder approval prior to an issuance of securities when the issuance or potential issuance will result in a "change of control" of the issuer. Although Nasdaq has not adopted any rule as to what constitutes a "change of control" for the purpose of Rule 5635(b), Nasdaq has previously indicated that the acquisition of, or right to acquire, by a single investor or affiliated investor group, as little as 20% of the common stock (or securities convertible into or exercisable for common stock) or voting power of an issuer could constitute a change of control if such ownership or voting power would be the largest ownership position.

Alkaline currently expects that ♦ Alkaline Common Shares will be issued to Yucaipa American Alliance (Parallel) Fund II, LP and Yucaipa American Alliance Fund II, LP (together, the "Yucaipa Entities"), which following completion of the Merger, would represent ♦% of the issued and outstanding Alkaline Common Shares. To Alkaline's knowledge, the Yucaipa Entities do not currently own any Alkaline Common Shares. However, because the exact amount of the Merger consideration to be issued to the Yucaipa Entities will not be known until the time of the Merger, it is possible that the Yucaipa Entities hold over 20% of the Alkaline Common Shares following the Merger, in which case the Yucaipa Entities are expected to hold the largest ownership position following completion of the Merger. Accordingly, a new Control Person may be created for the purpose of Section 5.14(a) of TSXV Policy 5.3 and the change of control may occur for the purpose of Nasdaq Listing Rule 5635(b). As a result, Alkaline proposes to obtain the approval of Alkaline stockholders for the creation of a new Control Person and the resulting change of control.

Alkaline stockholders should note that a "Control Person" defined in the policies of the TSXV and a "change of control" as described under Nasdaq Listing Rule 5635(b) apply only with respect to the application of such rules, and do not necessarily mean a "Control Person" or "change of control" for other purpose.

Alkaline's board of directors recommends that the Alkaline stockholders vote FOR the creation of a new Control Person and the resulting change of control.

ALKALINE PROPOSAL 3
APPROVAL OF THE ADJOURNMENT OF THE ALKALINE MEETING TO SOLICIT ADDITIONAL PROXIES

At the Alkaline Meeting, Alkaline stockholders will be asked to approve the adjournment of the Alkaline Meeting, if necessary, to solicit additional proxies if sufficient votes to approve Alkaline Proposals 1, 2, 4, 5, 6 and 7 have not been obtained.


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Alkaline's board of directors recommends that Alkaline stockholders vote FOR the adjournment of the Alkaline Meeting, if necessary, to solicit additional proxies.

AQUAHYDRATE PROPOSAL 1
APPROVAL OF THE AMENDMENT AND RESTATEMENT OF AQUAHYDRATE'S ARTICLES OF INCORPORATION

At the AQUAhydrate Meeting, AQUAhydrate stockholders will be asked to approve the amendment and restatement of AQUAhydrate's articles of incorporation.

AQUAhyrate currently has outstanding shares of common stock, Series A Preferred shares, Series B Preferred shares, Series C Preferred shares, Series D Preferred shares, Series E Preferred shares, Series F Preferred shares, Series G Preferred shares, Series H Preferred shares, and Series I Preferred shares. The Sixth Amended and Restated Articles of Incorporation provide for the distribution of the Merger consideration according to certain priorities. If those priorities were followed the holders of common stock and Series A Preferred shares, Series B Preferred shares, Series C Preferred shares, Series D Preferred shares, Series E Preferred shares, Series F Preferred shares, Series G Preferred shares, Series H Preferred shares would receive little or no Merger consideration.

AQUAhydrate's board of directors have proposed to distribute the Merger consideration to all stockholders. In order to accomplish such a distribution, the AQUAhydrate board of directors has approved a proposed Seventh Amended and Restated Articles of Incorporation pursuant to which each share of Series A Preferred shares is converted into 8.981 shares of common stock, each share of Series B Preferred shares is converted into 8.981 shares of common stock, each share of Series C Preferred shares is converted into 17.962 shares of common stock, each share of Series D Preferred shares is converted into 17.962 shares of common stock, each share of Series E Preferred shares is converted into 8.909 shares of common stock, each share of Series F Preferred shares is converted into 1.796 shares of common stock, each share of Series G Preferred shares is converted into 2.066 shares of common stock, each share of Series H Preferred shares is converted into 1.085 shares of common stock, and each share of Series I Preferred shares is converted into 1.565 shares of common stock and 0.513 shares of a new class of preferred stock.

No fractional shares will be issued in connection with the amendment and restatement of AQUAhydrate's articles of incorporation. In the event that any holder of AQUAhydrate preferred stock would otherwise be entitled to receive a fractional share of a share of AQUAhydrate common stock or a new class of preferred stock of AQUAhydrate (after aggregating all shares and fractional shares issuable to such holder), then such holder will receive an aggregate number of shares of AQUAhydrate common stock or shares of the new class of preferred stock of AQUAhydrate, as applicable, rounded down to the nearest whole share. No new share certificates will be issued in connection with the amendment and restatement of AQUAhydrate's articles of incorporation.

Following the amendment and restatement of AQUAhydrate's articles of incorporation, it is expected that there will be ♦ shares of AQUAhydrate common stock and ♦ shares of the new class of AQUAhydrate preferred stock issued and outstanding.

AQUAhydrate's board of directors recommends that AQUAhydrate stockholders vote FOR the Capital Reorganization.

AQUAHYDRATE PROPOSAL 2
APPROVAL OF THE MERGER AND THE MERGER AGREEMENT

At the AQUAhydrate Meeting, AQUAhydrate stockholders will be asked to approve the Merger Agreement. The terms of, reasons for and other aspects of the Merger Agreement and the Merger are described in detail in the other sections in this joint proxy statement/prospectus.

AQUAhydrate's board of directors recommends that AQUAhydrate stockholders vote FOR the approval of the Merger Agreement.


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AQUAHYDRATE PROPOSAL 3
APPROVAL OF THE ADJOURNMENT OF THE AQUAHYDRATE MEETING TO SOLICIT ADDITIONAL PROXIES

At the AQUAhydrate Meeting, AQUAhydrate stockholders will be asked to approve the adjournment of the AQUAhydrate Meeting, if necessary or appropriate, to solicit additional proxies if there are not sufficient votes to approve AQUAhydrate Proposal 1 and AQUAhydrate Proposal 2.

AQUAhydrate's board of directors recommends that AQUAhydrate stockholders vote FOR the adjournment of the AQUAhydrate Meeting, if necessary or appropriate, to solicit additional proxies.

THE MERGER

This section describes the material aspects of the Merger, including the Merger Agreement. While Alkaline and AQUAhydrate believe that this description covers the material terms of the Merger and the Merger Agreement, it may not contain all of the information that is important to you. You should read carefully this entire joint proxy statement/prospectus for a more complete understanding of the Merger and the Merger Agreement, including the Merger Agreement itself (including each amendment thereto through the date hereof), which is attached as Schedule "A" to this joint proxy statement/prospectus, and the other documents to which you are referred herein. See the section entitled "Where You Can Find More Information" beginning on page 155 of this joint proxy statement/prospectus.

General Overview of the Merger

Upon the terms and subject to the conditions of the Merger Agreement and in accordance with the NRS, at the effective time of the Merger, Merger Sub, a direct, wholly-owned subsidiary of Alkaline and a party to the Merger Agreement, will merge with and into AQUAhydrate and the separate corporate existence of Merger Sub will cease. AQUAhydrate will survive the Merger as a direct, wholly-owned subsidiary of Alkaline. The Merger will become effective at such time as the articles of merger have been filed with the Secretary of State of Nevada or at any later date or time mutually agreed to by Alkaline and AQUAhydrate and specified in the articles of merger.

Prior to the Merger, AQUAhydrate agreed to conduct the Capital Reorganization, whereby, all outstanding shares of current preferred stock of AQUAhydrate, other than the Series I Preferred shares of AQUAhydrate, will be converted into common stock of AQUAhydrate and the Series I Preferred shares of AQUAhydrate will be converted into common stock and a new class of the preferred stock of AQUAhydrate. Specifically, prior to the Merger, each share of the Series A Preferred shares of AQUAhydrate will be converted into 8.981 shares of common stock of AQUAhydrate, each share of the Series B Preferred shares of AQUAhydrate will be converted into 8.981 shares of common stock of AQUAhydrate, each share of the Series C Preferred shares will be converted into 17.962 shares of common stock of AQUAhydrate, each share of the Series D Preferred shares will be converted into 17.962 shares of common stock of AQUAhydrate, each share of the Series E Preferred shares will be converted into 8.909 shares of common stock, each share of the Series F Preferred shares will be converted into 1.796 shares of common stock of AQUAhydrate, each share of the Series G Preferred shares of AQUAhydrate will be converted into 2.066 shares of common stock of AQUAhydrate, each share of the Series H Preferred shares of AQUAhydrate will be converted into 1.085 shares of common stock of AQUAhydrate, and each share of the Series I Preferred shares of AQUAhydrate (including the Series I Preferred shares to be issued in exchange for the promissory notes) will be converted into 1.565 shares of common stock of AQUAhydrate and 0.513 shares of the new class of preferred stock of AQUAhydrate.

At the effective time of the Merger, which will be soon after the Capital Reorganization, (i) the holders of AQUAhydrate Common Shares will receive an aggregate of 19,565,217 Alkaline Common Shares, less any Alkaline Common Shares to be issued in connection with the Merger to any finders or placement agents or to any persons for the payment of outstanding liabilities of AQUAhydrate on a pro-rata basis in the proportion the number of AQUAhydrate Common Shares held by such holders, and (2) the holders of the shares of AQUAhydrate New Preferred Shares will receive an aggregate of 3,750,000 Alkaline Common Shares on a pro-rata basis in the proportion the number of shares of AQUAhydrate New Preferred Shares held by such holders, subject to a performance escrow release. All of the issued and outstanding AQUAhydrate Common Shares and AQUAhydrate New Preferred Shares immediately prior to the effective time of the Merger will be cancelled.


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It is expected that the 19,565,217 Alkaline Common Shares to be issued at the closing of the Merger will be issued as follows: (i) 641,168 Alkaline Common Shares to Roth Capital Partners, LLC pursuant to a financial advisory agreement with AQUAhydrate; (ii) 233,152 Alkaline Common Shares to Emerald Partners Pty Limited pursuant to a financial advisory agreement with AQUAhydrate; (iii) such number of Alkaline Common Shares as is equal to the outstanding balance of the principal of certain loans (currently $1,600,000 in aggregate), plus any accrued interest, divided by the weighted average trading price for the Alkaline Common Shares for the 21 days prior to the date of the loan agreement to certain creditors of AQUAhydrate; and (iv) the balance of the remaining Alkaline Common Shares to the holders of AQUAhydrate Common Shares in proportion to the number of AQUAhydrate Common Shares held by such holders.

Based on the number of Alkaline Common Shares outstanding as of ♦, 2019, and the aggregate number of Alkaline Common Shares to be issued pursuant to the Merger Agreement, immediately following completion of the Merger, Alkaline stockholders immediately prior to the completion of the Merger are expected to own approximately ♦% of the outstanding Alkaline Common Shares and former AQUAhydrate securityholders (including holders of AQUAhydrate Common Shares and AQUAhydrate New Preferred Shares and any other persons to whom Alkaline Common Shares will be issued pursuant to the Merger Agreement) are expected to own approximately ♦% of the outstanding Alkaline Common Shares.

Alkaline stockholders will not receive any Merger consideration and will continue to hold their Alkaline Common Shares after the Merger.

Alkaline and AQUAhydrate currently expect the closing to occur during the first calendar quarter of 2020. However, as the Merger is subject to the satisfaction or waiver of other conditions described in the Merger Agreement, it is possible that factors outside the control of Alkaline and AQUAhydrate could result in the Merger being completed at an earlier time, a later time, or not at all.

Background of the Merger

Between December 4-6, 2018, at the Roth Investment Banking Conference in Orange County, CA, Roth Capital Partners, LLC ("Roth") made an informal inquiry to Richard A. Wright, President, Chief Executive Officer and director of Alkaline, and Aaron Keay, Chairman and director of Alkaline, to determine whether Alkaline had any interest in acquiring AQUAhydrate.

On December 14, 2018, Alkaline and AQUAhydrate executed a non-disclosure agreement.

On February 7, 2019, an in-person meeting was held at the Beverly Hills, California headquarters of The Yucaipa Companies, LLC ("Yucaipa"), a significant stockholder of AQUAhydrate. Present at the meeting was Ira Tochner, Adam Rashbaum and Stephen Chick of Yucaipa, Matthew Howison, President of AQUAhydrate, Mr. Wright, and Mr. Keay. The parties discussed the deal structure for a potential transaction ultimately agreed upon as an all-stock transaction for the acquisition of AQUAhydrate by Alkaline.

In March 2019, Roth established a virtual data room for Alkaline to conduct due diligence for a potential transaction and began populating it with data for review by Alkaline. Alkaline began conducting due diligence at this time, and continued to do so up until the execution of the Merger Agreement.

Early May 2019, Alkaline provided a draft binding letter of intent to AQUAhydrate.

In May 2019, Clark Wilson LLP ("CW"), Alkaline's external counsel, provided an initial draft due diligence memorandum to management of Alkaline.

In May 2019, AQUAhydrate expressed desire to avoid binding letter of intent and instead, that the parties should proceed straight to the negotiation of a definitive agreement.


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In mid-May 2019, Alkaline received AQUAhydrate's audited financial statements. CW began drafting definitive agreement as the parties agreed they would not proceed with a binding letter of intent. Mr. Keay negotiates the working capital ratio and representations and warranties with Mr. Howison.

From June to September, 2019, the parties performed ongoing due diligence of each other, and continued negotiations of the definitive agreement and all ancillary agreements (including the service agreements for Mark Wahlberg, Sean Combs and Jillian Michaels). Mr. Keay was the lead negotiator for Alkaline, and Mr. Howison was the lead negotiator for AQUAhydrate.

On July 23, 2019, the Alkaline board of directors held a phone call to review the due diligence memorandum and authorized Alkaline to proceed. Alkaline's board of directors approved the transaction with AQUAhydrate subject to finalization of definitive agreement and execution of the service agreements with Mr. Wahlberg, Mr. Combs and Ms. Michaels.

On July 26, 2019, Alkaline received AQUAhydrate's reissued 2017 and 2018 audited financial statements.

From August 2019 to September 2019, Mr. Keay and Mr. Howison negotiated and finalized the Merger Agreement and the services agreements with Mr. Wahlberg, Mr. Combs and Ms. Michaels.

On September 9, 2019, the Merger Agreement and ancillary agreements were signed by all relevant parties and transaction was publicly announced.

On October 31, 2019, Alkaline, Merger Sub and AQUAhydrate entered into the First Merger Agreement to extend the date after which either Alkaline or AQUAhydrate can terminate the Merger Agreement if the Merger has not been consummated to January 31, 2020 (from October 31, 2019).

Alkaline Reasons for the Merger

In evaluating the Merger Agreement and the transactions contemplated thereby and recommending that Alkaline's stockholders vote in favor of the transactions contemplated by the Merger Agreement, Alkaline's board of directors, in consultation with Alkaline's senior management and outside legal counsel, considered numerous positive factors relating to the Merger Agreement, the Merger and the other transactions contemplated thereby including the following material factors:


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In the course of its deliberations, the Alkaline board of directors also considered a variety of risks associated with the Merger, including those described in the section entitled "Risk Factors - Risks Relating to the Merger" beginning on page 35 of this joint proxy statement/prospectus and other countervailing factors related to entering into the Merger Agreement, including:

The foregoing information and factors considered by the Alkaline board of directors are not intended to be exhaustive but are believed to include all of the material factors considered by the Alkaline board of directors. In view of the wide variety of factors considered in connection with its evaluation of the merger and the complexity of these matters, the Alkaline board of directors did not find it useful to attempt, and did not attempt, to quantify, rank or otherwise assign relative weights to these factors. In considering the factors described above, individual members of the Alkaline board of directors may have given different weight to different factors. The Alkaline board of directors conducted an overall analysis of the factors described above, including thorough discussions with, and questioning of, the Alkaline management team and the legal counsel of Alkaline, and considered the factors overall to be favorable to, and to support, its determination.

AQUAhydrate Reasons for the Merger

Since formation of AQUAhydrate in 2003 management has worked hard to build the AQUAhydrate brand.  AQUAhydrate has raised more than $65 million from investors.  However, due in large part to a competitive environment, AQUAhydrate was not able to reach scale and penetration in the market in a significant enough way to drive long-term growth and profitability by itself.  In September, 2018, AQUAhydrate began searching for a merger partner.


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On September 9, 2019 AQUAhydrate entered into the Merger Agreement with Alkaline. The board of directors of AQUAhydrate believes that the Combined Company will benefit from the increased scale of operations and the clear synergies in production, distribution and logistics. AQUAhydrate and Alkaline have complementary product portfolios which target different demographics in fast growing market.  In addition, Alkalines's capital resources are expected to enable AQUAhydrate to continue to develop and grow its brand. Moreover, since stockholders will receive stock in the Combined Company they will participate in the continued growth of the Combined Company.  Alkalines' public listing also provides AQUAhydrate stockholders increased liquidity for their shares.

Board of Directors and Management After the Merger

At the closing of the Merger, Alkaline agreed to cause its board of directors to consist of seven directors, of which four will be nominees of Alkaline and three will be nominees of AQUAhydrate. Following the Merger, it is expected that the directors of the Combined Company will be as set forth in the table below, which also indicates whether the director nominee currently serves on the Alkaline's or AQUAhydrate's board of directors:

Name

Position

Prior Board Service

Aaron Keay

Chairman and Director

Alkaline

Richard A. Wright

Director

Alkaline

Brian Sudano

Director

Alkaline

Bruce Leitch

Director

Alkaline

Matthew Howison

Director

AQUAhydrate

Ira Tochner

Director

N/A

Director

N/A

In addition, at the closing of the Merger, Alkaline agreed to cause the officers of Alkaline to consist of Richard A. Wright, Alkaline's current President, Chief Executive Officer and director, as the Chief Executive Officer, Matthew Howison, AQUAhydrate's current President and director, as President and such other persons as are mutually determined by Alkaline and AQUAhydrate.

Interests of the Alkaline Directors and Executive Officers in the Merger

In considering the recommendation of the Alkaline board of directors to Alkaline stockholders to vote in favor of the Merger Agreement and the transactions contemplated thereby, including the Merger, and the other matters to be acted upon by Alkaline stockholders at the Alkaline Meeting, Alkaline stockholders should be aware that certain directors and executive officers of Alkaline will have interests in the Merger that may be different from, or in addition to, the interests of Alkaline stockholders generally or which may conflict with the interests of Alkaline stockholders. The Alkaline board of directors was aware of these interests and considered them, among other matters, when it evaluated, supervised the negotiation of and approved the Merger Agreement and the transactions contemplated thereby, and in making its recommendations to Alkaline's stockholders. The following discussion sets forth certain of these interests in the Merger of each person who has served as a director or executive officer of Alkaline since the beginning of its last fiscal year:


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Interests of the AQUAhydrate Directors and Executive Officers in the Merger

In considering the recommendation of the AQUAhydrate board of directors to vote in favor of the Merger Agreement and the transactions contemplated thereby, including the Merger, and the other matters to be acted upon by AQUAhydrate stockholders at the AQUAhydrate Meeting, you should be aware that some of AQUAhydrate's directors and executive officers have interests in the Merger that are different from, and in addition to, the interests of the AQUAhydrate stockholders generally. The AQUAhydrate board of directors was aware of and considered these potential interests, among other matters, in approving the Merger Agreement and the transactions contemplated thereby and in determining to recommend that the stockholders vote for approval of the merger agreement and the transactions contemplated thereby. The following discussion sets forth certain of these interests in the Merger of each person who has served as a director or executive officer of AQUAhydrate since the beginning of its last fiscal year:

Regulatory Approvals Required for the Merger

Completion of the Merger is subject to the approval of the TSX Venture Exchange. Alkaline and AQUAhydrate must also comply with applicable federal and state securities laws and the rules and regulations of the Nasdaq Stock Market in connection with the issuance of Alkaline Common Shares and the filing of this joint proxy statement/prospectus with the SEC.


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Stock Exchange Listing

The Alkaline Common Shares are listed for trading on the Nasdaq Capital Market and the TSX Venture Exchange under the symbol "WTER." Alkaline agreed to use its reasonable best efforts to obtain the acceptance by the Nasdaq Capital Market and the TSX Venture Exchange of the transactions contemplated by the Merger Agreement including the Merger and the issuance of the Alkaline Common Shares in connection with the Merger and to cause the Alkaline Common Shares to be issued in connection with the Merger to be listed on the Nasdaq Capital Market and TSX Venture Exchange, subject to official notice of issuance, prior to the Merger.

Resale of Alkaline Common Shares Received by AQUAhydrate Stockholders in the Merger

Subject to the escrow agreements to be entered into in accordance with the Merger Agreement, the Alkaline Common Shares to be issued in connection with the merger will be freely transferable under the Securities Act, except for Alkaline Common Shares issued to any AQUAhydrate stockholders who may be deemed to be an "affiliate" of the Combined Company at the time of the completion of the Merger. Persons who may be deemed to be affiliates include AQUAhydrate directors or executive officers who become directors or executive officers of the Combined Company after the Merger as well as the principal stockholders of the Combined Company. This joint proxy statement/prospectus does not cover resales of Alkaline Common Shares received by any person upon the completion of the Merger, and no person is authorized to make any use of this joint proxy statement/prospectus in connection with any resale.

Anticipated Accounting Treatment

The Merger will be accounted for as an acquisition of a business. Alkaline will record assets acquired and liabilities assumed from AQUAhydrate at their respective fair values at the date of completion of the Merger. Any excess of the purchase price over the net fair value of such assets and liabilities will be recorded as goodwill.

The financial condition and results of operations of Alkaline after completion of the Merger will reflect AQUAhydrate's balances and results after completion of the Merger but will not be restated retroactively to reflect the historical financial condition or results of operations of AQUAhydrate. The earnings of Alkaline following completion of the Merger will reflect acquisition accounting adjustments, including the effect of changes in the carrying value for assets and liabilities on interest expense and amortization expense. Intangible assets with indefinite useful lives and goodwill will not be amortized but will be tested for impairment at least annually, and all assets including goodwill will be tested for impairment when certain indicators are present. If, in the future, Alkaline determines that tangible or intangible assets (including goodwill) are impaired, Alkaline will record an impairment charge at that time.

Dissenters' Rights

Alkaline

Alkaline stockholders are not entitled to appraisal or dissenter's rights in connection with the Merger or any of the other transactions described in this joint proxy statement/prospectus.

AQUAhydrate - Nevada Dissenters' Rights

Under Nevada law, AQUAhydrate stockholders who do not wish to accept the Merger consideration have a statutory right to dissent from the Merger and demand payment of the fair value of their AQUAhydrate shares (excluding any appreciation or depreciation in anticipation of the Merger, unless exclusion of any appreciation or depreciation would be inequitable). The fair value of the shares may be more or less than the amount AQUAhydrate stockholders will receive pursuant to the Merger Agreement.

Chapter 92A (Section 300 through 500 inclusive) of the NRS (the "Nevada Dissent Provisions") provides that a AQUAhydrate stockholder may elect to have AQUAhydrate purchase the AQUAhydrate shares held by such AQUAhydrate stockholder for a cash price that is equal to the "fair value" of such shares, as determined in a judicial proceeding in accordance with the Nevada Dissent Provisions. The fair value of the AQUAhydrate shares means the value of such shares immediately before the effectuation of the Merger, excluding any appreciation or depreciation in anticipation of the Merger, unless exclusion of any appreciation or depreciation would be inequitable.


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A copy of the Nevada Dissent Provisions is attached as Schedule "B" hereto. If an AQUAhydrate stockholder wishes to exercise his, her or its dissenters' rights or preserve the right to do so, he, she or it should carefully review Schedule "B" hereto. IF AN AQUAHYDRATE STOCKHOLDER FAILS TO COMPLY WITH THE PROCEDURES SPECIFIED IN THE NEVADA DISSENT PROVISIONS IN A TIMELY MANNER, HE, SHE OR IT MAY LOSE HIS, HER OR ITS DISSENTERS' RIGHTS. BECAUSE OF THE COMPLEXITY OF THOSE PROCEDURES, AQUAHYDRATE STOCKHOLDERS SHOULD SEEK THE ADVICE OF COUNSEL IF THEY ARE CONSIDERING EXERCISING THEIR DISSENTERS' RIGHTS.

AQUAhydrate stockholders who perfect their dissenters' rights by complying with the procedures set forth in the Nevada Dissent Provisions will have the fair value of their shares determined by a Nevada state district court and will be entitled to receive a cash payment equal to such fair value. Any such judicial determination of the fair value of shares could be based upon any valuation method or combination of methods the court deems appropriate. The value so determined could be more or less than the value of the consideration to be paid in connection with the Merger. In addition, AQUAhydrate stockholders who invoke dissenters' rights may be entitled to receive payment of a fair rate of interest from the effective time of the Merger on the amount determined to be the fair value of their shares.

Under NRS Section 92A.440(3), AQUAhydrate stockholders who fail to comply with the statutory procedures for dissenter's rights will not be entitled to demand payment or receive the fair value for their shares as provided under Nevada law. Instead, such AQUAhydrate stockholders will receive the same consideration as the AQUAhydrate stockholders who do not exercise dissenter's rights.

Pursuant to NRS Section 92A.460, within 30 days after receipt of a demand for payment, AQUAhydrate must pay each dissenter who complied with the provisions of the Nevada Dissent Provisions the amount AQUAhydrate estimates to be the fair value of such shares, plus interest from the effective date of the Merger. The payment must be accompanied by the following: (a) AQUAhydrate's balance sheet as of the end of 2018, a statement of income for 2018, a statement of changes in the stockholders' equity for 2018 or, where such financial statements are not reasonably available, then such reasonably equivalent financial information and the latest available quarterly financial statements, if any; (b) a statement of AQUAhydrate's estimate of the fair value of the shares; (c) an explanation of how interest was calculated, and (d) a statement of the dissenter's rights to demand payment under NRS Section 92A.480 and that if any such stockholder does not do so within the period specified, such stockholder will be deemed to have accepted such payment in full satisfaction of the corporation's obligations under Chapter 92A of the NRS.

Under NRS Section 92A.470(1), AQUAhydrate is entitled to withhold payment from a dissenter unless the dissenter was the beneficial owner before the date set forth in the dissenters' notice as the first date of any announcement to the news media or to the stockholders of the terms of the proposed corporate action. If AQUAhydrate chooses to withhold payment, it is required, within 30 days after receiving demand for payment, to notify the dissenter: (a) of AQUAhydrate's balance sheet as of the end of 2018, a statement of income for 2018, a statement of changes in the stockholders' equity for 2018 or, where such financial statements are not reasonably available, then such reasonably equivalent financial information and the latest available quarterly financial statements, if any; (b) of AQUAhydrate's estimate of the fair value of the shares; (c) that the dissenter may accept AQUAhydrate's estimate of the fair value, plus interest, in full satisfaction of her demand or demand appraisal; (d) that if the dissenter wishes to accept the offer, the dissenter must notify AQUAhydrate of acceptance within 30 days after receiving of the offer; and (e) that if the dissenter does not satisfy the requirements for demanding appraisal, the dissenter will be deemed to have accepted AQUAhydrate's offer.

If AQUAhydrate does not deliver payment within 30 days of receipt of the demand for payment, the dissenting stockholder may enforce under NRS Section 92A.460(1) the dissenter's rights by commencing an action in Carson City, Nevada.


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If a dissenting stockholder disagrees with the amount of AQUAhydrate's payment, then the dissenting stockholder may, pursuant to NRS Section 92A.480, within 30 days of such payment, (i) notify AQUAhydrate in writing of the dissenting stockholder's own estimate of the fair value of the dissenting shares and the amount of interest due, and demand payment of such estimate, less any payments made by AQUAhydrate, or (ii) reject the offer by AQUAhydrate if the dissenting stockholder believes that the amount offered by AQUAhydrate is less than the fair value of the dissenting shares or that the interest due is incorrectly calculated. If a dissenting stockholder submits a written demand as set forth above and AQUAhydrate accepts the offer to purchase the AQUAhydrate shares at the offer price, then such dissenting stockholder will be sent a check for the full purchase price of the AQUAhydrate shares within 30 days of acceptance.

If a demand for payment remains unsettled, AQUAhydrate must commence a proceeding in the Carson City, Nevada district court within 60 days after receiving the demand. Each dissenter who is made a party to the proceeding will be entitled to a judgment in the amount, if any, by which the court finds the fair value of the dissenting shares, plus interest, exceeds the amount paid by AQUAhydrate. If a proceeding is commenced to determine the fair value of the AQUAhydrate shares, the costs of such proceeding, including the reasonable compensation and expenses of any appraisers appointed by the court, will be assessed against AQUAhydrate, unless the court finds the dissenters acted arbitrarily, vexatiously or not in good faith in demanding payment. The court may also assess the fees and expenses of the counsel and experts for the respective parties, in amounts the court finds equitable against AQUAhydrate if the court finds that (i) AQUAhydrate did not comply with the Nevada Dissent Provisions or (ii) against either AQUAhydrate or a dissenting stockholder, if the court finds that such party acted arbitrarily, vexatiously or not in good faith with respect to the rights provided by the Nevada Dissent Provisions.

If AQUAhydrate fails to commence such a proceeding, it would be required by NRS Section 92A.490(1) to pay the amount demanded to each dissenter whose demand remains unsettled. Dissenters would be entitled to a judgment for the amount, if any, by which the court finds the fair value of his shares, plus accrued interest, exceeds the amount paid by AQUAhydrate; or the fair value, plus accrued interest, of his after-acquired shares for which AQUAhydrate elected to withhold payment pursuant to Section 92.470 of the NRS.

Under Section 92A.490(4) of the NRS, the district court may appoint one or more persons as appraisers to receive evidence and recommend a decision on the question of fair value. The appraisers have the powers described in the order appointing them or in any amendment to such order. In any such court proceeding, the dissenters are entitled to the same discovery rights as parties in other civil proceedings.

Under Section 92A.500 of the NRS, the district court will assess the costs of the proceedings against AQUAhydrate, unless the court finds that all or some of the dissenters acted arbitrarily, vexatiously or not in good faith in demanding payment. The district court may also assess against AQUAhydrate or the dissenters the fees and expenses of counsel and experts for the respective parties, in the amount the court finds equitable.

A person having a beneficial interest in AQUAhydrate shares that are held of record in the name of another person, such as a broker, fiduciary, depository or other nominee, must act to cause the record holder to follow the requisite steps properly and in a timely manner to perfect dissenters' rights of appraisal. If the AQUAhydrate shares are owned of record by a person other than the beneficial owner, including a broker, fiduciary (such as a trustee, guardian or custodian), depositary or other nominee, the written demand for dissenters' rights of appraisal must be executed by or for the record owner. If AQUAhydrate shares are owned of record by more than one person, as in joint tenancy or tenancy in common, the demand must be executed by or for all joint owners. An authorized agent, including an agent for two or more joint owners, may execute a demand for appraisal for a stockholder of record, provided that the agent identifies the record owner and expressly discloses, when the demand is made, that the agent is acting as agent for the record owner.

A record holder, such as a broker, fiduciary, depository or other nominee, who holds AQUAhydrate shares as a nominee for others, will be able to exercise dissenters' rights of appraisal with respect to the AQUAhydrate shares held for all or less than all of the beneficial owners of those AQUAhydrate shares as to which such person is the record owner. In such case, the written demand must set forth the number of AQUAhydrate shares covered by the demand. Where the number of AQUAhydrate shares is not expressly stated, the demand will be presumed to cover all AQUAhydrate shares outstanding in the name of such record owner.


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Under NRS Section 92A.380(2), a stockholder who is entitled to dissent and obtain payment pursuant to NRS Section 92A.300 to 92A.500, inclusive, may not challenge the Merger unless it is unlawful or fraudulent with respect to the stockholder or AQUAhydrate. The board of directors of AQUAhydrate was not required under NRS Section 78.138(5) to consider the proposed effect of the Merger upon any particular group having an interest in the corporation as a dominant factor, such as the unaffiliated stockholders, and the board of directors of AQUAhydrate did not appoint an independent committee to consider the proposed effect of the Merger on the stockholders of AQUAhydrate.

The foregoing summary of the rights of dissenting stockholders under the Nevada Dissent Provisions does not purport to be a complete statement of the procedures to be followed by stockholders desiring to exercise any dissenters' rights of appraisal rights available under NRS. The preservation and exercise of dissenters' rights of appraisal require strict adherence to the applicable provisions of NRS, and the foregoing summary is qualified in its entirety by reference to Schedule "B" hereto. AQUAhydrate stockholders should carefully read Chapter 92A (Sections 300 through 500 inclusive) of the NRS, particularly the procedural steps required to perfect appraisal rights, because failure to strictly comply with the procedural requirements set forth in Chapter 92A (Sections 300 through 500 inclusive) of the NRS will result in a loss of appraisal rights. AQUAHYDRATE STOCKHOLDERS ARE URGED TO CONSULT WITH THEIR OWN ATTORNEY REGARDING AVAILABLE DISSENTERS' RIGHTS, AND THE PROCESS TO PERFECT THEIR DISSENTERS' RIGHTS UNDER CHAPTER 92A (SECTIONS 300 THROUGH 500 INCLUSIVE) OF THE NRS.

Pursuant to the Second Amended and Restated Investors' Rights Agreement of AQUAhydrate dated May 2, 2017, certain AQUAhydrate stockholders have agreed not to exercise dissent rights.

AQUAhydrate - California Dissenters' Rights

Although AQUAhydrate is incorporated in the State of Nevada, because a majority of the holders of AQUAhydrate's voting securities have addresses in California and AQUAhydrate's other contacts with the State of California, the provisions of California law relating to the rights of dissenting stockholders in a merger apply to the Merger.

In accordance with Sections 1300 - 1313 (inclusive) of the California Code (the "California Dissent Provisions"), AQUAhydrate common stockholders and AQUAhydrate preferred stockholders who are entitled to vote on the Merger (collectively, the "AQUAhydrate Voting Stockholders") have the right to dissent from the Merger and to receive payment in cash for the "fair market value" (as defined below) of their AQUAhydrate Common Shares or shares of AQUAhydrate preferred stock, as applicable (the "AQUAhydrate Voting Stock"). The holders of Series A, B, C, D and E Preferred shares of AQUAhydrate are not entitled to vote on the Merger, and are therefore not entitled to exercise rights under the California Dissent Provisions. AQUAhydrate Voting Stockholders should recognize that fair market value of their AQUAhydrate Voting Stock as determined pursuant to the California Dissent Provisions could be higher, lower or the same as the Merger consideration.

AQUAhydrate stockholders electing to exercise dissenters' rights must comply with the provisions of the California Dissent Provisions, which consists of Sections 1300-1313, in order to perfect their rights. AQUAhydrate will require strict compliance with the statutory procedures. If an AQUAhydrate Voting Stockholder fails to meet any of the requirements for assertion of dissenters' rights, such stockholder will not be entitled to payment in cash for the fair market value for such stockholder's AQUAhydrate Voting Stock under the California Code. The following is intended as a brief summary of the material provisions of the California statutory procedures required to be followed by an AQUAhydrate Voting Stockholder in order to dissent from the Merger and perfect the stockholder's dissenters' rights. This summary, however, is not a complete statement of all applicable requirements and is qualified in its entirety by reference to Chapter 13 of the California Code, the full text of which is set forth in Schedule "C".

All references in the California Dissent Provisions and in this summary to a "stockholder" are to the holder of record of AQUAhydrate Voting Stock as to which dissenters' rights are asserted. A person having a beneficial interest in AQUAhydrate Voting Stock held of record in the name of another person, such as a broker, bank or nominee, cannot enforce dissenters' rights directly and must act promptly to cause the holder of record to follow the steps summarized below properly and in a timely manner to perfect such person's dissenters' rights.


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Under the California Code, AQUAhydrate Voting Stock must satisfy each of the following requirements to qualify as dissenting shares, which are referred to as dissenting shares:

 such dissenting shares must have been outstanding on the record date;

 such dissenting shares must not have been voted in favor of the Merger proposal;

 the holder of such dissenting shares must timely make a written demand that AQUAhydrate repurchase such dissenting shares at fair market value; and

 the holder of such dissenting shares must submit (a) certificates representing such dissenting shares for endorsement or, (b) if the shares are uncertificated, written notice of the number of shares which the stockholder demands that AQUAhydrate purchase.

A vote "Against" the Merger proposal, or abstaining from voting, does not in and of itself constitute a demand for appraisal under California law.

Pursuant to the California Dissent Provisions, holders of dissenting shares may require AQUAhydrate to repurchase their dissenting shares at a price equal to "fair market value" of such shares, which is the fair market value of such shares determined as of the day of, and immediately prior to, the first announcement of the terms of the Merger, excluding any appreciation or depreciation as a consequence of the proposed Merger, but adjusted for any stock split, reverse stock split or stock dividend that becomes effective thereafter.

Within 10 days following approval of the Merger proposal by AQUAhydrate stockholders, AQUAhydrate is required to mail a dissenter's notice to each person who did not vote in favor of the Merger proposal. The dissenter's notice must contain the following:

 a notice of the approval of the merger proposal;

 a statement of the price determined by AQUAhydrate to represent the fair market value of dissenting shares (which will constitute an offer by AQUAhydrate to purchase such dissenting shares at such stated price unless such shares lose their status as "dissenting shares" under Section 1309 of Chapter 13 of the California Code);

 a brief description of the procedure for such holders to exercise their rights as dissenting stockholders; and

 a copy of Sections 1300 through 1304 of Chapter 13 of the California Code.

Within 30 days after the date on which the notice of the approval of the Merger proposal by the outstanding shares is mailed to dissenting stockholders, AQUAhydrate or its transfer agent must have received from any dissenting stockholder a written demand that AQUAhydrate repurchase such stockholder's dissenting shares. The written demand must include the number and class of dissenting shares held of record by such dissenting stockholder that the dissenting stockholder demands that AQUAhydrate purchase. Furthermore, the written demand must include a statement of what such dissenting stockholder claims to be the fair market value of the dissenting shares (which will constitute an offer by the dissenting stockholder to sell the dissenting shares at such price). In addition, within such same 30-day period, a dissenting stockholder must submit to AQUAhydrate or its transfer agent certificates representing any dissenting shares that the dissenting stockholder demands AQUAhydrate purchase, so that such dissenting shares may either be stamped or endorsed with the statement that the shares are dissenting shares or exchanged for certificates of appropriate denomination so stamped or endorsed. If the dissenting shares are uncertificated, then such stockholder must provide written notice of the number of shares which the stockholder demands that AQUAhydrate purchase within 30 days after the date of the mailing of the notice of the approval of the Merger proposal. The demand, statement and AQUAhydrate certificates should be delivered by overnight courier or certified mail, return-receipt requested to:

AQUAhydrate, INC.
5870 West Jefferson Blvd., Suite D
Los Angeles, CA 90016
Attention: President


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If upon the dissenting stockholder's surrender of the certificates representing the dissenting shares, AQUAhydrate and a dissenting stockholder agree upon the price to be paid for the dissenting shares and agree that such shares are dissenting shares, then the agreed price is required by law to be paid (with interest thereon at the legal rate on judgments from the date of the agreement) to the dissenting stockholder within the later of (i) 30 days after the date of such agreement or (ii) 30 days after any statutory or contractual conditions to the completion of the merger are satisfied.

If AQUAhydrate and a dissenting stockholder disagree as to the price for such dissenting shares or disagree as to whether such shares are entitled to be classified as dissenting shares, such holder has the right to bring an action in California Superior Court of the proper county, within six months after the date on which the notice of the stockholders' approval of the merger proposal is mailed, to resolve such dispute. In such action, the court will determine whether the AQUAhydrate Voting Stock held by such stockholder are dissenting shares and/or the fair market value of such dissenting shares.

In determining the fair market value for the dissenting shares, the court may appoint one or more impartial appraisers to make the determination. Within a time fixed by the court, the appraisers, or a majority of them, will make and file a report with the court. If the appraisers cannot determine the fair market value within 10 days of their appointment, or within a longer time determined by the court, or the court does not confirm their report, then the court will determine the fair market value. Upon a motion made by any party, the report will be submitted to the court and considered evidence as the court considers relevant. The costs of the dissenters' rights action, including reasonable compensation to the appraisers appointed by the court, will be allocated between AQUAhydrate and the dissenting stockholder(s) as the court deems equitable. However, if the appraisal of the fair market value of AQUAhydrate shares exceeds the price offered by AQUAhydrate in the notice of approval, then AQUAhydrate will pay the costs. If the fair market value of the shares awarded by the court exceeds 125% of the price offered by AQUAhydrate, then the court may in its discretion impose additional costs on AQUAhydrate, including attorneys' fees, fees of expert witnesses and interest.

AQUAhydrate stockholders considering whether to exercise dissenters' rights should consider that the fair market value of their AQUAhydrate Voting Stock determined under the California Dissent Provisions could be higher, lower or the same as the Merger consideration. Also, AQUAhydrate reserves the right to assert in any appraisal proceeding that, for purposes thereof, the fair market value of dissenting shares is less than the value of the Merger consideration to be issued and paid in connection with the Merger, as set forth in the Merger Agreement. AQUAhydrate stockholders considering whether to exercise dissenters' rights should consult with their tax advisors for the specific tax consequences of the exercise of dissenters' rights.

A copy of the California Dissent Provisions is attached as Schedule "C" hereto. If you wish to exercise your dissenters' rights or preserve the right to do so, you should carefully review Schedule "C" hereto. IF YOU FAIL TO COMPLY WITH THE PROCEDURES SPECIFIED IN THE CALIFORNIA DISSENT PROVISIONS IN A TIMELY MANNER, YOU MAY LOSE YOUR DISSENTERS' RIGHTS. BECAUSE OF THE COMPLEXITY OF THOSE PROCEDURES, YOU SHOULD SEEK THE ADVICE OF COUNSEL IF YOU ARE CONSIDERING EXERCISING YOUR DISSENTERS' RIGHTS.

Except as expressly limited by the California Dissent Provisions, dissenting shares continue to have all the rights and privileges incident to their shares until the fair market value of their shares is agreed upon or determined.

Dissenting shares lose their status as "dissenting shares," and holders of dissenting shares cease to be entitled to require AQUAhydrate to purchase such shares, upon the happening of any of the following:

 the Merger is abandoned;

 the dissenting shares are transferred before their submission to AQUAhydrate for the required endorsement;

 the dissenting stockholder and AQUAhydrate do not agree on the status of the shares as dissenting shares or do not agree on the purchase price, but neither AQUAhydrate nor the stockholder files a complaint or intervenes in a pending action within six months after AQUAhydrate mails a notice that its stockholders have approved the Merger; or


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 with AQUAhydrate's consent, the dissenting stockholder withdraws the stockholder's demand for purchase of the dissenting shares.

In view of the complexity of the California Dissent Provisions and the requirement that stockholders must strictly comply with such statutory procedures, stockholders who wish to exercise dissenters' rights should consult their legal and financial advisors. There can be no assurance that fair market value of any such stockholder's AQUAhydrate Voting Stock as determined pursuant to the California Dissent Provisions will be greater than or equal to the Merger consideration.

Certain Differences Between Nevada and California Law on Dissenter's Rights

There are several differences between the laws of Nevada and California with respect to dissenting stockholders' rights. These differences include, but are not limited to the following:

 Entitlement to Dissent. Under Nevada law, any stockholder of record is entitled to exercise dissent rights, regardless of whether the stockholder is permitted to vote on the Merger. Under California law, only those stockholders entitled to vote on the Merger are entitled to exercise dissent rights.

 Timing of Appraisal Demand. Under Nevada law, AQUAhydrate must send a written dissenter's notice to the applicable stockholders no later than 10 days following the completion of the Merger, and must set a date by which it must receive the demand for payment which may not be less than 30 nor more than 60 days after the notice is delivered. Under California law a stockholder who has not voted in favor of the Merger is not required to deliver a written appraisal demand until 30 days after the date on which the notice of the approval of the Merger by the requisite AQUAhydrate stockholders is mailed to the stockholder.

 Process of Filing Petition. Under Nevada law, if AQUAhydrate and the dissenting stockholder do not agree on the fair value of the dissenting shares, AQUAhydrate must commence a proceeding in the district court of the county where its principal office is located within 60 days of receiving the dissenting stockholder's estimate of fair value of the dissenting shares, otherwise AQUAhydrate must pay the dissenting stockholder the amount demanded. Under California law, if AQUAhydrate and the dissenting stockholder do not agree on the status of shares as dissenting shares or their fair market value, the stockholder has until up to six months after the date on which the notice of approval of the Merger by AQUAhydrate stockholders was mailed to the stockholder to file a complaint in the California Superior Court requesting a determination of these matters.

 Timing of Determination of Fair Market Value/Fair Value. The California Dissent Provisions dictate that the fair market value of a dissenting AQUAhydrate stockholder's shares must be determined as of the day before the first announcement of the terms of the Merger and specifically excludes any appreciation or depreciation resulting from the proposed actions. The Nevada Dissent Provisions dictate that the fair value of a dissenting AQUAhydrate stockholder's shares must be determined as of the time immediately before the Merger was effectuated, and excluding any appreciation or depreciation in anticipation of the Merger unless exclusion would be inequitable.

AQUAhydrate Voting Stockholders considering whether to seek appraisal should note that the fair value of their AQUAhydrate Voting Stock determined under NRS Sections 92A.300 - 92A.500 or the fair market value determined under Chapter 13 of the California Code could be more than, the same as or, less than the value of the price paid in the Merger as set forth in the Merger Agreement. Also, AQUAhydrate reserves the right to assert in any appraisal proceeding that, for purposes thereof, the "fair value" of the AQUAhydrate common stock or AQUAhydrate preferred stock, as applicable, is less than the value of the Merger consideration as set forth in the Merger Agreement.

The process of dissenting and exercising appraisal rights requires strict compliance with technical prerequisites. AQUAhydrate Voting Stockholders wishing to dissent should consult with their own legal counsel in connection with compliance with NRS Sections 92A.300 - 92A.500 or Chapter 13 of the California Code.

Any AQUAhydrate Voting Stockholder who fails to comply with the requirements of NRS Sections 92A.300 - 92A.500, attached as Schedule "B" to this joint proxy statement/prospectus, or Chapter 13 of the California Code, attached as Schedule "C", will forfeit his, her or its rights to dissent from the Merger and exercise dissent rights and will receive the consideration to be issued and paid in the Merger as set forth in the Merger Agreement.


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THE MERGER AGREEMENT

A summary of the material terms of the Merger Agreement is set forth below. The full text of the Merger Agreement (including each amendment thereto through the date hereof) is attached as Schedule "A" to this joint proxy statement/prospectus and the Merger Agreement is incorporated by reference into this joint proxy statement/prospectus.

Principal Terms of the Merger Agreement

The Merger Agreement provides that at the effective time of the Merger, AQUAhydrate will be merged into Merger Sub and Merger Sub will cease to exist and AQUAhydrate will be the Surviving Company and a wholly-owned subsidiary of Alkaline, will operate under the name "AQUAhydrate, Inc.", and will be governed by the laws of Nevada. The articles of incorporation and bylaws of the Surviving Company will be the articles of incorporation and bylaws of Merger Sub, except that references of Merger Sub's name will be replaced with references to AQUAhydrate's name.

AQUAhydrate Capital Reorganization

The Merger Agreement provides that, prior to the closing of the Merger, AQUAhydrate will obtain the approval of the AQUAhydrate stockholders for the adoption of the Seventh Amended and Restated Articles of Incorporation and amend and restate the articles of AQUAhydrate to effect the Capital Reorganization. The Capital Reorganization will result in the conversion of all outstanding shares of current preferred stock of AQUAhydrate, other than the Series I Preferred shares, into shares of AQUAhydrate common stock (each, an "AQUAhydrate Common Share") and the conversion of the Series I Preferred shares into AQUAhydrate Common Share and AQUAhydrate New Preferred Shares. In addition, immediately prior to the Capital Reorganization, $4,304,582 principal amount of promissory notes will be exchanged for 593,565,687 shares of Series I Preferred shares.

Specifically, under the Capital Reorganization, each share of current preferred stock of AQUAhydrate will be converted into securities of AQUAhydrate as follow:

Following the Capital Reorganization, it is expected that there will be ♦ AQUAhydrate Common Shares and ♦ AQUAhydrate New Preferred Shares issued and outstanding.


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Effective Time of the Merger

The Merger Agreement provides that the closing of the Merger will take place as soon as practicable (and in any event, within two business days) after the satisfaction or waiver of all conditions to the Merger and, at the closing, the parties will cause the articles of merger to be executed and filed with the Secretary of State of Nevada in accordance with the relevant provisions of the NRS. The Merger Agreement provides that Merger will become effective at such time as the articles of merger have been duly filed with the Secretary of State of Nevada or at such later date or time as may be agreed by Alkaline and AQUAhydrate in writing and specified in the articles of merger in accordance with the NRS.

Manner and Basis of Converting AQUAhydrate Common Shares after the Capital Reorganization

At the effective time of the Merger, as a result of the Merger and without any action on the part of Alkaline, Merger Sub, or AQUAhydrate or the holder of any capital stock of Alkaline, Merger Sub, or AQUAhydrate, each share of the AQUAhydrate common stock or preferred stock that is owned by Alkaline or AQUAhydrate (as treasury stock or otherwise) or any of their respective direct or indirect wholly-owned subsidiaries as of immediately prior to the effective time of the Merger will automatically be cancelled and retired and will cease to exist, and no consideration will be delivered in exchange therefor. Each AQUAhydrate Common Share issued and outstanding immediately prior to the effective time of the Merger (other than cancelled shares and dissenting shares) will be converted into the right to receive such number of shares of Alkaline common stock (the "Consideration Shares") that is equal to 19,565,217 less any shares of the Alkaline common stock to be issued in connection with the Merger to any finders or placement agents (the "Service Providers"), and to any other persons for the payment of liabilities of AQUAhydrate (the "Creditors"), divided by the number of shares of AQUAhydrate common stock outstanding immediately prior to the effective time of the Merger, which will be soon after the Capital Reorganization.

It is expected that the 19,565,217 Alkaline Common Shares to be issued at the closing of the Merger will be issued as follows: (i) 874,320 Alkaline Common Shares (consisting of 641,168 Alkaline Common Shares to Roth Capital Partners, LLC pursuant to a financial advisory agreement with AQUAhydrate and 233,152 Alkaline Common Shares to Emerald Partners Pty Limited pursuant to a financial advisory agreement with AQUAhydrate) to the Service Providers; (ii) such number of Alkaline Common Shares as is equal to the outstanding balance of the principal of certain loans (currently $1,600,000 in aggregate), plus any accrued interest, divided by the weighted average trading price for the Alkaline Common Shares for the 21 days prior to the date of the loan agreement to the Creditors; and (iii) the balance of the remaining Alkaline Common Shares, being the Consideration Shares, to the holders of AQUAhydrate Common Shares in proportion to the number of AQUAhydrate Common Shares held by such holders.

No certificates or scrip representing fractional shares will be issued as Consideration Shares. In the event that any holder of the AQUAhydrate Common Shares would otherwise be entitled to receive a fractional share of a Consideration Share (after aggregating all shares and fractional shares of the Consideration Shares issuable to such holder), then such holder will receive an aggregate number of Consideration Shares rounded down to the nearest whole share.

Assuming (1) that the aggregate of ♦ Alkaline Common Shares to the Service Providers and the Creditors will be issued in accordance with the Merger Agreement, (2) that $4,304,582 principal amount of promissory notes of AQUAhydrate will be exchanged for 593,565,687 shares of Series I Preferred shares prior to the Capital Reorganization, and (3) that the number of shares of common stock and preferred stock of AQUAhydrate do not otherwise change from the number of issued and outstanding shares of common stock and preferred stock AQUAhydrate as of ♦, 2019 (♦ for shares of common stock of AQUAhydrate and ♦ for shares of preferred stock of AQUAhydrate), the AQUAhydrate stockholders will be entitled to receive the following number of Consideration Shares for each share of AQUAhydrate common stock or preferred stock previously held by such stockholders prior to the Capital Reorganization:


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AQUAhydrate Common Stock or Preferred Stock prior to the Capital Reorganization

Number of Consideration Shares to be Received for One Share of AQUAhydrate Common Stock or Preferred Stock held prior the Capital Reorganization*

Common Stock

Series A Preferred

Series B Preferred

Series C Preferred

Series D Preferred

Series E Preferred

Series F Preferred

Series G Preferred

Series H Preferred

Series I Preferred

*The exact number of Alkaline Common Shares to be received will be subject to changes due to the changes in the number of issued and outstanding shares of common stock or preferred stock AQUAhydrate both prior to and subsequent to the Capital Reorganization and immediately prior to the Merger and the changes in the number of Alkaline Common Shares to be received by the Service Providers and the Creditors.

Manner and Basis of Converting AQUAhydrate New Preferred Shares after the Capital Reorganization

Each AQUAhydrate New Preferred Share issued and outstanding immediately prior to the effective time of the Merger, which will be soon after the Capital Reorganization, (other than cancelled shares and dissenting shares) will be converted into the right to receive such number of Alkaline Common Shares (the "Performance Shares") that is equal to the quotient of 3,750,000 divided by the number of AQUAhydrate New Preferred Shares outstanding immediately prior to the effective time of the Merger. No certificates or scrip representing fractional shares will be issued as Performance Shares. In the event that any holder of the AQUAhydrate New Preferred Shares would otherwise be entitled to receive a fractional share of a Performance Share (after aggregating all shares and fractional shares of the Performance Shares issuable to such holder), then such holder will receive an aggregate number of shares of Performance Shares rounded down to the nearest whole share.

Assuming (1) that $4,304,582 principal amount of promissory notes of AQUAhydrate will be exchanged for 593,565,687 shares of Series I Preferred shares prior to the Capital Reorganization and (2) the number of shares of Series I Preferred shares will not otherwise change from ♦, being the number of issued and outstanding shares of Series I Preferred shares as of ♦, 2019, the holders of the Series I Preferred shares of AQUAhydrate will be entitled to receive ♦ Performance Shares for each share of Series I Preferred shares previously held by such stockholders prior to the Capital Reorganization.

The exact number of Performance Shares to be received will be subject to changes due to the changes in the number of issued and outstanding shares of Series I Preferred shares both prior to and subsequent to the Capital Reorganization and immediately prior to the Merger.


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Escrow Agreements

All of the Alkaline Common Shares issued in connection with the Merger will be placed in escrow by Alkaline, the release of which will be contingent upon certain events and conditions.

Prior to or simultaneously with the closing of the Merger, it is contemplated that Alkaline and a representative of the AQUAhydrate stockholders (the "AQUAhydrate Stockholder Representative") will enter into an escrow agreement (the "Escrow Agreement") with an escrow agent reasonably acceptable to the AQUAhydrate Stockholder Representative governing the deposit into escrow and release of Alkaline Common Shares to be issued pursuant to the Merger Agreement.

Pursuant to the Merger Agreement and the Escrow Agreement, 75% of the Consideration Shares to be issued to the stockholders of AQUAhydrate (the "Regular Escrow Shares") will be subject to escrow for a period of six months from the date of the effective time of the Merger, except for the Regular Escrow Shares issuable to certain stockholders of AQUAhydrate, being Yucaipa American Alliance (Parallel) Fund II, LP, Yucaipa American Alliance Fund II, LP, SC Beverages, LLC, and the Mark Wahlberg Trust (collectively, the "Principal Stockholders"). The Regular Escrow Shares issued to the Principal Stockholders will be subject to escrow for a period of 24 months following the date of the effective time of the Merger (with 33% to be released 12 months from the date of the effective time of the Merger, 33% to be released 18 months from the date of the effective time of the Merger and 34% to be released 24 months from the date of the effective time of the Merger).

Pursuant to the Merger Agreement and the Escrow Agreement, 25% of the Consideration Shares to be issued to the stockholders of AQUAhydrate (the "Indemnity Escrow Shares") will be subject to escrow for a period of 12 months (or a longer period if there are unresolved indemnity claims) from the date of the effective time of the Merger (the "Indemnity Period") in connection with the indemnities provided by the AQUAhydrate stockholders in favor of Alkaline and the AQUAhydrate Stockholder Representative. Any indemnity claims made by Alkaline or the AQUAhydrate Stockholder Representative under the Merger Agreement during the Indemnity Period, if determined to be valid claims, will be satisfied by a release of Indemnity Escrow Shares, pro rata in accordance with the interest of each stockholder, to the party to be indemnified. At the end of the Indemnity Period, the balance of the Indemnity Escrow Shares remaining in escrow after the satisfaction of any valid indemnity claims will be released to the stockholders of AQUAhydrate, pro rata in accordance with their interest, provided that if there are any unresolved indemnity claims at the end of the Indemnity Period, the amount of Indemnity Escrow Shares required to satisfy such unresolved claims will not be released to the appropriate party until the resolution of such claims.

Pursuant to the Merger Agreement and the Escrow Agreement, the Performance Shares are to be held in escrow following the closing of the Merger and are subject to escrow release as follows:

provided, however, that all of the Performance Shares held in escrow will be immediately released from escrow upon a change of control of Alkaline. In the event that some or all of the performance milestones described above are not achieved by the date which is five years from the date of the closing of the Merger, any Performance Shares held in escrow will be immediately returned to Alkaline for cancellation.

In addition, it is further contemplated that the Services Providers and the Creditors will have entered into escrow agreements with Alkaline, pursuant to which all of the Alkaline Common Shares issuable to the Service Providers and the Creditors will be subject to escrow for a period of six months and 12 months, respectively, following the date of the effective time of the Merger.


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Treatment of Stock Options and Other Stock-Based Compensation

Prior to the effective time of the Merger, AQUAhydrate agreed take such actions as may be necessary to provide that each option to acquire shares of AQUAhydrate common stock or AQUAhydrate preferred stock then outstanding under the AQUAhydrate stock option plan, as well as any arrangement for the issuance of AQUAhydrate stock options not covered by the AQUAhydrate stock option plan, will be of no further force or effect as of the effective time of the Merger, either because such stock option will have been exercised prior to the effective time of the Merger or will have been otherwise cancelled and terminated as of or prior to the effective time of the Merger.

Treatment of Warrants

Prior to the effective time of the Merger, AQUAhydrate agreed to take such action as may be necessary to ensure that each outstanding and unexercised warrant to purchase AQUAhydrate common stock or AQUAhydrate preferred stock will be of no further force or effect as of the effective time of the Merger, either because such warrant will have been exercised prior to the effective time of the Merger or will have been otherwise cancelled and terminated as of or prior to the effective time of the Merger. Without limiting the foregoing, AQUAhydrate agreed to take such action as may be necessary to ensure that AQUAhydrate and the Surviving Company, as applicable, will not, at the effective time of the Merger, be bound by any rights or agreements which would entitle any person, other than Alkaline and its subsidiaries, to own any capital stock of AQUAhydrate or the Surviving Company or to receive any payment in respect thereof.

Stock Certificates

At the effective time of the Merger, all shares of AQUAhydrate common stock and AQUAhydrate preferred stock will no longer be outstanding and will be cancelled and retired and will cease to exist, and each holder of a certificate formerly representing any shares of AQUAhydrate common stock and AQUAhydrate preferred stock or any book-entry shares which immediately prior to the effective time of the Merger represented shares of AQUAhydrate common stock and AQUAhydrate preferred stock will cease to have any rights with respect thereto, except the right to receive the Merger consideration.

At the effective time of the Merger, all shares of Merger Sub common stock issued and outstanding immediately prior to the effective time of the Merger will be converted into and become one newly issued, fully paid, and non-assessable share of common stock, par value $0.001 per share, of the Surviving Company with the same rights, powers, and privileges as the shares so converted and will constitute the only outstanding shares of capital stock of the Surviving Company. All certificates representing shares of Merger Sub common stock will be deemed for all purposes to represent the number of shares of common stock of the Surviving Company into which they were converted in accordance with the Merger Agreement.

Effect of the Merger

Upon the consummation of the Merger, Merger Sub will merge with and into AQUAhydrate, the separate corporate existence of Merger Sub will cease, and AQUAhydrate will continue its corporate existence under the NRS as the Surviving Company in the Merger and a wholly-owned subsidiary of Alkaline. From and after the effective time of the Merger, all property, rights, privileges, immunities, powers, franchises, licenses, and authority of AQUAhydrate and Merger Sub will vest in the Surviving Company, and all debts, liabilities, obligations, restrictions, and duties of each of AQUAhydrate and Merger Sub will become the debts, liabilities, obligations, restrictions, and duties of the Surviving Company.

Representations and Warranties

The Merger Agreement contains a number of representations and warranties made by Alkaline, AQUAhydrate and Merger Sub that are subject in some cases to exceptions and qualifications (including exceptions that do not have, and would not reasonably be expected to have, individually or in the aggregate, a material adverse effect on the party making the representations and warranties). The representations and warranties in the Merger Agreement relate to, among other things:


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The representations and warranties in the Merger Agreement are to survive for a period of 12 months following the closing of the Merger. For a full description of the representations and warranties given by the parties to the Merger Agreement, see Articles 4 and 5 of the Merger Agreement appended hereto as Schedule "A".


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Closing Conditions

The obligations of Alkaline and AQUAhydrate to effect Merger is subject to the satisfaction or waiver of certain conditions including, but not limited to, the conditions set out in this section. For a full description of the closing conditions to the Merger, see Article 6 of the Merger Agreement appended hereto as Schedule "A".

The respective obligations of each of Alkaline and AQUAhydrate to effect the Merger are subject to the satisfaction or waiver of the following conditions prior to closing:

The obligations of Alkaline and Merger Sub to effect the Merger are subject to the satisfaction or waiver of the following conditions prior to closing:

The obligations of AQUAhydrate to effect the Merger are subject to the satisfaction or waiver of the following conditions prior to closing of the Merger:


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Conduct of Business

Alkaline agreed, during the period from the date of the Merger Agreement until the closing of the Merger, to use commercially reasonable efforts to conduct, and to cause Merger Sub to conduct, their respective businesses in the ordinary course of business consistent with past practice. In particular, Alkaline agreed that, other than as contemplated by the Merger Agreement and other limited exceptions, it will not, and will not permit Merger Sub to, without the prior written consent of AQUAhydrate, do any of the following:

AQUAhydrate agreed, during the period from the date of the Merger Agreement until the closing of the Merger, to use commercially reasonable efforts to conduct its business in the ordinary course of business consistent with past practice. In particular, AQUAhydrate agreed that, other than as contemplated by the Merger Agreement and other limited exceptions, it will not, without the prior written consent of Alkaline, do any of the following:


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Indemnification; Directors' and Officers' Insurance

Alkaline has agreed that all rights to indemnification, advancement of expenses, and exculpation by AQUAhydrate existing in favor of each person who is now, or has been or who becomes prior to the effective time of the Merger an officer or director of AQUAhydrate (each a "AQUAhydrate Indemnified Party") as provided in the charter documents of AQUAhydrate, in each case as in effect on the date of the Merger Agreement, or pursuant to any other contracts in effect on the date of the Merger Agreement and disclosed to Alkaline, will be assumed by the Surviving Company.


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For a period of two years from the effective time of the Merger, (i) the Surviving Company must, and Alkaline must cause the Surviving Company to, maintain in effect the exculpation, indemnification, and advancement of expenses equivalent to the provisions of the charter documents of AQUAhydrate as in effect immediately prior to the effective time with respect to acts or omissions by any AQUAhydrate Indemnified Party occurring prior to the effective time of the Merger, (ii) maintain a policy of director and officer liability insurance with commercially reasonable coverage, however, in no event must such coverage be less than any such current policy maintained by AQUAhydrate for the period prior to the effective time of the Merger, and (iii) must not amend, repeal, or otherwise modify any such policies or provisions in the charter documents of AQUAhydrate in any manner that would adversely affect the rights thereunder of any AQUAhydrate Indemnified Party; provided that all rights to indemnification in respect of any claim made for indemnification within such period must continue until the disposition of such action or resolution of such claim.

Standstill

Each of Alkaline and AQUAhydrate agreed that, from the date of the Merger Agreement and for a period of 120 days following such date, except as expressly provided for in the Merger Agreement, neither party will directly or indirectly, or permit any of its representatives to:

Under the Merger Agreement, a "Transaction Proposal" is defined as any bona fide offer, proposal or inquiry made by any person with respect to:

Notwithstanding the above, if at any time following the date of the Merger Agreement and prior to the closing of the Merger, either party receives a bona fide written Transaction Proposal that did not result from a breach of the foregoing, and the applicable board of directors, acting in good faith and after consultation with outside legal counsel, determines that such proposal could reasonably lead to a Superior Proposal (as defined below) failure to take such action would be inconsistent with such board's fiduciary duties, it may, in response to a request made by the person making such Transaction Proposal:


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Under the Merger Agreement, a "Superior Proposal" is defined as any bona fide, unsolicited, written Transaction Proposal made by a person that relates the Subject Party, and:

The Merger Agreement also provides that if either party receives or otherwise becomes aware of any inquiry, proposal or offer from any person that constitutes, or may reasonably be expected to constitute or lead to, a Transaction Proposal, or any request by any person for copies of, access to, or disclosure of, information relating to such party, such party will immediately notify the other party, at first orally, and then promptly, and in any event within 48 hours, in writing, of such Transaction Proposal (including a description of its material terms and conditions and the identity of all persons making the Transaction Proposal). Each party agrees to keep the other party informed of the status of developments and negotiations with respect to such Transaction Proposal and will provide the other party with copies of all documents, correspondence or other material received in respect of, from or on behalf of any such person making the Transaction Proposal.

Amendment

At any time prior to the effective time of the Merger, the Merger Agreement may be amended or supplemented in any and all respects, whether before or after receipt of the requisite stockholder votes of Alkaline and AQUAhydate, by written agreement signed by each of Alkaline and AQUAhydate, provided however, that following the receipt of such requisite stockholder votes there will be no amendment or supplement to the provisions of the Merger Agreement which by law or in accordance with the rules of any relevant self-regulatory organization would require further approval by the Alkaline stockholders or the AQUAhydrate stockholders.

Termination

The Merger Agreement may be terminated at any time prior to the effective time of the Merger (whether before or after the receipt of the requisite stockholder votes) by the mutual written consent of Alkaline and AQUAhydrate.

The Merger Agreement may be terminated by either Alkaline or AQUAhydrate at any time prior to the effective time of the Merger if:


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Important Statement Regarding the Merger Agreement

The Merger Agreement has been included in this joint proxy statement/prospectus to provide Alkaline stockholders and AQUAhydrate stockholders with information regarding its terms. It is not intended to provide any other factual information about Alkaline, Merger Sub, AQUAhydrate or their respective subsidiaries and affiliates. The Merger Agreement contains representations and warranties by Alkaline and the Merger Sub, on the one hand, and by AQUAhydrate, on the other hand, made solely for the benefit of the other. The assertions embodied in those representations and warranties are qualified by information in disclosure letters delivered by each party in connection with the signing of the Merger Agreement. Moreover, certain representations and warranties in the Merger Agreement were made as of a specified date, may be subject to a contractual standard of materiality different from what might be viewed as material to stockholders or may have been used for the purpose of allocating risk between Alkaline and Merger Sub, on the one hand, and AQUAhydrate, on the other hand. Accordingly, the representations and warranties in the Merger Agreement should not be relied on by any persons as characterizations of the actual state of facts about Alkaline or AQUAhydrate at the time they were made or otherwise. In addition, information concerning the subject matter of the representations and warranties may change after the date of the Merger Agreement, which subsequent information may or may not be fully reflected in Alkaline's or AQUAhydrate's public disclosures. The Merger Agreement should not be read alone but should instead be read in conjunction with the other information regarding the Merger Agreement, the Merger, Alkaline, AQUAhydrate, their respective affiliates and their respective businesses, that is contained in this joint proxy statement/prospectus.

MATERIAL U.S. FEDERAL INCOME TAX CONSEQUENCES

The following are the material U.S. federal income tax consequences of the Capital Reorganization and the Merger to holders of AQUAhydrate capital stock that exchange their shares of AQUAhydrate capital stock for shares of Alkaline common stock in the Merger.

This discussion addresses only holders of AQUAhydrate capital stock who hold that stock, and the Alkaline common stock received in the Merger in exchange for AQUAhydrate capital stock, as a "capital asset" as defined for U.S. federal income tax purposes.

This discussion does not address all aspects of U.S. federal income taxation that may be relevant to a holder of AQUAhydrate capital stock in light of that holder's particular circumstances or to a holder subject to special rules (such as, for example, dealers or brokers in securities, commodities or foreign currencies, traders in securities that elect to apply a mark-to-market method of accounting, banks and certain other financial institutions, insurance companies, mutual funds, tax-exempt organizations, holders subject to the alternative minimum tax provisions of the Code, partnerships, S corporations or other pass-through entities or investors in partnerships, regulated investment companies, real estate investment trusts, holders who are not U.S. persons (as defined below), holders who hold shares of AQUAhydrate capital stock through certain foreign financial institutions (including investment funds or other investment vehicles), controlled foreign corporations, passive foreign investment companies, former citizens or residents of the United States, U.S. expatriates, holders whose functional currency is not the U.S. dollar, holders who hold shares of capital stock as part of a hedge, straddle, constructive sale or conversion transaction or other integrated investment, holders who acquired capital stock pursuant to the exercise of employee stock options, through a tax qualified retirement plan or otherwise as compensation or holders who actually or constructively own more than 5% of AQUAhydrate capital stock).


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For purposes of this discussion a "U.S. person" for purposes hereof is:

This discussion is based on the Code, applicable U.S. Treasury regulations, administrative interpretations and court decisions, each as in effect as of the date of this joint proxy statement/prospectus and all of which are subject to change, possibly with retroactive effect.

If a partnership (or an entity or arrangement treated as a partnership for U.S. federal income tax purposes) holds AQUAhydrate capital stock, the tax treatment of a partner will generally depend on the status of the partner and the activities of the partnership. Partners of partnerships holding AQUAhydrate capital stock should consult their own tax advisors.

This discussion of material U.S. federal income tax consequences is for general information purposes only and is not intended to be, and should not be construed as, tax advice. Holders of AQUAhydrate capital stock are urged to consult their independent tax advisors with respect to the application of U.S. federal income tax laws to their particular situations as well as any tax consequences arising under the U.S. federal estate or gift tax rules, or under the laws of any state, local, foreign or other taxing jurisdiction or under any applicable tax treaty.

Neither AQUAhydrate nor Alkaline have sought, nor will either of them seek, any ruling from the Internal Revenue Service (the "IRS") regarding any matters relating to the Capital Reorganization or the Merger, and as a result, there can be no assurance that the IRS will not assert, or that a court would not sustain, a position contrary to any of the conclusions set forth below.

Tax consequences of the Capital Reorganization to AQUAhydrate stockholders

The Capital Reorganization will be treated as a "reorganization" for U.S. federal income tax purposes within the meaning of Section 368(a) of the Code and AQUAhydrate and holders of AQUAhydrate preferred stock will not recognize any gain or loss for U.S. federal income tax purposes as a result of the reclassification of AQUAhydrate preferred stock into AQUAhydrate common stock, and the case of Series I Preferred shares, into AQUAhydrate common stock and a new class of preferred stock. The aggregate tax basis and holding period of a holder's shares of AQUAhydrate capital stock will carry over as the aggregate tax basis and holding period of such holder's shares of AQUAhydrate capital stock after the Capital Reorganization.

Tax consequences of the Merger to Alkaline, AQUAhydrate and Merger Sub

AQUAhydrate and Alkaline intend for the Merger to qualify as a "reorganization" for U.S. federal income tax purposes within the meaning of Section 368(a) of the Code. Accordingly, none of Alkaline, AQUAhydrate or Merger Sub will recognize any gain or loss for U.S. federal income tax purposes as a result of the Merger.


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Tax consequences of the Merger to AQUAhydrate stockholders

Each holder of AQUAhydrate capital stock who exchanges such holder's AQUAhydrate capital stock for Alkaline common stock generally will not recognize gain or loss. The aggregate tax basis of the Alkaline common stock each holder receives in the Merger will equal the aggregate adjusted tax basis in the shares of AQUAhydrate capital stock such holder surrenders in the Merger. The holding period for the shares of Alkaline common stock received in the Merger will include the holding period of the shares of AQUAhydrate capital stock surrendered in the Merger. If a holder acquired different blocks of AQUAhydrate capital stock at different times or at different prices, the Alkaline common stock such holder receives will be allocated pro rata to each block of AQUAhydrate capital stock, and the basis and holding period of each block of Alkaline common stock received will be determined on a block-for-block basis depending on the basis and holding period of the blocks of AQUAhydrate capital stock exchanged for such block of Alkaline common stock.

Merger reporting requirements

A holder of AQUAhydrate capital stock, as a result of having received Alkaline common stock in the Merger, will be required to retain records and file certain statements with their tax returns pertaining to the Merger as provided pursuant to U.S. Treasury regulation Section 1.368-3. holders of AQUAhydrate capital stock should consult with their tax advisers regarding the compliance with these requirements.

Sale or other disposition

A sale, exchange, or other disposition of the Alkaline common stock received in the Merger will generally result in gain or loss equal to the difference between the amount realized upon the disposition and a holder's adjusted tax basis in the Alkaline common stock, as the case may be. Such gain or loss will be capital gain or loss and will be long-term capital gain or loss if the holder's holding period for the Alkaline common stock, as applicable, exceeds one year. If a holder is an individual or other non-corporate holder, net long-term capital gain realized by such holder is subject to a preferential maximum tax rate of 20%, whereas short term capital gains are taxable at ordinary effective income tax rates. The deduction of capital losses is subject to limitations.

A Medicare contribution tax is imposed on the "net investment income" of certain individuals, estates and trusts with income exceeding certain threshold amounts. An individual is subject to a 3.8% tax on the lesser of: (1) his or her net investment income for the relevant taxable year, or (2) the excess of his or her modified adjusted gross income for the taxable year over a certain threshold ($125,000, $200,000 or $250,000 depending on the individual's U.S. federal income tax filing status). Estates and trusts are subject to similar rules applied to undistributed net investment income. Net investment income generally would include any capital gain recognized in connection with a disposition of Alkaline common stock, as well as, among other items, other interest, dividends, capital gains and rental or royalty income received by such individual. Holders of AQUAhydrate common stock should consult their tax advisors as to the application of this additional tax to their circumstances.

Information reporting and backup withholding

In general, information reporting will apply to dividends in respect of the Alkaline common stock and the proceeds from the sale, exchange or other disposition of the Alkaline common stock that are paid to a holder within the United States (and in certain cases, outside the United States), unless a holder is an exempt recipient and appropriately establishes that exemption. Backup withholding may apply to such payments if a holder fails to provide a taxpayer identification number or certification of other exempt status or fails to report in full dividend and interest income.

Any amounts withheld under the backup withholding rules will be allowed as a refund or a credit against a holder's U.S. federal income tax liability provided the required information is timely furnished to the IRS.


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DESCRIPTION OF SECURITIES OF ALKALINE

The aggregate number of shares that Alkaline has the authority to issue is 300,000,000, of which 200,000,000 shares are common stock, with a par value of $0.001 per share, and 100,000,000 shares are preferred stock, with a par value of $0.001 per share. 3,000,000 shares of Alkaline's authorized preferred stock are designated as "Series C Preferred Stock" and have conversion rights. 5,000,000 shares of Alkaline's authorized preferred stock are designated as "Series D Preferred Stock" and have conversion rights.

As of ♦, 2019, there were ♦45,549,081 shares of Alkaline common stock outstanding, 1,500,000 shares of Series C Preferred Stock issued and outstanding and 3,800,000 shares of Series D Preferred Stock issued and outstanding.

Common Stock

Alkaline common stock is entitled to one vote per share on all matters submitted to a vote of Alkaline stockholders, including the election of directors. Except as otherwise provided by law or as provided in any resolution adopted by Alkaline's board of directors providing for the issuance of any series of preferred stock, the holders of Alkaline common stock possess all voting power. There is no cumulative voting in the election of directors. Stockholders holding at least 33⅓% of the stock issued and outstanding and entitled to vote thereat, present in person or represented by proxy, will constitute a quorum at all meetings of the stockholders for the transaction of business except as otherwise provided by statute or by the articles of incorporation. When a quorum is present or represented at any meeting, the vote of the stockholders of a majority of the stock having voting power present in person or represented by proxy will be sufficient to elect members of Alkaline's board of directors or to decide any question brought before such meeting, unless the question is one upon which by express provision of statute or of the articles of incorporation, a different vote is required in which case such express provision will govern and control the decision of such question. Except as otherwise required by law, any action required to be taken at a meeting of Alkaline stockholders, or any other action which may be taken at a meeting of Alkaline stockholders, may be taken without a meeting, without prior notice and without a vote if written consents are signed by Alkaline stockholders representing a majority of the shares entitled to vote at such a meeting.

Alkaline's board of directors has the power to amend Alkaline's bylaws. As a result, Alkaline's board of directors can change the quorum and voting requirements at a meeting of Alkaline stockholders, subject to the applicable laws.

Subject to any preferential rights of any outstanding series of preferred stock created by Alkaline's board of directors from time to time, the holders of Alkaline common stock are entitled to receive, when, as and if declared by Alkaline's board of directors, out of funds legally available therefore, dividends payable in cash, stock or otherwise. Alkaline's board of directors is not obligated to declare a dividend. Any future dividends will be subject to the discretion of Alkaline's board of directors and will depend upon, among other things, future earnings, the operating and financial condition of our company, its capital requirements, general business conditions and other pertinent factors. It is not anticipated that dividends will be paid in the foreseeable future.

Upon any liquidation of Alkaline, and after holders of any outstanding series of preferred stock have been paid in full the amounts to which they respectively are entitled or a sum sufficient for such payment in full has been set aside, the remaining net assets of Alkaline are to be distributed pro rata to the holders of Alkaline common stock, to the exclusion of holders of Alkaline's preferred stock.

Alkaline common stock is not convertible or redeemable and has no preemptive, subscription or conversion rights. There are no conversions, redemption, sinking fund or similar provisions regarding Alkaline common stock.

Preferred Stock

Alkaline's preferred stock may be divided into and issued in series. Alkaline's board of directors is authorized to divide the authorized shares of preferred stock into one or more series, each of which will be so designated as to distinguish the shares thereof from the shares of all other series and classes. Alkaline's board of directors is authorized to fix and determine the designations, rights, qualifications, preferences, limitations and terms of the shares of any series of preferred stock including but not limited to the following.


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Alkaline must not declare, pay or set apart for payment any dividend or other distribution (unless payable solely in shares of common stock or other class of stock junior to the preferred stock as to dividends or upon liquidation) in respect of common stock, or other class of stock junior to the preferred stock, nor must Alkaline redeem, purchase or otherwise acquire for consideration shares of any of the foregoing, unless dividends, if any, payable to holders of preferred stock for the current period (and in the case of cumulative dividends, if any, payable to holders of preferred stock for the current period and in the case of cumulative dividends, if any, for all past periods) have been paid, are being paid or have been set aside for payment, in accordance with the terms of the preferred stock, as fixed by Alkaline's board of directors.

In the event of the liquidation of Alkaline, holders of preferred stock are entitled to receive, before any payment or distribution on the common stock or any other class of stock junior to the preferred stock upon liquidation, a distribution per share in the amount of the liquidation preference, if any, fixed or determined in accordance with the terms of such preferred stock plus, if so provided in such terms, an amount per share equal to accumulated and unpaid dividends in respect of such preferred stock (whether or not earned or declared) to the date of such distribution. Neither the sale, lease or exchange of all or substantially all of the property and assets of Alkaline, nor any consolidation or merger of Alkaline, will be deemed to be a liquidation for this purpose.

Series C Preferred Stock

3,000,000 shares of Alkaline's authorized preferred stock are designated as "Series C Preferred Stock."

Series D Preferred Stock

5,000,000 shares of Alkaline's authorized preferred stock are designated as "Series D Preferred Stock."

Anti-Takeover Provisions

Some features of the NRS, which are further described below, may have the effect of deterring third parties from making takeover bids for control of Alkaline or may be used to hinder or delay a takeover bid. This would decrease the chance that Alkaline stockholders would realize a premium over market price for their shares of Alkaline common stock as a result of a takeover bid.

Combination with Interested Stockholder

The NRS contain provisions governing combination of a Nevada corporation that has 200 or more stockholders of record with an interested stockholder. As of ♦, 2019, we had approximately ♦53 Alkaline stockholders of record. Therefore, Alkaline believes that these provisions governing combination of a Nevada corporation do not apply to Alkaline and will not until such time as these requirements have been met. At such time as they may apply to Alkaline, these provisions may also have effect of delaying or making it more difficult to effect a change in control of Alkaline.


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A corporation affected by these provisions may not engage in a combination within three years after the interested stockholder acquires his, her or its shares unless the combination or purchase is approved by the board of directors before the interested stockholder acquired such shares. Generally, if approval is not obtained, then after the expiration of the three-year period, the business combination may be consummated with the approval of the board of directors before the person became an interested stockholder or a majority of the voting power held by disinterested stockholders, or if the consideration to be received per share by disinterested stockholders is at least equal to the highest of:

Generally, these provisions define an interested stockholder as a person who is the beneficial owner, directly or indirectly of 10% or more of the voting power of the outstanding voting shares of a corporation. Generally, these provisions define combination to include any merger or consolidation with an interested stockholder, or any sale, lease, exchange, mortgage, pledge, transfer or other disposition, in one transaction or a series of transactions with an interested stockholder of assets of the corporation having:

Articles of Incorporation and Bylaws

There are no provisions in Alkaline's articles of incorporation or Alkaline's bylaws that would delay, defer or prevent a change in control of Alkaline and that would operate only with respect to an extraordinary corporate transaction involving Alkaline, such as merger, reorganization, tender offer, sale or transfer of substantially all of its assets, or liquidation.

COMPARISON OF RIGHTS OF HOLDERS OF ALKALINE SHARES AND AQUAHYDRATE SHARES

The following is a summary of the material differences between the rights of the Alkaline stockholders and the rights AQUAhydrate stockholders, but it is not a complete description of those differences. These differences arise from the governing corporate documents of the two companies, including the articles of incorporation and bylaws of Alkaline, the articles of incorporation and bylaws of AQUAhydrate. Alkaline and AQUAhydrate are both incorporated under the laws of the State of Nevada, and accordingly, the rights of the Alkaline stockholders and the rights AQUAhydrate stockholders are governed by the laws of the State of Nevada. After the completion of the Merger, the rights of AQUAhydrate stockholders who become Alkaline stockholders will be governed by the laws of the State of Nevada and the articles of incorporation and bylaws of Alkaline.


87


 

Rights of Alkaline Stockholders

Rights of AQUAhydrate Stockholders

Authorized Capital Stock

The authorized capital stock of Alkaline consists of 200,000,000 shares of common stock, par value of $0.001 per share and 100,000,000 shares of preferred stock, par value of $0.001 per share.

3,000,000 shares of Alkaline's authorized preferred stock are designated as "Series C Preferred Stock" and have conversion rights. 5,000,000 shares of Alkaline's authorized preferred stock are designated as "Series D Preferred Stock" and have conversion rights.

The authorized capital stock of AQUAhydrate consists of 625,000,000 shares of common stock, par value of $0.001 per share and 344,842,464 shares of preferred stock, par value of $0.001 per share. The authorized preferred stock consists of 250,000 Series A Preferred shares, 768,000 Series B Preferred shares, 303,500 Series C Preferred shares, 302,500 Series D Preferred shares, 100,000 Series E Preferred shares, 26,082,420 Series F Preferred shares, 20,865,936 Series G Preferred shares, 162,834,432 Series H Preferred shares, and 133,335,676 Series I Preferred shares.

As long as at least 65,390,916 shares of Series I Preferred shares (as adjusted for any reorganization) remain outstanding, the creation of or issuance of any additional class or series of capital stock, or an increase or decrease in the authorized number of Series I Preferred shares is subject to the approval of at least a majority of the holders of the Series I Preferred shares outstanding, voting as a separate class on an as-converted to common stock basis.

As long as at least 72,246,493 shares of Series H Preferred shares (as adjusted for any reorganization) remain outstanding, the creation of or issuance of any additional class or series of capital stock, or an increase or decrease in the authorized number of Series H Preferred shares is subject to the approval of at least a majority of the holders of the Series H Preferred shares outstanding, voting as a separate class on an as-converted to common stock basis.

As long as at least 10,432,968 shares of Series G Preferred shares (as adjusted for any reorganization) remain outstanding, the creation of or issuance of any additional class or series of capital stock, or an increase or decrease in the authorized number of Series G Preferred shares is subject to the approval of at least a majority of the holders of the Series G Preferred shares outstanding, voting as a separate class on an as-converted to common stock basis.

As long as at least 13,041,210 shares of Series F Preferred shares (as adjusted for any reorganization) remain outstanding, the creation of or issuance of any additional class or series of capital stock, or an increase or decrease in the authorized number of Series F Preferred shares is subject to the approval of at least a majority of the holders of the Series F Preferred shares outstanding, voting as a separate class on an as-converted to common stock basis.



88


 

Rights of Alkaline Stockholders

Rights of AQUAhydrate Stockholders

Amendments to the Articles of Incorporation or Bylaws

Alkaline's board of directors, may by a majority vote of the board of directors at any meeting, amend any of Alkaline's bylaws, including bylaws adopted by the stockholders, but the stockholders may from time to time specify particular provisions of the bylaws, which must not be amended by Alkaline's board of directors.

Except as set forth below, the board of directors of AQUAhydrate has the power to adopt, amend and repeal the bylaws of AQUAhydrate.

As long as at least 65,390,916 shares of Series I Preferred shares (as adjusted for any reorganization) remain outstanding, amendments are subject to the approval of at least a majority of the holders of the Series I Preferred shares outstanding, voting as a separate class on an as-converted to common stock basis.

As long as at least 72,246,493 shares of Series H Preferred shares (as adjusted for any reorganization) remain outstanding, amendments are subject to the approval of at least a majority of the holders of the Series H Preferred shares outstanding, voting as a separate class on an as-converted to common stock basis.

As long as at least 10,432,968 shares of Series G Preferred shares (as adjusted for any reorganization) remain outstanding, amendments are subject to the approval of at least a majority of the holders of the Series G Preferred shares outstanding, voting as a separate class on an as-converted to common stock basis.

As long as at least 13,041,210 shares of Series F Preferred shares (as adjusted for any reorganization) remain outstanding, amendments are subject to the approval of at least a majority of the holders of the Series F Preferred shares outstanding, voting as a separate class on an as-converted to common stock basis.



89


 

Rights of Alkaline Stockholders

Rights of AQUAhydrate Stockholders

Preferred Stock

Alkaline's bylaws provide that the Alkaline board of directors are authorized to divide the authorized shares of preferred stock into one or more series, each of which will be so designated as to distinguish the shares thereof from the shares of all other series and classes. Alkaline's board of directors is authorized to fix and determine the designations, rights, qualifications, preferences and terms of the shares of any series of preferred stock.

The preferred stock of AQUAhydrate may be issued in one or more series, denominated as "Series A Preferred," "Series B Preferred," "Series C Preferred," "Series D Preferred," "Series E Preferred," "Series F Preferred," "Series G Preferred," "Series H Preferred," and "Series I Preferred" shares. One or more additional series of AQUAhydrate preferred stock may be created and issued by the AQUAhydrate board of directors.

Dividends

Subject to any preferential rights of any outstanding series of preferred stock created by Alkaline's board of directors from time to time, the holders of Alkaline's common stock are entitled to receive, when, as and if declared by Alkaline's board of directors, out of funds legally available therefore, dividends payable in cash, stock or otherwise. Alkaline's board of directors is not obligated to declare a dividend. Any future dividends will be subject to the discretion of Alkaline's board of directors and will depend upon, among other things, future earnings, the operating and financial condition of Alkaline, its capital requirements, general business conditions and other pertinent factors.

Subject to the rights of holders of all classes of stock at the time outstanding having prior or concurrent rights as to dividends, the holders of the common stock are entitled to receive, when, as, and if declared by the AQUAhydrate board of directors, out of any assets of AQUAhydrate legally available therefor, any dividends as may be declared from time to time by the AQUAhydrate board of directors.

First, Series I Preferred shares are entitled to receive dividends of 8% per annum on a cumulative non-compounded basis.

Second, after the payment of dividends in respect of the Series I Preferred shares, concurrently and equal in priority with the Series H Preferred shares, the Series F Preferred and Series G Preferred shares are entitled to receive dividends of 8% per annum on a cumulative basis, compounded annually from the date of issuance until January 22, 2015, and after such date on a non-compounded basis.

Third, after the payment of dividends in respect of the Series I Preferred, the Series H Preferred, the Series G Preferred and the Series F Preferred shares, the Series A Preferred shares are entitled to receive dividends of 5% per annum on a cumulative non-compounded basis..

Fourth, after the payment of dividends in respect of the Series I Preferred, the Series H Preferred, the Series G Preferred, the Series F Preferred and the Series A Preferred shares, the Series B Preferred shares are entitled to receive dividends of 5% per annum on a cumulative non-compounded basis.



90


 

Rights of Alkaline Stockholders

Rights of AQUAhydrate Stockholders

   

Fifth, after the payment of dividends in respect of the Series I Preferred, the Series H Preferred, the Series G Preferred, the Series F Preferred, the Series A Preferred, and the Series B Preferred shares, the Series C Preferred shares are entitled to receive dividends of 5% per annum on a cumulative non-compounded basis.

Sixth, after the payment of dividends in respect of the Series I Preferred, the Series H Preferred, the Series G Preferred, the Series F Preferred, the Series A Preferred, the Series B Preferred, and the Series C Preferred shares, the Series D Preferred shares are entitled to receive dividends of 8% per annum on a cumulative non-compounded basis.

Seventh, after the payment of dividends in respect of the Series I Preferred, the Series H Preferred, the Series G Preferred, the Series F Preferred, the Series A Preferred, the Series B Preferred, the Series C Preferred, and the Series D Preferred shares, the Series E Preferred shares are entitled to receive dividends of 8% per annum on a cumulative non-compounded basis.

No dividends will be paid on any common stock unless and until the aforementioned dividends are paid.

Liquidation

Upon any liquidation of Alkaline, and after holders of any outstanding series of preferred stock of Alkaline have been paid in full the amounts to which they respectively are entitled or a sum sufficient for such payment in full has been set aside, the remaining net assets of Alkaline are to be distributed pro rata to the holders of Alkaline common stock, to the exclusion of holders of Alkaline preferred stock.

Upon the liquidation, dissolution or winding up of AQUAhydrate, the assets of AQUAhydrate will be distributed as described below. If remaining assets are insufficient to permit full payment, assets will be distributed to holders pro rata.

First, the holders of Series I Preferred shares are entitled to receive $0.1208 per share (as adjusted for any reorganization) plus any declared or accumulated but unpaid dividends on such share, before any payment is made or any assets distributed in respect of any other shares of preferred stock or common stock.

Second, after payment or distribution to the holders of Series I Preferred shares, the holders of Series H Preferred, Series G Preferred, and Series F Preferred shares are entitled to receive $0.1208, $0.3834, and $0.3834 per share (as adjusted for any reorganization), respectively, plus any declared or accumulated but unpaid dividends on such shares, before any payment is made or any assets distributed in respect of any other shares of preferred stock or common stock.


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Rights of Alkaline Stockholders

Rights of AQUAhydrate Stockholders

   

Third, after the payment or distribution to the holders of Series I Preferred, Series H Preferred, Series G Preferred, and Series F Preferred shares, the holders of Series B Preferred shares are entitled to receive $1.00 per share (as adjusted for any reorganization), respectively, plus any declared or accumulated but unpaid dividends on such shares, before any payment is made or any assets distributed in respect of any other shares of preferred stock or common stock.

Fourth, after the payment or distribution to the holders of Series I Preferred, Series H Preferred, Series G Preferred, Series F Preferred, and Series A Preferred shares, the holders of Series B Preferred shares are entitled to receive $1.00 per share (as adjusted for any reorganization), respectively, plus any declared or accumulated but unpaid dividends on such shares, before any payment is made or any assets distributed in respect of any other shares of preferred stock or common stock.

Fifth, after the payment or distribution to the holders of Series I Preferred, Series H Preferred, Series G Preferred, Series F Preferred, Series A Preferred, and Series B Preferred shares, the holders of Series C Preferred shares are entitled to receive $2.00 per share (as adjusted for any reorganization), respectively, plus any declared or accumulated but unpaid dividends on such shares, before any payment is made or any assets distributed in respect of any other shares of preferred stock or common stock.

Sixth, after the payment or distribution to the holders of Series I Preferred, Series H Preferred, Series G Preferred, Series F Preferred, Series A Preferred, Series B Preferred, and Series C Preferred shares, the holders of Series D Preferred shares are entitled to receive $2.00 per share (as adjusted for any reorganization), respectively, plus any declared or accumulated but unpaid dividends on such shares, before any payment is made or any assets distributed in respect of any other shares of preferred stock or common stock.

Seventh, after the payment or distribution to the holders of Series I Preferred, Series H Preferred, Series G Preferred, Series F Preferred, Series A Preferred, Series B Preferred, Series C Preferred, and Series D Preferred shares, the holders of Series E Preferred shares are entitled to receive $2.00 per share (as adjusted for any reorganization), respectively, plus any declared or accumulated but unpaid dividends on such shares, before any payment is made or any assets distributed in respect of any shares common stock.



92


 

Rights of Alkaline Stockholders

Rights of AQUAhydrate Stockholders

   

Lastly, after the payment or distribution to the holders of each series of preferred stock, any remaining assets is distributed with equal priority and pro rata among the holders of common stock.

As long as at least 65,390,916 shares of Series I Preferred shares (as adjusted for any reorganization) remain outstanding, effecting a liquidation is subject to the approval of at least a majority of the holders of the Series I Preferred shares outstanding, voting as a separate class on an as-converted to common stock basis.

As long as at least 72,249,493 shares of Series H Preferred shares (as adjusted for any reorganization) remain outstanding, effecting a liquidation is subject to the approval of at least a majority of the holders of the Series H Preferred shares outstanding, voting as a separate class on an as-converted to common stock basis.

As long as at least 10,432,968 shares of Series G Preferred shares (as adjusted for any reorganization) remain outstanding, effecting a liquidation is subject to the approval of at least a majority of the holders of the Series G Preferred shares outstanding, voting as a separate class on an as-converted to common stock basis.

As long as at least 13,041,210 shares of Series F Preferred shares (as adjusted for any reorganization) remain outstanding, effecting a liquidation is subject to the approval of at least a majority of the holders of the Series F Preferred shares outstanding, voting as a separate class on an as-converted to common stock basis.


93


 

Rights of Alkaline Stockholders

Rights of AQUAhydrate Stockholders

Conversion

Alkaline common stock is not convertible into other securities and has no conversion rights.

For the purposes of determining the amount each of the holders of Series I Preferred, Series H Preferred, Series G Preferred, Series F Preferred, Series E Preferred, Series D Preferred, and Series C Preferred shares is entitled to receive on liquidation, each holder of the above stated shares will be deemed to have converted such shares into common stock immediately prior to a distribution on liquidation, if as a result of an actual conversion, such holder would receive, in the aggregate, an amount greater than the amount that would be distributed to such holder if such holder did not convert such shares into common stock. The aforementioned shares have the conversion rights described below:

At the option of the holder, each share of Series I Preferred and Series H Preferred shares is convertible into that number of shares of common stock that is equal to $0.1208 (as adjusted for any reorganization) divided by $0.1208 (subject to adjustment).

At the option of the holder, each share of Series G Preferred shares is convertible into that number of shares of common stock that is equal to $0.3834 (as adjusted for any reorganization) divided by $0.24 (subject to adjustment).

At the option of the holder, each share of Series F Preferred shares is convertible into that number of shares of common stock that is equal to $0.3834 (as adjusted for any reorganization) divided by $0.27, except if (a) Sean Combs or an entity affiliated with him, or a transferee of such persons, exercises the warrant to purchase 26,082,420 shares of AQUAhydrate's common stock, or (b) Mark Wahlberg or any entity affiliated with him, or a transferee of such persons, exercises the warrant to purchase 21,082,420 shares of AQUAhydrate's common stock, then instead divided by $0.20.

At the option of the holder, each share of Series E Preferred shares is convertible into that number of shares of common stock that is equal to $1.00 (as adjusted for any reorganization) divided by $1.00 (subject to adjustment). At the option of the holder, each share of Series E Preferred stock may be converted into that number of additional shares of common stock as is equal to the amount of any accrued and unpaid dividends divided by $1.00 (subject to adjustment).

At the option of the holder, each share of Series D Preferred and Series C Preferred shares is convertible into that number of shares of common stock that is equal to $2.00 (as adjusted for any reorganization) divided by $2.00 (subject to adjustment). At the option of the holder, each share of Series E Preferred stock may be converted into that number of additional shares of common stock as is equal to the amount of any accrued and unpaid dividends divided by $2.00 (subject to adjustment).

Each of the above stated shares will automatically convert into shares of common stock (1) immediately upon the affirmative vote of the holders of at least a majority the holders of each series or (2) immediately prior to the consummation of a firmly underwritten public offering of common stock pursuant to the Securities Act of 1933 on Form S-1 or any successor form, provided that the aggregate equity value of the Company is equal to greater than $100,000,000.

Series A Preferred and Series B Preferred stock does not have any conversion rights.


94


 

Rights of Alkaline Stockholders

Rights of AQUAhydrate Stockholders

Voting

Alkaline common stock is entitled to one vote per share on all matters submitted to a vote of Alkaline stockholders, including the election of directors. Except as otherwise provided by law or as provided in any resolution adopted by Alkaline's board of directors providing for the issuance of any series of preferred stock, the holders of Alkaline common stock possess all voting power. There is no cumulative voting in the election of directors. Stockholders holding at least 33⅓% of the stock issued and outstanding and entitled to vote thereat, present in person or represented by proxy, will constitute a quorum at all meetings of the stockholders for the transaction of business except as otherwise provided by statute or by the articles of incorporation. When a quorum is present or represented at any meeting, the vote of the stockholders of a majority of the stock having voting power present in person or represented by proxy will be sufficient to elect members of Alkaline's board of directors or to decide any question brought before such meeting, unless the question is one upon which by express provision of statute or of the articles of incorporation, a different vote is required in which case such express provision will govern and control the decision of such question. Except as otherwise required by law, any action required to be taken at a meeting of Alkaline stockholders, or any other action which may be taken at a meeting of Alkaline stockholders, may be taken without a meeting, without prior notice and without a vote if written consents are signed by Alkaline stockholders representing a majority of the shares entitled to vote at such a meeting.

Alkaline's board of directors has the power to amend Alkakline's bylaws. As a result, Alkaline's board of directors can change the quorum and voting requirements at a meeting of Alkaline stockholders, subject to the applicable laws.

Except as otherwise described below, the holders of any classes of voting preferred stock and the holders of common stock will vote together as a single class.

Holders of common stock are entitled at each meeting of the stockholders to one vote for each share of stock standing in his, her or its name on the books of AQUAhydrate.

The holders of Series A Preferred, Series B Preferred, Series C Preferred, Series D Preferred and Series E Preferred shares do not have voting rights, except in relation to automatic conversion in the case of a public offering of common stock as described above in the 'Conversion' section.

The holders of Series I Preferred, Series H Preferred, Series G Preferred, and Series F Preferred shares are entitled to the number of votes equal to the number of shares of common stock into which such Series I Preferred, Series H Preferred, Series G Preferred, and Series F Preferred shares could be converted pursuant to the 'Conversion' rights set out above.

The holders of Series I Preferred, Series H Preferred, Series G Preferred, and Series F Preferred shares are entitled to vote on all matters on which the common stock are entitled to vote, except where holders of Series F Preferred shares and holders of common stock are entitled to vote as separate classes for the election of directors.

Fractional votes are not permitted.

Except as otherwise provided, the holders of a majority of the outstanding shares of stock entitled to vote will constitute a quorum at a meeting of the stockholders for the transaction of business.



95


 

Rights of Alkaline Stockholders

Rights of AQUAhydrate Stockholders

Redemption

Alkaline common stock is not redeemable and has no redemption rights.

AQUAhydrate may, but has no obligation to redeem, the preferred stock of AQUAhydrate, as follows:

Series A Preferred, at any time at the option of AQUAhydrate, at the price of $1.00 per share plus any accrued but unpaid dividends.

Series B Preferred, at any time after or concurrently with the redemption of all Series A Preferred shares at the option of AQUAhydrate, at the price of $1.00 per share plus any accrued but unpaid dividends.

Series C Preferred, at any time after or concurrently with the redemption of all Series A Preferred and Series B Preferred shares at the option of AQUAhydrate, at the price of $2.00 per share plus any accrued but unpaid dividends.

Series D Preferred, at any time after or concurrently with the redemption of all Series A Preferred, Series B Preferred, and Series C Preferred shares at the option of AQUAhydrate, at the price of $2.00 per share plus any accrued but unpaid dividends.

Series E Preferred, at any time after or concurrently with the redemption of all Series A Preferred, Series B Preferred, Series C Preferred, and Series D Preferred shares at the option of AQUAhydrate, at the price of $1.00 per share plus any accrued but unpaid dividends.

AQUAhydrate has no right to redeem Series I Preferred, Series H Preferred, Series G Preferred, and Series F Preferred shares or common stock.



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Number of Directors

The number of directors which constitutes the whole board of directors of Alkaline is at least one. The number of directors may from time to time be increased or decreased by resolution of the board of directors of Alkaline to not less than one nor more than fifteen.

AQUAhydrate must have seven directors on its board of directors.

As long as at least 65,390,916 shares of Series I Preferred shares (as adjusted for any reorganization) remain outstanding, an increase or decrease in the authorized number of directors is subject to the approval of at least a majority of the holders of the Series I Preferred shares outstanding, voting as a separate class on an as-converted to common stock basis.

As long as at least 72,246,493 shares of Series H Preferred shares (as adjusted for any reorganization) remain outstanding, an increase or decrease in the authorized number of directors is subject to the approval of at least a majority of the holders of the Series H Preferred shares outstanding, voting as a separate class on an as-converted to common stock basis.

As long as at least 10,432,968 shares of Series G Preferred shares (as adjusted for any reorganization) remain outstanding, an increase or decrease in the authorized number of directors is subject to the approval of at least a majority of the holders of the Series G Preferred shares outstanding, voting as a separate class on an as-converted to common stock basis.

As long as at least 13,041,201 shares of Series F Preferred shares (as adjusted for any reorganization) remain outstanding, an increase or decrease in the authorized number of directors is subject to the approval of at least a majority of the holders of the Series F Preferred shares outstanding, voting as a separate class on an as-converted to common stock basis.

Election of Directors

As stated above under 'Voting', when a quorum is present or represented at any meeting, the vote of the stockholders of a majority of the stock having voting power present in person or represented by proxy will be sufficient to elect members of Alkaline's board of directors. There is no cumulative voting in the election of directors.

 

 

 

The holders of Series F Preferred, voting as a separate class, are entitled to elect two (2) directors of AQUAhydrate. The holders of Series I Preferred, Series H Preferred, Series G Preferred, and Series F Preferred stock (all on an as-converted basis), and the holders of the common stock, voting together as a single class, are entitled to elect three (3) directors of AQUAhydrate. The holders of the common stock, voting as a separate class, are entitled to elect two (2) directors of AQUAhydrate.

At any meeting held for the purpose of electing directors, the presence in person or by proxy of the holders (i) of a majority of the shares of Series F Preferred or a majority of the shares of common stock will constitute a quorum for the election of the two (2) directors to be elected solely by the holders of said classes of stock; and (ii) of a majority of the shares of Series I Preferred, Series H Preferred, Series G Preferred, and Series F Preferred stock (all on an as-converted basis), and the holders of the common stock will constitute a quorum for the election of the three (3) directors to be elected solely by the holders of said classes of stock.



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Removal of Directors

The holders of two-thirds of the outstanding shares of stock entitled to vote may at any time peremptorily terminate the term of office of all or any of the members of the board of directors of Alkaline by vote at a meeting called for such purpose or by a written statement filed with the secretary or, in his or her absence, with any other officer. Such removal will be effective immediately, even if successors are not elected simultaneously. No reduction of the authorized number of directors will have the effect of removing any director prior to the expiration of his or her term of office.

Any director who has been elected by the holders of the particular classes of stock outlined above may be removed by and only by the affirmative vote of shares representing two-thirds of the voting power, on an as-converted basis, of all the outstanding shares of such particular classes of stock entitled to vote to elect such a director.

Vacancies of Directors

Vacancies in the board of directors of Alkaline, including those caused by an increase in the number of directors, may be filled by a majority of the remaining board of directors, though not less than a quorum, or by a sole remaining director, and each director so elected will hold office until his or her successor is elected at an annual or a special meeting of the stockholders.

If there is any vacancy in the office of a director elected by the holders of the particular classes of stock outlined above, the vacancy may only be filled as directed by (i) the remaining sole director or a majority of the remaining directors (if any) in office that were so elected by the particular classes of stock, or (ii) by the required vote of holders of such shares of the particular classes of stock that are entitled to elect such a director.

Limitation of Liability and Indemnification

To the fullest extent permitted by the NRS, Alkaline must indemnify any person who was or is made or threatened to be made a party to any action, suit or proceeding, whether civil, criminal , administrative or investigative, by reason of the fact that such person is or was a director, officer, employee or agent of Alkaline, or was serving at the request of Alkaline as a director, officer, employee or agent of another corporation, partnership, joint venture, trust or other enterprise, against expenses, including attorney's fees, judgments, fines and amounts paid in settlement actually and reasonably incurred by such person in connection with the action, suit or proceeding.

The expenses of officers and directors incurred in defending a civil or criminal action, suit or proceeding must be paid by Alkaline as they are incurred and in advance of the final disposition of the action, suit or proceeding upon receipt of an undertaking by or on behalf of the director or officer to repay the amount if it is ultimately determined by a court of competent jurisdiction that he or she is not entitled to be indemnified by Alkaline. Such right of indemnification is a contract right which may be enforced in any manner desired by such person.

The board of directors of Alkaline may cause Alkaline to purchase and maintain insurance on behalf of any person who is or was a director or officer of Alkaline, or is or was serving at the request of Alkaline as a director or officer of another corporation, or as its representative in a partnership, joint venture, trust or other enterprise against any liability asserted against such person and incurred in any such capacity, whether or not Alkaline would have had the power to indemnify such person against such expense under the NRS.

To the fullest extent permitted by the NRS, directors and officers of AQUAhydrate will not be personally liable to AQUAhydrate or its stockholders for monetary damages resulting from any act or failure to act in his or her capacity as a director officer. To the fullest extent permitted by the NRS, AQUAhydrate must indemnify any person who was or is made or threatened to be made a party to any action, suit or proceeding, whether civil, criminal , administrative or investigative, by reason of the fact that such person is or was a director, officer, employee or agent of AQUAhydrate, or was serving at the request of AQUAhydrate as a director, officer, employee or agent of another corporation, partnership, joint venture, trust or other enterprise, against expenses, including attorney's fees, judgments, fines and amounts paid in settlement actually and reasonably incurred by such person in connection with the action, suit or proceeding.

AQUAhydrate may maintain insurance, at its expense, to protect itself and any director, officer, employee or agent of AQUAhydrate or another corporation, partnership, joint venture, trust or other enterprise, against expense, whether or not AQUAhydrate would have the power to indemnify such person against such expense under the NRS.



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Special Meetings of Stockholders

Special meetings of the Alkaline stockholders for any purpose or purposes, unless otherwise prescribed by statute or by Alkaline's articles of incorporation, may be called by Alkaline's President or Secretary by resolution of Alkaline's board of directors or at the request in writing of the Alkaline stockholders owning a majority in amount of the entire capital stock of Alkaline issued and outstanding and entitled to vote. Such request must state the purpose of the proposed meeting. Special meetings of the Alkaline stockholders will be held at such place within or outside the State of Nevada as the Alkaline board of directors determines or as the respective notices thereof specify. Alkaline stockholders holding at least thirty three and one-third percent (33⅓%) of the stock issued and outstanding to vote thereat, present in person or represented by proxy, will constitute quorum at special meetings of the Alkaline stockholders for transaction of business.

Special meetings of the AQUAhydrate stockholders may be called by the directors or by any officer instructed by the directors to call the meeting. Written notice of special meetings must be given, stating the place, date, hour of the meeting and stating the place within the city at which the list of stockholders of AQUAhydrate may be examined. The notice of a special meeting must in all instances state the purpose or purposes for which the meeting is called. Special meetings of the AQUAhydrate stockholders must be held on the date and at the time fixed by the AQUAhydrate directors. Special meetings must be held at such place, within or without the State of Nevada, as the directors may, from time to time, fix. Where the directors fail to fix such place, the meeting must be held at the registered office of AQUAhydrate in the State of Nevada. The holders of a majority of the outstanding shares of AQUAhydrate stock entitled to vote will constitute a quorum at special meetings of the AQUAhydrate stockholders for transaction of business.



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Special Meetings of the Board

Special meetings of the Alkaline board of directors may be called by the Chairman or the President or by any Vice President or by any two directors.

Written notice of the time and place of special meetings must be delivered personally to each director. In case such notice is mailed, it must be deposited in the United States mail at least five (5) days prior to the time of the holding of the meeting. In case such notice is hand-delivered, faxed or emailed, it must be so delivered at least twenty-four (24) hours prior to the time of holding the meeting.

Special meetings of the AQUAhydrate board of directors may be called by or at the direction of the Chairman of the board, if any, the Vice-Chairman of the board, if any, or the Chief Executive Officer, or of a majority of the directors in office. Notice of the time and place of the special meeting must be given to each director twenty-four (24) hours in advance of a special meeting, unless such director has submitted a written waiver of notice. Neither the business to be transacted at, nor the purpose of any special meeting need be specified in any notice of the meeting.

Stockholder Action by Written Consent

Any action required or permitted to be taken by vote of the stockholders at a meeting may be taken without a meeting if authorized by the written consent of the stockholders holding at least a majority of the voting power, unless the provisions of the statutes, or of the articles of incorporation require a greater proportion of voting power to authorize such action in which case such greater proportion of written consents will be required.

Subject to the NRS, any action that may be or is required by the NRS to be taken at any annual or special meeting of stockholders, may be taken without a meeting, without prior notice and without a vote, if a consent in writing, setting forth the action so taken, must be signed by the holders of outstanding stock having not less than the minimum number of votes that would be necessary to authorize or take such action at a meeting at which all shares entitled to vote thereon were present and voted. Prompt notice of the taking of the corporate action without a meeting by less than unanimous written consent must be given to those stockholders who have not consented in writing.

Advance Notice of Director Nominations

The articles of incorporation and bylaws of Alkaline do not require stockholders to provide advanced or timely notice in order to nominate candidates for election to the Alkaline board.

The articles of incorporation and bylaws of AQUAhydrate do not require stockholders to provide advanced or timely notice in order to nominate candidates for election to the AQUAhydrate board.

Forum Selection Provision

The articles of incorporation and bylaws of Alkaline do not provide for the selection of a specific forum for legal proceedings.

 

Unless AQUAhydrate consents in writing to the selection of an alternative forum, the District Courts of the State of Nevada will be the sole and exclusive forum for (i) any derivative action or proceeding brought on behalf of AQUAhydrate, (ii) any action asserting a claim of breach of a fiduciary duty owed by any director, officer, or other employee of the corporation to AQUAhydrate or AQUAhydrate's stockholders, (iii) any action asserting a claim arising pursuant to any provision of Title 7 of the NRS or AQUAhydrate's articles of incorporation or bylaws, or (iv) any other action related to the internal affairs of AQUAhydrate or asserting a claim governed by the internal affairs doctrine.



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MANAGEMENT FOLLOWING THE MERGER

Directors and Executive Officers

Resignation of Certain Current Directors and Executive Officers of Alkaline

At or prior to the completion of the Merger, it is expected that David A. Guarino will resign as a director of Alkaline.

Directors and Executive Officers of the Combined Company Following the Merger

Pursuant to the Merger Agreement, following completion of the Merger, the size of the board of directors of the Combined Company will be increased to seven, and the initial directors are expected to be comprised of four nominees of Alkaline, being Richard A. Wright, Aaron Keay, Brian Sudano and Bruce Leitch, and three nominees of AQUAhydrate, being Matthew Howison, Ira Tochner and ♦.

The following table lists the names and ages as of ♦, 2019 and positions of the individuals who are expected to serve as directors and executive officers of the Combined Company upon completion of the Merger:

Name

Position

Age

Aaron Keay

Director, Chairman of the Board

42

Richard A. Wright

Director, Chief Executive Officer

62

Matthew Howison

Director, President

54

David A. Guarino

Chief Financial Officer

55

Brian Sudano

Director

55

Bruce Leitch

Director

62

Ira Tochner

Director

58

Director

Business Experience

The following is a brief account of the business experience of expected directors and executive officers of the Combined Company.

Aaron Keay

Aaron Keay is Chairman of Alkaline's board of directors and has served on multiple boards over the last decade in multiple sectors, but with an emphasis on consumer products. Mr. Keay has acted as a private investor who acts as an advisor, consultant, key investor or board member to multiple companies. His specialties are identifying early stage opportunities, and working with management teams to establish the fundamentals of a strong operating business as they become positioned to go public. Once established and public, Mr. Keay has been the lead on multiple financings or M&A transactions well in excess of $1 billion in total value. A former professional soccer player, Mr. Keay is a graduate from the University of British Columbia.


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Richard A. Wright

Mr. Wright is a co-founder of Alkaline and is responsible for its success and rapid growth. He brings over 41 years of experience as a CEO, CPA, entrepreneur, and executive. Mr. Wright has extensive knowledge about the financial industry, with an emphasis on mergers and acquisitions, transaction planning, and international operations. Mr. Wright helped run operations in 42 different countries ranging from start-ups to 100+ million dollar companies. Earlier in his career, Wright was a Regional Director of Tax and Financial Planning with one of the "Big Four" accounting firms.

Matthew Howison

Matthew Howison is a lawyer and international financier who has held senior positions at NM Rothschild & Sons, Turnbull & Partners, Goldman Sachs and Salomon Smith Barney (Citigroup) before establishing the boutique merchant banking firm, Emerald Partners. In a career spanning more than twenty years, he has been involved in advising on mergers and acquisitions and capital raising transactions. He has relevant expertise in the paper and packaging, food & beverage, media & entertainment sectors. He holds Bachelors and Masters degrees in Law from University of Sydney and an MBA from London Business School. He has been a board member and investor in AQUAhydrate since 2010 and is currently acting President of AQUAhydrate.

David A. Guarino

On April 28, 2017, Mr. Guarino was appointed as the Chief Financial Officer, Secretary, Treasurer and a director of Aklaline. Mr. Guarino holds a Bachelor of Science in Accounting and a Master of Accountancy from the University of Denver. From 2008 to 2013, Mr. Guarino was the President and a director of Kahala Corp, a worldwide franchisor of multiple quick service restaurant brands with locations in 49 states and over 25 countries. From 2014 to 2015, Mr. Guarino was President of HTI International Holdings, Inc., a technology company focused on forward osmosis water filtration technology. From 2015 until April, 2017, Mr. Guarino had been a consultant to Alkaline.

Brian Sudano

Brian Sudano has been a director of our company since September 14, 2018. Mr. Sudano is Managing Partner of Beverage Marketing Corporation and BMC Strategic Associates. Mr.Sudano's experience covers nearly the entire beverage industry, from energy drinks to wine, with special expertise in beverage alcohol by virtue of varied industry experience and broad range of projects. Mr. Sudano manages several major clients, providing on-going strategic and market advice, while leading projects in strategic planning, market entry analysis and planning, sales/distribution, business modeling, brand repositioning and international opportunity assessment. He has spoken at many beverage industry events, and is a contributing editor at Beverage World magazine.

Bruce Leitch

Bruce Leitch has been a director of Alkaline since September 8, 2016. During the past five years Mr. Leitch has been actively engaged as a management consultant with respect to business development strategies and overseeing the corporate governance requirements for various private companies. The bulk of his time has been spent as the V.P. Corporate Finance and a director for Citadel LED Lighting Corp., a private company engaged in the importation of innovative LED lighting products with applications in the retail, hospitality, outdoor lighting and commercial buildings and facilities market sectors. Mr. Leitch has extensive experience with consumer products companies, and is well versed in all aspects of branding, marketing, cross marketing through strategic relationships, interacting with advertising agencies to create highly focused and effective sales campaigns, along with being very conversant in wholesale distribution networks, logistics, managing multiple channels of product distribution and supply chain management. Mr. Leitch has extensive experience in the capital markets and the securities industry, having worked for several major financial services institutions as well as having been an officer, director and principal of several public and private companies.


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Ira Tochner

Ira Tochner is a Senior Partner at The Yucaipa Companies, LLC an investment firm specializing in the consumer products, lifestyle/hospitality and entertainment industries. Mr. Tochner joined Yucaipa in 1990. Formed in 1986, Yucaipa has completed mergers and acquisitions valued at more than $40 billion. Mr. Tochner was previously employed by Arthur Andersen & Co. as an audit manager (1983 - 1989). Mr. Tochner has been involved in all aspects of portfolio company ownership, including mergers and acquisitions, financings, portfolio company monitoring, strategic planning, labor relations, executive recruiting, asset dispositions, and public company reporting. Mr. Tochner has served on numerous boards during his tenure at Yucaipa. Some of the companies include Pathmark Stores, Dominick's Supermarkets, A&P Grocery Company, Fresh & Easy Markets, Golden State Foods, Wild Oats Marketing, Aloha Airlines, O'Gara Coach Company, and Americold Realty Trust. Mr. Tochner graduated from the University of Southern California with a Bachelor of Science, Business and Accounting in 1983.

Family Relationships

There are no family relationships between proposed directors and executive officers of the Combined Company.

Involvement in Certain Legal Proceedings

Proposed directors and executive officers of the Combined Company have not been involved in any of the following events during the past ten years:

 

1.

any bankruptcy petition filed by or against any business of which such person was a general partner or executive officer either at the time of the bankruptcy or within two years prior to that time;

 

2.

any conviction in a criminal proceeding or being subject to a pending criminal proceeding (excluding traffic violations and other minor offenses);

 

3.

being subject to any order, judgment, or decree, not subsequently reversed, suspended or vacated, of any court of competent jurisdiction, permanently or temporarily enjoining, barring, suspending or otherwise limiting his involvement in any type of business, securities or banking activities;

 

4.

being found by a court of competent jurisdiction (in a civil action), the Securities and Exchange Commission or the Commodity Futures Trading Commission to have violated a federal or state securities or commodities law, and the judgment has not been reversed, suspended, or vacated;

 

5.

being the subject of, or a party to, any federal or state judicial or administrative order, judgment, decree, or finding, not subsequently reversed, suspended or vacated, relating to an alleged violation of: (i) any federal or state securities or commodities law or regulation; or (ii) any law or regulation respecting financial institutions or insurance companies including, but not limited to, a temporary or permanent injunction, order of disgorgement or restitution, civil money penalty or temporary or permanent cease- and-desist order, or removal or prohibition order; or (iii) any law or regulation prohibiting mail or wire fraud or fraud in connection with any business entity; or

 

6.

being the subject of, or a party to, any sanction or order, not subsequently reversed, suspended or vacated, of any self-regulatory organization (as defined in Section 3(a)(26) of the Securities Exchange Act of 1934), any registered entity (as defined in Section 1(a)(29) of the Commodity Exchange Act), or any equivalent exchange, association, entity or organization that has disciplinary authority over its members or persons associated with a member.

Director Independence

Pursuant to the Merger Agreement, following completion of the Merger, the size of the board of directors of the Combined Company will be increased to seven, and the initial directors are expected to be comprised of four nominees of Alkaline, being Richard A. Wright, Aaron Keay, Brian Sudano and Bruce Leitch, and three nominees of AQUAhydrate, being Matthew Howison, Ira Tochner and ♦. Alkaline's common stock is listed on the Nasdaq Capital Market. Alkaline's common stock is also listed on the TSX Venture Exchange which imposes director independent requirements. Under Nasdaq Marketplace Rule 5605(a)(2), a director is not independent if he or she is also an executive officer or employee of the corporation or was, at any time during the past three years, employed by the corporation or its subsidiary. Using this definition of independent director, the Combined Company is expected to have four independent directors, Aaron Keay, Bruce Leitch, Brian Sudano, Ira Tochner and ♦.


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Executive Compensation

Alkaline

For information about the compensation of the directors and executive officers of Alkaline, see "Alkaline Proposal 4 Election of Directors - Executive Compensation" beginning on page 132 of this joint proxy statement/prospectus and "Alkaline Proposal 4 Election of Directors - Transactions with Related Persons" beginning on page 138 of this joint proxy statement/prospectus.

AQUAhydrate

During the years ended December 31, 2018 and 2017, Matthew Howison, the acting President of AQUAhydrate, did not receive any compensation from AQUAhydrate directly. However, AQUAhydrate has compensated Emerald Partners US Corp ("Emerald US"), an entity in which Mr. Howison is a partner, pursuant to a financial advisory agreement entered into in May 2017. This agreement was superseded by the financial advisory agreement AQUAhydrate entered into with Emerald Partners in March 2019. See "Management following the Merger - Transaction with Related Persons - AQUAhydrate" beginning on page 103 of this joint proxy statement/prospectus.

Transaction with Related Persons

Alkaline

For information about the transactions with related persons of Alkaline, see "Alkaline Proposal 4 Election of Directors - Transactions with Related Persons" beginning on page 138 of this joint proxy statement/prospectus.

AQUAhydrate

Between January 1, 2018 to May 15, 2018, (i) Yucaipa American Alliance (Parallel) Fund II, L.P. and Yucaipa American Alliance Fund II, L.P. purchased $326,189 and $516,810 principal amount, respectively of unsecured convertible notes of AQUAhydrate, (ii) SC Beverages, LLC (an entity affiliated with Sean Combs) purchased $928,971 principal amount of unsecured convertible notes of AQUAhydrate, and (iii) Mark Wahlberg purchased $594,367 principal amount of unsecured convertible notes of AQUAhydrate.  The unsecured convertible notes bear interest at a rate of 2.5% per annum, and are convertible into Series I Preferred shares at a conversion price of $0.12080 per share.

Between December 18, 2018 to June 6, 2019, (i) Yucaipa American Alliance (Parallel) Fund II, L.P. and Yucaipa American Alliance Fund II, L.P. purchased $1,178,700 and $1,789,170 net principal amount, respectively of secured convertible notes of AQUAhydrate, (ii) SC Beverages, LLC (an entity affiliated with Sean Combs) purchased $268,762 net principal amount of secured convertible notes of AQUAhydrate, and (iii) Mark Loeffler purchased $28,677 net principal amount of secured convertible notes of AQUAhydrate.  The convertible notes were purchased for a price of 25% of the gross principal amount thereof.  The convertible notes bear interest at a rate of 2.5% per annum, and are convertible into Series I Preferred shares at a conversion price of $0.00725 per share.

Between September 13, 2019 to October 30, 2019, (i) Yucaipa American Alliance (Parallel) Fund II, L.P. and Yucaipa American Alliance Fund II, L.P. purchased $415,962 and $631,395 principal amount, respectively of notes of AQUAhydrate (the "Bridge Notes"), (ii) SC Beverages, LLC (an entity affiliated with Sean Combs) purchased $285,558 principal amount of Bridge Notes, and (iii) Mark Wahlberg purchased $267,207 principal amount of Bridge Notes. The Bridge Notes were sold by AQUAhydrate in order to raise capital to enable AQUAhydrate to continue operations pending the Merger.  The Bridge Notes bear interest at a rate of 10% per annum. If the Merger is consummated, the Bridge Notes will be repaid by the delivery of shares of Alkaline common stock valued at $1.70 per share, which represents the average closing price of the Alkaline common stock for the 90 days prior to the announcement of the Merger.


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In March 2019, AQUAhydrate entered into a financial advisory agreement with Emerald Partners, an entity in which Matthew Howison, the acting President of AQUAhydrate, is a partner. Pursuant to such agreement Emerald Partners serve as a financial advisory to AQUAhydrate.  Pursuant to such agreement AQUAhydrate pays Emerald Partners $25,000 per month.  If a change of control transaction (such as the Merger) is consummated, Emerald Partners will receive a cash payment of $275,000 in cash and common stock of the surviving entity which has a value of 1% of the value of AQUAhydrate (233,152 Alkaline Common Shares in connection with the Merger). 

In May 2017, AQUAhydrate entered into a financial advisory agreement with Emerald US, an entity in which Matthew Howison is a partner. Emerald US was retained to pursue corporate development opportunities.  Pursuant to such agreement, Emerald US provided the services of Mr. Howison as the acting President of AQUAhydrate.  Pursuant to such agreement, AQUAhydrate paid Emerald $12,500 per month and Emerald US would have been entitled to receive a bonus if a merger was completed. This agreement was superseded by the agreement AQUAhydrate entered into with Emerald Partners in March 2019.

INFORMATION WITH RESPECT TO ALKALINE

DESCRIPTION OF BUSINESS

Corporate Overview

We offer retail consumers bottled alkaline water in 500ml, 700ml, 1-liter, 1.5-liter, 3-liter and 1-gallon sizes, and bottled flavored infused water in 500-milliliter sizes coming in raspberry, watermelon, lemon and blood-orange flavors, under the trade name Alkaline88. Our product is produced through an electrolysis process that uses specialized electronic cells coated with a variety of rare earth minerals to produce our 8.8 pH drinking water without the use of any chemicals. Our product also incorporates 84 trace Himalayan salts. The main reason consumers drink our product is for the perceived benefit that a proper pH balance helps fight disease and boosts the immune system and the perception that alkaline water helps to maintain a proper body pH and keeps cells young and hydrated.

Our company, the Alkaline Water Company Inc., was incorporated in Nevada on June 6, 2011 under the name "Global Lines Inc." Our business model prior to the acquisition of Alkaline Water Corp. on May 31, 2013 was to provide chauffeuring and transportation services to residents within our local market, primarily providing transportation services such as private school student transport, sightseeing trips, and elderly transportation, and offering transportation to the airport and special events such as proms and weddings. However, as we had not successfully developed our service and had no source of revenue from our business plan, we determined to seek out a new business opportunity to increase value for our stockholders.

On February 20, 2013, The Alkaline Water Company Inc. (formerly Global Lines Inc.) entered into a non-binding letter of intent with Alkaline 88, LLC (formerly Alkaline 84, LLC), a wholly-owned subsidiary of Alkaline Water Corp., for the acquisition of all of the issued and outstanding securities of the capital of Alkaline 88, LLC. Further to this letter of intent, on May 31, 2013, The Alkaline Water Company Inc. entered into a share exchange agreement with Alkaline Water Corp. and all of its stockholders, and as a result of the closing of this agreement on the same date, Alkaline Water Corp. became a wholly-owned subsidiary of The Alkaline Water Company Inc. Consequently, after the closing of this agreement we adopted the business of Alkaline Water Corp.'s wholly-owned subsidiary, Alkaline 88, LLC.

Alkaline Water Corp. was incorporated in the State of Arizona on March 7, 2013, and it is the sole stockholder of Alkaline 88, LLC. Alkaline Water Corp. is the wholly-owned subsidiary of The Alkaline Water Company Inc., and Alkaline 88, LLC is Alkaline Water Corp.'s wholly-owned subsidiary.

Prior to the closing of the share exchange agreement, on May 30, 2013, our company effected a name change by merging with its wholly-owned Nevada subsidiary named "The Alkaline Water Company Inc." with our company as the surviving corporation under the new name "The Alkaline Water Company Inc." In addition, on May 30, 2013, our company effected a 15:1 forward stock split of our authorized and issued and outstanding common stock.


105

On October 7, 2013, we amended our 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 the 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.

On October 8, 2013, we designated 20,000,000 shares of the authorized and unissued preferred stock of our company as "Series A Preferred Stock" by filing a Certificate of Designation with the Secretary of State of the State of Nevada. At the time, the Series A Preferred Stock had 10 votes per share. The Series A Preferred Stock is not convertible into shares of our common stock.

On November 5, 2013, we designated 1,000 shares of the authorized and unissued preferred stock of our company as "10% Series B Convertible Preferred Stock" by filing a Certificate of Designation with the Secretary of State of the State of Nevada. The 10% Series B Convertible Preferred Stock has, among other things, conversion rights, liquidation preferences, dividend rights, redemption rights and conversion rights.

On December 30, 2015, we effected a 50-for-1 reverse stock split of our authorized and issued and outstanding shares of common stock. As a result of the reverse stock split, the number of authorized shares of common stock of our company decreased from 1,125,000,000 to 22,500,000 and the number of issued and outstanding shares of common stock of our company decreased correspondingly. As a result of the reverse stock split, holders of our Series A Preferred Stock had 0.2 votes per share of Series A Preferred Stock.

On January 21, 2016, we amended our Articles of Incorporation to increase the number of authorized shares of our common stock from 22,500,000 to 200,000,000 by filing a Certificate of Amendment to Articles of Incorporation with the Secretary of State of the State of Nevada. As a result, the aggregate number of shares that we have the authority to issue is 300,000,000, of which 200,000,000 shares are common stock, with a par value of $0.001 per share, and 100,000,000 shares are preferred stock, with a par value of $0.001 per share.

On January 22, 2016, we amended the Certificate of Designation for our Series A Preferred Stock by filing an Amendment to Certificate of Designation with the Secretary of State of the State of Nevada. We amended the Certificate of Designation for our Series A Preferred Stock by deleting Section 2.2 of the certificate of designation, which proportionately increases or decreases the number of votes per share of Series A Preferred Stock in the event of any divided or other distribution on our common stock payable in our common stock or a subdivision or consolidation of the outstanding shares of our common stock. Accordingly, holders of Series A Preferred Stock now have 10 votes per share of Series A Preferred Stock, instead of 0.2 votes per share of Series A Preferred Stock.

On April 25, 2018, shares of our common stock were approved for trading on the TSX Venture Exchange in Canada, as a Tier 2 Industrial Issuer, under the symbol "WTER."

On August 24, 2018, we formed A88 Infused Beverage Division, Inc., or "A88 Infused," a Nevada corporation and our wholly-owned subsidiary.

On December 10, 2018, shares of our common stock were listed for trading on the Nasdaq Capital Market under the symbol "WTER".

On March 12, 2019, we closed an underwritten public offering of 4,600,000 shares of our common stock. The shares were issued at a purchase price of $2.50 per share, for net proceeds of $10,450,900.

On September 17, 2019, we formed A88 Infused Products Inc., or "A88 Infused Products," a Nevada Corporation and our wholly-owned subsidiary.

The principal offices of our company are located at 14646 N. Kierland Blvd, Suite 255, Scottsdale, AZ 85254. Our telephone number is (480) 656-2423. Our corporate website address is www.thealkalinewaterco.com. The information contained on, or that may be accessed through, our corporate website is not part of, and is not incorporated into, this joint proxy statement/prospectus.

Operations


106

We offer retail consumers bottled alkaline water in 500ml, 700ml, 1-liter, 1.5-liter, 3-liter and 1-gallon sizes, and bottled flavored infused water in 500-milliliter sizes coming in raspberry, watermelon, lemon and blood-orange flavors, under the trade name Alkaline88® which is produced through an electrolysis process that uses specialized electronic cells coated with a variety of rare earth minerals to produce 8.8 pH drinking water without the use of any manmade chemicals. The products incorporate 84 trace minerals from Himalayan pink rock salt and are designed to have a clean smooth taste using only purified water and the Himalayan pink rock salt. We believe consumers drink our water because of the taste profile and the preconceived health benefits (although none of these products are marketed as having any potential health benefits), as well as because of the brand and trademark, which we believe is one of the most easily identifiable in the category. Measured by sales volume in 2018, we believe we are now one of the largest alkaline water companies in the United States.

Our products are presently available in all 50 states and the District of Columbia, although over 50% of current sales are concentrated in the Southwest and Texas. We distribute our products through several channels. We sell through large national distributors, including UNFI, KeHE, C&S, and Core-Mark. We also sell products to retail clients, including convenience stores, natural food products stores, large ethnic markets and national retailers. Examples of our retail clients include Walmart, Food Lion, Albertson's, Safeway, Kroger, Schnucks, Smart & Final, Jethe Companyl-Osco, Sprouts, Bashas', Stater Bros. Markets, Unified Grocers, Bristol Farms, Publix, Vallarta, Superior Foods, Ingles, 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 operating subsidiary, Alkaline 88, LLC, operates primarily as a marketing, distribution, and manufacturing company. It has entered into co-packing agreements with eight different bottling companies located in Virginia, Georgia, California, Texas, Nevada and Arizona to act as co-packers for our product. The current capacity at all plants exceeds approximately $8.3 million per month wholesale.

Our component materials are readily available through multiple vendors. Our principal suppliers are Vav Plastics Inc., Amcor Inc. and Packaging Corporation of America.

In August 2018, we formed A88 Infused Beverage Division, Inc., or "A88 Infused," a Nevada corporation and a wholly-owned subsidiary of Alkaline. A88 Infused's focus is brand extension and product innovations in the wellness water category. We formed A88 Infused to meet what we believe is increasing consumer demand for enhanced and functional (value-added) beverages. We expect A88 Infused to capitalize on this and potential consumer demand with the development and launch of new products focused on growing trends in the beverage space.

To prepare for the launch of products by A88 Infused, we have expanded our packaging capabilities. In January, 2019, we announced that Nevada-based Western Group Packing has agreed to produce A88 Infused's flavored Alkaline88® water products and our planned hemp extract-infused water product at its 150,000+ square foot facility located in North Las Vegas, NV. We have received verbal confirmation from many of our current retail clients of their interest in purchasing our flavored Alkaline88®waters. The production of A88 Infused's planned hemp extract product is contingent on U.S. Food and Drug Administration, or the FDA, and state laws, regulations, and guidance. While the Agriculture Improvement Act of 2018 removed hemp from Schedule I of the Controlled Substances Act, the law did not change the FDA's authorities with respect to food or drugs. As of the date of this joint proxy statement/prospectus, the FDA has not made a determination that the use of hemp extract in food is safe. The FDA has evaluated Generally Recognized as Safe (GRAS) notices for three hemp seed-derived food ingredients and determined that the agency has no questions that those ingredients are GRAS under their intended conditions of use.

In early February 2019, at the Convenience EPPS trade show in Chicago, Illinois and in May, 2019 at the Western Association of Food Chains Convention, Alkaline sampled and offered up for sale "Alkaline88® Flavored," which is available in four different, all natural, sugar-free flavors. We believe "Alkaline88® Flavored" is the first flavored bottled alkaline water to be sold in the United States.

A88 Infused is also developing and preparing for the initial launch of its planned hemp extract product, which will be marketed under the trademark Soothe™. In the event the FDA issues appropriate regulations or guidance or determines that it has no questions that hemp extract is GRAS under intended conditions of use that would permit A88 Infused to market hemp extract in water without food additive approval, we expect to produce and sell Soothe™ as still water in bottles. We may also decide to market Soothe™ in any states, districts or territories if applicable laws allow for such sale or if a supplier meets and complies with the FDA's GRAS regulations with respect to a self-certification regarding the safety and GRAS status of the use of hemp extract. We expect to produce Soothe™ as a low calorie or no calorie, hemp extract-infused water in four flavors. We may change the composition of our planned hemp-extract-infused product as necessary to comply with federal, state or local laws, regulations or guidance.


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In September 2019, we formed A88 Infused Products, Inc., or "A88 Infused Products," a Nevada corporation and a wholly-owned subsidiary of Alkaline. A88 Infused Products' focus is on the development and production of a variety of topical CBD infused products which include salves, balms, lotions, essential oils, and bath-salts all made with CBD derived from hemp.

We intend to comply in full with all federal, state, and local laws, rules and regulations as we develop our hemp extract alkaline water and other product lines (including CBD products). We will not pursue the production or sale of hemp extract-infused products (including CBD products) until legally permitted.

Plan of Operations

In order for us to implement our business plan over the next 12 months, we have identified the following milestones that we expect to achieve:

 Expansion of Broker Network - We expect to continue to develop our working relationship with our national broker network. We continually meet, train, and participate in sales calls with our national broker network in order to take advantage of the momentum currently being created by their efforts. We anticipate a considerable amount of travel and ongoing expenses to be incurred as part of this expansion.

 Increase Manufacturing Capacity - (i) Flagship Alkaline88 product: we expect to add one to two new co-packer facilities, strategically located to reduce freight costs and meet current volumes and future growth objectives; and (ii) A88 Infused: we expect to add three to five new co-packer facilities strategically located to meet anticipated volumes by product type and future growth objectives.

 Expand Retail Distribution - We continue to expand our retail presence.

 Addition of Support Staff - In order to support expansion efforts and to continue the training and support of our broker network, we anticipate that we will need to hire approximately four more people on the corporate level for the specific purpose of supporting the broker, distributor and retailers and their logistical and accounting requirements. We continue to seek and interview candidates to fill our growing need for additional staffing.

 Capital Considerations - Our business plan can be adjusted based on the available capital to the business. In March, 2019, we raised net proceeds of $10,450,900 via a public offering of our common stock. We believe the proceeds from this offering, plus anticipated warrant exercises (we received $2,500,456 from warrant exercises since March 31, 2019) will adequately fund Alkaline's operations and capital needs for the next 12 months.

The milestones set forth above reflect the current judgment and belief of our management regarding the direction of our business. Actual events, expenditures and results will almost always vary, sometimes materially, from any estimates, predictions, projections or assumptions suggested herein.

If our financial resources and future cash-flows from operations are insufficient to satisfy our capital requirements, we may seek to sell additional equity or debt securities or obtain additional credit facilities. The sale of additional equity securities will result in dilution to our stockholders. The incurrence of indebtedness will result in increased debt service obligations and could require us to agree to operating and financial covenants that could restrict our operations or modify our plans to grow the business. Financing may not be available in amounts or on terms acceptable, if at all. Any failure by us to raise additional funds on favorable terms, or at all, will limit our ability to expand business operations and could harm overall business prospects.

Product Distribution Method


108

Our distribution network is a broker-distributor-retailer network, whereby brokers represent our products to distributors and retailers. Our target retail markets are: (a) chain and independent health food stores; (b) grocery stores; (c) convenience stores; (d) drug stores; and (e) the mass retail market. We have recently gained broker representation through Advantage Solutions for the continued expansion into our target retail markets and Cross Mark to expand into the largest convenience store chains.

We have distribution agreements with large national distributors (UNFI, KeHe, CoreMark, and C&S), representing over 150,000 retail establishments. Our current retailers include convenience stores, natural food products stores, large ethnic markets and national retailers. Currently, we sell all of our products to our retailers through brokers and distributors. Our larger retail clients bring the water in through their own warehouse distribution network. Our current retail clients are made up of a variety of the following; convenience stores, including 7-11's; large national retailers, including Walmart, CVS, Albertson's/Safeway, Kroger companies, and regional grocery chains such as Schnucks, Smart & Final, Jewel-Osco, Sprouts, Bashas', Bristol Farms, Stater Brothers, Publix, Vallarta, Superior Foods, Brookshire's, HEB and other companies throughout the United States. In total we are now in more than half of the top 75 grocery retailers in the United States.

We have engaged a producer of private labeled bottled water to assist in the manufacturing, procurement and logistical aspects of our business. Their specialized water production capabilities are expected to allow us to support the growing demand for our products. We believe this arrangement will enable us to further scale production and distribution as the Alkaline88®brand continues to gain market share.

Dependence on Few Customers

We had 2 major customers that together accounted for 35% (23% and 12%, respectively) of accounts receivable at June 30, 2019, and 2 customers that together accounted for 40% (22% and 18%, respectively) of the total revenues earned for the quarter ended June 30, 2019.

We had 2 major customers that together accounted for 46% (28% and 18%, respectively) of accounts receivable at March 31, 2019, and 2 customers that together accounted for 43% (25% and 18%, respectively) of the total revenues earned for the year ended March 31, 2019.

There can be no assurance that such customers will continue to order our products in the same level or at all. A reduction or delay in orders from such customers, including reductions or delays due to market, economic or competitive conditions, could have a material adverse effect on our business, operating results and financial condition.

Marketing

We intend to continue to market our products through our broker network and to avail ourselves to the promotional activities of other companies and competitors regarding the benefits of alkaline water. We anticipate that our initial marketing thrust will be to support the retailers and distribution network with point of sales displays and other marketing materials, strategically adding an extensive public relations program and other marketing as the markets dictate.

We have engaged a business and marketing consulting firm and sales broker to assist our company in all aspects of our marketing, trade promotion, public relations and brand development. Their expertise in all aspects of consumer goods brand development, marketing and promotional programs is expected to help us meet the growing consumer demand for both our flagship Alkaline88® product and our upcoming A88 Infused product line. We have also engaged a sales and merchandising broker to implement a unique "Van Program" (where sales representatives sell products directly from vans to the retailers) throughout Texas and California which is intended to bring both our flagship Alkaline88® products and, once launched, A88 Infused's products to over 13,000 independently owned convenience stores in those markets. We expect to be able to expand the program to an additional nine US markets over the next few years.


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Competition

The commercial retail beverage industry, and in particular its non-alcoholic beverage segment, is highly competitive. Market participants are of various sizes, with various market shares and geographical reach, some of whom have access to substantially more sources of capital.

We compete generally with all liquid refreshments, including bottled water and numerous specialty beverages, such as: CORE® Hydration, SOBE®, Snapple®, AriZona® Iced Tea, Vitaminwater®, Gatorade Perform®, and POWERADE®.

We compete indirectly with major international beverage companies including but not limited to: The Coca-Cola Company®, PepsiCo, Inc., The Nestlé Group, Dr Pepper Snapple Group, Inc, Danone S.A., The Kraft Heinz Company, and Unilever PLC. These companies have established market presence in the United States and globally, and offer a variety of beverages that are competitors to our products. We face potential direct competition from such companies, because they have the financial resources, and access to manufacturing and distribution channels to rapidly enter the alkaline water market.

We will compete directly with other alkaline water producers and brands focused on the emerging alkaline beverage market including Eternal, Essentia, Core, Icelandic, Real Water, Mountain Valley, Qure, Penta, and Alka Power. Products offered by our direct competitors are sold in various volumes and prices with prices ranging from approximately $0.99 for a half-liter bottle to $4.99 for a one-gallon bottle, and volumes ranging from half-liter bottles to one-gallon bottles. We currently offer our products in a one-gallon bottle for a suggested resale price or an SRP of $4.99, three-liter bottle for an SRP of $3.99, 1.5 liter at an SRP of $2.49, 1 liter at an SRP of $1.99, 700 milliliter single serving at an SRP of $1.19, and a 500 milliliter at an SRP of $0.99. Our competitors may introduce larger sizes and offer them at an SRP that is lower than our products. We can provide no assurances that consumers will continue to purchase our products or that they will not prefer to purchase a competitive product.

Intellectual Property

Where available, we intend to obtain trademark protection in the United States for a number of trademarks for slogans and product designs. We intend to aggressively assert our rights under trade secret, unfair competition, trademark and copyright laws to protect our intellectual property, including product design, product research and concepts and recognized trademarks. These rights are protected through the acquisition of patents and trademark registrations, the maintenance of trade secrets, the development of trade dress, and, where appropriate, litigation against those who are, in our opinion, infringing these rights. The trademark for Alkaline88® has been registered in the USA, Canada, Hong Kong, and has been applied for in China.

While there can be no assurance that registered trademarks will protect our proprietary information, we intend to assert our intellectual property rights against any infringer. Although any assertion of our rights could result in a substantial cost to, and diversion of effort by, our company, management believes that the protection of our intellectual property rights will be a key component of our sales and operating strategy.

The electrolysis process through which our product is produced is proprietary to us and, while the process is not patented, we seek to protect the process through the maintenance of trade secrets and know-how agreements.

Seasonality of Business

The sales of our products are influenced to some extent by weather conditions in the markets in which we operate. Unusually cold or rainy weather during the summer months may have a temporary effect on the demand for our product and contribute to lower sales, which could have an adverse effect on our results of operations for such periods.

Government Regulation

The advertising, distribution, labeling, production, safety, sale, and transportation in the United States of our product will be subject to: the Federal Food, Drug, and Cosmetic Act; the Federal Trade Commission Act; the Lanham Act; state consumer protection laws; competition laws; federal, state and local workplace health and safety laws; various federal, state and local environmental protection laws; and various other federal, state and local statutes and regulations.


110

Legal requirements apply in many jurisdictions in the United States requiring that deposits or certain ecotaxes or fees be charged for the sale, marketing, and use of certain non-refillable beverage containers. The precise requirements imposed by these measures vary and are constantly evolving. Other types of statutes and regulations relating to beverage container deposits, recycling, ecotaxes and/or product stewardship also apply in various jurisdictions in the United States. We anticipate that additional, similar legal requirements may be proposed or enacted in the future at the local, state and federal levels in the United States.

Any third-party bottling facility that we may choose to utilize in the future and any other such operations will be subject to various environmental protection statutes and regulations, including those relating to the use of water resources and the discharge of wastewater. It will be our policy to comply with any and all such legal requirements. Compliance with these provisions has not had, and we do not expect such compliance to have, any material adverse effect on our capital expenditures, net income or competitive position.

Employees

In addition to Richard Wright, who is our President, Chief Executive Officer and director, David A. Guarino, who is our Chief Financial Officer, Secretary, Treasurer and director, and Ronald DaVella, our Executive Vice President of Finance, we currently employ 18 full time employees and 1 part-time employee. We also work with retail brokers in the United States who are paid on a contract basis. Our operations are overseen directly by management that engages our employees to carry on our business. Our management oversees all responsibilities in the areas of corporate administration, business development, and research. We intend to expand our current management to retain skilled directors, officers, and employees with experience relevant to our business focus. Our management's relationships with manufacturers, distillers, development/research companies, bottling concerns, and certain retail customers will provide the foundation through which we expect to grow our business in the future. We believe that the skill-set of our management team will be a primary asset in the development of our brands and trademarks. We also plan to form an independent network of contract sales and regional managers, a promotional support team, and several market segment specialists who will be paid on a variable basis.

DESCRIPTION OF PROPERTY

Our principal offices are located at 14646 N. Kierland Blvd, Suite 255, Scottsdale, AZ 85254 with a size of 3,352 square feet leased from a third party through September, 2020 at the current rate of $7,751.50 per month. We believe that the condition of our principal offices is satisfactory, suitable and adequate for our current needs.

We do not own any real estate or other property used in the operation of our current business.

LEGAL PROCEEDINGS

Our company was named as a defendant in a lawsuit filed on April 6, 2017, by Douglas Horn in the Maricopa County, Arizona, Superior Court, styled as "Horn v. The Alkaline Water Company, Inc., et al.," cause number CV2017-005485. Mr. Horn sought damages arising out of the alleged breach of a written employment agreement between our company and Mr. Horn. Mr. Horn alleged that our company has failed to pay wages and to transfer stock allegedly owed to him under the terms of his employment agreement. Our company denied the allegations of the claims, and moved to dismiss pursuant to the terms of the employment agreement which require that all disputes be resolved by arbitration. In response, Mr. Horn filed a notice of dismissal of all claims in that court, without prejudice. On September 21, 2017, Mr. Horn filed a Demand for Arbitration with the American Arbitration Association, asserting the same claims. The claim has been assigned No. 01-17-0005-6474. Our company has responded, denying any liability to Mr. Horn. On March 19 to 21, 2019, a three day arbitration hearing on this matter occurred in front of a panel of three arbitrators (the "Panel"). On April 25, 2019, the Panel issued an Interim Arbitration Award finding that Mr. Horn voluntarily left his employment with our company in October, 2016 without legal justification, and ruled that the relevant employment agreement became null and void in October, 2016. The Panel further found our company to be the prevailing party in the arbitration and thus entitled to an award of reasonable attorney fees, costs and expenses. In late May, 2019, we submitted an application for fees and costs. On June 17, 2019, the Panel issued its Final Award granted us an award of $162,670 against Mr. Horn for our attorneys' fees and associated costs. We intend to vigorously attempt to collect these awarded fees and costs from Mr. Horn.


111

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

Except as detailed above, we know of no material proceedings in which any of our directors, officers or affiliates, or any owner of record or beneficially of more than five percent of our common stock, or any associate of any such director, officer, affiliate or stockholder is a party adverse to our company or our subsidiary or has a material interest adverse to our company or our subsidiary.

MARKET PRICE OF AND DIVIDENDS ON ALKALINE'S COMMON EQUITY
AND RELATED STOCKHOLDER MATTERS

Market Information

Our common stock has been listed for trading on the Nasdaq Capital Market since December 10, 2018 and on the TSX Venture Exchange since April 25, 2018 under the symbol "WTER". Until the listing of our common stock on the Nasdaq Capital Market on December 10, 2018, our common stock was quoted on the OTC Market Group's OTCQB.

Transfer Agents

Our shares of common stock are issued in registered form. The transfer agent and registrar for our common stock is Transhare Corporation, located at 2849 Executive Drive, Suite 200, Clearwater, Florida 33762. The co-transfer agent for our common stock is TSX Trust Company, located at 650 West Georgia Street, Suite 2700, Vancouver, British Columbia V6B 4N9, Canada.

Holders of Common Stock

As of ♦, 2019, there were approximately ♦ holders of record of our common stock. As of such date ♦ shares were issued and outstanding.

Security Ownership of Certain Beneficial Owners and Management of Alkaline following the Merger

The following table sets forth, assuming the completion of the Merger, certain information with respect to the beneficial ownership of our common stock immediately following the completion of the Merger by each current Alkaline stockholder known by Alkaline to be the beneficial owner of more than 5% of any class of Alkaline's voting securities and by each of Alkaline's current directors, director nominees, and current executive officers and by Alkaline's current executive officers and directors as a group.


Name of Beneficial Owner


Title of Class

Amount and Nature of
Beneficial Ownership(1)

Percentage of
Class(2)

Richard A. Wright

Common Stock

700,000

♦%

Series C
Preferred Stock(3)

1,500,000

100%

Series D
Preferred Stock(4)

1,500,000

39.47%

David A. Guarino

Common Stock

909,300

♦%

Series D
Preferred Stock(4)

1,000,000

26.32%

Aaron Keay

Common Stock

262,500(5)

*



112


Bruce Leitch

Common Stock

75,000(6)

*

Brian Sudano

Common Stock

Nil

*

Ronald DaVella

Common Stock

Nil

*

All executive officers and directors as a group (6 persons)

Common Stock

1,946,800

♦%

Series C
Preferred Stock(3)

1,500,000

100%

Series D Preferred Stock(4)

2,500,000

65.79%

* Less than 1%.

(1)

Except as otherwise indicated, we believe that the beneficial owners of the common stock listed above, based on information furnished by such owners, have sole investment and voting power with respect to such shares, subject to community property laws where applicable. Beneficial ownership is determined in accordance with the rules of the Securities and Exchange Commission and generally includes voting or investment power with respect to securities. Common stock subject to options or warrants currently exercisable or exercisable within 60 days, are deemed outstanding for purposes of computing the percentage ownership of the person holding such option or warrants, but are not deemed outstanding for purposes of computing the percentage ownership of any other person.

(2)

Percentage of common stock is based on ♦ shares of our common stock expected to be issued and outstanding immediately after the completion of the Merger (consisting of43,685,592 shares of Alkaline common stock issued and outstanding as of ♦, 2019 and 23,315,217 shares of Alkaline common stock to be issued pursuant to the Merger Agreement). Percentage of Series C Preferred Stock is based on 1,500,000 shares of Series C Preferred Stock issued and outstanding as of ♦, 2019. Percentage of Series D Preferred Stock is based on 3,800,000 shares of Series D Preferred Stock issued and outstanding as of ♦, 2019.

(3)

Each share of the Series C Preferred Stock will be convertible, without the payment of any additional consideration by the holder and at the option of the holder, into one fully paid and non-assessable share of our common stock at any time after (i) we achieve the consolidated revenue of our company and all of its subsidiaries equal to or greater than $15,000,000 in any 12 month period, ending on the last day of any quarterly period of our fiscal year; or (ii) a Negotiated Trigger Event, defined as an event upon which the Series C Preferred Stock will be convertible as may be agreed by our company and the holder in writing from time to time.

(4)

Each share of the Series D Preferred Stock will be convertible, without the payment of any additional consideration by the holder and at the option of the holder, into one fully paid and non-assessable share of our common stock at any time after (i) we achieve the consolidated revenue of our company and all of its subsidiaries equal to or greater than $40,000,000 in any 12 month period, ending on the last day of any quarterly period of our fiscal year; or (ii) a Negotiated Trigger Event, defined as an event upon which the Series D Preferred Stock will be convertible as may be agreed by our company and the holder in writing from time to time.

(5)

Consists of 262,500 stock options exercisable within 60 days.

(6)

Consists of 75,000 stock options exercisable within 60 days.

Dividends

The payment of dividends, if any, in the future, rests within the sole discretion of our board of directors. The payment of dividends will depend upon our earnings, our capital requirements and our financial condition, as well as other relevant factors. We have not declared any cash dividends since our inception and have no present intention of paying any cash dividends on our common stock in the foreseeable future.

There are no restrictions in our articles of incorporation or bylaws that prevent us from declaring dividends. The Nevada Revised Statutes, however, do prohibit us from declaring dividends where, after giving effect to the distribution of the dividend:

 

1.

We would not be able to pay our debts as they become due in the usual course of business; or



113


 

2.

Our total assets would be less than the sum of our total liabilities plus the amount that would be needed to satisfy the rights of stockholders who have preferential rights superior to those receiving the distribution.

MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS

Our management's discussion and analysis provides a narrative about Alkaline's financial performance and condition that should be read in conjunction with Alkaline's audited and unaudited consolidated financial statements and related notes thereto included in this joint proxy statement/prospectus. This discussion contains forward looking statements reflecting our current expectations and estimates and assumptions about events and trends that may affect our future operating results or financial position. Our actual results and the timing of certain events could differ materially from those discussed in these forward-looking statements due to a number of factors, including, but not limited to, those set forth in the sections of this joint proxy statement/prospectus titled "Risk Factors" beginning at page 35 above and "Forward-Looking Statements" beginning at page 52 above.

Overview

We offer retail consumers bottled alkaline water in 500ml, 700ml, 1-liter, 1.5-liter, 3-liter and 1-gallon sizes, and bottled flavored infused water in 500-milliliter sizes coming in raspberry, watermelon, lemon and blood-orange flavors, under the trade name Alkaline88. Our products are produced through an electrolysis process that uses specialized electronic cells coated with a variety of rare earth minerals to produce our 8.8 pH drinking water without the use of any chemicals. Our products also incorporate 84 trace Himalayan salts. The main reason consumers drink our products is for the perceived benefit that a proper pH balance helps fight disease and boosts the immune system and the perception that alkaline water helps to maintain a proper body pH and keeps cells young and hydrated.

Our company, The Alkaline Water Company Inc., was incorporated under the laws of the State of Nevada on June 6, 2011 under the name "Global Lines Inc.". Our business model prior to the acquisition of Alkaline Water Corp. on May 31, 2013 was to provide chauffeuring and transportation services to residents within our local market, primarily providing transportation services such as private school student transport, sightseeing trips, and elderly transportation, and offering transportation to the airport and special events such as proms and weddings. However, as we had not successfully developed our service and had no source of revenue from our business plan, we determined to seek out a new business opportunity to increase value for our stockholders.

On February 20, 2013, The Alkaline Water Company Inc. (formerly Global Lines Inc.) entered into a non-binding letter of intent with Alkaline 88, LLC (formerly Alkaline 84, LLC), a wholly-owned subsidiary of Alkaline Water Corp., for the acquisition of all of the issued and outstanding securities of the capital of Alkaline 88, LLC. Further to this letter of intent, on May 31, 2013, The Alkaline Water Company Inc. entered into a share exchange agreement with Alkaline Water Corp. and all of its stockholders, and as a result of the closing of this agreement on the same date, Alkaline Water Corp. became a wholly-owned subsidiary of The Alkaline Water Company Inc. Consequently, after the closing of this agreement we adopted the business of Alkaline Water Corp.'s wholly-owned subsidiary, Alkaline 88, LLC.

Results of Operations

Our results of operations for the three months ended June 30, 2019 and June 30, 2018 are as follows:


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    For the three     For the three  
    months ended     months ended  
    June 30,     June 30,  
    2019     2018  
Revenue $ 10,153,044   $ 7,880,865  
Cost of goods sold   6,028,197     4,491,213  
Gross profit $ 4,124,847   $ 3,389,652  
             
Net Loss $ (5,056,188 ) $ (1,090,584 )

Our results for the years ended March 31, 2019 and March 31, 2018 are as follows:

    Year Ended     Year Ended  
    March 31, 2019     March 31, 2018  
Revenue $ 32,199,528   $ 19,812,199  
Cost of goods sold   19,252,768     11,687,017  
Gross profit   12,946,760     8,125,182  
             
Net Loss (after operating expenses and other expenses)   (8,617,565 )   (6,687,280 )

Revenue and Cost of Goods Sold

We had revenue from sales of our products for the three months ended June 30, 2019 of $10,153,044, as compared to $7,880,865 for the three months ended June 30, 2018, an increase of 29% generated by sales of our alkaline water. We had revenue from sales of our products for the year ended March 31, 2019 of $32,199,528 as compared to $19,812,199 for the year ended March 31, 2018, an increase of 63%, generated by sales of our alkaline water. The increase in sales is due to the expanded distribution of our products to existing retailers and the addition of new retailers throughout the country. We distribute our products through several channels. We sell through large national distributors (UNFI, KeHe, C&S, and Core-Mark), which together represent over 150,000 retail outlets. We also sell our product directly to retail clients, including convenience stores, natural food products stores, large ethnic markets and national retailers. Some examples of retail clients are: Walmart, CVS, Albertson/Safeway, Kroger, Schnucks, Smart & Final, Jewel-Osco, Sprouts, Bashas', Stater Bros. Markets, Unified Grocers, Bristol Farms, Vallarta, Superior Foods, Ingles, HEB Brookshire's, Publix, Shaw's, Raley's, Food Lion, Harris Teeter, and Festival Foods.

Cost of goods sold is comprised of production costs, shipping and handling costs. For the three months ended June 30, 2019, we had cost of goods sold of $6,028,197, or 59% of revenue, as compared to cost of goods sold of $4,491,213 or 57% of revenue, for the three months ended June 30, 2018. For the year ended March 31, 2019, we had cost of goods sold of $19,252,768, or 60% of net sales, as compared to cost of goods sold of $11,687,017, or 59% of net sales, for the year ended March 31, 2018. The increase in cost of goods sold as a percentage of net sales was due to increased raw material cost and associated freight as a result of our east coast expansion.

Expenses

Our operating expenses for the three months ended June 30, 2019 and June 30, 2018 are as follows:

    For the three     For the three  
    months ended     months ended  
    June 30,     June 30,  
    2019     2018  
Sales and marketing expenses $ 4,472,460   $ 3,136,990  
General and administrative expenses   4,379,271     1,085,567  
Depreciation expenses   233,940     114,073  
Total operating expenses $ 9,085,671   $ 4,336,630  


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Our operating expenses for the years ended March 31, 2019 and March 31, 2018 are as follows:

 

 

Year Ended

 

 

Year Ended

 

 

 

March 31, 2019

 

 

March 31, 2018

 

Sales and marketing expenses

$

13,009,384

 

$

7,211,399

 

General and administrative expenses

 

7,420,078

 

 

6,425,069

 

Depreciation expenses

 

580,669

 

 

418,777

 

Total operating expenses

$

21,010,131

 

$

14,055,245

 

For the three months ended June 30, 2019, our total operating expenses were $9,085,671, as compared to $4,336,630 for the three months ended June 30, 2018.

For the three months ended June 30, 2019, the total included $4,472,460 of sales and marketing expenses. Sales and marketing expenses increased as a result of increased freight and sales promotional expenses due to our increase in sales. General and administrative expenses of $4,379,271, consisted primarily of approximately $2,539,309 of professional fees, media fees and legal fees, stock option expense in the amount of $1,103,740 and $432,341 of wages and wage related expenses. Professional, media and legal fees increased as a result of increased spending on stock and brand awareness.

For the three months ended June 30, 2018 the total included $3,136,990 of sales and marketing expenses and $1,085,567 of general and administrative expenses, consisting primarily of approximately $557,780 of professional fees, media and legal fees and $333,139 of wages and wage related expenses.

For the year ended March 31, 2019, our total operating expenses were $21,010,131 as compared to $14,055,245 for the year ended March 31, 2018. Sales and marketing expenses increased by $5.8 million primarily as a result of increased outbound freight costs of $2,728,322 and increased marketing spend of $1,885,139 due to the 63% increase in revenue. General and administrative expenses increased by $995,009 primarily resulting from an increase in professional fees, media fees and legal fees for new stock exchange listings on the Nasdaq Capital Market and the TSX Venture Exchange of approximately $3.9 million, offset by a decrease in stock compensation expenses of $2.9 million. In the year ended March 31, 2018 we incurred $1.7 million in stock compensation expense due to the settlement with related parties as described in Note 7 to our audited financial statements for the years ended March 31, 2019 and 2018 and $1.3 million in stock compensation provided to contractors which did not occur in the year ended March 31, 2019.

For the year ended March 31, 2019, the total of $7,420,078 of general and administrative expenses consisted primarily of $4,511,325 of professional fees, $1,423,245 in wage expense and $478,043 in stock compensation expense, relating to stock option expense and stock expense relating to endorsement.

For the year ended March 31, 2018, the total of $6,425,069 of general and administrative expenses consisted primarily of $1,255,183 of professional fees and $3,385,340 in stock compensation expense, relating to an agreement to retire Series A preferred stock in exchange for Series D preferred stock and common stock, issuance of common stock to consultants and stock option expense.

Liquidity and Capital Resources

Working Capital

Our working capital as of June 30, 2019, March 31, 2019 and March 31, 2018 was as follows:

    June 30, 2019     March 31, 2019     March 31, 2018  
Current assets $ 15,424,400   $ 16,537,343   $ 4,886,491    
Current liabilities   8,581,469     7,125,695     5,595,885    
Working capital $ 6,842,931   $ 9,411,648   $ (709,394 )  


116

Current Assets

Current assets as of June 30, 2019 and March 31, 2019 primarily consist of $10,013,737 and $11,032,451 in cash, $4,118,117 and $3,068,181 in accounts receivable and $1,045,313 and $2,058,012 in inventory, respectively.

Current assets as of March 31, 2019 and March 31, 2018 primarily consist of $11,032,451 and $988,905 in cash, $3,068,181 and $2,599,095 in accounts receivable and $2,058,012 and $1,002,020 in inventory, respectively. Current assets primarily increased as a result of the capital raise in March 2019 of $10,450,900 and increases in accounts receivable and inventory resulting from the 63% increase in revenues.

Current Liabilities

Current liabilities as of June 30, 2019 and March 31, 2019 primarily include $3,746,000 and $2,898,958 in accounts payable, revolving financing of $3,714,101 and $3,131,279, and accrued expenses of $1,033,200 and $1,095,458, respectively.

Current liabilities as of March 31, 2019 and March 31, 2018 primarily relate to $2,898,958 and $2,052,988 in accounts payable, revolving financing of $3,131,279 and $2,592,015, and accrued expenses of $1,095,458 and $819,011, respectively. Current liabilities primarily increased as a result of the 63% increase in revenues.

Cash Flow

Our cash flows for the three months ended June 30, 2019 and June 30, 2018 are as follows:

    For the three     For the three  
    months ended     months ended  
    June 30,     June 30,  
    2019     2018  
Net Cash used in operating activities $ (2,746,352 ) $ (1,812,035 )
Net Cash used in investing activities   (35,670 )   (375,275 )
Net Cash provided by financing activities   1,763,308     3,954,676  
Net (decrease) increase in cash and cash equivalents $ (1,018,714 ) $ 1,767,366  

Ours cash flows for the years ended March 31, 2019 and March 31, 2018 are as follows:

 

 

Year

 

 

Year

 

 

 

Ended

 

 

Ended

 

 

 

March 31,

 

 

March 31,

 

 

 

2019

 

 

2018

 

Net Cash used in operating activities

$

(8,128,613)

 

$

(2,625,849

)

Net Cash used in investing activities

 

(1,356,299

)

 

(317,855

)

Net Cash provided by financing activities

 

19,528,458

 

 

3,328,804

 

Net increase in cash and cash equivalents

$

10,043,546

 

$

385,100

 

Operating Activities

Net cash used in operating activities was $2,746,352 for the three months ended June 30, 2019, as compared to $1,812,035 used in operating activities for the three months ended June 30, 2018. The increase in net cash used in operating activities was primarily due to the increase in accounts receivable and increase in net loss primarily from additional professional fees, media fees and legal fees, freight and marketing expenses offset by the reduction in inventory and increase in accounts payable in the quarter ended June 30, 2019, compared to the quarter ended June 30, 2018.

Net cash used in operating activities was $8,128,613 for the year ended March 31, 2019, as compared to $2,625,849 used in operating activities for the year ended March 31, 2018. The increase in net cash used was primarily due to the funding of the additional professional fees, freight and marketing expenses and the reduction in stock compensation discussed in the expense section above.


117

Investing Activities

Net cash used in investing activities was $35,670 for the three months ended June 30, 2019, as compared to $375,275 used in investing activities for the three months ended June 30, 2018. The decrease in net cash used by investing activities was from a decrease in purchases of production equipment in the three months ended in June 30, 2019 compared to the three months ended June 30, 2018.

Net cash used in investing activities was $1,356,299 for the year ended March 31, 2019, as compared to $317,855 used in investing activities for the year ended March 31, 2018. The increase net cash used by investing activities was from increased purchases of production equipment due to the increase in our revenue.

Financing Activities

Net cash provided by financing activities for the three months ended June 30, 2019 was $1,763,308, as compared to $3,954,676 for the three months ended June 30, 2018. The decreases of net cash provided by financing activities is primarily attributable to the $1,180,486 proceeds from the exercise of warrants in the three months ended June 30, 2019 as compared to $3,848,800 of proceeds from sale of common stock in the three month ended June 30, 2018.

Net cash provided by financing activities for the year ended March 31, 2019 was $19,528,458, as compared to $3,328,804 for the year ended March 31, 2018. The increase of net cash provided by financing activities was mainly attributable to the sale of our common stock for total net proceeds to our company of $17,238,430 and warrant exercises for net proceeds of $1,882,348.

Cash Requirements

We believe that between the cash on hand as of June 30, 2019, additional warrant exercises, and our credit line, we will have sufficient cash to sustain operations including our cash needs through at least June 30, 2020. If our own financial resources and future cash-flows from operations beyond June 30, 2020 are insufficient to sustain operations, we may seek to sell additional equity or debt securities or obtain additional credit facilities. The sale of additional equity securities will result in dilution to our stockholders. The incurrence of indebtedness will result in increased debt service obligations and could require us to agree to operating and financial covenants that could restrict our operations or modify our plans to grow the business. Financing may not be available in amounts or on terms acceptable to us, if at all. Any failure by us to raise additional funds on terms favorable to us, or at all, will limit our ability to expand our business operations and could harm our overall business prospects.

Off-Balance Sheet Arrangements

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

CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE

Alkaline was notified that AMC Auditing, LLC, its former independent registered public accounting firm, was acquired by Prager Metis CPAs, LLC, and that all of the employees of AMC Auditing, LLC were joining Prager Metis CPAs, LLC. As a result, effective as of April 25, 2019, AMC Auditing, LLC resigned as Alkaline's independent registered public accounting firm. Concurrent with such resignation, Alkaline engaged Prager Metis CPAs, LLC to serve as its independent registered public accounting firm effective April 25, 2019. The change of Alkaline's independent registered public accounting firm from AMC Auditing, LLC to Prager Metis CPAs, LLC was approved by Alkaline's board of directors.

The report of AMC Auditing, LLC on Alkaline's financial statements as of and for the fiscal years ended March 31, 2018 and 2017 did not contain an adverse opinion or disclaimer of opinion, or qualification or modification as to uncertainty, audit scope, or accounting principles, except that such report on Alkaline's financial statements contained an explanatory paragraph in respect to the substantial doubt about Alkaline's ability to continue as a going concern.


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During Alkaline's two most recent fiscal years ended March 31, 2018 and 2017 and in the subsequent interim period through the date of resignation of AMC Auditing, LLC, there were no disagreements, resolved or not, between Alkaline and AMC Auditing, LLC on any matter of accounting principles or practices, financial statement disclosure, or auditing scope or procedure, which disagreements, if not resolved to the satisfaction of AMC Auditing, LLC, would have caused AMC Auditing, LLC to make reference to the subject matter of such disagreements in connection with its report on Alkaline's financial statements for such years.

During Alkaline's two most recent fiscal years ended March 31, 2018 and 2017 and in the subsequent interim period through the date of resignation of AMC Auditing, LLC, there were no reportable events within the meaning of Item 304(a)(1)(v) of Regulation S-K.

During Alkaline's two most recent fiscal years ended March 31, 2018 and 2017 and in the subsequent interim period through the date of appointment of Prager Metis CPAs, LLC, Alkaline did not consult with Prager Metis CPAs, LLC on either (1) the application of accounting principles to a specified transaction, either completed or proposed; or the type of audit opinion that may be rendered on Alkaline's financial statements, and Prager Metis CPAs, LLC did not provide either a written report or oral advice to Alkaline that Prager Metis CPAs, LLC concluded was an important factor considered by Alkaline in reaching a decision as to the accounting, auditing or financial reporting issue; or (2) any matter that was either the subject of a disagreement, as defined in Item 304(a)(1)(iv) of Regulation S-K and the related instructions, or a reportable event, as defined in Item 304(a)(1)(v) of Regulation S-K.

INFORMATION WITH RESPECT TO AQUAHYDRATE

DESCRIPTION OF BUSINESS

AQUAhydrate produces and distributes a lifestyle beverage geared towards the new generation of millennial consumers. The product is available in 500-milliliter, 700-milliliter, 1-liter1.5-liter and 1-gallon sizes under the AQUAhydrate brand. The product is ultra-purified, supplemented with all natural electrolytes and trace minerals and then elevated to an alkaline pH of over 9 using electrolysis. AQUAhydrate is great tasting high-performance water specially formulated for people with an active lifestyle. AQUAhydrate offers superior hydration without sugar, calories, or artificial additives. Using a proprietary blend of 72 trace minerals, AQUAhydrate is enhanced with 2x the electrolytes of competitive brands. Electrolytes are minerals in your blood and other body fluids that carry an electric charge. Electrolytes affect the amount of water in your body, the acidity of your blood (pH), your muscle function, and other important processes. You lose electrolytes when you sweat. AQUAhydrate isn't dosed with sodium and potassium like many competitors. Instead, AQUAhydrate uses ConcenTrace, an all-natural mineral blend sourced from the mineral-rich Salt Flats of Utah. ConcenTrace provides 70+ electrolytes and trace minerals - even beyond what comes in standard sports drinks.

The product is available in stores in 47 states and may also be ordered online through Amazon, Walmart and GNC.

MARKET PRICE OF AND DIVIDENDS ON AQUAHYDRATE'S COMMON EQUITY
AND RELATED STOCKHOLDER MATTERS

The Sixth Amended and Restated Articles of Incorporation of AQUAhydrate authorize the issuance by AQUAhydrate of common stock, and Series A Preferred shares, Series B Preferred shares, Series C Preferred shares, Series D Preferred shares, Series E Preferred shares, Series F Preferred shares, Series G Preferred shares, Series H Preferred shares and Series I Preferred shares. There is no established public trading market for any of AQUAhydrate's securities.

As of ♦, 2019, there were approximately ♦ holders of record of common stock, approximately ♦ holders of record of Series A Preferred shares, approximately ♦ holders of record of Series B Preferred shares, approximately ♦ holders of record of Series C Preferred shares, approximately ♦ holders of record of Series D Preferred shares, approximately ♦ holders of record of Series E Preferred shares, approximately ♦ holders of record of Series F Preferred shares, approximately ♦ holders of record of Series G Preferred shares, approximately ♦ holders of record of Series H Preferred shares and approximately ♦ holders of record of Series I Preferred shares.


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AQUAhydrate has never paid a dividend or made a distribution with respect to its capital stock.

MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS

Our management's discussion and analysis provides a narrative about our financial performance and condition that should be read in conjunction with the audited and unaudited financial statements and related notes thereto included in this joint proxy statement/prospectus. This discussion contains forward looking statements reflecting our current expectations and estimates and assumptions about events and trends that may affect our future operating results or financial position. Our actual results and the timing of certain events could differ materially from those discussed in these forward-looking statements due to a number of factors, including, but not limited to, those set forth in the sections of this joint proxy statement/prospectus titled "Risk Factors" beginning at page 35 above and "Forward-Looking Statements" beginning at page 52 above.

Overview

We offer retail consumers bottled alkaline water in 500ml, 700ml, 1-liter, 1.5-liter and 1-gallon sizes under the trade name "AQUAhydrate." Our product is created through a process involving reverse osmosis, ultra-violet light purification, added minerals and electrolytes, and electrolytic cell ionization to produce a drinking water with a pH of over 9 without the use of chemical additives, flavors, or colors. The primary reason consumers drink our product is for the perception that the elevated electrolyte and alkalinity levels in AQUAhydrate result in a better-tasting and more effective hydrating product.

Our company, Aquahydrate, Inc., was incorporated under the laws of the State of Nevada on July 24, 2003 under the name "AquaGenus, LLC".  On February 25, 2010 the shareholders of AquaGenus, LLC voted to pursue conversion from a Nevada LLC into a Nevada corporation. On March 25, 2010 AquaGenus, LLC was converted into AquaGenus, Inc. Immediately subsequent to the conversion, the name of the corporation was changed to Aquahydrate, Inc.

In 2013-14 AQUAhydrate underwent a successful brand re-development process targeting consumers in the fast-growing health & wellness sector. The re-launch campaign was among the largest of any bottled water product to that date and resulted in expanded distribution and new national retail partners. From 2015-2017 AQUAhydrate launched new 1.5-liter, 1-gallon, and multipack packages into the marketplace. The new packages quickly became among AQUAhydrate's most popular products. Following on the success of the gallon package, AQUAhydrate initiated product tie-ins with partners such as the Wounded Warrior Project and Breast Cancer Research Foundation to promote their respective causes.

Results of Operations

Our results of operations for the three months ended June 30, 2019 and June 30, 2018 are as follows:

    For the three     For the three  
    months ended     months ended  
    June 30,     June 30,  
    2019     2018  
Revenue $ 4,367,261   $ 4,351,989  
Cost of goods sold   3,299,835     3,315,612  
Gross profit $ 1,067,426   $ 1,036,286  
             
Net Loss $ (739,105 ) $ (641,417 )


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Our results of operations for the six months ended June 30, 2019 and June 30, 2018 are as follows:

    For the six     For the six  
    months ended     months ended  
    June 30,     June 30,  
    2019     2018  
Revenue $ 7,589,677   $ 6,632,164  
Cost of goods sold   5,864,379     5,354,646  
Gross profit $ 1,725,298   $ 1,277,518  
             
Net Loss $ (1,712,053 ) $ (2,606,195 )

Our results for the years ended December 31, 2018 and December 31, 2017 are as follows:

     
Year Ended
     
Year Ended
 
    December 31, 2018     December 31, 2017  
Revenue $ 12,347,492   $ 12,726,664  
Cost of goods sold   9,644,386     9,864,803  
Gross profit   2,703,106     2,861,861  
             
Net Loss (after operating expenses and other expenses)   (4,353,724 )   (5,710,281 )

Revenue and Cost of Goods Sold

We had revenue from sales of our product for the three months ended June 30, 2019 of $4,367,261, as compared to $4,351,989 for the three months ended June 30, 2018, an increase of under 1%. We had revenue from sales of our product for the six months ended June 30, 2019 of $7,589,677, as compared to $6,632,164 for the six months ended June 30, 2018, an increase of 14% . We had revenue from sales of our product for the year ended December 31, 2018 of 12,347,492 as compared to $12,726,644 for the year ended December 31, 2017, an decrease of 3% driven by the loss of product availability in a major national retailer. The increase in sales for the periods ended June 30,2019 is due to the expanded distribution of our products to additional retailers throughout the country. We distribute our products through several channels. We sell through large national distributors (UNFI, KeHe, McClane, and Core-Mark) along with multiple regional distributors. We also sell our products directly to retail clients, including convenience stores, drug stores, and grocery stores. Some examples of retail clients are: Walmart, CVS, Albertson/Safeway, Kroger,  Bashas, Stater Bros. Markets, Bristol Farms, Vallarta, HEB, Circle-K, QuikTrip, Hy-Vee, Meijer, and Harris Teeter,

Cost of goods sold is comprised of production costs, shipping and handling costs. For the three months ended June 30, 2019, we had cost of goods sold of $3,299,835, or 76% of revenue, as compared to cost of goods sold of $3,315,612 or 76% of revenue, for the three months ended June 30, 2018. For the six months ended June 30, 2019, we had cost of goods sold of $5,864,379, or 77% of revenue, as compared to cost of goods sold of $5,354,646 or 81% of revenue, for the six months ended June 30, 2018. For the year ended December 31, 2018, we had cost of goods sold of $9,644,386, or 78% of net sales, as compared to cost of goods sold of $9,864,803, or 78% of net sales, for the year ended December 31, 2017. Cost of goods sold as a percentage of net sales stayed consistent year-over-year with the exception of the six months ended June 30, 2019 where we saw a decrease from 81% to 77%. That decrease was driven by lower shipping costs following the opening of our co-packing facility in Texas.


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Expenses

Our operating expenses for the three months ended June 30, 2019 and June 30, 2018 are as follows:

    For the three     For the three  
    months ended     months ended  
    June 30,     June 30,  
    2019     2018  
Sales and marketing expenses $ 187,793   $ 118,285  
General and administrative expenses   1,346,827     1,476,512  
Depreciation expenses   113,102     82,906  
Total operating expenses $ 1,647,722   $ 1,677,703  

Our operating expenses for the six months ended June 30, 2019 and June 30, 2018 are as follows:

    For the six     For the six  
    months ended     months ended  
    June 30,     June 30,  
    2019     2018  
Sales and marketing expenses $ 254,959   $ 253,224  
General and administrative expenses   2,734,847     3,383,552  
Depreciation expenses   213,888     176,044  
Total operating expenses $ 3,203,694   $ 3,812,820  

Our operating expenses for the years ended December 31, 2018 and December 31, 2017 are as follows:

 

 

Year Ended

 

 

Year Ended

 

 

 

December 31, 2018

 

 

December 31, 2017

 

Sales and marketing expenses

$

485,023

 

$

400,025

 

General and administrative expenses

 

6,097,618

 

 

7,866,559

 

Depreciation expenses

 

339,665

 

 

165,295

 

Total operating expenses

$

6,922,306

 

$

8,431,879

 

For the three months ended June 30, 2019, our total operating expenses were $1,647,722, as compared to $1,677,703 for the three months ended June 30, 2018.

For the three months ended June 30, 2019, the total included $187,793 of sale and marketing expenses. Sales and marketing expenses increased as a result of increased project fees related to packaging redesign. General and administrative expenses of $1,346,827, consisting primarily of approximately $896,377 wage-related expenses and $159,195 of professional fees.

For the six months ended June 30, 2019, our total operating expenses were decreased to $3,203,694, as compared to $3,812,820 for the six months ended June 30, 2018 primarily due to lower salary and wage-related expenses resulting from lower headcount year-over-year.

For the six months ended June 30, 2019 the total included $254,959 of sales and marketing expenses and $2,734,847 of general and administrative expenses, primarily consisting of  $1,931,656 of wage-related expenses and $225,446 of professional fees.

For the year ended December 31, 2018, our total operating expenses were $6,922,306  as compared to $8,431,879 for the year ended December 31, 2017. General and administrative expenses decreased by $1,768,941 primarily due to reduced headcount including executive-level headcount resulting in lower wage-related expenses.  Additionally, we incurred $216,323 of one-time expenses related to the final payoff of an asset-back loan in 2017 that did not occur in 2018.

For the year ended December 31, 2018, the total of $6,097,618 of general and administrative expenses consisted primarily of $4,405,103 of wage-related expenses and $233,609 of professional fees.


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For the year ended December 31, 2017, the total of $7,866,559 of general and administrative expenses consisted primarily of $5,896,411 of wage-related expenses and $296,717 of professional fees.

Liquidity and Capital Resources

Working Capital

Our working capital as of June 30, 2019, June 30, 2018, December 31, 2018 and December 31, 2017 was as follows:

    June 30, 2019     June 30, 2018     December 31, 2018     December 31, 2017  
Current assets $ 5,467,033   $ 4,407,573   $ 3,013,203     4,154,090  
Current liabilities   12,710,258     8,107,539     8,374,783     5,268,385  
Working capital $ (7,243,225 ) $ (3,699,966 ) $ (5,361,580 )   (1,114,295 )
                         

Current Assets

Current assets as of June 30, 2019 and June 30, 2018 primarily relate to $7,627 and $0 in cash, $3,229,905 and $2,456,195 in accounts receivable and $2,167,550 and $1,941,206 in inventory, respectively. Current assets as of December 31, 2018 and December 31, 2017 primarily relate to $6,547 and $167,027 in cash, $1,186,654 and $1,776,182 in accounts receivable and $1,820,002 and $2,157,444 in inventory, respectively. Current assets primarily increased as of June 30, 2019 due to an increase in accounts receivable driven by the 14% increase in sales for the six months ended June 30, 2019. 

Current Liabilities

Current liabilities as of June 30, 2019 and June 30, 2018 primarily include $5,674,644 and $4,902,257  in accounts payable and accrued expenses and bridge loans of $6,534,559 and $2,561,789, respectively. Current liabilities as of December 31, 2018 and December 31, 2017 primarily relate to $4,978,011 and $4,902,665 in accounts payable and accrued expenses, and bridge loans of $3,058,112 and $0, respectively. Current liabilities primarily increased as a result of additional bridge loans needed to fund operations.

Cash Flow

Our cash flows for the six months ended June 30, 2019 and June 30, 2018 are as follows:

    For the six     For the six  
    months ended     months ended  
    June 30,     June 30,  
    2019     2018  
Net Cash used in operating activities $ (3,181,749 ) $ (2,889,276 )
Net Cash used in investing activities   (55,988 )   (48,226 )
Net Cash provided by financing activities   3,238,457     2,770,475  
Net (decrease) increase in cash and cash equivalents $ 720   $ (167,027 )

Our cash flows for the years ended December 31, 2018 and December 31, 2017 are as follows:

 

 

Year

 

 

Year

 

 

 

Ended

 

 

Ended

 

 

 

December 31,

 

 

December 31,

 

 

 

2018

 

 

2017

 

Net Cash used in operating activities

$

(2,941,902)

 

$

(4,864,552

)

Net Cash used in investing activities

 

(48,227

)

 

(440,409

)

Net Cash provided by financing activities

 

2,829,649

 

 

4,979,747

 

Net decrease in cash and cash equivalents

$

(160,480)

 

$

(325,214)

 



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Operating Activities

Net cash used in operating activities was $3,181,749 for the six months ended June 30, 2019, as compared to $2,889,276 used in operating activities for the six months ended June 30, 2018. The increase in net cash used in operating activities was primarily due to the increases in accounts receivable and inventory partially offset by the decrease in net loss combined with the increase in accounts payable and other accrued expenses.

Net cash used in operating activities was $2,941,902 for the year ended December 31, 2018, as compared to $4,864,552 used in operating activities for the year ended December 31, 2017. The decrease in net cash used was primarily due to the lower net loss along with lower accounts receivable and lower inventory.

Investing Activities

Net cash used in investing activities was $55,988 for the six months ended June 30, 2019, as compared to $48,226 used in investing activities for the six months ended June 30, 2018. The increase in net cash used by investing activities was from an increase in purchases of production equipment during the six months ended in June 30, 2019 compared to the six months ended June 30, 2018.

Net cash used in investing activities was $48,227 for the year ended December 31, 2018, as compared to $440,409 used in investing activities for the year ended December 31, 2017. The decrease in net cash used by investing activities was due to lower purchases of production equipment in 2018 compared to 2017.

Financing Activities

Net cash provided by financing activities for the six months ended June 30, 2019 was $3,238,457, as compared to $2,770,475 for the six months ended June 30, 2018. The increase of net cash provided by financing activities was primarily due to $3,413,202 of bridge loans received for the six months ended June 30, 2019 compared to $2,541,471 of bridge loans received for the six months ended June 30, 2018.

Net cash provided by financing activities for the year ended December 31, 2018 was $2,829,649, as compared to $4,979,747 for the year ended December 31, 2017. The change in net cash provided by financing activities was primarily due to $6,000,000 of bridge loans received for the year ended December 31, 2017 compared to $3,004,901  of bridge loans received for the year ended December 31, 2018 and the repayment of outstanding notes totaling $924,000 in 2017.

Cash Requirements

We continue to generate operating losses and do not have adequate cash resources to sustain operations for the  next 12 months. As disclosed herein, we have entered into the Merger Agreement with Alkaline. Our ability to satisfy our trade and equity obligations and to sustain operations is dependent on the successful consummation of the Merger or on our ability to obtain alternative financing sources.

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.

ALKALINE PROPOSAL 4
ELECTION OF DIRECTORS

Our board of directors has nominated the persons named below as candidates for directors at the Alkaline Meeting. Unless otherwise directed, the proxy holder will vote the proxies received by him for the five nominees named below.

All directors of our company hold office until the next annual meeting of our stockholders or until their successors have been elected and qualified, or until their death, resignation or removal. The executive officers of our company are appointed by our board of directors and hold office until their death, resignation or removal from office.


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If elected at the Alkaline Meeting, these nominees, except for David A. Guarino, will continue to serve as directors of Alkaline following the Merger.

Pursuant to the Merger Agreement, Alkaline agreed to cause its board of directors to consist of seven directors, of which four will be nominees of Alkaline and three will be nominees of AQUAhydrate. Accordingly, it is expected that David A. Guarino will resign at or prior to the completion of the Merger and the board of directors of Alkaline will increase its number of directors to seven and appoint three nominees of AQUAhydrate to serve as directors of Alkaline.

Our board of directors recommends that you vote FOR these nominees.

Nominees

Name

Position Held with Our Company

Age

Date First Elected or Appointed

Richard A. Wright

President, Chief Executive Officer, Vice-President, Chief Operating Officer and Director

61

May 31, 2013

David A. Guarino

Chief Financial Officer, Secretary, Treasurer and Director

55

April 28, 2017

Aaron Keay

Chairman of the Board and Director

42

July 22, 2016

Bruce Leitch

Director

61

September 8, 2016

Brian Sudano

Director

55

September 14, 2018

Business Experience of Nominees

The following is a brief account of the education and business experience of the nominees during at least the past five years, indicating their principal occupation during the period, and the name and principal business of the organization by which they were employed.

Richard A. Wright

Mr. Wright is a Certified Public Accountant. He graduated Magnum Cum Laude in 1978 from Mount Union University in Alliance, Ohio. He has taken graduate level MBA courses at Case Western Reserve College in Cleveland, Ohio. In 2008, Mr. Wright became the Chief Financial Officer for PCT International, a leading worldwide developer and manufacturer of last mile and access network solutions for broadband communication networks. PCT focuses on innovative and cost-effective solutions that allow service providers to improve system integrity and expand service offerings. It has manufacturing plants in USA and China and sells its products in 42 countries. In 2010, Mr. Wright started his own tax and accounting CPA firm in Scottsdale, Arizona, Wright Tax Solutions PLC. Mr. Wright also started Wright Investment Group, LLC, a small equity participation firm that helps provide seed capital through micro loans and financial expertise to start-up enterprises.

Effective as of May 31, 2013, Mr. Wright was appointed as the Vice-President, Treasurer and as a director of our company. On August 7, 2013, our board of directors appointed Mr. Wright as Secretary of our company. On August 28, 2016, our board of directors appointed Mr. Wright as Chief Operating Officer of our company. On April 7, 2017, our board of directors appointed Mr. Wright as President of our company. On April 28, 2017, Mr. Wright resigned as the Secretary and Treasurer of our company and our board of directors appointed Mr. Wright as the Chief Executive Officer of our company.

We believe that Mr. Wright is qualified to serve on our board of directors because of his knowledge of our current operations in addition to his education and business experiences described above.

David A. Guarino

On April 28, 2017, Mr. Guarino was appointed as the Chief Financial Officer, Secretary, Treasurer and a director of our company. Mr. Guarino holds a Bachelor of Science in Accounting and a Master of Accountancy from the University of Denver. From 2008 to 2013, Mr. Guarino was the President and a director of Kahala Corp, a worldwide franchisor of multiple quick service restaurant brands with locations in 49 states and over 25 countries. From 2014 to 2015, Mr. Guarino was President of HTI International Holdings, Inc., a technology company focused on forward osmosis water filtration technology. From 2015 until April, 2017, Mr. Guarino had been a consultant to our company.


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We believe that Mr. Guarino is qualified to serve on our board of directors because of his knowledge of our current operations in addition to his education and business experiences described above.

Aaron Keay

On July 22, 2016, Mr. Keay was appointed as a director of our company and on August 17, 2017, Mr. Keay was appointed as the Chairman of the Board.

Mr. Keay has been the President and Managing Partner of Inform Capital Partner, a corporate finance advisory and merchant banking firm, from 2008 to present. He was the Chairman, Chief Executive Officer and director of Inform Resources Corp., a mining company listed on the TSXV, from August 2010 until July 10, 2014. Mr. Keay was the Chief Executive Officer, President and a director of IDM Mining Ltd. (formerly Revolution Resources), a mining company listed on the Toronto Stock Exchange, from 2009 until January 7, 2015. He was a director of OrganiGram Holdings Inc., an industrial company specializing in the production of condition specific medical marijuana under license from Health Canada listed on the TSXV, from September 14, 2010 until July 17, 2014. Mr. Keay was a director of Plateau Uranium Inc. (formerly, Macusani Yellowcake Inc.), a uranium exploration and development company listed on the TSXV, from April 5, 2013 until September 4, 2014. He was a director of Aftermath Silver Inc. (formerly, Full Metal Zinc Ltd.), a mineral exploration and development company listed on the TSXV, from February 2011 until December 12, 2013. Mr. Keay holds a Bachelor of Human Kinetics from the University of British Columbia.

We believe that Mr. Keay is qualified to serve on our board of directors because of his knowledge of our current operations in addition to his education and business experiences described above.

Bruce Leitch

Mr. Leitch has been a director of our company since September 8, 2016. During the past five years Mr. Leitch has been actively engaged as a management consultant with respect to business development strategies and overseeing the corporate governance requirements for various private companies. The bulk of his time has been spent as the Vice President of Corporate Finance and as a director for Citadel LED Lighting Corp., a private company engaged in the importation of innovative LED lighting products with applications in the retail, hospitality, outdoor lighting and commercial buildings and facilities market sectors.

Mr. Leitch has extensive experience with consumer products companies, and is well versed in all aspects of branding, marketing, cross marketing through strategic relationships, interacting with advertising agencies to create highly focused and effective sales campaigns, along with being very conversant in wholesale distribution networks, logistics, managing multiple channels of product distribution and supply chain management. Mr. Leitch has extensive experience in the capital markets and the securities industry, having worked for several major financial services institutions as well as having been an officer, director and principal of several public and private companies.

We believe that Mr. Leitch is qualified to serve on our board of directors because of his knowledge of our current operations in addition to his business experiences described above.

Brian Sudano

Mr. Sudano has been a director of our company since September 14, 2018. Mr. Sudano is the Managing Partner of Beverage Marketing Corporation and BMC Strategic Associates. Mr. Sudano has been the Managing Partner of Beverage Marketing Corporation since July 2008 and was the Managing Director of Beverage Marketing Corporation from September 2000 to July 2008. Mr. Sudano's experience covers nearly the entire beverage industry, from energy drinks to wine, with special expertise in beverage alcohol by virtue of varied industry experience and broad range of projects. Mr. Sudano manages several major clients, providing on-going strategic and market advice, while leading projects in strategic planning, market entry analysis and planning, sales/distribution, business modeling, brand repositioning and international opportunity assessment.


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From 1997 to 2000, Mr. Sudano was with Constellation Brands, Inc., a leading US beverage alcohol company, where he held the position of Vice President of Business Processes and was responsible for creating a corporate operations and consulting function to service Constellation's wine, spirits and beer businesses. While in this role, Mr. Sudano lead the due diligence and transition efforts for entering the premium wine business and provided corporate oversight for the integration and transition of the Black Velvet distillery and brands. Other activities included oversight of business risk management and covering issues such as promotional effectiveness to performance metrics.

Mr. Sudano received an MBA from Rutgers Graduate School of Management, was a magna cum laude and honors graduate from Delaware Valley College where he received a Bachelor of Science degree and is a New Jersey CPA.

We believe that Mr. Sudano is qualified to serve on our board of directors because of his knowledge of our current operations in addition to his education and business experiences described above.

Executive Officers

The name of our executive officer who is not also director, his age, positions held, and duration of such and a brief description of the background and business experience for the past five years are as follows:

Name

Position Held with Our Company

Age

Date First Elected or Appointed

Ronald DaVella

Executive Vice President of Finance

62

May 1, 2019

Ronald DaVella

On May 1, 2019, we appointed Ronald DaVella as our Executive Vice President of Finance. Mr. DaVella has served as a board director and Chairman of the audit committee of the Joint Corp., a public franchisor and operator of over 475 chiropractic clinics, since Joint Corp.'s initial public offering in November 2014. Mr. DaVella formerly served as Chief Financial Officer for NanoFlex Power Corporation, a public company that was commercializing two disruptive solar technologies from May 2017 to March 2019. He also formerly served as the Chief Financial Officer for Amazing Lash Studio Franchise LLC from March 2016 to May 2017, a franchisor of eyelash extension service studios with over 200 operating locations in the United States. From August 2015 to February 2019, Mr. DaVella was also a franchise owner with Amazing Lash Studio LLC. Mr. DaVella was an audit partner with Deloitte & Touche LLP from June 1989 to July 2014.

Family Relationships

There are no family relationships between any director, director nominee or executive officer.

Involvement in Certain Legal Proceedings

None of our directors, director nominees and executive officers has been involved in any of the following events during the past ten years:

 

(a)

any petition under the federal bankruptcy laws or any state insolvency laws filed by or against, or an appointment of a receiver, fiscal agent or similar officer by a court for the business or property of such person, or any partnership in which such person was a general partner at or within two years before the time of such filing, or any corporation or business association of which such person was an executive officer at or within two years before the time of such filing;

 

 

 

 

(b)

any conviction in a criminal proceeding or being subject to a pending criminal proceeding (excluding traffic violations and other minor offences);

 

 

 



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(c)

being subject to any order, judgment, or decree, not subsequently reversed, suspended or vacated, of any court of competent jurisdiction, permanently or temporarily enjoining such person from, or otherwise limiting, the following activities: (i) acting as a futures commission merchant, introducing broker, commodity trading advisor, commodity pool operator, floor broker, leverage transaction merchant, any other person regulated by the Commodity Futures Trading Commission, or an associated person of any of the foregoing, or as an investment adviser, underwriter, broker or dealer in securities, or as an affiliated person, director or employee of any investment company, bank, savings and loan association or insurance company, or engaging in or continuing any conduct or practice in connection with such activity; engaging in any type of business practice; or (iii) engaging in any activity in connection with the purchase or sale of any security or commodity or in connection with any violation of federal or state securities laws or federal commodities laws;

 

 

 

 

(d)

being the subject of any order, judgment or decree, not subsequently reversed, suspended or vacated, of any federal or state authority barring, suspending or otherwise limiting for more than 60 days the right of such person to engage in any activity described in paragraph (c)(i) above, or to be associated with persons engaged in any such activity;

 

 

 

 

(e)

being found by a court of competent jurisdiction (in a civil action), the Securities and Exchange Commission to have violated a federal or state securities or commodities law, and the judgment in such civil action or finding by the Securities and Exchange Commission has not been reversed, suspended, or vacated;

 

 

 

 

(f)

being found by a court of competent jurisdiction in a civil action or by the Commodity Futures Trading Commission to have violated any federal commodities law, and the judgment in such civil action or finding by the Commodity Futures Trading Commission has not been subsequently reversed, suspended or vacated;

 

 

 

 

(g)

being the subject of, or a party to, any federal or state judicial or administrative order, judgment, decree, or finding, not subsequently reversed, suspended or vacated, relating to an alleged violation of: (i) any federal or state securities or commodities law or regulation; or (ii) any law or regulation respecting financial institutions or insurance companies including, but not limited to, a temporary or permanent injunction, order of disgorgement or restitution, civil money penalty or temporary or permanent cease- and-desist order, or removal or prohibition order; or (iii) any law or regulation prohibiting mail or wire fraud or fraud in connection with any business entity; or

 

 

 

 

(h)

being the subject of, or a party to, any sanction or order, not subsequently reversed, suspended or vacated, of any self-regulatory organization (as defined in Section 3(a)(26) of the Securities Exchange Act of 1934), any registered entity (as defined in Section 1(a)(29) of the Commodity Exchange Act), or any equivalent exchange, association, entity or organization that has disciplinary authority over its members or persons associated with a member.

We know of no material proceedings in which any of our directors or executive officers, or any associate of any such director or executive officer is a party adverse to our company or our subsidiary or has a material interest adverse to our company or our subsidiary.

Corporate Governance

Meetings

During the year ended March 31, 2019, our board of directors held 2 meetings and each director attended 100% of these meetings.

We encourage all incumbent directors and nominees for election as director to attend our meeting of stockholders. Two directors attended our annual meeting of stockholders on September 14, 2018.


128

Committees of Board of Directors

Audit Committee

Effective February 22, 2018, our board of directors established an audit committee. The audit committee currently consists of three directors, Aaron Keay, Bruce Leitch and Brian Sudano. Our audit committee assists our board of directors in fulfilling its financial oversight responsibilities by reviewing the financial reports and other financial information provided by our company to regulatory authorities and stockholders, our systems of internal controls regarding finance and accounting and our auditing, accounting and financial reporting processes. Our audit committee's primary duties and responsibilities are to: serve as an independent and objective party to monitor our financial reporting and internal control system and review our financial statements; oversee our accounting and financial reporting processes and the preparation and auditing of our financial statements; review and appraise the performance of our external auditor; and provide an open avenue of communication among our auditor, financial and senior management and our board of directors.

Our audit committee fulfills these responsibilities primarily by carrying out the activities enumerated in the audit committee charter adopted by our board of directors on February 22, 2018. The audit committee charter is attached as Schedule "F" to this joint proxy statement/prospectus.

During the year ended March 31, 2019, our audit committee held 4 meetings, and each member of our audit committee attended 100% of these meetings.

Audit Committee Report

Our audit committee oversees our financial reporting process. Management has the primary responsibility for the financial statements and the reporting process, including the system of internal accounting controls.

Our audit committee has reviewed and discussed the audited financial statements for the year ended March 31, 2019 with management.

Our audit committee has discussed with Prager Metis CPAs, LLC, our independent registered public accounting firm, the matters required to be discussed by the statement on Auditing Standards No. 61, as amended (AICPA, Professional Standards, Vol. 1. AU Section 380), as adopted by the Public Company Accounting Oversight Board in Rule 3200T.

Our audit committee has received written disclosure and the letter from Prager Metis CPAs, LLC required by applicable requirements of the Public Company Accounting Oversight Board regarding communications of Prager Metis CPAs, LLC with our audit committee concerning independence, and has discussed with Prager Metis CPAs, LLC its independence.

Based on the reviews and discussions referred to above, our audit committee recommended to our board of directors that the audited financial statements referred to above to be included in our annual report on Form 10-K for the year ended March 31, 2019 for filing with the Securities and Exchange Commission.

Members of the Audit Committee

Aaron Keay

Bruce Leitch

Brian Sudano

The material in this report is not "soliciting material," is not deemed "filed" with the Securities and Exchange Commission and is not to be incorporated by reference in any filing of our company under the Securities Act of 1933 or the Securities Exchange Act of 1934 whether made before or after the date hereof and irrespective of any general incorporation language in any such filing.

Compensation Committee


129

On September 4, 2018, our board of directors established a compensation committee, comprising of two directors. The compensation committee currently consists of Aaron Keay and Bruce Leitch. During the year ended March 31, 2019, our compensation committee did not hold any meetings.

The purpose of our compensation committee is to carry out the responsibilities delegated by our board of directors relating to the review and determination of executive compensation. Our compensation committee has the following authority and responsibilities:

Our compensation committee has the authority, in its sole discretion, to select, retain and obtain the advice of a compensation consultant as necessary to assist with the execution of its duties and responsibilities. Our compensation committee must set the compensation, and oversee the work, of the compensation consultant. However, our compensation committee is not required to implement or act consistently with the advice or recommendations of its compensation consultant to the compensation committee and the ability or obligation of our compensation committee to exercise its own judgment in fulfilment of its duties are not affected by the engagement of the compensation consultant. During the year ended March 31, 2019, we did not engage a compensation consultant.


130

Our compensation committee is to meet at least one time a year at such times and places as it deems necessary to fulfill its responsibilities and report regularly to the board regarding its actions and make recommendations to the board as appropriate. Our compensation committee may invite such members of management to its meetings as it deems appropriate. However, our compensation committee is to meet regularly without such members present, and in all cases the chief executive officer and any other such officers must not be present at meetings at which their compensation or performance is discussed or determined.

Our compensation committee has the authority to delegate any of its responsibilities, along with the authority to take action in relation to such responsibilities, to one or more subcommittees as our compensation committee may deem appropriate in its sole discretion.

Our compensation committee fulfills these responsibilities primarily by carrying out the activities enumerated in the compensation committee charter adopted by our board of directors on September 4, 2018. The compensation committee charter is attached as Schedule "G" to this joint proxy statement/prospectus.

Nominating Committee

We do not presently have a separately constituted nominating committee. Our board of directors does not believe that it is necessary to have such committee because it believes that the functions of such committee can be adequately performed by our board of directors.

On September 4, 2018, our board of directors adopted a board director nomination process, which is attached as Schedule "H" to this joint proxy statement/prospectus. Our board of directors has determined that it is in our best interests to have director nominees recommended for the board's selection by a majority of our independent directors in a vote in which only independent directors participate and to have the full board participate in the consideration of the board of directors nominees.

In general, when our board of directors determines that expansion of the board or replacement of a director is necessary or appropriate, our independent directors will be responsible for identifying one or more candidates to fill such directorship, investigating each candidate, evaluating his/her suitability for service on our board of directors and recommending for selection suitable candidates for nomination to our board of directors.

Our independent directors are authorized to use any methods they deems appropriate for identifying candidates for board membership, including recommendations from current members of the board, senior management or other third parties (including recommendations from stockholders). Our independent directors may engage outside search firms to identify suitable candidates.

Our independent directors are also authorized to engage in whatever investigation and evaluation processes it deems appropriate, including a thorough review of the candidate's background, characteristics, qualities and qualifications, and personal interviews with all or some of our independent directors, our management or one or more other members of the board. While diversity may contribute to an evaluation, it is not considered by the board as a separate or independent factor in identifying board of director nominees.

In formulating its recommendation, our independent directors will consider not only the findings and conclusions of the investigation and evaluation process, but also the current composition of the board; the diversity of the board, including gender diversity; the attributes and qualifications of serving members of the board; additional attributes, capabilities or qualifications that should be represented on the board; and whether the candidate could provide those additional attributes, capabilities or qualifications. Our independent directors will not recommend any candidate unless that candidate has indicated a willingness to serve as a director and has agreed to comply, if elected, with the expectations and requirements of serving as a member of the board.


131

In considering whether to recommend directors who are eligible to stand for reelection, our independent directors may consider a variety of factors, including, without limitation, a director's contributions to the board and ability to continue to contribute productively; attendance at board and committee meetings and compliance with our corporate governance policies; whether the director continues to possess the attributes, capabilities and qualifications considered necessary or desirable for continued service on the board; the independence of the director; and the nature and extent of the director's non-Alkaline activities.

Stockholders desiring to suggest a candidate for consideration must do so in accordance with our bylaws and applicable securities laws, and should send a letter to our Chief Financial Officer at our principal office located at 14646 N. Kierland Blvd., Suite 255, Scottsdale, Arizona 85254, U.S.A. Candidates recommended by our stockholders will be considered in the same manner as other candidates.

Director Independence

We currently act with five directors consisting of Richard A. Wright, David A. Guarino, Aaron Keay, Bruce Leitch and Brian Sudano. Our common stock is listed on the Nasdaq Capital Market. Our common stock is also listed on the TSX Venture Exchange which imposes director independent requirements. Under Nasdaq Marketplace Rule 5605(a)(2), a director is not independent if he or she is also an executive officer or employee of the corporation or was, at any time during the past three years, employed by the corporation. Using this definition of independent director, we have three independent directors, who are Aaron Keay, Bruce Leitch, and Brian Sudano.

In addition, Aaron Keay, Bruce Leitch and Brian Sudano, the members of our audit committee or compensation committee, have not accept directly or indirectly any consulting, advisory, or other compensatory fee from our company or subsidiary other than in his capacity as a member of the audit committee, our board of directors, or any other board committee, and each member of our audit committee is not a beneficial owner, directly or indirectly, of more than 10% of our common stock and is not an executive officer of our company. Accordingly, they are independent under independence standards applicable to the audit committee or compensation committee of a company whose stock is listed on the Nasdaq Capital Market.

Board Leadership Structure

The positions of our principal executive officer and the chairman of our board of directors are served by two individuals. Richard A. Wright is the President, Chief Executive Officer, Vice-President, Chief Operating Officer and a director of our company and Aaron Keay is the Chairman of the Board and a director of our company. Because of the separation of those functions to two individuals, we have determined that the leadership structure of our board of directors is appropriate, especially given the current stage of our development.

Our board of directors provides oversight of our risk exposure by receiving periodic reports from senior management regarding matters relating to financial, operational, legal and strategic risks and mitigation strategies for such risks.

Stockholder Communications with Our Board of Directors

We welcome comments and questions from our stockholders. Our stockholders can direct communications to David A. Guarino, at The Alkaline Water Company Inc., 14646 N. Kierland Blvd., Suite 255, Scottsdale, Arizona 85254. While we appreciate all comments and questions from our stockholders, we may not be able to individually respond to all communications.

David A. Guarino collects and evaluates all stockholder communications. If the communication is directed to our board of directors generally or to a specific board member, Mr. Guarino will disseminate the communication to the appropriate party at the next scheduled board meeting unless he decides that the communication requires a more urgent response. In that case, Mr. Guarino will direct the communication to the appropriate party prior to the next scheduled board meeting. If the communication is addressed to an executive officer, Mr. Guarino will direct that communication to the executive officer. All communications addressed to our directors and executive officers are reviewed by those parties unless the communication is clearly frivolous.


132

Prohibited Transactions in Our Securities

Under our insider trading policy, no officer or director may ever make a short sale of our common stock. The prohibition against short sale means that an individual subject to the rule cannot sell our common stock if he or she does not then own the securities he or she purports to sell, and even if he or she does own the securities sold, he or she must deliver the securities within 20 days after the sale.

Delinquent Section 16(a) Reports

Section 16(a) of the Securities Exchange Act of 1934 requires our executive officers and directors, and persons who own more than 10% of our common stock, to file reports regarding ownership of, and transactions in, our securities with the Securities and Exchange Commission and to provide us with copies of those filings. Based solely on our review of the copies of such forms received by us, or written representations from certain reporting persons we believe that during year ended March 31, 2019 all filing requirements applicable to our executive officers and directors, and persons who own more than 10% of our common stock were complied with, with the exception of the following:

Name

Number of Late Reports

Number of Transactions Not Reported on a Timely Basis

Failure to File Requested Forms

Richard A. Wright

1

2

Nil

David A. Guarino

2

2

Nil

Executive Compensation

Summary Compensation

The particulars of compensation paid to the following persons:

 

(a)

all individuals serving as our principal executive officer during the year ended March 31, 2019;

 

 

 

 

(b)

each of our two most highly compensated executive officers who were serving as executive officers at the end of the year ended March 31, 2019; and

     

 

(c)

up to two additional individuals for whom disclosure would have been provided under (b) but for the fact that the individual was not serving as our executive officer at March 31, 2019,



133

who we will collectively refer to as the named executive officers, for all services rendered in all capacities to our company and subsidiaries for the years ended March 31, 2019 and 2018 are set out in the following summary compensation table:

Summary Compensation Table - Years ended March 31, 2019 and 2018





Name
and
Principal
Position








Year







Salary
($)







Bonus ($)






Stock
Awards
($)






Option
Awards ($)


Non-
Equity
Incentive
Plan
Compensa -tion
($)


Non-
qualified
Deferred
Compensa-
tion
Earnings
($)




All
Other
Compensa- tion
($)







Total
($)


Richard A. Wright
President, Chief Executive Officer, Vice-President, Chief
Operating Officer, Director and
Former Secretary and
Treasurer(1)


2019
2018


168,000
168,000


Nil
Nil


Nil
1,500(3)


Nil
Nil


Nil
Nil


Nil
Nil


24,940
24,186


192,940
193,686


David A. Guarino
Chief Financial Officer,
Secretary, Treasurer and Director(2)


2019
2018


168,000
154,000


Nil
N/A


Nil
168,700(4)


Nil
N/A


Nil
N/A


Nil
N/A


9,000
N/A


177,000
328,200


Notes:

 

 

 

(1)

Effective as of May 31, 2013, Mr. Wright was appointed as Vice-President, Treasurer and a director of our company. On August 7, 2013, our board of directors appointed Mr. Wright as Secretary of our company. On August 28, 2016, our board of directors appointed Mr. Wright as Chief Operating Officer of our company. On April 7, 2017, our board of directors appointed Mr. Wright as President of our company. On April 28, 2017, Mr. Wright resigned as the Secretary and Treasurer of our company and our board of directors appointed Mr. Wright as the Chief Executive Officer of our company.

(2)

On April 28, 2017, our board of directors appointed Mr. Guarino as the Chief Financial Officer, Secretary and Treasurer and a director of our company. From 2015 until April, 2017, Mr. Guarino has been a consultant to our company.

(3)

Reflects the grant date fair value computed in accordance with FASB ASC Topic 718. Reflects the issuance of 1,500,000 shares of Series D Preferred Stock which will be convertible, without the payment of any additional consideration by the holder and at the option of the holder, into one fully paid and non-assessable share of our common stock at any time after (i) we achieve the consolidated revenue of our company and all of its subsidiaries equal to or greater than $40,000,000 in any 12 month period, ending on the last day of any quarterly period of our fiscal year; or (ii) a Negotiated Trigger Event, defined as an event upon which the Series D Preferred Stock will be convertible as may be agreed by our company and the holder in writing from time to time.

(4) Reflects the grant date fair value computed in accordance with FASB ASC Topic 718. Reflects the issuance of 130,000 shares of common stock effective April 28, 2017 (valued at $167,700) and the issuance of 1,000,000 shares of Series D Preferred Stock (valued at $1,000).
     


134

Employment Agreement with Richard A. Wright

On March 30, 2016, we entered into an employment agreement dated effective March 1, 2016 with Richard A. Wright, the Vice-President, Secretary, Treasurer and director of our company, pursuant to which Mr. Wright agreed to perform such duties as are regularly and customarily performed by the vice president, secretary and treasurer of a corporation, and any other duties consistent with Mr. Wright's position in our company. Pursuant to the terms of the employment agreement, we have agreed to (i) pay Mr. Wright $14,000 per month or such other amount as may be determined by our board of directors from time to time; and (ii) issue to Mr. Wright 1,500,000 shares of our Series C Preferred Stock (issued effective as of March 31, 2016). We also agreed that each of the following events constitute a "Negotiated Trigger Event" as defined in the Certificate of Designation for the Series C Preferred Stock: (i) the occurrence of a change of control event; (ii) the death of Mr. Wright; and (iii) the termination of the employment agreement for any reason.

In addition, we may (i) grant awards under our 2018 stock option plan to Mr. Wright from time to time and (ii) pay to Mr. Wright an annual discretionary performance bonus in an amount to be determined by our board of directors in its sole discretion. Mr. Wright will also be eligible to participate in other bonus programs offered by our company to our senior staff from time to time.

In addition, Mr. Wright will be entitled to participate in all of our employee benefit plans provided by our company to our senior officers. If we do not provide such plans at any time, we agreed to reimburse Mr. Wright for the reasonable cost of any such plans obtained privately. We also agreed to (i) provide Mr. Wright with vehicle leased in our company's name, with lease payments not exceeding $700/month or such other amount as may be determined by our board of directors; (ii) pay Mr. Wright an allowance of $5,000 per month or such other amount as may be determined by our board of directors, which may be used by Mr. Wright as he sees fit, including without limitation, the funding of non-qualified retirement plans; (iii) reimburse Mr. Wright for any expenses that he incurs in connection with his duties under his employment agreement. Mr. Wright will be entitled in each year to five weeks' paid vacation, in addition to weekends and statutory holidays, to be taken in installments of no more than three consecutive weeks of paid time off.

The initial term of the employment agreement with Mr. Wright is three years and, on the third anniversary of the effective date of the employment and on each annual anniversary date thereafter, the term of the employment agreement will automatically be extended by one additional year unless either party gives 90 days' written notice to the other of its intention not to renew the employment agreement.

Provided that Mr. Wright has acted within the scope of his authority, we have agreed to indemnify and save harmless Mr. Wright (including his heirs and legal representatives) against any and all costs, claims and expenses (including any amounts paid to settle any actions or satisfy any judgments) which: he may suffer or incur by reason of any matter or thing which he may in good faith do or have done or caused to be done as an employee, officer or director of our company, any of its subsidiaries or of any of their respective affiliates; or was reasonably incurred by him in respect of any civil, criminal or administrative action or proceeding to which he is made a party by reason of being or having been an employee, officer or director of our company, any of its subsidiaries or of any of their respective affiliates; provided that, the foregoing indemnification will apply only if: he acted honestly and in good faith with a view to the best interests of our company, any of its subsidiaries or any of their respective affiliates; and in the case of a criminal or administrative action or proceeding that is enforced by a monetary penalty, he had reasonable grounds for believing that his conduct was lawful.

Mr. Wright has agreed to indemnify and save harmless our company against, and agree to hold it harmless from, any and all damages, injuries, claims, demands, actions, liability, costs and expenses (including reasonable legal fees) incurred or made against our company arising from or connected with the performance or non-performance of his employment by him or the beach of any warranty, representation or covenant herein by him, other than claims by him pursuant to his employment agreement.

If and to the extent we maintain directors' and officers' liability insurance for the protection of our executives in connection with acts and omissions occurring during the course of their employment with our company, we have agreed that Mr. Wright will be included as an officer and director who is covered by such policy on a basis no less favorable than made available to other executives of our company.


135

On August 28, 2016, our board of directors appointed Mr. Wright as the Chief Operating Officer of our company. On April 7, 2017, our board of directors appointed Mr. Wright as President of our company. On April 28, 2017, Mr. Wright resigned as the Secretary and Treasurer of our company and our board of directors appointed Mr. Wright as the Chief Executive Officer of our company.

David A. Guarino

We pay David A. Guarino $14,000 per month for his services and a $750 monthly car allowance. Effective April 28, 2017, we issued 130,000 shares of common stock to Mr. Guarino, who was appointed as the Chief Financial Officer, Secretary, Treasurer and a director of our company on the same date.

Grant of Series D Convertible Preferred Stock

On May 3, 2017, we designated 3,000,000 shares of the authorized and unissued preferred stock of our company as "Series D Preferred Stock" by filing a Certificate of Designation with the Secretary of State of the State of Nevada. On November 2, 2017, we increased the number of authorized shares of Series D Preferred Stock in our company to 5,000,000 shares by filing an Amendment to the foregoing Certificate of Designation with the Secretary of State of the State of Nevada. Each share of the Series D Preferred Stock will be convertible, without the payment of any additional consideration by the holder and at the option of the holder, into one fully paid and non-assessable share of our common stock at any time after (i) we achieve the consolidated revenue of our company and all of its subsidiaries equal to or greater than $40,000,000 in any 12 month period, ending on the last day of any quarterly period of our fiscal year; or (ii) a Negotiated Trigger Event, defined as an event upon which the Series D Preferred Stock will be convertible as may be agreed by our company and the holder in writing from time to time.

Effective May 3, 2017, we issued 1,000,000 shares of our Series D Preferred Stock to Richard A. Wright and 1,000,000 shares of our Series D Preferred Stock to Mr. Guarino.

Retirement or Similar Benefit Plans

There are no arrangements or plans in which we provide retirement or similar benefits for our directors or named executive officers.

Resignation, Retirement, Other Termination, or Change in Control Arrangements

Other than the provisions of the employment agreement with Mr. Wright described below, we have no contract, agreement, plan or arrangement, whether written or unwritten, that provides for payments to our directors or named executive officers at, following, or in connection with the resignation, retirement or other termination of our directors or named executive officers, or a change in control of our company or a change in our directors' or named executive officers' responsibilities following a change in control.

If, within 90 days of the occurrence of a change of control event, Mr. Wright resigns from his employment relationship with our company or our company terminates his employment agreement for any reason other than for just cause, then we agreed to pay Mr. Wright severance in an amount equal to the following: 36 months' salary plus an amount, if any, equal to the following: one month's salary multiplied by the number of calendar years, starting on the effective date of the employment agreement, that Mr. Wright is employed by our company under his employment agreement.

We may terminate Mr. Wright's employment at any time for other than just cause by delivering to Mr. Wright written notice of termination. In such a case, we agreed to pay Mr. Wright severance in an amount equal to the following: 36 months' salary plus an amount, if any, equal to the following: one month's salary multiplied by the number of calendar years, starting on the effective date of the employment, that Mr. Wright is employed by our company under his employment agreement.

Subject to applicable employment laws or similar legislation, we may terminate Mr. Wright's employment in the event he has been unable to perform his duties for a period of eight consecutive months or a cumulative period of 12 months in any consecutive 24 month period, because of a physical or mental disability. Mr. Wright's employment will automatically terminate on his death. In the event Mr. Wright's employment with our company terminates by reason of Mr. Wright's death or disability, then upon and immediately effective on the date of termination we agreed to promptly pay and provide Mr. Wright (or in the event of Mr. Wright's death, Mr. Wright's estate); any unpaid salary and any outstanding and accrued regular and special vacation pay through the date of termination; reimbursement for any unreimbursed expenses incurred through to the date of termination; and any outstanding amounts due under any awards which will be dealt with in accordance with our 2013 equity incentive plan or 2018 stock option plan and the award agreement. In the event Mr. Wright's employment is terminated due to a disability, we agreed to pay to Mr. Wright the severance referred to above.


136

We may terminate Mr. Wright's employment for just cause at any time by delivering to Mr. Wright written notice of termination. In the event that Mr. Wright's employment with our company is terminated by our company for just cause, Mr. Wright will not be entitled to any additional payments or benefits (except as otherwise provided in his employment agreement), other than for amounts due and owing to Mr. Wright by our company as of the date of termination, except for any awards under our 2013 equity incentive plan or 2018 stock option plan will be dealt with in accordance with the plan and award agreement.

Outstanding Equity Awards at Fiscal Year-End

The following table sets forth for each named executive officer certain information concerning the outstanding equity awards as of March 31, 2019:

 

Option awards

Stock awards

















Name











Number of
securities
underlying
unexercised
options
(#)
exercisable











Number of
securities
underlying
unexercised
options
(#)
unexercisable







Equity
incentive
plan
awards:
Number of
securities
underlying
unexercised
unearned
options
(#)














Option
exercise
price
($)















Option
expiration
date








Number
of
shares
or units
of stock
that
have
not
vested
(#)






Market
value
of
shares
of
units of
stock
that
have
not
vested
($)



Equity
incentive
plan
awards:
Number
of
unearned
shares,
units or
other
rights
that have
not
vested
(#)

Equity
incentive
plan
awards:
Market
or
payout
value of
unearned
shares,
units
or other
rights
that
have not
vested
($)

Richard A. Wright

Nil

Nil

Nil

N/A

N/A

Nil

N/A

Nil

N/A

David A. Guarino

Nil

Nil

Nil

N/A

N/A

Nil

N/A

Nil

N/A

Compensation of Directors

The particulars of compensation paid to our directors who are not named executive officers for the fiscal year ended March 31, 2019 are set out in the following director compensation table:


137


Name

Fees
Earned or
Paid in
Cash
($)

Stock
Awards
($)

Option
Awards
($)

Non-Equity
Incentive
Plan
Compensation
($)

Nonqualified
Deferred
Compensation
Earnings
($)

All
Other
Compensation
($)

Total
($)

Aaron Keay

Nil

Nil

Nil

Nil

Nil

Nil

Nil

Bruce Leitch

Nil

Nil

Nil

Nil

Nil

Nil

Nil

Brian Sudano(1)

Nil

Nil

Nil

Nil

Nil

Nil

Nil


Note:

(1)

Brian Sudano was elected as a director of our company on September 14, 2018.

We have no formal plan for compensating our directors for their services in their capacity as directors. Our directors are entitled to reimbursement for reasonable travel and other out-of-pocket expenses incurred in connection with attendance at meetings of our board of directors. Our board of directors may award special remuneration to any director undertaking any special services on their behalf other than services ordinarily required of a director.

Security Ownership of Certain Beneficial Owners and Management

The following table sets forth, as of ♦, 2019, certain information with respect to the beneficial ownership of our common stock by each stockholder known by us to be the beneficial owner of more than 5% of any class of our voting securities and by each of our directors, director nominees, executive officers and by our executive officers and directors as a group.


Name of Beneficial Owner


Title of Class

Amount and Nature of
Beneficial Ownership(1)

Percentage of
Class(2)

Richard A. Wright

Common Stock

700,000

♦%

Series C
Preferred Stock(3)

1,500,000

100%

Series D
Preferred Stock(4)

1,500,000

39.47%

David A. Guarino

Common Stock

909,300

♦%

Series D
Preferred Stock(4)

1,000,000

26.32%

Aaron Keay

Common Stock

262,500(5)

*

Bruce Leitch

Common Stock

75,000(6)

*

Brian Sudano

Common Stock

Nil

*

Ronald DaVella

Common Stock

Nil

*

All executive officers and directors as a group (6 persons)

Common Stock

1,946,800

♦%

Series C
Preferred Stock(3)

1,500,000

100%

Series D Preferred Stock(4)

2,500,000

65.79%

* Less than 1%.

(1)

Except as otherwise indicated, we believe that the beneficial owners of the common stock listed above, based on information furnished by such owners, have sole investment and voting power with respect to such shares, subject to community property laws where applicable. Beneficial ownership is determined in accordance with the rules of the Securities and Exchange Commission and generally includes voting or investment power with respect to securities. Common stock subject to options or warrants currently exercisable or exercisable within 60 days, are deemed outstanding for purposes of computing the percentage ownership of the person holding such option or warrants, but are not deemed outstanding for purposes of computing the percentage ownership of any other person.



138


(2)

Percentage of common stock is based on 43,685,592 shares of our common stock issued and outstanding as of ♦, 2019. Percentage of Series C Preferred Stock is based on 1,500,000 shares of Series C Preferred Stock issued and outstanding as of ♦, 2019. Percentage of Series D Preferred Stock is based on 3,800,000 shares of Series D Preferred Stock issued and outstanding as of ♦, 2019.

(3)

Each share of the Series C Preferred Stock will be convertible, without the payment of any additional consideration by the holder and at the option of the holder, into one fully paid and non-assessable share of our common stock at any time after (i) we achieve the consolidated revenue of our company and all of its subsidiaries equal to or greater than $15,000,000 in any 12 month period, ending on the last day of any quarterly period of our fiscal year; or (ii) a Negotiated Trigger Event, defined as an event upon which the Series C Preferred Stock will be convertible as may be agreed by our company and the holder in writing from time to time.

(4)

Each share of the Series D Preferred Stock will be convertible, without the payment of any additional consideration by the holder and at the option of the holder, into one fully paid and non-assessable share of our common stock at any time after (i) we achieve the consolidated revenue of our company and all of its subsidiaries equal to or greater than $40,000,000 in any 12 month period, ending on the last day of any quarterly period of our fiscal year; or (ii) a Negotiated Trigger Event, defined as an event upon which the Series D Preferred Stock will be convertible as may be agreed by our company and the holder in writing from time to time.

(5)

Consists of 262,500 stock options exercisable within 60 days.

(6)

Consists of 75,000 stock options exercisable within 60 days.

Changes in Control

Except in connection with any change in control of our company that may occur as a result of the Merger, we are unaware of any contract or other arrangement the operation of which may at a subsequent date result in a change in control of our company.

Transactions with Related Persons

Other than as disclosed below, there has been no transaction, since April 1, 2017, or currently proposed transaction, in which our company was or is to be a participant and the amount involved exceeds $122,693.67, being the lesser of $120,000 or one percent of the average of our total assets at year-end for the last two completed fiscal years, and in which any of the following persons had or will have a direct or indirect material interest:

 

(a)

any director, director nominee or executive officer of our company;

 

 

 

 

(b)

any person who beneficially owns, directly or indirectly, more than 5% of any class of our voting securities;

 

 

 

 

(c)

any person who acquired control of our company when it was a shell company or any person that is part of a group, consisting of two or more persons that agreed to act together for the purpose of acquiring, holding, voting or disposing of our common stock, that acquired control of our company when it was a shell company; and

 

 

 

 

(d)

any member of the immediate family (including spouse, parents, children, siblings and in- laws) of any of the foregoing persons.

Grant of Series C Convertible Preferred Stock

On August 17, 2017, we issued 1,500,000 shares of our common stock to Steven P. Nickolas, a former stockholder who beneficially owned, directly or indirectly, more than 5% of a class of our voting securities and a former officer and director of our company, upon conversion of 1,500,000 shares of our Series C Preferred Stock held by Mr. Nickolas. The shares of our Series C Preferred Stock became convertible into shares of our common stock without the payment of any additional consideration by Mr. Nickolas and at the option of Mr. Nickolas because the termination of the employment agreement between our company and Mr. Nickolas was an event constituting a "Negotiated Trigger Event" as defined in the Certificate of Designation for our Series C Preferred Stock.


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During the year ended March 31, 2018, we paid Steven P. Nickolas a salary of $3,072.

On October 31, 2017, our company and its subsidiaries entered into a Settlement Agreement and Mutual Release of Claims (the "Settlement Agreement") with Steven P. Nickolas, the Nickolas Family Trust, Water Engineering Solutions, LLC and Enhanced Beverages, LLC, companies and trust that are controlled or owned by Mr. Nickolas, (collectively, the "Nickolas Parties") and McDowell 78, LLC and Wright Investments Group, LLC, a company controlled or owned by Richard A. Wright, (collectively, "Wright/McDowell").

The Settlement Agreement provides, among other things, the following:

1.

Simultaneous with the full execution of the Settlement Agreement, we agreed to pay Mr. Nickolas $110,000 in one lump sum (paid);

2.

From the date of the Settlement Agreement, we agreed to waive the application of our Insider Trading Policy as to Mr. Nickolas, thereby removing any black-out periods for all future sales of our common stock by Mr. Nickolas;

3.

Within three business date of the full execution of the Settlement Agreement, we agreed to instruct our transfer agent to issue Mr. Nickolas 700,000 shares of our common stock (issued);

4.

Within 10 business days of the full execution of the Settlement Agreement, we agreed to issue Mr. Nickolas 300,000 shares of our Series D Preferred Stock (issued);

5.

In exchange for 700,000 shares of our common stock and 300,000 shares of our Series D Preferred Stock described above, Mr. Nickolas forfeited his 10,000,000 shares of our Series A Preferred Stock, to be cancelled for no further consideration;

6.

Upon the full execution of the Settlement Agreement, Mr. Nickolas and our company agreed to file the stipulations to dismiss the complaints and counterclaim filed by each of them with prejudice, with each side to bear its own costs and attorney's fees. In addition, our company and Wright/McDowell agreed that they will effectuate the dismissal of an arbitration proceeding against the Nickolas Parties with prejudice, with each side to bear its own attorneys' fees and costs;

7.

Mr. Nickolas surrendered all right, interest or claim to the shares of our common stock owned by WIN Investments, LLC and Lifewater Industries, LLC for no additional consideration;

8.

Mr. Nickolas acknowledged and agreed that the employment agreement between Mr. Nickolas and our company was terminated as of April 7, 2017 and no further amounts are owed to Mr. Nickolas under the employment agreement and we agreed to waive restrictive covenants set out in the employment agreement;

9.

We agreed to assume financial responsibility for the federal tax obligations in the total amount of $45,738.68 owed by Mr. Nickolas and a certain outstanding invoice in the amount of $21,008.71;

10.

Mr. Nickolas acknowledged and agreed that 1,500,000 stock options with an exercise price of $0.52 issued to Mr. Nickolas on or about March 1, 2016 have expired and a total of 148,000 stock options issued to Mr. Nickolas before 2016 will automatically expire 90 days from October 6, 2017, the date Mr. Nickolas ceased being a director of our company (expired);



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11.

We agreed that Mr. Nickolas will have access to a reasonable amount of Alkaline88 water, not to exceed 30 cases at the time of pickup at our facility, for his personal consumption only at no cost while Mr. Nickolas is a direct stockholder of our company and Mr. Nickolas will be limited to an average of 20 cases per month for his personal consumption; and

12.

The parties also agreed to mutual release of claims.

On November 8, 2017, we entered into an Exchange Agreement and Mutual Release of Claims (the "Exchange Agreement") with Richard A. Wright, the President, Chief Executive Officer and a director of our company.

The Exchange Agreement provides, among other things, the following:

 

1.

Within five business days of the full execution of the Exchange Agreement, we agreed to instruct our transfer agent to issue Mr. Wright 700,000 shares of our common stock (issued on November 9, 2017);

 

2.

Within 10 business days of the full execution of the Exchange Agreement, we agreed to issue 300,000 shares of our Series D Preferred Stock (issued on November 9, 2017);

 

3.

In exchange for 700,000 shares of our common stock and 300,000 shares of our Series D Preferred Stock described above, Mr. Wright forfeited his 10,000,000 shares of our Series A Preferred Stock, to be cancelled for no further consideration; and

 

4.

The parties also agreed to mutual release of claims.

On November 8, 2017, Richard A. Wright and Sharon Wright, Mr. Wright's spouse, executed a Stock Option Forfeiture & General Release (the "Stock Option Forfeiture Agreement").

The Stock Option Forfeiture Agreement provides, among other things, the following:

 

1.

In exchange for, among other things, receipt of 200,000 shares of our Series D Preferred Stock (issued on November 9, 2017), Mr. Wright agreed that Mr. Wright's stock options to purchase 1,500,000 shares of our common stock at an exercise price of $0.52 per share were forfeited, terminated and otherwise cancelled as of November 8, 2017; and

 

2.

Mr. Wright also agreed to release of claims against our company.

On September 14, 2017, Wright Investment Group LLC, an entity controlled by Richard A. Wright, the President, Chief Executive Officer and a director of our company, advanced $200,000 to our company. On October 17, 2017, Wright Investment Group LLC advanced $400,000 to our company. On November 22, 2017, Wright Investment Group LLC advanced $400,000 to our company. The $1,000,000 in advances was repaid to Wright Investment Group, LLC on March 2, 2018.

On February 14, 2018 and December 31, 2018, David A. Guarino, the Chief Financial Officer, Secretary, Treasurer and a director our company, entered into two separate guarantee agreements with CNH Specialty Finance in order for CNH Specialty Finance to agree to provide our company two separate $400,000 temporary order advances under the credit facility agreement. Under the guarantee agreements, Mr. Guarino personally, absolutely, and unconditionally, jointly and severally, guaranteed the prompt, complete and full payment of our obligations to repay each of the temporary order advances only, under the credit agreement, with CNH Specialty Finance.

On May 25, 2016, we entered into an agreement with BMC Strategic Associates ("BMCSA"), a division of Beverage Marketing Corporation, with regard to a possible strategic transaction "relationship" involving the Alkaline88 brand and all assets related to such brand. Brian Sudano, a director of Alkaline, is Managing Partner of Beverage Marketing Corporation and BMC Strategic Associates. During the term of the agreement, BMCSA has the exclusive right to represent our company in the developing a strategic relationship (defined as any investment, joint venture, etc. involving the Alkaline88 brand and all assets related to such brand and a strategic party who is more than a mere financier). The agreement provides that if our company consummates a strategic relationship during the term of the agreement with any party, licensor, joint venture partner, etc., or within 18 months of the date of termination of the agreement, then we must pay BMCSA, at closing of such strategic relationship, a commission based upon the value of the strategic relationship as follows: 5% for the first $2 million, 4% for next $2 million, 3% for next $2 million, 2% for next $2 million and 1% of the total amount above $8 million, provided however, in no event will the commission be less than $500,000. We agreed to reimburse BMCSA on a monthly basis for all reasonable out-of-pocket expenses incurred by BMCSA in connection with the performance of services provided under the agreement. The agreement continues in force until terminated by either party in writing upon at least 30 days' written notice. Since April 1, 2017, we paid BMCSA an aggregate of $25,145 in consideration of the consulting services provided by BMCSA under the agreement.


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Effective April 28, 2017, we granted 350,000 stock options to Aaron Keay, a director of our company. These stock options are exercisable at the exercise price of $1.29 per share for a period of ten years from the date of grant and vest as follows: (i) 87,500 upon the date of grant; and (ii) 87,500 on each anniversary date of grant.

Effective April 28, 2017, we granted 100,000 stock options to Bruce Leitch, a director of our company. These stock options are exercisable at the exercise price of $1.29 per share for a period of ten years from the date of grant and vest as follows: (i) 25,000 upon the date of grant; and (ii) 25,000 on each anniversary date of grant.

On May 1, 2019, we appointed Ronald DaVella as our Executive Vice President of Finance. On April 25, 2019, we entered into an employment agreement with Ronald DaVella pursuant to which Mr. DaVella agreed to act as our Executive Vice President of Finance and to perform such duties as are regularly and customarily performed by the executive vice president of finance of a corporation, and any other duties consistent with Mr. Da Vella's position in our company. Pursuant to the terms of the employment agreement we have agreed to: (i) pay Mr. DaVella $14,000 per month or such other amount as may be determined by our board of directors from time to time, (ii) pay a monthly car allowance of $800, and (iii) pay a monthly cell phone allowance of $150.

In addition, we agreed to grant Mr. DaVella (i) 75,000 shares of restricted common stock, with 50,000 shares vesting on the six month anniversary of the effective date of his employment agreement and 25,000 shares vesting on the one year anniversary of the effective date of his employment agreement and (ii) 200,000 stock options vesting over three years, with one-third vesting on each yearly anniversary date of his employment agreement.

In addition, Mr. DaVella will be entitled to participate in all of our employee benefit plans provided by our company to our senior officers. If we do not provide such plans at any time, we have agreed to reimburse Mr. DaVella for the reasonable cost of any such plans obtained privately. We also have agreed to reimburse Mr. DaVella for any expenses that he incurs in connection with his duties under his employment agreement. Mr. DaVella will be entitled in each year to five weeks' paid vacation, in addition to weekends and statutory holidays, to be taken in installments of no more than three consecutive weeks of paid time off.

The initial term of the employment agreement is three years and, on the third anniversary of the effective date of the employment and on each annual anniversary date thereafter, the term of the employment agreement will automatically be extended by one additional year unless either party gives 90 days' written notice to the other of its intention not to renew the employment agreement.

If, within 90 days of the occurrence of a change of control event, Mr. DaVella resigns from his employment relationship with our company or our company terminates his employment agreement for any reason other than for just cause, then we have agreed to pay Mr. DaVella severance in an amount equal to the following: 5 months' salary plus an amount, if any, equal to the following: one month's salary multiplied by the number of calendar years, starting on the effective date of the employment agreement, that Mr. DaVella is employed by our company under his employment agreement.

We may terminate Mr. DaVella's employment at any time for other than just cause by delivering to Mr. DaVella written notice of termination. In such a case, we have agreed to pay Mr. DaVella severance in an amount equal to the following: 5 months' salary plus an amount, if any, equal to the following: one month's salary multiplied by the number of calendar years, starting on the effective date of the employment, that Mr. DaVella is employed by our company under his employment agreement.


142

Subject to applicable employment laws or similar legislation, we may terminate Mr. DaVella's employment in the event he has been unable to perform his duties for a period of eight consecutive months or a cumulative period of 12 months in any consecutive 24 month period, because of a physical or mental disability. Mr. DaVella's employment will automatically terminate on his death. In the event Mr. DaVella's employment with our company terminates by reason of Mr. DaVella's death or disability, then upon and immediately effective on the date of termination we have agreed to promptly pay and provide Mr. DaVella (or in the event of Mr. DaVella's death, Mr. DaVella's estate); any unpaid salary and any outstanding and accrued regular and special vacation pay through the date of termination; reimbursement for any unreimbursed expenses incurred through to the date of termination; and any outstanding amounts due under any awards which will be dealt with in accordance with our equity incentive plan and the award agreement. In the event Mr. DaVella's employment is terminated due to a disability, we agreed to pay to Mr. DaVella the severance referred to above.

We may terminate Mr. DaVella's employment for just cause at any time by delivering to Mr. DaVella written notice of termination. In the event that Mr. DaVella's employment with our company is terminated by our company for just cause, Mr. DaVella will not be entitled to any additional payments or benefits (except as otherwise provided in his employment agreement), other than for amounts due and owing to Mr. DaVella by our company as of the date of termination, except for any awards under our equity incentive plan will be dealt with in accordance with the plan and award agreement.

Provided that Mr. DaVella has acted within the scope of his authority, we have agreed to indemnify and save harmless Mr. DaVella (including his heirs and legal representatives) against any and all costs, claims and expenses (including any amounts paid to settle any actions or satisfy any judgments) which: he may suffer or incur by reason of any matter or thing which he may in good faith do or have done or caused to be done as an employee, officer or director of our company, any of its subsidiaries or of any of their respective affiliates; or was reasonably incurred by him in respect of any civil, criminal or administrative action or proceeding to which he is made a party by reason of being or having been an employee, officer or director of our company, any of its subsidiaries or of any of their respective affiliates; provided that, the foregoing indemnification will apply only if: he acted honestly and in good faith with a view to the best interests of our company, any of its subsidiaries or any of their respective affiliates; and in the case of a criminal or administrative action or proceeding that is enforced by a monetary penalty, he had reasonable grounds for believing that his conduct was lawful.

Mr. DaVella has agreed to indemnify and save harmless our company against, and to hold it harmless from, any and all damages, injuries, claims, demands, actions, liability, costs and expenses (including reasonable legal fees) incurred or made against our company arising from or connected with the performance or non-performance of his employment by him or the beach of any warranty, representation or covenant herein by him, other than claims by him pursuant to his employment agreement.

If and to the extent we maintain directors' and officers' liability insurance for the protection of our executives in connection with acts and omissions occurring during their employment with our company, we have agreed that Mr. Da Vella will be included as an officer and director who is covered by such policy on a basis no less favorable than made available to other executives of our company.

Compensation for Named Executive Officers, Directors and Nominees

For information regarding compensation for our named executive officers and directors, see "Executive Compensation".


143

ALKALINE PROPOSAL 5
RATIFICATION OF THE APPOINTMENT OF THE INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

Our board of directors is asking our stockholders to ratify the appointment of Prager Metis CPAs, LLC as our independent registered public accounting firm.

Stockholder ratification of the appointment of Prager Metis CPAs, LLC as our independent registered public accounting firm is required by the policies of the TSX Venture Exchange. If the stockholders fail to ratify the appointment, our board of directors will reconsider whether or not to retain the firm. Even if the appointment is ratified, our board of directors in its discretion may direct the appointment of a different independent registered public accounting firm at any time during the year if our board of directors determines that such a change would be in the best interest of our company and our stockholders.

Representatives of Prager Metis CPAs, LLC are not expected to be present at the Alkaline Meeting. However, we will provide contact information for Prager Metis CPAs, LLC to any stockholders who would like to contact the firm with questions.

Unless otherwise directed, the proxy holder will vote the proxies received by him for the ratification of the appointment of Prager Metis CPAs, LLC as our independent registered public accounting firm.

Our board of directors recommends that you vote FOR the ratification of the appointment of Prager Metis CPAs, LLC as our independent registered public accounting firm.

Fees Paid to Our Independent Registered Public Accounting Firms

We were notified that AMC Auditing, LLC, our former independent registered public accounting firm, was acquired by Prager Metis CPAs, LLC, and that all of the employees of AMC Auditing, LLC were joining Prager Metis CPAs, LLC. As a result, effective as of April 25, 2019, AMC Auditing, LLC resigned as our independent registered public accounting firm. Concurrent with such resignation, we engaged Prager Metis CPAs, LLC to serve as our independent registered public accounting firm effective April 25, 2019.

The following table sets forth the fees billed to our company for the years ended March 31, 2019 and 2018 for professional services rendered by AMC Auditing, LLC:

Fees

 

2019

 

 

2018

Audit Fees

$

 

 

$

40,000

Audit Related Fees

 

-

 

 

-

Tax Fees

 

-

 

 

-

Other Fees

 

31,000

 

 

22,500

Other fees for the year ended March 31, 2019 were for quarterly reviews, consents for registration statements and comfort letters. Other fees for the year ended March 31, 2018 were for quarterly reviews.


144

The following table sets forth the fees billed to our company for the year ended March 31, 2019 for professional services rendered by Prager Metis CPAs, LLC:

Fees

 

2019

 

Audit Fees

$

95,000

 

Audit Related Fees

 

-

 

Tax Fees

 

-

 

Other Fees

 

-

 

Pre-Approval Policies and Procedures

Our audit committee reviews and pre-approves all audit and audit-related services and the fees and other compensation related thereto, and any non-audit services, provided by our independent registered public accounting firm. All of the above services and fees were reviewed and approved by our board of directors (prior to the establishment of our audit committee) and our audit committee (subsequent to the establishment of our audit committee) before the respective services were rendered.

Our board of directors has considered the nature and amount of fees billed by AMC Auditing, LLC and believes that the provision of services for activities unrelated to the audit is compatible with maintaining its independence.

Our board of directors recommends that you vote FOR the ratification of the appointment of Prager Metis CPAs, LLC as our independent registered public accounting firm.

ALKALINE PROPOSAL 6
APPROVAL OF 2019 EQUITY INCENTIVE PLAN

Our board of directors is asking our stockholders to approve our 2019 equity incentive plan.

On ♦, 2019, our board of directors adopted the 2019 equity incentive plan, pursuant to which we may grant stock options to acquire up to a maximum of 9,000,000 shares of our company's common stock and non-stock option awards to acquire up to a maximum of 1,650,000 shares of our company's common stock.

Unless otherwise directed, the proxy holder will vote the proxies received by him for the approval of our 2019 equity incentive plan.

Our board of directors recommends that you vote FOR the approval of our 2019 equity incentive plan.

Description of Our 2019 Equity Incentive Plan

The following is a summary of the material features of our 2019 equity incentive plan. The full text of our 2019 equity incentive plan is attached to this joint proxy statement/prospectus as Schedule "E" to this joint proxy statement/prospectus.

Purpose

The purpose of our 2019 equity incentive plan is to: (i) enable our company and any affiliate of our company to attract and retain the types of employees, consultants and directors who will contribute to our company's long range success; (ii) provide incentives that align the interests of employees, consultants and directors with those of our company's stockholders; and (iii) promote the success of our company's business.


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Administration

The plan administrator, which is currently our board of directors, administers our 2019 equity incentive plan. The plan administrator has sole authority, in its absolute discretion, to (i) construe and interpret the plan; (ii) grant stock options and non-stock option awards (each, an "award") under the plan; (iii) determine the individuals to whom stock options and non-stock option awards will be granted under the plan and whether an option is an incentive stock option or a non-qualified stock option; (iv) determine the number of shares of our common stock subject to each stock option and non-stock option award, the terms and conditions of each stock option and non-stock option award, including the exercise price, medium of payment and vesting provisions, and to specify the provisions of the agreement with respect thereto.

Eligibility

Employees of our company or subsidiary who are subject to tax in the United States are eligible to receive incentive stock options. As of ♦, 2019, there are approximately [15] persons eligible to receive incentive stock options. Employees of our company or subsidiary, consultants and such other persons as the plan administrator selects are eligible to receive non-qualified stock options. As of ♦, 2019, there are approximately [15] persons eligible to receive non-qualified stock options.

While our common stock is listed on the TSX Venture Exchange, an award recipient must either be a Director, Employee or Consultant (as defined by the policies of the TSX Venture Exchange) of our company or a subsidiary of our company at the time of grant of the award, except as otherwise provided by the policies of the TSX Venture Exchange and, for awards granted to Employees, Consultants or Management Company Employees (as defined by the policies of the TSX Venture Exchange), we must ensure that the award recipient is a bona fide Employee, Consultant or Management Company Employee, as the case may be.

While our common stock is listed on the TSX Venture Exchange, except in relation to Consultant Companies (as defined by the policies of the TSX Venture Exchange), the awards may be granted only to an individual or to a company that is wholly owned by individual eligible for a grant of an award.

Shares Subject to Our 2019 Equity Incentive Plan

Under the plan, the plan administrator is authorized to grant stock options to acquire up to a total of 9,000,000 shares of our company's common stock and non-stock option awards to acquire up to a maximum of 1,650,000 shares of our company's common stock.

Number of Stock Options

While our common stock is listed on the TSX Venture Exchange, the maximum number shares of our common stock subject to a stock option to a holder who is a Consultant (as defined by the policies of the TSX Venture Exchange) is limited to an amount equal to 2% of the then issued and outstanding shares of our common stock (on a non-diluted basis) in any 12 month period.

While our common stock is listed on the TSX Venture Exchange, the number of stock options granted to all persons in aggregate who are employed to perform Investor Relations Activities (as defined by the policies of the TSX Venture Exchange) is limited to an amount equal to 2% of the then issued and outstanding shares of our common stock (on a non-diluted basis) in any 12 month period, provided that such stock options vest in stages over a 12 month period with no more than 1/4 of the stock options vesting in any 3 month period.

Type of Awards

Under the plan, either stock options or non-stock option awards may be granted. Incentive stock options are stock options that qualify for certain favorable tax treatment under the U.S. tax laws. Non-qualified stock options are stock options that are not incentive stock options. The aggregate fair market value on the date of grant of our common stock with respect to which incentive stock options are exercisable for the first time by an optionee subject to tax in the United States during any calendar year must not exceed $100,000, or such other limit as may be prescribed by the Code. Non-stock option awards means a right granted to an award recipient under the plan, which may include the grant of stock appreciation rights, restricted awards or performance compensation awards.


146

Award Price

The per share exercise price for an incentive stock option must not be less than the fair market value per share of our common stock on the date of grant. With respect to incentive stock options granted to a greater-than-ten percent stockholder of our company, the exercise price per share must not be less than 110% of the fair market value per share of our common stock on the date of grant. With respect to non-qualified stock options, the exercise price per share must be determined by the plan administrator at the time the stock option is granted.

While our common stock is listed on the TSX Venture Exchange, the exercise price of the shares of our common stock covered by each stock option must be determined by the plan administrator and the exercise price must not be less than the price permitted by the TSX Venture Exchange or other regulatory body having jurisdiction. We must not grant stock options or establish a minimum exercise price for stock options unless and until the stock options have been allocated to a particular person or persons.

While our common stock is listed on the TSX Venture Exchange, the exercise price of a stock option must be paid in cash.

The exercise price of a stock appreciation right granted alone ( a "free standing right") will be determined by the plan administrator, but will not be less than 100% of the greater of: (i) the fair market value of the shares underlying the free standing right on the date of grant, and (ii) the fair market value of the shares underlying the free standing right on the trading date immediately preceding the date of grant. A related right granted simultaneously with, or subsequent to, the grant of an option and in conjunction therewith or in the alternative thereto, will have the same exercise price as the related option, will be transferable only upon the same terms and conditions as the related option, and will be exercisable only to the same extent as the related option. However, a stock appreciation right, by its terms, will be exercisable only when the fair market value per share subject to the stock appreciation right and related option exceeds the exercise price per share thereof and no stock appreciation rights may be granted in tandem with an option unless the plan administrator determines that the applicable requirements of the plan are satisfied.

On ♦, 2019, the closing price of our common stock as reported by the Nasdaq Capital Market was US$♦ per share and the closing price of our common stock as reported by the TSX Venture Exchange was CDN$♦.

Duration of Stock Options

The expiration date of a stock option must not be later than 10 years from the date of grant; provided that the expiration date of any incentive stock option granted to a greater-than-ten percent stockholder of our company must not be later than five years from the date of grant.

Vesting Schedule

The vesting schedule for each stock option must be specified by the plan administrator at the time of grant prior to the provision of services with respect to which such stock option is granted. If no vesting schedule is specified at the time of grant by the plan administrator or in our 2019 equity incentive plan, the stock option vests immediately.

The plan administrator may accelerate the vesting of one or more outstanding stock options.

Term of Stock Option

Stock options that have vested but have not been exercised terminate upon the occurrence of the first of the following events, except as provided for in a stock option agreement: (i) the expiration of the option; (ii) the date of an optionee's termination of employment or contractual relationship with our company for cause; (iii) the expiration of three months from the date of an optionee's termination of employment or contractual relationship for any reason other than for cause, death or certain disability; and (iv) the expiration of one year from termination of an optionee's employment or contractual relationship by reason of death or certain disability, provided, however, that while our common stock is listed on the TSX Venture Exchange, stock options granted to optionees engaged in Investor Relations Activities (as defined by the policies of the TSX Venture Exchange) on behalf of our company must expire 30 days after such optionees cease to perform such Investor Relations Activities for our company. Stock options that have not vested terminate immediately upon the optionee's resignation or termination of employment or contractual relationship with our company for any reason whatsoever, including death or disability.


147

Transfer of Stock Option

The stock options granted under the plan may not be transferred, assigned, pledged or hypothecated in any manner other than by will or by applicable laws of descent and distribution, and will not be subject to execution, attachment or similar process, provided, however, that subject to applicable laws, the optionee's heirs or administrators may exercise any portion of the outstanding vested stock options within one year of the optionee's death. Upon any attempt to transfer, assign, pledge, hypothecate or otherwise dispose of any stock option contrary to the provisions of the plan, or upon the sale, levy or any attachment or similar process contrary to the rights and privileges conferred by the plan, such stock option will terminate and become null and void.

Securities Regulation and Tax Withholding

Stock options will not be granted and shares of our common stock will not be issued with respect to stock options unless the grant of such stock options, the exercise of such stock options and the issuance and delivery of such shares comply with all applicable laws. The optionee must pay to us promptly upon exercise of a stock option or, if later, the date that the amount of such obligations becomes determinable, all applicable federal, state, provincial, local and foreign withholding taxes resulting upon exercise of a stock option or from a transfer or other disposition of shares of our common stock acquired upon exercise of a stock option or otherwise related to a stock option or shares of our common stock acquired in connection with a stock option.

Certain Corporate Transactions

If we are involved in a merger, consolidation, acquisition of property, reorganization, or liquidation, or we declare a dividend payable in, or subdivided, reclassify, reorganize, or combine our common stock, the plan administrator will, with respect to each outstanding stock option, proportionately adjust the number of shares of our common stock subject to such stock option and/or the exercise price per share so as to preserve the rights of the optionee substantially proportionate to the rights of the optionee prior to such event. Also to the extent such action includes an increase or decrease in the number of shares of our common stock, the number of shares available under the plan and the exercise price for such stock option will automatically be increased or decreased proportionately.

For greater certainty, the exercise price for any stock options and the number of shares of our common stock deliverable upon the exercise of the stock options will be subject to adjustment in the case of any capital reorganization or of any reclassification of the capital of our company, or in the case of the consolidation, merger or amalgamation of our company with or into any other company, each stock option will, after such event, confer the right to purchase the number of shares of our common stock or other securities of our company (or of the company resulting from such event) which the optionee would have been entitled to upon such event if the optionee had been a stockholder of our company at the time of such event.

Term of the Plan

The plan administrator may grant incentive stock options on or after the date on which the plan is adopted through the day immediately preceding the 10th anniversary of the date the plan is adopted. The plan administrator may grant non-qualified stock options on or after the date the plan is adopted and until the plan is terminated by our board of directors.


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Stockholder Approval

While our common stock is listed on the TSX Venture Exchange, unless disinterested stockholder approval is obtained, under no circumstances will the plan, together with all of our other previously established and outstanding stock option plans or grants, result in:

(i) the aggregate number of shares of our common stock reserved for issuance under awards granted to insiders (as a group) at any point in time exceeding 10% of the issued shares of our common stock;

(ii) the grant to insiders (as a group), within a 12 month period, of an aggregate number of stock option awards exceeding 10% of the issued shares of our common stock, calculated at the date a stock option award is granted to any insider;

(iii) the grant to insiders (as a group), within a 12 month period, of an aggregate number of non-stock option awards exceeding 10% of the issued shares of our common stock, calculated at the date a non-stock option award is granted to any insider;

(iv) the aggregate number of stock options granted to any one award recipient (and any companies wholly owned by that optionee) within a 12 month period exceeding 5% of the issued shares of our common stock, calculated on the date a stock option is granted to the award recipient;

(v) the aggregate number of shares of our common stock subject to non-stock option awards granted to any one award recipient within a 12 month period exceeding 1% of the issued shares of our common stock, calculated on the date a non-stock option award is granted to the award recipient;

(vi) the aggregate number of shares of our common stock subject to awards granted to any one award recipient who is a Consultant (as defined by the policies of the TSX Venture Exchange) within a 12 month period exceeding 2% of the issued shares of our common stock, calculated on the date an award is granted to the award recipient; or

(vii) the aggregate number of shares of our common stock subject to awards granted to all award recipients (as a group) who are employed to perform Investor Relations Activities (as defined by the policies of the TSX Venture Exchange) within a 12 month period exceeding 2% of the issued shares of our common stock, calculated on the date an award is granted to the award recipient.

While our common stock is listed on the TSX Venture Exchange, we must obtain disinterested stockholder approval for any amendment to stock options held by insiders that would have the effect of decreasing the exercise price of the stock options.

Amendment and Termination

The plan will terminate automatically on ♦, 2029. No award will be granted pursuant to the plan after such date, but awards granted before then may extend beyond that date. The plan administrator may suspend or terminate the plan at any earlier date in accordance with the terms of the plan. No awards may be granted under the plan while the plan is suspended or after it is terminated. Unless we determine to submit the section of the plan which sets out the plan's treatment of performance compensation awards and the definition of "Performance Goal" and "Performance Criteria" to the stockholders at the first stockholder meeting that occurs in the fifth year following the year in which the plan was last approved by stockholders (or any earlier meeting designated by our board of directors), in accordance with the requirements of Section 162(m) of the Code and such stockholder approval is obtained, then no further performance compensation awards will be made to covered employees under the section of the plan which sets out the plan's treatment of performance compensation awards after the date of such annual meeting, but the plan may continue in effect for awards to award recipients not in accordance with Section 162(m) of the Code.

The plan administrator may, subject to applicable laws, at any time modify or amend stock options granted under the plan, provided, however, that: (i) no amendment with respect to an outstanding stock option which has the effect of reducing the benefits afforded to the optionee must be made over the objection of such optionee; (ii) the events triggering acceleration of vesting of outstanding stock options may not be modified, expanded, or eliminated without the consent of the optionees; and (iii) the plan administrator may not increase the number of shares available for issuance on the exercise of incentive stock options without stockholder approval.


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Federal Income Tax Consequences

The following discussion is intended to be only a general description of the tax consequences of our 2019 equity incentive plan under the provisions of U.S. federal income tax laws currently in effect and does not address any estate, gift, state, local or non-U.S. tax laws. U.S. federal income tax laws are subject to change at any time, possibly with retroactive effect. This summary is not exhaustive of all possible United States income tax consequences. It is not intended as legal or tax advice to any particular participant and should not be so construed. The tax consequences to any particular participant will vary according to the status of that participant as an individual, trust, corporation or member of a partnership, the jurisdictions in which that participant is subject to taxation and, generally, according to that participant's particular circumstances. Each participant should consult his or her own tax advisor with respect to the income tax consequences applicable to such participant's own particular circumstances.

This summary is not exhaustive of all possible United States income tax consequences. It is not intended as legal or tax advice to any particular holder of shares of our stock and should not be so construed. The tax consequences to any particular holder of shares of our stock will vary according to the status of that holder as an individual, trust, corporation or member of a partnership, the jurisdictions in which that holder is subject to taxation and, generally, according to that holder's particular circumstances. Each holder should consult the holder's own tax advisor with respect to the income tax consequences applicable to the holder's own particular circumstances.

Non-Qualified Stock Options

A non-statutory or non-qualified stock option is a stock option that does not meet the requirements of sections 421 through 422 of the Code. A non-qualified stock option will be taxed in the hands of the optionee at the time of exercise. The optionee will recognize ordinary income for United States tax purposes in the amount of the fair market value (less whatever the optionee paid for the option) in the year of exercise. The optionee may recognize a capital gain or loss when the underlying shares of our common stock are sold. In calculating the gain or loss, the optionee's cost basis for the shares of our common stock will be the fair market value of the stock option when exercised.

Qualified Stock Options

The Code provides special tax treatment for qualified stock options meeting the requirements of section 422 of the Code, commonly called "incentive stock options".

If the stock option qualifies as an incentive stock option, the optionee will have no regular federal income tax liability upon its grant or upon its exercise. However, the excess, if any, of the fair market value of the underlying shares of our common stock on the date of exercise over their aggregate exercise price will be treated as an adjustment to alternative minimum taxable income for federal tax purposes and may subject the optionee to alternative minimum tax in the year of exercise.

Once the optionee exercises an incentive stock option, he or she must hold the underlying shares of our common stock for at least two years from the date the stock option was granted or at least one year from the date the stock option was exercised, whichever is later. If the shares of our common stock are sold after the hold period, any gain (or loss) will be taxed as a capital gain (or loss). On the other hand, if any of the shares of our common stock are sold during the hold period, any gain on the shares of our common stock that are sold will be taxed as ordinary income. Note that the balance of the shares of our common stock will continue to qualify for capital gains treatment if it is held until the expiration of the hold period.

Under section 422 of the Code, incentive stock options must meet the following requirements:

(a) incentive stock options can entitle the employee to purchase shares of the employer corporation, its parent or its subsidiary, but not of a sister corporation of the employer corporation;


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(b) incentive stock options can only be granted to an employee who, at the time of grant, does not own shares having more than 10 percent of the total combined voting power of all classes of stock of the employer corporation, its parent or any subsidiary; provided that this limitation will not apply if, at the time of the grant, the exercise price is at least 110 percent of the fair market value of the underlying stock, and the stock option is by its terms not exercisable for a period of more than five years from the date on which it is granted;

(c) generally, the exercise price of incentive stock options must be payable in cash, although this requirement is relaxed if the incentive stock option meets all of the requirements of section 422(b) of the Code (thus making it possible for the optionee to pay the exercise price by, for example, surrendering stock of the issuer or transferring to the issuer other property);

(d) incentive stock options must be granted under a plan adopted by the corporation;

(e) the plan must be approved by the stockholders within 12 months before or after the date on which the plan is adopted;

(f) the plan must set out the total number of shares that may be issued thereunder as well as the employees (or class of employees) who may receive the stock options;

(g) the incentive stock options must be granted and exercised within 10 years from the date the plan is adopted or approved, whichever is earlier;

(h) the stock option price must not be less than the fair market value of the stock at the time the stock option is granted;

(i) incentive stock options must not be transferable except in the event of death; and

(j) incentive stock options cease to qualify as such three months after the optionee ceases to be an employee, except where the optionee is disabled within the meaning of section 22(e)(3) of the Code, in which case the three-month period is extended to one year.

In addition, the aggregate fair market value of the shares of our common stock with respect to which incentive stock options are exercisable for the first time by the optionee during any calendar year (granted under the plan and all other plans of the company, its parent or any subsidiary) must not exceed US$100,000. Any portion of a stock option which exceeds this limit is treated as a non-qualified stock option.

Stock Appreciation Rights

Generally, the recipient of stock appreciation rights will not recognize any taxable income at the time the stock appreciation rights are granted.

With respect to stock appreciation rights, if the recipient receives the appreciation inherent in the stock appreciation rights in cash, the cash will be taxable as ordinary compensation income to the recipient at the time that the cash is received. If the recipient receives the appreciation inherent in the stock appreciation rights in shares of stock, the recipient will recognize ordinary compensation income equal to the excess of the fair market value of the stock on the day it is received over any amounts paid by the recipient for the stock.

In general, there will be no federal income tax deduction allowed to the company upon the grant or termination of stock appreciation rights. Upon the exercise of a stock appreciation right, however, the company will be entitled to a deduction for federal income tax purposes equal to the amount of ordinary income that the employee is required to recognize as a result of the exercise, provided that the deduction is not otherwise disallowed under the Code.


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Restricted Stock

The grant of restricted stock will subject the recipient to ordinary compensation income on the difference between the amount paid for such stock and the fair market value of the shares on the date that the restrictions lapse. This income is subject to withholding for federal income and employment tax purposes. Our company is entitled to an income tax deduction in the amount of the ordinary income recognized by the recipient, subject to possible limitations imposed by Section 162(m) of the Code and so long as our company withholds the appropriate taxes with respect to such income (if required) and the recipient's total compensation is deemed reasonable in amount. Any gain or loss on the recipient's subsequent disposition of the shares will receive long or short-term capital gain or loss treatment depending on how long the stock has been held since the restrictions lapsed. Our company does not receive a tax deduction for any such gain. Recipients of restricted stock may make an election under Section 83(b) of the Code to recognize as ordinary compensation income in the year that such restricted stock is granted, the amount equal to the spread between the amount paid for such stock and the fair market value on the date of the issuance of the stock. If such an election is made, the recipient recognizes no further amounts of compensation income upon the lapse of any restrictions and any gain or loss on subsequent disposition will be long or short-term capital gain to the recipient. The Section 83(b) election must be made within thirty days from the time the restricted stock is issued.

Other Stock Awards

Other stock awards may be granted as determined by the plan administrator. Such stock awards may be subject to forfeiture under conditions imposed by the plan administrator. Recipients of stock awards will realize ordinary income at the time of receipt of a stock award or, if such award is subject to forfeiture, upon the lapse of any such forfeiture provisions. The ordinary income realized by the recipient will be equal to the fair market value of the shares less the amount, if any, paid in connection with the issuance (the board of directors or the committee can require the payment of par value at the time of the grant). Our company is entitled to an income tax deduction in the amount of the ordinary income recognized by the recipient, subject to possible limitations imposed by Section 162(m) of the Code and so long as our company withholds the appropriate taxes with respect to such income (if required) and the recipient's total compensation is deemed reasonable in amount. The holder will have a basis in the shares acquired equal to any amount paid on receipt plus the amount of any ordinary income recognized by the holder. On sale of the shares, the holder will have a capital gain or loss equal to the sales proceeds minus its basis in the shares.

Stock Option Grants

As of ♦, 2019, the following persons or group of persons held the following number of stock options of our company.

Group

Number of Shares of Our Common Stock Subject to Stock Options

Richard A. Wright
President, Chief Executive Officer, Vice-President, Chief Operating Officer, Director

Nil

David A. Guarino
Chief Financial Officer, Secretary, Treasurer and Director

Nil

Aaron Keay
Director

350,000

Bruce Leitch
Director

100,000

All current executive officers as a group (3 persons)

Nil

All current directors who are not executive officers as a group (3)

450,000

The following individual received 5% or more of the total stock options granted to date (other than Richard A. Wright):

Frank Chessman

 

 

514,800



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Group

Number of Shares of Our Common Stock Subject to Stock Options

All employees, excluding executive officers, as a group

946,900

Securities Authorized for Issuance under Equity Compensation Plans

The following table summarizes certain information regarding our equity compensation plans as of March 31, 2019.








Plan category



Number of securities to be
issued upon exercise of
outstanding options, warrants
and rights

(a)



Weighted-average exercise
price of outstanding
options, warrants and
rights

(b)

Number of securities
remaining available for
future issuance under equity
compensation plans
(excluding securities
reflected in column (a))

(c)

Equity compensation plans approved by security holders
(2013 Equity Incentive Plan)(1)(2)

2,272,900

 

$0.92

 

Nil

 

Equity compensation plans not approved by security holders
(2018 Stock Option Plan)(3)

Nil

N/A

2,737,612(4)

 

Equity compensation plans not approved by security holders

Nil

N/A

Nil

Total

2,272,900

 

$0.92

 

2,737,612

 

(1) Effective October 7, 2013, our board of directors adopted and approved our 2013 equity incentive plan. The plan was approved by a majority of our stockholders on October 7, 2013. On October 31, 2014, our board of directors amended our 2013 equity incentive plan to, among other things, increase the number of shares of stock of our company available for the grant of awards under the plan from 20,000,000 shares to 35,000,000 shares. The purpose of the plan is to (a) enable our company and any of our affiliates to attract and retain the types of employees, consultants and directors who will contribute to our company's long range success; (b) provide incentives that align the interests of employees, consultants and directors with those of the stockholders of our company; and (c) promote the success of our company's business. Effective as of December 30, 2015, we effected a 50-for-1 reverse stock split of our authorized and issued and outstanding shares of common stock which decreased the number of shares of stock of our company available for the grant of awards under the plan from 35,000,000 shares to 700,000 shares. Effective as of January 20, 2016, our board of directors amended the plan to increase the number of shares of stock of our company available for the grant of awards under the plan from 700,000 to 7,700,000. The plan enabled us to grant awards of a maximum of 7,700,000 shares of our stock and awards that may be granted under the plan included incentive stock options, non-qualified stock options, stock appreciation rights, restricted awards and performance compensation awards.

(2)  Our 2013 equity incentive plan has been suspended in connection with our application to list our common stock on the TSX Venture Exchange, but the suspension does not affect any awards, including any stock options, already granted under the plan.


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(3)  Effective April 25, 2018, our board of directors adopted and approved our 2018 stock option plan. The plan was approved by a majority of our stockholders on September 14, 2018. The purpose of our 2018 stock option plan is to retain the services of valued key employees and consultants of our company and such other persons as the plan administrator selected, and to encourage such persons to acquire a greater proprietary interest in our company, thereby strengthening their incentive to achieve the objectives of our stockholders, and to serve as an aid and inducement in the hiring of new employees and to provide an equity incentive to consultants and other persons selected by the plan administrator.

(3) Our 2018 stock option plan permits the grant of up to an aggregate of 5,171,612 stock options (including all outstanding stock options granted under our 2013 equity incentive plan).

Our board of directors recommends that you vote FOR the approval of the 2019 equity incentive plan.

ALKALINE PROPOSAL 7
APPROVAL OF THE DELISTING OF COMMON STOCK OF ALKALINE FROM THE TSX VENTURE EXCHANGE

Alkaline has determined that, in order to provide increased flexibility for the Combined Company following the completion of the Merger, it may be desirable to delist the Alkaline common stock from the TSXV.

The TSXV policy on delisting an issuer's shares from that exchange requires that majority of the minority approval of stockholders be obtained. This means that shares held by promoters, directors, officers and insiders (as contemplated in the policies of the TSXV) must be excluded from voting on the proposal to delist the Alkaline common stock from the TSXV, and that accordingly the shares held by Richard A. Wright and David A. Guarino will be excluded from voting on this proposal.

If the proposal to delist the Alkaline common stock from the TSXV is approved by a majority of the minority of the Alkaline stockholders, the decision to proceed with the delisting will be at the sole discretion of Alkaline's board of directors.

Our board of directors recommends that you vote FOR the approval of the delisting of common stock of Alkaline from the TSX Venture Exchange.

INTEREST OF CERTAIN PERSONS IN MATTERS TO BE ACTED UPON

No director, executive officer, or nominee for election as a director of Alkaline and no associate of any of the foregoing persons has any substantial interest, direct or indirect, by security holding or otherwise, in any matter to be acted upon at the Alkaline Meeting other than the election of directors and the approval of Alkaline's 2019 equity incentive plan and those disclosed under "Interests of the Alkaline Directors and Executive Officers in the Merger."

LEGAL MATTERS

The validity of the shares of Alkaline common stock to be issued in connection with the Merger has been passed upon for Alkaline by Clark Wilson LLP, Vancouver, British Columbia. Glaser Weil Fink Howard Avchen & Shapiro, LLP, counsel to AQUAhydrate, has provided an opinion regarding material U.S. federal income tax matters set forth in this joint proxy statement/prospectus.

EXPERTS

Alkaline

Alkaline's consolidated financial statements for the year ended March 31, 2018 have been included in this joint proxy statement/prospectus in reliance on the report of AMC Auditing, LLC, an independent registered public accounting firm, which is included herein, given on the authority said firm as experts in auditing and accounting.


154

Alkaline's consolidated financial statements for the year ended March 31, 2019 have been included in this joint proxy statement/prospectus in reliance on the report of Prager Metis CPAs, LLC, an independent registered public accounting firm, which is included herein, given on the authority of said firm as experts in auditing and accounting.

AQUAhydrate

AQUAhydrate's consolidated financial statements for the years ended December 31, 2018 and 2017 have been included in this joint proxy statement/prospectus in reliance on the report of Armanino LLP, an independent auditor, which is included herein, given on the authority of said firm as experts in auditing and accounting.

INTERESTS OF NAMED EXPERTS AND COUNSEL

No expert named in the registration statement of which this joint proxy statement/prospectus forms a part as having prepared or certified any part thereof (or is named as having prepared or certified a report or valuation for use in connection with such registration statement) or counsel named in this joint proxy statement/prospectus as having given an opinion upon the validity of the securities being offered pursuant to this joint proxy statement/prospectus or upon other legal matters in connection with the registration or offering such securities was employed for such purpose on a contingency basis. Also at the time of such preparation, certification or opinion or at any time thereafter, through the date of effectiveness of such registration statement or that part of such registration statement to which such preparation, certification or opinion relates, no such person had, or is to receive, in connection with the offering, a substantial interest, direct or indirect, in Alkaline or AQUAhydrate or any of their respective parents or subsidiaries. Nor was any such person connected with Alkaline or AQUAhydrate or any of their respective parents or subsidiaries as a promoter, managing or principal underwriter, voting trustee, director, officer or employee.

"HOUSEHOLDING" OF PROXY MATERIALS

The Securities and Exchange Commission permits companies and intermediaries such as brokers to satisfy the delivery requirements for proxy statements or annual reports with respect to two or more stockholders sharing the same address by delivering a single copy of the proxy statement or annual report, as applicable, addressed to those stockholders. This process, which is commonly referred to as "householding", potentially provides extra convenience for stockholders and cost savings for companies.

Although Alkaline does not intend to household for its stockholders of record, some brokers household its proxy materials and annual reports, delivering a single copy of the proxy statement or annual report to multiple stockholders sharing an address unless contrary instructions have been received from the affected stockholders. Once you have received notice from your broker that it will be householding materials to your address, householding will continue until you are notified otherwise or until you revoke your consent. If, at any time, you no longer wish to participate in householding and would prefer to receive a separate copy of the proxy statement or annual report, or if you are receiving multiple copies of either document and wish to receive only one, please notify your broker. Alkaline stockholders who currently receive multiple copies of the proxy statement or annual report at their address from their brokers and would like to request "householding" of their communications should contact their brokers.

ALKALINE STOCKHOLDER PROPOSALS

Stockholder proposals to be considered for inclusion in the proxy statement and form of proxy relating to Alkaline's next annual meeting of stockholders must be received no later than ♦, 2020. If Alkaline changes the date of its next annual meeting of stockholders by more than 30 days from the date of this year's annual meeting of stockholders, then the deadline is a reasonable time before Alkaline begins to print and send its proxy materials. All such proposals must comply with the requirements of Rule 14a-8 of Regulation 14A of the Securities Exchange Act of 1934, which sets forth specific requirements and limitations applicable to nominations and proposals at annual meetings of stockholders.


155

All stockholder proposals, notices and requests for Alkaline should be made in writing and sent via registered, certified or express mail to The Alkaline Water Company Inc., 14646 N. Kierland Blvd., Suite 255, Scottsdale, AZ 85254, Attention: David A. Guarino.

WHERE YOU CAN FIND MORE INFORMATION

Alkaline files annual, quarterly and current reports, proxy statements and other information with the Securities and Exchange Commission. Such filings are available to the public over the internet at the Securities and Exchange Commission's website at http://www.sec.gov.

Alkaline has filed a registration statement on Form S-4 to register with the SEC the shares of Alkaline common stock to be issued to AQUAhydrate stockholders in connection with the Merger. This joint proxy statement/prospectus is a part of that registration statement and constitutes a prospectus of Alkaline in addition to being proxy statements of Alkaline and AQUAhydrate for their respective meetings. This joint proxy statement/prospectus, which forms a part of that registration statement, does not contain all information included in the registration statement. Certain information is omitted and you should refer to the registration statement and its exhibits for additional information.

OTHER MATTERS

Alkaline

Alkaline's board of directors does not intend to bring any other business before the Alkaline Meeting, and so far as is known to Alkaline's board of directors, no matters are to be brought before the Alkaline Meeting except as specified in the notice of the Alkaline Meeting. If any other matters are properly brought before the Alkaline Meeting, it is the intention of the person named on the proxy to vote the shares represented by the proxy on such matters in accordance with his judgment.

AQUAhydrate

If necessary or appropriate to solicit additional proxies if there are not sufficient votes to approve the Capital Reorganization and the Merger, the AQUAhydrate board of directors may seek to adjourn the meeting. The AQUAhydrate board of directors is not aware of any other matters that will be presented at the meeting. If any other matters are properly brought before the meeting, it is the intention of the person named on the proxy to vote the shares represented by the proxy on such matters in accordance with his or her judgment.


156

INDEX TO ALKALINE FINANCIAL STATEMENTS

 

Page

Financial Statements For the Years Ended March 31, 2019 and 2018

 

Report of Independent Registered Public Accounting Firm

F-1

Report of Independent Registered Public Accounting Firm

F-2

Report of Independent Registered Public Accounting Firm on Internal Control over Financial Reporting

F-3

Consolidated Balance Sheets

F-5

Consolidated Statement of Operations

F-6

Consolidated Statements of Stockholders' Equity

F-7

Consolidated Statements of Cash Flows

F-8

Notes to Consolidated Financial Statements

F-9


 

Page

Financial Statements For the Three Months Ended June 30, 2019 and 2018

 

Condensed Consolidated Balance Sheets

F-23

Condensed Consolidated Statement of Operations

F-24

Condensed Consolidated Statements of Stockholders' Equity

F-25

Condensed Consolidated Statements of Cash Flows

F-26

Notes to Condensed Consolidated Financial Statements

F-27



F-1

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the Stockholders and the Board of Directors of
The Alkaline Water Company Inc.

Opinion on the Financial Statements
We have audited the accompanying balance sheet of The Alkaline Water Company Inc. (the “Company”) as of March 31, 2019, and the related statement of operations, changes in stockholder’s equity and cash flows for the year ended March 31, 2019, and the related notes to the financial statements (collectively, the financial statements). In our opinion, the financial statements present fairly, in all material respects, the financial position of the Company as of March 31, 2019, and the results of its operations, stockholder’s equity and its cash flows for the year ended March 31, 2019, in conformity with accounting principles generally accepted in the United States of America.

We have also audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the Company’s internal control over financial reporting as of March 31, 2019, based on criteria established in Internal Control – Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission in 2013, and our report dated July 1, 2019, expressed a disclaimer of an opinion on the effectiveness of the Company’s internal control over financial reporting.

Basis for Opinion
These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on the Company’s financial statements based on our audits. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with U.S. federal securities laws and the applicable rules and regulation of the Securities and Exchange Commission and the PCAOB.

We conducted our audit in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. Our audit included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audit also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audit provides a reasonable basis for our opinion.

/s/ Prager Metis CPAs, LLC

We have served as the Company’s auditor since 2019
Basking Ridge, New Jersey
July 1, 2019

 


F-2



REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the Board of Directors and Stockholders of
The Alkaline Water Company Inc.

Opinion on the Financial Statements

We have audited the accompanying consolidated balance sheet of The Alkaline Water Company Inc. (the “Company”) as of March 31, 2018 and the related consolidated statements of operations, stockholders’ equity, and cash flows for the year ended March 31, 2018, and the related notes and schedules (collectively referred to as the “financial statements”). In our opinion, the financial statements present fairly, in all material respects, the financial position of the Company as of March 31, 2018, and the results of its operations and its cash flows for the year ended March 31, 2018 in conformity with accounting principles generally accepted in the United States of America.

Basis for Opinion

These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on the Company’s financial statements based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (“PCAOB”) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. The company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. As part of our audits, we are required to obtain an understanding of internal control over financial reporting, but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion.

Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion.

The accompanying financial statements have been prepared assuming that the Company will continue as a going concern. As discussed in Note 2 to the financial statements, the Company has negative working capital at March 31, 2018, has incurred recurring losses and recurring negative cash flow from operating activities, and has an accumulated deficit which raises substantial doubt about its ability to continue as a going concern. Management’s plans concerning these matters are also described in Note 2. The financial statements do not include any adjustments that might result from the outcome of this uncertainty.

 

/s/ AMC Auditing

AMC Auditing
We have served as the Company’s auditor since 2013
Las Vegas, Nevada
June 29, 2018

 


F-3

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM ON
INTERNAL CONTROL OVER FINANCIAL REPORTING

To the Stockholders and the Board of Directors of
The Alkaline Water Company Inc.

Opinion on the Internal Control Over Financial Reporting
We have audited The Alkaline Water Company Inc’s (the “Company”) internal control over financial reporting as of March 31, 2019, based on criteria established in Internal Control – Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission in 2013. Because of the significance of the matter described in the Basis for Disclaimer of Opinion paragraph, we have not been able to obtain sufficient appropriate audit evidence to provide a basis for an audit opinion. Accordingly, we do not express an opinion on the effectiveness of the Company's internal control over financial reporting.

We have also audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the balance sheet of the Company as of March 31, 2019, and the related statements of operations, changes in stockholder’s equity and cash flows for the year ended March 31, 2019 and the related notes to the financial statements of the Company and our report dated July 1, 2019, expressed an unqualified opinion.

Basis for Disclaimer of Opinion
The Company’s management is responsible for maintaining effective internal control over financial reporting and for its assessment of the effectiveness of internal control over financial reporting in the accompanying Management’s Report on Internal Control over Financial Reporting. Our responsibility is to express an opinion on the Company’s internal control over financial reporting based on our audit. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

Because material weaknesses have been identified, as described in ‘Management’s Annual Report on Internal Control over Financial Reporting’ we were unable to apply the appropriate procedures to test the controls during the year. The scope of our work was not sufficient to enable us to express, and we do not express, an opinion either on management’s assessment or on the effectiveness of the Company’s internal control over financial reporting.

A material weakness is a deficiency, or a combination of deficiencies, in internal control over financial reporting, such that there is a reasonable possibility that a material misstatement of the entity's financial statements will not be prevented, or detected and corrected, on a timely basis. If one or more material weaknesses exist, an entity's internal control over financial reporting cannot be considered effective. The following material weaknesses have been included in the accompanying report ‘Management’s Annual Report on Internal Control over Financial Reporting’.

 


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1) The Company did not prepare a risk assessment for internal control over financial reporting during the year ended March 31, 2019.

2) The Company did not retain certain evidence to support internal controls over financial reporting during the year ended March 31, 2019.

3) The Company did not document or test internal control over financial reporting during the year ending March 31, 2019.

4) The Company’s internal control over financial reporting lacked adequate oversight.

We considered the material weaknesses identified above in determining the nature, timing, and extent of audit procedures applied in our audit of the March 31, 2019 financial statements, and this report does not affect such report on the financial statements.

We conducted our audit in accordance with the standards of the PCAOB. Those standards require that we plan and preform the audit to obtain reasonable assurance about whether effective internal control over financial reporting was maintained in all material respects. Our audit included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists and preforming such other procedures as we considered necessary in the circumstances. Because material weaknesses have been identified, we were not able to obtain sufficient appropriate audit evidence to provide a basis for an audit opinion.

Definition and Limitations of Internal Control Over Financial Reporting
A company’s internal control over financial reporting is a process designed 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. A company’s internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of the company’s assets that could have a material effect on the financial statements.

Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

/s/ Prager Metis CPAs, LLC

Basking Ridge, New Jersey
July 1, 2019

 


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THE ALKALINE WATER COMPANY INC.
CONSOLIDATED BALANCE SHEETS

    March 31, 2019     March 31, 2018  
             
ASSETS  
Current assets            
Cash and cash equivalents $  11,032,451   $  988,905  
Accounts receivable   3,068,181     2,599,095  
Inventory   2,058,012     1,002,020  
Prepaid expenses   378,699     296,471  
             
   Total current assets   16,537,343     4,886,491  
             
Fixed assets - net   1,945,265     1,169,635  
             
           Total assets $  18,482,608   $  6,056,126  
             
             
LIABILITIES AND STOCKHOLDERS' EQUITY  
Current liabilities            
Accounts payable $  2,898,958   $  2,052,988  
Accrued expenses   1,095,458     819,011  
Revolving financing   3,131,279     2,592,015  
Note payable   -     131,583  
Derivative liability   -     288  
             
   Total current liabilities   7,125,695     5,595,885  
             
Stockholders' equity            
Preferred stock, $0.001 par value, 100,000,000 shares authorized, Series C issued and outstanding 1,500,000 and Series D issued and outstanding issued 3,800,000 at March 31, 2019 and 2018   5,300