Quarterly report pursuant to Section 13 or 15(d)


3 Months Ended
Jun. 30, 2023
Accounting Policies [Abstract]  


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

Nature of Business

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

Principles of consolidation

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

Use of Estimates

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

Stock Split

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

Accounts Receivable and Allowance for Doubtful Accounts

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

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

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

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


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

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

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

Revenue Recognition

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

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

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

Disaggregated Net Revenues

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

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

Concentration Risks

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

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

Correction of Previously Issued Financial Statements

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

Business Segments

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

Recent Accounting Pronouncements

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