Alkaline Water Company Inc (OTCMKTS:WTER) Files Annual Report, Starts Crashing

Since mid-May the stock of Alkaline Water Company Inc (OTCMKTS:WTER) has been moving upwards, despite the numerous red sessions, and from around 7 cents it hit a high of $0.1799 this Monday. The climb was support by investors’ anticipation of the annual report for the fiscal 2015 of the company. Well, when on Tuesday the report was finally submitted it had a rather negative event on the ticker and WTER closed 4% in the red on that day. Yesterday the negative momentum got even stronger with over 10% being wiped.

The sudden reversal of the stock’s direction seems rather perplexing in light of the fact that the annual report showed a dramatic increase in revenues compared to the previous fiscal year – from $552 thousand for the fiscal 2014 to over $3.7 million for the fiscal 2015. There aren’t that many pennystocks out there that could boast such a massive growth in a single year.

Unfortunately the rest of the numbers found on the balance sheet weren’t that encouraging:

• $90 thousand cash
• $717 thousand total current assets
• $1.4 million total current liabilities
• $3.7 million revenue
• $7.1 million net loss

An additional factor that could have influenced the stock’s drop is the continued dilution of the common stock. At the end of March 31, 2014, WTER had 81.6 million shares while as of March 31, this year, the outstanding shares had surpassed 133 million.

WTER are still using their common shares to pay for services and as a result in April and May 9,750,000 shares got issued. Furthermore, in order to boost their resources WTER have been selling quite a lot of units lately – between May 7 and July 6 a total of 10,582,859 units were sold. Each unit was priced at $0.07 and consisted of 1 common share and 1 warrant for the purchase of 1 share with an exercise price of $0.10. It should be noted that even after the recent corrections WTER’s current market price more than doubles the purchase price of the units. And as a result of warrants with the exact same price being exercised last year more than 14.8 million shares got issued.

The company has stated that it expects to be cash-flow breakeven by the third quarter of the fiscal 2016, profitable by the fourth quarter of the fiscal 2016 and to generate revenues of over $10 thousand for the fiscal year. If things go according to WTER’s projections the impact of the millions of underpriced shares that are being sold may be significantly lessened. For now though the red flags shouldn’t be underestimated and any trades involving the stock should be preceded by extensive due diligence. 

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