Greetings. And welcome to The Alkaline Water Company’s Fourth Quarter Fiscal 2019 Financial Results and Business Update Conference Call. At this time, all participants are in a listen-only mode. A brief question-and-answer session will follow the formal presentation. [Operator Instructions]As a reminder, this call is being recorded.

Now I would like to turn the call over to Andrew Haag, Managing Partner at IRTH Communications. Mr. Haag, you may begin..

Welcome to The Alkaline Water Company fourth quarter 2019 financial results and business update conference call.

With us today are The Alkaline Water Company’s CEO, Richard Wright; and Executive Vice President of Finance, Ronald DaVella.Before I turn the call over to Ricky, I would like to remind you that on this call, management’s prepared remarks may contain forward-looking statements, which are subject to risks and uncertainties and management may make additional forward-looking statements during the question-and-answer session.

Therefore the Company claims the protection of the Safe Harbor for forward-looking statements that are contained in the Private Securities Litigation Reform Act of 1995.Actual results could differ materially from those contemplated by any forward-looking statements as a result of certain factors, including but not limited to general economic and business conditions, competitive factors, changes in business strategy or development plans, ability to attract or retain qualified professionals, as well as changes in legal and regulatory requirements.In addition, any projections as to the Company’s future performance represent management’s estimates as of today, July 2, 2019.

The Alkaline Water Company assumes no obligations to update these projections in the future as market conditions change.The Company issued a press release, announcing its financial results and filed the 10-K with the SEC, so participants in this call who may not have already done so, may wish to look at those documents as the Company will provide a summary of the results discussed on today’s call.Today’s call may include non-GAAP financial measures.

When required, reconciliation to the most directly comparable financial measure calculated and presented in quarters with GAAP can be found in the Company’s Form 10-K annual filing at sec.gov, which is also available on their website at www.thealkalinewaterco.com.I will now turn the call over to The Alkaline Water Company CEO, Ricky Wright, who’ll give an overview of the Company’s fourth quarter 2019 financial results and business outlook for fiscal 2020.

Ricky Wright will then turn the call over to Ronald DaVella, The Alkaline Water Company’s Executive Vice President of Finance. Ronald DaVella, who will then provide an overview of the Company’s fourth quarter operating results. Ricky Wright will follow Ronald DaVella again, providing closing remarks.

We will then open the call for Q&A after management’s update. Ricky, go ahead..

Thank you, Andrew. Hello everyone, and welcome to The Alkaline Water Company’s first ever earnings conference call.

As many of you are aware, our flagship brand Alkaline88 is the number one bought Alkaline Water brand in the whole country.According to Nielsen data, on the list of the top 30 value-added water brands in the U.S., Alkaline88 was ranked as the fastest growing alkaline water over the 52-week period, ending March 23, 2019.

Also according to Nielsen, our gallon size is now the number one bulk water SQU [ph] within the value-added water segment in the entire country.We are very proud of both of these achievements is that we have grown the product from a regional brand to a national highly recognized brand.

For the fifth consecutive year, we’ve experienced an unprecedented growth of 50% or greater.For the fiscal 2019, our sales were up over 62%. We continued to achieve these results with a very lenient structure and a broad distribution of cost and grocery in other channels. As of today, we have distribution in over 55,000 stores in the U.S.

and growing, including the majority of the top-50 grocery retailers, the largest national food chain, and in the last 12 months we are proud to have expanded into Wal-Mart and CVS nationwide.Over the next 12 months, our omnipresence strategy for our flagship brand is to continue growing our national footprint with further expansion into drug stores.

Getting new distribution in the clubs, conveniences, home delivery, and e-commerce channels.

We are very optimistic that this strategy will help us achieve our vision to provide consumers across the country with multiple ways to gain awareness of the brand and to easily facilitate a trial of our products.Our fiscal 2020 objectives include the following major initiatives.

Number one, we will continue to build out our national footprint across all channels. Two, we plan to successfully introduce our newest product Alkaline88 infused flavored water.

And three, we now for the first time ever plan to launch our new national marketing campaign.As consumers continue to shop across multiple channels and looking for products both online and offline, it’s very important that our focus this year is to make sure we pursue and close distribution wherever and whenever a consumer wants to buy the brand.

As an example, growing our e-commerce presence is a significant priority to establishing this goal.Based on a high consumer demand that we’ve been seeing on Amazon.com, we have formed a new agreement with one of the nation’s leading online groceries Peapod Inc., which is a wholly-owned subsidiary of Royal Ahold.

This partnership will start with a pilot through their Chicago distribution center with national expansion soon to follow, as we achieve our mutual developed sales targets.Online ordering and delivery of our gallon size is an important part of our strategy to expand on our consumer base.

This channel will also serve as a platform to broadly launch our new infused flavor products in the coming quarters.Another part of the multi-channel consumer access strategy will be home delivery.

We are proud to say that we recently launched a home delivery with one of the nation’s largest home delivery water providers.This represents a brand new vertical for our Company.

It’s an important channel for us as home delivery actually represents 12% of the bottled water market according to the International Bottled Waters Association.Under this new agreement, 1 liter and 3 liters sizes of Alkaline88 will be available for home delivery to customers across California.

We are optimistic that the agreement will expand to include national distribution and more of our product portfolio.Finally, one of the biggest opportunities we have to complete in our national footprint is a convenience store channel. We see this initiative as a top priority for fiscal 2020.

This quarter efforts, we are attacking this opportunity on multiple fronts.In fiscal year 2019, we launched our small chain Van program with E.A. Berg.

I’m thrilled to announce that from the time we started that program, we have accelerated the growth of our single serving sizes in this channel by 65%.We are also excited to announce a new partnership with Crossmark to represent our brand across the country to national convenience store channels.

With a strong record of success and helping brands extend their coverage of market penetration, Crossmark represents a wide variety of major brands across several different food and beverage categories.

Crossmark has an in-depth knowledge of retailers, major retail channels, and product categories that will help them create an effective convenience store strategy for a brand.To complement our partnership with Crossmark, we’ve also entered into an agreement with Premier National Food Distributors.

Our Premier DSD has over 25 years of distribution experience and a nationwide network of over 1,000 direct store deliveries.Premier DSD will specifically strengthen our presence in the C store channel in the key northeastern markets, including New York, Connecticut, Pennsylvania, Massachusetts, and New Jersey.Premier DSD has extensive reach with thousands of retail and food service customers.

The agreement is expected to have a major impact on our direct store delivery and on-shelf availability in these key markets.All of these agreements represent an important step in our commitment to the convenience store strategy.

As I mentioned earlier, making sure we make Alkaline88 brand available to our consumers whenever and wherever they would like to buy it.

As the fastest growing water brand, alkaline water brand in the country, we still see significant growth potential.We start to realize that the sales of bottled water in convenience stores reached almost 4.3 billion in 2017 according to the market research firm IRI and that currently Alkaline88 is in less than 2% of the convenience stores in the U.S., you can see and imagine the opportunity we have.As we continue to gain shelf space online and offline, we intend to introduce new products including Alkaline88 infused flavored waters and when the hemp infused beverages are legally permitted to be sold, our hemp-infused brand Soothe.Over the last four years, it’s been our retail presence has been a major catalyst to our overall growth.

The full year fiscal 2019 revenue was 4.5 times greater than the fiscal year 2016. We’ve grown from $7.1 million to $32.2 million in that period.I’d like to spend a little minute -- a little bit of time talking about our latest initiative. Last year we launched an Infused Beverage division.

This division currently includes both a zero calorie all natural flavored Alkaline88 water. And when the hemp-infused beverages are legally permitted to be sold, it will have our hemp-infused brands too.

According to forecasts for the hemp CBD beverages, that market could exceed $1.6 billion by 2020.The flavors of all our infused beverages are absolutely amazing. The infused flavored product began to be delivered last month and is off to a very strong start.

As a result of our participation the recent 98 Annual Western Association of Food Chains Convention, we received at that convention signs of verbal commitments for initial orders of over 13 truckloads of our Alkaline88 flavored infused water.Just last month we were the number one selling national brand out of 750 vendors at the recently completed KeHE Holiday show.

We received an exceptional response from industry delegates attending both shows. Virtually everyone, loved our taste profiles and flavors and our branding.The successful launch of infused water supports our C stores strategy as well and the overall plan to increase sales in our small single-serve bottled category.

At both the WAFC convention and the KeHE show, we had literally 100’s of people try our flavors and their response was overwhelmingly positive.In addition, many of the senior executives and distributors in attendance expressed interest in our hemp-based Soothe products and plan on placing orders when the hemp-infused beverages are legally permitted to be sold.I want to emphasize that the Company intends to comply in full with all federal state and local laws, rules and regulations as the Company develops our hemp extract alkaline waters and other product lines.

The Company will not pursue commercial production or sale of hemp extract-infused products until legally permitted. We’re closely watching and responding to all regulatory developments within the FDA and each individual U.S.

state and plan to launch our Soothe brand accordingly.To support our growing role in multiple beverage categories, we also are increasing our focus for the first time and promoting our brand through marketing.

We have engaged ArchPoint Group to be our agency of record to help us develop our new brand strategy that will be launched in the fall of 2019.

Our strategy will be and to invest in both the traditional and digital marketing, and to increase awareness of our brand, drive trials and build loyalty amongst our targeted consumers.We also recently formed a new agreement with Wonder Woman Run Series to provide Alkaline88 water at the finish line in nine of the Wonder Woman 5K races and marathons in 2019, with an option to renew in 2020.And I cannot emphasize enough the marketing benefits of our Van program.

E.A. Berg representatives make their store visits and deliveries in a rap van [ph], the primary displays our name, logo, products portfolio as they drive through their territories.I’m sure you’ve seen this kind of vans advertising other products.

The American Truckers Association has done research that says vans generate 16 million impressions annually. And we have 11 of those vans displaying our products and product information in Texas and California.

And stay tuned, this is just the start as we look for new initiatives and new innovative ways to promote our growing product portfolios.Moving on to another important topic. As we previously announced, we have decided to offer revenue guidance on this call, the initiative of following our strong fiscal 2019 results.

For the fifth year in a row the Company continues to grow at over 50% per year. We owe this tremendous growth to our team, our strategies, our valued retail partners and the expanded acceptance by the customers.We have continued to make Alkaline88 the number one selling bulk alkaline water in the entire country.

We do expect this momentum to carry over into our first quarter of fiscal 2020 and I’ll expand on this in a few minutes.We feel that we are in a position to offer some insights into our near-term revenue trends and we have visibility in order to flow from retailers.

This comes on the heel of an announcing record sales of $3.8 million for the month ending May 31, 2019 and achieving a record 2020 first quarter of over $10 million.We expect our fiscal year 2020 revenue to be between $46 million and $50 million.

We anticipate the new flavor infused water to contribute approximately $3 million to $4 million in revenue over the remaining three quarters in fiscal 2020.

Please note that the revenue projections do not include any revenue from our hemp-infused product.We have finished our formulations and have completed the initial run on our trademarked hemp Soothe water. But we are waiting until the hemp-infused beverages are given regulatory clearance.

Most of our current customers are also waiting for similar clearance.

We have presented our hemp-infused Soothe product suppliers and distributors who representing over 30,000 stores nationwide and we’ve had tremendous reception.Now let’s comment on our packing and the Soothe brand, but more importantly to our buyers is that Alkaline88 is a trusted brand, both by the retailers and the consumer.

And none like others in the competitive space, our product Soothe is great tasty. We monitor daily the regulatory environment and are prepared to begin sales the moment the regulators give us the green light.We have significant growth in across all class of trade, including within the newly emphasized C store group.

We continue to accelerate growth in both our bulk and single serving sizes. Importantly, on fused product line has begun to gain traction. But it always earlier, based on what we’re seeing and our discussions with retailers, we expect the infused flavored water to contribute significantly to our sales over the next three quarters.

We are working and we will be rolling out new brand strategies that we believe will further accelerate our growth.I’d like now to pass the call on to Ron DaVella, our EVP of Finance and our most recent member of our team, so he can take you through the fourth quarter financial results.

Ron?.

Thank, Ricky. I’m really excited to be a part of this Company and this team as we continue to grow this Company.

Before I begin, I would like to encourage interested listeners to review the press release announcing our financial results issued yesterday and our form 10-K that we filed yesterday with the SEC, for more detailed explanation of some of the year-over-year variances as I will highlighting -- I will be highlighting just a few.Our revenues from sales of our product for the year ended March 31, 2019 were $32.2 million, up from $19.8 million reported for the prior fiscal year ended March 31, 2018.

This represents an amazing increase to 63% generated by sales of our alkaline water.

The increase reflects the expanded distribution of our products to additional retailers throughout the country.For the year ended March 31, 2019, we had cost of sales of $19.3 million or 60% of sales, as compared to the cost of goods sold of $11.7 million or 59% of sales for the year ended March 2018.

A slight increase in cost of goods sold as a percentage of net sales was due to increased raw material costs and associated freight as a result of our East Coast expansion.Total operating expenses were $21 million during the year ended March 2019, as compared to $14.1 million for the prior year.

Sales and marketing expenses increased by $5.8 million, primarily as a result of increased outbound freight costs of $2.7 million and increased marketing spend of $1.9 million, which was primarily due to the 63$ increase in revenues.General and administrative expenses increased by $1 million, primarily resulting from an increase in professional, media and legal fees for new stock exchange listings on NASDAQ and the Toronto Exchange of $3.9 million, offset by a decrease in stock comp expenses of $2.9 million.For the three months ended March 31, 2019, we reported $8 million in total revenues, as compared to $6 million for the same period in 2018.

Our gross profit from sales in the fourth quarter of 2019 was $3 million versus gross profit of $2 million in 2018.Selling and marketing expenses were $3.2 million in fiscal ‘19 fourth quarter versus $2.2 million in the prior year fourth.

And G&A expense for the fourth quarter of 2019 was $2.3 million versus $0.8 million in the prior year fourth quarter.We used cash in operations during the year, including changes in working capital of $8.1 million, as compared to $2.6 million in fiscal 2018.

We successfully increased our cash position by $10 million, which resulted primarily from completed finances. We will continue to keep a watchful eye on costs as we continue to grow our business.With that, I’d like to turn the call back over to Ricky..

Thanks, Ron. In conclusion, let me say that the tailwinds and the underlying momentum for Alkaline Water Company has never been stronger.

The returns on the different elements of our strategy are compelling and we are delivering value for our shareholders.Not only is revenue growing impressively, but we have also focused on maintaining the efficient cost structure in order to drive efficiencies and in turn bring shareholder value.

Overall, fiscal 2020 is going to represent another year of robust revenue growth for Alkaline Water Company.

We’re going to do it with a lean organization that is focused on servicing our retail partners, customers and delivery value to our shareholders.I want to thank all of our current customers, brokers, distributors, our dedicated employees and shareholders for making our story so exciting.

I don’t think I can stress enough that the opportunity ahead of us right now is great. The future of The Alkaline Water Company is bright. We look forward to keeping you informed on our progress. Thank you..

[Operator Instructions] Thank you. Our first question comes from the line of Neal Gilmer with Haywood Securities. Please proceed with your questions..

Yeah. Good morning, guys, and thanks very much for the prepared remarks. You certainly covered off a lot which was insightful. So I just wanted to follow up on a couple of the comments you made and maybe I’ll start with your hemp-infused product. So you did state that your guidance does not include any sales for that.

I’m just wondering whether you have any sense or any color on any particular states you think might be close to where you could enter? And I think the second part of my question would be assuming you get the clearance from a regulatory perspective on whatever date, what’s the realistic timeline to actually have the product available into the marketplace and starting to record sales on that product line?.

Neal, thank you for that question, both good questions. The first one is we are monitoring the state legislation taxes. Illinois has put up some legislation. We are working around with our counsel and the regulatory bodies that we report to, to get a clear path on those.In addition, Constellation Brands came out this morning.

The President and CEO, they probably even have better insight than we do. They stated that they think that by the fourth quarter of this year, the CBD will become available in the U.S. on consumables, so that’s exciting.We’ve also tracked the legislation with respect to what’s going on in Congress, and there seems to be a mandate.

I think, Mitch, the Senator met with the Head of the FDA this week and McConnell indicated that he’s putting pressure as well.So, we think that by the end of this year, which would be our second half of our year, we would have some availability. Our product has been shown to the various retailers. We will appear in some books this summer.

So, it will appear that we are available for sale, but obviously we would not be. So those are going to the nature food channels which is very exciting for us.We’ve also shown this to other major, major retailers. We’ve gone through some testing at their facilities as well for quality, et cetera.

We believe that we could be on the shelves within a month of having regulatory clearance.So, we think that we’ve got some very strong product ordain in the hopper. We have a great taste profile.

We believe we have the best tasting hemp water in the country, and literally we think it’s a 30-day run once we get the green light on the regulatory whether it be a state regulatory, NASDAQ regulatory, or FDA regulatory guidance..

Okay. That’s quite helpful. Thank you. Maybe wanted to again ask for a little more color on the Van program and given the success you’ve had with that. My understanding from your comments that it’s just in Texas and California.

Are you looking to expand that to potential other geographies or even increase in those two states given the success you’ve seen so far?.

Well, we’ve got both those states pretty well covered. We represent -- they represent 13,700 stores within that program itself. The easy answer is yes to the extent that we continue to see an ROI. We obviously will make that expansion.

They had the ability to go to 57,000.We picked those two states originally, Neal, just to give a little bit more color because we thought that they would be the first to give us the clearest guidance with the CBD product as well. So there is -- the hemp-based CBD was picked -- those two states.

Illinois is obvious another choice as they continue to have very favorable legislation. We do work with four different law firms to continue to get guidance in this area..

Okay. And then maybe just my last question is more sort of on the financial model. With your comments with respect to expanding your marketing campaign that you’re going to launch this fall, in the past I think your marketing and promotion line sort of ranged from sort of 35% to 40% of revenues, closer to 40%, I guess, for last year.

Are you expecting similar sorts of levels of marketing spend or should we expected sort of an increase in that line on -- at least on a percentage of revenue basis?.

I am going to turn that one over to Ron..

Hi, Neal. Nice to meet you on the phone on the phone..

You as well..

Yeah. I think we’re expecting to maintain marketing around that range. It will really depend on how quickly we can launch the CBD because we’re going to be investing in that, and obviously with the flavors, but we expect the percent of revenue to remain pretty consistent..

Okay. Great. Thanks very much guys. Congrats on the quarter and talk to you soon..

Thank you..

Our next question comes from line of Raveel Afzaal with Canaccord Genuity. Please proceed with your question..

Good morning, guys. Thank you for taking our questions. So, just first of all with respect to gross margins, we saw a small decline in the gross margin, but it seems like we’ll be back at 40% gross margin based on your guidance.

Can you tell us why we saw this dip in gross margin and why you expect that to improve again?.

Yeah. We had -- This is Ron. We had to spend a little bit more money in the Northeast on freight and some marketing to promote that as we’re expanding there very significantly, but But we are anticipating the margins to remain around the 40% level this coming year..

Got it.

So the margins declined primarily because of freight, but not marketing, right? Marketing is below the gross profit line?.

Yeah. Promotions -- so a little bit of promotions still in the Northeast..

Okay. Got it. Okay.

And then just moving on to my second question, with respect to single-serve bottles, how much does that represent of your revenues right now? And is it possible for you to quantify what sort of growth we have seen in the revenues coming from the single-serve bottles?.

Yes. We’re still in that 11% or 12% range. However, I’m happy to say that in the first five months we did more this year than we did all of last year and we continue to see that ramp-up. Obviously, only being in 2% of 150,000 convenience stores, we’ve got a lot of runway.

We expect our single-serve to do very well in the convenience store markets as well.So we see that as a major initiative for this year. We have done an unbelievably good job with our retailers in terms of adding additional SKUs and our six-pack has been greatly accepted in one of the largest retailers in the country.

We’re almost up to over a thousand cases a week on that -- in that particular retailer. So we feel very good about everything we’re doing on that..

Got it. But -- and you said that it represents 11% to 12% of your revenues right now and that was the same number about 11% to 12% the previous year.

So we have seen growth on an absolute dollar number than?.

Yes. Absolutely..

Got it. Okay.

And then just moving on to my next question, so $46 million to $50 million in revenue guidance, did I hear you guys right that you expect about $4 million to come from the infused beverages line?.

Yes..

Okay.

And so the remaining growth, how much of that is coming from the convenience store versus just your traditional grocery store or retail strategy?.

We’re hoping for some upward surprises in the convenience. Obviously, that’s a little slower build. We’ve had some really tremendous success so far. But I would say that it’s going to be relatively small portion.

Most of our growth will be organic through additional SKUs in our current stores, additional consumer demand.If you noted we’ve been up significantly in Walmart this year already, Kroger as well. We see that the Northeast will also be a big expansion. So I would say somewhat limited in the first year.

But if you look at our internal projections by next year, it’s going to be a huge part of our portfolio and part of our sales success. If we get lucky we’re already way ahead of our current internal financing projections on the convenience. So if we get lucky we may see a significant amount there..

Got it.

And how much does Northeast represent of your revenues now compared to the previous year?.

The Northeast is probably up about 10% versus the prior year..

Perfect. Awesome, guys. Great quarter here. I look forward to touching base again next quarter..

Thanks, Raveel..

[Operator Instructions] Our next question comes from line of Michael Brcic with National Securities. Please proceed with your question..

Good morning. Thank you. I’m new to the story, so hopefully I don’t have too many inane questions.

But how much market share do you have of the alkaline water category?.

I’m going to say we have about 20% market share. So we are….

Okay..

We’re not with a good solid number two in the country. We believe that the market this year will approach within the branded categories, 500 million, somewhere in that range, in the non-branded maybe 1 billion. So, we’ve got 20%, I would say, the actual branded. We dominate the bulk arena.

I’m not sure that anybody even has 5% of what we have in the bulk, which is a gallons of 3 liters..

Right. Right..

We’re only about 30% of the ACV. So, we’re relatively small with respect to the total numbers of stores we could be in. And that’s one of the main reasons we’ve gone to this focused strategy on getting into convenient markets..

How -- what is the general growth rate of the category?.

I would say the growth rate of the category has been in the 30% and 40%..

Okay.

And that makes up how much of the -- where do you put these under premium water or?.

Yeah. It’s a value-added water category..

Okay..

I think there is -- I think in the top 30 brands there are three of us in that that would be use consider alkaline brand..

Okay. Cool. You mentioned you had $11 million in cash at the end of calendar Q1, I guess. And you had a credit facility.

How big is the facility and how much is outstanding on that?.

We have just increased it from $4 million to $5 million. And right now we have about $2.5 million outstand -- $2.3 million outstanding on it..

Cool.

Do you have any other debt outstanding?.

No. No other debt..

Okay. Great.

The -- have you made any projections on cash usage for the next three quarters?.

Yes. We’re expecting cash usage to be pretty consistent with the current year. It really depends on how much we decide to invest in marketing costs….

Yeah. All right..

… and then media bias, which is a variable that we can turn on and off as necessary..

Yeah..

So we fully believe we’ll be in a solid cash position by the end of the year. And if we need to raise capital we can do that, but we’re not -- we don’t need to at this point..

Got it. Just real quick come in on the -- you mentioned that best tasting hemp water.

If it’s not out I mean, how that you compare -- what are you comparing it to?.

No. It’s available. We just -- there’s security in the FDA rules. Okay, so there’s tons of FDA -- there’s tons of hemp water where you go online tomorrow and buy some, I think, on Amazon..

Okay. Okay. So you’re actually -- okay. Good.

Now, is -- is it -- is CBD water or whatever let’s call is it legal in Canada or not?.

I don’t have all the rules on Canada. I believe by the end of December they just made an announcement. I think by December it will be available in Canada. Obviously, Canada has a bunch of provinces and it’s a provincial thing just like the U.S. state to state.So, we are looking at Canada.

We have opportunity to also move into Canada and we have a lot of support in Canada. So we have looked at that and we are moving in that direction as well. It is not a primary focus right now in that.

We haven’t put up a facility up there and this is a hot field product so we would not -- we would need to find a facility to be able to put this product up there..

Right. Great. Look, thank you very much and I apologize for taking up so much time..

Pleasure to talking to you. Glad to have you listen in..

Our next question comes from the line of Aaron Grey with Alliance Global Partners. Please proceed with your question..

Hi. Good morning and thanks for the questions..

Good morning..

So first just, I think, a little bit higher level on the single-serve and expanding and convenience stores. How do you feel about your brand appeal in the channel? Given the core consumer might be a little bit different from your traditional consumer buying the bulk products.

So with that difference can you talk about your efforts on how you plan to increase brand awareness in those in those new C store channels with the single-serve?.

Yeah. That’s part of the overall strategy. Obviously, we’ll do the same as some other people do. We’ll do the stickers. We’ll have the cool box stickers. We’ll have some promotion. We do believe that one of our big distinctions is that we are moving Alkaline88 into a flavor infused.We have worked on this for 24 months.

We think again that our flavor profile is better than most people. You finish -- our core product has a really smooth finish at the end. I don’t know any other way to describe it. We’ve done that same thing with our flavor infused in our hemp. It’s a product that doesn’t linger. You get to taste it.

You get to enjoy it.So we think that we’ll be able to gain some shelf space just by having a product differentiation in the flavored side. And then, obviously, that may allow us to also move our core product in there as well. We also know that convenience stores, believe it or not are also beginning to pay more attention to the bulk.

We got into loves this last year with our gallons, believe it or not..

Okay. Great. Thanks. That’s helpful.

And then on CBD or hemp, with you and many competitors waiting for regulatory clarity before entering the market, how do you feel about your positioning, well, it looks like we’ll be a rather crowded category once hemp and CBD kind of clear those FDA hurdles on the infused beverage side, sort of one why would you feel like you’re build to fit in the category? And number two, with consumers you seem to be still a lot of confusion in terms of what they’re consuming on the CBD/hemp side in terms of broad base or full spectrum.

So how do you feel about sort of just like a consumer education making sure they’re aware of what products they are consuming and how that help the category grow over time? Thank you..

Yeah. That’s a really good question and we think we have a really good answer for that. Number one, we’re trusted brand, the same guy that we are presenting to our core product that we’ve had tremendous success with -- some of these places we are the number one water. Five years ago we didn’t even exist on their shelves.

So they trust Alkaline88.Number two, we’re presented the same buyers that are buying our core products, our flagship product, our infused water-flavored product. They’re also looking at our Soothe.

They don’t trust a lot of other brands.The second thing that we’ve done is we have actually working with three of the top guys in the world in the sector, so we’ll have greater buyer availability. We’ll be able to document that.

So as the consumer begins to educate themselves the difference between an isolate and full spectrum or broad spectrum hemp, we will actually have some science behind that. We expect that science out sometime in August and we’ll be able to make an announcement around what will be in our water then as well.But I really think it comes down to trust.

I can’t tell you how many people have told us that it’s a brand that their consumers trust. You’ve got to remember we sold $100 million of this brand without any real nationwide or traditional marketing and we have a very, very loyal consumer following..

Great. Thanks very much and best of luck..

Thank you..

Your next question is a follow-up question from Raveel Afzaal with Canaccord Genuity. Please proceed with your question..

Yes, guys. Just a couple of follow up. First of all, how many co-packers do you have on the CBD side signed up already and how does it work right now? I mean do you get a firm commitment from them that you -- you’ll have availability on a line if and when the regulations are passed.

How does that work and how many co-packers do you have on that front?.

We have two currently. We have conversations with two additional. So we will have when -- if and when, there’s not if now, it’s just a when. We’ll have four.

We try to become as people that have co-pack for us, we try to become a trusted partner and we try to become candidly their number one client.We have commitments at least on one of our plants for half of their production capabilities. So we feel pretty good about out the door being able to meet whatever demand we have.

In addition to that the other ones that we’re bringing online, they have tremendous capabilities as well.So we feel pretty good just like we modeled up with our plan 88. One thing that we haven’t discussed is we do have a greater potential for maybe not a margin increase but we’ll make more dollars per can or buy dollars per bottle.

So we’ll have some flexibility to just spend some money on the shipping if demand hits hard and we’ll just add an additional ship. We’ve already had those conversations with those plans..

Perfect. And my last question, how much will a national marketing program cost, I know you mentioned that it’s going to remain pretty consistent 30% to 40% in terms of sales and marketing.

I just wanted to see how much this national program itself is going to cost and whether it’s going to be front-end loaded or back-end loaded to your fiscal year?.

They’ll be back-end loaded to the fiscal year. We have proposals online from anywhere from a 1.5 million to 3.5 million. But some of that just going to be -- we’re going to see what happens on a regional basis first. Obviously, we’re going to peg that to each region, the Northeast, because we’re not very well known there.

We’ll have a different type of marketing program with respect to what media is we use and the Southwest, the Southern Cal area where we’ve been there for six years. We’ll use other types of media that we won’t be using in the Northeast.So, we’re going to play that by year as Ron pointed out and we do have some flexibility.

I realize what we’re looking on and all those spins and we have some ability to track that. That’s one of the reasons that we chose ArchPoint, because there’s sophistication with respect to being able to track the ROIs..

Perfect. Thanks again..

Our next question is a follow-up question from Michael Brcic with National Securities. Please proceed with your question..

Thank you.

With this CBD infused or whatever or how much extra cost does that put into a bottle and what sort of selling price are we talking about?.

So, we’re looking -- we’ve done some market surveys. We have some excellent people on our Board as well. Brian Sudano from Beverage Marketing Corp. is a member of our Board. So he helps us view the market. They have a pretty expansive view of what’s going on in the market.We currently plan and price it at $3.99 [ph] on a retail basis.

I don’t want to give away the rest of the inside juice to my competitors. But we will -- the contract we have signed gives us most favored nation status with our CBD supplier. So we think that we will be able to put it in a bottle cheaper than anybody else in the country.And it’s just a question of getting to what know what the consumer wants.

Do they want 20 milligrams? Do they want 15? Do they want 10? And what that’s going to be is yet to be determined. FDA will probably have a say in that candidly and that will obviously determine the final cost. But we feel pretty good about our margins.

We feel pretty good about our price point and we love our product.One other things that we have been able to do is and I didn’t emphasize earlier so you gave me another chance is our taste profile is unbelievably excellent. We use a masking agent that nobody else in the country really has access to.

So we’re really happy about what we’ve created here..

How big a bottle for $3.99?.

16.9 ounces..

All right. Thank you very much..

We have no further questions at this time. I would now like to turn the floor back over to management for closing comments..

I want to thank everybody for being here today, supporting the Company. We appreciate it. We hope to be having another one of these in a couple of months with even greater and more exciting things going on. Please continue to watch our press releases. There is a lot of excitement in this Company.

There is a lot of things that we’re doing to move this Company forward and add additional shareholder value. Thanks again..

Ladies and gentlemen, this does conclude today’s teleconference. You may disconnect your lines at this time. Thank you for your participation and have a nice day..