form10k.htm
UNITED
STATES
SECURITIES
AND EXCHANGE COMMISSION
WASHINGTON,
D.C. 20549
FORM
10-K
ANNUAL
REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF
1934
For
the Fiscal Year Ended June 30, 2009
Commission
File Number 333-135783
WATERPURE
INTERNATIONAL, INC.
(Exact
name of registrant as specified in its charter)
Florida
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20-3217152
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(State
or other jurisdiction of incorporation
or
organization)
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(IRS
Employer Identification No.)
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525
Plymouth Road, Suite 310
Plymouth
Meeting, PA
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19462 (954)
728-2405
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(Address
of principal executive office)
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(Zip
Code) (Registrant’s telephone number, including area
code)
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Securities
registered pursuant to Section 12(b) of the Exchange
Act: None
Securities
registered pursuant to Section 12(g) of the Exchange Act: None
Indicate
by check mark if the registrant is a well-known seasoned issuer, as defined by
Rule 405 of the Securities Act. Yes o No x
Indicate
by checkmark if the registrant is not required to file reports pursuant to
Section 13 or 15(d) of the Act. Yes o No x
Indicate
by check mark whether the registrant (1) has filed all reports required to be
filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the
preceding 12 months (or for such shorter period that the registrant was required
to file such reports), and (2) has been subject to such filing requirements for
the past 90 days. Yes
x No
o
Indicate
by check mark whether the registrant has submitted electronically and posted on
its corporate Web site, if any, every Interactive Data File required to be
submitted and posted pursuant to Rule 405 of Regulation S-T (§ 229.405 of this
chapter) during the preceding 12 months (or for such shorter period that the
registrant was required to submit and post such files). Yes o No
o
Indicate
by check mark if disclosure of delinquent filers pursuant to Item 405 of
Regulation S-K (§229.405 of this chapter) is not contained herein, and will not
be contained, to the best of the registrant’s knowledge, in definitive proxy or
information statements incorporated by reference in Part III of this Form 10-K
or any amendment to this Form 10-K. o
Indicate
by check mark whether the registrant is a large accelerated filer, an
accelerated filer, a non-accelerated filer or a smaller reporting company. See
definitions of “large accelerated filer,” “accelerated filer” and “smaller
reporting company” in Rule 12b-2 of the Exchange Act.
Large
accelerated filer o
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Accelerated
filer o
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Non-accelerated
filer o
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Smaller
reporting company x
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(Do
not check if a smaller reporting company)
|
|
Indicate
by check mark whether the registrant is a shell company (as defined in Rule
12b-2 of the Exchange Act).Yes
No x
The
aggregate market value of the voting common equity held by non-affiliates as of
December 31, 2008, based on the closing sales price of the Common Stock as
quoted on the Nasdaq Over-the-Counter Bulletin Board was $157,984.
As of
October 12, 2009, there were 103,723,986 shares of registrant’s common stock
outstanding.
This
Annual Report of WaterPure International, Inc. on Form 10-K contains
forward-looking statements, particularly those identified with the words,
“anticipates,” “believes,” “expects,” “plans,” “intends”, “objectives” and
similar expressions. These statements reflect management's best judgment based
on factors known at the time of such statements. The reader may find discussions
containing such forward-looking statements in the material set forth under
"Legal Proceedings" and "Management's Discussion and Analysis and Plan of
Operations," generally, and specifically therein under the captions "Liquidity
and Capital Resources" as well as elsewhere in this Annual Report on Form 10-K.
Actual events or results may differ materially from those discussed
herein.
Although forward-looking statements in
this Annual Report on Form 10-K reflect the good faith judgment of our
Management, such statements can only be based on facts and factors currently
known by us. Consequently, forward-looking statements are inherently subject to
risks and uncertainties and actual results and outcomes may differ materially
from the results and outcomes discussed in or anticipated by the forward-looking
statements. Factors that could cause or contribute to such differences in
results and outcomes include, without limitation, those specifically addressed
under the heading "Risk Factors" below, as well as those discussed elsewhere in
this Annual Report on Form 10-K. Readers are urged not to place undue reliance
on these forward-looking statements, which speak only as of the date of this
Annual Report on Form 10-K. We file reports with the Securities and Exchange
Commission ("SEC"). You can read and copy any materials we file with the SEC at
the SEC's Public Reference Room at 100 F Street, NE, Washington, DC
20549. You can obtain additional information about the operation of
the Public Reference Room by calling the SEC at 1-800-SEC-0330. In addition, the
SEC maintains an Internet site (www.sec.gov) that contains reports, proxy and
information statements, and other information regarding issuers that file
electronically with the SEC, including us.
We
undertake no obligation to revise or update any forward-looking statements in
order to reflect any event or circumstance that may arise after the date of this
Annual Report on Form 10-K. Readers are urged to carefully review and consider
the various disclosures made throughout the entirety of this annual Report,
which attempt to advise interested parties of the risks and factors that may
affect our business, financial condition, results of operations and
prospects.
References to Company Abbreviations
(“we”, “our”, etc.) refer to WaterPure International, Inc.
References
to the “Bulletin Board,” the “OTCBB” or the “OTC Bulletin Board” are to the
Over-the-Counter Bulletin Board, a securities quotation service, which is
accessible at the website www.otcbb.com.
WATERPURE
INTERNATIONAL, INC.
FORM
10-K
For
the Fiscal Year Ended June 30, 2009
TABLE OF CONTENTS
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PAGE
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PART I
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Item
1.
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Business
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4
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Item
1A.
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Risk
Factors
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6
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Item
1B.
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Unresolved
Staff Comments
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10
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Item
2.
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Properties
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10
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Item
3.
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Legal
Proceedings
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10
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Item
4.
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Submission
of Matters to a Vote of Security Holders
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10
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PART II
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Item
5.
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Market
for Registrant’s Common Equity, Related Stockholder Matters and Issuer
Purchases of Equity Securities
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11
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Item
6.
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Selected
Financial Data
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11
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Item
7.
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Management’s
Discussion and Analysis of Financial Condition and Results of
Operations
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12
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Item
7A.
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Quantitative
and Qualitative Disclosures about Market Risk
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14
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Item
8.
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Financial
Statements and Supplementary Data
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14
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Item
9.
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Changes
in and Disagreements with Accountants on Accounting and Financial
Disclosures
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16
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Item
9A(T).
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Controls
and Procedures
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16
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Item
9B.
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Other
Information
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17
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PART III
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Item
10.
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Directors,
Executive Officers and Corporate Governance
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18
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Item
11.
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Executive
Compensation
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19
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Item
12.
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Security
Ownership of Certain Beneficial Owners and Management and Related
Stockholder Matters
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21
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Item
13.
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Certain
Relationships and Related Transactions, and Director
Independence
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21
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Item
14.
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Principal
Accountant Fees and Services
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22
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PART IV
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Item
15.
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Exhibits
and Financial Statement Schedules
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23
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Signatures
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24
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ITEM
1. BUSINESS
Overview
WaterPure
International, Inc. was organized under the laws of the state of Florida on July
22, 2005 and conducts business as a marketer and manufacturer of Atmospheric
Water Generators (“AWG”). Though originally structured as a marketing entity, we
have now become a manufacturer of AWGs after licensing patents from Everest
Corp. and developing our own new line of AWGs under those patents. This
strategic decision has led to sales fluctuations due to allocation of resources
to research and development in some of our previous operating
periods.
We are a
development stage company until the sale of these new products lead to
recognition of significant revenue. We want to be identified as an
environmentally sustainable business. Clean drinking water is becoming a scarce
commodity as our population increases. Additionally, it is our goal, to utilize
the intellectual property from Everest Corp. to become a leading worldwide
manufacturer of AWGs based on the quality of our machines and our choice of
distributors and marketing channels. Of course, our future results are highly
dependent upon the success of our efforts to manufacture and market our products
and having the ability to attain and attract qualified personnel and adequate
working capital.
In
December 2007, we entered into two worldwide license agreements with Everest
Water Ltd. for the manufacturing and marketing rights to advanced models of
AWGs. One license is a non-exclusive license for a stand-alone water generator
and the second license is an exclusive license for a mineral additive water
generator process that will permit the addition of organic minerals, flavors and
other additives to the water produced by the AWGs.
We
previously purchased our products from a manufacturer in South Korea under an
Original Equipment Manufacturer arrangement. However, we have chosen to
discontinue our supply relationship with the Korean manufacturer, but we may
reestablish the relationship at any time. Currently, we are selling a
unit that we are manufacturing ourselves in Florida.
For the
year ended June 30, 2009, we had revenue of approximately $120,000 and net loss
of approximately $1.42 million.
Business
Strategy
Currently
we have focused on completion of our final production model of our new AWG, the
WaterCycletm. We have leased a 1,000 sq. ft,
facility in Margate, Florida that is in close proximity to our supplier of sheet
metal used to build the new units. Our efforts to market the units after
production have led to the signing of contracts with distributors in Florida,
France, United Arab Emirates, the Cayman Islands and parts of Mexico. Also,
rights of first refusal have been granted for Illinois, Venezuela and
Colombia.
We intend
to generate and enhance revenues through the following measures:
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•
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Move
into larger production facilities;
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•
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Hire
more experienced and skilled production staff; and
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•
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Expand
our marketing channels through a growing network of distributors and other
methods.
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We will need to raise sufficient
capital n order to accomplish these goals.
Products
and Suppliers
The basic
technology employed by our products to produce water from air has been in use in
other applications for many decades. Looking very much like the traditional
water cooler (but without the inverted water bottle supplying the liquid), the
WaterPure AWG stands in a residential or office environment and converts the
moisture contained in the ambient air to water, providing a continuing supply of
fresh, pure, hot or cold water. The essential processes employed by the water
generator are simply evaporation and condensation. Water collected from this
processes is then treated through various specialized filters and ultra violet
light purification to obtain safe water output. Water produced from AWGs is not
currently regulated by government authorities, however our water exceeds FDA
standards for potable/drinking water. Since there is no revolutionary or
unproven technology utilized in our process, we expect that the risks of failure
of the product to perform as advertised are nominal.
Our
current production line consists of the WatercycleTM AWG. This machine converts
air into fresh drinking water. Our units operate on either 110 or 220 volt power
and look similar to a typical water cooler, but do not connect to any water
line. This avoids the need for bottled water delivery; heavy lifting of five
gallon jugs; and of course does not use up the world’s precious water supply.
The AWGs condensation and purification process takes water out of ambient air
(humidity) and filters and purifies the water from any foreign matter,
bacterial, organic and other impurities.
We have
been engaged in the development of a new AWG “the WatercycleTM”, in
connection with the patent license we acquired from Everest Water Ltd. This new
device utilizes ozone to eliminate microorganisms, increases water producing
ability, has a more attractive appearance and uses fewer parts than the machines
we are currently marketing. One model of the new AWG will also include an
optional feature that will permit the user to add flavors and natural herbal
additives, such as green tea. We have been marketing three models of
AWGs from our existing inventory as well as new purchases from Liquid
Air-Florida and
have generated minimal revenues from operations.
Customers
AWGs are
suitable for home/small office use and for higher volume office or commercial
use. They are currently sold in the United States (California, Florida, Georgia,
New Jersey and New York) as well as internationally (France, United Kingdom and
Mexico).
Sales,
Marketing and Distribution
We are
currently aligning our marketing and distribution program to place our AWG
products into the consumer market and commercial marketplace through distributor
relationships. Our intent is on establishing defined sales channels and
supporting them with meaningful marketing programs to the extent that funds are
available. We have sold a small number of units and have generated minimal
revenues from operations.
We
currently have contracts with distributors for France, United Arab Emirates,
Florida, the Cayman Islands, and parts of Mexico. We are in the negotiation
stages with four other potential distributors and have received inquiries from
over a dozen others for various territories. We are in the process of reviewing
these and timing their contracts with our ability to produce and deliver units
to them on a timely basis.
Research
and Development
We have
dedicated a significant amount of time and resources to research and development
activities and plan to increase our research and development efforts to improve
the efficiencies associated with water production, increase water storage
capacity, expand the effectiveness of filtration devices, and enhance energy
efficiency. For the year ended June 30, 2009, our R & D expenses were
approximately $18,000.
Competitive
Advantage
The
atmospheric water generator and filtration system industry is relatively new and
rapidly evolving. Based on our research, there are possibly 10 entities
experimenting with the technology of water generation, of which five are direct,
active competitors. Some of those companies have limited or no business
activities while others have entered into strategic alliances with one another.
The relatively high energy cost associated with changing water from its vapor
phase in the air to the liquid phase appears to be an obstacle to making sales
for a number of these competitors. Control of bacteria and viruses in the
field of atmospheric water generation creates a technological challenge, which
is a substantial barrier for others to enter this field.
Our
previous AWG products are comparable to the others in the industry utilizing
similar technologies with certain differences consistent with patented
processes. Our new AWG, which we call the WatercycleTM,
contains 50% fewer parts and has greater reliability than the competitive
devices. Additionally, our WatercycleTM
employs an ozone treatment to purify the water from all microorganisms as
opposed to the UV (ultra violet) light applications utilized by other AWGs. This
is an effective method of eliminating all bacteria and other microorganisms and
has the additional benefit of being environmentally friendly inasmuch as there
is no UV lamp to dispose and replace.
Today,
governments and health professionals are starting to realize and understand the
negative health effects of pollution, chemicals used to disinfect water
supplies, and residual salt in desalinated water, and how they affect human
bodies. We believe there is a robust market opportunity that exists for
atmospheric water generators and filtration systems. These technologies can
provide an alternative solution to the world’s shortage of fresh water and
provide clean, safe drinking water in various geographical
settings.
Patents,
Licenses and Royalty Agreements
Everest
Water, Ltd., the Licensor, has developed a new concept for a water-making
machine. Everest Water has received U.S. patent #7,272,947 and has another
patent pending in United States Patent No. Serial Number 11/833,491 filed August
3, 2007.
On
December 7, 2007, we acquired rights to manufacture and market these patented
AWGs pursuant to two worldwide license agreements entered into with Everest
Water Ltd. One license is a non-exclusive license for a stand-alone water
generator and the second license is an exclusive license for a mineral additive
water generator process that will permit the addition of organic minerals,
flavors and other additives to water produced by the machine. We agreed to pay
$300,000 and issue 1,500,000 shares of our common stock valued at $330,000 as
consideration for this agreement. We made a cash payment of $50,000 with the
execution of the agreement and an additional $10,000 in March 2008. The stock
was to be issued in two allotments: 1,000,000 shares to be held until completion
of the prototype machine and an additional 500,000 shares 90 days later. We
agreed to pay Everest Water Ltd. an 8% royalty payment with a guaranteed minimum
annual payment of $100,000 beginning in 2007. This agreement terminates with the
expiration of the Everest patent, on September 3,
2024.
On August
1, 2008, we and Everest Water Ltd. modified payment terms of the licensing
agreement. Under the modified terms, we shall pay Everest $430,000 over 33
months starting September 1, 2008 and shall make 8% royalty payments to Everest
within 20 days after the closing of each calendar quarter. The royalties have
guaranteed minimum payments as follows: $50,000 year one, $60,000 year two,
$70,000 year three, $90,000 year four and $100,000 each year after. The annual
periods commence August 1, 2008, the date of execution of the revised agreement.
As of June 30, 2009, we have paid $13,000 and are $22,000 in
arrears.
Competition
The
atmospheric water generator, water purification and bottled water industries are
highly competitive. This market segment includes numerous manufacturers,
distributors, marketers, and retailers that actively compete for the business of
consumers both in the United States and abroad. In addition, the market is
highly sensitive to the introduction of new products and technologies that may
rapidly capture a significant share of the market. As a result, our ability to
remain competitive depends in part upon its successful introduction and consumer
acceptance of new products. Although our products bear our own exclusive
WaterPure branding, we expect that the competition will intensify in the future,
since our competitors can and may duplicate many of the products or services
offered by us.
The principal competition within the
AWG industry comes from Air to Water, Inc. also known as World Wide Water
Company. This company holds a patent for atmospheric water generators for
various distributors, a similar water generating device and has product
manufactured in China. Yuxin, a Chinese manufacturing company, also produces
atmospheric water generators for various distributors.
The following are our other
competitors:
Hyflux
(www.hyflux.com) is a publicly traded company based in Singapore. Hyflux’s main
business is in extremely large-scale water filtration and purification through
membrane technology such as reverse osmosis and desalination. In January 2003,
they announced that they had purchased a portion of a U.S. company, World Wide
Air2Water, and also entered into a licensing agreement to manufacture air to
water generators called the Dragonfly. Hyflux contracted the manufacturing of
the Dragonfly units to a multi-billion dollar appliance manufacturer located in
Qing Dao, China, called Haier.
Dong Yang
Co. Ltd., (www.dywater.net) is based in Kimpo, South Korea. The company has been
involved with the manufacturing of residential/office water purification devices
using Reverse Osmosis for 20 years. They entered the AWG water industry in 2002
with an upright full size unit known today as the M-10.
Wataire
Industries (www.wataireindustries.com) is a publicly traded company with its
corporate office in Vancouver, Canada. Having been in the atmospheric water
business for a number of years, the company has kept a very low profile, only to
rise again in the past year by revamping and redesigning their products.
Wataire’s full-sized upright AWG is called the WII-4010. According to the
website, Wataire’s manufacturing facility is located in Sydney, Australia.
Additionally, Wataire also offers industrial/commercial water generators.
Government
Regulation
The
manufacturing, processing, testing, packaging, labeling and advertising of the
products that we sell may be subject to regulation by one or more U.S. federal
agencies, including the Food and Drug Administration, the Federal Trade
Commission, the Community Supported Agriculture in North America, the United
States Department of Agriculture, the Environmental Protection Agency, the
standards provided by the United States Public Health Authority and the World
Health Organization for drinking water. These activities may also be regulated
by various agencies of the states, localities and foreign countries in which
consumers reside. Currently, our AWGs are not subject to any governmental
regulation although it is possible that the FDA may choose to regulate the
quality of water that AWGs produce.
Since we
are subject to a wide range of regulation covering every aspect of our business
as mentioned above, we cannot predict the nature of any future U.S. laws,
regulations, interpretations or applications, nor can we determine what effect
additional governmental regulations or administrative orders, when and if
promulgated, would have on our business in the future. Although the regulation
of water is less restrictive than that of drugs and food additives, we cannot
assure you that the current statutory scheme and regulations applicable to water
will remain less restrictive. Further, we cannot assure you that, under existing
laws and regulations, or if more stringent statutes are enacted, regulations are
promulgated or enforcement policies are adopted, we are or will be in compliance
with these existing or new statutes, regulations or enforcement policies without
incurring material expenses or adjusting our business strategy. Any laws,
regulations, enforcement policies, interpretations or applications applicable to
our business could require the reformulation of certain products to meet new
standards, the recall or discontinuance of certain products not capable of
reformulation, additional record keeping, expanded documentation of the
properties of certain products, expanded or different labeling or scientific
substantiation.
Employees
As of
September 30, 2009, we had six employees, four of whom are either officers
and/or shareholders. The employees who are either officers and/or shareholders
have received no cash compensation to date. We are accruing the annual salary to
our CEO, which is $150,000. Staffing levels will be determined as we progress
and grow. Our Board of Directors determines the compensation of all new
employees based upon job descriptions.
ITEM
1A. RISK FACTORS
Our
company has limited operating history and therefore we cannot ensure the
long-term successful operation of our business or the execution of our business
plan.
We have
only been in existence and engaged in our current and proposed business
operations since July 2005. As a result, we have only a limited operating
history upon which you may evaluate our proposed business and prospects. Our
proposed business operations will be subject to numerous risks, uncertainties,
expenses and difficulties associated with early stage enterprises and the
development, production and sale of the types of products and services that we
offer. You should consider an investment in our company in light of
these risks, uncertainties, expenses and difficulties. Such risks
include:
• the
absence of an operating history;
• insufficient
capital;
• expected
continual losses for the foreseeable future;
• our
ability to anticipate and adapt to a developing market(s);
• acceptance
by consumers of our products;
• limited
marketing experience;
• reliance
on our license agreement with Everest Water Ltd.;
• reliance
on third party manufacturers for our AWGs;
• a
competitive environment characterized by numerous, well-established and
well-capitalized competitors;
• our
ability to identify, attract and retain qualified personnel;
• our
ability to provide superior customer service; and
• reliance
on key personnel.
Because
we are subject to these risks, you may have a difficult time evaluating our
business and your investment in our Company. We may be unable to successfully
overcome these risks which could harm our business.
Our
prospects must be considered in light of the risks, expenses and difficulties
frequently encountered by new and growing companies in the green technology and
wellness fields in which we operate. We must meet many challenges
including:
• establishing
and maintaining broad market acceptance of products and converting that
acceptance into customers;
• establishing
and maintaining our brand name;
• timely
and successfully introducing new products and increasing the functionality and
features of existing products; and
• successfully responding to
competition.
Our
business strategy may be unsuccessful and we may be unable to address the risks
we face in a cost-effective manner, if at all. If we are unable to successfully
address these risks our business will be harmed.
We
have a history of losses which may continue, which may negatively impact our
ability to achieve our business objectives.
We
incurred net losses of $1,423,395 and $2,289,370 for the years ended June 30,
2009 and 2008, respectively. In addition, at June 30, 2008, we had an
accumulated deficit of $4,890,357 and a working capital deficit of $927,551. We
cannot assure you that we can achieve or sustain profitability on a quarterly or
annual basis in the future. Our operations are subject to the risks
and competition inherent in the establishment of a business enterprise. There
can be no assurance that future operations will be profitable. Revenues and
profits, if any, will depend upon various factors, including whether we will be
able to continue expansion of our revenue. We may not achieve our business
objectives and the failure to achieve such goals would have an adverse impact on
us.
Our
independent registered public accounting firm has expressed substantial doubt
about our ability to continue as a going concern, which may hinder our ability
to obtain future financing.
In their
report dated October 12, 2009, our independent registered public accounting firm
indicated that there is substantial doubt about our ability to continue as a
going concern as a result of our minimal revenues, recurring net losses and our
working capital deficiency. Our ability to continue as a going concern is
subject to our ability to generate a profit and/or obtain necessary funding from
outside sources, including obtaining additional funding from the sale of our
securities, increasing sales or obtaining loans and grants from various
financial institutions where possible. Our continued net operating losses
increase the difficulty in meeting such goals and there can be no assurances
that such methods will prove successful.
If
we are unable to obtain additional funding our business operations will be
harmed.
Our
business plan contemplates a rapid rollout of our AWGs through multiple
channels, which will require significant capital. We will require additional
funds to sustain our operations and institute our business plan. We
anticipate that we will require up to approximately $2,000,000 to fund our
anticipated operations for the next twelve months. Additional capital will be
required to effectively support the operations and to otherwise implement our
overall business strategy. Even if we do receive additional
financing, it may not be sufficient to sustain or expand our development
operations or continue our business operations.
If
we do obtain additional financing our then existing shareholders may suffer
substantial dilution.
We do not
have any contracts or commitments for additional funding, and there can be no
assurance that financing will be available in amounts or on terms acceptable to
us, if at all. The inability to obtain additional capital will restrict our
ability to grow and may reduce our ability to continue to conduct business
operations. If we cannot raise the additional capital required to implement our
business plan, we may be required to curtail operations or develop a different
business strategy, which could adversely affect our financial condition and
results of operations. Further additional debt financing must be repaid
regardless of whether or not we generate profits or cash flows from our business
activities. Equity financing may result in dilution to existing stockholders and
may involve securities that have rights, preferences, or privileges that are
senior to our common stock.
Failure
to achieve market acceptance of our products would result in lack of
revenues.
Our
business is primarily based on a new concept of atmospheric water generators.
There is no assurance that our products will gain wide consumer acceptance or
any acceptance. Market acceptance of our products may take a long time. The
introduction of a new brand generally requires a minimum of twelve to eighteen
months before a new product will receive market acceptance from consumers and
retailers. If our products do not gain a sufficient level of consumer
acceptance, our revenues could be adversely affected which would have a material
impact on our business.
Our
licensing agreement with Everest Water Ltd. is subject to termination in certain
instances, which could result in a substantial loss of revenues from our
products.
We have
entered into a licensing arrangement with Everest Water Ltd., which grants us a
worldwide, non-exclusive license for a stand-alone water generator and an
exclusive license for a mineral additive water generator process that will
permit the addition of organic minerals, flavors and other additives to the
water produced by the machine. Under the terms of this arrangement, we are
obligated to make certain minimum payments to Everest Water. Failure
to meet these payments would result in a default under the contract. If the
license terminates, we would no longer have the right to market and sell the
atmospheric water generators, which we expect to account for substantially all
of our products in the immediate future. If this were to occur, we
could likely experience a substantial loss of revenues from our
products.
Inability
to satisfy demand for our product would reduce our ability to gain a foothold in
the market.
Even if
our AWGs do gain consumer and retail acceptance, there is no assurance that we
will be able to successfully meet the market's demand should our manufacturers’
capacity become limited or if we do not have sufficient capital to pay
manufacturing costs. If we cannot meet the demand for our products, our ability
to gain a foothold in the market may be compromised, with consumers turning to
other products that are available in sufficient numbers.
If
we need to replace suppliers, our expenses could increase resulting in smaller
profit margins.
We
compete with other companies for the production capacity of our suppliers and
import quota capacity. Some of these competitors have greater financial and
other resources than we have, and thus may have an advantage in the competition
for production and import quota capacity. We cannot assure you that this
additional capacity will be available when required on terms that are acceptable
to us or similar to existing terms which we have with our suppliers, either from
a production standpoint or a financial standpoint. We enter into purchase order
commitments on an as-needed basis, specifying a time for delivery, method of
payment, design and quality specifications and other standard industry
provisions, but do not have long-term contracts with any suppliers. None of the
suppliers we use produces our products exclusively.
Should we
be forced to replace one or more of our suppliers, then we may experience an
adverse financial impact, or an adverse operational impact, such as being forced
to pay increased costs for such replacement manufacturing or delays upon
distribution and delivery of our products to our customers, which could cause us
to lose customers or lose revenues because of late shipments.
Our
trademark and other intellectual property rights may not be adequately protected
outside the United States, resulting in loss of revenue.
We
believe that our trademarks, whether licensed or owned by us, and other
proprietary rights are important to our success and our competitive position. In
the course of our international expansion, we may, however, experience conflict
with various third parties who acquire or claim ownership rights in certain
trademarks. We cannot assure that the actions we have taken to establish and
protect these trademarks and other proprietary rights will be adequate to
prevent imitation of our products by others or to prevent others from seeking to
block sales of our products as a violation of the trademarks and proprietary
rights of others. Also, we cannot assure you that others will not assert rights
in, or ownership of, trademarks and other proprietary rights of ours or that we
will be able to successfully resolve these types of conflicts to our
satisfaction. In addition, the laws of certain foreign countries may not protect
proprietary rights to the same extent as do the laws of the United
States.
Our
business is exposed to domestic and foreign currency fluctuations; negative
changes in exchange rates could result in greater costs.
We
generally purchase our products in U.S. dollars. However, we obtain most of our
products from overseas and the cost of these products may be affected by changes
in the value of the relevant currencies. Changes in currency exchange rates may
also affect the relative prices at which we and our foreign competitors sell
products in the same market, resulting in higher costs to us. We currently do
not hedge our exposure to changes in foreign currency exchange rates. We cannot
assure you that foreign currency fluctuations will not have a material adverse
impact on our financial condition and results of operations.
We
are highly dependent on our management and our business would be materially
adversely affected if any of our executives leave.
The
operations and financial success of our company are significantly dependent on
Paul S. Lipschutz, our Chief Executive Officer. We do not maintain key man life
insurance on Mr. Lipschutz. Also, should he become unable or
unwilling to continue to direct operations, we may lack the funds and financial
resources to replace departing management and we would be materially adversely
affected. Operations could be materially affected and under certain
circumstances, shareholders would lose their entire investment.
Risks Relating to Our Common
Stock:
If
we fail to remain current in our reporting requirements, we could be removed
from the OTC Bulletin Board which would limit the ability of broker-dealers to
sell our securities and the ability of stockholders to sell their securities in
the secondary market.
Companies
trading on the OTC Bulletin Board, such as us, must be reporting issuers under
Section 12 of the Securities Exchange Act of 1934, as amended, and must be
current in their reports under Section 13, in order to maintain price quotation
privileges on the OTC Bulletin Board. If we fail to remain current on our
reporting requirements, we could be removed from the OTC Bulletin Board. As a
result, the market liquidity for our securities could be severely adversely
affected by limiting the ability of broker-dealers to sell our securities and
the ability of stockholders to sell their securities in the secondary
market.
We have not paid dividends in the
past and do not expect to pay dividends in the future. Any return on investment
may be limited to the value of our common stock.
We have
never paid cash dividends on our common stock and do not anticipate paying cash
dividends in the foreseeable future. The payment of dividends on our common
stock will depend on earnings, financial condition and other business and
economic factors affecting it at such time as the board of directors may
consider relevant.
Efforts
to comply with recently enacted changes in securities laws and regulations will
increase our costs and require additional management resources, and we still may
fail to comply.
In
accordance with Section 404 of the Sarbanes-Oxley Act of 2002, the SEC adopted
rules which require public companies to include a report of management on our
internal controls over financial reporting in their annual reports on Form 10-K.
In addition, the public accounting firm auditing our financial statements must
attest to and report on our internal controls over financial reporting. While
the requirements of section 404(a) are applicable this year, the section 404(b)
requirements are not presently applicable to us, but we will become subject to
these requirements for the fiscal year ending June 30, 2010. When section 404(b)
regulations become applicable to us, and if we are unable to conclude that we
have effective internal controls over financial reporting or if our independent
auditors are unable to provide us with an unqualified report as to the
effectiveness of our internal controls over financial reporting as required by
Section 404 of the Sarbanes-Oxley Act of 2002, investors could lose confidence
in the reliability of our financial statements, which could result in a decrease
in the value of our securities. We have not yet begun a formal process to
document and test our internal controls over financial reporting (see Item 9A(T)
Controls and Procedures). Given the status of our efforts, coupled with the fact
that guidance from regulatory authorities in the area of internal controls
continues to evolve, substantial uncertainty exists regarding our ability to
comply by applicable deadlines.
Our
common stock is subject to the "Penny Stock" rules of the SEC and the trading
market in our securities is limited, which makes transactions in our stock
cumbersome and may reduce the value of an investment in our stock.
The SEC
has adopted Rule 15g-9 which establishes the definition of a "penny stock," for
the purposes relevant to us, as any equity security that has a market price of
less than $5.00 per share or with an exercise price of less than $5.00 per
share, subject to certain exceptions. For any transaction involving a penny
stock, unless exempt, the rules require:
·
|
that
a broker or dealer approve a person's account for transactions in penny
stocks; and
|
·
|
the
broker or dealer receive from the investor a written agreement to the
transaction, setting forth the identity and quantity of the penny stock to
be purchased.
|
In order
to approve a person's account for transactions in penny stocks, the broker or
dealer must:
·
|
obtain
financial information and investment experience objectives of the person;
and
|
·
|
make
a reasonable determination that the transactions in penny stocks are
suitable for that person and the person has sufficient knowledge and
experience in financial matters to be capable of evaluating the risks of
transactions in penny stocks.
|
The
broker or dealer must also deliver, prior to any transaction in a penny stock, a
disclosure schedule prescribed by the SEC relating to the penny stock market,
which, in highlight form:
·
|
sets
forth the basis on which the broker or dealer made the suitability
determination; and
|
·
|
that
the broker or dealer received a signed, written agreement from the
investor prior to the transaction.
|
Generally,
brokers may be less willing to execute transactions in securities subject to the
"penny stock" rules. This may make it more difficult for investors to dispose of
our common stock and cause a decline in the market value of our
stock.
Disclosure
also has to be made about the risks of investing in penny stocks in both public
offerings and in secondary trading and about the commissions payable to both the
broker-dealer and the registered representative, current quotations for the
securities and the rights and remedies available to an investor in cases of
fraud in penny stock transactions. Finally, monthly statements have to be sent
disclosing recent price information for the penny stock held in the account and
information on the limited market in penny stocks.
None.
ITEM
2. PROPERTIES
Our
executive office is located at 525 Plymouth Road, Suite 310, Plymouth Meeting,
PA 19462. The rent for the office space is $500 a month and we have a
month-to-month lease.
In June
2007, we opened a regional operations center at 1975 E Sunrise Boulevard, Fort
Lauderdale, Florida. We entered into a month-to-month lease for $543
per month. This facility accommodates our administrative, sales and
customer relations personnel.
In May 2009, we moved the manufacturing
and research and development operations to a 1,000 sq. ft, facility
in Margate, Florida. We entered into a month-to-month lease for $1,200 per
month.
We are
currently not a party to any material legal proceedings or claims.
None.
PART II
PRICE
RANGE OF COMMON STOCK
Our common stock is currently traded on
the NASDAQ Over-the-Counter Bulletin Board under the symbol “WPUR.” Prior to
January 2007, there was no trading market for our common stock. For the period
from January 1, 2007 to date, the following table sets forth the high and low
sale prices of our common stock as reported by the NASDAQ Over-the-Counter
Bulletin Board.
Period
|
|
High
|
|
Low
|
|
Fiscal
Year Ended June 30, 2009:
|
|
|
|
|
|
|
|
First
Quarter
|
|
$
|
0.140
|
|
$
|
0.020
|
|
Second
Quarter
|
|
|
0.039
|
|
|
0.004
|
|
Third
Quarter
|
|
|
0.025
|
|
|
0.004
|
|
Fourth
Quarter
|
|
|
0.020
|
|
|
0.010
|
|
Fiscal
Year Ended June 30, 2008:
|
|
|
|
|
|
|
|
First
Quarter
|
|
$
|
0.700
|
|
$
|
0.220
|
|
Second
Quarter
|
|
|
0.400
|
|
|
0.150
|
|
Third
Quarter
|
|
|
0.240
|
|
|
0.110
|
|
Fourth
Quarter
|
|
|
0.200
|
|
|
0.070
|
|
On
October 9, 2009, the closing sale price of our common stock, as reported by the
NASDAQ Over-the-Counter Bulletin Board, was $0.01 per share. On October 12,
2009, there were 175 holders of record of our common stock.
DIVIDEND
POLICY
We have
never paid any cash dividends on our common stock and do not anticipate paying
any cash dividends on our common stock in the foreseeable future. We intend to
retain future earnings to fund ongoing operations and future capital
requirements of our business. Any future determination to pay cash dividends
will be at the discretion of the Board and will be dependent upon our financial
condition, results of operations, capital requirements and such other factors as
the Board deems relevant.
RECENT
SALE OF UNREGISTERED SECURITIES AND EQUITY PURCHASES BY THE COMPANY
During
the quarter ended June 30, 2009, we issued 7,343,400 shares of our common stock
for consulting services totaling $105,864.
During
the quarter ended June 30, 2009, in separate transactions, we sold in private
placements 500,000 shares of our common stock at $.0024 per share for a total of
$1,200, 7,600,000 shares at $.005 per share for a total of $38,000, and
6,000,000 shares at $.0015 per share for a total of $9,000. The fair values of
the shares were determined based on the closing market price of the shares at
the date of the agreements.
Unless
otherwise noted in this section, with respect to the sale of unregistered
securities referenced above, all transactions were exempt from registration
pursuant to Section 4(2) of the Securities Act of 1933, as amended (the "1933
Act"), and Regulation D or Regulation S promulgated under the 1933 Act. In each
instance, the purchaser had access to sufficient information regarding WaterPure
International, Inc. so as to make an informed investment decision. More
specifically, we had a reasonable basis to believe that each purchaser was an
"accredited investor" as defined in Regulation D or Regulation S of the 1933 Act
and otherwise had the requisite sophistication to make an investment in our
securities.
Equity
Compensation Plan Information
We do not
have any equity compensation plans.
ITEM
6. SELECTED FINANCIAL DATA
Not required under Regulation S-K for
“smaller reporting companies.”
ITEM
7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
This
Management's Discussion and Analysis of Financial Condition and Results of
Operations includes a number of forward-looking statements that reflect
Management's current views with respect to future events and financial
performance. You can identify these statements by forward-looking words such as
“may,” “will,” “expect,” “anticipate,” “believe,” “estimate” and “continue,” or
similar words. Those statements include statements regarding the intent, belief
or current expectations of us and members of its management team as well as the
assumptions on which such statements are based. Prospective investors are
cautioned that any such forward-looking statements are not guarantees of future
performance and involve risk and uncertainties, and that actual results may
differ materially from those contemplated by such forward-looking
statements.
Readers
are urged to carefully review and consider the various disclosures made by us in
this report and in our other reports filed with the
SEC. Important factors currently known to
Management could cause actual results to
differ materially from those in
forward-looking statements. We undertake no obligation to update or
revise forward-looking statements to reflect changed assumptions, the occurrence
of unanticipated events or changes in the future operating results over time. We
believe that its assumptions are based upon reasonable data derived from and
known about our business and operations and the business and operations of the
Company. No assurances are made that actual results of operations or the results
of our future activities will not differ materially from its assumptions.
Factors that could cause differences include, but are not limited to, expected
market demand for the Company’s services, fluctuations in pricing for materials,
and competition.
General
We are a
developing stage company, currently selling our products through our
distribution and marketing programs, which consists of placing our product in
retail establishments and through distributors. In December 2007, we entered
into agreements with Everest Water Ltd. for the manufacturing and marketing
rights to advanced models of our product. Our primary focus will be on
strengthening the defined sales channels and supporting them with meaningful
marketing programs to the extent that funds are available. We have sold our
first units and have generated minimal revenues from operations.
Our
current burn rate of available capital is currently unable to support operations
for the next 12 months. This consists of approximately $2,000,000 for
manufacturing, accounting, legal, technical support, web maintenance and service
equipment, travel, telephone and office supplies. An additional $100,000 would
be utilized for the production and execution of our marketing support program.
We are currently working on raising enough capital to cover these
expenditures.
Our plan
of operations for the next 12 months will be the continued development of our
distribution and marketing channels in our selected launch markets and the
continued expansion of our product line to afford us a larger market into which
we may sell product. We plan to conduct additional product research and
development through manufacturing partnerships so we do not intend to purchase
any additional significant equipment at this time. In addition, we do not expect
a significant change in the number of employees.
Results
of Operations
For
the Fiscal Year ended June 30, 2009 Compared to the Fiscal Year ended June 30,
2008
Revenue
and Net Loss
Revenue
for the year ended June 30, 2009 was $120,372, an increase of $54,372 or 82.4%
from approximately $66,000 for the comparable period in 2008 and we incurred a
net loss of approximately $1.42 million for the year ended June 30, 2009 as
compared to a net loss of approximately $2.29 million for the year ended June
30, 2008. The increase in revenue for the year was primarily attributable to
strategic planning, having capital to manufacture AWGs and developing
revenue-generating opportunities. The decrease in loss is directly attributable
to a decrease in general and administrative expenses.
Cost
of Goods Sold
Cost of
goods sold consists of direct costs on contracts, materials, direct labor, third
party subcontractor services, union benefits and other overhead
costs. Our cost of revenue was approximately $90,500 or 75.2% of
revenue for the year ended June 30, 2009, compared to $68,000 or 103% for the
prior year. The decrease is due to higher sales volume and better
cost controls on the parts for our machines.
General
and Administrative Expenses
General
and administrative expenses for the year ended June 30, 2009 were $1,256,707, a
decrease of $950,795 compared to $2,207,502 for the comparable period in 2008.
The
overall decrease resulted from decreases of $257,937 in officer compensation
($657,937 for the year ended June 30, 2008 compared to $400,000 for the year
ended June 30, 2009), $445,063 in stock compensation to others ($892,101 for the
year ended June 30, 2008 compared to $447,038 for the year ended June 30, 2009),
$118,369 in professional expenses ($290,217 for the year ended June 30, 2008
compared to $171,848 for the year ended June 30, 2009), $44,058 in meals and
entertainment expense ($54,664 for the year ended June 30, 2008 compared to
$10,606 for the year ended June 30, 2009), $24,829 in rent expense ($39,008 for
the year ended June 30, 2008 compared to $14,179 for the year ended June 30,
2009), $49,360 in travel expense ($64,452 for the year ended June 30, 2008
compared to $15,092 for the year ended June 30, 2009) and $11,179 in other
expenses.
Interest
Expense
There was
$13,417 in interest expense for the year ended June 30, 2009 compared to $10,275
for the year ended June 30, 2008. The increase is due to increase of interest
bearing debt. The short-term loans from shareholders and officers carry no
interest.
Income
Tax Expenses
We have
incurred only losses to date and therefore have no income tax
expense.
Liquidity
and Capital Resources
To date,
we have generated minimal revenues and have incurred operating losses in every
quarter. We are a development stage company, have not generated significant
revenues from operations and have incurred significant losses since inception.
These factors among others raise substantial doubt about our ability to continue
as a going concern.
As of
June 30, 2009, we had a working capital deficiency of $927,551. For the twelve
months ended June 30, 2009, we had net cash outflow from operating activities of
$237,302. Cash provided by financing activities totaled $231,881 for the twelve
months ended June 30, 2009.
We expect
significant capital expenditures during the next 12 months for manufacturing
products, license payments and plant expansion. We are currently seeking joint
venture partners and equity financing to fund these expenditures, although we do
not have any contracts or commitments for either at this time. We will have to
raise additional funds to continue manufacturing our AWGs and, while we have
been successful in doing so in the past, there can be no assurance that we will
be able to do so in the future. Our continuation as a going concern for a period
longer than the current fiscal year is dependent upon our ability to obtain
necessary additional funds to continue operations and the attainment of
profitable operations.
By
adjusting our operations to the level of capitalization, and through short term
loans from officers we believe we will have sufficient capital resources to meet
projected cash flow deficits in the near term. However, if during that period,
or thereafter, we are not successful in generating sufficient liquidity from
operations or in raising sufficient capital resources, on terms acceptable to
us, this could have a material adverse effect on our business, results of
operations, liquidity and financial condition.
We
presently do not have any available credit, bank financing or other external
sources of liquidity. Due to our brief history and historical operating losses,
our operations have not been a source of liquidity. We will need to obtain
additional capital in order to expand operations and become profitable. In order
to obtain capital, we may need to sell additional shares of our common stock or
borrow funds from private lenders. There can be no assurance that we will be
successful in obtaining additional funding.
We will
still need additional capital in order to continue operations until we are able
to achieve positive operating cash flow. Additional capital is being sought, but
we cannot guarantee that we will be able to obtain such investments. Financing
transactions may include the issuance of equity or debt securities, obtaining
credit facilities, or other financing mechanisms. However, the trading price of
our common stock and a downturn in the U.S. stock and debt markets could make it
more difficult to obtain financing through the issuance of equity or debt
securities. Even if we are able to raise the funds required, it is possible that
we could incur unexpected costs and expenses, fail to collect significant
amounts owed to us, or experience unexpected cash requirements that would force
us to seek alternative financing. Furthermore, if we issue additional equity or
debt securities, stockholders may experience additional dilution or the new
equity securities may have rights, preferences or privileges senior to those of
existing holders of our common stock. If additional financing is not available
or is not available on acceptable terms, we will have to curtail our
operations.
Contractual
Obligations and Off-Balance Sheet Arrangements.
We have
certain fixed contractual obligations and commitments that include future
estimated payments. Changes in our business needs, cancellation provisions,
changing interest rates, and other factors may result in actual payments
differing from the estimates. We cannot provide certainty regarding the timing
and amounts of payments.
Critical
Accounting Policies
Our
financial statements are prepared based on the application of accounting
principles generally accepted in the United States of America. These accounting
principles require us to exercise significant judgment about future events that
affect the amounts reported throughout our financial statements. Actual
events could unfold quite differently than our previous judgments had
predicted. Therefore the estimates and assumptions inherent in the
financial statements included in this report could be materially different once
those actual events are known. We believe the following policies may
involve a higher degree of judgment and complexity in their application and
represent critical accounting policies used in the preparation of our financial
statements. If different assumptions or estimates were used, our financial
statements could be materially different from those included in this
report.
Revenue
Recognition
We
recognize revenues in accordance with Staff Accounting Bulletin 104, “Revenue Recognition in Financial
Statements” (SAB 104). We sell atmospheric water generators. Revenue
from such product sales is recognized when persuasive evidence of an arrangement
exists, delivery has occurred, the fee is fixed or determinable and
collectibility is probable. At this time the earnings process is
complete and the risks and rewards of ownership have transferred to the
customer, which is generally when the goods are shipped and all our significant
obligations have been satisfied.
Accounts
Receivable
We must
make judgments about the collectibility of our accounts receivable to be able to
present them at their net realizable value on the balance sheet. To
do this, we carefully analyze the aging of our customer accounts, try to
understand why accounts have not been paid, and review historical bad debt
problems. From this analysis, we record an estimated allowance for
receivables that we believe will ultimately become uncollectible. As
of June 30, 2009, we had an allowance for bad debts of $22,759. We actively
manage our accounts receivable to minimize our credit risks and believe that our
current allowance for doubtful accounts is fairly stated.
Reliability
of Inventory Values
We make
judgments about the ultimate realizability of our inventory in order to record
our inventory at its lower of cost or market. These judgments involve
reviewing current demand for our products in comparison to present inventory
levels and reviewing inventory costs compared to current market
values.
Recent
Accounting Pronouncements
In May 2009, the FASB issued SFAS 165,
"Subsequent
Events", ("SFAS 165"), which establishes general standards for
accounting for and disclosure of events that occur after the balance sheet date
but before financial statement are issued or available to be issued. In
particular, SFAS 165 sets forth the period after the balance sheet date
during which management of a reporting entity should evaluate events or
transactions that may occur for potential recognition or disclosure in the
financial statements; the circumstances under which an entity should
recognize events or transactions occurring after the balance sheet
date in its financial statements' and the disclosures that an
entity should make about events or transactions
that occurred after the balance sheet date. It is effective
for interim and annual periods ending after June 15, 2009.
Not required under Regulation S-K for
“smaller reporting companies.”
ITEM
8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
WATERPURE
INTERNATIONAL, INC.
|
|
Page
|
|
REPORT
OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
|
|
F-1
|
|
FINANCIAL
STATEMENTS
|
|
|
|
Balance
Sheets
|
|
F-2
|
|
Statements
of Operations
|
|
F-3
|
|
Statement
of Changes in Stockholders’ Equity (Deficiency)
|
|
F-4
|
|
Statements
of Cash Flows
|
|
F-6
|
|
Notes
to Financial Statements
|
|
F-7
to F-16
|
|
To the
Stockholders and Board of Directors of
WaterPure
International, Inc.
We have
audited the accompanying balance sheets of WaterPure International, Inc. (a
development stage company) (the “Company”) as of June 30, 2009 and June 30,
2008, and the related statements of operations, changes in stockholders’ equity
(deficiency) and cash flows for the years then ended and for the period from
inception (June 22, 2005) through June 30, 2009. These financial statements are
the responsibility of the Company’s management. Our responsibility is to express
an opinion on these financial statements based on our audits.
We
conducted our audits in accordance with the standards of the Public Company
Accounting Oversight Board (United States). Those standards require that we plan
and perform the audits to obtain reasonable assurance about whether the
financial statements are free of material misstatement. The Company is not
required to have, nor were we engaged to perform, an audit of its internal
control over financial reporting. Our audits included consideration of internal
control over financial reporting as a basis for designing audit procedures that
are appropriate in the circumstances, 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. An audit includes examining,
on a test basis, evidence supporting the amounts and disclosures in the
financial statements, assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our
opinion, the financial statements referred to above present fairly, in all
material respects, the financial position of WaterPure International, Inc. as of
June 30, 2009 and 2008, and the results of its operations and its cash flows for
the years then ended and for the period from inception (June 22, 2005) through
June 30, 2009, in conformity with accounting principles generally accepted in
the United States of America.
The
accompanying financial statements have been prepared assuming that the Company
will continue as a going concern. As shown in the accompanying
financial statements, the Company has incurred a net loss since its inception
totaling approximately $4.89 million, has earned minimal revenues and has a
working capital deficiency as of June 30, 2009. These factors raise substantial
doubt about the Company’s ability to continue as a going concern. Management’s
plans in regards to these matters are also described in Note 2. These
financial statements do not include any adjustments that might result from the
outcome of this uncertainty.
/s/ CCR,
LLP
Glastonbury,
Connecticut
October
12, 2009
WATERPURE
INTERNATIONAL, INC.
(A
DEVELOPMENT STAGE COMPANY)
BALANCE
SHEETS
JUNE
30, 2009 AND 2008
|
|
|
|
|
|
|
|
|
2009
|
|
|
2008
|
|
|
|
|
|
|
|
|
ASSETS
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash
|
|
$ |
- |
|
|
$ |
5,421 |
|
Accounts
receivable - net of allowance ($22,759 at June 30, 2009 and $2,762 at June
30, 2008)
|
|
|
- |
|
|
|
- |
|
Inventories
|
|
|
15,960 |
|
|
|
87,957 |
|
|
|
|
|
|
|
|
|
|
Total
current assets
|
|
|
15,960 |
|
|
|
93,378 |
|
|
|
|
|
|
|
|
|
|
Trademark
|
|
|
325 |
|
|
|
325 |
|
Intangible
asset - license, net of accumulated amortization
|
|
|
992,221 |
|
|
|
1,056,785 |
|
|
|
|
|
|
|
|
|
|
Total
assets
|
|
$ |
1,008,506 |
|
|
$ |
1,150,488 |
|
|
|
|
|
|
|
|
|
|
LIABILITIES
AND STOCKHOLDERS' EQUITY (DEFICIENCY)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
CURRENT
LIABILITIES
|
|
|
|
|
|
|
|
|
Accounts
payable
|
|
$ |
120,888 |
|
|
$ |
122,641 |
|
Accrued
expenses
|
|
|
282,532 |
|
|
|
133,921 |
|
Accrued
royalties payable - current
|
|
|
50,000 |
|
|
|
- |
|
Licensing
fees - current
|
|
|
167,000 |
|
|
|
230,000 |
|
Deferred
revenue - current
|
|
|
1,800 |
|
|
|
- |
|
Notes
payable
|
|
|
25,000 |
|
|
|
25,000 |
|
Convertible
debt
|
|
|
105,938 |
|
|
|
50,000 |
|
Due
to officers
|
|
|
103,229 |
|
|
|
98,053 |
|
Due
to stockholders
|
|
|
87,124 |
|
|
|
105,169 |
|
|
|
|
|
|
|
|
|
|
Total
current liabilities
|
|
|
943,511 |
|
|
|
764,784 |
|
|
|
|
|
|
|
|
|
|
Accrued
royalties payable - non current
|
|
|
735,053 |
|
|
|
496,373 |
|
Licensing
fees - non current
|
|
|
185,983 |
|
|
|
- |
|
Deferred
revenue - non current
|
|
|
98,400 |
|
|
|
- |
|
|
|
|
|
|
|
|
|
|
Total
Liabilities
|
|
|
1,962,947 |
|
|
|
1,261,157 |
|
|
|
|
|
|
|
|
|
|
STOCKHOLDERS'
EQUITY (DEFICIENCY)
|
|
|
|
|
|
|
|
|
Common
stock, par value $.0001 per share; 250,000,000 authorized
|
|
|
9,242 |
|
|
|
3,147 |
|
Common
stock to be issued
|
|
|
2,500 |
|
|
|
355,000 |
|
Additional
paid in capital
|
|
|
3,924,174 |
|
|
|
2,998,146 |
|
Accumulated
deficit
|
|
|
(4,890,357 |
) |
|
|
(3,466,962 |
) |
|
|
|
|
|
|
|
|
|
Total
stockholders' deficiency
|
|
|
(954,441 |
) |
|
|
(110,669 |
) |
|
|
|
|
|
|
|
|
|
Total
liabilities and stockholders' deficiency
|
|
$ |
1,008,506 |
|
|
$ |
1,150,488 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The
accompanying notes are an integral part of these financial
statements.
WATERPURE
INTERNATIONAL, INC.
(A
DEVELOPMENT STAGE COMPANY)
STATEMENTS
OF OPERATIONS
FOR
THE FISCAL YEARS ENDED JUNE 30, 2009 AND JUNE 30, 2008 AND FOR THE
PERIOD
FROM JULY 22, 2005 (INCEPTION)
THROUGH JUNE 30, 2009
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
July
22,2005
|
|
|
|
Year
|
|
|
Year
|
|
|
(inception)
|
|
|
|
ended
|
|
|
ended
|
|
|
through
|
|
|
|
June
30, 2009
|
|
|
June
30, 2008
|
|
|
June
30, 2009
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
REVENUES
|
|
$ |
120,372 |
|
|
$ |
65,651 |
|
|
$ |
192,302 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
COST
OF GOODS SOLD
|
|
|
90,478 |
|
|
|
67,656 |
|
|
|
161,545 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gross
profit/(loss)
|
|
$ |
29,894 |
|
|
$ |
(2,005 |
) |
|
$ |
30,757 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
EXPENSES
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
General
and administrative expenses
|
|
|
1,256,707 |
|
|
|
2,207,502 |
|
|
|
4,624,604 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
LOSS
FROM OPERATIONS
|
|
|
(1,226,813 |
) |
|
|
(2,209,507 |
) |
|
|
(4,593,847 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest
expense
|
|
|
13,417 |
|
|
|
10,275 |
|
|
|
43,757 |
|
Accretion
of accrued royalties and licensing fees
|
|
|
100,163 |
|
|
|
31,509 |
|
|
|
131,672 |
|
Amortization
expense
|
|
|
83,002 |
|
|
|
38,079 |
|
|
|
121,081 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loss
before provision for income taxes
|
|
|
(1,423,395 |
) |
|
|
(2,289,370 |
) |
|
|
(4,890,357 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
Provision
for income taxes
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
loss
|
|
$ |
(1,423,395 |
) |
|
$ |
(2,289,370 |
) |
|
$ |
(4,890,357 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
loss per share basic and diluted
|
|
$ |
(0.03 |
) |
|
$ |
(0.09 |
) |
|
$ |
(0.16 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted
average per common share
|
|
|
54,972,043 |
|
|
|
24,125,379 |
|
|
|
31,381,235 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The
accompanying notes are an integral part of these financial
statements.
WATERPURE
INTERNATIONAL, INC.
(A
DEVELOPMENT STAGE COMPANY)
STATEMENT
OF CHANGES IN STOCKHOLDERS’ EQUITY(DEFICIENCY)
FOR THE PERIOD FROM JULY 22, 2005
(INCEPTION) THROUGH JUNE, 2009
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Common
stock-to-be-issued
|
|
|
Common
stock issued and outstanding
|
|
|
Additonal
paid-in-capital
|
|
|
Deficit
accumulated during the development stage
|
|
|
Total
stockholders' equity (deficiency)
|
|
|
|
Shares
|
|
|
Amount
|
|
|
Shares
|
|
|
Amount
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance
July 22, 2005 (inception)
|
|
|
- |
|
|
$ |
- |
|
|
|
- |
|
|
$ |
- |
|
|
$ |
- |
|
|
$ |
- |
|
|
$ |
- |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Common
stock to be issued in connection with Incorporation (July 22,
2005)
|
|
|
4,000,000 |
|
|
|
10,000 |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
10,000 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Common
stock to be issued for consulting services
|
|
|
16,150,000 |
|
|
|
40,375 |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
40,375 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Common
stock issued - private placement, net of issuance costs of
$58,255
|
|
|
461,750 |
|
|
|
126,445 |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
126,445 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
loss
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
(64,361 |
) |
|
|
(64,361 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance
June 30, 2006
|
|
|
20,611,750 |
|
|
|
176,820 |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
(64,361 |
) |
|
|
112,459 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Issuance
of shares
|
|
|
(20,611,750 |
) |
|
|
(176,820 |
) |
|
|
20,611,750 |
|
|
|
2,061 |
|
|
|
174,759 |
|
|
|
- |
|
|
|
- |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Beneficial
conversion of loan discount
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
18,750 |
|
|
|
- |
|
|
|
18,750 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Common
stock issued for consulting services
|
|
|
- |
|
|
|
- |
|
|
|
660,000 |
|
|
|
66 |
|
|
|
622,334 |
|
|
|
- |
|
|
|
622,400 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Issuance
of options for compensation
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
231,300 |
|
|
|
- |
|
|
|
231,300 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
loss
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
(1,113,231 |
) |
|
|
(1,113,231 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance
June 30, 2007
|
|
|
- |
|
|
|
- |
|
|
|
21,271,750 |
|
|
|
2,127 |
|
|
|
1,047,143 |
|
|
|
(1,177,592 |
) |
|
|
(128,322 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Common
stock to be issued
|
|
|
1,750,000 |
|
|
|
355,000 |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
355,000 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Issuance
of shares
|
|
|
- |
|
|
|
- |
|
|
|
4,330,000 |
|
|
|
433 |
|
|
|
468,567 |
|
|
|
- |
|
|
|
469,000 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Issuance
of shares as repayment of amount due to stockholders
|
|
|
- |
|
|
|
- |
|
|
|
467,626 |
|
|
|
47 |
|
|
|
70,097 |
|
|
|
- |
|
|
|
70,144 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Common
stock issued for consulting services
|
|
|
- |
|
|
|
- |
|
|
|
5,277,500 |
|
|
|
528 |
|
|
|
829,101 |
|
|
|
- |
|
|
|
829,629 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Issuance
of options for compensation
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
582,937 |
|
|
|
- |
|
|
|
582,937 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Exercise
of options
|
|
|
- |
|
|
|
- |
|
|
|
125,000 |
|
|
|
12 |
|
|
|
301 |
|
|
|
- |
|
|
|
313 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
loss
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
(2,289,370 |
) |
|
|
(2,289,370 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance
June 30, 2008
|
|
|
1,750,000 |
|
|
$ |
355,000 |
|
|
|
31,471,876 |
|
|
$ |
3,147 |
|
|
$ |
2,998,146 |
|
|
$ |
(3,466,962 |
) |
|
$ |
(110,669 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The accompanying notes are an
integral part of these financial statements.
WATERPURE
INTERNATIONAL, INC.
(A
DEVELOPMENT STAGE COMPANY)
STATEMENT
OF CHANGES IN STOCKHOLDERS’ EQUITY(DEFICIENCY)
FOR THE PERIOD FROM
JULY 22, 2005 (INCEPTION) THROUGH JUNE 30, 2009
(continued)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Common
stock to-be-issued
|
|
|
Common
stock issued and outstanding
|
|
|
Additonal
paid-in-capital
|
|
|
Deficit
accumulated during the development stage
|
|
|
Total
stockholders' equity (deficiency)
|
|
|
|
Shares
|
|
|
Amount
|
|
|
Shares
|
|
|
Amount
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cancellation
of common stock to-be-issued
|
|
|
(1,500,000 |
) |
|
|
(330,000 |
) |
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
(330,000 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Issuance
of shares
|
|
|
(250,000 |
) |
|
|
(25,000 |
) |
|
|
20,849,999 |
|
|
|
2,085 |
|
|
|
113,615 |
|
|
|
- |
|
|
|
90,700 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Issuance
of shares as repayment of amount due to officers
|
|
|
- |
|
|
|
- |
|
|
|
1,000,000 |
|
|
|
100 |
|
|
|
49,900 |
|
|
|
- |
|
|
|
50,000 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Issuance
of shares as repayment of amount due to stockholders
|
|
|
- |
|
|
|
- |
|
|
|
666,111 |
|
|
|
67 |
|
|
|
41,483 |
|
|
|
- |
|
|
|
41,550 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Beneficial
conversion of loan discount
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
22,500 |
|
|
|
- |
|
|
|
22,500 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Common
stock issued for consulting services
|
|
|
- |
|
|
|
- |
|
|
|
38,436,000 |
|
|
|
3,843 |
|
|
|
697,038 |
|
|
|
- |
|
|
|
700,881 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Issuance
of options as compensation
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
1,492 |
|
|
|
- |
|
|
|
1,492 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Common
stock to-be-issued
|
|
|
500,000 |
|
|
|
2,500 |
|
|
|
- |
|
|
|
- |
|
|
|
|
|
|
|
- |
|
|
|
2,500 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
loss
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
(1,423,395 |
) |
|
|
(1,423,395 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance
June 30, 2009
|
|
|
500,000 |
|
|
$ |
2,500 |
|
|
|
92,423,986 |
|
|
$ |
9,242 |
|
|
$ |
3,924,174 |
|
|
$ |
(4,890,357 |
) |
|
$ |
(954,441 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The accompanying notes are an
integral part of these financial statements.
WATERPURE
INTERNATIONAL, INC.
(A
DEVELOPMENT STAGE COMPANY)
STATEMENTS
OF CASH FLOWS
FOR
THE FISCAL YEARS ENDED JUNE 30, 2009 AND JUNE 30, 2008 AND FOR
THE
PERIOD
FROM JULY 22, 2005 (INCEPTION) THROUGH JUNE 30, 2009
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
July
22, 2005
|
|
|
|
Year
|
|
|
Year
|
|
|
(inception)
|
|
|
|
ended
|
|
|
ended
|
|
|
through
|
|
|
|
June
30,
|
|
|
June
30,
|
|
|
June
30,
|
|
|
|
2009
|
|
|
2008
|
|
|
2009
|
|
CASH
FLOWS FROM OPERATING ACTIVITIES:
|
|
|
|
|
|
|
|
|
|
Net
loss
|
|
$ |
(1,423,395 |
) |
|
$ |
(2,289,370 |
) |
|
$ |
(4,890,357 |
) |
Adjustments
to reconcile net loss to net cash used in operating
|
|
|
|
|
|
|
|
|
|
|
|
|
activities:
|
|
|
|
|
|
|
|
|
|
|
|
|
Accretion
of accrued royalties
|
|
|
100,163 |
|
|
|
31,509 |
|
|
|
131,672 |
|
Amortization
of intangible asset - license
|
|
|
64,564 |
|
|
|
38,079 |
|
|
|
102,643 |
|
Common
stock issued for consulting services
|
|
|
700,881 |
|
|
|
829,629 |
|
|
|
2,193,285 |
|
Issuance
of stock options - employees
|
|
|
1,492 |
|
|
|
582,937 |
|
|
|
815,729 |
|
Amortization
of beneficial conversion discount
|
|
|
18,438 |
|
|
|
- |
|
|
|
37,188 |
|
Changes
in operating assets and liabilities
|
|
|
|
|
|
|
|
|
|
|
|
|
(Increase)/Decrease
in:
|
|
|
|
|
|
|
|
|
|
|
|
|
Accounts
receivable
|
|
|
- |
|
|
|
6,904 |
|
|
|
- |
|
Other
receivables
|
|
|
- |
|
|
|
7,000 |
|
|
|
- |
|
Inventories
|
|
|
71,997 |
|
|
|
(24,315 |
) |
|
|
(15,960 |
) |
Other
current assets
|
|
|
- |
|
|
|
7,035 |
|
|
|
- |
|
Security
deposits
|
|
|
- |
|
|
|
200 |
|
|
|
- |
|
Increase/(Decrease)
in:
|
|
|
|
|
|
|
|
|
|
|
|
|
Accounts
payable and accrued expenses
|
|
|
153,858 |
|
|
|
212,939 |
|
|
|
403,420 |
|
Accrued
royalties and licensing fee payable
|
|
|
(25,500 |
) |
|
|
(63,000 |
) |
|
|
(88,500 |
) |
Deferred
revenue
|
|
|
100,200 |
|
|
|
- |
|
|
|
100,200 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
cash used in operating activities
|
|
|
(237,302 |
) |
|
|
(660,453 |
) |
|
|
(1,210,680 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
CASH
FLOWS FROM INVESTING ACTIVITIES:
|
|
|
|
|
|
|
|
|
|
|
|
|
Trademark
|
|
|
- |
|
|
|
- |
|
|
|
(325 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
cash used in investing activities
|
|
|
- |
|
|
|
- |
|
|
|
(325 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
CASH
FLOWS FROM FINANCING ACTIVITIES:
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
proceeds from private placement
|
|
|
- |
|
|
|
- |
|
|
|
126,445 |
|
Proceeds
from sale of founders shares
|
|
|
- |
|
|
|
- |
|
|
|
10,000 |
|
Net
proceeds from sale of stock and exercise of stock options
|
|
|
93,200 |
|
|
|
494,313 |
|
|
|
587,513 |
|
Proceeds
from notes payable
|
|
|
- |
|
|
|
- |
|
|
|
50,000 |
|
Repayment
of notes payable
|
|
|
- |
|
|
|
(25,000 |
) |
|
|
(25,000 |
) |
Advances
from officers
|
|
|
55,176 |
|
|
|
84,680 |
|
|
|
153,229 |
|
Advances
from stockholders
|
|
|
23,505 |
|
|
|
100,963 |
|
|
|
198,818 |
|
Proceeds
from convertible debt
|
|
|
60,000 |
|
|
|
- |
|
|
|
110,000 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
cash provided by financing activities
|
|
|
231,881 |
|
|
|
654,956 |
|
|
|
1,211,005 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
NET
DECREASE IN CASH
|
|
|
(5,421 |
) |
|
|
(5,497 |
) |
|
|
- |
|
CASH,
beginning of period
|
|
|
5,421 |
|
|
|
10,918 |
|
|
|
- |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
CASH,
end of period
|
|
$ |
- |
|
|
$ |
5,421 |
|
|
$ |
- |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Supplemental
disclosures of cash flow
information:
|
1) The Company issued 1,666,111
shares of common stock valued at $91,550 as repayment of amounts due to
stockholders and officers as described in Note 6
2) The Company issued 100,000
shares of common stock valued at $7,000 as repayment of accounts
payable.
3) The Company recorded a
liability of $340,217 for amounts owed as a licensing fee for the license
acquisition as described in Note 4
4) The Company recorded accrued
royalties payable of $767,651, which represents the present value of the
guaranteed minimum payments for the license acquisition as described in Note
4.
5) The Company cancelled
1,500,000 shares of common stock valued at 330,000 as a result of the
modification of payment terms related to the license acquisition described in
Note 4.
The accompanying notes are an
integral part of these financial statements
WATERPURE
INTERNATIONAL, INC.
(A
DEVELOPMENT STAGE COMPANY)
NOTES
TO FINANCIAL STATEMENTS
NOTE
1 - NATURE OF OPERATIONS
NATURE
OF OPERATIONS
WaterPure
International, Inc. (a development stage company) (the “Company”) was
incorporated in the state of Florida on July 22, 2005, for the purpose of
marketing selected private label products and services to the small office
and/or home office as well as the consumer markets. The Company intends to
market and eventually to manufacture the licensed Atmospheric Water Generators
from Everest Water Ltd, devices that harvest pure drinking water from ambient
air. These machines are engineered to produce drinking water virtually free of
any material, bacterial, organic or other contaminants. The Company also intends
to market mineral additives that will permit addition of organic minerals,
flavors and other desired additives to water produced by the machine. The
Atmospheric Water Generators will bear its own exclusive WaterPure
branding.
NOTE
2 - GOING CONCERN/MANAGEMENT’S PLAN
The
accompanying financial statements have been prepared assuming that the Company
will continue as a going concern, which contemplates the realization of assets
and the settlement of liabilities and commitments in the normal course of
business. The Company has incurred a net loss since its inception totaling
$4,890,357, has earned minimal revenues and has a working capital deficiency as
of June 30, 2009. These matters raise substantial doubt about the Company’s
ability to continue as a going concern. These financial statements do not
include adjustments that might result from the outcome of this
uncertainty.
In
order to generate revenues and the working capital needed to continue and expand
operations, the Company’s management has committed to a plan for increasing
retail distribution channels for its products and raising additional capital.
There can be no assurances, however, that the Company will be able to obtain the
necessary funding to finance their operations or grow revenue in sufficient
amounts to fund their operations.
NOTE
3 - SIGNIFICANT ACCOUNTING POLICIES
DEVELOPMENT
STAGE COMPANY
The
Company is considered a development stage company as defined by Statement of
Financial Accounting Standards (SFAS) No. 7, as it has no principal operations
and/or minimal revenues from any source. Operations from the Company’s inception
through June 30, 2009 were devoted primarily to strategic planning, raising
capital and developing revenue-generating opportunities.
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 and disclosures in
the financial statements. Actual results could differ from those
estimates.
CASH
AND CASH EQUIVALENTS
The
Company considers financial instruments with a maturity date of three months or
less from the date of purchase to be cash equivalents. The Company had no cash
equivalents at June 30, 2009 and 2008.
The
Company makes judgments about the collectability of accounts receivable to be
able to present them at their net realizable value on the balance sheet.
Such judgments require careful analysis of the aging of customer accounts,
consideration of why accounts have not been paid, and review of historical bad
debt issues. From this analysis, the Company determines an estimated
allowance for receivables that will ultimately become uncollectible. As of
June 30, 2009 and 2008, the Company had an allowance for bad debts of $22,759
and $2,762, respectively.
WATERPURE
INTERNATIONAL, INC.
(A
DEVELOPMENT STAGE COMPANY)
NOTES
TO FINANCIAL STATEMENTS
NOTE
3 - SIGNIFICANT ACCOUNTING POLICIES (continued)
INVENTORIES
The
Company states inventories at the lower of cost or market. As of June 30,
2009 and 2008, inventories consisted of purchased finished goods plus directly
attributable acquisition costs. Cost of inventory is determined using the
weighted average cost method. The Company assesses the need to establish
inventory reserves for excess, obsolete or slow-moving inventory based on
changes in customer demand, technology developments and other
factors.
LONG-LIVED
ASSETS AND OTHER INTANGIBLE ASSETS
The
Company accounts for its long-lived assets in accordance with Statement of
Financial Accounting Standards (“SFAS”) No. 142, “Goodwill and Other Intangible
Assets”, which requires that intangible assets with finite lives be amortized
over their respective estimated lives and No. 144, “Accounting for the Impairment of
Long-lived Assets and for Long-lived Assets to be Disposed of,” which
requires that long-lived assets and certain intangible assets be reviewed for
impairment whenever events or changes in circumstances indicate that the
carrying amount may not be recoverable. If undiscounted expected future
cash flows are less than the carrying value of the assets, an impairment loss is
to be recognized based on the fair value of the assets.
CONVERTIBLE
DEBT
The
Company accounts for its convertible debt in accordance with the provisions of
Emerging Issues Task Force Issue (“EITF”) 98-5 “Accounting for Convertible
Securities with Beneficial Conversion Features,” (“EITF 98-5”) and EITF
00-27 “Application of EITF
98-5 to Certain Convertible Instruments,” which require the embedded
beneficial conversion features present in convertible securities be valued
separately at issuance and should be recognized and measured by allocating a
portion of the proceeds equal to the intrinsic value of that feature to
additional paid-in capital.
REVENUE
RECOGNITION
The
Company recognizes revenue in accordance with Securities and Exchange Commission
(“SEC”) Staff Accounting Bulletin (“SAB”) No. 104, “Revenue Recognition,” which
outlines the four basic criteria that must be met before revenue can be
recognized: (1) persuasive evidence of an arrangement exists; (2) delivery has
occurred or services have been rendered; (3) the fee is fixed or determinable;
and (4) collectibility is reasonably assured. Determination of criteria
(3) and (4) are based on management’s judgments regarding the fixed nature of
the fee charged for services rendered and products delivered and the
collectibility of those fees.
The
Company has entered into a number of Master Distributorship Agreements with
third-parties where by the third-party will market and sell WaterPure branded
machines to customers and resellers. The distributors have entered into a
purchase commitment for 2,050 units and have deposited $101,800, which the
Company will apply in $50 increments towards each WaterPure atmospheric water
machine sold and delivered within twenty-four month of the execution of the
agreement. The Company has recorded the deposit as deferred revenue, and
recognizes the revenue as each machine is sold.
SHIPPING
& HANDLING COSTS
Outbound
shipping and handling costs are included in cost of goods sold in the
accompanying statements of income. These cost were $5,740 and $21,602 for the
years ended June 30, 2009 and 2008, respectively.
WATERPURE
INTERNATIONAL, INC.
(A
DEVELOPMENT STAGE COMPANY)
NOTES
TO FINANCIAL STATEMENTS
NOTE
3 - SIGNIFICANT ACCOUNTING POLICIES (continued)
INCOME
TAXES
The
Company recognizes deferred tax liabilities and assets for the expected future
tax consequences of events that have been included in the financial statements
or tax returns. Deferred tax liabilities and assets are determined based on the
differences between the financial statement and tax bases of assets and
liabilities using enacted tax rates in effect for the year in which the
differences are expected to reverse. Differences between the financial statement
and tax bases of assets, liabilities, and other transactions did not result in a
provision for current or deferred income taxes for the periods from July 22,
2005 (inception) through June 30, 2009.
CONCENTRATIONS
OF CREDIT RISK
The
Company’s financial instruments that are exposed to a concentration of credit
risk are cash and accounts receivable. The Company places its cash with a high
credit quality institution. At June 30, 2009, the Company’s cash balance on
deposit did not exceed federal depository insurance limits. The Company
routinely assesses the financial strengths of its customers and, as a result,
believes that their accounts receivable, net of reserves, credit risk exposure
is limited.
FAIR
VALUE OF FINANCIAL INSTRUMENTS
The
Company has partially implemented SFAS No. 157, “Fair Value Measurements” for
financial assets and financial liabilities. SFAS No. 157 defines fair value,
establishes a framework for measuring fair value, expands disclosure about fair
value measurements and is effective for fiscal years beginning after November
15, 2007, except as it relates to nonrecurring fair value measurements of
nonfinancial assets and liabilities. This standard only applies when other
standards require or permit the fair value measurements of nonfinancial assets
and liabilities. It does not increase the use of fair value measurement. The
Company has determined that none of its financial assets or liabilities are
measured at fair value on a recurring basis, therefore the disclosures by SFAS
No. 157 do not currently apply.
NET
LOSS PER COMMON SHARE
The
Company presents “basic” earnings (loss) per share and, if applicable, “diluted”
earnings per share pursuant to the provisions of SFAS No. 128, Earnings per Share. Basic
earnings (loss) per share are calculated by dividing net income or loss by the
weighted average number of common shares outstanding during each
period.
STOCK
BASED COMPENSATION
The
Company accounts for equity instruments exchanged for services in accordance
with FAS No. 123(R),
“Share-Based Payment” and EITF 96-18 “Accounting for Equity Investments
That are Issued to Other than Employees for Acquiring or in Conjunction with
Selling Goods or Services.” Under the provisions of FAS No. 123(R), share-based
compensation issued to employees is measured at the grant date, based on the
fair value of the award, and is recognized as an expense over the requisite
service period (generally the vesting period of the grant). Share-based
compensation issued to non-employees is measured at grant date, based on the
fair value of the consideration received or the fair value of the equity
instruments issued, whichever is more readily measurable, and is recognized as
an expense over the requisite service period
WATERPURE
INTERNATIONAL, INC.
(A
DEVELOPMENT STAGE COMPANY)
NOTES
TO FINANCIAL STATEMENTS
NOTE
3 - SIGNIFICANT ACCOUNTING POLICIES (continued)
RECENT
ACCOUNTING PRONOUNCEMENTS
In May
2009, the FASB issued SFAS 165, "Subsequent
Events" ("SFAS 165"), which
establishes general standards for accounting for and disclosure
of events that occur after the balance sheet date but before
financial statement are issued or available to be issued. In
particular, SFAS 165 sets forth the period after the balance sheet date
during which management of a reporting entity should evaluate events or
transactions that may occur for potential recognition or disclosure in the
financial statements; the circumstances under which an entity should
recognize events or transactions occurring after the balance sheet
date in its financial statements' and
the disclosures that an entity should make about events
or transactions that occurred after
the balance sheet date. It is effective for
interim and annual periods ending after June 15, 2009. The adoption
of SFAS 165 on June 30, 2009 required the Company to disclose the date through
which they have evaluated subsequent events and whether that date is the date
the financials were issued.
NOTE
4 – INTANGIBLE ASSETS - LICENSE
On
December 7, 2007, the Company entered into licensing agreements with Everest
Water LTD for the manufacturing and marketing rights to atmospheric water
generators and mineral additive units. The Company agreed to pay $300,000, plus
1,500,000 shares of the Company’s common stock valued at $330,000 as
consideration under this agreement. The Company paid $50,000 with the execution
of the agreement and an additional $10,000 in March 2008. On August 1, 2008 the
Company and Everest Water LTD modified their licensing agreement. Under the
modified agreement, the Company owes Everest $430,000 to be paid over 33 months
starting September 1, 2008, and 8% royalty payments with guarantee minimum
payments as follows: $50,000 year one, $60,000 year two, $70,000 year three,
$90,000 year four and $100,000 each year thereafter.
The
following table summarizes the various components of the Everest license as of
June 30, 2009 and 2008:
|
|
2009
|
|
|
2008
|
|
Cost
of license described above
|
|
$ |
1,094,864 |
|
|
$ |
1,094,864 |
|
Less:
accumulated amortization
|
|
|
102,643 |
|
|
|
38,079 |
|
License,
net
|
|
$ |
992,221 |
|
|
$ |
1,056,785 |
|
|
|
|
|
|
|
|
|
|
The total
amortization expense for the years ended June 30, 2009 and 2008 amounted to
$64,564 and $38,079, respectively.
Contingencies
- Royalties
Pursuant
to the licensing agreement as described above, the Company will pay Everest
Water LTD an 8% royalty payment with a guarantee minimum payment. The Company
has recognized a liability of $785,053, which represents the present value of
the minimum royalty payments using the effective discount rate.
The
Company has accounted for the modifications of the licensing agreement as a
troubled debt restructuring, and has reflected the net carrying amount of the
modified debt consistent with the carrying amount of the original troubled
debt.
NOTE
5 – NOTES PAYABLE
The
Company entered into a Securities Purchase Agreement with accredited investors
on May 21, 2007 for the issuance of two $25,000 notes for a total of $50,000.
The notes payable accrue interest at 12% per annum and were due six months from
the date of the note. On November 15, 2007,
the terms of these notes were extended for an additional six
months.
During
the year ended June 30, 2008, the Company repaid one of the $25,000 notes. The
other note is currently in default.
WATERPURE
INTERNATIONAL, INC.
(A
DEVELOPMENT STAGE COMPANY)
NOTES
TO FINANCIAL STATEMENTS
NOTE
6 – ADVANCES FROM OFFICERS AND STOCKHOLDERS
Officers
and stockholders of the Company have provided various short-term working capital
advances. During the year ended June 30, 2009, short-term working capital
advances from officers and stockholders under these borrowing arrangements
totaled $55,176 and $23,505 respectively. During the year ended June 30, 2008,
short-term working capital advances from officers and stockholders under this
borrowing arrangement totaled $84,680 and $100,963 respectively. The
Company issued 1,000,000 shares of common stock as repayment for $50,000 of the
amount due to officers and 666,111 shares of common stock as repayment for
$41,550 of the amount due stockholders on March 21, 2008. The Company does not
intend to pay interest on the principal borrowed from officers and
stockholders.
The
following table summarizes the Company’s debt to officers and stockholders as of
June 30, 2009 and 2008:
|
|
2009 |
|
|
2008 |
|
Advances from
officers |
|
$ |
103,229 |
|
|
$ |
98,053 |
|
Advances from
stockholders |
|
$ |
87,124 |
|
|
$ |
105,169 |
|
NOTE
7 – CONVERTIBLE DEBT
The
Company entered into a Securities Purchase Agreement with accredited investors
on May 21, 2007 for the issuance of an aggregate of $50,000 of convertible notes
(“Convertible Notes”). The Convertible Notes accrue interest at 12% per annum
and are due two years from the date of the note. The note holder has
the option to convert any unpaid note principal to the Company’s common stock at
a rate of $0.25. In accordance with EITF 98-5, during the year ended June 30,
2007, the Company recorded a debt discount of $18,750 on the debt, representing
the intrinsic value of the beneficial conversion features based upon the
difference between the fair value of the underlying common stock at the
commitment date and the effective conversion price embedded in the debt. The
Company determined the intrinsic value based on the fair value of the Company’s
common stock at the commitment date. The Company determined the commitment date
of the loans to be the date of the agreement.
The Company entered into another
Securities Purchase Agreement with accredited investors on July 30, 2008 for the
issuance of an aggregate of $50,000 of convertible notes. The convertible notes
accrue interest at 8% per annum and are due one year from the date of the
note. The note holders have the option to convert any unpaid note
principal to the Company’s common stock at a 30% discount to the average five
day stock price prior to conversion. In accordance with EITF 98-5, during the
year ended June 30, 2009, the Company recorded a debt discount of $15,000 on the
debt, representing the intrinsic value of the beneficial conversion features
based upon the difference between the fair value of the underlying common stock
at the commitment date and the effective conversion price embedded in the debt.
The Company determined the commitment date of the loans to be the date of the
agreement.
The
Company entered into a Securities Purchase Agreement with accredited investors
on November 18, 2008 for the issuance of an aggregate of $10,000 of convertible
notes. The convertible notes accrue interest at 12% per annum and are due one
year from the date of the note. The note holder has the option to
convert any unpaid note principal to the Company’s common stock at a rate of
$0.005 per share. In accordance with EITF 98-5, during the year ended June 30,
2009, the Company recorded a debt discount of $7,500 on the debt, representing
the intrinsic value of the beneficial conversion features based upon the
difference between the fair value of the underlying common stock at the
commitment date and the effective conversion price embedded in the debt. The
Company determined the commitment date of the loans to be the date of the
agreement.
WATERPURE
INTERNATIONAL, INC.
(A
DEVELOPMENT STAGE COMPANY)
NOTES
TO FINANCIAL STATEMENTS
NOTE
8 - STOCKHOLDERS’ EQUITY
The
Company had 250,000,000 and 100,000,000 shares of $.0001 par value common stock
authorized at June 30, 2009 and 2008, respectively. Of the authorized shares,
20,150,000 shares of common stock have been issued to the founders of the
Company (“founder’s shares”). The Company received $10,000 in cash and $40,375
in services in consideration of the founder shares.
As of
March 31, 2006, the Company completed a private placement to 40 investors and
allocated 461,750 shares of common stock at $0.40 per share (“private placement
shares”). The Company received gross proceeds of $184,700 from the offering. The
Company incurred offering costs of $58,255 and has applied such costs against
the proceeds from the offering.
During
the year ended June 30, 2007, the Company issued 660,000 shares of its common
stock for consulting services for $622,400. The Company issued 575,000 shares
under the Company’s S-8 filing. The other 85,000 shares were issued pursuant to
Rule 144 promulgated by the Securities and Exchange Commission (“Rule
144”).
The fair
values of the shares were determined based on the closing market price of the
shares at the date of the agreements.
During
the year ended June 30, 2008, the Company issued 5,290,000 shares of its common
stock for consulting services totaling $841,504. The Company also redeemed
12,500 shares that had been issued with a value of $11,875.
During
the year ended June 30, 2008, the Company issued 467,626 shares of common stock
for $70,144 due to stockholders.
During
the year ended June 30, 2008, in separate transactions, the Company sold in
private placements and issued 125,000 shares at $.40 per share for a total of
$50,000, 4,055,000 shares at $.10 per share for a total of $405,500 and 150,000
shares at $.09 per share for a total of $13,500. The fair values of the shares
were determined based on the closing market price of the shares at the date of
the agreements.
During
the year ended June 30, 2009, the Company issued 38,436,000 shares of its common
stock for consulting services totaling $700,881.
During
the year ended June 30, 2009, the Company issued 1,000,000 shares of common
stock for $50,000 due to officers.
During
the year ended June 30, 2009, the Company issued 666,111 shares of common stock
for $41,550 due to stockholders.
During
the year ended June 30, 2009, in separate transactions, the Company sold in
private placements and issued 250,000 shares at $.10 per share for a total of
$25,000, 1,000,000 shares at $.01 for a total of $10,000, 1,999,999 shares at
$.0075 per share for a total of $15,000, 11,100,000 shares at $.005 per share
for a total of $55,500, 500,000 shares at $.0024 for $1,200 and 6,000,000 shares
at $.0015 per share for a total of $9,000.
WATERPURE
INTERNATIONAL, INC.
(A
DEVELOPMENT STAGE COMPANY)
NOTES
TO FINANCIAL STATEMENTS
NOTE
9 – STOCK OPTIONS
At the
time of inception (July 22, 2005), the Company issued 125,000 options to one of
its consultants for services rendered. The exercise price was $.0025, the
options were immediately exercisable, and expired five years from the grant
date. These options were exercised on August 29, 2007.
During
the year ended June 30, 2007, the Company issued 500,000 options to one of its
executive officers. The exercise price is $0.55, which was the price of the
Company’s common stock on the grant date. The options are immediately
exercisable and expire five years from the grant date. The fair
values of the options were estimated at the date of grant using the
Black-Scholes option price model. The Company determined that the stock option
compensation was $231,300 and was recognized during the year ended June 30,
2007.
During
the year ended June 30, 2008, the Company issued 100,000 options to one of its
executive officers. The exercise price is $0.07, which was the price of the
Company’s common stock on the grant date. The options are immediately
exercisable and expire five years from the grant date. The fair
values of the options were estimated at the date of grant using the
Black-Scholes option price model. The Company determined that the stock option
compensation was $6,845 and was recognized during the year ended June 30,
2008.
During
the year ended June 30, 2008, the Company also issued 3,000,000 options to one
of its executive officers. The exercise price was $0.10, which is a discount to
the price of the Company’s common stock price of $.20 on the grant
date. The options are immediately exercisable and expire five years
from the grant date. The fair values of the options were estimated at
the date of grant using the Black-Scholes option price model. The Company
determined that the stock option compensation was $576,092 and was recognized
during the year ended June 30, 2008.
During
the year ended June 30, 2009, the Company issued 100,000 options to one of its
executive officers. The exercise price is $0.015, which was the price of the
Company’s common stock on the grant date. The options are immediately
exercisable and expire five years from the grant date. The fair
values of the options were estimated at the date of grant using the
Black-Scholes option price model. The Company determined that the stock option
compensation was $1,492 and was recognized during the year ended June 30,
2009.
To
determine the fair value of the options granted, the Company used the following
assumptions in its Black-Scholes option-price calculations:
Issue
date
|
June
30, 2007
|
January
1,2008
|
June
30, 2008
|
June
30, 2009
|
Options
issued
|
500,000
|
3,000,000
|
100,000
|
100,000
|
Risk-free
interest rate
|
5%
|
3%
|
3%
|
3%
|
Expected
option life
|
5
years
|
5
years
|
5
years
|
5
years
|
Dividend
yield
|
0%
|
0%
|
0%
|
0%
|
Volatility
|
120%
|
157%
|
194%
|
290%
|
Exercise
price
|
$ 0.55
|
$ 0.10
|
$ 0.07
|
$ 0.015
|
These
assumptions were determined as follows:
·
|
The
risk free interest rate for the period within the contractual life of the
option is based on the 5-year U.S. Treasury yield at the time of the
grant.
|
·
|
The
expected term of the options granted represents the period of time that
the options granted are expected to be
outstanding.
|
·
|
Historically,
the Company has not paid a dividend on its common shares and does not
expect to do so in the future.
|
·
|
The
volatility assumption represents an expectation of the volatility of the
price of the underlying shares for the expected term of the option,
considering factors such as historical stock price and stock volatility of
other companies within the
industry.
|
WATERPURE
INTERNATIONAL, INC.
(A
DEVELOPMENT STAGE COMPANY)
NOTES
TO FINANCIAL STATEMENTS
NOTE
9 – STOCK OPTIONS (continued)
The
following is a summary of the status of stock option activity for the period
from inception (July 22, 2005) through June 30, 2009:
|
|
Options
|
|
|
Weighted
Average Exercise Price
|
|
Outstanding
as of July 22, 2005 (inception)
|
|
|
- |
|
|
$ |
- |
|
Granted
|
|
|
125,000 |
|
|
|
0.0025 |
|
Exercised
|
|
|
- |
|
|
|
- |
|
Forfeited
|
|
|
- |
|
|
|
- |
|
Expired
|
|
|
- |
|
|
|
- |
|
Outstanding
as of June 30, 2006
|
|
|
125,000 |
|
|
$ |
0.0025 |
|
Granted
|
|
|
500,000 |
|
|
|
0.5500 |
|
Exercised
|
|
|
- |
|
|
|
- |
|
Forfeited
|
|
|
- |
|
|
|
- |
|
Expired
|
|
|
- |
|
|
|
- |
|
Outstanding
as of June 30, 2007
|
|
|
625,000 |
|
|
$ |
0.4400 |
|
Granted
|
|
|
3,100,000 |
|
|
|
0.0990 |
|
Exercised
|
|
|
125,000 |
|
|
|
0.0025 |
|
Forfeited
|
|
|
- |
|
|
|
- |
|
Expired
|
|
|
- |
|
|
|
- |
|
Outstanding
as of June 30, 2008
|
|
|
3,600,000 |
|
|
$ |
0.1610 |
|
Granted
|
|
|
100,000 |
|
|
|
.0150 |
|
Exercised
|
|
|
- |
|
|
|
- |
|
Forfeited
|
|
|
- |
|
|
|
- |
|
Expired
|
|
|
- |
|
|
|
- |
|
Outstanding
as of June 30, 2009
|
|
|
3,700,000 |
|
|
$ |
0.1577 |
|
Exercisable
as of June 30, 2009
|
|
|
3,700,000 |
|
|
$ |
581,100 |
|
125,000
options were exercised and $313 was received from the exercise of options
for the year ended June 30, 2008.
The
intrinsic value of the options granted was $1,492 for the year ended June 30,
2009.
NOTE
10 - RELATED PARTY TRANSACTIONS
LEASE
The
Company subleases their office space from Stein, Feldman and Sampson, LLC, of
which, Mr. Orr, our Chief Financial Officer is affiliated, for $500 per month on
a month-to-month basis.
DUE
TO OFFICERS
During
the year ended June 30, 2009, officers extended cash to the Company in the
amount of $55,176 to fund working capital needs to pay operating expenses. The
Company issued 1,000,000 shares of common stock as repayment for $50,000 of the
amount due to officers. The total amount due officers was $103,229 and $98,053
as of June 30, 2009 and 2008, respectively. The Company does not intend to pay
interest on the amounts borrowed from officers.
WATERPURE
INTERNATIONAL, INC.
(A
DEVELOPMENT STAGE COMPANY)
NOTES
TO FINANCIAL STATEMENTS
NOTE
10 - RELATED PARTY TRANSACTIONS (continued)
DUE
TO STOCKHOLDERS
During
the year ended June 30, 2009, certain stockholders extended cash to the Company
in the amount of $23,505 to fund working capital needs. The Company issued
666,111 shares of common stock as repayment for $41,550 of the amount due to
stockholders. The total amount due to stockholders was $87,124 and $105,169 as
of June 30, 2009 and 2008, respectively. The Company does not intend to pay
interest on the amounts borrowed from stockholders.
NOTE
11 - INCOME TAXES
The
Company adopted the provisions of FASB Interpretation No. 48, “Accounting for Uncertainty in Income
Taxes – an interpretation of FASB Statement No. 109” (“FIN No. 48”), on
July 1, 2007. FIN No. 48 requires that the impact of tax positions be recognized
in the financial statements if they are more likely than not of being sustained
upon examination, based on the technical merits of the position. The Company has
a valuation allowance against the full amount of its net deferred tax assets.
The Company currently provides a valuation allowance against deferred tax assets
when it is more likely than not that some portion, or all of its deferred tax
assets, will not be realized. There was no impact to the Company as a result of
adopting FIN No. 48 as the Company’s management has determined that the Company
has no uncertain tax positions requiring recognition under FIN No. 48 both on
July 1, 2007 (adoption) and on June 30, 2009 and 2008.
The
Company is subject to U.S. federal income tax as well as income tax of certain
state jurisdictions. The Company has not been audited by the I.R.S.
or any states in connection with income taxes. The periods from inception – 2008
remain open to examination by the I.R.S. and state authorities.
The
Company recognizes interest accrued related to unrecognized tax benefits in
interest expense. Penalties, if incurred, are recognized as a component of tax
expense.
Significant
items making up the deferred tax assets and deferred tax liabilities are as
follows:
|
|
2009
|
|
|
2008
|
|
Net
deferred tax assets:
|
|
|
|
|
|
|
Net
operating loss carryforwards
|
|
$ |
1,309,000 |
|
|
$ |
920,000 |
|
Less
valuation allowance
|
|
|
(1,309,000
|
) |
|
|
(920,000
|
) |
|
|
|
|
|
|
|
|
|
Total
net deferred tax assets
|
|
$ |
- |
|
|
$ |
- |
|
A
valuation allowance is established if it is more likely than not that all or a
portion of the deferred tax asset will not be realized. Accordingly, a
valuation allowance was established in 2009 and 2008 for the full amount of the
deferred tax assets due to the uncertainty of
realization. Management believes that based upon its projection
of future taxable operating income for the foreseeable future, it is more likely
than not that the Company will not be able to realize the benefit of the
deferred tax asset at June 30, 2009. The valuation allowance as of June
30, 2008 was $920,000. The net change in the valuation allowance during the year
ended June 30, 2009 was an increase of $385,280.
The
Company had net operating loss carry-forwards for federal income tax purposes of
approximately $3,850,000 at June 30, 2009. These net operating loss
carry-forwards expire at various dates from 2027 through
2028.
WATERPURE
INTERNATIONAL, INC.
(A
DEVELOPMENT STAGE COMPANY)
NOTES
TO FINANCIAL STATEMENTS
NOTE
11 - INCOME TAXES (continued)
The
Company’s effective income tax (benefit) rate for continuing operations differs
from the statutory federal income tax benefit rate as follows:
|
|
2009
|
|
|
2008
|
|
Federal
Statutory Rate
|
|
|
35
|
% |
|
|
35
|
% |
Other
|
|
|
(7 |
)
% |
|
|
(7 |
)
% |
Valuation
allowance
|
|
|
(28 |
)
% |
|
|
(28 |
)
% |
Effective
income tax (benefit) provision rate from continuing
operations
|
|
|
- |
|
|
|
- |
|
|
|
|
|
|
|
|
|
|
NOTE
12 – COMMITMENTS
The
Company’s executive offices are located is located in Plymouth Meeting, PA. The
rent for the office space is $500 a month, and the Company rents the space on a
month-to-month basis.
In June
2007, the Company opened a regional operations center in Florida to accommodate
administrative, sales and customer relations’ personnel. The Company
entered into a month-to-month lease for $ 543 per month.
The
Company owes Everest $430,000 to be paid over 33 months starting September 1,
2008, and 8% royalty payments with guarantee minimum payments as follows:
$50,000 year one, $60,000 year two, $70,000 year three, $90,000 year four and
$100,000 each year after.
NOTE
13 - SUBSEQUENT EVENTS
The
Company has evaluated subsequent events through October 12, 2009, which is the
date the financials were issued.
On
October 1, 2009, the Company received a $40,000 deposit for the exclusive rights
to sell the WaterPure Atmospheric Water Generators in the country of
Mexico.
Effective
July 1, 2009, the Company amended a convertible debt agreement with a face
amount of $50,000 originally dated May 21, 2007. The amendment to the agreement
calls for payments of principal and interest thereon at the annual rate of 12%
per annum of $5,000 per month through April 1, 2010. As of October 12, 2009 the
Company has made only one payment under the amended agreement.
There
have been no disagreements between the Company and its accountants as to matters
which require disclosure.
ITEM
9A(T) – CONTROLS AND PROCEDURES
Evaluation of
disclosure controls and procedures. We maintain "disclosure
controls and procedures," as such term is defined in Rules 13a-15(e) and
15d-15(e) under the Securities Exchange Act of 1934 (the "Exchange Act"), that
are designed to ensure that information required to be disclosed by us in
reports that we file or submit under the Exchange Act is recorded, processed,
summarized, and reported within the time periods specified in Securities and
Exchange Commission rules and forms, and that such information is accumulated
and communicated to our management, including our Chief Executive Officer and
Chief Financial Officer, as appropriate, to allow timely decisions regarding
required disclosure. In designing and evaluating our disclosure controls and
procedures, management recognized that disclosure controls and procedures, no
matter how well conceived and operated, can provide only reasonable, not
absolute, assurance that the objectives of the disclosure controls and
procedures are met. Additionally, in designing disclosure controls and
procedures, our management necessarily was required to apply its judgment in
evaluating the cost-benefit relationship of possible disclosure controls and
procedures. The design of any disclosure controls and procedures also is based
in part upon certain assumptions about the likelihood of future events, and
there can be no assurance that any design will succeed in achieving its stated
goals under all potential future conditions.
As of June 30, 2009, we carried out an evaluation, under the
supervision and with the participation of our Chief Executive Officer and Chief
Financial Officer, of the effectiveness of the design and operation of our
disclosure controls and procedures. Based on our evaluation, our Chief
Executive Officer and Chief Financial Officer concluded that, as a result of the
material weaknesses described below, our disclosure controls and procedures are
not designed at a reasonable assurance level and are ineffective to provide
reasonable assurance that information we are required to disclose in reports
that we file or submit under the Exchange Act is recorded, processed, summarized
and reported within the time periods specified in Securities and Exchange
Commission rules and forms, and that such information is not accumulated nor
communicated to our management, including our Chief Executive Officer and Chief
Financial Officer, as appropriate, to allow timely decisions regarding required
disclosure. The material weaknesses, which relate to internal control over
financial reporting, that were identified are:
a)
|
We
did not have sufficient personnel in our accounting and financial
reporting functions. As a result, we were not able to achieve
adequate segregation of duties and were not able to provide for adequate
reviewing of the financial statements. This control deficiency, which is
pervasive in nature, results in a reasonable possibility that material
misstatements of the financial statements will not be prevented or
detected on a timely basis;
|
b)
|
We
did not maintain sufficient personnel with an appropriate level of
technical accounting knowledge, experience, and training in the
application of U.S. GAAP commensurate with our complexity and our
financial accounting and reporting requirements. This control deficiency
is pervasive in nature. Further, there is a reasonable possibility that
material misstatements of the financial statements including disclosures
will not be prevented or detected on a timely basis as a result;
and
|
|
c)
|
We
did not document or test our key controls over financial reporting in
accordance with Section 404 of the Sarbanes Oxley Act of
2002. As a result, we cannot provide proper recording of the
framework for our internal controls nor the results of such controls.
There is a reasonable possibility that material misstatements of the
financial statements including disclosures will not be prevented or
detected on a timely basis without the ability to determine if our testing
was properly conducted.
|
We are
committed to improving our financial organization. As part of this commitment,
we will create a segregation of duties consistent with control objectives and
will look to increase our personnel resources and technical accounting expertise
within the accounting function by the end of fiscal 2010 to resolve non-routine
or complex accounting matters. In addition, when funds are available to the
Company, which we expect to occur by the end of fiscal 2010, we will take the
following action to enhance our internal controls: Hiring additional
knowledgeable personnel with technical accounting expertise to further support
the current accounting personnel at the Company, which management estimates will
cost approximately $75,000 per annum. We will engage outside consultants in the
future as necessary in order to ensure proper treatment of non-routine or
complex accounting matters. In addition, management is working to
establish written procedures to document and test the key controls over
financial reporting in accordance with Section 404 of the Sarbanes Oxley Act of
2002.
Management
believes that hiring additional knowledgeable personnel with technical
accounting expertise will remedy the following material weaknesses: (A) lack of
sufficient personnel in our accounting and financial reporting functions to
achieve adequate segregation of duties; and (B) insufficient personnel with an
appropriate level of technical accounting knowledge, experience, and training in
the application of US GAAP commensurate with our complexity and our financial
accounting and reporting requirements.
Management
believes that the hiring of additional personnel who have the technical
expertise and knowledge with the non-routine or technical issues we have
encountered in the past will result in both proper recording of these
transactions and a much more knowledgeable finance department as a whole. Due to
the fact that our accounting staff consists of a Chief Financial Officer and an
accounting clerk, additional personnel will also ensure the proper segregation
of duties and provide more checks and balances within the department. Additional
personnel will also provide the cross training needed to support us if personnel
turnover issues within the department occur. We believe this will greatly
decrease any control and procedure issues we may encounter in the
future.
We will
continue to monitor and evaluate the effectiveness of our disclosure controls
and procedures and our internal controls over financial reporting on an ongoing
basis and are committed to taking further action and implementing additional
enhancements or improvements, as necessary and as funds allow.
Management’s
Annual Report on Internal Control Over Financial
Reporting. Management is responsible for establishing
and maintaining an adequate system of internal control over financial reporting,
as defined in Rules 13a-15(f) and 15d-15(f) of the Exchange
Act. 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 in accordance with
GAAP.
Our
internal control over financial reporting includes those policies and procedures
that:
|
•
|
pertain
to the maintenance of records that in reasonable detail accurately and
fairly reflect our transactions and dispositions of our
assets;
|
|
•
|
provide
reasonable assurance that transactions are recorded as necessary to permit
preparation of financial statements in accordance with GAAP, and that
receipts and expenditures are being made only in accordance with
authorizations of our management and directors;
and
|
|
•
|
provide
reasonable assurance regarding prevention or timely detection of
unauthorized acquisition, use or disposition of our assets that could have
a material effect on the financial
statements.
|
Management
has conducted, with the participation of our Chief Executive Officer and our
Chief Financial Officer, an assessment, including testing of the effectiveness
of our internal control over financial reporting as of June 30,
2009. Management’s assessment of internal control over financial
reporting was based on the framework in Internal Control over Financial
Reporting – Guidance for Smaller Public Companies issued by the
Committee of Sponsoring Organizations of the Treadway Commission. Based on this
evaluation, Management concluded that our system of internal control over
financial reporting was ineffective as of June 30, 2009.
The
effectiveness of our internal control over financial reporting as of June 30,
2009 has not been audited by CCR LLP, our independent registered public
accounting firm. Management’s report was not subject to attestation by our
registered public accounting firm pursuant to temporary rules of the Securities
and Exchange Commission that permit the Company to provide only management’s
report in this annual report.
Changes in
Internal Control Over Financial Reporting. There were no changes in
our internal control over financial reporting identified in connection with the
evaluation required by paragraph (d) of Rule 13a-15 or Rule 15d-15 that
materially affected, or is reasonably likely to materially affect, our internal
control over financial reporting.
PART
III
Our
directors and executive officers and their ages as of the date hereof are as
follows:
Name
|
|
Age
|
|
Position
|
|
Paul
S. Lipschutz
|
|
63
|
|
President,
Chief Executive Officer and Director
|
|
Robert
F. Orr
|
|
43
|
|
Chief
Financial Officer and Director
|
|
Paul Lipschutz. Mr. Lipschutz
has been our President, Chief Executive Officer and a director since July 2005.
Since 1992, Mr. Lipschutz has been the Chief Executive Officer and Director of
Collectible Concepts Group, Inc. Mr. Lipschutz is a 1967 graduate of The Wharton
School of Finance and Commerce of the University of Pennsylvania.
Robert F. Orr. Mr.
Orr has been our
Chief Financial Officer and Director since July 2005. Since January
1997, Mr. Orr has worked for the accounting firm of Stein, Feldman and Sampson,
LLC. Since January, 1999, Mr. Orr has been the Chief Financial
Officer of Idayo Investor, a web based financial content
provider. Mr. Orr is a graduate from the University of Delaware and a
Certified Public Accountant.
Board
Committees
We
currently do not have any board committees; however, the Board of Directors will
form an audit committee at such time as there are at least two independent
directors. Our Board of Directors currently acts as our audit, compensation and
nominating committees.
Involvement
in Certain Legal Proceedings
Our
director, executive officer and control person have not been involved in any of
the following events during the part five 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;
or
|
4.
|
being
found by a court of competent jurisdiction (in a civil action), the
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.
|
Section
16(a) Beneficial Owner Reporting Compliance
Code
of Ethics
We adopted a Code of Ethics for our
officers, directors and employees. A copy of the Code of Ethics is incorporated
by reference as an exhibit.
ITEM
11. EXECUTIVE COMPENSATION
Summary
Compensation Table
The
following tables set forth certain information regarding our CEO and each of our
most highly-compensated executive officers whose total annual salary and bonus
for the fiscal years ending June 30, 2009 and 2008 exceeded
$100,000
Name and
Principal
Position
|
|
Fiscal
Year
|
|
Salary
($)
|
|
Bonus
($)
|
|
Stock
Awards
($)
|
|
Option
Awards
($)
|
|
Non-equity
Incentive Plan
Compensation
($)
|
|
Change in
Pension
Value
and
Nonqualified
Deferred
Compensation
Earnings
($)
|
|
All Other
Compensation
($)
|
|
Total
($)
|
|
Paul
S. Lipschutz (President, CEO and
|
|
|
2009
|
|
|
150,000
|
|
|
-0-
|
|
|
-0-
|
|
|
-0-
|
|
|
-0-
|
|
|
-0-
|
|
|
-0-
|
|
|
-0-
|
|
Director)
(1) |
|
|
2008
|
|
|
75,000
|
|
|
-0-
|
|
|
-0-
|
|
|
576,092
|
|
|
-0-
|
|
|
-0-
|
|
|
-0-
|
|
|
-0-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Robert
F. Orr (CFO
|
|
|
2009
|
|
|
-0-
|
|
|
-0-
|
|
|
-0-
|
|
|
1,492
|
|
|
-0-
|
|
|
-0-
|
|
|
-0-
|
|
|
-0-
|
|
and
Director) |
|
|
2008
|
|
|
-0-
|
|
|
-0-
|
|
|
-0-
|
|
|
6,845
|
|
|
-0-
|
|
|
-0-
|
|
|
-0-
|
|
|
-0-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1)
|
The full amount of
compensation due to Mr. Lipschutz has not been paid in the fiscal years
ended June 30, 2008 and 2009. We and Paul Lipschutz have agreed to accrue
his salary until there is significant cash
flow to enable us to pay his
salary.
|
Employment
Agreements with Executive Officers
Paul
S. Lipschutz
Effective
January 1, 2008, we entered into an employment agreement with Paul S. Lipschutz
as Chief Executive Officer for a period of three years. Pursuant to the
agreement, Mr. Lipschutz receives an annual salary of $150,000. In addition, Mr.
Lipschutz is entitled to receive an annual bonus based upon various criteria
targets. Mr. Lipschutz received options to purchase three million shares of our
common stock at an exercise price of $0.10 upon execution of the agreement,
which expire five years after issuance. Additionally, Mr. Lipschutz is entitled
to participate in any and all benefit plans, from time to time, in effect for
executives, along with vacation, sick and holiday pay in accordance with our
policies established and in effect from time to time.
Robert
F. Orr
Effective
July 1, 2006, we entered into an employment agreement with Robert F. Orr as
Chief Financial Officer for a period of five years. Pursuant to the agreement,
Mr. Orr received 500,000 options for the fiscal year ended June 30, 2007 and
thereafter, receives an annual salary of 100,000 options per
year. The options have an exercise price equal to the closing price
of our common stock on June 30 of each year. Additionally, Mr. Orr is entitled
to participate in any and all benefit plans, from time to time, in effect for
executives, along with vacation, sick and holiday pay in accordance with our
policies established and in effect from time-to-time.
Option/SAR
Grants in Last Fiscal Year
Name
and Position
|
|
Number
of Units
|
|
Paul
S. Lipschutz, Chief Executive Officer
|
|
-0-
|
|
|
|
|
|
|
Robert
F. Orr, Chief Financial Officer
|
|
|
100,000
|
|
|
|
|
|
|
Executives
as a Group
|
|
|
100,000
|
|
Outstanding
Equity Awards at Fiscal Year-End Table.
Option
Awards
|
|
|
|
Stock
Awards
|
Name
|
|
Number
of
Securities
Underlying
Unexercised
Options
(#)
Exercisable
|
|
Number
of
Securities
Underlying
Unexercised
Options
(#)
Unexercisable
|
|
Equity
Incentive
Plan
Awards:
Number
of
Securities
Underlying
Unexercised
Unearned
Options
(#)
|
|
Option
Exercise
Price
($)
|
|
Option
Expiration
Date
|
|
Number
of
Shares
or
Units
of
Stock
That
Have
Not
Vested
(#)
|
|
Market
Value
of
Shares
or
Units
of
Stock
That
Have
Not
Vested
($)
|
|
Equity
Incentive
Plan
Awards: Number
of
Unearned
Shares,
Units or Other Rights That Have Not
Vested
(#)
|
|
Equity
Incentive
Plan
Awards: Market or Payout
Value
of Unearned
Shares,
Units or Other Rights That Have Not Vested
($)
|
|
Paul
S. Lipschutz
|
|
|
3,000,000
|
|
-0-
|
|
|
-0-
|
|
.100
|
|
01/01/2013
|
|
-0-
|
|
|
-0-
|
|
-0-
|
|
|
-0-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Robert
F. Orr
|
|
|
700,000
|
|
-0-
|
|
|
-0-
|
|
.410
|
|
06/30/2012
|
|
-0-
|
|
|
-0-
|
|
-0-
|
|
|
-0-
|
|
Director
Compensation
Our
directors are elected by the vote of a majority in interest of the holders of
our voting stock and hold office until the expiration of the term for which he
or she was elected and until a successor has been elected and qualified.
A
majority of the authorized number of directors constitutes a quorum of the Board
of Directors for the transaction of business. The directors must be present at
the meeting to constitute a quorum. However, any action required or permitted to
be taken by the Board of Directors may be taken without a meeting if all members
of the Board of Directors individually or collectively consent in writing to the
action. We pay $1,500 in stock per quarter as compensation to our directors plus
reimbursement of reasonable expenses incurred in connection with providing
services as a director.
The
following table sets forth certain information regarding beneficial ownership of
our common stock as of October 12, 2009.
·
|
by
each person who is known by us to beneficially own more than 5% of our
common stock;
|
·
|
by
each of our officers and directors;
and
|
·
|
by
all of our officers and directors as a
group.
|
NAME
AND ADDRESS
OF
OWNER
|
|
TITLE
OF
CLASS
|
|
NUMBER
OF
SHARES
OWNED (1)
|
|
PERCENTAGE
OF
CLASS
(2)
|
|
|
|
|
|
|
|
Paul
S. Lipschutz
|
|
Common
Stock
|
|
19,162,382
(3)
|
|
17.96%
|
525
Plymouth Road, Suite 310
|
|
|
|
|
|
|
Plymouth
Meeting, PA
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Robert
F. Orr
|
|
Common
Stock
|
|
6,385,000
(4)
|
|
6.11%
|
525
Plymouth Road, Suite 310
|
|
|
|
|
|
|
Plymouth
Meeting, PA
|
|
|
|
|
|
|
|
|
|
|
|
|
|
All
Officers and Directors
|
|
Common
Stock
|
|
25,547,382
(3) (4)
|
|
23.78%
|
As
a Group (2 persons)
|
|
|
|
|
|
|
(1)
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. Shares of common stock subject to options or
warrants currently exercisable or convertible, or exercisable or convertible
within 60 days of October 12, 2009 are deemed outstanding for computing the
percentage of the person holding such option or warrant but are not deemed
outstanding for computing the percentage of any other person.
(2) Based
upon 103,723,986 shares issued and outstanding on October 12, 2009.
(3)
Includes 3,000,000 shares of common stock underlying options currently
exercisable. Also includes 4,272,382 shares owned by Paul Lipschutz’s
spouse.
(4)
Includes 700,000 shares of common stock underlying options currently
exercisable. Also includes Mr. Orr’s 25% ownership interest of two
partnerships, each of which owns 5,000 shares of our common stock.
Set forth
below are the related party transactions since June 30, 2007, among WaterPure
International Inc. and its shareholders, officers, and/or
directors:
Pursuant
to the employment agreement with our CFO dated July 1, 2006, we issued 100,000
five year options to Robert Orr. The strike price of the options is equal to the
closing price of our stock on June 30, 2008 (the last business day in our fiscal
year end) exercise price was $0.07. We recognized $6,845 in expense
for the issuance of these options.
Pursuant
to the employment agreement with our CFO dated July 1, 2006, we issued 100,000
five year options to Robert Orr. The strike price of the options is equal to the
closing price of our stock on June 30, 2009 (the last business day in our fiscal
year end) exercise price was $0.015. We recognized $1,492 in expense
for the issuance of these options.
Pursuant
to the employment agreement with our CEO dated January 1, 2008, we issued
3,000,000 five-year options to Paul Lipschutz. The exercise price was $0.10,
which is a discount to the price of our common stock price of $0.20 on the grant
date. The options were immediately exercisable and expire five years
from the grant date. The fair values of the options were estimated at
the date of grant using the Black-Scholes option price model. We determined that
the stock option compensation was $576,092 and was recognized during the year
ended June 30, 2008.
Leases
We
sublease our office space from Stein, Feldman and Sampson, LLC, of which, Mr.
Orr, our Chief Financial Officer is affiliated, for $500 per month on a month to
month basis.
In April
2006, we entered into a sublease for the rental of our office space with
Collectible Concepts Group, Inc., of which, Mr. Lipschutz, our Chief Executive
Officer is their President, for $170 per month for a six month period. In
October 2007, the lease was extended for an additional twelve months. This lease
is no longer in effect as of June 30, 2009.
Loans
During
the year ended June 30, 2009, the officers extended cash to us in the amount of
$55,176 to fund working capital needs to pay operating expenses. We issued
1,000,000 shares of common stock as repayment for $50,000 of the amount due to
officers. The total amount due officers was $103,229 and $98,053, as of June 30,
2009 and 2008, respectively. We do not intend to pay interest on the amounts
borrowed from this officer.
During
the year ended June 30, 2009, certain stockholders extended cash to us in the
amount of $23,505 to fund working capital needs. We issued 666,111 shares of
common stock as repayment for $41,550 of the amount due to stockholders. The
total amount due to stockholders was $87,124 and $105,169 as of June 30, 2009
and 2008, respectively. We do not intend to pay interest on the amounts borrowed
from these stockholders.
Procedures
for Approval of Related Party Transactions
Our board
of directors is charged with reviewing and approving all potential related party
transactions. All such related party transactions must then be reported
under applicable SEC rules. We have not adopted other procedures for review, or
standards for approval, of such transactions, but instead review them on a
case-by-case basis.
Audit
Fees
The
aggregate fees billed by our auditors for professional services rendered for the
audit of our annual financial statements during the years ended June 30, 2009
and 2008, and for the reviews of the financial statements included in our
Quarterly Reports on Forms 10Q and 10-QSB during the fiscal years, were $44,542
and $51,526, respectively.
Audit-Related
Fees
There
were no audit related fees during the fiscal years ended June 30, 2009 and 2008
for audit related services.
Tax
Fees
There
were no tax related fees during the fiscal years ended June 30, 2009 and 2008
for tax compliance or tax consulting services.
.
All
Other Fees
Our
independent registered public accounting firm did not bill us during fiscal
years ended June 30, 2009 or 2008 for other services.
The Board
of Directors has considered whether the provision of non-audit services is
compatible with maintaining the principal accountant's
independence.
PART
IV
ITEM
15 - EXHIBITS AND FINANCIAL STATEMENT SCHEDULES
Exhibits:
3.1
|
Articles
of Incorporation, filed as an exhibit to the registration statement on
Form SB-2 filed with the Securities and Exchange Commission on July 14,
2006 and incorporated herein by
reference.
|
3.2
|
By-laws,
filed as an exhibit to the registration statement on Form SB-2 filed with
the Securities and Exchange Commission on July 14, 2006 and incorporated
herein by reference.
|
3.3
|
Certificate
of Amendment to the Articles of Incorporation, filed as an exhibit to the
registration statement on Form SB-2 filed with the Securities and Exchange
Commission on July 14, 2006 and incorporated herein by
reference.
|
3.4
|
Certificate
of Amendment to the Articles of Incorporation, filed as an exhibit to the
Current Report on Form 8-K, filed with the Securities and Exchange
Commission on March 20, 2009 and incorporated herein by
reference.
|
10.1
|
Employment
Agreement by and between WaterPure International, Inc. and Paul S.
Lipschutz, dated as of January 1,
2008.
|
10.2
|
Employment
Agreement by and between WaterPure International, Inc. and Robert F. Orr,
dated as of July 1, 2006.
|
10.3
|
License
Agreement by and between WaterPure International, Inc. and Everest Water
Ltd., dated as of December 7, 2007.
|
10.4
|
Amendment
to License Agreement by and between WaterPure International, Inc. and
Everest Water Ltd., dated as of August 1,
2008.
|
14.1
|
Code
of Ethics, filed as an exhibit to the annual report on Form 10-KSB filed
with the Securities and Exchange Commission on September 28, 2007 and
incorporated herein by reference.
|
31.01
|
Certification
of Chief Executive Officer pursuant to Exchange Act Rules 13a-14(a) and
15d-14(a), as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of
2002.
|
31.02
|
Certification
of Chief Financial Officer pursuant to Exchange Act Rules 13a-14(a) and
15d-14(a), as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of
2002.
|
32.01
|
Certifications
of Chief Executive Officer and Chief Financial Officer pursuant to
18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the
Sarbanes-Oxley Act of 2002.
|
SIGNATURES
In
accordance with the requirements of the Exchange Act, the registrant caused this
report to be signed on its behalf by the undersigned, thereunto duly
authorized.
WATERPURE INTERNATIONAL,
INC.
Date: October
13, 2009
|
By: /s/ PAUL S. LIPSCHUTZ
|
|
Paul
S. Lipschutz
|
|
Chief
Executive Officer (Principal Executive Officer)
|
|
|
Date: October
13, 2009
|
By: /s/ ROBERT F. ORR
|
|
Robert
F. Orr
|
|
Chief
Financial Officer (Principal Financial Officer and Principal Accounting
Officer)
|
Pursuant
to the requirements of the Securities Exchange Act of 1934, this report has been
signed below by the following persons on behalf of the registrant and in the
capacities and on the dates indicated.
Name
|
|
Position
|
|
Date
|
|
|
|
|
|
/s/ PAUL S. LIPSCHUTZ
Paul
S. Lipschutz
|
|
Chief
Executive Officer (Principal Executive Officer) and
Director
|
|
October
13, 2009
|
|
|
|
|
|
/s/ ROBERT F. ORR
Robert
F. Orr
|
|
Chief
Financial Officer (Principal Financial Officer and Principal Accounting
Officer)
|
|
October
13, 2009
|
24