form10q.htm
UNITED
STATES
SECURITIES
AND EXCHANGE COMMISSION
Washington,
D.C. 20549
FORM
10-Q
(Mark
One)
x QUARTERLY REPORT PURSUANT TO SECTION
13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For
the Quarterly Period Ended December 31, 2009
¨ TRANSITION REPORT PURSUANT TO
SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For
the Transition Period from _________ to _________
Commission
file number: 333-135783
WATERPURE
INTERNATIONAL, INC.
(Exact
name of registrant as specified in its charter)
Florida
|
20-3217152
|
(State
or other jurisdiction of incorporation or organization)
|
(IRS
Employer Identification No.)
|
|
|
525
Plymouth Road, Suite 310
Plymouth
Meeting, PA 19462
|
(Address
of principal executive offices) (zip
code) |
(954)
731-2002
(Registrant’s
telephone number, including area code)
(Former
name, former address and former fiscal year, if changed since last
report)
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 ¨
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 (§ 232.405 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 whether the registrant is a large accelerated filer, an
accelerated filer, a non-accelerated filer, or a smaller reporting
company. See the definitions of “large accelerated filer,”
“accelerated filer,” and “smaller reporting company” in Rule 12b-2 of the
Exchange Act.
Large
accelerated filer o
|
Accelerated
filer o
|
Non-accelerated
filer o
|
Smaller
reporting company x
|
(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.
As of
February 16, 2010, there were 121,948,986 shares of registrant’s common stock
outstanding.
WATERPURE
INTERNATIONAL, INC.
INDEX
|
|
|
|
|
PART
I.
|
FINANCIAL
INFORMATION
|
|
|
|
|
|
|
ITEM
1
|
Financial
Statements
|
|
|
|
Balance
sheets as of December 31, 2009 (unaudited) and June 30,
2009
|
3
|
|
|
|
|
|
|
Statements
of operations for the three months and six months ended December 31, 2009
and 2008, and for the period from July 22, 2005 (inception) through
December 31, 2009 (unaudited)
|
4
|
|
|
|
|
|
|
Statement
of changes in stockholders’ equity (deficiency) for the period from June
30, 2008 through December 31, 2009 (unaudited)
|
5
|
|
|
|
|
|
|
Statements
of cash flows for the six months ended December 31, 2009 and 2008, and
cumulative from July 22, 2005 (inception) through December 31,
2009 (unaudited)
|
7
|
|
|
|
|
|
|
Notes
to financial statements (unaudited)
|
8-17
|
|
|
|
|
|
ITEM
2.
|
Management’s
Discussion and Analysis of Financial Condition and Results of
Operations
|
18-20
|
|
|
|
|
|
ITEM
3.
|
Quantitative
and Qualitative Disclosures about Market Risk
|
21
|
|
|
|
|
|
ITEM
4.
|
Controls
and Procedures
|
21
|
|
|
|
|
PART
II.
|
OTHER
INFORMATION
|
|
|
|
|
|
|
ITEM
1.
|
Legal
Proceedings
|
22
|
|
ITEM
1A.
|
Risk
Factors
|
22
|
|
ITEM
2.
|
Unregistered
Sales of Equity Securities and Use of Proceeds
|
22
|
|
ITEM
3.
|
Defaults
Upon Senior Securities
|
22
|
|
ITEM
4.
|
Submission
of Matters to a Vote of Security Holders
|
22
|
|
ITEM
5.
|
Other
Information
|
22
|
|
ITEM
6.
|
Exhibits
|
22
|
|
|
|
|
|
SIGNATURES
|
23
|
WATERPURE
INTERNATIONAL, INC.
(A
DEVELOPMENT STAGE COMPANY)
BALANCE
SHEETS
|
|
|
|
|
|
|
|
|
December
31,
|
|
|
|
|
|
|
2009
|
|
|
June
30,
|
|
|
|
(Unaudited)
|
|
|
2009
|
|
ASSETS
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash
|
|
$ |
10,725 |
|
|
$ |
- |
|
Accounts
receivable - net of allowance ($0 at December 31, 2009
and $22,759 at June 30, 2009)
|
|
|
- |
|
|
|
- |
|
Inventories
|
|
|
10,133 |
|
|
|
15,960 |
|
Prepaid
rent
|
|
|
2,729 |
|
|
|
- |
|
|
|
|
|
|
|
|
|
|
Total
current assets
|
|
|
23,587 |
|
|
|
15,960 |
|
|
|
|
|
|
|
|
|
|
Trademark
|
|
|
325 |
|
|
|
325 |
|
Security
deposit
|
|
|
6,000 |
|
|
|
- |
|
Intangible
asset - license, net of accumulated amortization
|
|
|
959,254 |
|
|
|
992,221 |
|
|
|
|
|
|
|
|
|
|
Total
assets
|
|
$ |
989,166 |
|
|
$ |
1,008,506 |
|
|
|
|
|
|
|
|
|
|
LIABILITIES
AND STOCKHOLDERS' EQUITY (DEFICIENCY)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
CURRENT
LIABILITIES
|
|
|
|
|
|
|
|
|
Accounts
payable
|
|
$ |
149,275 |
|
|
$ |
120,888 |
|
Accrued
expenses
|
|
|
297,819 |
|
|
|
282,532 |
|
Accrued
royalties payable - current
|
|
|
106,276 |
|
|
|
50,000 |
|
Licensing
fees - current
|
|
|
284,456 |
|
|
|
167,000 |
|
Deposits
- current
|
|
|
26,800 |
|
|
|
1,800 |
|
Notes
payable
|
|
|
25,000 |
|
|
|
25,000 |
|
Convertible
debt
|
|
|
92,612 |
|
|
|
105,938 |
|
Due
to officers
|
|
|
89,300 |
|
|
|
103,229 |
|
Due
to stockholders
|
|
|
110,396 |
|
|
|
87,124 |
|
|
|
|
|
|
|
|
|
|
Total
current liabilities
|
|
|
1,181,934 |
|
|
|
943,511 |
|
|
|
|
|
|
|
|
|
|
Accrued
royalties payable - non current
|
|
|
714,964 |
|
|
|
735,053 |
|
Licensing
fees - non current
|
|
|
82,908 |
|
|
|
185,983 |
|
Deposits
- non current
|
|
|
60,900 |
|
|
|
- |
|
Deferred
revenue
|
|
|
163,800 |
|
|
|
98,400 |
|
|
|
|
|
|
|
|
|
|
Total
liabilities
|
|
|
2,204,506 |
|
|
|
1,962,947 |
|
|
|
|
|
|
|
|
|
|
STOCKHOLDERS'
EQUITY (DEFICIENCY)
|
|
|
|
|
|
|
|
|
Common
stock, par value $.0001 per share; 250,000,000 authorized
|
|
|
11,417 |
|
|
|
9,242 |
|
Common
stock to-be-issued
|
|
|
2,500 |
|
|
|
2,500 |
|
Additional
paid-in-capital
|
|
|
4,247,446 |
|
|
|
3,924,174 |
|
Preferred
series A stock, par value $.001 per share; 1,000,000
authorized
|
|
|
- |
|
|
|
- |
|
Deficit
accumulated during the development stage
|
|
|
(5,476,703 |
) |
|
|
(4,890,357 |
) |
|
|
|
|
|
|
|
|
|
Total
stockholders' deficiency
|
|
|
(1,215,340 |
) |
|
|
(954,441 |
) |
|
|
|
|
|
|
|
|
|
Total
liabilities and stockholders' equity (deficiency)
|
|
$ |
989,166 |
|
|
$ |
1,008,506 |
|
|
|
|
|
|
|
|
|
|
The
accompanying notes are an integral part of these financial
statements.
WATERPURE
INTERNATIONAL, INC.
(A
DEVELOPMENT STAGE COMPANY)
STATEMENTS
OF OPERATIONS
FOR
THE THREE MONTHS AND SIX MONTHS ENDED DECEMBER 31, 2009 AND 2008, AND FOR THE
PERIOD FROM JULY 22, 2005 (INCEPTION) THROUGH DECEMBER 31, 2009
(Unaudited)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
July
22, 2005
|
|
|
|
Three
months
|
|
|
Three
months
|
|
|
Six
months
|
|
|
Six
months
|
|
|
(inception)
|
|
|
|
ended
|
|
|
ended
|
|
|
ended
|
|
|
ended
|
|
|
through
|
|
|
|
December
31,
|
|
|
December
31,
|
|
|
December
31,
|
|
|
December
31,
|
|
|
December
31,
|
|
|
|
2009
|
|
|
2008
|
|
|
2009
|
|
|
2008
|
|
|
2009
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
REVENUES
|
|
$ |
7,793 |
|
|
$ |
35,120 |
|
|
$ |
23,699 |
|
|
$ |
83,132 |
|
|
$ |
216,001 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
COST
OF GOODS SOLD
|
|
|
5,838 |
|
|
|
20,077 |
|
|
|
16,908 |
|
|
|
51,165 |
|
|
|
178,453 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gross
profit
|
|
$ |
1,955 |
|
|
$ |
15,043 |
|
|
$ |
6,791 |
|
|
$ |
31,967 |
|
|
$ |
37,548 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
EXPENSES
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
General
and administrative expenses
|
|
|
347,346 |
|
|
|
299,671 |
|
|
|
487,059 |
|
|
|
728,648 |
|
|
|
5,111,663 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
LOSS
FROM OPERATIONS
|
|
|
(345,391 |
) |
|
|
(284,628 |
) |
|
|
(480,268 |
) |
|
|
(696,681 |
) |
|
|
(5,074,115 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest
expense
|
|
|
3,629 |
|
|
|
4,067 |
|
|
|
6,663 |
|
|
|
6,317 |
|
|
|
50,420 |
|
Accretion
of accrued royalties
|
|
|
30,513 |
|
|
|
9,023 |
|
|
|
61,068 |
|
|
|
37,532 |
|
|
|
192,740 |
|
Amortization
expense
|
|
|
18,739 |
|
|
|
21,029 |
|
|
|
38,347 |
|
|
|
36,771 |
|
|
|
159,428 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loss
before provision for income taxes
|
|
|
(398,272 |
) |
|
|
(318,747 |
) |
|
|
(586,346 |
) |
|
|
(777,301 |
) |
|
|
(5,476,703 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Provision
for income taxes
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
loss
|
|
$ |
(398,272 |
) |
|
$ |
(318,747 |
) |
|
$ |
(586,346 |
) |
|
$ |
(777,301 |
) |
|
$ |
(5,476,703 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
loss per share basic and diluted
|
|
$ nil
|
|
|
$ |
(0.01 |
) |
|
$ |
(0.01 |
) |
|
$ |
(0.02 |
) |
|
$ |
(0.14 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted
average per common share
|
|
|
110,887,573 |
|
|
|
43,849,283 |
|
|
|
103,349,801 |
|
|
|
40,126,518 |
|
|
|
38,116,648 |
|
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
JUNE 30, 2008 THROUGH DECEMBER 31, 2009
|
|
Common
stock to-be-issued
|
|
|
Common
stock issued and outstanding
|
|
|
Preferred
series A issued and outstanding
|
|
|
Additonal
paid-in-capital
|
|
|
Deficit
accumulated during the development stage
|
|
|
Total
stockholders' equity (deficiency)
|
|
|
|
Shares
|
|
|
Amount
|
|
|
Shares
|
|
|
Amount
|
|
|
Shares
|
|
|
Amount
|
|
|
|
|
|
|
|
|
|
|
Balance
June 30, 2008
|
|
|
1,750,000 |
|
|
$ |
355,000 |
|
|
|
31,471,876 |
|
|
$ |
3,147 |
|
|
|
- |
|
|
$ |
- |
|
|
$ |
2,998,146 |
|
|
$ |
(3,466,962 |
) |
|
$ |
(110,669 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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)
STATEMENT
OF CHANGES IN STOCKHOLDERS’ EQUITY(DEFICIENCY)
FOR THE PERIOD FROM
JUNE 30, 2008 THROUGH DECEMBER 31, 2009
|
|
Common
stock to-be-issued
|
|
|
Common
stock issued and outstanding
|
|
|
Preferred
series A issued and outstanding
|
|
|
Additonal
paid-in-capital
|
|
|
Deficit
accumulated during the development stage
|
|
|
Total
stockholders' equity (deficiency)
|
|
|
|
Shares
|
|
|
Amount
|
|
|
Shares
|
|
|
Amount
|
|
|
Shares
|
|
|
Amount
|
|
|
|
|
|
|
|
|
|
|
Issuance
of shares (unaudited)
|
|
|
(500,000 |
) |
|
$ |
(2,500 |
) |
|
|
12,500,000 |
|
|
$ |
1,250 |
|
|
|
70 |
|
|
$ |
- |
|
|
$ |
236,250 |
|
|
$ |
- |
|
|
$ |
235,000 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Beneficial
conversion of loan discount (unaudited)
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
7,906 |
|
|
|
- |
|
|
|
7,906 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Common
stock issued for consulting services (unaudited)
|
|
|
- |
|
|
|
- |
|
|
|
9,250,000 |
|
|
|
925 |
|
|
|
- |
|
|
|
- |
|
|
|
77,675 |
|
|
|
- |
|
|
|
78,600 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Issuance
of options as compensation (unaudited)
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
1,441 |
|
|
|
- |
|
|
|
1,441 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Common
stock to-be-issued (unaudited)
|
|
|
250,000 |
|
|
|
2,500 |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
2,500 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
loss (unaudited)
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
(586,346 |
) |
|
|
(586,346 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance
December 31, 2009 (unaudited)
|
|
|
250,000 |
|
|
$ |
2,500 |
|
|
|
114,173,986 |
|
|
$ |
11,417 |
|
|
|
70 |
|
|
$ |
- |
|
|
$ |
4,247,446 |
|
|
$ |
(5,476,703 |
) |
|
$ |
(1,215,340 |
) |
The
accompanying notes are an integral part of these financial
statements.
WATERPURE
INTERNATIONAL, INC.
(A
DEVELOPMENT STAGE COMPANY)
STATEMENTS
OF CASH FLOWS
FOR
THE SIX MONTHS ENDED DECEMBER 31, 2009 AND 2008, AND FOR
THE
PERIODS
FROM JULY 22, 2005 (INCEPTION) THROUGH DECEMBER 31, 2009
(UNAUDITED)
|
|
|
|
|
|
|
|
July
22, 2005
|
|
|
|
Six
months
|
|
|
Six
months
|
|
|
(inception)
|
|
|
|
ended
|
|
|
ended
|
|
|
through
|
|
|
|
December
31,
|
|
|
December
31,
|
|
|
December
31,
|
|
|
|
2009
|
|
|
2008
|
|
|
2009
|
|
CASH
FLOWS FROM OPERATING ACTIVITIES:
|
|
|
|
|
|
|
|
|
|
Net
loss
|
|
$ |
(586,346 |
) |
|
$ |
(777,301 |
) |
|
$ |
(5,476,703 |
) |
Adjustments
to reconcile net loss to net cash used in operating
|
|
|
|
|
|
|
|
|
|
|
|
|
activities:
|
|
|
|
|
|
|
|
|
|
|
|
|
Accretion
of accrued royalties
|
|
|
61,068 |
|
|
|
37,532 |
|
|
|
192,740 |
|
Amortization
of intangible asset - license
|
|
|
32,967 |
|
|
|
29,583 |
|
|
|
135,610 |
|
Common
stock issued for consulting services
|
|
|
78,600 |
|
|
|
504,217 |
|
|
|
2,271,885 |
|
Issuance
of stock options - employee
|
|
|
1,441 |
|
|
|
- |
|
|
|
817,170 |
|
Amortization
of beneficial conversion discount
|
|
|
5,380 |
|
|
|
7,188 |
|
|
|
42,568 |
|
Changes
in operating assets and liabilities
|
|
|
|
|
|
|
|
|
|
|
|
|
(Increase)/Decrease
in:
|
|
|
|
|
|
|
|
|
|
|
|
|
Accounts
receivable
|
|
|
- |
|
|
|
(1,800 |
) |
|
|
- |
|
Other
current assets
|
|
|
(2,729 |
) |
|
|
(6,000 |
) |
|
|
(2,729 |
) |
Inventories
|
|
|
5,827 |
|
|
|
34,322 |
|
|
|
(10,133 |
) |
Security
deposit
|
|
|
(6,000 |
) |
|
|
- |
|
|
|
(6,000 |
) |
Increase/(Decrease)
in:
|
|
|
|
|
|
|
|
|
|
|
|
|
Accounts
payable and accrued expenses
|
|
|
44,874 |
|
|
|
56,488 |
|
|
|
448,294 |
|
Accrued
royalties and licensing fee payable
|
|
|
(10,500 |
) |
|
|
(12,500 |
) |
|
|
(99,000 |
) |
Deposits
|
|
|
85,900 |
|
|
|
- |
|
|
|
85,900 |
|
Deferred
revenue
|
|
|
65,400 |
|
|
|
- |
|
|
|
165,600 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
cash used in operating activities
|
|
|
(224,118 |
) |
|
|
(128,271 |
) |
|
|
(1,434,798 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
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
|
|
|
237,500 |
|
|
|
10,000 |
|
|
|
825,013 |
|
Proceeds
from notes payable
|
|
|
- |
|
|
|
- |
|
|
|
50,000 |
|
Repayment
of notes payable
|
|
|
- |
|
|
|
- |
|
|
|
(25,000 |
) |
(Repayments)/advances
from officers
|
|
|
(13,929 |
) |
|
|
26,350 |
|
|
|
139,300 |
|
Advances
from stockholders
|
|
|
23,272 |
|
|
|
26,500 |
|
|
|
222,090 |
|
Proceeds
from convertible debt
|
|
|
- |
|
|
|
60,000 |
|
|
|
110,000 |
|
Repayment
of convertible debt
|
|
|
(12,000 |
) |
|
|
- |
|
|
|
(12,000 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
cash provided by financing activities
|
|
|
234,843 |
|
|
|
122,850 |
|
|
|
1,445,848 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
NET
INCREASE/(DECREASE) IN CASH
|
|
|
10,725 |
|
|
|
(5,421 |
) |
|
|
10,725 |
|
CASH,
beginning of period
|
|
|
- |
|
|
|
5,421 |
|
|
|
- |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
CASH,
end of period
|
|
$ |
10,725 |
|
|
$ |
- |
|
|
$ |
10,725 |
|
Supplemental
disclosures of cash flow
information:
|
1)The
Company recorded a liability of $341,803 for amounts owed as a licensing feefor
the license acquisition as described in Note 4 during the six months ended
December 31, 2008.
2)The
Company recorded accrued royalties of $604,132, which represents the present
value of the guaranteed minimum payments for the license acquisition as
described in Note 4.
3)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 during the
six months ended December 31, 2008.
4)The
Company cancelled 1,500,000 shares of common stock valued at $330,000 as result
of the modifications of payment terms related to the license acquisition
described in Note 4
5)The
Company refinanced its November 18, 2008 convertible debt totaling $10,000 and
$1,200 of accrued interest thereon with new convertible debt dated November 4,
2009 (Note 7).
The
accompanying notes are an integral part of these financial
statements.
WATERPURE
INTERNATIONAL, INC.
(A
DEVELOPMENT STAGE COMPANY)
NOTES
TO FINANCIAL STATEMENTS (UNAUDITED)
NOTE
1 - NATURE OF OPERATIONS
NATURE
OF OPERATIONS
WaterPure
International, Inc. (the “Company”) (a development stage 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
products will bear the Company’s own exclusive WaterPure branding.
BASIS
OF PRESENTATION
The
accompanying unaudited interim financial statements have been prepared in
accordance with accounting principles generally accepted in the United States of
America and the rules and regulations of the Securities and Exchange Commission
(the “SEC”) for interim financial reporting. Certain information and footnote
disclosures normally included in the Company’s annual financial statements have
been condensed or omitted. In the Company’s opinion, the unaudited interim
financial statements and accompanying notes reflect all adjustments, consisting
of normal and recurring adjustments, that are necessary for a fair presentation
of its financial position and operating results for the three and six month
interim periods ended December 31, 2009 and 2008 and the cumulative period from
inception (July 22, 2005) to December 31, 2009.
The
results of operations for the interim periods are not necessarily indicative of
the results to be expected for the entire fiscal year. This Form 10-Q should be
read in conjunction with the audited financial statements and notes there to
included in the Company’s Form 10-K as of June 30, 2009 and for the period
commencing from inception (July 22, 2005) through June 30, 2009.
NOTE
2 - GOING CONCERN/MANAGEMENT’S PLAN
The
accompanying unaudited interim 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 $5,476,703, has earned minimal revenues and has a working
capital deficit of $1,158,347, as of December 31, 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 provide 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 it has no principal
operations and minimal revenue. Operations from the Company’s inception through
December 31, 2009 were devoted primarily to strategic planning, raising capital
and developing revenue-generating opportunities.
RECLASSIFICATIONS
Certain
amounts on the financial statements as of and for the six months ended December
31, 2008 have been reclassified to conform to the current period
presentation.
WATERPURE
INTERNATIONAL, INC.
(A
DEVELOPMENT STAGE COMPANY)
NOTES
TO FINANCIAL STATEMENTS - CONTINUED
NOTE
3 - SIGNIFICANT ACCOUNTING POLICIES (continued)
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 December 31, 2009 and June 30, 2009.
ACCOUNTS
RECEIVABLE
The
Company makes judgments about the collectibility 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
December 31, 2009, and June 30, 2009, the Company had an allowance for bad debts
of $-0- and $22,759, respectively.
INVENTORIES
The
Company states inventories at the lower of cost or market. As of December
31, 2009, 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 amortizes its intangible assets with finite lives over their respective
estimated lives and 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. There were no such impairment losses as of December 31, 2009 or
June 30, 2009.
DEPOSITS
The
Company recognizes deposits as liabilities when payments are received in advance
of formal agreements. These amounts are classified as current or non-current
pursuant to the Company’s expectation as to the future use of such
funds.
CONVERTIBLE
DEBT
The
Company accounts for its convertible debt by requiring the embedded beneficial
conversion features present in its convertible securities be valued separately
at issuance and 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 based on 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.
WATERPURE
INTERNATIONAL, INC.
(A
DEVELOPMENT STAGE COMPANY)
NOTES
TO FINANCIAL STATEMENTS - CONTINUED
NOTE
3 - SIGNIFICANT ACCOUNTING POLICIES (continued)
DEFERRED
REVENUE
The
Company has entered into a six separate Master Distributorship Agreements with
third-parties whereby the third-parties will market and sell WaterPure branded
machines to customers and resellers. These third-parties have entered into
purchase commitments for 3,310 units and have deposited $165,500, which the
Company will apply in $50 increments towards each WaterPure atmospheric water
machine sold and delivered within twenty-four months of the execution of the
agreement. The Company has recorded the deposit as deferred revenue, and
recognizes the revenue as each machine is sold. The Company has sold 10 of these
machines and recognized $500 in revenue for the six months ended December 31,
2009 and sold 24 units and recognized $1,200 in revenue for the year ended June
30, 2009.
SHIPPING
AND HANDLING COSTS
Outbound
shipping and handling costs are included in cost of goods sold in the
accompanying statements of income. These costs were $295 and $419 for the six
months ended December 31, 2009 and 2008, respectively.
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 basis 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 December 31, 2009.
CONCENTRATIONS
OF CREDIT RISK
The
Company’s financial instrument that is exposed to a concentration of credit risk
is cash. The Company places its cash with a high credit quality institution. At
December 31, 2009, the Company’s cash balance on deposit did not exceed federal
depository insurance limits.
FAIR
VALUE MEASUREMENT
The
Company has partially implemented a framework for measuring fair value of
financial assets and financial liabilities except as it relates to nonrecurring
fair value measurements of nonfinancial assets and liabilities. The Company has
determined that none of its financial assets or liabilities are measured at fair
value on a recurring basis.
NET
LOSS PER COMMON SHARE
The
Company presents basic loss per share and, if applicable, diluted 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. The effect of computing the diluted income (loss) per share is
antidilutive and as such, basic and diluted earnings (loss) per share are the
same for the three and six month periods ended December 31, 2009.
STOCK
BASED COMPENSATION AND PAYMENTS
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 the 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 - CONTINUED
NOTE
3 - SIGNIFICANT ACCOUNTING POLICIES (continued)
RECENTLY
ADOPTED ACCOUNTING PRONOUNCEMENTS
In June
2009, the Financial Accounting Standards Board (“FASB”), launched the FASB
Accounting Standards Codification (“ASC”) as the single source of authoritative
U.S. GAAP recognized by the FASB. The ASC reorganizes various U.S. GAAP
pronouncements into accounting topics and displays them using a consistent
structure. All existing accounting standards documents are superseded as
described in Statement of Financial Accounting Standard (“SFAS”) No. 168, The FASB Accounting Standards
Codification and the Hierarchy of Generally Accepted Accounting Principles.
All of the contents of the ASC carry the same level of authority,
effectively superseding SFAS No. 162, The Hierarchy of Generally Accepted
Accounting Principles, which identified and ranked the sources of
accounting principles and the framework for selecting the principles used in
preparing financial statements in conformity with U.S. GAAP. Also included in
the ASC are rules and interpretive releases of the SEC, under authority of
federal securities laws that are also sources of authoritative U.S. GAAP for SEC
registrants. The ASC is effective for interim and annual periods ending after
September 15, 2009. The adoption of the ASC as of July 1, 2009 had no impact on
the Company’s financial statements other than changing the way specific
accounting standards are referenced in the financial statements.
Effective
July 1, 2009, the Company adopted ASC 820 for nonfinancial assets and
liabilities that are measured at fair value on a non-recurring basis. Previous
to July 1, 2009, this Standard did not apply to such assets and liabilities. The
adoption of ASC 820 on July 1, 2009 for such assets and liabilities did not have
an impact on the Company’s financial statements,
In May
2009, the FASB issued ASC 855. ASC 855 establishes general standards of
accounting for and disclosure of events that occur after the balance sheet date
but before financial statements are issued or are available to be issued. The
adoption of this standard on July 1, 2009 required the Company to disclose the
date through which it has 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 $20,000 through July 31, 2008. On August 1,
2008, the Company and Everest Water LTD modified the payment terms of their
licensing agreement, because the cash payment obligation under the original
agreement could not be met by the Company. Under the amended payment terms, the
Company cancelled the shares to be issued to Everest and agreed to pay Everest
$430,000 over 33 months starting September 1, 2008, plus 8% royalty payments
with guarantee minimum payments as follows: $50,000 in year one, $60,000 in year
two, $70,000 in year three, $90,000 in year four and $100,000 each year after
until the termination of the licensing agreement,which coincides with the
expiration of the last patent in August 2027. The Company has accounted for this
modification as a troubled debt restructuring.
The
following table summarizes the various components of the Everest license as of
December 31, 2009 and June 30, 2009:
|
|
December
31,
|
|
|
June
30,
|
|
|
|
2009
|
|
|
2009
|
|
Cost
of license described above
|
|
$ |
1,094,864 |
|
|
$ |
1,094,864 |
|
Less:
accumulated amortization
|
|
|
135,610 |
|
|
|
102,643 |
|
License,
net
|
|
$ |
959,254 |
|
|
$ |
992,221 |
|
Total
license amortization was $16,484 and $32,967 for the three and six months ended
December 31, 2009, respectively and $16,342 and $29,583 for the three and six
months ended December 31, 2008, respectively.
WATERPURE
INTERNATIONAL, INC.
(A
DEVELOPMENT STAGE COMPANY)
NOTES
TO FINANCIAL STATEMENTS - CONTINUED
NOTE
4 – INTANGIBLE ASSETS – LICENSE (continued)
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 $821,240, 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.
This troubled debt restructuring had no impact on earnings (loss) per
share.
NOTE
5 – NOTES PAYABLE
The
Company has a note payable with an accredited investor which accrues interest at
12% per annum and was originally due November 21, 2007. On November
15, 2007, the terms of the note were extended for an additional six months. The
note is currently in default.
NOTE
6 – ADVANCES FROM OFFICERS AND SHAREHOLDERS
On May
15, 2009, The Company has a note payable with a shareholder which accrues
interest at 8% per annum and was originally due August 15, 2009. The note
is currently in default.
Officers
and stockholders of the Company have provided various short-term working capital
advances. During the six months ended December 31, 2009, repayments to officers
and advances from stockholders under these borrowing arrangements totaled
$13,929 and $23,272, respectively. During the six months ended December 31,
2008, short-term working capital advances from officers and stockholders under
this borrowing arrangement totaled $26,350 and $26,500, respectively. The
Company does not intend to pay interest on the principal borrowed from officers
and stockholders as the advances are intended to be short-term.
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. 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 per share. 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 commitment
date of the loans to be the date of the agreement. The note is currently in
default.
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. 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 note is currently in default.
WATERPURE
INTERNATIONAL, INC.
(A
DEVELOPMENT STAGE COMPANY)
NOTES
TO FINANCIAL STATEMENTS - CONTINUED
NOTE
7 – CONVERTIBLE DEBT (continued)
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 accrued interest at 12% per annum and was due one
year from the date of the note. The note holder had the option to
convert any unpaid note principal to the Company’s common stock at a rate of
$0.005 per share. 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. The Company refinanced its
November 18, 2008 convertible debt and accrued interest ($1,200) thereon be
entering into a new Securities Purchase Agreement with an accredited investor on
November 4, 2009 for the issuance of an aggregate of $11,200 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. During the six months ended December 31, 2009, the Company
recorded a debt discount of $7,906 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.
NOTE
8 - STOCKHOLDERS’ EQUITY
During
the six months ended December 31, 2009, the Company sold in private placement
12,000,000 shares of its common stock, for a total of $60,000. The fair value of
the shares was determined based on the closing market price of the shares at the
date of the agreements.
During
the six months ended December 31, 2009, the Company issued 9,250,000 shares of
its common stock for consulting services totaling $78,600.
On
October 22, 2009, the Company entered into a Securities Purchase Agreement (the
“Purchase Agreement”) with Mayim Tahor, LLC (“Mayim”) providing for the sale by
the Company to Mayim of up to 100 shares of the Company’s series A convertible
preferred stock (the “Series A Preferred Stock”) at a price of $2,500 per share
of Series A Preferred Stock. Through December 31, 2009, Mayim
purchased 70 shares of Series A Preferred Stock for $175,000. The
Company has the right to require Mayim to purchase up to an additional 30 shares
of Series A Preferred Stock at any time at a price of $2,500 per share, with a
maximum of 20 shares of Series A Preferred Stock per put notice from the Company
to Mayim.
Each
share of Series A Preferred Stock has a stated value of $2,500 (the “Stated
Value”), is entitled to a cumulative dividend of six percent (6%) of the Stated
Value per annum, payable semi-annually. In addition, each share of
Series A Preferred Stock is entitled to receive a royalty payment of $0.16 for
each atmospheric water generator sold by the Company. The Company has
accrued $45 pursuant to this agreement as of December 31, 2009
Mayim may
convert, at any time, the shares of Series A Preferred Stock into the number of
shares of common stock of the Company obtained by dividing the Stated Value by
the Conversion Price then in effect. The conversion price at December
31, 2009 is $0.01, as defined in the Purchase Agreement.
On
December 21, 2009, the Company sold in private placement 250,000 shares of its
common stock, for a total of $2,500, these shares were issued in January 2010,
and classified as common stock to-be-issued on the December 31, 2009 financial
statements. The fair value of the shares was determined based on the closing
market price of the shares at the date of the agreements.
WATERPURE
INTERNATIONAL, INC.
(A
DEVELOPMENT STAGE COMPANY)
NOTES
TO FINANCIAL STATEMENTS - CONTINUED
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 $0.0025, 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 value
of the options was estimated at the date of grant using the Black-Scholes option
pricing model.
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 value
of the options was estimated at the date of grant using the Black-Scholes option
pricing 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 of $0.20 on the grant
date. The options are immediately exercisable and expire five years
from the grant date. The fair value of the options was estimated at
the date of grant using the Black-Scholes option pricing 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 pricing model. The Company determined that the stock option
compensation was $1,492 and was recognized during the year ended June 30,
2009.
On
November 4, 2009, the Company issued 100,000 options to one of its debt holders.
The exercise price is $0.005, which is a discount to the price of the Company’s
common stock of $0.017 on the grant date. The options are immediately
exercisable and expire one year from the grant date. The fair value
of the options was estimated at the date of grant using the Black-Scholes option
pricing model. The Company determined that the stock option compensation was
$1,441 and was recognized during the six months ended December 31,
2009.
To
determine the fair value of the options granted, the Company used the following
assumptions in its Black-Scholes option-price calculations:
WATERPURE
INTERNATIONAL, INC.
(A
DEVELOPMENT STAGE COMPANY)
NOTES
TO FINANCIAL STATEMENTS - CONTINUED
NOTE
9 – STOCK OPTIONS (continued)
Issue
date
|
|
June
30, 2007
|
|
|
January
1, 2008
|
|
|
June
30, 2008
|
|
Options
issued
|
|
|
500,000 |
|
|
|
3,000,000 |
|
|
|
100,000 |
|
Risk-free
interest rate
|
|
|
5 |
% |
|
|
3 |
% |
|
|
3 |
% |
Expected
option life
|
|
5
years
|
|
|
5
years
|
|
|
5
years
|
|
Dividend
yield
|
|
|
0 |
% |
|
|
0 |
% |
|
|
0 |
% |
Volatility
|
|
|
120 |
% |
|
|
157 |
% |
|
|
194 |
% |
Exercise
price
|
|
$ |
0.55 |
|
|
$ |
0.10 |
|
|
$ |
0.07 |
|
Issue
date
|
|
June
30, 2009
|
|
|
November
4, 2009
|
|
Options
issued
|
|
|
100,000 |
|
|
|
100,000 |
|
Risk-free
interest rate
|
|
|
3 |
% |
|
|
3 |
% |
Expected
option life
|
|
5
years
|
|
|
1
year
|
|
Dividend
yield
|
|
|
0 |
% |
|
|
0 |
% |
Volatility
|
|
|
290 |
% |
|
|
192 |
% |
Exercise
price
|
|
$ |
0.015 |
|
|
$ |
0.005 |
|
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 U.S. Treasury yields at the time of the grants
based on the expected option life.
|
·
|
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 - CONTINUED
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 December 31, 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
|
|
Granted
|
|
|
100,000
|
|
|
.0050
|
|
Exercised
|
|
|
-
|
|
|
-
|
|
Forfeited
|
|
|
-
|
|
|
-
|
|
Expired
|
|
|
-
|
|
|
-
|
|
Outstanding
as of December 31, 2009
|
|
|
3,800,000
|
|
$
|
0.1537
|
|
NOTE
10 - RELATED PARTY TRANSACTIONS
LEASE
The
Company subleases its office space from Stein, Feldman and Sampson, LLC, of
which, Mr. Orr, the Company’s Chief Financial Officer is affiliated, for $500
per month on a month-to-month basis.
DUE
TO OFFICERS AND STOCKHOLDERS
During
the six-months ended December 31, 2009, the Company received advances, made
repayments, and had amounts due to officers and stockholders as disclosed in
Note 6.
WATERPURE
INTERNATIONAL, INC.
(A
DEVELOPMENT STAGE COMPANY)
NOTES
TO FINANCIAL STATEMENTS - CONTINUED
NOTE
11 - INCOME TAXES
The
Company recognized the impact of tax positions 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. The
Company has no uncertain tax positions requiring recognition as of December 31,
2009.
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.
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
November 2009, the Company moved its manufacturing operations to Oakland Park,
Florida to accommodate administrative, sales and manufacturing personnel.
The Company entered into a five year lease with lease payments beginning March
1, 2010.
Year
ending June 30, 2010
|
|
$ |
10,916 |
|
2011
|
|
$ |
33,566 |
|
2012
|
|
$ |
36,025 |
|
2013
|
|
$ |
38,924 |
|
2014
|
|
$ |
41,832 |
|
2015
|
|
$ |
28,388 |
|
Total
Lease Commitment
|
|
$ |
189,651 |
|
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 – SUBQUENT EVENTS
The Company has evaluated subsequent
events through February 16, 2010, which is the date the accompanying financial
statements were issued.
On
January 19, 2010, the Company received a $50,000 deposit for the exclusive
rights to sell the WaterPure Atmospheric Water Generators in the Country of
Mexico.
On
January 21, 2010, the Company sold 1,500,000 shares of its common stock for
$7,500.
On
January 27, 2010, the Company received a purchase order for 1,000 machines
totaling $637,040 from its Mexican distributor.
On
January 29, 2010, the Company sold 500,000 shares of its common stock for
$2,500.
On
February 1, 2010, the Company sold 10 shares of its Series A preferred stock,
for a total of $25,000, pursuant to its Purchase Agreement dated October 22,
2009 (Note 8).
On
February 4, 2010 the Company issued 5,775,000 shares for services rendered
valued at $86,625.
ITEM
2. 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 our 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 Securities and Exchange
Commission. 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 our assumptions are based upon reasonable data
derived from and known about our business and operations. No
assurances are made that actual results of operations or the results of our
future activities will not differ materially from our
assumptions. Factors that could cause differences include, but are
not limited to, expected market demand for our products, fluctuations in pricing
for materials, and competition.
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. 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.
Currently
we are focused on completion of our final production model of our new AWG, the
WaterCycletm. We
have leased a 4,400 sq. ft, facility in Oakland Park, 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 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.
We feel
that the differentiations in the new AWG could help us capture a larger market
segment in the future because of its design, features and worldwide respect for
“Made in USA” products, especially after the past product problems with a
variety of products manufactured overseas.
On
October 22, 2009, the Company entered into a Securities Purchase Agreement (the
“Purchase Agreement”) with Mayim Tahor, LLC (“Mayim”) providing for the sale by
the Company to Mayim of up to 100 shares of the Company’s series A convertible
preferred stock (the “Series A Preferred Stock”) at a price of $2,500 per share
of Series A Preferred Stock. Through December 31, 2009, Mayim
purchased 70 shares of Series A Preferred Stock for $175,000. The
Company has the right to require Mayim to purchase up to an additional 30 shares
of Series A Preferred Stock at any time at a price of $2,500 per share, with a
maximum of 20 shares of Series A Preferred Stock per put notice from the Company
to Mayim.
Each
share of Series A Preferred Stock has a stated value of $2,500 (the “Stated
Value”), is entitled to a cumulative dividend of six percent (6%) of the Stated
Value per annum, payable semi-annually. In addition, each share of
Series A Preferred Stock is entitled to receive a royalty payment of $0.16 for
each atmospheric water generator sold by the Company.
Mayim may
convert, at any time, the shares of Series A Preferred Stock into the number of
shares of common stock of the Company obtained by dividing the Stated Value by
the Conversion Price then in effect. The conversion price is $0.01,
as defined in the Purchase Agreement.
Results
of Operations
For
the Period from July 22, 2005 (Inception) through December 31, 2009
Since we
were formed on July 22, 2005, we have earned approximately $216,000 in revenues
and have incurred a cumulative net loss since our inception of approximately
$5,476,703 through December 31, 2009. Operations from inception through December
31, 2009 were devoted primarily to strategic planning, raising capital and
developing revenue-generating opportunities.
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
December 31, 2009, we had a working capital deficiency of $1,158,347. For the
six months ended December 31, 2009, we had net cash outflow from operating
activities of $224,118. Cash provided by financing activities totaled $234,843
for the six months ended December 31, 2009.
We do not
have enough capital to support operations for the next 12 months. We anticipate
we will need approximately $1.5 million, consisting of approximately $600,000
for manufacturing, $100,000 for sales and marketing and $600,000 for general and
administrative expenses and working capital. An additional $200,000 would be
utilized for the production and execution of our marketing support program. 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 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
current projected cash flow deficits. 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.
We have
financed our losses through the sale of our common stock, issuance of common
stock for services in lieu of cash, and loans from officers and stockholders.
During the six months ended December 31, 2009, we received the following capital
infusions: $62,500 from the sale of 12,250,000 shares of our common stock,
$175,000 from the sale of 70 shares of our series A preferred stock and loans
from shareholders totaling $23,272. In addition, during the six months ended
December 31, 2009, in lieu of cash payments, we issued 9,250,000 shares of
common stock valued at $78,600 for services rendered. We do not intend to
pay interest on the advances borrowed from officers and stockholders as the
advances are intended to be short-term.
Our
independent registered public accounting firm has issued a going concern
paragraph in their Report of Independent Registered Public Accounting Firm
(dated October 12, 2009) on our financial statements for the fiscal year ended
June 30, 2009 that states there is substantial doubt about our ability to
continue as a going concern. The conditions that led to the going concern
continue to exist as of December 31, 2009. Our ability to continue as a going
concern is dependent on our ability to access capital through debt and equity
funding as well as market and sell our various products.
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 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 December 31, 2009, we had no allowance for bad debts. We actively manage our
accounts receivable to minimize our credit risks and believe that our current
allowance for doubtful accounts is fairly stated.
Inventory
Valuation
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
There are
no accounting pronouncements not yet adopted that are expected to have a
significant impact on us.
ITEM
3 - QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
Not
required under Regulation S-K for “smaller reporting companies.”
ITEM
4 - CONTROLS AND PROCEDURES
a)
Evaluation of disclosure controls and procedures.
Our
management, with the participation of our Chief Executive Officer and Chief
Financial Officer, evaluated the effectiveness of our disclosure controls and
procedures pursuant to Rule 13a-15 under the Securities Exchange Act of 1934 as
of December 31, 2009. In designing and evaluating the disclosure controls
and procedures, management recognizes that any controls and procedures, no
matter how well designed and operated, can provide only reasonable assurance of
achieving the desired control objectives. In addition, the design of disclosure
controls and procedures must reflect the fact that there are resource
constraints and that management is required to apply its judgment in evaluating
the benefits of possible controls and procedures relative to their
costs.
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:
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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;
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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
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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.
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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.
(b)
Changes in internal control over financial reporting.
We
regularly review our system of internal control over financial reporting and
make changes to our processes and systems to improve controls and increase
efficiency, while ensuring that we maintain an effective internal control
environment. Changes may include such activities as implementing new, more
efficient systems, consolidating activities, and migrating
processes.
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 II - OTHER
INFORMATION
Item
1. Legal Proceedings
We are
currently not a party to any material legal proceedings or claims.
Item
1A. Risk Factors
Not
required under Regulation S-K for “smaller reporting companies.”
Item
2. Unregistered Sales of Equity Securities and Use of
Proceeds
During
the three months ended December 31, 2009, we sold 2,250,000 shares of our common
stock to accredited investors for aggregate proceeds of $12,500.
During
the three months ended December 31, 2009, we sold 70 shares of our series A
preferred stock pursuant to a securities purchase agreement for proceeds of
$175,000.
During
the three months ended December 31, 2009, in lieu of cash payments, we issued
8,450,000 shares of common stock valued at approximately $67,600 for services
rendered.
Item 3. Defaults Upon Senior
Securities
We are
currently in default on a $25,000 note, which was due May 15, 2008.
We are currently in default on a $50,000
note, as amended, which was due July 1, 2009.
We are
currently in default on a $50,000 note, which was due July 30, 2009
.
We are
currently in default on a $15,000 note, which was due August 15,
2009.
Item
4. Submission of Matters to a Vote of Security Holders
None.
Item
5. Other Information.
None.
Item
6. Exhibits
31.01
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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.
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31.02
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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.
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32.01
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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.
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SIGNATURES
Pursuant
to the requirements of the Securities Exchange Act of 1934, the registrant has
duly caused this report to be signed on its behalf by the undersigned thereunto
duly authorized.
WATERPURE
INTERNATIONAL, INC.
Date: February
16, 2010
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By: /s/ PAUL S. LIPSCHUTZ
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Paul
S. Lipschutz
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President
(Principal Executive Officer)
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Date: February
16, 2010
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By: /s/ ROBERT F. ORR
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Robert
F. Orr
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Chief
Financial Officer (Principal Financial Officer and Principal Accounting
Officer)
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