Document/Exhibit Description Pages Size
1: 10-K Annual Report 54± 243K
4: 10-K Annual Report -- wtarform10kmar2010h PDF 273K
2: EX-1 Underwriting Agreement 3± 18K
6: EX-1 Underwriting Agreement -- wtar-ex31mar2010 PDF 20K
3: EX-2 Plan of Acquisition, Reorganization, Arrangement, 2± 10K
Liquidation or Succession
5: EX-2 Plan of Acquisition, Reorganization, Arrangement, PDF 14K
Liquidation or Succession --
wtar-ex32mar2010
WATAIRE INTERNATIONAL, INC.
FORM 10-K
(Annual Report)
Filed 07/14/10 for the Period Ending 03/31/10
Address 3rd Floor, 21900 Burbank Blvd.
Woodland Hills, CA 91367
Telephone 877-602-8985
CIK 0001127007
Symbol WTAR
SIC Code 4941 - Water Supply
Industry Conglomerates
Sector Conglomerates
Fiscal Year 03/31
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-K
(X) ANNUAL REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934 For the fiscal year ended March 31, 2010
OR
( ) TRANSITION REPORT UNDER SECTION 13 OR 15 (d) OF THE SECURITIES
EXCHANGE ACT OF 1934 For the transition period from ________to ______
Commission File Number : 000 - 49955
WATAIRE INTERNATIONAL, INC.
( Exact name of registrant as specified in its charter )
Washington 91-2060082
------------------------------- ----------------------------
( State or other jurisdiction of ( I.R.S. Empl. Ident. No. )
incorporation or organization )
3rd Floor, 21900 Burbank Blvd, Woodland Hills, California 91367
------------------------------------------------------------
( Address of principal executive offices ) ( Zip Code )
877-602-8985
-------------------------------
( Issuer's telephone number )
Securities registered under Section 12(b) of the
Exchange Act : None
Securities registered under Section 12(g) of the
Exchange Act :- Common Stock, $0.0001 par value
Check whether the issuer (1) filed all reports required to be filed by
Section 13 or 15 (d) of the Exchange Act during the past 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 ( ) No ( )
Check if there is no disclosure of delinquent filers in response to
Item 405 of Regulation S-K contained in this form, and no disclosure
will be contained, to the best of registrant's knowledge, in definitive
proxy or information statement incorporated by reference in Part III
of this Form 10-K or any amendment to this
Form 10-K ( X )
Indicate by check mark whether the registrant is a large accelerated
filer, an accelerated filer, or a non-accelerated filer, or a small
reporting company. See definitions of "large accelerated filer,"
"accelerated filer," and "small reporting company" in Rule 12B-2 of
the Exchange Act. (Check one) :
Large accelerated filer ( ) Accelerated filer ( )
Non-accelerated filer ( ) Smaller reporting company ( X )
Indicate by check mark whether the registrant is a shell company (as
defined in Rule 12b-2 of the Exchange Act). ( ) Yes ( X ) No
The aggregate market value of the voting and non-voting common equity
held by non-affiliates as of the last business day of the registrant's
most recently completed second fiscal quarter was $8,261,662.
At July 2010 the Registrant had outstanding 98,710,123 shares of
Common Stock, $0.0001 par value per share.
WATAIRE INTERNATIONAL, INC.
FORM 10-K
For the Fiscal Year Ended March 31, 2010
TABLE OF CONTENTS
PART I Page
Item 1 Business 6-12
Item 1A Risk Factors 12-18
Item 1B Unresolved Staff Comments 18
Item 2 Properties 19
Item 3 Legal Proceedings 19
Item 4 Submission of Matters to a Vote of 19
Security Holders
PART II
Item 5 Market for Registrant's Common Equity, Related
Stockholder Matters and Issuer Purchases of
Equity Securities 19-22
Item 6 Selected Financial Data 22-23
Item 7 Management's Discussion and Analysis of Financial
Condition and Results of Operations 23-26
Item 7A Quantitative and Qualitative Disclosures About
Market Risk 26-27
Item 8 Financial Statements and Supplementary Data 27
Item 9 Changes in and Disagreements with Accountants on
Accounting and Financial Disclosure 27
Item 9A Controls and Procedures 27-28
Item 9B Other Information 28
PART III
Item 10 Directors, Executive Officers and Corporate Governance 29-31
Item 11 Executive Compensation 31-32
Item 12 Security Ownership of Certain Beneficial Owners and
Management and Related Stockholder Matters 32-33
Item 13 Certain Relationships and Related Transactions and
Director Independence 34-35
Item 14 Principal Accounting Fees and Services 35-36
PART IV
Item 15 Exhibits, Financial Statement Schedules 36-55
Signatures
PART I
This Annual Report on Form 10-K contains forward-looking
statements that have been made pursuant to the provisions of
Section 27A of the Securities Act of 1933, Section 21E of the
Securities Exchange Act of 1934, and the Private Securities
Litigation Reform Act of 1995 and concern matters that
involve risks and uncertainties that could cause actual
results to differ materially from historical results or from
those projected in the forward-looking statements.
Discussions containing forward-looking statements may be
found in the material set forth under "Business,"
"Management's Discussion and Analysis of Financial Condition
and Results of Operations" and in other sections of this
Form 10-K. Words such as "may," "will," "should," "could,"
"expect," "plan," "anticipate," "believe," "estimate,"
"predict," "potential," "continue" or similar words are
intended to identify forward-looking statements, although not
all forward-looking statements contain these words. Although
we believe that our opinions and expectations reflected in
the forward-looking statements are reasonable as of the date
of this Report, we cannot guarantee future results, levels of
activity, performance or achievements, and our actual results
may differ substantially from the views and expectations set
forth in this Annual Report on Form 10-K. We expressly
disclaim any intent or obligation to update any forward-
looking statements after the date hereof to conform such
statements to actual results or to changes in our opinions or
expectations.
Readers should carefully review and consider the various
disclosures made by us in this Report, set forth in detail in
Part I, under the heading "Risk Factors," as well as those
additional risks described in other documents we file from
time to time with the Securities and Exchange Commission,
which attempt to advise interested parties of the risks,
uncertainties, and other factors that affect our business. We
undertake no obligation to publicly release the results of
any revisions to any forward-looking statements to reflect
anticipated or unanticipated events or circumstances
occurring after the date of such statements.
5
Item 1. Business.
General
Wataire International, Inc. ("Wataire," the "Company," "us,"
or "we") was incorporated under the laws of the State of
Washington on August 17, 2000 and has been a reporting issuer
with the United States Securities and Exchange Commission
(the "SEC") since November 2000.
On October 3, 2006, the Company changed its name to Wataire
International, Inc. Previously on August 26, 2003, the
Company had changed its name from Corporate Development and
Innovation, Inc. to Cimbix Corporation. The Company's common
stock traded in the Over-the-Counter Bulletin Board Market
under the ticker symbol "WTAR".
The Company's business is still in its early developmental
and promotional stages and to date, the Company's primary
activities have involved significant re-structuring and re-
organization. After involvement in Petsmobility and MBG
businesses, in 2006 the Company entered into license
agreement with Ecosafe Innotech Inc., (formerly Wataire
Ecosafe Technologies Inc., formerly Wataire Industries
Inc.)("Ecosafe") to market and distribute their commercial
water generation machines. On April 25, 2007, we entered
into an agreement with Ecosafe, Canadian Dew Technologies
Inc. ("CanDew"), Terrence Nylander and Roland Wahlgren to
acquire all of the intellectual property ("IP") relating to a
water treatment process and devices for water-from-air
machines. The agreements previously executed between the
Company and Ecosafe have been terminated and cancelled and
forms part of the current agreement. Mr. Nylander was, at the
time, an officer and director of the Company.
Consideration for the purchase of the IP was $469,485 (CAD
$500,000), which was paid at March 31, 2007 by the issuance
of 4,800,000 shares of common stock of the Company, the
agreement by the Company to pay a royalty equal to 5% of the
gross profits from the sales of all apparatus or products
relating to the IP for a period of 30 years from April 25,
2007 and a royalty equal to 5% of gross licensing revenues on
the IP. This consideration is in addition to the 11,000,000
shares of common stock previously issued for the license
rights. The IP acquisition was completed in July 2007.
6
The IP acquired by the Company includes all copyrights,
patent rights, trade secret rights, trade names, trademark
rights, process information, technical information, contract
rights and obligations, designs, drawings, inventions and all
other intellectual and industrial property rights of any sort
related to or associated with the water treatment process and
devices for water-from-air machines invention.
LIQUIDITY AND FINANCIAL RESOURCES
Through March 31, 2010, the Company had not carried on any
significant operations and had not generated significant
revenues. The Company has incurred losses since inception
aggregating $11,000,701. The accompanying financial
statements have been prepared assuming that the Company will
continue as a going concern. These conditions raise
substantial doubt about the Company's ability to continue as
a going concern. The financial statements do not include any
adjustments that might result from the outcome of this
uncertainty.
We currently have minimal cash reserves. To date, the Company
has covered operating deficits primarily through its
financing activities. Accordingly, our ability to pursue our
plan of operations is contingent on our being able to obtain
funding for the development, marketing and commercialization
of our products and services. As a result of its lack of
operating success, the Company may not be able to raise
additional financing to cover operating deficits.
BUSINESS
Our business plan is to fully exploit our products and
technology by marketing and distributing our commercial and
home/office water generation machines as well as their under-
the-counter/over-the-counter units, and the water-producing
greenhouse.
Our atmospheric water generator produces purified water from
the atmosphere by using a condensing surface and a special
filtration system that removes dust, airborne particles and
bacteria to generate clean drinking water and simultaneously
cleaning the air. This method of extracting water vapor has
been in use for many years. Some similar applications include
air conditioners and dehumidifiers. The actual water
production and cost per gallon varies with the humidity and
temperature of the atmosphere at the specific site in which
the unit is employed.
7
The Wataire water generation equipment is a water-from-air
technology system developed by a team of specialized
technicians incorporating patent pending technologies that
control bacterial contamination. The Company currently sells
two types of atmospheric units: (i) small-scale home/office
units, which include a full-sized upright model and a
countertop model and which can produce between four to six
gallons of water per day depending on humidity and
temperature levels of the location of the unit, and (ii)
commercial/industrial units capable of producing more than
5,000 liters (1320 gallons) of safe drinking water each day
depending upon ambient conditions.
The home/office units are designed to replace bottled water
and purified water dispensers, eliminating the need for
replenishment and storage of plastic bottles. These units
are intended for usage in residences, schools, offices,
hospitals and restaurants. They can also serve as a personal
disaster relief unit for consumers in circumstances such as
hurricane Katrina where residents in the affected area had no
drinking water.
The industrial units are intended for use in military camps,
industrial applications such as factories, commercial
applications such as hotels, humanitarian and disaster relief
applications where fresh drinking water is scarce.
The water generation equipment is a water-from-air technology
system developed by a team of specialized technicians
incorporating patent pending technologies that control
bacterial contamination. The water generating units are
equipped with an electronic control system that turns the
machine on and off when full and can circulate the water to
maintain clean drinking water 24 hours a day, 365 days a
year. The equipment has a dynamic display to allow for
monitoring the machine's operation, showing when a new filter
is required.
The system provides an independent, sustainable, safe water
source for a wide variety of possible circumstances such as
mining and petroleum exploration camps, bottled water and
beverage manufacturers, food manufacturers, military camps,
non-government organizations, humanitarian assistance
organizations, emergency and disaster relief situations.
According to field trials recently held in Belize and
Thailand, the system performed well in a tropical environment
producing the design projected volume of water and achieving
the desired water quality standards. While we believe the
unit is also economically viable in temperate climates, the
Wataire units work best in the tropics due to the high
humidity levels, which make possible the highest rate of
water production at the lowest cost per gallon.
8
The patent pending water treatment system is comprised of a
three-stage water treatment design that cleans water to meet
World Health Organization guidelines. The unit consists of a
filtration system, a food-grade dehumidifier water producing
module, and a water treatment module. The water treatment
process is proprietary and may be subject of various patent
applications already filed.
The process basically involves taking filtered moist air from
the atmosphere and dehumidifying it for treatment by the
water treatment module. This produced water is then
processed through sediment filters, ultra-fine filters,
activated charcoal filters and ultraviolet light treatment
that eliminate virtually all biological contaminants
including bacteria, viruses, and pollutants that are in the
air. Atmospheric water vapor is an abundant resource that can
be used with virtually no negative environmental impacts.
The machine should be situated in a space that can provide
fresh flowing air to the machine intake as it dehumidifies
the space. The water-from-air technology has received broad
acceptance around the world as a new and sustainable source
of potable water.
COMPETITION
Water purification and bottled water industries are highly
competitive. According to past internal research, there were
possibly nine entities experimenting with the technology of
water generation, of which two or three were 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 that our patent pending water
treatment module has resolved. The atmospheric water
generator and filtration system industry is new, rapidly
evolving and can compete with more traditional water
treatment systems that rely on surface and ground water
supplies. In the future, our competitors can and may
duplicate or surpass in efficacy many of the products or
services offered by us.
9
REGULATORY ENVIRONMENT
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 CSA and UL 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.
CERTIFICATION AND TESTING
All the products that we sell and plan to sell will go
through stringent testing that will have the appropriate UL,
CE or CSA certifications on the products. The CSA Mark is an
internationally recognized mark that appears on over one
billion products worldwide. CSA International is a leader in
standards development, certification and testing, and quality
management registration. The CSA International marks are
accepted by many electrical inspectors, gas inspectors,
building inspectors and other governmental authorities that
approve projects and products that are sold in Canada, the
United States and all over the world. The Company uses the
services of CSA International because they test, certify and
ensure that products comply with applicable safety and/or
performance standards applicable to the products for the sale
in that country. These standards include UL, CSA, ANSI
(American National Standards Institute), ASTM, NSF, OSHA
(Occupational Safety and Health Administration under the US
Department of Labor), NVLAP (National Voluntary Laboratory
Accreditation Program), SCC (Standards Council of Canada),
IAS (International Accreditation Service Inc.) and others.
At this time, the products carry the markings of CE and we
are currently seeking CSA markings for Canada and UL markings
for the United States. These markings on the products
indicate to governmental officials and consumers that the
products may be legally placed on the market in the country
for sale. It also indicates that the products met all safety
requirements and tests, and such products are in conformity
with the applicable standards.
10
RESEARCH AND DEVELOPMENTS
The Company does not have its own research and development
department and will rely on Canadian Dew Technologies Inc. to
furnish the Company with new technology and improvements on
its existing applications, efficiency and theories of the
underlying atmospheric water generators and filtration
systems.
MARKET ANALYSIS AND STRATEGY
We believe a market opportunity exists for our atmospheric
water generators and filtration systems. Our technology
provides an alternative solution to the world's shortage of
fresh water and can provide clean, safe drinking water in
various geographical settings. Today, governments and health
professionals are increasingly conscious of the negative
health effects of pollution, chemicals used to disinfect
water supplies, and residual salt in desalinated water, and
how they affect human health.
Our target markets for the water-from-air systems are
businesses, governments, and people who are situated in the
humid tropics. To date, our products have been sold in over
30 different countries and have received positive response
from system users. Our systems, units and/or applications
target various markets including military applications, oil
and mining operations, new and existing tourist resorts,
beverage bottling plants, new condominium developments and
humanitarian missions.
The development of our marketing plan is still in its early
stages; however, we anticipate having an outline of our
marketing strategy in the fall of 2010. Management plans, as
soon as finances permit, to hire additional management and
staff for its US-based operations especially in the areas of
finance, sales, marketing, and investor/public relations.
The Company may also choose to outsource some of its
marketing requirements by utilizing a series of independent
contractors based on the projected size of the market and the
compensation necessary to retain qualified employees.
EMPLOYEES
The Company currently has no employees but has contract
staff. The Company anticipates entering into an employment
contract with Robert Rosner, our Chief Executive Officer, but
can provide no assurance that we will come to terms for such
employment agreement. The Company looks to its directors and
officers for their combined entrepreneurial skills and
talents, and to outside subcontracted consultants.
Management plans to use consultants, attorneys and
accountants as necessary until the Company has sufficient
funds to execute strategies for the Company. The Company's
performance and success is dependent on management's ability
to raise the necessary funds required to develop and promote
the sale of its products.
11
PATENTS AND TRADEMAKS
The patent pending and/or trademarks and copyrights from
Ecosafe, Terry Nylander, Roland Wahlgren and CanDew have now
been transferred to our name. The Company has also filed
other patents, trademarks and copyrights in other countries.
Item 1A. Risk Factors.
We have sought to identify what we believe to be the most
significant risks to our business. However, we cannot
predict whether, or to what extent, any of such risks may be
realized nor can we guarantee that we have identified all
possible risks that might arise.
We are dependent on external financing.
It is imperative that we raise additional capital to complete
our operational plan to promote and commercialize our newly
acquired business combinations and activities. We will also
require funds to sustain our business operations if we are
not successful in earning revenues from our product sales and
sub-licensing. We estimate that we would require additional
funding of $8,000,000 to pursue our business strategy. If we
are unable to obtain equity financing upon terms that our
management deems sufficiently favorable, or at all, it would
have a material adverse impact upon our ability to expand our
current operational plan. Any sale of share capital will
result in dilution to existing shareholders.
To date, we have generated some revenues from sales but not
enough to sustain our business operations. The success of
our business depends on us receiving inventory and
advertising materials from our suppliers and manufacturers.
The exact amount of our current and future capital
requirements will depend on numerous factors, some of which
are not within our control, including the progress of our
development efforts, the costs of testing, supply of our
products, demand of our products and changes in governmental
regulation. Our ability to raise additional financing
depends on many factors beyond our control, including the
state of capital markets, the market price of our common
stock and the development or prospects for development of
competitive technology by others. The necessary additional
financing may not be available to us or may be available only
on terms that would result in further dilution to the current
owners of our Common Stock. If we are unable to raise
additional funds when we need them, we may have to curtail or
discontinue our operations, in which case you could lose the
entire amount of your investment in the Company.
12
We are in our early stages of development and face a risk of
business failure.
We are in our early stages of development. We have no way to
evaluate the likelihood that we will be able to operate our
business successfully. The likelihood of success must be
considered in light of the problems, expenses, difficulties,
complications and delays encountered in connection with the
technology and sales industries. We recognize that if we are
unable to generate significant revenues from our sales, we
will not be able to earn profits or continue operations.
There is only a limited history upon which to base any
assumption as to the likelihood that we will prove
successful, and we can provide investors with no assurance
that we will generate any additional operating revenues or
ever achieve profitable operations from our current business
initiatives. If we are unsuccessful in addressing these
risks, our business will most likely fail.
We are competing against larger and better-financed
companies.
We operate in a highly competitive market with financial
rewards pending on market performance. Some of our
competitors are multi-million dollar enterprises with more
resources for marketing, distribution and development. We
may be in a disadvantage if any of our competitors focused on
similar products we sell. Because we don't have the
infrastructure and personnel in place to adequately implement
our business plans and operations, our business may fail.
Our business and the success of our products could be harmed
if we are unable to maintain our brand image.
Our success is heavily dependent upon the market acceptance
of our Wataire branded lines of atmospheric water generators.
If we are unable to timely and appropriately respond to
changing consumer demand, the brand Wataire distributes may
be impaired. Even if we react appropriately to changes in
consumer preferences, consumers may consider those brand
images to be outdated. Lack of acceptance of our brands will
have a material impact on the performance of the Company.
13
We are dependent on our suppliers
Our success is highly dependent upon the continued support
and services of suppliers. We are solely dependent on their
support to provide enough inventories to meet our purchase
orders. If our suppliers are not able to manufacture enough
products to meet the demands of our purchase orders, our
business will most likely fail.
Demand for our products and services may fail to materialize
Our growth and success will depend on our success in
introducing and selling our products. The market for the
products and services we plan to offer is relatively new and
there is little hard data to validate market demand or
predict how this demand will be segmented. There could be
much lower demand than believed, or interest in our products
and services could decline or die out, which could adversely
affect our ability to sustain our operations.
There is substantial doubt as to our ability to continue as a
going concern.
Our financial results for the fiscal year ending March 31,
2010 show substantial losses. The accompanying financial
statements have been prepared in conformity with the
generally accepted accounting principles in the United States
of American which contemplates the Company as a going
concern. The Company has sought out additional investment to
raise additional funds. However, there are no assurances that
the Company will continue as a going concern without the
successful completion of additional funding. The
accompanying consolidated financial statements do not include
any adjustments that might be necessary if the Company is
unable to continue as a going concern.
Our independent auditors, Gruber & Company LLC, have
expressed substantial doubt about our ability to continue as
a going concern given our recurring losses from operations
and net stockholder's deficit. This opinion could materially
limit our ability to raise additional funds by issuing new
debt or equity securities or otherwise.
14
Dependence on key management and personnel
Our success is highly dependent upon the continued services
of Robert Rosner, our Chief Executive Officer. If he were to
leave us this could have a materially adverse effect upon our
business and operations. We anticipate entering into
employment contract with Mr. Rosner but can provide no
assurance that we will come to terms for such employment
agreement.
Our business also requires additional staff in all areas to
successfully bring our products to market. Our success
depends on our ability to attract and retain technical and
management personnel with expertise and experience in the
technology field. If we are unable to attract and retain
qualified technical and management personnel, we will suffer
diminished chances of future success.
We may be subject to product liability or breach of contract
claim if our products do not work as represented.
The atmospheric water generators are designed to facilitate
potable safe drinking water. If the technology fails to work
as manufactured by our inventor(s) and predecessor, customers
may bring claims against us. Despite limitations on such
claims, such claims can be costly and time consuming which
could have a material adverse effect on our operations, even
if we are found not to have been at fault. We currently do
not have liability insurance and anticipate that we will seek
some coverage in the future if such coverage is available at
a reasonable cost.
Significant repair and/or replacement with respect to product
warranty claims or product recalls could have a material
adverse impact on the results of operations.
We provide a limited warranty for our products for a period
of one year. Significant warranty claims could have a
material adverse effect on our results of operations.
We are subject to governmental regulation
Regulation by government authorities in the United States,
Canada and foreign countries may be a factor in the
development, manufacture and marketing of our products and in
our research and product development activities. The process
of obtaining these approvals and the subsequent compliance
may require time and financial resources.
15
We have limited experience in marketing our products
Even if we are able to develop our products and obtain the
necessary regulatory approvals, we have limited experience or
capabilities in marketing or commercializing our products. We
currently have some sales and just engaged a marketing
agency. do not have a distribution infrastructure in place.
Accordingly, we are dependent on our ability to find
collaborative marketing partners or contract sales companies
for commercial sale of any of our products. Even if we find
a potential marketing partner, we may not be able to
negotiate an advertising and/or licensing contract on
favorable terms to justify our investment or achieve adequate
revenues.
Our business is subject to risks associated with offshore
manufacturing.
We import some of our products into the United States and
Canada from foreign countries for resale. All of our import
operations are subject to tariffs and quotas set by the U.S.
and other countries' governments through mutual agreements or
bilateral actions. Adverse changes in these import costs and
restrictions, or our suppliers' failure to comply with
customs regulations or similar laws, could harm our business.
Our operations are also subject to the effects of
international trade agreements and regulations such as the
North American Free Trade Agreement, the Caribbean Basin
Initiative and the European Economic Area Agreement, and the
activities and regulations of the World Trade Organization.
Trade agreements can also impose requirements that adversely
affect our business, such as setting quotas on products that
may be imported from a particular country into our key
market, the United States. In fact, some trade agreements can
provide our competitors with an advantage over us, or
increase our costs, either of which could have an adverse
effect on our business and financial condition.
In addition, the recent elimination of quotas on World Trade
Organization member countries by 2005 could result in
increased competition from developing countries which
historically have lower labor costs, including China. This
increased competition, including from competitors who can
quickly create cost and sourcing advantages from these
changes in trade arrangements, could have an adverse effect
on our business and financial condition.
16
Our ability to import products in a timely and cost-effective
manner may also be affected by problems at ports or issues
that otherwise affect transportation and warehousing
providers, such as labor disputes or increased U.S. homeland
security requirements. These issues could delay importation
of products or require us to locate alternative ports or
warehousing providers to avoid disruption to our customers.
These alternatives may not be available on short notice or
could result in higher transit costs, which could have an
adverse impact on our business and financial condition.
Our international operations expose us to political, economic
and currency risks.
All of our products came from sources outside of the United
States. As a result, we are subject to the risks of doing
business abroad, including:
- currency fluctuations;
- changes in tariffs and taxes;
- political and economic instability; and
- disruptions or delays in shipments.
Changes in currency exchange rates may affect the relative
prices at which we are able to manufacture products and may
affect the cost of certain items required in our operation,
thus possibly adversely affecting our profitability.
There are inherent risks of conducting business
internationally. Language barriers, foreign laws and customs
and duties issues all have a potential negative effect on our
ability to transact business in the United States. We may be
subject to the jurisdiction of the government and/or private
litigants in foreign countries where we transact business,
and we may be forced to expend funds to contest legal matters
in those countries in disputes with those governments or with
customers or suppliers.
We may suffer from infringements or piracy of our trademarks,
designs, brands or products.
We may suffer from infringements or piracy of our trademarks,
designs, brands or products in the U.S. or globally. Some
jurisdictions may not honor our claims to our intellectual
properties. In addition, we may not have sufficient legal
resources to police or enforce our rights in such
circumstances.
17
Unfair trade practices or government subsidization may impact
our ability to compete profitably.
In an effort to penetrate markets in which the Company
competes, some competitors may sell products at very low
margins, or below cost, for sustained periods of time in
order to gain market share and sales. Additionally, some
competitors may enjoy certain governmental subsidies that
allow them to compete at substantially lower prices. These
events could substantially impact our ability to sell our
product at profitable prices.
If we market and sell our products in international markets,
we will be subject to additional regulations relating to
export requirements, environmental and safety matters, and
marketing of the products and distributorships, and we will
be subject to the effects of currency fluctuations in those
markets, all of which could increase the cost of selling
products and substantially impair the ability to achieve
profitability in foreign markets.
As a part of our marketing strategy, we plan to market and
sell our products internationally. In addition to regulation
by the U.S. government, those products will be subject to
environmental and safety regulations in each country in which
we market and sell. Regulations will vary from country to
country and will vary from those of the United States. The
difference in regulations under U.S. law and the laws of
foreign countries may be significant and, in order to comply
with the laws of these foreign countries, we may have to
implement manufacturing changes or alter product design or
marketing efforts. Any changes in our business practices or
products will require response to the laws of foreign
countries and will result in additional expense to the
Company.
Additionally, we may be required to obtain certifications or
approvals by foreign governments to market and sell the
products in foreign countries. We may also be required to
obtain approval from the U.S. government to export the
products. If we are delayed in receiving, or are unable to
obtain import or export clearances, or if we are unable to
comply with foreign regulatory requirements, we will be
unable to execute our complete marketing strategy.
Item 1B. Unresolved Staff Comments.
Not applicable.
18
Item 2. Properties.
Our principal executive offices are located at 3rd Floor,
21900 Burbank Blvd., Woodland Hills, California 91367. The
Company's phone number is 877-602-8985.
Item 3. Legal Proceedings.
Aquaduct International, LLC v. Wataire International, Inc.
etal. This litigation was commenced on December 11, 2008 by
the Company's former distributor over the alleged purchase of
certain atmospheric water machines. On July 20, 2009, the
Company answered the lawsuit and filed a cross-complaint
against the plaintiff for Breach of Contract and Intentional
Interference. On February 2, 2010 a confidential settlement
agreement and release was effectuated between the parties.
The Complaint and cross complaint have been dismissed by the
parties with prejudice.
Item 4. (Reserved.)
PART II
Item 5. Market for Common Equity, Related Stockholder
Matters and Issuer Purchases of Equity Securities.
The Company's common stock is traded in the Over-the-
Counter Bulletin Board Market and on the "Pink Sheets" market
under the ticker symbol "WTAR".
The following table sets forth for each period indicated
the high and the low bid prices per share for the Company's
Common Stock.
Bid Prices
Quarter Ended High Low
March 31, 2010 0.0265 0.01
December 31, 2009 0.135 0.015
September 30, 2009 0.197 0.015
June 30, 2009 0.04 0.005
March 31, 2009 0.025 0.007
December 31, 2008 0.045 0.005
September 30, 2008 0.095 0.030
June 30, 2008 0.220 0.050
19
There were approximately 109 holders of record of the common
stock as of July 6 2010. The Company believes that an
undefined number of shares of its common stock are held in
either nominee name or street name brokerage accounts.
Consequently, the Company is unable to determine the exact
number of beneficial owners of its common stock.
The Company has never paid a cash dividend on its Common
Stock and does not anticipate paying dividends in the
foreseeable future. It is the present policy of the Company's
Board of Directors to retain earnings, if any, to finance the
expansion of the Company's business. The payment of dividends
in the future will depend on the results of operations,
financial condition, capital expenditure plans and other cash
obligations of the Company and will be at the sole discretion
of the Board of Directors
Section 15(g) of the Securities Exchange Act of 1934:
The Company's shares are covered by Section 15(g) of the
Securities Exchange Act of 1934, as amended that imposes
additional sales practice requirements on broker/dealers who
sell such securities to persons other than established
customers and accredited investors (generally institutions
with assets in excess of $5,000,000 or individuals with net
worth in excess of $1,000,000 or annual income exceeding $200,000
or $300,000 jointly with their spouses). For transactions
covered by this Section 15(g), the broker/dealer must make a
special suitability determination for the purchase and have
received the purchaser's written agreement to the transaction
prior to the sale. Consequently, Section 15(g) may affect the
ability of broker/dealers to sell the Company's securities
and also may affect your ability to sell your shares in the
secondary market.
20
Section 15(g) also imposes additional sales practice
requirements on broker/dealers who sell penny securities.
These rules require a one page summary of certain essential
items. The items include the risk of investing in penny
stocks in both public offerings and secondary marketing;
terms important to an understanding of the function of the
penny stock market, such as "bid" and "offer" quotes, a
dealers "spread" and broker/dealer compensation; the
broker/dealer compensation, the broker/dealers duties to its
customers, including the disclosures required by any other
penny stock disclosure rules; the customers rights and
remedies in causes of fraud in penny stock transactions; and,
the NASD's toll free telephone number and the central number
of the North American Administrators Association, for
information on the disciplinary history of broker/dealers and
their associated persons.
RECENT SALES OF UNREGISTERED SECURITIES
On April 8, 2008, the Company entered into an agreement to
issue 1,600,000 units at $0.05 per unit with Darfield
Financial Corp. for an aggregate amount of $80,000. Each unit
consists of one common share and one half warrant exercisable
at $0.05 per share on or before April 7, 2011.
On May 30, 2008, the Company entered into a private placement
agreement to issue 1,111,112 common stock at $0.09 per share
for proceeds of $100,000 to two accredited investors and to
issued 555,556 common stock to each investor.
On June 17, 2008, the Company approved the issuance of
1,000,000 units at $0.06 per share to settle amounts due to a
director of the Company totaling $60,000. Each unit contains
one common share and one share warrant exercisable at $0.06
per share on or before June 16, 2011.
On July 8, 2008, the Company approved the issuance of
1,000,000 units at $0.05 per share to settle amounts due to
a director of the Company totaling $50,000. Each unit
contains one common share and one share warrant exercisable
at $0.05 per share on or before July 7, 2011.
On January 9, 2009, the Company approved the issuance of
8,000,000 common shares at $0.005 per share to settle amounts
due to a director of the Company totaling $40,000.
On February 26, 2009, the Company has signed agreement with
existing warrant options holders to cancel all existing
warrant options available to the Company.
21
On April 22, 2009, the Company approved the issuance of
4,000,000 common shares at $0.005 per share to settle amounts
due to a debtor of the Company totaling $20,000.
On July 31, 2009, the Company approved the issuance of
7,600,000 common shares at $0.02 per share for services
provided by several professionals for a 12 months period
totaling $152,000.
On September 14, 2009, the Company entered into a definitive
agreement with the Chief Executive Officer and director of
the Company for the issuance of share purchase warrants for
executive compensation, with a term of five years expiring
September 14, 2014, exercisable at $0.01 per share, for
7,500,000 shares of common stock with a cashless exercise
provision. The Company recognized $94,242 in stock based
compensation expense for the issuance of these warrants.
On September 14, 2009, the Company received $304,534 in
convertible subordinated notes from investors and a related
party. These notes carries an 5% annual interest rate with
both principle and accrued interest payable on October 1,
2011. At the holders discretion these notes and any accrued
interest may be converted into common shares at $0.01 per
share.
The above issuances to lenders, consultants and investors are
viewed by the Company as exempt from registration under the
Securities Act of 1933, as amended ("Securities Act"),
alternatively, as transactions either not involving any
public offering, or as exempt under the provisions of
Regulation D, Regulation S or Rule 701 promulgated by the SEC
under the Securities Act.
Item 6. Selected Financial Data.
The following selected financial data has been derived from
our audited financial statements and should be read in
conjunction with such financial statements included herein.
For the year ended March 31,
2010 2009
Statement of operations data:
Operating revenues 15,000 174,540
Gross profit (3,000) 24,816
Gain (loss)- continuing operations (552,634) (714,182)
Gain (loss)- continuing operations (0.01) (0.01)
22
Balance sheet data:
Total assets 3,096,516 3,088,061
Long-term debt 321,449 -
Item 7. Management's Discussion and Analysis of Financial
Condition and Results of Operations.
The following discussion of our financial condition and
results of operations should be read in conjunction with the
financial statements and notes thereto and the other
financial information included elsewhere in this report.
Certain statements contained in this report, including,
without
limitation, statements containing the words "believes,"
"anticipates," "expects" and words of similar import,
constitute "forward looking statements" within the meaning of
the Private Securities Litigation Reform Act of 1995. Such
forward-looking statements involve known and unknown risks
and uncertainties. Our actual results may differ materially
from those anticipated in these forward-looking statements as
a result of certain factors, including our ability to create,
sustain, manage or forecast our growth; our ability to
attract and retain key personnel; changes in our business
strategy or development plans; competition; business
disruptions; adverse publicity; and international, national
and local general economic and market conditions.
Overview
Wataire is a Washington corporation incorporated on August
17, 2000. Wataire is currently in the development stage and
has completed its acquisition of all of the intellectual
property relating a water treatment process and devices for
water-from-air machines. The agreements previously executed
between the Company and Ecosafe have been terminated and
cancelled and forms part of the current agreement. To this
end, the Company's future results of operation will be highly
dependent upon the success of its efforts to sell and market
its products and technologies. The Company plans to sell its
products to distributors and also through multiple indirect
channels, such as resellers.
Results of Operations for the Years ended March 31, 2010
Our audited operating results and cash flows are presented
for the year ended March 31, 2010 and March 31, 2009 and for
the period of inception to March 31, 2010.
23
Revenues. For the year ended March 31, 2010, we had
total revenue of $15,000 compared to $174,540 for the
year ended March 31, 2009.
Operating Expenses. For the year ended March 31, 2010,
we had total operating expenses of $599,634 as compared
to $738,998 for the year ended March 31, 2009. The
decrease was mainly due to the absence of "Advances
Written Off" and "Research & Development" expenses in
the former year, which was offset by the incurrence of
"Amortization of notes discount", "Stock-based
compensation" and "Website development costs" of
$28,505, $94,242 and $37,449 respectively in the former
year but not in the latter.
Professional Fees. For the year ended March 31, 2010,
we had professional fees of $144,363 as compared to
$54,126, an increase of $90,237.
Net Loss. The net loss for the year ended March 31,
2010 was $598,994 as compared to $714,182 for the year
ended March 31, 2009, a decrease of $115,188. The
decrease was generally due to the overall decrease in
total expenditures amounting to $139,364.
Plan of Operation
We currently have minimal cash reserves and a significant
working capital deficit. Accordingly, our ability to pursue
our plan of operations is contingent on our being able to
obtain funding for the development, marketing and
commercialization of our products and services.
Management plans, as soon as finances permit, to hire
additional management and staff for its US-based operations
especially in the areas of finance, sales, marketing, and
investor/public relations. The Company may also choose to
outsource some of its marketing requirements by utilizing a
series of independent contractors based on the projected size
of the market and the compensation necessary to retain
qualified employees.
To achieve our new operational plan, we will need to raise
substantial additional capital for our operations through
licensing fees and product sales, sale of equity securities
and/or debt financing. We have no cash to fund our
operations
at this time, so we plan to sell licenses and products, offer
common stock in private placements as well as seeking debt
financing during the next 12 months to raise up to
$8,000,000. We believe the proceeds from such efforts will
enable us to expand our operations, buy inventory and start
our marketing campaign.
24
Due to the "start up" nature of the Company's business, the
Company expects to incur losses as the Company conducts its
ongoing research, product and systems development programs.
We will require additional funding to continue our
operations, for marketing expenses, to pursue regulatory
approvals for our products, for any possible acquisitions or
new technologies, and we may require additional funding to
establish manufacturing capabilities in the future. We may
seek to access the public or private equity markets whenever
conditions are favorable. We may also seek additional
funding through strategic alliances or collaborate with
others. We cannot assure you that adequate funding will be
available on terms acceptable to us, if at all. Because we
are presently in the early stages of development and
promotional stages of our business, we can provide no
assurance that we will be successful with our efforts to
establish any revenue. In order to pursue our existing
operational plan, we are dependent upon the continuing sales
and financial support of creditors and stockholders until
such time when we are successful in raising debt/equity
capital to finance the operations and capital requirements of
the Company or until such time that we can generate
sufficient revenue from our various divisions.
Liquidity and Financial Resources
The Company remains in the development stage since inception.
Operations were financed through proceeds from sales and the
issuance of equity and loans from directors. The directors
have also advanced funds into the Company to cover cash flow
deficiencies. The advances have no stated repayment terms.
These funds were used to pay inventory, services, legal and
accounting expenses along with several other miscellaneous
operational infrastructure costs.
The Company's financial statements are presented on a going
concern basis, which contemplates the realization of assets
and the satisfaction of liabilities in the normal course of
business. At March 31, 2010, we have had little success in
raising additional capital to meet our plan of operations.
Our cash position as of March 31, 2010 was $57. Since
inception, we have recognized no significant revenue. We have
accumulated operating losses of $11,000,701. At the present
time, and over the next twelve months, our primary focus will
be to develop our marketing plan, new initiatives and
operational plan to establish sales and to explore various
methods for raising additional funds.
25
Critical Accounting Issues
The Company's discussion and analysis of its financial
condition and results of operations are based upon the
Company's financial statements, which have been prepared in
accordance with accounting principles generally accepted in
the United States of America. The preparation of the
financial statements requires the Company to make estimates
and judgments that affect the reported amount of assets,
liabilities, and expenses, and related disclosures of
contingent assets and liabilities. On an on-going basis, the
Company evaluates its estimates, including those related to
intangible assets, income taxes and contingencies and
litigation. The Company bases its estimates on historical
experience and on various assumptions that are believed to be
reasonable under the circumstances, the results of which form
the basis for making judgments about carrying values of
assets and liabilities that are not readily apparent from
other sources. Actual results may differ from these estimates
under different assumptions or conditions.
NEW FINANCIAL ACCOUNTING STANDARDS
For a summary of new financial accounting standards
applicable to the Company, please refer to the accompanying
notes to the financial statements.
Item 7A. Quantitative and Qualitative Disclosures About
Market Risk.
We are primarily exposed to foreign currency risk, interest
rate risk and credit risk.
Foreign Currency Risk - We import products from foreign
countries into the United States and market our products in
North America. As a result, our financial results could be
affected by factors such as changes in foreign currency
exchange rates or, if we initiate our planned international
operations, weak economic conditions in foreign markets.
Because our revenues are currently denominated in U.S.
dollars, a strengthening of the dollar could make our
products less competitive in foreign markets that we plan to
enter. We have not hedged foreign currency exposures related
to transactions denominated in currencies other than U.S.
dollars. We do not engage in financial transactions for
trading or speculative purposes.
26
Interest Rate Risk - Interest rate risk refers to
fluctuations in the value of a security resulting from
changes in the general level of interest rates. Investments
that are
classified as cash and cash equivalents have original
maturities of three months or less. Our interest income is
sensitive to changes in the general level of U.S. interest
rates. We do not have significant short-term investments,
and due to the short-term nature of our investments, we
believe that there is not a material risk exposure.
Credit Risk - Our accounts receivables are subject, in the
normal course of business, to collection risks. We regularly
assess these risks and have established policies and business
practices to protect against the adverse effects of
collection risks. As a result we do not anticipate any
material losses in this area.
Item 8. Financial Statements and Supplementary Data.
The financial statements and supplementary data are located
at the end of this report.
Item 9. Changes in and Disagreements with Accountants on
Accounting and Financial Disclosure.
Not applicable
Item 9A (T). Controls and Procedures.
As supervised by our board of directors and our principal
executive and principal financial officers, management has
established a system of disclosure controls and procedures
and has evaluated the effectiveness of that system. The
system and its evaluation are reported on in the below
Management's Annual Report on Internal Control over Financial
Reporting. Our principal executive and financial officer has
concluded that our disclosure controls and procedures (as
defined in the 1934 Securities Exchange Act Rule 13a-15(e))
as of March 31, 2010, are effective, based on the evaluation
of these controls and procedures required by paragraph (b) of
Rule 13a-15.
27
Management's Annual Report on Internal Control over Financial
Reporting
Management is responsible for establishing and maintaining
adequate internal control over financial reporting, as such
term is defined in Rule 13a-15(f) of the Securities Exchange
Act of 1934 (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 for external
purposes in accordance with U.S. generally accepted
accounting principles.
Management assessed the effectiveness of internal control
over financial reporting as of March 31, 2010. We carried out
this assessment using the criteria of the Committee of
Sponsoring Organizations of the Treadway Commission (COSO) in
Internal Control-Integrated Framework.
This annual report does not include an attestation report of
our registered public accounting firm regarding internal
control over financial reporting. 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 us to provide
only management's report in this annual report. Management
concluded in this assessment that as of March 31, 2010, our
internal control over financial reporting is effective.
There have been no significant changes in our internal
control over financial reporting (as defined in Rules 13a-
15(f) and 15d-15(f) under the Exchange Act) during the fourth
quarter of our 2010 fiscal year that have materially
affected, or are reasonably likely to materially affect, our
internal control over financial reporting.
Item 9B. Other Information.
None.
28
PART III
Item 10. Directors, Executive Officers, Promoters, Control
Persons and Corporate Governance.
Directors and Executive Officers
The following sets forth certain information with respect to
the directors and executive officers of Wataire:
Name Age Office Held
Robert Rosner (1) 45 CEO, Secretary,
Director, Chairman
of the Board
Thomas M. Braid (2) 48 Treasurer, CFO,
Director
Notes:
(1)
Mr. Robert Rosner was appointed a Director in August
2003, Chief Executive Officer and Chairman of the Board on
August 19, 2005 and Corporate Secretary on March 13, 2007.
Mr. Thomas M. Braid was appointed as Treasurer, Chief
Financial Officer and Director on June 12, 2009.
Set forth below is a brief description of the background and
business experience of each of our executive officers and
directors for the past five years.
Mr. Robert Rosner - Chief Executive Officer, Corporate
Secretary, Director and Chairman of the Board
Mr. Rosner has served as a Director since August 2003, the
Company's Chairman and Chief Executive Officer since August
2005. He was the Vice President of Regulatory Affairs and
Compliance and Corporate Secretary from August 2003 until
August 2005. He was President from August 2005 to April
2007. He was re-appointed Corporate Secretary in March 2007.
Mr. Rosner was the president and director of Fortuna Silver
Mines Inc., a company listed on the Canadian Venture
Exchange, from June 1996 to January 2005.
Mr. Thomas M. Braid - Treasurer, Chief Financial Officer and
Director
29
Mr. Braid was appointed as Director, Chief Financial Officer
and Treasurer on June 12, 2009. He has had over 30 years of
experience in the newspaper industry and is a widely
respected and multi-award winning photojournalist, photo
department
manager, college instructor, workshop leader and community
volunteer. In October of 2002, he was awarded the Queen's
Golden Jubilee Medal by the Governor General of Canada and
the Canadian Government. In 2007, he was awarded the Edmonton
Sun's highest award by being honored with the Douglas
Creighton Award.
TERM OF OFFICE
Our directors are elected for a one-year term to hold office
until the next annual general meeting of our shareholders
or until removed from office in accordance with our bylaws.
Our officers are appointed by our board of directors and
hold office until removed by the board.
ADVISORY BOARD MEMBERS
The Company's advisory board members are appointed by the
Board of Directors to help oversee and provide support
relating to the Company's business affairs. The advisory
board members meet in person or via telephone conferencing
with the Board of Directors.
In May 2007, the Company initiated its Advisory Board
consisting of Professor James Marsden, PhD and Mr. Brian
Baker, BA. Since Mr. Brian Baker passed away, Dr. James
Marsden, a distinguished scientist and food safety and
security expert, has been the Company's Chairman of the
Scientific Advisory Board. Dr. Marsden currently serves as
Regent's Distinguished Professor and Associate Director of
the Biosecurity Institute at Kansas State University ("KSU").
KSU has placed a major emphasis on food safety and security.
The research and educational activities at KSU address issues
that directly impact human health, agricultural security and
the economy. The university is the site of the Biosecurity
Research Institute and the National Agricultural Biosecurity
Center. Dr. Marsden will advise us on issues relating to the
production of water for consumer products; products sized for
large commercial applications; government and military
systems; remote systems designed to produce drinking water
and sanitation in developing countries.
30
Committees
We do not have an audit committee, although we intend to
establish such a committee, with an independent "audit
committee financial expert" member as defined in the rules of
the SEC.
Corporate Code of Conduct
We are reviewing a proposed corporate code of conduct, which
would provide for internal procedures concerning the
reporting and disclosure of corporate matters that are
material to our business and to our stockholders. The
corporate code of conduct would include a code of ethics for
our officers and employees as to workplace conduct,
dealings with customers, compliance with laws, improper
payments, conflicts of interest, insider trading,
company confidential information, and behavior with honesty
and integrity.
Section 16(A) Beneficial Ownership Reporting Compliance
-------------------------------------------------------
Section 16(a) of the Securities Act of 1934 requires the
Company's officers and directors, and greater than 10%
stockholders, to file reports of ownership and changes in
ownership of its securities with the SEC. Copies of the
reports are required by SEC regulation to be furnished to the
Company.
Based solely upon a review of the Forms 3, 4, and 5 furnished
to us for the fiscal year ended March 31, 2010, we have
determined that our directors, officers, and greater than 10%
beneficial owners complied with all applicable Section 16
filing requirements.
Item 11. Executive Compensation.
The following table sets forth information for the years
ended March 31, 2010, 2009 and 2008 concerning the
compensation paid or awarded to the Directors and Executive
Officers of WTAR.
FILL IN FOR LAST THREE FISCAL YEARS
31
SUMMARY COMPENSATION TABLE
EXECUTIVE COMPENSATION POLICIES
Other Restricted Securities All
Name and annual stock underlying LTIP other
principal Year Salary Bonus compen- awards Options/ payouts compen-
position sation SARs sation
($) ($) ($) ($) (#) ($) ($)
(a) (b) (c) (d) (e) (f) (g) (h) (i)
Robert 2010 180,000 nil nil nil nil nil nil
Rosner 2009 180,000 nil nil nil nil nil nil
2008 75,000 nil nil nil nil nil nil
CEO,
Secretary
& Director
Richard 2010 nil nil nil nil nil nil nil
Jordan 2009 nil nil nil nil nil nil nil
2008 nil nil nil nil 200,000 nil nil
Treasurer,
CFO &
Director
Terrence 2008 nil nil nil nil nil nil nil
Nylander
Former
President
&
Former
Director
The Company anticipates entering into an employment contract
with Robert Rosner, our Chief Executive Officer, but can
provide no assurance that we will come to terms for such
employment agreement.
Item 12. Security Ownership of Certain Beneficial Owners and
Management and Related Stockholder Matters.
The following table sets forth certain information
regarding the beneficial ownership of the Company's common
stock as of June 30, 2010, by (a) each person known by the
Company to own beneficially more than 5% of the Company's
common stock, (b) each director of the Company who
beneficially owns common stock, and (c) all officers and
directors of the Company as a group. Each named beneficial
owner has sole voting and investment power with respect to
the shares owned.
32
As of July 14, 2010, there were 98,710,123 shares of common
stock outstanding.
Name and Address Amount and Nature
of Beneficial Position of Beneficial Percentage of
Owner Ownership Common Stock (1)
Robert Rosner CEO, 21,498,328 shares 21.78%
134-9663 Santa Secretary, (2)
Monica Blvd., Director
Beverly Hills,
California
Wataire Ecosafe Shareholder 13,400,000 shares 13.58%
Technologies Inc.
3033 King George
Hwy Suite 24
Surrey, BC Canada
All Directors and 21,498,328 shares 21.78%
Officers
as a group (1
person)
Beneficial ownership of common stock has been determined for
purposes of the above table in accordance with Rule 13d-3
under the Exchange Act, under which a person is deemed to be
the beneficial owner of securities if such person has or
shares voting power or investment power with respect to such
securities, has the right to acquire beneficial ownership
within 60 days or acquires such securities with the purpose
or effect of changing or influencing the control of the
Company.. A person is deemed to be the beneficial owner of
securities that can be acquired by such person within 60 days
from the date of this information statement upon the exercise
of warrants or options. Each beneficial owner's percentage
ownership is determined by assuming that options and warrants
that are held by such person (but not those held by any other
person) and that are exercisable within 60 days from the date
of this Annual Report have been exercised. For purposes of
calculating beneficial ownership, the total issued and
outstanding common stock of the Company as at the date of
this Annual Report was 98,710,123.
Voting and dispositive power over the shares held of record
by Ecosafe Innotech Inc., (formerly, Wataire Ecosafe
Technologies Inc., formerly Wataire Industries Inc.) is
exercised by its board of directors.
33
Item 13. Certain Relationships and Related Transactions, and
Director Independence.
In January 2007, the Company agreed to issue to Robert
Rosner, our Chief Executive Officer, up to 200,000 units,
each unit consisting of a share of common stock and a warrant
to purchase a share of common stock, in consideration for the
forgiveness of up to $150,000 of indebtedness of the Company
to Mr. Rosner ($.75 per unit). The warrants stock expire
December 31, 2008 and are exercisable at $.85 per share if
the warrant is exercised on or before June 30, 2007, at $1.00
if the warrant is exercised on or before December 31, 2007,
and at $1.15 if the warrant is exercised on or before
December 31, 2008. 195,334 units were issued to Mr. Rosner.
In October 2007, the Company agreed to issue to Robert
Rosner, our Chief Executive Officer, 696,494 units, each unit
consisting of a share of common stock and a warrant to
purchase a share of common stock, in consideration for the
forgiveness of up to $118,404 of indebtedness of the Company
to Mr. Rosner ($.17 per unit). The warrants stock will
expire on September 30, 2010 and are exercisable at $0.17 per
share.
In March 2008, the Company agreed to issue to Robert Rosner,
our Chief Executive Officer, 4,400,000 units, each unit
consisting of a share of common stock and one half of a
warrant whereby each whole warrant entitles the holder to
purchase a share of common stock, in consideration for the
forgiveness of $220,000 of indebtedness of the Company to Mr.
Rosner ($0.05 per unit). The warrants stock will expire on
March 18, 2011 and are exercisable at $0.05 per share. As of
the date of this
annual report, the shares have not been issued.
In March 2008, the Company agreed to issue to Robert Rosner,
our Chief Executive Officer, 25,000 shares of Preferred
stock, in consideration for the forgiveness of $5,000 of
indebtedness of the Company to Mr. Rosner ($0.20 per share).
As of the date of this annual report, the shares have not
been issued.
In June 2008, the Company agreed to issue to Robert Rosner,
our Chief Executive Officer, 1,000,000 units, each unit
consisting of a share of common stock and a warrant to
purchase a share of common stock, in consideration for the
forgiveness of $60,000 of indebtedness of the Company to Mr.
Rosner ($0.06 per unit). The warrants stock will expire June
16, 2011 and exercisable at $0.06 per share. As of the date
of this annual report, the shares have not been issued.
34
In July 2008, the Company agreed to issue to Robert Rosner,
our Chief Executive Officer, 1,000,000 units, each unit
consisting of a share of common stock and a warrant to
purchase a share of common stock, in consideration for the
forgiveness of $50,000 of indebtedness of the Company to Mr.
Rosner ($0.05 per unit). The warrants stock will expire July
7, 2011 and exercisable at $0.05 per share. As of the date
of this annual report, the shares have not been issued.
In January 9, 2009, the Company agreed to issue to Robert
Rosner, our Chief Executive Officer, 8,000,000 common shares
at $0.005 per share, in consideration for the forgiveness of
$40,000 of indebtedness of the Company to Mr. Rosner.
On February 26, 2009, the Company signed agreements with
existing warrant options holders to cancel all existing
outstanding warrants and options to purchase securities of
the Company.
Our management is involved in other business activities and
may, in the future become involved in other business
opportunities. If a specific business opportunity becomes
available, such persons may face a conflict in selecting
between our business and their other business interests. In
the event that a conflict of interest arises at a meeting of
our directors, a director who has such a conflict will
disclose his interest in a proposed transaction and will
abstain from voting for or against the approval of such
transaction.
Item 14. Principal Accountant Fees and Services.
Audit Fees . Audit fees expected to be billed to us by
Gruber & Company, LLC for the audit of financial statements
included in our Annual Reports on Form 10-K for the years
ended March 31, 2010 and 2009 are approximately $10,000 and
$10,000, respectively. These fees include auditing fees and
review of quarterly financial statements for the fiscal years
ended March 31, 2010 and 2009 respectively.
Tax Fees . We have been billed an aggregate of $Nil
for the fiscal years ended March 31, 2010 and March 31, 2009,
respectively, for tax services.
All Other Fees . We have been billed an aggregate of
$Nil for the fiscal years ended March 31, 2010 and 2009
respectively, for permitted non-audit services.
Other Matters . N.A.
35
To our knowledge, there have been no persons, other than
Gruber & Company's full time, permanent employees who have
worked on the audit or review of our financial statements.
PART IV
Item 15. Exhibits and Financial Statement Schedules.
(3) Exhibits.
Exhibit
Number
Description of Exhibit
--------- -------------------------------------------------
3.3 Amendment of Articles of Incorporation (Incorporated by
reference to Exhibit 8.01 to the Company's Current Report on
Form 8-K, filed October 17, 2006)
10.1
License Agreement between the Company and Wataire Industries
Inc. dated July 10, 2006 (Incorporated by reference to
Exhibit 99.1 to the Company's Current Report on Form 8-K,
filed July 14, 2006).
10.2
License Agreement between the Company and Wataire industries
Inc. dated September 12, 2006 ((Incorporated by reference to
Exhibit 99.1 to the Company's Current Report on Form 8-K,
filed September 15, 2006).
10.3
Amended License Agreement between the Company and Wataire
Industries Inc. dated October 19, 2006 ((Incorporated by
reference to Exhibit 10.3 to the Company's Current Report on
Form 8-K, filed October 23, 2006).
10.4
Amended License Agreement between the Company and Wataire
Industries Inc. dated October 19, 2006 ((Incorporated by
reference to Exhibit 10.4 to the Company's Current Report on
Form 8-K, filed October 23, 2006).
10.5
2006 Stock Option Plan (Incorporated by reference to Exhibit
10.3 to the Company's Current Report on Form 8-K, filed
October 10, 2006).
10.6
Form of Stock Option Agreement at $0.50 (Incorporated by
reference to Exhibit 10.4 to the Company's Current Report on
Form 8-K, filed October 10, 2006).
36
10.7
Form of Stock Option Agreement at $0.62 (Incorporated by
reference to Exhibit 10.4 to the Company's Current Report on
Form 8-K, filed November 13, 2006).
10.8
Amended 2006 Stock Option Plan*.
10.9
Consulting Agreement between Cucoloris Films Inc. and the
Company dated December 11, 2006 (Incorporated by reference to
Exhibit 10.5 to the Company's Current Report on Form 8-K,
filed December 15, 2006).
10.10
Consulting Agreement between Cucoloris Films Inc. and the
Company dated December 11, 2006 (Incorporated by reference to
Exhibit 10.6 to the Company's Current Report on Form 8-K,
filed December 15, 2006).
10.12
Warrant issued to P204 Enterprises Ltd. on October 17, 2006
(Incorporated by reference to Exhibit 99.2 to the Company's
Current Report on Form 8-K, filed October 20, 2006).
10.13 License Agreement between Airborne Water Company and the
Company dated January 25, 2007 (Incorporated by reference to
Exhibit 10.1 to the Company's Current Report on Form 8-K,
filed January 31, 2007).
10.14 IP Transfer Agreements between the Company, Wataire
Industries Inc., Canadian Dew
Technologies Inc., Terrence Nylander and Roland Wahlgren
(Incorporated by reference to Exhibit 10.1 to the Company's
Current Report on Form 8-K, filed April 30, 2007).
10.15
Form of Stock Option Agreement at $0.57 (Incorporated by
reference to Exhibit 10.2 to the Company's Current Report on
Form 8-K, filed April 10, 2007).
10.16
Form of Stock Option Agreement at $0.65 (Incorporated by
reference to Exhibit 10.2 to the Company's Current Report on
Form 8-K, filed May 9, 2007).
10.17 Compensation Agreement between Cucoloris Films Inc. and the
Company dated May 23, 2007
10.18
Amendment to Agreement between Airborne Water Company and the
Company dated June 20, 2007 (Incorporated by reference to
Exhibit 10.2 to the Company's Current Report on Form 8-K,
filed June 20, 2007).
10.19 Agreement between Access Energy Technologies and the Company
dated June 14, 2007
37
10.20
Amendment to Agreement between Access Technologies and the
Company dated June 20, 2007 (Incorporated by reference to
Exhibit 10.1 to the Company's Current Report on Form 8-K,
filed June 18, 2007).
10.21
Amendment to Agreement between Aquaduct and the Company dated
June 20, 2007 (Incorporated by reference to Exhibit 10.1 to
the Company's Current Report on Form 8-K, filed June 20,
2007).
10.22
Exclusive Marketing Agency Agreement, dated June 13, 2007,
between the Company and Access Energy Technologies Ltd.
(Incorporated by reference to Exhibit 10.1 to the Company's
Current Report on Form 8-K, filed June 18, 2007).
10.23
Form of 5% Convertible Subordinated Debenture due October 1,
2011. (Incorporated by reference to Exhibit 10.16 to the
Company's Current Report on Form 8-K, filed January 15,
2010
10.24
Form of Subscription Agreement for Convertible Subordinated
Debentures due October 1, 2011. (Incorporated by reference
to Exhibit 10.17 to the Company's Current Report on Form 8-K,
filed January 15, 2010.
10.25
Form of 5-year Warrants issued September 14, 2009, to
purchase an aggregate of 7,500,000 shares of Common Stock.
(Incorporated by reference to Exhibit 10.18 to the Company's
Current Report on Form 8-K/A, filed March 12, 2010.
31.1 Certification of the Chief Executive Officer pursuant to
Section 302 of the
Sarbanes-Oxley Act of 2002, filed herewith.
31.2 Certification of the Chief Financial Officer pursuant to
Section 302 of the
Sarbanes-Oxley Act of 2002, filed herewith.
32.1 Certification of the Chief Executive Officer pursuant to
Section 906 of the
Sarbanes-Oxley Act of 2002, filed herewith.
32.1 Certification of the Chief Financial Officer pursuant to
Section 906 of the
Sarbanes-Oxley Act of 2002, filed herewith.
99.1 License Agreement between the Company and On4 Communications
Inc., formerly
38
Petsmobility Network (Canada) Inc. (Incorporated by reference
to Exhibit 99.1 to the Company's Current Report on Form 8-K,
filed June 17, 2005).
99.2 Asset Purchase Agreement between the Company, Petsmobility
Inc. and On4
Communications, Inc. (Incorporated by reference to Exhibit
99.1 to the Company's Current Report on Form 8-K, filed
February 6, 2006).
99.3 Rescission Agreement between the Company and On4
Communications, Inc. (Incorporated by reference to Exhibit
99.2 to the Company's Current Report on Form 8-K, filed
February 6, 2006).
99.4 Articles of Correction (Incorporated by reference to Exhibit
99.1 to the Company's Current Report on Form 8-K, filed
February 6, 2006).
SIGNATURES
In accordance with 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.
Dated: July 14, 2010
WATAIRE INTERNATIONAL, INC.
By: /s/ Robert Rosner
Robert Rosner
Chief Executive Officer,
Director
July 14, 2010
By: /S/ Thomas M. Braid
Thomas M. Braid
Chief Financial Officer,
Director
39
Item 8 Financial Statements.
WATAIRE INTERNATIONAL, INC.
(A Development Stage Company)
CONSOLIDATED FINANCIAL STATEMENTS
March 31, 2010
(Stated in US Dollars)
40
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
THE BOARD OF WATAIRE INTERNATIONAL, INC.
We have audited the accompanying consolidated balance sheets of
Wataire International, Inc. (a Developmental Stage Company) as of
March 31, 2010 and 2009, and the related statement of operations,
stockholders equity and cash flows for the periods then ended.
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 audit.
We conducted our audit in accordance with the standards of the
Public Company Accounting Oversight Board (United States). Those
standards require that we plan and perform our audit 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 audit 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. An audit also includes assessing the
accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement
presentation. We believe that our audit provides a reasonable basis
for our opinion.
In our opinion, the consolidated financial statements referred to
above present fairly, in all material respects, the financial
position of Wataire International, Inc. (a Developmental Stage
Company) as of March 31, 2010 and 2009, the results of its'
operations and its' stockholders equity and cash flows for the
periods then ended in conformity with accounting principles
generally accepted in the United States of America.
The accompanying consolidated financial statements have been
prepared assuming that the Company will continue as a going concern.
The Company's viability is dependent upon its ability to obtain
future financing and the success of its future operations. These
factors raise substantial doubt as to the Company's ability to
continue as a going concern. Management's plan in regard to these
matters is described in Note 1. The financial statements do not
include any adjustments that might result from the outcome of this
uncertainty.
Gruber & Company, LLC Saint Louis, Missouri
July 14, 2010
41
WATAIRE INTERNATIONAL, INC.
(Formerly Cimbix Corporation)
(A Development Stage Company)
BALANCE SHEETS
(Stated in US Dollars)
March 31, March 31,
2010 2009
Assets
Current Assets
Cash $ 57 $ 35
Accounts receivable 9,000 -
Prepaid expenses & retainer 456 9,766
Sales deposit 10,000 -
Advance on marketing agreements 250,000 250,000
Inventory 249,506 250,456
Total Current Assets 519,019 510,257
Capital assets, net 1 308
Patents, Trademarks 31,434 31,434
Acquisitions of intangibles 2,546,062 2,546,062
______________________________
Total Assets $ 3,096,516 $ 3,088,061
______________________________
Liabilities
Current Liabilities
Accounts payable $ 472,896 $ 353,854
Provision and accrued liabilities 9,255 -
Shareholder loan and interest - 106,589
Due to related parties 84,140 1,280
Deferred revenue 154,924 189,067
Total Current Liabilities 721,215 650,790
Long Term Liabilities
Derivative liability 197,158 -
5% Converible Debentures 90,888 -
Convertible debenture, net 33,403 -
______________________________
Total Liabilities 1,042,664 650,790
Stockholders' Equity
Preferred shares, $0.0001 par value,
redeeemable at $0.005
Authorized 20,000,000 shares
Issued and outstanding, 27,501
(March 31, 2009: 27,501) 3 3
Common shares, $0.0001 par value:
Authorized 100,000,000 shares
Issued and outstanding, 98,710,123
(March 31, 2009: 87,110,123) 9,871 8,711
Additional paid-in capital 13,145,346 12,880,264
Deferred Stock-Based Comp. (50,667) -
Deficit accumulated during the
development stage (11,050,701) (10,451,707)
______________________________
Total Equity $ 2,053,852 $ 2,437,271
______________________________
Total Liabilities and
Stockholders' Equity $ 3,096,516 $ 3,088,061
______________________________
The accompanying notes are an integral part of the financial statements
42
WATAIRE INTERNATIONAL, INC.
(Formerly Cimbix Corporation)
(A Development Stage Company)
STATEMENTS OF OPERATIONS
(Stated in US Dollars)
August 17,
2000 (Inception)
Year ended March 31, to March 31,
2010 2009 2010
Sales $ 15,000 $ 174,540 $ 503,102
Cost of sales (18,000) (149,724) (394,292)
______________________________________________
Gross margin (3,000) 24,816 108,810
Other income - - 9,500
______________________________________________
(3,000) - 118,310
Expenses
Advances written off - 149,542 234,542
Amortization 306 307 71,049
Amortization of notes discount 28,505 - 28,505
Bad debt written off - 2,800 2,800
Donated services - - 11,250
Foreign exchange (gain)/loss - 21,399 (42,356)
General and administrative 98,102 195,132 892,862
Incorporation costs - - 2,005
Management fees 180,000 180,000 826,883
Marketing and promotion 54,116 30,692 218,717
Professional fees 144,363 54,126 503,218
Research & Development - 105,000 202,143
Settlement of accounts payable - - (3,250)
Stock-based compensation 94,242 - 8,104,292
______________________________________________
Total Expenses 599,634 738,998 11,057,660
Loss from continuing operations (602,634) (714,182) (10,939,350)
Gain/(Loss) from discontinued
operations 3,640 - (111,351)
______________________________________________
Net loss for the year $ (598,994) $ (714,182) $ (11,050,701)
Basic and diluted loss per share (0.01) (0.01)
Weighted average number of
shares outstanding 95,960,534 80,863,905
The accompanying notes are an integral part of the financial statements
43
WATAIRE INTERNATIONAL, INC.
(Formerly Cimbix Corporation)
(A Development Stage Company)
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY (DEFICIENCY)
for the period August 17, 2000 (Inception) to March 31, 2010
(Stated in US Dollars)
Shares Total
Subscrip Additional Stock-
Common -tions Preferred Paid-in Accum. holders'
Shares Amount Received Shares Amount Capital Deficit Equity
Common
shares
issued 200 - - - 10 10
Shares
subscrip
-tion 150,280 150,280
Net loss
for the
period (216,896) (216,896)
_______________________________________________________________________________
Bal,Sep
30, 2001 200 - 150,280 - - 10 (216,896) (66,608)
Shares
subscrip
-tion 76,105 76,105
Net loss
for the
year (29,313) (29,313)
_______________________________________________________________________________
Bal,Sep
30, 2002 200 - 226,385 - - 10 (246,209) (19,814)
Shares
subscrip
-tion 5,000 5,000
Common
shares
issued 80,160 8 (231,385) 232,542 1,165
Adj to
number
of shares
out-
standing
as a
result
of the
acqui-
sition
of Millen
-nium
Business
Gp. USA
Inc. (80,160) (8) (232,542) 232,560
Cimbix
Corp. 170,240 17 232,543 (232,560)
Fair
value
of
shares
issued
in conn-
ection
with
the
acqui-
sition
of Millen
-nium
Business
Gp. USA
Inc. 80,360 8 2,501 1 (9)
Net
asset
deficiency
of legal
parent
at date
of reverse
take-over
transaction (20,167) (20,167)
Common
shares
issued 2,772 - 13,810 13,810
Common
shares
issued 1,000 - 7,500 7,500
Donated
services 2,250 2,250
Net loss
for the
year (98,849) (98,849)
_____________________________________________________________________________
Bal,Sep
30, 2003 254,372 25 2,501 1 256,094 (365,225)(109,105)
The accompanying notes are an integral part of the financial statements
44-45
WATAIRE INTERNATIONAL, INC.
(Formerly Cimbix Corporation)
(A Development Stage Company)
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY (DEFICIENCY)
for the period August 17, 2000 (Inception) to March 31, 2010
(Stated in US Dollars)
(Audited)
Deferred Total
Additional Stock- stock-
Common Preferred Paid-in based Accum. holders'
shares Amount shares Amount Capital Comp. Defict Equity
Bal,sep 254,372 25 2,501 1 256,094 - (365,225) (109,105)
30,2003
___________________________________________________________________________
Common
shares
issued 5,000 1 49,999 - 50,000
Common
shares
issued 600,000 60 29,940 - 30,000
Net loss
for the
year (227,180) (227,180)
____________________________________________________________________________
Bal,sep
30,2004 859,372 86 2,501 1 336,033 - (592,405) (256,285)
Common
shares
issued 160,000 16 484 500
Common
shares
issued 36,000,000 3,600 86,400 90,000
Common
shares
issued 8,960,000 896 94,304 95,200
Common
shares
issued 2,440,000 244 121,756 122,000
Common
shares
issued 250,000 25 11,225 11,250
Disposal
of MBG (140,949) (140,949)
Net loss
for the
year (79,243) (79,243)
____________________________________________________________________________
Bal,Sep
30,2005 48,669,372 4,867 2,501 1 509,253 - (671,648)(157,527)
Common
shares
issued 336,000 34 15,086 15,120
Common
shares
issued 10,000,000 1,000 619,000 620,000
Common
shares
issued 440,000 44 109,956 110,000
Common
shares
issued 1,000,000 100 559,900 560,000
Inventory
donated 9,945 9,945
Net loss
for the
year (297,661)(297,661)
_____________________________________________________________________________
Bal,Sep
30,2006 60,445,372 6,045 2,501 1 1,823,140 - (969,309) 859,877
Common
shares
issued 272,536 27 204,375 204,402
Common
shares
issued 1,834,045 183 880,157 880,340
Common
shares
issued 1,000,000 100 409,900 410,000
Common
shares
issued 4,800,000 480 959,520 960,000
Stock-
based
compen-
sation 8,010,050 8,010,050
Net loss
for the
year (8,430,656)(8,430,656)
_____________________________________________________________________________
Bal,Sep
30,2007 68,351,953 6,835 2,501 1 12,287,142 -(9,399,965) 2,894,013
Common
shares
issued 2,058,823 205 349,795 350,000
Common
shares
issued 588,235 60 99,940 100,000
Common
shares
issued 4,400,000 440 219,560 220,000
Cancel-
lation of
shares (1,000,000) (100) (409,900) (410,000)
Preferred
shares
issued 25,000 2 4,998 5,000
Net loss
for the
period (337,560) (337,560)
_____________________________________________________________________________
Bal,Mar
31,2008 74,399,011 7,440 27,501 3 12,551,535 -(9,737,525)2,821,453
Common
shares
issued 1,600,000 160 79,840 81,000
Common
shares
issued 1,111,112 111 99,889 100,000
Common
shares
issued 1,000,000 100 59,900 60,000
Common
shares
issued 1,000,000 100 49,900 50,000
Common
shares
issued 8,000,000 800 39,200 40,000
Net loss
for the
year (714,182)(714,182)
_____________________________________________________________________________
Bal,Mar
31,2009 87,110,123 8,711 27,501 3 12,880,264 -(10,451,707)2,437,271
Common
shares
issued 4,000,000 400 19,600 20,000
common
shares
issued
for
service 7,600,000 760 151,240 (152,000) -
Amortization
of stock
based
comp 101,333 101,333
Warrant
issued
for
comp 94,242 94242
Net loss
for the
year (598,994)(598,994)
_______________________________________________________________________________
Bal,Mar.
31, 2010 98,710,123 9,871 27,501 3 13,145,346 (50,667)(11,050,701)2,053,852
The accompanying notes are an integral part of the financial statements
45-46
WATAIRE INTERNATIONAL, INC.
(Formerly Cimbix Corporation)
(A Development Stage Company)
STATEMENTS OF CASH FLOWS
(Stated in US Dollars)
August 17,
2000
For the year ended (Inception)
March 31, to March 31,
2010 2009 2010
_______________________________________
Operating Activities
Loss from operations $ (598,994) $ (714,182) $ (11,050,701)
Adjustments to reconcile loss
to cash used in operating
activities :
Amortization 306 307 71,049
Amortization of notes discounts 28,505 - 28,505
Donated services - - 11,250
Website development costs written off - - 8,700
Shares issued for services 152,000 - 454,070
Stock-based compensation 43,576 - 8,053,626
Advances written off - 149,542 199,542
Change in non-cash working capital items :
Accounts receivable (9,000) 2,800 (9,000)
Prepaid expenses and retainers (690) (7,486) (10,456)
Deferred revenue (34,143) 34,527 154,924
Advance on marketing agreements - - (250,000)
Inventory 950 82,965 (394,952)
Accounts payable and accrued
liabilities 128,297 32,546 482,151
______________________________________
Net cash used in operating activities (289,193) (418,981) (2,251,292)
______________________________________
Investing Activities
License payment advanced - - (50,000)
Capital assets - - (922)
Advanced to subsidiaries - - (115,091)
Acquisition of intangibles-net - (10,688) (1,467,624)
Website development costs - - (8,700)
Proceeds from disposition of subsibiaries - - 100
_____________________________________
Net cash used in investing activities - (10,688) (1,642,237)
_____________________________________
Financing Activities
Bank indebtedness - (5,885) -
Shareholder loan & interest (106,589) 106,589 -
Due to related parties 82,860 (1,000) 84,140
Shares issued for cash - 330,000 2,937,189
Shares issued for debt 20,000 - 579,313
Proceeds from Convertible debentures 292,944 - 292,944
____________________________________
Net cash provided by financing
activities 289,215 429,704 3,883,586
____________________________________
Increase/(Decrease) in Cash 22 35 57
Cash, beginning 35 - -
____________________________________
Cash, ending 57 35 57
_____________________________________
Supplemental Disclosure of Cash Flow
Information
Cash paid during the period for interest - - -
Cash paid during the period for income
taxes - - -
Supplemental Disclosure of Non-Cash
Items:
Shares issued for Debt 20,000 110,000 579,313
Deferred stock-based compensation (50,667) - (50,667)
Shares issued for Promissory Notes - - 365,087
Shares issued for intangibles - - 960,000
Exchange of shareholder loan for
Convertible Debt 125,000 - 125,000
The accompanying notes are an integral part of the financial statements
47-48
WATAIRE INTERNATIONAL, INC.
(Formerly Cimbix Corporation)
(A Development Stage Company)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
March 31, 2010
(Stated in US Dollars)
(Audited)
Note 1. General Organization And Business
The Company was incorporated on August 17, 2000 in the State of Washington,
USA and the Company's common shares are publicly traded on the OTC Bulletin
Board. On September 26, 2006, the Company approved a name change from Cimbix
Corporation to Wataire International, Inc.
The Company markets and distributes atmospheric water generator machines.
It also owns all of the intellectual property relating to a water treatment
process and devices for water-from-air machines. Management plans to further
evaluate, develop and manage the commercialization, sub-license and/or
commercial sale of these products.
These consolidated financial statements have been prepared in accordance
with generally accepted accounting principles applicable to a going concern,
which assumes that the Company will be able to meet its obligations and
continue its operations for its operations for its next fiscal year.
Realization values may be substantially different from carrying values as
shown and these financial statements do not give effect to adjustments
that would be necessary to the carrying values and classification of assets
and liabilities should the Company be unable to continue as a going concern.
At March 31, 2010, the Company had not yet achieved profitable operations,
has accumulated losses of $11,000,701 since its inception and expects to
incur further losses in the development of its business, all of which cast
substantial doubt about the Company's ability to continue as a going concern.
The Company's ability to continue as a going concern is dependent upon future
profitable operations and/or the necessary financing to meet its obligations
and repay its liabilities arising from normal business operations when they
come due. Management has obtained additional funds by related party advances,
however there is no assurance that this additional funding is adequate and
further funding may be necessary.
Note 2. Significant Accounting Policies
These consolidated financial statements have been prepared in accordance with
generally accepted accounting principles in the United States of America and
are stated in US dollars. Because a precise determination of many assets and
liabilities is dependent upon future events, the preparation of financial
statements for a period necessarily involves the use of estimates which have
been made using careful judgment. Actual results may differ from these
estimates.
The financial statements have, in management's opinion, been properly
prepared within the framework of the significant accounting policies
summarized below :
(a) Development Stage Company
The Company is a development stage company as defined in the Statements of
Financial Accounting Standards ("SFAS") No. 7. The Company is devoting
substantially all of its present efforts to establish a new business and none
of its planned principal operations have commenced. All losses accumulated
since inception has been considered as part of the Company's development
stage activities.
49
(b) Consolidation
These consolidated financial statements include the accounts of the Company
and its wholly owned subsidiaries, Petsmo Inc. and Aqua Technologies, Inc.
All inter-company transactions and balances have been eliminated.
(c) Financial Instruments
The carrying values of cash, accounts receivable, accounts payable, promissory
notes payable and due to related parties approximate fair value because of the
short-term nature of these instruments. Management is of the opinion that the
Company is not exposed to significant interest, currency or credit risks
arising from these financial instruments.
(d) Inventory
Inventory, which consists of finished goods, is valued at the lower of cost
net realizable value using the first in first out (FIFO) method.
(e) Website Development Costs
Under the provisions of Statement of Position No. 98-1 "Accounting for the
Costs of Computer Software Development or Obtained for Internal Use," the
Company previously capitalized costs of design, configuration, coding,
installation and testing of the Company's website up to its initial
implementation. Costs are amortized to expense over an estimated useful life
of three years using the straight-line method. Ongoing website post-
implementation cost of operations, including training and application, are
expensed as incurred. The Company evaluates the recoverability of website
development costs in accordance with Financial Accounting
Standards No. 121 " Accounting of the Impairment of Long Lived Assets."
(f) Intangible Assets and Amortization
The Company has adopted SFAS No. 142 "Goodwill and Other Intangible Assets",
which requires that goodwill not be amortized, but that goodwill and other
intangible assets be tested annually for impairment. Intangible assets with a
finite life will be amortized over the estimated useful life of the asset. The
Company's operational policy for the assessment and measurement of any
impairment in the intangible assets, which primarily relates to contract-
based intangibles such as license agreements and extensions, is to evaluate
annually, the recoverability and remaining life of its intangible assets to
determine the fair value of these assets. The patents are pending and the
Company has determined that the assets have an infinite life.
(g) Revenue Recognition
The Company receives revenues from the sale of water generator machines.
The Company recognizes revenues when persuasive evidence of an arrangement
exists, the product is delivered and collection is reasonably assured.
A one-year warranty is
provided by the Company on all its products.
(h) Income Taxes
The Company follows SFAS No. 109, "Accounting for Income Taxes" which
requires the use of the asset and liability method of accounting for income
taxes. Under the asset and liability method of SFAS 109, deferred tax assets
and liabilities are recognized for future tax consequences attributable to
temporary differences between the financial statements carrying amounts of
existing assets and liabilities and loss carry forwards and their respective
tax bases. Deferred tax assets and liabilities are measured using enacted
tax rates expected to apply to taxable income in the year in which those
temporary differences are expected to be recovered or settled.
50
(i) Basic and Diluted Loss Per Share
The Company computes net loss per share in accordance with SFAS No. 128.
"Earnings Per Share". SFAS 128 requires presentation of both basic and
diluted earnings per share ("ESP") on the face of the income statement.
Basic loss per share is computed by dividing the net loss available to
common shareholders by the weighted average number of common shares
outstanding during the year. Diluted EPS gives effect to all dilative
potential common shares outstanding during the year including stock options,
using the treasury stock method, and convertible preferred stock, using
the if-converted method. In computing diluted EPS, the average stock price
for the year is used in determining the number of shares assumed to be
purchased from the exercise of stock options or warrants. Diluted EPS
excludes all dilative potential common shares if their effect is
anti dilative.
(j) Stock-based Compensation
In December 2004, the Financial Accounting Standards Board issued FAS
123R "Share-Based Payment", a revision to FAS 123. FAS 123R replaces
existing requirements under FAS 123 and APB 25, and requires public companies
to recognize the cost of employee services received in exchange for equity
instruments, based on the grant-date fair value of those instruments, with
limited exceptions. FAS 123R also affects the pattern in which compensation
cost is recognized, the accounting for employee share purchase plans, and
the accounting for income tax effects of share-based payment transactions.
For small business filers, FAS 123R is effective for interim or annual
periods beginning after December 15, 2005. The Company adopted FAS 123R
on October 1, 2006.
(k) Foreign Currency Translation
The Company translates foreign currency transactions and balances to its
reporting currency, United States dollars, in accordance with SFAS No. 52,
"Foreign Currency Translation". Monetary assets and liabilities are translated
into the functional currency at the exchange rate in effect at the end of the
year. Non-monetary assets and liabilities are translated at the exchange rate
prevailing when the assets were acquired or the liabilities assumed. Revenues
and expenses are translated at the rate approximating the rate of exchange
on the transaction date. All exchange gains and losses are included in
the determinination of net income (loss) for the year.
(l) Reclassifications
Certain items in the prior year financial statements have been reclassified for
comparative purposes to conform to the presentation in the current period's
presentation. These reclassifications have no effect to the previously reported
income (loss).
(m) Change in Reporting Year
The Company adopted March 31 as its fiscal year end from September 30 in 2008.
51
(n) Recently Issued Accounting Pronouncements
In May 2008, the Financial Accounting Standards Board ("FASB") issued Statement
of Financial Accounting Standards ("SFAS") No. 162, The Hierarchy of Generally
Accepted Accounting Principles. SFAS No. 162 identifies the sources of
accounting principles and the framework for selecting the principles that are
presented in conformity with generally accepted accounting principles in the
United States. SFAS No. 162 is effective 60 days following the Securities and
Exchange Commission's approval of the Public Company Accounting Oversight Board
amendments to AU Section 411, The Meaning of Present Fairly in Conformity With
Generally Accepted Accounting Principles. The Company does not believe SFAS No.
162 will have a material impact on its financial statements.
In March 2008, the FASB issued SFAS No. 161, Disclosure about Derivative
Instruments and Hedging Activities, an amendment of FASB Statement No. 133.
SFAS No. 161 changes the disclosure requirements for derivative instruments
and hedging activities. Entities are required to provide enhanced disclosures
about (a) how and why an entity uses derivative instruments, (b) how derivative
instruments and related hedged items are accounted for under Statement No. 133
and its related interpretations and (c) how derivative instruments and
related hedged items affect an entity's financial position, financial
performance and cash flows. SFAS No. 161 is effective for financial statements
issued for fiscal years and interim periods beginning after November 15, 2008,
with early application encouraged. The Company does not believe SFAS No. 161
will have a material impact on its financial statements.
In December 2007, the FASB issued SFAS No. 141(R), Business Combinations.
SFAS No. 141(R) retains the fundamental requirements in SFAS No. 141,
Business Combinations, that the acquisition method of accounting be used
for all business combinations and for an acquirer to be identified for
each business combination. SFAS No. 141(R) requires an acquirer to
recognize the assets acquired, the liabilities assumed, and any
noncontrolling interest in the acquiree at the acquisition date, measured
at their fair values as of that date, with limited exceptions specified
in SFAS No. 141(R). In addition, SFAS No. 141(R) requires acquisition
costs and restructuring costs that the acquirer expected but was not
obligated to incur to be recognized separately from the business combination,
therefore, expensed instead of part of the purchase price allocation. SFAS No.
141(R) will be applied prospectively to business combinations for which the
acquisition date is on or after the beginning of the first annual
reporting period beginning on or after December 15, 2008. Early adoption is
prohibited. The Company expects to adopt SFAS No. 141(R) to any business
combinations with an acquisition date on or after January 1, 2009. The
Company does not believe SFAS No. 141(R) will have a material impact on its
financial statements
In December 2007, the FASB issued SFAS No. 160, Noncontrolling Interests in
Consolidated Financial Statements, an amendment to ARB No. 51. SFAS No. 160
changes the accounting and reporting for minority interests, which will be
recharacterized as noncontrolling interests and classified as a component
of equity. SFAS No. 160 is effective for fiscal years, and interim periods
within those fiscal years, beginning on or after December 15, 2008. Early
adoption is prohibited. The Company does not believe SFAS No. 160 will have
a material impact on its financial statements. In February 2007, the FASB
issued SFAS No. 159, The Fair Value Option for Financial Assets and
Financial Liabilities. SFAS No. 159 permits an entity to irrevocably elect
fair value on a contract-by-contract basis as the initial and subsequent
measurement attribute for many financial assets and liabilities and certain
other items including insurance contracts. Entities electing the fair value
option would be required to recognize changes in fair value in earnings and
to expense upfront cost and fees associated with the item for which the fair
value option is elected. SFAS No. 159 is effective for fiscal years beginning
after November 15, 2007. Early adoption is permitted as of the beginning of a
fiscal year that begins on or before November 15, 2007, provided the entity
also elects to apply the provisions of SFAS No. 157, Fair Value Measurements.
The Company does not expect the adoption of SFAS No. 159 to have a material
impact on its financial condition or results of operations.
Note 3. Related Party Transactions
During the year ended March 31, 2010, directors of the company charged the
following expenses to the Company:
Management fees $180,000
Loan interest $5,000
52
Note 4. Common Stock
For the Year Ended March 31, 2009
Share Subscriptions
On April 8, 2008, the Company entered into an agreement to issued 1,600,000
units at $0.05 per unit with Darfield Financial Corp. for an aggregate
amount of $80,000. Each unit consists of one common share and one half
warrant exercisable at $0.05 per share on or before April 7, 2011.
On May 30, 2008 the Company entered into a private placement agreement
to issued 1,111,112 common stock at $0.09 per share for proceeds of
$100,000 to two accredited investors and to issued 555,556 common stock
to each investor.
Share For Debt Settlements
On June 17, 2008, the Company approved the issuance of 1,000,000 units
at $0.06 per share to settle amounts due to a director of the Company
totaling $60,000. Each unit contain one common share and one share
warrant exercisable at $0.06 per share on or before June 16, 2011.
On July 8, 2008, the Company approved the issuance of 1,000,000 units
at $0.05 per share to settle amounts due to a director of the Company
totaling $50,000. Each unit contain one common share and one share
warrant exercisable at $0.05 per share on or before July 7, 2011.
On January 9, 2009, the Company approved the issuance of 8,000,000
common shares at $0.005 per share to settle amounts due to a director
of the Company totaling $40,000.
On February 26, 2009, the Company have signed agreement with existing
warrant options holders to cancel all existing warrant options
available to the Company.
For the Year Ended March 31, 2010
Shares For Debt and Service Settlements
On April 22, 2009, the Company approved the issuance of 4,000,000 common
shares at $0.005 per share to settle amounts due to a debtor of the
Company totaling $20,000.
On July 31, 2009, the Company approved the issuance of 7,600,000 common
shares at $0.02 per share for services provided by several professionals
for a 12 months period totaling $152,000.
On September 14, 2009, the Company entered into a definitive agreement
with the Chief Executive officer and director of the Company for the
issuance of share purchase warrants for executive compensation, with a
term of five years expiring September 14, 2014, exercisable at $0.01 per
share, for 7,500,000 shares of common stock with a cashless exercise
provision. The Company recognized $94,242 in stock based
compensation expense for the issuance of these warrants.
Note 5. Warrants
During February 2009, the Company received signed consent agreements
with all existing warrant holders that cancel the entire balance of
7,058,823 outstanding warrants as of February 2009.
53
Note 6. Stock Options and Stock Based Compensation
During 2006, the Company authorized a share option plan under which
employees were granted options to purchase shares of authorized but
unissued, common shares. During the years ended March 31, 2010 and 2009,
all options issued in this plan were either forfeited as options went
unexercised due to employee terminations or cancelled via signed
consent agreements with all remaining option holders.
There was no compensation charge associated with stock options included
in the statement of operations for the year ended March 31, 2010 and 2009.
Note 7. Contingencies
Agreement
On December 11, 2006 and December 12, 2006, the Company entered into two
marketing agreements in which the Company would pay $1,000,000 and issue
1,000,000 common shares. During the year ended March 31, 2008, the Company
paid $250,000 in respect to the cash portion of the agreements and had
issued 1,000,000 common shares of the Company. The 1,000,000 shares issued
were not released to the marketing company as it has not commenced its
branding and marketing efforts and the contract has expired. The 1,000,000
shares have been returned back to treasury. The $250,000 is classified as
an Advance on Marketing Agreements on the balance sheet. The Company is
currently re-negotiating new terms on this agreement.
Legal
On October 11, 2006, the Company was named as a co-defendant in a lawsuit
whereby the plaintiffs were claiming general damages, with respect to funds
totalling approximately $94,000 which were allegedly misappropriated,
interest, costs and such further and other relief as the court may deem
just. Management of the Company believed the claim was without merit and
was unlikely to succeed. The Company filed a statement of defence denying
the allegations and a counterclaim for defamation. The court ordered a
severance of the action, and required the plaintiffs to prove their
damages, before proceeding to trial on issues of liability. The lawsuit
by the plaintiffs was dismissed on October 6, 2008.
Aquaduct International. LLC v. Wataire International, Inc. et. AI. This
litigation was commenced on December 11, 2008 by the Company's former
distributor over the alleged purchase of certain atmospheric water
machines. On July 20, 2009, the Company answered the lawsuit and filed a
cross-complaint against the plaintiff for Breach of Contract and
Intentional Interference. On February 2, 2010 a confidential settlement
agreement and release was effectuated between the parties. The Complaint
and cross complaint have been dismissed by the parties with prejudice.
Note 8. Inventory
At March 31, 2010 and 2009, inventories are comprised of finished water-
from-air machines totaling $249,506, and $250,456, respectively.
Note 9. Intangibles
On April 25, 2007, the Company entered into an agreement to acquire all of
the intellectual property ("IP") relating to a water treatment process and
related devices for water-from-air machines from Wataire Industries Inc.,
Canadian Dew Technologies Inc., Terrence Nylander and Roland Wahlgren.
Mr. Nylander was at the time of signing the agreement and currently, the
President of the Company. Consideration for the purchase of the IP was
$476,190 (CAD $500,000), which was paid on March 31, 2007, the issuance of
4,800,000 shares of common stock of the Company, the agreement by the
Company to pay a royalty equal to 5% of the gross profits from the sales
of all apparatus or products relating to the IP for a period of 30 years
from April 25, 2007 and a royalty equal to 5% of gross licensing revenues
on the IP. This consideration is in addition to the 11,000,000 shares of
common stock previously issued for the license rights as disclosed in
the Company's annual September 30, 2006 audited consolidated
financial statements. The IP acquisition was completed in July 2007.
54
The IP acquired by the Company includes all copyrights, patent rights,
trade secret rights, trade names, trademark rights, process information,
technical information, contract rights and obligations, designs, drawings,
inventions and all other intellectual and industrial property rights of
any sort related to or associated with the invention.
The intangibles consist of patents and trademark applications of $31,434
and the cost of the acquisition of IP Technology of $2,546,062 as
described above.
Patents, Trademark applications $ 31,434
4,800,000 shares issued to Wataire Ecosafe and
Canadian Dew Technologies $ 960,000
Cash consideration 476,190
Remaining license rights including 11,000,000 shares
issued to Wataire Ecosafe 1,109,872
$ 2,546,062
Note 10. Deferred Revenue
As of March 31, 2010 and 2009, deferred revenue totaled $Nil and $189,067,
respectively, consisting of cash payments made by customers in advance of
product shipment. Revenue will be recognized when finished goods are shipped
to the customer.
Note 11. Shareholder Loan
Note 12. Subsequent Events
Subsequent to March 31, 2010:
Note 13. Income Taxes
The Company has losses for tax purposes totaling $11,000,701 which may be
applied against future taxable income. These losses begin to expire in 2027.
The potential tax benefit arising from these losses has not been recorded
in the consolidated financial statements. The Company evaluates its
valuation allowance requirements on an annual basis based on projected future
operations. When circumstances change and this causes a change in
management's judgement about the realizability of deferred tax assets,
the impact of the change on the valuation allowance is reflected in current
operations.
55
Dates Referenced Herein and Documents Incorporated by Reference
| This ‘10-K’ Filing | | Date | | Other Filings |
|---|
| |  |
| | 9/14/14 |
| | 10/1/11 |
| | 7/7/11 |
| | 6/16/11 |
| | 4/7/11 |
| | 3/18/11 |
| | 9/30/10 | | 10-Q, NT 10-Q |
| Filed on: | | 7/14/10 |
| | 6/30/10 | | 10-Q, 10-Q/A, NT 10-K, NT 10-Q |
| For Period End: | | 3/31/10 | | 10-K/A, NT 10-K |
| | 3/12/10 | | 8-K/A |
| | 2/2/10 |
| | 1/15/10 | | 8-K |
| | 9/14/09 | | 4, 8-K, 8-K/A |
| | 7/31/09 | | S-8 |
| | 7/20/09 |
| | 6/12/09 |
| | 4/22/09 |
| | 3/31/09 | | 10-K, NT 10-K |
| | 2/26/09 |
| | 1/9/09 | | 8-K |
| | 1/1/09 |
| | 12/31/08 | | 10-Q, NT 10-Q |
| | 12/15/08 |
| | 12/11/08 |
| | 11/15/08 |
| | 10/6/08 |
| | 7/8/08 |
| | 6/17/08 | | 4, 8-K |
| | 5/30/08 |
| | 4/8/08 |
| | 3/31/08 | | 10-K, 5, 5/A, 8-K, NT 10-K |
| | 12/31/07 | | 10QSB |
| | 11/15/07 |
| | 6/30/07 | | 10QSB |
| | 6/20/07 | | 8-K |
| | 6/18/07 | | 8-K |
| | 6/14/07 | | 8-K |
| | 6/13/07 | | 8-K |
| | 5/9/07 | | 8-K |
| | 4/30/07 | | 8-K |
| | 4/25/07 | | 8-K |
| | 4/10/07 | | 8-K |
| | 3/31/07 | | 10QSB, NT 10-Q |
| | 3/13/07 |
| | 1/31/07 | | 8-K |
| | 1/25/07 | | 8-K |
| | 12/15/06 | | 8-K |
| | 12/12/06 |
| | 12/11/06 |
| | 11/13/06 | | 8-K |
| | 10/23/06 | | 8-K |
| | 10/20/06 | | 8-K |
| | 10/19/06 | | 8-K |
| | 10/17/06 | | 8-K |
| | 10/11/06 |
| | 10/10/06 | | 8-K |
| | 10/3/06 | | 8-K |
| | 10/1/06 |
| | 9/30/06 | | 10KSB/A |
| | 9/26/06 |
| | 9/15/06 | | 8-K |
| | 9/12/06 | | 8-K |
| | 7/14/06 | | 8-K |
| | 7/10/06 | | 8-K |
| | 2/6/06 | | 8-K |
| | 12/15/05 |
| | 8/19/05 |
| | 6/17/05 | | 8-K |
| | 8/26/03 | | 10QSB/A, 8-K |
| | 8/17/00 |
| List all Filings |
3 Subsequent Filings that Reference this Filing
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