SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

x QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the Quarterly Period Ended ~~December~~March 31, ~~2010~~2011

¨ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the Transition Period from _________ to _________

Commission file number: 333-135783

WATERPURE INTERNATIONAL, INC.

(Exact name of registrant as specified in its charter)

Florida	20-3217152
(State or other jurisdiction of incorporation or organization)	(I.R.S. Employer Identification No.)

525 Plymouth Road, Suite 310 Plymouth Meeting, PA 19462
(Address of principal executive offices) (zip code)

(Registrant’s telephone number, including area code)

(Former name, former address and former fiscal year, if changed since last report)

Large accelerated filer o	Accelerated filer o
Non-accelerated filer o	Smaller reporting company x
(Do not check if a smaller reporting company)

WATERPURE INTERNATIONAL, INC.

INDEX

PART I.	FINANCIAL INFORMATION

	ITEM 1	Financial Statements
		Balance sheets as of ~~December~~March 31, ~~2010~~2011 (unaudited) and June 30, 2010	3

		Statements of operations for the three and ~~six~~nine months ended ~~December~~March 31, ~~2010~~2011 and ~~2009,~~2010, and for the period from July 22, 2005 (inception) through ~~December~~March 31, ~~2010~~2011 (unaudited)	4

		Statement of changes in stockholders’ equity (deficiency) for the period from July 22, 2005 (inception) through ~~December~~March 31, ~~2010~~2011 (unaudited)	5-10

		Statements of cash flows for the ~~six~~nine months ended ~~December~~March 31, ~~2010~~2011 and ~~2009,~~2010, and cumulative from July 22, 2005 (inception) through ~~December~~March 31, ~~2010~~2011 (unaudited)	~~11-12~~ 11

		Notes to financial statements (unaudited)	~~13-25~~12-23

	ITEM 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	~~26-30~~ 24-28

	ITEM 3.	Quantitative and Qualitative Disclosures about Market Risk	3028

	ITEM 4.	Controls and Procedures	~~31-32~~29-30

PART II.	OTHER INFORMATION

	ITEM 1.	Legal Proceedings	3331
	ITEM 1A.	Risk Factors	3331
	ITEM 2.	Unregistered Sales of Equity Securities and Use of Proceeds	3331
	ITEM 3.	Defaults Upon Senior Securities	3331
	ITEM 4.	(Removed and ~~Reserved~~Reserved)	3331
	ITEM 5.	Other Information	3331
	ITEM 6.	Exhibits	3332

	SIGNATURES		3433

WATERPURE INTERNATIONAL, INC.
(A DEVELOPMENT STAGE COMPANY)
BALANCE SHEETS

December 31,
2010 June 30,
(Unaudited) 2010
ASSETS

Cash $ - $ 45,740
Accounts receivable - net 5,098 1,000
Inventories 121,631 78,723

Total current assets 126,729 125,463

Trademark 325 325
Security deposit 6,000 6,000
Intangible asset - license, net of accumulated amortization 893,319 926,286

Total assets $ 1,026,373 $ 1,058,074

LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIENCY)

CURRENT LIABILITIES
Accounts payable $ 317,708 $ 127,460
Accrued expenses 229,561 291,908
Deposits 6,550 -
Deferred revenue 14,400 -
Accrued royalties payable - current 30,000 30,000
Licensing fees - current 335,157 57,500
Notes payable and advances 127,500 40,000
Convertible notes payable 403,071 214,429
Derivative liability 25,000 -
Due to officers 93,313 88,508
Due to stockholders 124,796 104,796

Total current liabilities 1,707,056 954,601

Accrued royalties payable - net of current portion 568,999 520,154
Licensing fees - net of current portion - 259,774
Deferred revenue -net of current portion 168,700 186,100

Total liabilities 2,444,755 1,920,629

STOCKHOLDERS' EQUITY (DEFICIENCY)
Common stock, par value $.0001 per share; 500,000,000 and 250,000,000 shares authorized at December 31, 2010 and June 30, 2010, respectively 17,794 14,903
Common stock to-be-issued 5,500 10,500
Additional paid-in-capital 5,191,083 4,925,190
Preferred Series A stock, par value $.001 per share; 1,000,000 shares authorized - -
Deficit accumulated during the development stage (6,632,759 ) (5,813,148 )

Total stockholders' deficiency (1,418,382 ) (862,555 )

Total liabilities and stockholders' equity (deficiency) $ 1,026,373 $ 1,058,074
WATERPURE INTERNATIONAL, INC.

(A DEVELOPMENT STAGE COMPANY)

BALANCE SHEETS

	March 31,
	2011			June 30,
	(unaudited)			2010
ASSETS

Cash	$	20,303		$	45,740
Accounts receivable - net		3,450			1,000
Inventories		72,377			78,723

Total current assets		96,130			125,463

Trademark		325			325
Security deposit		6,000			6,000
Intangible asset - license, net of accumulated amortization		876,835			926,286

Total assets	$	979,290		$	1,058,074

LIABILITIES AND STOCKHOLDERS' DEFICIENCY

CURRENT LIABILITIES
Accounts payable	$	290,592		$	127,460
Accrued expenses		304,254			291,908
Deposits		6,750			-
Deferred revenue		14,400			-
Accrued royalties payable - current		615,965			30,000
Licensing fees - current		344,145			57,500
Notes payable and advances		155,000			40,000
Convertible notes payable		416,620			214,429
Derivative liability		50,000			-
Due to officers		106,080			88,508
Due to stockholders		29,500			104,796

Total current liabilities		2,333,306			954,601


Accrued royalties payable - net of current portion		-			520,154
Licensing fees - net of current portion		-			259,774
Deferred revenue -net of current portion		168,700			186,100

Total liabilities		2,502,006			1,920,629

STOCKHOLDERS' EQUITY DEFICIENCY
Common stock, par value $.0001 per share; 500,000,000 and 250,000,000 shares authorized at March 31, 2011 and June 30, 2010, respectively		22,361			14,903
Common stock to-be-issued		11,586			10,500
Additional paid-in-capital		5,414,671			4,925,190
Preferred Series A stock, par value $.001 per share; 1,000,000 shares authorized		-			-
Deficit accumulated during the development stage		(6,971,334	)		(5,813,148	)

Total stockholders' deficiency		(1,522,716	)		(862,555	)

Total liabilities and stockholders' equity deficiency	$	979,290		$	1,058,074

The accompanying notes are an integral part of these financial statements.

WATERPURE INTERNATIONAL, INC.

(A DEVELOPMENT STAGE COMPANY)

STATEMENTS OF OPERATIONS

FOR THE THREE AND ~~SIX~~NINE MONTHS ENDED ~~DECEMBER~~MARCH 31, ~~2010~~2011 AND ~~2009,~~2010, AND FOR THE PERIOD FROM JULY 22, 2005 (INCEPTION) THROUGH ~~DECEMBER 30, 2010~~MARCH 31, 2011

~~(Unaudited)~~ (unaudited)

July 22, 2005
Three months Three months Six months Six months (inception)
ended ended ended ended through
December 31, December 31, December 31, December 31, December 31,
2010 2009 2010 2009 2010

REVENUES $ 48,240 $ 7,793 $ 106,690 $ 23,699 $ 344,516

COST OF GOODS SOLD 45,615 5,838 106,913 16,908 300,512

Gross profit (loss) 2,625 1,955 (223 ) 6,791 44,004

EXPENSES

Selling, general and administrative expenses 253,919 347,346 574,352 487,059 6,261,347

Loss from operations (251,294 ) (345,391 ) (574,575 ) (480,268 ) (6,217,343 )

Gain on restructuring of troubled debt - - - - (339,137 )
Interest expense 22,249 3,629 38,869 6,663 109,326
Accretion of accrued royalties and licensing fees 25,054 30,513 69,228 61,068 297,429
Amortization expense 58,402 18,739 136,939 38,347 347,798

Loss before provision for income taxes (356,999 ) (398,272 ) (819,611 ) (586,346 ) (6,632,759 )

Provision for income taxes - - - - -

Net loss $ (356,999 ) $ (398,272 ) $ (819,611 ) $ (586,346 ) $ (6,632,759 )

Net loss per share basic and diluted $ nil $ nil $ nil $ nil $ (0.12 )

Weighted average common shares 169,330,950 110,887,573 161,234,729 103,349,801 57,359,478


													July 22, 2005
	Three months			Three months			Nine months			Nine months			(inception)
	ended			ended			ended			ended			through
	March 31,			March 31,			March 31,			March 31,			March 31,
	2011			2010			2011			2010			2011

REVENUES	$	30,088		$	23,500		$	136,778		$	47,199		$	374,604

COST OF GOODS SOLD		27,052			18,220			133,965			35,128			327,564

Gross profit		3,036			5,280			2,813			12,071			47,040

EXPENSES

Selling, general and administrative expenses		227,098			236,050			801,450			723,109			6,488,445

Loss from operations		(224,062	)		(230,770	)		(798,637	)		(711,038	)		(6,441,405	)

Gain on restructuring of troubled debt		-			(339,137	)		-			(339,137	)		(339,137	)
Interest expense		23,527			6,776			62,396			13,439			132,853
Accretion of accrued royalties and licensing fees		25,953			26,509			95,181			87,577			323,382
Amortization expense		65,033			18,461			201,972			56,808			412,831

Income (loss) before provision for income taxes		(338,575	)		56,621			(1,158,186	)		(529,725	)		(6,971,334	)

Provision for income taxes		-			-			-			-			-

Net income (loss)	$	(338,575	)	$	56,621		$	(1,158,186	)	$	(529,725	)	$	(6,971,334	)

Net income (loss) per share basic and diluted	$ nil			$ nil			$ nil			$ nil			$	(0.11	)

Basic weighted average common shares		196,563,601			119,750,375			172,839,103			108,736,851			63,325,369

Diluted weighted average common shares		196,563,601			144,288,615			172,839,103			108,736,851			63,325,369

The accompanying notes are an integral part of these financial statements.

WATERPURE INTERNATIONAL, INC.

(A DEVELOPMENT STAGE COMPANY)

STATEMENT OF CHANGES IN STOCKHOLDERS’ EQUITY (DEFICIENCY)

FOR THE PERIOD FROM JULY 22, 2005 (INCEPTION) THROUGH MARCH 31, 2011

(unaudited)


	Common stock to-be-issued				Common stock issued and outstanding				Preferred series A stock issued and outstanding				Additional paid-in-capital		Deficit accumulated during the development stage			Total stockholders' equity (deficiency)
	Shares		Amount		Shares		Amount		Shares		Amount
Balance July 22, 2005 (inception)		-	$	-		-	$	-		-	$	-	$	-	$	-		$	-

Common stock to be issued in connection with Incoproation (July 22, 2005)		4,000,000	$	10,000		-		-		-		-		-		-			10,000

Common stock to be issued for consulting services		16,150,000		40,375		-		-		-		-		-		-			40,375

Common stock issued - private placement, net of issuance costs of $58,255		461,750		126,445		-		-		-		-		-		-			126,445

Net loss		-		-		-		-		-		-		-		(64,361	)		(64,361	)

Balance June 30, 2006		20,611,750	$	176,820		-	$	-		-	$	-	$	-	$	(64,361	)	$	112,459

WATERPURE INTERNATIONAL, INC.

(A DEVELOPMENT STAGE COMPANY)

STATEMENT OF CHANGES IN STOCKHOLDERS’ EQUITY (DEFICIENCY)

FOR THE PERIOD FROM JULY 22, 2005 (INCEPTION) THROUGH MARCH 31, 2011

(unaudited)


	Common stock to-be-issued						Common stock issued and outstanding				Preferred series A stock issued and outstanding				Additional paid-in-capital		Deficit accumulated during the development stage			Total stockholders' equity (deficiency)
	Shares			Amount			Shares		Amount		Shares		Amount
Issuance of shares		(20,611,750	)	$	(176,820	)		20,611,750	$	2,061		-	$	-	$	174,759	$	-		$	-

Beneficial conversion of loan discount		-			-			-		-		-		-		18,750		-			18,750

Common stock issued for consulting services		-			-			660,000		66		-		-		622,334		-			622,400

Issuance of options as compensation		-			-			-		-		-		-		231,300		-			231,300

Net loss		-			-			-		-		-		-		-		(1,113,231	)		(1,113,231	)

Balance June 30, 2007		-		$	-			21,271,750	$	2,127		-	$	-	$	1,047,143	$	(1,177,592	)	$	(128,322	)

WATERPURE INTERNATIONAL, INC.

(A DEVELOPMENT STAGE COMPANY)

STATEMENT OF CHANGES IN STOCKHOLDERS’ EQUITY (DEFICIENCY)

FOR THE PERIOD FROM JULY 22, 2005 (INCEPTION) THROUGH MARCH 31, 2011

(unaudited)

	Common stock to-be-issued				Common stock issued and outstanding				Preferred series A stock issued and outstanding				Additional paid-in-capital		Deficit accumulated during the development stage			Total stockholders' equity (deficiency)
	Shares		Amount		Shares		Amount		Shares		Amount
Common stock to-be-issued		1,750,000	$	355,000		-	$	-		-	$	-	$	-	$	-		$	355,000

Issuance of shares		-		-		4,330,000		433		-		-		468,567		-			469,000

Issuance of shares as repayment of amount due to stockholders		-		-		467,626		47		-		-		70,097		-			70,144

Common stock issued for consulting services		-		-		5,277,500		528		-		-		829,101		-			829,629

Issuance of options as compensation		-		-		-		-		-		-		582,937		-			582,937

Exercise of options		-		-		125,000		12		-		-		301		-			313

Net loss		-		-		-		-		-		-		-		(2,289,370	)		(2,289,370	)

Balance June 30, 2008		1,750,000	$	355,000		31,471,876	$	3,147		-	$	-	$	2,998,146	$	(3,466,962	)	$	(110,669	)

WATERPURE INTERNATIONAL, INC.

(A DEVELOPMENT STAGE COMPANY)

STATEMENT OF CHANGES IN STOCKHOLDERS’ EQUITY (DEFICIENCY)

FOR THE PERIOD FROM JULY 22, 2005 (INCEPTION) THROUGH MARCH 31, 2011

(unaudited)

	Common stock to-be-issued						Common stock issued and outstanding				Preferred series A stock issued and outstanding				Additional paid-in-capital		Deficit accumulated during the development stage			Total stockholders' equity (deficiency)
	Shares			Amount			Shares		Amount		Shares		Amount
Cancellation of common stock to-be-issued		(1,500,000	)	$	(330,000	)		-	$	-		-	$	-	$	-	$	-		$	(330,000	)

Issuance of shares		(250,000	)		(25,000	)		20,849,999		2,085		-		-		113,615		-			90,700

Issuance of shares as repayment of amount due to officers		-			-			1,000,000		100		-		-		49,900		-			50,000

Issuance of shares as repayment of amount due to stockholders		-			-			666,111		67		-		-		41,483		-			41,550

Beneficial conversion of loan discount		-			-			-		-		-		-		22,500		-			22,500

Common stock issued for consulting services		-			-			38,436,000		3,843		-		-		697,038		-			700,881

Issuance of options as compensation		-			-			-		-		-		-		1,492		-			1,492

Common stock to-be-issued		500,000			2,500			-		-		-		-		-		-			2,500

Net loss		-			-			-		-		-		-		-		(1,423,395	)		(1,423,395	)

Balance June 30, 2009		500,000		$	2,500			92,423,986	$	9,242		-	$	-	$	3,924,174	$	(4,890,357	)	$	(954,441	)

WATERPURE INTERNATIONAL, INC.

(A DEVELOPMENT STAGE COMPANY)

STATEMENT OF CHANGES IN STOCKHOLDERS’ EQUITY (DEFICIENCY)

FOR THE PERIOD FROM JULY 22, 2005 (INCEPTION) THROUGH MARCH 31, 2011

(unaudited)


	Common stock to-be-issued						Common stock issued and outstanding				Preferred series A stock issued and outstanding				Additional paid-in-capital		Deficit accumulated during the development stage			Total stockholders' equity (deficiency)
	Shares			Amount			Shares		Amount		Shares		Amount
Issuance of shares		(500,000	)	$	(2,500	)		24,300,001	$	2,430		110	$	-	$	426,070	$	-		$	426,000

Issuance of Preferred Stock as repayment of note payable		-			-			-		-		12		-		30,000		-			30,000

Beneficial conversion of loan discount		-			-			-		-		-		-		115,551		-			115,551

Common stock issued for consulting services		-			-			31,058,333		3,106		-		-		406,470		-			409,576

Shares issued in connection with issuance of convertible debt		-			-			1,250,000		125		-		-		21,125		-			21,250

Issuance of options as compensation		-			-			-		-		-		-		1,800		-			1,800

Common stock to-be-issued		2,066,667			10,500			-		-		-		-		-		-			10,500

Net loss		-			-			-		-		-		-		-		(922,791	)		(922,791	)

Balance June 30, 2010		2,066,667		$	10,500			149,032,320	$	14,903		122	$	-	$	4,925,190	$	(5,813,148	)	$	(862,555	)

WATERPURE INTERNATIONAL, INC.

(A DEVELOPMENT STAGE COMPANY)

STATEMENT OF CHANGES IN STOCKHOLDERS’ EQUITY (DEFICIENCY)

FOR THE PERIOD FROM JULY 22, 2005 (INCEPTION) THROUGH MARCH 31, 2011

(unaudited)


	Common stock to-be-issued						Common stock issued and outstanding				Preferred series A stock issued and outstanding					Additional paid-in-capital			Deficit accumulated during the development stage			Total stockholders' equity (deficiency)
	Shares			Amount			Shares		Amount		Shares			Amount
Issuance of shares (unaudited)		(2,066,667	)	$	(10,500	)		10,993,334	$	1,099		-		$	-	$	43,701		$	-		$	34,300

Beneficial conversion of loan discount (unaudited)		-			-			-		-		-			-		29,125			-			29,125

Common stock issued for consulting services (unaudited)		-			-			24,924,473		2,493		-			-		211,537			-			214,030

Shares issued in connection with settlement of accounts payable (unaudited)		-			-			1,049,868		105		-			-		11,267			-			11,372

Shares issued in connection with conversion of convertible notes payable plus accrued interest (unaudited)		-			-			12,612,964		1,261		-			-		86,056			-			87,317

Shares issued in connection as repayment of loans from stockholders plus accrued interest (unaudited)		-			-			15,399,285		1,540		-			-		102,206			-			103,746

Shares issued in connection with conversion of preferred series A stock (unaudited)		-			-			9,000,000		900		(36	)		-		(900	)		-			-

Shares issued in addition to issuance of notes payable (unaudited)		-			-			450,000		45		-			-		4,455			-			4,500

Shares issued in addition to issuance of convertible notes payable (unaudited)		-			-			150,000		15		-			-		1,485			-			1,500

Issuance of options in connection with issuance of convertible notes payable (unaudited)		-			-			-		-		-			-		549			-			549

Common stock to-be-issued (unaudited)		2,000,000			11,586			-		-		-			-		-			-			11,586

Net loss (unaudited)		-			-			-		-		-			-		-			(1,158,186	)		(1,158,186	)

Balance March 31, 2011		2,000,000		$	11,586			223,612,244	$	22,361		86		$	-	$	5,414,671		$	(6,971,334	)	$	(1,522,716	)

The accompanying notes are an integral part of these financial statements.

~~The accompanying notes are an integral part of these financial statements.~~

WATERPURE INTERNATIONAL, INC.
(A DEVELOPMENT STAGE COMPANY)
STATEMENT OF CHANGES IN STOCKHOLDERS’ EQUITY (DEFICIENCY)
FOR THE PERIOD FROM JULY 22, 2005 (INCEPTION) THROUGH DECEMBER 31, 2010

Common stock to-be-issued Common stock issued and outstanding Preferred series A stock issued and outstanding Additional paid-in-capital Deficit accumulated during the development stage Total stockholders' equity (deficiency)
Shares Amount Shares Amount Shares Amount
Cancellation of common stock to-be-issued (1,500,000 ) $ (330,000 ) - $ - - $ - $ - $ - $ (330,000 )

Issuance of shares (250,000 ) (25,000 ) 20,849,999 2,085 - - 113,615 - 90,700

Issuance of shares as repayment of amount due to officers - - 1,000,000 100 - - 49,900 - 50,000

Issuance of shares as repayment of amount due to stockholders - - 666,111 67 - - 41,483 - 41,550

Beneficial conversion of loan discount - - - - - - 22,500 - 22,500

Common stock issued for consulting services - - 38,436,000 3,843 - - 697,038 - 700,881

Issuance of options as compensation - - - - - - 1,492 - 1,492

Common stock to-be-issued 500,000 2,500 - - - - - - 2,500

Net loss - - - - - - - (1,423,395 ) (1,423,395 )

Balance June 30, 2009 500,000 $ 2,500 92,423,986 $ 9,242 - $ - $ 3,924,174 $ (4,890,357 ) $ (954,441 )

~~The accompanying notes are an integral part of these financial statements.~~

WATERPURE INTERNATIONAL, INC.
(A DEVELOPMENT STAGE COMPANY)
STATEMENT OF CHANGES IN STOCKHOLDERS’ EQUITY (DEFICIENCY)
FOR THE PERIOD FROM JULY 22, 2005 (INCEPTION) THROUGH DECEMBER 31, 2010

Common stock to-be-issued Common stock issued and outstanding Preferred series A stock issued and outstanding Additional paid-in-capital Deficit accumulated during the development stage Total stockholders' equity (deficiency)
Shares Amount Shares Amount Shares Amount
Issuance of shares (500,000 ) $ (2,500 ) 24,300,001 $ 2,430 110 $ - $ 426,070 $ - $ 426,000

Issuance of Preferred Stock as repayment of note payable - - - - 12 - 30,000 - 30,000

Beneficial conversion of loan discount - - - - - - 115,551 - 115,551

Common stock issued for consulting services - - 31,058,333 3,106 - - 406,470 - 409,576

Shares issued in connection with issuance of convertible debt - - 1,250,000 125 - - 21,125 - 21,250

Issuance of options as compensation - - - - - - 1,800 - 1,800

Common stock to-be-issued 2,066,667 10,500 - - - - - - 10,500

Net loss - - - - - - - (922,791 ) (922,791 )

Balance June 30, 2010 2,066,667 $ 10,500 149,032,320 $ 14,903 122 $ - $ 4,925,190 $ (5,813,148 ) $ (862,555 )

~~The accompanying notes are an integral part of these financial statements.~~

WATERPURE INTERNATIONAL, INC.
(A DEVELOPMENT STAGE COMPANY)
STATEMENT OF CHANGES IN STOCKHOLDERS’ EQUITY (DEFICIENCY)
FOR THE PERIOD FROM JULY 22, 2005 (INCEPTION) THROUGH DECEMBER 31, 2010

Common stock to-be-issued Common stock issued and outstanding Preferred series A stock issued and outstanding Additional paid-in-capital Deficit accumulated during the development stage Total stockholders' equity (deficiency)
Shares Amount Shares Amount Shares Amount
Issuance of shares (unaudited) (2,066,667 ) $ (10,500 ) 3,693,334 $ 369 - $ - $ 18,931 $ - $ 8,800

Beneficial conversion of loan discount (unaudited) - - - - - - 29,125 - 29,125

Common stock issued for consulting services (unaudited) - - 18,579,473 1,858 - - 153,262 - 155,120

Shares issued as repayment of accounts payable (unaudited) - - 424,868 43 - - 6,330 - 6,373

Shares issued in connection with conversion of convertible notes payable and accrued interest (unaudited) - - 5,612,964 561 - - 51,756 - 52,317

Shares issued in connection with issuance of notes payable (unaudited) - - 450,000 45 - - 4,455 - 4,500

Shares issued in connection with issuance of convertible notes payable (unaudited) - - 150,000 15 - - 1,485 - 1,500

Issuance of options in connection with issuance of convertible notes payable (unaudited) - - - - - - 549 - 549

Common stock to-be-issued (unaudited) 1,300,000 5,500 - - - - - - 5,500

Net loss (unaudited) - - - - - - - (819,611 ) (819,611 )

Balance December 31, 2010 1,300,000 $ 5,500 177,942,959 $ 17,794 122 $ - $ 5,191,083 $ (6,632,759 ) $ (1,418,382 )

~~The accompanying notes are an integral part of these financial statements.~~

WATERPURE INTERNATIONAL, INC.
(A DEVELOPMENT STAGE COMPANY)
STATEMENTS OF CASH FLOWS
FOR THE THREE MONTHS ENDED SEPTEMBER 30, 2010 AND 2009, AND FOR THE
PERIODS FROM JULY 22, 2005 (INCEPTION) THROUGH DECEMBER 31, 2010
(UNAUDITED)
July 22, 2005
Six Months Six Months (inception)
ended ended through
December 31, December 31, December 31,
2010 2009 2010
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss $ (819,611 ) $ (586,346 ) $ (6,632,759 )
Adjustments to reconcile net loss to net cash used in operating
activities:
  Accretion of accrued royalties and licensing fees 69,228 61,068 297,429
  Gaim on restructuring of troubled debt - - (339,137 )
  Amortization of  intangible asset - license 32,967 32,967 201,545
  Common stock issued for consulting services 155,120 78,600 2,757,981
  Issuance of stock options - employee - 1,441 817,529
  Amortization of beneficial conversion discount 103,972 5,380 165,003
  Changes in operating assets and liabilities
    (Increase)/Decrease in:
         Accounts receivable (4,098 ) - (5,098 )
         Other current asstets (2,729 )
         Inventories (42,908 ) 5,827 (121,631 )
         Security deposit - (6,000 ) (6,000 )
    Increase/(Decrease) in:
         Accounts payable and accrued expenses 142,935 44,874 563,952
         Deposits for orders 6,550 85,900 6,550
         Accrued royalties and licensing fee payable (2,500 ) (10,500 ) (119,000 )
         Deferred revenue (3,000 ) 65,400 184,900

Net cash used in operating activities (361,345 ) (224,118 ) (2,228,736 )

CASH FLOWS FROM INVESTING ACTIVITIES:
Trademark - - (325 )

Net cash used in investing activities - - (325 )

CASH FLOWS FROM FINANCING ACTIVITIES:
Net proceeds from private placement - - 126,445
Proceeds from sale of founders shares - - 10,000
Net proceeds from sale of stock and exercise of stock options 8,800 237,500 1,032,813
Proceeds from stock to-be-issued 5,500 5,500
Proceeds from issuance of notes payable 124,000 - 294,000
Repayment of notes payable (36,500 ) - (61,500 )
Advances/(repayments) from officers 4,805 (13,929 ) 143,313
Advances from stockholders 20,000 23,272 236,490
Proceeds from issuance of convertible notes payable 189,000 - 454,000
Repayment of convertible notes payable - (12,000 ) (12,000 )

Net cash provided by financing activities 315,605 234,843 2,229,061

NET INCREASE/(DECREASE) IN CASH (45,740 ) 10,725 -
CASH, beginning of period 45,740 - -

CASH, end of period $ - $ 10,725 $ -

~~The accompanying notes are an integral part of these financial statements.~~

WATERPURE INTERNATIONAL, INC.

(A DEVELOPMENT STAGE COMPANY)

STATEMENTS OF CASH FLOWS

FOR THE ~~SIX~~NINE MONTHS ENDED ~~DECEMBER~~MARCH 31, ~~2010~~2011 AND 2009, AND FOR THE PERIODS FROM JULY 22, 2005 (INCEPTION) THROUGH ~~DECEMBER~~MARCH 31, ~~2010~~2011

~~(UNAUDITED)~~(unaudited)

							July 22, 2005
	Nine months			Nine months			(inception)
	ended			ended			through
	March 31,			March 31,			March 31,
	2011			2010			2011
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss	$	(1,158,186	)	$	(529,725	)	$	(6,971,334	)
Adjustments to reconcile net loss to net cash used in operating
activities:
Accretion of accrued royalties and licensing fees		95,181			87,577			323,382
Gaim on restructuring of troubled debt		-			(339,137	)		(339,137	)
Amortization of intangible asset - license		49,451			49,451			218,029
Common stock issued for consulting services		214,030			268,726			2,816,891
Issuance of stock options - employee		-			1,441			817,529
Amortization of beneficial conversion discount		152,521			7,357			213,552
Changes in operating assets and liabilities
(Increase)/Decrease in:
Accounts receivable		(2,450	)		(7,725	)		(3,450	)
Other current asstets					-
Inventories		6,346			(4,174	)		(72,377	)
Security deposit		-			(6,000	)		(6,000	)
Increase/(Decrease) in:
Accounts payable and accrued expenses		197,462			(84,304	)		620,279
Deposits for orders		6,750			135,700			6,750
Accrued royalties and licensing fee payable		(2,500	)		(22,500	)		(119,000	)
Deferred revenue		(3,000	)		65,400			183,100

Net cash used in operating activities		(444,395	)		(377,913	)		(2,311,786	)

CASH FLOWS FROM INVESTING ACTIVITIES:
Trademark		-			-			(325	)

Net cash used in investing activities		-			-			(325	)

CASH FLOWS FROM FINANCING ACTIVITIES:
Net proceeds from private placement		-			-			126,445
Proceeds from sale of founders shares		-			-			10,000
Net proceeds from sale of stock and exercise of stock options		34,300			332,500			1,058,313
Proceeds from stock to-be-issued		11,586			-			11,586
Proceeds from issuance of notes payable		149,000			55,000			319,000
Repayment of notes payable		(34,000	)		-			(59,000	)
Advances/(repayments) from officers		17,572			(14,265	)		156,080
Advances from stockholders		26,500			17,672			242,990
Proceeds from issuance of convertible notes payable		214,000			-			479,000
Repayment of convertible notes payable		-			(12,000	)		(12,000	)

Net cash provided by financing activities		418,958			378,907			2,332,414

NET INCREASE/(DECREASE) IN CASH		(25,437	)		994			20,303
CASH, beginning of period		45,740			-			-

CASH, end of period	$	20,303		$	994		$	20,303

Supplemental disclosures of cash flow ~~information:~~information for the nine months ended March 31, 2011:

1)The Company issued ~~424,868~~1,049,868 shares of common stock valued at ~~$6,373~~$11,372 as payment of accounts payable.

2)The Company issued ~~5,612,964~~12,612,964 shares of common stock in connection with conversion of ~~$45,000~~$80,000 of convertible notes payable plus $7,317 of accrued interest.

3)The Company recorded debt discounts of $29,125 representing the intrinsic value of the beneficial conversion features of various convertible notes payable issued during the ~~six~~nine months ended ~~December~~March 31, ~~2010.~~2011.

4)The Company recorded debt discounts of $6,000 for the 600,000 shares of common stock issued as part of notes and convertible notes payable issued during the ~~six~~nine months ended ~~December~~March 31, ~~2010.~~2011.

5)The Company recorded debt discounts of $549 for the 100,000 options issued as part of notes and convertible notes payable issued during the ~~six~~nine months ended ~~December~~March 31, ~~2010.~~2011.

6)The Company recorded debt discounts and derivative liability of ~~$25,000~~$50,000 representing the fair value of the beneficial conversion feature of the convertible notes payable issued during the ~~six~~nine months ended ~~December~~March 31, ~~2010.~~ 2011.

7)The Company issued 15,399,285 shares of common stock in connection with conversion of $101,796 of loans to shareholders plus $1,950 of accrued interest.

8)The Company issued 9,000,000 shares of common stock in connection with conversion of 36 shares of preferred series A stock.

The accompanying notes are an integral part of these financial statements.

1211

WATERPURE INTERNATIONAL, INC.

(A DEVELOPMENT STAGE COMPANY)

NOTES TO FINANCIAL STATEMENTS (UNAUDITED)

NOTE 1 - NATURE OF OPERATIONS

Nature of Operations

Basis of Presentation

NOTE 2 - GOING CONCERN/MANAGEMENT’S PLAN

NOTE 3 - SIGNIFICANT ACCOUNTING POLICIES

Development Stage Company

~~WATERPURE INTERNATIONAL, INC.~~

~~(A DEVELOPMENT STAGE COMPANY)~~

~~NOTES TO FINANCIAL STATEMENTS (UNAUDITED)~~

~~NOTE 3 - SIGNIFICANT ACCOUNTING POLICIES (continued)~~

WATERPURE INTERNATIONAL, INC.

(A DEVELOPMENT STAGE COMPANY)

NOTES TO FINANCIAL STATEMENTS (UNAUDITED)

NOTE 3 - SIGNIFICANT ACCOUNTING POLICIES (continued)

Cash and Cash Equivalents

Long-Lived Assets and Other Intangible Assets

~~WATERPURE INTERNATIONAL, INC.~~

~~(A DEVELOPMENT STAGE COMPANY)~~

~~NOTES TO FINANCIAL STATEMENTS (UNAUDITED)~~

~~NOTE 3 - SIGNIFICANT ACCOUNTING POLICIES (continued)~~

WATERPURE INTERNATIONAL, INC.

(A DEVELOPMENT STAGE COMPANY)

NOTES TO FINANCIAL STATEMENTS (UNAUDITED)

NOTE 3 - SIGNIFICANT ACCOUNTING POLICIES (continued)

Derivative Instruments

Shipping & Handling Costs

Concentrations of Credit Risk

~~The Company’s financial instruments that are exposed to a concentration of credit risk are cash and accounts receivable.~~Cash - The Company places its cash ~~with a high credit quality institution. At~~in highly rated financial institutions, which are continually reviewed by senior management for financial stability. Effective December 31, 2010, extending through December 31, 2012, all “noninterest-bearing transaction accounts” are fully insured, regardless of the ~~Company’s~~balance of the account. The Company has not experienced any losses in such accounts and believes that its cash ~~balance on deposit did~~is not ~~exceed federal depository insurance limits.~~ exposed to significant credit risk.

~~WATERPURE INTERNATIONAL, INC.~~

~~(A DEVELOPMENT STAGE COMPANY)~~

~~NOTES TO FINANCIAL STATEMENTS (UNAUDITED)~~

~~NOTE 3 - SIGNIFICANT ACCOUNTING POLICIES (continued)~~

WATERPURE INTERNATIONAL, INC.

(A DEVELOPMENT STAGE COMPANY)

NOTES TO FINANCIAL STATEMENTS (UNAUDITED)

NOTE 3 - SIGNIFICANT ACCOUNTING POLICIES (continued)

Fair Value of Financial Instruments

~~Earnings~~Net Income (Loss) per Common Share

Share Based Compensation

Recent Accounting Pronouncements

WATERPURE INTERNATIONAL, INC.

(A DEVELOPMENT STAGE COMPANY)

NOTES TO FINANCIAL STATEMENTS (UNAUDITED)

NOTE 4 - INVENTORIES

NOTE 5 – INTANGIBLE ASSETS - LICENSE

WATERPURE INTERNATIONAL, INC.

(A DEVELOPMENT STAGE COMPANY)

NOTES TO FINANCIAL STATEMENTS (UNAUDITED)

NOTE 5 – INTANGIBLE ASSETS – LICENSE (continued)

Contingencies - Royalties

NOTE 6 – NOTES PAYABLE AND ADVANCES

NOTE 7 – ADVANCES FROM OFFICERS AND STOCKHOLDERS

WATERPURE INTERNATIONAL, INC.

(A DEVELOPMENT STAGE COMPANY)

NOTES TO FINANCIAL STATEMENTS (UNAUDITED)

NOTE 8 – CONVERTIBLE DEBT

~~WATERPURE INTERNATIONAL, INC.~~

~~(A DEVELOPMENT STAGE COMPANY)~~

~~NOTES TO FINANCIAL STATEMENTS (UNAUDITED)~~

~~NOTE 8 – CONVERTIBLE DEBT (continued)~~

WATERPURE INTERNATIONAL, INC.

(A DEVELOPMENT STAGE COMPANY)

NOTES TO FINANCIAL STATEMENTS (UNAUDITED)

NOTE 8 – CONVERTIBLE DEBT (continued)

~~WATERPURE INTERNATIONAL, INC.~~

~~(A DEVELOPMENT STAGE COMPANY)~~

~~NOTES TO FINANCIAL STATEMENTS (UNAUDITED)~~

~~NOTE 8 – CONVERTIBLE DEBT (continued)~~

WATERPURE INTERNATIONAL, INC.

(A DEVELOPMENT STAGE COMPANY)

NOTES TO FINANCIAL STATEMENTS (UNAUDITED)

NOTE 8 – CONVERTIBLE DEBT (continued)

~~WATERPURE INTERNATIONAL, INC.~~

~~(A DEVELOPMENT STAGE COMPANY)~~

~~NOTES TO FINANCIAL STATEMENTS (UNAUDITED)~~

~~NOTE 8 – CONVERTIBLE DEBT (continued)~~

NOTE 9 - STOCKHOLDERS’ EQUITY

WATERPURE INTERNATIONAL, INC.

(A DEVELOPMENT STAGE COMPANY)

NOTES TO FINANCIAL STATEMENTS (UNAUDITED)

NOTE 9 - STOCKHOLDERS’ EQUITY (continued)

~~WATERPURE INTERNATIONAL, INC.~~

~~(A DEVELOPMENT STAGE COMPANY)~~

~~NOTES TO FINANCIAL STATEMENTS (UNAUDITED)~~

~~NOTE 9 - STOCKHOLDERS’ EQUITY (continued)~~

WATERPURE INTERNATIONAL, INC.

(A DEVELOPMENT STAGE COMPANY)

NOTES TO FINANCIAL STATEMENTS (UNAUDITED)

NOTE 10 – STOCK OPTIONS

~~WATERPURE INTERNATIONAL, INC.~~

~~(A DEVELOPMENT STAGE COMPANY)~~

~~NOTES TO FINANCIAL STATEMENTS (UNAUDITED)~~2011, with an intrinsic value of $0.

NOTE 11 - RELATED PARTY TRANSACTIONS

DUE TO OFFICERS AND STOCKHOLDERS

WATERPURE INTERNATIONAL, INC.

(A DEVELOPMENT STAGE COMPANY)

NOTES TO FINANCIAL STATEMENTS (UNAUDITED)

NOTE 12 - INCOME TAXES

NOTE 13 – COMMITMENTS

NOTE 14 – SUBSEQUENT EVENTS

~~WATERPURE INTERNATIONAL, INC.~~

~~(A DEVELOPMENT STAGE COMPANY)~~

~~NOTES TO FINANCIAL STATEMENTS (UNAUDITED)~~

ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

This Management's Discussion and Analysis of Financial Condition and Results of Operations includes a number of forward-looking statements that reflect Management's current views with respect to future events and financial performance. You can identify these statements by forward-looking words such as “may,” “will,” “expect,” “anticipate,” “believe,” “estimate” and “continue,” or similar words. Those statements include statements regarding the intent, belief or current expectations of us and members of our management team as well as the assumptions on which such statements are based. Prospective investors are cautioned that any such forward-looking statements are not guarantees of future performance and involve risk and ~~u ncertainties,~~uncertainties, and that actual results may differ materially from those contemplated by such forward-looking statements.

Readers are urged to carefully review and consider the various disclosures made by us in this report and in our other reports filed with the Securities and Exchange Commission. Important factors currently unknown to ~~Management~~management could cause actual results to differ materially from those in forward-looking statements. We undertake no obligation to update or revise forward-looking statements to reflect changed assumptions, the occurrence of unanticipated events or changes in the future operating results over time. We believe that our assumptions are based upon reasonable data derived from and known about our business and operations. No assurances are ~~m ade~~made that actual results of operations or the results of our future activities will not differ materially from our assumptions. Factors that could cause differences include, but are not limited to, expected market demand for our products, fluctuations in pricing for materials, and competition.

WaterPure International, Inc. was organized under the laws of the state of Florida on July 22, 2005 and conducts business as a marketer and manufacturer of Atmospheric Water Generators (“AWG”). Though originally structured as a marketing entity, we have now become a manufacturer of AWGs after licensing patents from Everest Water Ltd. (“Everest”) and developing our own new line of AWGs under those patents. This strategic decision has led to sales fluctuations due to allocation of resources to research and development in some of our previous operating periods.

We are a development stage company until the sale of these new products leads to recognition of significant revenue. We want to be identified as an environmentally sustainable business. Clean drinking water is becoming a scarce commodity as our population increases. Additionally, it is our goal to utilize the intellectual property from Everest to become a leading worldwide manufacturer of AWGs based on the quality of our machines and our choice of distributors and marketing channels. Our future results are highly dependent upon the success of our efforts to manufacture and market our products and having the ability to attain and attract qualified personnel and adequate working capital.

On December 7, 2007, we entered into licensing agreements with Everest whereby we agreed to pay $300,000 and issue 1,500,000 shares of our common stock as consideration. We paid $50,000 with the execution of the agreement and an additional $20,000 through July 31, 2008. On August 1, 2008, we and Everest modified the payment terms of their licensing agreement, because we could not meet the cash payment obligation under the original agreement. Under the amended payment terms, we cancelled the shares to be issued to Everest and agreed to pay Everest $430,000 over 33 months starting September 1, 2008, plus an annual 8% royalty payment with guaranteed minimum payments as follows: $50,000 in year one, $60,000 in year two, $70,000 in year three, $90,000 in year four and $100,000 each year after until the termination of the licensing ~~agr eement,~~agreement, which coincides with the expiration of the last patent in August 2027.

On March 30, 2010, we and Everest modified the payment terms of their licensing agreement, because we could not meet the cash payment obligation under the original agreement, as amended. Under the amended payment terms, we agreed to pay Everest the balance owed Everest of $392,000 over 33 months starting April 1, 2010, plus an annual 5% royalty payment with guaranteed minimum payments as follows: $30,000 in year one, $40,000 in year two, $50,000 in year three, $75,000 in year four and $100,000 each year after until the termination of the licensing agreement, which coincides with the expiration of the last patent in August 2027. We are currently ~~$19,000~~$25,000 in arrears on our licensing fee/payments and are in default on this agreement.

Our current production line consists of the WatercycleTM AWG. This machine converts air into fresh drinking water. Our units operate on either 110 or 220 volt power and look similar to a typical water cooler, but do not connect to any water line. This avoids the need for bottled water delivery; heavy lifting of five gallon jugs; and does not use up the world’s limited supply of fresh water. The AWG’s condensation and purification process takes water out of ambient air (humidity) and filters and purifies the water to remove any foreign matter, bacterial, organic and other impurities.

We have been making significant improvements in the production of our Watercycle AWG, with regard to both efficiency in making the unit and the quality of the units being produced. Production quality has improved with the development of a new PC board and the outsourcing of the units casing to local metal fabricators. The outsourcing of the units frame and the new PC board has also allowed us to use a wire harness for installation of the components electronics and has cut production to less than one hour; with our ultimate goal to be able to produce a unit in twenty minutes.

We have received feedback from our distributors concerning the operating noise level of the AWG. This has lead to modifications within the unit. We have redesigned the condenser fan shroud and introduced new ducting and added a second extractor fan. Recent testing has shown that we have reduced the operating noise level by almost half, from 74 decibels to between 38 and 42 decibels.

We have noticed from field tests that as the ambient temperature drops, the water production from the units had dropped significantly. The problem has since been addressed by the installation of a TXV (thermal expansion valve) in the system which monitors and better controls the refrigerant flow in varying temperatures. Recent lab tests showed the unit performing at almost full capacity in ambient temperatures as low as 50 degrees Fahrenheit. While production still falls off in lower temperatures, the unit is still capable of producing water and since it is designed and recommended for indoor use it is not expected to be operating in temperatures much below the 50 degree threshold.

We have been engaged in the development of a new AWG, “the WatercycleTM”, in connection with the patent license from Everest. This new device utilizes ozone to eliminate microorganisms, increases water producing ability, has a more attractive appearance and uses fewer parts than the machines we are currently marketing. In the future, we intend to include an optional feature that will permit the user to add flavors and natural herbal additives, such as green tea. We are also planning to add a CO2 cartridge to make carbonated water or drinks.

We feel that the differentiations in the new AWG could help us capture a larger market segment in the future because of its design, features and worldwide respect for “Made in USA” products, especially after the past product problems with a variety of products manufactured overseas. Additionally, we feel that based on the quality of our machine and the warranty we offer, that we can command a higher price than less efficient or less reliable units of our competitors.

We are in the final stages of completing our new Magnum AWG. The Magnum AWG is a high output unit capable of producing up to 20 gallons of water per day. This unit is designed to be stored either in subbasement storage or outside the home.

As a result of manufacturing our own AWG’s there was an increase in revenue to approximately $107,000 for the six months ended December 31, 2010 as compared to approximately $24,000 for the six months ended December 31, 2009, when sales consisted of reselling a machine manufactured elsewhere.

In an effort to further increase sales and sales revenue, we ~~have~~ hired Lee M. Stein as our senior vice president of sales and marketing. Mr. Stein will be responsible for defining and implementing ~~the Company's~~our sales, marketing, and cutting-edge green initiative strategies worldwide. Mr. Stein, a recipient of many awards and honors in a variety of industries, joins WaterPure with more than 25 years' experience in successful new-product launches. His experience covers direct sales, growth and business strategy, organization development, alliance partnerships, consumer satisfaction, online and social media marketing.

Results of Operations

For the Period from July 22, 2005 (Inception) through ~~December~~March 31, ~~2010~~2011

Revenue and Net Loss

Since we were formed on July 22, 2005, we have earned approximately ~~$345,000~~$375,000 in revenue and have incurred a cumulative net loss since our inception of approximately ~~$6,633,000~~$6,971,000 through ~~December~~March 31, ~~2010.~~2011. Operations from inception through ~~December~~March 31, ~~2010~~2011 were devoted primarily to strategic planning, raising capital, manufacturing and developing revenue-generating opportunities. Revenue for the ~~six~~nine months ended ~~December~~March 31, ~~2010~~2011 was ~~$106,690,~~$136,778, an increase of ~~$82,991,~~$89,579, or ~~450%~~290% higher than the ~~$23,699~~$47,199 for the comparable period in ~~2009.~~2010. We incurred a net loss of approximately ~~$820,000~~$1,158,000 for the ~~six~~nine months ended ~~December~~March 31, ~~2010,~~2011, an increase of ~~$234,000~~$628,000 as compared to a net loss of approximately ~~$586,000~~$530,000 for the ~~six~~nine months ended ~~December~~March 31, ~~2009.~~2010. The increase in revenue is ~~di rectly~~ related to ~~manufacturing~~the Company’s efforts to increase awareness of our ~~own AWG’s.~~AWG’s and its benefits. The increase in loss is ~~directly~~ attributable to an increase in selling, general and administrative expenses as described ~~below.~~below and from a onetime gain on restructuring debt of $339,137 which occurred during the nine months ended March 31, 2010.

Cost of goods sold consists of direct costs on contracts, materials, direct labor, third party subcontractor services, and other overhead costs. Our cost of goods sold was approximately ~~$107,000,~~$134,000, or ~~100%~~98% of revenues, for the ~~six~~nine months ended ~~December~~March 31, ~~2010,~~2011, compared to approximately ~~$17,000,~~$35,000, or ~~71.3%~~74% of revenue, for the comparable prior period in ~~2009.~~2010. The higher cost of goods sold as a percentage of sales is due to ~~us fulfilling~~a combination of distributor agreements that had price guarantees, which could only be changed with a 90 day notice and higher cost of parts due to our ~~obligations on~~lack of ability to buy in quantity, as a results those orders ~~that are currently~~were priced at or below cost. All distributors have been notified of our price changes and we anticipate lower part costs and increased margins.

Selling, General and Administrative Expenses

Selling, general and administrative expenses for the ~~six~~nine months ended ~~December~~March 31, ~~2010~~2011 were approximately ~~$574,000,~~$801,000, an increase of ~~$87,000~~$78,000 compared to approximately ~~$487,000~~$723,000 for the comparable period in ~~2009.~~2010. The overall increase resulted from increases of ~~$32,000~~$27,000 in professional fees due to higher legal and accounting cost ($~~90,000~~102,000 for the ~~six~~nine months ended ~~December~~March 31, ~~2010~~2011 as compared to ~~$58,000~~$75,000 for the ~~six~~nine months ended ~~December~~March 31, ~~2009)~~2010), ~~$11,000~~$5,000 in consulting fees as consultants were hired to facilitate our production of AWG’s ($~~110,000~~274,000 for the ~~six~~nine months ended ~~December~~March 31, ~~2010~~2011 as compared to ~~$99,000~~$269,000 for the ~~six~~nine months ended ~~December~~March 31, ~~2009)~~2010), ~~$32,500~~$42,000 in payroll expense as we hired workers to build AWG’s ($~~124,500~~180,000 for the ~~six~~nine months ended ~~December~~March 31, ~~2010~~2011 as compared to ~~$92,000~~$138,000 for the ~~six~~nine months ended ~~Dec ember~~March 31, ~~2009)~~2010), $19,500 in marketing and advertising expenses as we prepared for the launch of our manufactured AWG’s ($21,000 for the ~~six~~nine months ended ~~December~~March 31, ~~2010~~2011 as compared to $1,500 for the ~~six~~nine months ended ~~December~~March 31, ~~2009)~~2010) and other selling, general and administrative expenses decreased ~~$8,000~~$15,500 ($~~228,500~~224,000 for the ~~six~~nine months ended ~~December~~March 31, ~~2010~~2011 as compared to ~~$236,500~~$239,500 for the ~~six~~nine months ended ~~December~~March 31, ~~2009)~~2010).

Accretion of accrued royalties and licensing fees

Amortization Expense

There was ~~$136,939~~$201,972 in amortization expense for the ~~six~~nine months ended ~~December~~March 31, ~~2010,~~2011, compared to ~~$38,347~~$56,808 for the ~~six~~nine months ended ~~December~~March 31, ~~2009.~~2010. The increase is due to discounts, options and stock awards we issued to convertible debt and note payable holders.

There was ~~$38,869~~$62,396 in interest expense for the ~~six~~nine months ended ~~December~~March 31, ~~2010~~2011, compared to ~~$6,663~~$13,439 for the ~~six~~nine months ended ~~December~~March 31, ~~2009.~~2010. The increase is due to ~~the increase of $276,500~~us incurring an additional $442,844 in interest bearing debt.

Liquidity and Capital Resources

To date, we have generated approximately ~~$345,000~~$375,000 in revenues and have incurred operating losses in every quarter. We are still a development stage company as we have not generated significant revenues on a consistent basis from operations and have incurred significant losses since inception. These factors among others raise substantial doubt about our ability to continue as a going concern.

As of ~~December~~March 31, ~~2010,~~2011, we had a working capital deficiency of ~~$1,580,327.~~$2,237,176. For the ~~six~~nine months ended ~~December~~March 31, ~~2010,~~2011, we had net cash outflow from operating activities of ~~$361,345.~~$444,395. Cash provided by financing activities totaled ~~$315,605~~$418,958 for the ~~six~~nine months ended ~~December~~March 31, ~~2010.~~2011.

We do not have sufficient capital to support operations for the next 12 months. We anticipate we will need approximately $1 million, consisting of approximately $400,000 for manufacturing, $100,000 for sales and marketing and $300,000 for general and administrative expenses and working capital. An additional $200,000 would be utilized for the production and execution of our marketing support program. We are currently seeking joint venture partners and equity or debt financing to fund these expenditures, although we do not have any contracts or commitments for either at this time. We will have to raise additional funds to continue manufacturing our AWGs and, while we have been successful in doing so in the past, there can be no assurance that we will be able to do so in the future. Our continuation as a going concern is dependent upon our ability to obtain necessary additional funds to continue operations and the attainment of profitable operations.

By adjusting our operations to the level of capitalization and through short term loans from officers and others, we believe we will have sufficient capital resources to meet current projected cash flow deficits in the near term. However, if during that period, or thereafter, we are not successful in generating sufficient liquidity from operations or in raising sufficient capital resources on terms acceptable to us, this could have a material adverse effect on our business, results of operations, liquidity and financial condition.

We presently do not have any available credit, bank financing or other external sources of liquidity. Due to our brief history and historical operating losses, our operations have not been a source of liquidity. We will need to obtain additional capital in order to expand operations and become profitable. In order to obtain capital, we may need to sell additional shares of our common stock or borrow funds from private lenders. There can be no assurance that we will be successful in obtaining additional funding.

We will still need additional capital in order to continue operations until we are able to achieve positive operating cash flow. Additional capital is being sought, but we cannot guarantee that we will be able to obtain such investments. Financing transactions may include the issuance of equity or debt securities, obtaining credit facilities, or other financing mechanisms. However, the trading price of our common stock and a downturn in the U.S. stock and debt markets could make it more difficult to obtain financing through the issuance of equity or debt securities. Even if we are able to raise the funds required, it is possible that we could incur unexpected costs and expenses, fail to collect significant amounts owed to us, or experience unexpected cash requirements that would force us to seek alternative financing. Furthermore, if we issue additional equity or debt securities, stockholders may experience additional dilution or the new equity securities may have rights, preferences or privileges senior to those of existing holders of our common stock. If additional financing is not available or is not available on acceptable terms, we will have to curtail our operations.

We have financed our losses through the sale of our common stock, issuance of notes payable and convertible notes payable, issuance of common stock for services in lieu of cash, and loans from officers and stockholders. During the ~~six~~nine months ended ~~December~~March 31, ~~2010,~~2011, we received the following capital infusions: ~~$8,800~~$34,300 from the sale of ~~1,626,667~~8,926,667 shares of our common stock, ~~$5,500~~$11,586 from the sale of ~~1,300,000~~2,000,000 shares of our common stock classified as to-be-issued, ~~$124,000~~$149,000 from issuance of notes payable, ~~$189,000~~$214,000 from the issuance of convertible notes payable, and loans from officers and shareholders totaling ~~$24,805.~~$44,072. In addition, during the ~~six~~nine months ended ~~December~~March 31, ~~2010,~~2011, in lieu of cash payments, we issued ~~18,579,473~~24,924,473 shares of common stock valued at ~~$155,120~~$214,030 for services rendered. We do not intend to pay interest on the advances ~~bor rowed~~received from officers and stockholders as the advances are intended to be short-term.

Critical Accounting Policies

Our financial statements are prepared based on the application of accounting principles generally accepted in the United States of America. These accounting principles require us to exercise significant judgment that affect the amounts reported throughout our financial statements. Actual events could unfold quite differently than our previous judgments had predicted. Therefore the estimates and assumptions inherent in the financial statements included in this report could be materially different once those actual events are known. We believe the following policies may involve a higher degree of judgment and complexity in their application and represent critical accounting policies used in the preparation of our financial statements. If different assumptions or estimates were used, our financial statements could be materially different from those included in this report.

We recognize revenues in accordance with Staff Accounting Bulletin 104, “Revenue Recognition in Financial Statements” (SAB 104). We sell atmospheric water generators. Revenue from such product sales is recognized when persuasive evidence of an arrangement exists, delivery has occurred, the fee is fixed or determinable and collectability is probable. Generally the earnings process is complete and the risks and rewards of ownership have transferred to the customer, when the goods are shipped and all our significant obligations have been satisfied.

We must make judgments about the collectability of our accounts receivable to be able to present them at their net realizable value on the balance sheet. To do this, we carefully analyze the aging of our customer accounts, try to understand why accounts have not been paid, and review historical bad debt problems. From this analysis, we record an estimated allowance for receivables that we believe will ultimately become uncollectible. As of ~~December~~March 31, ~~2010,~~2011, we had an allowance for bad debts of ~~$0.~~$6,499. We actively manage our accounts receivable to minimize our credit risks and believe that our current allowance for doubtful accounts is fairly stated.

We make judgments about the ultimate realizability of our inventory in order to record our inventory at the lower of cost or market. These judgments involve reviewing current demand for our products in comparison to present inventory levels and reviewing inventory costs compared to current market values.

Long-lived Assets and Other Intangible Assets

~~We account for our long-lived assets by requiring that long-lived~~Long-lived assets and certain intangible assets beare reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount may not be recoverable. If undiscounted expected future cash flows are less than the carrying value of the assets, an impairment loss is recognized based on the fair value of the assets.

Recent Accounting Pronouncements

There are no recent accounting pronouncements that are expected to have a material impact on us.

ITEM 3 - QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

Not required under Regulation S-K for “smaller reporting companies.”

ITEM 4 - CONTROLS AND PROCEDURES

Evaluation of disclosure controls and procedures. We maintain "disclosure controls and procedures," as such term is defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934 (the "Exchange Act"), that are designed to ensure that information required to be disclosed by us in reports that we file or submit under the Exchange Act is recorded, processed, summarized, and reported within the time periods specified in Securities and Exchange Commission rules and forms, and that such information is accumulated and communicated to our management, including our Chief Executive Officer and Chief Financial Officer, as appropriate, to allow timely decisions regarding required disclosure. In designing and evaluating our disclosure controls and procedures, management recognized that disclosure controls and procedures, no matter how well conceived and operated, can provide only reasonable, not absolute, assurance that the objectives of the disclosure controls and procedures are met. Additionally, in designing disclosure controls and procedures, our management was required to apply its judgment in evaluating the cost-benefit relationship of possible disclosure controls and procedures. The design of any disclosure controls and procedures also is based in part upon certain assumptions about the likelihood of future events, and there can be no assurance that any design will succeed in achieving its stated goals under all potential future conditions.

Based on our evaluation, our Chief Executive Officer and Chief Financial Officer concluded that, as a result of the material weaknesses described below, our disclosure controls and procedures are not designed at a reasonable assurance level and are ineffective to provide reasonable assurance that information we are required to disclose in reports that we file or submit under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in Securities and Exchange Commission rules and forms, and that such information is not accumulated nor communicated to our management, including our Chief Executive Officer and Chief Financial Officer, as appropriate, to allow timely decisions regarding required disclosure. The material weaknesses, which relate to internal control over financial reporting, that were identified are:

We did not have sufficient personnel in our accounting and financial reporting functions. As a result we were not able to achieve adequate separation of duties and were not able to provide for adequate review of the financial statements. This control deficiency, which is pervasive in nature, results in a reasonable possibility that material misstatements of the financial statements will not be prevented or detected on a timely basis;

We did not maintain sufficient personnel with an appropriate level of technical accounting knowledge, experience, and training in the application of U.S. GAAP commensurate with out complexity and our financial accounting and reporting requirements. This control deficiency is pervasive in nature. Further, there is a reasonable possibility that material misstatements of the financial statements including disclosures will not be prevented or detected on a timely basis as a result; and

We did not document or test our key controls over financial reporting in accordance with Section 404 of the Sarbanes Oxley Act of 2002. As a result, we cannot provide proper ~~recording~~documentation of the framework for our internal controls nor the results of testing of such controls. There is a reasonable possibility that material misstatements of the financial statements including disclosures will not be prevented or detected on a timely basis without the ability to determine if our controls are effective.

We are committed to improving our accounting and financial reporting functions. As part of this commitment, we will create a segregation of duties consistent with control objectives and will look to increase our personnel resources and technical accounting expertise within the accounting function by the end of fiscal 2011 to appropriately address non-routine or complex accounting matters. In addition, when funds are available to the Company, ~~which we expect to occur by the end of fiscal 2011,~~ we will take the following action to enhance our internal controls: Hiring additional knowledgeable personnel with technical accounting expertise to further support the current accounting personnel at the Company, which management estimates will cost approximately $75,000 per annum. We will engage outside consultants in the future as necessary in order to ensure non-routine or complex accounting matters are appropriately addressed.

Management believes that hiring additional knowledgeable personnel with technical accounting expertise will remedy the following material weaknesses: (A) lack of sufficient personnel in our accounting and financial reporting functions to achieve adequate segregation of duties; and (B) insufficient personnel with an appropriate level of technical accounting knowledge, experience, and training in the application of US GAAP commensurate with our complexity and our financial accounting and reporting requirements.

Management believes that the hiring of additional personnel who have the technical expertise and knowledge with the non-routine or technical issues we have encountered in the past will result in both proper recording of these transactions and a much more knowledgeable finance department as a whole. Due to the fact that our accounting staff consists of a Chief Financial Officer and an accounting clerk, additional personnel will also ensure the proper segregation of duties and provide more checks and balances within the department. Additional personnel will also provide the cross training needed to support us if personnel turnover issues within the department occur. We believe this will greatly decrease any control and procedure issues we may encounter in the future.

We will continue to monitor and evaluate the effectiveness of our disclosure controls and procedures and our internal controls over financial reporting on an ongoing basis and are committed to taking further action and implementing additional enhancements or improvements, as necessary and as funds allow.

Changes in Internal Control Over Financial Reporting. There were no changes in our internal control over financial reporting identified in connection with the evaluation required by paragraph (d) of Rule 13a-15 or Rule 15d-15 that materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

PART II - OTHER INFORMATION

Item 1. Legal Proceedings

We are currently not a party to any material legal proceedings or claims.

Item 1A. Risk Factors

Not required under Regulation S-K for “smaller reporting companies.”

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds

During the three months ended ~~December~~March 31, ~~2010,~~2011, we sold ~~1,526,667~~7,300,000 shares of our common stock to accredited investors for aggregate proceeds of ~~$8,300.~~$28,500.

During the three months ended ~~December~~March 31, ~~2010,~~2011, in lieu of cash payments, we issued ~~10,379,473~~6,345,000 shares of common stock valued at approximately ~~$73,120~~$58,910 for services rendered.

During the three months ended March 31, 2011, we issued 15,399,285 shares of our common stock to convert loans to stockholders in the amount of $101,796 plus accrued interest of $1,950.

During the three months ended March 31, 2011, we issued 9,000,000 shares of our common stock as part of a conversion of 36 shares of our Series A Preferred Stock.

During the three months ended March 31, 2011, we issued 7,000,000 shares of our common stock to convert the balance of a convertible note payable of $35,000.

During the three months ended March 31, 2011, we issued 625,000 shares of our common stock as repayment of accounts payable of $5,000.

We entered into a Securities Purchase Agreement with accredited investors on October 8, 2010 for the issuance of an aggregate of $31,000 of convertible notes. The convertible notes accrue interest at 18% per annum and are due upon demand. The note holder has the option to convert any unpaid note principal into our common stock at a rate of $0.01 per share.

We entered into a Securities Purchase Agreement with accredited investors on November 1, 2010 for the issuance of an aggregate of $20,000 of convertible notes. The convertible notes accrue interest at 18% per annum and are due upon demand from the date of the note. The note holder has the option to convert any unpaid note principal into our common stock at a rate of $0.01 per share.

~~We entered into a Securities Purchase Agreement with accredited investors on November 8, 2010~~March 3, 2011 for the issuance of an aggregate of $25,000 of convertible notes. The convertible notes accrue interest at 8% per annum and are due nine months from the date of the note. The note holder has the option to convert any unpaid note principal into our common stock at a rate of fifty percent multiple by the market price of the lowest three average trading days during the ten day period ending on the last complete trading day prior to the conversion date.

Item 3. Defaults Upon Senior Securities

We are currently in default on a $25,000 note, which was due May 15, 2008.

We are currently in default on a $50,000 note, as amended, which was due July 30, 2009.

We are currently in default on a $10,000 note, which was due November 22, 2010.

We are currently ~~$19,000~~$25,000 in arrears on our licensing fee/payments and are in default on this agreement.

We are currently $30,000 in arrears on our royalty payments to the holders of our Series A Preferred Stock.

Item 4. ~~Reserved~~{Removed and Reserved}

Item 5. Other Information.

10.01

Securities Purchase Agreement, dated as of March 3, 2011, by and between WaterPure International, Inc. and Asher Enterprises, Inc.

10.02

Form of Convertible Debenture, issued March 3, 2011

10.03

Securities Purchase Agreement, dated as of May 18, 2011, by and between WaterPure International, Inc. and Asher Enterprises, Inc.

10.04

Form of Convertible Debenture, issued May 18, 2011

31.01

Certification of Chief Executive Officer pursuant to Exchange Act Rules 13a-14(a) and 15d-14(a), as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

31.02

Certification of Chief Financial Officer pursuant to Exchange Act Rules 13a-14(a) and 15d-14(a), as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

32.01

Certifications of Chief Executive Officer and Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

WATERPURE INTERNATIONAL, INC.

	~~WATERPURE INTERNATIONAL, INC.~~

Date: ~~February 22,~~May 20, 2011	By:	/s/ PAUL S. LIPSCHUTZ
		Paul S. Lipschutz
		President (Principal Executive Officer)


Date: ~~February 22,~~May 20, 2011	By:	/s/ ROBERT F. ORR
		Robert F. Orr
		Chief Financial Officer (Principal Financial Officer and Principal Accounting Officer)

	December 31 2010		June 30, 2010		March 31, 2011		June 30, 2010
Raw materials	$	48,231	$	5,784	$	37,670	$	5,784
Work-in-progress		47,106		72,939		25,597		72,939
Finished goods		26,294		-0-		9,110		-0-
Total inventories	$	121,631	$	78,723	$	72,377	$	78,723

	Options	Weighted Average Exercise Price		Options		Weighted Average Exercise Price
Outstanding as of July 22, 2005 (inception)	-	$	-		-	$	-
Granted	125,000		0.0025		125,000		0.0025
Exercised	-		-		-		-
Forfeited	-		-		-		-
Expired	-		-		-		-
Outstanding as of June 30, 2006	125,000	$	0.0025		125,000	$	0.0025
Granted	500,000		0.5500		500,000		0.5500
Exercised	-		-		-		-
Forfeited	-		-		-		-
Expired	-		-		-		-
Outstanding as of June 30, 2007	625,000	$	0.4400		625,000	$	0.4400
Granted	3,100,000		0.0990		3,100,000		0.0990
Exercised	125,000		0.0025		125,000		0.0025
Forfeited	-		-		-		-
Expired	-		-		-		-
Outstanding as of June 30, 2008	3,600,000	$	0.1610		3,600,000	$	0.1610
Granted	100,000		.0150		100,000		.0150
Exercised	-		-		-		-
Forfeited	-		-		-		-
Expired	-		-		-		-
Outstanding as of June 30, 2009	3,700,000	$	0.1577		3,700,000	$	0.1577
Granted	10,249,997		.0021		10,249,997		.0021
Exercised	-		-		-		-
Forfeited	-		-		-		-
Expired	-		-		-		-
Outstanding as of June 30, 2010	13,949,997	$	.0434		13,949,997	$	.0434
Granted	100,000		.005		100,000		.005
Exercised	-		-		-		-
Forfeited	-		-		-		-
Expired	100,000		.005		100,000		.005
Outstanding as of December 31, 2010	13,949,997	$	.0434
Outstanding as of March 31, 2011					13,949,997	$	.0434

Year ending June 30, 2011	$	17,398	$	8,801
2012	$	36,230	$	36,230
2013	$	38,689	$	38,689
2014	$	41,147	$	41,147
2015	$	24,839	$	24,839
Total Lease Commitment	$	158,303	$	149,706

	December 31,		June 30,		March 31,		June 30,
	2010		2010		2011		2010
Cost of license described above	$	1,094,864	$	1,094,864	$	1,094,864	$	1,094,864
Less: accumulated amortization		201,545		168,578		218,029		168,578
License, net	$	893,319	$	926,286	$	876,835	$	926,286