Innova Pure Water 10QSB/A 2006 Q1 Quarterly report (small business) (amended)

UNITED STATES SECURITIES AND EXCHANGE COMMISSION

Washington D.C. 20549

FORM 10-QSB/A#1


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

For the quarterly period ended March 31, 2006


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

For the transition period from , 20 , to , 20 .

Commission File Number 0-29746

INNOVA PURE WATER, INC.

(Exact Name of Registrant as Specified in Charter)

Florida

59-2567034

(State or Other Jurisdiction of

Incorporation or Organization)

(I.R.S. Employer Identification Number)

4951 Airport Parkway, Suite 500, Addison, Texas 75001

(Address of Principal Executive Offices)

(972) 980-0486

(Registrant’s Telephone Number, Including Area Code)

Check whether the issuer (1) filed all reports required to be filed by Section 13 or 15(d) of the Securities 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. x YES ¨ NO

There were 34,824,236 shares of the Registrant’s $.0001 par value common stock outstanding as of March 31, 2006.

Transitional Small Business Format (check one) Yes ¨ NO x

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes Nox

Issuer’s net loss for its most recent fiscal quarter ended March 31, 2006 was $81,400.

Innova Pure Water, Inc.

Three and Nine Months Ended

March 31, 2006 and 2005 (Unaudited)

Table of Contents


Item 1.		Consolidated Financial Statements
		Consolidated Balance Sheet for March 31, 2006 (Unaudited)

		Consolidated Statements of Operations for the Three and Nine Months Ended March 31, 2006 and 2005 (Unaudited)

		Consolidated Statement of Changes in Stockholders’ Equity for the Nine Months Ended March 31, 2006 (Unaudited)

		Consolidated Statements of Cash Flows for the Nine Months Ended March 31, 2006 and 2005 (Unaudited)

		Notes to Consolidated Financial Statements

Item 2.		Management’s Discussion & Analysis of Financial Condition and Results of Operation

Item 3.		Controls and Procedures

Part II – Other Information

Item 1.		Legal Proceedings

Item 2.		Changes in Securities

Item 3.		Defaults Upon Senior Securities

Item 4.		Submission of Matters to a Vote of Security Holders

Item 5.		Other Matters

Item 6.		Exhibits and Reports on Form 8-K

Signatures

Innova Pure Water, Inc.

Three and Nine Months Ended

March 31, 2006 and 2005 (Unaudited)

Purpose of This Amendment # 1

Innova Pure Water, Inc. accounted for the purchase of Numera Software Corporation on June 27, 2005 as an acquisition of Numera by Innova. Subsequently, the Company determined that this accounting method was not in accordance with generally accepted accounting principles, and that Numera should be the acquiring company in a reverse acquisition.

As a result, the Form 10-KSB for the year ended June 30, 2005, and the Consolidated Balance Sheet as of June 30, 2005, and the Consolidated Statements of Operations, Consolidated Statements of Cash Flow, and Consolidated Statements of Stockholders’ Equity for the years ended June 30, 2005 and June 30, 2004 were restated to reflect the appropriate reverse acquisition accounting method. Also, the Form 10-QSB for the three month period ended September 30, 2005, the six month period ended December 31, 2005, the Consolidated Balance Sheets as of September 30, 2005 and December 31, 2005, the Consolidated Statements of Operations, Consolidated Statements of Cash Flow, and Consolidated Statements of Stockholders’ Equity for the three month period ended September 30, 2005 and September 30, 2004 and the six month period ended December 31, 2005 and 2004 were restated to reflect the appropriate reverse acquisition accou nting method.

Additionally, this Amendment # 1 is being filed to report the restatement of the accompanying Consolidated Balance Sheet as of March 31, 2006, and the Consolidated Statements of Operations, Consolidated Statements of Cash Flow, and Consolidated Statements of Stockholders’ Equity for the three and nine month periods ended March 31, 2006 and March 31, 2005 to reflect the appropriate reverse acquisition accounting method.

PART I – FINANCIAL INFORMATION

Innova Pure Water, Inc.

Consolidated Balance Sheet

March 31, 2006

(Unaudited)


Assets:
Current Assets:
	Cash	$	18,900
	Accounts receivable		59,600
	Other receivable		2,600
	Inventories		26,200
Total current assets			107,300

Property and equipment, net of accumulated depreciation of $9,500			3,100

Other assets:
	Computer software, net of accumulated amortization of $0		894,800
	Patents, net of accumulated amortization of $35,800		126,000
	Goodwill		160,100
	Other		8,600
Total Other assets			1,189,500

		$	1,299,900

Liabilities and Stockholders’ Equity:
Current liabilities:
	Accounts payable, trade	$	206,300
	Accrued expenses		116,500
	Note payable		4,000
	Advances, shareholders		92,200
	Deferred revenue		33,900
Total current liabilities			452,900

Note payable net of unamortized discount of $17,200			182,800

Stockholders’ equity:
	Preferred stock; $.001 par value; 2,000,000 shares authorized;
	0 shares issued and outstanding		0
	Common stock; $.0001 par value; 50,000,000 shares authorized;
	34,824,236 shares issued and outstanding		3,500
	Capital in excess of par value		4,124,100
Accumulated deficit			(3,450,500	)
			677,100
	Treasury stock, at cost; 500 shares		(12,900	)
Total stockholders’ equity			664,200

		$	1,299,900

The accompanying notes are an integral part of the consolidated financial statements.

Innova Pure Water, Inc.

Consolidated Statements of Operations

(Unaudited)


		Three Months Ended						Nine Months Ended
		March 31						March 31
		2006			2005			2006			2005


Net sales		$	86,300		$	0		$	374,800		$	0
Cost of sales			29,800			0			100,100			0

	Gross profit		56,500			0			274,700			0

Operating expenses:
	General and administrative expenses		181,600			2,500			450,200			2,500

Total operating expenses			181,600			2,500			450,200			2,500

Income (loss) from operations			(125,100	)		(2,500	)		(175,500	)		(2,500	)

Other (income) expenses:
	Interest, net		6,300			0			6,900			0
	Royalties and other income		(50,000	)		0			(50,000	)		0

Total other (income) expenses			(43,700	)		0			(43,100	)		0

Net income (loss)		$	(81,400	)	$	(2,500	)	$	(132,400	)	$	(2,500	)

Earnings (loss) per common share		$	.00		$	.00		$	.00		$	.00

Weighted average number of common
shares outstanding			34,824,236			16,600,000			34,689,309			16,600,000

The accompanying notes are an integral part of the consolidated financial statements.

Innova Pure Water, Inc.

Consolidated Statement of Changes in Stockholders’ Equity

Nine Months Ended March 31, 2006

(Unaudited)


				Capital In
	Common Stock			Excess Of		Accumulated			Treasury
	Shares	Amount		Par Value		Deficit			Stock			Total
Balance,
June 30, 2005	34,559,236	$3,500	$	4,097,600	$	(3,318,100	)	$	(12,900	)	$	770,100

Issuance of common
stock for legal fees	265,000			26,500								26,500

Net loss						(132,400	)					(132,400	)

Balance,
March 31, 2006	34,824,236	$3,500	$	4,124,100	$	(3,450,500	)	$	(12,900	)	$664	664,200	)

The accompanying notes are an integral part of the consolidated financial statements.

Innova Pure Water, Inc.

Consolidated Statements of Cash Flows

(Unaudited)

March 31, 2006


					Nine Months Ended March 31
						2006			2005
Operating activities:
	Net loss				$	(132,400	)	$	(2,500	)
	Adjustments to reconcile net loss to net cash used
	by operating activities:
			Depreciation and amortization			35,700			0
			Bad debt expense			800
			Amortization of note payable discount			6,100			0
			(Increase) decrease in:
			Accounts and other receivables			(46,100	)		0
			Inventories			39,800			0
			Other assets and prepaid expenses			(1,900	)		0
			(Decrease) increase in:
			Accounts payable and accrued expenses			97,600			0
			Deferred revenue			(75,900	)		0
	Total adjustments					56,100			0
				Net cash used by operating activities		(73,600	)		(2,500	)

Investing activities:
				Acquisition of software		(9,500	)		0
				Net cash (used) provided by investing activities		(9,500	)		0

Financing activities
				Advances from related parties		88,700			0
				Net cash provided by financing activities		88,700			0

Net (decrease) increase in cash						2,900			0

Cash, beginning of period						16,000			0

Cash, end of period					$	18,900		$	0

Supplemental disclosures of cash flow information and non-
cash financing activities:
		Cash paid during the year for interest			$$	3,200		$	0
		Common stock issued in settlement of accounts payable				26,500			0
		Payables incurred for additions to computer software				18,300			0

The accompanying notes are an integral part of the consolidated financial statements.

Innova Pure Water, Inc.

Notes to Consolidated Financial Statements

Three and Nine Months Ended March 31, 2006 and 2005 (Unaudited)

1. Consolidated Financial Statements

In the opinion of management, all adjustments consisting only of normal recurring adjustments necessary for a fair statement of (a) the results of operations for the three and nine month periods ended March 31, 2006 and 2005, (b) the financial position at March 31, 2006, and (c) cash flows for the nine month periods ended March 31, 2006 and 2005, have been made.

The unaudited consolidated financial statements and notes are presented as permitted by Form 10-QSB. Accordingly, certain information and note disclosures normally included in consolidated financial statements prepared in accordance with accounting principles generally accepted in the United States of America have been omitted. The accompanying consolidated financial statements and notes should be read in conjunction with the audited financial statements and notes of the Company for the fiscal year ended June 30, 2005. The results of operations for the three and nine month periods ended March 31, 2006 are not necessarily indicative of those to be expected for the entire year.

2. Going Concern

The accompanying consolidated financial statements have been prepared in conformity with accounting principles generally accepted in the United States of America, which contemplates continuation of the Company as a going concern. However, the Company has sustained substantial operating losses in recent years. The Company has incurred an additional loss of ($132,400) for the nine month period ended March 31, 2006, which increased the Company’s accumulated deficit to ($3,450,500). The Company also has negative working capital of approximately ($345,600) as of March 31, 2006. These factors raise substantial doubt about the ability of the Company to continue as a going concern. The consolidated financial statements do not include any adjustments that might result from the outcome of this uncertainty.

Although the Company continues to maintain costs and institute efforts to conserve cash, such efforts will not make them a viable business entity, and without significant additional revenues they may not be able to stay in business.

The Company continues to explore the possibility of outsourcing some production and support tasks that are currently being done in-house in order to reduce such costs. However, until sufficient volume is obtained to support significant outsourcing, the Company is not in a position to outsource production in order to save costs.

Innova Pure Water, Inc.

Notes to Consolidated Financial Statements

Three and Nine Months Ended March 31, 2006 and 2005 (Unaudited)

3. Contingencies

Innova was a successfulplaintiff in a patent infringement lawsuit entitled Innova Pure Water, Inc., v. Safari Water Filtration Systems, Inc. d/b/a Safari Outdoor Products, Defendant; Case No. 99-1781-Civ-T-23F filed by the Company on August 4, 1999. The case was filed with the U.S. District Court, Middle District of Florida, Tampa Division. The Company claimed patent infringement of U.S. Patent 5,609,759 on the part of the defendants. On December 16, 2003, the court ruled in favor of Safari. Innova filed an appeal with the United States Court of Appeals, case No. 04-1097, who, on August 11, 2004, reversed the lower courts decision. The case was remanded back to the Circuit Court on September 1, 2004 to find on any remaining issues. Innova filed for a summary judgment or the prompt setting of a trial date. On September 30, 2005, the Court issued an Order granting Innova's motion for a s ummary judgment. The Court adjudged that Innova's U.S. Patent 5,609,759 is valid and enforceable and that claims set forth in said patent were infringed upon by products made, used, sold or offered for sale by Safari. Safari was permanently enjoined from making, using, selling or offering for sale in the United States any product covered under the patent's claims as more fully set forth in the Order. Management of the Company believes the entry of this Order will have significance against other parties who may be infringing upon the Company's products and services. Innova subsequently filed with the Court a request for summary judgment pertaining to damages as Safari failed to respond to the Court’s requests on this issue. The Federal court in Tampa, Fl again ruled in favor of Innova awarding damages in the amount of $40,000. Presently, Innova is pursuing both collection and other remedies as a result of the favorable verdicts by the Court.

Innova is currently a plaintiff and a cross defendant in a case captionedJ. Smith and M. Danzel v. Innova Pure Water, Inc.v. Sawyer Products, Inc. – Sawyer Products, Inc. v. Innova Pure Water, Inc. and J. Nohren and Rose R. Smith; Case No. 05-000538C1-07 in the Sixth Judicial Circuit Court of Pinellas County. This case is in its early stages and it is not possible at the present time, with any reasonable degree of certainty, to determine the likelihood of a favorable or unfavorable outcome or to quantify the potential exposure to Innova. No amounts relating to this case have been recorded in the accompanying consolidated financial statements.

Originally, Mr. Smith and Ms. Danzel sued Innova for accrued and unpaid vacation time. The total amount was less than $10,000. Innova counterclaimed against the former employees and their new employer, Sawyer Products, Inc., for violation of, and interference with the former employees' covenants not to compete with Innova. In the litigation, Sawyer Products filed a $600,000 claim against Innova and its certain officers alleging misrepresentation in connection with certain loans Sawyer made to the Company and the issuance of warrants to Sawyer. Sawyer has also sued Innova for breach of contract. Sawyer is seeking damages in excess of $600,000. Innova is seeking both back royalties or lost profits, as well as damages, including punitive damages.

On December 2, 2005 the litigation involving Smith, Danzel and Sawyer Products was settled. As part of the terms of agreement, all claims and causes of action among the parties would be extinguished.

Innova Pure Water, Inc.

Notes to Consolidated Financial Statements

Three and Nine Months Ended March 31, 2006 and 2005 (Unaudited)

3. Contingencies (continued)

Additionally, the Company agreed to pay Sawyer Products $100,000 within 120 days in exchange for the return of warrants issued to Sawyer Products and the canceling of a loan in the amount of $200,000 from Sawyer Products to the Company. Claims to certain tooling used in the manufacture of the Company’s products were relinquished by Sawyer Products and the Company agreed to release Mr. Smith and Ms. Dancel from their employment contracts. Finally, Sawyer Products were specifically prohibited from contacting certain customers of the Company. However, the Company failed to make the $100,000 payment within the 120 day time period thereby voiding the settlement agreement. The Company is in the process of negotiating a new settlement that is believed to be beneficial to both companies. However, there can be no assurance that such an agreement can be reached.

4. Stock and Stock Options

Stock-based compensation to non-employees is valued using the Black-Scholes option pricing model. During the periods ended March 31, 2006 and 2005, the Company did not grant any stock options.

5. Segment Reporting

The Company has three reportable segments for the three and nine months ended March 31, 2006; manufacturing, software and consulting and only one reportable segment for the same periods ended March 31, 2005. Therefore, for the three and nine months ended March 31, 2006 the Company has included segment reporting.

March 31, 2006:


	Manufacturing		Software		Consulting		Total

Property and equipment, net of accumulated depreciation	$	3,000	$		$	100	$	3,100

Computer software, net of accumulated amortization	$		$	894,800			$	894,800

Goodwill	$	160,100	$		$		$	160,100

Patents, net of accumulated amortization	$	126,000	$		$		$	126,000

Segment assets	$	227,900	$	925,100	$	146,900	$	1,299,900

Innova Pure Water, Inc.

Notes to Consolidated Financial Statements

Three and Nine Months Ended March 31, 2006 and 2005 (Unaudited)

For the three months ended March 31, 2006:


	Manufacturing		Software			Consulting		Total

Net sales	$	25,400	$	8,500		$	52,400	$	86,300

Interest expense, net	$	6,100	$			$	200	$	6,300

Depreciation and amortization	$		$			$		$

Net income (loss)	$	(134,300)	$	(900	)	$	53,800	$	(81,400	)

For the nine months ended March 31, 2006:


	Manufacturing			Software		Consulting		Total

Net sales	$	201,000		$	40,700	$	133,100	$	374,800

Interest expense, net	$	6,100		$		$	800	$	6,900

Depreciation and amortization	$	200		$		$		$	200

Net income (loss)	$	(204,100	)	$	15,200	$	56,500	$	(132,400	)

6. Restatement

Subsequent to the issuance of the Company’s annual report on Form 10-KSB for the fiscal year ended June 30, 2005, the Company determined that the method of accounting for the acquisition of Numera Software Corporation by Innova Pure Water, Inc. on June 27, 2005 was not in accordance with generally accepted accounting principles. Consequently, the Company decided to account for the transaction between Innova Pure Water, Inc. and Numera Software Corporation as a reverse acquisition, with Numera Software Corporation as the acquiring company, in lieu of accounting for the transaction as a purchase of Numera Software Corporation by Innova Pure Water, Inc., as was originally reported.

As a result, the Consolidated Balance Sheets as of June 30, 2005, September 30, 2005, December 31, 2005, and the Consolidated Statements of Operations, Consolidated Statements of Cash Flow, and Consolidated Statements of Stockholders’ Equity for the years ended June 30, 2005 and June 30, 2004 and the quarterly periods ended September 30, 2005 and 2004, and December 31, 2005 and 2004 were restated to reflect the appropriate reverse acquisition accounting method. Additionally, the accompanying Consolidated Balance Sheet as of March 31, 2006, and the Consolidated Statements of Income, Consolidated Statements of Cash Flow, and Consolidated Statements of Stockholders’ Equity for the three month period ended March 31, 2006 and 2005 and the nine month period ended March 31, 2006 and 2005 were restated to reflect the appropriate reverse acquisition accounting method.

Effects of the Restatement

A summary of the primary effects of the restatement is as follows:

March 31, 2006


		Previously Reported		Restated
Stockholders’ Equity:
Capital Stock	$	3,500		$	3,500
Capital in excess of par		10,175,500			4,121,100
Accumulated deficit		(9,501,900	)		(3,450,500	)
Total stockholders’ equity		664,200			677,100
Total liabilities and stockholders’ equity		1,299,900			1,299,900

Nine Months Ended March 31, 2006


		Previously Reported			Restated
Operating Activities:
Total revenues	$	374,800		$	374,800
Cost of sales		100,100			100,100
Gross Profit		274,700			274,700
Operating Expenses		450,200			450,200
Net loss		(132,400	)		(175,500	)
Net cash used by operating		(73,600	)		(73,600	)
Net cash provided by investing		(9,500	)		(9,500	)
Net cash provided by financing		88,700			88,700
Net increase in cash and cash equivalents		(2,900	)		(2,900	)
Cash and equivalents, end of period		18,900			18,900

Nine Months Ended March 31, 2005


		Previously Reported			Restated
Operating Activities
Total revenues	$	273,300		$	0
Cost of sales		136,400			0
Gross Profit		139,600			0
Operating Expenses		440,000			0
Net loss		(204,600	)		0
Net cash used by operating		(231,300	)		0
Net cash provided by investing		67,000			0
Net cash provided by financing		176,400			0
Net increase in cash and cash		12,100			0
Cash and equivalents, end of period		12,100			0

Item 2. Management’s Discussion & Analysis of Financial Condition and Results of Operation

THIS FILING CONTAINS FORWARD-LOOKING STATEMENTS. THE WORDS “ANTICIPATED,” “BELIEVE,” “EXPECT,” “PLAN,” “INTEND,” “SEEK,” “ESTIMATE,” “PROJECT,” “WILL,” “COULD,” “MAY,” AND SIMILAR EXPRESSIONS ARE INTENDED TO IDENTIFY FORWARD-LOOKING STATEMENTS. THESE STATEMENTS INCLUDE, AMONG OTHERS, INFORMATION REGARDING FUTURE OPERATIONS, FUTURE CAPITAL EXPENDITURES, AND FUTURE NET CASH FLOW. SUCH STATEMENTS REFLECT THE COMPANY’S CURRENT VIEWS WITH RESPECT TO FUTURE EVENTS AND FINANCIAL PERFORMANCE AND INVOLVE RISKS AND UNCERTAINTIES, INCLUDING, WITHOUT LIMITATION, GENERAL ECONOMIC AND BUSINESS CONDITIONS, CHANGES IN FOREIGN, POLITICAL, SOCIAL, AND ECONOMIC CONDITIONS, REGULATORY INITIATIVES AND COMPLIANCE WITH GOVERNMENTAL REGULATIONS, THE ABILITY TO ACHIEVE FURTHER MARKET PENETRATION AND ADDITIONAL CUSTOMERS, AND VARIOUS OTHER MATTERS, MANY OF WHICH ARE BEYOND THE COMPANY’S CONTROL. SHOULD ONE OR MORE OF THESE RISKS OR UNCERTAINTIES OCCUR, OR SHOULD UNDERLYING ASSUMPTIONS PROVE TO BE INCORRECT, ACTUAL RESULTS MAY VARY MATERIALLY AND ADVERSELY FROM THOSE ANTICIPATED, BELIEVED, ESTIMATED, OR OTHERWISE INDICATED. CONSEQUENTLY, ALL OF THE FORWARD-LOOKING STATEMENTS MADE IN THIS FILING ARE QUALIFIED BY THESE CAUTIONARY STATEMENTS AND THERE CAN BE NO ASSURANCE OF THE ACTUAL RESULTS OR DEVELOPMENTS.

Innova cautions readers that in addition to important factors described elsewhere, the following important facts, among others, sometimes have affected, and in the future could affect, the Company’s actual results, and could cause the Company’s actual results during 2006 and beyond, to differ materially from those expressed in any forward-looking statements made by, or on behalf of, Innova.

INCOME STATEMENT DATA


	Nine Months Ended March 31,
	2006		2005
Total revenue	$	374,800	$	0

Net loss	$	(132,400)	$	(2,500	)

Loss per common share—basic	$	(.00)	$	(.00	)

Shares used in per share computation		34,824,236		16,600,000

BALANCE SHEET DATA


	March 31, 2006
Total assets	$	1,299,900

Working capital	$	(345,600)

Long-term debt	$	182,800

Stockholders’ equity	$	664,200

This Management's Discussion and Analysis and Results of Operation presents a review of the consolidated operating results and financial condition of the Company for the three and nine month periods ended March 31, 2006 and 2005. This discussion and analysis is intended to assist in understanding the financial condition and results of operations of the Company and its subsidiaries. This section should be read in conjunction with the consolidated financial statements and the related notes.

RESULTS OF OPERATIONS

The Company consisted of three segments, manufacturing, software, and consulting, during the three and nine months ended March 31, 2006. However, there was only one segment for the comparable periods in 2005. To facilitate the readers understanding of the Company's financial performance, this discussion and analysis is presented on a segment basis for the three and nine months ending in 2006. The differences in revenues and costs between comparable periods in 2006 and 2005 is due to the fact that, as the acquiring company for accounting purposes, only the revenues and costs of Numera Software Corporation were reportable in periods prior to the acquisition. Numera Software Corporation was in the process of software development, and had not yet begun to generate significant revenues, and Numera reported no significant expenses because expenses were generally capitalized as software development costs.

MANUFACTURING SUBSIDIARY

The manufacturing subsidiary, Innova Pure Water, Inc. (“Innova”) generates its revenues from designing, developing and manufacturing unique consumer water filtration and treatment products.

SOFTWARE SUBSIDIARY

Numera Software Corporation (“Numera”) provides small to mid-sized businesses with full-featured, easy-to-use, real-time accounting software systems that meet or exceed the performance characteristics of mid to high-end competitors, at significantly lower cost.

CONSULTING SUBSIDIARY

Desert View Management Services, Inc. ("Desert View") uses professional management consulting and IT services on a business to business basis.

COMPARISON OF THE RESULTS OF OPERATIONS FOR THE NINE MONTHS ENDED March 31, 2006 AND 2005.

General

Net Sales

Net sales for the nine month period ended March 31, 2006 were $374,800. There were no sales for the comparable period in 2005. The differences in revenues between comparable periods in 2006 and 2005 is due to the fact that, as the acquiring company for accounting purposes, only the revenues of Numera Software Corporation were reportable in periods prior to the acquisition. Numera Software Corporation was in the process of software development, and had not yet begun to generate significant revenues.

During the nine month period ended March 31, 2006 Nikken Global, accounted for 38.9% of total sales. The loss of this customer would have a material impact on the Company’s ability to continue in business.

While the Company has entered into several strategic alliances in previous years with companies such as Rubbermaid and U.S. Filter (Culligan), none of these alliances have resulted in the long-term trading partner relationships that would assist the Company in achieving its goal of becoming profitable. There are no assurances that any current strategic alliances will result in the Company becoming profitable.

The Company is continuing discussions with various companies regarding utilization of the proprietary Innova filtration systems. Although there are no assurances, the Company believes it will be able to increase its cash flow from operations in its current fiscal year.

Cost of Sales

For the nine months ended March 31, 2006, the cost of sales was $100,100. There was no cost of sales in the comparable period in 2005. The differences in costs between comparable periods in 2006 and 2005 is due to the fact that, as the acquiring company for accounting purposes, only the costs of Numera Software Corporation were reportable in periods prior to the acquisition. Numera Software Corporation was in the process of software development, and reported no significant expenses because expenses were generally capitalized as software development costs.

Gross profit margin was 73 percentage points for the nine months ended March 31, 2006. This was principally attributable to the receipt of royalties, with little or no associated cost, during the nine months ended March 31, 2006.

Because the company is reporting by segment, the combined cost of goods sold (COGS) should be analyzed by segment. The software and consulting subsidiary’s COGS is not typical of the COGS for the manufacturing and distribution activities and therefore assumptions made on the combined COGS may lead to incorrect assumptions on the reader’s part.

Operating Expense

Operating expenses for the nine months ended March 31, 2006 were $450,200. The operating expenses were $2,500 in the comparable period in 2005. The differences in costs between comparable periods in 2006 and 2005 is due to the fact that, as the acquiring company for accounting purposes, only the costs of Numera Software Corporation were reportable in periods prior to the acquisition. Numera Software Corporation was in the process of software development, and reported no significant expenses because expenses were generally capitalized as software development costs.

Because the company is reporting by segment, the combined Operating Expenses should be analyzed by segment. The software and consulting subsidiary’s Operating Expenses is not typical of the Operating Expenses for the manufacturing and distribution activities and therefore assumptions made on the combined Operating Expenses may lead to incorrect assumptions on the reader’s part.

Other Income

For the nine months ended March 31, 2006, net interest expense amounted to $6,900. This due to less interest having been incurred due to the financing structure.

Other income for the nine months ended March 31, 2006 of $50,000. There was no other income in the comparable period in 2005.

Income Taxes

Due to the Company’s history of operating losses, management has established a valuation allowance in the full amount of the deferred tax assets arising from these losses because management believes it is more likely than not that the Company will not generate sufficient taxable income within the appropriate period to offset these operating loss carry forwards.

Net Loss

Net loss for the nine months ended March 31, 2006 amounted to $132,400. The net loss for the comparable period in 2005 was $2,500. The differences in revenues and costs between comparable periods in 2006 and 2005 are due to the fact that, as the acquiring company for accounting purposes, only the revenues and costs of Numera Software Corporation were reportable in periods prior to the acquisition. Numera Software Corporation was in the process of software development, and had not yet begun to generate significant revenues, and Numera reported no significant expenses because expenses were generally capitalized as software development costs.

Loss Per Share

For the nine months ended March 31, 2006, basic loss per share amounted to $(.00).

Manufacturing Subsidiary

Net Sales

Net sales for the nine-month period ended March 31, 2006 were $201,000. There were no sales reported for the same period in 2005. The differences in revenues between comparable periods in 2006 and 2005 is due to the fact that, as the acquiring company for accounting purposes, only the revenues of Numera Software Corporation were reportable in periods prior to the acquisition. Numera Software Corporation was in the process of software development, and had not yet begun to generate significant revenues.

Cost of Sales

For the nine months ended March 31, 2006, the cost of sales amounted to $79,700. . There was no cost of sales in the comparable period in 2005. The differences in costs between comparable periods in 2006 and 2005 is due to the fact that, as the acquiring company for accounting purposes, only the costs of Numera Software Corporation were reportable in periods prior to the acquisition.

Gross profit margin was 60 percentage points for the nine-months ended March 31, 2006.

Operating Expense

Operating expenses for the nine months ended March 31, 2006 were $369,300.

Other Income

For the nine months ended March 31, 2006, net interest expense amounted to $6,100.

Software Subsidiary

Net Sales

The software segment, Numera, provided net sales of $40,700 for the nine-month period ended March 31, 2006.

Cost of Sales

For the nine months ended March 31, 2006, the cost of sales was $20,300.

Gross profit from Numera was $20,400 for the nine months ended March 31, 2006 providing a gross profit margin of 50%.

Operating Expense

During the period ended March 31, 2006, operating expenses of Numera were $5,100. Numera’s management was compensated on a commission basis and it is expected that future reporting periods will reflect payroll and other operating expenses.

Consulting Subsidiary

Net Sales

The software subsidiary, DesertView, was acquired during the year ended June 30, 2005 and provided net sales of $133,100 for the nine-month period ended March 31, 2006.

Cost of Sales

For the nine months ended March 31, 2006 the cost of sales was $0. This nominal cost of sales is typical for this service-type business.

Gross profit from DesertView was $133,100 for the nine months ended March 31, 2006 providing a gross profit margin of 100%.

Operating Expense

DesertView had $75,800 of operating expenses for the nine months ended March 31, 2006.

COMPARISON OF THE RESULTS OF OPERATIONS FOR THE THREE MONTHS ENDED MARCH 31, 2006 AND 2005.

General

Net Sales

Net sales for the three month period ended March 31, 2006 were $86,300. There were no sales for the comparable period in 2005. The differences in revenues between comparable periods in 2006 and 2005 is due to the fact that, as the acquiring company for accounting purposes, only the revenues of Numera Software Corporation were reportable in periods prior to the acquisition. Numera Software Corporation was in the process of software development, and had not yet begun to generate significant revenues.

During the three month period ended March 31, 2006 Nikken Global, accounted for 85.4% of total sales. The loss of this customer would have a material impact on the Company’s ability to continue in business.

The Company is currently in discussions with several companies regarding utilization of the proprietary Innova filtration systems. Although there are no assurances, the Company believes it will be able to increase its cash flow from operations in its current fiscal year.

Cost of Sales

For the three months ended March 31, 2006, the cost of sales increased to $29,800. . There was no cost of sales in the comparable period in 2005. The differences in costs between comparable periods in 2006 and 2005 is due to the fact that, as the acquiring company for accounting purposes, only the costs of Numera Software Corporation were reportable in periods prior to the acquisition. Numera Software Corporation was in the process of software development, and reported no significant expenses because expenses were generally capitalized as software development costs.

Gross profit margin was 65 percentage points for the three months ended March 31, 2006, attributable to sales of products and services with a relatively high profit margin during this period.

Operating Expense

Operating expenses for the three months ended March 31, 2006 were $181,600. The operating expenses were $2,500 in the comparable period in 2005. The differences in costs between comparable periods in 2006 and 2005 is due to the fact that, as the acquiring company for accounting purposes, only the costs of Numera Software Corporation were reportable in periods prior to the acquisition. Numera Software Corporation was in the process of software development, and reported no significant expenses because expenses were generally capitalized as software development costs.

Other Income

For the three months ended March 31, 2006, net interest expense amounted to $6,300.

Other income for the three months ended March 31, 2006 of $50,000.

Income Taxes

Net Loss

Net loss for the three months ended March 31, 2006 amounted to $81,400. The net loss for the comparable period in 2005 was $2,500. The differences in revenues and costs between comparable periods in 2006 and 2005 are due to the fact that, as the acquiring company for accounting purposes, only the revenues and costs of Numera Software Corporation were reportable in periods prior to the acquisition. Numera Software Corporation was in the process of software development, and had not yet begun to generate significant revenues, and Numera reported no significant expenses because expenses were generally capitalized as software development costs.

Loss Per Share

For the three months ended March 31, 2006, basic loss per share amounted to $0.

Manufacturing Subsidiary

Net Sales

Net sales for the three month period ended March 31, 2006 were $25,400.

Cost of Sales

For the three months ended March 31, 2006, the cost of sales was $25,600.

Operating Expense

Operating expenses for the three months ended March 31, 2006 were $177,900.

Other Income

For the three months ended March 31, 2006, net interest expense amounted to $6,100.

Software Subsidiary

Net Sales

The software segment, Numera, provided net sales of $8,500 for the three month period ended March 31, 2006.

Cost of Sales

For the three months ended March 31, 2006, the cost of sales was $4,300.

Gross profit from Numera was $4,200 for the three months ended March 31, 2006 providing a gross profit margin of 49%.

Operating Expense

Numera had $5,100 of operating expenses during the period ended March 31, 2006.

Consulting Subsidiary

Net Sales

The Consulting subsidiary, DesertView, was acquired during the year ended June 30, 2005 and provided net sales of $52,400 for the three month period ended March 31, 2006.

Cost of Sales

For the three months ended March 31, 2006 the cost of sales was $(100).

Gross profit from DesertView was $52,300 for the three months ended March 31, 2006 providing a gross profit margin of 100%.

Operating Expense

DesertView had $(1,400) of operating expenses for the three months ended March 31, 2006.

Liquidity and Capital Resources

Operating Activities

For the nine months ended March 31, 2006, net cash used by operating activities amounted to $76,300. The cash used for operating activities in the comparable period in 2005 was $2,500. The differences in revenues and costs between comparable periods in 2006 and 2005 are due to the fact that, as the acquiring company for accounting purposes, only the revenues and costs of Numera Software Corporation were reportable in periods prior to the acquisition. Numera Software Corporation was in the process of software development, and had not yet begun to generate significant revenues, and Numera reported no significant expenses because expenses were generally capitalized as software development costs.

Investment Activities

For the nine months ended March 31, 2006, net cash used by investing activities amounted to $9,500.

Financing Activities

Net cash provided by financing activities for the nine months ended March 31, 2006 was approximately $88,700.

As shown in the accompanying consolidated financial statements, the Company incurred a net loss of $132,400 during the nine months ended March 31, 2006 and as of that date; our working capital deficit was $345,600. Therefore, our ability to continue as a going concern is uncertain. We expect to incur significant losses in the future. As a result, we will need to generate significant revenues to achieve profitability and may never achieve profitability.

Although we continue to maintain our efforts to conserve cash, such efforts will not make us a viable business entity, and without significant additional revenues we may not be able to stay in business. Our two executive officers have agreed to defer a substantial portion of their compensation and payments.

We continue to explore the possibility of outsourcing some of our production and support tasks that are currently being done in-house in order to reduce such costs. However, until we have sufficient volume to support significant outsourcing, we are not in a position to outsource production to save costs.

We have not been successful in attracting outside capital. Although we continue to pursue various opportunities, we cannot assure you that we would be able to raise any outside capital or that such funds will be available to us on favorable terms. If we raise additional funds through the issuance of our equity or debt securities, such securities may have rights, preferences or privileges senior to those of the rights of our common stock and our stockholders may experience substantial dilution.

We are in continuous discussions with new prospective strategic alliance partners. However, there is no assurance we will enter into any new alliances in fiscal 2006. We do not anticipate significant business from Sawyer in the future due to the pending litigation matter. Nikken has remained our most significant customer.

Our principal capital and liquidity needs have historically related to the acquisition, procurement and manufacturing of component parts relating to our water filtration products, sales and marketing activities, the development of manufacturing infrastructure, litigation costs associated with patent protection, and compensation to our executive officers. Because we have not had sufficient capital resources, we substantially scaled back research and development efforts, marketing and improvement of our manufacturing infrastructure. Unfortunately, we do not believe that we are in a position to substantially decrease our capital and liquidity requirements through additional cost cutting efforts.

Our acquisitions made by the Company will substantially change our financing activities and needs during fiscal 2006. We believe that our acquisitions will diversify our business base and provide us the opportunity to generate additional revenues. Management also believes that the acquisitions will increase our chances of raising outside capital to meet our future capital requirements. However, there is no assurance that we will be able to attract such capital or if we do attract such capital that it will be on favorable terms.

INFLATION

We believe that the impact of inflation and changing prices on our operations since the commencement of our operations has been negligible.

SEASONALITY

The Company does not deem its revenues to be seasonal.

CRITICAL ACCOUNTING POLICIES

The following discussion and analysis is based upon our financial statements, which have been prepared in accordance with accounting principles general accepted in the United States of America. The preparation of our financial statements requires management to make estimates and assumptions that affect the reported amounts of revenues and expenses, and assets and liabilities during the periods reported. Estimates are used when accounting for certain items such as revenues, allowances for returns, doubtful accounts, employee compensation programs, depreciation and amortization periods, taxes, inventory values, insurance programs, goodwill, other intangible assets and long-lived assets. We base our estimates on historical experience, where applicable and other assumptions that we believe are reasonable under the circumstances. Actual results may differ from our estimates under different assumptions or conditions.

We believe that the following critical policies affect our more significant judgments and estimates used in preparation of our consolidated financial statements. We maintain allowances for doubtful accounts for estimated losses resulting from the inability of our customers to make required payments. We base our estimates on the aging of our accounts receivable balances and our historical write-off experience, net of recoveries. If the financial condition of our customers were to deteriorate, additional allowances may be required.

We value our inventories at the lower of cost or market. We write down inventory balances for estimated obsolescence or unmarketable inventory equal to the difference between the cost of the inventory and the estimated market value based upon assumptions about future demand and market conditions. If actual market conditions are less favorable than those projected by management, additional inventory write-downs may be required.

We amortize patent application costs, which includes litigation defense costs over a five (5) year period. We have changed the accounting treatment for a no interest loan and related options to reflect the value of options awarded in conjunction with a note payable as interest expense.

In accordance with Statements of Financial Accounting Standards (“SFAS”) No. 86, Accounting for the Costs of Computer Software to be Sold, Leased, or Otherwise Marketed, all costs incurred to establish the technological feasibility are research and development costs. Software development costs incurred after technological feasibility and prior to the software being available for sale are capitalized. The Company owns capitalized software development costs through Numera Software Corporation. The software development costs will be amortized over its estimated useful life of 5 years.

Item 3. Controls and Procedures

(a)Evaluation of disclosure controls and procedures. Under the supervision and with the participation of the Company’s management, including the Company’s Principal Executive Officer and Principal Financial Officer, the Company conducted an evaluation of the effectiveness of the design and operations of its 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, as amended (the “Exchange Act”), as of the end of the period covered by this report. Based on their evaluation, our Principal Executive Officer and Principal Financial Officer concluded that our disclosure controls and procedures were not effective such that the material information required to be included in our Securities and Exchange Commission (“SEC”) reports is recorded, processed, summarized and reported within the time periods specified in SEC rules and forms relatin g to Innova Pure Water, Inc., and was made known to them by others within those entities, particularly during the period when this report was being prepared, due to the fact that the initial reporting of the acquisition of Innova Pure Water, Inc. by Numera Software Corporation was not in accordance with generally accepted accounting principles, and the Company was unable to correct the error in time to file the March 31, 2005 10-QSB correctly, resulting in the filing of this amended 10-QSB/A#1 .

(b)Changes in internal controls. the company has implemented the following internal controls that could significantly affect our disclosure controls and procedures subsequent to the evaluation date.

The company’s current procedures require redundant backups of electronic information systems, as well as the establishment of timelines for gathering of data required for accurate and timely submittal of required forms.

Management implemented a business continuity plan while continuing its daily procedural and monitoring controls that were previously standard practice prior to the computer failure that occurred during the year, until new procedures and practices were in place

The company has and will continue to develop and implement procedures and timelines that will enable us to monitor the progress of all information required to meet our internal requirements and the reporting requirements of the guidelines by which we are governed.

PART II—OTHER INFORMATION

Item 1. Legal Proceedings

Innova was a successfulplaintiff in a patent infringement lawsuit entitled Innova Pure Water, Inc., v. Safari Water Filtration Systems, Inc. d/b/a Safari Outdoor Products, Defendant; Case No. 99-1781-Civ-T-23F filed by the Company on August 4, 1999. The case was filed with the U.S. District Court, Middle District of Florida, Tampa Division. The Company claimed patent infringement of U.S. Patent 5,609,759 on the part of the defendants. On December 16, 2003, the court ruled in favor of Safari. Innova filed an appeal with the United States Court of Appeals, case No. 04-1097, who, on August 11, 2004, reversed the lower courts decision. The case was remanded back to the Circuit Court on September 1, 2004 to find on any remaining issues. Innova filed for a summary judgment or the prompt setting of a trial date. On September 30, 2005, the Court issued an Order granting Innova's motion f or a summary judgment. The Court adjudged that Innova's U.S. Patent 5,609,759 is valid and enforceable and that claims set forth in said patent were infringed upon by products made, used, sold or offered for sale by Safari. Safari was permanently enjoined from making, using, selling or offering for sale in the United States any product covered under the patent's claims as more fully set forth in the Order. Management of the Company believes the entry of this Order will have significance against other parties who may be infringing upon the Company's products and services. Innova subsequently filed with the Court a request for summary judgment pertaining to damages as Safari failed to respond to the Court’s requests on this issue. The Federal court in Tampa, Fl again ruled in favor of Innova awarding damages in the amount of $40,000. Presently, Innova is pursuing both collection and other remedies as a result of the favorable verdicts by the Court.

On December 2, 2005 the litigation involving Smith, Dancel and Sawyer Products was settled. As part of the terms of agreement, all claims and causes of action among the parties would be extinguished.

Additionally, the Company agreed to pay Sawyer Products $100,000 within 120 days in exchange for the return of warrants issued to Sawyer Products and the canceling of a loan in the amount of $200,000 from Sawyer Products to the Company. Claims to certain tooling used in the manufacture of the Company’s products were relinquished by Sawyer Products and the Company agreed to release Mr. Smith and Ms. Danzel from their employment contracts. Finally, Sawyer Products were specifically prohibited from contacting certain customers of the Company. However, the Company failed to make the $100,000 payment within the 120 day time period thereby voiding the settlement agreement. Negotiations continue with Sawyer to reach a mutually beneficial settlement.

Neither DesertView nor Numera are currently involved in any litigation and neither of them is aware of any pending or threatened litigation.

Item 2. Changes in Securities

During the nine month period ended March 31, 2006, there was no modification of any instruments defining the rights of holders of the Company’s common stock and no limitation or qualification of the rights evidenced by the Company’s common stock as a result of the issuance of any other class of securities or the modification thereof.

Item 3. Defaults Upon Senior Securities

During the nine month period ended March 31, 2006, the Company was not in default on any of its indebtedness.

Item 4. Submission of Matters to a Vote of Security Holders

During the nine month period ended March 31, 2006, the Company did not submit any matters to a vote of its security holders.

Item 5. Other Matters

The Company does not have any other material information to report with respect to the nine month period ended March 31, 2006.

Item 6. Exhibits and Reports on Form 8-K


(a)		Exhibits included herewith are:



31.1		Certification of the Chief Executive Officer (2)
31.2		Certification of the Chief Financial Officer (2)
32		Written Statements of the Chief Executive Officer and Chief Financial Officer (2)


(b)		Reports on Form 8-K – None

SIGNATURES

Pursuant to the requirements of the Securities and Exchange Act of 1934, the registrant has caused this report to be signed on its behalf by the undersigned, thereto duly authorized:

INNOVA PURE WATER, INC


Dated: March 22, 2007	By: /s/ Don Harris
	Don Harris
	President, Chief Executive Officer
	Director

Dated: March 22, 2007	By: /s/ Jim R. Davisson
	Jim R. Davisson
	Chief Financial Officer
	Principal Accounting Officer
	Director

Innova Pure Water (IPUR) Inactive 10QSB/A2006 Q1 Quarterly report (small business) (amended)