WATAIRE INTERNATIONAL, INC.
FORM 10-K
(Annual Report)
Filed 07/24/09 for the Period Ending 03/31/09
Address 3rd Floor, 21900 Burbank Blvd.
Woodland Hills, CA 91367
Telephone 877-602-8985
CIK 0001127007
Symbol WTAR
SIC Code 4941 - Water Supply
Industry Conglomerates
Sector Conglomerates
Fiscal Year 03/31
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-K
(X) ANNUAL REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934 For the fiscal year ended March 31, 2009
OR
( ) TRANSITION REPORT UNDER SECTION 13 OR 15 (d) OF THE SECURITIES
EXCHANGE ACT OF 1934 For the transition period from _____ to _____
Commission File Number : 000 - 49955
WATAIRE INTERNATIONAL, INC.
( Exact name of registrant as specified in its charter )
Washington 91-2060082
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( State or other jurisdiction of ( I.R.S. Empl. Ident. No. )
incorporation or organization )
3rd Floor, 21900 Burbank Blvd, Woodland Hills, California 91367
- --------------------------------------------------------------------
( Address of principal executive offices ) ( Zip Code )
877-602-8985
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( Issuer's telephone number )
Securities registered under Section 12(b) of the Exchange Act : None
Securities registered under Section 12(g) of the Exchange Act :-
Common Stock, $0.0001 par value
Check whether the issuer (1) filed all reports required to be filed by
Section 13 or 15 (d) of the Exchange Act during the past 12 months (or
for such shorter period that the registrant was required to file such
reports), and (2) has been subject to such filing requirements for the
past 90 days. YES ( X ) NO ( )
Indicate by check mark whether the registrant has submitted electronically
and posted on its corporate Web site, if any, every Interactive Data File
required to be submitted and posted pursuant to Rule 405 of Regulation S-T
( 232.405 of this chapter ) during the preceding 12 months (or for such
shorter period that the registrant was requiredto submit and post such
files). Yes ( ) No ( )
Check if there is no disclosure of delinquent filers in response to
Item 405 of Regulation S-K contained in this form, and no disclosure
will be contained, to the best of registrant's knowledge, in definitive
proxy or information statement incorporated by reference in
Part III of this Form 10-K or any amendment to this Form 10-K ( X )
Indicate by check mark whether the registrant is a large accelerated filer,
an accelerated filer, or a non-accelerated filer, or a small reporting
company. See definitions of "large accelerated filer," "accelerated filer,"
and "small reporting company" in Rule 12B-2 of the Exchange Act.
(Check one) :
Large accelerated filer ( ) Accelerated filer ( )
Non-accelerated filer ( ) Smaller reporting company ( X )
Indicate by check mark whether the registrant is a shell company (as
defined inRule 12b-2 of the Exchange Act). ( ) Yes ( X ) No
The aggregate market value of the voting and non-voting common equity
held by non-affiliates as of the last business day of the registrant's
most recently completed second fiscal quarter was $1,686,354 based
upon the closing sales price of the Registrant's Common Stock as
reported on the Over the Counter Bulletin Board of $0.03.
At July 14, 2009 the Registrant had outstanding 91,110,123 shares of
Common Stock, $0.0001 par value per share.
WATAIRE INTERNATIONAL, INC.
FORM 10-K
For the Fiscal Year Ended March 31, 2009
TABLE OF CONTENTS
PART I Page
Item 1 Business 1-8
Item 1A Risk Factors 8-15
Item 1B Unresolved Staff Comments 15
Item 2 Properties 15
Item 3 Legal Proceedings 15-16
Item 4 Submission of Matters to a Vote of
Security Holders 16
PART II
Item 5 Market for Registrant's Common Equity,
Related Stockholder Matters and Issuer
Purchases of Equity Securities 17-24
Item 6 Selected Financial Data 24
Item 7 Management's Discussion and Analysis of
Financial Condition and Results of Operations 24-31
Item 7A Quantitative and Qualitative Disclosures About
Market Risk 31-32
Item 8 Financial Statements and Supplementary Data 32
Item 9 Changes in and Disagreements with Accountants
on Accounting and Financial Disclosure 32
Item 9A Controls and Procedures 32-33
Item 9B Other Information 33
PART III
Item 10 Directors, Executive Officers and Corporate
Governance 33-37
Item 11 Executive Compensation 37-39
Item 12 Security Ownership of Certain Beneficial Owners
and Management and Related Stockholder Matters 39-40
Item 13 Certain Relationships and Related Transactions,
and Director Independence 40-42
Item 14 Principal Accounting Fees and Services 42
PART IV
Item 15 Exhibits, Financial Statement Schedules 43-70
Signatures
PART I
This Annual Report on Form 10-K contains forward-looking
statements that have been made pursuant to the provisions of
Section 27A of the Securities Act of 1933, Section 21E of the
Securities Exchange Act of 1934, and the Private Securities
Litigation Reform Act of 1995 and concern matters that involve
risks and uncertainties that could cause actual results to
differ materially from historical results or from those
projected in the forward-looking statements. Discussions
containing forward-looking statements may be found in the
material set forth under "Business," "Management's Discussion
and Analysis of Financial Condition and Results of Operations"
and in other sections of this Form 10-K. Words such as "may,"
"will," "should," "could," "expect," "plan," "anticipate,"
"believe," "estimate," "predict," "potential," "continue" or
similar words are intended to identify forward-looking
statements, although not all forward-looking statements contain
these words. Although we believe that our opinions and
expectations reflected in the forward-looking statements are
reasonable as of the date of this Report, we cannot guarantee
future results, levels of activity, performance or
achievements, and our actual results may differ substantially
from the views and expectations set forth in this Annual Report
on Form 10-K. We expressly disclaim any intent or obligation to
update any forward-looking statements after the date hereof to
conform such statements to actual results or to changes in our
opinions or expectations.
Readers should carefully review and consider the various
disclosures made by us in this Report, set forth in detail in
Part I, under the heading "Risk Factors," as well as those
additional risks described in other documents we file from time
to time with the Securities and Exchange Commission, which
attempt to advise interested parties of the risks,
uncertainties, and other factors that affect our business. We
undertake no obligation to publicly release the results of any
revisions to any forward-looking statements to reflect
anticipated or unanticipated events or circumstances occurring
after the date of such statements.
1
Item 1. Business.
General
Wataire International, Inc. ("Wataire," the "Company," "us," or
"we") was incorporated under the laws of the State of
Washington on August 17, 2000 and has been a reporting issuer
with the United States Securities and Exchange Commission (the
"SEC") since November 2000.
On October 3, 2006, the Company changed its name to Wataire
International, Inc. Previously, on August 26, 2003, the Company
had changed its name from Corporate Development and Innovation,
Inc. to Cimbix Corporation. The Company's common stock traded
in the Over-the-Counter Bulletin Board Market under the ticker
symbol "WTAR".
The Company's business is still in its early developmental and
promotional stages and to date, the Company's primary
activities have involved significant re-structuring and re-
organization. After involvement in Petsmobility and MBG
businesses, in 2006 the Company entered into license agreement
with Ecosafe Innotech Inc., (formerly Wataire Ecosafe
Technologies Inc., formerly Wataire Industries Inc.)("Ecosafe")
to market and distribute their commercial water generation
machines. On April 25, 2007, we entered into an agreement with
Ecosafe, Canadian Dew Technologies Inc. ("CanDew"), Terrence
Nylander and Roland Wahlgren to acquire all of the intellectual
property ("IP") relating to a water treatment process and
devices for water-from-air machines. The agreements previously
executed between the Company and Ecosafe have been terminated
and cancelled and forms part of the current agreement. Mr.
Nylander was, at the time, an officer and director of the
Company.
Consideration for the purchase of the IP was $469,485 (CAD
$500,000), which was paid at March 31, 2007, the issuance of
4,800,000 shares of common stock of the Company, the agreement
by the Company to pay a royalty equal to 5% of the gross
profits from the sales of all apparatus or products relating to
the IP for a period of 30 years from April 25, 2007 and a
royalty equal to 5% of gross licensing revenues on the IP.
This consideration is in addition to the 11,000,000 shares of
common stock previously issued for the license rights. The IP
acquisition was completed in July 2007.
2
The IP acquired by the Company includes all copyrights, patent
rights, trade secret rights, trade names, trademark rights,
process information, technical information, contract rights and
obligations, designs, drawings, inventions and all other
intellectual and industrial property rights of any sort related
to or associated with the water treatment process and devices
for water-from-air machines invention.
LIQUIDITY AND FINANCIAL RESOURCES
Through March 31, 2009, the Company had not carried on any
significant operations and had not generated significant
revenues. The Company has incurred losses since inception
aggregating $10,451,707. The accompanying financial statements
have been prepared assuming that the Company will continue as a
going concern. These conditions raise substantial doubt about
the Company's ability to continue as a going concern. The
financial statements do not include any adjustments that might
result from the outcome of this uncertainty.
We currently have minimal cash reserves. To date, the Company
has covered operating deficits primarily through its financing
activities. Accordingly, our ability to pursue our plan of
operations is contingent on our being able to obtain funding
for the development, marketing and commercialization of our
products and services. As a result of its lack of operating
success, the Company may not be able to raise additional
financing to cover operating deficits.
BUSINESS
Our business plan is to fully exploit our products and
technology by marketing and distributing our commercial and
home/office water generation machines as well as their under-
the-counter/over-the-counter units, and the water-producing
greenhouse.
The atmospheric water generator produces purified water from
the atmosphere by using a condensing surface and a special
filtration system that removes dust, airborne particles and
bacteria to generate clean drinking water and simultaneously
cleaning the air. This method of extracting water vapor has
been in use for many years. Some similar applications include
air conditioners and dehumidifiers. The actual water production
and cost per gallon varies with the humidity and temperature of
the atmosphere at the specific site in which the unit is
employed.
3
The Wataire water generation equipment is a water-from-air
technology system developed by a team of specialized
technicians incorporating patent pending technologies that
control bacterial contamination. The Company currently sells
two types of atmospheric units: (i) small-scale home/office
units, which include a full-sized upright model and a
countertop model and which can produce between four to seven
gallons of water per day depending on humidity and temperature
levels of the location of the unit, and (ii)
commercial/industrial units capable of producing more than
5,000 liters (1320 gallons) of safe drinking water each day
depending upon ambient conditions.
The home/office units are designed to replace bottled water and
purified water dispensers, eliminating the need for
replenishment and storage of plastic bottles. These units are
intended for usage in residences, schools, offices, hospitals
and restaurants. They can also serve as a personal disaster
relief unit for consumers in circumstances such as hurricane
Katrina where residents in the affected area had no drinking
water.
The industrial units are intended for use in military camps,
industrial applications such as factories, commercial
applications such as hotels, humanitarian and disaster relief
applications where fresh drinking water is scarce.
The water generation equipment is a water-from-air technology
system developed by a team of specialized technicians
incorporating patent pending technologies that control
bacterial contamination. The water generating units are
equipped with an electronic control system that turns the
machine on and off when full and can circulate the water to
maintain clean drinking water 24 hours a day, 365 days a year.
It has a dynamic display to allow for monitoring the machine's
operation, showing when a new filter is required.
4
The system provides an independent, sustainable, safe water
source for a wide variety of possible circumstances such as
mining and petroleum exploration camps, bottled water and
beverage manufacturers, food manufacturers, military camps,
non-government organizations, humanitarian assistance
organizations, emergency and disaster relief situations.
According to field trials recently held in Belize and
Thailand, the system performed well in a tropical environment
producing the design projected volume of water and achieving
the desired water quality standards. While we believe the unit
is also economically viable in temperate climates, the Wataire
units work best in the tropics due to the high humidity levels,
which will produce the highest rate of water production at the
lowest cost per gallon.
The patent pending water treatment system is comprised of a
three-stage water treatment design that cleans water to meet
World Health Organization guidelines. The unit consists of a
filtration system, a food-grade dehumidifier water producing
module, and a water treatment module. The water treatment
process is proprietary and may be subject of various patent
applications already filed.
The process basically involves taking filtered moist air from
the atmosphere and dehumidifying it for treatment by the water
treatment module. This produced water is then processed
through sediment filters, ultra-fine filters, activated
charcoal filters and ultraviolet light treatment that eliminate
virtually all biological contaminants including bacteria,
viruses, and pollutants that are in the air. Atmospheric water
vapor is an abundant resource that can be used with virtually
no negative environmental impacts. The machine should be
situated in a space that can provide fresh flowing air to the
machine intake as it dehumidifies the space. The water-from-
air technology has received broad acceptance around the world
as a new and sustainable source of potable water.
COMPETITION
Water purification and bottled water industries are highly
competitive. According to past internal research, there were
possibly nine entities experimenting with the technology of
water generation, of which two or three were direct active
competitors. Some of those companies have limited or no
business activities while others have entered into strategic
alliances with one another. The relatively high energy cost
associated with changing water from its vapor phase in the air
to the liquid phase appears to be an obstacle to making sales
for a number of these competitors. Control of bacteria and
viruses in the field of atmospheric water generation creates a
technological challenge that our patent pending water treatment
module has resolved. The atmospheric water generator and
filtration system industry is new, rapidly evolving and can
compete with more traditional water treatment systems that rely
on surface and ground water supplies. In the future, our
competitors can and may duplicate or surpass in efficacy many
of the products or services offered by us.
5
REGULATORY ENVIRONMENT
The manufacturing, processing, testing, packaging, labeling and
advertising of the products that we sell may be subject to
regulation by one or more U.S. federal agencies, including the
Food and Drug Administration, the Federal Trade Commission, the
CSA and UL in North America, the United States Department of
Agriculture, the Environmental Protection Agency, the standards
provided by the United States Public Health authority and the
World Health Organization for Drinking Water. These activities
may also be regulated by various agencies of the states,
localities and foreign countries in which consumers reside.
CERTIFICATION AND TESTING
All the products that we sell and plan to sell will go through
stringent testing that will have the appropriate UL, CE or CSA
certifications on the products. The CSA Mark is an
internationally recognized mark that appears on over one
billion products worldwide. CSA International is a leader in
standards development, certification and testing, and quality
management registration. The CSA International marks are
accepted by many electrical inspectors, gas inspectors,
building inspectors and other governmental authorities that
approve projects and products that are sold in Canada, the
United States and all over the world. The Company uses the
services of CSA International because they test, certify and
ensure that products comply with applicable safety and/or
performance standards applicable to the products for the sale
in that country. These standards include UL, CSA, ANSI
(American National Standards Institute), ASTM, NSF, OSHA
(Occupational Safety and Health Administration under the US
Department of Labor), NVLAP (National Voluntary Laboratory
Accreditation Program), SCC (Standards Council of Canada), IAS
(International Accreditation Service Inc.) and others.
At this time, the products carry the markings of CE and we are
currently seeking CSA markings for Canada and UL markings the
United States. These markings on the products indicate to
governmental officials and consumers that the products may be
legally placed on the market in the country for sale. It also
indicates that the products met all safety requirements and
tests, and such products are in conformity with the applicable
standards.
6
RESEARCH AND DEVELOPMENTS
The Company does not have its own research and development
department and will rely on Canadian Dew Technologies Inc. to
furnish the Company with new technology and improvements on its
existing applications, efficiency and theories of the
underlying atmospheric water generators and filtration systems.
MARKET ANALYSIS AND STRATEGY
We believe a market opportunity exists for our atmospheric
water generators and filtration systems. Our technology
provides an alternative solution to the world's shortage of
fresh water and can provide clean, safe drinking water in
various geographical settings. Today, governments and health
professionals are increasingly conscious of the negative health
effects of pollution, chemicals used to disinfect water
supplies, and residual salt in desalinated water, and how they
affect human health.
Our target markets for the water-from-air systems are
businesses, governments, and people who are situated in the
humid tropics. To date, our products have been sold in over 30
different countries and have received positive response from
system users. Our systems, units and/or applications target
various markets including military applications, oil and mining
operations, new and existing tourist resorts, beverage bottling
plants, new condominium developments and humanitarian missions.
The development of our marketing plan is still in its early
stages; however, we anticipate having an outline of our
marketing strategy in the fall of 2008. Management plans, as
soon as finances permit, to hire additional management and
staff for its US-based operations especially in
the areas of finance, sales, marketing, and investor/public
relations. The Company may also choose to outsource some of
its marketing requirements by utilizing a series of independent
contractors based on the projected size of the market and the
compensation necessary to retain qualified employees.
7
In December 2006, the Company retained Cucoloris Films Inc.
("Cucoloris"), a Los Angeles based multimedia and marketing
company to help us with our marketing needs. The term of the
engagement is for one year, and the Company has paid the
marketing firm $250,000 and issued 1,000,000 shares of common
stock that has been registered on Form S-8 for their services.
The marketing agreements expired and the Company has not
commenced its branding and marketing efforts and therefore the
shares were not released by the Company and have been returned
to treasury. The Company is currently re-negotiating the terms
of its agreements with the marketing firm.
EMPLOYEES
The Company currently has no employees but has contract staff.
The Company anticipates entering into an employment contract
with Robert Rosner, our Chief Executive Officer, but can
provide no assurance that we will come to terms for such
employment agreement. The Company looks to its directors and
officers for their combined entrepreneurial skills and talents,
and to outside subcontracted consultants. Management plans to
use consultants, attorneys and accountants as necessary until
the Company has sufficient funds to execute strategies for the
Company. The Company's performance and success is dependent on
management's ability to raise the necessary funds required to
develop and promote the sale of its products.
PATENTS AND TRADEMAKS
The patent pending and/or trademarks and copyrights from
Ecosafe, Terry Nylander, Roland Wahlgren and CanDew has now
been transferred to our name. The Company has also filed other
patents, trademarks and copyrights in other countries.
PATENTS AND TRADEMAKS
The patent pending and/or trademarks and copyrights from
Ecosafe, Terry Nylander, Roland Wahlgren and CanDew has now
been transferred to our name. The Company has also filed other
patents, trademarks and copyrights in other countries.
Item 1A. Risk Factors.
We have sought to identify what we believe to be the most
significant risks to our business. However, we cannot predict
whether, or to what extent, any of such risks may be realized
nor can we guarantee that we have identified all possible risks
that might arise.
8
We are dependent on external financing.
It is imperative that we raise additional capital to complete
our operational plan to promote and commercialize our newly
acquired business combinations and activities. We will also
require funds to sustain our business operations if we are not
successful in earning revenues from our product sales and sub-
licensing. We estimate that we would require additional funding
of $8,000,000 to pursue our business strategy. If we are unable
to obtain equity financing upon terms that our management deems
sufficiently favorable, or at all, it would have a material
adverse impact upon our ability to expand our current
operational plan. Any sale of share capital will result in
dilution to existing shareholders.
To date, we have generated some revenues from sales but not
enough to sustain our business operations. The success of our
business depends on us receiving inventory and advertising
materials from our suppliers and manufacturers. The exact
amount of our current and future capital requirements will
depend on numerous factors, some of which are not within our
control, including the progress of our development efforts, the
costs of testing, supply of our products, demand of our
products and changes in governmental regulation. Our ability
to raise additional financing depends on many factors beyond
our control, including the state of capital markets, the market
price of our common stock and the development or prospects for
development of competitive technology by others. The necessary
additional financing may not be available to us or may be
available only on terms that would result in further dilution
to the current owners of our Common Stock. If we are unable to
raise additional funds when we need them, we may have to
curtail or discontinue our operations, in which case you could
lose the entire amount of your investment in the Company.
We are in our early stages of development and face a risk of
business failure.
9
We are in our early stages of development. We have no way to
evaluate the likelihood that we will be able to operate our
business successfully. The likelihood of success must be
considered in light of the problems, expenses, difficulties,
complications and delays encountered in connection with the
technology and sales industries. We recognize that if we are
unable to generate significant revenues from our sales, we will
not be able to earn profits or continue operations. There is
only a limited history upon which to base any assumption as to
the likelihood that we will prove successful, and we can
provide investors with no assurance that we will generate any
additional operating revenues or ever achieve profitable
operations from our current business initiatives. If we are
unsuccessful in addressing these risks, our business will most
likely fail.
We are competing against larger and better-financed companies.
We operate in a highly competitive market with financial
rewards pending on market performance. Some of our competitors
are multi-million dollar enterprises with more resources for
marketing, distribution and development. We may be in a
disadvantage if any of our competitors focused on similar
products we sell. Because we don't have the infrastructure and
personnel in place to adequately implement our business plans
and operations, our business may fail.
Our business and the success of our products could be harmed if
we are unable to maintain our brand image.
Our success is heavily dependent upon the market acceptance of
our Wataire branded lines of atmospheric water generators. If
we are unable to timely and appropriately respond to changing
consumer demand, the brand Wataire distributes may be impaired.
Even if we react appropriately to changes in consumer
preferences, consumers may consider those brand images to be
outdated. Lack of acceptance of our brands will have a
material impact on the performance of the Company.
Dependence on our suppliers
Our success is highly dependent upon the continued support and
services of suppliers. We are solely dependent on their
support to provide enough inventory to meet our purchase
orders. If our suppliers are not able to manufacture enough
products to meet the demands of our purchase orders, our
business will most likely fail.
Demand for our products and services may fail to materialize
10
Our growth and success will depend on our success in
introducing and selling our products. The market for the
products and services we plan to offer is relatively new and
there is little hard data to validate market demand or predict
how this demand will be segmented. There could be much lower
demand than believed, or interest in our products and services
could decline or die out, which could adversely affect our
ability to sustain our operations.
There is substantial doubt as to our ability to continue as a
going concern
Our financial results for the fiscal year ending March 31, 2009
show substantial losses. The accompanying financial statements
have been prepared in conformity with the generally accepted
accounting principles in the United States of American which
contemplates the Company as a going concern. The Company has
sought out additional investment to raise additional funds.
However, there are no assurances that the Company will continue
as a going concern without the successful completion of
additional funding. The accompanying consolidated financial
statements do not include any adjustments that might be
necessary if the Company is unable to continue as a going
concern.
Our independent auditors, Gruber & Company LLC, have expressed
substantial doubt about our ability to continue as a going
concern given our recurring losses from operations and net
stockholder's deficit. This opinion could materially limit our
ability to raise additional funds by issuing new debt or equity
securities or otherwise.
Dependence on key management and personnel
Our success is highly dependent upon the continued services of
Robert Rosner, our Chief Executive Officer. If he were to
leave us this could have a materially adverse effect upon our
business and operations. We anticipate entering into employment
contract with Mr. Rosner but can provide no assurance that we
will come to terms for such employment agreement.
Our business also requires additional staff in all areas to
successfully bring our products to market. Our success depends
on our ability to attract and retain technical and management
personnel with expertise and experience in the technology
field. If we are unable to attract and retain qualified
technical and management personnel, we will suffer diminished
chances of future success.
11
We may be subject to product liability or breach of contract
claim if our products do not work as promised from our
Inventor(s) and predecessor
The atmospheric water generators are designed to facilitate
potable safe drinking water. If the technology fails to work as
manufactured by our inventor(s) and predecessor, customers may
bring claims against us. Despite limitations on such claims,
such claims can be costly and time consuming which could have a
material adverse effect on our operations, even if we are found
not to have been at fault. We currently do not have liability
insurance and anticipate that we will seek some coverage in the
future if such coverage is available at a reasonable cost.
Significant repair and/or replacement with respect to product
warranty claims or product recalls could have a material
adverse impact on the results of operations.
We provide a limited warranty for our products for a period of
one year. Significant warranty claims could have a material
adverse effect on our results of operations.
Government Regulation
Regulation by government authorities in the United States,
Canada and foreign countries may be a factor in the
development, manufacture and marketing of our products and in
our research and product development activities. The process of
obtaining these approvals and the subsequent compliance may
require time and financial resources.
Limited experience to market our products
Even if we are able to develop our products and obtain the
necessary regulatory approvals, we have limited experience or
capabilities in marketing or commercializing our products. We
currently have some sales and just engaged a marketing agency.
We do not have a distribution infrastructure in place.
Accordingly, we are dependent on our ability to find
collaborative marketing partners or contract sales companies
for commercial sale of any of our products. Even if we find a
potential marketing partner, we may not be able to negotiate an
advertising and/or licensing contract on favorable terms to
justify our investment or achieve adequate revenues.
12
Our business is subject to risks associated with offshore
manufacturing.
We import some of our products into the United States and
Canada from foreign countries for resale. All of our import
operations are subject to tariffs and quotas set by the U.S.
and other countries' governments through mutual agreements or
bilateral actions. Adverse changes in these import costs and
restrictions, or our suppliers' failure to comply with customs
regulations or similar laws, could harm our business.
Our operations are also subject to the effects of international
trade agreements and regulations such as the North American
Free Trade Agreement, the Caribbean Basin Initiative and the
European Economic Area Agreement, and the activities and
regulations of the World Trade Organization. Trade agreements
can also impose requirements that adversely affect our
business, such as setting quotas on products that may be
imported from a particular country into our key market, the
United States. In fact, some trade agreements can provide our
competitors with an advantage over us, or increase our costs,
either of which could have an adverse effect on our business
and financial condition.
In addition, the recent elimination of quotas on World Trade
Organization member countries by 2005 could result in increased
competition from developing countries which historically have
lower labor costs, including China. This increased competition,
including from competitors who can quickly create cost and
sourcing advantages from these changes in trade arrangements,
could have an adverse effect on our business and financial
condition.
Our ability to import products in a timely and cost-effective
manner may also be affected by problems at ports or issues that
otherwise affect transportation and warehousing providers, such
as labor disputes or increased U.S. homeland security
requirements. These issues could delay importation of products
or require us to locate alternative ports or warehousing
providers to avoid disruption to our customers. These
alternatives may not be available on short notice or could
result in higher transit costs, which could have an adverse
impact on our business and financial condition.
13
Our international operations expose us to political, economic
and currency risks.
All of our products came from sources outside of the United
States. As a result, we are subject to the risks of doing
business abroad, including:
currency fluctuations;
changes in tariffs and taxes;
political and economic instability; and
disruptions or delays in shipments.
Changes in currency exchange rates may affect the relative
prices at which we are able to manufacture products and may
affect the cost of certain items required in our operation,
thus possibly adversely affecting our profitability.
There are inherent risks of conducting business
internationally. Language barriers, foreign laws and customs
and duties issues all have a potential negative effect on our
ability to transact business in the United States. We may be
subject to the jurisdiction of the government and/or private
litigants in foreign countries where we transact business, and
we may be forced to expend funds to contest legal matters in
those countries in disputes with those governments or with
customers or suppliers.
We may suffer from infringements or piracy of our trademarks,
designs, brands or products.
We may suffer from infringements or piracy of our trademarks,
designs, brands or products in the U.S. or globally. Some
jurisdictions may not honor our claims to our intellectual
properties. In addition, we may not have sufficient legal
resources to police or enforce our rights in such
circumstances.
Unfair trade practices or government subsidization may impact
our ability to compete profitably.
In an effort to penetrate markets in which the Company
competes, some competitors may sell products at very low
margins, or below cost, for sustained periods of time in order
to gain market share and sales. Additionally, some competitors
may enjoy certain governmental subsidies that allow them to
compete at substantially lower prices. These events could
substantially impact our ability to sell our product at
profitable prices.
14
If we market and sell our products in international markets, we
will be subject to additional regulations relating to export
requirements, environmental and safety matters, and marketing
of the products and distributorships, and we will be subject to
the effects of currency fluctuations in those markets, all of
which could increase the cost of selling products and
substantially impair the ability to achieve profitability in
foreign markets.
As a part of our marketing strategy, we plan to market and sell
our products internationally. In addition to regulation by the
U.S. government, those products will be subject to
environmental and safety regulations in each country in which
we market and sell. Regulations will vary from country to
country and will vary from those of the United States. The
difference in regulations under U.S. law and the laws of
foreign countries may be significant and, in order to comply
with the laws of these foreign countries, we may have to
implement manufacturing changes or alter product design or
marketing efforts. Any changes in our business practices or
products will require response to the laws of foreign countries
and will result in additional expense to the Company.
Additionally, we may be required to obtain certifications or
approvals by foreign governments to market and sell the
products in foreign countries. We may also be required to
obtain approval from the U.S. government to export the
products. If we are delayed in receiving, or are unable to
obtain import or export clearances, or if we are unable to
comply with foreign regulatory requirements, we will be unable
to execute our complete marketing strategy.
Item 1B. Unresolved Staff Comments.
Not applicable.
Item 2. Properties.
Our principal executive offices are located at 3rd Floor, 21900
Burbank Blvd., Woodland Hills, California 91367. The Company's
phone number is 877-602-8985.
Item 3. Legal Proceedings.
We are a defendant in a case brought in October 2006 in the
Supreme Court of British Columbia, Canada entitled Atkinson et
al. v. Cimbix Corporation et al. The action relates to
15
allegations by plaintiffs that $94,000 was deposited into a law
firm's trust account for investment in On4 Communications Inc.,
formerly PetsMobility Network (Canada) Inc. ("On4"). The
plaintiffs allege that the law firm deducted legal fees from
the amount held in trust and transferred the balance of the
funds to On4. Both the law firm and On4 are also defendants in
the case. The Company believes the claims against it are
without merit and unlikely to succeed. The Company has filed a
statement of defense denying the allegations against it and has
filed a counter claim for defamation. The investors have been
repaid all of the funds by On4. The Company has not paid any
amount to the plaintiffs. The Company takes the position that
it has done nothing wrong and, in any event, the plaintiffs
have recovered the entirety of their loss from On4. The court
has ordered a severance of the action, and has required the
plaintiffs to prove their damages, before proceeding to trial
on issues of liability. The claim and counterclaim have been
dismissed without costs.
On March 25, 2008, we received a subpoena from the Securities
and Exchange Commission ("SEC") issued in an investigation
initiated by the SEC with respect to a number of companies
traded on the "pink sheets" market (Our Company is not one of
the companies that are the subject of the investigation). The
subpoena, inter alia, requested documents relating to: contacts
with personnel of and sales of our products to the U.S. Navy,
sales of our products generally, the Company's license
agreement with Airborn Water Company, and display of the
Company's products at a music festival in Florida. Our Chief
Executive Officer, Robert Rosner, has provided testimony to the
SEC in this matter.
The Company received an alleged claim in January 2009 from one
of its former distributors for failing to deliver merchandise
ordered and paid for by the Plaintiff. The Company has
subsequently filed a motion to dismiss the claim and is
considering separate legal recourse.
On July 20, 2009, the Company filed a cross-complaint for breach of
contract, intentional interference with contractual relationship,
intentional interference with prospective economic relationship
and accounting
16
Item 4. Submission of Matters to a Vote of Security Holders.
Not Applicable.
PART II
Item 5. Market for Common Equity, Related Stockholder Matters
and Issuer Purchases of Equity Securities.
The Company's common stock is traded in the Over-the-Counter Bulletin
Board Market and on the "Pink Sheets" market under the ticker symbol "WTAR".
The following table sets forth for each period indicated
the high and the low bid prices per share for the Company's
Common Stock.
Bid Prices
Quarter Ended High Low
March 31, 2009 0.025 0.007
December 31, 2008 0.045 0.005
September 30, 2008 0.095 0.030
June 30, 2008 0.220 0.050
March 31, 2008 0.240 0.060
December 31, 2007 0.220 0.090
September 30, 2007 0.300 0.130
June 30, 2007 0.730 0.220
There were approximately 109 holders of record of the common
stock as of July 14, 2009. The Company believes that an
undefined number of shares of its common stock are held in
either nominee name or street name brokerage accounts.
Consequently, the Company is unable to determine the exact
number of beneficial owners of its common stock.
The Company has never paid a cash dividend on its Common Stock
and does not anticipate paying dividends in the foreseeable
future. It is the present policy of the Company's Board of
Directors to retain earnings, if any, to finance the expansion
of the Company's business. The payment of dividends in the
future will depend on the results of operations, financial
condition, capital expenditure plans and other cash obligations
of the Company and will be at the sole discretion of the Board
of Directors
17
Section 15(g) of the Securities Exchange Act of 1934:
The Company's shares are covered by Section 15(g) of the
Securities Exchange Act of 1934, as amended that imposes
additional sales practice requirements on broker/dealers who
sell such securities to persons other than established
customers and accredited investors (generally institutions with
assets in excess of $5,000,000 or individuals with net worth in
excess of $1,000,000 or annual income exceeding $200,000 or
$300,000 jointly with their spouses). For transactions covered
by this Section 15(g), the broker/dealer must make a special
suitability determination for the purchase and have received
the purchaser's written agreement to the transaction prior to
the sale. Consequently, Section 15(g) may affect the ability of
broker/dealers to sell the Company's securities and also may
affect your ability to sell your shares in the secondary
market.
Section 15(g) also imposes additional sales practice
requirements on broker/dealers who sell penny securities. These
rules require a one page summary of certain essential items.
The items include the risk of investing in penny stocks in both
public offerings and secondary marketing; terms important to an
understanding of the function of the penny stock market, such
as "bid" and "offer" quotes, a dealers "spread" and
broker/dealer compensation; the broker/dealer compensation, the
broker/dealers duties to its customers, including the
disclosures required by any other penny stock disclosure rules;
the customers rights and remedies in causes of fraud in penny
stock transactions; and, the NASD's toll free telephone number
and the central number of the North American Administrators
Association, for information on the disciplinary history of
broker/dealers and their associated persons.
RECENT SALES OF UNREGISTERED SECURITIES
In July 2006, the Company issued to Ecosafe 10,000,000
restricted shares of its common stock, $0.0001 par value per
share which were not registered under the Act in consideration
for the exclusive world wide license agreement with Ecosafe
relating to commercial units valued at approximately $620,000.
The Company claims an exemption from registration of these
securities pursuant to Section 4(2) of the Act.
18
In August 2006, the Company issued to an accredited investor
440,000 restricted shares of its common stock, $.0001 par value
per share, which were not registered under the Act in
consideration for $110,000 pursuant to a private placement.
The Company claims an exemption from registration of these
securities pursuant to Section 4(2) of the Act.
In September 2006, the Company issued to Ecosafe 1,000,000
restricted shares of its common stock, $0.0001 par value per
share, which were not registered under the Act in consideration
for the exclusive worldwide license agreement with Ecosafe
relating to home/office units valued at approximately $560,000.
The Company claims an exemption from registration of these
securities pursuant to Section 4(2) of the Act.
In October 2006, the Company's Board of Directors adopted the
2006 Stock Option Plan (the "2006 Plan"), reserving 8,000,000
shares for issuance under the 2006 Plan, and granted a total of
1,475,000 non-qualified stock options to the following
individuals: Terrance Nylander (250,000 options), Roland
Walgreen (175,000 options), Nand Shankar (250,000 options),
Bruce H. Haglund (100,000 options), Maribel Jordan (150,000
options), Philip Fraser (300,000 options), Nicole Fraser
(75,000 options), and Russ Lombardo (175,000 options). These
non-qualified stock options are exercisable at $.50 per share,
expire on September 30, 2013, and are fully vested. The Company
claims an exemption from registration of these securities
pursuant to Section 4(2) of the Act.
In October 2006, the Company agreed to issue to P204
Enterprises Ltd. 2,083,333 restricted shares of its Common
Stock, $0.0001 par value per share, in consideration for
$1,000,000. In connection with the sale of the Shares, the
Company issued to P204 Enterprises Ltd. a warrant to purchase
2,083,333 shares of common stock of the Company. On the
condition that the Warrant is exercised on or before April 30,
2007, the exercise price of the warrants is $0.85 per share; on
the condition that the warrant is exercised on or before
October 31, 2007, the exercise price of the warrant is $1.00
per share; and on the condition that the warrant is exercised
on or before April 30, 2008, the exercise price of the Warrant
is $1.15 per share. The Warrant expires on April 30, 2008.
This transaction closed in January 2007. The Company claims an
exemption from registration of these securities pursuant to
Section 4(2) of the Act.
19
In November 2006, the Company granted a total of 4,925,000 non-
qualified stock options under the 2006 Plan to the following
individuals: Robert Rosner (2,000,000 options), William
Robertson (1,500,000 options), Philip Fraser (1,200,000
options), and Russ Lombardo (225,000 options). These non-
qualified stock options are exercisable at $.62 per share,
expire on September 30, 2013, and are fully vested. The Company
claims an exemption from registration of these securities
pursuant to Section 4(2) of the Act.
In December 2006, the Company agreed to pay $1,000,000 and
issue 1,000,000 shares of its common stock to Cucoloris Films,
Inc. ("Cucoloris") pursuant to a Form S-8 registration
statement as partial consideration for the services of
Cucoloris to the Company. The agreement provided for the
registration of the shares prior to December 31, 2006, but the
parties have agreed to the filing of the registration statement
as soon as practicable. The Company issued 1,000,000 shares
and has paid $250,000. The 1,000,000 shares issued were not
released to the marketing company as it has not commenced its
branding and marketing efforts and the contract has expired.
The Company is currently re-negotiating the terms of the
remaining $750,000. The common shares have been returned back
to treasury.
In January 2007, the Company agreed to issue to James Marsden
133,333 units, each unit consisting of a share of common stock
and a warrant to purchase a share of common stock, for a
consideration of $100,000 ($.75 per unit). The warrants stock
expire in January 2009 and are exercisable at $.85 per share if
the warrant is exercised on or before June 30, 2007, at $1.00
if the warrant is exercised on or before December 31, 2007, and
at $1.15 if the warrant is exercised on or before December 31,
2008. The subscription was not completed.
In January 2007, the Company agreed to issue to Robert Rosner,
our Chief Executive Officer, up to 200,000 units, each unit
consisting of a share of common stock and a warrant to purchase
a share of common stock, in consideration for the forgiveness
of up to $150,000 of indebtedness of the Company to Mr. Rosner
($.75 per unit). The warrants stock expire in January 2009 and
are exercisable at $.85 per share if the warrant is exercised
on or before June 30, 2007, at $1.00 if the warrant is
exercised on or before December 31, 2007, and at $1.15 if the
warrant is exercised on or before December 31, 2008. The
Company issued 195,334 units to Robert Rosner. The Company
claims an exemption from registration of these securities
pursuant to Section 4(2) of the Act.
20
In January 2007, the Company agreed to issue to Donald Walker,
a former officer and director of the Company, up to 80,000
units, each unit consisting of a share of common stock and a
warrant to purchase a share of common stock, in consideration
for the forgiveness of up to $60,000 of
indebtedness of the Company to Mr. Walker ($.75 per unit). The
warrants stock expire in January 2009 and are exercisable at
$.85 per share if the warrant is exercised on or before June
30, 2007, at $1.00 if the warrant is exercised on or before
December 31, 2007, and at $1.15 if the warrant is exercised on
or before December 31, 2008. The Company issued 77,202 units to
Donald Walker. The Company claims an exemption from
registration of these securities pursuant to Section 4(2) of
the Act.
In January 2007, the Board of Directors approved an amendment
to the 2006 Stock Option Plan to increase the number of shares
issuable upon exercise of options to 11,000,000 shares and
approved the grant of 875,000 non-qualified stock options under
the 2006 Plan to the following individuals: James Marsden
(750,000 options), Adriana Mihalos (75,000 options), and Gary
Tacon (50,000 options). These non-qualified stock options are
exercisable at $1.10 per share, expire on September 30, 2013,
and are fully vested. The Company claims an exemption from
registration of these securities pursuant to Section 4(2) of
the Act.
In January 2007, the Board of Directors approved the grant of
2,000,000 non-qualified stock options outside of the plan to
two consultants (1,000,000 options each) with whom the Company
is presently negotiating consulting agreements. Neither the
consulting agreements nor the stock option agreements have been
executed as of the date of this Annual Report. The Company was
unable to reach amicable terms with the two consultants for
services. These non-qualified stock options were cancelled.
In April 2007, the Board of Directors approved the grant of
1,700,000 non-qualified stock options under the 2006 Amended
Stock Option Plan to Robert Rosner (1,500,000 options) and
Richard Jordan (200,000 options). These non-qualified stock
options are exercisable at $0.57 per share, expire on September
30, 2013, and are fully vested. The Company claims an
exemption from registration of these securities pursuant to
Section 4(2) of the Act.
21
In May 2007, the Board of Directors approved the grant of
1,295,000 non-qualified stock options under the 2006 Amended
Stock Option Plan to the following individuals: Connect
Corporate Communications (300,000 options), Connect Capital
(700,000 options), Gary Tacon (20,000 options), Adriana Mihalos
(25,000 options) and James Marsden (250,000 options). These
non-qualified stock options are exercisable at $0.65 per share,
expire on September 30, 2013, and are fully vested. The
Company claims an exemption from registration of these
securities pursuant to Section 4(2) of the Act.
In October 2007, the Company agreed to issue to Robert Rosner,
our Chief Executive Officer, 696,494 units, each unit
consisting of a share of common stock and a warrant to purchase
a share of common stock, in consideration for the forgiveness
of up to $118,404 of indebtedness of the Company to Mr. Rosner
($.17 per unit). The warrants stock will expire on September
30, 2010 and are exercisable at $0.17 per share. The Company
claims an exemption from registration of these securities
pursuant to Section 4(2) of the Act.
In October 2007, the Company agreed to issue to an accredited
investor, 1,362,329 units, each unit consisting of a share of
common stock and a warrant to purchase a share of common stock,
in consideration for the forgiveness of up to $231,596 of
indebtedness of the Company to the accredited investor ($.17
per unit). The warrants stock will expire on September 30,
2010 and are exercisable at $0.17 per share. The Company claims
an exemption from registration of these securities pursuant to
Section 4(2) of the Act.
In December 2007, the Company entered into a private placement
with an accredited investor of $100,000 for 588,235 common
shares of the Company at $0.17 per share. The Company claims
an exemption from registration of these securities pursuant to
Section 4(2) of the Act.
In March 2008, the Company agreed to issue to Robert Rosner,
our Chief Executive Officer, 4,400,000 units, each unit
consisting of a share of common stock and one half of a warrant
whereby each whole warrant entitles the holder to purchase a
share of common stock, in consideration for the forgiveness of
$220,000 of indebtedness of the Company to Mr. Rosner ($0.05
per unit). The warrants stock will expire on March 18, 2011
and are exercisable at $0.05 per share. As of the date of this
annual report, the shares have not been issued. The Company
claims an exemption from registration of these securities
pursuant to Section 4(2) of the Act.
22
In March 2008, the Company agreed to issue to Robert Rosner,
our Chief Executive Officer, 25,000 shares of Preferred stock,
in consideration for the forgiveness of $5,000 of indebtedness
of the Company to Mr. Rosner ($0.20 per share). As of the date
of this annual report, the shares have not been issued. The
Company claims an exemption from registration of these
securities pursuant to Section 4(2) of the Act.
In April 2008, the Company entered into a private placement
with an accredited investor of $80,000 for 1,600,000 units,
each unit consisting of a share of common stock and one half of
a warrant whereby each whole warrant entitles the holder to
purchase a share of common stock of the Company. The warrants
stock will expire on April 7, 2011 and are exercisable at $0.05
per share. As of the date of this annual report, the shares
have not been issued. The Company claims an exemption from
registration of these securities pursuant to Section 4(2) of
the Act.
In May 2008, the Company entered into private placements with
accredited investors of $100,000 for 1,111,112 common shares of
the Company at $0.09 per share. As of the date of this annual
report, the shares have not been issued. The Company claims an
exemption from registration of these securities pursuant to
Section 4(2) of the Act.
In June 2008, the Company agreed to issue to Robert Rosner, our
Chief Executive Officer, 1,000,000 units, each unit consisting
of a share of common stock and a warrant to purchase a share of
common stock, in consideration for the forgiveness of $60,000
of indebtedness of the Company to Mr. Rosner ($0.06 per unit).
The warrants stock will expire June 16, 2008 and exercisable
at $0.06 per share. As of the date of this annual report, the
shares have not been issued. The Company claims an exemption
from registration of these securities pursuant to Section 4(2)
of the Act.
In July 8, 2008, the Company agreed to issue to Robert Rosner,
our Chief Executive Officer, 1,000,000 units, each unit
consisting of a share of common stock and a warrant to purchase
a share of common stock, in consideration for the forgiveness
of $50,000 of indebtedness of the Company to Mr. Rosner ($0.05
per unit). The warrants stock will expire July 7, 2011 and
exercisable at $0.05 per share. As of the date of this annual
report, the shares have not been issued. The Company claims an
exemption from registration of these securities pursuant to
Section 4(2) of the Act.
23
In January 9, 2009, the Company agreed to issue to Robert
Rosner, our Chief Executive Officer, 8,000,000 units, each unit
consisting of a share of common stock in consideration for the
forgiveness of $40,000 of indebtedness of the Company to Mr.
Rosner ($0.005 per unit).
On February 26, 2009, the Company have signed agreement with
existing warrant options holders to cancel all existing warrant
options available to the Company.
Item 6. Selected Financial Data.
The following selected financial data has been derived from our
audited financial statements and should be read in conjunction
with such financial statements included herein.
For the year ended March 31,
2009 2008
Statement of operations data:
Operating revenues 174,540 195,792
Gross profit 24,816 55,921
Gain (loss) from continuing operations (714,182) (2,091,482)
Gain (loss) from continuing
operations per share (0.01) (0.03)
Balance sheet data:
Total assets 3,088,061 3,305,466
Long-term debt - -
Item 7. Management's Discussion and Analysis of Financial
Condition and Results of Operations.
The following discussion of our financial condition and results
of operations should be read in conjunction with the financial
statements and notes thereto and the other financial
information included elsewhere in this report. Certain
statements contained in this report, including, without
limitation, statements containing the words "believes,"
"anticipates," "expects" and words of similar import,
constitute "forward looking statements" within the meaning of
the Private Securities Litigation Reform Act of 1995. Such
forward-looking statements involve known and unknown risks and
uncertainties. Our actual results may differ materially from
those anticipated in these forward-looking statements as a
result of certain factors, including our ability to create,
sustain, manage or forecast our growth; our ability to attract
and retain key personnel; changes in our business strategy or
development plans; competition; business disruptions; adverse
publicity; and international, national and local general
economic and market conditions.
24
Overview
Wataire is a Washington corporation incorporated on August 17,
2000. Wataire is currently in the development stage and has
completed its acquisition of all of the intellectual property
relating a water treatment process and devices for water-from-
air machines. The agreements previously executed between the
Company and Ecosafe have been terminated and cancelled and
forms part of the current agreement. To this end, the
Company's future results of operation will be highly dependent
upon the success of its efforts to sell and market its products
and technologies. The Company plans to sell its products to
distributors and also through multiple indirect channels, such
as resellers. The marketing and sales of these products are
highly dependent
Results of Operations for the Years ended March 31, 2009
The audited operating results and cash flows are presented for
the year ended March 31, 2009 and March 31, 2008 and for the
period of inception to March 31, 2009.
Revenues. For the year ended March 31, 2009, we had total
revenue of $174,540 compared to $195,792 for the year
ended March 31, 2008.
Operating Expenses. For the year ended March 31, 2009, we
had total operating expenses of $714,182 as compared to
$2,147,403 for the year ended March 31, 2008. The decrease
was predominately due to the stock based compensation of
$1,617,300.
Management Fees. For the year ended March 31, 2009, we
had management fees of $180,000 as compared to $137,360
for the year ended March 31, 2008, an increased of $42,640
in management fees.
25
Professional Fees. For the year ended March 31, 2009, we
had professional fees of $54,126 as compared to $81,482, a
decrease of $27,356.
Net Loss. The net loss for the year ended March 31, 2009
was $714,182 as compared to $2,091,482 for the year ended
March 31, 2008, a decrease of $1,373,300. The decrease was
generally due to the stock based compensation of
$1,617,300.
Plan of Operation
We currently have minimal cash reserves and a significant
working capital deficit. Accordingly, our ability to pursue
our plan of operations is contingent on our being able to
obtain funding for the development, marketing and
commercialization of our products and services.
Management plans, as soon as finances permit, to hire
additional management and staff for its US-based operations
especially in the areas of finance, sales, marketing, and
investor/public relations. The Company may also choose to
outsource some of its marketing requirements by utilizing a
series of independent contractors based on the projected size
of the market and the compensation necessary to retain
qualified employees. The Company engaged a marketing firm to
handle the Company's branding, marketing, advertising, media
and public relations for the planned upcoming 2008 North
American launch of its consumer product line of atmospheric
water generators. The term of the engagement is for one year,
and the Company has paid the marketing firm $250,000 and issued
1,000,000 shares of common stock that has been registered on
Form S-8 for their services. The marketing agreements expired
and the Company has not commenced its branding and marketing
efforts and therefore the shares were not released by the
Company. The Company is currently re-negotiating the terms of
its agreements with the marketing firm.
To achieve our new operational plan, we will need to raise
substantial additional capital for our operations through
licensing fees and product sales, sale of equity securities
and/or debt financing. We have no cash to fund our operations
at this time, so we plan to sell licenses and products, offer
common stock in private placements as well as seeking debt
financing during the next 12 months to raise up to $8,000,000.
We believe the proceeds from such efforts will enable us to
expand our operations, buy inventory and start our marketing
campaign.
26
Due to the "start up" nature of the Company's business, the
Company expects to incur losses as the Company conducts its
ongoing research, product and systems development programs. We
will require additional funding to continue our operations, for
marketing expenses, to pursue regulatory approvals for our
products, for any possible acquisitions or new technologies,
and we may require additional funding to establish
manufacturing capabilities in the future. We may seek to
access the public or private equity markets whenever conditions
are favorable. We may also seek additional funding through
strategic alliances or collaborate with others. We cannot
assure you that adequate funding will be available on terms
acceptable to us, if at all. Because we are presently in the
early stages of development and promotional stages of our
business, we can provide no assurance that we will be
successful with our efforts to establish any revenue. In order
to pursue our existing operational plan, we are dependent upon
the continuing sales and financial support of creditors and
stockholders until such time when we are successful in raising
debt/equity capital to finance the operations and capital
requirements of the Company or until such time that we can
generate sufficient revenue from our various divisions.
Liquidity and Financial Resources
The Company remains in the development stage since inception.
Operations were financed through proceeds from sales and the
issuance of equity and loans from directors. The directors
have also advanced funds into the Company to cover cash flow
deficiencies . The advances have no stated repayment terms.
These funds were used to pay inventory, services, legal and
accounting expenses along with several other miscellaneous
operational infrastructure costs.
The Company's financial statements are presented on a going
concern basis, which contemplates the realization of assets and
the satisfaction of liabilities in the normal course of
business. At March 31, 2009, we have been unsuccessful in our
efforts to raise additional capital to meet our plan of
operations. Our cash position as of March 31, 2009 was $35.
Since inception, we have recognized no significant revenue. We
have accumulated operating losses of $10,299,365. At the
present time, and over the next twelve months, our primary
focus will be to develop our marketing plan, new initiatives
and operational plan to establish sales and to explore various
methods for raising additional funds.
27
Critical Accounting Policies
The Company's discussion and analysis of its financial
condition and results of operations are based upon the
Company's financial statements, which have been prepared in
accordance with accounting principles generally accepted in the
United States of America. The preparation of the financial
statements requires the Company to make estimates and judgments
that affect the reported amount of assets, liabilities, and
expenses, and related disclosures of contingent assets and
liabilities. On an on-going basis, the Company evaluates its
estimates, including those related to intangible assets, income
taxes and contingencies and litigation. The Company bases its
estimates on historical experience and on various assumptions
that are believed to be reasonable under the circumstances, the
results of which form the basis for making judgments about
carrying values of assets and liabilities that are not readily
apparent from other sources. Actual results may differ from
these estimates under different assumptions or conditions.
NEW ACCOUNTING PRONOUNCEMENTS
In July 2001, the Financial Accounting Standards Board issued
Statement of Financial Accounting Standards No. 141, Business
Combinations, and Statement of Financial Accounting Standards
No. 142, Goodwill and Other Intangible Assets. They also issued
Statement of Financial Accounting Standards No. 143, Accounting
for Obligations Associated with the Retirement of Long-Lived
Assets, and Statement of Financial Accounting Standards No.
144, Accounting for the Impairment or Disposal of Long-Lived
Assets, in August and October 2001, respectively.
SFAS 141 requires all business combinations initiated after
June 30, 2001 to be accounted for under the purchase method.
SFAS 141 supersedes APB Opinion No. 16, Business Combinations,
and Statement of Financial Accounting Standards No. 38,
Accounting for Pre-acquisition Contingencies of Purchased
Enterprises, and is effective for all business combinations
initiated after June 30, 2001.
28
SFAS No. 142 addresses the financial accounting and reporting
for acquired goodwill and other intangible assets. Under the
new rules, the Company is no longer required to amortize
goodwill and other intangible assets with indefinite lives, but
will be subject to periodic testing for impairment. SFAS 142
supersedes APB Opinion No. 17, Intangible Assets. The Company's
operational policy for the assessment and measurement of any
impairment in the value of goodwill and intangible assets,
which primarily relates to contract-based intangibles such as
license agreements and extensions, is to evaluate annually, the
recoverability and remaining life of its intangible assets to
determine the fair value of these assets. The methodologies to
be used to estimate fair value include the use of estimates and
assumptions, including projected revenues, earnings and cash
flows. If the fair value of any of these assets is determined
to be less than its carrying value, the Company will reflect
the impairment of any such asset over its appraised value.
SFAS No. 143 establishes accounting standards for the
recognition and measurement of an asset retirement obligation
and its associated asset retirement cost. It also provides
accounting guidance for legal obligations associated with the
retirement of tangible long-lived assets. SFAS 143 is effective
in fiscal years beginning after June 15, 2002, with early
adoption permitted. The adoption of SFAS No. 143 is not
expected to have a material impact on the Company's financial
statements.
SFAS 144 establishes a single accounting model for the
impairment or disposal of long-lived assets, including
discontinued operations. SFAS 144 superseded Statement of
Financial Accounting Standards No. 121, Accounting for the
Impairment of Long-Lived Assets and for Long-Lived Assets to Be
Disposed Of (SFAS 121), and APB Opinion No. 30, Reporting the
Results of Operations--Reporting the Effects of Disposal of a
Segment of a Business, and Extraordinary, Unusual and
Infrequently Occurring Events and Transactions. The provisions
of SFAS 144 are effective in fiscal years beginning after
December 15, 2001, with early adoption permitted, and in
general are to be applied prospectively. The Company records
impairment losses on long lived assets used in operations when
indicators of impairment are present and the undiscounted cash
flows estimated to be generated by those assets are less than
the asset's carrying amount. In such cases, the amount of the
impairment is determined on the relative values of the impaired
assets.
29
Financial Accounting Standards Board Interpretation No. 46,
Consolidation of Variable Interest Entities, an interpretation
of Accounting Research Bulletin No. 51, Financial Statements,
addresses consolidation by business enterprises of variable
interest entities. It is effective immediately for variable
interest entities created after January 31, 2003. It applies in
the first fiscal year or interim period beginning after June
15, 2003, to variable interest entities acquired before
February 1, 2003. The implementation of Interpretation No. 46
did not have a material effect on the Company's financial
statements.
SFAS No. 149, Amendment of Statement 133 on Derivative
Instruments and Hedging Activities, amends and clarifies
accounting for derivative instruments under SFAS No. 133. It is
effective for contracts entered into after June 30, 2003. The
impact of adoption of this statement is not expected to be
significant.
SFAS No. 150, Accounting for Certain Financial Instruments with
Characteristics of both Liabilities and Equity, establishes
standards for how an issuer classifies and measures certain
financial instruments with characteristics of both liability
and equity. It requires that an issuer classify a financial
instrument that is within its scope as a liability (or an asset
in some circumstances). This statement is effective for
financial instruments entered into or modified after May 31,
2003, and otherwise is effective at the beginning of the first
interim period beginning after June 15, 2003. The impact of
adoption of this statement is not expected to be significant.
In December 2004, the FASB issued SFAS 153, Exchanges of Non-
monetary Assets, an amendment of APB No. 29, Accounting for
Non-monetary Transactions. SFAS 153 requires exchanges of
productive assets to be accounted for at fair value, rather
than at carryover basis, unless (1) neither the asset received
nor the asset surrendered has a fair value that is determinable
within reasonable limits or (2) the transactions lack
commercial substance. SFAS 153 is effective for non-monetary
asset exchanges occurring in fiscal periods beginning after
June 15, 2005. The Company does not expect the adoption of this
standard to have a material effect on its financial position,
results of operations or cash flows.
In December 2004, the FASB issued Statement 123 (revised 2004)
which is a revision of FASB Statement No. 123, Accounting for
Stock-Based Compensation. This Statement supersedes APB
Opinion No. 25, Accounting for Stock Issued to Employees, and
its related implementation guidance. This Statement establishes
standards for the accounting for transactions in which an
entity exchanges its equity instruments for goods or services.
It also addresses transactions in which an entity incurs
liabilities in exchange for goods or services that are based on
the fair value of the entity's equity instruments or that may
be settled by the issuance of those equity instruments. This
Statement focuses primarily on accounting for transactions in
which an entity obtains services in share-based payment
transactions. This Statement requires a public entity to
measure the cost of services received in exchange for an award
of equity instruments based on the grant-date fair value of the
award (with limited exceptions). That cost will be recognized
over the period during which an employee is required to provide
service in exchange for the award the requisite service period
(usually the vesting period).
30
Item 7A. Quantitative and Qualitative Disclosures About Market
Risk.
We are primarily exposed to foreign currency risk, interest
rate risk and credit risk.
Foreign Currency Risk - We import products from foreign
countries into the United States and market our products in
North America. As a result, our financial results could be
affected by factors such as changes in foreign currency
exchange rates or, if we initiate our planned international
operations, weak economic conditions in foreign markets.
Because our revenues are currently denominated in U.S. dollars,
a strengthening of the dollar could make our products less
competitive in foreign markets that we plan to enter. We have
not hedged foreign currency exposures related to transactions
denominated in currencies other than U.S. dollars. We do not
engage in financial transactions for trading or speculative
purposes.
Interest Rate Risk - Interest rate risk refers to fluctuations
in the value of a security resulting from changes in the
general level of interest rates. Investments that are
classified as cash and cash equivalents have original
maturities of three months or less. Our interest income is
sensitive to changes in the general level of U.S. interest
rates. We do not have significant short-term investments, and
due to the short-term nature of our investments, we believe
that there is not a material risk exposure.
31
Credit Risk - Our accounts receivables are subject, in the
normal course of business, to collection risks. We regularly
assess these risks and have established policies and business
practices to protect against the adverse effects of collection
risks. As a result we do not anticipate any material losses in
this area.
Item 8. Financial Statements and Supplementary Data.
The financial statements and supplementary data are located at
the end of this report.
Item 9. Changes in and Disagreements with Accountants on
Accounting and Financial Disclosure.
Not applicable
Item 9A (T). Controls and Procedures.
As supervised by our board of directors and our principal
executive and principal financial officers, management has
established a system of disclosure controls and procedures and
has evaluated the effectiveness of that system. The system and
its evaluation are reported on in the below Management's Annual
Report on Internal Control over Financial Reporting. Our
principal executive and financial officer has concluded that
our disclosure controls and procedures (as defined in the 1934
Securities Exchange Act Rule 13a-15(e)) as of March 31, 2009,
are effective, based on the evaluation of these controls and
procedures required by paragraph (b) of Rule 13a-15.
Management's Annual Report on Internal Control over Financial
Reporting
Management is responsible for establishing and maintaining
adequate internal control over financial reporting, as such
term is defined in Rule 13a-15(f) of the Securities Exchange
Act of 1934 (the "Exchange Act"). Internal control over
financial reporting is a process designed to provide reasonable
assurance regarding the reliability of financial reporting and
the preparation of financial statements for external purposes
in accordance with U.S. generally accepted accounting
principles.
32
Management assessed the effectiveness of internal control over
financial reporting as of March 31, 2009. We carried out this
assessment using the criteria of the Committee of Sponsoring
Organizations of the Treadway Commission (COSO) in Internal
Control-Integrated Framework.
This annual report does not include an attestation report of
our registered public accounting firm regarding internal
control over financial reporting. Management's report was not
subject to attestation by our registered public accounting
firm, pursuant to temporary rules of the Securities and
Exchange Commission that permit us to provide only management's
report in this annual report. Management concluded in this
assessment that as of March 31, 2009, our internal control over
financial reporting is effective.
There have been no significant changes in our internal control
over financial reporting (as defined in Rules 13a-15(f) and
15d-15(f) under the Exchange Act) during the fourth quarter of
our 2009 fiscal year that have materially affected, or are
reasonably likely to materially affect, our internal control
over financial reporting.
Item 9B. Other Information.
None.
PART III
Item 10. Directors, Executive Officers, Promoters, Control
Persons and Corporate Governance.
33
Directors and Executive Officers
The following sets forth-certain information with respect to
the directors and executive officers of Wataire:
Name Age Position
Office Held
Robert Rosner (1) 44 CEO, Secretary,
Director, Chairman of
the Board
Thomas M. Braid (2) 47 Treasurer, CFO,
Director
Notes:
(1)
Mr. Rosner was appointed a Director and Corporate
Secretary on August , 2003; he resigned as Corporate Secretary
on August 19, 2005 and was appointed Chief Executive Officer,
Chairman of the Board and President. Mr. Rosner was appointed
Corporate Secretary on March 13, 2007 and resigned as President
on April 23, 2007.
(2)
Mr. Jordan was appointed a Director, Corporate Secretary,
Treasurer and Chief Financial Officer on August 19, 2005; he
resigned as Corporate Secretary on September 27, 2006.
On January 16, 2008, the Company accepted the resignation of
Terrence Nylander as officer and director.
On March 13, 2007, the Company accepted the resignations of Max
Weissengruber and Nand Shankar.
On September 27, 2006, Nand Shankar was elected as Director and
Corporate Secretary.
On July 27, 2006, Max Weissengruber, Mark Miziolek and Ron
Moodie were elected as Directors of the Company pursuant to the
license agreement with Wataire Industries Inc. On December 20,
2006, the Board of Directors received and accepted the
resignation of Mark Miziolek. On January 5, 2007, the Board of
Directors received and accepted the resignation of Ron Moodie.
As at September 27, 2006, Nand Shankar was elected as Director
pursuant to the license agreement with Wataire Industries Inc.
Mr. Shankar was then elected as Corporate Secretary on
September 27, 2006 when Richard Jordan resigned as Secretary.
34
On August 19, 2005, Donald Walker resigned as officer and
director of the Company. Mr. Rosner replaced Mr. Walker as
President, Chief Executive Officer and Chairman of the Board,
and Mr. Jordan filled the vacant director position and was
appointed Corporate Secretary, Treasurer and Chief Financial
Officer of the Company.
On June 12, 2009, Mr. Richard Jordan resigned as Director,
Chief Financial Officer and Treasurer of the Company. The
Board of Directors have appointed Mr. Thomas M Braid as
Director, Chief Financial Officer and Treasurer of the
Company on June 12, 2009.
Set forth below is a brief description of the background and
business experience of each of our executive officers and
directors for the past five years.
Mr. Robert Rosner - President, Chief Executive Officer,
Director and Chairman of the Board
Mr. Rosner has served as the Company's Chairman and Chief
Executive Officer since August 2005. He was the Vice President
of Regulatory Affairs and Compliance and Corporate Secretary
from August 2003 until August 2005. He was President from
August 2005 to April 2007. Mr. Rosner was appointed Corporate
Secretary in March 2007. He has been a member of the Company's
board of directors since August 2003. Mr. Rosner was the
president and director of Fortuna Silver Mines Inc., a company
listed on the Canadian Venture Exchange, from June 1996 to
January 2005.
Mr. Thomas M Braid - Treasurer, Chief Financial Officer and
Director
Mr. Braid was appointed as Director, Chief Financial Officer
and Treasurer on June 12, 2009. Mr. Braid had over 30 years
of experience in the newspaper industry. He is a widely
respected and multi-award winning photojournalist, photo
department manager, college instructor, workshop leader and
community volunteer. In October of 2002, Thomas was awarded
the Queen's Golden Jubilee Medal by the Governor General of
Canada and the Canadian Government. In 2007, Thomas was
awarded the Edmonton Sun's highest award by being honored
with the Douglas Creighton Award.
35
TERM OF OFFICE
Our directors are elected for a one-year term to hold office
until the next annual general meeting of our shareholders
or until removed from office in accordance with our bylaws.
Our officers are appointed by our board of directors and
hold office until removed by the board.
ADVISORY BOARD MEMBERS
The Company's advisory board members were appointed by the
Board of Directors to help oversee and provide support relating
to the Company's business affairs. The advisory board members
meet in person or via telephone conferencing with the Board of
Directors.
In May 2007, the Company initiated its Advisory Board
consisting of Professor James Marsden, PhD and Mr. Brian Baker,
BA. Mr. Brian Baker passed away recently. Dr. James Marsden, a
distinguished scientist and food safety and security expert, is
the Company's Chairman of the Scientific Advisory Board. Dr.
Marsden currently serves as Regent's Distinguished Professor
and Associate Director of the Biosecurity Institute at Kansas
State University ("KSU"). KSU has placed a major emphasis on
food safety and security. The research and educational
activities at KSU address issues that directly impact human
health, agricultural security and the economy. The university
is the site of the Biosecurity Research Institute and the
National Agricultural Biosecurity Center. Dr. Marsden will
advise us on issues relating to the production of water for
consumer products; products sized for large commercial
applications; government and military systems; remote systems
designed to produce drinking water and sanitation in developing
countries.
36
Committees
We do not have an audit committee, although we intend to
establish such a committee, with an independent "audit
committee financial expert" member as defined in the rules of
the SEC.
Corporate Code of Conduct
We are reviewing a proposed corporate code of conduct, which
would provide for internal procedures concerning the reporting
and disclosure of corporate matters that are material to our
business and to our stockholders. The corporate code of conduct
would include a code of ethics for our officers and
employees as to workplace conduct, dealings with customers,
compliance with laws, improper payments, conflicts of
interest, insider trading, company confidential
information, and behavior with honesty and integrity.
Section 16(A) Beneficial Ownership Reporting Compliance
- -------------------------------------------------------
Section 16(a) of the Securities Act of 1934 requires the
Company's officers and directors, and greater than 10%
stockholders, to file reports of ownership and changes in
ownership of its securities with the SEC. Copies of the
reports are required by SEC regulation to be furnished to the
Company.
Based solely upon a review of the Forms 3, 4, and 5 furnished
to us for the fiscal year ended March 31, 2009, we have
determined that our directors, officers, and greater than 10%
beneficial owners complied with all applicable Section 16
filing requirements.
Item 11. Executive Compensation.
The following table sets forth information for the years ended
March 31, 2009, 2008 and 2007 concerning the compensation paid
or awarded to the Chief Executive Officer and President of
PPMC.
37
FILL IN FOR LAST THREE FISCAL YEARS
SUMMARY COMPENSATION TABLE
EXECUTIVE COMPENSATION POLICIES
Other Restricted Securities All
Name and annual stock underlying LTIP other
principal Year Salary Bonus compen- awards Options/ payouts compen-
position sation SARs sation
($) ($) ($) ($) (#) ($) ($)
(a) (b) (c) (d) (e) (f) (g) (h) (i)
Robert 2009 180,000 nil nil nil nil nil nil
Rosner 2008 75,000
2007 120,000 3,500,000
CEO,
Secretary
& Director
Richard 2009 nil nil nil nil nil nil nil
Jordan 2008 nil 200,000
2007 nil
Treasurer,
CFO &
Director
Terrence 2008 nil nil nil nil nil nil nil
Nylander 2007 2,360 250,000
Former
President
&
Former
Director
Nand 2007 4,275 nil nil nil nil nil nil
Shankar
Former
Secretary
& Former
Director
2007
38
The Company anticipates entering into an employment contract
with Robert Rosner, our Chief Executive Officer, but can
provide no assurance that we will come to terms for such
employment agreement.
Item 12. Security Ownership of Certain Beneficial Owners and
Management and Related Stockholder Matters.
The following table sets forth certain information
regarding the beneficial ownership of the Company's common
stock as of June 30, 2009, by (a) each person known by the
Company to own beneficially more than 5% of the Company's
common stock, (b) each director of the Company who beneficially
owns common stock, and (c) all officers and directors of the
Company as a group. Each named beneficial owner has sole voting
and investment power with respect to the shares owned.
As of June 30, 2009, there were 91,110,123 shares of common
stock outstanding.
Name and Address Amount and
of Beneficial Position nature of % of
Owner beneficial Common Stock
ownership
Robert Rosner CEO,
21550 Oxnard Secretary 21,498,328 23.60%
Street, Director shares
Suite 300 (2)
Woodland Hills
CA 91367
Wataire Shareholder 13,400,000 14.71%
Ecosafe shares
Technologies 930
Inc.
3033 King
George Hwy
Suite 24,
Surrey, BC
Canada
All Directors 21,498,328 23.60%
and Officers
as a group (1
person)
Beneficial ownership of common stock has been determined for
purposes of the above table in accordance with Rule 13d-3 under
the Exchange Act, under which a person is deemed to be the
beneficial owner of securities if such person has or shares
voting power or investment power with respect to such
securities, has the right to acquire beneficial ownership
within 60 days or acquires such securities with the purpose or
effect of changing or influencing the control of the Company..
A person is deemed to be the beneficial owner of securities
that can be acquired by such person within 60 days from the
date of this information statement upon the exercise of
warrants or options. Each beneficial owner's percentage
ownership is determined by assuming that options and warrants
that are held by such person (but not those held by any other
person) and that are exercisable within 60 days from the date
of this Annual Report have been exercised. For purposes of
calculating beneficial ownership, assumes 91,110,123 shares of
common stock of the Company as issued and outstanding as of the
date of this Annual Report. The amount issued is 91,110,123
common shares.
39
Voting and dispositive power over the shares held of
record by Ecosafe Innotech Inc., (formerly, Wataire Ecosafe
Technologies Inc., formerly Wataire Industries Inc.) is
exercised by its board of directors.
Item 13. Certain Relationships and Related Transactions, and
Director Independence.
In January 2007, the Company agreed to issue to Robert Rosner,
our Chief Executive Officer, up to 200,000 units, each unit
consisting of a share of common stock and a warrant to purchase
a share of common stock, in consideration for the forgiveness
of up to $150,000 of indebtedness of the Company to Mr. Rosner
($.75 per unit). The warrants stock expire December 31, 2008
and are exercisable at $.85 per share if the warrant is
exercised on or before June 30, 2007, at $1.00 if the warrant
is exercised on or before December 31, 2007, and at $1.15 if
the warrant is exercised on or before December 31, 2008.
195,334 units were issued to Mr. Rosner.
In October 2007, the Company agreed to issue to Robert Rosner,
our Chief Executive Officer, 696,494 units, each unit
consisting of a share of common stock and a warrant to purchase
a share of common stock, in consideration for the forgiveness
of up to $118,404 of indebtedness of the Company to Mr. Rosner
($.17 per unit). The warrants stock will expire on September
30, 2010 and are exercisable at $0.17 per share.
40
In March 2008, the Company agreed to issue to Robert Rosner,
our Chief Executive Officer, 4,400,000 units, each unit
consisting of a share of common stock and one half of a warrant
whereby each whole warrant entitles the holder to purchase a
share of common stock, in consideration for the forgiveness of
$220,000 of indebtedness of the Company to Mr. Rosner ($0.05
per unit). The warrants stock will expire on March 18, 2011
and are exercisable at $0.05 per share. As of the date of this
annual report, the shares have not been issued.
In March 2008, the Company agreed to issue to Robert Rosner,
our Chief Executive Officer, 25,000 shares of Preferred stock,
in consideration for the forgiveness of $5,000 of indebtedness
of the Company to Mr. Rosner ($0.20 per share). As of the date
of this annual report, the shares have not been issued.
In June 2008, the Company agreed to issue to Robert Rosner, our
Chief Executive Officer, 1,000,000 units, each unit consisting
of a share of common stock and a warrant to purchase a share of
common stock, in consideration for the forgiveness of $60,000
of indebtedness of the Company to Mr. Rosner ($0.06 per unit).
The warrants stock will expire June 16, 2011 and exercisable
at $0.06 per share. As of the date of this annual report, the
shares have not been issued.
In July 2008, the Company agreed to issue to Robert Rosner, our
Chief Executive Officer, 1,000,000 units, each unit consisting
of a share of common stock and a warrant to purchase a share of
common stock, in consideration for the forgiveness of $50,000
of indebtedness of the Company to Mr. Rosner ($0.05 per unit).
The warrants stock will expire July 7, 2011 and exercisable at
$0.05 per share. As of the date of this annual report, the
shares have not been issued.
In January 9, 2009, the Company agreed to issue to Robert
Rosner, our Chief Executive Officer, 8,000,000 common shares at
$0.005 per share, in consideration for the forgiveness of
$40,000 of indebtedness of the Company to Mr. Rosner.
In February 26, 2009, the Company have signed agreement with
existing warrant options holders to cancel all existing warrant
options available to the Company.
Our management is involved in other business activities and
may, in the future become involved in other business
opportunities. If a specific business opportunity becomes
available, such persons may face a conflict in selecting
between our business and their other business interests. In the
event that a conflict of interest arises at a meeting of our
directors, a director who has such a conflict will disclose his
interest in a proposed transaction and will abstain from voting
for or against the approval of such transaction.
41
Item 14. Principal Accountant Fees and Services.
Audit Fees . Audit fees expected to be billed to us by
for the audit of financial statements included in our Annual
Reports on Form 10-K for the years ended March 31, 2009 and
2008 are approximately $20,000 and $20,000, respectively. These
fees include auditing fees and review of quarterly financial
statements for the fiscal years ended March 31, 2009 and 2008
respectively.
Tax Fees . We have been billed an aggregate of $Nil for
the fiscal years ended March 31, 2009 and March 31, 2008,
respectively, for tax services.
All Other Fees . We have been billed an aggregate of $Nil
for the fiscal years ended March 31, 2009 and 2008
respectively, for permitted non-audit services.
Other Matters . N.A.
To our knowledge, there have been no persons, other than
Gruber & Company's full time, permanent employees who have
worked on the audit or review of our financial statements.
42
Item 15. Exhibits and Financial Statement Schedules.
(3) Exhibits.
Exhibit
Number
Description of Exhibit
- --------- -------------------------------------------------
3.3 Amendment of Articles of Incorporation (1)
10.1
License Agreement between the Company and Wataire Industries
Inc. dated July 10, 2006 (2)
10.2
License Agreement between the Company and Wataire industries
Inc. dated September 12, 2006 (5)
10.3
Amended License Agreement between the Company and Wataire
Industries Inc. dated October 19, 2006 (6)
10.4
Amended License Agreement between the Company and Wataire
Industries Inc. dated October 19, 2006 (6)
10.5
2006 Stock Option Plan (9)
10.6
Form of Stock Option Agreement at $0.50 (9)
10.7
Form of Stock Option Agreement at $0.62 (10)
10.8
Amended 2006 Stock Option Plan (8)
10.9
Consulting Agreement between Cucoloris Films Inc. and the
Company dated December 11, 2006 (7)
10.10
Consulting Agreement between Cucoloris Films Inc. and the
Company dated December 11, 2006 (7)
10.12
Warrant issued to P204 Enterprises Ltd. on October 17, 2006
(11)
10.13 License Agreement between Airborn Water Company and the
Company dated January 25, 2007 (12)
10.14 IP Transfer Agreement between the Company, Wataire Industries
Inc., Canadian Dew
Technologies Inc., Terrence Nylander and Roland Wahlgren (13)
10.15
Form of Stock Option Agreement at $0.57 (14)
43
10.16
Form of Stock Option Agreement at $0.65 (15)
10.17 Compensation Agreement between Cucoloris Films Inc. and the
Company dated May 23, 2007
10.18
Amendment to Agreement between Airborn Water Company and the
Company dated June 20, 2007 (17)
10.19 Agreement between Access Energy Technologies and the Company
dated June 14, 2007
10.20
Amendment to Agreement between Access Technologies and the
Company dated June 20, 2007 (16)
10.21
Amendment to Agreement between Aquaduct and the Company dated
June 20, 2007 (17)
10.22 Exclusive Marketing Agency Agreement, dated June 13, 2007,
between the Company and Access Energy Technologies Ltd. (16)
31.1 Certification of the Chief Executive Officer pursuant to
Section 302 of the
Sarbanes-Oxley Act of 2002, filed herewith.
31.2 Certification of the Chief Financial Officer pursuant to
Section 302 of the
Sarbanes-Oxley Act of 2002, filed herewith.
32.1 Certification of the Chief Executive Officer pursuant to
Section 906 of the
Sarbanes-Oxley Act of 2002, filed herewith.
32.1 Certification of the Chief Financial Officer pursuant to
Section 906 of the
Sarbanes-Oxley Act of 2002, filed herewith.
99.1 License Agreement between the Company and On4
Communications Inc., formerly
Petsmobility Network (Canada) Inc. (4)
99.2 Asset Purchase Agreement between the Company, Petsmobility
Inc. and On4
Communications, Inc. (3)
99.3 Rescission Agreement between the Company and On4
Communications, Inc. (3)
99.4 Articles of Correction (3)
Notes:
44
(1)
Previously filed with the Securities and Exchange
Commission as an exhibit to the Form 8-K dated June 14, 2004
and October 17, 2006.
(2)
Previously filed with the Securities and Exchange
Commission as an exhibit to the Form 8-K dated July 14, 2006.
(3)
Previously filed with the Securities and Exchange
Commission as an exhibit to the Form 8-K dated February 6,
2006.
(4)
Previously filed with the Securities and Exchange
Commission as an exhibit to the Form 8-K dated June 17, 2005.
(5)
Previously filed with the Securities and Exchange Commission as
an exhibit to the Form 8-K dated September 15, 2006
(6)
Previously filed with the Securities and Exchange Commission as
an exhibit to the Form 8-K dated October 23, 2006.
(7)
Previously filed with the Securities and Exchange Commission as
an exhibit to the Form 8-K dated December 15, 2006.
(8)
Filed with this report.
(9)
Previously filed with the Securities and Exchange Commission as
an exhibit to the Form 8-K dated October 10, 2006.
(10)
Previously filed with the Securities and Exchange Commission as
an exhibit to the Form 8-K dated November 13, 2006.
(11)
Previously filed with the Securities and Exchange Commission as
an exhibit to the Form 8-K dated October 20, 2006.
(12)
Previously filed with the Securities and Exchange Commission as
an exhibit to the Form 8-K dated January 31, 2007
(13) Previously filed with the Securities and Exchange
Commission as an exhibit to the Form 8-K dated April 30, 2007.
(14)
Previously filed with the Securities and Exchange Commission as
an exhibit to the Form 8-K dated April 10, 2007.
45
(15)
Previously filed with the Securities and Exchange Commission as
an exhibit to the Form 8-K dated May 9, 2007.
(16)
Previously filed with the Securities and Exchange Commission as
an exhibit to the Form 8-K dated June 18, 2007.
(17)
Previously filed with the Securities and Exchange Commission as
an exhibit to the Form 8-K dated June 20, 2007.
(18)
Previously filed with the Securities and Exchange Commission as
an exhibit to the Form 8-K dated October 10, 2007.
(19)
Previously filed with the Securities and Exchange Commission as
an exhibit to the Form 8-K dated December 11, 2007.
(20)
Previously filed with the Securities and Exchange Commission as
an exhibit to the Form 8-K dated January 23, 2008.
(21)
Previously filed with the Securities and Exchange Commission as
an exhibit to the Form 8-K dated January 23, 2008.
(22)
Previously filed with the Securities and Exchange Commission as
an exhibit to the Form 8-K dated March 26, 2008.
(23)
Previously filed with the Securities and Exchange Commission as
an exhibit to the Form 8-K dated April 1, 2008.
(24)
Previously filed with the Securities and Exchange Commission as
an exhibit to the Form 8-K dated June 20, 2008.
(25)
Previously filed with the Securities and Exchange Commission as
an exhibit to the Form 8-K dated January 15, 2009.
(26)
Previously filed with the Securities and Exchange Commission as
an exhibit to the Form 8-K dated June 18, 2009.
46
SIGNATURES
In accordance with the Securities Exchange Act of 1934,
this report has been signed below by the following persons on
behalf of the registrant and in the capacities and on the dates
indicated.
Dated: July 23, 2009
WATAIRE INTERNATIONAL, INC.
By:_ /s/ Robert Rosner
Robert Rosner
Chief Executive Officer,
Director
July 23, 2009
By: /S/ Thomas M. Braid
Thomas M. Braid
Chief Financial Officer,
Director
47
Item 8 Financial Statements.
WATAIRE INTERNATIONAL, INC.
(A Development Stage Company)
CONSOLIDATED FINANCIAL STATEMENTS
March 31, 2009
(Stated in US Dollars)
48
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
THE BOARD OF WATAIRE INTERNATIONAL, INC.
We have audited the accompanying consolidated balance sheets of
Wataire International, Inc. (a Developmental Stage Company) as
of March 31, 2009 and 2008, and the related statement of operations,
stockholders equity and cash flows for the periods then ended.
These financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on these
financial statements based on our audit.
We conducted our audit in accordance with the standards of the
Public Company Accounting Oversight Board (United States). Those
standards require that we plan and perform our audit to obtain
reasonable assurance about whether the financial statements are
free of material misstatement. The Company is not required to have,
nor were we engaged to perform, an audit of its internal control
over financial reporting. Our audit included consideration of
internal control over financial reporting as a basis for designing
audit procedures that are appropriate in the circumstances, but not
for the purpose of expressing an opinion on the effectiveness of the
Company's internal control over financial reporting. Accordingly,
we express no such opinion. An audit includes examining on a test
basis, evidence supporting the amounts and disclosures in the
financial statements. An audit also includes assessing the
accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement
presentation. We believe that our audit provides a reasonable basis
for our opinion.
In our opinion, the consolidated financial statements referred to
above present fairly, in all material respects, the financial position
of Wataire International, Inc. (a Developmental Stage Company) as of
March 31, 2009 and 2008, the results of its operations and its
stockholders equity and cash flows for the periods then ended in
conformity with accounting principles generally accepted in the
United States of America.
The accompanying consolidated financial statements have been prepared
assuming that the Company will continue as a going concern. The
Company's viability is dependent upon its ability to obtain future
financing and the success of its future operations. These factors
raise substantial doubt as to the Company's ability to continue as
a going concern. Management's plan in regard to these matters is
described in Note 1. The financial statements do not include any
adjustments that might result from the outcome of this uncertainty.
Gruber & Company, LLC Saint Louis, Missouri
July 22, 2009
49
WATAIRE INTERNATIONAL, INC.
(Formerly Cimbix Corporation)
(A Development Stage Company)
CONSOLIDATED BALANCE SHEETS
as at March 31, 2009 and 2008
(Stated in US Dollars)
(Audited)
March 31 March 31
2009 2008
Assets
Current Assets
Cash 35 -
Accounts receivable - 2,800
Prepaid expenses & retainer 9,766 2,280
Advance on marketing agreeents 250,000 250,000
Advance on inventory - 174,635
Inventory 250,456 308,328
--------- ---------
Total Current Assets 510,257 738,043
Capital assets, net 308 615
Patents, Trademarks 31,434 20,746
Acquisitions of intangibles 2,546,062 2,546,062
--------- ---------
Total Assets 3,088,061 3,305,466
--------- ---------
Liabilities
Current Liabilities
Accounts payable 353,854 219,719
Bank indebtedness - 5,885
Shareholder loan and interest 106,589 101,589
Due to related parties 1,280 2,280
Deferred reveneu 189,067 154,540
--------- ---------
Total Liabilities 650,790 484,013
Stockholders' Equity
Capital stock
Authorized:
100,000,000 common shares with a par
value of $0.0001
20,000,000 preferred shares with a par
value of $0.0001,
redeemable at $0.005
Issued and outstanding:
87,110,123 common shares
(March 31, 2008: 74,399,011) 8,711 7,440
27,501 preferred shares
(March 31, 2008: 27,501) 3 3
Additional paid-in capital 12,880,264 12,551,535
Deficit accumulated during the
development stage (10,451,707) (9,737,525)
---------- ---------
Total Equity 2,437,271 2,821,453
---------- ---------
Total Liabilities and Stockholders' Equity 3,088,061 3,305,466
---------- ---------
The accompanying notes are an integral part of the financial statements
50
WATAIRE INTERNATIONAL, INC.
(Formerly Cimbix Corporation)
(A Development Stage Company)
CONSOLIDATED STATEMENTS OF OPERATIONS
for the years ended March 31, 2009 and 2008 and
for the period August 17, 2000 (Inception) to March 31, 2009
(Stated in US Dollars)
(Audited)
August 17
2000
Year ended (inception)
March 31 to March 31,
2009 2008 2009
Sales 174,540 195,792 488,102
Cost of sales (149,724) (139,871) (376,292)
Gross margin 24,816 55,921 111,810
Other income - - 9,500
------- ------- -------
24,816 55,921 121,310
Expenses
Advances written off 149,542 - 234,542
Amortization 307 19,975 70,743
Bad debt written off 2,800 - 2,800
Consulting fees 119,005 37,436 430,370
Donated services - - 11,250
Foreign exchange (gain)/loss 21,399 (49,118) (42,356)
General and administrative 54,979 81,438 236,435
Incorporation costs - - 2,005
Management fees 180,000 137,360 646,883
Marketing and promotion 30,692 55,211 164,601
Professional fees 54,126 81,482 363,855
Research & Development 105,000 97,143 202,143
Rent 11,341 29,906 49,009
Settlement of accounts payable - - (3,250)
Stock-based compensation - 1,617,300 8,010,050
Travel 9,807 39,270 70,246
Website development costs - - 8,700
------- ------- -------
Total expenses 738,998 2,147,403 10,458,026
Loss from continuing operations (714,182) (2,091,482) (10,336,716)
Loss from discontinued operations - - (114,991)
Net loss for the period (714,182) (2,091,482) (10,451,707)
Basis and diluted los per share (0.01) (0.03)
Weighted average number of
shares outstanding 80,863,905 70,725,144
The accompanying notes are an integral part of the financial statements
51
WATAIRE INTERNATIONAL, INC.
(Formerly Cimbix Corporation)
(A Development Stage Company)
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY (DEFICIENCY)
for the period August 17, 2000 (Inception) to March 31, 2009
(Stated in US Dollars)
(Audited)
Shares Total
Subscrip Additional Stock-
Common -tions Preferred Paid-in Accum. holders'
Shares Amount Received Shares Amount Capital Deficit Equity
Common
shares
issued 200 - - - 10 10
Shares
subscrip
- -tion 150,280 150,280
Net loss
for the
period (216,896) (216,896)
- ---------------------------------------------------------------------
Bal,Sep
30, 2001 200 - 150,280 - - 10 (216,896) (66,608)
Shares
subscrip
- -tion 76,105 76,105
Net loss
for the
year (29,313) (29,313)
- ----------------------------------------------------------------------
Bal,Sep
30, 2002 200 - 226,385 - - 10 (246,209) (19,814)
Shares
subscrip
- -tion 5,000 5,000
Common
shares
issued 80,160 8 (231,385) 232,542 1,165
Adj to
number
of shares
out-
standing
as a
result
of the
acqui-
sition
of Millen
- -nium
Business
Gp. USA
Inc. (80,160) (8) (232,542) 232,560
Cimbix
Corp. 170,240 17 232,543 (232,560)
Fair
value
of
shares
issued
in conn-
ection
with
the
acqui-
sition
of Millen
- -nium
Business
Gp. USA
Inc. 80,360 8 2,501 1 (9)
Net
asset
deficiency
of legal
parent
at date
of reverse
take-over
transaction (20,167) (20,167)
Common
shares
issued 2,772 - 13,810 13,810
Common
shares
issued 1,000 - 7,500 7,500
Donated
services 2,250 2,250
Net loss
for the
year (98,849) (98,849)
- ---------------------------------------------------------------------
Bal,Sep
30, 2003 254,372 25 2,501 1 256,094 (365,225) (109,105)
The accompanying notes are an integral part of the financial statements
52
WATAIRE INTERNATIONAL, INC.
(Formerly Cimbix Corporation)
(A Development Stage Company)
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY (DEFICIENCY)
for the period August 17, 2000 (Inception) to March 31, 2009
(Stated in US Dollars)
(Audited)
Total
Additional stock-
Common Preferred Paid-in Accum. holders'
shares Amount shares Amount Capital Deficit Equity
Bal,sep 254,372 25 2,501 1 256,094 (365,225) (109,105)
30,2003
- -----------------------------------------------------------------
Common
shares
issued 5,000 1 49,999 50,000
Common
shares
issued 600,000 60 29,940 30,000
Net loss
for the
year (227,180) (227,180)
- -----------------------------------------------------------------
Bal,sep
30,2004 859,372 86 2,501 1 336,033 (592,405) (256,285)
Common
shares
issued 160,000 16 484 500
Common
shares
issued 36,000,000 3,600 86,400 90,000
Common
shares
issued 8,960,000 896 94,304 95,200
Common
shares
issued 2,440,000 244 121,756 122,000
Common
shares
issued 250,000 25 11,225 11,250
Disposal
of MBG (140,949) (140,949)
Net loss
for the
year (79,243) (79,243)
- ----------------------------------------------------------------
Bal,Sep
30,2005 48,669,372 4,867 2,501 1 509,253 (671,648) (157,527)
Common
shares
issued 336,000 34 15,086 15,120
Common
shares
issued 10,000,000 1,000 619,000 620,000
Common
shares
issued 440,000 44 109,956 110,000
Common
shares
issued 1,000,000 100 559,900 560,000
Inventory
donated 9,945 9,945
Net loss
for the
year (297,661) (297,661)
- ----------------------------------------------------------------
Bal,Sep
30,2006 60,445,372 6,045 2,501 1 1,823,140 (969,309) 859,877
Common
shares
issued 272,536 27 204,375 204,402
Common
shares
issued 1,834,045 183 880,157 880,340
Common
shares
issued 1,000,000 100 409,900 410,000
Common
shares
issued 4,800,000 480 959,520 960,000
Stock-
based
compen-
sation 8,010,050 8,010,050
Net loss
for the
year (8,430,656) (8,430,656)
- ----------------------------------------------------------------
Bal,Sep
30,2007 68,351,953 6,835 2,501 1 12,287,142 (9,399,965) 2,894,013
Common
shares
issued 2,058,823 205 349,795 350,000
Common
shares
issued 588,235 60 99,940 100,000
Common
shares
issued 4,400,000 440 219,560 220,000
Cancel-
lation of
shares (1,000,000) (100) (409,900) (410,000)
Preferred
shares
issued 25,000 2 4,998 5,000
Net loss
for the
period (337,560) (337,560)
- ----------------------------------------------------------------
Bal,Mar
31,2008 74,399,011 7,440 27,501 3 12,551,535 (9,737,525) 2,821,453
Common
shares
issued 1,600,000 160 79,840 81,000
Common
shares
issued 1,111,112 111 99,889 100,000
Common
shares
issued 1,000,000 100 59,900 60,000
Common
shares
issued 1,000,000 100 49,900 50,000
Common
shares
issued 8,000,000 800 39,200 40,000
Net loss
for the
year (714,182) (714,182)
- ----------------------------------------------------------------
Bal,Mar
31,2009 87,110,123 8,711 27,501 3 12,880,264(10,451,707) 2,437,271
53
WATAIRE INTERNATIONAL, INC.
(Formerly Cimbix Corporation)
(A Development Stage Company)
CONSOLIDATED STATEMENTS OF CASH FLOWS
for the year ended March 31, 2009 and 2008 and
for the period August 17, 2000 (Inception) to March 31, 2009
(Stated in US Dollars)
(Audited)
August 17
2000
Year ended (inception)
March 31 to March 31
2009 2008 2009
- ----------------------------------------------------------------
Operating Activities
Loss from continuing operations (714,182) (2,091,322) (10,451,707)
Adjustments to reconcile loss to
cash used in operating activities:
Amortization 307 19,975 70,743
Donated services - - 11,250
Website development costs w/o - - 8,700
shares issued for service - - 122,070
Advances w/o 149,542 - 199,542
Change in non-cash woring capital item:
Accounts receivable 2,800 4,100 -
Prepaid expenses and retainers (7,486) (6,418) (9,766)
Deferred reveneu 34,527 154,540 189,067
Advance on marketing agreements - - (250,000)
Stock-based compensation - 1,617,300 8,010,050
Advance on inventory 25,093 123,734 (149,541)
Inventory 57,872 (305,403) (246,361)
Accounts payable 32,546 140,062 353,854
- -----------------------------------------------------------------
(418,981) (343,432) (2,142,099)
- -----------------------------------------------------------------
Investing Activities
License payment advanced - - (50,000)
Capital assets - (922) (922)
Advance to subsidiaries - - (115,091)
Acquisition of intangibles-net (10,688) (1,023,886) (1,467,624)
Website development costs - - (8,700)
Proceeds from disposition of
subsidiaries - - 100
- -----------------------------------------------------------------
(10,688) (1,024,808) (1,642,237)
- -----------------------------------------------------------------
Financing Activities
Bank indebtedness (5,885) 5,885 -
Promissory notes payable - (36,000) -
Shareholder loan & interest 106,589 - 106,589
Due to related parties (1,000) (159,495) 1,280
Shares issued for cash 180,000 985,341 1,792,102
Shares issued fo intangibles - 79,658 960,000
Shares issued for Debt 150,000 409,313 559,313
Shares issued for Promissory notes - 69,247 365,087
- -----------------------------------------------------------------
429,704 1,353,949 3,784,371
- -----------------------------------------------------------------
Increase/(Decrease) in Cash 35 (14,291) 35
Cash, beginning - 14,291 -
Cash, ending 35 - 35
The accompanying notes are an integral part of the financial statements
54
WATAIRE INTERNATIONAL, INC.
(Formerly Cimbix Corporation)
(A Development Stage Company)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
March 31, 2009
(Stated in US Dollars)
(Audited)
Note 1. General Organization And Business
The Company was incorporated on August 17, 2000 in the State of
Washington, USAand the Company's common shares are publicly traded
on the OTC Bulletin Board. On September 26, 2006, the Company
approved a name change from Cimbix Corporation to Wataire
International, Inc.
The Company markets and distributes atmospheric water generator
machines. It also owns all of the intellectual property relating
to a water treatment process and devices for water-from-air
machines. Management plans to further evaluate, develop and manage
the commercialization, sub-license and/or commercial sale of these
products.
These consolidated financial statements have been prepared in
accordance with generally accepted accounting principles applicable
to a going concern, which assumes that the Company will be able to
meet its obligations and continue its operations for its operations
for its next fiscal year. Realization values may be substantially
different from carrying values as shown and these financial statements
do not give effect to adjustments that would be necessary to the
carrying values and classification of assets and liabilities should
the Company be unable to continue as a going concern. At March 31, 2009,
the Company had not yet achieved profitable operations, has accumulated
losses of $10,451,707 since its inception and expects to incur further
losses in the development of its business, all of which cast substantial
doubt about the Company's ability to continue as a going concern. The
Company's ability to continue as a going concern is dependent upon
future profitable operations and/or the necessary financing to meet
its obligations and repay its liabilities arising from normal business
operations when they come due. Management has obtained additional funds
by related party advances, however there is no assurance that this
additional funding is adequate and further funding may be necessary.
Note 2. Significant Accounting Policies
These consolidated financial statements have been prepared in
accordance with generally accepted accounting principles in the
United States of America and are stated in US dollars. Because a
precise determination of many assets and liabilities is dependent
upon future events, the preparation of financial statements for a
period necessarily involves the use of estimates which have been
made using careful judgment. Actual results may differ from these
estimates.
The financial statements have, in management's opinion,
been properly prepared within the framework of the significant
accounting policies summarized below :
55
WATAIRE INTERNATIONAL, INC.
(Formerly Cimbix Corporation)
(A Development Stage Company)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
March 31, 2009
(Stated in US Dollars)
(Audited)
(a) Development Stage Company
The Company is a development stage company as defined in the
Statements of Financial Accounting Standards ("SFAS") No. 7. The
Company is devoting substantially all of its present efforts to
establish a new business and none of its planned principal
operations have commenced. All losses accumulated since inception
has been considered as part of the Company's development stage
activities.
(b) Consolidation
These consolidated financial statements include the accounts of the
Company and its wholly owned subsidiaries, Petsmo Inc. and Aqua
Technologies, Inc. All inter-company transactions and balances have
been eliminated.
(c) Financial Instruments
The carrying values of cash, accounts receivable, accounts payable,
promissory notes payable and due to related parties approximate fair
value because of the short-term nature of these instruments. Management
is of the opinion that the Company is not exposed to significant interest,
currency or credit risks arising from these financial instruments.
(d) Inventory
Inventory, which consists of finished goods, is valued at the lower of
cost net realizable value using the first in first out (FIFO) method.
(e) Website Development Costs
Under the provisions of Statement of Position No. 98-1 "Accounting for
the Costs of Computer Software Development or Obtained for Internal Use,"
the Company previously capitalized costs of design, configuration, coding,
installation and testing of the Company's website up to its initial
implementation. Costs are amortized to expense over an estimated useful
life of three years using the straight-line method. Ongoing website post-
implementation cost of operations, including training and application,
are expensed as incurred. The Company evaluates the recoverability of
website development costs in accordance with Financial Accounting
Standards No. 121 " Accounting of the Impairment of Long Lived Assets."
(f) Intangible Assets and Amortization
The Company has adopted SFAS No. 142 "Goodwill and Other Intangible
Assets", which requires that goodwill not be amortized, but that goodwill
and other intangible assets be tested annually for impairment. Intangible
assets with a finite life will be amortized over the estimated useful life
of the asset. The Company's operational policy for the assessment and
measurement of any impairment in the intangible assets, which primarily
relates to contract-based intangibles such as license agreements and
extensions, is to evaluate annually, the recoverability and remaining
life of its intangible assets to determine the fair value of these assets.
56
WATAIRE INTERNATIONAL, INC.
(Formerly Cimbix Corporation)
(A Development Stage Company)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
March 31, 2009
(Stated in US Dollars)
(Audited)
(g) Revenue Recognition
The Company receives revenues from the sale of water generator machines.
The Company recognizes revenues when persuasive evidence of an arrangement
exists, the product is delivered and collection is reasonably assured.
A one-year warranty is provided by the Company on all its products.
(h) Income Taxes
The Company follows SFAS No. 109, "Accounting for Income Taxes" which
requires the use of the asset and liability method of accounting for
income taxes. Under the asset and liability method of SFAS 109, deferred
tax assets and liabilities are recognized for future tax consequences
attributable to temporary differences between the financial statements
carrying amounts of existing assets and liabilities and loss carry forwards
and their respective tax bases. Deferred tax assets and liabilities are
measured using enacted tax rates expected to apply to taxable income in
the year in which those temporary differences are expected to be
recovered or settled.
(i) Basic and Diluted Loss Per Share
The Company computes net loss per share in accordance with SFAS No. 128.
"Earnings Per Share". SFAS 128 requires presentation of both basic and
diluted earnings per share("ESP") on the face of the income statement.
Basic loss per share is computed by dividing the net loss available to
common shareholders by the weighted average number of common shares
outstanding during the year. Diluted EPS gives effect to all dilative
potential common shares outstanding during the year including stock
options, using the treasury stock method, and convertible preferred stock,
using the if-converted method. In computing diluted EPS, the average stock
price for the year is used in determining the number of shares assumed to
be purchased from the exercise of stock options or warrants. Diluted EPS
excludes all dilative potential common shares if their effect is
anti dilative.
(j) Stock-based Compensation
In December 2004, the Financial Accounting Standards Board issued FAS 123R
"Share-Based Payment", a revision to FAS 123. FAS 123R replaces existing
requirements under FAS 123 and APB 25, and requires public companies to
recognize the cost of employee services received in exchange for equity
instruments, based on the grant-date fair value of those instruments, with
limited exceptions. FAS 123R also affects the pattern in which compensation
cost is recognized, the accounting for employee share purchase plans, and
the accounting for income tax effects of share-based payment transactions.
For small business filers, FAS 123R is effective for interim or annual
periods beginning after December 15, 2005. The Company adopted FAS 123R
on October 1, 2006.
57
WATAIRE INTERNATIONAL, INC.
(Formerly Cimbix Corporation)
(A Development Stage Company)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
March 31, 2009
(Stated in US Dollars)
(Audited)
(k) Foreign Currency Translation
The Company translates foreign currency transactions and balances to its
reporting currency, United States dollars, in accordance with SFAS No. 52,
"Foreign Currency Translation". Monetary assets and liabilities are
translated into the functional currency at the exchange rate in effect
at the end of the year. Non-monetary assets and liabilities are translated
at the exchange rate prevailing when the assets were acquired or the
liabilities assumed. Revenues and expenses are translated at the rate
approximating the rate of exchange on the transaction date. All exchange
gains and losses are included in the determinination of net income (loss)
for the year.
(l) Reclassifications
Certain items in the prior year financial statements have been reclassified
for comparative purposes to conform to the presentation in the current
period's presentation. These reclassifications have no effect to the
previously reported income (loss).
(m) Change in Reporting Year
The Company adopted March 31 as its fiscal year end from September 30
in 2008.
(n) Recently Issued Accounting Pronouncements
In May 2008, the Financial Accounting Standards Board (FASB) issued
Statement of Financial Accounting Standards (SFAS) No. 162, The
Hierarchy of Generally Accepted Accounting Principles. SFAS No. 162
identifies the sources of accounting principles and the framework for
selecting the principles that are presented in conformity with generally
accepted accounting principles in the United States. SFAS No. 162 is
effective 60 days following the Securities and Exchange Commission
approval of the Public Company Accounting Oversight Board amendments
to AU Section 411, The Meaning of Present Fairly in Conformity With
Generally Accepted Accounting Principles. The Company does not believe
SFAS No. 162 will have a material impact on its financial statements.
In March 2008, the FASB issued SFAS No. 161, Disclosure about Derivative
Instruments and Hedging Activities, an amendment of FASB Statement No. 133.
SFAS No. 161 changes the disclosure requirements for derivative instruments
and hedging activities. Entities are required to provide enhanced
disclosures about (a) how and why an entity uses derivative instruments,
(b) how derivative instruments and related hedged items are accounted for
under Statement No. 133 and its related interpretations and (c) how
derivative instruments and related hedged items affect an entity financial
position, financial performance and cash flows. SFAS No. 161 is effective
for financial statements issued for fiscal years and interim periods
beginning after November 15, 2008, with early application encouraged.
The Company does not believe SFAS No. 161 will have a material impact on
its financial statements.
58
In December 2007, the FASB issued SFAS No. 141(R), Business Combinations.
SFAS No. 141(R) retains the fundamental requirements in SFAS No. 141,
Business Combinations, that the acquisition method of accounting be
used for all business combinations and for an acquirer to be identified
for each business combination. SFAS No. 141(R) requires an acquirer to
recognize the assets acquired, the liabilities assumed, and any
noncontrolling interest in the acquiree at the acquisition date,
measured at their fair values as of that date, with limited exceptions
specified in SFAS No. 141(R). In addition, SFAS No. 141(R) requires
acquisition costs and restructuring costs that the acquirer expected but
was not obligated to incur to be recognized separately from the business
combination, therefore, expensed instead of part of the purchase price
allocation. SFAS No. 141(R) will be applied prospectively to business
combinations for which the acquisition date is on or after the beginning
of the first annual reporting period beginning on or after December 15,
2008. Early adoption is prohibited. The Company expects to adopt SFAS
No. 141(R) to any business combinations with an acquisition date on or
after January 1, 2009. The Company does not believe SFAS No. 141(R) will
have a material impact on its financial statements.
In December 2007, the FASB issued SFAS No. 160, Noncontrolling Interests
in Consolidated Financial Statements, an amendment to ARB No. 51. SFAS
No. 160 changes the accounting and reporting for minority interests,
which will be recharacterized as noncontrolling interests and classified
as a component of equity. SFAS No. 160 is effective for fiscal years, and
interim periods within those fiscal years, beginning on or after December
15, 2008. Early adoption is prohibited. The Company does not believe SFAS
No. 160 will have a material impact on its financial statements.
In February 2007, the FASB issued SFAS No. 159, The Fair Value Option for
Financial Assets and Financial Liabilities. SFAS No. 159 permits an
entity to irrevocably elect fair value on a contract-by-contract basis
as the initial and subsequent measurement attribute for many financial
assets and liabilities and certain other items including insurance
contracts. Entities electing the fair value option would be required to
recognize changes in fair value in earnings and to expense upfront cost
and fees associated with the item for which the fair value option is
elected. SFAS No. 159 is effective for fiscal years beginning after
November 15, 2007. Early adoption is permitted as of the beginning of
a fiscal year that begins on or before November 15, 2007, provided the
entity also elects to apply the provisions of SFAS No. 157, Fair Value
Measurements. The Company does not expect the adoption of SFAS No. 159
to have a material impact on its financial condition or results of
operations.
Note 3. Related Party Transactions
During the year ended March 31, 2009, directors of the company
charged the following expenses to the Company:
Management fees $180,000
Loan interest $5,000
59
Note 4. Common Stock
For the Year Ended March 31, 2008
Share Subscriptions
The Company entered into a private placement agreement to issue
588,235 common stock at $0.17 per share for proceeds of $100,000 on
December 5, 2007 to an accredited investor.
Share For Debt Settlements
On October 5, 2007, the Company approved the issuance of 2,058,823
units at $0.17 per unit to settle amounts due to a director of the
Company and a shareholder of the Company totaling $350,000. Each unit
contained one common share and one share purchase warrant exercisable
at $0.17 per share on or before September 30, 2010.
On March 19, 2008 the Company approved the issuance of 4,400,000 units
at $0.05 per unit to settle amounts due to a director of the Company
totaling $220,000. Each unit contained one common share and one half
share purchase warrant exercisable at $0.05 per share on or before
March 18, 2011.
On March 19, 2008 the Company approved the issuance of 25,000
preferred shares at $0.20 per share to settle amounts due to a
director of the Company totaling $5,000.
For the Year Ended March 31, 2009
Share Subscriptions
On April 8, 2008, the Company entered into an agreement to issued
1,600,000 units at $0.05 per unit with Darfield Financial Corp. for
an aggregate amount of $80,000. Each unit consists of one common share
and one half warrant exercisable at $0.05 per share on or before
April 7, 2011.
On May 30, 2008 the Company entered into a private placement agreement
to issued 1,111,112 common stock at $0.09 per share for proceeds of
$100,000 to two accredited investors and to issued 555,556 common stock
to each investor.
Share For Debt Settlements
On June 17, 2008, the Company approved the issuance of 1,000,000 units
at $0.06 per share to settle amounts due to a director of the Company
totaling $60,000. Each unit contain one common share and one share
warrant exercisable at $0.06 per share on or before June 16, 2011.
On July 8, 2008, the Company approved the issuance of 1,000,000 units
at $0.05 per share to settle amounts due to a director of the Company
totaling $50,000. Each unit contain one common share and one share
warrant exercisable at $0.05 per share on or before July 7, 2011.
On January 9, 2009, the Company approved the issuance of 8,000,000
common shares at $0.005 per share to settle amounts due to a director
of the Company totaling $40,000.
On February 26, 2009, the Company have signed agreement with existing
warrant options holders to cancel all existing warrant options
available to the Company.
60
WATAIRE INTERNATIONAL, INC.
(Formerly Cimbix Corporation)
(A Development Stage Company)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
March 31, 2009
(Stated in US Dollars)
(Audited)
Note 5. Warrants
During February 2009, the Company received signed consent agreements
with all existing warrant holders that cancel the entire balance of
7,058,823 outstanding warrants.
Note 6. Stock Options and Stock Based Compensation
During 2006, the Company authorized a share option plan under which
employees were granted options to purchase shares of authorized but
unissued, common shares. During the years ended March 31, 2009 and
2008, all options issued in this plan were either forfeited as options
went unexercised due to employee terminations or cancelled via signed
consent agreements with all remaining option holders.
SFAS No. 123R also required the Company to change its classification,
in the consolidated statement of cash flows, of any tax benefits
realized upon the exercise of stock options in excess of that which is
associated with the expense recognized for financial reporting purposes.
No significant tax benefits were recognized for the periods ended
March 31, 2009 or 2008.
The Black-Scholes valuation model was utilized in estimating the
calculated value, with the following weighted average assumptions:
2009 2008
Expected Dividend Yield 0.00% 0.00%
Risk Free Interest Rate 3.00% 4.58%
Expected Volatility 150% 153%
Expected Option Life (in years average) 0.00 5.53
A summary of the status of the Company's share option plan for the
periods ended as of March 31, 2009 and 2008, is as follows:
Weighted Average
Number of Exercise
Options Price
Outstanding March 31, 2007 - -
Granted 12,270,000 $ 0.71
Forfeited/Cancelled (7,075,000) 0.75
Exercised - -
-----------------------------
Outstanding March 31, 2008 5,195,000 $ 0.67
Granted - -
Forfeited/Cancelled (5,195,000) -
Exercised - -
-----------------------------
Outstanding March 31, 2009 - -
There was no compensation charge associated with stock options included
in the statement of operations for the years ended March 31, 2009 and 2008.
61
WATAIRE INTERNATIONAL, INC.
(Formerly Cimbix Corporation)
(A Development Stage Company)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
March 31, 2009
(Stated in US Dollars)
(Audited)
Note 7. Contingencies
Agreement
On December 11, 2006 and December 12, 2006, the Company entered into
two marketing agreements in which the Company would pay $1,000,000
and issue 1,000,000 common shares. During the year ended March 31,
2008, the Company paid $250,000 in respect to the cash portion of
the agreements and had issued 1,000,000 common shares of the Company.
The 1,000,000 shares issued were not released to the marketing
company as it has not commenced its branding and marketing efforts
and the contract has expired. The 1,000,000 shares have been returned
back to treasury. The $250,000 is classified as an Advance on
Marketing Agreements on the balance sheet. The Company is currently
re-negotiating new terms on this agreement
Legal
On October 11, 2006, the Company was named as a co-defendant in a
lawsuit whereby the plaintiffs were claiming general damages, with
respect to funds totaling approximately $94,000 which were allegedly
misappropriated, interest, costs and such further and other relief as
the court may deem just. Management of the Company believed the claim
was without merit and was unlikely to succeed. The Company filed a
statement of defense denying the allegations and a counterclaim for
defamation. The court ordered a severance of the action, and required
the plaintiffs to prove their damages, before proceeding to trial
on issues of liability. The lawsuit by the plaintiffs was dismissed on
October 6, 2008.
Aquaduct International. LLC v. Wataire International, Inc. et. ai,
Los Angeles County Superior Court Case No. LC083752. This litigation
was commenced on December 11, 2008 by the Company's former distributor
over the alleged purchase of certain atmospheric water machines. On
July 20, 2009, the Company answered the lawsuit and filed a
cross-complaint against the plaintiff. Both parties are interested in
resolving this dispute informally rather than proceeding further into
litigation. To that end, mediation has been scheduled for August 20,
2009 in Los Angeles County with a private mediator. We cannot provide
a reasonable evaluation of the likelihood of an unfavorable outcome at
this time since no discovery has commenced on the Company's
cross-complaint and only very basic discovery has been performed in
connection with the complaint. No loss provision has been recorded as
of March 31, 2009.
Note 8. Inventory
At March 31, 2009 and 2008, inventories are comprised of finished
water-from-air machines totaling $250,456, and $308,328, respectively.
62
WATAIRE INTERNATIONAL, INC.
(Formerly Cimbix Corporation)
(A Development Stage Company)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
March 31, 2009
(Stated in US Dollars)
(Audited)
Note 9. Intangibles
On April 25, 2007, the Company entered into an agreement to acquire
all of the intellectual property ("IP") relating to a water treatment
process and related devices for water-from-air machines from Wataire
Industries Inc., Canadian Dew Technologies Inc., Terrence Nylander and
Roland Wahlgren. Mr. Nylander was at the time of signing the agreement
and currently, the President of the Company. Consideration for the
purchase of the IP was $476,190 (CAD $500,000), which was paid on March
31, 2007, the issuance of 4,800,000 shares of common stock of the Company,
the agreement by the Company to pay a royalty equal to 5% of the gross
profits from the sales of all apparatus or products relating to the IP
for a period of 30 years from April 25, 2007 and a royalty equal to 5%
of gross licensing revenues on the IP. This consideration is in addition
to the 11,000,000 shares of common stock previously issued for the
license rights as disclosed in the Company's annual September 30, 2006
audited consolidated financial statements. The IP acquisition was
completed in July 2007.
The IP acquired by the Company includes all copyrights, patent rights,
trade secret rights, trade names, trademark rights, process information,
technical information, contract rights and obligations, designs, drawings,
inventions and all other intellectual and industrial property rights of
any sort related to or associated with the invention.
The intangibles consist of patents and trademark applications of
$31,434 and the costof the acquisition of IP Technology of $2,546,062
as described above.
Patents, Trademark applications $31,435
4,800,000 shares issued to Wataire Ecosafe and
Canadian Dew Technologies $960,000
Cash consideration 476,190
Remaining license rights including 11,000,000 shares
issued to Wataire Ecosafe 1,109,872
-----------
$ 2,546,062
Note 10. Deferred Revenue
As of March 31, 2009 and 2008, deferred revenue totaled $189,067
and $154,540, respectively, consisting of cash payments made by
customers in advance of product shipment. Revenue will be
recognized when finished goods are shipped to the customer.
Note 11. Shareholder Loan
During the period ended March 31, 2008, the Company's CEO loaned
the Company $100,000. This loan is payable on demand with interest
accruing at 5% per annum. Accrued interest at March 31, 2009 and 2008,
totaled $6,589 and $1,589, respectively, and is included in the loan
balance.
63
WATAIRE INTERNATIONAL, INC.
(Formerly Cimbix Corporation)
(A Development Stage Company)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
March 31, 2009
(Stated in US Dollars)
(Audited)
Note 12. Subsequent Events
Subsequent to March 31, 2009:
The Company approved the issuance of 4,000,000 common shares at
$0.005 per share totaling $20,000 to an individual for
indebtedness to the Company.
Effective June 12, 2009, the Company's Chief Financial Officer and
Treasurer resigned and a new Director holding the same title
was appointed.
On July 16, 2009, the Company approved consulting agreements with
3 individuals. The Company intends to pay for these services by
issuing common shares to the consultants in lieu of consulting fees
and registering these shares by filing an S-8 registration statement
under the Securities Act of 1933. The total number of shares to
be issued totals 6,900,000 common shares.
Note 13. Income Taxes
The Company has losses for tax purposes totaling $10,451,707 which
may be applied against future taxable income. These losses begin to
expire in 2027. The potential taxbenefit arising from these losses
has not been recorded in the consolidated financial statements. The
Company evaluates its valuation allowance requirements on an annual
basis based on projected future operations. When circumstances change
and this causes a change in management's judgement about the
realizability of deferred tax assets, the impact of the change on
the valuation allowance is reflected in current operations.
64
Exhibit 31.01
CERTIFICATION OF CHIEF EXECUTIVE OFFICER PURSUANT TO
RULE 13A-14(A) OF THE SECURITIES EXCHANGE ACT AND
SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002
I, Robert Rosner, Director and Chief Executive Officer of Wataire
International, Inc. certify that :
1. I have reviewed this Annual Report on Form 10-K of Wataire International,
Inc. ;
2. Based on my knowledge, this report does not contain any untrue statement
of a material fact or omit to state a material fact necessary to make the
statements made, in light of the circumstances under which such statements
were made, not misleading with respect to the period covered by this report;
3. Based on my knowledge, the financial statements, and other financial
information included in this report, fairly present in all material respects
the financial condition, results of operations and cash flows of the
registrant as of, and for, the periods presented in this report;
4. The registrant's other certifying officer and I are responsible for
establishing and maintaining disclosure controls and procedures (as defined
in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over
financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f))
for the registrant and have :
a. Designed such disclosure controls and procedures, or caused such
disclosure controls and procedures to be designed under our supervision, to
ensure that material information relating to the registrant, including its
consolidated subsidiaries, is made known to us by others within those entities,
particularly during the period in which this report is being prepared;
b. Designed such internal control over financial reporting, or caused such
internal control over financial reporting to be designed under our
supervision, to provide reasonable assurance regarding the reliability of
financial reporting and the preparation of financial statements for external
purpose in accordance with general accepted accounting principles;
c. Evaluated the effectiveness of the registrant's disclosure controls and
procedures and presented in this report our conclusions about the
effectiveness of the disclosure controls and procedures, as of the end of
the period covered by this report based on such evaluation; and
d. Disclosed in this report any change in the registrant's internal control
over financial reporting that occurred during the registrant's most recent
fiscal quarter (the registrant's fourth fiscal quarter in the case of an
annual report) that has materially affected, or is reasonably likely to
materially affect, the registrant's internal control over financial
reporting.
65
5. The registrant's other certifying officer and I have disclosed,
based on our most recent evaluation of internal control over financial
reporting, to the registrant's auditors and the audit committee of the
registrant's board of directors (or persons performing the equivalent
functions ):
a. All significant deficiencies and material weaknesses in the design or
operation of internal control over financial reporting which are reasonably
likely to adversely affect the registrant's ability to record, process,
summarized and report financial information; and
b. Any fraud, whether or not material, that involves management or other
employees who have a significant role in the registrant's internal control
over financial reporting.
Dated : July 23, 2009 Signature : /s/ Robert Rosner
--------------------------
Robert Rosner
Director and Chief Executive Officer
66
Exhibit 31.02
CERTIFICATION OF CHIEF FINANCIAL OFFICER PURSUANT TO
RULE 13A-14(A) OF THE SECURITIES EXCHANGE ACT AND
SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002
I, Thomas M. Braid, Director and Chief Financial Officer of Wataire
International, Inc. certify that :
1. I have reviewed this Annual Report on Form 10-K of Wataire
International, Inc. ;
2. Based on my knowledge, this report does not contain any untrue statement
of a material fact or omit to state a material fact necessary to make the
statements made, in light of the circumstances under which such statements
were made, not misleading with respect to the period covered by this report;
3. Based on my knowledge, the financial statements, and other financial
information included in this report, fairly present in all material respects
the financial condition, results of operations and cash flows of the
registrant as of, and for, the periods presented in this report;
4. The registrant's other certifying officer and I are responsible for
establishing and maintaining disclosure controls and procedures (as defined
in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over
financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f))
for the registrant and have :
a. Designed such disclosure controls and procedures, or caused such
disclosure controls and procedures to be designed under our supervision, to
ensure that material information relating to the registrant, including its
consolidated subsidiaries, is made known to us by others within those entities,
particularly during the period in which this report is being prepared;
b. Designed such internal control over financial reporting, or caused such
internal control over financial reporting to be designed under our supervision,
to provide reasonable assurance regarding the reliability of financial
reporting and the preparation of financial statements for external purpose in
accordance with general accepted accounting principles;
c. Evaluated the effectiveness of the registrant's disclosure controls and
procedures and presented in this report our conclusions about the effectiveness
of thedisclosure controls and procedures, as of the end of the period covered
by this report based on such evaluation; and
d. Disclosed in this report any change in the registrant's internal control
over financial reporting that occurred during the registrant's most recent
fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual
report) that has materially affected, or is reasonably likely to materially
affect, the registrant's internal control over financial reporting.
67
5. The registrant's other certifying officer and I have disclosed, based
on our most recent evaluation of internal control over financial reporting,
to the registrant's auditors and the audit committee of the registrant's board
of directors (or persons performing the equivalent functions ):
a. All significant deficiencies and material weaknesses in the design or
operation of internal control over financial reporting which are reasonably
likely to adversely affect the registrant's ability to record, process,
summarized and report financial information; and
b. Any fraud, whether or not material, that involves management or other
employees who have a significant role in the registrant's internal control
over financial reporting.
Dated : July 23, 2009 Signature : /s/ Thomas M. Braid
-------------------------
Thomas M. Braid
ector and Chief Financial Officer
68
EXHIBIT 32 .01
CERTIFICATION PURSUANT TO 18 U.S.C. SECTION 1350 AS ADOPTED
PURSUANT TO SECTION
906 OF THE SARBANES-OXLEY ACT OF 2002
In connection with the Annual Report of Wataire International, Inc.
(the "Company") on Form 10-K for the year ended March 31, 2009 as
filed with the Securities and Exchange Commission on the date hereof
(the "Report"),
I, Robert Rosner, Chief Executive Officer of the Company, certify,
pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906
of the Sarbanes-Oxley Act of 2002, that to the best of my knowledge:
(1) The Report fully complies with the requirements of section 13(a)
or 15(d) of the Securities Exchange Act of 1934; and
(2) The information contained in the Report fairly presents,
in all material respects, the financial condition and result of
operations of the Company.
/s/ Robert Rosner
----------------------
Robert Rosner
Chief Executive Officer
July 23, 2009
69
EXHIBIT 32 .02
CERTIFICATION PURSUANT TO 18 U.S.C. SECTION 1350 AS ADOPTED
PURSUANT TO SECTION
906 OF THE SARBANES-OXLEY ACT OF 2002
In connection with the Annual Report of Wataire International, Inc.
(the "Company") on Form 10-K for the year ended March 31, 2009 as
filed with the Securities and Exchange Commission on the date hereof
(the "Report"),
I, Thomas M. Braid, Chief Financial Officer of the Company, certify,
pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906
of the Sarbanes-Oxley Act of 2002, that to the best of my knowledge:
(1) The Report fully complies with the requirements of section 13(a)
or 15(d) of the Securities Exchange Act of 1934; and
(2) The information contained in the Report fairly presents, in
all material respects, the financial condition and result of
operations of the Company.
/s/ Thomas M. Braid
----------------------
Thomas M. Braid
Chief Financial Officer
July 22, 2009
70