UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

 

 

AMENDMENT NO. 1

to

FORM 10-K

 

 

 

x	ANNUAL REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the fiscal year ended March 31, 2010

OR

 

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

For the transition period from              to             

Commission File Number: 000 - 49955

 

 

WATAIR INC.

(Exact name of registrant as specified in its charter)

 

 

 

Washington		91-2060082
(State or other jurisdiction of incorporation or organization)		(I.R.S. Empl. Ident. No.)

# 134,9663 Santa Monica Blvd., Beverly Hills, CA 90210

(Address of principal executive offices) (Zip Code)

877-602-8985

(Issuer’s telephone number)

 

 

Securities registered under Section 12(b) of the Exchange Act: None

Securities registered under Section 12(g) of the Exchange Act: Common Stock, $0.0001 par value

Check whether the issuer (1) filed all reports required to be filed by Section 13 or 15 (d) of the Exchange Act during the past 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.    YES  x    NO  ¨

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (232.405 of this chapter) during the

preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).    Yes  ¨    No  ¨

Check if there is no disclosure of delinquent filers in response to Item 405 of Regulation S-K contained in this form, and no disclosure will be contained, to the best of registrant’s knowledge, in definitive proxy or information statement incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K    x

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, or a non-accelerated filer, or a small

reporting company. See definitions of “large accelerated filer,” “accelerated filer,” and “small reporting company” in Rule 12B-2 of the Exchange Act. (Check one):

 

Large accelerated filer		¨		Accelerated filer		¨
Non-accelerated filer		¨		Smaller reporting company		x

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).    ¨  Yes    x  No

The aggregate market value of the voting and non-voting common equity held by non-affiliates as of the last business day of the registrant’s most recently completed second fiscal quarter was $8,261,662.

At July 13, 2010 the Registrant had outstanding 98,710,123 shares of Common Stock, $0.0001 par value per share.

 

 

 

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EXPLANATORY NOTE

WE ARE FILING THIS AMENDMENT NO. 1 TO OUR FORM 10-K FOR THE YEAR ENDED MARCH 31, 2010 (THE “2010 FORM 10-K”) TO AMEND THE REPORT OF THE COMPANY’S INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM UNDER ITEM 8—“FINANCIAL STATEMENTS”. WE HAVE INCLUDED IN THIS AMENDMENT ONLY THE COMPLETE FINANCIAL STATEMENTS AS FILED IN THE 2010 FORM 10-K ON JULY 14, 2010, TOGETHER WITH THE AMENDED AUDIT REPORT.

 

Item 8.

Financial Statements.

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THE BOARD OF WATAIRE INTERNATIONAL, INC.

We have audited the accompanying consolidated balance sheets of Wataire International, Inc. (a Developmental Stage Company) as of March 31, 2010 and 2009, and the related statements of operations, stockholders equity and cash flows for the periods then ended and for the period from August 17, 2000 (inception) through March 31, 2010. These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on these financial statements based on our audit.

We conducted our audit in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform our audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. Our audit included consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion. An audit includes examining on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for our opinion.

In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of Wataire International, Inc. (a Developmental Stage Company) as of March 31, 2010 and 2009, and the results of its’ operations and its’ stockholders equity and cash flows for the periods then ended and for the period from August 17, 2000 (inception) through March 31, 2010 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.

 

/s/ Gruber & Company, LLC

Saint Louis, Missouri

July 14, 2010

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WATAIRE INTERNATIONAL, INC.

(Formerly Cimbix Corporation)

(A Development Stage Company)

BALANCE SHEETS

(Stated in US Dollars)

 

		March 31, 2010				March 31, 2009
Assets
Current Assets
Cash		$	57			$	35
Accounts receivable			9,000				—
Prepaid expenses & retainer			456				9,766
Sales deposit			10,000				—
Advance on marketing agreements			250,000				250,000
Inventory			249,506				250,456
Total Current Assets			519,019				510,257
Capital assets, net			1				308
Patents, Trademarks			31,434				31,434
Acquisitions of intangibles			2,546,062				2,546,062
Total Assets		$	3,096,516			$	3,088,061
Liabilities
Current Liabilities
Accounts payable		$	472,896			$	353,854
Provision and accrued liabilities			9,255				—
Shareholder loan and interest			—				106,589
Due to related parties			84,140				1,280
Deferred revenue			154,924				189,067
Total Current Liabilities			721,215				650,790
Long Term Liabilities
Derivative liability			197,158				—
5% Converible Debentures			90,888
Convertible debenture, net			33,403				—
Total Liabilities			1,042,664				650,790
Stockholders’ Equity
Preferred shares, $0.0001 par value, redeeemable at $0.005
Authorized 20,000,000 shares Issued and outstanding, 27,501 (March 31, 2009: 27,501)			3				3
Common shares, $0.0001 par value:
Authorized 100,000,000 shares Issued and outstanding, 98,710,123 (March 31, 2009: 87,110,123)			9,871				8,711
Additional paid-in capital			13,145,346				12,880,264
Deferred Stock-Based Comp.			(50,667	)			—
Deficit accumulated during the development stage			(11,050,701	)			(10,451,707	)
Total Equity		$	2,053,852			$	2,437,271
Total Liabilities and Stockholders’ Equity		$	3,096,516			$	3,088,061

The accompanying notes are an integral part of the financial statements

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WATAIRE INTERNATIONAL, INC.

(Formerly Cimbix Corporation)

(A Development Stage Company)

STATEMENTS OF OPERATIONS

(Stated in US Dollars)

(Unaudited)

 

		Year ended March 31,								August 17, 2000 (Inception) to March 31,
		2010				2009				2010
Sales		$	15,000			$	174,540			$	503,102
Cost of sales			(18,000	)			(149,724	)			(394,292	)
Gross margin			(3,000	)			24,816				108,810
Other income			—				—				9,500
			(3,000	)			—				118,310
Expenses
Advances written off			—				149,542				234,542
Amortization			306				307				71,049
Amortization of notes discount			28,505				—				28,505
Bad debt written off			—				2,800				2,800
Donated services			—				—				11,250
Foreign exchange (gain)/loss			—				21,399				(42,356	)
General and administrative			98,102				195,132				892,862
Incorporation costs			—				—				2,005
Management fees			180,000				180,000				781,883
Marketing and promotion			54,116				30,692				218,717
Professional fees			144,363				54,126				503,218
Research & Development			—				105,000				202,143
Rent
Settlement of accounts payable			—				—				(3,250	)
Stock-based compensation			94,242				—				8,104,292
Travel
Website development costs
Total Expenses			599,634				738,998				11,007,660
Loss from continuing operations			(602,634	)			(714,182	)			(10,889,350	)
Gain/(Loss) from discontinued operations			3,640				—				(111,351	)
Net loss for the year		$	(598,994	)		$	(714,182	)		$	(11,000,701	)
Basic and diluted loss per share			(0.01	)			(0.01	)
Weighted average number of shares outstanding			95,960,534				80,863,905

The accompanying notes are an integral part of the financial statements

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WATAIRE INTERNATIONAL, INC.

(Formerly Cimbix Corporation)

(A Development Stage Company)

STATEMENTS OF CASH FLOWS

(Stated in US Dollars)

(Unaudited)

 

										August 17,
		For the year ended								2000 (Inception)
		March 31,								to March 31,
		2010				2009				2010
Operating Activities
Loss from operations		$	(598,994	)		$	(714,182	)		$	(11,000,701	)
Adjustments to reconcile loss to cash used in operating activities :
Amortization			306				307				71,049
Amortization of notes discounts			28,505				—				28,505
Donated services			—				—				11,250
Website development costs written off			—				—				8,700
Shares issued for services			152,000				—				454,070
Stock-based compensation			43,576				—				8,053,626
Advances written off			—				149,542				199,542
Change in non-cash working capital items :
Accounts receivable			(9,000	)			2,800				(9,000	)
Prepaid expenses and retainers			(690	)			(7,486	)			(10,456	)
Deferred revenue			(34,143	)			34,527				154,924
Advance on marketing agreements			—				—				(250,000	)
Inventory			950				82,965				(394,952	)
Accounts payable and accrued liabilities			173,297				32,546				477,151
Net cash used in operating activities			(244,193	)			(418,981	)			(2,206,292	)
Investing Activities
License payment advanced			—				—				(50,000	)
Capital assets			—				—				(922	)
Advanced to subsidiaries			—				—				(115,091	)
Acquisition of intangibles-net			—				(10,688	)			(1,467,624	)
Website development costs			—				—				(8,700	)
Proceeds from disposition of subsibiaries			—				—				100
Net cash used in investing activities			—				(10,688	)			(1,642,237	)
Financing Activities
Bank indebtedness			—				(5,885	)			—
Shareholder loan & interest			(106,589	)			106,589				—
Due to related parties			37,860				(1,000	)			39,140
Shares issued for cash			—				330,000				2,937,189
Shares issued for debt			20,000								579,313
Proceeds from Convertible debentures			292,944				—				292,944
Net cash provided by financing activities			244,215				429,704				3,848,586
Increase/(Decrease) in Cash			22				35				57
Cash, beginning			35				—				—
Cash, ending			57				35				57
Supplemental Disclosure of Cash Flow Information
Cash paid during the period for interest			—				—				—
Cash paid during the period for income taxes			—				—				—
Supplemental Disclosure of Non-Cash Items:
Shares issued for Debt			20,000				110,000				579,313
Deferred stock-based compensation			(50,667	)			—				(50,667	)
Shares issued for Promissory Notes			—				—				365,087
Shares issued for intangibles			—				—				960,000
Exchange of shareholder loan for
Convertible Debt			125,000				—				125,000

The accompanying notes are an integral part of the financial statements

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WATAIRE INTERNATIONAL, INC.

(Formerly Cimbix Corporation)

(A Development Stage Company)

STATEMENTS OF STOCKHOLDERS’ EQUITY (DEFICIENCY)

for the period August 17, 2000 (Inception) to March 31, 2010

(Stated in US Dollars)

 

		Common Shares				Amount				Share Subscriptions Received				Preferred Shares				Amount				Additional Paid-in Capital				Accum. Deficit				Total Stockholders’ Equity
Common shares issued			200				—																10								10
Share subscriptions											150,280																				150,280
Net loss for the period																											(216,896	)			(216,896	)
Balance Sept 30, 2001			200				—				150,280				—				—				10				(216,896	)			(66,606	)
Share subscriptions											76,105																				76,105
Net loss for the year																											(29,313	)			(29,313	)
Balance Sept 30, 2002			200				—				226,385				—				—				10				(246,209	)			(19,814	)
Share subscriptions											5,000																				5,000
Common shares issued			80,160				8				(231,385	)											232,542								1,165
Adjustment to number of shares outstanding as a result of the acquisition of Millennium Business Group USA, Inc. Millennium Business Group USA, Inc.			(80,360	)			(8	)															(232,552	)			232,560				—
Cimbix Corporation			170,240				17																232,543				(232,560	)			—
Fair value of shares issued in connection with the acquisition of Millennium Business Group USA, Inc.			80,360				8								2,501				1				(9	)							—
Net asset deficiencyof legal parent at date of reserve 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	)
Balance Sept 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

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		Common Shares				Amount				Preferred Shares				Amount				Additional Paid-in Capital				Accum. Deficit				Total Stockholders’ Equity
Balance Sept 30, 2003			254,372				25				2,501				1				256,094				(365,225	)							(109,105	)
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	)
Balance Sept 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	)
Balance Sept 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	)
Balance Sept 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 compensation																			8,010,050												8,010,050
Net loss for the year																							(8,430,656	)							(8,430,656	)
Balance Sept 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
Cancellation 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	)
Balance March 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												80,000
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	)
Balance March 31, 2009			87,110,123				8,711				27,501				3				12,880,264				(10,451,707	)							2,437,271
Common shares issued			4,000,000				400												19,600												20,000
Common shares issued for service			7,600,000				760												151,240				(152,000	)							—
Amortization of stock-based comp.																							101,333								101,333
Warrants issued for compensation																			94,242												94,242
Net loss for the period																											(548,994	)			(548,994	)
Balance Dec 31, 2009			98,710,123				9,871				27,501				3				13,145,346				(50,667	)			(11,000,701	)			2,103,852

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WATAIRE INTERNATIONAL, INC.

(Formerly Cimbix Corporation)

(A Development Stage Company)

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

March 31, 2010

(Stated in US Dollars)

(Audited)

Note 1. General Organization And Business

The Company was incorporated on August 17, 2000 in the State of Washington, USA and the Company’s common shares are publicly traded on the OTC Bulletin Board. On September 26, 2006, the Company approved a name change from Cimbix Corporation to Wataire International, Inc.

The Company markets and distributes atmospheric water generator machines. It also owns all of the intellectual property relating to a water treatment process and devices for water-from-air machines. Management plans to further evaluate, develop and manage

the commercialization, sub-license and/or commercial sale of these products.

These consolidated financial statements have been prepared in accordance with generally accepted accounting principles applicable to a going concern, which assumes that the Company will be able to meet its obligations and continue its operations for its operations for its next fiscal year. Realization values may be substantially different from carrying values as shown and these financial statements do not give effect to adjustments that would be necessary to the carrying values and classification of assets and liabilities should the Company be unable to continue as a going concern. At March 31, 2010, the Company had not yet achieved profitable operations, has accumulated losses of $11,000,701 since its inception and expects to incur further losses in the development of its business, all of which cast substantial doubt about the Company’s ability to continue as a going concern.

The Company’s ability to continue as a going concern is dependent upon future profitable operations and/or the necessary financing to meet its obligations and repay its liabilities arising from normal business operations when they come due. Management has obtained additional funds by related party advances, however there is no assurance that this additional funding is adequate and further funding may be necessary.

Note 2. Significant Accounting Policies

These consolidated financial statements have been prepared in accordance with generally accepted accounting principles in the United States of America and are stated in US dollars. Because a precise determination of many assets and liabilities is dependent upon future events, the preparation of financial statements for a period necessarily involves the use of estimates which have been made using careful judgment. Actual results may differ from these estimates.

The financial statements have, in management’s opinion, been properly prepared within the framework of the significant accounting policies summarized below :

(a) Development Stage Company

The Company is a development stage company as defined in the Statements of Financial Accounting Standards (“SFAS”) No. 7. The Company is devoting substantially all of its present efforts to establish a new business and none of its planned principal operations have commenced. All losses accumulated since inception has been considered as part of the Company’s development stage activities.

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(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.

(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.

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(i) Basic and Diluted Loss Per Share

The Company computes net loss per share in accordance with SFAS No. 128. “Earnings Per Share”. SFAS 128 requires presentation of both basic and diluted earnings per share (“ESP”) on the face of the income statement. Basic loss per share is computed by dividing the net loss available to common shareholders by the weighted average number of common shares outstanding during the year. Diluted EPS gives effect to all dilative potential common shares outstanding during the year including stock options, using the treasury stock method, and convertible preferred stock, using the if-converted method. In computing diluted EPS, the average stock price for the year is used in determining the number of shares assumed to be purchased from the exercise of stock options or warrants. Diluted EPS excludes all dilative potential common shares if their effect is anti dilative.

(j) Stock-based Compensation

In December 2004, the Financial Accounting Standards Board issued FAS 123R “Share- Based Payment”, a revision to FAS 123. FAS 123R replaces existing requirements under FAS 123 and APB 25, and requires public companies to recognize the cost of employee services received in exchange for equity instruments, based on the grant-date fair value of those instruments, with limited exceptions. FAS 123R also affects the pattern in which compensation cost is recognized, the accounting for employee share purchase plans, and the accounting for income tax effects of share-based payment transactions. For small business filers, FAS 123R is effective for interim or annual periods beginning after December 15, 2005. The Company adopted FAS 123R on October 1, 2006.

(k) Foreign Currency Translation

The Company translates foreign currency transactions and balances to its reporting currency, United States dollars, in accordance with SFAS No. 52, “Foreign Currency Translation”. Monetary assets and liabilities are translated into the functional currency at the exchange rate in effect at the end of the year. Non-monetary assets and liabilities are translated at the exchange rate prevailing when the assets were acquired or the liabilities assumed. Revenues and expenses are translated at the rate approximating the rate of exchange on the transaction date. All exchange gains and losses are included in the determinination of net income (loss) for the year.

(l) Reclassifications

Certain items in the prior year financial statements have been reclassified for comparative purposes to conform to the presentation in the current period’s presentation. These reclassifications have no effect to the previously reported income (loss).

(m) Change in Reporting Year

The Company adopted March 31 as its fiscal year end from September 30 in 2008.

(n) Recently Issued Accounting Pronouncements

In May 2008, the Financial Accounting Standards Board (“FASB”) issued Statement of Financial Accounting Standards (“SFAS”) No. 162, The Hierarchy of Generally Accepted Accounting Principles. SFAS No. 162 identifies the sources of accounting principles and the framework for selecting the principles that are presented in conformity with generally accepted accounting principles in the United States. SFAS No. 162 is effective 60 days following the Securities and Exchange Commission’s approval of the Public Company Accounting Oversight Board amendments to AU Section 411, The Meaning of Present Fairly in Conformity With Generally Accepted Accounting Principles. The Company does not believe SFAS No. 162 will have a material impact on its financial statements.

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In March 2008, the FASB issued SFAS No. 161, Disclosure about Derivative Instruments and Hedging Activities, an amendment of FASB Statement No. 133. SFAS No. 161 changes the disclosure requirements for derivative instruments and hedging activities. Entities are required to provide enhanced disclosures about (a) how and why an entity uses derivative instruments, (b) how derivative instruments and related hedged items are accounted for under Statement No. 133 and its related interpretations and (c) how derivative instruments and related hedged items affect an entity’s financial position, financial performance and cash flows. SFAS No. 161 is effective for financial statements issued for fiscal years and interim periods beginning after November 15, 2008, with early application encouraged. The Company does not believe SFAS No. 161 will have a material impact on its financial statements.

In December 2007, the FASB issued SFAS No. 141(R), Business Combinations. SFAS No. 141(R) retains the fundamental requirements in SFAS No. 141, Business Combinations, that the acquisition method of accounting be used for all business combinations and for an acquirer to be identified for each business combination. SFAS No. 141(R) requires an acquirer to recognize the assets acquired, the liabilities assumed, and any noncontrolling interest in the acquiree at the acquisition date, measured at their fair values as of that date, with limited exceptions specified in SFAS No. 141(R). In addition, SFAS No. 141(R) requires acquisition costs and restructuring costs that the acquirer expected but was not obligated to incur to be recognized separately from the business combination, therefore, expensed instead of part of the purchase price allocation. SFAS No. 141(R) will be applied prospectively to business combinations for which the acquisition date is on or after the beginning of the first annual reporting period beginning on or after December 15, 2008. Early adoption is prohibited. The Company expects to adopt SFAS No. 141(R) to any business combinations with an acquisition date on or after January 1, 2009. The Company does not believe SFAS No. 141(R) will have a material impact on its financial statements

In December 2007, the FASB issued SFAS No. 160, Noncontrolling Interests in Consolidated Financial Statements, an amendment to ARB No. 51. SFAS No. 160 changes the accounting and reporting for minority interests, which will be recharacterized as noncontrolling interests and classified as a component of equity. SFAS No. 160 is effective for fiscal years, and interim periods within those fiscal years, beginning on or after December 15, 2008. Early adoption is prohibited. The Company does not believe SFAS No. 160 will have a material impact on its financial statements.

In February 2007, the FASB issued SFAS No. 159, The Fair Value Option for Financial Assets and Financial Liabilities. SFAS No. 159 permits an entity to irrevocably elect fair value on a contract-by-contract basis as the initial and subsequent measurement attribute for many financial assets and liabilities and certain other items including insurance contracts. Entities electing the fair value option would be required to recognize changes in fair value in earnings and to expense upfront cost and fees associated with the item for which the fair value option is elected. SFAS No. 159 is effective for fiscal years beginning after November 15, 2007. Early adoption is permitted as of the beginning of a fiscal year that begins on or before November 15, 2007, provided the entity also elects to apply the provisions of SFAS No. 157, Fair Value Measurements. The Company does not expect the adoption of SFAS No. 159 to have a material impact on its financial condition or results of operations.

Note 3. Related Party Transactions

During the year ended March 31, 2010, directors of the company charged the following expenses to the Company:

 

Management fees		$	180,000
Loan interest		$	5,000

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Note 4. Common Stock

For the Year Ended March 31, 2009

Share Subscriptions

On April 8, 2008, the Company entered into an agreement to issued 1,600,000 units at $0.05 per unit with Darfield Financial Corp. for an aggregate amount of $80,000. Each unit consists of one common share and one half warrant exercisable at $0.05 per share on or before April 7, 2011.

On May 30, 2008 the Company entered into a private placement agreement to issued 1,111,112 common stock at $0.09 per share for proceeds of $100,000 to two accredited investors and to issued 555,556 common stock to each investor.

Share For Debt Settlements

On June 17, 2008, the Company approved the issuance of 1,000,000 units at $0.06 per share to settle amounts due to a director of the Company totaling $60,000. Each unit contain one common share and one share warrant exercisable at $0.06 per share on or before June 16, 2011.

On July 8, 2008, the Company approved the issuance of 1,000,000 units at $0.05 per share to settle amounts due to a director of the Company totaling $50,000. Each unit contain one common share and one share warrant exercisable at $0.05 per share on or before July 7, 2011.

On January 9, 2009, the Company approved the issuance of 8,000,000 common shares at $0.005 per share to settle amounts due to a director of the Company totaling $40,000.

On February 26, 2009, the Company have signed agreement with existing warrant options holders to cancel all existing warrant options available to the Company.

For the Year Ended March 31, 2010

Shares For Debt and Service Settlements

On April 22, 2009, the Company approved the issuance of 4,000,000 common shares at $0.005 per share to settle amounts due to a debtor of the Company totaling $20,000.

On July 31, 2009, the Company approved the issuance of 7,600,000 common shares at $0.02 per share for services provided by several professionals for a 12 months period totaling $152,000.

On September 14, 2009, the Company entered into a definitive agreement with the Chief Executive Officer and director of the Company for the issuance of share purchase warrants for executive compensation, with a term of five years expiring September 14, 2014, exercisable at $0.01 per share, for 7,500,000 shares of common stock with a cashless exercise provision. The Company recognized $94,242 in stock based compensation expense for the issuance of these warrants.

Note 5. Warrants

During February 2009, the Company received signed consent agreements with all existing warrant holders that cancel the entire balance of 7,058,823 outstanding warrants as of February 2009.

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Note 6. Stock Options and Stock Based Compensation

During 2006, the Company authorized a share option plan under which employees were granted options to purchase shares of authorized but unissued, common shares. During the years ended March 31, 2010 and 2009, all options issued in this plan were either forfeited as options went unexercised due to employee terminations or cancelled via signed consent agreements with all remaining option holders.

There was no compensation charge associated with stock options included in the statement of operations for the year ended March 31, 2010 and 2009.

Note 7. Contingencies

Agreement

On December 11, 2006 and December 12, 2006, the Company entered into two marketing agreements in which the Company would pay $1,000,000 and issue 1,000,000 common shares. During the year ended March 31, 2008, the Company paid $250,000 in respect to the cash portion of the agreements and had issued 1,000,000 common shares of the Company. The 1,000,000 shares issued were not released to the marketing company as it has not commenced its branding and marketing efforts and the contract has expired. The 1,000,000 shares have been returned back to treasury. The $250,000 is classified as an Advance on Marketing Agreements on the balance sheet. The Company is currently re-negotiating new terms on this agreement.

Legal

On October 11, 2006, the Company was named as a co-defendant in a lawsuit whereby the plaintiffs were claiming general damages, with respect to funds totalling approximately $94,000 which were allegedly misappropriated, interest, costs and such further and other relief as the court may deem just. Management of the Company believed the claim was without merit and was unlikely to succeed. The Company filed a statement of defence denying the allegations and a counterclaim for defamation. The court ordered a severance of the action, and required the plaintiffs to prove their damages, before proceeding to trial on issues of liability. The lawsuit by the plaintiffs was dismissed on October 6, 2008.

Aquaduct International. LLC v. Wataire International, Inc. et. AI. This litigation was commenced on December 11, 2008 by the Company’s former distributor over the alleged purchase of certain atmospheric water machines. On July 20, 2009, the Company answered the lawsuit and filed a cross-complaint against the plaintiff for Breach of Contract and Intentional Interference. On February 2, 2010 a confidential settlement agreement and release was effectuated between the parties. The Complaint and cross complaint have been dismissed by the parties with prejudice.

Note 8. Inventory

At March 31, 2010 and 2009, inventories are comprised of finished water-from-air machines totaling $249,506, and $250,456, respectively.

Note 9. Intangibles

On April 25, 2007, the Company entered into an agreement to acquire all of the intellectual property (“IP”) relating to a water treatment process and related devices for water-from-air machines from Wataire Industries Inc., Canadian Dew Technologies Inc., Terrence Nylander and Roland Wahlgren. Mr. Nylander was at the time of signing the agreement and currently, the President of the Company. Consideration for the purchase of the IP was $476,190 (CAD $500,000), which was paid on March 31, 2007, the issuance of 4,800,000 shares of common stock of the Company, the agreement by the Company to pay a royalty equal to 5% of the gross profits from the sales of all apparatus or products relating to the IP for a period of 30 years from April 25, 2007 and a royalty equal to 5% of gross licensing revenues on the IP. This consideration is in addition to the 11,000,000 shares of common stock previously issued for the license rights as disclosed in the Company’s annual September 30, 2006 audited consolidated financial statements. The IP acquisition was completed in July 2007.

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The IP acquired by the Company includes all copyrights, patent rights, trade secret rights, trade names, trademark rights, process information, technical information, contract rights and obligations, designs, drawings, inventions and all other intellectual and industrial property rights of any sort related to or associated with the invention.

The intangibles consist of patents and trademark applications of $31,434 and the cost of the acquisition of IP Technology of $2,546,062 as described above.

 

Patents, Trademark applications		$	31,434
4,800,000 shares issued to Wataire Ecosafe and Canadian Dew Technologies		$	960,000
Cash consideration			476,190
Remaining license rights including 11,000,000 shares issued to Wataire Ecosafe			1,109,872
		$	2,546,062

Note 10. Deferred Revenue

As of March 31, 2010 and 2009, deferred revenue totaled $Nil and $189,067, respectively, consisting of cash payments made by customers in advance of product shipment. Revenue will be recognized when finished goods are shipped to the customer.

Note 11. Shareholder Loan

Note 12. Subsequent Events

Subsequent to March 31, 2010:

Note 13. Income Taxes

The Company has losses for tax purposes totaling $11,000,701 which may be applied against future taxable income. These losses begin to expire in 2027. The potential tax benefit arising from these losses has not been recorded in the consolidated financial statements. The Company evaluates its valuation allowance requirements on an annual basis based on projected future operations. When circumstances change and this causes a change in management’s judgement about the realizability of deferred tax assets, the impact of the change on the valuation allowance is reflected in current operations.

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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: January 26, 2011

 

WATAIR INC.
By:		/s/ Robert Rosner
		Robert Rosner
		Chief Executive Officer
		Director

 

By:		/s/ Thomas M. Braid
		Thomas M. Braid
		Chief Financial Officer and Principal Accounting Officer
		Director

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EXHIBIT INDEX

 

31.1		Certification of Chief Executive Officer Pursuant to Section 302 of the Sarbanes Oxley Act of 2002.
31.2		Certification of Chief Financial Officer Pursuant to Section 302 of the Sarbanes Oxley Act of 2002.
32.1		Certification of Chief Executive Officer Pursuant to 18 U.S.C. Section 1350 as adopted pursuant to Section 906 of the Sarbanes-Oxley Oxley Act of 2002.
32.2		Certification of Chief Financial Officer Pursuant to 18 U.S.C. Section 1350 as adopted pursuant to Section 906 of the Sarbanes-Oxley Oxley Act of 2002.