UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

_________________

FORM 10-Q

_________________

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

For the quarterly period ended: December 31, 2010

or

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

For the transition period from: _____________ to _____________

_________________

WATAIR INC.

(Exact name of registrant as specified in its charter)

_________________

Washington 000-49955 91-2060082
(State or Other Jurisdiction (Commission (I.R.S. Employer
of Incorporation or Organization) File Number) Identification No.)

#134-9663 Santa Monica Blvd., Beverly Hills, CA 90210
(Address of Principal Executive Offices) (Zip Code)

  877-602-8985
(Registrant’s telephone number, including area code)

  N/A
(Former name or former address and former fiscal year, if changed since last report)

_________________

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 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  

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company.

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 Act).     Yes        NO  X

 

APPLICABLE ONLY TO CORPORATE ISSUERS

Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date: 129,716,886 shares of $0.0001 par value common stock issued as of May 15, 2011.

 

 

1
 

 

WATAIR INC.

FORM 10-Q

For the Period Ended September 30, 2010

TABLE OF CONTENTS

PART I — FINANCIAL INFORMATION

Item 1. Financial Statements. 3-14

 

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations. 15-17

 

Item 3. Quantitative and Qualitative Disclosures About Market Risk. 17

 

Item 4. Controls and Procedures. 17

 

 

PART II — OTHER INFORMATION

Item 1. Legal Proceedings. 18

 

Item 1A. Risk Factors. 18-21

 

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds. 22

 

Item 3. Defaults Upon Senior Securities. 22

 

Item 4. Submission of Matters to a Vote of Security Holders. 22

 

Item 5. Other Information. 22

 

Item 6. Exhibits and Certifications. 23

 

2
 

 WATAIR INC.

(formerly Wataire International, Inc.)

(A Development Stage Company)

Consolidated Balance Sheets

 

    December 31,   March 31,
    2010   2010
    (Unaudited)    
ASSETS                
Current Assets                
  Cash   $ 43     $ 57  
  Accounts receivable     1,167       9,000  
  Prepaid expenses     -       456  
  Sales deposit     -       10,000  
  Advance on marketing agreements     -       250,000  
  Advance on Inventory     -       -  
  Inventory     352,946       249,506  
Total Current Assets     354,156       519,019  
                 
Capital assets     1       1  
Patents and trademarks     36,488       31,434  
Acquisitions of intangible assets     2,547,161       2,546,062  
Total Assets   $ 2,937,806     $ 3,096,516  
                 
LIABILITIES                
Current Liabilities                
  Accounts payable   $ 151,175     $ 472,896  
  Provision and accrued liabilities     507,500       9,255  
  Advances payable     25,000       —    
  Due to related parties     2,308       84,140  
  Deferred revenue     100,776       154,924  
Total Current Liabilities     786,759       721,215  
                 
Derivative liability     —         197,158  
Convertible Debentures     128,000       90,888  
Convertible debenture, net     —         33,403  
Total Liabilities     914,759       1,042,664  
                 
STOCKHOLDERS’ EQUITY                
  Preferred shares, $0.0001 par value, redeemable at $0.005,                
20,000,000 shares authorized; 27,501 shares issued
and outstanding 		    3       3  
  Common shares, $0.0001 par value, 500,000,000 shares authorized,                
       129,716,886 and 98,710,123 shares issued and outstanding at                
       December 30 and March 31, 2010 respectively     12,972       9,871  
  Additional paid-in capital     13,452,313       13,145,346  
  Deferred stock-based compensation     —         (50,667 )
  Deficit accumulated during the development stage     (11,442,241 )     (11,050,701 )
Total Equity     2,023,047       2,053,852  
TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY   $ 2,937,806     $ 3,096,516  

The accompanying notes are an integral part of the financial statements

3
 

 

WATAIR INC.

(formerly Wataire International, Inc.)

(A Development Stage Company)

Consolidated Income Statements

(Unaudited)

 

                    August 17, 2000
    For the Three Months Ended   For the Nine Months Ended    (Inception)
    December 31,   December 31,   to December 31,
    2010   2009   2010   2009   2010
                     
Sales   $ 227,269     $ —       $ 230,591     $ —       $ 733,693  
Cost of sales     151,570       —         167,811     —         562,103
Gross margin     75,699       —         62,780     —         171,590  
Other income
 Expenses 		                                       
 Advances written off     —         —         —         —         234,542  
 Amortization     —         77       —         231       71,049  
 Amortization of notes discount     -     28,505       (28,505 )     28,505       —    
 Bad debt written off     —         —         —         —         2,800  
 Donated services     —         —         —         —         11,250  
 Foreign exchange (gain)/loss     —         —         —         —         (42,356 )
 General and administrative     24,919       38,176       64,764       64,236       957,626  
 Incorporation costs     —         —         —         —         2,005  
 Management fees     45,000       45,000       135,000       135,000       916,883  
 Marketing and promotion     217,591       19,500       243,591       32,500       462,308  
 Professional fees     748       36,742       33,815       94,199       537,033  
 Research & Development     5,655       —         5,655       —         207,798  
 Settlement of accounts payable     —         —         —         —         (3,250 )
 Stock-based compensation     —         94,242       —         94,242       8,154,292  
Total Expenses     293,913       262,242       454,320       448,913       11,511,980  
                                         
Loss from operation     (218,214 )     (262,242 )     (391,540 )     (448,913 )     (11,340,390 )
Other income     —         —         —         —         9,500  
                                         
Loss from continuing operations     (218,214 )     (262,242 )     (391,540 )     (448,913 )     (11,330,890 )
Loss from discontinued operations     —         3,640       —         3,640       (111,351 )
Net loss   $ (218,214 )   $ (258,602 )   $ (391,540 )   $ (445,273 )   $ (11,442,241 )
                                         
Net loss per share, basic and diluted     (0.00 )     (0.00 )     (0.00 )     (0.00 )        
Weighted average shares outstanding                                        
   Basic and diluted     129,717,886       96,231,862       129,717,886       93,225,970          
                                         
                                         

 

The accompanying notes are an integral part of the financial statements

 

  

4
 

  WATAIR INC.

(formerly Wataire International, Inc.)

(A Development Stage Company)

Consolidated Cash Flow Statements

(Unaudited) 

            August 17, 2000
     For the nine months ended    (Inception) to
    December 31,   December 31,   Dec 31,
    2010   2009   2010
Operating Activities                        
 Loss from continuing operations   $ (391,540 )   $ (445,273 )   $ (11,442,241 )
Adjustments to reconcile loss to cash used                        
in operating activities :                        
 Amortization     —         231       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     —         —         454,070  
 Stock-based compensation     50,667       157,575       8,154,293  
 Advances written off     —         —         199,542  
Change in non-cash working capital items :                        
 Accounts receivable     7,833       —         (1,167)  
 Prepaid expenses and retainers     10,456       8,361       -
 Deferred revenue     (54,148 )     (28,143 )     100,776  
 Advance on marketing agreements     250,000       —         -
 Advance on inventory purchase     (89,580 )     —         (89,580 )
 Inventory     (13,859 )     —         (408,811 )
 Accounts payable and accrued liabilities     131,523       143,923       608,674  
Net cash used in operating activities     (127,153 )     (134,821 )     (2,333,445 )
Investing Activities                        
 Patents and trademarks     (5,054 )     —         (5,054 )
 License payment advanced     —         —         (50,000 )
 Capital assets     —         —         (922 )
 Advanced to subsidiaries     —         —         (115,091 )
 Acquisition of intangibles-net     (1,099 )     —         (1,468,723 )
 Website development costs     —         —         (8,700 )
 Proceeds from disposition of subsidiaries     —         —         100  
Net cash used in investing activities     (6,153 )     —         (1,648,390 )
Financing Activities     -       -       -  
 Bank indebtedness     —         —         —    
 Advances from customers     25,000       —         25,000  
 Shareholder loan and interest     —         18,411     —    
 Due to related parties     (36,832 )     46,013       2,308  
 Proceeds from convertible debentures     128,000       74,625       128,000  
 Debentures converted to shares     (292,944 )             —    
 Shares issued for cash     —         —         2,937,189  
 Shares issued for debt     310,068       -       889,381  
Net cash provided by financing activities     133,292       139,049       3,981,878  
Increase (decrease) in cash     (14)       4,228       43  
Cash, beginning     57       35       —    
Cash, ending     43       4,263       43  
                         
5
 
 
Supplemental Disclosure of Cash Flow Information 		       
 Cash paid for interest     —         —         —    
 Cash paid for income taxes     —         —         —    
                         
Supplemental Disclosure of Non-Cash Items:                        
 Shares issued for Debt     310,068       172,000       889,381  
 Deferred stock-based compensation     50,667       (88,667)       8,154,293  
 Shares issued for Promissory Notes     —         —         365,087  
 Shares issued for intangible assets     —         —         960,000  
 Exchange of shareholder loan for                        
      convertible debt     -       125,000       125,000  

 

 

 

 

 

 

 

 

 

The accompanying notes are an integral part of the financial statements

 

 

 

 

 

 

 

 

 

6
 

WATAIR INC.

(formerly Wataire International, Inc.)

(A Development Stage Company)

Statement of Stockholders’ Equity (Deficit)

For the period August 17, 2000 (Inception) to December 31, 2010

(Unaudited)