Explanatory Note

As reported in our current report on Form 8-K filed with the United States Securities and Exchange Commission (the "SEC") on February 14, 2008, we completed a share exchange transaction with Purio Environmental Water Source, Inc., a private Nevada corporation ("Purio"), and the shareholders of Purio that resulted in Purio becoming our wholly-owned subsidiary and our new operating business as of February 13, 2008. The closing of the share exchange transaction resulted in a change of control of our company. The share exchange transaction was accounted for as a reverse acquisition and, as a result, our consolidated financial statements are, in substance, those of Purio, with our assets, liabilities, revenues and expenses included effective from the date of the closing of the share exchange transaction.

Forward Looking Statements

This quarterly report on Form 10-Q contains forward-looking statements that involve risks and uncertainties. These statements relate to future events or our future financial performance. In some cases, you can identify forward-looking statements by terminology such as "may", "should", "expect", "plan", "anticipate", "believe", "estimate", "predict", "potential" or "continue" or the negative of these terms or other comparable terminology. These statements are only predictions.

While these forward-looking statements, and any assumptions upon which they are based, are made in good faith and reflect our current judgment regarding the direction of our business, actual results will almost always vary, sometimes materially, from any estimates, predictions, projections, assumptions or other future performance suggested in this report. Except as required by applicable law, we do not intend to update any of the forward-looking statements to conform these statements to actual results.

Our unaudited financial statements are stated in U.S. dollars and are prepared in accordance with generally accepted accounting principles in the United States. The following discussion should be read in conjunction with our financial statements and the related notes that appear elsewhere in this quarterly report.

As used in this quarterly report, the terms "we", "us", "our" and "our company" mean Purio Inc., unless otherwise indicated.

Business Overview

As of the closing date of the share exchange agreement on February 13, 2008, we adopted the business of Purio, which involves selling clarified and reclaimed product water for human consumption, as well as agricultural, industrial, domestic and recreational uses. Our business strategy is to generate revenues through the production, processing and distribution of clarified and reclaimed product water. In addition, we intend to distribute water purification equipment in Canada, the Unites States and internationally through license agreements and other appropriate arrangements.

Purio owns proprietary water clarification technology suitable for a broad number of applications including the clarification of surface water, industrial process water and sewage. We intend to use Purio's technology initially for industrial and commercial applications to reclaim water and reduce the need for fresh water in such applications. We further intend to use Purio's technology to produce potable water for commercial and residential use. In all cases, we intend for Purio to retain ownership and operation of its proprietary technology and to sell the water to end users.

We also intend to distribute a comprehensive line of in-home and office drinking water purification equipment in Canada and the Unites States.

Results of Operations

Our results of operations are presented below:

                                                                                      Period from
                                                                                     November 16,
                                                        Three           Three            1999
                                                       Months          Months          (Date of
                                                        Ended           Ended        Inception) to
                                                      March 31,       March 31,        March 31,
                                                        2009            2008             2009
                                                         ($)             ($)              ($)

Revenue                                                        -             277             5,113
Selling Expenses                                               -               -            40,345
General and Administrative Expenses                       28,097          72,219         1,110,890
Net Loss                                                  28,097          71,942         1,146,122

Results of Operations for the Three Month Period Ended March 31, 2009 and for the period from November 16, 1999 (Date of Inception) to March 31, 2009.

For the three month period ended March 31, 2009 we incurred a net loss of $28,097, compared to a net loss of $71,942 during the same period in fiscal 2008. Our net loss from inception to March 31, 2009 was $1,700,899. We did not experience any net loss per share for three month period ended March 31, 2009, compared to a net loss per share of $0.001 for the same period in fiscal 2008.

Our total operating expenses for the three month period ended March 31, 2009 were $28,097, compared to total operating expenses of $72,219 for the same period in fiscal 2008. Our total operating expenses from our inception on November 16, 1999 to March 31, 2009 were $1,110,890.

Our total operating expenses for the three month period ended March 31, 2009 consisted entirely of general and administrative expenses, including $6,176 in professional fees, $8,158 in occupancy costs, $2,060 in depreciation and $11,343 in other general and administrative expenses. We did not incur any other operating expenses during this period.

Our total operating expenses for the three month period ended March 31, 2008 consisted entirely of general and administrative expenses, including $25,476 in professional fees, $18,105 in consulting fees, $1,007 in depreciation, $3,600 in impairment of mineral rights and $24, 031 in other general and administrative expenses. We did not incur any other operating expenses during this period.

Our total operating expenses from our inception on November 16, 1999 to March 31, 2009 consisted of $40,345 in selling expenses, $352,697 in professional fees, $22,219 in exploration costs and advances, $30,397 in occupancy costs, $430,698 in consulting fees, $33,110 in depreciation, $3,600 in impairment of mineral rights,$4,987 in stock transfer fees, $42,894 in administration and $190,288 in other general and administrative expenses.

Our general and administrative expenses consisted of travel, meals and entertainment, office maintenance, communication expenses (cellular, internet, fax and telephone), office supplies, web development and courier and postage costs. Our professional fees consisted of legal, accounting and auditing fees.

The decrease in operating expenses for the three month period ended March 31, 2009 was primarily due to a decrease in our professional fees and our consulting fees.

Liquidity and Capital Resources

As of March 31, 2009 we had cash of $14,704 in our bank accounts. As of March 31, 2009 we also had prepaid expenses of $11,088, inventory of $13,093, property and equipment of $43,939 and patents of $121,610, for total assets of $204,434.

As of March 31, 2009 we had a working capital deficit of $292,720. Our accumulated deficit from our inception on November 16, 1999 to March 31, 2009 was $1,115,770 and was funded primarily through equity financing.

We are dependent on funds raised through our equity financing. Our net loss of $1,146,122 from our inception on November 16, 1999 to March 31, 2009 was funded primarily through equity financing.

For the three month period ended March 31, 2009 we spent net cash of $24,396 on operating activities, compared to net cash spending of $730 on operating activities during the same period in fiscal 2008. The increase in expenditures on operating activities for the three months ended March 31, 2009 was primarily due to a decrease in our deposits.

For the three month period ended March 31, 2009 we did not engage in any investing activities, compared to net cash spending of $4,200 on investing activities during the same period in fiscal 2008.

For the three month period ended March 31, 2009 we did not engage in any financing activities, compared to net cash received of $44,834 from financing activities during the same period in fiscal 2008. The decrease in receipts from financing activities for the three months ended March 31, 2009 was primarily due to the absence of a bank advance and a decrease in other contributed capital.

During the three months ended March 31, 2009 our monthly cash requirements to fund our operating activities was approximately $7,235 compared to approximately $16,072 during the same period in fiscal 2008. Our cash of $14,704 as of March 31, 2009 is sufficient to cover our current monthly burn rate for more than two months.

We estimate our planned expenses for the next 12 months (beginning May 2009) to be approximately $1,000,000, as summarized in the table below:

                                                           Potential    Estimated
                      Description                       Completion Date Expenses
                                                                           ($)
Construction or purchase of purification equipment         12 months     500,000
Marketing expenses                                         12 months     300,000
Research and development                                   12 months     50,000
Professional fees (legal, accounting and auditing fees)    12 months     100,000
Other general and administrative expenses                  12 months     50,000
Total                                                                   1,000,000

Our general and administrative expenses for the year will consist of travel, meals and entertainment, office maintenance, communication expenses (cellular, internet, fax and telephone), office supplies, web development and courier and postage costs. Our professional fees include legal, accounting and auditing fees, and are related to our regulatory filings throughout the year.

Based on our planned expenditures, we require additional funds of approximately $985,300 (a total of $1,000,000 less our approximately $14,700 in cash as of March 31, 2009) to proceed with our business plan over the next 12 months. If we are not able to obtain additional financing on a timely basis, we will be unable to conduct our operations as planned, and we will not be able to meet our obligations as they become due. In such event, we will be forced to scale down or perhaps even cease our operations.

Future Financings

We have generated limited revenues, have achieved losses since our inception, and rely upon the sale of our securities to fund our operations. We anticipate that we will incur substantial losses for the foreseeable future, and we are dependent upon obtaining outside financing to carry out our operations. Our financial statements for the three months ended March 31, 2009 have been prepared on a going concern basis and do not include any adjustments that might result from the outcome of this uncertainty.

We will require approximately $1,000,000 over the next 12 months in order to enable us to proceed with our plan of operations, including paying our ongoing expenses. These cash requirements are in excess of our current cash and working capital resources. Accordingly, we intend to raise the balance of our cash requirements for the next 12 months (approximately $985,300) from private placements, shareholder loans or possibly a registered public offering (either self-underwritten or through a broker-dealer). If we are unsuccessful in raising enough money through such efforts, we may review other financing possibilities such as bank loans. At this time we do not have a commitment from any broker-dealer to provide us with financing, and there is no guarantee that any financing will be available to us or if available, on terms that will be acceptable to us.

If we are unable to obtain the necessary additional financing, then we plan to reduce the amounts that we spend on our operations, our professional fees and our other general and administrative expenses so as not to exceed the amount of capital resources that are available to us. If we do not secure additional financing our current cash reserves and working capital will be not be sufficient to enable us to sustain our operations and for the next 12 months, even if we do decide to scale back our operations.

Off-Balance Sheet Arrangements

We have no significant off-balance sheet arrangements that have or are reasonably likely to have a current or future effect on our financial condition, changes in financial condition, revenues or expenses, results of operations, liquidity, capital expenditures or capital resources that are material to stockholders.

Critical Accounting Policies

Our financial statements are affected by the accounting policies used and the estimates and assumptions made by management during their preparation. A complete summary of these policies is included in Note 1 of the notes to our financial statements. We have identified below the accounting policies that are of particular importance in the presentation of our financial position, results of operations and cash flows, and which require the application of significant judgment by management.

Principles of Consolidation

The consolidated financial statements include the accounts of Purio Inc. and Purio Environmental Water Source, Inc., a wholly owned subsidiary. Significant inter-company transactions have been eliminated.

Patent

The patent is United States Patent 5904855 granted May 18, 1999 for a "Closed Chemically Advanced Treatment System". The invention described in the patent is used by the Company in the water purification equipment which is under development. The patent is not in use to protect marketed products and is therefore not amortized. There has been no change in circumstances that would warrant impairment per an evaluation under SFAS No. 121.

Inflation

The amounts presented in the financial statements do not provide for the effect of inflation on our operations or financial position. The net operating losses shown would be greater than reported if the effects of inflation were reflected either by charging operations with amounts that represent replacement costs or by using other inflation adjustments.