PINX:BSHF Quarterly Report 10-Q Filing - 1/31/2012

Effective Date 1/31/2012

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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

Form 10-Q


(Mark One)

[X]

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

For the quarterly period ended

January 31, 2012

 

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

000-52393

BIOSHAFT WATER TECHNOLOGY, INC.

(Exact name of registrant as specified in its charter)

Nevada

 

98-0494003

(State or other jurisdiction of incorporation or organization)

 

(IRS Employer Identification No.)

1 Orchard Road, # 220, Lake Forest, CA

92630

(Address of principal executive offices)

(Zip Code)

(949) 748-8050

(Registrant’s telephone number, including area code)

N/A

(Former name, 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.

[X]

YES

[  ]

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).

 

[X]

YES

[  ]

NO

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a small reporting company.  See the definitions of “large accelerated filer”, “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer

[  ]

Accelerated filer

[  ]

Non-accelerated filer

[  ]

(Do not check if a smaller reporting company)

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

APPLICABLE ONLY TO ISSUERS INVOLVED IN BANKRUPTCY
PROCEEDINGS DURING THE PRECEDING FIVE YEARS

Check whether the registrant has filed all documents and reports required to be filed by Sections 12, 13 or 15(d) of the Exchange Act after the distribution of securities under a plan confirmed by a court.     

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

[  ]

YES

[  ]

NO

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.

101,716,333 common shares issued and outstanding as of March 19, 2012.




PART I - FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS

Our unaudited interim financial statements for the three and nine month periods ended January 31, 2012 form part of this quarterly report. They are stated in United States Dollars (US$) and are prepared in accordance with United States generally accepted accounting principles.


















2





BIOSHAFT WATER TECHNOLOGY, INC.


TABLE OF CONTENTS


January 31, 2012








Balance Sheets as of January 31, 2012 and April 30, 2011

F - 1

 

 

Statements of Operations for the three and nine months ended

 

January 31, 2012 and 2011

F - 2

 

 

Statement of Stockholders’ Deficit as of January 31, 2012

F - 3

 

 

Statements of Cash Flows for the nine months ended

 

January 31, 2012 and 2011

F - 4

 

 

Notes to Financial Statements

F - 5 - F - 11











3



BIOSHAFT WATER TECHNOLOGY, INC.

BALANCE SHEETS (UNAUDITED)

AS OF JANUARY 31, 2012 AND APRIL 30, 2011


 

 

January 31,

2012

 

April 30,

2011

ASSETS

 

 

 

 

 

 

Current assets :

 

 

 

 

 

 

Cash and cash equivalents

 

$

78,344

 

$

611,729

Accounts receivable

 

 

300,443

 

 

-

Inventory

 

 

4,646

 

 

-

Loan receivable

 

 

215,000

 

 

-

Prepaid expenses

 

 

71,225

 

 

76,279

 

 

 

 

 

 

 

Total  Current Assets

 

 

669,658

 

 

688,008

 

 

 

 

 

 

 

Property and equipment, net

 

 

26,439

 

 

29,360

 

 

 

 

 

 

 

Other assets :

 

 

 

 

 

 

Deposits

 

 

2,248

 

 

2,248

 

 

 

 

 

 

 

Total Assets

 

$

698,345

 

$

719,616

 

 

 

 

 

 

 

LIABILITIES AND STOCKHOLDERS’ DEFICIT

 

 

 

 

 

 

Current liabilities :

 

 

 

 

 

 

Accounts payable and accrued expenses

 

$

798,014

 

$

620,254

Accrued interest

 

 

285,801

 

 

226,943

Customer deposits

 

 

175,901

 

 

-

Loans payable

 

 

25,000

 

 

25,000

Total current liabilities

 

 

1,284,716

 

 

872,197

 

 

 

 

 

 

 

Long-term debt

 

 

500,000

 

 

500,000

 

 

 

 

 

 

 

Total liabilities

 

 

1,784,716

 

 

1,372,197

 

 

 

 

 

 

 

Stockholders’ deficit :

 

 

 

 

 

 

Common stock, $0.001 par value; 300,000,000 shares authorized, 101,716,000 and 101,050,000 issued and outstanding, respectively

 

 

101,716

 

 

101,050

Preferred stock, $0.001 par value; 25,000,000 shares authorized, none issued and outstanding

 

 

-

 

 

-

Additional paid-in capital

 

 

17,017,122

 

 

16,816,123

Accumulated deficit

 

 

(18,205,209)

 

 

(17,569,754)

Total Stockholders’ Deficit

 

 

(1,086,371)

 

 

(652,581)

 

 

 

 

 

 

 

Total Liabilities and Stockholders' Deficit

 

$

698,345

 

$

719,616



The accompanying notes are an integral part of these financial statements.



F-1



BIOSHAFT WATER TECHNOLOGY, INC.

STATEMENTS OF OPERATIONS (UNAUDITED)

FOR THE THREE AND NINE MONTHS ENDED JANUARY 31, 2012 AND 2011



 

 

Three

months ended

January 31,

2012

 

Three

months ended

January 31,

2011

 

Nine

months ended

January 31,

2012

 

Nine

months ended

January 31,

2011

 

 

 

 

 

 

 

 

 

 

 

 

 

NET REVENUE

 

$

295,854

 

$

-

 

$

483,440

 

$

-

COST OF SALES

 

 

261,508

 

 

-

 

 

382,701

 

 

-

 

 

 

 

 

 

 

 

 

 

 

 

 

GROSS PROFIT

 

 

34,346

 

 

-

 

 

100,739

 

 

-

 

 

 

 

 

 

 

 

 

 

 

 

 

OPERATING EXPENSES

 

 

 

 

 

 

 

 

 

 

 

 

Depreciation and amortization

 

 

2,496

 

 

6,276

 

 

7,488

 

 

18,830

Impairment of assets

 

 

-

 

 

-

 

 

-

 

 

-

General and administrative

 

 

209,215

 

 

104,002

 

 

582,647

 

 

363,301

Stock-based compensation

 

 

70,717

 

 

3,453

 

 

101,665

 

 

100,569

TOTAL OPERATING EXPENSES

 

 

282,428

 

 

113,731

 

 

691,800

 

 

482,700

 

 

 

 

 

 

 

 

 

 

 

 

 

INCOME (LOSS) FROM OPERATIONS

 

 

(248,082)

 

 

(113,731)

 

 

(591,061)

 

 

(482,700)

 

 

 

 

 

 

 

 

 

 

 

 

 

OTHER INCOME (EXPENSE)

 

 

 

 

 

 

 

 

 

 

 

 

Other income

 

 

-

 

 

-

 

 

-

 

 

-

Interest income (expense), net

 

 

(31,617)

 

 

(18,904)

 

 

(44,394)

 

 

(63,187)

Forgiveness of debt

 

 

-

 

 

-

 

 

-

 

 

208,981

TOTAL OTHER INCOME (EXPENSE)

 

 

(31,617)

 

 

(18,904)

 

 

(44,394)

 

 

145,794

 

 

 

 

 

 

 

 

 

 

 

 

 

NET LOSS

 

$

(279,699)

 

$

(132,635)

 

$

(635,455)

 

$

(336,906)

 

 

 

 

 

 

 

 

 

 

 

 

 

LOSS PER SHARE: BASIC AND DILUTED

 

$

(0.00)

 

$

(0.00)

 

$

(0.00)

 

$

(0.00)

 

 

 

 

 

 

 

 

 

 

 

 

 

WEIGHTED AVERAGE NUMBER OF SHARES OUTSTANDING: BASIC AND DILUTED

 

 

101,716,000

 

 

97,704,348

 

 

101,506,521

 

 

95,911,954





The accompanying notes are an integral part of these financial statements.



F-2



BIOSHAFT WATER TECHNOLOGY, INC.

STATEMENT OF STOCKHOLDERS’ DEFICIT (UNAUDITED)

AS OF JANUARY 31, 2012



 

Common Stock

Additional Paid

 Accumulated

Total Stockholders’ Equity

 

Shares

Amount

in Capital

Deficit

(Deficit)

 

 

 

 

 

 

Balance, April 30, 2009

90,000,000

90,000

15,209,338

(16,125,371)

(826,033)

Shares issued for cash

3,500,000

3,500

171,500

-

175,000

Stock-based compensation

-

-

57,612

-

57,612

Net loss for the year

-

-

-

(651,760)

(651,760)

 

 

 

 

 

 

 Balance, April 30, 2010

93,500,000

93,500

15,438,450

(16,777,131)

(1,245,181)

 

 

 

 

 

 

Stock issued for cash

7,550,000

7,550

1,124,950

-

1,132,500

Stock options issued for services

 

 

184,196

-

184,196

Stock-based compensation

-

-

68,527

-

68,527

Net loss for the year

-

-

-

(792,623)

(792,623)

 

 

 

 

 

 

Balance, April 30, 2011

101,050,000

101,050

16,816,123

(17,569,754)

(652,581)

 

 

 

 

 

 

Stock issued for cash

666,000

666

99,334

 

100,000

Stock-based compensation

 

 

101,665

 

101,665

Net loss for the period

 

 

 

(635,455)

(635,455)

 

 

 

 

 

 

Balance, January 31, 2012

101,716,000

$    101,716

$ 17,017,122

$(18,205,371)

$    (1,086,371)











The accompanying notes are an integral part of these financial statements.



F-3




BIOSHAFT WATER TECHNOLOGY, INC.

STATEMENTS OF CASH FLOWS (UNAUDITED)

FOR THE NINE MONTHS ENDED JANUARY 31, 2012 AND 2011


 

 

Nine

months ended

January 31,

2012

 

Nine

months ended

January 31,

2011

2009

 

 

 

 

 

 

CASH FLOWS FROM OPERATING ACTIVITIES

 

 

 

 

 

 

Net loss for the period

 

$

(635,455)

 

$

(336,906)

Adjustments To Reconcile Net Loss To Net Cash Used In Operating Activities

 

 

 

 

 

 

Depreciation and amortization

 

 

7,488

 

 

18,830

Forgiveness of debt

 

 

-

 

 

(208,981)

Stock-based compensation

 

 

101,665

 

 

100,569

Change in operating assets & liabilities

 

 

 

 

 

 

(Increase) in accounts receivable

 

 

(300,443)

 

 

-

(Increase) in inventory

 

 

(4,646)

 

 

-

Decrease in prepaid expenses

 

 

5,054

 

 

(12,020)

Increase in accounts payable and accrued expenses

 

 

177,760

 

 

115,633

Increase in accrued interest

 

 

58,858

 

 

-

Increase in customer deposits

 

 

175,901

 

 

-

Net Cash Used in Operating Activities

 

 

(413,818)

 

 

(322,875)

 

 

 

 

 

 

 

CASH FLOWS FROM INVESTING ACTIVITIES

 

 

 

 

 

 

Purchase of property and equipment

 

 

 (4,567)

 

 

-

Net Cash Used in Investing Activities

 

 

 (4,567)

 

 

-

 

 

 

 

 

 

 

CASH FLOWS FROM FINANCING ACTIVITIES

 

 

 

 

 

 

Subscriptions received

 

 

-

 

 

-

Loan receivable

 

 

(215,000)

 

 

(100,000)

Proceeds from issuance of common stock

 

 

100,000

 

 

1,110,000

Net Cash Provided by Financing Activities

 

 

(115,000)

 

 

1,010,000

 

 

 

 

 

 

 

Change in cash and cash equivalents during the period

 

 

(533,385)

 

 

687,125

Cash and cash equivalents, beginning of the period

 

 

611,729

 

 

14,147

Cash and cash equivalents, end of the period

 

$

78,344

 

 $

 701,272

 

 

 

 

 

 

 

SUPPLEMENTAL CASH FLOW INFORMATION:

 

 

 

 

 

 

Cash paid for income taxes

 

 $

 0

 

 $

 0

Cash paid for interest

 

 $

 0

 

 $

 0





The accompanying notes are an integral part of these unaudited financial statements.   



F-4



BIOSHAFT WATER TECHNOLOGY, INC.

NOTES TO FINANCIAL STATEMENTS

JANUARY 31, 2012


NOTE 1. GENERAL ORGANIZATION AND BUSINESS


The Company was originally incorporated under the laws of the state of Nevada on March 8, 2006.   The Company owns worldwide patented technology and is in the business of designing, manufacturing and installing wastewater (sewage) treatment plants using its technology.


NOTE  2. SUMMARY OF SIGNIFICANT ACCOUNTING PRACTICES


Basis of Accounting

The accompanying financial statements have been prepared using the accrual basis of accounting in accordance with accounting principles generally accepted in the United States of America and are presented in U.S. dollars. The Company has adopted an April 30 year end.


Basis of Presentation

The accompanying unaudited interim financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America and the rules of the Securities and Exchange Commission (“SEC”), and should be read in conjunction with the audited financial statements and notes thereto contained in the Company’s Form 10-K filed with the SEC as of and for the period ended April 30, 2011.  In the opinion of management, all adjustments necessary for the financial statements to be not misleading for the interim periods presented have been reflected herein.  The results of operations for interim periods are not necessarily indicative of the results to be expected for the full year.


Development Stage in Prior Periods

Bioshaft Water Technology, Inc. was in the development stage from March 8, 2006 (date of inception) through April 30, 2011. The period ending October 31, 2011 is the first during which the Company is considered an operating company and is no longer in the development stage.


Use of Estimates

The preparation of financial statements in conformity with generally accepted accounting principles of the United States requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the year. The more significant areas requiring the use of estimates include asset impairment, stock-based compensation, and future income tax amounts. Management bases its estimates on historical experience and on other assumptions considered to be reasonable under the circumstances. However, actual results may differ from the estimates.


Cash and Cash Equivalents

Cash and cash equivalents include cash in hand and cash in time deposits, certificates of deposit and all highly liquid debt instruments with original maturities of three months or less.


Property and Equipment

Property and equipment consists of computer equipment, an automobile and demonstration equipment and is recorded at cost.  Depreciation is provided using the straight-line method over the estimated useful lives of the assets as follows:


Computer Equipment

3 Years  

Automobile

3 Years

Demonstration Equipment

5 Years




F-5



BIOSHAFT WATER TECHNOLOGY, INC.

NOTES TO FINANCIAL STATEMENTS

JANUARY 31, 2012


NOTE  2. SUMMARY OF SIGNIFICANT ACCOUNTING PRACTICES (CONTINUED)


Reclassifications

Certain accounts and financial statement captions in the prior periods have been reclassified to conform to the current period financial statements.


Intangible Assets

The Company adopted Statement of Financial Accounting Standards No. 144, “Accounting for the Impairment or Disposal of Long-Lived Assets” (“SFAS 144” or “ASC 360”), which addresses financial accounting and reporting for the impairment or disposal of long-lived assets and supersedes SFAS No. 121, “Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to be Disposed Of,” and the accounting and reporting provisions of APB Opinion No. 30, “Reporting the Results of Operations for a Disposal of a Segment of a Business.” The Company periodically evaluates the carrying value of long-lived assets to be held and used in accordance with SFAS 144. SFAS 144 requires impairment losses to be recorded 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 assets’ carrying amounts. In that event, a loss is recognized based on the amount by which the carrying amount exceeds the fair market value of the long-lived assets. Loss on long-lived assets to be disposed of is determined in a similar manner, except that fair market values are reduced for the cost of disposal.


Fair Value of Financial Instruments

The Company's financial instrument consists of prepaid expenses, deposits, investments, customer deposits, accounts payable and accrued expenses, accrued interest, loans payable and loans payable to a related party. It is management's opinion that the Company is not exposed to significant interest, currency or credit risks arising from its other financial instruments and that their fair values approximate their carrying values except where separately disclosed.  


Revenue Recognition

We recognize revenue in accordance with generally accepted accounting principles as outlined in the Securities and Exchange Commission’s Staff Accounting Bulletin No. 104, Revenue Recognition (SAB 104 or ASC 605-10), which requires that four basic criteria be met before revenue can be recognized: (i) persuasive evidence of an arrangement exists; (ii) the price is fixed or determinable; (iii) collectability is reasonably assured; and (iv) product delivery has occurred or services have been rendered. Revenue from the sale of products is generally recognized after both the goods are shipped to the customer and acceptance has been received, if required. Our products are custom made for our customers, who primarily consist of original engineer manufacturers (OEMs), and we do not accept returns. Our products are shipped complete and ready to be incorporated into higher level assemblies by our customers. The terms of the customer arrangements generally pass title and risk of ownership to the customer at the time of shipment.

 

Stock-Based Compensation

In December 2004, the FASB issued SFAS No. 123R, “Share Based Payment” (ASC 718). SFAS No. 123R establishes the accounting for grants of stock options and other 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. SFAS No. 123R (1) revises SFAS No. 123, “Accounting for Stock-Based Compensation,” (2) supersedes Accounting Principles Bulletin (“APB”) Opinion No. 25, “Accounting for Stock Issued to Employees,” and (3) establishes fair value as the measurement objective for share-based payment transactions. The Company is following the provisions of SFAS No. 123R and has recorded compensation expenses related to the granting of stock options to employees.






F-6



BIOSHAFT WATER TECHNOLOGY, INC.

NOTES TO FINANCIAL STATEMENTS

JANUARY 31, 2012


NOTE  2. SUMMARY OF SIGNIFICANT ACCOUNTING PRACTICES (CONTINUED)


Income Taxes

The Company provides for income taxes using an asset and liability approach. Deferred tax assets and liabilities are recorded based on the differences between the financial statement and tax bases of assets and liabilities and the tax rates in effect currently. Deferred tax assets are reduced by a valuation allowance if, based on the weight of available evidence, it is more likely than not that some or all of the deferred tax assets will not be realized.  No provision for income taxes is included in the statement due to its immaterial amount, net of the allowance account, based on the likelihood of the Company to utilize the loss carry-forward.


Basic and Diluted Earnings (Loss) Per Share

Earnings (loss) per share is calculated in accordance with the Statement of financial accounting standards No. 128 (SFAS No. 128 or ASC 260), “Earnings per share”. SFAS No. 128 superseded Accounting Principles Board Opinion No.15 (APB 15). Net income (loss) per share for all periods presented has been restated to reflect the adoption of SFAS No. 128. Basic net loss per share is based upon the weighted average number of common shares outstanding. Diluted net loss per share is based on the assumption that all dilutive convertible shares and stock options were converted or exercised. Dilution is computed by applying the treasury stock method. Under this method, options and warrants are assumed to be exercised at the beginning of the period (or at the time of issuance, if later), and as if funds obtained thereby were used to purchase common stock at the average market price during the period. Basic and diluted loss per share were $0.001 and $0.00 for the three months ended January 31, 2012 and 2011 respectively.


Concentration of Credit Risk

Financial instruments that potentially subject the Company to concentrations of credit risk are cash, accounts receivable and other receivables arising from its normal business activities. The Company places its cash in what it believes to be credit-worthy financial institutions. The Company has a diversified customer base. The Company controls credit risk related to accounts receivable through credit approvals, credit limits and monitoring procedures. The Company routinely assesses the financial strength of its customers and, based upon factors surrounding the credit risk, establishes an allowance, if required, for uncollectible accounts and, as a consequence, believes that its accounts receivable credit risk exposure beyond such allowance is limited.


Recent Accounting Pronouncements

In May 2009, the FASB issued SFAS 165 (ASC 855-10) entitled “Subsequent Events”.  Companies are now required to disclose the date through which subsequent events have been evaluated by management. Public entities (as defined) must conduct the evaluation as of the date the financial statements are issued, and provide disclosure that such date was used for this evaluation. SFAS 165 (ASC 855-10) provides that financial statements are considered “issued” when they are widely distributed for general use and reliance in a form and format that complies with GAAP. SFAS 165 (ASC 855-10) is effective for interim and annual periods ending after June 15, 2009 and must be applied prospectively. The adoption of SFAS 165 (ASC 855-10) during the year ended November 30, 2009 did not have a significant effect on the Company’s financial statements as of that date. In connection with the preparation of the accompanying financial statements as of July 31, 2011, management evaluated subsequent events through the date that such financial statements were issued.









F-7



BIOSHAFT WATER TECHNOLOGY, INC.

NOTES TO FINANCIAL STATEMENTS

JANUARY 31, 2012


NOTE  2. SUMMARY OF SIGNIFICANT ACCOUNTING PRACTICES (CONTINUED)


Recent Accounting Pronouncements

In June 2009, the FASB issued SFAS 168, The FASB Accounting Standards Codification and the Hierarchy of Generally Accepted Accounting Principles. (“SFAS 168” or ASC 105-10) SFAS 168 (ASC 105-10) establishes the Codification as the sole source of authoritative accounting principles recognized by the FASB to be applied by all nongovernmental entities in the preparation of financial statements in conformity with GAAP. SFAS 168 (ASC 105-10) was prospectively effective for financial statements issued for fiscal years ending on or after September 15, 2009 and interim periods within those fiscal years. The adoption of SFAS 168 (ASC 105-10) on July 1, 2009 did not impact the Company’s results of operations or financial condition. The Codification did not change GAAP, however, it did change the way GAAP is organized and presented.


As a result, these changes impact how companies reference GAAP in their financial statements and in their significant accounting policies. The Company implemented the Codification in this Report by providing references to the Codification topics alongside references to the corresponding standards.


With the exception of the pronouncements noted above, no other accounting standards or interpretations issued or recently adopted are expected to have a material impact on the Company’s financial position, operations or cash flows.


NOTE 3. INVESTMENT


During the year ended April 30, 2009, the Company entered into a contract with a third party whereby it agreed to split the cost of producing a waste water treatment plant. The third party is responsible for and will incur all costs and risks to do with the operations and maintenance of the plant while the Company is responsible for technology support and engineering of the plant. In addition, the third party agrees to market and sell the plant and profit will be split at the time the plant is sold to end-user. Costs for the project are split evenly between the two parties and treated as capital contribution to the joint venture. As of April 30, 2010, the company had recorded $50,000 in investment.  During the year ended April 30, 2011, the water treatment devise was determined to be no longer usable and has been fully impaired.  As of January 31, 2012, the investment carrying cost is $Nil.


NOTE 4. PROPERTY AND EQUIPMENT


Property and equipment consisted of the following at January 31, 2012 and April 30, 2011:


 

January 31,

2012

April 30,

 2011

Automobile

$          33,776

$         33,776

Demonstration equipment

50,125

48,934

Computer equipment

15,176

11,807

Total Cost

99,077

94,517

Less: Accumulated depreciation

(72,638)

(65,157)

Property and equipment, net

$          26,439

$         29,360


Depreciation expense was $7,488 and $18,830 for the nine months ended January 31, 2012 and 2011.







F-8



BIOSHAFT WATER TECHNOLOGY, INC.

NOTES TO FINANCIAL STATEMENTS

JANUARY 31, 2012


NOTE 5. LOANS PAYABLE


On August 11, 2008, the Company secured a loan payable of $500,000 accruing interest at 15%, secured by the assets of the company, subject to a 3% financing fee and repayable on the one year anniversary date of the agreement.  The term of this loan has been extended to August 11, 2012. Accrued interest related to this loan is $274,932 as of April 30, 2011.


On March 6, 2009, the Company secured a loan payable of $25,000 accruing interest at 15%, due March 6, 2010 and secured by the assets of the company.  The term of this loan has been extended to September 6, 2012. Accrued interest related to this loan is $10,869 as of April 30, 2011.


Total interest expense on the above loans was $44,394 for the nine months ended January 31, 2012.


NOTE 6. GOING CONCERN


The accompanying financial statements have been prepared assuming that the Company will continue as a going concern.  The Company has net losses for the period from inception to January 31, 2012 of $18,205,209 and has negative working capital. This condition raises substantial doubt about the Company’s ability to continue as a going concern. The Company’s continuation as a going concern is dependent on its ability to meet its obligations, to obtain additional financing as may be required and ultimately to attain profitability. The financial statements do not include any adjustments that might result from the outcome of this uncertainty.  Management is planning to raise additional funds through an equity offering. There is no guarantee that the Company will be successful in these efforts.


NOTE 7. STOCKHOLDERS’ DEFICIT


Authorized

The Company is authorized to issue 300,000,000 shares of $0.001 par value common stock and 25,000,000 shares of $0.001 par value preferred stock. All common stock shares have equal voting rights, are non-assessable and have one vote per share. Voting rights are not cumulative and, therefore, the holders of more than 50% of the common stock could, if they choose to do so, elect all of the directors of the Company. The preferred shares may be issued in series, with the powers, rights and limitations of the preferred shares to be determined by the Board.


On June 14, 2007, the Nevada Secretary of State accepted for filing a Certificate of Amendment increasing the Company’s authorized common stock from 25,000,000 with a par value of $0.001 to 300,000,000 with a par value of $0.001. The amendment was approved by the shareholders and directors on May 21, 2007.


On July 10, 2007, the Board of Directors approved a 60 for one (1) forward stock split of issued and outstanding shares of common stock. In connection with the forward stock split, the issued and outstanding shares increased from 4,500,000 to 270,000,000.


Issued and Outstanding

On March 1, 2010, the Company issued 3,500,000 shares of common stock at $0.05 per share for total proceeds of $175,000.


On August 10, 2010, the Company issued 3,400,000 shares of common stock at $0.15 per share for total proceeds of $510,000.  





F-9



BIOSHAFT WATER TECHNOLOGY, INC.

NOTES TO FINANCIAL STATEMENTS

JANUARY 31, 2012


NOTE 7. STOCKHOLDERS’ DEFICIT (CONTINUED)


Issued and Outstanding(continued)

On January 6, 2011, the Company issued 2,000,000 shares of common stock at $0.15 per share for total proceeds of $300,000.


On January 18, 2011, the Company issued 2,000,000 shares of common stock at $0.15 per share for total proceeds of $300,000.


On March 31, 2011, the Company issued 150,000 shares of common stock at $0.15 per share for total proceeds of $300,000.


On June 22, 2011, the Company issued 333,333 shares of common stock at $0.15 per share for total proceeds of $50,000.


On July 2, 2011, the Company issued 333,333 shares of common stock at $0.15 per share for total proceeds of $50,000.


Stock Options and Stock-Based Compensation

On September 15, 2010, the Company granted 6,000,000 options at an exercise price of $0.15.


2,000,000 options were issued to an employee and valued at $81,025 using the Black-Scholes model. Stock-based compensation totaling $10,128 was recognized in the current fiscal period. Unrecognized expense of $45,577 will be recognized over the remainder of the 24 month vesting period.


4,000,000 options were issued to two consultants.  2,000,000 of the options were valued at $81,025 using the Black-Scholes model, and were expensed in the current fiscal year as they immediately vested.  The remaining 2,000,000 options were valued at $81,025 using the Black-Scholes model, and are being expensed over the term of the consulting agreements. $12,896 was expensed in the current fiscal period, and the remaining $42,809 was recognized as Prepaid Consulting Fees and will be amortized over the remaining contract term. The term of both consulting agreements is 24 months.


On January 10, 2011, the Company granted 450,000 options with an exercise price of $0.15, valued at $22,146 using the Black-Scholes model to two consultants for management and marketing services.  The options are being expensed over the terms of the consulting agreements.


The Company uses the Black-Scholes option valuation model to value stock options granted. The Black- Scholes model was developed for use in estimating the fair value of traded options that have no vesting restrictions and are fully transferable. The model requires management to make estimates, which are subjective and may not be representative of actual results. Assumptions used to determine the fair value of the stock-based compensation is as follows:


Exercise price

$0.15

Risk free interest rate

1.4%-4.25%

Expected dividend yield

0%

Volatility

58-140%

Expected life of options

5 years






F-10



BIOSHAFT WATER TECHNOLOGY, INC.

NOTES TO FINANCIAL STATEMENTS

JANUARY 31, 2012


NOTE 8.  RELATED PARTY TRANSACTIONS


One of the consultants is due $251,000 for consulting expenses since inception which is included in accounts payable and accrued expenses.


NOTE 9. COMMITMENT


Operating Leases


In April 2009, Company entered into a lease for a new facility, commencing May 5, 2009. The lease expires on May 4, 2013 and carries a base rent of $24,692 per year.


The Company has the following rent commitment for the twelve months ended April 30:


April 30, 2012

 

$     24,692

2013

 

24,692

2014

 

326

Total

 

$     49,710


NOTE 10. INCOME TAXES


The Company did not provide any current or deferred United States federal, state or foreign income tax provision or benefit for the period presented because it has experienced operation losses since inception.  The Company has provided a full valuation allowance on the deferred tax asset, consisting primarily of net operating loss carry-forwards, because of uncertainty regarding its realization.


Deferred income taxes reflect the net tax effect of temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for income tax purposes. Significant components of the net deferred taxes at January 31, 2012 and April 30, 2011 are as follows:


 

January 31,

2012

April 30,

2011

Deferred tax asset attributable to:

 

 

Net operating losses carried forward

$   4,005,146

$3,885,146

Valuation allowance

(4,005,146)

(3,885,146)

Total net deferred tax asset

$                 -

$                  -


Bioshaft follows Statement of Financial Accounting Standards Number 109 (SFAS 109) (ASC 740-10), “Accounting for Income Taxes.” SFAS No. 109 (ASC 740-10) requires a valuation allowance, if any, to reduce the deferred tax assets reported if, based on the weight of the evidence, it is more likely than not that some portion or all of the deferred tax assets will not be realized.  Management has determined that a valuation allowance of $4,005,146 at January 31, 2012 is necessary to reduce the deferred tax assets to the amount that will more likely not be realized.  


At January 31, 2012, the Company had net operating loss carry-forwards amounting to approximately $18,205,209 that expire in various amounts through 2031 in the U.S.


NOTE 11. SUBSEQUENT EVENTS


Management has evaluated subsequent events to the date on which the financial statements were issued, and has determined it does not have any material subsequent events to disclose.







F-11



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


Forward Looking Statements


This quarterly report contains forward-looking statements. 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", "expects", "plans", "anticipates", "believes", "estimates", "predicts", "potential" or "continue" or the negative of these terms or other comparable terminology. These statements are only predictions and involve known and unknown risks, uncertainties and other factors, including the risks in the section entitled "Risk Factors", that may cause our or our industry’s actual results, levels of activity, performance or achievements to be materially different from any future results, levels of activity, performance or achievements expressed or implied by these forward-looking statements.


Although we believe that the expectations reflected in the forward-looking statements are reasonable, we cannot guarantee future results, levels of activity, performance or achievements. Except as required by applicable law, including the securities laws of the United States, we do not intend to update any of the forward-looking statements to conform these statements to actual results.


Our financial statements are stated in United States dollars and are prepared in accordance with United States generally accepted accounting principles.


In this quarterly report, unless otherwise specified, all dollar amounts are expressed in United States dollars. All references to "common shares" refer to the common shares in our capital stock.


As used in this quarterly report, the terms "we", "us", "our" and "our company" mean Bioshaft Water Technology, Inc., a Nevada corporation, unless otherwise indicated.


General


We were incorporated on March 8, 2006, under the laws of the State of Nevada as "Pointstar Entertainment Corp." Effective September 28, 2007, we completed a merger with our subsidiary, "Bioshaft Water Technology, Inc.", also a Nevada corporation. As a result, we changed our name from "Pointstar Entertainment Corp." to "Bioshaft Water Technology, Inc." Our stock symbol is "BSHF".


Our principal executive offices are located at 1 Orchard Road, # 220, Lake Forest CA, 92630 and our telephone number is (949) 748-8050.


Current Business


We are currently engaged in a specific branch of waste water treatment known as domestic waste or sewage treatment.


On September 18, 2007, we entered into an asset purchase agreement with Hans Bio Shaft Limited and Hassan Hans Badreddine, pursuant to which we acquired from Hans Bio Shaft U.K. Patent GB2390365 titled "Waste Water Treatment Plant and Method" and related United States and European patent applications for the design of a certain waste water treatment plant system. In consideration for the U.K. patent and related United States and European patent applications.


Effective September 28, 2007, we changed our name from "Pointstar Entertainment Corp." to "Bioshaft Water Technology, Inc.".


With the completion of the asset purchase agreement, we changed our business to the business of designing and manufacturing domestic waste water treatment plant systems, using our patented Hans BioShaft unit - the Hans BioShaft System.





4



We appointed Water Masters as a distributor in Saudi Arabia. On June 25, 2009, Water Masters sold a 30 m3/ day (7,920 GPD) Bioshaft plant for installation in Jeddah, Saudi Arabia. Also, a purchase order for a 15m3/day (3,960 GPD) plant was received on February 14, 2011. The plant is to be installed at the Musallam Villa.


·

A purchase order for a 500 m3/day (132,100 GPD) sewage treatment plant upgrade was received after the approval by the ministry of Public Works in Bahrain. This project has a potential for additional 15 plants to be upgraded with BioShaft Technology.


·

BioShaft Technology was specified by the ministry of defense in Saudi Arabia in a tender for a 14,000 M3/DAY (3,700,000 GPD) plant. We are waiting for the purchase order through Wettico, our partner, the largest waste water treatment contractor in Saudi Arabia, to start drafting the contract.


On March 6, 2010 we signed a teaming agreement with Zuheir Zahran & Co, a development company based in Jeddah, Saudi Arabia. The agreement provided our company with an experienced and established business developer to immediately pursue and implement our business plan in the Saudi Arabian and the gulf market. This teaming agreement boosted sales orders and qualified our company to bid for large size plants and provided the recognition of BioShaft Technology by government agencies and design engineering firms. Some of these highlights are:


·

May, 2010 we installed a 50 m3/day (13,210 GPD) plant at a residential complex in Jeddah, Saudi Arabia. Tests results were consistent and satisfactory for over a year of operation with superior effluent quality and no sludge production or extraction.


·

BioShaft Technology was approved for a 2,000 m3/day (528,400 GPD) plant from the City of Jazan, Saudi Arabia, ministry of water and electricity. Several other approvals are being formalized for high rise tower projects in Jeddah, Saudi Arabia where minimum footprint is a great advantage.


·

A 60 m3/day (15,852 GPD) plant is under construction in a Jeddah commercial center. Another 60 m3/day (15,852 GPD) was approved on February 21, 2011 serving Al-Rai pharmaceutical industrial plant at Jeddah's industrial area.


·

Our company completed the sales and installation of a 30 m3/ day (7,920 GPD) plant in Jeddah -Saudi Arabia through the appointed distributor Water Masters. Two other plants serving residential facilities were sold to Water Masters. A 30m3/day (7.920 GPD) on November 3, 2010 and a 15m3/day (3,960 GPD) on February 12, 2010. Both plants are under construction.  Both plants are awaiting delivery to their corresponding site and installation.  


·

Four more plants were sold to Water Masters, Jeddah, SA for residential complex applications in the Kingdom of Saudi Arabia. A 500 m3/day (134,000 GPD) concrete above ground plant is under construction. A 200 m3/day (52,800 GPD) packaged steel plant was fully installed on site and is awaiting client’s approval for startup after their completion of the residential development. Another 170 m3/day (44,900 GPD) packaged container plant was received from vendor and is being prepared for shipment to the site for installation. Also, a 100 m3/day (26,400 GPD) domestic container above ground plant was installed and is in process of being released to the end user.


·

Bioshaft is proud to announce it secured the sale of its first plant for industrial application for a new brewery in Texas, USA. The 36 m3/day (9,600 GPD) containerized plant is in process of being shipped to the site for installation in early April 2012.


·

Bioshaft sold another containerized 15 m3/day (3,963 GPD) for testing at an industrial application in Japan. The plant was installed and is running as of February 2012. Bioshaft received a much larger request for quote from the same client for another industrial application in Japan.  


On August 1, 2011, we entered into a stock option agreement with Walter Zurawick for an option to acquire 200,000 shares of common stock of our company at an exercise price of $0.15 per share for a period of five years. The option shall vest at 8,333 shares per month over 24 months on each monthly anniversary of the stock option agreement.




5



Effective February 24, 2012, we entered into an employment agreement, dated February 1, 2012, with Walter J. Zurawick Jr. whereby Mr. Zurawick has agreed to perform executive duties and responsibilities as president and chief executive officer of our company for a period of 24 months.  The employment agreement became effective upon the resignation of Mr. Zurawick’s predecessor, Hassan Hans Badreddine.  As compensation, we have agreed to pay Mr. Zurawick a base salary at an annual rate of US$210,000, pro-rated on a monthly basis.


Results of Operations


Three Months Summary


  

 

Three Months Ended

 

  

 

January 31,

 

  

 

2012

 

 

2011

 

Gross Margin                                         

$

34,346

 

$

Nil

 

Operating Expenses

 

282,428

 

 

113,731

 

Interest Income (Expense), net

 

(31,617

)

 

(18,904

)

  

 

  

 

 

  

 

Net Loss

$

279,699

 

$

 (132,635

)


Nine Months Summary


  

 

Nine Months Ended

 

  

 

January 31,

 

  

 

2012

 

 

2011

 

Gross Margin

$

100,739

 

$

Nil

 

Operating Expenses

 

691,800

 

 

482,700

 

Interest Income (Expense), net        

 

(44,394

)

 

145,794

 

  

 

  

 

 

  

 

Net Loss

$

(635,455

)

$

(336,906

)


Revenue


We have earned revenue of $295,854 and $483,440, respectively, during three and nine month periods ended January 31, 2012 as we enter into an agreement(s) with our potential customers for the purchase and sale of our products.


Expenses


 

 

Three Months Ended

 

 

 

January 31,

 

 

 

2012

 

 

2011

 

Depreciation and amortization              

 $

2,496

 

 $

6,276

 

General and Administrative

 

209,215

 

 

104,002

 

Stock based compensation expense

 

70,717

 

 

3,453

 

Net Loss from operations

$

248,082

 

$

(113,731

)


 

 

Nine Months Ended

 

 

 

January 31,

 

 

 

2012

 

 

2011

 

Depreciation and amortization

 $

7,488

 

$

18,830

 

General and Administrative

 

582,647

 

 

363,301

 

Stock based compensation expense

 

101,665

 

 

100,569

 

Net Loss from operations

$

(591,061

)

$

(482,700

)




6



Total operating expenses during the three months ended January 31, 2012 increased as compared to the comparative period in 2011 primarily due to an increase in general and administrative expenses and stock-based compensation.


Total operating expenses during the nine months ended January 31, 2012 increased as compared to the comparative period in 2011 primarily due to an increase in general and administrative expenses.


Liquidity and Financial Condition


Working Capital


As of January 31, 2012, our total current assets were $669,658 and our total current liabilities were $1,284,716 and we had a working capital deficit of $615,058.


  

 

January 31,

 

 

April 30,

 

  

 

2012

 

 

2011

 

Current assets

$

669,658

 

$

 688,008

 

Current liabilities

 

1,284,716

 

 

872,197

 

Working capital deficiency

$

(615,058

)

$

(184,189

)


Cash Flows


  

 

Nine Months Ended

 

  

 

January 31,

 

  

 

2012

 

 

2011

 

Net cash flows provided by (used in) operating activities

$

(413,818

)

$

(322,875

)

Net cash flows provided by (used in) investing activities

 

(4,567

)

 

Nil

 

Net cash flows provided by (used in) financing activities

 

(115,000

)

 

1,010,000

 

Net increase (decrease) in cash during period

$

(533,385

)

$

701,272

 


Future Financing


We have not had significant revenues from inception and cash on hand is currently our only source of liquidity. The ability of our company to meet our financial liabilities and commitments is primarily dependent upon the continued financial support of our directors and shareholders, the continued issuance of equity to new stockholders and our ability to achieve and maintain profitable operations.


Management believes that our cash and cash equivalents and cash provided by operating activities will not be sufficient to meet our working capital requirements for the next twelve month period. We estimate that we will require an additional $1,500,000 over the next twelve month period to fund our operating cash shortfall. We plan to raise the capital required to satisfy our immediate short-term needs and additional capital required to meet our estimated funding requirements for the next twelve months primarily through the private placement of our equity securities. There are no assurances that we will be able to obtain funds required for our continued operation. There can be no assurance that additional financing will be available to us when needed or, if available, that it can be obtained on commercially reasonable terms. If we are not able to obtain the additional financing on a timely basis, we will not be able to meet our other obligations as they become due and we will be forced to scale down or perhaps even cease the operation of our business.


There is substantial doubt about our ability to continue as a going concern as the continuation of our business is dependent upon obtaining further long-term financing, successful and sufficient market acceptance of our products and achieving a profitable level of operations. The issuance of additional equity securities by us could result in a significant dilution in the equity interests of our current stockholders. Obtaining commercial loans, assuming those loans would be available, will increase our liabilities and future cash commitments.


Capital Expenditures


We do not have any material commitments for capital expenditures and management does not anticipate that we will spend additional material amounts on capital expenditures in the near future.



7



Employees


We plan to employ a number of executive officers including a vice president of marketing and three sales engineers. We anticipate that we may spend up to $350,000 to employ officers and employees and up to $50,000 in payroll taxes.


Other than as disclosed herein, we have no plans to significantly change our number of employees for the next 12 months.


Off-Balance Sheet Arrangements


There are no 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 is material to investors.


Critical Accounting Policies


Our financial statements have been prepared in accordance with the U.S. GAAP. 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.


The financial statements have, in management's opinion, been properly prepared within reasonable limits of materiality and within the framework of significant accounting policies.


Basis of Accounting


The accompanying financial statements have been prepared using the accrual basis of accounting in accordance with accounting principles generally accepted in the United States of America and are presented in U.S. dollars. Our company has adopted an April 30 year end.


Basis of Presentation


The accompanying unaudited interim financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America and the rules of the Securities and Exchange Commission (“SEC”), and should be read in conjunction with the audited financial statements and notes thereto contained in our company’s Form 10-K filed with the SEC as of and for the period ended April 30, 2011.  In the opinion of management, all adjustments necessary for the financial statements to be not misleading for the interim periods presented have been reflected herein.  The results of operations for interim periods are not necessarily indicative of the results to be expected for the full year.


Development Stage in Prior Periods


Our company was in the development stage from March 8, 2006 (date of inception) through April 30, 2011. The period ending October 31, 2011 is the first during which our company is considered an operating company and is no longer in the development stage.


Use of Estimates


The preparation of financial statements in conformity with generally accepted accounting principles of the United States requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the year. The more significant areas requiring the use of estimates include asset impairment, stock-based compensation, and future income tax amounts. Management bases its estimates on historical experience and on other assumptions considered to be reasonable under the circumstances. However, actual results may differ from the estimates.




8



Cash and Cash Equivalents


Cash and cash equivalents include cash in hand and cash in time deposits, certificates of deposit and all highly liquid debt instruments with original maturities of three months or less.


Property and Equipment


Property and equipment consists of computer equipment, an automobile and demonstration equipment and is recorded at cost.  Depreciation is provided using the straight-line method over the estimated useful lives of the assets as follows:


Computer Equipment

3 Years  

Automobile

3 Years

Demonstration Equipment

5 Years


Reclassifications


Certain accounts and financial statement captions in the prior periods have been reclassified to conform to the current period financial statements.


Intangible Assets


Our company adopted Statement of Financial Accounting Standards No. 144, “Accounting for the Impairment or Disposal of Long-Lived Assets” (“SFAS 144” or “ASC 360”), which addresses financial accounting and reporting for the impairment or disposal of long-lived assets and supersedes SFAS No. 121, “Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to be Disposed Of,” and the accounting and reporting provisions of APB Opinion No. 30, “Reporting the Results of Operations for a Disposal of a Segment of a Business.” Our company periodically evaluates the carrying value of long-lived assets to be held and used in accordance with SFAS 144. SFAS 144 requires impairment losses to be recorded 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 assets’ carrying amounts. In that event, a loss is recognized based on the amount by which the carrying amount exceeds the fair market value of the long-lived assets. Loss on long-lived assets to be disposed of is determined in a similar manner, except that fair market values are reduced for the cost of disposal.


Fair Value of Financial Instruments


Our company's financial instrument consists of prepaid expenses, deposits, investments, customer deposits, accounts payable and accrued expenses, accrued interest, loans payable and loans payable to a related party. It is management's opinion that our company is not exposed to significant interest, currency or credit risks arising from its other financial instruments and that their fair values approximate their carrying values except where separately disclosed.  


Revenue Recognition


We recognize revenue in accordance with generally accepted accounting principles as outlined in the Securities and Exchange Commission’s Staff Accounting Bulletin No. 104, Revenue Recognition (SAB 104 or ASC 605-10), which requires that four basic criteria be met before revenue can be recognized: (i) persuasive evidence of an arrangement exists; (ii) the price is fixed or determinable; (iii) collectability is reasonably assured; and (iv) product delivery has occurred or services have been rendered. Revenue from the sale of products is generally recognized after both the goods are shipped to the customer and acceptance has been received, if required. Our products are custom made for our customers, who primarily consist of original engineer manufacturers (OEMs), and we do not accept returns. Our products are shipped complete and ready to be incorporated into higher level assemblies by our customers. The terms of the customer arrangements generally pass title and risk of ownership to the customer at the time of shipment.




9



Stock-Based Compensation


In December 2004, the FASB issued SFAS No. 123R, “Share Based Payment” (ASC 718). SFAS No. 123R establishes the accounting for grants of stock options and other 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. SFAS No. 123R (1) revises SFAS No. 123, “Accounting for Stock-Based Compensation,” (2) supersedes Accounting Principles Bulletin (“APB”) Opinion No. 25, “Accounting for Stock Issued to Employees,” and (3) establishes fair value as the measurement objective for share-based payment transactions. Our company is following the provisions of SFAS No. 123R and has recorded compensation expenses related to the granting of stock options to employees.


Income Taxes


Our company provides for income taxes using an asset and liability approach. Deferred tax assets and liabilities are recorded based on the differences between the financial statement and tax bases of assets and liabilities and the tax rates in effect currently. Deferred tax assets are reduced by a valuation allowance if, based on the weight of available evidence, it is more likely than not that some or all of the deferred tax assets will not be realized.  No provision for income taxes is included in the statement due to its immaterial amount, net of the allowance account, based on the likelihood of our company to utilize the loss carry-forward.


Basic and Diluted Earnings (Loss) Per Share


Earnings (loss) per share is calculated in accordance with the Statement of financial accounting standards No. 128 (SFAS No. 128 or ASC 260), “Earnings per share”. SFAS No. 128 superseded Accounting Principles Board Opinion No.15 (APB 15). Net income (loss) per share for all periods presented has been restated to reflect the adoption of SFAS No. 128. Basic net loss per share is based upon the weighted average number of common shares outstanding. Diluted net loss per share is based on the assumption that all dilutive convertible shares and stock options were converted or exercised. Dilution is computed by applying the treasury stock method. Under this method, options and warrants are assumed to be exercised at the beginning of the period (or at the time of issuance, if later), and as if funds obtained thereby were used to purchase common stock at the average market price during the period. Basic and diluted loss per share were $0.001 and $0.00 for the three months ended January 31, 2012 and 2011 respectively.


Concentration of Credit Risk


Financial instruments that potentially subject our company to concentrations of credit risk are cash, accounts receivable and other receivables arising from its normal business activities. Our company places its cash in what it believes to be credit-worthy financial institutions. Our company has a diversified customer base. Our company controls credit risk related to accounts receivable through credit approvals, credit limits and monitoring procedures. Our company routinely assesses the financial strength of its customers and, based upon factors surrounding the credit risk, establishes an allowance, if required, for uncollectible accounts and, as a consequence, believes that its accounts receivable credit risk exposure beyond such allowance is limited.


Recent Accounting Pronouncements


In May 2009, the FASB issued SFAS 165 (ASC 855-10) entitled “Subsequent Events”.  Companies are now required to disclose the date through which subsequent events have been evaluated by management. Public entities (as defined) must conduct the evaluation as of the date the financial statements are issued, and provide disclosure that such date was used for this evaluation. SFAS 165 (ASC 855-10) provides that financial statements are considered “issued” when they are widely distributed for general use and reliance in a form and format that complies with GAAP. SFAS 165 (ASC 855-10) is effective for interim and annual periods ending after June 15, 2009 and must be applied prospectively. The adoption of SFAS 165 (ASC 855-10) during the year ended November 30, 2009 did not have a significant effect on our company’s financial statements as of that date. In connection with the preparation of the accompanying financial statements as of July 31, 2011, management evaluated subsequent events through the date that such financial statements were issued.




10



In June 2009, the FASB issued SFAS 168, The FASB Accounting Standards Codification and the Hierarchy of Generally Accepted Accounting Principles. (“SFAS 168” or ASC 105-10) SFAS 168 (ASC 105-10) establishes the Codification as the sole source of authoritative accounting principles recognized by the FASB to be applied by all nongovernmental entities in the preparation of financial statements in conformity with GAAP. SFAS 168 (ASC 105-10) was prospectively effective for financial statements issued for fiscal years ending on or after September 15, 2009 and interim periods within those fiscal years. The adoption of SFAS 168 (ASC 105-10) on July 1, 2009 did not impact our company’s results of operations or financial condition. The Codification did not change GAAP, however, it did change the way GAAP is organized and presented.


As a result, these changes impact how companies reference GAAP in their financial statements and in their significant accounting policies. Our company implemented the Codification in this Report by providing references to the Codification topics alongside references to the corresponding standards.


With the exception of the pronouncements noted above, no other accounting standards or interpretations issued or recently adopted are expected to have a material impact on our company’s financial position, operations or cash flows.


As a result, these changes impact how companies reference GAAP in their financial statements and in their significant accounting policies. Our company implemented the Codification in this Report by providing references to the Codification topics alongside references to the corresponding standards.


With the exception of the pronouncements noted above, no other accounting standards or interpretations issued or recently adopted are expected to have a material impact on our company’s financial position, operations or cash flows.


Item 3. Quantitative and Qualitative Disclosures About Market Risk


As a "smaller reporting company", we are not required to provide the information required by this Item.


Item 4. Controls and Procedures


Management's Report on Disclosure Controls and Procedures


We maintain disclosure controls and procedures that are designed to ensure that information required to be disclosed in our reports filed under the Securities Exchange Act of 1934, as amended, is recorded, processed, summarized and reported within the time periods specified in the Securities and Exchange Commission's rules and forms, and that such information is accumulated and communicated to our management, including our president (our principal executive officer) and our chief financial officer (our principal financial officer and principle accounting officer) to allow for timely decisions regarding required disclosure.


As of the end of the quarter covered by this report, we carried out an evaluation, under the supervision and with the participation of our president (our principal executive officer) and our chief financial officer (our principal financial officer and principle accounting officer), of the effectiveness of the design and operation of our disclosure controls and procedures. Based on the foregoing, our president (our principal executive officer) and our chief financial officer (our principal financial officer and principle accounting officer) concluded that our disclosure controls and procedures were effective as of the end of the period covered by this quarterly report.


Changes in Internal Control over Financial Reporting


During the period covered by this report there were no changes in our internal control over financial reporting that materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.





11



PART II - OTHER INFORMATION


Item 1. Legal Proceedings


We know of no material, existing or pending legal proceedings against our company, nor are we involved as a plaintiff in any material proceeding or pending litigation. There are no proceedings in which any of our directors, officers or affiliates, or any registered beneficial shareholder, is an adverse party or has a material interest adverse to our interest.


Item 1A. Risk Factors


Much of the information included in this quarterly report includes or is based upon estimates, projections or other forward-looking statements. Such forward-looking statements include any projections or estimates made by us and our management in connection with our business operations. 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 herein. We undertake no obligation to update forward-looking statements to reflect events or circumstances occurring after the date of such statements.


Such estimates, projections or other forward-looking statements involve various risks and uncertainties as outlined below. We caution readers of this quarterly report that important factors in some cases have affected and, in the future, could materially affect actual results and cause actual results to differ materially from the results expressed in any such estimates, projections or other forward-looking statements. In evaluating us, our business and any investment in our business, readers should carefully consider the following factors.


Risks Related to Our Business


We have a history of losses and limited revenues, which raise substantial doubt about our ability to continue as a going concern.


From inception to January 31, 2012, we have incurred aggregate net losses of $18,205,209. We can offer no assurance that we will ever operate profitably or that we will generate positive cash flow in the future. In addition, our operating results in the future may be subject to significant fluctuations due to many factors not within our control, such as the unpredictability of when customers will order products, the size of customers’ orders, the demand for our products, and the level of competition and general economic conditions.


Our company’s operations will be subject to all the risks inherent in the establishment of a developing enterprise and the uncertainties arising from the absence of a significant operating history. No assurance can be given that we may be able to operate on a profitable basis.


Due to the nature of our business and the early stage of our development, our securities must be considered highly speculative. We have not realized a profit from our operations to date and there is little likelihood that we will realize any profits in the short or medium term. Any profitability in the future from our business will be dependent upon the successful commercialization or licensing of our core products, which themselves are subject to numerous risk factors as set forth below.


We expect to continue to incur development costs and operating costs. Consequently, we expect to incur operating losses and negative cash flows until our products gain market acceptance sufficient to generate a commercially viable and sustainable level of sales, and/or additional products are developed and commercially released and sales of such products made so that we are operating in a profitable manner. Our history of losses and limited revenues raise substantial doubt about our ability to continue as a going concern.






12



We have had negative cash flows from operations since inception. We will require significant additional financing, the availability of which cannot be assured, and if our company is unable to obtain such financing, our business may fail.


To date, we have had negative cash flows from operations and have depended on sales of our equity securities and debt financing to meet our cash requirements. We may continue to have negative cash flows. We have estimated that we will require approximately $1,500,000 to carry out our business plan for the next twelve months. There is no assurance that actual cash requirements will not exceed our estimates. We will require additional financing to finance working capital and pay for operating expenses and capital requirements until we achieve a positive cash flow.


Our ability to market and sell our waste water treatment plant system will be dependent upon our ability to raise significant additional financing. If we are unable to obtain such financing, we will not be able to fully develop our business. Specifically, we will need to raise additional funds to:


·

support our planned growth and carry out our business plan;


·

protect our intellectual property;


·

hire top quality personnel for all areas of our business;


·

address competing technological and market developments; and


·

market and develop our technologies.


We may not be able to obtain additional equity or debt financing on acceptable terms as required. Even if financing is available, it may not be available on terms that are favorable to us or in sufficient amounts to satisfy our requirements. Any additional equity financing may involve substantial dilution to our then existing shareholders. If we require, but are unable to obtain, additional financing in the future, we may be unable to implement our business plan and our growth strategies, respond to changing business or economic conditions, withstand adverse operating results and compete effectively. More importantly, if we are unable to raise further financing when required, we may be forced to scale down our operations and our ability to generate revenues may be negatively affected.


We have a limited operating history and if we are not successful in continuing to grow our business, then we may have to scale back or even cease our ongoing business operations.


We have a history of limited revenues from operations and have no significant tangible assets. We have yet to generate positive earnings and there can be no assurance that we will ever operate profitably. We have only recently completed our acquisition of the U.K. patent in respect to the Hans BioShaft System and our company has limited operating history in the business of designing and manufacturing domestic waste water treatment plant system. Accordingly, we must be considered in the development stage. Our success is significantly dependent on a successful commercialization of our waste water treatment plant system. Our operations will be subject to all the risks inherent in the establishment of a developing enterprise and the uncertainties arising from the absence of a significant operating history. We may be unable to develop a useful waste water treatment system or achieve commercial acceptance of our waste water treatment plant system or operate on a profitable basis. We are in the development stage and potential investors should be aware of the difficulties normally encountered by enterprises in the development stage. If our business plan is not successful, and we are not able to operate profitably, investors may lose some or all of their investment in our company.






13



If we fail to effectively manage the growth of our company and the commercialization of our products and technology, our future business results could be harmed and our managerial and operational resources may be strained.


As we proceed with the commercialization of our products, technologies and the expansion of our marketing and commercialization efforts internationally, we expect to experience significant growth in the scope and complexity of our business. We will need to add staff to market our services, manage operations, handle sales and marketing efforts and perform finance and accounting functions. We anticipate that we will be required to hire a broad range of additional personnel in order to successfully advance our operations. This growth is likely to place a strain on our management and operational resources. The failure to develop and implement effective systems, or to hire and retain sufficient personnel for the performance of all of the functions necessary to effectively service and manage our potential business, or the failure to manage growth effectively, could have a material adverse effect on our business and financial condition.


We do not have the ability to manufacture our product on a commercial scale and will need to rely on third-party manufacturers and other third parties for production of our products, and our dependence on these manufacturers may impair the development of our product candidates.


Currently, we do not have the ability to internally manufacture our product on a commercial scale. We are in the process of identifying manufacturers for long-term supply contracts of components and subassemblies of our product. There are several potential manufacturers capable of manufacturing components and subassemblies for our waste water treatment plant system. There can be no assurance that we will be able to successfully negotiate long-term agreements with any of such potential manufacturers at a reasonable price and on other acceptable terms.


If our third-party manufacturers fail to deliver our products on a timely basis, with sufficient quality, and at commercially reasonable prices, we may be required to delay, suspend or otherwise discontinue development and production of our product. While we may be able to identify replacement third-party manufacturers or develop our own manufacturing capabilities for our product, this process would likely cause a delay in the availability of our product and an increase in costs. We may also be required to enter into long-term manufacturing agreements that contain exclusivity provisions and/or substantial termination penalties. In addition, third-party manufacturers may have a limited number of facilities in which our product can be produced, and any interruption of the operation of those facilities due to events such as equipment malfunction or failure or damage to the facility by natural disasters could result in the cancellation of shipments, loss of product in the manufacturing process or a shortfall in available product.


We depend upon a number of third party suppliers for component parts for our products, and any disruption from such suppliers could prevent us from delivering our products to our customers within required timeframes or at scheduled prices, which could result in order cancellations and a decline in sales.


We assemble our products using materials and components procured from a number of third-party suppliers. If we fail to maintain our relationships with these suppliers, we may be unable to assemble our products or our products may be available only at a higher cost or after a long delay. We may be unable to obtain comparable materials and components from alternative suppliers. Our failure to obtain components that meet our quality, quantity, technological and cost requirements in a timely manner may interrupt or impair our ability to assemble our products or it may increase our manufacturing cost. We may be unable to identify new suppliers or qualify their products for use on our production lines in a timely manner and on commercially reasonable terms. Any of these factors could prevent us from delivering our products to our customers within required timeframes, and we may experience order cancellations which would adversely affect our business operations.







14



We may lose our competitiveness if we are not able to protect our proprietary technology and intellectual property rights against infringement, and any related litigation may be time-consuming and costly.


Our success and ability to compete depends to a significant degree on our proprietary technology. If any of our competitors copy or otherwise gain access to our proprietary technology or develop similar technologies independently, we may not be able to compete as effectively. The measures we have implemented to protect our proprietary technology and other intellectual property rights are currently based upon a combination of a patent, patent applications and trade secrets. These measures, however, may not be adequate to prevent the unauthorized use of our proprietary technology and our other intellectual property rights. Our pending patent applications may not result in the issuance of any patents or any issued patents that will offer protection against competitors with similar technology. Further, the laws of foreign countries may provide inadequate protection of such intellectual property rights. We may need to bring legal claims to enforce or protect such intellectual property rights. Any litigation, whether successful or unsuccessful, may result in substantial costs and a diversion of our company's resources. In addition, notwithstanding our rights to our intellectual property, other persons may bring claims against us alleging that we have infringed on their intellectual property rights or claims that our intellectual property rights are not valid. Any claims against us, with or without merit, could be time consuming and costly to defend or litigate, divert our attention and resources, result in the loss of goodwill associated with our business or require us to make changes to our technology.


The manufacture, use or sale of our waste water treatment plant system may infringe on the patent rights of others, and we may be forced to litigate if an intellectual property dispute arises.


If we infringe or are alleged to have infringed another party's patent rights, we may be required to seek a license, defend an infringement action or challenge the validity of the patents in court. Patent litigation is costly and time consuming. We may not have sufficient resources to bring these actions to a successful conclusion. In addition, if we do not obtain a license, do not successfully defend an infringement action or are unable to have infringed patents declared invalid, we may:


·

incur substantial monetary damages;


·

encounter significant delays in marketing our waste water treatment plant system;


·

be unable to conduct or participate in the manufacture, use or sale of our waste water treatment plant system;


·

lose patent protection for our inventions and products; or


·

find that our patents are unenforceable, invalid, or have a reduced scope of protection.


Parties making such claims may be able to obtain injunctive relief that could effectively block our ability to further develop or commercialize our waste water treatment plant system in United States, Central and Eastern Europe, Asia and Middle East and could result in the award of substantial damages. Defense of any lawsuit or failure to obtain any such license could substantially harm our company. Litigation, regardless of outcome, could result in substantial cost to and a diversion of efforts by our company.


Because our waste water treatment plant system has not been accepted as a recognized form of waste water treatment, we face significant barriers to acceptance of our services.


Our waste water treatment plant system has not been fully utilized in any particular market. The use of equipment such as ours is a relatively new form of waste water treatment. Traditionally, these services are provided through other treatment methodologies, such as chemicals or other aeration methods. Accordingly, we face significant barriers to overcome the consumer preferences of traditionally used treatment programs for the type of waste water treatment products and services that we offer.





15



Market acceptance of our products and services will depend in large part upon our ability to demonstrate the technical and operational advantages and cost effectiveness of our products and services as compared to alternative, competing products and services, and our ability to train customers concerning the proper use and application of our products. There can be no assurance that our products and services will achieve a level of market acceptance that will be profitable for us.


Our waste water treatment plant system may not achieve market acceptance at a level necessary for us to operate successfully.


Our waste water treatment plant system may not achieve market acceptance at a level necessary to enable production at a reasonable cost, to support the required sales and marketing effort, to effectively service and maintain, and to support continuing research and development costs. In addition, our waste water treatment plant system may:


·

be difficult or overly expensive to produce;


·

fail to achieve performance levels expected by customers;


·

have a price level that is unacceptable in our targeted industries; or


·

be precluded from commercialization by the proprietary rights of others or other competitive forces.


We cannot assure you that we will be able to successfully manufacture and market our waste water treatment plant system on a timely basis, achieve anticipated performance levels or throughputs, gain and maintain industry acceptance of our waste water treatment plant system or develop a profitable business. The failure to achieve any of these objectives would have a material adverse effect on our business, financial condition and results of operations.


Because we face intense competition from larger and better-established companies that have more resources than we do, we may be unable to implement our business plan or increase our revenues.


The market for our waste water treatment products and services is intensely competitive and highly fragmented. Many of these competitors may have longer operating histories, greater financial, technical and marketing resources, and enjoy existing name recognition and customer bases. New competitors may emerge and rapidly acquire significant market share. In addition, new technologies likely will increase the competitive pressures we face. Competitors may be able to respond more quickly to technological change, competitive pressures, or changes in consumer demand. As a result of their advantages, our competitors may be able to limit or curtail our ability to compete successfully.


In addition, many of our large competitors may offer customers a broader or superior range of services and technologies. Some of our competitors may conduct more extensive promotional activities and offer lower commercialization and licensing costs to customers than we do, which could allow them to gain greater market share or prevent us from establishing and increasing our market share. Increased competition may result in significant price competition, reduced profit margins or loss of market share, any of which may have a material adverse effect on our ability to generate revenues and successfully operate our business. Our competitors may develop technologies superior to those that our company currently possess. In the future, we may need to decrease our prices if our competitors lower their prices. Our competitors may be able to respond more quickly to new or changing opportunities, technologies and customer requirements. Such competition will potentially affect our chances of achieving profitability, and ultimately affect our ability to continue as a going concern.


If product liability lawsuits are successfully brought against us, we will incur substantial liabilities and may be required to limit commercialization of our products.


We face an inherent business risk of exposure to product liability claims in the event that an individual is harmed because of the failure of our products to function properly. If we cannot successfully defend ourselves against the product liability claim, we will incur substantial liabilities. Regardless of merit or eventual outcome, liability claims may result in:




16




·

decreased demand for our products;

·

injury to our reputation;

·

costs of related litigation;

·

substantial monetary awards to plaintiffs;

·

loss of revenues; and

·

the inability to commercialize our technologies.


We currently carry no product liability insurance. Although we expect to obtain product liability insurance coverage in connection with the commercialization of our products, such insurance may not be available on commercially reasonable terms or at all, or such insurance, even if obtained, may not adequately cover any product liability claim. A product liability or other claim with respect to uninsured liabilities or in excess of insured liabilities could have a material adverse effect on our business and prospects.


Products which incorporate our waste water treatment technology will be subject to extensive regulation, which can be costly and time-consuming and could subject us to unanticipated delays or prevent us from obtaining the required approvals to commercialize our products.


Before we can market and sell products which incorporate our waste water treatment technology in the United States and abroad, extensive regulatory testing, inspection and approvals may be required. The regulatory process can be costly and time consuming. Our products which incorporate the waste water treatment technology may not receive necessary regulatory approval. Even if these products receive approval, the approval process might delay marketing and sale of our products, which may lead to a failure to meet our sales projections.


We will be subject to laws, regulations and other procedures with respect to government procurement.


Because we plan to sell some of our products to government agencies, we will be subject to laws, regulations and other procedures that govern procurement and contract implementation by those agencies. These agencies are likely to impose vendor qualification requirements, such as requirements with respect to financial condition, insurance and history. We have limited experience with government procurement and cannot assure you that we will be able to meet existing or future procurements laws, regulations and procedures or that we will be able to qualify as a vendor.


Substantially all of our assets and a majority of our directors and officers are outside the United States, with the result that it may be difficult for investors to enforce within the United States any judgments obtained against us or any of our directors or officers.


Although we are organized under the laws of the State of Nevada, United States, a majority of our directors and our officers are nationals and/or residents of countries other than the United States, and all or a substantial portion of such persons' assets are located outside the United States. As a result, it may be difficult for investors to enforce judgments against us that are obtained in the United States in any action, including actions predicated upon civil liability provisions of federal securities laws. In addition, as the majority of our assets are located outside of the United States, it may be difficult to enforce United States bankruptcy proceedings against us. Under bankruptcy laws in the United States, courts typically have jurisdiction over a debtor's property, wherever it is located, including property situated in other countries. Courts outside of the United States may not recognize the United States bankruptcy court's jurisdiction. Accordingly, you may have trouble administering a United States bankruptcy case involving a Nevada company as debtor with most of its property located outside the United States. Any orders or judgments of a bankruptcy court obtained by you in the United States may not be enforceable.


Our by-laws contain provisions indemnifying our officers and directors against all costs, charges and expenses incurred by them.


Our by-laws contain provisions with respect to the indemnification of our officers and directors against all expenses, liability and loss (including attorneys' fees, judgments, fines and amounts paid or to be paid in settlement) reasonably incurred or suffered by him or her in connection with any action, suit or proceeding to which they were made parties by reason of his or her being or having been one of our directors or officers.




17



Currency translation and transaction risk may negatively affect our net sales, cost of sales and gross margins, and could result in exchange losses.


Although our reporting currency is the United States dollar, we intend to conduct our business and incur costs in the local currency of the other countries in which we intend to operate. Changes in exchange rates between foreign currencies and the United States dollar could affect our net sales and cost of sales figures, and could result in exchange losses. In addition, we incur currency transaction risk whenever we enter into either a purchase or a sales transaction using a dollar currency other than the United States.


Risks Related to Our Common Stock


A decline in the price of our common stock could affect our ability to raise further working capital, it may adversely impact our ability to continue operations and we may go out of business.


A prolonged decline in the price of our common stock could result in a reduction in the liquidity of our common stock and a reduction in our ability to raise capital. Because we may attempt to acquire a significant portion of the funds we need in order to conduct our planned operations through the sale of equity securities, a decline in the price of our common stock could be detrimental to our liquidity and our operations because the decline may cause investors to not choose to invest in our stock. If we are unable to raise the funds we require for all of our planned operations, we may be forced to reallocate funds from other planned uses and may suffer a significant negative effect on our business plan and operations, including our ability to develop new products and continue our current operations. As a result, our business may suffer and not be successful and we may go out of business. We also might not be able to meet our financial obligations if we cannot raise enough funds through the sale of our common stock and we may be forced to go out of business.


If we issue additional shares in the future, it will result in the dilution of our existing shareholders.


We are authorized to issue up to 300,000,000 shares of common stock and 25,000,000 preferred shares with a par value of $0.001. Our board of directors may choose to issue some or all of such shares to acquire one or more businesses or to provide additional financing in the future. The issuance of any such shares will result in a reduction of the book value and market price of the outstanding shares of our common stock. If we issue any such additional shares, such issuance will cause a reduction in the proportionate ownership and voting power of all current shareholders. Further, such issuance may result in a change of control of our company.


Trading of our stock may be restricted by the Securities Exchange Commission's penny stock regulations, which may limit a stockholder's ability to buy and sell our stock.


The Securities and Exchange Commission has adopted regulations which generally define "penny stock" to be any equity security that has a market price (as defined) less than $5.00 per share or an exercise price of less than $5.00 per share, subject to certain exceptions. Our securities are covered by the penny stock rules, which impose additional sales practice requirements on broker-dealers who sell to persons other than established customers and "accredited investors". The term "accredited investor" refers generally to institutions with assets in excess of $5,000,000 or individuals with a net worth in excess of $1,000,000 or annual income exceeding $200,000 or $300,000 jointly with their spouse. The penny stock rules require a broker-dealer, prior to a transaction in a penny stock not otherwise exempt from the rules, to deliver a standardized risk disclosure document in a form prepared by the Securities and Exchange Commission, which provides information about penny stocks and the nature and level of risks in the penny stock market. The broker-dealer also must provide the customer with current bid and offer quotations for the penny stock, the compensation of the broker-dealer and its salesperson in the transaction and monthly account statements showing the market value of each penny stock held in the customer's account. The bid and offer quotations, and the broker-dealer and salesperson compensation information, must be given to the customer orally or in writing prior to effecting the transaction and must be given to the customer in writing before or with the customer's confirmation. In addition, the penny stock rules require that prior to a transaction in a penny stock not otherwise exempt from these rules, the broker-dealer must make a special written determination that the penny stock is a suitable investment for the purchaser and receive the purchaser's written agreement to the transaction. These disclosure requirements may have the effect of reducing the level of trading activity in the secondary market for the stock that is subject to these penny stock rules. Consequently, these penny stock rules may affect the ability of broker-dealers to trade our securities. We believe that the penny stock rules discourage investor interest in and limit the marketability of our common stock.




18



FINRA sales practice requirements may also limit a stockholder's ability to buy and sell our stock.


In addition to the "penny stock" rules described above, the Financial Industry Regulatory Authority (FINRA), formerly the National Association of Securities Dealers or NASD, has adopted rules that require that in recommending an investment to a customer, a broker-dealer must have reasonable grounds for believing that the investment is suitable for that customer. Prior to recommending speculative low priced securities to their non-institutional customers, broker-dealers must make reasonable efforts to obtain information about the customer's financial status, tax status, investment objectives and other information. Under interpretations of these rules, the FINRA believes that there is a high probability that speculative low priced securities will not be suitable for at least some customers. The FINRA requirements make it more difficult for broker-dealers to recommend that their customers buy our common stock, which may limit your ability to buy and sell our stock and have an adverse effect on the market for our shares.


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


None.


Item 3. Defaults Upon Senior Securities


None.


Item 4. Mine Safety Disclosures


Not applicable.


Item 5. Other Information


Effective February 24, 2012, Hassan Hans Badreddine resigned as president, chief executive officer and as director our company.  Mr. Badreddine’s resignation was not the result of any disagreements with our company regarding our operations, policies, practices or otherwise.


Concurrently with Mr. Badreddine’s resignation, we appointed Walter J. Zurawick Jr. as president, chief executive officer and director of our company to fill the ensuing vacancy, effective February 24, 2012.


Item 6. Exhibits


Exhibit

Number

Description

  

  

(3)

Articles of Incorporation and Bylaws

  

 

3.1

Articles of Incorporation (incorporated by reference from our Registration Statement on Form SB-2 filed on June 13, 2006)

  

 

3.2

By-laws (incorporated by reference from our Registration Statement on Form SB-2 filed on June 13, 2006)

  

 

3.3

Certificate of Amendment (incorporated by reference from our Current Report on Form 8-K filed on August 6, 2007)

  

 

3.4

Articles of Merger filed with the Secretary of State of Nevada on September 24, 2007 and which is effective September 28, 2007 (incorporated by reference from our Current Report on Form 8- K filed on September 28, 2007)




19




Exhibit

Number

Description

 

 

(10)

Material Contracts

  

 

10.1

Asset Purchase Agreement dated September 18, 2007 between Hans Bio Shaft Limited, Hassan Hans Badreddine and our company (incorporated by reference from our Current Report on Form 8-K filed on September 24, 2007)

  

 

10.2

Patent Assignment Agreement dated September 18, 2007 between Hans Bio Shaft Limited and our company (incorporated by reference from our Current Report on Form 8-K filed on September 24, 2007)

  

 

10.3

Stock Option Plan of our company dated December 15, 2007 (incorporated by reference from our Quarterly Report on Form 10-QSB filed on March 17, 2008)

  

 

10.4

Consulting Agreement dated January 21, 2008 between our company and Tom Houston (incorporated by reference from our Annual Report on Form 10-KSB/A filed on August 14, 2008)

  

 

10.5

Loan Agreement made as of August 11, 2008 between our company and Premier Financial and Marketing Co. Ltd. (incorporated by reference from our Quarterly Report on Form 10-Q filed on September 12, 2008)

 

 

10.6

General Security Agreement made as of August 11, 2008 between our company and Premier Financial and Marketing Co. Ltd. (incorporated by reference from our Quarterly Report on Form 10-Q filed on September 12, 2008)

  

 

10.7

Teaming Agreement dated March 6, 2010 between our company and Zuheir Zahran & Co.

  

 

10.8

Stock Option Agreement made as of August 2, 2011 between our company and Walter Zurawick (incorporated by reference from our Quarterly Report on Form 10-Q filed on September 19, 2011)

 

 

10.9

Consulting Agreement made as of August 15, 2011 between our company and Canadian Environmental Consulting (incorporated by reference from our Quarterly Report on Form 10-Q filed on September 19, 2011)

 

 

10.10

Non-Disclosure Agreement made as of August 15, 2011 between our company and Canadian Environmental Consulting (incorporated by reference from our Quarterly Report on Form 10-Q filed on September 19, 2011)

 

 

10.11

Stock Option Agreement made as of August 15, 2011 between our company and Canadian Environmental Consulting (incorporated by reference from our Quarterly Report on Form 10-Q filed on September 19, 2011)

 

 

10.12

Employment Agreement made as of February 1, 2012 between our company and Walter J. Zurawick Jr. (incorporated by reference from our Quarterly Report on Form 10-Q filed on February 29, 2012)

  

 

(14)

Code of Ethics

  

 

14.1

Code of Ethics and Business Conduct dates effective July 1, 2008 (incorporated from our Annual Report on Form 10-KSB/A filed on August 14, 2008)

  

 




20




Exhibit

Number

Description

 

 

(31)

Rule 13a-14(a)/15d-14(a) Certifications

  

 

31.1*

Section 302 Certification under Sarbanes-Oxley Act of 2002 of Walter J. Zurawick, Jr.

  

 

31.2*

Section 302 Certification under Sarbanes-Oxley Act of 2002 of Imad Kamel Yassine

  

 

(32)

Section 1350 Certifications

  

 

32.1*

Section 906 Certification under Sarbanes-Oxley Act of 2002 of Walter J. Zurawick, Jr.

  

 

32.2*

Section 906 Certification under Sarbanes-Oxley Act of 2002 of Imad Kamel Yassine

 

 

101**

Interactive Data File

 

 

101.INS
101.SCH
101.CAL
101.DEF
101.LAB
101.PRE

XBRL Instance Document
XBRL Taxonomy Extension Schema Document
XBRL Taxonomy Extension Calculation Linkbase Document
XBRL Taxonomy Extension Definition Linkbase Document
XBRL Taxonomy Extension Label Linkbase Document
XBRL Taxonomy Extension Presentation Linkbase Document

*

Filed herewith.

**

Furnished herewith. Pursuant to Rule 406T of Regulation S-T, the Interactive Data Files on Exhibit 101 hereto are deemed not filed or part of any registration statement or prospectus for purposes of Sections 11 or 12 of the Securities Act of 1933, are deemed not filed for purposes of Section 18 of the Securities and Exchange Act of 1934, and otherwise are not subject to liability under those sections.








21




SIGNATURES

 

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

 

BIOSHAFT WATER TECHNOLOGY, INC.

 

 

 

 

 

Date:     March 20, 2012

/s/ Walter J. Zurawick, Jr.

 

Walter J. Zurawick, Jr.

 

President, Chief Executive Officer and Director

 

(Principal Executive Officer)

 

 

 

 

 

 

Date:     March 20, 2012

/s/ Imad Kamel Yassine

 

Imad Kamel Yassine

 

Chief Operating Officer, Chief Financial Officer,

 

Secretary, Treasurer and Director

 

(Principal Financial Officer and Principal Accounting

 

Officer)















22


PINX:BSHF Bioshaft Water Tech Inc Quarterly Report 10-Q Filling

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PINX:BSHF Quarterly Report 10-Q Filing - 1/31/2012
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