**UNITED
        STATES**
 **SECURITIES
        AND EXCHANGE COMMISSION**
 **Washington,
        D.C. 20549**
  **FORM
        10-KSB**
  (Mark
        One)
  **x**
              **ANNUAL
                  REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT
                  OF
                  1934**
  **For
        the fiscal year ended May 31, 2007**
  **o**
              **TRANSITION
                  REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT
                  OF
                  1934**
  **For
        the transition period from ___________ to ___________**
  **Commission
        file number**
 **BYWATER
        RESOURCES INC.**
 (Exact
        name of registrant as specified in its charter)
  **300
        Park Avenue, Suite 1700**
 **New
        York, NY 10022**
 **(212)
        572-6395**
 (Address
        and Telephone Number of Registrant’s Principal
 Executive
        Offices and Principal Place of Business)
 
 **Rolf
        Harms**
 **300
        Park Avenue, Suite 1700**
 **New
        York, NY 10022**
 **(212)
        572-6395**
 
 **Delaware**
              **45-0567010**(State
                  or other jurisdiction of incorporation or organization)
              (I.R.S.
                  Employer Identification No.)**300
                  Park Avenue, Suite 1700, New York, NY**
              **10022**(Address
                  of principal executive offices)
              (Zip
                  Code)
 
 Registrant’s
                  telephone number, including area code
              **(212)
                  572-6395**
  Securities
                  registered under Section 12(b) of the Exchange Act:Title
                  of each class
              Name
                  of each exchange on which registered**None**
              **None**Securities
                  registered under Section 12(g) of the Exchange Act:**Common
                  Stock, par value $.0001**(Title
                  of class)
  Check
        whether the issuer (1) filed all
        reports required to be filed by Section 13 or 15(d) of the Exchange Act during
        the past 12 months (or for such shorter period that the registrant was required
        to file such reports), and (2) has been subject to such filing requirements
        for
        the past 90 days.  YesxNoo
  Check
        if
        there is no disclosure of delinquent filers in response to Item 405 of
        Regulation S-B contained in this form, and no disclosure will be contained,
        to
        the best of registrant’s knowledge, in definitive proxy or information
        statements incorporated by reference in Part III of this Form 10-KSB or any
        amendment to this Form 10-KSB. o
  Indicate
        by check mark whether the
        registrant is a shell company (as defined in Rule 12b-2 of the Exchange
        Act).  YesxNoo
 
 State
        issuer’s revenues for its most recent fiscal year. $0
 
 Aggregate
        market value of the voting and non-voting common stock held by non-affiliates
        of
        the Company as of August 28, 2007: $400,000.
  Number
        of
        shares of the registrant’s common stock outstanding as of August 28, 2007:16,000,000 shares
        of
        Common Stock.
  
 
 **TABLE
        OF CONTENTS**
 
 
 **Part
                  I**Item
                  1.
              Description
                  of Business.
              1Item
                  2.
              Description
                  of Property.
              7Item
                  3.
              Legal
                  Proceedings.
              7Item
                  4.
              Submission
                  of Matters to a Vote of Security Holders.
              8**Part
                  II**Item
                  5.
              Market
                  for Common Equity and Related Stockholder Matters.
              8Item
                  6.
              Management’s
                  Discussion and Analysis or Plan of Operations.
              8Item
                  7.
              Financial
                  Statements.
              10Item
                  8.
              Changes
                  in and Disagreements With Accountants on Accounting and Financial
                  Disclosure.
              21Item
                  8A.
              Controls
                  and Procedures.
              21Item
                  8B.
              Other
                  Information.
              21**Part
                  III**Item
                  9.
              Directors,
                  Executive Officers, Promoters and Control Persons; Compliance with
                  Section
                  16(a) of the Exchange Act.
              21Item
                  10.
              Executive
                  Compensation.
              22Item
                  11.
              Security
                  Ownership of Certain Beneficial Owners and Management and Related
                  Stockholder Matters.
              23Item
                  12.
              Certain
                  Relationships and Related Transactions.
              24Item
                  13.
              Exhibits.
              24Item
                  14.
              Principal
                  Accountant Fees and Services.
              24**Signatures**
   *Table
            of Contents*
  *Except
          as otherwise required by the context, all references in this prospectus
          to "we",
          "us”, "our",  or "Company" refer to the Bywater Resources Inc., a
          Delaware corporation.*
  **Forward-Looking
        Statements and Associated Risks**
  *The
        Private Securities Litigation Reform Act of 1995 provides a "safe harbor"
        for
        certain forward-looking statements. Some of the statements contained in this
        annual report of Bywater discuss future expectations, contain projections
        of our operations or financial condition or state other forward-looking
        information. Some statements contained in this annual report on Form 10-KSB
        that
        are not historical facts (including without limitation statements to the
        effect
        that we "believe," "expect," "anticipate," "plan," "intend," "foresee," or
        other
        similar expressions) and are forward-looking statements. These forward-looking
        statements are based on our current expectations and beliefs concerning future
        developments and their potential effects on us. There can be no assurance
        that
        future developments affecting us will be those anticipated by us. All comments
        concerning our expectations for future revenue and operating results are
        based
        on our forecasts of our plan of operation and do not include the potential
        impact of any future acquisitions or operations. These forward-looking
        statements involve significant risks and uncertainties (some of which are
        beyond
        our control) and assumptions. Should one or more of these risks or uncertainties
        materialize, or should any of our assumptions prove incorrect, actual results
        may vary in material respects from those projected in the forward-looking
        statements.*
  **PART
        I**
 **Item
        1.                      Description
        of Business.**
 
 **General**
  Bywater
        Resources Inc. is a resource exploration stage company that was formed on
        January 11, 2006.  On February 6, 2006, we entered into a Property
        Acquisition Agreement (“Property Acquisition Agreement”). Pursuant to the
        Property Acquisition Agreement, we acquired an option to purchase a 100%
        interest in a mineral claim less a 21/2% Net Smelter Royalty. We refer to
        the
        mineral claim as the CARTER 1 mineral claim. Pursuant to the agreement, all
        of
        the rights, title and interest in the CARTER 1 mineral claim were transferred
        to
        Rolf Harms, our president, with a Trust Agreement dated May 31, 2006 for
        Mr. Harms holds a Free Miner License with the B.C. Mineral Titles Branch.
        We are required to pay the vendor $40,000 for the CARTER 1 claim. We have
        expended $40,000 in relation to our acquisition of the CARTER 1 mineral
        claim.
  We
          purchased this specific mineral claim based upon the recommendation of
          William
          Timmins, P.Eng. our consulting geologist. Mr. William Timmins will carry
          out all of our exploration work and is responsible for filing geological
          assessment reports with the B.C. Mineral Titles Branch in respect of our
          exploration expenditures. The CARTER 1 property is located 8 kilometres
          west of
          Port Alice, British Columbia on Vancouver Island. Access is provided to
          the
          claims off the main Port Alice Forest Service Road to Mahatta along the
          Cayuse
          Main Logging road and via the logging roads and access trails off it and
          the
          main Mahatta Creek Road. It has recently been further opened by logging
          operations which provide new access to the region.
  The
        Property Acquisition Agreement obligates us to incur sufficient exploration
        expenditures to keep the claim in good standing. We intend to explore the
        CARTER
        1 claim property with the intent of putting the property into commercial
        production should both a feasibility report recommending commercial production
        be obtained and a decision to commence commercial production be made. It
        is
        possible that results may be positive from the exploration program, but not
        sufficiently positive to warrant proceeding at a particular point in time.
        To
        date, we have not commenced our exploration program on this
        property.
  Our
        plan
        of operations is to conduct mineral exploration activities on the CARTER
        1
        mineral claim in order to assess whether this claim possesses commercially
        exploitable mineral deposits. Our exploration program is designed to explore
        for
        commercially viable deposits of copper-gold minerals. We have not, nor has
        any
        predecessor, identified any commercially exploitable reserves of these minerals
        on our mineral claim. We are an exploration stage company and there is no
        assurance that a commercially viable mineral deposit exists on our mineral
        claim.
  Prior
        to
        acquiring the CARTER 1 mineral claim, we retained the service of
        Mr. Timmins, a professional consulting engineer. After we acquired the
        CARTER 1 claim our consultant prepared a geological report on the mineral
        exploration potential of the claim. Included in this report is a recommended
        initial exploration program with a budget of $8,000. All dollar amounts provided
        in this prospectus are stated or quantified in U.S.
        currency**.**
  The
        mineral exploration program, consisting of geological mapping and sampling,
        is
        oriented toward defining drill targets on mineralized zones within the CARTER
        1
        mineral claim.
   1
 *Table
            of Contents*
  At
        this
        time, we are uncertain of the number of mineral exploration phases we will
        conduct before concluding that there are, or are not, commercially viable
        minerals on our claim. Further phases beyond the current exploration program
        will be dependent upon a number of factors such as our consulting engineer’s
        recommendations based upon ongoing exploration program results and our available
        funds.
  Since
        we
        are in the exploration stage of our business plan, we have not yet earned
        any
        revenues from our planned operations. As of May 31, 2007, we had $16,982
        cash on
        hand and liabilities in the amount of $3880. Accordingly, our working capital
        position as of May 31, 2007 was $13,102. Since our inception through May
        31,
        2007, we have incurred a net loss of $68,098. We attribute our net loss to
        having no revenues to offset our expenses and the professional fees related
        to
        the creation and operation of our business. Our working capital may be
        sufficient to enable us to perform limited exploration phases beyond the
        first
        geological exploration phase on the property. Accordingly, we may require
        additional financing in the event that further exploration is
        needed.
 
 **Acquisition
        of the CARTER 1 mineral claim**
  We
        entered into an agreement with Gillian Wells to acquire a 100% interest in
        the
        CARTER 1 claim. The CARTER 1 property is located 8 kilometres west of Port
        Alice, British Columbia on Vancouver Island. The property can be acquired
        from
        Wells by paying a total of $40,000. A total of $40,000 has been paid as required
        by the agreement. The property is subject to annual advance Royalty payments
        of
        $25,000 commencing February 6, 2010.
  **Property
        Purchase Payment**
  We
        have
        paid Wells a total of $40,000 to secure our 100% interest in the CARTER 1
        claim.
        The property will be subject to a 21⁄2% Net Smelter Return (“NSR”) of which 1 1⁄2%
        can be purchased for $1,000,000 within 12 months of the commencement of
        commercial production.
 
 **Description
        and Location of the CARTER 1 mineral claim**
  The
        CARTER 1 mineral claim is a mineral claim located within the Nanaimo Mining
        Division of British Columbia.
  **Name**
              **Record
                  Number**
              **Units**
              **Anniversary
                  Date**CARTER
                  1
              524224
              515.797
              December
                  22, 2006
   The
        CARTER 1 group total area is 515.797 hectares. For assessment purposes in
        British Columbia, assessment work of $4.00 per hectare per year is applicable
        for years 1 through 3, increasing thereafter to $8.00 per hectare. In addition,
        filing fees of $0.40 per hectare are due in years 1-3 rising to $0.80
        thereafter. It is our intention to continue exploration work and expend the
        necessary amounts to maintain our claim in good standing.
 
 **Annual
        Assessment Work and Filing Fees**
  The
        CARTER 1 claim will require that the annual minimum amount of exploration
        work
        that must be expended and filed along with an engineering report describing
        the
        work. The report and the description of the work must be accepted by the
        BC
        Government. The following table computes the actual minimal amount of acceptable
        work expenditures to be incurred. Any work carried out in a year that exceeds
        the minimal annual requirement, that excess dollar amount can be carried
        forward
        to future years.
  **Annual
                  Assessment Work and Filing Fees (Cdn$)****Date**
              **Assessment
                  per ha**
              **Filing
                  Fee per ha**
              **Total
                  Cdn$**
              **Acc
                  Total**Dec
                  22, 2006
              $4.00
              $0.40
              $2,269
              $2,269Dec
                  22, 2007
              $4.00
              $0.40
              $2,269
              $5,938Dec
                  22, 2008
              $4.00
              $0.40
              $2,269
              $8,907Dec
                  22, 2009
              $8.00
              $0.80
              $5,938
              $14,845
   2
 *Table
            of Contents*
   It
        is our
        intention to apply all funds expended on our CARTER 1 mineral claim as
        assessment work on the claim. In the event that all $8,000 US of our first
        stage
        exploration program funds are expended prior to December 22, 2006 that amount
        of
        expenditure will hold the claim in good standing for approximately three
        years.
  The
        Province of British Columbia owns the land covered by the mineral claim.
        Currently, we are not aware of any native land claim that might affect our
        title
        to the mineral claim or to British Columbia’s title of the property. Although we
        are unaware of any situation that would threaten our claim, it is possible
        that
        a native land claim could be made in the future. The federal and provincial
        government policy at this time is to consult with all potentially affected
        native bands and other stakeholders in the area of any potential commercial
        production. If we should encounter a situation where a native person or group
        claims an interest in our claim, we may choose to provide compensation to
        the
        affected party in order to continue with our exploration work, or if such
        an
        option is not available, we may have to relinquish our interest in this
        claim.
  Prior
        to
        the expiration dates listed above, we plan to file for an extension of our
        mineral claim. In order to extend the expiration dates of a mineral claim,
        the
        government requires either (1) completion of exploration work on the mineral
        claim valued at an amount stipulated by the government and the payment of
        a
        filing fee; or (2) payment to the Province of British Columbia in lieu of
        completing exploration work to maintain the mineral claim. A maximum of ten
        years of work credit may be filed on a claim. If the required exploration
        work
        expenditure is not completed and filed with the Province in any year or if
        a
        payment is not made to the Province of British Columbia in lieu of the required
        work within this year, the mineral claim will lapse and title with revert
        to the
        Province of British Columbia.
  **Geological
        Exploration Program in General**
  Mining
        Business in British Columbia
  The
        mining industry in the 1990s was plagued by an anti-mining government, First
        Nations land claims and low commodity prices. In a 2002 report prepared by
        the
        Fraser Institute, a Canadian think tank, British Columbia was ranked a lowly
        44th out of
        64
        world-wide mining districts. Soon after the new British Columbia provincial
        government was voted in 2001, it established a task force with a mandate
        to
        review the negative issues and to recommend policies to improve the mineral
        exploration investment back to the province. The government enacted incentives
        to change the tax regime, for the streamlining of regulatory and approval
        processes, for the extension of private investor tax breaks and to develop
        land
        management plans that provide security for the land base. The British Columbia
        government released “The B.C. Mining Plan” in January 2005 helping to focus
        British Columbia’s resources to ensure that the province remains globally
        competitive in the mineral extraction sector.
  British
        Columbia has eight operating mines, of which six produce copper-gold. The
        exploration expenditures bottomed out at $25.0 million Cdn in 2001 and were
        over
        $100.0 million Cdn in 2004, according to the B.C**.**Mine
        Plan.
 
 The
        B.C**.**Mine Plan outlines the following:
  **•**
              B.C.
                  Mineral potential is good**•**
              B.C.
                  Has untapped reserves of metals**•**
              Competitive
                  taxes**•**
              Streamlined
                  regulatory requirements**•**
              Electricity
                  rates are among the lowest in North America**•**
              Highly
                  skilled work force**•**
              Well
                  developed infrastructure
  The
        plan
        addresses a range of factors that set the stage for a healthy mining industry
        that delivers community benefits and is sustainable for years to
        come.
  The
        Canadian Federal Government and the Provinces offer very attractive tax breaks
        for investors in exploration companies. The Federal and Provincial Tax Credits
        are a tax advantage investment that is made into a company carrying out
        grassroots exploration work in Canada. The mining company enters into an
        agreement with an investor and “flow-through mining expenditure” is incurred by
        the company and the individual can claim over 100% of that investment off
        earned
        income. The B.C**.** Government will grant in addition to the
        Federal 15% tax credit a further 20% non-refundable tax credit for qualified
        investments made in new B.C. mineral exploration. Hence, an investor who
        is
        taxed at the highest marginal rate would receive a 141% tax deduction from
        earned income. The company must be publicly trading in order to deal with
        this
        tax advantage investment.
   3
 *Table
            of Contents*
  Vancouver
        Island British Columbia
  The
        area
        covered by the CARTER 1 claim is underlain by the Palaeozoic Sicker Group
        sediments and Upper Triassic basalts with minor carbonates and clastic
        sediments, which in turn are overlain by the Lower Jurassic Bonanza Group
        of
        andesitic to rhyodacitic volcanic flows, tuffs and breccias. This later unit
        which underlies the subject property of this report has been intruded by
        the
        Early –Middle Jurassic Island Plutonic Suite (granodiorite – monzonite –
diorite) which is coeval or late stage part of the volcanic island arc
        sequence.
  CARTER
        1
        Claim
  We
        have
        selected the CARTER 1 claim because of promising geology and the geochemical
        signature. The CARTER 1 property is located 8 kilometres west of Port Alice,
        British Columbia on Vancouver Island.The CARTER 1 claim is located in the
        Nanaimo Mining Division on Map Sheet M092L 05E.
  Access
        is
        provided to the claims off the main Port Alice Forest Service Road to Mahatta
        along the Cayuse Main Logging road and via the logging roads and access trails
        off it and the main Mahatta Creek Road. It has recently been further opened
        by
        logging operations which provide new access to the region.
  The
        area
        is an active logging region with plenty of heavy equipment and operators
        available for hire. Most live in Port Alice, Port MacNeil or Port Hardy.
        All
        these population centres totalling almost 20,000 people are within a two
        hour
        drive of the project and provide all amenities including police, hospitals,
        groceries, fuel, helicopter services, hardware and other necessary items.
        Drilling companies and assay facilities are located in Campbell River on
        the
        island or in the City of Vancouver on the mainland.
  **Climatic
        Conditions**
  The
        CARTER 1 claim topography and relief is fairly rugged extending from 300
        metres
        to 1000 metres in elevation. The forested slopes are actively being logged
        with
        some areas of re-growth typical of this area in British Columbia. There is
        a mix
        of cedar, hemlock, spruce trees with alder, willow and cottonwood on old
        roads
        and poorly drained areas. Undergrowth brush is typical with salal, devil’s club
        and assorted berry bushes. Climate is also typical of the upper Vancouver
        Island
        area and is such that the lower and middle elevations will be workable year
        round with little difficulty. Higher ground may require snow machines or
        similar
        track mounted vehicles. The most snow occurs in late January. All the major
        river drainages flow year round as do many subsidiary creeks.
  **Geology
        of the CARTER 1 Mineral Claim**
  The
        CARTER 1 claim is part of the Insular belt of the Cordillera of volcanics,
        crystalline rocks and minor sediments of the geological province of Wrangellia
        and represents its western most portion. The eastern portion of Vancouver
        Island
        is underlain by the Palaeozoic Sicker Group sediments and Upper Triassic
        basalts
        with minor carbonates and clastic sediments, which in turn are overlain by
        the
        Lower Jurassic Bonanza Volcanic Group which has been intruded by the Early
        –Middle Jurassic Island Plutonic Suite of the volcanic island arc
        sequence.
  Three
        types of deposits are associated with these rock units and the indicated
        geological environment underlying the claim group. A intrusive into the
        overlying Bonanza Volcanics, copper molybdenum deposit as mined to the north
        at
        the Island Copper Mine, a volcanic belt related oxide sulphide phase iron
        formation gold zone and a skarnified precious metal – base metal contact zone,
        all have elements of their host geology present on the property.
  The
        Island Copper deposit lies within moderately south dipping brecciated tuff,
        lapilli and tuff breccia of andesitic and basaltic composition, which have
        been
        subjected to contact thermal metamorphism and hydrothermal alteration. Pyrite
        is
        the most abundant sulphide, with chalcopyrite and molybdenite as the ore.
        Magnetite iron formations like the Merry Widow deposit, in volcanics have
        been
        traced to the sulphide phase which can be related to gold deposition. The
        mineralization in the lenses is massive, with sharp contacts with small amounts
        of arsenopyrite with pyrrhotite, sphalerite, marcasite, cuprite, chalcopyrite
        and calcite. Skarn mineralization associated with intrusives is in altered
        tuff.
        Mineralization includes pyrrhotite, chalcopyrite and sparse pyrite.
  On
        the
        property, andesite volcanics and tuffs are in fault contact with tholeiitic
        basalts where a intrusive diorite has intruded. Quartz stringers with
        copper-molybdenum mineralization cover a wide area.
  The
        immediate area of the claims is located on the south end of an area of high
        magnetics associated with volcanics and just north of an east west trending
        anomalous magnetic break. Geochemical reconnaissance surveys have published
        values in copper and gold for the drainages and the tills in the vicinity
        of the
        property with molybdenum, zinc, lead and mercury values also noted.
 
 **Exploration
        Potential**
  Our
        consulting engineer concluded that the CARTER 1 mineral claim exhibits an
        environment favorable to the discovery of economic copper and gold
        mineralization in the Bonanza volcanic belt. The Phase I budget will cover
        initial geological mapping; geochemical sampling and prospecting. It is
        estimated to cost $8,000.
  Our
        geological consultant further concludes that an airborne magnetometer survey
        carried out by Geological Survey of Canada highlighted certain, highly anomalous
        magnetic features associated with the property.
  4
 *Table
            of Contents*
   Regional
        government stream sediment and till sampling geochemical surveying was completed
        which identifies the Property as an area of anomalous base metal and indicator
        values. It should be noted that anomalous values, correlate with the magnetic
        flexure associated with the property identified from the 1972 government
        airborne geophysical survey.
  The
        Carter 1 property in the Bonanza volcanic belt provides an attractive
        exploration prospect for copper and gold mineralization. The belt has not
        been
        subjected to exploration despite being south of the former Island Copper
        Mine,
        one of British Columbia’s most profitable copper- molybdenum mines.
 
 **Recommendations**
  Our
        geological consultant recommends an exploration program on the CARTER 1 mineral
        claim to test for the presence of large body type mineral deposits. The initial
        stage of this program will be to complete research of public records to assist
        in determining the outcomes of exploration programs conducted by others in
        past
        years.
  Work
        to
        date shows that the mineralization is responsive to geophysical techniques
        and
        to soil geochemistry. Exploration on the property should include re-evaluating
        any old geochemical data available, testing the correlation between gold
        geochemistry and copper-gold geochemistry, and then doing any further soil
        sampling required to cover the potential mineralized zone.
  This
        work
        should be followed up by trenching of prospective areas not previously trenched.
        Trenching may not always possible due to the depth of the overburden. Assay
        results from trench sampling may not provide good results due to strong
        weathering, but the strength of mineralization should be apparent.
  A
        diamond
        drill program should then be undertaken to test the best mineralized/altered
        areas previously uncovered and any new zones outlined.
  Our
        consultant further recommended a program of prospecting, mapping, and sampling.
        In addition, prior to diamond drilling of defined targets, additional geological
        or geochemical surveys may be necessary, provided we receive successful results
        from these surveys.
  The
        property will be explored by a series of work phases and each following phase
        is
        dependent on the success of the prior phase. To date we have engaged William
        Timmins P.Eng. to assess and write a report on the CARTER 1 claim outlining
        what
        has been done to date and his recommended work program.
  The
        CARTER 1 claim will develop on a planned three-phase exploration
        program.
  Phase
        1
  The
        first
        phase will be carried out in the fall of 2007 and the results and the
        engineering report is expected to be ready in the late fall. Mr. William
        Timmins recommends that an engineer carry out an on-site review and examine
        in
        detail the mineralization. The previous work carried out is outlined in William
        Timmins’s engineering report.The $8,000 budget
        for the
        first phase of exploration is as outlined in the table below:
 
 **Budget
        – Phase I**
 1.
              
              Senior
                  Geologist 5 days @ $500/day
              
              $
              2,5002.
              
              Geological
                  technician 5 days @
                  $350/day
              
              $
              1,7503.
              
              Equipment
                  rental 1-4 wheel drive vehicles @$100/day
              
              $
              500Fuel,
                  Food, Field
                  Supplies
              
              $
              1,000Assays
                  50 @ $25
                  each
              
              $
              1,250Report
              
              $
              1,000**Subtotal**
              
              **$**
              **8,000**
  If
        the
        initial site inspection is favorable, we would carry out the geochem phase
        of
        the program as outlined below.
  Phase
        II
  Once
        the
        site observations and assays are received and the information plotted and
        analyzed, geochem program will be designed. The program would commence in
        the
        summer of 2008 depending on weather and the availability of an appropriate
        contractor.
   5
 *Table
            of Contents*
  Follow-up
                  Geochem and Detailed Geology sampling
              
              $
              6,000Assays
                  75 @ $25 per assay
              
              $
              1,875Report
                  Preparation
              
              $
              1,500Contingency
              
              $
              625**Subtotal**
              
              **$**
              **10,000****TOTAL
                  PHASE I & II**
              
              **$**
              **18,000**
  **Phase
        III**
  Based
        on
        the satisfactory results in the Phase II, a number of steps would be taken.
        Additional trenching work would be carried out to help select drill targets.
        This work would be carried out in the summer of 2009. If the results are
        very
        encouraging then steps could be taken to secure additional mineral claim
        in the
        area either by staking if it is available or by joint venture if it is owned.
        The budget for this phase is as follows:
  Follow-up
                  trenching and Geology mapping, sampling
              
              $
              7,000Assays
                  150 @ $20 per assay
              
              $
              3,000Reporting
                  and Supervision
              
              $
              3,500Contingency
              
              $
              1,500**Subtotal**
              
              **$**
              **15,000****GRAND
                  TOTAL – Phase I, II & III**
              
              **$**
              **33,000**
 
 Based
        on
        acceptable results from the above site exploration program and a preliminary
        market analysis, a diamond drilling program would be developed. A diamond
        drill
        has a carbide steel head imbedded with diamonds. The diamond drilling activity
        produces a small diameter (1 1/2 to 3 inches) solid rock core.
  Compliance
        with Government Regulation
  We
        will
        be required to comply with all regulations, rules and directives of governmental
        authorities and agencies applicable to the exploration of minerals in the
        Province of British Columbia. In addition, if we progress to the production
        phase, production of minerals in the Province of British Columbia will require
        prior approval of applicable governmental regulatory agencies. We cannot
        be
        certain that such approvals will be obtained. The cost and delay involved
        in
        attempting to obtain such approvals cannot be known in advance.
  The
        main
        agency that governs the exploration of minerals in the Province of British
        Columbia, Canada, is the Ministry of Energy and Mines.
  The
        Ministry of Energy and Mines manages the development of British Columbia’s
        mineral resources, and implements policies and programs respecting their
        development while protecting the environment. In addition, the Ministry
        regulates and inspects the exploration and mineral production industries
        in
        British Columbia to protect workers, the public and the
        environment.
 
 The
        material legislation applicable to Bywater Resources is the Mineral Tenure
        Act,
        administered by the Mineral Titles Branch of the Ministry of Energy and Mines.
        The initial phase of our exploration program will consist of hand trenching,
        sampling, mapping, and possibly a segment of an electronic based geological
        exploration technique referred to as Induced Polarization. The practice in
        British Columbia under this act has been to request permission for such a
        program in a letter to the British Columbia Ministry of Energy and Mines.
        Permission is usually granted within one week. Should a follow-up exploration
        program be undertaken, it would probably be intended to refine information
        garnered in the first phase employing the same methods of
        exploration.
  In
        addition, the B.C. Ministry of Energy and Mines administers the Mines Act,
        the
        Health, Safety and Reclamation Code and the Mineral Exploration Code. Ongoing
        exploration programs likely will be expanded to include activities such as
        line
        cutting, machine trenching and drilling. In such circumstance, a reclamation
        deposit is usually required in the amount of $3,000 to $5,000.
   6
 *Table
            of Contents*
  The
        process of requesting permission and posting the deposit usually takes about
        2
        weeks. The deposit is refundable upon a Ministry of Energy and Mines inspector’s
        determination that the exploration program has resulted in no appreciable
        disturbance to the environment.
  The
        Mineral Tenure Act and its regulations govern the procedures involved in
        the
        location, recording and maintenance of mineral and placer titles in British
        Columbia. The Mineral Tenure Act also governs the issuance of mining leases,
        which are long term entitlements to minerals, designed as production tenures.
        At
        this phase in the process, a baseline environmental study would have to be
        produced. Such a study could take many months and cost in excess of
        $100,000.
  All
        mineral exploration activities carried out on a mineral claim or mining lease
        in
        British Columbia must be in compliance with the Mines Act. The Mines Act
        applies
        to all mines during exploration, development, construction, production, closure,
        reclamation and abandonment. Additionally, the provisions of the Health,
        Safety
        and Reclamation Code for mines in British Columbia contain standards for
        employment, occupational health and safety, accident investigation, work
        place
        conditions, protective equipment, training programs, and site supervision.
        Also,
        the Mineral Exploration Code contains standards for exploration activities
        including construction and maintenance, site preparation, drilling, trenching
        and work in and about a water body.
  Additional
        approvals and authorizations may be required from other government agencies,
        depending upon the nature and scope of the proposed exploration program.
        If the
        exploration activities require the falling of timber, then either a free
        use
        permit or a license to cut must be issued by the Ministry of Forests. Items
        such
        as waste approvals may be required from the Ministry of Environment, Lands
        and
        Parks if the proposed exploration activities are significantly large enough
        to
        warrant them.
  We
        will
        also have to sustain the cost of reclamation and environmental remediation
        for
        all exploration work undertaken. Both reclamation and environmental remediation
        refer to putting disturbed ground back as close to its original state as
        possible. Other potential pollution or damage must be cleaned-up and renewed
        along standard guidelines outlined in the usual permits. Reclamation is the
        process of bringing the land back to its natural state after completion of
        exploration activities. Environmental remediation refers to the physical
        activity of taking steps to remediate, or remedy any environmental damage
        caused
        such as refilling trenches after sampling or cleaning up fuel spills. Our
        initial exploration program does not require any reclamation or remediation
        because of minimal disturbance to the ground. The amount of these costs is
        not
        known at this time because we do not know the extent of the exploration program
        we will undertake, beyond completion of the recommended exploration phase
        described above, or if we will enter into production on the property. Because
        there is presently no information on the size, tenor, or quality of any resource
        or reserve at this time, it is impossible to assess the impact of any capital
        expenditures on our earnings or competitive position in the event a commercially
        viable deposit is discovered.
 
 Our
        fiscal year end is May 31.
  We
        have
        not generated any revenue to date, and we have a total accumulated deficit
        of
        $68,098. We will need to raise additional capital to continue our operations,
        and there is no assurance we will be successful in raising the needed capital.
        We plan on raising additional funds through public or private debt or sale
        of
        equity to achieve our current business strategy. However, at this time, we
        do
        not have any lines of credit or other forms of financing available to us.
        Therefore, our auditors have raised substantial doubt about our ability to
        continue as a going concern.
 
 **Item
        2.                      Description
        of Property.**
  We
        presently maintain our principal offices at 300 Park Avenue, Suite 1700,
        New
        York, NY 10022. Our telephone number is (212) 572-6395.
  **Employees**
  We
        currently have no employees. We have one person in management. We do not
        have an
        employment contract with our management employee. We plan to employ additional
        people as we deem necessary as we continue to implement our plan of operation
        and exploration of the CARTER 1 property.
 
 **Item
        3.                      Legal
        Proceedings.**
  To
        the
        best of our knowledge, there are no known or pending litigation proceedings
        against us.
   7
 *Table
            of Contents*
   **Item
        4.                      Submission
        of Matters to a Vote of Security Holders.**
  None.
  **PART
        II**
 
 **Item
        5.                      Market
        for Common Equity and Related Stockholder Matters.**
  **Market
        Information**
 
 Our
          common stock was approved to trade under the symbol “BYWT” on the Over the
          Counter Bulletin Board “OTCBB” in March 2007.  Our stock price is
          currently $.10 but to date our common stock has traded on a limited
          basis.
 
 **Holders**
 
 As
        of May
        31, 2007 in accordance with our transfer agent records, we had 43 record
        holders
        of our Common Stock.
 
 **Dividends**
 
 Holders
        of our common stock are entitled to receive dividends if, as and when declared
        by the Board of Directors out of funds legally available therefore. We have
        never declared or paid any dividends on our common stock. We intend to retain
        any future earnings for use in the operation and expansion of our business.
        Consequently, we do not anticipate paying any cash dividends on our common
        stock
        to our stockholders for the foreseeable future.
 
 **Recent
        Sales of Unregistered Securities**
 
 **None**
 
 **Item
        6.                      Management’s
        Discussion and Analysis or Plan of Operations.**
 
 *The
        following discussion contains forward-looking statements within the meaning
        of
        Section 27A of the Securities Act of 1933 and Section 21E of the Securities
        Exchange Act of 1934 relating to future events or our future performance.
        Actual
        results may materially differ from those projected in the forward-looking
        statements as a result of certain risks and uncertainties set forth in this
        prospectus. Although management believes that the assumptions made and
        expectations reflected in the forward-looking statements are reasonable,
        there
        is no assurance that the underlying assumptions will, in fact, prove to be
        correct or that actual results will not be different from expectations expressed
        in this report.*
 
 **Organization**
  We
        were
        organized as a Delaware Corporation on January 11, 2006 for the purpose of
        locating and developing copper-gold exploration properties in British
        Columbia.
  **Overview**
  Pursuant
        to our business plan we searched for available copper-gold mineral exploration
        properties in Vancouver Island British Columbia. In February 2006, we entered
        into an option agreement with Gillian Wells to acquire a 100% interest in
        the
        CARTER 1 claim. Our mineral claim is located 8 kilometres west of Port Alice,
        British Columbia on Vancouver Island. The property has been acquired from
        Wells
        by paying her a purchase payment of $40,000.
  Upon
        commercial production, the property will be subject to a 2Ѕ% Net Smelter
        Return (“NSR”) of which 1 1/2% can be purchased for $1,000,000. However, if we
        are unable to delineate commercial quantities of copper-gold on the CARTER
        1
        claim we may have to cease operations on the CARTER 1 claim. We would seek
        out
        other
        properties with mineral potential to carry out exploration programs to replace
        the CARTER 1 claim.
  Our
        ability to execute our growth strategy depends in part on our ability to
        identify and acquire desirable acquisition candidates consisting of suitable
        exploration properties. Initially we will seek exploration properties held
        by
        individuals or small private corporations. We need to diversify our property
        holdings to improve the likelihood that we secure a property that can be
        developed into a mine.
   8
 *Table
            of Contents*
  There
        can
        be no assurance that we will finalize and close any transactions or be able
        to
        identify suitable acquisition candidates or, to negotiate their acquisition
        at
        prices or on terms and conditions favorable to us.
 
 **Property
        Payments**
  Pursuant
        to our agreement, we are required to pay Ms. Wells a single payment and
        then annual Advance Royalties of $25,000 commencing February 6, 2010 to keep
        our
        agreement in good standing. We paid $40,000 in February 2006 and we are in
        good
        standing until the commencement of the advance royalties on or before February
        6, 2010.
  Exploration
        stage expenses from inception through May 31, 2007 were $40,000 for general
        exploration costs related to the mineral rights of the exploration property
        and
        $19,848 of general and administrative costs for a total expense of $59,848
        as
        captioned in the financial statement’s statement of operations. Fees were
        incurred in the start-up costs of our company as well as the fees to prepare
        our
        audited financial statements and this registration statement. These fees
        were
        included in the general and administrative expense as discussed in this
        paragraph.
  Our
          plan
          of operations for the next twelve months is to continue exploration activities
          on the property. We are planning to spend $8,000 on further exploration
          on the
          property. If we are successful in raising sufficient capital we hope to
          carry
          out most or all of the work described under Further Exploration in the
          CARTER 1
          claim  in the next twelve months. We are current in all of our
          obligations.
  The
        following is a 12 month budget:
  Exploration
                  and site work (samples)
              
              
              8,000General
                  and administrative
              
              
              17,400Total
              
              $
              25,400
  At
            present, we do not have sufficient cash on hand to meet our exploration,
            general and administration expenses and we must raise more capital to
            carry out
            further exploration programs to maintain our interest in the CARTER 1
            claim. If
            we are unable to raise sufficient capital to meet our obligations we
            could lose
            our interest in the properties or a portion thereof.  To date we have
            not been successful in our plans to raise capital for our
            operations.
  We
            plan
            to raise a minimum of $45,000 to continue minimum exploration of our
            properties
            during the next 12 months through a private placement of debt, convertible
            securities, or common equity. If we are successful in raising the necessary
            capital, we may have to significantly dilute the current shareholders.
            Our plan has been  to offer the debt or equity to our current
            shareholders and management. We have not been successful in raising the
            required capital and we are offering our debt or equity to new investors.
            At
            present, we have not been successful in raising the required capital.
            As an
            alternative to raising capital through the selling of debt or equity,
            we may
            attempt to negotiate a joint venture with an industry partner. If the
            company is
            required to enter into a joint venture, we could end up with a minority
            interest
            in our properties. We have not contacted another party in the industry
            regarding
            a joint venture. There is no assurance we will raise the necessary capital,
            therefore there is a significant risk that the company may have to abandon
            or
            reduce the size of our property.
  Liquidity
            and Capital Resources
  Our
            audited balance sheet as of May 31, 2007 reflects assets of $25,232,
            consisting
            of cash of $16,982 and prepaid expense of $8,250. We have total liabilities
            of
            $3,880. We do not believe that the cash that we have on hand will be
            sufficient
            to meet our exploration, general and administration expenses for the next
            twelve months. We must raise more capital to carry out further exploration
            programs to maintain our interest in the CARTER 1 claim. If we are unable
            to
            raise sufficient capital to meet our obligations we could lose our interest
            in
            the properties or a portion thereof. We commenced pursuing financing
            activities
            in the spring of 2007 but to  date have been unable to raise the
            capital needed to pursue our exploration program.
 
 The
            accompanying financial statements have been prepared assuming that we
            will
            continue as a going concern. As discussed in the notes to the financial
            statements, we have experienced losses from inception. Our financial
            position
            and operating results raise substantial doubt about our ability to continue
            as a
            going concern. The financial statements do not include any adjustments
            that
            might result from the outcome of this uncertainty. We lack an operating
            history
            and have losses which we expect to continue into the future.
  9
 *Table
            of Contents*
  Based
        upon current plans, we expect to incur operating losses in future periods.
        This
        will happen because there are expenses associated with the research and
        exploration of mineral properties. We cannot guarantee that we will be
        successful in generating revenues in the future. Failure to generate revenues
        may cause us to go out of business.
 
 We
        intend
        to generate additional capital from the public markets to increase our ability
        to locate profitable mineral property and generate revenues. We may also
        consider public or private debt transactions and/or private placement, but
        has
        no such actions in place at this time.
  Critical
        Accounting Policies
  Bywater’s
        financial statements and related public financial information are based on
        the
        application of accounting principles generally accepted in the United States
        (“GAAP”). GAAP requires the use of estimates; assumptions, judgments and
        subjective interpretations of accounting principles that have an impact on
        the
        assets, liabilities, revenue and expense amounts reported. These estimates
        can
        also affect supplemental information contained in our external disclosures
        including information regarding contingencies, risk and financial condition.
        We
        believe our use if estimates and underlying accounting assumptions adhere
        to
        GAAP and are consistently and conservatively applied. We base our estimates
        on
        historical experience and on various other assumptions that we believe to
        be
        reasonable under the circumstances. Actual results may differ materially
        from
        these estimates under different assumptions or conditions. We continue to
        monitor significant estimates made during the preparation of our financial
        statements.
  Our
        significant accounting policies are summarized in Note 1 of our financial
        statements. While all these significant accounting policies impact its financial
        condition and results of operations, Bywater views certain of these policies
        as
        critical. Policies determined to be critical are those policies that have
        the
        most significant impact on Bywater’s financial statements and require management
        to use a greater degree of judgment and estimates. Actual results may differ
        from those estimates. Our management believes that given current facts and
        circumstances, it is unlikely that applying any other reasonable judgments
        or
        estimate methodologies would cause effect on our results of operations,
        financial position or liquidity for the periods presented in this
        report.
  Recent
          Accounting Pronouncements
 
 In
          July
          2006, the FASB issued FASB Interpretation No. 48, *Accounting for Uncertainty
          in Income Taxes - an Interpretation of FASB Statement No. 109*(“FIN 48”).
          FIN 48 is intended to reduce the diversity encountered in practice with
          regard
          to certain aspects of the recognition and measurement related to accounting
          for
          income taxes, and to clarify the accounting and disclosure for uncertainty
          in
          tax positions. FIN 48 introduces a new and more comprehensive model of
          accounting and reporting for a number of tax positions routinely taken
          by
          corporations when filing their tax returns. FIN 48 is effective for fiscal
          years
          beginning after December 15, 2006. The Company is evaluating the application
          of
          FIN 48 to its business, and currently believes that the adoption of FIN
          48 will
          not have a material effect on its financial position, operations or cash
          flows.
  In
          September 2006, the FASB issued SFAS No. 157, *Fair Value Measurements*(“SFAS No. 157”). SFAS No. 157 defines fair value, establishes a framework
          for measuring fair value under GAAP, expands the required disclosures regarding
          fair value measurements, and applies to other accounting pronouncements
          that
          either require or permit fair value measurements. SFAS No. 157 is effective
          for
          fiscal years beginning after November 15, 2007, and for interim periods
          within
          those fiscal years, with early adoption encouraged. SFAS No. 157 is to
          be
          applied prospectively, with a limited form of retrospective application
          for
          several financial instruments. The Company plans to adopt SFAS No. 157
          on June
          1, 2007, and currently believes that its adoption will not have a material
          effect on the Company’s financial position, operations or cash
          flows.
  In
          February 2007, the FASB issued SFAS No. 159, *The Fair Value Option for
          Financial Assets and Financial Liabilities*. SFAS No. 159 allows a company
          to choose to measure many financial assets and financial liabilities at
          fair
          value. Unrealized gains and losses on items for which the fair value option
          has
          been elected are reported in earnings. SFAS No. 159 is effective for fiscal
          years beginning after November 15, 2007. Therefore, the Company is required
          to adopt SFAS No. 159 by June 1, 2008. The Company is currently evaluating
          the
          requirements of SFAS No. 159 and the potential impact on the Company’s financial
          statements.
 
 In
          September 2006, the SEC issued Staff Accounting Bulletin No. 108,
*Considering the Effects of Prior Year Misstatements when Quantifying
          Misstatements in Current Year Financial Statements*(“SAB No. 108”). SAB No.
          108 provides guidance in considering the effects of prior year misstatements
          in
          the quantification of current year misstatements, for the purpose of determining
          whether the current year’s financial statements are materially misstated. SAB
          No. 108 is effective for fiscal years ending after November 15, 2006. The
          adoption of SAB No. 108 has not had a material impact on the Company’s financial
          position, operations or cash flows.
  **Item
        7.                      Financial
        Statements.**


10
 *Table
          of Contents*






**REPORT
        OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM**
 
 
 To
        the
        Board of Directors of:
 Bywater
        Resources, Inc.
 
 We
        have
        audited the accompanying balance sheet of Bywater Resources, Inc.  (an
        exploration stage company), as of May 31, 2007 and the related statements
        of
        operations, changes in stockholders’ equity and cash flows for the year ended
        May 31, 2007 and the period from January 11, 2006 (inception) to May 31,
        2007.
        The financial statements of Bywater Resources, Inc. for the period January
        11,
        2006 (Inception) to May 31, 2006 were audited by other auditors whose report
        dated June 15, 2006 included a paragraph describing conditions that raised
        substantial doubt about the Company’s ability to continue as a going
        concern.  The financial statements are the responsibility of the
        Company’s management.  Our responsibility is to express an opinion of
        these financial statements based on our audit.
 
 We
        conducted our audit in accordance with the standards of the Public Company
        Accounting Oversight Board (United States).  Those standards require
        that we plan and perform the audit to obtain reasonable assurance about whether
        the financial statements are free of material misstatement.  An audit
        includes examining, on a test basis, evidence supporting the amounts and
        disclosures in the financial statements.  An audit also includes
        assessing the accounting principles used and significant estimates made by
        management, as well as evaluating the overall financial statement
        presentation.  We believe that our audit provides a reasonable basis
        for our opinion.
 
 In
        our
        opinion, the financial statements referred to above present fairly in all
        material respects, the financial position of Bywater Resources, Inc. as of
        May
        31, 2007 and the results of its operations and its cash flows for the year
        ended
        May 31, 2007 and the period January 11, 2006 (inception), to May 31, 2007
        in
        conformity with accounting principles generally accepted in the United States
        of
        America.
 
 The
        accompanying financial statements have been prepared assuming that the Company
        will continue as a going concern.  As discussed in Note 2 to the
        financial statements.  The Company is in the exploration stages with
        limited operations from inception The Company also expects to incur operating
        losses in the future periods until they can generate revenue. These factors
        raise substantial doubt about the Company’s ability to continue as a going
        concern.  Management’s plans concerning these matters are also
        described in Note 2.  The financial statements do not include any
        adjustments that might result from the outcome of this uncertainty.
 
 
 WEBB
        & COMPANY, P.A.
 
 Boynton
        Beach, Florida
 August
        20, 2007






11




**REPORT
        OF INDEPENDENT REGISTERED ACCOUNTANT**
 
 To
        the
        Board of Directors and Stockholders
 Bywater
        Resources, Inc.
 
 We
        have
        audited the accompanying balance sheet of Bywater Resources, Inc, as of May
        31,
        2006, and the related statements of operations, stockholders equity and cash
        flows from inception, January 11, 2006, through May 31, 2006. These financial
        statements are the responsibility of the Company’s management. Our
        responsibility is to express an opinion on these financial statements based
        on
        our audit.
 
 We
        conducted our audit in accordance with the standards of the Public Company
        Accounting Oversight Board (United States). Those standards require that
        we plan
        and perform the audit to obtain reasonable assurance about whether the financial
        statements are free of material misstatement. An audit includes examining,
        on a
        test basis, evidence supporting the amounts and disclosures in the financial
        statements. An audit also includes assessing the accounting principles used
        and
        significant estimates made by management, as well as evaluating the overall
        financial statement presentation. We believe that our audit provides a
        reasonable basis for our opinion.
 
 In
        our
        opinion, the financial statements referred to above present fairly, in all
        material respects, the financial position of Bywater Resources, Inc., as
        of May
        31, 2006, and the results of its operations and its cash flows for the months
        then ended in conformity with generally accepted accounting
        principles.
  /s/Gately
                  & Associates, LLCGately
                  & Associates, LLCCertified
                  Public AccountantsAltamonte
                  Springs, FloridaJune
                  15, 2006










12




**BYWATER
                  RESOURCES, INC.****(an
                  exploration stage company)****BALANCE
                  SHEETS****As
                  of May 31, 2007 and May 31, 2006****ASSETS****As
                  of**
              
              
              **As
                  of****CURRENT
                  ASSETS**
              
              **May
                  31, 2007**
              
              
              **May
                  31, 2006**Cash
              
              $
              16,982
              
              
              $
              39,944Prepaid
                  expense
              
              
              8,250
              
              
              
              -**TOTAL
                  ASSETS**
              
              $
              25,232
              
              
              $
              39,944**LIABILITIES
                  AND STOCKHOLDERS' EQUITY****CURRENT
                  LIABILITIES**Accrued
                  Expenses
              
              $
              3,880
              
              
              $
              4,950**TOTAL
                  LIABILITIES**
              
              $
              3,880
              
              
              $
              4,950**STOCKHOLDERS'
                  EQUITY**Preferred
                  Stock
                  - Par value $0.0001;Authorized:
                  50,000,000None
                  issued and outstanding
              
              $
              -
              
              
              $
              -Common
                  Stock - Par value $0.0001;Authorized:
                  100,000,000Issued
                  and Outstanding: 16,000,000
              
              
              1,600
              
              
              
              1,600Additional
                  Paid-In Capital
              
              
              79,600
              
              
              
              79,600Accumulated
                  Deficit During Exploration Stage
              
              
              (59,848
              )
              
              
              (46,206
              )Total
                  Stockholders' Equity
              
              
              21,352
              
              
              
              34,994**TOTAL
                  LIABILITIES AND EQUITY**
              
              $
              25,232
              
              
              $
              39,944








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






13
 *Table
          of Contents*




**BYWATER
                  RESOURCES, INC.****(an
                  exploration stage company)****STATEMENT
                  OF OPERATIONS****For
                  the year ending May 31, 2007,****the
                  period January 11, 2006 (Inception) to May 31, 2006
                  and****the
                  period from January 11, 2006 (Inception) to May 31,
                  2007****For
                  the**
              
              
              **For
                  the****period
                  from**
              
              
              **period
                  from****For
                  the**
              
              
              **January
                  11, 2006**
              
              
              **January
                  11, 2006****year
                  ending**
              
              
              **(Inception)
                  to**
              
              
              **(Inception)
                  to****May
                  31, 2007**
              
              
              **May
                  31, 2006**
              
              
              **May
                  31, 2007****REVENUE**
              
              $
              -
              
              
              $
              -
              
              
              $
              -**GENERAL
                  AND ADMINISTRATIVE EXPENSES**
              
              
              13,642
              
              
              
              6,206
              
              
              
              19,848**EXPLORATION
                  COSTS**
              
              
              -
              
              
              
              40,000
              
              
              
              40,000**NET
                  INCOME (LOSS)**
              
              $
              (13,642
              )
              
              $
              (46,206
              )
              
              $
              (59,848
              )**Basic
                  and diluted earnings(loss) per share**
              
              $
              (0.00
              )
              
              $
              (0.00
              )**Basic
                  and diluted weighted average number of common
                  shares**
              
              
              16,000,000
              
              
              
              14,767,857










The
        accompanying notes are an integral part of these financial
        statements.
  14
 *Table
            of
            Contents*






**BYWATER
                  RESOURCES, INC.****(an
                  exploration stage company)****STATEMENT
                  OF STOCKHOLDERS' EQUITY****From
                  January 11, 2006 (Inception) to May 31, 2007****ADDITIONAL**
              
              
              **Accumulated****PREFERRED**
              
              
              **PAR**
              
              
              **COMMON**
              
              
              **PAR**
              
              
              **PAID
                  IN**
              
              
              **Deficit
                  During**
              
              
              **TOTAL****STOCK**
              
              
              **VALUE**
              
              
              **STOCK**
              
              
              **VALUE**
              
              
              **CAPITAL**
              
              
              **Exploration
                  Stage**
              
              
              **EQUITY**Common
                  stock issued as
              
              
              -
              
              
              $
              -
              
              
              
              12,000,000
              
              
              $
              1,200
              
              
              $
              -
              
              
              $
              -
              
              
              $
              1,200compensation
                  upon companyinception
                  (January 11, 2006)at
                  $0.0001 per shareCommon
                  stock issued for cash
              
              
              -
              
              
              
              -
              
              
              
              2,100,000
              
              
              
              210
              
              
              
              41,790
              
              
              
              -
              
              
              
              42,000February
                  16, 2006 at $0.02per
                  share on private placementCommon
                  stock issued for cash
              
              
              -
              
              
              
              -
              
              
              
              1,900,000
              
              
              
              190
              
              
              
              37,810
              
              
              
              -
              
              
              
              38,000March
                  3, 2006 at $0.02per
                  share on private placementNet
                  income (loss)
              
              
              -
              
              
              
              -
              
              
              
              -
              
              
              
              -
              
              
              
              -
              
              
              
              (46,206
              )
              
              
              (46,206
              )Balance,
                  May 31, 2006
              
              
              -
              
              
              $
              -
              
              
              
              16,000,000
              
              
              $
              1,600
              
              
              $
              79,600
              
              
              $
              (46,206
              )
              
              $
              34,994Net
                  income (loss)
              
              
              -
              
              
              
              -
              
              
              
              -
              
              
              
              -
              
              
              
              -
              
              
              
              (13,642
              )
              
              
              (13,642
              )Balance,
                  May 31, 2007
              
              
              -
              
              
              $
              -
              
              
              
              16,000,000
              
              
              $
              1,600
              
              
              $
              79,600
              
              
              $
              (59,848
              )
              
              $
              21,352








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




15
 *Table
          of Contents*






**BYWATER
                  RESOURCES, INC.****(an
                  exploration stage company)****STATEMENTS
                  OF CASH FLOWS****For
                  the year ending May 31, 2007,****the
                  period January 11, 2006 (Inception) to May 31, 2006
                  and****the
                  period from January 11, 2006 (Inception) to May 31,
                  2007****For
                  the**
              
              
              **For
                  the****period
                  from**
              
              
              **period
                  from****For
                  the**
              
              
              **January
                  11, 2006**
              
              
              **January
                  11, 2006****year
                  ending**
              
              
              **(Inception)
                  to**
              
              
              **(Inception)
                  to****CASH
                  FLOWS FROM OPERATING ACTIVITIES**
              
              **May
                  31, 2007**
              
              
              **May
                  31, 2006**
              
              
              **May
                  31, 2007**Net
                  income (loss)
              
              $
              (13,642
              )
              
              $
              (46,206
              )
              
              $
              (59,848
              )Adjustments
                  to reconcile net loss to net cash used in operationsCompensation
                  in the form of stock
              
              
              -
              
              
              
              1,200
              
              
              
              1,200Changes
                  in operating assets and liabilities:(Increase)
                  Decrease in Prepaid Expenses
              
              
              (8,250
              )
              
              
              -
              
              
              
              (8,250
              )Increase
                  (Decrease) in Accrued Expenses
              
              
              (1,070
              )
              
              
              4,950
              
              
              
              3,880Net
                  cash provided by (used in) operating activities
              
              
              (22,962
              )
              
              
              (40,056
              )
              
              
              (63,018
              )**CASH
                  FLOWS FROM INVESTING ACTIVITIES**
              
              
              -
              
              
              
              -
              
              
              
              -Net
                  cash flows provided by (used in) investing activities
              
              
              -
              
              
              
              -
              
              
              
              -**CASH
                  FLOWS FROM FINANCING ACTIVITIES**Proceeds
                  from stock issuance
              
              
              -
              
              
              
              80,000
              
              
              
              80,000Net
                  cash provided (used in) financing activities
              
              
              -
              
              
              
              80,000
              
              
              
              80,000Net
                  increase (decrease) in cash
              
              
              (22,962
              )
              
              
              39,944
              
              
              
              16,982Cash
                  - beginning balance
              
              
              39,944
              
              
              
              -
              
              
              
              -**CASH
                  BALANCE - END OF PERIOD**
              
              $
              16,982
              
              
              $
              39,944
              
              
              $
              16,982**Supplemental
                  disclosure of cash flow information:**Cash
                  paid for interest
              
              $
              -
              
              
              $
              -
              
              
              $
              -Cash
                  paid for taxes
              
              $
              -
              
              
              $
              -
              
              
              $
              -




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




16
 *Table
          of Contents*






**BYWATER
        RESOURCES, INC.**
 **(AN
        EXPLORATION STAGE COMPANY)**
 **NOTES
        TO FINANCIAL STATEMENTS**
 **AS
        OF MAY 31, 2007 AND MAY 31, 2006**
 **(UNAUDITED)**
  **NOTE
        1  SUMMARY OF
        SIGNIFICANT ACCOUNTING POLICIES AND ORGANIZATION**
 
 ***(A)
        Basis of Presentation and Organization***
 
 Bywater
        Resources Inc. (an exploration stage company) (the “Company”) was incorporated
        on January 11, 2006 in the State of Delaware. The Company is an exploration
        stage mining company. On February 6, 2006, the Company became actively engaged
        in acquiring mineral properties, raising capital, and preparing properties
        for
        production. The Company did not have any significant mining operations or
        activities from inception, and accordingly is deemed to be an exploration
        stage
        company.  The fiscal year-end of the Company is May 31.
 
 ***(B)
        Cash and Cash Equivalents and Credit Risk***
 
 For
        purposes of reporting cash flows, the Company considers all cash accounts
        with
        maturities of 90 days or less and which are not subject to withdrawal
        restrictions or penalties, as cash and cash equivalents in the accompanying
        balance sheet.  The Company at times has cash in banks in excess of
        FDIC insurance limits.  At May 31, 2007, the Company had no amounts,
        in excess of FDIC insurance limits.
 
 At
        May
        31, 2007, the Company had total cash of $16,982 US in a Canadian bank which
        is
        uninsured.
 
 ***(C)
        Use of Estimates***
 
 In
        preparing financial statements in conformity with generally accepted accounting
        principles, management is required to make estimates and assumptions that
        affect
        the reported amounts of assets and liabilities and the disclosure of contingent
        assets and liabilities at the date of the financial statements and revenues
        and
        expenses during the reported period. Actual results could differ from those
        estimates.
 
 ***(D)  Property
        and Equipment***
 
 Pursuant
        to SFAS No. 141 and SFAS No. 142, as amended by EITF 04-02, mineral interest
        associated with other than owned properties are classified as tangible
        assets.  The Company has expensed $40,000 of mineral rights acquired
        in 2006.
  Property
        and equipment purchased by the Company is recorded at cost. Depreciation
        is
        computed by the straight-line method based upon the estimated useful lives
        of
        the respective assets. Expenditures for repairs and maintenance are charged
        to
        expense as incurred as are any items purchased which are below the Company's
        capitalization threshold of $1,000.
 
 For
        assets sold or otherwise disposed of, the cost and related accumulated
        depreciation are removed from accounts, and any related gain or loss is
        reflected in income for the period.
 
 ***(E)
        Income Taxes***
 
 The
        Company records deferred taxes in accordance with SFAS No. 109,
*Accounting for Income Taxes* (“SFAS 109”). The statement requires
        recognition of deferred tax assets and liabilities for temporary differences
        between the tax bases of assets and liabilities and the amounts at which
        they
        are carried in the financial statements, based upon the enacted tax rates
        in
        effect for the year in which the differences are expected to reverse. A
        valuation allowance is established when necessary to reduce deferred tax
        assets
        to the amount expected to be realized.
   17
 *Table
            of Contents*
  ***(F)
        Business Segments***
 
 The
        Company operates in one segment and therefore segment information is not
        presented.
 
 ***(G)
        Foreign Currency Translation and Transactions***
 
 The
        Company's functional currency is the US dollar. No material translations
        or
        transactions have occurred. Upon the occurrence of such material transactions
        or
        the need for translation adjustments, the Company will adopt Financial
        Accounting Standard No. 52 and other methods in conformity with Generally
        Accepted Accounting Principles.
 
 ***(H)
        Earnings (loss) Per Share***
 
 Basic
        and
        diluted net loss per common share is computed based upon the weighted average
        common shares outstanding as defined by Financial Accounting Standards No.
        128,
“Earnings Per Share.” As of May 31, 2007 and 2006, there were no dilutive
        securities outstanding.
 
  ***(I)
        Long-Lived Assets***
  The
        Company accounts for long-lived assets under the Statements of Financial
        Accounting Standards Nos. 142 and 144 “Accounting for Goodwill and Other
        Intangible Assets” and “Accounting for Impairment or Disposal of Long-Lived
        Assets” (“SFAS No. 142 and 144”).  In accordance with SFAS No. 142 and
        144, long-lived assets, goodwill and certain identifiable intangible assets
        held
        and used by the Company are reviewed for impairment whenever events or changes
        in circumstances indicate that the carrying amount of an asset may not be
        recoverable.  For purposes of evaluating the recoverability of
        long-lived assets, goodwill and intangible assets, the recoverability test
        is
        performed using undiscounted net cash flows related to the long-lived
        assets.
  ***(J)
        Recent accounting pronouncements***
  In
        July
        2006, the FASB issued FASB Interpretation No. 48, *Accounting for Uncertainty
        in Income Taxes - an Inter**pretation of FASB Statement No. 109*(“FIN 48”). FIN 48 is intended to reduce the diversity encountered
        in
        practice with regard to certain aspects of the recognition and measurement
        related to accounting for income taxes, and to clarify the accounting and
        disclosure for uncertainty in tax positions. FIN 48 introduces a new and
        more
        comprehensive model of accounting and reporting for a number of tax positions
        routinely taken by corporations when filing their tax returns. FIN 48 is
        effective for fiscal years beginning after December 15, 2006. The Company
        is
        evaluating the application of FIN 48 to its business, and currently believes
        that the adoption of FIN 48 will not have a material effect on its financial
        position, operations or cash flows.
  In
        September 2006, the FASB issued SFAS No. 157, *Fair Value Measurements*(“SFAS No. 157”). SFAS No. 157 defines fair value, establishes a framework
        for measuring fair value under GAAP, expands the required disclosures regarding
        fair value measurements, and applies to other accounting pronouncements that
        either require or permit fair value measurements. SFAS No. 157 is effective
        for
        fiscal years beginning after November 15, 2007, and for interim periods within
        those fiscal years, with early adoption encouraged. SFAS No. 157 is to be
        applied prospectively, with a limited form of retrospective application for
        several financial instruments. The Company plans to adopt SFAS No. 157 on
        June
        1, 2007, and currently believes that its adoption will not have a material
        effect on the Company’s financial position, operations or cash
        flows.
  In
        February 2007, the FASB issued SFAS No. 159, *The Fair Value Option for
        Financial Assets and Financial Liabilities*. SFAS No. 159 allows a company
        to choose to measure many financial assets and financial liabilities at fair
        value. Unrealized gains and losses on items for which the fair value option
        has
        been elected are reported in earnings. SFAS No. 159 is effective for fiscal
        years beginning after November 15, 2007. Therefore, the Company is required
        to adopt SFAS No. 159 by June 1, 2008. The Company is currently evaluating
        the
        requirements of SFAS No. 159 and the potential impact on the Company’s financial
        statements.
   18
 *Table
            of Contents*
  In
        September 2006, the SEC issued Staff Accounting Bulletin No. 108,
*Considering the**Effects of Prior Year Misstatements when
        Quantifying Misstatements in Current Year Financial Statements*(“SAB No.
        108”). SAB No. 108 provides guidance in considering the effects of prior year
        misstatements in the quantification of current year misstatements, for the
        purpose of determining whether the current year’s financial statements are
        materially misstated. SAB No. 108 is effective for fiscal years ending after
        November 15, 2006. The adoption of SAB No. 108 has not had a material impact
        on
        the Company’s financial position, operations or cash flows.
  **NOTE
          2  **GOING
          CONCERN****
 The
        accompanying financial statements have been prepared assuming that the company
        will continue as a going concern. The Company’s financial position and operating
        results raise substantial doubt about its ability to continue as a going
        concern. The financial statements do not include any adjustments that might
        result from the outcome of this uncertainty.
 
 The
        Company lacks an operating history and has losses which we expect to continue
        into the future.
 
 The
        Company was incorporated in January 2006 and has not started the proposed
        business operations or realized any revenues. The Company has no operating
        history upon which an evaluation of our future success or failure can be
        made.
        The ability to achieve and maintain profitability and positive cash flow
        is
        dependent upon the Company’s ability to locate a profitable mineral property,
        generate revenues and raise the capital necessary to continue exploration
        of the
        property.
 
 Based
        upon current plans, the Company expects to incur operating losses in future
        periods. This will happen because there are expenses associated with the
        research and exploration of mineral properties. The Company cannot guarantee
        that it will be successful in generating revenues in the future. Failure
        to
        generate revenues may cause the Company to go out of
        business.
 
 The
        Company intends to generate additional capital from the public markets to
        increase its ability to locate profitable mineral property and generate
        revenues. The Company may also consider public or private debt transactions
        and/or private placement, but has no such actions in place at this
        time.
 
 **NOTE
        3  RELATED PARTY
        TRANSACTIONS**
 
 The
        Company has compensated officers of the Company with compensation in the
        form of
        stock as described in the equity footnote.
 
 **NOTE
        4             STOCKHOLDERS’
EQUITY**
 
 ***(A)
        Preferred Stock***
 
 The
        Company has authorized fifty million (50,000,000) shares of preferred stock
        with
        a par value of $.0001, none of which have been issued.
 
 ***(B)
        Common Stock***
 
 The
        Company has authorized one hundred million (100,000,000) shares of common
        stock
        with a par value of $.0001. The Company has 16,000,000 shares of common stock
        issued and outstanding.
 
 On
        January 11, 2006 the Company issued 12,000,000 shares of common stock to
        the
        Company President, Rolf Harms, as compensation for the formation of the
        corporation and services rendered for a value of $1,200 or $0.0001 per
        share.
   19
 *Table
            of Contents*
 
 On
        February 16, 2006 the Company issued 2,100,000 shares of common stock at
        a price
        of $.02 per share in an offering exempt from registration at Section 4(2)
        of the
        Securities Act of 1933 for a total value of $42,000.
 
 On
        March
        3, 2006 the Company issued 1,900,000 shares of common stock at a price of
        $.02
        per share in an offering exempt from registration at Section 4(2) of the
        Securities Act of 1933 for a total value of $38,000.
  **NOTE 5  **COMMITMENTS
          AND CONTINGENCIES****
 The
        Company entered into an agreement on February 6, 2006 with Ms. Gillian Wells
        (“Wells”) to purchase a 100% interest in the CARTER 1 claim located
        approximately 8 kilometers west of the Town of Port Alice, British Columbia
        for
        a total of $40,000. In addition, the Company gave Wells a 21⁄2% Net Smelter
        Royalty and received an option to repurchase 11⁄2% of the Net Smelter Royalty for
        $1.0 million within 12 months from commencement of commercial production.
        Advance minimum annual royalties of $25,000 are payable commencing 48 months
        from February 28, 2006. If the Company defaults on the royalty payments,
        the
        agreement calls for the Company to return its 100% interest in the claim
        to
        Wells and forfeits all future claims and royalty rights to the
        claim.
 
 During
        May 2007, the Company entered into an agreement with a consultant to provide
        strategic funding and consulting services for the Company for a period of
        one
        year.  The agreement calls for the consultant to be paid $9,000 for
        the one year period.
 
  20
 *Table
            of
            Contents*




**Item
        8.                      Changes
        In and Disagreements With Accountants on Accounting and Financial
        Disclosure.**
 
 On
        December 22, 2006, Gately & Associates, LLC ("Gately") was dismissed as the
        independent auditor for the Company and replaced by Webb & Company, P.A.
        ("Webb") as our principal independent auditors. This decision to engage Webb
        was
        ratified by the majority approval of our Board of Directors.
 
 Gately’s
          report on the financial statements for the period January 11, 2006 (inception)
          to May 31, 2006 contained no adverse opinion or disclaimer of opinion and
          was
          not qualified or modified as to audit scope or accounting principles but
          included an explanatory paragraph reflecting an uncertainty because we
          had yet
          to generate any revenue, and our shareholders funded any shortfalls in
          our cash
          flow on a day to day basis. These factors raise substantial doubt about
          our
          ability to continue as a going concern.
 
 Our
            Board
            of Directors participated in and approved the decision to change independent
            accountants. Since the Company’s inception in January 2006, including its review
            of financial statements of the quarter ending August 31, 2006 and the
            date of
            dismissal of December 22, 2006 there have been no disagreements with
            Gately on
            any matter of accounting principles or practices, financial statement
            disclosure, or auditing scope or procedure, which disagreements if not
            resolved
            to the satisfaction of Gately would have caused them to make reference
            thereto
            in their report on the financial statements.
 
 We
        engaged Webb, of Boynton Beach, Florida, as our new independent auditors
        as of
        December 26, 2006. Prior to such date, we, did not consult with Webb &
Company, P.A. regarding (i) the application of accounting principles, (ii)
        the
        type of audit opinion that might be rendered by Webb & Company, P.A. or
        (iii) any other matter that was the subject of a disagreement between us
        and our
        former auditor as described in Item 304(a)(1)(iv) of Regulation
        S-B.
 
 **Item
        8A.                      Controls
        and Procedures.**
 
 **Evaluation
        of Disclosure Controls and Procedures**
 
 Under
        the
        supervision and with the participation of our management, including our
        principal executive officer and principal financial officer, we conducted
        an
        evaluation of our disclosure controls and procedures, as such term is defined
        under Rule 13a-15(e) and Rule 15d-15(e) promulgated under the Securities
        Exchange Act of 1934, as amended (Exchange Act), as of May 31, 2007. Based
        on
        this evaluation, our principal executive officer and principal financial
        officer
        have concluded that our disclosure controls and procedures are effective
        to
        ensure that information required to be disclosed by us in the reports we
        file or
        submit under the Exchange Act is recorded, processed, summarized, and reported
        within the time periods specified in the Securities and Exchange Commission's
        rules and forms and that our disclosure and controls are designed to ensure
        that
        information required to be disclosed by us in the reports that we file or
        submit
        under the Exchange Act is accumulated and communicated to our management,
        including our principal executive officer and principal financial officer,
        or
        persons performing similar functions, as appropriate to allow timely decisions
        regarding required disclosure.
 
 **Changes
        in Internal Controls**
 
 There
        were no changes (including corrective actions with regard to significant
        deficiencies or material weaknesses) in our internal controls over financial
        reporting that occurred during the fiscal year ended May 31, 2007 that has
        materially affected, or is reasonably likely to materially affect, our internal
        control over financial reporting.
 
 **Item
        8B.                      Other
        Information.**
  None.
 
 **PART
        III**
 
 **Item
        9.**                      **Directors,
        Executive Officers,
        Promoters and Control Persons; Compliance with Section 16(a) of the Exchange
        Act.**
  The
        following table sets forth the name and age of our sole executive officer
        and
        director.
 
 **Name**
              
              **Age**
              
              **Position**
              
              **Date
                  of Appointment**Rolf
                  Harms
              
              76
              
              President,
                  Chief Executive Officer, Chief Financial Officer, Secretary, Treasurer,
                  Director
              
              Inception
   21
 *Table
            of Contents*
 
 Set
        forth
        below is a brief description of the background and business experience of
        our
        sole executive officer and director for the past five years.
 
 **Rolf
        Harms** is our founder and has been our Chief Executive Officer,
        Chief Financial Officer, President and Director****since our
        inception. Rolf Harms****was employed in the German printing
        industry after 3 years of trade school from 1948 to 1952. After immigrating
        to
        Canada in July 1952, he was employed in the Canadian printing industry from
        1952
        until 1963. He owned and operated a mink ranch in British Columbia from 1963
        to
        1973 after which he purchased and operated the Vancouver Supper Club, a night
        club from 1973 to 1979. In 1979 Rolf became the president and part owner
        of Wild
        Boar Enterprises Ltd. and operated a placer mine near Mayo, Y.T. for a period
        of
        2 years. From 1981 to date became a part owner and director of Orlon Resources
        Ltd., a private company, which manufactures and distributes specialized placer
        gold recovery equipment. In the mid 1980’s he was actively involved as a
        director in Baha Resources Ltd. and Gulderand Mining Corporation which were
        both
        public companies that traded on a Canadian Stock Exchange. In the mid-1980’s,
        Rolf was employed by private individuals and companies to provide management
        and
        consulting services for their placer gold operations located in north/south
        America and China. Rolf is presently retired except for his work on Bywater
        Resources Inc.
  **Term
        of Office**
  Our
        directors are appointed for a one-year term to hold office until the next
        annual
        general meeting of our shareholders or until removed from office in accordance
        with our bylaws. Our officers are appointed by our board of directors and
        hold
        office until removed by the board.
 
 **Significant
        Employees**
 
 None.
 
 **Family
        Relationships**
 
 No
        family
        relationships exist among our directors or executive officers.
 
 **Involvement
        in Certain Legal Proceedings**
 
 None
        of
        our Officers and/or Directors have filed any bankruptcy petition, been convicted
        of or been the subject of any criminal proceedings or the subject of any
        order,
        judgment or decree involving the violation of any state or federal securities
        laws within the past five (5) years
 
 **Code
          of Ethics**
 
 We
          have
          adopted a Code of Ethics applicable to our Chief Executive Officer and
          Chief
          Financial Officer. This Code of Ethics is filed herewith as an
          exhibit.
 
 **Compliance
        with Section 16(a) of the Exchange Act**
  Section
        16(a) of the Securities Exchange Act of 1934 requires the Company's officers
        and
        directors, and persons who own more than 10 percent of a registered class
        of the
        Company's equity securities, to file reports of ownership and changes in
        ownership with the Securities and Exchange Commission (SEC). Officers,
        directors, and greater than 10 percent stockholders are required by SEC
        regulation to furnish the Company with copies of all Section 16(a) forms
        they
        file.
 
 To
        the
        Company's knowledge, based solely on a review of the copies of such reports
        furnished to the Company, all reports under Section 16(a) required to be
        filed
        by its officers and directors and greater than ten percent beneficial owners
        were timely filed as of the date of this filing.
 
 **Item
        10.**                      **Executive
        Compensation.**
 
 **Compensation
        of Executive Officers**
  The
        following summary compensation table sets forth all compensation awarded
        to,
        earned by, or paid to the named executive officers paid by us during the
        fiscal
        years ended May 31, 2007 and 2006 in all capacities for the accounts of our
        executives, including the Chief Executive Officer (CEO) and Chief Financial
        Officer (CFO):
  22
 *Table
            of Contents*
 
 **SUMMARY
        COMPENSATION TABLE**
  **ANNUAL
                    COMPENSATION**
                **LONG
                    TERM COMPENSATION****NAME
                    AND**
                  **PRINCIPAL**
                  **POSITION**
                **FISCAL**
                  **YEAR**
                **CASH**
                  **SALARY**
                **ANNUAL**
                  **BONUS**
                **RESTRICTED**
                  **STOCK**
                  **COMPENSATION**
                **SECURITIES**
                  **UNDERLYING**
                  **AWARDS**
                **OPTIONS**
                  **(NO.
                    OF**
                  **SHARES)**
                **ALL
                    OTHER**
                  **COMPENSATION**ROLF
                    HARMS
                2007
                0
                0
                0
                0
                0
                0President,
                    CEO, CFO Treasurer
                2006
                0
                0
                12,000,000(1)
                0
                0
                0
   (1)
                Mr. Harms
                    received 12,000,000 founders’ shares for services rendered to us. He will
                    not receive such compensation in the
                    future.
  **Employment
        Agreements**
  Employment
        and Consulting Agreements
 
 We
        do not
        have written employment agreements with Rolf Harms. In the future, we will
        determine on an annual basis how much compensation our officer and director
        will
        receive.
 
 During
        May 2007, the Company entered into an agreement with a consultant to provide
        strategic funding and consulting services for the Company for a period of
        one
        year.  The agreement calls for the consultant to be paid $9,000 for
        the one year period.
  **Compensation
        of Directors**
  For
        the
        fiscal year ended May 31, 2007, we did not compensate our directors for their
        services.
  **Item
        11.                      Security
        Ownership of Certain Beneficial Owners and Management and Related Stockholder
        Matters.**
 
 The
        following table sets forth, as of August 28, 2007, certain information with
        respect to the beneficial ownership of the common stock by (1) each person
        known
        by us to beneficially own more than 5% of our outstanding shares, (2) each
        of
        our Directors, (3) each Named Executive Officer and (4) all of our executive
        officer and Director as a group. Except as otherwise indicated, each person
        listed below has sole voting and investment power with respect to the shares
        of
        common stock set forth opposite such person’s name.
  NAME
                  AND ADDRESS OF
                BENEFICIAL
                  OWNER (1)
              AMOUNT
                  AND NATURE OF
                BENEFICIAL
                  OWNERSHIP
              PERCENT
                  OF OUTSTANDING
                SHARES5%
                  STOCKHOLDERS, DIRECTOR AND NAMED EXECUTIVE OFFICERROLF
                  HARMS
                9301
                  WILSHIRE BLVD. SUITE 311 BEVERLY HILLS, CALIFORNIA 90210
              12,000,000
              75.00%OFFICERS
                  AND DIRECTORS
                AS
                  A GROUP
              12,000,000
              75.00%
 
 (1)
        Under
        the rules of the SEC, a person is deemed to be the beneficial owner of a
        security if such person has or shares the power to vote or direct the voting
        of
        such security or the power to dispose or direct the disposition of such
        security.
   23
 *Table
            of Contents*
  A
        person
        is also deemed to be a beneficial owner of any securities if that person
        has the
        right to acquire beneficial ownership within 60 days of the date hereof.
        Unless
        otherwise indicated by footnote, the named entities or individuals have sole
        voting and investment power with respect to the shares of common stock
        beneficially owned.
  (2)
        This
        table is based upon information obtained from our stock records. Unless
        otherwise indicated in the footnotes to the above table and subject to community
        property laws where applicable, we believe that each shareholder named in
        the
        above table has sole or shared voting and investment power with respect to
        the
        shares indicated as beneficially owned.
 
 **Item
        12.                      Certain
        Relationships and Related Transactions.**
 
 None
 
 **Item
        13.                      Exhibits.**
 
 **Exhibit No.**
              
              **Title
                  of Document**
              
              **Location**3.1.1
              
              Articles
                  of Incorporation
              
              Incorporated
                  by reference to Form SB-2 filed on July 21, 20063.2
              
              Bylaws
              
              Incorporated
                  by reference to Form SB-2 filed on July 21, 200631.1
              
              Certification
                  of Chief Executive Officer Pursuant to Rule 13a-14(a) of the
                  Securities Exchange Act of 1934
              
              Filed
                  herewith32.1
              
              Certification
                  of Chief Executive Officer pursuant to 18
                  U.S.C.  Section  1350,  as  adopted  pursuant  to
                  Section 906 of the Sarbanes-Oxley Act of 2002
              
              Filed
                  herewith
  **Item
        14.**                      **Principal
        Accounting Fees and
        Services.**
 
 **Audit
        Fees**
  For
          our
          fiscal year ended May 31, 2007, we were billed approximately $5,000 for
          professional services rendered for the audit and $2,500 for the reviews
          of our
          financial statements.  For our fiscal year ended May 31, 2006, we were
          billed approximately $1,000 for professional services rendered for the
          audit and
          $0 for the reviews of our financial statements.
  **Tax
          Fees**
  For
          our
          fiscal year ended May 31, 2007 and 2006 we were not billed for professional
          services rendered for tax compliance, tax advice, and tax planning.
  **All
          Other Fees**
  The
          Company did not incur any other fees related to services rendered by our
          principal accountant for the fiscal year ended May 31, 2007 and
          2006.
 
  24
  **Audit
          and Non-Audit Service Pre-Approval Policy**
 
 In
          accordance with the requirements of the Sarbanes-Oxley Act of 2002 and
          the rules
          and regulations promulgated thereunder, the Audit Committee has adopted
          an
          informal approval policy that it believes will result in an effective and
          efficient procedure to pre-approve services performed by the independent
          registered public accounting firm.
  **Audit
          Services.**Audit services include the annual financial statement audit
          (including quarterly reviews) and other procedures required to be performed
          by
          the independent registered public accounting firm to be able to form an
          opinion
          on our financial statements. The Audit Committee pre-approves specified
          annual
          audit services engagement terms and fees and other specified audit fees.
          All
          other audit services must be specifically pre-approved by the Audit Committee.
          The Audit Committee monitors the audit services engagement and may approve,
          if
          necessary, any changes in terms, conditions and fees resulting from changes
          in
          audit scope or other items.
 
 **Audit-Related
          Services.**Audit-related services are assurance and related services
          that are reasonably related to the performance of the audit or review of
          our
          financial statements which historically have been provided to us by the
          independent registered public accounting firm and are consistent with the
          SEC’s
          rules on auditor independence. The Audit Committee pre-approves specified
          audit-related services within pre-approved fee levels. All other audit-related
          services must be pre-approved by the Audit Committee.
 
 **Tax
          Services.**The Audit Committee pre-approves specified tax services that
          the Audit Committee believes would not impair the independence of the
          independent registered public accounting firm and that are consistent with
          SEC
          rules and guidance. The Audit Committee must specifically approve all other
          tax
          services.
 
 **All
          Other Services.**Other services are services provided by the independent
          registered public accounting firm that do not fall within the established
          audit,
          audit-related and tax services categories. The Audit Committee pre-approves
          specified other services that do not fall within any of the specified prohibited
          categories of services.
 
 **Procedures.**All proposals for services to be provided by the independent registered
          public accounting firm, which must include a detailed description of the
          services to be rendered and the amount of corresponding fees, are submitted
          to
          the Chairman of the Audit Committee and the Chief Financial Officer. The
          Chief
          Financial Officer authorizes services that have been pre-approved by the
          Audit
          Committee. If there is any question as to whether a proposed service fits
          within
          a pre-approved service, the Audit Committee chair is consulted for a
          determination. The Chief Financial Officer submits requests or applications
          to
          provide services that have not been pre-approved by the Audit Committee,
          which
          must include an affirmation by the Chief Financial Officer and the independent
          registered public accounting firm that the request or application is consistent
          with the SEC’s rules on auditor independence, to the Audit Committee (or its
          Chair or any of its other members pursuant to delegated authority) for
          approval.
     25
 *Table
            of Contents*
  **SIGNATURES**
  In
        accordance with Section 13 or 15(d) of the Exchange Act, the registrant caused
        this report to be signed on its behalf by the undersigned, thereunto duly
        authorized.
  **BYWATER
                  RESOURCES, INC.**By:
              */s/
                  Rolf Harms*ROLF
                  HARMSPresident,
                  Chief Executive Officer,
                Chief
                  Financial OfficerDate:
              August 28,
                  2007
 
 In
        accordance with the Exchange Act, this report has been signed below by the
        following persons on behalf of the registrant and in the capacities and on
        the
        dates indicated.
 
 **Name**
              
              **Title**
              
              **Date***/s/
                  Rolf Harms*
              
              President,
                  Chief Executive Officer,
              
              August
                  28, 2007ROLF
                  HARMS
              
              Chief
                  Financial Officer