**UNITED
            STATES SECURITIES AND EXCHANGE COMMISSION**
 **Washington,
            D.C. 20549**
  **FORM
            10-QSB**
 **(Mark
            One)**
  **x**
                  **Quarterly
                      Report Pursuant to Section 13 or 15(d) of the Securities Exchange
                      Act of
                      1934.**
  **For
            the quarterly period ended August 31, 2006.**
 **or**
  **o**
                  **Transition
                      Report Pursuant to Section 13 or 15(d) of the Securities Exchange
                      Act of
                      1934.**
  **For
            the transition period from ______to______.**
  **Commission
            file number 333-130858**
  **BYWATER
            RESOURCES INC.**
 (Exact
            name of registrant as specified in its charter)
 **Delaware**(State
                      or other jurisdiction of
                  (I.R.S.
                      Employer Identification No.)incorporation
                      or organization)
  **300
                      Park Avenue, Suite 1700, New York, NY**
                  **10022**(Address
                      of principal executive offices)
                  (Zip
                      Code)
  **(212)
            572-6395**
 (Registrant’s
            telephone number, including area code)
  (Former
            name, former address and former fiscal year, if changed since last
            report)
  Check
            whether the issuer (1) has filed all reports required to be filed by
            Section 13
            or 15(d) of the Exchange Act during the preceding 12 months (or for such
            shorter
            period that the issuer was required to file such reports), and (2) has
            been
            subject to such filing requirements for the past 90 days.
 Yes x No o
  Indicate
            by check mark whether the registrant is a shell company as defined in
            Rule 12b-2
            of the Exchange Act.
  Yes
                  x
                  Noo
 
 State
            the
            number of shares outstanding of each of the issuer’s classes of common equity,
            as of October 16, 2006: 16,000,000  shares
            of
            common stock.
     
 
  
               **BYWATER
            RESOURCES INC.**
 **FINANCIAL
            STATEMENTS**
  **INDEX**
  **PART
            I-- FINANCIAL INFORMATION**
  Item
                      1.
                  Financial
                      StatementsItem
                      2.
                  Management’s
                      Discussion and Analysis of Financial ConditionItem
                      3.
                  Control
                      and Procedures
  **PART
            II-- OTHER INFORMATION**
  Item
                      1.
                  Legal
                      ProceedingsItem
                      2.
                  Changes
                      in SecuritiesItem
                      3.
                  Defaults
                      Upon Senior SecuritiesItem
                      4.
                  Submission
                      of Matters to a Vote of Security HoldersItem
                      5.
                  Other
                      InformationItem
                      6.
                  Exhibits
                      and Reports on Form 8-K
 
 **SIGNATURE**
  **Item
            1. Financial Information**
  BASIS
            OF
            PRESENTATION
  The
            accompanying reviewed financial statements are presented in accordance
            with
            generally accepted accounting principles for interim financial information
            and
            the instructions to Form 10-QSB and item 310 under subpart A of Regulation
            S-B.
            Accordingly, they do not include all of the information and footnotes
            required
            by generally accepted accounting principles for complete financial statements.
            In the opinion of management, all adjustments (consisting only of normal
            occurring accruals) considered necessary in order to make the financial
            statements not misleading, have been included. Operating results for
            the three
            months ended August 31, 2006 are not necessarily indicative of results
            that may
            be expected for the year ending May 31, 2007, 2006. The financial statements
            are
            presented on the accrual basis.
     
 
  
   **BYWATER
                RESOURCES, INC.**
 **(an
                exploration stage company)**
 
 **FINANCIAL
                STATEMENTS**
 
 **As
                Of August 31, 2006**
 
 
 
 
 
 
 BALANCE
                          SHEET
                      F-1STATEMENT
                          OF OPERATIONS
                      F-2STATEMENT
                          OF STOCKHOLDERS' EQUITY
                      F-3STATEMENT
                          OF CASH FLOWS
                      F-4FINANCIAL
                          STATEMENT FOOTNOTES
                      F-5
     
  **BYWATER
                          RESOURCES, INC.****(an
                          exploration stage company)****BALANCE
                          SHEET****As
                          of August 31, 2006 and May 31, 2006****ASSETS****CURRENT
                          ASSETS**
                      
                      **8/31/2006**
                      
                      **5/31/2006**Cash
                      
                      $
                      28,461
                      
                      $
                      39,944Total
                          Current Assets
                      
                      
                      28,461
                      
                      
                      39,944**TOTAL
                          ASSETS**
                      
                      $
                      28,461
                      
                      $
                      39,944**LIABILITIES
                          AND STOCKHOLDERS' EQUITY****CURRENT
                          LIABILITIES**Accrued
                          Expenses
                      
                      $
                      1,200
                      
                      $
                      4,950Total
                          Current Liabilities
                      
                      
                      1,200
                      
                      
                      4,950**TOTAL
                          LIABILITIES**
                      
                      $
                      1,200
                      
                      $
                      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
                      
                      
                      (53,939
                      )
                      
                      (46,206
                      )Total
                          Stockholders' Equity
                      
                      
                      27,261
                      
                      
                      34,994**TOTAL
                          LIABILITIES AND EQUITY**
                      
                      $
                      28,461
                      
                      $
                      39,944
 The
            accompanying notes are an integral part of these financial
            statements.
  F-1
   
  **BYWATER
                          RESOURCES, INC.****(an
                          exploration stage company)****STATEMENT
                          OF OPERATIONS****For
                          three months ending August 31, 2006 and****From
                          Inception (January 11, 2006) through August 31,
                          2006****3
                          MONTHS**
                      
                      **FROM****ENDING**
                      
                      **INCEPTION****08/31/06**
                      
                      **TO
                          08/31/06****REVENUE**
                      
                      $
                      -
                      
                      $
                      -**GENERAL
                          AND ADMINISTRATIVE EXPENSES**
                      
                      
                      7,733
                      
                      
                      13,939**EXPLORATION
                          COSTS**
                      
                      
                      -
                      
                      
                      40,000**NET
                          INCOME (LOSS)**
                      
                      $
                      (7,733
                      )
                      $
                      (53,939
                      )**Basic
                          and diluted earnings(loss) per share**
                      
                      $
                      -
                      
                      $
                      (0.01
                      )**Weighted
                          average number of common shares**
                      
                      
                      4,841,667
                      
                      
                      4,841,667
   The
            accompanying notes are an integral part of these
            financial statements.  F-2
    
   **BYWATER
                          RESOURCES, INC.****(an
                          exploration stage company)****STATEMENT
                          OF STOCKHOLDERS' EQUITY****From
                          inception (January 11, 2006) through August 31,
                          2006****ADDITIONAL****COMMON**
                      
                      **PAR**
                      
                      **PAID
                          IN**
                      
                      **ACCUM**
                      
                      **TOTAL****STOCK**
                      
                      **VALUE**
                      
                      **CAPITAL**
                      
                      **DEFICIT**
                      
                      **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
                      
                      
                      37810
                      
                      
                      
                      
                      
                      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)
                      
                      
                      
                      
                      
                      
                      
                      
                      
                      
                      
                      (7,733
                      )
                      
                      (7,733
                      )Balance,
                          August 31, 2006
                      
                      
                      16,000,000
                      
                      $
                      1,600
                      
                      $
                      79,600
                      
                      $
                      (53,939
                      )
                      $
                      27,261
  The
              accompanying notes are an integral part of these
              financial statements.  F-3
     
  **BYWATER
                              RESOURCES, INC.****(an
                              exploration stage company)****STATEMENTS
                              OF CASH FLOWS****For
                              three months ending August 31, 2006 and****From
                              Inception (January 11, 2006) through August 31,
                              2006****3
                              MONTHS**
                          
                          **FROM****ENDING**
                          
                          **INCEPTION****CASH
                              FLOWS FROM OPERATING ACTIVITIES**
                          
                          **8/31/2006**
                          
                          **TO
                              8/31/2006**Net
                              income (loss)
                          
                          $
                          (7,733
                          )
                          $
                          (53,939
                          )Compensation
                              in the form of stock
                          
                          
                          -
                          
                          
                          1,200Increase
                              (Decrease) in Accrued Expenses
                          
                          
                          (3,750
                          )
                          
                          1,200Total
                              adjustments to net income
                          
                          
                          (3,750
                          )
                          
                          2,400Net
                              cash provided by (used in) operating activities
                          
                          
                          (11,483
                          )
                          
                          (51,539
                          )**CASH
                              FLOWS FROM INVESTING ACTIVITIES**None
                          
                          
                          -
                          
                          
                          -Net
                              cash flows provided by (used in) investing activities
                          
                          
                          -
                          
                          
                          -**CASH
                              FLOWS FROM FINANCING ACTIVITIES**Proceeds
                              from stock issuance
                          
                          
                          -
                          
                          
                          80,000Net
                              cash provided (used in) financing activities
                          
                          
                          -
                          
                          
                          80,000**CASH
                              RECONCILIATION**Net
                              increase (decrease) in cash
                          
                          
                          (11,483
                          )
                          
                          28,461Cash
                              - beginning balance
                          
                          
                          39,944
                          
                          
                          -**CASH
                              BALANCE - END OF PERIOD**
                          
                          $
                          28,461
                          
                          $
                          28,461
   The
                    accompanying notes are an integral part of these
                    financial statements.  F-4
   
   **BYWATER
                    RESOURCES, INC.**
   **FINANCIAL
                    STATEMENT FOOTNOTES**
  
 NOTE
                    1
                    - OPERATIONS AND BASIS OF PRESENTATION
 
 Bywater
                    Resources, Inc. (the Company), an exploration stage 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; accordingly, the Company is deemed
                    to be in the
                    exploration stage.
 
 The
                    Company's financial statements have been presented on the basis
                    that it is a
                    going concern, which contemplates the realization of the mineral
                    properties and
                    other assets and the satisfaction of liabilities in the normal
                    course of
                    business. The Company has incurred losses of from inception.
                    These factors raise
                    substantial doubt about the Company's ability to continue as
                    a going concern.
                    Management continues to actively seek additional sources of capital
                    to fund
                    current and future operations. There is no assurance that the
                    Company will be
                    successful in continuing to raise additional capital, establishing
                    probable or
                    proven reserves, or determining if the mineral properties can
                    be mined
                    economically. These financial statements do not include any adjustments
                    that
                    might result from the outcome of these uncertainties.
 
 The
                    fiscal year end of the Company is May 31.
 
 NOTE
                    2
                    - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
 
 Revenue
                    and Cost Recognition
 
 The
                    Company uses the accrual basis of accounting for financial statement
                    reporting.
                    Revenues and expenses are recognized in accordance with Generally
                    Accepted
                    Accounting Principles for the industry. Certain period expenses
                    are recorded
                    when obligations are incurred.
 
 Use
                    of
                    Estimates
 
 The
                    preparation of the financial statements in conformity with generally
                    accepted
                    accounting principles requires management to make estimates and
                    assumptions that
                    affect the reported amount of assets and liabilities, and disclosure
                    of
                    contingent liabilities at the date of the financial statements,
                    and the reported
                    amount of revenues and expenses during the reporting period.
                    Actual results
                    could differ from those results.
 
 Accounts
                    Payable and Accrued Expenses
 
 Accounts
                    payable and accrued expenses consist of trade payables created
                    from the normal
                    course of business.
 
 Non-mining
                    Property and Equipment
 
 Property
                    and equipment purchased by the Company are 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.
 
 F-5
  
  Income
                    Taxes
 
 The
                    Company accounts for income taxes using the liability method
                    which requires
                    recognition of deferred tax liabilities and assets for the expected
                    future tax
                    consequences of events that have been included in the financial
                    statements or
                    tax returns. Deferred tax assets and liabilities are determined
                    based on the
                    difference between the financial statements and tax basis of
                    assets and
                    liabilities using enacted tax rates in effect for the year in
                    which the
                    differences are expected to reverse.
 
 The
                    Company's management determines if a valuation allowance is necessary
                    to reduce
                    any tax benefits when the available benefits are more likely
                    than not to expire
                    before they can be used.
 
 Stock
                    Based Compensation
 
 In
                    October 1995, the Financial Accounting Standards Board issued
                    Statement of
                    Financial Accounting Standards No. 123, "Accounting for Stock-Based
                    Compensation," (SFAS 123), which is effective for periods beginning
                    after
                    December 15, 1995. SFAS 123 was revised by SFAS 123 (R) which
                    the Company has
                    adopted to account for stock based compensation.
 
 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
                    portion of deposits in a financial institution that insures its
                    deposits with
                    the FDIC up to $100,000 per depositor in excess of such insured
                    amounts are not
                    subject to insurance and represent a credit risk to the Company.
 
 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.
 
 Earnings
                    Per Share
 
 In
                    February 1997, the Financial Accounting Standards Board (FASB)
                    issued Statement
                    of Financial Accounting Standards No. 128 (SFAS 128), "Earnings
                    Per Share". SFAS
                    128 replaces the presentation of primary earnings per share with
                    a presentation
                    of basic earnings per share based upon the weighted average number
                    of common
                    shares for the period.
 
 NOTE
                    3
                    - AFFILIATES AND RELATED PARTIES
 
 Significant
                    relationships with (1) companies affiliated through common
                    ownership
 and/or
                    management, and (2) other related parties are as follows:
 
 The
                    Company has compensated officers of the Company with compensation
                    in the form of
                    stock as described in the equity footnote.
 
 NOTE
                    4
                    - INCOME TAXES
 
 The
                    Company may have available net operating loss carryforwards for
                    financial
                    statement and federal income tax purposes. These loss carryforwards
                    expire if
                    not used within 20 years from the year generated. The Company's
                    management has
                    decided a valuation allowance is necessary to reduce any tax
                    benefits because
                    the available benefits are more likely than not to expire before
                    they can be
                    used.
 
 The
                    Company has $46,206 in net operating losses that were generated
                    from normal
                    operations which will expire in 2026 if not used. The tax benefit
                    of this net
                    operating loss is $9,300 for which the Company’s management has set a valuation
                    allowance.
 
 F-6
  
  
 NOTE
                    5
                    - LONG-TERM DEBT
 
 The
                    Company has no long-term debt.
 
 NOTE
                    6
                    - SHAREHOLDERS' EQUITY
 
 Preferred
                    Stock
 
 The
                    Company has authorized one hundred million (50,000,000) shares
                    of preferred
                    stock with a par value of $.0001, none of which have been issued.
 
 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.
 
 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.
 
 Common
                    Stock Recorded as Compensation
 
 The
                    Company does not have an employee stock compensation package
                    set up at this
                    time. The stock compensation that has been granted falls under
                    Rule 144.
                    Compliance with Rule 144 is discussed in the following paragraph.
 
 In
                    general, under Rule 144 as currently in effect, a person who
                    has beneficially
                    owned shares of a company's common stock for at least one year
                    is entitled to
                    sell within any three month period a number of shares that does
                    not exceed the
                    greater of:
 
 1.
                    1% of
                    the number of shares of the company's common stock then
                    outstanding.
 
 2.
                    The
                    average weekly trading volume of the company's common stock during
                    the four
                    calendar weeks preceding the filing of a notice on form 144 with
                    respect to the
                    sale.
 
 Sales
                    under Rule 144 are also subject to manner of sale provisions
                    and notice
                    requirements and to the availability of current public information
                    about the
                    company.
 
 NOTE
                    7
                    - CONTRACTS AND AGREEMENTS
 
 The
                    Company entered into an option agreement on February 6, 2006
                    with Ms. Gillian
                    Wells (“Wells”) to earn a 100% interest in the CARTER 1 claim located
                    approximately 8 kilometres west of the Town of Port Alice, British
                    Columbia for
                    a total of $40,000. 11⁄2% of the NSR (Net Smelter Royalty) can be acquired for
                    $1.0 million within 12 months from commencement of commercial
                    production.
                    Advance royalties of $25,000 are payable commencing 48 months
                    from February 28,
                    2006.
 
 F-7
  
  
 NOTE
                    8
                    - COMMITMENTS AND CONTINGENCIES
 
 Commitments
                    of the Company include the responsibility to the registration
                    costs of the
                    proposed filing.
 
 Management
                    is not aware of any contingent matters that could have a material
                    adverse effect
                    on the Company’s financial condition, results of operations, or
                    liquidity.
 
 NOTE
                    9
                    - LITIGATION, CLAIMS AND ASSESSMENTS
 
 From
                    time
                    to time in the normal course of business the Company may be involved
                    in
                    litigation. The Company’s management has determined any asserted or unasserted
                    claims to be immaterial to the financial statements.
 
 
 NOTE
                    10 - GOING CONCERN
 
 The
                    accompanying financial statements have been prepared assuming
                    that the company
                    will continue as a going concern. As discussed in the notes to
                    the financial
                    statements, the Company has experienced losses from inception.
                    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:
 
 -
                        ability
                            to locate a profitable mineral property -
                        ability
                            to generate revenues -
                        ability
                            to 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.
 
 
 F-8
  
  **Item
            2. Management’s Discussion and Analysis or Plan of
            Operation**
  GENERAL
  **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 21⁄2% 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. 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 August 31, 2006 were $40,000 for
            general
            exploration costs related to the mineral rights of the exploration property
            and
            $13,939 of general and administrative costs for a total expense of $53,939
            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 section of this prospectus 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 have sufficient cash on hand to complete the filing of this
            prospectus and meeting our exploration, general and administration expenses
            and
            we must raise more capital by the summer of 2007 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 intend to pursue
            financing
            activities in the spring of 2007.
  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.
            We plan
            to initially offer the debt or equity to our current shareholders and
            management. If we are not successful in raising the required capital,
            we will
            offer our debt or equity to new investors. At present, we have no specific
            plans
            regarding a debt or equity offering, but intend to actively commence
            raising the
            required capital during the spring of 2007. As an alternative to raising
            capital
            through the selling of debt or equity, we will 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.
  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.
   **Item
            3. 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 February 28, 2006.
            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.
  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 fourth quarter of fiscal 2006 that
            has
            materially affected, or is reasonably likely to materially affect, our
            internal
            control over financial reporting.
   
  **PART
            II - OTHER INFORMATION**
  **Item
            1. Legal Proceedings.**
  The
            Company is currently not a party to any pending legal proceedings and
            no such
            action by, or to the best of its knowledge, against the Company has been
            threatened.
  **Item
            2. Changes in Securities.**
  None
  **Item
            3. Defaults Upon Senior Securities.**
  None
  **Item
            4. Submission of Matters to a Vote of Security Holders.**
  No
            matter
            was submitted during the quarter ending August 31, 2006, covered by this
            report
            to a vote of the Company’s shareholders, through the solicitation of proxies or
            otherwise.
  **Item
            5. Other Information.**
  None
  **Item
            6. Exhibits and Reports of Form 8-K.**
   (a)   Exhibits
 
 31.1
            Certification pursuant to Section 302 of Sarbanes Oxley Act of
            2002
 32.1
            Certification pursuant to Section 906 of Sarbanes Oxley Act of 2002
  (b)   Reports
            of Form 8-K
  None
 
 
 
   
 
  
       **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, there unto
            duly
            authorized.
 
 **BYWATER
            RESOURCES
            INC.**
 Registrant
  Date:
            October 16, 2006   By: */s/
            Rolf Harms*
 Rolf
            Harms
 President,
            Chief
            Executive Officer,
 Chairman
            of Board of
            Directors