---

UNITED STATESSECURITIES AND EXCHANGE COMMISSIONWashington, D.C.
20549

FORM 10-Q

(Mark One)

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

For the quarterly period ended October 31, 2009

or

[     ]     
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 000-52393

BIOSHAFT WATER TECHNOLOGY,
INC.(Exact name of registrant as specified in its charter)

|Nevada                                                               | 98-0494003                          
|-------------------------------------------------------------------- | ------------------------------------
|(State or other jurisdiction of incorporation or
      organization) | (I.R.S. Employer Identification No.)

1 Orchard Drive, Suite 220, Lake Forest CA
92630(Address of principal executive offices) (zip code)

(949) 748-8050(Registrants telephone number,
including area code)

Not Applicable(Former name, former address
and former fiscal year, if changed since last report)

Indicate by check mark whether the registrant (1) has filed all
reports required to be filed by Section 13 or 15(d) of the Securities Exchange
Act of 1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes [ X ] No [    ]

Indicate by check mark whether the registrant is a large
accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller
reporting company. See definitions of "large accelerated filer," "accelerated
filer," and "smaller reporting company" in Rule 12b-2 of the Exchange Act.
(Check one):

|Large accelerated filer [    ] |                                               | Accelerated filer [    
    ]
|------------------------------ | --------------------------------------------- | -----------------------------
|Non-accelerated filer [     ]  | (Do not check if a smaller reporting company) | Smaller reporting company [X]

Indicate by check mark whether the registrant is a shell company
(as defined in Rule 12b-2 of the Exchange Act). Yes
[     ]    No [ X ]

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- 2 -

APPLICABLE ONLY TO CORPORATE ISSUERS

State the number of shares outstanding of each of the issuers
classes of common stock, as of the latest practicable date:

90,000,000 common shares issued and outstanding as of December
15, 2009

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- 3 -

PART I - FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS

|                                                                                                                                                                               | Page Number
|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------ | -----------
|                                                                                                                                                                               |            
|Balance Sheets as of October 31, 2009 and April 30, 2009
        (Unaudited)                                                                                                   | 4          
|Statements of Operations for the three and six month periods
        ended October 31, 2009 and 2008 and for the period from inception to October
        31, 2009 (Unaudited) | 5          
|Statement of Stockholders Equity (Deficit) for the
        period from inception to October 31, 2009 (Unaudited)                                                              | 6          
|Statements of Cash Flows for the six month period ended
        October 31, 2009 and 2008 and for the period from inception to October
        31, 2009 (Unaudited)            | 7          
|Notes to the Financial Statements (Unaudited)                                                                                                                                  | 8-15       

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|BIOSHAFT WATER TECHNOLOGY, INC.
|-------------------------------
|(A Development Stage Company)  
|BALANCE SHEETS                 
|(UNAUDITED)                    

|                                                                                       |   |             |   |   |             |  
|-------------------------------------------------------------------------------------- | - | ----------- | - | - | ----------- | -
|                                                                                       |   | October 31, |   |   | April 30,   |  
|                                                                                       |   | 2009        |   |   | 2009        |  
|                                                                                       |   |             |   |   |             |  
|ASSETS                                                                                 |   |             |   |   |             |  
|                                                                                       |   |             |   |   |             |  
|Current assets :                                                                       |   |             |   |   |             |  
|Cash and cash equivalents                                                              | $ | 1,876       |   | $ | 25,560      |  
|Investment                                                                             |   | 50,000      |   |   | 50,000      |  
|Inventory                                                                              |   | 50,647      |   |   | 63,637      |  
|Other current assets                                                                   |   | 1,299       |   |   | 1,299       |  
|                                                                                       |   |             |   |   |             |  
|Total current assets                                                                   |   | 103,822     |   |   | 140,496     |  
|                                                                                       |   |             |   |   |             |  
|Other assets :                                                                         |   |             |   |   |             |  
|Deposits                                                                               |   | 2,250       |   |   | 4,939       |  
|Property, plant and
      equipment  net                                              |   | 19,223      |   |   | 26,883      |  
|                                                                                       |   |             |   |   |             |  
|Total other assets                                                                     |   | 21,473      |   |   | 31,822      |  
|                                                                                       |   |             |   |   |             |  
|Total assets                                                                           | $ | 125,295     |   | $ | 172,318     |  
|                                                                                       |   |             |   |   |             |  
|LIABILITIES AND STOCKHOLDERS EQUITY
      (DEFICIT)                                   |   |             |   |   |             |  
|Current liabilities :                                                                  |   |             |   |   |             |  
|Customer deposit                                                                       | $ | 1,000       |   | $ | 18,950      |  
|Accounts payable and accrued expenses                                                  |   | 570,958     |   |   | 379,401     |  
|Loan payable  related party                                                           |   | 100,000     |   |   | 75,000      |  
|Loans payable                                                                          |   | 525,000     |   |   | 525,000     |  
|                                                                                       |   |             |   |   |             |  
|Total current liabilities                                                              |   | 1,196,958   |   |   | 998,351     |  
|                                                                                       |   |             |   |   |             |  
|Stockholders equity (deficit) :-                                                      |   |             |   |   |             |  
|Common stock, $0.001 par value; 300,000,000
      shares authorized, 90,000,000 issued |   | 90,000      |   |   | 90,000      |  
|and outstanding                                                                        |   |             |   |   |             |  
|Preferred stock, $0.001 par value;
      25,000,000 shares authorized, none issued and |   | -           |   |   | -           |  
|outstanding                                                                            |   |             |   |   |             |  
|Additional paid-in capital                                                             |   | 15,238,144  |   |   | 15,209,338  |  
|Deficit accumulated during the development stage                                       |   | (16,399,807 | ) |   | (16,125,371 | )
|                                                                                       |   |             |   |   |             |  
|Total stockholders equity (deficit)                                                   |   | (1,071,663  | ) |   | (826,033    | )
|                                                                                       |   |             |   |   |             |  
|Total liabilities
      and stockholders' equity (deficit)                             | $ | 125,295     |   | $ | 172,318     |  

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

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- 5 -

|BIOSHAFT WATER TECHNOLOGY, INC.
|-------------------------------
|(A Development Stage Company)  
|STATEMENTS OF OPERATIONS       
|(UNAUDITED)                    

|                                  |   |             |   |   |             |   |   |             |   |   |             |   |   |                 |  
|--------------------------------- | - | ----------- | - | - | ----------- | - | - | ----------- | - | - | ----------- | - | - | --------------- | -
|                                  |   | Three       |   |   | Three       |   |   | Six         |   |   | Six         |   |   | Inception       |  
|                                  |   | Months      |   |   | Months      |   |   | Months      |   |   | Months      |   |   | (March 8, 2006) |  
|                                  |   | Ended       |   |   | Ended       |   |   | Ended       |   |   | Ended       |   |   | To              |  
|                                  |   | October 31, |   |   | October 31, |   |   | October 31, |   |   | October 31, |   |   | October 31,     |  
|                                  |   | 2009        |   |   | 2008        |   |   | 2009        |   |   | 2008        |   |   | 2009            |  
|                                  |   |             |   |   |             |   |   |             |   |   |             |   |   |                 |  
|Net Revenue                       | $ | 24,370      |   | $ | -           |   | $ | 24,370      |   | $ | -           |   | $ | 74,370          |  
|Cost of sales                     |   | 12,990      |   |   | -           |   |   | 12,990      |   |   | -           |   |   | 62,990          |  
|                                  |   |             |   |   |             |   |   |             |   |   |             |   |   |                 |  
|Gross Profit                      |   | 11,380      |   |   | -           |   |   | 11,380      |   |   | -           |   |   | 11,380          |  
|                                  |   |             |   |   |             |   |   |             |   |   |             |   |   |                 |  
|OPERATING EXPENSES                |   |             |   |   |             |   |   |             |   |   |             |   |   |                 |  
|Depreciation &
      amortization |   | 3,829       |   |   | 4,928       |   |   | 7,659       |   |   | 9,655       |   |   | 1,808,061       |  
|Impairment of assets              |   | -           |   |   | -           |   |   | -           |   |   | -           |   |   | 12,483,903      |  
|General & administrative          |   | 120,440     |   |   | 219,456     |   |   | 213,979     |   |   | 504,486     |   |   | 1,758,757       |  
|Stock based compensation          |   | 14,403      |   |   | 14,544      |   |   | 28,806      |   |   | 27,330      |   |   | 263,177         |  
|Total
      Operating Expense     |   | 138,672     |   |   | 238,928     |   |   | 250,444     |   |   | 541,471     |   |   | 16,313,897      |  
|                                  |   |             |   |   |             |   |   |             |   |   |             |   |   |                 |  
|NET LOSS FROM OPERATIONS          |   | (127,292    | ) |   | (238,928    | ) |   | (239,064    | ) |   | (541,471    | ) |   | (16,302,517     | )
|                                  |   |             |   |   |             |   |   |             |   |   |             |   |   |                 |  
|OTHER INCOME (EXPENSE)            |   |             |   |   |             |   |   |             |   |   |             |   |   |                 |  
|Other income                      |   | 2,400       |   |   | -           |   |   | 4,800       |   |   | -           |   |   | 4,800           |  
|Interest Income
      (Expense)   |   | (26,522     | ) |   | (18,750     | ) |   | (40,172     | ) |   | (30,385     | ) |   | (102,089        | )
|                                  |   | (24,122     | ) |   | (18,177     | ) |   | (35,372     | ) |   | (30,385     | ) |   | (97,289         | )
|                                  |   |             |   |   |             |   |   |             |   |   |             |   |   |                 |  
|NET LOSS                          | $ | (151,414    | ) | $ | (257,105    | ) | $ | (274,436    | ) | $ | (571,856    | ) | $ | (16,399,806     | )
|                                  |   |             |   |   |             |   |   |             |   |   |             |   |   |                 |  
|                                  |   |             |   |   |             |   |   |             |   |   |             |   |   |                 |  
|BASIC AND DILUTED NET LOSS        | $ | (0.00       | ) | $ | (0.00       | ) | $ | (0.00       | ) | $ | (0.01       | ) |   |                 |  
|PER SHARE                         |   |             |   |   |             |   |   |             |   |   |             |   |   |                 |  
|                                  |   |             |   |   |             |   |   |             |   |   |             |   |   |                 |  
|BASIC AND DILUTED                 |   |             |   |   |             |   |   |             |   |   |             |   |   |                 |  
|WEIGHTED AVERAGE NUMBER           |   | 90,000,000  |   |   | 90,000,000  |   |   | 90,000,000  |   |   | 90,000,000  |   |   |                 |  
|OF SHARES
      OUTSTANDING       |   |             |   |   |             |   |   |             |   |   |             |   |   |                 |  

Weighted average number of dilutive shares has not been
calculated as the dilutive shares will be anti-dilutive.

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

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- 6 -

|BIOSHAFT WATER TECHNOLOGY, INC.                                                
|-------------------------------------------------------------------------------
|(A Development Stage Company)                                                  
|STATEMENT OF STOCKHOLDERS' EQUITY (DEFICIT) FOR THE
      PERIOD FROM INCEPTION
|(MARCH 8, 2006) TO OCTOBER 31, 2009                                            

|                              |  |              |   |   |                            |   |   |                                                      |   |   |                                      |  
|----------------------------- |  | ------------ | - | - | -------------------------- | - | - | ---------------------------------------------------- | - | - | ------------------------------------ | -
|                              |  | Common Stock |   |   | Additional Paid In Capital |   |   | Deficit
    Accumulated During The Development Stage |   |   | Total Stockholder's Equity (deficit) |  
|                              |  |              |   |   |                            |   |   |                                                      |   |   |                                      |  
|                              |  | Shares       |   |   | Amount                     |   |   |                                                      |   |   |                                      |  
|                              |  |              |   |   |                            |   |   |                                                      |   |   |                                      |  
|Inception, March 8, 2006      |  | -            |   | $ | -                          |   | $ | -                                                    |   | $ | -                                    |  
|Initial capitalization        |  |              |   |   |                            |   |   |                                                      |   |   |                                      |  
|Sale of common stock          |  | 240,000,000  |   |   | 4,000                      |   |   | 11,000                                               |   |   | -                                    |  
|Net loss for the period       |  | -            |   |   | -                          |   |   | -                                                    |   |   | (4,077                               | )
|                              |  |              |   |   |                            |   |   |                                                      |   |   |                                      |  
|Balance, April 30, 2006       |  | 240,000,000  |   |   | 4,000                      |   |   | 11,000                                               |   |   |                                      |  
|                              |  |              |   |   |                            |   |   |                                                      |   |   | (4,077                               | )
|Sale of common stock          |  | 30,000,000   |   |   | 500                        |   |   | 49,500                                               |   |   | -                                    |  
|Net loss for year             |  | -            |   |   | -                          |   |   | -                                                    |   |   | (35,730                              | )
|                              |  |              |   |   |                            |   |   |                                                      |   |   |                                      |  
|Balance, April 30, 2007       |  | 270,000,000  |   |   | 4,500                      |   |   | 60,500                                               |   |   | (39,807                              | )
|Effect of forward stock split |  |              |   |   | 265,500                    |   |   | (265,500                                             | ) |   | -                                    |  
|Returned to treasury          |  | (210,000,000 | ) |   | (210,000                   | ) |   | 210,000                                              |   |   | -                                    |  
|Shares issued for cash        |  | 3,000,000    |   |   | 3,000                      |   |   | 1,496,967                                            |   |   | -                                    |  
|Shares issued for patent      |  | 27,000,000   |   |   | 27,000                     |   |   | 13,473,000                                           |   |   | -                                    |  
|purchase                      |  |              |   |   |                            |   |   |                                                      |   |   |                                      |  
|Stock based compensation      |  | -            |   |   | -                          |   |   | 176,760                                              |   |   | -                                    |  
|Net loss for the year         |  | -            |   |   | -                          |   |   | -                                                    |   |   | (15,182,132                          | )
|                              |  |              |   |   |                            |   |   |                                                      |   |   |                                      |  
|Balance, April 30, 2008       |  | 90,000,000   |   |   | 90,000                     |   |   | 15,151,727                                           |   |   | (15,221,939                          | )
|Stock based compensation      |  | -            |   |   | -                          |   |   | 57,611                                               |   |   | -                                    |  
|Net loss for the year         |  | -            |   |   | -                          |   |   | -                                                    |   |   | (903,432                             | )
|                              |  |              |   |   |                            |   |   |                                                      |   |   |                                      |  
|Balance, April 30, 2009       |  | 90,000,000   |   |   | 90,000                     |   |   | 15,209,338                                           |   |   | (16,125,371                          | )
|                              |  |              |   |   |                            |   |   |                                                      |   |   |                                      |  
|Stock based compensation      |  | -            |   |   | -                          |   |   | 28,806                                               |   |   | -                                    |  
|Net loss for the period       |  | -            |   |   | -                          |   |   | -                                                    |   |   | (274,436                             | )
|                              |  |              |   |   |                            |   |   |                                                      |   |   |                                      |  
|Balance, July 31, 2009        |  | 90,000,000   |   | $ | 90,000                     |   | $ | 15,238,144                                           |   | $ | (16,399,807                          | )

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

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|BIOSHAFT WATER TECHNOLOGY, INC.                                                    
|-----------------------------------------------------------------------------------
|                                                                                   
|(A Development Stage Company)                                                      
|STATEMENT OF CASH FLOWS FOR SIX MONTH PERIODS ENDED
      OCTOBER 31, 2009 AND 2008
|AND FOR THE PERIOD SINCE INCEPTION (MARCH 8, 2006) TO
      OCTOBER 31, 2009       

|                                                            |   |             |   |   |             |   |   |                    |  
|----------------------------------------------------------- | - | ----------- | - | - | ----------- | - | - | ------------------ | -
|                                                            |   |             |   |   |             |   |   | Period             |  
|                                                            |   |             |   |   |             |   |   | From Inception     |  
|                                                            |   |             |   |   |             |   |   | (March 8, 2006) to |  
|                                                            |   | October 31, |   |   | October 31, |   |   | October 31,        |  
|                                                            |   | 2009        |   |   | 2008        |   |   | 2008               |  
|                                                            |   |             |   |   |             |   |   |                    |  
|                                                            |   |             |   |   |             |   |   |                    |  
|CASH FLOWS USED IN OPERATING ACTIVITIES                     |   |             |   |   |             |   |   |                    |  
|Net loss                                                    | $ | (274,436    | ) | $ | (571,856    | ) | $ | (16,399,806        | )
|Adjustments To Reconcile Net Loss To Net
      Cash Used In |   |             |   |   |             |   |   |                    |  
|Operating Activities                                        |   |             |   |   |             |   |   |                    |  
|Impairment of assets                                        |   | -           |   |   | -           |   |   | 12,483,903         |  
|Depreciation & amortization                                 |   | 7,660       |   |   | 9,655       |   |   | 1,808,062          |  
|Stock based compensation                                    |   | 28,806      |   |   | 27,330      |   |   | 263,177            |  
|Change in operating assets & liabilities :                  |   |             |   |   |             |   |   |                    |  
|Other current assets                                        |   | 2,689       |   |   | 1,034       |   |   | 1,390              |  
|Inventory                                                   |   | 12,990      |   |   | -           |   |   | (50,647            | )
|Other assets                                                |   | -           |   |   | -           |   |   | (4,939             | )
|Accounts payable                                            |   | 191,557     |   |   | 65,261      |   |   | 570,955            |  
|Customer deposit                                            |   | (17,950     | ) |   | -           |   |   | 1,000              |  
|                                                            |   |             |   |   |             |   |   |                    |  
|Net cash used in operating activities                       |   | (48,684     | ) |   | (468,576    | ) |   | (1,326,906         | )
|                                                            |   |             |   |   |             |   |   |                    |  
|CASH FLOWS FROM FINANCING ACTIVITY                          |   |             |   |   |             |   |   |                    |  
|Proceeds from loan payable  related party                  |   | 25,000      |   |   | 500,000     |   |   | 525,000            |  
|Proceeds from loan payable                                  |   | -           |   |   | 75,000      |   |   | 175,000            |  
|Pepayment of related party loan payable                     |   | -           |   |   | -           |   |   | (75,000            | )
|Proceeds from issuance of
      common stock                |   | -           |   |   | -           |   |   | 1,565,000          |  
|                                                            |   |             |   |   |             |   |   |                    |  
|                                                            |   | 25,000      |   |   | 575,000     |   |   | 2,190,000          |  
|                                                            |   |             |   |   |             |   |   |                    |  
|CASH FLOWS USED IN INVESTING ACTIVITIES                     |   |             |   |   |             |   |   |                    |  
|Investment in joint venture                                 |   | -           |   |   | -           |   |   | (50,000            | )
|Purchase of equipment                                       |   | -           |   |   | (4,310      | ) |   | (61,135            | )
|Purchase of patent                                          |   | -           |   |   | -           |   |   | (750,083           | )
|                                                            |   |             |   |   |             |   |   |                    |  
|Net cash used in investing activities                       |   | -           |   |   | (4,310      | ) |   | (861,218           | )
|                                                            |   |             |   |   |             |   |   |                    |  
|Change in cash and cash equivalents during the period       |   | (23,684     | ) |   | 102,114     |   |   | 1,876              |  
|                                                            |   |             |   |   |             |   |   |                    |  
|Cash and cash equivalents, beginning of the period          |   | 25,560      |   |   | 80,200      |   |   | -                  |  
|                                                            |   |             |   |   |             |   |   |                    |  
|Cash and cash equivalents, end of the period                | $ | 1,876       |   | $ | 182,314     |   | $ | 1,876              |  
|                                                            |   |             |   |   |             |   |   |                    |  
|Supplemental disclosure with respect to cash flows:         |   |             |   |   |             |   |   |                    |  
|Cash paid for income taxes                                  | $ | -           |   | $ | -           |   | $ | -                  |  
|Cash paid for interest                                      | $ | -           |   | $ | -           |   | $ | -                  |  

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

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- 8 -

|BIOSHAFT WATER TECHNOLOGY, INC.
|-------------------------------
|(A Development Stage Company)  
|NOTES TO FINANCIAL STATEMENTS  
|October 31, 2009               

NOTE 1. GENERAL ORGANIZATION AND BUSINESS

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

NOTE 2. SUMMARY OF SIGNIFICANT ACCOUNTING
PRACTICES

Basis of Presentation

The accompanying unaudited condensed consolidated financial
statements contain all necessary adjustments and disclosures to present fairly
the financial position as of October 31, 2009 and the results of operations and
cash flows for the six month periods ended October 31, 2009 and 2008. The
results of operations for the three and six month periods ended October 31, 2009
are not necessarily indicative of the results for the full year. These
consolidated financial statements should be read in conjunction with the
financial statements and the notes thereto included in our Form 10-K for the
year ended April 30, 2009.

Use of Estimates

The preparation of financial statements in conformity with
generally accepted accounting principles requires management 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 the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates. Estimates
and assumptions are reviewed periodically and the effects of revisions are
reflected in the financial statements in the period they are determined.

Reclassification

Certain comparative amounts have been reclassified to conform
to the six month periods ended October 31, 2009 and 2008.

Cash and Cash Equivalents

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

Inventory

Inventories are valued at the lower of cost or market.
Appropriate consideration is given to deterioration, obsolescence and other
factors in evaluating net realizable value.

Intangible Assets

The Company adopted Statement of Financial Accounting Standards
No. 144, Accounting for the Impairment or Disposal of Long-Lived Assets (ASC
360-10), which addresses financial accounting and reporting for the impairment
or disposal of long-lived assets and supersedes SFAS No. 121, Accounting for
the Impairment of

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- 9 -

|BIOSHAFT WATER TECHNOLOGY, INC.
|-------------------------------
|(A Development Stage Company)  
|NOTES TO FINANCIAL STATEMENTS  
|October 31, 2009               

Intangible Assets (continued)

Long-Lived Assets and for Long-Lived Assets to be Disposed Of,
and the accounting and reporting provisions of APB Opinion No. 30, Reporting
the Results of Operations for a Disposal of a Segment of a Business. The
Company periodically evaluates the carrying value of long-lived assets to be
held and used in accordance with SFAS 144. SFAS 144 requires impairment losses
to be recorded on long-lived assets used in operations when indicators of
impairment are present and the undiscounted cash flows estimated to be generated
by those assets are less than the assets carrying amounts. In that event, a
loss is recognized based on the amount by which the carrying amount exceeds the
fair market value of the long-lived assets. Loss on long-lived assets to be
disposed of is determined in a similar manner, except that fair market values
are reduced for the cost of disposal.

Fair Value of Financial Instruments

Statement of financial accounting standard No. 107 (ASC 820),
Disclosures about fair value of financial instruments, requires that the Company
disclose estimated fair values of financial instruments. The carrying amounts
reported in the statements of financial position for current assets and current
liabilities qualifying as financial instruments are a reasonable estimate of
fair value.

Revenue Recognition

We recognize revenue in accordance with generally accepted
accounting principles as outlined in the Securities and Exchange Commissions
Staff Accounting Bulletin No. 104, Revenue Recognition(ASC 604), which
requires that four basic criteria be met before revenue can be recognized: (i)
persuasive evidence of an arrangement exists; (ii) the price is fixed or
determinable; (iii) collectability is reasonably assured; and (iv) product
delivery has occurred or services have been rendered. Revenue from the sale of
products is generally recognized after both the goods are shipped to the
customer and acceptance has been received, if required. Our products are custom
made for our customers, who primarily consist of original engineer manufacturers
(OEMs), and we do not accept returns. Our products are shipped complete and
ready to be incorporated into higher level assemblies by our customers. The
terms of the customer arrangements generally pass title and risk of ownership to
the customer at the time of shipment.

Stock-Based Compensation

In December 2004, the FASB issued SFAS No. 123R, Share Based
Payment. SFAS No. 123R (ASC 718) establishes the accounting for grants of
stock options and other transactions in which an entity exchanges its equity
instruments for goods or services. It also addresses transactions in which an
entity incurs liabilities in exchange for goods or services that are based on
the fair value of the entity's equity instruments or that may be settled by the
issuance of those equity instruments. SFAS No. 123R (1) revises SFAS No. 123,
Accounting for Stock-Based Compensation, (2) supersedes Accounting Principles
Bulletin (APB) Opinion No. 25, Accounting for Stock Issued to Employees, and
(3) establishes fair value as the measurement objective for share-based payment
transactions. The Company is following the provisions of SFAS No. 123R and has
recorded compensation expenses related to the granting of stock options to
employees.

Income Taxes

The Company utilizes SFAS No. 109 (ASC 740), Accounting for
Income Taxes, which requires the recognition of deferred tax assets and
liabilities for the expected future tax consequences of events that have been
included in the financial statements or tax returns. Under this method, deferred
income taxes are recognized for the tax consequences in future years of
differences between the tax bases of assets and liabilities and their financial
reporting amounts at each period end based on enacted tax laws and statutory tax
rates applicable to the periods in which the differences are expected to affect
taxable income. Valuation allowances are established, when necessary, to reduce
deferred tax assets to the amount expected to be realized.

---

- 10 -

|BIOSHAFT WATER TECHNOLOGY, INC.
|-------------------------------
|(A Development Stage Company)  
|NOTES TO FINANCIAL STATEMENTS  
|October 31, 2009               

Basic and Diluted Earnings (Loss) Per Share

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

Statement of Cash Flows

In accordance with SFAS No. 95, Statement of Cash Flows,
(ASC 230) cash flows from the Companys operations is based upon the local
currencies. As a result, amounts related to assets and liabilities reported on
the statement of cash flows will not necessarily agree with changes in the
corresponding balances on the balance sheet.

Concentration of Credit Risk

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

Equipment

Equipment consists of computer equipment and an automobile and
is record at cost.

Amortization is provided using the straight-line method, the
estimated useful life of the assets, over the following terms:

Computer Equipment
    3 YearsAutomobile
    3 Years


Recently issued accounting pronouncements

In June 2009, the FASB issued ASC 105 (previously SFAS No. 168,
The FASB Accounting Standards Codification and the Hierarchy of Generally
Accepted Accounting Principles ("GAAP") - a replacement of FASB Statement No.
162), which will become the source of authoritative accounting principles
generally accepted in the United States recognized by the FASB to be applied to
nongovernmental entities. The Codification is effective in the third quarter of
2009, and accordingly, the Quarterly Report on Form 10-Q for the quarter ending
September 30, 2009 and all subsequent public filings will reference the
Codification as the sole source of authoritative literature. The Company does
not believe that this will have a material effect on its consolidated financial
statements.

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- 11 -

|BIOSHAFT WATER TECHNOLOGY, INC.
|-------------------------------
|(A Development Stage Company)  
|NOTES TO FINANCIAL STATEMENTS  
|October 31, 2009               

Recently issued accounting pronouncements (continued)

In June 2009, the FASB issued amended standards for determining
whether to consolidate a variable interest entity. These amended standards
eliminate a mandatory quantitative approach to determine whether a variable
interest gives the entity a controlling financial interest in a variable
interest entity in favor of a qualitatively focused analysis, and require an
ongoing reassessment of whether an entity is the primary beneficiary. These
amended standards are effective for us beginning in the first quarter of fiscal
year 2010 and we are currently evaluating the impact that adoption will have on
our consolidated financial statements.

In June 2009, the FASB issued ASC 855 (previously SFAS No. 165,
Subsequent Events), which establishes general standards of accounting for and
disclosures of events that occur after the balance sheet date but before the
financial statements are issued or available to be issued. It is effective for
interim and annual periods ending after June 15, 2009. There was no material
impact upon the adoption of this standard on the Companys consolidated
financial statements.

In August 2009, the FASB issued Accounting Standards Update
(ASU) 2009-05, which amends ASC Topic 820, Measuring Liabilities at Fair
Value, which provides additional guidance on the measurement of liabilities at
fair value. These amended standards clarify that in circumstances in which a
quoted price in an active market for the identical liability is not available,
we are required to use the quoted price of the identical liability when traded
as an asset, quoted prices for similar liabilities, or quoted prices for similar
liabilities when traded as assets. If these quoted prices are not available, we
are required to use another valuation technique, such as an income approach or a
market approach. These amended standards are effective for us beginning in the
fourth quarter of fiscal year 2009 and are not expected to have a significant
impact on our consolidated financial statements.

NOTE 3. INVESTMENT

During the year ended April 30, 2009, the Company entered into
a contract with a third party whereby it agreed to split the cost of producing a
waste water treatment plant. The third party is responsible for and will incur
all costs and risks to do with the operations and maintenance of the plant while
the Company is responsible for technology support and engineering of the plant.
In addition, the third party agrees to market and sell the plant and profit will
be split at the time the plant is sold to end-user. Costs for the project are
split evenly between the two parties and treated as capital contribution to the
joint venture. As of October 31, 2009, the Company had invested $50,000.

NOTE 4. EQUIPMENT

Equipment consisted of the following at October 31, 2009 and
April 30, 2009:

October 31, 2009
    
    
    April 30, 2009Automobile
    $
    33,776
    
    $
    33,776Computer equipment
    
    11,807
    
    
    11,80745,583
    
    
    45,583Accumulated depreciation
    
    (26,360
    )
    
    (18,700
    )Property and equipment, net
    $
    19,223
    
    $
    26,883


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- 12 -

|BIOSHAFT WATER TECHNOLOGY, INC.
|-------------------------------
|(A Development Stage Company)  
|NOTES TO FINANCIAL STATEMENTS  
|October 31, 2009               

NOTE 4. EQUIPMENT (continued)

During six month periods ended October 31, 2009 and 2008, the
company recorded depreciation related to fixed assets of $7,660 and $9,655,
respectively.

NOTE 5. PATENTS ACQUISITION AND IMPAIREMENT OF
PATENT

On September 18, 2007, the Company acquired certain patents for
Waste Water Treatment Plant and Method in exchange for $750,083 cash and
27,000,000 shares, during the year-ended April 30, 2008. The shares were valued
at $13,500,000 which was the fair market value on the date of acquisition. The
patents will be amortized over the useful life of 5 years.

The Company evaluates intangible assets and other long-lived
assets for impairment, at a minimum, on an annual basis and whenever events or
changes in circumstances indicate that the carrying value may not be recoverable
from its estimated future cash flows. Recoverability of intangible assets, other
long-lived assets and goodwill is measured by comparing their net book value to
the related projected undiscounted cash flows from these assets, considering a
number of factors including past operating results, budgets, economic
projections, market trends and product development cycles. If the net book value
of the asset exceeds the related undiscounted cash flows, the asset is
considered impaired, and a second test is performed to measure the amount of
impairment loss. The Company assessed the carrying value of patents in
accordance with the requirements of SFAS #142 (ASC 350) "Goodwill and Other
Intangible Assets". Based on its assessment, the Company determined that
$12,483,903 of patents relating to Waste Water Treatment Plant and Method is
impaired at April 30, 2008, due to uncertainty about recovery of projected cash
flow from the patent

NOTE 6. LOANS PAYABLE

On June 3, 2008, the Company secured a loan payable of $500,000
accruing interest at 15%, secured by the assets of the company, subject to a 3%
financing fee and repayable on the one year anniversary date of the agreement
being August 11, 2009.

On March 6, 2009, the Company secured a loan payable of $75,000
accruing interest at 15%, due March 6, 2010 and secured by the assets of the
company.

On June 8, 2009, the Company secured a loan payable of $25,000
accruing interest at 15%, due June 8, 2010 and secured by the assets of the
company.

The interest expense for six month periods ended October 31,
2009 and 2008 were $40,172 and $30,385 respectively.

NOTE 7. GOING CONCERN

The accompanying financial statements have been prepared
assuming that the Company will continue as a going concern. The Company has net
losses for the period from inception to October 31, 2009 of $16,399,807. This
condition raises substantial doubt about the Companys ability to continue as a
going concern. The Companys continuation as a going concern is dependent on its
ability to meet its obligations, to obtain additional financing as may be
required and ultimately to attain profitability. The financial statements do not
include any adjustments that might result from the outcome of this uncertainty.

---

- 13 -

|BIOSHAFT WATER TECHNOLOGY, INC.
|-------------------------------
|(A Development Stage Company)  
|NOTES TO FINANCIAL STATEMENTS  
|October 31, 2009               

NOTE 7. GOING CONCERN (continued)

Management is planning to raise additional funds through an
equity offering. There is no guarantee that the Company will be successful in
these efforts.

NOTE 8. STOCKHOLDERS EQUITY

Authorized

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

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

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

Issued and Outstanding

On March 8, 2006 (inception), the Company issued 4,000,000
shares of its common stock to its Directors for cash of $15,000.

On August 22, 2007, the Company issued 3,000,000 shares of its
common stock for cash of $1.5 million. The shares were part of a unit comprising
of one share and two warrants. The warrants have exercise prices of $0.55 and
$0.60.

On August 24, 2007 the Company cancelled 210,000,000 shares of
its common stock and these shares were returned to treasury.

On September 18, 2007, the Company issued 27,000,000 shares of
its common stock in exchange for the rights to the Waste Water Treatment Plant
and Method. These shares have been valued at the fair market value on the date
of acquisition of $0.50 per share for total proceeds of $13,500,000.

---

- 14 -

|BIOSHAFT WATER TECHNOLOGY, INC.
|-------------------------------
|(A Development Stage Company)  
|NOTES TO FINANCIAL STATEMENTS  
|October 31, 2009               

NOTE 8. STOCKHOLDERS EQUITY (continued)

Warrants

The following table outlines warrants outstanding as at October
31, 2009:

Weighted
    TotalAverage
    WeightedTotal
    Remaining
    Average
    
    AggregrateExercise
    Warrants
    Life
    Exercise
    Warrants
    IntrinsicPrices
    Outstanding
    (Years)
    Price
    Exercisable
    Value$0.60
    3,000,000
    0.90
    $0.30
    3,000,000
    -


NOTE 9. RELATED PARTY TRANSACTIONS

On March 8, 2006 (inception), the Company issued 4,000,000
shares of its common stock to its Directors for cash of $15,000.During the year
ended April 30, 2009, the Company entered into a verbal loan agreement with an
officer of the Company, whereby, the Company borrowed $75,000 at a finance
charge of 4.99% per year. The Company paid off the loan during the period ended
January 31, 2009.

During the year ended April 30, 2009, the Company also entered
into a loan agreement with an officer of the Company, whereby, the Company
borrowed $75,000 at a finance charge of 10% per year. The loan is repayable in
February, 2010.

The warrants were valued using the black scholes option pricing
model using the following assumptions: term of 2 and 4 years, dividend yield of
0%, risk free interest rate of 3.125% and 3.335%% and volatility of 53%. The
fair value of the warrants was adjusted against additional paid in capital.

Stock Based Compensation

The Company granted 100,000 options at an exercise price of
$0.50 to a consultant in exchange for corporate communications services to be
rendered by the consultant. These options were vested on the date of grant. The
Company granted another 150,000 options to another consultant for management
& marketing services at exercise price of $0.50 which have a vesting
schedule extending over a period of 3 years from the date of grant. The Company
uses the Black-Scholes option valuation model to value stock options granted.
The Black- Scholes model was developed for use in estimating the fair value of
traded options that have no vesting restrictions and are fully transferable. The
model requires management to make estimates, which are subjective and may not be
representative of actual results. Assumptions used to determine the fair value
of the stock based compensation is as follows:

Risk free interest rate
    3%-4.25%Expected dividend yield
    0%Expected stock price volatility
    58%Expected life of options
    5 years


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- 15 -

|BIOSHAFT WATER TECHNOLOGY, INC.
|-------------------------------
|(A Development Stage Company)  
|NOTES TO FINANCIAL STATEMENTS  
|October 31, 2009               

NOTE 9. RELATED PARTY TRANSACTIONS
(continued)

Weighted
    TotalAverage
    WeightedTotal
    Remaining
    Average
    
    AggregateExercise
    Options
    Life
    Exercise
    Options
    IntrinsicPrices
    Outstanding
    (Years)
    Price
    Exercisable
    Value$0.50
    100,000
    1.19
    $0.20
    100,000
    -$0.50
    150,000
    1.94
    $0.30
    88,904
    -


The grant-date fair value of options granted during the
year-ended April 30, 2008 was $1.15 and $1.62.

Total stock-based compensation for the six month periods ended
October 31, 2009 and 2008 were $28,806 and $27,330, respectively.

During the six months ended July 31, 2009, the Company also
entered into a loan agreement with an officer of the Company, whereby, the
Company borrowed $25,000 at a finance charge of 10% per year. The loan is
repayable in June, 2010.

The Company incurred $45,000, $45,000 and $12,000 in consulting
fees to the president, the COO and the COOs son, consecutively during the six
months ended July 31, 2009. As of October 31, 2009, $71,500, $90,000 and $34,758
were due to the President, the COO of the Company and the COOs son,
respectively for their consulting fees and these amounts were included in
accounts payable and accrued expenses of the accompanying financial statements.

NOTE 10. COMMITMENT:

Operating Leases

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

The Company has the following rent commitment for the period
ended October 31:

2010
    $
    24,9992011
    
    25,7512012
    
    26,5242013
    
    15,740


The Company subleases a portion of its office space to a
non-related party for $800 per month commencing May 1, 2009. The sublease
expires on May 1, 2010.

The Company has the following income from sublease commitment
for the period ended October 31:

2010
    $
    5,600


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- 16 -

|BIOSHAFT WATER TECHNOLOGY, INC.
|-------------------------------
|(A Development Stage Company)  
|NOTES TO FINANCIAL STATEMENTS  
|October 30, 2009               

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

Forward Looking Statements

This quarterly report contains forward-looking statements as
that term is defined in Section 27A of the United States Securities Act of 1933
and Section 21E of the Securities and Exchange Act of 1934. These statements
relate to future events or our future financial performance. In some cases, you
can identify forward-looking statements by terminology such as "may", "should",
"expects", "plans", "anticipates", "believes", "estimates", "predicts",
"potential" or "continue" or the negative of these terms or other comparable
terminology. These statements are only predictions and involve known and unknown
risks, uncertainties and other factors, including the risks in the section
entitled "Risk Factors that may cause our or our industrys actual results,
levels of activity, performance or achievements to be materially different from
any future results, levels of activity, performance or achievements expressed or
implied by these forward-looking statements.

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

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

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

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

General

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

Our principal executive offices are located at Spectrum
Technology Centre, 184 Technology Drive, Suite 201, Irvine, CA 92618 and our
telephone number is (949) 748-8050.

Since our incorporation, we had been in the process of
establishing ourselves as a company that seeks to obtain distribution rights for
television programming and movies from film studios, television network
companies, and independent production houses. However, we were not successful in
implementing our business plan and we considered various alternatives to ensure
the viability and solvency of our company.

On August 14, 2007, Imad Kamel Yassine replaced Altaf
Alimohamed as one of our directors. Subsequent to his appointment, Mr. Yassine
focused his efforts on the identification of business alternatives and
additional financing.

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- 17 -

Effective August 15, 2008, Rafeh Hulays resigned as director
and the Chief Financial Officer, Secretary and Treasurer, Mr. Hulays was
replaced by Imad Kamel Yassine.

Current Business

On September 18, 2007, we entered into an asset purchase
agreement with Hans Bio Shaft Limited and Hassan Hans Badreddine, pursuant to
which we acquired from Hans Bio Shaft U.K. Patent GB2390365 titled "Waste Water
Treatment Plant and Method" and related United States and European patent
applications for the design of a certain waste water treatment plant system. In
consideration for the U.K. patent and related United States and European patent
applications, we issued to Dr. Badreddine, the principal shareholder of Hans Bio
Shaft, 27,000,000 restricted common shares of our common stock. In addition to
the common shares, we paid Dr. Badreddine, a cash consideration in the amount of
$750,000.

Furthermore, pursuant to the asset purchase agreement with Hans
Bio Shaft and Dr. Badreddine, we agreed to pay Dr. Badreddine additional amounts
of up to $1,750,000 on the following terms:

| | (a) | $750,000 upon the due execution and delivery, within 90
      days from the closing of the transactions contemplated under the asset
      purchase agreement, of contracts for the purchase of the waste water plant
      system in the aggregate amount of $6,000,000; and         
| | --- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |     |                                                                                                                                                                                                                                                                                       
| | (b) | $1,000,000 upon the due execution and delivery, within
      180 days from closing of the transactions contemplated under the asset
      purchase agreement, of additional contracts for the purchase of the waste
      water plant system in the aggregate amount of
  $10,000,000.

Subsequently, by written consent resolution of our directors
effective March 12, 2008, we agreed to extend the date set out in paragraph (a)
above to 365 days and the date set out in paragraph (b) above to 365 days.

Pursuant to the Asset Purchase Agreement, on August 2, 2007, we
closed a private placement consisting of 3,000,000 units of our securities at a
price of $0.50 per unit for aggregate proceeds of $1,500,000. Each unit
consisted of: (a) one common share; (b) one common share purchase warrant
entitling the holder thereof to purchase one common share for a period of
twenty-four months commencing from the closing of the Private Placement at an
exercise price of $0.55 per common share; and (c) one common share purchase
warrant entitling the holder thereof to purchase one common share for a period
of thirty-six months commencing from the closing of the Private Placement at an
exercise price of $0.60 per common share. We issued the units to a non-U.S.
person (as that term is defined in Regulation S of the 1933 Act) in an offshore
transaction relying on Regulation S and/or Section 4(2) of the 1933 Act.

Furthermore, pursuant to the asset purchase agreement with Hans
Bio Shaft and Dr. Badreddine, our directors passed resolutions, whereby Dr.
Badreddine was appointed as our president and a director as of September 18,
2008, and our corporate name was changed from "Pointstar Entertainment Corp." to
"Bioshaft Water Technology, Inc.", effective September 28, 2008.

With the completion of the asset purchase agreement, we changed
our business to the business of designing and manufacturing domestic waste water
treatment plant systems, using our patented Hans BioShaft unit  the Hans
BioShaft System. We are currently engaged in a specific branch of waste water
treatment known as domestic waste or sewage treatment. In the future, we plan to
expand into the treatment of industrial waste.

On January 31, 2008, we entered into a teaming agreement with
Rapid Impact Compaction Contracting LLC (RIC), a company based in Dubai, UAE.
The agreement provides the basis for our company and RIC to jointly pursue
sewage treatment projects in the Gulf Region, with exclusivity as to association
in the UAE. Pursuant to the agreement with RIC, we will perform engineering and
manufacturing services, provide our sewage treatment systems, supervise
installation, start-up and commissioning thereof and assist RIC over a five-year
period to develop a division within RIC that specializes in sewage treatment
plants using our patented Hans BioShaft technology. RIC will sell, install and
handle all construction matters, provide office space, in-country transportation
and assist with

---

- 18 -

business development. We will pay a commission payment to RIC
of 5% of the contract value of sewage treatment plant contracts in respect of
the Hans BioShaft technology.

On February 11, 2008, we entered into a license agreement with
FPS International (FPS) based in the Kuwait. FPS was established in 1977 and is
a leading provider in the Middle East of products and services for the water,
oil and gas industries.

Pursuant to the license agreement with FPS, we will license the
Hans BioShaft System to FPS for marketing and distribution in the Arab Gulf
Countries Council and Egypt. In consideration for the grant of the license, FPS
will pay our company a royalty based on FPS annual gross revenues from the Hans
BioShaft System, subject to a minimum annual royalty payment of $500,000.

Due to lack of payments of these royaly fees, the Licencing
Agreement with FPS is terminated along with our relationship with FPS.

Our company has been chosen by the Mace group, a project
management company with offices in Dubai, to bid on the Al Barari housing
development in Dubai, UAE. The successful bidder will be required to install a
waste water treatment plant capable of treating 32,000,000 cubic meters per day
of tertiary and sewage.

We are in the process of bidding on the project as requested by
the Mace group, a project management company with offices in Dubai.

The Al Barari development is being developed by Al Barari
Development Company, a company founded by Mr. Zaal Mohamed Zaal in 2005 to
provide high net worth individuals with innovative housing. Al Barari
Developments mission is to continuously raise the benchmark of the quality of
property development in the UAE. through the development of eco-friendly
sustainable communities and the implementation and utilization of new standards
in estate planning, environment controls, and ongoing quality driven management.

Pursuant to a draft project construction contract between FPS
International (FPS) and the municipality of Baghdad, the Hans BioShaft System
has been selected as the technology for 13 domestic waste water treatment plants
in the municipality of Baghdad in Iraq. The contract between FPS and the
municipality of Baghdad is valued at $56 million and manufacturing, construction
and installation of the plants by FPS is expected to begin in late-2008.

As at April 30, 2008, the Company has impaired the value of our
patent to a nominal amount.

On August 11, 2008, we entered into a loan agreement with
Premier Financial and Marketing Co. Ltd., in respect of the loan in the amount
of $500,000 at the rate of interest of 15% per annum payable in full on August
11, 2009. The loan is to be used for general working capital purposes.

On November 11, 2008 we completed an sales agreement with RIC
for a demo plant in Dubai, UAE. On July 14, 2009 completed the installation and
commissioning the plant. This plant is for demo purposes. RIC paid 50% of the
$100,000 cost.

On Dec 3, 2008 we received an order and down payment for a
plant in Jeddah, Saudi Arabia. On June 24, 2009 we completed the installation
and commissioning of the plant sold in Jeddah, Saudi Arabia.

On February 10, 2009. we received our United States Patent from
the United States Patent and Trademark Office for our wastewater treatment plant
and method. The patent number is 7,488,413. The we currently hold a patent in
the United Kingdom as well and we have filed a PCT application as well.

On February 27, 2009 we entered into a loan agreement with Imad
Yassine, in respect of the loan in the amount of $75,000 at the rate of interest
of 10% per annum payable in full on February 27, 2010. The loan is to be used
for general working capital purposes.

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- 19 -

On March 6, 2009 we entered into a loan agreement with Premier
Financial and Marketing Co. Ltd., in respect of the loan in the amount of
$25,000 at the rate of interest of 15% per annum payable in full on March 6,
2010. The loan is to be used for general working capital purposes

On April 15, 2009 we have completed the installation and
commissioning of a pilot plant for the city of Wayne, Nebraska. If the test
results are approved they will allow us to bid on a larger project to upgrade
their existing municipal plant.

On June 8, 2009 we entered into a loan agreement with Imad
Yassine, in respect of the loan in the amount of $25,000 at the rate of interest
of 15% per annum payable in full on June 8, 2010. The loan is to be used for
general working capital purposes.

Results of Operations

|Three Months Summary   |   |                                      |   |   |         |  
|---------------------- | - | ------------------------------------ | - | - | ------- | -
|                       |   |                                      |   |   |         |  
|                       |   | Three Months Ended October
      31, |  
|                       |   | 2009                                 |   |   | 2008    |  
|Gross Margin           | $ | 11,380                               |   | $ | -       |  
|Operating Expenses     |   | 138,672                              |   |   | 238,928 |  
|Other Income (Expense) |   | (24,122                              | ) |   | (18,177 | )
|                       |   |                                      |   |   |         |  
|Net Loss               | $ | 151,414                              |   | $ | 257,105 |  

|Six Months Summary     |   |                              |   |   |         |  
|---------------------- | - | ---------------------------- | - | - | ------- | -
|                       |   |                              |   |   |         |  
|                       |   | Six Months Ended October 31, |  
|                       |   | 2009                         |   |   | 2008    |  
|Gross Margin           | $ | 11,380                       |   | $ | -       |  
|Operating Expenses     |   | 250,444                      |   |   | 541,471 |  
|Other Income (Expense) |   | (35,372                      | ) |   | (30,385 | )
|                       |   |                              |   |   |         |  
|Net Loss               | $ | 274,436                      |   | $ | 571,856 |  

Revenue

We have earned $74,370 of revenue from inception, and $24,370
revenues during three and six months period ended October 31, 2009 as we enter
into an agreement(s) with our potential customers for the purchase and sale of
our products.

Expenses

|                                 |   | Three Months Ended October
      31, | 
|-------------------------------- | - | ------------------------------------ | 
|                                 |   | 2009                                 | 
|General and Administrative       | $ | 120,440                              | 
|Depreciation and amortization    |   | 3,829                                | 
|Stock based compensation expense |   | 14,403                               | 
|Net Loss from operations         | $ | 138,672                              | 

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|                                 |   | Six Months Ended October 31, | 
|-------------------------------- | - | ---------------------------- | 
|                                 |   | 2009                         | 
|General and Administrative       | $ | 213,979                      | 
|Depreciation and amortization    |   | 7,659                        | 
|Stock based compensation expense |   | 28,806                       | 
|Net Loss from operations         | $ | 250,444                      | 

Total operating expenses during the three months ended October
31, 2009 decreased as compared to the comparative period in 2008 due to an
overall decrease to general and administrative activity.

Liquidity and Financial Condition

Working Capital

|                    |   | October 31, |   |   | April 30, |  
|------------------- | - | ----------- | - | - | --------- | -
|                    |   | 2009        |   |   | 2009      |  
|Current assets      | $ | 103,822     |   | $ | 140,496   |  
|Current liabilities |   | 1,195,958   |   |   | 998,351   |  
|Working capital     | $ | (1,092,136  | ) | $ | (857,855  | )

Cash Flows

|                                                |   | Six Months Ended July 31, |  
|----------------------------------------------- | - | ------------------------- | -
|                                                |   | 2009                      |  
|Net cash flows used in operating activities     | $ | (48,684                   | )
|Net cash flows used in investing activities     |   | -                         |  
|                                                |   |                           |  
|Net cash flows provided by financing activities |   | 25,000                    |  
|Net increase in cash during period              | $ | (23,684                   | )

Future Financing

Prior to the completion of the Private Placement for $1,500,000
on August 22, 2007, we were insolvent and had no remaining cash. We have not had
revenues from inception and cash on hand is currently our only source of
liquidity. The ability of our company to meet our financial liabilities and
commitments is primarily dependent upon the continued financial support of our
directors and shareholders, the continued issuance of equity to new stockholders
and our ability to achieve and maintain profitable operations.

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

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

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- 21 -

Capital Expenditures

Other than as required under the terms of the Asset Purchase
Agreement with Hans Bio Shaft Limited and Dr. Badreddine, as of September 18,
2007, we do not have any material commitments for capital expenditures and
management does not anticipate that we will spend additional material amounts on
capital expenditures in the near future.

Employees

We plan to employ a number of executive officers including a
vice president of marketing and three sales engineers. We anticipate that we may
spend up to $1,650,000 to employ officers and employees and up to $250,000 in
payroll taxes.

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

Off-Balance Sheet Arrangements

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

Application of Critical Accounting Estimates

Our financial statements have been prepared in accordance with
the U.S. GAAP. Because a precise determination of many assets and liabilities is
dependent upon future events, the preparation of financial statements for a
period necessarily involves the use of estimates which have been made using
careful judgment.

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

Risk Factors

Much of the information included in this quarterly report
includes or is based upon estimates, projections or other forward-looking
statements. Such forward-looking statements include any projections or estimates
made by us and our management in connection with our business operations. While
these forward-looking statements, and any assumptions upon which they are based,
are made in good faith and reflect our current judgment regarding the direction
of our business, actual results will almost always vary, sometimes materially,
from any estimates, predictions, projections, assumptions, or other future
performance suggested herein. We undertake no obligation to update
forward-looking statements to reflect events or circumstances occurring after
the date of such statements.

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

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- 22 -

Risks Related to Our Business

We have a history of losses and no revenues, which raise
substantial doubt about our ability to continue as a going concern.

From inception to July 31, 2009, we have incurred aggregate net
losses of $16,351,404 from operations. We can offer no assurance that we will
ever operate profitably or that we will generate positive cash flow in the
future. In addition, our operating results in the future may be subject to
significant fluctuations due to many factors not within our control, such as the
unpredictability of when customers will order products, the size of customers
orders, the demand for our products, and the level of competition and general
economic conditions.

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

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

We expect to continue to incur development costs and operating
costs. Consequently, we expect to incur operating losses and negative cash flows
until our products gain market acceptance sufficient to generate a commercially
viable and sustainable level of sales, and/or additional products are developed
and commercially released and sales of such products made so that we are
operating in a profitable manner. Our history of losses and no revenues raise
substantial doubt about our ability to continue as a going concern.

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

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

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

- support our planned growth and carry out our business plan;
- protect our intellectual property;
- hire top quality personnel for all areas of our business;
- address competing technological and market developments; and
- market and develop our technologies.

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

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- 23 -

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

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

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

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

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

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

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

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- 24 -

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

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

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

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

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

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

- incur substantial monetary damages;
- encounter significant delays in marketing our waste water treatment plant
  system;
- be unable to conduct or participate in the manufacture, use or sale of our
  waste water treatment plant system;
- lose patent protection for our inventions and products; or
- find that our patents are unenforceable, invalid, or have a reduced scope
  of protection.

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

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- 25 -

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

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

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

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

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

- be difficult or overly expensive to produce;
- fail to achieve performance levels expected by customers;
- have a price level that is unacceptable in our targeted industries; or
- be precluded from commercialization by the proprietary rights of others or
  other competitive forces.

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

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

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

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

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- 26 -

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

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

- decreased demand for our products;
- injury to our reputation;
- costs of related litigation;
- substantial monetary awards to plaintiffs;
- loss of revenues; and
- the inability to commercialize our technologies.

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

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

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

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

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

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

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

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- 27 -

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

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

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

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

Risks Related to Our Common Stock

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

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

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

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

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

The Securities and Exchange Commission has adopted regulations
which generally define "penny stock" to be any equity security that has a market
price (as defined) less than $5.00 per share or an exercise price of less than
$5.00 per share, subject to certain exceptions. Our securities are covered by
the penny stock rules, which impose additional sales practice requirements on
broker-dealers who sell to persons other than established customers and
"accredited investors". The term "accredited investor" refers generally to
institutions with assets in excess of $5,000,000 or individuals with a net worth
in excess of $1,000,000 or annual income exceeding $200,000 or $300,000 jointly
with their spouse. The penny stock rules require a broker-dealer, prior to a
transaction in a penny stock not otherwise exempt from the rules, to deliver a
standardized risk disclosure document in a form prepared by the Securities and
Exchange Commission, which provides information about penny stocks and the
nature and level of risks in the penny stock market. The broker-dealer also must
provide the customer with current bid and offer quotations for the penny stock,
the compensation of the broker-dealer and its salesperson in the transaction and

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- 28 -

monthly account statements showing the market value of each
penny stock held in the customers account. The bid and offer quotations, and
the broker-dealer and salesperson compensation information, must be given to the
customer orally or in writing prior to effecting the transaction and must be
given to the customer in writing before or with the customers confirmation. In
addition, the penny stock rules require that prior to a transaction in a penny
stock not otherwise exempt from these rules, the broker-dealer must make a
special written determination that the penny stock is a suitable investment for
the purchaser and receive the purchasers written agreement to the transaction.
These disclosure requirements may have the effect of reducing the level of
trading activity in the secondary market for the stock that is subject to these
penny stock rules. Consequently, these penny stock rules may affect the ability
of broker-dealers to trade our securities. We believe that the penny stock rules
discourage investor interest in and limit the marketability of our common
stock.

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

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

Item 3. Quantitative and Qualitative Disclosures About
Market Risk.

Not Applicable.

Item 4T. Controls and Procedures.

Evaluation of Effectiveness of Disclosure Controls and
Procedures

As required by Rule 13a-15 under the 1934 Act, as of the end of
the period covered by this quarterly report, being the fiscal quarter ended
October 31, 2009, we have carried out an evaluation of the effectiveness of the
design and operation of our disclosure controls and procedures. This evaluation
was carried out under the supervision and with the participation of our
management, including our Chief Executive Officer and Chief Financial Officer.
Based upon the results of that evaluation, our Chief Executive Officer and Chief
Financial Officer have concluded that, as of the end of the period covered by
this quarterly report, our disclosure controls and procedures were effective and
provide reasonable assurance that material information related to our company is
recorded, processed and reported in a timely manner.

Our management, with the participation of our Chief Executive
Officer and Chief Financial Officer, is responsible for the design of internal
controls over financial reporting. The fundamental issue is to ensure all
transactions are properly authorized and identified and entered into a
well-designed, robust and clearly understood system on a timely basis to
minimize risk of inaccuracy, failure to fairly reflect transactions, failure to
fairly record transactions necessary to present financial statements in
accordance with the U.S. GAAP, unauthorized receipts and expenditures or the
inability to provide assurance that unauthorized acquisitions or dispositions of
assets can be detected. The small size of our company makes the identification
and authorization process relatively simple and efficient and a process for
reviewing internal controls over financial reporting has been developed. To the
extent possible given our companys small size, the internal control procedures
provide for separation of duties for handling, approving and coding invoices,
entering transactions into the accounts, writing cheques and requests for wire
transfers and also require two signatures on significant payments. As of October
31, 2009, our Chief Executive Officer and Chief Financial Officer conclude that
our system of internal controls is adequate and comparable to those of issuers
of a similar size and nature. There were no significant changes to our internal
controls or in other factors that could significantly affect these controls
during the most recent quarter ended October 31, 2009, including any significant
deficiencies or material weaknesses of internal controls that would require
corrective action.

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Managements Report on Internal Controls over Financial
Reporting

Management is responsible for establishing and maintaining
adequate internal control over our financial reporting. In order to evaluate the
effectiveness of internal control over financial reporting, as required by
Section 404 of the Sarbanes-Oxley Act, management has conducted an assessment,
including testing, using the criteria in Internal Control  Integrated
Framework, issued by the Committee of Sponsoring Organizations of the Treadway
Commission ("COSO"). Our system of internal control over financial
reporting is designed to provide reasonable assurance regarding the reliability
of financial reporting and the preparation of financial statements for external
purposes in accordance with the U.S. GAAP. Because of its inherent limitations,
internal control over financial reporting may not prevent or detect
misstatements. Also, projections of any evaluation of effectiveness to future
periods are subject to the risk that controls may become inadequate because of
changes in conditions, or that the degree of compliance with the policies or
procedures may deteriorate.

Inherent Limitations of Internal Controls

Our internal control over financial reporting is designed to
provide reasonable assurance regarding the reliability of financial reporting
and the preparation of financial statements for external purposes in accordance
with the U.S. GAAP. Our internal control over financial reporting includes those
policies and procedures that:

- pertain to the maintenance of records that, in reasonable detail,
  accurately and fairly reflect the transactions and dispositions of our assets;
- provide reasonable assurance that transactions are recorded as necessary to
  permit preparation of financial statements in accordance with the U.S. GAAP,
  and that our receipts and expenditures are being made only in accordance with
  authorizations of our management and directors; and
- provide reasonable assurance regarding prevention or timely detection of
  unauthorized acquisition, use, or disposition of our assets that could have a
  material effect on the financial statements.

Management does not expect that our internal controls will
prevent or detect all errors and all fraud. A control system, no matter how well
designed and operated, can provide only reasonable, not absolute, assurance that
the objectives of the control system are met. Further, the design of a control
system must reflect the fact that there are resource constraints, and the
benefits of controls must be considered relative to their costs. Because of the
inherent limitations in all control systems, no evaluation of internal controls
can provide absolute assurance that all control issues and instances of fraud,
if any, have been detected. Also, any evaluation of the effectiveness of
controls in future periods are subject to the risk that those internal controls
may become inadequate because of changes in business conditions, or that the
degree of compliance with the policies or procedures may deteriorate.

Changes in Internal Control over Financial Reporting

There were no significant changes to our internal controls
during the quarter ended October 31, 2009, that have materially affected, or are
reasonably likely to materially affect, our internal controls over financial
reporting.

PART II - OTHER INFORMATION

Item 1. Legal Proceedings.

None.

Item 1A. Risk Factors.

Not Applicable.

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

None.

Item 3. Defaults Upon Senior Securities.

None.

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

None.

Item 5. Other Information

None.

Item 6. Exhibits

Pursuant to Rule 601 of Regulation SB, the following exhibits
are included herein or incorporated by reference.

Exhibit Number
    Description(3)
    Articles of Incorporation and Bylaws3.1
    Articles of Incorporation (incorporated by reference from
      our Registration Statement on Form SB-2 filed on June 13, 2006)3.2
    By-laws (incorporated by reference from our Registration
      Statement on Form SB-2 filed on June 13, 2006)3.3
    Certificate of Amendment (incorporated by reference from
      our Current Report on Form 8-K filed on August 6, 2007)3.4
    Articles of Merger filed with the Secretary of State of
      Nevada on September 24, 2007 and which is effective September 28, 2007
      (incorporated by reference from our Current Report on Form 8-K filed on
      September 28, 2007)(10)
    Material Contracts10.1
    Form of Subscription Agreement (incorporated by reference
      from our Current Report on Form 8-K filed on August 24, 2007).10.2
    Affiliate Stock Purchase Agreement dated August 20, 2007
      between Imad Yassine, Altaf Alimohamed and Rafeh Hulays (incorporated by
      reference from Schedule 13D filed on August 24, 2007)10.3
    Asset Purchase Agreement dated September 18, 2007 between
      Hans Bio Shaft Limited, Hassan Hans Badreddine and our company
      (incorporated by reference from our Current Report on Form 8-K filed on
      September 24, 2007)10.4
    Patent Assignment Agreement dated September 18, 2007
      between Hans Bio Shaft Limited and our company (incorporated by reference
      from our Current Report on Form 8-K filed on September 24, 2007)10.5
    Stock Option Plan of our company dated December 15, 2007
      (incorporated by reference from our Quarterly Report on Form 10-QSB filed
      on March 17, 2008)10.6
    Consulting Agreement dated January 21, 2008 between our
      company and Tom Houston (incorporated from our Annual Report on Form
      10-KSB/A filed on August 14, 2008)


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- 31 -

10.7
      Teaming Agreement dated January
          31, 2008 between our company and Rapid Impact Compaction Contracting
          LLC (incorporated from our Annual Report on Form 10-KSB/A filed on August
          14, 2008)10.8
      License Agreement dated February
          14, 2008 between our company and FPS International (incorporated from
          our Annual Report on Form 10-KSB/A filed on August 14, 2008)10.9
      Draft Project Construction
          Contract between our company and FPS International (incorporated from
          our Annual Report on Form 10-KSB/A filed on August 14, 2008)10.10
      Loan
          Agreement made as of August 11, 2008 between our company and Premier
      Financial and Marketing Co. Ltd.  (incorporated from our Quarterly Report filed on September 12, 2008)10.11
      General
          Security Agreement made as of August 11, 2008 between our company and
      Premier Financial and Marketing Co. Ltd.  (incorporated from our Quarterly Report filed on September 12, 2008)(14)
      Code of Ethics14.1
      Code of Ethics and Business
          Conduct dates effective July 1, 2008 (incorporated from our Annual Report
          on Form 10-KSB/A filed on August 14, 2008)(31)
      Section 302 Certification31.1*
      Section
          302 Certification under Sarbanes-Oxley Act of 2002 of Hassan Hans Badreddine31.2*
      Section
          302 Certification under Sarbanes-Oxley Act of 2002 of Imad Kamel Yassine(32)
      Section 906 Certification32.1*
      Section
          906 Certification under Sarbanes-Oxley Act of 2002 of Hassan Hans Badreddine32.2*
      Section
          906 Certification under Sarbanes-Oxley Act of 2002 of Imad Kamel Yassine


______________________*filed herewith

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SIGNATURES

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

|BIOSHAFT WATER TECHNOLOGY, INC.
|-------------------------------
|                               
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|                               
|Date: December 15, 2009        
|                               
|                               
|                               
|                               
|                               
|Date: December 15, 2009        
|                               
|                               
|                               

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