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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 January 31, 2011

or

[   ] TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934 
For the transition period from _______________to
_______________

Commission File Number 000-52393

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

|Nevada                                                               | 98-0494003                       
|-------------------------------------------------------------------- | ---------------------------------
|(State or other jurisdiction of incorporation or
      organization) | (IRS Employer Identification No.)
|                                                                     |                                  
|1 Orchard Drive, Suite 220, Lake Forest, CA                          | 92630                            
|(Address of principal executive offices)                             | (Zip Code)                       

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

N/A(Former name, former address and
former fiscal year, if changed since last report)

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

Indicate by check mark whether the registrant has submitted
electronically and posted on its corporate Web site, if any, every Interactive
Data File required to be submitted and posted pursuant to Rule 405 of Regulation
S-T (§232.405 of this chapter) during the preceding 12 months (or for such
shorter period that the registrant was required to submit and post such
files).[   ] YES     [   ] NO

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

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


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

APPLICABLE ONLY TO ISSUERS INVOLVED IN BANKRUPTCYPROCEEDINGS DURING THE PRECEDING FIVE YEARS

Check whether the registrant has filed all documents and reports
required to be filed by Sections 12, 13 or 15(d) of the Exchange Act after the
distribution of securities under a plan confirmed by a court.[   ]
YES     [   ] NO

APPLICABLE ONLY TO CORPORATE ISSUERS

Indicate the number of shares outstanding of each of the
issuers classes of common stock, as of the latest practicable date. 100,900,000
common shares issued and outstanding as of March 21, 2011

1

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PART I - FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS

Our unaudited interim financial statements for the three and
nine month periods ended January 31, 2011 form part of this quarterly report.
They are stated in United States Dollars (US$) and are prepared in accordance
with United States generally accepted accounting principles.



2

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BIOSHAFT WATER TECHNOLOGY, INC.

FINANCIAL STATEMENTS

JANUARY 31, 2011

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BIOSHAFT WATER TECHNOLOGY, INC.

(A DEVELOPMENT STAGE COMPANY)

TABLE OF CONTENTS

JANUARY 31, 2011





|                                                                                                                                                                                              | PAGE            
|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- | ----------------
|FINANCIAL STATEMENTS:                                                                                                                                                                         |                 
|                                                                                                                                                                                              |                 
|Balance
      Sheets as of January 31, 2011 and April 30, 2010 (Unaudited)                                                                                                                    | F-1             
|                                                                                                                                                                                              |                 
|Statements
      of Operations for the Three Months and Nine Months Ended January 31, 2011
      and 2010 and the Period from March 8, 2006 (Inception) to January 31, 2011
      (Unaudited) | F-2             
|                                                                                                                                                                                              |                 
|Statement
      of Stockholders Equity (Deficit) for the Period from March 8, 2006
      (Inception) to January 31, 2011 (Unaudited)                                                         | F-3             
|                                                                                                                                                                                              |                 
|Statements
      of Cash Flows for the Nine Months Ended January 31, 2011 and 2010 and the
      Period from March 8, 2006 (Inception) to January 31, 2011 (Unaudited)                        | F-4             
|                                                                                                                                                                                              |                 
|Notes
      to the Financial Statements                                                                                                                                                       | F-5
       F-10

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BIOSHAFT WATER TECHNOLOGY, INC.
  (Formerly Pointstar Entertainment Corp.) 
  (A Development Stage Company) 
  BALANCE SHEETS (UNAUDITED) 
  AS OF JANUARY 31, 2011 AND APRIL 30, 2010

|                                                                                                                                           |   | January 31, |   |   | April 30,   |  
|------------------------------------------------------------------------------------------------------------------------------------------ | - | ----------- | - | - | ----------- | -
|                                                                                                                                           |   | 2011        |   |   | 2010        |  
|ASSETS                                                                                                                                     |   |             |   |   |             |  
|Current assets :                                                                                                                           |   |             |   |   |             |  
|Cash and cash equivalents                                                                                                                  | $ | 701,272     |   | $ | 14,147      |  
|Prepaid expenses                                                                                                                           |   | 12,020      |   |   | -           |  
|                                                                                                                                           |   |             |   |   |             |  
|Total Current Assets                                                                                                                       |   | 713,292     |   |   | 14,147      |  
|                                                                                                                                           |   |             |   |   |             |  
|Property and equipment, net                                                                                                                |   | 32,787      |   |   | 51,617      |  
|                                                                                                                                           |   |             |   |   |             |  
|Other assets :                                                                                                                             |   |             |   |   |             |  
|Deposits                                                                                                                                   |   | 2,248       |   |   | 2,248       |  
|Investment                                                                                                                                 |   | 50,000      |   |   | 50,000      |  
|Total other assets                                                                                                                         |   | 52,248      |   |   | 52,248      |  
|                                                                                                                                           |   |             |   |   |             |  
|Total Assets                                                                                                                               | $ | 798,327     |   | $ | 118,012     |  
|                                                                                                                                           |   |             |   |   |             |  
|LIABILITIES AND STOCKHOLDERS DEFICIT                                                                                                      |   |             |   |   |             |  
|Current liabilities :                                                                                                                      |   |             |   |   |             |  
|Customer deposit                                                                                                                           | $ | 16,000      |   | $ | 16,000      |  
|Accounts payable and accrued expenses                                                                                                      |   | 628,845     |   |   | 722,193     |  
|Loan payable  related party                                                                                                               |   | -           |   |   | 100,000     |  
|Loans payable                                                                                                                              |   | 525,000     |   |   | 525,000     |  
|Total current liabilities                                                                                                                  |   | 1,169,845   |   |   | 1,363,193   |  
|                                                                                                                                           |   |             |   |   |             |  
|Stockholders deficit :                                                                                                                    |   |             |   |   |             |  
|Common stock, $0.001 par value; 300,000,000
      shares authorized, 100,900,000 and 93,500,000 issued and outstanding,
      respectively |   | 100,900     |   |   | 93,500      |  
|Preferred stock, $0.001 par value; 25,000,000 shares
      authorized, none issued and outstanding                                         |   | -           |   |   | -           |  
|Additional paid-in capital                                                                                                                 |   | 16,641,619  |   |   | 15,438,450  |  
|Deficit accumulated during the development stage                                                                                           |   | (17,114,037 | ) |   | (16,777,131 | )
|Total stockholders deficit                                                                                                                |   | (371,518    | ) |   | (1,245,181  | )
|                                                                                                                                           |   |             |   |   |             |  
|Total liabilities and stockholders' deficit                                                                                                | $ | 798,327     |   | $ | 118,012     |  

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

F-1

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BIOSHAFT WATER TECHNOLOGY, INC.
  (Formerly Pointstar Entertainment Corp.) 
  (A Development Stage Company) 
  STATEMENTS OF OPERATIONS (UNAUDITED) 
  FOR THE THREE AND NINE MONTHS ENDED JANUARY 31, 2011 AND 2010 
  FOR THE PERIOD FROM MARCH 8, 2006 (INCEPTION) TO JANUARY 31, 2011

|                                                                      |   |              |   |   |              |   |   |             |   |   |             |   |   | Period From   |  
|--------------------------------------------------------------------- | - | ------------ | - | - | ------------ | - | - | ----------- | - | - | ----------- | - | - | ------------- | -
|                                                                      |   |              |   |   |              |   |   |             |   |   |             |   |   | March 8, 2006 |  
|                                                                      |   | Three Months |   |   | Three Months |   |   | Nine Months |   |   | Nine Months |   |   | (Inception)   |  
|                                                                      |   | Ended        |   |   | Ended        |   |   | Ended       |   |   | Ended       |   |   | to            |  
|                                                                      |   | January 31,  |   |   | January 31,  |   |   | January 31, |   |   | January 31, |   |   | January 31,   |  
|                                                                      |   | 2011         |   |   | 2010         |   |   | 2011        |   |   | 2010        |   |   | 2011          |  
|                                                                      |   |              |   |   |              |   |   |             |   |   |             |   |   |               |  
|NET REVENUE                                                           | $ | -            |   | $ | -            |   | $ | -           |   | $ | 24,370      |   | $ | 79,000        |  
|COST OF SALES                                                         |   | -            |   |   | -            |   |   | -           |   |   | 12,990      |   |   | 68,132        |  
|                                                                      |   |              |   |   |              |   |   |             |   |   |             |   |   |               |  
|GROSS PROFIT                                                          |   | -            |   |   | -            |   |   | -           |   |   | 11,380      |   |   | 10,868        |  
|                                                                      |   |              |   |   |              |   |   |             |   |   |             |   |   |               |  
|OPERATING EXPENSES                                                    |   |              |   |   |              |   |   |             |   |   |             |   |   |               |  
|Depreciation & amortization                                           |   | 6,276        |   |   | 3,082        |   |   | 18,830      |   |   | 10,741      |   |   | 1,843,431     |  
|Impairment of assets                                                  |   | -            |   |   | -            |   |   | -           |   |   | -           |   |   | 12,483,903    |  
|General & administrative                                              |   | 104,002      |   |   | 92,252       |   |   | 363,301     |   |   | 306,231     |   |   | 2,391,527     |  
|Stock based compensation                                              |   | 3,453        |   |   | -            |   |   | 100,569     |   |   | 28,806      |   |   | 392,561       |  
|TOTAL OPERATING EXPENSES                                              |   | 113,731      |   |   | 95,334       |   |   | 482,700     |   |   | 345,778     |   |   | 1,711,422     |  
|                                                                      |   |              |   |   |              |   |   |             |   |   |             |   |   |               |  
|NET LOSS FROM OPERATIONS                                              |   | (113,731     | ) |   | (95,334      | ) |   | (482,700    | ) |   | (334,398    | ) |   | (17,100,554   | )
|                                                                      |   |              |   |   |              |   |   |             |   |   |             |   |   |               |  
|OTHER INCOME (EXPENSE)                                                |   |              |   |   |              |   |   |             |   |   |             |   |   |               |  
|Other income                                                          |   | -            |   |   | 2,400        |   |   | -           |   |   | 7,200       |   |   | 7,200         |  
|Interest income (expense)                                             |   | (18,904      | ) |   | 373          |   |   | (63,187     | ) |   | (39,799     | ) |   | (229,664      | )
|Forgiveness of debt                                                   |   | -            |   |   | -            |   |   | 208,981     |   |   | -           |   |   | 208,981       |  
|TOTAL OTHER INCOME (EXPENSE)                                          |   | (18,904      | ) |   | 2,773        |   |   | 145,794     |   |   | (32,599     | ) |   | (13,483       | )
|                                                                      |   |              |   |   |              |   |   |             |   |   |             |   |   |               |  
|NET LOSS                                                              | $ | (132,635     | ) | $ | (92,561      | ) | $ | (336,906    | ) | $ | (366,997    | ) | $ | (17,114,037   | )
|                                                                      |   |              |   |   |              |   |   |             |   |   |             |   |   |               |  
|BASIC AND DILUTED NET LOSS PER SHARE                                  | $ | (0.00        | ) | $ | (0.00        | ) | $ | (0.00       | ) | $ | (0.00       | ) |   |               |  
|                                                                      |   |              |   |   |              |   |   |             |   |   |             |   |   |               |  
|BASIC AND DILUTED WEIGHTED AVERAGE NUMBER
      OF SHARES OUTSTANDING |   | 97,704,348   |   |   | 90,000,000   |   |   | 95,911,594  |   |   | 90,000,000  |   |   |               |  

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

F-2

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BIOSHAFT WATER TECHNOLOGY, INC.
  (Formerly Pointstar Entertainment Corp.) 
  (A Development Stage Company) 
  STATEMENT OF STOCKHOLDERS EQUITY (DEFICIT) (UNAUDITED) 
  FOR THE PERIOD FROM MARCH 8, 2006 (INCEPTION) TO JANUARY 31, 2011

|                                  |  |              |   |   |          |   |   |             |   |   | Deficit     |   |   |               |  
|--------------------------------- |  | ------------ | - | - | -------- | - | - | ----------- | - | - | ----------- | - | - | ------------- | -
|                                  |  |              |   |   |          |   |   |             |   |   | Accumulated |   |   | Total         |  
|                                  |  |              |   |   |          |   |   | Additional  |   |   | during the  |   |   | Stockholders |  
|                                  |  | Common Stock |   |   | Paid in  |   |   | Development |   |   | Equity      |  
|                                  |  | Shares       |   |   | Amount   |   |   | Capital     |   |   | Stage       |   |   | (Deficit)     |  
|                                  |  |              |   |   |          |   |   |             |   |   |             |   |   |               |  
|Inception, March 8, 2006          |  | -            |   | $ | -        |   | $ | -           |   | $ | -           |   | $ | -             |  
|Initial capitalization            |  |              |   |   |          |   |   |             |   |   |             |   |   |               |  
|                                  |  |              |   |   |          |   |   |             |   |   |             |   |   |               |  
|Sale of common stock              |  | 240,000,000  |   |   | 4,000    |   |   | 11,000      |   |   | -           |   |   | 15,000        |  
|Net loss for the period           |  | -            |   |   | -        |   |   | -           |   |   | (4,077      | ) |   | (4,077        | )
|                                  |  |              |   |   |          |   |   |             |   |   |             |   |   |               |  
|Balance, April 30, 2006           |  | 240,000,000  |   |   | 4,000    |   |   | 11,000      |   |   | (4,077      | ) |   | 10,923        |  
|Sale of common stock              |  | 30,000,000   |   |   | 500      |   |   | 49,500      |   |   | -           |   |   | 50,000        |  
|Net loss for year                 |  | -            |   |   | -        |   |   | -           |   |   | (35,730     | ) |   | (35,730       | )
|                                  |  |              |   |   |          |   |   |             |   |   |             |   |   |               |  
|Balance, April 30, 2007           |  | 270,000,000  |   |   | 4,500    |   |   | 60,500      |   |   | (39,807     | ) |   | 25,193        |  
|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   |   |   | -           |   |   | 1,499,967     |  
|Shares issued for patent purchase |  | 27,000,000   |   |   | 27,000   |   |   | 13,473,000  |   |   | -           |   |   | 13,500,000    |  
|Stock based compensation          |  | -            |   |   | -        |   |   | 176,760     |   |   | -           |   |   | 176,760       |  
|Net loss for the year             |  | -            |   |   | -        |   |   | -           |   |   | (15,182,132 | ) |   | (15,182,132   | )
|                                  |  |              |   |   |          |   |   |             |   |   |             |   |   |               |  
|Balance, April 30, 2008           |  | 90,000,000   |   |   | 90,000   |   |   | 15,151,727  |   |   | (15,221,939 | ) |   | 19,788        |  
|Stock based compensation          |  | -            |   |   | -        |   |   | 57,611      |   |   | -           |   |   | 57,611        |  
|Net loss for the year             |  | -            |   |   | -        |   |   | -           |   |   | (903,433    | ) |   | (903,433      | )
|                                  |  |              |   |   |          |   |   |             |   |   |             |   |   |               |  
|Balance, April 30, 2009           |  | 90,000,000   |   |   | 90,000   |   |   | 15,209,338  |   |   | (16,125,371 | ) |   | (826,033      | )
|Shares issued for cash            |  | 3,500,000    |   |   | 3,500    |   |   | 171,500     |   |   | -           |   |   | 175,000       |  
|Stock-based compensation          |  | -            |   |   | -        |   |   | 57,612      |   |   | -           |   |   | 57,612        |  
|Net loss for the year             |  | -            |   |   | -        |   |   | -           |   |   | (651,760    | ) |   | (651,760      | )
|                                  |  |              |   |   |          |   |   |             |   |   |             |   |   |               |  
|Balance, April 30, 2010           |  | 93,500,000   |   |   | 93,500   |   |   | 15,438,450  |   |   | (16,777,131 | ) |   | (1,245,181    | )
|                                  |  |              |   |   |          |   |   |             |   |   |             |   |   |               |  
|Issuance of stock                 |  | 7,400,000    |   |   | 7,400    |   |   | 1,102,600   |   |   | -           |   |   | 1,110,000     |  
|Stock-based compensation          |  | -            |   |   | -        |   |   | 100,569     |   |   | -           |   |   | 100,569       |  
|Net loss for the period           |  | -            |   |   | -        |   |   | -           |   |   | (336,906    | ) |   | (336,906      | )
|                                  |  |              |   |   |          |   |   |             |   |   |             |   |   |               |  
|Balance, January 31, 2011         |  | 100,900,000  |   | $ | 100,900  |   | $ | 16,641,619  |   | $ | (17,114,037 | ) | $ | (371,518      | )

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

F-3

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BIOSHAFT WATER TECHNOLOGY, INC.
  (Formerly Pointstar Entertainment Corp.) 
  (A Development Stage Company) 
  STATEMENTS OF CASH FLOWS (UNAUDITED) 
  FOR THE NINE MONTHS ENDED JANUARY 31, 2011 AND 2010 
  FOR THE PERIOD FROM MARCH 8, 2006 (INCEPTION) TO JANUARY 31, 2011

|                                                                                 |   | Nine        |   |   | Nine        |   |   | Period from    |  
|-------------------------------------------------------------------------------- | - | ----------- | - | - | ----------- | - | - | -------------- | -
|                                                                                 |   | Months      |   |   | Months      |   |   | March 8, 2006  |  
|                                                                                 |   | Ended       |   |   | Ended       |   |   | (Inception) to |  
|                                                                                 |   | January 31, |   |   | January 31, |   |   | January 31,    |  
|                                                                                 |   | 2011        |   |   | 2010        |   |   | 2011           |  
|                                                                                 |   |             |   |   |             |   |   |                |  
|CASH FLOWS FROM OPERATING ACTIVITIES                                             |   |             |   |   |             |   |   |                |  
|Net loss for the period                                                          | $ | (336,906    | ) | $ | (366,997    | ) | $ | (17,114,037    | )
|Adjustments To Reconcile Net Loss To Net
      Cash Used In Operating Activities |   |             |   |   |             |   |   |                |  
|Impairment of assets                                                             |   | -           |   |   | -           |   |   | 12,483,903     |  
|Depreciation and amortization                                                    |   | 18,830      |   |   | 10,741      |   |   | 1,843,431      |  
|Forgiveness of debt                                                              |   | (208,981    | ) |   | -           |   |   | (208,981       | )
|Stock-based compensation                                                         |   | 100,569     |   |   | 28,806      |   |   | 392,562        |  
|Change in operating assets & liabilities                                         |   |             |   |   |             |   |   |                |  
|(Increase) in prepaid expenses                                                   |   | (12,020     | ) |   | -           |   |   | (12,020        | )
|Decrease in other current assets                                                 |   | -           |   |   | 15,678      |   |   | -              |  
|(Increase) decrease in deposits                                                  |   | -           |   |   | -           |   |   | (2,248         | )
|Increase in accounts payable and accrued expenses                                |   | 115,633     |   |   | 278,685     |   |   | 837,826        |  
|Increase (decrease) in customer deposit                                          |   | -           |   |   | (17,950     | ) |   | 16,000         |  
|Net Cash Used in Operating Activities                                            |   | (322,875    | ) |   | (51,037     | ) |   | (1,763,564     | )
|                                                                                 |   |             |   |   |             |   |   |                |  
|CASH FLOWS FROM INVESTING ACTIVITIES                                             |   |             |   |   |             |   |   |                |  
|Investment in joint venture                                                      |   | -           |   |   | -           |   |   | (50,000        | )
|Purchase of equipment                                                            |   | -           |   |   | -           |   |   | (110,072       | )
|Purchase of patent                                                               |   | -           |   |   | -           |   |   | (750,092       | )
|Net cash used in investing activities                                            |   | -           |   |   | -           |   |   | (910,164       | )
|                                                                                 |   |             |   |   |             |   |   |                |  
|CASH FLOWS FROM FINANCING ACTIVITIES                                             |   |             |   |   |             |   |   |                |  
|Proceeds from loans payable                                                      |   | -           |   |   | 25,000      |   |   | 525,000        |  
|Proceeds from loans payable  related party                                      |   | -           |   |   | -           |   |   | 175,000        |  
|Payments of loans payable  related party                                        |   | (100,000    | ) |   | -           |   |   | (175,000       | )
|Proceeds from issuance of common stock                                           |   | 1,110,000   |   |   | 150,000     |   |   | 2,850,000      |  
|Net Cash Provided by Financing Activities                                        |   | 1,010,000   |   |   | 175,000     |   |   | 3,375,000      |  
|                                                                                 |   |             |   |   |             |   |   |                |  
|Change in cash and cash equivalents during
      the period                      |   | 687,125     |   |   | 123,966     |   |   | 701,272        |  
|Cash and cash equivalents, beginning of the period                               |   | 14,147      |   |   | 25,560      |   |   | -              |  
|Cash and cash equivalents, end of the
      period                               | $ | 701,272     |   | $ | 149,523     |   | $ | 701,272        |  
|                                                                                 |   |             |   |   |             |   |   |                |  
|SUPPLEMENTAL CASH FLOW INFORMATION:                                              |   |             |   |   |             |   |   |                |  
|Cash paid for income taxes                                                       | $ | -           |   | $ | -           |   | $ | -              |  
|Cash paid for interest                                                           | $ | -           |   | $ | -           |   | $ | -              |  

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

F-4

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BIOSHAFT WATER TECHNOLOGY, INC.
  (Formerly Pointstar Entertainment Corp.) 
  (A Development Stage Company) 
  NOTES TO FINANCIAL STATEMENTS 
  JANUARY 31, 2011

NOTE 1. GENERAL ORGANIZATION AND BUSINESS

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

NOTE 2. SUMMARY OF SIGNIFICANT ACCOUNTING
PRACTICES

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

Cash and Cash EquivalentsCash 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.

Basis of AccountingThe accompanying financial
statements have been prepared using the accrual basis of accounting in
accordance with accounting principles generally accepted in the United States of
America. The Company is currently a development stage enterprise. All losses
accumulated since the inception of the business have been considered as part of
its development stage activities.

Basis of PresentationThe accompanying interim
financial statements have been prepared in accordance with accounting principles
generally accepted in the United States of America and the rules of the
Securities and Exchange Commission (SEC), and should be read in conjunction
with the audited financial statements and notes thereto contained in the
Companys Form 10-K filed with the SEC as of and for the period ended April 30,
2010. In the opinion of management, all adjustments necessary in order for the
financial statements to be not misleading have been reflected herein. The
results of operations for interim periods are not necessarily indicative of the
results expected for the full year.

Development Stage CompanyThe accompanying financial
statements have been prepared in accordance with the accounting principles
relating to development stage enterprises. A development stage enterprise is one
in which planned principal operations have not commenced or if its operations
have commenced, there has been no significant revenues there from.

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

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

Computer Equipment
    3 YearsAutomobile
    3 YearsDemonstration Equipment
    5 Years


F-5

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BIOSHAFT WATER TECHNOLOGY, INC.
  (Formerly Pointstar Entertainment Corp.) 
  (A Development Stage Company) 
  NOTES TO FINANCIAL STATEMENTS 
  JANUARY 31, 2011

NOTE 2. SUMMARY OF SIGNIFICANT ACCOUNTING PRACTICES (CONTINUED)

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

Fair Value of Financial InstrumentsThe
Company's financial instrument consists of deposits, investments, customer
deposits, accounts payable and accrued expenses, loans payable and loans payable
to a related party.

The amount due to stockholder is non interest-bearing. It is
management's opinion that the Company is not exposed to significant interest,
currency or credit risks arising from its other financial instruments and that
their fair values approximate their carrying values except where separately
disclosed.

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

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

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

F-6

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BIOSHAFT WATER TECHNOLOGY, INC.
  (Formerly Pointstar Entertainment Corp.) 
  (A Development Stage Company) 
  NOTES TO FINANCIAL STATEMENTS 
  JANUARY 31, 2011

NOTE 2. SUMMARY OF SIGNIFICANT ACCOUNTING PRACTICES (CONTINUED)

Basic and Diluted Earnings (Loss) Per
ShareEarnings (loss) per share is calculated in accordance with the
Statement of financial accounting standards No. 128 (SFAS No. 128 or ASC 260),
Earnings per share. SFAS No. 128 superseded Accounting Principles Board
Opinion No.15 (APB 15). Net income (loss) per share for all periods presented
has been restated to reflect the adoption of SFAS No. 128. Basic net loss per
share is based upon the weighted average number of common shares outstanding.
Diluted net loss per share is based on the assumption that all dilutive
convertible shares and stock options were converted or exercised. Dilution is
computed by applying the treasury stock method. Under this method, options and
warrants are assumed to be exercised at the beginning of the period (or at the
time of issuance, if later), and as if funds obtained thereby were used to
purchase common stock at the average market price during the period. Basic and
diluted loss per share were $0.01 and $0.01 for the years ended April 30, 2010
and 2009 respectively.

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

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

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

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

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

F-7

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BIOSHAFT WATER TECHNOLOGY, INC.
  (Formerly Pointstar Entertainment Corp.) 
  (A Development Stage Company) 
  NOTES TO FINANCIAL STATEMENTS 
  JANUARY 31, 2011

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 January 31, 2011 and April 30, 2010, the company has
recorded $50,000 in investment. The Company reviewed its carrying cost of this
investment at January 31, 2011 and has determined that it is not impaired.

NOTE 4. PROPERTY AND EQUIPMENT

Property and equipment consisted of the following at January
31, 2011 and April 30, 2010:

January 31,
    
    
    April 30,2011
    
    
    2010Automobile
    $
    33,776
    
    $
    33,776Demonstration equipment
    
    48,934
    
    
    48,934Computer equipment
    
    11,807
    
    
    11,807Total Cost
    
    94,517
    
    
    94,517Less: Accumulated
      depreciation
    
    (61,730
    )
    
    (42,900
    )Property and equipment, net
    $
    32,787
    
    $
    51,617


During the three months ended January 31, 2011 and 2010, the
company recorded depreciation expense of $6,276 and $3,082, respectively.

During the nine months ended January 31, 2011 and 2010, the
company recorded depreciation expense of $18,830 and $10,741, respectively.

NOTE 5. LOANS PAYABLE

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

On March 6, 2009, the Company secured a loan payable of $25,000
accruing interest at 15%, due March 6, 2010 and secured by the assets of the
company. As of October 31, 2010, the loan has not been repaid and the Company
has re-negotiated an additional term of eighteen months with the same terms of
the original agreement. The term of this loan has been extended to September 6,
2011.

NOTE 6. GOING CONCERN

The accompanying financial statements have been prepared assuming
  that the Company will continue as a going concern. The Company has net losses
  for the period from inception to January 31, 2011 of $17,114,037. This condition
  raises substantial doubt about the Companys ability to continue as a going
  concern. The Companys continuation as a going concern is dependent on
  its ability to meet its obligations, to obtain additional financing as may be
  required and ultimately to attain profitability. The financial statements do
  not include any adjustments that might result from the outcome of this uncertainty.
  Management is planning to raise additional funds through an equity offering.
  There is no guarantee that the Company will be successful in these efforts.

F-8

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BIOSHAFT WATER TECHNOLOGY, INC.
  (Formerly Pointstar Entertainment Corp.) 
  (A Development Stage Company) 
  NOTES TO FINANCIAL STATEMENTS 
  JANUARY 31, 2011

NOTE 7. STOCKHOLDERS DEFICIT

Authorized

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

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

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

Issued and Outstanding

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

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

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

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

Stock-Based Compensation

On September 15, 2010, the Company granted 6,000,000 options to
a consultants for management and marketing services at an exercise price of
$0.15. 2,000,000 of these options vest immediately. 4,000,000 options vest
equally over a period of 24 months.

On January10, 2011, the Company granted 445,000 option to
consultants for management and marketing services at an exercise price of $0.15.
These options vest equally over a period of 24 months.

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
    1.4%-4.25%Expected dividend yield
    0%Expected stock price volatility
    58-140%Expected life of options
    5 years


The grant-date fair value of the options granted on January 21,
2008 was $1.15, the grant-date fair value of the options issued on October 24,
2007 was $1.62, the grant-date fair value of the options issued on September 15,
2010 was $0.04 and the grant-date fair value of the options issued on January
10, 2011 was $0.04. Total stock-based compensation for the three months ended
January 31, 2011 was $3,453 and $Nil, respectively, and $392,561 from the period
of inception to January 31, 2011.

F-9

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BIOSHAFT WATER TECHNOLOGY, INC.
  (Formerly Pointstar Entertainment Corp.) 
  (A Development Stage Company) 
  NOTES TO FINANCIAL STATEMENTS 
  JANUARY 31, 2011

NOTE 8. RELATED PARTY TRANSACTIONS

During the year ended April 30, 2010, the Company also entered
into a loan agreement with an officer of the Company, whereby, the Company
borrowed $25,000 at an interest rate of 10% per year. This loan has been repaid.

During the period ended January 31, 2011, the Company repaid
related party loans payable totaling $100,000. The balance of the loans payable
 related party was $0 as of January 31, 2011.

The Company incurred $Nil in consulting fees to the COO during
  the three months ended January 31, 2011. As of January 31, 2011, $240,000 were
  due to the COO of the Company and this amount was included in accounts payable
  and accrued expenses of the accompanying financial statements.

NOTE 9. COMMITMENT

Operating Leases

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

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

October 31, 2011
    24,6922012
    24,6922013
    12,3462014
    0


NOTE 10. FORGIVENESS OF DEBT

During the period ended January 31, 2011, the Company
negotiated the forgiveness of accrued expenses totaling $208,981. The amounts
were previously due to three consultants.

NOTE 11. SUBSEQUENT EVENTS

Management has evaluated subsequent events through March 17,
2011, the date on which the financial statements were issued, and has determined
it does not have any material subsequent events to disclose.

F-10

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

Forward Looking Statements

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

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

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

In this quarterly report, unless otherwise specified, all
dollar amounts are expressed in United States dollars. All references to "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 "our company" 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 stock symbol is
"BSHF".

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

Current Business

We are in 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.

On November 11, 2008 and pursuant to the agreement with RIC,
our company installed a 140 m3/day (37,000 GPD) pilot plant in Al Nakheel,
Dubai. Also, another pilot plant was installed for the same group in Sharja,
UAE.

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

3

---

On March 06, 2010 we signed a teaming agreement with Zuheir
Zahran & Co., a contracting company based in Jeddah, Saudi Arabia. The
agreement provided our company with an experienced and established contractor to
immediately pursue and implement sewage treatment projects in the Saudi Arabian
and the gulf area market. As a result of this agreement we accomplished
substantial amount of contracts with more in the pipeline. Next is a listing of
some of these contracts:

- In May, 2010 we installed a plant at a residential complex in Jeddah, Saudi
  Arabia. Tests and observations showed that the system has operated for a
  complete 8 months without removing any biomass from the system. Yet there was
  no evidence of any accumulated sludge in the aeration tank. The system was
  producing a low BOD and SS (below 10 ppm) consistently.
- We are waiting for the order for a previously approved 500 m3/day sewage
  treatment plant by the Bahrain ministry of works. Also, we received approval
  for a 2,000 m3/ day plant from the Jazan, Saudi Arabia Ministry of Water and
  Electricity. In-addition, we received approval for 450 m3/day plant for the
  Farsi Towers in Jeddah, Saudi Arabia. A contract for a plant for a private
  residential complex in Musallam, Saudi Arabia, was received and is in process
  of implementation.
- Our company participated in Jeddah water and environmental exhibition under
  Juffalis umbrella. Juffali is the largest company representing large
  international water and wastewater companies.
- Our technology was specified for 14,000 m3/day plant by the ministry of
  defense in Riyadh. Our partner, Wetico, the largest wastewater OEM in Saudi
  Arabia, was the lowest bidder.
- We are under construction of a sewage treatment plant for a shopping
  center.
- We were approved by Marafic, The largest utility company in Saudi Arabia.
- Currently, we are bidding for a 15,000 m3 plant for AL Jubail. They are
  part of the royal commission in Saudi, Arabia. This is one the opportunities
  for our company to break into the larger size municipal sewage treatment
  plants market.

Our pipeline is full with many other serious quotes and
proposals activity increased significantly.

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. The loan was paid off in full in mid 2010.

Results of Operations

Three Months Summary

|                       |   | Three Months Ended |  
|---------------------- | - | ------------------ | -
|                       |   | January 31,        |  
|                       |   | 2011               |  
|Gross Margin           | $ | Nil                |  
|Operating Expenses     |   | 113,731            |  
|Other Income (Expense) |   | (18,904            | )
|                       |   |                    |  
|Net Loss               | $ | (132,635           | )

4

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Nine Months Summary

|                       |   | Nine Months Ended |  
|---------------------- | - | ----------------- | -
|                       |   | January 31,       |  
|                       |   | 2011              |  
|Gross Margin           | $ | Nil               |  
|Operating Expenses     |   | 482,700           |  
|Other Income (Expense) |   | 145,794           |  
|                       |   |                   |  
|Net Loss               | $ | (336,906          | )

Revenue

We have earned $79,000 of revenue from inception, and $Nil and
$Nil revenues, respectively, during three and nine month periods ended January
31, 2011 as we enter into an agreement(s) with our potential customers for the
purchase and sale of our products.

Expenses

|                                 |   | Three Months Ended |  
|-------------------------------- | - | ------------------ | -
|                                 |   | January 31,        |  
|                                 |   | 2011               |  
|General and Administrative       | $ | 104,002            |  
|Depreciation and amortization    |   | 6,276              |  
|Stock based compensation expense |   | 3,453              |  
|Net Loss from operations         | $ | (113,731           | )

|                                 |   | Nine Months Ended |  
|-------------------------------- | - | ----------------- | -
|                                 |   | January 31,       |  
|                                 |   | 2011              |  
|General and Administrative       | $ | 363,301           |  
|Depreciation and amortization    |   | 18,830            |  
|Stock based compensation expense |   | 100,569           |  
|Net Loss from operations         | $ | (482,700          | )

Total operating expenses during the three months ended January
31, 2011 increased as compared to the comparative period in 2010 due to
increased general and administrative expenses.

Liquidity and Financial Condition

Working Capital

As of January 31, 2011, our total current assets were
$713,292and our total current liabilities were $1,169,845and we
had a working capital deficit of $456,553.

|                           |   | January 31, |   |   | April 30,  |  
|-------------------------- | - | ----------- | - | - | ---------- | -
|                           |   | 2011        |   |   | 2010       |  
|Current assets             | $ | 713,292     |   | $ | 14,147     |  
|Current liabilities        |   | 1,169,845   |   |   | 1,363,193  |  
|Working capital deficiency | $ | (456,553    | ) | $ | (1,349,046 | )

5

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Cash Flows

|                                                |   | Nine Months Ended |  
|----------------------------------------------- | - | ----------------- | -
|                                                |   | January 31,       |  
|                                                |   | 2011              |  
|Net cash flows used in operating activities     | $ | (322,875          | )
|Net cash flows used in investing activities     |   | Nil               |  
|Net cash flows provided by financing activities |   | 1,010,000         |  
|Net increase (decrease) in cash during period   | $ | 687,125           |  

Future Financing

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

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

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

Capital Expenditures

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

Employees

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

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

Off-Balance Sheet Arrangements

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

6

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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.

Use of Estimates

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

Cash and Cash Equivalents

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

Basis of Accounting

The accompanying financial statements have been prepared using
the accrual basis of accounting in accordance with accounting principles
generally accepted in the United States of America. Our company is currently a
development stage enterprise. All losses accumulated since the inception of the
business have been considered as part of its development stage activities.

Basis of Presentation

The accompanying interim financial statements have been
prepared in accordance with accounting principles generally accepted in the
United States of America and the rules of the Securities and Exchange Commission
(SEC), and should be read in conjunction with the audited financial statements
and notes thereto contained in our Form 10-K filed with the SEC as of and for
the period ended April 30, 2010. In the opinion of management, all adjustments
necessary in order for the financial statements to be not misleading have been
reflected herein. The results of operations for interim periods are not
necessarily indicative of the results expected for the full year.

Development Stage Company

The accompanying financial statements have been prepared in
accordance with the accounting principles relating to development stage
enterprises. A development stage enterprise is one in which planned principal
operations have not commenced or if its operations have commenced, there has
been no significant revenues there from.

Reclassifications

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

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Property and Equipment

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

Computer Equipment
    3 YearsAutomobile
    3 YearsDemonstration Equipment
    5 Years


Intangible Assets

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

Fair Value of Financial Instruments

Our company's financial instruments consist of deposits,
investments, customer deposits, accounts payable and accrued expenses, loans
payable and loans payable to a related party.

The amount due to stockholder is non interest-bearing. It is
management's opinion that our company is not exposed to significant interest,
currency or credit risks arising from its other financial instruments and that
their fair values approximate their carrying values except where separately
disclosed.

Revenue Recognition

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

Stock-Based Compensation

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

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Income Taxes

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

Basic and Diluted Earnings (Loss) Per Share

Earnings (loss) per share is calculated in accordance with the Statement of Financial Accounting Standards No. 128 (SFAS No. 128 or ASC 260), “Earnings per share”. SFAS No. 128 superseded Accounting Principles Board Opinion No.15 (APB 15). Net income (loss) per share for all periods presented has been restated to reflect the adoption of SFAS No. 128. Basic net loss per share is based upon the weighted average number of common shares outstanding. Diluted net loss per share is based on the assumption that all dilutive convertible shares and stock options were converted or exercised. Dilution is computed by applying the treasury stock method. Under this method, options and warrants are assumed to be exercised at the beginning of the period (or at the time of issuance, if later), and as if funds obtained thereby were used to purchase common stock at the average market price during the period. Basic and diluted loss per share were $0.00 and $0.00 for the three and nine months ended ended January 31, 2011 and 2010 respectively.

Concentration of Credit Risk

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

Recent Accounting Pronouncements

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

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

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

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

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

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

Item 3. Quantitative and Qualitative Disclosures About
Market Risk

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

Item 4. Controls and Procedures

Managements Report on Disclosure Controls and
Procedures

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

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

Changes in Internal Control over Financial
Reporting

There have been no changes in our internal controls over
financial reporting that occurred during our quarter ended January 31, 2011 that
have materially or are reasonably likely to materially affect, our internal
controls over financial reporting.

PART II - OTHER INFORMATION

Item 1. Legal Proceedings

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

Item 1A. Risk Factors

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

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

Risks Related to Our Business

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

From inception to January 31, 2011, we have incurred aggregate
net losses of $17,100,554 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,

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if we are unable to raise further financing when required, we
may be forced to scale down our operations and our ability to generate revenues
may be negatively affected.

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

We have 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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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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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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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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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
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

16

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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 2. Unregistered Sales of Equity Securities and Use of
Proceeds

None.

Item 3. Defaults Upon Senior Securities

None.

Item 4. [Removed and Reserved]Item 5. Other
InformationNone.

Item 6. Exhibits

|Exhibit | Description                                                                                                                                                                                                                                  
|------- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Number  |                                                                                                                                                                                                                                              
|        |                                                                                                                                                                                                                                              
|(3)     | Articles of
      Incorporation and Bylaws                                                                                                                                                                                                   
|        |                                                                                                                                                                                                                                              
|3.1     | Articles of Incorporation (incorporated by reference from
      our Registration Statement on Form SB-2 filed on June 13, 2006)                                                                                                              
|        |                                                                                                                                                                                                                                              
|3.2     | By-laws (incorporated by reference from our Registration
      Statement on Form SB-2 filed on June 13, 2006)                                                                                                                                
|        |                                                                                                                                                                                                                                              
|3.3     | Certificate of Amendment (incorporated by reference from
      our Current Report on Form 8-K filed on August 6, 2007)                                                                                                                       
|        |                                                                                                                                                                                                                                              
|3.4     | Articles of Merger filed with the Secretary of State of
      Nevada on September 24, 2007 and which is effective September 28, 2007
      (incorporated by reference from our Current Report on Form 8- K filed on
      September 28, 2007)
|        |                                                                                                                                                                                                                                              
|(10)    | Material Contracts                                                                                                                                                                                                                           
|        |                                                                                                                                                                                                                                              
|10.1    | Form of Subscription Agreement (incorporated by reference
      from our Current Report on Form 8- K filed on August 24, 2007).                                                                                                              

17

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|Exhibit | Description                                                                                                                                                                                                                                 
|------- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Number  |                                                                                                                                                                                                                                             
|        |                                                                                                                                                                                                                                             
|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)                                                             
|        |                                                                                                                                                                                                                                             
|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)                         
|        |                                                                                                                                                                                                                                             
|10.12*  | Teaming Agreement
        dated March 6, 2010 between our company and Zuheir Zahran & Co.                                                                                                                                                   
|        |                                                                                                                                                                                                                                             
|10.13   | Form of Regulation
        S Subscription Agreement (incorporated by reference from our Current Report
        on Form 8-K filed on August 17, 2010)                                                                                        
|        |                                                                                                                                                                                                                                             
|(14)    | Code of Ethics                                                                                                                                                                                                                              
|        |                                                                                                                                                                                                                                             
|14.1    | Code of Ethics
        and Business Conduct dates effective July 1, 2008 (incorporated from our
        Annual Report on Form 10-KSB/A filed on August 14, 2008)                                                                            
|        |                                                                                                                                                                                                                                             
|(31)    | Rule 13a-14(a)/15d-14(a)
        Certifications                                                                                                                                                                                             
|        |                                                                                                                                                                                                                                             
|31.1*   | Section
        302 Certification under Sarbanes-Oxley Act of 2002 of Principal Executive
        Officer                                                                                                                                   
|        |                                                                                                                                                                                                                                             
|31.2*   | Section
        302 Certification under Sarbanes-Oxley Act of 2002 of Imad Kamel Yassine                                                                                                                                                    
|        |                                                                                                                                                                                                                                             
|(32)    | Section 1350
        Certifications                                                                                                                                                                                                         
|        |                                                                                                                                                                                                                                             
|32.1*   | Section
        906 Certification under Sarbanes-Oxley Act of 2002 of Hassan Hans Badreddine                                                                                                                                                
|        |                                                                                                                                                                                                                                             
|32.2*   | 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.

|Date: March 21, 2011 |                                                
|-------------------- | -----------------------------------------------
|                     | Hassan Hans Badreddine                         
|                     | President, Chief Executive Officer and Director
|                     | (Principal Executive Officer)                  



|Date: March 21, 2011 |                                                                     
|-------------------- | --------------------------------------------------------------------
|                     | Imad Kamel Yassine                                                  
|                     | Chief Operating Officer, Chief Financial
      Officer, Secretary,  
|                     | Treasurer and Director                                              
|                     | (Principal Financial Officer and Principal
      Accounting Officer)

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