---

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 July 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 BANKRUPTCY
PROCEEDINGS DURING THE PRECEDING FIVE YEARS

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

APPLICABLE ONLY TO CORPORATE ISSUERS

Indicate the number of shares outstanding of each of the
issuers classes of common stock, as of the latest practicable date.
101,716,000 common shares issued and outstanding as of September 18,
2011.

---

PART I - FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS

Our unaudited interim financial statements for the three month
period ended July 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.

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BIOSHAFT WATER TECHNOLOGY, INC.

TABLE OF CONTENTS

JULY 31, 2011





|Balance
      Sheets as of July 31, 2011 and April 30, 2011                      | F
      - 1         
|-------------------------------------------------------------------------------- | --------------------
|                                                                                 |                     
|Statements
      of Operations for the three months ended July 31, 2011 and 2010 | F
      - 2         
|                                                                                 |                     
|Statement
      of Stockholders Deficit as of July 31, 2011                     | F
      - 3         
|                                                                                 |                     
|Statements
      of Cash Flows for the three months ended July 31, 2011 and 2010 | F
      - 4         
|                                                                                 |                     
|Notes
      to Financial Statements                                              | F
      - 5  F - 12

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BIOSHAFT WATER TECHNOLOGY, INC.BALANCE SHEETS
(UNAUDITED) 
  AS OF JULY 31, 2011 AND APRIL 30, 2011

|                                                                                                                                               |   | July 31,    |   |   | April 30,   |  
|---------------------------------------------------------------------------------------------------------------------------------------------- | - | ----------- | - | - | ----------- | -
|                                                                                                                                               |   | 2011        |   |   | 2011        |  
|ASSETS                                                                                                                                         |   |             |   |   |             |  
|Current assets :                                                                                                                               |   |             |   |   |             |  
|Cash and cash equivalents                                                                                                                      | $ | 707,342     |   | $ | 611,729     |  
|Prepaid expenses                                                                                                                               |   | 61,265      |   |   | 76,279      |  
|                                                                                                                                               |   |             |   |   |             |  
|Total Current Assets                                                                                                                           |   | 768,607     |   |   | 688,008     |  
|                                                                                                                                               |   |             |   |   |             |  
|Property and equipment, net                                                                                                                    |   | 30,015      |   |   | 29,360      |  
|                                                                                                                                               |   |             |   |   |             |  
|Other assets :                                                                                                                                 |   |             |   |   |             |  
|Deposits                                                                                                                                       |   | 2,248       |   |   | 2,248       |  
|                                                                                                                                               |   |             |   |   |             |  
|Total Assets                                                                                                                                   | $ | 800,870     |   | $ | 719,616     |  
|                                                                                                                                               |   |             |   |   |             |  
|LIABILITIES AND STOCKHOLDERS
      DEFICIT                                                                                                    |   |             |   |   |             |  
|Current liabilities :                                                                                                                          |   |             |   |   |             |  
|Customer deposit                                                                                                                               | $ | 108,680     |   | $ | -           |  
|Accounts payable and accrued expenses                                                                                                          |   | 601,507     |   |   | 620,254     |  
|Accrued interest                                                                                                                               |   | 254,924     |   |   | 226,943     |  
|Loans payable                                                                                                                                  |   | 25,000      |   |   | 25,000      |  
|Total current liabilities                                                                                                                      |   | 990,111     |   |   | 872,197     |  
|                                                                                                                                               |   |             |   |   |             |  
|Long-term debt                                                                                                                                 |   | 500,000     |   |   | 500,000     |  
|                                                                                                                                               |   |             |   |   |             |  
|Total liabilities                                                                                                                              |   | 1,490,111   |   |   | 1,372,197   |  
|                                                                                                                                               |   |             |   |   |             |  
|Stockholders deficit :                                                                                                                        |   |             |   |   |             |  
|Common stock, $0.001 par value; 300,000,000
      shares authorized,    101,716,000 and 101,050,000 issued and
      outstanding, respectively |   | 101,716     |   |   | 101,050     |  
|Preferred stock, $0.001 par
      value; 25,000,000 shares authorized, none    issued and
      outstanding                                    |   | -           |   |   | -           |  
|Additional paid-in capital                                                                                                                     |   | 16,925,585  |   |   | 16,816,123  |  
|Deficit accumulated during the
      development stage                                                                                         |   | (17,716,542 | ) |   | (17,569,754 | )
|Total Stockholders Deficit                                                                                                                    |   | (689,241    | ) |   | (652,581    | )
|                                                                                                                                               |   |             |   |   |             |  
|Total Liabilities and Stockholders' Deficit                                                                                                    | $ | 800,870     |   | $ | 719,616     |  

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

F-1

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BIOSHAFT WATER TECHNOLOGY, INC.STATEMENTS OF
OPERATIONS 
  FOR THE THREE MONTHS ENDED JULY 31, 2011 AND 2010

|                                                                       |   | Three       |   |   | Three      |   |   | From                |  
|---------------------------------------------------------------------- | - | ----------- | - | - | ---------- | - | - | ------------------- | -
|                                                                       |   | months      |   |   | months     |   |   | Inception           |  
|                                                                       |   | ended       |   |   | ended      |   |   | (March 6,           |  
|                                                                       |   | July 31,    |   |   | July 31,   |   |   | 2008) to            |  
|                                                                       |   | 2011        |   |   | 2010       |   |   | July
      31, 2011 |  
|                                                                       |   |             |   |   |            |   |   |                     |  
|NET REVENUE                                                            | $ | 3,200       |   | $ | -          |   | $ | 98,200              |  
|COST OF SALES                                                          |   | -           |   |   | -          |   |   | 68,132              |  
|                                                                       |   |             |   |   |            |   |   |                     |  
|GROSS PROFIT                                                           |   | 3,200       |   |   | -          |   |   | 30,068              |  
|                                                                       |   |             |   |   |            |   |   |                     |  
|OPERATING EXPENSES                                                     |   |             |   |   |            |   |   |                     |  
|Depreciation and amortization                                          |   | 2,496       |   |   | 6,277      |   |   | 1,849,355           |  
|Impairment of assets                                                   |   | -           |   |   | -          |   |   | 12,533,903          |  
|General and administrative                                             |   | 124,280     |   |   | 72,297     |   |   | 2,834,118           |  
|Stock-based compensation                                               |   | 10,128      |   |   | 14,403     |   |   | 370,639             |  
|TOTAL OPERATING EXPENSES                                               |   | 136,804     |   |   | 92,977     |   |   | 17,588,015          |  
|                                                                       |   |             |   |   |            |   |   |                     |  
|LOSS FROM OPERATIONS                                                   |   | (133,704    | ) |   | (92,977    | ) |   | (17,557,947         | )
|                                                                       |   |             |   |   |            |   |   |                     |  
|OTHER INCOME (EXPENSE)                                                 |   |             |   |   |            |   |   |                     |  
|Other income                                                           |   | -           |   |   | -          |   |   | 7,200               |  
|Interest income (expense), net                                         |   | (13,084     | ) |   | (15,406    | ) |   | (260,554            | )
|Forgiveness of debt                                                    |   | -           |   |   | -          |   |   | 94,759              |  
|TOTAL OTHER INCOME (EXPENSE)                                           |   | (13,084     | ) |   | (15,406    | ) |   | (158,595            | )
|                                                                       |   |             |   |   |            |   |   |                     |  
|NET LOSS                                                               | $ | (146,788    | ) | $ | (108,383   | ) | $ | (17,716,542         | )
|                                                                       |   |             |   |   |            |   |   |                     |  
|LOSS PER SHARE: BASIC AND DILUTED                                      | $ | (0.00       | ) | $ | (0.00      | ) |   |                     |  
|                                                                       |   |             |   |   |            |   |   |                     |  
|WEIGHTED AVERAGE NUMBER OF SHARES
      OUTSTANDING: BASIC AND DILUTED |   | 101,259,935 |   |   | 90,000,000 |   |   |                     |  

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

F-2

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BIOSHAFT WATER TECHNOLOGY, INC.STATEMENT OF
STOCKHOLDERS DEFICIT 
  AS OF JULY 31, 2011

DeficitAccumulated
      
      
      TotalAdditional
      
      
      during the
      
      
      StockholdersCommon Stock
      
      
      Paid
      
      
      Development
      
      
      EquityShares
      
      
      Amount
      
      
      in
        Capital
      
      
      Stage
      
      
      (Deficit)Balance, April 30, 2009
      
      90,000,000
      
      
      90,000
      
      
      15,209,338
      
      
      (16,125,371
      )
      
      (826,033
      )Shares issued for cash
      
      3,500,000
      
      
      3,500
      
      
      171,500
      
      
      -
      
      
      175,000Stock-based compensation
      
      -
      
      
      -
      
      
      57,612
      
      
      -
      
      
      57,612Net loss for the
        year
      
      -
      
      
      -
      
      
      -
      
      
      (651,760
      )
      
      (651,760
      )Balance, April 30, 2010
      
      93,500,000
      
      
      93,500
      
      
      15,438,450
      
      
      (16,777,131
      )
      
      (1,245,181
      )Stock issued for cash
      
      7,550,000
      
      
      7,550
      
      
      1,124,950
      
      
      -
      
      
      1,132,500Stock options issued for services
      
      
      
      
      
      
      
      184,196
      
      
      -
      
      
      184,196Stock-based compensation
      
      -
      
      
      -
      
      
      68,527
      
      
      -
      
      
      68,527Net loss for the year
      
      -
      
      
      -
      
      
      -
      
      
      (792,623
      )
      
      (792,623
      )Balance, April 30, 2011
      
      101,050,000
      
      
      101,050
      
      
      16,816,123
      
      
      (17,569,754
      )
      
      (652,581
      )Stock issued for cash
      
      666,000
      
      
      666
      
      
      99,334
      
      
      
      
      
      100,000Stock-based compensation
      
      
      
      
      
      
      
      10,128
      
      
      
      
      
      10,128Net loss for the period
      
      
      
      
      
      
      
      
      
      
      (146,788
      )
      
      (146,788
      )Balance, July 31, 2011
      
      101,716,000
      
      $
      101,716
      
      $
      16,925,585
      
      $
      (17,716,542
      )
      $
      (689,241
      )


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

F-3

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BIOSHAFT WATER TECHNOLOGY, INC.STATEMENTS OF
CASH FLOWS 
  FOR THE THREE MONTHS ENDED JULY 31, 2011 AND 2010

|                                                                                 |   | Three    |   |   | Three    |  
|-------------------------------------------------------------------------------- | - | -------- | - | - | -------- | -
|                                                                                 |   | months   |   |   | months   |  
|                                                                                 |   | ended    |   |   | ended    |  
|                                                                                 |   | July 31, |   |   | July 31, |  
|                                                                                 |   | 2011     |   |   | 2010     |  
|                                                                                 |   |          |   |   |          |  
|CASH FLOWS FROM OPERATING ACTIVITIES                                             |   |          |   |   |          |  
|Net loss for the period                                                          | $ | (146,788 | ) | $ | (108,383 | )
|Adjustments To Reconcile Net Loss To Net Cash Used In
      Operating Activities |   |          |   |   |          |  
|Depreciation and amortization                                                    |   | 2,496    |   |   | 6,277    |  
|Stock-based compensation                                                         |   | 10,128   |   |   | 14,403   |  
|Change in operating assets &
      liabilities                                   |   |          |   |   |          |  
|Decrease in prepaid expenses                                                     |   | 15,014   |   |   | 0        |  
|Increase (decrease) in
      accounts payable and accrued expenses               |   | (3,999   | ) |   | 60,430   |  
|Increase in accrued interest                                                     |   | 13,233   |   |   | 0        |  
|Increase in customer deposit                                                     |   | 108,680  |   |   | 0        |  
|Net Cash Used in Operating Activities                                            |   | (1,236   | ) |   | (27,273  | )
|                                                                                 |   |          |   |   |          |  
|CASH FLOWS FROM INVESTING ACTIVITIES                                             |   |          |   |   |          |  
|Purchase of property and
      equipment                                         |   | (3,151   | ) |   | 0        |  
|Net Cash Used in Investing Activities                                            |   | (3,151   | ) |   | -        |  
|                                                                                 |   |          |   |   |          |  
|CASH FLOWS FROM FINANCING ACTIVITIES                                             |   |          |   |   |          |  
|Subscriptions received                                                           |   | 0        |   |   | 510,000  |  
|Proceeds from issuance of common stock                                           |   | 100,000  |   |   | 0        |  
|Net Cash Provided by Financing Activities                                        |   | 100,000  |   |   | 510,000  |  
|                                                                                 |   |          |   |   |          |  
|Change in cash and cash equivalents during
      the period                      |   | 95,613   |   |   | 482,727  |  
|Cash and cash equivalents, beginning of the period                               |   | 611,729  |   |   | 14,147   |  
|Cash and cash equivalents, end of the
      period                               | $ | 707,342  |   | $ | 496,874  |  
|                                                                                 |   |          |   |   |          |  
|SUPPLEMENTAL CASH FLOW INFORMATION:                                              |   |          |   |   |          |  
|Cash paid for income taxes                                                       | $ | 0        |   | $ | 0        |  
|Cash paid for interest                                                           | $ | 16,827   |   | $ | 0        |  

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

F-4

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BIOSHAFT WATER TECHNOLOGY, INC.NOTES TO FINANCIAL
STATEMENTS 
  JULY 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

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 and are presented in U.S. dollars. The Company has adopted an April 30
year end.

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

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

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.

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

---

BIOSHAFT WATER TECHNOLOGY, INC.NOTES TO FINANCIAL
STATEMENTS 
  JULY 31, 2011

NOTE 2. SUMMARY OF SIGNIFICANT ACCOUNTING PRACTICES (CONTINUED)

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

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

Revenue 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.

F-6

---

BIOSHAFT WATER TECHNOLOGY, INC.NOTES TO FINANCIAL
STATEMENTS 
  JULY 31, 2011

NOTE 2. SUMMARY OF SIGNIFICANT ACCOUNTING PRACTICES (CONTINUED)

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.

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 $0.001 and $0.00 for the three months ended July 31,
2011 and 2010 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 July 31, 2011,
management evaluated subsequent events through the date that such financial
statements were issued.

F-7

---

BIOSHAFT WATER TECHNOLOGY, INC.NOTES TO FINANCIAL
STATEMENTS 
  JULY 31, 2011

NOTE 2. SUMMARY OF SIGNIFICANT ACCOUNTING PRACTICES (CONTINUED)

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

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

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

NOTE 3. INVESTMENT

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

NOTE 4. PROPERTY AND EQUIPMENT

Property and equipment consisted of the following at July 31,
2011 and 2010:

July
      31, 2011
    
    
    April 30, 2011Automobile
    $
    33,775
    
    $
    33,776Demonstration equipment
    
    50,125
    
    
    48,934Computer equipment
    
    13,768
    
    
    11,807Total Cost
    
    97,668
    
    
    94,517Less: Accumulated depreciation
    
    (67,653
    )
    
    (65,157
    )Property and equipment, net
    $
    30,015
    
    $
    29,360


Depreciation expense was $2,496 and $6,277 for the three months
ended July 31, 2011 and 2010.

F-8

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BIOSHAFT WATER TECHNOLOGY, INC.NOTES TO FINANCIAL
STATEMENTS 
  JULY 31, 2011

NOTE 5. LOANS PAYABLE

On August 11, 2008, the Company secured a loan payable of
$500,000 accruing interest at 15%, secured by the assets of the company, subject
to a 3% financing fee and repayable on the one year anniversary date of the
agreement. The term of this loan has been extended to August 11, 2012. Accrued
interest related to this loan is $216,019 as of April 30, 2011.

On March 6, 2009, the Company secured a loan payable of $25,000
accruing interest at 15%, due March 6, 2010 and secured by the assets of the
company. The term of this loan has been extended to September 6, 2012. Accrued
interest related to this loan is $8,132 as of April 30, 2011.

Total interest expense on the above loans was $13,084 for the
three months ended July 31, 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 July 31, 2011 of $17,716,442 and has negative
  working capital. This condition raises substantial doubt about the Companys
  ability to continue as a going concern. The Companys continuation as a
  going concern is dependent on its ability to meet its obligations, to obtain
  additional financing as may be required and ultimately to attain profitability.
  The financial statements do not include any adjustments that might result from
  the outcome of this uncertainty. Management is planning to raise additional
  funds through an equity offering. There is no guarantee that the Company will
  be successful in these efforts.

NOTE 7. STOCKHOLDERS DEFICIT

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

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

F-9

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BIOSHAFT WATER TECHNOLOGY, INC.NOTES TO FINANCIAL
STATEMENTS 
  JULY 31, 2011

NOTE 7. STOCKHOLDERS DEFICIT (CONTINUED)

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

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

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

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

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

Stock Options and Stock-Based CompensationOn September 15, 2010, the Company granted 6,000,000 options at an
exercise price of $0.15.

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

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

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

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

Exercise price
    $0.15Risk free interest rate
    1.4%-4.25%Expected dividend yield
    0%Volatility
    58-140%Expected life of options
    5 years


F-10

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BIOSHAFT WATER TECHNOLOGY, INC.NOTES TO FINANCIAL
STATEMENTS 
  JULY 31, 2011

NOTE 8. RELATED PARTY TRANSACTIONS

One of the consultants is due $206,000 for consulting expenses
since inception which is included in accounts payable and accrued expenses.

NOTE 9. COMMITMENT

Operating Leases

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

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

April 30, 2012
    $
    24,6922013
    
    24,6922014
    
    326Total
    $
    49,710


NOTE 10. INCOME TAXES

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

Deferred income taxes reflect the net tax effect of temporary
differences between the carrying amounts of assets and liabilities for financial
reporting purposes and the amounts used for income tax purposes. Significant
components of the net deferred taxes at June 30, 2011 and December 31, 2010 are
as follows:

July 31,
    
    
    April 30,2011
    
    
    2011Deferred tax asset attributable to:Net operating losses carried
      forward
    $
    3,897,639
    
    $
    3,885,146Valuation allowance
    
    (3,897,639
    )
    
    (3,885,146
    )Total net deferred tax asset
    $
    -
    
    $
    -


Bioshaft follows Statement of Financial Accounting Standards
Number 109 (SFAS 109) (ASC 740-10), Accounting for Income Taxes. SFAS No. 109
(ASC 740-10) requires a valuation allowance, if any, to reduce the deferred tax
assets reported if, based on the weight of the evidence, it is more likely than
not that some portion or all of the deferred tax assets will not be realized.
Management has determined that a valuation allowance of $3,897,639 at July 31,
2011 is necessary to reduce the deferred tax assets to the amount that will more
likely not be realized.

At July 31, 2011, the Company had net operating loss
carry-forwards amounting to approximately $17,716,542 that expire in various
amounts through 2031 in the U.S.

F-11

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BIOSHAFT WATER TECHNOLOGY, INC.NOTES TO FINANCIAL
STATEMENTS 
  JULY 31, 2011

NOTE 11. SUBSEQUENT EVENTS

Management has evaluated subsequent events through September
16, 2011, the date on which the financial statements were issued, and has
determined it does not have any material subsequent events to disclose.

F-12

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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 "common shares" refer to the
common shares in our capital stock.

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

General

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

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

Current Business

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

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

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

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

---

On January 31, 2008, we entered into a teaming agreement with Rapid Impact Compaction Contracting LLC, a company based in Dubai, UAE. The agreement provides the basis for our company and Rapid Impact to jointly pursue sewage treatment projects in
the Gulf Region, with exclusivity as to association in the UAE. Pursuant to the agreement with Rapid Impact, we will perform engineering and manufacturing services, provide our sewage treatment systems, supervise installation, start-up and
commissioning thereof and assist Rapid Impact over a five-year period to develop a division within Rapid Impact that specializes in sewage treatment plants using our patented Hans BioShaft Technology. Rapid Impact will sell, install and handle all
construction matters, provide office space, in-country transportation and assist with business development. We will pay a commission payment to Rapid Impact of 5% of the contract value of sewage treatment plant contracts in respect of the Hans
BioShaft Technology.

On November 11, 2008 and pursuant to the agreement with Rapid Impact, 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.

- Continued monitoring of tests of our plants' performance showed consistency results with superior effluent quality (below 10 PPM) and no sludge withdrawal. The demo plant with a capacity of 140 m3/day (37,000 GPD) that was installed at al
Nakheel project-Dubai showed such results since it's installation in November 2008. Furthermore, this plant showed superior results since it was re-installed at Sharja municipality on March 2009.
- A purchase order for a 500 m3/day (132,100 GPD) sewage treatment plant upgrade was received after the approval by the ministry of Public Works in Bahrain. This project has a potential for additional 15 plants to be upgraded with BioShaft
Technology.
- BioShaft Technology was specified by the ministry of defense in Saudi Arabia in a tender for a 14,000 M3/DAY (3,700,000 GPD) plant. We are waiting for the purchase order through Wettico, our partner, the largest waste water treatment contractor in
Saudi Arabia, to start drafting the contract.

Our BioShaft Technology was approved by several utility companies such as Marafic, the largest utility company in Saudi Arabia. Our company completed a bid for a 15,000 m3/day (4,000,000 GPD) plant for Al Jubail, part of the Royal commission in
Saudi Arabia. This is one of the opportunities for our company to break into the larger size municipal and utility sewage treatment plants' market.

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

- May, 2010 we installed a 50 m3/day (13,210 GPD) plant at a residential complex in Jeddah, Saudi Arabia. Tests results were consistent and satisfactory for over a year of operation with superior effluent quality and no sludge production or
extraction.
- BioShaft Technology was approved for a 2,000 m3/day (528,400 GPD) plant from the City of Jazan, Saudi Arabia, ministry of water and electricity. Several other approvals are being formalized for high rise tower projects in Jeddah, Saudi Arabia where
minimum footprint is a great advantage.
- 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.
- A 60 m3/day (15,852 GPD) plant is under construction in a Jeddah commercial center. Another 60 m3/day (15,852 GPD) was approved on February 21, 2011 serving Al-Rai pharmaceutical industrial plant at Jeddah's industrial area.
- Our company completed the sales and installation of a 30 m3/ day (7,920 GPD) plant in Jeddah –Saudi Arabia through the appointed distributor Water Masters. Two other plants serving residential facilities were

---

sold to Water Masters. A 30m3/day (7.920
  GPD) on November 3, 2010 and a 15m3/day (3,960 GPD) on February 12, 2010. Both
  plants are under construction.

Our pipeline is full with many other serious quotes and
proposal activity has increased significantly for the whole Middle East region.
Our company and Canadian Environmental Consulting are in process of signing a
consulting agreement, a non-disclosure agreement and a stock option agreement to
be effective as of August 15, 2011. As such, these agreements replace all
further actions stipulated in the previously signed agreements between our
company and Bashar Amin related, to these subjects, as of August 14, 2011.

As a result of the new agreements between our company and
Canadian Environmental Consulting, Bashar Amins entitlement for stock options
is accumulated from August 1, 2010 up to August 14, 2011. Accordingly, Mr.
Bashar Amin is entitled to exercising his total accumulation of stocks in
accordance with the stock option agreement dated August 1, 2010. Further stock
entitlements by Canadian Environmental Consulting are in accordance with the new
agreement effective as of August 15, 2011.

On July 5, 2011 we entered into a consulting agreement with Walter Zurawick to provide marketing, sales and business development for our company, with an effective date of August 1, 2011. As compensation we paid Mr. Zurawick $14,000 on execution of the agreement and will pay $14,000 every 30 days afterward for consulting services rendered on our company’s behalf. Additionally Mr. Zurawick will receive commission of 3% of gross profit margin on sales as well as pre-approved expenses of up to $48,000 per year for travel expenses and $5,000 per year for marketing and literature. The term of the agreement is through July 31, 2013.

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

Results of Operations

Three Months Summary

|                       |   | Three Months Ended |  
|---------------------- | - | ------------------ | -
|                       |   | July 31,           |  
|                       |   | 2011               |  
|Gross Margin           | $ | 3,200              |  
|Operating Expenses     |   | 136,804            |  
|Other Income (Expense) |   | (13,084            | )
|                       |   |                    |  
|Net Loss               | $ | (146,788           | )

Revenue

We have earned $98,200 of revenue from inception, and $3,200
revenues, during three month period ended July 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 |  
|-------------------------------- | - | ------------------ | -
|                                 |   | July 31,           |  
|                                 |   | 2011               |  
|General and Administrative       | $ | 124,280            |  
|Depreciation and amortization    |   | 2,496              |  
|Stock based compensation expense |   | 10,128             |  
|Net Loss from operations         | $ | (136,804           | )

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 July 31, 2011, our total current assets were $768,607 and our total current liabilities were $990,111 and we had a working capital deficit of $221,506.

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|                           |   | July 31, |   |   | April 30, |  
|-------------------------- | - | -------- | - | - | --------- | -
|                           |   | 2011     |   |   | 2011      |  
|Current assets             | $ | 768,607  |   | $ | 688,008   |  
|Current liabilities        |   | 990,111  |   |   | 872,197   |  
|Working capital deficiency | $ | (221,506 | ) | $ | (184,189  | )

Cash Flows

|                                                |   | Three Months Ended |  
|----------------------------------------------- | - | ------------------ | -
|                                                |   | July 31,           |  
|                                                |   | 2011               |  
|Net cash flows used in operating activities     | $ | (1,236             | )
|Net cash flows used in investing activities     |   | (3,151             | )
|Net cash flows provided by financing activities |   | 100,000            |  
|Net increase (decrease) in cash during period   | $ | 95,613             |  

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.

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, 2011. 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.

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Reclassifications

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

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.

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 months ended July 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-

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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.

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 July 31, 2011 that have materially or are reasonably likely to materially affect, our internal controls over financial reporting.

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PART II - OTHER INFORMATION

Item 1. Legal Proceedings

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

Item 1A. Risk Factors

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

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

Risks Related to Our Business

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

From inception to July 31, 2011, we have incurred aggregate net
losses of $17,716,542 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.

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

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

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

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

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

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

We have 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.

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.

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

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

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

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

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

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

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.

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

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

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

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

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

- 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.

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

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

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

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

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

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

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.

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

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

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

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

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]

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Item 5. Other Information

None.

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).                                                                                                              
|        |                                                                                                                                                                                                                                              
|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)                                                  

---

|Exhibit | Description                                                                                                                                                                                                        
|------- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Number  |                                                                                                                                                                                                                    
|        |                                                                                                                                                                                                                    
|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)                                                               
|        |                                                                                                                                                                                                                    
|10.14*  | Consulting Agreement  made as of July 5, 2011 between our company and Walter Zurawick                                                                                                                              
|        |                                                                                                                                                                                                                    
|10.15*  | Stock Option Agreement made as of August 2, 2011 between our company and Walter Zurawick                                                                                                                           
|        |                                                                                                                                                                                                                    
|10.16*  | Consulting
        Agreement made as of August 15, 2011 between our company and Canadian
    Environmental Consulting.                                                                                             
|        |                                                                                                                                                                                                                    
|10.17*  | Non-Disclosure
        Agreement made as of August 15, 2011 between our company and Canadian
        Environmental Consulting .                                                                                    
|        |                                                                                                                                                                                                                    
|10.18*  | Stock
        Option Agreement made as of August 15, 2011 between our company and Canadian
        Environmental Consulting .                                                                                      
|        |                                                                                                                                                                                                                    
|(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 Hassan Hans Badreddine                                                                                                                       
|        |                                                                                                                                                                                                                    
|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.

---

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:     September 18, 2011 | Hassan Hans Badreddine                                   
|---------------------------- | -----------------------------------------------------------
|                             | Hassan Hans Badreddine                                     
|                             | President, Chief Executive Officer and Director            
|                             | (Principal Executive Officer)                              
|                             |                                                            
|Date:     September 18, 2011 | Imad Kamel Yassine                                       
|                             | Imad Kamel Yassine                                         
|                             | Chief Operating Officer, Chief Financial
      Officer,    
|                             | Secretary, Treasurer and Director                          
|                             | (Principal Financial Officer and Principal
      Accounting
|                             | Officer)                                                   

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