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EXCEL - IDEA: XBRL DOCUMENT - BIOSHAFT WATER TECHNOLOGY, INC.Financial_Report.xls
EX-31.1 - CERTIFICATION - BIOSHAFT WATER TECHNOLOGY, INC.bshf_ex311.htm
EX-31.2 - CERTIFICATION - BIOSHAFT WATER TECHNOLOGY, INC.bshf_ex312.htm
EX-10.18 - CONSULTING AGREEMENT - BIOSHAFT WATER TECHNOLOGY, INC.bshf_ex1018.htm
EX-10.19 - CONSULTING AGREEMENT - BIOSHAFT WATER TECHNOLOGY, INC.bshf_ex1019.htm
EX-32.1 - CERTIFICATION - BIOSHAFT WATER TECHNOLOGY, INC.bshf_ex321.htm
EX-32.2 - CERTIFICATION - BIOSHAFT WATER TECHNOLOGY, INC.bshf_ex322.htm

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

Form 10-Q


(Mark One)

[X]

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

 

For the quarterly period ended January 31, 2014

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.)

 

 

 

111 West Ocean Blvd, 4th Floor, Long Beach, CA

 

90802

(Address of principal executive offices)

 

(Zip Code)


(562) 216-8043

(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). [X] 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.

108,911,170 common shares issued and outstanding as of March 10, 2014.



















































BIOSHAFT WATER TECHNOLGY, INC.

TABLE OF CONTENTS


PART I - FINANCIAL INFORMATION

4

Item 1.

Financial Statements

4

Item 2.

Management’s Discussion and Analysis of Financial Condition and Results of Operations

5

Item 3.

Quantitative and Qualitative Disclosures About Market Risk

12

Item 4.

Controls and Procedures

13

PART II - OTHER INFORMATION

14

Item 1.

Legal Proceedings

14

Item 1A.

Risk Factors

14

Item 2.

Unregistered Sales of Equity Securities and Use of Proceeds

14

Item 3.

Defaults Upon Senior Securities

14

Item 4.

Mine Safety Disclosures

14

Item 5.

Other Information

14

Item 6.

Exhibits

14

SIGNATURES

17





















3




PART I - FINANCIAL INFORMATION

Item 1.

Financial Statements

Our unaudited interim financial statements for the three and nine month periods ended January 31, 2014 and 2013 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.












































4






INDEX TO UNAUDITED FINANCIAL STATEMENTS

 

 

 

Financial Statements of Bioshaft Water Technology, Inc.

 

 

 

 

 

Balance Sheets as of January 31, 2014 and April 30, 2013

F-1

 

 

 

 

Statements of Operations for the Three and Nine Months Ended January 31, 2014 and 2013

F-2

 

 

 

 

Statements of Cash Flows for the Nine Months Ended January 31, 2014 and 2013

F-3

 

 

 

 

Notes to the Financial Statements

F-4 - F-9

































5






BIOSHAFT WATER TECHNOLOGY, INC.

BALANCE SHEETS

(unaudited)

 

 

 

 

 

January 31,

 

April 30,

 

 

 

 

2014

 

2013

ASSETS

 

 

 

 

 

Current Assets

 

 

 

 

 

 

Cash

 

 

$

229,866

 

$

315,832

 

Accounts receivable, net

 

 

 

252,558

 

 

15,700

 

Prepaid expenses

 

 

 

114,534

 

 

-

Total Current Assets

 

 

 

596,958

 

 

331,532

 

 

 

 

 

 

 

 

 

Property and equipment, net

 

 

 

835

 

 

1,684

Deposits

 

 

 

1,000

 

 

3,248

 

 

 

 

 

 

 

 

 

TOTAL ASSETS

 

 

$

598,793

 

$

336,464

 

 

 

 

 

 

 

 

 

LIABILITIES AND STOCKHOLDERS' DEFICIT

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

LIABILITIES

 

 

 

 

 

 

 

Current Liabilities

 

 

 

 

 

 

 

 

Accounts payable and accrued expenses

 

 

$

1,221,396

 

$

777,165

 

Billings in excess of costs and estimated earnings
   on uncompleted projects

 

 

 

272,218

 

 

294,797

 

Accrued interest, net of discount of $0 and $229,787, respectively

 

 

439,257

 

 

151,864

 

Loans payable, net of debt discount of $602
  and $330,147 respectively

 

 

 

524,398

 

 

194,853

 

Derivative liability

 

 

 

-

 

 

-

TOTAL LIABILITIES

 

 

 

2,457,269

 

 

1,418,679

 

 

 

 

 

 

 

 

 

STOCKHOLDERS' DEFICIT

 

 

 

 

 

 

 

 

Preferred stock, $0.001 par value;
   25,000,000 shares authorized, none issued and outstanding

 

 

 

-

 

 

-

 

Common stock, $0.001 par value; 300,000,000 shares
   authorized, 108,911,170 issued and
   outstanding, respectively

 

 

 

108,911

 

 

108,911

 

Additional paid-in capital

 

 

 

19,539,747

 

 

19,509,633

 

Accumulated deficit

 

 

 

(21,507,134)

 

 

(20,700,759)

TOTAL STOCKHOLDERS' DEFICIT

 

 

 

(1,858,476)

 

 

(1,082,215)

 

 

 

 

 

 

 

 

 

TOTAL LIABILITIES AND STOCKHOLDERS' DEFICIT

 

$

598,793

 

$

336,464





See accompanying notes to financial statements

F-1






BIOSHAFT WATER TECHNOLOGY, INC.

STATEMENTS OF OPERATIONS

(unaudited)

 

 

 

 

 

For the Three

Months Ended

 

For the Three

Months Ended

 

For the Nine

Months Ended

 

For the Nine

Months Ended

 

 

 

 

January 31, 2014

 

January 31, 2013

 

January 31, 2014

 

January 31, 2013

 

 

 

 

 

 

 

 

 

 

 

REVENUES

 

 

 

 

 

 

 

 

 

 

Net revenue from projects

 

 

$

1,136,884

 

$

-

 

$

1,731,477

 

$

409,103

 

Net revenue (expense) from sale of products

 

 

 

-

 

 

-

 

 

-

 

 

(350)

TOTAL REVENUES

 

 

 

1,136,884

 

 

-

 

 

1,731,477

 

 

408,753

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

COST OF GOODS SOLD

 

 

 

786,385

 

 

2,442

 

 

1,260,222

 

 

284,673

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

GROSS PROFIT (LOSS)

 

 

 

350,499

 

 

(2,442)

 

 

471,255

 

 

124,080

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

OPERATING EXPENSES

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Selling, general, and administrative

 

 

 

103,707

 

 

120,585

 

 

307,094

 

 

350,372

 

Advertising, marketing, and promotions

 

 

 

965

 

 

50

 

 

6,759

 

 

6,568

 

Consulting fees

 

 

 

121,500

 

 

114,500

 

 

316,200

 

 

333,279

 

Depreciation

 

 

 

283

 

 

283

 

 

849

 

 

849

 

Stock-based compensation

 

 

 

9,475

 

 

13,122

 

 

30,114

 

 

99,098

TOTAL OPERATING EXPENSES

 

 

 

235,930

 

 

248,540

 

 

661,016

 

 

790,166

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

INCOME (LOSS) FROM OPERATIONS

 

 

 

114,569

 

 

(250,982)

 

 

(189,761)

 

 

(666,086)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

OTHER INCOME (EXPENSE)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Interest income (expense), net

 

 

 

(19,187)

 

 

(19,849)

 

 

(57,282)

 

 

(59,469)

 

Amortization of debt discount

 

 

 

(1,515)

 

 

-

 

 

(559,332)

 

 

(250,000)

 

Gain on settlement with ZAZ

 

 

 

-

 

 

-

 

 

-

 

 

130,996

 

Change in fair value of derivative liability

 

 

 

-

 

 

(259,203)

 

 

-

 

 

1,913,812

TOTAL OTHER INCOME (EXPENSE)

 

 

 

(20,702)

 

 

(279,052)

 

 

(616,614)

 

 

1,735,339

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

INCOME (LOSS) BEFORE PROVISION
   FOR INCOME TAXES

 

 

 

93,867

 

 

(530,034)

 

 

(806,375)

 

 

1,069,253

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

PROVISION FOR INCOME TAXES

 

 

 

-

 

 

-

 

 

-

 

 

-

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

NET INCOME (LOSS)

 

 

$

93,867

 

$

(530,034)

 

$

(806,375)

 

$

1,069,253

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

NET INCOME (LOSS) PER SHARE: BASIC

 

 

$

0.00

 

$

(0.01)

 

$

(0.01)

 

$

0.01

NET INCOME (LOSS) PER SHARE: DILUTED

 

 

$

0.00

 

$

(0.01)

 

$

(0.01)

 

$

0.01

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

WEIGHTED AVERAGE NUMBER OF
   SHARES OUTSTANDING:

 

 

 

 

 

 

 

 

 

 

 

 

 

BASIC

 

 

 

108,911,170

 

 

104,383,000

 

 

108,911,170

 

 

104,383,000

DILUTED

 

 

 

148,628,017

 

 

104,383,000

 

 

108,911,170

 

 

130,567,316






See accompanying notes to financial statements

F-2






BIOSHAFT WATER TECHNOLOGY, INC.

STATEMENTS OF CASH FLOWS

(unaudited)

 

 

 

 

 

 

 

For the Nine

Months Ended

 

For the Nine

Months Ended

 

 

January 31, 2014

 

January 31, 2013

 

 

 

 

 

CASH FLOWS FROM OPERATING ACTIVITIES

 

 

 

 

Net income (loss)

 

$

(806,375)

 

$

1,069,253

Adjustments to reconcile net income (loss) to net cash used
   for operating activities:

 

 

 

 

 

 

Depreciation expense

 

 

849

 

 

849

Amortization of debt and accrued interest discount

 

 

559,332

 

 

250,000

Stock-based compensation

 

 

30,114

 

 

99,098

Change in fair value derivative liability

 

 

-

 

 

(1,913,812)

Changes in operating assets and liabilities:

 

 

 

 

 

 

Accounts receivable

 

 

(236,858)

 

 

-

Prepaid expenses and deposits

 

 

(112,286)

 

 

(8)

Accounts payable and accrued expenses

 

 

444,231

 

 

196,816

Due to related party

 

 

-

 

 

(24,120)

Billings in excess of costs and estimated earnings
   on uncompleted projects

 

 

(22,579)

 

 

(38,416)

Accrued interest

 

 

57,606

 

 

59,548

Net cash used in operating activities

 

 

(85,966)

 

 

(300,792)

 

 

 

 

 

 

 

Change in cash during the period

 

 

(85,966)

 

 

(300,792)

Cash at beginning of period

 

 

315,832

 

 

303,568

Cash at end of period

 

$

229,866

 

$

2,776

 

 

 

 

 

 

 

SUPPLEMENTAL CASH FLOW INFORMATION

 

 

 

 

 

 

Cash paid for interest

 

$

-

 

$

-

Cash paid for income taxes

 

$

-

 

$

-















See accompanying notes to financial statements

F-3





BIOSHAFT WATER TECHNOLOGY, INC.

NOTES TO FINANCIAL STATEMENTS

(unaudited)


NOTE 1 - GENERAL ORGANIZATION AND BUSINESS


Bioshaft Water Technology, Inc. (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.


The accompanying financial statements have been prepared in conformity with generally accepted accounting principles in the United States of America, which contemplate continuation of the Company as a going concern. The Company has used cash flows from operations and incurred net losses of approximately $21,507,000 since inception.  The Company currently has limited liquidity, and does not yet have enough revenues sufficient to cover operating costs over an extended period of time.  If the Company is unable to obtain adequate capital, it could be forced to cease operations. These factors cause significant doubt regarding the Company to continue as a going concern.


Management anticipates that the Company will be dependent, for the foreseeable future, on additional investment capital to fund operating expenses. The Company intends to position itself so that it may be able to raise additional funds through the capital markets. In light of management’s efforts, there are no assurances that the Company will be successful in this or any of its endeavors or become financially viable and continue as a going concern.


The ability of the Company to continue as a going concern is dependent upon its ability to successfully accomplish the plans described in the preceding paragraph and eventually secure other sources of financing and attain profitable operations. The accompanying financial statements do not include any adjustments that might be necessary if the Company is unable to continue as a going concern.


NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING PRACTICES


Basis of Presentation


The accounting policies of the Company are in accordance with the accounting principles generally accepted in the United States of America and are presented in United States dollars (“USD”).  Outlined below are those policies considered particularly significant. The accompanying unaudited financial statements contain all adjustments (consisting only of normal recurring adjustments) which, in the opinion of management, are necessary to present fairly the financial position of the Company as of January 31, 2014, and the results of its operations and cash flows for the three and nine months ended January 31, 2014 and 2013. Certain information and footnote disclosures normally included in financial statements have been condensed or omitted pursuant to rules and regulations of the U.S. Securities and Exchange Commission. The Company believes that the disclosures in the unaudited financial statements are adequate to make the information presented not misleading.  The operating results of the Company on a quarterly basis may not be indicative of operating results for the full year.  For further information, refer to the financial statements and notes included in the Company’s Form 10-K for the year ended April 30, 2013.


Use of Estimates


The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities at the date of the financial statements and the reported amounts of revenue and expenses during the reporting period. Actual results could differ from those estimates.  






F-4






Fair Value of Financial Instruments


The Company follows accounting guidance issued by the Financial Accounting Standards Board (“FASB”) on “Fair Value Measurements” for assets and liabilities measured at fair value on a recurring basis.  The FASB defines fair value as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. Additionally, the FASB requires the use of valuation techniques that maximize the use of observable inputs and minimize the use of unobservable inputs.


The guidance also establishes a fair value hierarchy for measurements of fair value as follows:


Level 1:

Observable inputs such as quoted market prices in active markets for identical assets or liabilities.


Level 2:

Observable market-based inputs or unobservable inputs that are corroborated by market data.


Level 3:

Unobservable inputs for which there is little or no market data, which require the use of the reporting entity’s own assumptions.


Our company discloses the estimated fair value for all financial instruments for which it is practicable to estimate fair value. As of January 31, 2014 and April 30, 2013, the fair value of short-term financial instruments including cash, accounts receivable, accounts payable and accrued expenses, approximates book value due to their short-term maturity. The fair value of property and equipment is estimated to approximate its net book value. The fair value of debt obligations, other than convertible debt obligations approximates their face values due to their short-term maturities and/or the variable rates of interest associated with the underlying obligation.   


As of January 31, 2014 and April 30, 2013, the Company’s convertible loan payable of $500,000 was considered a level 2 liability.  


Basic Income (Loss) per Common Share


Basic income (loss) per common share is calculated by dividing the Company’s net income (loss) applicable to common shareholders by the weighted average number of common shares during the period. Diluted earnings per share is calculated by dividing the Company’s net income (loss) available to common shareholders by the diluted weighted average number of shares outstanding during the period. The diluted weighted average number of shares outstanding is the basic weighted number of shares adjusted for any potentially dilutive debt or equity.  Under the treasury stock method, the exercise price of an award, if any, the amount of compensation cost, if any, for future service that the Company has not yet recognized, and the estimated tax benefits that would be recorded in paid-in capital, if any, when an award is settled are assumed to be used to repurchase shares in the current period.  


The Company excluded 11,300,000 and 12,300,000 common stock equivalents which consisted of options outstanding as of January 31, 2014 and 2013, respectively, as their exercise prices were in excess of the average closing market price of the Company’s common stock, causing their effects to be anti-dilutive using the treasury stock method.  


The following is a summary of outstanding securities which have been included in the calculation of diluted net income per share and a reconciliation of net income to net income available to common stock holders for the three months ended January 31, 2014 and the nine months ended January 31, 2013:







F-5






 

 

For the Three

 

For the Nine

 

 

Months Ended

 

Months Ended

 

 

January 31, 2014

 

January 31, 2013

Weighted average common shares outstanding
 used in calculating basic earnings per share

 

 

108,911,170

 

 

104,383,000

Warrants

 

 

2,826,087

 

 

6,184,316

Convertible loans payable and accrued interest

 

 

36,890,760

 

 

20,000,000

Weighted average common and common equivalent shares used in calculating diluted earnings per share

 

 

148,628,017

 

 

130,567,316

 

 

 

 

 

 

 

Net income as reported

 

$

93,867

 

$

1,069,253

Add - Interest on convertible loans payable

 

 

19,202

 

 

56,712

Net income as adjusted

 

$

113,069

 

$

1,125,965


Revenue Recognition


The Company recognizes revenues from contracts on the percentage-of-completion method, measured by the percentage of cost incurred to date to estimated total cost for each contract. That method is used because management considers total cost to be the best available measure of progress on contracts. Because of inherent uncertainties in estimating costs, it is at least reasonably possible that the estimates used will change within the near term.


Contract costs include all direct material and labor costs and those indirect costs related to contract performance, such as indirect labor, supplies, tools, repairs, and depreciation. Selling, general, and administrative costs are charged to expense as incurred. Provisions for estimated losses on uncompleted contracts are made in the period in which such losses are determined. Changes in job performance, job conditions, and estimated profitability may result in revisions to costs and income, which are recognized in the period in which the revisions are determined. Changes in estimated job profitability resulting from job performance, job conditions, contract penalty provisions, claims, change orders, and settlements, are accounted for as changes in estimates in the current period. No profit is recognized on change orders until they have been approved by the customer.


The liability, “Billings in excess of costs and estimated earnings on uncompleted contracts”, represents billings in excess of revenues recognized.


New Accounting Pronouncements

 

The FASB issues Accounting Standard Updates (“ASUs”) to amend the authoritative literature in the Accounting Standards Codification (“ASC”). There have been a number of ASUs to date that amend the original text of ASC. The Company believes those issued to date either (i) provide supplemental guidance, (ii) are technical corrections, (iii) are not applicable to the Company or (iv) are not expected to have a significant impact on the Company.


NOTE 3 - LOANS PAYABLE


$500,000 Convertible Loan 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.  


On February 13, 2012, the terms of the loan were changed to reflect a conversion feature and extend the maturity date to August 11, 2012. The loan is convertible into shares of the Company’s common stock, up to 20,000,000, at a price of $0.025 per share.




F-6






The Company accounts for the fair value of the conversion feature in accordance with ASC 815-15 “Derivatives and Hedging; Embedded Derivatives” which requires the Company to bifurcate and separately account for the conversion features as an embedded derivative contained in the Company’s convertible loan. The Company is required to carry the embedded derivative on its balance sheet at fair value and account for any unrealized change in fair value as a component of results of operations. The Company valued the embedded derivative using the Black-Scholes pricing model. On February 13, 2012, the fair value of the conversion feature was recorded as a derivative liability and a discount to the convertible loan of $1,363,664 and $500,000, respectively.  


On March 6, 2013, the convertible note was modified to extend the maturity date to August 11, 2013, which as of the date of this filing is in default.  As consideration for the extension, 2,811,873 common shares of the Company’s common stock were issued to the lender.  The common shares were valued at $168,712 based on the closing market price of the Company's common stock on the date of the agreement. The modification qualified for extinguishment accounting whereby the former convertible note was considered extinguished and a new convertible note issued.  Accordingly, the derivative liability allocated with the extinguished convertible note no longer required liability accounting as the conversion price of the convertible note was fixed at $0.025 per share. Thus, the derivative liability was valued immediately before extinguishment, using the inputs noted below at March 6, 2013, with the remaining balance of $700,004 being charged to additional paid-in capital.  Because the terms of the modified note included a fixed conversion price and because the Company has an adequate number of common shares available to be issued to cover the conversion, no derivative liability was applicable.  


The Company allocated fair value of the common shares issued of $168,712 in connection with the new convertible note based on their relative fair value to the face value of the convertible note, which resulted in a discount of $126,147 being allocated to the common shares.  The new convertible note also contained a BCF due to the conversion price being below the fair market value of the Company's common stock on the date of issuance. The BCF was valued at $331,288, which resulted in a 100%, or $500,000, discount to the new convertible note.  The Company is amortizing the discount over the term of the new convertible note using the straight line method due to the short term nature of the note.  During the nine months ended January 31, 2014, the Company amortized $325,000 of the discount to interest expense. As of January 31, 2014 and April 30, 2013, the remaining debt discount on the note was $0 and $325,000, respectively.


In addition, with the agreement the accrued interest was now convertible at $0.025, the same rate as the new convertible note. At the date of the agreement, the conversion price was below the fair market value of the Company's common stock which implied a BCF. The BCF was valued at $353,519, which resulted in a 100% discount to accrued interest. The Company is amortizing the discount over the term of the new convertible note using the straight line method due to the short term nature of the note. During the nine months ended January 31, 2014, the Company amortized $229,787 of the discount to interest expense. As of January 31, 2014 and April 30, 2013, the remaining discount on accrued interest was $0 and $229,787, respectively.


Accrued interest related to this loan is $422,269 and $366,019 as of January 31, 2014 and April 30, 2013, respectively.


Prior to extinguishment on March 6, 2013, the derivative liability was revalued each reporting period using the Black-Scholes model. The Company estimated the fair value of the derivative liability using the Black-Scholes model on the January 31, 2013 reporting date using the following assumptions:


 

 

January 31, 2013

Exercise price

 

$0.025

Risk free interest rate

 

0.07%

Expected dividend yield

 

0%

Volatility

 

186%

Expected life of options

 

.03 years


During the nine months ended January 31, 2013, the Company recorded a gain on the change in fair value of derivative liability of $1,913,812.



F-7






$25,000 Loan Payable


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 was initially extended to September 6, 2012.  


On March 6, 2013, the secured loan payable was modified to extend the maturity date to March 6, 2014.  As consideration for the extension, 133,297 common shares of the Company’s common stock were issued to the lender.  The common shares were valued at $7,998 based on the closing market price of the Company's common stock on the date of the agreement. The modification qualified for extinguishment accounting whereby the former secured loan payable was considered extinguished and a new secured loan payable was issued.  


The Company allocated the common shares issued in connection with the news secured loan payable based on their relative fair value to the face value of the secured loan payable, which resulted in a discount of $6,059 being allocated to the secured loan payable. As of January 31, 2014, the Company recognized interest expense of $5,457 in connection with the amortization of the secured loan payable discount using the straight line method, with $602 remaining unamortized.  The unamortized portion will be fully recognized in fiscal 2014.  Accrued interest related to this loan was $16,988 and $15,632 as of January 31, 2014 and April 30, 2013, respectively.


NOTE 4 - STOCKHOLDERS’ DEFICIT


Authorized


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


Stock Options and Stock-Based Compensation


During the nine months ended January 31, 2014 and 2013, the Company recorded $30,144 and $99,098 in stock-based compensation, respectively. The Company expects to record $9,475 in additional stock-based compensation for the remainder of fiscal year ended April 30, 2014.


NOTE 5 - RELATED PARTY TRANSACTIONS


As of January 31, 2014, the Company has consulting contracts with three related parties for total annual compensation of $384,000. Total amounts due to these related parties as of January 31, 2014 and April 30, 2013 were $140,556 and $141,400, respectively. The amounts are included in accounts payable and accrued expenses on the accompanying balance sheet.


As of January 31, 2014 and April 30, 2013, a former officer and current shareholder of the Company is due $206,000 for prior consulting services performed which is included in accounts payable and accrued expenses on the accompanying balance sheets.  There were no payments made on this obligation during the nine months ended January 31, 2014.


As of January 31, 2014 and April 30, 2013, another consultant, shareholder and officer of the Company is due a net $171,966 which is included within accounts payable and accrued expenses on the accompanying balance sheet. There were no payments made on this obligation during the nine months ended January 31, 2014.


During the nine months ended January 31, 2013, the Company generated revenues of $248,060 from an entity controlled by a member of our board of directors.  




F-8






On October 15, 2012, the Company entered into a settlement agreement with Zuhier Ahmad Zahran & Co. ("ZAZ"). Under the terms of the agreement, the Company transferred the responsibility of all outstanding projects in which ZAZ was acting as the teaming partner to ZAZ. Addition, ZAZ obtained the right to distribute the Company's products for a period of two years. In connection with this transaction, the Company recorded a gain on ZAZ settlement of $130,996 which was the result of $24,000 in receivable from ZAZ and the relief of liabilities and deposits of $106,996, net of a $30,000 in accounts receivable from ZAZ. The Company recorded the transaction as other income and expense as the transaction is a one-time transaction and the Company intends to generate future revenues from ZAZ through the distribution of the Company's product.


NOTE 6 - SUBSEQUENT EVENTS


In accordance with ASC Topic 855-10, the Company has analyzed its operations subsequent to January 31, 2014 to the date these financial statements were issued, and has determined that it does not have any material subsequent events to disclose in these financial statements.








































F-9





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 "Bioshaft", "we", "us", "our" and "our company" mean Bioshaft Water Technology, Inc., a Nevada corporation, unless otherwise indicated.


Corporate History


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 111 West Ocean Blvd, 4th Floor, Long Beach, CA 90802 and our telephone number is (562) 216-8043.


Our Current Business


We are currently engaged in treating both industrial waste-water, primarily from the food and beverage sector and domestic waste-water where containerized/modular plants can be deployed on a permanent or temporary basis along with our technology’s ability to provide expansion (upgrade/retrofit) to existing domestic activated sludge wastewater plants worldwide.


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.


With the completion of the asset purchase agreement, we changed our business to the business of designing and manufacturing both industrial and domestic waste water treatment plant systems, using our patented Bioshaft unit - the Bioshaft System along with the development of our modular anoxic anaerobic digester (“MAAD”) technology used to treat the primarily high strength industrial wastewater.



5





On August 6, 2008, we entered into a loan agreement with Premier Financial and Marketing Co. Ltd., in respect of a loan in the amount of $500,000 at the rate of interest of 15% per annum payable in full on August 6, 2009. The loan was used for general working capital purposes.  The loan bears interest at the rate of 15% per annum with interest to be paid monthly in arrears on the last business day of each month, commencing August 31, 2008.  The principal and all accrued and unpaid interest was due to be paid in full on August 11, 2009. On March 6, 2013, Premier agreed to extend the loan agreement until August 11, 2013.  The loan remains unpaid and is currently in default. Our company is currently negotiating an extension with Premier.


On March 6, 2009, we entered a loan agreement with Premier pursuant to which Premier loaned our company $25,000 for the purposes of working capital. The loan bears interest at the rate of 15% per annum with interest to be paid monthly in arrears on the last business day of each month, commencing March 6, 2010. The principal and accrued interest were due on March 6, 2010.  On September 6, 2011, Premier agreed to extend the loan agreement until September 6, 2012. On March 6, 2013, Premier agreed to further extend the loan until March 6, 2014.


Effective February 23, 2012, we entered into an assignment of debt wherein we have agreed to accept $250,000 as consideration for the assignment of obligations under a loan agreement with Pedernales Brewing Company, LLC and Lee Hereford. Pursuant to the terms of the assignment of debt, we agreed to absolutely and unconditionally assign, transfer and set over all of our right, title and interest in and to the loan. Further to the terms, we have the right to repurchase the loan for the remaining principal balance plus unpaid interest.


Also on February 23, 2012, we entered into an amending agreement to a loan agreement and promissory note to modify the loan agreement and promissory note we originally entered into with Premier on August 6, 2008. The parties have agreed to amend the loan agreement to provide for a conversion feature. Pursuant to the amending agreement, any amounts outstanding under the loan are convertible at the price of $0.025 per share of common stock upon the provision of seven days’ notice by the lender.


As of April 30, 2012, our company agreed to a settlement with Imad A. Yassine, our chief operating officer, chief financial officer, secretary, treasurer and director, regarding his consulting fees for the period from May 1, 2011 through April 30, 2012. Mr. Yassine is to receive a monthly consulting fee of $15,000. The total consulting fees accrued during that period amount to $180,000 and were paid in accordance with a mutually agreed upon schedule and terms.

On October 15, 2012, we entered into an international distributor agreement with ZAZCo. Under the distributor agreement ZAZCo will assist our company in the promotion, sale, marketing and distribution of our products in the Kingdom of Saudi Arabia and any other mutually agreed upon countries for a period of two years.


On July 1, 2013, we entered into a consulting agreement with Canadian Environmental Designers Inc., a company operated by our director, Bashir Amin, to assist our company in marketing, sales and business development. Under the terms of the consulting agreement, Canadian Environmental Designers Inc. shall be paid by our company as per direct costs to the projects being worked on. Additionally special pre-approved expenses are invoiced and paid by our company within 30 days. The term of the consulting agreement is through June 30, 2014.


On July 1, 2013, we entered into a consulting agreement with Hydro E+, LLC to assist our company in corporate finance, marketing and business development matters. For its services, Hydro E+ received compensation of $7,000 on execution of the consulting agreement and will receive $7,000 every 30 days afterward. The term of the agreement is until June 30, 2014.

 

On February 1, 2014, Mr. Walter J. Zurawick Jr. resigned as President, Chief Executive Officer, and as a director of our company.  Mr. Zurawick’s resignation was not the result of any disagreement with our company regarding our operations, policies, practices or otherwise.  Subsequent to Mr. Zurawick’s resignation, we entered into a consulting agreement with Walter Zurawick for marketing and business development services. As compensation, we have agreed to pay Mr. Zurawick $5,000 per month, compensation to be payable in arrears with our company’s payroll following the completion of each month during the term and will be prorated on a daily basis for partial months based on a 30 day calendar month. Our company shall also provide Mr. Zurawick with a commission of 3% of gross proceeds we receive from sales leads identified prior to February 1, 2014, or 5% of gross proceeds we receive from sales leads identified after February 1, 2014.  Mr. Zurawick shall also be compensated for overhead expenses pursuant to the terms of the agreement.  The term of the agreement is effective February 1, 2014 on a month to month basis. The consulting agreement replaces all previous agreements between our company and Mr. Zurawick.

6






Effective February 1, 2014, we entered into a consulting agreement with Sustainable Water Corp., a company operated by our officer and director, Imad A. Yassine in his capacity as a consultant, and as chief operating officer and chief financial officer of our company.  Under the terms of the consulting agreement, Sustainable Water Corp. will receive a monthly consulting fee of $15,000. The term of this agreement is for a period of two years, expiring on January 31, 2006.


Results of Operations


Three Months Summary


 

 

Three Months Ended

 

 

 

January 31,

 

 

 

2014

 

 

2013

 

Total revenue

$

1,136,884

 

$

Nil

 

 

 

 

 

 

 

 

Cost of goods sold

 

786,385

 

 

2,442

 

Total operating expenses

 

235,930

 

 

248,540

 

Total other income (expense)

 

(20,702)

 

 

(279,052)

 

Net income (loss)

$

93,867

 

$

(530,034)

 


Nine Months Summary


 

 

Nine Months Ended

 

 

 

January 31,

 

 

 

2014

 

 

2013

 

Total revenue

$

1,731,477

 

$

408,753

 

 

 

 

 

 

 

 

Cost of goods sold

 

1,260,222

 

 

284,673

 

Total operating expenses

 

661,016

 

 

790,166

 

Total other income (expense)

 

(616,614)

 

 

1,735,339

 

Net income (loss)

$

(806,375)

 

$

1,069,253

 


Revenue


We have earned revenue of $1,136,884 and $1,731,477 during three and nine month periods ended January 31, 2014 as compared with revenue of $Nil and $408,753 during the three and nine months ended January 31, 2013.  The increase in revenues during the current year is a result of the Company expanding its domestic and international distributors who have increased the number of projects.











7






Expenses


 

 

Three Months Ended

 

 

 

January 31,

 

 

 

2014

 

 

2013

 

Gross profit (loss)

$

350,499

 

$

(2,442)

 

 

 

 

 

 

 

 

Selling, general and administrative

 

103,707

 

 

120,585

 

Advertising, marketing and promotions

 

965

 

 

50

 

Consulting fees

 

121,500

 

 

114,500

 

Depreciation

 

283

 

 

283

 

Stock-based compensation expense

 

9,475

 

 

13,122

 

Income (loss) from operations

$

114,569

 

$

(250,982)

 

 

 

 

 

 

 

Nine Months Ended

 

 

 

January 31,

 

 

 

2014

 

 

2013

 

Gross profit

$

471,255

 

$

124,080

 

 

 

 

 

 

 

 

Selling, general and administrative

 

307,094

 

 

350,372

 

Advertising, marketing and promotions

 

6,759

 

 

6,568

 

Consulting fees

 

316,200

 

 

333,279

 

Depreciation

 

849

 

 

849

 

Stock-based compensation expense

 

30,114

 

 

99,098

 

Loss from operations

$

(189,761)

 

$

(666,086)

 


Total operating expenses during the three months ended January 31, 2014 decreased as compared to the comparative period in 2013 primarily due to decreases in selling, general and administrative expenses and stock-based compensation expenses.


Total operating expenses during the nine months ended January 31, 2014 decreased as compared to the comparative period in 2013 primarily due to decreases in selling, general and administrative expenses, consulting fees, and stock-based compensation expenses.


Liquidity and Financial Condition


Working Capital


As of January 31, 2014, our total current assets were $596,958 and our total current liabilities were $2,457,269 and we had a working capital deficit of $1,860,311.


 

 

January 31,

 

 

April 30,

 

 

 

2014

 

 

2013

 

Current assets

$

596,958

 

$

331,532

 

Current liabilities

$

2,457,269

 

$

1,418,679

 

Working capital deficit                                       

$

(1,860,311)

 

$

(1,087,147)

 







8






Cash Flows


 

 

Nine Months Ended

 

 

 

January 31,

 

 

 

2014

 

 

2013

 

Net cash flows (used in) operating activities

$

(85,966)

 

$

(300,792)

 

Net cash flows provided by (used in) investing activities

 

Nil

 

 

Nil

 

Net cash flows provided by (used in) financing activities

 

Nil

 

 

Nil

 

Net (decrease) in cash during period

$

(85,966)

 

$

(300,792)

 


Future Financing


We have recently had significant increases in revenues and accounts receivable, however, the continuance of such cannot be assured.  If revenues were to decrease, we would have significant difficulty sustaining our operations without additional support.  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 maintain profitable operations.


Management believes that our cash on hand, cash equivalents, and any cash revenue provided by our operating activities will be insufficient 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.


Plan of Operation


During the next twelve month period, we intend to:


(a)

penetrate the waste water treatment industry worldwide by stressing the cost advantages and space saving capabilities of the Bioshaft System;


(b)

build up a network of strategic alliances with several types of companies, including contractors that specialize in the construction of water treatment plants, engineering firms that work with municipalities and firms that specialize in “build own operate” project utilities;


(c)

form a partnership with a Chinese manufacturer that we can outsource to, and fabricate up to 2 Bioshaft units per month within the first 3 months;


(d)

implement our pilot project in Southern California where we will setup and operate a packaged unit in order to complete the municipal permitting process for the California commission on environmental quality; and


(e)

fill the positions of vice president of marketing and three sales engineers.



9





Not accounting for our working capital deficit of $1,860,311, we have estimated that we will require an additional $1,500,000 based on our projected cash flow from existing and future revenues to carry out our business plan for the next twelve months. In the event we do not have the funds necessary to cover our projected operating expenses for the next twelve month period, we may be required to raise additional funds through the issuance of equity securities, through loans or through debt financing. There can be no assurance that we will be successful in raising any required capital or that actual cash requirements will not exceed our estimates. We intend to fulfill any additional cash requirement through the sale of our equity securities.


If we are not able to obtain the additional financing on a timely basis, if and when it is needed, we will be forced to scale down or perhaps even cease the operation of our business.


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 sales and marketing and three sales engineers. We plan to employ these resources within the next 12 months. We anticipate that we may spend up to $260,000 to non-executive officers and employees and up to $50,000 in payroll taxes. We do and will continue to outsource contract employment as needed.


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.


Critical Accounting Policies  


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.


Basis of Presentation


The accounting policies of our company are in accordance with the accounting principles generally accepted in the United States of America and are presented in United States dollars (“USD”).  Outlined below are those policies considered particularly significant. The accompanying unaudited financial statements contain all adjustments (consisting only of normal recurring adjustments) which, in the opinion of management, are necessary to present fairly the financial position of our company as of January 31, 2014, and the results of its operations and cash flows for the three and nine months ended January 31, 2014 and 2013. Certain information and footnote disclosures normally included in financial statements have been condensed or omitted pursuant to rules and regulations of the U.S. Securities and Exchange Commission. Our company believes that the disclosures in the unaudited financial statements are adequate to make the information presented not misleading.  The operating results of our company on a quarterly basis may not be indicative of operating results for the full year.  For further information, refer to the financial statements and notes included in our company’s Form 10-K for the year ended April 30, 2013.





10






Use of Estimates


The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities at the date of the financial statements and the reported amounts of revenue and expenses during the reporting period. Actual results could differ from those estimates.


Fair Value of Financial Instruments


Our company follows accounting guidance issued by the Financial Accounting Standards Board (“FASB”) on “Fair Value Measurements” for assets and liabilities measured at fair value on a recurring basis.  The FASB defines fair value as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. Additionally, the FASB requires the use of valuation techniques that maximize the use of observable inputs and minimize the use of unobservable inputs.


The guidance also establishes a fair value hierarchy for measurements of fair value as follows:


Level 1:

Observable inputs such as quoted market prices in active markets for identical assets or liabilities.


Level 2:

Observable market-based inputs or unobservable inputs that are corroborated by market data.


Level 3:

Unobservable inputs for which there is little or no market data, which require the use of the reporting entity’s own assumptions.


Our company discloses the estimated fair value for all financial instruments for which it is practicable to estimate fair value. As of January 31, 2014 and April 30, 2013, the fair value of short-term financial instruments including cash, accounts receivable, accounts payable and accrued expenses, approximates book value due to their short-term maturity. The fair value of property and equipment is estimated to approximate its net book value. The fair value of debt obligations, other than convertible debt obligations approximates their face values due to their short-term maturities and/or the variable rates of interest associated with the underlying obligation.


As of January 31, 2014 and April 30, 2013, our company’s convertible loan payable of $500,000 was considered a level 2 liability.


Basic Income (Loss) per Common Share


Basic income (loss) per common share is calculated by dividing our company’s net income (loss) applicable to common shareholders by the weighted average number of common shares during the period. Diluted earnings per share is calculated by dividing our company’s net income (loss) available to common shareholders by the diluted weighted average number of shares outstanding during the period. The diluted weighted average number of shares outstanding is the basic weighted number of shares adjusted for any potentially dilutive debt or equity.  Under the treasury stock method, the exercise price of an award, if any, the amount of compensation cost, if any, for future service that our company has not yet recognized, and the estimated tax benefits that would be recorded in paid-in capital, if any, when an award is settled are assumed to be used to repurchase shares in the current period.  


Our company excluded 11,300,000 and 12,300,000 common stock equivalents which consisted of options outstanding as of January 31, 2014 and 2013, respectively, as their exercise prices were in excess of the average closing market price of our company’s common stock, causing their effects to be anti-dilutive using the treasury stock method.  




11






The following is a summary of outstanding securities which have been included in the calculation of diluted net income per share and a reconciliation of net income to net income available to common stock holders for the three months ended January 31, 2014 and the nine months ended January 31, 2013:


 

 

For the Three

 

For the Nine

 

 

Months Ended

 

Months Ended

 

 

January 31, 2014

 

January 31, 2013

Weighted average common shares outstanding
 used in calculating basic earnings per share

 

 

108,911,170

 

 

104,383,000

Warrants

 

 

2,826,087

 

 

6,184,316

Convertible loans payable and accrued interest

 

 

36,890,760

 

 

20,000,000

Weighted average common and common equivalent shares used in calculating diluted earnings per share

 

 

148,628,017

 

 

130,567,316

 

 

 

 

 

 

 

Net income as reported

 

$

93,867

 

$

1,069,253

Add - Interest on convertible loans payable

 

 

19,202

 

 

56,712

Net income as adjusted

 

$

113,069

 

$

1,125,965


Revenue Recognition


Our company recognizes revenues from contracts on the percentage-of-completion method, measured by the percentage of cost incurred to date to estimated total cost for each contract. That method is used because management considers total cost to be the best available measure of progress on contracts. Because of inherent uncertainties in estimating costs, it is at least reasonably possible that the estimates used will change within the near term.


Contract costs include all direct material and labor costs and those indirect costs related to contract performance, such as indirect labor, supplies, tools, repairs, and depreciation. Selling, general, and administrative costs are charged to expense as incurred. Provisions for estimated losses on uncompleted contracts are made in the period in which such losses are determined. Changes in job performance, job conditions, and estimated profitability may result in revisions to costs and income, which are recognized in the period in which the revisions are determined. Changes in estimated job profitability resulting from job performance, job conditions, contract penalty provisions, claims, change orders, and settlements, are accounted for as changes in estimates in the current period. No profit is recognized on change orders until they have been approved by the customer.


The liability, “Billings in excess of costs and estimated earnings on uncompleted contracts”, represents billings in excess of revenues recognized.


Recent Accounting Pronouncements


The FASB issues Accounting Standard Updates (“ASUs”) to amend the authoritative literature in the Accounting Standards Codification (“ASC”). There have been a number of ASUs to date that amend the original text of ASC. Our company believes those issued to date either (i) provide supplemental guidance, (ii) are technical corrections, (iii) are not applicable to our company or (iv) are not expected to have a significant impact on our company.


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.





12






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


During the period covered by this report there were no changes in our internal control over financial reporting that materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.




























13






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


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


Item 2.

Unregistered Sales of Equity Securities and Use of Proceeds


None.


Item 3.

Defaults Upon Senior Securities


None.


Item 4.

Mine Safety Disclosures


Not applicable.


Item 5.

Other Information


On February 1, 2014, Mr. Walter J. Zurawick Jr. resigned as president, chief executive officer, and as a director of our company. Mr. Zurawick’s resignation was not the result of any disagreement with our company regarding our operations, policies, practices or otherwise.


Concurrently, we appointed Mr. Bashar Amin, a director of our company, as president and chief executive officer of our company.


Item 6.

Exhibits


Exhibit Number

Description

(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)

 

 





14






Exhibit Number

Description

(10)

Material Contracts

10.1

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)

10.2

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)

10.3

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)

10.4

Loan Agreement made as of August 6, 2008 between our company and Premier Financial and Marketing Co. Ltd. (incorporated by reference from our Quarterly Report on Form 10-Q filed on September 12, 2008)

10.5

Form of Promissory Note made as of August 6, 2008 between our company and Premier Financial and Marketing Co. Ltd. (incorporated by reference to our Current Report on Form 8-K filed on August 19, 2008)

10.6

General Security Agreement made as of August 6, 2008 between our company and Premier Financial and Marketing Co. Ltd. (incorporated by reference to our Current Report on Form 8-K filed on August 19, 2008)

10.7

Loan Agreement made as of March 6, 2009 between our company and Premier Financial and Marketing Co. Ltd. (incorporated by reference to our Quarterly Report on Form 10-Q filed on September 14, 2012)

10.8

Form of Promissory Note Agreement made as of March 6, 2009 between our company and Premier Financial and Marketing Co. Ltd. (incorporated by reference to our Quarterly Report on Form 10-Q filed on December 16, 2013)

10.9

General Security Agreement made as of March 6, 2009 between our company and Premier Financial and Marketing Co. Ltd. (incorporated by reference to our Quarterly Report on Form 10-Q filed on December 16, 2013)

10.10

Stock Option Agreement made as of August 2, 2011 between our company and Walter Zurawick (incorporated by reference from our Quarterly Report on Form 10-Q filed on September 19, 2011)

10.11

Stock Option Agreement made as of August 15, 2011 between our company and Canadian Environmental Consulting (incorporated by reference from our Quarterly Report on Form 10-Q filed on September 19, 2011)

10.12

Amending Agreement dated February 23, 2012 between our company and Premier Financial Marketing Co. Ltd. (incorporated by reference from our Current Report on Form 8-K filed on March 7, 2012)

10.13

Assignment Agreement made as of February 23, 2012 between our company and Six Capital Limited (incorporated by reference from our Current Report on Form 8-K filed on March 7, 2012)

10.14

Non-Disclosure Agreement made as of July 1, 2012 between our company and Canadian Environmental Designers, Inc. (incorporated by reference to our Quarterly Report on Form 10-Q filed on September 14, 2012)

10.15

International Distribution Agreement made as of October 15, 2012 between our company and Zuhier Ahmad Zahran & Co. (incorporated by reference to our Quarterly Report on Form 10-Q filed on December 21, 2012)





15






Exhibit Number

Description

10.16

Consulting Agreement made as of July 1, 2013 between our company and Hydro E+, LLC (incorporated by reference to our Quarterly Report on Form 10-Q filed on September 23, 2013)

10.17

Consulting Agreement made as of July 1, 2013 between our company and Canadian Environmental Designers, Inc. (incorporated by reference to our Quarterly Report on Form 10-Q filed on September 23, 2013)

10.18*

Consulting Agreement made as of February 1, 2014 between our company and Walter Zurawick

10.19*

Consulting Agreement made as of February 1, 2014 between our company and Sustainable Water Corp.

(14)

Code of Ethics

14.1

Code of Ethics and Business Conduct dated effective July 1, 2008 (incorporated from our Annual Report on Form 10-KSB/A filed on August 14, 2008)

(31)

Rule 13a-14(a)/15d-14(a) Certifications

31.1*

Section 302 Certification under Sarbanes-Oxley Act of 2002 of Principal Executive Officer

31.2*

Section 302 Certification under Sarbanes-Oxley Act of 2002 of Principal Financial Officer and Principal Accounting Officer

(32)

Section 1350 Certifications

32.1*

Section 906 Certification under Sarbanes-Oxley Act of 2002 of Principal Executive Officer

32.2*

Section 906 Certification under Sarbanes-Oxley Act of 2002 of Principal Financial Officer and Principal Accounting Officer

(101)**

Interactive Data File  

101.INS

XBRL Instance Document

101.SCH

XBRL Taxonomy Extension Schema Document

101.CAL

XBRL Taxonomy Extension Calculation Linkbase Document

101.DEF

XBRL Taxonomy Extension Definition Linkbase Document

101.LAB

XBRL Taxonomy Extension Label Linkbase Document

101.PRE

XBRL Taxonomy Extension Presentation Linkbase Document


*

Filed herewith.

**

Filed herewith. Pursuant to Rule 406T of Regulation S-T, the Interactive Data Files on Exhibit 101 are deemed not filed or part of any registration statement or prospectus for purposes of Sections 11 or 12 of the Securities Act of 1933, are deemed not filed for purposes of Section 18 of the Securities and Exchange Act of 1934, and otherwise are not subject to liability under those sections.



















16






SIGNATURES

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

 

 

 

 

 

 

BIOSHAFT WATER TECHNOLOGY, INC.

 

 

 

 

 

 

Date:  March 14, 2014

By:

/s/ Bashar Amin

 

 

Bashar Amin

 

 

President, Chief Executive Officer and Director

 

 

(Principal Executive Officer)

 

 

 

 

 

 

Date:  March 14, 2014

By:

/s/ Imad Kamel Yassine

 

 

Imad Kamel Yassine

 

 

Chief Operating Officer, Chief Financial Officer, Secretary, Treasurer and Director

 

 

(Principal Financial Officer and Principal Accounting Officer)































17