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EXCEL - IDEA: XBRL DOCUMENT - BIOSHAFT WATER TECHNOLOGY, INC.Financial_Report.xls
10-Q/A - AMENDED QUARTERLY REPORT - BIOSHAFT WATER TECHNOLOGY, INC.bshf_10qa.htm
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EX-31.2 - CERTIFICATION - BIOSHAFT WATER TECHNOLOGY, INC.bshf_ex312.htm
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v2.4.0.6
SUMMARY OF SIGNIFICANT ACCOUNTING PRACTICES
3 Months Ended
Jul. 31, 2012
Notes  
SUMMARY OF SIGNIFICANT ACCOUNTING PRACTICES

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 July 31, 2012, and the results of its operations and cash flows for the three months ended July 31, 2012 and 2011. 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, 2012.

 

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

 

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 July 31, 2012 and April 30, 2012, 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 July 31, 2012 and April 30, 2012, the Company’s convertible loan payable of $500,000 and $250,000, and the Company’s derivative liability of $820,011 and $2,713,933, respectively were considered level 2 liabilities. 

 

Basic Loss per Common Share

 

Basic loss per share is calculated by dividing the Company’s net 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 loss available to common shareholders by the diluted weighted average number of shares outstanding during the year. 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 13,300,000 and 7,100,000 common stock equivalents outstanding as of July 31, 2012 and 2011, 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 reconciliation of net income to net income available to common stock holders for the three months ended July 31, 2012:

 

.

 

For the Three

Months

Ended

July 31, 2012

 

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

 

 

104,383,000

 

Warrants

 

 

6,947,147

 

Effect of conversion feature on loans payable

 

 

20,000,000

 

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

 

 

131,330,147

 

 

 

 

 

 

Net income as reported

 

$

1,360,407

 

Add - Interest on convertible loans payable

 

 

18,904

 

Net income available to common stockholders

 

$

1,379,311

 

 

 

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.