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UNITED STATESSECURITIES AND EXCHANGE COMMISSIONWASHINGTON, D.C.
20549

FORM 10-Q

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

For the quarterly period ended March 31, 2010

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

For the transition period from _________to ________

Commission File No. 000-53871

FRESHWATER TECHNOLOGIES,
INC.(Exact name of registrant as specified in its
charter)

|Nevada                                                               | 98-0508360                          
|-------------------------------------------------------------------- | ------------------------------------
|(State or other jurisdiction of incorporation or
      organization) | (I.R.S. Employer Identification No.)

30 Denver Crescent, Suite 200, Toronto, Ontario, Canada
M2J 1G8(Address of principal executive offices) (Zip Code)

(416) 490-0254(Registrants telephone number,
including area code)

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

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

Indicate by check mark whether the registrant 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 smaller
reporting company. See 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 [ ]                     | Smaller reporting company [ x ]
|(Do not check if a smaller reporting company) |                                

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2

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

APPLICABLE ONLY TO CORPORATE ISSUERS

As of May 14, 2010, there were 189,120,000 shares of common
stock, par value $0.001, outstanding.

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3

PART I  FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS.

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4

|Freshwater Technologies, Inc.   
|--------------------------------
|(formerly HMI Technologies Inc.)
|(A Development Stage Company)   
|                                
|March 31, 2010                  

|                                  | Index
|--------------------------------- | -----
|                                  |      
|Balance Sheets                    | F-1  
|Statements of Operations          | F-2  
|Statements of Cash Flows          | F-3  
|Notes to the Financial Statements | F-4  

---

|Freshwater Technologies, Inc.
|-----------------------------
|(A Development Stage Company)
|Balance Sheets               
|(expressed in U.S. dollars)  

|                                                                                                                                                                                     |  | March 31,  |   |  | December 31, |  
|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------ |  | ---------- | - |  | ------------ | -
|                                                                                                                                                                                     |  | 2010       |   |  | 2009         |  
|                                                                                                                                                                                     |  | $          |   |  | $            |  
|ASSETS                                                                                                                                                                               |  |            |   |  |              |  
|Current Assets                                                                                                                                                                       |  |            |   |  |              |  
|Cash                                                                                                                                                                                 |  | 578        |   |  | 226          |  
|Receivables                                                                                                                                                                          |  | 1,791      |   |  | 1,791        |  
|Inventory                                                                                                                                                                            |  | 122,211    |   |  | 122,211      |  
|Prepaid
      consulting fees                                                                                                                                                        |  | 179,667    |   |  |             |  
|Total Current Assets                                                                                                                                                                 |  | 304,247    |   |  | 124,228      |  
|Intangible Assets
      (Notes 2(l) and 4(d))                                                                                                                                        |  | 282,506    |   |  | 367,542      |  
|Total Assets                                                                                                                                                                         |  | 586,753    |   |  | 491,770      |  
|                                                                                                                                                                                     |  |            |   |  |              |  
|LIABILITIES AND STOCKHOLDERS EQUITY (DEFICIT)                                                                                                                                       |  |            |   |  |              |  
|Current Liabilities                                                                                                                                                                  |  |            |   |  |              |  
|Accounts payable                                                                                                                                                                     |  | 120,889    |   |  | 98,585       |  
|Accrued liabilities                                                                                                                                                                  |  | 7,037      |   |  | 7,037        |  
|Loan payable (Note 8)                                                                                                                                                                |  | 41,000     |   |  |             |  
|Due to related parties (Note 3(b))                                                                                                                                                   |  | 145,743    |   |  | 107,303      |  
|Total Liabilities                                                                                                                                                                    |  | 314,669    |   |  | 212,925      |  
|Commitments and Contingencies (Notes 1, 3(a)
      and 6)                                                                                                                            |  |            |   |  |              |  
|Subsequent Events (Note 9)                                                                                                                                                           |  |            |   |  |              |  
|Stockholders Equity (Deficit)                                                                                                                                                       |  |            |   |  |              |  
|Class A Common Stock (Notes 4 and 5) 
      Authorized: 300,000,000 common shares, with a par value of $0.001 
      Issued and outstanding: 180,120,000 shares (2009  152,120,000) |  | 180,120    |   |  | 152,120      |  
|Class B Common Stock 
      Authorized: 100,000,000 common shares, with a par value of $0.001 
      Issued and outstanding: none                                                    |  |           |   |  |             |  
|Additional Paid-in Capital (Notes 4 and 5)                                                                                                                                           |  | 1,820,662  |   |  | 1,371,436    |  
|Class A Common Stock Issuable (Note 4(d))                                                                                                                                            |  |           |   |  | 251,339      |  
|Deficit Accumulated
      During the Development Stage                                                                                                                               |  | (1,728,698 | ) |  | (1,496.050   | )
|Total Stockholders Equity (Deficit)                                                                                                                                                 |  | 272,084    |   |  | 278,845      |  
|Total Liabilities
      and Stockholders Equity (Deficit)                                                                                                                           |  | 586,753    |   |  | 491,770      |  

(The accompanying notes are an integral part of these financial
  statements)

---

|Freshwater Technologies, Inc.
|-----------------------------
|(A Development Stage Company)
|Statements of Operations     
|(expressed in U.S. dollars)  
|(unaudited)                  

|                                             |  | Accumulated from       |   |  | Three Months |   |  | Three Months |  
|-------------------------------------------- |  | ---------------------- | - |  | ------------ | - |  | ------------ | -
|                                             |  | January 21, 2005       |   |  | Ended        |   |  | Ended        |  
|                                             |  | (Date of Inception) to |   |  | March 31,    |   |  | March 31,    |  
|                                             |  | March 31, 2010         |   |  | 2010         |   |  | 2009         |  
|                                             |  | $                      |   |  | $            |   |  | $            |  
|                                             |  |                        |   |  |              |   |  |              |  
|                                             |  |                        |   |  |              |   |  |              |  
|Revenue                                      |  | 477,178                |   |  | 220          |   |  | 130          |  
|Cost of Sales                                |  | 214,951                |   |  | 133          |   |  | 88           |  
|Gross Profit                                 |  | 262,227                |   |  | 87           |   |  | 42           |  
|                                             |  |                        |   |  |              |   |  |              |  
|Expenses                                     |  |                        |   |  |              |   |  |              |  
|Amortization of intangible assets            |  | 407,225                |   |  | 85,035       |   |  | 40,068       |  
|Consulting (Note 3(a))                       |  | 256,000                |   |  | 9,000        |   |  | 9,000        |  
|General and administrative                   |  | 177,889                |   |  | 42,077       |   |  | 4,941        |  
|Imputed interest (Note 3(b))                 |  | 109,108                |   |  | 1,887        |   |  | 2,928        |  
|Marketing and sales (Note 3(a))              |  | 553,996                |   |  | 67,536       |   |  | 52,589       |  
|Professional fees                            |  | 218,788                |   |  | 30,550       |   |  | 22,478       |  
|Bad debts expense (recovery)                 |  | 361,728                |   |  | (3,350       | ) |  | (31,042      | )
|Commision Expense                            |  | 5,900                  |   |  |             |   |  |             |  
|Total Expenses                               |  | 2,090,634              |   |  | 232,735      |   |  | 100,962      |  
|Net Loss From Operations                     |  | (1,828,407             | ) |  | (232,648     | ) |  | (100,920     | )
|Other Income                                 |  |                        |   |  |              |   |  |              |  
|Gain on settlement of debt                   |  | 99,709                 |   |  |             |   |  |             |  
|Net Loss                                     |  | (1,728,698             | ) |  | (232,648     | ) |  | (100,920     | )
|                                             |  |                        |   |  |              |   |  |              |  
|Net Loss Per Share
       Basic and Diluted |  |                        |   |  |             |   |  |             |  
|                                             |  |                        |   |  |              |   |  |              |  
|Weighted Average Shares
      Outstanding    |  |                        |   |  | 171,098,000  |   |  | 109,795,000  |  

(The accompanying notes are an integral part of these financial
  statements)

---

|Freshwater Technologies, Inc.
|-----------------------------
|(A Development Stage Company)
|Statements of Cash Flows     
|(expressed in U.S. dollars)  
|(unaudited)                  

|                                                                                      |  | Three     |   |  | Three    |  
|------------------------------------------------------------------------------------- |  | --------- | - |  | -------- | -
|                                                                                      |  | Months    |   |  | Months   |  
|                                                                                      |  | Ended     |   |  | Ended    |  
|                                                                                      |  | March 31, |   |  | March 31 |  
|                                                                                      |  | 2010      |   |  | 2009     |  
|                                                                                      |  | $         |   |  | $        |  
|Operating Activities                                                                  |  |           |   |  |          |  
|Net loss                                                                              |  | (232,648  | ) |  | (100,920 | )
|Adjustments to reconcile net loss to net cash
      provided by operating activities: |  |           |   |  |          |  
|Amortization of intangible assets                                                     |  | 85,036    |   |  | 40,068   |  
|Donated costs                                                                         |  |          |   |  |         |  
|Imputed interest                                                                      |  | 1,887     |   |  | 2,928    |  
|Forgiveness of debt                                                                   |  |          |   |  |         |  
|Non cash consulting costs                                                             |  | 44,333    |   |  |         |  
|Changes in operating assets and liabilities:                                          |  |           |   |  |          |  
|Accounts receivable                                                                   |  |          |   |  |         |  
|Other receivables                                                                     |  |          |   |  | (4,869   | )
|Inventory                                                                             |  |          |   |  | (7,514   | )
|Prepaid expenses                                                                      |  |          |   |  |         |  
|Accounts payable and accrued liabilities                                              |  | 22,304    |   |  | 17,120   |  
|Due to related parties                                                                |  | 18,000    |   |  | 18,000   |  
|Net Cash Provided
      (Used) By Operating Activities                                |  | (61,088   | ) |  | (35,187  | )
|Financing Activities                                                                  |  |           |   |  |          |  
|Loan payable                                                                          |  | 41,000    |   |  |         |  
|Advances from related parties                                                         |  | 21,340    |   |  | 42,051   |  
|Repayments
      to related parties                                                   |  | (900      | ) |  | (4,900   | )
|Net Cash Provided (Used) By Financing Activities                                      |  | 61,440    |   |  | 37,151   |  
|Increase (Decrease) in Cash                                                           |  | 352       |   |  | 1,964    |  
|Cash  Beginning of Period                                                            |  | 226       |   |  | 160      |  
|Cash  End of
      Period                                                            |  | 578       |   |  | 2,124    |  
|                                                                                      |  |           |   |  |          |  
|Non-cash Investing and Financing Activities:                                          |  |           |   |  |          |  
|Issuance of shares of common stock for intangible
      
      assets                 |  |          |   |  | 450,000  |  
|Issuance of shares
      of common stock for consulting contracts                     |  | 224,000   |   |  |         |  
|                                                                                      |  |           |   |  |          |  
|Supplemental Disclosures                                                              |  |           |   |  |          |  
|                                                                                      |  |           |   |  |          |  
|Interest paid                                                                         |  |          |   |  |         |  
|Income
      tax paid                                                                 |  |          |   |  |         |  

(The accompanying notes are an integral part of these financial
  statements)

---

|Freshwater Technologies Inc.     
|---------------------------------
|(A Development Stage Company)    
|Notes to the Financial Statements
|March 31, 2010                   
|(expressed in U.S. dollars)      
|(unaudited)                      

|1. | Nature of Operations and Continuance of Business                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
|-- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
|   | On January 1, 2006 Freshwater Technologies
        Inc. (formerly HMI Technologies Inc.) (HMI) entered into an
        Asset Acquisition Agreement to acquire the business of Freshwater Technologies
        (Freshwater). HMI was incorporated in the State of Nevada,
        U.S.A. on December 10, 1999. Its principal business now involves the distribution
        and marketing of drinking water products and water activation products.
        HMI is a Development Stage Company, as defined by Financial Accounting
        Standards Board (FASB) Accounting Standards Codification (ASC)
        915, Development Stage Entities. Effective January 1, 2006,
        the acquisition of the Freshwater business was completed through the issuance
        of 80,000,000 split-adjusted restricted shares of common stock, and as
        a result, the former owners of the Freshwater business owned approximately
        79% of the outstanding common stock of HMI.                                                                                                                                                                                                                                                                                                                                                                                                                                                   
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
|   | Prior to the acquisition of Freshwater, HMI
        was a non-operating shell company with nominal net assets. The acquisition
        was a capital transaction in substance and therefore has been accounted
        for as a recapitalization, which is outside the scope of ASC 805 Business
        Combinations. Under recapitalization accounting, Freshwater
        is considered the acquirer for accounting and financial reporting purposes,
        and acquired the assets and assumed the liabilities of HMI. Assets acquired
        and liabilities assumed are reported at their historical amounts. These
        financial statements include the accounts of HMI since the effective date
        of the recapitalization (January 1, 2006) and the historical accounts
        of the business of Freshwater since inception (collectively, the Company).
        Refer to Note 5.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
|   | These financial statements have been prepared
        on a going concern basis, which implies that the Company will continue
        to realize its assets and discharge its liabilities in the normal course
        of business. The Company has generated limited revenues to date and has
        never paid any dividends and is unlikely to pay dividends or generate
        significant earnings in the immediate or foreseeable future. In order
        to fund the proposed plan of operation, the Company will require an additional
        $1,000,000 to $1,400,000 in funding through the next twelve month period.
        As at March 31, 2010, the Company had an accumulated deficit of $1,728,698
        and a working capital deficit of $10,422. The continuation of the Company
        as a going concern is dependent upon the continued financial support from
        its directors and officers, the ability to raise equity or debt financing,
        and the attainment of profitable operations from the business. These factors
        raise substantial doubt regarding the Companys ability to continue
        as a going concern. These financial statements do not include any adjustments
        to the recoverability and classification of recorded asset amounts and
        classification of liabilities that might be necessary should the Company
        be unable to continue as a going concern.
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
|2. | Summary of Significant Accounting Policies                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
|   | a)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
|   | b)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
|   | c)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      

---

|Freshwater Technologies Inc.     
|---------------------------------
|(A Development Stage Company)    
|Notes to the Financial Statements
|March 31, 2010                   
|(expressed in U.S. dollars)      
|(unaudited)                      

|2. | Summary of Significant Accounting Policies
        (continued)
|-- | --------------------------------------------------------------
|   |                                                               
|   | d)                                                            
|   |                                                               
|   |                                                               
|   |                                                               
|   | e)                                                            
|   |                                                               
|   |                                                               
|   |                                                               
|   | f)                                                            
|   |                                                               
|   |                                                               
|   |                                                               
|   | g)                                                            
|   |                                                               
|   |                                                               
|   |                                                               
|   | h)                                                            
|   |                                                               
|   |                                                               

Level 1

Level 1 applies to assets or liabilities
  for which there are quoted prices in active markets for identical assets or
  liabilities.

Level 2

Level 2 applies to assets or liabilities
  for which there are inputs other than quoted prices that are observable for
  the asset or liability such as quoted prices for similar assets or liabilities
  in active markets; quoted prices for identical assets or liabilities in markets
  with insufficient volume or infrequent transactions (less active markets); or
  model-derived valuations in which significant inputs are observable or can be
  derived principally from, or corroborated by, observable market data.

Level 3

Level 3 applies to assets or liabilities
  for which there are unobservable inputs to the valuation methodology that are
  significant to the measurement of the fair value of the assets or liabilities.

The Companys financial instruments
  consist principally of cash, receivables, accounts payable, loan payable and amounts due
  to related parties. The fair value of the Companys cash equivalents, when
  applicable, is determined based on Level 1 inputs, which consist
  of quoted prices in active markets for identical assets. The Company estimates
  that the carrying values of all of its other financial instruments approximate
  their fair values due to the nature or duration of these instruments.

---

|Freshwater Technologies Inc.     
|---------------------------------
|(A Development Stage Company)    
|Notes to the Financial Statements
|March 31, 2010                   
|(expressed in U.S. dollars)      
|(unaudited)                      

|2. | Summary of Significant Accounting Policies
        (continued)
|-- | --------------------------------------------------------------
|   |                                                               
|   | i)                                                            
|   |                                                               
|   |                                                               
|   |                                                               
|   | j)                                                            
|   |                                                               
|   |                                                               
|   |                                                               
|   | k)                                                            
|   |                                                               
|   |                                                               
|   |                                                               
|   | l)                                                            
|   |                                                               
|   |                                                               
|   |                                                               
|   | m)                                                            
|   |                                                               
|   |                                                               

---

|Freshwater Technologies Inc.     
|---------------------------------
|(A Development Stage Company)    
|Notes to the Financial Statements
|March 31, 2010                   
|(expressed in U.S. dollars)      
|(unaudited)                      

|3. | Related Party Transactions
|-- | --------------------------
|   |                           
|   | a)                        
|   |                           
|   | b)                        
|   |                           
|4. | Common Stock              
|   |                           
|   | a)                        
|   |                           
|   | b)                        
|   |                           
|   | c)                        
|   |                           
|   | d)                        
|   |                           
|   | e)                        
|   |                           
|   | f)                        
|   |                           
|   |                           

---

|Freshwater Technologies Inc.     
|---------------------------------
|(A Development Stage Company)    
|Notes to the Financial Statements
|March 31, 2010                   
|(expressed in U.S. dollars)      
|(unaudited)                      

|4. | Common Stock(continued)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
|-- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
|   | g)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
|   | h)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
|   | i)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
|5. | Recapitalization Transaction                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
|   | On January 1, 2006, Freshwater Technologies
        Inc. (formerly HMI Technologies Inc.) (HMI) entered into an
        Asset Acquisition Agreement to acquire the business of Freshwater Technologies
        (Freshwater) which involves the distribution and marketing
        of drinking water products and water activation products. Effective January
        1, 2006, the acquisition of the Freshwater business was completed through
        the issuance of 80,000,000 split-adjusted restricted shares of common
        stock, and as a result, the former owners of the Freshwater business owned
        approximately 79% of the outstanding common stock of HMI.                                                                                                                                                                                                                                                                                                                                          
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
|   | Prior to the acquisition of Freshwater, HMI
        was a non-operating shell company with nominal net assets. The acquisition
        is a capital transaction in substance and therefore has been accounted
        for as a recapitalization, which is outside the scope of ASC 805, Business
        Combinations. The acquisition has been accounted for as a continuation
        of the Freshwater Technologies business in accordance with ASC 805. Under
        recapitalization accounting, Freshwater is considered the acquirer for
        accounting and financial reporting purposes, and acquired the assets and
        assumed the liabilities of HMI. Assets acquired and liabilities assumed
        are reported at their historical amounts. These financial statements include
        the accounts of HMI since the effective date of the recapitalization (January
        1, 2006) and the historical accounts of the business of Freshwater since
        inception (collectively, the Company).

| |                               |  | $       |  
| | ----------------------------- |  | ------- | -
| | Advances from related parties |  | (45,301 | )
| | Net liabilities assumed       |  | (45,301 | )

|6. | Commitments
|-- | -----------
|   |            
|   | a)         
|   |            
|   | b)         

5,000,000 on July 25, 2009 (issued on
  August 20, 2009) 
  5,000,000 on January 25, 2010 
  5,000,000 on July 25, 2010
  5,000,000 on January 25, 2011

---

|Freshwater Technologies Inc.     
|---------------------------------
|(A Development Stage Company)    
|Notes to the Financial Statements
|March 31, 2010                   
|(expressed in U.S. dollars)      
|(unaudited)                      

|6. | Commitments (continued)
|-- | -----------------------

Under the agreement, the Company will
  pay Claudio Sgarbi any out-of-pocket expenses plus consulting fees as follows:

$4,500 per month until May 2009; 
  $6,000 per month thereafter until August 2009; 
  $7,500 per month thereafter until November 2009; and 
  $9,000 per month thereafter until the agreement is terminated.

Under the agreement, the Company has
  agreed to pay to ELCE 50% of the net profits relating to sales of ELCE water
  products and was to maintain minimum inventories of ELCE water products, estimated
  to be $881,000 in total, for each country specified in the agreement in due
  course.

Under an amendment to this agreement
  dated December 31, 2009, in return for ELCE eliminating the requirement for
  a minimum inventory in each country, the Company agreed to issue the remaining
  15,000,000 shares owing to Claudio Sgarbi under this agreement on January 25,
  2010.

| | c) | In February 2009, the Company entered into an Agency
        Agreement with Ancizar Rendon Ramirez to act as Agent for ELCE sales in
        the Southern Region of Colombia, South America. The Company will pay $1,000
        monthly for these consulting services including related sales expenses
        and a commission of 10% for all collected ELCE sales initiated by the
        Agent in the Southern Region of Colombia. The agreement is for a one year
        term which expires January 31, 2010, is renewable annually and can be
        terminated by the Company with three months notice. In January 2010,
        the Company agreed to extend the term of this agreement on a month to
        month basis.
| | -- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
| | d) | In July 2009, the Company entered into an Agency Agreement
        with Luis Alberto Buitrago Gonzalez to act as Agent for FW Activator sales
        in the Valle de Cauca Region of Colombia, South America. The Company will
        pay $400 monthly increasing to $600 per month after three months for these
        consulting services including related sales expenses and a commission
        of 5% for all collected FW Activator sales initiated by the agent in the
        Valle de Cauca Region of Colombia. The agreement is for a one year term
        which expires July 15, 2010, is renewable annually and can be terminated
        by the Company with three months notice.                                  

|7. | Economic Dependence                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
|-- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
|   | The Company relies solely upon VIQUA- a Trojan Technologies
        Company (formerly R-Can Environmental Inc.) (VIQUA), as the
        sole supplier of their drinking water products, ELCE International Corp.
        (ELCE), as the sole supplier of their water activation products
        and Ozocan Corporation as sole supplier of ozone water treatment systems.
        VIQUA and ELCE supplied the Company with 100% of the products that the
        Company offered and sold during the years ended December 31, 2009 and
        2008. VIQUA, Ozocan and ELCE are the sole manufacturers and primary developers
        of the respective technologies in such products. As a result, the Company
        could be adversely affected by changes in the cost of the suppliers
        products, the financial condition of the suppliers or by the deterioration
        or termination of its relationship with the suppliers.
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
|8. | Loan Payable                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
|   | During the three months ended March 31, 2010, the Company received a loan in the amount of $41,000. The loan is non-interest bearing, unsecured and due on demand.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
|9. | Subsequent Events                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
|   | a)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
|   | b)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 

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- 5 -

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, expect, plan, anticipate, believe, estimate,
predict, 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 companys 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.

In this report, unless otherwise specified, all references to
common shares refer to the common shares of our capital stock.

As used in this quarterly report, the terms we, us and
our refer to Freshwater Technologies, Inc., unless otherwise indicated.

Corporate History

We were incorporated in the State of Nevada on December 10,
1999 under the name HMI Technologies Inc. Following incorporation until January
1, 2006, we sought out prospective businesses with which to enter into a merger
or business combination. On January 1, 2006, we entered into and closed an asset
sale agreement with Max Weissengruber and D. Brian Robertson, whereby we
acquired all of the assets related to the business as operated by Mr.
Weissengruber and Mr. Robertson under the name Freshwater Technologies in
consideration for the issuance of 40,000,000 common shares to each individual.
Following the closing of the asset sale agreement, we commenced the business of
distributing and selling drinking water products and water activation products.
On July 5, 2006, we changed our name from HMI Technologies Inc. to Freshwater
Technologies, Inc. to better reflect our new business direction. Following the
closing of the asset sale agreement, we appointed Mr. Weissengruber as our
President and director and Mr. B. Robertson as our Chief Financial Officer and
director.

Current Business

We are a distributor of water treatment products to local
distributors and retailers for industrial, manufacturing productivity,
agricultural, commercial and household applications. Max Weissengruber,
President is responsible for day-to-day business operations with specific
responsibilities for marketing communications, website maintenance, investor
relations and liaison with regulatory agencies. Brian Robertson is Chief
Financial Officer responsible for budgeting, treasury and comptroller functions.
He also fills the specific role of Vice President of Sales, local distributor
relations, training and sales support. Douglas Robertson, Secretary maintains
corporate records and documentation of business decisions. These officers and
directors are capable of managing our current level of business much of which is
conducted by our local distributors and supported by our Vice President of
Sales, our Director of Marketing for Latin America and our Southern Colombian
sales agents.

We currently offer three product lines consisting of drinking
water treatment products and water activation products. The drinking water
treatment products feature Sterilight branded ultra violet products that are
supplied to our company by VIQUA(formerly R-Can Environmental Inc.), a
manufacturer based out of Guelph, Ontario, Canada. Sterilight branded
ultraviolet water treatment systems incorporate ultraviolet light energy that
eradicates harmful microbiological contaminants in drinking water.Traditional
disinfectant methods, such as chlorination, react with natural organic matter to
produce objectionable taste and odor and also forms substances with known
carcinogenic properties such as trihalomethane. Genetic components in organisms
carry hereditary characteristics that are copied and transmitted from each cell of water borne contaminants such
as bacteria, viruses and parasites. The Sterilight ultraviolet lamp emits
powerful ultraviolet light energy which, when absorbed by these contaminants,
causes disruption of the DNA Structure of those contaminants preventing
reproduction. It is the prevention of reproduction by microbial contaminants
that renders ultraviolet treated water safe for human consumption. Sterilight
lamps provide consistent UV output over the 9,000 hour life of the lamp and
uniform temperature distribution calculated to achieve the desired levels of
decontamination.

---

- 6 -

Our drinking water treatment products also feature the ozone
water treatment systems of Ozocan Corporation for the countries of Argentina,
Chile, Peru, Costa Rica and Panama. As a proven disinfectant, ozone is more
powerful than chlorine and, unlike chlorine, it discharges no potentially
harmful substances into the environment. Used in a variety of water treatment
applications, Ozocans products effectively treat municipal and industrial
drinking water and wastewater and are used in bottled water applications as well
as treating air conditioning and cooling tower installations. Ozocan systems can
be found throughout the globe either as custom designed applications or in one
of a number of standard sized units that can meet the effective treatment needs
of a wide variety of customers.

Our water activation products are designed to improve the
operating efficiency of commercial and industrial boilers and refrigeration
systems without the use of chemicals as well as improving significantly the
productivity results in certain manufacturing operations and agricutural
Greenhouse facilities. Our water activation products are supplied to our company
by ELCE International Corp., the worldwide distributor of ELCE products invented
by Nihon Jisui Co. Ltd. of Japan. In July, 2009 ELCE International Corp. agreed
to supply the Company with its own FW branded water activation technology. We
order units from ELCE International Corp. which are then shipped against
customer orders or shipped directly to one of our local distributors located in
Argentina, Chile, Colombia, Costa Rica, Panama and Peru. FW water activation
treatment systems remove rust, scale and corrosion within heating and cooling
systems. Additionally, FW water activators improve productivity in both
agricultural and manufacturing operations due to the FW Water Activators
capability to reduce the size of water molecules and reduce water surface
tension. The FW water activation units, which range in water flow capacity from
11 liters per minute to over 2,000 liters per minute, change water properties
physically without removing or adding chemical impurities, ions or minerals.

We will only purchase limited quantities of replacement filters
and lamps for our water purification products for inventory as our distributors
will be inventorying the majority of replacement parts. We will purchase all
other finished product from our three supplier-manufacturers in quantities
sufficient to satisfy product orders of our customers except for rental FW water
activators.

In January 2009, we signed a Joint Venture Agreement with ELCE
International Corp., the company who has been a significant supplier to our
company for a number of years. In July 2009, we were approved for a private
labelling program whereby all ELCE Activators made for our companys rental or
sale would now be labelled FW Activators. In July 2009 we introduced a FW
Activator rental program to our distributors and, as a result, we will inventory
rental units installed by our distributors at their customers. Pursuant to the
joint venture agreement, ELCE International will supply its FW water activation
units at manufacturers cost to Freshwater and will participate with Freshwater
to market and sell FW products in Argentina, Chile, Columbia, Costa Rica, Panama
and Peru. ELCE International Corp. has compiled technical information on ELCE
equipment installed world-wide in a variety of commercial, industrial,
agricultural and aquacultural applications. We intend to target industries and
companies for whom ELCE has already provided effective solutions in terms of
eliminating or reducing encrustations and corrosion, improving energy efficiency
and improving productivity and output.

The essential elements of the FW device lie in the properties
of its ceramic balls, hardened to 1200 degrees Centigrade. As water passes
through the stainless steel chamber containing the ceramic balls, the balls
rotate and rub against each other generating several forms of electrical energy
which act to reduce and eliminate the accumulated rust, scale and corrosion that
is caused by minerals and salts in the source water. As a result, FW water
activation eliminates the conventional use and ongoing costs of continually
using chemicals to clean out deposits within heating and cooling systems.

In manufacturing and agricultural operations, as a result of FW
activated water decreasing the surface tension of the water and reducing the
water molecule size, productivity is increased in many applications.

---

- 7 -

We have formalized our relationship with ELCE International
Corp. with a non-exclusive distribution agreement and a joint venture agreement.
We have also formalized our relationship with VIQUA(formerly R-Can Environmental
Inc.) and Ozocan Corporation pursuant to non-exclusive distribution agreements.
We also offer a full line of accessories, replacement parts and services
compatible with all types of our water treatment systems.

Currently, we market our products through local distributors
and agents in Argentina, Chile, Columbia, Costa Rica, Panama and Peru. These
specific markets were selected because the Company has the ability to conduct
business in Spanish and has been able to enter into business relationships with
firms and individuals with existing commercial customers and the technical
resources to sell, install and service our products. In addition, Central and
South America are areas where the depth and breadth of competitive products is
not as intense as other more developed markets such as North America and Europe.
All of our product lines are chemical free technologies which are gaining more
and more support by the general public and increased regulatory attention. Once
we have secured the interest of potential local distributors, our Vice President
of Sales and/or our Director of Marketing and Sales for Latin America visits the
country in question to determine if the potential local partner has an existing
business with the required technical capability to represent the Companys
products. Our initial focus is in the water activation products area since we do
have available activators for the boiler and refrigeration/cooling products
already sold by local distributors and are testing activators in the
manufacturing and agricutural areas. Once an agreement is signed, our Vice
President of Sales or Director of Latin American Marketing delivers on site
training programs for each local distributor and regularly accompanies local
partners on sales presentations to answer questions and provide technical
support. The Company receives ongoing product and technical support from ELCE
International which is usually provided in Spanish. Communication with local
distributors is maintained on a regular basis with quick responses to questions
or inquiries from our distributors.

As a marketing initiative, we also offer training and technical
information to local distributors, through our Director of Latin American
Marketing, who may then pass on such knowledge and information to the end-user.
Our primary objective in the short-to-medium term is to establish an initial
customer base in every market we enter. We have found that if potential
customers can see our products in a nearby location and talk with the owner of
our products, that third party support is critical in growing our business. As a
result of the specific definition of our target markets and the fact that we are
in the development stage of operations, we have focused on the development of
distribution alliances as the preferred means of business development. Our
company intends to leverage external resources provided by our local
distributors and satisfied customers to minimize overhead and to seek market
development by tapping into existing client pools of distributors. These
arrangements may take the form of a distribution agreement, joint venture or
partnership agreement. We believe that without well-established, reputable local
partners, it is difficult to manage the language, culture and business practices
of foreign territories.

To date, the cost of our water activation units compare with
other methods of treating scale, rust and corrosion in heating and cooling
systems and are a one time cost when compared with the never ending cost of
chemicals in chemical methods of removing such water based encrustations. We
have learned that industrial and commercial customers are financially able to
purchase our water activation products which cost a very small amount when
compared with the cost they pay for boiler and refrigeration equipment. In
addition, FW water activators are designed to maximize operational efficiency by
removing rust, scale and corrosion which can increase energy costs and cause
production shutdowns and reduce the equipment life of water based heating and
cooling systems.

The VIQUA ultraviolet units are marketed to middle and higher
income households who want to directly control the safety of their household
drinking water supplies.

In terms of drinking water treatment systems, all competitive
technologies such as chlorination, reverse osmosis, desalinization and ion
exchange require some form of electricity in order to function. A normal
household ultra violet water treatment system, which requires a sediment filter,
uses the equivalent electricity of a 40 watt light bulb. To eliminate sulphur
and other taste affecting odors, a carbon filter is also recommended.

We believe that we can develop a distribution network by
offering proven chemical free and competitively priced products to our
distributors. Through our distribution network, we hope to derive recurring
sales and rental revenue from sources, such as servicing potable water
equipment, the sale of replacement parts, filters and other consumables. Our
distribution network may enable us to offer appropriate solutions to water
problems for residential and commercial customers through a combination of
testing, product selection, installation, monitoring and service. We also intend
to use a distribution network as a way to consider new product lines and enter
new markets once a determination of potential need has been made. Distributors are
required to purchase all their requirements for water treatment products from
our company. As we do not manufacture our products, we are not required to
invest in capital intensive infrastructure that is necessary to complete the
manufacturing process. We will only purchase limited quantities of replacement
filters and lamps for our water purification products for inventory as our
distributors will be inventorying the majority of replacement parts. We will
purchase all other finished product from our three supplier-manufacturers in
quantities sufficient to satisfy product orders of our customers except for
rental FW water activators.

---

- 8 -

General

The following is a discussion and analysis of our results of
operation for the three month period ended March 31, 2010 and March 31, 2009 and
the year ended December 31, 2009, and the factors that could affect our future
financial condition. This discussion and analysis should be read in conjunction
with our consolidated unaudited financial statements and the notes thereto
included elsewhere in this quarterly report. Our consolidated financial
statements are prepared in accordance with United States generally accepted
accounting principles. All references to dollar amounts in this section are in
United States dollars unless expressly stated otherwise.

Results of Operations

Revenue

We generated revenues of $220 for the three month period ended
March 31, 2010, compared to revenues of $130 for the three month period ended
March 31, 2009. The cost of sales on the orders for the three month period ended
March 31, 2010 was $133, compared to cost of sales on the orders for the three
month period ended March 31, 2009 of $88.

This revenue was generated from sales of our drinking water
products.

Operating Costs and Expenses

The major components of our revenue and expenses for the three
month periods ended March 31, 2010 and March 31, 2009 and from date of inception
until March 31, 2010 are outlined in the table below:

|                                  |   | Three Months Ended |   |   | Accumulated from                                |  
|--------------------------------- | - | ------------------ | - | - | ----------------------------------------------- | -
|                                  |   | March 31           |   |   | January 21, 2005 
      (Date of
    Inception) |  
|                                  |   | 2010               |   |   | 2009                                            |  
|                                  |   |                    |   |   |                                                 |  
|Revenue                           | $ | 220                |   | $ | 130                                             |  
|Cost of Sales                     |   | 133                |   |   | 88                                              |  
|Gross Profit                      | $ | 87                 |   | $ | 42                                              |  
|                                  |   |                    |   |   |                                                 |  
|Expenses                          |   |                    |   |   |                                                 |  
|Amortization of intangible assets | $ | 85,035             |   | $ | 40,068                                          |  
|Consulting                        |   | 9,000              |   |   | 9,000                                           |  
|General and administrative        |   | 42,077             |   |   | 4,941                                           |  
|Imputed interest                  |   | 1,887              |   |   | 2,928                                           |  
|Marketing and sales               |   | 67,536             |   |   | 52,589                                          |  
|Professional fees                 |   | 30,550             |   |   | 22,478                                          |  
|Commission Expense                |   | --                 |   |   | --                                              |  
|Bad debts expense (recovery)      |   | (3,350             | ) |   | (31,042                                         | )
|Total Expenses                    | $ | 232,735            |   | $ | 100,962                                         |  
|                                  |   |                    |   |   |                                                 |  
|Net Loss From Operations          | $ | (232,648           | ) | $ | (100,920                                        | )
|                                  |   |                    |   |   |                                                 |  
|Other Income                      |   |                    |   |   |                                                 |  
|Gain on settlement of debt        |   | -                  |   |   | -                                               |  
|Net Loss                          | $ | (232,648           | ) | $ | (100,920                                        | )

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- 9 -

For the three months ended March 31, 2010, our operating
expenses totalled $232,735 as compared to $100,962 for the three months ended
March 31, 2009. Amortization of intangible assets representing costs incurred to
acquire product distribution rights under the joint venture agreement with ELCE
International Corp. amounted to $85,035 for the three months ended March 31,
2010 compared with $40,068 for the three months ended March 31, 2009.
Professional fees amounted to $30,550 for the three months ended March 31, 2010
as compared to $22,478 for the three months ended March 31, 2009. Marketing and
sales expenses and consultants costs were $76,536 for the three months ended
March 31, 2010 as compared to $61,589 for the three months ended March 31, 2009
with the increase being due to the write off of $13,333 representing two months
consulting costs of a one year marketing consulting services agreement, an
increase in travel expenses fees for our Director of Latin America sales of
$4,515 offset by a decrease in all other marketing/sales costs of $2,901.
General and administrative expenses were $42,077 during the three months ended
March 31, 2010 as compared to $4,941 for the three months ended March 31, 2009.
This increase is due to the write off of $21,000 representing three months
consulting costs of a one year business consulting services agreement, the write
off of $10,000 representing two months consulting costs of a one year web
developement consulting services agreement, FW Activator testing consulting fees
of $2,100 and increased trust company costs and shareholder communication costs
of $4,036. Imputed interest on directors loans was $1,887 for the three months
ended March 31, 2010 as compared to $2,928 for the three months ended March 31,
2009 due to lesser amounts owing to Directors during the three months ended
March 31, 2010 as compared to March 31, 2009. For the three months ended March
31, 2010 we recovered $3,350 of sales previously written off as compared to
$31,042 for the three months ended March 31, 2009.

Liquidity and Capital Resources

Material Changes in Financial Condition

|                           |   | March 31, 2010 |  |   | December 31, 2009 | 
|-------------------------- | - | -------------- |  | - | ----------------- | 
|                           |   |                |  |   |                   | 
|Current Assets             | $ | 304,247        |  | $ | 124,228           | 
|Current Liabilities        |   | 314,669        |  |   | 212,925           | 
|Working Capital Deficiency | $ | 10,422         |  | $ | 88,697            | 

Total assets at March 31, 2010 were $586,753 as compared to
$491,770 at December 31, 2009.$179,667 of this increase is attributable to
prepaid consulting fees resulting from the issuance of common stock for one year
consulting services agreements with three consultants under an equity incentive
plan entitled the 2010 Non-Qualified Stock Plan.

A decrease of $85,035 is attributable to the amortization of
Intangible Assets for the three months ended March 31, 2010 as described below:

On January 25, 2009, the Company issued
10,000,000 restricted shares of Class A common stock under the joint venture
agreement with ELCE International Corp. On July 25, 2009, the Company issued
5,000,000 restricted shares of Class A common stock under this agreement. The
fair value of the restricted shares issued was estimated to be $438,393. Under
the agreement, the Company issued a final 15,000,000 restricted shares of Class
A common stock on January 25, 2010. The fair value of these restricted shares
was estimated to be $251,339. As at March 31, 2010, these shares have been
presented as Class A common stock on the balance sheet. The estimated fair value
of the 30,000,000 shares issued and to be issued under the agreement of $689,732
has been recorded as intangible assets as at March 31, 2010, less accumulated
amortization of $407,226.

The remaining increase is due to an increase of $352 in cash
while inventories and other receivables did not change.

Liabilities at March 31, 2010 were $314,669 as compared to
$212,925 at December 31, 2009. The increase is due to an increase of $63,304 in
accounts payable and an increase of $38,440 due to our directors and officers.
The amounts due to our directors and officers total $145,743 and
are non-interest bearing, unsecured and have no specific terms for
repayment.

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- 10 -

We had cash on hand of $578 and negative working capital of
$10,422 as of March 31, 2010 compared to cash on hand of $226 and negative
working capital of $88,697 as of December 31, 2009. We anticipate that we will
require approximately $1,000,000 to $1,400,000 for operating expenses, including
professional, legal and accounting expenses associated with our reporting
requirements under the Exchange Act during the next twelve months. Accordingly,
we do not have enough money to carry out our business plan and we will need to
obtain additional financing in order to continue operating.

On May 5, 2010, we sold one convertible debenture to one
investor for gross proceeds of $55,000. This convertible debenture has a face
amount of $55,000, is due and payable on February 1, 2011, earns interest at a
rate of 8% per annum and is convertible, at the option of the holder, into
shares of our common stock at a conversion price as set forth in the convertible
note.

On May 5, 2010, we entered into an agreement with Equititrend
Advisors, LLC whereby Equititrend Advisors agreed to provide public relations
and communications services to our company for a period of six months in
consideration for the issuance of 9,000,000 shares of common stock of our
company.

There are no assurances that we will earn the funds required
for our continued operations. If we do not earn the required revenues, then we
will have to seek another source of financing, likely through the sale of more
shares of our common stock or borrowing money. 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 a
combination of our ability to obtain further long-term financing, the successful
and sufficient market acceptance of any product offerings that we may introduce,
the continuing successful development of our product offerings, and, finally,
our ability to achieve 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, would increase our liabilities and
future cash commitments.

Cash Flows

|                                                   |   | Three Months Ended March 31,
      2010 |   | Three Months Ended March 31,
      2009
|-------------------------------------------------- | - | --------------------------------------- | - | ---------------------------------------
|Cash provided
      (used) in Operating Activities | $ | (61,088 )                               | $ | (35,187 )                              
|Cash used by
      Investing Activities            |   | -                                       |   | -                                      
|Cash provided
      (used) by Financing Activities |   | 61,440                                  |   | 37,151                                 
|Net Increase
      (Decrease) in Cash              | $ | 352                                     | $ | 1,964                                  

Operating Activities

Operating activities used cash of $61,088 for the three months
ended March 31, 2010 and used cash of $35,187 for the three months ended March
31, 2009.

Financing Activities

Net cash provided by financing activities was $61,440 for the
three months ended March 31, 2010 and net cash provided by financing activities
was $37,151 for the three months ended March 31, 2009. These financing
activities were provided by two directors of our company.

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- 11 -

Non-cash Investing and Financing Activities

On May 5, 2010, we entered into an
agreement with Equititrend Advisors, LLC whereby Equititrend Advisors agreed to
provide public relations and communications services to our company for a period
of six months in consideration for the issuance of 9,000,000 shares of common
stock of our company.

In January 2010, the Company entered
into a one year business consulting services agreement with a consultant whereby
the Company issued 6,000,000 common shares, on January 25, 2010, for business
consulting services to be rendered over a one year period. The shares were
issued under the 2010 Stock Plan and were registered on Form S-8 on January 20,
2010.

In February 2010, the Company entered
into a one year marketing consulting services agreement with a consultant
whereby the Company issued 4,000,000 common shares, on February 22, 2010, for
consulting services to be rendered over a one year period. The shares were
issued under the 2010 Stock Plan and were registered on Form S-8 on January 20,
2010.

In February 2010, the Company entered
into a one year web development consulting services agreement with a consultant
whereby the Company issued 3,000,000 common shares, on February 22, 2010, for
consulting services to be rendered over a one year period. The shares were
issued under the 2010 Stock Plan and were registered on Form S-8 on January 20,
2010.

The estimated fair value of the common
stock issued for the three consulting services contracts amounted to
$224,000.

In January 2009, we signed a Joint Venture Agreement with ELCE
International Corp. Under the Agreement we are to issue 30,000,000 common shares
with an estimated fair value of $689,732 on the date of the agreement for
certain distribution rights.

Going Concern

Due to the uncertainty of our ability to meet our current
operating and capital expenses, in their report on our audited annual financial
statements for the year ended December 31, 2009, our independent auditors
included an explanatory paragraph regarding concerns about our ability to
continue as a going concern. Our financial statements contain additional note
disclosures describing the circumstances that led to this disclosure by our
independent auditors. There is substantial doubt about our ability to continue
as a going concern as the continuation and expansion of our business is
dependent upon obtaining further financing, successful and sufficient market
acceptance of our products, and, finally, 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.

Future Financings

Fundraising will be one of our primary objectives over the next
twelve months. The financial requirements of our company for the next twelve
months will depend on our ability to raise the money we require through credit
facilities and additional private placements of our equity securities or loans
from our directors. The issuance of additional equity securities by us may
result in a significant dilution in the equity interests of our current
shareholders.

There is no assurance that we will be able to obtain the funds
required for our continued operations or 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 our
operations. We do not currently have any plans to merge with another company,
and we have not entered into any agreements or understandings for any such
merger.

Our cash on hand and the revenue that we anticipate generating
going forward from our operations will not be sufficient to satisfy our cash
requirements for the next twelve month period. We expect to require from
$1,000,000 to $1,400,000. We intend to raise any such additional capital
primarily through the private placement of our securities and further borrowings from our directors if this
type of funding continues to be available. We also intend to continue to seek
additional funds from our directors to fund our day to day operations until a
private placement can be pursued but we have no guarantee that our directors
will continue to fund our day to day operations.

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Estimated Working Capital Expenditures During the Next Twelve
Month Period

We estimate our future expenditures for the next twelve months
as follows:

| | Operating expenditures                 |   |                       | 
| | -------------------------------------- | - | --------------------- | 
| | Marketing                              | $ | 400,000 - 550,000     | 
| | General and Administrative             | $ | 50,000 - 75,000       | 
| | Legal and Accounting                   | $ | 50,000 - 75,000       | 
| | Working capital                        | $ | 400,000 - 500,000     | 
| | Repayment of Directors
      Advances | $ | 100,000 - 200,000     | 
| | Total                                  | $ | 1,000,000 - 1,400,000 | 

Off-Balance Sheet Arrangements

Our company has no outstanding derivative financial
instruments, off-balance sheet guarantees, interest rate swap transactions or
foreign currency contracts. Our company does not engage in trading activities
involving non-exchange traded contracts.

Application of Critical Accounting Policies

Use of Estimates

The preparation of financial statements in conformity with U.S.
generally accepted accounting principles 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
reporting period. The Company regularly evaluates estimates and assumptions
related to provision for uncollectible sales, provision for inventory
obsolescence, valuation of distribution rights, donated expenses, fair values of
financial instruments and deferred income tax asset valuation allowances. The
Company bases its estimates and assumptions on current facts, historical
experience and various other factors that it believes to be reasonable under the
circumstances, the results of which form the basis for making judgments about
the carrying values of assets and liabilities and the accrual of costs and
expenses that are not readily apparent from other sources. The actual results
experienced by the Company may differ materially and adversely from the
Companys estimates. To the extent there are material differences between the
estimates and the actual results, future results of operations will be affected.

Cash and Cash Equivalents

The Company considers all highly liquid instruments with
maturity of three months or less at the time of issuance to be cash equivalents.
As at March 31, 2010, the Company had no cash equivalents.

Basic and Diluted Net Income (Loss) Per Share

The Company computes earnings (loss) per share in accordance
with ASC 260, Earnings per Share which requires presentation of both
basic and diluted earnings per share (EPS) on the face of the income statement.
Basic EPS is computed by dividing net income (loss) available to common
shareholders (numerator) by the weighted average number of shares outstanding
(denominator) during the period. Diluted EPS gives effect to all dilutive
potential common shares outstanding during the period using the treasury stock
method and convertible preferred stock using the if-converted method. In
computing diluted EPS, the average stock price for the period is used in
determining the number of shares assumed to be purchased from the exercise of
stock options or warrants. Diluted EPS excludes all dilutive potential shares if
their effect is anti dilutive. As at March 31, 2010, there are no potentially
dilutive financial instruments outstanding.

Comprehensive Loss

ASC 220, Comprehensive Income establishes standards for
the reporting and display of comprehensive loss and its components in the
financial statements. As at March 31, 2010, the Company has no items that
represent comprehensive loss and, therefore, has not included a schedule
of comprehensive loss in the financial statements.

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- 13 -

Inventory

Inventory consists of water activation products and water
filters and is recorded at the lower of cost and net realizable value on a
first-in, first-out basis. The Company establishes inventory reserves for
estimated obsolete or unmarketable inventory equal to the differences between
the cost of inventory and the estimated realizable value based upon assumptions
about future and market conditions. Shipping and handling costs are classified
as a component of cost of sales in the statement of operations.

Financial Instruments

Pursuant to ASC 820, Fair Value Measurements and
Disclosures and ASC 825, Financial Instruments,an entity is required
to maximize the use of observable inputs and minimize the use of unobservable
inputs when measuring fair value using a hierarchy based on the level of
independent, objective evidence surrounding the inputs used to measure fair
value. A financial instruments categorization within the fair value hierarchy
is based upon the lowest level of input that is significant to the fair value
measurement. The hierarchy prioritizes the inputs into three levels that may be
used to measure fair value:

Level 1

Level 1 applies to assets or
liabilities for which there are quoted prices in active markets for identical
assets or liabilities.

Level 2

Level 2 applies to assets or
liabilities for which there are inputs other than quoted prices that are
observable for the asset or liability such as quoted prices for similar assets
or liabilities in active markets; quoted prices for identical assets or
liabilities in markets with insufficient volume or infrequent transactions (less
active markets); or model-derived valuations in which significant inputs are
observable or can be derived principally from, or corroborated by, observable
market data.

Level 3

Level 3 applies to assets or
liabilities for which there are unobservable inputs to the valuation methodology
that are significant to the measurement of the fair value of the assets or
liabilities.

The Companys financial instruments consist principally of
cash, receivables, accounts payable, and amounts due to related parties. The
fair value of the Companys cash equivalents, when applicable, is determined
based on Level 1 inputs, which consist of quoted prices in active markets for
identical assets. The Company estimates that the carrying values of all of its
other financial instruments approximate their fair values due to the nature or
duration of these instruments.

Foreign Currency Translation

The Companys functional and reporting currency is the United
States dollar. Monetary assets and liabilities denominated in foreign currencies
are translated in accordance with ASC 830, Foreign Currency Translation
Matters, using the exchange rate prevailing at the balance sheet date. Gains
and losses arising on translation or settlement of foreign currency denominated
transactions or balances are included in the determination of income. Foreign
currency transactions are primarily undertaken in Canadian dollars and Euros.
The Company has not, to the date of these financials statements, entered into
derivative instruments to offset the impact of foreign currency
fluctuations.

Revenue Recognition

The Company recognizes revenue from the sale or rental of
drinking water products and water activation products in accordance with ASC
605,Revenue Recognition, and SAB 104. The majority of the
revenues consist of water activation units in Costa Rica, Panama and Peru.
Revenue consists of the sale/rental of drinking water products and water
activation products and is recognized only when the price is fixed or
determinable, persuasive evidence of an arrangement exists, the product is
shipped, and collectibility is reasonably assured. Our shipping terms are FOB
shipping point. For UV products, the customer pays all costs from the point of
shipment, and for ELCE/FW products, the customer pays all costs from arrival
point in the country to which the ELCE/FW products are shipped.

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- 14 -

The Company evaluates the collectibility of accounts receivable
based on a combination of factors. In cases where the Company is aware of
circumstances that may impair a specific customers ability to meet its
financial obligations subsequent to the original sale, the Company will record
an allowance against amounts due, and thereby reduce the net recognized
receivable to the amount the Company reasonably believes will be collected. For
all other customers, the Company recognizes allowances for doubtful accounts
based on the length of time the receivables are past due, the current business
environment and the Companys historical experience.

Stock-based Compensation

The Company accounts for share-based payments in accordance
with ASC 718, Compensation  Stock Based Compensation. All transactions
in which goods or services are the consideration received for the issuance of
equity instruments are accounted for based on the fair value of the
consideration received or the fair value of the equity instrument issued,
whichever is more reliably measurable. The Company has not issued any stock
options since its inception.

Intangible Assets

Intangible assets represent costs incurred to acquire product
distribution rights under the joint venture agreement with Elce International
Corp. amounting to $689,732. The useful life of the product distribution rights
acquired has been estimated by management to be two years. Amortization is
provided on a straight-line basis over the estimated useful life. During the
three months ended March 31, 2010, the Company recognized $85,035 in
amortization expense in relation to these assets as compared to $40,068
amortization expense for the three months ended March 31, 2009. The Company
estimates it will recognize $344,866 and $22,676 in amortization expense during
the years ended December 31, 2010 and 2011, respectively.

Recently Adopted Accounting Pronouncements

The Company has implemented all new accounting pronouncements
that are in effect and that may impact its financial statements and does not
believe that there are any other new accounting pronouncements that have been
issued that might have a material impact on its financial position or results of
operations.

Risks and Uncertainties

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 and
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.

Such estimates, projections or other forward looking
statements involve various risks and uncertainties as outlined below. We
caution the reader 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.

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- 15 -

Risks Related to the Economy

The weakening of economic conditions around the world could
have harmful effects on our business. If these harmful effects cause us to scale
down our planned operations, then our share price will likely decrease. If these
harmful effects cause us to cease our operations, then our shareholders will
likely lose their entire investment in our company.

The weakening of economic conditions around the world could
have harmful effects on our business. Weakening economic conditions generally
lead to less money being spent on luxuries, which water treatment products may
be considered by many to be. If consumers spend less and do not choose to spend
their limited funds on our water treatment products, we will earn less revenue
than we currently plan on and we will not be able to achieve profitable
operations.

The current economic problems will likely also have a negative
impact on the amount of money we may expect to raise through sales of our equity
securities. Many investors have recently seen large decreases in the value of
various investments due to declining share prices across many economic sectors.
Because of this and other market factors, if we choose to raise funds through
the sale of our equity securities, potential investors may be less likely to buy
our equity securities or we may need to sell our equity securities at low
prices, resulting in fewer proceeds. This would make it difficult for us to
raise adequate amounts to fund our operations through the sale of our equity
securities.

If we are unable to fund our operations through revenues or the
sale of our equity securities, then we may choose to borrow money to pay for
some of our operations. Because of the credit crisis, it is possible that we
would not be able to borrow adequate amounts to fund our operations on terms and
at rates of interest we find acceptable and in the best interests of our
company.

If we cannot fund our planned operations from revenue, the sale
of our equity securities or through incurring debt on acceptable terms, then we
will likely have to scale down or cease our operations. If we scale down our
operations, our share price would likely decrease and if we cease our
operations, shareholders will likely lose their entire investment in our
company.

The weakening of economic conditions around the world could
have harmful effects on the operations of our customers and suppliers and the
confidence of end consumers, all of which could cause our operations to suffer
and our revenues to decrease.

Some of our customers or suppliers could experience serious
cash flow problems due to the current economic situation. If our customers or
suppliers attempt to increase their prices, pass through increased costs, alter
payment terms or seek other relief, our business may suffer from decreased sales
to final consumers or increased costs to us. If any of our vendors or suppliers
go out of business, we may not be able to replace them with other companies of
the same quality and level of service. If the quality of our products and
promptness of delivery deteriorates as a result, our revenue will likely
decrease as retailers and consumers would be less likely to choose our products
out of those available to them.

We do not expect that the difficult economic conditions are
likely to improve significantly in the near future, and further deterioration of
the economy, and even consumer fear that the economy will deteriorate further,
could intensify the adverse effects of these difficult market conditions.

Risks Related to our Company

We have had minimal revenues from operations and if we are
not able to obtain further financing we may be forced to scale back or cease
operations or our business operations may fail.

To date, we have not generated significant income from our
operations and we have been dependent on sales of our equity securities and
advances from directors to meet the majority of our cash requirements. From the
date of inception on January 21, 2005 to March 31, 2010, we have generated
$477,178 in revenue from the sale or rental of our products. As at March 31,
2010, we had cash of $578 and negative working capital of $10,422. We expect to
generate a moderate positive cash flow from operations in the next twelve month
period. We estimate that we will require between $1,000,000 and $1,400,000 to
carry out our business plan for the next twelve month period. We will, in all
likelihood, continue to incur operating expenses without significant revenues
until our products gain significant popularity. Since we are still in the early
stages of operating our company and because of the lack of operating history, our independent auditors report and Note 1
to the financial statements for the years ended December 31, 2009 and December
31, 2008 state that these factors raise substantial doubt regarding the
Companys ability to continue as a going concern. Because we cannot anticipate
when we will be able to generate significant revenues from sales, we will need
to raise additional funds to develop our business plan, respond to competitive
pressures, sign distribution agreements with distributors and respond to
unanticipated requirements or expenses. If we are not able to generate
significant revenues from the sale of our products, we will not be able to
maintain our operations or achieve a profitable level of operations.

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- 16 -

We will not be able to expand our operations beyond current
levels without generating significant revenues from our current operations or
obtaining further financing. We cannot assure that we will be able to generate
enough interest in our products to ever become profitable. If we are unable to
establish and generate material revenues, or obtain adequate future financing,
our business will fail and you may lose some or all of your investment in our
common stock.

We have only commenced our business operations on January 1,
2006 and we have a limited operating history. If we cannot successfully manage
the risks normally faced by start-up companies, we may not achieve profitable
operations and ultimately our business may fail.

We have a limited operating history. From the date of inception
on January 21, 2005 to the closing of the asset purchase agreement on January 1,
2006, our business operations consisted primarily seeking out prospective
entities with which to enter into a merger or business combination. Since
January 1, 2006, we have concentrated on our new business of selling drinking
water products and water activation products to distributors for resale in our
target markets of South America and Central America. Our prospects are subject
to the risks and expenses encountered by start up companies, such as
uncertainties regarding our level of future revenues, our inability to budget
expenses and manage growth accordingly, and our inability to access sources of
financing when required and at rates favorable to us. Our limited operating
history and the highly competitive nature of the drinking water and water
activation industries make it difficult or impossible to predict future results
of our operations. We may not establish a distribution network that will make us
profitable, which may result in the loss of some or all of your investment in
our common stock.

The fact that we have only generated limited revenues since
our inception raises substantial doubt about our ability to continue as a going
concern, as indicated in our independent auditors report in connection with our
audited financial statements.

We have generated limited revenues since our inception on
January 21, 2005. Since we are still in the early stages of operating our
company and because of the lack of operating history, our independent auditors
report includes an explanatory paragraph about our ability to continue as a
going concern. We will, in all likelihood, continue to incur operating expenses
without significant revenues until our products gain significant popularity.
From December 1999 to March 31, 2010, we raised $13,000 through the sale of
shares of our common stock with the balance of our financing requirements coming
from two directors. We estimate our average monthly cash operating expenses to
be approximately $30,000 per month. We will not be able to expand our operations
beyond current levels without generating significant revenues from our current
operations or obtaining further financing. Our primary source of funds has been
the sale of our common stock and advances from two of our directors and
officers. We cannot assure that we will be able to generate enough interest in
our products. If we cannot attract a successful distribution network, we will
not be able to generate any significant revenues or income. In addition, if we
are unable to establish and generate material revenues, or obtain adequate
future financing, our business will fail and you may lose some or all of your
investment in our common stock. These circumstances raise substantial doubt
about our ability to continue as a going concern as described in an explanatory
paragraph to our independent auditors report on the financial statements for
the years ended December 31, 2009 and December 31, 2008.

Our substantial debt could adversely affect our financial
condition and prevent us from fulfilling our obligations to our creditors and
cause us to go out of business.

As of March 31, 2010, we had total liabilities of $314,669,
$145,743 of which was due to related parties. Our liabilities are substantial
relative to our current assets, which were $304,247 as of March 31, 2010, and
could adversely affect our financial condition and make it more difficult for us
to satisfy our obligations with respect to our creditors. If we are unable to
pay our debts as they come due, we will be insolvent and investors will lose all
of their investment in our company. Our substantial liabilities
and lack of cash could also have other negative effects, including:

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- 17 -

- increase our vulnerability to adverse general economic conditions;
- require us to dedicate a substantial portion of our cash flow from
  operations to payments on our liabilities, thereby reducing the availability
  of our cash flow to fund working capital, investments, capital expenditures
  and other general corporate purposes;
- limit our ability to make required payments under our existing contractual
  commitments (see Managements Discussion and Analysis of Financial Condition
  and Results of Operations  Liquidity and Capital Resources);
- limit our flexibility in planning for, or reacting to, changes in our
  business and the industry in which we operate; and,
- place us at a competitive disadvantage compared to our competitors that
  have fewer liabilities.

If we are unable to obtain financing in the amounts and on
terms and dates acceptable to us, we may not be able to expand or continue our
operations and development and so may be forced to scale back or cease
operations or discontinue our business.

We do not currently have any arrangements for financing and we
can provide no assurance to investors we will be able to find such financing
when such funding is required. Obtaining additional financing would be subject
to a number of factors, including investor acceptance of our product selection
and our business model. Furthermore, there is no assurance that we will not
incur further debt in the future, that we will have sufficient funds to repay
our future indebtedness, or that we will not default on our future debts,
thereby jeopardizing our business viability. Finally, we may not be able to
borrow or raise additional capital in the future to meet our needs or to
otherwise provide the capital necessary to maintain our operations, which might
result in the loss of some or all of your investment in our common stock.

Our company anticipates that the funds that were raised from
private placements by way of subscription agreements and funds advanced from
directors will not be sufficient to satisfy our cash requirements for the next
twelve month period. Also, there is no assurance that actual cash requirements
will not exceed our estimates. We will need additional capital in the next month
in order to continue our business plan.

We depend almost exclusively on outside capital to pay for the
continued development of our business and the marketing of our products. Such
outside capital may include the sale of additional stock, shareholder and
director advances and/or commercial borrowing. There can be no assurance that
capital will continue to be available if necessary to meet these continuing
development costs or, if the capital is available, that it will be on terms
acceptable to us. The issuance of additional equity securities by us will 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.

If we are unable to obtain additional capital in the next
month, then we will be unable to pursue our business plan and we will go out of
business. If this happens, investors will lose their entire investment in our
company.

Our company relies on three suppliers who supply our company
with all of our products and as a result, we could be adversely affected by
changes in the cost of the suppliers products, the financial condition of the
suppliers or by the deterioration or termination of our relationship with the
suppliers.

We sell drinking water treatment products and water activation
products. Our two suppliers of drinking water products, VIQUA(formerlyR-Can
Environmental Inc.) of Guelph, Ontario, Canada, and Ozocan Corporation of
Toronto, Ontario, Canada supplied our company with all of our drinking water
treatment products that our company sold during the years ended December 31,
2009 and December 31, 2008. Similarly, our sole supplier of water activation
products, ELCE International Corp., is the manufacturer and distributor of our
FW water activation units. We order units from ELCE International which are then
shipped to our warehouse facility for reshipment or directly to countries where
our distributors are located. ELCE International supplied our company with all
of our water activation products that our company sold during the year ended
December 31, 2009 and December 31, 2008. Our three suppliers manufacture their
respective products and develop the technologies within such products. In
addition, these suppliers also supply similar products from other manufacturers.
During the years ended December 31, 2009 and December 31,2008, VIQUA supplied
our company with products from some components from outside suppliers but all VIQUA products are assembled and shipped from their
Guelph, Ontario, Canada manufacturing facility. A significant decline in our
suppliers financial condition, a material rise in the cost of their prices or a
reduction in the number of products currently available could adversely affect
our results of operations. In addition, if our existing relationship with VIQUA,
Ozocan Corporation or ELCE International Corp. deteriorates or is terminated in
the future, and we are not successful in establishing a relationship with an
alternative supplier at prices and products currently offered by such suppliers,
our results of operations could be adversely affected.

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- 18 -

All of our directors and officers are engaged in other
business activities and accordingly may not devote sufficient time to our
business affairs, which may affect our ability to conduct operations and
generate revenues.

Although all three of our directors and officers are involved
in other business activities, as a development stage company, we are able to
manage the current level of business with our three officers, our relationship
with local distributors and the technical assistance of our three product
suppliers, VIQUA, Ozocan Corporation and ELCE International as well as local
accounting and technical support services, our Senior Operations consultant, our
Latin American Director of Sales, our Southern Colombian sales agents, our
marketing services consultant and our web development consultant. At present,
Max Weissengruber, our President and director, spends approximately 30 hours per
week, or 80%, of his business time on the management of our company. D. Brian
Robertson, our Chief Financial Officer, Vice-President of Sales and director,
spends approximately 35 hours per week, or 90%, of his business time on the
management of our company and Douglas R. Robertson, our Secretary and director,
spends approximately 4 hours per week, or 10 %, of his business time on the
management of our company. As a result of their other business endeavors, Mr.
Weissengruber, Mr. B. Robertson and Mr. D. Robertson may not be able to devote
sufficient time to our business affairs, which may negatively affect our ability
to conduct our ongoing operations and our ability to generate revenues. In
addition, the management of our company may be periodically interrupted or
delayed as a result of our directors and officers other business
interests.

All of our assets and all 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.

All of our assets are located outside the United States and we
do not currently maintain a permanent place of business within the United
States. In addition, all of our directors and 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 within the United States
any judgments obtained against us or our officers or directors, including
judgments predicated upon the civil liability provisions of the securities laws
of the United States or any state thereof. Consequently, you may be effectively
prevented from pursuing remedies under United States federal securities laws
against them.

Risks Relating to our Business

Changes to the current or future government regulation of
our products may add to our operating costs.

We may face unanticipated operating costs due to future
government regulation of drinking water standards. We believe that we are not
currently subject to direct regulation of our current and expected activities,
other than regulations generally applicable to businesses. However, the issue of
what constitutes pure drinking water as is currently defined leaves the claim of
purity open to a broad spectrum of water providers. Laws and regulations may be
introduced that affect drinking water standards and claims of purity or other
characteristics of water being sold to consumers. Complying with new regulations
could increase our operating costs. Furthermore, we may be subject to the laws
of various jurisdictions where we actually conduct business. Although we rely on
distributors who sell our products in our target markets, there is a risk that
we may be deemed to be actively selling in jurisdictions that may impose
regulations on the sale of our products. Under such circumstances, we could be
subject to fines or penalties that could have a material adverse impact on our
business and operations.

Sales and delivery of our products may be interrupted due to
international political situations, natural disasters or other causes.
Interruptions may cause us to lose customers and distributors and, accordingly,
may adversely affect our business and results of operations.

Most of our products are manufactured in Canada, Italy and
Japan. Our target market includes Central and South America, which are subject
to social, economic and political uncertainty. We are subject to the risk that
the sale, payment and delivery of our products may be interrupted as a
result of social, economic and political turmoil or by natural disasters such as
earthquakes and fires. Any such interruptions may cause us to lose customers and
distributors and, accordingly, may adversely affect our business and results of
operations.

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- 19 -

Our industry is very competitive and we may not be able to
achieve long term success. If this happens, we will go out of business.

Our products compete with a number of established brands and
new products that target the same market as we do. We compete against major
manufacturers of both traditional and new water treatment methods and
technologies most with substantially greater marketing, cash, distribution,
production, technical and other resources than our company has at present. In
addition to competitors with comparable ultra violet technology, there are
large, well established water treatment companies offering proven technologies
such as chlorination, ozone, reverse osmosis and physical filtration methods. If
we are unable to produce, market and distribute our products as well as our
competitors or if customers do not find our products to be as good or better
than others on the market, then we may never develop a client base or sell
enough of our product to be profitable. If this happens, we will go out of
business.

Risks Related to our Securities

Because our directors and officers control a large
percentage of our common stock, such insiders have the ability to influence
matters affecting our shareholders and other shareholders will likely have no
effect on the decisions made by our company. This could result in our management
making decisions that are in the best interest of themselves and not in the best
interest of shareholders. Shareholders could lose some or all of the value of
their investments in our common stock as a result.

Our directors, officers and insiders, in the aggregate,
beneficially own approximately 67% of the issued and outstanding shares of our
common stock. As a result, they have the ability to influence matters affecting
our shareholders, including the election of our directors, the acquisition or
disposition of our assets, and the future issuance of our shares. Because our
officers, and insiders control such shares, investors may find it difficult to
replace our management if they disagree with the way our business is being
operated. Because the influence by these insiders could result in management
making decisions that are in the best interest of those insiders and not in the
best interest of the investors, you may lose some or all of the value of your
investment in our common stock.

Because we do not have sufficient insurance to cover our
business losses, we might have uninsured losses, increasing the possibility that
you may lose your investment.

We may incur uninsured liabilities and losses as a result of
the conduct of our business. We do not currently maintain any comprehensive
liability or property insurance. Even if we obtain such insurance in the future,
we may not carry sufficient insurance coverage to satisfy potential claims. We
do not carry any business interruption insurance. Should uninsured losses occur,
any purchasers of our common stock could lose their entire investment.

The market price of our common stock is likely to be highly
volatile. The market price of our common stock may also fluctuate significantly
in response to the following factors, most of which are beyond our control:

- variations in our quarterly operating results;
- changes in securities analysts estimates of our financial performance;
- changes in general economic conditions and in the software industry;
- changes in market valuations of similar companies;
- announcements by us or our competitors of significant new products; and,
- the loss of key management.

The equity markets have, on occasion, experienced significant
price and volume fluctuations that have affected the market prices for many
companies' securities and that have often been unrelated to the operating
performance of these companies. Any such fluctuations may adversely affect the
market price of our common stock, regardless of our actual operating performance. As a result, stockholders may
be unable to sell their shares, or may be forced to sell them at a loss.

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Because we can issue additional common shares, purchasers of
our common stock may incur immediate dilution and may experience further
dilution.

We are authorized to issue up to 400,000,000 common shares,
including 100,000,000 Series B common shares which have equal rights and
preferences as our common shares. As of May 14, 2010, there were 189,120,000
common shares issued and outstanding and no Series B common shares issued and
outstanding. Our board of directors has the authority to cause our company to
issue additional shares of common stock without the consent of any of our
shareholders. Consequently, our shareholders may experience more dilution in
their ownership of our company in the future.

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

Our stock is a penny stock. The Securities and Exchange
Commission has adopted Rule 15g-9 which generally defines 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.

Financial Industry Regulatory Authority (FINRA) sales
practice requirements may also limit a stockholders ability to buy and sell our
stock.

In addition to the penny stock rules promulgated by the
Securities and Exchange Commission (see above), FINRA rules 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, FINRA believes that
there is a high probability that speculative low priced securities will not be
suitable for at least some customers. FINRA requirements make it more difficult
for broker-dealers to recommend that their customers buy our common stock, which
may limit your ability to buy and sell our stock and have an adverse effect on
the market for our shares.

Item 3. Quantitative and Qualitative Disclosures about
Market Risk.

Not Applicable.

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Item 4T. Controls and Procedures.

Evaluation of Disclosure Controls and Procedures

Our management, including our chief executive officer and our
chief financial officer, evaluated the effectiveness of our disclosure controls
and procedures as of the end of the period covered by this report. Based on that
evaluation, our management, including our chief executive officer and our chief
financial officer, concluded that our disclosure controls and procedures as of
the end of the period covered by this report were not effective.

Disclosure controls and procedures are controls and other
procedures that are designed to ensure that the information required to be
disclosed by us in reports filed or submitted under the Securities Exchange Act
of 1934, as amended, is (i) recorded, processed, summarized and reported within
the time periods specified in the SECs rules and forms and (ii) accumulated and
communicated to our management, including our chief executive officer and chief
financial officer, as appropriate to allow timely decisions regarding
disclosure. A controls system cannot provide absolute assurance, however, that
the objectives of the controls system are met, and no evaluation of controls can
provide absolute assurance that all control issues and instances of fraud, if
any, within a company have been detected.

Changes in Internal Control over Financial Reporting

There has been no change in our internal control over financial
reporting, that occurred during the quarter ended March 31, 2010, that has
materially affected, or is reasonably likely to materially affect, our internal
control over financial reporting.

PART II - OTHER INFORMATION

ITEM 1. LEGAL PROCEEDINGS.

None.

ITEM 1A. RISK FACTORS.

Not Applicable.

ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF
PROCEEDS.

None.

ITEM 3. DEFAULTS UPON SENIOR SECURITIES.

None.

ITEM 4. (REMOVED AND RESERVED).

ITEM 5. OTHER INFORMATION.

During the three months ended March 31, 2010, we received a loan in the amount of $41,000. The loan is non-interest bearing, unsecured and due on demand.

ITEM 6. EXHIBITS

|Exhibit | Description              
|------- | -------------------------
|Number  |                          
|3.1(1)  | Articles of Incorporation
|3.2 (1) | By-laws                  

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|Exhibit   |                                                                                                                                           
|--------- | ------------------------------------------------------------------------------------------------------------------------------------------
|Number    | Description                                                                                                                               
|10.1 (1)  | Supplier Agreement with ELCE International
      dated August 18, 2001                                                                    
|10.2 (1)  | Distribution Agreement with Avila S.T.E.M., SA
      dated February 1, 2005                                                               
|10.3 (1)  | Supplier Agreement with R-Can Environmental
      Inc. dated May 20, 2005                                                                 
|10.4 (1)  | Distribution Agreement with JEUFI International,
      SA dated June 22, 2005                                                             
|10.5 (1)  | Distribution Agreement with Freshwater
      Latin, S.A. dated September 1, 2005                                                          
|10.6 (1)  | Asset Sale Agreement dated January 1, 2006, among
      our company, Max Weissengruber and D. Brian Robertson                             
|10.7 (1)  | Consulting Agreement dated January
      1, 2006, between our company and D. Brian Robertson                                              
|10.8 (1)  | Agreement with Max Weissengruber, dated January
      1, 2006.                                                                            
|10.9 (2)  | Distribution Agreement dated October
      9, 2008 with Watergeeks Laboratories Inc., dated October 9, 2008                               
|10.10 (2) | Extension Agreement dated December 31, 2008 to
      Distribution Agreement with Watergeeks Laboratories Inc., dated October
      9, 2008
|10.11 (2) | Joint Venture Agreement with ELCE
      International Corp., dated January 25, 2009                                                       
|10.12 (3) | Form of Debt Settlement Agreement                                                                                                         
|10.13 (4) | Securities Purchase Agreement dated
      May 5, 2010 with Asher Enterprises, Inc.                                                        
|10.14 (4) | Convertible Note dated May 5, 2010                                                                                                        
|10.15 (5) | Agreement dated May 5, 2010 with
      Equititrend Advisors, LLC                                                                          
|31.1*     | Certification of Max
      Weissengruber pursuant to Section 302 of the Sarbanes-Oxley Act of 2002                                        
|31.2*     | Certification
      of D. Brian Robertson pursuant to Section 302 of the Sarbanes-Oxley Act
      of 2002                                 
|32.1*     | Certification of Max
      Weissengruber pursuant Section 906 of the Sarbanes-Oxley Act of 2002                                           
|32.2*     | Certification
      of D. Brian Robertson pursuant Section 906 of the Sarbanes-Oxley Act of
      2002                                    

|(1) | Filed as an exhibit to our Form SB-2
      registration statement filed on February 12, 2007.
|--- | ---------------------------------------------------------------------------------------------
|(2) | Filed as an exhibit to our Form 8-K filed on
      January 6, 2009.                          
|(3) | Filed as an exhibit to our Form 10-Q filed on
      November 16, 2009.                       
|(4) | Filed as an exhibit to our Form 8-K filed on
      May 11, 2010.                             
|(5) | Filed as an exhibit to our Form 8-K filed on
      May 12, 2010.                             
|*   | Filed herewith                                                                               

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SIGNATURES

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

FRESHWATER TECHNOLOGIES, INC.

|By    | /s/ Max Weissengruber                      | 
|----- | ------------------------------------------ | 
|      | Max Weissengruber                          | 
|      | President and Director                     | 
|      | (Principal
      Executive Officer)        | 
|      |                                            | 
|Date: | May 14, 2010                               | 
|      |                                            | 
|      |                                            | 
|By    | /s/ D. Brian Robertson                     | 
|      | D. Brian Robertson                         | 
|      | Treasurer, Chief Financial
      Officer   | 
|      | Vice-President of Sales and
      Director | 
|      | (Principal
      Accounting Officer        | 
|      | and Principal Financial Officer)           | 
|      |                                            | 
|Date: | May 14, 2010                               | 

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